Premium cement brands are important beneficiaries of GST Cut; Price increases probably in H2: Nomura Analyst

The cement industry expects a large lighting because the goods and service tax (GST) on cement will probably be reduced from 28% to 18%, according to Jasandep Chadha, stock research analyst at Nomura.

Chadha now said that there is “fair certainty” about the tax reduction after the upcoming GST Council meeting. “This will be structurally positive for the sector. Customers can upgrade from lower brands to premium, while companies have more room to gradually increase prices, to increase profitability,” he said.

Not expected big demand, price increases probably ahead

Despite the tax reduction, Chadha does not expect a sudden increase in question. “The demand for cement is fairly non -elastic for price changes. But leading brands such as Ultratech, Ambuja and Shree Cement are most likely to benefit from, because the sector is gradually shifting to premium brands. Through FY30 these top players could make 55-60% of the volumes,” he added.

Although the GST reduction could lower prices in the short term, Chadha believes that a stronger question will enable companies in the second half of the year to increase prices. “Housing and infrastructure projects will stimulate volumes, and when the demand is strong, the industry has shown that it can support higher prices,” he said. Nomura expects an annual price increase of 4-6% in FY26, together with a volume growth of 7-8%.

Consolidation to continue, but slow

The cement industry has seen aggressive consolidation in recent years, with more than 60 million tonnes of capacity-changing hands in FY23-24. However, Chadha expects the pace to slow down. “Most regions, except the south, are already dominated by the top three to six players. Although there is still room for acquisitions, his goals are limited, so consolidation will be more gradual,” he explained.

With a tax reduction on the horizon, premiumization of demand and the chance of steady price increases, analysts believe that the cement sector has been set for a structural upgrade. The combination of policy support and demand stand wind can improve profitability for the leading cement makers of India in the middle to long term.(Disclaimer: recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)