Star Cement Q1 FY27: Premium mix rises, but subsidies and costs bite

Star Cement entered FY27 with a quarter that management itself called tepid. For Q1 FY27, the company reported revenue from sale of cement and clinker of INR 943 crore, EBITDA of INR 203 crore, and profit after tax of INR 74 crore. Sales volume was 13.54 lakh tons, including clinker sales of 52 KT.

Operationally, the quarter carried multiple disruptions. Management cited delayed central government fund releases that tightened liquidity in parts of the market, temporary demand disruption due to elections in West Bengal and Assam, and broader uncertainty linked to the West Asia crisis. In addition, the company noted that intense protests and riots in Manipur negatively impacted sales in the region.

Despite the tough backdrop, Star Cement highlighted two commercial positives: premiumization continued, and market share in West Bengal improved. Premium share rose to 15.9 percent of trade sales in Q1 FY27 versus 12.2 percent in Q1 FY26. In West Bengal, within the companys operating area, market share increased from 19.4 percent to 22.0 percent, despite the election period.

What shaped Q1 FY27 performance

From the volume perspective, Star Cement posted modest year-on-year growth, but profitability weakened. In the investor presentation, the company flagged a key structural factor: subsidy declined by INR 39 crore year-on-year due to reduction of GST rate on cement and a change in reimbursement mechanism.

The conference call added more detail on margin pressure points. Management attributed the EBITDA decline primarily to reduced subsidy, increase in packing material costs, and shutdown expenses related to one kiln. Fuel costs also climbed, with fuel cost per NCV rising to 1.55 in Q1 from 1.33 in Q4. Management explained the increase was driven by lower sourcing from FSA and increased reliance on coal from Nagaland and spot contracts.

The operating mix remained heavily blended. Product-wise, the presentation shows 85 percent PPC and 15 percent OPC in Q1 FY27. The distribution mix remained road-heavy, with 88 percent dispatch via road and 12 percent via rail.

Q1 FY27 financial snapshot

Costs, logistics, and what management is trying to fix

Star Cements cost structure in the quarter was also influenced by logistics disruptions. The company highlighted route restriction by railways in NFR, which created challenges for coal and fly ash supply in the North-East. Separately, the Vikram Shila Bridge collapse at Bhagalpur affected fly ash cost at Siliguri.

On key operating cost lines, the presentation showed logistics cost of INR 1,280 per ton of cement in Q1 FY27, up from INR 1,255 in Q4 FY26. Lead distance reduced to 210 km from 220 km. Rail co-efficient moved down to 12.0 percent from 17.8 percent in Q4.

Power and fuel costs reversed sharply quarter-on-quarter. Power and fuel cost increased to INR 1,167 per ton of cement in Q1 FY27 versus INR 975 in Q4. Fuel cost per NCV rose to 1.55 from 1.33. Green energy share reduced to 26 percent in Q1 FY27 from 34 percent in Q4, while WHRS contribution was 25 percent.

Management commentary pointed to some near-term easing in fuel costs. On the call, the company indicated it expects fuel cost to reduce to around 1.45 in Q2, with potential further reduction in Q3 and Q4. However, the management described PP bag prices as difficult to predict given linkage to international turmoil.

Alongside cost normalization, Star Cement is pursuing logistics initiatives to structurally lower cost in select routes. The presentation mentioned trials for clinker movement through EV on the Lumshnong to Silchar route, and management said this could unlock meaningful value. In the call, management also spoke about a railway siding in Silchar expected by October to November, which could improve servicing of South Assam and nearby states. Additionally, the company plans a wagon tippler at Siliguri for clinker and fly ash handling. Management stated it expects about INR 150 per ton savings from Siliguri sales after commissioning the wagon tippler.

Expansion strategy: Moving from North-East leadership to a pan-India footprint

Star Cements medium-term narrative is anchored around a major entry into North India. The companys capacity roadmap outlines a move from 6.1 MTPA clinker capacity to 9.4 MTPA by FY29 and from 9.7 MTPA cement capacity to 14.7 MTPA by FY29.

The North India program comprises the Nimbol integrated unit in Rajasthan and the Jhajjar grinding unit in Haryana. In the investor deck, Nimbol is planned at 3.3 MTPA clinker and 3.0 MTPA cement, while Jhajjar is planned at 2.0 MTPA cement. The presentation shows a tentative project cash outlay of INR 3,080 crore across FY27 to FY29. It also states that ground-breaking work will start from Q3 FY27 onwards.

The call provided timeline clarity. Management said environmental clearance is expected around September end or October, with work on ground planned from mid-October to November. The company indicated an 18 to 20 month execution timeline from November, implying commissioning around Q4 FY28 or Q1 FY29, consistent with the FY29 label in the roadmap.

Funding discipline is a second pillar of the expansion plan. The presentation states expansions are planned with internal accruals and reasonable gearing. It also includes a stated guardrail of keeping net debt to EBITDA below 2x. On the call, management suggested the capex can be managed with debt to EBITDA at about 1.5x to 1.6x and said a QIP is not being actively considered at present.

The company also disclosed potential state subsidies for the new projects. For Rajasthan, options include capital subsidy at 23 percent of EFCI over 10 years, or net SGST reimbursement at 75 percent for 7 years, or a turnover subsidy of 1.65 percent of total sales from Nimbol over 10 years. For Jhajjar in Haryana, both net SGST reimbursement at 50 percent for 10 years and capital subsidy at 15 percent of EFCI over 10 years were listed.

Guidance and what to track over FY27

Management acknowledged that the first two quarters of FY27 are likely to be weak due to rain and flooding in the North-East, with the company observing volume degrowth in July. In response, management said the full-year cement volume growth expectation has been revised down from about 11 to 12 percent to around 8 to 9 percent.

Clinker sales guidance was also cautious. Management indicated clinker sales in FY27 could be stagnant or decline by 5 to 10 percent compared to FY26.

On capex, management said Q1 spend was around INR 93 crore and reiterated a FY27 capex plan of around INR 500 crore. For FY28, management referenced a capex run-rate of around INR 1,500 crore.

On incentives, management discussed a change in Assams payout mechanism and indicated that the annual subsidy expectation for the year could reduce from around INR 145 crore to about INR 115 crore.

Takeaways

Q1 FY27 showed that Star Cement is still able to protect its core franchise through premiumization and market share gains, but near-term profitability remains exposed to subsidy changes, fuel volatility, and regional disruptions like elections and floods.

The next set of triggers will likely be operational: normalization of volumes post-monsoon, fuel cost correction toward managements Q2 expectation, and delivery on logistics projects that management believes can structurally lower cost in Silchar and Siliguri.

Beyond FY27, the market will focus on execution discipline for the North India expansion. The capex plan, subsidy options, and timeline milestones are now publicly stated. Consistent progress on approvals, ordering, and construction from Q3 FY27 onwards will be key to whether Star Cement can successfully shift from a North-East stronghold to a broader India platform.