The benefit of price hikes for cement companies in the June quarter (Q1FY27) was offset by a sharp rise in raw material costs. Blended price realizations rose 5% sequentially to ₹5,700 per tonne for companies under Axis Securities’ coverage, while cement volumes grew 8%. Production cost per tonne rose 11% sequentially and 5% year-on-year, dragging Ebitda per tonne down 7% sequentially and 16% year-on-year to ₹1,005.
Power and fuel, which account for about 30% of the sector’s total costs, were the main culprits. Supply-chain disruptions following the West Asia war made imported petroleum coke and coal more expensive. Freight and packaging costs also rose amid higher diesel and polypropylene granule prices.
Costs have eased slightly from recent peaks, but the impact of higher-cost inventory is likely to show up in Q2FY27 as the benefit of low-cost stocks wanes. UltraTech Cement expects production costs to rise ₹130-140 per tonne sequentially, led by higher fuel costs, maintenance shutdowns and seasonal factors. Dalmia Bharat expects a ₹70-80 per tonne increase. Shree Cement, however, said costs peaked in Q1FY27 and expects them to stabilize from Q2.
Pricing power typically weakens during the monsoon as construction activity slows, limiting the scope to pass on cost inflation. Average pan-India cement prices rose 3% sequentially in Q1FY27, but Jefferies India expects a flat-to-1% sequential decline in Q2FY27.
“Pricing growth in the central region was weakest (in Q1FY27) amid capacity ramp-up by new players in the region; this will remain weakest as Dalmia also scales up recent acquisition of Jaiprakash Associates assets,” said a Jefferies report dated 14 August.
Amid intense competition, the pace of absorption of newly commissioned capacities would dictate pricing trends. After about 35 million tonnes per annum (mtpa) of additions in FY26, another 40-45 mtpa is expected to be commissioned in FY27, according to Axis Securities. UltraTech plans to add 15.9mtpa in FY27 and 29.8mtpa in FY28, taking its grey cement capacity to 237 mtpa by FY28-end. Adani Group company Ambuja Cements is on track to reach 119 mtpa by FY27-end, from 109 mt at FY26-end. Dalmia is targeting 66.7 mtpa by Q3FY28, from 54.7 mtpa currently.
“The consolidation theme (increased M&A) is largely over, the focus will shift back to regional demand-supply dynamics, wherein incrementally, North may see pricing pressure while East is better placed over FY28-29E,” said Kunal Shah, analyst at DAM Capital.
Mixed outlook ahead
Cost pressures are expected to ease in the second half of FY27 as supply chains normalize, provided geopolitical tensions see no further escalation. Q1FY27 was a mixed bag. Volume growth was healthy, supported by infrastructure and home-building demand. Shree Cement led large cement makers with 17% growth, albeit on a low base, followed by UltraTech at 12%. Ambuja’s volumes fell 7% because of plant shutdowns and lower non-trade sales.
Among mid-tier companies, JSW Cement and JK Cement reported volume growth of 15% and 18%, respectively, driven by capacity ramp-ups in north and central India.
Following the Q1 results, Jefferies cut aggregate Ebitda estimates for stocks under its coverage by about 2%, factoring in higher energy-linked costs. The cuts were steeper for Ambuja, Ramco Cements and JSW Cement, at 6-9%.
Company managements are upbeat on FY27 demand prospects, but weak farm incomes amid a likely below-average monsoon rainfall could hurt rural housing demand. Re-rating triggers, if any, will be seen in seasonally strong second half. Shares of Shree Cement and UltraTech are down 6.7% and 1.4%, respectively, so far in 2026.