Ladies and gentlemen, good day, and welcome to UltraTech Cement Limited Q4 FY 2019 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 risk 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. UltraTech Cement reserves the right to block access to any media to whom an invitation is not sent. As a reminder, all participant lines will be in listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Atul Daga, Executive Director and CFO of the company. Thank you. Over to you, sir.
Thank you, Sanford. Good evening. A very warm welcome to this call for UltraTech's Q4 FY 2019 results. Well, actually, the Q4 results are out of the way. I guess we can now focus on bigger things that the country is experiencing. First and foremost, the elections. All eyes are on the results of general elections, which will set the tone for the country's growth and, of course, for the cement industry for the next five years. All I can say is I'm keeping my fingers crossed. Next big thing or an event unfolding is the monsoons. There's confusion around monsoons. I think that's nothing new in India. Initial news was that monsoon will be deficit. Subsequent announcements were made that monsoons will be normal. It clearly shows that the weather department is as unpredictable as cement industry.
Last year also parts of the country had a dry spell. There could be a drought situation in some parts of the country this year as well. You may be aware that in some regions construction activities were banned due to acute water shortage last year. We'll have to wait and watch how the met department's forecast pans out this year. Forecast for this GDP for this year is also robust, upwards of 7%. Our belief is that the cement industry is back on track and will deliver a higher growth this year as well. Several questions have been raised about the growth of cement demand. While the institutional demand is clearly rising in the country, we are still a retail market. Affordable housing projects have started gaining momentum in several towns, alongside the low-income housing program in the rural markets.
The infrastructure demand continues to grow very strongly. Talking about demand, I should also touch upon the new supply situation. During last financial year, 12 million tons of capacity, mind you, only 12 million tons of capacity was commissioned. Of which 4 million tons was added in quarter one, 3 in quarter two, and 5 in quarter three. You all know that the cement plants take time to ramp up, and secondly, with the phasing of new capacities during the year, it has not seemed to be too much of a challenge with the new cement demand growing at a pace much higher than the new capacities. For FY 2019 thus, the effective annual new capacity during the year was around 6 million tons only.
Our estimate is that the annual demand for cement in the country is around 340 million tons. The installed capacity, the main state capacity, is around 480 million tons. Out of this installed capacity, clearly there are several plants which are not running optimally or shut down, giving us a lower effective available capacity in the country. We expect 15-20 million tons of capacity to get commissioned during FY 2020, staggered over the year. The incremental demand during this year will be around 20-30 million tons. For FY 2019, our numbers tell us that the industry will show a growth of about 13%. This is on the back of 9%-10% growth recorded in FY 2018, which had some economic reforms like GST and RERA. Prior to that, marginal or a regrowth in FY 2017 because of demonetization.
Ladies and gentlemen, don't be surprised in FY 2020 if it still delivers a reasonable growth that should bring a smile to our face. Having spoken about demand and supply, let come the input cost scene. As was expected, we have had favorable cost conditions during this quarter. We expect the same trend to continue at least till H1 FY 2020 for sure. Pet coke, which is nearly 14% of our total cost, has seen a reduction in the consumption price of about 7% sequentially. While imported pet coke prices were lower 15%, there was increase in domestic pet coke cost by about 4%. However, these days, the U.S. coal is as attractive as pet coke. Pet coke is not the standalone parameter for energy cost consumption.
Diesel, which roughly contributes 9% of total costs and 35% of our logistics cost, has also seen a reduction of 6%-7% sequentially, helping in our road transport costs. UltraTech has about close to 70% of its logistics being moved by road network. Selling prices have seen an improvement in almost all the regions in the country, driven by strong demand and improving regional capacity utilization. Having spoken about the macro environment about the cement industry, let me now tell you what we have been doing in the company. For the quarter, we have achieved a four-digit EBITDA per ton, up from around INR 770 in the previous quarter. This was achieved with an improvement in selling prices, reduction in costs, and strong volumes. Also, to our aid were our efficiency improvement program, which is continuously helping us deliver a sustainable reduced cost curve.
Besides this, another factor is the accruing of synergies because of the acquisitions done recently in logistics, procurement, and operating leverage. Talking about the acquisitions, let me tell you what has happened at Nathdwara Cement. We had completed the acquisition on 20th November 2018. The integration has been completed on a fast track. The operations have been stabilized and helping the company to further strengthen our presence in the north and west markets. Every month has been an improvement, and this quarter generated an operating EBITDA per ton of INR 830. I have eliminated the one-time ramp-up, legal costs, and foreign currency devaluation gain, all of which have had an impact of about INR 160 per ton. Obviously, the March 2019 exit performance is comforting and reassuring on our invested hypothesis. March 2019, we had an exit capacity utilization of 72%.
We are working on exiting the non-core businesses to reduce the overall cost of our acquisition and are hopeful to reach a conclusion before the end of FY 2020. We have increased the use of pet coke and imported coal from a middle level at the time of acquisition to more than 50% as we operate, as of now. There is further a program in place to deliver a cost reduction of close to INR 50 per ton, which should be delivered in the financial year FY 2020. A very important aspect to note is that the DFC, the Dedicated Freight Corridor, passes by very close to both these plants, which I hope will improve the dispatches dramatically. An important aspect has been the leverage position, and we are working on several initiatives to reduce our debt.
The India business, which is today 94.8 million tons of capacity, had a peak debt of INR 19,563 crores in December 2019, when we completed the acquisition. With a closing net debt of INR 17,594, we have reached a net debt to EBITDA in India at 2.5x. Needless to mention, this net debt to EBITDA does not include the benefit of operations of Nathdwara Cement for a full year. We always focus on India net debt EBITDA because the overseas operations have a separate debt at a cost of 1.6%, and the debt amount is about INR 2,000 crores, and it's a self-funding debt. Consolidated debt, net debt to EBITDA for someone looking at for academic interest, is 2.71x. On our sustainability agenda, I must tell you what has been happening in the company. We are now 2x water positive.
This means that with the persistent efforts, we have developed sources of water through rainwater harvesting, creating reservoirs, and fully secured the requirement of water supplies. As far as power supply is concerned, for our 94.8 million tons of capacity in India, 1,100 megawatts of power is acquired, and we have fully invested in captive power plants. Not satisfied over there yet. We have now started investing in renewable energies. Today, we have 62 megawatts of effective renewable energy from solar and windmills. This accounts for around 1% of our total power requirement. However, there are additional programs in progress which will increase our effective renewable energy from solar and wind sources to about 10%. Added to that, there is WHRS. During FY 2019, we commissioned 26 megawatts of WHRS, taking our total WHRS capacity to 85 megawatts.
There are four more investments in progress, which are expected to be completed in a phased manner by mid FY 2021, taking our WHRS capacity to 131 MW. Which will account for about 12% of our current power requirement. Thus, WHRS and renewable energy through solar and wind will contribute in excess of 20% of green energy that UltraTech will consume. We are very strong on our CSR initiatives as well. Around our network of more than 50 plants, we are touching the lives of people in 502 villages. Out of these, there are 58 model villages. What are these model villages? These villages have 100% children going to school, no girl dropouts from the education system, 100% immunization, and employment for all. This is what is our commitment to society. We should definitely look at our return on capital. UltraTech has been busy investing in the last five years.
Our capital employed, which stood at somewhere around INR 25,000 crores as of March 2014, has more than doubled to nearly INR 55,000 crores as at March 2019. Headwinds of our investments have obviously impacted the return on capital, which you all are concerned about. However, having reached an 84%-85% capacity utilization for last quarter, we have enough gunpowder in our system to meet the growing demand and improve the return on capital. I think we can sit back and relax and now enjoy the fruits of our investment in this upcycle. I've told you before, the best is yet to come from UltraTech. Before I open this session for questions, I think it will all be fair to say that all is well that ends well. Thank you and have a good evening.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may please press star then one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star then 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. To ask a question, please press star and one.
I think there are no questions.
We have the first question from the line of Sumangal Negi from Kotak Securities. Please go ahead.
Yeah. Good afternoon and congratulations on the strong results. First question, actually is with respect to Nathdwara volume and margin. If you could just share some more details what was it during the quarter? Mainly, I just want to understand how it is captured in the standalone results versus consolidated.
First and foremost, if you look at my presentation, page 22, if I remember it right. Yeah. There we have shown you the results of standalone UltraTech as well as India operations. India operations includes, the reason I was showing India operations separately is to add the Nathdwara Cement business along with it.
Understood.
Okay? That will show you the picture of what domestic cement is all about, and we want to eliminate the difference between the two entities as far as the financial performance is concerned. Your question about what was the volume, about 9.85 lakh tons?
9.75.
975,000 tons was the volume from Nathdwara Cement. Again, that number is misleading because month after month we have been ramping up.
Yeah.
Average capacity utilization for Nathdwara Cement for the quarter was 62%, 63%, whereas the exit month was 72%. Clearly shows things are on the northbound journey.
Understood. In terms of further cost reduction, in your presentation you said around INR 50, but given that volume has further scope for decent ramp-ups and pet coke usage, et cetera, is INR 50 looking a bit conservative?
Good question. Next question.
Okay, just another thing, on the cost inflation, what quantum of tailwind do you think will 1Q and 1H also have, or large part of the lag on cost is already reflected in 4Q results?
I think it's all baked in 4Q. Crude, as you know, thanks to Mr. Trump, is not behaving very well. For our lay consumer also, petrol prices have gone up marginally in the last few days. That is, I would say, a black hole. The other biggest cost driver for cement industry is fuel. I think that is under control.
Got it. Thanks and all the best, sir.
Thanks a lot.
Thank you. The next question is from the line of Vivek from CLSA. Please go ahead.
Hi, good evening. This is Vivek. A few questions.
I have a question before you start, Vivek. For you. Why is it that different name is used by CLSA and that Mr. Vaishnavi comes to ask questions every time?
Take it offline. Okay. My first on the Nathdwara. I just want to understand, I saw slide number 22. If you just look at standalone, can you just highlight other than purchases, which other line item or any of the line items other than purchases being impacted because of Nathdwara on the cost side?
No. Logistics will be one way. One way only. Sorry, because the clinker movement which is taking place, if you were to count the logistics cost of that will get knocked off. Obviously, interest income, interest paid by Nathdwara to UltraTech has to get adjusted. Other than that, let's say SG&A, manpower cost, fuel consumption is obviously direct. Manpower is direct. Marketing is all by UltraTech. Theoretically, there's no marketing overheads or marketing manpower. No, we have actually marketing manpower of Nathdwara on its Nathdwara roads. There is no overlap besides clinker transfer and related logistics.
Just to get it right between Nathdwara and UltraTech, the clinker gets sold to UltraTech standalone or it is the cement that gets sold?
It's two-way movement because of multi-plant locations.
From Aditya Cement, our plant, we transfer clinker to the What is that?
Sirohi.
Sirohi? No.
Neem Ka Thana.
Neem Ka Thana grinding unit. From Nathdwara grinding, Nathdwara our affiliated plant, we have the ability to transfer it to Wanakbori in the Gujarat. That is how logistics synergies will pan out for our network.
If that is the case, if you're transferring clinker from Nathdwara to UltraTech, then there will be obviously after that there will be outward freight cost for the cement which you are selling and all that. Basically, my limited point is, INR 830 million when you said Nathdwara, is that captured by entirely Nathdwara or a part of this is in UltraTech? Standalone.
It's 100% in Nathdwara.
Is there anything over and above that UltraTech makes from this or no?
No, no. Let's call it a management reporting. 830 is the benefit which Nathdwara is generating, or EBITDA which Nathdwara Cement is generating.
Okay. Any part of that Nathdwara operations, is any part of EBITDA being captured at UltraTech standalone level or no?
No.
UltraTech is selling its cement at almost zero EBITDA.
Yeah. That's why if you look at standalone results will not be correct because of.
Got it.
not the benefit, yeah.
Okay. Which also means that the denominator that we are using in standalone, if we reduce it with Binani number, then whatever your EBITDA return is almost INR 6,100 at a standalone level.
Your math is as good as mine.
Okay, got it. There was another thing on Binani I wanted to ask you.
Sorry, Binani.
Sorry, Nathdwara. Slide number 22, if we take. The problem is the EBITDA that you have given over here includes financial other income.
Right. If I subtract 2,406 minus 2,353, I get INR 53 crores. Which makes it around INR 540 EBITDA margin at Binani.
Yeah, you can take this question offline with Nilesh. They'll explain you the math because there is the other income, the channel inter-department reporting which has to be knocked off.
Okay. I have a few questions on Nathdwara I'll read later. One other bit is full axle load impact or benefit you have said is captured in the quarter, so there is not going to be anything else that we will see?
No. Nothing. Unless we are able to break the monopoly of the transport unions in Kerala and Himachal. There is nothing else left to be captured.
Okay. This impact was through the quarter? I mean, was it like back ended or?
It's difficult to say, but I think it's evenly spread out.
Okay, evenly spread out. Last question, if I may. Again, if I take your revenues, the way in which you have reported standalone, your revenues of fourth quarter versus third quarter, and I take the unit realization, it shows almost flat trend as against 1%-2%, which you have highlighted in your PPT. What is the delta? What am I getting wrong?
Same to same.
Vivek, I will separately fill the exact numbers, but there is an increase of 1% quarter-over-quarter on like-for-like basis.
Thank you, Nilesh. That's very clear. All right. Thank you and all the best.
For your reference, the way the accounting reports happen, knocking off certain expenses from the sales, et cetera, will never reflect the selling price.
Okay.
The way the selling price prevails in the marketplace.
Is Nathdwara impacting this or there is an accounting thing which is impacting?
I would say it's purely accounting. Any balance sheet, not just us, any balance sheet you look at. Assuming a cement bag is selling at INR 300 throughout the period, into the volume will never give you the revenue number on the P&L.
Sure. Okay, I'll take it offline. Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Madhav Marda from Fidelity Investments. Please go ahead.
Hi there. Good evening.
Hi, Madhav. Good evening.
One basic question. I was just trying to understand that in the previous quarter, we see seasoned commentary. We were highlighting surplus capacity at the industry level, pricing being challenging, and demand was pretty strong that time as well. Just after a quarter, we are seeing that next is an up cycle. I am not able to understand where the industry is. Are we in an up cycle or is it surplus industrial capacity? What's the?
Let me explain to you. First, between Q3 and Q4, I already referred to, explained in my commentary, we are like the weather department. Meteorological department will predict heavy rains, and there might be no rains. That was in the lighter vein, Madhav. However, up cycle, what we refer to is in terms of demand, there was no two doubts about it that the demand has always been bullish. I have been bullish on cement demand right since the time pre-demonetization. It is only demonetization which put brakes. Otherwise, if you go back and see the history of April to September 2015, April to September 2016, our markets were, cement demand had been starting to rise. You are in the up cycle ever since then. There have been roadblocks like RERA, like GST, which created a disruption. The inherent growth exists.
That is what is the up cycle. Up cycle again, I will repeat from our perspective, is volumes growing at well above GDP. That is the up cycle.
Got it. Is the current level of utilization for the industry, in the different regions of the country, is that good enough for a price up cycle? Because my understanding personally is that an industry up cycle corresponds to a price, basically a beta pattern goes up. Am I missing something there?
No. I think we have seen regional capacity utilization improvements, which is now leading to the industry's ability to pass on the cost pressure. Last year, we were seeing capacity utilization improvements taking place, but the cost pressure was significantly higher. Now, I think that is what is happening. In fact, Q4, if I look at year-over-year, the costs are still higher than Q4 last year. They are significantly down as compared to Q3. There is a bit of a catch-up that needs to be done yet.
Are the current utilizations, in your view, sufficient for a price above cost inflation sort of scenario for the cement?
Given current utilization and the pain that the cement industry has gone through in the last two years, I think so that there's a strong chance of price improvement in FY 2020 as well.
Okay. Great. Thank you so much.
Thanks, Madhav.
Thank you. All participants are requested to limit their questions to two per participant. If time permits, we will take follow-up questions. The next question is from the line of Rakesh Vyas from HDFC Mutual Fund. Please go ahead.
Hi. Congrats for good set of numbers. Can you just explain slide 24, which is the operating EBITDA bridge? The numbers that I am seeing is very different from the numbers that are highlighted on the other slides, on individual cost basis.
I don't know what the question is. Nikhil will answer.
The slide 24, this per ton numbers are based on the blended volume, while the other cost slide is purely for gray cement, and this is why there is a difference between these two sets of numbers.
When we are looking at energy cost reduction of INR 141 per ton.
Yes.
On a base which essentially would be on power and fuel cost around INR 1,100 is almost 13%.
Yes.
I think most of the cost items individually like pet coke, et cetera, has fallen by only 7%.
Yes.
What is leading to-
This is why if you see the power and fuel cost, where we have eliminated impacts of increased decrease in stock, and there is a reduction of 4% only from 1,105 per ton to 1,057 per ton. While the slide 24, since it is on blended basis and it is not adjusted for the increased decrease in stock. That is why this number is coming as INR 141 per ton.
On a static basis, which should be the number that we should look at?
We should see that 1,051 per ton. That is pure that energy cost on gray cement basis.
Okay. Got it.
Right.
The next question is from the line of Gunjan Prithyani from JP Morgan. Please go ahead.
She is not here on the line.
Gunjan Prithyani from JP Morgan, your line is unmuted. Please unmute the line from your side and go ahead. As there's no response, we'll take the next question from the line of Indrajeet Agarwal from Goldman Sachs. Please go ahead.
Hello, sir. Congratulations on a great set of numbers. A couple of questions from my side. How are the current pricing versus the quarter average? Are they significantly higher or largely on similar levels?
I think the exit prices were higher because the price improvements have taken place through the quarter.
Sure. That helps. Also, secondly, in terms of demand, I understand the year average demand that you are expecting, in the first half, are you expecting, because of elections and other factors, a significant deceleration of demand in the near term?
We are seeing that deceleration right now. April and May is not very encouraging, this I would attribute largely to movement getting restricted.
Sure. One last question, if I may. In one of your slides, you mentioned a PBT breakeven for Nagda by fourth FY 2020. What kind of utilizations are we building in for that?
85%-86%.
All right. Thanks a lot, sir. That helps.
Thank you. The next question is from the line of Mihir Zaveri from Avendus Capital. Please go ahead.
Thank you. My questions have been answered.
Thank you.
Thank you. The next question is from the line of Bhumika Nair from IDFC Securities. Please go ahead.
Yeah. Good evening, sir. Congratulations on a great set of numbers. Sir, from Nagda, you mentioned that the EBITDA for the quarter was INR 830. There is a one time cost. When I'm looking at the EBITDA number for our range of operations, it's actually including the one time impact?
Okay. As we go ahead, it will reflect the INR 830 plus the INR 50 cost efficiency.
Yes
to flow in, and that will take it to about INR 880 as.
That will take to INR 880, for sure. That's the math. It's on our 62% capacity utilization. As my capacity utilization goes up, there will be overhead absorption resulting into the benefits of operating leverage.
Understood. That will be gaps in our existing EBITDA, too?
Correct.
Understood. Sir, how has JP's assets, how has their EBITDA per ton moved?
JP assets are also almost operating. At a regional level, they are operating at par. We had a surprise in one of the plants, which is Bela, MP, where we had to take a major shutdown. I think I'd explained that in the last quarter results also. The shutdown carried through in January also. Is it?
Yeah.
Yeah. It had carried through in January also, now that plant is on track and delivering costs like any other plant. We would start looking at April, June quarter for the JP acquired assets also to operate at a four-digit level.
Okay. That will help in achieving the PBT breakeven?
Absolutely.
Okay. Lastly, if I may just squeeze in a quickie question on White and RMC revenues for the quarter and for the year.
White revenues, INR 536 crores for this quarter as against INR 591 crores. What were the numbers? Sorry.
536 crores.
One sec. White cement was INR 536 crores and RMC was INR 591 crores. Sorry.
If I could just get that for the full year as well, sir.
White cement INR 1,900.
White cement INR 1,900.
Yeah.
RMC is INR 2,100.
Okay. Thank you so much. I wish you all the best.
Thank you.
Thank you. The next question is from the line of Ankit Murarka from Deutsche Bank. Please go ahead.
Hi, Mr. Agarwal. Congratulations on the great result. Just a few questions now. Firstly, what is now the status between, has the decision been taken whether project expansion is going ahead or will be going-
No, not yet decided.
Okay.
We are now actually focusing on ramping up Nagda. Again, as I mentioned, March capacity utilization was 72%, so there is enough material to sell before we commit the capital.
Okay. The Nagda expansion then is also still not yet decided?
Not yet decided, no.
Okay, fine. Also just to be sure about the volumes that you have shared in the presentation. It's given as domestic volumes.
Yeah.
All of it was also standalone volume, right?
Nathdwara volumes were 9.75 lakh tonnes.
Yeah.
Which is included in our total domestic volume of 20.46 million tonnes or 204.65 lakh tonnes.
Yeah. That's also the standalone volumes, basically?
What do you mean? No, standalone would be this one, 194.9.
Yeah.
194.9 is standalone. 194.9 lakh tonnes is standalone. Add to that 9.75 lakh tonnes of Nathdwara.
Okay.
Total domestic becomes 204 lakh tonnes.
No, what I meant was even the Nathdwara volumes are there in your top line, standalone top line.
Yes. In the standalone numbers. Yes, you're right. Sorry.
Okay. In the presentation, in the slides, it was written or shared that the pricing premium is being realized for Nathdwara. Is it not fully realized yet?
Its pricing premium is fully realized. The two things which are left out as of now is the cost improvement program, which will deliver improvement in margin and capacity utilization.
Okay. Can you also share the trade, non-trade?
Trade we had improved to about 65%, 66% in this quarter. Sorry, what did you ask?
Yeah, that's all. Also what is the blended cement percentage now?
65.
55%.
Okay. Will you be able to share the PPC PSC split in that?
Don't have it readily. Can you call Nilesh and Prajit separately?
Okay, sure. Thanks. That's all from my end.
Thanks, Ankiit.
Thank you. Participants are requested to limit their questions to two per participant. The next question is from the line of Naveen Sahadevan from Edelweiss. Please go ahead.
Yeah. Firstly, congratulations on good set of numbers. Two questions. First is on this performance, if you could throw some light on the consolidated front. Standalone you did explain, but how have the Nathdwara's overseas units done and even the other overseas Star Cement volumes. Just wanted to get a color on.
Sure
These volumes and performance.
Sure. First on, Naveen, you were looking quite dapper on TV day before yesterday, I think so.
Thank you.
The Slide 23, which is consolidated, we have not included the performance of the acquired assets overseas because they have been classified as held for disposal. The total revenues, when you look at for Q4, INR 10,739 crores, includes our existing UAE operations, India, and domestic cement, which is UltraTech domestic and Nathdwara Cement sales. Does that help?
I was referring to your recent corporate presentation, in that the volumes given for the consol entity, were more like 18.9. If just the total consol volumes for grey for the company, if you can help.
Overseas volumes, it will add up to about 22.26 million tonnes.
This includes the white cement in Putki also.
Which is how much, Nilesh?
0.41.
Sorry, 0.41?
Yeah.
Yeah. Just a request, Atul sir, here that since, as you said, looking at standalone numbers is increasingly not correct because of these interrelated intercompany transactions. It will be helpful if you can also give these consol volumes as well and some more color.
All right, sounds a great suggestion. We'll add the volumes in. These Page 22 and 23 will be a standard part of our disclosures. I will add the volume numbers also on top, and I welcome any suggestions anybody has to show more color and clarity in case there is. I thought this was a good job done from our side to explain the numbers. Suggestions are most welcome. I'll add the volumes as well. Thanks.
Just my second question then was.
Yeah, sorry.
Me was asking. Okay. Second question is about this Dalla clinker update. What's the timeline there?
Dalla is delayed. I expect June end to see light of day. As part of the contract, Jaiprakash Associates had taken a turnkey contract to execute the entire project and hand it over to us. You know the situation with them. There's a slight delay, but I expect that the grinding unit will get commissioned by June.
Clinker, sir, for this?
The clinker is available in plenty from our Sidhi plant, in MP.
MP.
Yeah, the other, which is Dalla Super. It's a complicated legal issue. Part of it has got resolved, which is awaiting clearance now from MOEF, Delhi. I expect the clearances to come only after elections. There's one leg which needs to be completed about mines, but we are not extremely worried about that, because once the plant gets cleared, we will start manufacturing clinker from that plant from the existing mines. The clinker plant should also see light of day simultaneously along with Bara grinding unit getting commissioned.
Okay. That's helpful. Thank you very much.
Thanks, Naveen.
Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Sir, two questions from my side. One, how much scope is there for further reduction in lead distances without incorporating Century into fold, so within your existing portfolio of assets? That's question number one.
Yeah. Okay, let me respond to the other, then I forget. Today we are hovering around 400 kilometers of lead distance, and there is always an opportunity. Today it is 400. It cannot be a static number. It could go up or down. Hover around in a band of 395-405. There is always a possibility as we increase the ramp up of Nathdwara for it to come down by 10-15, 10 kilometers max.
sir, Nathdwara is largely catering to West India right now, or is it catering to North India equally?
It's catering to North as well. It's catering to the Western Rajasthan, where we had a void situation from our suppliers.
Sure. Sir, secondly, what is the debt repayment that is scheduled in FY 2020?
There's hardly anything.
500 odd crores.
One second. Atul Daga will give you exact number. The biggest repayment comes up in FY22 on the first leg of the JP acquisition borrowings.
535.
535 crore is the repayment due in FY20.
Okay, INR 500. FY22 would be how much, sorry?
About INR 1,500, close to INR 1,500 crore.
Sure.
Just one second, Pulkit. I don't want to give a wrong number.
Sure.
INR 1,535 is what I remember.
FY22.
FY 2022, yeah. When the big repayment is due.
2,000.
Sorry.
2,300.
Sorry. I was grossly wrong. It's INR 2,300 crores.
Sure. Thank you so much, sir.
Thank you.
The next question is on the line of Rajesh Lachhani from HSBC. Please go ahead.
Yeah, thanks for the opportunity. Sir, we have also heard there are some price hikes taken in the north, east, and central regions in April. Along with the exit rates in Q3 and this recent hike, can you just guide us to what could be the approximate realization level increase compared to the previous quarter?
Can't give price sensitive information.
Okay.
Joke apart, I don't want to give any forward-looking statements. I think that will have a bearing on the next quarter performance.
Understood. Sir, separately, if I look at your balance sheet consolidated and you have some assets held for disposal with assets with around INR 1,100 crore in it and liabilities are INR 500 crore. Can we assume the assets that are held for sale can be INR 600 crore?
That's the ambition that we have set out for.
Understood. Sir, last one. Century, I believe, has been delayed by three months. Earlier we were expecting it to come in 1Q. Now we are saying 2Q. Any reasons for the same, and can we see further delay in that?
Elections is one reason because we haven't had the NCLT hearing yet. Till the NCLT hearing takes place, I'm not able to put my finger on what date we will be able to complete the transaction. Now the process left is NCLT hearing, maybe one or two hearings, and award the NCLT order. That order gets filed with the mining department for mines transfer, and that completes the transaction. Mines department, it's not just filing, but there are several approvals within the mines department that are to be taken, which will take at least a month to 45 days after the NCLT order is received.
Understood. That's it from my side.
Thank you.
Thank you. The next question is from the line of Ashish Jain from Morgan Stanley. Please go ahead.
He's not there. Let's go to next.
Sure.
Don't have time.
The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi, sir. Congratulations on the set of numbers. Sir, my first question is, sir, if you can give us some sense on the inventory, at the system level and at the mill level. I'm trying to understand pricing, which you won't comment on, so I'm asking you indirectly.
Sir, you're asking about what?
Inventory.
Sir, channel inventory is never high, two to three days of channel inventory. Unless there is a news about price increase happening, dealers come to know about it, they will pull in inventory pre-price hike. Otherwise, it's a routine two to three days inventory anywhere in the country.
Okay. It hasn't moved up post March-end. It remains the very same two to three.
Yeah, I guess so. It cannot move up because dealers will not take delivery.
Okay. Fair enough. Sir, second thing is you indicated on cost tailwind still first half, you did indicate about pet coke and crude and Trump. Sir, what gives us visibility for next 6 months? Have you already locked in pet coke contracts for delivery for next 6 months or thermal coal? What have you indicated?
Pet coke and crude are commodities, and Trump is a human being.
Okay.
We have locked our prices at least till H1. That's where I was very confident in making my statement. After that, we'll see what happens.
Okay. Sir, lastly.
The macro environment indications are that we don't expect coal and pet coke, in any case, to go up.
Okay. Sir, given the macro is so positive, you indicated on 12 million tons and 20 million tons incremental supply and demand. Sir, why is the lead distance actually not coming down? One would expect this number to actually come down pretty sharply besides the trade non-trade mix, it has been improving gradually.
lead distance, we have seen it reducing from 450 to 400. That itself is a big reduction, and it cannot keep on reducing every time. For a network like ours, lead reduction will happen whenever a new plant, new location gets added to the network because the entire country ultimately will go through a reorganization from our distribution perspective. Otherwise, with capacity utilizations increasing, yes, we start selling closer to the plant, and that could see a lead reduction. However, I cannot ignore our customers sitting long distance.
Okay. Fair enough. Sir, last question. You indicated on DFC, it could benefit the Nathdwara asset. Sir, how do you see the implication on a system-wide level for UltraTech and at the system level, how will eastern and western DFC change things?
DFC will be a big benefit because the wagon availability will improve. Today, our rail is about 30% or less?
About 26.
It's about 26% today. I have seen in the last four years, rail network availability coming down from 30%-35% to 26%. Long distance movement, obviously rail is cheaper mode than road. Once DFC commissioning takes place, rake availabilities will improve, which will help us significantly.
Perfect, sir. I'll join the queue, sir. I have a few more questions. Thanks.
Thanks.
Thank you. The next question is from the line of Anuj from UBS . Please go ahead.
Hello. Hi, sir. Anuj, this side. Sorry about the issue earlier. I have two questions. Firstly, on the CapEx now, there is no clarity on Dalla and the UNCL expansion yet. How should we look at CapEx for FY 2020?
Anywhere between INR 1,500 crore-INR 2,000 crore would be the CapEx cash outflow in FY 2020.
This would eventually be maintenance.
The bigger project which is going on is the Bichhapur coal block development. There is a bulk terminal that we are developing outside of Mumbai. There are WHRS plants across four locations, as I mentioned. Those are the bigger ones. Of course, another standalone expansion, which is a Walkeri Kuti plant, incidentally in Nathdwara district itself is taking place. Sorry, one more is Bara grinding unit where CapEx is happening. These are the bigger projects. To recap, there is Bara, Bichhapur, WHRS, bulk terminal, and the Walkeri Kuti plant. If I were to add them together, they would stack up to 1,000 plus.
1,000, yeah.
Just one second. Bichhapur 500, 70. Sorry, spend. 2,370. 150. 150. 225. Think 225.
700.
700 crores would be attributable to these projects. Balance would be all maintenance costs.
Okay. Basically, I'm just trying to understand from an FY 2020 perspective, you're not looking at any aggressive expansions inorganic or organic. Is it fair to assume that a lot of focus will be on de-leveraging the balance sheet and optimizing the mix? Clearly we have gone lower on the trade side, and there will definitely be more synergies. I'm just trying to understand what will be the focus from an FY 2020 perspective, given you kind of now seem you're going to take pause on those expansions.
De-leverage.
Okay. Any target you have in mind in terms of net debt to EBITDA or which is where you want to get to?
Next target, next halt will be definitely below 2x.
Okay, got it. Second question is on this PBT breakeven for UNCL that you've mentioned now. This PBT breakeven pertains to the debt that is there on UNCL subsidiary?
Yes. On UNCL books. Also, we will have a benefit of liquidating the non-core assets which are sitting on the UNCL books.
That is INR 4,500 crores, right?
2,700 crore is the debt on No, 27 plus 1,800. Yeah, INR 4,500 crore is the debt. Yeah.
The PBT breakeven is to think in the perspective of this INR 4,500 crore?
Yes, absolutely. This INR 4,500 crore would get knocked down. We should look at Q4 numbers, not annual number. Q4 next year, where by when, we should be able to reduce leverage on account of selling off those non-core assets and improving profitability, which will give us a PBT breakeven.
Okay. Last question on this other expenses and ASP. Honestly, it's very difficult to see the ASP being flat Q-on-Q, and then I'm continuing to see that your other expenses are coming off, whereas the scale of operations has meaningfully increased. Is there something which is structurally some efficiencies or it is something to do with accounting? Other expenses has come off very meaningfully in the last couple of quarters.
It is bound to happen because it's clearly operating leverage advantage that one gets with additional capacities coming on stream. Expenses don't go up proportionately. A simple example I'll give you is TV ads, which are very expensive. The cost doesn't go up unless you increase the number of the time spent on TV.
Yes, even absolute number is coming down despite you having consolidated some large M&As. I'm just wondering, is there any accounting adjustment?
No. Compared to Q3, in Q4, the maintenance cost is very less.
Yeah.
Okay, got it.
The difference between Q3 to Q4 is the maintenance cost.
Maintenance cost, yes.
Okay. All right. Thank you so much.
Thanks, Anuj.
Thank you. The next question is from the line of Anshuman Atri from Premji Invest. Please go ahead.
Yeah, thank you for the opportunity and congratulations on strong performance. My question is.
Sir, can we request you to use a handset please? Your voice is not very clear. Thank you.
Yeah. First of all, congratulations. My question is regarding ramp-up of EBITDA on Century. We are seeing very sharp ramp-up on Binani, almost INR 500 on realization and INR 200 on cost, and Century is doing a INR 500 of EBITDA. Within a quarter or two of consolidation, can we see a INR 1,000 EBITDA from Century?
Very nice question. That's all I can say. I cannot give any guidance.
Okay. It's feasible?
Yeah, you are asking the same thing in a different manner.
Okay.
Obviously, our efforts will be to improve the performance from where they are.
Okay, sir. Secondly, on the north market. The utilization is significantly higher as compared to other regions, and no new mega capacities have been announced. Pali versus Nathdwara, what would be a priority if-
Nathdwara.
Okay. Will you be expanding on the lines of Dhar in a year's time if we announce?
I'm sorry, I missed you. What?
The way we had expanded Dhar in one year's time.
Yeah. Now I think our team will get skinned alive if they don't deliver one year.
Okay.
In one year.
Okay. Thank you, sir.
Thank you.
The next question is from the line of Girish Kacholia from Goldman Sachs. Please go ahead.
Thank you. Thank you for the opportunity. Sir, you mentioned INR 830 EBITDA for UNCL. How much could be captured in standalone?
None. Everything is UNCL.
Oh, okay. All right, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Ashish Jain from Morgan Stanley. Please go ahead.
Hi, good evening. First congrats on a great set of numbers. Firstly, this PBT breakeven that you're talking for Nathdwara, this is on a cash basis, I hope, or-
PBT is after depreciation.
Okay.
Cash basis, obviously, I would achieve earlier.
Okay. Secondly, on other expenses, another point that you made earlier. I understand this quarter had much lower maintenance expenses, but more on a run rate basis, how should we think about your other expense? That number, because of the one-off in Q3 has dipped quite sharply this quarter. On a more sustainable basis, how-
April, June should replicate. Again July, September will be high. July, September and October, December will be high because our maintenance will be spread in those two quarters.
Sir, this quarter had any maintenance or it was close to zero kind of a number? This quarter had any maintenance at all or-
It's always there. When we talk about maintenance shutdown, which has to be a long tenure shutdown taken for work.
The small maintenance is going on, major shutdowns are not there in Q4.
Not in Q1 either.
Hardly.
Yeah. Shutdown or major maintenance when we call is when the kiln is taken for a shutdown for five, seven, 10 or even 20 days. That's a major shutdown. There can always be a breakdown for a day or for a few hours. That is routine operating cost.
Got it, sir. Thank you.
Thank you.
Thank you. Ladies and gentlemen, that was the last question. On behalf of UltraTech Cement, that concludes this conference. Thank you for joining us, and you may now disconnect your line.