Detailed Narrative
Industry Overview and Demand Dynamics
Pan-India cement demand grew by 7% in FY26 to 480 million tons, an improvement over the 5% growth in FY25. Q4 FY26 saw 6-6.5% demand growth, with volumes up 17% QoQ. Demand was strong from December 2025 to February 2026 (8-10% growth) but moderated to 5% in March 2026 due to geopolitical conflicts. The company expects FY27-28 cement demand to grow around 6%.
Capacity Additions and Utilization
The industry witnessed its highest ever annual capacity addition of 64 million tons, bringing the national installed capacity to 712 million tons by March 2026. This led to pan-India capacity utilization of approximately 69%, marginally lower than the previous year. JK Lakshmi Cement's own capacity utilization for FY26 was 73% on a total capacity of 17.7 million tons, with the Surat plant already utilizing over 60% and expected to reach 70%+ this year.
Cost Headwinds and Pricing Environment
Fuel costs surged significantly in Q4 FY26, with pet coke prices up 40% QoQ to $160 per ton and global coal prices up 30% QoQ. While cement prices saw a partial recovery, particularly in the non-trade segment, intense competition and high capacity additions restricted meaningful price hikes. Management expects a cost impact of INR100-130 per ton in Q1 FY27, with a larger impact in Q2 FY27, but is confident in passing on the majority of costs if demand remains supportive.
Strategic Capacity Expansion Plans
JK Lakshmi Cement is pursuing an aggressive expansion strategy, targeting 30 million tons capacity by 2030. Planned capex for FY27 is INR1,500-1,700 crores and for FY28 is close to INR2,000 crores, including projects in Durg, Northeast, Kutch, and Nagaur. The Durg project is expected to be commissioned by end FY28, followed by the Northeast project a year later, and Kutch by FY30. Approximately INR500 crores has already been spent on the Durg project by FY26 March.
Profitability Improvement Initiatives
Despite FY26 EBITDA/ton being around INR730 compared to INR1,000 in FY25, the company aims to reduce the gap to industry leaders by INR50-75 in FY27. Key internal levers include improving the blended cement ratio from 62% to 65%, increasing clinker utilization to 97-98%, optimizing logistics, expanding renewable energy share (currently 46% with plans to go beyond), and deploying digital/AI/ML in manufacturing processes to improve efficiency and reduce costs.
NECEM Acquisition Update
The acquisition of NECEM is progressing, with past liabilities of approximately INR12.5 crores settled in March 2026. The total consideration involved INR19 crores plus liabilities, with INR1.5 crores paid for shares and INR3.5 crores of the additional INR7.5 crores capital induction completed. The company expects the transaction to be fully completed in Q1 FY27. This acquisition also led to a reduction in intangible assets by INR325 crores due to the derecognition of mining rights.
New Product Development and Brand Leverage
The company is exploring expansion into adjacent building materials, leveraging its brand strength and distribution network. This includes piloting products like TMT (iron rods) through partnerships, without direct manufacturing or distribution, to offer a broader portfolio to customers. This strategy aims to capitalize on synergies with the existing cement channel network and is currently in a nascent stage.