Dalmia Bharat Limited (DALBHARAT.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the earnings conference call of Dalmia Bharat Limited for the quarter ended 31st December 2025. Please note that this conference call will be for 60 minutes. [Operator Instructions] This conference call is being recorded, and the transcript will be put on the website of the company. [Operator Instructions] Before I hand over the conference to the management, I would like to remind you that the certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements. These statements are not based on expectations and projections and may involve a number of risks and uncertainties such that the actual outcome may differ materially from those suggested by such statements. On the call, we have with us Mr. Puneet Dalmia, Managing Director and CEO, Dalmia Bharat Limited; Mr. Dharmender Tuteja, CFO, Dalmia Bharat Limited; Mr. Yatin Malhotra, CFO, Dalmia Bharat Limited and the other management of the company. I now like to hand the conference over to Mr. Prassan Goyal, Investor Relations Lead. Thank you, and over to you.

Thanks, Rutuja. Good evening, everyone. Thank you for joining us today on the Q3 FY '26 quarterly earnings call of Dalmia Bharat Limited. We published our results and investor presentation a couple of hours back, and I hope you had a chance to go through it. We have the Dalmia management here with us today to answer your questions. I will now request Mr. Puneet Dalmia for his opening comments.

Thank you, Prassan. Good afternoon, everyone. Before I begin, I would like to wish everyone a warm and prosperous New Year. I will first begin some -- with my thoughts on the general Indian economy. The Indian economy has demonstrated strong resilience despite the geopolitical headwinds and registered a GDP growth of 8.2% in Q2. The Reserve Bank of India is projecting India's GDP growth at 7.3% in the current fiscal. We have become the fourth largest economy in the world, and we'll continue to hold our pole position as the fastest-growing major economy. I'm personally very excited about the India growth story, and we take pride in being an integral part of it. Cement sector. Talking about cement, continued government investments in infrastructure and capacity building is expected to support cement demand over the medium to long term. This is also encouraging us to step up our investments in the cement sector as we work towards our strategic goal of becoming a Pan-India player. In the current environment, we have started witnessing improved demand traction with the withdrawal of -- with the end of monsoon and the festivities. According to estimates, cement demand during quarter 3 grew at about 7% to 8% on a Y-o-Y basis, and I believe this momentum will continue in quarter 4 as well. At this pace, FY '26 will witness a growth of about 6% Y-o-Y on a full year basis. Moving to prices. We saw healthy increases at the beginning of FY '26. GST reduction in September was a key milestone for the Indian cement industry and benefits were duly passed on to the consumers. Q3 saw softening of prices beyond GST cuts, especially in our key operating regions of East and South. Though Q4 has started with some improvement, we will see how prices pan out in the coming months. As I mentioned earlier, pricing in the short term is difficult to predict due to market -- various market dynamics. However, I remain optimistic that prices should be supportive going forward in the mid- to long term. I would now want to spend some time on Dalmia's operating performance in Q3. Generating shareholder value by delivering profitable growth remains our topmost priority. We are focused on driving it through sustained improvement in revenue and deepening our cost leadership. In quarter 3, we delivered a robust volume growth of 10% versus last year. This growth was driven by focused efforts of our sales team to deliver superior value proposition to our customers, supported by improved demand traction. We have been making consistent efforts to deepen our channel engagement. We recently hosted our annual dealer conferences, and we have received very promising feedback from dealers. This is an encouraging sign, and it reinforces our belief that we are on the right track. Regarding cost, we remain steady on our path to deliver cost takeout target of INR 150 to INR 200 per tonne that we spoke a few quarters back. We have made meaningful progress in our journey by delivering efficiencies across the value chain, and there are more initiatives in the pipeline. I believe that this focus on cost will keep us in good stead to maintain our position as one of the lowest cost cement producers in India. Now let me talk about our expansion plans. I'm happy to share that we have started commercial production from the new clinker line at Umrangso in Assam with a capacity of 3.6 million tonnes of clinker per annum. The 2.4 million tonne per annum grinding capacity in Lanka was already commissioned in Q4 last year. This makes us fully clinker back to serve a total of 8 million tonne cement capacity in the region. Northeast as a region has been very promising in terms of demand growth and offers one of the best profitability among the regions. Our focus now is to ramp up this capacity quickly. Our Belgaum-Pune expansion as well as the Kadapa expansion are progressing as per schedule. We have placed all the major orders. Civil work in Belgaum is also in full swing. These projects will take our capacity to 61.5 million tonnes. As informed earlier, we are on the path to expand our presence in the new regions and reach a capacity of around 75 million tonnes of financial year '28. We are developing the Jaisalmer project and are likely to firm up our decision in the next few months. In parallel, we are working on various other projects in preparation to reach our stated long-term ambition of 110 million to 130 million tonnes by 2031. To conclude, I must say that I believe we are making very positive strides in our journey. Amidst promising times when prospects of long-term demand remains strong, industry consolidation is accelerating and the potential for margin expansion is significant. I'm confident that as a company, we are well positioned to capture the tremendous opportunity that lies before us. Thank you, and over to you, Dharmender for the financial update.

Thank you, Puneet ji. Let me give an overview of the financial performance. As Puneet ji mentioned, our performance for the quarter was continued to be guided by profitable growth. During the quarter, we witnessed a sales volume growth of 9.5% Y-o-Y to 7.3 million tonnes. Our trade share stood at 62% while premium product share was at 23% during the quarter. Revenue for the quarter improved by 10% on a Y-o-Y basis. While prices were marginally higher on a Y-o-Y basis, it corrected in our core markets sequentially. This led to NSR drop of about 4% on a Q-o-Q basis. As called out last quarter, with the change in GST regime, our incentive run rate has also come down. During Q3, we have accrued incentives of INR 91 crores. This figure includes certain incentives amounting to INR 37 crores pertaining to earlier years and INR 9 crores for H1 of FY '26. During the quarter, our receipt of incentives was INR 121 crores, with which our total outstanding incentive declined to INR 776 crores. As mentioned last time, we expect the incentive run rate to be around INR 200 crores next year. Coming to the cost line items. Our raw material cost per tonne of production increased only by 2% Y-o-Y to INR 780 per tonne despite the additional levy of tax on minerals and Tamil Nadu. Further, our power and fuel cost per tonne of production increased by just 1% Y-o-Y to INR 1,019 per tonne despite the cost headwinds. During the quarter, we have achieved RE share of 48% on a consumption basis. Our cost efficiencies will continue to improve with the rising share of renewable energy in our consumption mix. We have commissioned 23 megawatts of RE capacity this quarter. With this, our total RE capacity has reached 410 megawatt. In 9 months, we have invested about INR 50 crores in equity SPVs for the group captive RE projects. There are more projects in the pipeline, which are expected to come online in the next few months. During the quarter, our blended pet coke and coal consumption cost has remained range bound at about $99 per tonne on a Q-o-Q basis. Blended fuel cost during the quarter stood at INR 1.36 on per kcal basis, while CC ratio was 1.6x. Our logistic cost during the quarter saw a significant decline of 5.6% Y-o-Y, thanks to good progress on our various initiatives. Our direct dispatches percentage stood at 62% this quarter, while lead distance was at 277 kilometers. Other expenses during the quarter increased by 11% Y-o-Y to INR 579 crores primarily due to planned shutdowns and increase in marketing spend. During the quarter, the company hosted its annual dealer conference and was one of the major sponsor of the Messi India Tour, among other initiatives. As Puneet ji mentioned, we'll continue to strengthen our position as one of the lowest cost cement producers. In one of the slides of our earnings release, we have included our total cost trend, excluding the 2 major external headwinds that impacted us, that is additional levy of mineral tax in Tamil Nadu at INR 160 per tonne and spike in fuel prices, clearly shows that we have reduced our structural cost over the last few quarters through better operational efficiency across levers. Our EBITDA per tonne stood at INR 823 per tonne, while absolute EBITDA was at INR 602 crores. This is an improvement of 18% on a Y-o-Y basis. As you are aware that the government of India has recently notified the new labor codes. Consequently, we have assessed an incremental impact of these changes amounting to INR 32 crores towards gratuity and other employee benefits. This has been provided under exceptional items. During quarter 3 FY '26, we have incurred a CapEx of about INR 513 crores, which makes YTD December spending to be INR 1,703 crores. We expect the spending to be around INR [ 2,700 ] crores in FY '26. Majority of the CapEx in current year is being spent on Umrangso clinker, Belgaum, Pune units and Kadapa project, along with the other land acquisitions and other ROI projects. Our gross debt at the end of the quarter stood at INR 6,844 crores, while net debt stood at INR 1,703 crores. Our balance sheet position remains strong with our net debt-to-EBITDA at 0.6x. Just to summarize, we saw good volume growth and stable costs in quarter 3. Our drop in prices led to margin suppression during the quarter. As we look forward to quarter 4, we expect positive momentum to continue on demand, whereas margins are likely to get supported with better prices. With this, I open the floor for question and answer. Thank you.

[Operator Instructions] First question is from the line of Jashandeep Singh Chadha from Nomura.

Sir, before I ask my question, I just need a clarification on the incentive front. In your presentation, you have mentioned that around INR 37 crores of the incentive received this quarter was from the previous period. So is it in line with the expectation and the run rate that the management was building in? Or should we treat it as a one-off item? And how should we look at this INR 37 crores.

When we said that the run rate for the next year is about INR 200 crores, so this new incentive is also included. So this incentive is including the retrospective effect. That is why the figures have been stated that INR 37 crores pertains to the previous year and INR 9 crores pertaining to the first half. But the impact will come in the coming years also, that is included in the run rate of INR 200 crores per year.

So it is in the normal course of business, right, sir?

Yes, please. Yes.

Now my first question is largely on account of demand and pricing in your key states, a few of your key states in both East and Northeast, there will be state election that will be happening this year. So with that context, how do you see demand going in East? And what will be the impact on the pricing? How do you see cement pricing? I understand, Puneet, sir, just mentioned in short term, it is very hard to say. But over FY '27, if you can give a wider picture on both demand and pricing, how are you seeing, especially in East?

I think our view is that East is one of the lowest per capita consumption regions in the country, and the headroom for growth here is quite high. A lot of the Eastern economy is determined by mining and natural resources and I think the government is quite focused on unlocking some of these resources and converting them into GDP growth. Also, a lot of infrastructure is being built. So my personal view is that also given the fact that now to get reelected, you have to show good development and you have to meet the aspirations of the Indian demographic, which is largely a very young population. So my belief is that East should definitely be slightly above than the national average. And I think 7% to 8% growth in East should be quite easily possible. But again, as I said, there will be blips along the way. This is like a large part of Indian consumption is the CapEx business, whether it is housing or infrastructure, the repair business is quite low in India still because India is still being built. And therefore, sometimes CapEx gets postponed sometimes. But over a slightly longer period, it's more easier to predict. Quarter-on-quarter, there could be blips. But over a 3- to 5-year period, it evens out. And I think that East should grow in high single digits quite comfortably. Second point is, if I look at pricing, the pricing in East India and South also declined more than the adjustment for GST post 22nd September. I expect this to come back. And even in the first -- I mean, even in January itself, we are seeing some corrections, although they are still minor and not very meaningful. But I see some upward corrections in January. And this is usually a strong quarter in terms of demand also. So I think given the fact that there has been excessive correction in prices and the demand is strong, I expect some price uptick this quarter. But again, as I said, it's hard to say. And long term, I think prices will get driven by consolidation. I think barriers to entry in this business are rising and higher consolidation will mean higher prices over the medium to long term. That's all.

Yes. So if I put this question in a slightly different way, like we had Bihar election, and we saw out of all the Eastern states, Bihar spent close to 55% of their budgeted CapEx, whereas all the other Eastern states are less than 25%. So given that West Bengal and Assam will be soon having elections, do you think more funds and more projects will flow to East and hence, you will have a higher demand coming from these regions, which obviously suits Dalmia, but just wanted to understand a quick view on how elections normally affect demand in that sense.

Sandeep, I think if you were to look at quarter 3 here, if you look at quarter 3, we have seen revival across markets on demand in East. So if you were to see 4 quarters prior and the trend line, I think the trend line has started to move up in quarter 3. Elections would have an impact. We would right now not set in judgment and anticipate which way it will go. But if you were to look at collective East, I think Bihar is now through the election cycle. We expect spending to come back. In other markets also, I think the spending is a little overdue. So we are hopeful it will come back. So we will see how it pans out. I think Odisha, Jharkhand, Bihar, all of them should do good. And West Bengal might see some blip in the interim, but I think that, again, the demand will come back. So high single digit might be we may end up touching double digit is what our expectation.

Understood. My last question is largely on cost. We have seen pet coke rise in the recent months. So what will be the impact for Dalmia in fourth quarter on cost front, if you can just give an estimate?

Blended cost will go up as you've seen that the pet coke prices have gone up. But of course, we'll try to mitigate this by increasing the blend of the domestic coal, which is slightly cheaper.

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

A couple of questions. Of the INR 150 to INR 200 cost savings, how much have we realized so far? And what is still pending?

So Indrajit, I think Dharmender ji mentioned in his commentary earlier. If you look at Slide 23 of our IR deck, actually, we made that explicit because this is generally a question that comes up. I think we gave this estimate around 5 to 6 quarters ago. Structurally, if you were to see, I think we have made decent progress. We are -- if you were to remove the 2 major headwinds that have come along our way, one was the Tamil Nadu limestone and one is the fuel uncertainty. We have roughly in the ballpark of INR 45 to INR 50 per tonne is what we have structurally extracted. But as Puneet ji also mentioned, there are more in the pipeline. So we gave a guidance of INR 150 to INR 200. We have down 6 quarters. We are roughly INR 50 is in the bank. I think much more will get converted in the coming quarters. So we are pretty much steady on this journey.

Sure. This is helpful. Second, I missed the CapEx guidance for this year. What was it again?

INR 2,700 crores.

And lastly, if you can help us understand how is the current pricing versus 3Q average? We have seen some increases in early January. So is this like meaningfully above 3Q average or we are broadly at the same level?

I think we are just 20 days into the quarter. Right now, if you were to ask that question, yes, we are excited with the green shoots, but it's too early for us to count money. Early signs are good. Let us see how it pans out. As we have said, we are not in the business of predicting very immediate short term on prices. So let's see how it pans out.

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

My first question is on CapEx. So while this year, you have essentially been able to control the CapEx from an initial guidance of INR 4,000 crores you had given earlier in the year. Does it mean that next year now, the CapEx will be far higher with this reduction in '26? And if you could talk a bit more about the journey on CapEx in '27 and '28?

So next year also, we expect the CapEx to be around INR 4,000 crores. And for the next 2 years, I think the CapEx could be in the range of INR 8,000 crores to INR 9,000 crores.

So basically 4 and 5.

Yes. Amit, actually, if you dial back to what Puneet ji mentioned, we are working on other projects. There might be some more announcements coming around the way. Basis the current projects that we are running, we would be hitting in the vicinity of 2.5, 3 on an average annual, might be on a little above 3. And as we announce more projects, I think we'll have more clarity. We are a few months away from that announcement. So I think we can park that question for a while. Once we come with a full road map of 75 because the next thing is due, as Puneet ji mentioned, I think we'll give more clarity. So as of now, if you were to look at the current project and CapEx that we are doing, ballpark of roughly 3 per annum. And as more happens, we'll announce that.

Understood. Yes. And just a second question on realization. So again, last year in Q1, like we had mentioned that we are pursuing profitable growth, but we have essentially seen realization actually drop almost 9% for you between Q1 to Q3, which is actually higher than the industry pricing decline. So I wanted to understand, has there been a change in approach or we are still following the profitable growth strategy?

No. So you're saying Q1 to Q3.

Yes. So those 2 quarters, essentially, both quarters have seen like roughly 4%, 4.5% fall, which at least what I understand is a bit higher than the decline seen in the market.

No. So I'll make -- I'll try to answer your question in points. Number one, discounting and selling is definitely not a strategy on the table. I think when we say profitable growth, we deeply believe in this concept. Point number two, whatever drop in realization you're looking at a blended level is, by and large, a mix of the markets where we operate. As you are aware, East and South have seen the most significant drops in terms of the prices industry-wide. So if you were to benchmark us versus the peers, I don't think you will see us fall steeper. If anything, we would have improved something on price positioning. So rest assured that the NSR drop is not an outlier to the industry. It would be one shade better only. And discounting is not on the table as a strategy to sell and the profitable growth remains our objective.

Sure. And if I could just squeeze in one last question. So we have seen generally a very strong pickup in demand from December onwards largely. So in that context, what would you kind of pin your volume guidance, if you can give any for FY '27?

We generally don't guide the market on volumes, but we remain hopeful that we'll be able to do better than the industry. And this is what we are endeavoring to do.

The next question is from the line of Navin Sahadeo from ICICI Securities.

So my first question was on the total capacity plan, which in your opening comments, you said 75 million tonne target remains for FY '28. And you also said that plans for Jaisalmer will firm up in the next few months. Now I'm referring back to your comments in the previous quarters, wherein we had alluded that if the JP Associates transaction does not come through, we could actually see the digging the -- commencement of like breaking ground in Jaisalmer by April. So how are we positioned to start Jaisalmer project by April? Or are we awaiting any incentive-related clarity or some approval, may I say, from the government before we kickstart the Jaisalmer project? How should one look at it?

I think one should look at it with quite a bit of optimism. As Puneet ji mentioned, like we participated in the process. The process was out in open. The COC has made a decision. As we had said a couple of quarters back that if this doesn't happen, we look at other options. We are now actively pursuing JP project detailing -- sorry, Jaisalmer project detailing, my mistake. Every -- detailing of the project would entail at least 15, 20 critical points before we come and announce a date or a month. So just bear with us, as we said, in a few months, we'll be back, and we'll be informing you in terms of all the steps. But rest assured that every single element that goes into creating the project is happening and is well on track.

Helpful. My second question was on pricing. Puneet ji's initial comment this time appeared a little cautious than what it was in the past couple of quarters, more so after Q1 when South prices had really recovered. I mean we were -- I mean, expecting prices to hold up with benefits of consolidation in South. But Q3, of course, saw a much sharper dip. So is it fair to assume that competitive intensity has again like got elevated, and that's why the near-term caution even though long-term optimism prevails.

Look, the all India capacity utilization of the sector is around 70%. So I think we will see -- and there is reasonable capacity expansion in the pipeline. Our belief is that capacity growth will be around 5%, 6% per annum. So -- and demand supply -- demand growth, we think maybe 7%, 8% per annum. So really, we don't expect material increase in capacity utilization of the sector over the next few years. Of course, there are regional differences. This is the national average. I believe that the overcapacity in this sector is here to stay, at least for the next foreseeable future. So what happens is that when new capacity gets commissioned, at that time, there are -- sometimes there is a volatility in prices. But I think new projects are viable and acquisitions are viable at the price at which recent transactions have happened at EBITDA, which is much above the current level. So I believe that there is assuming rational behavior in the sector, my personal view is that pricing is going to move up over the medium term. And I remain cautious in the short term, but reasonably optimistic in the medium to long term. My position hasn't changed. But again, as entrepreneurs, we are mostly optimistic. So I think you should look at the long-term trends in the sector and discount what I want to say if you want to. But I think we are investing behind the growth in India and our deep conviction that there is -- entry barriers are rising due to limestone auctions and due to not easy to commission new projects, and it's not even easy to integrate acquisitions and turn them around quickly. It's a skill which requires a lot of hard work and a lot of focus and a lot of disciplined execution. So in our view that entry barriers are rising, and I think consolidation will yield good results in the long term. And I think this GST thing, again, is a very big shift. It's almost 10% difference than what it was. Consumers are used to paying a higher price than what is -- than what the spot prices are. And in the medium term, at least the prices should easily bounce back to what consumers are used to paying for a period of time. Over a 2-, 3-year period, I think that's easily possible. So I think I remain optimistic.

No, great. We truly appreciate your comment. Just one small question. For the Northeast clinker unit which got commissioned recently, are we planning any split grinding units in Bihar like some of your peers are already contemplating or in an advanced stage of land acquisition? Is that a possibility to expect a better utilization of the clinker there?

Can you please repeat the question?

Can you repeat the question, please?

Yes. My question was about the possibility of a split grinding unit coming up in Bihar. So some of your peers in Northeast are contemplating -- rather not just contemplating are in an advanced stage of land acquisition in Bihar for a grinding unit to utilize the clinker in Northeast. So -- and they are very close competitors to you, if I may say, said in an open forum. So I'm just trying to understand if we also, to utilize the clinker better, likely to put up a -- or pursuing to put up a grinding unit given the state also has incentives. Just trying to understand your thoughts around better utilization of Northeast clinker.

It's a definite possibility. I think, as I said, we are evaluating all options in line with our laid out road map. And I think as and when we are ready to make announcements, we will, but this is a definite possibility. We have excess clinker in the Northeast right now.

The next question is from the line of Pinakin from HSBC.

So my first question is on the near-term March quarter. So you mentioned in your comments that you expect industry demand growth of 6%, 1H was low single digits, Q3 was better. But that would broadly imply that Q4 could be as much as 10% industry or late high single-digit industry demand growth, which will be very strong. Would that assessment be correct?

Yes, I would -- this is what we expect. I think the momentum has picked up in December. We expect the same to roll on in quarter 4, might be a little here and there. So yes, high single digit is what our expectation is for the industry.

Sure. So if we have such strong demand growth, would pricing also see a similar improvement given pricing has been very weak for the last 6 months? Or you see industry overcapacity or competitive intensity hold back price increases? Because naturally, such a strong demand growth should drive prices higher.

Well, as I said, I mean, the prices corrected quite excessively beyond the GST reduction in both South and East. And there has been a marginal recovery in January. But as I said, I want to just wait and watch and demand growth obviously helps, but let's wait and watch as to what happens.

And Pinakin, just to add, December saw a more decent demand than November, but still it saw a price drop. So we can't put our finger down and say this is going to happen. Let us see. We are hopeful this should be positive for the industry. We are fingers crossed.

Got it. My second question is that the trade share, which used to be in the late 60s, Q3, Q4, Q1 has been 62% for the last 2 quarters or so. So is this the new normal we should work with as newer capacities come on stream for Dalmia? Or will the trade share go up back to the late 60s.

This is definitely not the new normal. This is a reality in a subdued demand environment, this is something that has happened. By choice, I would say, partially by -- and by the way market drove us. I think you should look at mid-60s to high 60s only as a future path. This is what we are committed to deliver. In the interim, as the capacities come online, there might be a little spike here and there. But steady state, I don't think this is what you would look at.

The next question is from the line of Satyadeep Jain from AMBIT Capital.

On the expansion plan, just wanted to touch on the next leg of growth. Puneet, you mentioned 28 million, 75 million tonnes, given typically it takes 2 years. How confident are you on 75 million tonnes in '28? And with Jaisalmer, just wanted to check what's the status on land acquisition, ECE. We are hearing reports of some delays in general because of Great Indian Bustard, GIB. So just wanted to see your preparedness specifically in Jaisalmer and as you look at FY '28. And also tied to that would be Nawalgarh that this was awarded 4 years ago to all the bidders and the premiums were very high. So given -- we understand there's a time line of 3 plus 1 years and if it don't commence production.

I'm sorry to interrupt Mr. Satyadeep Jain. May we request you to please hold up for a second. Ladies and gentlemen, please stay connected while we check the connection for management. Ladies and gentlemen, thank you very much for patiently holding. We have Mr. Satyadeep Jain in the connection. Mr. Jain, you may please proceed ahead with the question.

So Puneet, I just wanted to check on the expansion beyond what you already have, specifically tied to North. So you have 2 options, Jaisalmer and Nawalgarh. As you look at Jaisalmer specifically, what is the land acquisition status? What is the ECE? We are hearing generally some delays in ECE because of Great Indian Bustard even for cement plant. Is that something you're noticing? So level of preparedness for Jaisalmer, especially as you look at FY '28 commissioning. And also Nawalgarh, it's been 4, 5 years since you got that and all the others who got that lease in '21, 2021. And typically, as we understand that after the award of mining lease, typically, there is 3 plus 1 years. And if nobody commences production within that time frame, the lease is given back. So what is the status on the optionalities you have both in Jaisalmer and Nawalgarh, I just wanted to ask.

So I think on Jaisalmer, things are going as per plan. We expect a large part of the land acquisition for grinding units, et cetera, is already done. And in that area, it is not very difficult to acquire land. Some part of it is government land also. So I personally think that we are on schedule in terms of developing that project. So in terms of Nawalgarh, I think our priority is Jaisalmer right now because from a return perspective, we think that this will offer better returns. And therefore, we are more focused on this at the moment.