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

Ladies and gentlemen, good day, and welcome to Q2 and H1 FY '24 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 Mr. Madhumita Basu, Chief Marketing, Innovation, Sales and Business Development of the company. Thank you, and over to you, Ms. Basu.

Thank you, Yashaswi. Good afternoon, everyone. It gives me immense pleasure welcoming you to the Q2 FY '24 of Nuvoco Vistas Corp. Limited. As the outset, with reference to our feedback from some of you, Vistas, you will be happy to note that we have advanced significantly the Board meeting and consequently, this earning call dates. We believe this would provide opportunity for the investor and analysts fraternity to have more constructive engagement with us to understand the results and business outlook in the days to come. Vistas' economy is picking up steam and strength despite the global challenges. Real GDP growth for Q1 FY '24 came in at 7.8% Y-o-Y, significantly led by domestic drivers of private consumption and fixed investments. The momentum in agricultural activity in Q2 FY '24 has been sustained, although the monsoon has been uneven. According to Indian Metrological Department, rainfall over the monsoon all zone, comprising most of the rain-fed agricultural regions in the country was normal at 101% of long period average. The industrial sector signal recovery in Q2 as index of industrial production rose by 5.7% in July, and core industries output expanded by 12.1% in August. Going ahead, however, current global geopolitical tensions needs to be carefully monitored. Looking internally now as Nuvoco's performance for the quarter ended 30th September 2023. Revenue from operations improved by 7% Y-o-Y to INR 2,573 crores on the back of revenue per tonne improvement of 6% Y-o-Y, a value-led growth. Our premium product share stood at 37% of trade volumes, while our trade share also increased Y-o-Y 74%, reinforcing the strength of our network. Moreover, as you know, cement prices in the East also improved in September '23. Volumes grew by 1.2% Y-o-Y during seasonally this quarter. Demand in the loss region continues to be robust, where we saw a 14% Y-o-Y coal. In the East, coal markets of Bihar and Bengal saw subdued growth during the quarter. However, we continue to hold ground and remain here for demand revival in the East. Apart from infrastructure-led government programs, which will drive cement demand, PMAY team needs a special mention. Currently, as we speak, 33 lakh houses are pending for completion in the East. And all of these 40 lakh houses are only in the state of West Bengal, suggesting significant potential for cement demand rising from this region. As reiterated, we will continue to prioritize value over volume growth in the East. In the north, our plant expansion in Haryana Cement North will enable us to cater to strong demand in this region. We delivered a strong growth in EBITDA by 73% Y-o-Y driven by revenue growth and cost control measures. It is important to note that plant shutdowns at our launch of completing annual maintenance and debottlenecking projects impacted the EBITDA for the quarter. Additionally, we would like to remind you that we have stopped accruing incentives from Panama facility from April 2023, and Nemo plant incentive benefits period was completed in Q1, which has on a like-to-like basis, INR 45 per tonne impact in this quarter. As highlighted, the results also demonstrates our commitment to remaining vigilant on managing our coal spin. I now quickly share comments on the 3 major cement cost elements. Power and fuel costs per tonne remained flat quarter-on-quarter. Fuel cost in itself declined due to reduction in coal and pet coke prices and increase in airport usage in Q1 '24, AFR was 11.2%. This went up to 14.3% in Q2 FY '24. However, power costs increased quarter-on-quarter due to maintenance shutdowns and no utilization or no utilization of CPPs and WHR. Cement raw material cost per tonne increased 12% quarter-on-quarter, mainly due to requirements to purchase clinker on account of plant shutdown and increase in flat cost. On the flat, Nuvoco continues to be better placed due to its long-term supply agreement. Distribution cost per tonne declined 6% quarter-on-quarter, primarily due to lower clinker or movement, absence of busy season surcharge in months of August and September and internal cost control measures. As shared in earlier parts to improve margins, Nuvoco remains focused on measures such as premiumization, innovation, geo optimization, trade share improvement, fuel mix optimization, brand strengthening and project bridge about which I should be speaking in a bit. Firstly, on brand building. We are reinforcing the premium position of Concreto with our market campaign Concreto naam hi Kaafi hai. We also continue to reinforce marketing communication with the recent pacing received on our revolutionary product, fiber-reinforced cement, branded in the market as Duraguard microfiber cement. The pace has effected from date of application, 5 exclude lines for 20 years. The company also extended premium cement variants, Concreto UNO and Duraguard F2F from Bihar and West Bengal to Jharkhand market. Secondly, on Project Bridge. This project has been taken off in our company, CSA and is under rhythmic review with 2 ex commenters. We are focusing on cost savings measures purely from efficiency improvement. Areas include optimization of power and fuel costs by improving SHC, SPC and AFR usage. Elimination of losses in materials, transit and handling, reducing damages and demolitions in transit and warehouse and improving their out utilization. Logistics areas of direct order lead distance reduction, et cetera, and productivity improvement programs. On Debt. Our net debt at the end of September 30, 2023, stands at INR 4,734 crores, which is a reduction of INR 549 crores on a Y-o-Y basis. I would like to mention that as highlighted in our investor presentation, it has been on a declining trend, and our focus on net debt reduction remains a top priority. Interest rate at 8.4% on the other hand, reduced by 9 bps compared to March 23, despite Repo rate remaining the same. I will now briefly touch upon our ready-mix and FDM. Both businesses are performing well, revenues from RMX business grew by 11% Y-o-Y with a value-added products component of 34% data mix. During the current fiscal year, 4 new ready-mix concrete plants recommissioned taking our tale 55 plants across India. In modern building materials, construction chemicals, style analysis and cover block continue to witness sales improvement, and the company remains focused on building the non-cement channel for this range of products. Sustainability. Nuvoco remains committed to its sustainability agenda, protect our planet, which encompasses a sustainability road map, circular economy initiatives, green energy contribution, water positivity and biodiversity management. I would now like to share the progress on key sustainability parameter. As mentioned during our previous calls, we have one of the lowest carbon footprints in cement industry at 462 KECO 2 per tonne of cement materials duly validated by KP&G for the year FY '23. Our alternate fuel rate AFR has increased 5.2% on a Y-o-Y basis to 14.3% in Q2 FY '24. Chittor cement plant continues to demonstrate capability of approximately 30% AFR, while Vistas where the AFR feeding system was commissioned in Q4 FY '23 has achieved 18% AFR in September 2023. Growth projects. Reviewing quickly the update on our ongoing growth projects. On cement capacity expansion to 1.2 million tonnes per annum grinding unit at our Haryana Cement plant, I'm happy to confirm that we have completed NOLO trials. The commission is scheduled in Q3 FY '24, post weighted part overall cement capacity will reach 25 million tonnes per annum. Clinker capacity enhancement through debottlenecking projects at Risda & Nimbol cement plants have been completed, we saw a Nimbol clinker capacity now being enhanced to 12,000 TPD and 6,000 TPD respectively. The Nimbol capacity enhancement will also support our grinding unit expansion at Haryana. On redefining projects at Korea and Sonadih, tracking activities are underway. The Odisha operations are expected to commence from Q4 FY '21. With this, I conclude my opening remarks, I am joined here by Mr. Jayakumar Krishnaswamy, Managing Director, Nuvoco Vistas; and Mr. Maneesh Agrawal, Chief Financial Officer of the company. We are here together to answer your questions. Thank you.

[Operator Instructions] We have our first question from the line of Satyadeep Jain from Ambit Capital.

A couple of questions. One, on the value over volume strategy, that strategy would imply that management is walking away from certain less profitable markets. If you can maybe talk about -- I'm not sure if I missed that in the opening remarks, what those markets could be where you're choosing to walk away from? Is that any particular region? Is that nontrade? Is that maybe lower sales in the new Vistas brand? So that's the first question.

Yes. I guess we're waiting whether you're going to put a second together, Satyadeep. When we mean value-over-volume strategy, I guess it has been the approach we have taken for many quarters now. Just that we want to focus on predominantly but if you have to give a choice between volume and profitability, I think we are very clear that we need to kind of get the overall profitability up because our end objective or immediate objective is to kind of reduce the net debt so that we can fuel growth for the company. That's what I've been saying in all the quarters. And hence, it is just an extension of our commitment to reduce the debt levels of the company. As regards whether we will walk away from the market or not very clearly. In the previous call, I also mentioned one more thing that the installed capacity of the company is 25 million tonnes, with 6 million tonne in North and 19 million tonnes in East. And right from the IPO time until day, we have been very clearly mentioning that our growth projects in East will be second priority and before that, the growth in low stroke will happen. In light of the line with that, we still have a lot of headroom in the East market for the next 2 to 3 years. And then, we are cherry-picking premiumization, trade versus nontrade, [indiscernible], more of Concreto, more of premiumization. That is what we are saying when we say value over volume. And certainly, we will not go and sell for the sake of selling and getting volume growth in the market. And even within the coast state, our focus will be on those states where of contribution maximization happens and Geo makes the first clear agenda. Just to sum up, value over volume means for us is premiumization, getting the right geo-mix right use the headroom of entrees to get the growth numbers for the company in the coming few years and certainly focus on bottom line to ensure that the deal reducing the net less debtors of the company in the near future. That's what is our volume as a value number. And also in the monsoon period, generally volume comes up. Then for us, prudent was to ensure that we are able to focus on value overall.

So Jay, if you look at the October month, given you've already talked about the volume growth in this quarter of 1-odd percent, how has October been for you so far?

It's very difficult. We just started the quarter. So I guess why in September, if you had asked this question a few weeks ago a close period for quarter 2. But right now, it's open for Q3, but it's too early for me to make any comment on how this quarter will progress. Suffice to say with the festivities ending and the monsoon ending market will open up from November onwards. And I guess once the Durga Puja is done, I think it will be a little bit of home stretch all the way from Durga Puja all the way to March 31, and we will leave no stone unturned not to kind of grab something is available there. But certainly, I guess, we won't sell for the sake of selling in markets where we don't make contribution, adequate contribution. And also, will be on trade versus not nontrade.

Okay. Just one more question on premiumization on brand Concreto. When we started this journey about 2 years ago during the entire listing at that time, Concreto we understood was the premium brand in the entire East in the entire premium brand and all, but our channel checks seem to indicate that some players, including Ultratech have now gained pricing premium. Would that be correct? And if that is true, how does the company plan to regain the premium pricing for Concreto in that region?

So Satyadeep, thanks for the question. You will appreciate that on this call, I would not like to make a specific comparison with any competition. However, to make certain facts relevant to address your query there are 2 aspects to premiumization. One is the share of premium products in the mix. And second is the absolute premium or brand vis-a-vis to Bank of competition out. As you know, at 37% of trade sales, we are one of the highest in premiumization. Within this, in the key markets of Bihar, Bengal and Jharkhand, premiumization trends to about 65% to 68%. Secondly, driving realization improvement from premiumization is a key ever on our GP. And we continue to remain vigilant on market price tracking from both internal and external sources. So on a database and a band of competitors in the market, from base product, the bank of premium for Concreto, depending on state and competitor products is anywhere between INR 15 to INR 35 per bag. Finally, I'd like to round up saying that this is a continuous process for us. And last year, when we launched Concreto UNO, we are bettering our own price game. Concreto UNO is priced INR 20 per bag higher than our Concreto products. I trust that address your question.

We have a next question from the line of Jashandeep Singh from Nomura.

So I have 3 questions, and I hope management will be able to answer them. The first one is, as we call and since the IPO, we are saying that meet deleveraging is our priority. We also set a target of around INR 3,000 crores to INR 500 crores before we do any expansion, but the debt is only increasing, it's around INR 47 billion right now. So I just want to understand where the management is saying it met by the end of this year? And what is the long-term strategy to actually deliver? So my first question is regarding this.

If you really look at our investor presentation, Chart #23, we have very clearly shown debt levels of the company, March '21, March '22, March, '23 and the same comparison for September '21, September '22, and September '23. I'll just read out some numbers for you. We will provide you adequate clarity on the question which you asked. March '21, the debt lever of the company was INR 6,730 crores. September '21, it was 5,718. March, '22, 5,064, September '22, 5,283. March '23, 4,414, September 4,734. Every quarter of March, every September of the last 3 years, our net debt is continuously coming down. You made a statement that we are increasing our debt, which is actually not correct. March '21 to March '23, every quarter, INR 6,730, 5,764, 4,414 crores. September '21 to September '23, 5,718, 5,283, 4,534. And you also mentioned that from IPO, I am mentioning that our company will reduce the debt level. Of course, our commitment is to reduce the net level. And I will still repeat in this call, in every call, I had said that our target for the next phase of growth will happen when our debt level comes down between INR 3,500 crores to INR 4,000 crores. We are committed to that. And as the year progresses in the quarter ensures our numbers will come down to the numbers which I have been mentioning, and we will come with the growth plan around that time.

Sir, let me explain why I ask you. If you look at from the March end or in the 6 months, you have increased INR 350 crore of needed. And what I wanted was what's the year-end target you are looking for the March '24, what you were looking for?

I'm sure you're tracking the cement industry. When you finish Q4 end, obviously, Q4 and the working capital release are big time. The collections are big time in the quarter. And hence, every company, the debt levels and the working capital to be lower than the month of March. And when you come to September, because of the season winter from October to March, all of us stock up with clinker cement and fuel, our clinker and cement stock when compared to March to now has increased by 100,000 tonnes between clinker and cement and fuel stocks are at 70,000 tonnes in September. You will watch us in December 31, there's a quarter 3 saw and will watch us in quarter 4. This number will come down, and we will see it in the coming 2 quarters.

Okay, sure. So I'll wait for that. I think to my second question, sir, on the combined raw material or cost, if we look at the ePower infill cost growth went down, but your other raw material cost increase. In the opening presentation, ma'am was saying that you had to buy some clinker. So just wanted to ask what percentage of that your raw material cost is clinker. And given it's the seasonal quarter was not the center built up as an inventory in the first quarter? And why normally, your raw material doesn't increase that much in the second quarter. So what was the change this year?

Power and fuel cost in Q1 and Q2 was INR 129. But when you go deep into the 129% in Q1 and Q2 and when you split the power and fuel cost into fuel costs and power cost, the huge amount of drop has happened in the fuel cost of the company from INR 850 per tonne in Q1 to INR 790 per tonne in Q2, a reduction of INR 502 basis cost of the company. In the same period, power costs went up from 369 to 421, an increase of 52 basis and hence, we are more or less flat at 119. The reason for Power cost going up in Q2 versus Q1 is due to the shutdown as well as the debottlenecking activities in a couple of our plants in Nimbol, we had to shut the WHR as well as the CPP and we had a big power and hence the power cost vendor. But the efficiency of the skills and the programs for the company to reduce SSC and also to maximize AFR has resulted in fuel cost reduction to 50 to 798. And the first part is drop in fuel costs. Power costs went up temporarily. You'll see the Q3 numbers. There will be a reduction in Q3 power and fuel costs when compared to Q2 power costs based on the efficiency factor as well WHR and CPP as regards the raw material where you asked the question while the raw material cost has gone up and because of the clinker purchase what Madhumita has spoken in her opening remarks. As regards to the amount of clinker we sold during Q2 when compared to previous quarter, but 50,000 tonnes of clinker to ensure growth ambitions. And typically, this is not typically the number of 50,000 tonnes of clinker was purchased in north to few other not growth net not to grow double digit and we incurred cost by fleet rate 50,000 tonnes. And that's the reason for the raw material cost increase.

We have a next question from the line of Prateek Kumar from Jefferies.

Yes, my first question is on the cement pricing in East, we have benefited to some extent in September month during the last quarter. So the question is around -- so there were like 2, 3 rounds of price hikes which were tempted in September. So has some of it got rolled back in the month of October for your case? Or is it like largely sustaining and the full benefit should be realized in the third quarter?

Also, Prateek, firstly, to set the perspective to exit basis, we have seen about 7% increase in East, primarily because this price increase came in, in the month of September. So, 2 months of September and October, there has been the natural bit of up and out. But the price of steel to have stabilized early in the quarter of October, as you know, for the festival month had disturbed in some parts of East, but we are definitely seeing the pricing situation stabilize. We'll have to see how it pans out is with 8 more weeks to go to the quarter.

Suffice to say, the number of pricing is almost equal October pricing. So as of now, we are able to hold prices in this quarter.

So the October pricing stable Optimal pricing is stable versus September in your case side?

Yes. Obviously, as Mita said, there has been ups and downs in price from September to end of October. But net-net, we have benefited out of pricing. And then as we enter November, we still are able to hold on power prices.

Right. And then we say that like we have like sort of high premium mix and focusing on further premiumization the price are better by INR 15, INR 35. So on the profitability, how is it different like these products versus like normal products on a per tonne basis?

So Prateek, I would not like to go into a brand-by-brand discussion, but I'd like to mention here that the company has a price acceleration program, which is KPI driven for an improvement just through the Premiumization of up to INR 50 per tonne. So this comes out of a mix. The focus on continuous increase in the premium share and where a unit-to-unit price inference between these products and fee range.

Sure. And one last question on your CapEx. So we see right now, our CapEx is -- sorry, net debt is seasonally higher, but maybe we can assume like by the second half of FY '25, we may like start to see some bulk happening on the West project or not project in terms of expansion?

Yes. I guess current year CapEx is like in last call, I mentioned that FY '22 CapEx saw the tune of about INR 300 crores is all basically the brownfield expansions in Haryana, Nimbol, Risda and exciting projects and the routine CapEx in the factories. All of it is about INR 600 crores this year, all of which H1, we have done about 300 and then we read about 300 in the balance 6 months in H2. Once next year, in terms of these projects, all of them will be completed by March, April, April FY '25. But as I mentioned a few minutes ago, I'm really looking at debt reduction in this period of 6 to 8 months. And when the debt comes down, hopefully, fingers crossed, we'll come back and announce our growth plans trending. If we are able to shave off that number in the industry and overall market scenarios favorable in the next 6 months, which we are optimistic. So there is a good possibility that we can come up with the plants.

In your annual report, it was mentioned that we will be starting the CapEx in FY '25 I remember correctly.

Yes. If you really look at whether it be Q1 FY '25 or Q2 FY '25, I think a little bit fast fish to say at this point of time. But as we come closer to the date, and I think every passing quarter with the strength of performance, continuously improving seen our company in FY '23 and FY '24. Every quarter Y-o-Y, we have improved over the previous year's quarters number. I think we will continue to maintain this trajectory going forward, and we are in a good spot to get our growth maps going once the debt numbers come below 4,000. And in the best possible area could be early quarters by '25.

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

Yes. Sir, to put it simple, so current average October realization for us in east, if I compare with the 2Q average, how much is higher on per bag basis or per tonne basis?

Shravan how can we tell October number, the quarter has just started. Let me answer in a different way, in one of the previous questions, I mentioned that the pricing in October is holding November is holding at result in October. So suffice to say realization will also hold in the month.

Okay. Because why I was asking is because we have seen a INR 70-odd kind of out in September hike out of that INR 50, INR 55 got absorbed. And now again, we are seeing INR 17, INR 15 kind of a roll back. So in GAAP, the price got increased in step-wise it is getting rolled back. So that's what I was broadly trying to understand because that's the major thing in terms of increasing our profitability in the third quarter and that is a major driver in terms of achieving our net debt reduction. And that's why broadly trying to understand how one can look at least INR 10, INR 15 kind of an increase in per bag for third quarter versus the second quarter. That's the broader I'm trying to understand.

I cannot comment on the first part of your question. I will only comment on the second part of your question, which is about whether realizations in Q3 will be better than Q2. Certainly, our realizations in Q3 will be better than Q2.

Okay. Got it. Second, just on the expansion, whenever we do whether Q1 or Q2 FY '25, when we will be reaching up less than INR 4,000 crores net debt, as you mentioned. Last time we talked about close to maybe a INR 1,200 crores to INR 1,400 crores kind of expense CapEx, we are looking for the Rajasthan expansion. So for that, how much capacity are we looking at of the clinker and grinding level broadly, roughly?

I guess there are 2 models we have on whether we should go for a 6,000 TPD 8,000 TPD lines. So we still started our engineering work to estimate the designs because brownfield expansion. The Chittor plant originally when we put up, it was designed for a token configuration in terms of layout and the overall infrastructure in the plant. So I guess with that in mind, that's how the engineering design is being worked upon. So closer to the date, we will decide whether we will set up a 8,000 TPD line or a 6000 TPD line. But certainly, the current plan is 6000 TPD line. As an engineer's answer, I would say, it's better always to have similar kind of industrial equipment so that we're able to get standardization. But certainly, business nation will come in the front of endearing decisions. So we will make a decision closer to the date. Whether the 8000 TPD line will fit there with the maximum benefit for infrastructure or 6,000 TPD line. But 1 of the 2 will happen.

So on a grinding level, it would be close to 3.5 million, 4 million tonnes kind of a grinding considering the 1.7 or 1.8 kind of [indiscernible]?

It's not like 6000 TPD line would be about 2 million tonnes of fleet and 8,000 line will be close to about 3 million tonnes of 2.8 million tonnes of Risda. So the ticket issue is not is far lower than the -- so last asset was, Mita mentioned we have been mentioning that our OPC test nonrated will come down as a company to go own to maximize the install capacity, even at a very conservative number of about 1.6x, we can look at 2 million tonnes of base, 3.2 million tonnes of cement, [ 2.4 million tonnes ] of cement. Certainly, the branding unit will not be side Chittor trending unit. And here again, we are working, whether it will be Western MP or it will be in Western UP based on a flyer model.

And lastly, sir, data points late distance Lost for this quarter and the fuel mix for this quarter?

Fuel mix fuel of scheme on returns, the fuel mix for the quarter 2 was 1.7% for the same period in Q1, it was 1.83 became 1.77%. And in Q3, I guess, this number will come down even a little bit more than 1.77. In terms of the distance, we have been able to reduce the resistance vehicles in quarter 2 versus quarter 1.

So pet coke, imported coal linkage coal share was how much, sir, for this quarter?

General retail if you want I can wrap out in Q2, pet coke, 47%, imported coal, 1%, non-linkage, domestic 1%, linkage, 25% and let's say, AFR 44%.

We have a next question from the line of [ Sanjay Kumar Damani from SKR Consulting ].

Thank you for the opportunity, and good afternoon to all you, and my respect for you all as a leading management operating such large cement plants. Sir, my question is, one, regarding the efficiency of our plant on Energy side. So can we say that we are most economical today? Or are best comparable to the industry be standard? I want your comment on this, please, sir?

Can you restate the first line of your question if you retain the question one more time, I'll catch it, please?

No problem, sir. Actually, it is regarding our efficiency, energy efficiency of our plants on fuel side as well as power side. So are the most economical producer of cement or we are still to do something to get most economical?

Okay. In our industry, if you really look at, there are 3 energy levers in the company in the till SCP, then you've got the clinker SCP and then you've got the branding SCP. And no cos uniquely placed with all our skills without captive or plan. But that's nothing to do with energy efficiency, just a sound decision to ensure that we are able to buy, won't generate our own power from coal rather than buying from gripper extension. The second one is how do we reduce the specific consumption or skills out of -- we have got multiple generation skills in the company. The older skill is made in 1984. The younger skill is to be installed in 2016. So that's the kind of the 6 cases of like 40 years from each other. But the younger skill runs 685 kilotonne of clinker, which is easily one of the best in the industry. There's a 60-page and it's similar comparable to any other energy benchmark in the industry. We also have a 2013 installed skill at Chittor, which is not a Chinese design. But when that skill has made Jan progress in the last 2 to 3 years, it's been able to master 2016 Kiln net which is also running at 688, 689 kilo cancer task. I think these 2 are our flagship kilns. The Sonadih Line 2 is also about event. So suffice to say, our blended SSC for the company is anywhere between INR 72 to 77. If you really look at the average of us the best in the industry, but 2 kilns in our company will be equal to the best in the industry. That's on the specific let consumption. Again, in terms of power, [indiscernible] got one well, we got BRS. So I guess the BRMs running in [ Jojobera ] as well as our rise plan or operating at 30, 31 units per tonne of cement, and that's again almost equal to the best in the industry. Our bond mills operated 26, 27, again, that's also fine numbers. The unique factor, which Nuvoco, which we are very proud and of energy efficient companies in the industry comes from our WHR systems. We have WHR charts, which are fitted in all our skills and the installed aerator capacity is about 45 megawatts. And in the entire industry, we are a 2-to-1 installed capacity to WHR, which is I won't be able to exactly compare every other competition, but suffice to say, we should be 1 or 2 in this. And last but not the least, in terms of ordinary fuel consumption against a global benchmark, we are Indian benchmark of 1%, 8%. We are at up 14% in India, easily better than the Indian average. Global average about 20% AFR consumption, we are at 14%. But once the Nimbol and is active scale up, our AFR usage will be also in excess of 20%. So with AFR at greater than 20%, WHR is a 45-megawatt CPP on our skills and the 2 kilns which are running at SSC-685,688, suffice to say, we'll be one of the best in the country in terms of energy efficiency.

And I hope whatever is still to be done, you must have in your mind to correct it. Second question is regarding capacity utilization. I noted during the discussion that we produced the 45 lakh tonnes in this quarter, I noted that you have a capacity of 1.9 million tonnes in the East and rest is in the North. So can I know the capacity utilization in the last quarter in North as well as in East. Can you kindly?

Okay. So 2.8 million tonnes of current installed capacity we have to do quarter by quarter, so roughly 24.4 million to 6 million tonnes of capacity and out of which, if I did, 45, we're operating at 70% capacity patio in Q2.

Okay. But can you be the utilization out of 1.9 and how much is on the north side?

Right now, I'm not having the exact number, but again, if you reach out to our Investor Relations, they think they will be able to give you a capitalization in eastern capitalization if not. But as a company, we were at 78% in Q2. But come Q4, our old D&A of the company is operating at 90% capacity utilization. So you will see us go back very quickly from a test match to ODA to a TPD more a quickly.

We have a next question from the line of [ Armik Chia ] from Asian Markets Securities.

Just one question. The linker needed to be bought in North because of kiln shutdown due to maintenance during one on month. Isn't it a normal every year recurring features that in monsoon the can shut down and companies pile up clinker stock during the previous quarter. Another reason I ask is care, CC is obviously lower than east. You don't have a concreto or in north. And in terms of pricing, I don't think you are among the top 5 in the region. You saw from the northern plant. So isn't that a substantially negative for margins?

Okay. First answer to your first part, the clinker purchase in North will not be an annual phenomena. It was only a unique phenomena for this year simply because we had to take a 45-ish down in Nimbol plan for annual shutdown to us, the bottlenecking project, which was happening there, we needed 45 days to fit the various other parts to ensure the line capacity went up to 6,000 TPD. So it's a one-off thing, it will not happen. But the rest of the year, we don't buy so much clinker at all in the atonal company. We always have our own clinker to run our company at 4 million tonnes of installed linked capacity North, 6 million tonnes of cement. That's the kind of number we have for North for installed capacity. As regard to your second question of Concreto, we don't have any plans to launch Concreto competitors a uniquely slack cement, which is unique to east and then that's where we are market leader. North our premium product comes from Duraguard microfiber, which our marketing hideout patented product, which is unique. So that's our premium product offering in North. As regards pricing and not, we are just 8, 9 years old companies and north. I guess our entire dams to run a premium products company. More and more Duraguard Microfiber will sell in the market in the North region in the coming years. And certainly, our ambition is to get into top 3 of pricing in North in the near future.

We have our next question from the line of Amit Murarka from Axis Capital.

So just on demand in East, like we have seen last 2 quarters being quite soft in East. So could you highlight what has pulled down this trend of strong demand in the region? And what's the outlook for the region?

Thanks so much for the question. We have also addressed this in our previous calls right from Q4 of last year, demand has remained soft in Bengal and Chakan initially. And last quarter, we saw Bengal and Bihar. So Bengal has remained on the lower side. And that is why even in my speech, I made a reference that we continue to remain bullish looking at the potential in West Bengal, particularly, release of funds for CMA projects has a very favorable impact on our business, which is CAGR individual homebuilder or trade-driven business. So we will just have to see. We remain optimistic that when this demand opens up when funds flow improves in the market of West Bengal, we are sitting on some good potential.

Bengal is a temporary is around phenomena?

Yes, it's been there for the last 3, 4 quarters, but things should change in is because the reports about cement industry for the future, we look at the regional growth plans and any release report by all the research hoses and analysts very clearly says in the next 5 to 10 years, East will be continuing to grow at 8%, 9% CAGR. So overall industry will be about 7% is would be faster than the industry. But that's not come through in the last 2 quarters. But I guess all this is based on the base data of infrastructure, roads, PMAY and the rest of the undeveloped part of India largely located needs and that's one of the reasons why lot of capacities are coming in the east and the tar industry is looking at as a growth engine for the infrastructure and cement industry and things should certainly improve in the coming quarters.

Sure. Understood. And your freight cost has been quite volatile. I understand part of it is because of real rates availability and all that. But is the situation now stabilized on rate availability? And what's the plan to mitigate this volatility in freight cost?

I think freight cost is a function of external levers and internal levers. The external levers are all coming out of the fuel price as well as the second one is all about rail freight and rail rate availability. Rate availability, we are constantly knocking at the dose of Indian ways to release more rigs and ensure the wagon supply is adequate for us. As you would know that no has got a relatively very good index of rail share in the overall East market. The other thing for us to exploit this advantage is the reason why we are setting up prices heading in our Jharkhand plant in [ Jajpur ] and extending the always adding in Sonadih that we're able to get the benefit of it. And you would know that if you have more and more fitting than the allocation of rates from the Indian is a little bit of a formula-driven based on the sidings one has. And with these 2 signings coming in, we should get more rates per clinker and more rigs for bank. So that's the external factor. As regards the fuel cost as well as the freight rate, very difficult for us to command as all now open market rates for fuel and then and then the fuel rate changes in the on freight trading fees. But you got to east also go to the follow-up for how much of delaying the fuel cost and overall price rate, which would be okay for everyone. But having said, this is about the excellent levers. What as a company we have to focus and not focusing is based on 2 such 2 other levers, which Madhumita mentioned about the Bridge program, one of it, which we can certainly do is increasing the Geo Mix and reducing the lead distance. In this quarter, we were able to reduce the lead distance but our aim is to reduce the lead distance in East by minimum 10 kilometers in the medium to long term. That's one of the biggest agenda which as a company we are trying. The second lever, which we have is to increase the direct dispatches and circumvent the FCM route. And here, we see a huge opportunity, but it is going to be a challenging one because we've got to change the trade trackers. But nevertheless, we are committed to take the low-hanging fruit in those states where we can migrate from FCM route in [ Desso ], we are already set targets to move about excess of 55%, 60% as a blended company. But in the long run, even 60 is not a good number. We should have an ambition of going up to 75%, and we can unlock 50 to 60 out of secondary dispatch freight cost. So freight cost production, increasing the rail movement and reducing lead distance, all this are the big agenda for the company in the medium to long term.

Got it. Also, like you mentioned, the cement capacity is growing to 25 MT after the Bhiwani grinding unit. Similarly, what is the clinker capacity now with the debottlenecking that has happened at Razdan Nimbol?

North or in terms in capacity is 4 million tonnes and at 13.5 million tonnes, 9.5 million tonnes, I'm sorry. So overall, as a company, we'll have 13.5 million tonnes of clinker and the corresponding C/K ratio will land us to 25 million tonnes.

So this 13.5% is all operational now, right? I mean the debottling all completed now.

It is all operational. Grinding, Bhiwani is under commissioning, as we mentioned a little while ago. By end of Q3, miles be running at full speed and then packing lines will come around with Suman. So by end of the next year, we can safely say we are home and through for 23 million tonnes.

We have our next question from the line of [ Park Bauser ] from Investec.

Sir, I wanted to understand that we've done quite well operationally just that your other expenses has shot up at by INR 150 per tonne on a quarter-on-quarter basis. So I believe this would be on account of the maintenance shutdown that we have taken, right? But is there anything besides the maintenance shutdown?

The quarter 2 to quarter 1, other expenditure increase is totally a function of the shutdown as well as the shutdown expenditure of the company.

Okay. So nothing else, right? So this will like normal is going ahead, like it will come down in the range of maybe INR 700 to 750.

That is the only reason for Q2 to Q1 other expenditure increase. So this will come down to mend our shutdowns already completed. And in Q3, this number will come back to normative events.

Okay. And just sir, can you help me like where the shutdowns were taken like if you could just name the plan?

So we have completed shutdowns in 5 out of 6 skills even in a kill in the month of September, we have done part work. So for the year, more or less our shutdown is kilns is done and out is almost all melted and there are 2 coal mills into 4 plants were small cost shutdowns there, but that's not going to impact us for this year at all.

Okay. So shutdown and the plan is done, and also wanted to know like how many days these lens were shut down for?

That would be very difficult for me to remember every kiln and how many days. I only remember the Nimbol because I was personally moderated. It took 45 days for us to shut down the kiln and debottleneck for 6000 TPD.

We have a next question from the line of Navin Sahadeo from ICICI Securities.

So, my first question was regarding the repayment schedule towards acceptances. So what I gathered from the annual report is that of the total trade payables of INR 1,700-odd crores roughly INR 1,467 crores is due or payable within less than a year. So my question was that are we likely to get a rollover of this acceptance facility or this trade payable facility? Or this can see a meaningful decline more like INR 1,100-odd crores of normalized levels that were there prior to the spike that we saw last year?

So thanks, Navin, for the question. So basically, the trade papers is all about our negotiation, negotiated terms with the vendors, both on the raw material side, U.S. side. So given the seasonality. So this is on a higher side, we have been able to get better negotiation on these payment terms. And as the volumes pick up, this may go up, but although it's not going to go down to 11% in the Q3 and Q4.

Right. So no, it's great. I mean if you can get that kind of a credit facility is definitely great. I'm only trying to understand if there is a repayment due to it.

So there's no repayment Perks I clearly mentioned. So Navin, just to be more specific, in fact, and I've been talking about in the previous quarters as well. So working capital management has always remained a paramount focus for us at Nuvoco. And on the side, we have been continuously negotiating our payment terms with the lenders and try to see as to what sort of payment terms can be given to us. So this is more through the routes of the trade financing of CBG and also the open credits that we enjoy even our position in the market.

Absolutely great. This is absolutely great, and congratulations to you for doing such a great negotiation there. Sir, my second question, just a confirmation. In response to the call, a couple of turns back, did the Madhumita say that the exit for the exit price or the exit realization for September quarter was 7% higher versus the average for the quarter?

I mentioned the quarter-to-quarter, June exit to September, I said.

Okay. September exit was 7% higher versus June. I get it. So which means...

Sorry, Navin, as I mentioned, the price increase was realized in the month of September. That is why an exit to exit come back.

Of course. But that's great.

We have our next question from the line of Tejas Pradhan from Citigroup.

I heard the call that you mentioned North saw 14% volume growth in this quarter, 2Q. Can you share the same number for the East?

It has been very marginally lower, and we have a little bit of business in center. So between each and center, we've been about 1% to 2% more.

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

Thank you, Operator. So in conclusion, firstly, thank you all for attending the call and for your questions. Cement demand is expected to be driven by housing and government-led infrastructure development projects. We continue to remain optimistic on the potential demand uptake from pending CMA and infrastructure projects in East. We continue to focus on operational efficiencies and remain committed to our growth projects. As clarified with an early closure of the earnings call, we look forward to being available for any clarification and further discussions that you would like to have with us. Thank you once again for joining us today. Wish you all a happy the day and a prosperous new year.

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.