Ladies and gentlemen, good day, and welcome to the Ultratech Cement Limited Q1 FY 'twenty one Earnings Conference Call. We must remind you that the discussion on today's call may include certain forward looking statements and must be therefore viewed in conjunction with the risks that the company faces. The company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent development, information or events or otherwise. As a reminder, all participant lines will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded.
I now hand the conference over to Mr. Atul Daba, Executive Director and CFO of the company. Thank you, and over to you, sir.
Thank you. Good evening, ladies and gentlemen. First and foremost, I hope and wish that your family, friends, and colleagues have been safe from COVID, and I pray that all of us get out of this crisis safely and quickly. With a big unpredictability and uncertainty about what will happen tomorrow, and surprisingly, the world is united in its stand on dealing with COVID, which is irrational and with utter disdain to self preservation and well-being of the society. Lockdown are lifted by the regulators and the masses start celebrating, and what happens after that, well, you all know it.
The scariest news article that I have read is from MIT on the July 9. It said, India will have two point eight seven lakh COVID cases a day by winter twenty one if there are no remedies found before that. In these challenging times, this quarter has been quite unique. Companies who did their business continuity plans well have weathered the storm so far and with what, Amash? Numbers speak for themselves.
For cement industry, demand has been buoyant since late April, and the industry started operations. Industry witnessed demand pick up in East Central, North, Tamil Nadu, and Kerala markets, while weak demand persisted in Western India, Andhra, Telangana, and Karnataka markets. Cement consumption has found its way into the rural and regional markets since the heat of pandemic was felt much more in the urban markets at that point in time. In the markets, we believe, will continue to thrive in future months as well. Our retail share in overall sales for the quarter has increased to an all time high at about 78%.
Malaysia is picking up development activities as part of the typhoon rehabilitation program. West Bengal, with elections approaching, will keep the momentum on project execution and thus consuming cement. We also we are also seeing large projects unfolding in the northern markets. This segment is gradually improving. It has gone up three x from April, but it's not at its peak.
Fingers crossed that things could stabilize or divide with return of migrant labor. Talking about Algertech, we recorded an effective rebirth of only twenty two percent, which in current COVID times, we are not so unhappy about. The restated numbers for the period up to first October twenty nine will reflect a higher rebirth. This is purely on account of the appointed date of merger of Century Cement being fixed at twentieth May twenty eighteen compared to the effective date of takeover being 01/2019, clearly reflecting the strong equity of our brand and its market potential, the strength that we derive from a network of more than 95,000 channel partners. Yes.
That is what differentiates men versus boys. Even prices remain resilient during the quarter before witnessing the season time during the end of the end of the month end of the month of June that entered the monsoon with held held held high on prices. Average prices increased about 7% for March. As we expected, most of the expansion plan across the industry are moving cautiously. We have not seen any additional capacity going on soon this quarter across the industry.
As as for Antogec, work on our 1,200,000 tons downfield expansion in Bihar and West Bengal is going on. There will be delays. There are challenges in terms of labor availability and material supplies. We are now targeting to commission these plants somewhere in early next financial year. We also expect to commission the 2,300,000 tonne Dalmar Shifur Tinker plant in Uttar Pradesh in the next fiscal year.
I'm glad to tell you that we are on track in getting approvals from the government. Total cash flow on CapEx this year will not be more than INR 1,500 crores. Bulk of the investment is towards return based CapEx projects, which includes 66 megawatt of WHRS projects, stood across seven plant locations, daily sidings, there are ongoing 1,200,000 ton, town field expansion, phase two of the Bada mining unit, the chart with gold block. There is a bulk packaging terminal that we are doing in near Mumbai. Ready mix ready mix concrete plants, and other normal maintenance and modernization topics.
I mentioned in the past about our endeavor to dispose of noncore assets. And to that effect, we have completed our transaction to sell the 92.5% share in a cement subsidiary. We held these assets in our books as assets held for disposals, and hence, its P and L or capacity has not been part of our operating performance. The same proceeds which we expect to be received in August, will help reduce the net debt of the company further. We are working on other non core assets, but at this moment, I don't have anything concrete to tell you.
Cash flow management is a must to talk about, and it has been a hallmark of our company. We have shrunk our working capital by over 600 crores this quarter. This excludes the one time provision that we have had to make for prior period adjustments. We will continue to maintain a tight hand, on our overall cash flows. I would don't expect this reduction to repeat in future months.
Sustainability, I direct joins a growing list of companies adopting science based target initiatives, which was called SBTI, as part of its climate commitment. We are committed to build our business in line with below two degree world under the policy agreement. To talk a little more about sustainability, we have achieved 19.14% reduction CO2 emission levels in f y twenty over the base of 02/2006. Water positive score has increased 2.8 x in f y twenty, and we are targeting to reach about four x this year or early next year. All of you are watching the fuel costs very closely.
Cement industry from India and Brazil, which is coal and pet coke, which has cost a run up in the spot prices of fuel. We are not expecting any future benefit further benefit in terms of reduction in fuel costs. The cost seems to have added for now. What we can what we continue to work on is improving our internal efficiency on a sustainable basis. Added to that, our green power share in total power mix base for the quarter has increased to 14% from 10% last quarter.
Busy prices have been continuously increasing since May 20. Average all India unit unit prices are higher over 15% as compared to the prices in the April. Although the average for the year remained more or less at the same level as March. Hence, we did not have any adverse impact on logistics cost during this quarter. But the increased diesel prices will have an impact for the industry in the coming periods.
Over its control is another important aspect which I
should talk to you about.
As we have mentioned in the last call last quarter, the efforts in cost reduction has gone through, it is evident in the numbers for q one. It enhances our confidence on the ability to generate a 10% reduction in overheads over the last year for sure. This quarter, the total fixed costs were down 31% over the previous year, reducing thus reducing the impact on our P and L of lower capacity utilization. Sensory assets, the integration efforts have continued in spite of the slowdown this quarter. Capacity utilization has been robust.
I mean, in we've also touched about 70% plus in in phases when lockdowns are getting lifted. EBITDA per ton profile is almost, you know, reaching a thousand rupee mark. We have reduced our net debt further by about 2,200 crores this quarter to $12,009.50 crores in India. We expect to receive the funds from sale of China units, China unit in this quarter, which will help reduce the leverage further. In addition to that, we have a loan of INR 700 crores in our overseas company at a cost of about 1.5%.
Our India net debt to EBITDA on the basis of twelve months performance is at 1.4 x as compared to 1.55 x previous quarter. Let me just clear clarify on the one time expense that we have had, and it happens only in India. State governments get incentives to invest in their state and then try and muscle their way out of their commitments. This quarter, we have recorded an exceptional expense of $1.57 4. To give you the history, that incentive given in the year 2006 or 2007 has been reversed with interest.
Unfortunately, we went up to those approval, but unfortunately, Supreme Court also ruling favor the state. The new and a new petition that making a full provision for this liability Does not impact in any way the company's operating performance, where we have delivered 28% of operating EBITDA margin and an EBITDA per ton of 1,353. The impact of this reversal will not be there in future quarters because the incentive which was given is not no longer, available. It has already been exhausted. In the end, let's just discuss briefly about what lies ahead.
Well, your guess is as good as mine. The crisis brought about by this pandemic is far from over. And now the local lockdowns have thrown in an additional layer of uncertainty. On the positive side, real markets have been good so far. Monsoons have been also equally good.
In most parts of the country, Khai crop has been favorable, showing was much higher, which will mean that the real cash flows will continue to stay strong. And in a bid to revise the economy, government will fast track its spending on infrastructure. Most of the infrastructure project are are now operational, but operating at a much lower capacity due to labor availability issues. Keeping our fingers crossed, in the end, I take this opportunity of thanking you for joining us today. Stay safe.
Stay blessed. Thank you. Over to you for questions.
Sure, sir. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. 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.
All participants are requested to limit their question to two per participant. If time permits, we will take the follow-up question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Bumika Naya from IDFC. Please go ahead.
Yeah. Good evening, sir, and congratulations on a great set of numbers with the strong that we've witnessed. Sir, I just wanted to understand the July volume trend and the market trend a little better. You know, in your sense and interaction, how are you seeing the on ground demand with Montrose setting in and the pent up demand being largely exhausted? Is the demand trend still continuing to remain healthy, or are you seeing, you know, Google coming off?
If you can give some more color on, you
know, by when do you expect institutional demand coming back? That's question number one. And on, you know, debt, we've definitely seen a very strong deleveraging in the past nine to nine months to a year. A lot of it has also been a lot of working capital driven. So is that now behind it and incrementally the debt leveraging will be more operational?
And, you know, what kind of non core asset sale can further help in terms of the entire deleveraging?
I'll take the second question first, And before that, thank you for the company's numbers. Looking at the release, we have squeezed the tides to the bone. And as I mentioned in my commentary, don't expect further removing working capital. That's the math I think we can do. We might want to pump in some more working capital depending upon how the markets shape up.
On the non core assets, there is a unit in Dubai and loan outstanding to this company in Europe, which is a noncement company company called three d fiberglass. Okay. Our intent is to bank, there will be loan and realize whatever we can realize from that loan. On the fiberglass industry, whatever I understood, that particular unit, it is to automotive sector and windows. Both the both the markets are down.
Both the sectors are down, and COVID is also there. So it's we have not been able to find buyers as of now. Dubai unit is also not not able to find investors to buy the asset. We will try for some more time. Otherwise, maybe for this this quarter, we will try and, otherwise, integrate it and, you know, start operating it as part of our own capacity.
So that's as for the design as it is content. And I think we can synergize because there are some advantages that we see in that dividing. But we will, you know, wait for this quarter before we do the final call. On July, you know, today, if you see the rain clouds in Mumbai, it's pretty heavy rains. Last week, you know, it was totally dry.
Mhmm.
I knew knew that it would be raining here so badly today. The uncertainty is very high. Now what is happening is, we tried on July, alright, you know, continue the momentum that we got from June.
Mhmm.
Is that you know, in your sense? But as we are progressing, it's a normal monsoon slowdown that would take place. Last quarter last year, July, September, period, we were operating under a new COVID and normal monsoons. We were operating in about 60% capacity utilization. Monsoon is there to, you know, is a weak period in any case for cement industry.
The challenge that we are facing the industry is facing is local lockdowns. That becomes a problem because, you know, a project which is going on in, let's say, Canada or Bangalore. I barely, you know, the state government puts a lockdown. No movement allowed. It it kind of puts a very urgent break on the sales.
This Right.
Unpredictability is not in one hand, not not in my hand. Otherwise, if the unpredictability was not there, seems to be fine. Okay. And, Rodney, you still
have 60% utilization? Or, you know, as you said, that is what we were Would it be a similar utilization? Would we be lower or higher?
That would be the overall number. I don't want to comment on that, and I don't know. Honestly, I don't. Because tomorrow, if there's a major lockdown, we are always shooting up to 50,000 cases a day in India. If there's a major lockdown happening, then things will go haywire.
Sure. And on pricing, sir, what is the average of one to 21? Are they largely holding on, or are we seeing a correction?
Yeah. Once in correction, four to 5% correction is normal.
Lisa, wish you all the best. I'll come back in the queue. I have
more questions. I'll come back. Thank you.
Thank The
next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Hi. Good evening, Atul, sir.
Good evening, sir.
Getting into this, you know, this quarter June, there was I mean, whatever interaction I had with the industry, the outlook was looking far weaker than what the outcome has been. Less in your case, the decline is a restricted 22%, right, in terms
of volumes. Now
can you just elaborate on? I understand the rural and the retail bit which help, but who is the end user or, you know, where is the cement exactly, you know, going in your assessment and, you know, given that there has been such a huge surprise on the positive side, so to speak?
You can elaborate on that. It's when I said our retail share has gone up 78 two seventy eight percent, not only ours, practically everybody else or whatever else have been declared. Everybody's retail share would have gone up dramatically. Blended cement shares have gone up dramatically because retail sales only blend it. And where this material is going is to the individual home builder in the remote areas.
What will happen is migrant labor normally goes back in batches. You know, a family of seven, ten people, few people will go back, few people will stay back in town, you know, urban areas, and they keep on locating their home visits. This time, everybody has landed back in their remote areas, in their hometowns, and are building their next room, next house, or, you know, whatever work had to be done. In the fear, because COVID is playing heavily on everybody's mind, social distancing requirements are playing on the mind, and cost of doing construction is far lower. Oh, sorry.
Yeah. I mean, land cost is insignificant or not there. It's only the construction cost that one has to increase. So we've seen retail demand, which is in the what the what cement industry call IHB, individual home builder demand, drive bulk of the cement consumption and cement demand. Right.
Not seeing we did not see we've been in metro towns, Mumbai, Mandalini, Bangalore, etcetera. I know real estate companies. We have started work towards we got permission in the idea of April, and they started getting permission slightly fifteen minute later. We started to work on project sites and had to stop completely. What also happened, the moment that Mylan labor got up to, you know, opportunity to move out, we were an exodus of labor.
Companies like L and T, L and T had meant, mentioned on their call, they were they were holding back a number of people one and a half or 1.6 lakh. They do want across all their web public sites. But the moment the opportunity was available, people left the sites and went back remote areas to their hometowns. Malaysia is not enough. The government paycheck is not enough.
So they went on to whatever project work is available in remote areas. This is not a road or a bridge or a station or, you know, a metro construction in remote areas, but these are individual houses.
Sure. Two two points from here, Atul, sir. One is the the fact that, you know, these, let's say, workers have moved from urban to rural. Does that worry you from an urban market perspective given that, you know, these projects which they build on here in urban are far more cement intensive compared to, let's say, the rural piece? And the second thing is, you know, when they have built these IHBs, some part of this is pent up from, let's say, April and, you know, whatever happened March, and the other part would be some advancement from later of part of the year.
So on the demand side, do you worry or you think that, you know leave aside, you know, what the comment you made about the localized lockdown. Let's assume that, you know, if that was to kind of, you know, to to, you know, go past, would you think that, you know, things will get incrementally better as we move into the, you know over the next during the course of the year?
Yeah. So so let's quickly let's leave COVID aside. Okay? Right. And so we change the normal, manner.
The pent up demand that we talk about or returning demand that we talk about will continue because we it all is linked to the old cash flows. Factory sales are going up. Two year sales are going up. People will invest in two wheelers for individual post two wheelers or entry level four wheeler for the purpose of, you know, social distancing, instead of traveling, public transport. Practices are going up.
Agribing terms are going up. Government has also increased the MSP. So there's a huge amount of support which is going in in the towards improving the new cash flows. Our change check, our lipstick tells us that newer demand will continue. There will be these hiccups.
Now let me bring COVID into place. There will be these hiccups. There are small small towns where I've heard that markets which will open seven days a week have had to start operating smaller towns, you know, very remote towns, which are operating only till afternoon, Saturday, Sunday close, because they're having some cases. And they don't have as good facilities as whatever level of activity you may say that city like Mumbai or metro towns have. So if COVID spike keeps happening, there will be, you know, blips of slowdown, and then demand will be there.
Another positive sign is that people are realizing COVID is not so bad after all. Not so difficult because staying at home and getting cured is also a very good possibility, that's what people are resolving to. But what it does is is there's a, you know, patient in a family in a remote area, that family is into a lockdown. There is a social boycott because of which work suffers. Talking about all the markets, we believe that now and we we are also reading in the news newspapers that labor is coming back.
And, yes, we we are seeing labor come back. The big labor come back will happen only after the one when all the ugly work is over. They have to now go back again somewhere around February, March for the April harvest, and then in the monsoons. From November onwards, we will start seeing long trade demand come back. The the institutional projects will start stabilizing with whatever level of of project site which was working with 100 people, and if they are, you know, an organized real estate player or or large contractor, they will continue the project site with social distancing or whatever else they have to do with slightly lesser number of people, work will continue.
Okay. Okay. Thank you very much. That's all, sir, for the elaborate explanation.
Thank you. The next question is from the line of Nitin Arora from Access Mutual Fund. Please go ahead.
Hi, sir. Good evening. My first question is more on the core real estate sales. I remember in the last call, you talked about a proportion, and I'm talking more from perspective on, let's say, a client like L and T, Shapunji, more on the real estate side. Has that volume started to picking has started to pick up?
Or how do you see that? And as a percentage, I'm talking on a very rough basis, let's say, if we, in a normal scenario, it's about 80,000,000, 90,000,000 tons of volumes. I think the hardcore real estate as such would be around twenty, fifty million tons. Is that the right number to look at it, sir?
I normally look at the urban real estate if that's what you are alluding to to be about 32, 40. I'll give a binary. 30 to 50,000,000 does not more than that. As of now, they are suffering because of labor availability essentially, because of labor availability and local lockdowns if they hit them.
Okay. And so once if I understand your view. So if, let's say, mean, it's difficult to time the time line when the urban markets really open up in full way. But that's where the existing the project developers who are still rich on their balance sheet and still not declining, being our large customers, that pent up will eventually come once this market starts opening up, if they are not getting too much volume right now or it's an on and off situation.
Is that the right way to conclude?
Yes. Actually, will not be able to because the developers, there is a whoever whichever developer has a strong balance sheet can tap into the projects or, you know, very good deals, I should say. So this will this is also helping, and I'm speaking with some dealers with experience. This is helping the larger developers consolidate further. This is helping them strike between the landowners or the developer which had who had bad balance sheets given upon projects more rapidly.
The the deals are more highly available in numbers. But all depends on how many deals would one want to sign up. There will be uncertainty on this pandemic is not going down.
Got it. And just last question on the on the debt reduction part direct on a directional side. Given that capital expenditures still remains on the lower side versus what we used to do on an average even for this year and I think next year also, if this pandemic is assuming to be continuing for the next two, three months, we'll almost reach towards FY 'twenty two. Directionally, we look at more I understand you said that working capital is something which we need to infuse also at some point in time to generate more sales and support dealers and distributors. But directionally, if you look at from a two years point of view, given whatever the CapEx level you have been envisaging, do you see the debt reduction to the tune of about INR 2,000 to INR 3,000 crores on a minimum side?
Is that the right way to conclude?
That's right. We will go at this next week. We don't want to give any numbers, but we are clearly running at mid speed to reduce leverage. Remaining opportunity, as I said, is 700 floor liquidation, which has not yet secured in the cash flows. There is more from the other nonoperating assets.
The the new capacity, which will come up, the 1,200,000 ton. We'll start generating cash flows from day one. With 2,300,000 ton, which was part of the JP deal, by the way, which what which we consciously bought as a unit stock in NJT. That's 2,300,000 tons of clinker sitting in the outside of the market, which is which is Eastern UP. It will start generating zero more cash flows.
Sure. Sure.
So We will we should run towards one x or lower very fast.
Just last, if I can guess one more. We saw you and that's purely on our channel indication. We saw in MP, you really growing very high in Madhya Pradesh. I understand because of Bara as well, which is it's got commission and all. It's more of market share gain, which you grew very fast.
I mean, what we get from a channel, you're growing almost 30%, 40% in that market in June, maybe higher than that. Is it more of market share gain? Or is it more of increasing dealer and distributor, which is getting more volumes in? If you bet you know, not to answer it, but I just thought I'll try.
No. It's from a low base. These are not present in Madhya Pradesh at all because, you know, we are supplying from Vikram's domain, which is more closer to norm. So we were on a central player for a very long time, and it's only after JT acquisition we have got new JP and 20. Both acquisitions are added to our, you know, capacity.
Yes. And, yes, dealer addition, dealer network creation is an important element of any b to b play. And I I need it to be a number of 95,000 channel partner, which is all India, which is normally achieved.
Got it. Thank you very much, and all the best. Thank you.
Thank you. The next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Hey. Great execution, sir. Thanks for taking my questions. So two questions. Firstly, what would be the like for like
Sorry, Gaurav. We have lost you.
We lost you.
Gaurav, you're not audible, Gaurav. So it seems there's no response from the line of Gaurav. We will move to the
next Yeah.
We will move to the next question that is from the line of Gunjan Pratyani from JPMorgan. Please go ahead.
Yeah. Hi. Thank you so much for taking my question. Really commendable delivery, sir. On the I had a question specifically on the cost side, and I do note that in the presentation, you've marked out 10% reduction on the overhead side.
Now when I look at the expenses on the other expenses, it's been a very material reduction. Is it and and is it is there definitely a combination of some deferment of OpEx, like, which wouldn't have been high in this quarter and some of the cost program that you're working on. Is it possible for you to give us some sense in terms of absolute savings that we'll we are targeting and what we've achieved on that overhead overhead cost control program?
So we've achieved a 21% reduction in this quarter over last year on fixed overheads, which was something $9.89 crores, if I remember it right, as compared to $12.31 crores 78 last year. Now deferment, and this is not necessarily a deferment, but, yeah, it was not required. Yes. We did not take any expense. Travel, for example, is not a deferment.
It's it's it was just forced. So today, when we have achieved that 20% with 21% reduction, I'm sure that we will continue to maintain a minimum of minimum 10%. Other expenditures, you know, various selling variable in it. Like, packing bag packing cost is part of my other expenses. We're selling over it and continue this is also part of other expense.
So they are with volume down, they are naturally going to get them. And that's why I'm not going to replicate 21% for reduction in the future quarters, but the reduction plan that we have put in place for a sustainable sustainable longer term, minimum ten fifty is our idea.
Which would be almost about going by the number 1,200 crores a quarter, kind of a fixed extent. It can be close to about $1.20 odd crores a quarter. Can you staff cost just clarification on that?
So twelve thirty one, you know, full year numbers you need to see instead of one year number, and I think last year, our full year overheads were close to 5,000 crore units. Is that correct? Yes. Yes. Yeah.
So close to 5,000 crores, I would do minimum 500 crores on an annual basis. Oh, no. Okay.
Got it. That's great. And on the fixed on the cost side, the other question was on the variable. Now when when I look at the comments on the power and fuel, I sense that directionally you're not expecting very meaningful savings on that cost lighter item. And on the freight side as well, given where we are where the diesel price has been moving, are there any significant savings that you're expecting there, you know, anything from the M and A or logistic optimization?
Optimization will continue because the capacity utilization goes up. We will get the benefit of logistics optimization. And as I mentioned, our green power investment, which today has reached 20%, that must be costing maybe, No. 15 or less than 20% of the current cost of fund. That green power contribution because of the investment in WHRS and solar will go up to about 20 to 23%.
So that will help us reduce the fuel cost. Added to that, there will be a continuous effort on reducing the part time consumption of power consumption of cement. Now, you know, as we move forward, the incremental reduction is not in big chance, but smaller units, smaller denomination, but those are the efforts which will lead to a sustainable reduction in costs.
Okay. Got it. But, lastly, if I can just put one question on the transaction, which you mentioned, which has been concluded in last quarter. Are there any outstanding liabilities to meet or the it's the net cash flow that comes to UltraTech, that $120,000,000?
So $1.20 was, like, easy. That would make it 900, crores. We have to pay withholding tax in China, and they they that asset had a losing, also. Net of everything, you know, after taxes, we should get 700 crores in India.
Got it. Thank you so much. I'll join back with you.
Thank you. The next question is from the line of Sumangal Nevitta from Kotak Securities. Please go ahead.
Yeah. Good evening, mister Dada. Sir, couple of questions. Firstly, a clarification. So the INR 100 crores cost reduction which we are claiming from the overhead cost roughly.
So that's one should expect that to be achieved in FY '21 or it's over one to two years kind of?
2021.
Okay. Okay. Got it. The second, with respect to the 700 crore which you just mentioned is what we get in India. So this is net of the loan which is there against that asset, or is it just net of the withholding taxes?
No. No. No. Net of everything. 700 cash in India.
Okay. Okay. So then it looked like, overall, when we were talking about thousand crores from divestment, it's only 700 crores from one asset itself. So it looks like we've I mean, crossed our overall, expectation in terms of divestment revenue. Right?
No. This has nearly 700 does not necessarily mean that I will get you know, I'm not really hopeful on how much I can get from Dubai, and I'm still working on it's been a long time already, still not being able to crack a deal on the, European loans. So we will, I'm sure we will cross thousand dollar number for sure. So I have two more assets to do. And
Okay. I'll just mhmm.
Sir, second question with respect to the work or overall maintenance CapEx. Now this year, the guidance is around thousand crores, but we also have growth CapEx with respect to the grinding units, WHRS, and and something with respect to the core block.
Guidance is 1,500 crores, not thousand. That is one. And with this 1,500 crores, obviously, includes my balance spent on the 1,200,000. The chart code is coming to a close, should get commissioned in March 21. 1,200,000,000.0 expansion also.
Lot of spending had all had already happened, so we have both of that and the WHRs. So more than we see capital requirement is, you know, 700, 800, more than
that. Okay. And this run rate is I mean, this is a normal normalized run rate given the vintage of our plans. So without any growth CapEx, $7,800 per year is what we should build in in future?
On the current capacity, yeah, 800 seven fifty to 800 is a reasonable modernization or maintenance CapEx because we we spend on a regular basis. That's fine.
Okay. Got it. Thanks, all the best, sir. Thanks.
Thank you.
Thank you. Before we take the next question, we would like to remind the participants to limit the question to two per participant. If time permits, you may join the question queue for any follow-up. The next question is from the line of Gaurav Ratharia from Morgan Stanley. Please go ahead.
Hey. Thank you for taking my question. Am I audible, sir?
Yes. You are now.
How are you today?
Sir, just a question on the retail volume on a like for like for the period you were operational during the quarter, what would have been the growth compared to the same period last year? Because we can't compare the whole quarter. One month was completely locked down, so it doesn't make sense to compare the on a quarter on quarter for last year.
You're right. You know, effectively, we had sixty eight days of operation, and then twenty third April permission started coming in. They were also, you know, full of controversies that they would put people management team behind bars. This was a COVID case in any of the plants, so we did not start the plants, ASAP. I have not completed the number of sixty days of sale of same period last year.
And, obviously, if you would do that, it's a classic case of correcting the base. Right now, you are correct connect using a ninety day base and comparing a sixty day performance, which is showing 20% video. And if you were to correct that, the number will look more rosy. The other way to give you some perspective, while the average capacity utilization for the quarter was 46%. Is this correct?
Is it 46%? Yeah. Yeah. So we I will be looking at the sixty odd days of capacity utilization. The capacity utilization was upwards of 70% for those two months ago.
Okay. Other than that, I'm I haven't completed, the data for last year's payments.
No, sir. Actually, was specifically asking this for the retail volume just to understand how much of the retail can actually offset any weakness in the institutional demand during the current year. But that's fine. I mean, I'm good for the answer. Just other question on the other expenses, sir.
The overall overall overhead reduction is 500 crore. This is something which one should build for on a sustainable basis going forward beyond FY twenty one also?
Yes, please.
Okay. Thanks a lot. Thank
you.
On a current capacity on a current capacity, pilot grows. If the capacity grows, then obviously expenses will have to go.
Okay, sir. Thank you.
Yes.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Thanks for the opportunity. So my first question is if you could provide some detail on this $1.57 crore of Exceptional. For what asset was this and for what duration was that?
It was for expansion and then nine g expansion. We had got the incentive. Actually, I I don't know whether I spoke in my commentary in detail. The incentive at that point in time was 75% of that in case the investment size ticket size is more than 100 crores. Clearly, the investment on the brownfield expansion and the greenfield quarterly was way higher than a 100 crores.
And that's why there was a special committee in Rajasthan, which approved the 75% incentive for these two projects. 75 bad incentive of 75%. The incentive was exhausted, I think, by 02/2012, because both The US were doing very well, and. Incentive was exhausted by 02/2012. And now in 2019, which is Thomas said, no.
We should have taken only 50% for whatever their analysis. I don't want to I know what happened, but long story short, they they ruled that 75% they gave by oversight, and it should be restricted to 50%. We challenge that matter in high court cost during the Supreme Court Supreme Court ruled in their favor, but the only saving raise is that they're using the interest rate to 12%. Exactly. That answers.
That that's useful, sir.
And my second question is on pricing and discounts. I think I have done a wonderful job on the cost side. But specifically, I look at the pricing head, what should one make of this Looking at pricing and discount both in tandem. So other management which have come on the call, basically, what we hear is there will be reduction in price differential between the invoice price and the selling price. They are also talking about stricter working capital when it comes to dealers, more of cash and carry.
Just comment to you on that side would be quite useful.
No. I didn't know. What's the question then? I don't understand the question.
Sir, the question is regarding discounts. Basically, the decision, which is a practice which is in the market. I think a few companies that are already reported that they have indicated that this is something which is good lever, and we are playing on it. And it actually helps margins. And the in the terms, which the companies have with the dealers, it's now more on cash and carry.
And there are no more fees which are there at the dealer level. So, sir, if I look at the results overall, have done a wonderful job on the cost side. But, honestly, I was expecting something
have done an excellent job on the and we have done an excellent job on sales price also, which we're not explaining anyway.
Right. It's just some So
what happened I actually, I haven't understood your question, but what is this rate difference? What happened is you can we cannot keep on changing the price on a daily basis. The invoice that is getting deleted. So the the in the there's a market practices, you will issue an invoice at x per brand. And if the dealer is not able to sell in the retail market x plus his margin, then the dealer gets compensated with that rate difference.
That is what is called the rate difference discount. Right. Of course, there are a huge amount of debt provision, including books, etcetera, etcetera. Might be making some extra money also. Can't do that out.
But this is prevalent maximum in Southern markets. Okay. Northern markets, which should be stopped with? West, some month in a while, it happens when East doesn't have it. It's I think it's predominant in South India.
Okay. Okay. Sir, probably, I'll give you a call offline for this. I I wanted some more details. I'll take it off.
Thank you so much. Thank
you. The next question is from the line of Naveen Sahade from Etelwife. Please go ahead.
Hello? Am I audible?
Yes. You are.
Hello? Yeah. Thank you. Thank you, and thank you for the opportunity. So I think that the last time when we spoke on the call, I think sometime in May, after your q four results, you had mentioned around the call time that the capacity utilization for Orthotech stood at around 65 odd percent with fees operating at a much higher level of 8590%.
If you can, can I just request, like, you know, a similar commentary of the current status as to how do you see your capacity utilization for the company, let's say, July or as we speak? And then some color on the region region by utilization fee?
Naveen, I think talking about capacity utilization for a two month period and spreading it on a three month period that it says in the policy. Second, we have an average of 46% capacity utilization for the full period. The low would be maybe 40%, and high would be about 70%, Leaking from market to market, obviously, 70% would be the the Eastern markets. This is on a ninety day. But if I were to look at on a sixty eight days or sixty five days of operation, the overall numbers will jump up.
I don't know how you want to No. Okay.
Let me okay. Let me put it simply. June would have been, like, you know, maybe July as we speak, what could be the capacity utilization, so to say? Because QP last year was 64% or or around that level. So if
Right right now right now, as of today, is running pretty well, And I would imagine it is between 6065% already for the month of July. But don't multiply it by three or average it to three because we don't know how August the remaining two days of July and August and September will pan out.
Yeah. Yeah. Sure. That's clearly dynamic, and I'm not getting into that. That's anybody's guess, and I'm not here trying to get it.
Thank you for this. Second, sir, if I may just ask, how has been the utilization at Century Textiles? Are they similar to what we have done at a company level, which is around 46, 47%, or are they materially different?
Right. So that recent plan would have gone higher. The western plan would have gone back. For us, it is becoming very difficult, especially in the Scentile acquisition as compared to the JP acquisition because each plant was a standalone, you know, in that geography that we entered. It will give details on the Sinti acquisition.
The management plan is within 20 kilometers of our existing our footprint. Mayer plant has two other plants within forty, fifty kilometers, which is. The Chattin, the vacant plant is is also close to two other plants that we have. It's only a Sonar Bamba plant, which is a tiny, which is standalone by itself. So what happened is my customer is the same.
Our our objective is to deliver same quality of cement from any plant. The moment I have achieved the quality, equilibrium, the individual plants knew their sanctity. I hope I'm able to explain this. So like, my customer, an LED is doing which is doing the mobile app for expressway. Some would be expressway.
These are the plans that are applying, wherever I have material, it's supplying. So it is very difficult to segregate between them. And, hence, I think now we are operating optimally on a regional basis. If my east is operating at 70% or 80%, all my plants will operate at the same level. Does that explain?
What is the revenue from the white segment in RNC business in the quarter?
R and C business was about 148 crores. And INR $2.50 crores? INR $2.50 crores.
You very much, sir.
Thank you. The next question is from the line of Indrajit Agarwal from CRSA. Please go ahead.
Hi, sir. Thank you for the question, please. I just have one question.
Can you
give us some blended payment percentage in this quarter?
I'm sorry?
The blended percentage.
Blended blended blended 78% or
So just to understand,
Raj, can you give an exact
28%.
28%. Oh, it's correct. 78%.
Sure. So we have been at about 68% last year. So once the trade deal or the non trade or the institutional sales come back, it will have some impact on the raw materials cost as well as the blending goes down. Is that the correct understanding?
Absolutely right.
Sure.
Thank you.
That's all for me.
Okay. Thank you. The next question is from the line of Kamlesh Jain from Prabhudas. Go ahead.
Yeah. Thanks for the opportunity, sir, and congratulations on good set of numbers. Sir, just one question on the CapEx side. Like, I know that given the performance we have, we can have the, like, say, excuse for that as well. So but, like, say, last quarter, we were having a CapEx guidance of around thousand crore.
So this quarter, we have increased it to, like, 1,500 crore. Is it only because of the project cap and guidance in the last quarter or,
like, say, was,
the guidance has increased?
Yeah. So our algorithm has reduced. You know, in the April, we were looking at very grim future. We are now wanting to expedite our debt. So we have increased our cash flows the cash flow requirements on return based CapEx, which we were going to do in any case and like a WHRS.
And as I mentioned, 66 megawatts of WHRS work has started, and that's why we have to do certain more, you know, fast tracking on, some CapEx. Not doing field blast, but fast tracking on some CapEx.
Okay. And, sir, how much
potential do we have for this WHRS? Because some of the peers, I know you would be very well able to get that, are having 40% at like, a 40% share of the WHO. So are we looking at the same level of share as as well from current levels?
Yeah. We reached about 15%. My guess is after the current phase of expansion, we will go up to about 30%. I'm not very sure. I'll ask the patient's the best to confirm.
20 yeah. Yeah. 20%. More than that. It's under around 20%.
We will then examine. See the advantage of players, you know, we are definitely excuse me. The advantage that we have and then enter into the new jobs, a single location where they could plan very well. And we are place like Rajeshwitz, which has four lines. A single location, six and a half million ton capacity.
You have to do the, regular role of identifying space where to put additional WHRS capacity because we have large turbine and a boiler which has to be put in place. And We need to keep on adding that that there's no more juice left to put up the. I don't have a number in plan or the opportunity that exists, but there is still room to expand our WHRS network on our current capacity.
Thank you, mister Jin. Would request you to join the question queue for any follow-up. The next question is from the line of Rashi Chopra from Citigroup. Please go ahead.
Thank you. I just wanted to check-in where does the India demand growth demand decline for the quarter stand in context of your 22% organic decline? That was one
question. Decline as in?
As in India all India volumes. I didn't understand or understand where you where you stand in respect of the all all India volumes for the first quarter. I do have a 22% decline if I exclude Century. So what is all India? I mean, the industry data.
Industry data. So we are looking at industry doing about thirty thirty three or 35% decline this quarter.
Okay. And this you know, you explained all this in some of prior questions, but, essentially, when we look at the, you know, when we look at the 35% decline in India right now or if, you know, if you wanna talk about Altertec specifically, if anecdotally, we had to kind of ascribe some percentages to the end use segment. So or just maybe an as more straightforward type of low cost housing data or the IHP, what, you know, what is the date of decline there? You know? So I'm just trying to figure out, like, what segments are likely to see some sort of recovery and how we can extrapolate that to the second half.
IHP, you know, is growing today. And when we talk about ISB, we talk about retail demand, which is smaller towns. It is there is no ISB in Numbai. Okay? So in my hypothesis, the housing demand is they were at 50% excluding the tier one pound, which is another 10%.
So 60% is the total hourly demand, and that 50% demand. In that 50% demand, 55% is in rural demand. Rural demand, we internally, and this is our internal definition, we classify any town with a population of less than 30,000 people as a rural town. Those markets are growing. And you will believe that Central India has grown for us this quarter over the same period last year in spite of doing only sixty days of whatever, sixty five days of operations in this quarter.
So the the base is not correct, but on that base also, we have grown. Central India is a rural market, and it's not an institutional market. It's a ISB market. The m p m p u p market. Going forward, you know, I'm giving you all all kinds of analogies and explanations, and I think you will be able to derive a conclusion.
As I mentioned, we are not we are seeing a big spending coming up.
Government support is happening.
It is not only their government program of low income housing, but it is because of that typhoon which had hit. There's a good amount of rehab work which is going on. Meanwhile, the moment they left lockdown and they get the situation under control, they are going all out for development, you know, that'll be our institutional, spend happening in elections. I think the elections are just a few months away, if I I don't remember the exact period. But five, six months away, I if I'm right, you have you don't want spending happening in the world.
These are the two big chunks in the Eastern markets. West, unfortunately, continues to struggle. West, whatever demand we are seeing, let's say, 40% or 42% capacity utilization that we're seeing in the Western market is largely institutional or largely government spending on the big projects. Metro, you will see still some work happening in Mumbai, wherever they they have sites working. The road project is still happening.
So institutional demand is going up, continuing. Now the base is so volatile that the percentages will look totally different. If my overall, all India demand basket shrinks and IHP continues to grow, and IHP will occupy a higher share this year. Does that answer a bit?
Yeah. So just to if I understood this right, so ISB is roughly about 35% of India's demand, and that you're saying is up on a year on year basis. All India demand on a on a whole is down about 35%. Is that okay to like, a fair summary?
Yes.
Okay. Okay. Thank you.
Thank you. The
next question is from the line of Rajesh Lachhani from HSBC. Please go ahead.
Yeah. Thanks for the opportunity. So two questions from my side. One, in earlier during the call, I heard that in July, the realizations are down by 45%. Can you please confirm that?
That will be question number one.
Yeah. Confirm.
Okay. I'll that.
Yeah. And secondly, Ashwin, we have also seen employee cost decline during this quarter. Even quarter on quarter, we have seen a 14% employee cost decline. So just wanted to understand how much of this is sustainable and how much would reverse in the in q two and going forward?
Okay.
So these these are. That's it from my side, sir.
Thank you.
Thank you.
The next question is from the line of from Goldman Sachs. Please go ahead.
Sir, thanks a lot for taking my question. Basically, you know, if I understand correctly, it is obviously, you know, the trade segment that has actually driven the the demand. Now what I'm unable to understand why this apprehension about strong growth continuing because, you know, project work will only get better from where it is. So far, if projects are operating at 50%, they will only get to 60% or 70%. And given the monsoon and as you said that rural crop has been good, that momentum should also continue.
So what I'm unable to relate to is that why should there be an apprehension in terms of positivity on demand? Because whatever has happened in terms of a month locked lockdown across the country is probably the worst. Even if there are pockets of the country which see sporadic lockdowns, why should the momentum not stay positive? Is your concern that project work, etcetera, could not begin for a long time or new project awards could not happen? Because it seems the worst is over.
From here, why should there not be a positive momentum is what I'm trying to understand.
I am very positive. We have increased our CapEx by 500 crores. We are going ahead with our capacity expansion plans.
Okay.
Do any uncertainty which we are worried about what is the classic example of lockdown? I was just alluding to the election the election spending, which everybody is aware of what happens. Government's hand start tidying. They can't do an inch. What happens is if I have an RNC plant sitting out there, handling raw material in, and new trucks to your site.
Don't keep casual labor with you. You just ban the casual labor. And to mobilize all resources again, takes time to mobilize, demobilize again. This is the uncertainty which we are struggling with. Otherwise and in the last quarter, I think I had already mentioned that this financial year could be the best ever in terms of profitability for cement industry.
Volumes, we are in the current pandemic times. The month of July, we are doing 60 to 65% capacity utilization. The month is already coming to an end. So this is under the belt. And soon it's doing pretty well in the country.
Generally, everywhere we are seeing wet stress or floods also for that matter. In that scenario, if July, we have done 65%, there's no reason why we cannot keep on the same momentum. And if that happens, well, it's paid our time. I I hope you read that message. It's a good message you guys given.
Fair point. And state finances also do not worry you,
in a in a big way.
No. No. They don't. No. They are we can have a offline discussion, and I have heard this.
I don't have my own resources, but I heard this from prominent economists and bankers. There is a government cash surplus cash pool line? The minimum of cash available in the country, don't worry about it.
Thank you. The next question is from the line of Saurabh Thakkar from HDFC. Please go ahead.
Yeah. Hi, sir. Good evening. This is Rajesh from HDFC. Sir, Hi.
First on the yeah. Ali's pension, what is the status on that projected? What's Ali's pension?
I will start work in the next financial year positively. So that that project is going on stream for sure. Because we can get we have mines. We have to commission it, otherwise, we lose the mines in December 22. So we will start work on it next financial year.
Okay. So by '22 end, do you expect that to be commissioned, or it may extend into '23, FY '23?
No. It's in FY '23. December 22. Sorry. Okay.
'23. That's '23. Calendar '23. Condition by October, December 22.
Okay. And, sir, on the volume card, when you say that, like, like, 23% volume decline, would you please explain how that works? Because, I would assume that your, you know, the century last year, when it's from the record that when you are checking the model impact, you would have taken only proportionate volumes of century in the reported numbers that we have?
For from twentieth May twenty eighteen. No. April let the like for like period April, June 19. So that has full ninety days volume. But this this quarter, you have only ten sixty days of volume.
That's another dimension. Yeah. Any acquisition that takes place.
It is
not Denali's and then that we acquired. We acquired Denali's event in November 2018. And when we reported out when you when you analyze our performance for October, December 18, there was no impact of the Nani that you calculated for October, December 17 in the base. Any acquisition that takes place, any inorganic, not just in an event. When a capacity acquisition takes place, you start counting the benefits from that period.
Either you, debit or credit me for the performance of the previous management and the previous team. That doesn't happen.
Thank you, Mr. Dikul. Request to join the question queue for any follow-up. The next question that is from the line of Amit Murarka from Multidar Raswal. So
my question is on cost. So what I understand is the cost reduction has been quite phenomenal. But some of the spends like repairs, which you have curtailed this quarter, by when can this come back? Because at least, normally, we are in the maintenance season anyways. So can we expect normalization of the repairs and maintenance costs in this quarter?
And secondly, on the power and fuel side, if I gathered it correctly, you mentioned that the power and fuel costs will not fall further from 1Q FY 'twenty one levels. While my understanding has been that the low point in Pesco was about $60 and the last quarter average for us was $70 So should there be some follow through benefits of that $60 Pesco into 2Q?
It could be there, but if you look at the quarter, because current purchases, which are happening for $75 $70.75 dollars also will hit the next quarter, and bulk, you know, weighted of 70, 75 will be higher. It's too early to say unless, you know, prices suddenly crash. But as of now, the prices are still around $75 as compared to a low of 55 or $60. The other thing that happens in the petco prices, this is a landed price. Okay.
Ocean freight is a very high component. At times, it becomes 50% also. Currently, I think it is you said it's around 50%. Ocean freight is 50% around. Yeah.
So, you know, the, according price might still be $35, but Ocean Freight, when, it will Ocean Freight has fallen dramatically because there was no movement. Now OceanPeg is picking up. They are backing up the price the freight rates also. In fact,
there was a hardly condition happening between the 55 to 60. It was a rate only. Yeah. There are hardly buyers available in the market.
Yeah. Okay. I'm I'm supposed to be seeing, I mean, you know, $70 becoming $60, which is $10, might impact $50 or, you know, 70 becomes 75. Right? So it's just, let's say, 15 rupees a ton.
Yes, sir.
And also, like, this quarter was also kind of hampered by the lower working run rates or the utilization rates, which would have hampered efficiency. Could you quantify what what could be the impact on, let's say, what the 2% to 3% additional consumption energy consumption because of that?
Yes. I think we have mentioned it in the presentation also that what is called a frequent start stop causes a high conversion, but I don't have a separate number for that. Maybe, you know, I'm getting this kind of review offline. That will work it out. We haven't got the other number.
Okay. And then the repairs and maintenance, ma'am,
I mean, that would be not largely normalized this quarter. Right?
Amit, the important point to note is that powder consumption per ton of cement, which we had put down in the presentation, is down only if I remember it right. I'm trying to It is. It is down only. Yeah. It is down.
So it's not mentioned here, but the power consumption per ton of cement is down as of now. Yeah. There will be a benefit, in case the plants run, smoothly.
Worries. It's slightly down. But if you compare to q four, it is higher because of the interruption in the No. Okay.
Yeah. So could you quantify, like, what will be the impact of that interruption? I mean, just to interpret the context.
Muresh, between q four and, q one, how much is higher power consumption? About one and a
half unit.
One unit cost less than around 5 rupees Ethernet. Into, you know, 75.
So INR 5 per ton may be the cost.
Thank you. Mr. Request to join the queue for any follow-up. Ladies and gentlemen, we'll be taking up the last question from the line of Deepak Mehta from MetLife Insurance. Please go ahead.
Speak up, your line is unmuted. Please go ahead with your question.
No. I think he's dropped off.
In that case, that was the last question. So ladies and gentlemen, on behalf of Ultratex Cement, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.