Cement companies could be making their last-ditch effort to shield themselves from profitability pressures with the September quarter (Q2FY27) at its fag-end. Companies are trying to tackle input cost inflation by taking price hikes amid muted demand in a seasonally weak quarter, but dealers caution that implementation remains challenging.
According to Nomura Global Markets Research, average pan-India prices in the trade segment could rise by ₹10 per bag month-on-month to ₹330 in September. In the trade segment, cement is sold through a network of local dealers, usually in 50-kilogram bags. But the chances that these attempts to raise prices will fail are high. September’s volume offtake may be hurt by monsoon-related slowdown in construction activities and non-availability of labour due to festivals in certain regions.
In July-August, industry volume growth is estimated at 6-7% year-on-year, according to Motilal Oswal Financial Services. Demand is driven by higher infrastructure spending, while retail/residential construction activity remains more dependent on rainfall and labour availability.
Demand growth in September would be aided by a low base, said the Motilal Oswal report dated 7 September, adding that regional demand trends remain mixed amid elevated competition.
Uneven demand conditions constrain pricing power. This could hamper volume growth for manufacturers with regional exposure, but geographically diversified companies such as UltraTech Cement, ACC and Ambuja could be better placed. Cement spreads, a key leading indicator of industry unitary Ebitda, currently averages at around ₹2,447 per tonne Q2FY27, implying a sequential drop of ₹63 per tonne as pricing conditions don't fully offset elevated fuel costs, said Nomura in an 8 September report.
While the costs of key fuels, imported petroleum coke and coal, have moderated from the peaks seen after the beginning of the West Asia war, their impact on earnings is reflected with a lag. Availability of low-cost inventory could be a differentiating factor in Q2FY27 earnings. But lower costs can protect profitability only to a certain extent, so sustaining price hikes beyond the seasonally weak Q2 is crucial.
Expectations are that demand could recover in H2FY27, driven by a pick-up in government-led infrastructure projects and as residential realty sector braces for new launches. This should strengthen cement makers’ ability to raise prices and boost realizations outlook.
Price hike attempts in south, east and select west India suggest that companies are seeking to establish a pricing floor ahead of the post-monsoon recovery, said Systematix Shares and Stocks (India). Near-term profitability, however, is likely to remain under pressure from ₹70–150 per tonne of incremental sequential costs in Q2FY27, it added.
True, companies are taking cost control initiatives and increasing thrust on the usage of green power to counter fuel price volatility and reduce carbon emission. But lack of pricing discipline so far in H1FY27, keeps companies’ earnings exposed to risks.
Profitability pressures could extend beyond H2FY27 if the relentless West Asia war leads to a renewed spike in input costs, dampening hopes of a revival.
In Q1FY27 earnings call, managements of companies said they are upbeat on FY27 demand prospects. But weak agricultural incomes due to a below-average monsoon may hurt rural housing demand.
So far in 2026, stocks of large cement companies have declined more than the 10% fall in benchmark index Nifty50. Valuations have moderated, but unless fundamentals improve, that’s not enticing enough.