HeidelbergCement India Limited (500292) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '21 and FY '21 call of HeidelbergCement India Limited hosted by PhillipCapital (India) Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Agarwal of PhillipCapital (India) Private Limited. Thank you, and over to you, sir.

Thank you, Aman. Good afternoon, everyone. On behalf of PhillipCapital (India) Private Limited, we welcome you to the Q4 FY '21 and 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 at HeidelbergCement India Limited. I would like to mention on behalf of 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 Q4 FY '21 and FY '21 presentation on the stock exchanges 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 thereafter a Q&A. Thank you, and over to you, Cooper, sir.

Thank you very much, Vaibhav. And thanks everybody who has joined for this earnings call. First of all, I hope and I wish that everyone is safe and healthy and so are their families. In times of COVID today, survival has become more important than anything, and I hope to take care of ourselves first. Coming to -- as you would have received our presentation, so taking you straight to Slide #3, where you will appreciate that 72% capacity utilization. This capacity utilization, what you are seeing, is in terms of after our last March increase, what we took increase of almost 1 million tonnes we added and the market has come down. Otherwise in real terms, if you look on like-for-like, it will be much higher 80 -- around 80%, should be utilization should come. So this is a 72% utilization under difficult times. We produced -- as you know, that we produced 100% of our blended cement. Another good feature, which has happened is our grid power dependence has continuously reduced and now it stands at close to 63%, out of which we have green power and that is about 22% of -- that is green power. So this is a very -- I would say that the team has made a good progress on looking at sustainability issue. On the EBITDA front, we did marginally better on a year-on-year basis. But I think under such challenging circumstances, this is a good achievement I would say. On ESG projects, solar power and alternative fuels, we have done very well, I would say. Our projects, I will talk about it in a further slide, how we have moved to -- on this part. We have paid our second tranche of NCD of INR 1.25 billion.

Cooper, so sorry to disturb you. Actually, there's a message on the operator that your voice is little cracking at times. So if you can just come a little closer to the phone also, it would be better.

Yes, I am very much close to the phone. So on the NCD, we have paid about INR 1.25 billion. And now one more tranche is there, which will happen in this December, and that will be ending of our total payment. Cash and balances are -- we are very well placed. We'll talk about in -- ahead of this. And we are operating on negative operating working capital. So this is one of really where -- seems where this industry is one of those few who operate on a net working capital -- negative working capital. And the Board is -- you will be happy that the Board has recommended a progressive increase in the dividend, which is at -- stands at INR 8 per share. Last time, it was INR 7.50, which had quarter component of interim dividend. But this time, it is given as a one-shot, INR 8 per share. Coming to Slide #4. If you look at how the volumes have panned. So if I look at the volumes I mentioned to you, the capacity utilization may look smaller compared to FY '20, and that is because of the capacity additions of 6.26 million tonnes. But if I say that in terms of volume, it is marginally subdued at 7 -- 4.5 million tonnes versus 4.7 million tonnes of last year. Coming to Slide #5. I think we have more positives than the negatives. The positive is EBITDA is up by 19.5% on a quarter basis. On interest and financial charges, it has reduced subsequent significantly. If you look at tax expenses are reducing and further it will reduce and profit after tax stands at a whopping almost more than double of last year. Coming to -- on EBITDA per tonne. We are -- on EBITDA, it is up 4%. And in terms of revenue also, EBITDA percentage of revenue, it is 117 basis points up. So this time, it is close to 26% against 25% of last year. On the EBITDA margin, we are -- I think, you will appreciate this. On revenue also, it's significantly better, and that results you can see on a -- for the full year basis, yes, there is a volume dip and there are certain reasons of this volume. I can answer right away, yet inform you that there are -- the markets throughout the year, different pockets, the market has behaved differently. At different places in the market, you find different types of demand. In markets, which were doing very well last year, the rural markets are not doing now very well. So there is a balance -- shift in balance, which is happening from market to market. And it depends on which market you are being prominently positioned and things like that. So you get a hit and the advantage also. So in the past, we have taken some advantage out of those things. In some places, sometimes you also take a hit. But overall basis, the company is well placed in terms of its -- it is well settled in terms of the market positioning is concerned. Coming to Slide #6, which is on the EBITDA side, you can see how the waterfall has been. Power and fuel has been one of the game spoilers and that everybody knows where the power and fuel has shifted. Fuel -- pet coke, which used to be close to about $70, $60, now today, it's stable at $142, $143. Coal was far lower than how it is today at $80, imported coal. So these are the ones which will be spoiling the game. As of now, also, they have spoiled and they are, I think, in the future also, they are going to remain -- movement is likely to remain more northwards. And that is basically because of lower production of pet coke and things like that. And there is some demand from some pockets. China is a net importer of fuel. So you will see these type of imbalances happening on the international coal and fuel prices also. Coming to Slide #7. We have said that the power and fuel cost here, if you are seeing it, for the whole year, that is one of the -- in terms of price, we have gained. Raw material marginally off; freight marginally off because of the diesel price. But there has been more positive to add up -- to build up this. So there is a positive movement, but there are pressures. Coming to Slide #8. If I look at our -- for the full year, April to March, you will be happy to note that our road volumes, despite diesel and all those changes, we have ended at 47% road volume with a 1% growth on year-on-year basis, which is astute planning. On coal, we had to shift certain linkages and certain things because coal -- pet coke has gone like a shot through the roof. You can't make cement using pet coke now any longer. So you have to rebalance your cities. On premium cements, we have growth of about 29% on a year-on-year basis. It is now today clocking around 19% of our total trade volume. And when it comes to our trade sales, that is at 83%, minus 2% over last year. And that is basically more to do with the volume pressures to sell volume. You have to go and sell certain parts to including nontrade. What is the nontrade? Just only to mention to you, that in Central India, the nontrade difference between -- to trade hovers between INR 800 a tonne to INR 400 a tonne. So these are the delta what you see in nontrade. Coming to Slide #9. And please keep there some questions on that, we will talk about it. But we try to operate on a negative operating working capital, which is a thing. And coming to Slide #10, you will appreciate at the position what we have shown as of date we cover just only our balances after making the payment of our debt payment, which is due in '22. And even taking the future payments. And Just only on this basis also, your company is well covered, with -- and still it will continue to have a cash balance, and we have not put here what our future cash flow. But on that point, here, it stands on a very strong footing. On the ratings, which is on Slide 11, you can see a very consistent operation of the company. India Ratings is continuously rating at AA plus, and we are happy to see that this could have a positive trajectory going forward. Coming on Slide #12, which is you must be aware that the future of businesses will be governed not by your balance sheet or things like that. How well you can manage your cash flows and these cash flows, how will you manage the sustainability of business is very much dependent on the future government policies with the ESG. And we have been working consistently for the past several years on improvement on our ESG footprint, whether it is carbon footprint or anything. But here is some snapshots of a solar power plant coming up in Patharia, which is about to be commissioned. And on the right-hand side of the screen, you see on the slide, which is the waste heat recovery project, which will also start firing somewhere from September -- August-September. So we will have a good thermal substitution of close to about 8% at Damoh from this. And this is about a 5.5 megawatt power plant, which is coming up. Going to further talking about on ESG is our Slide 13. You will observe that what is our footprint, how we have reduced it. Consistently, there is an effort to reduce it compared -- we'll not compare with anybody else, but we are clear that by 2030, we have to further reduce it and bring it below 500. So we are working on this. And there are a number of initiatives. We are 100% blended company, 40% on WHR is coming in our Narsingarh plant. If you look at Ammasandra, it is -- almost 80% is green power. We are putting up any possible -- possibilities are there to put up plantation around us. Our Friends of Earth, it will be further -- energies will be further pushed into that on Friends of Earth to increase our green power. 5.2x water positive. We are there, and we are working to improve this from 5.1 upwards. Our -- in terms of our environment friendliness, our mines are -- we work on a bird life project. And there, you can see that our mines, despite explosion -- where there is explosion, usually wild life does not exist. But in our case, we manage it in such a manner that we have a very good harmony with the natural habitat of the animals. And we have -- are home to 117 bird species in that area. We have planted about 1,500 trees, which are geotagged. You can see it on our Friends of Earth website. These are officially with pictures, everything it is, not just only say. But there are many more, which we have to tag up, and these we will upgrade on our website because the website is not taking more data. So we are upgrading that, and we'll put more and more data on that. On our Narsingarh project, we are -- AFR project, I showed you the picture, that should start picking up. Coming to Slide #14, okay? CSR spend, you can see the company earns more profit and the company keeps investing in CSR. We call it, as you know, Flying Back to the Society, and that we keep doing it in our own way. We got our Golden Peacock Award, SafeWork to Place Award, we got in Jhansi. And then we have got some CSR leadership award. And there are a number of school and education programs and whether it is road construction or running a sewing machine and stitching and tailoring classes for the women to uplift their caliber and make them self-employed. Those are the ones which we work on our -- we have got a program which is on -- which is we have developed a center also in Jhansi that is called structure Saksharta Vikas Kendra, where we try to improve -- Sakshamta Vikas Kendra, where we try to improve the abilities of the people Saksham means ability of the people. So Sakshamta Vikas Kendra is there and which we work on that. Coming to the future. When we talk about future, this is Slide #15. And the group has reoriented its first-time members team also at the group level and to bring impetus to the digitization part of it. Although we are digitally savvy, we are trying to do everything possible, but that is -- given the world today and when you are totally dependent on mobile connectivities and the world's systems are going to take over when you can't travel, you can't meet, you can't touch people, you can't talk, you can only the medium of communication. So I think with this type of advent of changes scenario, digitization seems to be a very major issue. So the company runs many multiple baskets -- buckets in one, which is HConnect. We try to improve our connectivity with the dealer, which will happen very soon now. HProduce, there are multiple things in this. I'm not talking about everything. But we are trying to work on an e-commerce system also, so that we will work on that. On HProduce, we're trying to connect all our plants so we can do a real-time analysis of every machinery, every equipment, all systems, all gearboxes, bigger gearboxes through a dialogue system have been connected with. So we know the health of each and every machine, predictive maintenance becomes much easier for us and we are able to monitor. We will be in -- by end of this year, we will be able to monitor all the controls of the control -- the CCR rooms, we will be able to monitor from a central required place or take help from our group sitting in Germany who can just log into the system and advise us on the improvements what they can make on -- which we need to make. And services back -- back-office services, whether to improve the customer speed of contract to give them services in terms of speed for their inquiries, whether it is passing of the inventory bill, whether it is payment of accounts payable to our vendors, these are the areas which we are working very, very rapidly under the HServices. So from my side, so this is all part of it. And I think I'm sure you will have many, many more questions. So I'll stop at this. And once again, thank you for your continued support to us and your interest in our company. Thank you very much.

[Operator Instructions] The first question is from the line of Amit Murarka from Motilal Oswal.

A couple of questions. So firstly, on -- after the 3Q call, you had explained about the OLBC belt replacement and that it will recur again sometime around June-July. So could you just touch upon that aspect? And is the time line still the same?

Yes. So Amit, that is all going as per target. There was a little setback because when these type of major changes happen, you require oxygen, oxyacetylene, for cutting things and things like that. So oxygen was a very big limiter, but now we've been able to tide over that situation also. We have managed to find out other ways to do the cutting and all those. And I think we will get back, and I think by end of this whole project, maybe a day or 2 delay, not more than that.

Okay. But so again, with the clinker need to be shut, I think plant 90 was shut last time around, so...

It's okay, but we have enough clinker to service the market needs. So that will not disturb our business. The business will continue. We have got -- we have created enough clinker right now in our stock.

Okay. So just to understand it clearly. So then the loss will be lesser than last time? Last time, you mentioned there was INR 8 crore to INR 9 crore, INR 3 crore direct and INR 5 crores to INR 6 crores from loss of WHRS usage. So this time around...

That is okay. See, that, anyway, it is a part of the plant shutdown. So there is no -- you can call it as a fiscal sort of book entry only. But as of now, we will be -- that number of days of shutdown was anyway booked under our operating plan. Anything, which is beyond our operating plan, we take it as a loss, which is -- because if the market -- kiln has to run 330 days, if it is going to run 330 days, we are happy with it.

Okay. Understood. And also regarding the price and demand outlook from a near-term perspective, so we understand that, obviously, demand has been impacted. So like this quarter, how much of a fall in volumes are you seeing at an industry level?

This quarter, there is some fall in the market. I cannot tell you offhand right now. But yes, the fall is far lesser in Central India as compared to other markets. So I would say it is a little better off in Central India.

Okay. And price has gone up about right, would you be...

It's okay. I think prices, now with the back to the wall, everybody knows that the fuel and coal and power prices are going up unreasonably high. So you see prices, everybody -- probably in Central India, people have understood one thought process, which seems is that dropping price cannot increase sales. That maturity, it seems, that it is there.

Right. Okay. And the nontrade also fell down -- my understanding is that nontrade has still dropped a bit. While trade is steady, but nontrade is coming down.

So Amit, we are into very small, as I said, 83% of ours is trade. And nontrade, we only pick up the orders which are having a good relative margin, otherwise we do not take up. And anyway, for us, nontrade business anyway shrinks because we never do business in nontrade on credit. So 100% of the business, our non-trade business is on advanced payment. So there are people, who want to go for low-price orders or anything like that, and there they give credit also. So we do not pick up those orders.

The next question is from the line of Mohammed Ali-Reda from Darkhorse Capital.

Just 2 questions. One following up on the, I guess, the trade. Could you help me understand some of the share gains? I think it was mentioned in the slide that there was a 29% increase. Can you maybe talk about what's driving that share gain?

Market share, you're talking about?

Yes, sure.

So on the market share, we are not losing out anything. If this is the question, I believe, what I understood, on the market share, we are sustaining our...

No, we are increasing.

We are, yes. So we are -- we have a 2-prong strategy. One is we are talking about trade sales, another we talk about non-trade sales. In the same thing, in the same battle, we talk about even increasing our share of premium products. So our focus is more to improve our positioning in the market and our brand premium. So as such, we are talking about maintaining our market share with the same volumes what we sell.

No. I understand that. I'm just wondering you posted 29% increase of trade volume share, right, increase in that. Is that not?

I think what happened, this some -- in some months, some manufacturer -- it's a very complex market. We -- this market is not a traditional market for many players who come by fly-by-night operators. So this equilibrium keeps shifting month after month depending on the availability of nontraditional players coming into the market. So there might be a shift of about 0.5% here and there.

Mr. Ali, if your question is specifically to Slide #8, where we have shown 29% growth. If your question is specifically on that particular statistics, we can confirm that this 29% growth is only our premium product during this fiscal year as compared to last year. So our -- today's premium product is 19% of total trade volume and that has grown by 29% during this current year.

Yes. No, and that's why I think that was quite interesting because the market seems to be softening and yet you're continuing to grow share in kind of a premium segment. So just wondering what is driving that, longer-term strategy or was there any control...

I will tell you. We have introduced -- if you see this on the slide, there are 2 packaging shown. One is Mycem Power and other is Mycem Cement, okay? So this introduction of that Mycem Cement in a different type of poly packing, on a box bottom packing, was introduced very recently. And that is adding up because that is somewhere priced in between the power and the normal cement. So there was a customer pocket, which was unsatisfied demand in that price bracket. So this is filling up that.

Okay. That makes sense. And the other question is just generally on the industry, you've mentioned this a little bit. But given that we have this negative working capital even in the trade sector, are you seeing any liquidity squeezes in the ecosystem in terms of payments, et cetera? And even in the pricing pressure, we see it, let's say, in the fuel cost, and this is something that even globally is happening, the supply/demand imbalances. So I'm curious how the company is thinking about the unfolding of this year? I know a lot of things are uncertain, but are you seeing signs of, let's say, stress in the trade with tens of -- credit and terms, and do you think that there's any major significant supply/demand imbalances, which can really affect pricing?

So to answer your question -- to answer your point, see, this market has been very volatile, okay? There are many companies who will go up and down the ladder. But as a policy, we have created a customer base and our structure of working in such a manner that I don't think we will ever need to dismount from this particular direction and then adopt some other strategies when it comes to payments is concerned. So on payment side, we are very well -- in fact, we are trying to bring in more value by this method. And our channel partners are also getting trained more and more to do business on advanced payment with their consumers. So it's a trend setter sort of a thing. And I think this helps them also to do business without fear, okay? And that's how they feel also more comfortable if they have to -- earlier, they were extending 50 days credit, but today, they are extending 3 days credit. They have definitely far more liquidity as compared to what they used to have earlier. So it's a question of, over a period of time, our trainings, our discussion with channel partners. We have been able to bring up to them this sort of an understanding as a change of DNA for their business also.

Okay. So you don't see any stresses even on a relative basis last few months, is this is what...

See, there are -- okay. There are little stresses there, but then to overcome there, extending credit is not going to help. So we have find -- we have found out other ways and means of our change in shift in customer base. Because ultimately, with every dealer, every channel partner, the resources will remain finite. Now this finite cannot be changed overnight. Now I cannot -- even if I give him extended credit, the ability of the fellow to accept that credit also, that risk-taking ability also has to be there. Many dealers, if you want to extend credit also, they don't take it. They say, [Foreign Language], I cannot manage beyond this, and I do not want to risk my position in the market. So we have to do a different type of setup. Yes, we have faced, you rightly said, that in the last 2, 3 months. But we have found out ways to overcome it without putting pressure on our dealer, existing reserve.

Okay. That makes sense. And just other question in terms of, if we're seeing, let's call it, price inflation in fuel costs, how should one think about the same dynamic, again, supply/demand imbalances? Cement is very localized. And what's happening on the ground in India? And what's the company have outlook on this particular issue?

So on the cost side, you know the cost pressure that's truly, and I think the industry has to learn to now beat this by -- only by doing a little more astute pricing or by holding on to the prices and things like that. I don't think there is any other way. See, how much can you cut down costs? Okay, there is a limit. After a point of time, once you've touched the bone, okay, scratch the bone, then there is no other room to go. At best, you can save -- in a power plant or anywhere you can say how much money. INR 1 a tonne or INR 2 a tonne. But the real crux is to maintain your prices at a good price in the market and reduce your logistics costs, reduce your adjusting time stocks, okay? You look at many other things in the market, which are there untapped so far. Look at your mix design, mix for rail and road. There are so many things, which there is room for scope or manipulation in those areas. And I think those are the ones, which we should start looking at more than rather only we just looking at cost, because coal and fuel, I can't do anything, and I have to use it. At best, 72 units of fuel, how much power can I reduce? 0.5 unit, at best, okay. If I even put my -- some very good IT digitization system and take the process full control process, maybe another 2 units. See, INR 10 at -- INR 7 a unit, INR 14 a tonne at best. But imagine, you can change the price dynamics of the market by INR 14 a bag. So that is where the gain has to be.

[Operator Instructions] Next question is from the line of Sanjay Nandi from Ratnabali Investment Private Limited.

Hope you are fine, sir. Everything is fine, sir. Sir, just a few questions from my side. Like in this quarter's performance, we have seen some elevated EBITDA per tonne, which is mostly because of that other operating income, which received the GST benefit of INR 15-odd crores for the quarter. And apart from that, we also found out some spike in the power and fuel cost as well as the distribution cost. So will that thing be like keeping up in the next quarter as well or we can do some cost cutting going forward?

So on the GST benefit, what we have got is once a year. So we don't count on it, okay? Like that will continue, this type of a flow will continue in the future also. As far as other costs are there, they will keep moving up and down. So if you're referring to any specific ones, I can -- we can answer those.

So the power and fuel costs, we have found out like there's been a significant jump on a Q-o-Q basis of 8-odd percent on a per tonne basis. So sir, are we expecting to maintain that momentum going forward as well? Or we can manage to get some like cost-cutting things on the foreign and fuel cost front?

See, there will be some changes, which will come in once our AFR comes in, okay? And there will be some changes in our site -- this, 5 megawatts solar power plant comes in. Then there will be some changes, which we are going to -- which we are trying to bring by taking some power into Jhansi. Jhansi has done a very good job in the last few quarters. Over 1 year, their outsourced power way open access has increased significantly. So we are working on that. That cost of power sometimes goes up because right now, in the open access also in between, the prices have shot up through the roof, okay? So that time, we lost on that. But on an overall, on a full year basis, it always is positive for us. It has always given us a good return.

Okay. So sir, what is the percentage of power as of now that we buy from the grid, sir?

As I said, that's about 62%, we mentioned.

62% get from the grid or we get from the captive?

No, it is from the -- no, no 62% is still outsourced power.

From the grid, sir? 62% is from the grid?

The grid.

And remaining is captive.

Yes. And Sanjay, one thing on the specific question on -- am I audible?

Yes, sir. Audible, sir. Tell me, sir. I can hear you, sir.

On power and fuel, if you talk about development from Q2Q, December '20 to March 2021, you see the negative development, cost increase. But at the same time, we need to factor the change in inventory. In December 2020, our inventory has decreased. And in December -- March 2021, our inventory has increased. And that is a normal feature. Every March quarter, we see our inventory increase because we need to prepare for the monsoons. Now if you factor that thing, it is more or less on the same range because pet coke prices have started picking up from the month of February. And therefore, in December -- this March quarter, we have seen little bit increase, not the fully has come in this quarter. Going forward, yes, there will be some impact because of the pet coke price. But at the same time, there will be a few benefits on account of renewable power, which we are going to start, and AFR, which we are going to start in the coming quarters.

Okay. Okay. Sir, what is the quantum of the savings, if you can quantify, if possible?

So we are working for this 5-megawatt solar power plant. And when we talk about this power plant, then we can say that it will replace our existing grid power. And the grid power in the state of Madhya Pradesh is in the range of around INR 6 to INR 6.50 per unit. There will be a good saving on that account. So when we start the operation of this power plant, we can talk about the actual quantification of the benefit because it depends upon the number of units we get from the power plant.

Got your point, sir. And what is the percentage of the pet coke we're using in the current quarter, sir?

Pet coke, we have a little bit reduced in quarter. It used to be around -- in the past 60%, the pet coke consumption, which we have reduced around 40% to 45% during this quarter.

[Operator Instructions] Next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher.

I had one question on the SGST incentive, which we have got in this quarter or which we have recognized. So is it pertained to the entire FY '21 or it is related to the last year as well, because we have not been recognizing this incentive for the last 1 or 2 years?

So it is -- Kamlesh, it is resource -- this is an incentive, which the state government of MP was to give. Post-GST, there was some -- it was lying in limbo because of some policy framework to be created on that. Now that framework is created, so we will start getting this money on a yearly basis of about something like INR 16 crores, INR 17 crores. You can say this will keep coming in the coming periods.

So I was just asking that whether it also relates to previous year as well.

It relates to previous year as well.

It is on cumulative.

Okay. Can you provide some...

Kamlesh, this INR 14.8 crores is more pertaining to fiscal year 2021. The earlier -- you will appreciate that when the GST has started, government gave out the notification immediately post-GST go live, that is in the month of August 2017. And thereafter, then they brought the notification, which creates a kind of interpretation issue for 2019 and we stopped accrual. This amount, INR 14.8 crores, we have accrued, this is pertaining to 2021.

Okay. And sir, this incentive will continue until 2023, February 2023, because we started our plant from February 2013. Is that understanding correct, sir?

Yes, that's right. That's right.

And sir, lastly, on the part of this volume growth, like sir, we had debottlenecking everything, 1-odd million tonne got released through the debottlenecking. So how's the growth plan going forward? Like say, what is our plan that we want to grow this much of volumes in this year, next year? Because if you see last 5 years, right from FY '16 to FY '21, so the volume growth -- the volumes have been at the similar levels, which we were doing in FY '16. I do appreciate that we have been focusing more on the realizations and the margin. But even then, like as new capacities are coming up, new entrants are coming in this market, so what's our growth plan, like in terms of volumes? Because earlier, we used to say that we have capacity constrained, but we have got 20% additional volume through debottlenecking. So what would be the growth in coming years FY '22, FY '23?

So Kamlesh, on today's times, we could have sold off this entire volume, that was not a problem, okay? But then the market would have dropped significantly because there is a short -- there is an inherent market setback. There has been a degrowth in the market. Now under today's circumstances, it is unfortunate that we put up the policy -- you know last March, we -- our capacity came and the market all of a sudden COVID came. Had COVID not been there, we would have grown continuously further also. This capacity also today, by next year, we would have exhausted this capacity. But it is unfortunate that this whole system of COVID came in. And it took us on the back foot -- put us on the back foot. So our plans are there of whatever the volumes we want to do with respectable margin. We are not losing market share in the markets wherever we want to. We have evacuated Bihar. For us, it was not a primary market. But for our home market, we continue to remain very strong and keep growing in our home market.

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

Sir, I had two specific questions. One was, how are we placed on the Gujarat expansion? Any specific update on land acquisition approvals that you are pursuing? That's one. Second related question from a growth side is, how is the management looking at the Zuari merger specifically towards the MMDR amendment? Those are the first 2 questions, sir.

Okay. So in terms of our expansion, we will be doing our Gujarat project for -- under HCIL to increase our capacity. In Central India, the opportunities are few of M&A, chances are low. But in other states, right now, there is no worthwhile asset, which is available on the block, which could benefit or which could be worked upon. So the status, I think, post this COVID things once settle down, probably things will start changing and things will start opening up. But as of now, whatever we were pursuing in the past also has been -- everything has -- the people who are interested, the keen people, the parties who were keen also had put everything on the back foot now. So this is our dilemma. Today, if we have more capacity in Central India, possibly we can sell more capacity, not a problem. And we can sell it at a relatively good price also. But those opportunities today don't exist. We need a plant and we need grinding units, a little bit realigned to the market. Possibly, there are some opportunities, which may come up very soon in terms of the mine auctioning and things which are happening in MP. Those may come up, and there we might get a good opportunity to expand our sales in Central India. And if not Central India, we will expand somewhere else. So Gujarat is one of the -- which is on the card, which we are pursuing very seriously. We are investing into licenses, getting approvals and those things we are really following it up on that.

Sir, would there be a time line that we would like to put on the Gujarat expansion, basically a start date and probably eventually commissioning time line? Is it something on the front board?

To get licenses alone, it is going to take 2 years.

And in status quo, we ourselves for past year or so -- basically, the company pursuing license, is it like bureaucratic delays and that's the reason why the delay?

See, sir, today, so anything you do, anything -- today, you move a paper, probably to submit a paper, it takes you 6 months, 3 months. People are saying [Foreign Language]. So you are fighting against the -- you are moving against the current today. Today, you want to submit even a tax claims or anything people say, [Foreign Language].

Mr. Shah, your second question, that is with respect to merger of these 2 legal entities India, yes, the MMDR amendment is the welcome amendment. It supports the industry and as well to us. We have been evaluating it. And if it really creates a value addition for the shareholders, accordingly, we will get back to the shareholder in due course of time.

The next question is from the line of Hiten Boricha from Joindre Capital.

Sir, my question is on the costing side again. So the first question is, I want to ask other expenses have gone down from INR 106 crores to INR 87 crores on a Q-on-Q basis. Same on raw material costs also, it has gone down from INR 120-odd crores to INR 90-odd crores. So if you can comment on that, sir.

Anil, please take on this.

Yes, sir. So the first question with respect to development of the other expenses from December quarter to March quarter, I think we have explained this thing during our last earnings call for the December that during December quarter, this time we did shutdown the efficient kiln and at the time we did the replacement for our belt for 20 kilometers. And that time, we have incurred expenditure for the plant maintenance. And you will appreciate that this expenditure -- this other expenditure will be some kind of expenses, which have been pure variable and some expenses, which are fixed or semi-fixed. So these fluctuations of the expenditures from 1 quarter to another quarter, you will see depending upon the plant shutdown of our kiln and the cement mill. And therefore, last year, the cost has incurred. And this time, there is no such plant shutdown happened, so that saving is there. At the same time, there are a few initiatives on the administrative cost. In any case, it is going as a part of our continuous improvement plan. On your question with respect to raw material, this raw material cost, if I see, there is no major increase and decrease because we need to then always take this figure vis-à-vis our inventory change. So inventory change in December quarter, again, that was the negative inventory change and inventory increased, here the inventory decreased. So we have not seen any major fluctuation in our raw metal prices. We have not seen any increase or decrease -- whether increase or decrease in our raw material cost, except the cost increase, little bit on account of diesel price because most of the raw material also is part of the cost comprises of the inward logistics costs or you can say the transportation costs. And to that extent, costs have increased, otherwise it is almost similar to last quarter.

Okay. Okay. So just to confirm, sir, so other expenses will remain in the range of INR 90 crores to INR 95 crores on a quarterly basis, right, sir?

That's right. That will be -- maybe you will see 5% plus or minus here depending from one quarter to another quarter. And therefore, always we suggest that when we talk about the other expenses, we always see the development from year-to-date basis. So if you see the year 2, there you will see that the expenses really represent the extra -- actual expenditure incurred by the company either on the increased side or the reduced side.

Next question is from the line of Uttam Kumar Srimal from Axis Securities.

My question is on CapEx plan for this year and the next year. And what has been the lead distance during the quarter?

So CapEx for this year is about INR 95 crores. It is significantly higher than last year. And as far as our -- you said one was CapEx and another you asked for -- it is about 350 kilometers is our lead distance.

Okay. And sir, we have forwarded intercorporate loan to Zuari Cement. So what interest rate this loan will carry?

About 7 point -- if I'm not mistaken, it is -- the interest is 7-point-something.

It is 7.64% per a month.

The next question is from the line of Milind Suresh Raginwar from Centrum.

Two questions. One, I think is answered. On the logistic cost per tonne basis on a Q-on-Q basis, we are showing some increase of 6% to 7%. Any specific reason that we have gone to new markets or our lead distance has changed, any specific reason?

Milind, the little bit impact is of the diesel price. So that is -- also that is one of the concerns. And there is, of course, we have started entering a little bit to some distant markets also where we did not sell, but because just wanted to dissipate volume. So without disturbing the existing markets, you go to little distance market where you don't have enough stake and you offer some supplies at a little higher price, so that is also factored into this. But mostly, I would say it is more or less, it is an impact of diesel, more to do.

Okay. And the next question is, sir, you have been maintaining that we are -- we have maintained our market share. But if you look at the -- and the peers in our own region, the growth that they have shown is a bit aggressive while on a Q-on-Q basis, we have -- though marginally, we have declined. How could we differentiate...

So currently -- okay. To answer your point, which I was mentioning in the initial stages also, see, all companies sell in their own area of expertise and areas of prominence -- dominance. Now the markets in which we are present have taken a little more hit and they took -- started taking a hit earlier, much earlier before some other markets started closing. So if we are moving somewhere in markets of, I would say, the Western MP part or the Western UP part, these markets started getting locked down much earlier than the markets in the central and the eastern side. Now that impact will come and sometimes you lose because you are into certain markets, which are high-revenue markets. If they get impacted more, your impact is far more. So it is a question of the markets where I may be strong, my other competitor hardly sells any volume. And in the markets where they sell, I don't sell. So like Bihar, okay? I may be just selling maybe 2%, 3% of my material, okay? Whereas some other company may sell close to their -- out of the total dispatches, on rail dispatches, it is 50% of the dispatches to Bihar. So these are the things which will -- which you don't look at it just only for a quarter or anything. On a year-wise balancing, if you look at it, it all evens out.

[Operator Instructions] The next question is from the line of [ Simran Bhatia ] from SMC Global.

See, I first want to ask that, sir, how you see the demand trend in the second COVID wave as compared to the first wave in your central region? And secondly, can you give some top line and the EBITDA margin guidance for the FY '22? These are the 2 questions, if you can answer it.

Absolutely. As far as the second COVID market, the way it has panned out, it is very different from what it was first. In the first COVID wave, you saw a very good demand uptick and good continuity of business in the Tier 4, 5, 6 cities. This time, it is not so. Last time, you saw total lockdown. This time, you are seeing a partial lockdown. It is on paper. On paper, it looks like it is partial lockdown, but in terms of civil life, disturbance is very much. But in terms of -- if I talk industrial life, industrialization, industrial activities continue. So there is a stark difference between the two. But when it comes to cement consumption, when we talk about cement consumption, the scenario is very clear that the demand has been hit across the state, whether it is Tier 1 city or Tier 2 city or Tier 5 city. It is the same state of affairs everywhere. Because this time, the impact has gone rural, okay? It has worsened the sentiment. Last time in the wave 1, we did not lose a single dealer or the loss of life or fatalities were hardly anything. This time, we have seen a lot of fatalities happening. So it has subdued or suppressed the business sentiment in the market compared to -- so the demand will also, in relation to that also, get impacted. But if I would say that after the second wave, third, what will happen, okay, it will be another further change because now it will become a way of life. Possibly demand may not dip also. So it is a learning curve for the humanity, the human race.

Sure. Sure, sir. And sir, my second question, can you give some guidance on the top line and the EBITDA margin front for the...

That is what we avoid every time. Sorry for that.

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

Just a follow-up on the previous question. So during the month of May and now like we have already closed the month also, has there been any difference in trends like a part of May or right now when we are ending the May, has the sales like sort of deteriorated or remained stable and back throughout the month.

So as I said last time, it was from a complete lockdown, okay, in the month of April. And then when you happen in May, the demand pattern has changed. But this time, it is not the same. The cement sales is going on. So it is -- these situations are not comparable.

No, no. I'm talking about current May only. So in part of...

I'm talking about May only because it does not matter really, May or anything, because the whole of March and from 23rd of March to April was closed down. Okay. So you can imagine, but April was not closed down in India this time.

No, I was talking about current month only.

Current month only because every month has got a -- every month has a dependence on its previous month. What is the material flow into the market? What has been the shortfall deficit? What is the vacuum created in the market? All these factors depend on the demand of the product and how it moves. So in April last year, it was a total vacuum in the market. So the demand will be different, okay. Well, now here in this time, the April demand was about the same and people sold in April materials and the people are selling in the month of May also. So it's not that sort of a dire. Last time we had a recurve, okay. From April -- from May, you sort of see a shot up, but not this time.

Due to time constraints, we'll be able to take the last 2 questions. The next question is from the line of Utkarsh Nopany from Haitong.

Sir, my first question is, what is the reason for increase in our employee cost in March quarter? And whether the current run rate is likely to be maintained going ahead?

Okay. So this is basically the increments happened in the month of -- in this quarter plus there are some small -- some changes which happened, some realignment happened. So those are the changes. This is not something which will happen in future. It is a onetime sort of thing.

Okay. So whether we will go back to our previous run rate of around INR 32 crores to INR 33 crores...

So around that much. It will come with a marginal increase of our -- some adjustments that we did for our increments and some now -- some promotions which will come in this quarter. Some minor increases will come. Otherwise, it will be very stable.

Okay. And sir, my last question is, by what proportion are solar and AFR project under implementation is likely to reduce our grid power share in future?

Which Anil mentioned to you, we are putting up a 5.5 megawatt power plant, solar power plant in Damoh. So this will replace about 5.5 megawatt, a little less than that, of course, much lower than that. Anil, what is the quantum of it will reduce because it is INR 15 lakh units per megawatt?

Yes. So it is 5 megawatts. So every year, the number of units will be in the range of 9 million to 10 million units.

So about 9 million to 10 million on this part. And AFR, what we put it, is not going to reduce, but it will reduce our thermal share.

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

Thank you. On behalf of PhillipCapital (India) Private Limited, we would like to thank the management of HeidelbergCement India Limited for the call, and many thanks for the participants joining the call. Thank you, sir. Aman, you may now conclude the call.

Thank you. Take care.

Thank you.

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