New Delhi: The cement demand, which grew 7 per cent year-on-year in April this year, may be impacted by the early onset of monsoon, according to a report by rating agency Ind-Ra.

However, overall cement demand is expected to grow in single digits in the June quarter on the weak base a year ago due to general elections, it said.

The cement volumes witnessed a "notable recovery of 10-11 per cent y-o-y" in the March 2025 quarter after recording a subdued 2 per cent growth in the first half of the last fiscal.

"The recovery was driven by an 11 per cent y-o-y pick-up in infrastructure to Rs 10.5 trillion, led by the central government capex after a similar y-o-y decline in 8M FY25," it said.

Despite this late recovery, the weak H1 restricted the overall demand growth for FY25 to 5 to 6 per cent, which is the lowest since the pandemic affected FY21, the report said.

Moreover, price hikes also aided the manufacturers in improving sales realisations in Q1 FY26 after a multi-decadal fall last fiscal. Cement players took multiple price hikes in April-May 2025, propelling y-o-y growth in prices after five quarters despite some rollbacks.

"Despite the healthy demand growth leading to a marginal increase in prices, cement realisations remained lower y-o-y in 4Q FY25. Cement prices fell 5-6 per cent y-o-y in FY25, marking the sharpest annual decline in the past 20 years, led by the intensified market share race as additional supply outpaced demand growth," the report said.

Southern India experienced the most pronounced price contraction due to oversupply, followed by the eastern region.

In the March quarter, despite an increase in capacities, utilisation for the listed cement companies remained at around 90 per cent.

"However, the overall utilisation for FY25 declined slightly to around 75 per cent (FY24:77 cent) due to the sluggish H1," it said.

It further said that consolidation in the cement sector will continue, where the top five players are snapping up smaller firms.

"The challenging operating environment in FY25 has widened the performance gap between large (Tier 1) and small (Tier 2) cement players. While the overall listed cement universe recorded 5-6 per cent y-o-y growth in sales volumes, Tier 2 players saw a decline of 2-3 per cent," it said, adding this disparity was even more evident in profitability.

Median EBITDA per tonne for Tier 1 companies declined around 20 per cent y-o-y, while Tier 2 players experienced a steep drop of over 50 per cent.

"This sharp decline in profitability has weakened the credit metrics of small players, whereas Tier 1 companies have maintained comfortable financial headroom, potentially paving the way for further consolidation," it said.

Around 45 million tonnes of acquisitions were announced across five major transactions in FY25, over half of which involved assets in the fragmented Southern region. PTI