India’s cement industry is bracing for a softer earnings season in the December quarter as a confluence of tax-led price adjustments, subdued demand and rising input costs eat into profitability for major manufacturers. The trend underscores emerging challenges for a sector long viewed as a barometer of construction and infrastructure growth.
Cement prices have weakened across regions, with the south and east of the country showing steeper declines. On average, a 50-kg bag fetched around ₹333 during the October–December period, down from ₹372 in the preceding quarter and lower than the comparable period a year ago. This deceleration comes despite the Goods and Services Tax (GST) rate cut on cement taking effect in the latter part of September 2025. Industry analysts caution that the lower GST’s intended price relief has been only partially reflected in market pricing, especially in non-trade segments such as smaller builders and individual buyers. Demand in these segments remained weak through the quarter, dampening pricing power even as developers and large institutional purchasers maintained relatively stable offtake.
Higher raw material costs have compounded pressure on margins. Inputs such as pet coke and energy have surged in recent months, lifting production expenses at a time when selling prices are under downward pressure. Cement companies typically operate on thin margins, and any sustained imbalance between input costs and realisations can erode earnings before interest, tax, depreciation and amortisation (EBITDA). Urban planners and sector experts point to the broader economic cycle as another factor. Construction activity has not rebounded uniformly post-monsoon, and public infrastructure spend has yet to offset softer activity in rural and affordable housing segments. Cement accounts for roughly 10–12 percent of construction costs, meaning any volatility directly influences project economics and developer decisions.
From a policy perspective, the GST rationalisation was designed to lower building material costs, potentially fostering demand in affordable and mid-income housing, as well as infrastructure projects by reducing overall input outlay. Early data suggest that while the tax shift has eased retail pricing modestly — estimated at around ₹25–₹35 per bag — it has not translated into a broad upswing in volumes so far. Market watchers note this dynamic could change if infrastructure allocations in the upcoming budget prioritise accelerated project clearances and supply chain reforms, which in turn may bolster demand for cement in core segments like roads, urban transit and mass housing.
Financial analysts expect earnings pressure to persist in the short term but stress that the sector’s long-term fundamentals remain linked to India’s urbanisation trajectory and public capital spending plans. Firms with strong balance sheets and diversified geographic portfolios are better positioned to absorb pricing cycles and capitalize on eventual demand upticks.
