Mumbai, Nov 12 : India's cement industry is poised for an expansion spree, with grinding capacity of 160-170 million tonnes (MT) expected to be added between financial years 2026 and 2028, up sharply compared with the 95 MT added in the past three financial years. This is primarily fuelled by a healthy demand outlook and high capacity utilisation, according to a Crisil report released on Wednesday.

While this will entail substantial capital expenditure (capex) of around Rs 1.2 lakh crore in three years, which is around 50 per cent higher compared with the previous three fiscals -- predominantly to fund the capacity additions. The risks associated will be lower because a sizeable proportion is brownfield and most of the expansion will be funded from healthy operating cash flows.

Consequently, the financial leverage of cement makers, as measured by the net debt to earnings before interest, taxes, depreciation and amortisation (Ebitda) ratio, will be steady and keep credit profiles stable, the report states.

The report is based on an analysis of 17 cement makers, accounting for around 85 per cent of the 668 MT installed capacity as on March 31, 2025..

In the past three financial years, cement saw robust demand -- with volume clocking a compound annual growth rate (CAGR) of 9.5 per cent -- driven by key segments such as infrastructure and housing. As a result, capacity utilisation increased to around 70 per cent last fiscal, compared with a decadal average of 65 per cent.

Crisil Ratings director Anand Kulkarni said that 'over fiscals 2026-2028, the cement makers are expected to see healthy incremental demand of 30-40 MT annually, prompting a strong growth in capacities".

"The distribution of incremental capacities may not be linear though. For instance, this fiscal is likely to see commissioning of 70-75 MT, which could moderate capacity utilisation in the near term. All the same, over the three fiscals, demand is expected to be commensurate with supply addition bringing utilisation back to around 70 per cent," he mentioned.

According to the report, while capacity addition is sizeable, the associated risks are partly mitigated by the fact that about 65 per cent of the addition will be undertaken via brownfield projects, which entail a shorter construction period and limited land acquisition requirement resulting in lower capital cost and fewer implementation challenges.

Additionally, two-thirds of the incremental capacity will be in the form of split grinding units, which are separate cement grinding plants located away from the main clinker production facility. The grinding units typically have lower complexity compared with clinker plants, resulting in lower capex and shorter gestation periods of 1-2 years, compared with 3-4 years for integrated cement plants. This provides early access to market as well as a reduction in lead distance and freight cost due to proximity to consumption regions, thereby resulting in faster paybacks, the report added.

/IANS