India’s cement industry is set for one of its biggest expansion phases yet, with total grinding capacity expected to rise by 160–170mn (million) tonnes (MT) between financial years (FYs)25-26 and 27-28, a sharp 75% jump compared with the 95MT added in the past three years, says CRISIL Ratings. The surge in capacity creation is being fuelled by strong demand prospects and high-capacity utilisation levels across the sector.
In a research note, the rating agency says the upcoming expansion would involve significant capital expenditure (capex) but added that associated risks would be lower because most projects are brownfield in nature and will rely largely on internal cash flows rather than debt. This, the agency noted, would help cement companies maintain stable credit metrics despite the aggressive capacity build-up.
An analysis by CRISIL of 17 leading cement makers, accounting for nearly 85% of India’s total installed capacity of 668MT as of March 2025, indicates that the industry’s financial health remains strong. Over the past three fiscals, the sector witnessed robust demand, with cement volumes growing at a compound annual growth rate (CAGR) of 9.5%, driven mainly by government-led infrastructure projects and steady housing construction. As a result, capacity utilisation improved to about 70% last fiscal, compared with a decadal average of 65%.
“Over fiscals 2026–2028, the cement makers are expected to see healthy incremental demand of 30–40 MT annually, prompting a strong growth in capacities,” says Anand Kulkarni, director of CRISIL Ratings. He noted, however, that the distribution of new capacity additions would not be uniform.
“This fiscal is likely to see commissioning of 70MT–75MT, which could moderate capacity utilisation in the near term. All the same, over the three fiscals, demand is expected to be commensurate with supply addition, bringing utilisation back to around 70%,” he added.
CRISIL highlighted that nearly 65% of the upcoming capacity expansion will be through brownfield projects, which are faster to implement as they require limited land acquisition and face fewer execution hurdles. This shortens project timelines and keeps capital costs under control. Moreover, about two-thirds of the additional capacity will come from split grinding units, standalone cement grinding plants situated closer to consumption centres rather than near clinker manufacturing sites. These units are less capital-intensive, have shorter gestation periods of one to two years (versus three to four years for integrated plants), and enable faster market access while cutting down freight costs due to proximity to end markets.
“The cement industry is estimated to incur capital expenditure of about Rs1.2 lakh crore between fiscals 2026 and 2028, around 50% higher than the previous three fiscals, largely for these capacity additions,” says Parth Shah, associate director of CRISIL Ratings.
“However, similar to the past, capex intensity is expected to remain in the range of 0.8 times–0.9 times, ensuring limited reliance on external borrowings. This will keep credit metrics steady, with net debt-to-earnings before interest, taxes, depreciation and amortisation (EBITDA) expected at around 1.1 times going forward, in line with the average of the past three fiscals,” he added.
A portion of the upcoming investment, estimated at 10%–15%, will also be channelled into green energy projects and cost-efficiency initiatives which are expected to enhance long-term profitability and reduce carbon footprints. Many cement manufacturers have been increasing their use of renewable power and alternative fuels as part of broader sustainability goals aligned with global environmental standards.
CRISIL observed that the industry’s comfortable leverage levels provide adequate headroom for additional borrowing if needed, but cement makers have remained conservative in their approach. By maintaining capex intensity and debt ratios within prudent limits, companies are well-positioned to withstand potential volatility in demand or pricing in the years ahead.
The ratings agency expects that this new phase of capacity addition will not only meet India’s growing cement demand — spurred by the government’s infrastructure push and strong housing momentum — but also enhance operational efficiency through regional diversification and improved logistics. With steady utilisation rates and disciplined balance-sheet management, the cement industry appears ready to sustain its growth trajectory while keeping credit quality stable, it concluded.
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