This report profiles India’s cement industry, discussing market trends and outlook through 2015 and beyond. The report also highlights leading players in the sector including Ambuja Cements Ltd, UltraTech Cement Ltd and Shree Cement Ltd.

Cement is one of the eight core industries of the Indian economy. As of Dec 2014, India was the world’s second largest producer of cement, just behind China. However, per capita cement consumption in India is still amongst the lowest in the world. The vast potential that exists in the industry has attracted investors from all round the world.

FY15 (fiscal year ended March 2015) was a steady year for the Indian cement industry with growth in both production and consumption. However, slowdown in industries and the construction sector constrained growth rates to low single-digits. High interest rates particularly hit the real estate sector, which is the main driver of the construction sector. Cement overcapacity and falling margins have made the situation ripe for industry consolidation. Going forward, a rise in mergers and acquisitions is likely within the sector. FY16 started on a low note with the cement production index growing by only 1.8% y/y in the first five months, mainly due to subdued demand.

India's cement consumption is expected to grow in the years to come, backed by increased political stability and steady growth in housing and infrastructure development. Domestic installed capacity is sufficient to accommodate any rise in consumption.

Key Points:

• During 2006-14, India's cement installed capacity increased at a CAGR of 10%. In FY15, it grew by 7%y/y. The private sector accounted for over 95% of the total capacity, while the remainder came from the government.

• During 2006-14, annual domestic cement consumption grew at a CAGR of 8%, which was less than capacity growth during the same period.

• During 2008-14, the production index for core industries recorded a CAGR of 5.1%. The cement industry outperformed the overall group with a CAGR of 6.6% during the same period. In FY15, the cement industry grew by 5.6%, which was greater than the overall group. However, the cement production index grew by just 1.8% y/y in 5MFY16.