Shree Cement and Ambuja Cements Cut Capex Amid Overcapacity Concerns
Can Shree Cement, Ambuja's capex breather allay sector’s overcapacity concerns?
Mint
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Shree Cement Ltd reported a 9% volume growth in Q4FY26, slightly above the industry average, while Ambuja Cements Ltd also moderated its capital expenditure (capex) plans. Both companies are responding to low capacity utilization and softening demand, which may stabilize cement prices and address overcapacity issues in the sector.
- 01Shree Cement's volume growth in Q4FY26 was 9%, ahead of the industry average of 8%.
- 02The company's FY27 capex has been reduced from ₹3,000 crore (approximately $360 million USD) to ₹1,500 crore (approximately $180 million USD).
- 03Ambuja Cements plans to lower its FY27 capex to ₹6,000-6,500 crore (approximately $720-780 million USD) from ₹7,500 crore (approximately $900 million USD) in FY26.
- 04Both companies are focusing on profitability and efficiency amid concerns of overcapacity in the cement sector.
- 05Cement prices have seen a slight increase, but sustaining these prices may be challenging without improved demand.
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Shree Cement Ltd achieved a 9% volume growth in the March quarter of FY26, surpassing the industry average of 8%. The company closed FY26 with a total volume of 36.4 million tonnes and aims for 40 million tonnes in FY27. However, due to a low capacity utilization rate of 66%, Shree Cement has cut its capital expenditure (capex) guidance for FY27 from ₹3,000 crore (approximately $360 million USD) to ₹1,500 crore (approximately $180 million USD), focusing on ready-mix concrete expansion and initial work on a new plant in Meghalaya. Similarly, Ambuja Cements Ltd has moderated its capex plans, reducing its FY27 budget to ₹6,000-6,500 crore (approximately $720-780 million USD) from ₹7,500 crore (approximately $900 million USD) in FY26. This strategic slowdown in capex by both companies is intended to address overcapacity concerns and enhance profitability amid a broad-based slowdown in cement demand across India, linked to seasonal factors and economic conditions. Recent reports indicate that cement prices have increased by ₹10-13 per bag, but sustaining these prices may prove challenging if demand does not improve.
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The capex cuts by major cement manufacturers may lead to more stable cement prices, which could benefit homebuyers and construction projects by preventing further price inflation.
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