In the next three years, India's cement industry will see an unprecedented wave of capacity expansion. According to the latest report of the rating agency, in the three fiscal years from 2026 to 2028, the country plans to increase its grinding capacity by 160 ~ 170 million tons, nearly doubling the increase of 95 million tons in the past three years. If the demand maintains the current pace, India's total cement production capacity is expected to approach 830 million tons by the end of fiscal year 2028. Behind
this round of investment boom is sustained strong demand and high capacity utilization. In fiscal year 2023, the compound growth rate of cement sales in India was as high as 9.5%. Driven by infrastructure and housing, the capacity utilization rate of the whole industry rose to about 70%, significantly higher than 10-year average of 65%. The industry expects that there will still be an annual incremental demand of 30-40 million tons in 2026-2028, which is enough to absorb most of the new supply, so that the utilization rate will continue to stabilize at about 70%.
However, rapid expansion is often accompanied by capital and execution risks. The report estimates that capital expenditure in the industry will reach about 1.2 trillion rupees in three years, an increase of 50% over the previous three years. Fortunately, this expansion is mainly based on "tapping the potential of the old plant": 65% of the projects are brownfield expansion projects, which do not require new land acquisition and have a short construction period; two-thirds of the incremental projects are independent grinding stations, which are far away from the clinker base but close to the consumption area, with low single-line investment intensity and fast repayment speed, and can be put into operation in 1-2 years. In contrast, the traditional integrated factory needs 3-4 years from project establishment to material discharge, and the capital precipitation and uncertainty are higher.
Thanks to stable cash flow and prudent financial strategies, the net debt/EBITDA ratio of major enterprises will remain stable, and credit quality will not deteriorate significantly. The analysis sample covers 85% of the country's production capacity, including 17 leading enterprises such as UltraTech, Shree and Dalmia Bharat, and the conclusion is representative enough.
In short, India's cement industry is taking advantage of demand to launch a new round of "grinding competition". As long as the macro-economy does not fluctuate sharply, the production capacity feast, which totals 170 million tons and costs more than trillion rupees, is expected to complete the layout within three years and reach a new balance between supply and demand around 2028.
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