Ambuja Cements Limited (500425) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Earnings Conference Call for the Quarter and Year Ended 31st March 2024 of Ambuja Cements Limited, ACC Limited and Sanghi Industries Limited, hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital India Private Limited. Thank you, and over to you, sir.

Thank you, Michelle. Good afternoon, everyone. On behalf of PhillipCapital India Private Limited, we welcome you to the earnings call for the quarter and full year ended 31st March 2024 for Ambuja Cements Limited and its listed subsidiaries ACC Limited and Sanghi Industries Limited. I would like to mention on behalf of Ambuja Cements and subsidiaries that certain statements that may be made or discussed on this conference call may be forward-looking statements related to future developments and which are based on current management expectations. These statements are subject to a number of risks, uncertainties and other important factors, which may cause actual developments and results to differ materially from the statements made. Ambuja Cements and its subsidiaries assumes no obligation to publicly update or alter these forward-looking statements, whether as a result of new information or future events or otherwise. I will now hand over the floor -- hand over the call to Mr. Deepak Balwani, Head of Investor Relations at Adani Group's Cement business. Thank you, and over to you, Deepak.

Thank you, Vaibhav. Good afternoon, everyone. Thank you very much for taking out time to join Adani Cements Quarter 4 FY '24 earnings call. On behalf of Adani Cements, a very warm welcome to all of you. On this side, we have Mr. Ajay Kapur, Chief Executive Officer; and Mr. Vinod Bahety, Chief Financial Officer. Before I hand over the call to Mr. Ajay Kapur for his opening remarks, requesting you all to kindly limit your questions to a maximum of two and then reenter the question queue. Over to you, Ajayji.

Thank you, Deepak. Good afternoon to all of you. I extend a warm welcome to each of you for joining us in our quarter 4 and FY '24 earnings call of Adani Group Cement business for Ambuja, ACC and Sanghi. We continue to strengthen our position as a market leader in the cement industry. Our strong operational and financial performance are a testament to our business model's flexibility and solid foundation. Adani Cement is becoming stronger over time with an intense commitment towards capacity expansion through both organic and inorganic growth, along with efficiency improvement initiatives. Adani Cement's current market share is about 14% plus with an internal target to hit 20% by FY '28. To begin with, I would like to share some of the heavy head-level highlights before diving into the specifics. In April '24, Ambuja Cement successfully completed the acquisition of state-of-the-art 1.5 million tonne grinding unit at Tuticorin in Tamil Nadu. This will help strengthening our market share in southern markets. We have increased our capacity by 17% since acquisition through organic and inorganic growth translating to 11.4 million tonnes. 142 million tonnes of new limestone reserves secured in quarter 4 FY '24, total results reaching 7.8 billion tonnes. In FY '24, Ambuja and ACC both achieved all-time highest annualized PAT. In quarter 4 FY '24, Ambuja achieved the highest-ever clinker and cement sales over the last 20 quarters. Capacity growth from the current 78.9 million tonnes to 140 million tonnes will be met through both internal accruals and opening cash flows. We will continue to remain debt-free. 4 million tonnes of clinkering and 4.8 million tonnes of cement capacity is expected to commence by quarter 4 FY '25. The promoters have fully subscribed to the warrants program in the company by further infusing INR 8,339 crores in April '24, thereby infusing a total amount of INR 20,000 crores. Promoters have further increased their stake in the company by 3.6% to 70.3%. With strong balance sheet and cash position, this further strengthens and accelerates our growth journey. The consolidated quarterly Y-o-Y performance, we reported a revenue of INR 8,894 crores, a jump of 12%. This is driven by a strong focus on our micro market management strategy, expansion of dealer network, blended cement as a mix of total sales maintained at 86%, premium products as a percentage of trade sales increased to 24%. Operational costs for the quarter is at INR 4,345 per tonne, shows a decline of 9%. This is driven by a 13% decline in energy cost owing to better fuel management, which resulted in reduction of kiln fuel cost by 17% to INR 1.84 from INR 2.21 per 1,000 kilocal. The transportation costs declined by 8% at INR 1,280 per tonne on account of footprint optimization, secondary lead distant reduced by 4 kilometers to 48, the direct dispatch to customers has been maintained at 54%. Other expenses were marginally reduced at INR 699 per tonne. With the improvements mentioned on the revenue and cost front, the EBITDA grew by 37% at INR 1,699 crores. EBITDA per tonne grew by 17% at INR 1,026 and the margin expanded by 3.5 percentage to 19.1%. The master supply agreement volume stood at 3.4 million tonnes against 2.4 million tonnes, an increase of 42%. You have to further look at the master supply agreements with the companies have entered with Sanghi. And for the quarter, Sanghi to Ambuja was 4.2 lakh tonnes and Sanghi to ACC was 2.5 and that itself with additional volume gain, which has come in from these MSAs. As of 31st March '24, the consolidated cash and cash equivalents stood at INR 15,999 crores. With the warrant money of INR 8,339 received in April, our total cash and cash equivalents currently is at INR 24,338 crores. Now looking at the full year FY '24 Y-o-Y performance, revenue up 7% at INR 33,160 crores. EBITDA up 73% at INR 6,400 crores. EBITDA per tonne grew by 60% at INR 1,081, EBITDA margin expanded by 7.4% to 19.3 percentage. Tax expenses in FY '24 is higher mainly for reversal of tax provision of INR 150 crores in FY '23 for 80IC benefit. In the best interest of time, I will not discuss the stand-alone financial performance of the listed companies separately as they are available on the stock exchanges. I will share with you the progress we have made on our announced long-term strategic plan. For doubling the capacity of grinding units -- capacity of grinding facilities to 140 million tonnes for FY '28, we are targeting 35 new grinding units. With acquisition of 1.5 million of Tuticorin in Tamil Nadu, our grinding capacity now stands at 78.9 million tonnes. Another 3 units are mapped to the upcoming clinker facility at Bhatapara in Chhattisgarh of 4 million tonnes. These include 1 unit each in Sankrail and Farakka in Bengal, and Warisaliganj in Bihar. Another 2 grinding units are mapped to Chandrapur grinding unit -- clinker unit of Maratha Cement of 4 million tonnes. These include 1 unit at Jalgaon and 1 unit at Amaravati in Maharashtra. Both of them would be 2 million each. Other grinding units which are being set up are at Salai Banwa in Uttar Pradesh, Sindhari, Marwar in Rajasthan and Mundra in Gujarat. All these units are expected to get commissioned by the end of FY '26. Additionally, we would also be setting up grinding units at Hoshiarpur in Punjab and Pune in Maharashtra to be commissioned by FY '27. For the new facilities of 4 million tonnes clinker at Bhatapara, 67% of the civil work is now complete and receipt of major equipment has also commenced. Expected completion is by quarter 4 FY '25. For its corresponding grinding units at Sankrail and Farakka in Bengal, 52% civil cost and 40%, respective for both the units have been respectively done. Expected completion of this unit is by quarter 3 FY '25. For the new facility of 4 million tonne clinker line at Maratha in Chandrapur, contract has been awarded on EPC vendors. Project execution work started. Expected completion is by quarter 2 FY '26. These kiln lines will have 42 megawatts of waste rate recovery and provision for utilizing 30% alternate fuels in the kilns. We have placed orders on EPC basis for 2.4 million tonnes grinding units at Salai Banwa and 1.6 million tonne grinding units at Sindri. Project execution work at both the sites has started. Out of the total CapEx, all of our kilns will be brownfield and the grinding units will be a mix of greenfield 53% and brownfield 47%. Now I will share with you some of the key initiatives being taken for becoming a cost leader in the cement business. Securing major raw materials at cost-competitive prices and efficiency and productivity improvement CapEx will further help in cost optimization by 8% to 10%. First, let me discuss the steps we have taken to lower our energy cost. Our waste heat recovery capacity at the time of takeover was 40 megawatts in September '22, which we are now targeting to increase to 186 megawatts by March '25. Currently, the WHRS capacity is at 134 megawatts. We have earlier announced our investments of 1,000 megawatt in RE, which is expected to get commissioned by FY '26 and would ensure that 60% of our power requirement would be met through green power. This would help in reducing the power cost by INR 90 per tonne by FY '28. First phase of 200 megawatts is getting commissioned at Khavda in quarter 1 FY '25. As previously explained, to meet our requirements, we aim to have captive coal supplies. As a result, we are bidding for coal mines in the auctions being conducted by the government. Besides the 1.2 million tonne captive mine at Gare Palma in Ambuja, we have won and bid for 2 million tonnes coal mine in Dahegaon Gowari in Maharashtra and another mine of 2 million tonnes at Lamatola in Madhya Pradesh. These 3 mines together would cater to about 50% of our current requirement. A high share of coal from captive mines and opportunity to buy imported pet coke will further lower our fuel cost. Besides this, within the group, we are also working on other options, and I believe with that, in the next 12 months' time, we should be able to secure 80% to 90% of our goal through our own captive sources. Driven by better fuel management and structural initiatives undertaken, our power and fuel costs have decreased by 13% to INR 1,219 per tonne in quarter 4 FY '24 from INR 1,404 per tonne in quarter 4 last year. These initiatives include an increase in share of AFR and WHRS. The share of AFR in fuel mix has improved to 10.6% from 8.7%. Share of WHRS in power mix has increased to 13.5% from 9%. The second cost item is the freight and forwarding costs. There are 3 focus areas for cost reduction here, reduction in lead distance, warehouse footprint optimization and railroad mix optimization. We are targeting to reduce the average primary road lead distance to about 100 kilometers. Primary lead distance in the current quarter was 276 kilometers versus 271, and secondary lead 48 versus 52. So you can see though marginal, but improvements. To further optimize our cost in logistics, we have ordered 11 GPWIS rakes of which 8 have been delivered, and the rest are expected to be delivered by the end of quarter 1 FY '25. These rakes will enable cost-efficient clinker movement from the mother plants. In addition to these, we have also ordered 26 DCFC rakes for safe and cost-effective transportation of fly ash from thermal power plants to our facilities. We expect 10 rakes to be delivered in the current financial year. Because of these initiatives, our logistics cost has been reduced by 8% to INR 1,280 per tonne in quarter 4 FY '24 from INR 1,389 in the same quarter last year. To secure our limestone supplies, we have won bids for 15 new mines with total reserves reaching 7.8 billion tonnes. On ESG, we are committed to net zero by 2050 for Ambuja and ACC. With near-term targets validated by SBTi, 60% of power sourced will be from green power by FY '28, which will help us to reduce carbon footprint. Ambuja is 11x water positive, establishing leadership in water governance. Reached an impressive 8x plastic negativity for Ambuja through coprocessing of plastic waste in cement Kilns. Ambuja and ACC put together used more than 21 million tonnes of waste derived resources in FY '24, impressing secular economy. We have pledged to plant 8.3 million trees by 2030. Ambuja and ACC created societal values for more than 4.6 million people by contributing to fields like health care, education, employment and sustainable livelihood. We are optimizing the infrastructure at Sanghi that would enable efficient transportation of cement and clinker from the plant to the jetty through mechanized conveyor belts. Now looking at the industry outlook. The government's push for affordable housing, increased budgetary allocation to infrastructure and construction, the shift to green energy, demand/supply dynamics and greater consolidation all indicate a positive outlook for the Indian cement industry. We expect higher utilization over the next 5 years, since demand is expected to grow at a rate of 8% to 9% faster than the capacity expansion rate. In conclusion, as I mentioned this earlier, at multiple occasions, Adani Cement will benefit from accelerated growth, lower cost and group synergies, all of which will contribute to lead the market and achieve sustainable performance in the near future. So with this, before going for Q&A, I'll request Vinod to also give some opening insights.

Thank you, Ajayji. Good afternoon, friends. Wonderful to again connect with all of you on another fulfilling quarter with lots of good actions on the business as well as the balance sheet, which Ajayji has well highlighted. Most importantly, the completion of the warrant program wherein we also issued closer to INR 8,400 crores in April. Now so this year, we have reported the highest ever PAT in the history of Ambuja at INR 4,738 crores. We have also touched net worth of INR 51,000 crores closer to, and if I add the money of warrants for April, it is closer to INR 60,000-odd crores. We have also achieved the highest cash position profile. And as of now, say, almost INR 24,000-odd crores. In terms of fixed assets, our balance sheet is, again, very strong, and including CWIP and I'm almost at, say, INR 23,000 crores. Now with this healthy balance sheet supported by all the improvement in the KPIs, and we have already indicated our cost to achieve almost INR 530 a tonne for the reduction, which we are envisaging by '28. So we are fully geared well on growth and supported by all the enablers, which I've highlighted in my investor deck as well, FY-'25, I will be exiting with capacity of almost 86 million tonnes. In '26, we should achieve 100 million; '27, 120 million; and finally, FY '28, you will see me achieving 140-odd million tonnes. So that is how the overall narration on the growth as well as the cost factors, which we want to achieve relentlessly, and we look forward to on the Q&A. Thank you.

[Operator Instructions] The first question is from the line of Navin Sahadeo from ICICI Securities.

Am I audible?

Yes, Navin we can hear you.

Two questions. First, of course, is on the capacity expansion plan, and it's very reassuring that every single time that the company has maintained the target of 140 million tonnes in terms of cement grinding. But honestly, sir, as an analyst, my fear is about on the clinker expansion front because except for about 8 million tonnes of clinker that we are already pursuing, there is like not much announcement on the clinker front. Even the Mundra unit, I'm saying is not yet given a specific date or a milestone or if EC has been received or not. So if you could just throw some light as to how the clinker capacities will stack up as you gave the cement capacity that will be far more reassuring and will help us take that into account?

So Navin, what I've refrained from saying is, until I have the EC in my hand, I generally don't speak about kiln lines, but let me make it very clear, 3 locations, 1 in West, 1 in North and 1 in South, 4 million, 3 Kilns, we are ready to place orders as soon as we have the EC. And this is not so far in distant future. I'm talking of only a quarter or 2 at the most. And interestingly at all the locations, the entire land is in our position. The leases are in our position. I'm just waiting for the EC.

Understood. This is great. Sir, my second question then was...

Basically, what I've told you is 12 million clinker, which technically can produce 20 million plus cement.

So just to add to that, Navin, like from -- our target is to reach almost 76 million tonnes of clinker by end of the '28 when -- sorry, 82 million tonnes of clinker, when I look at, say, 140 million tonnes. And a good part of this is almost 80% of it will be my brownfield expansions, which again, is a very reassuring and only 20% will be greenfield for which also a substantial part of limestone and land is already in possession. So we have a complete clear outline over this clinker expansion. So when we say cement, it is imbibed that clinker is also finally expanding. It's not like that we are going to purchase cement and put the -- purchase clinker and put the cement. So it is inherently inbuilt over there. Just to -- yes, yes, please go ahead.

Sorry, to cut. Yes. My second question sir, then was on the Sanghi. And I just have like -- because there has been a fundraise announcement recently with the commitment of INR 2,200 crores. So in terms of basically what is the overall game plan for Sanghi here, is it growth CapEx? Also quickly, I just want to mention here that we came across recently an environment clearance-related document where a company has applied for a 10 million tonne clinker and a similar 10 million tonne cement at Sanghi. So I just wanted to understand what is the overall game plan for Sanghi.

So Navin, let me first handle the game plan for Sanghi. Sanghi has a great location. That's the reason we invested in that asset. It has a fantastic fitment of footprint within our ecosystem, especially our West-South corridor. Currently, we have 2 kilns, which can produce 6.6 million as per the rated capacity. As I speak to you, as you know, the kilns needed refurbishment. So we are doing that. This whole process will be over by H1 of this year. Our plan is to run both the kilns flat out in H2, literally at 100%. And I think that will -- that is the first game plan at Sanghi. The second game plan at Sanghi is we will be putting up in time to come 2 more kilns of 4 million each. And that will then make it one of the largest single-location, lowest-cost plants. Having handled -- and of course, it will have its own adjoining grinding stations and cement-linked bulk grinding units/terminals, which Ambuja already has. So that is in short of the game plan. The issue you're talking of INR 2,200 is basically to get the ICD, which Ambuja earlier given to Sanghi to give it back to us. It is more cost-efficient and financially a much better structure. That's the reason we are doing it, in short.

And just to add, Navin, and good to share with all of you that Sanghi already has been rated now AA, the rating has upgraded from D to AA, and the journey is to become AAA for Sanghi as well like Ambuja and ACC. And therefore, what Ajayji has highlighted that this ICD, when I paid for my preference shares that will help us to move into the league of AAA for Sanghi as well. And that was our commitment to the investors of Sanghi in terms of improving the overall balance sheet and financials. We are in this journey.

The next question is from the line of Rahul Gupta from Morgan Stanley.

Am I audible?

Yes.

I have two questions. So first question, taking the Sanghi game plan forward. Based on your comments, is it fair to say that you would target something like 5 million tonnes from Sanghi in fiscal '25. And secondly, how should one look at Sanghi profitability from here?

So to answer one question is a simple answer. Yes, 5 million is something minimum we will do, number one. As you know, we have done an MSA with Sanghi in the current format and that MSA is in the public domain. For the current year, nothing changes there. I think as and when we make a change to that MSA, we'll come back to you. The MSA basically, you can look it at the website...

It is a margin of 9% around for Sanghi.

It leaves 9% the margin for them and rest, since we are selling in our brands of Ambuja and ACC, that margin is then retained in Ambuja and ACC.

Great. This is very helpful. So my second question is more from the industry perspective. We saw industry prioritized volumes at the expense of prices during the fourth quarter. And given you and another large player have talked about cost-saving initiatives over the medium term, is it fair to say that margin expansion will be led by cost control and cement prices may remain sluggish for longer despite a strong demand outlook? Any color on this will be helpful.

It's a very interesting question, Rahul, and you know why I'm saying it because end of the day, they are 2 separate streams. One is the stream on cost and productivity. As you know, many of our initiatives post taking over by Adani have been accelerated at 10x speed. I think the companies were lagging behind versus worthy competition on waste heat, on some of the other initiatives which needed to be invested. So we -- and then growth, of course. So we are clearly focused on being the lowest cost. That's also the Adani DNA. If you look at any of our Adani companies, in each of the sectors, we are the lowest cost and highest productivity and thereby, it also renders us highest EBITDA. So that having said, cement industry also is an industry where brand and price and the segments you choose to play have a sizable role. I think Ambuja and ACC are both iconic brands. Both of them are placed at the highest end, as we call it, A or A+ pricing. On top, we have within the trade segment in ACC even higher than 30% premium products. But on an average level between both the companies, we are still more than 25% premium products, and we're targeting much higher volumes coming from there. That is an area which keeps us a little away from day-to-day commodity wars. But yes, as more capacity comes in and if the sentiment is a little down, it can have an impact on pricing. I believe this is going to get improved because I think post elections, we'll see a much more robust program. And I believe GDP should be 7% and cement should play 1.2 to 1.3x. We did an asset check in the last 5 years, and we again proved right that cement has again started behaving 1.2 to 1.3x. So if cement demand is about 8% to 9%, irrespective of cost, I don't think cost is something we're going to pass on. It's meant also to help us grow the business. So pricing, I think, should be stable. It should not go down and it should only improve from here.

The next question is from the line of Raashi Chopra from Citigroup.

Just on the cost side, you may have mentioned in the presentation and today that you're expecting the costs to come down by about INR 500 by FY '28, so is it coming off like this current base? And if yes, how has that broken up amongst the various heads?

So Raashi, this is a very interesting question. What I'll do is rather than deep diving into -- there will be at least 100 line items to get to that number. I will not go there. It's also not right for me to go there. What we are basically looking at, I'll give you the heads up. One heads up is coal mines, which I just mentioned in the opening, I think that's going to be a game changer for us, number one. Number two, I mentioned about long-term procurement of critical raw materials. We are also targeting a sizable percentage coming through long-term agreements. We are also investing in railway wagons, which help us to streamline day-to-day vagaries of increasing raw material prices. Once I have secured the source and I have also secured the transportation, the cost is more or less stabilized. And in raw material, the large part of transportation -- cost is the transportation cost. So we are getting a fix over there. The third and very important area is the power cost. We already mentioned in the beginning, about INR 100 per tonne or I believe it will be plus INR 100 coming out of our massive program of investing INR 10,000 crores in green and waste heat. So today, the power cost is about INR 6.75. Over the next 5 years, this will come down to about INR 4.50 or so. And that itself, you can work out is about INR 150 a tonne, purely on cement. When you then bring it back per tonne, it might get adjusted, but purely on production, it will be about INR 150. Logistics is another area, as we improve our footprint in the country and also put up more grinding units, 35 of them, and constantly focus on going direct, we are using digital in a big way. I think today, our company is perhaps the highest GPS enabled in the ecosystem, in the large sector, not just cement. So we have absolute visibility of where our fleet is going. And with that, we are able to see 10% to 15% logistics cost optimization. I believe logistics would be a big number out of this INR 500 plus. Let's say, 40% will come from logistics and other services and about 55% to 60% will come from manufacturing and associated adjacencies, which I mentioned.

So Raashi, also if you look at it, like when we took over in somewhere September, our cost -- net price is somewhere like on an overall total cost basis per tonne, we were at almost for INR 5,300 a tonne, which at this quarter, for example, you will see on a cement, it is INR 4,185 a tonne. So we have almost brought it down by 20%. And this journey from INR 4,185 to INR 3,640, INR 530 is 12.5%. Whatever the idea which Ajayji has given, 12.5% we strongly believe we will be able to reach these another reduction. So from 20% in last say 15, 18 months to another 12.5%. There is a complete clearly outlined road map for this. And hence, my balance sheet is stronger enough to make all those strategic investments, which will bring these savings.

So you can calculate, no. I mean this is an answer also for other potential questions. We are at an EBITDA per tonne of upwards of INR 1,050 or closer to INR 1,100. These cost initiatives that we are seeing, these are all structural costs, there's nothing related to market, everything is structural. So you're straight away looking at a INR 1,500 plus number with the end state.

Got it. So just continuing on this, like, for example, in this quarter as well, your fuel cost is, on a sequential basis, not year-on-year, on a sequential basis, the fuel cost is flattish. But you've seen a decline in the power and fuel costs per tonne of cement. So have we seen like the benefits of green energy, et cetera, I think, efficiency is also coming on a sequential basis quarter-on-quarter?

Yes, yes, yes. So our -- in fact, I mentioned that in the opening also, if you see our percentage of green energy has improved, number one. Our AFR percentage is also shot up by a couple of percentage points. And then efficiencies at the plant have also increased. We had also launched a new kiln in Ametha of ACC I think it's already running at 100% plus capacity utilization. It's efficient new plant. All these initiatives are also helping us. And plus, we had -- after taking over, we had also introduced many initiatives, including putting new coolers -- new clinker coolers and equipment. Those are also now showing results and improved efficiency parameters.

But Raashi, perhaps, I just want to clarify to you that this -- when you say flattish, in fact, we have reduced our power and fuel on a per tonne basis almost by 10% efficiency. Fuel is flat.

[Operator Instructions] The next question is from the line of Prateek Kumar from Jefferies.

First question is on your detail like on cost and CapEx time lines on a 5-year basis. CapEx you have talked about also on, I think, yearly basis. Is it possible to also give out like cost decline estimate on a yearly basis, maybe broad-based, but not very specific?

That would be too much forward-looking, Prateek. But I can only tell you, you can see sequentially, every quarter, we've been -- what I gave you, heads up numbers, the waste heat number -- capacity I spelled out in my opening, it is going up this year. So straight away, waste heat is at INR 1 and INR 1.10. That's going to bring down the cost. I also spell it out, in this quarter, we are commissioning 200 megawatts solar. So it will be available for the 9 months or maybe 10 months for this year. You can calculate. That's another cost item. I also mentioned about bringing in additional 10 rakes for fly ash transportation, that will be additional source for saving our cost. And I think by the end of the year, we'll also be commissioning state-of-art new kiln and also 3 new grinding stations. In addition to the ongoing program of CapEx, which was launched earlier, I think some of that will also bring in the savings. I think we'll still do a very tight management of fuel cost. We won a lot of good auctions in the domestic auctions that were done, both for kiln fuel and CPP fuel. So a large cost part of our coal cost is already secured in those auctions. So that gives us a fairly good assessment of our costs going forward. I hope I've answered your question, Prateek.

Yes, and one last question on your CapEx. So our annual CapEx expectation. So this year, we did INR 4,500 crores on organic, I think INR 2,500 crores on organic. So total INR 7,000 crores in line with your guidance. Does the number remains same for annual CapEx guidance?

Yes, we are actually having a very big plan for CapEx for this year, but that includes everything because of buying new railway wagons, also ongoing programs for efficiency. So I would say our total CapEx would be, for growth alone, if you're asking would be in the range of about INR 5,000 crores to INR 6,000 crores, purely growth.

Yes, purely growth around INR 7,500 crores, which we have planned for current year. And it is all on -- from our operating cash flow is what we are targeting. So the war chest of INR 20,000 crores of refunds received from the warrant, we keep it for strategic initiatives. But as an important underlying statement that whatever the yearly CapEx, we intend to largely use the internal accruals and the operating cash flows.

And some part of it will also be spent for completing our ongoing green initiative. As you know, by FY '25 mid -- sorry, FY '26 mid, we are targeting completing the remaining 800 megawatts of wind and solar. So that also will need some investments besides clinker line and the grinding units I mentioned and the railway wagons, which we have in the process of procuring, and efficiency improvement projects, including opening new coal mines.

The next question is from the line of Ashish Jain from Macquarie.

Sir, my first question is on the clinker capacity. I thought Vinod sir spoke about 82 million tonne clinker by 2028. So today, we are 54. And shall we think that 8 million tonnes that is announced and 8 million tonnes that we will do in Sanghi, so that takes us to around 70 million tonnes. So apart from that, there's 12 more million tonnes that we would be doing, which is what you spoke about 4 million tonnes into 3. Is that the broad number?

Yes. So basically, no, no. What I will tell you is what we have announced. We have announced already 2 new kilns of 4 million each, plus, I said I'm ready to go with 3 new kilns, 1 in West, which you can take Sanghi, 1 in North, 1 in South, that is 12 million, that is immediately where the ECs are being awaited. In addition to that, the EC applications have been filed parallelly. I may get a few more ECs by this year or beginning of next year. We have, interestingly, the land and requisite limestone secured at all the locations for this 140 million. If you ask me, I'm ready for 175 million. So it should not be a worry.

Okay. Okay. Got it, sir. And sir, secondly, I may have missed this number, did we kind of highlight that the INR 500 cost reduction that we are talking about is benchmark to Q4 number, which was at INR 4,185 per tonne cost?

For the FY -- FY is a better number to take, FY '24 is a full year number. That reflects the 12-month averaging out. You take FY '24 number and then say the end-state number is what we have given. We have given an end-state number. You look at that end-state number rather than INR 500. And I highlighted the pillars of that journey, and I'm 110% confident that, that journey will be made before time.

And sir, the end-state is INR 3,650, right?

Yes, please. Yes, please.

The next question is from the line of Amit Murarka from Axis Capital.

On Sanghi, I wanted to check what is the volume for Sanghi? You mentioned, 0.67 MT was done as MFA between Ambuja, ACC, but what is the total volume?

So for March quarter, Sanghi, in terms of clinker, we have produced 0.7 million tonnes. And in terms of cement, we have 0.8 million tonnes. But just to also add to this, wherein in March quarter, the line -- the kiln #2 was nonoperational, but now from this quarter, both the kilns are going to be operational and sooner we are going to achieve 17,500 TPD per day. And as Ajayji mentioned, we are looking forward to achieve 5 million tonnes of clinker for this fiscal. So Sanghi, I think numbers are now very clearly -- we have repeated again. So this is how the numbers will stack up for this year.

Around 5 million benchmark you can take for the current year because we are stabilizing the kilns in the first half. Second half, both the kilns will be running flat out.

Also, under the MFA, there's a 9% EBITDA margin, but I see in Q4, Sanghi's EBITDA margin is 20.5%. So just wanted to understand like where is the disconnect coming from, given that the incremental volume by Sanghi was only 0.1 million tonnes.

So basically, Sanghi had a write-back of discount provision. There was a fuel cost lower, then there was also a lower fixed cost, and there were some provision write-backs. All this was about INR 33 crores, that is why you saw a little bit of an upbeat in the -- and this is done on a quarterly basis, the MFA formula, the price was much lower, the cost of production versus the next quarter. So I think you're seeing that -- but largely these are some one-offs, which gives them this extra, which is good for them.

Of course, sir. Also, there was some debottlenecking as well in Sanghi besides the clinker line. So the debottlenecking, I believe, was expected to get completely faster. So is there any update on that?

So basically, we believe versus 6.6 million clinker, these are still our numbers. We'll know after the current refurbishment program is over. I think the kiln should be able to produce 7 million plus clinker. I think that is what will really help us. We really don't need so much of cement grinding debottlenecking there because we will be using this clinker for some of our grinding stations. We have recently acquired at Tuticorin 1.5 million unit, as you know. So this clinker will be used for that. We also have a group -- within the group an asset in the Dahej. We'll be using for that, plus, of course, our other facilities.

And just like also to add to this, in terms of debottlenecking, all of you would know that the evacuation in Sanghi in terms of the jetty, you'll be happy now we have reached already a draft of 4.5 meters, which is improved from 2 meters earlier. Now we are able to handle larger vessels compared to in the past. So that -- this important opportunity of evacuation will help us in overall debottlenecking of Sanghi and this draft will further improve as things go forward. So we will be able to handle -- we are targeting almost more than 10,000 DWT of vessels down the line.

Also just a last question on the strategy around the Gujarat market. So this incremental volume that is coming from Sanghi to you, and which will only grow in FY '25, which regions will it go to, this 5 million tonnes that you're talking about?

See, we'll use, as I mentioned, Sanghi clinker and cement, both would be used. Clinker would also be used in the second half more towards the Tuticorin new grinding unit. We are also using Sanghi clinker for our Dahej grinding unit, which is in Gujarat. Plus, we are using the volumes right up to Baroda part and also in Saurashtra and Kutch.

The next question is from the line of Ritesh Shah from Investec.

My question is pertaining to ESG and cost drivers. Sir, can you indicate what is the sort of clinker factor that we are looking at, say, 2, 3 years out? I think it's around 0.6 right now. Just a related question. How do we look at composite cement as well as an calcined clay over here? That's the first question.

So Ritesh, you're right, our clinker factor is hovering around 0.6. ACC is slightly lower because they use slag in east. Ambuja is slightly higher, but an average of 0.55 to 0.6 is what we would target. As you know, as we move larger volumes and also cover more parts of the country, we will have to also service the large infra markets where, as you know, the requirement is OPC cement. That's also the reason in this quarter also, we had a little shift in Ambuja on OPC. In time to come, we will have to also cater for that segment. Having said that, on the other hand, we'll have to continue to find ways and means to improve our clinker factor on the regular products. So I think that's the journey we'll have to traverse as we go. Composite Cement is a very good quality. I think it is -- it has a mix of both slag and fly ash. Wherever we are able to secure good slag at the right price, because as you know, slag draining also has a higher cost element to it. At the same time, if you're able to get a mix, which is a cost-effective mix, that is what generally determines our product strategy on composite cement.

So Ritesh, that's also a very interesting point you have highlighted and gives me an opportunity to cover more here on the ESG part. So first, a, our slides have given to you that we are ahead of 2030 in terms of achieving our plans of SDP. But importantly, for all our incremental projects, these capacities which we are discussing on increasing the volume, all our new capacities are in build with WHRS. They are in-built with AFR. They have proper railway infrastructure facilities. Let's say, typically, a kiln of 4 million will have 21 megawatts of WHRS. It will have 30% of AFR that is our desired number. The overall efficiency on heat value is also going to be sizable. We will have a green power, which we set at 60%. So this will add up to the ESG drive what Ambuja and ACC and Sanghi are working on. And I'm very confident that we will be having a very high score of ESG down the line.

Sir, if you could just comment on calcined clay. Does it feature anywhere on the plants? Or is it more a storyline at this point?

At this moment, to be very honest, yes, 1 or 2 industrial trials have been done by some people. We are studying it. We are also partnering with a few institutions. We'll have to do more work on it, to be honest. [Foreign Language].

Okay, fine. And sir, my second question is on cost. Sir, you have indicated on the logistic cost, but could you comment on the mix on road, rail and sea. I think Vinodji did touch upon a higher draft. So what is the percentage of volumes that we moved via sea last year at a consol basis and how it could change over the next 2 to 3 years? And the second question was on fuel costs. I think we have given a number of INR 1.75 for full year. In fact, how one should grade it given we have already locked in the volumes?

So we should be looking at another INR 0.04 to INR 0.05 improvement over there on the fuel side. On the logistics, basically, if you see, we are currently hovering at about 26% -- rather 27% rail. I think the rail coefficient will more or less remain where it is because our volumes are going up. And some plants are better served through road logistics. So more or less, this is what it will remain. And sea will change once the Sanghi sea infrastructure changes in time to come. I think that needs a little bit of a different game plan and we are working on it. I think I'll come back and talk to all of you about it once we are fully ready with that because that needs a very different game. That will take about 18 months to play out, then I think there will be a very different logistics model on the West Coast, and I think that will have a sizable impact on our freight cost.

We have a ballpark. I think sea freight, we can expect around, say, 10% by...

Next after 24 months.

24 months, yes.

[Operator Instructions] The next question is from the line of Sumangal Nevatia from Kotak Securities.

My first question is on the broad corporate structure. We are now having 3 separate listed cement companies. So one, what's the long-term strategy? Do we intend to keep running 3 separate company? And in the light of MSA, I mean, are large part of the benefit already captured or a potential -- some bit of consolidation could have further benefits on the cost side or some synergy side?

So, Sumangal, I can handle first the second question and then I'll come to the first one, which is MSA. MSA, I think from the time when we started to where we are, I would say we almost reached a level where it is operating by default, right? We have complete algorithms and computer systems and programs. The lowest cost plant serves the market and the highest EBITDA yielding route is what works. So I think that's what we are trying to achieve, number one. I think the Sanghi is a new entrant, and so that will take 1 year to stabilize, which I believe should happen already. It's already been working very beautifully well. So other than that, I don't think there is any further comment on MSA side. I'll make one comment for everybody. You will find -- going forward, I would encourage all of you to look at Ambuja results as a consol only because my job as a CEO for the entire outfit is to get the best out of all, and when I squeeze the juice of each of the entities and get the maximum benefit from our shareholders, is when you see the consol results of Ambuja and not necessarily individual entities. So I think that's where you're seeing the play of MSA really playing out in full potential. I'm now answering your first question on the corporate structure. I think as a management team, we are 1 team, which is running the show. So therefore, in terms of sharpness, focus, time lines from the time we make a decision to execution, I think there is no bureaucracy. We work pretty sharp as 1 entity, even though we have 3 legal entities. For the reasons known to all of you, I cannot comment any further on next steps, but I can only tell you, whenever we are ready for any further next steps, we will come out transparently as per law.

Understood. That's very useful. My second question is on our market share target. This 20%, I believe, is basically from our organic capacities and organic expansion. So if I just do some rough math from currently around 12-odd -- 14% to 20%, in a 6%, 7% kind of a growing market also, we will require a high-teens kind of growth on the sales volume over the next 4, 5 years. So practically, I just want to understand how is the bottom of plan or strategy here. I mean do we -- can we practically achieve this kind of high growth from existing capacities without really distorting or deflating the prices in the market? Some thought process here would be helpful.

So two things. number one, we have a program to put 140 million. So I'm very confident we would be ahead of the curve on that program. Our utilization levels for both the companies have never gone below mid-80s. And actually, a large part of our plants are operating at 90%, 95%. So as soon as we have a plan, it takes about a year, like I just mentioned, Ametha plant came in Central Region, ACC Ametha, we have produced 300,000 tonnes in the month of April clinker, which annualizes 3.3 million, which is its peak capacity, say more than the peak capacity. So typically it takes 8 months to a year to have full stabilization. Both the companies have a very strong dealer-distributor network. We have over 1 lakh channel partners. We are investing more in the brand and you would see that renewed focus and trust. We are increasing our technical and field force. And we are making sure that our product quality remains top. So I think these are the 3 fundamentals when you want to increase market share. And also in many markets, we are undersupplied. Now recently, you have taken a grinding station in Tamil Nadu. So we are undersupplied there. I believe it should not be very difficult for us to ramp up very fast. Likewise, in South, we've been actually losing market share because we don't have capacity. As soon as we put up new capacity there, ACC has a tremendous brand name in many parts of South and we should be able to ramp up. Same is the case in Uttar Pradesh, parts of Central India, where we have a very strong brand image. Gujarat has been our core market, Maharashtra has been our core market. I believe we should be able to increase our market share. Last quarter numbers is a good reflection because this is a question asked to me every quarter. I think we have grown at about 17%, which is much more than the industry growth. And we have not really disturbed the markets because we still play within our premium segments. So I believe India will grow, number one. And number two, with that, with the capacity coming in every year in 1 or 2 regions, not across all the country, we should be able to spread the risk and also capture market share. But the good part is India is growing, and we are growing along with that.

The next question is from the line of Indrajit Agarwal from CLSA.

A couple of questions. First, again, on the industry, right? So you have been growing much ahead of most of the peers. But if you look at some of the larger guys, they have also had double-digit growth. So who do you think is losing market share? And what happens to them going ahead? Do you think the smaller players become less and less relevant in the next 3, 5 years?

I think it's very difficult for me to comment on relevance of smaller players. But I can only comment that eventually in the long term, you will find -- if you have the right cost structure, if you have the right architecture of distribution points, if you have a well-laid-out strategy of how you want to service your various segments, IHB is one segment, which is we call largely trade in the cement trade. And the non-IHB, generally we call it non-trade. But it's not that simplistic. It's a further micro marketing at each and every level. So you have largely housing, which has mass housing, small housing, individual housing, and then you have infra where you have government and you have -- within government, you have railways, roads, bridges, highways, metros, and irrigation, and then you have ICI, the buildings and commercial. I think for each of the segment, you will have to have a strategy. The companies which will have a good strategy here, the companies which will have the right product mix, the companies which also will be the lowest cost, I believe are the companies which will be able to take full advantage of cement sector, which interestingly today is 420 million tonnes per head -- per capita is still 270, world average is 500. I think in time to come, just to meet the 8% growth every year, we will need about 40 million tonnes of new capacity to be added. So I think very difficult for me to say [Foreign Language].

So Indrajit, just to also add, I think this is like now industry in terms of consolidation, the scale, size and efficiency are very important factors. And those with the stronger balance sheets have the ability to invest on the efficiency CapEx and the growth, I think that those definitely will have a good plans of cost-led leadership and improving the -- expanding the margins. When I look at like my numbers, September '22, when we took it over, again, my volume was at 12.5 million tonnes for the quarter. And then this time, when we hit 16.6 million tonnes, but when I look at my margins, they have only expanded. And that is precisely the journey, which is going to be down the line in a much more amplified manner. Hence, you can figure it out who will be able to better catch on this opportunity and who will be perishing on it. But definitely, Ambuja and ACC and Sanghi as a group are sitting on a huge stronger balance sheet to make those investments and opportunities.

My second question is on the coal blocks that we have won. Historically, what we have seen is Indian coal cannot cater to the kilns given that they are generally low calorific value. So the coal mines that you have won, are they sufficient or adequate for kilns or these are just for blending purpose? How do you see that?

No, no, they are 100% for the kilns. The good advantage is we have Gare Palma IV, which is the mine Ambuja won in 2018. One of the reasons why Ambuja has also been able to show a good reduction in coal cost is because we are using coal from this mine. Most of our mines are underground mines. In fact, when we are planning our future, we are looking at G5, G6, G7 quality of coal for the kiln and about lower quality for captive power plants. Some mines are very interesting where I can do both. In one seam I'm able to get a coal which is very good for captive power and at other seam I can get a coal for the kiln. This is where I believe we are very lucky, very fortunate. We are part of an ecosystem, a platform called Adani, where we have some of the smartest guys who are running coal mines to understand coal, and my coal team and the group and the coal team and the cement, the fuel management team, when they interact with each other, I think the learnings and lessons of running multiple coal mines as MDOs, trading, I think this is where it really helps us having a very sharp-shooted strategy. Every coal mine that we win or we plan, it goes through the asset test of what quality, what grade. And generally, by rule, we don't like to wash because we believe a lot of wastage happens there. We try and straightaway work on good quality coal.

This will be the last question for today, which is from the line of Satyadeep Jain from AMBIT Capital.

A couple of questions. One on the entire strategy for South. I can understand part of growth, which is Sanghi Cement directed to South. When you look at Sanghi itself at a floating terminal of the cost of Kochi, and now Tuticorin strategy. So just wanted to understand some strategic point was comparing Kochi floating terminal. In Tuticorin, we don't -- Adani ports doesn't have its own port. So how do you plan to get cement in South strategically and what cost can you get, especially if you use some of the other -- some other companies ports? That's the first question.

So Satyadeep, thanks for the question. If you recall, even before we became part of Adani Parivar, Ambuja Cement was a pioneer in spearheading the entire coastal sea transportation. Way back in the '90s, we had set up our own port in Muldwarka in Gujarat, Ambuja Nagar, deep sea with a multiple, which could also take Handymax vessels. We have a jetty in Mumbai. We have a Jetty in Cochin. We have a jetty in terminal in Mangalore. All deep sea. So we have good knowledge both in Ambuja, and we have a solid knowledge within the group. First ship of clinker being loaded from Sanghi is already getting ready to come to Tuticorin, carrying 50,000-plus tonnes of clinker. It will land at the Tuticorin port. All arrangements have been made. The costs are perfect. And their unit is about a couple of kilometers, I think about 20, 30 kilometers away. And it works pretty efficient because the ship size is 55,000 tonnes, but it becomes pretty efficient when we move that, number one. Number two, we also have a power plant close by where our group has already in advanced stages of acquisition and that shows us a fly ash, which is one of the biggest costs, as you know, when you make cement, 35% coming at a very low cost fly ash and assured cost, that makes Tuticorin already a very, very viable proposition. Cochin, you forgotten Ambuja already has a bulk cement terminal already. In Mangalore, Ambuja already has a bulk cement terminal. And I think our strategy of Sanghi, as I mentioned, in time to come, I'll come out and make a full disclosure as it pans out, but it will have multiple grinding stations. Dahej is already one, which I mentioned. Tuticorin is the second one I mentioned. In addition, we are in the process of finalizing and getting ready with a few more. So I think that will play out pretty efficiently.

Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Mr. Vaibhav Agarwal for closing comments. Over to you, sir.

Thank you. On behalf of PhillipCapital India Private Limited, we like to thank the management of Ambuja Cement, ACC Limited and Sanghi Industries for the time on the call. And we also thank all the participants who are joining the call. Michelle, you may now conclude the call. Thank you very much, sir.

Thank you, members of the management.

Thank you all.

Thank you, sir. Ladies and gentlemen, on behalf of PhillipCapital India Private Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.