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JK Lakshmi Cement Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 FY '23 and H1 FY '23 Call of JK Lakshmi Cement, 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 India Private Limited. Thank you, and over to you, sir.
Yes. Thank you, Melissa. Good evening, everyone. On behalf of PhillipCapital India Private Limited we welcome you to the Q2 FY '23 and H1 FY '23 of JK Lakshmi Cement. I need to highlight that JK Lakshmi Cement is also the holding company of Udaipur Cement Works Limited and, therefore, this call is also open for discussion about the performance of Udaipur Cement Works Limited.
On the call we have with us, Mr. Arun Kumar Shukla, President and Director; and Mr. Sudhir Bidkar, CFO of JK Lakshmi Cement. I would like to mention on behalf of JK Lakshmi Cement and its management that certain statements that have been made or discussed on this conference call, maybe forward-looking statements related to 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 results to differ materially from the statements made. JK Lakshmi Cement Limited and the management of the company assumes no obligation to update or alter 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 JK Lakshmi Cement for opening remarks which will be followed by Q&A. Thank you and over to you, sir.
Thank you, Mr. Vaibhav. And good afternoon ladies and gentlemen for this and welcome to Q2 call for FY '23. We have with us, as Vaibhav mentioned, Mr. Arun Kumar Shukla, our President and Director, and also my colleague, Mr. Rajesh Sharma. The results you would have seen, I don't have to harp on or repeat the results. So to say one time the next keep the floor now open for question and answers please.
[Operator Instructions] We have the first question from the line of Prateek Kumar from the line of Jefferies.
Congrats for the results and perfect management. First question is, can you highlight like versus peers our volume growth has been a bit tepid but our realization seems to have a significant difference versus what most companies have reported in the sector. So is there any material difference in our strategy since past 6 months, which have handled their realization better versus the peers?
Yes. I think our focus when it comes to prices and realization has been on a couple of things. One of course, how we are going to optimize the geo mix. So that is one area which we have been focusing on for the last so many months. Second has been the premium product proportion, which we are driving, because we do have some good products in our portfolio and we are trying to take advantage of that. And the third of course, I think other elements like product mix, segment mix also which has been in the focus of our team at JK Lakshmi Cement as a whole to drive realization and the top line.
So what could be our trade mix and focusing mix -- currently -- how do we look at…
Rendered cement production is about 67% right and 33% is OPC and trade also we are at about you know 54%, 55% now. There has been good improvement in the past few quarters on account of segment mix, which is trade and non-trade and product mix which is blended versus pure cement.
How is it staying like in past year and how do you see that moving forward next 12 to 18 months from current mix?
So, Prateek, you're asking about the outlook, business outlook or the…
Trade mix, has been now 54%, 55%. I guess it was close to 50%.
Our plan is to take it to beyond 60% in the next maybe 2, 3 quarters right. And blended proportion to about 72% to 75%. So that is our -- what our plan is.
And is there any specific focus on overall profit per tonne as a business under new leadership like any…
I think that we need to focus because that is very important and not only about top line but I think you have to really look at all elements of your balancing, right. So when I said that our focus, major focus is on the top line. Of course, I think we need to grow our volume, we need to grow our volume in the right market. We are our complicatedness is better than others. So this is one.
Second, I told you about segment and the product mix, which we are driving. And third, of course, the premium product which we have with us. So this is what the focus is on our top line. Of course, I didn't focus this on utilizing our full capacity with earning season or clinker adjacent unit and we are keeping a very close eye on each and every element of cost with our logistics costs. With our fuel costs, fuel mix, or power costs. I think this is what our focus is while we are working consistently on top line improvement but at the same time trying to better our performance in terms of efficiency at the plant and all other various things which takes our cement to the customers.
And the last question on your CapEx project. UCW project, the timelines for commissioning of the cement, the status of environmental clearance, et cetera, for that project?
So, for Udaipur 75% civil work has already been accomplished. Our target is to accomplish our clinker areas and unit, we hope to complete that project by March 24.
So the clinker plus grinding all by March 24?
That is as of now. The clinker would come a little earlier. So maybe around March and a month or 2 later is going to be the grinding facility.
[Operator Instructions] We have the next question from the line of Shravan Shah from Dolat Capital.
Before asking the questions a couple of data points. So first is non cement revenue under RMC revenue for the quarter?
Non cement revenue is INR 116 crores and RMC is INR 52 crores.
And premium was how much?
Can you repeat?
Premium, last time you said 14% of total sales is a premium product, sir. So, what was in this quarter?
It is more than 20% -- it's around 20% -- more than 21%, right, yes.
21% of trade shrinks or the total volume?
Total sales. So 21% is…
21% of total volume is a premium share?
21% of trade is volume.
What was the same number in 1Q FY '23, last quarter.
I think it was 1.5% lower than this.
Okay 19.5%. Okay. What was the lead distance in the 2Q?
Q2 lead distance just 395…
Still once again, I want to reiterate the first questions again. Still not able to understand clearly in terms of the realization, the growth that we have seen last 6 months particularly Q1. We have seen a 12% plus and this quarter only 0.4% decline though you have mentioned but if you can elaborate more, because this is -- that's the thing that is definitely positive for us, but we are still not able to understand. And how do we see, in terms of the pricing, for September, how much pricing, price increase we have seen in each of the states or the region where we operate. So that I want to understand.
So on pricing, you are right, September typically is lower demand wise and hence the prices falls over under pressure. Overall, we see -- industry wide we see a decline of about, 5% in the prices, right. Okay. So July, August, price wise, I think there was a lot of pressure, but the September prices revised a little bit during the back end of the month, maybe after 15th or so, right? So we have seen revival of prices towards end of September. And now onward, I think, this is going to [indiscernible] because demand is improving, right? So this is on market size. If you really look at our net sales, it has gone up by 8% Y-o-Y, right? And if you compare this with previous quarters, it's gone down by 3%. Okay. So while industry -- our estimation is about 5% lower. We are down by about 3% lower than the preceding quarter, and 8% up with respect to corresponding quarter.
But if I look at our trade sales, share has not increased. It has remained rather from the last quarter, it was 56%. Now it is 54%, 55%. Nothing has much changed in terms of the premium share also 1.5%, but the realization increased. So my -- not only my -- I think the entire street just wanted to understand in detail in terms of the, if you divide revenue by the volume, the realization growth that we are seeing in the first quarter and the second quarter of this year, it is much, much higher than the entire, all other peers. So that thing we are not able to understand. So my question is on the consol level. So I understand on the stand-alone for last quarter, we have changed the method. But on the consol level, nothing changed, it remains. But still we are not able to understand what is driving our realization growth?
And I'll tell you, Shravan. I think it's a very good question. And in fact, you have noticed when I started my conversation the first priority of course is geo mix, right? Typically, our presence is there in north, west and east part of India part of this, right. Prices in western part of India is better. So our effort was to maximize our sales in western part of our footprint, where prices are better. Just for give you -- to just elucidate this, non-trade realization or margin increase of west is much higher than trade in, let's say, some part of north and even a part of east, right? So our focus was to first optimize the geo mix. How we can sell more in the area where our margins are low, irrespective of the segment. So that is what is the first effort is, and that is what we have done in the previous quarter and even before, right?
So our -- we are consistently increasing our volume share in this part of geography, where our margins are better, irrespective of the segment. This is one, right? And then there comes, thereafter, within that area, how we are going to optimize, or maximize trade, right? So suppose we have optimized segment mix or geo mix, let's say, more sales in western part of India. And when it comes to north, then we are optimizing our trade and non-trade segment. If you go to east, the same way, right? So wherever our margins are better, first, we go for geo mix and then we go for non-trade. So it's the kind of hierarchy which we follow, right? We are not really looking at segment per se, why at all, we have divided that sale into segment because of the profitability of margin. If you get better margin in non-trade segment, I think we are not averse of that. And that is what we have done in previous quarters.
So just further more on, does our trade, nontrade price gap in last 6 months, has it reduced significantly versus Q4 average?
Yes. It has gone down.
How much was the -- in Q4 and now in the last 6 months, how much it has reduced, what is the difference of a gap between what we sell in trade and nontrade, on an average? I'm not asking the exact number, but broadly.
I think Shravan, a range is so wide, average would not be the right one. So I'll just give you an example. In case of west the gap in trade and nontrade is very low. It's about maybe about INR 200 a tonne, right? If you go to Rajasthan and northern part of it, the gap is about INR 1,200 to INR 1,400 a tonne. If you go to this I think gap is about INR 400, right? So averaging would not be the right way of looking at this gap between trade and nontrade. But there is a huge, I think, wide bank. So -- and that is why I told you that first focus was to really kind of capture some down trade also in the western part of our footprint, where trade non-trade gap was the list, right?
Last question is on the power and fuel mix. So what was the fuel mix for this quarter and the fuel consumption cost? Because last quarter, we said INR 1,700. And how do we see -- though we expected 20% increase this quarter, but it has only the 10%. So how do we see now in the third quarter, the power and fuel cost?
In this quarter, our pet coke consumption was about 48%, 39% was coal and balance was the other. Broadly, it was -- around -- remain the same in the coming quarters. Cost was, yes, you are right. We had thought that it will go up. But thanks to some additional low-cost inventory, we were able to correlate down to less than INR 12,000. Going forward, we see that overall fuel costs going up from INR 12,000 to INR 13,000 in the coming quarter.
So currently, for Q2, it was INR 12,000 and it will increase to INR 13,000.
That is what our expectation is in the coming third quarter.
And last on the working capital, sir, we have seen the INR 420-odd crores increase in the first half on consol basis. So do we see this once again reducing in the second half, so that if you can clarify?
That is increase in working capital is on account of the stocking of the pet coke and coal, primarily on account of that. So it may -- depending on our strategy going forward of sourcing pet coke and coal. It may -- it is expected to come down. That is what we believe.
[Operator Instructions] We have the next question from the line of Kamlesh Bagmar from Lotus Asset Managers.
Congrats on a good set of performance. Because I have one question, like since we had changed that volume accounting or volume presentation for stand-alone operations right from Q1 FY '23. So can you like say, give the numbers for the Q1 and Q2 of last year to have the like-to-like comparison.
Like to like -- because it will be enough for us to give because last time we had accounted for as the clinker sale and all that. So that will not be proper. But for the sake of giving the figures I'm telling you. In the corresponding quarter last year, we had total -- on a -- you want on a consolidated basis, no.
Like, say, because what happened that there are some doubts in the market that our volumes in standalone has gone down because we don't have the like-to-like volumes for the last year on the stand-alone front.
I will give you. On a stand-alone basis, this year, you have the volumes. The 22.36% is cement sales and 0.69% is the clinker sales. Total in this quarter is 23.05%. In the corresponding quarter last year, our cement sale was 20.43%. So there is an increase in cement sales by 7%, but clinker has gone down. Last year, it was in corresponding quarter, 1.48%. So that has reduced from 1.48% to 0.69% clinker sales. Overall, it is -- this time it is 23.05% last year, it was 21.95%. Overall growth is 2%, clinker and cement included. But importantly, cement has grown by 7%.
And same for the Q1 for last year?
Q1, I don't have because I have the for the corresponding figure quarter I have kept it ready.
And sir, lastly, like if we see the -- our performance or the margins in this quarter, they have been far better. And the way the gap between our and like for the peers, the margins are like say that the gap is hardly around INR 100 now. So going forward, like I believe in this quarter, we had some benefit of low-cost coal, which peers may not have.
Right.
So going forward, do we see this particular trend going on, like, say, INR 150 to INR 100 gap because over the years, we had this particular argument that on the logistics front, we are not that competitive as against peers because of our plant's location in Sirohi. So have you been able to contain that particular impact, are margins going to remain, like say, now the gap is going to remain INR 50 to INR 100 compared to our peers. So what's the thought process on that part?
Actually, I can't comment on the fuel cost of the other players. We can talk of what we are doing, as I mentioned in response to an earlier question, our fuel cost is expected to go from about INR 12,000 cost to about INR 13,000. I don't know about the other. But yes, this quarter, we have been able to substantially reduce other overhead. Our endeavor would be to continue to work on that and improving as Mr. Shukla mentioned, the geo mix, et cetera, which helps us to reduce the logistic cost also doing more of direct dispatches and trying to reduce on the need as -- so that should help us to bridge that gap going forward.
And sir, any measures we are taking in each market to bring down our power cost or anything -- any particular effort going on there?
East, we are trying to evaluate the possibility of increasing from the renewable sources, trying to see if we can put additional solar power to reduce the cost of thermal generation and that we are evaluating.
So how much -- what is the potential there? So -- what can we do there?
Can do about maybe because of the availability of -- we can go up to an additional we can -- we'll need to make some investment. We are evaluating the proposal maybe about 30, 40 megawatt we are trying to evaluate.
And lastly, sir, just one analysis.
Instead of doing the entire CapEx in our books, we'll try to get some implementer implement the project for us and we take a stake in that. Because as of now, the state of Chhattisgarh allows the various benefit under the captive route by taking only 26% stake. So we are evaluating as of now. So that could -- will come with the concrete plan going forward maybe in the coming -- in this quarter.
And sir, lastly, like, say, on the console side, if we take out the non-cement revenues then it seems that realizations have fallen by INR 94 crores, INR 95 crores. So it's not the case that our realizations have not fallen. It has fallen, but to a very nice quantum, that is INR 94 crores because you have provided the non-cement revenues. So based on that, your realizations have fallen INR 94 crores. So is it on the current line?
Yes. Other players who are commenting other colleagues of yours who were commenting was maybe because of non-exclusion of the non-cement revenue. Last year, in the corresponding quarter last year, it was INR 92 crores. It has gone up non-cement revenue to INR 116 crores. If you eliminate that, what you are saying may be right.
[Operator Instructions] We have the next question from the line of [ Tushar Sarda ] from Athena Investments.
All my questions have been answered.
We have the next question from the line of Rajesh Kumar Ravi from HDFC Securities.
I have a few questions. Some of them have already been answered. Could you share the clinker production number for this quarter?
Sorry. Income.
Clinker production in Q2.
Clinker production in this quarter was 19.47 lakhs. 14.69 lakhs.
15.69 lakhs. This is stand-alone, consol?
14.69 lakhs.
Standalone or consol, sir?
This is stand-alone. And UCW was 3.8 lakhs. So on a consolidated basis, the clinker production is 18.49 lakhs.
Sir, if I look at the purchase of traded goods, that number is sort of considerably. I assume this is with regard to the on arrangement with Kanodia Cements. So how is this being accounted, sir, you are booking the sale of clinker to them and the purchase of cement from them and subsequently, sale of that cement is moved into the top line again.
Yes. That will be the way it will be accounted for the…
Okay. And…
To do that way.
How much would be the volume from this Kanodia Cements, if that would be in Q1 -- Q2 number?
About 70,000 tonnes, right? So we started during this monsoon season. So in the end of August about 70,000 tonnes.
And by March, what sort of number you're looking at?
So we have a ramp-up plan for this outsourced unit. And we have a plan to take it to about 60,000, 65,000 tonnes by March 2024.
So 60,000, 65,000 tonnes per quarter?
No, no, per month.
And this quarter it -- 70,000 tonnes. So yes okay. If you're looking to increase your blended cement by another 600 to 700 bps. Similarly, trade share should go up. So a sharp jump in next see, as you mentioned, 2 to 3 quarters. So what are the strategies which are -- which gives you confidence?
And the question is not clear.
Am I audible now?
Slightly better, better yes.
Yes, yes. Sir, I wanted to understand from 54% trade sales, you're looking to go up to north of 60% over next 2 quarters. And similarly, your blended shipment share is also expected to expand and which is a good thing, given that you're running high on clinker utilization. So what is giving you this confidence in terms of your strategies, distribution?
I think we are reasonably confident that the steps which we are taking at the ground level that is going to help us. And more so, I think although the efficiency -- ground logistics efficiencies, which we are looking at, I think that will also help us to achieve this. So we are reasonably confident that it will help us to achieve our objective of blended cement.
Second question pertains to -- and earlier participants have also wanted to know this. In terms of realization, see, we understand sequentially, all markets witnessed pressure on the realization while on a blended basis, your numbers don't reflect that. But for your own markets, can you give us a sense what was the like-to-like realization form across north, west and east markets for you in Q2 quarter-on-quarter?
I think market-wise, we are not ready with all those realization data. What we have as of now is the consolidated one. Perhaps I think we can maybe we can discuss or send you separately this data.
Sure, sir, I'll discuss with you on that. In terms of 2 more questions on the green power usage, what is the current green power consumption and what are the targets from FY '24 what sort of green power number you're looking at on consumption basis?
We are working quite intensively on improving our green power proportion. And right now, we are close to about 25% of cement renewable source of energy.
And where do you see this number going up?
So we see that the numbers should go to about 37% from currently, we are at 35%.
You're already the highest in -- and other expenses numbers on a quarter and if I look at quarter-on-quarter, they have come off despite lower volumes quarter-on-quarter. So is there any deferment in the maintenance expense or some other costs, which was building up in Q1 has not come through in Q2. Could we explain the Q2 other expense numbers.
Other expenses have dropped in this quarter, you are right. But a major portion of that is like other expenses includes taking commission stores and spares, which are in direct proportion to the change in the production. So production has fallen, so have these expenses. Overhead, we have slightly been able to reduce on that. So broadly, the fall is in line with the fall in the production.
We will go to the next question from the line of Navin Sahadeo from Nuvama Securities.
And congratulations on a very good set of numbers, much ahead of Street expectations. Sir, two questions. One is, are we also looking at or in a way already able to narrow the price gap versus peers because since Shukla-ji in his initial comments said the prime focus is on the top line and revenue. So I'm saying, is there already an implementation or a thought to narrow the price gap? How do you see this?
Yes, yes. I think you're right. This is one of the major value driver when we talk of top line. And we do have identified a few actions, which we have started implementing market-by-market. And perhaps this implementation part would be over by end of this quarter or maybe it will extend till about January. And hopefully, I think February, March onward, we see that in our prices, price gap very [ tender ]. And we do have -- we have clarity in our thought as to what we need to do in order to reduce this gap. So all those actions are being taken.
Second question that I had was on the cost front. So of course, I think on the power utilization front in terms of overall energy consumption, I think we are already at a fairly low level, even I think both at the clinker stage as well as at the cement stage. And you said you are looking at adding some wastage recoveries or more green, renewable energy per se at the eastern plant. Apart from this, what are the other initiatives which are possible to like pull the cost down further, both from a near term or even it's a medium-term kind of a thing. What could be those revenues, sir?
Okay. So I think renewable is one part which we are working. It is going to help us to reduce costs. So that I told you that we have -- we are already at 35%, will go to 37%. Another big area where we are working on is alternate fuels [ EWA ]. Right now, we are at a not so great level, like about 3%, 3.5% level. Our plan is to take this EWA proportion to 10% in the next 9 to 12 months' time. And for that, we have already started developing our capabilities at our integrated units. So that is a second major action which we are taking, right?
And the third action also is on how we can really use cost-effective raw materials. So just to give you an example, maybe from mineral gypsum versus phosphor gypsum, right, chemical gypsum versus mineral gypsum for fly ash right, also, I think different sourcing fly at sources and different kind of fly at -- availability. So that is another thing, raw material part also, we are looking at it very closely as to how we can use all those resources to reduce our costs without compromising on our promises to customers. So that is another thing which we are working on.
And as you know, I think we are already competitive in terms of heat value, power consumption. But we are not at all complacent, let me tell you. I think there is an endeavor to further reduce this cost element, by 2 ways: one, of course, straightway improvement of efficiency. Second, also, if we can improve productivity to an extent with some low CapEx intervention. So these are the few actions which we are looking at.
I'll just leave this with one feedback. But why JK Lakshmi is taking so many efforts like to spruce up the profitability, it will be really great if like, if you can also have some sort of a quarter presentation, which gives volume data and more importantly, the ESG milestone targets if there are because most of the companies, other cement companies tend to talk about this and investors also incrementally are getting aware of ESG targets and the road map that the company has. I think if you include it in the presentation form, it will really help JK Lakshmi really to -- not just the realization graph which you are trying, but also the valuation gap in mind.
We'll do that, we'll upload that on the website in near future.
We have the next question from the line of SimranJeet from Omkara Capital.
Congrats to the good set of numbers in a challenging environment to all the management. Sir, I have only one question. I want to understand what is the…
Your voice is breaking, can you repeat your question please?
Sir, I just want to understand what is the JK Lakshmi focus on the debt, to bring down the debt of the Udaipur Cement, how the company is focusing on that in the future? I mean because you're still having close to INR 1,000 crores of that mix of long and the short in the --with the good cement. So that is the only point which I want to understand how the JK Lakshmi team is focusing on bringing down the debt of the…
Basically is in the process of implementing this project of expanding its capacity in clinker of 1.5 million, which will take their capacity to go from 1.5 million to 3 million and cement capacity from 2.2 million to 4.7 million. Then that project will cost INR 1,650 crores and we are planning to contract and to fund that to a debt equity of 2:1, contracting INR 1,100 crores of debt. So basically, we don't have any immediate plans to suddenly bring down the debt. They already have about INR 500 crores of debt based on the existing CapEx, which they have done in the recent past. And gradually, it will get paid off from their cash flows only. No immediate plan to as such, pay off any debt because otherwise, that will require induction of funds from JK Lakshmi only. We are, in any case, going to fund about INR 400 crores through the rights issue, which will come in the next year. So no immediate plan as such. But yes, to the extent possible, we'll try to pay off from their cash flows only.
This INR 400 crores of the rights issue is for Udaipur or for [indiscernible]?
[indiscernible] part finance the expansion project. So out of INR 1,650 crores, INR 1,100 crores comes by debt and INR 550 crores is the promoter's contribution. And out of that, INR 150 crores comes from the internal accrual of UCWL and INR 400 crores would be to the right issue size of UCWL. And JK Lakshmi being a 72% holder of shares in UCWL will have to fund a major portion of the rights issue, balance 28% coming from the public.
We will move to the next question from the line of Parth Bhavsar from Investec India.
Sir, I just had one question that you said that your geo mix is improving and the focus going ahead would be on the geo mix. So can you help me with this, like in this quarter, what was the geo mix in percentage terms that you could share?
So we have divided the different geographies into GY&R we call it green, yellow and red. So green proportion is going up month after month, right? And our green proportion as of 30th of September was more than 55%.
So green is basically blended cement?
No. The green is based on the margin, right? You talked about geo mix, right? I am talking…
So in terms of red not…
Yes. So what we have done is all markets are divided into GY&R, green, yellow and red categories based on the margins which we get, right? We try to sell maximum quantity in G area, right, where margins are.
Okay. So green is right now at 55%. And what was this number last year?
It was about 52%, 53% report.
And yellow and red, if you could.
I think red is, I think, building the fastest, right? So red still is about 12% around.
And this was red was, what was it, red last year, sir?
15%.
15%.
We have the next question from the line of Uttam Kumar Srimal from Axis Securities Limited.
Congratulation for a great set of numbers. Sir, my question relates to gross debt and net debt position on a stand-alone basis?
Sorry.
Gross and net debt on a stand-alone basis?
The stand-alone of our total debt on a stand-alone basis is about close to INR 900 crores and net is about INR 225 crores.
INR 285 crores.
INR 225 crores.
And sir, we have reported EBITDA turnover was around INR 600 crores for this quarter. So what kind of EBITDA turn we are looking in quarter 3 and 4 since commodity prices also softened.
It is difficult to pinpoint a figure of EBITDA. Target is to ultimately go up to INR 1,000 crores EBITDA. But considering the increase in the fuel cost, it may take some time for that to actually materialize. But endeavor would be to ultimately have a 4-digit EBITDA.
And sir, what has been our rail road mix this quarter?
In east we don't have much.
I think rail proportion is the less and maybe -- we do not have the exact data we can give you a little later. We're not carrying that. But I think majority is road only. That way. Only west I think some of the market we go through rail. Otherwise, it's all road.
[Operator Instructions] We have the next question from the line of Dharmesh Shah from Emkay Global.
Congratulations on good set of numbers. Sir, my first question is on the company's strategy side from the next 2 to 3 years perspective. And if you can just prioritize what are the #1 priority and #2 priority?
Yes. So I'll tell you the top level strategy. I will give you, and this is what in fact we are working on. One, of course, I think we are working with a lot of focus and a lot of intent on the top line. And when I talk of top line, then it includes improving volume, it includes quality of volume, which I told you, the geo mix, how we can sell in the right area at the right price, right? Our focus is leveraging our brand because we do have some good products in our portfolio of how we can leverage and really kind of go to the customer with the right value and the right kind of product and services which we have. So leveraging our brand, which we have. We are also working on -- I think some of you asked the question of price positioning, how we can really improve our price positioning. So this is also a strategy.
There are some milestones which we have set for ourselves. We have started working on that. So that is another one. And of course, I think blended cement and trade mix wherever favorable, that is what the top line strategies are. And for each and every element, we do have quantifiable numbers as to what we are targeting and how we are going to achieve that. So those things are in place. When it comes to operations, I think our focus is on renewable energy. How we can really take our renewable energy from 35% to maybe beyond 50% going forward. For that also, we have prepared some road map. That which is a combination of solar power plant, wherever possibility of improving efficiency in [ WHR ] right.
Then on fuel, I think our strategy is to improve our AFR, AFR we are there at about 3%, 3.5% now. How we can really go to 10% at the first place and then to 15%. And for that, I think we have already started working on that. We are also working quite intensively on using digital and technology to drive performance. We had started a pilot project in our kiln as to how AIML can help us in kind of improving our kiln efficiency and also improving optimal fuel mix. We have also started kind of monitoring all our critical equipments through this IoT, Internet of Things. So a lot of digitalization, which is happening in the operations side. At the logistics front, our focus is to really work on a lead, how we are going to reduce our lead.
And if we really achieve our geo mix target, then I think it is the result of -- so this is, in a way, I would say the lag indicator, but the leading indicator, of course, is geo mix. PTPK is the pure logistics factor, which we are working on how we can reduce PTPK with a lot of analytics and also using technology. So OTM, we have implemented in all our plants, Oracle Transport Management so how we can improve turnaround time. And hence, if we can really work on reducing our PTPK and logistics cost. So that is the other area we are working on. I think a lot of things on customer interface. So using digital, give them a differentiated experience like now our dealers place their order over WhatsApp, right? So WhatsApp bot we have recently launched.
They have got their app, they can place their orders through mobile. They can look at their account statement and all those stuff. So I think there also, I think, is going to help us to achieve our in a way top line and the positioning which we are seeking for -- our focus also is on ESG. I think which combines a host of things, some of the things which I have already mentioned you. But yes, I think ESG front, I think, is one of our focus area where we are going to work on reducing carbon footprint. We have taken a very ambitious target of being carbon neutral by 2047. And right now, just to give you a sense, we are at about 555 kg per tonne of cement as of today.
Our focus is to reduce this and being the -- among the best in the industry. So that is another focus which we have. So this is what I think broader, I would say, strategies which we have, which includes, just to summarize on top line, driving top line performance in terms of volume, premiumness and pricing. On operations, it's all about operational efficiency using different means like renewable AFR and digital. On the customer front, using the digital to really give them the right value and get the right value from them. On logistics side, I think using digital and a lot of other methods like OTM and e-bidding those things we are working on. So this is a nutshell, I think, our strategy.
Sir, secondly, our mean distance are broadly flat on a quarter-on-quarter basis. But what does it explain the decline in the freight cost per tonne?
Freight costs per tonne.
So looking at consol basis?
It's 1263 per tonne.
We are trying to increase the proportion of direct dispatches, which is helping us apart from the PTPK and other things.
We will move to the next question from the line of Vishal Periwal from IDBI Capital.
More clarity, if you can just provide on the band which you mentioned green, yellow and red. So what kind of -- I mean like sales qualify for a green, any particular EBITDA margin or threshold that is there or it will vary every quarter.
So that varies because based -- you know that situation is quite volatile, right? So this GYR is dynamic. So typically, right now you cannot really put EBITDA because maybe during quarter 1, EBITDA green would have been different than what green is today, right? So this is based on the band of margins which we have from different markets. And based on that, this is dynamically decided that this is what GY&R is. And typically, those -- see, we have a metric of just to give you a little bit more on this. We have a metric of one -- this total delivered costs in that particular market and the margin, right? In a way, most of the time, I think this is in the direct relationship. If you are logistics or total delivery cost is low, then typically you're going to have better margins. Unless you have different market dynamics, where prices are not operating that, right? So we have a metric of total delivered costs and margin and market share. So based on that, we kind of categorize our market in categories of GY&R.
So just a clarification. So this GYR, it's not per margin. It is a combination of 3, is it some sort of data you are going.
Right. But invariably, your TDC is lower, then I think typically, those markets are going to be falling in that in a green category. If market dynamic is entirely different, that is a different issue. But that is, I think, a very rare, right?
But then you did mention in this call that west has been a better market. So can we broadly say green is something probably west region or…
Yes, you're right. So maybe I think the green is the west region, Y typically, some of the markets of north and red is the far off market. Yes, you are right.
And last thing is, can you give clarity like how is the pricing behaving for us in the market. I think you did mention like from September onward, there has been a price hike, which is their -- moved also there in October. And can you give us some color like region-wise, which has been better market for us in terms of pricing in this quarter 3 probably season?
September, I think I told you that a little bit inching of prices towards the fag end of the month. October more or less has been flat. There has not been any increase because of the reasons like demand was again low the Dasara, Diwali both in the same month and also prolonged Southwest monsoon, right? But November onwards since I believe that demand is going to pick up, and we do have some initial signs say -- initial sense towards that. So prices will definitely likely to go up, I would say, in coming months, which is going to be better than October. But again market dynamics, we -- just based on the demand situation, we can reasonably say that yes, prices will go up.
Thank you. Before we move to the next question, we would like to inform participants that due to time constraints, we will be able to take the last 2 questions only. The next question is from the line of Ankur from Quasar Capital.
Congrats on a good set of numbers. Sir, all my questions have been answered.
We have the next question from the line of Amit Murarka from Axis Capital.
On the intent of kind of improving the price realization. So I just wanted to understand like how are you going about it in terms of your distribution network? Are you also trying to revamp your distribution network to do the same? Or is it going to happen through the same network?
Thanks. I think very good set of questions. It's also about -- see margin and prices not only is the function of the right case or the right [Technical Difficulty] also the proper channel, which you have. And I think whoever has mentioned in a lot of write-ups that this also really affects the margins to some extent. So yes, I think we do have a strategy, what we call is the channel strategy. So what kind of channels we are going to set up, like is there going to be a balanced kind of architecture include some big dealers or maybe more midsized dealers and not too long tail, right? Based on the competitive environment and competitive landscape, we do have a strategy to set up a design channel architecture in different markets, right? So what kind of dealers we are going to have. And of course, I think that also is part of our strategy when we talk of improving our volume and premiumness in the market.
And but generally, like when you go about like doing some changes in the dealership network, like typically, how long can it take to revamp this distribution channel?
I would not say this revamp. I think I would say this process of metamorphosis is right. It takes time and you do this gradually and in a designed way, right? Because you were in the market and I think revamping, I would not really go for entire revamping right away. Probably I think what you can do is without -- just for example, if you want to really grow a certain set of dealers, let's say, mid-size or lower segment dealers, then you have your strategy aligned to that rather than -- 2 ways are there kind of improving a set of dealers, either you kind of improve their volume and improve their presence or you reduce the upper one, right? But I would say, I think what we do, I think, we'll improve all of them. And probably the desired one will be improving much more than the other one. So this is the way we are going about it.
Ladies and gentlemen, that was the last question for today. I now hand the conference back to Mr. Vaibhav Agarwal for closing comments.
Thank you. On behalf of PhillipCapital India Private Limited, we would like to thank the management of JK Lakshmi Cement for the call and also many thanks to the parties for joining the call. Thank you very much, sir. Melissa you can conclude the call. Thank you.
Thank you, Vaibhav.
Thank you, members of the management and Mr. Agarwal. Ladies and gentlemen, on behalf of PhillipCapital India Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.