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Ambuja Cements Ltd
Earnings Call Analysis
Q2-2023 Analysis
Ambuja Cements Ltd
In the recent quarter, Ambuja Cements reported an 8.5% Y-o-Y increase in revenue to INR 8,713 crores. Auditor's revenue increase also saw a 10% rise in the volume of premium products. Substantial cost efficiencies were achieved, including a 7% Y-o-Y reduction in operating expenses to INR 4,575 crores, leading to a significant 55% Y-o-Y jump in EBITDA to INR 1,930 crores.
Ambuja Cements achieved notable cost reductions, with a strategic decrease in energy costs by 20% and raw material costs by 11% Y-o-Y. These efficiencies resulted from group synergies and a focused cost optimization strategy.
Ambuja Cements aims to ramp up its production capacity to 140 million tonnes by FY '28. The plan includes commissioning around 10 new clinker lines and doubling the grinding facilities to 140 million tonnes by FY '28, with a clear expansion strategy in place.
The company earned accolades as India's most trusted cement brand, reflecting brand value and a commitment to sustainability. Strategic updates on reducing energy costs and investing in renewable power generation position the company well for future growth and industry challenges.
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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.
Thank you, [indiscernible]. 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.
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 call. 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 it with comments from Mr. Vinod Bahety. And thereafter, we will open it for Q&A. So over to you, Mr. Bahety.
Thank you, Charanjit. Warm greetings to everyone. Thank you for joining us today. It is a 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 [indiscernible] per tonne. The volume of premium products 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 [indiscernible] 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 different, but this is largely on account also of a higher production that we have done of [indiscernible].
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 [indiscernible] tonnes, 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 4730 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%. Robust PAT growth at 29% on a Y-o-Y basis, again, on a like-for-like, excluding dividend income of 550 at INR 645 crores for this quarter.
The company won several awards and accolades for its outstanding work in customer service, safety, [indiscernible] economy and [indiscernible].
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 steady within a makeup with production likely to start in quarter 2. Equipment orders for other 2 more lines are already placed. This includes 4 million tonne facility at [indiscernible] and another 4 million facility at [indiscernible] in [indiscernible]. Each of these lines will have 42 megawatts of wasted recovery and provision for utilizing around 50% alternate fuels. These 2 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 branding 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 [indiscernible]. These include 1 each at [indiscernible], [indiscernible], Farakka. Another 3 units are mapped to [indiscernible] facility. These include 1 unit each at Jalgaon, Amravati, and Pune. Besides a facility of 1 million tonne capacity is proposed at Bhatinda grinding unit in Punjab and 1 new 1 million tonne unit will be commissioned at [indiscernible] in quarter 2 FY '24.
All together, 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 on 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 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 costs. 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 wasted 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 [indiscernible] 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 and 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 2,138 per tonne in June to September quarter, the last reported before our takeover. The second cost item is freight and converting. There are 3 focus areas for cost reduction here, first production in lead distance.
Second, warehouse footprint optimization. And third, railroad mix optimization.
We are targeting to reduce the average road lead business to around 100 kilometers. When we took over the company, the average road 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 and technology know-how fees and packing cost reduction, this has led to other cost reduction by 13% to [indiscernible] per tonne in quarter 1 FY '24 from 770 per tonne in the quarter proceeding to the change of ownership.
To ensure our assured supply 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'd now call upon my colleague, Vinod Bahety, to also make some comments on the performance of the quarter.
Thank you, Ajay. 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 tonne, 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 CRs commensurate with the overall tax. 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 CRs on ensuing 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 augers very well for our growth FX. I'm sure many of you have seen our annual report, both physical or digital. We have 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 Instructions] The first question is from the line of Sumangal Nevatia from Kotak Securities.
I'll start with my questions. My first 1 is on the volume growth. So this quarter, if we see we've grown volume by 9-odd at consolidated level whereas most of our large peers have grown significantly higher closer to 20-odd percent. So I just want to understand what is the reason for the underperformance and versus industry and versus last year? And what is the key constraint here? Is it a capacity constraint or some other issues which we faced during the quarter?
The industry, I believe, has, by enlarge grown around 9% and 10% and our growth more or less is the sync with that. The players who we are talking also added new capacity. 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 [indiscernible], 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 in West where we have a larger presence that, of course, had it play in the most of the month of June when the monsoon was very high.
Perfect. So with -- over the next, say, 2 years, and given our pipeline of capacity additions, 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?
I don't see any issue with our growth of 10% to 15% here.
Got that. 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 [indiscernible] of 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?
I think, as I mentioned last time, cost initiatives are of 3 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 savings, the overall SPC, as we call it, all those costs, if you see are already showing a good reduction. So I'm very happy with the trajectory that we are on. And of course, freight and forwarding, as we build the footprint of new grinding periods, you'll start seeing that also coming down with a much sharper turn.
And Sumangal just to also add all our efforts are actually to bring a sustainable savings in the cost. So you will find this is coming quarters also further improvement while we sustain on the achievements which we already made.
[Operator Instructions] We take the next question from the line of Prateek Kumar from Jefferies.
My first question is on employee costs, so there has been sharp production across both companies for [indiscernible] on employee cost. [indiscernible] so is this sustainable in terms of [indiscernible] effectively [indiscernible].
You're not very audible. -- at least I'm not able to hear very clearly, can you speak more clearly. I'm not able to hear, maybe the line is bad.
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.
First question, sir, you indicated on the clinker addition of 20 million tonnes. Sir, can you specify whether we have already placed the orders over here at the same people for the grinding station -- and you did indicate 140 by FY '28. But when we say 20 million tons of linker addition, what is the time line that we are looking at over here? And same thing for the grinding [indiscernible] please. .
Yes. Good question, Ritesh. I mentioned 40 million of [indiscernible] addition to reach our target of 140 million [indiscernible] and 35 new branding 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 [indiscernible] orders have been issued, 1 each at Maharashtra and Chandrapur at our Maratha Cement Works and 1 at Bhatapara in Chhattisgarh. Both these [indiscernible] are 4 million tonnes each. And I also mentioned and laid out the grinding units for which -- which are in sync with this incomings.
This orders are placed under the time line over here for [indiscernible] lines.
All 24 months.
The next question is from the line of Jashandeep Singh Chadha from Nomura.
First is on volume growth. So if you look at stand-alone both Ambuja and ACC has recorded above 100% utilization on clinker and cement as well. So just wanted to understand what is the proportion of NEC sales in that -- and where is that of this higher incremental volume coming from -- is it most of the on-trade segment you are seeing this demand? Or is it from the trade segment? The first question is on [indiscernible].
Okay. Thank you, 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 [indiscernible] sales which happens -- 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, 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.
And we can expect this above 100% utilization. Is this sustainable for this year? Just wanted to understand that.
As I mentioned, in the market, the volume up to 15% at this moment, I don't see any challenge in growing. [indiscernible] participate in the full potential of industry growth.
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 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.
So our CapEx guidance for this year, the projects which are under execution is INR 6947 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. .
Right. So that is for the 14 million tonnes of -- [indiscernible].
It's also a lot of other projects. For example, I mentioned [indiscernible] and some of the improvement projects at the plants. So this includes everything.
Understood, sir. And can you give a breakup for the INR 600 crores CapEx for this quarter? How much was for Ambuja [indiscernible].
For this quarter, CapEx breakup, maybe -- I will give -- in terms of the Ambuja -- 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 at [indiscernible] 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 we have put in INR 28 crores. And then we have also maintained CapEx of INR 34 crores. So about close to INR 260-odd crores is the CapEx stand-alone for Ambuja, and the remaining is for ACC.
[Operator Instructions] We take the next question from the line of Raashi Chopra from Citigroup.
Just wanted to know the breakup for the [indiscernible] 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?
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.
Does this also include -- sorry, in Ambuja case, does this also include the 42 megawatts that you're talking about with the new clinker line or that [indiscernible]?
Yes, yes. That includes that, yes. And when 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 87.5 and 85.5 for ACC, that does not include the new lines.
Right. Got it. So you said 87.5%.
Yes, please.
Okay. Secondly, on the power and fuel side, purely from a pet coke, coal cost perspective, how do you expect this to trend in the next few quarters?
I think the last 1 or 2 quarters earlier the trajectory was sharper decline, not being 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.
The next question is from the line of Satyadeep Jain from AMBIT Capital.
Couple of questions. One on CapEx. I want to understand is this Chandrapur and Bhatapara lines that are coming up. This also will slow around [indiscernible]. If we look at the target the company has, the 140 million tonne target and placing orders for 10 clinker lines. Is there any inorganic acquisition that [indiscernible] company recalibrate its organic growth expansion plans or any inorganic would be [indiscernible] to $140 million that you already have. And tied to that would be within that mix, majority of [indiscernible] on the expansion seem to be coming in Ambuja, [indiscernible], 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 how much would ACC participate in that growth versus Ambuja? So it's the first question.
So Satyadeep, then I take this question only because you asked 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?
Both -- one is if you look at the [indiscernible].
Okay. I'll address both your concerns. 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?
No, between that growth that you had, how much. If you place an order for 10 clinker lines is doing the clinker by 40 million and placing orders for [indiscernible] units. So that will get you 140 million tonnes. If in the meantime, any inorganic growth comes up.
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 are even 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 [indiscernible].
[indiscernible] between ACC and Ambuja, how are you thinking about placing orders in ACC, participation in inorganic group for ACC [indiscernible].
So it's a function of the deposits of limestone, which company has what kind of reserves. Interestingly, the 2 [indiscernible] I've ordered both had good reserves in Ambuja plants, 1 in Chhattisgarh and 1 in Chandrapur. ACC as I mentioned is about to complete 3.3 million new clinker line in Madhya Pradesh [indiscernible]. In time to come, you will find us growing in Karnataka, where ACC has [indiscernible]. And maybe the 1 or 2 locations as part of our journey to grow. So I think it will be a mix of where we find 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.
The next question is from the line of Amit Murarka from Axis Capital.
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?
Sure. So thanks, basically. In terms of stand-alone versus [indiscernible], this is more of an issue of the regrouping, which we got this regroup between the employee cost versus the other expenditure and the other expenditure is more about the common expenses between ACC and Ambuja, which was allocated in the ratio of -- as an approved policy in the ratio of [indiscernible] 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 selling 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 consol basis, there is marginal drop only in terms of overall employee cost from INR 378 crores for June '23 to last year INR 385 crores or last quarter was INR 387 crores.
So it's only a reclassification because of which we see a drop in Ambuja, ACC.
Yes. We have this master services agreement, yes. So that is more of account of the reclassification related point.
Also, could you just highlight how much is the MSA volume booked for -- in the ACC and Ambuja volumes?
The MSA volume is basically -- as I mentioned earlier, we try and optimize each of the entities, grinding units and clinker units. And [indiscernible] finally, what we report out in the consol level is what you see it goes in the market. Individual number already there with you, and you see the growth of Ambuja, and see growth of ACC. I think more or less that number is very clearly laid out. But at our consol entity, we would have done about 1.5 million in the MSA.
[Operator Instructions] The next question is from the line of Rajesh Ravi from HDFC Securities.
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 40 million tonne, good amount of them are concentrated in Maharashtra and West Bengal any thought on them?
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 get amount of while on a stand-alone basis, they remain there. So that is the overall consolidation effect. On the other part, I'm requesting [indiscernible].
Yes. So your question was why -- your question was on regional expansion. So basically, what will happen is over the next 5 years, that's 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 on clinker line, you also need to put up the grinding units, which have to sustain that clinker. In this case, we have put 2 clinker lines actually in Central and Eastern India. [indiscernible] ACC of 3.3%, which gets into commissioning very soon. And this Bhatapara and Chhattisgarh of Ambuja, so together, let's say out 7.3 million new clinkers, we need to have grinding for this. So therefore, you find these locations. The locations 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 ACC standard plan. After that, we have not added any new [indiscernible] here. So I think as part of our normal market share protection strategy. This [indiscernible] 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 [indiscernible] or 2 [indiscernible] together or 3 [indiscernible] together, you will also hear the associated grinding units which pan out along with that.
And sir, in the AGM note, you have mentioned INR 7,000 crore CapEx consol for the FY '24. So how would there be spread between both the companies Ambuja stand-alone and ACC?
I think that we can take the discussion off-line, but I take note of your question, it will definitely connect with you and provide you those details.
After this call, I'll give you the numbers.
The next question is from the line of Shravan Shah of Dolat Capital.
Sir, just to clarify, when we say 24 months, we will be adding this whatever the announced expansion. So these 24 months will start from March '23 or from August or July '23.
It's already started. This is somewhere in the month -- the day I made this press release, this was in May I announced. So it's already started from that time.
Okay. So broadly, it will be by fourth quarter of FY '26, all these new expansion will come?
Yes, please. Both the [indiscernible], 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.
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 is whatever [indiscernible] in terms of the EBITDA per tonne from stand-alone Ambuja, 1052. So from here on, how much is still left to reach INR 300 or INR 400 improvement?
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 are the highest and also -- that's not the quarter we wanted to pick it up. So on a base of [indiscernible] 1,100, INR 400 per tonne, we are saying, we will improve. So end state should be INR 1,450, INR 1,500, that's the end set target. I think all the initiatives that I've laid out are structural initiatives and these structure 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 just give a ballpark of INR [indiscernible] crores, one can expect almost 60% to 65% with say, Ambuja and 35% to 40% with ACC for FY '23 and '24.
The next question is from the line of Shyam Sundar Sriram from Franklin Templeton.
Very healthy operating performance in both ACC and Ambuja. Let me 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, this has moved from 694 per tonne to 900. Now on sequentially, volume increased about 10% to 11%, but the EBITDA growth has been very strong. Now from a business perspective, sir, what has driven this very strong EBITDA performance at ACC level? And how do we think about this business -- the profitability evolution over the next few quarters from an ACC list of perspective, if you can share that, that will be helpful.
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 with 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, flyash adjacencies, the procurement efficiencies, the plant operating parameters, the [indiscernible] 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.
Sure, sir. Just one follow-up on that. If you look at the 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%. And the MSA volumes for ACC seem 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 a prospective basis from this quarter onwards?
No. So, Shyam, in terms of purchase of these finished goods, if you look at it, for example, I would actually want you to consolidate these 4 cost items, which is the cost of material consumed, the purchase of the stock in trade, the change in the [indiscernible], 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 INR 2,552 crores on an SEC level versus March '23 is 2520. 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.
Also one more point, the coal block, which we have in Ambuja Garipalma, we also increased the share of coal from that block to ACC. So obviously, that helped in the power and fuel cost for ACC.
The next question is from the line of Vishal Biraia from [indiscernible] Management.
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.
Okay. [indiscernible], that's a very tricky question. Price, as you know, is a function of demand supply. Fortunately, the demand has been growing at a healthy 8%, 10% and last quarter was actually 10%, 11%. However, we also see new capacity 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 Peninsular, you will find this utilization more reaching towards 79 odd in some areas. So I think that's the 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 40 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 have a follow-up question also. I think other than pricing you're asking me something else.
[indiscernible] the discounts in the rates that were happening in the industry as to how is that practice going and how are you pleased to that.
I think by large, most large companies in the trade segment talking and I think that's what you are referring to follow a particular beer 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 the 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 sales people 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.
The next question is from the line of Pulkit Patni from Goldman Sachs Asset Management.
That's not asset management. This is the research side. Sir, 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?
See, it's a very difficult question to answer because there are 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 bids. That's the way I would look at it.
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.
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.
Which is that it should go down or it should be stable.
You understood what I meant, so obviously has to become better than where we are.
We 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 [indiscernible] 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 by on the coal.
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 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. I think that's the second part of my answer.
The next question is from the line of [indiscernible] Agarwal from Equirus Securities.
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?
See, [indiscernible], 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 see this will happen some days, we had a very good advantage in the domestic pet coke market and the local refineries offered us very good discounts. So we went and bought those shipments [indiscernible] plants, like many other local companies would have done. Likewise, the situation changes, and we do opportunist buying also -- but by enlarge, 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 1 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 adjacencies. So I think that's where it gives me a lot of strength of having 1 anchor mix, which continues to bring the cost down. And then you have an opportunity buying like you mentioned about Indonesia.
Understood, sir. Sir, on the same note, if you can just share the fuel mix for this quarter?
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.
Sure.
[indiscernible] -- we looked at the domestic petcoke. We also looked at local linkage and e-auction coals. And of course, wherever we had advantage of lower-cost imported costs, we did that. And that was primarily responsible for improving our mix at a good level.
Understood, sir. And sir, lastly, if I may -- When we say the prices [indiscernible].
[indiscernible] I think I remember we got some very good pricing. Yes.
Okay. And sir, when we 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?
For Ambuja you said consolidated is more like [indiscernible]. And I think Interstate 1279 is the right number, yes. So this will only improve going forward.
The next question is from the line of Shyam Sundar Sriram Franklin Templeton.
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 a ceiling, I think, for about $157 and a minimum of 5600 [indiscernible] -- 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 -- how have we managed to reduce the fuel cost sharper than -- than that. So that is 1 part.
And secondly, are we renewing those contracts because there seems to be benefiting us? Any thoughts on that?
So Shyam, let me address. Number one for Ambuja, the coal advance is 0 at the end of this quarter. For ACC, there is still some money there, which we expect to be 0 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. 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 spanning 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 target end-state target is to be the lowest cost clinker producer in the country.
Wonderful sir, wonderful. Sir, 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 [indiscernible]. Just how is that number as in the mix has moved.
So Verifalma is about 12% to 13% of our total mix for the fuel. What we have done is we have -- this quarter, we used almost 2.5% of Verifalma. 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 domestic linkage and imported coal.
The next question is from the line of Parth Goel from Omkara Capital.
So in one of our calls earlier, we had mentioned that we will be increasing our RMX [indiscernible] to 200 plus -- so any time line for it? And where is the progress? I mean like any input if you can give on that?
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 the RMD team to optimize the structures, lease accounting, which also helps us something on the tax planning. So I think the journey continues. We want to be focused into the coal markets where it fits beautifully well into our integrated customer service strategy.
We'll be able to take one last question. We take the last question from the line of [indiscernible] Agarwal from Motilal Oswal.
Sir, just 1 question like we have grown advances of INR [indiscernible] crores to a related party for long-term supplies [indiscernible] -- that is for the [indiscernible] plant [indiscernible] and that should be available from FY '26. So in terms of expansion, as you already placed order for 2 [indiscernible] one in Chhattisgarh and one in Maharashtra, so there is this [indiscernible] 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.
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 would be very green plant. And number three, it will be sitting on a location from where I have multi-model logistics supply chain arrangements. Mundra and Kutch is also connected with rail, which no other plant in Kutch is connected. So we have our own rail system there. It allows us to also bring 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 [indiscernible], which is at 2.3 million. The work 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 product project. But it's a very, very interesting project from overall perspective and also on improving our footprint and market share in West Coast markets.
So the highest level of adjacencies, you will find actually one location Mundra.
Yes. There's a fly ash 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 a raw material. So it will actually become 100% green cement.
Exactly. And we will lose [indiscernible] at that plant. Is it correct?
It will be calcium carbide, which is a byproduct of coal to PVC plant.
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.
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.
Thank you very much. Thank you, ladies and gentlemen. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.