Shree Cement Ltd clocked volume growth of around 9% in the March quarter (Q4FY26) at 10.8 million tonnes (mt), a tad ahead of the industry average growth of 8%.
It closed FY26 with volume growth of 2% at 36.4 mt and eyes 40 mt volumes in FY27. The 'value over volumes' strategy followed by Shree Cement over the last two years has narrowed the price gap with the industry leader, so volume growth can be higher ahead, the management said.
The 3.5 mt cement unit at Kodla, Karnataka was commissioned in Q4FY26, taking its domestic capacity to 69.3 million tonnes per annum (mtpa). Also, it has commenced work on the Meghalaya integrated plant. But in the backdrop of low-capacity utilization at 66% in Q4FY26, Shree Cement has decided to go slow on capital expenditure (capex).
The FY27 capex guidance has been cut from ₹3,000 crore (announced in Q2FY26 earnings call) to ₹1,500 crore, to be deployed towards ready-mix concrete (RMC) expansion, railway sidings, and initial work on the Meghalaya project. Shree Cement's plan to reach 80 mtpa capacity target by 2029 is contingent on demand conditions and optimization of capacity utilization.
Rival Ambuja Cements Ltd too has done a similar moderation. The Adani group was earlier targeting cement capacity of 117 and 155 mtpa by FY26-end and FY28, respectively with annual capex of around ₹8,000 crore. In Q4FY26 earnings call, the Ambuja management said capacity would touch 119 mtpa by FY27-end from 109 mtpa in FY26.
The capex outlay for FY27 is ₹6,000- ₹6,500 crore versus ₹7,500 crore in FY26. Unless profitability improves, Ambuja management feels that incurring capex shall only lead to sub-optimal return ratios. So, it is targeting higher profitability via reduction in raw material and energy consumption.
This contrasts with UltraTech Cement Ltd, which crossed 200 mtpa production capacity at the start of FY27, a year ahead of the target. It eyes 240 mtpa by FY28 end in a phased manner. UltraTech would spend ₹16,000 crore over the next three years. Nonetheless, a breather on capex by two large cement manufacturers should aid cement prices and allay concerns of over-capacity.
Going by the estimates of ICICI Securities, the sector is poised to see significant capacity additions of around 184 mtpa over FY26-FY28, with around 43% concentrated in north and central India.
Recent channel checks by Systematix Shares and Stocks (India) showed a broad-based slowdown in cement demand across India, primarily due to labour shortages linked to the wedding season, state elections (notably in West Bengal) and reverse migration for agricultural activities. This marks a reversal from the volume uptick seen in Q4FY26.
Ambuja management expects demand growth for FY27 to remain soft at around 5%, owing to fuel price volatility and early forecasts of a sub-par monsoon, which can hurt rural housing demand.
For now, pan-India average cement prices improved by ₹10-13 per bag month-on-month in May as companies attempted price hikes to partially offset the cost inflation arising due to the West Asia crisis, said the Systematix report dated 5 May.
Sustaining price increase may be challenging if demand fails to improve. Heatwave-related disruptions could slow construction activities. Given that meaningful re-rating triggers are missing, cement stocks are likely to remain range-bound in the near term.