ACC Ltd

NSE:ACC

Earnings Call Analysis

Ambuja Cement Reports Strong Q1 Growth

Ambuja Cement saw its revenue climb to INR 8,713 crores, an 8.5% year-on-year increase, accompanied by a 55% jump in EBITDA to INR 1,930 crores and a 31% rise in PAT to INR 1,135 crores, reflecting an EBITDA margin expansion of 670 basis points to 22.3%. The company efficiently decreased operating costs by 7% and reduced power and fuel costs by 30%, contributing to the robust financial performance. Notably, the volume of premium products escalated by 10%, and internal accruals and cash in hand covered the quarter's capital expenditure of INR 576 crores. Ambuja Cement is progressing strategically, with new capacity additions, including a ready-to-launch 3.3 million tonne facility and plans for increasing grinding capacity to around 83 million tonnes per annum. It's committed to reducing costs and enhancing operational efficiencies via waste heat recovery expansion and alternative fuel usage and is on track to become the cost leader in the industry.

Robust Financial Performance and Cost-Effective Operations

The company reported a solid quarter with revenue increasing by 8.5% year-over-year (Y-o-Y) to INR 8,713 crores. The operational efficiency was reflected in the reduction of operating cost by 7% from last year due to a 20% decrease in energy costs, an accomplishment tied to strategic coal tie-ups, and a significant decrease in clean fuel prices by 17%. Additionally, there was an 11% reduction in raw material costs. Despite an increase in sales volume, the transportation cost remained stable which signifies successful logistics and cost management. The substantial cost control measures led to an impressive 55% Y-o-Y jump in EBITDA to INR 1,930 crores, with EBITDA margins expanding by 670 basis points to 22.3%, and a 31% increase in profit after tax (PAT) to INR 1,135 crores.

Incremental Investments and Balance Sheet Strength

The company continues to invest in growth, with a CapEx spend of INR 576 crores in the quarter funded by internal accruals and cash on hand, reflecting a prudent approach to financing its investments. The balance sheet has remained strong, with net worth rising by nearly INR 700 crores, commensurate with the overall PAT, and maintaining robust operating cash flows even after substantial capital expenditures. Cash and cash equivalents stand at almost INR 12,000 crores, underpinning the company's solid financial position and readiness for future growth initiatives.

Sustainability and Expansion Plans to Solidify Market Position

The company has been recognized as one of India's most sustainable companies, indicating the strength of its environmental, social, and corporate governance (ESG) practices. Ambition to achieve a 140 million tonnes cement production capacity by FY '28 is on track with new clinker and grinding capacities expected to be commissioned within 24 months. Progress on the Alternative Fuels and Resources (AFR) strategy has been made with an increase in AFR share to 7% and an aim to be self-sufficient in coal requirements through captive coal supplies and group synergies. These efforts led to a 30% reduction in power and fuel costs, demonstrating a successful execution of the company’s cost-saving initiatives and sustainable practices.

Performance in Line with the Industry and Continuous Improvement

Industry growth was pegged at around 9-10%, and the company's growth was in line with this trend. Continued efforts in cost-saving initiatives have yielded positive results with significant reductions in fixed costs, employee costs, and general administrative expenses. The company's logistics costs have also been maintained despite higher sales volumes. Strategic measures such as running the business with a streamlined employee hierarchy and a unified executive team between Ambuja and ACC have played a role in cost reduction, demonstrating an ongoing commitment to efficiency and profitability.

Earnings Call Transcript 2024-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to the Ambuja Cements Limited and ACC Limited Q1 FY '24 Earnings Conference Call, hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Sahadeo from ICICI Securities. Over to you, sir.

[Navin Sahadeo, analyst]

Thank you, Zayo. So good afternoon, everyone. On behalf of ICICI Securities, I welcome you all to the Q1 FY '24 Earnings Call of Ambuja Cement and ACC Limited. From the management, we have with us CEO, Mr. Ajay Kapur; CFO, Mr. Vinod Bahety and Head Investor Relations, Mr. Charanjit Singh. Without any further ado, I now hand over the call to Mr. Charanjit Singh for his opening comments. Over to you, Mr. Singh.

[Charanjit Singh, executive]

Thank you, Navin, and a very good afternoon, everyone. Firstly, thanks for taking out the time to join on the call. Our format will be similar to as it has been in the previous calls. We will focus on Ambuja and ACC with reference to our numbers and the information. With respect to any information you require on the promoters on the group level, please feel free to reach out to me separately after the call. Without taking much time, I'll hand it over to Mr. Ajay Kapur, then we will follow the comments from Mr. Vinod Bahety. And thereafter, we will open it for Q&A. So over to you, Mr. Kapur.

[Ajay Kapur, executive]

Thank you, Charanjit. Warm greetings to everyone. Thank you for joining us today. It is my pleasure to share with you the operational and financial performance of Adani Group Cement business for the quarter ended June '23. The third quarter post the change in management has been a spectacular one for our progress on a number of projects, including operational efficiencies, synergies and business excellence, which have significantly improved key business metrics.

Let me provide some highlights of this quarter and some insights on the way forward. Starting with revenue. The revenue for the quarter came in at INR 8,713 crores, up 8.5% Y-o-Y. The realizations for the quarter were [ 5657 ] per tonne. The volume of premium product has increased by 10% on a Y-o-Y basis. Now coming to cost. Our operating cost for the quarter is at INR 4,575, which is 7% decline over last year. This is attributable to 20% fall in energy costs, given the coal tie-ups and reduction in clean fuel by 17% on a Y-o-Y basis at INR 2.07 per 1,000 [ kcal ]. The raw material costs reduced by 11% on a like-for-like basis, on a Y-o-Y from INR 707 per tonne to INR 631 per tonne.

In the figures, you might feel this is a little difference, but this is largely on account also of a higher production that we have done of clinker. This is in line with our target to reduce cost of raw materials by 12% during the year versus last year. Transportation cost is INR 1,436 per tonne, which is sustained at same quarter as the previous one, despite higher sales volume by 1.3 million tonnes, consistent reduction in other costs over the quarters, and this has come down to -- by about 163 per tonne, which is a 20% decline Y-o-Y.

On account of resource optimization and synergy with the parent company. With the mentioned improvements on both revenue and cost front, EBITDA for the quarter came in at INR 1,930 crores, which is a jump of 55% Y-o-Y. EBITDA per tonne for the quarter was INR 1,253, implying a jump of 41% Y-o-Y. The margins for EBITDA expanded by 670 bps to 22.3% on a Y-o-Y basis. PAT grew by 31% Y-o-Y at INR 1,135 crores.

The CapEx spend during the quarter was INR 576 crores for the quarter and was achieved from internal accruals and cash in hand. As on 30th June, the consolidated cash and cash equivalents in the company's books was INR 11,886 crores, which is an increase of INR 3,744 crores Y-o-Y. Coming to stand-alone results, the net revenue is up by 18% Y-o-Y at INR 4,730 in line with volumes, which are up by 23% on a Y-o-Y basis. EBITDA grew by 48% Y-o-Y. On a like-for-like basis, excluding dividend income of INR 550 crores last year same quarter from ACC at INR 1,138 crore, margin expanded from 19.2% to 24.1%. The robust PAT growth at 29% on a Y-o-Y basis, again, on a like-for-like, excluding dividend income of INR 550 at INR 645 crores for this quarter.

The company won several awards and accolades for its outstanding work in customer service, safety, circle economy and CSR. Ambuja has been recognized as India's most trusted cement brands, 2023 by TRA Research. Ambuja ranked amongst India's top 50 most sustainable companies across sectors and amongst India's top 3 most sustainable companies in the infrastructure and engineering sector by BW Businessworld.

So let me share with you the progress that we have made on our long-term strategy plan shared with you also in May at the time of full year results for FY '23. First on new capacity addition. On strategy update, I highlighted to reach cement production capacity of 140 million tonnes by FY '28. We will add around 40 million tonnes of new clinker capacity, thereby implying around 10 new clinker lines. The first line of 3.3 million tonne facility is now almost ready within [ Ametha ] with production likely to start in quarter 2. Equipment orders for other two more lines are already placed. This includes 4 million tonne facility at Bhatapara and another 4 million facility at [ Barata ] in Chandrapur.

Each of these lines will have 42 megawatts of wasted recovery and provision for utilizing around 50% alternate fuels. These two facilities are expected to be commissioned within 24 months. For doubling the capacity of grinding facilities to 140 by '28, we are targeting 35 new grinding units. Against this target, we have already announced 6 new facilities with a capacity of 14 million tonnes. Of these, 6 facilities, 3 units are mapped to the upcoming clinker facility at Bhatapara. These include 1 each at Sankrail, Kharagpur and Farakka. Another 3 units are mapped to Chandrapur clinker facility. These include 1 unit each at Jalgaon, Amravati and Pune. Besides a facility of 1 million tonne capacities proposed at Bhatinda grinding unit in Punjab and 1 new 1 million tonne unit will be commissioned at Ametha in quarter 2 FY '24. Altogether, will take the total grinding capacity to around 83 million tonnes per annum.

We will continue to provide progress updates of new orders and also the progress of individual products on an ongoing basis. Now sharing an update on structural initiatives to become the cost leader in the Indian cement industry. In my last call and also in our strategy presentation, I have guided for a total cost reduction of over INR 400 per tonne under 3 broad segments, which are energy and cost, freight and forwarding, manpower and admin. Let me first discuss on the progress made to reduce our energy cost. Our waste heat recovery capacity at the time of takeover in September was 40 megawatts, which we are targeting to increase to 175 megawatts by July 24. As of June 23, we managed to increase the waste heat capacity to 90 megawatts.

We could manage to increase our AFR share to 7% against our long-term target of 30%. I also mentioned that we are considering installing 200 megawatts of captive renewal power generation. The construction of the facility has already started in Kawada in Gujarat and is expected to be ready by the end of the current financial year. On multiple occasions, I have highlighted that we want to be self-sufficient on our coal requirements with captive coal supplies as well as coal from group synergies.

As a result, we have started bidding for coal mines in auctions being conducted by the government of India. On account of these initiatives and reduction in fuel prices globally, our power and fuel costs have reduced by 30% to INR 1,501 per tonne in quarter 1 FY '24 from INR 2,138 per tonne in June to September quarter. The last reported before our takeover. The second cost item is freight and forwarding. There are 3 focus areas for cost reduction here, cost reduction in lead distance, second warehouse footprint optimization; and third, railroad mix optimization. We are targeting to reduce the average road lead distance to around 100 kilometers. When we took over the company, the average growth distance was 172 kilometers in June to September '22, which has reduced to 170 in the current quarter.

We have increased the share of direct dispatches from 44% in September quarter to 51% in the current quarter. Rail dispatch percentage improved from 26 to 29 comparison of the same September versus June quarter. On account of these initiatives, our logistics costs have been sustained at June, September '22 quarters despite higher sales volume and catering to long lead markets to increase our market share.

Now moving to the third cost item, which is other costs. Our business is being run as a single entity with a single executive team, and a streamlined employee hierarchy, thereby removing the role of redundancies between Ambuja and ACC. With this savings in technology know-how fees and packing cost reduction. This has led to other cost reduction by 13% to INR 669 per tonne in quarter 1 FY '24 from INR 770 per tonne in the quarter proceeding to the change of ownership. To ensure our assured supply in limestone, we continue to bid for limestone mines.

And in the last few months, we have won some new mines. Let me conclude by saying that our performance during the quarter was strong with improvement in both operational as well as financial parameters. We continue to generate significant cash to finance our expansion and pay dividends to our shareholders. I will now call upon my colleague, Vinod Bahety, to also make some comments on the performance of the quarter.

[Vinod Bahety, executive]

Thank you, Ajay ji. Good afternoon, ladies and gentlemen. With a strong and robust financial performance seeing a good jump in EBITDA, both in absolute terms as well as on per metric tonnes. I'm also glad to inform that our balance sheet has grown stronger compared to last quarter, with net worth increasing by almost INR 700 crores commensurate with the overall PAT. The cash and cash equivalent is net positive, almost at INR 12,000 crores. My operating cash flows are healthy. I have spent almost INR 600 crores on increasing my gross block.

Despite that, I'm positive on the net operating cash flows. Overall, with a stronger balance sheet and healthy cash flow position it offers very well for our growth FX. I'm sure many of you have seen our annual report, both physical or digital. We've put in a lot of efforts to put all level of details, which will give you lots of insights on the initiatives and the efforts being done by the management.

Now we request the moderator to put the floor open for questions and answers.

[Operator]

Thank you very much. We will now begin the question and answer session. [Operator Instructions] The first question is from the line of Sumangal Nevatia from Kotak Securities.

[Sumangal Nevatia, analyst]

I'll start with my questions. My first one is on the volume growth. So this quarter, if we see we've grown volumes by 9-odd percent at consolidated level, whereas most of our large peers have grown significantly higher, closer to 20-odd percent. I just want to understand what is the reason for the underperformance and versus industry and versus last years? And what is the key constraint -- is it a capacity constraint or some other issues which we faced during the quarter? .

[Vinod Bahety, executive]

Okay. So thanks, Sumangal. The industry, I believe, has, by and large, grown around 9% and 10% and our growth more or less is in sync with that. The players whom you're talking have also added new capacities. So there's, of course, a flow from their new capacities, which has been added in the last couple of quarters. As we will start building and adding our new capacity, the one which is also coming in Ametha, I think you will start seeing our growth also coming up. But other than that, I think most markets, we have grown favorably. There was a little aggressive monsoon invest where we have a larger presence that, of course, had its play in the most of the month of June when the monsoon was very high. .

[Sumangal Nevatia, analyst]

Got it. So sir, over the next, say, 2 years, and given our pipeline of capacity addition from a utilization point of view, can we grow at 10% to 12-odd percent if the market growth supports that? Or we should expect a lower growth over the next 2 years? .

[Vinod Bahety, executive]

I don't see any issue with our growth of 10% to 15% here. .

[Sumangal Nevatia, analyst]

That's clear. Sir, second question is with respect to our cost savings initiatives. Our expectation was that given the group synergies and various new initiatives, we will achieve INR 300 to INR 400 per tonne cost-saving. Just want to know where are we in that journey? How much has already been achieved? And over the next couple of quarters, what's the trajectory? .

[Vinod Bahety, executive]

I think, as I mentioned last time, cost initiatives are of three raters now and here. So I think all issues of now and here have been addressed already, and you're already seeing the reflection coming in the numbers. Then the initiatives which needed to speed up and catch up, which is wasted recovery, solar, increasing alternate fuels. So I've already laid out in my opening that we will go from 40 megawatts when we took over the business to 175 by 24th June or July, I think I mentioned that itself will give us a sizable savings.

On top, the synergies within the group, we already started seeing power and fuel cost for us are, I think, in a much better trajectory than many other results, which I have seen so far. On top of it, the fixed cost savings, employee cost saving, the overall SPC, as we call it, all those costs, if you see already showing a good reduction. So I'm very happy with the trajectory that we are calling. And of course, freight and forwarding, as we built the footprint of new grinding units, you'll start seeing that also coming down with a much sharper turn.

[Ajay Kapur, executive]

And Sumangal, just to also add all our efforts are actually to bring a sustainable savings in the cost. So you will find this coming quarters also further improvement while we sustain on the achievements which you already made. .

[Sumangal Nevatia, analyst]

Got that. I have more questions, I'll join back the queue. Thank you and all the best. .

[Operator]

Thank you very much. Before we take the next question, we'd like to request participants to please ask 1 question. [Operator Instructions] We take the next question from the line of Prateek Kumar from Jefferies.

[Prateek Kumar, analyst]

So my first question is on employee cost. So we have seen sharp reduction across both companies or on employee cost year-on-year currency basis. So is this [ currently ] in terms of number of INR 130 crores and INR 150 crores effectively come...

[Vinod Bahety, executive]

You're not very audible. At least. I'm not able to hear very clearly. Can you again speak more clearly. I'm not able to hear actually maybe the line is bad.

[Operator]

We seem to have lost the line. We'll move to the next question. The next question is from the line of Ritesh Shah from Investec.

[Ritesh Shah, analyst]

First question is, sir, you indicated on the clinker addition of 20 million tonnes. Sir, can you specify whether we have already placed the orders over here and the same even for the grinding station. And you did indicate 140 by FY '28. But when we say 20 million tons of clinker addition, what is the time line that we are looking at over here and same thing for the grinding stations, please. .

[Vinod Bahety, executive]

Yes. Good question, Ritesh. I mentioned 40 million of new addition to reach our target of 140 million cement and 35 new grinding units to catch up with the grinding capacity. As I had mentioned in my last call and also in May, 14 million tonnes of cement capacity equivalent orders have been already finalized. Two kiln orders have been issued, 1 each at Maharashtra and Chandrapur at our Maratha cement works, and 1 at Bhatapara in Chhattisgarh. Both these kiln are 4 million tonnes each. And I also mentioned and laid out the grinding units for which are in sync with these clinker lines. .

[Ritesh Shah, analyst]

These orders are placed under the time line over here for Chandrapur, Bhatapara clinker lines? .

[Vinod Bahety, executive]

All 24 months. .

[Ritesh Shah, analyst]

All 24 months. This is helpful sir.

[Operator]

The next question is from the line of Jashandeep Singh Chadha from Nomura.

[Jashandeep Singh Chadha, analyst]

First is on volume growth. So if you look at stand-alone both Ambuja and ACC have recorded above 100% utilization on clinker and cement as well. So just wanted to understand what is the proportion of MSA sales in that? And where is that this higher incremental volume coming from [indiscernible], is it more from the non-trade segment you are seeing this demand or is it from the trade segment? The first question is on those lines. .

[Vinod Bahety, executive]

Okay. Thank you. You know what happens when you do optimization of each company's footprint. We try and squeeze out the lowest cost plants to serve. So therefore, there is this MSA sales which happened. But what you have to see is the console sale of Ambuja, which reflects both ACC and Ambuja together, and that's where we have grown at about 9%. And number one. Number two, our trade and nontrade ratio, which remains in the region of 77%, 78% has more or less stayed where it is with a minor shift of 1%. In fact, our premium product sales has gone up, as I mentioned earlier. So there is no major change over here. We have grown in all segments. We still continue to focus on trade as our main bread and butter. .

[Jashandeep Singh Chadha, analyst]

Right, sir. And we can expect this above 100% utilization. Is this sustainable for this year? Just wanted to understand that. .

[Vinod Bahety, executive]

As I mentioned, in the market, the volume up to 15%, at this moment, I don't see any challenge in growing. .

[Jashandeep Singh Chadha, analyst]

Understood. And sir, my next question is...

[Vinod Bahety, executive]

Participate in the full potential of industry growth. .

[Jashandeep Singh Chadha, analyst]

Okay sir. I just wanted to understand on your CapEx. So what is the CapEx guidance of FY '24, for both stand-alone Ambuja and ACC. And also for this quarter, we have mentioned around INR 600 crores of CapEx. So if you can give a bifurcation of how much was for stand-alone Ambuja and for stand-alone ACC, that would be great. .

[Vinod Bahety, executive]

So our CapEx guidance for this year, the projects which are under execution is INR 6,947 crores. Of course, the cash flows might be different because it depends on how the cash outflow happens. But these are the projects which we already approved and which are under play. .

[Jashandeep Singh Chadha, analyst]

Right. So that is for the 40 million tonnes for which...

[Vinod Bahety, executive]

There also a lot of other projects. For example, I mentioned waste heat and some of the improvement projects at the plants. So this includes everything. .

[Jashandeep Singh Chadha, analyst]

Understood sir. And can you give a breakup for the INR 600 crores CapEx for this quarter? How much was for Ambuja stand-alone? .

[Vinod Bahety, executive]

For this quarter, CapEx breakup, maybe...

[Ajay Kapur, executive]

I will give. I will give. In terms of Ambuja stand-alone, the overall CapEx has been close to about INR 300 crores, which is essentially for the WHRS at our Darlaghat plant, Bhatapara plant, then we have also acquired land for setting up a grinding unit at Ropar in Hoshiarpur and a few things more especially on the risk procurement, which you have put in INR 28 crores. And then we have also maintenance CapEx of INR 34 crores. So about close to INR 260-odd crores is the CapEx stand-alone for Ambuja?

[Vinod Bahety, executive]

And the remaining is for ACC. .

[Ajay Kapur, executive]

Yes. Right .

[Operator]

Before we take the next question, reminder once again to participate that in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. We take the next question from the line of Raashi Chopra from Citigroup. .

[Raashi Chopra, analyst]

Just wanted to know the breakup for the waste heat recovery increase that you're talking about the 90 megawatts going to 121 by FY '24 and 175 by FY '25. How does that -- I mean, I know the breakup of the 90 megawatts, but how does the increment breakup between ACC and Ambuja.

[Vinod Bahety, executive]

Just give me a moment. So basically, what we're going to do is, as an end state, ACC will go to close to 86 megawatts and Ambuja will go to 129 megawatts by July '25. And by July '24, our plan is 85 each, 85 in ACC and 87.5 in Ambuja.

[Raashi Chopra, analyst]

Does this also include -- sorry, in Ambuja case, does that also include the 42 megawatts that you're talking about with the 2 new clinker net.

[Vinod Bahety, executive]

Yes. Yes. That includes that.

Did I give you the figure of July '25? Ambuja 130 megawatts and ACC 86, that includes the new lines also. When I give you June '24, then it's 87.5 and 85.5 for ACC, that does not include the new lines.

[Raashi Chopra, analyst]

Right. Got it. You said 87.5?

[Vinod Bahety, executive]

Yes, please. .

[Raashi Chopra, analyst]

Okay. Okay. Secondly, on the power and fuel side, purely from a petcoke/coal cost perspective, how do you expect this to trend in the next few quarters? .

[Vinod Bahety, executive]

I think the last 1 or 2 quarters earlier, the trajectory was sharper decline. Now I'm seeing more stable. Very difficult to predict, but I think in my commentary also in the closing, I mentioned that the costs on energy side should remain stable going forward according to me, we shouldn't see major surprises. .

[Operator]

The next question is from the line of Satyadeep Jain from AMBIT Capital.

[Satyadeep Jain, analyst]

A couple of questions, one on CapEx, I want to understand there's this Chandrapur and Bhatapara lines that are coming up is also [indiscernible]. If we look at the target the company has the 140 million tonnes target and placing orders for 10 clinker lines. If there is any inorganic acquisition that [indiscernible] company recalibrate its organic growth expansion plans or any inorganic would be additive to 140 million-tonne you already have. And tied to that would be within that mix, majority of Ametha, all the expansion seem to be coming in Ambuja, Chandrapur, Bhatapara, even Mundra, if it comes, I'm not sure if it gets folded into Ambuja and now the inorganic expansion is also being talked about in Ambuja. So when you look at that [ whole half ] how much would ACC participate in that growth versus Ambuja? That's the first question.

[Vinod Bahety, executive]

So Satyadeep, can I take this question only because you ask me multiple questions prior to this. So should I take only the question on ACC or do you want me to also address your other concerns?

[Satyadeep Jain, analyst]

Both one is if you look at the...

[Vinod Bahety, executive]

Okay. I'll address both your concerns. Okay. So first, let me address your concerns about Bhatapara and basically, you're asking how do we reach this growth of 40 million additional clinker, right? .

[Satyadeep Jain, analyst]

No, between the growth that you have, how much -- if you place an order for 10 clinker lines you're doing that clinker lines 40 million tonnes, facing orders for 35 grinding units. So that is again 140 million tonnes, in the meantime, any inorganic growth comes up.

[Vinod Bahety, executive]

So basically, our target is 140 million, which is what I have stated in the strategy road map ahead. What could happen is if we have an inorganic growth happening in between. It will only expedite our reaching of that target and also make our numbers more faster. Whether we will exceed 140 is difficult for me to say today because I've placed some cash flow plans, which is what I've also put out in the public space. As and when we make a change, then I think we anyway talking to you every quarter. And also from time to time, we are meeting our investors, so we'll come out with a new blueprint. But as of now, the blueprint we came out in March and spoke about it also later on in the May call, is 140 million, and we are open for organic, inorganic growth if a good opportunity comes, and that will only help us to speed up our process in journey. .

[Satyadeep Jain, analyst]

[indiscernible] in Ambuja, how are you thinking about placing orders in ACC or participation inorganic growth for ACC versus Ambuja.

[Vinod Bahety, executive]

So it's a function of the deposits of limestone, which company has what kind of results. Interestingly, the 2 kiln I've ordered both had good reserves in Ambuja plants, one in Chhattisgarh, one in Chandrapur. ACC, as I mentioned, is about to complete 3.3 million new clinker line in Madhya Pradesh and Ametha. In time to come, you will find us growing in Karnataka, where ACC has Wadi plant. And maybe another 1 or 2 locations as part of our journey to grow. So I think it will be a mix of where we find a good reserve and where we find a good fit for each entity. Also, if you see cash in hand today, Ambuja has a little larger. It's about close to 7,000 plus. So I think that also dictates how directionally we are moving.

[Operator]

The next question is from the line of Amit Murarka from Axis Capital.

[Amit Murarka, analyst]

So just on employee cost first. So I see the console employee cost is much higher than the sum of ACC ASM this time, in fact, on console, there's hardly any drop on Q-o-Q on employee cost. Could you just help explain like why is it like that in this quarter?.

[Vinod Bahety, executive]

So thanks, basically in terms of stand-alone versus console, this is more of an issue of, say, regrouping which we got this regroup between the employee cost versus the further expenditure. And the other expenditure is more about the common expenses between ACC and Ambuja, which was allocated in the ratio as an approved policy in the ratio of say 52 to 48 between ACC and Ambuja. So therefore, that you will find a factor under the other expenditures. However, from July onwards, we will put everything even these common setting expenditures under the bucket of employee cost only so that there is a proper grouping of the overall element of cost. As you rightly said, on a console basis, there is a marginal drop only in terms of the overall employee cost from INR 378 crores for June '23 to last year's INR 385 crores over last quarter was INR 387 crores. .

[Amit Murarka, analyst]

Okay. Sir, it's only a reclassification because of which we see a drop in Ambuja, ACC basically...

[Vinod Bahety, executive]

We have this master services agreement, yes? So that is more of account of the reclassification related point. .

[Amit Murarka, analyst]

Okay. Also, could you just highlight how much is the MSA volume booked for -- in ACC and Ambuja volumes? .

[Vinod Bahety, executive]

The MSA volume is basically -- as I mentioned earlier, we try and optimize each of the entities, grinding units and clinker units. And interest rates, finally, what we report out in the console level is what you see it goes in the market. Individual number already there with you, and you see the growth of Ambuja, and you see growth of ACC. I think more or less that number is very clearly let out. But at our console entity, we would have done about 1.5 million in the MSA. .

[Operator]

Before we take the next question, a reminder once again to participants to please limit your questions to 1 per participant. The next question is from the line of Rajesh Ravi from HDFC Securities.

[Rajesh Ravi, analyst]

Sir, my first question pertains to similar to the employee cost, even your depreciation number, the consolidated number do not add up to the stand-alone depreciation numbers. The stand-alone depreciation numbers are higher. Any specific reason for the same? And second, can you talk on large capacity additions out of this 14 million tonnes? Good amount of them are concentrated in Maharashtra and West Bengal, any thought on them? .

[Ajay Kapur, executive]

I will take up the first one. In terms of the depreciation, that is on account of the lease accounting, which we follow for certain assets, in this case, shipping and some of the RMS business trucks and other equipment. So on a consol basis those gets [indiscernible] on a stand-alone basis, they remain there. So that is the overall consolidation effect. On the other part, I'm requesting a digital.

[Vinod Bahety, executive]

Yes. So your question was why -- your question was on regional expansion. So basically, what will happen is over the next 5 years as we play out our strategy road map on expansion. We will not be putting all the eggs in 1 particular market. We will grow. What happens is when you put one clinker line, you also need to put up the grinding units, which have to sustain that linker. In this case, we have put 2 clinker lines actually in Central and Eastern India. Ametha in ACC of 3.3%, which gets into commissioning very soon.

And this Bhatapara and Chhattisgarh of Ambuja. So together, let's say around 7.3 million new clinkers, we need to have grinding for this. So therefore, you find these locations. The location chosen also brownfield, it allows us to do a low-cost, fast expansion and also these are the home markets for Ambuja and ACC. And for Chandrapur, our last plant put up here was 2011, if I'm not mistaken, that was the ACC stand-up plant.

After that, we have not added any new clinker here. So I think as part of our normal market share protection strategy. This klin was very much useful, 4 million tonne clinker coming in Chandrapur after 10 years, I think, is the right strategy. And then to build its distribution, we have announced the grinding stations. As you see every quarter or every couple of quarters, we'll keep playing out our new expansion plans. So whenever you hear a kiln or 2 kilns together or 3 kilns together, you also hear the associated grinding units which pan out along with that.

[Rajesh Ravi, analyst]

And sir, in the AGM note, you have mentioned INR 7,000 crores CapEx consol for the FY '24. So how would they be spread between both the companies from Ambuja stand-alone and ACC.

[Vinod Bahety, executive]

I think that we can take the discussion offline. But if I take note of your question, we'll definitely connect with you and providing those details. .

[Ajay Kapur, executive]

After this call, I'll give you the number. .

[Operator]

The next question is from the line of Shravan Shah from Dolat Capital. .

[Shravan Shah, analyst]

Sir, just to clarify, when we say 24 months, we will be adding this whatever the amounts expansion. So these 24 months will start from March '23 or from August on July '23. .

[Vinod Bahety, executive]

It's already started. You are -- this is somewhere in the month. The day I made this press release this I think May, I announced. So it's already started from that time.

[Shravan Shah, analyst]

Okay. So broadly, it will be by fourth quarter of FY '26, all these new expansion will come.

[Vinod Bahety, executive]

Yes, please. On both the Klins, we already have mining licenses. We already have land. So I think those should fairly come up fast and these are brownfield expansions. And some of the grinding stations are also expansions at the same location. And in some other cases, also we have full land available. So I think we should be fairly fast in that.

[Shravan Shah, analyst]

Okay. And then just to clarify, when we say in terms of the EBITDA per tonne improvement INR 300, INR 400 so is it including the other income that we are talking about? Or without other income also post this whatever the [indiscernible] in terms of the EBITDA per tonne from stand-alone Ambuja, 1,042. So from here on, how much you state -- you'll have to reach INR 300 crores or INR 400 improvement? .

[Vinod Bahety, executive]

Yes, our end state target is what we announced in the month of March was to increase our EBITDA by INR 400 per tonne. On an average of [ 11,000 ] to 1,100 over the last 2 years, if you really see. I'm eliminating the quarter of September when we took over, it was also the time when the energy prices was highest and also, that's not the quarter we wanted to pick it up. So on a base of INR 1,000 to INR 1,100, INR 400 per tonne, we are saying will improve. So end state should be INR 1,450, INR 1,500, that's our end-state target. I think all the initiatives that I've laid out are structural initiatives and these structural initiatives will be cost competitiveness for the companies for all the time to come.

Just to also answer to the earlier question in terms of the CapEx for the year between Ambuja and ACC. So the CapEx of all the growth and efficiencies as well as maintenance CapEx is well distributed between both the companies. If I would have to just give a ball park INR 7,000 crores, one can expect almost 60% to 65% with a Ambuja and 35% to 40% with ACC for FY '23, '24. .

[Operator]

The next question is from the line of Shyam Sundar Sriram from Franklin Templeton.

[Shyam Sundar Sriram, analyst]

Very healthy operating performance in both ACC and Ambuja. We'll start with that. My first question is on ACC performance at the unit EBITDA level has seen a very strong sequential improvement than what is seen in Ambuja. On a reported basis, it has moved from INR 694 per tonne to INR 900. Now on a sequentially volume increased about 10% to 11%, but the EBITDA growth has been very strong. Now from a business perspective, what has driven this very strong EBITDA performance at ACC level and how do we think about the profitability evolution over the next few quarters from an ACC list perspective, if you can share that, that will be helpful. .

[Vinod Bahety, executive]

Yes. Thank you, Shyam. If you recall, the ones who were there in the call last time, the last 2 calls, one question was asked to me multiple times. Why is it that ACC continues to be a underperformer. And why is it the gap between Ambuja and ACC is not bridging. And I think I mentioned the same thing last time. We are running both the companies within single management executive team, both from operations of the plants to the sales, to logistics, to finance, to procurement, to the entire group synergies, both are receiving same level of support. In fact, we have pushed a lot on ACC side to have a catch-up plan. And I think I'm very happy that ACC has -- the plants have shown improvements.

Besides the structural investments of coal from our own mines, coal from adjacencies of the business, fly ash adjacencies, the procurement efficiencies, the plant operating parameters, the waste heat recovery project investments, alternate fuel investments, logistics initiatives, the MSA initiatives, which I spoke about, I think all these are helping ACC to catch up.

There are some plants in ACC, which are a little dated, which we need to invest more. And I think we also focus there. So I think this is a result of all this panning out. I believe in time to come, ACC will continue to improve. And also, we will continue to see a much better catch up between ACC and Ambuja because end state, we are managing it as one entity.

[Shyam Sundar Sriram, analyst]

Sure, sir. Just one follow-up on that. If you look at purchase of finished goods at ACC level. As a percentage of revenue, last quarter, it was around 14% for ACC, that is now around 13%. The MSA volumes for ACC seemed to be slightly higher. Now my only question is, is there any change in terms of the pricing or anything of that sort on the MSA agreement that we have done on prospective basis from this quarter onwards? .

[Ajay Kapur, executive]

No. Shyam, in terms of purchase of these finished goods, if you look at it, for example, I would actually want you to consolidate this 4 cost items, which is the cost of materials consumed. The purchase of the stock in trade, the change in the finished goods and the power and fuel because generally, you will find that when you produce some of these costs get distributed across these 4 items. And when I sum total of that, vis-a-vis June '23, it is a INR 2,552 crores on an ACC level versus March '23 it is INR 2,520. So there is hardly any change.

So suffice to say that when you produce and then when there is a stock in hand, the stock treatment as well as the amount which goes into power and fuel and cost of raw materials consumed. This actually sometimes brings some aberration in the line items. So when you consolidate that together, those 4 items, you will find it is in sync with the overall volume growth.

[Vinod Bahety, executive]

Also one more point, the coal block, which we have in Ambuja Gare Palma, we also increased the share of coal from that block to ACC. So obviously, that hit in the power and fuel cost for ACC. .

[Operator]

The next question is from the line of Vishal [ Dhiriya ] from Bandhan Asset Management.

[Unknown Analyst]

Sir, could you also talk about pricing as to how the environment that you are seeing in the key markets? And could you also touch upon the discounts and rebates that we used to give?

[Vinod Bahety, executive]

Okay. Bandhan, that's a very tricky question. Price, as you know, is a function of demand and supply. Fortunately, the demand has been growing at a healthy 8%, 10% and last quarter was actually 10%, 11%. However, we also see new capacities come in, in some parts by some of the players. On top of it, in June, we saw also a heavy monsoon. So that had a little bit of an overhang of little extra supply in the market. While prices have not risen but the good news is they're also not drastically fallen. The trajectory has been maintained even as we entered the monsoon season. I think going forward, as I see the utilization levels in the industry should go up from 75%, 76% to more like 78%. If I remove south and then only look at the top part of the Indian peninsula you will find this utilization more inching towards 79% odd in some areas.

So I think that's a level where it hits 80%, you have a very good pricing power. But I think there's a very mature industry. It's a huge 400 million-plus market. So you have to look at micro markets rather than looking at the All India picture on pricing. I think that we had a follow-up question also. I think other than pricing, you're asking me something else.

[Unknown Analyst]

Just trying to stress upon the discounts and the rebates that were happening in the industry as to how is that practice going? And how are you placed on that front? .

[Vinod Bahety, executive]

I think by and large most large companies in the trade segment I'm talking about and I think that's what you are referring to follow a particular remuneration policy. I think more or less, we are also following the same. However, there was also some discounts, which are not the regular dealer remuneration, but these are adjustment of market prices. Every market has a different structure. East has a little different structure than West. And then, of course, South has a little different structure than center. We are not very big players in South today. But in rest of the industry, we are more or less addressing this, keeping our dealer network and also our sales objectives in place.

We try and have more transparency in our approach so that the customer and also our salespeople are able to leverage the brand strength. I think we are undoubtedly having 2 of the strongest brands in most of the markets. So I think the pressure on us is a little less than some of the other companies in this regard .

[Operator]

Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs Asset Management.

[Pulkit Patni, analyst]

That's not asset management. This is the research side. So my question is, I just want to check, I think I heard you answer some other questions on power and fuel prices from here on, you mentioned that you expect it to be stable. So given the correction in global prices of fuel, should we not expect it to fall further from here? If you could just clarify what that answer was. .

[Vinod Bahety, executive]

See, it's a very difficult question to answer because the multiple factors which play out. But I would say, stable or remaining competitive in time to come is the best way for me to say. But I would not expect them to rise if at all, they should come down by a couple of bips. That's the way I would look at it. .

[Pulkit Patni, analyst]

Sir, this is basically based on whatever shipments you are expecting to receive in the next, say, couple of quarters, whatever we would have ordered, we should expect it to be stable. .

[Vinod Bahety, executive]

Okay. So just to be very clear and also again reiterate what I meant, I was talking more at the industry level, how the fuel prices in general will play out in the industry. Of course, we have a different strategy. And I think my strategy is exactly what is playing out in my numbers. So I think we would continue to play that strategy out.

[Pulkit Patni, analyst]

Which is that it should go down or it should be stable.?

[Ajay Kapur, executive]

You understood what I meant, obviously has to become better than where we are. .

[Vinod Bahety, executive]

Well, also just to reiterate and maybe a smart strategy what Ajay ji is following is that keep it stable for the team so that there's a good pressure on bringing efficiency on all the other factors. And whenever the price declines on the coal, this gives you much better stop of the margins. So I think we are not overambitious in terms of only driven by market on the coal prices. Our whole focus is on the controllable factors, which is within our overall efficiencies across the other costs, which is within our control, more than the market driven largely on the coal.

[Ajay Kapur, executive]

Also, the inventory element of it plays out because, as you know, when you import a ship, you have to plan 3 months in advance. And also, typically, 30, 35 days of inventory, people keep in the factory. So I think it's also the cost of your inventory as that cost of the inventory gets finished with a lower cost fuel you bought, you start seeing the impact in the following quarters. So I think that's the second part of my answer.

[Operator]

The next question is from the line of Aman Agarwal from Equirus Securities.

[Aman Agarwal, analyst]

Sir, again, on the fuel side, we recently heard of some softening in the prices of Indonesian coal, which was pretty sizable. So on the current booking, are you seeing anything on that side?

[Vinod Bahety, executive]

See, Aman, what we do is we work very closely with our group ICM team on all imports. And I think what we do is we always have a plan of next 3 months in place. I can only tell you that you see, this will happen some days, we had a very good advantage in the domestic petcoke market and the local refineries offered us very good discounts. So we went and bought those shipment sector plants, like many other local companies would have done. Likewise, the situation changes, and we do opportunist buying also.

But by and large, our 3-month planning keeps into account all these and whenever there's an opportunity we go ahead and book at a good level. And we continue to keep multi-fuel strategy, so we are not married to one particular kind of a fuel. What we do is we keep optimizing the fuel mix. We keep optimizing the inventory mix. And I think that's what I believe in time to come, we want to play out.

And on top of it, I think our core strategy is our own mines and also group adjustancy. So I think that's where it gives me a lot of strength of having one anchor mix, which continues to bring the cost down. And then you have an opportunity buying like you mentioned about Indonesia.

[Aman Agarwal, analyst]

Understood, sir. Sir, on the same note, if you can just share the fuel mix for this quarter. .

[Vinod Bahety, executive]

Fuel mix for the quarter. I think it's a fairly complicated number. We can certainly connect and ask Charanjit to connect with you and we can have that offline. .

[Aman Agarwal, analyst]

Sure. Sure, sir. Sir, last month and...

[Vinod Bahety, executive]

[ Indirectly ] shifting towards -- we looked at the domestic petco. We also looked at local linkage and e-auction coals. And of course, whenever we had advantage of lower-cost imported coals, we did that. And that was primarily responsible for improving our mix, the group level. .

[Aman Agarwal, analyst]

Understood, sir. And sir, lastly, if I may, when we say the qualities...

[Vinod Bahety, executive]

Imported petco also. I think I remember, we got some very good pricing. .

[Aman Agarwal, analyst]

Okay. And sir, when you say we expect the power and fuel cost to be rather stable going ahead. We are taking the -- for Ambuja per se, the 1,279 level mark rather than the 1,500 level mark, right? .

[Vinod Bahety, executive]

For Ambuja, you said consolidated, it's more like [ 1480-odd ] And I think interstate 1,279 is the right number, yes. So this will only improve going forward. .

[Operator]

The next question is from the line of Shyam Sundar Sriram from Franklin Templeton.

[Shyam Sundar Sriram, analyst]

Just one follow-up question, we have reported our power and fuel cost on a production basis has reduced anywhere between 7% to 8%, 8% for ACC and 7% for Ambuja on a stand-alone. Now the question is we had some coal advanced asset at the end of March '23 that we had contracted some time back with the ceiling, I think, for about $157 and a minimum of 5,600 [ kcal ], now the actual fuel cost that is in per rupees kcal that we have mentioned in the press release seems to be lower than that. Now the question is, first part is has that coal advance being used? How have we managed to reduce the fuel cost sharper than that. So that is one part. And secondly, are we renewing those contracts because that seems to be benefiting us? Any thoughts on that? .

[Vinod Bahety, executive]

So Shyam, let me address number one, for Ambuja, the coal advances is zero at the end of this quarter. For ACC, there is still some money there, which we expect to be zero by September quarter, which is what I had also mentioned in the last call. If you recall, I had also mentioned that this has been a strategic buy for us. It was also in my inaugural today in the call.

And I'm very happy that the strategy which our procurement teams had played out have actually helped us delivering industry best power and fuel cost. And also one of the remarkable ones for our AAA performance over the last running 3 or 4 quarters.

Whether we will again do a transaction, it's difficult for me to comment today. As I said, we have a mix of strategies. Core of our strategy is to go more and more of our own coal mines and work with our group synergies, and I'm very confident it will help us to bring down the power and fuel cost. And our end state target is to be the lowest cost clinker producer in the country.

[Shyam Sundar Sriram, analyst]

Wonderful. Just the domestic coal mix in the fuel, is that possible to share that number? How will that move, because you mentioned we have started using more of Gare Palma coal. Just how that number as in the mix has moved?

[Vinod Bahety, executive]

So Gare Palma is about 12% to 13% of our total mix for the fuel. What we have done is we have -- this quarter, we used almost 12.5% of Gare Palma. So that, I think, really helped us also in the past. And I also mentioned we looked at imported pet coke, which was a sizable number. And then, of course, remaining was our domestic linkage and imported coal.

[Operator]

The next question is from the line of Parth Goyal from Omkara Capital.

[Unknown Analyst]

So in one of our calls earlier, we had mentioned that we will be increasing our RMS plan of 78-odd to 200 plus. So any time line for it? And where is this progress? I mean like any input, if you can give on that? .

[Vinod Bahety, executive]

Yes. So RMX, our strategy of going to 200 remains. Current year, we should cross 100-plus plants. My colleague also mentioned he's also -- Vinod is working with my RMX team to optimize the structures lease accounting, which also helps us some things on the tax planning. So I think that journey continues. We want to be focused into the core markets where it fits beautifully well into our integrated customer service strategy.

[Operator]

We'll be able to take one last question. We take the last question from the line of Mudit Agarwal from Motilal Oswal .

[Unknown Analyst]

Sir, just one question like we have given advances of [indiscernible] crores to a related party for long-term supply of fuel that is was on Mundra cement plant period, and that would be available from FY '26. So in terms of expansion, as we already placed order for 2 lines, one in Chhattisgarh and one Maharashtra. This Mundra Cement plant be our next first priority for the expansion? And if you are -- what is the status of land as well as the environmental clearance?

[Vinod Bahety, executive]

Okay. So Mundra will be a beautiful investment, I think, from my perspective because of 2 counts. Number one, it will be a very competitive plant. Number two, it will be a very green plant. Number three, it will be sitting on a location from where I have multi-model logistics supply chain arrangements.

Mundra and Kucthh is also connected with rail, which no other plant in Kucthh is connected. So we have our own rail system there. It allows us to also bring a lot of raw materials and also product output. Second, Mundra is a beautiful port, you can reach anywhere, including exports and also domestic markets right up to Trivandrum in the down south.

We already decided to place 2 million tonne grinding at Mundra. Eventually, there will be 2 mills of 4 million and the kiln, which is at 2.3 million. The work at the site is already there. Land is available with us, and EC is also available with us. I'll give you more updates in my forthcoming calls on the status of the project. But it's a very very, very interesting project from a overall perspective and also on improving our footprint and market share in West Coast markets.

[Unknown Analyst]

So the highest level of Adani adjacencies, you will find actually one location that is on Mundra.

[Vinod Bahety, executive]

There's a flash available. There is a port available. There is a railway connectivity available. And there is what you call -- there is no need for a limestone. We are actually going to build it with the raw material. So it will actually become 100% green cement.

[Unknown Analyst]

And do we move limestone slurry at that plant? Is it correct? .

[Vinod Bahety, executive]

It will be calcium carbide, which is a byproduct of coal to PVC plant. .

[Operator]

Thank you very much. We'll have to take that as the last question. I would now like to hand the conference back to the management team for any closing comments.

[Vinod Bahety, executive]

So thank you once again for taking out the time. I hope most of the questions have been answered. For any unanswered questions, feel free to reach out to me and looking forward to the next quarterly call in October. Thank you. .

[Operator]

Thank you very much.

[Ajay Kapur, executive]

Thank you, ladies and gentlemen. .

[Operator]

On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.