Orient Cement Ltd

NSE:ORIENTCEM

Earnings Call Analysis

Steady Performance Amid Market Challenges

Orient Cement faced a tough Q1 FY '25 with a 15% drop in volumes, yet managed to keep its prices stable and profitability steady compared to last year. Power and fuel costs saw significant decreases, which helped offset the impact of lower sales volumes. The company is strengthening its green power initiatives, expecting new solar and waste recovery units to be operational by mid-September. Though the demand outlook remains uncertain, the company maintains its strategy of not diluting brand value by chasing low-margin orders, focusing instead on long-term shareholder value.

Strong Brand Positioning Amid Market Challenges

In the recent earnings call for Q1 FY '25, Orient Cement showcased resilience in preserving its brand positioning despite significant market challenges. The CEO, Desh Khetrapal, indicated that the company aims to maintain its pricing strategy instead of compromising quality for volume. He noted that even as industry dynamics led to a 15% decline in sales volume compared to the previous year, the firm managed to sustain profitability and average selling prices. This approach demonstrates their commitment to long-term shareholder value over short-term gains.

Financial Performance Highlights

The company reported an increase in EBITDA per ton, rising from INR 650 last year to INR 750, despite these difficult market conditions. This performance contrasts sharply with many peers who either suffered lower realizations or deeper losses, showcasing Orient Cement's underlying strength. Their approach of prioritizing profitability over volume in a declining market speaks to disciplined management.

CapEx and Strategic Expansion Plans

Orient Cement laid out its capital expenditure (CapEx) guidance for FY '25, adjusting it downwards from INR 1,000 crore to approximately INR 150-300 crore. Plans include capacity expansions at key facilities—particularly doubling the capacity at Chittapur from 3 million tons to 6 million tons. The immediate focus is on optimizing existing plant utilization before scaling further capacity, emphasizing a strategic approach to growth.

Sustainability Initiatives and Cost Management

The management highlighted a strong commitment to sustainability, with expectations of increased green power generation with operational solar installations coming online. Notably, the cost of power and fuel has seen a decline, significantly reducing input costs to INR 1,337 per ton from 15.1% last year—benefits stemming from both energy efficiency initiatives and a strategic mix of alternative fuels.

Market Dynamics and Pricing Environment

Discussing market demand, the management noted that the overall demand remains soft, particularly in Southern markets, which have faced high double-digit declines. However, they anticipate a post-monsoon recovery driven by pent-up construction activity. The average price realization was stable despite aggressive pricing from competitors, indicating a strong market position. The short-term price outlook shows a decrease of 2.5% to 3% in July compared to the previous quarter as market pressures continue.

Future Guidance and Market Outlook

While the management had initially guided for an 8% volume growth for the year, they adjusted that stance, recognizing that it may be reevaluated in light of the current market trends. They have connected the potential for recovery to robust post-monsoon construction activities, suggesting that the second half of FY '25 might witness a stronger rebound.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Orient Cement Limited Q1 FY '25 Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Sahadeo from ICICI Securities. Thank you, and over to you, sir.

[Navin Sahadeo, analyst]

Thank you, operator. On behalf of ICICI Securities, I welcome you all to the Q1 FY '25 Earnings Call of Orient Cement. From the management, we have with us, MD and CEO, Desh Khetrapal. without any further ado, I hand over the call to Mr. Khetrapal for his opening comments. Over to you, sir.

[Desh Khetrapal, executive]

Thank you. Thank you, Navin, and a very, very warm welcome to all of you who joined the call right in time. We are waiting for a few more people to come, but I think it's unfair to you people who are joining to wait any longer. Once again, as always, extremely grateful to all of you for the time that we signed and show interest in our company.

In terms of highlights, I'm sure all of you have seen the numbers that we published yesterday for the quarter. What has not come in the numbers, I mentioned upon has always a positive for any company, and we are extremely proud of the fact that -- and the recently completed away that was a grade to work, which basically many of the top companies are participating in.

Not only have we been certified once again as a business to work for the fifth competitive year. But year after year, actually request scores are moving up. And we are -- right now, [ 93 ] which is 1 of the highest that we've seen anywhere. And not just that, we -- if you look at these across sectors, we are now in the top 50 companies with top scores like this -- top 50 for a company like cement, I mean, we're talking about the solar which is across all industries, tires of the company [indiscernible] We have the top 50 within the cement sector, we are the only 1 in top 100.

And in the building products and cement sector, out of the India #1. So it's like I said, a formation of the kind of company and the kind of culture we built in the company. And perhaps that 1 person of trucks. Secondly, we completed sensor ownership by our team members is what sort of keeps engaging the performance that we keep reporting to you all the time.

So that's an upfront thing. Second thing, which I really don't know whether I should be talking about it, but since in the works person, I also mentioned, but similar organizational bites to work along with great [indiscernible] they have a process in which to pick up a few people from the cloud. It's not as big a list as we greater away. But a short list in which I personally have been given the title of the most profitable leader for the second year, I mean last year also had a entrant got it.

So it's more for information than in -- it does sort of will make new field good that whatever I think I end up doing the people, the cost let do went following, but without question on it. Thank you.

Coming back to the highlights for the quarter. The -- I think the slowdown in the cement sector is visible from the fact that [indiscernible] data also has come out. It has actually shown flat growth over last year. This is for the, let's say, the country as a whole. But in terms of nuances, if you see obviously some reasons have had more growth from actually a big one with fairly large numbers.

Although the data doesn't get us that, but we do know that markets in Tenaga or markets in Canada, at least in our U.S. operation has been softer markets, not just now for many quarters now. What's unusual about Q1 quarter this year has been the fact that even Maharashtra total demand, including Mumbai City, the demand is down over last year. And that's more to do with the [indiscernible] obviously remain diverse in the national election probably something that.

There obviously hit rate that we saw this year in May, especially was extremely intense, which in some of the listed actually the construction work had to stop by the local authorities with the collector because in human for people to be able to do out those work and construction out this work.

Come June and the kind of range this year we had in the month of June, across Maharashtra all of our markets across Maharastha, Mini, be aware of that. including, I would say, markets not just in no even the reason like Gibela, for example, this year has got really, really a good range. But that meant during the time and gaining the construction activity does slow down.

So all that put together, obviously, has in the industry in terms of the total demand in our market has been a year. And the slowdown -- I'm sure all of us felt slowdown have actually started somewhere in the middle of Q4 FY 2012. And that was bought worse with the extreme and the general elections and the other points that are made out the now.

In some markets like Mona, for example, there was a strike by the people who get aggregates to the construction actioner. Absolutely great in refined carry on construction at -- so multiple factors that the fact is that we have struggled and we -- one thing that I would certainly like to point out is that this quarter has really been what I will call earlier of our grid and our commitment to our strategy of actually sticking to profitable business and not chasing earnings and because of margins and loss of value.

I mean we are here to create value for shareholders but -- if you start doing business is moving value for the shareholders is something that we don't excite to. And we try to defend our pricing even during the time when the prices were actually low. And that obviously has come at the cost of volumes being -- while I have mentioned in our market, the demand has gone down, but I think our degrowth of 15% over last year, certainly, we've seen unreal large growth even in our markets.

And as you know, we [indiscernible] 15% growth over Q4 is 31% growth simply because Q4 [indiscernible] drop there. So 15% degrowth is unusual over last year. And we obviously, in rupees crore as on the similar growth as volume basically indicates that our price realizations have actually been stable.

We've seen industry results. And I think any company which operates in our markets, if you look at, they have actually lost realization per ton on the [indiscernible]. We have more or less expected scale. There is around 1% over last year, but sequentially keeping it steady around the same level as I think I mean major thing, which is I take price because we play with a decided strategy and is probably not now.

Most of the who are regular on the call that we address other quarter, we will know that for the past many quarters, we've been talking about our strategy to shift our brand positioning upwards and not prices for product, which is cheap. Now I mean in a difficult quarter, you start rewarding your pricing in an immediate reaction to the pressure. When the brand positioning that, in our case, still work in process, we haven't quite got there and brand position shifting -- brand position takes a number of years.

We are well under our journey and we didn't want to roll the journey at this juncture by dropping the prices and going in the. But that is right the reason behind we not be a in the pipe of the volumes of the industry that we are happy that we managed to maintain our sales. And maintaining the sales obviously -- sorry, the price aviation enabled us that despite 15% de-growth despite fall in prices in the market, we managed to sustain our profitability, we are working the same as we were last year, which I think is something which I definitely want all investor and analytic statement of.

It's not an easy strategy. It is a continuing strategic restate industry. And I would say some would call it risky, but I call the bold strategy to say, there is another model of running cement business within the industry, which is -- most of the people are following the same track in we decided that no, we are not following that fact set of our strategy.

We expect to we maintain our prices. Volumes will come when we start getting the, let's say, orders which give us the kind of minimum threshold of contribution that I think this is perhaps, again, I'm just bearing your attention to the fact that last many quarters, we've been saying that we give us orders unless you make our social level of contribution, net of everything.

And in this quarter, we found many more orders which we had to refuse and the result was fantastic. The key ones here is that even when we are saying that give us volumes in our cost for pricing. We are not being silly in doing things which can actually hurt us in long run. What I mean by that is we realize that the consumer market or trade market, if you lose the market share, it's very difficult to regain the market share because the consumer sector is brand-driven.

They have loyalty brand and things like that. And if we actually don't feel them and don't retain our market share, it becomes very difficult in that the B2C market back to us. So we actually then aligning our prices with the trade sales with the industry leaders. We're not obviously aligning a price in category B brand at every [indiscernible].

We have come in the category of Cadia brands, and we are allowing our prices with them and staying competitive with them. And we obviously don't want market share that we will do deportees brand or times. But when it comes to B2B business, we have realized that B2B customers. Actually, about as to the brand, they are driven by the high quality of cement. Will the price be right?

So the current stake when we realize with the market prices in [indiscernible] very, very low, and we're not happy with the margins that we were taking. Those are the order to refuse. So obviously, the -- we worry about moving market share and the consumer market should not be carried in the mine. But B2B, yes, we were not volume and when the time is right, either a cost come down or the price become better. Is that the competitive prices in the customer away every order, every month is based on what some of the to I just wanted to assure all of you that is not a policy, which is the new ones, which we meet [indiscernible].

The -- I think from the -- The results that are published and many -- most of the companies any company this exposure to the market as is similar to ours. I don't think there's any 1 company in the industry which would have reported an increase in EBITDA per ton over last year same quarter. And we were at about 650 last year, we were around INR 750 this year, which is I think something that I would like to point out to all of patents.

I told you that we have retained our market share debt, those we are not leaving. And I still believe that adding capacity, which I think some of the industry leaders have been very listening, I'm sure I don't need to link the all of you know. So these large players, leading players have been adding to capacity. I think their clarity today seems to be increased capacity -- capacity utilization set the effect that they've got.

While we see that street their path to set the for and sell more volume in the market, their aggression to this more volume is keeping the pricing in the markets on the lower side, more so on the demand in any case, it's not really enough.

So the only option for people across them is to either spend to the pressure of very low prices and start moving money within losing money or to follow their own strategy and policy of making sure that this business being done is not big in the loss.

That's our philosophy at our company that we are following a [indiscernible]. We would like to make money on [indiscernible] salon on 1 bag. While the market conditions are what they are, it's the fact that many other smaller players also like us, we are not struggling with the larger volumes which are coming in now from the newly acquired capacity like the industry leaders.

And not just like some of them being we have now have plants which are closer to our core markets, we're believing to see that from paradise volumes are coming into our core markets and they are having at the prices which are lower than I wouldn't. Name the branch, but there are some of the leading brands that we've always known in our life in the index industry, who in the market will be selling their cement at 10% to 15% with investment the price of cement?

That is the reality. I can take pride in the fact that we have a position which even a price still that the strategy of some alien brand is all selling the way down our own pricing is something that is a matter of concern for the certain but also shows how the position of the market is. In base have accepted the pain of lower volumes while depending on pricing and profitability more for us, more important is also, as I mentioned, the brand positioning at what price are you available in the market.

And that we don't want to defer as I said, that [indiscernible] but the thing I would like to also assure all of you that we are monitoring the market dynamics very, very clearly. And we will ensure any responsibility management has to do that in this process, we don't create lasting risks for the company in terms of [indiscernible] that's been maintained.

We -- again, we keep talking about premiumization in we're talking about the repair brand. The fact of the matter is that despite what challenges we've had in the market in some of the overall demand. The growth that we have seen in our premium products is once again an evidence that the products that we've created and what we've launched in the market at a fairly significant premium.

I think our premium in the market is the highest on our premium brands. Despite that price gap over a normal cement, which reset very good quality. In Q1 of this year, the overall proportion of our premium cement put together at least 23%. And we are very close from the dividend. Even when we started our target initially is 10%, then we said we want to go to 25% and 23% has already been achieved. I'm quite sure by the time the end of this year, we will hit the target 25% of utilize efforts.

[indiscernible] on the call right now. I'd just like to remind him, when you were launching our first in brand in 2018 and a question to you was what's your ambition for the premium filing? Because obviously, a some of that that time was something quite not expected in the oil industry. And I don't know whether [indiscernible] recall. My promise to he was my bold other would be that or incent action should be selling only stronger than nothing else.

Remember that Manish?

[Manish Dua, executive]

I do. I do.

[Desh Khetrapal, executive]

So on traffic, let's see how long the take that we are here in the arena will be going on in the [indiscernible] We are not relating from that. It's not a new crater. I'm not saying it because we lost volume in this particular quarter. I'm saying -- I said it about 6 years ago. And that kind of a strategy needs execution, which is unwavering.

Then that we keep making to this quarter after quarter. Now coming to a little more detail that all of you are [indiscernible] In Q1, the -- our overall sales broken winters. We have sold 68% of our Q1 volumes. And in states has been 24%. Obviously, we're still even higher than what it was earlier.

The de-growth, obviously is largest in our southern markets, which is demand Karnataka, where we sell most of our mine which is a fairly strong double-digit where Maharashtra. Also in terms of total our sales to Rawas68% as a proportion of our total sales. But in this year, the growth in Maharashtra for a 5.5% over the last years compared to high double digits in [indiscernible] Karnataka.

BPBs of tier slightly higher because the consumer market in U.K. at a very, very low level. And the OPC as a percentage of our total unit [indiscernible] continues to be begin 45%, 47% in that range. I think the last investor call, I had updated a little very early may I said that on 29th of April the second stage of our basic recovering the balance what we have in the also has been continent happy to now report that with the rate recovery, which became fully operational and available to us in the 2 months, which is month of May and June.

And the solar power that we've been receiving our total I would say the power components in Q1 has reached a higher 24%, which is a higher product is a good position today. the benefits from rate recovery in Q1 as well, despite the fact that part of it was only for 2 months. And also the production is not because most recovery actually gives you a lot more benefit when we are gaining the programs all the time, which obviously the low demand has not been possible and we have to shut down in place also.

But despite that in the first quarter, the gain [indiscernible] recovery is close to INR 9 crores. And the -- solar has given us a net benefit over INR 2.5 crores. So these are the benefits of going green at the same time, giving value to shareholders. Our plans for expansion of solar power, which we have taken the approval from shareholders on signed [indiscernible] plant out of keep on song age that we've proposed [indiscernible] operations are small because yes, it should be operating any day now.

The Chittapur that we were actually putting up about 70 megawatts. That unfortunately has been delayed a little bit for us, and that will come into operation I think maybe 5 to 6 weeks' time, but mid-September, we expect the sale at will also to start contributing. So once seals comes in and waste recovery, I think the proportion of green power that we're using will go up even higher.

So that's a breakup on how we are doing power. In Q1, the par and fuel costs for us are down to INR 1,337 for cement, which is down from 15.1% in Q1 of last year. So obviously, there is a significant drop. And sequentially, again, there is a little bit of going there in Q4 of last year, we were cutting [indiscernible] which is now down to [indiscernible] which I mentioned. And just let me remind you on despite the fact that we are doing in the high 40s as a percentage OTC lending, which takes a lot more power. Our product mix right now is adverse because the OPC sales are much higher than what we would like to happen.

The landed fuel cost for us has been in this quarter is INR 1,785 [indiscernible] cases and so want to call it 1.75 per car that we typically are quoting a with last year in the same quarter was 2,100. And -- but in quarter 2, quarter 3, specifically equentially, it's almost flat, tenor. The fuel mix, all of you remain curious about getting questions later, so we call out right now. It's a domestic coal is 30%; pet coke, 22%; alternative fuels are 18%. Yes. So that's the mix that we have.

The fuel mix in PFI terms which we not give us a lot more of solid value per ton. So then it has become 31% coal and 56% per in terms of caliber come. But in terms of making up most of the rest. In particular can if you go as per [indiscernible] 31% core and 56% pet coke.

In terms of -- the total new or already mentioned it's already 24% than it was last year same quarter to 12%. I only updated on more solar power that are coming through very small part left balance at this time in September. That will be a very small part in this quarter, but thereafter start becoming available.

For us, we ultimately feel in this particular quarter have been slightly lower at 13% on AFR basis, which last quarter. But if you compare our sales with last year, you were at 5% only Socofrom 5% to 13% we keep increasing our efforts to maximize use of opening fees.

So as I mentioned to you, there is the benefit that we have achieved from that I've been very, very significant that's the wrong number. I'll come back to you look, they have been obviously more than double of what we consumed our automated over last year.

In terms of other metrics that you we want to case, in this particular quarter, I mean, overall power heat and power has been similar, but some marginal increase in ranging part simply because the machines the are not going full and because of low volumes on lots of stops and starts depending some inefficiency.

Some slight increase in the part count 6.7%, which was sequentially up 51.4%. So lower volumes convert was more in efficiency in the acid consumption, we are marginally lower as the the margin increased their fee financial for the company as a whole in Q1.

So the data [indiscernible] move power costs for us in this particular quarter [indiscernible], which is per tonne of cement is very Q4 that sequentially the quarter end. But if you look at last year, because 45 basis look is down to almost 60 drop largely coming in from the recital that we installed at [indiscernible].

Our fuel cost on assay, we purchase sales covers only that I'm talking in terms of certain some fuel cost was down to 9 49 from 11 14 last year and 9 15 the preceding quarter. So all this, as you would see, in terms of efficiency, we keep sustaining in terms of promised renewal power and in part, we're doing our job at you have already mentioned, we've doubled over the last year.

Our premium brand strategy seems to be panning out quite well, and we continue to follow our strategy of not trying to downgrade our brand in the market. That leaves me, I think, with some updates on the projects before I open to questions.

Our project now last time I had mentioned that we struggling with the location to be moved for environment clearing for reticent, which has been overdue. The fact of the matter is still be certain elections, there letterform. Somehow the units of the public hearing that we have already conducted the ones, but after that, they have come in.

And based on the -- all the paperwork, our applications or normal for expansion of capacity there. and also for expansion of mining. Both of them are already on the portal of ministry of even products. So some delays here because, obviously, intensity, a lot of shoe decay that will happen.

We are still expecting that, hopefully, in the meeting that there is for towards the end of August, our applications would be coming up before the committee for presentation and all the protein. So it's a question of now going through the process of presentations to the committee in [indiscernible] for us. And thereafter a few more weeks, we can approvals, which will enable us to start taking further action for implementation of the project. So there is a progress there.

So sorry, we are told that the one term which we wanted altered -- we understand formally that the Board has agreed to our request, but we have received more formal intimation as we are only after the formal international payer will make the every disclosure to the authorities. But right now, progress there is let promising, but we'll wait to will be getting official letter on the medication of the corporation, confirming that the terms of these accepted to them.

So again, not too long because we're both making over about 2 weeks ago, so on the minute should be out on day after it should get a formal letter. On the product clearance for developer minds, again, all the posse the highlight any risk Minister of Forest in Telangana government. So the minister has to just now sign the file and sell it across to delete the Ofo evaluation by the central government of all the products contribution measures and all that we put together. And that's -- again, the very last stage of Claros now because once it's moved from Panama government, it's like I said -- rest of the government has been processed, which will be administered for [indiscernible] the business.

So only thereafter we talk about I think by, as I said earlier, the priorities remain to cap capacity expansion because we keep seeing more and more demand coming from that and also to improve the situation for capacity implosion of our existing sales itself reducing capacity of center, Sony would be the next priority.

There's no change in the priority. And in terms of CapEx, I think seeing that we're already in the amount of others, and we think we take 3, 4 months before we can start doing some activity. The CapEx that I keep on using we seem to be sort of something keeping pushed back. And I personally don't think there will be too much of CapEx outflow on the projects at Chittapur. It could be just a couple of hundred crores or something inside in the non-people to mobilize and things like that.

But the real investments will put up some more site will come into next year. And because currently we certainly really far construction activity. And similar thing I would think certainly also will take about 6 months for the lending for us to start some activity.

So the CapEx front, I think we'll have lot of cash we do by the time it starts to heavy load in the mission. But in the meantime, in any case, we are beginning to touch base with some banks to see whatever money we need to bother to complete these 2 products at the total cost as we keep talking about real volume flows between the [indiscernible] expansion and [indiscernible].

So are ready now. But the delays in on clearance have been delaying our project execution ethane, but unfortunately count context. And in the meantime, the demand of also has been that great that we use a lot what we need to add more capacity. So that's the on mine as all the updates that I wanted to share, and I'll open the forum for questions and we'd happy to answer. Thank you. Thank you for question.

[Operator]

[Operator Instructions] Our first question is from the line of Keshav from HDFC Securities.

[Keshav Lahoti, analyst]

I Just want to understand the Chittapur and NV expansion, which was earlier expected in H2 FY '26. Now in all likelihood that will flip to FY '27. That is the right profit understanding.

[Desh Khetrapal, executive]

Okay. It could be early [indiscernible] I'm not able to say because I still don't have the in all the clarity that I hand a big bit of uncertainty possibly. It is probable, but Chittapur certainly the clinkerization and the grinding all put together, certainly a simpler place because already in the side the promising of power solution and the branding on it should normally take less time than a full integrated capacity. But we have our ante well placed because I still don't have all the currency that I need to start [indiscernible].

[Keshav Lahoti, analyst]

Understood. Got it. For few operating metrics number like trade share and lead distance for this quarter?

[Desh Khetrapal, executive]

Our lead distance as we keep saying is so marginally higher still we continue to be in the range of 300 to 310, 320. We have not valid that at all. So there is not much difference in terms of the business travel and in terms of freight cost also, we are more or less straight over the previous quarter. The question was the [indiscernible] one thing that you had mentioned. Page for us -- something -- I did mention that business sales as per of 56% in [indiscernible].

[Keshav Lahoti, analyst]

Okay. Understood. Last question from my side. I want to understand how is the demand now shaping up in Telangana market, which has been pretty weak. So we are seeing high double-digit degrowth. Any signs of pickup or when will it happen?

[Desh Khetrapal, executive]

Well, during the monsoon in case the demand is further lower, I mean the tactical matter, what we've seen of this quarter so far, the demand actually continues to be very soft all across, not just Telangana. But Telangana market, we still have to see a real time year for demand picking up because we can support and we -- it's not sure that needs to be there for people to start doing more investments and thereby increasing the demand. As of now, singles are still too much. So continue to remain worried about Paloma demand.

[Keshav Lahoti, analyst]

Understood. So what sort of volume growth you are guiding for this year? Earlier you're guiding 8% but that doesn't look now achievable. So what is the...

[Desh Khetrapal, executive]

If you promise me -- I think let me go through a little bit more we already had 15% degrowth in Q1, right? Q2, as of now, I think we'll struggle to make the same as last year. So if the first half of the year does not give us the required growth. Obviously, the full year forecast needs to be relooked at. I'm going to go to the monsoon gets so because the advantage with on a heavy monsoon, the intense months the time we are having right now is that post monsoon, the demand picks up very sharply.

Now that is the normal trend that we've seen in the past. The 2 things happen. One, there's a lot of pent-up construction which did not happen because there is a retail one. Secondly, the expensive rates also caused a lot of damage to infrastructure and housing. So a lot of demand consumers work itself, right? So why we would expect during the past trend demand to pick up in the second half, but I'll perhaps hold my work up for now and see how the markets behave by the time dancing lending. So next time, we can be a better idea right now is whatever pacing like a bad thing in the board. There's no data that I have to base on to say, I'll go by matching this view.

[Operator]

Our next question is from the line of Sumangal from Kotak Securities.

[Sumangal Nevatia, analyst]

My first question is on this quarter's performance. Now in the opening remarks, we compared with the last year same quarter, but just wanting to know if that is appropriate because if memory serves us right, last year, we had something around INR 25 crores, INR 24 crores of impact because of extended shutdown at Chittapur. So that is around INR 150 on a per ton basis.

[Desh Khetrapal, executive]

No, no. INR 25 crores is over the cost of shutdown. Shutdown cost only around between INR 8 crores and INR 10 crores. Never INR 25 crores.

[Sumangal Nevatia, analyst]

Crores. Okay. But there were some adverse logistics and fuel mix because of the shutdown. So overall, I think the impact was around INR 24 crores if our notes are correct.

[Desh Khetrapal, executive]

That is your calculation. I'm not agreeing to that.

[Sumangal Nevatia, analyst]

Okay. Okay. But was there any shutdown in any of sort of demonstrated activity this quarter? .

[Desh Khetrapal, executive]

Some small maintenance activities have happened at both the plants, but not a full branch at down yet. But it's not that the maintenance cost on the meaning the plants.

[Sumangal Nevatia, analyst]

Okay. Okay. Understood. Sir, with respect to mining lease in Rajasthan, has there been any start-up plan equation happening there? If you could just share some update on that.

[Desh Khetrapal, executive]

No, we have still -- we are in negotiations, but we've not closed any deals for the land in Rajasthan. Not any one.

[Sumangal Nevatia, analyst]

Understood. And sir, from the -- as far as 2Q is concerned, is it possible to share how is the price environment currently in July? And I mean year-on-year also, should we continue to see volume decline given the adverse weather or you should now come back to growth from 2Q onwards?

[Desh Khetrapal, executive]

As I mentioned in -- while answering the previous question, I did say that during monsoon, we have actually seen July also has been soft, very, very soft, both in terms of volume and in pricing. August 1st 5 days sales in this company. I think today, I was hearing from some of our markets that the wins are not there to [indiscernible] as single day time. Very sharp at times not so sharp but in our market teams have been persistent. We obviously -- and I did mention that while monsoons always present a struggle in terms of earnings.

And I have just said because you heard the previous answer. But we are struggling during the monsoon period, and we'll struggle to what we did last year in this particular quarter. But the expectation is post monsoon, the demand has put good monsoon. It became stronger. I just say that just 2 years back. So I would repeat that again for you. We do expect the demand to rise sharply once the rain stop because the construction activity has been held up. There's a lot of pent-up paceport that needs to be done. There'll be a lot of repower necessary, which has been caused by an extension in very heavy winds, on and to die. So the retail itself creates the motion demand for cement.

[Sumangal Nevatia, analyst]

Understood. Sir, is it possible to quantify the pricing, how soft it is on a sequential basis in July?

[Desh Khetrapal, executive]

I would say it is in the region 2.5%, 3% in July what over the previous quarter.

[Operator]

Our next question is from the line of Rajesh Kumar Ravi from HDFC Securities.

[Rajesh Ravi, analyst]

Am I audible?

[Desh Khetrapal, executive]

You are but slightly. [indiscernible]

[Rajesh Ravi, analyst]

Yes. Is it better now?

[Desh Khetrapal, executive]

A lot better.

[Rajesh Ravi, analyst]

Sir, my question pertains to, first on the expansion program. You mentioned that the clearances and all is real for it. So for FY '25 versus INR 1,000 crore CapEx, which we had guided earlier. What are the provision CapEx, which will happen in FY '25?

[Desh Khetrapal, executive]

Again, the first question coincides a couple of maybe INR 200 crores to INR 300 crores, not more than that.

[Rajesh Ravi, analyst]

So in that, you mentioned INR 100 crores or we will go towards a rates what sort of CapEx you are building in this year?

[Desh Khetrapal, executive]

In FY '25, I don't think that certainly would be more than INR 25 crores, INR 30 crores not more than that.

[Rajesh Ravi, analyst]

INR 25 crores is that nothing expected.

[Desh Khetrapal, executive]

It all depends on the land [indiscernible] will certainly will keep trying. And in this year, as we had said. So land base when they start happen, they can happen early. I'll still say maybe INR 100 crores for Radian and creating invest in Dagestan. Evolution of lamps.

[Rajesh Ravi, analyst]

You're not expecting anything to happen this year?

[Desh Khetrapal, executive]

At the moment to clears comes in, that's about INR 130 crores, INR 140 crores that I -- in fact, I talked about more. I talked about particularly in the INR 150 crores bearable. But we will have to pay to the government to finally get the statement that is converted into state clearance. That has to happen in this particular area, it's very vertical for us.

[Rajesh Ravi, analyst]

So that is around INR 125 crores you are building for this year.

[Desh Khetrapal, executive]

INR 150 crore.

[Rajesh Ravi, analyst]

INR 150 crore. And if I look at just your brownfield expansion potential at both the Geraud and Chittapur, what are the peak capacity potential at both these locations even if you do it gradually?

[Desh Khetrapal, executive]

No. We -- as I mentioned, the plan is to put up another 3 million ton cement capacity at Chittapur. Same to what we have today, we would like to double that stat 3 to 6, okay? Chittapur development driving intro. One is the centralization of developer and secondly, the grade capacity. Because a citation tire branding on size but we are going to be putting up this 2 million tons blending unit in Nalagarh that people see mentation we're going to be in a pro. And to that extent, Chittapur will be center expansion and only 1 million tonnes of additional branding. That's a consideration. And I would rather do forming first so that my in existing utilization of [indiscernible] and Devapur right now is a little low. So how would be to go to a new market using some grinding unit and increase the capacity like there and probably once the branding will start from to then come back to Devapur do the solution.

[Rajesh Ravi, analyst]

Correct. Correct. And the project cost, which you had earlier elected INR 2,000 crores for Chittapur combined will that remain or?

[Desh Khetrapal, executive]

NPM develop.

[Rajesh Ravi, analyst]

How much and [indiscernible]?

[Desh Khetrapal, executive]

No, no, no. I think that will be slightly higher than 2,000 because we did talk about data putting a base typically plant also, we have to went in some of the infrastructure that we infrastructure, but the renewal but go up in income later that license. Right now, let's focus on Chittapur at INR 1,500 crore then in terms of projects at 2 different projects are total CapEx to be 0. So when you were saying, I got a lot confused situation, I'm not connected. But correct automatical addition may be INR 2,000 crores between the 2 of them.

[Rajesh Ravi, analyst]

Okay. And there any number for the program that you tinker additional few million on clinker and 1 million and grinding it and the chapters that you're trying to ballpark what sort of CapEx would be?

[Desh Khetrapal, executive]

By the time we completed to be more like INR 1,700 crores, INR 1,800 crores.

[Operator]

Our next question is from the line of Navin from ICICI Securities.

[Navin Sahadeo, analyst]

First a couple of questions. So first is on prices, and I know that you never give a guidance on slide. We always maintain that sense. But since consolidation, the likes that we have seen in South, do you think there's enough consolidation that has already there to hope that prices should improve? Or in your view, what could be that 1 trigger, so to say, or 1 event that can lead to an improvement in pricing scenario of a broader industry level?

[Desh Khetrapal, executive]

That's a very tricky question for you to answer because people who are doing the consolidation for [indiscernible] on to only -- how do I answer that? I mean, look, end of the day, pricing in an industry where capacity utilization in India so remains struggle to between 70% and pining. The only way prices become stable then people accept the fact that trying to sell to the market more volume at a lower does not help and it does not help that company, does not help the rest in the industry also. Now that's a rational thinking. But when the business decisions start getting driven more by not so much by immediate profits, but either one on starting how will win, but in the short term, I don't ones. As long as that approach remains, it's very difficult to sort of innovate for for somebody who is in the pipeline like me to comment a bit all that event in which people will remain the priority for profitability being the topmost strategy. And here the on the industry leaders, I mean we know there are 2 large groups, both of them are right now. in the more to acquire more and add to the capacity, even organically, I think they're building more capacity, right? And when they be more capacity, if they decide to prioritize the volumes are higher, right. Prices will always be to, that's the fact.

So in this aggression on adding the capacity, both the acquisition and to organic construction and also to utilize all the capacity in the industry is not growing at that pace would always be designate pricing. That's what our learning is in tier it's difficult to tell what the tier would be just the normal business is that if we're adding capital what many adding capacity, what are we doing talking more capital. If we say we are not so keen on increasing the return on the capital, we are more interested in getting your market share and getting the volumes in. When you're changing a different party compared to what the shareholders want. So we want the investment to be profitable and accretion to their wealth, right?

What we hear in our business have learned and as far as 1 can we find you or in the long term the last period in the industry in any nestor in the market where these things have given a goal in pursuit of some of our business strategies, which may be rational from that company's perspective and nobody pit because they're in the tower company. It goes for its auto for us to reduce the return on capital at employing the nothing that anybody can say about it. So in that battle been investing more capital and reducing costs, return on capital employed. So that is the strategy on can only come by a loss in the entire industry. Not to just on that.

[Navin Sahadeo, analyst]

Understood. Understood. My second question then was about the -- like a strategy stance for Orient. And as you already mentioned that there are 3 sites that like our CapEx is we want to be pursued First is, of course, or and panettone are for and some -- along with the land acquisition and maybe for the sales is in sight and tragic as well. So from a strategy perspective, since these are like in a big-ticket CapEx plan. Is there somewhere or thoughts that we can -- because there are companies who have done that, that we can monetize the limestone lease in the Rajasthan Bank, which is not our core market as of now. and gain or rather strengthen our market presence like we are doing like prioritizing it up over and then or -- so is there a thought process that we can look to monetize the limestone in Rajasthan?

[Desh Khetrapal, executive]

Maybe I can only talk about the strategy of looking the Board, which I think at a particular time, everybody are very, very concerned that we must try and diversify our market because we are too much out in Maharashtra. We should be -- and the other one or one the opportunity available to us at -- I would say, at a at no cost of having to acquire limestone mines in another market because today, these days, we might come to you to auctions and the additional costs for you. The other point is our best opportunity to actually diversify our markets at costs which are not crazy. I don't think our Board is even considering the possibility of monetizing the [indiscernible].

[Rajesh Ravi, analyst]

Understood. Understood. And sir, my last question is for the DevCo location, can you please remind if the limestone battery get there? The royalty is standard at par to the industry rate? Or is it linked to some IBM-related formula now or for the expansion that we are looking at?

[Desh Khetrapal, executive]

No. Developer mines are the same royalty quite everybody recent, which is demand that's lady in the mine. If, let's say, the new Supreme Court drilling has come recently, which has given powers to stay government to maybe no taxes. That will create, I think, state-to-state variation that might have a potential depending on your -- wants to maybe move that through. But I'm telling me the situation as it persists is the purest it is same on royalty on limestone mining that ever in India, including us.

[Operator]

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

[Desh Khetrapal, executive]

Thank you. I always have [indiscernible]. So thank you all to you to patiently hear me understand to, asking question, which we need to clarify further. Thank you for keeping faith in us. I know we are playing with a confusion strategy to be to the industry. And what we can promise to you is that every decision that we take here comparable to all of you will come back and keep explaining to you how we are doing it why we are doing. But the goal all the time is to make sure the long term of this company is being protected through whatever actions that we can take as management of this company. Thank you for support and trusting us. Thank you.

[Operator]

On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

[Desh Khetrapal, executive]

Thank you, Evan. Thank you. Bye-bye.