Dalmia Bharat Ltd

NSE:DALBHARAT

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the earnings conference call of Dalmia Bharat Limited for the quarter and year ended 31st March 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 that may be forward-looking statements. These statements are based on the 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 of Dalmia Bharat Limited; Mr. Mahendra Singhi, Managing Director and CEO of 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. I would now like to hand the conference over to Ms. Aditi Mittal, Head Investor Relations. Thank you, and over to you, ma'am.

[Aditi Mittal, executive]

Thank you, [ Sajan. ] Good afternoon, everybody. We welcome you to the Quarter 4 FY '23 and FY '23 earnings call of Dalmia Bharat Limited. Hope you've had a chance to go through our results, which have been uploaded on the stock exchange. Without much delay, I'll hand over the call to Mr. Dalmia for his opening comments. Thank you.

[Puneet Dalmia, executive]

Good afternoon, everyone. And thank you, Aditi, for your opening remarks. It gives me immense pleasure to welcome all of you to the Q4 FY '23 and FY '23 earnings call of Dalmia Bharat Limited. Let me briefly share my outlook with you, and after which, Mr. Singhi and Dharmender will give you more details about our performance.

I continue to have deep conviction on the Indian growth story and would reiterate that the next 2 or 3 decades really belong to our country with GDP growth expected at 6.5% to 7% in FY '24 and beyond.

I think that for India to leverage this opportunity that lies ahead of it and for the government to generate employment opportunities for millions of people who are getting added to the workforce every year, the thrust on infrastructure development, increased public spending, and augmentation of private CapEx is imminent. And cement sector would be a direct beneficiary of this.

I strongly believe that Dalmia's growth will continue to accelerate as India accelerates. From the end of financial year '22, we have increased our capacity by almost 15% from 35.9 million tons to 41.1 million tons per annum at present. Let me give you an update on the acquisition side of cement assets on Jaiprakash Associates Limited.

Yesterday, we have signed a definitive agreement for the 2.2 million ton cement capacity at [indiscernible], along with 3.3 million tons of clinker, including both, at Babu Pur and JP Super. For the Nigrie cement capacity of 2 million tons, we are proposing to enter into a long-term lease agreement, having a term of 7 years with an option to purchase the Nigrie unit anytime within the lease period for an enterprise value of INR 250 crores.

I'm very excited that this acquisition is coming at a time when India is at the cusp of a strong cement demand up cycle, starting with the pre-election year 2024, when the industry demand is likely to grow at almost 8% to 9%. In April '21, when we had announced the capacity expansion plan and the first milestone of 49 million tons, we were not aware of the opportunity of JP acquisition.

Now with the JP acquisition being signed, it was important to reassess and recalibrate the original expansion plan of 49 million tons. Accordingly, we have decided to defer the 2.5 million ton branding unit expansion in Bihar. Due to this, the original capacity of the organic expansion changes to 46.6 million tons, and the total capacity, including JP acquisition changes to 56 million tons by end of financial year '24.

Even if you look at the year gone by, the industry cement demand is believed to have grown at 9% to 10% alongside an increase in prices on a pan-India basis. As Dalmia Bharat is marching towards this vision to become a 110 million to 130 million ton company by FY '21 -- '31, execution excellence and financial performance are the 2 equal priorities of the company.

During financial year '23, we have delivered an industry-leading volume growth of 15.9% Y-o-Y. And our revenue for full year has grown by 20% Y-o-Y [ to ] INR 13,550 crores. So significant improvement in multiple operating metrics such as increase in CC ratio from 1.63 in FY '22 to 1.71 in financial year '23 or improvement in renewable energy consumption from 10% in FY '22 to 21% in FY '23.

I'm proud to say that our teams have not only been able to mitigate the adverse impact of the inflation in the commodity prices but also been able to build on the sustainability quotient of our operations. On a full year basis, the carbon footprint of our company has further come down from 489 kg per ton of CO2 to 463 kg per ton of CO2.

Our organization is deeply committed to all our environment-related commitments under ESG, whether it's RE100, EP100 and EV100 by 2030, carbon negative by 2040. And these commitments are an integral part of my personal priorities too, to deliver upon in a timely manner.

For the next year, FY '24, some of our areas of focus for our company will be: one, timely completion of the ongoing CapEx and integration of the JP Cement asset; two, further improve our manufacturing KPIs and build long-term input security; three, HR transformation with focus on leadership development; four, digital enablement of the company.

To add to the strength of our leadership and assist in driving the company in the next stage of its growth, I would like to share with you that we have appointed a Chief Operating Officer in our company; Mr. Sameer Nagpal. Sameer has already been with the Dalmia Bharat Group as the CEO of Dalmia Refractory, and he was instrumental in growing the business bottoms up and finally led the M&A transaction in which the Refractory business was sold to RHI Magnesita. Mr. Singhi will mentor Sameer in his new role, and I'm excited about having him aboard. With this, I would now like to hand over the call to Mr. Singhi for his opening remarks.

[Mahendra Singhi, executive]

Thanks, Puneet. Happy afternoon friends. Last year has indeed been a tough year competitively as the industry continued to witness unprecedented rise in commodity pricing and particularly fuel. But as Puneet has mentioned that we are very optimistic about the year ahead of us now and believe that the peak of cost is behind us. Besides the softness in the commodity prices, we are also witnessing a strong demand momentum.

During financial year '23, we delivered a volume and revenue growth of 15.9% at a volume of 25.7 million tons and 20% Y-o-Y at INR 13,540 crores, respectively. This growth of 15.9% is maybe more than 1.5x of all-India demand growth. The growth is balanced with our regions, East, Northeast, West and South and delivering a double-digit volume growth during the year.

For the quarter, we had the highest ever sales volume and absolute revenue in any quarter with volume of 7.4 million tons and revenue at INR 3,912 crores, respectively. During the year, the NSR growth has been almost 14 -- 4%, which was led by stability and the spending of prices in the East and Northeast states, while the increase in NSR at 4% being higher than the long-term average price increase of 1.5% to 2% annually.

It has not been sufficient to offset the adjusted impact of input price inflation. During the year, the average fuel conversion prices despite from equivalent [indiscernible] price of USD 141 in FY '22 to USD 198 per ton in FY '23, which was again a massive 40% interest in fuel cost. However, the good part is this is interesting as started now subsidizing with a peak being $218 and now at $174 in Q4.

The good -- for the good news is now the spot prices of [indiscernible] are around $140 per ton, which can be effectively used in second quarter. On a Q-o-Q basis, prices marginally softer in southern regions, much remained stable at East, North East and West.

During the quarter, our available cost was slightly impacted due to congestion of high-cost opening inventory of clinker and cement. In Q3 FY '23, we had built up clinker inventory due to the upcoming plant shutdowns and debottlenecking projects in answering Q4. Thus, while you may see a variation on a quarter-to-quarter basis, but you will notice that during the full year, there is not much variation in the overall inventory levels.

Even in the past, we have seen that companies undertake inventory planning. This is a number of factors such as seasonality, plant shutdowns, [indiscernible], new plant time, et cetera, which may lead to quarterly variations, but on a full year basis, it tends to normalize. Our EBITDA per ton during the full year has been INR 900 a ton.

And our exit EBITDA came in better in Q4 at INR 951 per ton. Like Puneet was mentioning, our people have been very proactive and as a team, we were successfully able to improve a lot of our manufacturing and sales KPIs, which enabled us to mitigate the adverse impact of the inflation.

Mentioning some of these during the year, our blending ratio improved to 84% being from 79% in FY '22. In Q4, we were able to take it to an all-time high of 88%, with all regions showing progress. And this high [indiscernible] cement number would definitely further improve in quarters and years to come.

Our renewable energy capacity has increased from 17 megawatts in FY '19 to now 166 megawatts by FY '23 end, which is almost 10x increase in the last 4 years. With the upcoming year FY '24, we are targeting to almost double the current renewable power capacity from 166 megawatts to around 324 megawatts. Our sale of premium product has also improved significantly by 19% to 3.4 million tons during full year FY '23.

As has been our commitment, we have been working on sustainability and reducing carbon footprints month-to-month basis. And I'm very happy to again reiterate that our carbon footprint of 463 kg per ton is one of the lowest in global cement world. I would also like to highlight that 4 years back, we had targeted that our carbon footprint in FY '23 would be 480 kg per ton, which our team has been able to improve to afford at 463 kg.

Moving on the regional performance. If we look at regional volumes for our company, both in South and East markets, we outperformed and delivered double-digit sales volume growth. The performance in South is especially encouraging where over the last couple of years, we have continued to strengthen our market share without adding any capacity in the regions.

Another best part has been that in South also, we have been able to further announce the blended cement volume, which would further help us in building up more blended cement volume in the years to come. At the same time, our confidence in the [indiscernible] market potential remains intact. With all the capacity announcements, we believe that the bulk of it has already been commercialized. And now from '23 to FY '26, the rate of increase in capacity may drop to 4% or 5% of CAGR, with demand expected to outstep it at 9% to 10% CAGR growth.

The -- This will lead to steady improvement in the utilization levels going ahead. And we could expect a much stable pricing scenario on back of this. And this would prove that our strategy for East has been right. For Dalmia, East is one of the most efficient areas in terms of costs, and we are able to sale 100% low carbon [indiscernible] cement in this region.

On the expansion side, while -- so Dharmender will give you the detailed update on CapEx and cash outflow. I would like to update that during the year FY '23, we have commercialized 2.7 million ton capacity in both [indiscernible], respectively. This has taken of a closing cement capacity to 38.6 million tons.

Recently, in current month of April '23, we have commercialized the new cement line at Bokaro of 2.5 million tons, which takes our capacity of installed capacity to 41.1 million tons. Another good part is that now Bokaro is one of the biggest cement grinding capacity in the country. During the year, our clinker capacity has also increased from 18.9 million tons to 21.7 million tons by March '23. Now during FY '24, we have another 2 million ton clinker expansions to come up in addition to what would come along with JP assets in Central region.

[indiscernible], I'm happy to share that in [indiscernible], this is the detailed exploration carried out by our teams as well as revalidation of certain mining leases. We have been able to build [ livestock visibility ] of 18 to 20 years. In times to come, it would further go up. During March '23, our capacity utilization of the plant was around 52%.

And in the month of March, we have dropped 60% capacity utilization, and we are reasonably confident that during the current fiscal, we should be able to reach more than 60% capacity utilization. On the cost side, we have also taken many initiatives such as commissioning of WHRS of 7-megawatt, solar capacity of 4.5 megawatts, which will give us full year benefit from this year onwards as well reviving the coal linkage will also help.

Likewise, in Kalyanpur, which was acquisition part to [indiscernible] and the plant, which was closed for a long time. The plant has successfully been turned around, and it is now one of the highest profit-making plants in our Eastern operations. In addition to stalling, 4 megawatts of WHRS and first floating solar power plant of 4 megawatts, we have again taken many operating initiatives to optimize costs and improve the plant throughput.

In regard to JP admission, one of the initiatives which we took is how to enroll the exiting dealers of JP as well also to introduce brand [indiscernible] in advanced in central regions where we are not present. I'm happy to share that our initiative has led to enrolling around 1,000 dealers of JP, which would -- in time to come, would be very helpful in ramping up our capacity of serving more cement.

In addition to this, we have been also able to operate with the support of JP group plants, which have been able to deliver the cement required. Now for the rest of the details and key financial updates, I would now request our CFO, Sri Dharmender to share with you the figures and facts and thereafter, I'll be very happy to answer all questions in the Q&A. Thanks and all the best.

[Dharmender Tuteja, executive]

Thank you, Singhi. Good afternoon, all. As all the major business updates have already been covered by Puneet and Singhi, I'll quickly jump into the key financial updates. With regard to the incentives, this quarter, we have accrued INR 92 crores of incentives, which takes the FY '23 accrual number to about INR 272 crores. The collections during the quarter has been INR 96 crores, and the total collection for the year has been close to INR 250 crores. The average receivable as of 31st March stood at INR 700 crores.

Going forward, including Murli, we expect incentive accruals to be around INR 275 crores to INR 300 crores for FY '24. Regarding other expenses, sequentially, we have seen an increase, which has 3 large components. The marketing spreads during the quarter increased by about INR 35 crores and also around INR 20 crores each is on account of increase in the packing cost and [ deferred expenses ] because of the higher volumes.

On the debt side, on a full year basis, our gross debt has increased by INR 623 crores and the closing debt as of 31st March stood at INR [ 3,733 ] crores. The net debt to EBITDA as of 31st March was 0.29x. Regarding CapEx, we have spent close to INR 27 crores during the full financial year FY '23.

As mentioned by Singhi, we have closed this year with a capacity of about 38.6 million tons per annum and the capacity as on date when we are talking today stands at 41.1 million tons. Our budgeted CapEx spend for FY '24 is in the range of INR 5,000 crores to INR 5,500 crores including the payment which is to be made to JP for the new acquisition in central region.

Of this, roughly about INR 3,000 crores to INR 3,500 crores will be paid for the acquisition, and balance INR 2,000 crores to INR 2,500 crores will be for the ongoing expansion projects plus the other efficiency lined maintenance CapEx, et cetera. And pursuant to aim of becoming a pure-play cement player, and as already informed to you earlier, the company had entered into a binding agreement to sell its entire investment of INR 1.8 crore equity shares of Dalmia Bharat Refractory Limited at a consideration of this INR 800 crores to Mr. Sarupria, Healthcare Solutions Private Limited of [indiscernible] Group Company.

With regard to the same, I would like to update that the total receivable -- out of total receivable, 20%, which is INR 160 crores has been received in cash and for this balance, 80% consideration and CDs have been [indiscernible] to DCPL. And also in line with the capital allocation framework, the Board has proposed a final dividend of INR 5 per share, which is subject to the approval of the shareholders and the answering AGM.

This is in addition to the interim dividend of this 4 per share, which was paid out in the month of November. The total dividend declared for the year, including interim, is INR 9 per share, which is same as declared and paid in last year. With this, I now open the floor for question and answer.

[Operator]

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

[Indrajit Agarwal, analyst]

I have 2 questions. First, on the organic expansion, while we have deferred the Bihar grinding unit, the other South grinding units remain as is. So if you can help us understand what is the status of land acquisition, ordering of equipment, et cetera? And if we are confident of commissioning it in by FY '24?

[Mahendra Singhi, executive]

Yes. So first 6% of our cement capacity is going to happen this year, which is near [indiscernible] , which we call [indiscernible]. So this will get completed well before times by June '23. Second, 2 cement periods, which are being set up now in [indiscernible] and [indiscernible], they are all expected to go by March '24. So this is basically the 4 million tons. This will get added to the capacity in addition to some debottlenecking projects. So we are all on track and well within the cost.

[Indrajit Agarwal, analyst]

So what is the remaining CapEx in the organic part now?

[Mahendra Singhi, executive]

Now in totality, we will be investing about INR 5,000 crores, which would also include CapEx for JP assets.

[Indrajit Agarwal, analyst]

That is your saying for FY '24. I'm saying, what is the pending CapEx just for the organic? So after what we have spent, say, about INR 2,000 cores, INR 2,500 crores for organic, will there be still some pending CapEx for the organic part?

[Mahendra Singhi, executive]

Yes. So Indrajit, we will not give a breakup between how much is organic and inorganic [indiscernible]. We are looking at spending up to INR 5,500-odd crores next year, including JP acquisition. JP, depending on how each of the sensation is approved by the bank and the lenders. But we are looking at a range of between INR 5,000 to INR 5,500 crores in the range right now.

[Indrajit Agarwal, analyst]

My second question is on JP acquisition. So we understand that you have signed a definitive agreement, and we had signed one earlier for the stand-alone JP assets. So what kind of timelines we can look at when those assets will be under our fold?

[Mahendra Singhi, executive]

It is a process, and now lenders are picking up this matter. And within a couple of months, we should be able to operationalize.

[Indrajit Agarwal, analyst]

And we will need NCLT approval for this or that is not required?

[Mahendra Singhi, executive]

It may not be required.

[Rajiv Bansal, executive]

No, see, Indrajit -- Rajiv here. See, this was not admitted by NCLT. NCLT approval is not required. This requires lender's approval. And only for the super [indiscernible], there are certain conditions [indiscernible]. So there's 2 parts of it. One is the lender's approval. Second is the conditions [indiscernible].

I think you were saying -- at least the transfer in tranches that we're speaking about, we hope to close that in the next couple of months. And the super [indiscernible], the financial will be the closure of the arbitration proceedings with UltraTech, and once that is [indiscernible].

[Indrajit Agarwal, analyst]

I have more questions, I'll join back the queue.

[Mahendra Singhi, executive]

Thank you.

[Operator]

The next question is from the line of Sumangal Nevatia from Kotak Securities.

[Sumangal Nevatia, analyst]

My first question is on the cost. So there was a sharp increase in raw material cost. Is it largely because of higher opening costs inventory or also some other line items like [indiscernible], [indiscernible] also saw some inflation? If you could share some details there. And also the second part is on the fuel cost. If you could share what is the coal cost in 4Q? And what is the guidance for 1Q?

[Mahendra Singhi, executive]

Yes. So one, to some extent, the raw material cost has gone up on account of inventory. And second, since our CC ratio has also gone up. So to that extent, the raw material cost has gone up. And thirdly, there has been little price increase in [indiscernible] and [indiscernible]. So in totality, that is the region. But at the same time, there has been a substantial reduction in fuel price -- fuel power and fuel costs. And this will be again further visible, quarters to come.

[Sumangal Nevatia, analyst]

Okay. Is it possible to get some quantification at least on the power and fuel cost in terms of dollar per ton. What was the average in 4Q? And what's the current procurement levels?

[Aditi Mittal, executive]

So for the quarter 4, both the purchase and consumption has happened at about $174, $175 per ton. And during quarter 1, we believe the rate should be anywhere about $165 per ton, so another $10 is what you can see. The spot trade, which Mr. Singhi has spoken about, the impact of that, you can see quarter 2 onwards.

[Sumangal Nevatia, analyst]

Understood. That's very clear. And one just last question. We are doing a great job on increasing the blending ratio. I heard if correctly, it was 84% in FY '23. So just want to know what sort of near-term target are we looking for in FY '24, '25? And if just some comments on the acceptance of blended cement in non-trade segment, please?

[Mahendra Singhi, executive]

Yes. So let me answer the last question first. You're fully aware of the commitment of Indian government to go green by 2070 in totality, but at the same time, the various initiatives which government has taken to encourage green products that I'd say, green cement or green steel or many other such products. So now various government departments have started accepting PPC or PSC in place of OPC. And our team has been working very efficiently on this, and we are proud to say that in many projects, including the projects for [indiscernible], project for road, projects for bridges. Now Dalmia Infra Cement, which is a PPC product has been approved in place of OPC and that could help us in a big way.

Similarly, there has been now evidence in builder and the road projects. So they have also started now accepting PPC. And this has been -- there has also been for -- from NHI also to go for more and more PPC. So this is one part. Secondly, in a quarter-to-quarter, our blending ratio will go up as we are fully committed that in few years' time, we should be producing only blended cement, which is low-carbon cement.

[Sumangal Nevatia, analyst]

So from 84%, I mean what's -- I mean any sort of target we are looking at internally in FY '24, '25?

[Mahendra Singhi, executive]

Internally, yes, but we'll share when we do it.

[Rajiv Bansal, executive]

Rajiv here, we don't want to put a number on a yearly basis or quarterly basis. I think our gold cost is very clear. We said we wanted a 100% [indiscernible]. We've been saying that for a couple of years now. And I think the road map and trajectory is very clear. We have been increasing year by year.

I think it's difficult to put a number in a quarter or a year, because every market operates differently, right? And so we'll have to keep looking at it and tweaking it and recalibrating it. So at this point of time, the goal is very clear. I think we are ensuring continuous improvement and that journey will continue.

[Mahendra Singhi, executive]

And I want to add that even on total holiday basis also, the low carbon cement percentage in India is going up, and this is the highest percentage of low carbon cement in the world. So it may be today around 71%, 72%.

[Operator]

The next question is from the line of Pinakin Parekh from JPMorgan.

[Pinakin Parekh, analyst]

So I have 2 sets of questions. The first is on the JPA Cement acquisition. Now given that JPA, the parent entity is in the IBC and timelines -- sanctity of timelines on any resolution over there has, in the past across the board, not been respected. Is it fair to say that till Dalmia has clarity on the JP acquisition, it will not go ahead with any organic expansion plans beyond the 46.6 million tons?

[Mahendra Singhi, executive]

Let me first clarify that JP asset was not admitted in IBC. And secondly, now even in court also where the petition was put up, now even banks are also now requesting High Court that since [indiscernible] is happening, they would not like to proceed ahead. And because of that region, we are fully confident that in a couple of months, we will be able to get this acquisition in place.

[Pinakin Parekh, analyst]

Agree. But if it gets delayed beyond a couple of months, should we -- so I'm just trying to understand that the next phase of organic expansion beyond 46.6 million tons, when should we see visibility on that? It's only after JPA gets done, whatever the timeframe would be, or during FY '24, we can see that?

[Rajiv Bansal, executive]

Rajiv here to answer that question. See, we have guided everyone to 75 million tons by FY '27. That plan and that goal remains intact. What we have done is 49 million tons is what we're committed by FY '24. We are likely to be about 56 million tons, including JP acquisition. We are absolutely confirmed about JP acquisition being closed in the next couple of months.

In the next couple of months -- hopefully, in the next quarter, we'll start giving you road map for the next leg of expansion from 49 or [ 56 to 75 ]. So there is nothing being stopped pending for JP. I think we have committed to building 100 million to 130 million tons company by FY '21. And we made milestone of [ 75 ] million tons by FY '27.

[Pinakin Parekh, analyst]

Sure. Secondly, just trying to understand this final cost of the JP acquisition. So the company mentioned that INR 5,000 crores of spending in FY '24, it includes INR 2,600 crores, INR 2,700 crores of organic CapEx. The rest is JPA. So is this the final cost to ramp up the assets? Or will there be an additional cost over the INR 2,000 crores, INR 2,500 crores? What will be the total cost for the 9.4 million tons given now that you have signed a definitive agreement, you will be in a better position to answer that?

[Rajiv Bansal, executive]

So if you remember, when we made the announcement of our JP acquisition, we had said the total consideration is about INR 5,656 crores. And we have also said that we'll probably spend about INR 800 crores and INR 1,000 crores additional to bring the plant to the state of art [indiscernible] would like to operate [indiscernible] WHRS has done everything else.

Now only the third tranche for super [indiscernible] is likely to probably -- it will be independent on the closure of the arbitration proceeding between JP and [indiscernible]. Other than that, if you look at the balance amount, again, we'll be spending roughly about INR 700-odd plus crores on [indiscernible]. So the total cost would still be about $70-odd per ton, and it's a great asset. And I think you're saying we've also started the [indiscernible] agreement. We have started enrolling dealers. We have started understanding the market. We started building the brand, so that the moment these transactions are closed, we can hit the road running.

[Pinakin Parekh, analyst]

So it's fair to say that there will be another equally large amount of spending related to JP in FY '25 as well, right, beyond the INR 2,500 crores this year?

[Rajiv Bansal, executive]

Yes. Absolutely. We have already guided that when we acquired, talking about a number of [indiscernible] with INR 800,000 crores on the overall JP acquisition.

[Pinakin Parekh, analyst]

Understood. And my second question, just trying to understand the power and fuel cost of $175 in 4Q, $165 in third quarter, $140 per ton at the spot market. So to that extent at this point of time, the power and fuel decline, so far did not flow through to the EBITDA line. Going forward, at least in the first half of the year, do we expect pricing to hold up and hence, the full benefit of lower power and fuel cost to flow through the bottom line, or pricing is expected to remain soft?

[Rajiv Bansal, executive]

Difficult to predict pricing. As you know, there are too many moving parts in the pricing in the region, say, initial markets. But I would not like to look at pricing on a quarter-to-quarter basis. If you look at it on an annual basis, I think we've been getting around 2% -- 1.5% to 2.5% increased on an average.

Last year, we've seen 4% price increase. So comment on this part has gone up dramatically. As you all know, we keep certain stocks. There are certain spot price virtuality and Mr. Puneet shared a few minutes back. So definitely, our ability to purchase own fuel and set foot at lower costs will go into the EBITDA. And how much we decide to invest, back to we're building a business for generation, we're building a business for decades.

So there are certain investments in different markets in terms of brands. As we're becoming a larger company. In a large company, we also just spend money on brand. We're getting in new markets.

So we'll have to balance this out, right? We would like to build a sustainable and scalable business model, so that we may have to invest lots of money. But yes, the [indiscernible] price coming down is a huge boost for us to invest money in the market and build our businesses and build up [indiscernible].

[Mahendra Singhi, executive]

And let me just add that, yes, whatever you are thinking, overhead fuel cost will come down in quarter 1 and quarter 2 also.

[Operator]

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

[Prateek Kumar, analyst]

My first question is on the fuel cost again. So has this inventory impact would not be there, so what would be the -- like on fuel cost benefit, which we could have to stabilize on a per ton basis during the quarter?

[Aditi Mittal, executive]

So every $10 change, Prateek, in terms of pricing leads to about $30, $35 of cost savings. To that extent, it has slowed. What we've also seen during the quarter that our renewable power capacity has gone up on a consumption basis. That has also led to some benefits. Like Mr. Singhi had mentioned in his opening remarks, in the last quarter 3 and quarter 4, there has been a little bit of an anomaly because of the opening and closing stock. Otherwise, as the markets are seeing the benefit and the industry is witnessing there a decline in power and fuel cost flows into the numbers, it doesn't do [ our ] numbers as well.

And on a new basis, the inventory impact is actually almost negligible. So going forward, since this will normalize, you will see that next quarter, to the extent of softness in the power and full cost will directly flow into the P&L if [indiscernible].

[Prateek Kumar, analyst]

Okay. So on the closing 4Q basis in terms of foreign fuel cost, I mean remain petcoke at $140 or lower. So on a full year basis, FY '24.

[Operator]

Mr. Kumar, the audio is not clear from your lines. The audio is breaking.

[Prateek Kumar, analyst]

Is it better now?

[Operator]

Yes, sir. Sir, please repeat. The current participant has left the question queue. We'll move on to the next question from the line of Rajesh Kumar Ravi from HDFC Securities.

[Rajesh Ravi, analyst]

Am I audible?

[Aditi Mittal, executive]

Yes.

[Rajesh Ravi, analyst]

First question, potentially the fuel costs. Could you give us a per kilo-cal what was the cost in Q4? And what is the expected -- what is the current trend in Q1? And secondly, pertaining to the same, if I -- what you have mentioned that the blending ratio has increased to 88%. It was close to 83%. So a significant savings should have come in even from your raw material.

[Operator]

Mr. Ravi, please use the handset mode, sir.

[Rajesh Ravi, analyst]

Hold on, please. Hello, am I -- is this better?

[Operator]

Yes, sir.

[Rajesh Ravi, analyst]

Okay. So on a per kilo-cal basis, the fuel cost would have come down. So what is the per kilo-cal cost? And with the increase in blending ratio from 83% to 88%, even the total variable costs should have come down, but as you have reported, even the variable cost has gone up Q-on-Q. So what explains that?

[Aditi Mittal, executive]

So the kcal rate for the quarter is 2.06%. And on the raw materials, Rajesh, I think what everybody is doing while calculating the VC is taking the full impact of the change in top of inventory. And which is why you are seeing an increasing trend on a quarter-on-quarter basis. But if we were to remove the impact of the opening high-cost inventory, the decline in raw material or power [ tool ] is visible and more so, because the blending has definitely gone up between quarter 3 and quarter 4 from 83% to 88%.

But I think it is only because we have a high top up of opening inventory, which is at a higher cost, also has certain fixed expenses allocated into it. It is showing an increasing trend when you club all 4 line items and do a VC per ton. I think next quarter onwards, you'll get a lot more clarity as this inventory line normalizes. And -- but if you were to ask X of this, benefit is visible in the raw material and powering fields, respectively.

[Rajesh Ravi, analyst]

Great. So from 2.43%, in Q3, we have already come down to 2.06% sort-of. And there, you are further expecting it to come off in Q1. So -- and that with the increased blending and anomaly on the inventory side, we should see a boost to the numbers, assuming prices remain stable on the cement side, right?

[Rajiv Bansal, executive]

Yes, Rajesh. The inventory line, if you look at on a year-on-year basis, there's actually no impact.

On a quarterly basis, you do see, in fact, opening stock and closing stock depending on production, which shut down. We also did some debottlenecking, because we had to take shutdown in some of our plants. There still is a quarterly anomaly, which keep happening depending on when there's so much of volatility in the input costs. So opening stocks and closing stock [indiscernible] will be very different, right? So I think if you look on an annual basis, I think generally, you'll see over the year that trend of opening and closing does not really make an impact.

So I think I still want to make the point that, yes, on a quarterly basis, you will see operations here and there, depending on schedules and everything else. But on annuals, we don't see that's a impact.

[Rajesh Ravi, analyst]

And sir, for full year, what would be your per kilocal cost be?

[Aditi Mittal, executive]

Full year will be 2.21%.

[Rajesh Ravi, analyst]

2.21% and closing is 2.06%, so a good saving higher on. Okay. Second, on the acquisitions and CapEx. First on JP's acquisitions, which was announced was INR 3,200 crores, right? And the current announcement which came -- which would another sum up to -- another INR 2,300, INR 2,500 crores. Is that understanding right?

[Aditi Mittal, executive]

Yes, absolutely.

[Rajesh Ravi, analyst]

And additionally, we would be doing another INR 1,800 crores additionally, you said INR 1,800 crores is total to make them ship share.

[Aditi Mittal, executive]

INR 800 crores.

[Rajiv Bansal, executive]

We say total 9.4 million tons. We may spend between INR 800 crore to INR 1,000 crores.

[Rajesh Ravi, analyst]

Okay. So this INR 5,500 crores, INR 5,600 crore total acquisition cost will go in FY '24 itself?

[Rajiv Bansal, executive]

No, it will happen over [indiscernible] that the additional INR 800 crores and INR 1,000 crores is with spread depending on when each of these plants and the tranches are closed. So things you are saying, it may take a couple of months.

So the initial money concession, which we need to pay to JP and the bank will happen immediately in FY '24. The expansion that we're talking about are the modifications and refurbishment and everything else would generally happen in this in the subsequent year.

Even if you look at on the INR 5,650 crores of consideration, the JP Super, which is the [indiscernible] would happen only when that is closed, which is subject to the condition that we are speaking about of UltraTech and [indiscernible] and JP. So that consideration is [indiscernible]. So out of INR 5,676 crores, [indiscernible] we're talking about INR 4,000-odd crores. And on INR 4,000 crores is [indiscernible], which is total for [indiscernible] crores for a 9.4 million tons of capacity.

[Operator]

[Operator Instructions] The first question is from the line of Sham from Franklin Templeton.

[Unknown Analyst]

On the geography mix perspective, we do hear that Southern regions was particularly quite strong in the fourth quarter. How has the geography mix changed when we look at sequentially? And was that any -- did that have any impact on the EBITDA per ton or the spread that we saw on a quarter-on-quarter basis? That's the first part of my question.

[Mahendra Singhi, executive]

Geographically, it has not much changed. But at the same time, when we look at the increase in prices, then increased prices had gone up to [indiscernible] said, whereas in the southern part of India either we're stable in one or two states and had gone down also. So from mix point of view, not much change. But from a pricing point of view, it has changed, and that has got us some price increase.

[Unknown Analyst]

Sure. Understood, sir. And sir, just a follow-up on this. Now given that we are seeing southern pricing be weaker, now with the cost curve shifting down meaningfully from the second quarter F '24, do we see sharing some of these benefits with the customers until we reach a certain hurdle rate of EBITDA per ton? How do we think about the sharing of these cost benefits that we'll likely see in the second half of F '24?

[Rajiv Bansal, executive]

Rajiv here, when the input costs go -- and went up so much. The question came to us was why are you not able to share it with the customers and why you're not be to pass on to the consumers. And then first [indiscernible] coming down, the question is how much of it will be shared with the consumers?

I think there will be volatility in the price as I told you, there are multiple factors that will define how the prices move by regions, by state, by different product lines.

On an average, if you look at it, our prices do increase year-on-year between 1.5% to 2.5%. Last year it was 4% in spite of all this stuff in the [indiscernible]. People have had confirmed about the NP of pricing sector, what will happen to pricing environment, and other things.

But if you look at it on average, we got about 4% price increase, right? The demand environment was very, very good last year. I think if you were saying, we had almost 9% to 10% cement demand, the industry as the whole last year. And we expect that to continue in next year as a [indiscernible]. Now with such a great demand that we're talking about for the industry, I would expect [ residential ] costs going down. I would expect the pricing performance remains stable and I would also say the EBITDA will be better for everybody. I'm not aware specifically but for the industry as a whole...

[Unknown Analyst]

I think I was trying to get it from -- more from an industry perspective as well. And one last point from an expansion per se. In F '24 or southern cement, grinding capacity goes up by roughly 4.9 million tons, including the debottlenecking in Belgaum. How do we -- sorry, just I'm trying to understand from supplying of clinker to these units, how does that arrangement work there, if you can just help us understand that?

[Mahendra Singhi, executive]

So net [ element ] works very well because we have sufficient clinker to support this production of our cement. And as you also know that once a week, we put up a capacity of 4 million plus. Immediately, we would not be working on 100%. But at the same time, the nets which we have done, blending ratio, which we have done, we have sufficient clinker to serve full capacity of cement in Southern India.

[Unknown Analyst]

Sorry, just to clarify, this is from the [indiscernible] unit and existing in [indiscernible] clinker that will support this, just to understand?

[Mahendra Singhi, executive]

Yes. So we have 4 plants in Southern India, which produces clinker, which is Dalmiapuram and [indiscernible] in [indiscernible] district, then Karaka in Andhra and then Belgaum in Karnataka. So these all 4 plants produce clinker and cement. So all these clinker of these 4 plants will be able to serve the cement capacity, which we are putting up.

[Dharmender Tuteja, executive]

If I can just add here, when [indiscernible] spoke about the clinker debottlenecking and how we're going to increase in the next financial year, almost, I think, 0.9 million tons to 1 million tons is coming from South.

So there is almost 0.9 million tons to 1 million tons of clinker debottlenecking, which is happening in South and in addition to what [indiscernible] was talking about Karaka. So I think we are really comfortable about [indiscernible]. We don't stay concerned. And as [indiscernible] also said, increasing our lending in South in [indiscernible]. I think the risk is very encouraging as well, and we hope to continue with that.

[Rajiv Bansal, executive]

Another 1.2 million ton capacity of clinker would also be added through bottlenecking.

[Operator]

The next question is from the line of Pulkit Patni from Goldman Sachs.

[Pulkit Patni, analyst]

Continuing with what Sham was asking, if you look at bulk of our expansion next year is happening in South India. In light of that, how do we expect blending ratios to go up? I mean our understanding was that acceptability of blended cement in South is still not as high as it is at East. So if you could highlight what is the strategy there?

[Mahendra Singhi, executive]

So I would say that there were [indiscernible] in the mind of many people in 2 years back, 3 years back and a little bit in our mind also. But then whatever say performance, we could see, whatever the success we could see last 1 year, we do see that there's a full stability.

And second, is 100% blended cement usage in retail market trade sale, and our trade sale is going up there. In addition to this, in institutional sales also, more and more acceptivity has been coming, which I shared earlier also that the government is also working on it. Prudent developers, prudent contactors, they are now also accepting PPC. So this is a trend which will ultimately prevail.

[Aditi Mittal, executive]

Is, if I were to just add a few numbers to it, I think in FY '19, 5 years back, our blending in South was almost 40%, 45% which increased to 50% in FY '21. And on a full year FY '23, 65%. Quarter 4, the blended cement percentage was higher, it was about 75%.

So I think as Mr. Singhi was saying whether there is an effort on both, the side of the government and companies all together in the sector, I don't think there is a problem in terms of acceptability and it's actually showing up in the numbers also now. Year-on-year, it is getting accepted. 75% for South is actually pretty high.

[Mahendra Singhi, executive]

And it required a very point of time, our team can share that how acceptance of PPC has come up in a various very important critical projects of the country.

[Pulkit Patni, analyst]

Sure, sir. Sir, that's helpful. Sir, one more question, if I could. Can you split the volume growth between South and East, maybe for the quarter or for the year?

[Rajiv Bansal, executive]

Pulkit, we don't give [indiscernible] numbers. I'm sorry about it, we have seen double-digit volume growth in every region that we obtain. And I think we want a very, very stable work in every region. That's the focus. So unfortunately, we don't share numbers that's why.

[Operator]

The next question is from line of Ritesh Shah from Investec Capital.

[Ritesh Shah, analyst]

Sir, a couple of questions. First is with respect to the JP assets. Can you please give some color on limestone results. That's one. Second is the growth opportunity on the assets and third is incentives, if any, related to the assets we can enjoy going forward. So that's the first question in 3 parts.

[Mahendra Singhi, executive]

There's a sufficient quantum of limestone in the lease area, and we have done some study, and more study would be done as well. You can also be confident of Dalmia's history of getting limestone everywhere, whether it's [indiscernible], whether it's [indiscernible] or any other. We have seen JP area, and there's a sufficient limestone, and this is how we have gone ahead. So this is on limestone part.

[Ritesh Shah, analyst]

Sir, second question over here was growth optionality. Can we increase the capacities over here? And the third question over here was on the incentives, if any, corresponding to the JP assets.

[Mahendra Singhi, executive]

So now are you [indiscernible] of limestone than on [ top of expansion? ]

[Ritesh Shah, analyst]

Yes, sir, I will go by what you said, sir?

[Mahendra Singhi, executive]

Thank you. Yes, once we acquire this asset, then definitely we will come out, but then definitely, they are possibilities. They are good possibilities. One, on account of good plant of JP as well as the possibilities, limestone reserves as well as increasing demand in central region and particularly to some extent in part of [indiscernible] also.

[Ritesh Shah, analyst]

Sir, possible to quantify something like we can double the cement capacity, double the clinker capacity. Any numbers over here?

[Rajiv Bansal, executive]

What do you want to hear?

[Ritesh Shah, analyst]

Whatever is feasible.

[Rajiv Bansal, executive]

So Ritesh, as I said earlier, we would share the plans beyond [indiscernible]. Hopefully, in the next call, you'll have to unfortunately wait till then. Once we are closing the JP acquisition, [indiscernible] opportunity incentive region. We have put our minds there. We are looking at each of the plants, [indiscernible], expansions that we can do further. But these are all work in progress.

And I would not want to jump into it and comment from numbers. I think we'll have to do our homework properly and then come to you and report the numbers. So I think wait for the 3 months, hopefully, we should be able to announce the investment.

[Mahendra Singhi, executive]

They are good growth opportunities everywhere.

[Ritesh Shah, analyst]

Sir, just last question. What is the status of East India Energy, I think this 180 megawatt? Is it also part of the transaction, that's one. And the second question over here is basically how critical is Super [indiscernible] to us? And the value that you have indicated of INR 5,600 crores, does it include or exclude that? If it excludes what's the [ quantum ] corresponding to that particular asset?

[Rajiv Bansal, executive]

And also last question for INR 5,665 crores that we spoke about includes the value for super [indiscernible] by INR [indiscernible] crores. So that is in fiscal '19 without that is about INR 4,000-odd crores.

[Mahendra Singhi, executive]

And this [indiscernible] is part of the deal.

[Operator]

We will take the last question from the line of Shravan Shah from Dolat Capital.

[Shravan Shah, analyst]

Sir, first, on the costing front, just to clarify, the other expenses that we mentioned INR 75-odd crores higher. So from the Q1 FY '24, will this number will remain so that in totality, the -- or important in terms of the other expenses, will it remain same? Or can we see a sizable reduction there?

[Aditi Mittal, executive]

Yes. As Dharmender had mentioned, the sequential INR 80 crore increase that you've seen in the other expenses, INR 40 crore which pertains to the bags and the depot expenses is [indiscernible]. So it depends upon the volume.

And INR 35 crores that we have spoken about pertains to advertisement expenses, because we are adding capacity. On a per ton basis, the costs have been relatively stable. So going forward also, I think on a per ton basis, we would expect stability. It is -- this sequential increase that you saw was mainly to do with an increased volume. So I think on a per ton basis, the costs are expected to remain stable at the current levels.

[Mahendra Singhi, executive]

And otherwise also, if you look at fixed per ton, you would find that Dalmia cement's cost per ton would be one of the lowest in the industry.

[Shravan Shah, analyst]

Yes, sir. Secondly, on the kcal basis, you mentioned that for 4Q, it is 2.06%. So in Q1, this current quarter, how much we are expecting the kcal?

[Dharmender Tuteja, executive]

About 5% reduction we can expect, 5% to 6%.

[Shravan Shah, analyst]

Okay, 5% to 6%. And net-net, if we look at the -- let's say, if we assume is $1.65 petcoke on the full year basis, if we have to look at, so how much more reduction -- sorry?

[Dharmender Tuteja, executive]

That will go down further. So let's say Q2, another, you can expect fall of about 10% as the prices have come down. So Q2 improvement of 10% over Q1. In Q1, it will be improvement of 5% to 6% pavement over Q4 of this year. [indiscernible].

[Shravan Shah, analyst]

Sir, the last one, sir, have you seen any price increase in this month, April?

[Mahendra Singhi, executive]

We wanted to see, but we wouldn't see.

[Operator]

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Puneet Dalmia for closing comments.

[Puneet Dalmia, executive]

Thank you all for your interest in us. And we ended very volatile year with great performance. I look forward to staying in touch. And I'm very confident that there are good times ahead. Thank you.

[Mahendra Singhi, executive]

Thanks, everyone.

[Operator]

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