Ladies and gentlemen, good day and welcome to the UltraTech Cement Limited Q1 FY 2020 earnings consensus 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 statement on the basis of any subsequent development, information, or events, or otherwise. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Atul Daga, Executive Director and CFO of the company.
Thank you, and over to you, Mr. Daga.
Thank you. Good evening, ladies and gentlemen. Welcome to the earnings call of UltraTech Cement for Q1 FY 2020. With general elections behind us, we all know and believe that continuity at the center will help stabilize the economy and bring growth to the economy. This is a temporary slowdown, which I believe is being visible across all sectors. We have seen, I would say, an unpredictable slowdown in the economy, as well as cement sector, which is part of the whole game. You must have heard several theories around it. Let me add my two cents to the pot boiler. Construction industry, the real estate sector, as well as the infrastructure sector, is one of the quickest drivers for employment of unskilled labor. With construction activities slowing down, it has had a cascading effect on employment and rural incomes.
Various states are facing a tight fiscal position, resulting in a slow release of funds for infrastructure projects. Our sense is that demand should stabilize after Diwali 2019. All the ongoing long-term projects, such as metros, roads, et cetera, will pull demand. We have seen improving sentiments in the organized housing sector in the tier 1 towns, with organized real estate players gaining momentum. There is a big vacuum in real estate in the tier 2 towns, which we believe will be captured by the organized developers in the longer term. Low-cost housing and affordable housing segments continue to grow, providing some support to the housing segment. It has always been and will be a key demand driver going forward. Let me talk about sand mining, which has become an area of concern time and again.
In Rajasthan since November 2017, the sand mining ban is continuing on major mines, which is impacting the construction activities there. Recently, High Court has given a decision that mines allotment are valid and mines can be operational after all required clearances as per NGT. We expect that in the next couple of months, the sand mines in Rajasthan should be operational. In the state of Andhra Pradesh, in the month of June 2019, the new government has imposed ban on sand mining, which is creating a barrier for construction activity in the state. The government is expected to introduce new sand mining policy in the month of September, which would restore construction activities to normalcy. In West Bengal, the state government has strict norms on movement of sand, which is keeping sand prices high and having an impact on construction activity.
Andhra Pradesh also has seen a slowdown in all state-level projects with the new government coming in. We believe once their review is over, the projects will kickstart work, and we should, as I mentioned, it's barely anybody's guess, one quarter, two quarter, it should start and come back into mainstream. Let me touch upon costs. Costs have been under control, thankfully. We do not expect any surprises in the near future. Petcoke prices have come down nearly 25% from their peak. UltraTech's average consumption price in the quarter was around $95, marginally lower from the consumption price of Q4 2019, which was around $98. The benefit of the continuously falling prices will reflect in future periods. For example, the current purchase price is prevailing anywhere around $75-$80 only.
Imported Petcoke supplies have filled the vacuum created by reduction in domestic Petcoke supply, thus not having any adverse impact on Petcoke. 70% of our Petcoke requirements are now being met from imports without any constraints. Besides Petcoke, we are also using high calorific value imported coal, which is economical at some of the plant locations. With capacity utilization going up strongly in almost all the regions in Q4, we were able to take price improvements, the impact of which is reflected in the earnings of this quarter. With monsoons, we have seen prices correcting a bit and along with a slowdown in demand. This is nothing unusual. This is a direct correlation between demand, capacity utilization, and prices. Let me look inwards. It's important to share the progress on our growth plans. First and foremost, on Century Textiles.
We have received the NCLT order approving the takeover of cement business of Century. This takes our total operating capacity in India to 109.4 million tons. We are awaiting completion of other regulatory approvals for completing the transaction, which we expect should get completed in this quarter. The mines transfer, which is underway, will attract additional royalty under the MMDR Act. UltraTech will be fully compliant with the MMDR Act. After inclusion of Nathdwara Cement in our network, our numbers were consolidated with no option of having comparative numbers. Well, you'll have to live with this phenomena for some more time. NCLT Mumbai has fixed 20th May 2018 as the appointed date for the transaction. We will recast financials from the date of 20th of May 2018 going forward, once the transaction is completed.
I can only assure you that our presentations will be as simple and as clear as possible so that you don't have any difficulties in interpreting and analyzing the numbers. Speaking about Nathdwara Cement, I'm pleased to inform you that the integration has been fully completed. The plants are fully synchronized with our existing operations. Nathdwara Cement has generated an EBITDA per tonne in excess of INR 1,200, and there is enough capacity available at the plant as and when the demand opens up. We have achieved a PBT breakeven for Nathdwara operations within two quarters of acquisition. However, at the current cost of acquisition, our returns are not really worth talking about from the acquisition. We are evaluating opportunities to liquidate non-core assets before the end of this fiscal year, which will improve the returns.
In the next few years, with the improvement in demand, there is always the option to double the capacity at Nathdwara Cement, which will help us generate a desired level of returns from this investment. The decision on Pali greenfield expansion has been put on hold for the time being. We will revert once the board takes a call on going ahead on Pali expansion. We, as a responsible cement player, keep our growth options open. The Jaiprakash assets which were acquired in July 2017. Some of you might require our guidance for these plants to be EPS accretive in the eighth quarter of the operations, i.e., April-June 2019. Well, we are stuck to our guns. The cash flows from the acquired assets have improved significantly. This quarter, the plants were operating at a capacity utilization of 68% and have become EPS accretive. We have generated positive PBT.
We have had a small setback in this acquisition, though. Nothing to be perturbed about. Bara grinding unit was under trial runs last month, but there was a breakdown during the process. The free of cost replacement parts have been ordered and are underway, and we expect the plants to get commissioned in Q3 FY 2020. Leverage, which is always an important focus area for us. Our focus on improving leverage has helped us to reduce net debt further by about INR 1,000 crores during the quarter. To be precise, INR 1,022 crores. Our trailing net debt EBITDA is at 2.24x as compared to 2.71 in March 2019. Our consolidated return on capital on trailing 12-month performance has improved to 11% for June 2019 as compared to 10% in March 2019. Our business and our balance sheet will remain sharply focused and cater to the needs of cement business only.
There have been lots of questions raised in the past, and hence I thought of making it very clear for everybody that we are very focused in our business. A small initiative, which I would definitely want to mention before ending this commentary, is on sustainability. In one of our initiatives, we have collaborated with our group company, Hindalco, to develop aluminum dry bulker vehicles, which can carry 10% extra quantity. This will support to reduce the number of trips for the trucks, which eventually reduce carbon emissions. Once this scheme is fully implemented, we will have three lakh trucks moving less on the roads, and that is our contribution to sustainability. We assure you of a long, sustainable future in UltraTech. With that, I hand over the session for questions. Thank you, and have a good evening.
Thank you very much, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may please 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. Thank you. The first question is from the line of Indranil Agarwal from Goldman Sachs. Please go ahead.
Hello, sir. Thank you for the opportunity. Two questions. First, on the demand. In your slides, you have mentioned several factors which has led to a weakness on industry demand. Can you highlight which of these factors are more transient in nature, and which do you think are at least structural in the near term, at least through the course of FY 2020 will be an overhang on demand?
Short term, Indranil, is slowdown in construction activities, as I mentioned in the commentary also. The housing sector continues to grow, albeit at a very slow pace. I believe that infrastructure growth will come back with gradual stabilization that we'll see in the economy. Infrastructure and real estate. Within real estate also, it's government-led, low-income housing and affordable housing. The good part about affordable housing projects is that affordable housing segment has started taking off now.
Have you seen, like liquidity was one of the concerns in the last couple of quarters. Have you seen some easing on that front at all in the last few weeks?
No. It's difficult to quantify on a weekly basis. I don't want to discuss the current operating quarter. April, June, we saw squeeze on liquidity because of election, because of all related reasons with elections. Things should come back to normalcy, as a layman, if I were to speak, should come back to normalcy. It's anybody's guess whether it happens in July or this quarter or at the earliest.
Sure. Thanks. One housekeeping question. Would you be guiding us to how much was the utilization for Nathdwara in this quarters?
Nathdwara was about 60%. Of course, we had a major maintenance shutdown taken during this quarter.
Sure. Thanks. Atul.
Thank you. The next question is from the line of Gunjan Prithiani from J.P. Morgan. Please go ahead.
Yeah. Hi, sir. Thanks for taking my question. Just a follow-up on this industry growth. Going by the trends that you're seeing in the market right now, would you say that the 6%-7% growth that we were looking for full year or I think even higher would be at risk? Is there any revision to the growth expectation for full year that you're looking at now?
As of now, Gunjan, I would still look at ±6%. Maybe you have to drop it by a percentage. That is what you would look at. All these projects which have been underway will not stop and will kick off. The latter half of the financial year will see or should see a phenomenal growth.
Even on a high base that we saw in March quarter?
Yes.
I'm just trying to understand because we do have a very demanding base as we get into the second half for the entire industry.
Yeah. Historically, if you look at January, March quarter has always proven to be the best quarter. The government spending kicks up because the government spending is also looking at their own budgetary allocations for the next financial period. There is a huge pace of activities typically in the January, March quarter.
Okay, we'll stick with the 6%, six, 7%?
Yes, 6, 7%. There's no decimal that I can guide to.
Sure. The second question is on the deleveraging and capacity expansion plans. If I got understood right, there's no new project that you've approved as such in terms of expansion.
Nothing much. No approvals from the board yet.
No Pali, no the Nathdwara additional expansion. This year, do you see we can have more expansion being announced, or the focus is going to stay on just consolidation of Century and deleveraging then?
My guess is it will remain focused on deleveraging and Century consolidation.
Okay. Just on this overall CapEx number, if you can give guidance what should be?
Roughly INR 2,000 crore for this fiscal year. There are some big projects which are ongoing, like WHRS, Rajhara coal block. There's a white cement putty plant which is ongoing. There is a bulk terminal that we are doing besides the Bara project, which is going on. Then there will be routine maintenance capital. Give or take INR 2,000 crore is what we would look at.
Okay. Last question. On the Century, you mentioned that there will be that fee under the new mining regulation. That is similar to the JPA thing, right? That there'll be additional-
Sorry. Yeah
around INR 60, right?
As of now, the current rate is INR 60 per ton. INR 64, sorry. Effective is INR 64.
64, the Century EBITDA margin, can you share anything around it? Where are they operating right now?
January, March was INR 670 EBITDA. Huh? January, March was INR 670 EBITDA per ton.
Okay, got it. Thank you so much.
March.
Thank you. The next question is from the line of Vivek Maheshwari from CLSA. Please go ahead.
Hi. Good evening, Atul sir.
Very good evening.
First, on the demand, your comment about 6% demand growth, that's for full year or for rest of the year, as in the nine months?
Full year.
Okay
of what I'm saying. Yeah, full year.
Okay. Understood. Petcoke prices, as you mentioned, have gone down quite a bit. Is there any inventory that you still carry the high-cost inventory? Second quarter, we should start to see the benefits of low Petcoke prices?
We will see improvement in fuel consumption prices quarter on quarter. Today, we don't have any inventory above $100. It is in the range of early $90s. Added to that, the procurement which takes place will help improve the fuel consumption prices for the next quarter as well.
Okay. This quarter, obviously, saw very strong realization, and you indicated about some pullback. Can you share where were the exit cement prices or realization compared to the quarter average?
Exit cement prices were obviously lower. You could mark indicative maybe 3% average across the country reduction.
3% from your quarter average?
Yeah.
Okay. Lastly, you mentioned about this CSR project with Hindalco. I fully could not understand. You mentioned something like 10% higher tonnage and all. Can you just repeat what exactly it is and how do you plan to go ahead?
These are trucks or bulkers. You know the dry bulkers, the vehicles which carry cement in bulk. These are developed with aluminum body, and that obviously helps them carry, one is the capacity has been increased. Capacity is being increased because lighter weight on the same chassis, it is able to carry a higher weight. On that basis, effectively for the same volume to transport, we require lesser number of trucks.
Are there any timelines here? Is this still an experiment?
No, it has been officially launched.
Officially launched. The benefit of this, we should be able to see in next quarter.
You count it next year. I would want to see scale to reflect in our numbers. Small number of trucks will roll out, which might not see too much, because in the long run, we are looking at three lakh trucks moving less. That's a bigger number. I would start counting my chicken only in the next financial year.
Sure. Just last bit on the same point. Let's say FY 2021. The plan is basically to get all the trucks which are therefore able to carry 10% more. Is that how you would plan it?
Wait, you will scare the truck operators. Let's not.
All right, sir. Looking forward to it. Thank you, and all the best.
Thank you. The next question is from the line of Navin Sahadeo from Edelweiss. Please go ahead.
Hello.
Hi, Navin.
Good evening, sir, and congrats on good set of numbers.
That's why you are depressed.
No, I'm not depressed. I sound like that? I'm sorry. I'm excited to see the numbers, definitely. My first question basically was, what were the consolidated volumes? Of course, you've shared 17.86 as the total volumes.
Yeah.
I believe you said Nathdwara, which include definitely Nathdwara at 60% utilizations. Correct?
Correct.
Just wanted to understand, what are the total consolidated gray volumes and white cement volumes?
18.8 is the total volume, including white cement of 0.315.
White is 0.315?
Yeah. 0.315.
Okay. Got it. Fair. Second, I just wanted to understand, you said your premium sales segment has grown by 24% in your presentation. Just wanted to understand, it contributes how much now of the total volumes? Is there a target we have in mind towards premium products? Also just an extension there that, how much more in terms of margins do these products contribute?
Sorry. Firstly, what is the target?
To be as high as possible, as much as the market can absorb. There will always be a challenge because there will be a market which is not interested in paying a premium. There are products which we have launched in the market, which are INR 50 to INR 55 per bag, higher in realization as compared to our own prices. Those are very niche products. The market will also remain niche. All the products, whether composite or these value-added products, we are still launching in various markets. I know I'm going round about because I don't have an exact number to give you.
Directionally, yes, we will be increasing the percentage share of all the value-added products.
As on date, these are.
Navin, I don't have a number immediately.
Sure. Okay. Just one bit, Bara grinding unit is scheduled for Q3.
Yeah.
Clinker is likely by when there?
We already have clinker available.
No, which is fine. We have surplus clinker, but along with the same project, there was a clinker-
The Dalla Super clinker. Happy to tell you that the MoEF or the Forest Advisory Committee meeting took place on 31st of August, has cleared the proposal. Now it should go through and if we are speaking in September, maybe April, June for sure, we'll see the plant commissioning.
Okay, great. Thank you so much.
Thank you. The next question is from the line of Madhav Marda from Fidelity. Please go ahead.
Hi, sir. Good evening. Sir, just wanted to understand on the demand drivers, companies have been talking about social housing programs, and I look at the government's allocation for the next four years, we get what the numbers are. If I just go through the budgetary documents and something I'm trying to solve for, if I look at the allocation that they made for the budget for rural housing, for example, they've allocated about INR 19,000 crores, which was close to INR 20,000 crores last year. Urban housing was about INR 6,800 crores, which was INR 6,500 crores last year. Net-net it's a 2% decline YOY in the government budget allocation for the next financial year. All I'm trying to understand is how does this step up in terms of demand for the next year? I'm just trying to solve for that equation.
Madhav, why I say the budget allocation, whether the government is able to exhaust that allocation is, if they are able to exhaust that allocation, that will be a wonderful achievement because they are growing rapidly. We have seen allocation targets getting missed, in spite of achieving huge growth. Over a current base, while the allocation is one aspect, looking at on a current base, they will keep on growing. That is more important.
Sir, that's what I'm trying to understand. They had a lot of growth last year, and if I look at the completion data which is available on the website, there's been a massive scale-up over the last three years.
Yes.
In this year, the budget allocation, of course, got stepped up as we went into elections. Now that number sort of seems to be leveling off or is coming down a little bit on the rural side. I don't know if there's going to be growth in terms of execution.
This slowdown, which you've seen, is because there have been delays in contractor payments. I have understood that beyond 31st of March, there was a major slowdown in release of funds. At a state level, you look at various states, whether it is UP, whether it is MP, whether it is Andhra, whether it's West Bengal, the state treasuries are running dry, and there has been delay in release of payments to large contracting companies, which has had a cascading effect on the project execution. I believe things will come back to normalcy. Payments will get released, and you have to give it six months for normalcy to come back, then you start seeing, which is where I was looking at post-Diwali, which is October or November. Post-November is when you should start seeing action on ground.
Okay. Great, Navin. Thank you so much.
Thanks, Madhav.
Thank you. The next question is from the line of Kamlesh Jain from Tribhuvan Realty Advisor. Please go ahead.
Yeah. Thanks for the opportunity, sir. Sir, I must congratulate that the industry has-
Excuse me, this is the operator. Mr. Jain, may we request you to speak closer to the phone? We are unable to hear you.
Yeah. Am I audible now?
Yeah, slightly better. Thank you.
Yeah. Thanks, sir. Sir, just one question. In this quarter, the industry has shown excellent resilience in terms of prices and the shipping. The way the demand is, if it continues to grow at a meager, let's say 4% to 5%, so how do you see the shipping in the industry going forward?
Well, any industry, nothing to do with cement, any industry operates on the pillars of demand, supply, and capacity utilization. Those pillars will have their forces playing
In which particular markets you see better pricing going forward? Like, say, in North, which all markets? In the eastern market, despite the fact that the capacity has not been there in last one and a half year, demand has been growing at a strong pace.
4.5 million ton of capacity got added this quarter in eastern market. Are you aware of that?
Yeah, it's more not led by the clinker-based capacity, sir.
True.
Despite that, we are seeing significant erosion in the eastern market in terms of prices. How do you see the reason why dynamics going forward?
I really don't know how other companies are thinking. We are more than 95% utilized. We are a small player in the East. We are more than 95% utilized, and we will continue to follow the market in the Eastern corridor.
Lastly, sir, are we still hungry for the M&A, sir, let's say some of the opportunities which are available in the eastern market, are we looking at those opportunities available despite the focus on deleveraging the balance sheet?
Any other question? Jokes apart, I will not be able to comment anything on that.
Thank you, sir. Great.
Thank you.
Yeah.
The next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Hey, good evening, sir. Two questions. Firstly, is there any difference in the growth for trade versus non-trade segment during the quarter?
No, in fact, we have marginally improved our trade. We are now at about 66% on trade as compared to 65%, previous quarter.
Okay. Have you seen any green shoots in the month of June and July, post the elections were over? Which would be the segments where you have probably seen some pickup in the demand?
Infrastructure and affordable housing. These are the two segments. There are state-level challenges which exist. Overall, if you were to talk about, these are the two areas where we see traction coming back in the month of July. In spite of monsoons, we have seen good traction in July.
Okay. Thirdly, sir, the Bara facility, will that be contributing additional volume for you or will that help you in saving some cost because clinker was already available with us?
We have surplus clinker, so it will increase overall capacity in the industry.
Okay. Last question from me on the difference between the consolidated and the standalone EBITDA. There was quite a bit of a jump in there. Any color or explanation there that will be helpful? Thank you.
Including UAE. Consolidated UltraTech Nathdwara, which had in excess of INR 150 crores of EBITDA.
Yeah.
Yeah, 156. It was in excess of INR 150 crores EBITDA from Nathdwara and UAE operations and Sri Lanka port terminal. All those get consolidated.
Thank you.
Thank you. The next question is from the line of Tanisha Mukia from Bank of America. Please go ahead.
Hi, sir. Thank you for taking my question. Can you please comment on demand outlook for the next nine months, specifically for North and for Central India?
Let me talk about Central first. An easier question. Central is very strong in demand. Barring the slowdown of April, June, I believe we should see good capacity utilization in Central India. In the northern markets, it will remain good. It will remain buoyant. Rajasthan has some challenges on sand mining. I would look at Jammu and Kashmir as a segment opening up with the new focus there. Lots of tunnels, roads, that kind of infrastructure. Defense-related infrastructure will start picking up in the J&K market. North markets will remain buoyant, but I will see stronger growth in Central markets.
Understood, sir. The follow-up to that question is, if I look at your presentation for Rajasthan, it just shows red across all the demand driver segments. Keeping that in perspective, could you comment on your pricing outlook for North India, and is there a scope of further price hikes post monsoons?
Prices, as I mentioned, will be clearly governed by capacity utilization, demand, and supply. Supply as in new capacity coming in. It's a natural phenomenon. I really can't comment. If suppose the demand just collapses, then obviously prices will collapse. If demand is buoyant, there's no new capacity coming in, which is quite unlikely, then you could see prices remain firm.
Okay. Understood. Sir, for Century Cement, do you plan to rebrand Century Cement into UltraTech Cement after merging the two businesses?
Yes. As we have done with all our acquisitions, we will be a single-brand company. We have to undertake quality upgradation, process alignment at Century plants. As we have mentioned in the earlier calls also, that one of the plants is very old. It's a vintage 1972, '74, or thereabouts. That is a plant which will take maximum amount of time for quality upgradation and rebranding. Other plants will be much faster. Give it a quarter or so, we should be able to rebrand and launch UltraTech from the remaining three locations.
Okay, understood. My last question is, can you elaborate what could be your freight cost savings or cost savings after acquiring Century Cement? How much EBITDA pattern improvement can we see in Century Cement?
We might not see too much of freight benefit because all the plants are co-located. Barring one plant, which is in West Bengal, which might be 120-150 km away from our existing location. Other plants being co-located, we might not see too much of freight savings.
Okay. Sir, what's the fuel mix in Century Cement right now, and how can we?
I'm sorry?
What's the fuel mix in Century Cement right now, and how can we-
Fuel mix of Century. I don't have that, unfortunately. The transaction has not completed. We have not yet stepped in. I don't have that information.
Okay. Sir, thanks a lot for answering my questions.
Thank you. The next question is from the line of Rajesh Lachhani from HSBC. Please go ahead.
Yeah. Many thanks for the opportunity. Sir, also my question is basically on demand. While the industry, as you have pointed out in your presentation, has contracted by three to four%, can you throw some color on region-wise demand breakup?
What would you mean?
Which regions have contracted more and which regions have shown some resilience?
In that sense, I've given a state-wise breakup in our presentation. If you have to look at, I think South contracted the most. Andhra was the state which contracted the most. We saw some impact in central market and Gujarat market. Sorry, Odisha as well. Sorry, I forgot about that. Odisha as well. These are the few states which come to my mind immediately. Others might be very relative, one against the other. Difficult for me to pinpoint.
Okay. No quantification. Can you help us with some quantification with regards to region-wise demand growth?
I don't have it, unfortunately.
Okay. No problem, sir. Sir, with regards to the current quarter, are you looking at some growth in the current quarter or even the current quarter looks like to be a muted quarter or de-growth?
Forward-looking numbers, I don't want to talk about, if you don't mind.
Understood. That's it from my side, sir.
Thank you.
Thank you. In order to ensure that the management is able to address questions from all the participants in the queue, we request the participants to please limit your questions up to two. Should you have a follow-up question, we request you to rejoin the queue. We move to the next question from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Thanks a lot for taking my question. My first question is, in your opinion, how are you looking at capacity addition over the next couple of years, and has that estimate changed given the strong pricing we've seen in the last three months in the industry? That's my first question.
Because of three months change or any performance during one particular quarter, next year's capacity addition or the year after will not have any impact because as you're aware, Pulkit, this is a long gestation cycle for putting up a capacity, six to seven years. Whatever is in pipeline will come through. My sense is we have seen a slowdown in the new capacity addition. People, whoever had existing mines, to do a brownfield will come to an end. You have to wait for auction mines, which slows down the new capacity addition instead of increasing the pace of new capacity addition. Last year, if you recall, we had a very small, I think 12 million tons of capacity, which got added last year. We have seen four and a half million ton already getting commissioned this year in the first quarter.
Give or take 15 million tons. I would keep my tab on a 15 million ton capacity getting added this financial year.
Sure. Thanks. My second question is, if I look through those state-wise demand colors that you have put in, a lot of those you've attributed to non-availability of labor. If I was to ask you to hazard a guess that out of the 3%-4% demand decline that you're talking about in the quarter for the industry, how much of that would be related to election, and how much is general demand slowdown that you see, which could reverse in this quarter and the subsequent quarters?
Pulkit, I don't know who in Delhi is listening to my call, so I don't want anything to happen to me. All right? There was a lighter rain, I don't have a breakup of how much to attribute to which factor. Everybody knows where the labor goes during election time. There's a lot of earning opportunity which the labor has during that period, which sees a scarcity of these people on construction sites. Construction sites are sites which offer employment on a day's notice. You land up at a site, and you can start working tomorrow. That is the scene which typically we see around election time when labor is not available.
Sure, sir. Thank you.
Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Thanks. Just one small clarification. You shared that Nathdwara EBITDA is around INR 156 crore. On the volumes, based on the utilization you shared, appears that EBITDA per ton is more than overall EBITDA per ton, which is around INR 600 odd rupees per ton. Is this the right way to look at this, Atul?
What can I say? Yeah, you have the numbers with you. You can do the analysis.
Okay. Second question with respect to working capital, given the liquidity tightness in the economy and higher prices, what sort of working capital buildup do we expect this year?
We have peaked out in working capital. Working capital buildup typically happens pre-monsoon for almost all cement guys. Now we should not see any further buildup in working capital. There will be one lumpy payment, which happens towards the MMDR advance royalty for the Century acquisition, which should be less than INR 100 crores. Somewhere around INR 100 crores would be that one element of advance royalty. Other than that, I should start seeing reduction in working capital.
Understood. All right. Thanks, and 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. You mentioned that you have held back on the Pali expansion, where exactly are we in terms of preparation, in terms of the land acquisition, et cetera?
Land is fully available. Environment clearance, all licenses fully available. It's a matter of the day the board gives us a nod, we can start civil work.
Okay. From that day, what kind of timeline-
12 months.
should we look at?
12 months.
Okay. Second question is on the Binani non-core assets. When can we expect the process to start if it has not started already?
It started already. We are in different levels of discussion for their multiple assets. I would want to see some color of money before the end of March 2020.
Okay. That's encouraging. As part of this acquisition, we also acquired some loans and advances. I think this is for the glass fiber business.
Correct.
I just wanted some color on, is it interest-bearing? If it is, are we getting the interest on time?
Yes, it is interest-bearing. No, we are not getting our interest payment. We are looking at cashing out on that loan at the earliest. Don't want to hold that loan on our books.
Right. We have to take a haircut. Is that understanding right?
Yeah, we'll have to look at a haircut. Yes.
Okay. Last question is, you mentioned about the quality upgradation as part of the Century deal to get it under one brand. What exactly will we be doing there to upgrade the quality?
Easiest one to tell you is to increase the strength of cement coming out of those factories to the same level of strength that we produce. Strength is the biggest thing. Besides that, the texture, the fineness of cement has to be identical to what we produce. That would amount to the quality upgradation.
Right. Would that mean a lower blending and higher cost of production?
Not necessarily, because there are lots of common costs. We'll have synergies in terms of procurement costs. We will have synergies in terms of clinker movement for them, because right now they move clinker from the Chhattisgarh plant or even the Maharashtra plants to their Sonar Bangla, which is a West Bengal plant. We will be able to serve them clinker from a closer plant. That, in fact, would be a small amount of logistic gain also, as somebody had asked me earlier on the call. The fixed overhead load will not be there. On an absolute basis, we will not have costs going up.
Okay, understood. Thanks.
Thank you. The next question is from the line of Dheeresh Bhatia from Goldman Sachs. Please go ahead.
Goldman Sachs.
Thank you. Sir, for Century Assets for the June quarter, what has been the EBITDA?
The results have not been declared yet. I believe Century's board meeting is scheduled for 12th of this month.
Okay. Can you give the RMC and the white and putty revenues?
RMC 580.
Okay.
White cement INR 410.
Okay, thank you.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, you won't probably give some color on Emami or CCI limits, but if I had to ask you the other way around, what is the sort of balance sheet parameters that we are looking at factoring, Binani Overseas will be there with us by March. What is the appetite that we have for inorganic growth?
Good question, Ritesh. You tried me, but I'm wide awake, so you won't catch me off-guard. Our balance sheet, all I can say is, and I've given this, what should I say, advance estimate also, that we would reach our debt EBITDA of below 2x for sure by the end of March 2020.
Sir, you said net debt to EBITDA of 2x by March 2020, correct?
Yes. Net debt to EBITDA will be below 2x as of 31st March 2020. That's what we are working towards.
Sir, this will factor in what CapEx?
2,000 crores of CapEx is already included. I think somebody had asked a question on the CapEx.
Correct. sir, including Century, this number would go up. Will the ratio of 2x still stand?
Yeah. I am absorbing Century debt, which will come on our books on account of Century.
Right. That's helpful. Sir, secondly, incentives as percentage of sales have increased considerably for us on FY19 annual numbers. In the annual report it's nearly 7% now. How should one look at this trend going forward? How is the cash conversion over here? Because the receivables are also moving up sharply.
Just for a second, I'm looking at my numbers. Should I quote the number? FY 2019 we had nearly INR 450 crores of fiscal incentives, and this quarter it's about INR 112 crores. I don't think too much of offline. The numbers are broadly trending the same way. In fact, when Bara grinding unit kicks in, the absolute amount of incentives will go up because Bara also has incentives attached to it. Second point that you raised on cash coming in on account of these incentives, they have an assessment cycle. The approval which is done in Q1 FY 2020, the assessment will take place after March 2020 only. The cash which is coming in is of obviously prior period. I don't have any, what should I say, abnormal delays. I don't have any abnormal delays in collection of our incentives. If that helps your question.
That helps. Sir, you indicated a timeline of April to June for Dalla Super. Is that correct?
Yes. April, June 2020.
Sir, this particular project, it has got postponed by quite along on the timelines. To my numbers, I think we have less quantum of clinker in Eastern India, and with Century coming in, it would only aggravate the situation. Sir, please correct me if I'm going wrong anywhere.
No. Century is already short in clinker. What was your point you made? I just missed you.
Sir, Dalla, you indicated that it will come by April to June.
Yeah.
I was hopeful of Dalla coming in a bit early, given we are short of clinker. In a way it is a bit subject to the blend in Eastern India. Once Century comes to the fold, I think the clinker shortage will only increase for us.
No. one is clinker shortage does not increase, and by the time my Bara grinding unit comes up, we will be able to service it with the surplus clinker that we have in the central market. To meet our requirements, Dalla Super will come up in April, June. We will be fully balanced. We are always fully balanced, and we make it sure that we are fully balanced.
Right. Sir, just to continue, last question. Sir, we are operating at pretty high utilization in North and Central India. You also did indicate that Bara could be serviced by the other kilns.
Yes.
Now we are in a scenario wherein we are talking about high not to go ahead with expansion either at Pali or at Binani.
Okay.Hello?
Sir, it's a good scenario to expand the capacity, then why are we not expanding the capacity?
It's a good scenario to expand capacity. We will expand at the right time, as I said. Today, if you were to look at, we have sufficient capacity available in North. Just for your reference, our total capacity in North India is close to 24 million tons, and we have sufficient room over there as of now. We are operating somewhere around 70%-75% for the last quarter. If I were to not go by last quarter as in April, June, which is not a benchmark, if I were to go by the January, March quarter, we still have sufficient capacity, and this is a high capacity utilization of January, March as well. I don't want to block capital unless it is required. We have our long-term planning.
We know how the markets are moving, and it will take us 12 months flat to erect a plant, and we will be sure that we are not out of place at any point in time.
Okay. Thank you so much, sir. I will join back if few more questions come in.
Thank you. Ladies and gentlemen, we take the last question for today from the line of Milind Raginwar from Centrum Broking. Please go ahead.
Hi, sir. Thanks for this opportunity. The incentive number for the quarter was INR 112 crores, if I just read it. Are you confirming this?
Yeah. Incentive, yes, I just gave that number. Yeah.
Hello?
Yes.
Okay. Sir, just on your initial answers to some questions, that 6% looks to be still possible. Would that mean that the second half we will be at about 9%-10% of-
Yes. It will give double-digit growth then only second half, then only you can achieve a 6% growth.
In that line, do you see the pricing pressure continuing that we are seeing in June, July?
Pricing, again, I will maintain that I'll tell you it's a matter of demand, capacity utilization and new supplies. It's market force driven, nothing else.
Okay. Got it, sir.
Thank you. Ladies and gentlemen, this was the last question for today on behalf of UltraTech Cement Limited. That concludes this conference call. Thank you for joining us, and you may now disconnect your lines.