Detailed Narrative
Q2 FY26 Performance Overview
Star Cement reported robust Q2 FY26 results with revenue growing 26.3% YoY to ₹811 crores, and EBITDA more than doubling to ₹194 crores from ₹97 crores in the prior year. PAT saw a significant surge to ₹71 crores from ₹6 crores. This strong performance was supported by a 20.16% increase in total sales volume (cement + clinker) to 11.74 lakh tons and an improved EBITDA/tonne of ₹1,650, up from ₹995.10 last year.
Strategic Expansion into Bihar
The company announced plans for a new 2 million tons grinding unit in Begusarai, Bihar, driven by a lucrative 300% SGST benefit under Bihar's new industrial policy. This expansion aims to cater to the fast-growing East Indian market, leveraging existing sales of 6-7 lakh tons in Bihar and optimizing clinker utilization. The project is expected to cost approximately ₹500 crores, including land, and is targeted for commissioning by H1 FY28.
Long-term Capacity Roadmap
Star Cement outlined a multi-stage expansion strategy. Following the Silchar project commissioning by January next year, the immediate priority is the Bihar grinding unit. Concurrently, the company is working on a 4 million tons clinker-grinding complex in Rajasthan, with land and mines already acquired in Nimbol and Jaisalmer. A clinker plant in Umrangso, Assam, and a grinding unit in Jorhat are planned for 2028-29, aiming for a total capacity of 14 million tons cement and 9 million tons clinker by 2030.
Incentive Dynamics and Fuel Cost Stability
The company booked ₹56 crores in incentives during Q2 FY26. Management clarified that while the per-ton benefit from SGST incentives has reduced by ₹130-150 due to GST rate cuts, the total incentive pool remains unchanged, with the realization period merely extended. Fuel costs remained competitive at ₹1.25 per kcal in Q2, and management expects this to remain stable between ₹1.25-₹1.3 per kcal for the next 5 months, supported by existing book stock.
Product Diversification and FY26/FY27 Outlook
Star Cement is diversifying its product portfolio, having launched AAC blocks 3-4 months ago, which contributed ₹13-14 crores in Q2 FY26 and are projected to generate ₹50-60 crores for FY26 and ₹80-90 crores for FY27. The company also launched a construction chemical segment this month and is investing in R&D for forward integration. For FY27, the company anticipates a 12% volume growth, while maintaining its FY26 volume target of 5.4-5.5 million tons and an EBITDA/tonne guidance of ₹1,500-₹1,550.
Q2 Operational Impact
The company's Q2 FY26 per-ton EBITDA was impacted by approximately ₹100 due to annual shutdown costs of ₹13-14 crores. This is a recurring annual event, typically occurring in Q2, and is not expected to affect Q3 profitability.
Funding and Market Demand
Star Cement has passed a resolution to raise ₹1,500 crores to fund its Rajasthan expansion, with the specific form of fundraising (e.g., QIP, preferential allotment) to be determined and announced later. Management noted robust demand in the Northeast, with the market growing at 8-9%, higher than other regions. They also anticipate significant future demand from upcoming dam and hydro projects in Arunachal Pradesh.