normal monsoon. Going forward, CRISIL Research expect the cement demand multiplier to replenish as cement
demand revives from low levels.

In fiscal 2018, the cement demand to GDP multiplier rose to 1.4 post a subdued demand scenario during fiscals
2014 to 2017. In contrast, the cement industry was growing at a healthy rate of 1.2 times of GDP during fiscals
2007 to 2013 owing to healthy capital investments.

Cement demand - GDP growth trend

   

    

(%)
sucess 2 eee
400) Buoyant economy Healthy multiplier (sustained Structural shiftfrom Ecol 19%
360 (GDP growth: >9%) development accross sectors) manufacturingto followed by pandemic’
~ \ services economy led recession 10%
300 — a
5%
250
200 0%
150
5%
100 7
10%
50
» LSI [183] [202] i237] [24s] [257] [200] [2z4} [200} [225] [228] 295]/
5 8 2 = = e = 2 2 = 2 2 & =
§ § ¢ €£ &£ @ &£ 2 @#@ & &€ &@ @ G&G
= & : & & & & & & & 8 & & & 8
mms Cement Demand (Mn tonns) —>— Cement Demand Growth India GDP growth

Source: CRISIL Research

The cement industry, after witnessing a healthy demand growth of ~12% in fiscal 2019, exhibited slowdown with
decline of ~2% in fiscal 2020. Apart from the general economic slowdown, cement demand was sluggish during
the first half of fiscal 2020, post the general elections in April-May 2019. The second half of fiscal 2020 witnessed
extended monsoons, low capital expenditure on infrastructure and road activities, labour shortage owing to local
elections and water and sand unavailability in several states along with financial stress in the NBFC and housing
sectors. Though the demand started indicating some signs of improvement since December 2019, the momentum
could not be sustained due to the Covid-19 pandemic in the seasonally strong quarter of the fiscal. This severely
impacted construction activities, which consequently resulted in the industry witnessing decline in fiscal 2020,
the first time in the last two decades.

CRISIL Research expects cement demand to register 3.5-4.5% CAGR over fiscals 2021 to 2025 as against a robust
5.0% CAGR witnessed during fiscals 2016 to 2020, driven by a raft of infrastructure investments and moderate
revival in housing demand.

Cement demand outlook

 

400 15%
cu 10%
300
250 SH
200 0%
150 aR
100
50 “10%
- “15%

FY15 FY16 Fy17 Fy18 FY19 FY20 FY21P FY24P
mmm Cement Demand (mn tonnes) -——=% growth y-o-y

Source: CRISIL Research

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