Gentlemen, good day, and welcome to the earnings conference call of Dalmia Bharat Limited for the quarter ended 30th June 2024. Please note that this conference call will be for 60 minutes, and for the duration of this conference call, all participant lines will be in the listen-only mode. This conference call is being recorded, and the transcript may be put on the website of the company. After the management discussion, there is an opportunity for you to ask questions. Should anyone need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. As a reminder, all participant lines will be in the listen-only mode.
Before I hand over the conference to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements. These statements are based on expectations and projections and may involve a number of risks and uncertainties, such that the actual outcome may differ materially from those suggested by such statements. On the call, we have with us Mr. Puneet Dalmia, Managing Director and CEO, Dalmia Bharat Limited, Mr. Dharmender Tuteja , CFO, Dalmia Bharat Limited, Mr. Rajiv Bansal, President and Chief Transformation Officer, and the other management of the company. I would now like to hand the conference over to Ms. Aditi Mittal, Head, Investor Relations, for her opening remarks. Thank you, and over to you, ma'am.
Good morning, everybody. Welcome to Dalmia Bharat earnings call for quarter one FY 2025. We declared our results yesterday, and the presentation and the results have been uploaded on our website and can be downloaded from there. With this, I will now hand over the call to Mr. Dalmia for his opening remarks.
Good morning, everyone. I will begin with an overview of our performance, and then Dharmender will provide a more detailed explanation of our operational and financial aspects. In line with our expectations, quarter one of financial year 2025, being an election quarter, we saw moderation in cement demand across all markets in the country. Some other factors, such as heat wave, water shortage, and floods in other, floods in certain regions, further added to the slowdown. Based on all these, we believe that the sector demand grew in the range of 2%-4% on a YOY basis. However, these were only temporary setbacks, and the continuity of the incumbent government manifests stability in policies and doubling down on the infrastructure spend. This bodes well for the cement sector in the long term.
While cement demand was weak during the quarter, what has been surprising is the continuous weakness in prices since the last 7-8 months. On an average, Pan-India cement prices were softer by 2%-3% QOQ, while exit prices of June, in June, were lower by another 3% compared to Q1 average. I believe that the prices may remain soft until the monsoon quarter, and thereafter price increase could happen from Q3 onwards this year. Coming to Dalmia Bharat, during the quarter, we delivered a volume growth of 6.2% and an EBITDA of INR 901 per ton. Even though there is softness in earnings due to weaker prices, the counterbalancing and improvement in EBITDA is largely on account of reversal of certain cost inefficiencies, which we had last quarter, and partly on account of better input pricing.
Dharmender will further elaborate on this. While I talked about the promising cement demand environment in the country, the industry supply is also getting consolidated at a faster pace than anticipated. If you look at 2013, the capacity share of the top four cement companies was about 36%, which increased to 48% by the end of financial year 2023. That is, it took 10, almost 10 years to increase the share by 12 percentage points. However, it has now increased to 55% in a period of just 15 months, demonstrating that the consolidation is accelerating. In this backdrop, we aspire to increase our capacity and volume share faster than the industry. We are committed to becoming a Pan-India player by 2031, having a cement capacity of 110-130 million tons.
While we had given an intermittent milestone of 75 million tons by financial year 2027, but given that Jaiprakash Associates has entered into the insolvency process, we believe that we should now be able to achieve this milestone by financial year 2028. We had earlier guided the street that we will deliver 1.5x of the industry growth, and we reiterate our guidance. In spite of the recent development on JP, we believe that we can deliver 1.5x of the industry growth in this financial year. We have delivered a robust EBITDA performance this quarter, despite a challenging price environment. We have also identified levers for sustainable cost reduction, and we believe that we will be able to reduce our cost to the tune of INR 150-INR 200 per ton in the next three years.
With regards to our organic expansion, we are currently at 46.6 million tons, and we will reach 49.5 million tons by the end of financial year 2025. We are on track to complete the Northeast and Bihar expansion as per the earlier committed timelines. Now I will request Dharmender to take you through the detailed financial performance for the quarter gone by. Thank you.
Thank you, Puneet Ji. Good morning, everyone. Let me take you through the key aspects of our performance. During the quarter, we have delivered a volume growth of 6.2% YOY and sold 7.4 million tons. This includes tolling volume of 0.2 million tons from the JP assets. Our overall trade mix remained about 64% during the quarter. Our revenues during the quarter were flattish at INR 3,621 crores on a YOY basis. While our volumes grew by 6.2%, the NSR has declined by a similar percentage, keeping the revenue flattish.
On a QoQ basis, while prices for the sector have declined in the range of 2%-3%, our NSR declined marginally by 0.3% in Q1 of FY 2025, because of our initiatives to improve brand mix, price positioning, and rationalization of discounts. From early June 2024, the cement tolling operations at JP plant are being done on job work basis. Accordingly, the cost of material purchases form part of cost of raw material consumed and not purchase of stock in trade. Excluding the cost of these purchases, raw material cost in Q1 FY 2025 was INR 729 per ton of cement production, which is lower by 5% YoY. The reduction in raw material cost has been contributed by our mining cost optimization and usage and procurement efficiencies, which we feel are sustainable.
Power and fuel costs declined 22% YOY to INR 1,003 per ton of cement, mainly due to $46 decline in the fuel consumption cost from $152 to $106 on a YOY basis. Another reason for steady decline in this cost line item is our increasing usage of renewable energy as compared to last year. Our RE share has increased to 35% during the quarter. Our fuel cost during the quarter stands at INR 1.38 per Kcal. We continue to be one of the lowest cement cost producers in the industry. We are working to improve cement to clinker ratio and increase the share of renewable power, among other things.
In the past few months, we have entered into multiple renewable power agreements under the group captive arrangement, which will secure 127 MW of renewable power through solar and wind energy. The commissioning of these renewable power plants is expected to be in FY 2025 and FY 2026. We expect to reach about 50% of RE power share by last quarter of FY 2025. During the quarter, our logistic costs decreased by about 3.4% YOY to INR 1,117 per ton. On a QOQ basis also, the cost has declined by 3.5%, as we had incurred additional logistic costs last quarter, which, as indicated in our last call, were expected to be reversed. The employee and other expenses were largely flattish in absolute terms on a YOY basis.
With improvement in sales volume, we got some positive operating leverage benefiting the per ton profitability. Overall, our EBITDA during the quarter increased by 9% YOY to INR 669 crore, which translates to an EBITDA of INR 901 per ton. We accrued INR 74 crore of incentive during the quarter and collected INR 45 crore, with closing outstanding of INR 734 crore. For FY 2025, we expect the total incentive accruals and collections to be around INR 300 crore. Our total income, our other income during the quarter declined by INR 4 crore to INR 50 crore on a YOY basis, but by INR 70 crore on a QOQ basis, as the previous quarter had dividend income and also some one-off incomes.
The depreciation during the quarter declined by INR 82 crore to INR 317 crore on a YOY basis, in spite of taking depreciation of new capacities commissioned in last one year. There are two key factors leading to this reduction. Firstly, Q1 last year had accelerated depreciation impact of INR 37 crore on equipment being replaced in our debottlenecking projects, which is no longer there. Second, in Q4 FY 2024, we realigned our method of depreciation in Northeast plants to straight-line method to align with the practice followed by leading cement players. This contributed to reduction in depreciation by INR 47 crore in this quarter. We expect FY 2025 depreciation to remain in the range of INR 1,350-1,490 crore. As you are aware that Jaiprakash Associates Limited has been referred to CIRP proceedings.
While we have filed our claims to IRP, we have considered the provision for potential loss that may occur on account of amount recoverable from JAL. This sub-provision, amounting to INR 113 crore, at EBITD level, has been considered as a sectional item. Our capital expenditure during the quarter stood at about INR 660 crore. We have commissioned one million tons cement capacity each at Kadapa and Ariyalur, which takes our total capacity in South to 17 million tons. We are also at the advanced stage of completing our 2.9 million tons of cement expansion in Assam and Bihar. During the full year, we expect to spend about INR 3,700-INR 4,000 crore, largely towards organic expansions, efficiency improvement, land and maintenance CapEx.
As of 30th June, our gross and net debt remained range bound at INR 4,613 crore and INR 445 crore, respectively. Hence, our net debt to EBITDA also remained stable at 0.17 times. Our strong financial positions are quite well for the next phase of expansion. With this, I now open the floor for questions. Thank you very much.
Thank you very much, sir. We will now begin the question-and-answer session. Anyone who wishes to ask questions may press star and one on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Amit Murarka from Axis Capital. Please go ahead.
Yeah. Hi, all. Thanks for the opportunity. M y question, the first question is around JPA. W ith this development of it going into NCLT, what will be the tolling arrangement going ahead? Will you continue with it, and will the terms be the same? That is the first thing I wanted to understand.
See, we are in discussion with the IRP on the modalities of the tolling operations, and we are hopeful that we'll continue to serve and rather improve our presence in the central markets from JPA plants as well as our plants in the east. Thank you.
Okay. A lso on the expansion program, so you have a capacity target of, interim target of 35 and long term of 100 and 130. B y when do you expect, or can we think of, more announcements on the expansion front now?
Look, we are very committed to our long-term roadmap of 100 million ton plus by 2031. And, you know, we are doing very detailed work on this, and we will give a very clear-cut timeline, along with the locations of where we are going to expand, after 12 months.
Oh, after 12 months. Okay, nothing this year then. Okay. Sure, I'll come back in the queue. Thanks.
Thank you. The next question is from the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead. Mr. Ravi, Mr. Kumar, Ravi, I have unmuted your line.
Oh.
Sir, please proceed with your question. As the current participant is not answering, we will move on to the next question, which is from the line of Aman Agrawal from Equirus Securities. Please go ahead.
Yeah. Thank you, sir. Thank you for the opportunity, and congrats on a good recovery in margin. W ith respect to the cost reduction target, if you can just elaborate on the 150%-200% reduction that you're expecting over three years. One was that. S econd, if you can provide some more details on the captive coal mines that we have been highlighting.
See, definitely, this will be contributed by our VC reduction, which will come from the improvement in the RE power share, as well as we'll be also using our captive coal mines. A lso, we are also committed to reduce our logistics costs, which will be through a reduction in the lead distance, as well as other initiatives like direct dispatches, improvement, et cetera.
The captive coal mine itself, if you can just provide additional details, you know, when are we expecting that by, and what kind of output can we expect out of the same?
See, Vindhya and Sial Ghoghri coal block, we'll be commissioning in the current year, and while the Mandla coal block will be commissioned the next year. Of course, they will contribute to these regional profitabilities, wherever these fuel will be supplied.
Understood, sir. L astly, you know, with JPA now more or less out of the scope, on the alternative expansion strategy, if you can just, you know, highlight on the region-specific, that this is the existing limestone mine, which region, you know, can we potentially look at for further expansion?
I think I've already said that, you know, we have scope for brownfield expansion in some of our plants, and we have, you know, mines in central India as well as in North India. That means in Madhya Pradesh and Rajasthan. We are preparing a full group blueprint. We'll come back to you with a very, very specific timeline, along with all locations, you know, after 12 months.
Understood. Understood, sir. Thank you.
Thank you. The next question is from the line of Madhu Kela from MK Ventures. Please go ahead. Mr. Madhu, kindly proceed with your question. Sir, unmute yourself and speak. We are not able to hear you. As the current participant is not answering, we will move on to the next question, which is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Yeah, good morning, sir. Thank you for the chance. My first question is on the realization. W e are expecting realizations to be weak, based on the dealer feedback. I n your opening remarks also, you said, 1Q was down 2 odd %, but that's not visible in our results. I s there any one-offs, or how should we see the reported, revenue or realizations, for this quarter?
No, there's no one-off, but as indicated in the opening remarks, there have been improvement in the brand positioning, whatever marketings that we have done, that has also started yielding results. There have been improvement in the product mix, as also, there has been some rationalization in the discount schemes, which have all contributed to negate the impact of the price fall in the sector.
Okay, I understand. For next quarter, can you guide what sort of current trends of realization versus average of last quarter? I missed those numbers.
For the current quarter, already we are seeing that the prices are lower by about 3% or so compared to the previous quarter, and we don't expect these to improve in the current quarter. Hopefully, from Q3 onwards, we should start seeing the recovery in the prices.
Understood. Thank you. W ith respect to cost, any near-term cost levers or cost reduction because of commodity deflation, which is continuing, do we expect? I f you could quantify for the next one or two quarters, how could maybe energy price trend?
The RE power share, which is 35%, will of course be increased, and the major impact will come in the Q4, which by when it will reach about 50%. But we will see the steady improvement in our power and fuel cost, which I said about 5.3, 5.38—sorry, INR 1.38 per kcal in Q1, which should go down steadily to about 1-2% improvement in the coming.
1%-2% improvement, sir? Yeah.
Yeah. The raw material settings, which I've indicated, that we feel are sustainable.
Understood. O ne just last quick question. The tolling arrangement with JPA, I mean, what is the risk of it being now discontinued? I f you could just share, what would be FY 2024 volume and EBITDA contribution from this arrangement?
As I said earlier, we are in discussion with the IRP, and we are hoping that, of course, we will be continuing to serve this market and rather improve our presence. O f course, more details we cannot give until modalities get firmed up.
Is it possible to share what could be the EBITDA contribution from tolling?
That would be up in the possibility we don't share.
Understood. All right. Thank you so much, sir, and all the best.
Thank you.
Thank you. The next question is from the line of Rahul Gupta from Morgan Stanley. Please go ahead.
Yeah, hi. Thanks for taking my question. C ouple of questions. One, taking the point forward of, cost improvement by INR 150-INR 200 over the next three years. Just want to understand your view, how this, number or this range changes, with you expanding and becoming a pan-India player. Is there a drag to this number, or you have taken that into consideration that you becoming a pan-India player would also drive INR 150-INR 200 cost improvement? T hat's my first question. Thank you.
I think right now, you know, we are looking at our current footprint, and this cost improvement is based on our current footprint only. I think as we, you know, look at the expanded footprint in terms of and announce the specific locations, these numbers, you know, would change with that mix. But in the current footprint, we are very confident that we will deliver INR 150-INR 200 per ton over the next three years.
Great. Thanks for the clarification. My second and last question is, you talked about INR 113 crore of one-time provisions against your receivables from JPA. Can you just help me understand, is there, what is the overall outstanding there, and what is the risk of this provisioning increasing in the future? Thank you.
While, whatever risk we considered as of date has been fully provided for, we hope to mitigate part of this, but, of course, things will be reviewed from quarter to quarter. Hopefully, we don't, foresee this should increase.
Okay, that's very clear. Thank you so much.
Thank you.
Thank you. We'll take the next question from the line of Indrajit Agarwal from CLSA. Please go ahead.
Hi. Thank you for the opportunity. A couple of questions from my side. First, sir, on the pricing outlook for the industry, while you highlighted that consolidation has picked up meaningfully, but still we see pricing outlook to be fairly negative. If I were to look at how the prices are trending currently, even for a flattish YOY pricing for FY 2025, we need close to 6%-8% price increase in second half. With that backdrop, over the next 2-3 years, do you think that pricing growth would be much lower than the last 15 years average, which has been 3-3.5%? Can we see a much lower price increase or maybe a flattish price increase, and all profitability increase will be driven by cost savings?
I think it is hard for us to, you know, predict exactly how much price increase will happen and how long it will sustain. I think this is a very important question that, you know, consolidation is happening and when will pricing power come back? I personally think that, you know, there is still, you know, some time to go before the consolidation fully plays out. I think it is hard to predict as to, you know, how long it will take to fully play out. I think we can just say that the trend is towards greater consolidation, faster consolidation, and even organic, large part of the organic growth being captured by the top players because of their stronger balance sheet and their ability to execute projects.
I would just say that I think on a trend line perspective, we can say that consolidation will accelerate. And how quickly will that translate into earnings power? I think it is hard for me to, you know, predict. But we have seen in sector after sector, whether it is telecom, whether it is steel, whether it is banking, consolidation plays out and eventually margins improve. We've also seen it in cement sector around the world. But in India, I think it is still a very fragmented market, and you know, top four is 55%, but there are still 20-25 players in this market. I think it's going to play out over the you know, medium term, but how will it translate into pricing power is hard for me to predict.
Sir, on that front, how do we see our inorganic aspirations? W hat kind of assets would we, would you be closely evaluating? Is there any regional or IRR criteria in mind before you go ahead and bid for it? Because clearly, balance sheet is much stronger for us as well.
I think we have said this earlier, too. I think we have an ambition to be a pan-India player, and we will look at acquisitions, you know, from a strategic attractiveness which fulfills our strategy. We also will look at, you know, our hurdle rates of return. I t has to meet, you know, our financial criteria. I think, in the past also, we have seen that there are acquisitions which we have done, which meet our criteria, and we have successfully integrated them and turned them around. T here are acquisitions which we've, you know, either walked away from or not been able to do because they did not fit in our criteria. I t may be more attractive for someone else, but less attractive for us.
I would say that, you know, we will evaluate it on two parameters. One is the, you know, strategic criteria, which helps us diversify our footprint or, increase our share in our present markets, and obviously, something which, is at a, you know, price where we can justify the risk-return trade-off.
Okay, thank you. I have two housekeeping questions. Can you give us the lead distance for this quarter?
272 km.
Sharp decline QOQ. Secondly, what is the current booking cost of fuel? I understand INR 1.38 is what we have booked in 1Q. Are the current spot prices much lower than that?
Around similar.
Okay. Thank you. That's all from my side.
Thank you.
Thank you. We'll take the next question from the line of Satyadeep Jain from Ambit Capital. Please go ahead.
Hi, thank you. A few-- a couple of questions. Puneet, on that, 75 million target, just want to understand, you mentioned that you'll share more details 12 months from now, which will be almost mid FY 2026. I f we keep inorganic, growth aside, that would imply almost 25 million ton ordering, and execution within two-year timeframe from mid 2026. Is that realistic? What are you-- what's the strategy? A re these numbers making sense about 25 million ton ordering and execution within a frame of 2 years, given the execution and balance sheet that you have? That's the first question.
What's the next question? I'll answer both of them together.
O n the cost also, the INR 150-INR 200 per ton target that you outlined, is it possible to break it into various buckets on how much savings you're looking at, RE, how much from, captive coal and other variables? And if I may add just one quick question to this. When you look at Central India, what has been your marketing spend so far? L et's say if JP doesn't come through in the NCLT route, would you look to accelerate your greenfield plant there? What would be the thought process in Central India? T hose are the questions.
I think on the first question, you know, as I said, we are very committed to our long-term roadmap of 100 million tons plus by 2031. I will share a very, very concrete roadmap along with timelines in 12 months. You know, we can assure you that a lot of work is being done, and we have, you know, a scope for expansion in our current locations, as well as we have mines in Central India and North India. W hether inorganic happens, doesn't happen, I think we have a backup where we can do organic expansion for sure. And I would say that project execution time is something also we are, you know, looking at very carefully.
We have commissioned all our projects ahead of the promised timelines in the last 10 years, except one, which was Bihar grinding unit, which took little longer, and then we, you know, just scrapped it because we thought we could-- we had better opportunities. I would say that overall, in all the projects that we've executed, we have executed them ahead of time, barring one. And you know, we are very confident that you know, we will be able to execute the projects you know, on time, on cost. The issue is that there is some delay. You know, we acknowledge that, and we recognize that. But you know, when you are you know, looking at a long-term growth plan, sometimes you know, a year here or there, it does happen.
But I can just say that we are absolutely committed, given the opportunity and our own execution capability and our strong balance sheet, that, you know, we will, you know, we will deliver on this growth. The second point I want to say is that in terms of INR 150-INR 200 per ton cost targets, we are not breaking it down, by, you know, bucket, because, the, the spreads might change in terms of the, you know, fuel cost versus our, you know, captive coal, or depending upon how fuel prices behave. The, you know, spread might also change on power.
But we have on these three areas, which is renewable power, our own coal mines and logistics cost. I think no matter what happens, we are fairly confident that we will deliver INR 150-INR 200 per ton saving in the next three years. And I think, regarding the central India marketing spend, I think, we don't share so much granular details about each regional market. Y ou know, please bear with us on that.
Thank you so much.
Thank you. We'll take the next question from the line of Ambar Singhania from Nippon India AMC. Please go ahead.
Yeah, hi. Thanks for taking my question. But I just wanted to understand one thing, like a few years back, or almost three years back, we mentioned our intention to reach around 100 million ton by FY 2030. Post that JP happened. JP almost it's been like two, 2.5 years. But JP was just 10 million ton. JP would have been would not have been helped us to achieve or reach our target completely. There could have been more expansion or which should have been announced or planned earlier. Last quarter also, we mentioned that in another two quarter time, we will give the clear roadmap. This time we are saying another one year.
I mean, just wanted to understand, was there ever a plan B or the other plans, or we were, like, too much dependent on JP, knowing fully that JP alone will not suffice us to reach that 100 million target? N ow the asking rate is too high, as the previous participant also asked. J ust wanted to understand your thought and the board's thought process on that line. Where are we missing out on the planning and execution on that?
I think there are two things. I think, you know, one is, first of all, I completely acknowledge the fact that, you know, there has been a delay from our side on this issue. I think, you know, there are two issues which, you know, we have been grappling with. I think one is that this, you know, we were fairly confident that the JP transaction will get consummated this year, and I have myself guided on that. But the fact that they got pushed into insolvency was a huge surprise for us. I think there has been definitely some delay on account of that, and there is uncertainty on account of that, which we, you know, we did not anticipate it.
The second thing is that, you know, we are not announcing the exact locations because it takes time to buy land. You know, when you announce exact locations, sometimes people front run the land and, you know, land prices go up, and the uncertainty gets heightened, in terms of executing the project. Y ou know, our view is that, you know, announcing all locations ahead of schedule until we are fully secure, you know, just increases the execution risk. W hile there has been delay from our side on, you know, a little bit of land acquisition on our sites, and there has been uncertainty in JP, which, we did not anticipate as much as we should have, you know, I think, you know, these are the two reasons why there is a delay.
You know, there is always a plan B. The question is that whether, you know, we can—these are long range targets. We might be plus one year here or there, but I can just say that we are fully committed to our, you know, expansion plan. You know, we will, we will demonstrate, you know, very strong execution as, as we have done in the past. We have gone from 1 to 50 million tons with a strong balance sheet and, you know, no dilution in equity. I think we can go from 50 to 100 million tons, you know, and we will give you a very concrete roadmap about it.
Got it. S econdly, this started, are we still open for inorganic acquisitions in future on that line o r are we changing our strategy toward more of organic growth?
No, I think we've always maintained it will be a mix of inorganic and organic. There are uncertainties in inorganic, so it is hard to commit what will happen, what will not happen. But there will be a mix of organic and inorganic, as it has been in the past. You know, I think we will continue to look at assets which fit our strategic, you know, footprint and our financial attractiveness criteria.
Got it. L astly, if I may ask, after providing this INR 113 crore, what is the pending amount invested or put in the JP?
As I said earlier, also, practically whatever exposure we considered has been fully provided for. H opefully we don't see any further cost coming, and we are working on mitigating part of these. S ome reversal we can see in the coming quarters.
Got it. Thank you.
Thanks a lot.
Thank you. We'll take the next question from the line of Raashi Chopra from Citigroup. Please go ahead.
Thank you. Just on the volume growth for the industry, what kind of volume growth are you expecting this year?
Close to about 8%.
F or yourselves, it would be double-digit growth, right? Based on the one point-
Yes, 12. 12%, yes.
12%. W ithin that 12%, are you taking some tolling volumes as well?
W hen I say it is including the tolling volume last year, from that also, 12%, at least we should clock.
Okay. W ith this year's tolling volume, are you anticipating—like, assuming a similar level as last year, or in your--
As I said, we are working, we are in discussion with the RP, and we are hopeful that both from the JP plants as well as our own eastern plants, we should be able to cover this volume.
All right. J ust on the limestone reserves, is any lease expiring in 2031? M ore in terms of like, you addressed this the last time as well, but just kind of reiterating it, in terms of limestone sufficiency from a number of years perspective, what are the timelines?
On the limestone, I think we are pretty covered, but of course, a timeframe of this will be clearly visible in a couple of quarters, because some of the things in the IBM data are being updated. You'll see, that should not be a concern for the limestone security point of view.
Okay. Okay, just some bookkeeping questions again. What was the percentage of blended cement in this quarter?
86%.
CC ratio?
CC ratio is 1.67.
6/7. Okay, and just two questions. I think I missed. Just to be doubly sure, you said 1Q CapEx was INR 660 crore?
Yes.
Tolling was 0.2 million tons.
0.4 .
0.4 . Okay, thank you.
Thank you.
Thank you.
The next question is from the line of Prateek Kumar from Jefferies. Please go ahead.
Hello. Good morning, sir. Congrats for good results. Yeah, so my question is on actually the volatility in the results. While the performance was very good, but most investors actually complain about the performance being extremely volatile in the past, turning from huge, very, very subpar versus peers to, like, above par versus peers on a quarter-to-quarter basis. How do we explain this, as well as is there anything which we can do to address this kind of volatility? Thank you.
Yes, Prateek, I think you raised a valid question. In the last financial year, many of our plants had debottlenecking projects, so it led to shutdowns and the planning of materials. T here were some L2 movement, which we call, that means supply from a longer distance, costlier source, as well as stocking of inventory. O ur movement of inventory, that also was more fluctuating compared to the rest of the peers. W hen you increase the inventory, some of the overheads get loaded into the inventory, and that doesn't show up in the same quarter. When that inventory gets released, it comes in the cost. T hat contributed significantly to our fluctuations in the cost.
Going forward, since both these factors and these debottlenecking projects are over, we expect you'll see much more normalized growth in line with the industry parameters.
Sure. Okay. Second question is on your marketing costs. You last time talked about because of hiring of brand ambassador, there was an increase in marketing costs. Is it already, now part of the other expense, or is there some elevation which we can expect there?
That is part of the other expenses, and we are committed to keep our brand building efforts strong. You'll see the results in the sales also, and that is already part of the cost structure, which is already reflected in the first quarter results.
Sure. Thank you, sir. All the best.
Thank you.
Thank you. The next question is from the line of Jashandeep Singh Chadha from Nomura. Please go ahead.
Hello.
Yes, sir. Please proceed.
Yes, thank you for the opportunity. Just two questions. Firstly, I just wanted to understand your view on the southern market. W e have seen a lot of consolidation as well as, you know, expansion happening in South India. V olume push is one of the reasons why the prices of, you know, earlier higher price market is quite low. D o you see any price recovery coming from there? And, and your view on the, how the pricing of the Southern India will remain. Just wanted to b ecause Dalmia also has a large share of its volume coming from South India, so wanted to understand your view of this.
As we said, it's South is a very fragmented market, and there is increasing consolidation. But you know, some of these plants, you know, which have, which are being bought over, were underutilized. Y ou know, with a stronger promoter, the utilization will go up. I would say that, you know, there could be short-term pressure on prices till utilization of some of these underperforming assets goes up. Y ou know, over the medium to long term, as consolidation enhances, prices should stabilize or go up. That's my view. But I think we'll have to wait and watch as to how things shape up.
Thank you. Thank you for that. My second question is, you know, more on Dalmia. I f we see from the core markets, that's excluding tolling volume, this quarter also, it was 2% growth. I n fact, in the last year as well, we saw from the core markets, the volume growth is lagging industry. I s there a structural issue going on in your core markets? G iven the fact that you will announce your expansion after 12 months, is there a chance that Dalmia might lose some market share in its core markets? Just wanted to understand about it.
I think we are running at, you know, 65% utilization. W e have huge scope to, you know, grow. And, you know, I don't think we are gonna, you know, lose out in terms of, you know, volume growth as the demand in our core markets grow. Our headroom for growth is very high.
Okay. Just one last question. Let's say there, you know, quite uncertainty on JP, and you might not have decided on whether to, you know, progress with JP or not. Will you get, you know, similar acceptance from dealers also if you start, you know, continue with tolling? Because dealers might want to, you know, stay with the kind of established players there, because you, Dalmia will be using a lot of shelf space. J ust want or will it, you know, be required that you have to give extra commission to dealers? Just wanted to understand the dynamics of how this will work.
Sorry, your question, your voice was a little muffled. Can you?
I'll repeat. Y ou know, Dalmia started doing tolling because there was certainty or you were going to take over JP. Now, there's quite, you know, a lot of uncertainty over there. H ow much does that tolling agreement, continuing that tolling agreement still make sense for Dalmia? And will there be, you know, some resistance from the dealer as well? Because since you have not announced any expansion, our dealers might want to keep the products of the established brands over there, than let's say a newer brand, Dalmia. Just wanted to understand that.
I think we are not seeing any such situation in the marketplace. You know, irrespective, I think, you know, we have the ability to supply to that region from eastern plants as well. W e are not seeing any resistance from the dealers. In fact, we are seeing a lot of acceptance.
Thank you. Thank you so much. I'll join back with you.
Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead.
Hi, hi, good morning. M y question, you know, is again, you know, going back to the long-term strategy. I had a couple of--
Sorry to interrupt, sir. Your voice is breaking. Your audio is not clear.
Am I audible now?
Sir, may I request you to kindly use your handset?
Okay, let me come back in, please.
Sure, sir. Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. We'll take the next question from the line of Shravan Shah from Dolat Capital. Please go ahead.
Yeah, thank you. I, sir, just wanted to first clarify when we say 12% volume growth for FY 2025, so this is on 28.8 million ton volume [consensus] that we have done in FY 2024, on that we are seeing a 12% volume growth?
Yes, your calculation is right.
Yeah. T hat means for next three quarters, we need to do 14% kind of volume growth, and we are confident that we can do that.
Yes, we are confident.
Okay. Yeah, that's great. Second, sir, I understand that we will take one year or two to announce the external plans. But broadly, trying to understand in terms of the CapEx and on broadly $25 million [per dollar], or if we take broadly 15,000-odd crore kind of [concept that we have to]. B roadly INR 4,000-5,000 crore every year from next forward. T his year also, say, INR 500-4,000. H ow do we see the net, you know, will-
Sorry, sir, your voice is breaking, Mr. Shah. Your voice is breaking, sir. You'll have to repeat your last line again, please.
Yeah. I'm trying to understand how one will look at in terms of the net debt, given the CapEx for next four years, and maybe even going forward also would be close to INR 4,000 crore. Will our CFO will be sufficient? H ow one can get increase in the net debt?
Yes, while we announce these expansions, of course, the financing and the net debt, gross debt positions will be duly factored in, and we would like to remain within our announced capital allocation policy, guideline that our net debt to EBITDA should not cross 2:1. Because the safety of balance sheet, I think that will be also paramount while we plan these expansions.
Okay. Is it fair to say, let's say, this INR 150-INR 200 rupees of reduction over three years? Broadly, one can look at INR 50-INR 70 rupees every year, kind of, and even the prices, as you mentioned, 3% target prices is average of Q1.
Comes back, we are third quarter, even cost reduction will not help us to increase--
Shravan, can you come again? Repeat the question.
Yes.
Voice is not clear.
Yeah. Sir, I was trying to say,
Mr. Shah, I request you to kindly rejoin the queue, as your audio is not clear, sir. There is an issue on your end.
Is it better now?
Yes, sir.
Yeah. Go ahead?
Yes, sir. Please go ahead.
Yeah. I was just trying to understand this INR 150 cost reduction over this--
Mr. Shah, sorry, I'll have to interrupt again and again, but your audio is not clear.
Okay. Okay, okay.
Please rejoin the queue. Thank you. The next question is from the line of Ravi Sodah from Elara Capital. Please go ahead.
Sir, can you help me with the net debt reconciliation from the March quarter till now? Broadly, I see that there has been a INR 600 crore gain booked for mark-to-market for IEX, but our net debt numbers have remained unchanged. We might have also made a cash profits. J ust wanted to understand from that perspective.
Yeah, primarily in this industry, in the first quarter, you end up increasing the working capital, because at the year-end, the dealer discounts get paid off, the GST liabilities or the TDS liabilities get paid off in the first quarter. A lso the inventories are almost at a year-end low, at this March position. T here's an increase in working capital. S econdly, the CapEx INR 60 crore has been primarily funded by the internal accruals. Y ou see that the working capital got consumed, and that deficit has been made good by the IEX improvement. M ore or less, the net debt has remained same.
Okay, sir. T he INR 650 crore spend has been primarily on the Northeast expansion that we are doing, or it is on the cost saving initiative that we are doing?
All of them. As I said, mainly, of course, the organic expansion of Northeast as well as Bihar, and also our efficiency projects, maintenance CapEx, and partly land also.
Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead.
Yeah. Hi, sir. While some of my questions have been answered, I just wanted to get some more color on this volume growth guidance of 1.5x industry growth. You know, even last year, you were looking at similar growth trajectory, and on core volume growth, we landed up in a single digit. G iven that, we are still confident that next nine months we would be able to deliver 14% volume growth. Shall we assume that our realizations again, the discounting structure may need to increase, which we have seen normalization in Q1? And second, your thoughts on the IEX stake sale.
See, on the volume front, 14% growth, we feel that is possible. Of course, last year there were a couple of issues which we had shared in the industry calls also, that whatever experiment we did in the first quarter, this had some impact and took couple of quarters for us to come back, and those issues are behind. S econdly, the brand positioning has been improved, and we are seeing that traction coming. A ll these initiatives, we are sure that will lead to better results. And I don't think we'll have to increase the discounts to gain the volumes. The first quarter also, we have seen that the discounts have been rationalized, and still we have been able to at least meet or slightly exceed the industry volume growth.
On the IEX, we continue to maintain our stand that, yes, it should be a short-term investment. Of course, exact timelines I cannot give, but we'll be looking to sell this and to meet our funds requirement for the expansion. This money will be used.
Okay. This INR 150-INR 200 per ton, I understand that, if I look at your green power mix for FY 2024, this will be close to 26-27%, which in FY 2026, you would be close to, you know, on an average, 50%. Is this understanding correct?
That's right. The 50% we plan to reach by Q4 of FY 2025 and in 2026 to improve further on this.
A t least full year, you will have 50% green power, renewable power, green power available to you. T hat saving, if I factor in, given that, good chunk of that may also come in from grid power, you may save, incremental INR 2-3 per unit. T hat would give another INR 40-50 versus... You know, I'm looking FY 2024 versus FY 2026. A re you also building in the cost reductions coming in from the fuel prices? Because, you know, per kilo cost costing on FY 2024 versus FY 2025, that number is down by almost INR 0.30-0.35 versus current price. I s that also baked in this INR 150, or they are, in over and above the fuel cost reductions?
See, we are factoring in the current level of the petcoke international prices. If any movement there happens, of course, that I have not factored in, but, there will be further savings in the fuel cost coming from the use of our captive coal mines, and of course, some efficiency improvements which will come.
No, what I was referring to is this 150-200--
One minute--
Yeah, I'll just complete this. Yeah, I'll just complete.
Okay. Thank you.
INR 150-INR 200 per ton reduction in OpEx, which you are referring to, that includes the fuel, or this is over and above the fuel changes of--
No, that includes the fuel, but not coming from the drop in the international petcoke prices.
Understood.
The current international prices should be the base.
Correct. Correct. Great, sir. Thank you. I'll come back in queue. Thank you.
Thank you, Rajesh.
Thank you. The next question is from the line of Dishant Jain from Quasar Capital. Please go ahead.
My question has been answered. Thank you.
Thank you. We'll take the next question from the line of Navin Sahadeo from ICICI Securities. Please go ahead.
Yeah, good morning. Am I audible?
Yes, we are.
Yes, please go ahead.
Right. Thank you for the opportunity. Just two quick questions, and sorry if it's a repeat. But just as to build more conviction into our numbers, is it still possible to give a little more specific breakup of this cost cuts that we are talking about, INR 150-200, is definitely encouraging. T he companies are, several large companies are talking about it. A broad breakup, like, let's say, about INR 50-60 rupees from renewable, 70, I mean, 30-40 from mining. Some broad breakup will really help us factor in in our forecast. Thanks.
T hat will share for all the investors, but of course, as I said, it is primarily coming from the renewable energy going up to at least 50% by this quadrant at this year-end, and going further to hopefully about 60% the coming year-end, next FY 2026 year-end. And use of the captive coal mines, which should reduce our fuel cost. O f course, besides, we see that will be, there'll be savings in the logistic cost plant, where we can see the scope of about INR 50-100 coming from there also.
Understood. Helpful. S econd, in your key markets, could you please tell us what is the difference in the current trade and non-trade prices? That will really help in key markets of the South and East. Trade and non-trade price difference. Thank you so much.
Of course, it varies, but exact numbers would not like to share at this call. Kindly bear with us.
Sure. Thank you.
Thank you. Next question is from the line of Niraj Bhanushali from Groww Mutual Fund. Please go ahead.
Yeah. Hi, sir. Congrats on good set of number. I just wanted to understand that how is the demand scenario you are seeing, like, post the election, and is it improving in your key markets as well as in the central region?
See, of course, post-elections, the monsoon started, and of course, the monsoons have been quite uneven at certain places. The impact is quite high, certain places is low. T he volumes have started coming back, but of course, not with the full intensity. Of course, we remain hopeful that the overall trust of the government to support the Indian economic growth, that will continue, and that will translate to the goods demand growth. Because all sectors are practically firing. The real estate demand from the household, both in the urban as well as the rural areas, is good, and such as spending is also good. W e don't foresee that the overall demand for the full year should be less than 8%.
Because as we are saying, that demand is improving, but still the price hikes have not been sustained from last couple of months.
Yeah, prices have not sustained because there is a market share gain by all the players. People are hungry for their market share. O f course, that is one of the key reasons why prices have not improved.
Thanks a lot.
Thank you.
Thank you.
Thank you, sir. The next question is from the line of Ashish Jain from Macquarie. Please go ahead.
Hi, sir. Good morning. Sir, my question, you know, again, pertains to the growth outlook. You know, I have three parts to it. One is, you know, you highlighted that you, you're not sharing the details at this moment from a competition point of view. S hall we assume that in 12 months, when you come out with a detailed plan, you would have progressed fair bit in terms of the resource access on land, limestone, all of that, and hence the execution time would be much shorter? That's the first thing. Second thing, you know, you would be factoring some inorganic growth as well, like you alluded to earlier. You know, given there are a lot of, you know, large companies which are still fairly active in terms of acquisition of assets.
Can you give some color of how much acquisition-led growth you would be looking at? I know there's, you know, it's impossible to give a right number to it, but just, you know, in terms of the proportion, how much intuitively you are factoring from acquisition. And thirdly, you know, if I look at fiscal 2024 + 2025 put together, we are effectively guiding, you know, for a CapEx both put together of around INR 7,000-INR 8,000 crore. But in terms of incremental capacity in this period, we are barely adding 7-8 million in terms of capacity. Y ou know, can you also elaborate a bit more on, you know, where is the balance CapEx going? Is it future preparedness or a lot of cost savings initiatives?
If yes, then what is the quantum of cost savings we can expect from these specific projects?
See, on the roadmap, when we announce the expansion roadmap, you'll have clarity about the sites, about land procurement or the limestone reserves, et cetera. T he full clarity will be available when we announce this expansion in next 12 months. Regarding inorganic growth, I think it's not possible to share any specific details, which markets, which kind of players, et cetera. I t all depends on the strategic fit, which develops between the two players and the fairness of the evaluation, et cetera. But of course, that will remain as part of the overall expansion strategy. If any such opportunity comes, the balance expansion can be modulated accordingly to fit our balance sheet size and expansions.
With regard to the CapEx expansions in the last two years, of course, of course, bulk of this has gone for the organic expansions, but also from lot of efficiency improvements, which will definitely translate to the improvement in the variable cost. Part of that has been also started showing in the results. In the next three years, when we say that we will translate to 200 INR per ton saving, so part of that will also come from efficiency improvements.
When we say that RE power asset, all these are part of the efficiency improvements or the ROI projects, which you call it. Partly, of course, the money has been spent on the maintenance CapEx, as well as some land, land purchases to prepare for our future expansions also.
Sir, can you give some break-up of this CapEx under the headings that you just mentioned?
I think that we're not likely to share. Please bear with it.
Okay. Thank you so much.
Thank you.
Thank you. The next question is from the line of [Saket Kapoor from Kapoor & Co]. Please go ahead.
Yeah, namaskar team, and thank you for the opportunity. Sir, you mentioned about INR 600 crore being spent on CapEx. W hat have we outlined for the entire year? I missed the number.
Yeah, full year, we expect it to be about INR 37,000-4,000 crores.
Okay. O n the non-core asset part, sir, what did you mention about the IEX sale? I missed that point also.
Yeah, we remain committed to sell this share because we consider this as a short-term investment only. But of course, the exact timelines I cannot share, and this money will be definitely used for funding our expansion.
Right. A small point, sir. When we mentioned about 100 million ton at the exit of 2031, what kind of market share are we eyeing at that time? I mean, what do we envisage in terms of the total cement industry size, say, 7-8 years down the line when we are mentioning our number? C urrently, what is our blended market share for the country as a whole?
C urrently, our blended market share at, for country as a whole would be around 7.5%-8%. I think, you know, if we look at, financial year 2031, and if you take a 8% demand growth, our capacity share will be, higher than 7.5. I t will probably be just under 10% or close to 10%.
Thank you, sir. Ladies and gentlemen, we will take that as the last question for today. I will now hand over the conference to Mr. Puneet Dalmia for closing comments. Over to you, sir.
Yeah. I would just say again, thank you very much for your questions, and thank you very much for your interest. We look forward to continuing this journey. We continue to be very optimistic about the future and, you know, a lot of potential ahead and a lot of exciting times in our sector with a lot of action. T hank you for your interest, and look forward to continuing our communication going forward. Thank you.
Thank you, members of the management. Ladies and gentlemen, on behalf of Dalmia Bharat Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.