Cement firms are expected to have a better FY26 in terms of pricing and profitability compared to the previous fiscal, thanks to better pricing growth in the first quarter of the current financial year. Also helping is the fact that prices did not decline by large margins in July, which was marked by heavy rainfall in many parts of India. According to analysts, an uptick in infrastructure spending by both the Union and the state governments is driving improved prices, even as demand growth is expected to be moderate.
Analysts noted that price support started from the beginning of the financial year, with a marathon election season—the 2024 general election, and state elections in Haryana, Maharashtra and Jharkhand.
Cement prices in southern India, a highly fragmented and competitive market, rose the highest, followed by the east. This was driven by higher infrastructure spending by states like Andhra Pradesh, as well as stability after a frenetic year of mergers and acquisitions, especially by the top two industry players.
Much of the inorganic expansion activity was carried out in southern India by the Aditya Birla Group-backed UltraTech Cement, India's largest cement maker, as well as Adani Cement, which owns Ambuja Cements and ACC. While UltraTech took over India Cements, Ambuja Cements bought brands such as Penna Cement and Orient Cement.
"Ambuja Cements’ transition from Penna/Orient toward Ambuja brands is gaining pace; the company stands to gain Rs 20-30/bag from this rebranding exercise," said a sectoral report from Emkay Global.
"For the cement industry, the volume growth in FY26 is expected to be mid-to-high single digit. All-India average prices increased for the third successive quarter in Q1FY26. Prices in South India in Q1FY26 increased sharply as compared to other regions. However, prices in July were lower than Q1FY26 averages," said Amit Agrawal, vice president of fundamental research, Kotak Securities.
According to a report from brokerage firm JM Financial, cement prices in July declined by a marginal 0.5 percent over June, while ruling higher by 6 percent year-on-year. Despite a demand decline in the previous month owing to the monsoon halting construction activity, JM Financial noted that demand in the southern markets outperformed the rest of India.
Analysts said that the increase in prices, as well as incremental demand, is expected to reflect favourably in terms of sales realisations and earnings before interest, taxes, depreciation and amortisation or EBITDA per tonne, even as it is not expected to hit the peaks of FY24, a bumper year for the sector. Analysts expect cement demand to grow by around 6-7 percent this year over FY25, when around 453 million tonnes of cement was sold.
"We expect some growth in profitability, while not heading to the levels seen in FY24. Pan-India price growth for FY26 is expected to be in the mid-single digits. While South and East showed the highest growth in prices, these were also the regions where prices had been the lowest. While a lot of supply is coming into the eastern market, the industry feels that it remains an under-penetrated market, and expects good growth," said Khushbu Lakhotia, director, India Ratings and Research.
Lakhotia, however, said that the profitability also hinges on factors such as fuel and raw material prices, even as much of the price hikes this year are expected to flow through to the EBITDA per tonne.
"Fuel prices remain under control, and despite it being exposed to geopolitical risks, we do not expect it to play spoilsport. If those factors play out favourably, we expect much of the price growth to flow into the EBITDA per tonne, and it is expected to grow by around 10 percent for FY26," she added.
In an initial public offering note for JSW Cement, which lists on August 14 (Thursday), brokerage Angel One noted that despite the ongoing relatively favourable dynamics for the industry, significant capacity addition is expected for the year, in the range of 43-45 million tonnes per annum.
Capacity utilisation is expected to remain at around 70 percent for the ongoing fiscal, analysts said, with cement players of all sizes looking to expand capacities through greenfield or brownfield expansions, or through smaller acquisitions compared to last year.
Analysts' sentiments have also been positive on most cement stocks since the beginning of the calendar year. The UltraTech scrip on the National Stock Exchange has traded higher by 8.4 percent since the beginning of 2025, while Ambuja Cements' shares have rallied by more than 9 percent over the same period. Prices of Shree Cement's shares over the same period have risen by more than 20 percent.
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