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

Ladies and gentlemen, good day, and welcome to Q4 and 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 the 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, Mr. Basu.

Thank you. Good evening, everyone, and a warm welcome to the Q4 and FY '21 earnings call of Nuvoco Vista. Looking at the year gone by, the financial year was dynamic for the entire industry. On one side, cement demand has shown robust growth, coupled with improvement in prices from FY '22 levels, which is outperforming the all India average. On the other hand, soaring energy costs has impacted margins during the year. However, softening in the fuel prices from Q4 FY '23 has provided support to margins in the later part of the year. On the economic front, the macroeconomic indicators demonstrate a positive outlook for the sector, and annual consumer inflation in India eased 5.7% in March '23. Manufacturing and investment activity is expected to increase in the economy due to the government's emphasis on capital expenditure, better capacity utilization and manufacturing, double-digit credit growth and moderate commodity prices. With the government's continued focus on developing infrastructure and rural housing, cement demand is expected to remain strong in FY '24. Coming to the industry performance in FY '23 cement demand in East and North have witnessed robust demand growth during the year, driven by rural housing and infrastructure. However, looking at the regional dynamics, especially the states of Bengal and Jharkhand witnessed subdued demand growth during the year, moderating our overall sales volume growth during the year. However, we have stayed focused on our premium products and on trade volumes in FY '23, and this will continue to be a major thrust area for us. Nuvoco has one of the highest cement-to-clinker ratios in the industry at 1.82%, with continuous focus on blended cement. Prices have improved from FY '22 levels with east at 7% outperforming all India average of 3%. However, price increase in FY '23 has not been adequate to contain pressure from the high energy costs. Given this environment, I now move on to sharing some strategic and operational updates. Continuing our thrust on premiumization and innovation, we have successfully added Concreto UNO, Duraguard F2F and Concreto Glyde to our premium product portfolio during the year. We have sustained investment in brand building with focused brand association programs for brand Nuvoco. We have launched on digital platform, engagement films as a marketing communication campaign for brand Duraguard, which showcases its unique selling points. The campaign has been well received, attracting more than 10 million-plus impressions with stakeholders. An update on our projects. We have been prudently prioritizing our CapEx on sustainability, debottlenecking payback-based projects and north footprint enhancement. A quick update on our ongoing growth and debottlenecking programs. Cement capacity expansion to 1.2 million tons per annum grinding unit at Bhiwani cement plant in Haryana is ongoing. Civil and capitation advancement is on mark, and all major orders have already been released and deliveries are on track. This will take our overall cement capacity to 25 million metric tons per annum. The alternate fuel core processing and pre-processing systems have been commissioned at Risda and Nimbol. This will facilitate our handling of a wider range of [indiscernible] with increased waste recycling tonnage in FY '24. Railway siding projects are on track at both Jajpur and Sonadih and commissioning its plant later in the financial year. Clinker capacity enhancement at Risda and Nimbol are on stream within H1 FY '24 deliverables and the latter will support our mining unit expansion in Bhiwani. Ready-mix operations. Our Ready-Mix Concrete business has seen improved revenues by 24% in FY '23 with premium products and new products comprising almost 1/3 of the business. We see the Ready-Mix business gather momentum and will utilize this opportunity to ramp up our pan-India RMX presence. Our commitment to this business is demonstrated by back-to-back commissioning of our Guwahati and Coimbatore plants. I share here with pride that the Guwahati plant is the first all women led Ready-Mix plant. Modern Building Materials, the company remains committed to offering a diversified range of products to meet our customers' construction needs. This business has recorded a near 20% growth in FY '23. On the people and processes front, at Nuvoco, we recognize people and processes as key to remaining agile and competitive. In the year on the review, the company launched the Nuvoco University, a platform to upskill people via e-learning and classroom training. The company has in place programly for process oriented performance improvement and project them to digitally enable internal and external stakeholders. On sustainability, the company stays committed to its sustainability initiatives by concentrating on raising the consumption of alternate fuels and has exhibited an exit rate of 12% TSR in FY '23. We have one of the lowest carbon footprints in the industry with net carbon emissions at 465 kg CO2 per ton cementitious material in FY '23, primarily it is driven by good focus on blended cement, WHR, AFR and improving thermal efficiencies. Reiterating our commitment to sustainability, we have launched a company-wide program named, POP, Protect Our Planet. This has been taken as a company's strategic action and is shared by [indiscernible]. Activities encompass all functions and passes from sustainability road map to green concrete products, use of recycled construction and demolition rates in concrete manufacturing, reducing single-use plastics and becoming water positive. Coming to the financial performance. For the quarter, cement volumes in Q4 FY '23 stood at 5.2 million tons. Volumes remained impacted as key markets of Bengal and Jharkhand remains sluggish sequentially for 2 quarters. Our revenue from operations improved by 12% quarter-on-quarter to INR 2,929 crores in Q4 FY '23. PAT, profit after tax, for Q4 FY '23 stands at INR 201 crores. On a full year basis, cement volumes improved to 18.8 million tons. Our revenue from operations improved by 14% Y-o-Y to INR 10,586 crores against a volume growth of 5% as the company prioritized value over volume growth. As for FY '23 stands at INR 16 crores. Key cost elements, our focus on Q4 FY '23. Cement raw material costs increased by 4% Y-o-Y due to increase in key commodity costs with inflationary pressure. This has been partially mitigated with long-term contracts of slag and improved cement-to-clinker ratio. Power and fuel costs increased by 11% Y-o-Y due to external pressure from high energy prices. However, on a quarter-on-quarter basis, there has been a reduction of 14% due to softening in fuel prices, coupled with higher from thermal substitution rate. Distribution costs during the quarter primarily increased with the reimposition of busy season surcharge on the railway freight, coupled with increased load movement of clinker due to baggage availability issues. Our team is working closely with the Indian Railways and in an industry first has introduced innovative solutions for clinker movement, such as [indiscernible], which were typically used by the railways for transportation of [ segregate ] and track balance materials. Our consolidated EBITDA for the quarter improved by 41% quarter-on-quarter to INR 383 crores. We have been continuously working to strengthen our balance sheet. Our net debt at the end of March '23 declined to INR 4,414 crores with a focus drive on collection, coupled with efficient working capital management. Our interest costs have also been effectively contained with an increase of about 160 bps against the increase in repo rate by 250 bps since March '22, with opportunistic refinancing and debt repayments. Our CapEx spend for FY '23 stands at INR 486 crores. Just to summarize before I open the floor for Q&A. The macroeconomic indicators are creating a buoyant outlook for sector and government's continuous thrust on infrastructure development offer value for cement demand and prices. The government focus on housing for all scheme and expectation of improvement in disposable income, we will continue to leverage our trade centricity to drive volume growth. Our growth projects in the North, including the 1.2 million ton per annum cement capacity expansion at Bhiwani and the debottlenecking in Nimbol, are both progressing well and will help to increase our footprint in the region. The Ready-Mix Concrete business is on growth momentum, and we are actively ramping up pan-India run operations. Moderation in fuel prices will favorably impact margins, and we remain focused on continuous reduction of net debt and prepared for our next phase of expansion. With this, I will end my opening remarks. I'm joined by Mr. Jayakumar Krishnaswamy, Managing Director; and Mr. Maneesh Agrawal, Chief Financial Officer with us. We are here together to take your questions. Thank you. Over to you.

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

So just firstly, I wanted to know like what was your clinker production in FY '23? And what was the clinker utilization?

Look, in terms of -- Amit, in terms of detail clinker output and cement output, it would be very difficult for me to right away tell you in this call how much clinker we produced on a company-wide basis. Of course, internally we track cement production, and that's where we are at 80.8 million tons of cement sales, which we did. And at the beginning of the year in April 2023, we hardly had close to about 1 lakh -- 1.5 lakh tons of cement stocks. So whatever cement which got sold in this fiscal were all manufactured and the closing stock of cement was also hardly about 1.5, 2 lakh tons of cement in the system. So that really go back to 1.8 an issue on 18.8, we can you safely say, close to about 10 million tons of clinker, which we -- so that's the roundabout way of looking, but we still have headroom. A number of cases we had to kind of okay. Clinker capacity for the company is 11.88 million tons. Actual production for FY '23 is 10.3 million tons and clinker capacity utilization at 87.5%.

Okay. And also like your debt has dropped in Q4 quite significantly, and congratulations on that. But just to -- I mean, if I go through the details, it seems like it's come through payables extension and payable days have gone up a lot. So how sustainable is this reduction in working capital and ended in that context?

I will take the first part and then I'll ask my CFO to give you the details. As we have been telling in all our calls right from the beginning, the endeavor of the company is to keep a hold on debt in the short run. And so that we come into a manageable debt levels to the tune of about INR 4,000 crores thereabouts. Then we decide the next phase of expansion. So that's the view of the organization. And our efforts and endeavor has been in the last -- ever since we listed the company and going forward, we'll have to pay the debt so that we are ready for the next phase of expansion. So that's now in the last 3 years, March of '21 to '22, '23, there is a continuous improvement in reduction of debt. Now I'll ask Maneesh to give you details about how we went about doing this.

So basically, I would say the teams have done a very good job in managing all the key lever of working capital. So all the 3 key levers comprising off on the receivable front, on the inventory side as well on the payable side. So as Nuvoco is a cement trade-centric business, so we have received full support from our cement channel partners. And we did a record collection in quarter 4. We have achieved a revenue growth of 14% in FY '23. However, if we look at the financials, our receivables have remained broadly in line with that of last year. So this clearly indicates that there is an improved DSO as of March 31, 2023. Also on the RMX side, we have continued to focus on driving sales on our cash and carry model, and we have also reduced our credit terms with our customers if I compare it with the past period. On the inventory front, there was significant buildup of inventory in H1, primarily on account of 3 factors. One is because of the seasonality involved, the cement and clinker stocks are generally high as of September end and also because of the higher fuel prices that were prevailing at that point in time, coupled with the issue of uncertainty around the talks on the fuel front, so we had to stock side also. However, gradually from Q3 onwards, we have reduced inventory level and brought it in line with our internal secreted DIO norm and also the fact that there has been softening of the fuel prices from Q4, and that's clearly evident in our financials also, the overall inventory value has reduced. The third key lever on the payable side. So I would say with the change post-COVID dynamics, we have been focusing on renegotiating our payment terms for raw materials, fuel and other line items with our vendors, with our suppliers, and we have achieved an encouraging report -- response to this. So that is how we have been able to bring down our working capital in a big way.

Okay. And was cash and carry the reason why like sales volume dropped Y-o-Y for the hopes and drop in sales volume?

So he's talking about the Ready-Mix business.

The cash and carry comment was in respect of our Ready-Mix business, Amit.

So the ready-mix business, Amit, we used to have credit terms to an excess of 90 days or even 120 days in the past period. So one of the things I have mentioned in the previous call was the entire business model we revisited post-COVID when we resumed operations after the shutdown during the COVID period. So we took 2 or 3 levers at the time. First, we said we will operate our plants only in those markets where the [indiscernible] as well as the raw material cost is manageable from our perspective. Number two, we also said that we will not offer -- we will not supply to those customers who are expecting longer credit terms. And hence, our business itself shrank in those days. We've started selling much lower than the prior to FY '19 cash. That was the second thing. The third thing we also said was this entire concept of cash and carry, which introduced, which means in Ready-Mix business, there are a lot of small ISB who will put a roof or something and then they buy Ready-Mix for one lot or two lots or 2 transit mixtures. In those cases, we are very clear that we wanted to focus more on those cases so that we're able to get advance or cash and carry for supplying to those places and hence, credit exposure, big time reduced. Last but not the least, one of the big efforts which we have been doing in the last 1.5 years is we don't do within sales ready customer whose credit is more than 45 days overdue. And hence, this has greatly improved the overall receivable position in the Ready-Mix business.

[Operator Instructions] The next question is from the line of Satyadeep Jain from AMBIT Capital.

Just a couple of questions, just within 2 questions. One on the very strong cash flow performance in the quarter. I just want to understand the moving parts for both DSO and inventory. On the DSO, I mean, I can understand very strong collection from the channel partners. But somehow, we've not seen others being able to replicate that in the quarter. What was driving that very strong collection that you've seen outside of RMC in the purely cement business? Is there some element of bill discounting or vendor financing in that particular element? And on the inventory front, was there basically inventory liquidation for cement also in addition to fuel cost in this particular quarter? And why -- was there fuel cost, is that -- does that mean the inventory of fuel cost was actually very high in a period when fuel costs were actually high? And where is the fuel inventory right now? Is it very lean given we are looking at lower fuel price environment? So that's the question on working capital. And then I have just a quick question on incentives also.

Yes. So Satyadeep, I'll go one by one. The first point was in relation to your the receivable front. So I cannot comment about other companies per se in terms of DSO. But for us, specifically, if I compare it from the last year, there is a reduction in the DSO. That's point number one. And as I mentioned in the previous question, we have achieved a revenue growth of 14% this year, as per the last year. However, our receivables, if you look at the financials, they are broadly in line with the last year. That clearly shows there is an improvement on the DSO front. Secondly, on the inventory front, again, as I mentioned earlier, there are 3 parts to that. In H1, as in the cement industry because of the cyclicality and seasonability involved in that, the clinker stock and cement stocks are pretty high as of September, right? So that was the case with us also. And it gradually starts depleting from Q3 and Q4, and we were able to get that sort of a benefit by way of production on the clinker and the cement stock. That's point number one. Point number two is with regard to the high fuel prices. You will recall in Q4 of last year and the Q4 of FY '22 and Q1 of FY '23, the fuel price has actually peaked up, right? So obviously, this was affecting in the inventory that we were carrying as of September also. Secondly, because of the uncertainty around the overall environment, we have to carry large stocks of fuel to take care of our production for Q3 and Q4. So that was also one of the reasons which was experience in September. Subsequent to that, in H1, in Q3 and Q4, as I mentioned, the clinker stock depleted, the cement stock reduced, the fuel prices started softening from Q4 and also the stock levels right now, we are doing a strategic and opportunistic buy as and when the situation demands. But obviously, if I look at the DIO for fuel stock, as of now, it is less than what it was in the month of September. So these are 3 factors attributed to the overall reduction in the inventory. And you can see from the financials, there is a significant drop inventory for the set of INR 350 crores from the last month.

Just to add to what Maneesh said, you all referred in our earlier calls, we have been saying that the linkage coal supplies is totally evaporated in H1 because of the power crisis in the country. Gradually from November, December to January onwards, the linkage coal availability also increased. Hence, our overall import of pet coke as well as imported regular coal content also somewhat reduced because we started getting linkage coal. And in our consolidated fuel mix in Q4 of last year, we are 19% of linkage coal, and that came down to 13%, 14% in -- in H1, it was single digit. Q3, it became 13%, and in Q4, it improved to 16%. So overall, we started getting local linkage coal, which helped us to bear on the stock of pet coke and imported coal. Last but not the least, our AFR consumption also increased in the last Q-o-Q basis. Every quarter, we have an increasing AFR. From a 6% usage last year, we exited at 5%. There again, that also kind of substituted the overall inventory of fuel. So all in all, fuel inventory was under control because of more linkage coal, reduced price of coal, a reduced price of fuel and last but not the least, improved usage of AFR.

Just one follow-up on that on the DSO front, obviously, faster collection cycle from the customers. Just want to clarify, was there any element of bill discounting, vendor financing and did it have any impact on discount or incentives that the dealer demand?

So nothing as such, Satyadeep, in terms of bill discounting. But -- so this cash and carry, what I talked about was specifically to the RMX business. So as a percentage of overall sales, there is a sizable component of space which is happening on the cash and carry model wherein we get the payment in advance or within a period of 1 to 2 days. That is also helping us to reduce our overall lever which was not the case to that extent in quarter 4 of FY '22. But obviously, there's no element of bill discounting, for sure.

Okay. Just if I can just squeeze one question on incentives. What were the incentives accrued in FY '23? And what was the incentive received in FY '23?

Hold on a sec.

More or less similar?

So basically, we have incentives coming in from both East and North. So across all East and North, we accrued overall incentive value of close to INR 190 crores. And we were able to get the large part of it primarily from the incentive, which was there in the Rajasthan side. And on the East side, it's already there for 2 plants of Mejia and Panagarh.

So fiscal '23, the incentive is close to INR 190 crores. Out of which Rajasthan is close to INR 40 and the balance is East. And you would know that we have stopped accruing Mejia a couple of years ago. And from this April onwards, we desire to stop accruing Panagarh as well.

So how much was received across both North and East, including Panagarh and north?

That's why I'm told you it's about INR 190 crores last year, out of which North is INR 40 crores, East is INR 150 crores.

And the entire INR 190 crores was received also from the government?

No, no. Rajasthan is the only state, which does quarter-to-quarter disbursement. We received everything in Rajasthan. East is on accrual basis because that's been the case with West Bengal as well as -- Jharkhand, we just started a 1 year. So West Bengal is the one where Mejia and Panagarh, so we've been accruing ever since the incentive scheme started. One was this from the stands in Mejia and then 2 years into -- after acquisition of Nirma, we decided to stop accruing Mejia. And then when Emami came to our hold, they are already -- where they were accruing Panagarh. So at the time of acquisition, we continued with the practice for 1.5 years. And then this year, we have decided that we'll stop accruing for Panagarh as well.

I just want to understand of the INR 140 crores that you're accruing East during the year, given the quarterly disbursement that you get from the government, overall, what was the amount received from incentive in East during the entire year for FY '23?

So it is primarily from the Rajasthan plant that we got in FY '23.

So East, we have received all the money from the government. Why don't you reach out to our Investor Relations, they'll give you granular details, so we'll be able to give you all details when we meet. Not a problem.

[Operator Instructions] The next question is from the line of Shravan Shah from Dolat Capital.

First, a couple of data points. Trades share for fourth quarter, lead distance for fourth quarter and CAGR cost for fourth quarter.

Shravan, I will just go one point at a time. You asked for lead distance. So lead distance is roughly over the full year about 340 kilometers. This on year basis has remained rather flattish. In Q4 sequential quarter, we have seen about 5 7 kind of kilometer improvement. But largely, I would mention that it has been flat. The question you had on fuel. So fuel consumption rate has been INR 2.31 per on overall basis. And the question you had on the trade share. So trade share has been on Q4, 75%.

So now, we have reduced the net debt significantly INR 750-odd crores Q-o-Q. So two things I just wanted to know. As on today, the net debt number is same around the -- I'm not asking the exact number, but broadly, whether it has remained the same INR 4,400-odd crores net debt? Second, in terms of the expansion plan. So our stand obviously was INR 3,000 crores, INR 3,500 crores which we will go for a next phase of expansion. So our preference was North. So when will we start and what the likely CapEx for that? And apart from that, for the -- even without that, what's the CapEx for this year we are looking at?

Okay. I'll just give you one at a time. The first question was all about current debt at INR 4,400 crores. So why don't you put the chart, which is about the -- last 3 years, March to March, I think the debt has reduced from INR 5,400 crores all the way to every year 3 years up to INR 4,400 crores. In the past calls, I've been talking about the priority for the company is to ensure that debt levels are to the tune of about INR 4,000 crores or thereabouts before we start announcing the next phase of expansion. So we continue to be committed to what we have been informing you in the quarterly calls, and that doesn't change as we speak. The second one is about CapEx last year and the future CapEx. So last year, when we doing our calls, we mentioned that with the company focused on brownfield expansions in Bhiwani, Sonadih, Jajpur and Nimbol and which Nimbol, we said, we'll increase the capacity of clinker to 5,750 TPD. Bhiwani instituting of 1.2 million tons. Sonadih is all about improving the logistics to get clinker movement out of Sonadih into Eastern portion. And the last but not the least, Jajpur is the only facility which does not have a railway setting. We wanted to put up a railway setting there. All this had a CapEx outlay, including the routine CapEx as well as the land procurement and rest of all the stuff. We said we would invest close to about INR 550 crores what we have been mentioning during the call. As we completed here, there's always a little bit of phasing in cash flows, which happened. In FY '23, as of 31st of March, we ended up spending INR 486 crores out of the overall projects which we envisaged during the year. Some amount of money will get spent in this year. As regards to the CapEx plan for this year. We, right now, don't have any new projects at this point of time. We will continue to complete all the brownfield projects of Bhiwani, Sonadih, Jajpur and Nimbol. And current outlay for all the projects is tuning to the tune of about INR 550 crores in this fiscal. We are also decided to set up additional Ready-Mix plants in the tune of about 12 to 15 plants. There, we are parking close to about INR 25-odd crores to set up the new Ready-Mix facilities. So in our last year, INR 486 crores CapEx spend. This year outlook for CapEx is INR 550 crores. Our debt levels in March INR 4,400 crores. Our endeavor will be, if the fuel prices tepid and the demand is as robust as it is currently and the prices hold in the market, we are looking at a reasonable period of time in the future to pay the debt to INR 4,000 crores, and then on, we come back with our expansion plan, either in North or West, or we also -- we have the Nimbahera site as well as Gulbarga. As mentioned in our calls in the past, our primary focus at this stage is to expand in North, to our North facility.

So just to clarify. So maybe by next quarter or the second quarter, are we going to start spending for the North or the Karnataka expansion and still the preference remains for the North?

I've been consistently telling in this calls that on a quarter-to-quarter basis, we'll keep all of you informed about our starting of a greenfield facility, either in North or West. At this point of time, in this call, I'm informing you that, in this quarter, we don't have any plans to commence construction. I think when we reach the next call, I think -- we'll keep you updated every quarter about our plans whenever it will happen. But the primary focus, as we have mentioned in the last 5 calls, the primary objective of the company is to pay the debt to about INR 4,000 crores level.

Okay. And last, sir, Bhiwani will start by...

Sorry to interrupt you. I would request you to please come back in the queue. [Operator Instructions] The next question is from the line of [ Darshit ] from RoboCapital.

Hello, am I audible?

Yes, you are audible.

I wanted a basic overview of, say, revenue and margin guidance over the next, say, 2 years, 3 years, span.

Okay I'm afraid I can't make any forward prediction about revenue or performance of the company. All I can say is from the macroeconomic indicators and also the published report from agencies like CRISIL and others, the entire outlook for the cement industry is to the tune of close to about 7% to 9% growth, which will be there. And of course, the reports which are published and which all of you would have access to is, at a regional level, people are predicting different growth rates. And certainly, in markets like Eastern center there because of the inherent nature of the under development, so there is a likelihood of better growth and higher growth in this region. That's one aspect on volume growth. Second one is again on price stable movement. Here again, I think the reports are out where people are looking at better pricing outlook. And based on this year, East, followed by West and North, with East followed with North and West will have better pricing than Center and South. So Nuvoco being a strong player in -- leading player in East and also decent position in North, I think we will have a better growth opportunity in terms of volume and also the pricing realization, if it happens, I think you will get a positive tailwind.

The next question is from the line of Mangesh Bhadang from Centrum Broking.

Sir, My question is with regards to the capacity that [indiscernible] add in the Eastern region. Do you believe that if the costs are going to come down from the current level, the profitability would remain curtail because of the competition that is increasing in East? And just if you can highlight what was the growth in Eastern region in FY '23, state wise?

I would not be having the details of state wise growth for FY '23. The overall growth would have been in the order of 8% to 9%. The states of Bengal and Jharkhand, as I mentioned in my call, has been somewhat subdued at 2%. And rest of the states will be somewhere around that between 5% to 8%, 9% kind of growth level. Answering your first question on the capacity utilization, as I have been mentioning in previous calls that when we look at the Eastern demand, we should look at it in the perspective of the clinker utilization. So if we were to go back to FY '22 because FY '23 figures are yet to be updated on a run basis. So FY '22 clinker position was about 43 million tons of clinker. And at a 1.6 kind of clinker cement factor, that translates to about 72 million to 75 million tons of cement. Give or take another 8 million, 10 million of tons of cement coming in from the Central region. So we are looking at East getting capability -- having a capability of up to 80 million tons of cement. And demand, which is in the region of 70 million to 80 million. So it is standing -- it was standing at a 90% capacity utilization. Over the last period we are mentioning 10 million tons kind of cement -- clinker addition of about 10 million tons with some new announcements, which is looking more like a 12.5 million tons. I don't think the 2.5 million tons additional, which is expected to come in by FY '25, is going to radically rock the boat. We are still seeing clinker capacity utilization at somewhere around an 87% to 88%. And it would be probably right to say that at any point in time, when clinker and/or cement capacity utilization crosses an 80% to 85% kind of level, prices have a propensity to improve.

Very helpful, ma'am. Just you can leave me with the time line for the Bhiwani expansion? When it will get commissioned, that will help?

Sorry, can you repeat the question, please?

When the Bhiwani will get commissioned?

Bhiwani will be operational this year in H1 itself. We hope to make our first dispatch from the plant before H1.

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

Just a clarification, like to my earlier question, you mentioned the clinker capacity as 11.88 million tons. Hasn't it gone to like 12.5% after the couple of debottlenecking you did across the units?

Yes, it will go. Currently, Nimbol capacity is still under commissioning. So I guess, at the end of H1 when we talk, we would -- Nimbol got commissioned. And then the Risda also has got a commissioned Phase 1 and Phase 2, while the majority of work has happened. During this year's annual shutdown, that's when we'll connect the higher capacity blower which are needed. They're all in place. But during a shutdown this year, we will do it. Post the shutdown and annual shutdown in Risda this year and post the commissioning of Nimbol, whatever capacity which we mentioned will happen, maybe H2 of this year, it should happen. Right now, I think with the available clinker, we're able to feed the market. But by H2 of this year, we'll have all that number in place, both in -- North will have 6,000 TPD of Chittor, 5,750 TPD in Nimbol and likewise in East, which will have 11,500 TPD of Risda, 6,000 TPD in Sonadih Line 2, 4,350 TPD in Line 1 Sonadih and 5,250 TPD in Arasmeta. So that's the capacity which we will reach by September this year.

And on AFR, like the projects that you have, like I believe you target to go to 20%. So what is the commission schedule of those projects?

Risda is fully commissioned. So actually -- so we have AFR facility in Chittor, which is the oldest plant which has been processing AFR. There, we -- TSR reached as high as 35% in Q4 of this year. So that -- there, there is no CapEx. There, we'll continue to operate at peak capacity. In Arasmeta, it's a very rudimentary AFR. We'll continue to use whatever availability there. We are not -- we did not invest in Arasmeta. In Sonadih, again, no investment. However, we have close to about 6% of AFR consumption in the lines -- both lines put together in Sonadih. The investments which we made in Risda and Nimbol to the tune of close to INR 50-odd crores in both the plants combined together. Both of them had a pre-processing and co-processing facility. Happy to inform Risda both pre-processing and co-processing commissioned, and that is well and running as we speak. In Nimbol, the co-processing is commissioned. Pre-processing shredder is under commissioning in this week -- early next week, it will be completed. So when we hit June 1, we'll have Nimbol fully capable of doing pre and pro. Risda, fully capable of doing pre and pro. and Chittor, anyway, it does post high level. And with all this put together, we're looking at excess of 15% TSR at an average level from July 1 onwards.

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

Am I audible?

Yes, Rajesh.

Two questions. First, I see your clinker -- cement-to-clinker ratio for FY '23 has improved significantly and is now at close to 1.83 versus 1.74 odd 2 years back. So do you see an opportunity to further enhance it to, and if to, what level? And second, when you mentioned 15% TSR you would be achieving from Q2 onwards, that's a sizable increase. And in that context, what would be your average per kilo cal costing given that your current fuel mix cost is around INR 2.3?

Yes, Rajesh, I can take your first question first. So yes, we -- the opportunity to improve our cement-to-clinker ratio further. Firstly, the actions which we have taken is the significant increase in Concreto Cement, which is slag cement introduction of PCC Cement. Today, Panagarh as well as Jajpur and Jojobera plant practically shifted fully from PPC to PCC Cement. We see opportunity to take the shift and we are planning in our Mejia plant. So roughly speaking, over a 2-year period, the outlook is going up from 1.84 blended across the country to 1.92. What we have not into these calculations, and we hope to see a good upside there, Rajesh is the introduction of SCP cement in North.

And on the TSR costing -- yes, AFR costing.

Yes. So on the AFR, firstly, on the robustness of 15%, as Jay explained, we have invested in our facilities, and that's going to give us this increase. To give you a little bit of perspective on the numbers, 9% AFR -- in midyear, 4% last year went up 9% in H1, and we have exited at 12%. To give you a perspective on the overall fuel cost in today's reference, as I mentioned sometime back, overall, fuel cost blended was about 2.31 and AFR ratio is 1.6. We have roughly seen a 1:2 ratio of the overall blended AFR in terms of in cal.

Just building further, Rajesh, if you really look at AFR, the component to AFR basically are carbon black, then you've got recycled plastic and you've got bio waste. That's typically what one process in AFR. And until about 2 years ago, the general arbitrage of AFR is the fuel blended cost of fuel -- solid fuel would be typically 1. So if the fuel cost was about 1.5 or something, AFR would be coming at a rate of about 0.75, that's the kind of rupees per million one was getting. But what has happened in the last 1 year is with so many companies in the sustainability agenda have started trying to use AFR in, not only in cement, in other industries as well. And we all know carbon black is like a like-to-like substitution for a pet coke or linkage coal. So the rate of carbon black is more or less trending at much higher levels than the old rates of AFR. And hence, the original arbitrage of INR 1 per million is kind of reduced to about INR 0.60, INR 0.70. So this is a little bit of background I'm just telling you because we have to source carbon black in all our plants. And secondly, currently, there is a little bit of a shortage of carbon black, everybody wants to use carbon black. And hence, to avoid that, one of the things which in Nuvoco we have done is to get the pre-processing facility where we can go on shred all the other raw materials and hence, we've been doing in Risda and Nimbol with shredder option to maximize AFR. So having said this, we're really looking at close to about the current rate of 12% to 15%. Our target is our fuel bill should be anywhere between INR 25, INR 30 per ton positively impacted by use of AFR.

And lastly, on the incentives this year, now this Panagarh INR 140 crores, which you billed -- accrued last year and now they have -- they won't be getting accrued next year onwards. So I see that if I look at from the current year, if I remove INR 140 crores from the reported EBITDA, that would have an impact of around INR 80 per ton. So in that case, INR 6.60 EBITDA per ton, INR 600. So how do you look FY '24 when your sizable amount of incentive want to be accruing in FY '24, how do you see margin trajectory?

So basically, as Jay mentioned just a few minutes back, Mejia, we had already stopped accruing this year, right? In FY '23, we accrued only Panagarh incentive, right? So the impact of not accruing it from FY '24 is just INR 40, not INR 80. So that's the clarification I wanted to bring in.

So this year, you accrued INR 140 crores is what you had mentioned, right? From the -- out of the INR 190 crores?

Multiple incentives in Panagarh, Jharkhand, that was -- that is what we mentioned. Out of INR 190 crores, INR 40 crores is in East and about INR 150 crores in -- INR 40 crores in North and INR 150 crores in East. Over next year, we will continue to accrue Jharkhand. If Panagarh there because many years, we have made a decision to be conservative and not start accruing from April. And hence, around INR 40 to INR 44 per ton, we will -- it will have a reduction in accrual.

And on the fuel side, what sort of savings purely on the landed cost of fuel currently versus full year average FY '23, what would be the number, FY'23 average?

There, I can give you some -- pet coke prices, I will tell you. So in terms of fuel per rupees, it's a function of linkage coal, it's a function of AFR, all of it. However I'll do purchase price of pet coke, I will say, it used to be in March '22, all of us know it went to as high as $250 per ton. And then somewhere in January, February, it came towards USD 150 to USD 160 per ton. And currently, as earlier said later last week, we have booked at USD 133 per ton. So obviously, the numbers have come down. And rupees per million cal which used to be INR 2.67, INR 2.8 per million cal in North, which has come to about INR 1.95 per million cal. So that's only pet coke. But then I have to use pet coke plus linkage coal and non-linkage domestic coal, all of it in FY '23 was at INR 2.49, I'm really looking at this number coming to -- in Q4, it is INR 2.31 the blended rate. So I'm really looking at this number further going to about INR 2.1 -- just about INR 2.1 is the number as we speak at current levels.

The next question is from the line of Prateek Kumar from Jefferies.

My first question is on your volume mix. So we have reported this 5%, 6% volume decline, so largely attributable to 2 markets. So how much these 2 markets constitute in overall volume mix for us?

So Prateek, Bengal, Jharkhand in East is about 50% of our volume. But however, I would like to point out that, on a full year basis, our revenue growth has been 14% against a volume growth of 5%. And this is primarily because of executive decision to prioritize value over volume growth.

So Bengal plus Jharkhand accounts for 30% of the overall volumes of the company?

50% - roughly 50%.

50%?

Yes.

Of our East volumes.

East volumes, east volumes.

Of the East volumes. Okay. And secondly, on the fuel cost, you indicated like in the last question. But on an overall basis for FY '24, based on current quarter end. So can we expect like a INR 200 per ton reduction in cost -- fuel cost for the company?

It will be very difficult for me to predict a number. But then, I can only say that we are targeting from Q4 actuals another INR 100 is the kind of number we are looking at.

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

Sir, just continuing the previous question, just trying to understand the degrowth for this quarter in terms of the volume, you -- so in the totality, you mentioned the 50% West Bengal, Jharkhand is 50% of the East. But in the total volume, what's there? So is it fair to say that we have also seen a reduction or the volume decline in other states also because the math doesn't work just because of the 2 states, if there is a decline or the decline is so significant that the -- impacted the overall volume decline for this quarter?

Shravan, as I mentioned on a full year basis, our revenue growth was 14% and volume was a 5% growth. This was an executive decision to prioritize value over volume growth. We believe it has reflected well in our realization per ton at 7% from -- I'm sure you are also reviewing the industry figures. We've largely been seeing figures of the nature of 3%, 4% or 5%. And we believe at a realization, but out of 7% improvement, it cover well for our performance ratio.

No, Ma'am. Actually, my question was pertaining to only fourth quarter. So this 5.3% volume decline for fourth quarter, is it only because of the West Bengal and Jharkhand? Or is it the case that we have also -- there is a degrowth in other states also we have witnessed?

Demand growth has largely been established in Bengal and Jharkhand.

And what was the fuel mix for this quarter pet coke, imported coal, linkage coal and then the AFR?

We clarified those numbers at the start of the meeting, Shravan. Linkage coal in Q4 FY '23 was 16% and pet coke was about 54% and AFR was 12%.

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

So just on slag cost, in the last quarter, you had mentioned that slag cost is moving up. Could you give the number for Q4?

I think, details let Mittal give you through a separate call. But suffice to say that the current market rates for slag is anywhere between INR 1,900 to INR 2,100 per ton is kind of more than equal to the past value clinker cost. That's the kind of irony which is there. But then we are kind of safeguarded by our long-term tie-up in Jamshedpur as well as Jajpur from the Tata plant as well as the Kalinga Nagar plant. So we have a little bit of a -- not a little bit, sufficient breathing room with 2.5 million tons of slag contracted. But the trending rates are INR 1,900, INR 2,100. I think, many of the latest auctions, we have simply walked away from the auction price like some of the other cement manufacturers as well. So I believe that as we go forward, these rates have to temper down because people eventually have to pick up slag and this raise everybody will have a rethink on contracting slag.

As there are no further questions, I would now like to hand the conference over to Ms. Madhumita Basu for closing comments.

Thank you, everybody, for attending our call. We've had fairly detailed discussions, and we hope to have addressed all your queries. However, my office and I remain available for any further clarification. Please do reach out to us. I wish you all a good evening ahead. All the best. Thank you once again.

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