Business: India's cement companies are focusing a lot on expanding their business. They can make a capital expenditure of Rs 1,25,000 crore during the financial year 2025-27. This estimate has been made by the country's reputed rating agency Care Ratings.

CARE Ratings says that cement is expected to have a good demand, to meet which and increase their market share, companies can increase capital expenditure. Capital expenditure or capex is used to set up long-term assets, such as new factories.

Strong jump in demand for cement

There has been a huge jump in the demand for cement in the last three years. On one hand, the government is putting a lot of emphasis on infrastructure, on the other hand, housing schemes have also given a boost to cement sales. In the financial year 2023-24, the production capacity of the industry reached the highest level of the decade and manufacturers needed to increase capex to meet the demand.

The cement demand scenario remains healthy with a compound annual growth rate of 7 per cent in FY2025-2029. Cement companies will meet the growing demand by increasing capital expenditure in the next three financial years. Also, they will expand their business in new areas. During this period, the industry can add a total of 130 million tonnes of cement grinding capacity, which is about a quarter of the existing capacity.

Manish Gupta, Senior Director, Crisil Ratings

Demand remained sluggish in previous quarters

There was a slowdown in the demand for cement in the last few quarters. Brokerage says that construction activities had slowed down due to the Lok Sabha elections. Also, there was severe heat in some areas, while in some places the monsoon arrived before time. There was also a shortage of workers. Due to all these factors, the demand for cement remained sluggish. This was also reflected in the quarterly results of cement companies. Except for a few, the performance of most companies was disappointing.

Status of shares of cement companies

Correction is currently being seen in the shares of cement companies. In the last one month, the stocks of cement companies on NSE have fallen by 23 percent, while the Nifty-50 index has slipped only 1.2 percent during this period. In the last four weeks, Burnpur Cement fell 23.3 percent, ACC 10.8 percent, Shri Cement 10.5 percent and Udaipur Cement Works fell by 9.5 percent. Shri Digvijay Cement, Ambuja Cements, JK Lakshmi Cement, Barak Valley Cements and Sanghi Industries fell between 5 to 8 percent during this period.

What is the expert's opinion on cement

Experts believe that given the current correction, this could be a good opportunity to invest in the shares of cement companies. After the elections and monsoon season are over, construction activities may pick up again, which may affect the demand. Also, cement prices are also expected to increase. The price of petcoke used in the cement manufacturing process has also come down from $130 to around $100. Cement companies can also benefit from this and their financial performance may be better in the second quarter.