The recent reduction in Goods and Services Tax (GST) on cement from 28% to 18% is expected to lower cement prices by ₹26-28 per bag, according to a latest report by ICRA. The rating agency expects the GST cut to reduce overall construction expenses in rural housing by 0.8%-1.0%, boosting volumes and supported enhanced capacity addition.

As per the report, average cement realisation (ex-factory price excluding GST) is estimated to rise by 3%-5% in FY26, even as input prices remain range-bound. This is expected to push operating profits higher by ₹100-150 per metric tonne (MT), it said.

“With the recent GST rate cut from 28% to 18% expected to be passed on to customers, and the average retail price of cement currently ranging between ₹350–360 per bag, consumers are projected to benefit by ₹26–28 per bag,” said Anupama Reddy, vice president and co-group head, Corporate Ratings, ICRA.

“Driven by healthy demand, capacity additions may increase to 41-43 million MTPA in FY2026 from 31 million MTPA in FY2025, spearheaded by the eastern region, which is likely to lead the grinding capacity,” he added.

ICRA projects OPBIDTA/MT, a key metric used to measure profitability on a per unit (per tonne) basis, to improve by 12%-18% to ₹900-950/MT in FY26, following a decline of 16% YoY in FY25, which was impacted by weak realisations due to extended monsoons and lower government capex during the election year.

Cement volumes up 8.5% in FY26

The report highlighted that cement volumes rose 8.5% in the first five months of FY26, supported by robust demand from housing and infrastructure despite early monsoons in some regions. Prices have also increased by around 7.4% year-on-year (YoY) during the same period, led by sharp hikes in the northern and eastern markets.

“The trajectory of input prices, especially for pet coke and freight, are linked to global crude, which remains exposed to geopolitical dynamics,” it noted.

ICRA expects the credit profile of large cement producers to stay stable, supported by healthy growth in operating income, improved margins, and comfortable leverage. Larger players are also expected to outperform mid-size companies due to consolidation trends in the industry.

ICRA further estimates that green power will account for 43%–45% of the total power mix for its sample set of cement companies by March 2026, compared to about 35% as of March 2023.

Large cement producers are targeting a 15%–17% reduction in emissions over the next 8–10 years through an increased share of blended cement and greater reliance on renewable energy sources such as solar, wind, and waste heat recovery systems (WHRS), it added.

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