India Cement Sector Set For Profit Surge As CRISIL Sees 300 Bps Margin Expansion
India’s cement sector is heading into a stronger earnings cycle in FY26, as operating margins are projected to expand by up to 300 basis points on the back of rising construction demand, faster volume growth and improving cost efficiencies, according to a recent industry assessment by a domestic ratings agency. While average cement prices are expected to remain largely stable, higher sales of premium products, recovering regional pricing and softer power and freight costs are set to lift profitability across major manufacturers.
The margin expansion marks a notable turnaround after a period of muted pricing power and elevated costs. Industry-wide operating margins are estimated to rise to nearly 18–20 per cent in the current financial year, compared with around 16 per cent in the previous fiscal. Analysts point out that this improvement reflects a more balanced demand-supply environment as infrastructure execution accelerates and housing activity gains traction across urban and semi-urban markets.Volume growth is expected to be a key driver of the recovery. Cement dispatches are forecast to grow between 6.5 and 7.5 per cent year-on-year in FY26, supported by government-led capital expenditure, steady real estate launches and a gradual pick-up in private construction. Growth is likely to be skewed towards the second half of the year, when volumes could rise by as much as 8–9 per cent as delayed projects resume and liquidity conditions improve. An industry executive said the sector is seeing “more predictable demand visibility compared with last year, especially in infrastructure-linked regions”.
Despite stable headline prices, producers are finding room to improve realisations. Average pan-India cement prices are expected to remain within a narrow band, even as recent tax changes exert some pressure on retail pricing. However, manufacturers are increasingly pushing blended and premium cement variants, which command higher margins and align with stricter construction quality and sustainability norms. Excluding tax impacts, net realisations are expected to rise by 2.5–3.5 per cent during the year.Regional dynamics are also improving. Markets in eastern and southern India, which faced sharp price corrections last year, are showing early signs of recovery, while other regions may see marginal price softness without materially affecting profitability. Analysts note that a more disciplined pricing approach across major players is helping avoid aggressive undercutting.On the cost side, easing global energy prices are providing meaningful relief. Power, fuel and freight — which together account for more than half of operating costs — are expected to decline modestly during the year, offsetting elevated raw material expenses such as limestone. This cost stability is creating headroom for margin expansion even in the absence of sharp price hikes.
The outlook, based on analysis of leading manufacturers representing the bulk of industry revenues, suggests a broad-based recovery. Stronger balance sheets could support investments in energy-efficient plants, alternative fuels and low-carbon cement, reinforcing the sector’s role in building more sustainable and resilient urban infrastructure. However, analysts caution that unexpected spikes in global energy prices or geopolitical disruptions remain risks to the margin trajectory.
