India Cement Sector: FY28 Capex ₹120,000 Cr Plan

A capex cycle that is getting bigger

India’s cement sector has entered a large capacity expansion phase, with investment plans extending well into FY28. Over FY22 to FY25, cement companies invested about ₹70,000 to ₹80,000 crore in capex. The next leg is larger, with around ₹120,000 crore of additional capex expected over the next three years in the data provided. The focus is on adding grinding capacity, which directly supports dispatches as demand rises.

What CRISIL is projecting for FY26 to FY28

CRISIL Ratings has flagged a major capacity build-up, estimating 160 to 170 million tonnes (MT) of grinding capacity additions between FY26 and FY28. This is described as a 75% jump compared with the 95 MT added over the past three years. CRISIL’s analysis cited in the inputs refers to 17 major cement makers as the basis for the capacity and capex assessment. The report also notes that capex between FY26 and FY28 is about 50% higher than in the previous three fiscals.

How this cycle compares with the previous one

The expansion being planned is notably larger than the last major capex cycle mentioned in the text. The earlier capex cycle saw roughly 9.5 crore tonnes of new capacity additions, equivalent to about 95 MT. In the current cycle, the expected new capacity addition is 16 to 17 crore tonnes, equivalent to about 160 to 170 MT. In scale terms, the current plan is close to double the prior cycle’s additions.

Demand outlook: current size and incremental growth

India’s cement demand is pegged at around 45 crore tonnes per annum, or about 450 MT per annum. CRISIL’s estimates in the provided material suggest incremental demand could rise by 3 to 4 crore tonnes (30 to 40 MT) each year up to FY28. Over the next 3 to 4 years, that implies total demand could increase by around 9 to 12 crore tonnes (90 to 120 MT). The stated demand drivers in the text include infrastructure and housing.

Capacity and utilisation: where the balance could land

A key question in a capex upcycle is whether supply races ahead of demand. As per the provided data, India’s cement capacity could reach about 85 crore tonnes per annum by FY28, or about 850 MT. At an average utilisation of 70%, the effective capacity would be about 59.5 crore tonnes, or about 595 MT. Demand is estimated at about 55 crore tonnes, or about 550 MT, which suggests a gap but one described as manageable in the short term. The material also says utilisation has improved to about 70%.

Near-term commissioning pace could affect utilisation briefly

CRISIL’s commentary in the inputs notes that about 70 to 75 MT of capacity is likely to be commissioned in the current fiscal. The report adds that this could temporarily moderate utilisation before it stabilises near 70% over the next three years. This sequence matters because utilisation trends influence pricing discipline, operating leverage, and the pace at which new kilns and grinding units can be absorbed.

Brownfield takes the lead in the next expansion

The data provided indicates that around 65% of the new capacity will come from brownfield expansions. Brownfield additions typically involve expanding existing sites, which can be faster and less costly than building entirely new facilities. CRISIL’s framing also links this approach to cost optimisation, which can be relevant when the sector is simultaneously adding large capacity and trying to protect profitability.

Capex mix: efficiency and green energy also feature

Beyond pure capacity creation, the inputs state that 10% to 15% of the projected investment is expected to go towards green energy initiatives and cost-efficiency improvement projects. Separately, the text mentions CRISIL’s view that capex intensity is expected to remain range-bound at 0.8x to 0.9x, supporting limited reliance on external debt. The overall message is that capacity growth is the main use of funds, with a defined portion allocated to efficiency-linked projects.

Regional and company references mentioned

The provided material references major companies including UltraTech, Ambuja, Dalmia Bharat, and Shree. It also includes a regional split from a CRISIL note stating that eastern and central regions could account for almost 57% of incremental capacity, with south and north at 19% each and west at 5%. These splits are presented as expectations for where new capacity is likely to come up during the expansion period.

Key numbers at a glance

Market impact: what investors typically track in such cycles

The figures point to a classic capacity build-up, where utilisation becomes a key marker to watch as new plants start commissioning. The inputs indicate utilisation is around 70% and could be temporarily moderated if 70 to 75 MT gets commissioned in the current fiscal, before stabilising near 70% over the next three years. Alongside volumes, the capex allocation to green energy and efficiency projects (10% to 15%) is another datapoint investors may track because it can influence cost structures. Finally, the stated capex intensity range (0.8x to 0.9x) and the comment on limited reliance on external debt give a framework for monitoring balance-sheet pressure during execution.

Why the expansion matters

The scale of additions, at 160 to 170 MT by FY28, is materially larger than the prior cycle’s 95 MT, which increases the importance of demand staying on track. CRISIL’s demand estimate of 30 to 40 MT incremental demand each year till FY28 provides the context for why the sector is comfortable adding capacity. At the same time, the FY28 capacity and effective capacity arithmetic in the text suggests supply could run ahead of demand, but not by an unmanageable margin in the short term if utilisation stays near 70%.

Conclusion

India’s cement sector is moving deeper into a high-capex phase, with ₹120,000 crore of spending expected over FY26 to FY28 and 160 to 170 MT of capacity additions projected by CRISIL. Demand is estimated at about 450 MT currently, with annual incremental additions of 30 to 40 MT possible till FY28. The next key checkpoints flagged in the provided material are commissioning volumes in the current fiscal and whether utilisation stabilises near 70% as new capacity ramps up.