Good morning, ladies and gentlemen. Welcome you all to the Q1 FY23 results conference call of Sagar Cements Limited. We have with us from the management Mr. Sreekanth Reddy, Joint Managing Director, Mr. Rajesh Singh, Chief Marketing Officer, and Mr. Soundararajan, Company Secretary. We will now start the session today with the opening remarks from the management, and this will be then followed by a Q&A session. I request all the participants to be in the mute only mode during the course of the call. I would now like to hand over the call to Mr. Sreekanth Reddy for his opening remarks. Over to you, sir.
Yeah. Thank you, Manish. Good morning, everyone. Welcome to Sagar Cements earnings call for the quarter ended June 30 2022. Let me begin the discussions with a brief overview of the market in terms of the demand and the pricing, post which I'll move on to Sagar specific developments. Demand for the quarter was largely benign on the account of challenging environment, inflationary environment, labor availability and heat wave, and also unseasonal or rather, season being slightly ahead in terms of the rainy season. Subsequently, overall volumes as well remained steady, though they appear elevated on a year-on-year basis, largely owing to a low base effect.
Despite muted demand, here we have had to operate in a high inflationary environment wherein the price of raw materials remained considerably elevated, which in turn necessitated undertaking price hikes to help preserve overall profitability in the margins of the business. However, given the subdued demand, the industry couldn't undertake the requisite price revision, which in turn led to the profitability and margin compression during the quarter. However, we are now witnessing softening of certain raw material prices and are hopeful that with time and with the demand picking up, we should be able to deliver better performance going forward.
Moving on to Sagar ’s specific developments, our revenue for the quarter stood at INR 558 crore as against INR 393 crore reported during Q1 FY22, higher by 42% on a year-on-year basis, largely driven by volumes following the commissioning of the new capacities. Average realizations remained largely stable during the quarter. EBITDA for the quarter stood at INR 61 crore as against INR 107 crore generated during Q1 FY22, lower by almost 43% on a year-over-year basis. Margin for the current period stood at 11% as against 27% reported during corresponding period last year. Margin compression was largely owing to higher input costs. The raw material prices were fairly stubborn during the Q1, which resulted in a margin compression of almost 1,600 basis points.
Loss after tax for the quarter stood at INR 13 crore s as against a profit of INR 49 crores generated during Q1 FY22. Average power and fuel cost stood at INR 1,827 per ton as against INR 1,017 per ton reported during Q1 FY22. Elevated prices of coal and pet coke resulted in higher per ton cost of power and fuel during the quarter. Freight cost for the quarter stood at INR 798 per ton as against INR 764 per ton during Q1 FY22. From an operational point of view, the capacity utilization stood at 57% on a consolidated basis during the quarter.
As far as the key balance sheet items are concerned, the gross debt as on thirtieth of June 2022 stood at INR 1,490 crores, out of which INR 1,293 crores as a long-term debt, and the remaining constitutes the working capital. The net worth of the company on a consolidated basis as of thirtieth June 2022 stood at INR 1,639 crores. Debt equity ratio stands at 0.79:1. The cash and bank balances are at INR 282 crores as on thirtieth of June 2022. To conclude, I would like to reiterate that while the near-term outlook may be slightly bit challenging, we believe our diversified geographical presence, improved product mix, and cost rationalization measures position us well to create a value for our stakeholders. We also remain on track towards scaling up on our business inorganically.
As mentioned during our previous call, we will be able to share further details on the same in next few months. We are cognizant of not overstretching our balance sheet in our pursuit of chasing scale, and we'll continue to work towards maintaining a right balance between the two. That concludes my opening remarks. Would now be glad to take any questions that you may have. Thank you.
Thank you, sir. We will now begin with the question and answer session. A reminder to all the participants, you can ask your question by raise of hand in the participant tab of the Zoom platform. The first question is from Shravan Shah. Please go ahead, Shravan.
Thank you, sir. Sir, first question on, we informed the exchanges that the board has approved the proposal for the acquisition of Andhra Cements, which is in NCLT. In the opening remarks you mentioned in a couple of months you will have more clarity, but still trying to understand the basic understanding in terms of the valuation timeline, when it will be finalized, of the existing capacity, and post the acquisition, what kind of a CapEx are we looking at, when we start seeing the revenue profitability? Any color would be helpful, sir.
Yeah. Good morning, Mr. Shravan. I'm sure you appreciate. As indicated earlier, actually on those it's very strategic for us, so it is too soon for us to comment on any of the questions that you have asked at this point of time. I'm sure you'll appreciate that position.
I understand, sir.
On the timeline, sir, as indicated before, the resolution plan needs to be submitted before eighteenth of August. Should get all the clearances and all somewhere around end of September to early part of October. Now, from whatever little diligence that we have done, the asset looks like it might need a three-month kind of maintenance-related issues before we could start. I mean, this is what I can broadly indicate at this point of time.
By September, if we get the clarity and if we get the asset, then, after three months the maintenance, we can start seeing the revenue flowing in. That's how one should understand?
Yes, sir. I think that's our internal understanding, sir. There's a likelihood that it should take three months max on getting into the production now.
Okay. In terms of the size, the capacity would be 2.5 million ton-
It is 2.6 million, sir. With 1.8 million at the integrated plant and 0.8 grinding capacity in Vizag.
The clinker is how much?
Clinker is 1.65 million.
1.65. Okay. Now coming to the operational aspect. Any change in terms of the forecast comment on the volume per se. Last time you said we are looking at five MTPA volume for this year.
The outlook remains, sir. As you have seen even in Q1, we are very close to becoming that. Outlook we took a realistic view, so it still remains at five, sir, for the current year.
Okay. The incremental volume, as you mentioned last time, it would be from the new both the assets, that would be the giving the group for this year.
Yes, sir.
Okay. Now coming on the pricing, and then I will ask on the costing. Pricing, if you help us in terms of, it's good that we had a better realization this quarter, on QoQ front, despite our channel check, we are seeing a slightly lower growth. In which states, broadly we how much increase we have seen? Now post the June, how do we see the pricing, any correction we have witnessed and, what's the expectation?
Sir, the realization grew for us on a quarter-on-quarter basis at 5%, sir. Fortunately, the realization did not move downward, though unfortunately it remained stable and it did not, you know, cover the inflationary kind of input prices. It remained stable. We believe that even in the current quarter it might look in a similar kind of a structure. Though we are expecting a marginal kind of an increase, but it is too soon. We are just done close to 20-odd days into this July month, sir. As you know that this quarter is one of the off-season quarters. Good that it is raining well for longer, but affecting the business, especially.
Okay. Now costing, specifically for the fuel costing. Broadly, how much cost to increase this quarter? Also the second question,
Mm-hmm.
Coal prices, given what we mentioned is a kind of flattish and current price of imported coal, as mentioned in the presentation, is up 70% high, versus our understanding is it has increased throughout April, May due to. What is your understanding on that?
Sir, I think the prices were fluctuating, especially the pet coke has come down by 10%, though it is at the, middle to end of, June month, sir. As you would have seen, it dropped by 10%. Unfortunately it moved from INR 7,000-INR 8,000 odd to INR 25 ,000 and came down and settled at INR 22,000 as we speak. The good news is that it is trending downwards. By how much at all, it is too soon. Coming back to it, though, sir, though we have not aggressively, procured any of the imported coal, it looks like there is a small reduction, but I think what we have indicated is, definitely not the spot prices, but, it, the average kind of a consumption kind of a pricing is what we have taken.
Spot prices have come down a bit. It again varies from place to place and like Indonesia, Australia and South Africa. Domestic coal for us remained fairly stable, though the availability is a question because during the monsoon time some of the mines get flooded, so it could probably take some time before it gets restored. We are good on the stocks. Right now, for the next couple of months we do have the inventory. During this quarter we don't expect major material movement. We are good on even on clinker inventory as well as the inventory.
On total costing per se for this second quarter?
We are expecting it to be flat, sir.
Okay. That's good news that now we don't expect the further increase in the coal prices. Just-
At least for one quarter we can keep our neck out, sir. Beyond that again is a challenge, but for the next quarter, we believe it is going to be flat for us.
Okay. Couple of data points. First, trade share for this quarter was how much?
65%, sir. 65%, sir.
Okay. It remains the same. In terms of the-
Our market mix and the product mix did not change to an extent, so it remained fairly stable because we do have decent exposure into the rural, government volume sales.
Okay. Just click on the date, as last time mentioned that, I recall our net debt, we were maybe half.
Sir, this debt, sir, is inclusive of the debt that we have borrowed for the acquisition.
Yeah.
If you remove, sir, it remains close to that number. The interest cost looks to be elevated at this point of time, but as we are posting interest cost. Once the acquisition is complete, I think it will get capitalized, sir. That's the position for us. The net debt excluding the potential acquisition, we still remain sub-INR 800. That's what we have indicated, and that position remains fairly there.
Okay. Thank you and all the best, sir.
Thank you.
Thank you. Anyone who has a question may indicate by raise of hands. Sir, in the meanwhile, the question comes up. One question from my side, sir. Sir, in terms of, coal inventory and current coal procurement from Singareni, what is the price that we are currently getting it at, and what would be the inventory cost?
Yeah. The inclusive of inventory cost, it is at INR 2 per 100 kcal, Manish, so that remains fairly stable there.
Okay.
The only variable in this is, again, if we have to go for a far-off mining this thing, it could marginally go up by maybe INR 0.01-INR 0.04. The average holding cost for us on the is sub INR 2 for every 100 kcal.
Got it, sir. Sir, any comment on the Russian coal that has started coming in. It's almost 20% cheaper is what we understand. Is that coming on the same terms or
We have seen some of the coal hitting Vizag Port, at least in our operational area.
Okay.
We have seen it is hovering anywhere between INR 165-INR 170 on a landed CIF basis to the port.
Okay.
Which definitely looks like it's discounted to the other coals. We have not sourced any of that because in our case it would still be a lot more expensive than the domestic coal, so we are yet to try the Russian coal, Mr. Manish.
Got it. Thank you. The next question is from Sanjay Nandi. Please go ahead, Sanjay.
Yeah. Good morning, sir.
Good morning.
Sir, just to mention, like, we have an inventory for, like, couple of months going forward. Like the same pressure will be there for next months as well, sir, because we are having a high cost inventory of the coal. The same thing will continue for the next quarter, right?
Yeah. It would remain very similar, sir, because our challenge is more on pet coke because we are using 100% pet coke for our Madhya Pradesh plant.
Okay.
We are using limited pet coke, though we are using some pet coke at both Gudipadu and Mattampally, but it is limited.
Mm-hmm.
That is putting some pressure, but the domestic coal is fairly stable. During this quarter, the volumes may not be as high, so we should be good to tide over the situation. Given this scenario, we think that the cost should remain flat from Q1, and Q2 should be very, very similar, Mr. Sanjay.
Sir, if the, like, the price drop which we can see from the pet coke and the international coal as well, like 10%-15% kind of drop from the peak. What kind of benefit will be accruing, like from which month that will be accruing, sir?
Sir, it will.
between the Q3 or in Q4.
Sir, we typically average it out, sir. I think the real this thing we should get from middle to end of Q3 onwards.
The full thing will come from Q4 onwards, right, sir?
That's the assumption, sir.
Good things. Okay. Sir, what is the pricing scenario like? Like the prices have hiked up a lot from that May thing to, because-
Sir, I will.
Obviously because of the monsoon things. Can you
See, right now I can give you up to 15th of July pricing, sir.
Mm-hmm.
Like Bangalore, prices have moved up by INR 5-INR 10 per bag.
Okay.
Chennai remain more or less flat, with Farrukhabad increased by INR 5.
Okay.
Sholapur remained flat. Pune remained flat. Berhampur, there is a slight drop. Not slight, it is around INR 10 drop.
Okay.
Yeah. Bhubaneswar is again a INR 10 drop. Coming back to Telangana, yeah, it's more or less flat. Hyderabad, again, we have seen a INR 5 increase.
Mm-hmm.
North Coastal AP, that is Vizag, yeah, increase is around INR 5. Central Coastal again is a INR 5 increase. Rayalaseema remains flat, sir. I mean, this is what is our observation. Again, this is only into the 15 days we are talking of, from June exit to 15th of July.
Got it. Sir, what is the net debt standing in the books? Is it INR 200 crores?
INT 291 crores. Yes, this includes the INR 500-odd crores that we have borrowed for the acquisition, Mr. Nandi.
Okay. 1,290 is the net debt figure including the
Around 2, INR 1,200, sir.
INR 1,200.
Yeah. INR 1,208
INR 1,208, right. It includes the INR 500 crore s thing which you have borrowed.
Yes, sir. Yes.
Okay. Sir, what will be the repayment structure like going forward?
Sir, it's a long tenure. Debts is what we are sitting on them. We have structures, but would be very happy to share the tenure for each of the loan. It's, yeah, we have multiple loans, sir. Each of them have their own tenure, but for us it's a long drawn kind of a schedule, sir.
Long drawn. Okay. Got it, sir. As of now, that's from my side, sir. I'll join back in the queue, sir. Thank you so much, sir.
Thank you.
Thank you. The next question is from Sunny Agrawal. Please go ahead.
Thanks for the opportunity. Sir, I would like to understand slightly demand supply scenario from near to long-term perspective.
Especially in the light of wherein the government is under pressure to, I mean, garner tax revenue, so they may curtail some CapEx at one end. On the other end, guys like UltraTech, Adani or Shree Cement, they have announced an aggressive expansion plan over next two to four years. Just from a medium to long-term perspective, you can throw some light on demand and supply. Thank you.
Sir, I think the cement demand for a short term might look a bit challenging, though it's still growing, but it's growing at mid to low single digit kind of a number. Long term looks promising, sir. Most of the announcements that are coming, I think they are to cater to the medium to long term kind of a demand. Our belief is it is still 24-28 months away. By that time we are more than hopeful that we should have completed the elections and would have been into the next running of it. Our past experience is the demand shoots up a year and a half or two years before the election. That's what most of us are gearing up for. The medium term to long term looks promising, sir.
Historically, the cement demand doubled every 10 years. If it has to double 10 years, I'm sure we'll be falling short of the capacity. For some period there could be optically looking like an excess kind of a supply, but we are reasonably confident that on a medium to long term horizon, the gap should actually narrow down or the demand probably should shoot slightly ahead of supply. I'm talking of all India, sir. If you look at some regions, especially south, I think for next 10 years probably the supply is going to be more than the demand. Again, the problem with our sector is that, yeah, we have much higher nameplate capacities, which could be true on the grinding.
The real thing and the conversion factor would probably not be as high as it looks, sir. That might optically make people think that we are having too much of supply. In reality, the gap may not be more than 10%-15%, sir, as we speak. Which we are more than hopeful that over a five to 10-year horizon, the gap should narrow down even to a lower single digit is what we think. That's what probably is making some of the sectoral players to invest and be prepared to handle that kind of a situation is what we strongly think.
Yeah. Thank you, sir.
Thank you.
Thank you. Anyone who has a question may indicate by a raise of hands. We have the next question from Amit Srivastava. Please go ahead.
Yeah. Thank you, sir, for the opportunity. Sir, just wanted to know your thoughts on our newer capacity which has come up on our Jeerabad and Jajpur. How is the ramp up in terms of the volume as well as the profitability? Because if I look at the standalone number, the EBITDA quarter is INR 650+, where the consolidated is, it's lower. It's indicating that these units are not yet contributing in a full phase. How we are looking at in our future after six months, nine months, what the actually ramp up will happen in terms of the profitability and what is the thought process over there? You know, if when it can happen in terms of the profitability at the.
Yeah.
optimum level. Yeah, that's it.
Yeah. Good morning, Amit.
Yeah.
As you have rightly said, the two assets are in ramp-up phase.
Yeah.
We are doing an average 40% capacity utilization, slightly more than 40% capacity utilization at Jeerabad. It's close to 46% capacity utilization at Jeerabad on the volume front. The plant has touched 100% capacity utilization only during the second fortnight of June. With the coal and everything, the thermal consumption and everything also getting full-fledged. The full-fledged waste heat recovery also got commissioned during the last week of June. That should help us mitigate on the cost side. Once this off season is over, we are more than confident that the ramp up at Jeerabad should be much faster than what we initially indicated or expected. Going to Jajpur, sir.
Jajpur just started, so the average capacity utilization is.
10%.
Yeah. Sub-10% as we speak. We were waiting for some of the approvals for some of the product, that is the composite cement and all. We just received the ad hoc permission from BIS for that particular product. So all these approvals coming in, I think post this season, yeah, we are more than hopeful that we should reach to 35%-40% capacity utilization in that particular asset. I think once these two assets slowly start getting back to normal, the real margin would start getting reflected. As you have rightly said, the standalone numbers are much higher. There has been a drag because unfortunately these things did not ramp up in time.
Though we have indicated that the ramp up could take for the second half, internally we were hoping that it should have happened slightly before. In the current year, we are more than hopeful that both the operations at both these assets should stabilize and start contributing rather than being a drag, sir.
Yeah, it's helpful, sir. Second, sir, just on a follow-up of 5 million tons which you have guided. There mostly we are taking it, the growth of incremental, whatever we are looking at is from the newer capacity ramp up.
Yes, sir. I think we indicated even earlier that 3.6 million-
Right.
Would at best become INR 3.7 million in the asset here, and the rest around INR 1.3-1.4 million has to come from those two assets. They are comfortably in a position to do that this time. We don't see that as a factor.
Yeah. If the south growth will be better, then we can get further upside on that one.
The issue as indicated, sir.
Yeah.
Being the industry player, if you look rationally and logically, yeah, there are some ramp-ups and there are some commissioning that has happened in this region.
Okay.
The growth is in a low single digit in South, so it would be very unfair for us to assume that we would be growing, when market itself is growing at a slower pace. That's one of the reason why we have clearly indicated that we expect it to be flat for the areas that we operate. The incremental volume is coming from the places where we have just commissioned, sir. That will be a bonus, which we are not expecting either way.
Yes. Thank you, sir. It's been helpful.
Thank you.
Yeah.
Thank you, sir.
Thank you. The next question is from Himanshu Yadav. Please go ahead.
Thanks for the opportunity, sir. Could you just provide some comments on price, pricing situation? I mean, we understand that monsoon months is obviously the demand is, you know, seasonally weak. In terms of, you know, if we see some fuel cost reduction coming in and fuel prices decline, do you think these will be absorbed by the companies or players in the industry? I mean, are you seeing any pressure in terms of passing on those reduction in prices to the end user?
Yeah. Mr. Himanshu, I think end users are getting the best of the benefit. Even at such a high inflationary kind of a thing, the realizations did not move up much. Now, will it come down? The realizations, will it come down when the prices coming down? I think only time will tell. Our belief is, as you have seen, the margins have actually come down by less than half of what normally the industry has delivered. So it's a function of time, sir. We internally believe that the realizations should go up for us to sustainably survive in this particular market. That's what we internally think. We strongly believe that it has to move up to catch up with the inflationary kind of a thing.
Though the prices, the input prices looks to come down, but as told earlier, there were some INR 7,000-8,000 per ton for each of the coals, sir. They are almost 3x more than what they used to be exactly a year back. They are coming down slowly. There is a huge pressure on that. Till it normally stabilizes, sir, I don't see further reduction in prices. We believe it has to move up for us to survive. That's what is our thinking and belief, and we seriously hope for that to happen.
Thank you. That was my only question.
Thank you.
Thank you. The next question is from Shravan Shah. Please go ahead.
Hi. Sir, two, three things. First, in terms of the blended cement, slowly we are inching up. Now at 50%. Last time we said 60% that we are targeting. That remains the same.
Yes, sir. Because as indicated earlier, sir, the ramp up at Jajpur as well as Hyderabad should help us achieve that number, sir. Should help us achieve that number. Okay. Second, just wanted to understand, this time it's good that our lead distance has come down from 283 odd kilometer to 268 kilometer. But in terms of the freight cost per ton has increased 3 % odd . Is it fair to assume that the entire fuel cost increase is already there and now we can start seeing the slightly higher reduction in the freight cost per ton?
Sir, we did indicate that, objectively we tend to be less than INR 300 and slowly inching towards INR 275. Yeah. With the reduction of lead distances, it's logical to assume that the overall freight cost should come down. But some of the tollages and some of the transport contractors had to be, you know, we had to compensate for their overage with this inflationary pressure. What you're seeing is only the diesel price alone, sir. But there are other inflationary pressures even for them, for their manpower and the other tolling costs and everything is going up. Yeah, we do expect the savings, but the bigger saving in our case is the strategically reducing the lead distance. That should disproportionately start impacting.
As long as the fuel and other inflationary prices remain constant, we should see a saving. At this point of time, the other inflationary costs other than fuel are also got adjusted. We strongly think that if all the things remain stable, the freight cost should definitely come down for us.
Okay. Other thing is in terms of this quarter, we have seen a significant increase in other income from INR 4 odd crore to INR 12 + crore s. Is it the extra debt that we have raised, we maybe have partially used as a treasury gain?
Sir, it's a mix of many things. This is, these are one-offs, sir. These are not something which you should factor. Yeah, these are one-offs, sir.
Okay. Got it. Second, sir, a broader thought in terms of normally what our strategy is to keep on doubling the capacity.
Every 10 years.
Yeah. Every 10 years. Now with Andhra Cements would be there, so we would be 10 plus capacity. What's the next plan and when
Every 10 years it will double, sir. Every 10 years it means, the earlier indicator was to become a 10 million by 2025 and 20 million by 2035. Yeah, that remains. That duration remains for us.
Oh, okay. Thank you, sir.
Thank you.
Thank you. The next question is from Rajesh Ravi. Please go ahead.
Yeah, hi. Good afternoon. Could you share the regional breakup broadly, sales in South, East and Central together and West, any broad percentage? Because just wanted to understand your realization from whatever assessment you have earlier discussed or shared. East market, you have seen strong pricing. West and South, the prices has been more flattish to, you know, a few markets have seen pricing, price improvement. Where is this 5% realization growth coming in from?
Mr. Rajesh, I will broadly tell you, but the real numbers.
Yeah, yeah, broadly. Yes.
Telangana contributes close to 27%, sir. AP contributes 31%, Karnataka 6%, Maharashtra 6%, Tamil Nadu 12%, Odisha 7%, Madhya Pradesh 9%, and other states remain at 1%. Which broadly is in line with what we have done even during the last year same time, sir, as percentages.
Okay.
Now, specifically going to the realization which moved up. Yeah, the Odisha is the only place, and the other contributed quite significantly.
Mm-hmm.
The places where we were slightly negative were in Karnataka and Tamil Nadu, sir. The rest everything.
Yeah.
remained flat or positive. Yeah.
Mm-hmm.
We have seen a 6% gain in Maharashtra. What you should be mindful of is this, Mr. Rajesh, that it also has to do with the product mix change. From a year to now.
Okay.
Yeah. There is a shift. The distances would have changed, the things would have altered. Broadly, I think we would be happy to share those specific details.
Sure, sure.
Yeah.
It's more to add with your increasing share of trade, and, sorry, blended cement sales.
No, no. Blended cement typically might put downward pressure in terms of realization. Margin could be flat or positive. There is a possibility there have been some sales, higher sales in OPC in certain segments where the contribution could have been higher on that issue.
Okay. Okay.
What you have to be mindful, sir, the AP government, supply prices have gone up.
Okay.
Yeah.
Okay, okay.
It has gone up by INR 50 per bag also, sir.
Oh, okay. That is a major contributor.
Yeah. 15. It is 15.
Yeah. INR 15.
That alone is not, but that also a big contributor.
Yeah, yeah. That also contributed. Okay.
Yes, sir.
Okay. Second is, in terms of the demand number, your assessment, the monthly assessments, you know, indicates that South market is showing strong traction. Even if we look beyond FY 2021 or 2020.
Sir, the problem is.
Uh, volume grow-
Not demand, sir. The problem has been with the lackluster demand. It's on and off. That actually is creating the pressure on the market.
Okay.
Whatever order that is coming into the market, you know, once it is not there, tend to pick up at whatever is the price. That indirectly is putting the pressure.
Mm-hmm.
We don't see a big challenge with the demand as long as you see the ABC.
Mm-hmm.
Because people expect it to ramp up very fast. It has been very stable, sir. It has been very stable.
Mm-hmm. Okay. Sir, when you talk about subsidiaries, currently only these two are your subsidiaries, right? The Jeerabad and the Jashpur units.
Yes, sir.
and the BMM Ispat amalgamated.
No. Vyavaram was always the part of the asset.
Correct.
The Bayyavaram got merged last year.
Yes. Okay. When we look at standalone numbers, we are just excluding these two new units.
Yes, sir.
Okay. Great, sir. Last question on the costing. You know, while your presentation, you are saying that the sequential Q2 costs are much higher in terms of imported coal prices shooting up 70% plus and all, you are still expecting your cost to be flattish Qo Q?
These are two things.
Two separate things.
Rajesh. We don't use imported coal at all.
Okay.
That, you know, cost doesn't arise.
Mm-hmm.
We have just indicated the imported coal prices in general.
Got it.
We're not using any of it, Mr. Rajesh.
Because of your usage of pet coke and domestic coal, you are expecting the cost to be flat.
It will remain flat, sir, because there is some saving that we have already started seeing.
Correct.
It might be backended. May not be in this quarter, but in subsequent quarter.
Mm-hmm.
We expect it to be flat. We are not expecting it to move higher or come lower.
Mm-hmm.
We're expecting it to be flat.
Okay. Sir, one last question. These two new entities at EBITDA level and, on what utilization you're expecting them to break even, at least?
Sir, it's a-
At EBITDA level.
It's an overrated question, Mr. Rajesh. It is to do with the realization.
Uh-uh.
It is not just the utilization alone, but if the utilizations move up even at a lower capacity utilization, it should.
Mm-hmm.
Our experience is that at Jeerabad, even 50% capacity utilization should help us be EBITDA positive.
Okay.
I think it should be close to around 40% capacity utilization. That's what,
Okay.
If everything remains flat.
Q4, you are expecting those numbers to be achieved?
We are hoping for that, Mr. Rajesh.
Okay. Great, sir. Thank you. I'll come back in queue.
Thank you.
Thank you. Sir, the next question is from Tanisha on the chat. After some recovery seen in June 2022, how has the demand been in July 2022? Has there been any improvement? Also, if you could give some regional flavor.
Yeah. No, no. The demand related issue, it's a very seasonal issue, Mr. Manish. I'm sure you appreciate that they cannot compare month on a month for this season. As seen, it's too soon. But if I have to compare with June to the first 15 days of this July, yeah, it definitely dropped because season is on. As indicated, though for the short term it looks difficult, but for the long term from an economy perspective, it looks very, very promising because the rains are much higher than normal is what they have indicated. All the reservoirs are almost close to full a couple of months ahead of time. That's a good sign for agriculture and the economy.
For the short term it looks challenging because it started raining a good 15-20 days ahead of schedule. That is what is making the demand numbers look lower. That's the season.
25%.
Thank you, sir. The next question is from Amit Murarka. Please go ahead, Amit.
Yeah. Hi, hi, good morning, everyone. Just, my question is again on power fuels. From the slide, I can see, the numbers are higher than the first quarter numbers. Just wanted to check like, the understanding that was there is that the pet coke has come off like from a level of INR 250 to like INR 220-odd. Why is the spot prices then showing higher, than the prior quarter?
Yeah, they are what they are, sir. We have not done anything.
Okay.
That's what we have indicated about what the spot prices are. That's what we have indicated in our presentation.
Right.
Our own consumption, sir, they are blended. You know that we do it on a weighted average. They are trending down, but by the time the low cost pet coke, relatively low cost pet coke would hit us in the middle to end of Q3.
Right. Does this cost that you indicate also include that, 10% customs duty? This is the landed cost.
It's all in landed cost at each of our sites.
Right. I just missed the topical breakup that you shared of your various states, the revenue.
I would share that with you, Mr. Amit.
Okay.
Yeah, it's topical, so I'm sure it should be a challenge for me to read out, but would be more than happy to share those numbers.
Theek. Okay. Sure. Thank you.
Thank you. The next question is from Vincent Andrews. Please go ahead. Vincent Andrews, please go ahead with your question. Unmute your line.
Sorry, it was muted. Thanks for the opportunity. I have only one question. See, the net debt currently is at INR 1,290. What will be the repayment for this, including the addition that you have taken for FY 2023 and 2024?
What is the EBIT? It will be very principally close to INR 100 crore.
Yeah.
Mr. Vincent Andrews. It is structured in a similar way for next seven to eight years, sir. Our net debt at this point of time is INR 208 crores. That includes INR 500 crores of money that we have borrowed for the acquisition, Mr. Vincent Andrews.
One more question. For the Andhra Cements, I just want to confirm. The clinker capacity is 1.65, right, and grinding capacity is at 2.6, right?
Yes, sir. See, these are as indicated by the RP, sir. Which of course our people did do the technical diligence. Yeah, it is at 1.65 million clinker, 1.8 million ton
Okay. Thank you. Out of INR 48 crore, interest and other costs in this quarter, how much it will be getting capitalized for the acquisition?
Sir, I think let me give you the precise numbers in due course of time and even offline. Yeah, we are expecting that this tends to continue for even into Q3.
Mm.
Once any of the assets that we are targeting to acquire, then it'll get capitalized. At such time, I think, this would exist in the book.
Okay.
Yeah, I think close to around INR 50 crores would come from this additional borrowing of INR 500 crores for acquisition, Mr. Vincent.
Okay. Thank you. That's from my end. Thank you.
Thank you. Sir, a couple of questions from the chat box, from Mr. Pradeep. What is the fuel mix, domestic coal and pet coke ratio?
Sir, it is 70/30, sir. It is 70% domestic coal and 30% pet coke.
Thank you. Sir, next question is from Nikhil Deshpande. Has the entire INR 500 acquisition debt fully drawn, and have you received the INR 350 crore from Premji?
Yeah. It's fully drawn as far as the acquisition funding is concerned. We received the entire INR 350 crores from the Premji for their equity participation, sir. Yes, we did receive both.
Thank you, sir. The next question is from Keshav Lahoti. Please go ahead, Keshav.
Sir, your other expense have decreased by INR 100 million in this quarter. I think it's more to do with the ramp up of the new plant. Is it fair to assume now in this quarter there is no one-off expense in other expense?
Sir, as you have rightly said, the most of the ramp up has already completed. Yeah, some of the one-off expenditure is pertaining to the legal, pertaining to the acquisitions and all. Yeah, more or less, we have done with most of them, sir. Even if they are, they should be very, very much.
Okay. One more question from my side. The fuel mix in Q2 will also be stable?
Yes, sir. I think we are more or less expecting. There could be a small change where the domestic coal could slightly come down. Petcoke could go up because we are trying to manage the moisture. So typically, petcoke could be a better choice. We might see a slight increase in the petcoke utilization, but by few basis points only, sir. That shift could be by a few basis points, that's it.
Okay. Thank you. That's it from us, sir.
Thank you.
The next question is from Shravan. Please go ahead, Shravan.
Hi, sir, in terms of the CapEx, last time we said it is only INR 30 crore. That remains the same or anything?
Yes, sir. That remains the same, sir. The maintenance CapEx remains at INR 30 crores. Sub INR 30 crores.
Okay. Just on the tax rate front, for the full year on the P&L front, in the report.
We should be in Mattampally, sir.
Okay. This is including the deferred tax, we are seeing or-
Yes, sir. Yes, sir. It's inclusive because with the margin of, I think we are back to the MAT and, yeah.
Okay. Thank you.
Thank you.
Thank you. The next question is from Harshit. Please go ahead.
Yeah. Hi, sir. Thank you. Just one question on the foreign fuel inventory costing. We follow first in, first out methodology.
We do the weighted average.
Okay. The 30% domestic petcoke which we use, what is the price at this point of time?
lakh kcal average.
Indian petcoke it is, INR 2.71, sir.
Yeah, it is 2.71 for the 100 kcal, Mr. Harshit.
Our inventory cost and weighted average cost which we are having right now, it's largely same.
Yes. It has to be, yeah.
Yeah. All right.
Because the reduction only happened during the last fortnight or the last week of June, Mr. Harshit. The real impact will be felt only, as mentioned in the middle of next quarter.
All right. Sir, if I may ask, how many months of fuel do we carry as inventory at present?
At 100% capacity utilization, sir, we have domestic coal for 2 months and petcoke for around 45 days.
45 days.
But, uh-
Yeah.
We don't operate at 100%, so that would translate to we have.
Three months.
Sufficient coal. Yeah.
Got it. Sure. Thank you, sir.
Thank you.
One more thing, if I may ask. That 10 million ton is something if Andhra plant goes along with our plan, then that 10 million ton is something which are going to be there even in FY23 end itself. Just want to understand that the INR 500 crore s additional funds which we have, is that largely gonna get consumed for this capacity or we have?
Yes. I think what you should look at is this money was earmarked for the acquisition, sir. That's the debt. Probably at best it could go up by another INR 100 crores. That we should start reflecting at 10+ million tons for close to INR 1,500 odd crores on a higher side. That includes working capital and everything.
No. I, sir, didn't get the last part. Basically we reach 10 million tons by end of FY 2023 itself. The last part of debt which we have, the INR 500 crores-
Exactly. It's going to remain the same, sir. We are already sitting on the debt for the potential acquisition. Debt numbers would not change, but the capacity.
Understood. Got it. Perfect. Thank you, sir.
Thank you.
Thank you. The next question is from Abhishek Lodha. Is demand elastic to change in price? Because we have seen higher volume at highest prices. Does lowering price help to push volume?
Sir, these commodities' influence on the overall cost of construction, be it house or any other project, is very, very limited. Historically, we have never seen higher price compressing the demand or vice versa, the lower price accelerating. Yeah, what we have seen is only if at a very high inflationary kind of a pressure on the building material, some small deferment is what we have seen. We have never seen any correlation vis-à-vis to price to demand. We have never seen any inversely kind of a correlation or a positive correlation. We have never seen any of that in the past.
Thank you. Next question is from Amit Murarka. Please go ahead, Amit Murarka.
Yeah. Hi. Just on the fuel sourcing bit, like, generally I remember in the past you mentioned that during monsoons you generally raise your inventory holding, and what you said that is as of now you would have two months of inventory. Is there a change in strategy?
No, we have not changed anything in our strategy, Amit. Since the inflation has hit us hard for last three quarters, we are not aggressively procuring it because we always think that once we buy, if prices come down, it would impact. We slowly have reduced from six months to three months now. What we have indicated is at 100% capacity utilization. Which we are not doing either way. This actually is very close to three and a half to four months of our fuel requirement. We did reduce it from six months to close to four months or three and a half months. That we have done because of the very high cost and very volatile kind of pricing regime on those fuels.
Yeah, we would be very happy to revert back to that six months as soon as we see some stable kind of a pricing on the fuel side, Amit.
Oh, sure. That's understood. Also on Singareni, like, given that the alternatives are so much more expensive, what kind of or what is the period, periodicity of this agreement you have with Singareni? Is it like six years?
These are FSAs which are long-term, but agreement needs to be entered every year. Everything is in place for us, for the fuel supply.
Okay. The pricing can be revised when.
Pricing is dynamic.
Okay.
The FSA is perpetual only for the supply, sir. It has nothing to do with the pricing. Pricing is very dynamic. There is no agreement for the price.
Sure. Sure. Thank you.
Thank you. Anyone who has a question may indicate by raise of hand. As there are no further questions, I would now hand over the call to Mr. Srikanth Reddy for his closing comments. Over to you, sir.
Yeah. Yeah. We would like to once again thank you for joining on the call. I hope you got all the answers you were looking for. Please feel free to contact our team at Sagar or CDR should you need any further information or you have any further queries, and we'll be more than happy to discuss them with you. Thank you, and have a good day. Thank you, Manish.
Thank you, sir. That concludes the call. We will now disconnect.
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