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Dalmia Bharat Ltd
Earnings Call Analysis
Q1-2025 Analysis
Dalmia Bharat Ltd
Dalmia Bharat Limited's first-quarter results of FY '25 reveal challenging market conditions, largely influenced by the election period, heatwaves, and natural calamities. These factors moderated cement demand growth to about 2% to 4%. Particularly surprising was the continued decline in cement prices, which dropped on average 2% to 3% quarter-over-quarter and further declined in June. The expectation is for these low prices to persist into the monsoon season, with potential improvements only anticipated from Q3 onwards.
Dalmia Bharat has reported a substantial volume growth of 6.2% year-over-year, selling 7.4 million tons of cement. Notably, their EBITDA per ton improved to INR 901, reflecting a 9% increase despite the overall pressures on margins due to softening prices. This improvement is primarily attributed to the reversal of previous cost inefficiencies and better pricing for inputs. However, revenues remained flat year-over-year at INR 3,621 crores due to falling net sales realizations (NSR).
The company has effectively managed costs, with reductions seen in raw material expenses, down 5% year-over-year to INR 729 per ton, and a 22% decline in power and fuel costs, bringing them to INR 1,003 per ton. This success is attributed to improved mining efficiencies and the increasing share of renewable energy, which now accounts for 35% of their energy mix. Management aims to boost this to 50% by the end of FY '25, driving further cost efficiencies.
Dalmia Bharat is on track with its aggressive expansion strategy, aiming for a cement capacity of 110 to 130 million tons by 2031. The interim target to reach 75 million tons has been setbacks due to the insolvency proceedings of Jaiprakash Associates, but the company remains confident of achieving this by FY '28 instead. The management reiterated its commitment to exceed 1.5 times the industry's growth rate despite these challenges.
For FY '25, Dalmia Bharat anticipates total incentive accruals of roughly INR 300 crores, with a consistent focus on improving EBITDA margins by achieving cost reductions of INR 150 to 200 per ton over the next three years. This target primarily includes efficiency gains from renewable energy deployment and logistics optimization. The full-year capital expenditure is projected to be between INR 3,500 to 4,000 crores, thus reinforcing the company’s commitment to expansion while maintaining a net debt-to-EBITDA ratio of 0.17.
Dalmia Bharat holds a current market share of about 7.5% to 8%, with expectations to grow closer to 10% by FY '31, driven by strategic expansions and market consolidation. The consolidation in the industry is accelerating faster than expected, allowing Dalmia Bharat to potentially capitalize on the acquisition of underperforming plants, significantly impacting market pricing dynamics over the medium to long term.
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Ladies and gentlemen, good day, and welcome to the Earnings Conference Call of Dalmia Bharat Limited for the quarter ended 30th June 2024. Please note that this conference call will be for 60 minutes. [Operator Instructions] This conference call is being recorded, and the transcript may be put on the website of the company. [Operator Instructions]
Before I hand over the conference to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements. These statements are based on expectations and projections and may involve a number of risks and uncertainties, such that the actual outcome may differ materially from those suggested by such statements.
On the call, we have with us Mr. Puneet Dalmia, Managing Director and CEO, Dalmia Bharat Limited; Mr. Dharmender Tuteja, CFO, Dalmia Bharat Limited; Mr. Rajiv Bansal, President and Chief Transformation Officer and the other management of the company. I would now like to hand the conference over to Ms. Aditi Mittal, Head, Investor Relations, for her opening remarks. Thank you, and over to you, ma'am.
Good morning, everybody. Welcome to Dalmia Bharat earnings call for quarter 1 FY '25. We declared our business results yesterday, and the presentation and the results have been uploaded on our website and can be downloaded from there. With this, I will now hand over the call to Mr. Dalmia for his opening remarks.
Good morning, everyone. I will begin with an overview of our performance, and then Dharmender will provide a more detailed explanation of our operational and financial aspects. In line with our expectations, quarter 1 of financial year '25 being an election quarter, we saw moderation in cement demand across all markets in the country. Some other factors such as heatwave, water shortage and floods in other -- floods in certain regions, further added to the slowdown. Based on all these, we believe that the sector demand grew in the range of 2% to 4% on a Y-o-Y basis. However, these were only temporary setbacks and the continuity of the incumbent government manifests stability in policies and doubling down on the infrastructure spend. This bodes well for the cement sector in the long term.
While cement demand was weak during the quarter, what has been surprising is the continuous weakness in prices since the last 7 to 8 months. On an average, pan-India cement prices were softer by 2% to 3% Q-o-Q, while exit prices of June -- in June were lower by another 3% compared to Q1 average. I believe that the prices may remain soft until the monsoon quarter. And thereafter, price increase could happen from Q3 onwards this year.
Coming to Dalmia Bharat, during the quarter, we delivered a volume growth of 6.2% and an EBITDA of INR 901 per ton. Even though there is softness in earnings due to weaker prices, the counterbalancing and improvement in EBITDA is largely on account of reversal of certain cost inefficiencies, which we had last quarter and partly on account of better input pricing. Dharmender will further elaborate on this. While I talked about the promising cement demand environment in the country, the industry supply is also getting consolidated at a faster pace than anticipated. If you look at 2013, the capacity share of the top 4 cement companies was about 36%, which increased to 48% by the end of financial year '23. That is it took 10 -- almost 10 years to increase the share by 12 percentage points. However, it has now increased to 55% in a period of just 15 months, demonstrating that the consolidation is accelerating.
In this backdrop, we aspire to increase our capacity and volume share faster than the industry. We are committed to becoming a pan-India player by 2031, having a cement capacity of 110 million to 130 million tons. While we had given an intermittent milestone of 75 million tons by financial year '27, but given that Jaiprakash Associates has entered into the insolvency process, we believe that we should now be able to achieve this milestone by financial year '28. We had earlier guided the Street that we will deliver 1.5x of the industry growth, and we reiterate our guidance. In spite of the recent development on Jaypee, we believe that we can deliver 1.5x of the industry growth in this financial year. We have delivered a robust EBITDA performance this quarter despite a challenging price environment. We have also identified levers for sustainable cost reduction, and we believe that we will be able to reduce our cost to the tune of INR 150 to INR 200 per ton in the next 3 years.
With regards to our organic expansion, we are currently at 46.6 million tons, and we will reach 49.5 million tons by the end of financial year '25. We are on track to complete the Northeast and Bihar expansion as per the earlier committed time lines.
Now I will request Dharmender to take you through the detailed financial performance for the quarter gone by. Thank you.
Thank you, Puneet-ji. Good morning, everyone. Let me take you through the key aspects of our performance. During the quarter, we have delivered a volume growth of 6.2% Y-o-Y and sold 7.4 million tons. This includes tolling volume of 0.4 million tons from the Jaypee assets. Our overall trade mix remained about 64% during the quarter. Our revenues during the quarter were flattish at INR 3,621 crores on a Y-o-Y basis. While our volumes grew by 6.2%, the NSR has declined by a similar percentage, keeping the revenue flattish.
On a Q-o-Q basis, while prices for the sector have declined in the range of 2% to 3%, our NSR declined marginally by 0.3% in Q1 of FY '25 because of our initiatives to improve brand mix, price positioning and rationalization of discounts. From early June '24, the cement tolling operations at Jaypee plant are being done on job of basis. Accordingly, the cost of material purchases forms part of cost of raw material consumed and not purchase of stock-in-trade. Excluding the cost of these purchases, raw material cost in Q1 FY '25, was INR 729 per ton of cement production, which is lower by 5% Y-o-Y.
The reduction in raw material costs has been contributed by our mining cost optimization and usage and procurement efficiencies, which we feel are sustainable.
power and fuel cost declined 22% Y-o-Y to INR 1,003 per ton of cement, mainly due to $46 decline in the fuel consumption cost from $152 to $106 on a Y-o-Y basis. Another reason for steady decline in this cost line item is our increasing usage of renewable energy as compared to last year. Our RE share has increased to 35% during the quarter. Our fuel cost during the quarter stands at INR 1.38 per Kcal. We continue to be one of the lowest cement cost producers in the industry. We are working to improve cement-to-clinker ratio and increase the share of renewal power, among other things.
In the past few months, we have entered into multiple renewable power agreements under the group captive arrangement, which will secure 127 megawatts of renewal power through solar and wind energy. The commissioning of these renewable power plants is expected to be in FY '25 and FY '26. We expect to reach about 50% of RE power share by last quarter of FY '25. During the quarter, our logistic costs decreased by about 3.4% Y-o-Y to INR 1,117 per ton. On a Q-o-Q basis, also, the cost has declined by 3.5% as we had incurred additional logistic costs last quarter, which, as indicated in our last call, were expected to be reversed. The employee and other expenses were largely flattish in absolute terms on a Y-o-Y basis. With improvement in sales volume, we got some positive operating leverage, benefiting the per ton profitability. Overall, our EBITDA during the quarter increased by 9% Y-o-Y to INR 659 crores, which translates to an EBITDA of INR 901 per ton.
We accrued INR 74 crores of incentive during the quarter and collected INR 45 crores, with closing outstanding of INR 734 crores. For FY '25, we expect the total incentive accruals and collections to be around INR 300 crores. Our total income -- our other income during the quarter declined by INR 4 crores to INR 50 crores on a Y-o-Y basis, but by INR 70 crores on a Q-o-Q basis as the previous quarter had dividend income and also some one-off incomes.
The depreciation during the quarter declined by INR 82 crores to INR 317 crores on a Y-o-Y basis in spite of taking depreciation of new capacities commissioned in last 1 year. There are 2 key factors leading to this reduction. Firstly, Q1 last year had accelerated depreciation impact of INR 57 crores on equipments being replaced in our debottlenecking projects, which is no longer there. Second, in Q4 FY '24, we realigned our method of depreciation in Northeast plants to straight-line method to align with the practice followed by leading cement players. This contributed to reduction in depreciation by INR 47 crores in this quarter. We expect FY '25 depreciation to remain in the range of INR 1,350 crores to INR 1,400 crores. As you are aware, that Jaiprakash Associates Limited has been referred to NCLT proceedings. While we have filed our claims to IRP, we have considered the provision for a potential loss that may occur on account of amount recoverable from JAL. This provision amounting to INR 113 crores activity level has been considered as a sectional item.
Our capital expenditure during the quarter stood at about INR 660 crores. We have commissioned 1 million tons cement capacity each at Kadapa and Ariyalur, which takes our total capacity in south to 17 million tons. We are also at the advanced stage of completing a 2.9 million tons of cement expansion in Assam and Bihar. During the full year, we expect to spend about INR 3,500 crores to INR 4,000 crores, largely towards organic expansion, efficiency improvement, land and maintenance CapEx. As of 30th June, our gross and net debt remained range bound at INR 4,613 crores and INR 445 crores, respectively. Hence, our net debt to EBITDA also remained stable at 0.17x. Our strong balance sheet positions us quite well for the next phase of expansion.
With this, I now open the floor for questions. Thank you very much.
[Operator Instructions]
The first question is from the line of Amit Murarka from Axis Capital.
So my question -- the first question is around JPA. So with this development of it going into NCLT, what would be the tolling arrangement going ahead? Will you continue with it? And now in the terms with same that is the first thing I wanted to ask, sir.
See, we are in discussion with the IRP on the modalities of the tolling operations. And we are hopeful that we'll continue to serve and rather improve our presence in the central markets from Jaypee plants as well as our plants in the East.
And also on the expansion program, so you have a capacity target of interim target of 75 million tons and long-term of 100 million and 130 million tons. So by when do you expect or can we think of more announcements on the expansion from now?
Look, we are very committed to our long-term road map of 100 million ton plus by 2031. And we are doing very detailed work on this, and we will give a very clear cut timeline along with the locations of where we are going to expand after 12 months.
After 12 months? Okay, nothing this year then, okay.
The next question is from the line of Rajesh Kumar Ravi from HDFC Securities.
As the current participant is not answering, we will move on to the next question, which is from the line of Aman Agarwal from Equirus Securities.
Congrats on good recovery in margin. Sir, with respect to the cost reduction target, if you can just elaborate on the INR 150 to INR 200 per ton reduction that you're expecting over 3 years, one was that? And second, if you can provide some more details on the captive coal mines that you have been highlighting.
Definitely, this will be contributed by our VC reduction, which will come from the improvement in the RE power share as well as we'll be also using our captive coal mines. And also, we are also committed to reduce our logistic costs, which will be through a reduction in the lead distance as well as other initiatives like direct dispatches improvement, et cetera.
[indiscernible] itself, if you can just provide additional details when are we expecting that by and what kind of output can we expect out of the same?
Brinda and Sisai coal block, we will be commissioning in the current year, while the Mandla coal block will be commissioned in the next year. And of course, they will contribute to these regional profitabilities wherever these fuel will be supplied.
Understood, sir. And lastly, with JPA now more or less out of the coal, on the alternative expansion strategy, if you can just highlight on the region specific than basis the existing limestone mine, which region can we potentially look at for further expansion?
I think I've already said that we have scope for brownfield expansion in some of our plants. And we have mines in Central India as well as in North India. That means in Madhya Pradesh and Rajasthan. We are preparing a full blueprint. We'll come back to you with a very, very specific timeline, along with all locations after 12 months.
The next question is from the line of Madhu Kela from MKVentures.
As the current participant is not answering, we will move on to the next question, which is from the line of Sumangal Nevatia from Kotak Securities.
My first question is on the realizations. So you're expecting realizations to be weak based on the dealer feedback and in your opening remarks also, you said 1Q was down 2-odd percent, but that's not visible in our results. So is there any one-off? Or how should we see the reported revenue or realizations for this quarter?
There's no one-off. But as indicated in the opening remarks, there have been improvement in the brand positioning, marketing spend that we have done that has also started yielding results. There have been improvement in the product mix as also there has been some rationalization in the discount scale, which have all contributed to negate the impact of the price fall in the sector.
Okay. I understand. And for next quarter, can you guide what sort of current trends of realization versus average of last quarter? I missed those numbers.
For the current quarter, already, we are seeing that the prices are lower by about 3% or so compared to the previous quarter, and we don't expect these to improve in the current quarter. But hopefully, from Q3 onwards, we should start seeing a recovery in the prices.
Understood. And with respect to cost, any near-term cost levers or cost reduction because of commodity deflation, which is continuing, do we expect? And if you could quantify for the next 1 or 2 quarters, how could maybe energy price trend?
The RE power share, which is 35% will be, of course, increased and the major impact will come in the Q4, which by when it will reach about 50%. But we will see the steady improvement in our power and fuel cost, which I said about 5.3 -- 5.38 -- sorry INR 1.38 per Kcal in Q1, which should go down steadily to about 1%, 2% improvement in the coming quarters.
So 1% to 2% improvement, sir?
Yes. And the raw material savings, which I have indicated that we feel are sustainable.
Understood. And one just last quick question. The tolling arrangement with JPA, I mean, what is the risk of it being now discontinued. And if you could just share what would be FY '24 volume and EBITDA contribution from this arrangement?
As I said earlier, we are in discussion with the IRP, and we are hoping that, of course, we will be continuing to serve this market and rather improve our presence. And of course, more details we cannot give until modality is get firmed up.
Understood. Is it possible to share what could be the EBITDA contribution from tolling?
[indiscernible] breakup in the profitability, we don't share.
The next question is from the line of Rahul Gupta from Morgan Stanley.
So a couple of questions. One, taking the point forward of cost improvement by INR 150 to INR 200 over the next 3 years. I just want to understand your view how this number or this range changes with you expanding and becoming a pan-India player? Is there a drag to this number? Or you have taken that into consideration that you're becoming a pan-India player would also drive INR 150 to INR 200 cost improvement? So that's my first question.
I think right now, we are looking at our current footprint. And this cost improvement is based on our current footprint only. I think as we look at the expanded footprint in terms of and announce the specific locations, these numbers would change with that mix. But in the current footprint, we are very confident that we will deliver INR 150 to INR 200 per ton over the next 3 years.
Great. My second and last question is, you talked about INR 113 crores of onetime provisions against your receivables from JPA. Can you just help me understand is there -- what is the overall outstanding there? And what is the risk of this provisioning increasing in the future?
While whatever risk we considered as of date has been fully provided for. We hope to mitigate part of this. But of course, things will be reviewed from quarter-to-quarter. Hopefully, we don't foresee this should increase.
We'll take the next question from the line of Indrajit Agarwal from CLSA.
A couple of questions from my side. First, sir, on the pricing outlook for the industry, while you highlighted that consolidation has picked up meaningfully, but still we see pricing outlook to be fairly negative? And if I were to look at how the prices are trending currently even for a flattish Y-o-Y pricing for FY '25, we need close to 6% to 8% price increase in second half. So with that backdrop over the next 2, 3 years, do you think that pricing growth would be much lower than the last 15 years' average, which has been 3%, 3.5%? Can we see a much lower price increase or maybe a flattish price increase and all profitability increase will be driven by cost savings?
I think it is hard for us to predict exactly how much price increase will happen and how long it will sustain. I think this is a very important question that consolidation is happening and when will pricing power come back. I personally think that there is still some time to go before the consolidation fully plays out. And I think it is hard to predict as to how long it will take to fully play out. I think we can just say that the trend is towards greater consolidation, faster consolidation and even organic -- large part of the organic growth being captured by the top players because of their stronger balance sheet and their ability to execute projects.
So I would just say that I think on a trend line perspective, we can say that consolidation will accelerate and how quickly will that translate into earnings power? I think it is hard for me to predict. But we have seen in sector after sector, whether it is telecom, whether it is steel, whether it is banking, consolidation plays out and eventually margins improve. We've also seen it in cement sector around the world. But in India, I think it is still a very fragmented market and top 4 is 55%, but there are still 20, 25 players in this market. So I think it's going to play out over the medium term. But how will it translate into pricing power is hard for me to predict.
Sir, on that front, how do we see our inorganic aspiration? So what kind of assets would you be closely evaluating? Is there any regional or IRR criteria in mind before you go ahead and bid for it? Because clearly, balance sheet is much stronger for us as well.
I think we have said this earlier, too, I think we have an ambition to be a pan-India player. And we will look at acquisitions from a strategic attractiveness, which fulfills our strategy. We also will look at our hurdle rates of return. And it has to meet our financial criteria. And I think in the past also we have seen that there are acquisitions which we have done, which meet our criteria, and we have successfully integrated them and turned them around. And there are acquisitions which we've either walking away from or not been able to do because they did not fit in our criteria. So it may be more attractive for someone else, but less attractive for us. So I would say that we will evaluate it on 2 parameters. One is the strategic criteria, which helps us diversify our footprint or increase our share in our present markets and obviously something which is at a price where we can justify the risk-return trade-off.
Okay. I have 2 housekeeping questions. Can you give us the lead distance for this quarter?
272 kilometers.
So sharp decline Q-o-Q. And secondly, what is the current booking cost of fuel? I understand INR 1.38 is what we have booked in 1Q. So are the current spot prices much lower than that?
Around similar.
We'll take the next question from the line of Satyadeep Jain from AMBIT Capital.
A couple of questions. Puneet on that 75 million target. I just wanted to understand, you mentioned you'll share more details 12 months from now. This will be almost mid FY '26. So if we keep inorganic growth aside, that would imply almost 25 million ton ordering and execution within 2-year time frame from mid-'26. Is that realistic? What are you -- what's your strategy? And are these numbers making sense about 25 million ton ordering and execution within a frame of 2 years, given the execution in balance sheet that you have. That's the first question.
And what's the next question? I'll answer both of them together.
So on the cost also, the INR 150 to INR 200 per ton target that you outlined, is it possible to break it into various buckets on how much savings you're looking at RE, how much from captive coal and other variables. And if I may add just one quick question to this. When you look at Central India, what has been your marketing spend so far. And let's say if Jaypee doesn't come through in the NCLT route, would you look to accelerate your greenfield plant there? What would be the thought process? Those are the questions.
So I think on the first question, as I said, we are very committed to our long-term road map of 100 million tons plus by 2031. I will share a very, very concrete road map along with time lines in 12 months. We can assure you that a lot of work is being done, and we have a scope for expansion in our current locations as well as we have mines in Central India and North India. So whether inorganic happens, it doesn't happen, I think we have a backup where we can do organic expansion for sure. And I would say that project execution time is something also we are looking at very carefully.
We have commissioned all our projects ahead of the promised time lines. in the last 10 years, except one which was Bihar grinding unit, which took a little longer, and then we just scrapped it because we thought we could -- we had better opportunities. So I would say that overall in all the projects that we've executed, we have executed them ahead of time, barring one. And we are very confident that we will be able to execute the projects on time, on cost. The issue is that there is some delay. We acknowledge that and we recognize that. But when you are looking at a long-term growth plan, sometimes a year here or there, it does happen. But I can just say that we are absolutely committed, given the opportunity and our own execution capability and our strong balance sheet that we will deliver on this growth.
The second point I want to say is that in terms of INR 150 to INR 200 per ton cost target, we are not breaking it down by bucket because the spread might change in terms of the fuel cost versus our captive coal depending upon how fuel prices behave. The spread might also change on power. But we have on these 3 areas, which is renewable power, our own coal mines and logistics cost, I think no matter what happens, we are fairly confident that we will deliver INR 150 to INR 200 per ton saving in the next 3 years.
And I think regarding the Central India marketing spend, I think we don't share so much granular details about each regional market. So please bear with us on that.
We'll take the next question from the line of Amber Singhania from Nippon India AMC.
I just wanted to understand one thing like a few years back or almost 3 years back, we mentioned our intention to reach around 100 million ton by FY '30, post that Jaypee happened, Jaypee almost it's been like 2, 2.5 years. But Jaypee was just 10 million ton, Jaypee would have been -- would not have been helped us to achieve or reach our target completely, there could have been more expansion which should have been announced or planned earlier. Last quarter also, we mentioned that in the 2 quarter time, we will give the clear road map. This time, we are saying another one year. So I mean just wanted to understand, was there ever a plan B or the other plans? Or we were like too much dependent on Jaypee knowing fully that Jaypee alone will not suffice us to reach that 100 million target. And now the asking rate is too high as the previous participant also asked. So just wanted to understand your thought and the board's thought process on that line. Where are we missing out on the planning and execution on that?
I think there are 2 things. I think one is -- first of all, I completely acknowledge the fact that there has been a delay from our side on this issue. I think there are 2 issues which we have been grappling with. I think one is that this -- we were fairly confident that the Jaypee transaction will get consummated this year, and I have myself guided on that. But the fact that they got pushed into insolvency was a huge surprise for us. So I think there has been definitely some delay on account of that, and there is uncertainty on account of that, which we did not anticipate it.
The second thing is that we are not announcing the exact locations because it takes time to buy land. And when you announce exact locations, sometimes people front-run the land and land prices go up and the uncertainty gets heightened in terms of executing the project. So our view is that announcing all locations ahead of schedule until we are fully secured just increases the execution risk. So while there has been delay from our side on a little bit of land acquisition on our sites, and there has been uncertainty in Jaypee, which we did not anticipate as much as we should have. I think these are the 2 reasons why there is a delay.
And there is always a plan B -- the question is that whether we can -- these are long-range targets, we might be plus 1 year, year or there. But I can just say that we are fully committed to our expansion plan. And we will demonstrate a very strong execution as we have done in the past. We have gone from 1 million to 50 million tons with a strong balance sheet and no dilution in equity. I think we can go from 50 million to 100 million tons, and we will give you a very concrete road map about it.
Got it. And secondly, we started, are we still open for inorganic acquisitions in future on that line? Or are we changing our strategy towards more of organic growth?
No. I think we have always maintained. It will be a mix of inorganic and organic. There are uncertainties in inorganic. So it is hard to commit what will happen, what will not happen. But there will be a mix of organic and inorganic as it has been in the past. And I think we will continue to look at assets which fit our strategic footprint and at our financial attractiveness ideally.
Got it. And lastly, if I may ask, after providing this INR 113 crores, what is the pending amount invested or put in the Jaypee?
And as I said earlier also, practically, whatever exposure we considered has been fully provided for. So hopefully, we don't see any further cost coming, and we are working on mitigating part of these. So that some reversal we can see in the coming quarters.
We'll take the next question from the line of Raashi Chopra from Citigroup.
And just on the volume growth for the industry, what kind of volume growth are you expecting this year?
Close to about 8%.
So for yourselves, it would be double-digit growth, right? Based on...
Yes, 12%, yes.
12%. And within that 12%, are you taking some tolling volumes as well?
When I say it is including the tolling volume last year from that also 12% at least we should clock.
Okay. So with this year's tolling volume, are you assuming a similar level as last year or in your...
As I said, we are working -- we are in discussion with the IRP, and we are hopeful that both from the Jaypee plants as well as our own Eastern plants, we should be able to cover this volume.
All right. And just on the limestone reserves, is anything going to be -- is any lease expiring in 2031? And in terms of like addressed it the last time as well, but just kind of reiterating it in terms of limestone sufficiency from a number of years perspective, what are the time lines?
On the limestone, I think we are pretty covered. But of course, time frame of this will be clearly visible in a couple of quarters because some of the things in the IBM that are being updated, and you will see that should not be concern for the plant from security point of view.
Okay. Just some bookkeeping questions again, what was the percentage of blended cement in this quarter?
86%.
CC ratio?
CC ratio is 1.67.
Okay. And just 2 questions. I think I missed -- just to be doubly sure, you said 1Q CapEx was INR 660 crores?
Yes.
And tolling was 0.2 million tons?
0.4.
0.4. Okay.
The next question is from the line of Prateek Kumar from Jefferies.
Congrats for good results. Yes. So my question is on actually the volatility in the results while the performance was very good, but most investors actually complain about the performance being extremely volatile in the past, turning from very subpar versus peers to like above par versus peers on a quarter-to-quarter basis. How do we explain this as well as is there anything which we can do to address this kind of volatility?
Prateek, I think you raised a valid question. In the last financial year, many of our plants had debottlenecking projects. So it led to shutdowns and the planning of materials. So there was some L2 moment, which we call that means supply from a longer distance, costlier source as well as talking of inventory. So our movement of inventory that also was more fluctuating compared to the rest of the peers. So when you increase inventory, some of the overheads get loaded into the inventory. And that doesn't show up in the same quarter. When that inventory gets released, it comes in the cost. So that contributed significantly to our fluctuations in the cost.
Going forward, since both these factors and these debottlenecking projects are over, we expect you'll see much more normalized growth in line with the industry parameters.
Sure. Okay. And second question is on your marketing cost. You last time talked about because of hiring of brand ambassador, there was an increase in marketing cost. Is it already now part of the other expense? Or is there some elevation which we can expect there?
That is part of the other expenses, and we are committed to keep our brand building efforts strong, and you'll see the results in the sales also, and that is already part of the cost structure, which is already reflected in the first quarter results.
The next question is from the line of Jashandeep Singh Chadha from Nomura.
Just 2 questions. Firstly, I just wanted to understand your view on the urban market. So we have seen a lot of consolidation as well as expansion happening in South India and volume push is one of the reasons why the prices of -- earlier higher price market is quite low. So do you see any price recurring coming from there? And your view on the -- how the pricing of this Southern India will remain. Just wanted to -- because Dalmia also has a large share of its volume coming from South India. So I wanted to understand your view of this.
As we said, it's -- South is a very fragmented market, and there is increasing consolidation but some of these plants, which are being bought over were underutilized. And with a stronger promoter, the utilization will go up. So I would say that there could be short-term pressure on prices until utilization of some of these underperforming assets goes up. And over the medium to long term, as consolidation enhances, prices should stabilize or go up. That's my view. But I think we'll have to wait and watch as to how things shape up.
And my second question is more on Dalmia. So if we see from the core markets, that's excluding tolling volume, this quarter also, it was 2% Y-o-Y growth. And in fact, in the last year as well we saw from the core markets, the volume growth is lagging industry. So is there a structural issue going on in your core markets? And given the fact that you will announce your expansion after 12 months, is there a chance that Dalmia might lose some market share in its core market? Just wanted to understand what?
I think we are running at 65% utilization. So we have huge scope to grow. And I don't think we are going to lose out in terms of volume growth as the demand in our core markets grow. Our headroom for growth is very high.
Okay. And just one last question. [indiscernible] quite uncertainty of Jaypee and you might not have decided on whether to proceed with it or not. When do you get similar acceptance in dealers also if you start continue with tolling because leaders might want to steal the cement of established players there because Dalmia will be using a lot of share. So I just wonder will it be required that you have to give extra commission to dealer. I just wanted to understand the dynamics of how this will work.
Sorry, your question, your voice was a little muffled. Can you...
I'll repeat. So Dalmia started doing tolling because there was certainty or you were going to take over Jaypee. Now there's a lot of uncertainty over there. So how much does that tolling agreement continuing the tolling agreement still makes sense for Dalmia? And will there be some resistance from the dealer as well because since you have not announced any expansion, dealers might want to keep the products of the established brands over there, then let's say, newer than Dalmia. Just wanted to understand that.
I think we are not seeing any such situation in the marketplace. And irrespective, I think we have the ability to supply to that region from our Eastern plants as well. So we are not seeing any resistance from the dealers. In fact, we are seeing a lot of acceptance.
The next question is from the line of Ashish Jain from Macquarie.
Puneet, so my question is, again, going back to long-term strategy. So I have a couple of...
Your voice is breaking. Your audio is not clear.
Am I audible now?
Sir, may I request you to kindly use your handset.
Okay, let me come back and join you.
Sure, sir. Thank you. [Operator Instructions] We'll take the next question from the line of Shravan Shah from Dolat Capital.
Sir, just wanted to first clarify, when we say 12% volume growth for FY '25, so this is on 28.8 million ton volume consol that we have done in FY '24 on like we are seeing a 12% volume growth.
Yes, your calculation is right.
Yes. So that means for the next 3 quarters, we need to do 14% kind of volume growth, and we are confident that we can do that.
Yes. We are confident.
Okay. Yes, that's great. Second, sir, I understand that we take 1 year or 2 to announce the expansion plans. But broadly, trying to understand in terms of the CapEx and -- so broadly 25 million [indiscernible] if we take broadly a INR 15,000-odd crore kind of [indiscernible] book, so broadly INR 4 crores to INR 5 crores every year from next onwards. So these are also say, 500 to 4,000. So how do we see sort of the net [indiscernible]
I'm sorry sir, your voice is breaking Mr. Shah. Your voice is breaking, so you'll have to repeat your last line again, please.
Yes. So I'm trying to understand how one will look at in terms of the net debt given the CapEx for next 4 years and maybe even going forward also, would be a close to INR 4,000 crores plus. Will our CFO will be sufficient. So how one can catch increase in the net debt?
Yes, while we announce these expansions, of course, the financing and the net debt, gross debt positions will be duly factored in, and we would like to remain within our announced capital allocation policy guideline that our net debt-to-EBITDA should not cross 2:1 because the safety of balance sheet, I think that will be also a better amount well while we plan these expansions.
Okay. And then is it fair to say let's say this INR 150 to INR 200 cost reduction over 3 years. Broadly, one can look at INR 50, INR 70 every year kind of [indiscernible] and even in prices, as you mentioned, 3% [indiscernible] of Q1, [indiscernible] comes back, we have expected in third quarter. Even cost action will not help us to...
Shravan, Can you complete your question. Your voice is not clear.
Mr. Shah, we request you to kindly rejoin the queue as your audio is not clear. There is a issue on your end.
Is it better now? Yes, sir. Yes. go ahead?
Yes sir, please go ahead.
So I was just trying to understand this [indiscernible] cost reduction...
Mr. Shah. Sorry, I'll have to interrupt again and again, but your audio is not clear on your end. Please rejoin the queue. The next question is from the line of Ravi Sodah from Elara Capital.
Sir, can you help me with the net debt reconciliation from the March quarter till now, broadly, I see that there has been a INR 600 crore gain booked for mark-to-market for IEX, but our net debt numbers have remained unchanged. We might have also made a cash profit. So I just wanted to understand from that perspective.
Yes, primarily in this industry in the first quarter, you end up increasing the working capital because at the year-end, these discounts get paid off, the GST liabilities or the TDS liabilities get paid off in the first quarter. And also the inventories are almost at a year-end low at this March position. So there's an increase in working capital. And secondly, the CapEx of INR 650 crores, has been primarily funded by the internal accruals. So you see that the capital got consumed and that deficit has been made good by the IEX improvement. So more or less the net debt has remained same.
Okay, sir. And the INR 650 crore spend has been primarily on the Northeast expansion that we are doing or it is on the cost saving initiatives that we are doing?
All of them, as I said, mainly, of course, organic expansion of Northeast as well as Bihar and also our efficiency projects, maintenance CapEx and partly land also.
The next question is from the line of Rajesh Kumar Ravi from HDFC Securities.
While some of my questions have been answered, I just wanted to get some more color on this volume growth guidance of 1.5x industry growth. Even last year, you were looking at similar growth trajectory and on core volume growth, we ended up in a single digit. So given that we are still confident that next 9 months, we would be able to deliver 14% volume growth. Shall we assume that our realizations, again, the discounting structure may need to increase, which we have seen normalization in Q1? And second, your thoughts on the IEX stake sale.
See, on the volume front, 14% growth. We feel that it's possible. Of course, last year, there were a couple of issues which we had shared in the investor calls also that whatever experiment we did in the first quarter. This had some impact and took a couple of quarters for us to come back. And those issues are behind. And secondly, the brand positioning has been improved, and we are seeing the traction coming. So all these initiatives, we are sure that will lead to better results. And I don't think we'll have to increase the discounts to gain the volumes. For the first quarter also, we have seen that the discounts have been rationalized. And still, we have been able to at least meet or slightly exceed the industry volume growth.
And on the IEX, we continue to maintain our stand that yes, it will be a short-term investment. And of course, the time lines I cannot give, but we'll be looking to sell this and to meet our funds requirement for the expansion. This money will be used.
Okay. And this INR 150 to INR 200 per ton, I understand that if I look at your green power mix for FY '24, this would be close to 26%, 27%, which in FY '26, you would be close to -- on an average, 50%. Is this understanding correct?
That's right. The 50% we plan to reach by Q4 of FY '25 and in '26 to improve further on this.
So at least full year, you will have 50% green power -- renewable power, green power available to you. So that saving, if I factor in given that a good chunk of that may also come in from green power, you may save incremental INR 2 to INR 3 per unit. So that would give another INR 40, INR 50 versus -- I'm looking at FY '24 versus FY '26. So are you also building in the cost reductions coming in from the fuel prices because per kilo-cal costing on FY '24 versus FY '25. That number is down by almost 30%, 35% versus current price. So is that also baked in this INR 150 or they are over and above the fuel cost reductions?
See, we are factoring in the current level of the pet coke international prices. If any moment, there happens, of course, that we have not factored in, but there will be further savings on the fuel cost coming from the use of our captive coal mines and of course, some efficiency improvements which will come.
No. What I was referring to this INR 150 to INR 200...
Mr. Kumar Ravi?
Yes, I'll just complete this and yes, I'll just complete this. INR 150 to INR 200 per ton reduction in OpEx, which you are referring to, that includes the fuel or this is over and above the fuel changes.
That includes the fuel, but not coming from the drop in the international pet coke prices. The current international prices should be above this.
Correct. Correct.
The next question is from the line of Dishant Rakesh Jain from Quasar Capital.
My questions have been answered.
We'll take the next question from the line of Navin Sahadeo from ICICI Securities.
Sir, 2 quick questions, and sorry if it's a repeat. But just as to build more conviction into our numbers, is it still possible to give a little more specific breakup of this cost cuts that we are talking about INR 150, INR 200, it's definitely encouraging, and companies are -- several large companies are talking about it. So a broad breakup, like, let's say, about INR 50, INR 60 from renewable 70 -- I mean INR 30, INR 40 from mining, some broad breakup will really help us factor in, in our forecast.
So that we will share for all the investors. But of course, as I said, it is primarily coming from the renewable energy going up to at least 50% by this quarter, but this year-end and going further to hopefully about 50% in the coming year-end next FY '26 year-end and use of the captive coal mines, which should reduce our fuel cost. And of course, besides we see there'll be savings in the logistic cost plan, where we see the scope of about INR 50 to INR 100 coming from there also.
Understood. Helpful. And second, in your key markets, could you please tell us what is the difference in the current trade and non-trade prices that will really help in key markets of your South and East? Trade and non-trade price difference.
Of course, it varies, but exact numbers, I would not like to share at this call, kindly bear with us.
Next question is from the line of Nirav Bhanushali from Groww Mutual Fund.
Congrats on good set of number. I just wanted to understand that how is the demand scenario you are seeing, like post the election and is it improving in your key markets as well as in the central region.
See, of course, post elections, the monsoon started. And of course, the monsoons have been quite uneven at certain places. The impact is quite high, certain places, it is low. So the volumes have started coming back, but of course, not with the full intensity. Of course, we remain hopeful that the overall thrust of the government to support the Indian economic growth that will continue, and that will translate to the goods demand growth because all sectors are actively firing the real estate demand from the household both in the urban as well as the rural areas is good. And such a spending is also good. So we don't foresee that the overall demand for the full year should be less than 8%.
Because as we are saying that demand is improving, but still the price hikes have not been sustained from last couple of months.
Yes, prices have not sustained because there is a market share gain by all the players. People are hungry for their market share. And of course, that is one of the key reasons why prices have not improved.
The next question is from the line of Ashish Jain from Macquarie.
Sir, my question again pertains to the growth outlook, and I have 3 parts to it. One is you highlighted that you're not sharing the details at this moment from a competition point of view. So shall we assume that in 12 months when you come out with the detailed plan, you would have progressed a fair bit in terms of the resource access on land, limestone, all of that. And hence, the execution time would be much shorter. That's the first thing.
Second thing, you would be factoring some inorganic growth as well, like you alluded to earlier. Given there are a lot of large companies which are still fairly active in terms of acquisition of assets. Can you give some color of how much acquisition-led growth you would be looking at? I know there's -- it's impossible to give a right number to it. But just in terms of the proportion, how much intuitively you are factoring from acquisition?
And thirdly, if I look at fiscal '24 plus '25 put together, we are effectively guiding for CapEx, both put together of around INR 7,000 crores, INR 8,000 crores. But in terms of incremental capacity in this period, we are barely adding 7 million, 8 million tons of capacity. So can you also elaborate a bit more on where is the balance CapEx going? Is it future preparedness or a lot of cost savings initiatives? And if yes, then what is the quantum of cost savings we can expect from these specific projects?
On the road map, when we announced the expansion road map, you'll have clarity about the sites about land procurement or the limestone results, et cetera. So the full clarity available when we announce this expansion in the next 12 months. Regarding inorganic growth, I think it's not possible to share any specific details, which markets, which kind of players, et cetera, it all depends on the strategic fit, which develops between the 2 players and the fairness of the evaluation, et cetera. But of course, that will remain as part of the overall expansion strategy. If any such opportunity comes, the balance expansion can be modulated accordingly to fit our balance sheet size and expansions.
And with regard to the CapEx expansions in the last 2 years, of course, bulk of this has gone for the organic expansions, but also from a lot of efficiency improvements, which will definitely translate to the improvement in the variable cost. And part of that has been also started showing in the results. And in the next 3 years, when we say that we will translate to INR 200 per ton saving. So part of that will also come from efficiency improvements. So when we say that RE power et cetera, all these are part of the efficiency improvements of the ROI projects, which you call it. And partly, of course, the money has been spent on the maintenance CapEx as well as some land purchases to prepare for our future expansions also.
Sir, can you give some breakup of this CapEx under the headings that you just mentioned?
I think that we would not like to share. Please bear with us.
The next question is from the line of Saket Kapoor from Kapoor Company.
Sir, you mentioned about INR 600 crores being spent on CapEx. So what have we outlined for the entire year? I missed the numbers.
Yes. Full year, we expect it to be about INR 3,500 crores to INR 4,000 crores.
Okay. And on the non-core asset part, sir, what did you mentioned about the IEX sale, I missed that point also.
Yes, we remain committed to sell this share because we consider this as a short-term investment only. But of course, the great time lines, I cannot share. And this money will be definitely used for funding our expansion.
And a small point, sir, when we mentioned about 100 million tons at exit of 2031, what kind of market share are we eyeing at that time? What do we envisage in terms of the total cement industry size, say, 7 to 8 years down the line when we are mentioning our number. And currently, what is our blended market share for the country as a whole?
Currently, our blended market share for country as a whole would be around 7.5% to 8%. And I think if we look at financial year '31 and if you take an 8% demand growth, our capacity share will be higher than 7.5%. So it will probably be just under 10% or close to 10%.
Ladies and gentlemen, we will take that as the last question for today. I will now hand over the conference to Mr. Puneet Dalmia for closing comments. Over to you, sir.
I would just say again, thank you very much for your questions, and thank you very much for your interest. We look forward to continuing this journey. We continue to be very optimistic about the future and a lot of potential ahead and a lot of exciting times in our sector with a lot of action. So thank you for your interest and look forward to continuing our communication going forward. Thank you.
Thank you, members of the management. Ladies and gentlemen, on behalf of Dalmia Bharat Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.