India’s cement makers are expected to invest capital expenditure (capex) worth Rs 1.25 trillion over FY25 to FY27, according to rating agency CRISIL. They said the capex is driven by a healthy demand outlook and a quest for market share.
CRISIL said the projected outlay will be 1.8 times the capex during the past three financial years. However, they expect the credit risk profiles of manufacturers to remain stable. “This is owing to their continued low capex intensity and solid balance sheets, with financial leverage sustaining below 1 time on the back of strong profitability,” the agency said.
The agency said an analysis of 20 cement makers, accounting for over 80 per cent of the industry’s installed cement grinding capacity as of March, indicates the stated capex combined.
CRISIL also noted that over 80 per cent of the projected capex over the three financial years through 2027 is likely to be funded through operating cash flows, resulting in minimal requirement of additional debt. “Moreover, existing cash and liquid investments of over Rs 40,000 crore will provide a cushion in case of implementation-related delays,” said Ankit Kedia, director, Crisil Ratings.
“A healthy 10 per cent annualised increase in cement demand in the past three financial years outpaced growth in capacity addition, pushing the utilisation level to a decadal high of 70 per cent in FY24 and prompting manufacturers to press the capex pedal,” the report said.
For the coming years, Manish Gupta, senior director and deputy chief ratings officer, CRISIL Ratings, expects the cement demand outlook to remain healthy, with a compound annual growth rate of 7 per cent over FY25 to FY29. He added, “a total of 130 million tonnes (MT) of cement grinding capacity (nearly a fourth of the existing capacity) is likely to be added by players over this period.”
First Published: Aug 22 2024 | 3:35 PM IST
