Ladies and gentlemen, good day, and welcome to Q1 FY2024 earnings conference call of Orient Cement Limited, hosted by ICICI Securities. As a reminder, all participant lines will be in 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Sahadeo from ICICI Securities. Thank you, and over to you.
Thank you, Yashaswini. Good afternoon, everyone. On behalf of ICICI Securities, I welcome you all to the Q1 FY 2024 earnings call of Orient Cement. From the management, we have with us MD and CEO, Mr. Deepak Khetrapal. Without any further ado, I hand over the call to Mr. Khetrapal for his opening comments, followed by interactive Q&A. Over to you, sir.
Thank you, Navin. Good afternoon, all the participants who've already joined in. I'm told the number is still going up, but I think we don't want to keep the people who joined in time waiting. A very warm welcome to this earnings call. Happy to have you here and thankful to all of you to take time out and listen to us. In terms of the Q1 FY 2024 performance, the most important thing that I would first like to start with, which was actually towards the end of my call that I did on Q4, where I'd already indicated that this Q1 on the surface is likely to look soft. I had sort of made the disclosure three months ago itself, and this is how it pans out. I'm using the word carefully. It will look like it's softer.
I think the numbers that you've seen, you would've actually seen that while we are reporting a very strong growth in volumes in terms of EBITDA, obviously the numbers looking soft. So here is the perspective which I started building last quarter itself. We actually went through the planned shutdown of the kiln at Chittapur, at Gulbarga, where that's the only kiln and that plant is very far away from everything else. The maintenance shutdown of that kiln actually has a lot more impact on our operations compared to anything else. This particular year, we have done the maintenance of the kiln and the supporting equipment after nearly 23 months ago. The last shutdown of that kiln was actually in April 2021, which is unheard of in the cement industry, including the suppliers of the equipment.
They are surprised how we managed to sort of keep working with the same kiln without doing the shutdown and replacement of refractory for that long. I think that is something that we take a great amount of pride in. At the same time, what happened was, by the time we decided to take the shutdown, it was also a time in the market. Q1 typically happens to be a buoyant quarter. But we were left with no option.
Having run it for nearly 23 months, I do not think we could have taken any further risk with it. So we finally took the maintenance shutdown in April. Like I said, the impact of that on our books obviously is the one, what is euphemistically called annual shutdown. Actually, most of the industry does it in about 270 days of running. Since it is run on an average once in a year, it is called annual.
I cannot call it annual because we have actually done it after nearly two years. So it has a bunch of costs that happened in that. Refractory get replaced, all the other equipment are overhauled and repaired. So it is a fairly large cost that hits the books of the company in one particular month. Whereas, the benefits of that obviously flow into the rest of the year. That is why it is called the annual shutdown. So that is one, I think, part of the framework that we have to remember.
For us, the other challenge was because not only did we have, for example, if you do the same maintenance at Devapur, we do not have other complications because we have three kilns and we can plan the inventories of both clinker and cement so that we do not see much of a problem in availability of cement. But around the Chittapur plant, earlier also I mentioned, last quarter, I had told you that we had actually worked at a capacity which was higher than the capacity which was given under the Consent to Operate document that we have. So when the demand was buoyant, and more importantly, some of the customers who have become very heavily dependent on our cement because their processes are run with our quality of cement, we did not have the option to let them down.
As a result of that, we did not reject any of our large, loyal customers. Actually, every single bag of cement that they needed, every single ton of cement that they needed, we made sure that we make available to them. That we could do when the kiln at Chittapur was shut only by transporting clinker from our other plants, which is in Telangana and Devapur, as we keep calling it. So obviously, there is a huge amount of, I would say, movement of clinker that we had to make. Totally nearly 72,000 tons of clinker was moved at Chittapur, which was actually produced in Devapur in the month of April. Besides the inventory that we had already built up at Chittapur.
It is a matter of pride for us that our customer who depend on us, we managed to meet their entire demand, and we took the costs as a part of remaining in the market and maintaining our relationship with the customers. Those relationships again become stronger because every customer was aware that our kiln was not there and clinker was not available. But they know that no matter what it costed to us, we met the entire demand, which I am sure goes towards strengthening our relationship with those customers even further. They also saw, if you read our annual report, we keep talking about responsibility, we keep talking about agility. All those things we actually demonstrate, not just talking within ourselves in the company, but our customers get to see it all the time.
It is something that we do take a great amount of pride in. At the same time, some of the markets which, in the overall process, fall somewhere between our Telangana plant and our Gulbarga, Karnataka plant, we also decided to service those markets directly from the Telangana plant, although they are closer to the other Chittapur plant. Which means our logistics cost per ton also definitely restricted for the time that we made these rearrangements. With all these challenges, we have reported, as you have already noticed, the volume growth over last year of 15%. Sequentially, yes, there is a de-growth of 7%, but that I believe all of us do expect. The Q4 numbers are always the highest in Q4. While it trails Q4, but it does not quite become a Q4. So 7% de-growth there.
I would say people largely. We obviously haven't seen the industry numbers. Some of the players have reported higher growths. But I believe those higher growths are being reported courtesy the new capacity that has got added during the year. I do not think from the same facility, same capacity, people are achieving the kind of growth that we reported. Subject to correction, that is my impression. The part which I think the investors would certainly not be happy because we are also not happy that despite such strong demand, the prices in the market actually have stayed flattish with a little bit, I would say, softer bias.
As a result of that, some of the, let us say, initiatives that I have been talking about in the past in terms of repositioning of a brand, in terms of also moving up the sales of our premium products, both StrongCrete and OrientGreen now. Courtesy of all of that, YoY, we have managed to maintain our realizations almost there. We are a shade under INR 5,200 a ton, which is flat over last year.
But what I understand, some people are actually taken surprise that QoQ, we have reported a higher realization than we had in the preceding quarter, that is Q4. This obviously has enabled us to report also a revenue growth of 15%, and the sequential shrinkage in volumes terms, in terms of turnover, we managed to contain that to 6% against the loss of revenue or the decrease in revenue over 7%.
So that's on the sales and the volume side. But on the maintenance and freight cost, I've already mentioned the impact that is there. The EBITDA for the quarter, which has shown, I think it was INR 100 crores, it's flat over last year. While on the surface, as I said, this might look a little soft, but if you actually account for the fact and make a more apple-to-apple comparison, I think there were I'm not saying these costs are abnormal. Please don't misunderstand me. These costs are not abnormal. Still, maintenance costs are a normal part of the operations of the company. It's just that it get booked in one month, in one quarter. And for us, that one quarter happens to be rather big, so I'm highlighting that part.
Typically, I would say if I was to look at total costs of maintenance and transportation of clinker and the impact of realigning some of the customers with the Telangana plant instead of Chittapur plant, which is closer, our total cost for the quarter would be just on that about INR 20 crores for the quarter. Also, the other thing that we had mentioned that we had actually engaged a service where we can do a certain amount of validation of our investment hypothesis, doing a little bit of more market research in terms of how we are faring with competition in those individual markets.
So that cost also has been booked the same quarter. So the INR 20 odd crores, INR 20 crores+ actually, INR 23 crore, INR 24 crores of a little bit distortion. Please note that maintenance cost is a one-off cost for sure. The transportation cost increase, the clinker transport from Devapur to Chittapur is a one-off cost. That's not going to be repeated. But the maintenance costs are part of the cycle of the cement industry. So I'm just reminding people that we need to remember, despite taking nearly 25 crores in additional costs over last year's same quarter, we still are reporting flat EBITDA.
So that's something that I thought I'll just highlight here. What would surprise you, and I know because typically the commentary in the market by all the investors and all of you analysts also, has been around the fact that the international fuel prices are low, and so we should benefit. And that would surprise you when you see that our fuel prices over, let's say, sequentially, they are not that much down.
Even over the June 2022, that means YoY also, they're not looking as low as we should have expected, right? Given the softening of international fuel prices. I'm emphasizing the word international because while the international fuel prices, both coal and petcoke, have definitely dropped. What we have to remember is in the meantime, the domestic coal prices have actually gone up. And the fact of the matter is, I'm sure the many plants in the industry in India are still using dependent on coal, which is being supplied by Coal India and Singareni Collieries and other companies. In our case, as most of you who've been attending our calls, we've been informing you that our Devapur plant in Telangana because of its proximity to Singareni coal mines Depends almost entirely on domestic coal.
Whereas the Karnataka Chittapur plant, that one runs more or less entirely on the petcoke. The mix of different fuel, the two different plants is the reason behind the improvement in fuel cost not being visible. Please remember, in April 2021, our Chittapur plant was shut, so the overall petcoke consumed there was lower. Savings at Chittapur itself became lower because nearly a month out of three, we did not use petcoke. On top of that, the additional clinker that we transported, 72,000 tons or whatever, they were actually produced in Devapur, where we use more domestic coal and actually the domestic coal. The nuances are important to see behind the numbers. Our proportion of domestic coal consumption went up in this particular quarter.
If you compare the domestic coal prices, they have actually gone up during the year by 17%-18% over the same quarter last year, right? If you make a similar comparison with Chittapur, obviously the petcoke prices are lower by 14% over the quarter. These are actual prices. Domestic prices up 17%, 18%, coal prices, and international petcoke prices, as we received them, are down about 14%. Which is a fact and which is there, but it's not getting reflected in power and fuel costs, which should have been softer. The second reason, which is important also to remember, is that this is a combination of power and fuel at two states during this particular quarter. Maharashtra and also Karnataka. They have changed their prices on the grid power.
Despite having solar power at Jalgaon and despite having our captive power plant in Chittapur, we do have some committed loads from the grid because just in case of any failure, we do not want to be completely powerless. We obviously make a certain commitment to the governments, to the state electricity boards, and they keep us connected, and they have fairly steep fixed charges, which we still have to incur even if we don't draw enough or any power from them. Those costs have actually been increased during this quarter. Power costs have gone up. Coal, including for CPP, has gone up. That's all domestic coal. As a result of that, the power and fuel number I thought needed a little bit of explanation. So I've taken a few extra minutes just to explain to you why that looks the way it looks.
Obviously, the impact of international fuel prices has got blunted with the plant mix in this particular quarter and with the coal and the fuel mix that we have had to use. If you're curious about the number, at our Devapur plant, the overall fuel costs, not counting power, the fuel costs for the kiln, they're down to about 1,900, 2,500 million kilocalories and down by nearly 9%.
At Chittapur, on landed cost, million kilocalories, which we are down about 12%. The power and fuel cost put together is up despite this, and that is led by the fuel mix that we have had to use. In the raw material side, the transportation cost for transport of clinker has been part, obviously, as accounting numbers are in the raw materials because we use a landed cost of raw materials. So some costs are parked in the raw material also.
Besides that, obviously some gypsum and fly ash costs also have gone up both on YoY and QoQ, on quarter-on-quarter basis. There's been a little bit of difficulty in improving our alternative fuels on which we are beginning to depend a lot more. But in the last quarter, we did not get as much supply of alternative fuels as we would have wanted to. As a result of that, what I reported, 13% being the AFR percentage for us in the previous quarter, have actually been a little less than 12%. The renewable power that we've used at Jalgaon is as high as 64% in this particular quarter.
The benefit that we are seeing in the solar power that we are buying at Jalgaon now, obviously has encouraged us to invest more in the supply of captive solar power, for which you would have seen we made an announcement a few weeks ago. We've signed a new agreement to add another 21 odd MW of solar power in a captive capacity basis on which we acquired 28% of the SPV company, which will be setting that.
That agreement is signed with a company called Cleantech Solar, which is Singapore based. It happens to be a joint venture of Shell, the oil company. We got very, very competitive rates when it comes to setting up and supply of solar power, which they have committed to start supplying to us in about nine months from the time we signed the agreement. These are the, I would say, broad highlights for the quarter. Another highlight for the quarter, at least we internally in the company feel very good about it because it's more about the kind of company we are and we want to be. In this quarter, we also received the Not this quarter, we received it a little while ago.
The certification continuously for many years now, again, as a Great Place to Work with scores which actually are surprisingly in the 90s already, with nearly every single employee working with the company participating in the survey process. So we are a Great Place to Work, again, certified. Not only that, we've jumped. Let's say last year we were just outside of the top 100 companies in India. This year we've got the rank of 70th company in the ranking, which includes all companies which undertake this survey.
We are the only company from the cement industry in the top 100 list. We are delighted because we take a huge amount of pride in our culture, the way we are as an organization, and our annual reports every year that we send out. We do try and introduce a story of Orient Cement as an organization beyond what we do as a business. I'm sure all of you would have seen this year's annual report as well. We continue with the theme of being responsible and being agile. The theme of responsibility actually is a further amplification of, I would say, our effort that we made in terms of launching another premium brand, OrientGreen. As all of you know, we launched that a few months ago. That cement is called the responsible cement for the responsible consumer.
That sense of responsibility, we wanted to link it to what else we do, and that's why the annual report theme is completely aligned with who we are and what we do, including being a Great Place to Work for people. That's the reason, as a result, we are having perhaps an excellent collection of top talent from the cement industry who are proud to be working here. On the customer mix side, there's always a curiosity and a valid curiosity. So I may give you the answer before the question gets asked. In this quarter also, the B2C demand has remained soft.
If we have achieved a large amount of growth, it has actually come from the B2B demand, and again, largely to large infrastructure projects where we continue to be a preferred customer and also a fairly large number of the Ready-mix plant operators who want our cement more and more. As a result, the good news here is that in the past, OPC, in terms of contribution, while it was not as attractive as PPC, the blended cement. But fortunately, with the good quality and the good demand, good relationship with customers, we are transparent with them on our costing, and we're making sure that the contributions on the OPC that we sell from Chittapur actually are in no way less than the PPC contribution. So that's the reason why we're encouraged to keep meeting OPC.
Most of the time, we were earlier not selling that much OPC simply because the contributions there used to fall below PPC. But for us now, last few quarters consecutively, including this quarter, our contribution from OPC sold at Chittapur are higher than PPC. So we continue to accept those orders and keep selling. In terms of the B2C sales, obviously, industry trend B2B. So B2C sales this last year around this time was 56%, with only 44% being B2B. This quarter, we've seen the B2C actually have fallen to 47%, with 53% being B2B, which is, as I said, beyond 50%, we never expected it to go. But if the contributions keep coming in, I think we are okay.
It still has one side effect, and with that side effect is that it consumes more of clinker, and we have a Consent to Operate limitation on the clinker that we can produce. So we are very well aware of that pressure, and hopefully, we'll have solutions for that like we had last year also. But in terms of contributions, we are doing fine there. The OPC as a percentage, customer mix I've already given you is 47% B2C, or rather trade sales and 53% B2B. On the product mix, OPC is 45% in this quarter, which was 41% last year. So some B2B sales also happen with PPC, that's the indication. So it's not exactly equivalent of the B2B demand. In the B2C market, as I mentioned, despite the fact it keeps remaining slow, we are happy about one aspect that is in the lower B2C demand also.
Our premium products put together, StrongCrete and OrientGreen, actually have a 34% year-on-year growth. If we add volumes of StrongCrete and OrientGreen in this quarter over the same quarter last year, we are up by 34%. The premium products today are forming 20% and over. We just started crossing 20% overall in premium product sales of our B2C volumes, despite the fact that our B2C volumes sequentially actually have dropped 7.5%. It basically means that our value proposition of premium products continues to be attractive to our customers, and we expect our revenues and volumes from the premium products to keep rising, keep helping us overcome the challenge of market pricing, which will remain under pressure most of the time.
Obviously, for that, maintaining our positioning well, if there are some compromises, I call them investments or sacrifices to be made in the volume that we sell because we still refuse many orders which do not give us a certain price that we demand and a certain contribution that we demand. That strategy is unwavering. The net-net, I think the implication of what I've told you about OPC, PPC mix is basically means that Chittapur once again will be under pressure towards the end of the year to meet the OPC demand given the Consent to Operate.
We are hopeful that with the new applications that we have moved for additional capacity creation, if those approvals are in hand, then the Consent to Operate limitation at Chittapur will not apply because the new approval will come with a higher permission to actually do more mining and more production of clinker. So we're trying to solve that problem on a proactive basis. It does mean that we need to get those permissions, and the moment we get the permissions, as you know, we also want to start the construction activity at Chittapur for the second line that we've planned already. Other important, I would say, update which I must share with you. Our waste heat recovery plant, which quite honestly we were expecting that we'll get the power by before end of June.
It has suffered a few more weeks of delay because of some additional problem that cropped up when we started commissioning it. But the good news is it is now in the final stages of commissioning. What they call the steam blowing, which has to happen for 50, 60 times every day. We are trying that. So we are expecting now that within the next couple of weeks, within the month of August, the waste heat recovery plant will start giving us power. A large amount of power. Actually, the waste heat recovery plants have two different segments to it, where the major power comes from the heat which you take from the cooler to the kiln and some power also from the preheater.
Preheater power, which is nearly 20%, may be delayed by another four weeks, but within August we should get the power from at least the cooler waste heat. As we always anticipate the savings from this are going to be about INR 3 crores+ per month. It is a very important project for us to commission at this stage. The fly ash rake handling system that we had said earlier is operational. We have tried bringing in fly ash by rails even from far off plants, and we have seen that it is working well. As long as the fly ash is available from nearby plants, we are okay to transport it by trucks. The moment we run into a problem, that is the risk mitigation measures that we have taken. That also is ready and has already been commissioned. We are using it.
Regionwise, our exposure to West has gone up even further in this particular quarter. Our total sales to West are 62%, which was 55% last year. Anybody who still believes we are a South-based company, this is a wake-up call. We are 62% in West and we are 10% in Central. 72% of sales of Orient Cement actually come from non-South markets. I just thought I will call it out because many people still call, "Oh, you are a South-based company." I say, yeah.
We have 72% sales in non-South sales. Our fuel mix, as I mentioned, in this quarter has actually become 53% domestic coal, which was 43% last year. The reason behind that I have already explained. As a corollary, petcoke is down to 36% from 42% last year in this quarter. Our cost management, like I said, has not suffered any setback. Although in the quarterly results it will appear as if we have incurred a lot more cost than you people expect us to do. There are absolutely clear reasons for them.
As things are normalizing now, we get back to the same efficiency in the cost. Efficiencies are always being maintained. The cost has changed because, like I said, the plant mix changing and the fuel mix changing there. At the end, I think another update which all of you do look for is our borrowing status. Our bank borrowings are now down to, I will talk about the project borrowings. Against CapEx borrowings, they are at INR 203 crores as on 30th June . Another, I think, three quarters less than that old one will be done.
Now the new borrowings that we have against the waste heat recovery plant and the fly ash handling system, those I think around INR 100 crores will be paid over a longer period of time. Net working capital from the banks net of cash in hand was down to INR 55 crores. If you take a dip in that sense, it was INR 250 crores at the end as of 30th June . Prospects looking forward, I do believe the prospects remain strong, although the extremely heavy rains that most of you yourself are experiencing in a city like Bombay, they have had a dampening impact on the project work all around. July has obviously had a setback from the very heavy rains that happened all across our markets.
I'm not giving you the numbers, but the demand is not as buoyant as it should have been given the momentum in the previous quarters. Early August still, we are beginning to see some relief from the rains. As a result, some pickup in demand obviously is happening. Projects who keep waiting, they won't be selling to the consumer further. So I stay very positive about that.
The energy prices have been softening and the full impact of that softening, as all of us know, would start emerging as the year progresses, as we consume the old inventory. Our pet coke last shipment that we have, we've already started consuming out of that, and we are well covered. From today, it depends on how much is the demand in the market. I think from minimum two to about three months pet coke fuel we already have.
As a result of that, we obviously have not been able to avail of the window when the pet coke prices were down to very close to $100 a ton because we just didn't have the need to book that. In the meantime, we started looking up at about $100, $102 a ton. We haven't seen any transactions happening from India. Nor were we in a position to book. I think that's why, because there is no buyer in the market, the prices came down.
As we return to the market, a little bit of uptick will happen in the pet coke prices. That's our reading. But they'll still be much lower than our last purchase of pet coke. That should help going forward. The railroad mix wise, I think we've been facing some policies from railway which have not been very friendly towards using them. As a result of that, the cement transported using railway has gone down to 15%. At one point of time, we were doing 20%, now it's down to 15%. That broadly would be my commentary.
The CapEx schedule that we have given, we continue to sort of face a slower response from the government departments to our papers that have been made for approvals. Pushing them hard, but it's still taking time. I'm still hopeful that we'll be able to start the work in third quarter. We are continuing, maybe not early third quarter, but towards the end of third quarter. Assuming approvals come in time, we do want to start Chittapur very, very quickly. The last piece on the project, which was very contingent till the last time, it's now firmed up a lot.
The new grinding unit that we've been talking about in Madhya Pradesh area to be able to cater to the central market and from there to parts of the North India market. I think that site is more or less sort of closed in the sense that we already have our meetings, initial meetings have been signed. The other party to the agreement on whose premises we will be putting up the grinding unit, they are now in the process of seeking an approval from their board of directors.
Subject to that proposal coming in, we'll sign up an agreement very, very quickly and start applying for clearances. I'm talking about that grinding unit more from the perspective of, one, getting the much-needed diversification in our market exposure, and also to start the work on line four at Devapur in Telangana, which will be feeding the grinding unit.
That is still part of interlink. I thought I will start with the update on the grinding unit. Getting closer to sign up is now the process is only going on for the board approvals. Hopefully the board will see merit in allowing us to put up the grinding unit there. That will trigger the need for line 4 immediately. Rajasthan project, again, the update is that all the mining lease has been restored by the government. Unfortunately, this mining lease, given the coordinates that used to be there when these mining leases were given to us more than 30 years ago, everything is digital.
When they did the digital measurement of that, they found that in the plot of land on which the mining lease is there with all the coordinates, the area that they had granted to us, the area comes to be about five hectares more than what the mining lease was. For the five hectares, they need to go back all the way to the state minister of mines to get the approval, which hopefully. In fact, my person is still even today sitting in Jaipur and we are trying to get that out so that at least that part is. When the coordinates are finally frozen in the form of a mining lease, only then we want to start acquisition of land, because in the meantime, otherwise, we end up complicating matters.
It looks like a small detail, but when it comes to mining leases, even 1 m of mining lease is critical for the government to have the details absolutely right. We would rather sort that out now rather than do it at a later point in time. That is openings and lasts always happen to be a lot longer, but I try and obviate the need for questions coming up. I try and answer as many questions as I can think answers for. I will stop here, and I am open to the questions that will still be there. Thank you.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephones. 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 have our first question from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Yeah. Thank you. Good afternoon, sir, and thank you for this opportunity. Firstly, would like to compliment you on very impressive details in the annual report with regards to various clean energy initiatives and also your premiumization efforts. Sir, my first question is on the WHRS plant. This INR 3 crore per month savings, are we expected to get that at least for six, seven months in this year? Or there is also a ramp-up schedule and you also detailed about some delays in few parts of the plant. What sort of, say, FY 2024 is available for that, and the INR 3 crore should be fully available per month in FY 2025. Is that the right understanding?
Yes, absolutely. On the delay part, I think you mentioned, assuming that in August we start drawing power, as I mentioned to you, that will be 80%. Maybe in the month of September or maybe early October, it may be slightly less. But towards the end of the year, when the entire 10 MW start becoming available, we will still be able to meet the target on an average of INR 3 crore a month. Yeah. FY 2025, you can certainly take it that way.
Got it. At least from fourth quarter, January onwards, this should be the run rate of savings.
Yes, please.
Got that. My second question is on the sequencing of these various projects. I am a bit confused. One is, we are starting or hoping to start Chittapur expansion by 3Q, as per my understanding. Please, if you would like to confirm that. Also, land acquisition at MP is still not started, but we have kind of frozen the line. Are we planning to then parallelly invest both in Chittapur and Devapur grinding and clinker line, or is it going to be sequenced one after the other?
Let me sort of provide maybe clarity on that. Chittapur is something where we only are awaiting some approvals which have all been applied for. That is simpler, and the need for more clinker is much higher at Chittapur. Chittapur in the sequence, it will be the number one. When it comes to land for the grinding unit in Madhya Pradesh that I spoke about, we do not have to acquire that land. We are talking to a counterparty who has the land, who are agreeing to give the land to us.
As I have said, they are in the process of obtaining the approval on their board. The moment the board gives the approval to sign the agreement, we already have the land with us, because that company is going to give us the land, has that land in their control. You do not have to acquire anything for that. In fact, it may not be even acquiring of land on ownership basis.
We are actually going to give the landowner right to use agreement. Which is a long-term agreement. We can apply for the environment clearance for that grinding unit only when we have that agreement of right to use. I cannot even start applying for that clearance. Once I apply and get the clearance and start the activity for grinding unit in Chittapur, only then I need line four in Devapur. Is sequencing now getting understood a little better?
Yeah, I have got that. Sir, at Chittapur, grinding also is coming, right? It is 3 million tons grinding and 2 million tons.
That's right. So expansion at Chittapur is absolutely right. 2 million tons clinker, 3 million tons of grinding. Correct.
Okay. From a three to five-year point of view, say next 2 years, we are looking to close Chittapur, then Devapur should start, and then eventually the Rajasthan mining sites will be in place to start with Rajasthan. Right? So that should be the pecking order, right?
Excepting that there will be some parallel costs which will be incurred even for the grinding unit, plus Devapur as a combination, as I explained in the last quarter's call. Which basically, I would just sort of tell you why I'm saying so. One, the CapEx that we need to incur for the I did explain, and I guess most of you are aware that the mines in Devapur are the forest area, where the forest clearance is in the process.
The moment we get stage one clearance for forest, we have to actually deposit a significant sum of money, around INR 140 million, INR 150 million, with the forest department, who will use this money for afforestation of the land elsewhere. So that CapEx obviously will happen in parallel. Although we are not doing construction activity, the CapEx I need to do to get my stage two forest clearance. Right?
That will be capitalized with Devapur. Although you might say technically, there are no commercial activity or erection activity on. Similarly, there will be some expenses which start getting incurred for Devapur and the grinding unit combination. But that also, to my mind, will happen only when a major activity or major investment at Chittapur is getting over, because sequencing wise, the environment approval and all do take time.
Got it. For full year, would you like to give any number, any range of CapEx for FY 2024 and 2025?
FY 2024, in fact, I had also been in the last quarter, so I do not think I am going back. We had said total about INR 1,000 crores in FY 2024 is what our ambition has been, because only then we meet our requirement for clinker in time, which largely we had said about under multiple projects. We talked about INR 600 crores at Chittapur. We talked about INR 150 odd crores at Devapur, the forest clearance and mines clearance and everything. We talked about saying we might spend close to INR 100 crores towards acquisition of land in Rajasthan, and there are already some maintenance and the waste heat recovery that is going on here. So there are multiple projects all put together. We have said FY 2024, we were saying INR 1,000 crores.
Whether the remains INR 1,000 crores that become INR 750 crore, INR 800 crore , is a matter of when we receive the clearances. Our intention, our effort would be that we start spending CapEx soon, because that will determine how quickly we get the additional capacities.
Got it, sir. Thank you, sir. This is very clear. All the best.
Thank you.
Thank you. We have our next question from the line of Rajesh Ravi from HDFC Securities. Please go ahead.
Yeah. Hi, sir. Good afternoon. First question pertains to you explained on the fuel cost, why it went up. Could you share the fuel cost in per million kilocalories number for that quarter, Q1?
How will that help you? You need to know my cost of how I am sort of doing it. For any reason, people will get into the nitty-gritty, which you can't even relate to the reality. I will give you a number if you wish.
Sure, sir.
I have the number which is readily available with me for two major plants. I am just looking through. At Devapur, in the last quarter, we had 1,925, and at Chittapur, it is 2,340.
Sorry. Okay. This is 1,925. Okay, 1.92 something like that. Okay.
Yeah. Chittapur is 2.340, which is imported petcoke.
2340.
Yeah.
Okay. And sir, this Chittapur costing is higher, right? Compared to Devapur.
Yes, because Devapur have mines nearby. Chittapur has no mines nearby. It is a landed cost. Please understand, I am giving you landed cost, not.
Yeah, understood. Because you have the linkage cost where the costing is much better.
More than linkage, the transportation under coal.
Transportation, okay. This Devapur. Sir, what is the trend you are looking at for these numbers in Q2 or maybe in Q3? You mentioned that the domestic coal prices have rather gone up. Whereas there's some expectations of cost savings to flow through in the imported coal and petcoke. So what is the trend you are looking at?
Same. I personally do not think the domestic coal prices will increase again in the next two quarters. I don't expect them to. There's no reason for them to increase them. Petcoke prices actually should stay soft compared to when we purchased last. Right? Because the prices even today, we're talking in the range of more than 1,600, 1,820, right? Which is a lot cheaper than what we were buying coke, petcoke earlier. So I do expect petcoke prices to our next procurement to be at a cost which will perhaps be about 20% less than what we did last time. Domestic coal prices, I don't expect them to go up anymore.
Okay. Sir, this next procurement will be coming up for convention by when? This 20% lower cost.
Towards November. October or November.
Okay. And sir, this AFR cost, how are they currently? Because I remember earlier they used to be less than INR 1, and then it shot up to INR 1.5 or so. What is the current cost trend that you're looking at?
My own reading of it is always we have to remember, AFR is not one fuel.
Right.
Although it is fuel, we have five, six different kinds of fuel coming. Some of them fairly. If you look at carbon black, which happens to be the most expensive. People who buy carbon black, they will still incur more than 1.5.
Okay.
People who buy rice husk and if they are around the rice mills who are doing it, that comes cheaper. If they're far away, it becomes more expensive. If you are using hazardous waste, you actually may get a negative cost also. So it's all a combination of multiple fuel types. For us, it will be more in the region of 1.2.
Okay. And sir, your annual target of 6.3, 6.4 million tons, this remains?
We are keeping that absolutely, but I am not letting my sales effort go any soft to.
Correct. Lastly, on this capacity guide, INR 1,000 crore, where you mentioned INR 600 crore Devapur, that will only start once you get the stage one forest clearance.
Rajesh, don't confuse everybody. Chittapur.
Sorry. Chittapur.
Do not confuse everybody.
I know. This Chittapur 600 crore will start only when the stage one is received. Do you see.
Sorry, Rajesh, you are completely confused. Stage one is for Devapur forest clearance. Chittapur is not a forest area.
Okay.
Chittapur, we are waiting for environment clearance.
Okay, understood. This is already.
Environment clearance is being awaited. Devapur's forest clearance is being awaited, along with the grinding unit being awaited. Stage one, stage two is only for forests.
Okay. At Chittapur, the INR 600 crore, there are no major deviation you are looking at for this financial year?
I wish we do not have a deviation because I need that capacity to start coming up soon.
And sir, lastly, on this lead distance, which you mentioned 300 km, if you could give sense, is it primary lead or secondary lead when you mention 300 km?
Secondary remains more or less constant. It is the primary which goes up, depending on the market mix. For example, as I told you, in the Q1, if I sold a customer which was closer to Chittapur, I sold him cement from Devapur because I did not have there. Obviously, the lead has gone up because I am supplying the cement from a farther away plant.
I would say it's always the primary that when you dump the material in that market, from there, secondary is always short hauls all around it, really small retailers and things like that. It's all primary.
Okay.
When you talk of 300, around 300, little over 300, it's always about primary.
Okay. Secondary would be less than 50 km. Is that understanding right?
Absolutely. Otherwise, we will open cement there.
Correct. Great. That is all from my end for now. Will come back in queue. Thank you.
Thank you, Rajesh.
Thank you. We have our next question from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi. Thank you for the opportunity. It is great to see the premium cement sale is picking up. Can you give some sense about how are the margins in premium versus other cements? Also, if there is a margin differential between the StrongCrete which you have been selling from long years and between OrientGreen, the more sort of a recently launched cement.
Yes, the OrientGreen, which we introduced just a few months ago, that is midway between our PPC cement and our StrongCrete. StrongCrete we sell at INR 45 higher than our PPC, and OrientGreen is priced at INR 25 +. So it's a premium product, but not as high. So today our StrongCrete is a super premium product, and the premium is OrientGreen.
Okay. Understood. What was the fuel mix for the quarter?
Back to the same question again.
Okay.
It never changes. Some things never change. What did I say earlier? Fuel mix for the quarter, once again, I'm repeating for everybody else, please don't ask me again. 53% domestic coal in this year or this quarter, and petcoke 36%, and balance is AFR, if you will.
Okay.
I'm sorry, excuse me. This is typically 54% is the percentage that we are using. 50 and 36.
One last question from my side. The SPV which you will get the power, what will be the cost of that power?
This is contractual details right now. It will be a significant savings from the grid price. It's linked to what the grid price will be and what will be the margin for us. I can't reveal that at this stage. There's definitely, I've given you the savings that we're having in Jalgaon already, and that's what encouraged us to go more for that.
Okay. Got it. Thank you.
Yeah.
Thank you. We have our next question from the line of Raghav from Asian Markets Securities. Please go ahead.
Sir, I wanted to understand primarily the Maharashtra market, which is our key prime market, because according to my understanding, we are selling almost 50% + in volume into the Maharashtra. The last two capacity addition which we have done into the Maharashtra is almost at a level of 35%-40% utilization at the industry level. Ambuja Cements is adding almost 6 million tons in the Maharashtra, other than the Mumbai market, which is primarily your core region of Vidarbha, Marathwada, Khandesh, and the Pune. How will you see further two years down the line, the Maharashtra particularly market as a, in the profitability term, in the pricing term, west of the Mumbai?
Well, you are talking the supply side, you also have to remember the demand side to the equation, isn't it? The way the demand has been growing in these markets obviously has encouraged people to put up more capacity. If the demand was not that high, who would want to put up capacity? While we very quickly are able to calculate the new capacity coming in, we are not adding. Maharashtra as it is the largest market in India. If it keeps growing at the percentage we are growing today, obviously the demand in Maharashtra will be far higher than the other places, and the capacity is for us to be catering to that.
While it is a matter of concern for sure in short term, new people coming in, they obviously want to utilize their capacity faster. But as things settle down over a period of time, the markets will absorb the capacity. That is how we have seen every time a new capacity has come up in any neighborhood. Exactly the same story pans out. Few months, few quarters, you see the impact, and then it flies back to normal because they are also there to do the business something.
You will say, see Maharashtra as a safe market for a future term also?
Yes, I would. Because I personally don't see the growth in Maharashtra disappearing anytime soon. It's the demand growth which keeps me hopeful. While the capacity is coming, it always look like threats. But everybody's finally looking, when they're making a capacity, they're doing their own calculation and their own hypothesis, and they know that we already exist at lower costs. So they're also coming there to make a return on their investment.
That's why things over a period of time, no matter how dangerous it looks I always keep reminding people about the time that we were putting our Chittapur plant in Gulbarga. Everybody used to tell me, "There is UltraTech next to you. There is ACC Wadi next to you. Shree Cement is coming next door. Vopak type there. How will you survive?" And I'm telling you, we need more clinker there now.
How did that happen? Because this is a story, this is how businesses go.
Got it, sir. What is the last question from my side, what is your estimation for a commissioning time for the Chittapur and the fourth line of the Devapur and the Amte grinding unit? What is this in the broad term?
Sorry, I did not get your question.
Sir, what is the estimated deadline to completion for the Chittapur line two and the Devapur line four?
Typically speaking, the brownfield project we want to commission within 15 months from the date of start of construction. Okay? Let's assume for the moment that we are starting that on 1st of January 2024. 15 months from there, we should commission Chittapur. 15 months is what we take as a erection time for a brownfield expansion. For a greenfield grinding unit, because it is a pure grinding unit, that also can be achieved in about 15-18 months because there are still utilities, railway siding needs to get built in a grinding unit. At places like Chittapur, you do not even have to build a railway siding. It is already there. I would consider the other one to be more like 18 months than 15, but 15-18 months there also would be our target from the day we start doing the construction.
We can take a volume assumption since that part.
Volume assumption, obviously, you cannot say that we commission the capacity and next month itself we will be selling the full capacity. It does not happen, right? So that buildup will have to take. Typically, in the first year of commissioning, 12 months, we think if we are doing 50%-60% utilization, we feel good, because by third year, fourth year, we start aiming for about 75%-80%.
Yes, sir. That is why I asked you this question regarding to Maharashtra, because the last two players who commissioned there, one has commissioned their kiln and one has the acquired capacity. They are not operating till 40% since last 15 months of operation. That is why I asked this question for the Maharashtra, because they are not operating at 40%.
That is why I am not adding capacity in Maharashtra now.
Got it, sir. Thanks.
Thank you.
Thank you. We have our next question from the line of Amit Murarka from Axis Capital. Please go ahead.
Hi. Thanks for the opportunity. Just a couple of basic questions, if I have to go back a year or two, we were prioritizing Devapur expansion with the Tiroda grinding unit. I know that Tiroda got called off. But why now Chittapur given priority over Devapur? I just wanted to understand what's the change which has led to that.
See, the change came in one, we do not have a grinding unit that we were setting up in Tiroda. That sent us all over again on a wild goose chase to locate another site where we can put up a grinding unit. And without the grinding unit, I don't need more clinker in Devapur, right? So that got delayed because we didn't have a grinding unit site, right?
In the meantime, at Chittapur, the demand changed more towards OPC from some very good customers, because of which my overall capacity of the plant was 3 million tons that we speak about. 3 million tons is a certain assumption of OPC, PPC. In FY 2024 itself, I ran short of clinker at Chittapur. I have been mentioning that last quarter, today also I mentioned.
So we can't get fixated with any decision taken. That's the definition of being agile. The moment we realize that Chittapur is opening up an opportunity, Devapur got delayed because Rewas were canceled. What do we do? Do we still talk about Devapur first, or do we go and do business where it is available first? Very simple.
Got it. That is the understanding I wanted. Also just another basic question, you took this plant shutdown in Chittapur in Q1, which impacted cost. Just to improve my understanding, generally is not monsoon considered a better month to take these kind of shutdowns as these are lower demand periods? Why is plant shutdown taken in Q1?
Because we did not take the shutdown in last monsoon. We saved money on that. We continued to use the same refractory without incurring the cost till this year, April. After that, even nine, 10, 11 months is just about the maximum people use between that maintenance. We used it 23 months. It could not have gone to 26 months.
Okay.
Very simple. A very fundamental issue.
Got it. So in this situation, this time when you take a maintenance, will this be a longer maintenance because you skipped one cycle, and will the cost also be higher?
No, somewhat. Not too much. The cost would not change by more than 10% to 20% of the overall cost.
Okay.
But the utility value you see, instead of spending once in nine months, I am spending once in 23 months. You just see that.
Yeah, of course. Then I understand. You cannot stretch it. You risk killing et cetera. I understand that. Yeah.
Right.
Okay. That's all then. Thank you very much.
Thank you. Ladies and gentlemen, we will take the last two questions now. We have a question from the line of Vaibhav Jain, an independent investor. Please go ahead.
Hello. My questions are mostly answered. Just one suggestion regarding your opening remarks. I would suggest you put this in an investor presentation rather than It saves you energy as well, and we can be prepared beforehand to ask questions. Otherwise, my questions have been answered.
Thank you so much. See, in presentation, the reason I do it is twofold. One is the nuances that I can bring out in my delivery, I cannot put that in a presentation, because then the presentation will be far too long, right? There's lots of nuances that I explain when I am giving the information. But I do get the hint that you do not like my voice, so I will try and speak less. Thank you.
Thank you.
Thank you. We have our next question from the line of Navin Sahadeo from ICICI Securities. Please go ahead.
Thank you for the opportunity. Sir, of course, as always, the great initial introduction or the comments, which take care of most of the questions. I really request you to continue with that. Having said that, just couple of questions. Sir, the CapEx you guided as of now for FY 2024, more like INR 1,000 crore. In the same way, assuming everything falls as per plan, what should we pencil in for FY 2025?
FY 2025, I am still struggling to get my INR 1,000 crore going. That is my worry. But typically speaking, now, if we go by the fact that we have said Chittapur should cost us close to INR 50 million, logically thinking. If I am doing INR 600 crore in this financial year, obviously we want to complete that during the next financial year. We need INR 900 crore for Chittapur itself, right? It is straightforward calculations.
Sure.
When the project is on, I spend INR 600 crores versus INR 900 crores to be spent, and I want the project to be ready before the end of next financial year. So INR 900 crores for Chittapur. Maybe another INR 100 crores-INR 150 crores we may spend in Rajasthan in the meantime, parallel to making all the preparations. My own guess is there will be another INR 300 crores to INR 400 crores at least that we might need for the grinding unit in Madhya Pradesh, even before we start spending money at Devapur line four. So I would perhaps, sir, consider INR 1,500 crores - INR 1,700 crores in the next year all told, including grinding unit in Madhya Pradesh, including Devapur, further plans for fly ash, and INR 900 crores in Chittapur.
Understood. Sir, just staying on this capacity while we are looking at Chittapur line two, an entire 3 million tons coming up there, are you also looking or exploring some possibility of a grinding unit more near? Since west is now such a big market for us, as you just mentioned in your initial comments. New grinding units near Patras or Solapur, where other peers have also, I think, have some grinding units. Is there an option to explore there, or are you sure that Chittapur is where you want an entire 3 million tons to get consumed?
Look, in life, there's nothing that I assume forever. At the time that we were taking the decision, the proposition had come to me earlier also, this area that we're talking about. We've actually gone and done an in-depth study of the availability of fly ash and the cost of fly ash, which is available from now onwards, given all the existing capacities. That didn't look very promising.
So unless one of those assets comes up for sale at a price which is reasonable, the Chittapur plan is the only plan we have, because there's no more space for any more grinding units to keep getting fly ash in the quantum that we need. Right. So there's something you're pointing or something that was some of the grinding unit which might come up for sale.
If it does come up, we'll keep our eyes and ears open, and then we might rethink. But as of now, we don't see that opportunity. Putting up a grinding unit there didn't get us, despite availability of higher incentives in Maharashtra. The differential in the fly ash cost and the CapEx that a separate grinding unit needs compared to the CapEx that we do when we are doing it on-site is very different.
So while we considered the incentives in Maharashtra, basically that we considered looking at the additional CapEx, which may be that the additional CapEx can be recovered from the incentives that the Maharashtra government gave. But the differential in the fly ash cost is sort of taking away a lot of that attraction.
Got it. Just one last question. Will Devapur now go for maintenance shutdown in the current quarter, like typically Q2 maintenance shutdown? Or that could be the same
No, it is good that you asked the question. One line in Devapur, we have already done the shutdown in the month of July. We just completed it. There is one more line to be done at Devapur that we will do in the next quarter. But the impact will be not as stark as here because we do not need to move any kiln. We just need to utilize more the three lines in Devapur, right?
That makes it a lot easier. Those kilns are smaller, so the maintenance cost also is a function of size of the kiln, right? Chittapur kiln is the biggest kiln that we have, 6,000 TPD. Devapur, the biggest is 4,000 TPD. It is size-wise and in terms of availability of our kilns, we have done the maintenance in July. We will do one more in October. They will come, but the impact is not be as dramatic as we had in Chittapur.
Got it. Thank you. Thank you so much for this opportunity, and all the very best.
Thank you.
Thank you. I would now like to hand the conference over to management for closing comments. Over to you, sir.
Thank you. I personally make all my comments as opening comments themselves. My closing comment only is to thank all the participants once again for sparing the time and listening to my long introduction that I gave and asking questions which are intelligent and which push our thinking even further. The grinding unit in Maharashtra, the incentive question was very intelligent, which came from earlier result, and that integrated we give a response to that. I really appreciate the engagement that all of you show in our business. Thank you very much.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you. Thank you, everyone. Bye-bye.