UltraTech, Ambuja, ACC & Others: Profitability in FY26 Hinges on Cement Pricing, Says India Ratings

According to India Ratings and Research, the cement industry, including major players like UltraTech Cement, Ambuja Cements, ACC, and Dalmia Bharat, is expected to witness moderate growth in FY26. The agency projects that demand in the sector will likely grow at a mid-single-digit rate, indicating a steady but not aggressive expansion.

While the overall growth outlook remains positive, India Ratings emphasizes that pricing will play a crucial role in determining the profitability of cement manufacturers. Despite rising demand, the ability of companies to maintain or improve their pricing power will be a key factor in sustaining healthy margins.

The report suggests that while the industry is poised for continued growth, external factors such as raw material costs, supply chain dynamics, and competitive pressures could influence pricing strategies. As a result, cement manufacturers will need to carefully navigate pricing decisions to ensure sustained profitability in the upcoming fiscal year.

India Ratings and Research anticipates that cement demand will grow at a mid-single-digit rate in FY26, supported by multiple factors contributing to a recovery in the sector. One of the key drivers of this growth is the expected revival in infrastructure demand, which had been relatively subdued during FY25. The slowdown in infrastructure activity this year was largely attributed to the impact of the general elections, which often lead to delays in project execution and new investments. However, with the election period concluding, infrastructure development is expected to regain momentum, providing a boost to cement consumption.

Additionally, a strong monsoon in the previous year is likely to contribute to improved rural demand for cement. India Ratings highlights that better rainfall supports agricultural productivity, leading to higher rural incomes and, in turn, increased spending on housing and construction activities in rural areas. An improvement in real wage growth, particularly for individuals in the lower-income segments, is also expected to strengthen demand fundamentals in the sector.

In the urban housing market, the report notes that growth is expected to continue, albeit at a moderate pace due to the base effect. Despite this, steady demand from urban housing projects will remain a positive factor for cement consumption. With these combined factors—reviving infrastructure development, stronger rural demand, and sustained urban housing activity—the cement sector is expected to witness stable growth in FY26.

India Ratings and Research has provided a mixed outlook for different segments of the economy in FY26, with a deteriorating outlook for smaller (tier-2) businesses, while maintaining a neutral stance on the cement industry as a whole.

Despite facing challenges such as intense competition and significant capital expenditure commitments, the cement sector is expected to remain stable due to certain positive factors. India Ratings and Research notes that range-bound input costs—meaning raw material prices are not expected to fluctuate significantly—will help support industry stability. Additionally, cement manufacturers continue to maintain strong balance sheets, which provide financial resilience amid market uncertainties.

Another key factor contributing to the neutral industry outlook is the anticipated steady demand growth in FY26, driven by infrastructure recovery, rural demand improvement, and urban housing expansion. While pricing pressures could emerge due to heightened competition, these supporting fundamentals are expected to help balance the challenges.

Given this overall scenario, India Ratings and Research has chosen to maintain a stable rating outlook for the cement companies within its rated portfolio for FY26, indicating that the sector’s fundamentals remain steady despite potential headwinds.

India Ratings and Research anticipates that the pricing environment in the cement industry will remain weak in FY26, as companies shift their focus toward boosting sales volumes rather than prioritizing price stability. This comes after the industry experienced the sharpest year-on-year price decline in nearly two decades during FY25. The drop in prices was primarily driven by a surge in new capacity additions and relatively weak demand, leading to intense competition among manufacturers.

Although the pricing pressure is expected to persist in FY26, India Ratings and Research suggests that the decline may not be as steep as the one observed in FY25. Instead, prices are likely to stabilize to some extent, even though they may not recover significantly. The agency highlights that realizations fell by approximately 7% year-on-year in the first 11 months of FY25 (11MFY25) due to a combination of continuous capacity expansion and subdued demand growth.

The cement sector is currently witnessing a decade-high influx of new production capacity, which has led companies to prioritize higher sales volumes to maintain their market share. This focus on volume expansion could keep pricing under pressure, though a more balanced supply-demand equation may help prevent another steep decline. While the outlook for pricing remains cautious, companies are expected to adapt strategies to navigate the evolving market conditions in FY26.