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Cement demand is expected to moderate to 6 per cent in this fiscal from earlier high of 9 per cent, largely due to softer demand and higher base effect.
According to CareEdge Ratings, the cement demand was relatively stagnant across the industry in the first half of this fiscal, influenced by the impact of general elections, extended monsoon season and the sluggishness in infrastructural activities.
In last two month the demand was sluggish due to festive season and the current construction ban in the northern region.
However, CareEdge Ratings expects demand to rise from December to achieve a full year 5-6 per cent growth in demand.
Cement sales has registered a compounded annual growth rate of 13 per cent between FY22 to FY24 driven by a pickup in housing, pre-election, and thrust for infrastructure and low base effect due to adverse impact from Covid.
In long-term, CareEdge Ratings projects a 6.8-7.2 per cent CAGR for cement demand and 5-6 per cent in capacity growth between FY25 to FY30 period. It expects government spending to increase over the next four months and significant growth momentum to resume by FY26, with a much stronger pace of development.
Sabyasachi Majumdar, Senior Director, CareEdge Ratings said while demand may slowdown in this fiscal due to subdued government spending, the long-term outlook aligned with India’s broader growth strategy with housing, continuing to be primary driver of cement demand.
About 55-60 per cent of the total cement demand comes from the housing sector, while infrastructure contributes about 30 per cent and the remainder comes from the industrial segment. CareEdge Ratings anticipate that infra share will further increase to 33 to 34 per cent in the coming years due to the government’s strong infra push and increased budget allocations.
Majumdar said government initiatives such as RERA, Pradhan Mantri Avas Yojana, and the Special Window for Affordable and Mid-Income Housing Fund have improved supply and affordability, boosting demand.
Furthermore, under the GRAMEEN scheme, additional 20 million houses have been planned, bringing the total target to 49.5 million over the next five years, out of which 32.1 million have already been sanctioned, he added.
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