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Shree Cement Ltd
Earnings Call Analysis
Q1-2025 Analysis
Shree Cement Ltd
In the first quarter of 2025, Shree Cement faced significant headwinds due to sluggish demand exacerbated by elections and extreme weather conditions. Despite these challenges, the company focused on optimizing production processes and implemented cost-efficiency initiatives. These steps helped maintain stability in difficult market conditions, allowing Shree Cement to continue delivering consistent value to stakeholders.
Shree Cement managed to increase its total volume by approximately 8%, from 8.92 million tonnes in Q1 2024 to 9.64 million tonnes in Q1 2025. This increase occurred despite overall weak demand, with the company achieving a utilization rate of around 76%. The commissioning of new capacities played a significant role in these numbers. However, realizations dropped by about 6% from INR 4,771 per tonne to INR 4,469 per tonne due to moderate demand and changes in geographical mix. Additionally, average fuel costs fell from INR 2.34 per kCal last year to INR 1.76 per kCal this quarter.
Total EBITDA declined slightly by 2% from INR 933 crores to INR 916 crores. EBITDA per tonne decreased from INR 1,046 to INR 950 year over year. Sequentially, volumes were up by 1%, but realizations dropped by 5%. Increased expenses related to the stabilization of two new plants and higher advertising costs contributed to the decline in EBITDA. On a more positive note, the company reported a cash profit increase from INR 898 crores to INR 957 crores year over year, with cash EPS rising from INR 248 crore to INR 259 crore.
During the quarter, Shree Cement commissioned an integrated cement unit in Guntur, Andhra Pradesh, with a capacity of 3 million tonnes per annum. The company is also making progress on other significant projects in Rajasthan, Karnataka, Chhattisgarh, and Uttar Pradesh, totaling about 15 million tonnes. Moreover, Shree Cement achieved a milestone of 1 gigawatt of installed power capacity, including a mix of solar, wind, thermal, and waste heat recovery power plants. The company aims to further increase its solar power capacity by 135 megawatts.
Shree Cement is committed to decarbonization and expanding renewable energy usage. About 54% of its total electricity consumption comes from green power, one of the highest in the cement industry globally. The company is also investing in alternative fuels, utilizing agro waste and hazardous waste, which helped conserve significant amounts of fossil fuel and reduce CO2 emissions. All manufacturing locations are zero-liquid discharge, treating, cycling, and reusing 100% of wastewater.
Despite weak demand in Q1 and a pessimistic outlook for Q2 and possibly Q3, Shree Cement remains optimistic about its long-term strategy. The company expects to grow in tandem with the market in the upcoming quarters. It does not foresee significant supply-side pressures despite the anticipated 30-40 million tonnes of capacity additions per annum in the industry. The company's robust expansion plans and focus on sustainable practices position it well to capitalize on future demand recovery.
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Ladies and gentlemen, good day, and welcome to Shree Cement Limited Conference Call for Quarter Ended 30 June 2024 hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital India Private Limited. Thank you, and over to you, Mr. Agarwal.
Yes. Thank you, Michelle. Good evening, everyone. On behalf of PhillipCapital India Private Limited, we welcome you to the Q1 FY '25 call of Shree Cement Limited. On the call, we have with us Mr. Neeraj Akhoury, Managing Director; and Mr. Ashok Bhandari, Senior Adviser; and Mr. Subhash Jajoo, Chief Financial Officer at Shree Cement.
I would like to mention on behalf of Shree Cement Limited and its management that certain statements that may be made or discussed on this conference call may be forward-looking statements related to future developments and these statements are based on current management expectations. These statements are subject to a number of risks, uncertainties and other important factors, which may cause actual developments and results to differ materially from the statements made. Shree Cement Limited and the management of the company assumes no obligation to publicly alter or update these forward-looking statements, whether as a result of new information or future events or otherwise. I will now hand over the floor to the management of Shree Cement Limited for the opening remarks, which will follow by interactive Q&A. Thank you, and our we hand it over to you, Neeraj sir.
Vaibhav, you hand it over to the MD of the company.
Okay. Sir, you can take it. That's what I -- you can take it, sir.
Neeraj ji?
Yes, I'm here, I'm here.
Kindly start the call.
And I welcome you to the earnings call of Shree Cement for Q1 2025. Just to set the agenda, June '24 quarter was certainly tough for us, but also for the industry. Despite the challenging market conditions, typically characterized by sluggish demand due to a combined impact of elections as well as extreme weather conditions, we -- and despite all this, we continue to optimize our production processes in the last quarter. We did enhance our cost efficiencies, and our focus on the branding initiatives, but also go-to-market initiatives continues. These efforts have enabled us to navigate the difficult market conditions. And historically, with these steps, we have been able to deliver consistent value to our stakeholders.
While the challenge remains, we are very confident that Shree's strategy is very well positioned to seize the future opportunities. Our focus will continue to be on driving growth, expanding our market presence, engage in innovations to meet the evolving needs of our customers while keeping a very sharp, a razor-sharp focus on our cost optimization initiatives.
The broad features of the financial results, both on a Y-o-Y basis and a Q-o-Q basis can be summarized as follows: despite weak demand, we were able to increase our total volume from 8.92 million tonnes in Q1 of 2024 to about 9.64 million tonnes in the current quarter, vesting a growth of approximately 8%. The utilization for the quarter stood at about 76%. Please to remind everybody that Shree has commissioned new capacities in this calendar year. Revaluation of course, was down by about 6% from INR 4,771 to INR 4,469, largely because of moderate demand condition, but also because of change in our geographical mix. The good part was the average fuel cost, which reduced from [ INR 2.34 ] CV last year to [ INR 1.76 ] CV in this quarter. Total EBITDA marginally decreased from 2% from INR 933 crores to INR 916 crores, and EBITDA per tonne stood at about INR 950 against INR 1,046 last year. Sequentially, total volumes were up about 1% from 9.53% to 9.64%. Realization dropped again about 5% from INR 4,721 per tonne to INR 4,469 per tonne. Fuel prices were more or less stable. However, other expenses increased due to increased stabilization expenses following commissioning of the 2 new plants, as I said, in the last few months, but also advertisement expenses also increased due to the launch of the new brand identity, along with Bangur Magna, our premium brand. Total EBITDA accordingly went down from INR 1,327 crores to INR 916 crores. EBITDA per tonne also fell down from INR 1,392 to INR 950 per tonne.
During the quarter, the company commissioned its integrated cement unit in Guntur district of Andhra Pradesh with a production capacity of 3 million tonnes per annum. Besides this, company's ongoing expansion projects in Jaitaran in Rajasthan of 6 million tonnes, Kodla in Karnataka by about 3 million tonnes, Baloda Bazar of Chhattisgarh at about 3.4 million tonnes, and Etah in Uttar Pradesh by 3 million tonnes, totaling about 15 million tonnes, progressing satisfactory, and on all these projects are as per schedule. The company is working on further expanding the capacities in different geographies to reach its target ahead of schedule.
The company achieved a significant milestone, a very big record-breaking milestone of 1 gigawatt of installed power capacity with commissioning of 19.5 megawatts solar power plant at its manufacturing unit in Andhra Pradesh in June '24, taking a total power capacity to 1,003 megawatt. The company's 1 gigawatt capacity includes a mix of solar, wind, thermal and waste heat recovery power plants with high priority of renewable energy to meet the electricity demand for cement production. We are further increasing our solar power capacity by 135 megawatts as our manufacturing locations in Rajasthan, Panipat, Jharkhand, Uttarakhand and Uttar Pradesh. With the launch of another greenfield ready-mix concrete plant in Hyderabad in Q1 '25, the company's RMC business, which has been set up recently, now has about 7 plants with total capacity of 624 cubic meters per hour. Bangur concrete units are fully equipped to manufacture all types of special concretes, offering advanced testing facilities, best technical manpower and digitized solutions. The company plans to set up almost 100 Bangur concrete plants over the next 3 to 5 years, operating in over 50 cities.
The company is focused on decarbonization and renewable energy continues. The company's share of green power in total electricity consumption, as I have said in the last call also, is one of the highest in the world, if not the highest in the world, and it stands at about 54% in Q1 '25, which is very high -- which is one of the highest in cement industry. With investment lined up to expand over energy generation capacity, the proportion is set to further increase as we commission the new plants.
The company is also steadily making investments for increasing its usage of alternate fuels. Notably, the company used about 0.27 lakh tonnes of agro waste in the quarter, thereby conserving fossil fuel equivalent to producing about 80 billion kCal and save about 0.32 lakh tonnes of CO2. As part of this agro waste consumption, the company procured 8,837 tonnes of stubble during the quarter within the NCR region. The company also consumed 0.78 lakh tonnes of hazardous waste during Q1 '25 replacing the fossil fuel-based heat by 26.3 billion kCal. All the company's manufacturing locations are 0-liquid discharge. Treating, cycling and reusing 100% of wastewater generated from our operations. In Q1 '25, the company achieved water positivity levels of more than 6x. With good progress on monsoon for the year as a whole, it aims to improve its water positivity level to more than 7x for the whole year. Bangur Cement further strengthened its brand presence with a comprehensive marketing plan across TV, print media, digital platforms and on-ground activations, building on the success of the Solid Ghar Sirf Bangur campaign, the brand agency adapted its key messages for the national elections with the Vote Solid, Desh Solid campaign. This initiative encourage citizens to pledge for a stronger nation through responsible voting. This media and social campaigns engaged over 100 million people and encouraged 1.8 million citizens to pledge their commitment to vote.
The INR 11 lakh crores capital expenditure announced in the Indian budget '24 signifies the government's commitment to modernize India's infrastructure through various projects and allocations. This, together with 3 crores additional houses in PM Awas Yojana, and launch of Phase 4 of PM Gramin Sadak Yojana will undoubtedly drive demand for cement and other building materials. I have with me Mr. Ashok Bhandari, Senior Adviser; Mr. Subhash Jajoo, CFO; Mr. K.K. Jain, our Head of Finance, to take you through the Q&A session. Thank you.
[Operator Instructions] The first question is from the line of Aman Agarwal from Equirus Securities.
Sir, firstly, I wanted to again understand on the realization part. You did mention about change in geographic mix in your opening remarks. If you can just elaborate on the same? And if you can provide us with the regional volume streams for this 1Q?
Mr. Agarwal, please appreciate that if you are growing at a greater pace than your peer group volume-wise, it will have some appertinent cost with it. Now the cost estimation for taking additional volume was at level x based on the price prevailing in April. And as the price and demand scenario both deteriorated, though we could get the additional volume, we could not get remunerative or better pricing. That is point number one. Point number two is, there has been a marginal shift from North to East. Now unfortunately, East, it was the lowest realization region. And so it pulled down my weighted average realization, having a consequential effect on EBITDA. This also resulted in a very marginal increase in the lead distance. The lead distance quarter-on-quarter increased by about 25 kilometers -- yes, sorry, 21 kilometers, which had its consequential effect on logistic costs. Thirdly, as Neeraj pointed out to you guys, the stabilization -- the consumption of major stores and spares for stabilizing both Nawalgarh and Guntur had also increased beyond our estimates. This has all pulled down the EBITDA.
Understood, sir. Sir, secondly, on the region-specific volume growth and utilization, if you can provide the numbers, that would be really helpful.
Volume growth region-wise?
Yes, sir.
We will give you. I'm asking Mr. Subhash Jajoo to share this with you.
Yes. As compared to last year, the total growth was 8%. And region-wise, it is 7% in North, 15% in East, and around minus 5% in South. And on a quarter-on-quarter basis, the growth is 1%, where it is minus 3% in North, 11% plus East, and minus 4% South.
[Operator Instructions] The next question is from the line of Jyoti Gupta from Nirmal Bang.
Two things I wanted to understand. One is you said that due to a change in geography, you have to bear the cost. So just wanted to understand while the realization on an overall basis declined for all the companies across the board, what was the contribution of realization coming from that aspect? And the one wherein since you were moving -- shifting your product, started selling more in East, [Foreign Language]?
Jyoti, you have to understand.
Yes, sir.
Basically, we have expanded capacity to 56 million tonnes now. We have to create a market to absorb this 20% additional capacity. North had some constraints because I had 2 very powerful competitors sitting with me there, which is UltraTech and Ambuja. It was difficult to really have a better advantage vis-a-vis them in North, so my North volume declined. However, the overall volume increased, it was -- the sales got it did not get transferred from North to East, but the additional quantity got sold in East which changed the reasonable mix. Now East being a lower realization -- East being a lower realization market, with falling demand and faster falling prices, the average realization -- weighted average realization declined. It is not by design that we have moved. It is...
I agree, sir. I understand that, sir, I completely agree to that also. Just to understand that since -- and I totally understand the realization across had to do. So there's nothing in the -- I'm not questioning the strategic part or anything. Just wanted to know that what was the realization you would have anticipated in the North? And what we actually got in the East? That is one of the reasons which is...
So you need a realization per tonne region-wise, Am I correct?
Correct, sir. And also the impact -- since that volume did not get sold, which got sold in North, obviously, that brought down our realization on a weighted average basis. So just to understand that.
The average realization in North stood at INR 4,641. The average realization in East stood at INR 4,154, and the average realization in South also stood at INR 4,620. Weighted average of this based on the percentages which Mr. Jajoo has given. If you want me to repeat it, I'll do that. Our sales percentage was 55% in North, 35% in East and 10% in South. So you can do a metrics on your spreadsheet, on which region resulted into what increase or decrease in the weighted average realization of the company.
I got it, sir. Sir, one -- can I ask 1 more question?
Please go ahead.
I wanted to understand the upon the turmoil in Bangladesh, I think somewhere we understand that volumes from Northeast are actually sold in Bangladesh. Now I think that is somewhere going to be impacted, if I'm correct? Please correct me if I'm wrong. Do you think that is...
One second. We don't sell...
Not at all, Jyoti. Not at all. Bangladesh market is, as it is a surplus market. Some amount of Bangladesh quantity does come to parts of Northeast, but few districts of Northeast, not even full state. So Bangladesh turmoil, and therefore, the economic consequences in cement will have to our estimates, no impact on India.
Okay. And sir, I had anticipated as Bangur cement really -- the brand has actually picked up to your expectation?
Otherwise, I would have grown volumes. This is infructuous, isn't it? If I say that I have gained volumes, then the brand acceptance is automatically established, isn't it?
Yes, maybe. I mean...
How maybe? Let us be very clear, how maybe. If I have sold under the new brand more than last quarter, then the brand has been accepted, isn't it? If there is question mark on the acceptance of the brand, then I would not sell more volumes. Am I correct?
Yes, sir.
[Operator Instructions] The next question is from the line of Jashandeep Singh Chadha from Nomura.
Just 2 questions. Firstly, this time, as you mentioned in your opening remarks, the fixed cost as well as freight cost were high because of Guntur and because of change in region mix. So how much of this cost can we expect to revert back in the next couple of quarters because Guntur will stabilize it?
Let us take it on the other way. Ideally speaking, I would not like to spend a single penny more, but that is not -- life is not ideal. As on date, about INR 52 crores in this quarter represents additional [indiscernible] consumed in Guntur and Nawalgarh. Now hopefully, this INR 52 crores should not -- there should not be any further expenditure. But if it is required to incur, it will be incurred. I cannot just say how the equipment will behave. One has got commissioned in January, one has got commissioned in April. So each plant has a stabilization period. In that stabilization period, both minor and major space can be consumed. And we are hoping for the best.
Understood, sir. If I can just ask this in a way, how much time do you think it will take more to stabilize the unit?
Look, let us understand, my experience says that the general normalization time is between 3 to 6 months. However, sometimes or some plants may take as much as 12 months also. So hopefully, everything is fine. But if something unforeseen happens, it happens, what to do -- they are -- the stabilization cost only. Ideally, if I would not have commercially commissioned the plant, they would have gone as a capital expenditure. But we have commercially initiated the production. They are in commercial production, so they have to take revenue hit only.
Understood, sir. My second question is on pricing. So far, the July exit prices, how much the price drop? Or what's the price trend that you have noticed in your core markets?
[Foreign Language], Jashandeep, let us understand this very clearly. Pricing is a function of demand. If the demand does not revive, the prices -- the pricing power will not be there with the industry. The demand in Q1 was very weak, that you can see the -- you see the peer group, roughly Ramco lost 21% in quantity, 16% was lost by Dalmia, UltraTech lost 9%. We gained 1%. Okay. Now if you add such a wide range of demand fall, it will have its consequential effect on pricing, which could get reflected again in EBITDA. Nothing has revived the demand in July that everybody knows. August till date, we are weak. Now you have to understand why this is happening. The central budget has still not been passed. It is still being debated. Once it gets passed, it goes to President of India for her assent. Once she gives the assent, then the ministry allocates the resources. Once the resources are allocated to respective ministries, then officers start working on it, call for tenders for all the projects, including those 3 crores housing and 25,000 village -- rural village highway connectivity. Looking at current status of affairs, I don't think the presidential assent will come before third week of August or something. That means by September, the resources will be allocated. Then somewhere in mid-September or end-September, you have the tenders from the government. So demand in this quarter is going to remain weak. If demand is going to remain weak, price will be weakening also. Please appreciate that I have never in my 40-year career in this industry, ever given any guidance on price. And consequentially, I don't give any guidance on EBITDA. I always give guidance on my cost. My cost this quarter is inflated because of higher logistic costs and higher unforeseen stores and spares expenses. They will all get normalized, but as EBITDA is price minus cost, even though I can establish my cost at a reasonable level without any one-off, these critical stores and spares, I cannot give you an EBITDA guidance because I don't know what the selling price will be. So Q2, for sure, is not going to be good for the industry. And I will take an insurance on Q3 also because in Q3, you lose about 10 days of working because Diwali and Chhath Puja and all other festivities. So Q3 will be about 80 days instead of 90 days of working. Q2, the writing is on the wall. Even if all the tenders get floated by end-September or early October, I don't think major changes will happen in demand scenario in Q3 as well. So I have no qualms in saying that Q2 and Q3 may not be very good. Q2, for sure; Q3, we can wait and watch.
Understood, sir. Just 1 last question if I could squeeze in. So Shree Cement has performed better than its peer in the industry on volume front in the first quarter. So your volume -- whether the 40 million tonnes for FY '25, it still stands? I mean, is there any change from the management?
No, no. If I have lost, I have gained some share in Q1. But Q2, I'm growing almost in tandem with the market. And Q3 also, the same should happen. So I'm toning down my guidance by making an ominous statement that we will grow in tandem with the market. If I can do it better, I will be the first one to beat that up.
Next question is from the line of Sumangal Nevatia from Kotak Securities.
Sir, few -- I'll start with some bookkeeping questions. I mean, our depreciation rate has increased significantly. It should we assume that 600...
It has not increased my dear friend. If you look at my total gross block, it has increased, isn't it? So depreciation is a function of my increase in capital assets.
So this is a normal level to kind of expect, right?
Correct, correct. With this capacity, which is in vogue today, I will guide you a depreciation of about INR 2,600 crores. However, Mr. Nevatia, since I've never interacted with you earlier. I have always maintained that don't please judge Shree Cement on net profit numbers. Look at the cash profit numbers, and I'm happy to state that in spite of all the turmoil we have faced, our cash EPS has not fallen much. The cash profit for Shree in June '23 stood at INR 898 crores, and it is at INR 957 crores this year. If you look at cash EPS, then the cash EPS in June '23 was INR 248 crores and it has reached to INR 259 crores. These numbers are there in my results. You can look at them.
Yes, that's great. Sir, how should we...
No point -- just hear me out once. We are basically a cash-focused organization. We are not net profit-focused organization. We run the company on the principle that cash is real, rest all is myth. So please be very careful while making any analysis based on net profit numbers.
That's clear. Sir, Sir, what should we -- I mean, what is the guidance for the tax -- cash tax rate for the year?
I am running at INR 16,000 crores CapEx expenditure here. And I'm on record saying, I will neither dilute nor borrow. We are keeping on increasing dividend. Last year, we paid INR 100. This year, we have paid INR 105. So there will be an increasing dividend trend. Rest all will go into CapEx.
Sir, I'm asking about the tax rate, cash tax rate, what should we kind of expect? Last year, I think it was around 18%, 19%...
[Foreign Language] Cash tax rate is apparent in my result.
We should expect this to continue? I mean, this low rate for this year, at least?
This is calculation of profit before tax. If I'm not being able to give you an EBITDA guidance, how can I say that this will remain same. PBT is after EBITDA, my dear friend. I'm saying my depreciation will remain almost the same. Finance cost [Foreign Language] Nevatia ji.
Sir, just if you can give some color how is the quarter started, July where the volume has been very weak for the industry, with a decline -- so is it a decline as far as volumes are concerned for the industry?
For sure.
Sorry?
Yes, for sure.
Okay, okay. On a year-on-year basis, got it. And sir, are prices down from last quarter's average?
Mr. Nevatia for follow-up questions, I would request you to kindly rejoin the queue, sir.
[Operator Instructions] The next question is from the line of [ Rishabh ] from Goldman Sachs.
This is Pulkit from Goldman. Sir, my question is on the Nawalgarh plant. I remember when we had spoken last time, you mentioned the advantage of this plant is that it is very close to the cream market of Delhi NCR, and we can get there really quickly with the decent realizations as well. Now have you just made the statement that one of the reasons why you couldn't do much in volumes in North despite -- yes, sir.
One second. Be very careful. Somewhere there has been a miscommunication. We are entitled to certain industrial subsidy on our Nawalgarh plant. Now the subsidies are state-related, right? Each state has its own policy for the plants getting commissioned in that state. And the subsidy is restricted to the amount of GST collected within the state of Rajasthan because Nawalgarh is in Rajasthan. But if I sell quantity from here to NCR or Delhi, I lose on the subsidy in the state of Rajasthan, okay? Point number one. Point number two, Nawalgarh, logistic advantages will kick in only when we commission our Etah grinding unit in UP, which is likely to be in the fourth quarter of this year. When the logistics compensates the subsidy, which is receivable from the state of Rajasthan, then I can jolly well and more profitably by using Etah grinding unit sell there. So at the moment, Nawalgarh is majorly catering to Rajasthan. [Foreign Language] is one of the ways. [Foreign Language] Nawalgarh [Foreign Language] Delhi NCR, Western UP [Foreign Language].
[Foreign Language] my understanding may have been different. But the point I was trying to make is that got Nawalgarh and then there is going to be another 6 million tonnes in Rajasthan, which is pretty substantial. You just said, there are 2 behemoths in that particular region which are continuing to supply. So I'm just trying to understand in terms of our expansion...
In my interaction with Goldman Sachs of over 25 years, have I ever shown you fear psychosis of competition.
No sir.
[Foreign Language] try to understand, 39 years back, I was 0.6 million tonnes. I was nobody in the industry. Today, I am #3 player, all-India. [Foreign Language].
[Foreign Language] So volume growth from this plant will be mostly focused on Rajasthan based on what you just said, and that's how we should think about it?
Till I commission Etah. [Foreign Language] because of the subsidy. [Foreign Language] I can gain more than what I am gaining on subsidy, I'll do [Foreign Language] everything is dependent on how much money you make per tonne, inclusive of subsidy or not including the subsidy. Overall profitability [Foreign Language].
The next question is from the line of Prateek Kumar from Jefferies.
Yes. I have like just a couple of bookkeeping questions. On CapEx, we continue to expect INR 4,000 crores kind of CapEx annually for like next year?
Yes, yes.
Also, this INR 1.76 on fuel cost, kCal base. So is this further savings expected on this number going forward? Or this is...
Please understand, that in the last call or maybe somewhere either individually or collectively, I have maintained that my order book or coal pipeline, is at this level, INR 1.76 -- it was INR 1.72 I think. Going forward, as we book as the price is increasing -- as the price is decreasing, this cost should come down. Average fuel cost, let me put it, again, net of alternative fuel at the moment is INR 1.74 per kCal.
So INR 1.74 or maybe INR 1.72 is something which we are looking at going for later part of the year, and...
It is based on my committed orders to various suppliers. This is not an assumptive number. This is an actual number. It may go down because the pet coke prices are going down. Typically we maintain 3 to 6 -- 3 to 4 months of pipeline for coal. [Foreign Language] INR 1.74 [Foreign Language]. New orders, if they are released at a lower rate, the average fuel price may come down.
And what about power cost -- power mix, which is like 52% as RE green power currently. We are looking at somewhat about to...
What you want there?
The RE power mix can go from 54% number to what number like going forward?
Today it is 54%. And by June, in -- 1 second, today it is at 54%. By June '25, this would go to 62%.
Right. Okay. And my last question on your annual incentives based on like several new plants which are commissioning, our annual incentives have, I think, come down to INR 150 crores range -- INR 125 crores to INR 150 crores range in the past 2 years versus INR 250 crores, which you used to have earlier...
I could not understand your question.
So the annual incentive or subsidies, which we used to have...
You are saying that the run rate of subsidy will go down as the time passes. You get additional subsidy on Nawalgarh also. But please understand, I do not recognize any subsidy in my books of accounts unless realized in cash. Because if I take that credit, I have to pay unnecessary taxes, which is a cash cost. I have always maintained that I do my books on cash basis. I do not carry -- I do not recognize any subsidy which I have not realized in the year.
So what is the annual run rate of cash incentives which you are like sort of looking at from like FY '25, '26?
[Foreign Language] all state governments are tight in financial positions, and I cannot predict when they will release what. As soon as it is released, you will find it in my other operating income number. I would not like to hazard a guess on that.
Okay. And last question on power business. Can you give like the power EBITDA number for the quarter?
We have taken a decision that you guys keep on asking UltraTech and they don't give their breakdown of EBITDA into gray, white, RFC and others. We are also going to give you only blended EBITDA. We're not going to do any disclosure on power quantity or power EBITDA. My total composite EBITDA for the company will be reported quarter-on-quarter. And I will refrain from answering what is power and what is non-power.
Okay. Would you be giving out power revenues or that's also you will not be giving?
I will not give. In any case, our revenue stream doesn't come to the shareholders. You get benefited out of the EBITDA only. So giving you a split of revenue, how does it matter. I have given you my quarterly average revenue of cement business. [indiscernible] can give you whatever it can.
We'll take the next question from the line of Navin Sahadeo from ICICI Securities.
Sir, 2 questions. One is observation, and correct me if I'm wrong. But you -- in the quarterly breakup of sales quarter-on-quarter, of course, Shree has done a commendable job of volumes rise 1% where most of the players are down in the range of 10% or more, and we have shown a growth. But my observation here was that -- and then the breakup you've given, my observation was that we saw an expansion in Nawalgarh and also in South, Guntur. But our quarter-on-quarter volume growth has actually gone -- increased 11%, as you said, in the East region. So, I mean...
North [Foreign Language] because competitive pressures from powerful players was there, okay? So [Foreign Language] East, we have grown in East because East was having more -- it was possible for us to sell more. East, it is -- you have to understand, it's very difficult. Please understand that Guntur -- yes, Guntur we expanded. South is doing very bad. South realizations are very bad. It will come up for sure. [Foreign Language] and INR 26,000 crores he has given to then these 2 regions should do better, relatively. Andhra's demand should pick up. Guntur will get more viably utilized in Guntur because of this INR 15,000 crores largesse and Bihar INR 26,000 crores and [Foreign Language] the plant which we put with a 50-year vision -- in one quarter, they have not shown the desired results, it's all right. How does it matter. The problem is that I keep on fighting on a quarter-to-quarter basis, whereas our decisions for setting up plants are on a 50-years vision. In some quarters you may go up, you may go down.
Sure, sir. No worries. No worries on that. Sir, second question was, did we also then saw some shift more towards non-trade for the quarter, which would have had some impact and hence, element that once, let's say, demand normalizes, that shift could also reverse and give that tailwind?
Your observation is correct. I don't have the numbers readily available with me. Jajoo will share with you, but yes, the non-trade component has gone up. [Foreign Language].
Sure. And just 1 more question, if I may slip in quickly. Railway siding was the next, I think, efficiency CapEx that we were pursuing. Of course, we're doing -- we're far ahead...
It's on schedule. It's on schedule.
Yes. So sorry, if I could just request you, by which quarter, from when can we see start seeing some benefits of that?
What I suggest is that paper is just not in front of me at the moment. We will send you a mail of each power -- railway connectivity and each plant by which date. I will send you that.
[Operator Instructions] The next question is from the line of Amit Murarka from Axis Capital.
So just on volumes, like while your volume growth has been above industry, is it also possible to split it between cement and clinker?
Clinker is nothing [Foreign Language]. What are we talking. Clinker is hardly anything. In a 96.4 million tonne volume -- sorry, 96,40,000 volume, clinker maybe hardly [Foreign Language]. Clinker volumes are there. It's quite low. Don't worry. I'll give you the number, 1 second. So out of 96 lakh, hardly 4 lakh tonne is clinker.
Okay. Understood. So like in Dachepalli, where you have just commissioned the unit, I believe it's a 1.5 million tonne clinker and 3 million in grinding. So what's the idea in that excess grinding like? Is there a next clinker line which will be coming up that will balance out the excess grinding there? Or will the clinker come from some other source?
No,no, wait a minute. Transporting clinker is not a cheap exercise. It's a trade up. Please understand, it is -- we have to look at overall logistic cost optimization. It is not that [Foreign Language]. In the total equation, what we -- there is a concept of [indiscernible] cement realization. That is money coming to my pocket, rest is all reimbursements. Freight is a reimbursement, GST is a reimbursement, packing cost is a reimbursement. [Foreign Language] and I will keep on praying for it that, yes, we get another chance of setting up a clinker line because of vibrancy in demand.
Sure. No, but like generally that market is like OPC market, so in that sense...
No, wait a minute, wait a minute. Now you are trying to question our business wisdom.
Not at all. I'm just trying to understand how the balance will come?
One second. I've explained you that we have -- we also do our calculations. We also know what is required. So I've said that as per our calculation, we are fine. You are welcome to believe or not believe it. But please don't question our 40-year-old wisdom [Foreign Language].
Sure, sure. Definitely not. Also, on RMC, like what are the targets for...
One second, 1 second. Let me put it in a different manner. RMC is the future is correct. RMC has its own business learning curve is also correct. We have just started [indiscernible]. It is peanuts compared to our overall operations. Let us operate these 5, 6 plants, see what kind of profitability is there, learn the nuances of the business, and then we will expand. Yes, we will go into Bangur concrete. But the time -- we'll come back with exact profitability and capacity numbers, but give us some breathing time. We have just started it.
We'll take the next question from the line of Parth Bhavsar from Investec.
Sir, all my questions have been answered.
Let me conclude by saying that Q2 is going to be bad because there is no demand. And Q3, because of festivities and other reasons, I am not very hopeful. All vibrancy should get reflected in Q4, because in Q4, the government departments are also under pressure to exhaust their budgets. So Q4 should be better. Let us see how things pan out.
Sir, we'll move on to the next question, which is from the line of Rajesh Kumar Ravi from HDFC Securities.
Rajesh Ravi here from HDFC. Sir, just a few housekeeping questions, which -- what was the blended cement and trade mix in this quarter? Lead distance, you already mentioned as partially going up. And yes, so first these 2 numbers. And I just wanted to understand this is the volume split and MSR trend which you have shared for Q1. Sequentially, it works out to be that in all the 3 markets, realizations are down by around 5% to 6%. Is that understanding correct?
Ravi saab, I had told you that I do not in front of me have the trade and non-trade number at the moment. The most of housekeeping questions are related to product mix and quantitative details, I suggest please drop a mail to Mr. Jajoo and he will reply you ASAP. I do not have those numbers because I thought that quantities are...
Sir, I'll take that. Let me come to the most important question, sir. You see the current dynamic, the M&As which are happening in the industry. Prices are going through in terms of the payback period, depending upon the asset class. So what is your understanding on the consolidation and the subsequent impact on market dynamics, how do you look at the pricing, near term, obviously, demand is weak? However, we don't see...
Great question. Let me explain you. Let me explain you slightly differently. Yes, there are targets for acquisition. Yes, further consolidation will happen. But the guys who are the contender for such consolidation would like to keep the prices of cement depressed to have a better value. This is one of the major factors why the prices are not being increased. Yes, consolidation will happen. Yes, in short term, there may be pain, but consolidation always pay in longer.
Ladies and gentlemen, due to time constraint, we'll take 1 last question from Ronald Siyoni from Sharekhan Limited.
Yes. Sir, I just wanted to understand on the 2- to 3-year perspective, like as industry, we are expecting at least 30 million to 40 million tonnes of capacity additions per annum over next 2 years, at least. So as you said, that demand may revive during Q4. So what we are portraying a picture like supply would be far exceeding the demand over the next 2 years. So is the reading correct or whether...
Let me correct you, sir. Give me 2 minutes. We are at about 450 million tonnes as of 31st March 2024.
Yes, sir?
Now if we take an 8% demand rise or a demand equivalent to the GDP growth rate, which [ Navin ] had always been advocating to me. Then you are looking at a 7.5% to 8% demand escalation, [Foreign Language] GDP, you agree. So 7.5% of 45 million is how much, my friend -- roughly 30 million tonnes. And all 30 million tonnes do not come on 31st March or 1st April. They are spread over a period. So the effective capacity will be far less than the number you are talking about. So we -- I do not find any supply side pressure -- sorry, any demand distortion because of capacity creation.
As that was the last question for today, I would now like to hand the conference over to Mr. Vaibhav Agarwal for closing comments. Over to you, sir.
Yes. Thank you. On behalf of PhillipCapital India Private Limited, we'd like to thank the management of Shree Cement for their time on the call, and many thanks for participants for joining the call. Thank you very much, sir. Michelle, you may now conclude the call.
Thank you, members of the management. Ladies and gentlemen, on behalf of PhillipCapital India Private Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.