Cement Sector Set for Stronger Profit Margins in FY2026: ICRA

The Investment Information and Credit Rating Agency of India Limited (ICRA) has projected a notable improvement in the profitability of cement companies in FY2026, driven by strong demand, stable input costs, and recent tax benefits. According to the agency, operating profit is expected to rise by Rs 100–150 per metric tonne (MT), providing much-needed momentum for the sector.

Cement volumes witnessed a healthy increase of 8.5% during the first five months of FY2026 (April–August 2025), despite the early onset of monsoons in several regions. The surge was largely supported by housing and infrastructure demand. Average cement prices have also risen by about 7.4% year-on-year, with significant hikes seen in northern and eastern India.

ICRA noted that the Goods and Services Tax (GST) rate cut from 28% to 18% will make cement more affordable for end consumers, particularly in rural housing. With retail cement bags priced between Rs 350–360, the cut translates to a saving of around Rs 26–28 per bag. This reduction is expected to lower rural housing construction costs by nearly 0.8%–1.0%, further boosting demand across smaller towns and villages.

Alongside the rising demand, capacity expansion in the sector is gaining pace. Cement manufacturing capacity is projected to grow to 41–43 million tonnes per annum in FY2026, compared to 31 million tonnes added in FY2025, led by the eastern region. The credit outlook for large producers is expected to remain stable, backed by improved operating margins and comfortable leverage metrics.

Sustainability also remains in focus. ICRA estimates that green power usage will rise to 43–45% of the total power mix by March 2026, compared to around 35% in March 2023. Major players are also working towards reducing carbon emissions by 15–17% over the next decade through higher adoption of blended cement, renewable power, and waste heat recovery systems.

With strong fundamentals, government policy support, and a push towards greener operations, FY2026 is shaping up to be a year of stable growth and profitability for India’s cement sector.