HeidelbergCement India Limited (500292) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the HeidelbergCement India Limited Q4 FY '20 and FY '20 Conference Call hosted by PhillipCapital (India) Private Limited. [Operator Instructions] I now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital (India) Private Limited. Thank you, and over to you, sir.

Thank you, Stanford. Good afternoon, everyone. On behalf of PhillipCapital (India) Private Limited, we welcome you to the Q4 FY '20 and FY '20 conference call for HeidelbergCement India Limited. On the call, we have with us Mr. Jamshed Naval Cooper, Managing Director; and Mr. Anil Sharma, Chief Financial Officer. I would like to mention on behalf of HeidelbergCement India Limited and its management that certain statements that may be made or discussed on this conference call maybe forward-looking statements related to future developments and current performance. These statements may be subject to a number of risks, uncertainties and other important factors, which may cause the actual development and results could differ materially from the statements made. HeidelbergCement India Limited and the management of the company assumes no obligation to update or alter these forward-looking statements, whether as a result of new information or future events or otherwise. Also, HeidelbergCement India Limited has uploaded a copy of the presentation on the stock exchanges and its website. Participants may download a copy from these websites. I will now hand over the floor to the management of HeidelbergCement for their opening remarks, which will be followed interactive Q&A. Thank you, and over to you, sir.

Thank you, Vaibhav, and thank you, everybody, for joining this call today. First of all, I hope we are meeting after in a very -- time at a time when the world is really undergoing a change. Our lives have undergone a change and I don't know how things will move forward. But yes, the business has to go on. I think everybody has to maintain the social distancing and whatever is required to do. And I wish that everybody, we, as a country and as individuals in the nation and the globe, tides over this coronavirus thing and everybody, everybody loved ones and everybody is safe, hale and hearty, and we see the brighter sun at some time of life. So it's -- I wish this for everybody, each and every individual on this planet. You have seen our presentations, which are there before you. So I would start with the presentation in front, which is Slide #3. If you look at it, the cement industry was doing well. I think the quarters which went on were doing well. It moved from 5% growth, 5%. And again, it was moving 8%. It was a healthy growth. Unfortunately, the brakes got applied in the month of December, almost fag end of the year-end, when the -- it was -- when the steam was full steam and things were moving in the right direction. And -- but unfortunately, this happened and the industry recorded just by 1 -- just matter of 9 days, it lost a significant volume. And you must appreciate that the cement industry, March year-end is many -- for many of the companies which is a March year-end and the maximum volumes get sold in the last 10 days of the month, which probably got sacrificed. So you see this particular part on that. But all said and done, I think we will be back at it soon. On the financial year-wise, we did a capacity utilization of close to 87% utilization. So I think it was a good job done, despite this 10 days of loss. And 100 -- as you know, your company is 100% blended cement we manufacture. Dependence on grid power as WHR and the power sourcing what we do from -- as green power resource from other sources in Ammasandra and other places, so that has -- our dependence has come down to 66%. So about 34%, we are into a better situation on that count. We have repaid our first tranche of NCD at about INR 1.25 billion. So that has happened. The next 1 will be due in the next December. We have paid interim dividend of INR 1.5. And now we have -- the Board has recommended to the -- for the AGM a dividend of INR 6 per share. You are aware -- sure, definitely, you will have questions on our capacity utilization. I will come to that, which is now capacity has increased to about 6.26 and I'll take you to the next slide, which is Slide #5. You'll see the volumes, again, it has dropped 3.9% is basically more to do with the March impact of COVID. Coming to the -- where you will -- before you ask these questions, I am talking to you on the Slide #6, which we have put specifically for in terms of how our capacity has increased, okay? So here, you can see that our utilization in Imlai was about 94.5% and 99%, almost 100% in Jhansi. So there were some improvements, which we had to be done to build up some more. Basically, it is to be done grinding, okay? On clinkering, we are operating at close to about 80% utilization, 85% -- 80% to 83% utilization. But we needed cement capacity to absorb this particular thing. And we have been -- as you know, that we have a continuous improvement program over the years, which goes on. So we keep improving things here and there, and we keep discovering, okay? So it is also a matter of how you discover your equipment and plant and machinery. And then you try to test out the limits of the plant and equipment. And one fine morning, you realize, yes, by a small expenditure, you can really extract far more and then the management takes a call, okay, let us put on this investment, which is just -- and in this case, it was our -- the ones which you put separators in our mills. So we had to just put an investment of a small amount. The manufacturers guaranteed that, okay, what your assumptions are correct, by putting up this type of small money, you will be able to enhance it. So we did a test of it, and we were sure -- when we're sure about it, we made this investment, and we were lucky that we were not proven wrong. The machine started delivering to the weighted output what we thought. And that's how your capacity has increased now at -- Imlai at 2.5, and Jhansi it has gone to 3.25. Coming to the results on Page 7, you're seeing that for the year -- or for the whole year, it is -- EBITDA is up by 9%. On the PAT side, it is up on the whole year by 17% (sic) [ 21% ]. And all the other figures what you are looking at in terms of whether it is gross realization -- sales volume got hit. Had it not hit the -- I think we could have done better. But all said and done that we cannot keep going back that because of COVID business happened. It has happened. We have to move forward on that, and we have to see how best we can work under the change environment. If you look at the whole year of waterfall in terms of how the EBITDA has moved, so you can see that the maximum benefit has come out of the GSR, on Slide 8. Raw materials minor impact, and there are some small other impacts are there. So that is not something very big to worry about. Well managed -- the team has managed the consumption parameters, whether you call it as sourcing parameters, everything has been managed very well. The market has delivered to the -- they have recognized the premiums what the company has -- the brand deserves, and they have been giving those type of premiums in the market. Coming to Slide 9, Page 9 that is. You can look at that we have got a 46% volume -- percentage of our volume is by road and about 36% coal. You look at it from this as 0.655 basis points year-on-year, there's an improvement on that. On the blended cement, you can see that, as I said -- mentioned to you that we will go up to a maximum of 15%, so we are nudging there, okay? So it is -- now the volume is -- about 13% of our volumes is coming close to it. But we will be -- as I said, again, I will be very steady. And unless I get my premiums, I will not push the volumes of any premium products. They have to go slow. So they will keep improving over a period of time. We had our sales. We are mostly a retail-driven company. So you can see that about 85%, 86% of our volumes happens in -- only in trade. As the tradition goes over the period of time, you will see that we have been working with the net negative working capital and that continues. So the tradition continues. Our customers are -- respect us. They count on us. They give us the payments advance most of the times on our DIO, DPO, all those things which are there. It is a well-managed, well-oiled machinery, which is working, and this is how we proceed forward. In terms of bank balances and borrowings is concerned, we said that we have already made 1 tranche payment. And in FY '21, that is INR 1.25 billion, and another INR 1.2 billion in '22, which will happen in December of '21. And then everything is beyond that. In a gloomy picture also, in such a situation also, the India Ratings has continued to give us a AA+ rating. So we are thankful that for this -- giving us this rating in an environment which is a little difficult. Coming to Page 13. Not -- I don't know how many people of you are aware of it, but during the COVID times, when the COVID started for 21 days, we were developing 1 theme on COVID on a day -- every day basis and sending it to our vendors, dealers, channel partners, to our customers on social media more to explain to them the need of the hour or to make them relevant. So we have kept our company very relevant during the times when people were -- every time, every house and every individual was talking about COVID. So how do we make a difference in their lives? So how do we make our presence felt among them and being talked about. So this is what we did. The team did it, a wonderful job, and they were able to put up 1 snippet on an everyday basis. So these are some of the glimpses of that. You can go to the -- our Facebook and the LinkedIn pages and you can find all of these 21 there and some more which are keep coming on sometimes or the other. PSR and social responsibilities remain at the top agenda for our company and for each individual of us. And you can see that we have been in the forefront, whether it is distribution of masks, food items or giving hygiene factors, whether it is inside the plant outside the plant. I must say that the maximum impact of this COVID is felt by the underprivileged section of our society, which I am worried that many of these people will be pushed down below the poverty line. And this will set our country back many, many years, if we do not wake up and do anything, something for the society. So these are the concerns which we have on a particular part, where the COVID is concerned. So if I go -- take you to the Page 15 and you will observe that we have recently announced that we will be -- for every bag of cement Heidelberg sells, we will contribute INR 1 a bag for the cause of feeding the poor or feeding the underprivileged, those people who need really attention. So we are -- so this is on -- this will go on till such time we are able to feel that, okay, we have done enough for the society. I don't think we will be able to ever do enough. We have a population of 1.4 billion in this country. I don't think as a company, we are at the bigger level, but we can make a -- whatever we can do, we will try and do our best. And thank you all of you for your support. And I also thank my dealers, my C&Fs and everybody for their support who are coming forward and who will also be volunteering there in whatever way they can. Coming to the outlook on -- which is there. So there's a demand reduction in urban cities. We have seen it. Somewhat improvement is there in the rural areas. On the working capital and liquidity, I'm expecting the crunch to become tighter and tighter. So far, there are -- there could be some monies locked inside the market that has to be -- maybe it is not the company's money, but even if it belongs to the channel, and if we do not help them take out that money out of the system or into that, you get back into the rolling into the system, then we will have a problem. So we are working on that also. Reduced availability of trucks and drivers is always there. There is a railway -- there is a labor availability shortage at the ply -- at the yards, which will impact the rolling stock which is in the coming times to [there]. Lower energy costs will be there. We will get benefit out of it. But again, it is not a very healthy sign. If the industry grows, it is good. But it does impact us because if there is power plant shutdown, then we have to go for our fly ash sources. We have to search for fly ash. We are a 100% blended company, so we have these challenges. And we are trying to optimization of your operational and capital expenditure. We are into everything. The life for us has really, really changed. And I'm telling you the business we have seen a change in these 2.5 months of time, I can tell you that nobody had expected it, nobody had dreamt about it, but it has been a very, very, very interesting learning lesson. It has brought into the fore, that your agility of your company, your agility of the management, ability to think fast, okay? It is not the big fish, which is going to eat the small fish, it is the small fish, which is going to escape faster and lead the race. So agility and ability and the quickness or the promptness, it is now the speed. It is not the size which matters today. So we -- every time when people say that you are a small company, I say today, it is agility, which will count today on this particular part. So this is all from my side. Another thing, which -- before I end, I want to add up -- or add on that, that because of the measures which the company took in terms of -- okay, all the employees of the company are safe, healthy, we did everything possible to ensure none of our trade channels and partners, we educated them on COVID and things like that. And now we are getting into the deep of it to educate them on how the new business will run, okay? The business will not be the same the way it used to be. And I'm seeing these type of changes, which will take over very soon. Our dealers, unfortunate part is that they are not agile enough. They sometimes sit down in their homes. They are not privileged enough to be exposed to the environment, which we are privileged to because we interact with the society, the environment everywhere. So we are privileged to that extent. So it is our duty also to see to it that our channel partners and our business associates are also equally brought up to the levels, which is need of the hour. We have done a lot of trainings everywhere. Done -- all said and done, now our dealer partners, channel partners, we have taken them on. IT systems, we are educating them on Teams, whether it is on Zoom or whatever it is. Whatever is required to uplift the level because I am sure that the new normal is quite different from what we have ever seen, and I don't expect also that we will be ever back to the normal what we have seen earlier. So it will be something history. And I think whatever we led our lives so far is something which I call it as history. Now we have to think it's a new start. So life has to and the business has to change. We are determined. My team and I are determined that we will do everything possible. We'll adapt, okay, to the new systems, adapt to the new style, adapt to the market requirements. And very -- I would very be happy to say that each and every person, whether it is the smallest man on the field or my workman, who is -- he's given his commitment that we will stand by the new rules of the game, and we will play the new rule of the game. One thing -- another thing, which I want to tell you till March and all the months, we have paid our salaries, okay? None of the people have been isolated or anything in any manner or been underprivileged to that extent. So the salaries have been paid. The workmen are okay with it. Everything is happy. The only thing is the plants have started now. So I think the things will go on. So this is all I have to say. And as we go forward, I will answer all your questions to the best of our ability, and thank you for being here once again.

Thank you, sir. Shall we open up for Q&A?

Yes, please.

[Operator Instructions] The first question is from the line of Rahul Jain from Credence Wealth.

Hello? Am I audible?

Yes, you are, Rahul. Go ahead.

Yes. A couple of questions from my side. Firstly, on the demand side, how is the demand scenario in our retail markets where we operate? Have you speak today, what is our capacity utilization? And we understand from some of the channel checks the rural demand has been very strong. And hopefully, that should continue up to June end or July, but urban has been a bit lackluster. This was based on some channel checks and dealer calls about a week, 10 days ago. And with now some opening up, has the demand also improved from urban? So basically, if you could shed some light on the demand scenario and pricing? And second question is about the cash, sir. We understand we are in a very healthy position with regards to our balance sheet in terms of cash available. And again, this year and next year also, probably next 2 years, we will generate a very good amount of cash. So any plans which we have finalized in terms of utilization of this cash, which we have and which we are going to generate over a period of next 2 years, even after excluding the debt repayments? And lastly, sir, anything on the cost front, which we are trying, which could be helpful in this year in terms of reduction of our costs, measures or steps which the management has already started taking?

Okay. So Rahul, there are a few questions -- your questions. Some of them, I will answer from a perspective because we are talking about results of quarter ended and the financial year ended. So if I make any statement, which is in the current scenario or going forward, it will be amount to -- will not be -- I would -- appropriate at this juncture. So I would refrain from that, but I can give you simple answers to some of these things. When you are seeing demand, yes, you are right, the urban demand has dropped. The rural demand has marginally improved. In terms of capacity utilization, we have seen -- April has been virtually a down month. Okay, you can understand that. May, there is some uptick has happened. And June, we have just started. So we will see how the demand pans. Too early to say what the capacity utilizations are going to be. But I think the way things are going on, I think it should be -- I would say, okay, okay. Not to get too much pessimistic about it, neither to get optimistic about it either. On the pricing side, yes, I can tell you the pricing has firmed up. And pricing will stay firm for quite some time because everybody in the market understands one thing that if you are going to operate at lower capacity, then the only way to break even is to have a higher volume -- to have a higher price. So the prices will continue to stay in these markets for quite some time to come. Of course, there it has got negatives also. I'm saying this upfront because you can see that when we are holding on to a higher prices, in our region, we are also opening up gates for our competition to come in, okay? Those who are coming at a very, very low prices at almost INR 100, INR 120 a bag, lower lending prices are happening than us. So there is a stretch which will happen on our brand people also. So we -- but anyways, as of now, we are able to take the stretch because if our material is moving, I say, that if my customer is ready to buy my cement at an ex price, why should I bother about anybody else's brand, okay? So right now, the elasticity has been -- has increased significantly. I can take a brunt of -- as high as INR 80 a bag from competition, competitors' brand. I have no problems on that. As far as the cash is concerned, yes, you are right, that our cash balances are good. We are working on, as it is always on a negative working capital. So it will continue. I think we will see. We have given a dividend right now. We have announced it. Now it will be approved by the AGM, and we'll see how it goes. Going forward, we will see -- we will try to see what is to be done with this cash or whatever it is. Of course, we are always in the lookout for some acquisitions. So that theme continues as of now. In terms of costs, you can see the costs are coming down in some of the areas, certain areas, but then certain costs are also going up also, okay? Because when you are traveling to long lead distances, okay, then there is a problem. Then there is also money stuck up in the cycle, which has to be also brought out of the cycle. So those things will have to -- it will take some time. It is -- there is no ready-made solution for us at the moment. But I can only tell you that going forward, we are trying to see that we sustain some way or the other, our business to the best of our ability, so that we do not dishearten anybody going forward.

Any brownfield, greenfield CapEx plans at this point of time?

As of now, nothing.

[Operator Instructions] The next question is from the line of Chintan Sheth from Sameeksha Capital.

It's good to hear that all the teams are safe and healthy right now. And great gesture on the INR 1 social contribution. That will go a long way. Sir, on the -- your comment on -- you rightly pointed out that the improvement in the EBITDA, the bridge you mentioned, our realization was a driving force on this year. And if I look at past 3, 4 years also, the most of our EBITDA gain, time role was played by the -- our average sales realization improving or contributing. So how sustainable this -- obviously, near term, you mentioned that it looks like we can sustain that. But given you also pointed out that higher realization also attracts competition. So I'm just trying to understand going forward over a long-term basis, how sustainable this [ASR's] contribution to EBITDA? And how long it can continue? If you can...

Okay. So Chintan, valid point. The margin is coming from the market. This is a result also of how -- which markets we are present, which -- how are we nurturing our customers, whether it is through services or through whatever methods, okay? And whatever the customers' expectation more we are able to meet. And that is how we get that -- we are able to garner that additional money. If I would -- if somebody say -- would say that today, if I'm going to take a flexibility of close to about INR 80 a bag, I can sell higher than my competition, yes, going forward, this can go to INR 160 a bag. I'm not very -- not concerned about it. If the customer feels that there is a price band which it has to take and he has to pay for INR 160 a bag higher than my competition, then they will pay it to me. So I think we are looking at more of the customer side psyche on this part. And of course, when there is an abundance of material, I can say that I will come under pressure. So let me put it that today, we may be able to bear this very different size. But in future, maybe we have to come down to differences of INR 5, INR 10 also between the 2 brands. Today, it's a very different scenario. So I can say that sustainability going forward, I think it is a sustainable game.

In terms of the ASP levels maintaining or sustaining, but in terms of its contribution to our profitability. So my question is from that angle that how much we have to depend on our firm sales realization in the market, which will drive the EBITDA and from the cost front, again, most of the expenses are variable in nature. But still, what can we do to trim down our fixed cost or improve up on our existing facility that you are doing a commendable job in putting up capacities at a lower cost, that adds to the efficiency in the profitability as well. But yes, from that angle, I'm trying to assess further?

Chintan, to answer your question, we must say that, that cost-wise, more or less, the industry is close to each other, okay, not too much of a variance in this, okay? I don't think -- in the cost side, if we keep looking at it, okay, we can go to a -- ultimately, we'll touch the bone fast, okay? It will go and pick there. Now after this, there is no flesh remaining. Flesh has to come from the market, okay? So the entire effort and energy has to be there.

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

So congrats on a good set of numbers for the quarter gone by. Two questions. Sir, one, I was going through your update related to COVID-19 that you filed on the exchange, where it says that it's been a month for the production to have started, but normalcy is yet to be achieved. Now just a perspective, like we got from other companies in their most recent conference calls post the results, that especially in the center and the east region, the utilizations had come back to near normal. And in fact, if we try to probe it through -- like probe it further, we also understand that May as a month has actually seen marginal growth in dispatches coming largely from the central region, so to say, especially for large dealers and all this, just a channel check. So in that context, I was just trying to understand, when we say normalcy yet to be achieved, are we seeing a lot of material coming in from other markets and hence we are lower? Or we would still be broadly at par with the industry average?

Okay. To answer your thing, see, normalcy means like when we talk about normal plant operations, that means you are seeing that you will operate with 100% of the people there, okay? Here, you are operating with less number of people, social distancing, okay? The speed between each. The shift you have to go, 1 hour gap you have to give, okay? The next shift starts. So the hours lost. So in terms of that -- in terms of those efficiencies, that is what I was -- we are referring to, okay? Today, to run a skill and a mill, okay, fine. But tomorrow, monsoons are coming in front of you, how much are you monsoon prepared, your plants are prepared for that. You have to be -- there are many things. It's not just only production and sales is not the answer, okay? We have to sustain it also. Tomorrow, if something happens, a big shower, a cloud burst happens and you have not cleaned drains of your plant then you are had it. Your plant will be off for 10 days off together. So otherwise you got that -- so there are many things of this nature are concerned. Yes, on the other point is concerned, yes, there are other brands who are coming in. There are logistics bottlenecks, okay? Our prices are higher, significantly higher. So our acceptance also will be to that extent little. So softer only. We will get a pushback from the market to that extent. Some other brand would be able to sell a marginally a little higher volume than us. But then finally, it will balance out somewhere between. On a revenue basis, you will see it how it balances out.

Certainly. But I was only referring to -- and I appreciate the other aspect which you mentioned, but I was precisely mentioning only about the production part of it. That in May, is it fair to assume that we are like, as we speak, and I know, and I'm not even asking the guidance going ahead or in terms of any future outlook. But as we speak, is it safe to assume that we are seeing a near normal production versus last year or that kind of a utilization?

I think we can come to that level. That is not an issue, okay? But there are sometimes some months you have also your maintenance is repairs, okay, sometimes they coincide with certain months. So those things are the ones which will always -- if you compare it that am I able to -- if you ask me a question, can you run your plant at full capacity? I say the answer is yes.

Navin, just to add one more point in this COVID-19 the mitigation things, management has taken up during the last 2, 2.5 months. And the information we shared with the stock exchange yesterday. We are talking about that we are taking all utmost care for the safety of our people. At the same time, gradually, we are stepping up production. And we know that, okay, when you talk about the new normal in the business, then it will be totally different than what we used to talk in the past. So it talks about the entire COVID-19 situation, putting together all these aspects of the operation, including production.

[Operator Instructions] The next question is from the line of Sanjay Nandi from Ratnabali Capital.

Congrats on a good set of numbers. Sir, my question is like you mentioned that our GSR improved like INR 277 per tonne on a Y-o-Y basis, so which comes to this INR 14 per bag. So sir, is it because of the change in the some trade mix? Or is it because of only the market-driven prices?

Some part market driven, some part from -- it comes from all the incentive schemes and things like that. Everything that we have to keep tweaking it. It comes from various -- many aspects of the business, okay? So normally, we try to see that we optimize everything on the field also. So some months, we may not give some incentives, for me a draw back. And we see the prices are going up. Prices have gone up in fact now. As of now, there is a -- price of movement is very high.

Okay. Sir, what is the exit like price movement as what happened in the March quarter like as on date?

Prices have improved significantly. I would say I'm not -- I don't have the figure right away. But what is the March improvement? This is what you are seeing is this -- I'll have to check out. What is the exact amount, I am not having. But definitely, there would have been about INR 10 a bag, INR 10 to INR 12 or INR 10 a bag, somewhere improvement was there if I recollect correctly because it is now quite long back. When you discuss in the month of June, when you are wanting to be ahead on the way, at that time, if you look at it, I'll have to see my figures. Around INR 10 [Foreign Language], INR 10 to INR 12, [Foreign Language].

The next question is from the line of Shreyas Bhukhanwala from Canara Robeco.

Sorry, I joined in late. So just 1 question. So sir, how are we looking at the CapEx for this year? And we were thinking of expanding in west, if I'm not wrong. So any update on the same?

CapEx is normal. Of course, we have cut down on certain CapExs, which are -- which we think we can prolong or we can extend it into the next year. We have to conserve a little bit of more money at this juncture. So we have identified. There's a full exercise done. We have identified, classified them into 1, 2 and 3 segments into A, B and C, and then we have what is urgent and important and what is important and urgent. We have classified those, made those and accordingly, we will proceed on that. The other part of is, which is Gujarat is concerned, yes, we are progressing on that. But everything is -- right now every machinery, government machinery or anything has come to a grinding halt. So there is nobody there to talk about the government machineries fully engaged into managing COVID crisis. So any government department, you talk to them, they are not willing to talk because they are either on some emergency duty or something or the other.

Okay. So sir, if you can just quantify what would be the CapEx for this year, rough range, if you can give?

So generally, we do the CapEx based on the -- our replacement on account of the depreciation. And generally, we feel that 40% to 45% of the annual depreciation required to be replaced in the business. So based on that, the amount is almost around INR 500 million in a year.

Okay. And for Gujarat, since we are looking to progress, so have you postponed it to next year? Or we would be spending some amount for Gujarat also in this year?

We will be spending some money possibly. But as of now, this -- all these are statutory payments. So these are -- these will come up. There is nothing called as an -- into plant and machinery, okay? So everything will go under the studies and the environmental and all those things which where we go. But it will all depend on how the environment turns conducive.

Sure, sir. And there, we are looking at 3 million tonnes, right?

Yes, around that.

The next question is from the line of [ Pritesh Seth from Edelweiss. ]

Firstly, congratulations on good set of numbers. So 1 question is on the fixed cost side, which we have seen it increasing this year to around INR 800 or INR 900 per tonne. Especially in Q4, there was an increase in other expenses of 17%. So 2 questions on that part is, firstly, what was the reason for the increase? Is it because of some additional promotional expenses? And how do you look to control it in FY '21, given there would be a low-demand scenario or even a negative volumes?

So basically, if you see the trend of our fixed costs in some of the -- 1 of the quarters, maybe you'll find some increase in some quarter, you'll find some decrease. Because you know in the cement industry, generally fixed costs move based on your either plant shutdown or some of your sales promotional activities. During March quarter, yes, the amount when we compare to year-on-year, a little bit increase. But quarter-on-quarter, if you see there is a reduction in the cost. And the year-on-year cost increase a little bit on account of some of the sales promotional activities and some of the CSR activities we did additionally during the quarter. So these are the all controllable costs, you can say that, okay, based on the comparable quarter of last year, you will find that, okay, that there will be significant increase or decrease in the quarter -- in the future quarter comes.

Okay. And any plans of controlling that in FY '21, like any plans you have laid out already that -- how much of that would be cut down to in this year?

I think the management has really very close watch on the development or movement of the variable costs and the fixed costs. And earlier also in some of the calls, we talked about our continuous improvement program. And we really keep growth focus and we work on those kind of costs where we can bring under control. So I think it is very much under control. And you will not see much significant movement -- upward movement in the cost.

Okay. Okay. And lastly, any debottlenecking now you are looking at from your side maybe for next 2 years?

Right now. I think in '20, a little bit it will happen, something somewhere here and there, minor, small, small. We will look only at -- now at the clinker part. Maybe in '21 or so -- '21 next year, we will start looking at it that if we can do something in our clinker capacity enhancement that we will do.

The next question is from the line of Keshav Lahoti from Angel Broking.

Sir, can you please give us what was your capacity utilization in May month? And what is your current capacity utilization?

I won't -- as I said, I won't be able to inform you about the current one because we are relevant -- we will be talking about close to about 80 -- say, around 80% of utilization, which I have mentioned even the total last year also. So it is close to, I would say, 87% utilization is there.

Okay. Okay. And on the demand side, can you give me which was -- what would be the -- demand would be earlier it's picking up from infrastructure segment or the housing sector? As the -- what is coming towards the real estate is going to be in pressure pots quite some time now, the developers are planning to postpone the project. So is it like your cement industry will have a lower demand for a year?

Okay. So Keshav, on this part of demand is concerned, I mentioned in the beginning that you will find a reduction in cement demand in -- when it is coming to the small, small projects which are happening, okay, which are private-driven projects. But when it comes to government spending, I'm sure that the government is spending on MGNREGA or anything, they have increased the rates also in the MGNREGA there. The government spending, whether it will be irrigation projects or anything, they will be coming in a big way. That is what I'm expecting the way the government should be looking at it. Why I get hope from this is because cement and building materials were the first one, even under the restricted area in red zones, they allowed you to start. So the government knows. And I think yesterday or day before, our Minister Piyush Goyal also mentioned something somewhere, which I remember, which said that they are talking to builders and how do we revise these builders because build -- construction industry happens to be the biggest employment provider to the migratory labor in this country. So if you -- if the government's thought processes are like that, we should not get worried too much. But in the short term, yes, because government -- anything government does, it takes its time to mobilize things. Once the money comes in and to reaches the people and then mobilization takes place. It takes a hell of a time. I would say, completely it may take about 6 to 8 months if they start thinking today, it will happen in 7 to 8 months. You are right that the builder and some of these contracts will have a problem. And we are seeing that happen. So there will be -- a lot of money will get stuck up also in the channel in the businesses where they are not able to restart the business. So those people who are having exposures in these type of businesses with builders or other things or anywhere, could have a problem.

[Operator Instructions] The next question is from the line of Manish Saxena from Pinebridge Investments.

I think -- congrats for a good results in this sort of an environment and speaking to us regarding all the arrangements you have done post COVID. I have a few things that I wanted to check with you. As we still don't have the annual report, more of a bookkeeping thing. But just to understand in terms of the loan that's yet to be repaid, which you have showed in the presentation slide, how much of this is like the one which is NCD? And what is the government grant portion in this?

This is mostly what you have shown here is the NCD part and that what are you seeing in the '22 one, there is a government portion to it, which will be to...

'23 onwards.

'23 onwards, correct.

To answer to your question, if you see the presentation of Slide #11, talks about the entire outstanding debt of the company. The first 2 years, see, '21 and '22, these are the NCD, 2 installments, 2 tranches are yet to be paid. It will be paid in the month of December of 2020 current year. And then next year, again, December 2022, the balance amount will be paid. The third, bar chart on there, INR 2.3 billion, that is related to the government grant. It will start due from '23 onwards.

'23 onwards, okay. Also, just to understand, we have a net cash -- we have a reasonable levels of cash but this is something that even you highlighted in the COVID-related issues, and we'll be having a huge amount of a cash payout in terms of the dividend that would happen across. So are you envisaging that the debt levels in this current year will increase? Or how do you actually plan to manage the finances for the current year?

So at this moment, as on 31st March, we are more or less a debt-free company. So debt is basically equal or more or less equal to the total bank balances. And going forward, let us see, the shareholder will get the dividend. At the same time, we are hopeful that company also will make -- continue making money. So although it is the COVID-19 situation, very uncertain and the outlook also at this moment is uncertain, but we are very much hopeful that, yes, this growth part of the company will continue.

Okay. Okay. And just to also understand, in part of the other expenditure, is there any portion of other expenses, which is variable? Or this is largely fully fixed in nature?

So if you see the detailed annual report because in the published result, it is the format given by the SEBI. So there you need to give only 5 or 6 line items. So other than power and fuel and the freight and salary, everything is consolidated under the other expenditure. But when you see the -- our detailed annual report, you will find that some of the expenditures are variable in nature, like there are some handling costs, which we incur for the cement, unloading and loading. But at the same time, some of the costs are the semi-fixed and the fixed nature. So the detail, you will find it in our detailed annual report.

Okay. Okay. And the reason was basically to just to check on, like, would there be some reduction in other expenses because April was largely a shutdown or not?

Yes. The management has taken the entire status of the -- all this expenditure, and we have also informed the stock exchange yesterday about the initiative taken by the company. And we are hopeful that, yes, there will be -- always be tranches of optimization, and we are taking up with the various means, so that shareholders will feel that, yes, we have handled the COVID-19 situation appropriately and very timely manner.

Okay. Okay. Okay. And 1 final question was on -- other expenditures is done and cash, was on -- you again mentioned in the COVID outlook that some issues in terms of procuring jute bags or something like that in terms of packaging material or this thing. Is that a thing that you really think that because of the other things that you mentioned, is that something that we should keep a watch for?

Jute bag?

Jute, I mean something in terms of availability of packing material or migrant workers. What was...

Okay. Okay. Okay. See, it is to do with -- what happens most of these bag suppliers, okay, you must understand that these bag supplies, HDT bag or PP bags, it has got a very high quantum of manual work, which is some time in printing, sorting, packing, stitching, okay, these are things which are happening there. There's a lot of manual labor employed at these packing units. Now this labor has migrated. So the suppliers are finding it a little difficult, of course because this is all skilled manpower. So they are facing problems. But I think now most of these people, we have been able to get the labor back. And I think in another 15 days or 20 days, they should come back to normalcy.

The next question is from the line of Kamlesh Jain from Prabhudas Lilladher.

Sir, just 1 question on the part of incentives, the GST incentives, which we book or recognized in other operating income. So what's the status on that? And would we be eligible for this expansion to get the same incentives or not?

See, incentives are linked to volumes, they do. So I think they will continue to get whenever they do the volumes, they do their targets. Whenever they do their -- they achieve their cash discount schemes. So all those things, which will -- as a business, common business practice will go. So suppose in the month of April, you did sale virtually nothing, okay?

But I'm not asking about that, sir. I'm asking about the GST incentive.

GST incentive.

So basically, GST incentives, like we have said last time that we have for the time being discontinued the accrual of the GST incentive in our books. We are waiting for the changes or modification in the notification issued by the Government of Madhya Pradesh. Your -- answer to your another question with respect to incentive entitlement of the debottlenecking volume increased by the company, very difficult to say at this moment because our incentive industrial policy benefits in Madhya Pradesh has given based on the incremental volume. So if our incremental volume we achieve in the Madhya Pradesh, we'll get it on prorated basis on that volume wise. So let us wait for the modification by the Madhya Pradesh government and thereafter, I think we will have the more clarity about the entitlement of the incentive.

And secondly, on the -- your opening remarks, that we are getting -- our entire earnings is coming through the higher realizations, and we are proud of that our margin -- our premiums and all that. But if we see our capacity, we have increased more than by 20% and we are going to just be satisfied with the fact that we have the margin. So would we be eager enough to push the volumes? Or we would be more satisfied with these margins going up by INR 100 or whatever levels we want to target? So how the thinking would be going forward?

So it is -- today -- it is a day-by-day fight, okay? Kamlesh, the problem is today, if I've got 20 trucks standing outside who can take my material and 1 rack, okay. Now I know that if I have only this much of material, my price will be different. Tomorrow, I've got 60 trucks standing and my racks are -- 3 racks are standing, then my pricing will be different. So it's very clear that if I have got lesser material and there are buyers are standing outside, there are 300 dealers waiting for material, then my price will be for today different. Tomorrow, it will be different.

The next question is from the line of [ Jaspreet Singh from Equentis. ]

In one of the slides -- the second slide, you mentioned that there was a reduction in volumes primarily because of the lockdown. Just possible to share what could be the potential production or sales loss in the month of March because of the shutdown, ballpark?

March...

About 10 days impact was there.

About 10 days impact is there. 10 days of volume lost. So you can say we are doing about 4 lakh tonnes a month. You can say about -- close to about...

1.25 to 1.5...

Yes, about 1 lakh tonnes -- 1.25 lakh tonnes is gone.

See, the government has given this lockdown officially from 24, but you see in some of the states, the restriction have started much before. Somewhere, it is the 15th March; somewhere, it is the 20th March. So overall impact, you can say that, okay, 1.25 to 1.5 lakh tonne in the month -- the real potential during this situation.

See, more than that, the stocks which got held up, okay, which were in transit, that was very big. So that could not be sold. But anyway, that -- ultimately, when the lockdown opened, it went off at a very high price. Because everybody was dry up with material. So that went up at INR 50 a bag higher.

Okay. Understood. Got it. And the second slide, you talk about FY '21 outlook, all of the constraints, working capital, liquidity crunch, truck drivers, labor cost and railway yards, manpower, you -- I mean, I know it's been clubbed together. But what's your strength? I mean, is it -- from now, is it a month or 2 problem? Or you think it's going to be there for most part of the next couple of months? How do you see this, sir?

See, this will continue to keep haunting us somewhere or the other till the time -- and I think this will continue. I'm expecting -- see the agricultural produce this year has been good, okay? So those labors who have migrated to rural India, okay, their chances of coming back soon are little remote. So you can expect that you'll -- we'll have these bouts of blow hot, blow cold. It will be very uncertain situation. And I think things will start improving after Diwali, okay, when it comes to major cities are concerned. Small businesses, small, medium enterprises, they will continue unless they had some permanent jobs, and they were paid very well. But if somebody normally in small, small industries, what happens, the labor does not get paid as well as the organized industry. So if they are going to be paid lower than NREGA -- MGNREGA and MGNREGA, you're getting more money, these guys will not go back. There is -- okay [Foreign Language].

Next question is from the line of Prateek Kumar from Antique Stock.

Sir, my first question is on your realization growth for the quarter, is at around 4%, 4.5%. It looks like slightly higher than most peers. So when you mentioned that INR 10, INR 12 increase, was that for Q4? Or you were talking about current quarter Q1?

This increase of gross realization is about 5.8% over the previous quarter year-on-year basis.

On a quarter-on-quarter, if you can...

Current quarter.

INR 10 to INR 12, we are talking about the current situation, post -- maybe during the COVID-19 period.

Right, right. So on -- in Q4 versus Q3, also, your realization was around 4.5% higher. So this seems higher than some of the peers, so any specific reason there? Either there's clinker or cement mix change or something that contributed to this?

[Foreign Language] nothing. We did not sell any clinker. It's only probably market driven.

Okay. So when you say INR 80, you have a flexibility of selling volumes at -- as like INR 80 versus competition? So this would be part of your like INR 280 kind of increase in realization, which you saw last year and maybe going forward...

See, I don't know. It is not -- no, no, no, don't be under that impression that it is an increase, okay? It is those people who are coming down and selling it at these prices, okay? So if I am -- if I was selling at INR 400 today, okay, my -- if I have increased from INR 380 to INR 400 I have gone, okay -- when I was at INR 380, they were bringing cement at INR 250, okay? Now today, they are able to -- maybe INR 300 or so, okay? Maybe today, we are bringing at INR 310 only or they are at the same price. So my INR 20 has gone up to that extent, for INR 25 or INR 30 depending on the market to market, whichever I have. In certain markets, the prices are shot up by more than INR 30 also, okay? And they continue to be at the prices, which they were in February there. So that's the difference. I'm not making more money. My difference has increased.

Okay. Just 1 question on your other income looks slightly higher for the quarter and tax rate for future, are we looking to move to new tax rate anytime soon?

So basically, the other income is coming mainly on account of this income on the surplus fund available with the company. And that's why you have seen the gradually quarter-to-quarter, there is some little bit improvement in the other income. With respect to your question on the -- if I understand correctly, you're talking about the concessional income tax rate. Is it your question with respect to concessional income tax rate...

Yes, 25% tax rate as per the announcement last year, government announcement.

See actually, company is currently carrying some amount of minimum alternative tax balance. And we are still evaluating this situation when we need to switch over from the normal tax to concessional tax rate. And I think we will decide as we think that okay it will be better to move to concessional rate. Once we adjust our minimum alternative tax amount, I think that will be the right time to move to the new tax regime.

We are on 22.

Ladies and gentlemen, due to time constraints, we'll be taking the last question. We'll take the question from the line of [Amit Maheshwari from HDFC].

Sir, I would like to understand what will be the total delivered cost for the company? And at what lead distance we operate?

About -- right now, delivered cost is about INR 1,000.

Okay. So does it include, sir, clinker transfer cost also to the grinding rate?

No, no, no, this is pure cement.

Pure cement. And what leads, where we are operating, sir?

About INR 375. 360 -- between -- around you say -- INR 368 or INR 370, you can say.

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Vaibhav Agarwal for closing comments.

Yes. Thank you. On behalf of PhillipCapital, I would like to thank the management of HeidelbergCement for the call and also many thanks for the participants for joining the call. Thank you very much, sir. Stanford, you may now conclude the call.

Thank you.

Thank you, sir.

Thank you, Stanford.

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