Ladies and gentlemen, good day, and welcome to the Birla Corporation Limited Q1 FY 2027 Earnings Conference Call hosted by HDFC Securities. As a reminder, all participant lines will remain in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal the operator by pressing star then zero on your touchtone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Rajesh Kumar Ravi from HDFC Securities Limited for opening remarks. Thank you, and over to you, Rajesh.
Thanks, Ryan. Good afternoon, everyone. On behalf of HDFC Securities, we welcome you all to the earnings call of Birla Corporation Limited for Q1 FY 2027. On behalf of the management, we have Mr. Sandip Ghose, MD and CEO, and Mr. Aditya Saraogi, Group CFO, including other senior members of the management team. I now hand over the call to the management team for their opening remarks, which will be followed up by the Q and A. Over to you, sir.
Very good afternoon, and thanks all of you for joining on a late Saturday afternoon as the weekend is starting. The results already should be before you. The press release is out. We have informed the stock exchange. This quarter, I would say that we have been, to some extent, a victim of our own success. I will explain why I say that. Because we had, over a period of time, maxed out on our trade sales, trade volumes, and blended cement volume. Which fortunately, that segment did not see any significant price increase. In fact, they saw a bit of a price roll back in the last month of the quarter. Whereas the real gains have come during this period from the non-trade segment, industrial segment, and OPC, which is again, not our strong suit.
As a matter of strategy, we have defocused on OPC because our capacity is, as you know, very high level of capacity utilization. So we focus primarily on blended. So the blended overall in the industrial scenario, since the blended cement realizations did not go up at all in comparison to the non-trade, which showed significant recovery in most markets, especially North and even the center. Our relative realization was lower than what was anticipated. We had expected that some amount of price correction will happen during the quarter, and especially since demand was pretty buoyant from the middle of May and June. But we were surprised that the reluctance on part of players to pass it on to the market. They instead focus on correcting their non-trade and OPC prices and not really touching the trade prices where the gap certainly came down.
Overall price levels, I don't want to get into what is our reading of that. This affected us most in Central India. Unfortunately, Central India, for whatever reason, the prices have remained soft practically for the last one year, I would say, because of competition dynamics. Since over a period of time, again, our dependence or dominance in Central India is very high, and it has in fact increased further with the commissioning of Kundanganj Line 3. This, I wouldn't say hurt us, but we could not be beneficiary of the increases which were seen in, say, for example, North and certainly in the East, which as I see the reports of the many East-based companies coming through, people have seen a major spurt in profitability over there. We have a very small presence, as you know, in the East, so we didn't benefit from that.
Maharashtra is the same story. We have been going in Mukutban, maintaining the volumes, in fact, changing product mix to get into more proximate markets. We don't want to go all the way up to Bombay, et cetera, except for the high-value OPC 53, which is sold in that market. We sell a bit of that. We are trying to focus on the closer geography. We could have, or we would like to ramp up the production further. We have headroom for it. In the last quarter, there were sporadic disturbance in logistics, as you know, for the availability of diesel and trucks, et cetera, that area. There were periods when there was dislocation in logistics. So we lost some volumes over there. So there could have been additional volume gain in Mukutban, which remains an opportunity area for us.
Going forward, we think we will be able to take advantage of that. We'll come back to our outlook of the second quarter and the rest of the year, which you know most of the industry players who declared their results have already spoken there on that. We have certain other marketing plans, which we shall share with you at the right time, which we are looking at. Given the constraints, as I said, of the central region prices remaining where they are, and if this continues, if the bigger players do not show any interest in raising the trade prices, we have to also revisit some of our strategy, which we have thought, but that will depend on how the market pans out.
In terms of costs, I think, in terms of our estimates, we have managed the costs reasonably well, given, again, our geographic spread, our dependence on pet coke where it is lower in terms of replacing. Some places we do have limitations in terms of using domestic coal, which some players have done and been able to, again, on a relative basis from their initial base, they have been able to bring down. So for us, that has not been significant. We have been hurt, again, on the petroleum front and our mechanical mining, which happens in Rajasthan. Because of diesel costs, et cetera, some of that has added to our cost basis. Overall, in terms of our assessments, in terms of our estimates, we think we have done reasonably well on the costs. Mr. Saraogi and Mr. Prusty will answer that more specifically.
As we go forward to second quarter, we are all looking eagerly at how the markets pan out. We are almost towards the end of July. So far, we haven't seen any movement in terms of pricing there. Due to delayed monsoon, demand is continuing well, but if the monsoons hit later, one doesn't know how much it will have a carryover impact into the third quarter. If the agricultural scenario is not that good, if the harvest is not that good. But this is too early to predict that. We will look at it when we discuss. Either in the course of this quarter we will talk about it or when we discuss the next quarter's projection. Thank you for my side. At the moment, I'll leave it to Mr. Saraogi, Mr. Prusty, Mr. Kalidas Pramanik-
You can open floor.
All of them there. So you can actually go straight into the questions, and as per your questions, respective colleagues will answer. Thank you very much.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and one. We take the first question from the line of Shravan Shah from Dolat Capital. Please go ahead.
Hi, sir. Sir, before asking questions, just four or five data points that would be better to ask a proper relevant question. Sir, if you can share the Mukutban volume, lead distance, fuel cost, that is the kcal for Q1, and the CapEx for first quarter, and net debt as on first quarter.
Yeah. Mukutban volume was 7.5 lakh tons. Total lead distance was 335 km. Mukutban lead distance was around 400 km. And kcal cost was INR 1.64 per kcal .
CapEx and net debt for Q1.
CapEx was INR 120 crores.
Okay. And net debt, sir?
Net debt, INR 2,300 crores.
INR 2,300 crores. Okay. Got it. And the incentive will be at INR 28 crore?
Incentive, we have accrued INR 33 crores.
Okay, Sir. Now, sir, as far as in the opening remarks, as I mentioned that whatever is our plus point in terms of the trade blended cement that are working against us in terms of we are not seeing the price hike there versus the non-trade we are seeing. Given this, and also at the same time, the Q2, maybe the way that everybody is talking in terms of the cost pressure will be there. So two things one to understand in Q2, given, let's say, the prices as it is, where it is, how much more cost pressure on per ton we can see in the Q2, including everything diesel. Obviously, packing will not be there, but the fuel and the diesel.
Overall, last time we said that we are looking at kind of a 6%-7% or maybe industry kind of a growth, and then EBITDA per ton of last time, which is INR 786. But given this and maybe Q2 will be booked, is it fair to say unless the prices improve, we would be seeing a for full year FY 2027 YoY, maybe a different decline on the EBITDA per ton?
I'll start with the initial comment on the realization. Now, on the face of it, you find that there's a reduction in realization to the extent of about INR 40 per ton. But we have to see it in perspective. One, as I said, the incentive booked in this quarter is about INR 33 crores. Now, in the Q4 of last year, total incentive booked was INR 60 crores. So on account of lower incentives, there's been an impact of about INR 50-odd per ton on the realization on a current basis. To be really on account of several other factors, as we have always maintained, there are certain year-end adjustments relating to discount, et cetera. So having regard to all those factors, actually, if you exclude those factors, realization during the quarter actually gone up by INR 8 on a sequential basis. Okay, number one.
Coming to the question you asked in terms of cost pressure, yes, we continue to see cost pressure, particularly fuel, the full impact will be seen in Q2. So in Q2, we expect the cost to increase by INR 70- INR 80 sequentially. As far as the growth is concerned, we are maintaining our guidance, which we have provided earlier. As far as the EBITDA for the whole year, it is too early to comment. We are hopeful of prices recovering in the markets we operate. So it is safe to premature to comment on the EBITDA for the whole year.
Okay. Thank you, sir. I have a couple of questions, but will come back in queue. Thank you, sir.
Thank you. We take the next question from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Yeah. Namaskar, sir, and thank you for the opportunity. Saraogi , as you mentioned that the CapEx for the quarter was to the tune of INR 120 crores. So what have we outlined for the current financial year?
We are maintaining the guidance of INR 900 crores for the whole year.
Okay. The debt number at INR 2,300 crores. What would be exiting the debt figure for FY 2026/2027?
I think we are not changing our guidance. Most of the guidance we have given, I think possibly it was around INR 2,000 odd crores. We are maintaining those guides.
Okay. Sir, in terms of the CapEx part, for this year, we will have the entire benefit of the Kundanganj line, the grinding one, 1.4 million tons. That will add to the volume. How are we moving ahead with our timeline of FY 2029 of 27.6 metric ton capacity? How are things aligned?
Yes. Whatever guidance we have given, we are on track to achieve our guidance, okay, in terms of capacity expansion.
Okay. Can you just explain to us, Mr. Ghose, about the dynamics of trade and non-trade mix that have changed and as you mentioned that we need to take a course correction. So what has exactly happened, if you could just open more light on the same.
We do not want to take course correction in the terms of trade and non-trade. We are very happy with our mix. We are not going to give up trade to go into non-trade. If that is the takeout, I am sorry. That is not what I meant. I meant that knowing that we will be focused on trade as per our strategy, if other players are not willing to take up prices in that segment, for whatever reason of their own, if they are happy to keep the prices low and not go in for price increases, we have to then decide on our own strategy of how to play that market. That is a marketing thing which we are not going to discuss on an open call.
We cannot be dependent on others who, for very inexplicable reasons, when cost going up, everything, if they do not feel the need to take up prices in that segment, we will have to figure out how we protect our margins in that segment. Which could be varied, not necessarily by taking up prices. It could be through other measures by which you do. So that is a part of the strategy, but we are not certainly going to change our strategy to reduce trade and increase non-trade.
The non-trade is pertaining to the government purchaser that is the institutional one. As you mentioned that there is lot of traction in that category. That is what the understanding is. There is a lower uptake for the trade segment. That is from the housing and the other segments.
I don't agree on that. If you see the volumes of the last quarter, middle May onwards, everybody has sold well. That's why they have got growth. The growth has come from both segments. Delayed monsoons have in fact, kept the momentum going in rural demand as far as rural housing, et cetera, is concerned, because harvests were good and people have done, so that has continued. When we talk of non-trade, non-trade is not necessarily just infra demand. There are also real estate, big, large real estate development. There are other industrial and other development where it goes. The problem was, in previous quarters, in last year, there had been a severe undercutting in the non-trade segment, due to which the trade non-trade gap had increased to abnormal levels.
That was also hurting the trade prices and trade volume because in these markets, there is always leakage, there will always spill over from one side to the other. If non-trade prices are very low, some of the material will naturally flow into the trade market and affecting both volumes in trade as well as the realization in trade. The players who have got larger stake in non-trade, they therefore first concentrated on correcting the non-trade prices because those non-trade prices were not remunerative on a few items compared on a point-to-point, like-to-like basis. Those who have a higher non-trade component, and if non-trade has improved realization of INR 10 or INR 20 per bag, that translated into their top line better than others.
Now, since we are already focused on 85%, practically on blended cement and over 80% on trade, and if that segment hasn't grown up, although our prices were pegged wherever, we didn't get that incremental gain in that because that segment didn't grow. Because our non-trade component is low, whatever improvement over there, that has only a marginal impact on our overall realization. So that is the point I was making. Thanks for asking this question. I hope people didn't get a feeling that we are now going to shift towards non-trade from trade. That's certainly not our strategy. We will focus on trade, we will focus on blended cement. Not only because it makes commercial sense, but because we think it's a sustainable cement. It's good for the environment. So we are a strong votary of promoting blended cement, and we'll continue to do that.
Just a small point, sir, on the WHRS investment. What is our current capacity and what are we emphasizing for the year? Also in terms of the other expenses line item that has moved up from Q1 FY 2027 from INR 264 crore to INR 281 crore. So what explains this jump? I think the number is INR 511 crore to INR 551 crores on a console basis. I mentioned the standard numbers. So these two points if you could answer.
Rajat here. For WHRS, our present capacity is around 43 MW, 44 MW. There are projects which are in the pipeline, which will further help us to increase up to 50 MW. Then obviously when the Maihar Line 2 which will be coming, there we'll add another 17 MW- 18 MW of WHRS.
Right. On the other expenses part?
That I think we are checking back.
What is the question regarding other expenses?
Sir, the other expenses Q on Q also has moved up from INR 511 crores to INR 551 crores on a console basis. What explains this 8%-9% jump on a Q on Q basis? Just to add to it that this year we will have only the benefit of the Kundanganj line in the volume. That is the growth which is expected for this year.
Yes, Kundanganj of course we will get full benefit this year.
Right.
As far as other expenses concerned, there is no specific reason which has annually increased. The mining has been more, the limestone mining, so that has also had some attribution to the other expenses.
Because of the higher clinker production.
Because of higher clinker production.
Because of the higher clinker production, we did our own mining more, cost of which goes to other expenditure. That is why your other expenditure seems to be higher year-over-year basis.
Right. In terms of the incentive for the Kundanganj line, sir, what would be accruing for this year? Now the commissioning or we will first reach an optimum level in volume, then we will start accruing the same?
Total increases, we are expecting about INR 130 crore-INR 135 crore including Mukutban and Kundanganj.
Right. Okay, sir. Thank you.
Thank you. We take the next question from the line of Karan Tubadia, an individual investor. Please go ahead. Karan, if you can please unmute your line and proceed with your question. Since there is no response, we will move ahead. We take the next question from the line of Rajesh Kumar Ravi from HDFC Securities Limited. Please go ahead.
Hi, sir. I just wanted to check, the central market now with JP's asset to be ramped up under Dalmia, the competition will only intensify, and more so I would assume the non-trade market because this is the easiest early market any player, when they ramp up the capacity, they follow through. So when non-trade prices will face stiff competition, even trade prices generally don't see a recovery. So what is your thought in terms of pricing for the second half of this year? Q2 could be a monsoon quarter. I understand, best case, the industry would look to keep a flattish pricing. But central, where you have the largest exposure, there the competitive intensity in H2 will certainly be much higher than what we are seeing currently. Any thoughts on that?
We can only expect, as we said, more enlightened competition in this market because keeping prices low is not necessarily a formula for volume growth. If the demand is good, I don't see why there should be space for everyone. Why should people have to keep instead, if they make money, that money invested in brand building will give them far more lasting benefits than short-term price cuts. So we think that is a matter which people will take a strategic call. But we have so far, for good or bad, in the last, I can talk of the last three years, we have stayed on course to our stated strategy. We want to do that, and we would like to, as I said, if others are not doing some things, they have got their own reasons, we have to cut our own course.
Being a Bengali, I can only say, [Non-English content] , but we have to do what is right for us and right for the business.
Understood, sir. On the CapEx, any tangible progress or whatever milestones we have covered in terms of achieving this 25 million ton capacity, more so from the Maihar clinker unit ?
That is as per plan. Our EC and other activities, pre-project activities are going on. Whatever we have committed last call, we are maintaining that.
Understood, sir. I will come back in queue. Thank you.
So just one clarification. I think someone asked about the other expense. Here we must clarify that the packaging cost also gets included in other expenses. That is one single most important reason for the anomaly increase in other expense.
Thank you. We take the next question from the line of Shravan Shah from Dolat Capital. Please go ahead.
Hi, sir. Sir, just wanted to check the ongoing expansions which will be by FY 2029, we are expecting the 6.2 million ton to come in. So roughly out of INR 4,800 crore kind of a CapEx was supposed to be there. Out of that, how much we have till now would have spent on that?
It is very low, very minimal because
Kundanganj Line 2 was included.
No.
Kundanganj Line 2 was included in INR 4,800 crores .
No. We just started the activity, so it's almost nil, you can say. Because now the next phase will be starting on the placing the order and other thing. That time, that will be there.
In FY 2028 then, this INR 900 crore CapEx that we are looking at this year will significantly inch up to close to maybe a INR 2,500 crore kind of a number?
It is slightly premature comment , but yes, there will be a significant increase next year.
Okay. In terms of, sir, our Bikram Coal, which has just started, just to get a more sense for this year, I think last time we said around 1.2 lakh ton kind of volume that we can do. In terms of the costing also, INR 1.05 per kcal versus whatever currently we have in terms of blended INR 1.63, INR 1.64. In terms of the percentage, how much this will contribute, just additional, whatever the quantity, if you want to rectify in terms of the Bikram. For next year, how much we can, in terms of the overall fuel mix can increase. Just wanted to understand how it will help us to save or reduce the power and fuel cost.
This year, it will be about 1.2 lakh tons. Next year, we are trying to take it up to 3.5 lakh tons. Okay?
The actual saving and all will be a function of the market price.
Yeah. Definitely. But in terms of, let's say, this 1.2 lakh tons and then 3.5 lakh tons, how much currently, let's say, the Bikram is zero. So it will reach to how much, 15%, 20% of the total fuel that we need, in terms of the coal pet coke or 30%, 35%? Just wanted to understand.
No, it is more of, you can say, this will be more supply to our CPP.
In the current-
In the current scenario, and maybe next year, partly it will go to kiln also. But the majority will be for the CPP only. And you can say that one-third of the CPP coal requirement can be met through Bikram.
Okay. Got it. In terms of the peak net debt, last time we said INR 4,000 crore, and we will not cross 2x net debt EBITDA. That 2.5 x, we are maintaining, sir.
Yes. We are not changing any guidance also.
Okay. Got it, and hope for the prices recover, and we should see a better profitability. Thanks.
Thank you. We take the next question from the line of Karan Tubadia, an individual investor. Please go ahead.
I want to ask, for this financial year
Karan, I do apologize to interrupt you, but your audio is not clear. Could you please use your handset?
Sure.
Karan, are you there?
Yes. My question is, for this financial year, how much growth you are targeting as, say, year percentage?
How much growth? We are maintaining our earlier guidance of what all we have given. We are not changing the guidance.
Good day.
Thank you. We take the next question from the line of Girija Ray from Nirmal Bang Securities. Please go ahead.
Hi. Thanks for taking my question. I have a couple of questions. First, coming to your other expenses. For this quarter, on per ton basis, how much was the packaging cost impact, and what we can expect for next quarter in terms of with respect to your packaging cost? My second question is related to, you said, we did a lot of limestone extractions. That is a component of your other expenses. Ideally, this is the limestone extraction, what I believe, we use industrial diesel, which has the cost of industrial diesel has shot up. This is the reason where it is also impacting the actual cost of producing the limestone. Second most importantly, this should be a part of our raw material cost, if I think.
Is this the reason that we have taken out from raw material cost and we have added it here in other expenses, that is the reason we are seeing a spike in other expenses? I will come back with the fourth question.
In terms of accounting, the expenses get booked in the natural heads. The weighing cost is, for example, the diesel expense etc., they book in other expenses. The employee cost, the people who are working there also, they book under employee cost. It does not get booked under raw materials. There are two different kinds of accounting which are followed by cement companies. One type of company, they book it in raw material on a functional account basis. The other type of company, they book under actual head. We have always been booking under natural head. And you are right to the extent that diesel, commercial diesel price is going up, does have an impact on the weighing cost, more so in Chanderia, where we are dependent on mechanical mining. Our cost is higher than others on a relative basis also.
Coming to the impact of bag and fuel in this quarter, because of geopolitical factors, we basically had been to the extent of INR 150 per ton. As I explained, in the next quarter on a sequential basis, we expect a further increase in cost to the extent of INR 72 on account of geopolitical factors.
Okay. My next question will be for the industry-wide. If I see, there are a couple of companies, they have deferred their capacity expansion to FY 2030, or some of the larger players are actually coming up with their highest capacity by FY 2028. We saw in FY 2026, throughout, over the years, the highest capacity addition in FY 2026. Even inside, we are expecting higher capacity addition, more than FY 2026, even FY 2028. Coming back to your trade non-trade mix, OPC, PPC markets and the pricing war is happening. How do you see, despite adding higher capacity in FY 2028, how the cement companies are going to manage with the pricing? And is this incremental capacity going to be absorbed by the incremental demands in next two years? That is my last question.
See, there are two parts. One is I am not at all surprised by some people rolling back their plans, because sometimes when people were going very gung ho, as you have seen, we have really not been so gung ho in terms of that. For some time, we were flummoxed by the kind of bullishness shown by others in capacity expansion during that period. All these things obviously get moderated as per how the market pans out. That is not for us. When you are talking about, I do not think there is a price war happening. It is just a question of people being shy of taking price increases because they do not want to upset the equilibrium. Because when you want to make those changes, sometimes people have to sort of make a leap of faith to some extent, and that depends on individual risk appetite or individual attitude.
Now, it changes from time to time. Different companies have their different. Now among the big players, it is not for me to say. You people talk, you hear other players giving out their views. Some people may like to play it more just like in test match. Some people hit sixes and some people like to take singles and play with a straight bat for a while for their own reason if they are doing. That sort of a thing is happening. I do not see a price war happening. People who will enter the market, luckily, these are not new players. They have been there in the business for a long time in other regions. So they know the limitations of going and undercutting and trying to make a quick entry because they have done it in the past, seen it happening in their markets.
I would expect them to be sensible and ramp up. But I do not see them getting aggressive in pricing terms. They might try to do things on the marketing front, acquiring network, how they are going to the market, the monies they put in terms of brand building in that area, in terms of people and the rest of it. But I do not see them playing just the price game to buy immediate volume, because these people are also investing a lot of money. They have seen others who have tried to play those price games in the short term, how they have panned out. In fact, some of the assets people are buying are companies which played that game and burnt their platforms. So they will not repeat that mistake. These are successful companies who have been around, seen it, and done that.
I am not worried about any kind of price war per se.
Fair enough, sir. Thank you very much and all the best.
Thank you.
Thank you. We take the next question from the line of Vipul Kumar Anupchand Shah from Sumangal Investments. Please go ahead.
Hi, thanks for the opportunity. Sir, in view of this uncertain geopolitical situation, are we reconsidering or deferring any of our expansion plans by few years? What are your thoughts, sir?
We are already operating at more than 90% capacity. As far as we are concerned, we are constrained for growth in the market that we are operating. There is no question of any deferral of capacity creation.
And sir, regarding other expenses, what is the per ton cost for packaging in this quarter, and what was the same in last quarter?
In this quarter, it is INR 269 per ton, and in the corresponding quarter previous, it was INR 191.
And in last quarter of the last financial year, what was that?
That number is not easily available. You can write a query to us. Okay?
Okay. Thank you.
Thank you. Ladies and gentlemen, we take that as the last question and conclude the question and answer session. I now hand the conference over to the management for their closing comments.
Right now, I don't think there is much more to add. We are all looking at things circumspectly. There are various forces at play internally. We've been talking about geopolitics. There is the climate issue in terms of rains, monsoons. At this point in time, I don't think there is much to speculate and make any forward-looking comments, or anything different from what you've heard from others. We shall wait for things to pan out, and we'll speak to you either at the end of this quarter or earlier if required, if we have some significant changes to report or guidance to provide. But thank you once more for joining us on a Saturday afternoon, and wish you all a very happy weekend. Goodbye.
Thank you, sir. On behalf of HDFC Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your line.