Ambuja Cements Limited ($500425)

Ladies and gentlemen, good day, and welcome to the Ambuja Cement Limited Q4 FY '26 Earnings Call hosted by JM Financial Institutional Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Dharmesh Shah from JM Financial. Thank you, and over to you.

Thank you, everyone. Without much delay, I will transfer the call to Mr. Dipak Balwani, Head of Investor Relations. Mr. Deepak, over to you.

Thank you, Dharmesh. On behalf of Ambuja Cement, I'm pleased to welcome all the participants to our earnings call for the fourth quarter of FY '26. Ambuja Cement is the ninth largest building material solution company globally and part of the diversified ag portfolio. Before we start, please note that this call may include forward-looking statements based on our current beliefs and expectations. These are not guarantees of future performance and may involve unforeseen risk and uncertainty. We remain committed to further strengthening our disclosure standards and improving the quality of our capital market implications to the best in the industry. We are pleased to have with us on the call Mr. Vinod Bahety, Chief Executive Officer; and Mr. Rohit Soni, Chief Financial Officer. Now I invite Mr. Bahety to provide his valuable insight on the quarterly performance.

Yes. Thank you, Deepak. Thanks, Dharmesh. Good evening, everyone. FY '26 was a year of resilience for the Indian cement sector marked by industry consolidation and the GST 2.0 reforms on one side, while the adverse and the extended weather conditions global geopolitical factors and the various state elections also affected the industry and demand in some of the other way. Against this backdrop, Ambuja delivered a resilient performance for the year, achieving its highest ever annual sales volume of 73.7 million tonnes, up 16% Y-on-Y year-on-year in that manner. And on a normalized basis, the EBITDA of INR 6,539 crores, up 31% at INR 887 per metric tonne, which is on a PMT basis up 12% and the PAT of INR 2,647 crores, up 17%. The company continues to remain debt-free and with highest credit [indiscernible]. Annual volumes grew well ahead of the industry. Trade sales volume grew steady at 10%, while the premium cement accounted for 35% of the trade sales during the year, reflecting sustained progress on premiumization. During the year, company's cement capacity increased to 109 million tonnes, supported by commissioning of 10.7 million tonnes of new branding capacity at various locations like Marwa, [indiscernible], Krishnapatnam and the additional clinker capacity of 7 million tonnes at Jodhpur and [indiscernible]. During financial year '26, we also made meaningful progress on the portfolio integration, successful organization of Sanghi Industries and [indiscernible] Cement, [indiscernible] is now completed while [indiscernible] and Orient Cement is under process. The one cement platform, the strategic initiative and will help to bring sharper focus on the operational performance business synergies and the overall higher review of compliances. Therefore, this time, the balance sheet of [indiscernible] now has finalized purchase price allocation of Orient [indiscernible] till December, it was on a provisional basis. The numbers you will find marginally changes in the balance sheet, which is the classification of goodwill and the other intangible assets. While in the P&L, you will find some changes in terms of amounts for depreciation and the deferred tax accounting treatments. Further trends, you will see in the notes of the accounts, you will see various tax-related provisional notes with respect to reversals details are there in the published financials. Please also note financial year '25 and financial year 26 are not comparable like-to-like since FY '25 does not have Orient Cement while [indiscernible] was acquired and consolidated from 16th of August '25, that is only 7.5 months for the FY '25 as against 12 months for FY '26. And while Orient is only for 11 months in FY '26 and was not there in FY '25. Now let's again come back to the business part my green power share increased almost 32% now in Q4 compared to 26% before. The newly acquired assets, particularly Sanghi and Penna, they witnessed lower utilization levels. Sanghi steel remains at around say for the full year at 57% on cement capacity utilization, while [indiscernible] is 46%. However, last time, I mentioned to you that in December quarter, we have seen a good improvement, especially for Sanghi. The turnaround initiatives have taken a little longer than the expected time lines. And some of these plants, especially of [indiscernible] needed higher than expected time for maintenance CapEx and overall upkeep of the assets. So on the cost front, we have seen a bit of higher cost compared to our own expectations and therefore some disappointments primarily if I have to look at the reasons, higher freight cost due to increase in the overall sale lead primarily and secondary both, increase in some of the states like the additional good stack, especially in [indiscernible] then in terms of the higher stacking costs, which we more so have seen that in the month of March, which have seen some abruptions given the West Asia war. The higher fuel cost on account of a little higher-than-expected sheet consumption, what we have and more so for the acquired assets, the higher branding cost, now that we have focus more on trade sales starting from the Q4. And while we have also improved our trade sales to 74% compared to in December quarter of '25 which was 68%, which would clearly mean we are focusing on blended cement. And if you also see my [indiscernible] has improved from 67% in December quarter to now 55%. This has also one of the cost, which is the pending cost [indiscernible] the sales promotion costs have gone up. And some of the other issues like the raw material costs, which we could have improved in terms of the [indiscernible] but pending some of the railway infrastructure, which will be completed in the coming months, and you will see a good level of improvement on that. But pending that, we have not been able to meet our some of the raw material costs to our desired levels. [indiscernible], there is 3 to 6 months delay on some of the efficiency CapEx which has happened. And hopefully, like in coming quarters, we should be gaining momentum to complete and get the benefits of it. So therefore, in FY '27, our focus firmly remains on streamlining the operations and margin expansion. So we will continue to focus on trade sales and also on the premium product sales, which we have a huge leadership, almost 36% of my trade sales has been premium cement sales for Q4. We will continue to improve the reliability at [indiscernible] and Sanghi and the overall asset utilization. Together, they have 19 million tonnes of capacity, and the target is to increase utilization by at least 5% to 10% for these assets. In terms of the cost, while we are cognizant of the overall ongoing global geopolitical situation, and we have already seen cost escalations in Q4 also in the month of March, almost by INR 25 a bag closer [indiscernible], ballpark INR 400, INR 500, if I have to go on a full blown basis. Our cost increased is there in the industry and so it's to our company. So we are recalibrating our cost for this financial year. I have mentioned earlier about our [indiscernible] achieve cost of almost INR 4,000 a tonne by March '26 exit. Meanwhile, in terms of the full year of '26, we have given a figure -- we have achieved a figure of INR 4,400 a tonne, which is almost 10% higher to our own target for the reasons which I've mentioned before. Although in the month of March, we are closer to at INR 4,100 a tonne. Since there are -- these are like fast-moving global situations and dynamism over the energy costs and other specifically expected hikes in the in the fuel and diesel and all. Therefore, it will be very difficult to provide any long-term estimates for right now until the time things stabilize over the next 2, 3 quarters. Therefore, I would say that on strong conviction on certain components, of course, for example, which have, a, is in terms of the overall saw material costs led by [indiscernible]. And in terms of in energy costs, for example, which is going to be a substantial improvement further in our overall supply chain. Therefore, I strongly believe [indiscernible] will savings will come from this component. On our overall [indiscernible] volume, we are expecting to grow in FY '28 -- '27 by almost 8% to around 80 million odd tonnes. And we are cognizant of the fact that we will focus on value with the trade volumes premium cement. And therefore, we are doing a bit moderate overall sales growth in the volume part. At an industry level, we believe that in the headlines of inflation and weak monsoon, the industry made at around 5% to 5.5%. We continue to remain committed to our end state sales volumes targeted supported by a focus on higher capacities and while operationalizing the new capacity and stabilizing them. Therefore, with this proposed ongoing additions of 10 million tonnes of GU, which you are aware of, which I've already shared with you in the investor deck, some of them, for example, [indiscernible] and so on and so forth, we are expecting to hit capacity of almost 119 million tonnes by end of FY '27. Capacity expansion plans, we are recalibrating in line with our approach to take the advantages of the recent railway policies on [indiscernible], with additions pursued more gradual in terms of first focusing on optimizing the current capacities in hand. This will also help in terms of our disciplined allocation of capital and a steadfast commitment to optimizing returns on the capital employed. Looking ahead, India's long-term infrastructure story remains fundamentally very strong. However, with the expected [indiscernible], big monsoon and cement demand is expected to remain a little soft, this backdrop [indiscernible] on disciplined institution, trending bank penetration, sales, premium inventory and want the cost and capital. Thank you, and I will now hand it back to [indiscernible]

[Operator Instructions] We'll take our first question from the line of Navin Sahadeo from ICICI Securities.

So friends, just to inform you that we also have our for Director and Senior Mr. [indiscernible] ban also on the call. He has just joined us. So I welcome the invite. And I just basically on his opening remarks, and we are now on the Q&A. So over back to the moderator, please.

We have a question from Navin Sahadeo.

My first question was on the volume growth front in this quarter as per the Investor Day, volumes have grown by about 10-odd percent. But if I adjust them to the Orient Cement volumes, they are more like flattish on a Y-o-Y basis. And here, my question is that if you are seeing some pressure on volumes because for FY '27, we have given a guidance of 80 million tonnes, which is roughly a growth of 9% to 10% against the backdrop that we are expecting a much softer industry growth of 5%. So I'm just wanting to request the overall color on your volume.

Sorry for this. Navin, so you're right, absolutely. In terms of the volume, especially for this March quarter, it has been a little muted. But now for the FY '27, when I give you an indication of 80 million, which is around closer to [indiscernible] we have the visibility in of a stabilizing the acquired asset of with IWB the ongoing expansion which we get commission in the next few months, like between let us say [indiscernible] September will be capacities will get commissioned and will also then stabilize them. So I have the incremental volume also coming from these capacities that I mentioned almost around 10 million tonnes and, of course, stabilizing the quartet of [indiscernible] Sanghi. Yes. So on that using although with a softer demand for the year. Did I answer your question, Navin?

Yes, yes. My second question then was on the overall CapEx plan. So as mentioned in the presentation, we are recalibrating our entire growth plan. We have visibility of taking that overall capacity to 119. But I'm just trying to understand by when will -- like we get color on the next leg of CapEx because the first day when the asset was acquired, the vision was to like, I think, double the capacity and take it to 140 in the interim agreement [indiscernible] it 155 and now we are taking a slightly step back. So my question was from a growth point of view, is there a -- by then, first of all, can we get a color of the big picture or the next longer-term plan? And in the same breath, -- is it that we are more open to pursue inorganic growth, which helps us catapult to that overall growth target? Or you still believe organic the [indiscernible]

So Navin, our primary focus remains organic in terms of stabilizing our ongoing expansions and also already acquired assets. So therefore, I would say that, that remains the primary focus. I think we have a good headroom to improve our overall market share by improving the capacity utilization of these plants. And therefore, as I said, we are going to follow quite a disciplined capital allocation and given the headwinds right now for the industry, it makes sense to push a little bit but without losing [indiscernible] the overall same market share and the volume improvement in the existing assets and the ongoing expansion. To answer your question, I think maybe what I would say that the target plan of FY '28, it could move a year or 2, let's say, on a safer side, I would say that FY '30, but as I said, it doesn't really matter. What matters is how you're able to ramp up the volume from your overall existing assets? And I have a substantial good headroom to ramp up over there, even if I hit 120 million tonnes by end of '27. It will give me a good leverage of the overall market opportunity.

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

Just on the -- continuing on the previous question, what is the clinker capacity as of now?

So Raashi, as of now, we are sitting on 73 million tonnes of clinker capacity.

And you will be adding another 4 million this year?

Yes. So at [ Maratha ] and at like [indiscernible], we will be adding up almost like 5 million. So [indiscernible] is 3 million -- sorry, 2 million and Maratha another 2 million -- 4 million.

Okay. And you mentioned earlier on that the 56% utilization was for Sanghi for the [indiscernible] and [indiscernible] 47, is that correct?

That is true. That is true.

Okay. And the next question on cost. Now for the full year, the cost is INR 4,400. For the quarter, what was the average cost? INR 4,500?

[indiscernible] we are sitting at almost INR 4,250 for the overall quarter and plus some of these increases what we have seen from the overall escalation. So I would -- let us say that a normalized was almost 40 to 50 and plus another INR 250, which we have seen increase here. So almost we are at now INR 4,500 a tonne for the quarter of March.

Right. And you were saying that the industry costs have gone down by anywhere -- gone up by anywhere in the range of INR 400 to INR 500. So is it safe to assume that because of the crisis, you will see another to INR 200, INR 250 increase in costs, which will get offset by your [indiscernible] green energy, et cetera? Is that how we should be thinking about it?

Sorry, [indiscernible]

You indicated that -- so we are at INR 4,500 now on cost. You said 150 to 200 is a reduction that you're expecting because of fly ash, green energy, right? So 150 to 200, but the overall industry cost has gone up by more, right, because of the West Asia prices. So is that INR 150 to INR 200 already capturing the increase in industry cost or is INR 150 to INR 200 decline in your internal cost and then as an increase in cost because of the war beyond this?

So Raashi, like as I said, the INR 4,500, which is for the March quarter, has already taken the hit of existing increases of almost INR 50. So I would say that INR 4,500 safely, I would say, is on on a peak basis let say, on a higher basis, which we have seen, barring like any aberration of plus minus INR 50. But otherwise, you will see a journey which will actually start coming down in passing quarters. So although, like, for example, with the overall situation, how the overall energy situation emerges, I would not view with conviction, but I strongly believe that, yes, this is like the peak, which we have hit and should see a progressive improvement.

So if I can just rephrase this, if nothing in increases further in terms of global prices, you will see a decline of at least INR 150 to INR.

Absolutely well summarized.

Okay. And on the pricing, what has happened to offset these cost pressures, cement pricing? .

So that's interesting, Raashi. So you're heading on both the right questions. On the pricing, like industry has seen a modest improvement of, I would say, INR 10 in few pockets, let us say, INR 15, INR 20, but that's like in a very selected area geographies. Otherwise, ballpark for the quarter of March it's around [indiscernible] INR 10. Now with the demand getting a little softer, the pressure on pricing definitely is higher. And despite the circumstances of costs gone up. Unfortunately, industry is still under the relentless pressure and not able to pass on the price.

Got it. And just last question, what was the CapEx for the year?

So CapEx for the year, we are keeping a little moderate and ballpark, [indiscernible] so you're seeing for FY '26? FY '26 is closer to about INR 7,500-odd crores and I will just answer because there would be another question. So for FY '27, we are keeping a estimate of almost INR 6,000 crores to INR 6,500 crores. And that too will also which is how things pan out. It may change a couple of hundreds here here and there, but that is the estimate of what we have.

Next question is from the line of Indrajit Agarwal from CLSA.

Congratulations on increasing both trade sales and premium mix. But on that note, if I look at Slide 27, the realization has largely moved Q-o-Q versus years, it is somewhere between 1.5% to 2%. So is it mainly because of the mix or what is driving the weaker [indiscernible]

[indiscernible] and therefore, you will see it more benefit coming together quarter. What is we have sustained the price [indiscernible] at INR 254 of that compared to in December. So from our own December quarter, we are up by, say, modestly at say, INR 1. And compared to, say, last year, we were at [indiscernible] so yes, the journey would further see improvements with higher blended cement and more premium cement sales. So it has just begun.

Second, if I look at your blended utilization for next year, would we add best 71%, 72% on your expanded, let's say, weighted average capacity on that note, probably you will not need additional capacity in FY '28 as well. Is that what is driving more [indiscernible]?

So I have [indiscernible] to answer this question [indiscernible]

[Technical Difficulty] which is there, which is in the long basis [Technical Difficulty] terms of reducing our costs, logistics costs, especially as well as help us improve our ration into those markets. I'm talking specifically into the markets where we have high market share and high recall value. So those are the places that we would definitely look at expanding our capacity over there. The second is, [indiscernible] we would be looking at expanding our clinker capacity. The correspondingly go capacity will also increase. And this year, apart from Rajasthan and Maharashtra. As you know that we [Technical Difficulty] that is on 2 new areas, we will start [indiscernible] second, new areas we will be starting is in Mundra in some liability 2 new projects, apart the new that will help reducing our cost.

One last one, if I may. In light of this, how would we see any inorganic opportunity that comes up? Would you be interested beyond organic growth.

So inorganically, we keep evaluating, but our focus right now is on organic development and greenfield expansion. That's the number 1 side.

[Operator Instructions] We'll take our next question from the line of Jashandeep Singh Chadha from Nomura.

Sir, my first question is regarding the cost structure, especially in the fourth quarter, we saw that the fixed cost that we deployed over the first has significantly Y-o-Y versus when we compare it to your peers also. Just to understand why you say there were some pent impacted the cost. However, the comp started to be in the past was also in the mid of March with respect to the industry. I want to understand why among all your peers, Ambuja is seeing such an increase in its cost structure? And secondly, in your presentation, you've also mentioned that the freight cost was high because of some planned [indiscernible] if I'm not wrong, in third quarter also, you took planned shutdowns. Normally, the industry take shutdowns in the second quarter. So in quarter 3 and quarter 4, where the volume growth was really strong, the management decided to take branch, which is a hidden higher cost I just want to understand what is the rationals behind taking plant shutdowns in volume for the quarter? And why Ambuja's fixed cost is increasing way higher than its peers? [indiscernible]

So Jashandeep [indiscernible] asked this, and we have to explain. So in terms of [indiscernible] on our cost at INR 4,500 which I mentioned. And from here, you will see improvement. But yes, your question is in terms of -- compared to the competition by. Now 2 components which are deliver to my business, I mentioned about higher focus now on the branding tangent to promote the trade sales and premium cement. Second is in terms of higher repairs and maintenance costs. And you're right that [indiscernible] one should do it during the off seasons like monsoons, but not all the machines can be done during that period. And there have been a few breakdowns also of the [indiscernible] assets of [indiscernible] and all. So under under the planning and also under -- out of planning, we will do it. So therefore, there have been those additional expenses of repairs and maintenance. Then in terms of the bad costs, which although you are set in the last week of February to the [indiscernible] full month of March. When you promote and sell more premium cement, then there are also some additional costs of logistics and handling which also fits into our cost. I also mentioned to you the journey, which we want to achieve in terms of improved heat consumption, it is still not coming in the range. And therefore, we still have a higher feed consumption, and I would say, ballpark, 35, 40 kilo calories minimum which we have to improve. Again, I will attribute to some of the acquired assets. Actually, when I look at the EBITDA of Ambuja [indiscernible] minus of the acquired assets, but is actually higher by INR 70, INR 80. So it will be almost like INR 800 and actually more when I normalize it, but it is at least INR 800. So I would say that the acquired assets still are not basically coming in the range to our desired levels. and for which I had mentioned that the first priority is to stabilize the overall operations achieved a good level of performance improvement. Hence, in the -- I think maybe a couple of months, we had taken the entire [indiscernible] Sanghi plant [indiscernible] readiness and still higher improved volume I think we did in some like March [indiscernible] itself. Now that is like for example, want to showcase that yes, some of these assets have taken time, but now they are in the state of readiness. Sooner that I will take you -- take all of you to [indiscernible] but before that, we took our [indiscernible]. The journey is known. The issues are known and for in my opening remarks also, I am certain to us also that we see that side we are basically to bring it down in the coming quarters. So therefore, let see this breakdown and improvement prospect from here.

My next question is largely taking forward Naveen's question early. So first of all, but the only company which has given such a bearish scenario for FY '27, and I understand the rationale that you have given behind [indiscernible] But with [indiscernible] growth and would you expect a growth a certain capacity, which I completely understand that. But what target utilization from the assets of an [indiscernible] for FY '27. And I understand there are some challenges. So will there be additional CapEx required to bring the acquired assets to Ambuja [indiscernible] I just want to understand this.

Thank you, Jashandeep, for like Orient, for example, is operating at full capacity. So far as Sanghi concerned, I will say myself that almost like 65% to 70%. And so far as [indiscernible] concerned, I will continue around 35%, 26% in terms of the implication factors and existing sets of I would tag it to closer to around 75% to 80%. So on an overall basis at the mutant level, average in the situation the scenario which I mentioned to you, I would say [indiscernible] and you're right, like we have -- we anticipate software demand, and therefore, we would go with this belief. But if for any surprises positive in the industry and number will definitely look positive. But as of now [indiscernible]

And sir, any further CapEx to bring these assets to a Ambuja standard?

So as mentioned by [indiscernible], the overall plan approach of CapEx, where we want to now set up in the high potential market, which we have now completely done a mapping where we have market leadership, so which we will -- we have -- so he has already indicated a few of the assets in his narrative. But progressively now, for example, let me first commission the existing assets in hand, which are ongoing, basically the 10 million and come to you all with the stabilizing [indiscernible] of the capacities for them. But passing quarters, then we will also highlight to you the CapEx program as it forms up. But [indiscernible] is very much now in the pipeline. And so we are a few assets which you mentioned.

We take our next question from the line of Manish Somaiya from Cantor.

I just wanted to ask, we have talked quite a bit about fiscal '27 outlook. But what I'm trying to reconcile is how should be reconcile between the improvements that you're planning in fiscal '27 is that dependent -- how much of that is dependent on internal execution versus external normalization? Maybe if you could just help us understand that.

I would say, Manish [indiscernible] A very good question. I would say that the external factors will affect most of the industry players. Therefore, I will give more weightages on the internal factors and the execution of the same, which will bring the overall differentiation and leadership leverage on that. So that I would put it in this manner.

So Manish, if I may just come here -- Karan here. I think if you look at our performance we realized that where the gaps are. And that's focused on and those performance and based on whatever guidance we are giving, this is 100%, which is controllable, which is controllable by us. And if not able to [Technical Difficulty] of our [Technical Difficulty] focused on and delivering on the numbers now that we [indiscernible] And we are very confident that this year, we will be able to hit the numbers that we are talking about.

The other -- my second follow-up is on the premium products now they constitute about 35% to 36% of trade. What should be the realistic target that we should have in our models as we go out to fiscal '27 and maybe even beyond? What's the upside to that 35% to 36%.

So Manish, right now, for example, [indiscernible] is a good number to [Technical Difficulty] and therefore, for example, can be catered in terms of the share of premium cement as a percentage of trade.

[Operator Instructions] We'll take our next question from the line of Prateek Kumar from Jefferies.

My question is on cost again. Yes. So in the last third quarter con call, which happened like around the start of the February management talked about like cost of INR 4,000, we're talking about INR 4,100 -- INR 4,000 in January. We're talking about INR 4,100 in exit of this quarter. So how the quarter cost is INR 4,500, I'm able to understand. My other question is on the balance sheet. So your ACC's operating cash flows are negative -- sharply negative for the year. And your overall consolidated Aura's cash flows also like negatively impacted by negative working capital. Can you throw some light on this?

I will take the second. In terms of [Technical Difficulty] in terms of the [indiscernible] the receivables will get paid also, like you will find in the quarter, this will drop off with the ICD, number one. [Technical Difficulty] of higher. But when it comes to receivables, they are under good control with the higher degree of trade sales and therefore, overall working capital of Ambuja [indiscernible] about the cost. So Prateek, I think what we had start to what is the reality? Yes, there are [indiscernible] because of the overall quarter sales situations. And many times, those anticipations [Technical Difficulty] the have come up also for example, and [indiscernible] about growth. We also lost a good level of volume because of the packing bag issues and all. So there are situations which will it, but let's see now, at least that this is the peak we have hit and from here, for example, also that the numbers will be tapping down every quarter. So reasons already [indiscernible] branding to [indiscernible] to the higher freight cost, the higher [indiscernible] or the [indiscernible] EBITDA, the changes we are now [indiscernible] we have a lower government incentive because of the GST rates which have come down. [indiscernible] , which we are giving [indiscernible] we are now going on in what will visibility certain places, basically so that I don't want to have single -- so there are comp policies and the situation of plants which are not mature to what we thought [indiscernible]

So just some clarification on -- yes, one clarification to opening remarks, it was said that you had like INR 4,100 of cost. Is it just a day cost or a month cost or a [indiscernible]

We had basically hit it INR4,100 for the month of March, Prateek, but then -- but as I said, that except those -- the escalations of war, for example, almost INR 250, which affected us -- so on a normalized basis, I was saying INR 4,100 for the month of March.

Next question is from the line of [indiscernible] from Nippon India AMC. .

Just my question is also following up with the question on the cost front. So if I see on the first week of February, when we had the last con call and if I quote the average cost for the quarter was INR 4,500 along with the one-off, whereas we have exited December quarter went below INR 4,000 of cost. That was the commentary on the first week of the I understand we do carry a good amount of inventory as well. We see a month on the for most of the real and the input on a part Furthermore, we had some one-off in the Q3, we have increased or enhanced our premier contribution in this quarter. pricing was slightly better than the previous quarter. Seasonally, this is a better quarter. This would logically contribute towards better profit in 8 years. despite everything and also with this previous answer that March month was 100, which is a cost. So trying to understand how should add [indiscernible] of the entire cost for quarter on the light of the invest commentary of December [indiscernible] that was driven on of February the inventory will near along with your committee currently on the March 4 to 100 average cost. Also, the real saying most of them are an actor factors which would impact every player for most of the players in the industry. So for whatever we we we have seen from large monetize. These factors are not [indiscernible] just want to understand how to start or come on the what we quoted along with the peers who then how can you look at in our outlook on that.

[indiscernible] in December, for example, we have been very update in terms of some of the turnarounds, which you will see in some of our acquired assets of enough example, more so especially. And as you know, [indiscernible] more in the South and if you actually look at the numbers and South, for example, has been one of the most affected geography for the much quarter, therefore, we have taken some of the machines shutdown. And basically, there have been a couple of breakdowns also and therefore, which has increased by higher fares and cement quarter of March number -- number two, in terms of some of the installation, which we have to do to our sales and branding and advertisement is what we have given. And the results of the same, we will get actually as an investment on our supply chain, but this will more be accounted as an operating cost. So that is where, for example, the branding and advertisement costs are higher. Then, of course, for the month of March, there have been this abnormal cost for the packing, for example. And we have also seen a higher fuel cost and higher fuel consumption. Also, for example, we don't have a write the consumption of the feel the heat consumption is also higher. So those also file technically, the technical KPIs have got effect. Now -- that was also in December or was at INR cost the quarter March was most actually for 500, yes. So I think looking in this at a certain plant for the March not by or we could not also full -- and therefore, we basically been at the same level. So just I understand that part of INR 4,500 crore versus INR 4,500 crore. I'm just trying to reconcile the commentary mid-quarter of 2,000 exits with a current commentary of INR 4,100 for the month of March, there was 1 month in February I'm just trying to understand how the entire cost is up because of that, when we look at inventory gets carried on for a couple of months, it is there. I understand I'll appreciate if you can share us quantification of merit sorter, large cost items along with the benefit of comment from exit of INR 4,000 now may not be now, but later [indiscernible]

[Technical Difficulty] I think even if it was last quarter, we always said that this month of -- so while you are in the whole quarter of that was on country our education and our plan and get closer to 4,000 by month of March. Now basically, therefore, while the average would still be higher than not at INR 4,000, the 4 don't mistaken with 4,000 ever for the March quarter. number one. Number two, of course, like -- therefore, I was taking that month of March, for example, barring this aberration of the west -- as prices -- and you might say that we would have got a little bit affected more compared to as compared to others could be. But yes, we have -- we got effective with the overall packing bags and all -- and therefore, the pressure of volumes and therefore, the better on sales and -- so therefore take below 500 for this entire quarter of March [indiscernible]

We'll take the next question from the line of [indiscernible]

I have a couple of them. One is for the [indiscernible] plant, which is operating at 57% utilization, how important is for the [indiscernible] to be ready and how far do you see alia being connected and ramp-up in volumes at Sanghi. That's question number one, sir.

So Pulkit, our base model is not linked to [indiscernible] railway line. It is more with the overall. Our [indiscernible], and therefore, as you would know that we have already ordered 7 vessels, which will be delivered in progression an starting from next year. So that is what able will bring the strength. And then otherwise, we are counting on the road movement from San the railway line only will be an add-on, but not being considered in the base model.

Sure. So the land is to ramp up even if Malia takes a little longer to be ready? Is that the right way to look at it?

Yes, yes. So right now, all those -- in Sanghi, we don't have a ramp-up per day of capacity expansion, but yes, ramp-up of the existing capacity, the utilizing products.

My second question is, is it fair to assume that as there is a financial that those assets would come to us? Or is there a possibility given that we already have our own growth plan. A lot of work increasing that we could also not be considered those assets. [indiscernible]

[indiscernible] I will still consider that for JP, the RP is another listed company, and therefore, it would be appropriate from my side to answer anything on that. But as we progress, whatever development happens, we'll come to know.

We'll take our next question from the line of Pinakin Parekh from HSBC.

I have 2 questions. My first question is, given Ambuja is the fourth company to have reported earnings and the EBITDA per tonne is the lowest with high cost inflation. Do you see the industry and the company raising cement prices in the next few months to pass on the full cost inflation? Or can we expect further margin deterioration with the inability to raise cement prices?

So Pinakin, I would say that given the scenario of demand will be very important to basically see the price being passed on to the customers. And as of now, I anticipate the overall demand looks to be for right now, when I look at say April and now in May, a little subdued and soft, therefore, Therefore, some when you export ad, I would be happy even if the industry gets half of the same. So that is like, for example, right now, the situation is. But yes, cost on the other side has gone up by at least INR 25. So that is like the only way then to resolve and protect the margin is to focus on our -- and that is, therefore, [Technical Difficulty]

Sir, my second question is given Ambuja cost delivery has been all over the place over the last few quarters. Can you give us some guidance where you move away from cost to EBITDA person by FY '28. Given where your EBITDA per tonne is today and over the next 2 years, where do you see the EBITDA per tonne [indiscernible] and what are the building blocks of the margin? What kind of pricing is, what kind of cost savings, what kind of turnaround do you want or do you expect for the next 2 years?

So Pinakin, I think it will be [indiscernible] for any industry person to give any estimate of EBITDA per tonne at this stage. I would rather still continue my efforts on cost and therefore, for example, 1 thing is like INR 4,500 a tonne, let us say, it peaks out and then it starts coming down from here to what journey will go. I think progressively, we'll keep you posted and really in next 2, 3 quarters as things look more brighter than clear. But for right [indiscernible] focus area. Obviously, like when you focus on trade sales and when you focus on premium cement, this will keep giving you more mitigations. But I think any guidance on EBITDA will be at later stage. But let me just add that cost, we are looking at roughly INR 250 a tonne reduction this year and then another reduction of INR 250 next year as well. That is that we are looking at [indiscernible]

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

My first question is you talked about INR 500 per tonne of cost improvement over the next couple of years. Are we shying away from the earlier target of INR 3,650 that you had shared earlier [indiscernible]

So we are not shying away with our target. I think as we have told earlier also, we need to focus on our execution. We still have -- there are multiple steps on the cost that we need to take between manufacturing, between raw material and be logistics. And we are confident that we will be able to achieve that number. I think it's just we are giving to in terms of where we will be able to achieve in next 2 years' time. But that does not mean that we don't have some way to go to the earlier target. We know what are the steps to take. We know where need to where we need to improve in terms of our efficiency, that's where we are for. But this is something the 500 is what we can commit right now for the next [indiscernible]

Got it. Got it. So I have one more clarification that I want Karan is [indiscernible] shifting away from and capacity. So just a clarification that [indiscernible] guided for 15 million tonne of debottlenecking gross assets. So does that stay? Or there will be some change on that?

So those still continues. I think it's just timing, which will differ based on where we get the maximum return of the return on the investment.

Got it. One final question. I remember in second quarter and third quarter, the company was already accelerating your branding and advertisement cost. So it would be helpful if you can help us understand what would be overall branding and advertisement cost for full fiscal '26.

So for the full fiscal year '26, we are closer to almost like INR 700 to basically INR 70 to basically yes, INR 70 a tonne basically on the full year, which is of [indiscernible]

Next question is from the line of Ritesh Shah from Investec.

One question for Karan [indiscernible] question, what prompted us for said right now -- if you could highlight key [indiscernible] that probably as a for your sensor next 1 year? And how does [indiscernible] in overall scheme of being after the rest.

Sorry, can you repeat that question? I can't hear you properly.

So first question is, what prompted us for a reset right now? Second, what are the 5 key [indiscernible] that you have laid out for yourself? And third, how does SLA fit in overall scheme of things after the reset?

Yes. So I think why the reset, I mean, it's quite evident our performance has not been great. We've not been able to -- we've not been able to deliver what we have promised to our shareholders. And so that is number one. I think if we have to assess ourselves, we really need to improve on our cost. That is number one. I think the key KPIs that we are putting for ourselves is we need to reduce. We need to -- I would say 5 things that we need to focus on. One is L1 plants delivering to the market, the discipline on L1 plants delivering to the respective markets. Second discipline is on on trade versus non-tip sales. Number three is on our raw material consumption, reducing our cost on raw material as well as on the electricity front, energy consumption. And number four is improving our, I would say, channel network. In terms of to help us increase our sales. So I think these are the 5 things. But predominantly, if I would say, is to do with the cost, and we really need to get our act in order in terms of to make sure that we are able to reduce our costs. And so that is what we are looking at. until the time we are not able to deliver on what we are promising. I don't think so it makes sense to make more capital investment because you don't get the returns on those capital invested as well. You had a second question?

On [indiscernible] service agreements, I think a few of the plants that we have tied up there. How should we look at that on overall in -- so SLA-based contracts. This is something that is part of these initiatives because we do believe that what we need to -- what we need our teams to focus on and what -- where do they need to put their energy on. We do believe that there are -- at least in India now there are enough competent partners out there who can run who can run the plants at the efficiency level that we would aspire to. And that's how we are looking at. And second, obviously, given the history of Ambuja in ACC. I think the SLA partners help us in terms of cleaning up all the past union issues and all of that. So from that perspective, it really helps us in terms of reducing our cost and improving our efficiency.

Next question is from the line of Ashish Jain from Macquarie.

Sir, it is great to see exclusive capital litipline. But in that context, I just want to understand this INR 65 billion to INR 70 billion of annual CapEx for the next 2 years that we're talking about, can you break it down ballpark in terms of growth versus cost efficiency versus any other initiative that it includes.

Yes. So roughly 4 billion is what is already the CapEx, which is already under execution, and it is implementation of that. which includes capacity, which includes WHRS, which includes your fly ash transportation system that we need -- and the balance is, I would say, debottlenecking plus maintenance CapEx. Yes. So yes yes. So yes, basically, I hope that answers your question.

Next question is from the line of Amit Murarka from Axis Capital.

I just wanted to understand more from a strategic perspective, like when but [indiscernible] had acquired these cement assets, you had qualified out I'm wishing to kind of become the industry leader and double capacity in volume. So in that context, the current guidance seems to be quite subdued. So is it fair to say that there is a reset in ambition kind of from the earlier year thought that was there at the time of the acquisition?

We'll be honest with you. Yes, partially, there is a reset. We are not moving away from the target. Yes, we are moving away from the time line. That is to do with the -- we know that we are not delivering in terms of what we had committed -- and so it definitely makes sense to step back to look back and to see where we are going wrong and to cost correct and then to -- and that's where we are. and that's why we are giving you the new guidance in terms of where -- what is the capacity -- revised capacity enhancement that we are looking at and the time frame that we are looking.

Sure. And is there a target IRR in mind when you were doing your CapEx program now?

It's CapEx -- I mean the project IRR has to be 18%. This is all equity money. So you have to look at equity returns like anybody else.

Next question is from the line of [indiscernible] HDFC Securities.

Happy to know that the management focus is more graded on CapEx and also focused on cost execution. My only question while you have been candid on the guidance, this rent cost reduction, you're looking for FY '27 over FY '26. And at the same time, from exit Q4, we are seeing around INR 250 to INR 300 cost inflation because of the packaging and fuel rise increase. So is this INR 250 million net off or net-net, you will see INR 300-odd increase and INR 250 decline. So from current level, we would still see ours going up by INR 50 to INR 100 in Q1 FY '27?

So Rajesh, thank you. What we would put it is 4,500 is the peak, and this 250 reduction is from here. essentially to [indiscernible] a target for '27.

Right. This is factoring in the cost inflation that we have already seen?

Yes, that is true.

Okay. And in Q1 also, you are looking at similar cost structure in Q1 versus -- Q4 versus Q1, what sort of you're looking at basically the current [indiscernible] cost savings.

So right now, for example, the headwind continues, and therefore, it could be flattish for Q1 and I think comes out better that it will start tapering.

[indiscernible] flattish means your current cost, which is some of the cost inflation is factored in Q4, the energy and the packaging?

Almost like INR 4,500, I would [indiscernible] it for, say, Q1. And then from this year, we will have the reduction journey continue. And for the year, therefore, we are targeting to have reduction of INR 250.

Right, right. And on the noncore working capital, if I look at your core working capital has come down year-on-year from 30 days to 20 days. But if I look at your noncore working capital [indiscernible], that seems to have gone up significantly. So is there any strategic reason from [indiscernible] 14 days, it has now gone up to 49 days. That is where you [indiscernible] noncash working capital seems to have shot up significantly from [indiscernible]

Therefore, like, for example, some of the -- some of the points which I mentioned that on certain incentives and all, now we will be looking to book it on an actual basis when resumed, then the actual which is, for example, so that is noncore working capital of operating the working capital can be controlled? Second is, I think some of these are -- which you are referring to could be purely accounting working capital. So maybe we can [indiscernible] for example [indiscernible]

Yes, just on this 2 clinker plants which you are looking for was [indiscernible] other beyond what is getting right now?

The one which I mentioned was one was in our [Technical Difficulty] turn will have a [indiscernible] Maratha [indiscernible] upcoming Mundra will be another 2 million [Technical Difficulty]

And that would have 3 years from [indiscernible]

Next question is from the line of Shravan Shah from Dolat Capital.

Yes. Sir, just to clarify, this INR 250 cost, this is on a full year average FY '27 that we are seeing?

Yes. So [indiscernible] for full year '27. And therefore, for example, that June quarter will be at the March quarters [indiscernible] So you're right, will be average for [indiscernible]

Got it. And second, when you mentioned about the prices, was it INR 10 and INR 15, INR 20 hike that you mentioned, this was for the April you wanted to say, or this is for March. So currently, on an average from the exit of March, have the prices for us have increased by INR 10-odd that's what we are trying to say?

Yes. Basically, I was hinting on that only. So April was [indiscernible]

And lastly, for full year [indiscernible] in Q4, you mentioned INR 102 crores. But for full year FY '26, what could be [indiscernible]

[indiscernible] dig on this number. So here, the [indiscernible] EBITDA, you asked, right?

Yes, sir.

[indiscernible] for the FY '26.

Next question is from the line of Raghav Maheshwari from Equirus Securities.

Just one question from the side. Our CapEx is continuously getting any standard, we are very fast [indiscernible] cement side, we are expecting in the late [indiscernible] [Technical Difficulty] what is the issue and to continue and continuously, we are getting some breakdowns [indiscernible] plant . [indiscernible]

[indiscernible] CapEx has not been up to the mark. And that's one of the reasons we are pausing and [indiscernible] our projects that we have taken before we start new projects. One of the main reasons why we have not been able to deliver as per what our standards are is 2, 3 things. One is we did not choose the right contractor when for execution. Number 2 is we started these projects when we acquired Ambuja and ACC. And at that time, there was no team. So it took us time to build up that team as well. And now we will be able to the project [Technical Difficulty] And from these projects was without full engineering done in place. So we're using the 6 months engineering for the new products that we are thinking of starting and once that is in place, then we will be looking at starting the project. So that's where our direct observation that we've not been able to develop projects in the stipulated bank. Number two, the breakdown. I would say it is predominantly in the acquisition assets where we have seen major breakdowns happening, especially [indiscernible] and Sanghi. And that's where the problem area has been for us, and that's where the team is focused on in terms of improving the reliability of the plant. And that's one of the reasons why you are seeing higher R&M costs in this year, partially because a lot of the resin maintenance, which was -- it was supposed to be done in [indiscernible]

Next question is from the line of Harsh Mittal from Emkay Global.

My first question is can you pursue to focus on premiumization. What is the current average gap between [indiscernible] brand versus the near competitor currently? And what is the target to narrow it further my first question.

So you are referring to premium cement and I can say that the gap has cement product is closer to a and 2025 for the premium one. I think that was like first. Then second, your question is about the gap between our price and compared to that competition. I think see everyone looks to as price better than others. And therefore, every time when the industry people try and compare there is always different opinions. I would say that the Pan India players like us and basically the other player [indiscernible] I think the pressures are more or less in a similar range in the states [indiscernible] here and there, either they are higher or we are lower or whatever reverse way. But that's how the trend has been. And that is also reflected in the overall energy quarter other for the number.

Next question is from the line of [indiscernible] from Ambit Capital.

This question is for current can just want to understand the comment you made about recalibrating capacity that earlier, the capacities were not in the right location now the capacity in the right location. So where were you initially looking at this capacity? I believe Sanghi will also there in terms of expansion is. Maybe could you just discuss where is this [indiscernible] coming from in terms of capacity?

So the recalibration is coming, basically, especially where we have the integrated units those are the locations that we are recalibrating because we find that the branding units, the operating cost, the logistics cost, one of the reasons for the logistics cost being so high compared to competition is because the distance traveled by the integrated units is quite higher than what it should be. So one of the things that we are working towards is shutting down the grinding units in a lot of these places and moving them closer to the market. So that is the recalibration we are looking at. I don't think that we are looking at recalibration of, let's say, tinker unit. The second is we are Sanghi is predominantly a clinker plus cement we are moving towards in the next years, you will see Sanghi moving predominantly into clinker, and you will see new capacities coming up on the coastal region of [indiscernible] and the Line 2 is one of the classic examples of that where we would look at Sanghi clinker and moving and cement being supplied from these fees. So some of these recalibration is happening. Majority of the recalibration is happening in the North UP and Bihar [indiscernible] Maharashtra.

So this is not something -- if you see specific I believe FCC had more integrated units, but you're mentioning -- it's Ambuja, it's ACC and Ambuja, both of them had issue. So I'll give you an example. Like today, we move -- we supply our Bihar market through [indiscernible] and though we get the EBITDA, but it is not the optimal movement of the cement that we are seeing. So that's where we are looking at. We need to set up grinding units in Bihar to serve the Bihar market and Chatisgarh unit should be just a clinker unit.

Ladies and gentlemen, we'll take that as a last question for today. I now hand the conference over to Mr. [indiscernible] for closing comments. Over to you, sir.

Yes. Thank you, Karan, for joining the call and sharing your insights. Most questions have been answered. You have my contact numbers, please free to call me. Thank you.

On behalf of JM Financial Institutional Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.