ACC Limited (ACC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 FY '24 Conference Call of Ambuja Cement, ACC And SANGHI Industries hosted by Antique Stockbroking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Charanjit Singh, Head, Investor Relations. Thank you, and over to you, Mr. Singh.

Thank you very much. Good evening, ladies and gentlemen. Thank you very much for taking out the time to join this call. On behalf of Adani Cements, a very warm welcome to all of you. Before I hand over the call to Mr. Ajay Kapur for his opening remarks, I'll make a request that kindly limit your questions to 1 or max of 2, and then you can reenter the question queue. I -- on this side, we have Mr. Ajay Kapur and Mr. Vinod Bahety, the CEO and the CFO, to answer your questions. And we will go for around an hour. So hopefully, we'll manage to answer all your questions, but in case something gets left, then kindly feel free to reach out to the IR post the call. Thank you very much, and over to you, Ajayji.

Thank you, Charanjit. Good afternoon to all of you. Warm greetings. Thank you for joining us today. It is my pleasure to share with you the operational and financial performance of Adani Group's cement business for the quarter ended 31st December '23. To begin with, the consolidated quarterly Y-o-Y performance, we registered a revenue of INR 8,129 crores, a jump of 3%. This is largely driven by a strong focus on our micro market management strategy, expansion of dealer network, blended cement as a mix of total sales was maintained at 87%. Premium products as a percentage of trade sales volume increased to 22%. Operational costs for the quarter was at INR 4,526 per tonne, shows a decline of 10%. This is attributable to 21% decline in energy costs driven by better fuel management, which resulted in reduction of kiln fuel by 25% to INR 1.84 per 1,000 kcal from INR 2.45. The transportation cost declined by 1% to INR 1,297 per tonne on account of footprint optimization. The direct dispatch to customers has further increased to 52% from 50%. The rail coefficients stands at 26%. Other expenses stand at INR 777 per tonne. With the improvements mentioned on both revenue and cost, EBITDA grew by 70% at INR 1,732 crores and EBITDA per tonne at INR 1,225, implying a jump of 65%. EBITDA margin expanded by 8.4 percentage points to 21.3%. The CapEx spend of INR 1,048 crores was achieved from internal accruals and cash in hand. As on 31st December, the consolidated cash and cash equivalent in the company's books stood at INR 8,591 crores. Reduction in consolidated cash was on account of acquisition of Sanghi Industries, resulting in cash outflow of INR 3,801 crores. While looking at the 9 months Y-o-Y performance, revenue is up 5% at INR 24,266 crores. EBITDA grew at 91% at INR 4,701 crores. On a per tonne basis, it was INR 1,103, implying a jump of 82% and EBITDA margin too expanded by 8.7 percentage points to 19.4%. Now coming to stand-alone performance of Ambuja for the quarter ended 31st March on a Y-o-Y basis. The revenue is up 8% at INR 4,440 crores, in line with the volume growth of 6%. EBITDA jumped by 33% to INR 851 crores. EBITDA per tonne stood at INR 1,043, a jump up 26% and EBITDA margin expanded by 3.7 percentages to 9.2%. We had a robust PAT growth of 39% to INR 514 crores. Speaking of the last 9 months stand-alone performance on a Y-o-Y basis, net revenue up 11% at INR 13,139 crores, in line with volume growth of 12%. EBITDA jumped by 57% at INR 2,573 crores. EBITDA on a per tonne basis was INR 1,035, a jump of 40% and margin expanded by 5.7% at 19.6%. We had a robust PAT growth of 16% to INR 1,802 crores. Now let me share with you the progress that we have made on our announced long-term strategic plan. Firstly, on our new capacity addition in line with our plan to add around 40 million tonnes of new clinker capacity, Ametha integrated unit in Madhya Pradesh has now been commissioned, enhancing the clinker capacity by 3.3 million tonnes. Acquisition of Sanghi has increased our clinker capacity by another 6.6 million tonnes. With these 2 additions, we have already added 10 million tonnes of clinker out of 40 million tonnes as we had planned. Now our total clinker capacity stands at 51 million tonnes. For doubling the capacity of grinding facilities to 140 million tonnes by FY '28, we are targeting around 35 new grinding units, 1 million tonne of grinding rate at Ametha has now been commissioned. Acquisition of Sanghi has increased our grinding capacity by 6.1 million tonnes. Further acquisition of remaining stake in Asian Concretes and Cements Private Limited has increased our grinding capacity by another 1.5 million tonnes. Our grinding capacity now stands at 77.4 million tonnes. Another 2 units are mapped to the upcoming clinker facility of Bhatapara of 4 million tonnes. These include one at Sankrail and one at Farakka in West Bengal. Another 2 units are mapped to Chandrapur clinker facility of 4 million tonnes in Maharashtra. These include one unit at Jalgaon and one at Amravati. Other grinding units which are being set up are Salai Banwa in Uttar Pradesh, Sindri in Jharkhand, Marwar -- at Marwar in Rajasthan. All these units are expected to get commissioned by FY '26 end. Additionally, we would be also setting up grinding units at Hoshiarpur Punjab. Warisaliganj in Bihar and Pune in Maharashtra to be commissioned by FY '27. For the new facilities of 4 million tonne clinker at Bhatapara, 30% of civil execution work is now complete and major equipment dispatch has also commenced. Expected completion is by quarter 4 FY '25. For its corresponding grinding grid at Sankrail and Farakka, order has been placed on EPC vendor, and 80% of the filing work has been completed off at the site. Expected completion of these units is by quarter 3 FY '25. For the new facility of 4 million tonne clinker line at Maharashtra in Chandrapur, LOI has placed on the EPC vendor, site development and pre-project work has already been started. ECF approval is expected in this quarter, expected completion by quarter 2 FY '26. Each of these kiln lines will have 42 megawatts of waste heat recovery and provision for utilizing beyond 30% alternate fuels. We also placed orders on EPC basis for grinding units at Salai Banwa, Uttar Pradesh, 2.4 million tonnes; Sindri, 2.4 million tonnes in Jharkhand. At our Salai Banwa grinding unit in Uttar Pradesh, groundbreaking activities have already been done. We will continue to provide progress updates of new orders and also the progress on individual products on an ongoing basis. Now sharing an update on the structure initiatives to become the cost leader in the Indian civil industry. In my last call and also in our strategy presentation, I have guided for a total cost reduction of over INR 400 per tonne. Let me first discuss on the progress made to reduce our energy costs. Our waste heat recovery capacity, at the time of takeover, last year, September '22, was 40 megawatts, which are now targeting to increase to 186 megawatts by March '25. At present, the waste heat recovery capacity stands at 119 megawatts. We have recently announced installation of 1,000 megawatt of RE energy, which is expected to get commissioned by FY '26 and would ensure that 60% of our power requirements would be through green power. This would help in reducing the power cost by INR 90 per tonne on the expanded capacity by FY '28. On multiple occasions, I've highlighted that we want to be self-sufficient on our coal requirements with captive coal mines. As a result, we have started bidding for coal mines in the options being conducted by the Government of India. Besides the 1.3 million captive coal mine at Gare Palma, which Ambuja has since 2018, we have won the bid for 2 million tonne coal mine in Dahegaon Gowari in Maharashtra. The 2 mines together would cater to around 40% to 50% of our current coal requirements. Our power and fuel costs have decreased by 21% to INR 1,353 per tonne in quarter 3 FY '24 from INR 1,702 per tonne in quarter 3 FY '23, driven by better fuel management and structural initiatives undertaken. These initiatives include an increase in share of AFR and waste heat recovery in fuel and power mix. Share of AFR in fuel mix has improved to 9.1%, which was 7.1% at the time of acquisition. Share of waste heat recovery in power mix has increased to 12.7% from 3.4% at the time of acquisition. The second cost item is freight and forwarding costs. These are 3 focus areas for cost reduction here. First reduction in lead distance; second, warehouse footprint optimization; and third, railroad mix optimization. We're targeting to reduce the average primary lead distance to about 100 kilometers. Lead distance in the current quarter was 284 km versus 291 km at the time of acquisition. For Ambuja standalone, in quarter 3 FY '24, it was 277 kilometers and for ACC, it was 295 km. We have made progress on warehouse optimization as well and increased the direct dispatches from 50% to 52% on a Y-o-Y basis. With focus on cost reduction in logistics, we have ordered 11 General Purpose Wagon Investment Scheme, rakes of which 7 have already been delivered, and the rest are expected to be delivered by the end of the current financial year. These trains will enable cost-efficient clinker movement from the mother plants. Apart from these, we have also ordered 26 BCFC rakes for safe and cost-efficient transportation of fly ash from thermal power stations to our facility. The cost reduction is mainly driven by detailed route planning at each micro market level and adherence to our L1 source, renegotiation on commercial terms, GPS and technological measures. And today, 98% of our fleet leaving the plant is not tagged with the GPS system. On account of these initiatives, our logistics costs have reduced to INR 1,297 per tonne in quarter 3 FY '24 versus INR 1,310 per tonne in quarter 3 FY '23. To secure our limestone supplies, we have also won bids for 10 new mines with 1 each in Odisha, Maharashtra, Madhya Pradesh, 2 in Gujarat and 5 in Rajasthan. Together, these limestone reserves are estimated to have a total reserve of 586 million tonnes of limestone. And with the acquisition of Sanghi, we are optimizing the infrastructure at the site that would enable efficient transportation of cement from the plant to the jetty through mechanized conveyor belts. Along with other basic infrastructure upgrades, we are expecting a modest CapEx of INR 200 crores to improve the efficiency at the Sanghi plant. The master supply agreement has been signed between Ambuja and Sanghi and ACC and Sanghi that would enable in improving the utilization of Sanghipuram unit from current 25%, 30% to 75% to 80% in the near future. Improved utilization levels would enable us to transform the company from EBITDA negative to EBITDA positive within a very short span of time. In conclusion, we have made strong strides both operationally and financially in the recent quarter, a testament to our consistent efforts and strategic planning. We continue to generate significant cash to finance our expansion and pay dividends to our shareholders. Your trust and support have been our guiding force. Thank you for believing in us. Yes, I'll now request my colleague, Vinod, our CFO, to also start the initial remarks.

Thank you, Ajayji. I also just want to exert my jubilance in terms of some of the important parameters. For this quarter, we have achieved EBITDA on a consol basis per metric tonne of INR 1,225, which is highest amongst the peer group. Our EBITDA margin of 21.3% is among the highest in the industry. Our rating is reaffirmed to AAA level, stable long term. Our highest PAT margin of 13.4% in the industry. Net worth is lifetime high at INR 42,824-odd crores. And in terms of cash and cash equivalents at INR 8,500-odd crores, we are again in the highest category. From a trade sales perspective, the percentage is again the highest. And from a premium cement sales our percentage is again very high. If you see in 9 months, the cost reduction, which is achieved almost at 10%, we were almost at INR 4,700, INR 4,800 a tonne in December last year, and now we are at close to INR 4,300. So this INR 400 per tonne, which has been saved is, again, the cost reduction which has been highlighted. And if you see the Investor deck also, there were some feedback to bring in more and more information. So this time, we have covered lots of additional information in our Investor Day. So I'm sure people would have gone through it all of you, and we are open to questions now.

Operator, can you open the line for questions, please?

[Operator Instructions] The first question is from the line of Indrajit Agarwal from CLSA India.

Okay. My first question is on Sanghi, congratulations on the acquisition. So post the acquisition, would Sanghi as the brand cease to exist, meaning would the entire volumes be sold under MSA to ACC Ambuja or that brand will also exist?

Okay. Indrajit, the simple answer is we already shifted the entire sales in the brands of Ambuja and ACC. And that is very well received in the market. So Sanghi as a brand, we are not using.

Okay. This is helpful. My second question is actually on the CapEx. If you can help us with the guidance of CapEx for '24, '25 and '26 and the split between Ambuja and ACC on this?

So if you see our investor deck, we have loaded Slide 29. All the details are there. We have, as I mentioned also in my opening, 2 lines, 8 million tonne clinker, 19.6 million cement. In addition, there are 5 new grinding stations. I know this question will also come later. So I'm attempting an answer now only so that I -- perhaps another question on the same I'll answer. Amravati and Jalgaon, the land acquisition is currently in active progress. We expect this to be completed by -- and EC also by December '24. And therefore, after that, about 14 months, the project should be on. Hoshiarpur in Punjab, the line has been purchased. Public hearing has been completed. So we are already in an advanced stage. I think we should get the EC by March '24. After that, again, around 14 to 15 months, the project should be live. The Bihar grinding unit, Warisaliganj, land is already available. Public hearing also completed. The EC time line is March '24. After that, 14 to 16 months for project completion. And Pune, the land is identified under progress. Like Amravati and Jalgaon, we should get it by EC by December '24, and after that, another 12 to 14 months. So this is the status of the new 5 branding units, which have been announced today. In addition to 19.5, which you've already announced with the time lines.

And how will we source clinker here?

So we have clinker at ACC Wadi. We are doing some debottlenecking there. Maharashtra, we have anyway put up a clinker line of 4 million, so that can easily produce 6.5 million tonnes of cement. And you can see the 3 grinding units are coming in there, Pune, Amravati and Jalgaon. Regarding Bihar, we already have put -- we are putting a new line at [ Bhatapara ], which can again produce with slag and composite cement closer to 7 million, of which 4 million is in Bengal and the remaining, as I mentioned, in Bihar and some of the other areas. So more or less a well-balanced clinker across. Obviously, very soon, you'll also hear from us the next set of clinker lines. I can tell you a lot of work is already being done. But today's call, I'm not going to announce new clinker lines, but rest be assured a lot of work has already been done there.

And Indrajit just to also preempt another question. So for December quarter, Sanghi, it was only, say, 25 working days, which is part of the results. And just to also highlight the entire integration process has gone very well ahead of the plant. And March quarter, you will see some good volume jump coming from Sanghi itself, which I'm expecting almost 1 million tonne for the 3 months and compared to less than 0.3 million for the December or less than 0.2 million for December quarter. So Sanghi, this volume expansion is on back of the brand strength of Ambuja and ACC as well as the overall, say, distribution strength of both the companies, and hence, it makes more relevant to use Ambuja and ACC.

The next question is from the line of Prateek Kumar from Jefferies.

My question is on, if you can explain the cost hit which we had during this quarter because of which EBITDA per tonne has got hit during the current quarter. Is it related to buying clinker from ACC or some outside? And what is -- what part of it is extraordinary when you say you have sort of took a 12% clinker shutdown during the quarter?

Basically, we had 3 big kilns of Ambuja, which are about, what, 40% of our clinker. They were under the routine maintenance, and one had unscheduled breakdown. As a result, the clinker production was less, and therefore, the cost absorption was on a lower volume. I think that's the main principal reason. And I think other than that, I don't see -- I think that should come back in the following quarters.

What would be the cost associated with this? I mean, because why I ask is like most of your peers have reported INR 200 improvement in EBITDA per tonne, ACC is like also higher on a stand-alone basis at least. So your consolidated number actually looks quite good. But your stand-alone numbers of Ambuja are looking like sort of flattish on unit EBITDA. So I mean does all that loss has like sort of got booked in ACC in terms of more clinker purchase from ACC and as a result ACC results have improved significantly during the quarter?

So one question was already asked to me was in the past that ACC and Ambuja had a big lag, right? So -- and we always said that we are running both companies with the same set of lens. So we have seen ACC performance certainly going up. If you see stand-alone Ambuja volumes are pretty good, I would say. It's just that absorption has happened because in -- some clinker capacities were not running. As a result, our cost for Ambuja for this particular quarter is slightly higher. But I think this should catch up another I think about INR 100 a tonne is a catch-up, I would expect.

That is -- so just to put some numbers, let us say, in September on standalone Ambuja was INR 1,020 a tonne on EBITDA. And as you rightly said, this shutdown and also higher clinker of the inventory, which has been consumed close to about INR 150 to INR 200 a tonne is what is going to -- which has affected Ambuja. So if I normalize it, it would be close to INR 1,200-odd which is also a INR 200 jump in the EBITDA. So Prateek, Prateek only right? So Prateek, just to give you the numbers, like this higher cost of the shutdown of almost, say, 40% capacity costed me almost INR 50 a tonne, then the inventory of clinker, which I consumed, the opening stock, if you see also the difference in the change in the inventory earlier it was positive this quarter, it is negative because I've consumed more inventory of the opening stock, which has cost me almost like INR 30 to INR 40. And then higher sales of the traded goods when it comes to Ambuja, there has been a higher proportion. And I will explain to you on the MSA part, which also posted another say INR 30 or INR 40. So close to INR 150-odd has been impacted to Ambuja stand-alone EBITDA. Otherwise, it would be closer to INR 1,200 a tonne on a normalized basis.

And also on our MSA, one good news is that we have been able to maximize the synergies between the 2 companies. As a result, that volume has taken a significant improvement. And when you consol at Ambuja level at a holdco level, you find that the margins are now really shooting up. So I think that's a very good news, I would say, because the interest rate improvement for MSA volume itself has been substantial uptick for the consolidated company, which is Ambuja.

Sure. Just one clarification on Q4, this INR 150 should send back, right in terms of...

Yes.

Yes, for sure. In fact, therefore, we also highlighted in our press release that this will -- the benefits will come in the coming quarters, immediately in Q4 itself.

Next question is from the line of Raashi Chopra from Citigroup.

So my first question on the cost side. You had mentioned that the cost will improve by about INR 400 a tonne based on all the efficiency parameters, et cetera. So how much of that is already done and how much more can come?

So Raashi, if you see my opening, we already have saved some because of increased share of waste heat. By March, you will see a substantial improvement in the RE because 200 megawatts is getting commissioned. Let's say, on a 30%, 32% factor, 60 megawatts of RE would be available to us. Then next year, as I mentioned, we are further going to add waste heat recovery. So I think in the journey of 400, we -- I know our EBITDA already at consol level is now nearing INR 1,200. So you can see improvement happening purely on efficiency. But I believe another INR 300 will come over the next 12 to 24 months.

So Raashi, what -- Ajayji has just highlighted some of the important investments which we are making in terms of the power, renewable power, WHRS. And also in terms of the raw materials procurement, for example, whether it comes to gypsum, whether it comes to fly ash, putting CapEx for fly ash handling system or putting facility of synthetic gypsum, these all are going to give us the visibility of at least a couple of hundred crores of reduction in the coming quarters. We're very confident of achieving our INR 1,450 guidance, which we had given in the initial period. I think we are very much on the -- and the exit of FY '24, we should be moving towards that.

And this just keeping in mind, I mean, your EBITDA per tonne guidance, keeping in mind that the price hikes that happened over the course of the last few months have kind of reversed, et cetera. So this is really only a cost advantage we're talking about, right?

Yes, yes. So I don't want to get into the price debate and discussion because it's a very dynamic one, first of all. So it's not right for me to comment there. I was therefore commenting only that you've seen from -- when we put up our strategy road map in May, last year, from then till now, we had guided about INR 400-plus cost improvement on a static price line. Of that, I said another INR 300 should flow in over the next 12 to 24 months. What are the levers? INR 90 per tonne will straightaway come from waste heat and green power when fully implemented. And another INR 50 to INR 60 will come from logistics and another INR 50 to INR 60 will come from footprint optimization. And the last INR 50 will come from the raw material procurement. And this still doesn't have the play of our own fuel management, I think that will be on top. So I'm very comfortable that I'll exceed that guidance which I've given. And there's no question, we are very much progressing on that direction.

Sorry, I missed that INR 90 was waste heat recovery and green, INR 50, INR 60 logistics, INR 50 was raw material and what was the other 50?

Footprint optimization.

Footprint optimization.

Yes, you have new grinding stations, your cost associated with the market tends to improve. And it straight away the one lever which hits first is the lead distance. And every kilometer per tonne, but if you take INR 4 or INR 5, the decrease in cost is substantial.

Understood. That's very helpful. Just one more question. So currently, your grinding capacity, cement capacity 77.4 and clinker is 51, and in the immediate visibility based on the announced expansions, you have cement going to 110. And I know you said you didn't want to detail clinker, but at 110 cement base, how much clinker do you expect to have?

Again, as I said, then I'll have to give you a number, which I'd rather come out with a proper guidance. And with the details as we have loaded on our website today. So allow us some time. I can assure you, just to give you some comfort, at Sanghi itself have a billion tonne of limestone. Likewise, there are multiple sites where work is going on. Land has been acquired, EC applications have been filed. I want to announce when my EC application for a mother plant is already in my hand. So just wait for some time.

Sure. So just on a consolidated basis from a volume growth perspective, FY '25-'26, how does -- I mean, how do you first look at that?

Let me only give you a number right now. Our growth number for Indian demand should be about 7% to 8%. I'm very confident about that. I think our normal capacities, existing capacity should get that number. And our new capacity that we have acquired and also some of the markets that we have acquired with those capacities, that should give us a number on top of the normal 7% to 8%.

Yes. But Raashi, like straightaway, we have added almost 15 million tonnes -- 15% of the capacity where we were 67.5, and today, we are at 77.4. That will definitely add up to my overall volume when the full blow of strategy comes on it the capacity that we have acquired. Now you can just do the math. This will definitely be better than the industry growth for Ambuja consol.

[Operator Instructions] The next question is from the line of Rahul Gupta from Morgan Stanley.

I have 2 questions. First, out of this 2.9 million tonne of MSA sales, can you help me understand how much would be to ACC on a net basis?

I will take up that, Rahul. So Rahul, in terms of this 2.9 million tonnes, 1.7 million comes from ACC to Ambuja and 1.3 million comes from Ambuja to ACC.

Got it. Got it. My second question is a bit related to strategy. So how is the group thinking now with respect to ACC and Sanghi consolidation into Ambuja? Or is it they would continue to keep 3 companies separately listed eventually? Any color on this would be very helpful.

Rahul, you'd appreciate at this moment, if there was any comment I would have already commented in the press release or in our media statement. Give us some time, we'll come back to you with a more coherent and clear strategy on that. For ACC Ambuja, we are very clear, right now, we are running it as 2 companies. However, you've seen the MSA volume, the MSA volume in this quarter has been the highest and the biggest and that is already showing in the results margin for the consolidated entity. As far as Sanghi is concerned, we just acquired, we are still in the process of finishing for certain steps. Step 1 to finish our open offer. Step 2 would be to integrate. Again, there are 4 or 5 steps before I can answer the question you have raised, but allow us some time, we'll come back to you on that.

So just a follow-up on this. So is it fair to say that the MSA volumes, net MSA volumes of around 2.9 million or 3 million tonne would be the way to go forward with?

I think at this moment, with -- this volume is all right, but don't forget that every year, we are adding 10% to 15% new capacity. So as the new capacities get added, until such time the 2 entities remain the way they are, we will always keep optimizing the footprint, and that's where the value is coming in. And you are seeing for yourself that at a holdco level we have seen a margin uptick coming because of consolidation and because of MSA. So I would say the full strategy is playing out beautifully well.

Next question is from the line of Bharat Shah from ASK Investment Managers.

Kapur saab, last year, we had detailed discussion about the strategic road map. And some of the contours in terms of the cost and other things are beginning to get visible. But I wanted to take an opportunity and check with you as to what your overall vision of the industry, Ambuja combined plays under that? And some of the more tangible guideposts in terms of kind of volume, profitability and capital efficiency over 3 to 5 years' time frame? I'm aware of the road map that you had drawn and indicated. But my personal opinion is that maybe this is cement industry is probably -- Indian cement industry is one of the best period ahead is my personal understanding. But I would like to have some more clarity from your end as to how you view it and Ambuja combines plays under that overall opportunity for the industry?

So Bharatji, thanks. I think you asked me very, very interesting questions. There are also strategic and future oriented. Let me attempt answers. First of all, our position is very clear. We want to grow and we want to have an end state road map, which our Chairman had given us this vision of doubling the capacity from the day we acquired the companies from 67.5 to 140. I've already in my PR today released a number of 110 million, of which 10 million has already been acquired, which has already taken to 77.5 in 1 year. Work on multiple others already started, but a very clear road map with names we have given up to 110 million. Now that clearly is a work in that direction. On the cost leadership, you are seeing the margins improve. You've also seen the turnaround in the company of ACC under Adani leadership. It's a complete turnaround. Today, ACC EBITDA margin is nearing 1,000. And when we acquired, it was almost negative a year back. Now coming on, how do I see next 3 to 5 years? I believe EBITDA per tonne of Ambuja consolidated should be in the realm of INR 1,450 plus. That guidance stays firmly in place, and this guidance is not basis price. This guidance is firmly based on cost. And I'm very confident this will come. And it will be further supported with a larger volume from the current 77.5 to 140, we should be selling 120 million tonnes by March of '28. I'm very confident we should be able to get to that number. Now I think that itself will tell you the position, the valuation and the financial metrics because that will also give me a ROCE of closer to 19% with EBITDA margin of 25%, 26%, other things remaining equal. So I think that's what I've put out in the public space. That's what I'd like to further reiterate and also mention that a lot of actions on ground are happening across our sites. I hope I've answered your question, Bharatji.

Yes. But return on capital employed of 19% to 20%. Would you not regard it as a little less ambitious because today cement, Indian cement industry is placed in the global context. On many qualitative parameters is much more distinguished than before. Industry itself is consolidated, underlying demand drivers in terms of real estate, housing, infrastructure, all that appear to be robust. And it looks very clear that industry, which has grown in last 20 years at 6%, 7% per annum in volume terms should do a lot better on a larger base in the next 20 years. Therefore, consolidation of the industry, improvement of the practices, very clearly global level capability and capacity emerging and the opportunity highway and our stringent focus on internal efficiency and raising the bar there, 19%, 20% in our consolidated industry for the lead player, would you not regard it as somewhat underwhelming?

Bharatji, if you -- one thing I didn't mention, this is on static prices. My entire strategy which I had laid out then and I'm again laying out today, I have not considered a healthy price increase in this. So if there's a price increase, as you rightly mentioned, the demand-supply gap narrowing, the upside could be much higher. But in the interest of time, I would suggest we can engage offline, and we can have a much more nuanced discussion on it. Thank you.

[Operator Instructions] Next question is from the line of Devesh Agarwal from IIFL Securities.

I missed the number on the cost that is there in this quarter on per kcal basis, what is that number, and what is the expectation for the fourth quarter?

Sorry, can you repeat the question?

Cost per kcal business, sir, for third quarter and your expectation for the fourth quarter?

INR 1.82, I think, is a cost I give it. And I think we expect the cost to more or less trend in the same format because we expect much more smart buying on pet coke prices. And also what do you call -- it was INR 1.84, sorry fuel cost.

Just to add, Devesh. So you're right. I think what we have seen in this quarter, December, is that the pet coke has been subdued in terms of the overall price, which has come down almost like if I compare, say, 20-odd percent from $140 a tonne to almost like $115 a tonne. Now there is a lag effect with coal. And now, for example, we are seeing a good trend of softening of the coal prices for this quarter. And definitely, it should help. As you know, my basket of coal is actually improving in terms of domestic more as compared to import, and we also definitely have put all the 3 lakh tonnes of opportunity buy when it comes to pet coke from Saudi Aramco. So that is definitely going to help me in coming quarters.

All right, sir. And on Sanghi, you mentioned a 1 million tonne volume in the next quarter itself in the running quarter, that implies a 75% utilization. So what are your plans to increase capacity at Sanghi, the 10 million tonnes that you mentioned? And what could be the markets that you're targeting from the Sanghi plant?

So Sanghi plant will initially target Gujarat and Maharashtra markets. And in time to come, as the full strategy plays out, it will go down south as well to markets of Cochin and Mangaluru. But it'll cover the entire Gujarat, it will cover parts of Maharashtra, most of the coastal parts and then it will also then go down south.

And sir, target to increase from 6 million to 10 million tonnes?

That I will lay out in my road map, as I mentioned. The next set of kiln announcements, you'll also hear Sanghi kiln.

Right, sir. And one final question, sir. What are the time lines for the balance warrant money that is likely to come from promoters?

So Devesh, as you know that the time lines are somewhere like mid of April, but that is where the promoter group will be able to highlight on that part. So as of now, no comments on that.

Next question is from the line of Navin Sahadeo from ICICI Securities.

Two questions, one on CapEx. Second, on the sustainability of fixed cost reduction. So on CapEx, if you could first like share the actual cash outflow that you are like estimating, because what I also see is while your clinker addition given so far is about 10.25, 8 already announced, 2.25% at Mundra. And total grinding is almost 32 million tonnes. So it does appear that for -- like even from an FY '27 year perspective, you could be higher on the grinding and lesser on the clinker front.

So as I mentioned earlier on the clinker, very soon, you will hear the next set of clinker capacities. I'm waiting for public hearings to be done. I expect this to be done by June. Post that, you will hear our next set of kilns, for which most of the land is in our position. These are brownfield assets. Limestone reserves in our possession, land in our possession, only public hearing we are awaiting. Therefore, in some places, we have to build -- this has always happened as we expand. Sometimes, the grinding will be ahead. Sometimes the clinker will be ahead, but we are very confident that -- and these projects since they are Brownfield, we should be able to get from the time of EC approval to the plant commissioning, outer limit would be 18 to 20 months.

So Navin, you're preempting in terms of the overall, say, capital management plan around this CapEx, then we have done our maths and for any intermittent any M&A outgo. Otherwise, all our CapEx is well planned, aligned with the cash flows, what we are expecting from the business. And if there is any requirement for any additional opportunity, definitely, our balance sheet is very, very strong, very healthy, debt-free as of now. So that is capable to handle that part.

Fair. And second question was about the sustainability of fixed cost reduction because in the case of ACC particularly and also in case of Ambuja fixed cost, at least the staff expenses and in case of ACC, even the other expenses, we have seen a significant reduction. So just wanted to get a sense, are these more sustainable or it had probably some element of one-off or it could be volatile going ahead?

I think there's no one-off per se. I would say the entire strategy, as we had laid out last year, is now playing out in full potential. There is a lean management. There is single management. And of course, we have also volume as it kicks in, you will find the fixed cost journey at least will not go haywire from where it is. It will only get slightly improved further. But I don't see any major uptick in the cost going forward. And some of the cost in other expenses, we are also now investing in brands. I think that part, I would say, was underinvested. In future, we'll invest a little more. But I think other than that, I think it's more or less in place. I don't see any major concerns going forward either way.

Navin, like interestingly, this one-off question has been coming every quarter and every quarter, we have been surprising -- not surprising, but sustaining in terms of the cost, which actually shows that last 4 quarters, from almost a 10% reduction. And if you start from looking at March to December '23, the trend is very, very clear. And in all our investor presentations, we are highlighting all the components of the cost. And further, we have now highlighted what are the efficiency improvements, CapEx is. So only from here, there will be improvement.

And of course, annual bonus, as you know, kicks in, in the April quarter. So they could always be a little bit natural payout of bonuses. So that's the only thing which should happen going forward.

Next question is from the line of Sumangal Nevatia from Kotak Securities.

Firstly, appreciate the granular details on various aspects in the presentation. My first question is on the volume growth part. So if you look at last 4 quarters, our volume growth on the consol basis has been just 2.5%, 2.6%, excluding the Sanghi volumes versus peers have grown by early teens. So I just want to understand from the last 4 quarters, I mean, what are the key reasons why we are lacking the growth and the market share, and some future guidance on this aspect?

So if you see for the current quarter, I believe the industry growth is about 3.5%. We are more or less in line with the industry growth. Within that, if you see Ambuja is stand-alone about 6%. It's a little better than industry growth. I think in the -- and also, of course, in this quarter, you had a very bad November. So some of those issues also had impact on rest of the industry, also had -- and there are some elections, I think, in this quarter. I think going forward, as I mentioned, the industry growth should be about 6%. At the base level, all of our units should be able to get plus that. And all the incremental volumes that we're adding in the system, plus the catch-up, as you rightly mentioned, should also help us. And I can only give you that January, we are seeing a very robust numbers for the entities. So I think I'm very confident that going forward, we should have a healthy growth.

And just to confirm, in terms of our capacity utilization, we are amongst the highest in the peers at 77-odd percent, which means with every increasing capacity, one can just expect that the volume expansion will be proportionately growing with that. That is straight forward, like, for example, maths.

Okay. Got it. And I missed the CapEx number. Is it possible to share what is our full year CapEx latest guidance for FY '24 and '25 as well?

Let me take this question. Basically, let's go with the overall -- again, I would reflect you on the 140 million tonnes of plan, right, which is staggered into the next 4 years. And for -- as I highlighted, 80% of this, we will be achieving by say '27. And when I do a complete math, I'm generating an EBITDA of close to, say, INR 8,000 crores to INR 1,000 crores, which we'll be generating. And the business itself will be showing a healthy cash of INR 5,000 to INR 6,000 crores, net of taxes and all. So from an overall CapEx outflow perspective, each year, we are expecting a INR 4,000 crores to INR 5,000 crores outflow staggered over the next 3, 4 years. For FY '24, we are expecting INR 3,500 crores overall basically outflow. So this quarter will be -- we will see a good CapEx outflow as well. But Sanghi will be adding to the incremental requirement. But however, as I mentioned, from an overall capital management plans and perspective, the numbers which we are discussing with you, these are all without any incremental borrowings at this stage. These are all basis the healthy cash flows and the existing treasury on the books, which will be self-sustaining. And the EBITDA which are highlighting to you doesn't factor in the potential jump on basis of the price realizations improving. So this is a cost leadership journey, which we have achieved. And any further improvement on the market, which we've highlighted, will only be adding to my EBITDA. So the business is generating a good healthy cash flows and which will maintain my CapEx plans. So broadly, as I said, INR 5,000 crores to INR 6,000 crores from a cash outflow perspective, and from a commitment perspective, INR 8,000 crores to INR 10,000 crores a year you can expect.

[Operator Instructions] Next question is from the line of Amit Murarka from Axis Capital.

My first question is on the arrangement with Adani Cement's Dahej plant. I think in the presentation, you have mentioned that you've entered into an arrangement. Can you please explain that?

So like we do a master supply agreement between Ambuja and ACC, since it is a related party, we have done a similar arrangement with Dahej, unit of Adani cementation, whereas we use it like a toll manufacturing. So we give them clinker, convert it into cement and take it at the ex-factory gate, sell it in both Ambuja and ACC brands. more or less similar arrangement as we have done with all of our entities, including now Asian, which ACC has acquired in North.

Okay. So is this a cost plus 10% arrangement, like similar to, let's say, what you saw in Sanghi or it's a different arrangement?

Since this is on a pure tolling basis, so this will not be cost plus 10%. It will be on a measure of tolling charges per metric tonne, which is close to about INR 300 to INR 350 a tonne.

So in this case, in Sanghi, Sanghi is producing clinker and billing us on cost plus, plus we are taking the entire investments. We have given loans at a very market-friendly pricing versus what they were getting earlier. So I think -- and the entire brands are from Ambuja and ACC. In this case, we are using the grinding unit purely as a tolling unit. So we have to mitigate the entire cost. And then we buy it on a price, more or less the same formula as we do for ACC and Ambuja.

I stand corrected. This is on a sales basis only, similar to what we have adopted. It's not on a tolling, sorry, it is on a sales basis, which we were adopted for Sanghi and ACIL. So it is on a similar principles.

There would be some double counting of volume then right? When you sell clinker, you would be booking a clinker sale and then cement sold externally will again be booked as sales?

Sorry, I couldn't follow the question.

No, it will now...

You will sell clinker to Dahej, right, and then they will sell cement to you?

Yes. So in this case, for example, we will only factor in the sale of the cement, which will be there from our side. And in the cost, it will also come as a purchase of cement. So basically, that is how it will be. But there will not be any per se double accounting.

So you will sell the cement externally. So that will come as sales, cement sales as well?

Yes, yes. I will be selling and then I will be buying. Delta is mine.

Okay, sure. And also on your ACC, just if you could just help understand like there has been quite a bit of volatility in the numbers there, like we saw Q1 being good, Q2 again being weak. Q3 has again been good thankfully. So how can we expect INR 1,000 EBITDA profile to sustain and in fact, hopefully improve from there? Or if you can just dwell into that a bit?

So basically, if you see ACC movement has been -- you're right. I mean it was -- March quarter was 554, December '22 was 496. Sequentially, you have seen from June from 800 to September, it had a dip and then it has again gone up. I would say it's a more stable now. A lot of inefficiencies in the system have been addressed. And we are also addressing the tail-end plant. So I think that's also helping. On top, we are also doing a footprint optimization. I think this was a question if you all recall, was asked that why was such a big margin gap between the 2 entities. And I think that strategy is now playing up.

Sure. So we would now hope for INR 1,000 profile to sustain basically right at ACC?

Hopefully, so yes, we are also hoping the same.

Sorry to interrupt you. Next question is from the line of Satyadeep Jain from AMBIT Capital.

A couple of questions. One, on the new capacity expansion you've announced of 2.5 million on the clinker and 10 million tonnes cement. Is that -- which entity would that come under? Some are Adani Cement, I guess. May be can you talk about where all this capacity settled?

So all the capacities that I've announced, I think the ones are there on the Slide #30 of our Investor Day. No, no, this is the limestone one. I think the 2 clinker lines are coming in Ambuja, Slide 29, sorry. Bathinda in Ambuja. Bhatapara is in Ambuja. Maratha, of course, is Ambuja. Sankrail is Ambuja. Marwar is Ambuja. Farakka is Ambuja. Sindri is ACC. Salai Banwa is ACC. Mundra is Ambuja, and of the new capacities that are coming in, all of them are in Ambuja.

I just wanted to ask, given ACC also has a lot of cash on the books, what's the thought process behind adding all these capacities in Ambuja and not ACC?

As I mentioned, I've yet to announce a new set of cement kiln. And in time to come, you will hear expenditure plan over there as well from ACC.

Okay. Second was on power, thank you for all the details slide you put out, it's very informative. So I just wanted to ask on power, obviously, Adani Cement, Ambuja is doing all the power commissioning execution by itself. Whereas we have Adani Green, Adani Power, they have the experience. What's behind doing it in-house? And also when you're building that INR 1.3 savings, can you maybe talk about what kind of grade power costs you have assumed for that kind of savings?

So basically, we have taken around average INR 7 grid power cost. That is basis, this booking. I think the details are given on Slide 41 -- 43, I think. And then if you really look at the mix, we are -- it's not just green, it's also wast heat recovery. Wast heat, we are looking at -- see, the grid, we have calculated for FY '27-'28, around INR 8.50, CPP INR 8.28, wast heat about INR 1.4 and then that's how we have worked out this savings.

CPP is very high, just on that, because you're using the building of this green energy, which is going to be solar will be mostly during the day. So during the evening, you're going to replace grid-based captive cool plant, is that correct? And would that mean that you ramp up, ramp down the coal plant during the day, during the day we shutdown coal and during the evening you start...

So what we have done is, basically, on a technical minimum, what the grinding units -- sorry, the captive power plants will be run during the night. And during the day, the solar would be drawn. I think that was -- and we have taken a lot of help from our colleagues in the green and also in our distribution and part of planning the strategy.

Because of the ramp up, ramp down, you assumed more than INR 8 cost of CPP, is that correct? Otherwise, that cost will be slightly higher.

No, no. CPP cost is basically will also go up because we have taken some assumptions in the cost of coal. That's the reason.

Assume, cost of coal is -- okay.

There will be some -- because that is what has -- we have taken the trend of past few years. 2% to 3% inflation we have taken for the purpose of our modeling.

And just on that, what the -- why Ambuja is executing this and why not Adani Power, given these capabilities on that?

So basically, a good point and good observation. So it is the investment from Ambuja on its balance sheet because this is like a strategically important investment from my cost to my ESG requirements and all. And Adani Green, which is the group's leader in the green power, they are helping us to implement it. So a large part of this green power is coming in Khavda, where Adani Green has sizable, as we all know, ongoing projects and wherein they are giving us some part of this out of this Khavda location. So of course, they're helping us in terms of implementing and executing this project. But strategically, it is important from Ambuja perspective. As I highlighted, it's a long-term requirement for me and also help me in my overall larger ESG standards.

Ladies and gentlemen, due to paucity of time, we will take that as the last question. I will now hand the conference over to Mr. Charanjit Singh for closing comments.

Thank you, everyone, and thanks for taking out the time. For any leftover, you can directly reach out to me after the call. Looking forward to another engagement after Q4 results. Thank you, everyone, and good day.

Thank you very much. On behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.