Nuvoco Vistas Corporation Limited (NUVOCO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Q3 FY '23 Earnings Conference Call of Nuvoco Vistas Corporation Limited. We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risks that company faces. The company assumes no responsibility to publicly amend, modify or revise any forward-looking statement on the basis of any subsequent development, information or events or otherwise. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Madhumita Basu, Chief Strategy and Marketing Officer of the company. Thank you, and over to you, Ms. Basu.

Thank you, Tanvi. Good evening, everyone, and a warm welcome to the Q3 FY '23 Earnings Call of Nuvoco Vistas. I'm excited to take this call after the recently presented union budget of India for the next fiscal. It is very encouraging to see government's continuous thrust on infrastructure-led economic growth, which is a very positive read for the construction industry. The budget underpins infrastructure focus, includes a growth and higher consumption, which reflects good growth, good growth, good growth. A significant increase of 33% in the capital expenditure to INR 10 lakh crores, thrust to fast-track infrastructure development and 66% higher outlay at INR 79,000 crores for Pradhan Mantri Awas Yojana will translate into robust cement demand. Other factors like strong housing demand, improvement in rural sentiment, higher disposable income with change in tax slab, coupled with moderating inflation, augur well and Nuvoco is fully poised to capitalize on it. Looking at the economy on a medium-term perspective, while the budget itself is very promising, the India growth story also remains resilient. Various agencies worldwide continue to project India as the fastest-growing major economy, which emanates from the buoyancy the economy has seen from the seamless rebound of private consumption post the COVID era. This has also given a boost to production activity, resulting in an increase in capacity utilization across sectors as reflected in the improving PMI figures as well as high average gross GST collection on a monthly basis. Measures taken by the government and RBI, along with the easing of global commodity prices, have also managed to bring down retail inflation below RBI upper tolerance target. Given this backdrop and coming to the industry performance in Q3 FY '23, cement demand in East has witnessed good demand growth during the quarter on Y-o-Y basis, driven by rural housing and infrastructure segment, coupled with lower base effect of last year. However, looking at the dynamics within the region, the states of Bengal and Jharkhand witnessed subdued demand growth on Y-o-Y basis, moderately impacting our overall sales volume growth during the quarter. Nevertheless, we continue to register double-digit volume growth on a 9-month basis. North region also saw healthy double-digit growth led by higher execution of infrastructure projects and rural IHB activity. North prices remained stable during the quarter. Prices in East improved in the months of October and November with the pickup in activities post monsoon and festive season. This was followed by some softness in December. Despite this, each region saw the highest price increase during the quarter among all regions, which benefited Nuvoco. Since then, prices have been range bound with an optimism around price hikes on the back of robust demand. On the other hand, fuel costs are believed to have peaked during the quarter and the recent softness in coal prices will certainly support near-term margins. In this backdrop, we continue to progress on our near-term plans with agility while building upon long-term strategic action. We have successfully launched our super premium cement variant, Concreto UNO, which has unique water-repelling properties, protecting the house from water ingress, dampness and efflorescence. This launch is in line with our continuous endeavor to service the need of individual homebuilders and enhance customer satisfaction. Just to remind, we have been continuously introducing new products throughout the year across our segments, including premium composite cement, Duraguard F2F, and premium quality ready-mix solution, Concreto Glyde. Further, in line with our focus on individual homebuilders, we recently unveiled our first direct-to-consumer home assist app, NuvoNirmaan, that covers a wide range of information and guidance throughout the homebuilding stages. We have also introduced Tech Express vehicles to provide on-site services to our customers. These initiatives will further strengthen our brand through phygital connect with the consumer and provide us necessary impetus to enhance our retail reach. We have been prudently prioritizing our CapEx on cost savings and sustainability projects like alternate fuel material handling facility at Risda and Nimbol, and railway sidings. With the commissioning of co-processing system at Risda, we have initiated feeding of alternative fuels in higher quantities. Work on other projects is also progressing well. Lastly, our other businesses of ready-mix concrete and modern building materials are on a steady growth trajectory. We have more than 50 operational ready-mix plants spread across the country and further working on opening more. Our ready-mix revenues improved by more than 20% during the quarter on a Y-o-Y basis with higher value-added product share. MBM has also been penetrating well into non-cement channels in North and West regions. A quick update on our ongoing growth and debottlenecking program. Cement capacity expansion to 1.2 million tonnes per annum grinding unit at our Bhiwani cement plant in Haryana is going well. Civil and fabrication advancement is on mark and all major orders have already been released. This will take our overall cement capacity to 25 million tonnes per annum. Clinker capacity enhancement project at Risda and Nimbol through debottlenecking are also progressing well. Moving on to our sustainability initiatives. We remain focused on enhancing the use of alternative fuels, improving the share of composite cement and conserving natural resources while giving back to the society in which we operate. Happy to share a few highlights. We remain steady on our thermal substitution rate at 9% sequentially, while improving 4% year-on-year during the quarter. With the ongoing investments in material handling systems, we are targeting to achieve an exit run rate of 12% by end of this fiscal. During the quarter, we added lighter aluminum body trucks for cement dispatches, an industry first. This will help reduce about 28 tonnes CO2 per vehicle in its life cycle by reducing fossil fuel consumption. At the same time, it will also increase the payload by 2.5 metric tonnes per truck per trip additionally bringing logistics cost efficiencies. We have also introduced Nuvo Mason, a masonry skill development program, which aims at enhancing the masonry skills of youth and construction workers, empowering them, expanding their work opportunities and improving their overall quality of life. Coming to the financial performance for the quarter. Our consolidated revenue from operations during Q3 FY '23 improved by 20% Y-o-Y to INR 2,605 crores with a 6% Y-o-Y improvement in sales volume to 4.5 million tonnes and better prices. As mentioned earlier, consolidated cement volumes continue to improve at double digit on a 9-month basis. We are consistently working on optimizing our operating cost through multiple levers. While our cement raw material costs increased by 21% Y-o-Y with higher flat consumption, in line with our thrust to set more slag in composite cement, it helped in improving our clinker-to-cement ratio which stands at 1.8x against India's average of about 1.5x. This is benefiting our overall cost slice through lower clinker factor. We have also been able to effectively contain our power and fuel costs sequentially with our continued focus on optimal fuel mix, sustaining thermal substitution rate and high utilization of Waste Heat Recovery systems. We have also started operating our CPPs at almost all the locations. Distribution costs during the quarter primarily increased with the reimposition of busy season surcharge on the rail freight. Our consolidated EBITDA for the quarter improved by 30% Y-o-Y and 40% quarter-over-quarter to INR 272 crores. We have been continuously working to strengthen our balance sheet. Our net debt at the end of December '22 declined to INR 5,165 crores from September '22 level. Our interest cost have also been effectively contained with an increase of about 120 bps against the increase in repo rate by 225 bps since March '22, with opportunistic refinancing and debt repayments. Our CapEx spend for 9-month period stands at INR 329 crores. Just to summarize before I open the floor to Q&A. The demand indicators with the government's consistent focus on infrastructure driven economic growth, as visible in the recently announced budget, augurs well for cement demand. With higher allocation under PMAY and expectation of improvement in disposable income, we will continue to leverage our trade centricity to drive volume growth. Our CapEx priority towards diversification of footprint, cost savings and sustainability projects are on track. We are also progressing well on our product innovation focus by rolling out [Technical Difficulty] quarter-upon-quarter. Lastly, with optimism around price hikes, robust demand and peaked fuel costs, margins certainly appear to be improving from here on. With this, I will end my opening remarks. I am joined by Mr. Jayakumar Krishnaswamy, Managing Director, Nuvoco Vistas; along with Mr. Maneesh Agrawal, Chief Financial Officer of the company. We are here together to take your questions. Thank you.

[Operator Instructions] The first question is from the line of Abhimanyu Kasliwal from Choice International.

Am I audible?

Yes, you are.

Congratulations on strong performance this half. But my question is, we can see that you have improved dramatically in operational basis. You have become more efficient. However, there seem to be little CapEx to increase your tonnage. Now competitors there...

We lost your audio, Abhimanyu.

Okay. I'm saying that competitors are planning substantial Eastern growth. I won't name a competitor. Pleased to listen to them a few days back. They increased [ it 7 million ] tonnes in the East. And cement now takes 2, 3 years for capacity plans to get implemented. But I believe -- so do we have any plans to increase the capacity or maybe in ready-mix or will we just depend on debottlenecking because that is expected to give us 2 million tonnes per annum growth? Are we not showing any growth in top line or we are basically now working on improving our EBIT margins by improving our efficiency and ensuring that you are allotting much CapEx, so there's not much increase in depreciation. What is your plan, madam?

Okay. Thank you very much. As we have mentioned during our IPO and then subsequent quarters, one of the principal objective for the company. While we have a number of avenues to grow in North, West as well as East, as I mentioned in the last quarter and the previous quarter, our immediate objective is to pare the debt and get the balance sheet hygiene growing. And like I said before, with the passing of every quarter, we will give an update about how are we going to plan the future expansion programs for the company. We have very clearly a couple of projects for us to expand for the future, as we mentioned during our IPO times. Also during the last call and the previous call, I had mentioned that the immediate objective will be to debottleneck the company with minimum CapEx and take the capacity of the company from the current 23.8 million to 25 million. As we stand today in February, the kind of numbers we are looking is excess of 19 million tonnes this year. And if you really look at from 19 million to 25 million, we're looking at a 6 million tonne of headroom. We are very confident in the coming 24 months we would be able to utilize this headspace, so that we are able to get the growth going for the company like the industry growth. Around the same time next year or every quarter, we'll give an update about our large-scale expansion. And with the changing scenario in the market in terms of demand uptake and the pricing improvement as well as the tempering of cost, we believe that as we get into fiscal '24, we will see improvement in margins, and that will help us come up with expansion plans for Nuvoco.

The next question is from the line of Amit Murarka from Axis Capital.

So just a couple of questions. Like, firstly, in the presentation, you've mentioned that East and North markets saw double-digit growth, but our volumes were up 6%. Does that imply some market share loss over here? That's the first question.

Thanks, Amit, for that question. I likely touched upon it in my speech. The demand scenario in East has been both. But if we take a closer look at the region dynamics, states of Jharkhand and West Bengal have been a little bit subdued. Going forward, we believe that these states will also grow on a robust trajectory. We are trending 10% on a 9-month basis, and we'll be keeping the thrust on volumes. However, I'd like to take this opportunity to mention that we will also simultaneously be working on levers such as geo optimization and premiumization, primarily directed towards driving margins.

Okay. Got it. And secondly on power and fuel costs. Like while obviously it is understood that there has been a significant cost inflation, but there was an expectation that the third quarter, we'll see some -- start seeing some decline in the cost, but it has seen an increase for you. Is there any specific reason for that?

Yes. During the -- the earlier quarter had an inflated number. But as Mita said, we have peaked. But I'm happy to say that as we came into December and into January, the power costs have started coming down significantly from the high levels of October and November. That was also due to the inventory which we carried from Q2 into Q3. But as we ended December and into Q4, there is a more than adequate reduction in fuel costs, and we will see an improved power and fuel costs in Q4 and beyond.

So how much deduction can we see from here? Like could you give us some ballpark guidance?

It will be very difficult to pinpoint the number to say what is the kind of drop. But whatever we had from April till November and then December onwards, there is substantial deduction in the numbers from December onwards. And I think as we enter -- actually, when we come back to you guys in Q4, you will be able to see a substantial reduction in the power and fuel cost. Also, our alternate fuel program is also getting into a commissioning mode. And as we speak, I can give numbers for this very clearly. In Chittor factory, we have touched a 32% to 33% alternate fuel consumption, which is one of the highest in the industry. And in Risda and Nimbol factory without the coprocessing commissioning, which is happening as we speak, currently, we're trending at about 10%, 11% of AFR. And as Mita said, exit December was 9%. January we have already hit into double-digit AFR. And as we end the quarter we are confident that we'll get a 12% TSR, and that should have a good impact on the overall power and fuel cost. Last but not the least, the overall international coal prices have also softened a bit. And while in December, we got a little bit more linkage coal, January with the rake shortage and rest of all the stuff, there is some reduction in availability of linkage coal. But I think with the winter going away, we expect more and more linkage coal availability. So the reasons for our power and fuel costs coming down will be -- and as Mita said, CPPs have started firing in all our factories. So WHR and CPP will get into full swing in Q4, AFR increase to 12% exit rate, more linkage coal and overall tempering of international crude prices, there is going to be a sizable impact in the power and fuel cost in Q4.

But just to get into numbers, what was the rupees per Kcal cost in Q3?

Okay. Just a minute. Our Q3 rupees per Kcal -- Q2 FY '23, which we finished last quarter, was INR 2.64 and it peaked at INR 2.74. December exit is much lower than INR 2.64. And then on, I guess, that's how we can look at going forward.

Got it. And linkage coal share was how much in the quarter?

In this quarter, we got about 14%. Technically, we can -- we have the linkages to the level of about 25% to 27%. But Q2 it trended at 10% to 12%. So in Q3, it improved to 14%. But as we go forward, I expect this 14% going to 17%, 18% in the coming 2 to 3 months.

The next question is from the line of Satyadeep Jain from AMBIT Capital.

A couple of questions. One, just a follow-up question on the cost. I think in the presentation, you mentioned the slag prices have also gone up. Where are the slag prices now versus where they were in the third quarter? And also on linkage coal, we are hearing that there is still some tightness in availability of rakes and stuff. So in the last 6 weeks of this quarter so far, I know you're expecting some improvement in future, but where is the mix right now for linkage coal right now compared to the last quarter? That's the first question on cost.

In Q2, our slag price was INR 1,200. In Q3, it kind of hit INR 1,300 -- around INR 1,310, that's the kind of number. But we believe that this will get sustained at similar numbers in Q4 as well. But as you know, overall, the slag availability is going to be a challenge FY '24 and beyond. But we have now started -- while we are very nicely placed with our slag tie up of close to 2.5 billion from Tata Steel in our Jojobera plant and then some 1-year or 3-year contracts for our Jajpur plant. So we would have always a little bit of a price as well as availability advantage in slag. But having said that, slag prices have indeed gone up from INR 1,200 to INR 1,300 in the quarter, and this is the kind of number we see it happening in Q4. But if every company is going to increase their blended cement production going forward, slag production -- not slag production. Slag availability is not going much higher by the industry. So it's going to be a little bit of a challenge going forward. We are well placed with our tie-up with Tata Steel, which will give us about close to 50% to 56% of our overall slag requirement comes from our long-term tie-up, which we have. Coming to the second question of linkage shortage, yes, you're right. There is a challenge in linkage as we speak because of the availability of rake. But I think our teams have done a very good job in talking to the necessary people to find a way to move from rake movement to road movement clearance. So we're able to get additional coal through road movement, which is a welcome development as far as we are concerned. But however, I think we've also been pursuing with the authorities in SSCL as well as the Indian Railways to see how they can help the industry in whole, and we hope some positive response happening in the coming quarter.

Okay. Second question on the capacity expansion. I remember in the previous call you had mentioned that the target is to look at INR 3,000 crores, INR 3,500 crore of net debt and then look at CapEx. And you're evaluating 2 different options, Gulbarga and north. Is it -- have the plans been firmed up on which location you may possibly look at, first, north or Gulbarga? And secondly, any development on LC3 or any studies that you've done recently on maybe expansion in Rajasthan?

Yes. Satyadeep, I think we are pretty consistent with what we have mentioned in the previous quarters. It's very clear that the primary objective for us is to get the balance sheet hygiene going and the numbers which you mentioned is what we are really targeting thereabouts. That's the kind of number. We cannot have a direct fixed number or it will be around that number is what we are certainly focusing on. As regards where do we expand, certainly, as is mentioned in previous time around, which is about either the north expansion through the brownfield expansion in Chittor via this Nimbahera mines or the Western expansion through the Gulbarga integrated and split line. As we speak, our preferred choice inclination will be first north and then to west. But it's too early for us to really put the peg on the ground and say that we will -- the timing of announcement we will mention in one of these calls. But as I have consistently maintained in the previous quarters, every quarter, we'll give an update to you. The update on this quarter is the following. The industry dynamics has improved. The overall margin profile as well as the profitability is certainly seeing an improvement. And I think if the same trend continues, our numbers will improve further. And certainly, every quarter, I'll be able to make a positive news about what's the timing of our announcement. Till then, our objective of getting our debt levels to around INR 3,500 crores is the prime objective, and then we would pursue that.

Satyadeep, taking on your second question, we are very excited about LC3. Finally, there is an opportunity in blended cement for a product, which is almost close to OPC level in performance. Given our thrust on innovation, we have done some prototyping and the product is under testing with external agencies. We are awaiting the BIS specs release.

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

And just to clarify, sir said in the opening remarks that we are looking at close to 19 million tonnes this year. Last time we were looking at 20 million tonnes. So am I right on that front in terms of the volume? And next year, we were last time told about in FY '24 double-digit volume growth. So is there any change in stand there?

Thanks, Shravan, for the question. I wouldn't be pegging a particular figure that would be forward looking. But generally, to give you the direction, 9 months, we have clocked 10% Y-o-Y growth. We are entering into a seasonally strong quarter, and we need to understand exactly how the demand is panning out at the state level. Suffice to say that we are working on maintaining our sales front. But more importantly, we are working equally strongly on areas of geo-optimization, premiumization and other margin improvement levers.

Okay. So we would not like to -- or rather we would like to change our stand in terms of giving our guidance to not to give a guidance on the volume front. That's the way I should be looking at. Just to further clarify in terms of the Bhiwani, the COD, last time we said, August '23. What's the new time line and a couple of data points on the trade share lead distance for this quarter and the composite cement share for this quarter?

Shravan, taking it in 3 parts, we are maintaining our ambition towards a double-digit growth for now. Secondly, the perspective on Bhiwani, as we have mentioned earlier, we are on track looking at early H2 of next year. And I'm sorry, what was your third question?

Trade mix.

Trade mix has remained unchanged at a 71% level, same as Q2.

And composite and lead distance.

Let me just add one more thing to what Mita said. In Bhiwani, the mill shell is arriving as we speak this month. The silos or the cement silos with clinker silo, adequate progress is made. Most of the purchases and ordering has been completed. Civil work is in full swing. Our initial target is somewhere, as Mita said, early part of H2, which is July, August is when we want to kind of have the dry runs and commissioning happening. So we would see adequate volumes coming out of Bhiwani in H2 next year. And as against the trade bit, I think she explained to you, which is at 71% for the company in Q3.

The remaining data point I asked is the lead distance, composite share, fuel mix for this quarter?

So the lead distance is approximately 340, remains more or less the same as in Q2 levels. Composite cement, I will put it this way, we are at 1.8 cement to clinker ratio. And the bucket is fungible between PCC and PSC. Suffice to say, we are working towards a 2 million kind of targeted in PCC.

Okay. And the fuel mix for this quarter?

Can I request you, Shravan, to reach out to our office?

Lastly, in terms of the pricing. So the current prices in the month of January until now -- is it average with the third quarter, what we have reported? Or has it slightly gone down?

As we started January, the prices are holding with respect to Q3 numbers. So there is -- that's how -- we are already on the end of first week and we are holding prices. And in any case, as a company, as Mita spoke in one of the answers to the question, our big focus is to get our premium going, get our geo mix going and maximize our numbers in high NODT market, so that in spite of whether market is giving us all the tailwind or not, there is something which we have to do through our pricing acceleration program. And that's working very well for us. But the short answer to your question is the price holding as we speak on the 7th of February, I have to say, yes, when compared to Q3 numbers as to the January numbers.

Lastly, CapEx was INR 329 crore for 9 months and for full year now how much we are looking at?

We were close to about INR 450 crores. The overall project outlay for all the projects is close to about INR 550 crores is what we mentioned in one of the calls earlier. But as we are progressing, the spends as of now is about INR 329 crores. And by the end of this year, we will be around INR 450 crores to INR 475 crores. Balance spill over will happen to fiscal '24, but all projects are on the time lines in terms of the Nimbol expansion or the Risda AFR or Sonadih railway siding or the Jajpur railway siding or the Bhiwani brownfield.

[Operator Instructions] The next question is from the line of [ Surya Narayan Nayak ] from Sunidhi Securities.

Am I audible now?

Yes.

Yes, [ Surya Narayan ]. Please go ahead.

Just to understand that in terms of the rail coefficient, investment in the railway sidings and locomotives, we are having the highest share, around 4.5% to gross book but that kind of benefit is not seen. So just to understand whether -- because we have to bring a lot of clinker from the Chhattisgarh area to Eastern part, so that is our necessity. But even currently, we are also implementing a lot of railway projects. So just can you share the rail logistics versus the road logistics cost in our total logistics? And secondly, when the tangible benefits of those investments in the railway will -- investments will flow?

Yes. Thank you, [ Surya Narayan ]. So I'll just give a very high-level answer to you. As regards the nitty-gritties of rail versus road and PTPK and then the coefficient and all, may I request you to reach out to our Investor Relations department. We'll give you all the information. But the question specific about our expansion of siding in Jajpur and Sonadih. If you had really listened to our earlier calls as well as our IPO, one of the things which triggered this project was when we acquired Emami Cement. The Risda plant does not have railway siding. And it was -- all the movement was happening through road movement. And all of us know road movement of clinker is much higher than the rake movement of clinker. So we -- fortunately, for us, our Sonadih plant is just about 20 kilometers from Risda. And hence, we took a decision of expanding the siding in Sonadih plant, so that we're able to kind of move -- store most of the clinker from Risda into Sonadih and forward movement through rake from Sonadih into the various grinding units of Jojobera, Panaghar, Mejia, which already have full-fledged siding. Jajpur was the place where we did not have a siding. It was half completed when we acquired Emami Cement. Then we took a decision to put up the siding in Jajpur. When this project gets completed, we'll have -- other than Risda, which does not have inside the factory siding. The siding will be from Sonadih. So all the clinker, which moves to Jojobera, Panaghar, Mejia, as well as Jajpur is to be through rake movement and all of us know the cost of clinker movement by rail is roughly about -- at a full level for the company, it trends about INR 250, INR 260. And by road, it is much higher. So it will have a huge benefit for the organization in terms of moving clinker by raking. Rest of the details reach out to our team. We'll give you all the details in terms of rail coefficient, lead distance and every bit is available and it will be easy for us to explain you across the table.

Okay. Second is that the trade sale percentage is remaining the same, I mean, nearly static and due to the slowdown in the real estate due to the rate hike policies of the RBI. So that will be going on till we see that trade stops on its path, so that is on the macro side. So that will be definitely impacting the affordable housing schemes, LIG or MIG type of projects. Though government has made substantial emphasis on this budget, but some kind of slowdown is already visible. So my point is that as we approach the election year next year, so we have to do a lot of the OPC sales to the government projects. So in this case, the power and fuel cost will be definitely higher. So how you are going to take on the market, especially when up to '23, we are seeing a lot of investments in Eastern side as well as the Northern side is happening, to say, around 38% rise in the Eastern market and Northern market around 22%. So there will be definitely market share loss on our side. So how you approach the market with competition? So are we seeing lower realization for that? How is that will be going into market?

So [ Surya Narayan ], I will take your question in 2 parts. Firstly, the opportunities which open up with the union budget and the run up to the election. The opportunities that open up will drive the overall growth, which will provide opportunity for cement industry and individual players to grow. However, I would like to reiterate that as an organization, when we have a strategic footprint for improving power trade sales, our business model is designed to take that trade share. By which I mean, we have strategically priced brands, triple brand franchise with Concreto, Duraguard, and Double Bull. We have an over 16,500 direct dealers and 3x the numbers as a sub-dealer base. We continue to invest in brands not just in terms of advertising and communication, but as I shared during the short speech through continuous product innovation, value addition and consumer connect programs like our Tech Express vans and NuvoNirmaan. So it is not just the opportunity opening up but it is our commitment and strengthening of our team with the right design and support to drive IHB business. I hope that answers your question. It also indicates in our overall trade share remaining over 70%, which as you know is significantly higher than the industry average.

You don't expect the trade volumes to go down. I mean -- or the share of the nontrade volumes to go up. You will be definitely seeing -- able to get higher share in trade sales in the face of a competition.

Sorry to Interrupt, [ Surya ]. I would request you to please come back in the queue. [Operator Instructions] The next question is from the line of Vishal Periwal from IDBI Capital.

Sir, I think you briefly commented that the primary objective is to reduce debt and then to focus on growth. So over how many quarters, I think, that we are targeting to reach the desired number of INR 3,500 crores, maybe the around about because currently, we are at roughly like INR 5,100 crores. INR 1,600 crores kind of difference is there. So what are the internal targets that we have?

No, I cannot do a crystal ball guessing of how the fuel prices will look in the future. We all have some forecast of where the international fuel price is. If you -- you had -- If we spoke to you 6 quarters back, when we are listed and come back to the -- come to all of you on a call in September 2021, the whole dynamics was totally different with the prevailing fuel price and then the overall EBITDA per ton at that time. But unfortunately, a lot of things will happen from then until now. So hence, we are also very clear. When we went through IPO, we were very clear 18 to 24 months from the listing date in August '21, we said we'll be ready to reduce the debt levels of the company to an acceptable level and get our expansion going. But along the journey, we also realized that a lot of market dynamics have changed and there's huge headwinds. So I won't underline the word primary objective, but I think prudent business sense is to ensure balance sheet hygiene is good. Hence, we really looked at the objective of ensuring that we come into respectable levels of debt before we get growing -- growth growing. Having said that, we also have very good ambition to grow the business. Little while ago, I mentioned that while we'll do 19 million and thereabouts volume this year, we still have scope to grow this company to 25 million tonnes, which is good 6 million tonnes or 25% headroom. You can still ask the industry capacity utilization is lower, how are you expecting your capacity utilization to be pretty high? Running the company at high capacity utilization is the DNA of the erstwhile company and the current Nuvoco. We used to operate in the past at 90% capacity utilization. In some months, we have operated at 95% capacity utilization, and we are banking upon our DNA to go back to operating the company at 90%, 95% capacity utilization. That is how we'll navigate in the next 24 months. But I'm assuming and being optimistic here that the overall fuel prices in international crisis will come down over a period of this year, and coal prices will taper down and then our EBITDA per ton will increase and thereby we will prepay or faster repayment of our debt. And as I said, I can't give a time line to you, whether it will be 3 quarters away, 4 quarters away. But suffice to say, commitment from all of us is every quarter we'll come and tell you that what's the outlook. Secondly, every quarter, we will reduce and pare our debt. And you would have seen in the last 3 quarters, quarter-upon-quarter, we have come and given you a debt level which is lower than the previous quarter. And you will see it in March, and you'll see it in June next year. Our debt levels will be sequentially reducing going forward, and that will give us confidence that we are in the right path to pare the debt and grow the company.

Okay. Continuing on this particular thing. So from an industry point of view, in the East side, I think given the players are increasing capacity. So what according to you could be market share? Maybe like what is the industry capacity vision, which is happening according to in the next 12 to 24 odd months?

So Vishal, we've been asked this question in earlier calls, too. And I would like to reiterate that when you look at the demand and the capacity, the capacities particularly in East should be read both in terms of cement and clinker capacity. And if you take a look, clinker capacity is going up from 43 million tonnes per annum end of March '22 to 56 million tonnes per annum in the next 3 years. If we were to translate this in terms of cement at the cement to clinker ratio of 1.6, we would be facing a situation of over 90% clinker utilization in the region. There's a lot more grinding capacity, which is being added. There is the apparent situation of bunching of capacities in the coming months. But as we mentioned, the demand outlook in the months to come, given the robust union budget trust as well as the upcoming elections, there should be enough demand to absorb the additional supply.

Okay. Sure. One last thing. On the AFR, like on -- in the PPT you've mentioned that our fuel cost is roughly like INR 1,611. The AFR that we use on a like-to-like basis, what exactly is the costing for the same?

Okay. So it's roughly the rupees per million cal, if you were someone -- one of you gentleman asked what is the cost of fuel for Nuvoco, the pet coke as well as the blended coal rates were trending at anywhere between INR 2.6 to INR 2.7, whereas AFR for Nuvoco is trending at 1.6 to 1.7, a good INR 1 per million call reduction versus coal and AFR. That's the kind of arbitrage we get.

[Operator Instructions] The next question is from the line of Amit Murarka from Axis Capital.

So just wanted to check on the working capital situation. Like generally, we have been seeing some reduction in working capital as fuel costs come off. So could you just guide on the expectation on the same?

So basically, as we move into the season, so Q4, we are expecting a reduction in the working capital, and that is going to help us -- along with the operational profit, that's going to help us reduce the debt.

Could you help quantify it a bit? How much of a relief are you expecting in the Q4 specifically?

Can you just be more specific?

No. I was saying that could you just quantify roughly ballpark number like how much of rupees per crore number kind of relief that you are expecting, just so that we can better think of the debt number?

Yes. So we are looking at a reduction of working capital to the extent of around INR 300 crores in Q4.

The next question is from the line of Rajesh Kumar Ravi from HDFC Securities.

Sorry if I missed in some of your earlier comments. On per kilo cal, how has been the fuel cost in Q3 and what is the trend for Q4?

Thanks, Rajesh. This question got picked up earlier. So I have mentioned in the earlier statement that the Q2 numbers for the company was INR 2.6 to INR 2.64 per million cal. Q3, we peaked at INR 2.74. And as we stand in January, we completed January, we've already come back on peak levels to slightly lower than even Q2 levels, and then that's going to kind of continue in Q4 of this year. And as it stands with the kind of coal prices prevailing going forward as well as this is kind of number. So we already peaked and we've come down substantially from peak levels in end December as well as in January and February as we speak.

Okay. So Q4, you're looking below Q2 numbers, right?

Around that. Yes.

Okay. And basically, the current spot prices and all, can it come closer to INR 2 in next, say, 2 quarters, if the current prices were to stay on your fuel mix?

That would be very difficult for me to say. Can I request you to connect with our team because right now off hand, I will not be able to calculate the mix as well as do but...

No issues, sir. I'll get back. And...

But certainly, the pet coke purchase price is trending at about $180 and imported coal is about $145 is what we're trending directly. That's where we are moving. And with AFR coming in, which is going to be somewhat good for the organization, I spoke in my earlier, one of the questions that we closed December at 9% TSR and then in Q4 exit is going to be 12% TSR. So in the entire next year, our preprocessing, coprocessing, carbon black for North, as for the rest of all the AFR is going to be fully running. And we are expecting at a company level at 12% substitution rate in fiscal '24.

Okay. Okay. And in terms of the freight costs, how is that expected to trend, sir?

Freight cost, one of the challenges for the entire industry is the railways have come and put back busy season surcharge, which was not there for the last 2 years. Unfortunately, that has come back, and then there is also news that it's going to be for full year and not only the busy season. It's no more a busy season surcharge. It's going to be increase in freight rates. So having said that, the prevailing distribution cost for the company in Q2 and Q3 is likely to continue in Q4. However, one of the things which we are aiming for is the availability of wagons will improve going forward. And if that were to improve, our distribution costs should come down from current trending levels of about INR 1,450 because there's a lot of road movement we have done on clinker because of nonavailability of wagons. So if the nonavailability of wagons -- wagon availability improves from semi-finished goods movement of close to about INR 310 per ton the clinker movement costs will come down to INR 250, INR 260 per ton. There we target another INR 40, INR 50 reduction in distribution costs only with virtue of moving from road to rail. Rest of the initiatives that the company is focusing on is to improve the geo mix and focus on home market and also get the Bhiwani growing needs. Then I will move -- I will sell lot of cement in Haryana and focus on Rajasthan and Chhattisgarh. The primary freight as well as the overall distribution costs should come down to better numbers than what we are currently trending.

And sir, in the presentation -- yes, yes. Sure. And by when do you expect this trend to play out, the wagon availability to a greater extent?

I also mentioned in one of the questions that we are proactively engaging with the Ministry to see how they can support the cement industry. Obviously, we have to talk for the industry, plus certainly for Nuvoco we always represent. So there is a positive view that maybe the wagon availability will certainly improve going forward movement, the coal stocks and power plants improve. So I foresee as we get into fiscal '24, our overall availability of wagons will increase. And also, there is this announcement which all of us would have seen. The Indian Railways is probably making about 10 wagons per day, so which is a huge number which will come into the system. I heard the Rail Minister speaking in one of the meetings about focus on railways to build more wagons. So it will not happen overnight, all of us know. But certainly over a period of 3 to 6 months, overall wagon availability will improve, which will positively impact the cement industry.

Sure, sure. Last question demand numbers, you mentioned double-digit growth in both East and North markets. But for you, if I look at the volume growth sequentially has been flattish, just 2% and year-on-year also in single digit, 6%. So could you just throw some light that why you were not able to grow on a sequential basis?

Yes. This was covered in my speech and in a question earlier this afternoon. While the Eastern region demand growth has been good, if we take a look at the regional dynamics, states of Bengal and Jharkhand was somewhat subdued, and we have a fair bit of our sales there. However, we see with the budget, the elections and all, a quick catch up in these two states. So still chasing our ambition for the year. And also, I would like to take this opportunity to mention that we are working very strongly on the levers of geo optimization and premiumization. So the focus will be on driving margin-based levers.

The next question is from the line of Shubham Thorat from Perpetual Investment Advisors.

Am I audible?

Yes, you are. Please go ahead.

Shubham, your voice is breaking up in between.

Is it better now?

Yes, much better.

Yes. So just a clarification to begin with. So we mentioned in the earlier comments that the Bhiwani plant will be commissioned in early FY '24. So can you please state that what will be the total capacity for this Bhiwani plant after the completion of the CapEx?

Yes. Currently, our North capacity is close to about 4.8 million tonnes and the mill which we're putting up in Bhiwani is 1.2 million tonne capacity, and we take the North capacity to 6 million tonnes grinding. Along with that, Chittor factory clinker debottling happened last fiscal. Nimbol factory clinker debottlenecking is happening as we speak. The plant is under commissioning for that expansion with the additional clinker between Chittor and Nimbol and also with Bhiwani grinding capacity coming. By July, August in the coming year, early part of H2, we would be at installed capacity of 6 million tonnes in North.

Okay. And a couple of data points if you can provide. So can you provide the fuel mix and lead distance for last financial year and the FY '21 as well?

Nitty-gritty details, can I request you to reach out to our Investor Relations team. We'll provide you all the details about lead distance, railroad, coefficient, fuel mix. Everything we will provide you. Just reach out to our team, and we will be happy to give all details to you.

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

Sir, you mentioned the Nimbol clinker debottlenecking. So by when it will be done? And the Risda 5,000 TPD debottlenecking, which was remaining. So when it will be done?

For Risda, we are done out at 11,500 TPD. We could still take about a little bit more for which we have to modify some facts. I think in the next shutdown in the coming fiscal, that should be completed. But in terms of Nimbol, as we speak, all the work is happening. The hopper belts and additional roller press are all being implemented. We will just have to take an appropriate time, opportune time in April or May when we build adequate clinker stocks to take the shutdown. Otherwise, the project is on stream. So we'll take a sensible call in Q1 of next year to take because the shutdown will take about 25 days. So we will choose the right window to hook up all the systems. Our target is by the time we hit July, August, Nimbol factory will be at 5,750 tonnes per day capacity, 1,000 tonnes more than what it is currently slated to give.

Okay. Just -- again, just trying to clarify in terms of the volume front. So this quarter, volume growth ma'am has mentioned in terms of the West Bengal and Jharkhand issues were there. But even if I look at the Q3 FY '23, so not the last year, even the previous last year, so at that time also, we have done a 4.86 volume. And after that, this time, we have a higher 1.5 million tonne extra capacity. So despite that, this problem in these 2 states are so significant that we are not even able to reach that. And does this problem got now sorted in January? Or still, it is half sorted and half problem is there?

I think if one were to kind of simply sell volumes, it should not be that difficult to sell volume. But Mita mentioned multiple times in the call, our focus has been to get the mix going and also choose the geo mix as well as the premiumization. So if it was simply going and dumping volume, we didn't take that call. And hence, the primary endeavor in this quarter has been to ensure that we get the margin profile right, which I think we have made a big improvement from what it was in Q2 to Q3. We are pretty pleased with the effort, which we have put and the results which we have got. And I think we'll continue with similar effort, but this is the season for cement. January to June, we would certainly not lose a niche in the marketplace and get the volume as well as going. But the premiumization and geo mix will also be a criteria for us.

I would now like to hand the conference over to Ms. Madhumita Basu for closing comments.

Thank you. Thank you all for joining us today. I trust with the short comments in the opening remarks, followed by all your questions and our responses, we will have closed the top line takeaways from this call very well. My team also tells me that it has been a long day for most of you, and there's probably another call coming up. So I will not take up more time for closing remarks. My team and I, the Investor Relations Department, is available for any further clarifications that you may require. Thank you once again, and wish you a good evening.

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