Indian Cement Industry Set for Strong Expansion with Major Capacity Additions

The Indian cement industry is set for one of its strongest expansion phases over the next three years, with Crisil reporting a significant rise in capacity creation supported by large scale investments. According to the rating agency, the sector is expected to add nearly 160 to 170 million tonnes of grinding capacity between FY26 and FY28. This marks a sharp increase of almost 75 percent when compared to the previous three year period, during which about 95 million tonnes were added.

Crisil notes that this accelerated expansion is driven by a consistently healthy demand outlook and higher levels of capacity utilisation across key markets. The agency highlights that robust demand from infrastructure development, housing activity and large public sector spending has improved the operating environment for cement manufacturers. Over the past three fiscals, the industry recorded a compound annual growth rate of 9.5 percent in volumes, pushing utilisation to 70 percent, which is higher than the long term average of 65 percent.

The report adds that around 65 percent of the upcoming capacity is being developed through brownfield projects. Such projects typically require shorter construction timelines and limited land acquisition, helping reduce overall capital costs and minimise execution challenges. This approach also ensures quicker commissioning, which supports the industry’s effort to meet rising demand without stretching financial resources.

Cement manufacturers are expected to invest approximately Rs 1.2 lakh crore in capital expenditure during the FY26 to FY28 period. This investment amount is nearly 50 percent higher than what was undertaken in the previous cycle. Crisil states that the bulk of this capex will be funded through healthy operating cash flows, reducing risks associated with indebtedness. As a result, the net debt to EBITDA ratio of major players is likely to remain stable, keeping credit profiles strong.

Additionally, about 10 to 15 percent of the projected capex is earmarked for green energy adoption and cost efficiency programmes. These sustainability focused initiatives are expected to improve profitability and strengthen long term competitiveness.

Crisil’s assessment covers 17 leading cement companies which together account for 85 percent of the installed capacity in the country. The rating agency concludes that the industry is entering a period of expansion supported by solid demand fundamentals, disciplined investments and improving operational efficiencies.