HeidelbergCement India Limited (500292) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '21 Conference Call of HeidelbergCement India Limited, call hosted by PhillipCapital (India) Pvt. Ltd. [Operator Instructions] I now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital (India) Pvt. Ltd. Thank you, and over to you, sir.

Thank you, Stanford. Good afternoon, everyone. On behalf of PhillipCapital (India) Pvt. Ltd., we welcome you to the Q2 FY '21 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 HeidelbergCement India Limited and its management that certain statements that may be made or discussed on the conference call may be forward-looking statements related to future developments and the current performance. These statements are subject to a number of risks, uncertainties and other important factors, which may cause the actual developments and results to 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 Exchange and its website. Participants may download a copy of the presentation from these websites. I will now hand over the floor to the management of HeidelbergCement India Limited for their opening remarks, which will be followed by the Q&A. Thank you, and over to you, sir.

Thank you, Vaibhav. And once again, thank you to each and everyone for joining this earnings call. First of all, my best wishes to all of you on the occasion of Dussehra, and I hope everyone is safe and healthy in these times which are really challenging times. Nevertheless, the business has to go on. And continuing with our tradition, the way we are moving ahead, so I just present to you the September quarter results. You have seen them already. The presentation is already there on your -- in front of you, you would have seen it. Coming to the Page 3 of the presentation, which talks about our cement industry volume. I would say that it has been an up and down movement. Things are swinging, which I would say fully in the positive direction, given the growth rates which are coming in. Of course, it is a very mixed feeling when you look at an all India picture. But when you look at region-to-region, the feelings are very different. So I can only say that recovery in the markets where your company operates, the trend has been a little positive. And as more work, should I say, is more stable, considering that this is -- these 2 markets, Central India, our labor surplus, and these are the exporters of labor. So they have got enough labor which came back. So there has been a positive factor on that. There is a pattern -- demand pattern has changed over the last 7 months -- 6, 7 months. Nevertheless, going forward, I think the trend is going to be somewhat up and down. We will see some good months, some bad months. Coming to page -- next page of this. If you look at -- we had -- we continue our tradition of 0 harm to our people. We want our people to be safe, healthy, okay? They come here to work and be happy. So we have a 0 lost time injury and 0 fatality. Fatality is a big no. But even we don't want scratch on our people going forward. Recovery, most of them, as I mentioned to you, the volumes have recovered to some extent. But it varies in micro markets. And in the market, micros have done a little better than the urban markets. We are 100% blended cement that takes you to a very clear picture that we are CO2 -- very strong on the CO2 footprint. And going forward, I will talk to you about that also. Dependence on the grid power remains around at 60%. So we have come a long way. We have renewable energy third-party energy. And now we are working towards putting up an AFR feeding system also in Narsinghgarh. Our EBITDA per tonne has gone to about INR 1,137 -- INR 1,140 almost per tonne, which is a 5% increase -- growth over year-on-year basis. And the final dividend we have declared and it has been approved by at the AGM of 60%. So in all, total was about 75% for the year. We continue to operate on net working capital, which is again a forte for us, which is again a very strong point for us that we are one of the companies who believe cash is the king, and we manage our cash very clearly, and we continue to work on our negative working capital. Going to Slide 5 of the presentation, you will see that we have -- I mentioned about EBITDA has grown by 5% on a PAT side. On absolute terms, we have grown 7.3% on the PAT side. EBITDA, we have had 1% close to about 100 basis points improvement over last year -- till last year. And similar is reflected in the PAT also over the last year basis, based on the margin side. Coming to the waterfall, which is on Page 6, you will have seen a consistent improvement that it is -- the price has been a very big beneficial part of it. And of course, power and fuel because we had power, we had fuel, which was at a lower cost at that point of time, which supported us during this quarter. And also, there was a good rejigging of the power sources. So we could get power also at a reasonably good price, and that's how we could save on this. On the side of the other expenses, others, what you are seeing, which is the red point, let me mention to you that there is basically because of some postponement, we not -- we would have taken 2 shutdowns but we postponed 1. And there was a rejigging because of the -- because the plant did not operate 1 month. Okay, you cannot take up as schedule. So the entire schedule has got disturbed of the shutdowns. And taking a premature shutdown also is not a very good thing. So you have to extend the life and you have to use the full utility and benefits out of this. Before you take the shutdown, you should come nearly close to a point where the plant will stop. That's how efficiency of the operations is reflected in our system. And when I talk about on the Slide 7 on the share of volume, there's an improved higher road share has gone up to 49%, that is about almost 5% or 500 basis points, which is better. Coming to coal. Coal component has gone up because we had to rejig this based on the availability of pet coke and things like that. So our premium brand share on a -- it was -- in the trade volume, it has gone up by almost -- to almost 20% year-on-year basis. I should like to mention here also that we have introduced another packaging in the market, which is premium packaging in the market. And we were clocking around close to about 13%, 14%. Now we are clocking to 20%. So that has got us from additional share -- displaced share of -- which was -- which we probably would have lost to some people, some industry colleagues or some brands. So we have again taken it back. Our target is to reach to 25% of our total volume share. I think we are on the right trajectory is correct. 85% of our target is to remain in trade sales, about 85% to 90%. Next year, it should be -- we are targeting to improve upon it. So there has been a little slip of 225 basis points on this. Nevertheless, this is not so much of a -- it does not hold so much of impact on the result because you have to -- this nontrade becomes a filler for us and we try to optimize it. Tomorrow, if we are on a sold-out basis, we will expand nontrade business totally. On the balance sheet, we have increased the size of the balance sheet. So you can see this. Now it is 28,000 -- almost INR 28 billion worth of balance sheet is there. So it is -- the growth is -- anyway but there will be some changes in the balance sheet in the years -- months to come, in the years to come, right? Considering that we are a very environment conscious organization from the -- if we draw from the group and we want to be -- business is one side, you've got to be compliant and you've got to be socially responsible, okay? And our business exists because people exist, the society exists. If the society won't exist and people would suffer from health, their medical bills will go up and it is contrary to everything. And of course, it also deteriorates the human DNA. So we're cautious about our very thought process that we have to be very environment-friendly and sustainability. We launched this website of Friends of Earth. You can most welcome to go to the site. This site is nothing but it logs down all the tree plantations done by business associates. And now it will be open for even general public who can plant trees and send us the data and we'll put it. These all trees with their details, what tree it is, what is the size of the tree, date of plantation, what was the occasion of plantation and all that and the pictures are attached to it with the lat long so you can see them on geotag. It is nothing something that you say that I've planted 1,000 trees. You can verify each and every tree. If 1,000 trees are there, it has to be verified. It's a verifiable thing on the basis of lat long. And this will carry history of pictures as they come in, flow in every year after year or after every 3 years to show the growth of the tree, which is visible to the people who are planting today and to their children and to their grandchildren in future too. So this is one initiative which we are trying to make our footprint stronger on the planet and also we -- what -- it is delivering what we are saying, okay? It's not something we are delivering just by -- in words, but it is action in action. Annam scheme is yet another measure where you would have seen the commitment of the company towards the underprivileged section of the society, CSR. This is part of the CSR. Over 28,000 families have been covered. We did this in the month of -- previous months, and there is a flow. We did it for 2 months, and the flow of that money continues to be spent in these months also. So that has helped a lot of -- your company also has been able to build up a very good image in the market. A lot of loyalty has developed. A lot of appreciation from the society. And there is inclination towards more towards your brand. Coming -- another point which is on Slide 11, we have started -- this will be probably going down as one of the major initiatives which will be -- as I'm told that we are talking about carbon footprint. So we have designed a special measure where do we stand in terms of our carbon sustainability. These vehicles are sourced from GCCA, Global Cement and Concrete Association. This is the global website where people can also go and verify these data of what the industry data are. And this company-by-company and the product-by-product, we can define very clearly based on the clinker content or the cement which we produce. So your company is here in this Central India and South India, the HCIL is 100% blended cement. So this is what you see it in the footprint. It talks about 520 Kgs per tonne, which is far lower than the industry standard. Target is to that we want to have a carbon-neutral concrete by 2050. But by 2030, we want to reduce further our carbon emissions and this -- now this, we are launching -- going to launch our new cement also, which is called Greencem, which has already been now at the levels of approval levels. And this will be -- Greencem will be a new product which we will be introducing in markets, and this will carry the label also. It is -- this cement will be for those who matter -- for those who care for the environment. Idea is to propagate and make people think what is good for the society and also support and buy products which are green products, which is a normal global trend. You would have seen any where now people are talking green. And this will be -- this carbon level will be, as I'm told -- as we have checked it across the globe, this is the first of its kind carbon label ever used by any cement company across the world. So there is no mention about these things. But your company, this HeidelbergCement India will become the first ever cement company in the world to put up this carbon label on its product. Coming to -- on the outlook. As it happens, resumption of business took place in the month, I'm talking about cycle. And we have been moving and tugging along properly. Things have moved. Steady recovery in the IHB segment and some rural areas, as I said, that it is positive. Further improvements post festive season, we are expecting that will start moving. Also not bad -- now also, it is not bad for Central India or any other market. The best part is the prices are from -- demand is consistently -- even if the demand has been a little softer than some parts -- some weeks of the month, still the prices -- we have been able to hold on to the prices without any stretch coming in. Working capital, as I said, its -- liquidity will remain a big issue. And in the previous discussions also I said. But HeidelbergCement India has been able to -- the team has been able to do proper collections and manage its cash very well, and very astute treasury system to manage this cash. Energy prices will depend. As I said, it is a government thing, and energy prices will be dependent on the supply/demand. But I don't think they should move not for us too much because the economy is reeling under real pressure. So after seeing a degrowth of close to 23%, 24% in the GDP, I don't think there will be -- you should expect price hikes. Input raw materials, we have to now -- because of the power plants and things like that, material availability, raw materials is a challenge. But anyway, the procurement team and everybody is fully geared and they are able to source the material. We don't source it at unreasonable price or unrealistic price but within the limits defined by the management. People are able to run our -- bring the material and also we are able to produce our cement and sell it in the market. But going forward, if these prices remain firm, the price -- there is no second option but the cement prices will have to go up. There's no option to the -- before us but to increase prices. And optimization of operational and working capital will hold the key how well you manage these operations in time. Flexibility, okay. Agility and speed are the key words which will drive the organization going forward. So we work on that. And with this, I come to the end of my -- I mentioned to you, all of you, addressed to you very happy to take on questions from you. So we can -- over and back to you, Vaibhav. Okay. Just 1 second, 1 second. I would like you to take you to one page on the 14 page. Page 14, you would have seen, we have put up a new slogan for our group. Group has come out with a new vision, it is coming out with a new vision and mission statement. And this is part of that, "Material to build our future." So this is the Heidelberg Square finds its position across the globe, which is footprint that is visible on the globe. And these are -- we are -- and it can be read in both materials to build the future and it is even material to build the future, okay? So it is -- it can be used in both the manners and both connotation it works out well. So this is our new corporate global logo or you should see a sign or a signature of the Heidelberg. Thank you very much.

[Operator Instructions] The first question is from the line of Dhaval Joshi from Sundaram Mutual Fund.

Sir, just a couple of questions from my side. Can you give us the idea about how much percentage growth we have seen in our central region for the quarter?

Quarter -- for the quarter, I don't have the real figures actually where we -- I cannot talk about the industry figures because there is a mismatch -- there's -- say, in the figures. We are not -- the results of all cement companies from central are not declared. Ballpark figure which is visible seems to be a little bit of flattish or maybe a little negative, too. I can't say right now.

Okay. Because sir, where I'm coming from is the -- our volume number is constantly -- if I exclude last 2 quarters because of the COVID impact, Q4 and Q1, then we are seeing continuous negative growth since Q4 FY '19 onwards. I just wanted to know whether it is constrained to the capacity which have -- anyways we have resolved with debottlenecking thing. So when can we expect growth or market share improvement in that?

See, we have been able to improve the price line, okay? That is very important. So if I -- we could have done 2 things, okay? We could have sold more volumes and dropped the prices, okay? Since we are the -- one of the prominent strong brands in the Central India, it might have caused more flutter in the industry if you would have dropped the prices and taken the volumes. I could have -- we could have done that also, okay? But I think it was making more sense because we are moving towards the premium category positioning. So we -- sometimes we take conscious decisions also on volumes. Volumes will come through. Volume is not a big thing to say, okay, volume, this is a matter of -- just a question of price. So as I see it right now, when we have taken a trajectory and we have taken a decision that we reach a certain level once there is a customer pull for our brand, then volumes will just fly off.

Okay. Like -- because despite -- we have a negative working capital and so much of demand for our product and brands, that's why my question came that we are losing our market share. That is what I thought, and that is the reason I've checked with you.

Yes, Dhaval, we are not -- I don't think we have lost market share, okay? And even if -- because we were almost close to -- in Central India, close to 10% market share. So even if, let's say, become 9.8%, it really won't matter because this is the inertia which I can just put a step -- just put the foot on the pedal and then it will just straightaway zoom off. It will not take that long.

Got it, sir. Got it. And sir, next, only one clarification. The full impact of WHR and in power and fuel everything has came off, right, as of now?

Yes. So right now...

The impact has already came?

Yes. And for WHR is -- with God's grace, it is operating also at a very good throughput.

Okay. And what is the total savings you have seen so far?

On an annual basis at about INR 40 crores.

On power front, maybe there is some little bit room further for the renewable power, which we are working for. And I think going forward, next year, you will serve -- see some saving on that account also.

Okay. Okay. So -- okay, renewable power, that's right. And sir...

Also about the WHR, we are putting up -- this -- the waste heat recovery of the AFR. AFR is alternate fuels we will start. Really about 6% to 7% of our thermal substitution will happen out of that once that gets into full swing. That we expect to start somewhere around June, July. After July, it should click in.

Got it, sir. Got it. And sir, low-cost coal, pet coke inventories are there as of now for the next quarter?

We have exhausted our inventory. That's why you are seeing some benefit, which has come under fuel. We took advantage of it. But in the future -- right now, the coal and the average cost of fuel is about something like 300-odd, which is similar to per gigajoule which is very similar to what was last year.

Okay. So I mean we are switching more towards coal and not the pet coke because pet coke is around $100 as of now. It is correct?

Yes. Now it is 10% costlier than on calorific value more than coal.

Okay. Right. So I mean -- so my question is, I mean, probably Q3 where we can see 80-20 kind of a ratio of coal, pet coke?

[Foreign Language], we won't see next year. With this pet coke, we remain...

No, no quarter?

I don't think it will -- it is possible to do that, no. Now the new pet coke which will come, it will be at a very high price. So we'll have to be very, very stingy about it on use of pet coke. It is not good for us because we had aligned our system with higher pet coke. We are -- we tried to use other additives also. It makes the impact on the total raw meal what we create. So if pet coke is cheaper, it adds much more value to us.

But at the same time, you will see a little bit maybe plus/minus in the pet coke consumption. Even in the September quarter, you have seen that we have slightly increased the -- our coal consumption and try to -- in the coming quarters also try to optimize the mix based on the availability and the cost. And when we see the cost, always we calculate that what is the pattern on the cost of production of clinker and considering all the details and the other material, then we decide about the pet coke consumption either reduced or increased.

The next question is from the line of Rahul Jain from Credence Wealth.

Sir, my first question is with regard to the demand scenario. Considering classified into trade, nontrade, rural demand, urban demand, infrastructure demand and housing, if you could share some more details on each of these segments. How they have been in the last 2, 3 months -- last 1 quarter? And also, how do we see the situation today and going ahead for the industry and for the company in terms of the regions in which we operate?

So the government demand has been, I would say, on an average, strong, I would say, on the positive side only, especially in Uttar Pradesh. A little soft on -- it would be on the MP side. But on UP, it is positive. Coming to your share, IHB segment constitutes about close to 60%, 62% of the cement consumer to the retail outlets. There is a very massive drop down in the builder segment. So that has been hit badly for various reasons of labor, for various reasons of cash flow that these people are reeling under pressure, and they don't have capital to put into the market. They don't pay you for their old dues also. So there is a problem there. So this will continue to languish for some more years, maybe for months or maybe a year or 2 also. You cannot say that because there is a lot of unsold inventory stuck in the market. The property prices have corrected in many of the markets by almost 20%, 22% or 25%. So this is what it appears to be. Government constitutes close to about 30%, 35%, 32% -- 30% to 35% of the volume it is pulling up. And then this 5%, 7%, which was missing -- which is missing, which -- out of which, you can say, it is operating at 50% capacity. So here we stand on that.

Sir, going ahead, the way we look at for next 2 quarters to come, what is your judgment in terms of demand moving up, of course, apart from the seasonal impact, I'm comparing it on a year-on-year basis, basically?

See, now COVID has become part of our life, okay? Now people are not so -- despite you're clocking the -- the country clocking 1 lakh and mortality coming to such quite high also, rates are not -- about -- what I would think the people have got used to this whole system of COVID. Now people are getting back to work. You can see traffic has come back again almost close to 80%, okay? These are some studies -- research studies done by many research agencies. You are seeing the traffic back to 80%. Migration of labor taking back from -- to cities, which is happening. So you can see that also. Yes, precaution is there. Speed of work is a little slow. But imagine what has happened is in this whole bargain, the labor cost has shot up, okay? You go to any market where a labor earlier was available for INR 500, today he is not available less than INR 800. The guy who was the Mistri or Carpenter or senior guy who was drawing INR 800, today he is charging INR 1,500, okay, as high as that. And people are not available. So this has improved the earning ability of -- at the bottom of pyramid. Now if these people are going to earn like this, okay, their spending power will come back gradually. So the power of earning will come back, back into the rural markets where it is supposed to be. So Tier, which we have been proponent of this, we're talking about for so many years that the growth is in the hinterland and that is becoming -- coming true. You asked me that the situation demand for the coming 2 quarters is concerned, I would say very careful about it. And I would say, okay, you should be able to do the similar volumes what you did last year or a little marginally here and there. So if that answers your question. I'm giving it with a very much of a caution. Reason is that now that the Dussehra is over, Diwali is just another 15 to 20 days ahead of us. Nothing -- we have not seen any negative signs of people. Yes, consumerism in terms of the consumer movement of our other goods, we are seeing very soft pedaling. But in terms of cement, I think it is going up.

[Operator Instructions] The next question is from the line of Ramesh Bagwan from Prabhudas Lilladher.

This is Kamlesh here, sir. Sir, just 1 question on the part of the volumes. Like we have been growing far, far below the -- our market for last 3, 4 quarters as rightly pointed out by Dhaval as well. So actually, what is the rational for us going forward? Like, are we really focused on the margins only, like we want to maintain INR 1,100 per tonne? And for that, say, if the volumes are down by 5%, 10%, would we be happy in that as well as much?

Volumes, we are never happy by 5% to 10%, okay? This quarter, we lost about a little bit. As I said, for me, it's okay. As I said, on your EBITDA front, the entire [ head/eye ] dropped prices by INR 10, the entire industry would have also lost, okay? Please understand that there is a responsible behavior at the top, and the market is really not growing at that pace, okay? There is a liquidity crunch. We can throw material left, right and center and then write-off maybe another INR 20 crores as bad debts. That's not the answer to it, okay? Today, you give money to a builder, you don't expect him to pay you since 9 months -- next 9 months. And tomorrow, if he meets with the fatality of COVID, you are dead forever. That money is never going to come. It's a question of time. Ramesh (sic) [ Kamlesh ], you have to -- we have to be very clear about it, what you can manage and what you cannot manage. Eat only to the extent of your -- you can justify to your shareholders, okay? Tomorrow, you will not spare us if we were to come back to you and say that INR 50 crores has to be written off. You won't like that.

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

Sir, my question is on capital allocation. One is what is the status of the Gujarat expansion? And secondly, from the annual report what we see is there are term loans which has been given to Zuari. What should we make of this? And what is the end-use for the quantum? And is there any cap to it?

Okay. So Ritesh, on the Gujarat, we now -- we will now start our environmental studies. So this will start. It will take about a year, 2 years to do this. Once the environmental studies are avail, then we'll go for a clear and environmental approval. And once that approval comes, then we will think about the Gujarat -- putting up the Gujarat project. That is one. On the term loan given to Zuari, it is about INR 150 crores. And the last tranche will be disbursed by -- latest by March 2021, and it will carry close to an interest rate of about 7.5%, close to that. And this will be fixed for the entire term. No further expansion -- no further loans are to be given. This is the one and all -- one by itself. No further extensions to be given. There is no rollover in this loan. It comes back to us by end of 2 years in full. Where -- in terms of its use, Zuari Cement is putting up WHR plant, WHR unit, which is costing them INR 230 crores. We are funding that -- the rest, they have funded about INR 80 crores, they have done it on their own. And about INR 150 crores, we are giving. So in fact, today, it is a very good thing that the shareholders approved this giving the term loan. Otherwise, we would have been settled. And at least there will be income which will come to you of close to about INR 24 crores, INR 25 crores. Plus, I have spoken to you about in the past also about the MAT credit, we will be able to utilize, about INR 85 crores of MAT credit still remains on our books to be utilized in the coming 1.5 to 2 years.

So Ritesh, just to add one thing that the shareholder has approved this loan. So far, no amount has been given as a term loan. We see the enabling provision given by the shareholders. So based on the requirement of the Zuari Cement, then we will release the tranche by 31st March 2021. So at this moment, as on 30th September, in the balance sheet, there is no loan to Zuari.

The next question is from the line of Rahul Jain from Systematics.

Sir, coming back to the question on volumes again. So we right now did debottlenecking, and we are at 6.3 million tonnes. So how should we look at it, say, over 2 years? So essentially you are trying to say that if you get the market opportunity, you probably can reach to 90% of utilization. Is that how we should look at it?

So today, we are operating close to -- if you say that we are operating close to 80% of capacity utilization. And going forward, we will step it up. Now in the coming months, we are obviously observing that there will be a good demand. So we will improve the capacity utilization. We will have to do a little bit of changes also in terms of logistics also. So there will be some logistics tweaking will have to be done for the market. Because now -- right now, we are in the position that if we have to go full steam, then we will require some more trucks also. So our contractors are building up the truck fleets and things like that, and they are getting ready for that to serve the market. But today, also, if I want to operate at 90% capacity utilization, the existing resources are good enough to operate. The 2 things which we want, okay, we will not compromise on and that is on the quality of our product, quality of our sales also, okay? We will not throw money on credit. We will take always our payments into time. We are very selective about our consumers. We are very selective. There is a good amount of demand which comes in. Sometimes it does happen also that we may have more orders but we may not be able to dispatch. That also happens. In today's COVID's time, one bad wave comes in, in some market and some district and then there is a lot of fear and panic. And that can push you back. So you -- today, they want 200 tonnes of material. When the truck reaches there, there is a lot of entire market is closed down or something that the panic has started. So that also impacts. And then what do you do with the 200 tonne. You have to put it into some other place. So these ups and downs are there. Notwithstanding this, we are clear that we will in -- by '21, '22 -- '22, we will be virtually almost again sold our provision.

The next question is from the line of Gaurav Rateria from Morgan Stanley.

Sir, just to clarify, when you said retail demand is 65%, 66% in builder segment, that is -- is that another 5% over and above the retail demand, is that what you quantify?

See retail demand is mostly for the IHB segment. Now what is happening, there are quite a few contractors earlier who were gone into nontrade. They are not able to come directly to the companies also because their cash flow is dried out. So they are now going back to the retailers. So we really cannot make out. Sometimes what happens is at the retail level the person who is buying, although we try to tell our retailers, we -- although as a customer base we maintain. But to get a full clear picture that this contractor was an irrigation contractor who bought the material or it was a builder who bought the material on credit and the dealer is funding that, okay? We are not funding it. Earlier, we were -- these builders and many of these people used to pay us advanced payment and take material. Now because of the cash crunch, they are going to the dealers or the middlemen who are buying cement and as a dealer and supplying to them. They are ready to pay a higher price. They are not getting the benefit of a lower price. If that was your question, it answers your question?

Quantify how big is that segment which is stressed right now and where the demand...

About -- it is about 20% of that market is stretched.

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

Sir, my question basically was the sustainability of volumes. So if I look at it on 1.1 million tonne that we have done for the quarter, typically, that comes to around 11,000, 12,000 tonnes per day, sort of a number. I believe, for the month of September, that could have been slightly higher. So how do you see October going or like because towards the end of October. So how do you see that sustaining for us or for the broader industry as well? And in the same breath, are we seeing a lot of material influx coming in from the Central -- from the northern player, the Chhattisgarh player which is disturbing much more than what it used to before?

So right now in the month of October also, it is a little softer because at least 4 days of the month are still because of holidays. So you can say that if it would flock out, it will flock out to something like 12,000 only. On the basis, this is what could happen. It's happening also. And -- but the best part is that the prices have improved, okay? In the month of October, there is an improvement in prices. So marginal, a little bit of softening in volume, but this is for the industry, I'm talking about. Our industry, I think, should also taken benefit of this price. We have increased our prices in the month of October.

The next question is from the line of Rakesh Vyas from HDFC Mutual Fund.

I have 3 quick questions. First is on the freight side, sir. So we have been able to reduce our freight cost despite increase in the road share, and there has been a substantial increase in diesel prices as well. So can you just highlight the reason behind it? Is it just the lead distance? Or there has been any other changes that you would have made?

So I can only say that this is -- from the competition viewpoint of it, I won't speak too much on this. We do a lot of internal discussions with our transporters, how do we improve the turnaround time and how do we improve their total earnings also despite certain metros -- market forces being in place. So we do a lot of exercise with them, and that is -- this is the result of that. Diesel prices will continue to go up. And going forward also, we are clear about it that if the surcharge, what you call it as the peak season surcharge does not come in, we will try to clock the similar logistics costs in the future also.

Okay. Okay. Sir, second is around the fuel mix. So essentially, you were highlighting that pet coke is now costlier. So I believe, given how our location is, we are relying more on the domestic coal itself or are we importing as well given the price differential? And where do you think your coal mix could actually settle at if this price differential remains between pet coke and domestic?

So we have -- Rakesh, we have signed an FSA for -- on coal. So we are obliged to take that coal. So that much quantum of coal [Foreign Language] we'll have to take anyway. But in future, in the year ahead, we will definitely look at some imported coal also because the quality of coal in the Indian market is deteriorating very, very sharply. And there is -- nobody wants to listen to the quality. What is assured and what is delivered, it is a hell of a difference, and you can't fight out a battle. Management cannot lose time on that. It is better to find out a solution of your own where you can operate. So we are -- pet coke is totally domestic. No imported pet coke we have taken. And right now, also, there is no way that you will be -- anybody will be able to take an imported pet coke given the current prices. So in the next year, if you ask me, going forward, what will be the mix, I'm sure that coal percentage will remain on the higher side. Those days of 70% pet coke and 30% coal are not likely to come unless the refinery start working, okay? And right now, it seems that globally, the refineries are not operating because of the fuel -- because of the diesel and petrol consumption may have come down. So this could be one of the reason. But then once we start plants, I think again, pet coke will come back down to INR 60, INR 65, which would come back.

Fair enough, sir. And 1 last quick question, sir. Have you seen any supply disruption in the market that we are operating by any other players in general?

See most of the disruption is happening is because of low-priced brands which are coming in sold rates, which come anywhere close to -- they are available in the market of INR 40 to INR 60 or INR 80 a bag, cheaper than the brands -- the top brands, which are selling. So on the retail counter, you can find a price gap of as high as INR 60 to INR 70 also of some brands.

[Operator Instructions] The next question is from the line of Sonal Minhas from Prescient Capital.

Sir, this is Sonal Minhas. I wanted to talk to you with regard to your outlook on price size and realization, given that how you're seeing the cost hardening in the last few quarters? So just maybe a ballpark of what price you're planning in the next 3, 6 months would be helpful?

So Sonal, we are looking at the prices in the month of December. And if December, the winter start -- depending on when the winter starts, there will be some price movement on the upside. We are expecting -- in November also we are expecting some price hike which can happen. And in the month of December also some price hikes could happen. This is what our take on this. On the demand side, again, if the demand stays at the level at what it is today, the price hike may not take place too much. But if the demand which we expect the -- post Diwali, the demand will shoot up, then we should see at least some improvement in price realization for close to about, you can say, INR 100 a tonne is possible on clean side, okay? I'm not talking about giving a PD and then reversing it and all that. I'm not talking about that. Genuine price increase can happen to about -- an extent of about INR 100 a tonne and more if -- depending on the market.

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

Sir, 2 questions. One is, you mentioned on the -- some price hike taken in October. Is it possible to quantify broadly how much price hikes were taken in October?

I would refrain from answering this question. But yes, you can say it has added at least INR 50 a tonne to your NSR.

Sir, Gujarat expansion, you did mention that probably you'll start with the environmental study, which would take some time. So any time line possibly what we are looking at? Probably, when the plant to set up and like when it would start commissioning?

Shreyas, the thing is this environmental studies are not within our control. These are done in cycle, okay? So we can only say that give it to an agency who will do the -- this, then can go to the -- go for approvals. It's a long process. It's a statutory requirement. So only when that happens through, and once we get a clearance on the environmental clearance, then we can give you a time line, yes, now from this date, it will take us another 3 years, 3.5 years to put up a plant.

The next question is from the line of Sanjay Nandi from Ratnabali Investments.

Sir, just to mention, like we are just entering into some green cement, which is a premium segment. So what is our current like exposure in the premium segment thing? And what kind of the relations per tonne improvement we might feel like once that thing gets increment...

So it is close to about 20% today we are selling in the premium segment. And the realizations, there are anywhere as it can be -- it will range to close to about INR 10 a bag minimum, which comes net into the company -- INR 10 to INR 12 a bag which net comes into the company, after taking discounts and all those things which are there. So we guide new packing. Right now, we are clocking close to about 22% of our volumes till last month we were clocking. Now with this introduction, 14% plus 7%, almost 20%, 21%. 21%, now we are clocking there. September, it was a little better. October, a little softer. But I think November should again move up.

The next question is from the line of [ Janice Chera from Dimensional Securities. ]

Sir, just 1 question. Your interest cost has dropped down drastically in this quarter, so -- whereas the debt levels are still constant. So any specific reason for that?

See we now -- we have -- I think that is because we largely paid our 1 NCD tranche which was last year, that we paid last year. There is no change after that. We have not paid anything out. And the next tranche is due in December of this year, which is about INR 125 crores.

So basically, your question is about the reduction of the interest. So if you see it compared to September 2019, yes, there is reduction. And as well as the June quarter also, there is a reduction in the interest cost. When you talk about the reduction as compared to September '19, it is because of the loan which we paid in last December. That is the first tranche of the NCD. And during this quarter, yes, there is a reduction because this interest and costs also include the various financial charges. Some bank guarantee charges, some other bank charges. So we have saved a lot on that account. Because now in the case of our few [indiscernible] matters, those matters are already resolved, and we have saved bank guarantee charges by returning those bank guarantees from the government.

The next question is from the line of Prateek Kumar from Antique Stock.

My question is regarding the premium segment, you mentioned that we have moved to 20%, but presentation says 13%. So we have moved to 20% towards the end of the quarter. Is that correct?

13% was there. Now we have moved to 20% -- plus 20% on that. So that is till September because now -- now we will give you -- when we give you in the next quarter difference. So this is right now 13% and growth is of about 20% year-on-year. It is on a year-on-year basis. So if you compared with our volumes last year percentage, then it would have been 20% lower.

And this 13% we talk about, it is the -- we have the -- one is the Mycem Power which we call it under the premium branding. And that Mycem Power, we have launched 2 years back. And gradually, every quarter, you'll see the growth in the Mycem Power. And recently, now we have loans also new LPP packing in box bottom bags. And that is also now we have classified. So you will see that also gradually increasing. This is in addition to 13%.

And again, from 1st October, we have also increased our premium by INR 5 on power. So that is also net which comes back to the company. Net of tax, it will be somewhere around INR 3.60.

The next question is from the line of Sumedha Srinivasan from ICICI Prudential Asset Management.

So you had mentioned that grid power dependent is right now 60%. Is that correct?

Grid power is 60%, yes.

Yes. So what is the total share in renewable power? And I mean what would be your target for renewable power over the coming years? And what would be the cost benefits from that?

So see, we have a WHR and we have a renewable power. So WHR, if you call it under renewable power, then it's a different thing. Otherwise, total -- in terms of this component of power which we talk about is about 19%, 20% close to WHR 20% and the rest is the third party.

So out of third party, actually, Sumedha, under this renewable power, if we put WHR as well as the solar energy, wind power. So in our case, 60% is the grid; around 25%, including WHR, is renewable; and 15%, actually, we are buying bilateral power from the third party.

Okay. And do you have solar separately or it's a part of -- I mean we get that from third party?

This is bought out from the third party. So we cannot tell you that it is a wind power or solar power. This is in south we are taking into Ammasandra.

The next question is from the line of Manish Saxena from Pinebridge Investments.

Just wanted to check if you can -- if you have any updates on the e-commerce part which you had talked about earlier. So anything in terms of selling digitally or something like that, if that is progressing?

So we are working on that. It is under progress. It takes time to develop software. So that is -- we are working on it. I think by -- in the next financial year, we should be able to talk much strongly about it.

The next question is from the line of [ Simran Bhatia from SMC Securities. ]

Sir, I have 2, 3 questions lined up. First of all, can you give some guidance on the debt profile, how it will go forward? Like I'm very impressed by seeing your debt profile, especially from INR 670 crores to INR 280 crores in the past 5 years, you have constantly bring down your debt to INR 280 crores. So will there be any further? I mean can you give some light on the debt going forward -- borrowings going forward? And second, on the operating margins guidance, like right now it is at 23% to 24%. So can you throw some light there also?

So we look at it, I was talking about our debt, so we have been paying now -- after this, we pay 1 more tranche this year. After that, then there is nothing till 2022, okay? So thereafter, it is only the repayment of the UP state debt-free loan what we have given. So it will start after '23 -- from '23, '24 onwards. So if you are saying that what will be our risk profile in terms of -- if we were to take up Gujarat project, okay, then we will have to do some borrowing. But touchwood with God's grace, today we are sitting on close to INR 700 crores of net cash in the books. So we are very comfortable to pay off our next 1 load. We will be able to very comfortably give INR 150 crores to this. And again, by March, I think we should come back to the same level of our cash reserves with us. So we will try to build up about INR 1,000 crores at the point of time so that when we do our Gujarat project our borrowing is at the least possible lowest level. So this is our one point on this. In terms of our operating margins improving, what should I say, there is always an effort to keep improving this to the best possible. Yes, once our AFR picks in a little bit, that will support us. Then once we have implemented our solar project, which we are looking at 5 megawatt, which will be implemented, that will give you some operational benefit. And all said and done, the target is to improve on consumption parameters, okay? We are very focused on reducing power, okay? So power consumption has to be continuously brought down. Fuel consumption has to be brought down. Again, we have to also keep in mind not to ignore the fact that now we have to be more compliant on SOx and NOx. So you have to take care of also that also. So we are doing a little bit of renovation in the plant here and there to put a different type of a burner here and there and see that how you control your SOx, NOx. So these costs will keep happening small, small costs. And in the long run, we will also look at a little bit of improving our clinker -- clinkering capability so that we get a better quality of clinker improve further. Now the only upside which we are waiting is it all with very hopeful eyes looking at the BIS, that they allow us to start putting 40% fly ash, okay? The day they allow us, I can assure you we will be the -- we will be one of the companies, if I'm not saying we will be the only company who have excellent quality of clinker. We can observe 40% of fly ash and still improve our profitabilities far, far more. But we are constrained. We have to only use maximum 35%. So it's a little bit of a tight rope walk right now.

But at the same time, you have seen that margin has improved during September quarter by almost 100 basis points as compared to corresponding quarter of last year. So it has been gradually increasing. And now we are almost at 25% of the EBITDA margin.

The next question is from the line of Sumangal Nevatia from Kotak Securities.

Sir, first question is with respect to the pet coke, you said you're switching gradually to thermal coal. So just want to understand, given the technical and the quality constraints, if we are in a scenario where pet coke remains at 10%, 15% expenses, what could be a sustainable mix of both the coals? That is one. And second question on, sir, your very aggressive carbon footprint reduction target. I want to understand the 300 kg per tonne, what is the target year to achieve that? And for achieving that, what is the ask in terms of alteration in our product mix, in our power mix, et cetera, which we are looking at over the long term?

See, this 520 can further go down to 500 kgs if we were to increase the fly ash incorporation, okay? On -- right now, the room is very limited. Now when we are going on -- low on pet coke and more on coal also, there we'll have to start containing a little bit on that side also. So that is also -- sometimes it disturbs your whole working scenario. But today also at 520 kgs, you show me one cement company in India which shows 520 kgs. Everybody has a component of OPC. The moment you produce OPC, this you can't exceed 520. On this particular part, we are -- what was the second question you asked. Sorry to -- I missed it, the question you asked one more, I missed it. If...

The other thing is given the technical and the quality constraints, et cetera, what could be the sustainable mix of fuel if pet coke remains expensive?

Okay. So you can say 50-50, you can say, on an average basis. You will have to keep a 50-50 mix because we have also a target to extend the life of our mines. So in these last 4, 5 years, 6 years, we have been able to extend our life of mines by close to 7 years, okay? And we will try to keep this that we don't lose out a single, we don't share the 7 years of extra life with at any cost. So we'll have to use pet coke, and this will be a give and take sort of a number. So we do not lose that on a short-term basis.

The next question is from the line of Saurabh Dugar from HDFC Securities.

This is Rajesh here from HDFC Securities. I have a few questions. First is on the WHR. We are currently operating at around 55%, 60% utilization for the WHR is what I understand. So what is the thought process over there? How much more it can be expected? And second, are we working on any -- or reducing our fly ash cost in initiatives that we are working on? And third, given that we are -- our major project expansion in Gujarat is still a few years ahead, what could be the CapEx outgo in FY '21 and '22?

So to answer your question, on the WHR, we are running right now at close to very highest levels of capacity utilization. I think sometimes we run on a per day basis on 2 kiln basis. We run at least 5% better than off than it's expected rated capacity. So that is what it is. So there is no further improvement in WHR generation possible. So we will -- if we run 3 kilns, we will produce 300 megawatts of [indiscernible] per day. And coming to -- your answer to your fly ash, the fly ash, you said cost-wise, fly ash cost-wise, I have to tell you today that if the thermal power plant in UP close down, then we have to go to further off. So sometimes we go to further off distances also because we are 100% blended cement. If we don't get fly ash, we will have a problem to survive also, to run our plants. So as long as the fly ash sourcing is less -- normally fly ash, you can source it from the cost -- minimum cost, INR 250, so it can go to INR 650 or INR 800 also, which is far lower than the cost of clinker, which is about close to INR 2,000, INR 1,900, INR 1,800, INR 1,900. So it makes more sense on fly ash. Now coming to your Gujarat project, as we said, there is not too much of CapEx which will happen in '21 and '22, okay? Just minor environmental studies. And if things happen, it will happen only post '22. No major CapExs, as I see it, excepting for a little bit of CapEx, which we will do on AFR. And maybe about INR 15 crores -- INR 15 crores, INR 16 crores, if we were to do our cooler for line 3.

Ladies and gentlemen, due to time constraints, we will be able to take the last 2 questions. We take the next question from the line of Chintan Sheth from Sameeksha Capital.

Couple of questions. One on, you've mentioned that you're balancing both the volume and pricing in the market and slight plus/minus basis points of market share doesn't -- much matter right now. With the increased capacity last year, we should have expected a better market share gain given the increase in our capacity. So if you can just throw some light on how do you look at -- obviously, you've mentioned about it your strategy of balancing both acts. But if you can just indicate how long we will take to utilize the extended capacity at the current rate?

Chintan, to answer your question, I always take a perspective of 5 years, okay? Where I want to be in 5 years, okay? What should be my planning for 5 years? And then we decide on our current positioning, okay? I can ruin the next 50 years by taking wrong decisions, okay? Or we are taking a very short-cut method. But that is not the way we would like to build our company. So yes, I'm very clear about it that what is my price positioning. Today, if I will ask you -- tell you, in 2006, when we started this company, from the top brand, we were priced at INR 50 a bag lower, okay? Today, among the top brands, in quite a few markets, we are INR 5 ahead of them. And the target is to develop another INR 30 premium over the top brand, which one is our positioning we want to go. That is very important to understand today. 2% volume, I can -- tomorrow itself take it. I can take another 7% volume. It's not a problem, I'm telling you. Volume selling is not a problem for me at all. I never look at volume as a game winner because volume I can take. The day you tell me if you will say that I want to -- my management says, okay, we compromise on our 50-year principle and you just take volumes, no problem tomorrow I will give you a 9% growth in next month. What's there? It does not take time. So I'm not looking at a very short-term area. We are building a company which has come a long way. From a company which was -- its EBITDA was about close to INR 400 per tonne when others were giving you INR 700, okay? To leading today a position from INR 400 to those INR 700 those people who are giving, we are giving you INR 900 to INR 1,000, and we are giving you INR 1,100 plus. So it's a question of how you want to structure your organization going forward. That is very important for me. 2%, 3% of volume really does not matter to me.

And Chintan, your specific point with respect to utilization of the new capacity, which we have debottlenecked and now it is increased to -- by 1 million tonnes further. And seeing the market growth of around maybe average between 5% to 6% next 3 years, I think that will be utilized. Although in 2021-'22 fiscal year, the demand growth, we are hopeful that, will be significantly higher. It should not be less than the double-digit demand growth because in fiscal year '21 the cement market will degrow in the range of between 10% to 11%. So that will come back and you will see really a good volume growth in the company in the next 1 to 2 fiscal years.

Easily. I can assure you next year, you will -- you yourself in the same meetings when we discuss, you will say that the situation is a little different. And it comes over time. We understand a little bit on the ground reality where we need to press the pedal as well we need to not press the pedal.

Ladies and gentlemen, we'll take the last question from the line of Raghav Maheshwari from Asian Market Securities.

Sir, what is the status of our debottlenecking?

Raghav, most of the debottlenecking is over. There is nothing much left to debottleneck, excepting for a clinker -- a little bit on clinker side, line 3, which will add up another 200,000 to 250,000 tonnes of clinker.

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 (India) Pvt. Ltd., we thank the management of HeidelbergCement India Limited for the call, and many thanks for participants for joining the call. Thank you very much, sir. Stanford, you may now conclude the call.

Thank you, Vaibhav, and thank you, everybody.

Most welcome, sir. Thank you.

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