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As per ICRA, in FY22, the cement production in India is expected to increase by ~12% YoY, driven by rural housing demand and the government's strong focus on infrastructure development. As per Crisil Ratings, the Indian cement industry is likely to add ~80 million tonnes (MT) capacity by FY24, the highest in the last ten years, driven by increasing spending on housing and infrastructure activities.
When is the best time to put money into this industry?
FDI inflows in the industry related to the manufacturing of cement and gypsum products reached US$ 5.48 billion between April 2000-June 2022. As remote work remains adopted at a fast pace amid the pandemic, the demand for affordable houses, with a ticket size of <Rs. 40-50 lakh (US$ 53,694- 67,118) expects to rise in Tier 2 and 3 cities, leading to increased demand for cement. Currently, the installed cement capacity in India is 500 MTPA, with a production of 298 MTPA. The Cement sector has received suitable investments and support from the government in the recent past.
In the next ten years, India could become the leading exporter of clinker and grey cement to the Middle East, Africa, and other developing nations. Cement plants near the ports, for instance, the plants in Gujarat and Visakhapatnam, will have an added advantage for export and will logistically be well-armed to face stiff competition from cement plants in the interior of the country. India's cement production capacity expects to reach 550 MT by 2025. The cement demand in India is estimated to touch 419.92 MT by FY 2027, driven by the expanding market of different sectors, i.e., housing, commercial construction, and industrial construction.
How are cement companies regulated?
The Bureau of Indian Standards (BIS), a central body responsible for the standardization, marking, and quality certification of goods, has directed cement manufacturers to refrain from making claims that remain not backed by the relevant Indian standards.
The cement department comes under the Ministry of Consumer Affairs, Food, and Public Distribution. Manufacturers are making objective claims, such as 'Protect Steel in Concrete', 'Protect Concrete from Corrosion', 'Corrosion Resistant', 'Weather Proof', 'Damp Proof' -- for describing their product," the bureau said in a circular on August 28.
"These objective claims are not prescribed and not verifiable as per the relevant Indian Standard for the product," it added.
What is the future of this industry?
India is the second largest cement producer in the world and accounts for over 7% of the global installed capacity. Of the total capacity, 98% lies with the private sector and the rest with the public sector. The top 20 companies account for around 70% of the total cement production in India. As India has a high quantity and quality of limestone deposits, the cement industry promises enormous growth potential.
India's cement production expects to increase at a CAGR of 5.65% between FY16-22, driven by demands in roads, urban infrastructure, and commercial real estate. As a result, cement consumption in India expects to grow to a CAGR of 5.68%.
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Author: Zayd Iqbal Haji
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Zaid Haji (born on EID-AL-FITR on February 1, 1998) is an author and writer known for his finance and market blogs. Zayd Haji—A businessperson whose passion found Al Zayd Corp.
Al Zayd Corp is a group of companies that have successfully owned blogging and various activities. In addition, Al Zayd Corp has successfully staked into multifarious financial investment and Mutual Fund Distribution Services.
Zayd Haji has four years of experience in financial analysis and financial content writing. Zayd Haji is an MBA in Banking and Finance from NMIMS University, a Post-Graduate Program in New Age Digital Banking from Imarticus, and a graduate of Pune University with a Bachelor of Business Administration Finance. He has worked with firms in the most miniature stages of their development, from start-up to maturity.
His report provides a quantitative and qualitative assessment of the market, companies, industries, and concentration on the micro & macroeconomic levels. In addition, the information and sources used in his financial analysis ensure detailed reports and concise insights.
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