India’s cement capacity to rise 75% by FY28, industry to invest ₹1.2 lakh crore in capex: Crisil

India’s cement industry is set to add a grinding capacity of 160-170 million tonne (MT) between FY26 and FY28, a 75% jump from the 95 MT added over the past three years, according to an analysis by Crisil Ratings.

The surge in expansion is "primarily fuelled by healthy demand outlook and high capacity utilisation.”

“Over fiscals 2026-2028, cement makers are expected to see healthy incremental demand of 30-40 MT annually, prompting a strong growth in capacities,” said Anand Kulkarni, Director, Crisil Ratings. “The distribution of incremental capacities may not be linear though.”

He said the current fiscal year may see commissioning of 70-75 MT, which could temporarily moderate utilisation. The demand is expected to catch up, keeping utilisation around 70% by fiscal 2028.

"While this (growth) will entail substantial capital expenditure (capex), the risks associated will be lower because a sizeable proportion is brownfield and the majority of the expansion will be funded from healthy operating cashflows," it said.

Despite the heavy investment requirements, Crisil said credit metrics of cement makers are likely to remain steady as a large share of the expansion is brownfield and funded through internal accruals.

Crisil's analysis is based on the performance of 17 cement makers, which account for 85% of the 668 MT installed capacity as on March 31, 2025.

Cement demand has grown robustly over the last three years, with volumes recording a compound annual growth rate of 9.5%. This pushed capacity utilisation to about 70% in FY25, compared with a decadal average of 65%.

Crisil noted that around 65% of the planned capacity additions will be through brownfield projects, which typically have shorter construction timelines and lower implementation risks.

Nearly two-thirds of the new capacity will come in the form of split grinding units, which are less capital-intensive and have shorter gestation periods than integrated cement plants.

“Cement makers are estimated to incur capex of ~Rs 1.2 lakh crore between fiscal 2026 and 2028 - around 50% higher compared with the previous three fiscals-predominantly to fund the capacity additions,” said Parth Shah, Associate Director, Crisil Ratings. “Capex intensity is expected to remain range-bound at 0.8-0.9 times, ensuring limited reliance on external debt.”

Moreover, the projected capex also includes 10-15% outlay towards investments in green energy and cost efficiency improvement projects, which would support profitability, it said.