The Ramco Cements Ltd Management Discussions

NAVIGATING THE GLOBAL ECONOMY

The global economy grew by an estimated 3.4% in 2025, according to the International Monetary Funds World Economic Outlook (April 2026). Over the past year, headwinds from higher trade barriers and elevated uncertainty were somewhat offset by tailwinds from technology-related investment and accommodative financial conditions. However, the outbreak of war in the Middle East earlier in the year severely tested this resilience. The geopolitical conflict emerged as a significant counterforce to recent economic momentum, impacting commodity markets, inflation expectations, and financial conditions. It continued to weigh on the expansion and broad-based capex recovery. Under the assumption of a limited conflict, global growth was projected to slow to 3.1% in 2026.

As the global economy advanced through 2026, risks remained heavily tilted to the downside. The conflict in the Middle East severely disrupted critical energy supply chains, causing heightened instability around the Strait of Hormuz. As a transit route for nearly 20% of global oil and gas flows, its disruption raised industrial input costs globally. These constraints sharply increased energy prices. Earlier in the year, the IMF projected energy commodity prices to rise by 19% in 2026, including a 21.4% structural increase in oil prices. Higher energy costs renewed inflationary pressures, with global headline inflation forecast to reach 4.4% in 2026 before resuming its decline to 3.7% in 2027. For energy-intensive and importing sectors, this has directly increased fuel, power, and logistics expenses. Food prices also faced upward pressure due to higher energy and fertilizer costs, disrupted shipping routes, and compounded transport delays. Consequently, world trade volume growth is anticipated to decline from 5.1% in 2025 to 2.8% in 2026, reducing overall global trade efficiency.

The global economic outlook remains highly uncertain, with elevated downside risks predominantly arising from energy disruptions and deepening geopolitical fragmentation. According to the IMFs April assessment, while the baseline forecast indicates a modest slowdown, an adverse scenario involving a prolonged conflict and persistent energy price pressures could drag global growth down to 2.5% in 2026, pushing inflation to 5.4%. A more severe scenario involving sustained damage to energy infrastructure could reduce global growth to nearly 2%, leaving the world economy at the brink of a global recession.

In this context, agile policy responses remained critical throughout the year. Central Banks maintained vigilance, focusing on anchoring inflation expectations and safeguarding price stability against prolonged supply shocks. Concurrently, governments have balanced the trade-offs of scaling up necessary defence spending against the risks of weakened fiscal sustainability, ensuring that support for vulnerable populations remained targeted, timely, and temporary. Over the medium term, early macroeconomic stabilisation and an accelerated shift away from volatile energy dependencies will be essential to rebuilding institutional credibility and laying the foundation for a sustained recovery.

Indias economic trajectory in 2025-26 reflects sustained growth, supported by strong domestic fundamentals and prudent policies. The Second Advance Estimates by the National Statistics Office (NSO), released in February 2026, project real GDP growth at 7.7%, highlighting resilient demand and structural strength.

Growth was largely driven by domestic factors, particularly robust private consumption, the key driver. Strong macroeconomic fundamentals, including foreign exchange reserves of about USD 710 billion, stable financial conditions, and improving external metrics, enhanced resilience to external shocks such as geopolitical disruptions, oil price volatility, and global market fluctuations. While risks from capital outflows, trade dynamics, and energy security persisted, stronger buffers, policy support, and domestic demand continued to stabilise growth.

Inflation remained within the target range. Retail inflation, measured by the Consumer Price Index (CPI), stood at 2.1% in 2025-26, driven by price pressures in food and beverages, clothing, housing, and utilities. Despite these pressures, inflation stayed within the Reserve Bank of Indias (RBI) 2-6% band, indicating relative price stability.

Reflecting this backdrop, the RBIs Monetary Policy Committee (MPC) kept the policy rate at 5.25% in its February 2026 meeting, retaining a neutral stance. This followed cumulative rate cuts of 125 basis points during 2025, with transmission visible in lower lending rates. While easing inflation supported expectations of further cuts, the stance remained balanced to support growth and anchor inflation expectations.

Supply-side conditions remained supportive. The Index of Eight Core Industries (ICI), covering coal, crude oil, natural gas, refinery products, fertilisers, steel, cement, and electricity, grew 2.9% between April 2025 and February 2026, indicating continued but moderate expansion. This helped ease bottlenecks and supported industrial activity, especially in infrastructure-linked sectors.

However, inflation risks persisted. Global uncertainties, including disruptions in West Asia, continued to pose upside risks to energy prices. Given Indias reliance on energy imports through the Strait of Hormuz, any disruption could raise fuel costs, affecting transportation, logistics, and input costs across sectors such as cement.

Against this backdrop, sectoral trends supported industrial growth. Manufacturing saw improved capacity utilisation, aided by policy measures such as the Production-Linked Incentive (PLI) scheme across 14 sectors. With cumulative investments exceeding Rs. 1.7 lakh crores, the scheme continued to boost domestic manufacturing, reduce import dependence, and strengthen the industrial ecosystem.

Urban infrastructure remained central to Indias growth strategy, supported by sustained public investment and policy focus. Public capital expenditure was budgeted at Rs. 12.22 lakh crores, up year-on-year, at 4.4% of GDP, reinforcing infrastructure-led growth.

Investments continued across flagship programmes such as Bharatmala Pariyojana, Sagarmala, Smart Cities Mission, and UDAN, improving connectivity, logistics efficiency, and transport costs. The expansion of high-speed rail corridors and dedicated freight corridors is expected to improve freight efficiency, critical for bulk commodities such as cement. Policy focuses also expanded to City Economic Regions (CERs), with investments aligned to region-specific growth drivers. In parallel, infrastructure development in Tier 2 and Tier 3 cities remained a priority, supporting distributed urbanisation and incremental demand for building materials.

The government introduced measures to enhance private participation in infrastructure. The Infrastructure Risk Guarantee Fund provides partial credit support for long-gestation projects, improving risk sharing.

Support to states also strengthened through expansion of the 50-year interest-free loan scheme, with allocations increased to Rs. 1.85 lakh crores for 2026-27, supporting infrastructure spending.

Affordable housing remained a key focus. PMAY-Urban 2.0 was scaled up with higher outlay, while PMAY-Gramin continued supporting rural housing, including additional units. The SWAMIH initiative advanced to its next phase, providing last-mile funding for stalled housing projects. Completion of these projects remains critical to unlocking demand across construction-linked sectors, including cement.

Sustainability remained a priority, with allocations towards Carbon Capture, Utilisation, and Storage (CCUS) and continued emphasis on cleaner mobility. The push for electric buses and investments in low-carbon infrastructure signals a gradual shift towards sustainable urban development.

For the cement industry, these initiatives are expected to increase focus on low-carbon production, alternative fuels, and emission management, alongside evolving regulations.

Indias growth outlook for 2026-27 remains robust, with real GDP projected at 6.8-7.2%, supported by stable macroeconomic fundamentals despite emerging domestic pressures. However, domestic demand may moderate amid rising input costs.

Policy support across fiscal, monetary, labour, and trade measures will remain critical to growth. Nevertheless, external risks stay elevated. Ongoing Middle East tensions and disruptions in the Strait of Hormuz could raise energy, freight, and insurance costs, affect industrial output and trade flows if sustained.

For infrastructure and construction-linked sectors, including cement, these trends may impact both demand and cost structures. These dynamics highlight the need for continued macroeconomic vigilance to sustain growth momentum and ensure long-term resilience.

The cement industry remains a key enabler of Indias economic and infrastructure-led growth, supporting housing, urban development, and core industries. As a critical input, cement plays a central role in executing large-scale infrastructure projects, including highways, metro systems, bridges, and smart cities, along with residential and commercial construction. Effective 22nd September 2025, the GST rate on cement was reduced from 28% to 18% following the 56th GST Council meeting. This rationalisation is expected to improve cost efficiency across the value chain, enhance construction affordability, and drive demand across infrastructure and housing segments. It also aligns cement taxation with other core materials, easing developer costs and improving project viability.

Thesectorcontinuestobenefitfromfavourablemacroeconomic conditions. Indias per capita cement consumption stands at approximately 290 kg, compared to the global average of 540 kg, indicating strong growth potential. Demand remains supported by sustained government focus on infrastructure, including highways, railways, housing, smart cities, and rural development.

At the same time, the industry faces emerging external challenges. Escalating geopolitical tensions, particularly the US-Iran conflict, have disrupted key energy supply routes, causing volatility in fuel prices such as crude oil, coal, and pet coke. This has led to elevated input costs across the sector; however, strong fundamentals continue to support resilience.

• Transition Towards Low-Carbon Cement

Sustainability is emerging as a strategic priority, with manufacturers accelerating adoption of alternative fuels, blended cement, and energy-efficient processes. This shift towards low-carbon production is expected to reshape industry competitiveness.

• Digitalisation and Process Innovation

Increasing integration of automation, advanced controls, and digital monitoring systems is driving efficiency and cost optimisation. Technology adoption is enabling better plant performance, predictive maintenance, and more data-driven decisions.

• Demand Diversification across Tier 2 and Tier 3 Markets

Cement demand is shifting beyond metropolitan centres, with Tier 2 and Tier 3 cities emerging as high-growth markets. Infrastructure expansion and urbanisation in these regions are broadening demand and creating new growth corridors.

The outlook for Indias cement industry remains positive, supported by infrastructure development and urban expansion. As a core construction input across residential, commercial, and industrial segments, cement demand remains closely tied to government capital expenditure and real estate activity. This favourable demand environment is expected to drive volume growth of approximately 6-7% in 2025-26. At the same time, the sector is likely to see significant capacity expansion, with an estimated 160-170 million metric tonnes to be commissioned by 2027-28, enhancing long-term growth visibility and market depth.

However, caution is warranted amid ongoing geopolitical tensions in the Middle East, which may cause volatility in energy and freight costs. Prolonged disruptions could pressure input costs and margins, even as underlying demand fundamentals remain strong.

The Ramco Cements Limited (‘Ramco Cements or ‘We) is a leading force in Indias cement sector, with over six decades of legacy. We have a strong presence across South and East India, supported by a distribution network of around 10,000 dealers and 25,000 sub-dealers. Our integrated manufacturing capabilities, along with a robust supply chain, ensure the seamless delivery of the right product for the right application across diverse regional markets.

Our growth is anchored in disciplined operational excellence and sustainable expansion. Through strategic debottlenecking and targeted brownfield enhancements, particularly at Kolimigundla and Ariyalur, we continue to strengthen our production base in line with Indias rising demand for high-quality construction materials.

Our product portfolio reflects a strong understanding of evolving customer needs, with a consistent focus on quality, strength, and durability. Our flagship offerings of blended cements, such as Ramco Supergrade, Ramco Supercrete, Ramco Super Steel and other cements such as Ordinary Portland Cements (43 and 53 grades), serve both residential and large-scale infrastructure segments. Beyond our core cement products, our Hard Worker brand offers 20 specialised construction solutions, from plasters and waterproofing products to tile adhesives, enhancing precision and performance across all construction stages.

Read more about our Product Portfolio on Page No. 8.

Sustainability remains integral to our long-term strategy. We have emerged as a leader in environmental stewardship, achieving 4.5X water positivity and meeting about 40% of our power needs through green energy, including wind power and Waste Heat Recovery Systems (WHRS). With a focused approach to reducing carbon intensity and a continued commitment to inclusive community development, we are strengthening the environmental and social foundations that support Indias long-term growth.