Cement's growth surge: 50% CAGR projected by 2027 – Are these stocks ready?
Subscribe to enjoy similar stories. Cement, the cornerstone of India's infrastructure and housing development, faces a paradox. Despite record-breaking home sales, robust infrastructure projects, and a thriving economy, the sector has struggled to keep pace, weighed down by pricing pressures, overcapacity, and sustainability challenges.
Over the past three years, profitability has remained elusive, even as demand continues to surge. The cement sector might be on the cusp of a revival, according to IKIGAI Asset Manager, led by Pankaj Tibrewal, the renowned former fund manager of Kotak Emerging Opportunities Fund. Today, we dig into IKIGAI’s detailed report and share the key takeaways from the report titled Cement Sector Outlook.
To start with, cement is a highly affordable commodity, priced at ₹5-7 per kilogram in India, far lower than milk and tomatoes. Historically, India's cement demand has closely followed GDP growth, with a notable boom starting in 2003, driven by a strong housing and capex cycle. Until 2012, the sector outpaced GDP growth, with an average 10-year growth rate of 1.4x.
However, according to IKIGAI, this growth rate has not been surpassed yet. Despite occasional volatility, cement demand remained in line with GDP growth. However, the sector performed much below the GDP growth rate in the next decade due to economic issues.
The downturn began when builders defaulted on their loans, triggering a severe slump in the real estate sector. The cement sector has faced a series of setbacks, from the taper tantrum and demonetisation to the pandemic-induced downturn, each leaving it struggling to keep pace with GDP growth. While reopening spurred a brief recovery with surging demand, the industry is once again
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