Star Cement Ltd Q1 FY2026 Concall Summary

Key Takeaways

• Earnings tripled on incentive booking and volume growth: PAT surged to ₹98 crores (vs ₹31 crores YoY), boosted by ₹62 crores in incentives booked during the quarter, while cement volumes grew 6% YoY.
• Early monsoon hit Q1 volumes, but full-year target stands: Management is sticking to its 0.54-0.55 crore ton FY26 volume guidance, betting on a pickup in subsequent months after the Northeast monsoon recedes.
• Rajasthan entry is the big strategic bet: The company is bidding for a mine in Jaisalmer; if secured, it plans a ₹2,400-₹2,500 crore integrated plant, a move that would nearly double its capacity and geographic footprint.
• Balance sheet is clean, subsidy backlog is clearing: Net debt stood at ~₹300 crore in March, cumulative outstanding incentives are ~₹150 crore, and management expects the backlog to be received before Q2 end.
• What to watch next quarter: Whether the Rajasthan mine auction succeeds, the pace of volume recovery after the early monsoon disruption, and progress on the Silchar grinding unit commissioning timeline.

Quarterly Performance

• Volume growth despite headwinds: Cement sales rose to 12.22 lakh tons from 11.54 lakh tons YoY, with Northeast volumes up 5.5% and outside-Northeast volumes up 7%. Clinker sales added 0.74 lakh tons from a negligible base.
• Profitability jump was incentive-led: EBITDA more than doubled to ₹230 crores and EBITDA per ton improved to ₹1,774 from ₹1,018, but ₹62 crores of the gain came from incentive booking, with another ~₹150 crores in cumulative outstanding incentives yet to be received.
• Sequential cost increase was an absorption artifact: Power and fuel and raw material costs rose QoQ because lower kiln utilization in Q1 (driven by lower demand and early monsoon) pushed up per-unit overhead absorption; underlying production cost was flat.
• Premium cement share stalled sequentially: Premium sales improved from 6-7% a year ago to 12% currently but remained flat versus Q4; the year-end target is 18%.
• Fuel costs are benign and locked in: Q1 fuel cost (rupees per Kcal) was slightly better than Q4 and better than the same quarter last year; 78% of fuel requirement is met through FSA, and management is hopeful the current level (~1.35) holds through the fiscal year.

Tushar Bhajanka: "The Quarter 1, because of the early monsoon, the volume has taken a bit of a hit. I think in Quarter 2, because now we do not have as much monsoon in northeast, I think the subsequent months are picking up well. So, I think it will take another full quarter to actually see whether volumes will end up. But I do think that it may be realistic to get that kind of a growth."

Expansion Pipeline

• Silchar grinding unit on track for Q4 FY26: Construction has started, all permissions are in place, and commissioning is expected in January or February of this financial year; only ₹105 crores has been spent to date, with major payments due in Q2 and Q3.
• Jorhat grinding unit targeting Q4 FY27: Land has been selected, the application for environmental clearance goes in within a month, and clearance is expected in 3-4 months; commissioning is penciled in for January or February of next financial year.
• Rajasthan is the transformative opportunity: The company has bought mines in Nimbol and is participating in an auction in Jaisalmer, with news expected in a week; if a mine is secured, the plan is a 3-million-ton clinker plant plus a 0.4 crore ton grinding unit at a CAPEX of ₹2,400-₹2,500 crores, roughly three years from mine acquisition to commissioning.
• Bihar plant under evaluation: Management is assessing a 0.2 crore ton grinding unit in Bihar and expects to have an answer in a quarter or two.
• AAC block plant ramping slowly: Commissioned 1-1.5 months ago and currently operating at ~40% capacity; revenue is expected at ₹70-₹80 crores this year, with a 20-30% ramp-up next year.

Tushar Bhajanka: "Right now, we are trying to just secure a mine. But if you are able to secure a mine, then we plan to do a CAPEX of, we plan to put up about 3-million-ton clinker plant along with 0.4 crore ton grinding in Rajasthan, which would basically be about Rs. 2,400-Rs. 2,500 crores CAPEX overall."

Market & Competitive Position

• Northeast pricing is holding: Prices in the Northeast and East are maintaining, and management does not expect a big dip during the off-season.
• Siliguri unit pivoting to higher-price markets: The company is pushing more volume from Siliguri into West Bengal and Bihar, where prices have improved, and expects this to lift Q2 volumes.
• Northeast market structure is favorable: The market is expected to grow at about 10% CAGR, no other plant is expected in the next 3-4 years, and the region will be dominated by two players; a third player is possible in 3-4 years, but the market will be big enough to absorb it in 4-5 years.
• No synergy from Ultratech's stake: When asked about any business relationship or benefit from Ultratech's shareholding (trade arrangements, dealer distribution, logistics, cost), management stated both companies operate at arm's length with no synergy being realized.
• Northeast utilization is moderate: The market is operating at 65-70% capacity utilization, leaving headroom for volume growth without new capacity.

Balance Sheet & Capital Allocation

• CAPEX guidance intact: ~₹820 crores for FY26 and ~₹600 crores for FY27, covering Silchar, Jorhat, and other ongoing projects.
• Debt comfort and funding options: Management is comfortable with about ₹1,500 crores of debt in a worst-case scenario; if the Rajasthan expansion proceeds, a QIP may be considered. Net debt stood at around ₹300 crore in the March quarter.
• Subsidy collection track record is clean: ₹150 crores was booked last year and is expected to be received before Q2 end; going forward, the subsidy for each quarter should be received by the end of the next quarter, and management emphasized that subsidies are not merely a book entry.
• EBITDA trajectory improving: Management expects ₹850-₹900 crores of EBITDA from this year onward, with a probable improvement next year.

Tushar Bhajanka: "the subsidy does not remain an amount which is just showing in the books and never received by the company. So, in our case, it has"

Energy Strategy

• Green energy roadmap in the works: EY has been hired to design a comprehensive plan for substituting power requirements with green energy; a clear roadmap is expected in a month.
• 40 MW solar in Assam underway: The company is implementing its own solar capacity, and management argued that owning plants makes more long-term sense than PPAs because the variable cost falls to ₹0.6-0.7 per unit versus paying a tariff.
• PPA with JSW Green Energy delayed: The agreement should start contributing by the end of the fiscal year, though there has been a 3-4 month delay. Wind options in other states are also being evaluated.

Tushar Bhajanka: "if you put up your own plants, then your base cost is only the cost of the O&M of the plant, solar or wind. So, your variable cost falls to 0.6-0.7. So, I think in the long run, it makes much more sense for them and companies if they want to be competitive to kind of put up their own plants"

Guidance & Commitments

Key Metrics