New Delhi, Oct 14 Cement demand in India is likely to grow at a moderate pace of 7-8 per cent (year-on-year) to 475 million tonnes (MTs) this fiscal, after clocking a compound annual growth rate of 11 per cent between fiscals 2022 and 2024, according to a report on Monday.
Healthy monsoon, improved labour availability after the festive season, and pick-up in government spending on infrastructure and housing (under the Pradhan Mantri Awas Yojana) should drive demand up 9-11 per cent in the second half, taking the annual growth tally to 7-8 per cent, according to the report by CRISIL Ratings.
Despite the slow growth, operating profitability of cement players is likely to sustain at Rs 975-Rs 1,000 per tonne, above the decadal average of Rs 963 per tonne.
This, coupled with strong balance sheets, will keep credit profiles stable.
Sehul Bhatt, Director-Research, CRISIL Market Intelligence and Analytics said that cement demand is expected to rebound in the second half of this fiscal (which typically accounts for more than half of the annual sales), as construction activity gathers pace across infrastructure and housing segments post-monsoon.
India’s cement demand grew 3 per cent in the first quarter of this fiscal, owing to an extended heatwave and shortage of labour during general elections.
It is estimated to have grown at a similar pace in the second quarter as well owing to seasonal weakness. However, second half is likely to bode well for the sector, said the report.
The report further stated that growth in housing segment, which accounts for 55-60 per cent of cement demand, will see a likely revival in rural housing demand supported by the healthy monsoon this year.
Similarly, government spending on infrastructure development, which accounts for 30 per cent of cement demand, will support demand too.
Power and fuel cost (30 per cent of total production cost) could decrease Rs 135-145 per tonne this fiscal as average coal/pet coke prices have declined and are currently stable, the report noted.
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