Ladies and gentlemen, good day, and welcome to Ultratec Cement Limited Q3 FY 'twenty one Earnings Conference Call. We must remind you that the discussion on today's call may include certain forward looking statements and must be therefore viewed in conjunction with the risks that the company faces. The company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent development, information or events or otherwise. As a reminder, all Paracel lines will be in the listen only mode And there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded.
I now hand the conference over to Mr. Atul Dhaka, Executive Director and CFO of the company. Thank you, and over to you, Mr. Dhaka.
Thank you. Good evening and a warm welcome to all of you on this call. Wishing you all a very safe 2021 and my apologies for having dragged you on a holiday of Saturday. I'm happy to inform you today that we have our Managing Director, Mr. Keshi Jhamad, Also on this call to talk to all of you.
I could go on and speak for an hour to introduce him, But I'll have to restrict myself from doing that. To introduce him, he has spent major part of his career of More than 35 years in cement, having worked at the grass root of plants, putting up several of our projects, The best being the Dhar unit, setting it up in a world record for time taken and the cost at which the project was done. He is a veteran of the group, I have already mentioned child accountant by profession and a thorough gentleman. Thank you, sir, for joining us today. Before I delve into the quarter, let's discuss ESG.
And I think nobody is better equipped to talk about how conscious Haltertec is with The environment other than Mr. Jawahar himself. Over to Jawaharzab. Yes.
So thank you, Atul. And Again, a very warm welcome to all analysts joined on this meeting. I'm extremely very happy to be interacting with all of you on this
Sir, we are not able to hear you.
Yes, sir. Now you can yes. So I'll start with the ESE part actually. Particularly, if I say about the ESE, I would say that this is one of the important pillar of our vision and mission statement where we have committed that This would be going to be demand as important as other business. We have put all kind of policies to achieve this Particular objective on whether it's environment, whether it's safety or whether it is social responsibility, everything.
So whatever area which covers under the ESG have been very well defined in the organization. And there is a framework also in place Where our 3 strategic pillars on sustainability framework are responsible stewardship, stakeholder engagement, where we have an interaction with the stakeholder Group and the future talking, which is equally important. And we have very clear cut focus area In the area of ESD, whether it's decarbonization, water management, environment side, Circular economy, which is very important, biodiversity and of course, you can't achieve anything without having a thought leadership. I'm also happy to share with you that there is a well defined milestone based action plan under the each These focus areas, whether it's a consumption side, whether it's alternate fuel usage, whether it's green power, WHRS, renewable energy, Etcetera. So and these are areas are trade on a very regular basis.
And on a quarterly basis, it gets discussed in the Management meeting. It is not only the these two three areas, but equally important that the environment norms, Which are, of course, mandatory, but we need to exceed those norms so that we are ahead of those things and norms. And in terms of circular economy, I would say that we are one of the largest consumer of the Fly ash, actually, we consume almost 12,000,000 tonne Fly Ash. Per year, we consume almost 1,000,000 tonne alternate fuels and raw metals, And we consume almost another 500,000 tonne in terms of various best products of the industry. So if I may say, It's not only the ESG per se for doing the ESG, but all these areas are well aligned.
And along with these facts these focus areas, the biodiversity is another one important area. We have already completed 5 plants 4 hour assessment and plants have been made under execution and 3 more plants assessments will be done during this year. And if I may say, the company has already committed The science based targets, which are under validation and we are committed to build our business in line with This is below 2 degree worth under the Peris agreement. And we are hopeful that by 2,032, We would be definitely able to issue the targets as defined. So if I may say, whether this ESD It's done in a right speech.
I can commit to all the ladies and gentlemen present in this meeting. It is Being done very religiously and if I may share some numbers actually about our green power, we have target to achieve our green power SO in total Almost to 34% by 2024, which includes our waste heat recovery systems and the solar power, wind power, etcetera. So this area is under huge focus. Coming to the social responsibility front, again, ladies and gentlemen, Aditya Birla Group started on this fund much ahead than anyone else, if I may say, in the industry. Some of the industrial houses We're doing but we are among one of them.
And our focus is on the education, health care, sustainable livelihood, infrastructure Development, etcetera. And the total beneficiaries with all these, our initiatives are more than 1,600,000 people On the education front, we are almost 1 lakh children Our benefited rural healthcare village covered our 502 villages, and we cover almost 16 states. So and if I may say about the number also, our CSR spread even for April to December This year is almost more than little more than INR 100 crores. So this is all about the ESG, but I would not say it's the work is still in progress. We have to go yet long way.
And every day, this subject, as you know, is getting evolved. So we are fully aligned, And we are again part of the world concrete association. We are the founding members actually, and there is a regular interactive learning from those platforms. Are also part of the one of the member of the Terry West platform. In terms of We have a disclosure to Dow Zone Sustainability Index, and I'm happy to say that we have improved our Dow Sustainability Zone almost by 9 points From 59 to 68.
So it's a journey is still on, and we have yet to go a long way. But I can only make the statement on this opportunity that the entire company is fully committed. We are well aligned. Business Hope this is well aligned with our ESC. So thank you, Atul.
That's what I would Sorry, I will take a little more time, but it was maybe the need of the hour.
Thank you, Giovanni. No, it was certainly very important to tell the whole world Coming back to the nitty gritties of our quarter, let me start with how demand has been shaping up. Pandemic has not had a significant impact on the cement industry. I think everybody is aware of that now. After the initial setback, The industry has got on track with demand surfacing from almost all the quarters.
We already talked about rural and infrastructure demand picking up. Now we are also seeing Tier 2, Tier 3 towns urban real estate, which was languishing in the dark for last few years, Has started showing signs of recovery aided by the current low interest cost regime, various Benefits being given by Jet's Harit is to homebuyers as well as builders to give a boost in the air estate sector. We've seen a healthy improvement in capacity utilization across regions. Ultratech achieved a capacity utilization of 80% for the quarter, Ending December with as high as 85%, sales have gone stronger only month after month. These markets continue their swansong on cement consumption.
Pre COVID rural market and infrastructure segment was driving demand, but now as I mentioned, Arun is also Arun Aoudin is also gaining momentum. Let me now quickly talk about our CapEx, The way things have been shaping up. Firstly, the last acquisition, Century Cement, was consummated on the 1st October 2019 and this quarter, finally, Ultratech is a like for like quarter. 23 assets have been shaping up very well. There was a small delay in terms of the rebranding exercise because of COVID, but we are sure that we will be able to complete the rebranding exercise as per plan by March or not later than Q1 next financial year.
Line 2 of Bara Grinding mill was another delay beyond our control, But now it's in the last phase and we expect that the line will get commissioned by March 21. Line 1, which was commissioned in February 2020, has already achieved a capacity utilization of more than 70%. Work on our next phase of expansion, which was about close to 19,000,000 tonnes, has commenced in full swing, and we are on course for commissioning during FY 'twenty three in a staggered manner. You're also aware that we were holding the assets, a 2,000,000 ton grinding unit, which was acquired as part of The Binani Cement acquisition, it was held for sale. We have finally decided to give up the idea of selling that unit And consolidated the performance consolidated the asset itself as part of our UAE operations.
Our total overseas capacity now stands at 5,400,000 tons. I'm very proud to tell you about Our team has managed cash flows. Not a penny of extra cash anywhere, that's the mantra which the team has been following. Our efforts have resulted in a reduction in the reduction of net debt by a further INR 2,696 crores this quarter, totaling to INR 7,123 crores in the 1st 9 months of the year. And you all know January March quarter is Supposedly a very good quarter for Cement Industry.
Net debt stands at INR 7,973 crores. We are having a current gross debt of INR 21,000 crores. However, we and a treasury surplus of INR 13,000 crores. Our treasury surplus continues to give us an interest arbitrage, and we are always in the money, our treasury surplus. This treasury is deployed in 100% secured AAA risk free investment opportunities only.
Another dimension which we keep looking at is our ROE. ROE without bill to bill has reached a number of 14.1%. We are confident to improve this further With all our new investments being at a low cost and generating very high returns, I expect to cross the number of 15% ROE along with the new projects coming on stream. We must talk about the cost curve as well. Yes, cost of coal and pet coke both have been going up.
Fuel forms nearly 13% of costs for cement industry. Currently, Coal and petco both are trading around $110 per tonne as compared to somewhere around $60 or $65 in June 20, it's almost doubling on there. Petco market has been soaring high over the last few months and is expected to peak by June in all probability. This has happened because Availability of U. S.
Pet coke has been scarce with petroleum crude production going down with automobile sector demand going down in the Earlier times of COVID and the demand for pet coke has been rising in Latin America and the Middle Caribbean. Many cement manufacturers switched to coal, international coal prices have also risen Steeply over the last few months due to production and logistic disruption, strong Chinese winter demand amid ban on Australian coal as well. We as I mentioned, we expect that the coal prices, the fuel prices should stabilize in the next 6 months when again the crude production goes up for building up to winter stocks in the U. S. Refineries.
Quickly to tell you about selling prices. Selling prices were marginally lower this quarter. This quarter is has been volume raised, but selling prices y o y have been stable. I must also update you on RMC. As in our last presentation, we had I'll talk about RMC.
RMC is a space gaining momentum for us. We now have 9 plants in the country as compared to A number of 100 plants where our RNG network was stagnating for a very long period of time. We have started growing RNG in a significant manner. Besides being a large captive customer for our own cement, R and C generates incremental margins over cement Vitamin continues to strengthen its position in the market, net sales going up 15% this quarter. This was driven by good volume performance and a strong pricemix with growth broad based across categories and regions.
Growth comes from both Vitamin and Whal Care Food Tea segment of the business. Vitamin grew about 13%, has grown constantly at 80%. With strong focus on penetration in new towns, rural sales have also grown by 91% over The last quarter same period last year. We are continuing on the path of innovation with Launch of new products, we launched best in class water proof footie in the market with 2 times water resistance meeting great success. Introduction of new variants of fragrance putty and expansion of current product portfolio has resulted in incremental growth in putty segment.
I believe fragrance putti has also been very well appreciated in the market, while waterproof putti has shown promising results In a very short time after its launch, I hope our results brought a smile on your Phase 2. Some of you might remember my message a few quarters away a few quarters ago, the best is yet to come. So hold on and enjoy the ride. Thank you. Over to you for questions.
Thank you very much. We will now begin the question and answer session. We will wait for a moment while the question queue assembles. All participants are requested to limit their questions to 2 per participant. If time permit, We will take follow-up questions.
First question is from the line of Bhoomika Nair from IDFT Securities. Please go ahead.
Yes. Good evening, sir, and congratulations to the entire team for a great set of numbers. And thank you for the update on the ESG and the Power or direction towards the green production that we are looking at. So the first question is on everybody's mind is the group investment or new entry of the paint business. And just wanted to get our thoughts on why we are not doing this ourselves given that we have the moat of the Dealer network and the brand through white cement.
And the second question is on the fundraise. Given that we've been deleveraging quite well, The reason for the INR 3,000 crores of fund raising?
Umika, first question on Paints. I think we did not see any synergy of paints with cement. Globally, there is no cement company who is doing paints. And The customer for Paints from a sales force perspective is different from for a cement sales guy as well as a Paints salesperson. We are a single product core cement company, and I think Surging ahead with our investment plan and growth plan in Cement in a big way.
To your second point, fundraise, fundraise, there is a lot of Interest arbitrage opportunities that exist in the market, I'm happy to tell you that last month, We had raised a 3 year debt at 3 year bonds at 4.5%. Sorry? 4.6%. My colleague is correcting me for a few decimal points. So We see an opportunity of interest arbitrage whereby we can refinance our some of our existing debt, and that's where we are Looking at this opportunity of raising debt.
To quell all doubts And
for any other question that might come on this debt, the fundraising, we are not raising equity. There have been questions which have been raised In the last two days, whether we are going for equity days, it's not an equity days. We do not mention in any shape or form about equity. It's a debt raise only.
Okay. So 3 finance.
Yes.
Okay. So if I may just squeeze in one question, we've done quite well across all our Positions of both UNCL as also Century. Are there any further synergies and possible ways to reduce costs Further between all the assets that we've acquired and setting up?
Yes, there are lots of things that are happening. If You'll see our presentation there is an investment and a big investment that we are doing in WHRS in both UNCL as well as Century. There are production cost improvement program, which is happening At Raipur Unit, which is what the oldest unit in the network of Century plants, When we are when we complete our WHRS implementation, the cost will come down further. I'll request Jawherjee also
to add further on this. Yes. Just to add upon, ma'am, because, yes, as far as the All assets acquired, JP and the Binani Cement, the most of the synergy has been, So I would say that realized, but yes, always there is a every day some learning and some opportunities. In terms of Sensory, yes, The major part has been done, and Aathil has said in his opening remarks that the plant transition we have completed, plant transition to the extent of about 79%, 80% under AltaTeq. So the balance part will definitely give additional benefit to I'll take once the full brand transition takes place.
And in terms of the cost side, yes, definitely Some more opportunities are there, and we are hopeful that in next 2, 3 quarters, we would be able to realize further value in terms of Optimization of certain our consumption ratios and RamEx designs, etcetera, which is already on. But yes, definitely, it's As you know, it's a continuous process industry and take little time to reset the optimum level.
I'll come back in the queue and wish you all the best.
Thanks, Lomika. Thank you very much. The next question is from the line of Gunjan from JPMorgan. Please go ahead.
Yes. Hi, sir. Thanks for taking my questions. Two questions from my side. Firstly, on the cost side, there is clearly a huge difference still between the approval rate and the spot prices for At Kokan International.
Also, could you just give us some sense like how should we what kind of inflation you further expect assuming spot stays where it is Right now. And along with that, on this WHRS program, which is fairly aggressive for the next 2, 3 years, What kind of cost savings can this yield when it is fully executed?
Yes. I'll start with the second part actually of your question. So the in terms of waste heat recovery system, yes, the So they got little bit delayed during this pandemic because of the non availability of manpower. But now I would say the work is in full swing since last later part of the second quarter, and we are hopeful to the commission All those projects maybe 3, 4 months later than what it was originally targeted. And in terms of saving, definitely, as you know, the WHRS power is generally, it's sort of If we exclude the CapEx cost and depreciation aspects, then the power is practically pre subject to the Certain government levies actually like electricity duty, etcetera.
So at most of the places, if I may say a CEFR number, it is within INR 1 per kilowatt of the total cost actually, which is generally the major part is of coming contributing from the government levies. And the second, in terms of the petco prices, To us, actually, now petcock prices have already touched on the upper band actually. And there may be some possibility it may further move, Maybe another $10, $15 it's very difficult to predict, but yes, that's what the general feeling in the marketplace. But the coal is now reasonably settled. But yes, there are other challenges to switch over from 1 fuel to another fuel.
But I would say, at Ultratech, our team could able to develop a good understanding so that we can switch over to hydro fuel Without much of delay because sometimes it takes little time, but I think that flexibility has been developed. So, I believe I have read something here. So that is the case, ma'am.
Sure. No, that's really helpful. But if I can just have to just put the numbers, if I have like we are at $74 Approval versus 110 at Petco. Is it fair to say that there is almost INR 120 to INR 150 of incremental cost, Cost, assuming cost stays where it is, which is incremental increase that can come from
It can be Gunjan, it can be there, but it's all linked to how each company or each player manages its fuel. We have reduced our dependence on pet coke and increased our consumption of imported coal, Taking new sources of coal. My sense is that the Current high cost purchases will come up for consumption in April, June quarter. And The math that we had run earlier, every $10 increase could impact the cost by $50
Yes. So yes, it has been explained, but I would only say because always there is some inventory in the pipeline. So It may not have that much impact actually of $74 versus $120 But yes, if it continues for a longer period, then obviously, we would be also going to hit with the $1.20 kind of cost. But yes, I don't think at least in our case it is likely to happen at least in a short period.
Boonjan, in my commentary, I had mentioned it will be we see it maybe 6 months more of this high price regime.
Sure. Before just taking the second question, could you would you be able to put any number to these savings from WHRS? Because I mean or maybe if I think through it, incremental 20% shifting to the WHRS potential savings can be RUB 70 to RUB 80.
Let me flip that question. I will leave it to your calculations. As, Jayaj, you already mentioned, the cost of WHRS is less than INR 1 and the cost of the Garabampel power is INR
4 to INR 5 INR 4 to INR 4 to INR 5 INR 4 to INR 5 INR, depending on the location.
Yes, between INR 4 to INR 5 INR. 26% of our power will become WHRS.
Okay. That makes it clear. Now just second question is on the industry growth. Now we've done 14% and if you can share what is your assessment that where industry would have been In December quarter. And to me, it seems there are clearly some market share gains.
So what are there any specific regions where we have done Better than the market, any thoughts you can share around this?
Very difficult because there's no data that is available to quantify how the market has grown. Yes, I'm sure Ultratech has done much better than the industry. The other point that you asked mid zones, almost all regions, East has grown phenomenally well, Again, growing more than 20%. NORT is also growing 20%. So It's general euphoria, I can say, which is being which is visible in the cement industry across the country.
Okay. All right. I'll join back the queue. Thank you so much.
Thank you very much. The next question is from the line of Indrajit Agarwal from CLSA. Please go ahead.
Hi, sir. Congratulations on a great set of numbers and thank you for the opportunity. First question is, can you give us tentatively what is your capacity utilization in each region? Or what was our utilization in each region in the quarter gone by?
Okay. I'll give you a range. So when we ended for the year around 80%, East was doing more than 100%, and the lowest would have been South, which was in the 70s and rest All were closer to the 80% mark.
Sure. That's helpful. 2nd is, what is your sense On industrial capacity addition over the next 2, 3 years, where do you see that? Do you see that outstripping the demand growth? Or it should be lower than that?
The way we have looked at the announcements and plans in the industry, I think Demand will outstrip the incremental new capacity, and you will start seeing The demand supply demand gap tightening over a longer period of time. Longer period is 3, 4 years.
Yes. So What Atul said, so there is good opportunity for improvement in the capacity utilization going forward. But as you know, because everything that demand is fundamentally is linked with how infrastructure momentum Yes, Mented actually. And whatever we read or whatever we hear from the policymakers that the infrastructure Spend is likely to continue, and now the urban growth has started happening. So hopefully, the Demand should support for improving the capacity utilization well for you.
Sure. That's very helpful. And last one, if I may. You have done a phenomenal job on working capital with you throughout the course of the year. Do you think there's still some scope left or we could see some reversal in the next couple of quarters?
And Rajit, can I keep surprises to myself?
Sure, sir. Thank you. All right. Yes. Okay.
Thank you.
Thank you. The next question is from the line of Gaurav from Morgan Stanley. Please go ahead.
Hi, thank you for taking my questions. So, Pafiti, a little bit of color on how has been the growth in the trade versus non trade? And within trade, how was urban done and rural done? I'm sure that rural has been doing phenomenally well. Just want to get a little bit of understanding that what is the delta which has come in the urban Trade and the non trade segment.
Yes. Let me start saying that trade has obviously That's very well in the if I may say from the 3rd quarter, second quarter. The overall trade ratio, if we calculate arthmetically, The trend ratio was higher because the urban and the intra was not picked up actually. And in the Last call, it was you must have been definitely informed that there was a very good demand from the rural Pired because of the lot of migrant labor moving to their hometown, constructing some small houses here and there. And this time, the Rabi crop is also good.
Water table is also increasing almost 100 and 12% of the last one decade. So there is every likelihood that the rural demand is going to Be robust. Urban demand, yes, I may say that there is a lot of articles in the paper that unsold inventory Getting reduced. But I think no major activity in terms of new constructions have started on the ground at least. But yes, Now if the unsold inventory gets reduced, obviously, the activity will happen in on the ground.
So If I may say, in total, yes, in last 6 months, our trade was in terms of ratio, trade ratio, derived ratio was definitely good because of Good because of the lower demand from urban and the infra. But the same, I'm sure, will get normalized now going forward Because now the urban demand has started showing some sign of improvement and particularly the infra and The government policy related with low cost urban housing, PR prime ministers, Awa Sushyushna, etcetera. So So obviously, the calculated ratio of trade should come down. So obviously, it was much better in the last two quarters. So that's my errand point.
Okay. The second question on UNPL, historically, it has been at around 60% utilization, current presentation 75% and profitability has been in line or even better. So has there been any rethinking in terms of So strategic decisions on increasing late distance or anything which has led to this increase in utilization
The demand has generally been good in the market, yes, and we are not leaving any stone unturned to service our customers. Lead might have increased, but the increase in capacity utilization is not because of lead, but it's more because of Overall improvement in the demand sentiment and we are able to service all the customers.
The last question, bookkeeping on white cement and RMC revenue. Thank you.
RMC was INR 6.20 crores and white cement was INR 5.38 crores.
Thank you.
Thank you. The next question is from the line of Ritesh Shah from Investec. Sir,
I have two questions, 1 on the EAG side and 1 on The call that we had earlier during the day. Atul Sarai specifically wanted to check with you
Ritesh, what earlier during the day, I did not have any call.
Good afternoon, Tal, sorry, group call. Right. So this question is specifically for you. How should one look at the incremental CapEx deployment on the distribution network specifically for White Cement and Putty? I'm specifically asking this given Graphene's goals of INR5,000 crores over next 3 years and they are looking to leverage on our on Ultratech's network.
So how should one look at this angle or should one expect that Ultratech will get some royalty from Gassim going forward as they make good of the brand, Brinavite, What is the network?
So our first part of your question, Ritesh, on CapEx on distribution network, There's hardly any CapEx that we do on our distribution network. Correct me the way I'm understanding your question because distribution network for me is my dealer network And Transporters, both are Transporters is all outsourced. We don't buy fleet on our books. And appointment of a distributor is not a CapEx for us. Whilst we have generally a large part of dealers Prefer dealing only in Ultratech, but there are lots of multi brand dealers also Attached with our product line.
So when there are multi brand dealers attached to Ultratech Cement, If they want to sell our Grasim's paint, they are free to do so. It does not in any way impact the performance of Belawhite or Ultratech. And anybody can approach those dealers to empanel their product. So there is hardly any problem over there.
Okay. So there won't be any cash flow drag on back of this as Graphene goes aggressive on paints, specifically for Ultratech? I understand you're correct.
No, no, no. So, Ultratech, cash flow is on cement. We breathe cement, we sleep cement, we make cement, we eat cement. Okay. So we are expanding, Ritesh, you've seen our expansion plan.
And this is not the end of the road for expansion. We will India is a growing market for cement, and we will continue to participate in the growth of cement in the country.
And if I may add, even in the worst cases, suppose if some resources get shared From the synergy point of view, obviously, it would be the 100% on arm's length, but there is no question of CapEx utilization
That's useful. So my second question is on ESG side. We have recently placed a voluntary Direction of 25% on a new baseline, but if I look at whatever target was for FY 2021 on FY 2010 year baseline, we have actually lagged to what we had stated. So how would you reflect upon that? And given that we have new Target what we have already laid out, is there a particular road map on cement to clinker ratio or carbon capture or using hydrogen as an alternate fuel?
How should one look at that given we are specifically now actually
moving up the
ladder when it comes to commitments over here? So that's the first thing. And the second thing is, would it be possible for you to classify what percentage of our capacities or plants are in safe, semi critical, critical and over exploited regions, Looking at it from a water perspective. Thank you.
Okay. So let me start with the first part. Yes, Based on the science based target, actually, we have a very clear cut roadmap in terms of the How we are going to do in terms of improving our conversion ratio actually, how we are going to come out with some The new products in time to come. So the and so for achieving those targets, I Brief in my initial talk, actually, we have clear cut Focus area defined for the Easting, how we are going to reduce power consumption, how we are going to reduce fuel consumption by Modernization and all power coolers and the plants, pretest, etcetera, so as to bring down the Energy efficiency, electrical energy as well as the thermal efficiency and how we can do the process optimization, use of alternate fuel, Etcetera. So the entire road map is very much in place, whether it is a road map for CO2 Or anything else.
Coming to the water management, I would say I'm happy to say that today we are Almost water positive to the extent of 3x actually. And however, we have a very aggressive target How we can reduce the water consumption in the process, and we are targeting that our water consumption positive ratio should Increased to 4 at least by after 1 year or so. So and I don't remember any of our plant is in that covered zone as far as the water The concern side is concerned, the water ratio is concerned. Am I able to answer your questions, sir?
Yes, sir. I wanted specific numbers. Probably I'll Come back, I'll take it from my
end. Let's discuss offline, I'll share the number. Yes. Yes.
Thank you so much. Thank you.
Thanks, Sudesh.
Thank you. The next question is from the line of Amit Muralkha from Motilal Oswal. Please go ahead.
Yes. Hi, good evening and Congratulations, Anagreet Soodani. So my last question is around the mix. So what was the trade mix in this quarter?
64% was trade.
Sure. So is it right to say that the strong growth that has Kam, like it is also implying a recovery of the non trade or the institutional demand?
Yes, absolutely. I think Intra demand has been picking up. Urban real estate has been picking up, which is also institutional or non trade. So Are you seeing non trade coming back very well?
And you see, Elta, fundamentally because the ratio is, as I said, a derived number. So if the Demand is, say, suppose growing by 20% or urban is growing much faster than the obviously, the overall The ratio of trade looks down, but we are very clear that our trade sales should continue to increase. Actually, that's How we measure internally.
Okay, okay. And just also on the cost side, like Also, I want to check on freight. There was a 15% busy season surcharge which was waived last year. So is it getting levied now?
It's not there now. As on today, it's not there. It is not there. Again, I don't think If I may share my personal view, actually, the government wants to give the push. And I think based on whatever we had some otherwise interaction, the government is very clear that I think they would Get more benefit if this surcharge is not there, but I don't think it should be charged again.
But You never know because of the overall budget gets optimized by a policymaker.
Okay. Also on pet coke, like I believe the low cost inventory now would be exhausted. So in 4Q, like If the cost as such has gone up, let's say, 30%, 40%, so all of it should reflect in 4Q in that case?
No, it will be a mix Because inventory is there and there's a lead time in deliveries coming in, so you would start seeing Full impact would be in Q1 only and there will be a marginal impact in Q4 Q1 next year and marginal impact in Q4.
Sure. And lastly on the price, so generally this time around every year we see some seasonal hikes happening Around because of the earlier construction season and demand being good. So what is it like so far January, I believe, has not seen much of hike. So what is the sense around pricing in this environment?
Yes, we restrict to Q3, Amit.
Okay, okay. Sure. Thanks. Okay. Thanks.
That's all, Dominik.
Thank you. The next question is from the line of Rashi Chopra from Citigroup. Please go ahead.
Thank you. Just on costs, just re checking for you talked about the impact of Petco coming through in the Q1. Obviously, there are a lot of efficiency measures that are ongoing. But are there any how does one think about costs In the sense that any other COVID related expenses that had stopped them coming back, so how do I think about cost in the next half with the combination of all three?
Yes, I didn't get your point, Rashi. COVID related expense as in?
As in like a lot of the spend like in terms of your travel, etcetera, all of that Advertising all of that kind of when
So advertising spends are coming back years. And I've been maintaining right from Q1 that What we saw 20% reduction in expenses will not stay, but We've also learned a new way of working and I foresee a 10% saving on overheads Going forward in any case year on year, travel is not happening in a new ways of working. It's More of online meeting unfortunately. So there are lots of overhead reduction that
is taking
place. And don't foresee costs coming back to the same levels of Q4 ever again.
Okay. Just to clarify, when you say 10% reduction in overhead, you're talking about again next year versus as in FY 2022 versus FY 2021 Or this is the ongoing
No, no, FY 2021 is a year not to be used for comparison. It will be you are sure to compare, you have to compare with FY 2020.
Okay. Okay. Okay. And what is the lead distance now?
It's close to 4 40 kilometers. And this was somebody might get alarmed why our lead has gone up, but this was a Conscious effort to service our customers, as I mentioned, Eastern plants were running at more than 100% capacity And we were falling short of material. And that is where when we saw this coming, we also announced our we Press the pedal on our expansion plans. A lot of expansion happening in Eastern markets so that we are able to meet the growing demand in East. We have been servicing East from as far as Maharashtra plants, from Central plants, from South plants also.
And that is one that is the reason for lead going up, yes.
So it's not it's a fundamental because of, as one Atul said, We had to move Lotto Metal to service our valued customer, but it is also to do a lot with Okay. Mix it because the Eastern market generally have a much larger lead than the any part of The country, whether it's a Southwest or not. So that's also helped the impact.
Got it. Okay. Okay. Thank you.
Thank you very much. The next question is from the line of Ashish Jain from Macquarie Group. Please go ahead.
Hi, sir. Good evening. Sir, my first question is on the debt rate that you indicated that we have also raised debt at 4.6% last year.
4.54%.
Okay, 4.54%.
Probably, it will be hard if I say 4.6%.
Sir, what is the hedge cost of that debt? And does it still make it attractive versus whatever you're earning on your treasury at this point of Fine. And another question for the same context is also that now we are sitting on like a huge INR 13,000 crores of Actually, our cash flows are fairly strong. They are well covered for our CapEx as well. So is there no thought of actually reducing the cross debt going ahead?
If you are doing more fundraisers with a longer tenure issuances, which does it should it be read as a thought that You will not reduce cost debt going ahead?
As long as I am having a negative sorry, a positive arbitrage, We are keeping our treasury, and the treasury will also start getting deployed for our expansion for all the CapEx that we are undertaking. So monies will be used over there. And I don't know what is the linkage of hedge cost, 4.5% was Rupee cost of debt. Sorry, we have to say something.
Listen, INR bond, so there is no hedge cost attached to
Sorry, I thought that is the dollar bonus.
It was an Indian rupee bond.
Okay, fine. And secondly, is any part of the treasury invested as intercompany loan?
Ashish, I have told you guys n number of times.
Right. Right. Fine. And then just lastly on in terms of pricing and all, can you give some color how Q3 pricing was at a regional level? Because like sequentially, your pricing is flattish, which was like better than my expectation for sure.
So can you give some color on where we are on each region in terms of QQ pricing in December quarter?
Look, generally, we saw a reduction of 1% or 2% in prices Q o Q. Regionally, East was weaker because weaker than the other markets because the volume uptick was very high. And It's not only us, practically every player who doesn't have enough capacity in these markets tends to bring material from other markets. North was stable, if I remember it right. There was some correction in the Southern market as well.
Okay, understood. Thank you so much, sir. Thanks.
Thank you. The next question is from the line of Naveen Sadhav from Edelweiss Financial. Please go ahead.
Hello? Hi, Naveen. Yes. Good evening, sir, and good evening, Jainaljeet. Congratulations for posting a great set of numbers.
While most of the questions are answered, just one question and this is just like in continuation of what we heard from the parent's call this morning that the entire idea of the paint business was to leverage on the Very strong distribution network of the white cement business and putti business because that is where the paint business has most of the synergies with. So just a question here was, is because since our business again, as you mentioned, is gray cement, Is there a possibility that we hive off or give back this white cement business to the parent And that helps unlocking some value for this because it's typically seen as an FMCG business, but gets a multiple of a Great business. So is there a possibility that this kind of a high loss can happen?
No thoughts as yet on this Point that you have raised of hiding off white cement because for us, we have white cement, we have gray cement, we have weatherproof cement, We have PPC, we have OPC, we have PSC. So we have various kinds of cement and white cement is an integral part of Ultratech. Vitamin manufacturing process, vitamin can be manufactured in a gray cement kiln also. That is also a possibility. There is a lot of Synergy amongst the operating teams, procurement is very procurement is common, in Coal pet coke procurement is common.
And as far as distribution network Is concerned or Grasim Paints business leveraging on our Distribution network, I already mentioned on the in one of the questions because we have lots of multi brand dealers. Today, let's say, any other cement company can also approach them to keep their product. Any other paint company, There might be dealers already who are stocking some other paint. So there is no reason why They might they will not be willing and given the trust, the respect that The Tibella Group's brand has it all our dealer community. They will be more than happy to do paints.
They will for them, it will be one more source of attachment and connection with the group and generating revenues for them. This does not in any way create a problem or hamper our distribution network.
Okay. That's helpful. Just one question on RMC. You mentioned that business has come back strong With INR620 crores of revenues in the quarter, if I understand correct, it's over 20% YOY growth. So Given that we are still recovering and I'm sure demand in all probabilities will be in Q4 will be better.
So is it safe to say that like Going ahead now, since this quarter December itself has seen over INR 600 crores revenues, going ahead this business can continue to Grow with more plants and all coming under its fold?
Yes, certainly. And in the last call itself, when I Showcased our portfolio of that. And I mentioned RMC was bound to grow 10% to 20% by the end of March 'twenty one itself, and we are on course.
Yes. And to further add upon what Atul said because As you know, the RMC is linked with the intra- and the urban centric. So if the upper demand is now showing Improvement and so the infrastructure. So I'm sure the RMCs should do Continue to do better, going forward also.
Great. Just one small bookkeeping question. How much was white cement volumes for the quarter? Why is the
volume 3.9 lakh tonnes.
3.9 lakh tonnes. Okay, that's helpful. Thank you, sir.
Thank you. The next question is from the line of Pratik Kumar from Santi Stock Booking Limited. Please go ahead.
Yes. Venet, thanks for the opportunity. My first question is regarding the recent cabinet approval for this mining Do you think from although the fine print is not available, do you think from the read, is it something which will facilitate Cement sector M and As or and will also help reduce your royalty payments on the acquisitions that you did in the past?
Yes. I Yes. I would say there are some amendments are yet to be announced. Some decisions have been taken by the Cabinet Committee actually, but nothing else is put under PIV actually. So yes, that's A lot of rumors that this has happened, this has not happened.
But if I'm very honest, it's So once we see the final print and the notification once it is passed in this coming session, parliament session, Then only we'll get to know. But the ministry has so far not shared anything Officially with anyone. But yes, as you said rightly, somebody is talking that Now, David, they have been removed. The limestone can be sold and some positive, some negative for the industry. But Would we be able to make comment very honestly once it is in?
So let me To your question, if the proposed amendments come through, it will make consolidation easier. There's a lot of if, as Jawad, you already mentioned.
There's a How would you drop that funnel in there?
There's a slip between the cup and the lip. So the final print lines have to be seen, final law as and when it gets Implemented as to be seen. But if it does, then yes, it could help consolidation.
And also like it could be retrospective reducing our cost of royalty as well.
We haven't got any fine print yet.
And just one question on other expense. It seems to be now higher on year on year basis versus like large declines before last So is there any additional expenditure?
Yes. There's slight increase in ad spend, which was there Y o Y. But if I look at on a 9 month basis, we are still below Numbers. And I again maintain, we'll have a Reduction in overall expenses going forward in any case.
Thanks and all.
Thank you.
Thank you. The next question is from the line of Raj Gandhi from SBI Mutual Fund. Please go ahead.
Hi, sir. Thanks for the opportunity and Congrats for the great set of numbers. So just here, during the announcement of the capacity addition, you did highlight Ultratech Moving into this Building Solutions business wherein we are rolling our outlets with paints and everything and even construction chemicals and also Seemed like a great opportunity, right, from a standard on Ultratech perspective to create value given We're already moving in that direction and we have the dealer network with us. So sorry for the same repetition, but it seemed like a huge opportunity for Ultratech on
So what opportunity? I didn't understand.
The paint opportunity.
Okay. So one is UBS. We did not start UBS network last quarter. It has been there, and I had just showcased the strength that we have developed with a network of 2,300 stores. And yes, that we do sell paint from that network, which is a branded which is a thrilling play for us.
More important for us is UBS acts as a channel for as a customer for us for selling cement. Paint, as I explained, did not does not fit into the overall scheme of things of cement as a business. And I think let me flip that question. Had we done paints in Altertech, you guys would have questioned why are you doing paint and cement? Now you are questioning why is it not there.
But jokes apart, Rajesh, the World over, if you see, there is no cement company, which is doing paint. And The customer profile, if we evaluate, the customer for gray cement And customer for paint is totally different.
Right, right. Grey cement is different, but just because we have that white cement,
Customer for White Cement is also different than customer for paints, completely different. Customer for White Cement is my Mason and a painter and customer for paints is the lady of the house. This is my understanding. I'm not a paints person.
There may be some synergy, but I think but still there is a It's a altogether different segment. Yes, some As you said rightly, no connection with Gray Cement, but yes, may have something with the white mesh.
And also, just Because the paint company has been pushing putty based on a very bundled offering. From now, for us, it's being in a different company to offer similar bundle offers and all that, It gets kind of
So it's too early for us to say anything and there can always be a cross selling of products within the same group. There's nothing wrong in that.
Sure, sure, sure.
Whatever we do, it will be on arm's length. That is most important.
Sure, sure, sure. Thanks, Abhil.
Thank you.
Thank you. The next question is from the line of Rajesh Kumaravi from HDFC Securities. Please go ahead.
Yes. Hi, sir. Good evening and congrats on great set of numbers. First of all, on few numbers like You mentioned your WHRS capacity. Would you also give us what is the current thermal power capacity with the group, Altratic as a whole?
It's total 1100 or 1200 megawatts.
1200 megawatts. Okay. And sir, On the RMC, you did mention that there is a sharp increase and it will continue to grow. On the working capital, Even in your September quarter, you had already squeezed in your working capital significantly, and thereafter, you have further reduced it. So do you believe that the December quarter number are more sustainable?
Or there are few specific reasons because of which The working capital is somewhat significant.
December is sustainable.
Okay. Okay. And Yes. I think most of the other questions are already answered.
Thanks.
Thank you. The last question is from the line of Madhu Marga from Fidelity International. Please go ahead.
Yes. Hi, sir. Good evening. Thank you so much for your time. I just wanted to ask because there have been so many questions on why Architect didn't enter the Paints business, which
I find very surprisingly why you should do Paints
Very surprising.
But I
mean, I just want to yes, I mean, I don't understand like
There's no basement company in the world that's doing things anyway. Asim, my question only was like even if we do like an kind of transaction, would you be able to give us some sense on how that could be structured? Like it will be some sort of distributor margin or
I don't know, Madhav, as and when it happens, because this has just been taken up by Grasem, I'm sure they will come to us in case they need to do some kind of a tire or synergy because as I explained, Anybody can approach the dealer to empanel enlist their product. Today for I'm not 100% sure, But there might be a white cement dealer who is already selling some paint. It could be it is a possibility. I don't know for sure. So they might will be more than happy to sell Grasim's paint.
They don't even have to take any permission, any approval from us.
Right. Understood. Okay, okay. That's all for myself. Thank you.
Thank you very much. I will now hand the conference Over to Mr. Akul Dhaka for closing comments.
Thank you, everybody, for having spent your Saturday evening with us. And as I said earlier also, the best is yet to come. So hold on and enjoy the ride. Look forward to meeting you again for the next quarter results. And I'll be more than happy to talk to you In case there are any queries left, you can give me a call or my colleagues later on.
Jammaji, anything to add?
Yes. So thank you once again. It was nice interacting with all of you. So thank you once again.
Thank you.
Thank you very much. On behalf of Altrax Cement, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.