J K Cement Ltd

NSE:JKCEMENT

Earnings Call Transcript 2023-Q3

[Operator]

Ladies and gentlemen, good day, and welcome to J.K. Cement Limited Q3 and 9 Months FY '23 Earnings Conference Call hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital. Thank you, and over to you, sir.

[Vaibhav Agarwal, analyst]

Yes. Thank you, Nirav. Good evening, everyone. On behalf of PhillipCapital India Private Limited, we welcome you to the Q3 FY ' 23 and 9 month FY '23 call of J.K. Cement Limited. On the call, we have with us Mr. Ajay Kumar Saraogi, Deputy Managing Director and CFO; and Mr. Prashant Seth, President, Business Information and Investor Relations.I would like to mention on behalf of J.K. Cement Limited and its management that certain statements that may be made or discussed on this conference call may be forward-looking statements related to future performance -- future developments and current performance. These statements are subject to a number of risks, uncertainties and other [ important factors ], which may cause the actual developments and the results to differ materially from the statements made. J.K. Cement Limited and the management of the company assumes no obligation to publicly alter or update these forward-looking statements whether as a result of new information or future events or otherwise.I will now hand over the floor to the management of J.K. Cement for their opening remarks which will be followed by interactive Q&A. Thank you, and over to you, Saraogi, sir.

[Ajay Saraogi, executive]

Yes. Thank you, Vaibhav. Good evening, and welcome to Q3 call. The Board of Directors met on 5th of February to review the performance for the quarter and 9 month ended 30th December. And the major highlights for the quarter are as under. Revenue from operations was INR2,288 crores as against INR1,940 crores in the previous quarter, an increase of 18%. The other income was at INR22 crores compared to INR26 crores. The operating expenses were INR2,025 crores as against INR1,570 crores, an increase of 29%. The EBITDA for the quarter was INR267 crores as against INR377 crores, a drop of about 29%. The finance cost was INR66 crores as against INR65 crores. The profit before tax was INR129 crores as against INR260 crores, a drop of about 50%. The profit after tax was INR97 crores as against INR167 crores, a drop of 42%. The EPS was INR12.50 as against INR21.66. The EBITDA margins for the quarter was 11.95% as against 19.83% in the previous quarter.If we see the 9 months data, the revenue from operations have increased during the 9-month period by 22% at INR6,596 crores as against INR5,410 crores, and the operating expenses by INR5,636 crores as against INR4,311 crores, an increase of 31%. And the EBITDA for the 9-month period was INR974 crores as against INR1,139 crores, a drop of 14%. The EBITDA margin for the 9-month period was 15.11% as against 21.46%, a drop of 30%. The profit after tax for the 9-month period was INR403 crores as against INR544 crores, a drop of 26%. The EPS was INR52.10 as against INR70.46.During this quarter, the company has successfully commissioned the greenfield expansion in Central India of 4 million tons. Of this, 2 million ton grinding is at Panna and 2 million ton grinding is at Hamirpur in UP. The total amount spent during -- up to the year on the project is INR2,723 crores as against INR2,970 crores. Balance would be spent in next -- in this quarter. Also during this quarter, the company and its wholly owned subsidiary -- as you are aware that we had decided to go in for paint business, wholly owned subsidiary acquired stake in Acro Paints -- a 60% equity of Acro Paints was acquired at INR153 crores, and balance 40% shall be acquired over a period of 1 year. So in that way, the company would be able to start the paint business very soon.If we look at the balance sheet position, the standalone gross debt as at 31 December is INR2,686 crores as against INR2,850 crores as on 31s March. And the net debt is INR1,455 crores as against INR1,606 crores. The net debt to equity is 0.32 as against 0.38. On a consolidated basis, the gross debt is INR4,141 crores as against INR3,434 crores, and the net debt is INR2,871 crores as against INR2,150 crores and the net debt to equity is 0.63 as against 0.51.So these are the major highlights. [Audio Gap] questions, we'll be pleased to answer them. Thank you.

[Operator]

[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital.

[Shravan Shah, analyst]

Sir, my first question is on the pricing front. So first of all, where we have seen the price increase in the third quarter in terms of the regions where we operate because across the companies, we have seen different scenarios which we are reporting? So some companies are reporting a growth in South and East [indiscernible] did not reported any growth in realization Q-o-Q. So just wanted to understand what was actual and for us and post December till now, have you seen any decline or increase? And how do we expect realization for this quarter? Do we expect any price increase?

[Ajay Saraogi, executive]

So as regards price increase is concerned, we saw some increase in prices in the North in the month of November. But again, all the price increase which was taken by, say, about INR15, INR20 could not be sustained in the market. There is this [Audio Gap] and we saw maybe during the quarter, maybe about INR5 a bag net increase in the prices in the North. South, the price increase had taken place, but again, then there was a different prices, and we are seeing further pressure on the pricing in the South. And as of now, if you see even in the North, there has not been any further increase and still there is some pressure only on the pricing. Yes, I mean, the only silver lining is that the demand is good and we do expect that, going forward, there should be -- there are possibilities that some of the -- the industry could take some price increase, and we could offset the impact of the cost increase.

[Shravan Shah, analyst]

But sir, what do you think could be a logical reason? I understand, it is difficult to comment in terms of the region, but still in terms of why a significant pressure in prices in South and even North now when the full construction season is going on, what could be the reason? Is it the cost pressure which is cooling off or that is giving a comfort to the players that net-net, we are still able to see the improvement in margins, so not to go for a price hike or maybe some price reduction is fine and still focus on the volume?

[Ajay Saraogi, executive]

Volume is a part of the demand. In cement, it is not that if you reduce prices, you will get more volume. It is not related. Volume is always related to the demand. But we have seen good price increase in the East and West. But the cost inflation in both those areas are similar to what the producers are filling in the North or in the South. We really do not see any plausible reasons. Especially I would say that the North demand could be better than any other regions. In spite of that, the prices have not taken place to the -- I mean, at least what was expected. And definitely, we were hoping that we would get a price increase of minimum INR20 to INR30 a bag. But somehow it did not happen. We are just waiting. And even if you look at the various results which have come out, there are -- it is not that the EBITDA margins or [ EBITDAs ] are at a very comfortable level, which gives a comfort to the industry players not to go for any price increase. It only happens in cement and it is happening, very difficult to revive.

[Shravan Shah, analyst]

Yes, got it. Sir, couple of data points: railroad mix for this quarter, lead distance, fuel mix, power and fuel average cost on rupees terms and in JKL business for this quarter?

[Prashant Seth, executive]

Yes. The rail movement is 19% and lead distance is 470 kilometers.

[Shravan Shah, analyst]

Okay. Power and fuel costs in rupees term, last quarter it was around [ INR12,000 ] and on Kcal basis, it was 2.4%. So what was the number for third quarter?

[Prashant Seth, executive]

Yes, it has increased by around INR400 per ton, the fuel rate. So on per Kcal basis, it has gone up by INR0.20. Last quarter, it was INR2.40. Now it is INR2.60.

[Shravan Shah, analyst]

Okay. And then now in January, what you saw -- from this quarter also, how do we see? Do we see the same because of the inventory that we are carrying?

[Prashant Seth, executive]

[ In the OpEx ], it should reduce to the level of the previous quarter. So we should see reduction of minimum INR0.20 per Kilocal in the current quarter.

[Shravan Shah, analyst]

Okay. Got it. And the fuel mix, so pet coke 50%, the same share remain?

[Prashant Seth, executive]

It is even higher. Pet coke is 55% in terms of volume. And if you see in terms of yield, around 75%.

[Shravan Shah, analyst]

And in terms of the CapEx, last time, we said INR1,900 crore for '23 crore and INR1,400 crore for FY '24 and now still INR250-odd crore is remaining for Panna. So for fourth quarter, what is the CapEx that we are looking at and for FY '24 what's the number?

[Prashant Seth, executive]

So it is same -- at the same level. Out of the INR1,900 crores, we have already spent close to INR1,600 crores. So balance, we expect INR200 crores, INR250 crores in the last quarter. And the guidance for the next year remains the same.

[Shravan Shah, analyst]

Okay. Sir, last, just a clarification needed in the sense that we share the standalone number, standalone volume on the white and gray front, but now Panna is in a subsidiary though we are expecting it will get merged hopefully. So you can also update whether it is getting merged by 31 March or not. So on consol basis, when we started looking at the consol to capture the value of the Panna, so it's better if we start giving the number for the consol in the sense that the same way we give. So what is the consol gray volume...

[Ajay Saraogi, executive]

Yes, we understand that. We will share the consol number for the gray business, I mean, whatever it is there in the main company and the subsidiary. And for this quarter it is 36.61 lakhs, the overall gray volumes, and the net sales was INR1,789 crores.

[Shravan Shah, analyst]

Sorry, sir. Gray volume from Panna was how much?

[Ajay Saraogi, executive]

No, no, it is a consol number.

[Prashant Seth, executive]

Consol is 36.61 lakhs, okay? And the gray volume for the main company was 35.46 lakhs So this is -- 1.15 lakhs is the volume, which is subsidiary.

[Shravan Shah, analyst]

Yes. And same for the...

[Operator]

[Operator Instructions] The next question is from the line of Navin Sahadeo from Nuvama Institutional Equities.

[Navin Sahadeo, analyst]

Sir, if you could just help us understand the ramp-up at Panna, so to say. And also, are there any one-off expenses or stabilization-related costs to the same, which have been, let's say, incurred in this quarter and may not continue going ahead?

[Ajay Saraogi, executive]

So the ramp-up plan for Panna, we had initiated opening up of various markets. And we are confident that as far as -- even in this last quarter we should have Panna about 50% capacity utilization levels we should reach. And the [ exit ] should be even higher than that. So we are confident on ramping up the volumes of Panna. Having said so, yes, the plant stabilization after we commissioned the kiln in the latter part of November, there are always certain gating troubles and it still is under stabilization. And as you know, the waste-heat recovery power plant is yet to be commissioned, and there would be some shutdowns for that purpose. So -- and if I would say that the entire project activities, that will get over by sometime by March, April. And the plant should get fully stabilized in the first quarter of next fiscal year.This is the first time there would be certain additional operational expenses both at the plant level and even in the market, since we are going to seed new markets, so there will be continuous -- more branding and other activities. We have already done quite a bit even in this quarter, certain branding activities and that is reflected in our EBITDA also of about INR20 crores is the branding activities. But after making an investment of close to INR3,000 crores, the business need to do all these branding activities and market development exercises, but unfortunately, they are not part of the project cost as per the accounting and they have to be treated as a revenue. And -- but however, this will help us, and we are confident that we would be ramping up our capacity in a new market region at a rate which would be far more than expectations, and we will do it faster. We are confident on that. This is the first line indication which also we have, our product is well accepted in the market, and we do not foresee any problem on that front.

[Navin Sahadeo, analyst]

I appreciate that, sir. And I understand even in the previous quarter, you had highlighted that even as the [ kiln ] mechanism, before it starts production, we had started seeding that market and setting up our distribution network and overall preparations around that. So it's great. But just from a numbers perspective, if you could just help us understand, in the standalone P&L that we are looking, how much could be, let's say, the cost attributable to all these activities put together, which will then be more streamlined in the coming quarters? Is there some costs associated to that?

[Ajay Saraogi, executive]

No, so. Navin, what will happen in this quarter, in the standalone, I would say about INR20 crores is there because of opening up and all the sales have been -- majorly the sales have been done in the standalone company. However, from this quarter onwards, all these activities and branding activities will be done as per accounting in the subsidiary itself. So that major expenditure will not come in into the subsidiary part. But definitely, as a consol basis, we'll definitely see because we would need to -- so the subsidiary would see higher operational costs because the plant is going -- I mean, there are operational -- there are issues on stabilizing, the wastage is not there, which would lead to higher power costs. The fuel -- when you fire the kiln, you have different mixes of fuel, there's a lot of this initially wastage of fuel, which leads to a higher fuel costs. We had a high inventory. We had planned some imported pet coke at -- for the plant, which was a high-cost pet coke. But in the existing operations, the costs gets averaged out with different consignments. But here on a standalone basis for the subsidiary, we have a high cost fuel available, which will affect the EBITDA of the subsidiary.So having said that, it's difficult to put in numbers, but I would say 2, 3 quarters, at least maybe towards branding and operational cost, another INR20 crores each in -- for next 2, 3 quarters -- 2 quarters, INR20 crores, INR25 crores may be there as a, call it, a one-off for stabilizing or market development and other costs that could be there, which is quite normal for a greenfield plant.

[Navin Sahadeo, analyst]

Appreciate. But just a follow-up here, wastage recovery, that hooking up with this new kiln would ideally happen now directly in Q2, right, because you are stabilizing the kiln as we speak? And then in Q1, you may not want to take a shutdown. So fair to assume that this would happen in Q2 now, wastage recovery?

[Prashant Seth, executive]

No, no. So we are planning sometime in March, April.

[Navin Sahadeo, analyst]

Okay. Okay. Okay. Understood. And just one last question, if I may. This total CapEx, as Prashant ji mentioned initially of INR1,900 crore. That is excluding what we are paying for Acro Paints acquisition, right?

[Prashant Seth, executive]

No, no, no. That includes the CapEx for the paint business.

[Navin Sahadeo, analyst]

It includes the CapEx...

[Prashant Seth, executive]

Yes, yes, it includes.

[Ajay Saraogi, executive]

No, actually, that INR1,900 crores indication was based on certain -- because earlier, we were planning -- about 2 years ago, as a standalone as an investment, it doesn't go as a part of CapEx. But -- and that INR1,900 crores included, I mean, a normal when we were putting up the plant -- expenditure on the plant, now since we have acquired on the equity this quarter, the cumulative -- the upfronts but the amount spent during this [ fiscal ] or on the paint business would be marginally -- would be higher by about INR100 crores because we had planned about INR175 crores, and we will be spending in this whole fiscal, INR275 crores on the paint business. So to that extent, yes. But next year, it well get -- now since we have acquired and it will reduce other costs. So the paint business -- next year investment would be lower in the paint business. Yes, well within the INR600 crore approval which the Board has given and which we had committed. There is no plan. There is, I mean, all expenditures, we would be able to develop the paint business well within that INR600 crores.

[Operator]

[Operator Instructions] The next question is from the line of Keshav Lahoti from HDFC Securities.

[Keshav Lahoti, analyst]

Sir, what is -- what would be your lead distance maybe 2, 3 quarters later? So it used to be at one time 450 kilometers, now it's at 475 kilometers now. So how will it shape up post Panna?

[Ajay Saraogi, executive]

So post Panna, I think the lead -- overall lead distance will get reduced. So even for the North, it had increased a bit because we were serving certain markets of Panna where which was -- which had longer leads from the existing North plant. So post Panna, I think, overall, there should be a reduction -- exactly, maybe 30 kilometer reduction could be there. So it may go up to 50 kilometers. We are still working on all the details. But definitely, there would be a reasonable 8% to 10% reduction in the lead distance.

[Keshav Lahoti, analyst]

Okay. So maybe something like 440 kilometers, 450 kilometers types?

[Ajay Saraogi, executive]

Yes, yes, we should definitely see to that -- those levels.

[Keshav Lahoti, analyst]

Okay. And sir, how is the white cement business doing?

[Ajay Saraogi, executive]

So white cement is doing fine otherwise, even though the pressure on the putty still continues. There are -- I mean, all the other paint manufacturers are continue to be very, very aggressive. And we have now even in the gray, 2 gray cement producer has also entered the putty segment, and Wonder Cement has put up a plant in Rajasthan and even JK Lakshmi has put up a plant in Rajasthan only recently last week, they've commissioned a plant there of putty in Rajasthan, [ Alwar ] I think. So -- and there are -- I mean -- so putty -- as far as putty is concerned, it is becoming still more and more competitive. So that is the position which is definitely having some impact on the [Audio Gap].

[Keshav Lahoti, analyst]

Okay. Okay. So the number INR20 crore for branding, which you mentioned, is this for the entire company or just related to Panna?

[Ajay Saraogi, executive]

Pardon?

[Keshav Lahoti, analyst]

The number of INR20 crore that you said you spent for branding. So is this for the entire company?

[Ajay Saraogi, executive]

Incremental amount, which was spent for Panna.

[Operator]

[Operator Instructions] The next question is from the line of Shravan Shah from Dolat Capital.

[Shravan Shah, analyst]

Yes. So sir, continuing my previous question, I was asking, you mentioned that 1,15,000 is the Panna volume, but you also mentioned that you booked the revenue in standalone and not paying up Panna subsidiary?

[Prashant Seth, executive]

No, no, no. It is not like that. Whatever volume, whatever new market is fed from the standalone, that revenue [Technical Difficulty] volume is in that company and subsidiary, we had done the volume of 1.15 lakh tons, and that revenue is booked in the subsidiary only. The combined revenue numbers, the net sales combined for the gray cement operation is in the main company and the subsidiary is INR1,789 crores. And in the main company it is INR1,739 crores.

[Ajay Saraogi, executive]

So you see what happens, when we were -- see, when there was no production in Central India, and we had to seed the markets of Panna, so we had to supply from the existing plant. All that booking is part of the turnover and profit and everything of the existing plants.

[Shravan Shah, analyst]

Yes. I got that point. I was looking at the only number. So -- and the same way in terms of the White, at consol level, what is the revenue and what is the volume, so netting of the UAE volume in the standalone? So I want the same number, consol White revenue and consol White volume for this quarter.

[Ajay Saraogi, executive]

So we'll send you a separate mail the consol White numbers.

[Shravan Shah, analyst]

Okay. Okay. And the second thing in terms of the expansions in terms of the debottlenecking. So 2 million ton we were looking at to start by this March. So are we on track? Is there any constraint...

[Ajay Saraogi, executive]

We are on track. It's a normal upgradation and so we are on track. And I think before -- well within maybe in the last fortnight of March, we should be able to conclude this capacity. So we will -- our capacity will increase by 2 million tons by end of this fiscal.

[Shravan Shah, analyst]

So, sir, from the next quarter, that is the next year, about 1Q FY '24, that should not be a problem in terms of the increasing the utilization for this extra debottlenecking, so we can easily see the normal utilization, what currently we have, that should be the case for the extra 2 million ton.

[Ajay Saraogi, executive]

Yes, it will have a -- it will give us more flexibility as the market is growing, and we have not done any investment -- I mean, addition in the Northern market. So it will give us a space to expand our existing markets, both in the North as well as in the South. So we'll be able to do that.

[Shravan Shah, analyst]

Okay. Sir, though we definitely not look at the short-term borrowing as a number in terms of the present and we only consider the long-term, but still for the numbers sake, what could be the short-term borrowing as on December?

[Ajay Saraogi, executive]

So short-term borrowing is around between INR350 crores to INR400 crores. That is the working capital.

[Shravan Shah, analyst]

Okay. Okay. Okay. I was just looking at from the reported gross debt number. So that's what I was asking in that sense.

[Prashant Seth, executive]

See, in the gross debt, the short-term borrowing is not included.

[Shravan Shah, analyst]

No, for the -- per the reported balance sheet, the way we report in the balance sheet on the liability side, noncurrent and the current, so in noncurrent liabilities, we have a borrowing and in the short -- current liability also we have a borrowing. So that number, what we report normally for the last September or March, against that, what's the number that I was looking at.

[Ajay Saraogi, executive]

See, actually, that needs to be worked out because when you report in the balance sheet, even certain long-term borrowings, which are becoming due and payable within next 6 months, they are not forming part of the long-term borrowings and they get to short and short-term borrowing. So we'll recast -- we need to recast in terms of balance sheet and send you separately.

[Prashant Seth, executive]

Those are current maturities and the gross debt we are telling you the number, that includes debt. It is only the working capital facilities, which we are not including in the number which we are giving to you. [Technical Difficulty] [ INR350 crores ] to INR400 crores.

[Shravan Shah, analyst]

So as the standalone and consol, the number remains the same INR350 crore, INR400 crore.

[Prashant Seth, executive]

Yes, yes.

[Ajay Saraogi, executive]

Consol, it will not be because there is some working capital facilities which the Fujairah plant also has.

[Shravan Shah, analyst]

So at consol level, this number would be INR500 crores upwards?

[Ajay Saraogi, executive]

[indiscernible].

[Operator]

[Operator Instructions] The next question is from the line of Sanjeev Kumar Singh from Motilal Oswal.

[Sanjeev Singh, analyst]

So I wanted to understand about the brand positioning of our brand in the Central regions because the numbers for revenue and the volume which you gave, it looks like that the realization there is around INR600 lower than the normal [indiscernible] realized on which we report. So have we given higher discount in the beginning to make a market or there is something else to relinquish?

[Ajay Saraogi, executive]

No, no, we have not given -- yes, some additional discounts have been given, that is a normal course. But having said so, we had placed our product in the premium category only.

[Sanjeev Singh, analyst]

Okay. Okay, sir. And secondly, when -- still at Panna has not stabilized, so are we seeding the grinding rates from the North plant and that has led into higher lead distance or clinker requirement is being made from Panna plant as of now?

[Ajay Saraogi, executive]

So now -- as of now, mostly, if you look at January, then the most of the requirement has been met from Panna itself. But in the last quarter, I said in the quarter under reference, the clinker only started in end of November. So there was when -- December only exactly major all clinker has come from North only, even whatever has been fed into the existing markets, 1,15,000, which is the standalone sale. That is also majorly out of clinker, which has come from North.

[Sanjeev Singh, analyst]

Okay. So there should be some reduction in lead distance going forward in this quarter only, right?

[Ajay Saraogi, executive]

Yes, yes.

[Operator]

[Operator Instructions] Next follow-up question is from the line of Navin Sahadeo from Nuvama Institutions.

[Navin Sahadeo, analyst]

Yes. My question was about merger of the subsidiary Panna with the standalone entity. So by when is that expected? Anytime soon, please?

[Ajay Saraogi, executive]

Yes, anytime soon, given the matter is already listed with NCLT. And so I hope -- I mean, there was a hearing earlier which they had given a date. Our next date is on the 10th itself. So maybe we get -- see we can't -- from our side, we already everything has been submitted as to whatever has been the requirement. It is only -- I hope the hearing takes place and we get the order and there are no, I mean, complaints and the order get reserved and/or they may give another date. But otherwise, it should be done very soon. Everything is complete from our side.

[Navin Sahadeo, analyst]

So everything falling in place, is it possible that March quarter numbers can well be like Panna cam well be part of the stand alone entity and...

[Ajay Saraogi, executive]

So it may not be so, because the effect -- though the effective date of the merger is 1 April 2021, so we will be doing that. But the actual effect of the merger may take some time as a part of our scheme [Audio Gap] state governments to reconfirm on the subsidies and on the transfer of mining leases as an abundant precaution before we actually effect the merger. We don't foresee see any problem in that. It is being done as a part of abundant precaution.

[Navin Sahadeo, analyst]

Fair point, sir. These incentives which are linked to the Panna project, they start kicking in now or...

[Ajay Saraogi, executive]

Yes, yes. So when we are starting it, they start coming in immediately. So we just -- though we have already -- they are aware of this merger and everything is in order and they have said that they will make it effective once you bring the order copy to us, so what we have decided that we'll put it in the scheme that the scheme should become -- we would like the scheme to be effective immediately on our reconfirmation that this has been transferred to the parent company.

[Navin Sahadeo, analyst]

Understood, sir. Sir, just second question was on the paint business front. I think, Prashant ji, if I heard correctly, you said CapEx towards paint this year is more like INR275 crore. So I was just trying to reconcile this because for Acro acquisition, we have paid about INR153 crore and some another INR18 crore, INR20-odd crore is likely to be infused to pull up the capacity to whatever is promised. So that total is still more like INR175-odd crore.

[Ajay Saraogi, executive]

No, no. Actually, what happens, Navin, is that the whole consideration goes into the escrow mechanism. So I'm taking the entire amount transferred to the escrow mechanism as the investment. The first lot of acquiring 60% shareholding, that has already gone to the shareholders -- to the Acro promoters. The balance amount will go within a period of 1 year in 2 instalments, 20% after 6 months and 20% after [ 6 months ]. But the amount is lying with the escrow agent. So I'm thinking as far as company is concerned, whatever amount has gone into the escrow mechanism as an investment -- as an amount spent. That is the point. If we take the escrow mechanism, then the amount remains what [Audio Gap].

[Navin Sahadeo, analyst]

Right, right. Understood. Just one last question. You said putty business is getting even more competitive as we speak. So now from a company's perspective, how are we looking at this business? At consistent volume increase, but sliding margins? Or is there any other way we can attack this? Because I think there was also a plan of pursuing contract grind -- contract manufacturing of putty at remote locations or third-party rotations.

[Ajay Saraogi, executive]

No, no. So I'll answer the second part first. Some distributed manufacturing has already started, but that's only small pockets and not very big capacity. We are getting -- see, as a -- what -- with the -- whatever with the stiff competition in the putty business, so we are not, A, able to -- we have 2 things. One is to secure the present volume and also whatever is the growth in the market to get that, whatever is the market share, we don't lose the market share. So what we are trying to work -- I mean, we were had a plan that we could be able to increase our market share. On this direction, at least in this year, what we have been able to do, at least a marginal improvement in the market share, but we have been more or less there not to lose any market share. Though the margins -- because there are 2 things on the putty front. Even with the increase in the white cement cost, the white cement prices, the input, the raw material costs of putty are increasing. The chemicals are -- costs have increased, both in terms of the rate of chemicals, two, because of the rupee devaluation because chemicals are all imported. So all this is putting pressure on the putty margins.And because of the stiff competition, the incentives have also increased because now majorly, the paint guys are in the putty business, and they are giving higher margins, which need to be matched. And as I said, 2 new players are getting in, so they would like to get [Audio Gap] pass on some addition. So again, see, putty is getting from a specialized product to a commodity. And once they get into commodity, we have to be -- we can't have that edge, which -- I mean, unless we have edge in terms of, yes, though our putty is well accepted, we have a -- we still command a premium in the market, we still command a preference in the market. But with both the things, we cannot -- our premium cannot be very high. The bridging of the premium with the other brands has to be there to maintain the volume numbers.

[Navin Sahadeo, analyst]

Understood. But the Lakshmi and Wonder Cement's plan of putty, that is based on white cement of domestic source or this is more on the imported white cement?

[Ajay Saraogi, executive]

It doesn't matter whether they take domestic white cement or they take imported white cement that is immaterial because the white cement component is only between 16% to 18%. So it really doesn't matter and whether they take -- they will take white cement either from us or [ BW ] -- and even imported, it will be us or [ BW ] because there are -- mostly the -- all the imports are being done from UAE, it is RAK White and us. So RAK White is going -- now UltraTech is the owner of -- more or less becoming the owner of RAK White. So it will be again UltraTech or us. So that is there. But again, they try and take the other 80% of the raw material is local dolomite. So they are trying to whatever -- try and capitalize on that local dolomite and the existing whatever dealer network and retailer network and use that for the sales. So they are not investing so much, they are not investing anything on branding. They're not investing anything on aftersales service and all. They're only leveraging their gray cement network. As far as Wonder is concerned, they're leveraging their marble network also.

[Navin Sahadeo, analyst]

Understood. So is it safe to say that the margins, let's say, for our overall margins for the white segment business, are they -- are we seeing slipping below the gray business as we think? Or they are still a part...

[Ajay Saraogi, executive]

Firstly, presently, it would be at par. If you see even last fiscal, I would see most margins are more or less same. And what we had an advantage in the white business having 25% to between -- range in between 25% to 30%. So those good days are no more there. So we would see -- I mean, in line going forward, it could be marginally in line with the good -- with the paint companies' margins of around 15% or so.

[Navin Sahadeo, analyst]

Understood. Sir, just one last question, if I may. Paint -- since Acro Paints will get, in a way, formally integrated with us from FY '24, so what kind of revenue and margin guidance, if you could just help us with that?

[Ajay Saraogi, executive]

So see, again, as a plan -- earlier, by our entering into -- with the paint, earlier plan was we'll put up our plant and then also develop a market and there will be lot of investments in terms of the market development and all. With the acquisition of Acro Paints, a lot of expenditure towards market development, the formulation that has been -- we have been -- we should be able to save substantially over there. So though we had -- even in the paint business, in the initial years, projected a higher loss in terms of operating loss for the first 3 years substantially, when we were looking at, the capital investment was only about INR300 crores and balance INR350 crores -- INR300 crores was going in terms of partially for working capital and the losses. So we would -- we definitely foresee that the losses figure should be substantially reduced because the Acro existing is not a loss-making company. We will try and work out levers and our own putty network to grow the market. And so what -- we shall be doing that. And so, I mean, having said so, yes, to create a brand, there would be certain expenses, but we do not expect to huge losses in the paint business in the first year. But -- and on the top line, suppose Acro has top line of net of around INR70 crores, INR80 crores, we expect that end of FY '24, we should be able to do a total at least 50% to -- 50% increase, maybe a 75% increase on the top line.

[Operator]

[Operator Instructions] I now hand the conference over to Mr. Vaibhav Agarwal for closing comments.

[Vaibhav Agarwal, analyst]

Yes. Thank you. On behalf of PhillipCapital India Private Limited, l would like to thank the management of J.K. Cement for the call and many thanks to the participants for joining the call. Thank you very much, sir, and we will now conclude the call. Thank you, sir.

[Ajay Saraogi, executive]

Yes. Thank you, everyone, for joining.

[Prashant Seth, executive]

Thank you.

[Operator]

Thank you very much. On behalf of PhillipCapital India Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.