Ladies and gentlemen, good day and welcome to the Birla Corporation Q1 FY 2025 earnings conference call hosted by HDFC Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Rajesh Ravi Kumar from HDFC Securities. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. On behalf of HDFC Securities, we welcome you all to Q1 FY 2025 earnings call of Birla Corporation. From the management side, we have Sandip Ghose, MD and CEO, and Aditya Saraogi, Group CFO. I will now hand over the call to the management for the opening remarks, which will be followed by Q&A. Over to you, Sandip, sir.
Very good afternoon to everyone. Thank you so much for joining this call. I see a very large attendance already, and it is encouraging that there is so much interest in the results of Birla Corporation and the support we have been receiving from all of you. I have with me, as mentioned, Aditya Saraogi, our CFO. I have Rajat Kumar Prusty, who is our Chief of Manufacturing and Projects. We have Kalidas Pramanik, who is our Chief Marketing Officer, and we also have Arun Agarwal, who is the CFO for our Reliance Cement Company Private Limited , RCCPL. I know you have a lot of questions, a lot of queries. I have been receiving some of them since our press release last evening.
I will keep our presentation short and give more time for all of you to ask, clarify whatever doubts, queries you have, and we will try our best to answer those. As a preamble, I will address a few issues on which I have already received questions, and I think they are a special area of interest for all of you. Subsequently, when we open it up for questions, if your answers on those issues have been met, I would request you to avoid repetition and move on to additional topic, and we will be very open to answering, clarifying whatever doubts or whatever queries you have.
To begin with, I know many of you from your consensus estimates as well as your own brokerage house estimates, the results which we have declared this quarter may have fallen below your expectations, particularly seen in the light of the last quarter of previous year and overall our exit rates on various counts, including our EBITDA per ton. One repeated query I have been receiving is on realization, why our realization drop has been probably higher than expected, or some peer group companies you have been comparing with. Though, if you really look at, also some of your colleagues have shared with me comparative companies who operate in similar geographies. In that, if you were to compare, I do not see the variance being very high. But be that as it may, I would like to state what is our position on the matter.
First of all, when you look at realization, you should not look at it in an absolute term because the previous period and current period are not always comparable. If you were to look at the regional mix, the market-wise mix, and in our case, the market-wise mix has changed considerably. It is a weighted average of the various regions. In our case, the weighted average of the market-wise composition has changed considerably due to addition of Mukutban, where we have had not only the maximum capacity utilization but also ramp up. So much of the volume growth which you have seen for us has come from Mukutban, and that will change our overall mix in the realization. But that is one aspect.
I will dwell on that later on because I would like to discuss with you our views of how the realization of the markets have moved in each of our addressable markets, our relevant markets. But overall, what I would like to add, everybody has spoken of, and what is there, all of you in your commentaries have spoken about two factors which affected Q1 of this year. One was the elections, and secondly, the extended heat wave which resulted in non-availability of workers. A lot of workers also went home for the voting and the rest of it, which affected the market. But a third element, which for some reason everybody has not spoken of, is the pricing behavior of the leaders.
Despite the volumes, whatever volumes you have seen, especially the volumes you have seen in June, we do not think that that kind of a softening of prices or aggression in pricing was really warranted or called for, and that was something I do not think many of us factored in. There are reasons for it, which we can only conjecture. One is because of consolidation in the market. People were wary about losing market share. So there was a defensive pricing strategy. Nobody wanted to yield market share to their other larger competitors, so they tried to hold on and therefore, they were less, I think, bullish on pricing. Not only less bullish on pricing, the price situation diluted, and I will dwell on that also a little bit more.
But more importantly, due to lower capacity utilization in the units, many new units have come up and all those units which have come up, the newer units are all incentivized. Because they are the grinding units, they have incentives in the key markets. So there was a double benefit which many enjoyed. One was the lower input cost, and on top of that, the benefit of the incentive which came. So the more they ramped up the grinding units, et cetera, they had a bigger cushion. These two things probably facilitated a soft pricing strategy, especially by the leaders and some of the bigger new entrants. This was particularly relevant for some of our core market areas, which primarily, I would say first of all, which is of great importance to us, is Central India, which is U.P. and Madhya Pradesh. U.P. had another factor.
U.P., if you see in every way, whether it is in terms of volume growth or whether in terms of pricing, all of you have the statistics, if you see the pricing pattern of U.P. for almost two years, till, I would say, the third quarter of the previous fiscal, U.P. pricing held on and in fact, there were marginal increase from time to time, but certainly there was no slide down. But U.P., the scenario changed during and post-elections, and therefore, you see a lot of dilution of prices in the U.P. region and consequently also parts of Madhya Pradesh. This is a phenomena which I said affected people like us, because we operate in this area with practically 100% capacity utilization. So our strategy here was, we certainly didn't want to dilute our price positioning.
We tried to hold on to our price positioning and in our price positioning, something we have worked and built upon over the years is our entire premium brand positioning, which was there. So we were very clear that we don't want to lose either market share or dilute our price positioning. To our surprise, we saw some market leaders who were at one point in time enjoying almost INR 20 or INR 30 premium, even within the A category other players, today their pricing levels have come down. They have actually wiped out their entire premium and they are operating at a much lower premium. Secondly, another very interesting and new phenomena which we saw, though there were a lot of talks a year back about people withdrawing all price equalization discount or RDs from the thing.
If you go back to these markets, some of you who do channel checks, you will find that the PE and the RD levels have actually not only shot up, but they have shot up very, very exponentially. By our estimate, in some places, markets operate in our relevant geographies to INR 30 to INR 40 PE, which has resulted in the WSP position, that is the wholesale price position, significantly coming down. Whereas retail doesn't fall in the same way, so the margin between WSP and retail has gone up. That has caused certain aberrations in the market because also the dealers, their investment gets stuck in the market because what they pay for and then subsequently what they receive back in PE and RD, which is after the lag, requires greater investment. So these have caused certain distortions in the market. So this is just in terms of background.
What is relevant is what has been our strategy. Our strategy, as we mentioned to you, was first of all, we are very clear that we do not want to dilute our price and our brand positioning. We as a company have believed always that investment in cement, contrary to popular belief or counterintuitively, it doesn't mean investment only in plant and machinery or setting up new units. Investment, also what you make investment in the go-to market assets, which includes logistics, your entire distribution network, channel therefore, and then finally, obviously, your brand pull. For us, that is equally important. We have invested in this consciously in the last seven, eight years, which you are aware, from being primarily a Birla Corporation, which used to operate at a B- minus or a lower thing.
Today, we operate with more than 55% of our trade volumes in the premium category. I can say with some degree of pride, as I told you, if you today go into the retail segment in these markets, some of our key markets, you will find us to be at par or in some cases, maybe slightly higher than some of the market leaders. We think this strategy has paid off for us. Equally, if I were to look at, if you see Mukutban, where we have been an entrant in just about a year back, even today, we are selling more than 40% of our volumes in the premium category, despite being a new entrant. Our ramping up there has been also, some of you would see in terms of the percentages, what we have ramped up.
It has been much higher, and that too, within the premium category in the trade channel. Even during this period, we have succeeded in further ramping up Mukutban. That's why we have a 91% weighted average capacity utilization, and also maintain prices there. We will continue. As a strategy, we have done it now, we'll continue to maintain our brand strategy, invest in the market, because we do believe that this market situation is temporary. It is not going to last forever. There will be sanity prevailing and market correction. At that point in time, we don't want to be relegated to a lower pricing point, and we will therefore continue to do that. Secondly, what we have done is our geomix optimization. When we talk of geomix, we don't talk of it in the larger context. We talk about within our core markets.
Our core market, for example, is Eastern U.P., so we would like to focus there, defend our market, and grow there. That's why our investment is now coming up in Kundanganj, which is going to start operation early next fiscal. Also, we will also get the advantage of the incentives in the new plant, which is now the old Kundanganj plant. Have the incentive has dried out, that has stopped, but we will get it, and that will increase our competitiveness. Again, therefore, when we get back there, we do not want to dilute our price positioning. Our focus and strategy, that will remain. Secondly, what we have tried to do, we tried to also expand our footprint, our position in the secondary markets, which are there for us. Mukutban, we have tried to increase our footprint.
As we increase our footprint from Mukutban, since our plant is located in Vidarbha, we will see some amount of dilution also in realization the further we go. It is the same thing with Bihar as a market which has been growing on volume. There also, we have been consciously working on our brand strategy to upgrade our volumes, get a more quality volumes over there, more premium volumes. That will also affect. Bihar, again, is a market where prices, as you know, in Eastern India were very, very depressed. There, we have lost on realization. I am giving you this granular detail of regions, so that will give you a picture. But honestly, where we have been hurt most is in Rajasthan. Rajasthan, we have been hurt because the price levels crashed. People have been discounting heavily, but there was a salvation for everybody in Gujarat.
Until the previous quarter, Gujarat was doing extremely well. Gujarat pricing was higher. A lot of people, a lot of other companies also, you will see a lot of their profitability was coming from Gujarat. But in the last quarter, Gujarat tanked. Gujarat having tanked, for a company like ours, which has got a high cost of production, that is no secret. Everybody knows. We have been rendered uncompetitive in many places, including there has been a huge shift because of capacity utilization. People have shifted to non-trade, that is institutional sales and OPC. We found ourselves to be quite outpriced in many cases. In some cases, we had to actually choose not to compete. It has been crazy out there. Our customers within 50 km of our plant, we found our prices were undercut.
We have lost a chunk of our premium, our volumes and our realization in our Chanderia plant. Chanderia plant, again, is where we do not have a very high component of premium products. We have got just about 25% of our product sales at the premium. While we have held on to that volume or improved that volume marginally, certainly our base product, popular product, MP Birla Cement Chetak, has been quite hurt. As I mentioned again, our realizations, that has a higher component of OPC and institutional, we have a loss there as well. It is the combination of all these factors, which has, if you see brought down, it is not that any places where there is a dilution which has overall reduced our realization.
We are conscious of this situation, what has happened, but we have decided consciously also to ride this through because we genuinely believe, as I repeated earlier, as situations stabilize, as equilibrium sets in, there is greater sanity. Markets have to improve with the demand. The demand improves, pricing will improve. At that point in time, we want to be in a position of strength because one, again, a reality for us, we know that we are not going to add very major capacity going forward in the next two years till 2027, when our plan is to go to 25 million tonnes. During this period, our objective is that we will play at the position where we have chosen, not dilute, not get relegated back to A- minus or B- category player. We want to continue in our distinct in whatever we sell.
Our company's vision is that we may not be the biggest. We want to be the best in class. That is something which we say, and that is what we want to practice. Hopefully this has given you some broad overview on the marketing and the pricing front, and we will take on the other elements. Subsequently, my colleagues will talk. Only two other things we would like to continue to add is, like everybody else, our investments in terms of cost reduction has happened. Some of you have even commented in your commentary about that reduction in operating costs, which we have reported. I recall reading somebody say that that is the only silver lining they have seen in the results. It is not a surprise. We have been doing this. We have been doing excellent work on Project Shikhar.
We have been doing great work on Project Unnati, which is related. A lot of it is related to logistics improvement. While those are happening, and so has renewable energy trust, our own captive coal mines on which we will deal on in the progress of it in a bit. We will talk about that as well. While those will do, there are many more strategic other things in the anvil and the pipeline, which we will talk about it in due course. Some of them we cannot talk about it now, which will happen. Our trust and cost will remain. Equally, we will try to tactically increase, as I said, our geographic footprint. We have plans, which was discussed many quarters ago, and some of you may not recall.
We had plans in setting up a grinding unit in Bihar, in Gaya, which for a variety of reasons was earlier put on a, shall we say, on a slightly slow track. Now it is back on fast track. Bihar's situation has improved. The new government is very, very receptive to investment. They have become proactive. We are almost completing our land acquisition there. There are a couple of other also grinding units or extension we have in plan on which we should be in a position to talk to you by the next quarterly call. Those things will go on. That is business as usual. There is no letup in focus. That will happen. This is the mix of strategy on which we are going.
At the moment, we are not really doing any crystal ball gazing beyond what is there in public domain from all of you in terms of how the market will behave going forward. Everybody is projecting that, okay, if GDP growth is 7%, the year we are supposed to end cement also in 6% or 7%. How that will pan out, things can go in various directions. Post a good monsoon with a lag, there can be a great demand surge. To get to 6%- 7%, one will need a hockey stick effect in the second half. We will hold our horses for talking about those things till there is greater visibility in the current scenario, economic, political, as well as industry scenario. We are not really sticking our neck out to say too much about it. With that, I will open this one.
Yes.
With that, I am opening the call for questions. As I said, we will try our best to answer your queries. Let us not repeat things which we have already addressed. Anything more, please feel free to come across. Thank you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Yeah. Thank you, sir. Sir, two questions. One is on the volume front. Last time we said 8%-10% growth that we are looking at in FY 2025. Already a 0.7% decline this quarter. Given if you also can share what was the Mukutban volume in this quarter and for full year, how much we are looking at. What is the revised guidance on the volume growth front? Second, on the profitability, last time we had talked about 8%-10% growth on EBITDA per ton. That goes to INR 880 odd per ton. But given the INR 603 EBITDA per ton, the ask rate is now significantly higher, INR 950, INR 970, and given the pricing pressure is already there and we are seeing.
Even second quarter, which is also muted, then for second half, we need a significant close to INR 1,200 kind of EBITDA per ton if we want to have our INR 880. What is the revised guidance on volume and EBITDA per ton?
As I mentioned, we are not giving any guidance just now because the market is very, very nebulous, the situation. I think it would be imprudent for us, not just from our side, but even from a market standpoint, to stick out and mention any numbers. We would go by what all of you are predicting in terms of the market growth, as I just said, that people are talking about a 6%-7% volume growth. If the market grows that way, we have that much of cushion and headroom because especially of our Mukutban upside, as well as you have got upside in Chanderia. Even in our existing units, we have got upside. We do not see a problem if the market picks up to be at par or slightly ahead of the market over there. In terms of profitability, again, we would not comment just now.
We of course, have our ambitions of what we have stated. We will still try to do that, but we will not either revise or give a firm guidance at this juncture. Mukutban question you asked, we have done INR 5.93 lakh tonnes in Mukutban in the last quarter, which, given the market conditions and the usual dip on monsoons, we are personally very happy with that number, and especially since the number has come a large amount from premium and a lot of it has come from the core area of our proximate area of the plant. That gives us, and we have been in our strategy, we have been focusing more on blended cement. Even that has been kept, though we are open to revising some of the product mix if the markets so demands. But so far, we have been on track and strategy.
We will leave it at that. Next question, please.
Mr. Shravan Shah, does that answer your question?
Sir, the last one is, I just wanted a lead distance for this quarter, 1Q, and what was the CapEx in Q1 and for full year, how much we are looking at?
The lead distance was around 350 km. We are maintaining our guidance for CapEx for this year. It may be slightly less, but we are maintaining our guidance on that.
Okay. Thank you and all the best, sir.
Again, on lead, I would like to clarify. We are not making it granular to compare our lead with our older markets and newer markets. Obviously, because of Mukutban, where we are trying to increase our reach and footprint, there will be some increase of lead there which might compensate for the reductions which we are achieving in other areas for our geomix optimization. We are doing a lot of optimization elsewhere so that our overall lead doesn't change. But there is a certain, we could have probably dropped it further if we just looked at our existing units. But Mukutban is going to add some more lead distance to our overall weighted average lead.
Last, if you can squeeze in terms of the from 2020 to 2025, 1.4 MTPA Kundanganj, 1.4 MTPA Prayagraj, and how much we are planning to add at Gaya, and if the timeline possible, when all these plants will come up.
Whatever we have said about the expansion that is contained in our declaration, we are not going to make any more specific comments on actual things because that will be contrary to our disclosures.
Thank you. Thank you. We should move away. Not any more supplementary on that, please. The next person, Jyoti Gupta, please go ahead.
Thank you. The next question is from the line of Jyoti Gupta from Nirmal Bang. Please go ahead
Thank you so much, sir, for the opportunity. My question is, why are you saying that the trade mix has actually improved by 59% of the total sales? One is, what is the breakup of trade, non-trade? Second is, if it has increased, then how has it impacted? Why has it actually impacted, or why has it now stabilized the realization? Further, could you provide us numbers on the regional mix in terms of north, south? And what has been the shift in terms of the regional mix?
See, first of all, as I said, our trade channel, we have tried to maintain. Trade has not increased in this quarter.
Premium. It was premium.
We have talked about premium being 59%. Trade, we have kept it same as previous quarters because in fact there is a just 1% decline, you might say, marginally. That's because how the market has behaved. As we said that a lot of people, because of lower capacity utilization, they have been focusing more on OPC, et cetera, and general market. So we have not increased trade in terms of percentage. Premium, we have increased from 55% to 59%. But again, you'll see it, Jyoti, you have to keep in mind that weighted average is big. So while I'm selling more premium, say in Maharashtra now as a total component, my Maharashtra premium prices are obviously lower than what I get in U.P. So you are not going to get in the weighted average that sort of an impact. So you have to look at the entire in totality.
That is what I say is when you're comparing realization for us year-on-year or even quarter-on-quarter, our thing is not like to like because it is not in the same markets where we are expanding.
Okay. My next question is, I understand that a lot of companies which have put up new plants are actually running it by the new lines and therefore there's been a significant improvement that they're able to show in their EBITDA patterns. But I thought we will see some incentive gains or some improvement, something coming from Mukutban. Because for me, this decline in EBITDA pattern is pretty significant. I'm not able to understand why such a steep decline, even considering the way Birla Corporation has actually operated the last three to four quarters.
I tried to explain that, Jyoti, in fair amount of detail because, A-
Yeah, I got it.
Again, repeating, it is a weighted average of, I think all regions have not moved. I told you about U.P.
Can you share region mix numbers? Is it possible to do that?
I will come to that. First of all, let me answer your first question.
Okay.
Mukutban incentive. Yes. Mukutban incentive, we have booked. We have booked Mukutban incentive this time, and it is in line with whatever guidance we have given. But at the same time, Kundanganj incentive has gone out of the system. So that it doesn't fully compensate for what Kundanganj was. Kundanganj, you will understand, is a plant which produced over 2 million tonnes, and just about the same thing is coming about in Mukutban. We are at around the same level, but at a lower price level, at a lower therefore GAC level, so obviously the incentive levels will not be the same. And in terms of regional sales, we have given you broad indications. I think giving specific ones will be correct on our part because we have not declared that in the results we don't give, but you know broadly how we operate.
Unlike I was seeing some other companies just now, they have given their statewide percentages. We don't declare it in that manner, either annually or here, so I wouldn't get into those specifics. But people have a broad idea because of our plants, our location of the plants, et cetera. What is our broad pattern across regions. And I've also given away to you what is my Mukutban volume. So obviously you can do very simple back of the envelope calculation to get them.
Okay. Thank you, sir.
Thank you. The next question is from the line of Mangesh Bhadang from Centrum Broking. Please go ahead.
Hi. Good afternoon, sir, and thank you for the opportunity. Sir, a couple of questions. Thank you very much for giving a detailed explanation on realization in your opening remarks. My question is on the industry pricing. As you said that industry leaders are actually keeping the pricing lower in the markets. Where do you see the revival coming? Is it only because demand has been weak now and after demand recovers, it will come back? Or you think that that weakness can sustain for a longer term? That's the first question.
See, I can't read other people's minds. The leaders are far too big people for somebody of our size to try and read and predict their mind. As I said, we were wrong in terms of our. I have no qualms in admitting what we expected, the kind of behavior in the first quarter. I repeat that we don't think the kind of volume change or drop, and if you see the kind of volumes, especially people have done in the month of June, warranted this kind of price correction. So difficult for me to predict how the competitive scenario will pan out because as you see, every second day, there is some new announcement happening in the industry. You all who are much more informed about companies would probably be in a better. We are price takers.
We have to plan our strategy as per how the market goes. We are smaller players. We have no illusions about that. We'll have to protect our turf, protect our thing, and we will do what we can. We are not going into acquisitions, as I said. Therefore, our investment has been a lot of investment has been in brands. That is where our assets lie. Not just brand, it's the whole entire go-to market assets, which distribution assets, which is our people on the ground, the feet on the street, which we have got. The investments we have made in software for customer relations and logistics. We are continuing to make things in our ILMS system. All of that we are doing, and we can't just fritter it away getting into a pricing game with the big brothers.
Okay. Secondly was on CapEx. We have maintained our CapEx of I think INR 800 crore for this year. I just wanted to understand the timelines for the two units that we are planning, when they would be operational. When actually should we take the additional capacity in our numbers?
We have mentioned Kundanganj. Bihar, I said that is in the pipeline, but we are not giving any firm dates or anything for it because we have to make a formal announcement on that. Overall, we have said that 25 million tonnes by 2027. We stand by that.
Understood. I will come back in due time. Thank you.
Thank you. The next question is from the line of Saket Kapoor from Kapoor & Co. Please go ahead.
Yeah. [inaudible], sir, and thank you for the opportunity.
[inaudible].
I missed you at the AGM. Normally you are one, so yes, I thought the question in the AGM, instead you have come in on a virtual call. You are closest to our office and still you come through a telephone line.
Yes, sir. Using your queue. Anyway, go ahead.
Thank you, sir, for enlightening me. Sir, firstly, Saraogi sir, can you give me the current maturities for the year? About the NCD issuance, what are the rationales for going ahead, and what kind of cost of fund are we looking to price the issue?
See, NCD issue is just an enabling resolution in case the terms are more competitive, then only we will go for the NCD. We are flexible whether it is the NCD. Today we are not under any kind of obligations or in the point of review resolution for it. It is just an enabling-
Sorry to interrupt, sir. Ladies and gentlemen, the management line has been disconnected. Please hold. We shall reconnect them shortly. Ladies and gentlemen, the management line has been reconnected. Over to you, sir.
As I was mentioning, it is just an enabling resolution, and if we find the terms of NCD more competitive, then only we will go for it. Our average cost of borrowing currently is 7.9%, and any fresh borrowing that we understand is also expected to be south of 8%. In terms of the time maturity in this year, it is INR 375 crore, including INR 125 crore of NCD.
Sir, what are the receivable dues from the government incentives?
As I remember, it is about INR 500 crore.
Okay. Last year, how much we have received?
In when did, sir? Last year?
Last full year. I just wanted to understand what are the receivable general inflow from the incentives that we
You cannot project that as a trend because last year we did not get any amount from U.P. government, where most of our incentive is usually from U.P. government. Whereas this year we are expecting a large amount to be received from U.P. government.
Okay.
It doesn't happen on a pro rata basis.
Yeah.
Because the way Saket, you know how governments work. There were some procedural issues which have got resolved. So it's the amount we expect to receive from the government. Government's budget, everything else. So that's not in our hands. We can't really predict that.
Okay. As of now, you mentioned INR 500 crore as the closing receivable balance.
Yeah. Right. Other than.
Other than that. That is from the state of U.P. only, the INR 500 crore.
See, mostly. A small part of maybe INR 40- odd crore from M.P. And then we have Maharashtra also adding up now, INR 21 crore.
Okay.
Yeah. It is not clear.
Not clear. Thank you. Then this exit of June also, we have been witnessing the correction in cement prices or the realizations are down. Can you give some more color? At 5%-6% of further correction we have seen as you were alluding that these prices are not commensurate for the market, but even exit of June. Can you give some color on the same?
You are saying the change from exit of June to now is what you are saying?
Yes.
No, I don't think it's a 5%-6%. It is not a 5%-6% change in the market, but everybody will half of us will be closed down.
Sorry, sir. Can you give some color, sir, how the market is behaving since it's a monsoon quarter?
Market has weakened. Market has definitely weakened. It's different in different regions. But there is more change in behavior. We have seen people in everywhere. So it's a variation between some areas, it's 3%, 4%, or that's the kind of increment to go for.
Okay. And two small points. Firstly, on the coal addition, that will be self-mining activity. How are those going to improve?
Just to clarify or recall, as I said, it is a range. If you see our impact, we look at it between 1.5%-2%. As I told you, some areas it could be more, where there is a slide, and then you see the composite between trade and non-trade and all of that. But it is not 5% across the board. I would like to reiterate that.
Right, sir. Sir, I was seeking some additional information about the availability of other coal, which we will be mining. What is the status of the additional coal volume, and when will that kick in? And other efficiency steps also, which are in the annual that will further lower our variable cost. And last point is on the Supreme Court ruling on allowing states to impose further imposing them more power on for further sales also on the minerals from the land. Does limestone also fall under that? What is the thought process of the management on the same, sir? These are my two questions.
Last one, I would react that we cannot be again conjecturing what the government is. In each government, there are several governments with different kind of stakes in minerals. How they are going to do, and that will be an industry-wide effect. We do not see that being specific to us over there. That is not something which we would like to comment just now. On the coal-
Yeah, coal, as indicated earlier, we expect Bikram coal mine to be operational by end of this year. So you will see the production really will come from the next year. The other one, Marki Barka , we had indicated that we expect it to commence in FY 2027, so that is what we are expecting right now. Apart from that, as Sandip Ghose indicated in his initial opening remarks, across the board, whether it is manufacturing, whether it is sales, marketing, logistics, across the board, there are multiple programs which are being undertaken for cost rationalization. So basically, there is no particular area, no particular scheme. There are multiple numerous schemes on which work is going on. Two major initiatives we have always indicated is Project Shikhar and Project Unnati.
Unnati is to do with the go-to-market side. Project Shikhar is the supply chain and actually manufacturing plant costs and overheads.
So cost reduction, you will see on a continuous basis, you will find cost improvement.
Also renewable energy, et cetera, which will go on.
Yeah, absolutely.
ASR, renewable energy, all that is part of the sum of them are part of our CapEx and the rest of it. That continue. As I said, we are absolutely focused. While we do not see a huge difference between us and somebody else doing, we are not going to lag behind others either.
Thank you, sir. Thank you for all the answers. Also, do provide us some comment on the Jute division. You did not allude to the fact that Jute being a small part also, but this time I think there were some extraordinary factors that resulted into poor numbers. If you could just enlighten us on what happened.
We have mentioned that, Saket, in fair amount of detail in the press release.
Yes, sir.
You live in Kolkata and you know the Jute industry is in doldrums. There are statements in vain, including by [inaudible] , who has given a statement. Right now, Jute is in a totally topsy-turvy thing. Good for us is that we are not totally dependent on government order. We have a large chunk of our private orders, as well as we have an export business. That is why while many units have shut down just now, there are big plants which have declared shutdown for 45 days, two months, and the rest of it. We are running, though albeit with a slightly lower number of shifts, but our plant is operational, that is going on. We are committed to this business. We are not here in an opportunistic way. As you know, Birla Corporation started with Jute. This is the first enterprise.
That is why we are a 104-year-old company. Here, that was our first unit, so there is both sentimental, emotional, and management attachment to it. We will persist, and if there are these kind of INR 5 crore loss in Jute, those things we will have to take in our stride, because it is really speaking, it is like the mother of our company.
Got it. Thank you, sir. I join the queue, sir, and all the best to the team in these tough times.
Thank you very much.
Thank you. The next question is from the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead.
Hi, sir. Good afternoon. My question pertains to first on the, could you share the fuel cost both in Q1 and what is the current conversion cost you are looking at in Q2?
In Q1, the fuel cost was INR 1.48 per million kilo calories.
Right.
Going forward, we expect some maybe about 5 paisa of further reduction as of now.
Okay. And sir, incentives you mentioned you have booked in Q1. What was the amount in Q1 and same number in Q4 on total basis?
Q1 it was INR 21 crore, and we are maintaining our guidance that we had provided earlier for the whole of year.
Q4 it was how much, sir?
Q4 it was around INR 44 crore.
44.
INR 44 crore.
That is because Q4 we also had Kundanganj land.
Yeah, yeah.
You can say right now between quarter-on-quarter, it is less than half.
Mm-hmm. Okay. Sir, this coal, how is this, the percentage I think last year was close to 18% of your total coal requirement was captive. How will this number be in basis your current ramp-up plans in FY 2025 and FY 2026?
That we cannot share just now. Maybe in the next call we can share it in more detail.
Okay. Lastly, on the progress on the Prayagraj and Kundanganj expansions.
Kundanganj then we mentioned that we are looking at early next year, by second quarter next year, we hope to start Kundanganj then. Prayagraj, we have not started work as yet. It is in a state of we are getting it ready, so it will follow after Kundanganj then, and we will give you an indication later.
Kundanganj is all equipment ordering would have been already done?
Yeah. Kundanganj has a lot of work has already happened. A lot of work had happened even earlier. Kundanganj we are moving on a fast clip.
Maihar clinker, any thought by when that plant you are looking at clinker expansion at Maihar?
We told overall, Rajesh will not speak exactly where, but we are committed to our 25 million tonnes by 2027.
Okay. Great, sir. Welcome that news. Thank you.
Thank you so much, Rajesh.
Thank you. The next question is from the line of Viraj Mahadevia from MoneyGrow. Please go ahead.
Hi, sir. Thank you for the comprehensive introduction in the beginning. Just a quick question. What are the plans either organic growth-wise or unconventional out-of-the-box steps for deleveraging the balance sheet because your interest coverage ratios are pretty weak given the leverage.
I think our leverage is not high. In fact, as of 31st March, our debt to EBITDA was less than 2x. On what basis do you say we are highly leveraged in terms of debt to EBITDA is concerned. In fact, our rating also based on our last year's performance, the outlook which was turned to negative, those have also been reverted back to stable by the rating agency.
Yeah. From a servicing perspective, I guess you are okay, but your interest coverage ratio, if I look at it this quarter, is not very strong.
You cannot look at quarter to quarter wise. You have to look at from a more long-term perspective.
Understood. Even if I look at FY 2024, an entire financial year, your PBT was INR 573 crore, whereas the interest finance cost was INR 371 crore. That's a lot of leakage.
See, we have always maintained that we set our debt in terms of debt to EBITDA, and as long as it is 3, we are okay. As of 31st March it was less than 2, and this is what we have always maintained across all forums with the rating agencies, with the bankers, and with the media, with the investors, everyone. We continue to maintain that. We continue to track our leverage in terms of debt to EBITDA. This we will continue to do so. As long as debt to EBITDA is comfortable, because EBITDA is an indication of profitability, as long as debt to EBITDA is within the specified range we are okay with. We will definitely be okay in terms of interest coverage and other ratios also.
Understood. Given that your plans that presumably now you will go slower on CapEx as mentioned, will the priority be to pay down debt on the balance sheet over the next year?
No, we are not going slow on CapEx. We are maintaining our guidance of reaching 25 million tons by 2027. There's going to be CapEx, but at the same time, we are not divesting from our philosophy of maintaining debt within the range of 3 in terms of debt to EBITDA.
All right. Thank you.
Thank you. The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Yeah. Thank you, sir. Sir, last time you said that we are-
Shravan, you are playing a second innings now. This is ODI, you do not play a second innings anyway.
Sir, if I allowed, the first guy has actually played the test, Mr. Kapoor. He asked so many questions. In that sense, I thought I can also play test.
Okay. Okay.
Yeah. Last time we said that net debt for this year by FY 2020 and we are looking at net debt would be lower than the INR 3,000 odd crore. There, we are maintaining that stand or there also we are having-
We are maintaining that.
Okay. And sir, we mentioned about the cost reduction. If you can help us in terms of any quantum that we are looking at now onwards, if by end of this year, how much more, or even by FY 2026, how much more cost reduction can happen?
This is Rajat here. Good afternoon. The way our MD has already briefed about Project Shikhar, this is a manufacturing transformation project, which we are working in all the areas of operations, including the efficiency. If I see three, four areas which are the key areas, one is the renewal. The increase in the renewal percentage. Even in last quarter, it was 27%, and gradually it will improve. Second one is the AFR. Of course, the AFR is again a delta between the fuel cost and this. So this also we are working on to improve further on the AFR. Third one is the efficiency improvement, both electrical and thermal in all plants. All together you can see that this year we have taken a stretch target of around INR 30-INR 40 reduction, and similar will be there for the next year also.
Thank you.
Sorry, you said INR 30, INR 40, sir?
Yeah. We will close it here. Thank you very much for participating. I will only close with quoting something we have written in the press release. The company has invested a lot in the last eight years in building our organizational capacity. Today, our depth of management, leadership, as I said, our assets in every front, not just in manufacturing or marketing, but how we are managing our HR, how we are managing our other capabilities and competencies that have increased. Therefore, we say with a lot of conviction that we will stay the course of our strategy. We do not want to move major. We will not do flip-flops. That is why what you have seen, we have not hesitated in putting upfront the actual thing without any way to dress it up or beat around the bush because we are confident of our strategy.
It can be temporary blips one can go through. But the way we have tried to do work on things for the last so many years and the last one and a half years in particular, we stay committed to that. That is the confidence with which I would like to leave all of you. You will see if there is something requires a course correction, we will come back to you and state it upfront. Otherwise, you will see a consistency in approach of Birla Corporation, the kind of consistency you have seen. Also along with that, two more important things you will see from us. One is total transparency. Secondly, higher standard of governance. Because our thing is to be not only the, as I said, best in class, but also the most respected in our category. So we will work towards that.
That is something which you can take from me as long as I am at the helm and the current leadership and our chairman, you can expect us to be exemplars in that way. Thank you very much. Pleasure.
Thank you. Ladies and gentlemen, we have reached the end of question and answer session. I would now like to hand the conference over to Mr. Rajesh Kumar for closing comments.
Yeah. Thanks everyone for joining this call on HDFC Securities. Thank you all again, and with this, we conclude the call. Please, [inaudible], you can conclude the call.
Thank you. On behalf of HDFC Securities, that concludes this conference. Thank you for joining us. You may now disconnect your line.