ACC Ltd

NSE:ACC

Earnings Call Analysis

Robust EBITDA, Highest Industry Margins

The company has the highest EBITDA per metric ton in its peer group at INR 1,225. With an EBITDA margin of 21.3% and a PAT margin of 13.4%, the company stands among the industry's top performers. Its AAA rating is reaffirmed, signaling stable long-term prospects. The net worth has hit an all-time high of INR 42,824 crores, supported by significant cash reserves of INR 8,500 crores. Notably, a nearly 10% cost reduction has been accomplished, decreasing the cost metric from INR 4,800 to INR 4,300 per ton within nine months.

Robust Financial Performance with Operational Efficiency

The Adani Group's cement business has exhibited a notable quarter with revenue reaching INR 8,129 crores, which marks a 3% increase from the previous year's corresponding quarter. This upward trajectory in earnings has been attributed to a refined market management strategy, an enlarging network of dealers, and a consistent blend of lended cement making up 87% of total sales. Notably, there was an uptick in the premium product segment, now accounting for 22% of the trade sales volume. Operational efficiency was a highlight, with operational costs per tonne plummeting by 10%, primarily due to a sizeable 21% slash in energy costs, thanks to more effective fuel management. The company has also been prudent with transportation expenses, resulting in a modest decline, and has enhanced direct customer dispatches to 52%.

Solid EBITDA Growth and Margin Expansion

Improvements on both the revenue front and cost-control measures have led to a massive 70% increase in EBITDA, standing at INR 1,732 crores. Correspondingly, EBITDA per tonne climbed to INR 1,225, a significant leap of 65%. The company proudly reported an EBITDA margin inflation of 8.4 percentage points, culminating in an impressive 21.3%. These results were accomplished without relying on outside capital, as the CapEx spend of INR 1,048 crores was covered through internal accruals and existing cash reserves.

Strategic Investments Toward Self-Sustenance

In a forward-looking step, the company has engaged in acquiring coal mines through government auctions, adding to their existing Gare Palma mine. Their latest acquisition, a 2 million tonne coal mine in Maharashtra, is expected to cater to a significant 40% to 50% of their coal requirements. These ventures are part of a broader strategy to bolster self-sufficiency in raw materials.

Cost Reduction Successes and Expansion Plans

Adani Group's cement business has successfully decreased its power and fuel costs by 21% to INR 1,353 per tonne, from INR 1,702 per tonne, underscoring their focus on better fuel management and the adoption of alternative fuels. Furthermore, the company has made strides in logistics efficiency, achieving a decrease in logistics costs to INR 1,297 per tonne compared to the previous year. By tapping into GPS technology and optimizing routes, the company has also ordered new wagons to augment cost-effective clinker transportation. These cost reduction initiatives have been undertaken alongside plans to expand infrastructure at Sanghipuram plant, enhancing efficiency and utilization.

A Testament to Strategic Planning and Stakeholder Confidence

Thanks to its operational and financial might in the recent quarter, the company has been generating substantial cash, which supports expansion initiatives and shareholder dividends. The leadership has recognized the trust and support from stakeholders as a driving force behind their continued success.

Earnings Call Transcript 2024-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to Q3 FY '24 Conference Call of Ambuja Cement, ACC and Sanghi Industries hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Charanjit Singh, Head, Investor Relations. Thank you, and over to you, Mr. Singh.

[Charanjit Singh, executive]

Thank you very much. Good evening, ladies and gentlemen. Thank you very much for taking out the time to join this call. On behalf of Adani Cements, a very warm welcome to all of you.

Before I hand over the call to Mr. Ajay Kapur for his opening remarks. I'll make a request that kindly limit your questions to 1 or max of 2, and then you can reenter the question queue. I -- on this side, we have Mr. Ajay Kapur and Mr. Vinod Bahety, the CEO and the CFO, to answer your questions. And we will go for around an ask. So hopefully, we'll manage to answer all your questions, but in case something gets left, then kindly feel free to reach out to the IR post the call. Thank you very much, and over to you, Ajay.

[Ajay Kapur, executive]

Thank you, Charanjit. Good afternoon to all of you, warm greetings. 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 31st December '23. To begin with, the consolidated quarterly Y-o-Y performance, we registered a revenue of INR 8,129 crores, a jump of 3%. This is largely driven by a strong focus on our micro market management strategy, expansion of dealer network, lended cement as a mix of total sales and was maintained at 87%. Premium products as a percentage of trade sales volume increased to 22%. Operational costs for the quarter was at INR 4,526 per tonne, shows a decline of 10%. This is attributable to 21% decline in energy costs driven by better fuel management, which resulted in reduction of kiln fuel by 25% to INR 1.84 per 1,000 kcal from INR 2.45. The transportation cost declined by 1% to INR 1,297 per tonne on account of footprint optimization. The direct dispatch to customers has further increased to 52% from 50%. The rail coefficients stands at 26%. Other expenses stand at INR 777 per tonne. With the improvements mentioned on both revenue and cost, EBITDA grew by 70% at INR 1,732 crores and EBITDA per tonne at INR 1,225 implying a jump of 65%. EBITDA margin expanded by 8.4 percentage points to 21.3%. The CapEx spend of INR 1,048 crores was achieved from internal accruals and cash in hand. As on 31st December, the consolidated cash and cash equivalent in the company's books stood at INR 8,591 crores. Reduction in consolidated cash was on account of acquisition of Sanghi Industries resulting in cash outflow of INR 3,801 crores.

While looking at the 9 months Y-o-Y performance, revenue is up 5% at INR 24,266 crores. EBITDA grew at 91% at INR 4,701 crores. On a per ton basis, it was INR 1,103 implying a jump of 82% and EBITDA margin expanded by 8.7 percentage points to 19.4%.

Now coming to stand-alone performance of Ambuja for the quarter ended 31st March on a Y-o-Y basis. The revenue is up 8% at INR 4,440 crores, in line with the volume growth of 6%. EBITDA jumped by 33% to INR 851 crores. EBITDA per ton stood at INR 1,043, a jump up 26% and EBITDA margin expanded by 3.7 percentages to 9.2%. We had a robust PAT growth of 39% to INR 514 crores. Speaking of the last 9 months stand-alone performance on a Y-o-Y basis, net revenue up 11% at INR 13,149 crores, in line with volume growth of 12%. EBITDA jumped by 57% at INR 2,573 crores. EBITDA on a per ton basis was INR 1,025, a jump of 40% and margin expanded by 5.7% at 19.6%. We had a robust PAT growth of 16% to INR 1,802 crores.

Now let me share with you the progress that we have made on our announced long-term strategic plan. Firstly, on our new capacity addition in line with our plan to add around 40 million tons of new clinker capacity, Ametha integrated unit in Madhya Pradesh has now been commissioned, enhancing the clinker capacity by 3.3 million tonnes. Acquisition of Sanghi has increased our clinker capacity by another 6.6 million tonnes. With these 2 additions, we have already added 10 million tons of clinker out of 40 million tonnes as we had planned. Now our total clinker capacity stands at 51 million tonnes. For doubling the capacity of branding facilities to 140 million tonnes by FY '28, we are targeting around 35 new grinding units, 1 million tonne of grinding rate at Ametha has now been commissioned. Acquisition of Sanghi has increased our grinding capacity by 6.1 million tonnes. Further acquisition of remaining stake in Asian Concretes and Cements Private Limited, has increased our grinding capacity by another 1.5 million tonnes. Our grinding capacity now stands at 77.4 million tonnes. Another 2 units are mapped to the upcoming clinker facility of Bhatapara of 4 million tonnes. These include 1 at Sankrail and 1 at Farakka in West Bengal. Another 2 units are mapped to Chandrapur clinker facility of 4 million tonnes in Maharashtra. These include 1 unit at Jalgaon and 1 at Amravati. Other grinding units which are being set up are Salai Banwa in Uttar Pradesh, Sindri in Jharkhand, Marwar -- at Marwar in Rajasthan. All these units are expected to get commissioned by FY '26. Additionally, we would be also setting up grinding units at Hoshiarpur Punjab. Warisaliganj in Bihar and Puna in Maharashtra to be commissioned by FY '27. For the new facilities of 4 million tonne clinker at Bhatapara, 37% of a civil execution work is now complete and major equipment dispatch has also commenced. Expected completion is by quarter 4 FY '25. For its corresponding grinding grid at Sankrail and Farakka, order has been placed on EPC vendor, and 80% of the filing work has been completed off at the site. Expected completion of these units is by quarter 3 FY '25. For the new facility of 4 million clinker line at Maharashtra in Chandrapur, LOI has placed on the EPC vendor, site development and pre-project work has already been started. ECF approval is expected in this quarter. expected completion by quarter 2 FY '26. Each of these kiln lines will have 42 megawatts of waste heat recovery and provision for utilizing beyond 30% alternate fuels. We also placed orders on EPC basis for grinding units at Salai Banwa, Uttar Pradesh, 2.4 million tonnes, Sindri, 2.4 million tonnes in Jharkhand. At our Salai Banwa grinding unit in Uttar Pradesh, groundbreaking activities have already been done. We will continue to provide progress updates of new orders and also the progress on individual products on an ongoing basis.

Now sharing an update on the structural initiatives to become the cost leader in the Indian civil 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. Let me first discuss on the progress made to reduce our energy costs. Our wasted recovery capacity. At the time of takeover, last year, September 22 was 40 megawatts, which are now targeting to increase to 186 megawatts by March '25. At present, the waste heat recovery capacity stands at 119 megawatts. We have recently announced installation of 1,000 megawatt of RE energy, which is expected to get commissioned by FY '26 and would ensure that 60% of our power requirement would be through green power. This would help in reducing the power cost by INR 90 per tonne on the expanded capacity by FY '28.

On multiple occasions, I've highlighted that we want to be self-sufficient on our coal requirements with captive coal mines. As a result, we have started bidding for coal mines in the options being conducted by the government of India. Besides the 1.3 million captive coal mine at Gare Palma, which Ambuja has since 2018, we have won the bid for 2 million tonne coal mine in Dahegaon Gowari in Maharashtra. The 2 mines together would cater to around 40% to 50% of our current coal requirements.

Our power and fuel costs have decreased by 21% to INR 1,353 per tonne in quarter 3 FY '24 from INR 1,702 per tonne in quarter 3 FY '23, driven by better fuel management and structural initiatives undertaken. These initiatives include an increase in share of AFR and waste recovery in fuel and power mix. Share of AFR and fuel mix has improved to 9.1%, which was 7.1% at the time of acquisition. Share of estate recovery in power mix has increased to 12.7% from 3.4% at the time of acquisition.

The second cost item is freight and forwarding costs. These are 3 focus areas for cost reduction here. First reduction in lead distance, second, warehouse footprint optimization; and third, railroad mix optimization. We are targeting to reduce the average primary lead distance to about 100 kilometers. Lead distance in the current quarter was 284 km versus 291 km at the time of acquisition. For Ambuja standalone, in quarter 3 FY '24, it was 277 kilometers and for ACC, it was 295. We have made progress on warehouse optimization as well and increase the direct dispatches from 50% to 52% on a Y-o-Y basis. With focus on cost reduction in logistics, we have ordered 11 General Purpose Wagon Investment Scheme, [ rates ] of which 7 have already been delivered, and the rest are expected to be delivered by the end of the current financial year. These trains will enable cost-efficient clinker movement from the other plants. Apart from these, we have also ordered 26 BCFC [ rigs ] for safe and cost-efficient transportation of Fly Ash from thermal power stations to our facility. The cost reduction is mainly driven by detailed route planning at each micro market level and adherence to our L1 source, renegotiation on commercial terms, GPS and technological measures. And today, 98% of our fleet leaving the plant is not tagged with the GPS system. On account of these initiatives, our logistics costs have reduced to INR 1,297 per tonne in quarter 3 FY '21 versus INR 1,310 per tonne in quarter 3 FY '23.

To secure our lines and supplies, we have also won bids for 10 new mines with 1 niche in Orissa, Maharashtra, Madhya Pradesh, 2 in Gujarat and 5 in Rajasthan. Together, these line reserves are estimated to have a total reserve of 586 million tonnes of limestone. And with the acquisition of Sanghi, we are optimizing the infrastructure at the site that would enable efficient transportation of cement from the plant to the jetty through mechanized conveyor belts. Along with other basic infrastructure upgrades, we are expecting a modest CapEx of INR 200 crores to improve the efficiency at the Sanghi plant. The master supply agreement has been signed between Ambuja and Sanghi and ACC and Sanghi that would enable in improving the utilization of Sanghipuram unit from current 25%, 30% to 75% to 80% in the near future. Improved utilization levels would enable us to transform the company from EBITDA negative to EBITDA positive within a very short span of time.

In conclusion, we have made strong sites both operationally and financially in the recent quarter, a testament to our consistent efforts and strategic planning. We continue to generate significant cash to finance our expansion and pay dividends to our shareholders. Your trust and support have been our guiding force. Thank you for believing in us.

Yes. I'll now request my colleague, Vinod, our CFO, to also start the initial remarks.

[Vinod Bahety, executive]

Thank you, Ajay. I also just want to exert much jubilance in terms of some of the important parameters. For this quarter, we have achieved EBITDA on a console per metric INR 1,225 is highest amongst the peer group. Our EBITDA margin of 21.3% is among the highest in the industry. Our rating is reaffirmed to AAA level stable long term or a highest PAT margin of 13.4% in the industry. Net worth is lifetime high at INR 42,824-odd crores. And in terms of cash and cash equivalents at INR 8,500-odd crores, we are again in the highest category. From a trade sales perspective, the percentage is again the highest. And from a premium cement sales are percentage is again, very high. If you see in 9 months, the cost reduction, which is assumed almost at 10%, we were almost at INR 4,800 a tonne in December last year, and now we are at close to INR 4,300. So this INR 400 odd turn, which has been saved is, again, the cost reduction which has been highlighted and if you see the Investor Day also, there were some feedback to bring in more and more information. So this time, we have covered lots of additional information in our Investor Day. So I'm sure people would have gone through it all of you, and we are open to questions now.

[Charanjit Singh, executive]

Operator, can you open the line for questions, please?

[Operator]

[Operator Instructions] The first question is from the line of Indrajit Agarwal from CLSA India.

[Indrajit Agarwal, analyst]

Okay. My first question is on Sanghi, congratulations on the acquisition. So post the acquisition, would Sanghi as the brand cease to exist, meaning would the entire volumes be sold under MSA to ACC Ambuja or that brand will also exist?

[Ajay Kapur, executive]

Okay. Indrajit, the simple answer is we already shifted the entire sales in the brands of Ambuja and ACC. And that is very well received in the market. So Sanghi as a brand, we are not using.

[Indrajit Agarwal, analyst]

Okay. That is helpful. My second question is actually on the CapEx. If you can help us with the guidance of CapEx for '24, '25 and '26 and the stake between Ambuja and ACC on this?

[Ajay Kapur, executive]

So if you see our investor deck, we have loaded Slide 29. All the details are there. We have, as I mentioned also in my opening, 2 lines, 8 million tonne clinker, 19.6 million cement. In addition, there are 5 new grinding stations. I know this question will also come later. So I'm attempting an answer now only so that I -- perhaps another question on the same I'll answer. Amravati and Jalgaon, the land acquisition is currently in active progress. We expect this to be completed by -- and EC also by December '24. And therefore, after that, about 14 months, the project should be on. Hoshiarpur in Punjab, the line has been purchased, public hearing has been completed. So we are already in an advanced stage. I think we should get the EC by March '24. After that, again, around 14 to 15 months, the project should be live. The Bihar grinding unit, Warisaliganj, land is already available, public hearing also completed. The EC time line is March 24, after that, 14 to 16 months of project completion. And Puna, the land is identified under progress. Like Amravati and Jalgaon, we should get it by EC by December 24, and after that, another 12 to 14 months. So this is the status of the new 5 branding units, which have been announced today. In addition to 19.5%, which you've already announced with the time lines.

[Indrajit Agarwal, analyst]

And how will you source clinker here?

[Ajay Kapur, executive]

So we have clinker at ACC Wadi. We are doing some debottlenecking there. Maharashtra, we have anyway put up a clinker line of 4 million, so that can easily produce 6.5 million tonnes of cement. And you can see the 3 grinding units are coming in there, Puna, Amravati and Jalgaon. Regarding Bihar, we already have put -- we are putting a new line at Vattappara, which can again produce with slag and composite cement closer to 7 million, of which 4 million is in Bengal and the remaining, as I mentioned in Bihar and some of the other areas. So more or less a well-balanced clinker across. Obviously, very soon, you'll also hear from us the next set of clinker lines. I can tell you a lot of work is already being done. But today's call, I'm not going to announce new clinker lines, but rest be assured a lot of work has already been done there.

[Vinod Bahety, executive]

And Indrajit just to also preempt another question. So for December quarter, Sanghi, it was only say, 25 working days, which is part of the results. And just to also highlight the entire integration process has gone very well ahead of the plant. And the March quarter, you will see some good volume jump coming from Sanghi itself, which I'm expecting almost 1 million tonne for the 3 months and compared to less than 0.3 million for the December or less than 0.2 million for December quarter. So Sanghi, this volume expansion is on back of the brand strength of Ambuja and ACC as well as the overall, say, distribution strength of both the companies, and hence, it makes more relevant to use Ambuja and ACC.

[Operator]

The next question is from the line of Prateek Kumar from Jefferies.

[Prateek Kumar, analyst]

My question is on, if you can explain the cost hit which we had during this quarter because of net EBITDA per tonne has got set in the current quarter. Is it related to buying clinker from ACC or some outside? And what is -- what part of it is extraordinary can you say you have like sort of our 12% clinker shutdown during the quarter?

[Ajay Kapur, executive]

Basically, we had 3 big kilns of Ambuja, which are about, what, 40% of our clinker. They were under the routine maintenance, and 1 had unscheduled breakdown. As a result, the clinker production was less, and therefore, the cost absorption was on a lower volume. I think that's the main principal reason. And I think other than that, I don't see -- I think that should come back in the following quarters.

[Prateek Kumar, analyst]

What would be the cost associated with this -- I mean, because why I ask is like most of your peers have reported INR 200 improvement in EBITDA per tonne, ACC is like also higher on a stand-alone basis at least. So your consolidated number actually looks quite good. But your stand-alone numbers of Ambuja are looking like sort of flattish on unit EBITDA. So I mean does all that loss has like sort of got booked in ACC in terms of more clinker purchase from ACC and as a result ACC results have improved significantly during the quarter?

[Ajay Kapur, executive]

So 1 question was already asked to me was in the past that ACC and Ambuja had a big lag, right? So -- and we always said that we are running both companies with the same set of lens. So we have seen ACC performance certainly going up. If you see stand-alone Ambuja volumes are pretty good, I would say. It's just that absorption has happened because in -- some clinker capacities were not running. As a result, our cost, for Ambuja for this particular is slightly higher. But I think this should catch up another I think about INR 100 a tonne is a catch-up, I would expect.

[Vinod Bahety, executive]

That is -- so just to put some numbers, let us say, in September on standalone Ambuja was INR 1,020 a turn on EBITDA, and as you rightly said, this shutdown and also higher clinker of the inventory, which has been consumed close to about INR 150 to INR 200 a ton is what is going to -- it has affected Ambuja. So if I normalize it, it would be close to INR 200-odd which is also INR 200 jump in the EBITDA. So Prateek,am I right? So Prateek, just to give you the numbers, like this higher cost of the shutdown of almost 40% capacity costed me almost INR 50 a tonne, then the inventory of clinker, which I consume, the opening stock, if you see also the difference in the change in the inventory earlier it was positive this quarter, it is negative because I've consumed more inventory of in stock, which has cost me almost like INR 40 and then higher sales of the traded goods when it comes to Ambuja, there has been a higher proportion. And I will explain to you on the MSA part, which will also posted another say INR 30 or INR 40. So close to INR 150-odd has been impacted to Ambuja stand-alone EBITDA. Otherwise, it would be closer to INR 100 a tonne on a normalized basis.

[Ajay Kapur, executive]

And also on our MSA, 1 good news is that we have been able to maximize the synergies between the 2 companies. As a result, that volume has taken a significant improvement. And when you consolidate with a level at a holdco level, you find that the margins are now really shooting up. So I think that's a very good news, I would say, because the interest rate improvement for MSA volume itself has been a substantial uptick for the consolidated company, which is Ambuja.

[Prateek Kumar, analyst]

Sure. Just 1 clarification on Q4, this INR 150 should send backed, right, in terms of [indiscernible].

[Ajay Kapur, executive]

Yes.

[Vinod Bahety, executive]

Yes, for sure. In fact, therefore, we also highlighted in our press release that this will -- the benefits will come in the coming quarters, immediately in Q4 itself.

[Operator]

Next question is from the line of Raashi Chopra from Citigroup.

[Raashi Chopra, analyst]

So my first question on the cost side. You had mentioned that the cost will improve by about INR 400 a tonne based on the efficiency parameters, et cetera. So how much of that is already done and how much more can come?

[Ajay Kapur, executive]

So Raashi, if you see my opening, we already have saved some because of increased share of waste heat. By March, you will see a substantial improvement in the RE because 200 megawatts is getting commissioned. Let's say, on a 30%, 33% factor, 60 megawatts of RE would be available to us. Then next year, as I mentioned, we are further going to add wasted recovery. So I think in the journey of 400, we -- I know our EBITDA already at consol level is [indiscernible] INR 1,200. So you can see improvement happening purely on efficiency. But I believe another INR 300 will come over the next 12 to 24 months.

[Vinod Bahety, executive]

So Raashi, what -- Ajay just highlighted some of the important investments which we are making in terms of the power, renewable power, WHRS. And also in terms of the raw materials procurement, for example, whether it comes to gypsum, whether it comes to fly ash, putting CapEx for fly ash handling system or putting facility of synthetic gypsum, these all are going to give us the visibility of at least a couple of hundred crores of reduction in the coming quarters. We're very confident of achieving our INR 1,450 guidance, which we had given in the initial period, I think we are very much on the -- and the exit of FY '24, we should be moving towards that.

[Raashi Chopra, analyst]

And this just keeping in mind, I mean, your EBITDA per tonne guidance, keeping in mind that the price hikes that happened over the course of the last few months have kind of reverse, et cetera. So this is really only a cost advantage we're talking about, right?

[Ajay Kapur, executive]

Yes, yes. So I don't want to get into the price debate and discussion because it's a very dynamic one, first of all. So it's not right for me to comment there. I was therefore commenting only that you've seen from -- when we put up our strategy road map in May, last year. From then till now, we had guided about INR 400-plus cost improvement on a static price line. Of that, I said other INR 300 should flow in over the next 12 to 24 months. What are the levers? INR 90 per tonne will straightaway come from waste heat and green power when fully implemented. And another INR 50 to INR 60 will come from logistics and another INR 50 to INR 60 will come from footprint optimization. And the last INR 50 will come from the raw material procurement. And this still doesn't have the play of our own fuel management, I think that will be on top. So I'm very comfortable that I'll exceed that guidance which I've given. And there's no question, we are very much progressing on that direction.

[Raashi Chopra, analyst]

Sorry, I missed that INR 90 was waste heat recovery and green, INR 50, INR 60 logistics, INR 60 was raw material? And what was the other 50?

[Ajay Kapur, executive]

Footprint optimization.

[Raashi Chopra, analyst]

Footprint optimization.

[Ajay Kapur, executive]

Yes, you have new grinding stations, your cost will improve when the market tends to improve. And it straight away the 1 lever which hits first is the lead distance. And every kilobit per tonne, but if you take INR 4 or INR 5, the decrease in cost is substantial.

[Raashi Chopra, analyst]

Understood. That's very helpful. Just 1 more question. So currently, your grinding capacity, cement capacity 77.4% and clinker is 51%, and in the immediate visibility based on the announced expansions, you have cement going to 110. And I know you said you didn't want to [ retake ] clinker, but at 110 cement base, how much linker do you expect to have?

[Ajay Kapur, executive]

Again, as I said, then I'll have to give you a number, which I'd rather come out with a proper guidance. And with the details as we have loaded on our website today. So allow us some time. I can assure you -- just to give you some comfort, at Sanghi, it still have a billion tons of limestone. Likewise, there are multiple sites where work is going on. Land has been acquired, EC applications have been filed. I want to announce when my EC application for another plant is already in my hand. So just wait for some time.

[Raashi Chopra, analyst]

Sure. So just on a consolidated basis from a volume growth perspective, FY '25, '26, how does -- I mean, how do you push -- look at that?

[Ajay Kapur, executive]

Let me only give you a number right now. Our growth number for Indian demand should be about 7% to 8%. I'm very confident about that. I think our normal capacities, existing capacity should get that number. And our new capacity that we have acquired and also some of the markets that we have acquired with those capacities, that should give us a number on top of the normal 7% to 8%.

[Vinod Bahety, executive]

Yes. But Raashi, like straightaway, we have added almost 15 million tonnes, 15% of the capacity where we were 67.5%, and today, we are at 77.4%. That will definitely add up to my overall volume when the full flow of strategy comes on it -- the capacity that we have acquired. Now you can just do the math. This will definitely be better than the industry growth for Ambuja consul.

[Operator]

[Operator Instructions] The next question is from the line of Rahul Gupta from Morgan Stanley.

[Rahul Gupta, analyst]

I have 2 questions. First, out of this 2.9 million tonne of MSA sales, can you help me understand how much would be to ACC on a net basis?

[Vinod Bahety, executive]

I will take up that, Rahul. So Rahul, in terms of this 2.9 million tonnes, 1.7 million comes from ACC to Ambuja and 1.3 comes from Ambuja to ACC.

[Rahul Gupta, analyst]

Got it. Got it. My second question is a bit related to strategy. So how is the group thinking now with respect to ACC and Sanghi consolidation into Ambuja? Or is it they would continue to keep 3 companies separately listed eventually. Any color on this would be very helpful.

[Ajay Kapur, executive]

Rahul, you'd appreciate at this moment, if there was any comment I would have already commented in the press release or in our media statement. Give us some time, we'll come back to you with a more coherent and clear strategy on that. For ACC Ambuja, we are very clear. Right now, we are running it as 2 companies. However, you've seen the MSA volume, the MSA volume in this quarter has been the highest and the biggest and that you're already showing in the results margin for the consolidated entity. As far as Sanghi is concerned, we just acquired, we are still in the process of finishing for certain steps. Step 1 to finish our open offer. Step 2 would be to integrate step. Again, there are 4 or 5 steps before I can answer the question you have raised, but allow some time, we'll come back to you.

[Rahul Gupta, analyst]

So just a follow-up on this. So is it fair to say that the MSA volumes, net MSA volumes of around 2.9 or 3 million tonne would be the way to go forward with?

[Ajay Kapur, executive]

I think at this moment, with -- this volume is all right, but don't forget that every year, we are adding 10% to 15% new capacity. So as the new capacities get added, until such time the 2 entities remain the way they are, we will always keep optimizing the footprint, and that's where the value is coming in. And you are seeing for yourself that at a holdco level we have seen a margin uptick coming because of consolidation and because of MSC. So I would say the full strategy is playing out beautifully.

[Operator]

Next question is from the line of Bharat Shah from ASK Investment Managers.

[Bharat Shah, analyst]

Kapur. Last day, we had detailed discussion about the strategic road map. And some of the [indiscernible] in terms of the cost, and other things beginning to get visible. But I wanted to take an opportunity and check it to is to -- what your overall reason of the industry, Ambuja combined place under that? And some of the more tangible -- so some of the more tangible guide post in terms of kind of volume, profitability and capital efficiency over 3 to 5 years' time frame. I'm aware of the road map that you had drawn and indicated. But my personal opinion is that maybe this is cement industries probably -- Indian cement industry is 1 of the best we get ahead is my personal understanding. But I would like to have some more clarity from your end as to how you view it and Ambuja combines place under that overall opportunity for the industry?

[Ajay Kapur, executive]

So Bharat, thanks. I think you asked me very, very interesting questions. There are also strategic and future oriented. Let me attempt answers. First of all, our position is very clear. We want to grow and we want to have an end state road map, which our Chairman had given us this vision of doubling the capacity from the day we acquired the companies from 67.5 to 140. I've already in my PR today, released a number of 110 million, of which 10 has already been acquired, which has already taken to [ 77.5% ] in 1 year. Work on multiple others already started, but a very clear road map with names we have given up to 110 million. Now that clearly is a work in that direction.

On the cost leadership, you are seeing the margins improve. You've also seen the turnaround in the company of ACC under Adani leadership. It's a complete turnaround. And today, ACC EBITDA margin is clearing 1,000. And when we acquired, it was almost negative a year back. Now coming on, how do I see next 3 to 5 years? I believe EBITDA per tonne of Ambuja consolidated should be in the realm of INR 1,450 plus, that guidance stays firmly in place, and this guidance is not basis price. This guidance is firmly based on cost. I'm very confident this will come. And it will be further supported with a larger volume from the current 77.5 to 140, we should be selling 120 million tonnes by March of '28. I'm very confident we should be able to get to that number. Now I think that itself will tell you the position, the valuation and the financial metrics because that will also give me a ROCE of closer to 19% with EBITDA margin of 25%, 26%, other things remaining equal. So I think that's what I've put out in the public space. That's what I'd like to further reiterate and also mention that a lot of actions on ground are happening across our sites. I hope I've answered your question, Bharat.

[Bharat Shah, analyst]

Yes. But return on capital employed of 19% to 20%. Would you not regard it a little less ambitious because today cement, Indian cement industry is placed in the global context. On many qualitative parameters is much more distinguished than before. Industry itself is consolidated, underlying demand drivers in terms of real estate, housing, infrastructure, all that appear to be robust. And it looks very clear that industry, which has grown in last 20 years at 6%, 7% per annum in volume terms should do a lot better on a larger base in the next 20 years. Therefore, consolidation of the industry improvement of the practices very clearly global level capability and capacity emerging and the opportunity highway and our stringent focus on internal efficiency and raising the bar there 19%, 20% in our consolidated industry for the lead player, would you not regard it as somewhat underwhelming?

[Ajay Kapur, executive]

Bharat, if you -- 1 thing I didn't mention, this is on static prices. My entire strategy, which I had laid out then, and I'm again laying out today, I have not considered a healthy price increase in this. So if there's a price increase, as you rightly mentioned, the demand supply gap narrowing, the upside could be much higher. But in the interest of time, I would suggest we can engage offline, and we can have a much more nuanced discussion on it. Thank you.

[Operator]

[Operator Instructions] Next question is from the line of Devesh Agarwal from IIFL Securities.

[Devesh Agarwal, analyst]

I missed the number on the cost that is there in this quarter on per kcal basis, what is that number, and what is the expectation for the fourth quarter?

[Ajay Kapur, executive]

Sorry, can you repeat the question?

[Devesh Agarwal, analyst]

Cost per kcal business, sir, for third quarter and your expectation for the fourth quarter?

[Ajay Kapur, executive]

INR 1.82, I think, is a cost I give it. And I think we expect -- the cost to more or less trend in the same format because we expect much more smart buying on pet coke prices. And also what do you call -- it was INR 1.84, sorry fuel cost.

[Vinod Bahety, executive]

Just to add, Devesh. So you're right. I think what we have seen in this quarter, December is that the pet coke has been subdued in terms of the overall price, which has come down almost like if I compare, say, 20-odd percent from $140 a tonne to almost like $115 a ton. Now there is a lag effect with coal. And now, for example, we are seeing a good trend of softening of the coal prices for this quarter. And definitely, it should help -- as you know, my basket of coal is actually improving in terms of domestic more as compared to import, and we also definitely have put all the 3 lakh tons of opportunity buy when it comes to pet coke from Saudi Aramco. So that is definitely going to help me in coming quarters.

[Devesh Agarwal, analyst]

All right, sure. And on Sanghi, you mentioned a 1 million tonne volume in the next quarter it in the running quarter, that implies a 75% utilization. So what are your plans to increase capacity at Sanghi, the 10 million tonnes that you mentioned? And what could be the markets that you're targeting from the Sanghi plant?

[Ajay Kapur, executive]

So Sanghi plant will initially target Gujarat and Maharashtra markets. And in time to come, as the full strategy plays out, it will go down south as well to markets of Cochin and Bangalore. But it'll cover the entire Gujarat, it will cover parts of Maharashtra, most of the coastal parts and then it will also then go down south.

[Devesh Agarwal, analyst]

And sir, target to increase from 6 million to 10 million tonnes?

[Ajay Kapur, executive]

That, I will lay out in my road map, as I mentioned, the next set of kiln announcements, you'll also hear Sanghi kiln.

[Devesh Agarwal, analyst]

Right, sir. And 1 final question, sir. What are the time lines for the balance warrant money that is likely to come from promoters?

[Vinod Bahety, executive]

So Devesh, as you know that the time lines are somewhere like mid of April, but that is where the promoter group will be able to highlight on that part. So as of now, no comments on that.

[Operator]

Next question is from the line of Navin Sahadeo from ICICI Securities.

[Navin Sahadeo, analyst]

Two questions, 1 on CapEx. Second, on the sustainability of fixed cost reduction. So on CapEx, if you could first like share the actual cash outflow that you are like estimating, because what I also see is while your clinker addition given so far is about 10.25%, 8 already announced, 2.25% at Mundra. And total grinding is almost 32 million tonnes. So it does appear that for -- like even from an FY '27 year perspective, you could be higher on the grinding and lesser on the clinker side.

[Ajay Kapur, executive]

So as I mentioned earlier on the clinker, very soon, you will hear the next set of clinker capacities. I'm waiting for public hearings to be done. I expect this to be done by June. Post that, you will hear our next set of kilns, for which most of the land is in our position. These are brownfield assets limestone reserves in our possession, and in our possession, only public hearing, we are waiting. Therefore, in some places, we have to build -- this has always happened as we expand. Sometimes, the grinding will be ahead. Sometimes the clinker will be ahead -- but we are very confident that -- and these projects since they are Brownfield, we should be able to get from the time of EC approval to the plant commissioning, outer limit would be 18 to 20 months.

[Vinod Bahety, executive]

So Navin, you're preempting in terms of the overall, say, capital management plan around this CapEx, then we have done our maths and for any intermittent any M&A outgo. Otherwise, all our CapEx is well fund -- aligned with the cash flows, what we are expecting from the business. And if there is any requirement for any additional opportunity, definitely, our balance sheet is very, very strong, very healthy, debt-free as of now. So that is capable to handle that part.

[Navin Sahadeo, analyst]

Fair. And second question was about the sustainability of fixed cost reduction because in the case of ACC, particularly and also in case of immediate fixed cost, pleased with staff expenses and in case of ACC when the other expenses, we have seen a significant reduction. So just wanted to get a sense, are these more sustainable or it had probably some element of one-off or it could be volatile going ahead time?

[Ajay Kapur, executive]

I think there's no one-off per se. I would say the entire strategy, as we had laid out last year is now playing out in full potential. There is a lean management, there is single management. And of course, we have also volume as it kicks in you will find the fixed cost journey at least will not go away from where it is. It will only get slightly improved further. But I don't see any major uptick in the cost going forward. And some of the cost in other expenses, we are also now investing in brands. I think that part, I would say, was underinvested in future, we'll invest a little more. But I think other than that, I think it's more or less in place. I don't see any major concerns going forward either way.

[Vinod Bahety, executive]

Navin, like interestingly, this one-off question has been coming every quarter and every quarter, we have been surprising -- not surprising, but sustaining in terms of the cost, which actually shows that last 4 quarters, from almost a 10% reduction. And if you start from looking at March to December '23, the trend is very, very clear. And in all our investor presentations, we are highlighting all the components of the cost. And further, we have now highlighted what are the efficiency improvements, CapEx is. So only from here, there will be improvement.

[Ajay Kapur, executive]

And of course, annual bonus, as you know, kicks in, in the April quarter. So they could always be a little bit natural payout of bonuses. So that's the only thing which should happen going forward.

[Operator]

Next question is from the line of Sumangal Nevatia from Kotak Securities.

[Sumangal Nevatia, analyst]

First, appreciate the granular details on various aspects in the presentation. My first question is on the volume growth part. So if you look at last 2 quarters, our volume growth on the consolidated basis has been just 2.5%, 2.6%, excluding the Sanghi volumes, as peers have grown by early teams. So I just want to understand from the last 4 quarters, I mean, what are the key reasons why we are lacking the growth and the market share, and some future guidance on this aspect?

[Ajay Kapur, executive]

So if you see for the current quarter, I believe the industry growth is about 3.5%. We are more or less in line with the industry growth. Within that, if you see Ambuja is stand-alone about 6%, it's a little better than industry growth. I think in the -- and also, of course, in this quarter, you had a very bad November. So some of those issues also had impact on rest of the industry also had -- and there are some elections, I think, in this quarter. I think going forward, as I mentioned, the industry growth should be about 6%. At the base level, all of our units should be able to get plus that. And all the incremental volumes that we're adding in the system, plus the catch-up, as you rightly mentioned, should also help us. And I can only give you that January, we are seeing a very robust numbers for the entities. So I think I'm very confident that going forward, we should have a healthy growth.

[Vinod Bahety, executive]

And just to confirm, in terms of our capacity utilization, we are amongst the highest in the peer at 77-odd percent, which means with every increasing capacity, one can just expect that the volume expansion will be proportionately growing with that. That is straight forward, like, for example, [ Maths ].

[Sumangal Nevatia, analyst]

Okay. Got it. And I missed the CapEx number. Is it possible to share what is our full year CapEx latest guidance for FY '24 and '25 as well?

[Vinod Bahety, executive]

Let me take this question. Basically, let's go with the overall, again, I would reflect you on the 140 million tonnes of plan, right, which is staggered into the next 4 years. And for -- as I highlighted, 80% of this, we will be achieving by say '27. And when I do a complete math, I'm generating an EBITDA of close to say, 8,000 or INR 8 crore to INR 1,000 crores, which we'll be generating. And the business itself will be growing a healthy cash of INR 5,000 to INR 6,000 crores, net of taxes and all. So from an overall CapEx outflow perspective, each year, we are expecting a INR 4,000 to INR 5,000 crores outflow staggered over the next 3, 4 years. For FY '24, we are expecting INR 3,500 crores overall metical outflow. So this quarter will be -- we will see a good CapEx outflow as well. But Sanghi will be adding to the incremental requirement. But however, as I mentioned, from an overall capital management plans and perspective, the numbers which we are discussing with you, these are all without any incremental borrowings at this stage. These are all was the healthy cash flows and the existing treasury on the books, which will be self-sustaining. And the EBITDA, the EBITDA which are highlighting to you doesn't factor in the potential jump on basis of the price realizations improving. So this is a cost leadership journey, which we have achieved. And any further improvement on the market, which we've highlighted, will only be adding to my EBITDA. So the business is generating a good healthy cash flows and which will maintain my CapEx plans. So broadly, as I said, INR 5,000 to INR 6,000 crores from a cash outflow perspective, and from a commitment perspective, INR 8 crores to INR 10 crores a year you can expect.

[Operator]

[Operator Instructions] Next question is from the line of Amit Murarka from Axis Capital.

[Amit Murarka, analyst]

My first question is on the arrangement with Adani Cements, the hedge plant. I think in the presentation, you have mentioned that you've entered into an arrangement. Can you please explain that?

[Ajay Kapur, executive]

So like we do a master supply agreement between Ambuja and ACC, since it is a related party. We have done a similar arrangement with the hedge unit of Adani cementation, whereas we use it like a toll manufacturing. So we give them clinker, convert it into cement and take it at the [ extractory ] gate, sell it at both Ambuja and ACC brands. more or less similar arrangement as we have done with all of our entities, including now Asian, which ACC has acquired in North.

[Amit Murarka, analyst]

Okay. So is this a cost plus 10% arrangement, like similar to, let's say, what you saw in Sanghi or it's a different arrangement?

[Vinod Bahety, executive]

So since this is on a pure tolling basis, so this will not be cost plus 10%. It will be on a measure of tolling charges per metric ton, which is close to about INR 300 to INR 350 a tonne.

[Ajay Kapur, executive]

So in this case, in Sanghi, Sanghi is producing clinker and billing us on cost plus. Plus we are taking the entire investments. We have given loans at a very market-friendly pricing versus what they were getting earlier. So I think -- and the entire brands are from Ambuja and ACC. In this case, we are using the grinding unit purely as a tolling unit. So we have to mitigate the entire cost. And then we buy it on a price, more or less the same formula as we do for ACC and Ambuja.

[Vinod Bahety, executive]

I stand corrected. This is on a sales basis only, similar to what we have adopted. It's not on a tolling, sorry. It is on a sales basis, which we were adopted for Sanghi and [ ACIS ]. So it is on a similar principles.

[Amit Murarka, analyst]

There would be some double counting of volume then right? When you sell clinker, you would be booking a clinker sale and then cement sold externally will again be booked as [indiscernible]?

[Vinod Bahety, executive]

Sorry, I couldn't follow the question.

[Ajay Kapur, executive]

No, it will now..

[Amit Murarka, analyst]

You will sell clinker to the hedge, right, and then they will sell cement to you?

[Vinod Bahety, executive]

Yes. So in this case, for example, we will only factor in the sale of the cement, which will be there from our side. And in the course, it will also come as a purchase of cement. So basically, that is how it will be. But there will not be any per say, double accounting.

[Amit Murarka, analyst]

So you will sell the cement externally. So that will come as sales, cement sales as well?

[Vinod Bahety, executive]

Yes, yes. I will be selling and then I will be buying. Debt [ tied ] is mine.

[Amit Murarka, analyst]

Okay, sure. And also on your ACC, just if you could just help understand like there has been quite a bit of volatility in the numbers there, like we saw Q1, being good, Q2 again being weak. Q3 has again been good thankfully. So how can we expect INR 1,000 EBITDA profile to sustain like and in fact, hopefully improve from there? Or if you can just dive into that a bit?

[Ajay Kapur, executive]

So basically, if you see ACC movement has been -- you're right. I mean it was -- March quarter was 554, December '22 was 496. Sequentially, you have seen from June from 800 to September, it had a dip and then it has again gone up. I would say it's a more stable now. A lot of inefficiencies in the system have been addressed. And we are also addressing the tail-end plant. So I think that's also helping. On top, we are also doing a footprint optimization. I think this was a question if you all recall, was asked that why was such a big margin gap between the 2 entities. And I think that strategy is now playing up.

[Amit Murarka, analyst]

Sure. So we would now hope for INR 1,000 profile to sustain basically right?

[Vinod Bahety, executive]

Hopefully, so yes, we are also hoping the same.

[Operator]

Sorry to interrupt you.

[Aman Agarwal, analyst]

We'll take 1 more question and then we can end the [ session ].

[Operator]

Yes. Next question is from the line of Satyadeep Jain from AMBIT Capital.

[Satyadeep Jain, analyst]

A couple of questions. One, on the new capacity expansion you've announced of 2.5 on the clinker and [indiscernible] cement. Is that - which entity would that come under. Some are Adani Cement, I guess. May be can you talk about where all this capacity setting?

[Ajay Kapur, executive]

So all the capacities that I've announced, I think the ones are there on the Slide #3 of our Investor Day, No, no, this is the limestone ones. I think the 2 clinker lines are coming in Ambuja, Slide 29, sorry. Bhatinda in Ambuja, Bhatapara is in Ambuja. Maratha, of course, is Ambuja. Sankrail is Ambuja, Marwar is Ambuja, Farakka is Ambuja, Sindri is ACC, Salai Banwa is ACC, Mundra is Ambuja, and of the new capacities that are coming in, all of them are in Ambuja.

[Satyadeep Jain, analyst]

I just wanted to ask, given ACC also has a lot of cash on the books. What's the thought process behind adding all these capacities in Ambuja and not ACC?

[Ajay Kapur, executive]

As I mentioned, I've yet to announce a new set of cement kiln, and in time to come, you will hear expenditure plan over there as well from ACC.

[Satyadeep Jain, analyst]

Okay. Second was on power, thank you for all the details slide you put is very informative. So I just wanted to ask on power, obviously, Adani Cement, Ambuja doing all the power commissioning executing right [ status ], where do we have Adani Green, Adani Power, they have the experience what is what behind doing it in-house. And also when you're building that INR 1.3 savings, can you maybe talk about what kind of grade power costs you have assumed for that kind of savings?

[Ajay Kapur, executive]

So basically, we have taken around average INR 7 grid power cost. That is basis, this booking. I think the details are given on Slide 41, 43, I think. And then if you really look at the mix, we are -- it's not just green, it's also wasted recovery. Wasted, we are looking at -- see, the green, we have calculated for FY '27, '28, around INR 8.50, CPP, INR 8.28, wasted about INR 1.4 and then that's how we have worked out this savings.

[Satyadeep Jain, analyst]

CPP has been very high, just on that because you're using the building of this green energy, which is going to be solar will be mostly during the day. So during the evening, you're going to replace grade-based captive, cool plant, is that correct? And would that mean that you ramp up -- rampdown the coal plant during the day during the day shutdown coal and during the evening you start [indiscernible]?

[Ajay Kapur, executive]

So what we have done is, basically, on a technical minimum, what the grinding units -- sorry, the captive plants will be run during the night. And during the day, the solar would be drawn. I think that was -- and we have taken a lot of help from our colleagues in the green and also in our distribution and part of planning the strategy.

[Satyadeep Jain, analyst]

Because of the ramp up, ramp down, you will assume more than INR 8 cost of [indiscernible] otherwise that cost will be slightly higher.

[Ajay Kapur, executive]

CPP cost is basically will also go up because we have taken some assumptions in the cost of coal. That's the reason.

[Satyadeep Jain, analyst]

I'll assume. Cost of coal is [indiscernible]

[Ajay Kapur, executive]

There will be some -- that is what has -- we have taken the trend of past few years. About 2% to 3% inflation, we have taken for the purpose of our modeling.

[Satyadeep Jain, analyst]

And just on that, what the -- why Ambuja is executing this and why not Adani, [indiscernible] given these capabilities on that?

[Vinod Bahety, executive]

So basically, a good point and good observation. So it is the investment from Ambuja on its balance sheet because this is like a strategically important investment from my cost to my ESG requirements and all and Adani Green, which is the group's leader in the green power, they are helping us to implement it. So a large part of this green power is coming in Khavda, where Adani Green has sizable, as you all know, ongoing projects and where they are giving us some part of this out of this Khavda location. So of course, they're helping us in terms of implementing and executing this project. But strategically, it is important from Ambuja perspective. As I highlighted, its a long-term requirement for me and also help me in my overall larger ESG standards.

[Operator]

Ladies and gentlemen, due to [indiscernible] of time, we will take that as the last question. I will now hand the conference over to Mr. Charanjit Singh for closing comments.

[Charanjit Singh, executive]

Thank you, everyone, and thanks for taking out the time for any leftover, you can directly reach out to me after the call. Looking forward to another engagement after Q4 results. Thank you, everyone, and good day.

[Operator]

Thank you very much. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.