Indian Cement Sector Volumes to Grow by 6-7% in FY2027 Amid Cost Pressures, Reports ICRA
New Delhi, July 1, 2026: Cement volume growth in India is expected to moderate to 6-7% in FY2027, according to a report released by credit rating agency ICRA Ltd. The anticipated moderation follows a robust FY2026, which saw cement volumes expand by 8.6% year-on-year driven by strong demand from the housing and infrastructure sectors. The initial momentum has carried into the current fiscal year, with volumes during the first two months of FY2027 increasing by approximately 8.3% year-on-year to around 85 million metric tonnes, ICRA said in a press release.
Net sales realisations across the sector increased by roughly 7% year-on-year in FY2026 and are projected to see a further uptick of around 3-5% in FY2027. While input costs remained largely stable throughout FY2026, fuel and freight costs linked to global crude prices have been trending upward. ICRA notes that these expenses could increase further in FY2027 due to volatility stemming from geopolitical developments in West Asia, potentially exerting pressure on the sector’s overall cost structure.
In terms of infrastructure and manufacturing capabilities, domestic cement capacity increased by around 43 million metric tonnes per annum in FY2026, with an additional 30-34 million metric tonnes per annum expected to be commissioned in FY2027. Despite the expanding capacity footprint, overall capacity utilisation is expected to remain steady at 70-71%, aligning broadly with the 70% utilization levels recorded in FY2026.
However, profitability metrics are expected to face some headwinds over the coming months. Operating margins are projected to moderate by around 150-250 basis points in FY2027, driven primarily by higher input costs. ICRA warns that significant downside risk remains for manufacturers, given the ongoing volatility in crude-linked petcoke and freight costs amid the unresolved geopolitical tensions in West Asia.
For its surveyed sample set of companies, ICRA estimates that operating income will grow by 9-12% in FY2027, supported by volume expansion and a moderate uptick in cement prices. Conversely, operating profit before interest, depreciation, taxes, and amortization per metric tonne is likely to decline by 8-14% to Rs. 820-870/MT in FY2027, contrasting with the 16% rise to Rs. 950/MT achieved in FY2026.
Despite the forecasted moderation in profitability and an increased reliance on debt to fund ongoing capital expenditure, the financial health of major sector players is expected to hold firm. ICRA reports that debt protection metrics are likely to remain comfortable, with leverage measured as total debt to operating profit estimated at 1.45-1.55x and the debt service coverage ratio projected at 3.2-3.4x for FY2027.
