ICRA: Cement Industry In India Consolidating, Market Shares Of Top Companies Growing

Major cement companies are planning to boost their capacity and retain market share through both organic and inorganic expansions. ICRA, a leading rating agency, predicts continued organic growth in the medium term, with a growing preference for inorganic growth through acquisitions or mergers, leading to industry consolidation.

As of December 2023, the market shares of the top five cement companies have risen to 54 percent from 45 percent in March 2015, expected to further increase to 55 percent by March 2025. The eastern and western regions are driving this consolidation, with the top five players expected to capture 22-25 percent more market share from 2015 to 2025.

ICRA’s report highlights potential consolidation in Southern India as well, with the top five companies’ share projected to rise from 40 percent in 2015 to 50 percent by 2025. Consolidation offers synergies like cost reduction and operational efficiency improvements, along with access to existing capacity and limestone reserves.

Over the past nine years, there have been 15 mergers and acquisitions (M&A) in the sector, with lower costs compared to setting up new cement plants, resulting in capex savings. ICRA maintains a Stable outlook for the cement sector, forecasting revenue growth of 9-10 percent in 2024-25 and operating margins improvement by 80-100 basis points to around 16.8-17.3 percent.

While debt levels may rise by 20 percent in 2024-25 for ongoing capital expenditure, improved operating profits are expected to maintain comfortable debt protection metrics.