Cement demand to fuel consolidation; top 10 firms to add 140 MMTPA: Moody's

Business Standard

26-05-2025

Growing cement demand will fuel consolidation in the cement sector, where large players are acquiring smaller regional players as they rush to increase production capacity to match the rising consumption, said Moody's Ratings.
Over the past five years, the cement sector in India has witnessed significant industry consolidation and top 10 producers in the country have acquired around 140 MMTPA (million metric tonnes per annum) of domestic cement capacity, valued at around Rs 890 billion ($10.5 billion), from smaller regional players, it said.
"Large companies with a pan-India presence such as UltraTech and Ambuja will continue to engage in M&A (merger and acquisition) to acquire smaller regional producers with weaker capacity utilisation and lower profitability," it said.
Given the presence of a large number of smaller cement producers, numbering over 70, companies in South India are more exposed to industry consolidation compared with those domiciled in other parts of the country.
South India, with an installed capacity of more than 200 MMTPA, comprising states of Telangana, Tamil Nadu, Kerala, Karnataka and Andhra Pradesh, is the largest cement-producing region in the country followed by the north and east, each with a capacity of around 150 MMTPA.
According to Moody's Ratings, cement demand in India is expected to grow "substantially" through the end of the decade with a consumption growth of 6 to 7 per cent CAGR, supported by tailwinds such as rising housing needs and government-led infrastructure spending.
This will force the industry to expand capacity by a third in the next five years to cater to growing demand.
"Larger players with a pan-India presence will likely acquire smaller regional producers with weaker capacity utilisation and lower profitability. Ongoing industry consolidation combined with steady demand growth will keep capacity utilisation stable for the incumbents," the report said.
The industry capacity will likely expand by a third in the next five years as leading companies increase capacity to cater to growing demand.
"Based on announced capacity additions by the top 10 cement producers in India, who account for around 75 per cent market share, overall industry capacity will increase by around 30 per cent or 200 MMTPA by the end of the decade. Around 170 MMTPA of this new capacity is expected to be commissioned by FY27-28," the report said.
Aditya Birla group firm UltraTech and Adani Group's Ambuja, India's top two cement producers, will contribute to around 30 per cent of this growth.
"Shree Cement and Dalmia Bharat, the third- and fourth-largest cement producers in the country, respectively, will together add around 50 MMTPA of new capacity and account for around 25 per cent of the upcoming capacity additions.
"Meanwhile, smaller players such as JK Cement, JSW Cement and JK Lakshmi Cement will almost double their existing capacity and account for 35 per cent of the announced capacity expansions," it said.
The report also highlighted that India's per capita cement consumption is 260 kg, which is less than half the global average consumption of 540 kg, which indicates potential for cement consumption to rise as the Indian economy continues to grow.
"Cement consumption in India will continue to grow at a CAGR of 6 per cent-7 per cent through the end of the decade to reach around 670 MMTPA by 2030 from 445 MMTPA in FY23-24," it said.
It expects India's cement demand to be driven by the expected growth in its two largest cement consuming sectors - housing, which accounts for 55-60 per cent of cement consumption in the country, and infrastructure that accounts for 28-30 per cent.
However, the report also cautioned that volatility in raw material prices will be key risks that will reduce cement producers' profitability.
"Changes in the regulatory landscape can lead to fluctuation in prices of limestone, a key raw material for the cement sector, and reduce profitability of cement producers," it said.
For instance, in February, the Tamil Nadu government imposed a tax of Rs 160 per tonne on the mining of limestone in the state.
Given the average industry profitability of Rs 800/tonne-Rs 900/tonne, such levies and taxes can reduce cement producers' profits by almost 15 to 20 per cent, if implemented on a pan-India basis, it said.
Moreover, coal and petcoke are the main sources of energy in cement manufacturing and due to low domestic availability of these commodities for the cement sector in the country, cement producers are largely reliant on imports.