HeidelbergCement India Limited (500292) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the HeidelbergCement India Limited Q1 FY '22 Conference Call hosted by PhillipCapital (India) Private Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital (India) Private Limited. Thank you, and over to you, Mr. Agarwal.

Thank you, Janice. Good afternoon, everyone. On behalf of PhillipCapital (India) Private Limited, we welcome you to the Q1 FY '22 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 this conference call may be forward-looking statements related to future developments and current performance. These statements may be subject to a number of risks, uncertainties and other important factors, which may cause the actual 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 Q1 FY '22 presentation on the stock exchanges and its website. Participants may download a copy of the presentation from these websites. I'll now hand over the floor to the management of HeidelbergCement India Limited for their opening remarks, which will be followed by the interactive Q&A. Thank you, and over to you, Cooper sir.

Thank you, Vaibhav, and welcome to all who have joined the conference today. Thank you for your presence and your continued interest in HeidelbergCement. Wishing -- hoping that everyone is safe and healthy in these times of -- difficult times. So I wish everyone a healthy and a safe life. Talking about our June quarter results, we have uploaded our presentations, which you have seen. The key highlights of this is we are -- on the ESG front, we are looking at the CO2 emission to achieve 500 kgs per tonne of cement against from our 511 as we stand today by 2025. So this is one of our focus areas on sustainability. On ESG projects, we are putting -- to support the ESG projects, we are putting a 5-megawatt solar power plant, which should be operational now any time. So we are looking at that. So in terms of the capacity utilization, the company has touched 74% utilization, and this capacity looks a little tad softer because we added about 1 million tonne last March. So this looks -- otherwise, we are operating close to about 90%-plus. We continue to produce 100%. I think this is a hallmark of HeidelbergCement across. I don't think there is anybody in this industry who is on 100% blended cement. So on the compliance side, we will be -- on the environmental side, we will be having the lowest CO2 footprint because being 100% of PPC market producer. In terms of our green power, we are very proud that we are -- right now, about 23% of our power used in HeidelbergCement is -- 23% is green power. On the EBITDA side, which is there, which we have slipped a little by 12%, but given the times which we are into, we have clocked about INR 1,107 EBITDA per tonne. But on an absolute EBITDA, there is an increase of 21%. Net cash in bank, which is almost INR 2.3 billion, we have a negative working capital, which are some of the highlights. And these hallmarks what we have will continue to drive in the future also. Talking about -- on Slide 4, we're just talking about -- if you go through it, this is our road map. We are talking about alternative fuels, which will start sometime in the quarter 3 and quarter 2, and we should be ready with AFR use in Narsingarh plant. Renewable energy, as we said that we're looking at 5-megawatt. And the table, which is shown to you and the graph, which is shown to you, which says clearly that from 511 in HCIL, 2020 target is to reach 500. So this is our road map. If you -- for comparison purposes, we have given the -- where the world's cement industry stands at 640 kgs of CO2 emission, Indian cement industry stands close to about 580 kgs. Our company stands at about currently 511. So we have a lesser road to travel. But we unrelentingly continue to pursue our target of becoming carbon neutral by 2050. This is our group's target also, global target also, and we align ourselves to that. In terms of COVID times, progressing to Slide 5, we have done whatever possible to support our society, which is around our plants by giving them whether it is oxygen cylinders or providing them beds. And we tried to give them masks. So with education, only -- also we're giving enough -- devoting enough time to educate people on the necessity of putting up masks, responsibility -- bringing in the sense of responsibility among the people. So those were some initiatives from distribution of medicines and all those things which we have done and which have been also recognized by the media at various stages. We have given -- under our CSR activities, we have also started operating 1 -- opened a very small hospital for children who will benefit. So these are things which we have done. Not really -- we are not -- I would say -- admit that the society needs far more than what we can do. And we also look forward to -- as over a period of time to support as much as possible from our side to the society, the needy and elevate their status also in the world, global environment. We're talking about -- referring to Slide #6, here I'm giving you a very broader view, which I always say that sometimes the ups and downs, because 2020 and '21, 2021 was a very unpredictable year, okay, which had a lot of ups and downs. But when you look at an averaging out of last 4 quarters, how it looks like, okay? So it averages out that, we have maintained a 12% growth in our volume of the last 12 trailing months. So this is our way of looking at business. Maybe this -- because we are not a pan-India player, I cannot tell you, but it is our -- all our efforts are there to ensure that we remain aligned to the market growth or market will be a little better than the market growth perspective also. So referring you to this Slide 7, I need not say too much. You people would have analyzed this much, much, much clearly. On the EBITDA side, we have increased by almost 20%, 21%. On PAT side, we are 40% plus. The sales volumes are 38%. A little bit of impact from the south in Karnataka because we sell also cement in Karnataka from Ammasandra. So there, it was a little softening of volume. Otherwise, we could have clocked a little better here. On the gross realization, softened a little, mainly because of -- today, the markets were a little under pressure at point of time. Cost has gone up, more -- mainly driven by fuel. Power and fuel have been game-spoiler in the last quarter. The waterfall chart, you can see it, about INR 160 has just gone away, taken away by power and fuel, which has been, to an extent, compensated by freight and others. So this is some benefit there. But yes, had power and fuel being a little better for us, we could have improved our EBITDA, we could have at least reached there. This almost is equal to 12% reduction what you are seeing. INR 160 is equal to almost 12% of the reduction what you are observing in the EBITDA per tonne. Next. Referring you to Slide -- drawing your attention to Slide 9. 45% of our volumes are road. And in terms of rail, it has a little bit increased because of various benefits which we get from the railway. So it keeps switching here and there. Coal has become 65% because pet coke gradually has shot up through the roof. And as of now, it’s too costly to think of also pet coke. On premium quality cements that we are talking about, our share is now 20%, which has grown by almost 88% over last year. Trade. We have slipped a little of -- only saying that because if you look at a year-on-year basis, last year we were 89%, now it is 83%. And this is also because of some nontrade orders, which are government orders, which are coming in and in a big way. And to fill up, this is more for us filling up area. So we have extended a little bit and moved to 83%. Otherwise, our target is to remain to around 85%. That is our target and 15%, we don't prefer to do more nontrade. So anyway, this will be getting made up. Last year, there was -- the difference was also because there was a cement shortage in the market, and the government projects were not working last year in June. More -- private demand was very high. So we have served that time the private demand and IHB segments and this time the demand has been almost the same. It has come back to the normal standards. So that is where we move. Outlook. We have almost -- we have vaccinated. We have given a free vaccination drive to our entire employees, not only our employees, our workmen, it is also to even our contract workmen who are working and including their families. It is not that only to those people, but also to their families we have extended because we believe that if people have to be safe, their families also have to be safe. So we have extended it across the length and breadth of the society wherever we can serve. Demand recovery on the housing side, infrastructure, we have seen good demand from the government projects, so that will continue. I think government wants to spend and improve the -- and if you can see -- if you really look at the recent trend of unemployment, okay, it is again back to 10% and 11%, which since COVID 1 had shot up to close to about 23%, 24%. So there is a significant improvement. I would say the world is trying to learn to live with COVID. The risk is hardening of our domestic fuel prices and international fuel prices. So customer sentiment, I will say that rural sentiments are significantly strong across. If you look at the PMI data, recent PMI published data, rural demand is looking to be much stronger than the urban demand. So I have a very positive note on this that we've been a very rural player in a B class or C class or even Tier 3, 5, 6 tier cities, it is a good time for HeidelbergCement to strengthen its position there. All said and done, 2020 was an election year in Central India, which is UP. And there is no relenting on -- by the government on spending on projects. So I think the demand will continue to be strong in Uttar Pradesh. Madhya Pradesh should not lag behind because that is also in a strong position. We have not seen any setback coming in there. Raw materials. We had to source and that has got a little costly. Logistics will become -- because of the diesel prices have shot up through the roof. Now I think in the months to come, we do not know how the logistics market unfolds. It is yet not reacted to those so much of major increases. But in the years -- in the months to come, we do not know how the logistics market will unfold. And today, I will always say with a caution that demand is growing at about 8%, 9% we anticipate for the year, but we cannot say what will COVID wave 3 do to us, whether we will be worse, good, better, but possible chances are there that the way the government has moved and people have now realized, the wave 3 may not be as harsh, but let me keep my fingers crossed because we are not an expert at health or hygiene or anything or doctors in this industry. We will have to wait. If we have to look at the examples of Indonesia and Europe, then things are bad. If you look at Australia, also the third wave is bad. So we -- Australia has already been declared as a lockout, it's now -- when I was in the morning talking. So things are very fluid situation. We will keep our fingers crossed. We will ensure that our plants are working, our people are safe, and our dealer network, also our channel partners, we try to see that they are safe, so they can continue their business uninterrupted. We are assisting them if they are having problems in their life. There are many dealers who suffered out of COVID, but we have -- our company has helped them to come out of this crisis situation. So this is all from my side. And I'll leave the floor to you for questions. Happy to answer those. Thank you very much.

[Operator Instructions] The first question is from the line of Gaurav Birmiwal from Credit Suisse.

Sir, can you throw some more light on your power cost? So I just wanted to understand what your average consumption cost of pet coke and coal was in 4Q, 1Q? And what are the spot rates? So I just wanted to understand the potential impact on power cost going forward.

So right now, as I said in my slide also, it is 65%, so about 35% is pet coke in the quarter ended June. In terms of -- you asked about the price of pet coke. In terms of our power, power is about 72 units -- 72 to 73 units is the power consumption per tonne of cement. In terms of our fuel, it is about 3.05 gigajoule is our consumption on fuel. So I think that is okay. That is more or less strong. Maybe a little bit 1 unit of power here and there and a 0.01 or something can be happening in a safe method on coal. But now when the pet coke being getting lower and lower, there are other issues, which will come about. So we have to learn to live with those things also.

On the price, sir, what was your average purchase price or consumption versus the spot price for pet coke and coal?

Pet coke is right now trading at about INR 16,000 to INR 16,500 odd some per pet coke, and that is about INR 8,500 for coal. It is -- this is the average price, which is delivered.

[Operator Instructions] The next question is from the line of Pinakin from JPMorgan.

Sir, you mentioned that pet coke has come down to 35%. And at this point of time, the deliver cost of coal is roughly around INR 8,500. So what kind of coal are we talking about? Is it Richards Bay? Is it Newcastle? And essentially, at this point of time, does this reflect spot prices of INR 8,500 mandate or the June quarter average?

We are buying coal from the open market, mostly it is domestic coal only.

Okay. So this will essentially be the e-auction coal that you're talking about?

That's right. This is for the e-auction or who are importing that also from those imported coal also, if it is available at a good price.

And is it fair to say that this will be more than INR 5,500 Kcal coal?

This includes the domestic coal, which we get under our fuel supply agreement. When we talk about the open market coal, yes, you are right, it is between INR 5,200 to INR 5,500 NCV, where when you talk about the domestic coal, it is the domestic coal under fuel supply agreement, it is around INR 4,400.

Understood, sir. Now sir, just taking this question forward because what has happened is in the energy market, is that LNG prices have shot through the roof, even though it is seasonally the weak quarter for LNG and thermal coal has again started rising. Newcastle has hit $140, $150 a tonne, and there are worries that when China's winter starts, coal prices could take another leg. So at this point of time, sir, the way -- how you're seeing your energy cost evolve over the next 2 quarters? Do you think that energy cost for the company will remain flat over year? Or can we see double-digit increases?

If you look at our last 9 quarters, if you look at it, it is hovering around INR 6.3 -- INR 6.2, INR 6.3 per unit, okay? So it is very much similar. But when we -- our WHR -- this time the WHR output has also been very good compared to last year, almost 16 gigawatt hours compared to 13 last year. So it is a better output. We get it at a very cheap price. But of course, yes, you are right that if the energy price keeps going up, we will have to -- but we are adding 5 megawatts of our solar power plant, okay? Then we are getting it from the open grid, from the open exchange also -- open access also, we are getting. So it is the balancing. We are trying to balance. If you look at it in last 9 quarters, it is virtually almost similar, hovering around between INR 6 to almost INR 6.3. So it is -- I think the team has managed with power sourcing very well.

Understood, sir. But sir, in terms of the fuel for the kiln, we should see cost inflation?

Pardon, I could not get you.

For the coal that will be used in the kiln, sir, cement kiln, over there, we should see material cost inflation?

As I said, coal has increased by almost 3% for us and pet coke has risen by almost 57%.

Understood. And sir, my last question is that you mentioned in an earlier comment that the lower usage of pet coke, there are other issues that you have to live with. So operationally, what are the challenges or issues faced when you're migrating from a high pet coke usage to a high coal usage?

See you have to maintain your place. SO3 and SO2, you have to maintain in your cement, okay? So that becomes a challenge. Every time you have to keep changing the recipe, plus you have to use less -- you have to use high-grade limestones. So these are challenges, which will come in when you are using coal alone.

[Operator Instructions] The next question is from the line of Rajesh Ravi from HDFC Securities.

Sir, I have a few questions. First is, if I adjust for the GST gains in Q4 and Q1, our realization appears to be flattish versus our channel check suggesting that 3% to 5% sequential improvement in realization. So is there any major change in sales mix quarter-on-quarter?

Not so much on. I would say a little bit -- the prices would have become a little -- we would have sold it to a little distant market, but also not so much, very small quantity. I don't see any much major change in -- there is a small drop of about INR 70 to -- INR 80 to INR 90 per tonne in terms of our realization. Our non-trade is a little higher.

No, Q-on-Q, it is flat only, sales mix, the trade mix is similar, both in 4Q and 1Q as you have shared in presentation, which is 3% and 3%.

Yes, you are right. There is some pressure -- a little bit of pressure on price because of -- in Central India, must have been.

Okay. Because our channel check are suggesting gain sequentially. That is why I was surprised that why we have posted flattish numbers.

I think this could be made mainly because of little bit of price pressure because markets where we might be selling, there must be more ingress of material which has come from outside.

Okay. Okay. And sir, are you selling any clinker also?

No, we are not selling any clinker.

Okay. And possible to share your clinker production numbers for 1Q and for FY '21, please?

Clinker production was -- for us was about 690-odd.

690, okay. And for full year, sir, FY '21?

For whole year of '21, it was about 2,600-odd something.

2,600. Okay. And sir, second is on the costing side, when you said that pet coke prices are up more than 50%, while coal prices are up just 3% for you, so is it like what portion of your fuel mix is domestic coal, sir? I think that is where most of the benefit is there in terms of inflation?

Most of the fuel for us in Central India is domestic only.

Okay. Okay. Great. And sir, on the power cost, though you are very strong on the efficiency metrics, 72 units, but are you seeing any inflationary pressure on that also with grid power supply cost going up? Or are they still stable?

I think after this 5-megawatt kicks in, and we are signing 1 more contract for our Jhansi unit, I think on the grid, the dependency will come down to 30% or so.

Okay. No, no, that's fine. But I'm saying the purchase cost, the grid purchase cost?

During this year, we don't foresee any big increase because in Madhya Pradesh, the government has already revised their tariffs in December 2020. So we don't think that they are going to revise their power rate, grid rate during this year. And similarly, in Uttar Pradesh also, we don't foresee that in the next 2 to 3 quarters, we don't have any increase in the grid prices because UP election is there. So from the power side, we can say there should not be any much inflationary impact in the coming 2 to 3 quarters.

Okay. Okay. So only on the fuel side, whatever the pet coke usage you're doing, there, inflationary impact will be there. And one last question on your AFR, which you have mentioned, this project to start in September this year. Could you speak more on this what exactly is this project? And what sort of cost saving and all if you see from this project?

It is basically more of a sustainability on an ESG side of things to reduce our carbon footprint. So it will be about -- TSR basis, it will be about starting with 6% to 7% on the TSR. And then it will go up to -- in a phase-wise manner, it will go up to 20%, 22%. We will try to see that it goes to that level within a period of 2, 3 years' time...

[Operator Instructions] The next question is from the line of Ritesh Shah from Investec Capital.

A couple of questions. Sir, in one of the earlier questions, you did comment upon a shift in inter-regional trade or more material coming into central region impacting pricing. Sir, can you provide some more color on this particular variable?

See, the Central India markets for the last few years, I would say, at least 3 years or 4 years has remained much more stable. This has attracted the attention of quite a few people, who are wanting to dump in their extra surplus from the industry. So they are pumping in these materials, which come to our markets. But of course, they sell at about INR 70, INR 80, INR 90 a bag cheaper than us, than the traditional players, most of the players. So they have a destabilization impact on. Some people can bear it. Some people cannot bear it. So that is the only issue. So nothing much about it. It is like this, if you are keeping sugar on the table, probably the bees will fly to it.

Right. But sir, has the volume reduced on a sequential basis, if one looks at it on a percentage of consumption basis, basically – which gets imported into the region specifically for the regions where we sell our materials?

Essentially, we have the degrowth of only 5%. So when we see the -- volume-wise.

Sir, I'm not worried about volume. I'm worried about pricing, given we have such a strong brand, we are 100% net debt, and we have significant percentage of the trade side. So is this a particular variable, which does impact our pricing as well, given we have no pressure to push incremental volume in the marketplace? So I'm just trying to understand how the business works? Does inter-regional trade significantly or adversely impact us?

Yes, it did impact. It does impact from time to time. If the markets are sluggish, and if you sell -- to sell this volume also during a period of this recent times has been not an easy thing, okay? So just a little additional volume push has led to -- given us a little bit setback on prices. But I think this is -- it will happen, in some quarters, it will not happen because we have to also balance -- safeguard our markets. So we will keep doing this different pricing strategy, we will do it from time to time.

Right. Sir, just a related question. I just wanted to understand, has the peer side competition changed the discounting structures in the region? We hear about this in Southern India. Has it something of that sort of happened in Central India as well? And have we changed our market policy on back of this?

No, no, no. We do not have a change in market policy at all, okay? We fixed up our discount structure, our incentive structure on 1st of January and then it stays there for the whole year. It is written in document. It is given to every dealer in writing, okay? So our documents are very clear where we are fully compliant with the tax laws. Whatever we give, whatever we put on paper, it is -- that is it. So that does not change us from day to day.

Correct. And sir, for competition, if you'll be able to comment on that?

I cannot comment on competition.

Okay. No problem. Sir, my second question is any update on group simplification and the Gujarat expansion? We have been waiting to hear on this particular variables from you.

So Ritesh, clearly that we are working on the Gujarat project, which is already there. So it is -- the work is going on. It's environmental clearances and all those, that will take its own time. So we are proceeding with it. How long it takes? Because these are not in our hands, 100%, okay? There is a government agency involved. Environmental clearances are involved. Surveys have to be done. So it's a very long process, which takes its own course. Normally, as I said, that it takes about 1.5 years or 2, sometimes even 2, to get a clearance.

And sir, group simplification around Zuari, Heidelberg India, any update over here?

Yes. So Ritesh, we are looking at it now since the laws are changed on -- the mining laws have changed. It does not erode the wealth of the shareholders. So we will -- we are looking at it now. So we have started working on this. How fast it happens? I cannot tell you, but yes, it is on our cards. We have started thinking about it.

[Operator Instructions] Next question is from the line of Amit Murarka from Motilal Oswal AMC.

Sir, my first question was on production numbers. So like -- I mean, is there any quarter-ending clinker inventory that you would have in your books? Like from the P&L, it doesn't look like there's much change in the inventory valuation.

Any point of time, we could carry about 75,000 to 80,000 tonnes of clinker.

Okay. Okay. Sir why I asked that is that because generally, in this quarter, we have seen like companies trying to build some clinker inventory because anyway, the demand was a bit softer, which could then have helped you do better volumes in the rest of the 9 months and in fact, effectively utilize the full year capacity.

Amit, we had a major OLBC change, okay? So that has been a period the line 3 was stopped. So we had -- this is depletion on stock of our clinker, but we had built up enough clinker to sustain our dispatches and sales. Earlier when we took the shutdown, it was almost for 18 days to 20 days.

Okay. So like -- and what was the cost for that? This is the second phase of the OLBC replacement, right?

Absolutely right.

So that work is completed now, right? I mean what was the cost for that? Sorry, I missed the opening comments, if it was shared.

It was the CapEx. It was not flowing through the profit and loss account. Last time also, we have done 50% OLBC replacement and this time also. This time, it would actually reduce the number of shutdown days of the other bigger lines. The total CapEx we have incurred on this replacement of the -- both the year is around INR 180 crores.

Sorry, how much 100…

INR 180 crores.

INR 180 crores.

Okay. Got it. And just like realizations for you seems to have been flat Q-o-Q, whereas I believe like other players and broader industry has seen improvement in sequential realizations. So was it because of some mix change or something like -- could you just explain that a bit, please?

See, I cannot say about -- because there are people whose results have come in. So far, they are pan-India players. Of course, South has seen an improvement about INR 100, INR 150 in the realization. So there could have been some benefit out of those markets, which we are not privy to it, neither we are operating in a big way. Our major markets are Central India. So we did not see this sort of price boost coming out here.

The next question is from the line of Shravan Shah from Dolat Capital.

Sir, just to clarify, post June, in terms of this July, have you seen further reduction in prices for us? Or is it stable?

It is stable. So when it is -- it is stable right now. Nothing much changed. But of course, we cannot say that it will remain like this. Monsoons have just set in about a week back, okay, so we'll have to wait and watch.

Yes. Because that's the main thing that's where the -- I think most of the people are worrying because even if we adjust for the GST benefit of the last quarter, then also we are at a flattish or maybe INR 7, INR 8 decline or people would have expected some improvement if it is not there. And this quarter also, we see a decline. Then for the full year, maybe we need a significant increase in realization for at least in the third and fourth quarter. That's where the people are worried. And we are also having some cost pressures that may come. So that's the -- what is -- that's what I was worrying whether we have seen some decline, even around INR 5, INR 10 also. Or at the same time in terms of the premium share also, are we -- would we stabilizing at this level or 20% or we can see further improvement there?

Shravan, 2 things. One is the last point, which is about -- we have a target to reach 25% of the premium cement, not beyond that as of now. We do not want to push too much of premium cement beyond the point. Otherwise, it leads to dilution of the pricing. So that is one. Number two, in terms of price reductions or anything, there is not much of sales alteration, which is happening in the prices. But yes, going forward, I will expect some prices to slip a little bit here and there. But not too much for the simple reason, the costs have shot through the roof, so there is no too much of tracking that, okay? So I cannot be on a back foot. Very soon cement companies will find themselves back to the wall, okay? If they don't make profit, then it will be a problem. So not -- I don't think any company will, at this juncture, think of dropping prices unreasonably even to pick up volumes. It is not suitable. Going into quarter 3 and quarter 4, definitely, I'm very hopeful that by the time COVID wave 3 would be over, which is the fear, which is hanging sword on our head, which people keep talking about, but it is -- if it happens, it happens, it does not happen. But this time, COVID 2, and if I compare the demand and the methods and how the industry has behaved, the employment has changed and how the growth or demand pockets have changed and how they have moved, I can say that only that COVID 2 was not as frightful as COVID 1 was. The way it pushed down the index of the 8 core industries, it was a total lockdown in wave 1. In wave 2, it was -- everything was working. Markets were opening. Partial lockdown, partial working. So it is not -- I think if COVID wave 3 happens, probably you will not see much lockdowns also happening. People will try to adjust their own tone and tenor and try to exist themselves rather than forcing the government to go for lockdown. That's what my reading is. But yes, quarter 4 -- 3 and 4, I'm expecting price to really improve significantly.

Yes. That's very helpful. Sir, last 2 clarifications. One, the runway, there's -- the work of the 20-kilometer -- 22-kilometer has been done or it will be done in this July, August, September quarter? And last time in the third quarter, we have spoke about INR 9 crore, INR 10-odd crores whenever it will happen, we can see other expenses to go up. So clarification needed on that.

So Shravan, it is already all over. The belt is on and live, and it is working. We are out of this, and there is no further thing to be done in the rest of the year.

So now for the full year, how much CapEx we can see?

It is already done. It is -- last year and this year, the total CapEx was INR 18 crores to INR 20 crores.

Yes. No, no. So I'm saying now for the full year -- last time, we talked about INR 95-odd crores CapEx. So will the numbers remain the same? Or any change in that number for FY '22?

There is no change.

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

Sir, can you just tell me what was the lead distance during the quarter?

350.

250?

Yes.

Okay. And sir, how much we have incurred on conveyor belt, I missed that number.

What is the question?

What was the CapEx incurred for building this conveyor belt?

So this -- we have done this CapEx in 2 years, last year and the current year. Total CapEx for the entire 21 km was around INR 20 crores. So most of the part of the CapEx we did last year and the balance we did this year.

Just to correct you. I thought you written down. You written down 250, it’s 350, 3-5-0.

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

My first question is, we were looking at certain clinker -- I mean we were scouting for some limestone in central market for a clinker debottlenecking. Have we moved forward in that respect?

Yes, we have moved forward in that respect.

So we should...

We will approach whatever excavation we have done. Once the results are out, then we will approach the government for that.

So the clinker expansion would be possible in this location?

Let's see. It depends. When the results come out -- just the drilling and all those things have got over recently. So I don't have full data about the results.

Okay. And sir, how much according to you on per tonne basis, inflation would be -- we would see inflation over like next 2 quarters, fuel inflation?

Very difficult. Today, I cannot comment at all on fuel inflation at all. Absolutely, no clue. We never thought that pet coke could trade at $150 and $155, unimaginable.

And how much inventory we maintain for the fuel? I ask because -- I mean you have said that coal mix has gone to like 65%. Is it further going to go up, which will contain our overall fuel inflation?

Generally, it is very difficult for the people to carry the huge coal and pet coke inventory. We generally try to keep the 30 days inventory. And therefore, any major increase or decrease in the fuel prices will impact the profitability in the quarter.

[Operator Instructions] We will take the next question from the line of [ Kedar Kajli ] from Fortress Group.

Sir, my first question is, what is your logistics mix in terms of road and rail? And secondly, with this dedicated freight corridor coming up, do you see any benefit for your company?

Okay. So today, it is about 55% rail and 45% road for the quarter ended. So this is what our -- mix has changed. Earlier, it used to be 50-50 and it's changing depending on how the railway freights pan out and how the logistics is available. As far as freight corridor is concerned, I do not foresee any major benefits coming out of it because cement is limited to a geographical boundary, which cannot exceed beyond certain levels. If you try to do that, it can become a negative impact on your realization. So I don't think today freight corridors -- freight corridors are long haul for movement, material moving from north corridor to south corridor and east to west. Those corridors will help those type of material movement. Cement, not too much.

The next question is from the line of [ Vishal Thanvi ] from ValueQuest.

I have seen one trend in cement company’s reserve. So in the raw material costs, they have -- they gained the benefit from change in inventories. And in our case, the reserves that benefit was not there. Can you highlight what was the benefit which others got and we didn't get it?

It depends upon how much clinker and cement inventory you carry in a plant as well as in warehouses. As on 30th June, we have not showed increase in the inventory as compared to the March. March, we have seen that our inventory has increased, whereas in the June quarter, our inventory has reduced. So it depends upon your production and the dispatch. We have taken our bigger kilns shut down during the month of June, and it was coupled with the -- replacement of our overlength belt conveyor of 20 kilometers. So therefore, our clinker inventory and -- as well as cement inventory was lower. And therefore, the inventory gain was not there in this quarter. And whenever inventory increase, yes, you are right that the company in that particular quarter has the benefit and that is the benefit on account of only bookkeeping or accounting benefit. It's not the real benefit. Now during the quarter, you may see these kinds of changes, but ultimately end of the year, it is given out from one quarter to another quarter.

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

Sir, I just wanted to understand how have we moved from September quarter to our -- I mean the last 2 to 3 quarters in terms of domestic coal? Or that's what we have replaced, right, for over…

Yes, yes, you're talking about domestic coal?

Yes. So what was the proportion of the December quarter and what will be it now?

If you look at last -- if we look at the June quarter, last year, it was -- 38% was coal. Today, it is 65%.

Okay. And largely, we are procuring from e-auction or from FSA?

From all possible resources wherever it is available on the best possible options we take. Plus, we have got an FSA, as Anil has already informed. We have got an FSA also.

Sure. Okay. And that is -- okay, sir. That is one part of it. And secondly, we see on a per tonne basis, actually, our logistic costs also showing some kind of a decline. So it's the reason there because our volume has gone up, the fuel -- so can you please throw some light there?

So it is very clear that the way -- if you look at it, the rail movement has increased, okay? At that point of time, the rail was 48%, now rail is 55%. So whenever there is an option, you have to shift material. So you take the advantage of the railway freight. And when you take the advantage of more railway freight and it was available at a good price and since our distances which we travel also a little extended into some markets. So there the advantage has come for 614 also. And it is also -- right now, the issue is not that, it should have gone up. It is a team which has managed it. Otherwise, the diesel prices has shot through the roof. So freight should have been more. Now the pressures will build up on this.

And then, Milind, we also got some freight rebate from the railways during this quarter, and maybe we will be able to get this kind of rebate in the next coming 2 to 3 quarters.

Okay. So should be a need that we have moved to more of newer markets through the railways or it was in our own market?

So it -- there are 1 or 2 markets are new markets also where we have given some material -- seeding materials.

Okay. And that -- we indicate that that can sustain if the demand in that market continues?

If it continues, then we will try to push up the prices there.

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

Sir, just one question. Sir, how would you reflect upon the recent limestone auctions? And how do you see the pipeline for auctions in the regions that we operate?

So the limestone auctions are okay, good. I think the recent one, one which was -- which occurred, we also participated in, but there is a -- clarity was a little low on that. So it went -- we participated in an auction. We had a certain target to -- beyond a point. But then it was not a very clear picture about -- the results were not very transparent. So we went to a certain level. Beyond that point, we did not go -- exceed beyond a point. So there will be some more pockets, which will come up for auctioning in the near future. It was at a little distance away from us. We could have put up a greenfield. But if the -- we always look at everything from this perspective of the quality, the size and a little bit of more transparent. There was a little forest land on to that. So there are certain areas, which puts us -- on the basis of our own assessment, we said there was a certain price to be paid for it. If it goes beyond that point, we don't proceed further.

And just, sir, a related question, sir, how should one look at the growth prospects for HeidelbergCement India, given you did indicate basically we are -- so Gujarat is one which is -- we are looking at limestone auctions. But if I had to look, say, 3 years out, 5 years out, how should one picturize the company?

So today, we are -- if you look at the group's presence is close to about 14 million tonnes, if I combine Zuari entry. It is a 6.25 million. And if I combine them both together, it is close to about 14 million tonnes of capacity in India. We are looking at organic growth also. If something is available, asset is available, the group will always be interested in going for it. And of course, there we are exploring some mines also, limestone mines also. So that will also add up. In Zuari, there is a sitting capacity, there is a market already, there is already a 1 unit, which is -- one greenfield can be done here, one greenfield can be done in Zuari. So if you look at it, the potential is to go to almost 20 million tonnes, not a problem.

And sir, just a follow-up. Sir, when we go for auction, is there a hurdle rate when we actually go and bid? How should one understand that? I understand that calcium content might be different, logistics is different. But is there any hurdle rate? Or how should one look at basically when the company goes and bids for limestone deals?

No, you have to assess your -- based on the information given to you in the initial offer document, you have to -- based on that and on the basis of that, you do your calculation, you do your ROI and then you bid for it. The base price is decided by the government, by the -- government decides the base prices and on that, you quote a premium. If it suits you, you take it. If it don't suits you, don't take it. It's okay.

Okay. Sir, just a follow-up, but do we know that what is the sort of incentive that the state government will give on that particular limestone auction when we go and bid for particularly? It is something which is known for from before? It is something which is definitive on paper? Or it has something that has to be worked upon?

No, we'd like to -- whatever the information is available, government will not -- tomorrow, if you find more limestone, the government is not going to give anything on that.

We take the last question from the line of Amit Murarka from Motilal Oswal AMC.

No, I don't have any further questions. Thank you.

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

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

Thank you.

Thank you. On behalf of PhillipCapital (India) Private Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.