Sagar Cements Ltd

NSE:SAGCEM

Earnings Call Analysis

Earnings Call Transcript 2025-Q1

[Operator]

Good morning, ladies and gentlemen. Welcome you all to 1Q FY '25 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. Raja Reddy, Company Secretary; and Mr. Rajesh Singh, the Chief Marketing Officer.

We will start today's session by opening remarks from the management and then will be followed by a Q&A. I would now request Gavin Desa of CDR to please give his opening remarks, and then we move on to the management remarks. Thanks, Gavin. Over to you, Gavin.

[Gavin Desa]

Thank you, Manish. Thank you, Manish, for the introduction. In addition, I would just like to point out that some of the statements made in today's discussions may be forward-looking in nature, and a note of this effect has been shared in the call invite sent to you earlier along with -- we've also said the presentation and other documents, real documents. I would now request Mr. Sreekanth Reddy to make some opening remarks. Over to you, Sreekanth.

[Sammidi Reddy, executive]

Thank you, Gavin. Good morning, everyone, and welcome to Sagar Cements earnings call for the quarter ended June 30, 2024.

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, Q1 was expectedly a soft quarter, marked by muted demand and realizations. Volume offtake trended lower, amidst key trade, labor unavailability and a slowdown in construction equity because of the general elections.

While certain pockets still witnessed pickup in demand during the later part of the quarter on an overall basis, so it was largely subdued. Prices as well were largely benign across key markets in line with people demand and heightened competitive intensity, which in turn resulted in lower profit. However, we do expect situations to start improving in the second half onwards, both in terms of demand and pricing income.

Let me now move on to our quarterly performance. As mentioned earlier, Q1 has been relatively muted amid slower demand and pricing income. Our overall volumes for the quarter stood at 1.28 million. For the full year, we have overall volume target of 6.5 million.

Moving on to the headline numbers. Our revenue for the quarter stood at INR 561 crores as against INR 540 crores during Q1 FY '24, higher by 4%. EBITDA for the quarter stood at INR 47 crores as against INR 31 crores generated during Q1 FY '24.

Margins for the quarter stood at 8% as against 6% in Q1 FY '24. EBITDA per tonne stood at INR 356 during the quarter as against INR 259 during Q1 FY '24. We remain committed to lowering our costs and strengthening our position as one of the lowest cost producers -- cement producers in the country. With improvement in operational efficiencies across our units and higher share of renewable power in the mix, we expect our profitability and margins to improve in coming years.

Loss after tax stood at INR 32 crores for the quarter as against a loss of INR 42 crores generated during Q1 FY '24. In terms of key operational activities, expansion plan in [ logical ] unit of Andhra Cements Limited is progressing as per schedule. Our internal cost stood at INR 1,470 per tonne as against INR 1,732 per tonne reported during Q1 FY '24.

Credit cost for the quarter stood at INR 844 per tonne as against INR 862 per tonne during Q1 FY '24. From an operational point of view, Mattampally plant operated at 49% utilization. while Gudipadu, Bayyavaram, Jeerabad, Jajpur, and Dachepalli plant operated at 78%, 62%, 75%, 26%, and 29%, respectively during the quarter.

As far as the key balance sheet items are concerned, the gross debt as on 30th June 2024 stood at INR 1,462 crores, out of which INR 1,203 crores as long-term debt and the remaining constitutes the working capital. The net worth of the company on a consolidated basis as of 30th of June 2024 stood at INR 1,987 crores. Debt equity ratio stands at [ 0.61:1 ], cash and bank balances were at INR 168 crores as of 30th June 2020.

Board has recorded its approval for setting up 6-megawatt solar power plants each at Gudipadu and Dachepalli, which is in line with our stated ESG road map and the objectives.

In summary, we believe our enhanced capacity position us well to capture the growing infrastructure and real estate demand over the coming years. Furthermore, our efforts towards diversifying revenue streams, increasing our regional footprint should help us in improving the overall profitability profile of the company.

That concludes my opening remarks. We would now be glad to take any questions that you may have. Thank you again.

[Operator]

[Operator Instructions]. The first question is from Sharavan Shah. Please go ahead.

[Shravan Shah, analyst]

In terms of the guidance, what we have previously talked about. So we have -- obviously, we have mentioned in the presentation, 6.5 million tonnes of volume. So despite this quarter, maybe slightly on the lower side, what the number we said in terms of the pure sales. So I'm talking not including the clinker so -- which is significantly higher in this quarter, 89,000 odd tonnes.

So there, we are confident that it will be there in terms of the 6.5 million tonnes. So that is first. I just wanted the confidence on that part.

Second, coming on the pricing and the profitability. So if you can help us how the prices -- current prices are versus the Q1 averages and if possible, in terms of the state-wise, how the prices have moved in this Q1 versus the fourth quarter?

[Sammidi Reddy, executive]

Yes. Thank you, Mr. Shravan. I'm assuming that you wanted reconfirmation on the volume guidance, right? I think we are reasonably sure that we should be close to 6.5 million. This includes the lower volumes that have been moved, and this definitely excludes the clinker sale leverage [ test ]. So 6.5 million is our volume guidance.

From a context perspective, I think as the quarters go by, we should have a lot more clarity on the volume guidance. But at this point of time, in spite of Q1 and we are assuming Q2 also to be as challenging, we believe we should be very close to 6.5 million is what we think, Shravan.

From a profitability guidance perspective, we believe that we should lose 6.5 million. The overall EBITDA should be in the range of around INR 350 crores to INR 375 crores, which should roughly translate to INR 575 EBITDA per tonne.

I think on that count, we are also believe that overall kind of a cost, there should be some amount of improvement because of the operating leverage, we are not factoring any further cost pressures going up. At the same time, most of the savings which we are likely to happen, have been realized.

So barring the operating leverage, we are not expecting any major changes on the cost side and looking, that should be on a positive tonne. So on the relation front, internally, our estimation is that until middle of Q3, we don't expect major changes in the realization. So that's what we are considering.

So that -- we believe that the EBITDA guidance should be in the range of around INR 350 crores to INR 375 crores for the full year.

Now going to the pricing trends from Q4 to the current Q1. We believe, or at least what we have noticed in most of our operating markets, there has been a drop of INR 5 per lag from the exit of Q4 until middle of this month, Shravan. That has been the case across the markets.

[Shravan Shah, analyst]

So from Q4 or from Q1 -- from June until now, there is a further INR 5 drop?

[Sammidi Reddy, executive]

Yes. That's what I mentioned. It is exit of Q4 to the middle of this month, there is a drop of almost INR 5.

[Shravan Shah, analyst]

You can justify rupees from March until now, only the INR 5 drop, which is, I think, good.

[Sammidi Reddy, executive]

No. From June. I'm talking from June.

[Shravan Shah, analyst]

Yes. So June...

[Sammidi Reddy, executive]

Sorry, I think it's my mistake. Yes, it's from end of June to the -- so it's almost INR 15 dropped from Q4 exit to the current months.

[Shravan Shah, analyst]

Okay. And then in Q1, broadly, how the state-wise or broadly south, how much price decline that we have seen versus Q4? So June quarter was [indiscernible] how much the decline [indiscernible].

[Sammidi Reddy, executive]

See, I think the drop from Q4 to the Q1, the overall -- you have seen almost INR 10 per [indiscernible]. There has been a significant cycle here in Tamil Nadu, but for us, the average is around INR 10 drop from Q4 to the end of Q1. From exit of Q1 so far in the month, we see under INR 5 drop.

[Shravan Shah, analyst]

Okay. But given that the -- despite whatever the M&A is happening, do we think that this year, as you have mentioned, that middle of third quarter, we expect a price hike? Because for us, that is the major in terms of increasing the profitability for us because as you mentioned, there's not so much scope in terms of the cost reduction?

[Sammidi Reddy, executive]

No. Mr. Shravan, against is also to do with the product [ details ]. See, we are not penciling in, in a major kind of cost relation increase. What we are assuming is whatever is the block from an off season to the season, around INR 10 is what we are penciling, INR 10 to INR 15 is what we are penciling starting from middle of Q3.

We are not trying to be [ euphoric ] about the potential kind of a price increase that is possible. In the market case, what we have penciled is INR 10 to INR 15 per [ bag, ] potentially to go up from middle of Q3 is what we are factoring, which is normal seasonal.

[Shravan Shah, analyst]

Okay, okay. And lastly, in terms of the incentive that INR 30-odd crore for [ MP ], will it now come in Q2?

[Sammidi Reddy, executive]

Yes, we are expecting in the current month itself.

[Operator]

The next question is from Keshav Lahoti.

[Keshav Lahoti, analyst]

So I want to understand one thing on the realization. We do understand the normal trend realization to pick up from Q3. But will this time be different because what we are seeing, Panyam is acquired by Ambuja, India Cement also some stake acquired by UltraTech. Some sort of consolidation is happening and these assets are already operating at low utilization. So the bigger hands will try to ramp up the utilization. So this can lead to muted realization this time in H2 also?

[Sammidi Reddy, executive]

Yes. Mr. Keshav, I have very limited comments on how they are going to manage. So our experience is that definitely, some of the assets which were utilized lesser probably would potentially go up, but that also is in line with the expected demand ramping up in due course of time.

So will it lead to price erosion? I think we are already in [indiscernible]. So I would never say that we have in the past last kind of a number. But the ability for price to go down further from here is very, very limited, sir, because the players are -- I think it is going to be a bigger loss. I would put it from here on.

So given that scenario, I'm sure they acquired these assets from a business perspective. So that may not lead to something which is very unusual. But internally, we did factor that prices only would pick up in line with the demand ramp-up rather than any of the market players' expectation.

[Keshav Lahoti, analyst]

Understood. Got it. At Jeerabad, you tend to -- you will start according from July month, so will INR 30 crores will be recorded this year or it will be more like a per 3-quarter earnings?

[Sammidi Reddy, executive]

No, I think as we would receive, you will be confirming it. Sir, we are expecting the current month, most likely we should receive. Because as we speak, I think there is an investor summit that is happening in Madhya Pradesh for [ Jabalpur ], sir.

So the communication that we have received is that we would be receiving immediately after that. Because most of the official machinery was missing from [ Rupal ]. So they did commit that we should expect it any time soon. So we are -- we believe that we should receive this incentives in the coming monthly sell.

[Keshav Lahoti, analyst]

Okay. So it's a possibility like the entire INR 30 crore might be recorded this year, around INR 30 crores?

[Sammidi Reddy, executive]

We think so, sir. Though we need to look at the breakup, but we are confident that we should receive the -- if not in the current quarter, at least before the end of the current financial year, we should have received the entire [indiscernible].

[Keshav Lahoti, analyst]

Understood. Got it. What was the clinker sale in this quarter? And what was the realization for the clinker sale?

[Sammidi Reddy, executive]

Yes, I think it's on an average around INR 8,000 has been the sale of clinker for the last quarter, sir. The average relation is close around 3,050 kind of a number per tonne. I'm talking about [indiscernible], sir.

[Keshav Lahoti, analyst]

3,050, right?

[Sammidi Reddy, executive]

Yes, sir. Yes, sir.

[Keshav Lahoti, analyst]

Understood. One last question from my side. Fuel costs are expected to remain stable from Q1 average?

[Sammidi Reddy, executive]

Yes, that's what we have penciled in, though there is a dollar here or there, but we have covered more than 2/3 of our volume is already as inventories, sir. So our hedge is only open for probably 1/3 of the year for the full year. So given the scenario, we believe that it might remain flat. In our case, general market trend, what we started seeing from the earlier months to now, I think it has gone up by $1. I'm talking about per tonne, sir. It went up by $1 per tonne.

[Operator]

The next question is from Mangesh Bhadang. Please go ahead, Mangesh.

[Mangesh Bhadang, analyst]

So sir, first question is on the volumes. So the [ PPT ] mentions volumes of cement only, right? So that 84,000 is extra or which we need to add to the...

[Sammidi Reddy, executive]

Yes, sir. Our disclosure when it comes to volumes, it's only on cement, sir. We have never included clinker in the past, so it remains so even now.

[Mangesh Bhadang, analyst]

Let's open to the revenue and costs do include ...

[Sammidi Reddy, executive]

When you look at the absolute numbers, I think it includes. But when it comes to specific numbers for a per tonne basis, I think what we have done is we have normalized it only for the cement sale. So that is where I think there is some amount of confusion. If you have to do a straight arithmetic, it could be a challenge. So what we have disclosed is for a pure cement number. That is a per tonne is purely on per tonne cement-only. So we made a direct correction in terms of revenue and the related associated costs.

[Mangesh Bhadang, analyst]

Okay. Yes. Second one is on the capacities in South. So I think [indiscernible] cement is going to -- would have started and even Dalmia has commissioned the granting units along with some other companies. So is the supply situation in your markets is what I wanted to understand. Is that the pressure because of this, because it is anyway is going to increase both Panyam [indiscernible] picture?

[Sammidi Reddy, executive]

I think there are 2 aspects. One, it's a demand and there is supply. See here -- see, at the end of the day, demand is almost close to 20% lower compared to last year same time to now. Year-on-year number is 20% now for obvious reasons that which we discussed in the earlier call, when the elections and the weather-related issues definitely took a toll.

Now coupled with that, there are some ramping up of Aramco's [indiscernible] plant along with [indiscernible] Dachepalli plant. And I believe that any plant of Dalmia also got commissioned itself. And same is the case with the ramp-up of [indiscernible] line for [indiscernible].

So what we are expecting from here on is ramp-up of UltraTech Tadipatri, Line 3. We are also expecting that can also to get commissioned anytime soon and the ramp-up also is likely to happen. So this -- you have [ Kalur ] -- Chettinad and Kalur plant also, I believe, got commissioned. But that is more westbound rather than southbound.

But these are the 3 major supplies that are likely to get ramped up from the coming few months, 2 quarters is the [ longest ]. Along with some amount of realignment of restarts of plants of [indiscernible] with [ Adani ] Group, taking over those assets. But these are likely to happen in a phased manner. I'm not talking of Adani's ramp-up.

But the entire supply into the region is likely to happen in a phased manner, not that everything is going to abruptly fall on it. But this might also get aligned with the potential kind of a demand that is -- we strongly believe that from middle of Q3, the demand is likely to shoot up more sharply. So net-net, it may not be significantly under the overall kind of demand/supply equation.

[Mangesh Bhadang, analyst]

That was the next question, sir. So basically, after the political outcomes in both these states, especially under that, so what kind of demand expectation do you have? And on the ground, whatever we've been hearing regarding Amravati capital project, have any work started? Or do you see...

[Sammidi Reddy, executive]

Mr. Mangesh, I think the good news is that government is very clear to develop Amravati in a big way. But we should be very pragmatic about what is likely to come. So the government just came.

So I think by the time they settling in, most of the demand from Amravati starts picking up, we believe that it may be later half of this year as a best case scenario. But most of it, we believe that it should happen in the next year from next year onwards.

But in general, most of the deferral during these election times and the off season, we expect them to come back because as you know, demand was at its peak when we started getting into the election. So it's likely that, that continued, that those works are likely to start fully implementing from middle of -- end of Q2. So the demand is likely to start pick up from middle of Q3 is what we [indiscernible].

[Operator]

The next question is from Amit Murarka. Amit, please go ahead.

[Amit Murarka, analyst]

So again, following up on the discussion around the new clinker capacities as well as Panyam ramp-up. So firstly, like in Panyam, EBITDA in Panyam, so what would be the current utilization at the industry level? Is it like 70%, 75% now?

[Sammidi Reddy, executive]

So Amit, you should know that it's close to 110-odd near tonne kind of installed capacity when the [ states ] come back, okay? So you should pencil in quite a few things because 50% of Andhra's capacity typically ends up servicing the outside states. So the average capacity utilization in [ RV ] is somewhere around 45% to 50% in general. There could be 1 or 2 units, which could be exceptionally higher or lower than this, but in general, the capacity utilization is somewhere around in the range of around 45% to 50%.

[Amit Murarka, analyst]

I thought last 2 years, the demand has been very strong. I mean I believe it is up like 20% or so, right? I mean...

[Sammidi Reddy, executive]

Mr. Amit, you should understand that you are talking of 110 [indiscernible] itself. So you're not talking of a smaller number. [indiscernible] for sure. I think the implication was fairly strong because there is some amount of clinker outflow from both the states into the other grinding locations which are outside the region in the state.

It's likely that we might go back to those numbers reasonably quickly or maybe in the current year itself, in the current fiscal year itself. It's likely that we will go back to the numbers where we were before the start of the election airing. So that is a possibility.

That is the reason why we believe that the current Q1 -- the overall -- the growth is at 20%, sir. So we might end up [indiscernible] kind of flat to slightly positive kind of a [ base ] at the end of the year. That's what we are factoring in. But the [indiscernible] market.

[Amit Murarka, analyst]

Understood. And also, as far as these plants are concerned, you mentioned [ my home line ] for commissioned. I think -- it was about, I think, end of December of Q3 FY '24 and then [ usually ] commissioned in April. So can you -- would you be aware like particularly for my home line, is it already ramped up or it is still [indiscernible]?

[Sammidi Reddy, executive]

Mr. Amit, I think the typical ramp-up, I think, is happening. I don't know specific numbers for each of the unit wise, but I think ramping up is happening. So that's what we are in there. Same would be the case with [indiscernible]. I don't know the specific numbers unit-wise. But I think it looks like they are also ramping up in line with the market.

[Amit Murarka, analyst]

Okay. Okay. So I mean, if you are already at 45%, 50%, and there's a few more units don't matter then.

[Sammidi Reddy, executive]

We are at 45% at [indiscernible]. We are only at 26 [indiscernible]. So there is some catch-up that is required from our end, but we are waiting for the demand. As always, we have been a marketer. So we believe that likely that we should give these numbers before the end of this fiscal year itself.

[Amit Murarka, analyst]

Got it. And just one more question. So generally, if I have to see the pricing movement in the last, I would say, 2 years or so. While the [Indiscernible] pricing has been, I think, actually up Tamil Nadu, Kerala have actually come off a lot to a point that Tamil Nadu probably is now in line with [indiscernible]. So do you think that with this Penna acquisition and also these new units which are coming, we could again get into a situation wherein the [indiscernible] pricing goes into a discount to Tamil Nadu?

[Sammidi Reddy, executive]

No, Mr. Amit, I go with what is -- see, Penna's supply from the location of the plant is more southbound, not north. I am talking about southbound. They only have 1 million to 1.2 million tonnes installed capacity in the [ Alberta ] cluster. Everything is either in Maharashtra or towards Maharashtra or deep south.

So from that perspective, would it influence? I cannot comment. But rationally speaking, it should not. And as such, we believe that [indiscernible] prices did not move on, sir. They remained flat. It's unfortunate that deep south prices have corrected quite steeply.

For the first time in my career, sir, I've seen Chennai prices, either part of or a [indiscernible] which we have never noticed. So would [indiscernible] prices get corrected with Chennai prices just because Chennai prices have come down? Only time will tell. But I think [indiscernible] prices are not at its best either. So from here, is there a scope for [indiscernible] prices to come down? It's only [indiscernible] go going down below that. I think the whole industry is already bleeding, sir. So it mean it's going to be a [indiscernible].

[Operator]

The next question is from Shravan Shah.

[Shravan Shah, analyst]

Sir, this Vizag landfill, so any update?

[Sammidi Reddy, executive]

I think we would be in a much better situation. The status remains same as the last call, sir, because we could not go to any of the government departments, as you know, it's in transition. So we have indicated that it would probably take under a couple of months for us to reapproach them because out of these 3 critical milestones, we only achieve one, there is 2 more.

So from a time perspective, what we have indicated before end of this December or to the middle of Q4. I think that time line at this point of time, we would like to keep it status for because nothing much has moved. We will be in a much better situation to take a call probably in the next quarter call, Mr. Shah. So we believe that we should have a lot more information about the focus on that by the time we address the Q2 results, we'll be in a much better situation.

[Shravan Shah, analyst]

So most likely by March end, we should be able to monetize. So that's the...

[Sammidi Reddy, executive]

As it looks -- as I mentioned, the status, there was not much at the a moment. And it is in line with our internal time lines what we have indicated, sir. So it looks like that we should be ready by then.

[Shravan Shah, analyst]

Okay. Okay. Okay. That's great. Second, sir, just trying to understand. So you mentioned in terms of the cost reduction from now onwards, not much scope. So whatever the cost that we are having in this quarter. So from here on, what max cost reduction can possible?

[Sammidi Reddy, executive]

See, in our plan, the road map we have clearly indicated even in our presentation about the CapEx plan. So we are sticking to our CapEx plan. So each of those implementation, we do expect some potential savings.

Like, for example, in the current year, slightly that commission going to 6-megawatt solar branch [indiscernible]. So in case it implements itself, we expect annual savings of around INR 5 crores of [indiscernible] both of them. Then the other, where we have already subjected the technical kind of a specification and in [indiscernible] more or less, we are digit order placement is [indiscernible] ecosystem would follow. So -- but it's an 18-month effect from the day we place the order.

So we are waiting for some amount of clarity from a financing perspective because we did indicate that we would not like to move from the net debt position that we are in. But the current cash flows are exactly enough for us to fulfill the current obligations on the CapEx what we have mandated. So we still would want to wait for the market to improve before we would like to place order on the [indiscernible].

So the only orders that we are doing much in CapEx is on solar and the ongoing CapEx side, Dachepalli as well as the 2 other locations where we are doing small investments to ramp up the brownfield capacity, Gudipadu as well as Jeerabad.

So from that perspective, we don't expect any cost levers to kick in, in the current year, except for the operating cost, which are likely to contribute to a certain extent.

[Shravan Shah, analyst]

Okay. Okay. And in Q1, how much CapEx we have done?

[Sammidi Reddy, executive]

INR 33 crores.

[Shravan Shah, analyst]

Okay. And sir, just wanted to understand why we have sold such a significant clinker of 89,000-odd this -- so why can't we sold the cement?

[Sammidi Reddy, executive]

Sir, I think you should understand that this is an off-market, sir. So market, when it is down, there was an opportunity that came, right? So it's not that you would get it every time. So we had this opportunity. We ended up selling because we had too much of inventory. So either we had to shut the plant and increase the cost structure because obviously, overheads would always remain higher, right? So when this opportunity came in and the transaction happen, it is a reasonably good realization. So it's a decent margin that was a [indiscernible].

[Operator]

We have the next follow-up from Keshav Lahoti. Please go ahead.

[Keshav Lahoti, analyst]

So is it possible to bifurcate the [indiscernible] effect for this year and next year?

[Sammidi Reddy, executive]

We would be happy, sir. I think you -- if you can bear with us, we will be happy to share in kind [indiscernible]. There is some amount of small changes that might happen. Yes, we would revert Mr. Keshav. I think you would see a -- in the current year, we indicated that it should be close to around INR 300 crores. Out of that, we have already done a CapEx of INR 30 crores. So the breakup is part of the presentation, Mr. Keshav, but we would be very happy to again share it once again. So around INR 50-odd crores.

If you look at the Slide 12, we did indicate the overall kind of a CapEx plan for Andhra, sir, this INR 255 for the current financial year, we balance in FY '26, but we would be really happy to share just in case you want that.

[Keshav Lahoti, analyst]

And lastly, on the clinker sales, so how should we see the clinker still more like INR 100 EBITDA per tonne, it was more like you want to operate the plant so maybe your minimum...

[Sammidi Reddy, executive]

I think you should understand that was a season when there was a requirement from one of our [ limbering ] companies. So it's usually nobody denies it. They had some maintenance issues, so we ended up servicing it. It's a one-off opportunity that we have had, sir. It's not like we always would like to [indiscernible]. So there was too much of inventory. So we thought it would be means of trying to shed the plant and had a higher operating costs. So we thought it's an opportunity that we ended up in [indiscernible].

[Operator]

The next question is from [indiscernible]. Please go ahead.

[Unknown Analyst]

Sir, my question is regarding the renewable energy capacity targets. So like we are targeting 50% in FY '30. So are there any interim targets like we have announced 6-megawatt reaching Dachepalli and other regions? So any interim target for FY '25, '26 for the renewable energy?

[Sammidi Reddy, executive]

See, I think we stated that we would want renewable power to be 60% of our total electrical energy portfolio. We are committed to that. Now part of that, we did indicate the CapEx plan in our presentation by year.

If you can look at the same slide, 12, we did indicate just solar [ multipart ] is 6-megawatt by FY '25, [indiscernible] for a good part by FY '27. Solar 4-megawatt [indiscernible] by FY '27. Basic recovery for [ Line 1 ] at Mattampally, which is 2-megawatt by FY '28. Solar at Jeerabad by FY '27.

The only thing that we [indiscernible] of 9 megawatt at Dachepalli that we are doing 6 megawatt in current year itself, which was slated for FY '29. So solar was at 6 megawatts for FY '25. I think it is more or less done. Basic recovery at Dachepalli, which is 9 megawatt for FY '29. So I think these are the interim targets, which we have clearly indicated in our Slide 12 part of our investor presentation.

[Unknown Analyst]

Yes. And sir, again, on the demand and pricing environment, you talked about the South Asian, like the demand has declined by 20% and prices are also declining. So can you please share or what is the pricing and demand scenario in the central region, mostly in [indiscernible]?

[Sammidi Reddy, executive]

See, again, [indiscernible] is a big area for us. We are very specific to the western part of [ MBS ] market for us and to a certain extent, certain pockets of [indiscernible]. Our assessment is that monetization market has come down by 15% year-on-year. Gujarat actually is trending upward, but it is 5% lower by the current quarter year-on-year kind of. Odisha is flat to slightly with a positive bias. So these are some of the statements other than the south that we follow early.

[Unknown Analyst]

Okay. And sir, lastly, on Andhra Cements, like Andhra, we have guided to be breakeven by Q1 FY '26. So is that still standing?

[Sammidi Reddy, executive]

Yes. Can you repeat the question, [indiscernible]?

[Unknown Analyst]

Sir, Andhra Cements, we have been guided to be at breakeven by Q1 FY '26.

[Sammidi Reddy, executive]

I'm sure you're very close to that time line. It's just a question of ramping up. The [indiscernible] capacity as well as optimization is going in a very [indiscernible] way. It's a question of doing volumes. I think we should be breakevening by Q1 is what we start building.

[Operator]

The next question is from [ Tushan ].

[Unknown Analyst]

Sir, my first question is regarding that you had a substantial CapEx for power generation. So I just want to know that what sort of EBITDA per tonne could one get if all your power requirement was sourced through like solar power generation. I know that's not what you're aiming for. But let's say, hypothetically, if one would source all their power through solar generation. How would that affect the EBITDA per tonne levels?

[Sammidi Reddy, executive]

Mr. Tushan, solar cannot sublease 70% of our electrical power because as you know that we do not have battery since -- so when solar -- when sun is around, we generate, but plant runs 24/7. So in our outlay, we are looking at all the entire green sources.

So if my understanding is correct, your question is if you turn green and the entire thing is from green power, what potentially it could contribute from an EBITDA perspective, right, EBITDA per tonne perspective?

[Unknown Analyst]

Yes.

[Sammidi Reddy, executive]

So now see, at this point of time, we are close to around 30% of our entire electrical requirement is coming from green power. This is both the renewable as well as the basic recovery. Now the [indiscernible] will go up to 50%. That is incrementally. We believe that it should contribute close to around another INR 50 to INR 75 per tonne because you should -- it also has its cost, right? It's not that it is coming free. So that CapEx also needs to become factored in.

Right now, the overall average blended cost for us per unit per kilowatt is around INR 6 per unit. So we believe that once we get into the -- some current 32, if we move to 50, then it potentially could come down to around INR 5 to [ 475 ], so the delta is what it would be sell around -- roughly around INR 50 crore to INR 75 is what we should think.

[Unknown Analyst]

Okay, sir. And my next question is regarding that, what's the usual frequency for maintenance of things like you have to get some frequent intervals, you have to maintain your things, right, you have to do some debottlenecking or some [indiscernible]. How -- what is that frequency?

[Sammidi Reddy, executive]

Yes, Mr. Tushan, there are 2 things here. One is a long-term one, rather 3 things medium and a short term, okay?

Now let us look at the long term. Long term typically, lead the game. We need to overall not only tackling but the associated equipment like [indiscernible] clean tires, some amount of shell and everything [indiscernible]. But in the medium term, of course, there are some amount of shell replacement and again, I'm not enabling myself to [ kiln ], but I'm talking about the entire [ pyro ] system itself. That includes the heater [indiscernible] cooler.

Medium term, it demands some amount of replacement to some of the consumers, especially the refractory and the customers. And the spare parts that are long term, medium term for a cooler. Short term, it is limited only to burning fuel, sir. So most of the declining in the burning zone and slightly higher temperature zone needs replacement of once 6 to 9 months' time. Same would be the case with some moving parts in the cooler, that needs quick maintenance in the short term.

But all in all, what we generally, do not only for the kiln, sir, but the entire equipment, charter anywhere between INR 150 to INR 200 per tonne as we replace the maintenance kind of a cost for the overall kind of maintenance. In a large -- longer-term kind of replacement is typically capitalized because these are meant for sometimes 10 years, sometimes 7 years so they get capitalized.

[Unknown Analyst]

Okay. The INR 150 to INR 200 per tonne that you've given for maintenance cost is per year, right, on average?

[Sammidi Reddy, executive]

Yes, per tonne. For a year, that would be the usual. That includes the replace and maintenance and some consumables that get added up. I'm only talking of this pyro and onset, but there are other consumables like lubricants and all, which are just slightly factored slightly differently. That should be another INR 100 extra.

[Unknown Analyst]

That's fair enough. And so the last question is regarding your plant in Dachepalli. Right now, it's a utilization of around 29%. You have planned an expansion, so what are your plans for ramping this location?

[Sammidi Reddy, executive]

Yes, Mr. Tushan, I'm sorry, [indiscernible]. See, this is not an expansion alone. Expansion is incidental, sir. The idea is to increase the efficiency of the plant. So the investment was more directed towards increasing the efficiency rather than an expansion kind of a moat. Since we are adding a new generation preheater, so it also is helping us have an additional output but the primary purpose for this investment is to increase the efficiencies because the old pyro system is a 4-stage preheater with a separate line, high-stage [indiscernible]. It's almost a 15-year-old kind of setup.

What we are doing is we are going up with a 6-stage in line will string [indiscernible] from earlier in [indiscernible] to consume for [indiscernible], we are targeting at less than 700 kind of a [indiscernible] with this investment, sir.

So this sort is helping us increase the output of the pyro system. So that is where most of the investment is directed. Same is the case with the grinding circuit. So there were 2 standalone ball mills earlier. So of course, they had uninstalled [indiscernible] for one more [indiscernible].

So what we're also doing is, we are also adding one more [indiscernible] the roles for one [indiscernible]. I mean, these measures are primarily from a perspective of increasing the overall kind of an efficiency, reduce the cost which incidentally also is helping us increase the [indiscernible]. So that is where our state and objective is.

But if you look at our operating outlook, what we have indicated for Andhra, we don't expect it to cost more than 60% over the next 5 years' time, either way because that is more in line with what we believe are the markets that would service the overall kind of demand/supply question in those areas. Probably would not be any different than what we have penciled in. So the idea has not been expansion. Our idea is to optimize the overall cost.

[Operator]

The next question is from Mr. [indiscernible]. Mr. [indiscernible], you can unmute your line and please go ahead with your question.

Okay. We'll wait for a response. Sir, in the meanwhile, just one question from my side. How much in terms of the overall cost would come down for Andhra Cements after the entire CapEx is done?

[Sammidi Reddy, executive]

As I mentioned, Mr. Manish, that we are expecting around 5 electric -- again, let me break down into 2 parts. One is to [indiscernible] clinker and the other is the cement.

Now what I'm talking is only up to clinker, sir. It is for anybody to make a calculation, which is relatively easier. So we are expecting close to around 100 kcal reduction. So on per kcal, whatever is the likely price. At this point of time, it is INR 150-odd per kcal because here, we are also using imported coal plus it's a blend of imported coal with [ petrol ].

So the average is around INR 160 to 170, sir, per kcal in this instance. So you multiply that into whatever, 100 kcal so it comes to around INR 160 to INR 170 is the savings there. But we are also incurring quite a bit of on the maintenance side, because these are relatively old. [indiscernible] is almost close to 40-year-old kind of a kin setup. So bulk of the investment also is going into that.

So breakdown cost and all, we expect another INR 50-odd from the mechanical maintenance related issues. We are expecting around 7 electrical units to come down from the current 60-odd units. We expect it to be close to 50-odd but I'm assuming it should be 7 electrical units, that would be close to INR 40-odd should come down.

So all in all, we are looking at close to INR 250 per tonne, up to clinker to come down.

And from a perspective of cement grinding, we expect the number of units to come down by 5 units. So that should INR 125-odd at the cement level. But cement is a bit complex because it's again to do with OPC and PPC, so factoring that would be a challenge.

So from a clinker to that conversion factor, if we have to look at it and do that, I think we should definitely save INR 250 on an average at a cement once the entire project is done.

I'm talking only on the CapEx related, sir, then, of course, there are other costs related, this thing with renewable power investment and all that should be tapping the overall kind of cost reductions that are likely to happen. I have not factored basic recovery, nor have I factor in the solar unit at Andhra in these numbers.

[Operator]

Got it. So this is the existing CapEx plan that will reduce...

[Sammidi Reddy, executive]

Yes. Yes, sir.

[Operator]

Got it, sir. The next question is from [indiscernible]. Mr. [indiscernible], you can please go ahead, your line is on muted. Okay. We'll take the next question from Rajesh Ravi.

[Rajesh Ravi, analyst]

Sir, given the target that you are -- INR 370 to INR 380 EBITDA per tonne, INR 200 to INR 250-odd crore at max EBITDA you're looking for this financial year...

[Sammidi Reddy, executive]

No, Mr. Rajesh. Can I -- see, we are looking at anywhere between INR 350 crores to INR 375 crores as an absolute, Mr. Rajesh. So I just want to clarify that we are looking at the current Q1 and Q2, we expect trends to be very simple, sir. But we do expect hedge to be slightly better. So all in, we are factoring some current INR 360-odd we assume it should move to INR 350 on an average for the full year.

[Rajesh Ravi, analyst]

Okay. Okay. So full year around, 530, 540 per tonne, you're looking at.

[Sammidi Reddy, executive]

Yes, sir.

[Rajesh Ravi, analyst]

Okay. And sir, what is your net debt target for the end of this financial year?

[Sammidi Reddy, executive]

I think we should be at a similar level, sir. I think around INR 1,300-odd, INR 1,250 to INR 1,300 is what we are limiting ourselves. So I think we will be capping our net debt position there. Plus, we would not exceed the current position itself.

[Rajesh Ravi, analyst]

And this [ land ] sale, which you were targeting, but you're seeing no progress so far. So fair to...

[Sammidi Reddy, executive]

I'm not saying no to this, sir. The last quarter, we could not -- we did not get any update because most of the government establishment was more directed towards election airing. Right now it is [indiscernible] so out of 3 critical milestones, sir, we did make a progress, so we covered one.

So there are 2 more critical milestones to be covered. So even when we indicated that it should be done by -- before the current financial year itself, we are maintaining that at this point of time, but we would have a lot more clarity probably coming few quarters, Mr. Rajesh.

[Rajesh Ravi, analyst]

Okay. And sir, how much you are targeting if this financial year, you will be closing this? How much cash inflow this can bring in?

[Sammidi Reddy, executive]

No, we have not factored any cash flows from the monetization of this land, Mr. Rajesh, in the current year.

[Rajesh Ravi, analyst]

No, no, I understood. You are not factored in your current estimates. I'm looking -- I'm just asking in case you are able to monetize this, how much cash this may bring in?

[Sammidi Reddy, executive]

No, I think we would start interacting with potential buyers who are interested in this only after the cost. One more typical milestone, sir, so which we believe that it should happen in the coming few quarters. So far, we did not approach -- as indicated earlier, sir, the current government indicated rate for the decision is at INR 4 crores an acre.

[Rajesh Ravi, analyst]

Okay. Okay. Understood. And lastly, given that now Penna is acquired and they would be ramping up 10 million tonne capacity, struggling with working capital would go full throttle. And even [ Kesoram ] will see some uptick in volumes. This year, this may get consummated in UltraTech. And a few more assets are under talks as per market chatter.

So how should we look at the south landscape and for places like you? Your utilization is already low. Will that impact -- will keep the margin subdued for more time? I mean the pricing may not see meaningful uptick for next 1, 2 years. Is that a better understanding?

[Sammidi Reddy, executive]

Yes. Mr. Rajesh, I'm sure you look at this market much more closer than what we would. So the top 10 players, market shares have not moved significantly even with the most -- some of the M&A that has happened, sir.

So the number of factors more or less remain very close to the past numbers. So should we expect any differently? Internally, we believe that it may not significantly alter, sir. I think it's a current 2-player market, so it cannot change that significantly in either direction. For a minute, telling that market would be much better or much worse, for some, I think internally, for what we are factoring is from an offseason, there could be a price increase. Nothing beyond is expected in the current year, sir.

And we'll take one step a time as these player ramp up because I think there could be a realignment in brands and which currently we are only hearing because we are here to see, so how the position of it and all would alter, those things could be significant. How we look at our own market position, sir.

See that we have [indiscernible] our significant market is still not yet impacted because the Penna footprint in our own bigger markets is very, very limited. So with the ramp-up and all, it may not significantly alter the major markets that we are in. So that is what we because even if that one asset that has to operate at 100%, it can not significantly alter the market landscape itself.

[Operator]

Sir, the next question is from Mr. [ Jayesh Gandhi ]. What can be the capacity utilization of the entire AP post the Amravati development goes to full swing. That's the first part of the question.

[Sammidi Reddy, executive]

Okay. So should I address this first or do you want to...

[Operator]

Yes.

[Sammidi Reddy, executive]

I think our assessment is that since supply also has matched up, sir, we exactly are not in a position to really calculate the exact demand of Amravati. But in the past 5 to 7 years back when Amravati was being implemented or it was in the pipeline. If I have to assume that same thing more or less remains with slightly increased outflow, okay, supply more or less caught up in that area. But internally for some of the players, which are in [indiscernible], which most of the people are, I think it should impact around 250 to 500 bps, if not more, in terms of an utilization because the demand, in our view, could have changed from earlier regimes to this, so that is what is also another factor that one has to be mindful of when you are [indiscernible] at a potential demand in Amravati [indiscernible].

But what is very important is the robust effect of Amravati on the surrounding districts is something which we have to pencil in, sir. We are still trying to calculate the data of likely kind of impact in that neighborhood. That is something which also gives confidence that it should improve 250 to 500 bps at an overall industry level.

But at each individual players, I don't know how much it would have impacted because some players more or less are on a similar line, sir, time line we have looked at it, [indiscernible] capacity, she has added capacity. Chettinad has come up move vis-a-vis to the earlier, 5 years back. Andhra was not very active. Andhra Cements was not at its best at that point of time. So all these ramp ups should negate the overall kind of operating debt for declares in general [indiscernible].

[Operator]

The next part of the question is what is the lead distance of our plants at Mattampally, Gudipadu, and Bayyavaram? And do we have an edge in terms of the lead distance?

[Sammidi Reddy, executive]

Yes, Manish, edge towards Amravati or edge towards in market in general. See, I think our average lead distance is somewhere around 244 what we have indicated. For each plant, I think you will be very happy separately sharing it. The average is at 244, sir. So for some units like [indiscernible], it is less than 200. For Jaipur also, it is less than 200. Somewhere around 150 for Rajpur [indiscernible] has come down. Has come down, but it may not remain so.

But what we have indicated to the market is that we should be below 300 or below 280. I think we should be more or less on an average. Our lead distance towards Amravati, sir, we are part of the [indiscernible] cluster, sir. I think, really, some people might be very close to Amravati, but I think the average distance from each of our assets should be less than 150 kilometers. Less than 100 kilometers for few assets of us.

On an average, it should not be more than 150 because Amravati is not just one location, sir. It's actually, a big -- I think it's a 50 square kilometer kind of area. So for each of our assets in different direction, it is close by. But that is the case with the cluster players, sir. I think the entire [indiscernible] cluster may not be very far out, may not be very close. They are equal distance to Amravati is what we strongly believe in.

[Operator]

Got it, sir. Thank you so much. Anyone who has a question, may please indicate by raise of hands. Sir, as there are no further questions, I would like to hand over to you for your closing comments.

[Sammidi Reddy, executive]

Yes. Thank you, Manish. Thank you to each one of you for taking your time out and joining and showing interest in listening to us and having to get more information about us. We would like to thank once again for all of you for joining on this call.

I hope you got all the answers you are looking for. Please feel free to connect with our team, HR or CDR, should you need any further information or have any further queries. We will be more than happy to address them and discuss them with you. Thank you again. Have a good day. Thank you.

[Operator]

Thank you, everyone. That concludes the call. You may now disconnect. Have a good day.