India's cement industry is expected to maintain healthy demand in FY2027, supported by continued activity in housing and infrastructure. However, rising fuel and freight costs are likely to temper profitability, even as companies expand production capacity.
According to ICRA, cement volumes are projected to grow by 6-7 per cent in FY2027, moderating from the 8.6 per cent growth recorded in FY2026. The ratings agency attributes the slower pace to softer economic growth expectations, although demand from residential construction and infrastructure projects is expected to remain the sector's primary growth driver.
The industry has started the fiscal on a positive note. During the first two months of FY2027, cement volumes rose by around 8.3 per cent year-on-year to nearly 85 million tonnes, indicating sustained construction activity across key markets.
Pricing also remains supportive. Net sales realisations increased by around 7 per cent in FY2026 and are expected to rise by another 3-5 per cent this financial year, helping companies offset part of the cost pressures.
The biggest challenge, however, comes from input costs.
While overall costs remained largely stable in FY2026, ICRA expects fuel and freight expenses to increase during FY2027. Prices of petcoke, coal and diesel remain vulnerable to fluctuations in global crude oil markets, with geopolitical developments in West Asia posing an additional risk to the sector's cost structure.
As a result, operating margins are expected to decline by 150 to 250 basis points during the year. Operating profit per tonne, which climbed to around ₹950 per tonne in FY2026, is projected to ease to ₹820-870 per tonne in FY2027.
On the supply side, the industry continues to expand aggressively. Cement capacity increased by around 43 million tonnes per annum (MTPA) in FY2026, with another 30-34 MTPA expected to be added during FY2027. Most of the expansion will be concentrated in eastern and southern India, where grinding capacity additions are expected to accelerate over the next two years.
Despite these additions, capacity utilisation is expected to remain steady at 70-71 per cent, broadly unchanged from FY2026, suggesting that demand growth will continue to absorb much of the new supply.
ICRA also expects leading cement companies to report 9-12 per cent growth in operating income during FY2027, driven by higher volumes and moderate price increases. Although companies are investing heavily in capacity expansion, leverage and debt coverage indicators are expected to remain comfortable, supported by stable cash flows and sustained demand.
The outlook suggests that while India's cement sector is entering another year of expansion, maintaining profitability will depend on how effectively producers manage rising input costs amid an uncertain global energy environment.
