According to a Crisil Ratings analysis of 20 cement manufacturers, representing over 80 per cent of the industry's installed cement grinding capacity (as on March 31), the projected outlay will be 1.8 times the capital expenditure during the last three fiscal years, but the credit risk profiles of manufacturers will remain stable.
This is due to their continued low capital expenditure intensity and strong balance sheets with financial leverage remaining below 1x thanks to strong profitability, according to the report.
The outlook for cement demand remains healthy with a compound annual growth rate of 7 per cent during fiscal years 2025-2029, said Manish Gupta, senior director and deputy director of ratings at Crisil Ratings.
The increase in capital expenditure over the next three fiscal years will primarily cater to this growing demand as well as the aspirations of cement manufacturers to enhance their domestic presence.
"Players are likely to add a total of 130 million tonnes (MT) of cement grinding capacity (almost a quarter of the existing capacity) during this period," informed Gupta.
The eight major industries that include sectors such as coal, cement, steel and electricity recorded 4 percent growth in June this year compared to the same month last year, according to the government.
The report mentions that a healthy 10 per cent annualized rise in cement demand in the last three fiscal years outpaced growth in capacity addition, taking the utilization level to a decade high of 70 per cent in fiscal 2024 and prompted manufacturers to press the pedal on capital spending.
According to Ankit Kedia, Director, Crisil Ratings, low capex intensity will keep manufacturers' balance sheets strong and ensure stable credit profiles.
More than 80 percent of projected capital spending over the three fiscal years through 2027 is likely to be funded through operating cash flows, resulting in a minimum additional debt requirement.
"In addition, existing cash and liquid investments of over Rs 40,000 crore will provide a cushion in case of implementation-related delays," Kedia said.
This is due to their continued low capital expenditure intensity and strong balance sheets with financial leverage remaining below 1x thanks to strong profitability, according to the report.
The outlook for cement demand remains healthy with a compound annual growth rate of 7 per cent during fiscal years 2025-2029, said Manish Gupta, senior director and deputy director of ratings at Crisil Ratings.
The increase in capital expenditure over the next three fiscal years will primarily cater to this growing demand as well as the aspirations of cement manufacturers to enhance their domestic presence.
"Players are likely to add a total of 130 million tonnes (MT) of cement grinding capacity (almost a quarter of the existing capacity) during this period," informed Gupta.
The eight major industries that include sectors such as coal, cement, steel and electricity recorded 4 percent growth in June this year compared to the same month last year, according to the government.
The report mentions that a healthy 10 per cent annualized rise in cement demand in the last three fiscal years outpaced growth in capacity addition, taking the utilization level to a decade high of 70 per cent in fiscal 2024 and prompted manufacturers to press the pedal on capital spending.
According to Ankit Kedia, Director, Crisil Ratings, low capex intensity will keep manufacturers' balance sheets strong and ensure stable credit profiles.
More than 80 percent of projected capital spending over the three fiscal years through 2027 is likely to be funded through operating cash flows, resulting in a minimum additional debt requirement.
"In addition, existing cash and liquid investments of over Rs 40,000 crore will provide a cushion in case of implementation-related delays," Kedia said.
