Andhra Cements Limited (502090) Earnings Call Transcript & Summary

Yes. Ladies and gentlemen, good day, and welcome to the Sagar Cements call to discuss the acquisition [indiscernible] the recent acquisition announcement of Andhra Cements Limited. Please note that this conference is being recorded. On this call we have Mr. Sreekanth Reddy, Joint Managing Director; Mr. K. Prasad, the Chief Financial Officer; Mr. Rajesh Singh, Chief Marketing Officer; and Mr. R. Soundarajan, Company Secretary. We will begin this call with a brief opening remarks from Mr. Sreekanth Reddy, following which you will have a session open for an interactive Q&A session. Before we begin, I would like to point out that some statements made in today's discussions may be forward-looking in nature, and a note to that effect was stated in the con call invite sent to you earlier. I'd now like to hand over to Mr. Reddy for the opening remarks.

Thank you, Gavin. Good morning to everyone. We are happy to inform that the National Company Law Tribunal, the NCLT has since approved the resolution plan submitted by us for acquisition of Andhra Cements Limited on 16th February 2023. This acquisition is aligned with our strategy of consolidating our presence in established markets to better service our customers in a cost-efficient and entirely manner. Furthermore, the acquisition will also help us meet our objective of reach 10 million ton capacity by 2025. We believe the acquisition cost of $56 per ton, including the upgradation is competitive and will help us create value for all our stakeholders in the coming years. We propose to spend INR 762 crores for acquisition, the restart CapEx of INR 85 crores and an additional INR 75 crores as working capital and other costs. Barring unforeseen circumstances, we expect to start commercial operations by end of Q1 FY '24. Further, our Board has approved an additional capital outlay of INR 468 crores for enhancement of the clinical capacity to 2.3 million ton from existing 1.65 million ton and the cement capacity to 3 million ton from 1.8 million ton at Dachepalli Cement Works of Andhra Cements Limited. We are hopeful that the enhanced capacities will be commissioned during the second half of [ FY '25 ]. We are contemplating discontinuing the operations of the Vizag Cement Works of Andhra Cements due to the constraints resulting from the plant's proximity to the Vizag city. Our efforts are now directed towards operating these assets at optimal level to enable us to serve our customers better and create value for all our stakeholders. This concludes my opening remarks. We will now be glad to take any questions that you may have. Thank you.

[Operator Instructions] Yes, [ Mangesh ], please go ahead.

And congratulations on closing the deal. Sir, my question is just if you can give more details on this acquisition cost of [ INR 768 ] crores in terms of how much was the haircut that was taken on the debt? And how does -- you mentioned that we would continue to -- Andhra Cement would continue to remain listed with 95% stake being with Sagar Cements? So if you can explain the equity as well as the debt component of it?

Mangesh, as mentioned, it is INR 762 crores is the acquisition cost. Yes, this not only includes the purchase of the debt, but also includes the CIRP cost and the settlement cost for the other liabilities. The debt liability has been acquired at -- yes, the total debt is at INR 1,316 crores, that has been settled for INR 725 crores, the balance between INR 725 crores to INR 762 crores, is the CIRP cost, the legal cost and the other liability settlement cost Mr. Mangesh. I hope that addresses the first part of your question.

Right. Second one on the equity, sir.

Yes. The equity -- what the Sagar Cements board has tried to do is to keep Andhra Cements listed so that we are aligned with taking care of the minority shareholders' interest. Yes, the entire existing promoter equity would be extinguished. The current public shareholders holding would get reduced to 5%. What it translates is from the current rate of capital of [ 293.52 crores ] would get reduced to [ 9.15 crores ]. So what it translates is the public equity holders from 45,79,704 share, yes, from 9,15,94,086 shares, they would get reduced to 45,79,704 shares. We paid a capital from [ 293.52 crores ], as I mentioned, would get reduced to [ 9.15 crores ], which is again of this 95% would translate to 8,70,14,382 shares will be owned by Sagar, would be owned -- and 45,79,704 shares will be given by -- so would be given to the existing shareholders, which would translate to 5%. All in all, let me also explain for people who would own more than 100 shares would get 5 shares, for people who would own 20 and below, they would actually get 1 share each. I would again repeat, for every person who would own 100 shares and above, for each 100 shares they would get 5 shares, and for people who would own 20 shares and below, yes, they would get 1 share. So a person who would own 20 shares also would own 1 share, a person who would also own 1 share will also continue to own that one single share. Yes, this is as per the plan, Mr. Mangesh. I hope I could clarify the question that you have had. Pretty happy to share the numbers because these are all [ patched up ] numbers, so we'll be very happy to share those numbers.

And sir, any covenants to this deal or any liability for operational creditors that would be pending after this?

See, as per the plan, the current liabilities for the operational creditors have been adjusted at 5% to their overall kind of outstanding liabilities they have, they have been adjusted for 5%, sir.

Okay. And sir, last question on the Vishakapatnam grinding unit. So you mentioned that you may discontinue the operations there. So you would be selling the land there to basically cover some of the costs?

Yes, Mr. Mangesh at this point of time. As I mentioned, the Vizag, a set of Andhra Cement has become part of the city. So there is a restriction in terms of both inward and outward movement of heavy trucks. They are restricted between only night 9 and morning 6. I'm sure you are aware that it may not be a feasible option for us to run a cement plant with that kind of restriction. Secondly, the asset is reasonably old. These are with ball mills. So you know the slag mill, Vizag is more a slag market. So running slag cement with ball mills, we believe that it's not a feasible option. And having a reasonably modern and a big asset in the close possibility, we thought we will make use of the asset of [ Biorem of ] Sagar Cements for managing the additional incremental volumes that we need is the mantra. So this is that. At this point of time, the land monetization in all those issues, we would probably come back in some time. But at this point of time, the decision has been made to shut the operations. On a medium term, for sure, we would like to monetize the real estate what exists in that particular location, Mangesh.

And could we able to use the plants there? Or you said because it is old ball mill, or it may not?

These are ball mill, though it's a very good quality asset, but these are ball mills. So they are not as efficient as the new vertical mills [ on the road process ]. So the idea is not to make use of that. Though we might still cannibalize some of the equipment, wherever it is required for some portion of it. But as such, that asset probably we may not put to use Mr. Mangesh.

Manish, would you like to ask a question?

Sir, my question is, firstly, on the limestone availability at the parent plant. So what kind of reserves are we looking here? And is there an opportunity to add another line or obviously, you are extending this clinker line. So what is the opportunity there? And the second question is actually the land value that you would be -- as you mentioned in the presentation, it's about 107 acres of plant in Vizag city.

Yes. Manish, the limestone resources that are available in the larger building of Andhra Cement is around [Technical Difficulty] very good quality. The growth for expansion definitely is [indiscernible] because we could double up [Technical Difficulty] we could comfortably double it up. That probably addresses the first question that you have had. The next part is the land value advisor. As you rightly mentioned and we should have made part of the presentation is there is 107 acres of [ land in projects ]. The client -- the government value -- because the government value itself is at INR 4 crores per acre, and translating it's an industrial land. So this industrial land, the government rate is given as per square yard, the square yard, sorry, it's roughly translating to around INR 4 crores per acre. It's part of the city. So there is a lot of apartments and everything all around. The ongoing market rate looks to be much, much higher. We are yet to do that exercise, but we would be very happy to revert as and when we come to some understanding about this particular thing of converting this into multi-use or whatever, what could be the potential value. But as such, the government rate is roughly INR 4 crores per acre, Mr. Manish.

We'll take the next question from Ramesh Mehra.

First of all, very congratulations. The way we have like [indiscernible]. And secondly, it's really honor and grateful that probably we are the second time like after Tatas, like we protected minor shareholders. I heard like [indiscernible] they have protected minus shareholders and now Sagar Cement protecting the minor shareholder of Andhra Cement. That's really appreciate and grateful to you. So my question here is, sir, like when can we expect the Andhra Cement will be start trading and with the new shareholding pattern? And what exactly would be the total debt for the -- consolidated debt for the Sagar Cement after this acquisition? And what exactly the road map to decrease this debt?

Yes. As mentioned, we are taking care of the minority shareholders interest in...

I'm really grateful, sir, to be honest, like probably many people are many across India, retailers invested in Sagar and Andhra Cement, and they're really thankful from the bottom of heart that you are protected their interest and their family, maybe their savings. And we're really grateful that we are [indiscernible]

Yes. Mr. Ramesh, we did present the overall consolidated debt that includes even Andhra Cement acquisition in our investor presentation. But just for the comfort, the gross debt inclusive of the acquisition and everything would be at INR 1,644 crores. The net debt would remain much, much lower. Yes, we also indicated the principal and as well as the interest payouts spend over the next 5 to 6 years at a consol level. Yes, the net debt would be somewhere around INR 1,432 crores. We believe over the next 4 to 5 years, yes, we should become net of debt also. I mean, we probably should remain in cash by FY '28. This is without considering any of the monetization or a potential kind of dilution, which we have to do, which is mandated from a regulation perspective. From the current 95% shareholding, within 12 months, we need to reduce it to 90%. And within 36 months, we need to reduce it to 75%. So historically, we have never encashed on our stakeholding. We believe that all these resources will be put to use to ensure that the stakeholders would get maximum value. So [ these are the scenarios ].

Sreekanth, adding to these questions, like when we can expect the new company, it will be the same ISIN number or it's a --?

Yes. I think Mr. Ramesh, the current work -- it's a work in progress. So we believe it should take 90 to 100 days for us to fulfill all the requirements as far as the regulatory requirement is concerned. It's not only with [ SEBI ]. Yes, we need to put quite a few steps. Internally, from what has been discussed and what we have understood it should take anywhere between 90 to 120 days, Mr. Ramesh.

Once again, congratulations, sir, for this achievement.

[Operator Instructions] The next in line, we got Sumangal Nevatia. Sumangal?

Many congratulations for this great strategic deal. Sir, just one clarification for this Vizag land, is it our endeavor to monetize it? Or any -- I mean, joint development or some other -- something which we can explore, #1? And what is the rough timing we're looking at?

Yes. Mr. Sumangal, as indicated, yes, the overall idea is to monetize. We are not into the real estate. So at this point of time, we will start evaluating all the options. Our intention is to monetize. The work that we need to do, we roughly have estimated, but it's not in its complete shape. From whatever little work that we have done in that regard, yes, it should take anywhere between 18 to 24 months is what our team has indicated. We will do whatever it takes to get the maximum value out of it. So that's what I would like to highlight at this point of time.

Management, I just voice text that has been made by Mr. Deshpande. I am Deshpande. Before taking the next question, he says, it would be helpful if a presentation could be made on NSE and BSE mentioning the broad numbers of the deal. Since this is material information of working about the reduction in number of shares for public shareholders of Andhra Cement can be uploaded on the BSE NSE, and that would help in price discovery post acquisition. Andhra Cement is currently listed in IRP1 in BSE are scheduled to take this out of IRP1 group. That would help us really.

Yes. Noted the observation, sir. At this point of time, it's work in progress. So we would be extremely happy to come back and upload the stakeholders of both Sagar as well as Andhra Cement, about the overall kind of shareholding pattern and the specifics of those would be uploaded. But I did address in the earlier query about what we have given to the resolution plan. We would -- I would be extremely happy to repeat just for the benefit of it. From the current [ 293.52 crores ] of paid up capital, which has roughly 69% promoters holding would be [ 0 ]. So the balance, the public shareholding, which is close to 9,15,94,086 shares would be compressed to 5%, which would again be adjusted to the current trade up capital adjustments from [ 293 crores ]. It would be adjusted to 9,15,94,086. So the public shareholding from 9,15,94,086 would get reduced to 45,79,704, which would constitute 5% of the adjusted paid up capital. The balance would be owned by Sagar Cements. So Sagar Cements is infusing [ 322.2 crores of equity with INR 10-plus INR 27 ] as premium. Every 100 shares and above shareholders would be getting 5 shares, 100 -- for every 100 shares that public shareholders would own, it would be -- they would be given 5 shares. Any person with 20 shares and below, he would get 1 share, sir. So this is what, I didn't make the presentation. We would wait for some more clarity before we would upload and we would be very happy uploading this also onto the both exchanges that is NSE and BSE. We would be happy doing it. Hope that addresses the query that you have.

[Operator Instructions] The next question from [ Fahad Fasad ].

Congratulations on closing the deal. Sir, just one clarity. Firstly, I wanted to know that this Durga Cement Works, Dachepalli plant, it has limestone reserves of [ 188 million ], you said, right?

198 million.

198 million, okay, 198 million. And sir, we've already announced this CapEx at the plant? And what is the brownfield optionality like over and above this that we've announced.

And I did mention that we could comfortably double for a minimum 50-year deposit life, Mr. Fahad.

Okay. So you can double the capacity from 3 million ton, right?

Yes, from 3 to 6, from 3 million, we comfortably go for 6 million, for a minimum 50-year kind of a deposit life.

Okay. And sir, once we start operations at this unit by maybe Q1, Q2 FY '24. So what kind of profitability are we looking from this unit and at what utilization will it operate?

Mr. Fahad, at this point of time, it would be a challenge for me to go into very specifics of this, because it's work in progress. We think that it should get aligned with the other operating units in the region, which are in the range of around 55% to 60%, Mr. Fahad.

Utilization?

Yes.

Perfect. And sir, like just to -- so this would be over a period of time or like starting from Q1 itself?

Yes, Mr. Fahad, I think middle of Q1 is what we are expected to go live. So we are getting into this half season in terms of Q2. But I'm sure as and when the season would come, I think we should get aligned with it. [ Anyhow, we're ] going to have Sagar brand itself, so we should not take big time is what we think for the ramp-up.

Right. And any plans just to put up any WHRS?

Yes, sir. I think it's something which we definitely would want to do it, but we would want to first get this plant operational before we start optimizing on those [indiscernible] the associated things upon.

The next question we take is from [ Nishant Bagrecha ].

And again, many congratulations for this deal. So I have one question like about -- so post this acquisition now, you will surpass the objective of reaching 10 million ton capacity by FY '25. So now you'll be 11 million ton capacity company. So again, your objective is to double the capacity every 10 years. So any change in the time line of post this acquisition [ now you've got ] the approval from the NCLT also. So any change in the time line, for doubling the capacity or your focus will remain on to de-lever the balance sheet?

No, I think Mr. Nishant, every 10 years, we double. I think that would not change. Would it happen in 2035? Would it happen in 2033 or '35 is a question. But I think the stated objective is to double every 10 years. I think that's what we are focused on, and we will continue to focus on that. The deleveraging issue, let me assure you, sir. Yes, if you look at debt for every million, I think we are around close to INR 125 crores to INR 150 crores. I don't think we will be crossing that number at any given point of time. So growth as well as the leverage sticking to at balance kind of leverage is something which you always remain and we would remain focused on those aspects, Mr. Nishant.

The next question we take is from Sanjay Nandi.

Congrats on the deal, sir. Sir, can you please clarify on the price difference between Sagar and Andhra Cement, like what price they used to sell. And once we change our brand from Andhra to Sagar, what would be the incremental price difference you can get from that?

Yes. Mr. Sanjay, I think let us not get into the part, because Andhra Cement had always multiple brands over a period of time. So initially, they were Durga brand, then it became Duncan, then it became Jaypee. And for last more than 3.5 years, we have not seen the Jaypee brand coming out of this particular asset. So there is no point in discussing the potential kind of a listing. Whatever cement that would come out of Andhra, would be sold as [ averments ], which would be aligned with the current brand positions and the markets that we have always dealt with.

[Operator Instructions] From Manish Valecha.

Yes. Sir, just a follow-up, sir. So on the debt side, sir, how do we see the debt going forward? And also the high cost debt, what is the plan for that going forward, sir?

Yes, Manish, I think the high-cost debt, which was taken for the transaction would get closed before the end of this current financial year. So it would be rolled over into the term debt at Andhra Cement level. So that's a straightforward roll over. And we did indicate in terms of for over next 5 years, how the debt movement is happening on a quarter-to-quarter, Mr. Manish, it is presented part of the analyst presentation that we have done for the acquisition -- specific to this acquisition, we have made a presentation to the exchange as well as we did share. So we did indicate the reduction of the pattern of the debt. Let me again update. With the acquisition, the gross debt would be hitting around INR 1,644 crores. This includes working capital of INR 272 crores and the term loan of INR 1,372 crores. From next year onwards, we believe that it should start slowly sliding down because we do have some moratorium for some of the debts that we have taken in the past. So if you look at the net debt movement, the current net debt is at around INR 1,432 crores. Yes, we do believe that it would strongly come down over the next 2 to 3 years to become net cash by FY '28.

Next question is from Amit Srivastava.

Yes. Congratulations on one of the [ really remarkable year ] for you and for us, also. Sir, my question is related to the plant operation basically. So as we have guided that we will operate at a 55% or 50% kind of utilization and what we understand that a plant is closed or shut down right now. So basically, the markets are same and now we are converting into a brand of Sagar only. So how easy or tough it would be to ramp it up to 1 million ton incremental sales because we already have that much of capacity to ramp it up in the past. But this is how we are strategy-wise, how we are looking at? Second, we have a good track record of turning around the assets. So what are the levers we have in this asset to make it efficiency-wise? And what is your sense once it will be upgraded the plant [indiscernible] versus our existing plant, how it will be on operational side?

Amit, so the first question is pertaining to the ramp-up. Yes, we are not expecting any challenge as far as the market is concerned for the Andhra, because Sagar as a brand did hit other plus potential kind of Andhra volumes historically in the past. So these are not something which is new to us. So we did sell Sagar plus Andhra kind of potential volumes a couple of times even in the past few years. So we don't see that as a big, big challenge for us in terms of the ramp up. Fortunately, we could not have better tying the acquisition than now because the next couple of years, it is likely that the demand in the regions that we are servicing or could potentially service are likely to grow at a much faster pace than what it has grown in the past. Given that scenario, we are not seeing any of the challenges trying to put these incremental kind of volumes that are likely to happen on Andhra as Sagar brand into those markets, we are not expecting any major issues. And practically and pragmatically, what we have also done is we are [ hoping to have 100% capacity utilization ]. Yes, we would be happy to do that. But our internal estimation is to -- that there could be an average capacity utilization of anywhere between 55% and 60%. So the overall utilization, the overall financial planning, the financial model is basis that the market would offer 55% to 60% average capacity utilization what has been planned. And knowing the realization potential itself, it is planned. So [ at a $56 ] acquisition plus upgrade, we strongly believe that this asset would significantly contribute to its stakeholders, Amit. So that part is given. Now the question is the asset was talked very well. And I would like to assure you that asset is of a very, very good quality. But the preheater is slightly of a older generation. It is a first stage preheater with a separate line, 5-stage Calciner line. Part of our plan is to make it into a double string 6-stage preheater for the upgrade. When we conclude the upgradation, it will be one among the best assets in the market, [ even ] with the current assets that we have because we are going to adopt the newer technology coming from the best of the technology providers. So we are opting for it. A 6-stage twin string in-line Calciner preheater that itself should significantly make it that much more efficient. Coming to the raw mill and the cement mills. Yes, these are new generation ones, which are already there. So some amount of optimization is what we need to do. And we do plan for a basic recovery and also the alternate fuel firing up in due course of time. Given these issues, we strongly think over next 18 months to 24 months as the asset would be upgraded, it should get aligned with the best in the business. And that should also help us save on the cost. And we on the ESG front, in line with whatever we have disclosed in the past. So the overall alignment, we expect over 2 years' time to happen at Andhra with the current assets that we have, Amit. So, hope that I could clarify the question that you have, you have asked.

Yes, sir. Yes, sir. It's really helpful. And this plant sir, [ signal any ] coal mines linkages also?

See, I think there is a very small linkage that was there much before the asset was closed down. So as it stands, there was a couple of bank guarantees that were issued, which is not encashed. So part of the NCLT resolution, we did request the court to give the direction, but the NCLT court at this point of time, said that we have to -- on those specific things, we need to go back to signal any colleagues with the request to get it revived. But as it stands, it doesn't have the FSA, Amit.

I'll just take a couple of chat questions before taking the next raise hand. Another question from Deshpande. Given the limestone reserves and land availability, what could be the peak capacity Andhra Cement can be expanded to? And at the peak capacity, what would be EBITDA per ton? And when do you plan to expand Andhra Cements capacity to peak capacity?

Noted, Gavin, the objective is to first, on a short to medium term, the idea is to stabilize. The plant, as I mentioned earlier, have we believe plant can be expanded as many times. But what is very important is how long you want to keep the deposit. Our internal philosophy is that we would always have a comfort of minimum 50 years deposit life is a minimum requirement for us internally. Even that scenario, we don't see a big challenge for it to double. That is from the current or the intended 3 million, it could easily double to 6 million. So we would limit it to that, given the minimum deposit requirement that we internally have put for ourselves, so we could comfortably double. Yes. Now when we would double, yes, the current status that we've always followed in the southern market is that we do not want to add any greenfield or brownfield at least for next 3 years, given the supply scenario. We are happy to acquire because that would not add any new additional volume pressure into the market. That's what we have done here. And as such, we are also planning to expand the upgrade the current capacity from 1.8 million and the current location to 3 million. I think that's what we would like to stick to for the next at least 3 to 4 years' time before we're taking a call for the further expansion. Gavin, I missed the question that...

Yes, just a related question on working capital. Can you ask about the working capital infusion, we indicated about INR 75 crores seems less.

Sir, I think that is what has been estimated. As the ramp-up would happen, I think the requirement for working capital also is likely to go up. But it's a situation where it's very situational, that working capital would definitely be expanded as the requirement would arise. We would be very happy if the working capital requirement goes up, that means we are in a very, very good operating ramp-up, and we should not hesitate to increase the working capital. This has been estimated with the current ramp-up requirement, [ Gavin ].

The next question here, we can take from [ Naveen Sadhu ]. Naveen?

Sreekanth, sir, heartiest congratulations on the deal. Sir, my question was on the debt front. So just to reconfirm some of these numbers. As at the end of Q3, your net debt was about INR 1,078 crores, which we are saying post this acquisition goes to more like INR 1,432 crores. Is that correct? All-in, this net debt from INR 1,078 crores will go to INR 1,432 crores. Is that a correct understanding?

Yes, sir. Yes, yes, Mr. Naveen. I think your understanding is correct.

Correct. And then for next year, we are saying this goes down to, let's say, more like INR 1,273 crore. So I'm just trying to understand what net debt to EBITDA as a -- because we obviously will have FY '24 as the first full year of Andhra volumes coming to us and also our own volume growth that we'll see at Sagar, the original company. So overall, what is the comfort net debt to EBITDA you have in mind is what my broader question was?

Yes. Mr. Naveen, we did state in the past, let me repeat once again. We would not cross more than 4x on a short term, slightly short term to medium term. We would not be very comfortable crossing that number to be net debt to EBITDA to be more than 4x. At 3.5x itself we internally panic. So we believe that it should be less than 3.5x to 4x, we would not cross either way, Mr. Naveen. So we would limit ourselves to that extent.

[Operator Instructions] There's a question from name called [ Redmi ], if you could identify yourself please and ask your question. Redmi?

Yes. I'm Sushil Agarwal calling from Abu Dhabi. My only point was because other producers like the Dalmia Cement and all, they are increasing their capacity very fast. So maybe we need to review this doubling the capacity in 10 years. Maybe we need to review this one.

Yes. I appreciate [ Sushil ji ], of your comment. So Mr. Sushil ji of your advice, we would definitely be cautious of your -- we would definitely mull on that. But the fact is that this is a large CapEx [ divine ] sector. We should -- we are very aware of our bandwidth in terms of financial as well as that. We generally don't want to leverage. At the same time, we do not want to compromise on the market position. The number that we have kept itself is very, very ambitious, sir. So we do not want to follow somebody just because he's going aggressive, it doesn't mean that we have to. But we would definitely not let down the stakeholders whenever there is an opportunity without compromising the core aspects of not over-leveraging and not compromising on what we need to do to reach to that point in terms of efficiency, we would be more than happy doing it at a faster base Mr. Sushil.

Maybe we can start this next 10 years from now, like '23...?

Noted, sir. I think every 10 years, when we mentioned, I think, yes, as I mentioned even in my earlier comment, instead of 2035, because earlier intend was to, to be at 10 million by '25, since we could say 2 years' time, I think same thing also could be applicable internally, we could definitely target. So the next immediate target is to look at [ 15 million ]. So we would be very happy to revert back to you noting your comment, if we would be happy to come back to you when we would like to achieve [ 15 million ].

Yes. Very, very, congratulations. And I find it very -- very, very, managed very well. I mean specifically in finance side, I find it is managed very good.

Appreciate your comments on that.

We'll take the next question from [ Abhisar Jain ].

Sir, many congratulations for closing the deal. And thank you so much for giving out all the details as you had promised that when you close the deal you will give the details. So the disclosure seem quite good, sir. Sir, I just wanted to pick up on your comment about the land that we have at the Vizag unit, and which you, you said that you would like to maximize over the next 18 to 24 months and monetize it. Now sir, the cash flows that we may get from there could be substantial, okay? And I just wanted to understand that since we are already expanding Andhra from [ 1.8 to 3 ], and we are also ramping up our other capacities. So once you receive that cash, would you want to flow it back into the business for further expansions? Or would you balance out and look to deleverage first? Because I think for the next 2 years, we do have enough capacity in hand.

Yes, Mr. [ Abhisar, ] as I'd mentioned, I think our leverage position is not bad, sir. I'm sure some people would have had comments on the leverage position. I think we are fairly comfortable on the leverage side. Of course, we -- once we monetize and we exactly know the controls of the likely receipt, 2 things we would want to do. One, we do have waste recovery plan in mind. And whatever would be the surplus amount, we would ideally like to reduce the intent burden. So these are -- this is the plan that we have in mind, but we would be extremely happy to come back to all the stakeholders at the right time as and when we get more specific details on to any of these issues, Mr. Abhisar.

Okay. So waste recovery plant at Andhra Cements you're saying, right?

Yes, sir.

Any ballpark, sir, would you have for this kind of 3 million capacity that you would want to set up?

Yes. Typically, it is 35 kilowatt hour per each ton of things, sir. We believe that it should be anywhere between 7.5 to 9 megawatt is a possibility for that 3 million. I think that's what is a possibility even in Andhra.

Yes. But sir, again, that will be really a small investment in that sense. And the cash flow, I'm just coming from the price...

It is close to INR 150 crores, sir. So we might want to look at some amount of optimization and all. Yes, Mr. Abhisar, I mentioned to you. So we're very happy to revert as and when we know the contour of all the overall investment that is required would be extremely happy putting it to use once we know the exact numbers of the requirement and what would come in, Mr. Abhisar.

And sir, just last thing. Now for the volume, volume expectation for FY '24, earlier in Q3 call, you had mentioned around, say, 5.5 million from our existing asset, and you have indicated 50% utilization for Andhra now for FY '24. So can we assume right now 6.5 million for the whole company that we'll target for next year?

I would not disagree with you on that number, Mr. Abhisar.

The next question we have is from [ Mehak Kapoor ].

Sir, congratulations. Sir, my question is with respect to the ramp up. So what I understand is that out of the 2.6 million capacity of Andhra Cements currently, the 0.8 million is not going to be -- I mean, it's going to be scrapped. So the remaining is a 1.8 million, which just to the previous participant, you indicated that there will be a 50% capacity utilization in FY '24. So could you just give some clarity on the time lines and when this 1.8 million would become 2.6 million and then 3 million. If you could give some more clarity on that.

Yes, let me clarify. Yes, it's a 2.6 million with a 1.8 million at the Dachepalli Works and 0.8 million at Visaka. As you rightly pointed out, 0.8 million at Vizag would be -- would not be put to use. This 1.8 million, we strongly believe that should give 1 million ton for the coming year, that is the coming financial year. So we don't see that as a challenge. And over the next 18 months to 24 months, we strongly believe that the upgrade plan, the existing location itself have a current 1.65 million ton clinker capacity will be upgraded to 2.3 million and the current 1.8 million ton grinding will be upgraded to 3 million over the next 18 to 24 months. That is by FY '25, middle of FY '25. We are more than hopeful that these upgrade plants could be [ fully in position ].

Okay. So just -- so that I got it correctly, what I understand is that in the next 6 months to a year, this 1.8 million ton, you will get approximately a 50% capacity like...

In the next financial year as I mentioned, we should produce 1 million ton is what we have indicated, sir. And we will stick to that.

And then in the next 24 months, you'll ramp it up to the total 3 million.

Yes, sir.

We have the next question, which is from Vishal Periwal.

Congratulations on this deal. Sir, just a clarification on the land part. Is there any upside or any amount that are we supposed to share with the creditor whenever the transaction happens or the amount comes straightaway to us?

It's a clean transaction. There is nothing that we have to do with the outgoing financial trade asset on. It's an unencumbered and a [ free title ] is what we have inherited, sir.

And just maybe like trying to be a little critical. But sir, I mean, if he just do working of like 100-odd acres that you have and the government rate that you mentioned. And then if you just do the working then probably the acquisition cost comes to like in pretty low rate. So the deals on the good side is lucrative. So is there anything that we are missing out here or that you like to highlight...

Vishal, I don't know what you felt less in this. This is a close to 2.6 million tons, right. Even with an upgrade, it is costing us is $56 without monetizing any of the lines. So do you think that anything more competes...

No, no, I'm saying on a positive side, it's like too good to be true types.

Sir, I missed on that. Can you repeat Mr. Vishal.

No. So what I was trying to say is that, if he just, I mean, like a 100-odd acres and the rate that you mentioned, government rate of whatever you mentioned. And if he just do the working of it and like the acquisition cost of INR 700 crores plus and eventually, like we are getting this deal at around 300 or maybe like plus the amount of CapEx. So we were too good.

No, no, Mr. Vishal, you should understand everything has its function of time with a resumption. Yes, we took a call without having the land value into this system. I think that's what most of the industries will look at in. See the encashment opportunity is a function of time. Yes. If it gets more, yes, we all look like heroes. Yes, if it doesn't, then people would be critical. So I would -- we are industrial players. We are not into the real estate. Our industry is not on the land. It's incidental. So let us look these 2 issues very, very separately. Yes, we would be extremely happy for ourselves and all our stakeholders. It becomes true and we could encash more, the deal itself could become free. But at this point of time, the transaction is happening with almost close to INR 1,400 crores kind of a contour or a 3 million ton, that includes the acquisition as well as the upgradation. We in this scenario, we never wanted to miss on that opportunity. That's the reason why those South region perceived to be slightly challenging. But at 50% to 60% capacity utilization with this kind of value without monetizing on the land, it look lucrative for us. Now why others did not see why we -- we too did not see the land value at all, sir. So we specifically looked at what value this asset was coming purely as an industrial kind of a thing. Rest everything is only incidental, sir. Only time will tell how well we could turn it around from a stakeholder's perspective in terms of monetizing plus the overall kind of a structure, Mr. Vishal.

We'll have the next question from Ramesh Mehra.

So my question, sir, after this acquisition, is there any long-term [ detriment underestimate ]? Or it's a finally closing with the amount you have mentioned in the presentation.

Sir, I think it is a complete -- the balance sheet itself is clean, and it is presented theirselves. So we do not have -- we are not carrying forward with any existing financial datas. This is fresh, sir.

Okay. So it's a kind of fresh investment for us and completely...

Yes, it's a clean transaction. It's a brand-new balance sheet is what we can safely assume, Mr. Ramesh.

Yes. And sir, with this new capacity, like are you taking any initiative like to promote our brand in other part of the area rather than sticking with Telangana, Andhra and Tamil Nadu?

Sir, I think we typically have indicated even in the past, Mr. Ramesh about the lead distance [ that we could. We could ] aggressively pursuing the same similar strategy when it comes to the lead distance. So we would not be very different from what we have been so far. It doesn't make compelling reason for us to go far. We would consolidate the positions where -- which are in the footprint area, which of the asset, Mr. Ramesh. Yes. Let me assure that captive area itself very much available for us as far as the volumes are concerned.

If there are no further questions, Ramesh, do you have a further question, your hand is raised?

No, sir, no, sir. No I missed, that could be.

We have one more question. So we have another question from [ Ritesh ].

Sir, simple question. How should we look at the capital structure of the acquired entity? I presume it will remain listed. So if I'm a minority sitting in that particular entity, how should we look at the capital structure?

Yes. Mr. Ritesh, let me again repeat once again, just from a [ 293 odd crores ] of paid up, we are reducing it to [ 9 crore of -- 91 crores ] of paid up, Mr. Ritesh. So that itself would give a lot more comfort because for this size of an asset, [ 292 crore ] look big and heavy. Secondly, Sagar itself then had an option to infuse a part, but Sagar preferred to infuse that [ INR 10-plus INR 27 ] as a premium. So as to ensure that the minority shareholders would have a good return on a medium to long term as the asset would turn around. So from a [ 293 crores ], we have reduced it to 91-odd crores in terms of the paid-up. That is the first part. The second part is the absolute minority shareholders, less than 20 shareholders, don't mind believe that they are getting 1 share, but even 1 shareholder would remain as 1 single shareholder. So that has been kept in mind and we have taken care of it. For every 100 shares, the -- above 100 shares, every individual whoever is owning it, you will get 5 shares for his 100 shares of he owning those shares, Mr. Ritesh. That's the structure. So we strongly believe that the minority shareholders have been kept in our mind in the overall kind of restructuring of the capital is concerned, Mr. Ritesh.

Sure. And sir, how should we look at the effective tax rate of that particular entity?

Yes, I think we should be in MAT for at least a couple more years because there is an accumulated losses of more than INR 1,000 crores Mr. Ritesh.

Sure. And sir, last question. Will we look to simplify the structure going forward, say, 3 years out, 5 years out?

At this point of time, it is too soon. So we would -- for the next 3 years, we know we would want to stick to what we have clearly stated before we would turn around, we would be happy to come back. But at this point of time, since it's just come into the fold, yes, this is the plan that we have.

We have a couple of questions from the chat. Is there any plan to merge Andhra Cement with Sagar Cements over the next 2 to 3 years? Or would Andhra Cement continue to remain as a separately listed entity in the long term.

Yes, for this question, I just addressed...

Yes, you have.

Let me repeat once again. The plan at this point of time is to stick to what we have indicated that we would want to keep it listed. Yes, we need to reduce it to 90% in the first 12 months, before the end of 12 months. And before the end of 36 months, we need to dilute it to 75%. So when we reach to that point, we would want to take the call. But for such time, we would want to [ don't want to stick ] to this plan, Gavin.

Since we do not have any further questions, we could close the floor. Sreekanth, would you like to make some final comments?

Thank you, Gavin. We would like to once again thank each one of you for joining the call. I hope you got all the answers that you are looking for. Please feel free to connect our team at Sagar or CDR if you need any further information or you have any further queries, and we'll be more than happy to discuss them with you. Thank you. Have a good day. Thank you.

Thank you, everybody. Thanks.