Construction Industry News
According to a report, continued government pressure to create infrastructure will increase cement consumption by 8-9% this fiscal year, on top of a 9% growth in FY22, which will help the sector return to profitability. According to India Ratings, which has a neutral outlook for the sector for the year, the sector will remain strong despite its significant investment pipeline thanks to a recovery in profitability despite inflationary pressures and stable balance sheets.
According to the agency, demand in FY24 would increase by 8-9% compared to an expected 9% increase in FY23, giving the industry a five-year compound annual growth rate of 4.5%.
The agricultural sector and the emphasis on finishing affordable housing projects will be additional important drivers. But the study also suggested there could be downside risk if the monsoon was affected by the expected negative impact of the El Nino.
However, despite the huge growth plans, the occupancy rate will still be below 70%, up from 65% in FY23. It expects that 75% of the 150 million tons of announced expansion will likely begin production in FY23-25. However, as most of the capacity growth takes place in grinding plants, clinker utilization is expected to remain 800-1,000 basis points higher than cement utilization, indicating higher effective utilization rates.
The southern market, which is followed by the western region, has the greatest potential for inorganic expansion due to its high degree of fragmentation and the abundance of small to medium-sized businesses.
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