India’s cement sector is showing preliminary evidence of restraint on capital spending as prominent companies scale back expansion plans to address weak capacity utilisation, according to analysis from Jefferies.
Shree Cement has cut its planned capital expenditure to about 15 billion rupees for each of fiscal years 2026 and 2027, reduced from an earlier plan of 30 billion rupees, with management signalling a renewed focus on improving utilisation of existing capacity. Ambuja Cements, after a period marked by mergers and acquisitions, is decelerating further expansion beyond fiscal 2027. Ambuja’s management has indicated a 30% to 35% cut in capital expenditure and has delayed its 140 million tonnes per annum capacity target amid project slippages and underperforming acquired assets.
Jefferies notes that over the last decade companies tended to add capacity primarily to defend or expand regional market share rather than to maximise returns. That strategy allowed supply growth to outstrip demand, keeping industry earnings before interest, taxes, depreciation and amortisation per tonne largely within a narrow band.
Capacity utilisation varies across regions. In southern India, plants are operating at roughly 60% to 65% of capacity, versus national levels closer to 70% to 72%, underscoring the uneven recovery in demand and the potential benefits of restraint in new-build programmes.
UltraTech Cement has proposed an 85% dividend payout for fiscal 2026, underpinned by operating cash flows of more than 150 billion rupees and consolidated net profit exceeding 80 billion rupees for the first time. These results provide a strong cash cushion for the company while also returning capital to shareholders.
Market concentration at the top has increased significantly. The five largest cement producers now account for 64% of India’s installed capacity, compared with 46% in March 2015. UltraTech remains the largest player, with about 200 million tonnes per annum capacity and approximately 28% market share. Ambuja commands roughly 15% to 16% of the market, while Shree Cement holds about 10% of market share with 69 million tonnes per annum of capacity.
In its sector recommendations, Jefferies named UltraTech Cement and JK Cement as top picks.
Context and implications
Jefferies’ assessment highlights a shift from aggressive capacity addition toward a more measured approach that prioritises utilisation and returns. For investors and market participants, the combination of reduced capital spending by major producers and stronger cash generation at leading firms such as UltraTech could change the industry’s supply trajectory if these early signs of discipline persist.