Cement companies are on an expansion spree and are expected to add 80-100 million tonnes (mt) of fresh capacity by FY25 despite the looming challenges on rising input cost and uncertainty on the demand front.

With a well deleveraged balance sheet, the industry will add an incremental capacity of 33 mt this fiscal with Aditya Birla Group’s UltraTech Cement accounting for a chunk.

Gearing for growing demand and intense competition from new entrant Adani Group in the cement business, UltraTech Cement has drawn plans to increase its installed capacity to 159 mtpa by FY25 by adding 42 mtpa of capacity across the country along with grinding units and bulk terminals. The company’s capacity has already increased 41 per cent to 120 mtpa in the last fiscal from 85 mtpa in FY18.

Last May, Gautam Adani-led Adani Cement acquired majority stake in ACC and Ambuja Cement for $10.5 billion from Holcim AG. Ranked second and third largest, both the companies have a cumulative installed capacity of 70 mtpa.

Shree Cement, which has a production capacity of 43 mtpa, will add 3.5 mtpa cement capacity with an investment of ₹3,500 crore. JK Cement plans to invest ₹1,161 crore over the next two years to expand its capacity by 5.5 mtpa from 20 mtpa.

Dalmia Bharat has drawn a ₹9,000-crore plan to increase its cement capacity to over 48 mt by FY24 from the current 36 mtpa. Last month, it acquired the stressed asset of 9.4 mtpa of Jaiprakash Associates.

Moderate utilisation

Anupama Reddy, Vice President, ICRA, said supported by strong demand prospects, the cement capacity additions are expected to increase to about 29-32 mtpa this fiscal from about 25 mtpa in FY22. Despite an expected increase in volumes by 7-8 per cent, the cement industry’s capacity utilisation is likely to remain moderate at about 68 per cent on an expanded base, she said.

Prateek Agrawal, Executive Director, Motilal Oswal AMC, said notwithstanding the lingering challenges posed by the pandemic, long-term cement industry growth potential is intact and cement companies are favorably positioned to deliver building solutions.

Infra upgrades

Cement demand will be driven by infrastructure upgrades, rural housing and urbanisation. The sector will see huge demand momentum with higher government spending on infrastructure owing to general elections, he added.

India’s cement demand is expected to reach 550-600 mtpa by 2025 with the housing sector accounting for about 67 per cent of the total consumption. The other major consumers of cement are infrastructure at 13 per cent, commercial construction at 11 per cent and industrial construction at 9 per cent, sources said.