Star Cement Expansions in Eastern India
As the tide remains favorable for cement manufacturers, rising demand and realizations are prompting companies to expand capacities and diversify into new geographies. Star Cement, having a strong presence in the northeast, is expanding into eastern India with ongoing capacity expansion at Siliguri, West Bengal.
Eastern India has been a key focus area for most cement manufacturers, given the expected demand surge. Limestone availability in the region, the key raw material for cement manufacturing, makes it an attractive destination. Hence, utilising its strong cash flows from the northeast, expanding in the neighbourhood in eastern India is the logical next step for Star Cement. The company’s Siliguri plant will commence production soon.
The company is already present in the region through leased grinding units of 0.6 MT capacity. The new grinding unit at Siliguri will replace supply from the leased units and will be able to boost further volume growth. Analysts expect the expanded capacities to see 60-65% utilisation in FY22.
The company had seen cement sales volume grow 8% year-on-year during the September quarter. While the impact of lockdowns on June quarter sales may mean FY21 sales growth will be tepid, nevertheless a strong rebound is expected in FY22. “We expect sales volume to decline 11% in FY21 and grow 19% in FY22. Strong growth momentum in its key market of northeast and expected triggers to be provided by expansions in eastern India makes Star Cement the pick of analysts. Improved cement prices in the east, availability of coal from Meghalaya for regional players and rising operating efficiency are some of the key positives. Nevertheless, for the benefits to accrue, a timely ramp-up of new grinding unit without any delays is crucial.