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Sagar Cements Ltd
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Good morning, ladies and gentlemen. Welcome you all to the 1Q FY '24 Results Conference Call of Sagar Cements Limited. We have with us from the management, Mr. Sreekanth Reddy, Joint Managing Director; Mr. K. Prasad, CFO; Mr. Rajesh Singh, Chief Marketing Officer; and Mr. Soundararajan, the Company Secretary. We will start the session today with an opening remark from the management and then we'll be open followed by a Q&A session. I request all the participants to be on a mute mode during the course of the call. I would now like to hand over the call to Gavin Desa of CDR for his opening remarks. Over to you, Gavin.
Thank you, Manish, and thank you for the introduction. Just to add that I would like to point out that some statements made in today's discussion may be forward-looking in nature, and a note to this effect was stated in the con call invite sent to you earlier. We trust you all received the presentation and the communication results. I now request Mr. Reddy to commence his opening remarks. Over to you, Sreekanth.
Thank you, Gavin. Good morning, everyone, and welcome to Sagar Cements earnings call for the quarter ended June 30, 2023. Let me begin the discussion with a brief overview of the market in terms of demand and pricing, post which I will move on to Sagar-specific developments. Overall, the industry in general has been good volume growth during the quarter on the back of steady demand from both housing and infrastructure segments across regions. Input prices as well continue to trend lower, auguring well for the business in this sector. Higher utilization levels amidst steady demand, coupled with lower input prices, should help improve the overall profitability of the industry over the coming quarters. Despite stable demand, realizations though, have remained more or less benign in turn capping the overall benefit from the moderating raw material prices. On the whole, we remain optimistic about the sector's prospects as we believe demand and eventually pricing both should improve on back of government's infrastructure push coupled with demand from urban housing. Let me now move on to our quarterly performance. I would just like to highlight that Q1 performance was largely impacted going through the maintenance shutdown undertaken from Mattampally's line 2 clinker production that coupled with competitive pricing environment across our key markets, banking on our quarterly performance. With that, let me call out our reline numbers, starting with the revenue, which came in at INR 540 crores as against INR 558 crores during the quarter, lower by 3% on a Y-o-Y basis. EBITDA for the quarter stood at INR 30 crores as against INR 61 crores generated during Q1 FY '23, lower by almost 50%. Margins for the current quarter stood at 6% as against 11% reported during the corresponding period last year and 6% generated during the previous quarter. Lower utilization rate, coupled with high cost inventory and benign pricing environment resulted in profitability compression for the quarter. As mentioned in our earlier call, Q1 profitability was expected to be muted going to the higher cost inventory on our books. However, going forward, though we believe the business will start reflecting the benefits of lower input prices. In addition to lower input prices, we believe higher utilization levels and geographical diversification should assist in improving the margin profile. Although the overall advantage may be restricted due to the overall benign pricing environment. Furthermore, we are hopeful that our investments towards strengthening our operational infrastructure in recent times should help us further improve the profitability. In terms of key operational activities, as mentioned earlier, our efforts are directed towards improving the overall efficiency and ramping up the utilization levels of our recently acquired units Jeerabad and Jashpur units are performing as per our expectations, and we believe we will be able to achieve the 80% utilization levels for the farmer and the EBITDA breakeven for Jashpur during this fiscal. Average fuel cost stood at INR 1,735 per tonne as against INR 1,827 per tonne reported during Q1 FY '23. Freight cost for the quarter stood at INR 862 per tonne as against INR 798 per tonne during Q1 FY '23. On a sequential basis, though, as mentioned earlier, we see moderation in fuel and freight costs, loss after profit for the quarter stood at INR 42 crores as against loss of INR 13 crores reported during Q1 FY '23. From an operational standpoint of view, Mattampally plant operated at 52% utilization, while Gudipadu, Bayyavaram, Jeerabad, Jashpur and Dachepalle plants operated at 89%, 59%, 81%, 14% and 6% respectively, during the quarter. As far as the key balance sheet items are concerned, the gross debt as of 30th of June 2023 stood at INR 1,507 crores, out of which INR 1,300 crores as long-term debt and the remaining constitutes the working capital. The net worth of the company on a consolidated basis as on 30th June 2023 stood at INR 1,647 crores. Debt equity ratio stands at 0.79:1. Cash and bank balances were at INR 151 crores as on 30th of June 2023. During Q1, FY '24, the blended cement sales improved to 55% as against 50% reported during Q1 FY '23. On the ESG front, company has acquired electric trucks and electric wheel loader to be used in the operations at the plants. Also company has started using biomass fuel as alternate fuels [indiscernible]. In summary, we believe that our efforts towards cost rationalization, better product mix and presence across the established and faster-growing regions position us well to create value for our stakeholders. That concludes my opening remarks. We would now be glad to take any questions that you may have. Thank you.
Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Shravan Shah. Please go ahead.
Thank you sir, the first question is coming on the volume front. So this quarter, definitely volume is just a 1% or flattish, I would say, Y-o-Y. So we were looking at 6.5 million tonnes, 35% growth for this year. So how do we now look at console volume for this year? And if you can also help us, although we mentioned that 80% utilization for Jeerabad and Jashpur to breakeven. So if you can help us in terms of how the volume will come, particularly all the plants, including the Andhra that we were looking at 1 million tonne. So that is our first question.
Yes. Good morning, Mr. Shravan. As indicated, our outlook remains very close to 6.5 million what we have indicated. I think we should be very close to 6.4%, we are expecting an EBITDA of around INR 400 crores for the current fiscal. Yes, this is not new to us as indicated itself. This quarter, we had a shutdown. Unfortunately, the shutdown took longer almost by 10 days extra because we were trying to fine tune into it Mattampally for additional and biomass fuel feeding, which was long overdue. So it almost took 1 month complete shutdown at Mattampally. So in spite of that shutdown, I think the outlook for the current year remains very close to what we have indicated earlier at 6.4% and close to INR 400 crores of EBITDA is what we have believe would come. Now specific to each of the units, sir, as indicated, we more or less ramped up at Jeerabad is almost complete. Jashpur, we are more than confident that in the current year, we should more than breakeven. From earlier, we thought it should take longer, but I think the ramp-up at Jashpur also is taking in a good shape. And we are very happy to tell that Andhra Cement Dachepalle unit, [indiscernible] we are almost at 80% of the related output, and it is setting historical high numbers. As indicated, the capacity at Dachepalle, as we speak, is a 2.5 million tonne cement. So we should be able to achieve 750,000 tonnes of sales for the current fiscal from Andhra Cements. In that, we are more than hopeful to achieve 6.5 million volumes, Mr. Shah.
So Andhra for full year, previously, we were looking at 1 million tonnes. So now 7 lakh.
Seven Lakh 50,000 as a minimum is what we are indicating, sir. Because we are also believing that some amount of clinker also we should be able to transfer to Bayyavaram. So with all that in, I think 750 is definitely a doable number from Andhra.
Okay. So just to elaborate on further on that. So have we started seeing now the volume growth from June, July to achieve this number?
Yes, sir. I think except for the month of April and partially to first week of May, the rest of the monthly performance run rate has been aligned with what we have indicated Mr. Shravan.
Okay. Secondly, on the profitability front, when still we are seeing that INR 400 crores kind of EBITDA, it seems definitely a difficult task on that front. But how do we broadly see.
Mr. Shravan, except for the month of April because it was negative EBITDA for us. The other run rate has been very close to the number what we have indicated itself. So that's what I would like to highlight at this point of time.
So does that mean from Q2, we will be seeing a significant improvement? Or largely, this will be the third and maybe the fourth quarter where we...
It is across, we definitely have 9 more months. So it is spread, I would say, 8 more months because even in the current month, things are not bad. So what we have been very cautious is we are not chasing the volumes everywhere where there is a very difficult pricing. So we have been very cautious even on that. The advantage for us has been on the costing side, Mr. Shravan.
So for this, in terms of to achieve this INR 400 crore kind of EBITDA. So now on just trying to understand on the pricing and the cost upfront. So from the exit of or the average of 1Q, have you seen any price decline where we are operating on average?
So for us, Q1, as I mentioned, our volumes were not significant. So we have not seen a major downward revision in our realization because as I mentioned, we are not chasing the market share related. The exit of June to July, for us, the price has been very, very flat, sir. Except for certain pockets of Tamil Nadu where the price there has been a small correction, the Karnataka, AP, Telangana markets, which are significant markets for us, they remained flat, I would put it. We have not seen any downward revision as far as the pricing is concerned. The only concern area for us is the Tamil Nadu market. Unfortunately, there, the price revision from June to July, there has been a slight downward revision. But it did not impact much. In our case, most of our margin actually is happening from the ramp-up itself, Mr. Shravan. I'm sure you would appreciate as and when the capacity utilization is moving up, the spend on the fixed cost would itself add up for the number that we have indicated to you. Q1 definitely looked very depressive for a simple reason that we shut down. And we also did buy the clinker from an external district, which was 1,000 plus compared to the internal sourcing of clinker, Mr. Shravan, but I think we have hit the bottom with the Q1. From here on, we should look up is what we strongly believe.
Okay. Lastly, on the debt front, so INR 1,500 crores plus debt, and we were looking at a big debt of 1,200 1,250. So by the end of [indiscernible].
Yes, that's a gross debt at INR 1,500. The net debt, what we have indicated earlier, around INR 250 to INR 1,300 crore, I think we remain committed that we would not exceed the number what we have indicated earlier, Mr. Shravan. This is also from a fact that Sagar would become by middle of FY '26 at 12 million company with the expansion of Andhra from 2.25 million to 3 million. And there is also an investment that is getting into the brownfield from a $1.25 million to $1.5 million in Gudipadu and at Jeerabad from 1 million to 1.5 million. This includes the CapEx that are associated with all these brownfield expansions. We believe that we should not cross INR 1,250 crores to INR 1,300 crores net debt kind of a thing for company over the next 2 years for sure.
Sir, just to clarify further on what right now we mentioned in terms of the expansion. So 2 things. One is how much CapEx we are going to do for this year and next year? And when this all the capacity expansions that we mentioned will be coming in.
Yes, Mr. Shravan, we would come back by end of this Q2 with a clear-cut plan in terms of each CapEx and how much it is costing. We'll be very happy to revert to you. We just received the quotations, which is still in negotiation stage. So we will be very happy to come back by the Q2 results time about the overall structure in terms of the overall CapEx. But what I would like to assure is that we would not exceed the current net debt as indicated, even for those projects getting implemented, Mr. Shravan.
Okay. Last is on the sale of the Vizag land. So previously, we were saying it will take 15, 18 months. So it...
[indiscernible] speak to that, nothing much has changed on that, sir. We just supply. So we believe that it should take that long for us to revert. If there is any revision in terms of the time line, we would be happy to come back to you with that.
So broadly by next December, we should be able to monetize this land.
As indicated, it's a 15-18-month issue. If there is any reduction in time, I'm sure we would be happy to revert back to you on that Mr. Shravan.
So this 15, 18 months starts from when our ends [indiscernible].
I think in April, we have indicated that sir, that remains there Mr. Shravan.
Okay, thank you sir.
Thank you Mr. Shravan.
Thank you, the next question is from Rajesh Ravi. Please go ahead.
Hi sir, good morning. My question pertains to, first, the INR 400 crore EBITDA target, which you have opened for this financial year. If I look at the 9 months SaaS rate, given that you have a $6.5 million volume target, the SaaS rate for the 9 months is close to INR 700 per tonne. Obviously, Q2 would be a dull period because of rains and ongoing pricing pressure. So how do you look at this number working out? And second, from your detailed presentation, what we see, the Jashpur and Andhra, Jashpur utilization has been quite low of 15% for long now. So what is the trajectory you're looking at?
Mr. Rajesh, you are right. So the run rate for us is not very different, except for the April month was very difficult. It was negative EBITDA, as indicated earlier. So the volume outlook, as indicated, is $1.2 million for Q1, which we have achieved. For Q2, it's $1.4 million, for Q3 $1.8 million and for Q4 is $2 million. So that should add up to $6.4 million. But for the April month, all the other months run rate has been quite healthy in terms of the margin. So we don't look at as a very, very difficult challenge. This in spite of the fact that we have not been very optimistic on the price outlook. So we believe that prices more or less should remain very, very similar. So the seasonality would definitely impact the volumes, may not be a margin very, very significantly, Mr. Rajesh. That's what we believe.
And Jashpur sir, how are you looking at Jashpur?
Yes, Jashpur, the current outlook is from current operating rate of close to around single-digit number or slightly higher double-digit number. We believe we should achieve 40% capacity utilization for the current full year. Our target is to achieve $0.6 million for the current year, Mr. Rajesh. And we are more than hopeful to break even in the current year itself.
Okay. And coming to this CapEx number, let me complete the P&L first, this Andhra clinker expansion, which you would be doing it in Q2 start assumed. So this INR 50 crore depreciation run rate, how would that change Q2 onwards and save more interest, is interest fully capitalized in P&L on a console level?
Sir, I think everything is done. I think the new depreciation would only kick in once we start the expansion and commission it, sir, and we are good 18 months away from when we start. I think all these projects should get commissioned by end of FY '25 to early part of FY '26. So till such time, I think the depreciation would be very, very similar to what you are seeing at this point of time now.
Okay. So Andhra is already fully capitalized in terms of depreciation and interest, 4 crore interest is also fully reflecting all the debt on book, right?
Yes, sir.
Okay. Great. And CapEx number, did you mention I think I missed...
We are yet to mention the CapEx number because this entails 2 brownfield expansions, both at Gudipadu and Jeerabad and also in Andhra Cement. So we will be happy to come back along with the Q2 results, exactly the CapEx outlay and the time lines for those CapEx also will be negating with the Q2 results Mr. Rajesh.
Okay. But any broad numbers, I know you can find...
I think let us wait, just we are initiation stage, so once it is firmed up, we'll be very happy to revert back.
Okay sir, I will come back in queue. Thank you all the best, sir.
Thank you. The next question is from Ritesh Sha. Please go ahead.
Hi sir, am I audible?
Good morning, Mr. Ritesh. Yes, you are...
Good morning sir. Sir, I have 3 questions. First is specific to your comment on the EV thing. Sir, can you highlight from a CapEx perspective, OpEx perspective? And basically, if one had to look at payback, how should we look at this particular investment? And I think I can look at the image, I think we have BYD trucks and something called SOLG or SDLG. So was there any specific reason to 0 down on these guys.
Good morning, Ritesh, the SDLG is actually Volvo. It's actually the wheel order that we have taken it on lease from the Volvo itself. So the CapEx impact is negligible. From an OpEx perspective, it is aligned with the more or less the same wheel order, which is diesel operated. So from an OpEx perspective, it is neutral, I would put it. So we are turning green. So we ended up having 2 SDLG loaders at Mattampally, and we've also signed contract for having 2 more in Andhra cement. So this is neutral on CapEx as well as on OpEx as far as the wheel order is concerned. Now specifically going back to the EV truck, which we are going to operate, we received 2 trucks of BYD after the long delay of more than a year, unfortunately, because of the COVID the BYD trucks just landed exactly a year later than what we have anticipated. Those trucks we did buy. The breakeven for us is around 3.5 years. The only reason why it is breakevening fast is because we are able to put this at only the Vizag unit. The range, as indicated by them is around 200 kilometers. So in our case, the market as well as one of the primary raw material source, which is the Vizag steel plant is less than 100 kilometers. So we could deploy these trucks there. And it's more or less loaded on all the directions. So we take cement to the godown, except for 10 kilometers from godown to the slag loading side, that is the only time when it is actually empty, and it comes back with the slag back to the plant. So since it has a 2-way load, so the breakeven is less than 3.5 years in spite of paying almost 2x of the conventional truck, Mr. Ritesh, so the way we have structured this, the truck would be operated by the authorized contractor, but owned by the company. This is for the first time the company is owning the truck, but would be operated by the contractor, the authorized transport contractor from an operational standpoint, Mr. Ritesh.
Can you give tonnage for the truck. And when we say 2x as a normal cost, can you please quantify the numbers?
Yes, I think it is close to around INR 1.1 crore because there is no life tax. Life tax is exempt in Andhra. So by virtue of it, it is exactly 2x of the overall ownership of the truck. Because there is a tractor which has come from BYD and the trailer is locally made by [indiscernible].
And tonnage?
Tonnage is 45 tonnes.
And the plans to increase the fleet further?
No, I think this you would want to try because as I mentioned to you, this is very useful only for that leg of our logistics because the range is not much. The range looks to be somewhere around 200 to 220 kilometers. So rest of the areas, it is not looking feasible because the breakeven also is partly due to the turnaround time. In other cases, the turnaround time is not as quick. But we wanted to look at this. And the reason for choosing BYD is at that point of time, there were not much of trucks in this range sir. Now I believe there are a few options available. So our team is evaluating them. So basis that we would like to do it, but you want to wait for this experience for next 6 months before taking a call. But we have been extremely happy with the EV loader because this is very much part of the implant kind of an operation, though we are operating for close to a month now, people are extremely happy operating it. And of course, from an OpEx standpoint and a CapEx standpoint, it is very neutral.
This is very useful. Sir, I have 2 follow-up questions. It's more industry related. There has been one large transaction in the region where we operate. I'm referring to between Prism and Aramco. Sir, how do you lead at this, so there has been some transfer of these if the transaction is successful. Would it essentially imply that the new buyer will have to come up and set up a plant? Or is it that they could potentially get an exemption. I'm trying to make a read on demand supply for the region?
See, I think Mr. Ritesh, the news that we had is exactly the press news and from interactions with good friends like you. So it looks like they were trying to consolidate their limestone deposit. I think it entails the start of the mine, which we don't see a challenge here. Do they have to come up with the investment? I think the regulation now states that you have to operate the mine within 3 years or 2 years with an extension possible of 1 additional year. But for that, I don't think there is any regulation which will state that if you buy a line mine, you should put up a plan. But I think the regulation is currently saying that you should operate the mine in the 2-year time frame, Mr. Ritesh.
That's helpful. And sir, I'll just squeeze in one more. Sir, there has been other industry event potentially OMDC giving a mine to one of the companies, which is looking for a small asset in your region. Is something of this sort of possible at no cost? Or is it something like OMDC will look at auctions as the only way out. The reason to ask is again, the OpEx or operating economics could actually vary significantly?
If I'm not mistaken, you're talking about the social [indiscernible], Mr. Ritesh. I think most of the governments would be happy giving away as long as they are helping the industry to come up, which in turn should help the economy. The cost implications, we are not as are sir. So I cannot comment much what is involved in the overall kind of a transfer. But I think it is always a possibility. I think it's the correlator of mine on to transfer the mine to the other people. At what cost is happening, I think it is mutual. So from that perspective, we have nothing much to add other than the comments that I have already made.
Sure, sir. Congratulations for excellent disclosures, scope 1, 2 and 3 emissions separately. I think it's commendable, thank you.
Yes. Thank you, Mr. Ritesh.
Thank you so much. The next question is from Keshav. Please go ahead.
Sir, it's good to see improvement in blended cement share. Have you seen the same in trade share too? What is the trade share for Q1.
I think we are more or less very similar patent, sir. I think around 60% to 65% is our trade share. That more or less remains uniform because we do have government exposure Mr. Keshav. So that puts that much extra in the trade. But as a company, we don't believe that these 2 are very significantly very different because we don't chase low cost on either side. So both are very similar on the margin side for us, Mr. Keshav.
Okay, if you see your EBITDA per tonne guidance has significantly reduced in this quarter versus what was guided earlier. So last quarter, you were bearish on prices, you're expecting it to remain flattish. So this reduction is due to lower prices or some sort of operational efficiency, which might be missing in some of the ramp-up units, which you are planning? How should we read this?
Mr. Keshav last time, we did indicate 6.5 million and INR 410 crores kind of EBITA. So now we are talking of INR 6.4 crores with INR 400 crores of EBITDA. So I don't think there is a significant reduction because since there is a drop in almost 100,000 tonnes, so the matching number has come down, Mr. Keshav.
Okay. So INR 400 you told EBITDA. EBITDA per tonne would be INR 625 only what you guided earlier.
I'd say it's a very simple...
Okay. I missed it. I thought you said 400 unitary EBITDA, okay, and fuel cost reduction should be sort of 400 in Q2?
Yes, sir. I think we did indicate in the past, so it should remain very close to that number as well, Mr. Keshav.
Okay, thank you, that's it.
Thank you, the next question is from Bhavin Chheda. Please go ahead.
Good morning Sreekanth, few questions. First, on Slide #16, where you are mentioning your capacities, what would be your current clinker capacity?
I think we did indicate that Mr. Bhavin. I don't mind giving you those numbers
Total is fine.
Yes, we would revert Mr. Bhavin. So do you have any other questions?
Except for the Satguru where you have 65% stake, the rest of the units you have 100% stake?
Sir, Andhra is 95%, and the rest are all the 100% wholly owned subsidiary. The only other asset that remains outside is the Jashpur cement, sir, which also is due for merger. I think by end of this August, I think we should have merged Jashpur. So that leaves 95% stake in Andhra and the 65% stake in Sagar Cements Private Limited, which is formerly Satguru Cement.
Also congrats on a very strong guidance you are giving, so to just more understand from the opening much, as you said, April loss and then you have been operating as per your expectations only. So can we assume you have exited June, more or less at the EBITDA per tonne of INR 600, INR 700 per ton, what you're expecting for the year?
Yes, sir. Except for the month of April, the rest of all the other run rate is very close to that number, Mr. Bhavin.
And also, can we assume that the majority of the data is coming from reduction in fuel prices because you commented that [indiscernible].
As indicated, it is only INR 100 from the fuel side, but it has more to do with the ramp-up, so the ramp of what will happen is your fixed cost spread, whatever is the EBITDA items would also help us get aware. Yes, we are at 6.4 million, the clinker capacity...
Sue, and you also said that you plan to go to $12 million, and you will soon give the CapEx guidance on the same. We're already at 10.85%. Apart from that, any other CapEx you are planning or if you can give us a guidance on maintenance CapEx number? And apart from that, is there any other CapEx for...
Mr. Bhavin, just acquired and we are ramping up Andhra sir, so at this point of time, we are more or less focused on the ramp up and operational efficiency improvement. The maintenance CapEx across all the units we need to indicate that it would be close to INR 30 crores on a console basis. And the other CapEx, we would be happy to come back with the Q2 results, Mr. Bhavin.
And last question, if you can share your sales volume mix between different states roughly?
Yes, we'll be happy to revert on that. Mr. Bhavin. We will be happy to share that number. We are then reading out. I would be happy to share that with you.
Thank you, the next question is from Sanjay Nandi, please go ahead.
Sir, just to guide us on the power and fuel cost front, like you told we have a high-cost inventory in the last quarter, which is why the overall cost got like stretched. So going forward, what kind of guidance can we expect in the coming quarters?
See the power cost, fuel cost as indicated, sir, we did get a INR 50 benefit, which in spite of having 1 full month shutdown. Going forward for the next quarter, we are indicating close to around INR 100 per tonne kind of a drop from the current level on the power and fuel cost. Q3 we are yet to start booking the fuel because there is some amount of ambiguity in what's happening. We would be happy to revert once we reach close to procuring fuel, which fortunately looks like it is lower than the earlier procurement what we have done. But we are not able to give a specific number because we are still in the negotiation stage for the fuel.
Got it sir, thank you so much. I wish you all a very best sir.
Thank you Mr. Sanjay.
Thank you, anyone who has a question may please go ahead, [indiscernible] you can go ahead with your question.
Sir, can you please share the renewable energy share in your total fuel mix and any targets that you are preparing?
Yes, [indiscernible] can you repeat the question, please? Sorry, I could not hear you well?
Yes. So can you hear me now?
Yes now.
Okay. Sir, can you please share the renewable energy mix in your total fuel mix? What is the share of renewable energy? And any targets that you are having?
Yes [indiscernible]. At this point of time, we are at 27%. I would rephrase my thing. It's not just the renewal, it is green power because as recovery still is not classified part of the renewable. So we call it as green power. So basically recovery plus all the renewable energy that we have. We have all the possible sources that is the hydro, wind and solar part of our portfolio, along with basic recovery. Today, we are at a console basis close to 27%. And the guideline needs to go up to 50% by FY '30. So we do have plans to ramp up this solar and some additional basic recovery. As indicated, we would be happy to come back with the breakup in terms of what we are likely to come going forward, along with the CapEx and the time lines will be coming back by Q2 results, [indiscernible].
Sir, a couple of questions from the chat window. Can you please brief us about the significant CSR initiatives during the quarter and approximate spending?
Yes. I think, Manish, we would be happy to revert because it makes no sense to read out those numbers, but I think we will revert for the calculation, and we'll put it in the corporate kind of fitting for this query, quarterly, we just implemented the ISO 26,000. So part of that discussion, we will be happy to come back. We will be sharing the spend across various sectors that we know, we'll be happy to revert on that. Kindly bear with us for a month, we will be happy to come with that number.
The second question is on fuel prices have experienced fluctuation in the recent times. How do you see the next few months the likely impact on the future projects? And what plans do you have to tackle its adverse effects?
I think the prices did fluctuate Fortunately, they are trending down for most part of the last quarter. Only during the last 15 days, what we have seen is the spot price looks to have indicated at 105, but we have never seen any code at less than $118. In fact, as we speak, people are talking of $120 on the imported pet coke, Manish. Now, how do we address this issue? I think this is not an issue that we could address in the short term, but the internal policy is to make that much more efficient in terms of the process where in we consume less. So we did stop the plant at Mattampally to upgrade the plant for consumption of higher percentage of biomass. We did indicate in the current quarter, we started using a new generation grass, which we did on a trial production. But for us to be very successful, it should take a year. Instead of bamboo, we actually started growing grass, which is rapid growing grass, which is effectively very close replacement to Singareni coal that we use. It is anywhere between 3,600 to 3,800 GCV fuel with the 1-week drying itself, we are able to achieve. The grass from cropping into the harvest, it should take only 60 days. So it's a very, very rapidly growing grass. That's what we have tried. We have been very successful from the first crop. So we did make some modifications for the process to accept it. So given that scenario, we hope to mitigate some amount of these inflationary kind of things on the hydrocarbon fuels Manish, I hope I could address. But I think we would revert back with few more initiatives that we have taken in due course of time.
The next question is from [indiscernible] please go ahead.
Sir, firstly, I wanted to do the pricing trends in the region. So some of the things that we heard of regional dealers and all of that is that the pricing gap between AP and TN is kind of shrunk a lot and all of that. So what kind of impact do you see on your business with respect to this?
See, as indicated in my earlier comments, sir, the pricing in most part of South, except for Tamil Nadu and Kerala remained flat. Unfortunately, the Tamil Nadu, we have never seen Chennai prices being very close to Hyderabad prices historically ever. So I think the gap has quite significantly shrunk, which we have never seen, at least in my career, I have never seen that happen. But the Tamil Nadu prices are very, very close to the Andhra prices at this point of time, now how do we mitigate? I think it's a question of we have to sell. And fortunately, in our case, we are going more blended. So we are trying to mitigate the risk by putting whatever is the volumes that we have to put. That those are the volumes that we are putting in those markets. The rest everything we are trying to sell in the places where we could comfortably divert and not lose those margins quite significantly [indiscernible].
So have we seen a dip in volumes in the region, sir, for us?
Q1 was an aberration because we never had volumes because we shut the plant. So that also helped us to reposition ourselves relatively better. But our volumes as we have indicated, sir, we should do 6.4 million. So we cannot quite significantly alter our market mix. We are only trying to ensure that we don't go too far off places, and we are trying to avoid those few orders, which are extremely negative Mr. [indiscernible]. We're then to optimize.
Okay. And just one last question on our fuel mix. What kind of alternate fuel mix do we have currently in our system? And what is the Kcal price for the alternate fuel that trying to get into your system, sir?
See, the AFR historically, we were very aggressive on the pharma-based and all. But with the net 0 commitment and in the net 0 commitment, most of the alternate fuels, which are abundantly available. Some of them are negatively priced. We started avoiding because that may not offset the CO2. We typically follow the net zero standards in terms of our competition for the CO2 emissions. So if you are using those alternate fuels, the CO2 that is coming out is not offset sir. So we slowly started for more than 1 year, 1.5 years. We have been working on the biomass wherein there is enough offset mechanism. So most of this would happen at less than Rs. 1 per kcal Mr. [indiscernible].
Yes. So what is the contribution currently? And where would you like to speak to that percentage of fuel?
Yes, we are at 5%, sir. Our alternate fuel is at 5%. At some point, we were almost anywhere between 15% to 18%. As I mentioned, we slowly started moving away from those complex alternate fuels because we don't want to act like a inset. So we have put a cap on what percentage of those alternate fuels from pharma waste and all we have to use. We have cap detect less than 5%, Mr. [indiscernible] so for us a significant jump has to happen only from biomass and some of those fuels, which could offset the CO2 as per the guidelines given in [indiscernible].
Thank you, the next question is from Amit Murarka, please go ahead.
Hi, just a couple of questions. Sorry, I joined the call a bit late. So the fall in volumes is because of plant maintenance or like demand is also concerned?
No, I think demand has been very healthy, sir. I think in our case, it's more an issue of shutdown at the plant. And most of these volumes that we have fulfilled also is partly from clinker purchase, so margin was an issue for us with the clinker purchase. But for that, I think volume, as indicated earlier, we believe that the markets that we service would grow anywhere between 8% to 10% even in the current year. This is in spite of having Telangana elections in Q3 of this current fiscal. So I don't think demand is an issue. But of course, there are some ramp-ups that have happened in the region, so that has been adjusted. So I don't think demand was an issue for our lower volume. In our case, it's very specific that we took a shutdown and on and there were no volumes available for us.
Okay, understood. And also some capacities are coming here, like My Home was supposed to start that [indiscernible] started it. And even Shri Cement will have its Guntur plant?
I believe in the current year, the only supply which is likely to ramp up is the ramp at Ramco Kolimigundla plant sir, so we do expect both My Home and Shri Cement to come somewhere around Q4 and their volume ramp up to start impacting from next year, Q1 onwards. Fortunately, the ramp-up time is happening at a time and we believe that demand is reasonable.
Okay. Understood. And just on the point, which was just discussing around for the first time, like Andhra or Hyderabad prices coming to Chennai price levels. Is there a case of like the Tamil Nadu-based companies kind of losing some market share to Andhra companies or like basically employ to kind of discuss under the companies into...
Amit, you should understand that all the players who are servicing Chennai have all the plants on either side. So now how do I address this?
No, why I ask the question is because we know the issue of low limestone reserves in...
But the fact is that Chennai gets serviced from both the regions. And fortunately, all the players have all the plants on either side. Now there is no exception there. I mean if you look at ICL, you look at Ramco, you look at Dalmia, you look at Ultratech and Chittinad, see all these players who have plants deep South also have plants on this side. So I don't think it's a question of somebody gaining a market share or not, but I think it's strange, but we have never seen in the past, but that is happening. We wish we knew why and we had a solution for it, but it's something which we are seeing it happen for the first time. I think with this experience, probably we'll have better learnings to improve because at this current pricing in Chennai, it doesn't make commercial sense to anyone.
And any clarity or resolution to the limestone auction issue in Tamil Nadu?
I have no idea, sir. We are not very active in that aspect. So I have nothing to comment because I am not know of any of those issues.
Sir, a couple of questions from the chat window. The company has excess land at Andhra cement. Any plans to monetize it?
Yes. I think that I've stated so we applied for the government for the conversion and permission to sell because that's how the previous agreement was, we hope to get the resolution fairly quickly from the government. The monetizing also involves [indiscernible], how do we do that? Should we go into joint development or -- as a company, I don't think we will be getting into any of those land developments, either it would be an outright sale or get into joint development, but we do have time. So the first step is that we have applied for the government for conversion as well as seeking permission for the potential sale. So it should take probably 15 months from now. I have to be cautious in using my time lines. We need to indicate in April that it should take 15 to 18 months. So we believe that it should take 12 to 15 months from now. That's what is the potential time it could take, and we'll be happy to come back if there is any progress that is happening. Of course, company is also monetizing some amount of sale lands that are there historically. So those are small parts as I said, but these are not significant numbers for us to report to. Company do own a few acres of land in Jayanthipuram, which is very close to Ultratech and Ramco site. Historically, Andhra Cement used to own some land in that region, around 5 to 10 acres of land parcels to exist in that region. So those areas we are trying to identify the buyer and monetize them, but those are very, very small. And on the financial side, it's very insignificant, Manish.
Thank you, sir. And the next question is what one element is going to be the most important focus for the company.
I wish there was one reason, sir, I think it's [indiscernible]. The very existence of the company is for the business. I think we have been in the business for over 40-plus years. There are multiple reasons for us to be that long. And I'm sure it's a conversation which can go on. I would leave it there at this point of time, Mr. Manish
Thank you, anyone who has a question, please indicate by raise of hand. Sir, as there are no further questions, I would like to hand over the call to you for your closing comments.
Yes. Thank you, Manish. Yes, we would once again thank each of you for taking your precious time off and hearing us and joining in the call. I hope you got all the answers that you are looking for. Please feel free to connect with us at CDR or at Sagar Cement, we'll be more than happy to revert. Thank you again. Have a good day.
Thank you so much. We will now conclude the call.
Thank you.