Good morning, and welcome, ladies and gentlemen, to UltraTech Cement's earnings call for Q4 FY 2021. I thank everybody for joining in, and I hope and pray that you, your family, and friends are all safe from COVID. The second wave is hitting our country badly, and we are seeing cases all around us. We as a company and Aditya Birla Group are doing everything possible to help the people in need. I pause here for a moment to pray for all the people who lost their battle to COVID and for those who are fighting it. Life goes on, and so does work. I'll be brief today in my commentary and happy to take any questions in the end, for which our Managing Director, Mr. K. C. Jhanwar, is also present on the call today. This has been a phenomenal quarter, and results of cement companies are speaking for themselves.
The Indian economy has shown a strong resilience against the pandemic, and the government support has been unparalleled. Cement consumption has been at its best in FY21, barring the Q 1 of last year. We at UltraTech have been focused on what we know best, and that is cement. UltraTech has reached a capacity utilization of 93% for the quarter, and March 2021 was a record 99%, which is very heartwarming and reassuring about things to come. It put all our skills to test to dispatch nearly 9 million tons of cement in one month. That is on an average 0.3 million tons of cement a day. UltraTech did it in style. The complexity of the scale of operation is to be looked at in light of the dispatches being done from 54 locations across the country.
Considering the Indian cement demand of 350 million tons a year, which is roughly a million tons of dispatches a day, we did 0.3 million tons of cement. This gives you a perspective of what UltraTech is all about. This is one of the efforts which has helped us generate a jump in our net profits by 60% in this quarter. We have been reading the markets right and taken advantage of the tailwinds of growth, going ahead with our expansion of 19.5 million tons. We believe that India is on the brink of a jump in cement demand. Per capita consumption of cement has already gone up from the lows of 190 kgs to around 250 kgs per capita, which clearly shows that Indian cement industry is on an upswing. Our expansion program is on track, barring a bit of a slowdown due to the current wave of pandemic.
As the analysis and reports are coming in from all over, this shall also pass. This second wave also should come to an end, and we don't think that we will lose any time in ramping up. We on course to commission our 19.5 million tons by the end of March 2023. The input costs have unfortunately also been on the rise, casting a shadow on the profitability of the industry. Spot prices of pet coke, as you know, have shot up from the lows of $60 per ton to around $125 per ton-$130 per ton already. Diesel has also been continuously going up, resulting in the two biggest cost components, that is logistics and power and fuel, putting pressure on the profitability for the industry. We believe that pet coke will start stabilizing as we see the restart of Texas refineries, which had suffered recently due to floods.
As the COVID vaccination program in the U.S. keeps making progress, there are increasing number of people returning back to work in the refineries, thus helping increase the output in these refineries. This will lead to increase in pet coke production and consequently, pet coke prices should also stabilize, which we believe should happen in the H2 of this calendar year.
This meeting is being recorded.
Logistics costs have been hit with diesel price increase, but we are doing everything possible to manage this cost. Logistics is a big science, and we have been investing heavily in digitalization of our logistics network, which has been bearing fruits. In spite of increase in diesel costs, we have been able to bear the pressure of rising input costs. Demand is very robust and continues to surge from all corridors. While the initial thrust came from the rural market, the infrastructure segment picked up as the government spending gained momentum, and now we started seeing gradual improvement in the urban real estate, no thanks to the pandemic. With relaxation in stamp duties in Maharashtra and some other states, I think, lowest possible interest rate regime and the increase in the need for space, we believe that this growth in consumption will continue.
Towards the end of the phase I of COVID, the government had started expediting the projects, making sure that the payments to the contractors are released on time. They continue to do so, unfortunately, the lockdown pressures are withholding project work. I must talk about cash flow management in UltraTech, which continues to yield results. Tight working capital has helped good cash flow during the quarter, reducing our leverage by a further nearly INR 2,700 crores. In this financial year, we have deleveraged rapidly, reaching a net debt EBITDA of 0.55x from a peak of 3.3x at the end of last acquisition, which was December 2018, October/December 2018. Towards the end of March 2021, we prepaid our long-term loan to the extent of INR 5,000 crores. You will start seeing the benefit of reduction in interest costs on our P&L from Q1 on account of these prepayments.
As the year progresses, we are confident that there will be some more prepayments that we will do during the year. I've already mentioned about our 19.5 million ton of expansion. All critical orders have been placed. Civil work on all the sites has started off. The second COVID wave has slowed down work a bit temporarily. As I mentioned, we are hopeful that we will maintain our timelines on execution of these projects. For the Dalla super clinker plant, I'm glad to inform you that we have received the stage one clearance from Ministry of Environment and Forests, MoEF, and we hope to complete the formalities by end of September 2021. This gives us confidence that the plant will go on stream before the end of this fiscal year and provide relief to our east and central markets' requirement of clinker.
It's a 2.3 million tons of clinker plant. In the last meeting, I had told you about our RMC starting to play a bigger and a far more important role. Well, we are now a 132-plant network, up from 109 plants at the end of December 2020. In UltraTech, RMC is one of the largest internal customers for gray cement and generates an incremental margin over the gray cement margins. Nathdwara Cement has been doing very well. We operated Q4 with almost 85% capacity utilization serving the markets of Gujarat and Rajasthan. Century assets have not stayed behind, operating at 90%+ capacity utilization. All the operating costs optimization plans are in place. Except for the markets of Bihar and Chhattisgarh, where we are yet to do the brand change, all other markets brand change has happened, accounting for almost 77% of Century's output.
Chhattisgarh, as we have already mentioned earlier, will continue with the old brand, and Bihar would account for 7%-8% of the Century brand. You are aware of the amendment in the MMDR Act. UltraTech is the only cement company, like a good corporate citizen, that continued to pay the royalty as per the old MMDR Act on the limestone raised from the acquired cement units. As of March 28th, this additional royalty has been withdrawn, and we stand to gain by way of reduction of our costs of royalty that was being incurred. The story of this quarter will be incomplete without telling you about our work on sustainability. We are targeting a reduction in carbon emissions by about 27% at the end of 2032 over the base of 2017.
Such is the high level of confidence that we have committed to pay additional interest on our USD bonds that we raised in the last quarter, and if we don't meet the emission targets. There is no better recognition for UltraTech's commitment, this being our maiden debt issuance in the offshore markets, the first company from India and only the second out of Asia to issue a sustainability-linked bond and achieving sovereign pricing. That is UltraTech for you, ladies and gentlemen. Thank you, and I hope you decipher my message in the last slide of our presentation. Wish you all a very safe time ahead, and I hand it over for the questions. 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 touch-tone telephone. If you wish to remove yourselves 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. A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Yeah, good morning, and congratulations. First question, Mr. Daga, is on the balance sheet and on the capital allocation. We are impressively deleveraging every quarter. In couple of quarters we would be net cash. Given our expansion plans already announced, it appears that we will be accruing a lot of cash balance. In terms of capital allocation priorities over the next two to three years, can you share your pecking order, whether you would like to keep some cash on books as gunpowder for any future inorganic opportunities, or one would start expecting good dividends coming out? In case there are any international or global or non-core ambition which UltraTech would like to pursue.
Thanks, Sumangal Nevatia. I think I should have spoken about our capital allocation policy in my commentary. But let me give you guys an overview. You would have seen that we have stepped up the dividends. The money had to go back to the shareholders. You are absolutely right that the cash flows that we expect in future years will be very good. On 111 million tons of capacity with a 71% capacity utilization for the year, the free cash flow was close to five-digit number, EBITDA being close to INR 12,000 crore. This number with 130 million ton of capacity is going to go up further. As for international acquisitions or international foray, no. There are no plans as yet. I guess we have enough to do in India. Several markets are wide open for our organic expansion.
There will be opportunities for inorganic growth for which we will keep gunpowder on the balance sheet. Excess cash will be returned to the shareholders. I hope that answers your question.
Yes, sir. It does. Second question on the cost front. Going into FY22, Mr. Daga, what are the key cost areas which you would keep an eye on or the key risk of inflation, whether it is raw material prices in terms of fly ash or pet coke. Also if you could share or explain us that what is the flexibility for us to switch between alternate fuels and even thermal coal in case pet coke keeps inflating the way it is.
All our plants are multi-fuel and highly flexible on switching on a instantaneous basis from pet coke to coal or different grades of coal. It's a fuel mix that has to be managed. That is never a constraint. In fact, this quarter, we reduced the dependence on pet coke and increased coal to manage the fuel mix, which has helped manage our costs as well. As for these costs, none of them give us flexibility. Fly ash, coal, pet coke, diesel, if these are the main cost drivers, as a buyer we can only strategize, try and read the markets, lock in quantities at the optimal prices. Spot prices are not in anybody's control.
We do our planning pretty solid, and I think UltraTech as a company with its size and scale, is very well-placed, very well-organized, very well-connected in the international markets for sourcing, in the domestic markets for fly ash. Whatever best is possible, I think UltraTech is able to get the best.
Understand. If I may just squeeze in one more question on slide 14 on your demand chart. After many quarters, there is green again, now in the Q1, we are hit with COVID. This time around, this rural demand, which has been a key strength area for the industry, is a significant risk. I know it's quite a dynamic situation, any early thoughts you would like to share, sir?
No, it's too volatile or too unpredictable with lockdowns and, I mean, life is more important. I think it's now the question of how the country fights this menace of the pandemic. Once that is out, I am sure history is very short. Like last year, history will repeat itself. We are already seeing everybody's authority on COVID. We are already seeing reduction in numbers in Maharashtra and Gujarat, and the focus is now shifting to other states. I'm sure other states will also start seeing recovery. We are seeing demand sustaining and improving in Gujarat and Maharashtra.
Understand. All right. I'll get back in the queue. Thank you and all the best, sir.
Thanks, Sumangal.
Thank you. The next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Good morning, Atul, sir.
Morning, Vivek.
Sir, a few questions. First, on this limestone royalty, the change that you spoke about. That helps Century, JP West, as well as JP all three? Binani merger?
Yeah. All should also happen based on the Nathdwara merger should also be on the cards, given that there is not going to be any limestone implication. Is that understanding correct?
Yes. We still have to do a lot of cleanup on Nathdwara balance sheet. The litigation cases keep popping up everywhere. Luckily we have a Supreme Court blessing. I don't want to do the merger till we have absolute clean balance sheet on Nathdwara. Maybe FY 2023, we'll certainly go ahead with the merger of Nathdwara. If not, by the end of this financial year. It's within our control. Yes, the royalty benefit is there on JP as well as all JP assets, as well as Century assets.
Sorry. Could you remind me, sir, Jaiprakash Associates, whether limestone royalty is paid on that one as well? I think the merger happened probably before the regulation change, or maybe I'm a bit confused on that.
No. You see, we had acquired JP assets. There's nothing called Jaiprakash Associates, Okay, you're talking about.
That's right.
Sewagram acquisition. Yeah. Mukesh, is royalty applicable on Sewagram also?
Yeah, because the transfer has been done later on.
Yeah. You will be surprised that there is one plant of Grasim transfers, which the government delayed doing the transfer and put royalty on that also. The JP West that you talk about also attracted royalty. The rest of JP that we acquired also attracted royalty as well as Century Assets.
Oh, okay. Would it be possible in terms of just quantifying it in terms of capacity which gets impacted or rupees crore, whatever that number?
In terms of capacity, I'll give you a number. Yeah, it's INR 200 crores plus per annum. That's the benefit.
Oh, okay. Great. That starts right from April 1st?
From March 28, 2021.
March 28. Okay, got it. That was one. Second, on the dividend payout. You have elaborated to your earlier response, but just to get it right. Let's say that this year's payout, as in FY 2021 payout has been about 19%. Is that what the number?
20%.
Sorry?
19.99% or 20% is what I would look at.
Okay.
The board had adopted a capital allocation dividend policy of ranging from 15%-25%. I think we are going to sustain and improve our dividend as a percentage to net profit. It's 20% is here.
Got it. Okay. Sure. That is second. Third, sir, in the last call you have had indicated that you have, let's say, a low-cost fuel inventory going up to April or maybe early part of May. Can you just give us an update now?
We are managing our inventories and procurement processes, procuring from wherever possible, and I can only share with you that our cost will be better than the industry.
Sure. Lastly, can you just quickly also talk about you have covered demand, but the local restrictions impact, let's say, was there a material difference between April first fortnight and second fortnight in terms of, let's say, Maharashtra being an example while construction at site is allowed, but what are you seeing on the ground right now?
It's too unpredictable, Vivek. I don't want to say anything which will change dramatically in the next 10 days. Let's watch this quarter. Let's not take decisions on one month, one day, per se.
I see.
I'm sure you guys have your infamous channel checks that you can figure out stuff. I'm surprised you did not ask any question about my last slide. Anyways.
I'll take it offline with you, sir. Thank you very much.
All right.
All the best.
Thank you. Yeah.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, couple of questions.
Mr. Shah, sorry to interrupt you. May I request that you please increase the volume of your phone. Mr. Shah?
Ritesh, a little louder, please. Can't hear you.
Mr. Shah, Please increase the volume of your phone.
Hello?
Mr. Shah, you are not audible, sir.
Yeah. Hi. Sir, I'll just repeat the question. Sir, my first question is on construction tender. How do we see the allied category for UltraTech, and obviously the company has a right to win.
If you can provide some color on how much revenue you are churning right now and where do you see this business going forward?
I can't hear anything that you are saying, Ritesh.
Sir, am I audible?
You are audible, but it was garbled. Your voice was very garbled.
Sorry for that. I'll just repeat it. Sir, my question pertains to construction chemicals. How do we see this business going forward, specifically wherein the company has a right to win? If you can provide some numbers on where we are right now and where do we see this going forward, that would be useful.
I will reserve our commentary on what we call BPD, Building Products Division, as part of our foray. We are going great guns ahead, and this will become one of the big drivers in UltraTech. Numbers, it's too difficult to put numbers at the moment. We have discussed this in the past also, Ritesh. We are very focused. I told you about RMC, and I have shown you the numbers this quarter. RMC is going to go full steam ahead. So is BPD, and when the time is right, I will speak about BPD in much more detail.
Sure, sir. Sir, second question was on RMC. You did indicate that we have increased the number of plants from 109- 132. Sir, can you allude over here, has the industry gone some shift in cost structure or basically the way in which the industry operates, specifically on transit mixtures? Is there a structural change? I think post-COVID, the business model did get reversed a bit. Are we back to normal? How should one look at RMC as a business?
RMC is a big growth engine. In the lighter vein if I can say, UltraTech decides the future of RMC. Honestly, RMC is going to be a big element of construction industry. People are realizing the benefits. Construction sites are realizing the benefits of buying RMC instead of mixing RMC on-site, and that is what is paying off. This is how we try and educate and give a better product, better service to our customers.
Okay, sir. I have more questions over here. Sir, just last question. Under the amendments, one of the things which came out was that the leases which don't have peers on it, basically they got lapsed or the saved leases got lapsed. Just wanted to ensure, basically get comfort from you that for all leases which UltraTech has, basically they are safe.
We have zero lapses. No, we did not have any lease lapsing. All are secure.
That's quite useful, sir. Thank you so much. That's very useful. Thank you.
Thank you.
Thank you. The next question is from the line of Amit Murarka from Motilal Oswal. Please go ahead.
Yeah, hi. Good morning.
Morning, Amit.
Yeah. Just firstly, a question on the capacity update.
Amit, there is a lot of background talk from your side.
I guess it is better now.
Yeah. Thank you.
Yeah. I was asking, could you provide an update on Super Dalla and Bara, too?
I did mention about Dalla Super. MoEF Stage 1 clearance has been received for the plant land. Unfortunately, because of COVID, the next step, which is payment of dues, et cetera, is pending. We hope things settle down and we'll start work on the plant and be ready with the plant by December. Hopefully January, March quarter should see the production coming out of Dalla Super. That's a 2.3 million tonnes of clinker. Bara has already got commission. Line two has already got commission. Railway siding has already got commission, and at last I remember it had reached a capacity utilization of upwards of 70%, 75%.
Okay, fine. Yeah. Also on the fixed cost, last year, obviously post-COVID, we had seen industry cut down on spend. We were on a recovery mode, but now the demand is again looking a bit shaky. Can we now expect spends like whatever dealer promotions, ad spends and all and other such things getting cut in?
It's natural. K. C. Jhanwar, you want to comment?
Yeah. I would like to say yes, it's a very dynamic situation. We have seen that the overall environment has changed after the first wave. Everyone was bullish. In last one month, all we know that things are again at a different stage, actually. Yes, we are quite conscious about the same. In case the problems continue, obviously we may have to look for some cost-cutting measures again, the way we did in the past. Yes, I would say it's little early to conclude that we are going full blast on the other cost aspects.
To supplement what Jhanwar just mentioned, Amit, we have shaved off nearly INR 500 crore over FY20. Because you see, there is inflation in every element of cost. Even if I assume a 5% inflation, that inflation has been nipped, and we are looking at fixed costs at almost the same level as FY20 only. So there's a saving which is uncertain.
Okay. Sure. Thanks. Also on RMC, just had a simple question. In the presentation, you've mentioned the RMC volume is up 31% QOQ, but revenue is up only 8% QOQ. Why would there be such a big fall in realization? I mean, just to understand.
No, it's not one second. Ankit, can you correct the number?
Yeah. RMC is 32% revenue increase also year-on-year.
This is QOQ. Last quarter revenue was mentioned as INR 620 crore, in the presentation, the volume is mentioned 31% or 32% up QOQ.
Let me give you a clarification in a moment. We will go on to the next question. Mukesh, just look up the numbers and be ready with the clarification.
Also on the fuel mix, could you share your current fuel mix? I guess pet coke would have gone down.
Yeah. Pet coke has gone down to under 30% and imported coal is up to 60%+.
Okay, thanks. That's all.
RMC and other projects, we give the combined number, which is 18% higher than the last quarter.
Okay, I'll take it offline because last quarter.
Yeah, sure. Amit will explain it to you.
Mr. Murarka.
Thanks so much. Yeah, that's all. Thank you.
Yeah.
Thank you. All participants are requested to limit their questions to two per participant. If time permits, we will take follow-up questions. The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Yeah. Sir, it's a clarification. On page number 17 and 18, the volume in the presentation, there is some calculation mistake is there. India operation volume is 26.59, overseas is 1.41. If we add together, it is not tallying with the consolidated number. Same is the case with the annual number. First, if you can tell us what the exact number consolidated plus India plus overseas for Q4 and for the full- year. It's good that we have shared the number in the presentation on the white RMC everything. On the annual number, there is no RMC annual number. Is it possible to share the same way Q4 number we have shared, gray, RMC, white export for the full- year of FY 2020? Is there any restatement of the FY 2020 annual numbers because growth number does not also tally?
Need some clarification on that part.
I don't know how you are calculating the numbers. If you can connect with Ankit offline, the number that we have mentioned in the slides are all audited and accurate numbers. There's no error in the numbers.
Sir.
Whatever specific clarification you require, if you can connect with Ankit, he will be helping you on that. A quick clarification. Between consolidation, there is an elimination of intercompany transaction. To that extent, you cannot do a math. You see, Nathdwara supplies cement to UltraTech. That I can't count double.
No, sir, I understand. Even if you just look at 26.59 for this quarter India operation number, and you add 1.41 overseas, the number tell is at 28 million, and we mentioned the 27.78. There is a difference of 0.22. If I look at for the full- year, the difference is 1 million tons. That's what I say, it's a clarification and the request to share the same way the annual number for RMC, white and all this, the way we have shared for the gray. My question is, most of the things is answered. Two things. One is, what's the trade, non-trade mix for this quarter for the full- year FY2021, and what was it for FY2020 restated now? What is the lead distance same way for this quarter for full- year FY2021, and the same for FY2020 and FY2020?
Trade share is about 67% for this quarter. Lead distance is about 440 km.
What is for full year FY21?
Full year FY 2021.
69%, sir.
69.
Yeah.
What was for FY 2020?
Ankit, what was our FY 2020 full- year?
Atul Daga, that must be lower actually.
Yeah. We'll give the exact number, sir.
Okay. No . All the best. Keep the good work going on
Thank you.
Thank you. The next question is from the line of Madhav Marda from Fidelity International. Please go ahead.
Madhav, are you there?
Mr. Marda has left the question queue. We'll move on to the next question from the line of Indrajit Agarwal from CLSA. Please go ahead.
Good morning, Mr. Daga. I have a couple of questions.
Hi, morning.
I have a couple of questions. First, on the utilization levels. As you mentioned, our March utilization was close to 99%. Is there any market where we have struggled to cater to demand high utilization, or we have managed to through?
If I had more cement to sell, we would have sold more.
Sure. On that note, you mentioned about keeping the powder dry for inorganic expansion. Do we have a priority order in terms of which regions you would be scouting for assets more? What would be our focus areas?
Except for West, where we would get restricted by consolidation from a CCI point of view, all other markets are wide open. I am keen on Northeast and we are keen on South, we are keen on all the markets.
Sure. That helps. One last question. Current levels, what would be the price differential on landed versus?
Sorry?
The price differential between landed petcoke and imported coal on a blended basis for us.
One second. If I look at fuel price. Consumption rate. I'll tell you % gap. You're asking about imported coal and pet coke?
Correct.
There's a gap of about 20%, 25%.
Imported coal is cheaper?
Yeah.
Okay, thanks. That answers my question. All the best.
Thank you.
Thank you. The next question is from the line of Swagato Ghosh from Franklin Templeton. Please go ahead.
Yeah, thanks for taking my question. Daga, sir, firstly, a very simple question on realization. Your realization was up about 1% QOQ, but from the general channel check, the sense that I got was overall for the sector, it was down QOQ as the pricing increases came in later part of the quarter. Can you just help me understand that how did you buck this trend of realization?
Let me ask you the question. Your channel checks cover how many people? We deal with 60,000 dealers across the country.
What happens is, the price improvements, depending upon which market, what date the price improvements take place, will have an overall impact. Let's say if you are dealing with a regional player and the price improvement had taken place on March 25th, obviously they will not have a huge impact. As a pan-India player, when we are selling all across, every price change has a positive or a negative impact.
I just want to understand, so was your pricing improvement in line with the overall market improvement like these were my channel checks? I just want to understand, did you outperform the market or yours was in line?
It goes to show we have outperformed the market.
Right. I just want to understand whether this is fortuitous for the quarter or can we do it because of our scale and obviously because of our size, can we continue to do this every time, like most of the time?
Because of scale and size and the brand.
The pricing capability or respect for the brand is higher than respect for or the willingness to pay for a brand B and a brand C. Obviously price improvement for category A brand is far higher.
Okay, fair enough. Sir.
It's a sustainable methodology, if that's what your question is. It's a sustainable methodology.
Yeah. Okay, got it. Sir, the other question I have is, because you're the market leader, you have strong market intel. I wanted to get a sense of what has happened to the tail of the market during this last disruptive year. By the tail, I mean the small 1 million ton-2 million ton capacity players. Have some of them gone out of market or have they severely stressed?
There has been an impact on smaller players because, in the initial period of COVID, when we discussed, there was a time if there's a two-plant company and if there's a lockdown in one of their plant locations, 50% of their capacity is gone. Right? As compared to that, if there was one plant of UltraTech was in a lockdown situation, we or any large company would have the benefit of servicing its customers from other plants, sacrificing lead distance, but servicing the customer and gaining market share. I made a big statement earlier on in my commentary. We sold 0.3 million tons a day as compared to a million ton a day of all India. That speaks.
Right. That's definitely huge. Sir, I just want to understand when we look at the demand supply for the sector, the supply side, we look at a INR 500 million-INR 520 million kind of a supply number. Do you think that the tail might shrink and this overall number might come down in FY 2021?
Of course, the tail might shrink. Those are the 1 million ton and the smaller players, also 2.5 lakh ton, 500,000 ton capacity players will shrink. You will have larger players like UltraTech and other larger players investing in capacity because there is a huge potential. I believe that we will see a large CAGR growth in India for a long period of time. These projects which are under execution are very cement intensive and time consuming.
India will have a long sustained period of demand and capital intensive nature of cement industry will not let smaller investments sustain. We have the capability of investing and putting up greenfield expansions at a cost of $60, $70 a ton or even lower. It will not be possible for everybody.
Mm-hmm. Right. Sir, if I may squeeze in just one small question on your government project orders. Have you seen any great pricing pressure over the last one year?
No. Government is focused on project execution and fast tracking projects. No pricing pressures. Pricing are generally long-term contracted prices with the government projects.
Sure.
I'm really happy. Actually, this is the most sensible thing that the government is doing to generate employment, to bring back labor to project sites. That the government is now releasing payments to the large contractors on time and pushing the pedal on execution. Let's not talk about yesterday and day before or in the last few days of COVID, but general, the underlying current is that we want to increase the project execution at the ground level so that employment generation is also there and labor is available.
Atul, just to add up on. You said rightly, unlike last year, this is not the case because all projects are practically running. Yes, number of labor might have reduced because of some sites, say now maybe 60% labor may be working. Major projects like road, metro, all projects are on.
All projects are on.
Even if I talk about Bombay, the Coastal Road Project is on.
Is on.
The government is fully committed because it has linkages with the employment also.
Thank you, and all the best.
Thank you. If the person from Dolat Capital is still on the line, 26.59+ 1.41 is yes, 28. The number reported is 27.78 million tons because 0.22 is again elimination of domestic sales, our cement supply to Sri Lanka. It's an elimination only. The numbers are not wrong. Yeah, go ahead.
Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead.
Hello. Hi, sir. Good morning. Can you give some sense, like you gave a color of how infra is doing on demand side. Can you give some sense of how bad rural is as we speak? Because the impact on rural this time has been much more than what it was last year. If you can also give some sense of how our volumes would have dropped in April over March. Any sense of that will be very useful.
No, I don't want to comment on one month, one day, one hour of sale. Let's watch this quarter go by. Too unpredictable. I know my April numbers, but I'm restricting myself from commenting on them because let's say June picks up and whatever work was lost in April or in There's a work loss. There's a construction slowdown, no doubts about that. We'll come back to you with the exact numbers at the end of the quarter. As for infrastructure, K. C. Jhanwar already mentioned, and yes, all sites wherever possible, work has not stopped. This lockdown, slowdown or curfews are not an economic lockdown. Economic lockdown is where you have to shut down everything. That has not yet happened in the country. Infrastructure is growing. In Bombay, you see your coastal road project continues. Highways continue, work on metro is continuing. Everywhere, work is going on.
At a slower pace, but work is going on.
My question was more for rural. What kind of impact we have seen on the rural demand this time?
I don't have a daily number. Yes, there is a slowdown.
There is a slowdown. Atul, just to tell, the slowdown, obviously, because we all know there are lockdowns across the country in different parts. There is a slowdown, but it's not a slowdown where there is a huge, very poor kind of thing. Yes. Obviously, with all this kind of pandemic environment, there is definitely a slowdown. March and April, always there used to be different.
Yeah. April will in any case be lower than March. March is a huge month. Even if I did 99% capacity utilization in March, in normal circumstances without COVID also, April would not have been 99%.
Yes. That's a normal trend.
Second, Atul, can you give a sense of region-wise how the pricing moved in March over December? I know overall number is 1%, but can you give some color on region-wise how it moved?
I'll give it to you offline.
Sure. Okay. Okay, great. Thanks. That's it from my side.
Thank you.
Thank you. The next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Hi. Thank you for taking my question. Sir, two questions. Firstly, on the market share gains you talked about the initial part of the year, you benefited from supply side issues which other plants were facing. I think, every quarter- after- quarter, UltraTech has been gaining market share. In the recent quarter, there has not been any supply side issues. What really has been driving the market share gain for UltraTech and which regions in particular? If you can throw some light, that would be helpful.
Gaurav, compliment. Compliment sometimes. We had a capacity utilization of 100%+ in the eastern markets, 90% plus in all the other regions, and a shade under 90% in south. South is always supposed to be laggard, but just a shade under 90% in south. That is the kind of demand, that is the kind of euphoria in cement consumption in the country. UltraTech is the only company. There's no other company which is in that situation, which our diversity of the spread that we have in the country comes to our advantage. We are able to service customers from anywhere.
Right. Sir, second-
Atul, if I may add, the best part is the serviceability, Atul.
Yes.
We can service from central to east, from west to north to east. Maybe at certain costs, but yes, the serviceability is always ensured with our size and scale.
Yeah. Gaurav, we have focused on gaining market share. Theoretically saying, not losing a single order.
Understood, sir. Sir, second question. A great move on dividend of increasing the payout. Just trying to contextualize this in terms of the percentage of free cash flow, it was probably still 10%. That will probably be the case even going forward because of good confidence on the future cash flow. What is the kind of a gunpowder you want to have on the balance sheet to have that optionality of any future inorganic opportunities in the balance sheet?
My aim is to go net cash on the balance sheet, and irrespective of any gunpowder, if I have to leverage for a year, my free cash flow for one year will be, let's say, INR 10,000 crore. We will deleverage and come back to net cash in a year's time if we were to leverage. Having said that, we would carry a INR 10,000 crore plus surplus on the balance sheet for any exciting opportunity.
Understood, sir. Thank you so much. Great set of numbers.
Thank you.
Thank you. Our next question is from the line of Madhav Marda from Fidelity International. Please go ahead.
Yeah. Hi, sir. Good morning. Am I audible now?
Yes, Madhav.
Yeah. Sir, I just had one question. On the fixed cost side, we had an INR 500 crore saving this year over the last year. I didn't fully sort of understand. You said that in FY 2022, we'll maintain it at the same level as FY 2020, is it? That's what you said?
Yeah. Ankit, correct me, Mukesh. My fixed cost for FY 2020 was close to INR 5,500 crores.
Yes.
Yeah. If I were to do an inflation on that INR 5,500 crores, I should be inching towards INR 6,000 crores at the end of two years. We will maintain INR 5,500 crores.
We maintain INR 5,500 crore in FY 2022. Okay, wonderful.
Yeah. That's the way I count my chicken.
Got it. Okay. That's all from my side. Thank you.
Thank you. What happened?
The next question is from the line of Sumita Srinivasan from ICICI Prudential AMC. Please go ahead.
Hi, sir. Congratulations on a good set of numbers. My question was on the WHRS capacity that has been announced. I think the result mentions that we expect to go to almost close to 300 MW by the end of FY 2023, which is more than double of the current capacity that we have. Is this mainly coming up in the new expansion projects that are happening? Will this come up along with the expansions or after completion of it, and what would be the CapEx for this?
All the expansion that we are doing, the integrated plants, we are taking in WHRS in parallel. Today, we have reached 125 MW of WHRS, and by 2023 or middle of 2024, WHRS would be at 304 MW. The incremental investment, Ankit, Mukesh, can you guys give the number?
Around INR 1,800 crores.
That is the part of overall investment on WHRS.
Atul Daga, if I may add, because wherever new sites are coming, it is part of our CapEx plan announced. No additional CapEx.
No additional CapEx. It's part of the announced CapEx. Yes.
Understood. Okay. What would be the cost benefit that we would be likely seeing from this, and would that be visible from FY 2024 onwards, if my understanding is correct?
Yeah, it will be visible through 2022, 2023, but if you want to annualize the benefit of 304 MW, that will be in 2024. The cost, WHRS will become about 25%-26% of our total power consumption. I'll give you all the levers, you can do your own math. On the current network, our power consumption is about 1,200 MW, and this will be 300 MW, 304 MW of WHRS. Current cost of power without WHRS would be INR 5.5-6.5 a unit.
Less than INR five.
Let's say INR five a unit is the grid power or our thermal power.
The WHRS power will be INR 0.50-INR 0.75 a unit.
Okay.
25% of my power will cost INR 0.75 a unit, and 75% of my power will cost, let's say, INR 5 a unit.
Understood. Okay. Thanks, sir.
Thank you.
Thank you. The next question is from the line of Bhavin Shah from Enam Holdings. Please go ahead.
Yeah. Good morning, Mr. Daga and the entire UltraTech team. Excellent performance across FY 2021. Sir, two questions. What was the premium cement now as a percentage of overall total cement sold by UltraTech?
About 7%-8%.
How it has moved over last year?
Over? Last year.
How much was it in FY 2020?
Oh, sorry, it's not 7%-8%, it's about 10% now. Last year, I think it was 8%.
And-
Yeah. There's talk about two.
Okay. Any internal targets how this will move going forward as you're planning ahead?
We are looking at going up to 15%.
By when, sir?
This is on the current new products or value-added products, and the company is working separately on identifying and bringing out newer value-added products.
Okay. Sir, just before the second wave hit India, I think majority of the Indian got impacted in April, May. Most of the cement industry projections were close to industry projections of 15%-16%, and obviously UltraTech being market leader expected to grow ahead of that. Your internal projections on industry still stand there, or what will be your view going forward?
I would count pandemic as a temporary slowdown. It's an unfortunate one, but I will want to count it as a bad blip. Two months, we should come back, and I'm scared of reading about the third wave, and I don't know how long it will go, but we have to take it in stride. If by June things become normal, fingers crossed, people are saying by May 15th, things will start improving or just start subsiding. Let's say June things improve, and then we are back on track. The industry is back on track
Okay.
You have to see the project. Now, let's say you're in Bombay, right? Yeah. Coastal Roads Project, they have to complete it, and they will push the pedal. Whatever slowdown has taken place will be wiped out. You'll be back to normal speed. The project life is not reduced. The quantity of cement required in a project, the work involved in a project is not going down. It's only a temporary setback in the pace of execution.
Sure. What about the individual home units consumption? That forms a very substantial part.
It's going up.
Okay. Using the pent-up real estate demand, last six months, what we saw a big pickup in real estate.
Will come back.
will eventually relate to. Okay.
If you have started a project, you have done the roof or one wall, you'll not leave it there. The moment labor is available, things at home are all right, things in the neighborhood are normal, I am confident of stepping out and buying cement. I'll go out and buy cement, get my contractor back home and do the job. That's the IHB segment.
Sure.
Let's be honest. Today, I am scared. Personally, I don't want to call an electrician inside my house for any repair work or a mason or the pest control guy. When things normalize, we'll start calling. Similarly, when things normalize, the work which has stopped on my house, which I'm building in Timbuktu, I start work there. That's the general philosophy, right?
Sure. Last question I missed out, you said you want to maintain a net cash of INR 10,000 crores. That is net cash in the balance sheet or you spoke about liquidity-
No.
You want to maintain about INR 10,000.
Liquidity on the balance sheet.
Liquidity.
Yeah.
Technically, you want to be a net cash company, but you're not giving any figure on that.
Yes.
Sure. Okay. That sounds good. Thank you.
Thank you.
Thank you. Ladies and gentlemen, as there are more questioners, we are extending the call by 15 minutes. Thank you. The next question is from the line of Girish Choudhary from Spark Capital Advisors. Please go ahead.
Good morning, both of you. A couple of questions from my side. Firstly, on the RMC business, if you could also share the margins which you're making and on the capacity utilizations for the year and extending the capital employed in this business just to get a sense on the return profile of this business.
The last question first, you will fall out of the chair if I were to tell you the return on capital employed in an RMC. It's a very high number. Second question was on, it will go above 25%? Yes, sir. Of course, above 25%. Yeah, it'll go way above 25%. Second question was on margins. Margins, we would have 5%-7% over grey cement.
Okay.
On a transfer pricing. That I clarified. It is on a transfer pricing. RMC is one of the biggest customers for my grey cement. RMC marketing team is separate and the grey cement marketing team is separate. Grey cement marketing team sells cement to RMC at the best possible price, and then they earn a margin of 5%-7% over grey cement margin. Third point on capacity utilization. There is no concept of capacity utilization in RMC because the transit mixer is not allowed to move 24/7. We run maybe 13 km- 15 km distance because we don't want the material to set. We don't go by capacity utilization percentage. RMC plant might be 30 what cubic meter? Million cubic meter, what do you call that in English?
60.
60.
60 cubic meter.
60 cubic meter plant. That's the sizing of the plant, depending upon the customers that we want to service. Capacity utilization is not a number to track.
Got it. That was very helpful on the RMC bit. The other question was that I had a follow-up on the premium migration, the earlier participant asked. What we have seen is that in the recent past, we have seen increasingly many players focusing on this and also talking about premiumization of products, moving to 10%-15% and also targeting closer to 20%. UltraTech, if you see, has the highest priced premium product, which is UltraTech Weather Plus. Do you think this can slowly get commoditized or let's say, can there be some pricing pickups in this part of the product profile?
See, in this space, there's always an early mover advantage. When our product has established itself, it is very difficult for somebody else to substitute. As more and more players copy us, yes, there will be some bit of discounting on the current pricing, but we will have a premium positioning in this product also. Jhanwar, would you like to add something?
Atul, because fundamentally, because the brand has its premium tag. Even if somebody, new person is coming in this product range, our premium on the new product should continue to command in the market.
Yeah
the practice in the market.
sir, lastly, if I may.
Can we take one another question? I've already extended the call. Let me take other questions, please.
Sure. No issue. Yeah.
Thanks. Yeah.
Thank you. The next question is from the line of Arijit Dutta from Axis Capital. Please go ahead.
Congratulations, sir, on strong set of number, balance sheet leverage and high dividend payout. Two question from my side. Considering cement prices moving up in latter part of Q4, and the full inventory impact in cost will be realized in Q1, can you give some guidance on how EBITDA per ton increase will be currently versus Q4 level without considering the operating leverage part?
Yeah. Arijit, you are asking me to talk about Q1 2021. I don't want to give you any details.
Some guidance?
I don't believe in giving any guidance. Whenever we meet one-on-one, I'll explain trajectories and show you directions, how things are moving. You make your conclusions.
Sure, sir. We'll connect up then.
All right.
Thank you. The next question is from the line of Sanjay Parekh from Nippon India Mutual Fund. Please go ahead, sir.
Yes.
Mr. Parekh.
Yeah.
Please go ahead with your question. Your line is in talk mode.
Oh.
Move to the next question, please. He's on another call.
The next question is from the line of Prateek Tayal from Antique Stock Broking. Please go ahead.
Yeah, thanks for the opportunity, sir, and congrats to great results. First question. When you said that utilization of Nathdwara was 85, Century was 90, was this for annual numbers or for per Q? What are the-
Quarter. I told you about quarter numbers, yeah.
Quarter numbers. What would be the annual profit per ton, EBITDA per ton for these assets now, for FY 2021?
Well, Nathdwara, yes. Nathdwara would be about INR 1,500 a ton. The Century asset is very difficult because they are totally synchronized with our existing network in the same markets. Nathdwara being a standalone entity. Yeah?
We used to target something in the range of 900- 1,000 for Century.
Yes. From there, I think I have already reached above INR 800. Now INR 60 will be realized from MMDR royalty. INR 64 will come as arrear . INR 865 will be there. I'm sure with some pending improvements, brand transition that are happening, we will cross INR 900 for sure.
Sure. Just second question on your gross debt. We did some absolute gross debt reduction by INR 5,000 crore as you mentioned. Our reported gross debt took only INR 2,500 crore lower for FY 2021.
What happened was, I will tell you, we paid off INR 5,000 crore. We had done a raising of U.S. dollar bonds, which was INR 2,900 crore. Net number will be less. We had also raised an NCD during the year, which was about INR 1,000 crore. Gross debt level, you will not see an INR 5,000 crore number.
Sure. I'll get back with you. Thank you, sir.
Thank you.
Thanks.
Thank you. The next question is from the line of Kamlesh Jain from Prabhudas Lilladher. Please go ahead.
Yeah. Thanks for the opportunity, sir, and congratulations on good set of numbers. Sir, one question on the part of CapEx. Like say, I do appreciate that COVID volatility or uncertainty is there. How much CapEx can we consider in for FY 2022 and 2023?
Sorry, you're asking for what? How much CapEx cash flow?
CapEx. Yeah.
CapEx spend this FY 2022, we will look at INR 4,000 crores-INR 5,000 crores. That will be the bulk of our cash flow. FY 2023 might come down to about INR 3,000 crores. It is largely because of the expansions.
Sir, secondly, on the cost part, sir, we have done phenomenal work, particularly on the energy and the freight, which is the bulk of the cost. Sir, going forward, if I see the imported coal cost, it is flat quarter-on-quarter, $76 or dollars. Going forward, say two quarters or three quarters, so from the current levels, what could be the cost increase we can see for UltraTech?
I don't think we'll see cost increases. Cost should come down. Diesel, of course, is not under our control. Luckily, we don't consume petrol, which has gone up to INR 100 a liter. Pet coke will come down. This is what our reading of the international supplies is.
Sir, given the current prices sustained, what could be the Like say, as we had moved to coal to at around 61%. Taking that into consideration, I do appreciate that on the freight cost we can't comment, and their impact has been visible. On the energy cost side, how much could be the incremental move which we can see?
No. What I'm saying, the incremental might be $50 here or there per ton, but not more than that. July onwards, it cannot be cast in stone, but second half of this calendar year, fuel prices should come down.
Okay. Lastly, sir, on the overseas. We have done roughly around INR 250 odd crore EBITDA there. That's also far better as compared to what the headlines had been there that in Middle East market, the market has not been that strong. Do we see the sustainability of the INR 250 crore EBITDA there in overseas operations?
Yes. I'm glad you asked about our UAE operations. The brand is very well established. We would have more than 25% of the market share in the UAE. We are the best performing cement company in the UAE.
Okay. Thanks a lot, sir. Thank you.
Thank you. Ladies and gentlemen, we will take the last question from the line of Vivek Geda from HSBC Securities. Please go ahead.
Hi, sir. Thanks for the opportunity. Firstly, I just wanted to get a sense of the volume group and pricing trends for UltraTech by regions. I think a few people have alluded to that, but I actually may have missed that.
I didn't get your question.
I just wanted to get a sense on the volume growth and pricing trends for UltraTech by region.
By region. I think somebody else also had asked that question. Let me give it to you offline, Vivek.
Got it. Secondly, just wanted to get a sense that with RMC and BPD being your long-term growth engines, what kind of ROE would you target for the consolidated business on a medium to long- term from the current 15%?
Great question. Lovely question to end this session today. We have reached an ROE of about 15%, and I am looking at taking it at least two or three bps higher.
Any time frame that I may estimate?
By 2025.
Got it. Thanks. Thank you.
Thank you.
Thank you.
Thank you.
Ladies and gentlemen, that was the last question. On behalf of UltraTech Cement, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.