| Star Cement Meghalaya 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 ‘Crisil AA/Stable/Crisil A1+’ ratings on the bank facilities of Star Cement Meghalaya Ltd (SCML).
SCML is a subsidiary of Star Cement Ltd (SCL; ‘Crisil AA/Stable/Crisil A1+’) and has a clinker manufacturing capacity of 2 MTPA in Meghalaya. It procures limestone from SCL and supplies clinker to grinding units under SCL. Post the scheme of amalgamation between SCML and other subsidiaries of SCL viz. Meghalaya Power Ltd, Megha Technical and Engineers Ltd and NE Hills Hydro Ltd effective May 10, 2024, , SCML now houses 0.7 MTPA grinding unit and 51 MW thermal power unit as well. Further, SCML also undertakes fleeting services for SCL group companies under it. Thus, it remains crucial to the business of the parent.
Therefore, the rating factors the parentage of SCL, considering the strategic importance of SCML to the parent and the strong operational, managerial and financial linkages between the entities. These strengths are partially offset by limited scale of operations under SCML and captive nature of its business owing to dependence on SCL for procurement of raw material as well as sale of products.
SCML has a track record of stable operations with healthy utilisation levels in the clinker manufacturing unit. Although the utilisation levels dropped in fiscal 2025, owing to commissioning of a new clinker capacity under SCL in March 2024, utilisation is expected to remain strong at more than 80% going forward. Further, with captive fleet of 317 trucks as of March 31, 2025, the fleeting business is expected to continue to support the EBITDA over the medium term.
SCML has negligible debt on its books. The financial risk profile is further supported by the absence of large-scale capex, prudent working capital management and expected healthy cash accruals of more than Rs 130 crore each year going forward. |
Analytical Approach Crisil Ratings has applied its criteria for notch-up of rating based on parent support. This is owing to the strategic importance of SCML to SCL, its 100% effective ownership and common management by the parent. |
Key Rating Drivers & Detailed Description Strengths: Strong support from the parent, SCL SCL will have high operational, managerial and financial integration with its subsidiary, SCML, with the SCML being a wholly owned subsidiary of SCL.
The parent is expected to maintain its stance of financial and managerial support to the company, given its strategic importance to SCL. Further, the rating of SCML will remain sensitive to the credit rating of SCL.
Strategic importance to SCL Clinker manufacturing at SCML supports overall cement production at the facilities of SCL, and thus it remains crucial to its operations. The company commissioned WHRS capacity of 12.5 MW during fiscal 2024, which is also expected to support its overall efficiency.
Further, post the proposed scheme of amalgamation between SCML and other subsidiaries, the strategic importance of SCML to SCL has increased as SCML has gained ownership of 0.7 mtpa of cement capacity from Megha Technical & Engineers Pvt Ltd and 51 MW captive power unit from Meghalaya Power Ltd.
With healthy expected accruals annually, SCML is also expected to partly fund the capex requirements in SCL and/or other group companies through advances / equity infusion. Thus, it’s strategic importance to SCL will continue going forward.
Weakness: Moderate scale of operations SCMLs overall scale is moderate with a clinker unit of 2 mtpa in Meghalaya and limited external sales. Thus, it is sensitive to demand fluctuation risks in the region with absence of diversification. This risk is mitigated to an extent by a track record of the management in successfully keeping utilisation levels high and prudent working capital management in the company. Additionally, SCML is also undertaking fleeting operations, catering to transportation requirements of the parent and group companies.
Liquidity: Strong Liquidity of SCML derives strength from the overall liquidity of SCL. In turn, SCL has robust liquidity, driven by cash and bank balance at approximately Rs 52 crore as on March 31, 2025, and cash accrual of close to Rs 625 crore projected for fiscal 2026; Additionally, SCML is expected to generate accruals of more than Rs 130 crores each year over the medium term from its clinker and fleeting operations, which should be sufficient to fund its working capital needs. |
Outlook: Stable The outlook on bank facilities of SCML reflects the rating outlook of the parent, SCL.
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 SCML is a subsidiary of Star Cement Ltd, with clinker capacity of 2 MTPA in Lumshnong, Meghalaya, grinding capacity of 0.7 mtpa and thermal power capacity of 51MW. Additionally, it has a fleet of 317 owned trucks responsible for the logistical requirements of SCML and SCL group companies.
SCML was incorporated on 22nd December 2005, in Meghalaya under the name of “Meghalaya Logistics Ltd”. The name of the Company was changed on 12th March 2007 to ‘Star Cement Meghalaya Limited’. |
About the Parent 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 (SCML)
Key financials (SCL consolidated)
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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 - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||||||||||
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Criteria Details
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