Operating profit of cement companies to grow by Rs 100-150/MT in FY26: ICRA
Ratings agency ICRA in its latest report has said that the Goods and Services Tax (GST) cut is likely to reduce overall construction expenses in rural housing by 0.8%-1.0%, boosting volumes and supported enhanced capacity addition. It said backed by the healthy cement demand, average cement realisation (ex-factory price excluding GST) to rise by 3-5% in FY2026, even as the input prices are expected to remain range-bound, boosting the operating profit of cement companies by Rs 100-150 per metric tonne (MT).
The report said cement volumes increased by 8.5% in 5M FY2026 due to strong demand from the housing and infrastructure segments, despite the early onset of the monsoons in a few regions. Cement prices have increased by around 7.4% in 5M FY2026 on a YoY basis, with major hikes in the northern and eastern regions. The trajectory of input prices, especially for pet coke and freight, are linked to global crude, which remains exposed to geopolitical dynamics.
ICRA stated that with the estimated increase in cement realisation, along with likely stable cost structure, the OPBIDTA/MT for ICRA’s sample set is estimated to increase by 12-18% to Rs. 900-950/MT in FY2026. In FY2025, the OPBIDTA/MT had declined by 16% YoY due to weak realisations (especially during H1 FY2025, because of extended monsoon and impact on Government capex amid the General Elections). Overall, the credit profile of large cement producers is expected to remain stable, driven by a healthy growth in operating income, expected improvement in operating margins and comfortable leverage metrics. The industry has witnessed consolidation in recent years, and the performance of larger players is expected to outperform compared to that of mid-size players in the medium term.
