Dalmia Bharat Ltd

NSE:DALBHARAT

Earnings Call Transcript 2022-Q2

[Operator]

Ladies and gentlemen, good day and welcome to the earnings conference call of Dalmia Bharat Limited for the quarter ended 30th September 2021. Please note this conference call will be for 60 minutes. [Operator Instructions] This conference call is being recorded, and the transcript of the same may be put on the website of the company. [Operator Instructions]Before I hand the conference over to the management, I'd like to remind you that certain statements made during the course of this call may not be based on the historical information or facts and may be forward-looking statements. The forward-looking statements are based on expectations and projections and may involve a number of risks and uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements. On this call, we have with us Mr. Puneet Dalmia, Managing Director, Dalmia Bharat Limited; Mr. Mahendra Singhi, Managing Director and CEO, Dalmia Cement Bharat Limited; Mr. Dharmender Tuteja, CFO, Dalmia Bharat Limited; Mr. Rajiv Bansal, Group Head, Strategy and Transformation and other management of the company. I'd now like to hand the conference over to Ms. Aditi Mittal, Head Investor Relations. Thank you, and over to you, ma'am.

[Aditi Mittal, Head of Investor Relations]

Thank you so much, Vikram. Good morning, everybody. A very warm welcome to all of you in the Q2 earnings call of Dalmia Bharat Limited. Hope you had a chance to go through the results and also the earnings presentation which we've uploaded on our website. If not, you can, of course, download it from our website under the Investors section. I will not take much of your time and hand over the call to Mr. Dalmia for his opening remarks. Over to you, Mr. Dalmia.

[Puneet Yadu Dalmia, MD, CEO & Executive Director]

Thank you, Aditi. Good morning, everyone. It gives me great pleasure to welcome all of you to the Q2 earnings call of Dalmia Bharat Limited. We sincerely hope that even your family are safe, healthy and vaccinated. Continuing our growth journey. The company has yet again delivered a healthy performance during the quarter, which was driven by our robust operating model, a strong brand and an agile team. I'm delighted to note that we at Dalmia Bharat have remained positive in our outlook and productive in our lives despite cruising through one of the most exceptional times in human history. The Indian economy has rebounded very strongly after the second wave, with the output of infrastructure industries expanding at 11.6% in August primarily driven by coal, natural gas, steel and cement. The Indian economy is expected to grow between 9.5% to 10% in FY '22, and between 6.5% to 7% over the next few years. This growth is going to be driven by an increase in rural consumption, housing and commercial real estate. And a massive trust on infrastructure spending such as on roads, highways, ports, airports, et cetera. Hence, we are very excited about a favorable macroeconomic environment for the sector. We feel thrilled about the opportunity and are well positioned to capitalize on the favorable demand environment. Our vision is to be a pan-India pure-play cement company, and we are aiming to take our cement capacity to between 110 million, to 130 million tonnes over the next decade. The market opportunity, which we foresee ahead of us only reinforces our conviction about our vision. We are building plants of tomorrow with deep technology integration, which will enhance both our operational efficiency and sustainability. Keeping our commitment towards our stakeholders, we have continued the disinvestment in noncore assets, including IEX and the retail undertaking, the details of which will be shared by our CFO, Mr. Dharmender Tuteja later in this call. The Board of Directors of the company has proposed an interim dividend of INR 4 per share for the financial year '22, in line with the capital allocation framework we rolled out last quarter. As we are expanding capacity, we are also making significant investments in our human capital as we desire to build leadership teams which are future ready and aligned to our long-term goals. We are making collective efforts to multiply our people power and create leaders of tomorrow. With the swiftness of transformation, which I'm witnessing across our company and our people, I believe that we're just getting started and the best is yet to come. I thank you all once again for your valuable inputs and constructive feedback. We will continue to seek your guidance, support and feedback from time to time. I would now like to hand over the call to Mr. Singhi for an update on the quarterly performance. Thank you.

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Thank you, Puneet ji. Friends, a very happy morning to all of you, and welcome. I'm so happy to share with you a great performance made by our team despite witnessing heavy monsoon floods and some of the most unprecedented quarter of headwinds across our value chain. The revenue for the quarter was INR 2,577 crores, which grew at 11% on Y-o-Y basis. The sales volume displayed growth of 6% Y-o-Y at 5.1 million tonnes. While prices extended on Y-o-Y basis, there was a sequential decline in prices in our market, particularly at East. The EBITDA for the quarter was at INR 621 crores including a few one-off items, which our CFO, Mr. Dharmender, will elaborate in his opening remarks. Friends, it is known to all of you that the energy market is witnessing some unprecedented price increases and supply chain disruptions, which seems to be affecting the economies worldwide. With economic activity picking up in most geographies, up -- and winter setting up in most parts of the globe, the demand for crude and fossil fuel is already expected to inch up, thereby offering the little scope for respite in prices. The domestic supply of coal, which got materially impacted here in September has now seen some little improvement in October, this -- but facility has still to be come. In fact, the good news is that the past -- the last 2 days, China and 2 global countries, they are now trying to curb the abnormal prices of coal, abnormal prices of fuel, and we hope that maybe in a month or 2, its impact may be visible in our country also. The [ scale of ] input cost has been very steep over the last one year. But despite that, our EBITDA margin came in healthy at 24.1%, going toward efficient and deductible operating model. In fact, the focus which our team has been making on the cost management, on price management, on brand management has brought in good results. As you already know, that the cement prices have seen a considerable increase over the last few quarters. And hence, in order to mitigate the impact, we successfully moved our product mix from Portland Slag Cement to Portland Composite Cement, which, quality wisely, is comparable. As well, the most sustainable product that reduce the usage of [ fuel ]. The PSE products declined from 27% in Q1 to 14% in Q2. The petcoke prices too have continued to increase and are at now, maybe, level of $220 to $240 compared to $50 to $120 in first quarter last year. Once again, our team has managed to moderate the impact to a reduced usage of petcoke from 47% in Q1 of this year to 33% in this quarter. And increasing the usage of coal and whatever the other -- like asset that can be used. But given the current cost situation in the country and disruptions with the coal supply in prices, we could once again expect highest rate of petcoke in the coming quarters, which could drive up the variable cost. From a long-term perspective, we are putting focused and great efforts at increasing the purposes of green fuel. During quarter 2, percentage of green fuel stood at 12% as compared to 9.1% in Q1. This is all the productive excellence, which our team could take -- our team could visualize the future and could take right excellence at right time. We are also expecting to add 9 megawatts of WHRS power and 70-plus megawatt of solar power in the later half of this year. All these investments will not only help in minimizing our cost, but would also help us to achieve our clean green facility goals. Now let me also share with you the update on the ongoing expansion. the new line of KCW and Odisha, having a capacity of 2.25 million tonnes, has been successfully commercialized in September. And now, our current cement capacity stands at 33 million tonnes. Furthermore, [indiscernible] of 0.2 million tonnes has been positive coming -- from the [indiscernible] during the quarter. The target production upwardly has begun now, and we are on track to start commercial production by December '21, which will take our cement capacity to 36 million tonnes by March '22. There has been significant progress made towards the balanced cement and clinker capacity expansion, which has been committed for completing by March '24. So I'm quite hopeful that the actions, which our team has taken to expand the capacity and reach to a level of 48.5 million tonnes by March '24 would be completed well in time. Friends, we were in the global spotlight again at the TED Climate Conference at Edinburg U.K., where we shared a blueprint of our business philosophy and heralded our journey towards a better future with the philosophy of clean and green is profitable and sustainable. And this has been the first time that on the global TED platform, a cement company could share their thoughts, which is otherwise called as hard to cement sector. Our Board commitments have also been well received, and we are now set to partner global leaders to establish the First Movers Coalition, which is called FMC, at COP26, which would be launched by Mr. John Kerry at World Economic Forum in Glasgow. Our company has been appointed as COP-accredited business leader by COP26 presidency. And accordingly, our company has been invited to attend and deliver our thoughts on how global cement sector can be also made possible to added sector. I'm so happy that our journey towards clean and green is moving at fast pace, and then our commitment of delivering no-carbon cement or the blended cement only from -- after FY '25 is in the place. Now, friends, I would request our CFO, Mr. Tuteja, to take over. But before that, let me wish you and all your family members, your team members, a very happy, clean and prosperous Diwali. Thank you.

[Dharmender Tuteja, Chief Financial Officer]

Thank you, Singhi ji, and good morning, everybody. I'm pleased with the all-round performance, which our company has delivered during Q2. The company has been continuously hitting its gross debt, and I'm happy to share that we are a net debt-free company with net debt to EBITDA at minus 0.48x. As Mr. Singhi has mentioned, I would like to highlight a few one-off P&L items, which happened during this quarter. The incentive accrued during the quarter includes an ammount of almost INR 56 crores pertaining to prior period from April 2019 to June 2021. It pertains to our unit, Dalmia DSP Limited. We have also written back liabilities to the tune of INR 24 crores pertaining to Dalmia DSP Limited, which are no longer payable, and these are classified as exceptional item. During the quarter, we have made provision of INR 30 crores towards an intercorporate loan given to [ reverse port ] in 2010, though we continue to explore the legal options for complete recovery. The CapEx during the quarter has been INR 440 crores. And during H1, it is INR 780 crores. We are on track on our expansion plans and believe that during current year, we would be able to spend about INR 3,000 crores. And the recently concluded AGM, the shareholders had appointed Walker Chandiok & Co. as auditors of Dalmia Bharat Limited. They are a member firm of Grant Thorton, and are one of the big sized audit firsm. This was the first quarter with them as statutory auditors of the company. Keeping our commitment to divest noncore assets, we have sold 21.4 lacs shares in IEX, and our stake in IEX now stands at 14.8%. In line with our Capital Allocation framework and our vision of building a pure-play cement company, the Board has approved the sale of master wholesaler business for construction and building materials of the company as a going concern on a slump sale basis to Hippostores Technology Private Limited, which is a promoter group company. The buyer has expressed his desire to acquire this business as a going concern by way of executing its business sponsor agreement, and has submitted a binding offer for the same. The company had appointed 2 independent valuers, [indiscernible] and company were appointed on behalf of the independent directors of the Board. The side appointment of a [ Western valuer ], Mr. [ Ashit Dia ], for this sale. The independent directors considered and reviewed the valuation reports. The independent director also considered and reviewed the binding offer [indiscernible]. After deliberations amongst the independent board members and the members of the management team, the Board has approved the scale of the business to buyer for a consideration of INR 115 crores. This consideration is as of 31st August 2020, and any further cash infusion in this business from 1st September onwards till the closure of the sale will be added to the agreed consideration of INR 115 crores to arrive at total consideration. As per the terms approved by the Board, 20% of the total consideration is to be paid immediately on closure of the sale, and the balance 80% is to be converted into unsecured nonconvertible debentures residential after 2 years. The [ NCVs ] would carry interest rate of 10% per annum to be paid half yearly. The buyer has the option to prepay the amount of [ NCVs ] at any time. Based on discussions with buyer, we are given to understand that they are most likely to pay 100% of the consideration at the time of closure of the sale itself. The Board has also directed the management to close the sale within 45 days from the execution of the business master agreement, but not later than 31st December 2021. During the quarter ended 30 September '21, the assets and liability of this business have been shown as held for sale and presented as discontinued operations. With this, I would now like to open the floor for question and answer. Thank you.

[Operator]

[Operator Instructions] We have the first question from the line of Sumangal Nevatia from Kotak Securities.

[Sumangal Nevatia, Senior Vice President]

Yes. Good morning, everyone. Firstly, many congratulations to the management on the progress on multiple fronts, as we see an impressive transformation in the last 12, 18 months on the overall capital allocation strategy via divesting noncore assets, paying out debt, dividend. And also, we see a lot of -- an improved transparency in the overall disposal level, it's very commendable. I have a couple of questions that I want some clarifications on. Firstly, on the East pricing. So we've seen pricing in the East continues to be a bit weaker than other regions, and we do pick up from our dealers that -- the top 2, 3 players are backing there for market share. So any thoughts on East pricing? How do you see in coming quarters? And what has been the key reason for the weakness given our leadership there?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Thanks, Sumangal, for your appreciation and complement. I would like to highlight to you is that East normally, in the second quarter, always remains weak. And if you look at prices of last quarter -- last year, Q2 FY '21 and FY '22, you would find the prices are almost at the same level. But at the same time, this year, there has been very heavy rains, floods as well -- because of aftereffects of COVID also, there has been drop in overall cement demand that has hampered the pricing. And now what we are seeing, particularly from 1st October onwards, that prices have started inching out. And November onwards when demand would also grow up, I think prices up East may go up. Now everybody tries to get their own share, and this depends on the policy of each and every company. So there has not been any new development if I compare with last year, before last year in regard to -- on the pricing strategy of West broadly as a company, or the marketing strategy. But then yes, whenever new capacities do come, people do try to overreach and that may sometimes hamper the pricing. As far our operations are concerned, our pricing is concerned, our market leadership is concerned, that's quite intact, and we have been doing good. And if I look now from August, September, October numbers, we are fairly now inching up. And the acceptance of our new products, which we started from April, now it has been adjusted very well, and we're quite hopeful that when we end by March, we'll be doing quite good, quite better in East.

[Sumangal Nevatia, Senior Vice President]

Understood. Sir Singhi ji, from what I understand, no region-specific issues there, and these prices should not be underperforming the other regions in the coming quarters. Is that a fair understanding?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

May be, may not be. You know, like, if you adjust this again, the prices of last quarter, India wide, you would find that the prices have gone up high in North and West, there up to Central and then South and then the East, so it doesn't go equally everywhere. But what we are now trying to understand is that one consumer has been able to give some extra price not only in cement, but steel and few others also because of the very high cost of input, particularly energy. And that's why we have seen that the prices in East has gone up ranging from state to state from say INR 10 to INR 25 a bag. And this is how I think we are expecting that the prices should go further better.

[Sumangal Nevatia, Senior Vice President]

Understood. Understood. Secondly Singhi ji, on the quality, what we are picking from the dealers is there has been some issues and pushbacks on the quality of our cement in the last couple of months. So I mean, any thoughts on what are we doing to address this and by when can we resolve this issue?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Mr. Sumangal, I would like to share with you that quality issue has not been per se, but it was perceived that earlier that the new product which we have launched, which is composite cement, may not have the same quality of slag cement. But now the stability has come, and that's why this is possible to some extent might have come. But if you would look now at the number of, say, September or October or November, then everybody would find that there are no pending issues in terms of either perception of composite quality. And another thing is that now, other players are also joining this journey of low carbon cement, low slag cement. And with that, I think acceptability would further go up and up.

[Sumangal Nevatia, Senior Vice President]

Okay, fair. Moving on to the capital allocation side. We've spent only INR 800-odd crores in the first half, which is almost -- I mean, this is 20% of our full year guidance. So how should we read this? Is it back ended? Or are we on track for the full year guidance? Or there are some execution delays on the ground of what we are witnessing?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

First, you are rightly understood, it is back ended. Second, we are seeing now that we may be able to spend about INR 3,000 crores in totality in this year, so to that extent, there may be some gap here and there. But at the same time, I think we have been able to now complete our order for cement needed for the [ immediate stuff ]. So we have already committed for it. And we are hopeful that our journey of completing 48.5 million tonnes in next year's time would be in place.

[Sumangal Nevatia, Senior Vice President]

Understood. Just one last question, if I may squeeze in, on this IEX. We had a very good start to the year by divesting 25% of our stake. Now, given that IEX stock has done very well, do we expect -- and also given we have a huge CapEx lined up, do we expect to continue on this journey of gradual divestment of our stake here?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

So as and when, Sumangal, we decide our firther strategy, definitely, we would share because you must have seen that now whatever our forecast, we are able to consequently share with all of our stakeholders.

[Sumangal Nevatia, Senior Vice President]

But that's a broad strategy, right, to gradually exist and divest completely. Is that right?

[Rajiv Bansal]

Sumangal, Rajiv here. That is right. I think we have clearly said in our capital allocation policy that we will keep coming out of our noncore assets. And IEX, as we see the need for making CapEx investments, we would keep diluting IEX. So that is on track.

[Operator]

Your next question is from the line of Bhoomika Nair from DAM Capital.

[Bhoomika Nair, Security Analyst]

Sir, my first question is in terms of the East demand, which was kind of impacted in 2Q. And thereby, given that we're taking further price hikes to pass on further cost escalation, will that have an impact on the likely growth in the second half, given that we already have a pretty decent base of last year?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

I would say, normally in cement, the prices have not impacted much on any demand because it's a very less [ flexibility ] on the prices. So I don't think prices would hamper any demand, but at the same time, I think the good months are coming up. So both demand would go up and prices should go up, and mainly that's also on account of the high input cost.

[Bhoomika Nair, Security Analyst]

And so far, I mean, we said that we took about INR 15 to INR 25 kind of a price hike. What kind of price hikes do we need to take further to kind of pass on this rising raw material and fuel prices, particularly in terms of coal? And if you can talk about what was the consumption level in 2Q? And what is the likely impact that we might see into the second half?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

So broadly, I would say, on fuel prices, there's uncertainty. The good part is that we have a large amount of petcoke that we already booked, so we don't expect any disruption in supply. But at the same time, the prices of even Indian coal has been also going up, even in [indiscernible] also, [indiscernible] has also been [indiscernible] in the prices. So I may not be able to quantify per se, but then definitely looking to the -- what overall impact on cement cost is, companies and the market will go on lowering the prices.

[Bhoomika Nair, Security Analyst]

Right, sir. Sir, if you can talk about the consumption, what was the coal price average or petcoke consumption in 2Q?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes, so I would say that if I compare with the Q1 to Q2 of this year, then we have been able to bring down our petcoke consumption to 34%. To some extent, our coal consumption of imported coal has gone up. Our coal consumption of Indian coal has gone up to some extent. We have also started using lignite. And then, like I highlighted earlier also, that we have been able to increase the usage of green fuel or you might be calling [indiscernible] fuel to 12%, which we also inch up. So that way, we have tried to manage the overall cost. And one more thing here I may highlight is that we have been able to bring down our fuel consumption, which has also helped us in containing the cost of fuel -- of current cement. So now our fuel consumption which was earlier -- if I talk of last year, it was anywhere between [ INR 720 ] to [ INR 780 ], now it's ranging raning around 730 [indiscernible]. So it has also helped us in containing cost of fuel by maybe INR 80 to INR 100.

[Bhoomika Nair, Security Analyst]

Right. Sir, I was asking for per tonne cost of coals from petcoke in the current quarter, 2Q.

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes. So exactly, I may not be able to remember, but our -- about -- it should be INR 800 something, as far as the fuel is concerned.

[Rajiv Bansal]

The total [ parental ] cost is about INR 990 per tonne.

[Bhoomika Nair, Security Analyst]

Okay. Okay. And.

[Rajiv Bansal]

It's the total [indiscernible].

[Bhoomika Nair, Security Analyst]

Yes. So basically, actually, I was trying to understand the coal consumption and price, say, an average of, say, $120, $130 versus today's spot of...

[Aditi Mittal, Head of Investor Relations]

Bhoomika, if I can come in. On an average, the consumption rate for our input on power and fuel has somewhere ranged around $120 to $130 per tonne.

[Bhoomika Nair, Security Analyst]

Okay. That helps, that helps. Just lastly, in terms of freight cost. We've seen a reduction in freight on a quarterly basis between 1Q and 2Q despite rising diesel prices. So if you can elaborate on the reason for the same. And what is the lead distance like?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

So on lead distance, we have been able to bring down our lead distance maybe by 12 to 14 kilometers, maybe one part. Secondly, various initiatives which we took one on [indiscernible]. And secondly, now tracking our truck movements well in time that has helped us. Third, one of the elements -- onetime elements of INR 16 crores railway incentive, which has also come in on that account, if I talk of Y-o-Y basis, our logistic cost has gone up by maybe 3.7%. But considering INR 16 crores, our logistic cost has gone up by 1%. But if you just look at -- we have been able to contain the logistic cost in spite of increase in diesel prices. But we would not have taken all the measures to contain the logistic costs or make it efficient, then this logistic cost might have gone up by 78%.

[Operator]

We have next question from the line of Girish Choudhary from Spark Capital Advisors.

[Girish Choudhary, Vice President]

A couple of questions. Firstly, what is the kind of inflation you're seeing in the procurement of slag? And then, what would be the CC ratio now considering that you have reduced slag production?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Slag production, I would say that production of slag cement has reduced. But overall, we see that it has not reduced much because instead of now we are using partially slag and partially [indiscernible] to make composite cement. So per se, on this account, definitely has not gone down much. Secondly, I would say that slag prices, they are expected to go up. To some extent, we were able to maintain or reduce the increase of slag prices in this quarter. But in times to come, it may go up. Now it's difficult to project how much volume or price might go up.

[Girish Choudhary, Vice President]

Got it. So then the first would be per tonne procurement cost of slag in 2Q.

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

You know, on average basis, this would be ranging from, say, INR 1,100 to INR 1,300. It will not be right to just give you just a number, but then yes, it could be ranging from INR 1,100 to INR 1,300.

[Girish Choudhary, Vice President]

Okay. And then, let's say, in the future, hypothetically, if the price of slag comes down, could you already start increasing PSC mix?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Now we have decided that the composite cement, we did a good quality cement, a sustainable cement and low-carbon cement, low-cost cement. So we would continue to work on this composite cement, and this is the cement of the future.

[Girish Choudhary, Vice President]

Got it. Perfect. And then I have a last question. This is in terms of the -- if you can help us on the blended sales this quarter versus the last quarter. And then, given you have plans to increase blending to 100%, so if you can elaborate on the plan to increase this at a market level?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

So I would say that yes, that plan of increasing blended cement and PPC is leading to 100% by '25, that's in place. And accordingly, strategies have been created. And then we have been also able to increase our blended cement or PPC product plant in Southern India where it was mainly for OPC, particularly institutional and part of the retail sales in few states. So there, we have been able to make good inroads. And secondly, the same is also happening in Northeast market also. And, Aditi, would you like to give the percentage of blended cement?

[Aditi Mittal, Head of Investor Relations]

Yes. So at blended cement, it is about 75%during the quarter. Previously, it was at about 80%. So while there was a slight dip during the current quarter in terms of the percentage of blending. But I think in the long term, we remain [indiscernible] take it up 100%. And even if you see the last 3 years, consistently from around 70% to 73% on an average on a full year basis, we've touched 80%. The highest is about 82-odd percent. So I think we are on track. Obviously, it will dip this quarter, we'll [indiscernible].

[Operator]

[Operator Instructions] We have next question from the line of Swagato Ghosh from Franklin Templeton.

[Swagato Ghosh]

Yes. Hope I'm audible. So the first question I had is on relate cost. Did I hear you right when you said $120 to $130 per tonne is your relate costs? And is this for the imported part -- only imported petcoke and coal combined? Can you please confirm that?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes. Let me just share that if you take everything into account, then the comparable price is $120 to $150. It [indiscernible].

[Swagato Ghosh]

Okay. So sir, I just want to understand how do you manage to get the cost to this level? Because even if I take like 2, 3 months lag and petcoke and coal were both above $150. So how is our realized cost this month? Can you help me understand this, sir?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes. So two things. One, we had some inventory. Second, the Indian coal, which we could procure well in time before this higher prices, that has helped us. Third, to some extent we could use lignite. Fourth, the greenfield, which we are using. So mix of many things has helped us to contain some costs.

[Swagato Ghosh]

Okay. So this $120 to $130 is even considering the cost of Indian coal?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes.

[Aditi Mittal, Head of Investor Relations]

So it's the mix of the consumption cost, which also includes the greenfield. So I think as that power consumption has been on a comparable basis to the last.

[Swagato Ghosh]

Okay. And what is the mix of the Indian -- sorry domestic versus imported sales? Domestic sales and imported sales when we consider both the CTP and the [indiscernible]?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

So I said that petcoke is 34%, then maybe 28%, 30% may be imported coal. And then maybe 28%, 30% Indian coal and lignite. And balance 12% is greenfield.

[Swagato Ghosh]

Okay. Okay. And sir, the next question we have -- sorry, the next question I had is on this write-off of INR 30 crores that we did this quarter, a small amount. But I just want to understand that the time line for this, when was it given? And any details that can be shared around the rationality -- rationale of this loan deal?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Dharmender?

[Dharmender Tuteja, Chief Financial Officer]

Yes. So this loan was given in 2010. Of course, this loan was [indiscernible]. And last 2 years, we saw some delays on the call happening. And considering the risk of recovery returns, the interest for the last 2 years have not been felt. So we prepared this reason on a present basis to impair this loan, so some legal options will be taken to recover this.

[Swagato Ghosh]

Okay. So the directional -- and which industry was the corporate working within...

[Dharmender Tuteja, Chief Financial Officer]

Yes, it was given to [indiscernible] in 2010, the corporate loan.

[Operator]

We have next question from the line of Indrajit from CLSA.

[Indrajit Agarwal, Research Analyst]

A few questions. First, can you throw some light on the demand-supply dynamic of this green fuel? Some of your peers have highlighted that availability of green fuel has now become very stretch in places of [indiscernible] as well meaningfully in the last few months. How are you seeing that for us in terms of [ publicity ]?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

I presume they must be right because there are challenges in the -- one, procuring it, processing it then using it. And it's not that a cake walk. But at the same time, at few places, we have some long-term contracts. But otherwise, availability of the green fuel that would be [indiscernible] and then again less now major developments happens at the municipalities and certain chemical and pharmaceutical companies, so generally there.

[Indrajit Agarwal, Research Analyst]

So maximum, technically, how much we can go in terms of the proportion? Can this 12% go to 20% in the next few quarters?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

It's still to be tried out because in India, so far, the segregate municipal way, segregate [indiscernible] is not that proper. On account of that, you have to just go step by step. Of course, we have to keep your ambitions high, but you have to go step by step. And then only the new [ techniques ] will come in place. So -- and this will not apply to each and every company that -- a company, they were able to use this much or this fuel, then b company would be also going to use because it also depends on whatever other fuel you use, whatever -- what limestone qualities you have. So, so many sectors and at the same time, the mindset and vision of the management team.

[Indrajit Agarwal, Research Analyst]

Okay. My second question is, again, relating to power cost. If I hear you correctly, this quarter, our power cost was INR 990 per tonne. This was a sharp decline from about INR 1,054 we had last quarter per tonne, in your presentation as reported. So is that understanding correct? We had a decline in power cost per tonne? And is it mainly because of mix because absolute -- like on a tonne basis, cost was not going down?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

This is power and fuel cost. It's just not on the power cost. It's the power and fuel cost that is well. And secondly, 2 more -- one, whatever I've said about the procurement of fuel and its cost. Secondly, like I highlighted that we have been able to improve on 2 things. One, keep convention cotton of clinker from say [ INR 720 to INR 780 ], we have been able to reach to INR 730. So [indiscernible] make the difference. That is one. Secondly, we have also been able to bring down our power comsumption button of cement to now 62 kWh per tonne of cement. And I would say, in India and maybe globally also, this would be one of the lowest power consumption per tonne of cement. So that has also helped us to contain the cost.

[Indrajit Agarwal, Research Analyst]

One last question, if I may. At EBITDA line, we have 2 one-off incentives. Is that understanding correct? INR 56 crores on the revenue side and INR 16 crores on the railway, so a total of INR 72 crores. Is that correct? Or is it like...

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes, yes. The only change that the trade incentive, we have about one more year of grid contract funding. So this income will come again in the coming year. So you can say 1 year income has been accrued in this quarter, but next year also 1 year income will come.

[Indrajit Agarwal, Research Analyst]

Okay. So the lumpy thing will be there in one of the quarters next year. Is that correct?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes. And also for the [indiscernible] incentive, yes, INR 56 crores pertains to the earlier period. But other quarter income will keep coming now because of incentives.

[Indrajit Agarwal, Research Analyst]

Okay. So the INR 16 crore railway thing will come again sometime next year, but INR 56 crores is one in the...

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes. And we expect -- sorry, go ahead.

[Indrajit Agarwal, Research Analyst]

No, I just had a question on the Bihar grinding unit, any progress on that?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Puneet?

[Puneet Yadu Dalmia, MD, CEO & Executive Director]

Yes. So we are in the final stage of identifying the land and computing and making the land registry. So that's get rids of today.

[Operator]

We have next question from the line of Kamlesh Bagmar from Prabhudas Lilladher.

[Kamlesh Bagmar, Research Analyst]

Just one question. I do appreciate the focus of the company on the sustainability and ESG part. But sir, if you see our waste recovery or renewable share, even if I take FY '24, then it would be moving up to 25%. But if you see the peers, they are way ahead of us, like I won't name the peers, but all are targeting north of 35%. So like the company has been hoping very aggressively that we are looking for the zero carbon and all those things. But if you see on the numbers, that really is not the picture. So can you give some clarity on that part?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes, yes. So definitely, because of right region, we started late on, one, WHRS and solar power plant. But now we are catching up on speed. And the immediate excellence plan, which we have created, which says that by FY '23, it should be 25% in our green power. And at the same time, now we are creating some different bottles by which we can share that how we would be reaching 100% by 2030. So that would be in place. We are -- competitively, you may say that we may be lower than 1 or 2 companies. But the point is we are on our road, and we know that in next 1 or 2 years, what sort of developments are going to take place which will help us not only in looking at green power, but that will also be helpful for us in creating the green carbon project also. So we are waiting for the opportune time to start those projects. That's a cautious call which we have taken. So like now the -- after a weak, COP26 is going to start where some important decisions may come out in regard to interest in carbon market. And then we will make out our strategy. We are fully committed for our government negated road map. We have fully committed and 100% able. But at the same time, we are also fully committed for our profitability also. And we know how and when to take the expensive decision.

[Kamlesh Bagmar, Research Analyst]

And secondly, sir, on the part of this like par the various CapEx programs which are underway. So at par let's say, no doubt, we have been telling or we had stretched our time line for that unit. But like 2 years back or 3 years back, we were guiding that this unit would come up like by end of FY '22 or that particular period. And until now, we have not identified the land or maybe we have speed to that particular stage. And now we are saying that the land acquisition would be getting under. So what's the clarity? Or what's the visibility on the expansions, which we are working as well? So like 2 grinding units -- like 2 greenfield grinding units we are committing on. So what's the time line on that particular part as well?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

So first, in totality, the time line is there where we are committed and [indiscernible] would give them [ 48.5% ] by March 24, that is wrong. Secondly, we already now bought land allotted from Jharkhand government to put up new grinding unit in Bokaro. So that process has already been completed and now we'll be starting our construction after getting EP, et cetera. And third, surely, there has been some delays or major delay in Bihar grinding unit and we are trying to catch up. But at the same time, the cement grinding capacity, which we have today. So because of that, we are able to cater to our Bihar market also both from our [indiscernible] as well as from our Bokaro unit. So good part is that we are not losing much market share, but at the same time, yes, it has impact on -- some of the impact on logistic costs. So definitely collective actions are being taken, and there has been pickups in there. And that's why we have been sharing the latest progress. And at the same time, we have already placed order for 4 cement mills and the progress regarding putting up a grinding unit in South, that's on. So we are fully hopeful, and we can commit to you that things would be in place at the right time.

[Kamlesh Bagmar, Research Analyst]

So has it been ordered because in the press release, we are seeing that in H2, the ordering will be done?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

And fortunately, H2 has started from 1st October, and today, we are talking on 28th. So that's where we stand at things.

[Kamlesh Bagmar, Research Analyst]

And sir, lastly, my last question. On the 2 units, one in Northeast and in the Tamil Nadu, both the units have been performing way before -- below our expectation. Like both units are not able to even go beyond 60%, 65% utilization levels, and that is not for a year, that has been for the 5, 6 years consecutively. And we are putting 2 greenfield grinding units in Tamil Nadu where I believe the clinker would be sourced from the Tamil Nadu [indiscernible]. So how certain we are on the part of the higher clinker utilization at that the Tamil Nadu unit and even Northeast?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

First, let me address the Tamil Nadu. So in Tamil Nadu, like our volume is going up. And the good part is that the cement demand is also growing. Most important is that the overall cement demand should grow, but at the same time, our market share should also grow. And we are on that path, and that's why the latest decision by us to put up a grinding unit so that it can support more, one, higher volume. And secondly, our blended cement also. So that way, all marketing activities are in place. And by March, when you see, you actually find that yes, that graph is on upper side. Secondly, on Northeast, which unit you are referring to?

[Kamlesh Bagmar, Research Analyst]

Sir both.

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

They are performing quite well. And we must try to understand that these all units are meant for Northeast. And now in the last 2 years, you would find that the market -- or the demand of cement is growing in Northeast. And accordingly, we have been also able to bring up our market share. Always the management strategy has to be and our management strategy is that we should take proactive actions. And we should be able to, one, generate right EBITDA and right return on capital employed. So that if you look at, we have been able to do that in Northeast in the last 2, 3 years. And we are propelling ourselves from the good market with the way government is focused on earlier, it was all East. Now it will look Northeast also. So we are expecting good growth in cement demand in North Sea. And accordingly, we would always remain prepared.

[Operator]

[Operator Instructions] We have next question from the line of Amit Murarka from Axis Capital.

[Amit Murarka]

First question is on the East market actually. So while I understand that the East market saw a tough quarter from [ Amphan ] Cyclon. But South India did quite well, and we've already seen that in some of the companies that have reported. So like the thought that was there is that you had a lot of expansion in the East. So at least there should have been some market share gain, which doesn't seem to have happened. So any specific reason that why earlier we used to talk about capacity constraints. So now that constraints are not there, why is the volume ramp-up not coming through? Just some thoughts on that.

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

I'm sure you know about the whole India market. And if you scan the whole India market also, then you would find that the cement demand on Y-o-Y basis has only gone down in fees, whether it's for [indiscernible]. So when the demand overall has gone down, then definitely, it will impact each and every play. It's just not a company, b company or c company. And secondly, our expenses are not for today or tomorrow. They are for next 5 years, next 7 years. So accordingly, the [indiscernible] are there. And our market share, you will find that sequentially, it will also go up because now our capacities are in place. So we don't expect that our capacity inflation would remain low next year. But then yes, these are the ramp-up processes, which do happen as the natural calamities, the health calamities that has impacted every cement company in the East.

[Operator]

We have next question from the line of Prateek Kumar from Antique Stock Broking.

[Prateek Kumar]

My question is on incentives accrued in -- total incentives accrued in first quarter and first half. And what is the outlook on annual incentives now?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Incentives accrued in the first half was INR 113 crores. And you can expect around INR 120 crores to INR 130 crores in the second half also.

[Prateek Kumar]

Second quarter, how much was that?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Second quarter, let me check. It was about INR 80 crores, INR 80 crores to INR 85 crores.

[Prateek Kumar]

INR 80 crores. And so now we are moving to INR 250 crores kind of annual incentive. So is this a number which will sustain going forward? Because earlier you used to say INR 120 crores to INR 140 crores kind of annual incentive.

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes, because we're going to start Murli operations also in the second half. That also will have incentives that will sustain.

[Prateek Kumar]

So INR 200 crores plus is the right number now, to take?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

For current year, yes.

[Prateek Kumar]

No, no, not for current year. As an outlook for '23, '24 also.

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Yes, please.

[Prateek Kumar]

Okay. And just one question on -- I mean, as mentioned about September being very bad. So is October also worsely impacted because of some nonseasonal in some of these markets and then down on a year-on-year basis for industry?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

You are right.

[Operator]

We have next question from the line of Devesh Agarwal from IIFL Capital.

[Devesh Agarwal, Assistant Vice President]

Quickly, the realizations drop that we saw on a sequential basis, if you can help me understand how much was on account of mix change, whether it is a trade, nontrade or geographical mix change?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Mainly the drop has been -- because of the drop in prices, both in South also and East also. In totality, if you want to stand then maybe 5% to 10% of the total drop may be on account of mix change. But otherwise, in general, it is the total price drop of industry, both in South and East.

[Devesh Agarwal, Assistant Vice President]

And what about the shares of [indiscernible] in the quarter?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

In the quarter, it may be 38% of core. But Aditi? Okay, we will share with you.

[Devesh Agarwal, Assistant Vice President]

Sure, sir. And the Bihar incentives that we have got in the quarter, for how many years still we have the incentives to get?

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

This is till March 24.

[Aditi Mittal, Head of Investor Relations]

On [indiscernible] this is at about 62% this quarter.

[Devesh Agarwal, Assistant Vice President]

[ 31% ] is the non-trade?

[Aditi Mittal, Head of Investor Relations]

Yes.

[Operator]

Ladies and gentlemen, that was the last question. I'd now like to hand the conference over to Mr. Puneet Dalmia, for closing comments. Over to you, sir.

[Puneet Yadu Dalmia, MD, CEO & Executive Director]

Thank you very much, once again, everyone, for their interest and their feedback. As I said that the economy is bouncing back, and we are very hopeful that with our CapEx plans and with the positioning that we have in the markets, the best of the company is yet to come. So I look forward to continuing our engagement with you and wishing all of you a very happy Diwali in advance. Thank you very much.

[Mahendra Kumar Singhi, Group Chief Executive Officer of Cement]

Thanks, friends. Bye.

[Operator]

Thank you. Ladies and gentlemen, on behalf of Dalmia Bharat Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.