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Shree Cement Ltd
Earnings Call Analysis
Q2-2024 Analysis
Shree Cement Ltd
Shree Cement's second half of FY 2024 already shows a strong performance with an 11% increase in production and an even higher 14% increase in sales compared to the previous year. What's notable is the leap in net profit to INR 1,072 crores, which more than doubles the INR 505 crores from the last half-year. This significant rise in profits is attributed to higher selling prices, an improved product mix, reduced costs, and enhanced operational efficiencies. The cement realization has modestly improved both sequentially and annually, by 2% and 1%, respectively.
The company has its eyes set on growth, with capacity utilization jumping to 76% from 66% in the previous year, indicating increasing demand and efficiency in their operations. Shree Cement has ambitious plans to increase its capacity to 56 million tonnes by 2024 and is progressing towards a goal of 80 million tonnes by March 2028. This sets the company on a path of a compound annual growth rate (CAGR) of 12% in capacity over the next five years. Additionally, the company is streamlining operations by merging two of its cement subsidiaries to enhance synergies, simplify structures, and improve compliance.
In an effort to be more environmentally friendly and efficient, Shree Cement has increased its share of green power consumption to 58% from 51% last year and plans to push this to 62% by June 2024. This commitment to sustainability goes hand-in-hand with their expectation of a continued robust demand for cement, spurred by increased infrastructure spending and housing development.
Diving deeper into the financials, the EBITDA from the cement segment was reported to be around INR 1,060-1,062 crores for the quarter. Power sales have contributed positively, with a separate EBITDA from power recorded at INR 30 crores. The overall turnover for the power segment was INR 343 crores for the quarter, with the EBITDA margin being between 8-9%, influenced primarily by the fact that the power unit is fueled entirely by imported fuel. For the first half, the power business revenue stood at INR 822 crores with an expected combined EBITDA of around INR 75 crores.
The company has identified Eastern India as a region with underutilized capacities, such as their Odisha plant. Despite the apparent discrepancy between clinker and cement grinding capacities, the management justifies this with higher conversion factors in the East due to factors like composite cement and flat demand. Shree Cement plans to further expand its clinker capacity in this region with the fourth clinker line expected to come on stream between 2027 and 2028.
Cost management, particularly in the volatile area of fuel costs, is critical. This quarter, the cost per kilo calorie of fuel was INR 2.05. Looking ahead, the company expects this to come down to below INR 2, with an anticipation of INR 1.9 in the upcoming quarter, which could further improve profitability if realized.
Addressing regulatory matters, Shree Cement has completed its IT survey without any further queries over the last one to two months, indicating no significant compliance issues at present. The company has also shown a proactive approach to risk mitigation, particularly regarding water scarcity concerns. For the new plant at Nawalgarh, they've strategically secured a surplus water supply by taking on the responsibility to clear all municipal waste of Nawalgarh.
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Ladies and gentlemen, good day, and welcome to the Shree Cement Q2 FY '24 Earnings Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Navin Sahadeo from ICICI Securities. Thank you. And over to you, sir.
Thank you, [ Davin ]. Good afternoon, everyone. On behalf of ICICI Securities, I welcome you all to the Q2 FY '24 earnings call of Shree Cement. From the management, we have with us Chairman Shri HM Bangurji; Managing Director, Shri Neeraj Akhouryji, Senior Adviser, Shri Ashok Bhandariji; and CFO, Shri Subhash Jajooji.
Without any further ado, I hand over the call to Shri HM Bangurji for his opening comments. Over to you, sir.
Thank you, Navin. Good afternoon, ladies and gentlemen. Welcome to our earnings call. I will be giving a few highlights. They may be sequential in importance or otherwise. And then we are open for questions. I will leave more time for that.
Half year 2024 registered an increase of [ 11% ] in production and 14% in sales over half year last year. Capacity utilization also stood at 76% against 66% last half year. Net profit stood at INR 1,072 crores compared to INR 505 crores. All this is due to increase in selling price, better product mix, a reduction in cost and better operating efficiency. Cement realization during the prior quarter improved from INR 4,771 to INR 4,843 per tonne sequentially and INR 4,805 to INR 4,843 per tonne on a year-on-year basis, that is respectively 2% and 1%.
Share of green power in total power consumption increased to 58% in September 2023 vis-a-vis 51% last year. We are likely to increase it to 62% by June 2024. We expect cement demand to remain robust in the coming years on account of rising expenditure on infrastructure and housing development. Our capacity should increase to 56 million tonnes by 2024. The company is on the track to [indiscernible] capacity of 80 million tonnes by March 2028, achieving a CAGR of 12% capacity in next 5 years. The company has decided to merge its 2 cement subsidiaries with itself for better synergies, simplicity and compliance.
With this, I will now open the floor to question and answer. Thank you.
[Operator Instructions] The first question is from the line of Amit Murarka from Axis Capital.
I missed the opening comment, but just wanted to check if you could just tell us what was the cement realization on a Q-o-Q, Y-o-Y basis?
Yes. Cement realization in this quarter is INR 4,843, which is 1% better year-on-year and 2% better quarter-on-quarter.
Okay, okay. Sure. And could you also be able to guide something on EBITDA, like how much of the EBITDA came from cement?
About INR 1,060 crores -- INR 1,062 crores is the exact number which is coming from cement, quarter.
Okay. So I believe that would also have some benefit of power sale and all that.
Of course, benefit of power sale, everything is there. But if you mean power EBITDA, that will be INR 30 crores. That is separate.
Okay, okay. That's included then in this reported EBITDA, right?
Power EBITDA is not included here in INR 1,062 crores -- it is, sorry. It is included.
Got it. So it will be great, actually, if you can restart like sharing the power details. It just helps in better understanding actually of the cement business.
So our turnover in the quarter was INR 343 crores. And EBITDA will be around INR 30 crores, 8% to 9% of the turnover is EBITDA. Basically, our power unit is based on imported fuel, 100% imported fuel. And this is coming from Gujarat port, cost of the fuel is higher. So average EBITDA will be only 8% to 9%. This year -- this quarter, it is INR 30 crores also -- [indiscernible] INR 42 crores.
Also possible to give H1 number similarly?
For numbers, I will -- INR 822 crores is the revenue from power business. So about INR 75 crores, which is expected to be with the -- I don't have the exact number right now. But it will be around INR 75 crores in the 2 quarters put together.
No that's very helpful. The second question for me is on the capacity addition that you've announced, 3.4 million tonnes in the Baroda Bazaar. My understanding is that after that, you'll go to 21 million tonnes of cement grinding in East, whereas the clinker is 9.2 million tonnes. So like when can we expect the fourth clinker line then to come at Baroda Bazaar?
For clinker line, it will take some time. Eastern India, we have certain capacities which are underutilized like Odisha plant. Somewhere it is -- and then the capacity dispatch, what it seems is not the real fact because in East India, conversion factor is much higher, more or less like [ 1.9 or 2 ] because of composite cement also because of flat demand. So all put together between [ 10 to 20 ] or 9.2 million to 21 million looks unjustified, but because of the East and because of the conditions, they are highly justified. Fourth clinker line will be part of the capacity increase between '27 to '28.
Okay, okay. Understood. And lastly, any guidance on power and fuel cost? What was the rupees kCal in Q3 -- in Q2, sorry? And what can we expect in Q3?
This quarter, it was -- we are doing it net kilo calorie, this is INR 2.05 was the cost per kilo calorie, and which is going to be less than INR 2. INR 1.9 is what we are expecting.
The next question is from the line of Satyadeep Jain from AMBIT Capital.
Just one question on the IT survey that happened back in June. Just wanted to see what has happened since then? Any updates, any progress on that?
The survey separately completed. No more questions have been asked for last 1 month or 2 months. Few questions to the clarifications were needed that we have given. After that, we have also not heard anything about that.
The next question is from the line of Ritesh Shah from Investec.
Sir, my first question is pertaining to water as a commodity. I did ask this question on the last conference call as well. Given Rajasthan has a lot of water stress regions, what is our risk mitigation strategy specifically for the assets that we have in Rajasthan, if one takes a longer-term tenure? That's the first question.
Right. So first question is regarding the new plant at Nawalgarh which we are starting, we have purchased the obligation of clearing all the municipal waste of Nawalgarh. So there, we will be water surplus by a huge margin. We have put a total unit for this improvement of water quality, and there, we will be -- lot of surplus will be there.
Regarding [indiscernible], for last 5 years, we are collecting the water harvesting -- not water harvesting, but rainwater which comes into the area, We have selected the lowest spots. So rain water is connected not only from our area but from the far distant area also, We have made the profile such. And about 24 million tonnes of water is collected, which will be lasting us for about 8 months and then for 4 months, sometimes the rain comes up. Or we are also continuously reducing water consumption. There is no problem for last 10 years.
Sure, sir. Sir, my second question was how would you reflect on our [indiscernible] operations. And I think when we had ventured into UAE, we had indicated that we will look to cater into the Western coast line by setting up bulk cement terminals. That was our thought, I think, a couple of years back. So where do we stand on that particular aspect? That's the second question.
Regarding Union Cement, we are not [indiscernible] coming into India in a meaningful way. There, the handling cost of Indian ports are very high, roughly INR 150 per bag or INR 3,000 a tonne is the handling cost if we bring it to the [ NPT ]. So it doesn't make much business sense as the similar margin can be attained from other sites. Somehow, this is the cost which we are taking how to reduce it. So though our plan remains same, handling cost is abnormally high.
Sure, sir. I'll just squeeze in a last question. Sir, if you look at our annual numbers, there is a significant difference between the cash tax rate and the effective tax rate. So in the annual report, there is a line item which says that items not deductible for tax, not liable for tax. And this has always been a pretty significant number from, say, around INR 150 crores to INR 400 crores on an annual basis. So I just wanted to understand how should we look at the differential between cash tax rate and the effective tax rate? And how should we reconcile say, fast data?
See, we'll be able to talk about it. It is a highly practical questions.
What you have to appreciate is that the tax rate, you are taking the declared tax rate. Whereas the tax is calculated on income derived from the tax statutes, So -- and these are [indiscernible] or any other accounting standard, we have to provide full tax, whatever is applicable to the company. So basically, where is the disconnect? The tax, which has been provided, [indiscernible] care of tax, which is [indiscernible] under the tax statutes. Now where is the confusion, sir?
Sir, there are deductibles which the company is enjoying, and we have been enjoying that over a good tenure. So if I just give you a number from CY '17 to, say. FY '23, the cash tax rate, which is there on the cash flow statement is around INR 2,100 crores. And tax as per P&L is INR 2,600 crores. So there is a differential of 5% over here. So over time, this should merge with each other, but there is still a differential which was there. Probably I'll drop a line to seek clarification over here, but it would be good to have some understanding on this particular aspect.
I will tell you, normally, the company has a policy to pay aggressively the tax or provide aggressively the tax. And you will see year after year, every year we get some refunds. So if it is sufficient to put the question -- or my understanding is wrong, because the difference will be INR 400 crores to INR 500 crores. Next year, if the tax is more, it will -- from INR 500 crore, it will go INR 600 crores. 2 years back what was paid is aligned now because of the refund has come and other things. But next 2 to 3 years, til the refunds come, our tax paid will be continuously higher. We are taking a very collaborative policy of paying high taxes.
Sure, sir. And just a follow-up. Why is this change in policy? Because historically, we have been smart capital allocators and we have realized the benefits of taxation and fiscal incentives. Is there any change in the thought process?
No, no, no. No change in policy. This, we have been doing for many years and continuously from the beginning that we are really conservative as far as tax is to be paid. And then we fight our cases, we fight our views. Sometimes we win, sometimes we lose. It is for the tax authorities to decide whether our claims are right.
The next question is from the line of Milind S. Raginwar from BOB Capital Markets Limited.
[Technical Difficulty]
What would be the contribution of the blended and nonblended [indiscernible], if you can share the trade non-trade?
Our 75% of the production is blended, 25% is [indiscernible].
So as the Chairman said, blended cement is 75%, whereas trade is -- we are at the currency at about 80%.
And what would be this in the comparable quarter?
I didn't get you, please, comparable with what?
I mean what would be this number in the last year, and I mean, year-on-year in sequential?
So on trade sales mix, we have been continuing at about 80%. Within last September, we were at 80% yes, [indiscernible] September. On the blended ratio, we have -- again, we are almost there, 76% last year, 75% this year.
So actually, I was coming to this jump in the receivables that we see from March to September, is peak. Can you just throw some light there in the balance sheet?
Yes. March to September, is not comparable. Every year in March, the outstanding dip, everybody wants to be there. We have to compare from March to March or September to September. Otherwise, in March, the outstanding is the minimum, Everybody wants to pay and make their books clean.
Is it safe to assume that this will normalize over the next 6 months?
Yes. [indiscernible] Again, depending on the increase in sales volume, only proportionate in outstanding will be there. Number of days wise, it is almost same.
Okay. And what would be explaining this overall increase in the power and fuel cost on a year-on-year basis [indiscernible] if I calculate it on a quarter basis? Any specific reason that we are seeing this increase for?
Power and fuel costs also increased because you are seeing the blended [indiscernible], if our percentage of power sale increases, we are about 80% will be the fuel cost. So the power cost -- the fuel cost will be on a blended basis, increase or decrease depending on the amount of sales of power which we have done. That is one part. Secondly, it is the power cost -- the fuel cost. Sometimes -- normally, we are booking about 3 to 4 months in advance. So whenever the prices increase or decrease, our effect will be 3 to 4 quarters -- months later yes.
So I think, sir, even the previous participant also indicated, if we can share this power sale numbers beyond EBITDA and...
I will share -- about INR 342 crores is the power sales for this quarter.
Number of units so that we know exactly where...
Number of units also we will be telling you, what is the average realization. Just a minute. I will give you this quarter. [ INR 8,810 lakh ] kilowatt hour . This is the generation. INR 4,028, that is about 40 crores units we have sold this quarter.
And what will be the external sales of this proportion, sir?
External?
For [indiscernible] process?
Capital process, about, again [ INR 40 crores ]. We have generated 88 million -- 88 crores unit, 40 crores is for sale, 44 is for internal consumption. 48-44 for internal consumption [indiscernible], 88 is the total generation.
Okay. And if you can please share the number in September '22?
Send me a mail? I'll send you all the details here.
[Operator Instructions] The next question is from the line of Jashandeep Singh from Nomura.
My first question regarding power and fuel cost. So in the presentation, the press release you have mentioned that the green power mix has increased from 50% last year to 58%. However, I see this 2% decline in power and fuel costs. I just wanted to understand once we reach the 63% green power mix by the end of FY '25, how much cost saving you are building in? Just wanted to understand, in a sense the such a drastic increase in beginning [indiscernible] powering costs between just 2%.
Yes. About INR 5 crores per megawatt is the solar power cost, which we are adding, and part of it will be coming down, the percentage, because of more efficient motor which we are changing. So the overall power consumption also is expected to be lower per tonne. So it is a blend because of the new extra capacity and because we have lower consumption of power, the 58 will become 63.
And sir, how much savings are you seeing from this, I mean, this increase?
Roughly, the payback period, depending on the grid rate is between 6 years to 8 years. So on an average, 7 years is the payback period. 14% return on the capital employed is expected.
Okay. And sir, my next question is regarding raw material costs we have seen in the entire industry. The raw material costs have escalated over sharply. However, Shree Cement raw material can actually decreased sequentially by 13%. So what was the reason for that? And what is a sustainable number that we should build in for the coming quarters for raw material?
Raw materials, we will be talking about ourselves, but I will not be able to know why others' costs have increased. We are using in raw material gypsum and flyash, the 2 principal raw material. The rest is our own limestone. So gypsum cost has come down in 1 year from INR 90 to INR 75. Flyash cost for us have come down from INR 200 crores to INR 190. And that -- how other cost is increasing, I don't know.
Understood. And if I can squeeze in one last question. I'm sorry, you might have answered. But I just wanted to understand on the -- whether there will be any filter shortage is the East post [indiscernible].
The question is regarding the widening unit of [indiscernible]. For which we have about 10% extra capacity. 9.2. will require us to have 19 million tonnes minimum. When we have 21 million tonnes, depending on the market, sometimes market A, B, C, this 10% or so capacity -- additional capacity gives us the freedom to sell in the highest realization market. So this is a policy which has been purposely kept to increase the flexibility.
The next question is from the line of Prateek Maheshwari from HSBC Securities.
Sir, I was just looking at your comment on the first half utilization for the company, which is around 70%. The much larger power is kind of operating itself at a larger capacity at 90% [indiscernible] levels for the same period. Just wanted to understand from you what's stopping the utilization levels from improving to -- to see our margin improvement in utilization now, what would be your target? And which are the reasons where you're probably seeing that utilization is much lower? That is one question.
Yes. Neeraj?
So it is true that utilization this month where the last -- what we have reported is 71, but do also remember that quarter before that we report around 80%, yes. So because of the little lower demand last quarter, so it came down a bit. But also we added new capacity in Purulia. Going forward, we are coming up with new cities in the next 6 months both in Rajasthan and in South, so in Guntur. So I think the [indiscernible] for 1 year will deteriorate a bit. And again, we should be able to catch up as we go forward, yes. We should be able to catch up. This is howI would like to respond. Is that okay?
Yes, yes. And sir, can you provide us the utilization regionally also for this quarter or for the first half?
Your other question was? Sorry, I'm not very clear.
I was just checking if you could also provide the utilization levels for this quarter regionally or for the first half period regionally versus what is...
We are at 71% this quarter. yes. And for the half year, we will be at about 76%.
Sir, I was just checking what -- if you could just tell East -- what is the East India -- for the capacity in the East, what would be the utilization level?
See, this is -- in June quarter, our East India utilization level was 92%, which has gone down to 74% in this quarter, mostly because of the rains are very heavy in some areas. And so overall, the second thing is when new capacity is being added, so certainly the capacity utilization will come down. So overall, volumes were not that much lower. Purulia capacity got added, which brought down the utilization immediately. It will take time to ramp up.
Okay, sir. Got it. Sir, just lastly, if you could repeat your comment on the per kCal unit cost that you incurred this quarter, second quarter? And I think you said it is INR 1.9 per kCal for the next quarter, right?
Yes. In the previous quarter, it was INR 2.34 kcal. In September quarter, it is INR 2.05 kcal. And in the last year, it was INR 2.80 kcal. So compared to that, this year, we are expecting INR 1.90 kcal for coming 6 months, not for the whole year -- for the coming 6 months, it is expected to be at between INR 1.90 kcal.
The next question is from the line of Rajesh Ravi from HDFC Securities.
Sir, could you share how much incentive has been booked in P&L in Q2 and H1? So full year, you have guided around INR 130 crores to INR 140 crores.
It is about -- incentive to whom?
Incentive on the various projects that you received. While I understand you book incentives on the receivable on cash basis?
It is -- the release numbers are not there, how much. But it is also an integral part of the realization. It is all months into realization. We are never focusing on what incentives and what is not incentives, We will just calculate and let you know.
Sure, sir. And volume for this full year, what sort of volume number you're looking at? And on the cost you mentioned, your full -- your flyash and gypsum costs has come down. Could you share how much is your usage? And what is the cost trend, please?
The volume for...
So as we said that on cement volume this quarter, we have grown by about 10%, 9.9%. And half year, they've grown by about 14%, yes, for half year.
For full year, what is the number you're looking at? Any target do you want to share?
The next 6 months, it is difficult to -- but looking at our plans and the way we are working, we should be around 12%, yes, for the full year.
Okay, okay, sir. And on the slag prices, how much -- what is the price trend? And what is the usage of -- how much slag cement you are producing, from lenders [indiscernible]?
Can you ask the question again, please? You're saying is -- price?
Slag price trend, which is a [indiscernible] and how much of your product is slag-based cement?.
Slag-based cement will be around 10% where we are talking of slag cement as well as composite cement, which is a modern trade. So about 10% will be the total volume.
Out of this 26%, 10% -- the 75% blended cement, 65% would be normal PPC and 10% is slag-based composite.
Slag-based composite, yes.
[Operator Instructions] The next question is from the line of Indrajit from CLSA.
I have 2 questions, both on Eastern market. If you can give a qualitative indication how different is profitability in East versus North for you?
Yes. East profitability is quite low compared to North at present, but this keeps changing. Sometimes we see better North -- better. So right now, we're at this point of time or the last quarter, North was about 30% -- 40% 0% more than the East.
The recent price hikes have been more prominent in East. So post that, has that gap reduced meaningfully?
Yes, that is expected to reduce, but we will be talking about it, when we talk in January after October-December results because a lot of things change in between in the commodity market. Right now, the difference has come down. Your observation is perfectly in order.
Sure. My second question, again, on the East market, given that there's so much capacity that is being added and the growth has not really been blockbuster at least in the last 2, 3 quarters, do you see an oversupply situation in that market, and hence, competitive intensity can be much sharper than what we have seen in the past?
No. East market, because of the low base, all over India, the growth will be such that is what our expectation is, that gradually, the differential will come down. That means that where the per capita income is low, those places, then percentage growth will be better. So I've seen that East needs more capacity and Odisha is doing very well.
Unfortunately, the limestone is there only in [indiscernible] office. So East, the coal base has to be catered from the [indiscernible] division. Very small milestone is in there in Odisha, and somewhere something in the Northeast. Otherwise, we have Odisha, Bengal, Chhattisgarh, Jharkhand everything has to be served only from one place. So East definitely needs more capacity.
The next question is from the line of Kamlesh Jain from Lotus Asset Managers.
Sir, just 2 questions broadly, like one on the capacity addition time line. Like when are we expecting or when are we commissioning the Rajasthan plant and the Punjab Grinding Unit and lastly, our Andhra plant?
So this year, Andhra plant, Guntur will be completed in quarter 4 of financial '24, something like March or maybe April, May, Guntur will be completed. Nawalgarh also will be completed in quarter 4 '24. It is delayed by about 3 months. And these are the 2 units which you are talking about. The [indiscernible] Grinding Unit in UP, we are coming up, this will be -- just started. We have got the permissions now and we are starting the work.
Cement grinding unit Baroda Bazaar, also the work has started. It will take about 8 months -- It will take about 18 months before it is completed. And we are putting up an integrated unit in our [indiscernible] district, that is [indiscernible]. So all these things put together by the year-end, we will be 56 million tonne plus. And by 31st March, again 6 million more. [indiscernible] it will be 62 million tonnes. So these 2 are the time lines. And then in next 3 years, 62, we want to make it 80.
Okay. Sir, and just on the power side, like if you just take the math, like the INR 0.75 per unit is the EBITDA which we have made. But even in the worst year, we have not made such a low EBITDA. So like the INR 30 crore EBITDA which we have, just told on the call, that INR 30 crore EBITDA on a sellout of around 40 crore units. So it seems to be very low like -- and with the realization of 8.5 years on the revenue side.
This is because the power coal rates have come down very fast. We were stuck with the old pool which was there for the long -- which we had contracted earlier. So at the past, coal rate has come down this year itself from INR 2.80 in September '22 to INR 2.05 for the quarter. So this is the fuel cost, which is true pet coke, which is a fast-moving items.Coal, which we have to see that pet coke is not allowed in the coal in the power. So coal prices are such that the profitability changes to this extent.
Okay. And sir, lastly, like Shree Cement has been the pioneer in the cost side. But the way the, like say, now Adani has acquired wholesale assets, they are also becoming very competitive over the next 2, 3 years. They would also be having 60%, 65% renewable and rest, the entire industry is moving very, very fast on the cost side. How do we see Shree Cement? Because over the years, cost has been a big advantage towards in terms of profitability and every other aspect, project and division.
So now like, say, in order to like -- to have a [indiscernible], to have a far better advantage over the industry, do you think that all those potential have already been explored? Or is there further potential available for the Shree Cement on the cost side? Because on the realization side or on the pushing volumes, we have not performed at par with the industry, which has been the case, like say, prior to 5 years. But in terms of volumes, we are almost at par with the industry. So what are parameters?
Our volumes, where we are doing better, industry growth is not 14% for the first half. It is much less. We are better off in volume. Secondly, the volume gives lower fixed cost at all others, that is a small advantage. Overall, we are saying we are already 58% renewable power, and it will come to 62%, 63% in the coming 6 to 8 month period. So is it not a big cost advantage, which company had even 50%. We talk of not marginally lower, I'm talking about 50%. So any company, [indiscernible] I don't know, you people track all the companies but with us. So 30% renewable power, and we are 58% renewable power, that is quite a big advantage. That should give us cost leadership.
Secondly, one of your colleagues we are talking about, our raw material costs have come down. So is it not that we are doing something smarter compared to the industry? Not doing that other raw material cost has increased that much.
[Operator Instructions] The next question is from the line of Shravan Shah from Dolat Capital.
Sir, first a couple of data points. Positive lead systems for this quarter is how much and fuel mix for this quarter pet coke, coal and AFR?
So this quarter, the lead distance is 472 kilometers.
It has increased significantly versus last quarter?
Yes. Last quarter, it was 456 . So 16 kilometers, the distance has increased. So that is one part. Because in Eastern India, as I was explaining, everything comes from Chhattisgarh, whether you want to send it to Odisha, you want to send it to Bengal, anywhere. Now when our Bengal plant has started, it is going to increase our distances as the big material is coming from Chhattisgarh only. So Chhattisgarh to Bengal means that much extra freight. But that is -- will be in par with others who are selling in Bengal, whether our trade in the various markets have increased, that is not the case. It is a new geographical location, which has increased the freight -- increase the distance.
You asked about pet coke and...
Coal, fuel mix.
Pet coke and coal put together with -- and also mix fuel, including [indiscernible] very low cost, is 10%.
Sorry, sir, Pet coke, how much you said, 90%?
Pet coke and coal put together is 90%. And alternate fuel, that is a municipal waste or agro waste, hazardous chemicals which are to be burned out in the kiln only, those put together is 10%.
Okay. And TSR for this quarter is how much? Because we were looking at to increase to 15%. So where we have reached and by when we will be reaching a 15% TSR?
TSR, we are not -- it will be increasing to 15% by the year-end. Delay is there. But that is the time we are thinking. Suddenly unexpected problems comes when TSR is used. Everywhere TSR is totally different. They are not consistent in nature. So yes, we are having some delays in the TSR.
The next question is from the line of Atharva Bhutada from Purnartha Investment Advisers.
Sir, I just wanted to understand how a power cost in line with the industry over the last 2 quarters? Whereas green power has gone up to 68% of the total power being the highest in the industry.
Yes. Our -- just a minute. We will not be talking about the industry, what is their blended power cost. But I will be talking about -- yes.
So what the question again, the power cost, right?
Yes, power and fuel cost per tonne?
So the power cost is -- for last quarter is at INR 259 per tonne which is down last year from INR 295 per tonne. Compared to last quarter, they have slightly gone up from INR 248 per tonne.
So half year, it will be around INR 250.
Okay. So why is it so much like green energy thing going off and our power fuel haven't been coming down significantly per tonne?
The volume effect of the production also will come. But basically, if we see the per unit power cost -- per tonne power cost, that will be INR 253 is the per tonne power cost per cement. Last year, for the same period, it was INR 295, it is INR 253. So INR 40, the power cost has come down.
The next question is from the line of Abhishek Verma from Fidelity International.
Yes. I just wanted to understand power cost, sort of unable to make sense of this number of around INR 250. I think the power and fuel cost per tonne is around INR 1,700 and it has not declined on a Y-o-Y basis. Maybe to reconcile the numbers.
Fuel -- power cost has come down to this extent, but fuel cost is totally bought out item. So fuel cost of INR 5,100 is in line because it's 700-kilocalorie used per tonne of clinker, INR 2 in the -- charges to INR 2.05 or so to INR 1,400, But it can be about INR 1,200 also. Rest, INR 200 or INR 300 will be the new further power generation, INR 380 crores to INR 340 crore is the power sales. For that power sale, this will be around INR 290 crores, INR 280 crores of fuel will be used.
There has to be a sequential -- sorry, a Y-o-Y decline because for all your peers , there is a meaningful decline in the power and fuel cost per tonne. And whereas for you, I cannot see -- in fact, there's a lot of an increase here.
The number which you are talking about is the composite power and fuel. Mr. Bangur is trying to explain you that power that the coal use for power generation is also included here. If you exclude that, then you may not -- then you add power and you'll find the savings. Otherwise, what I'll suggest is, you send a mail to Mr. Jajoo or me, and we'll explain you in detail, how it has worked out, right? .
I will give you my numbers. Last year, in quarter, power sale was INR 46 crore. And this year, it is INR 343 crores. So INR 300 crores increase in power sales means around INR 250 crore increase in the coal at power and fuel costs. This is the reason when we are talking of the totality.
The next question is from the line of Raghav Maheshwari from Asian Market Securities.
Sir, my question is firstly from the Southern market expansion plan. Our current Southern market clinker capacity is at 2.4 million tonnes, where we expanding in the Kodla is approximately 3.2 million tonnes clinker as well as 1.5 in the Guntur. But if we -- I see same time as a cement expansion plant, it will be somewhere around 9 million tonne expansion plant as well as the 6 million tonne existing cement capacity, including the full year. It will give the [ CC ] somewhere around 2.06, where the rest of the industry for South is the below 1.4, below 1.3, how it will work for the CC of the 2.06 particularly in the South?
South -- there will be some difference in timing. But we will be also putting more lines in Kodla. Some [indiscernible] unit may come a little early, but that has to be followed by us, where our 80 million tonne plant is there, one unit in Kodla will be there. One unit in Raipur will be there. And we are so sure about it because the land and everything is there. So when we put the grinding clinkerization next, we don't have to put the grinding unit. Grinding unit, we are putting a little bit in advance.
So is it my understanding correct, we are ahead sometimes for the cement side. And clinker, we will be followed by them.
Yes. Sometimes, we are ahead in the clinker, sometimes in the cement. But overall, in a next 2 years period, it will all be evened out. Your understanding is correct.
And sir, one thing. What is the clinical production number for this quarter as well as the sequentially Q1? Or this, can you provide that number?
So we did about 59.61 lakh tonnes of clinker, 5.9 million tonnes. This is versus 46.16 lakh tonnes last quarter -- last year same quarter, which is roughly about 30 -- [ 30% ] increase.
Sequentially, Q1 numbers?
This is September -- last September, Sequentially, we are 11% high. Last year, we were at [ INR 11,53.79 ] last quarter. Compared to [indiscernible] we have gone up to 59.6%.
Sir, if my understanding is correct on last quarter, our CC is somewhere around 1.60 where now it's what number you are telling, it is 1.6. Where you told before your blended cement ratio is at 75%. And what is the reason to drop in the major cities it's not reflecting in the material cost. Can you just throw some light on that part?
So we have given you our blended cement ratio, remember? What is happening is that some part of the products now is CC, where the mergers are [indiscernible] versus only B2C.
But sir, the clinker production number you are sharing, regularly showing, that you had reduced the clinker sector for 1.6 to 1.46.
Yes.
Then, sir, what is the reason -- if your blended is at the same level, then what is the reason to drop in the CC is not reflecting in any cost side?
It is reflected in cost side as per tonne, your raw material cost has come down. It may be because of volume. Sometimes the production number and the consumption numbers are not same. Part of it [indiscernible] is the stock. We have maybe -- how much stock, we have not the clinkers. Like that numbers are not trading. Secondly, area to area, this is all composite area, where we see the East. For the other areas, difference is very high because if the East consumption is low, where the conversion factor is high.
In this quarter, it East percentage have come down, overall thermostat factor will be changing to lower size because in North sales blended cement, the percentage that we see in blended segment in North is, 1.6%, 1.7%, in East it is more than 2%. So if we are replacing by 2% to 1.7%, average will come down. So those are all details that we will be -- we have to discuss point by point. Overall, it cannot be discussed.
The next question is from the line of Cheragh Sidhwa from Emkay Global.
All my questions have been answered.
We have the next question from the line of Navin Sahadeo from ICICI Securities.
Sir, just one question. A couple of quarters. I mean in the previous conference call, the management has focused or highlighted the importance on premiumization, so to say. Now it's clearly heartening to see that our capacity expansion announced so far is amongst the highest in the industry at 13%, 14% CAGR. And there is more to come, as you said, 80 million tonnes being the target. So in this backdrop of significant capacity addition, how should one look at volume versus value? That's my only question.
Regarding premiumization, our focus is on the right pricing. The volumes will come later. But if the prices are diluted to get the volume much faster, then you will the sprint race but you lose the marathon race. So our volumes will grow very gradually, but our prices in premiumization is at the level at which we wanted. EBITDA is better. Premiumization for the same sake of premiumization by investing more, giving a better -- higher cost material with lower realization, lower EBITDA is not the idea. So we are focusing on the right pricing, which is there. And right now, it is around 10% -- 9.5% to 10%. And 3 months -- in the 6 months' time, it should be around 12%. This is all what we are expecting now.
Thank you. Ladies and gentlemen, we will take that as a last question. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you, everybody, for getting the better understanding. This year -- this quarter, the results were good. And next quarter, we expect this to be still better because of the -- what is expected. You all ask about the prices, past and more distant past, but compared to July, September quarter, October realization is higher by INR 200 and the fuel cost is lower. Rest is all calculation. That's the [indiscernible]. Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.