Ladies and gentlemen, good day, and welcome to Ultratech Cement Limited Q1 FY 'nineteen 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. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded.
I now hand the conference over to Mr. Sattul Daga, Executive Director and CFO of the company. Thank you, and over to you, Mr. Daga.
Good morning, everyone, and welcome to our call for this April results. I wish we were doing a repeat performance of last year April on current volumes. That would be the day. If wishes were out, then we would surely be riding them. Let me get on to the first of the wish list, demand.
Cement demand, I believe, is coming back and this trend we noticed more than a year ago. Housing has been and will always remain the biggest demand driver for cement. But in this cycle, infrastructure led demand is taking cement consumption up. And with the improving infrastructure, a natural extension is improvement in the housing demand, which we believe should start off in the next two to three years. There's a moderate shift at present from individual housing to institutional housing.
And I have mentioned in the past also about this being the biggest up cycle for cement. Historically, cement cycles have been three to four years, but we believe this being the longest upcycle that the industry is witnessing because this time around, the demand drivers are different. We expect the momentum in cement demand to continue with some big projects around the annual. I understand work on Jawar Airport, that is the New Delhi Airport, coastal roads in Mumbai, Pulwanchal Expressway on the Alabad, Gurupur sector, Mumbai Nagpur Expressway will commence before the end of this year. The long overdue Mumbai Airport also is expected to commence work now.
Land leveling has been completed, and the contracts have already been awarded for the construction of the airport. Pulavaram Dam in Andhra continues in full swing. All these are very large projects. And this time around again, government has introduced penalty clauses and delays beyond the deadline given for completion of the project. Hence, there is a strong chance of systematic and time bound execution.
The recent MSP hike will further help improve the rural demand. Of course, this is bound to create inflationary pressures in the economy. Rural market has been a very strong forte of architect. Today, we have nearly 36%, 37% of our sales in rural markets. Sorry, can't break it, it's now up to 40%.
Low cost housing and affordable housing consistently are supporting cement demand growth with increased pace of execution. Since April 2018, I am told fresh construction work started for another 1,000,000 houses in urban areas, 1,000,000 below income houses, and construction has already been completed about 400,000 houses in the last few months. In rural areas, about 5,000,000 houses have been completed during the last quarter and sanctioned about 2,000,000 new houses. Total sanctioned till now is about 8,500,000 houses. Government is far reaching its target of at least sanctioning the 10,000,000 houses per year that we had emphasized.
Further to update, the first phase of DFC project is also likely to commission by the end of this year. For Western Trade Corridor, which is four thirty two kilometers out of the 1,500 kilometers and Eastern Trade Corridor, three forty three kilometers is likely to commission. This should this is important not for cement consumption, but to improve the logistics for cement, improvement in rail availability in the Eastern Corridor, which is absolutely dry as as far as cement industry is concerned for rig availability. Movement of cement becomes extremely difficult due to in the absence of availability of rigs because rigs are diverted for government requirements. The growth and improvement of infrastructure in the country will lead to a general improvement in housing demand.
Additional capacity from new assets acquired has given us an opportunity to expand our footprint into newer markets and in the institutional channel. With Pan India presence, we enjoy a very high share of business for Cement sales amongst all the leading intra companies who are catering to the low income housing projects, catering to the intra projects and urban housing as well. This quarter, our domestic volumes have grown 32%. The quarter saw strong demand across all regions. In our view, we could see double digit growth for the sector in this quarter for sure.
For Ultratech, blended sales have gone up 3% and now at about 67% and trade sales being in the focus have now risen 2% to 68% over the previous quarter. Let me get on to the next wish list, the next of the horses of the wish list, which is prices. I would, you know, complement our own team for achieving this growth without compromising on prices. The realizations on an average have gone up 1% to 2% quarter on quarter. However, the exit prices have been far higher than the average prices for the quarter across all zones.
As compared to previous quarter, Central and Western markets saw a good improvement followed by North and South, which were lower than Q4, but the exit prices, as I mentioned earlier, were higher. East was muted or remained flat. Full benefit of June price hikes should reflect in the current quarter since the exit June prices were higher than the average. The next area which I would want to touch upon is our costs. Our costs have increased about 3% quarter on quarter.
Petco, coal, diesel have not shown any signs of slowing down in terms of costs. Rupee depreciation is also impacting the import bill. Another dimension to watch now is the interest cost, which seems to be inching up. This could be a dampener on new capital spending, new expansions that seem to be mushrooming. The price seem to be mushrooming as of now in the country.
We are focusing on reducing the impact of increasing purchase price with efficiency improvement. During this quarter, the purchase price impact was about 13% and efficiency gain was about 2% in our direct manufacturing costs. Mind you, this improvement of 2% is a sustainable long term permanent reduction in cost. And I believe the purchase price impact price today is high. In the long term, it is not sustainable, and there will be a tipping point when costs start coming down.
With the current cost of pet coke at some of our locations, coal is becoming economical. Our total usage of coal, both in kiln and power plants put together, has increased to 16% during this quarter as compared to 11% in the same period last year. Amidst the adverse cost scenario, there is one good news for the sector. In the last few days, the government announced the new norms for axle load for trucks, increasing it by 20%, 25%. This will surely benefit the logistics costs.
There was some confusion that the axle load is allowed only for new trucks, But however, a clarification has been issued that the axle load increase will be the older trucks will be eligible for the improvement in axle load. We will see how the benefit starts impacting the P and L in the future quarters. Another element wise, the focus is always on operating margins. We run a large treasury, which forms and the income treasury income forms part of our overall EBITDA. This quarter since the yield curve has gone up, it resulted into an M2M dip in our treasury income because of which the overall EBITDA would also look slightly down.
Let me now share with you an update on our sustainability agenda. Five new projects are under commissioning for WHRS, which will take our WHRS capacity to 121 megawatts, meeting about 15% of our total power requirement. We expect them to be completed by somewhere in the financial year 2020. We have increased the consumption of alternate fuel to about 4% of our total fuel and are working on further increasing it. We are now certified now certified as 2.18 times water positive by a global quality assurance and risk management company, BNB GL.
I wouldn't know the full name. Don't ask me about it. Let me touch upon the acquired assets. It's almost a year of year has gone by. I think twelve months of operations now.
We completed the acquisition on 06/29/2017. Our focus has been on cost optimizations this quarter, and we should be able to achieve the optimal level of cost from all the acquired plants post monsoons, a couple of plants are under shutdown right now, after which we believe that costs will be at par with our existing plants, accepting, of course, the structural cost, which are the MMDR royalty and logistics cost because some of the plants are, landlocked or foreign locations. Total variable cost difference today is around 160 per metric ton between the two sets of plants and the acquired plants and our existing plants, out of which there is scope to achieve efficiency improvements to the extent of rupees 50 per ton, which is remaining now, and INR 110 will be the structural difference. We are confident to complete our improvement plans by December 2018. These assets were operating at a very low level of capacity utilization when we acquired them at somewhere around 18%.
We completed the acquisition at the start of monsoon months last year and also sand mining brands were hitting the country at that point in time. This led to a forced suppression of demand. And our focus has been to increase our capacity utilization of the acquired assets without compromising on prices. We have successfully increased the capacity utilization across the network, and the plants are now stable at around 70%, 75% capacity utilization. A lot of lot has been said and I've read about increasing supply.
We expect the supply to moderate around 3% to 4% every year, whilst the demand growth will be around 8% to 10%. Faster pace of demand growth than supply would result in narrowing of demand supply gap and gradual increase in capacity utilization. Historically, if you if you scan decades of history of cement industry in the country, every time when the cement demand has started booming, supply has also increased. This is nothing new. However, this time around, what we are looking at as the gap between demand and supply, demand will certainly be far higher than the supply.
The moderation in supply would be primarily be driven by continuing cost pressures for key input items such as coal, pet coke and oil as well as costly mines in the long run. Also the rising interest rates will increase the overall financing cost for new capital outlay. On our own home front, we have already completed our 3,500,000 ton of capacity, green build capacity at Dhar in Western NP out West NP. The Bara grinding unit of 4,000,000 tons is under execution. Work has picked up pace and we expect the plant to be commissioned by Q4 this financial year.
CapEx spend during the quarter were about INR330 crores and balance to be spent for the year is roughly around INR1800 crores. We had also announced the merger of cement business of Century Textiles with Ultratech. We expect the transaction to be completed by q four f I f I nineteen yeah. F I nineteen after all the regulatory formalities. CCI application is has already been filed.
It is under review, and we expect CCI clearance by August. And thereafter, the the legal formalities of court convened shareholder papers meeting, filing with ROC, etcetera. And in between there are court holidays because of which the transaction will get see a closure only by 2019. White Cement based new capacity expansion of 0.4 MTPA is also on track. This is expected to commission by FY twenty twenty.
Let me talk about our own cash flows. So it's a high focus area right now. Net working capital has increased by about INR $5.68 crores, essentially with the buildup of raw materials and fuel inventory, this is typical for pre monsoon period. During this quarter, our net debt has reduced by about INR208 crores and now stands at INR11799 crores on the Indian balance sheet. Net debt to EBITDA is around 1.75x, and the growth has marginally inched up to 10.4% on the basis of Q1 annualized.
That is all that I have to say. And in the end, I I I have heard a lot about anxieties about the cement sector saying that demand is rising, prices are not rising, etcetera, etcetera. But I believe that the fruits of patients are always sweeter. There are no secrets to success, and it is the result of preparation and hard work which Alphabet is well known for. Thank you so much.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the attached tone telephone. Call. First question is from the line of Gunjan Prathyani from JPMorgan.
Please go ahead.
Yeah. Hi, sir. Thanks for taking my questions. Just one quick clarification. Firstly, you mentioned the difference between the cost of the JPA and the ex JPA assets are about $1.60.
Right? Yes. And the the difference is all cost or this 110 of MMDR is included in this? Yeah.
$1.60 includes $1.01 0 of MMDR and Extra Logistics.
Okay. So the the incremental cost saving or cost reduction would be about 50 rupees Yes. Over the next two quarters?
Yes.
Okay. And just to get clarity on this road map to PBT breakeven, Now we are already at about cash breakeven in this quarter. Right?
Yes, please.
And from here, of course, the the cost reduction of 50 will come through in next two quarters. But I think from a perspective of reaching PBT breakeven, there'll be more needed in terms of EBITDA per ton increment. So is is this banking on the debt pay down or the road map is contingent on pricing improvement? Just want to get clarity there.
It's a mix of both, Gunjan. There is continuous focus on debt repayment. Last year, we had reduced 1,600 crores. This year, about 200 this year, first quarter, 200 crores already down. However, today, when we are at about 75% capacity utilization, this capacity expansion will go up.
One of the plants is under a long shutdown for environmental improvements, you know, ESPs being converted to back house. That's category requirements. So once all the plants are fully up, The capacity utilization will also go up. And with this increasing demand, the buoyancy in demand, I believe the prices are bound to rise further, helping us improve EBITDA. Second thing also, which will help Altertech improve its EBITDA for the acquired assets is fast change in in the ratio of trade, non trade sales, and blended sales improvement.
And that should also yield some realization, of course.
Yes. Absolutely. So there will be a mix effort. It's not just realization by itself.
Okay. And would you be okay to comment on what will be the EBITDA per ton difference? Because, of course, we can work out the calculations given set of cash breakeven. But any sense you can give us, what will be the
It's difficult to say that,
Okay. Secondly, on the it it just on these results, the fiscal incentives seem to be higher. So any specific reason why there is more accrual in this quarter, and how should we look at the remainder of the year?
One is, it's directly linked to volumes and, you know, prices in the in the markets where, the plants have a still incentive. This will go up further when one or the one plant where incentives are due, believe that should get cleared data should get cleared this quarter. So they we would expect clearance on another set of incentives for the already it's already provided for. Sorry. Sorry.
So this is all due to volume and realization mix as of now.
And this should stay as a run rate for the rest of the year. Because this has risen pretty sharply versus what we were reporting until even last q four of last year.
We still waiting watch. You know, it's a mix. Suppose the volumes go up in Western markets and on an average, then the incentive mix will not be visible as much.
Sure. Just one last question. I'll join back. The q one on the lead distance, you mentioned there's been improvement sequentially. But anything you can comment on versus last year?
Because last year, one q, we didn't have GPA with us. So what is
is not sequentially Gurjin, it's not sequentially. It's year on year. The What is the
lead distance now?
About two forty. How much? Four twenty seven. Four what am I saying? Four twenty seven or four twenty nine kilometers.
Yeah. Okay. Got it. I'll join that. One year ago.
Now it's about four twenty seven.
Okay. Got it. I'll join back with you. Thank you so much. Thank
you. The next question is from the line of from Goldman Sachs. Please go ahead.
Thank you for the opportunity, sir.
Sir, two questions.
First, on pet coke Can you give us some
idea as to what was the average rate for the quarter?
$110 was
$228
was the average for this quarter, and current trading is happening at around earning 19.
Alright. That is helpful, sir.
And, second thing on any update on your restrictions in the Northeastern market? Anything that you can share at this point?
No. When I have an update, I'll come back officially.
Sure. Thank you. That's all from my side.
Thanks, David.
Thank you. The next question is from the line of Anubhav Adhirwar from Credit Suisse. Please go ahead.
Hi, sir. Morning. Morning. Other
expenses, compared to December versus March, we all always seen that the other expense declined. But if I even compare to December, given the volume increase that we've seen versus December, our other expenses were absolutely lower than the December.
This is all linked to maintenance costs, which would, you know, surface. There's no big pattern on maintenance costs.
So you commented that in December, there was 30 crore GP related shutdown costs. Even if I adjust for that, the despite a 10% increase in volume versus December, absolute other expenses were lower than that.
Wish you have anything to say. Other than maintenance, there is some slight difference in advertisement cost. It very depends on So my colleague here tells me there will be some element of advertisement costs, you know, in this quarter or maybe the last quarter.
But that would
be I think unusual.
That gap will be only $10.15 crores. Right? That's it. Right?
Yeah.
So there's nothing unusual that
There's nothing unusual. It will be, you know I I don't remember anything unusual. Yeah.
Okay. Second thing you mentioned, the exit prices are higher. Just a one question that if you look if you take those prices to sustain at the higher cost of cost of pet coke and freight, your contribution, excluding the fixed cost, you will still be maintaining the contribution today, what you had in the June?
Let me give you an analogy on this. The prices average prices went up about 1% to 2%, and costs have variable costs have gone up about 13%, Krishna. EBITDA per ton has improved quarter on quarter quarter on quarter. Quarter on quarter cost has increased 34%. I'm sorry, I calculated, Anurag.
Quarter on quarter, the costs have gone up about 33% to 4%, and prices have gone up 1%. Prices have risen only in the month of June. So if we are able to sustain these prices in the entire quarter, then obviously, we should be able to do a good EBITDA. However, April, June, July, September quarter is a maintenance, period. Maximum amount of maintenance work, is undertaken from on account of you know, during the month in period.
But as you mentioned on contribution, yes, contribution levels will be maintained. You will be able to Yeah. Yeah. I I don't foresee a challenge over there.
Okay. And, sir, the last question on
the freight benefit you mentioned on the cut load bearing capacity being increased. Any initial assessment? Let's say, what kind of
We are doing it at the moment, maneuver. Earlier, when the first circular was out, we're not really focused because it was about new trucks. Now the subsequent amendment talks about old trucks also, and there are various categorizations, 20 tonner, 38 tonner and 35 tonner that's already published. So we are analyzing the fleet and how fast we can get the benefit of that.
But just a rough idea in the sense that the benefit can be low single digit in terms of reduction of freight cost, or can it be higher than mid single digit?
I'll keep my fingers crossed. I'll, you know, take a target of low single digits only, but if higher is available, good for us. I don't have any computation. Hence, I'm not able to comment on it right now.
Okay. Sure. Thank you, sir. It's helpful.
Alright.
Thank you. The next question is from the line of Raju Chopra from Citigroup. Please go ahead.
My questions have been answered. Thank you.
Thank you. The next question is from the line of Murtusa Alciwala from Kotak Securities. Please go ahead. Yeah. Hi, sir.
Just wanted to check, you know, the Dhar capacity has been ramped up fairly, fairly aggressively compared to what we've traditionally known, you know, a more slow ramp up. Is it a reflection of the underlying demand growth or Altertec continues to sort of, sell ahead of peers and gain market share like we saw with the Japrakash acquisition where you've grown much faster than the industry? So is the ramp up still reflective of
Why can't you compliment us for doing something good?
Sir, I'm just trying to get
a clarification whether it's a good work that you're doing versus peers or industry volumes have also improved.
Sir, I think our there's a shining example of IZX capability, the technical team's capability. First and foremost, the execution of the project from the groundbreaking to commissioning of the first line in a record three fifty four days, cost being controlled, and the ramp up. So, of course, ramp up is we wanted to do a ramp up earlier also, and the demand has also supported.
Alright. Thank you so much, sir. Alright. Thank you. The next question is from the line of Amit Murarka from Deutsche Bank.
Please go ahead.
Yes. Good morning, sir.
Good morning.
So just first two data questions. What was your white cement putty volume and revenue in TLS? RMC as well? Cement?
Three lakh tonnes of white cement. 40 is 40 is included. Yeah. Sorry. One and half.
R and C. One and half. White cement revenues is about 400 crores. RMC volumes is about 1,100. Revenue is INR 507 crores.
Okay. Great. And just then a a question related to the annual report actually from me. So just notice the production mentioned was 57.23, but the sales and domestic sales have been 59.3. So there's a 2,000,000 ton additional sales versus cement production that is I'm talking about.
So I I guess this is what the tolling arrangements have increased.
There are lots of tolling arrangements which we keep trying, you know, short term versus long term. If there are opportunities available, we do that.
Okay. It's not that the clinker sales have increased. Right?
No. No. No. Will tell that another clinker.
Right. Okay. And just some clarification on the regulatory issues. I believe there is a Supreme Court hearing wherein the oil ministry has kind of supported the pet coke import ban. Now I think the environment ministry has to respond.
What is your sense on that as to
No. As far as I understand, they they the supreme court just asked or has asked the ministry petroleum ministry to file their report. And since they have delayed a 25,000 rupees fine has been imposed on the ministry. However, the ministries have maintained and have seen this order also. I'm sure you will also see the order and heard the supreme court ruling or the supreme court arguments that both cement and steel are allowed to use pet coke.
The import ban is not is not being discussed as of now. It's more about what the Supreme Court judge was talking about the pollution and, you know, pollution and related issues with Petco. Imports import ban is not there on the annual. Okay. And we are pretty confident, you know, it is a that beats all logic.
Then India is deficit in pet coke, then why would you ban imports?
Right. And the the other worry also, I think, is that the the Reliance Petco gasifier is almost complete now, so the domestic availability of Petco could also probably reduce.
Yeah. That's true. Right. And any update to
the Rajasthan sand mining issue? I believe there's a court hearing pending on that as well.
Rajasthan, I believe, is the only state where, you know, there are still some issues left to be sorted out. But by and large, it is not impacting the concession activity because sand imports from neighboring states is happening at the moment in the in the in the state of our time.
Okay. Lastly, can I please get the fuel mix and OPC, PPC, PSC mix as of now?
I had mentioned that OPC is about, you know, blended at 67%. And and what else did you ask? Is about 75%.
Oh, 75% of of
the KL. KL. KL.
Okay. Okay. And balance, 25% would be what? Broadly cone then? And then 44% of the APR?
Code is about 20%, and alternate fuel is about 4%.
4%. Yeah. Okay. Great. Thanks.
That's all from my side. Yeah.
Thank you. The next question is from the line of Sudhaj Yadar from CRSA. Please go ahead.
Hello. Good morning, Atul, sir.
Yes. Good. This
is Vivek. My so my first question is, again, on Freight one. So while you said, you know, about the calculation that you will have to do, but just conceptually, this will only benefit your output or there will can be some benefit on the input side also? I mean, when you, you know, fetch raw materials or when you fetch chips and fly ash or coal.
Yeah. Yeah. Both sides.
Both sides? I thought inputs will be more volume dependent, and therefore, you know, there is a limited potential to increase the tonnage over there.
No. There are open trucks also, which are used for exports. And earlier, when before this relaxation, the government had put penalties on the buyer if the, you know, the the trucks were loading extra. So a minor a local minor would tend to load extra, but the buyer is not buyer was a handicap. So but there was a lot of restriction on inbound logistics as well.
This will get this will get eliminated to the extent of whatever is the allowance.
Okay. So the the benefit will be on both the pricing put as well as on the output?
Yes. Yes.
Okay. Second is on the cement pricing, where the exit prices are compared to where the lesser spot costs are, is it still pushing up margins or you are just maintaining what the levels were?
Pushing up margins. And as I mentioned, if you were to exclude the July, September quarter, because July, September quarter will be heavier on costs, everything else remaining the same, October, December, if you were to observe, it will push up margins.
Okay. Okay. And obviously, I don't have the detailed numbers for, let's say, different revenue line items. But if I just purely if I remove operating income and, you know, look at gray cement realization, it doesn't look like on a sequential basis there is, there is there is hardly an increase. Is that correct or no?
Sequentially, about one to 2%.
No, sir. But if I remove operating other income, which has fiscal incentives and a lumpy one, actually, there is no increase in sequential realization. Is that not correct?
Sorry?
I'm saying if I remove the fiscal incentives or let's say operating other income
I look at my, fiscal incentive is not part of my billing. So if I look at my average billing, my average billing is, higher.
Okay. For the quarter, you are saying?
For the quarter, about 2%. Q o q is what I'm talking, but, of course, not Y o Y.
Sure. Sure. So you are saying underlying Graceman realization, sir, higher on a sequential basis?
And more important so this was you know, I'm sure you guys can do your math. The price hikes were taken during June and multiple, points in time in June. So not even you don't have full month effect on June, and this is, as I'm repeatedly saying, the prices excess prices are higher.
By how much?
Good question.
Could you quantify on a serious note?
Obviously, I will will not want to tell you. That's why I don't wanna quantify.
Okay. And lastly, your outlook says with the cement industry now in its upcycle, demand is expected to be healthy. So your demand is looking like to be more of an outcome because cement is in an upcycle. What do you mean by that exactly? Because when your volumes are rising, let's say, 33%, there is hardly any change in EBITDA.
So I mean upcycles are not characterized by that. How would you respond to that?
I will have a Shakespeare way to capture words properly. But the point that I'm trying to make is cement as an industry will see volume growth, a very high volume growth, long story short. Second one, again, from our perspective, I don't know about other players in the country, but from our perspective, our focus was to ramp up the capacities of the acquired assets, which we have been successful. And wherever we found opportunities to increase prices, we have taken price hikes.
Okay. Okay. So upcycle, obviously, should also mean better margins. Right? Is is that how one should look at
it?
Because this quarter, when you say it's a start of an upcycle, but, you know, numbers are not showing that is what I'm trying to say. You know?
I know. So what is happening is this time around, the costs are also ramping up very fast. Whether it is Petco, I don't have to repeat that point, but all these elements which contribute about 65% of our costs are going up continuously. The low on Petco, if you will recall, was January, March 16, about 41 to $45. Today, it is hovering around $119.
Okay? Coal is at 101 or $102,100 yeah. Anywhere around $105, actually. Israel prices, the crude is stable at $75. Rupee is depreciating.
This is causing a far higher impact on costs. Small hikes in prices are enough to take care of these costs, which has been again visible in this quarter. Because if you see that the marginal hike in prices, let's say, percent to 2% in this quarter And the total cost increase of about 3% to 4% over the previous quarter has helped improve the EBITDA per ton marginally over the previous quarter.
So
our forecast is and if you look at any what is Arvest? Arvest's? Petro. So there is an agency called Arges who publishes data on coal and pet coal. If you look long two years long, the prices are being forecast in a downward trajectory.
Alright? So cost will come down. They it cannot go unabated the way the costs are going up on Petco and Co. There are global phenomenon. There's an Aramco IPO, you know, if you were to ask me, that Mhmm.
That also is linked to crude prices. There are there are several other phenomena which, you know, we can discuss offline, which are keeping the prices at these levels.
Okay. But my point is wherever the costs are in an up cycle means that you should be able to pass on all the impact and should still grow the margins. Right?
Absolutely. Absolutely. It will happen.
Okay. Okay. On the positive note, wish you all the very best, sir.
Thank you. Thank you so much. I do agree.
Thank you. The next question is from the line of Naveen Sahade from Edelweiss. Please go ahead. Hello? Hi, Naveen.
Hi, sir. So so my question
Can you speak loudly, please?
Yeah. Is it better now?
Yeah. Yeah. That's better.
Perfect. So, sir, my question was now from a market share perspective, having acquired JPSS, Century is also on its way and hopefully even Denani. So from a overall market share perspective from here on, how do we see expansions in the sense that, do we look at maintaining market share, expansions for Ultra Tech to maintain market share or there is scope and of course the company is, like, you know, aspires to increase it further?
So today, our capacity is 88,500,000 plus 4,000,000 tonnes of Bara, which will take you to 92,500,000.0 plus roughly 14,000,000 I'm rounding it off, 106.5 That divided by about four sixty million tonnes gives us about 23% capacity share. AlgoTech believes in profitable growth. So and there is no end to profitable growth. We will want to increase our market share and profitability alike.
Fair. So in the sense that expansions in that sense that because a lot has been talked about, you know, expansion that you've mentioned in your initial comments. I do understand that our expansion including that of Pali, so that can be followed with expansions which are targeted at growth higher than the industry to further increase market share?
Yes.
Okay. Fair. And and my question was again on the, JP associate g assess. Is there are these assess having waste heat, recovery plans? Or is there a sorry?
No. Not yet. We will take them up now. Currently, we have five plants under execution. As I've mentioned, we will take them take up the waste heat recovery plans in in the acquired assets also in due course.
So the 62 which is planned, new new wasted recovery of 62 megawatt, which is planned, that is at JPA?
No. Existing plans. Existing plans. So it is at Kotkukli, which is in Rajasthan, Dhar itself. There is Hirni.
Hirni. Hirni, which is in Chhattisgarh, GCW, Gujarat plant, the Gajat And one plant in Anja.
But there is scope to using put it for JP or say acquire assets also. Right?
Definitely. So with the feedback the plant, more the opportunity for WHRS.
So my question then, sir,
is that if, like, you know, the payback period, typically, as we understand for waste heat recovery projects is being very high, what is it stopping us to, like, you know, have these waste heat plants at JPS Associates in
Wait. I have two arms and two legs. So management where management is required. So we will take it up. We don't want to you know, whether I put it up over there or put it up in our existing plans, there is bound to be efficiency gain and improvement.
Return internal investments will be there.
No. No, sir. I was only saying since the cost difference is that 50 rupees, which is you said can be abridged, and there is some element of structurality of INR110 odd, I'm saying, Phase three recovery could get us another INR20, INR30 there, I think?
Yes. So we will take
it up. Since these projects are already you know, planned and, you know, conceived, the work has already commenced on them. The team is, I believe, working on the plan. So adjustment is happening right now, my colleague from the JPS has acquired The assessment is happening, and it will be put up to the board for a two year.
And okay. One last thing.
Poly, what is the timeline? Have we ordered equipments for this unit? Poly expansion, I'm saying?
Not yet ordered, but we'll start On June 20. The commissioning is June 20. That's what the target
is. Okay.
Fair. Thank you.
That's it
from my side.
Alright.
Thank you. The next question is from the line of Sanjay Padek from Alliance Mutual Fund. Please go ahead.
Hello? He's not there.
As there's no response on the line, we move to the next question. That is from the line of Rajesh Lachani from HSBC. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Sir, two questions.
Can you just give me what is the demand growth in each of the regions, and what was our utilizations in these regions? Our utilization North would be somewhere around 80%, Central about 70%, East 95%, West about somewhere around 75%, South somewhere around 60%. Okay. And sir, demand growth in these regions would be? Demand growth, how do I estimate that?
It's very difficult for me to comment on demand growth on an individual region, Rajesh.
Always. Not all.
Yes. Thank you. The next question is from the line of Kamlesh Chen from Prabhudas Leelatir. Please go ahead.
Yeah. Thanks for the opportunity, sir. So, like, with regard to this Bali expansion or the the greenfield plant, somehow, it's that the feeling which we are getting that it has been postponed. Earlier, we were talking March 2020. Now even the equipments have been not supplied.
So what's the actual thought process on the plant in terms of adding capacity in the Saharajanistan? Or is it a thought that we would first on to complete this and then we will give you a thought to that?
No. There's nothing like that. North Market is so buoyant that we have to do our Pali project. We are running fully sold out, almost fully sold out. Benani paper to happen, it will help us meet the growing demand of Rajasthan and the Northern markets.
So both and this is something we are committed to a June 20 March or June 20 deadline. That should not be a problem.
Okay. And, sir, just one more question on this incentive part. Actually, some of the incentives would be getting expired, like, say, for the HP plant. So what should be the steady rate or per ton rate we should look into? Because in this quarter, has been as high as around 100 and 5 per ton.
Very difficult to compute that. Well, as was mentioning on the call earlier, it all depends upon the mix of sales volume from region to region and the realizations that are happening in that high prices and low volumes will still lead to lower incentives.
Okay. But sir, your like a breakup among the incentives as well, so it would be more contributed by your Western business, like say, the master plans or it's equally distributed among the reasons?
It could be more or less equally equated because incentives are on now on a GST policy is outside within that state. So the rate of incentive is the same. Somewhere you might have one off off additional incentives like electricity duty, some where it is exemption is available and so on and so forth. But the biggest standard incentive is an exemption on SGST for sales within the state. So that ratio remains the same.
It's only directly linked to the volumes then.
And so lastly, like, say, what's the guidance on the CapEx part in this year and next year?
This year, we've already completed about 300 odd crores of CapEx in q one, eighteen hundred crores more to go. And next year, I would have about 2,000 crores as of now.
Okay. Okay.
Great, sir. Thanks a
lot, sir.
Thank you.
Thank you. The next question is from the line of Anshoomanathri from FameGain West. Please go ahead.
Yes. Thank you for the opportunity.
Sir, can you speak up that louder, please?
Yeah. I'm saying thank you for the opportunity and good performance in a challenging time. My question is regarding the recent ministry talk on bringing the royalty payment under GST. So will this change the economics of the acquired plant and bring it at par with the existing one?
Why not it will? It's additional royalty. No. No. So sorry.
Acquired plant, there is one more level of royalty, which will continue. But if this happens, then I think the the margins and everything will I will
not I'll stop coming to
the operator and go and pay gold. That's all. So so if it happens, it will be wonderful for the industry.
Okay. And secondly is on coal. For example, for the past one and a half years, we have not seen any auction, and all the captive producers would like to have, for example, Ultra Tech requires so much of coal. So what do you think is, like, why are these coal auctions not happening? And would you then
I have something like recently read a notification announcing the next set of coal auction. We are examining if there's any mine of interest to us. We had one coal mine in auction in 2015, which we are working on commissioning, which should start production in now somewhere in 2020 or 2021.
Okay, sir. And the preference would be
a linkage or a captive course for Altertec? Sorry?
The preference for Ultratex, be a linkage or a captive coal mine?
The preference is linkage coal. Okay. Got it, sir. Thank you. Thank you.
Thank you. The next question is from the line of Anupam Goswami from Stewart and McEach. Please go ahead.
Yeah. Hi. Good morning, sir. Just want to know one question. What is your cost usage on pet coke and what is your cost on coal?
I'm sorry. What is the cost? Cost per ton if we use on pet coke. And what what is your cost per ton on coal? Just one second.
On an IT basis, Petcook cost is about 1 rupee 1 rupee 30 k, sir. Mhmm. Only about 1 rupee 40 k, sir. 45 k. For one ton.
Right?
1 k. 1 k.
1 k. 1 k. K. Okay. Okay.
And, sir, if you and I can list in the beginning, if you could give the prices trend in the for other agents of India, Like, how much it has risen or it has gone down from the previous year? Just one second. Yeah. So if I were to look at quarter on quarter, the prices have better percentage movement. The central is about four to 5%.
West is, again, four to 5%. East is flat. North is about percentage up, and south is, you know, I would call it a flat only. Okay. Okay.
And, sir, on an overall basis in the longer term, where do you see a mark sustainable margin there? Because as sharply for me. And can you see anything improvement in the next two or three year maybe? Yeah. Yeah.
Yeah. So today, are, like, a 20% market instead of talking about EBITDA per ton. I'll switch gears to percentage. Today, we are at 20%. Yes, sir.
I think this is the lowest level of margins. We should see improvement in margins in the coming years.
Okay.
That's all sir. Thank you very much. Thank you.
Thank you. The next question is from the line of Bhavin Chera from Indam Holdings. Please go ahead.
Yeah. Good morning, sir.
Good morning.
Yeah. So you indicated of a good demand, and actually, we are seeing it across the region. But you also mentioned a good demand supply equation. So when we are reading reports or when we are hearing from companies, everyone is looking for expansion and even the ordering activity is picking up. So what is your sense of supply side?
Because demand looks strong, but supply side, they're seeing reports of 25 to 27,000,000 addition for next three years.
Yeah.
Proceeds less than 20,000,000 tons for last three years. So can you throw some light here about your understanding of ordering activity?
It's slightly higher than that, maybe close to 40,000,000 tons over a period of three years, which is around 10% growth in supply. All right? And the demand is expected to grow at about 8% to 10%. I would be bullish on a double digit mark even if 8% to 10% average 9% growth, which is 27% growth in demand over the next three years. So current demand is roughly around two seventy five million or two ninety million tons.
Two ninety million tons, that is potentially set to grow by about 27, percent, which is roughly 78,000,000 tons. And, the new capacity announced this is announcement and, you know, board approvals and all displays anywhere between 40,000,000 to 45,000,000 tons is the supply which will get commissioned during the next three years. So to that extent, supply demand gap will be shrinking.
So you are indicating you expect 40 odd million tons over next three years?
Yes.
Whereas the consensus is building towards upwards of 20,000,000 per year. So that's a number of 60,000,000 No.
That's wrong. That's totally wrong.
Okay. Okay. So I think we have to do some more work on that. Yes. But I think if your number is correct, then I agree with your assessment.
Thanks a lot, sir. Yeah.
Thank you.
Thank you. Next question is from the line of Madhu Matha from Fidelity. Please go ahead.
So just one question on the demand side. You're saying eight to 10%, and probably if you're bullish, it could be higher.
Yes.
In in the history, if I look for the last four years and now we're at a higher base, also of 300,000,000 tons versus 300 in the last up cycle that we saw. So what makes you bullish on getting that 10% number? Because on a 300,000,000 ton base and with urban housing, private CapEx not looking that great, how do we see that demand coming through? Because 10% seems
very sharp. We'll be happy if
it comes, but how what are the drivers which will with Inphar is not a very big part of overall India demand, right?
Very good point, Madhav. My colleague just told me yesterday that FY 'twelve or FY 'ten, 'ten was the in the history of cement in India, FY 'ten was the highest demand growth in volume terms, about 12.1%. Okay. That's anecdotal. Now why then of course, I don't remember what was the base in FY 2010 and absolute growth number.
So you're absolutely right that on a higher today, it's a higher base of two ninety million tonnes, that is 300,000,000 tonnes also rounded off and 10%, 30,000,000 tonnes of demand. Now where is this demand going to come from? All these intra projects that we are talking about, some of them I enumerated on the call as well. The so I'll I'll build on examples. The the bullet train project, it will consume additional one to 1,500,000 tons of cement every year.
There is a rehab project for the Birichall in Mumbai. It's a 12,000 crore project. That's a massive cement gazler. The highways now cement roads were not being done in the earlier build cycles. Cement roads are happening now.
Okay. The metro project where we are one of the biggest suppliers in Mumbai, the sales are going up currently somewhere around fifteen, twenty thousand tons will go up post monsoons to about 30,000 tons a month. So these are I'm just so 30,000 tons are not equal to a 30,000,000 tons, I understand that. But the point that I'm trying to make is all these projects and these projects are on a time bound execution plan. Government is levying every penalties on contractors for any delays.
You've only seen project which took seven years, eight years. I don't know how many years and how many how many extensions. Those kind of delays will not be permitted now. So this time around, the the heavy duty consumption of cement is what is going to drive demand. The Purvanchal Expressway, which is the one of the longest ones from Allahabad to Gorakhpur, one of the longest expressways that has been done.
The Bharatmala project, you know, encompassing all these concrete road projects, 84,000 kilometers of roads. The the low income housing project, which is now picking up pace, I I again repeat that the affordable housing program has not yet kicked off in a, you know, in its super speed. I am in touch with some developers, and the organized real estate is is gathering steam now because of RERA. People have forgotten that RERA just came in May 17, and only eight or 10 states have adopted RERA till now. Once the entire country is on RERA, the organized real estate will start booming.
We are seeing, uptick in urban real estate already. So these are Mumbai, Gurgaon, Pune, they are seeing, you know, the construction activity and demand for organized real estate coming back. It's a matter of time when the tier two and tier three towns start picking up pace. I'll give you another example. Gujarat as a state was not growing in demand for cement till about till about six months or nine months ago.
The moment BFC has entered Gujarat, there is so much of ancillary activity which has started picking up that we are seeing huge volumes of cement in Gujarat. State by state, there are different demand drivers which are generating volumes. Rural markets, we keep forgetting about the rural markets in the country. Rural markets are the largest markets in the country. First and foremost, there was a crop loan there.
Now the MSP hike, which has come in, monsoon has been good consecutively for the three years in our running. The demand from rural markets has started picking up big time. So all this is leading to the 8% to 10% growth. Last three quarters, we have seen 13%, 14% growth in cement industry. It is
happening. Okay.
So just one quick follow-up to that. So in terms of pricing being better, you mentioned that we'll also try to increase our retail institutional mix. But many of these will be institutional projects, right, in start plus the low income housing. So do you think that could be that could not help margins a bit? Would you agree with that?
So we have seen price hikes in institutional clients for our institutional clients also. And because, you know, there is only this much of cement that is available. Why we talk about 72% capacity utilization or 72% overall? 73% overall capacity utilization in the country. There's a lot of dead capacity also in the country.
So there is bound to be price improvements from institutional customers also, which we are already seeing ourselves. Okay. And and more important than the price is the the margin because there's a lot of lot of cost which is eliminated in institutional supply. So margins are fairly robust.
Right. Okay. Right. Thank you so much, sir.
Thank you. Ladies and gentlemen, this time constraints. We'll take our last question. That is from the line of Ashish Jain from Morgan Stanley. Please go ahead.
Hi, sir. Sir, so my question actually pertains to the last point you made. Today, what is the kind of EBITDA per ton differential you see in your institutional versus non institutional business? Difficult to go down to the EBITDA level on you know? So if our average EBITDA per ton is $9.29, you know, give or take $20.30 rupees here or there, that's what I would estimate.
Okay. Okay. Fine. And then secondly, you know, the the spike in in the incentive income that we have seen this quarter, is it from a specific plant? If and if yes, can you just highlight which plant is it?
So the new plant, which was to which started generating incentives was Dunda, part of the acquired assets. But more important is the mix of sales and prices, which has had to improve the other income or incentives. Okay. Mister, just as a side point, there has been a need to put article now this pertains to Bemani that as per the terms of the bid that we have given, you are entering 1.5 crores of interest cost on a per day basis. Will it is it possible for you to comment on that?
And, you know, is is that how the deal is matter is subject based. It's in court, so I don't want to delve on that at the moment. Okay. Thank you, sir. Thanks so much.
Thank you.
Thank you. Ladies and gentlemen, that was our last question. I now hand the conference over to mister Atul Daga for closing comments. Thank you, and over to you, sir.
Thank you, everybody, for participating in this call. The q two July, September, let me warn you upfront, don't have high expectations in terms of margins because it's a wet period. Volumes, I still hope the way the construction activity is going, volumes will sustain and prices will sustain. However, with higher maintenance cost during the quarter, you could see some kind of a depression in margins. Otherwise, there seems to be beginning of a good year and a good feeling for cement.
Thank you so much.
Thank you very much. Ladies and gentlemen, on behalf of Ultratec Cement, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Yeah.