Crisil sees cement cos' operating margin fall 150-200 bps FY27 on high costs
This story was originally published at 15:59 IST on 13 April 2026
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MUMBAI – The operating margin of cement companies in India is expected to decline by 150-200 basis points on year to 16-18% in 2026-27 (Apr-Mar) as surging energy prices due to the West Asia confict raises the power and fuel costs for the cement makers, according to a report by Crisil Intelligence. Cement manufacturers are likely to partially pass on the increased expenses to end-users by raising prices by 1-3% on year to INR 355-INR 360 per bag in FY27, it said.
"Geopolitical disruptions will intensify cost pressures for cement makers in the first half this fiscal (Apr-Sept)," Sehul Bhatt, director, Crisil Intelligence, said in the report. "A surge in energy prices, which will have a pronounced impact on power and fuel expense, and a moderate increase in raw material and freight cost will push total cost up 4-6% this fiscal," Bhatt said.
A surge in crude oil and pet coke prices will translate into 10-12% on-year increase in power and fuel costs, which account for 26-28% of the total cost of cement companies, according to the report. Prices of international pet coke rose 13% sequentially last quarter and are expected to rise further due to soaring crude oil prices. Crisil expects Brent crude oil prices to average $82-$87 per barrel in FY27, up 21-23% on year.
Similarly, global prices of thermal coal rose 8% on year in the last quarter and are expected to remain in a range of $80-$85 in FY27, "with upside bias as opposed to the declining trend witnessed in earlier three fiscals", according to the report. "These price estimates are contingent upon a gradual easing of the West Asia conflict, with sea-borne traffic expected to normalise starting May 2026."
Even though prices of retail diesel have been steady, industrial diesel prices have jumped around 25% in March, which is likely to have a cascading effect on raw material procurement costs. "While cement prices will be increased to mitigate the impact of higher cost to some extent, there will still be a dent on profitability," Kinjal Shah, manager, Crisil Intelligence, said in the report.
Cement demand is expected to rise 6.5-7.5% in FY27, mainly driven by the infrastructure segment and industrial and commercial segment. However, commissioning of additional capacities and heightened market competition will cap a further rise in prices. "With steady demand growth and price uptick, realisation of players is expected to improve a moderate 2-4% this fiscal, which will offer some respite," Shah said. End
Reported by Ashutosh Pati
Edited by Tanima Banerjee
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