The Union Budget 2025-26, scheduled on February 1, is expected to provide a substantial boost to the cement sector through increased capital expenditure on infrastructure and road development—critical measures to address the slower pace of growth, as seen in the third quarter GDP numbers.
The move will follow a year of consolidation in the cement space, marked by mergers and acquisitions by leading companies. Despite a muted show in 2024, the cement space is poised for revival, believe experts.
Shares of cement companies delivered mixed results last year - UltraTech rose 8%, Ambuja Cement edged up by 3%, while Shree Cement and ACC recorded a decline of 10% and 8%, respectively. Growth in cement demand slowed to 4.5–5.5% last year, following three years of robust expansion, as construction activity was hindered by a prolonged heatwave, a labour shortage during general and states elections, and seasonal monsoon activity.
Utilization levels of cement makers fell below 70%, leading to a 10% on year drop in net price realizations in H1CY24, a revenue decline, and a 200-basis point contraction in profitability, industry experts noted.
This downturn weighed on cement prices which dropped by 7% during 2024, with all-India average price declining to Rs 330 per 50-kg bag by September — a fall of 11% on year. However, September prices showed a modest 2% recovery on month-on-month basis.
Looking ahead, the Union Budget 2025-26 is expected to prioritize growth in core sectors by increasing budgetary allocations, introducing policy reforms, and incentivizing private sector involvement. Analysts suggest these measures could significantly impact the growth of the sector, thus moving the share performance.
Cement demand, closely linked to infrastructure and real estate, remained resilient in FY25 despite delays in highway construction and real estate projects. Nitya Shah, Co-Founder of KamayaKya anticipates an 8–10% rise in demand for FY26, fuelled by investments in road and railway projects. Additionally, the government is expected to unveil tax incentives to promote green cement technologies, as part of the sustainability agenda.
Rural development is another likely priority, with higher allocations for roads, housing, and irrigation under rural infrastructure programs. Significant funding is expected through the National Infrastructure Pipeline (NIP) and Pradhan Mantri Gati Shakti initiative, with an estimated Rs 1.8 lakh crore earmarked for logistics and infrastructure. Further investments are anticipated under the Bharatmala Pariyojana, targeting 25,000 kilometers of new highways, alongside increased public-private partnerships via the National Monetization Pipeline.
Manish Chowdhury, Head of Research at StoxBox, highlighted potential GST rate cuts on cement from the current 28% to enhance housing affordability. Such reforms could drive growth in urban infrastructure and affordable housing, supporting broader economic expansion. The sectoral outlook remains optimistic, with UltraTech, Ambuja, and ACC emerging as top picks for investors.
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