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Star Cement Ltd
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Ladies and gentlemen, good day, and welcome to the earnings conference call for quarter and year ended 2024 of Star Cement Limited, 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.
Yes. Thank you, Yashyaswi. Good evening, everyone. On behalf of PhillipCapital India Pvt. Ltd., we welcome you to the earnings call for the quarter and year ended 31 March 2024 for Star Cement Limited. On the call, we have with us Mr. Tushar Bhajanka, Deputy Managing Director; Mr. Vinit Kumar Tiwari, Chief Executive Officer; and Mr. Manoj Agarwal, Chief Financial Officer of the company.
At this point of time, I'll hand the floor to Mr. Manoj Agarwal for his opening remarks, which will follow by an interactive Q&A. Thank you, and over to you, Manoj, sir.
Yes. Mr. Tushar Bhajanka will give the opening remarks, then I will provide you the detailed numbers.
Yes. So good evening, all. My name is Tushar Bhajanka, and I'm the Deputy MD of Star Cement. I would like to welcome you all to the earnings call of quarter 4. I have the CEO and CFO of the company with me. The CFO will give out the numbers of quarter 4, and then we can have the Q&A session. Thank you.
Hi, friends, very good evening. I, on behalf of Star Cement Limited, welcome you to all our con call for discussing our number of Q4 FY '24 and full year FY '23-'24. I would like to clarify that we are discussing on the historical numbers and there is no invitation to invest.
Having said that now, I will just take you through the Q4 number followed by the full year number. Starting from clinker production during the quarter ended March '24, produced 6.93 lakh tonne of clinker as against 7.78 lakh tonne same quarter last year. So far as cement production is concerned, we have produced 13.88 lakhs tonne this quarter as against 12.51 lakhs tonne same quarter last year. As you are aware that we have successfully started commercial production from our newly commissioned cement grinding unit of 2 million tonne per annum capacity in March '24.
Now I will take you through sales volume. During the quarter, we have sold 13.87 lakh tonne of cement as against 12.35 lakh tonne of cement and 0.24 lakh tonne of [indiscernible] quarter there was no clinker sales.
Sir, we are unable to hear you clearly.
Yes. Yes, now am I audible?
Yes, please go ahead.
There is a growth of [Technical Difficulty]. This is as far as cement and clinker sale is concerned. As far as geographical distribution of cement is concerned, we -- in northeast, we have sold around 10.40 lakh tonne as against INR 9.12 lakh tonne during same quarter last year. And as for outside northeast is concerned, we have sold 3.48 lakh tonne of cement this quarter against 3.23 lakh tonne same quarter last year. In terms of blend mix, it is almost same, 10% of OPC and the rest is PPC. These are the quantitative numbers of the quarter.
Now I will take you to the financial. The total revenue figure this quarter is around INR 914 crores as against INR 829 crores same period last year. As far as EBITDA figure is concerned, the quarter we have done an EBITDA of around INR 188 crores as against INR 179 crores last year. Profit after tax is INR 88 crores as against INR 96 crores in the same period last year. On per tonne EBITDA front, it is INR 1,329 during this quarter as against INR 1,448 per tonne same quarter last year. This is what our quarterly numbers for fourth quarter.
So the total revenue figure for FY '24 is around INR 2,911 crores as against INR 2,705 crores last year. As far as EBITDA figure is concerned, in FY '24, we have done an EBITDA of around INR 583 crores as against INR 520 crores last year. Profit after tax is INR 295 crores as against INR 248 crores last year. On per tonne EBITDA front, it is INR 1,312 during FY '24 as against INR 1,297 per tonne last year. These are the quarterly and yearly numbers.
Now I request all of you that if you have any query, you can ask the same, and I will request Vaibhav to moderate the query wherever it requires. Thank you.
[Operator Instructions] We'll take our first question from the line of Shravan Shah from Dolat Capital.
Congrats on starting a clinker and the grinding unit. Sir, just a couple of data point first and then the question. Trade mix late distance for this quarter and the fuel mix?
On trade mix, in quarter 4, we were around [Technical Difficulty].
I'm sorry, sir, you are not audible.
On the trade mix we are around 84%, 85% trade and around 15%, 16% in non-trade. As far as lead distance is concerned, it was 227 kilometer.
And in terms of the fuel mix for this quarter, a spot contract coal Nagaland and biomass and FSA?
Okay. Our FSA was around 4%. Biomass was around 10%. Nagaland was around 36%, and spot contract coal was around 50%.
Okay. And then kcal cost for this quarter was?
Come again, please.
Kcal costs for this quarter, Q4?
The weighted average kcal fuel was 1.7.
So any further reduction possible from here on?
Yes. So we expect that for the coming year because we have signed an FSA contract with Coal India for the next 10 years, where we have locked 3.6 lakh tonnes of coal at about INR 1.5 GCV, so we do expect that contract to, of course, reduce our weighted average cost and we substitute more expensive coal now to FSA. So our target for the coming year is about INR 1.55 per GCV weighted average.
Okay. And this will start from the Q1 itself?
This should start reflecting from quarter 1, because we just signed a contract beginning of this month, the coal will start coming from May onwards. So partially in quarter 1 and then fully see the affect.
Okay. Sir, now particularly on the volume front. So previously, we said 18%, 20%. So now the clinker 3.3, 2 MTPA griding has also started. So how are we now looking at the same kind of 20% kind of volume growth? And also, if you can help us how far in the last 1.5 months or 2 months in this April-May, how the -- in terms of the demand is there?
So the demand has been not very great, I will say. It was a reasonable demand, but it was not something which we can think about, say that it is great. So as far as our mix is concerned, you're right. Now we have clinker with us. And as we are going hard in this year, so obviously, we will be focusing on these segments, especially the institutional segment, which we had a pretty less percentage. So that will be a big segment for us as far as volume gain is concerned, so the percentage of institutional sales, which all may go up.
Add with that we had gotten the clinker plant in the third week of April, but we had some technical difficulty with the plan that took 1 or 2 more weeks to properly start getting clinker out of it. So we had to buy a clinker from outside in the month of April and also some part of May. So that, of course, in Q1 will have a negative effect, and that is also the reason why we did not push as much because we were running on bought clinker, but now that the plant is running and it's picking up. We are able to operate it at a good TPH. So we are building up the store and the problem of shortage of clinker that we faced in Q1 would not be there in Q2.
Okay. So just to come back to the normal in terms of the summary. So in Q1, if possible, if you can help and for the full year, how in terms of the volume growth we are looking at? Previously, we say 20% and then maybe if you can help us in terms of the incentives that will be flowing from the Q1?
Yes. So we are still looking at -- year round, we're still looking at a 20% growth. So that stays the way it is. On the incentive part, first, our GST credit that we had spent on our new project will get adjusted. And then from Q2, the GST benefit will start hitting our books, because right now we only adjusting for the GST that we paid in the CapEx, that will first get adjusted. And from Q2, once it's adjusted, I think it should be adjusted by the first week of July. And then we'll start getting the benefit of the GST which should be in quarter 2. So both the benefit of clinker as well as the benefit of subsidies would start accruing to us from quarter 2. We can see it in the books in quarter 2 it will clearly start affecting in quarter 2.
Okay. So previously, what we said INR 300 per tonne GST benefit, IGST on the clinker and INR 800 for the grinding unit? So for the grinding, we were looking at INR 150 crores, INR 160-odd crores, so that will remain intact?
Yes. So that will remain intact. It's just that because we'll start getting the benefit in Q2, so it will just start reflecting in Q2 results properly. So from Q2 results, you clearly see that there is a jump in the EBITDA per tonne because of those reasons.
Sir, lastly, on the pricing and the cost. So net-net, from Q1, can we see any -- because this clinker are starting. So in terms of any increase in the OpEx cost in the Q1 and then how it will start reducing from the Q2, particularly cost? And so net-net how much cost reduction are we looking at? That is one and in terms of the pricing, so current prices versus the fourth quarter average is how much lower, both in Northeast and outside Northeast?
So in terms of cost, the costs have increased because we were commissioning a plant and consumed extra fuel and generic parameters for [ heat rate ] and all the things kind of take a toll. So by Q2, we should be able to reduce and stabilize our cost and at the same time, operate the kilns -- the new kiln asset efficiency. Of course, the kilns is bigger. So the heat rate and other parameters would be lower in the kiln. And so there should be a long-term [Technical Difficulty] from operating the kiln.
In terms of price, the price in Northeast has broadly been stable. Whereas, the price outside Northeast, which is Bengal and Bihar has seen a drop, which I think is common across everyone either in east. So there is a drop of about INR 300 in prices outside Northeast.
So this 300 is from the average of the fourth quarter or the March exit you are saying?
This 300 is from the March of -- yes. So 300 is from the average of the last quarter, basically, quarter 4.
Okay. And lastly, on the CapEx front, sir. So how much we have already outspend both on clinker and this grinding 2 MTPA and what is left on the 2 MTPA grinding Silchar and net-net total FY '25 and '26 CapEx?
I'm sorry, can you repeat the question?
I'm saying how much we have spent on 3.3 MTPA clinker, what was previously, we were looking at INR 1,250-odd crore and for Meghalaya 2 MTPA grinding unit INR 385 crores. So how much out of that we have already spent? And what is left to be spent in this year and the remaining 2 MTPA Silchar grinding, how much we have spent and how much is left to be spent in FY '25? So I mean, put together everything in the solar CapEx net-net FY '25 CapEx is how much?
Yes. So we were supposed to spend about INR 1,250 crores; still date, we have spent about INR 1,035 crores. I think there's another INR 150 crores, INR 200 crores, which will be spent on the clinker plant. So in total, we will be around the INR 1,250 crores number because there's still some CapEx in terms of silos and all those things which are left on the clinker plant. So the overall number would be about INR 1,250 crores as we had indicated.
And Silchar grinding unit, we have till date only spend INR 22 crores. In FY '25, we plan to spend INR 300 crores in the Silchar grinding unit. So most of the CapEx for the grinding unit will take place in FY '25, and some part of it will take place in FY '26. Today, in the Board, we had also discussed and decided that we want to put a plant [indiscernible] so that will be a fresh CapEx.
And that CapEx would be about INR 250 crores, which will be spent in the next 2.5 years, and we expect to commission [indiscernible] plant in the next 2 years as we've started buying the land for it. So for FY '25, the overall CapEx is expected to be about INR 1,000 crores. This also includes a lot of operational CapEx. It includes group [indiscernible] it includes AAC blocks and the BTAP and it also includes our own fleet that we are expanding now. So it includes a lot CapEx, which will, of course, give us the own returns. So in FY '25, we expect INR 1,000 crores investment.
Sorry, I need a clarification both on this -- the new expansion [indiscernible] INR 450-odd crores. So what's the grinding capacity of that? And this INR 1,000 crores, if you can split it where we are likely to spend that would be helpful, sir.
Yes. So the INR 1,000 crores, if I give a split of it, so about -- in INR 1,000 crores, about INR 220 crores would be spent in the clinker plant, right? Just for creating the silos and other amenities that we need to still create in the clinker plant. About INR 300 crores will be spent in Silchar grinding unit, about INR 55 crores would be spent AAC blocks and adjacent construction chemicals plant, about INR 30 crores would be spent in [indiscernible] for acquiring the land for the grinding unit.
The BTAP we will be spending about INR 58 crores. That will be to set up BTAP systems in Guwahati as well as in [indiscernible] will be spending about INR 30 crores and for operational CapEx, which are related to plant we'll be spending about INR 150 crores.
And the [indiscernible] capacity will be, sir, how much?
Sorry?
[indiscernible] new plant capacity?
That will be 2 million.
Two million, and that will be in FY '27 will come?
Yes.
[Operator Instructions] The next question is from the line of Jyoti Gupta from Nirmal Bang.
I would like to understand what is the demand environment now in the Northeast and the pricing mechanism as well. How is it playing out? And how do you think -- I mean, the substantial capacity addition now, how do you see the market dynamics changing for you with competition intensifying in the next 2 to 3 years in the Northeast as well as the markets where you're coming up their capacity?
So the demand right now, at least in Q1, little bit subdued. I think that is mainly because of the elections and [indiscernible] and Eid which happened in April. And also the election, which is now also carrying on in May. So demand is a bit subdued because of those reasons. The price, I think, is broadly stable.
And the competition in the next 1 or 2 years. So for the 1 year, we are the only ones who actually are getting a clinker plant in Northeast. So for the 1, 1.5 years, I think there would be some stability in terms of the profitability and it will be growing. And there will also be a good margin in selling clinkers for the next 1, 1.5 years. And then how the competition behaves after 2 years would just depend on how the demand is and how is the supply-demand situation in Northeast.
I'm not talking about organic I'm talking about acquisitions, which would happen by other players like buying out plants because they do not supply in the Northeast market. So obviously, the competition then to intensify doesn't mean one has to come up with the greenfield project. I mean acquisitions can also happen unlike with you increasing your share in the non-trade segments, will that impact your margin at your realizations as well going forward?
So I mean, first of all, on the expansion part, sorry, on the inorganic mergers, acquisitions and all those things, there's nothing really Northeast required. There's nothing really available. So I don't know what acquisition are you talking about. Because I don't think there's anything available in Northeast, which is materially sizable, which is ready for sale.
So for hypothetical situation where there may be a merger and acquisition, then I think the situation a little bit different. We haven't studied that situation yet. So we can't really comment. And what was the other point, sorry?
My other point was, your...
Non-trade margins, right? So yes, the non-trade definitely, as we ramp up the non-trade sales, the margins in non-trade may reduce right, naturally. But at the same time, what we are expecting is to grow and trade as well, right? Because we are 85% trade. So if you want to show a 20% growth, we'll have to show a good growth in trade as well.
So what we are really trying to do is 360-degree push where we're also pushing outside Northeast. We're also pushing in non-trade. But at the same time, we have to be very central to out core, which is trade in Northeast, right? So we are, of course, going to make sure that we are, first, pushing on trade; the second, that on an absolute level, we are able to earn much more profit, right?
And then also maintain the margin per tonne basis, we will be able to maintain the margins because there are a lot of benefits and subsidies and other benefits of operating a bigger kiln, of not deviating L1, not having logistic deviations because of shortage of grinding availability. So all those problems that we used to face earlier, we will not face this year. So there are some benefits that will come and I think the margin should broadly be increasing only, it should not be decreasing.
[Operator Instructions] The next question is from the line of Giriraj from MDM come Mr. Giriraj from Mdm Tradecom.
So firstly, you've pointed out that there was expansion of INR 1,000 crores in the current year. So can I have a breakup on how this would be funded, because already the company has started taking about INR 82-odd crores of loans in the current year. So how do you plan to fund this INR 1,000 crore?
Yes. So I think what we've said is that this year, we think about INR 750 crores would be our own cash profit generation that we'll have, right? So that will broadly fund majority of the INR 1,000 crores. And then rest would be a bit of debt, right? So it's just a loan that we'll take. So we have about -- I think about INR 70 crores debt, and we will probably take about INR 200 crores of more debt by the end of the year. So may be about INR 300 crores debt.
Okay. And as far as the benefit part is concerned for GST benefit, what is the kind of expected number that we can expect benefits in the current year for FY '25, what is the kind of benefit that the company hopes to realize?
In terms of per tonne or in terms of absolute number?
In terms of absolute number.
In terms of absolute number, it would be about -- I think about INR 150 crores to INR 160 crores.
And as far as Silchar plant is concerned, so the land acquisition has been completed, if I'm not wrong?
Silchar plant?
Yes.
Yes. So for Silchar plant, the land acquisition is almost 90% complete. We just need to buy like some passes here and there. We have already gotten the DOR from the NOF. We will be having a public hearing in 1.5 months. We'll hopefully get it cleared. And after that, we'll start commissioning the plant from September, October onwards. And by November, December next year, we should be able to get the plant running.
So Q3 FY '26, we should be operational, right?
Q3 FY '26, yes, we should be operational.
Okay sir, what's the overall situation as far as the Siliguri plant is concerned and what has there been -- the company has been speaking for the last 2, 3 quarters on cost-cutting measures out there. So what's the update on that?
So I think the Siliguri plant has in terms of cost efficiency, it has reached -- it has become much more efficient than it was. It stabilized very well. But the prices outside Northeast are low, right? And they have actually decreased, which I'm sure is clear from other investor calls of other companies as well. So from that perspective, I think the profitability of Siliguri is, of course, is profitable, but at the same time it really depends on the prices as well, which are not in our control.
And the utilization, we do plan to ramp up Siliguri now because we have clinkers. Earlier, we were not ramping it up because it was not -- it was -- because we had shortage of clinker, we didn't want to buy clinker for Siliguri. Now that we have clinker, we plan to operate it at about 15 lakh tonnes -- like about 80% capacity around.
Okay. In the last 2 calls, we were told that there has been cost-cutting measures as far as [indiscernible] would be honored and logistics cost and all could be saved, so have you moved on that particular part? Or there will be no significant development on that?
So basically, we are talking about BTAP basically like that will help us transport fly ash at a cheaper rate. So we are going to lock it in a week's time. We are going in a lease model on that, and that will help us reduce the cost both in terms of the raw material costs.
Okay. Okay. And sir, one last question. Sir, what is the current capacity utilization as like what we are running in the Q1 on an average?
Of what, of Siliguri?
The capacity utilization.
Overall capacity utilization?
Yes, overall capacity utilization.
So we have just commissioned the clinker plant. So it's just stabilized. I can tell you about the grinding units. I think we are above -- it would be about -- I think, about 55% around.
Okay. So the demand being very tepid right now in Q1 and do you see some in Q2 or...
Sorry, we're operating -- in terms of grinding, we'll be operating at about 78%. That is also -- we're operating low also because we're just commissioned a grinding unit in Guwahati, right?
Okay. And how do you see the demand in Q2 or Q3 going forward since Q1 is being very tepid as far as we did in formal?
It just depends on how the election happens, what the results are how the market behaves looking at the results. What...
And sir, what is the kind of a drop with institutional sales coming in, so what is the kind of EBITDA per tonne that would...
I think how the market behaves, how the money flows after the government has been formed in the rural areas through MGNREGA or any other scheme that they have, that will really decide how things go.
Right. And sir, since the company has been focusing on institutional sales, so what could be the material impact as far as EBITDA per tonne is concerned?
[Technical Difficulty]
Yes. Mr. Giriraj, please stay connected. We have lost the management connection. [Operator Instructions] We have the management team back on the call. Mr. Giriraj, please go ahead.
Sir, as the company has been focusing on increasing institutional sales, what is the kind of EBITDA point impact that could happen?
So I mean, we sell about 15% in non-trade, right? So if it drops by about INR 200 on an average then we can have an INR 30 per tonne impact on EBITDA per tonne. But I would just say that we should not be so anticipate it on EBITDA per tonne because the EBITDA per tonne [Technical Difficulty].
Mr. Agarwal, we are unable to hear you.
Sorry, so I was just saying that we should not be [ too specific ] per tonne because the non-trade margins in Northeast are still healthy. They are INR 1,200. Even if it goes down from INR 1200 to INR 1,000, it's still INR 1,000 of EBITDA, right? So we should be only looking at numbers in per tonne basis, and we should also be looking at growth numbers. So it will have to be a combination of both, but I don't think non-trade prices going a little bit -- falling up a little bit, still have a significant impact on the overall EBITDA per tonne.
Sir, one last question. Actually, I've missed the kind of benefit that the company could see from the 10-year lock-in that you have with Coal India as far as coal supply is concerned. So just can you give a highlight on that because I missed that?
Yes. So we are doing about -- even like last year, average was about INR 1.85 GCV for coal, right. We lost [indiscernible] right now for 3.6 lakh tonnes at INR 1.5 GCV. So that is almost about 40% of our coal requirements for 10 years. So I think it's just the difference between the GCV and to [ kilocalorific ] value into the tonnage, right? So I think it would be about INR 70-odd crores in a year.
[Operator Instructions] The next question is from the line of Girija from Asit C. Mehta.
So you mentioned income INR 70 crores of savings from that FSA you said something. The INR 70 crores you mentioned that is savings per year from the coal you said, right, if I'm not wrong?
Yes.
So my first question is with regards to premium product sales. So what is the percentage for the fourth quarter?
Percentage in fourth quarter is around 6.7%, around 7%.
Okay. And the incentive, you mentioned it is INR 150 crores to INR 160 crores per year. So that is including our clinker unit as well, right, clinker and grinding unit both?
Yes, yes. So that is about INR 150 for this year, it will be higher for next year because we will not be missing out in quarter 1, right? Because right now, as GST credit has been adjusted for the CapEx that we did, right? So next year, the same thing will not happen in quarter 1. So next year expectation of the GST benefit is about INR 200 crores because we are missing on quarter 1. So this year has benefited about INR 150 crores.
So FY '26, we can expect INR 200 crores of GST benefit you're saying, right?
Yes, additional benefit. Still we're getting about INR 27 crores, which is on top of the INR 27 crores that you are expecting.
Okay. Okay. Sir, this time with freight cost, I can see there is a significant increase in freight cost per tonne. So what leads us this kind of increase?
So I think in Q4, mainly for the deviation, right, because in Q4 in March, we were just settling our grinding units in Guwahati, and there was very good demand in Feb and March in Guwahati, right? Sorry, in Assam and Northeast, right. So what we had to do at that point to get cement from Siliguri to Northeast. And because of that reverse movement, the cost increasing the output freight and [indiscernible] also which was more expensive than the usual transport, right?
So we loaded [ grade ] from Siliguri to serve Northeast, right? So that also led to additional cost, so that was mainly because [indiscernible] came in March and the demand that's picking up from Feb -- from Jan, Feb, and we needed extra grinding capacity in those 2 months, and we have to then get it from Siliguri.
Fair enough. Is there any plan of expansion outside the Northeast? And like we are well established in Northeast region. So are we looking any kind of expansion in outside Northeast like West Bengal, Chhattisgarh, Bihar, or somewhere?
So because why I'm paying like previous someone was asking about the competition like in Ultratech is coming up with bulk of terminal by, I think, FY '27 and Dalmia is also is a very big competitor of Star Cement. So that's what like any kind of inorganic expansion or acquisition, so that may lead some kind of trade to Star Cement. And most of the companies are also coming up with a lot of premium segment sales where realization is better than the other cement. So what is our future plan, sir?
So we are right now looking at another area, which is in Rajasthan. We are looking at Jaisalmer and [indiscernible] region. And there, we are in the process of acquiring a mine. So that is where we think the profitability outside Northeast is, right, because we don't see much profitability in South or availability of mines we need. So the natural place to go now is to go to Rajasthan, right? So that is why we think we would be wanting to expand outside Northeast.
So our plan is, of course, for the 3, 4 years to make 12 million capacity in Northeast, including Siliguri. And then try to put up a 4 million to 5 million kind of a setup in Rajasthan and start serving the Delhi NCR, Haryana, Punjab market, along with Rajasthan. This is where we feel, right?
And about Ultratech, yes, of course, we may be making [indiscernible] about other companies acting upon in Northeast, but we haven't seen any movement in there such, right? The only moment we see which was Dalmia which was already there in Northeast and we have announced a project in Northeast, which is significant, and that will be coming in the next 1.5 years. So that is -- and that is what it is, I'd says.
[Operator Instructions] The next question is from the line of Uttam Kumar Srimal from Axis Securities.
Sir, you said in quarter 1, the demand is subdued. So that means we will degrow this year from last year or we will be in the same level what we had done last year around 1.16 million tonnes?
I don't think in the April month, yes, because of a lot of festivities and the elections, the demand was negative, there was a negative industry growth, which we saw. But in the month of May, after the elections when things have got over, we are seeing some positive growth coming in. And I think we finish quarter, we will definitely finish it in a growth, that's what the expectation is maybe in the lower single digit, but that should be there.
Okay. And since we have guided for 20% volume growth, so balance, we will meet in the next few quarters?
Yes.
[Operator Instructions] The next question is from the line of Shravan Shah from Dolat Capital.
Yes. Sir, I couldn't hear the previous participant. So did we say anything of a growth number for the Q1 that it will be -- any number on the group part for the Q1?
Yes. So I think in April, there was a slight degrowth. In May, it seems like 8% to 9% kind of a growth. In June, we expect that we can get about 10% growth. So on a weighted average in quarter 1 compared to last year quarter 1, you can expect a growth of about 6% to 7%.
Okay. 6% to 7%. And despite that, and in the remaining 3 quarters, we will be able to catch up and to reach a 20% growth?
Because the election would be over by then and there were also festivities in Northeast, Eid right? So all those festivities are now done and also the election would be done. So I think from June onwards only we should start seeing a positive sale and demand, and also, we've [indiscernible] plant now. We are ramping it up now. So we have dropped our sales in outside Northeast, we [indiscernible] sales in non-trade [indiscernible] delayed in the clinker. And now that we are building up our stock of clinkers, we should be able to push for sale, and we should be getting a higher growth.
Okay. So I'm trying to understand both the profitability and outside Northeast and the non-trade part of -- help me with that. So currently, broadly, we have 55% in Northeast 80%, 84% in the trade. And as you mentioned that the non-trade margin in Northeast is INR 1,200-odd. So now let's clear it on the line, how are we looking at these trades where it will come down -- and also at the same time, the outside Northeast, how much are we planning to increase our share?
And ultimately, in terms of the -- from the profitability perspective, if I, let's say, remove the pricing part, let's say, it is stable, what it is currently then how the increase in the non-trade and the increase in the share [Technical Difficulty] how it will reduce the profitability? I understand the INR 150 crores, INR 160 crores incentive is beneficial. But if we ignore that then how that will pan out?
It will -- our non-trade sales is about 3%, we can expect it to be [ 4% ] to 20%. Outside Northeast sales is about 25% [indiscernible] 28%, 29%. Our stage is, of course, definitely want to grow.
In terms of benefits, it's not only the clinker, not only the subsidy benefit, but also the trade benefit likely with L1 deviation will not be there, also coal benefit also the production efficiency benefit, right, so those all benefits will also factored in. So yes, I think with all those kept in mind I think really needs to be feel how the profitability works out, right? I mean, I can't give you a fortunate number right now. But yes, I think it should be broadly offset in terms of reaching numbers. And I think there is a beat on the EBITDA margins, then there will be an increase in the volume proportion to that. So I think we [indiscernible] numbers.
I got the answer. So sir, in the fourth quarter, broadly [Technical Difficulty] Tushar, sir, can you hear me?
Tushar, sir, you sounding muffled. Can you repeat that question?
Sir, I hope now it should be better.
Yes. Please go ahead.
Sir, I was trying to understand that cost part is outside Northeast in the fourth quarter, how was the profitability? Because in the third quarter, it was around INR 300-odd, so given the prices are lower, what is a kind of a flattish kind of profitability in the fourth quarter outside Northeast. And second is the bigger one is now we are looking at INR 1,000 crores CapEx. And also, as you mentioned, we want to grow outside Northeast, particularly Rajasthan, so broadly from '26, '27 onwards, can we see a kind of an INR 800 crore kind of INR 1,000 crores kind of a CapEx can be there? So ultimately, how one can look at the metrics going forward for next 3, 4 years down the line?
[Technical Difficulty]
Ladies and gentlemen, please stay connected. We have lost the management connection. We have the management team back on the call. Mr. Shah, I'm sorry, please go ahead. Please repeat your question.
Yes. Sir, I'm repeating, I have -- so what was the profitability EBITDA per tonne outside Northeast in the fourth quarter because in the third quarter, it was INR 300-odd. I'm just trying to understand, given the pricing were much lower, was it a negative or a flattish for the fourth quarter?
It was about INR 260 compared to INR 500 last year same quarter.
Okay. Okay. And now, sir, given the kind of expansion that we are looking at both [indiscernible] INR 450 crores plus Rajasthan. So how one can look at in terms of the CapEx for next 3, 4 years, broadly, what's the thought that [Technical Difficulty] ultimately the net debt, how one can look at 3, 4 years down the line?
So we are looking at -- if you do your Rajasthan project, it will be for 3 years to put the plant. We would have to spend about INR 2,500 crores with set up 4.5 to 5 million tonne capacity during the clinker plant. We will have about INR 1,500 crores, including the INR 1,000 crores just mentioned in Northeast. So that will be about INR 4,000 crores of CapEx. So the INR 4,000 crores of CapEx in the next 3 years will be financed to our own accruals. It will also be financed to some part of it will be financed through debt and some part, we still have to decide how we want to get financed, would it be a QIP or any other source of finance payment.
But sir, doesn't -- even if you let, just trying to understand, even if we, lets say, [Technical Difficulty] our profitability definitely will be much lower versus the Northeast, which is the case with even other places also. Will it make sense to go in the lower profitability or still we can squeeze whatever juice is left in the Northeast?
No, I think we've only set up a 3.3 million clinker plant. It is increasing from 2.6 million tonnes to 6 million tonne capacity of clinker. So I mean, the natural step is, of course, to go outside. And I think whatever juice needs to be extracted out of Northeast is in which way the clinker is good enough for Northeast for the next 3 years, 4 years, right? So I think from that perspective, I think we are going outside and the profitability is much lower, but the ROIs are still decent for good bells.
So I think we should not look at only EBITDA per tonne, but we should also be looking at the volume that gets being a mainland player. And that is what we'll be focusing on capacity utilization, the volumes and also the profitability outside is, of course, lower than Northeast, but the volumes more in compensate side. So the absolute return of money is much faster than in Northeast.
So I think there's been direct calculation to it, right? So I think we're just of course going to do a project, which gives us a good IRR on our investment, and that's why we will take it, right.
Okay. And lastly, sir, this 12-megawatt WHRS with the clinker has it also started or will it be starting in maybe 1 or 2 years' time?
It will starting in August, September.
Okay. Okay. Okay. And this 24-megawatt solar plant will be starting?
No. So we are now going for a good captive model. So we will be locking that in a week's time, and that will be a hybrid model where we will be setting up 26 megawatt of solar plus wind with the company in the middle, and we going for that now.
Okay. So currently, our [indiscernible] megawatt WHRS and when this will come this 24-megawatt group captive, when we'll start using it and our green share will increase to how much by? So I think [indiscernible] by FY '26. So if you can help us?
We haven't locked the contract, so I can't comment about it. As and when we lock it, we will let you know.
Okay. And lastly, in terms of...
Mr. Shah, I'll request you to join back in the queue, please?
Ladies and gentlemen, due to time constraints, we'll take the last 2 questions. The next question is from the line of Naitik Mohata from Sequent Investments.
Most of my questions have been answered. Just one, what are the volumes that we're expecting out of the Guwahati grinding unit and Meghalaya clinker unit for FY '25, respectively?
So we give a target that the company has taken is to grow from a 4.4 million tonnes to 5.5 million tonnes. So that would be a 1.1 million tonne increase in the grinding capacity and that -- sorry, 1.1 million tonne increase in the sales -- sorry, 1.1 million tonne increase in sales in -- at least 80% of that or 90% of that will be coming from the new Guwahati plant, the utilization would be about [ 50% ] of the new Guwahati plant.
And for the clinkers, we would require about -- to produce about 5.5 million tonnes, we'll require about 3.9 million tonnes, so about 1 million tonne of clinker will be produced in the new clinker plant. So -- and then also, we're producing about 4 lakh tonnes, 5 lakh tonnes turns of clinker that we plan to sell because the Northeast right now is also a very good market for clinkers.
What we plan to do is that we plan to shut our old line, line 1, which is an efficient and of which line 3 and make some repairs and improvements in line 1.
We'll take our next question from the line of [ Hemant Soni ], an individual investor.
I have a few questions. First question is, as per a media interview, in June 2023, we had initially guided for 18% to 20% volume growth in FY '24. But I think the same was missed. Sir, any specific reason for that? I'm new to this company that I'm asking you, sir?
So we had shown a growth of 14% in Northeast. And that is mainly because of clinker because we thought that clinker plant would come sooner, it did not. We have shown a 14% growth in Northeast. Our growth outside Northeast was only minus 1%. So I think if we would have ramped up on outside Northeast as well as grown in Northeast more aggressively with the new clinker that if we had gotten on time, then you would have had a higher growth rate, right? So I think what we led to having a lower growth rate is a 1-month delay in the grinding unit in Guwahati and delay in the clinker plant.
So what is the total sales volume for FY '24?
As I said [ 4.4 ] million tonnes.
Okay, sir. Sir, one more thing I wanted to ask you is since we have a subdued Q1, okay, and -- but you noted us that there will be a lower single-digit growth in Q1, so how confident are we for 18% to 20% volume growth in FY '25 because Q2 will again be lean period due to monsoon?
No, [indiscernible] just that, that is what our team is aiming at, right? I'd not give you a probability of it. We are sure that we will be able to ramp up in the next 2 to 3 quarters, right? And I think from that perspective as well, I think it will be depend on quarter-on-quarter growth. Year growth is 1 benchmark, but in case there is a miss in quarter 1 because we are settling our clinker capacity and bringing it to action.
We, of course, will try to make up in quarter 2. By irrespective, we see a better growth rate in quarter 2. And you will see that Y-o-Y from quarter 2 onwards, we are growing healthily, right, that number could be 15%, that would be 20%, that could be 25% that is to be seen, it depends on how the market grows.
But our internal target is 18% to 20% kind of volume growth in FY '25, right?
Yes, it is about 18% to 25%.
18% to 25%?
[indiscernible].
Okay. And what I understand from our conversation is Q2 should be better than Q1, then it will be quarter-on-quarter recovery?
Yes.
And one more thing, sir, what is the EBITDA per tonne on a blended basis, we are targeting for FY '25?
On blended basis, we are targeting about 1,550.
Sir, your voice is a little muffled. Can you please come again, sir?
[indiscernible].
Mr. [ Soni ], can you please mute your line. There's background on your line.
Yes, yes, I do that right now, ma'am. So just what is the -- sir, EBITDA per tonne...
I said it will be 1,550.
1,550, right?
Yes, yes.
And sir, what is this 800 [ TPT AAC ] block?
AAC block is basically produces AAC, it's a plant that we have commissioned which produces AAC block. AAC block is a kind of bit that we used for construction, that basically -- sales is the same channel as a non-trade cement and use a cement as a raw material and also fly ash and sand. So it is -- it has a lot of synergies with cement. And the market in Northeast is growing very fast. It's growing at about 20% for AAC block. So that's why we wanted to get into this industry and see how it will work out for us and also leverage our brand name little bit in peer world because this is also a very close construction material.
So sir, this unit has already been commissioned?
No, it will be commissioned in August.
In August. So it will cut some sort of additional revenue, sir, right? So what kind of additional revenue we are expecting in FY '25 from this unit in FY '26 as well?
So the revenue -- because it's a very low-value product. So the revenue will not be too high. It would be about -- I think about INR 35 crores or INR 40 crores. And it will just give -- and the profitability is decent, it's about 20% margin. So the profitability will be about INR 10 crores from it.
Okay, sir. And sir, this 18% to 20% volume growth, it excludes the -- I mean -- it excludes the products from the AAC block, right?
Yes. It excludes the production of AAC block.
As there are no further questions, I now hand the conference over to Mr. Vaibhav Agarwal for closing comments. Over to you, sir.
Tushar, I was just signing to ask you one question from my end. It's basically about the Northeast market. So in the recent past, we have been hearing quite a lot of new regional players applying for mines in Northeast or scouting for land in Northeast. You have born and brought up in Northeast, all your family belongs to Northeast. So I just wanted to understand from you your perspective about the ground reality as to, do you think that all these players are serious players in long term or they are just coming in Northeast with an announcement and it may not be very serious in the long term as far as our plants are concerned. Just wanted to take a view on that.
I think it will be very hard for me, Vaibhav, to say if these players will in the long run in about 5 to 10 years, be able to come to Northeast or not. I just think like right now, what we've done in Star Cement as we entered the demand, which should have been coming in Northeast. And what has really done -- what we've achieved is that in a market which is about 11 million to 12 million, we've been able to set up 3.3 million clinker. So about 5 million tonnes of additional grinding capacity.
Tushar, I'm sorry, actually, I lost your audio, can you repeat what you said, please, if you don't mind?
I was just saying that in Northeast it will be very hard for me to comment. Is there any players in the long run, who would be able to come or not. What I can say is that in Star Cement, we have been able to [indiscernible] the demand, which is coming in Northeast. We are well equipped in the sense that we are getting about 3.3 million tonnes of clinker in a market, which is of 12 million tonnes of cement, right? And even Dalmia after 1.5 years, we'll be getting a capacity similar to this right?
So both Dalmia and Star Cement together are actually serving the capacity that is required for Northeast. I think any other player who comes in Northeast, I don't see how the economics will work out, right? Because this market right now with that capacity and also the coming capacity will be saturated in terms [indiscernible], right? And to kind of any benefit that we see in Northeast of [ HDFC ] any other benefit comes when you sell that -- that has a kind of a revenue base, right? If you don't have that kind of a revenue base, then that those benefits are not that significant.
So because we've been here for 20 years, we can see those benefits, right? So I think the overall costing and the time lines of putting up a greenfield in Northeast, for outside player is on long, right? Because the area has its own province, right. I mean Northeast has been a market since the last 20 years -- there has to come, they could have come any time, right?
[indiscernible] because the dynamics here work differently Rajasthan if not Jaipur -- [indiscernible] where you have a flat bit of land where you could buy piece of land to put up a plant, right? It's a different dynamic, right?
There's a lot of forest area. There's a lot of tribal areas. There are a lot of -- its own dynamics, right, which I don't think main, main players is spending enough time to understand. So I, from my perspective, do not see a plants coming from any other mainland players for 5 years. That's what I can see.
Rest, of course, after 5 years, anything can happen, anyone can come anywhere, right? So that forecast I can't give. But from my perspective, honest feedback, I don't see any plant coming up in 4, 5 years because it's also a long gestation period of acquiring land, applying for mining lease, getting a plant ready, setting our plant here, not as we are setting a Rajasthan or Andhra because everything is just harder here in terms of logistics, in terms of procurement, in terms of everything.
Right, Tushar, I completely get your point, actually, I was asking more from the perspective of some of players have started announcing that they have acquired land, mines, et cetera. So I remember there was a disconnect between your grounds and the announcements which have been made, so from that perspective I am asking that...
Sorry for cutting you, for example JK Lakshmi announced that they have acquired a mine, right? I mean, everyone knows that just buying a plot and land doesn't give you the mineral reserve, right, it has to come an auction as well. So I don't think there's any action which will happen of their mine. So we won't be able to -- so I don't see like -- how some of the players which have announced, how they are setting up a clinker plan and not visible to me honestly.
They could be buying a piece of plot, but that piece of plot needs to also have the mining lease which is an auction process which -- then everyone will -- is going to participate, right? So any option which comes at that time again will have to go through auction. So the auction everyone is going to participate. Everyone is interested in Northeast, so what are the premiums going to look, right?
Will there be 200%, 250% of premium, we'll be able to compete effectively. These are the questions which I think someone looking in Northeast still have there plants. And I think that will be bit dissident. So yes, I think that is what my feedback is and making a grid terminal in Northeast that of course, give them some kind of advantage [indiscernible] clinker in Northeast. How you are going to have been clinker in Northeast.
Understood, sir. Thanks a lot Tushar on behalf of PhillipCapital India Pvt. Ltd., we'd like to thank the management of Star Cement for the call, and many thanks to participants joining the call. Thank you very much, everyone. Thank you.
Thank you. On behalf of PhillipCapital India Pvt. Ltd., that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.