Ladies and gentlemen, good day and welcome to the Q2 FY23 earnings conference call of Star Cement hosted by PhillipCapital (India) Private Limited. 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 and zero on your touchtone phone. Please note that this conference is being recorded. I'll hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital (India) Private Limited. Thank you, and over to you, sir.
Thank you, Rutika. Good morning, everyone. On behalf of PhillipCapital (India) Private Limited, we welcome you to the Q2 and H1 FY23 call of Star Cement. On the call, we have with us Mr. Tushar Bhajanka, Executive Director, and Mr. Manoj Agarwal, CFO of the company. At this point of time, I'm going to hand over the floor to the management of the company for the opening remarks, which will follow the interactive Q&A. Thank you, and over to you, Manoj, sir.
Hello. Yeah, hi. Good morning, all. My name is Tushar Bhajanka. I'm the Executive Director of Star Cement. I'd like to welcome you all to the earnings call of quarter two. I have Mr. Manoj Agarwal with me, who's the CFO of the company. He will take you through the numbers of quarter two, and after that, we can have a Q&A session. Thank you.
Yeah. Yeah, hi friends. Very good morning. I am, on behalf of Star Cement Limited, welcoming you all to our phone call for discussing our numbers of Q2 FY23 and half-year ended September 2022. I would like to clarify that we will be discussing the historical numbers, and there is no invitation to invest. Having said that now, I will just take you through the Q2 numbers followed by half-year numbers. Starting from clinker production during the quarter ended September 2022, we have produced 5.11 lakh tons of clinker as against 5.49 lakh tons same quarter last year. So far as cement production is concerned, we have produced 8.91 lakh tons this quarter as against 6.18 lakh same quarter last year. This quarter, we have taken shutdown in both of our fields at Lumshnong, Meghalaya. Now, I will take you through sales volume.
During the quarter, we have sold 891,000 tons of cement as against 617,000 tons of cement and a negligible quantity of clinker same quarter last year. This is as far as cement and clinker sales is concerned. As far as geographical distribution of cement is concerned, in Northeast, we have sold around 654,000 tons as against 493,000 tons during same quarter last year. As far as outside Northeast is concerned, we have sold 238,000 tons of cement this quarter as against 125,000 same quarter last year. In terms of blend mix, it is almost 6% of OPC, and the rest is PPC. These are the quantitative numbers of the quarter. Now, I will take you through the financial. The total revenue figure this quarter is around INR 593 crore as against INR 406 crore same period last year.
As far as EBITDA figure is concerned, this quarter, we have done an EBITDA of around INR 83 crore as against INR 80 crore last year. That is INR 49 crore as against INR 44 crore in same period last year. This is on account of increased tax expenses due to some set of tax exemption periods in respect of our company's Guwahati Grinding Unit and its subsidiary, Star Cement Meghalaya Limited. However, the cash outflow will be that only. On per-ton EBITDA front, it is INR 934 per ton during this quarter as against INR 1,302 per ton same quarter last year. This is what our quarterly numbers are of this quarter. The total revenue figure for the half-year ended September 20 is around INR 1,258 crore as against INR 917 crore same period last year.
As far as EBITDA figure is concerned, during half-year ended September 2022, we have done an EBITDA of around INR 221 crore as against INR 182 crore last year. That is INR 99 crore as against INR 115 crore in same period last year. That is down due to increased income tax expenses as explained before. On per-ton EBITDA front, it is 1,183 during this half-year ended September 2022 as against 1,317 per-ton same period last year. These are the quarterly and half-yearly numbers. Now, I request all of you that if you have any query, you can ask the same, and I will request Vaibhav to moderate the query wherever it's required. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the 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, to ask a question, you may press star and one. The first question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Yeah, thank you. Sir, first on the volume front, so last time we said we are looking at close to 17% growth, that is a 4 million ton volume for this year and the next year double digit. So the strength remains same or may be likely to slightly better in this year.
You know, sir, the volume growth that we've had in quarter two has basically been about 42%. So we have actually been faring much better than what we had actually projected earlier. In this, a lot of our growth has come from outside Northeast. So we have grown about 91% year-over-year in outside Northeast. And in Northeast as well, our volumes have grown by about 33%. So we do stick to the numbers that we had earlier projected, and we do expect that the numbers will be better than what we had said.
Okay. Secondly, in terms of the geographical mix, so this quarter, since the Northeast is slightly lower, but we were looking at close to 65% share in Northeast. So will we remain the same?
Yes. So I think even if you look at the numbers this time, we have made more than 65% of our sales in Northeast compared to any of the previous quarters. Of course, the growth in outside Northeast has been better this quarter, but even the North has grown. So in that sense, we are trying to maintain a 75/25 or a 70/30 ratio between Northeast and outside Northeast sales.
Okay. And what will be the number in terms of the trades, sir, for this quarter and lead distance?
Yes. So the trade sales, the overall so we have actually increased our trade sales to about 93% of our overall sales. If you compare it to previous numbers, it was about 85% last quarter and 88% YOY. So we have increased so we have not only led to a higher overall number, we have actually increased the proportion of our trade within non-trade sales. So that proportion on trade sales right now is about 92.4%. And regarding the lead distance, the lead distance has increased slightly from 230 km last quarter towards 233 km this quarter. So it has only increased very slightly.
Okay. So in terms of the premium share this quarter, how much? And we were looking at to increase to 10% this quarter. So for this quarter, has it increased to 10% from 8% in June?
Of cement product?
Yeah.
So the cement product sale has not shown that kind of a growth. So it has broadly remained at about 7% of our overall sales, which was very similar to the number last quarter.
So, in terms of the new pricing, so how the pricing has moved in East and Northeast in second quarter and post-September, how the prices have increased in both the regions?
So the pricing has broadly remained the same in Northeast. It has probably fallen back on the fees, but not significantly. The pricing outside Northeast has, of course, taken a hit. So if you talk about North Bengal area, the pricing has fallen by about INR 20 in August month. But then from September month, it had been increasing. So even in October or November, we have taken price increases in outside Northeast. So the Northeast prices have broadly remained the same, whereas the prices outside Northeast had fallen by about INR 20, but now they have again picked up.
Broadly, post-September, on an average, outside Northeast, the price increase would be how much? INR 15-INR 20, both Bihar and West Bengal?
Sorry, could you repeat that, please?
I'm saying post-September, Bihar and West Bengal price increase would be around INR 20 post-September.
Yes. So yes, so we have taken a price increase in September. And then the prices have actually fallen again in October because October was not a good month for any of the cement players because all the festivals actually took place in October. But now in November, again, we have increased the prices by INR 10, and we expect that again, we will increase the price of INR 10-INR 15.
10-15 more, we are expecting?
Yes. Yes, in the month of November.
Lastly, on the expense and then the CapEx and the lead front, so in terms of the timeline for 3 million ton clinker, 2 million ton grinding in Guwahati and 2 million in Assam. So previously, we mentioned December 2023, January 2024, and March 2024. So that remains intact. Or do we see any delay in terms of commissioning the plant? Because last time we said from August, the full construction will start. So has it started? Any update? And in terms of the CapEx, though this 1H , the CapEx was only 120-odd, INR 127 crore versus where we are looking at INR 1,000 crore this year, next year. So what's the new number?
So we have, of course, embarked on the project that we were discussing. Our commissioning of the plant has already started in Lumshnong for the 3 million ton clinker plant. We have also started our commissioning of the grinding unit in Guwahati. We have started buying the land that we require in Silchar for our grinding unit in Silchar. So the CapEx is going on in full front, and we still stick to the timeline that we had discussed earlier. In terms of the CapEx outlay, the CapEx outlay has just started. So overall, we must have in terms of projects, we must have spent about INR 100 crore. So I think the major spending which will happen will start from the fourth quarter of this year. And that's where we expect most of the CapEx outflow to happen.
INR 1,000 crore this year, we are looking at, and the next year also, INR 1,000 crore CapEx. And.
Maybe this year may not be INR 1,000 crore. It may be about INR 700 crore. But if we carry forward to the next the CapEx that we don't do this year will carry on to the next financial year, which is we do aim that our capacities would come by December or January, December 2023 or January 2024.
Okay. And the peak net debt, we were looking at INR 500-odd crore. So that remains intact.
I'm sorry?
Peak net debt, we were looking at INR 500 odd crore. So versus currently, the.
That remains intact. Yes.
Okay. And lastly, if you can help on the power and fuel cost. So in terms of the Kcal, how was it for this quarter, and how do we see because previously, we were looking at 10% increase in the second half of this year? So any color on that?
Yes. So the power and fuel costs have actually increased. The power in terms of sorry, the fuel cost that we had has increased from about INR 1.5 per GCV that we were averaging out earlier to about INR 2.1. The main reason for this is, of course, that the FSA contracts that we have are only partially being obliged by the ECL, mainly because of the shortage which is happening throughout the country. So because of that, we had to buy a few rates from spot contracts, which is leading to a higher per-unit fuel cost. And the power cost has probably remained the same. It may have increased by about INR 0.5 per unit. And yes, so that is basically the situation that we have in power and fuel costs at the moment.
So in second half, we see a further increase by how much in terms of both power and fuel costs combined put together?
So in second half, we see a basic increase of about 30% in terms of the fuel cost and the power cost because we rely on IEX, and IEX is not fluctuating as much in the quarter two. So the power cost has not increased more than 10%.
Okay. Okay. Thank you. All the best.
Thank you. Thanks for that.
Thank you. Ladies and gentlemen, to ask a question, you may press star and one. Participants who wishes to ask a question may press star and one. The next question is from the line of Uttam Kumar Srimal from Axis Securities Limited. Please go ahead.
Yes, sir. Thanks for the opportunity. Sir, my question pertains to our WHRS plant. When this plant is going to commission, the 12-MW WHRS plant?
So good question. The plant was supposed to commission by about November, but there is a 1-month delay to the commissioning of the plant. So now it will be commissioning end of December. That is our timeline, the revised timeline for the WHRS plant. So it should be coming up very soon by next month.
Okay. Sir, what has been our power and fuel mix this quarter? Because last quarter, it was around 90% domestic coal and 10% biomass. It remains the same, or there has been some change in the fuel mix this quarter?
No. So basically, last quarter, we, of course, had 10% of biofuel, which we also have this quarter. But the domestic coal was basically coming from the FSAs that we had. But because the FSAs this quarter weren't obliged, though we were eligible, but we didn't get it because of the shortage, which is happening in Coal India, we had to rely on buying spot options. We had to participate in spot options and buy outside coal at a higher price. And so yes, we have been importing, we have been using the domestic coal, but the domestic coal is coming from a different source than what we had earlier.
Okay. So now this situation has normalized, or still you are buying from outside rather than getting from FSA?
So we still get whatever we are trying to get as much as we can from the FSA because the FSA contract that we had was offer INR 1.5 per GCV. So we are trying to make sure that we get as much as from FSA, but we have started buying coal from spot contracts other than FSA as well, which, of course, is coming at a rate of INR 2.9 per GCV to the plant.
Okay. So that's why in third and fourth quarter, fuel cost is higher because you are purchasing from outside?
Yes. That is correct. Our fuel mix has definitely changed between FSA and options. I think the fuel cost that we saw in quarter two will also be passed on to quarter three and quarter four.
Okay. Okay. Sir, when are the Guwahati grinding units expected to commission, this year or next year?
So the grinding unit, so we are coming with two grinding units. One is in Guwahati, and the other one is in Silchar. The one in Guwahati is due to be commissioning in October next year. And the one in Silchar should be commissioning by June 2024.
Okay. Okay. And the clinkerization plant will be commissioned this year only, the Meghalaya 3 million ton?
No. So the Meghalaya clinkerization plant will also commission by December next year. So this will plant this financial year.
Okay. Okay. Okay. That's all from my side. Thank you. All the best.
Thank you.
Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Sir, again, just trying to reconfirm because previously, when I asked, you mentioned the deadline of all the plants same, but now since a slight change. So 3 million clinker at Meghalaya will start by?
December 2023 or January 2024.
Okay. And 2 million ton Guwahati will start by?
October 2023.
October. Okay. So that is prepon and the 2 million ton Assam Silchar will be June versus last quarter we were looking at March 2024.
Yes. Yes.
Okay. And the second thing is in terms of this quarter, in terms of the Siliguri utilization was how much?
Siliguri utilization this quarter was of about 50%. If you compare it to last year, same quarter, it was about 30%.
Okay. And so we were looking at for the full year so last quarter, Q1 was 67, now 50%. So for full year, we were previously looking at 65%-70%. So this would be now would be in the 60%-65% for full year?
So yeah. So I think we should still touch at 55% because we all know that quarter two is the worst quarter in terms of volume that we have. So quarter three seems better. Quarter four should be the best. So in terms of utilization, I think we can average a good 60% or above.
Okay. And on the premium share, just trying to continue. So now 7% share. And so how much we can increase the premium share? And also, previously, we were looking at the price gap between the normal and the premium was kind of a INR 20 or INR 400 per ton. And we were looking at to increase this from INR 20 to 100 to 200. So when that can be possible? Any color on that?
Yes. So I think we have so our shares, we are right now launching policies, and we are giving themes which would lead to an increase in our shares. We are basically focusing outside Northeast because Bihar has a good market for Premium cement. That's where we are trying to push our Premium sales. So we can target that by the end of this financial year, we are targeting a Premium sales proportion of about 11%. And as per the gap, the price gap between the Premium and the PPC, right now, the price gap is of about INR 25. Of that, we have to give about INR 5 as discount. So the impact on the NOD, the net of discount price, is about INR 20 still. And we are working towards creating the difference between the PPC and the Premium, but we have to follow the market trend.
We have to follow other players as well and the difference that they have between PPC and the normal PPC.
Okay. Okay. And just to get it right, in terms of the fuel mix, you mentioned that the option coal that you purchased was higher. So for this quarter, Q2, 10% you said the biomass. So in terms of the fuel mix, if you can help us, what was the FSA and the spot or maybe the Nagaland coal share?
This quarter, we had about 10% is still coming from biomass. We had about 45% of our coal coming from spot contracts, which are higher. It has a higher cost. The other 30%-35% is mainly coming from the FSA contracts. There is 10% coal coming from Nagaland.
Okay. Okay. Just a second. Yeah. Mostly done. Nothing remains. Thanks. All the best.
Thank you. Thanks.
Thank you. Participants who ask a question may press star and one. The next question is from the line of Amit Murarka from Axis Capital. Please go ahead.
Yeah. Hi. Good morning. So just on the expansion program, just wanted to have some clarification. So the size of clinker is 3 million ton. And what is the size of each of the grinding units?
It is about 2 million tons each.
Okay. And what's the CapEx outlet for each of those?
It is about the clinker plant is basically for about INR 1,250 crore. And the grinding units would be about INR 400 crore for the Guwahati plant because that's a brownfield expansion and about INR 450- INR 475 crore for the Silchar plant because that will be greenfield.
Okay. Okay. So in total, about close to INR 2,100 crore Capex?
Yes. Yes.
Got it. Got it. What is the plan? Why are you saying that long-term, you're looking for 70% Northeast and 30% East? But a lot of the incremental expansions are also happening. I mean, at least some of the companies like UltraTech is also looking to be more aggressive in the Northeastern market. So do you think that this kind of will you will be able to sustain your volume market share and grow these capacities given this inflow of new volumes?
So I think the belief is that we can sustain these margins. Plus, we are actually trying to increase our market share now. The main reason is that the cost of fuel has increased throughout the country, right? And earlier, what basically used to happen is that a lot of cement from outside used to be dumped in Northeast, right, by UltraTech or by other players whenever they had the capacity or whenever the demand was not picking up in the mainland India. So I think now because the variable cost has really increased, they're not finding it that profitable to actually dump in Northeast. So from that perspective, I think the higher costs are leading to less of dumping in Northeast from outside companies. So I do not think and that has been the trend in quarter two as well.
So there actually has been less cement coming from outside.
Ladies and gentlemen, please stay connected. The line of the management got disconnected. Ladies and gentlemen, thank you for patiently holding the line. The line of Mr. Tushar is reconnected. Thank you, and over to you, sir.
Yeah. Sorry about that. I was just saying that the arrival of outside companies in Northeast has actually reduced in quarter two, and we see a similar trend in quarter three as well. From our perspective of what is going within Northeast, there are smaller players in Northeast which have set up their capacities about 2013, but no one is really expanding at the moment. And I think we'll, again, get the first move advantage in terms of expansion. And the two-three years that we'll have where others are still setting up their capacities and we have already set it up will really give us the advantage to get a higher market share. So that's what we're really aiming at.
Okay. Understood. Understood. Thank you. That's all from my side.
Thank you. Ladies and gentlemen, this will be the final reminder for the questions. Participants who wish to ask a question may press star and one. The next question is from the line of Mangesh Bhadang from Nirmal Bang. Please go ahead.
Hello, sir. So a couple of questions. First is on the demand side, we've seen good volume growth in this quarter. I just wanted to have your view on how the demand should set up in this year as well as next year in Northeast as well as outside Northeast markets.
Sorry to interrupt you, Mr. Mangesh, but your voice is muffled, and there is a lot of disturbance from your background, sir.
Just hold on. Is it okay now?
Yes. This time, that's better.
Yeah. Sir, I just wanted to have your views on what your demand outlook is in the Northeastern and Eastern region?
So I think this year, the markets in the Northeast are really supported. So the outlook seems positive from a Northeast perspective. Even Eastern markets have really grown in quarter two. So I think we are optimistic about how the market is behaving. Of course, we have cost pressures that every company is clearly facing in cement, and that will remain a problem. However, we are looking for a good season ahead, and we do think that we will be able to pass on some of the costs in the price. So I do see a good season ahead, and I do expect Northeast to keep growing in the way it's doing.
Any number you can assign to the demand growth expectation in this region?
Yes. I think Northeast is showing trends of growing about 10%-11%, whereas the outside Northeast market is showing a growth of about 12%. Outside Northeast, I just mean the places that we are serving, the area that we serve, which is basically North Bengal and East Bengal.
Right. Right. And sir, last year, I think Bihar market, because of the sand issues, the demand was slightly lower. So you think this time around, there will be a point of demand because of that that could see higher number? And even in Bengal, I think because of floods, we had seen that temporarily, the demand was lower. So would this affect the overall demand growth that would pick up in this year from the low base of last year? Or do you think that 10%-12% is the number that is basically which is prominent?
Yeah. So I think I do not think that we had the problem of the sand problem that we had last year. I don't think we had it to that extent this year, and that's why the numbers look better. In Bihar, we have actually increased a lot in terms of sales. I think we have increased our sales in Bihar by about 120% this quarter. And that's clearly a sign of the sand issue or the flood issue not affecting us that much.
Okay. Sir, the next question is on the profitability in the Northeastern and the Eastern region. Can you just give a broad outline or highlight how our profitability would look like in these two regions, specifically because I think the next leg, at least since Siliguri starts expanding to, say, 70%-80% utilization, largely, the sales would be more towards outside of Northeast. So if you can give some color on profitability in terms of EBITDA in these two regions, that would be helpful. Any broad guidance would be helpful.
Yeah. So I think because time is so uncertain, it will really be hard to give a number to it. But last time, we said that we'd like to maintain an average EBITDA, overall EBITDA margin for the company to be about INR 1,200-INR 1,250, and we would like to stick to that. Of course, it really affects pricing behavior. So I do not, but I would still say that we'll aim for a INR 1,200 per ton EBITDA overall. In the Eastern region, we, of course, run lower than what we run in Northeast. Northeast, our margin is about INR 1,400 on an average. In the Eastern region, it is about INR 400-INR 500. So, of course, the weighted average comes to about INR 1,200, and that's the distribution of our margin between the two regions.
Understood. Thank you.
Thank you. The next question is from the line of Chandresh Malpani from Niveshaay. Please go ahead.
Hi, sir. Hi. Hi. Yeah. Hi. This is firstly on the Waste Heat Recovery System. Is it commissioned, and what cost savings do we see from this plant?
So we have set up a 12.3 megawatt waste heat recovery, which we commissioned by next month. And with that, currently, on average, we pay a price of a type of power is about INR 6. So we can actually backcalculate, and it should be a saving of about INR 0.45-INR 0.50.
Okay. Okay. Secondly, sir, what is our dealer network stands as on dates? Have we increased the network?
So yes. We have increased our network. Actually, our focus right now is not that much outside Northeast. It is actually in Northeast, right, because there are still many areas in Northeast that we, of course, can serve better, that we can have a higher market share in. There may still be markets in Northeast where there are white spaces where in our micro markets we aren't serving. Our focus right now is entirely Northeast because the capacities that we're getting are, of course, in Northeast. To utilize the capacities better, we definitely have to focus in Northeast. We are focusing on dealer appointments, and that primarily will be in Northeast.
Okay. Okay. Thank you, sir. Thank you.
Thank you. The next question is from the line of Rupam Patwa, an Individual Investor. Please go ahead.
Hello, sir. Yeah. Hi. Good morning. Yeah. Let's know regarding that coal. We have sourcing from the FSA and also the Nagaland coal. The Nagaland coal belongs to Coal India or some others? And what is the landed cost for this coal?
So the Nagaland coal is actually not belonging to Coal India. It is actually the state of Nagaland authorizes individual mine owners or companies to mine in Nagaland, and we buy it through those sources. So they aren't owned by Coal India. They're owned by private individuals or companies in Nagaland. And the landed cost of Nagaland coal is of about INR 2.05-INR 2.15 per GCV.
Okay. Regarding the Meghalaya coal, has any auction been conducted, or till when will we see any outcome of that coal of Meghalaya?
So I mean, that's a very good question. So I mean, right now, of course, Meghalaya coal, no one can mine Meghalaya coal because there's no structured mining deeds which have been allotted in Meghalaya. But there are individuals who are local to Meghalaya who are applying for mining deeds in Meghalaya. And if they are successful in getting those mining deeds operating, then definitely, coal in Meghalaya will open up. And that, of course, is a very, that could be a very big savings for the company going ahead.
Okay, sir. So right now, no coal.
Hello?
Mr. Jaiswal, we cannot hear you, sir. As there is no response from the line, we'll move to the next question, which is the follow-up question from the line of Amit Murarka from Axis Capital. Please go ahead.
Thanks for the opportunity again. So on your current capacity, I just wanted to check. I am seeing you have 2.75 million in clinker and 5 million tons grinding. Is that correct?
We have about 5.6 million tons in grinding, and we have about 2.65-2.7 million tons in clinker.
This 5.6 million tons grinding, does it also include some of the tolling arrangements which you had, or this is your own capacity, 5.6?
No, this is our own capacity. Right now, we're not renting out or leasing any of the other plants. This is our own capacity.
Okay. Okay. So those arrangements are no longer being done?
Yeah. So we had earlier, two to three years back, we had a plant in Durgapur, and we had a plant in Siliguri as well that we stopped supplying to Durgapur. So we aren't serving that market anymore. And in Siliguri, we got our own plant, so we stopped renting the plant that we are renting as well.
Got it. Got it. So in the future, also, you don't plan to now get into these arrangements with these expansions that they are doing now?
Not really. I don't think we are trying to serve a market where we need to do that. Yeah. So not really.
Okay. And if I got your EBITDA kind of outlook right, you said that in Northeast, you are making INR 1,400 per ton. In East, you are making INR 400-500 per ton.
Yeah.
Right. Great. So the lower margin is a large part of it because of the logistics cost, right? And also, yeah, the pricing is lower, of course.
Yes. Exactly. So it's mainly because of logistics, right? So it's mainly because of logistics. And of course, the pricing outside Northeast is lower than in Northeast. So that is the payload factor. So it's both, actually. It's higher logistics cost coupled with lower prices. And it's not lower prices, I mean, of course, the prices in general outside Northeast are lower. It's not that Adani charges a lower price. He actually charges the same price as Ultratech outside Northeast as well.
Got it. Got it. Thank you. That's all. Yeah.
Thank you. We'll take the next question, which will be the last question. So just from the line of Shravan Shah from Dolat Capital. Please go ahead.
So continuing the previous question, so broadly, let's say for this quarter, whatever our realization was there, on an average for outside Northeast, what would be the realization? And in the Northeast, what is? So just trying to understand the pricing difference between Northeast and East, what we sell.
So I mean, the difference in realization between outside Northeast, Northeast would be about INR 1,100 per ton on NOD basis, net of discount basis. Right?
Okay. So net of GST and everything, what we book in our accounts, so that difference would be INR 1,100?
Yeah. So it will be basically about.
Yeah. I said that again.
About INR 800-INR 700.
Okay. INR 700-INR 800 in terms of what we book in the report in the P&L?
Yeah. Yeah.
Okay. Okay. Second, I think just wanted to understand in terms of the lead distance. So what the max we can say in terms of the further reduction is possible, let's say, the Siliguri full utilization of 65% and maybe next year if it increases. So to what extent we can reduce the lead distance from currently 233 km?
So, in this, we are actually expecting that our capacity so right now, also, our main focus is on reducing the lead distance and trying to serve markets closer in Siliguri because at this point, we are focusing much more on profitable and sustainable growth rather than just selling anywhere and everywhere. So, I think from next quarter as well, we'll see that the lead distance will be coming down, and that will be primarily our focus. I cannot give a number just now about what the future lead distance is going to be, but the focus is definitely to serve closer, to serve to a higher profitable market, and to not go very far in terms of just for the sake of just utilization.
No. I understand that we can't give the number. But broadly, can it be 10-15 kilometers more than that reduction is possible, or the reduction would be in the five-10 kilometers only? Just on the full blended basis for us, just trying to understand that directionally.
So, again, I won't be able to comment on that, really, because I really have to give the number. It won't be fair for me to just agree to a number. But we definitely will see a reduction is what I can see. But then the lead distance also sometimes increases because of a lot of other things. Sometimes one road is not working, and we have to send to the other route, and sometimes lead distance increases because of that. And in Northeast, that is very, very common, right, because the road infrastructure is not as good as in India. So it's really hard to comment or promise any number for next quarter. But yeah, I think we should be looking at a decent reduction in our lead distance.
And then we've already started acting upon it in terms of choosing the right markets and to get out of markets where we are not earning much and not selling much.
Okay. Lastly, sir, the data point on the trade subsidy, how much book in this quarter?
So we don't have any trade subsidy this quarter. For that, I think the CFO can share better.
Yeah. We don't have any trade subsidy. Obviously, long back, it has already been there is no trade subsidy because it's for five years only, and it is gone. All are gone. So there is no trade subsidy in books of accounts.
Okay. Okay. Yeah. Okay. Thank you.
Thank you. Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to Mr. Vaibhav Agarwal.
Yeah. Thank you, Rutika. Tushar, I had a couple of questions from my info in particular. So firstly, because Northeast is a very kind of a player market dominated by very small players as well, there are a number of small players in Northeast and given the consolidation happening in the industry. So do you see any potential of further consolidation happening within Northeast by the larger players? What are your comments around that, if possible?
So I don't think right now in Northeast, there is any potential of consolidation, mainly because the smaller plants because I think Dalmia will also be aiming to set up a greenfield expansion. Of course, right now, they haven't progressed with it. I don't know of their progression in Northeast in terms of setting up a plant, but I'm sure they will aim at setting up a plant. Even us, we are setting our own plant. So it doesn't make sense for us to unnecessarily go for an acquisition when our own capacity, which will be much more efficient than the smaller units, is coming up. So I don't think there's any scope in Northeast for consolidation at the moment. Probably after we get the capacity and there is some pressure on the smaller units, then there may be some scope.
Do you believe that some of the larger players, some of the water plant country-wide players, they would be looking at Northeast geography, and they would be targeting some of the existing players? Any thoughts around that? Because a lot of capacity is coming from mainland to Northeast now. Is what you said earlier.
Yeah. I think the trend of actually cement coming from outside Northeast to Northeast, there's a similar trend of cement going from Northeast to outside Northeast. Whenever we have capacity, there's a tendency to go far out. So I think that is and this thing has been very common in Northeast for 10 years. It's not the first time UltraTech is sending clinker to or cement, sorry, cement to Northeast. And the trend says that the amount of quantity which is coming earlier from outside has actually reduced. So from them actually targeting Northeast from outside is not possible. Now, if you come to the point of them acquiring a plant, a smaller plant in Northeast, I don't think it is very economical for them because the smaller plants are of 0.7, 0.6 million tons. I don't think an UltraTech or a Dalmia would be interested in something that small.
And also, the terrain is very different. The kind of problems that one faces of setting up a plant is very different. So I think for them to kind of invest so much time in a smaller plant and then growing it is something which I don't know if it's still worth their time either.
Understood. And one more question with regards to our cement in particular. So despite all the expansions on our roadmap to nearly 10 million tons now, we would be quite the in terms of we would be having quite a healthy balance sheet. So what's your roadmap for Star Cement in the medium to longer term over the same next 5-7 years? And do you look at Star Cement being restricted to only East and Northeast, or you are looking at other geographies? Are you willing to evaluate opportunities, organic, inorganic, across other parts of the country beyond East and Northeast? Any thoughts on that?
So that's a good question. So I mean, so in one and a half years from now, we are trying to set up about 4 million tons of cement and about 3 million tons of clinker in Northeast, right? That will take care of Northeast for our market in Northeast for the next 5-6 years, right? And as a company, we are already very cash-rich, and of course, with these capacities and the benefits, the subsidies that we'll get from these capacities, we'll have an even richer cash inflow. So we definitely have to get out of Northeast and probably target other areas as well for us to use those cash flows in the best possible manner. So right now, also considering other areas outside Northeast just so that once our capacity comes in Northeast, we can keep on with the expansion phase and grow outside Northeast as well.
So any regions which you are currently shortlisting in terms of your future longer-term growth plans?
So we are exploring MP because that, of course, is a natural expansion to where we are. So we are in Northeast, and putting up a plant in MP will definitely help us serve Bihar better. It will also help us serve other areas in East which we don't serve at the moment. We are also looking at Rajasthan because it broadly is part of North India, and North India, of course, is growing at a faster rate. And then we look at other areas as well. It just depends on what is also available because the availability of good assets in cement right now for something that we can acquire given our size is also limited. So it really depends on what is coming our way either.
Just an extended question to what you just said. When you're looking at places outside East and Northeast, when you evaluate such opportunities, is it necessary for you that they should synergize with your current operations, or are you willing to enter a new geography in all ways possible, or it's compulsory that it should have a synergy with your current operations when you evaluate such?
So that's again a fair question, right? So I think it just depends on the opportunity which comes, right? We have to evaluate whatever is coming without any bias. Yes, of course, we would have loved if it was a natural extension to where we are at the moment. But cement is, I don't think the synergy is that strong that we need to worry too much about that synergy, right, because the market that we will try to enter by putting up a plant in MP would be completely new. So any trail we'll have to blaze, we'll have to do the entire effort as a greenfield project. So from that perspective, the synergy is fairly limited. So we're not really bothered about that synergy too much.
You remain indifferent from that perspective. It's fair to say.
Yes. Yeah. Yeah.
Okay. Thank you, Tushar. Thank you, Manoj sir. Thank you for your time. Rutika, you can now conclude the call. Thank you very much, all the participants joining the call. Thank you very much. On behalf of Phillip Capital, I'll conclude the call. Thank you so much.
Thank you. On behalf of PhillipCapital (India) Private Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect the lines.
Thank you.