JK Lakshmi Cement Limited (500380) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '22 conference call of JK Lakshmi Cement 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 from PhillipCapital (India) Pvt. Ltd. Thank you, and over to you, sir.

Thank you, Stanford. Good evening, everyone. On behalf of PhillipCapital (India) Private Limited, we welcome you to the Q1 FY '22 call of JK Lakshmi Cement. I need to highlight that JK Lakshmi Cement is also the holding company of Udaipur Cement Works Limited, and therefore, the call is also open for discussion about the performance of Udaipur Cement Works Limited. On the call, we have with us, Dr. Shailendra Chouksey, Whole-Time Director; and Mr. Sudhir Bidkar, CFO of JK Lakshmi Cement. I would like to mention on behalf of JK Lakshmi Cement and its management that certain statements that are made or discussed on the conference call may be forward-looking statements related to future developments and current performance. And 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. JK Lakshmi Cement 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. I will now hand over the floor to the management of JK Lakshmi Cement for their opening remarks, which will be followed by interactive Q&A. Thank you, and over to you, sir.

Thank you, Vaibhav, and thank you all the participants for joining. You would have seen the results, and now we are open for Q&A. And once again, we thank you for the continuous interest that you show in our organization. Thank you.

[Operator Instructions] The first question is from the line of Manish Ostwal from Nirmal Bang.

I have one question only. On the volume, I want the volume of Udaipur Cement Works for the current quarter and the last quarter, quarter 4 FY '21, sir.

This quarter, Udaipur did -- you have to hold for a minute, please. [Foreign Language] Yes, they had total volume of 5.93 and -- in this quarter.

And the last quarter, 5.88?

Rajesh, confirm that.

[Technical Difficulty]

Hello? Sir, your voice was...

[Foreign Language] Let's move on. If you have anything else?

5.81, sir.

Sorry?

5.81, sales.

5.81 for the previous quarter.

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

Sir, am I audible?

Yes, you are.

Yes. First, on housekeeping number. Would you share the clinker production and cement production for JK Lakshmi, standalone?

For this quarter?

Yes. For the...

Clinker production in this quarter was 17.45 and cement production was 18.8 -- 20.88.

20.88. And for March quarter, same number?

March quarter, same numbers. We were -- in the March quarter, clinker production was 17.24 and cement production was 26.07.

And sir, non-cement revenues in this quarter?

Non-cement revenues, it was about 33, I think. Just a second.

No. No, no. 78.

INR 78 crores. And corresponding quarter was INR 29 crores because that was COVID-impacted quarter.

Correct. INR 29 crore Y-o-Y. And March quarter was INR 65 crore?

INR 95 crores.

Sorry, INR 95 crores. INR 95 crores, okay. And sir, how is the balance sheet positioned currently? And what is your status on the ongoing CapEx?

CapEx ongoing, we have only one CapEx, which is ongoing, which is the Waste Heat Recovery and some project on the SOx and NOx for -- at Sirohi. That is a project which is costing us about INR 240 crores, out of which we had incurred INR 104 crores last year. So balance INR 136 crores will get incurred in this year. And other than that, the normal CapEx of about INR 30 crores, INR 40 crores.

Okay. And for the Udaipur Cement -- Udaipur Works, what is the status on the CapEx?

CapEx, they have just completed in June quarter the balancing project of INR 60 crores, wherein their capacity has gone up from 1.6 for cement to 2.2 and clinker from 1.2 to 1.5. Now they would embark on the expansion project of INR 1,400 crores.

So what is the time line you're looking for the same, sir?

We had talked last con call also, 3 years' time, we are talking of and out of which the clinkerization plus 1 grinding unit will happen at the mother plant only at Udaipur. So our internal target is to complete at least that in 2 years' time, and the split location grinding unit, 1 or 2 would happen maybe a year later, in third year.

Okay. Okay. And for Udaipur, you mentioned the March quarter sales volume were 581 -- 581,000, March quarter?

Yes, in responsed, yes. Just now somebody asked this question.

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

So I just wanted to understand on the clinker sales for this quarter, I understand the clinker sale has been much higher. So given that demand is improving now and all, so what would be your strategy on clinker sales? Like would you like look to produce and hold inventory to optimize your revenues and margins in 4Q, when generally, seasonally, the prices margins are better? Or would you continue with clinker sales in the next 2 quarters?

We normally do not -- we plan what is going to the requirement of clinker in the coming next 2 quarters and as well as the production. If there's any gap, we'll stock the inventory. Otherwise, we dispose of. So whatever is feasible from our grinding operations that much clinker we ensure that we have it with us. This quarter, the clinker sale was higher primarily because of the uncertainty in the month of April and in the 2, 3 weeks of May, as to how long the wave 2 will continue, whether the grinding would get affected because of the lockdown. And that's why we cleared some more clinker than what was originally planned. Besides, we have a second quarter [Technical Difficulty] when normally the demand gets slightly subdued. So whatever was the surplus clinker has been sold in that quarter.

All right. So I believe your clinker utilization was 100% in this quarter?

Sorry?

The clinker utilization based on the production of 17.45, or if I'm not wrong, the -- your clinker capacity is about 6.9 million tonne, right?

Yes, it was 100%.

100%, yes.

Yes. Yes. So just in that context, I was asking that, I mean, based on this, like going ahead as well you would look to sell clinker? Or would you look to build that inventory for like doing more cement when the demand is generally better in, let's say, December, Jan onwards?

I think I've already answered that. We'll keep adequate provisions for meeting all the cement requirement. We don't allow cement grinding to get -- suffer on account of shortage of clinker.

Okay. Sure. Understood. Also on the cost side, so in this quarter, like, I mean, looking at the numbers, seems like your raw material cost has gone up. Like what would be the reason for the increase in the raw material cost?

Actually, we had also a part -- there have been some higher gypsum and fly ash costs plus some purchase of clinker has also happened. That's the reason as to why the raw material cost looks higher.

So this purchase of clinker would be from UCW or from the market?

Primarily from UCW only. But some may be there from the market also because at times, your question could be if you are purchasing them, why you're selling. So still if it makes sense to sell in a market where it gives us better realization and procure it in the market where the prices are less, so we do that as well.

Okay, sure. And also on the power side, like this quarter, generally, the entire industry has suffered from higher power consumption cost. So what would be your like coal consumption cost in this quarter?

In this quarter, we were at 7,000, a shade over 7,000 as against 6,800 in the corresponding quarter and 6,600 in the preceding quarter.

Okay. And what would be like the purchases at?

Purchases right now that -- those have become very expensive, but we have got -- we've done a lot of purchases in this quarter. So our inventory is good enough for another 3, 4 -- 4, 5 months.

Sure. But the inventory that you're holding would be again higher than, let's say, 7,000, what will...

Yes, naturally, it will be higher than the 7,000 cost, which has been -- you are right, absolutely.

So since you're already holding that inventory, would you be able to guide about the inflation that is likely, let's say, for 2Q because you already are like having that inventory at the quarter?

It should be 8,000-plus only.

The next question is from the line of Madhav Marda from Fidelity International.

I just wanted to just to get an idea from your side on the -- any specific cost side initiatives that we have ongoing? I think in the last quarter, you did mention that there were some initiatives ongoing to improve the EBITDA per tonne profile of the company. If you could just help us understand what's happening on that side?

Cost side, we are doing the basic recovery project at Sirohi, which will help us to reduce the power cost further. It will get implemented by third quarter. Other than that, we are working very closely on the logistic cost improvement.

Okay. And sort of what are the key target areas that we have with the logistic cost? Is it basically bringing down the lead distance? Or you've heard that some other companies are doing warehouse rationalization, more direct dispatches, et cetera, what would be yours? But I'm just trying to understand what are the sort of target areas from the logistics program?

I think these are the major buckets are, of course, ensuring that we get the -- we operate in the minimum heat is obviously the #1. Then the allocation to various plants become the #2; #3 is the direct dispatches. Of course, going forward, in every of these areas, the headroom gets limited. We are already doing nearly 80% on direct dispatch, 100% on the nontrade. So the headroom going forward gets lesser day by day. But still, the whole attempt is to optimize each of these buckets.

Okay. And secondly, on the -- on improving our trade mix and trying to sort of push more sales of premium-branded products, is that also something that we are pursuing in the next 2 or 3 years?

Yes, of course. The whole idea of premium brands and products are that we maximize their sales. We are currently at about 25% of our trade sale on the premium side. And the whole attempt is how do we really move on to 30%, 35%.

[Operator Instructions] The next question is from the line of Keshav Lahoti from Antique Stock Broking.

Sir, I want to understand, as the fuel cost is rising and also the diesel prices, so what sort of increase in fuel and diesel prices per tonne we should modeling for next quarter on Q-on-Q basis?

We answered that in response to the earlier question, it should -- this quarter, it was about 7,000 of our average fuel cost, should be 8,000-plus in the coming quarter.

And sir, what about freight cost?

Freight cost, the impact of the diesel would be there going forward. This time, there has been an increase in the -- as compared to fourth quarter, the diesel prices have gone up by about 15% and 27% corresponding to the -- with reference to the corresponding quarter. So that impact would come going forward.

Okay. Understood. One last question from my side. Last quarter, the April and May was quite bad for you, like 25% to 30% drop was there. I believe June has been quite good. So you have delivered a good number on volume front. So how has been the demand over July?

The demand, we saw a good run on demand in the month of April, up to 20th, 22nd April. Thereafter the -- because of the lockdown in the various markets at different times, our dispatches were slightly subdued by about -- till about first week of June. Thereafter, there has been a good demand run right up to second week of July. Now with monsoons widespread all over, there has been a slightly flattening demand in almost all the market, which is a normal phenomenon during the Q2. And I would expect that to continue till middle of September. But as I said, this is a usual phenomenon, it's nothing new.

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

Sir, I have 2 questions. One is, we understand that the company has won a few leases in Rajasthan and Gujarat. Sir, can you give some details on that? What are those leases, at what premiums we got? And what does it mean for the group's growth plans going forward?

We have got 2 mines, one in Kutch in Gujarat and the second one in Rajasthan. So as far as Rajasthan is concerned, that is available in public domain, the premium which we have bid for.

Yes, sir. So sir, what would this mean for the growth plan for the company?

Right now, we are working on expansion of the Udaipur second line. And towards the end of that, we would take a call when to expand -- take up the next further expansion, whether it will be a brownfield in Eastern side, depending on the demand/supply, or using one of these mines for a greenfield opportunity. We'll -- it's too early for us to take a call. We'll be working closely right now on the usage of their expansion only. But yes, these will be the opportunity going forward.

Yes. But when we say what does it mean, it means that we will not obviously lose our market share. We'll continuously have opportunities to create capacity so that the market share gets grown rather than shrinks when we run out of the capacity. So what it means basically is that in both our key markets of Rajasthan and Gujarat, we now have adequate coverage or limestone availability so that we maintain our -- or grow our market share.

Sure, sir. Sir, my second question is, there have been top level management inductions in the company. Has there been any change in responsibilities on the marketing side or on the manufacturing side of things? I just wanted to have some sense on this particular aspect on how we should look at it, say, 6 months or 2 years out?

Yes. We have now -- as we mentioned in the previous quarter con call as well, that we now have a president who will be looking after both these operations under one umbrella. So obviously, that means that going forward, he's already in the process. Going forward, he will be the face looking after both these things, both the major operations.

The next question is from the line of Roshan Paunikar from JM Financial.

Yes. Sir, firstly on this Udaipur expansion. So in the last call, we had noted that we are looking to release an equity in the Udaipur Cement in either through rights issue or through equity infusion from JK Lakshmi side. So have we decided on that?

This, we'll announce in the coming quarter. We will form it up and announce it in the quarterly results along with the quarterly results of Udaipur.

Okay, sir. Sir, and the other question, so basically, what would be -- what would have been our trade/non-trade mix, blended cement mix from this quarter?

In this quarter, we had trade about 53% and blended 58%.

All right, all right. And our fuel mix for this quarter would have been?

Sorry?

Fuel mix, sir, pet coke, coal.

Okay, we are -- because of this spurt in the prices of the pet coke, we've switched over to coal primarily. We were already very high in [indiscernible] So overall, we ended at 54% coal, 40% pet coke and 6% other fuels, biomass, et cetera.

All right, all right. Sure. And sir, just last question. Sir, what would have been our clinker sales during this quarter and at what price would we have sold it on this particular quarter?

Price, I will not be able to share. Clinker sales were 3.69 in this quarter.

[Operator Instructions] The next question is from the line of Milind Raginwar from Centrum Broking.

Sir, can you please share the breakup of this INR 77 crores of the other [Technical Difficulty] the RMC and the...

Sorry?

Can you please share the breakup of this other operating income that we get from RMC and other?

70s, yes. It is about -- RMC is 33, AAC block is 33, POP and others is 11, 12.

Okay. And sir, in terms of the pet coke and the fuel breakup that you have shared, is it possible that we can share this unit in terms of the clinkerization unit at Sirohi and Durg?

We don't give separately figures for East and North. And -- but broadly, it is higher coal in case of Durg primarily because of, one, the proximity to the coal sources and also the linkage they have got.

Okay. And lastly, sir, on the logistic cost, sequentially, on a per tonne basis, we are -- we have a flattish trend when the fuel cost seems to be trending higher. So can you please share the lead distance and reason for that?

[Technical Difficulty] that we've been able to maintain the freight cost to about similar extent is on account of various savings and not just the lead distance but also in direct [indiscernible] allocation, plant allocation, et cetera. So that will be too minute a detail to be given right now.

Okay. Okay. And sir, we were taking some [Technical Difficulty] from an external source. Is that..

Sorry?

Mr. Raginwar, your voice is breaking.

We are not able to hear you. Can you repeat your question, please?

Yes. I just said we were hiring some consultancy services -- external consultancy services. Are they still -- are we doing the same still? Or is it now that contract has ended?

That has almost ended. They were earlier doing for the logistic cost improvement, then they reviewed the operational improvements also. Now that contract is almost over.

So there is nothing for those fees in the other expenses?

No, we'll pursue ourselves whatever they have suggested. So it's not that there will not be any savings. Whatever has been their suggestion, we are implementing it in the logistics side also and then the operational side also.

Sorry, sir, I just wanted to know, so those fees are not now...

The cost would not be there. And no additional cost going forward, you're right.

[Operator Instructions] The next question is from the line of Uttam Kumar Srilam (sic) [ Srimal ] from Axis Securities.

Yes. Sir, I just wanted to know what is the current gross and net debt position of the company?

Yes. Gross debt position, last March, it was -- our total debt was 1,125. That has marginally come down to 1,100, 1,095 to be precise. And net, which was around 400, is we have gone up marginally to 435 because of the reduction in the cash and bank balance. As I mentioned, we have used this surplus cash for stocking our -- without additional borrowing for working capital for coal and pet coke inventory. So the marginal reduction is there. Overall, it is 435 net debt, gross is 1,095.

Okay. Okay. And sir, how is the current volume pricing in your respective markets? Has it come down from last quarter? Or is it stable currently?

No, there have been some pressure on the prices, especially in the northern markets.

Okay. And it's stable in the East and Gujarat market?

Almost, still, I would say, in the Eastern market and Gujarat. Yes, you're right.

Okay. And sir, with regard to your value-added product, RMC, AAC block. In the last con call, you had said that we have an internal target of reaching INR 500 crores going forward. So that target remains the same? Or there has been some change in that?

No, it remains the same.

The next question is from the line of Pinakin Parekh from JPMorgan.

Sir, my first question is on pricing trends. Given that we are in the midst of monsoon, but at the same time, there is relentless cost pressure for the industry. Do you see cement prices going up over the next couple of months? Or more clearly price hikes would only be possible after the festival season gets over in October, November?

No, you see, because the cost pressures are fairly uniform over all the players, I would expect some correction in the prices, at least by September when the rain gets slightly lessened in the market.

Sure, sir. And sir, if I were to just ask you, given that in terms of the cost pressures that you, as a company, are seeing, if you were to maintain the June quarter EBITDA per tonne and your visibility on your costs and going forward from here, what kind of price hike would the company need to see in order to maintain the current margins, sir, in terms of INR 30, INR 40 a bag or lower than that?

No, no, I would expect increase of about [ INR 20 per bag ].

Okay. So that's kind of INR 20 to INR 25 a bag, sir?

INR 20 a bag, yes.

Okay. And that you see possibly happening from September once the rains recede because...

Yes, by middle of September, definitely, yes.

Understood. And sir, my last question is on the fuel mix. Now all the cement companies are talking about pet coke and how pet coke prices have surged and reducing the consumption. And I'm looking at thermal coal. Now sir, the problem is that thermal coal prices are also moving sharply higher. So at this point of time, do you think, as a company, moving away from pet coke to other fuels will materially reduce the cost? Or the blended energy costs will keep on moving higher even beyond the September quarter?

Since pet coke and coal, both the prices are going up, so it will move in tandem with the market, depending -- but obviously, subject to the inventories, which we are holding.

Understood. Sir, even adjusted for the industry -- inventories, it's fair to say at this point of time that September fuel costs will be higher than the June fuel cost? And December fuel cost would be higher than September?

Yes, I mentioned that in response to earlier question. Last quarter, it was about 7,000. This quarter, the September quarter, could be to over 8,000.

And December should also be higher than September, right, sir?

Marginally, yes. Yes.

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

Sir, I missed out the initial conversation. Can you please share us with the volume numbers for standalone and a consol basis?

We have -- our volume is -- for this quarter was 22.89 for cement and 3.69 for the clinker. And Udaipur did about 5 point -- just a second. In response to the 5 -- 5.93 was the Udaipur volumes.

So sir, this 22.89 includes 5.9?

22.89 is JK Lakshmi standalone.

The next question is from the line of Shanti Patel from Shanti Patel Investment Advisors.

I hope my voice is reaching you.

Yes, very clear. Quite clear.

Now as you told that cost is going to go up slowly but steadily in future. And at present, the demand/ supply scenario is in favor of the producers. Demand is -- I have been told that demand is very great. So will you be -- do you think that you will be able to pass on the cost by way of increasing the price of cement in future? That is question #1. Should I go to question #2 or will you answer, and then I should come back for question #2?

No, Mr. Patel, we answered that question earlier. We expect the price to see a positive correction by September middle.

No, that is why. But if the cost goes up, you have to increase your selling price. Will you be able to do it looking to the demand scenario prevalent today?

Not today. As I said, I'm repeating it, we expect price correction, which will take care of the cost increase by middle of September.

Okay. Now the second question is regarding the Udaipur's demand. As you told that you have got the CapEx plan of around 1,200 or 1,400, spanning over...

1,400.

1,400, spanning over a period of 2 to 3 years. So what will be the impact of the installed capacity of Udaipur Cement? Means, what is the installed capacity today? And what will be the installed capacity after expansion?

Today, they have just completed one small balancing project, which you would have seen in their results, they have given a note. The balancing project by which their capacity in clinker has gone up from 1.2 to 1.5. And after this expansion of INR 1,400 crores, their clinker capacity will double from 1.5 million to 3 million. That is number one. Number two, in balancing their -- cement capacity had gone up from 1.6 to 2.2, and they are going to add in this INR 1,400 crores, about 2.5 million tonnes. So that will be INR 4.7 crores to 5 million tonnes in 2 to 3 years' time.

And how it would be financed?

Broadly, we have not formed out or made public the means of financing, but it will be a blending, as I mentioned in my last call also, through some debt and equity either by way of rights issue or equity induction by the parent company.

Okay.

The form of -- means, financing will be announced in the coming quarter.

[Operator Instructions] The next question is from the line of Mudit Agarwal from IIFL Capital.

I had 2 questions. One is on the other expenses. The other expenses on sequential basis, it looks slightly higher. So is there anything one-off which is included in other expenses for instance because of the higher packing material cost and the cost inflation?

Yes, that is the only reason. The last quarter, it was about INR 158 crores. This quarter, it is INR 152 crores. Per tonne basis, we're slightly higher. But otherwise, that is normative.

Okay. Okay. And the second question, sir, is on the intercompany elimination of the sales -- of the volume. So in consol basis, how much we should eliminate on the intercompany sales, volume number?

Volume, we will have to eliminate 4.26.

4.26.

4.26. I repeat the numbers for the benefit of everybody on the call. JK Lakshmi standalone, we had reported a volume of 26.58. Udaipur standalone, we have reported 5.93. So consolidated is not just the summation of these 2. We have to reduce 4.26, which is inter unit. So the consolidated net of inter unit is 28.25.

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

Yes. My question is on revenue. So the standalone revenue, which is INR 1,231 crores, can I get the breakup of how much is cement sales, how much is clinker sales, and other sales we have already given? Can I get the breakup of cement and clinker?

We don't provide the breakup of cement and clinker separately. Sorry, sir.

Okay. Because for particular this quarter, your clinker sales has increased due to which your realization EBITDA per tonne looks a bit weak. That's why I wanted...

Yes, yes, but unfortunately, we don't share that.

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

Most of the question has been answered. Two, three things. First is, in terms of the consolidated, is it the same standalone 1,095 plus 500 or anything is different?

Sorry, can you repeat your question, please?

Can I have the consolidated debt and consolidated -- gross debt and net debt, consolidated?

Consolidated debt is 16 65. And consolidated net debt is 8 53. Or may be around, yes, around 500-plus is there. That's all.

Yes. And sir, broadly, a rough idea would be fine. If you can help me in terms of the -- our realization East versus others, West and North? And maybe on EBITDA also, just to have a broad idea. We understand that East definitely is lower, but just to have a broad idea how much realization the difference or the lower East is versus the North and West?

We don't share separately the East and North. But that correction, which used to -- that has been corrected and now East is as good as North, if not better, as far as costs and other things are concerned. So -- but we don't share separately about the East and North.

Okay. Okay. And in the -- Chouksey sir, in the interview, has said that we are looking at 8% to 10% volume growth for this year. So just to -- if I am calculating mathematically for next 9 months, then it seems that we will be having only 2% to 3% max volume growth. So the only -- the point what I am trying to understand is there is a cost pressure. We do not have a scope for a volume growth. So the only scope left is a price increase where we are seeing -- at least in the next quarter, we are not seeing. So whatever the hike has to happen, it will be post September, October. So anything you want to add on this?

No, you're right. The -- what we are looking at is -- because last year by -- the Q3 and Q4, we had done quite good volume numbers. So I will not expect in the fourth quarter a 10% growth. It will be a growth of 4% to 5%. Similarly, in Q3, maybe we'll see a 5% to 6% growth. And Q2, of course, would remain subdued, so I will not expect much of growth over last year. So taking into account all these factors, we see a growth of 10% to 11%.

Okay. Okay. And sir, last clarification...

Obviously, subject to -- we are assuming that there's no further lockdown, et cetera, in the remaining 9 months of the year.

Yes. True, true, true, sir. And the last clarification, sir, Mr. Arun Shukla, we mentioned that hejoined as a President. But if I look at in LinkedIn profile, it says that CEO of JK Lakshmi. So if you can clarify?

No, he joined as the President of the company. LinkedIn is not our formal communication.

We take the follow-up question from Amit Murarka from Motilal Oswal.

I remember like you had mentioned in the earlier call that UCWL has a debt repayment of some INR 330 crores coming up in this year. So like how do you plan to fund that?

We never said that UCWL has INR 330 crores debt repayment. JK Lakshmi has that debt repayment of INR 330 crores, it will fund out of its surplus funds and fresh accruals for the current year profitability.

Okay.

UCWL doesn't have any major debt repayment because we have just refinanced their entire loan of 525, which was earlier the subsidiary, HITCL, and that has now been entirely replaced, those were only a short-term arrangement. Those have now entirely been replaced by 10, 12 years bank loan, which has 1 or 2 years moratorium and a ballooning repayment. So there's not much pressure on the cash flow as far as Udaipur is concerned on any repayment. Marginally, INR 20 crores, INR 30 crores is only getting repaid over the next 2, 3 years each year. INR 330 crores, you rightly remember, that is not of UCWL, it is of JK Lakshmi...

Got it. And any way we have enough accruals for that.

Yes, we will have -- we have adequate accruals.

And also like UCW incentive has expired, right? I mean as of March or...

Yes, yes. That has expired in March.

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

Bidkar sir, one question on the part of this INR 240 crores. So I believe this includes your Waste Heat Recovery of 10 megawatt as well? So how -- what is the breakup between SOx, NOx and WHRS.

Once I think -- though we do not give, but then broadly, it is 160, 170, is on Waste Heat Recovery, balance on SOx, NOx.

Okay. Okay. And sir, one question on the part of clinker sales. Every company is looking to conserve their limestone reserves. They push for higher and higher clinker -- cement-clinker ratio. I'd say, if you take any company, they are moving on, like, say, 1.4, 1.5 odd cement to clinker ratio. But on other hand, we are like say roughly in this quarter, we have sold roughly around 14% to 15% of our volumes in clinker. So that anyway, we have also accepted that, that is a low-margin segment. But I'm really surprised why we continue to sell such a large quantity in the clinker?

As we have mentioned that earlier, we will only sell the clinker which we have surplus, after we have taken into account the coming next 2 quarters cement requirement.

But, let's say, in terms of surplus clinker, sir, we have a grinding network of around 4 grinding network -- satellite grinding units we have. And like the cement capacity is much higher than your clinker capacity. But how can -- how do we have the surplus clinker? Because in none of the companies, we have seen that they sell more than 4% of their volumes in clinker.

Yes. Last quarter, we had definitely more higher clinker percentage sales. And that was basically because of the lockdowns that we have had in the first quarter, lockdowns that we faced in various markets.

Okay. And sir, lastly, on this expansion in UCWL. Sir, have you finalized the grinding unit? Other than the...

One will be at the mother plant only and that there will be 2 other grinding units. We are finalizing -- in the process of finalizing. We'll announce it in the coming quarters once we have done that.

Okay. But like, say, as you had mentioned that you would be looking at growth opportunities, be it at the recently won mines or, like, say, in the East. So like over the last 3, 4 years, we have been continuously maintaining that we won't look into the East market because of the soft earnings which we have seen there. So has the priorities now changed? Or are we looking at the East market as well now?

The priorities have not changed, but as I mentioned, it is 2 years still away from what -- when we have to take a call about the future expansion, when we are nearing the completion of the Udaipur. We'll take a call depending on the demand/supply scenario, pricing scenario and the new capacity in the pipeline and all that before we take a call there to expand.

Okay. Okay. And last question, that as we expand in the Udaipur and other grinding units would be coming up. So if, say, from the today's volume mix, which we have in the North market, how the change would be there in terms of lead distance? Because our lead distance or the freight cost is much higher as compared to our peers because of our location of plant. So how that would -- like, say, kilometers or the lead distance would change once your these entire new expansion comes into the North market?

We are not looking at increasing our lead distance on the new expansion plants. Because in about 2 years' time, taking a normal growth of about 6% to 7% in the market, we are very confident that we should be able to absorb our quantity in the same market where we are operating right now.

We'll take the last 2 follow-ups. We take the question from the line of Rajesh Ravi from HDFC Securities.

Sir, if I see the realization for Udaipur Cement and compare that with of JK Lakshmi standalone, I see that the Udaipur realization are almost INR 25 lower versus that of JK Lakshmi, even adjusted for the non-cement revenues. So why is such a large gap between both the entities?

I'm not sure whether INR 25 or -- you're saying INR 25 a tonne or...

INR 25 per bag, sir, almost 500. If I see for June quarter, the realization for Udaipur is almost INR 3,650 per tonne. And in case of JK Lakshmi, even if we adjust for the non-cement INR 78 crore, it works out to be INR 4,300. So I don't know this...

Yes, but there you would find the freight is lower than that of JK Lakshmi Cement. So what is happening is that there are markets which have a higher selling price, but there the freight is also high. So in case if Udaipur, we are only marketing our produce in Rajasthan and Gujarat, where the selling price may be less, but the freight is much lower.

You'd see net of the freight, we'll net it off by freight then the difference may not be that much.

Right, right. Freight per tonne is lower, INR 200, INR 250.

Yes. Exactly, Rajesh and you'll get -- when you net off...

Okay, okay. Yes. I agree, sir. And second, when you talked about the -- because of this higher clinker sales and all, it is better if you can share the consolidated cement and clinker sales for the quarter as a whole; 28.25, which you mentioned for the quarter, how much of that on a consol basis is clinker sales?

Rajesh, [Foreign Language]

Hello?

Yes, we will get you. Mr. Rajesh, can you tell?

Sir, Rajesh Sharma's line has dropped.

Okay. I'll separately send it across. I don't have readily the figure with me.

We take the next question from Sanjay Nandi from Ratnabali Investments.

Sir, going forward, what is our view of clubbing or bringing the Udaipur into one umbrella and consolidating with JK Lakshmi? So are we thinking of anything on the same note, sir?

We don't have any immediate plans because of the differential tax rate in the 2 companies. Udaipur Cement Limited is at 25%, and JK Lakshmi is at 34%. So merging the same at this point, meaning, Udaipur being taxed at higher rate for their income. So we cannot do that. We will guide you to 25% once our MAT credit get exhausted in 3 to 4 years. Then we'll also get 25%. And that both the companies are at the same tax rate, we'll merge it.

So currently, Udaipur is in 25% tax bracket, right?

Yes, right. So they don't have any net liability also, yes.

Any -- Udaipur Cement?

Yes.

Okay. Sir, suppose the next 4 years' time, suppose we get merged with JK Lakshmi, so then what kind of synergies would accrue for that merger? Sir, suppose in 4 years...

Your voice is echoing. I'm not able to hear your question, please.

So now it's audible?

Yes, slightly better.

So sir, I wanted to know like in next 4 years' time, if we just think of merging with that of JK Lakshmi. So then what would be the synergy that would accrue for that merger? If you can throw some light on that?

Synergies broadly would be -- first and foremost, basic synergy would be that the cash flows would accrue, merge in the 2 companies. But other synergies, we are already getting the benefit in terms of common marketing, common procurement, et cetera, common management, top management and all that. But it will be consolidated cash flows meeting the liability, that's all.

Okay. And sir, what is the consolidated...

And those inter unit questions and those will not be there because then all will be in the same company, those figures if we have to shell out for those inter-unit transaction and knocking off that will not be there.

Got your point, sir. Got your point. And sir, what is the gross debt in the Udaipur's standing as on date, sir, post this expansion thing that happened in June quarter?

INR 550 crores.

INR 550 crores. And net debt?

They are having a cash of about INR 140 crores. So you [ have to reduce that. ] Yes.

Sir, we've got Mr. Rajesh Sharma online, maybe we can have the question addressed.

Mr. Rajesh, there's volume, consolidated volume of 28.25 net of the inter unit sale, what is the breakup in clinker and cement, if you can give? There was a query from the investor. We'll give it separately if he's not able to get it.

We take one question from the line of Rajesh Ravi from HDFC Securities.

Yes. No, this was regarding the sale. Only if you could share the purchased clinker numbers also for the quarter? And Udaipur in 1Q last year, how much it was?

Rajesh, purchased clinker, I'm not sure whether we have it right now. But Udaipur volumes, Rajesh, if you are there, can you share that number?

Hello? Are you hearing me?

Yes, we can hear.

Yes. [Technical Difficulty]

Your voice is echoing. Nobody is able to hear. Rajesh [Foreign Language]

We -- this quarter, we have purchased 194,000 tonne clinker. Hello?

Yes, yes, please. They are asking about Udaipur volume in the first quarter, corresponding quarter.

For [indiscernible] clinker?

No, no, Udaipur volume. Sales volume for Udaipur last year -- first quarter. Sales volume of Udaipur in the first quarter FY '21.

[Technical Difficulty]

Okay. And lastly, it was -- no issues. For the total volume, would you have the breakup of cement and clinker, consol volume, 28.25 lakhs?

24.21 lakh tonne is cement and 4.04 lakh tonne in clinker.

4.04 is clinker. Okay. And corresponding number for fourth quarter, would you have it?

Yes. [Technical Difficulty]

Your voice is not audible.

Mr. Sharma, your voice is breaking.

In the preceding quarter, it is -- cement is [ 23.97 ] [Technical Difficulty]

23.97, right?

Yes. And 1 lakh tonne clinker.

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

Yes. Thank you. On behalf of PhillipCapital (India) Pvt. Ltd., we like to thank the management of JK Lakshmi Cement for the call and also many thanks to participants joining the call. Thank [Technical Difficulty] the call. Thank you very much, sir.

Thank you. Thank you, Mr. Vaibhav. Thank you, everyone.

Thank you, everyone.

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