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Informist, Wednesday, May 20, 2026

 

MUMBAI - ICRA Ltd. expects the operating profitability of Indian cement companies to moderate in 2026-27 (Apr-Mar), mainly due to high power, fuel, and selling costs owing to the ongoing war in West Asia. However, the impact will be mitigated by a likely increase in prices, the ratings agency said in a report Wednesday.

 

The operating profit before interest, tax, depreciation, and amortisation per tonne for cement companies under ICRA's coverage companies is projected to decline 10-15% to INR 820-INR 870 per tonne in FY27, lower than the estimates of INR 950-INR 980 per tonne a year ago, the report said.

 

Power, fuel, and selling costs account for 50-55% of the total operating costs for cement companies. "The ongoing West Asia conflict has raised global crude oil prices, increasing costs of key inputs such as petcoke, diesel and polypropylene for cement companies, which is likely to weigh on their operating profitability," it said.

 

"In 2026-27, power and fuel costs are set to rise, driven by the uptick in petcoke prices, tightening fuel markets and likely rise in coal prices," Anupama Reddy, vice president and co-group head of corporate ratings at ICRA, said in the report. "Additionally, higher logistics costs and a depreciating rupee are expected to increase the landed cost of fuel," she added.

 

Overall, power and fuel costs are likely to increase 10-12%, while selling costs are expected to rise 6-8% in FY27 on higher freight and packaging expenses, Reddy said. Cement companies, however, are expected to mitigate a part of the impact by passing it on through price hikes, she added.

 

ICRA expects crude oil prices to remain high if the West Asia war prolongs and average $95 per barrel in FY27 in a base case scenario, compared to $72 per barrel in FY26. Petcoke prices rose 19% on month in April, and diesel prices rose INR 3.9 per litre in May, according to the report.

 

Cement prices are expected to rise 3-5% in FY27, following a marginal recovery of around 2% in FY26. Companies have raised prices by INR 10-INR 12 per bag in April, although the extent of cost pass-through depends on demand-supply dynamics, Reddy said. "Pricing flexibility of the cement players remains constrained due to intense competition. Despite cost pressure, the sector's credit profile remains stable and debt protection metrics are likely to remain comfortable," she added.  End

 

Reported by Simran Rede

Edited by Avishek Dutta

 

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