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Dalmia Bharat Ltd
Earnings Call Analysis
Q2-2024 Analysis
Dalmia Bharat Ltd
The company saw an incentive accrual of INR 53 crores for the quarter, with collections at INR 25 crores, while for the first half of FY'24, accruals totaled INR 141 crores and collections stood at INR 64 crores. The outstanding incentive receivables as of September 30th were INR 785 crores. Looking ahead to the full fiscal year, the company anticipates incentive accruals to reach between INR 275 crores to INR 300 crores.
Employee costs climbed by INR 37 crores year-over-year to INR 226 crores, largely attributed to annual wage increases and new hirings to manage expanding capacities. Although other expenses remained relatively stable at INR 473 crores, the company experienced a significant year-over-year depreciation increase of INR 69 crores, partly due to equipment replacements as part of debottlenecking initiatives. An additional INR 15 crores in depreciation is expected to be recorded next quarter.
The company invested INR 611 crores in capital expenditures during the quarter, contributing to a half-year total of INR 1,517 crores. With the new cement plant in Tamil Nadu, capacity expansions have increased grinding and clinker capacities to 43.7 million tonnes and 22.2 million tonnes respectively. The expected capital expenditure for FY'24 suggests a significant investment of approximately INR 6,500 crores, which will include both the acquisition of JP assets and organic expansion projects.
There has been an increase in gross debt by INR 907 crores during the quarter, with the closing debt reaching INR 5,294 crores. Nevertheless, the company has also seen its cash and cash equivalents rise by INR 615 crores. The net debt increased by INR 292 crores, resulting in a low net debt-to-EBITDA ratio of 0.59 times. Alongside, the Board has announced an interim dividend of INR 4 per share.
A notable internal change is the impending transition of managerial duties from Mr. Singhi to Mr. Puneet Dalmia, who will take over as the MD and CEO. The company aims to ensure continuity and leverage strategic advisory from Mr. Singhi to sustain and expand its market leadership.
Despite market share struggles in certain regions, the company is optimistic about its growth trajectory and expects to outpace industry growth in the coming years. They are currently revising their marketing and sales strategies, particularly in the Eastern market, and projecting a rebound in performance from Q4 onwards. These measures will be supported by brand-building campaigns and exploiting opportunities in underpenetrated markets like Central India and Northeast, where the brand is gaining positive reception.
The company discussed an inventory buildup that has been reflected in its financials, noting a possible cost impact of over INR 25 per tonne due to fixed cost allocation to inventory. This is expected to correct over the next six months as the inventory is sold, and aside from this, the company's cost condition remains stable.
A critical focus for the company is the completion of the JP acquisition, which has faced delays due to the need for approvals from numerous banks. The company remains confident that the transaction will conclude by the end of this fiscal year, signaling significant expansion once finalized.
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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 September 2023. 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, Dalmia Bharat Limited; Mr. Mahendra Singhi, Managing Director and CEO, Dalmia Cement Bharat Limited; Mr. Dharmender Tuteja, CFO, Dalmia Bharat Limited; Mr. Rajiv Bansal, President and Chief Transformation Officer; and the other management of the company.
The earnings release has already been uploaded on the company's website. With this, I will now hand the conference over to Mr. Dalmia for opening remarks. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. I want to start with wishing all of you and your family members, a very happy Navratri. It gives me my pleasure to welcome all of you to the Q2 financial year '24 earnings call of Dalmia Bharat Limited.
After almost a decade of reforms under the leadership of the current government, our country is transitioning from a reform stage to a growth stage. As the GDP of India expands, cement and the building materials sector will automatically become a direct beneficiary. The Indian economy is undergoing a large-scale metamorphoses and our young, ambitious and massive middle class is already seem to be driving the much-needed consumption story.
I'm glad to say that we were one of the first ones to foresee this up-cycle in the industry as we started building our capacity ahead of time. In the last 3.5 years, we have added about 17.2 million tonnes per annum of cement capacity, which is about 65% growth over the financial year '20 cement capacity.
With the ongoing cement expansion and the acquisition of JP Associates' cement assets, we are expected to reach 56 million tonnes by the end of this fiscal. You are already aware that Singhi Ji has successfully completed his decade-long tenure as CEO and Managing Director at DCBL. And after 8th December, he will continue with us as a Director as well as a strategic adviser to me in our growth and profitable journey which is lying ahead.
In the last 10 years, we have witnessed incredible growth and have laid a strong foundation for future growth and profitability. We are now steering our company's transformational journey, Dalmia 2.0. In the past month, I have had the opportunity to engage with most of our leadership team and together, we have started brainstorming on how we should navigate the future.
Collectively, we have all reiterated that as before, we have a clear mission to build a scalable, sustainable, predictable and a consistent organization, Dalmia 2.0.
We have categorized our priorities into 4 buckets of growth, financial performance, sustaining trust and organization building. This includes a deep focus on leadership development and digital transformation.
Now coming to the financial performance of our company during H1 of financial year '24. If I break the earnings into revenue and costs, I would like to say that the first half of the year was a bit soft in terms of volume and revenue growth. But on the cost side, I'm pleased that our variable cost performance is in line with our expectations.
With the softening fuel consumption -- with the softening fuel prices to the tune of around $60 on a Y-o-Y basis, we have seen that delta flowing into a variable costs, including savings coming in from our sustainability efforts, such as increase in RE power consumption and some positive movement in our other manufacturing KPIs.
With this, I would now like to hand over the call to Mr. Singhi for his opening remarks.
Thank you, Puneet Ji. Happy afternoon, friends. Starting with our operating performance. During the quarter, we delivered a volume of 6.2 million tonnes and revenue of INR 3,149 crore, which translates to a Y-o-Y growth of 6.6% and 6%, respectively. Like the previous quarter, weakness in South prices persisted, which led to a slight drop in the realization for our company.
Having said so, the trade sales for our company improved during the quarter to 68%, which was primarily driven by Southern regions and that too with a complementing increase in the low-carbon cement sales.
For the last 3 quarters, our low-carbon cement mix has consistently been at a healthy rate of 88%. In fact, last -- Q2 of last year, it was 83%. For last 5 quarters, our CC ratio has been at 1.71 on an average. We will continue to follow this path in order to enhance our resource efficiency and reduce our carbon footprint further.
On the cost side, our raw material cost has increased moderately by 2% Y-o-Y to INR 785 per tonne of cement production due to increase in slag and fly ash rate by almost 10% and 5%, respectively. This is also somewhat increase in raw material costs on account of higher low-carbon cement consumption.
However, since this line item also includes purchase of stock in trade under the [indiscernible] arrangements from JP. You will see that the increase in the financial has a much higher number of INR 928 per tonne.
Coming to the power and fuel costs. During the quarter, our fuel costs and power has declined to 26% on a Y-o-Y basis to INR 1,140 per tonne of cement production. As Puneet Ji mentioned, our fuel cost declined due to $60 per tonne -- correction, in fuel consumption cost compared to Q2 financial year '23.
But as you all know, the fuel prices have inched up again from the recent bottom of about $105 to $110 to now the spot being $130 to $135. Other items, which mainly added to our cost efficiency is the increase of renewable energy consumption to 29% from 18% in Q2 FY '23.
During the quarter, our sales team has been able to bring down reduction in lead distance from 308 kilometers to 277 kilometer Y-o-Y. But most of it got offset by the levy of DCBL surcharge such as for the month of July and some onetime Railway incentive which were there in Q2 FY '23, but not in this quarter.
Sequentially, under the freight cost, we saw the benefit of lead distance reduction, the upliftment of -- or the levy of -- at the same time the levy of DCBL surcharge in August, September and also in the last quarter. There was a intra-regional movement due to plant shutdowns, which were much lower this quarter and hence, a cost reduction from INR 1,156 a tonne to INR 1,024 Q-o-Q.
As a result of all the above, our EBITDA per tonne during the quarter improved 46% Y-o-Y to INR 955 a tonne from a low figure of INR 655 a tonne in Q2 FY '23.
Friends, on the expansion side, while Dharmender will give you the detailed update on CapEx and cash flow. I would like to update that during the quarter, we have commercialized 2 million tonnes new guiding cement capacity at Sattur, Tamil Nadu and also have debottlenecked our clinker capacity by 0.5 million tonnes our clinker in Ariyalur in Tamil Nadu.
Going forward, we have ongoing work for 2.9 million tonne cement grinding capacity to South, which in totality will come to line by March '24, and we are expecting 0.9 million tonnes cement grinding capacity shortly.
2.4 million tonne in Northeast by FY '26 also would be coming up. In addition to this, the Board of Dalmia Cement Bharat Limited has approved the proposal to adding 0.5 million tonne of capacity in our Rohtas Cement Works in Bihar.
We already have a clinker capacity of 1 million tonne in the state, which will cater to the increasing grinding capacity. This expansion will help us to improve our volumes in the high contributing state of Bihar.
The work with regard to acquisition of JP Cement assets is underway, and we are expecting to complete the acquisition before the end of this financial year. I wish all of you friends, happy Navratri as well in advance, happy Dussehra and Diwali.
Now I would like to hand over the call to our CFO, Mr. Dharmender Tuteja, for key financial updates, and we'll be happy to answer all your questions in the Q&A and following his remarks.
Thank you, Singhi Ji. Good afternoon, everyone. Let me quickly give you the key financial updates before we open the floor for question-and-answers.
With regards to the incentives, the accrual during the quarter is INR 53 crores, while collections during the quarter is INR 25 crores. For H1 FY '24, the total accrual stands at INR 141 crores and collections at INR 64 crores.
The incentive receivable as on 30th September stands at INR 785 crores. For FY '24, we expect the total accruals to be around INR 275 crores to INR 300 crores.
Moving to the fixed assets -- sorry, moving to the fixed costs. Our employee cost has increased by INR 37 crores to INR 226 crores on a Y-o-Y basis, primarily due to the annual increments and increase in number of headcounts owing to addition of new capacities across different locations.
The other expenses have, however, remained flattish at INR 473 crores on a Y-o-Y basis. Our depreciation during the quarter has increased by INR 69 crores on a Y-o-Y basis. Of this total increase, INR 40 crores pertains to certain components of plant [indiscernible] equipment, which are being replaced as part of our overall debottlenecking projects. I had mentioned about this during the Q1 earnings call as well.
As in that quarter, there was an additional depreciation impact of INR 57 crores. This is a one-off charge and around INR 15 crores additional depreciation charge will be taken in the next quarter [indiscernible].
On the debt side, our gross debt has increased by INR 907 crores during the quarter, and the closing debt stands at INR 5,294 crores as on September 30. At the same time, the cash and cash equivalents have increased by INR 615 crores.
As a result, the net debt of the company has increased by INR 292 crores to INR 1,500 crores. The net debt-to-EBITDA is 0.59x as on 30th September.
With regard to the capital expenditure, we have spent close to INR 611 crores during the quarter and INR 1,517 crores during H1 FY '24. With the commercialization of our 2 million cement plant at Sattur, Tamil Nadu, our grinding capacity has increased to 43.7 million tonnes, while our clinker capacity has also increased by 0.5 million tonnes to 22.2 million tonne.
Our total weighted CapEx spend during the financial year '24 could be around INR 6,500 crores. Of this, about INR 3,500 crores for JP and the balance INR 3,000 crores for the organic expansion including the expansion projects at Northeast and [ RCW ].
The Board has declared an indium dividend of INR 4 per share.
With this, I now open the floor for question-and-answers. Thank you very much.
[Operator Instructions] We have the first question from the line of Indrajit from CLSA.
I have 2 questions. First, Singhi Ji, thank you so much for your contributions to the sector, not just to the company, and we have all learned a lot from you. I just want to understand the management structure post these changes. So Mr. Dalmia currently holds the MD position in both entities. So would that be the structure or are we looking to make some more hires or we will continue the current structure?
Can you please repeat the question?
So as you would be taking over, Mr. Dalmia as the MD of the operating unit DCBL as well, so would we continue with that structure or are we looking to hire externally in the...
No, no, no. This is going to be the structure. Mr. Singhi is transitioning to me, and he will continue to be associated as a strategic adviser to me in the group. So there will be complete continuity. And this is the structure where I will be the MD and CEO of the operating company as well.
Sure. My second question is on the JPA acquisition. Now this has been delayed a couple of times. So what is the current status now? Where is it exactly stuck? And how confident are you to complete it within this fiscal year?
So as we told last time also, we have to get approval from several banks for closing this transaction. And I think there are about 35 banks to process this and that is taking a little bit longer than what we expected. We are quite confident that we will be able to conclude this transaction by end of this fiscal year.
We'll take the next question from the line of Sumangal Nevatia from Kotak Securities.
First question is on the volumes, if you could share what is the tolling volume in this, the number which we have reported?
3 lakh tonnes in the quarter.
Okay. Understood. So continuing on the volume part, I mean, this looks like the second quarter where we had lost market share, whereas in the last call, we did share that there's some strategy we did not work out and we are kind of changing and from say, 2Q onwards, we'll kind of recover the losses.
So if you could just explain a little bit on this on 3 parts: one, what has gone wrong or what is not working? What is the changes we are doing it? And the third part is from next quarter onwards, can we expect, we continuing or going back to old ways of growing at least 1.5x the market which have been guided in the past quarters?
So I think we already explained in the last earnings call, like we took certain pricing decisions in the East, which we think did not work out as we had planned -- we have already made connections. And I think we are going to start seeing results of that from Q4 onwards. We expect that we will continue to grow faster than the industry in the coming years despite the short-term blip. And I think we are very confident about our own marketing and sales strategy. We are also going to invest in brand-building campaign, and you will see that in the coming quarters.
Okay. So when we say Q4 onwards, that means this year, we will continue to kind of underperform and then maybe from next year we should kind of expect the recovery?
Well, I mean, I spoke specifically about the Eastern market. In the rest of the markets, we are gaining share. And like, for example, in Central India, we have literally no presence. Our brand has already started gaining very good acceptance. And I think we will continue to further build on this. It's a market which is quite attractive.
Northeast, we are doing very well. So there are some pockets where we have to first -- we have already taken steps, which will impact sales. And I think you will start seeing that result from Q4 onwards in those markets.
Understood. Just 1 last clarification. I missed the opening remarks. Is there any one-off element, any write-backs or anything in the cost items?
In the current quarter as well as the previous quarter, we have got a buildup of inventory. So that, as per the accounting policies, includes the fixed cost buildup in the inventory, so which will be corrected in the coming 6 months, which may have an impact of over INR 25 per tonne. Besides that, I think the rest of the conditions are normal and a very small impact would be there of [indiscernible] that's been significant.
We take the next question from the line of Amit Murarka from Axis Capital.
Yes. So my first question is on incentives. So in the last 2 quarters, at least the incentives receivables have been moving up. So is there any specific plant on which you are accruing incentives and receipt is getting delayed?
Yes. The seat normally depends on the allocation of the budget by the concerned state governments. So -- but we expect that it will catch up in the coming first -- second half. So for the year as a whole, we expect that whatever accruals will happen, will also get corrected.
Okay, okay. Sure. And freight costs dropped quite sharply this quarter. What's the reason for that? And look at a Q-o-Q basis, is there any onetime Railway freight incentive or anything that came through?
As Singhi Ji explained in his remarks that we have reduced the lead distance to 277 kilometers compared to about 300-plus in the corresponding quarter last year. And there is no Railway incentive impact, whereas it was there in the corresponding period last year.
I was looking at per tonne has dropped 13% Q-o-Q on a per tonne basis. So the lead distance reduction that sharp in this quarter compared to Q1?
One more thing was that in the first quarter, there was a DCBL surcharge, whereas in the quarter 2, it was only for July. So that is also 1 of the reason. And as well, there has been reduction in lead distance also.
Okay. Okay, sir. And just 1 last question on capacity utilization. Your utilization seems to be at only 60% currently, like while we are expanding capacity, the ramp-up seems to be a bit slower than what one would have expected to see. Why is it that like the ramp-up is taking so much longer?
Like we have explained that in the East now we are ramping up our volumes. In time to come from Q4 you would see better capacity and also a better market share also. But otherwise, there is no problem as such in terms of production. There is no -- problem in terms of now expanding in everywhere -- in other regions.
The next question is from the line of Prateek Kumar from Jefferies.
My first question is on your leverage expectations. So if we are able to close the JPA deal in FY '24 versus INR 1,500 crore kind of net debt, do we expect our net debt to cross like INR 5,000 crores or what is that number which we are looking at in terms of net debt?
Yes, net debt will cross, let's say, the current limit, which you're seeing at INR 1,500 crore. But of course, we still expect net debt-to-EBITDA should be at least [indiscernible] in the current year.
Sorry, how much?
[indiscernible] around that?
1x?
Yes.
Yes, yes.
So that would mean like net debt-to-EBITDA -- so net debt around maybe something in the range of INR 3,000 cores to INR 4,000 crores, which the peak net debt which you are expecting?
Yes, yes.
Okay. And regarding freight cost, is there any element of freight subsidy in Northeast, which is also part of cost and which is like changing on a quarter-to-quarter basis or there is no component there?
No component there. [indiscernible] subsidy is not there.
Last clarification. On Northeast, like we have increased stake in -- we will be increasing stake in Calcom with additional investment. How do we value such kind of investments like when we are taking stake up from 75% to 95%? Also, is there any update on legal dispute with the promoter there?
See, this is the rights issue. So rights issue is given to all the shareholders in the same proportion. So it is valued at par. So there's no valuation required for this. And secondly, the arbitration which was decided in our favor and finally, it was shut down by the High Court. So other group has gone to the division bench and that is still pending. So currently, the High Court has decided in our favor.
Okay. In regards to the investment structure, so rights issues, so the other investor would not have sort of participating at all in this -- that's why our stake goes up significantly?
Very few investors participated in the rights issue. It was a small participation. So that's why our stake has gone up because many people did not participate.
Okay. So why would that happen? Because of lack of capital with those people?
I think that question you have to ask them.
Mr. Kumar, I'm sorry to interrupt. I will request you to kindly rejoin the queue, sir. Several other participants are waiting. We'll take the next question from the line of Satyadeep Jain from AMBIT Capital.
A couple of questions or a classification question. Considering the volume growth that we've seen for Dalmia in this quarter. Is this fair to say that Dalmia did lose market share in some of the markets it operates in? Just a clarification on that.
It may be in just 2 states of East where we might have lost, but otherwise our market share has gone up in South. It has gone up in Northeast. And the Central, definitely, we have taken up 3 lakh tonnes share.
Okay. Secondly, on power and fuel cost, there's obviously moderation in fuel cost this quarter. Where is the fuel cost inventory right now compared to spot? And is it possible to see more fuel cost moderation in the coming quarters?
Yes. Currently, the rate is about 1.58, which has gone to consumption. This is a blended rate. And we expect some marginal reduction in the coming quarter sequentially also, but that could be around 3%-or-so.
You think the consumption cost was about 1.5 this quarter?
1.58 per calorie.
The next question is from the line of Jashandeep Singh from Nomura.
Sir, I just wanted to ask you that since now we will be adding another 2.9 million tonnes, so what is the new CapEx for our total organic expansion? And also, if you can provide any -- I mean, if there has been any update on the FY '24 and '25 CapEx guidance? My first question is this.
First part question, can you repeat?
So what is the total CapEx for our organic expansion now, from 43.7 million tonnes to 49.5 million tonnes.
This, I'll come back to you. But on the second part of your question, the current fiscal -- the guidance is about INR 6,500 crores total CapEx, including about INR 3,500 crores from JP acquisition.
And sir, on the second question. So we have seen some -- it's on pricing. So we have seen strong price hikes in the South and some reversal in East. So if you can give us sense on how these current prices are, that would be great?
So one, I would say that East, for us, prices have not it down, we are holding, and we are able to see about INR 40 to INR 50 price increase. And at the same time, in South now, yes, price increase has happened because now demand is improving. So we are quite hopeful that we'll be able to get that benefit also.
Right. And last question, if I may. There was a news article on a legal dispute in the JP Bhilai plant [indiscernible] sales. So anything that will impact our takeover of that?
The news item which came, I think it pertains to an old development about 2 years back because there's nothing new development. All this was already known to us when we acquired. So this withdrawal of the claim by sales from NCLT, that is one of the preconditions of the acquisition.
So it won't affect our deal.
The next question is from the line of Shravan Shah from Dolat Capital.
Sir, I have 3 questions, so everything is interrelated. So just trying to ask, so on the volume front for this year FY '24 previously, we talked about a 15%, 17% kind of growth for this year. So first half, we are already 9.6%, and we are expecting that volume to improve in the second half.
So broadly, what would be the -- at consol level one can think of the volume growth? Second, considering, as you mentioned, the price hiking is INR 40 to INR 50 and in the South, if you can specify would be a great -- our [indiscernible] broadly INR 30 kind of price hike is already kind of getting implemented. So just trying to connect. If we, of course, GST, can think of at least for us in the third quarter, we should be seeing to INR 15 to INR 20 kind of per bag, so that is a INR 300, INR 350 kind of realization increase should be there. And considering the volume increase, though the cost would be marginally declining, is it fair to say that from INR 956 -- INR 955 EBITDA per tonne, one can easily see a INR 1,200 to INR 1,300 kind of EBITDA per tonne?
First, I must compliment your whole envisage and whole exercise and your [indiscernible] is right that, yes, prices have gone up in South and we are quite hopeful that it will continue. And based on this, definitely, there will be positive impact on EBITDA on Q3 performance, but at the same time, it wouldn't be right to predict any number.
Okay. But on the volume front, sir, broadly, any broad range of where one can think of for this FY '24 in terms of the growth for us?
I feel that it will be better than the industry.
Okay. Okay. Got it. The other thing is in terms of the CapEx for FY '25 would be a INR 3,000 crores, INR 3,500 crores?
Yes, close to the around that level, the firm numbers will be able to share maybe in the coming call.
Okay. Okay. And sir has mentioned this 2.9 million tonnes South that will be starting in the second half. So 0.9 million tonnes will be coming in the third quarter and rest Tamil Nadu and AP 2 million tonnes will come in the fourth quarter?
You're very right.
Okay. Okay. And what would be the premium, sir, for this quarter and consumption cost in terms of the fuel? Broadly, it would be a $135-odd for this Kcal. We've mentioned, but in terms of the absolute, is it a $135-odd dollar?
So premium product sale is about 21%, update sale is 21% -- 22%.
Okay. And the fuel consumption cost for this quarter would be a $135-odd dollar?
$127-something, $127.
$127. Okay. Okay. Okay. Got it. Is it possible to share the total other operating revenue for this quarter and maybe 1Q FY '24? Incentive we've shared, but just trying to get a broader sense. Will it be a INR 30-odd crore, INR 40-odd crore kind of extra -- revenue for this quarter and maybe for 1Q?
No, it wouldn't be like that.
The next question is from the line of Rajesh Ravi from HDFC Securities.
Am I audible?
Yes. Sir, Mr. Ravi, I would request you to kindly use your handset, sir. Your voice is muffled.
Is it better now?
Yes, sir, please continue.
Sure. Yes. Sir, first question pertains to the fuel cost, which you mentioned 1.58 is for the Q2 in Kcal.
Yes, it is.
1.58 for this quarter.
Yes. 1.58.
Yes. This was in the second quarter, right?
Yes, yes.
And Q3 numbers, are they similar to Q2 or there is some softening which is possible?
Marginal softening, you can expect on the consumption side.
Okay. And coming to the demand, sir, first half, we have grown by around 10%. And if we exclude the JPA contribution, the volume growth would be close to 7%, 8%. So for full year, you're saying that you'll look to grow higher than the industry and first half industry growth would be north of 10%. So are you looking at a strong volume growth in second half? And if that happens, how would the pricing scenario be there?
Now you see that overall demand in the cement is also growing up in almost all regions, and we are quite hopeful that in Q4 our growth would be quite better and we'll have also the capacity in the market also. So we're quite hopeful that we should able to do better.
Okay. And what was the incentive received in H1, Dharmender, sir, mentioned?
Total accrual was INR 141 crores and received was INR 64 crores.
INR 64 crores.
H1?
Yes, received is INR 64 crores in H1.
Because Q1 you had mentioned around INR 39 crores received, listed.
Yes, [ INR 45 crores ] was received in Q2.
The next question is from the line of Aman Agarwal from Equirus Securities.
Congratulations on good set of numbers, especially on the profitability side. Sir, first question from my end on the Eastern market again. So I just wanted to get an update on the end market consumption since a peer of ours has been highlighting about subdued demand from 2 major states, mainly West Bengal and Jharkhand. So is that also impacting our growth in the Eastern state?
To some extent, yes.
Okay. So any kind of update or any kind of expectation when do you expect a good growth coming in from those markets?
We are hopeful that normally after pooja festival et cetera, things should be brighter and in past also we have seen it and so same continues is our assumption.
Sure, sir. And sir, secondly, in terms of regional expansion, while we are expecting expanding materially in the eastern and southern region, no further expansion plans are yet planned in the West region, even after Murli having achieved a healthy utilization levels for us. So going on to our next expansion plan, maybe do we remain open for further expansion into the Western market or maybe via inorganic route in the western market itself?
It's Puneet here. We already have said that we have an ambition to be a pan-India player. And we will look at all markets in terms of demand supply and in our -- in terms of market structure. And based on that, we will make our decision to expand in terms of where to expand and when to expand. You will hear about this more in the coming quarters as we firm up our plans.
Understood, sir. So what I was just asking really was we are not seeing material additions may be planned in the Western market. So that can shape up well for our company as well. But got the point, got your point.
The next question is from the line of from Jyoti Gupta from Nirmal Bang.
Congratulations on good set of numbers...
I'm sorry to interrupt, Ms. Gupta, your audio is not clear, ma'am. Your audio is feeble.
Can you hear me now?
No, ma'am. I will request you to kindly use your handset, if possible?
Okay. Can you hear me now? Is it audible?
Yes.
Yes. So I want my -- I had 2 questions, 1 was on the market share and second on the JP deal, which you've already answered. But my question was on -- can you give us numbers on region-wise growth rates for Dalmia? I know you have lost market share in Bihar. What is the other state you have lost market share? Correct me if I'm wrong? And Y-o-Y -- regional growth Y-o-Y basis for the second quarter?
We do not share market share region-wise and state-wise. Thank you.
No, I said -- okay, you don't share, but what are the 2 states that we have lost market share?
Little bit in West Bengal and Bihar, North Bihar.
Okay. Correct. So Bihar and West Bengal.
We'll take the next question from the line of [ Saket Kapoor ] from [ Kapoor Company ].
Yes. Yes. Can you hear me now?
Yes, sir -- as a current has put the conference on hold, we'll move on to the next question, which is from the line of Amit Murarka from Axis Capital.
Yes. Like continuing with my earlier question, like given the capacity utilization is only 60%, and I believe there was an interim target of 75 million tonnes by FY '27. Like can we expect a rethink on that expansion plan now given that the current capacity itself were taking time to ramp up?
We take these decisions based on our long-term conviction about growth in the Indian market. And I don't think a few quarters of lower utilization has changed our fundamental conviction about the Indian opportunity in this decade. So I do not think that we are going to make long-term decisions based on a couple of quarters of view. So no, this is not going to impact our thought process.
Sure, sure. And also, any update on the East mining land? I believe you were adding on to the surface rights by acquiring more land over there.
Presently, we have sufficient limestone deposit also as well as the process which we started for acquiring additional surface rights, that's going on.
The next question is from the line of [ Saket Kapoor ] from [ Kapoor Company ].
Yes. Hello? You can hear me?
Yes, yes.
Sir, firstly, about this other income component regarding the dividend received from your subsidiary. So if you could explain which subsidy we have received this dividend?
You're talking about receipt of dividend in Dalmia Bharat Limited?
Yes, the other income component. I needed the granular details for other income component of INR 85 crores for the quarter.
This is at a consol level. So consol level includes dividends from Dalmia Bharat Sugar and also the treasury income on our treasury investments and including whatever NCDs are recoverable from Hippo Stores as well as Sarvapriya. So the interest on that.
Okay. And the major component from Dalmia Sugar dividend...
No, so that is a small component. That's a very small component.
Sir, on the cost of material consumed, Q-on-Q, we have seen an increase. So what explains this 3% increase in Q-on-Q and for the first half at 5%?
There are 2 components: one is there have been higher rates of slag and fly ash, but major increase is because of the increase of the blended percentage also.
Net debt -- percentage. I didn't get you, sir, come again? Hello?
Yes, yes. Sorry, can you repeat that?
Sir, I missed your point. Sir, you said about the slag and other...
Yes, increase of this slag rate and fly ash rate.
Okay. And sir, going ahead, this is going to be consistent? How are the slag prices currently trending?
So they remain volatile, but yes, we expect it to be around similar levels.
Similar level only. Okay. And sir, we are expanding majorly in the Southern part, but the Southern markets have always been historically also. So what gives us the confidence that here the markets are going to improve substantially and thereby, our expansion would commensurate going ahead, capacity expansion?
I think most of our expansion is in Tamil Nadu. It's a deficit market in terms of demand-supply. And I think we have a very strong presence in that market. So I think we are very confident that this expansion is very healthy and going to give us good returns. There's some expansion in Karnataka in Belgaum, which is also for North Karnataka and the Western Maharashtra market, I think there also, there is a big opportunity as markets are growing and economies are growing.
So I think the challenge in the southern market is Telangana and North Andhra Pradesh. And that's not a place where we are investing. So we are investing in that part of the market which has opportunity and which intersects with our strength.
Sir, for the Southern market, especially for Tamil Nadu...
Mr. Kapoor -- I'm sorry to interrupt, Mr. Kapoor, I will request you to kindly rejoin the queue, sir. There are several other participants who are waiting for their turn. We'll take the next question from the line of Raashi Chopra from Citigroup.
You'd mentioned that you're focusing on our branding exercise. So with that, what kind of volumes are you targeting, one, for FY '24 and subsequently for FY '25?
I think we will share with you the guidance once we are ready. I think right now it is suffice to say that we are looking at increasing our utilization and growing faster than the industry.
All right. On the pricing aspect, what is the quantum of the price in the East, you mentioned INR 40 to INR 50, South is about INR 30 to INR 40, is that correct?
In South, the is around INR 30 at the moment.
Okay. And in your opinion, in both the regions, how sustainable are the increases given that they've come after a while and...
Let's -- it's wait-and-watch only, but...
Okay. Also, what was the lead distance during this quarter?
277.
The next question is from the line of Vishal Biraia from [ Bandhan AMC ].
Could you give the perspective of the trade demand and the nontrade demand? How is the infra and real estate panning out across the East and South? And also, how is your profitability between trade and nontrade moving?
I would say that our trade volume has grown and more particularly in South we have been able to grow to 58%. And profitability definitely is always a bit lower in institutional sales. That's what I can explain to you.
Sir, how much lower would that be? What would be the current difference between trade and nontrade for you?
It varies from place to place -- those numbers cannot be shared, please.
We'll take the next question from the line of Sanjay Nandi from VT Capital.
Yes. Sir, can you please throw some colors on investments in this RHI Magnesita? What we are thinking as of now?
We have no investment in RHI Magnesita and Dalmia Bharat Limited.
But we are holding a significant stake in the company, right, sir?
It's not a part of this company.
Sure. Can you please throw any light, sir, on our [indiscernible] business, what is the outlook and what we are thinking on that?
We had divested the DBRL shares. So currently, our economic stake in RHI is 0. So DBRL holds the economic stake in RHI.
Yes. From a company -- particularly, I'm asking you that, sir, what is the overall like view on the top managing...
Let us not discuss on DBL call.
The next question is from the line of Amish Thakkar from Siguler Guff India Advisor Private Limited.
Congratulations on a very good set numbers to both Mr. Dalmia and Mr. Singhi. I have a couple of questions for Mr. Dalmia. Just want to understand, Dalmia has always been a cost leader in all the micro market [indiscernible] and there are multiple factors that drive that. So when you think about from your medium-term perspective in the next 2 to 3 years, to your long-term guidance that you've given of being 100% renewable where you're 29% today, similarly for lead distances and energy consumption per tonne of cement and power cost -- electricity cost, project of electricity, any medium and long-term targets that you're working with, given that your blending ratios and rates seem to be capped out?
So I don't think we can share any target right now on this call. But all I can say is that our renewable mix will expand the total mix. Secondly, I think we have won some full mines in auctions. And I think our fuel cost as those mines come into production will become less volatile. Currently, we are very exposed to imports and the rupee-dollar exchange rate.
as these lines come into production, our coal prices will go down, will go down in the short term given where we are today, but it will become less volatile for sure. And I think finally, I think we are just looking at how to optimize our logistics cost and the segment mix. And over the long term, there are multiple levers on these costs which we will work upon. So I think there is still juice left in becoming more efficient as we build scale. But I'm unable to give any guidance on what those numbers could be on this call.
And can you explain the drivers behind the reduction in lead distance? Is it the more -- is that due to supply chain, any other initiatives that are driving this 10% reduction in lead distance this quarter and how sustainable this is?
I think some of the markets which are closer to our plants, our service levels are much higher and our sharp focus on those markets has led to this reduction in lead distance. So we are continuing to think about which markets are core to us in terms of where we have a competitive advantage, in which micro markets. And I think in those markets, we will just plan to increase our share.
And lastly, on the share of DSP in your trade mix where your realizations are significantly higher and it's a 30% increase, 20% South, 20% in East and 10% the Northeast. So any guidance going forward in terms of share of premium cement in your overall trade mix?
I think we don't give breakups of our premium product mix by region. But I think, again, as a part of our strategy, we want to increase our premium product mix. And I think our branding exercise will -- it will be a step in this direction. But this is a long-term plan.
So this is not something which will give us results quarter after quarter. But over the next 2 to 3 years, I feel that it should help us in increasing our premium cement mix in [indiscernible] significantly.
And 1 final question from my side. Green fuel price competitive with traditional fuel or is this study in a long-term investment that you are making?
I think it just helps us become more environmentally friendly because it is -- we are recycling waste from other industries, and I think, second, it gives us hedge against volatility in fuel price. So I think from both an ecofriendly perspective and a cost perspective, it is beneficial. But again, as I said, that market change from time to time, and we want to create the maximum flexibility in our process that we can use the most cost efficient and the most ecofriendly fuel in times to come. So we want our process to be so flexible that it can use all kinds of fuel, and that gives us the best negotiation power, and that gives us the maximum hedge against cost volatility.
The next question is from the line of Raghav Maheshwari from Asian Market Securities.
Sir, what is our current product mix between the PPC, OPC, PSC and PCC at the company level? Because this time in the annual report, we have not given this number.
I think we have already shared that our blended cement mix is 88%. So I think -- and we've also said that over the next few years, we want to move to a even higher percentage and hopefully 100% low-carbon cement. So I think that is the guidance that we can give as of now.
Sir, as a product mix is -- you will not give for the future prospects in the -- between the products, PPC -- PCC and PSC? Because [indiscernible] is a blended level, so that's why.
So Raghav, we have given this number previously on an annual basis, you will get the number from us. But on a quarter-on-quarter, it's not possible to share it over the call every time.
Okay. And sir, this is the time of the -- this time as the lead distance, it's a 277 kilometer. It's something which we are doing for our market reorganization like thing or is the sustainable number for the future also this time because of the low volume and the seasonality, this number is...
I think we'll have to manage this dynamically. And when the volume growth is low, we try to optimize our costs. And when volume growth is higher, then we may have to choose longer lead markets also. So I don't think that this is -- this should be taken as a permanent structural reduction. But all I can say is that we will optimize our profitability. And we look at which are the core markets where we want to really compete. And at the same time, we want to look at volume growth as well. But if you want to look at a 5-year average, the 5-year average lead distance is somewhere between 280 to 290 kilometers.
Got it, sir. Sir, last 1 question from my side. What's our thought process behind remaining stake of the Dalmia Refractories and IEX, what's the time frame we are looking to divest?
See, DBRL stake is already divested. Whatever proceeds are to come, they'll come as per the schedule, partly in now December and partly September next year. And IEX also will get disposed -- it's already been considerably noncore investment. That timelines we cannot share, but it should be soon.
Ladies and gentlemen, that was the last question for today. I would now like to turn hand the conference over to Mr. Puneet Dalmia for closing comments. Over to you, sir.
Once again, I thank all of you for joining this call, and you know your interest in Dalmia Bharat Limited. I wish you and your families a very happy Dusshera and a happy Diwali in advance and look forward to continuing our interaction in the next year. And once again, thank you for your interest.
Thank you very much, sir. Thank you, members of the management. Ladies and gentlemen, on behalf of Dalmia Bharat Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.