India’s cement industry is expected to witness pressure on profitability during FY27 despite healthy demand growth, as rising fuel, freight, packaging, and logistics costs linked to geopolitical tensions in West Asia increase operational expenses across the sector.
According to a recent assessment by ICRA, operating profitability of cement companies is likely to moderate in FY27 due to elevated input costs, particularly petcoke, coal, diesel, and transportation expenses. The sector remains highly sensitive to energy price fluctuations because cement manufacturing relies heavily on fuel-intensive clinker production and road-based logistics networks.
Industry estimates suggest operating profit before interest, depreciation, tax and amortisation (OPBIDTA) per tonne could decline by nearly 6–11 per cent to around ₹820–870 per metric tonne in FY27, compared to stronger profitability levels recorded in FY26. Operating margins are also expected to contract by nearly 150–200 basis points due to escalating cost pressures.
The profitability squeeze comes at a time when India’s cement demand outlook remains relatively strong. Analysts expect cement demand to grow by around 7–8 per cent in FY27, supported by sustained infrastructure investment, housing activity, highway construction, rail projects, urban infrastructure development, and industrial expansion.
Government infrastructure spending under programmes such as PM Gati Shakti, Bharatmala, railway expansion, metro rail construction, and affordable housing initiatives continues to provide strong long-term demand support for the cement sector. The Union Budget 2026–27 has also significantly increased capital expenditure allocations for infrastructure development, which is expected to sustain cement consumption momentum.
However, analysts noted that cement manufacturers may struggle to fully pass on rising costs to consumers because of intense competition and limited pricing flexibility across regional markets. While companies have attempted selective price hikes in recent months, industry observers expect price increases to remain moderate at around 2–4 per cent during FY27.
Several leading cement producers including UltraTech Cement, ACC, Ambuja Cements, and Shree Cement have already reported margin pressure in recent quarterly results due to higher power, fuel, branding, freight, and raw material expenses. Some companies have also indicated that cost escalation may continue into the first half of FY27.
The industry is simultaneously undergoing aggressive capacity expansion despite near-term margin concerns. Major cement companies continue to invest in new grinding units, integrated plants, waste heat recovery systems, renewable energy integration, and logistics infrastructure to strengthen long-term competitiveness and market share.
Industry experts believe that while FY27 may witness temporary margin moderation, the long-term outlook for the Indian cement sector remains positive due to strong structural demand fundamentals, rising infrastructure spending, and continued economic expansion. Companies with greater operational efficiency, renewable energy integration, captive logistics networks, and lower fuel dependency are expected to be better positioned to manage the ongoing cost pressures.
