| Star Cement North East Limited | ||||||
| Long-term rating reaffirmed at 'CRISIL AA/Stable'; 'CRISIL A1+' assigned to Short-term bank debt; Rated amount enhanced for Bank Debt | ||||||
| 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’ rating on the long-term bank facilities of Star Cement North East Limited (SCNEL) and assigned its 'CRISIL A1+’ rating to the short term bank facilities.
Star Cement Ltd (SCL; ‘CRISIL AA/Stable’) has a 60% stake while Star Cement Meghalaya Ltd (SCML; ‘CRISIL AA/Stable’; wholly-owned subsidiary of SCL) has a 40% stake in SCNEL. The rating considers strategic importance of SCNEL to SCL and centrally factors the strong operational, managerial and financial support SCNEL will receive from SCL on an ongoing basis. These strengths are partially offset by risks associated with the sizeable, ongoing capex.
The company commissioned 2 MTPA grinding unit in Guwahati during March 2024 and recorded a utilisation of more than 50% during the first quarter of 2025. Further, it is setting up cement grinding capacity of 2 MTPA each in Silchar (expected to get commissioned by third quarter of fiscal 2026) and Jorhat (expected to get commissioned by third quarter of fiscal 2027), for a total budgeted cost of around Rs 1,000-1,100 crore over fiscals 2025-2027. |
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 SCNEL to SCL, and its 100% effective ownership and common management by the parent. |
Key Rating Drivers & Detailed Description Strengths:
SCL will have high operational, managerial and financial integration with its subsidiary, SCNEL. The parent holds 100% effect stake in SCNEL (including stake of SCML, a subsidiary of SCL), thus giving it complete control over the operations. SCL intends to infuse funds for the upcoming capacities of SCNEL and could also extend corporate guarantee for the debt to be raised for the project. Further, the grinding units of SCNEL will receive clinker from the Lumshnong plant of SCL; this will result in SCL achieving full balance between its clinker and grinding capacities at an overall level.
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 SCNEL will remain sensitive to the credit rating of SCL.
The capacity additions undertaken in SCNEL is strategic from the perspective of SCL as the recently commissioned 2 MTPA grinding unit at Guwahati, and upcoming 4 MTPA grinding capacity would further strengthen the market position of SCL in northeast India; the subsidiary will form around 51% of the expected combined capacity of 11.7 MTPA of the parent by FY27.
SCNEL’s plants will also be eligible for state government incentives such as refund of State Goods and Service Tax for up to 200% of the cost of machinery, factory building land & site development. This would, in turn, boost the operating profitability of SCL.
Weakness
SCNEL is undertaking a capex of around Rs 1,000-1,100 crore to set up two grinding units of 2 MTPA each, which should commence commercial operations in fiscal 2026 and 2027 respectively. The capex is likely to be funded through a both external term loans and loans extended from parent SCL; This exposes SCNEL to risks associated with funding and implementation of the project. This risk is mitigated to an extent by track record of the management in successfully tying up funds from lenders and setting up similar projects in the past. Timely commencement of operations within budgeted costs will, however, remain a key monitorable. |
Liquidity: Strong Liquidity of SCNEL derives strength from the overall liquidity of SCL. SCL has strong liquidity driven by cash and bank balance at approximately Rs 103 crore as of March 31, 2024 and expected accrual of close to Rs 500 crore in fiscal 2025. 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 The outlook on the long-term bank facility of SCNEL 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 Incorporated on May 26, 2021, Star Cement Northeast Limited is a wholly owned subsidiary of Star Cement Ltd. The company commissioned 2 MTPA grinding unit at Sonapur, Assam on 12th March 2024. Further, the company is also constructing 2 MTPA grinding unit at Silchar under SCNEL (earlier under SCIL), which is in the project phase and is expected to commence operations in H2FY26. Additionally, the company will also be undertaking 2 MTPA grinding unit expansion at Jorhat, Assam under SCNEL, such that total capacity under SCNEL is expected at 6 MTPA by Q3FY27. |
About the Group 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 June 30, 2024. |
Key Financial Indicators (SCNEL)
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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