| Star Cement Limited | ||||||
| Ratings reaffirmed at 'Crisil AA/Stable/Crisil A1+' | ||||||
| Rating Action | ||||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||||
| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has reaffirmed its ratings on the bank loan facilities of Star Cement Ltd (SCL) at ‘Crisil AA/Stable/Crisil A1+’.
The ratings factors in the market leadership and strong brand recall of the company in the north-east region, healthy operating profitability and robust financial risk profile. These strengths are partially offset by susceptibility to volatility in input prices, the commoditised nature of the product and exposure to risks associated with the sizeable, ongoing capital expenditure (capex).
SCL’s strong market position in the northeast was enhanced with the commissioning of 3.30 MTPA clinker unit and 2 MTPA grinding unit in March 2024. Successful stabilization and ramp up of utilization levels at these facilities will enable additional sales volume. Additionally, the group has ongoing projects to further enhance capacity in the northeast by 4 MTPA, through 2 MTPA grinding units each in Silchar (expected to get commissioned by fourth quarter of fiscal 2026) and Jorhat (expected to get commissioned by fourth quarter of fiscal 2027). The commissioning of these facilities will enable higher scale of operations and full balancing of cement and clinker capacities, thereby enabling higher utilisation and strengthening of the business risk profile of the company. Further, the group also plans to set up an integrated unit at Rajasthan, over the next 3-4 years which will entail capex of Rs 3,000-3,500 crores, funded through internal accruals and external borrowings. The financial risk profile is expected to remain robust even with planned capex, with cash accruals of more than Rs 2,300 crore over the next three fiscals cumulatively, which will keep the overall external debt in check.
For fiscal 2025, SCL recorded revenue of Rs 3,163 crore (Rs 2,912 for fiscal 2024) at a consolidated level, driven by 7.5% on-year increase in volume to 4.73 million tonne (from 4.40 million tonne in fiscal 2024) supported by increase in utilisation of Siliguri and Guwahati units. During the period, EBITDA/ton moderated to Rs 1,223 from Rs 1,281 in fiscal 2024, owing to subdued cement realisations across the industry. However, operating performance recovered during fourth quarter of fiscal 2025, as reflected in EBITDA per ton of Rs 1,715, as benefits from incentives and ramp up in utilisation boosted the profitability. With continuing benefit of incentives, EBITDA/ton is expected to improve and remain more than Rs 1300-1400 going forward. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of SCL and its subsidiaries, collectively referred to as SCL herein. This is because all the companies are in the same or related businesses, have a common management and fungible cash flow.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths: Established market position and brand, and lesser competition in north-east India SCL is a leading cement player in north-eastern India, supported by its strong brand. It had volume market share of ~25% as of March 31, 2025, in the region. Owing to its strength as a local brand, the company has been able to command higher prices compared with its peers in the region as reflected in its industry-leading blended realisations. Furthermore, competitive intensity is comparatively low in the north-eastern region as some of the pan-India players do not have manufacturing base in the region and transporting cement from outside the region is not economically viable owing to the high freight costs in the hilly terrain. This gives local players such as SCL an edge in terms of higher pricing flexibility.
SCL also has presence in eastern India primarily in West Bengal and Bihar. Additionally, SCL also plans to set up an integrated unit in Rajasthan, over the next 3-4 years. This would diversify its geographical presence and further strengthen its business risk profile.
Healthy operating profitability SCL has maintained healthy profitability over the years, as indicated by average Ebitda per tonne of more than Rs 1,350 over the decade through fiscal 2025, owing to better pricing flexibility, financial incentives and cost-efficient operations. Operating profitability recovered in fiscal 2024 with reduction in input costs, after having moderated over the past 3-4 years owing to sunset of freight incentives and increase in sales volume outside the northeast (which fetch lower margins). Profitability moderated again in fiscal 2025 with subdued cement realisations across the industry. However, benefits from SGST incentives, improvement in pricing, ramp up in utilisation and savings from waste heat recovery system (WHRS) of 12 MW should support the profitability increase over the medium term.
Robust financial risk profile with strong debt protection metrics SCL had negligible debt and healthy networth of Rs 2,871 crore as on March 31, 2025. While the company is expected to borrow to fund the ongoing sizeable expansion of around Rs 3,000 crore, it is likely to maintain strong capital structure and healthy debt protection with strong accruals every year. Also, it has a track record of bringing down debt post commissioning of new capacities. Higher-than-expected leverage as a result of either new expansion or any potential acquisition will be a monitorable.
Weaknesses: Geographical concentration and small scale of operations SCL is a regional player, with more than 71% of its sales volume being in the north-east, rendering the company vulnerable to demand and supply patterns in the region. However, the company is steadily diversifying in eastern India to reduce the geographical concentration. Further, it is also looking at increasing share in the trade segment. While favourable demand scenario and strong brand positioning are strong mitigating factors, geographical concentration will remain a risk over the medium term. Additionally, SCL has small (though growing) capacity compared with established, pan-India players.
Susceptibility to volatility in input prices and cyclicality in the cement industry Capacity addition in the cement industry tends to be sporadic because of the long gestation period for setting up a facility and numerous players adding capacity during the peak of a cycle. This led to unfavourable price cycles for the sector in the past. Moreover, profitability remains exposed to volatility in input prices, including raw material, power, fuel and freight. |
Liquidity: Strong SCL has strong liquidity driven by cash and bank balance at approximately Rs 52 crore as of March 31, 2025 and expected accrual of close to Rs 625 crore in fiscal 2026. Further cushion is available in the form of moderately utilised fund-based bank lines of Rs 300 crore. SCL has minimal repayment obligations in fiscal 2025. While SCL will dip into its cash balance to fund the equity portion of capex, accruals and bank lines should be sufficient to cover for any incremental working capital requirements of the company. |
Outlook: Stable Crisil Ratings believes SCL will maintain a strong credit risk profile over the medium term on back of its strong credit metrics and with commencement of additional capacities, resulting in increased scale of operations and superior cash accruals. |
Rating Sensitivity Factors Upward factors:
Downward factors:
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About the Company Based in Lumshnong (Meghalaya), SCL (formerly Cement Manufacturing Company Ltd [CMCL]) was earlier a subsidiary of Century Plyboard (India) Ltd (CPIL). It commenced operations in December 2004. After a demerger in April 2012, CPIL transferred its cement, ferroalloy and power divisions to Star Ferro and Cement Ltd (SFCL), which held 70.5% in CMCL. In March 2015, the businesses were further demerged. The ferroalloy and power businesses were transferred to Shyam Century Ferrous Ltd (SCFL). SCL got its present name in June 2016. In August 2016, the board approved reverse merger of SFCL into SCL, which was completed in the first quarter of fiscal 2018, post which SCL, the operating company has become the listed parent company.
SCL has a combined cement manufacturing capacity of 7.70 MTPA, clinker manufacturing capacity of 6.1 MTPA, 12.3 MW WHRS and a captive power plant with capacity of 51 MW as of March 31, 2025. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure – List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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