Ladies and gentlemen, good day and welcome to Star Cement Limited Q1 FY '23 earnings conference call hosted by HDFC Securities 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 then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rajesh Kumar Ravi from HDFC Securities. Thank you, and over to you, sir.
Hi everyone, good afternoon. On behalf of HDFC Securities, we welcome you all to the earnings conference call of Q1 FY '23 of Star Cement. From the management we have, Mr. Tushar Bhajanka, member, Promoter Group and Executive Director, and Mr. Manoj Agarwal, Chief Financial Officer of the company. I now hand over the call to the management for the opening remarks, after which, we'll start the Q&A. Over to you, sir.
Good evening all. My name is Tushar Bhajanka. I'm one of the executive directors at Star Cement. I would like to welcome you all, to the earnings call of quarter one. I have Mr. Manoj Agarwal, who's the CFO of the company. He'll take you, through the numbers of quarter one. After that, we'll be able to you know, have a Q&A session and answer the calls. Thank you.
Yeah, hi friends. Very good evening. I on behalf of Star Cement Limited welcome you to our phone call for discussing our numbers for Q1 FY '23. I'd like to clarify that we are discussing the historical numbers, and there's no invitation to invest. Having said that now, I will just take you through the Q1 numbers. Starting from clinker production, during the quarter ended June 22, we have produced 6.92 lakh tons of clinker as against 4.30 lakh tons same quarter last year. So far as cement production is concerned, we have produced 9.90 lakh tons this quarter as against 7.72 lakh tons same quarter last year. Last year, we have taken a shutdown in our main clinker unit. That is why clinker production was lower. Now I will take you through sales volume.
This quarter we have sold 9.80 lakh tons of cement and negligible quantity of clinker as against 7.60 lakh tons of cement. Increase is around 29%. This is as far as cement and clinker sale is concerned. As far as geographical distribution of cement is concerned, in North East we have sold around 6.48 lakh tons as against 6.03 lakh tons during same quarter last year. That is a growth of around 8%. As far as outside North East is concerned, we have sold 3.32 lakh tons of cement this quarter as against 1.58 lakh tons same quarter last year. That is, around we have doubled the number. In terms of blend mix, it is almost 11% of OPC and rest is PPC. These are the quantitative numbers of the quarter. Now I will take you through the financials.
The total revenue figure this quarter is around INR 665 crore as against INR 511 crore same period last year. As far as EBITDA figure is concerned, this quarter we have done an EBITDA of around INR 138 crore as against INR 101 crore last year. That is almost same at the level of INR 168 crore in this quarter and the corresponding previous quarter. This is on account of increased tax expenses due to the sunset of tax exemption period in respect of our company's Guwahati Grinding Unit and its subsidiary Star Cement Meghalaya Limited. However, the cash outflow will be net only. On per-ton EBITDA plan, it is INR 1,400 per ton during this quarter as against INR 1,330 per ton same quarter last year. This is what our quarterly number sounds.
Now I request all of you that if you have any queries, you can ask the same, and I will request Rajesh to moderate the query wherever it's required. Thank you.
Yeah, Moderator, please start the Q&A session.
Thank you very much. We'll 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. Participants, you may press star and one to ask a question. The first question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Thank you, sir, and congrats on good set of numbers. So first, couple of data points, in terms of the trade sale, was how much for this quarter?
Trade sale was about 86% of the overall volume that we did, and overall we did about 980,000 tons, and 14% was the non-trade sale.
Okay, and what was the lead distance?
Shravan, may I request an [EQ line for your equities?]
Sorry, sir?
I think 230.
230 km.
230. Okay. So it has marginally increased from last quarter of 218 km. Yes, sir, now in terms of the first coming on the volume, so last time we guided around 4 million ton volume for this year. So we have already done kind of a 1 million ton. So that target remains.
Yeah, so even internally, you know, we are meeting the target that we had set for the first quarter, and we are in line to meet the overall target of 4 million by year-end. Yes.
Okay, okay. Regarding the Siliguri utilization for this quarter, how much was the utilization for Siliguri?
The utilization was about 67% for Siliguri.
Okay. So for fully up, then we can easily do a 65% kind of a utilization.
Now, what we have basically seen in Siliguri that, you know, quarter one quarter four of last year should have been ideally better, historically than quarter one. But our volume in Siliguri has remained constant between quarter four of last year and quarter one because, you know, we are really working on a dealer network at the moment. So, you know, my expectation would be that, yes, the utilization overall should be about 65%-70% on a year-round level.
Okay. Now, sir, on the pricing front, and then I will ask on the costing. So, pricing post the June, how much price decline have we seen in the month of July and August?
So I mean, you know, if you divide it between outside North East and North East, then in North East, we haven't really seen a very big decline in the prices as such. So the prices have more or less remained stable, and that is mainly because of the you know, higher fuel costs that the other players in North East are facing, that the prices haven't fallen. In outside North East, because of the competitive scenario, the prices have dipped by about INR 20-INR 25 per bag. So that is broadly the yeah, the pricing.
So, both in Bihar and West Bengal, sir, same INR 20-INR 25 rupees kind of a decline?
Yeah. So it is, it's similar in both, both the states.
Yeah. And now on the costing front, so, it's a great gap for the entire quarter. We haven't seen any increase in terms of the overall OpEx per ton. So how do we see particularly on the power and fuel also and the entire costing now, how do we see? And are we having any issue in terms of the coal supply from Coal India?
Yeah. So I mean, you know, there are a couple of reasons, and it's, you know, why our costs per ton haven't really increased. One is that we, of course, have, you know, diversified our fuel mix. So like we discussed last time, you know, we have gotten into AFR. We've been using bamboo. We have also gotten into, you know, right now we're looking at other options like briquette. You know, we have our FSA agreements. We are buying right now coal from Nagaland. So, so we have actually explored many other areas through which we can, you know, source fuel. And, and that is what is helping us, you know, limit the extent of, you know, increase in our costs. Secondly, we have, of course, you know, also optimized on our plant performance.
So we have, you know, reduced our clinker factor, optimized, you know, to introduce maintain the same quality. So, so I mean, with all those, you know, changes, there has been a positive, you know, movement towards the cost. And, and that's probably the reason why the costs aren't increasing. And we believe that in the next nine months, the trajectory should be the same. So I do not see the cost increasing by much. Of course, the fuel cost may increase by about 10%, which is very unforeseen. So, so I can't comment about that. But generally, I do not think that the cost should be increasing.
This 10%, we're mainly expecting this quarter, second quarter, the increase in the fuel?
No, that may be in the third or the fourth. In the second, I do not foresee any significant increase to what we have performed in the quarter one. But I cannot comment because it's such a, you know, uncertain time, especially for fuel, that I won't be able to comment about the third and the fourth quarter. But in the second quarter, at least right now, I do not see any increase as such.
Okay. Lastly on the, sir, expansion that 3 MTPA clinker and 2 MTPA grinding at Meghalaya and Guwahati. So last time we said that construction to start by June. So what's the status and in terms of the overall CapEx and the debt front, what's the status? How much we spent and what's the revised number for the full year? And yeah, that's it.
So, I mean, the status, you know, the last call, you know, we had discussed about the environmental clearance and how we are going to receive it. So now we have actually gotten the environmental clearance for the 3 million ton plans. So, and you know, we have already started some of the civil work at the site. And we will take up the civil work more aggressively when the rain stops because there's also, you know, a heavy monsoon in North East. So effectively, we'll be, you know, starting full-fledged construction by this month. And in terms of the CapEx outlay, right now, we've placed the order for most of the machineries. We have finalized the contractors. We have, you know, started securing some of the raw materials on our side.
Right now, the CapEx outlay would not be that much because we are just, you know, paying the guarantees to all the suppliers right now. But I think in the next month or two, the CapEx outlay would start happening.
So, last time we said around INR 1,000-odd crore this year, and the next year also INR 1,000-odd crore. So in this quarter, how much we have already spent and how much now we expect?
So I mean, till now, we would have barely spent much, not more than INR 1 crore because right now, we have just paid the first installment for the machinery to the machinery suppliers and to the contractors. But in our estimate remains the same that in this financial year, we'd be spending about INR 1,000 crores. And in the next financial year, we'll be again spending about INR 1,000 crores. And this is not only just for the 3 million ton clinker plant and 2 million ton grinding unit. It also includes the second grinding unit at Silchar.
Oh my God.
This INR 2,000 crore CapEx is basically for a 3 million ton clinker plant and 2 grinding units of 2 million tons each.
Yeah. So, sorry, I missed the number, how much we spent in the first quarter, sir?
We wouldn't have spent more than INR 50 crore in the first quarter because, you know, we have just been paying the installment, the first installment, for the machinery and to the contractors. Going ahead in the coming quarter and the quarter after that, you know, we'll see a lot of outlay happening. The target remains to be the same as what we had discussed last, last time, that in this year, there'll be an outlay of about INR 1,000 crore.
Okay. And in terms of the COD for this both clinker and the two grinding, what's COD and that? What's the net date now?
So, you know, so we are aiming to commission the plants by, so the clinker plant should be coming by December next year. The grinding unit should be coming by about January next year. The grinding unit is,
Jan '24?
January 2024 next year, next to next year. So that is our timeline for these two plants. And the grinding unit in Silchar should be coming up about March of 2024.
Okay. And last on the net debt, what's the number as on June?
Sorry, again? Which number?
Net debt.
Net debt. Oh, net debt. Debt is zero. We are net debt free, no debt, it looks.
I'm sorry. Net cash, sorry.
Yeah. Net cash is around INR 750 crores.
Okay, okay. That's it from my part and all the rest. Thank you.
Thank you.
Thank you. Participants, we may press star and one to ask a question. The next question is from the one of Kashvi Dedhia , from Centra Advisors . Please go ahead.
Hi. Thank you for the opportunity. My question is on fuel mix. What will be our fuel mix for the quarter?
So, you know, majority of our fuel mix is basically coming from FSA. And that would be about 65%. And then rest, about 15%-20% is coming from Nagaland coal, which is a new source that we've identified in Nagaland. And about 10%-15% is the AFR.
Okay. And what is the inventory days for fuel mix?
Inventory days for f uel mix.
Oh, fuel. No, correction.
It is about 20 to 25 days, roughly.
Okay, sir. Thank you. That's all from my side.
Thank you.
Thank you. Participants, we may press star and one to ask a question. The next question is from the one of Rajesh Kumar Ravi from HDFC Securities. Please go ahead.
Yeah. Hi, sir. This quarter number has been very strong. What we see is all the industry is really under cost pressure. Your costs are, you know, stable on a year-over-year and a sequential basis. So, could you give some, you know, in terms of per kilocal, what was the costing you have seen in the June quarter and, you know, what you know, how it has moved towards the March quarter?
I think the per kcal fuel cost that we faced was about INR 1.
1.5.
INR 1.75. If you compare it to March quarter, I think it was about INR 1.55-INR 1.6. So our fuel cost has increased by about roughly 10%.
Mm-hmm.
So that has, you know, of course, been there. And, you know, one of the saving reasons for us has been, of course, the FSA contract that we made last year, early last year. So, you know, that was at about INR 1.5 or INR 1.45 per GCV. And, you know, because we made a very major contract, then, so that is also something which is hedging us against the increase in the fuel cost, which is, of course, in our industry.
Okay. In this quarter, Q2, the costing or flat is at around INR 1.75 in the current quarter?
Yeah. I think there's no reason to expect anything higher than that.
You mentioned that Q3 onward, there will be an increase in the costing because most of your FSA volume will be exhausted?
No, no. Actually, we have a 5-year FSA contract.
Okay.
So, what I meant to say was not that, you know, the Q3 and Q4, the costing will be higher.
Okay.
What I meant to say was that I cannot predict how the coal is going to behave because we are still exposed to outside coal, right?
Correct.
Some percentage of us are still buying from e-auctions and the spot e-auctions and e-auction and imported coal, right?
Mm-hmm.
So that exposure still remains. So I can't vouch for how that behaves.
Anything, any positive development on the, you know, the Meghalaya coal which was supposed to come through e-auction?
Yes. So there is actually an option tomorrow for that. And we will be participating. The volume is, of course, very less. It is about 35,000 or 38,000 tons.
Okay.
But that, of course, actually going to participate in the auction to win as much as we can.
Mm-hmm.
To maintain our rates of coal.
Okay. Okay. And the two grinding units, one you mentioned is in Silchar. The second one will be coming in?
So, one grinding unit is coming in Guwahati, next to our current grinding unit. So it's a greenfield expansion. And the other one is coming up in Silchar, and that will be a 1 million-ton grinding capacity with the railway siding.
Okay. Any update on the waste heat recovery projects?
Yes. So, you know, last time, when we had spoken, there was a, you know, it is broadly in time. It was supposed to come in September, and we are expecting it about end of October.
Okay.
There was a delay because, you know, because of the, you know, in the middle, there was an increase in the steel prices, and then some vendors started to re-bargain. So because of that, there was some delay.
Mm-hmm.
Meeting the terms and also the other things. But, now I think that problem is sorted, and we should be commencing the plants in October this year.
Okay. Great. And on the new project, what should be the new CapEx, and is this reflected in Q2 factoring in that, the new CapEx cost?
Yeah. So the CapEx cost is actually factored in already. Factored in already the cost of WHRS. So that's already included. We'll be going for about 12 MW WHRS in the new plant as well.
Okay. Great. I'll come back. Thank you. Thank you.
Yes. Thank you.
Thank you. Next question is from the line of Uttam Kumar Srimal from Axis Securities. Please go ahead.
Yeah. Thank you, sir, and for giving the opportunity. Congratulations on good circuit numbers. Sir, my question is the grinding unit in Silchar. So have you identified the location for that?
Yes. So we have identified the location for it. We are also in the process of, you know, finalizing the land. So I think in this month, we'll be, you know, paying the advances for the land and finalizing and re-registering the land. So we are, you know, at a very advanced stage in, in terms of finalizing the location and, and the land. So, so that's already going on.
Okay.
It won't be right on my part to disclose the exact location because that will be counterproductive for us. But we have already identified.
Okay. And, sir, this grinding unit will get operational by January 2024, as you said?
No. So the grinding unit that I was talking about was the grinding unit at Guwahati. That should be coming.
Okay.
In December to January 2024, the unit in Silchar should be coming about March of 2024 or March to April 2024.
Sir, this clinkerization unit?
The clinkerization should be coming in December next year. So, the December...
'23?
Yeah.
Yeah. Okay. And, sir, how has been our sale of premium cement? So what progress we have made, in terms of premium cement sale?
So, the ARC sales. I mean, we have three products. Mainly, we have the PPC, OPC, and the ARC, which is our premium cement. So, you know, till April, you know, the sale of ARC was about 3.5%-4%, which is very less. But now we've actually started working on increasing the sales of, you know, ARC. And, you know, the number I can give you is that in June, our sale of ARC was about 8% because we have come up with many schemes and incentives to promote our, you know, premium cement. And our target is that by the end of next quarter, we should be targeting at about 10% sales of our premium cement.
Okay. And, sir, what is the price difference between normal cement and this premium cement?
The price difference is about 20, it's about INR 20 per bag. So that's about INR 400 per ton.
Per ton. Per ton. Okay.
the margin that we of course we are right now promoting it. So some of the margin is actually going in promoting the more premium cement. But once it stabilizes, our aim is to earn about INR 150-INR 200 extra on the premium cement.
Okay. Sir, okay, sir, this quarter, we have done a better margin of 18.6%. So can this margin be sustained for the next three quarters?
I mean, I mean, I think these margins in the first quarter, of course, higher because the prices are prices were higher. The volumes were good. In the cement industry, the second and third quarter are usually not as good as the first and the fourth quarter. So you know, so you know, so we'll we may expect, you know, some decline in the margins, not because of the cost pressure, but just how the numbers work, you know, and how, how the seasonality affects the business. And in the first quarter in the in the fourth quarter, I would expect the margins to again pick up. So, so yeah. So because I think the prices dropped or the prices have already started dropping in outside North East. So, you know, because of that, of course, there's a margin freeze, which happens.
Okay. Okay. And, sir, any freight subsidy that we have received this quarter? The last quarter, we have received around, say, INR 37 crore. And any freight subsidy we have received in this quarter?
We have received INR 32 crore of freight subsidy, which we are outstanding for earlier years. And also received the GST because we are all online because last quarter up to last quarter, we have already received. So there is no such outstanding receivable from the on subsidy side.
Okay. Okay. Okay, sir, that's all, that's all, all from my side. Thank you.
Thank you. Thanks a lot.
Thank you. Next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Yeah, sir, just a clarification. Last time, I think, you mentioned that this five-year fixed price contract that we have for coal, it had 1.35 kcal, and now you mentioned 1.45 or 1.5. Is it, is it right?
So I mean, it is about INR 1.0, you know, well, that's the landed price. The landed price is about INR 1.4-INR 1.45. It really depends on the phase right now because, you know, I'm getting the rakes. There's a rake availability problem, so the landed cost is a bit higher, because you have to pay higher for the rakes. But, you know, that time, the rake price may have been lower, so the landed cost was a little cheaper. So I think it just depends that when, ETA is actually the difference in the logistics cost, mainly.
Okay. Okay. Second, sir, last time you mentioned that there were truck availability issues. So now, has it sorted out, or is still we are facing some issues?
No. So I think the truck availability issues were, you know, primarily because of two main reasons. One was that, of course, fourth quarter, in terms of volume, was the first time we were dealing such a large volume because of Siliguri. And we were not as prepared. But now, of course, you know, with the experience of, you know, dealing that kind of volume, you know, our preparedness and, you know, our preparation for handling that kind of volume has increased. And also, the volume this quarter was lower, so the pressure on logistics was also much lower. So this quarter, we did not face any problems in logistics whatsoever, and we are, so right now, we have a railway siding, you know, which is commissioned in Siliguri.
So that will also help us take care of some of the logistics problems in terms of clinker and cement dispatch. So I think going forward, I don't think that we'll be having the same kind of problem that we did in quarter four.
Okay. The other question is in terms of the tax rate. So now, this 35%-36% tax rate for full year is the normal that we will see, or, for the full year, how do we see the tax rate?
No, the tax rate will be 34%-35% approximately will be there because but cash actual cash outflow will be MAT only because we have more than INR 30-40 crore of MAT credit adjustment. So actual cash outflow will be only the MAT. But tax rate, effective tax rate for P&L purposes, it will be 35%.
Okay. Okay. Okay. Got it. Got it. And, just to clarify, the ongoing WHRS is 12.3 MW that will be started by October. And the new clinker will have another 12 MW of WHRS.
Yeah. Yeah. And, you know, I just want to, again, emphasize on the point that you mentioned that, of course, our income tax exemption got over, this quarter. So that's why you can see in the books that we are paying about 35% of tax. But that is adjusted, you know, and for the next three years, it will be adjusted from the MAT, you know, that has been accumulated in the company. So from a cash outflow perspective, that is not affecting us. But, of course, from an approval perspective on which we make the books, it is, you know, of course, showing a lower amount.
Okay. In terms of the other expenses, it has a decline on a QoQ basis. So this INR 80-90 odd crore quarterly run rate is the sustainable number?
Maybe there's 2, maybe 1 or 2 crore here and with there because there are certain expenses in March. There are certain other expenses. Items are there for official companies. The other expenses are there. So it will be maybe INR 1 crore, INR 2 crore per quarter, maybe varying. But it will hardly have any much larger impact in that.
Yeah. So I think that really, you know, the pattern costing would really depend on the volume that we do. Right now, even in the second quarter, we do seem to be doing good volumes. And if that continues, then, yes, the costing will be in control. So I think, yes, you should, you know, we are also targeting a similar, you know, kind of EBITDA year-round. So yes, we should be hopeful of, you know, meeting, you know, augmenting the track record.
Okay. And, sir, as you mentioned, we have a INR 750-odd crore kind of cash and INR 2,000 crore kind of CapEx will be there in two years, 2023, 2024. So, how do we see in terms of this net cash turning into the net debt by FY 2024?
So, you know, we, of course, have to, though we are generating cash ourselves. And, you know, by in two years, we you know, the situation would be that we have about INR 1,500-odd crores as cash reserve, which, which we will, of course, plow into the, in the CapEx land. And we may need a, a debt of about INR 500-odd crores, which will, you know, which we will pay as soon as, you know, our plants get commissioned. So there'll be no long-term borrowing that we're looking at. We may be looking at a year or two borrowing to help us in this liquidity situation.
Okay. Okay. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Prateek Kumar from Jefferies India. Please go ahead.
Yeah. Thanks for the opportunity. Sir, my first question is on your fuel inventory. So you used to mention, like, 1.5 months fuel inventory. So this has particularly gone down because of fuel price impact, or is it something which you are looking to have, like, going forward of 25 days, which you mentioned?
So I mean, ideally, of course, we would, you know, we have been able to maintain about 2 months, 1.5-2 months, inventory. That is why we, you know, were able to absorb some of the cost increases in the fuel. Right now, you know, there we are having some issues in terms of, you know, rake availability because most of the rakes have been diverted to the power plants by the government. Because of that, you know, our inventory is falling short to about 25 days. We are you know, we are working with the, you know, railways to, you know, improve the availability of rakes. With that, you know, I, I expect to go back to about 1 month or 1 month and 10 days kind of a inventory.
Can we talk about volumes for the month and for the year? We used to have 75%-25% mix of North East East, for me, which has now gone down to 66% North East in this quarter. What would be this number for, like, let's say, FY '23? The 65% is, like, more.
We are expecting, you know, about 65-35 kind of a ratio for the entire year, broadly.
Hello?
Okay. Right. Okay. Next on net debt—like, while you mentioned this in previous response, sir, but the peak net debt related to this project expansion, we should expect at INR 500 crore?
Yes, INR 500-INR 550 range. It should not be going more than that.
Okay. For the overall cost, the project cost for, let's say, for this 3 million tons clinker and 4 million tons grinding plus, 12 MW WHR, what is the total project cost which we have? Is it INR 2,000 crore, or is it slightly higher?
Slightly more than INR 2,000 crores. It's about INR 2,000 crores-INR 2,100 crores. It will range between that, and it, you know, it just depends on the cost of putting up filters. So our estimate is about INR 400 crores for filters. But if it exceeds because of the railway siding and because of the filling of the land, in that case, you know, it may go to about INR 450 crores. So because of that, there may be a variability from INR 2,000 crores to about INR 2,100 crores.
Okay. As the quote I maybe used to give data of INR 1,000 crore for 3 million tons clinker. So we are adding 4 million tons grinding for another INR 1,000 crore, sir.
Yeah. So I think the clinker with the WHRS, at the moment, is not going to cost you lower than INR 1,200 crores. So that may be a data point which may be true 4-5 years back or 3-4 years back. But given the increase in the steel prices, I know it has come down now, but it's still higher than what it was, you know, a year or two back. So I mean, given the increase in steel prices and just the inflation, I don't think anyone is able to set up a plant below 1,200, even in a brownfield expansion.
When we say we have already in the orders of equipment, so we would have ordered that in March or, like, after the recent moderation in, like, sort of June?
I'm sorry. Can you repeat the question?
When we say we have already put in orders for CapEx equipment, etc., so.
Yeah. Yeah.
Would that be, like, in peak cost of March, April for metals and other commodities, or would that be, like, closer to, like, last month when the FC brought base the deflation in commodities?
In terms of, you know, the external benchmarking, we, you know, we ordered the mill, the pyro, and, you know, other major equipment for the clinker plant, and they have come in, in a good price range. So it, it hasn't really faced the brunt of the higher steel prices as such. But, you know, there's also a lot of steel for fabrication and for other purposes that we need. And there, we, you know, we see that our costs have, of course, increased compared to what it could have been a year back or, or a year and a half back. So from there, that point of view, and also from a civil contracting point of view, the costs have run up in the industry.
So that's why I was just saying that, you know, I don't think we, you know, a 3 million tons plant would be possible in about INR 1,000 crores. It will probably require about INR 1,200 crores to put that kind of a plant.
Lastly, on cement prices, you said that INR 20-INR 25 they have corrected in July-August. How do they stack up versus March prices?
Sorry. Can you repeat the question?
You said, prices have corrected by INR 20-INR 25 in July-August. How do these prices stack up versus March of this year?
So in March, for example, in Bihar, the prices were about INR 400. And, you know, in as on date, the prices are about INR 370. So if you compare it to March, then the prices have fallen by about INR 30.
Okay. So, so basically, all of the hike of Q1 is, like, wiped off, and there's another INR 30 drop from there, and.
Yeah. Yeah. I mean, only in, no...
I mean, I think the INR 400 was in April. I think you're mentioning about the price after the increase which happened in April. Is it?
Yeah. Yeah. Yeah. So I think this, 4, 4 you know, this is from April. And yeah, this is from April. And this is only in West Bengal and Bihar. This is not in North East. In North East, what I can see is that the prices have more or less remained stable. It has actually increased. If you compare it to March, then the prices actually increased by INR 10 for that for March.
For Bihar and West Bengal, price of March will be similar to prices today. Is that right?
No, the prices of March would be about INR 20 higher than the prices today. The prices have fallen in West Bengal and Bihar.
Oh, okay. Okay. Thanks, sir, for all the answers.
Thank you. The next question is from the line of Mangesh from Nirmal Bang. Please go ahead.
Hi. Good afternoon, sir. Congratulations on good set of numbers. Sir, a couple of questions from my side. Firstly, I just wanted to understand the competitive intensity in North East. You know, so with Eastern prices coming off and new capacity coming into that region, do you expect more inflows in North East, given the pricing that is prevalent there? That's the first question. The second question is, we are adding a very large capacity in North East, which is 4 million tons. We've been present in North East for much longer. And still, we are doing close to 2.1-2.2 million tons of volumes there. So what gives us the confidence that with that added capacity, you know, with existing capacity operating, let's say, 60% utilization, we would be able to ramp up those plants and, you know, penetrate the new market?
Because I think for this new capacity, you'll have to gain market share substantially from others. So these two questions. Can answer, please?
Of course. So I mean, to answer the first question, within North East, you know, most of the players are running full capacity. So there is actually and that is the reason why there may be some, you know, inflow from outside, North East. Outside North East, I do not expect them to, you know, send in to North East now because the cost of production for them has increased. So earlier, they used to operate on variable basis, right, on contribution basis. They used to basically dump in North East. But now, because the cost of production has increased, I don't think it is viable for them to dump. And that is also being very clearly shown in the data. So if we look at the June, you know, arrivals from outside, you know, we can see that there's a you know, sharp decline compared to last year.
Mm-hmm.
So, I think that is not a threat. Of course, about the utilization, last year, we did about 2.5 million tons in North East. That is after we have really cut down on the non-trade, right, because we are not trying to promote ourselves too much in the non-trade. So once the plant comes, of course, we are going to be aggressive in non-trade. There's a lot of government infrastructure projects which require us to, you know, which requires a lot of OPC and non-trade sales. So right now, our focus is not in non-trade. So once the plant comes, we'll, of course, get into non-trade because non-trade also has a margin of about INR 800 per ton, which we should not be missing.
So, from that perspective, you know, the utilization would partially be, you know, fulfilled for the new clinker plants and the new grinding units from non-trade.
Okay. And so, confident of running that 50% utilizing at least within one or two years?
Yes. We are.
Okay. Sir, also wanted to understand, on the existing plant, in terms of what kind of growth rate that you expect for the next two years, if you can specify in North East and East, even if you can mention about the industry growth rate that you expect or what you are targeting, that would be helpful.
No, sir. No. So, in this, to just give you an idea, let's just talk about this quarter. The market has grown by only 2%. And there's a for the reason because we were hit by a very, you know, damaging flood this time.
Right. Right.
So it's served by that. So that is the reason why, you know, main major markets like Assam, you know, have not grown at all. And the overall Northeast growth was only 2%. In West Bengal, you know, to the market that we serve because West Bengal did not see that kind of growth last year and because there was COVID last year, which affected West Bengal and Bihar both, you know, the market is showing an improvement compared to last year. And it is showing a growth of about 25% for the quarter. And if you compare and that is also primarily because COVID was hitting the last year, same quarter.
Right. Mm-hmm.
And then the same is with Bihar. So West Bengal and Bihar are broadly the same in terms of growth rate. I do not expect this to sustain, of course, but I would expect that Bengal and Bihar would grow about 10% odd this year. And our expectation of what our growth is so in the you know this quarter, when NE was doing 2%, we did 8%. So we are you know in line to generating an alpha to whatever the growth rate in the market is. So you know so we do expect about 11%-12% growth in NE. And similarly in West Bengal and Bihar, we have grown significantly. So last year, same quarter, we had done about 160,000 tons sales in West Bengal and Bihar. This quarter, we have done about 320,000.
So we've actually doubled our sales in outside North East in the last one year. I do expect our growth rate to be fast in outside North East.
Understood. Understood. So basically, for the full year 2023-2024, high teens growth can be expected or a high double-digit growth can be expected?
Yeah. Yeah. Yeah. And also, this growth is not untamed in the sense that outside North East also, we have actually left the markets where it was not very profitable for us to serve. So it is not an untamed growth where we do not look at the EBITDA per ton or coming from those markets. This is a very sustainable growth and markets where we expect to receive decent EBITDA. So that will also help in improving the bottom line and the, you know, the margins, basically.
Understood. Sir, just last question. For the markets you serve in, North Bengal, the landed cost of clinker for the Chhattisgarh players and you, how much would be the difference?
To that, of course, we'll have to calculate. But my expectation right now is that we'll be cheaper by about INR 500 per ton.
Understood. Understood. Sir, thank you very much. And, congrats once again .
Thank you.
Thank you. The next question is from the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead.
Yeah. Hi, sir. My question is, you know, you mentioned that you have significantly cut down on the non-trade volume, which is visible. Could you share what were the non-trade volumes in Q4 percentage and in FY '22?
Yeah. Just a second, just a second.
Q4, it is, yeah. Q4, it is 70/30.
Okay. So 30% has now come down to below 15%, right?
No.
Non-trade volume.
Oh, trade, talking about trade, sorry, you were talking about non-trade trade, right? So it was 85/15. So it was 15%, you know.
Okay. So this quarter has come to.
Yeah. So this quarter, it has come to 14%.
Correct.
You know, the step of reducing non-trade has just been taken a month back. So the quarter going ahead, you'll see a drastic fall in non-trade, and it's coming down to about 8%-7%. At the same time, you'll see a drastic increase in the premium sales of premium products where we earn more margins, ARCs, from about 3.5%-10%. So we are basically reducing our sales of non-trade, which is the lower margin product because non-trade, you know, because we sell more clinker at the same time because it is selling at a lower price. And then we are increasing the sales of our premium products. So you'll see that the markets, you know, the, the portfolio mix that the non-trade is losing, the premium products are gaining.
Agree. Agree. This portfolio, FY '22, what was your trade, non-trade mix?
86/14, the same guy.
86/14.
86%. Okay. 14%. Coming to Siliguri performance, you know, how is that, you know, in terms of EBITDA margin? What would be the difference between Siliguri and the North East operations now, given we are now north of 60% utilized the last two quarters?
So I mean, North East, you know, is very hard to compare with the profits that we earn outside because North East is our main market and also has a lot of competitive advantages compared to other players which are serving from outside. So, you know, so there is, you know, if you suppose earn about INR 700 in Siliguri or INR 800 in Siliguri per ton, then outside, you may earn a bit higher.
Correct.
Double. So, so I think that may not be a too fair comparison. Of course, we are working on reducing our Siliguri, you know, costing in Siliguri. That would add to the margin. And we have gotten the railway siding. We plan to get fly ash, get clinkers, you know, in peak season, and get other, you know, raw materials like gypsum, you know, through the railway. And that should also play in the improvement of the margins. But I think comparing it to, you know, something like a Guwahati, in our context will not be very fruitful because, you know, Siliguri will always be a secondary market that we are serving on top of what we primarily serve.
Okay. So in terms of costing, you are confident that by March, you know, when your railway siding starts performing optimally in terms of your raw material and sales sourcing, your costing will fall in for the Siliguri operations, you will be at par with the industry on the costing side.
Yes. So, yeah. So that is what we are aiming at. Of course, you know, the costing of serving Siliguri market for any company will be very high, right?
Exactly. Exactly.
All of them will be very high. So it's not that we are anything against what the industry standard is at in that market. We'd be probably earning as much as what, you know, an UltraTech or an Ambuja would be earning in these markets. It's just that, you know, we are trying to better ourselves and earn, you know, some more.
Okay. And two last questions. First is, as you mentioned, the cement prices in Bengal and Bihar. What would be the pricing in Assam and Nagaland markets for you, currently? And, you know, you said that their prices have been marginally inched up only post-monsoon, right?
Yeah. So I think I'm not, like, seeing any decrease in the prices in North East right now. That is also a function of, you know, a lot of clinker, sorry, UltraTech cement which was dumped from outside, North East to North East is not happening. So I'm seeing a decent price in North East. Of course, you know, it, it, may fall like it does in the second quarter. But right now, I'm not seeing any signs of that happening. Of course, the prices have fallen in West Bengal and Bihar. That has fallen not only in the area that we serve in West Bengal and Bihar but overall as well. So, but I do not see, you know, much scope of prices falling too much because of the cost pressure.
So, you know, even if our costs have increased or not increased, you know, we, we can see other results of other companies and their costs have really increased. So I don't think they have that kind of a scope to, play around too much with the pricing.
Sure. Sure. One last question. If I look at sequentially, the volume mix of North East has come down because there will be around 20% volume decline versus March in North East, where the pricing base is higher. We are flat here, outside North East, which is flat volumes quarter on quarter. So, could you comment on this, you know, still, with, you know, higher share of lower pricing base sales in outside North East? Our realizations sequentially have jumped by 5%. Like to like, what were the price increases seen in North East and outside North East?
Sorry, could you repeat that again?
I want to know how have the prices quarter-over-quarter moved in your North East markets and outside North East in Q1?
Okay. So, compared to Q4 and Q1, the prices basically have remained stable, probably increased a little, in North East. In outside North East, I can see a INR 20 decline in the prices. So, in West Bengal and Bihar, the prices have fallen by about, I suppose, 5%. And in North East, the prices have increased by about, INR 10. So that is about 3%.
No, you're talking about the July month, yes. I'm talking July or June quarter?
June. June. I'm talking about the June quarter.
Oh, but then how come our realization has and blended realization sequentially have improved by 5% quarter-over-quarter?
Look, you're talking about the Q4 number.
I think, see, I think.
Q4 to Q1.
There's one thing that we have to add to the prices. The pricing that I have is also month of March, right? So the prices increased from January to March. So if you take the weighted average of what the prices have been in the quarter four compared to what the weighted price, you know, in quarter one, the weighted prices will, of course, show an increase. You know, this is, you know, so this is not a weighted average price of the quarter that I'm talking about. I'm talking about the price in the month of March compared to the price in the month of June, right? So I think that is where the difference is being created. So if I take the weighted average price of the entire quarter of quarter four and entire quarter of quarter Q1, then we'll see an increase.
Yeah. I agree. Okay. I'll check that offline. One last question. Is there any big incentives booked in revenues this quarter in this revenues?
No, there is no such increase. There is the same kind of incentive that we have booked in the last quarter. The same, there is nothing new.
Okay. So March quarter and June quarter, the incentive number has not changed anything?
No, no. No, no, no.
Okay. Great, sir. I'll come back with it. Thank you.
Thank you. A reminder to all the participants, you may press star and one to ask a question. Next question is from the line of Keshav from HDFC Securities. Please go ahead.
Hi. Sir, I want to understand whether or how has been your marketing experience in this month, advertisement, how it cooled off in this quarter?
So, I mean, you know, like, I had mentioned last time as well, we are cutting our branding expenditure because we have done that a lot in the last year. I will just take out the actual numbers. So there's a decrease of about INR 2 crore in sales promotion and marketing expenses in advertisement, basically, this quarter. And this number should be going down or the difference should be increasing even further going ahead because there were some of the contracts that we had to renew this quarter, which the payment will not come in the next quarter. So because of that, you'll see a difference of about INR 3 crore-INR 4 crore in the next quarter two.
Okay.
That, that yeah?
So what I remember, last quarter, you guided, it was INR 45 crores for that quarter. And now onwards, you said it won't exceed INR 33 crores. So you were planning to.
No, it was for the entire year. It was not for the quarter.
Yeah. For the year. So.
Yeah.
So, isn't that?
So, I mean.
You think it won't be INR 33 crore this year?
Yes. So it should be, like, this year, like, right now in quarter one, the advertisement cost was about INR 11 crore. And that is also because we had to make some of the payments which will help us in quarter two as well. So, so I do not expect the cost of advertisement going above INR 33 crore for the entire year.
Okay. Understood. And as you are now procuring, you know, the new source, that is Nagaland coal, so will it mix inch up in the upcoming quarter?
Sorry, can you repeat that?
Your Nagaland coal, which is 15%-20% of the fuel mix, is it expected to increase in upcoming quarter?
No, I think it just will broadly remain the same. So that's the amount of, you know, coal that we can source from Nagaland. So I think that will not probably increase too much.
Okay. Thank you. That's it.
Thank you.
Thank you very much. I now hand the conference over to Mr. Rajesh Kumar Ravi for closing remarks.
Yeah. Thanks everyone for joining in the call. Tushar, would you want to make any closing comments?
No. Thank you so much for ringing the call, and thank you everyone for joining. You know, if there's any doubt outside this call as well, you can, of course, speak to our CFO, and then we are more than happy to answer any doubts, any, any queries that you may have. So happy to answer any questions outside the call as well. Thank you.
Thank you. Thank you very much. On behalf of HDFC Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.