Star Cement Ltd Q1 FY2027 Concall Summary

Key Takeaways

• A quarter hit by one-offs, not structural damage: EBITDA fell to ₹203 crores from ₹230 crores YoY, but ₹40 crores of that was the GST subsidy reduction alone; excluding it, EBITDA was positive in both percentage and absolute terms.
• Volume guidance revised down, not abandoned: Full-year FY27 volume growth is cut from 11-12% to 8-9%, with the miss concentrated in Q1-Q2 on Assam elections and floods; management still expects double-digit growth from Q3 onward.
• Rajasthan is now real: Land is purchased, the public hearing is scheduled for end-August, and construction should start by mid-October to November, putting commissioning at Q4 FY28 to Q1 FY29.
• Cost relief is visible but not yet in the P&L: Fuel should fall from ₹1.55 to ₹1.45 as FSA rakes normalize, and three logistics initiatives (Silchar siding, EVs, Siliguri wagon tippler) land in the next 3-6 months.
• What to watch next quarter: Whether September volumes actually catch up July's flood-driven 12% degrowth, the West Bengal industrial policy decision on grinding unit location, and the Rajasthan vendor lock-in.

Quarterly Performance: The Subsidy Cliff, Absorbed

• The ₹40 crore subsidy hit: Q1 FY27 was the first full quarter lapping the GST rate cut from 28% to 18% on the subsidy, and it alone explains most of the EBITDA decline. Management's framing is that excluding this one-time step-down, the quarter showed resilience.
• Per-ton economics compressed: Per-ton EBITDA fell to ₹1,497 from ₹1,774 YoY, driven by the subsidy reduction, higher packing material costs, and kiln shutdown expenses taken in one of the kilns.
• Fuel cost spike was temporary: Fuel rose from ₹1.33 in Q4 FY26 to ₹1.55 in Q1 because Coal India diverted FSA coal to power plants amid a power demand surge, forcing spot purchases at higher prices. Management expects normalization to ₹1.45 from Q2 as FSA rakes resume.
• PP bag inflation is exogenous: Packing material cost increases are tied to international turmoil and war conditions, and management says the trajectory is hard to predict.
• Northeast volumes were flat, not lost: Northeast sales were nearly flat (8.71 vs 8.67 lakh tons) because April, the best month, collided with the Assam election, and Assam is 60-70% of the Northeast market. Management explicitly stated no market share was lost to Dalmia's ramp-up.

Tushar Bhajanka: "If we actually exclude that hit of INR40 crores, then I think we were positive EBITDA in terms of percentage in absolute terms, which shows that there was resilience."

Volume Trajectory: Floods, Elections, and a Back-Half Bet

• July was the trough: July volume degrew ~12% YoY because Assam was completely flooded and shut down in many areas. August is showing marginal growth.
• September is the catch-up month: Last year's September was depressed by the GST revision from 28% to 18%, creating a weak base; this year September is expected to be free of floods and regulatory changes, so management hopes to recover July's lost volume then.
• Full-year guidance reset: Volume growth guidance is revised from 11-12% to 8-9%, with the first two quarters muted by elections and floods and the second half expected to release pent-up demand.
• Clinker sales are structurally weaker: FY27 clinker sale is expected to be stagnant or degrow 5-10% versus FY26 because clinker is now coming into the Northeast from outside players.
• Industry context: Northeast industry growth is expected at about 7% for FY27; Star hopes to do 8-9% in the region. No clinker capacity is coming online in FY27, and management expects about 0.1 crore tons each from two players over the next three years.
• West Bengal demand is muted: Cement demand in West Bengal has been soft partly due to a crackdown on illegal sand mining; management expects the government to open sand mining in some form after the rainy season because it is critical to construction.

Tushar Bhajanka: "I think we expect to probably revise the numbers. A bit from 11% to 12% to about 8% to 9%."

Rajasthan Expansion: From Paper to Ground

• Land and approvals in place: Purchase of plant land for the Rajasthan project is complete, and the plant plan for clinker and integrated grinding has been obtained. The public hearing for environmental clearance is scheduled for end-August, with EC expected by late September or early October.
• Vendor lock-in imminent: The company has started calling vendors for quotations and expects to lock vendors by end-August or start-September. Engineering work begins after vendor lock-in.
• Construction timeline: Work on ground is planned to start between mid-October and November, with completion in 18-20 months, implying commissioning around Q4 FY28 or Q1 FY29.
• Incentives secured but unquantified: Rajasthan has approved a standard package for the Nimbol clinker plant including capital subsidy and SGST benefit; the exact quantum was not available on the call and will be shared in the next presentation.
• Capex envelope still fluid: The North expansion is the primary focus of all capex for the next two years, but exact machinery specs are still being finalized; the budget may move ₹100-200 crores up or down from ₹2,700 crores. FY27 capex stays at ₹500 crores, FY28 at ₹1,500-odd crores.

Tushar Bhajanka: "It would be about 18 to 20 months from November onwards, I guess. So it means about quarter 1 of FY29 or quarter 4 of FY28."

Cost & Logistics Initiatives: The Next 3-6 Months

• Silchar railway siding: Expected by October-November, this will allow full operationalization of Silchar capacities and deliver logistics savings serving South Assam and other Northeast states.
• Siliguri wagon tippler: Planned for clinker and fly ash movement, expected to save about ₹150 per ton on Siliguri sales. This also changes the economics of a potential brownfield expansion at Siliguri.
• EV introduction: Planning to introduce EVs on some typical routes in the next 5-6 months for significant savings.
• Fuel cost normalization: Q2 onwards fuel cost should come down to about ₹1.45 as FSA rakes come more frequently, with further reduction hoped for in Q3 and Q4.
• Full-year EBITDA per ton: ₹1,500-₹1,600 is still a good estimate for the full year; Q2 may dip to about ₹1,400 due to shutdown costs and lower volume absorption of fixed costs in monsoon, but Q3 and Q4 should catch up.

Tushar Bhajanka: "Only for quarter 2 because the shutdown cost also gets added in the cost in quarter 2 and also because in Northeast, the rain is more so of course, the fixed costs are getting absorbed by a lower volume. So it may be about INR1,400 for quarter 2, but I think we'll catch up in quarter 3 and 4."

Capital Allocation: West Bengal vs Bihar, and the QIP Question

• West Bengal industrial policy is the trigger: The policy is expected around August 15, and the company will take a capex call based on potential benefits. If favorable, it may reconsider Bihar capex and redirect to West Bengal.
• Scale rules out splitting: Management does not think it makes sense to put 0.1 crore tons in West Bengal and 0.1 crore in Bihar because a greenfield grinding unit with railway siding needs economies of scale. The decision will be made after the policy announcement, with more clarity in the next investor call.
• Siliguri brownfield is attractive: The existing Siliguri plant has enough land for another grinding unit and railway siding, and the wagon tippler changes the economics. Capex decision to be shared next call.
• Timeline for the chosen unit: If demand continues, management plans to commission one of the grinding units in the next 2-3 years.
• QIP is opportunistic, not planned: Management is not actively thinking of a QIP at the moment but will do it at an opportune time if organic or inorganic opportunities require further funds.
• Assam subsidy receivables: ₹130 crores outstanding from Assam; everything up to June '25 will be cleared. ₹50-odd crores was received this quarter.

Tushar Bhajanka: "I don't think it makes sense to put 0.1 crore in West Bengal and 0.1 crore in Bihar because the overall capex of a grinding unit along with the railway siding in a greenfield project sometimes may not -- may need economies, which may not come with the 0.1 crore ton grinding unit."

Subsidy Mechanics & Non-Cement Businesses

• The subsidy step-down is now lapped: The GST revision from 28% to 18% hit in September '25, so from Q3 FY27 onwards there will not be much incremental loss from subsidy reduction. Profitability percentage growth in EBITDA will start reflecting in the books from Q3.
• Assam's new circular changes the math: The Assam government has issued a circular dividing the overall subsidy benefit across the remaining years of validity, reducing the annual payout.
• Non-cement revenue is behind plan: Not at the ₹150 crore ARR ballpark because demand has been sluggish; management expects to reach that level by Q4.
• RMC in the North is under evaluation: Management will evaluate the suggestion of entering the North with RMC units before the product launch and will discuss it in the next earnings call.

Tushar Bhajanka: "The hit that the books are facing because of the subsidy will stop being felt after September onwards, and you'll start seeing a growth thereafter."

Guidance & Commitments

Key Metrics