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UltraTech Cement Ltd
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Ladies and gentlemen, good day and welcome to UltraTech Cement Limited Q1 FY '22 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] There will be an opportunity for you to ask questions after the presentation concludes. [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. Good evening, everybody, and thank you for joining this call to discuss our earnings for Q1 FY '22. First and foremost, I wish and pray that all of you are safe and vaccinated. Global economies, after reaching a vaccination status of -- in excess of 70%, are shutting the burden of COVID and making it a part of life. We should also commit ourselves with the cause and get ourselves vaccinations -- get our vaccinations completed at the earliest, whoever has not done it yet. With wave 2 of COVID reasonably under control, we have seen revival of demand as the statewide lockdowns have been -- gradually been coming off. Demand saw resurgence from almost all fronts, i.e., trade and nontrade. This quarter, we have achieved a growth of 48% Y-o-Y. An interesting point to emphasize upon is the growth trajectory that we have demonstrated quarter after quarter since Q1 FY '21, growing faster and rapidly as compared to the Southern industry. And all the growth has been without new capacity addition, organic or inorganic. We achieved a capacity utilization of 73% this quarter, with South going above 50%, North being above 75%, East more than 95% and Central and West doing 70%-plus. This needs to be looked at in light of the previous quarter, where UltraTech operated at 93% capacity utilization, ending March with 99% capacity utilization. We grew 30% Y-o-Y last quarter and 17% Q-o-Q as compared to rest of the industry, growing 22% and 13%. This -- I'm referring to, ladies and gentlemen, for the January-March quarter. It is important to keep this factor in mind. And our growth was mostly organic as compared to the industry having added nearly 3% additional capacity. All of you know that UltraTech is a growth-hungry company, and the country's cement consumption is expected to keep on growing. This is what propelled our expansion plans, which are more or less on schedule. You will recall our expansion plans of 19.5 million tonnes, which we started towards the end of last calendar. We expect the next quarter to come to 3.2 million tons, which will be in East and Central; Q1 FY '23, about 3.5 million tons, which will be again East and Central. The next 3 quarters would see the balance of 9, 11 -- about 12-odd million tons of commissioning happening in the remaining 3 quarters. We are on course to complete all our expansions by the end of FY '23. Our cash flows continue to grow stronger with every incremental capacity going on stream. We have reached net debt-EBITDA of less than 0.5% already. Going to net cash on the balance sheet is within sight after absorbing all the cash flows for our growth CapEx this year. Talking about cash flows. COVID had an impact on our cash flows this quarter. We -- although we saw a reduction of INR 733 crores in net debt this quarter, we could have done better because a lot of working capital requirements came up in this quarter suddenly due to the surge in COVID cases. Our confidence on the cash flow has helped us increase our dividend payout to the shareholders, and we will meet our ongoing CapEx out of internal accruals and yet be net cash on the balance sheet, as committed, in FY '24 for sure. Happy to share with you that today, we have, again -- today, we have prepaid another INR 5,000 crores of long-term loans, today as in, to be precise, 22nd of this month. We have doubled our ROCE to around 16.5% from the average of around 8% in 2018, and we'll continue this trajectory as well as we keep improving our earnings supported by low-cost expansions and asset swapping. RMC and white cement both were impacted due to COVID lockdowns this quarter. In spite of that, we have added 4 new RMC plants this quarter, taking the tally to about 136 and achieving a growth of more than 300% in RMC Y-o-Y. White cement volumes were a bit slow, but now they have started catching up. Work has commenced on the putty expansion plan in Rajasthan as well, which would get commissioned in Q2 FY '23. Happy to tell you about Dalla Super unit. We have received a Stage 1 approval from MoEF for the plant. For refreshing your memory, it is a 2.3 million-ton clinker facility which we had acquired from Jaypee. Stage 2 approval is in process, and we expect to start work on the plant and commission it by March '22. Let's now talk about the brass tax, namely demand, supply, prices, costs. Our views have one big assumption that wave 3 will not impact the business. Demand has started picking up on all fronts. Against the earlier period of rural slump, we have seen the rural cement consumption also increasing in almost all the corridors, in particular Central and East followed by other parts of the country. It is clearly reflected in our trade sales jumping to about 70%. Urban real estate continues being pulled up by the current situation of lower interest rates, government subsidies, the need for space being [ pushed ] due to COVID. And large infrastructure projects continue to generate increase in demand across the country. Infrastructure projects, if you want to talk about a bit. Roads, there's a big emphasis on road infrastructure both by way of speed of construction as well as awarding new projects. As on June -- as at June end, the daily road length completion had reached 37 kilometers per day versus a target of 40 kilometers a day. I remember talking about these numbers way back in 2014, 2015 when the speed of execution was 3 or 4 kilometers a day, and it -- this number was unbelievable, but the government has actually achieved and delivered it. Greater emphasis is given on the completion of expressways between Mumbai-Delhi, Nagpur-Mumbai, Bangalore-Chennai, Delhi-Varanasi, all of which are cemented roads. Just to refresh again, 1 lane kilometer of cement concrete road takes about 600 tonnes of cement. Metros. All the metro rail projects which were announced in the last budget are going on. In addition, the first RRTS connecting and -- 8 satellite towns to NCR, Ghaziabad, Meerut, Alwar, Panipat, et cetera, is all going on full swing. The other major, new development which is taking place in the space of infrastructure is health infrastructure. To tackle the potential challenge of COVID wave 3, recently the government has allocated as much as INR 21,000 crores from the PM relied fund to develop public health centers. Oxygen plants are coming up in all district hospitals. 15 All-India Institute of Medical Sciences, vaccine manufacturing facilities, all of them will, of course, contain cement and [indiscernible] every year. To talk about airports, the work on all regional airports has started as part of [ Horan's ] scheme to connect a lot of districts of commercial and tourist importance. Smart cities, worth mentioning about that, work on 100 smart cities is going on to build sustainable, connected infrastructure in these places to improve the urban infrastructure, to address the rapid urbanization of these -- of the country. High-speed train, which is a bullet train project, work on the first Mumbai-Ahmedabad section has started in Q1 and will pick up pace in remaining part of the year. Clearly, infrastructure will lead from the front. Another interesting phenomena worth sharing with you is changing landscape of logistics for cement. The painting is still on the canvas, and we have seen a brushstrokes only. I'm referring to DFC. DFC started emerging as a game changer for logistics. Few patches have already been implemented. The total program as of now is for around 2,800 kilometers, out of which nearly 435 kilometer is in operation. It is important to note that the rail speed has doubled. The rail size will become 4x the current capacity. You can visualize the impact it will have on the cost of rail movement and shift from roads to rail. And Nathdwara Cement, which we acquired recently -- or 2018, is already connected to DFC. [indiscernible] of these rigs will also increase max speeds of -- will increase to 33%, I'm told. Rig wagon capacity will increase more than 50%. So this is going to be a game changer for logistics, and I think we are very well connected. To talk about input costs, both coal and pet coke have been threatening to break all the chains around them and continue to surge. Demand from China, as usual, is one big lever driving up prices. Coal has gone up from $60 in Q1 to around $100-plus -- or $120 in June. Petcoke is hovering around $160. July loading U.S. petcoke cargoes have been offered somewhere around $160 to $163 per tonne but without any buying interest. Saudi-origin cargoes are being offered around $140 per tonne. However, the industry so far has shown resilience against these cost pressures with price improvements, i.e., cost pressures are being passed on in prices, thus protecting the margins. Talking about prices, prices have generally been stable to strong in most regions. We have noticed an average of 6% to 8% increase in regional prices in regional markets: East and South growing somewhere around 10%, West growing 7% to 10%, North and Central growing 3% to 6%. In the end, I will only say don't worry about these line items. Let the operating teams manage that. We have, this quarter, delivered an EBITDA per metric tonne of around INR 1,600 per tonne, which is the highest so far and will go higher further; growth of 17% from less than 10% until 4 years ago, a growth faster than the industry; fastest deleveraging program, from a 3.4x in December '18 to 0.4x in June '21. And all growth financed from internal accruals. We deliver what we commit. Thank you, ladies and gentlemen, for your time. And over to you for questions.
[Operator Instructions] The first question is from the line of Sumangal from Kotak Securities.
Yes. Many congratulations for the results. First question is on the realization you touched a little bit in the opening remarks. But we've seen a healthy increase in this quarter sequentially and a bit more than what we were anticipating. Is it possible to share some more regional color for us to better understand this and also how the trade, nontrade moved during the quarter? And lastly, some color on how prices are shaping up in July?
July typically slows down a bit, and you're seeing heavy rains across the country. And it is premature for me to talk about the ongoing quarter in detail. And for prices -- regional prices, I had already given a breakup in my commentary. East and South, around 10%; West, 7% to 10%; North is 3% to 6%, the price hike which we saw in the last quarter.
Okay. And sir, the trade and the nontrade also moved in line? Or was there any...
[indiscernible]
Okay. Sir, next question is on the costs. I mean we've been keeping costs impressively under control. But, I mean, as you said, the recent cost numbers for petcoke, I mean, what sort of cost inflation is expected on that front in the coming 1 to 2 quarters? If we can get some directional sense. And also, any line item under fixed costs or something which was lower because of COVID-led restriction, and that is somewhere -- where we see increase in coming quarters as we return to normalcy?
On your first question, we have not seen any respite in the prices of coal and petcoke, fuel prices essentially. And we don't have any signals here or indications whether production of oil increasing and thus petcoke increasing or coal mining output going up or China demand coming down. Nothing is visible. So it might -- and what is happening is petcoke, as I was mentioning, cargoes are being quoted, but there is no offtake. So there will be a tipping point after which either the prices start -- reduce the speed of increase or slow down or stop or you see some correction. It's very difficult as of now to give any trend on which side the wind is blowing as far as fuel prices is concerned. The second point, you were asking about overheads. COVID-related overhead or impact due to COVID is mostly on travel, I would say, because the travel costs have gone down dramatically. Plants are running as usual. Maintenance costs -- we have preponed some maintenance cost this quarter which will benefit in the subsequent quarters. So I don't foresee any spike in fixed costs from where we are right now.
Understood. Sir, just last follow-up on the petcoke topic. Is it possible to share what would be your consumption cost in 1Q versus the current procurement? Procurement you already said, but the consumption cost in 1Q?
I'll just double check and give the number during the call. Can we move to the next question, please?
[Operator Instructions] The next question is from the line of Pinakin from JPMorgan.
Sir, just following up on the previous question. In terms of -- you said July is seasonally a weak month. So is it fair to say that the prices which we saw in the first quarter have broadly held up in month of July across the key markets? Or July has -- we have seen a correction versus the June quarter average?
I wouldn't be tracking day-to-day prices. But generally, prices don't go up. At times, there might be some questions. I have our Managing Director, Mr. Jhanwar, also on the call. Perhaps he can give a bit of color.
Yes. Very good afternoon to you. Yes. Mind that, yes, the movement in prices are interim. But as you know, the last 1 week, 10 days, the monsoon has picked up across the country. So that -- well, basically, there generally used to be some dilution in the prices. But it would be very difficult to guess at this point of time whether it would continue or whether it would stay at this stage basically. But yes, once there is a demand pressure -- you understand when there -- there used to be some price increase here and there and some additional logistics cost and the [indiscernible] cost, I think. That also impacts the amount realized.
Understood. That is very helpful. Sir, my second question is on energy cost. Now, as you mentioned, there is a relentless cost surge, and what we understand is that Newcastle high-grade coal prices have actually crossed $150 a tonne. Now as the company would be maintaining a certain amount of inventory, has the policy changed? Are you buying less coal at this point of time and petcoke in the expectations of price fall? Or broadly, you're maintaining the same inventory?
We can't take that risk. We are not speculative in nature. We have to protect the operations. So at any point in time, we would carry 45 days of inventories.
Understood. And sir, so that broadly stays the same?
Yes. Yes.
The next question is from the line of Indrajit from CLSA.
Two questions. First is more on the medium term. Thank you for the detailed explanation of demand drivers. But what we are seeing on the supply side is some of the limestone mines which have been auctioned are struggling to -- can't pick up given the new mine tax. So on a 5-, 7-year period, how do you see the demand-supply dynamics changing? Do you think that utilization could tighten meaningfully more than probably what The Street is expecting or what we are working on?
I have always been of the firm view that utilization will tighten over a longer period of time. Limestone mines -- obtaining a limestone mine in auction is one aspect -- or first aspect. The next on line is land acquisition and various approvals, which is a time-consuming process. It becomes expensive because the operating costs for the new plant comes -- will go up because of the royalties, the premium that is attached to it. Cost of land goes up because it's all in public domain, which company has bought the -- acquired the limestone mine. So it becomes difficult to compete at this point in time.
Now just -- yes. Just to add at the end of what Atul said, because there are lots of regulatory requirements, so the overall gestation period of the project gets enhanced. So generally, if you have a direct eluted mine, you can put a plant in 2 to 3 years' time depending on the location and the issues there. But now 5 to 6 years is the general time line from auction and then finally concluding the auction [indiscernible] and the lending decisions, et cetera. So that's the reason things are going to be a little difficult.
A follow-up to that is, in the last annual report, you had mentioned that we have reserves to expand capacity by up to 15 million tonnes. None of our mines get impacted by this, is that correct?
Sorry?
So in the last annual report, you had mentioned that we have reserves to go up to 15 million tonnes of additional capacity organically.
Yes.
So none of our mines or our results get impacted?
No, no.
No, no. Whatever we said, it is fully protected.
Yes.
Okay. And one last question, if I may. So are you sharing the working capital and the CapEx numbers for this quarter? What was the working capital also?
CapEx spend was about INR 1,000 crores cash out. Working capital went up...
INR 600 crores.
INR 600 crores or INR 700 crores.
Yes, which is a very normal figure because Q4 versus Q1 always...
Always spikes.
High, one. And number two, the monsoon buildup also takes place for inventories. And...
So I'm not particularly disturbed about a spike in working capital at in this quarter. So as Jhanwar here also just now mentioned, Q1, April-June always spikes up historically. You can check a number of quarters, it always spikes up. And then it'll start tapering down, and I'll release more working capital. And just to complete to the previous question, the construction cost was $123 per tonne of fuel in this quarter as compared to $109 in the previous quarter.
The next question is from the line of Ashish Jain from Macquarie.
He's dropped out. If you could take the next question, please.
The next question is from the line Amit Murarka from Motilal Oswal.
So first question is around the capacity. So while you mentioned that about 3.5 million tonne will be commissioned in 2Q, so that includes, sir, the Dalla -- or, sorry, the Bara Phase 2, right?
Yes, Bara Phase 2.
Okay. Okay. And also, like -- well, just in terms of, well, the cash flows and the exceedingly strong cash flow then, I believe for the full year it looks like we should be generating INR 12,000 crores-plus. And now that the leverage is coming down substantially, so like is there any -- I mean, what is the thought around the utilization of this cash flow? Will it go towards further organic growth? Or will inorganic be also on the table? How will it be?
It will go towards growth and shareholder returns.
Okay. Okay. Got it. And so on trade, I missed the trade mix number. What was the trade mix in this quarter?
70%.
Sorry?
70%.
70%. And blended cement would be how much?
72%.
72%.
Okay. Got it. So also during the quarter, like my understanding was that generally the larger projects did not get impacted as much because the on-site workers were there. So...
There was a bit of a slowdown, Amit, in whatever we've undertaken, and things have started picking up.
Okay. Okay. Now why I ask that is in the last quarter, the trade mix was 67%, and this quarter it is 70%. So do we think that the nontrade activity slowed down more than trade in this quarter? Or was it just because in the last quarter, you could capture a bigger share of the nontrade market?
What was happening is the impression being built up -- the assumption being made in this quarter was that rural market has slowed down, rural market has slowed down. But rural market did not slow down actually, and we saw a good amount of demand surfacing from rural areas. My absolute quantity of cement consumption in nontrade is continuously going up also.
Okay. Sure.
Basically today, it's too difficult to dissect where there is a slowdown. I know some real estate projects where they were having 500 laborers on the site, and now they have 350 laborers. But the entire team of 500 laborers does not work on cement only -- in the cement related. There might be some other staff also involved in a project. It's very difficult. If you have been traveling to really the coastal road project, it has been on throughout. COVID could have brushed all -- the general area was badly hit. I'm just assuming. I don't know any project in Kerala, but Kerala is so badly impacted with COVID it must have been [indiscernible].
Yes. Just to add upon, I think there are some disruptions from site to site basically temporarily because some get the impact of COVID more serious than the [ if our gents ] must have left actually. But to our -- the best of understanding, they're working on them most of the sites. Nowhere practically is a 0 kind of activity has happened actually. So the work is going on but maybe at reduced rate at certain times.
Okay. Understood. And just lastly on Century, like what percentage of the brand transition has already happened?
Everything completed. We had -- I know the Chhattisgarh plant, we are not doing. So that continues to operate on the old brand.
Okay. And then when will the work -- we started on Chhattisgarh. I believe you'll have to do some CapEx also there.
Yes. So decision has not been taken on that as yet because we are having a lot of other expansions happening, a plant 1,300 kilometers which is -- 1,100 kilometers, which has Hirmi, is undergoing expansion. So we will -- we have not taken a decision on that yet.
Okay. Okay. And that would be roughly 15% of volume, if I'm not wrong, of the Century volume? So the Baikunth capacity would be 15% of the total Century capacity, if I'm not wrong?
2 million tonnes, 2-point or...
Baikunth? Well, almost 2 million.
2-point...
Yes.
2.4 million tonnes out of 40.6 million.
[Operator Instructions] The next question is from the line of Lokesh Garg from Crédit Suisse.
Yes. Basically, I just want to ask you. In terms of quarterly volumes. You have ended up the quarter, let's say comparing to 1Q '20 base, almost unimpacted while, obviously, nation went through a massive COVID with all the destruction that it caused. Could you also give a sense -- although it's backward looking, I understand there is a lot of excitement going forward. But could you also help us understand how did April, May and June individually pan out? Because then, the June momentum could have at least helped us get insight into what we can look forward to.
So June capacity utilization was obviously the highest, way above 70% -- sorry, 74% was June.
70.
Huh?
70%.
Could you sort of share this commentary in form of Y-o-Y volume movement?
Monthly numbers, I don't want to talk about, actually.
Okay. Any other way you can give just perspective on how things have panned out as we move from...
I always share with you the -- directionally, June had improved much better than what April was doing.
The next question is from the line of Satyadeep Jain from AMBIT Capital.
Most of my questions have been answered. Just one quick question. After the expansion you mentioned, any clinker and grinding unit expansion, all the other expansion, in East? By FY '23, would you have clinker shortage in East?
No. The other thing that is happening is Dalla clinker is coming up, which was stuck for a long time, which is in Central but in close proximity to serve the Eastern markets. Hirmi is expanding with clinker, so we will not have clinker shortage.
The next question is from the line of Ritesh Shah from Investec.
Sir, my first question is...
Ritesh, ask me an easy question, please.
Yes, sir. Sir, for this quarter, did we have full benefit of the MMDR amendment, which I think was March end? Is it possible to quantify the amount?
I will get the quantification done and share with you. But it's fairly simple, $64 a tonne on...
Limestone.
Limestone.
Okay. Okay. And sir, second question is...
3.5 million tonnes. You can -- what amount, you can take the same way. So 20 million tonnes of limestone [indiscernible].
Oh, okay. Great. Sir, my second question is, we have stayed away from commenting much on construction chemicals and white cement and wall putty, and the initiatives now [indiscernible] about wall putty expansion. So these are easy wins for the company. Grasim has gone into paints. I think investors would love to hear specifically on construction chemicals wherein the company has a right to win. Sir, any incremental color or target expansion plans would be very useful.
So I think you should reserve that question for the AGM and our Q4 because I'm discussing quarterly results. But that was on a lighter way Ritesh. Construction chemicals, we have started work, and we are building scale. And there's a lot of work happening right now, but it's too small in the overall P&L and balance sheet of UltraTech. Maybe [indiscernible] can answer that.
Yes. No, as Atul said, I would like to just build up on -- the construction chemical is -- as you all know, it's a very specialized subject, actually. So we started building up some skills about it, and we are looking for something -- if something we'll find interesting, then, obviously, we will think of. But -- and we are not at the stage to -- I would say we have not zeroed on anything. We are just trying to build up our skills.
Okay. And sir, possible to quantify how much will be the white cement and wall putty capacity post expansion?
We are 0.6 right now. And how many is the expansion for wall putty?
Putty is...
Ritesh, I'll let you know. I'll let you know.
[indiscernible].
Yes.
[indiscernible].
Yes. [indiscernible].
The next question is from the line of Girish Choudhary from Spark Capital Advisors.
Yes. A couple of questions. Firstly, in your earlier comments, you did indicate trade sales were 70%. So similarly, what is the rural-urban split? And if you could also guide us the volume mix from the urban real estate, if you have it handy.
[indiscernible]. Urban real estate, I don't have a split like that. And I just gave you the rural. So I will give you the numbers separately.
Sure. Sure. Secondly, if you can also split the net debt between gross debt and cash.
Just 1 second, 1 second. So I'll just tell you rural sales were about 65% of our trade sales. 70% was trade sales, yes.
Okay. Okay.
And what are you asking?
I -- yes, my second question was the gross debt and cash in -- cash as a...
Oh, INR 18,000 crores gross debt as of 30th June.
INR 19,000 crores.
INR 19,000 crores gross debt and INR 13,000 crores of treasury.
Sure, sure. Sir, I have one more last question.
Sure, sure.
Yes. You did give a very good slide on the UltraTech smart factory, which talks about various initiatives using tech. If you could sort of elaborate this more in terms of ramping this up across plants. And if this is already implemented at any specific plant, what are the benefits you are seeing? If you could...
So I -- we will -- I cannot disclose the plant at which it has already been implemented. There are various schemes which are under implementation at different levels and different things at different plants. I'll give you...
Jhanwar here. I would add to what Atul said, yes. Because the digital, as you know, there are a number of areas where our plant teams are working. And it are in the cement plant area, it is in the power plant area and the other auxillary area. So the entire idea is how we can improve the reliability of our operations, how we can have our operations with a minimized cost and reduce the variances. And if you are able to reduce the variances, obviously the cost and reliability gets improved. So some pilot projects have succeeded, and now we are moving forward across our sites.
Sir, it involves a sizable CapEx or what?
No, it's not -- I would say that it's not sizable CapEx. It's more of a sort of software sitting on our existing systems, actually. So there's not much hardware gets involved in this CapEx.
Yes. So for example, a lot of artificial intelligence, IoT is being done. To give you one example, a classic example, when the heat temperature varies in the scale from one end to the other, then the team is trying to stabilize it through the kiln, narrowing it, which reduces the overall heat consumption. And this is being done through digital interventions.
The next question is from the line of Navin Sahadeo from Edelweiss Financial Service.
Can you hear me?
Yes, please.
Great. Congratulations on good set of numbers. I have 2 questions. One is, you said your capacity utilization for the quarter was about 73% and June was also around 74%.
Yes. Yes, that's correct.
Okay. Which means it...
April was lower, yes.
Okay. 73% and 74%.
April is what we -- the real impact of lockdown, shutdown, COVID wave 2 was in April.
And May. May.
Okay. My -- what I was trying to really understand is, in July -- I mean, since Q1 has already seen the impact of wave 2, and so in July, are you seeing a sense of pent-up demand? Or in general, are we operating at, let's say, the June utilization levels directionally or higher or lower than that? If you can give some color, it will help us understand.
July is all about rains. Navin, July is all about rains. So July, you will expect a lower capacity utilization. It should not be new to you guys because every July, the capacity utilization goes down.
No, fair. I was just talking that in some regions, the monsoon seemed a little [ bit deep ]. And so I was just thinking, is there is any pent-up factor, so to say, in Bombay? I mean, they had a bit...
We expect pent-up demand to kick in big time, yes. I don't want to comment -- as I mentioned earlier, I don't want to comment specifically on the month of July, on what's happening on the 22nd of July at 4 p.m. But there is a huge expectation of pent-up demand coming back. As monsoon recedes, you will start seeing demand picking up.
Okay. My second question was on your fuel mix. So in the last call, you said petcoke has come down to almost about 28%, which is...
It's gone lower further.
Yes. So I just wanted to understand what is the current fuel mix. And it seemed that...
Yes. Petcoke is about 17%, 2%, 3% would be others and balance would be coal.
So in coal, I just wanted to understand if -- because prices of both imported coal as well as petcoke have been going up on a landed [ kcal ] basis. I believe the Indian coal turns out economical. So just trying to understand how much can it go then. Can Indian coal be 20%? It used to be 10% in FY '21. So just trying to understand where is that as a percentage in overall mix come up to.
Okay. I would respond then, Navin. So fundamentally, it's a function of your plant location, actually. Because if you have your plants located in Central and Eastern part of the country, obviously you have linked or you are near to the coal mine. So then you can get the local coal. But if you are located, as you know, in the West or North, no way you can transport coal despite that quoted coal price has gone up. Number two, there is also [indiscernible] of the coal with the now -- the limestone quality and so on. So the people -- even if the coal prices go -- local coal prices go quite low, but switching over to the highest coal would be very difficult for the industry. So we -- and if we talk about UltraTech, we have plant in East, Central, North, West. So it's a combination of fuel mix actually. So we have in our basket indigenous coal, we have the imported coal plant located on the West Coast and the north part of the country.
Navin, the advantage of our diversity is that we can use the most optimal fuel at a particular location.
Fair. So I was just trying to like request a number. So last year, if Indian coal was 10%, will it be broadly there not likely to change? Or there can be some scope of 10% going to 15%?
There is -- no, you can take a rate of 10% to 20%. I also don't have a number, but I'm just guessing it will not go beyond that.
Understood. Understood. Fair point.
The next question is from the line of Rajesh Ravi, HDFC Securities.
Congratulations on great set of numbers. My question is with regard to the fuel energy cost. You mentioned during the call that our conversion cost is up by almost 12% Q-on-Q. However, in the presentation that you shared, your energy cost per tonne is up around 5% Q-on-Q. So what is explaining this massive difference?
I'm sorry, I missed your question.
Well, in the presentation that you shared where the per-tonne cost -- energy cost, fuel energy cost is up by around 5% Q-on-Q.
Yes.
And during the call, you answered to one of the participants that your fuel cost -- conversion cost for the fuel has increased from $109 to $123.
Yes.
Okay. So that is close to around 12% to 13%. So...
Yes.
So it's a combination of -- because...
Jhanwar, petcoke is what he was talking about, yes.
Okay. So this is particular to petcoke. You are saying that this cost is $109 to $123?
Yes. That is petcoke.
Okay. So my question -- where I was coming in from is that because petcoke and coal both have surged over the last 6 months, so how is that impacting your captive power generation also? Are you seeing a bump-up in your electricity generation cost also?
No, not really because we are taking FSA coal, which is regulated prices.
Okay. And sir, how much would be your captive consumption for electricity?
Coal?
No, no, electricity, how much of it is captive?
Well, 88% would be captive power.
Oh, 88%.
88% would be captive -- our -- most of the integrated plants, we have almost 88%...
80%-plus is captive power.
Okay. Okay. And there, you're not seeing a larger chunk of the inflation that is largely coming up. It's in the kiln. Fuel is where you're facing the...
Correct. Correct, correct.
Yes. Right.
Okay. And that is why the blended number is much lower on power and fuel cost together. Okay.
Yes.
And sir, secondly, on the CapEx, you had mentioned that this year, around 2 million tonne would be commissioned, right? So of the total 19 million tonne in FY '22, how much and which place the capacities are coming up?
In '22, we'll have 3.2 million tonnes commissioned, Patna, Dankuni and Bara.
Okay. Okay. And the clinker also will be coming by end of March '22?
I already have clinker. These are all grinding capacities. I already have clinker.
No, no. Yes, yes. These 3 -- no, the Phase 2, where your -- Phase 1 you have already Dalla...
All clinker will come by the end of '23.
'23, okay. So the Dalla in the [ UP ], which was the -- where the approvals that you received is Stage 1?
Dalla will come by March '22.
March '22.
Pali and Hirmi by March '23.
The next question is from the line of Milind Suresh Raginwar from Centrum.
Sir, one thing -- at the beginning of the call, you just mentioned about the regional capacity utilization. I got about 50% in South and 70% in East. Can you also, I mean, repeat the numbers for the other regions, please?
South was 50%, North was 75% -- around 75%, East was 95%-plus, Central and West were 70%-plus.
And the next thing is, sir, about the incentives part. How much of that should be built in the revenue number?
Roughly INR 80 to INR 90 a tonne is -- or INR 70 crores to be precise, sorry.
Okay. And sir, if I'm comparing the number of our volume in the first quarter of '22 over the first quarter of FY '20, that is June '19 quarter, we are, I mean, still declining, I mean, on that number despite the capacity. So how should we read...
No new capacity has been added from June '19 to June...
'21.
'21. So that is one which is being ramped up right now. So no new capacity has got added on our overall base of 100-plus million tonnes. Looking at April-June '19 and April-June '21, there's a marginal growth, not a decline. And what we are looking at is the potential the way we saw the pent-up demand coming in and the new infra projects which I was particularly -- I said in my opening remarks. We expect that the demand will continue to surge. So the cement consumption will keep on going up.
Okay. Okay. Yes, yes, I got it.
Just to complete the loop, I don't think that there is a stagnation. And there's no point in comparing with April-June '19 because a lot of water has gone under the bridge. There's a lot of issues with COVID which have impacted demand. New vistas of demand have opened up. Also, real estate, Tier 2 towns have started picking up. Tier 1 has started picking up. Now we are just in the midst of monsoon. You see October, December -- Jhanwar, do you want to add to that?
Yes. Yes. Just to add upon what Atul said, I would say it's good to note that there is a marginal increase in the overall numbers in terms of demand despite the severe environment of COVID actually in any particular quarter actually. We're -- as we all know, there were lockdown -- a number of lockdown across the country and the severity rate was too high actually. So that's the -- on the positive side, there is a good opportunity for growth going forward actually. I would read this way.
Okay. And I think, sir, lastly, our overall capacity utilization for the quarter was 74%. Is that what I heard correctly?
73%.
And for June, it was 74% of the month?
Yes.
So that means our loss in the first 2 months were not that significant. Is that the way to look at it?
Yes. May was pretty bad. April had started declining.
The next question is from the line of Prateek Kumar from Antique Stockbroking.
Sir, my first question is on the Century plant profitability. So while we are now so like INR 1,500 EBITDA per tonne, so the Century, where you used to target INR 900-odd, that would have been also exceeded, that number?
We have crossed INR 1,000 mark there also.
INR 1,000 mark, okay. And regarding your fuel cost, is it possible to give a -- or like sort of average fuel cost, including coal and petcoke combined, for this quarter versus last quarter?
Just one second. I think the team has it. I'll give it to you. Or [indiscernible], you should do it. Or I can communicate it with you separately.
Okay. And particularly last quarter results, PBT of yours, then the imported coal consumption at that time was $76 per tonne?
Yes.
So how much of that now moves it?
[indiscernible]?
Imported coal.
[indiscernible].
Prateek, I'll give you -- a breakup to you separately.
Sure. And is it possible to quantify like how much -- like another INR 100, INR 150, I mean, say, we can build on? Or is it too early to tell?
A million dollar question. I also don't have the answer for that.
The next question is from the line of Sanjay Nandi from Ratnabali Investments.
The next person. He must have dropped off.
Hello?
Hello?
The next question is from the line of Ronald from Sharekhan.
He has dropped off.
Hello?
Yes?
Hello? Yes, am I audible, sir?
Yes, please.
Yes. Yes. Just I had one query regarding raw material costs. Like we believe during this quarter, you had changes in inventory, which, if I see that including raw material and purchase of finished stocks, it had completely absorbed the rising power and fuel and freight cost rise. So -- and this phenomenon has also been the result of [ ACP ] in Mangala. What we are seeing that raw material costs together on an aggregate has led to our performance on EBITDA per tonne which we should expect also. So if this can be explained, like what is this thing? Like is it gains in the inventory? Or what -- and this kind of -- so then, what would happen, do you think, over the next coming quarters?
I haven't followed your question. So one is if I look at my raw material costs, which had gone up from INR 470 a tonne to INR 510 a tonne, a large impact is felt because of business [ build ] (1:06:33). A huge amount of consumption in the mining operations, movement -- internal movement. That is what drives costs otherwise. And the second one is fly ash contracts. Fly ash is very opportunistic. The power plants also keep on changing prices depending upon demand-supply situation. Both of these are not in control.
Sir, I'm referring to the negative INR 290-odd crores, the changes in inventory of finished goods which was reported during the current...
[indiscernible]...
Yes?
P&L, there's a valuation impact on our inventory. That is what he's asking about.
[indiscernible].
There is an increase of value for the -- that is a color increase in inventory in this case. So last quarter -- last year, it was a decrease in inventory.
Yes. So this has bring down the overall cost of this -- if I include the raw materials and purchase of stock into it. So this frees up around INR 200 per tonne in profitability.
This is an increase of inventory. This is the increase/decrease of finished product and [indiscernible] inventory.
And this figure won't be repeated in coming quarters, right?
It will change. It will change. It can go up or down.
Under there.
This element of the P&L is always there.
Yes, yes. That's true. So okay, sir, I'll understand it later.
[indiscernible].
The next question is from the line of Roshan Paunikar from JM Financial Services.
Sir, in your presentation, given that the proportion of green energy in your portfolio is at [ 10% ]...
Correct. Yes.
Are there any internal targets? And is there a cap to which it can go up to?
We are now looking at going up to 34% of our existing capacities with the green power. That should get commissioned -- get completed by '23 -- FY '24 latest, yes.
Okay. So this includes the WHRS capacity?
Yes, WHRS, solar, these are the 2 main sales.
All right. All right. And the next question is on the lead distance, sir. What would it have been in this quarter?
Lead distance, I believe, would have been higher, around 430-odd kilometers.
430 -- 432 kilometers.
Ladies and gentlemen, we'll take the last question from the line of Bhavin Chheda from Enam Holdings.
Excellent set of numbers. Sir, 2 questions. One was, what was your white cement and -- white cement volume and Portland...
Yes, look at the presentation. [indiscernible].
EBITDA numbers. EBITDA numbers.
I don't -- I'm not able to calculate EBITDA separately.
Okay. You used to give a combined number of noncement in the earlier quarters. So if you can -- normally, it's between 150, 160.
No. No. No, no, nothing like that.
Okay. Are there -- and sir, what was the industry growth number in the quarter 1? If you can share that number? And any update on the...
If the results get declared, we will know. Only the results -- second or third company declaring that -- third company, right? Yes.
[indiscernible].
Oh, [indiscernible], yes. Four companies have declared their results, so we'll have to wait to know what the industry results are like.
The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher.
One question on the part of divestment of overseas operations like, say, that fiber asset which we got through the acquisition of Binani Cement. So any update on that, sir?
We're working on it. I'm hopeful to conclude it by -- in this financial year. We are -- now at least have multiple dialogues going on. There are interests being generated. So the confidence level is very high that by end of March '22, we should be rid of all these pending issues.
Okay. And sorry, second question on this margin. So you mentioned in your opening remarks that you are very confident that margins could improve from current levels of roughly around INR 1,600 per tonne, which we did in this quarter. So given the fact that there is significant pressure on the cost side and, secondly, like the way the volumes are coming up and the capacities are also coming up in the system, so what drives this particular confidence on the margin?
Firstly, costs going up, they will not keep on moving in one single direction. And again, we'd harp on the point that there is no offtake of petcoke at $150. So it's naturally going to correct. Second point is new capacity is coming up. They need time to stabilize, time to mature, time to establish in the marketplace. Third point is from UltraTech's point of view, we ourselves will begin close to 15 million tonnes of capacity in the next fiscal year. I can already say lots of plants are already oversold, as in we have our order book building up whereby we will have our utilizations going up in those acquisitions -- in those new capacities as well. Next point to add here is the brand itself. UltraTech is one of the best brands of cement. It's -- any major project, whether it is a house or an infra, UltraTech is there. And the way India is growing, there's no reason why UltraTech will not grow. Clearly, overhead absorption is where the incremental capacity utilization will help absorb overheads at a much faster pace. The operating leverage keeps on improving, thus helping me improve my margins further.
Thank you very much. Ladies and gentlemen, on behalf of UltraTech Cement, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Thank you.