India Investor Conference - India Cement Industry Outlook 2026

ICICI Securities Ltd - INZ000183631

The Indian cement industry has undergone a remarkable transformation over the past few decades. From being viewed as a highly polluting sector to becoming an important contributor to waste utilization and infrastructure development, the industry has evolved significantly.

Speaking at the India Investor Conference 2026, Hari Mohan Bangur, Chairman of Shree Cement, shared his perspective on the industry's journey, its economics, demand outlook, consolidation trends, and the factors that determine long-term success.

How the Cement Industry Has Changed Over the Years

Hari Mohan Bangur began by reflecting on his five decades of experience in the cement industry. He noted that the industry's image today is very different from what it was thirty years ago.

According to him, cement plants in the past were associated with dust and pollution. Continuous tightening of environmental regulations over the last two decades has changed that picture significantly. Modern cement plants are now operating under strict emission norms and are monitored continuously through online systems.

He explained that dust emissions as well as gaseous emissions such as nitrogen oxides and sulphur oxides are maintained within stringent limits. He also pointed out that features such as rose gardens and fish ponds thrive within cement plant premises, demonstrating the industry's environmental improvements.

The Cement Industry's Role in Waste Utilization

Bangur described the cement industry as a scavenger that finds productive uses for materials that would otherwise become environmental challenges.

Fly ash from power plants and slag from steel plants are widely used in cement manufacturing. He also highlighted the increasing use of refuse derived fuel from municipal waste.

According to him, the industry initially viewed municipal waste as a challenge. Over time, refuse derived fuel emerged as a valuable source of cost savings and energy.

The use of agricultural waste has also expanded. Bangur noted that around 1,500 tonnes of agricultural waste are being collected and used daily in cement units and power plants.

He added that cement kilns, operating at temperatures of around 1,400 degrees Celsius, are capable of safely handling materials such as surgical waste, expired food products and certain waste liquids.

Why Cement Remains One of the Cheapest Building Materials

A common perception is that cement prices rise sharply. Bangur challenged this view by highlighting the long-term pricing trend.

He stated that cement prices have increased at only about 3% compounded annual growth over periods of five, ten and twenty years.

According to him, cement is among the cheapest materials available, costing around 7 rupees per kilogram when delivered to customers and approximately 3.5 rupees per kilogram at the factory.

The difference between factory price and customer price comes from transportation expenses, dealer and distributor margins, and goods and services tax.

Bangur explained that cement manufacturers operate with extremely tight cost controls because profitability must be measured in terms of paisa per kilogram rather than rupees.

Understanding the Economics of a Cement Plant

Bangur used a practical example to explain why the industry's returns on capital remain modest.

A three million tonne cement plant may require an investment of around ₹3,000 crore. With average utilization levels of about 65%, sales volumes would be closer to two million tonnes annually.

Even with margins of around 20%, the earnings generated on such a large investment remain limited. He explained that newly commissioned plants often require 5-7 years before becoming financially mature.

The initial years involve lower utilization levels, market penetration efforts, debt servicing and repayment obligations. Older plants often support the growth of newer facilities during this period.

This, according to Bangur, explains why return on capital across the industry remains relatively low despite profit margins that may appear attractive when viewed in isolat ion.

Consolidation Continues Across the Industry

Industry consolidation was another important topic discussed during the session.

Bangur noted that ten years ago, the largest companies accounted for approximately 55% of industry capacity. That share has increased to around 65%.

He suggested that India should be viewed as multiple regional markets rather than a single market when analysing cement industry concentration. In several regions, consolidation levels are already comparable to those seen in many developed countries.

He expects consolidation to continue because low returns on capital create pressure for greater scale and efficiency.

Demand Growth and India's Infrastructure Push

Historically, cement demand in India grew at a rate higher than economic growth. Bangur observed that demand growth is currently closer to the country's gross domestic product growth rate.

Despite this moderation, he remains optimistic about the industry's future.

He pointed to continued announcements of large investments in infrastructure. Roads, railways, airports, ports and connectivity projects will require substantial quantities of cement in the years ahead.

According to him, infrastructure development remains essential regardless of which government is in power, creating a strong foundation for future demand.

Why Cement Roads Can Play a Bigger Role

Bangur also spoke about the advantages of cement roads.

He noted that cement roads currently cost around 40% to 50% more than tar roads during construction. However, their longer lifespan changes the economics considerably.

A cement road can last around twenty years, while tar roads may require major repairs or replacement within four to five years. When lifetime costs are considered, cement roads can prove more economical.

He also highlighted the domestic value addition associated with cement. Most of the value generated through cement production remains within India, making it an attractive option from an economic perspective.

Cement and Employment Generation

Another interesting point raised during the discussion was the relationship between cement consumption and employment.

Bangur explained that a mason typically uses around 250 tonnes of cement annually. Based on current cement prices, this translates into substantial economic activity and productive employment opportunities.

He argued that large-scale use of cement can support job creation while contributing to infrastructure and construction development.

The Reality Behind Capacity Utilization

At first glance, industry capacity utilization appears relatively low at around 65% to 70%.

Bangur explained that this figure can be misleading because cement companies maintain additional grinding capacity beyond their clinker production capacity.

Grinding capacity provides flexibility and helps companies remain present in the market throughout seasonal fluctuations in demand.

When measured against clinker capacity, actual utilization levels are significantly higher. He suggested that cement capacity utilization of around 80% effectively represents full utilization for the industry.

Three Factors That Drive Success in Cement

According to Bangur, the success of a cement company depends on three key areas.

The first is energy management. Thermal and electrical energy together account for around 70% of manufacturing costs. Managing energy efficiently therefore has a major impact on profitability.

The second factor is logistics. Transportation and distribution expenses can account for 15% to 20% of selling costs. Companies with a larger network of plants can often reduce transportation distances and improve efficiency.

The third factor is balance sheet strength. New entrants often face challenges because profitability takes time to develop. Companies with strong financial positions are better equipped to navigate the early years of a project's life cycle.

Branding Has Become Increasingly Important

Bangur concluded by discussing the role of branding in the cement industry.

Having witnessed the transition from a controlled market to a fully decontrolled one, he explained how consumer choice has transformed the sector.

In an environment where customers have multiple options, branding plays an important role. He compared the situation to everyday consumer businesses where branding influences customer preferences and purchasing decisions.

As markets mature and competition increases, strong brands become an important differentiator even in industries traditionally viewed as commodity businesses.

Conclusion

Hari Mohan Bangur's observations offered a comprehensive view of the Indian cement industry. His comments highlighted the sector's environmental progress, its contribution to waste utilization, the realities of plant economics, the importance of infrastructure-led demand and the factors that determine long-term success. The sector's future, according to Bangur, will be shaped by efficient operations, financial discipline, strong logistics networks and brands that earn consumer trust.