Summary
Star Cement Limited - Q3 FY26 Earnings Call Summary Monday, February 09, 2026 4:00 PM
Event Participants
Executives 2 Manoj Agarwal (CFO), Tushar Bhajanka (Deputy Managing Director)
Analysts 8 Harsh Mittal, Kamlesh Bagmar, Milind Raginwar, Navin Sahadeo, Rajesh Ravi, Shravan Shah, Siddharth Mehrotra, Uttam Kumar Srimal
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Cement Sales Volume | 12.31 lakh tons | +16% YoY; driven by 12% growth in Northeast and 32% growth outside Northeast. |
| Clinker Sales Volume | 0.65 lakh tons | Significant increase from 0.07 lakh tons YoY; management expects this run rate to continue. |
| Revenue | ₹880 crores | +22.4% YoY; supported by volume growth and a ₹20/bag price increase in Northeast. |
| EBITDA (Excl. Exceptionals) | ₹207 crores | +93.4% YoY; EBITDA per ton improved to ₹1,600 from ₹1,000 YoY. |
| Profit After Tax | ₹74 crores | +722% YoY; substantial jump due to operational leverage and improved margins. |
| Subsidy Income | ₹33 crores | -23% YoY; reduction attributed to GST rate cut from 28% to 18%. |
| Cost per kcal | ₹1.2 | Stable fuel costs; coal mix comprises 79% FSA, 15% biomass, and 5% spot. |
| Lead Distance | 212 km | Improved from 220 km sequentially. |
Geographic & Segment Commentary
- Northeast: Sold 9.36 lakh tons (+12% YoY) with stable pricing around ₹453 per bag; remains the primary margin driver with the Silchar unit (2 MTPA) set for commissioning in late February 2026.
- Outside Northeast (East): Sold 2.95 lakh tons (+32% YoY) across West Bengal and Bihar; EBITDA per ton in this region stands at ₹600–700, with targets to reach ₹800 through price optimization.
- AAC Blocks: Generated ₹13 crores revenue this quarter at 45% utilization; management targets ₹90–100 crores annual revenue at full capacity with 20% EBITDA margins.
Company-Specific & Strategic Commentary
- Geographic Diversification: Firm plans to enter the North market via a 3 million ton clinker plant in Nimbol (Rajasthan) and a 2 million ton grinding unit in Haryana to reduce regional concentration.
- Product Premiumization: Premium cement share of trade sales increased to 17.1% from 12% YoY, contributing to realization gains.
- Logistics Disruption: Experienced a temporary logistics cost spike in Q3 due to a transporters’ strike in Meghalaya, necessitating more expensive rake movements for clinker.
- Strategic Realignment: The Jorhat grinding unit project has been deferred in favor of a new 2 million ton grinding unit in Bihar to better utilize existing clinker capacity.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| FY26 Sales Volume | ~5.3 - 5.4 million tons | Includes both cement and clinker; implies 10-12% growth in Q4. |
| Total Expansion CAPEX | ₹4,800 crores | Budgeted for Bihar, Rajasthan (Nimbol/Haryana), and Assam (Umrangso) over 3-4 years. |
| Commissioning Timeline | Q3 FY28 - FY29 | Rajasthan project construction to start by Oct 2026; Umrangso clinker by FY29. |
| Long-term EBITDA | ₹1,300 - ₹1,400/ton | Consolidated target for the group post-expansion, though North-specific margins may initially be lower (~₹1,000). |
Risks & Constraints
| Risk | Context |
|---|---|
| Supply Overhang | Significant capacity additions (50-55 MTPA) coming up in North India may lead to aggressive competition and pricing pressure. |
| Execution & Leverage | Large ₹4,800 cr CAPEX plan; management aims to keep Net Debt/EBITDA below 1.5x, potentially requiring a QIP to fund the gap. |
| Regulatory & Mining | Ongoing crackdowns on illegal mining in Meghalaya; while currently sourcing via FSA/Biomass, any wider regional disruption could impact spot availability. |
Q&A Highlights
Pricing & Market Dynamics
- Question: How are prices holding up in Northeast following new capacity additions by competitors? (Navin Sahadeo)
- Answer: Prices have remained stable since the December hike; the management does not see a supply-induced price problem for the coming year. (Tushar Bhajanka)
Logistics Costs
- Question: Why did freight costs increase 13% YoY? (Harsh Mittal)
- Answer: Primarily due to a strike in Meghalaya in October which forced clinker movement via rakes instead of roads, increasing handling costs; this is viewed as a one-off. (Manoj Agarwal)
Expansion Strategy
- Question: What is the rationale for entering the North market? (Siddharth Mehrotra)
- Answer: It is a diversification story; the goal is to build a premium brand positioning rather than competing on volume/discounts, targeting ₹1,000+ per ton steady-state EBITDA. (Tushar Bhajanka)
Capital Allocation
- Question: How will the ₹4,800 crore CAPEX be funded? (Shravan Shah)
- Answer: Internal accruals and debt; a QIP of roughly ₹1,500 crores remains an option to keep Net Debt/EBITDA below the 1.5x threshold. (Tushar Bhajanka)
Key Takeaway
Star Cement delivered a robust Q3 FY26, characterized by a 93% YoY increase in EBITDA to ₹207 crores and a significant expansion in EBITDA per ton to ₹1,600. The performance was supported by healthy volume growth of 16% in cement and a strategic increase in premium product mix to 17.1%. The company is at a critical strategic pivot point, embarking on a ₹4,800 crore expansion program to diversify away from its Northeast stronghold into the North (Rajasthan/Haryana) and Bihar markets. While the Northeast remains the primary cash cow with stable pricing, the new projects aim to bring the total capacity to nearly 15-17 MTPA by FY29. Management maintains a volume guidance of 5.3-5.4 million tons for FY26 and expects to maintain consolidated EBITDA in the ₹1,300-₹1,400 per ton range long-term, despite potential initial margin dilution from the new, more competitive territories.
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