Govt infra push to boost cement demand by 12%

Report Card

♦ Cement demand growing by 13-15% in first half of FY24

♦ Operating profit of cement makers to recover by Rs 200/tonne this fiscal

Mumbai: The massive infra spending by the central government towards building roads, railway lines and power, among others, will boost cement demand by 10-12 per cent this fiscal, according to a report.

The Centre has increased its budget allocation for infrastructure - such as roads, railway lines/stations, power, including renewables, urban infra, telecom, ports, airports, and water works, among others - by Rs 1.6 lakh crore to Rs 5.9 lakh crore for fiscal 2024 from a revised estimate of Rs 4.3 lakh crore for fiscal 2023.

Continuing the robust ride of the past two fiscals, cement demand is likely to grow 10-12 per cent year-on-year to 440 million tonne in fiscal 2024, driven by strong offtake from the infrastructure segment, Crisil Ratings said in a note Friday.

Cement demand grew by 12 per cent in fiscal 2023 and by 8 per cent in fiscal 2022. Combined with stable cement prices and softening power and fuel costs, the operating profit of cement manufacturers is likely to recover by Rs 200/tonne from a multi-year low of Rs 770/tonne last fiscal, the report said.

The projected demand growth and margin rebound will spur cash accrual and keep the credit profiles stable of the 21 companies, accounting for 90 per cent of domestic sales volume.