India’s cement sector is witnessing a growing divide. While industry leaders like UltraTech and Ambuja Cement have managed to weather cost pressures with stable revenue and volume growth, smaller and mid-sized players—including JK Cement, JK Lakshmi, and Ramco Cement—have seen their profitability take a sharp hit in the third quarter of FY25.
The October-December quarter was weighed down by sluggish demand amid tepid government spending on infrastructure in contrast to the expectations of robust demand post monsoon. While the companies attempted to hike prices during the quarter, they had to roll back due to sluggish demand, impacting realisations.
Ambuja Cement reported a 29 percent decline in standalone EBITDA for Q3. On a consolidated basis, EBITDA remained relatively stable, falling just 1.15 percent. Meanwhile, UltraTech Cement, the market leader, and Shree Cement, the third-largest by capacity, saw their core profits decline by 7 percent and 23 percent, respectively in the third quarter on a consolidated basis, amid depressed prices.
In contrast, mid-tier players like Ramco Cement (-27 percent), JK Lakshmi (-33 percent), and Dalmia Bharat (-34.5 percent) saw steeper declines in operating profit, due to their inability to pass on costs. Although the industry anticipates an upward trend in cement prices, driven by rising rural consumption supported by improved farm cash flows, steady demand for urban housing, and a potential increase in government infrastructure spending, executives caution that intensifying competition could limit significant price gains.
"Our discussions with dealers, sales executives, and C&F agents indicate that while attempts were made to hike prices across the markets, the companies struggled to sustain these in most pockets due to increased supply and a competitive pricing trend," Elara analyst Ravi Sodah wrote in a note published on February 25 this year.
A race to capture market share between the market leaders has led to more consolidation and increased volumes, keeping the prices pressured, at least in the near term.In Q3, volumes grew in double digits for UltraTech and Ambuja, while other players except Nuvoco, such as JK Cement, JK Lakshmi Cement, Ramco and Dalmia Bharat reported low to mid single digit volume growth. The industry expects ~50 mtpa (million tonnes per annum) capacity addition in FY26. Nuvoco saw its volumes jump 16 per cent.
Cost savings to rescue profit
Industry players are targeting cost savings in the range of Rs 100-Rs 300 per tonne over the next two to three years, according to brokerage firm Motilal Oswal.
Dalmia Bharat, India's fourth largest cement maker, is keeping its hiring under check, in a bid to drive cost savings. The company plans to continue investing in branding and retail distribution channels to give the company an edge over competitors. "If I talk about cement prices, there is a growing sense of optimism. We have seen some price improvements in December and expect further increases in Q4, driven by stronger demand. However, increasing competitive intensity may cap any significant gains on this front. While prices remain market-driven, we are working consistently on the cost reduction front," said Chief Financial Officer, Dharmender Tuteja.
Managing Director Puneet Dalmia said that long-term focus was on brand-building, premiumisation, and strengthening retail distribution.
"We are not increasing the hiring. Marketing costs are also being seen in line with what it can lead in terms of productivity," added Tuteja.
The management of JK Lakshmi Cement too flagged that the company is working to reduce fixed costs wherever possible and has already implemented several measures, with further actions planned in the coming months and years.
In a post earnings call, the management said that the delayed CAPEX rollout is expected to unleash pent-up demand in the next financial year, leading to stronger overall market conditions. However, rising competitive intensity — as companies seek to maximise asset utilisation — may create temporary pricing pressure during periods of lower demand. The company too is focused on leveraging brand recognition to strengthen price positioning, aiming to command a premium of Rs 80 to Rs 100 per tonne by enhancing brand strength.
Meanwhile, JK cement also announced that it is going to launch a new brand.
Large players like UltraTech, ACC and Ambuja are focusing on lowering fuel and logistics costs and securing raw material at cost competitive prices.
"We remain positive as long-term demand drivers are intact and expect cement demand to grow at a CAGR of 7 percent-8 percent over FY24- 27E. Sector consolidation is expected to benefit large players through economies of scale, supply chain efficiency, and better ricing in the long term," Axis Securities wrote in a note.
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