Nuvoco Vistas Corporation Limited (NUVOCO.BO) Q2 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Nuvoco Vistas Corporation Limited Q2 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. I now hand the conference over to Mr. Bishnu Sharma, Head of Investor Relations from Nuvoco. Thank you, and over to you.

Thank you, yes. Good afternoon, and thank you for joining us today for second quarter of fiscal 2026 conference call. The quarter has been marked by numerous key events. To begin with, we witnessed an unusually intense and prolonged monsoon across our key markets. The monsoon arrived earlier than usual and extended well into the later part of the quarter. Secondly, we also navigated the implementation of revised GST rates, which required facilitating with channel partners for a smooth transition and compliance. While the transition was managed effectively, it did add a layer of operational nuances as stakeholders adjusted to the new regime. However, having said that, the reduction of GST rate on cement from 28% to 18% is a structurally positive move for the sector. This step should enhance affordability for infra and housing and benefiting both the industry and end users in the long term. Demonstrating our commitment to customer value, we passed on the benefit of the GST rate reduction to customers. Thirdly, this quarter was also unique because the festive season as well as the separate period were all concentrated within the quarter itself, unlike last year when they were spread across Q2 and Q3. Despite facing these headwinds, we sustained our Y-o-Y improved performance by achieving the highest second quarter EBITDA of INR 371 crores, reflecting a year-on-year increase of 62%. The company successfully delivered 1% rise in revenue per tonne quarter-on-quarter. The team remains dedicated to driving growth, enhancing premium product offerings and maintaining operational excellence. Briefly to touch upon, premiumization reached a high of 44% in Q2 FY '26, while trade mix remained at a favorable level of 74%. The strong uptick reflects strengthening brand momentum for Concreto and Duraguard, which are steadily gaining recognition as reliable choices for high-quality construction applications. On the cost front, following a recent uptick in pet coke prices, the blended fuel cost inched up quarter-on-quarter to INR 1.46 per m-Kcal. Nevertheless, Nuvoco continues to drive efficiency through optimization of fuel mix and strategic sourcing. Friends, the company is on a robust capacity growth path supported by continuous deleveraging initiatives. Let me begin firstly by updating you on the recently acquired Vadraj Cement Limited. As you are aware that Vadraj acquisition was funded through a mix of long-term debt and short-term bridge financing of INR 600 crores and INR 1,200 crores, respectively. As communicated earlier, Vadraj Cement Limited proposes to issue up to INR 1,200 crores of unsecured CCDs to external investors to replace the short-term bridge financing divided into 2 series of INR 600 crores each with maturity of 3 to 6 years. This equity-like instrument will have features of call and put options, whereby Nuvoco will have the right, but not the obligation to exercise the call option subject to market condition at that point of time. Also, the external investors of CCDs will hold a put option, which gives them the right to put the CCDs to promoter group entities. Continuing with Vadraj, I would like to brief you on the progress of the refurbishment activities at the plant. We have completed inspection of all major equipments in Kutch and Surat, critical goods and service orders for the Kutch clinker unit, Kutch grinding unit and Surat grinding unit have also been released. The site execution overrunning activities for the plants are now underway. We have also received initial project clearance for railway siding at Kutch from Indian Railways. The plant at Kutch and Surat, along with associated equipment, including the jetty are on track to be ready for trial runs by H1 FY '27 with full commissioning targeted by Q3 FY '27. Secondly, I am happy to state that all internal projects in the East, that is the railway sidings and wagon tippler and cement loading system at Odisha Cement plant as well as the clinker wagon loading system and coal loading system at Sonadih Cement plant have been completed. The construction of railway sidings enable more economical and efficient servicing of key markets across Eastern UP, Eastern MP, West Bengal, Odisha. Coupled with this, the growing success of premium and blended cement products driven by brands such as Concreto, Concreto Uno and Duraguard Microfiber highlights the need for expansion to meet increasing demand, especially for blended cement varieties like composite cement and slag cement. Hence, we have embarked on expanding the capacity in the East by 4 million tonnes per annum at an investment of less than INR 200 crores. Through installation of one cement mill at Arasmeta, along with equipment upgrades and internal debottlenecking and process improvement across 3 plants. Out of this planned expansion in East, we are targeting capacity addition of 1 million tonnes each in December 2025, March 2026, June 2026 and FY '27. Moreover, the state incentive schemes make this investment highly appealing. Overall, the expansion is set to further strengthen our presence in the East, facilitating catering to the markets of East UP, East MP, Andhra Pradesh, Telangana, Maharashtra and Northeast. Thirdly, in the medium term, once operations at Vadraj commences in FY '27, our growth momentum will continue as we have the option to expand in North through brownfield project or pursue greenfield development in the Gulbarga region with a focus on Western and Central markets. For the time being, the expansion in North is expected to take precedence over Gulbarga expansion. Turning to the balance sheet. Improved results have enabled us to make further progress in reducing leverage. During the quarter, the company lowered like-to-like net debt by INR 1,009 crores year-on-year to INR 3,492 crores. Moreover, thanks to significant efforts in managing working capital, the company has contained working capital requirements, resulting in net debt increasing by only INR 18 crores quarter-on-quarter. To briefly highlight on digitization efforts, we are driving efficiency, transparency across operations. Our customer portal now handles over 95% of total orders, providing real-time control and accuracy in order management. The vendor portal has streamlined onboarding compliance and transactions. In manufacturing, we are leveraging artificial intelligence for predictive maintenance, heat loss prediction and developing dashboards to optimize waste heat recovery, kiln operations and blend and fuel blending strategies. For analytics and decision support, [indiscernible] integration is underway to deliver faster, smarter predictions and KPI insights. Going forward, we are working on building a business data cloud to enable real-time AI-driven analytics across functions, integrating all data points via unified data warehouse. On cement demand, the quarter witnessed moderate growth in cement offtake as construction activity slowed due to the intense monsoon and onset of festival season. However, looking ahead, we remain positive on demand. As of August 2025, only about 38% of the central government planned CapEx and 21% of the state government planned CapEx for FY '26 have been spent so far, indicating substantial CapEx potential for the rest of the fiscal period. Cement demand is expected to pick up in the second half of the year, supported by increased execution in housing and infra projects, along with the positive impact of the GST rate reduction and lower interest rates. Lastly, the company's dedication to sustainability is demonstrated by its continued leadership in minimizing the [Technical Difficulty].

Ladies and gentlemen, please stay connected. The management line is disconnected. Ladies and gentlemen, we have the management team back online. Sir, please go ahead.

Sorry, the connection was disconnected. Lastly, to touch upon on the sustainability front, as highlighted, we have demonstrated continuous leadership in minimizing the carbon emissions within the industry. Carbon emissions at 454 kg per tonne of cementitious material as of FY '25 demonstrates company's ongoing efforts to promote environmental responsibility while maintaining industry excellence. That concludes my opening remarks. I'm here with Mr. Jayakumar Krishnaswamy, Managing Director of Nuvoco Vistas; and Mr. Maneesh Agrawal, Chief Financial Officer. We are happy to answer any questions you may have. Thank you. Over to you.

[Operator Instructions] We'll take our first question from the line of Navin Sahadeo from ICICI Securities.

Congratulations on good set of numbers. Two questions. So first question is on the net realization front. So of course, post GST rate cut, all the benefits were passed on to the consumers. My question was, how should one look at the net realizations in Q3 in the sense that post the rate cut and as all mentioned, the entire benefit is passed on, but is there any benefit of premiumization that we can get because there has been a price drop? Or is there any -- like I mean to say, how should one look at the normalization of demand supply coming back? And when can price increases resume? That's my first question.

Okay. First of all, as mentioned by Bishnu, as our commitment to nation building and as per the expectations of the union government for the basic decision to reduce GST, we passed on the entire benefits to the customers as a part of our corporate governance philosophy. So that one is done. Second, as in our speech, this entire GST cut happened at a time when the demand is interrupted by festive season and the sacred period. So there was a little bit of a -- dealers had stopped buying 15 days before the GST announcement happened because announcement happened technically on the Independence Day and then on the final announcement happened in first week of September and then the implementation date was 22nd. So some disruption happened in those times. But post 22nd September till end of the month, demand did pick up, but one can say that is because of the pent-up demand because people didn't buy cement, dealers didn't have cement in the prior period. So I think that entire up and down bit is behind us. And also Dussehra happened in our core states of East. So with now Diwali finishing off next week, my estimate is from now on till the balance 2 months of this year as well as the 3 months of quarter 4, it is going to be only a steady increase in demand, plus this is the winter month and construction activity picks up and then overall, everything is going to be in the right side for the industry. I see a demand uptick of close to about 7%, 8% in the coming months, and that should really augur well. As regards to your question regarding what do we look at realization going forward, basically, my read is in the short run, it will be a little bit difficult for any price increase because we are morally obligated not to tinker with prices in the short run, unless until a big event and raw material prices happen, then I think we will continue to be in the same window for a certain period of time. But as you mentioned in your question itself, then what are the levers as a company we have to improve realization. Number one lever is, certainly, I think we have the geo mix lever. Now with the festive season over, so we still have the ability to sell in higher annuity, higher realization markets and higher contribution margin market. That will be a big focus for us, namely Rajasthan, Chhattisgarh, Haryana, where we have incentive and these are the markets we will focus to increase our numbers. And then number two is premiumization has been a constant agenda, continuous agenda for the company for many quarters now. As mentioned, we have hit an all-time high of 44% premiumization at this point of time. But I have to say that still we have not kind of reached the peak level at all actually. One thing which we have noticed is more and more, we focus on premium, there are consumers who are ready to buy premium. Our Concreto Uno in Bihar is a runaway hit. Our Duraguard Microfiber with renewed trust in Rajasthan, Western MP still is showing a wonderful uptick in terms of dealer placement as well as offtake. So we are looking at a big time goal of increasing these 2 products, Concreto Uno and Duraguard Microfiber by at least 25% increase in quarter 3 versus quarter 2 and then on at a stable level to about another 10% in quarter 4 versus quarter 3. So we've got very ambitious plans to increase premiumization. Overall volume will also increase. So the percentage, 45% may not kind of go up by the number which I mentioned. But certainly, I'm looking at, at least 150 to 200 basis points increase in premium product sale in the coming quarters as we navigate. These 2 levers will certainly improve our realization going forward.

My second question then was about the expansion that you are pursuing or announced in the East region, which is 4 million tonnes, but I also understand there is no clinker like addition or debottlenecking, which is planned, which basically means that the entire premise rests on the increase in the blend ratio or the CC ratio as we call it. So if you could just help us understand what is the current CC ratio in particular in East? And how much then is the scope to increase it in the sense, are there already companies which are offering that high a blend ratio in the region or we will be pioneers there also to sell the highest blended cement in the region to be able to use this 4 million tonne expansion?

Excellent. So this question, I will have to explain you in 3 ways, 3 rational reasons for us to expand this 4 million tonnes in East. First was we had Jojobera at peak capacity, then we have Sonadih, Risda, all these -- so Risda doesn't have a railway siding and so we have railway siding in Sonadih, Arasmeta, Jojobera and then in Panagarh and Mejia. During peak months, we have noticed that our capacity utilization reaches close to about 85%, 90%. And many at times, we have -- we are staffed for capacity from these plants because factories are running at full capacity. So one of the reasons for us to expand in East is to get more capacity going in Jojobera because we've got a railway siding. Then we have in Panagarh, we have railway siding. And also in Arasmeta, we have 2 mills, but we have a full-fledged railway siding. We wanted to put a third mill because the mill was existing about 20 years ago. It was kind of removed at one point of time. We are kind of rebuilding a mill on the third line. So this was the first criteria to ensure we have surplus capacity in our grinding units to serve the market during the season. Number two, as we have increased our premium products in Microfiber as well as Concreto Uno, more and more in the coming quarters and months, we would go into more and more blended cement category, which means some clinker will get released and I will have more clinker to supply more products in the market. That is the second criteria. We operate at close to about 2.1 C/K ratio. I won't name the company, but there's another company which operates higher C/K ratio than us in East. So there is an opportunity for us to increase the C/K ratio from 2.1 to 2.3. And if we kind of move on totally into big time into blended cement. But when we move from PPC to composite cement, then clinker release happens and C/K ratio goes even further high, and then we get our additional capacity. So that's the reason number two is exploit the blended cement opportunity by increasing the C/K ratio for which we need grinding capacity. Number one is peak capacity headroom. Number two is blended cement ratio. And the third one is we've also realized that we have been focused only on the 4 states of Bihar, Bengal, Jharkhand, Chhattisgarh and Odisha. But then there's a market beyond these 5 states, which is Eastern UP, Eastern UP, Northeast, Telangana borders, Chhattisgarh as well as Andhra Pradesh borders, Odisha. So these are the markets where we get an opportunity. Once we expand Jojobera, rail feed, we can do. Once we expand Arasmeta, which has also got railway flying, so we can move material through -- rake through these markets. So we get opportunity to participate in more markets. That's why grinding unit has improved. C/K ratio is the second reason. Third one is headroom during peak season. And last but not the least, Chhattisgarh offers incentive for new capacities in grinding. So putting a 1 million tonne grinding unit in Arasmeta helps us exploit, get the favorable benefit of incentive offered by the State of Chhattisgarh. These were the 4 rationale in getting it done. And last but not the least, the cost of CapEx is also very, very attractive. We are going to spend less than INR 200 crores to do it. In Arasmeta, where we just put the mill, most of the civil structure is already ready. So we kind of get the ball mill going in Arasmeta at a much lower CapEx cost. Plus in Jojobera, Panagarh and Jajpur, we are going to simply copy what we did in Risda 2 years ago by modifying the classifier, the collection systems as well as the motor HP and various other matching equipment at a very minimal CapEx, we can get 1 million tonne additional in Panagarh, Jajpur and Jojobera and 1 million tonne ball mill capacity in Arasmeta. All this put together gives us 4 million tonnes in less than INR 200 crores CapEx.

We'll take our next question from the line of Pinakin Parekh from HSBC.

My first question is that what would be your sense of the demand growth for the industry would have been in this quarter? Your volume growth was around 2%. So just trying to understand the industry growth across India and in your key markets?

That would be very difficult for me to estimate what the industry growth would be. But I guess, in the market East, I think the demand has been a little bit tepid East as in east. But then I think if you really look at various regions of North, Center, West and South, I think demand has been kind of mixed. So I won't be able to put a number at how industry would have grown in this quarter. We'll wait for the results of other companies. But I think from our perspective, we had handsome growth in North. East was a little bit subdued. But overall, I'm looking at growth between 2% to 4% kind of a number.

Sir, my second question is trying to understand the second half. You said you expect demand of 7% to 8% in the coming months. So as a company, should we expect the similar kind of volume growth for yourself as well? Or would you grow faster or slower than the industry?

Okay. I'll have to go back to my conference call in Q2, Q3 last year, Q3, Q4, Q1. So very clear, I think we will match the industry growth at a minimum level, minimal level, if the industry is at 7%, certainly, we'll kind of catch the growth at 7%. But in key markets of Chhattisgarh, Haryana, Rajasthan and Gujarat, our aim will be to grow faster than the market of minimum 1.2 to 1.5x the market. That's our ambition. That's our goal. We'll have to execute very well going forward to catch this wave. But certainly, I'm looking at not leaving any product on the table if the market grows at 7%, 8%.

Sure. And sir, my last question is, you highlighted that while you don't see cement prices moving higher given the GST cuts and everything, but you expect your realizations to move higher in the second half. You mentioned premiumization and you mentioned geo mix. So broadly, sir, if industry prices remain stable, in your view, how much of these 2 drivers can uplift your realizations? Can we look at a 3% to 5% ASP increase in the second half or a more muted ASP increase? I'm just trying to understand how will this aid your realizations?

First of all, I think overall, I think every industry, every company currently is looking at premiumization. So I guess, in general, I think if the market doesn't support price increase through this kind of internal levers, when companies will get improved realization, we would follow a similar route. I'm really -- I'm targeting a INR 25 to INR 50 increase in net of discount and tax price for the company going forward. That's the kind of number, through realization, we'll be able to deliver.

We'll take our next question from the line of Tejas Pradhan from Citigroup.

Just my first question on the spot pricing trends versus the last quarter average, if you exclude the GST impact, how much would the prices be in the regions of East and North?

I just missed that first few words of yours. If you can repeat, I will be able to answer you properly.

Sorry. Yes, yes. Just the spot prices, where they are versus the last quarter average, excluding the impact of the GST change?

Okay. I would say between Q1 to Q2, it's more or less flattish.

Okay. And the October prices versus second quarter average?

It has not dropped since GST other than what we have passed. As of now, there has not been price drop in the market ever since GST has happened other than the -- what we call GST pass on. While there are 1 or 2 markets like East UP and all, there is some dilution in price. But I think it is all seasonal, but that's not a very big market for us. So I'm not greatly worried. Our core markets of Bengal, Jharkhand, Bihar, Chhattisgarh Odisha, Rajasthan, Haryana and Western MP are seeing prices holding.

Okay. Okay. Then on the pet coke costs, so given some increase that we have seen in pet coke prices over the last few months, do you think there will be an increase in the cost that you have in 3Q and 4Q? Or would they be more stable?

Yes. I guess, as Bishnu mentioned, our 1Q and 2Q number changed from 1.43 per million Kcal to 1.46 per million Kcal. But I think we are kind of really doggedly attacking this number because pet coke may not help us in the short run. But this 1.46 in this quarter is also due to a couple of shutdowns in the kilns, and we had to kind of shut CPP and overall, the fuel cost is slightly higher than Q1. But I think with Q3 post November, all shutdowns is all done, and I think that's one first agenda is going to be -- we will run flat out and then certainly, I think our entire system will be fully lubricated to get the full efficiency of lines running. Number two, our AFR trust continues to be there in the company. Q3 and Q4, our AFR consumption will go up from 10% to targeting 12% on that on our key factories of Nimbol, Chittor and Risda that should give us a tailwind for us. By doing all these things, we are targeting a number again, 1.43 in Q3, give or take, 0.1 here and there. But certainly, I'm really looking at 1.43 pull back to 1.43. But big time reduction, I don't see happening in the near future. But big time as if the current prices hold good for the next few months, I think we should be able to maintain at 1.43 for the next quarter.

Okay. And lastly, I think earlier you used to give a breakup of RM power and freight cost in the presentation, stripping out the RMC impact. Could you share what those numbers were for this quarter?

No. What I'll do is I've not put it on the chart. If you can reach out to Bishnu and his team, I think we'll give you all details. But suffice to say, I guess, RM has been flat from Q2 to Q1. In terms of pet coke. Fuel cost, there's an increase a little bit. But other than that, I think that the raw materials space, things are equal to slightly less as well. If you reach out to Bishnu, he will give you detail, please.

Next question is from the line of Ashutosh Murarka from Choice Institutional Equities.

I want to ask on the volume side, how we are looking at the volume for H2 FY '26?

I'm looking at close to about industry, our view is close to 7% growth and Y-o-Y H2 versus this year, I'm really looking at 7%, 8% growth.

Okay. Okay. And on CapEx side, like we are looking to enter in this western season. So any further plan there?

Yes. I'll just give you all details. Overall, CapEx this year, as I mentioned, you have to put the other table. Just give me a second. Yes. I mentioned our routine CapEx was close to about INR 100 crores to INR 150 crores. So we continue to stick to that number of INR 100 crores to INR 150 crores. H1, we have spent about INR 78 crores, and our target in H2 is about INR 70 crores. So we'll be kind of managing the routine operation -- routine CapEx requirements at this kind of number of INR 100 crores to INR 150 crores. Then comes the rebuild CapEx where in the last call, I had given a phasing of that INR 1,600 crores plus INR 200 crores overall INR 1,800 crores number at INR 600 crores, INR 600 crores, INR 600 crores over a period of 3 financial years of '26, '27 and '28, so which means we have to spend close to about INR 600 crores in this year. As we stand today, we have spent close to INR 45 crores at the end of Q2 for this. So we won't be spending all INR 600 crores in the balance, while we'll be releasing purchase orders for all of INR 600 crores, we won't -- the cash flow will not happen at INR 600 crores. I'm estimating and targeting a cash of about INR 300 crores going away in the H2 of this year. And last but not the least, the East expansion CapEx, which just now announced overall outlay of less than INR 200 crores. In H1, we didn't spend anything. H2, I'm looking at about INR 50 crores ordering the mill and rest of all the stuff will happen. The civil work will start. So overall, I'm looking at in H2 CapEx outflow of close to about INR 370 crores plus INR 50 crores, INR 420 crores is the cash outflow. And H1 has been close to INR 78 crores plus INR 45 crores is INR 123 crores.

Next question is from the line of Milind Raginwar from BOB Capital Markets.

Sir, first on the line item, the other expenditure on a year-on-year has grown up sharply. So any specific reason for this? It's about 12% higher on a year-on-year basis. So last year also, we should have had the maintenance. So anything other than maintenance that we have to read here?

No, it's only pure and pure maintenance. This time in Q2 FY -- we increased our -- in Q2 FY '25, we had INR 14 crores was there in this quarter for shutdown. This year, we have done INR 33 crores. So all the impact on other expenditure is coming out of the shutdown, which happened in this quarter. So one more shutdown is left, which will happen in the coming months. By November 15, all shutdown for the year will be over. So it's purely because of shutdown expenditure, phasing of shutdown, which happened, and that's why this quarter is reflecting this number.

Okay. And the next question I have is what would be the amount of incentive that we would be building in on a per tonne basis or absolute number for the quarter?

You will have to repeat, I missed the first few words of yours again. Per tonne basis of what?

Sir, the incentive amount whether...

I think in this call, I will not be able to quantify and give you. Certainly, I think CG government gives incentive for, I think, medium projects, large projects at a percentage of SGST. But if you can reach out to Bishnu, he'll have a detailed conversation on the overall cost per tonne -- incentive per tonne we will get out of the expansion in Arasmeta. So there is this, we will give you if you reach out to our team.

We'll take our next question from the line of Prateek Kumar from Jefferies.

I have a couple of questions. Firstly, just on CapEx. So you said like FY '26, we are looking at around, I think, INR 650 crores CapEx -- sorry, INR 550 crores CapEx, including some pending to next year. What is the absolute number for FY '27 and FY '28 without any specific details, like total number?

Okay. I'll have to give you -- I'm looking at INR 600 crores each of 3 years is what I said last time for the East buildup for the Vadraj buildup, and then we are looking at close to about less than INR 200 crores, let me target INR 200 crores, give or take, INR 10 crores here, INR 200 crores for next year, FY '27 and '28 would be, say, INR 80 crores and INR 120 crores. So we're looking at close to about INR 600 crores, INR 680 crores and INR 720 crores and routine CapEx of INR 150 crores INR 150 crores INR 150 crores. So let me just give you a breakup for next year. INR 150 crores routine CapEx, close to INR 600 crores of Vadraj CapEx is INR 750 crores, another INR 80 crores of East CapEx will be INR 930 crores next year. And this year, it will be INR 550 crores. INR 550 crores plus INR 930 crores is INR 1,480 crores, another INR 1,000 crores will be in FY '28.

Sure. And regarding the refinancing, you said that refinancing is done, right, the short-term refinancing is done. So now FY '26 second half, will it reflect into -- just for accounting purposes, it will reflect into your interest expense changing from like INR 100 crores -- INR 102 crores in FY -- Q2 to like a higher number? Or how will it reflect on your P&L?

Maneesh will answer this bit.

So the interest component will, by and large, remain the same. In fact, it may go down in Q3.

Okay. And relating to the refinance...

Please continue.

Please continue.

Yes. So I was asking like how will that reflect in your P&L like the refinancing cost?

Given the full details of CCD.

So basically, it is INR 1,200 crores of CCDs, it is broken up into 2 tranches of INR 600 crores each, right? And the deal is about to be in very soon. So since it is an equity linked instrument, this is going to be forming part of the equity and to the extent of interest that gets reduced. So in the P&L, you will see some impact of it in the quarter 3. So -- so you will see some impact of this positive impact in quarter 3.

Right now, all of it is considered as a debt of INR 600 crores plus INR 1,200 crores. So there will be interest charge, which is happening as you see. The moment we move away this INR 1,200 crores from debt into CCD, then the interest will go away from that bid. So whatever is the interest bid on Q2 and Q3, you will see some changes happening. Technically, it will be less than that. So you will see the impact of it in the P&L in Q3.

And eventually, your number of shares from INR 35.7 crores will increase to a higher number?

So it is not the Nuvoco shares that are going to be issued. So the number of shares of Nuvoco will continue to be the same. So basically, the CCD is getting issued in Vadraj. So for the CCD at the time of conversion, which is at the end of the seventh year, the shares of Vadraj will be equated to -- it will be issued to the CCD holder.

Sure, sir. I will take it offline.

We'll take our next question from the line of Shravan Shah from Dolat Capital.

First, just 2 data points, lead distance for this quarter and road rail mix was how much?

Quarter lead distance at 331, road at 60%, rail at 40%.

Yes. And now first, if you can specify this 4 million tonne East expansions. So in Q3, will it be Jojobera and in Q4, Panagarh will come? 1 million tonnes?

Yes, that's the target. We are looking at Jojobera going from 6.3 million tonne currently to 7.3 million tonne by end of December. And the next sequence will be to do Panagarh at end of March so that I have capacity of additional 1 million tonne for fiscal '27. And then June of next year will be Jajpur and then during the course of the year, targeting by Q4 FY '27 Arasmeta to come on stream. So '28 onward full 4 million tonne. This year, Q4, 1 million tonne addition. Next year, we'll have truncate at 3 million tonne and next '28, all of 4 million tonne.

Yes. So considering this 3 million tonne will be -- broadly will be there for entire year of FY '27. So how one can look at in terms of the volume for FY '27? So roughly, even if you take, let's say, kind of the current utilization, 70%, 73%. So 2 million to 2.5 million -- 2 million tonne kind of a number should be there from only just this expansion and plus the -- even to some extent, the Vadraj also will be there for -- at least in the fourth quarter, even third quarter also will be there. So is it fair in terms of broader level, if I look at 2.5 million to 3 million tonnes, is it possible that translates to 10% to 12% kind of a growth in FY '27 -- FY '27?

I think it will be -- I can't put numbers to it so easily simply because Vadraj is going to have 1 quarter or 2 quarters coming in. And then this one will be phased increase. But suffice to say that we can look at anywhere between 1.75 million tonne to 2 million tonne incremental sales volume happening next year versus this year.

Okay. Okay. Great. And the third is in the opening remarks, you have mentioned that the Chittorgarh brownfield expansion will be the first preference versus the Gulbarga. But whatever left of 4 million tonne at the Vadraj is there. So out of this, currently, we will be having a 4.5 million tonne and then the 4 million tonne is left. So will we prefer Chittorgarh first over this 4 million tonne left of Vadraj or...

Okay. I think I'll have to go back to my previous call. So we have an installed capacity of 6 million tonne in North. And the rationale for getting Vadraj was simple because out of the 6 million tonnes installed in North, I bring 1 million tonne into Gujarat and already sell 1 million tonne in Gujarat. And by the end of this year, we will be sold out in North if we don't expand in North. So the idea of getting Vadraj was to get Vadraj going in Gujarat and Maharashtra and in year 1, get about additional 1 million tonne from Vadraj. Already 1 million tonne is coming from North into Gujarat. So I get a 2 million tonne head start in Gujarat in year 1. But as the Gujarat market grows, Vadraj expand, I will pull back 1 million tonne which comes from Chittor into Gujarat and put that 1 million tonne into the northern markets of Rajasthan, Haryana. So I will breathe that northern markets for -- I get a breathing time in Northern markets for at least 2 years after this fiscal. So I navigate for 2 years and then Vadraj ramps up for Gujarat and Maharashtra and then come back once the CapEx is done, obviously, we are mindful of the debt, which I keep telling in every call that we are comfortable with the debt of INR 3,500 crores to INR 4,000 crores. So deleveraging will be a big agenda for the company going forward as well. So with this deleveraging and expansion in Vadraj, so the next available opportunity for us will be a somewhat lower cost CapEx, which will be a brownfield CapEx. And Chittor comes in the scheme of things. We need capacity. We need to spend lower cost and hence, in our [indiscernible] priority will be Chittor. Unless until the market conditions in north of Karnataka and Maharashtra dramatically changes by higher price, we may look at even Gulbarga this time.

Okay. Okay. So once this 4.5 million tonne of Vadraj will be there, that is by Q3 FY '27, then the next plan is to go for the Chittorgarh and then maybe we can think of again coming back to the remaining 4 million tonne of Vadraj and or maybe Gulbarga depending on the market condition.

We got mines in Nagpur. We've got mines in Gulbarga. We have mines in Guntur, multiple locations, we have mines. So I think really doing a crystal ball guessing at 2030 will be not appropriate at this point of time. But suffice to say, we want to kind of exploit already the market and the brand equity, which we have, which is the northern market. So we will expand in North first. Gulbarga will be somewhat a new territory for us. But certainly, as per the growth ambitions of the company, we have ambition to become a West, North, Center, a niche player. So certainly, I think at appropriate stage, even that becomes a focus area for the company.

[Operator Instructions] We'll take our next question from the line of Raghav Maheshwari from Equirus.

Just one question from my side. What are plans regarding the ABG's spare 4 million tonne capacity at Surat because we are already putting up 2.5 million tonne in Kutch and 2 million tonne, we will be revamping Surat. Then remaining 4 million tonne, what is our plan to -- regarding to that?

Yes. The mill which we are putting up in Kutch will be a 2.5 million tonne mill. And as we know that even in the Jajpur, Panagarh and Risda, we have taken the capacity from 2 million to 3 million tonne. So our target is the mill which we commissioned in Surat as Phase 1, we will commission as a 2 million tonne. But I guess within a span of a year or so, we should take it up to 3 million tonne. So with the 3 million tonne in Surat and the 3 million -- 2.5 million tonne in Kutch, we should have adequate capacity in Gujarat market. That is the reason why we are not commissioning these 2 new mills in -- the old mills, we are not reconditioning in Surat. So our thought would be that some stage, relocate this mill from Surat to elsewhere where we set up either a brownfield or a GU unit or something. So it's for that actually. If we get into Chittor, we might have to go to GU. So this mill goes at a much lower cost or we expand in Gulbarga, we will have a split grinding unit. That's where this mill can come at a much lower cost. So it's kind of using it later stage and not kind of spend all the money to commission it right away.

So basically, we can assume Surat will operate at 2 million tonne in the first phase and then 2 million tonne will go for a 3 million tonne in the next upcoming years.

Absolutely. So our target is to get FY '27, '28, '29, '30, I have a simple number, 2, 3, 4, 5. 2 million tonne in '27, 3 million tonne in '28, 4 million tonne in '29 and 5 million tonne in '30. I guess, in span of 2 to 3 years, we will exhaust all the capacity, which we have bought from Vadraj.

But sir, our clinker is only sufficient for best case in a 5 million tonne according to the Gujarat condition because the Gujarat is almost operating more than 50% in OPC product. That's why I'm asking, then we need an...

We will bottleneck the kiln. The Risda kiln was a 10,000 TPD kiln when we acquired erstwhile Emami. Currently, we have kind of done engineering modifications to take the kiln to about 11,500. The Vadraj kiln is even shade bigger than the Risda kiln. So I guess we are pretty confident that as we expand the market, we would be able to take the capacity to current 10,000 to 12,000 odd. So right now, we are also very clear that CapEx, we are very mindful of CapEx. So we are mindful of money to modify everything. Our focus is to have the kiln running, have the WHR so that we have the power cost in control, start the CPP so that we have the power requirements, energy requirements in place, railway siding because it gives us -- totally opens up the entire Gujarat market as well as the Surat market through rake movement from the side. So those have been the CapEx and also putting the GU because of incentive benefit in Gujarat. So we have focused our entire expansion strategy based on a cost-effective and prudent use of capital. But going forward, when we need capacity, it takes only 6 to 8 months for us to bottleneck from 10,000 to 12,000 tonnes.

So best case, we can assume this existing kiln can go up to the 4 million tonne as a clinker level and the cement we can assume in the Gujarat from this mill around 6 million tonne. It is the best.

That's our target, I think. I think even market at the time may change from current OPC mix to PPC. Currently, Gujarat is at 50%-50%. But I think I'm assuming over a period of time, everybody wants to make more cement from this plant and then certainly we go from OPC to PPC market. And last but not the least, if and most likely the Commonwealth Games is going to happen in Ahmedabad, then you'll see cement demand perking up in 2030. I think I'm really looking at a very positive sign for us because with our plant ramping up and the demand for cement is going to big time increase in Gujarat with the opening up of Ahmedabad. So I think we are in a very good wicket to utilize all our capacity, which we have invested on.

Next question is from the line of [ Harshal ] from AMSEC.

So a few questions from my side. First is in terms of costing targets we had of INR 50 per tonne for full year. So are we track on that? Secondly, in terms of our strategy for each market like East, we used to focus on value over volume. And how to do that with our recent remarks where we say Chhattisgarh, we want to grow at 1.2 to 1.5x the market. And lastly, in terms of Gulbarga and Chittor expansion, if you can give some details as to the time line in terms of capacity CapEx. So I think that will be quite helpful.

Yes. In terms of the cost savings, which I mentioned in the last call, we should target INR 50 in FY '26 over '25. We are well on the way on the course. We'll see the reflecting of that happening in H2 of this year. Broadly, it will come from using alternate raw materials will be one. Second one will be increasing the efficiency of our WHR and CPP and third one will be lead time reduction -- lead distance reduction and the benefit coming out of the Orissa siding, which is already commissioned now as we speak, it is commissioned. So this quarter onwards, Jajpur siding will happen, then the lead time -- lead distance reduction is a big agenda the company is running. And this -- all this, I'm looking at INR 50 reduction happening in H2 certainly versus last year. So it's on course. The second one which you asked was about the timing of Gulbarga and Chittor and all. So as we stand today, our CapEx time line, our Vadraj CapEx is H2 of next year, I commission the Surat grinding unit as well as the clinker unit will happen during the course of H2 last year and then next year. And then we have the WHR and the Kutch grinding unit happening in Q4 FY '27, around April is the time when I have the grinding unit happening there. So I guess we are booked for expansion in '26, '27 and Q1 of '28. So we will take up any -- and in parallel, the East expansion is happening. So 2 big activities happening. One is the Vadraj expansion and East expansion in the next 24 to 36 months. And I think around 24 months, we will start evaluating whether Chittor becomes app site for us to kickstart or the Gulbarga site. So I'll wait for some time. As it stands today, our priority is Chittor is what we said. But sometime Q4 of next year, the exact thing will crystallize.

And sir, one more question on the strategy, like East region, where you focus on.

Yes, yes, I missed that. I think if you have attended our quarterly calls, I think sometime in Q3 last year, till because the industry was in a somewhat very muted growth in prices at that time in Q2, Q3 were kind of 10-year low, which was happening at that time. So one of the things which we adopted at the time was to -- at such low prices, Nuvoco has got premium products, and we need to kind of exploit our standing as a premium product, and that's when we had the value strategy. But I think if you had seen Q3 last year, we had delivered a high single-digit growth. And then on, we have been on a growth phase. continuously 4 quarters, we have been growing at single digit in 1 quarter, we even grew 11%. So that's the kind of stuff. But we will not take our eyeball away from the premiumization. But certainly, I think we will not leave volume growth against value growth. Both will run concurrently.

This is for both the markets, right? East and North.

East is where our premium products of Concreto Uno and Microfiber are there. North, as we say, at this point of time, we are at a capacity utilization pretty high. But even in North, I think moving away -- moving towards premiumization in the Microfiber, which gives us close to about INR 20 per bag more than the base product. I think if our capacity is going to be constrained in the quarters going after next year, I think our focus will be to move more and more into premium. We used to be 7%, 8% premium product sale in North. Today, we are at 16%, 18% premium product sale in North, already we doubled the premium sale in North markets.

We'll take our next question from the line of Omkar Rane from Emkay Global Financial Services.

Actually, my questions were answered earlier.

We'll take our next question from the line of Navin Sahadeo from ICICI Securities.

Before I ask my question, I would request a clarification because in the previous -- one of the answers on premiumization, you mentioned the endeavor is to increase prices by INR 25 to INR 50. I just wanted to confirm, is it per bag that we are expecting or it's a per tonne number?

Per tonne of cement. INR 25 per bag means then we'll go with -- how would I do that? I don't think it's possible. So looking at INR 25 to INR 50 per tonne of cement. I wish we will do that.

Even I wish so. I would have been...

Jokes apart, I guess, we are looking at this kind of number of INR 25 to INR 50 per tonne.

My question was on -- again, on the premiumization front. So is there a seasonality aspect to it? Because last year also in Q2, the premium percentage as an overall sale did see an increase, but thereafter, it has tapered again in Q3, Q4. So what I'm -- the reason I'm asking is because GST rate cut has reduced prices and there is every incentive or every tendency by a customer to like upgrade the value proposition. So are you seeing that kind of trend already into October, further premium sales? Or it can be similar to last time when there can be a slight drop?

Too early to comment. Ideally, I think if one were to look at from a wearing a marketing perspective and looking at consumer habits and what a consumer would do. So if you are able to get a high-value product at a lower price, technically, all of us will go and buy a high-value product, which is available at a lower price now because of GST cut. But I won't kind of put all my eggs on the basket and say it is going to happen overnight. But things will happen over a period of time when I think premiumization focus will improve. But one point which you said, whether our percentage will increase or not, I think I would not be -- I won't be able to simply come and say that because my volume in H2 is going to be much more than H1. And there, if I put the same percentage premium formula, I think the number will be pretty high. I'm really looking at increase in premium product sale, which is x lakh tonnes in Q1 and Q2, it's continuously increasing. That's where I'm going to increase the amount of premium product sale in Q3 and Q4. I'm looking at a 25% increase in premium product sale of Q3 versus Q2, another 10% from Q4 versus Q3. How much it will pan into the overall volume? Right now, I'll not be able to tell. But certainly, I think we will not drop our numbers from 44% to much lower. It could be give or take 1% here and there.

Understood. And then my second question was on the dealer discounting. So our channel checks, and I'm not referring here to your company, your brand Nuvoco. I'm talking about, in general, our channel checks were basically revealing that this time around, there were no Diwali-related schemes or some like incentive structure offered for dealers. And there is also some bit of maybe expectation or maybe I say some fear by the dealers that the overall discounts of schemes, which earlier the company used to offer may go down because since the prices itself of cement has come down, there is that much more, what do you say, companies or the industry need not push extra sales by offering more incentives to dealers. Is there any such thought specific to you?

I think our dealers and distributors who are extension of our company, the mission of our company is to become a trusted building material, creating value for our stakeholders. Our -- one of the principal stakeholders for the company is our dealers. Since some of our dealers might also have connected to this call, I just want to pass on a message that never ever we will reduce our discounts to our dealers. That is our commitment because they are an important part of our growth. And we are obligated. We are very proud for our dealers, and we will never ever reduce the discount scheme just to make some short-term gains.

Understood. Very, very clear. Just one question, if I can slip in. Have we purchased the captive power capacity in the premises of Vadraj, which was to be, I think, in control of JSW?

Last stages of discussion happening. I guess it should be done in the next few weeks.

Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to Mr. Bishnu Sharma for closing comments. Over to you, sir.

Thank you, everyone, for your insightful questions. I hope all your questions have been addressed. Otherwise, you can reach out to me or Adit from my team for any further clarification. Before we close the call, I just wanted to state you the statement I just wanted to make. We remain firmly focused on sustaining growth and enhancing our market position. The Vadraj Cement project is progressing as per schedule with plants targeted to be commissioned by Q3 FY '27, strengthening our footprint in the Western region. Our planned expansion in the Eastern region, driven by rising demand for blended cement under the Concreto and Duraguard brands will further reinforce our leadership position in that market. Following these projects, along with balance sheet discipline, brownfield expansion at Chittor in North and greenfield development in Gulbarga will underpin long-term structural growth. Moving forward, we will continue to prioritize strategic initiatives such as premiumization, geo optimization and cost efficiency to enhance our competitive edge and deliver long-term value to our stakeholders. Thank you, everyone. Thank you for being here today.

Thank you, members of the management team. On behalf of Nuvoco Vistas Corporation Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.