Ladies and gentlemen, good day and welcome to Q3 FY 2025 Earnings Conference Call of Nuvoco Vistas Corporation Limited. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risk that the company faces. The company assumes no responsibility to publicly amend, modify, or revise any forward-looking statement on the basis of any subsequent development, information, or events, or otherwise. 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 Ms. Madhumita Basu, Chief Investor Relations. Thank you, and over to you.
Thank you, Yashasvi. Good afternoon, everyone, and thank you for joining our first-quarter fiscal 2025 conference call. Let me start by briefly discussing the broader macroeconomic landscape linked to cement demand, followed by a review of our performance and the key events for the quarter. As you are aware, during the first half of the fiscal year, the macroeconomic environment remained challenging, and India's growth rate turned out to be much lower than anticipated due to deceleration in industrial growth and CapEx. However, high-frequency indicators available so far suggest that the slowdown in domestic economic activity bottomed out in Q2 FY 2025 and has since recovered gradually, aided by sensitive demand and pickup in rural activities. A record Kharif harvest and increased Rabi sowing have contributed to a reasonable performance in agriculture and allied activities, leading to an improvement in the rural economy's fortunes.
Meanwhile, India continues to be the fastest-growing major economy. Although GDP growth has moderated to 6.4% for FY 2025, primarily due to lower CapEx by Centre and states in the first half of the fiscal, the real GDP growth for Q1 FY 2026 is projected at 6.9%, and Q2 FY 2026 is projected at 7.3%. The Union Budget for FY 2026, scheduled to be presented in February, is expected to prioritize infrastructure development. Economic experts project a 30% increase in the infrastructure allocation, reinforcing the sector's critical role in driving economic growth. All this augurs well for cement demand going forward. Moving on, let me first spend some time on the key milestones that the company achieved in the recent period. Friends, we became a successful resolution applicant for Vadraj Cement Limited, which is undergoing a corporate insolvency resolution process, and accordingly, a letter of intent has been issued.
Filing with NCLT has been done, and approval to the company's resolution plan is expected within eight to nine months. Asset-wise, Vadraj Cement has a 3.5 million tonnes per annum clinker unit in Kutch and a 6 million tonnes per annum grinding unit in Surat. Both equipped with equipment from top-quality manufacturers. Production from the facility is targeted to start from Q3 FY 2027. The acquisition offers a valuable buy and sizable growth opportunity being available at a highly competitive cost of approximately $60 per tonne. Recently reported acquisition costs in the industry. By acquiring Vadraj Cement, the company's overall capacity to reach 31 million tonnes per annum cement capacity by Q3 FY 2027, with 19 million tonnes per annum in East and 6 million tonnes per annum each in North and West. In essence, this investment follows the company's strategy of growth and diversification.
With this strategic acquisition, Nuvoco Vistas is set to expand and consolidate its footprint in the Western region of the country, becoming the third-largest player by capacity across the combined geographies of Gujarat and Maharashtra. Additionally, by serving the Western markets from Vadraj Cement, the company would also release much-needed capacity to meet the growing demands of the Northern markets from its Rajasthan plants, thereby strengthening its competitive position across both regions. The acquisition will unlock significant synergies with the Rajasthan plants, enabling seamless operations in existing markets, optimizing logistics, and enhancing overall competitiveness. To reiterate, in line with our future expansion strategy outlined in earlier calls, the Vadraj acquisition meets the timeline of Q3 FY 2027 and will be achieved at a significantly lower cost, reinforcing our commitment to strategic growth. Let's now focus on our quarterly performance, reviewing our progress and discussing our outlook for the future.
In Q3 FY 2025, the company recorded revenue and EBITDA of INR 2,409 crores and INR 258 crores, respectively. Allow me to take a moment to highlight the key factors that contribute to these headline figures. Firstly, let me touch upon the volume growth of 16% YoY to 4.7 million tonnes in Q3 FY 2025. Following the challenging conditions in H1 FY 2025, demand conditions showed improvement in Q3 FY 2025. In response, the company undertook several initiatives to drive strong volume growth during the quarter. However, cement prices in our key markets plummeted in the months of October and November and remained subdued for the major part of the quarter. Price improvement was observed only towards mid-December. Consequently, our realization was impacted during this period. The positive news is that price improvement has been observed in the market. We remain optimistic that sustained demand recovery will continue to support prices moving forward.
I'd now like to give an overview of the quarter's performance, specifically focusing on key cement cost elements. Power and fuel costs per tonne reduced by 6% quarter on quarter. The company has reached the lowest spending fuel cost in the last 13 quarters at INR 1.45 per million tonne. I would like to emphasize that Nuvoco's power and fuel cost continues to be amongst the lowest in the industry. On the raw materials side, Nuvoco continues to be better placed due to its long-term slag supply agreement. Distribution cost per tonne declined by 3% quarter on quarter due to efficiency in operations. On cost efficiency program, Project Bridge 2.0 is on track, delivering a reduction upwards of INR 50 per tonne YTD. Turning to our balance sheet, net debt as of December 31st, 2024, stood at INR 4,350 crores, reflecting a year-on-year reduction of INR 183 crores.
This demonstrates our consistent efforts towards effective debt management. On a quarter-on-quarter basis, net debt further declined by INR 151 crores, mainly driven by release of working capital. The company stays on course with its objective to bring net debt below INR 4,000 crores to support our future investment. Cement demand. The cement industry has witnessed a recovery following a challenging first half of fiscal 2025. After grappling with subdued demand, the industry is showing signs of improvement driven by improved market dynamics. Going forward, we believe a key driver to watch out for would be pickup in unspent capital expenditure at both Centre and state levels. As of November, the Centre has INR 5.97 lakh crore in pending CapEx, while states have 5.34 lakh crore CapEx pending to be executed.
Region-wise, in Eastern states, including states of West Bengal, Bihar, Jharkhand, Chhattisgarh, and Odisha, pending states' CapEx on an average is upwards of 65%. This implies significant potential for increased infrastructure activity in the coming months and thereby acting as a catalyst for cement demand. Additionally, rural housing demand is poised for growth, supported by a healthy monsoon. Improved agricultural income and favorable rural economic conditions are expected to drive construction activities further boosting the industry's outlook. With respect to our ready mix and MBM business, focus on innovation continues. In ready mix business, Concreto Uno launched in FY 2025, gaining traction across different markets. The MBM business introduced three new products: Tile Adhesive T5, Tile Grouts, and the Tile Bonder under the brand Zero M to strengthen the product portfolio. Additionally, tile adhesives, construction chemicals, and cover blocks continue to witness improvements in sales.
On the sustainability front, our commitment to sustainability is a fundamental part of our operations, reflected in our leadership in low carbon emissions. The audited emission rate for FY 2024 stands at 457 kg CO2 per tonne of cementitious material, which is among the lowest in the industry. We believe our ongoing sustainability efforts will consistently deliver value to all our stakeholders, including the communities we impact. With this, I conclude my opening remarks. I'm joined here by Mr. Jayakumar Krishnaswamy, Managing Director, Nuvoco Vistas, and Mr. Maneesh Agrawal, Chief Financial Officer of the company. We are here together to answer your questions. Thank you.
Should we begin the question and answer session? Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take a first question from the line of Navin Sahadeo from ICICI Securities. Please go ahead.
Yeah. Good evening, sir, and thank you for the opportunity. So my first question was with respect to Vadraj Cement. So if you can just help us understand that you said it's going to take about, I mean, in the initial comments, Madam did mention that it will take about eight to nine months for the deal to get consummated. So if you can just help us understand how much, once the approval is received, what is the bullet payment that will be due to the process or to the consortium of banks in general, and thereafter, how do we plan to spend the balance payment? As I understand, you're mentioning the acquisition at about $60. So roughly, give or take, it's more close to 3,000 crores or so. So if you can just help us understand that part, please. Thank you.
Okay. Thank you very much for this question. As you would all know, Vadraj Cement is based in Gujarat. They have a clinker unit in Kutch for 3.5 million tonnes of clinker, and they have a grinding unit in Surat for 6 million tonnes. And both these plants were operational when they were shut five, six years ago, and then on, they've been in idle condition, and finally, it came through the insolvency IBC route. And we successfully bid for it, and as mentioned earlier by Madhumita, we have got the LOI in the month of January. So the bid amount was for INR 1,800 crores, and the papers have been sent to NCLT now, subject to the approval of the Honorable Court, which should take eight, nine months. The payment will happen subsequent to that.
And then, on the basis of the due diligence and the various assessments we have carried out in the two sites, we have a range of spend from INR 900 crores-INR 1,200 crores, which would be the money needed over a period of 18- 24 months to make the sites fully operational. However, we target to operationalize one line initially and then the clinker line, and then the CapEx would be for a period of 18- 24 months. So we're looking at INR 1,800 crores of payment post the court approval, and then another INR 900 crores-INR 1,200 crores over a period of the next 18- 24 months. So that's how it is. By around quarter three this year, that's when, subject to approval of court, the payment will happen.
Thank you. And sir, my second question then was about how confident are we of the balance payment, as you said, initial payment is INR 1,800 crore, which is the bid amount, but INR 900 crore-INR 1,200 crore. So just wanted to get a sense that have we got, what do you say, some sort of assurance or guarantee from the original equipment manufacturers? Because you'd appreciate that this plant was not operational for quite some time. So of course, you would have looked into it, but my only simple question is if there is a guarantee, some sort of, with the original equipment supplier that it will not exceed this range of INR 900 crore-INR 1,200 crore. Thank you so much.
Obviously, when we bid for it, we had done our homework, and that's how we kind of participated in the entire bidding process. So we have a fairly elaborate and detailed assessment of both the sites. So we have personally visited the site along with the OEMs. As you would know, the lines are all best European machines. You have an FLS line and a Loesche Mill and Siemens Electrical and rest of all the structures. As per the best OEM, almost all cement companies have this kind of technology. Just that these assets have been idle for many years, so they kind of have the wear and tear and not have been operating. So that's the X factor in it.
But other than that, in terms of assurances from the OEMs and the technical assessment guys, we were pretty confident of our ability to restart the plant in the timelines we shared in mind, and hence we participated in the bid, and that's how we offered and bid at this level of INR 1,800 crores to acquire the assets.
Appreciate. And just one last question, if I may slip in, please. Does this amount, this INR 900 crore-INR 1,200 crore, also include the captive power plant cost as well? Because I believe 50 MW of power plant is there, but currently, it is under the JSW Group. So does this cost factor in that cost as well? And are we planning to put in a waste heat recovery? Thank you. That's it from my side. Thanks.
Yeah. The CPP cost at Kutch is not. Kutch, the Vadraj is not part of the deal. So we are currently working on to work out what are the modalities of it. So it's not part of this INR 1,800 plus INR 900 crores-INR 1,200 crores. It will be above this. The CPP cost is more than this.
Waste heat recovery is something that we'll contemplate later at a later stage.
I'm sorry?
I'm saying, sir, are we planning to incorporate a waste heat recovery plant as well, given the kiln size, or not required since the grinding unit is too far?
We will do, but it will be on phase II and not the day we start the line. However, the INR 1,200 crores does include the cost of WHR.
Oh, great. That's what I wanted to confirm. Thank you so much, sir.
Thank you. Next question is from the line of Jashandeep from Nomura. Please go ahead.
Hello. Yeah, hi. Thank you for the opportunity. Sir, my first question is on volume. I mean, you have reported strong volume growth. Just wanted to understand from the East market side, sir, how has the market performed this quarter? And how are you looking at the fourth quarter and FY 2026 in terms of volume? And adding to that also, sir, how is the volume mix between East and North? And have you seen more of non-trade this quarter? Just want some clarity on that, sir.
Yeah. As Madhumita mentioned, after the Q2 ended with the ending of monsoon as well as festive season, demand did pick up in both the markets of East and North, and we did fairly well double-digit growth in both the markets in both North and East. And we certainly grew ahead of market in both the places. Our trade volume certainly picked up, and one of the reasons is also the base effect. But in general, we were able to get our volumes in Odisha, Chhattisgarh, Rajasthan, Western MP, these were the markets where we did quite well. We had a broad-based growth both in trade and non-trade. And certainly, we maintained our value strategy. Our premium product percentage continued to be at 39%, and that's the focus always. I have mentioned in the call that we will never run behind volume compromising on value.
We did get our premium product number of 39% as well as the volume in both the markets. And as Mita mentioned, the only headwind in this quarter was prices kind of went to probably three-year low in East as well as North, and that had a significant impact in the realization bit. But the positive note I always look at is around middle of December, I think we took price rises in both the markets as well as East and North, and certainly, things looked up for us end of quarter. Since the question on this will come later, I just want to inform you as well that the December end realization was 6% above the quarter realization.
We ended the quarter very strong, and as we enter January with this backdrop of volume growth, with the backdrop of focus on premiumization and also overall improvement in realization. I think we are on a very strong footing as we enter quarter four.
Thank you. Thank you for such an explanation.
Additional data point, Jashandeep, to answer your question, our trade percentage here remained at 71% both Q2 and Q3.
Okay. Thank you for that, ma'am. Just touching upon realization before I ask my second question, sir, your blended realization seems to have dropped around 5% quarter- on- quarter, which is slightly more than what we saw during our channel checks. Just wanted to understand, is there a drop in RMC realizations also? Or if you can just give me how much your cement realizations have declined quarter- on- quarter, that would be great.
Cement realizations dropped Q2 by 3.6%, but as I mentioned, we ended the quarter with December exit realization of 6% over the quarter average, so I guess the reported number in quarter in the end of December is 6%, so we have kind of overcome the realization drop of 3.6%. On top of it, we have grown, so I think we entered January on a strong weekend with a good momentum behind us in terms of volume, focus on trade premium, so that's where we're looking. Q4, we are very well placed.
Right. Thank you and just last question on this, sir. I mean, in about six months, we might be seeing INR 1,800 crore cash outflow, then another INR 1,200 crore cash outflow. So how do we see net debt? How should the market look at your net debt? How will that trajectory go? Are you looking to take more borrowings? Are you expected to increase? I mean, if you can just give clarity on how your net debt will be, let's say, by the end of FY 2026, just a trajectory-wise, that would be great.
Yeah. I will answer it in a little bit of a detailed one so that I think almost all aspects get covered. In all our calls in the last few years, we have maintained that we would be comfortable having a debt level of INR 3,500 crores-INR 4,000 crores, and around that time is when we will kickstart the next growth plans for the company. And even in the last investors' call, I had answered a question from one of the analysts where I mentioned that we will start up the next expansion for the company either in Q1 or Q2 of FY 2026. So that's the position we had three months ago, six months ago. And one of the principal endeavors of the company was to pare down the debt from the IPO times till now.
And very happy to report that from December 2021, as just mentioned in the investors' deck, you would have seen in the presentation our December 2021 debt level of the company was INR 5,495 crores. And comparable December 2022, December 2023, December 2024, this number has moved from INR 5,495 crores to INR 5,165 crores to INR 4,533 crores to INR 4,350 crores. Every quarter, comparable quarter for every quarter ending, we have been paring the debt all the time. And the trajectory certainly gives us confidence that by the time we finish this year, we would be INR 4,000 crores and thereabouts will be the debt level, and that's our committed number to make the next investment. That is the backdrop of either through Vadraj or through own growth in brownfield expansion.
That is how we never envisaged Vadraj three months ago, six months ago, but certainly, we were very clear that Nuvoco will start this expansion plan the moment we hit our internal target of INR 3,500 crores-INR 4,000 crores of debt level. And in between, Vadraj happened, and then we did a cost-benefit analysis of the value pie of Vadraj as well as our own investment. We found the Vadraj being very economically attractive for us, and hence we went for it and then successfully bid for it. And the benefits of Vadraj, Madhumita, very well explained that it gives us a growth opportunity in North where I will release capacity and go participate in North more aggressively going forward. Plus, it gives an opportunity for me to grow in the West.
Six in North, six in West, 90 in East, overall 31, consolidate to continue to be the fifth largest player. The question you asked about, how do we kind of fund this deal? So here, we are currently in the process of working out the modalities. Suffice to say, we are mindful of the debt levels in our balance sheet, and I just want to assure the investors that as we do the financing for this deal, which will take minimum six to eight months since NCLT is still going to take that much amount of time, we are mindful of the debt and will ensure that all the governance conditions of NVCL are always met.
Sure. Thank you so much for such a detailed answer, sir. I'll turn it back to you.
Thank you, Jashandeep.
Thank you.
Thank you.
Next question is from the line of Satyadeep Jain from Ambit Capital. Please go ahead.
Hi. Thank you. I had a few questions on Vadraj and then one on the quarter. So on Vadraj, just wanted to understand from capital allocation perspective, the company has INR 4,000 crore-odd of net debt. Sitting outside, we would imagine that between brownfield expansion in North and this, brownfield would be, given the situation, given the debt on the balance sheet, the less risky option would be a brownfield expansion in area you already know, the asset you already know. This one is an asset which is unknown in a way to you. The entire sea logistics, operating jetty, a very different model with which carries an going into an unknown territory to some extent.
So how do you just want to understand from capital allocation when you're looking at this investment and you're evaluating at this stage, why now, just not the acquisition itself, but the stage where you are, why this made more sense versus brownfield expansion? Let's see first question.
Let me just take that question, Satyadeep. First of all, I guess we have been in the industry for many years, and then certainly, we have the requisite knowledge to start a plant, put up a plant, expand a plant anywhere in the country. So I guess we've got a good set of people, good team, so that the confidence arises from the fact that we have a wonderful bunch of people who will be able to do it. But having said this, certainly, as you mentioned that there is always the jetty element which we don't have experience, plus also it is going into a new territory. Let me address the first question of new territory. Already, we sell close to about a million tonnes in Gujarat. So expanding from one million to two million and above in a span of a year and a half will certainly happen.
But this capacity of six million is not going to be consumed in one or two years. It will take probably three to four years for us to consume this capacity. And as we ramp up the capacity from this asset, the Chittor and the Nimbol facility, which we currently use to feed Gujarat, will get reused in Rajasthan, Haryana, and beyond, and also with the Bhiwani grinding unit. We are very nicely placed to go up North to grow in that side of the country. Coming to the jetty bit, yes, I acknowledge the fact that we currently don't have experience in jetty operations, but we are mindful of the fact we will bring on board the experts who know how to operate a jetty and manage a jetty, and they will come on board pretty early in the journey.
By the time we start this expansion work, we would have a wonderful team of expert jetty operators who will be on board, and that's how we plan to address this issue.
Thank you. One more thing I wanted to ask, a follow-up on this jetty situation. If I look at the only two players I can think of, and maybe you can correct me if I'm wrong, is UltraTech when we acquired, when they acquired the Sewagram, they are already operating in that area, and then largely Ambuja. But barring that, I'm not too sure of too many players being successful. Many players have tried this entire coastal movement, and nobody I can think of has been successful. Maybe just wanted to understand when you evaluated different case studies and how they played out, what do you think went wrong for some of the players, and where do you think you can replicate what UltraTech and Ambuja have been able to do, and maybe others have not been able to do?
Why do you think you can, and gives you confidence that you can do what these two guys have done?
Okay. First of all, Satyadeep, obviously, we have done our internal homework. Obviously, we have not ticked all the boxes when we have gone. Suffice to say that with the knowledge which we have and the expertise we acquired in the organization, we would be able to address the issue. That's the first point I want to make. And in terms of the people who have been successful in that region, and obviously, we've got the place where we operate, there are a couple of other neighbors, and in fact, the topography of the place in such a way that the ocean depth and the estuary mouth and all are going to be shared between us and the other two players. But then we have come to this Porbandar, and then you come to Gir area, Amreli area, and you go to Saurashtra area.
Then you've got three, four more cement companies who've got clinker as well as cement movement. People have tried. Some of them have been successful. Some of them have not been successful. So being an we are running a company, and we are pretty optimistic that we will be able to learn and operate. We've got time. It's not like tomorrow morning I need to operate the jetty. Starting now, NCLT takes a few months from now, six-to-eight months, and then another 12-odd months for the plant to come. We've got time from now till end of next year. So that's where we plan to build capability in the organization to try it out, build what you call bring in recruited people to make this work.
In terms of lessons learned, too early for me in this call to tell you what are all the potential lessons, but I promise you that in a quarter from now, two quarters from now, once we gain knowledge, I will be able to share with you our plan, and then at that time, I will be much more competent to answer your queries.
Okay. Thank you. Just one clarification on this. Is it a fair weather port or an all-weather port?
No. It is a fair weather port. Certainly, in the months of pre-monsoon months of May, June, July, so normal recommendation is cannot move. So it's factored in our plan. So we would either there is adequate space in the Surat facility to store. So we've done some calculation. Technically, we need to store about two lakh tonnes of clinker, and we plan to have capacity to store that kind of clinker to manage the pre-monsoon area. Otherwise, I guess we will take an external space. Some handling costs will increase for those three months, but certainly, that is factored in the overall plans for the company.
Okay. Just one quick question, last question if I can squeeze on this quarter. Historically, we understood the company was avoiding certain markets where pricing was lower, maybe Chhattisgarh, if I'm not mistaken, maybe Odisha, West Bengal. I don't recall. And the idea was quality over quantity. And this quarter, it seems to be do we assume that maybe some markets that were quite historically vacated is entering. There's also a change in sales team recently. So just wanted to understand, is there a change in strategy there of chasing quantity, volume over pricing? Looking at the numbers, it looks like I just wanted to check if that is wrong or a wrong assumption.
No. I guess it's a fair question for you because you're observing a 16% volume growth, and I guess you will have this in mind. How did we change our strategy? I just want to assure you that we were always committed to premium products. We pride on our ability to sell premium products in the company. I think that's the DNA of the company, and I don't think we will move away from the basic DNA of the organization. Even in this quarter, we have not moved. That is why with this 16% volume growth as well, our premium product continued to be 39%. So obviously, we grew more in premium products also in absolute volume terms. So there, there is no compromise.
But certainly, in the previous calls, you would have heard that in Bengal and Jharkhand markets, I think the demand was pretty tepid in the past quarters. I think that opened up a bit, and we sold more in Bengal. We did sell more in Jharkhand. Chhattisgarh, I guess it's a home market for us. So I won't say there's a strategy shift for us in Chhattisgarh, but I think one of the priority areas I have kept for my company is we have three factories with grinding facilities, and we are equal to anybody else, any of our competitors in that market. Certainly, we would like to play aggressive, not as in dropping price, but using the proper resources because the contribution margins are highest in that market. So we ran a program called Vijay Chhattisgarh and Chhattisgarh.
There's an internal program which we deployed, looked into markets which he said we did not participate, and hence we participated. Even in Chhattisgarh, our Microfiber is a premium product. Even Microfiber target for the actual achievement for the quarter was well into double digits. So I think there again we made good inroads. So in Chhattisgarh, we participated with Microfiber. In Bihar, we participated with launching Concreto Uno in Bihar, Bengal, and Jharkhand. So you will see us coming up with top-end products which will be higher than the highest priced product in the market to maintain our premium position.
Okay. Thank you so much. I wish you all the best.
Thank you. Next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Hi. Thank you. Most of our bigger questions have been answered. A couple of data points. Lead distance for third quarter, road rail mix, and if possible, fuel mix if you can share.
We'll be able to give you our quarter three FY 2025. Our lead distance is 327 km vis-à-vis Q2 number of 330 km, three km reduction in lead distance. Our road share increased from 60%- 64%. I mentioned that we focus more on Chhattisgarh, so road percentage did increase. Rail share reduced from 40%- 36%. That's all. So it is 64% road share, 36% rail share, 327 km lead distance. In terms of fuel mix, as mentioned in earlier part of the call, our INR per million kcal Q3 stood at 1.45, lowest in the last 10, 11 quarters, 13 quarters. And out of which, linkage coal 1.32, non-linkage coal 1.3, imported coal little bit we used two, pet coke at 1.66, AFR was at 1.02. Percentagewise, if you want to know, our coal was 42%, pet coke 48%, and AFR 10%.
Sorry, AFR was, sir, how much?
10%. Q2 was 8%, Q3 10%.
Okay. Got it.
Q3 of last year, but we were improving in Q4. You'll see much more AFR in Q4.
Okay. Okay. And in terms of the sir, from here on the project bridge, last time we were saying that we are looking at a 75-odd kind of a cost reduction in second half of this year, FY 2025. So now how much one can look at in this Q4? How much more is left? And going forward in FY 2026, 27, how one can look at in terms of the cost reduction?
In terms of actual rupees which we will clock in Q4, as can be at nine months, we are at INR 54. I guess with the increase in volumes expected in Q4 and all the programs coming to fruition, this number can certainly go up another INR 15-INR 20. So that's the number we will have in Q4. Our Q4 number could be about INR 75. Full year number will be a little bit lower than that because nine months is at INR 54. But there are the projects which will certainly continue to next year, the grid integration, power sale, as well as increase in AFR of key programs. Sonadih railway siding is completed. So we used to do about three rakes per day movement of clinker.
Recently, we moved from two, three to four rakes, and our target is to move five rakes, which would mean that no more of road movement of clinker from Sonadih. Everything will be by rake movement. Jharkhand siding is at advanced stage of completion. So I think the last about 100 meters of track needs to be laid, so it should be ready in the next six to eight weeks. Come Q1, FY 2026, Jharkhand should be on, and the last movement of clinker by moving from Sukinda, sorry, from the siding which is close to Jharkhand into the plant siding will happen. And also cement movement from Jharkhand into South Bengal will also happen through rake. So those savings will happen from Q1 next year.
Okay. And then in terms of the CapEx in nine months, how much we have done and what is left in the fourth quarter?
YTD CapEx this year has been INR 299 crores, and I guess in Q4, which we are looking at, there is Jharkhand and a little bit of subsidiary CapEx, which should be close to the tune of another INR 50 crores-INR 60 crores.
Okay. Okay. So broadly, if I look at Vadraj, 3,000-odd crore to be spent in 2026 and 2027, and plus I think 300-odd crore kind of a maintenance every year, so 600-odd crore. So 3,600-odd crore kind of a CapEx one can look at in FY 2026 and 2027. Is it a fair assumption to look at? And also, if possible, can we see what kind of a volume in the Q3 FY 2027 or Q4 FY 2027 from Vadraj?
That would be very difficult, Shravan, to answer in this call. But I'm looking at a ramp-up. I'll just give you a number which we are working on. Q3 FY 2027 is when we are going to be ready with the plant. So I'll get one quarter of FY 2027 and then 2028 and 2029. I'm looking at a very optimistic a million coming out of Vadraj in FY 2027, and then on it goes to two million in 2028 and three million in 2029.
Okay.
Our spend of the company will increase because the capacity which gets released from Chhattisgarh will be sold in North of India.
Got it. Got it. Understood. Understood, sir. Thank you. Thank you and all the best, sir.
Thank you. Next question is from the line of Navin Sahadeo from ICICI Securities. Please go ahead. Mr. Navin Sahadeo.
So thank you. Thank you for the opportunity. So in the previous question, sir, you did mention about plans for volume ramp-up, which is one million ton, one, two, and three million ton in FY 2028, FY 2029, FY 2030. Is that what you just mentioned? Correct?
One million 2027, 2028, one million, and then 2029, one million will come out of it. But then that's far I'm looking currently right now. But if we look at our company, I'm really looking with the kind of volumes we did last year at 18.7 million, and then with the kind of Q3 numbers and overall forecasting for this year. If I create an indicative number, I'm giving plus minus 0.1, 0.2, we should always keep. I'm looking at a 10% growth year- on- year from next year. We should have all the way to 2021, 2023, 2025, 2027. That's the kind of two million increase in sales which the target I'm keeping for us is going forward for the next three to four years.
Correct. Correct. But just from a capacity utilization point of view, and I'm talking about specifically Vadraj here, so if the clinker is 3.5, it is only a fair-weather port, which means one quarter the operations could be impacted. The region, both Gujarat and Maharashtra, are non-trade dominated. So if I, let's say, broadly assume a 50/50 mix between OPC and PPC in that market for a 75% clinker utilization, max what we can extract from this six million ton capacity is about 3.5 million tonnes at its peak.
That's the way you're looking at the calculation. I will tell you the way I'm looking at the calculation. We are looking at the calculation. First of all, if it's a what do you call fair weather port, certainly I think we will stock clinker. That's how all industries work, even in the East. Because for shutdown and rest of the movement, I always keep clinker stock in Q2 and Q3 so that when Q4 comes, cement industry is also somewhat seasonal. And then certainly, I think every player in the cement industry has the ability to stock and use clinker. We will also stock and use clinker. So certainly, before the onset of this fair weather period, we will plan in such a way that the clinker movement during non-movement of clinker during those months will not impact our cement production. That's the first thing.
There will be some impact. I cannot say everything is going to be unequivocal only in real life. There will always be some gap. So that's the first thing on clinker. Clinker will not kind of be a spoilsport for me. The second thing that comes is you mentioned about 50/50 OPC and PPC market. I'm looking at Gujarat market at 60%, 40% PPC and 60% OPC. In fact, even more conservative than you have taken. You have taken 50/50. My business model looks at 60/40. And trade to non-trade ratio is also about 65/35, which is what I've taken.
With all these numbers, the kind of volume that will come out of 3.5 million tonnes, C/K ratio of close to about 1.4-1.5 will take the overall capacity to close to five million tonnes, 5-5.2 million tonnes. But one thing we are very clear is at this point of time, it's 3.5 million tonnes. But our clinker line in Risda factory, when we acquired Emami, came with 10,000 TPD. Today, the line has been debottlenecked to take to 12,000 TPD. So I think we are not looking at 12,000 TPD in Vadraj on day one. But I think as we grow the market and we understand the market and ramp-up volumes, at some stage in FY 2027 and 2028, and the debottlenecking which you have done in Risda is not like making huge CapEx.
It was about 100-odd crore kind of a CapEx where we kind of change the coolers and the blowers and the RPM of the kiln and then in the what do you call the air circuits and the bag filters. That's how we kind of de-bottleneck them. We will de-bottleneck like this line. This is a copy of Risda kiln. So we've got good experience with Risda kiln. Same improvement we will do, take the capacity from 10,000-12,000 TPD at some stage in the future.
Navin will be happy to engage with you on more details on the mix. Just would like to add, our model also factors in the trade market a product like PSC because there is access to slag cement in that market. And one of the lead players has already introduced this product. We also see in a period of four to five years, there will be substantial demand from sustainability point of view on the entire industry because, as you know, in the eastern region, there isn't any predominant cost for staying with OPC in infrastructure. So changes are there. Some of these are factored in. And as I mentioned, you may reach out to the investor relations at any time for greater clarification on these numbers.
Thank you so much. I really appreciate the clarity of the operations that you have in mind so early in the scheme of things. So congratulations on that. My last question, is it safe to assume CapEx of roughly INR 2,000-odd crore each in FY 2026 and FY 2027? Thank you.
FY 2026 and 2027 CapEx? Currently, INR 2,000 crores per annum. Not possible.
Taking 3,600 for both years, about 1,800 would be 800+3 00.
Yeah. I would spend 1,800 to sorry, 1,200 to get the Vadraj deal. 1,800 to buy out is not CapEx. So it's financing of the deal. So that cannot be considered CapEx. The CapEx will be about 1,200 crores here. And as I mentioned in the previous call, there was a question about what will be the how will we expand our brownfield expansion was the question to me last time. And I had mentioned that there won't be any major growth CapExes in any of our plants in East. It will be the sustaining maintenance CapEx, which should be to the tune of about. In fact, one of the analysts had asked, what should be the typical routine CapEx for the company? I had mentioned 300-odd crores will be the kind of routine CapEx for the company.
And hence, with this kind of CapEx to run the operation and also do a INR 1,500-odd, INR 1,700-odd crores to set up a brownfield, we would be able to fund the CapEx with the internal cash flows and the profitability improvement in the next two years. That's how I had answered a question. Same thing holds good, just that the location is changed. The level of spend is slightly more. Note that the brownfield expansion was much more expensive than this expansion. Funding of this deal, we are working, as I mentioned before. So I think that's the view we have over the period of two, two and a half years. Internal accruals, proper cash flows, improvement in profitability should be able to help us fund this CapEx programs.
So great. Great. Really appreciate the clarity. Thank you so much.
Thank you. Thank you, Navin. Next question is from the line of Prateek Kumar from Jefferies. Please go ahead.
Yeah. Good evening. My first question is on your cost. So despite 4% decline in pricing, EBITDA has actually slightly expanded quarter on quarter, largely implying a very sharp reduction in cost trends for this quarter of Q2. Maybe some of it is operating leverage, but there is a nearly 2 50+ reduction in the variable cost of the company. I'm including RM, power and fuel and freight there. So is this largely due to the cost-saving initiative, which you said a much lower number? But is there any one-off there, and do you expect this number to sort of continue? Because in past quarters, we have not seen such kind of declines on a quarter-on-quarter basis for the company.
The principal components of cost reduction are of three folds. One is reduction in power cost. The number at power cost is lowest in 13 quarters of INR 1.45. That contributed to the reduction in the energy cost for the company. The second one was reduction in logistics cost by close to about INR 50, which comprised of lead distance reduction by three kilometers, handling cost reduction by about INR 20-odd, and also maximum utilization of the rail siding. That was the second variable. The third variable cost reduction was coming from raw material cost reduction, which contributed about INR 50-odd. So all this certainly contributed to overall variable cost reduction for the company. But as you asked the pertinent point, the price drop, which happened, the realization reduction simply chewed away all the cost savings which we did.
But the positive thing for me is, as we entered December, the realization got reinstated by 6% over quarter average. So what I lost in the first two and a half months of quarter, I reinstated by end of December, which will come.
Thank you. Prateek Kumar , have you responded to your query?
Right. Yeah. So previous thing that this quarterly savings and cost are sort of sustainable, and next quarter, particularly, there will be further benefit of operating leverage. So I mean, based on obviously, we've talked about 6% price increase, which is through January. So not looking at forecast, but a INR 300- 400 rupees swing in EBITDA per tonne in fourth quarter, I'm looking at.
Yeah. I guess I can't comment on your numbers, but certainly, I'm looking at certainly reinstatement of realization end of December and in January.
Sure. Okay. My other question is on Vadraj acquisition. So do you also see, because we have seen some recent events related to that, but do you also see any chances of this deal while we have sort of won this acquisition, any reversal on the whole process and deal not going through?
Possible because recent issues which happened in others, I guess there are various reasons, so technically, I guess if somebody wants to put a spanner on the work, it's possible, so I guess, but I don't think in terms of what do you call the reasons which hampered others' issue may not be the reason which will come for us because our due diligence was pretty exhaustive, and then the kind of considerations we made were clear, but certainly, I think I cannot rule out any hiccup which may come on the way.
So I'm asking because for modeling purposes, so we should sort of look to get more confirmation closer to the event by maybe Q2, FY 2026, and then probably want to model it? Or how do you think about the same kind of a confirmed call?
It's difficult because the NCLT process we have filed only two days ago. I guess typically it should take optimistically six months. In the worst case, maybe eight, nine months. So that's the kind of window we are working on. But I think certainly, I think in terms of the modeling and in terms of overall company's outlook for the next four to five years, I would certainly suggest you to consider the projections which we have factored. But there's always a factor which I don't think we cannot control, but that can happen. I don't think I can comment on that. But certainly, the other way I would look at it is in any unlikely event of anything happening, our story of expanding through brownfield still holds good, and there we are committed to growing the business in North, South, West.
Yeah, that's true. But in other case, also that was the case, but there was a lot of, I would say, rather time-based which happened in this whole process of acquisition. So that was the only point I was talking about.
Fair. I think you are pretty right in asking this question. But I think having made all the assumptions and went behind this acquisition and having fructified the deal right now, I think I won't be in a position to say that whether we will lose out or not. But there is always a business risk associated with stuff. So what you're mentioning can be a risk, which as a company which we have gone for it, I will not be able to say that it will happen, it will not happen. But we are confident of overcoming the points. But you can consider it if you want to.
I'm sorry, sir. You're not audible.
You're talking about Nuvoco or Prateek from Jefferies?
Nuvoco, sir.
Oh, I don't know. I was speaking all the while. I don't know where it leaves me.
No, I think we got the answer. I think I'm done with the question. Thank you.
Thank you.
Thank you.
Next question is from the line of Kunal Shah from DAM Capital. Please go ahead.
Yeah. Hi, good evening, team. Just a couple of questions. One, you I think briefly mentioned upon this, but is there any discussion with ArcelorMittal in Surat for slag procurement? And could you sort of launch either composite cement or PPCs in Gujarat to sort of create some bit of differentiation?
There's no any conversation with anybody at this point of time. Just that the history of this asset when it was set up, whenever it was set up, factor that there would have some tie-up with the company which you mentioned for slag. The fact that they are close by and then they generate slag, there's always a possibility. Nuvoco being a strong player in East with making blended cement, have the ability to use slag, this opportunity will always be there. At this point of time, there is no conversation going on with anybody. As Mita mentioned, another player has already launched composite cement in this market. We kind of navigate the next few months, we'll observe this particular trend very, very closely.
We will plan our strategy based on this and formulate our plans based on how the market is picking up this blended cement and if there's an opportunity to procure slag from people who generate this slag.
Understood. This is helpful. And the other bit is you mentioned your opening remarks there is a very big shortfall on the government Capex, especially until November. But just wanted to understand how is December and January sort of panning out on the ground? Are we seeing sort of a robust pickup or it still remains sort of moderate? Thanks.
I think, sitting at the beginning of the quarter, for me to tell how the market demand, I think it will not be appropriate. But certainly, I can vouch for price sticking to the market because that's a published number which all of us pick up during trade checks. But I'm pretty optimistic that Q4 overall demand should improve for the industry and certainly for our company.
Understood. Thanks. It's helpful. All the best.
Thank you. Ladies and gentlemen, we'll take that as last question for today. I now like to hand the conference over to Ms. Madhumita Basu for closing comments. Over to you, ma'am.
Thanks again, Yashasvi. To wrap up, I would like to mention a few points. We believe that the cement sector is witnessing a promising demand recovery. The huge unspent capital expenditure from central and state and an expected revival in rural housing demand aided by favorable monsoons provides a catalyst for the cement demand. The price increase observed in the recent period continues to sustain, reflecting a positive trend, while sustained demand improvement should support prices further going ahead. We are confident in our strategy and ability to execute our growth plans with respect to Vadraj Cement, which will enable us to consolidate our footprint in the Western region. We are excited about our prospects for the future. Meanwhile, our strategic priorities will continue to focus on premiumization, geo-mix optimization, enhancing fuel mix efficiency, strengthening our brand, and maintaining focus on cost excellence.
Prateek, I would just like to add that while we are cognizant of business risks, we repeat, we are confident in our approach, strategy, and actions we have taken on the Vadraj front. Our investor relations team will remain available for any clarification required. Thank you for being with us today.
Thank you, members of the management team. On behalf of Nuvoco Vistas Corporation Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.