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UltraTech Cement Ltd
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Ladies and gentlemen, good day, and welcome to the UltraTech Cement Limited Q1 FY '20 Earnings Conference Call. We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risks that the company faces. The company assumes no responsibility to publicly amend, modify or revise any forward-looking statement on the basis of any subsequent development, information or events or otherwise. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Atul Daga, Executive Director and CFO of the company. Thank you, and over to you, Mr. Daga.
Thank you. Ladies and gentlemen, welcome to the Earnings Call of UltraTech Cement for Q1 FY '20. With general elections behind us, I -- we all know and believe that continuity at the center will help to stabilize the economy and bring close to the economy. This is a temporary slowdown, which I believe is being visible across all sectors. We have seen, I would say, an unpredictable slowdown in the economy as well as cement sector, which is part of the whole game. You must have heard several theories around it and let me add my two cents to the pot boiler. Construction industry, the real estate sector as well as the infrastructure sector is one of the quickest drivers of employment of unskilled labor. It consists -- construction activities slowing down, it has had a cascading effect on employment and rural incomes. Real estate are facing a tight fiscal position, resulting in a slow-release of funds for infrastructure projects. Our sense is that demand should stabilize after Diwali 2019. All the ongoing long-term projects, that is metros, roads, et cetera will pull demand. We are seeing improving sentiments in the organized housing sector in the Tier 1 towns with organized real estate players gaining momentum. There is a big vacuum in real estate in the Tier 2 towns, which we believe will be captured by the organized developers in the longer term. Low-cost housing and affordable housing segments continue to grow, providing some support to the housing segments. It has always been and will be a key demand driver going forward. Let me talk about sand mining, which has become an area of concern time and again. In Rajasthan, since November '17, the sand mining ban is continuing on medium mines, which is impacting the construction activities there. Recently, High Court has given a decision that mines allotment are valid and mines can be operational after all required clearances as per NGT. We expect that in the next couple of months, the sand mines in Rajasthan should be operational. Again in the state of Andhra Pradesh, in the month of June '19, the new government has imposed a ban on sand mining, which is creating a barrier for construction activity in the state. The government is expected to introduce new sand mining policy in the month of September, which would restore construction activity to normalcy. Similarly, in West Bengal, the state government has strict norms on the movement of sand, which is keeping sand prices high and having an impact on construction activity. Andhra Pradesh also has seen a slowdown in all state-level projects with the new government coming in. We believe once their review is over, the projects will kick-start work and we should, as I mentioned, experience -- anybody's guess 1 quarter, 2 quarter, it should start and come back into mainstream. Let me talk about costs. Costs have been under control, thankfully. We do not expect any surprises in the near future. Petrol prices have come down nearly 25% from their peak. UltraTech's average consumption price in the quarter was around $95, marginally lower from the consumption price of Q4 '19, which was around $98. The benefit of the continuously falling prices will reflect in future periods. For example, the current purchase price is trailing anywhere around $75 to $80 [ a liter ]. Imported pet coke supplies have filled the vacuum created by a reduction in domestic pet coke supply, thus not having any adverse impact on pet coke requirements. 70% of our pet coke requirements are now being met from imports without any constraints. Besides pet coke, we are also using high calorific value imported coal, which is economical at some of the plant locations. With capacity utilization going up strongly in almost all the regions in Q4, we were able to take price improvements, a part of which is reflected in the earnings of this quarter. With monsoons, we have seen prices correcting a bit and along with a slowdown in demand, there is nothing unusual. This is a direct correlation between demand, capacity utilization and prices. Let me look inwards. It's important to share the progress on our growth plans. First and foremost, on Century Textiles. We received the NCLT order approving the takeover of cement business of Century. This takes our total operating capacity in India to 109.4 million tonnes. We are awaiting completion of other regulatory approvals for completing the transaction, which we expect should get completed in this quarter. The mine's transfer, which is the underway, will attract additional royalty under the NMDR Act. UltraTech will be fully compliant with the NMDR Act. After inclusion of Nathdwara Cement in our network, our numbers were consolidated with no option of having comparative numbers. Well, you'll have to live with this phenomena for some more time. NCLD Mumbai has fixed 20th May 2018, as the appointed date for the transaction. We will recast financials via -- from the date of 20th of May 2018, going forward once the transaction is completed. We will -- I can only assure you that our presentations will be as simple and as clear as possible so that you don't have any difficulties in interpreting and analyzing the numbers. Speaking about Nathdwara Cement, I am pleased to inform you that the integration has been fully completed. The plants are fully synchronized with our existing operations. Nathdwara Cement has generated in excess of INR 1,200 and there is enough capacity available at the plant as and when the demand improves. We have achieved PBT breakeven for Nathdwara operations within 2 quarters of acquisition. However, at the current cost of acquisition, our returns are not really worth talking about from the acquisition. We are evaluating opportunities to liquidate noncore assets before the end of this fiscal year, which will include the returns. And in the next few years with the improvement in demand, there is always the option to double the capacity at Nathdwara Cement, which will help us generate a desired level of returns from this investment. The decision on Pali greenfield expansion has been put on hold for the time being. We will revert once the Board takes a call on going ahead on Pali expansion. We, as a responsible cement player, keep our growth options open. The JP assets which were acquired in July 2017, some of you might require a guidance for these plants to be EPS accretive in the eighth quarter of the operations i.e. April/June '19. Well, we have stuck to our guns. The cash flows from the acquired assets have improved significantly. This quarter, the plants were operating at a capacity utilization of 68% and have become EPS accretive. We have generated positive PBT. We have had a small setback in this acquisition though, though nothing to be [ upset ] about. Bara grinding unit was under trial runs last month but there was a breakdown during the process. The free-of-cost replacement parts have been ordered and are underway, and we expect the plant to get commissioned in Q3 FY '20. Leverage, which is always an important focus area for us. Our focus on improving leverage has helped us to reduce net debt further by about INR 1,000 crores during the quarter, to be precise, INR 1,022 crores. Our trailing net debt EBITDA is at 2.24x as compared to 2.71x in March '19. Our consolidated returns on capital on trailing 12-month performance has improved to 11% for June '19 as compared to 10% in March '19. Our business and our balance sheet will remain sharply focused and cater to the needs of cement business only. There have been lots of questions raised in the past and hence I've thought of making it very clear for everybody that we are very focused in our business. A small initiative which I would definitely want to mention before ending this call -- ending this commentary, sorry, is on sustainability. In one of our initiatives, we have collaborated with our group company Hindalco to develop aluminum dry Hindalco vehicles, which can carry 10% material -- 10% extra quantity. This will support to reduce the number of truck -- number of trips for the trucks which eventually reduce carbon emissions. Once this team is fully implemented, we will have 3 lakh trucks moving less on the roads and that is our contribution to sustainability. We assure you of a long sustainable future in UltraTech and with that, I hand over the session for questions. Thank you, and have a good evening.
[Operator Instructions] The first question is from the line of Indrajit Agarwal from Goldman Sachs.
Two questions. First on the demand, in your slides you have mentioned several factors which has led to a weakness on the industry demand. Can you highlight which of these factors are more transient in nature? And which do you think are at least structurally in the near term at least through the course of FY '20, will be an overhang on demand?
Short term, it is slowdown in construction activities, as I've mentioned in the commentary also. The housing sector continues to grow, albeit at a very slow pace. And I believe that infrastructure growth will come back with a gradual stabilization that we'll see in the economy. So infrastructure and real estate, within real estate also, it's governmental-led low income housing and affordable housing. The good part about affordable housing projects is that affordable housing segment has started taking off now.
Have you seen like liquidity around the concerns on the last couple of quarters, have you seen some easing on that front at all in the last few weeks?
No. I mean it is difficult to quantify on a weekly basis but -- and I don't want to discuss the current quarter -- current operating quarter. April, June saw a squeeze on liquidity because of election because of all related reasons with elections. Things should come back to normalcy as [ -- as in liquidity level we seek ] should come back to normalcy. It's anybody's guess whether it happens in July or this quarter or at the earliest.
And one housekeeping question. Would you be guiding as to how much of utilization for Nathdwara in this quarter?
Nathdwara was about 60%. Of course, we had a major maintenance shutdown taken during this quarter.
The next question is from the line of Gunjan Prithyani from JPMorgan.
Just a follow-up question on this industry growth. Going by the trends that you are seeing in the market right now, would you say that the 6%, 7% growth that we were looking for full year or I think even higher, would be at risk? Is there any revision to the growth expectation for full year that you are looking at now?
As of now, I would still look at plus-minus 6%. Maybe it will drop by a percentage if that is what you would look at because all these projects which were -- which have been underway will not stop and will take off. So the latter part of -- the latter half of the financial year will see or should see a phenomenal growth.
Even on a high base that we saw in March quarter? I'm just trying to understand because we do have a very demanding base as we get into the second half for the entire industry.
Yes. Historically, if you look at January, March quarter has always proven to be the best quarter and the government spending kicks up because the government spending involves looking at public -- their own particular allocations for the next financial year. So there is a huge base of activities typically in the January, March quarter.
Okay. So we will stick with the 6%, 6%-7% that's given.
Yes. Because there is no decimal that I can guide to.
Sure. And the second question is on the deleveraging and capacity expansion plan. If I understood right, I mean, there's no new project that you've approved as such in terms of expansion. So it will definitely going to be...
I think the Board -- there is no approvals from the Board yet.
So no Pali, no De Nul driver, additional expansion for this year? Or do you see we can have more expansion being announced or the focus is going to stay on this consolidation of Century and deleveraging, then?
My guess is that we'll remain focused on deleveraging and Century consolidation.
Okay. And just on this overall Capex number, if you can give guidance. What is -- what should we...
Roughly INR 2000 crores for this fiscal year. There are some big projects which are ongoing like WHRS, which are for coal block, Bicharpur coal block. There are [ 14 ] plants, [ bitumen Kotputli ] plant which is ongoing. There is a bulk terminal that we are doing besides the Bara project which is going on. And then there will be maintenance, routine maintenance capital. It will take INR 2000 crores is what we would look at.
Okay. And last question on the Century, you mentioned that there will be that fee on under the new mining regulation. So that is similar to the JPA thing, right? That there will be additional, around INR 60, right?
Yes. As of now, the current rate is INR 60 rupees per tonne -- INR 64 sorry, effectively INR 64.
INR 64. And the Century EBITDA per tonne, can you share anything around it? Where are they operating right because the last update, we...
January, March was INR 670 EBITDA. What? January, March was INR 670 EBITDA.
The next question is from the line of Vivek Maheshwari from CLSA.
First on the demand. Your comment about 6% demand growth, that's for full year or for rest of the year as in the 9 months?
Full year. Full year. I'm talking -- it's what I'm saying yes, full year.
Okay. Understood. Second, I mean, pet coke prices, as you mentioned, have gone down quite a bit. Is there any inventory that you still carry the high-cost inventory or second quarter we should start seeing -- start to see the benefits of low pet coke prices?
We will see fewer and fewer consumption prices quarter-on-quarter. So we will have -- today we don't have any above inventory above [ INR 100 ]. It is in the range of early [ INR 90s ]. So added to that, the procurement which takes place will help improve the fuel consumption prices for the next quarter as well.
Okay. Okay. And this quarter obviously saw very strong realization and you indicated about some pull back. But can you share how -- where were the exit cement prices or the realization compared to the quarter average?
Exit cement prices were obviously lower and June quarter, March indicated maybe 3% average across the country reduction.
3% from your quarter average?
Yes. Yes.
Okay. And lastly, you mentioned about this CSR project with Hindalco. I fully could not understand, sir, you mentioned something like 10% higher [ season ] tonnage and all. Can you just repeat what exactly it is and how do you plan to go ahead?
These are trucks or bulkers, the dry bulkers, the vehicle that carries cement in bulk. So these are developed aluminum body and that obviously helps help them carry what is the capacity has been increased. So capacity is being increased because lighter weight on the same chassis, it is able to carry a higher weight. And on that basis, effectively for the same volume to transport, we require lesser number of trucks.
And I mean, are there any time lines? I mean is this still an experiment or you would be...
No. It has been officially launched.
Oh officially launched. So the benefit of this, we should be able to see next...
[ Within a quarter. ] You count it next year. I would want to see scale to reflect in our numbers. So small number of trucks will rollout which might not see too much because what in the end in the long run, we are looking at 3 lakh trucks moving less. So that's a bigger number and I will start counting my chicken only in the next financial year.
Okay, and just last bit on the same point. So let's say FY '21, so the plan is basically to get all the trucks which are, therefore, able to carry 10% more? Is that how would you -- you would plan it?
Well, you will scare the truck operators. Let's not.
Next question is from the line of Navin Sahadeo with Edelweiss Securities.
So my first question basically was what were the consolidated volume? Of course you have said 17.86 as the total volumes. And I believe you said Nathdwara -- which include definitely Nathdwara at 60% utilizations, correct?
Correct. Correct.
So just wanted to understand what are the total consolidated gray volumes and white cement volumes?
18.8 is the total volume, including white cement. White cement, 0.315.
And white is 0.315?
Yes, 3 lakh tonnes.
Okay. Got it. Fair. Second then, I just wanted to understand you said your premium sales segment has grown by 24% in your presentation. So just wanted to understand, it contributes how much now of the total volume then? Is there a target we have in mind towards premium products? And also, just an extension there that how much more in terms of margins do these products contribute?
So firstly, what is the target now obviously, we will want to be as high as possible as much as the market can absorb. There will always be a challenge because there will be a market, which does -- is not interested in paying a premium. There are products which we have launched in the market which are INR 50 to INR 55 per bag higher in realization as compared to our own prices. So that's very niche products. So the market will also remain niche. And all the products which are composite or these value-added products, we are still launching in various markets. I know I'm going roundabout because I don't have an exact number to give you. But my -- rationally, yes, we will be increasing the percentage share of all the value-added products.
As on date...
I don't have a number -- Navin, I don't have a number immediately.
Sure. Sure. Okay. And just one bit then, Bara grinding unit is scheduled for Q3.
Yes.
Clinker is likely by when there?
We already have clinker available.
No which is fine, we have seen first clinker but along with the same project there was a clinker...
Yes, that large support clinker, I'm happy to tell you that the MOEM or the ForEx advisory committee meeting took place on 31st of August. It has cleared the proposals. Now it should go through and if you're speaking in September, maybe April, June, for sure we'll see the plant commissioning.
The next question is from the line of Madhav Marda from Fidelity.
Sir, just wanted to understand on the demand drivers. Companies have been talking about [ first housing ] program, and I look at the company -- the government's allocation for the next 4 years, we get what the numbers are. But if I just go to the budgetary document, something I'm trying to solve for if I look at the allocation that's been made for the budget for rural housing, for example, they've allocated about INR 19,000 crores, which is -- which was close to INR 20,000 crores last year. And urban housing was about INR 6,800 crores, which was INR 6,500 crores last year. So net-net, it's a 2% decline Y-o-Y in the government budget allocation for the next financial year. So all I'm trying to understand is how does this step-up in terms of demand for the next year? I'm just trying to solve for that equation, sir.
Budget -- why it is a budget allocation it is the government agenda to exhaust that allocation -- is if they're unable to exhaust that allocation, that will be a wonderful achievement because they are growing rapidly. We have seen allocation targets getting met in spite of achieving huge growth. So over the current base the allocation is one aspect of looking at on a current base, they will keep on growing. That is what is important.
Sir, that's what I'm trying to understand. So we had a lot of those last year and if I look at the completion rates just available on the website, there has been a massive scale-up over the last 3 years.
Yes.
But in this year, it's still -- and the budget allocation of course got stepped up as we went into elections. But now that number is sort of seems to be leveling off or it's coming down a little bit on the rural side. So either there's going to be growth in terms of execution...
This slowdown which you've seen is because there have been delays in contractor payments. I understood that beyond 31st of March, there was a major slowdown in release of funds at a state level. And when we look at various states, whether it's UP, whether it's MP, whether it is Andhra whether it is West Bengal. The states are -- state treasuries are running dry and there has been delay in release of payments to large contracting companies, which has had a cascading effect on the project execution. I believe things will come back to normalcy, payments are -- will get released. And you have to give it 6 months for normalcy to come back then you start seeing -- which is where I was looking at post-Diwali, which is October or November. Post-November is when you should start seeing action on ground.
The next question is from the line of Kamlesh Jain from Prabhudas Lilladher.
I must congratulate...
Mr. Jain, may we request you please be closer to phone? We are unable to hear you.
So just 1 question. In this quarter we are -- the industry has shown excellent visibility in terms of prices and executing. So the way the demand is, like say if it continues to grow at maybe like 4% to 5%. So how do you see the cement industry going forward?
Well, there are -- in any industry, nothing to do with cement, any industry operates on the pillars of demand-supply and capacity utilization. So those pillars will come at -- or have their forces play.
Okay. But like in which particular markets do you see better pricing going forward? Like say, in North, which of our markets? Because in the Eastern market despite the fact that capacity has not been there in the last 1, 1.5 years demand has been growing at a strong pace.
4.5 million tonnes of capacity got added this quarter in Eastern markets. Are you aware of that?
Yes but it's more -- not lead by the, let's say, lack of clinker base capacity?
True.
But despite that, we are seeing significant erosion in the Eastern market in terms of prices. So how do you see the reason why dynamics going forward?
We -- I really don't know how other companies are taking. We are more than 95% utilized. We are a small player in the East. We are more than 95% utilized and we will continue to follow the market in the Eastern corridor.
Okay. And lastly, sir, are we still hungry for the M&A, sir? Like with all the opportunities which are available in the Eastern market? Are we looking at those opportunities available despite the focus on, let's say, [ delevers ] in the balance sheet?
Any other question? I joke, about it. I will not be able to comment anything on that.
The next question is from the line of Gaurav Rateria from Morgan Stanley.
Two questions. Firstly, is there any difference in the growth for trade versus nontrade segment during the quarter?
Sure. In fact, we have marginally improved our trade. We are now at about 66% on trade as compared to 65% previous quarter.
And have you seen any green shoots in the month of June and July post-elections were over, and which would be the segments where you have probably seen some pickup in the demand?
Infrastructure and affordable housing, these are the 2 segments. There are state-level challenges which exist. But overall, if you were to talk about, these are the 2 areas where we see traction coming back in the month of July. In spite of monsoon, we have seen good traction in July.
Okay. Thirdly, sir, the Bara facility, will that be contributing additional volume for you? Or will that help you in saving some cost because clinker was already available for -- with us?
So we have surplus clinker so it will increase overall capacity in the industry.
Okay. Last question from me. On the difference between the consolidated and the standalone EBITDA, there was a quite a bit of a jump in there. Any color or explanation there that would be helpful?
[ Let me see ]. So consolidated other than Nathdwara, which had in excess of INR 150 crores of EBITDA. Yes, INR 156 crores. It was in excess of to INR 150 crores EBITDA from Nathdwara and UAE operations and Sri Lanka [ bitumen ] so all consolidated.
The next question is from the line of Tanuj Mukhija from Bank of America.
The first question is on can you please comment on demand outlook for the next 9 months, specifically for North and for Central India?
Let me talk about Central first that's an easier question. Central is very strong in demand. Barring the slowdown of April, June, I believe we should see good capacity utilization in Central India. North -- in the northern markets, it will remain good. It will remain buoyant. Rajasthan has some challenges on sand mining. I would look at Jammu and Kashmir as a segment opening up with the new focus there. Lots of tunnels, roads, that kind of infrastructure. Defense-related infrastructure will start picking up in the J&K market. So North markets will remain buoyant, but I will see a stronger growth in Central markets.
Understood, sir. The follow-up to that question, sir, if I look at the presentation for Rajasthan, it just shows there -- across all the demand driver segments, keeping that in perspective, could you comment on your pricing outlook for North India and the status quo for further price hikes post monsoons?
Prices, as I mentioned, will been clearly governed by capacity utilization demand and supply. Supply as in new capacity coming in. So it's a natural phenomenon. I really can't comment. It's -- suppose the demand just collapses, then obviously prices will collapse. If demand is buoyant, there's no new capacity coming in, which is quite unlikely, then you could see prices remain firm.
Okay. Understood. And sir, for Century Cement, do you plan to read that Century Cement at all to UltraTech Cement after merging the 2 businesses?
Yes. As we have done with all our acquisitions, there will be a single brand company. We have to allocate all the acquisition process alignment at Century plants. As we have mentioned in the earlier calls also that one of the plant is very old. It's a vintage 1972, '74 or thereabouts. So that is a plant will take maximum amount of time for quality aggregation and rebranding but other plants will be much faster. Give it a quarter or so, we should be able to rebrand and launch UltraTech from the remaining 3 locations.
Okay. Understood. And my last question is can you elaborate what could be your freight cost savings or cost savings after acquiring Century cement? I mean how much EBITDA improvement can we see in Century cement...
You might not see too much of trade benefit because all the plants are co-located, barring 1 plant which is in West Bengal. It might be 120 kilometers to 150 kilometers away from our existing location. Other plants being co-located, we might not see too much of freight savings.
Okay. And sir, what's the fuel mix at Century Cement right now? And how can we...
I'm sorry, I'm sorry?
What is the fuel mix of Century Cement right now and how can we...
The fuel mix of Century, I don't have that, unfortunately. The transaction has not completed. We have not yet stepped in. I don't have that information.
The next question is from the line of Rajesh Lachhani from HSBC.
Sir, also my question is basically on demand. So why the industry, as you have pointed out in the presentation has contracted by 3% to 4%? Can you throw some color on region-wise demand breakup?
I -- what would you mean?
Means which -- which regions have contracted more and which regions have shown some resilience?
So in that set, I have given a state-wise breakup in our presentation. If you were to look at, I think South contracted the most, Andhra was the state which contracted the most. We saw some impact in Central market and Gujarat market -- sorry, Orissa is a -- sorry, I forgot about that. Orissa as well. Few states which come to my mind immediately are [ those by the area, say you know ], are one against the other. Difficult for me to pin point.
Okay. So no quantification -- can you help us with some quantification with regards to region where is the demand growth?
I don't have it, unfortunately.
Okay. No problem, sir. Sir, with regards to the current quarter, are you looking at some growth in the current quarter or even the current quarter looks like to be a muted quarter or weak growth?
Forward-looking numbers, I don't want to talk about it if you don't mind.
[Operator Instructions] We move to the next question from the line of Pulkit Patni from Goldman Sachs.
My first question is, in your opinion, how are you looking at capacity addition over the next couple of years? And has that estimate changed, given the strong pricing we've seen in the last sort of 3 months in the industry? That's my first question.
No. So because of 3-month change earlier, a change of our performance during one particular quarter, next year's capacity addition or the year after will not have any impact. Because as you are aware, Pulkit, there is a longer gestation period for putting up capacity, 6 or 7 years. So whatever is in pipeline will come through. And my sense is we have seen a slowdown in the new capacity addition. We will -- whoever had existing mines to do [ accounting ] will come to an end. And then you have to wait for auction the mines which slows down the new capacity addition instead of increasing the pace of new capacity addition. Last year, if you recall, we had a very small, I think 12 million tonnes of capacity, which got added last year. We have seen 4.5 million tonnes only getting commissioned this year in the first quarter. Give or take, 15 million tonnes, I would keep my path on 15 million tonnes capacity getting added this financial year.
Sure. Thanks. My second question is if I look through those state-wide demand color that you have put in, a lot of those you have attributed to nonavailability of labor. So if I was to ask you to hazard a guess that out of the 3% to 4% demand decline that you're talking about in the quarter for the industry, how much of that would be related to election? And how much is general demand slowdown that you see which could reverse in the quarter -- this quarter and the subsequent quarters?
Pulkit, I don't know who is listening to my calls so I don't want anything to happen to me, all right? That was on a lighter vein. But I don't have a breakup of what would have -- how much to attribute to which factor. But everybody knows where does the labor go during election time. There is a lot of earning opportunity which the labor has during that period which sees a scarcity of these people on construction sites. And construction sites are sites which offer employment on a day's notice. You'll end up at our site and you can start working tomorrow. So that is the scene which typically we see around election time when labor is not available.
The next question is from the line of Sumangal Nevatia from Kotak Securities.
Just a small clarification. You shared that Nathdwara EBITDA is around INR 156 crores. And on the volumes, based on the utilization you shared, it appears that EBITDA per tonne is more than overall EBITDA per tonne, which is around INR 1,600-odd crores -- INR 1,600 rupees per tonne, sorry. So is this the right way to look at this certain?
What can I say, yes. Yes, you have the numbers with you so you can do the analysis.
Okay. Second question with respect to working capital, I mean, given the liquidity tightness in the economy and higher prices, what sort of working capital build-up do we expect this year?
We have peaked out in working capital. Working capital build activity happens pre-monsoon for almost all cement guys. And now we should not see any further build-up in the working capital. There will be one lumpy payment which happens is towards the MMBR advance royalty for the Century acquisition, which should be less than INR 100 crores? Somewhere around INR 100 crores would be that one element of advance royalty. Other than that, I should start seeing reduction in working capital.
Next question is from the line of [ Aswarel Kush ] from Franklin Templeton.
Sir, you mentioned that you have held back on the Pali expansion but where exactly are we in terms of preparation, in terms of the land acquisition, et cetera?
Land is fully available. Environment clearance, all licenses fully available. It's a matter of the day the Board gives us a nod we can start, we will start to work.
Okay. So from that day, what kind of time line should we look at?
12 months? 12 months.
Okay. Okay. And second question is on the Binani noncore assets, when can we expect the process to start, if it has not started already?
It has started already. We are in different levels of discussions for their multiple assets. I would want to see some color of money before the end of March '20.
Okay. Okay. That's encouraging. And as part of this acquisition, we also acquired some loans and advances. I think this is for the glass fiber business.
Correct.
So I just wanted some color on is it interest-bearing? And if it is, are we getting the interest on time?
No, it is -- yes, it is interest-bearing. And no, we are not getting our interest payments. So we are looking at cashing out on that loan at the earliest. Don't want to hold that loan on our books.
Right. But we have to take a haircut, is that the understanding, right?
Yes. We'll have to look at a haircut, yes.
Okay. Okay. And sir, the last question is you mentioned about the quality upgradation as part of the Century deal to get it under one brand. What exactly will we be doing there to upgrade the quality?
The easiest one to tell you is to increase the strength of cement coming out of those factories to the same level of strength that we produce. Besides that -- the strength is the biggest thing. Besides that, the texture, the fineness of cement has to be identical to what we produce. That would amount to the quality upgradation.
Right. But would that mean a lower blending and higher cost of production?
Not necessarily because there are lots of common costs. We'll have synergies in terms of procurement costs. We will have synergies in terms of clinker movement for them because right now, they move clinkers from the [ Chhattisgarh ] plant or even the Maharashtra plants to their Sonar Gamla, which is the West Bengal plant. We will be able to sell them clinker from a closer plant that in fact, would be a small amount of logistic that somebody had asked me earlier on the call. But overhead -- the fixed overhead load will not be there. So we will not have, on an absolute basis, we will not have costs going up.
Next question is from the line of Dheeresh Pathak from Goldman Sachs.
Sir, for Century assets, for the June quarter, what has been the EBITDA per tonne?
The result has not been declared yet. I believe Century's Board meeting is scheduled for 12th of this month.
Okay. And can you give the RMC and the white and [ whole case earnings -- ] revenues -- RMC costs?
RMC [ higher T ] and white cement [ lower T ].
The next question is from the line of Ritesh Shah from Investec Bank.
Sir, you won't probably give some color on [ Binani ] or CCI [ D match ]. But sir, if I had to ask you the other way around, what is the sort of balance sheet parameters that we're looking at factoring Binani overseas will be there with us by March? So what is the appetite that we have for inorganic growth?
Good question, Ritesh. You are driving me but I'm wide awake so you won't catch me off guard. On balance sheet all I can say is -- and I have given this quarter, what should I say, advance estimate also. That we would reach a debt EBITDA of below 2x for sure by the end of March '20.
Sir, you said net debt-to-EBITDA of 2x by March '20, correct?
March '20. Yes, net debt-to-EBITDA will be [ around ] 2x as of 31st March 2020. That's what we are working towards.
And sir, this will factor in what CapEx? I'm assuming...
INR 2,000 crores of CapEx is all we put it. I think somebody had asked a question on CapEx.
Correct. Answer including Century, this number would warp. So does the ratio of 2x still stand?
I am involving Century debt, yes, which will come in our books on account of Century.
Right. That's helpful. Sir, secondly, incentive as a percentage of sales have increased considerably for us on FY '19 annual numbers and annual report. It's nearly 7% now. So how should one look at this trend going forward? And how would the cash conversion over here because the sales are also moving up sharply?
So just I'm looking at my numbers. Can I quote the numbers? So FY '19, we had nearly INR 450 crores of fiscal incentives. And this quarter, it's about INR 112 crores. So I don't think too much, off-lying. The numbers are broadly trending the same way. In fact when Bara grinding unit fix in, the absolute amount of incentives will go up because Bara also has incentives attached to it. Second point that you raised on cash coming in on account of these incentives, they have an assessment cycle. So the accrual which is done in Q1 FY '20, the assessment will take place after March '20 only. So what the cash just coming in off, obviously prior period. I have -- I don't have any, what should I say, abnormal delays. I don't have any abnormal delays in collection of our work incentives, if that helps your question.
That does help. Sir you indicated a time line of April to June for Dalla Super. Is that correct?
Yes. April, June '20.
Sir, this particular project has -- it has got postponed by quite a long on the time lines. To my numbers, I think we are -- we have less quantum of clinker in Eastern India. And with Century coming in, it would only aggravate the situation. Just please correct me if I'm going wrong anywhere?
No. Century is already short in clicker. What was your point you made? I just missed misheard?
Sir Dalla, you indicated the number April to June. So I was hopeful of Dalla coming in a bit early given we are short of clinker in a way. It is a bit subject to the plan in Eastern India and once Century comes to the fold, I think the clinker shortage will only increase for us.
No, our clinker shortage does not increase and by the time my Bara grinding unit comes up, we would be able to service it with the surplus clinker that we have in the Central market. And to meet our requirements, Dalla Super will come up in April, June. We will be fully balanced. We are always fully balanced and we make sure to keep it fully balanced.
Sir, just to continue, last question. Sir, we are operating at a pretty high utilization from North and Central India. You also did indicate that Bara could be serviced by the other [ kilns ].
Yes.
Now we are in a scenario wherein we are[Audio Gap] is it high enough to go with expansion either at Pali or at Binani?
Okay. Hello?
Sir, if it's a good scenario to expand the capacity then, why are we not expanding the capacity?
So it's a good scenario to expand capacity. We will expand at the right time, as I said. Today, if you look at -- we have sufficient capacity available in North. Our -- just for your reference, our total capacity in North India is close to 24 million tonnes and we have sufficient room over there. As of now, we are operating somewhere around 70%, 75% for the last quarter. And if I were to not go by last quarter as in April, June, which is not a benchmark, if I were to go by the quarter ended -- January, March quarter, we still have sufficient capacity basis the high capacity utilization of January, March as well. I don't want to block capital unless it is required. We do -- we have a long-term planning and we know how the markets are moving and [ how much time ] to erect a plant and we will be sure that we are not out of clinker at any point in time.
Ladies and gentlemen, we'll take the last question from today from the line of Milind Raginwar from Centrum Broking.
Sir, the incentive number for the quarter was INR 112 crores, if I'm -- just to reiterate, just reconfirming it?
Yes. Incidentally, I just gave the number.
Hello?
Yes.
Sir, just on your initial answers to some questions that 6% looks to be still possible. Would that mean that the second half, we will be at about 9% to 10% of...
If we will get double-digit growth then only second half then only, you can achieve a 6% growth.
Sir, in that line, do you see the pricing pressure continuing that we are seeing in June, July?
Pricing again, I will maintain that I'll tell you it's a matter of demand, capacity utilization and new supplies. So it is market force-driven, nothing else.
Ladies and gentlemen, this was the last question for today. On behalf of UltraTech Cement Limited, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.