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

Ladies and gentlemen, good day, and welcome to the Q3 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 Ms. Madhumita Basu, Chief Marketing, Innovation, North Sales and Business Development of the company. Thank you. And over to you, Ms. Basu.

Thank you, Darwin. I'm happy to take over from here. Good evening, everyone. Thank you for joining the Nuvoco call to review the third quarter results. I know it's been a busy day with a number of corporate reporting, and we appreciate your interest in attending today's call. I trust everybody has had a chance to review our earnings release documents, which are available on our website as well as stock exchanges. I shall touch briefly on the macro environment before reviewing the Q3 FY '24 performance. Indian economy continues to show resilience and buoyancy, despite global economy remaining fragile. The headline PMI for the manufacturing sector has remained over 50 consecutively for the past 30 months, indicating expansion in the sector. GST collections grew by 10.3% Y-o-Y to INR 1.65 lakh crores in December 2023. This marks the seventh month so far this year with collections exceeding INR 1.6 lakh crores. Real gross domestic product is projected to drop 7.3% in 2023-'24 from 7.2% in the previous year. This augurs well for cement demand. Looking internally now at Nuvoco's performance for the quarter ended 31st December 2023. During the quarter, EBITDA grew 55% Y-o-Y to INR 421 crores. The company has worked on a number of levers to deliver EBITDA per tonne of INR 1,048, the highest in the past 10 quarters. Despite volume degrowth, we stuck to our strategy of value over volume, which resulted in robust uptick in realization per tonne. We reduced our operating costs primarily in the areas of raw material and power and fuel. Moreover, our EBITDA per tonne number should be studied in the context that it does not factor in incentives from Panagarh and Rajasthan plant, which cumulatively have an impact of INR 45 per tonne. It is pertinent to mention that we stopped accruing that incentives from Panagarh plant effective April 2023, and the incentives from Rajasthan plant ended in June FY '23. Net-net, our strong EBITDA growth and margin expansion are a testament to our operational excellence, which focuses on cost efficiency and value-led growth. We will continue to maintain rigorous attention to operating costs. Let me brief you on 3 major cement cost elements. Power and fuel costs reduced 7% quarter-on-quarter due to higher linkage mix, decline in coal and pet coke prices and higher utilization of CPPs and WHRs. Cement raw material cost per tonne decreased 13% quarter-on-quarter due to decline in slag and fly ash cost. On slag, Nuvoco continues to be better placed due to its long-term supply agreement. Distribution cost per tonne remained flattish quarter-over-quarter, despite the busy seasonal surcharge on rail freight practically for the entire Q3 period. On cost-saving initiatives, our project BRIDGE program, which focuses on cost-saving measures purely from efficiency improvement is progressing well. As shared in earlier calls to improve margins, Nuvoco remains focused on measures such as premiumization, innovation, geo-optimization, trade share improvement, fuel mix optimization, brand strengthening and cost efficiency. Additionally, the company flagged off a channel integration program offering premium brand, Concreto and Duraguard Microfiber to the Double Bull channel. Our premiumization, premium products continue to remain a key focus for the company and have contributed significantly, with a 36% share of the company's cement trade volumes in Q3 FY '24. Our trade share also increased Y-o-Y to 73%, thus reinforcing the strength of the network. Building upon this leadership, we recently launched a brand-new marketing campaign for the Duraguard franchisee, Seedhi Baat Hai, Duraguard Khaas Hai, which underscores its unique features and reinforces customer trust. As part of the IHB-driven rural reach program, the company also introduced an engaging brand activation program, Sabse Khaas Sarpanch showcasing impactful stories of Sarpanches contributing to their village development. We also rolled out the new cement packaging designs. The Nuvoco logo will now be prominently placed on the front of the cement packs. The new design will highlight a much stronger bond between the mother brand and its sub-brands, while also instilling confidence in our channel partners and IHBs, individual home builders. On the cement demand front, as you are aware, all-India industry volume growth for Q3 FY '24 has been relatively benign at 3%. For Nuvoco, demand in the North region remained strong and was better than the industry. In the East core markets of West Bengal, Bihar and Jharkhand witnessed weak demand during the quarter. Festivities, assembly elections, coupled with fiscal challenges by states had an impact on the cement demand during the quarter. We remain optimistic on the demand going forward as significant portion of infrastructure programs are under execution by the government. Currently, as we see, 30 lakh houses on the PMAY program are pending for completion in the East, out of which 14 lakh houses pertain to just West Bengal. 20,000 kilometers of roads under the Bharatmala Pariyojana Phase 1 is yet to be constructed, out of which 3,600 kilometers is in the Eastern region. Our strategy in the East continues to remain, prioritizing value over volume growth. In the North, as Haryana Cement plant expansion is complete, we are in a much better footing to consolidate our position in the region. On debt, as part of our deleveraging plan, we have reduced net debt by INR 632 crores Y-o-Y to INR 4,533 crores as on 31st December. Historically, net debt has been on a declining trend, as our focus on net debt reduction remains a top priority. Interest rate at 8.47% on the other hand reduced by 2 bps compared to March '23, despite repo rate remaining the same. I will now briefly touch upon our Ready-Mix and Moder Building Materials businesses. Both businesses are performing well. On the Ready-Mix Concrete business, we have commissioned 5 new plants in the current fiscal, bringing our total to 56 plants pan-India. We believe Ready-Mix business has a lot of scope in India given that the business is at a relatively nascent market level, with penetration hovering barely at [indiscernible]. In Modern Building Materials, as our products provide superior, durable and sustainable solutions to its customers, we are seeing improved traction in the cement channel to offer complementary products such as construction chemicals, ready-mix mortars and tile application products. Sustainability. At Nuvoco, we recognize that robust sustainability management and performance is essential in creating value for our stakeholders, including customers, workforce, communities, suppliers and shareholders. Our sustainability program called Protect Our Planet aims at achieving environmental and social sustainability through participation from cross-functional teams across the organization. It encompasses sustainability road map, circular economy initiatives, green energy contribution, water positivity and biodiversity management. We are focusing on enhancing the use of alternative fuels, improving the share of composite cement and conserving natural resources. I would now like to share the progress on each sustainability parameter. As mentioned during previous calls, we have one of the lowest carbon footprint in the cement industry at 462 kg CO2 per tonne of cementitious materials, duly validated by KPMG for the year FY '23. Our alternate fuel rate has improved by 5% on a Y-o-Y basis to 14% in Q3 FY '24. During the quarter, Chittor Cement plant demonstrated capability of 35% AFR, while Nimbol, if you will recall, where the AFR feeding system was recently commissioned in Q4 FY '23, has also demonstrated capability of up to 25% AFR. Finally, a round up on our growth projects. A quick update on our key ongoing CapEx programs. I'm happy to share that we have successfully commissioned a 1.2 million tonne per annum cement mill at Haryana Cement plant, elevating the overall cement capacity to 25 million tonnes per annum. Railway siding projects at Odisha and Sonadih is progressing well. Currently, track laying activities are under progress. With this, I conclude my opening remarks. I'm 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] The first question is from the line of Raghav Maheshwari from Asian Markets Securities.

Congratulations, firstly, a good set of the profitability. My question is regarding to the volume. There are very few occasions where we will see the volume degrowth in primarily Q3 rather than the -- compared to the Q2. Can you please a little bit elaborate what is the reason? Is it because of the East price hike in the end of the Q2 and start of the Q3? Or there is some other reason?

Thank you, Maheshwari, for your questions. So yes, it's been a mixed bag, as I mentioned in my speech, too. We have seen significantly muted demand in the key states of Bihar, Bengal and Jharkhand. While there is a lot of potential in the pipeline in terms of Bharatmala roads and the PMAY program, its actual fruition at market level is something we have not seen in either Q2 or Q3.

Ma'am, the industry has degrown from the larger number compared to the Nuvoco Vistas? Or are how we placed against the industry, particularly in the Eastern market?

So our -- just to take you back on a few calls in which we have been mentioning, our footprint is strong in the markets of Bihar, Bengal and Jharkhand. So definitely, a muted demand in this part of the geography would have a specific impact on our footprint and the business.

Ma'am, I just wanted to understand only prospect to East, the competition is also -- East industry -- particularly East industry has also degrown, has been significant, our number is it better compared to the industry in terms of the volume degrowth?

Yes. You've got to look at it different. Most of the -- almost all the companies have got an all India footprint, and they have reported volume growth or degrowth or muted growth at an all India level. We are a company, which is highly indexed on the East and good presence in North, but solid presence in East. So we cannot kind of publish region-wise sales of all companies as well -- that's not there. But in general, if you see the core states with my colleagues spoke about Bihar, Bengal and Jharkhand did have muted demand as well as reduction in offtake in the months of October, November, December. So while your question increase level -- can price rise happened in October, did kind of cost demand -- drop in demand. That was very short phenomenon, but no industry has continued reduction in demand, in spite of price. Because eventually, house buildings will always happen in the medium to long run. In a few weeks, 1 or 2 weeks, there can always be some changes, but eventually, the demand picks up. But surprisingly, this quarter, Q3, in many years of the industry, the demand post the festivities normally picks up, but this quarter did not pick up and continued to be very dull entering November as well as all the way through to December. And if one may have to look at it, arrivals all the major players in East -- certainly, I think all the leading players in East will have a reduction in sales in the East region, more so in Bengal, Bihar and Jharkhand. Of course, elections also played a part in Chhattisgarh and in general MP elections and general election was also there, which also played a part in the November and December. So net-net, if you have to look at it, Q3 has been a quarter, especially in East, because of reduction in demand. And having said that, my colleague also said that market will grow. The intrinsic capability of the Indian economy as infrastructure will grow going forward. So I guess, this is a temporary phenomenon, we'll have to take it on our stride and then look forward. And where we had a good focus in North, we grew handsomely in North. Our growth in Q3 is one of the highest in the history of Nuvoco in North. That's the kind of sales we have achieved in the Northern region in the last 6 months. We will continue to -- and that's how the 1.2 million tonne capacity in North is also going to help us to grow. Debottlenecking Nimbol will also help us to grow our North business. So North is one area where while our capacity is limited, but we will really grow ahead of industry, which happened in Q3. East is a region where, in general, the market was a little bit subdued. And I guess, this quarter has been a little bit of a challenging quarter for the entire cement industry. So in January and going forward, I think things will improve. We are fairly confident that the market will rebound very quickly.

Okay. Got it. Got it. And sir, last question for the Emami side. So how is the Emami brand doing right now in the -- particularly in the Eastern market? Is it better? And what is the price gap between exiting Double Bull and Nuvoco's old products of the Lafarge, Nuvoco Duraguard versus how it plays between the Emami and Nuvoco side...

In the past many calls, we acquired Double Bull brand through acquisition, and it has a very good presence in certain markets. But over a period of time, we realized that Duraguard is a much stronger franchise than the Double Bull franchise. So my colleague had explained in the last 2, 3 calls ago that we have phased and a detailed plan to move from Double Bull to Duraguard product portfolio in the channel. That phasing is already happening. Barring 2, 3 markets, I think in markets of Bengal, Bihar and Jharkhand, quite a bit of shift has happened. And in a couple of other markets, I think we are doing it in a phased change. But as a company strategy, one of the points which my colleague mentioned a little while ago was the first thing we did was to kind of place the premium Concreto in the Double Bull franchise to ensure that, that channel is [ clued ] onto our portfolio of Concreto in premium products. So over a period of next 2 to 3 quarters, we will gradually move the other end of product in the Double Bull into Duraguard franchise. But certainly for sure that we will not put an abrupt stop to the product overnight. It will be a phased plan. We have a strategy in place. And we are very well executing the strategy as per the plan, which we have made for ourselves. So maybe 2, 3 quarters is when the complete shift will happen. But till then, there'll be tapering down of the Double Bull channel.

Sir, it's some time before we have launched the Emami in North also, Double Bull. So what is the strategy, when we are removing from the one market and introducing in other markets? It's because of the -- there is acceptability of the -- beyond the Duraguard, it is introducing as new brand. What's the strategy behind that?

I think good question. This launch of Double Bull happened, right, one quarter after the acquisition of the company. At that time, we had additional capacity available with us. And then our short-term strategy was to somehow find a way to fill the pipeline in North and get some immediate bids. However, even when we launched Double Bull in North, we are very clear that we will launch Double Bull only 1 or 2 markets of Haryana and Western UP. We did not launch Double Bull in Gujarat or in Western MP or Rajasthan. These are very large market for us. We want to grow only in Duraguard. So it's a little bit of a short-term tactic to kind of get the thing going. But having said that, the key program for the company is to do a brand rationalization, have 2 key products, Concreto on the slag cement category, and then Duraguard at the next level and non-trade at Infracem. So there are still 1 or 2 markets in North where we sell Double Bull, but over a period of next 3 to 4 quarters, we will phase out that as well.

[Operator Instructions] The next question is from the line of Aman Agarwal from Equirus.

Congratulations on good EBITDA per tonne number. Sir, my first question was pertaining to the RMC business -- RMC plus Modern Building Materials business. So just wanted to understand on your strategy for that business. Now this question is coming because if we see on EBIT level, the contribution from that segment has not been anything meaningful in the last, say, 12, 13 quarters. So wanted to understand on the margins that you operate in this business, on the EBITDA side and the strategy going ahead.

Yes. First of all, we will be in Ready-Mix business, so that's something we have strong plans for doing all the 3 verticals of cement, Ready-Mix, concrete and modern building materials. That's the first point I would like to inform you. Secondly, Ready-Mix business is all-India business. As you would know that the business came to our fold way back in 2010 with the L&T business which got acquired to the organization. Around COVID time, we had a serious challenge because the entire metro-based construction has come to a halt. And then we also did a major decision of closing down, winding up or turning down all the operations for a period of 3 to 4 quarters. But from then on -- from 2019 till 2023, this business has made a huge turnaround. We are one of the most profitable Ready-Mix business in the country. So our -- in cement, we call contribution, in Ready-Mix, we have contribution margins [indiscernible] what we call. That number in quarter 3 delivered the highest in the history of the company at INR 975 per meter cube. This is one of the highest in the entire industry. Having said that, how did all these things happen? Certainly, our entire portfolio, Nuvoco is the premium product in cement, it is also premium in Ready-Mix. So we are very clear on that. Credit used a big challenge in the business. So we sorted out the entire credit thing. We have about 35% of the business on cash and carry business. We sell in IHB. We exited many project verticals in this because project is a low-margin business. So we kind of rushing the entire portfolio from 60 to 63 plants to 52 plants during the COVID time. And now that we have a proven successful model of selling in commercial as well as IHB through cash and carry and fixed credit business model, we are slowly scaling up the business. Like Madhumita said, we have 56 plants now. Happy to say, only yesterday, we inaugurated the 57 plant. And by the end of next fiscal, which is FY '25, we have plans to take the business to 80 plants. And then in the next 2 years, it will go to 100 plants, sustaining at about INR 975,000 contribution margin. This will give a sizable absolute EBITDA to the company, even though the EBITDA percentage margin will be much lower than the cement. That's the nature of the business. So we have to run the business profitably and expand the business.

Understood, sir. Understood. And very happy to listen about the expansion plans that we have for this business. Next is, I wanted a clarification or understanding on our cost efficiency program that we have running internally. Where do we stand right now? We talked about some INR 250 per tonne kind of a saving, and more than half of the savings was already delivered. Just wanted to understand, how are those parameters shaping up? And on the cost item-wise, which line item do you think has the highest potential to deliver cost savings from here on?

So Aman, thank you for that question. We really need to take it up in 2 parts. When you are referring to the INR 250 per tonne piece, it is project SPRINT. We have successfully closed this project, and I have handled it a couple of calls back. So if you're comfortable, I will walk you through Project SPRINT separately. You are welcome to get in touch with me or the IM team. The program, which we have now flagged off and which I have mentioned in the previous quarter call is Project BRIDGE. Under Project BRIDGE, we are looking at all areas of efficiency optimization. So just to give you some examples, optimizing the power and fuel cost by working on lead indicators, like SHC and SPC; elimination of transit losses; controlling damages and demurrages in transit, improving warehouse utilization. So it's a certain shortlist of programs, which is being driven with periodic reviews from the MD's office. We were looking at an order of INR 50 per tonne savings in -- out of the BRIDGE program rolling in over a 12-month period. We are happy to mention that about INR 20 per tonne of saving is what we are already seeing since the start of this project about 4 months back.

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

Just to continue. So does that mean that we can see a INR 30 per tonne more saving is still possible?

Thank you, Shravan, for that question. Definitely, it is a program, and we are chasing that number. As I said, we see it rolling in over a running 12-month period.

Okay. Two, three things. First, on the volume front. So 9 months, we have 0.5% decline. So looking at the number of -- correct me if I'm wrong, I see -- still, we will be seeing a 7% to 10% kind of a volume degrowth in the fourth quarter also. So will you please help us how one can look at in terms of whatever till now we have seen in January in terms of the -- how do one can see the volume for this quarter, fourth quarter?

Shravan, just as a continuity with all the speech and the discussions we had so far, we did see degrowth in 2 quarters on the run, particularly in some of our key states and in overall horizons into the Eastern region. However, we'd like to reiterate two things. Firstly, in North, we have been driving more than the growth. We were, to some extent, restricted. But now with the commissioning of the Haryana cement plant, we would definitely like to push ourselves more to capitalize on all those opportunities in the North market. In the East, we are still very optimistic on the potential in the pipeline. We have an election year that has come up. There are budgets lying on various government projects. And basically, the challenge has been in terms of fiscal deficiency in the market because these projects were not moving at the expected pace. We would continue to remain optimistic as we enter Q4. Definitely, every attempt to maximize volume in both regions, it is important to state here that the 25 million tonnes, we have well spread out headroom in all geographies to optimize on the market gains.

Okay. Got it. Just to understand in terms of the prices, so current prices, broadly the January, our dealer channel check suggests that it is lower than the average for the third quarter. If you can quantify in terms of East and North, what's the broader, INR 5, INR 8 decline versus the third quarter average?

I will give all India blended price. I would not be giving a regional pricing. That would not be right. As we ended December and we are on the 30th of January, I have hardly seen some INR 20, INR 30 per tonne of change in pricing on the lower side. That's not very big at all. So that monthly changes will always happen to the tune of INR 3, INR 4 per bag. So I'm not greatly worried. But not a big drop has happened from what we were in December and Q3 average and January now. I don't see any indication at this point of time for any big change in the pricing. So my view is going forward, in February and March, this kind of price should hold, maybe a sensitivity of INR 2, INR 3 per bag, overall INR 3 in January, another INR 2 in February. So overall, we're looking at about a INR 5 per bag kind of sensitivity. Having said that, there are very clear initiatives we are embarking in the company. One is to increase premium. In fact, East is trending at a premium of close to 49%, 50%. And at a blended level, we are operating at a premium for over 36% as a company. So that will be one big lever. Second is, again, the geo mix lever of trying to sell more in states where the pricing and realization is much better. That's the second lever. Third is the pricing acceleration program in the company where we tweak prices at an appropriate time. Even in the last 4, 5 months, we have gone and taken a price increase in Concreto. We have taken price increase in Double Bull in Bengal. We've taken price increase in Duraguard in North India. So overall, we have made small price increase, independent of the prevailing market prices. So our aim is, in the coming quarter, we will find a way to adjust the price in such a way that we don't have the major impact due to any external factors.

So simply put it, so INR 1,000 plus kind of EBITDA per tonne, considering the INR 30 cost further savings would be there over next 9, 12 months, and the pricing remains stable. So we can see INR 1,000 plus kind of EBITDA per tonne. So that's the most important. Just last on the expansion and then the CapEx, so how much we have done? And what's the new number for this year and next year? Definitely, it depends on the -- our Chittorgarh expansion, but when we'd like to go ahead with the INR 3,500 crores to INR 4,000 crores net debt. So when we see that net debt? And when we will you announce that expansion?

Consistent is the hallmark of investors call, that's something very clear. So I'm going to say something, which I have been telling in the past itself, which is a CapEx plan. You wanted to know about the CapEx plan for this year. So our CapEx plan broadly had Nimbol expansion, Sonadih Railway siding, Odisha Railway siding and Bhiwani expansion...

We wanted -- I wanted the number.

Yes, yes. I'll give you. Since you asked the question, you've got to listen to my answer. So that's how the whole thing happens. And this year, we have -- 9 months, we are at INR 457 crores of CapEx. In January, February, March, we'll end up spending another INR 150 crores, give or take, INR 10 crores here and there. So we're looking at about INR 600 crores, INR 610 crores. If you remember, two calls back, I said our CapEx outlay for this year is around INR 650 crores. So we'll be ending about INR 610 crores, INR 615 crores will be the -- this year's CapEx. So balance, INR 20 crores, INR 30 crores, will be unfinished of the current CapEx, which will happen in next year. Next year, we'll have two bits. One is the routine CapEx. Here, we are looking at close to about INR 500-odd crores as current outlay of CapEx for next year. As regards to the greenfield or the brownfield expansion, either in Chittorgarh or any other place, we will inform you at that time when we make a decision to start construction. But baseline condition for looking at expansion will be to pare our debts to thereabouts of INR 3,500 crores to INR 4,000 crores. So right now, we are at INR 4,533 crores. We expect in Q4 end and somewhere in April, we will come to that kind of ballpark number. And that's when we will make the serious decision of when we will start the expansion for the company.

[Operator Instructions] We have the next question from the line of Satyadeep Jain from AMBIT Capital.

In the last few quarters, we've been seeing some market share losses, but good to see decent price gains this quarter. So on that strategy, I want to come back. We've seen some management changes on the marketing sales front in the last few months. We -- the entire -- what changes have we seen in the last few months in the new team for marketing and sales? I believe all these things would have been tried historically also, premiumization and all the geo mix. What is different that you are doing now versus what was there? And are there any different strategies between North when you look at different levers for increasing prices? That's the first question.

I will talk about org design, and Madhumita will talk about the market strategy. I don't think we have made any organization change at all. So we had one more, which happened many months ago, and that had in fact necessitated internal realignment. In terms of leading the marketing function, Madhumita continues to head marketing, which she was doing prior to the change. Just that she has additional responsibility to run North sales, along with our other portfolios. So there's no -- there's a consistency in the approach. So there's not any change -- not an iota of change in the way you look at the market a year ago and a year now. We've been consistent. As regards to approach to North and East, I will request Madhumita to explain to you what are the broad themes and how we are going about enacting those themes in the market.

So Satyadeep, thanks for the question. Basically, as you know, the North and the East markets for us is different in its construct as well as the presence and footprint of our brands. So in East, our focus continues to remain on maximizing business in geo-optimizing states of Bihar, Bengal and Jharkhand. We work in all these 3 markets with a very strong Concreto franchisee now. We have Concreto and Concreto UNO. We have a good brand portfolio of Duraguard with premium products, Duraguard F2F and Duraguard Microfiber. So towards extend with a 50%, 52% premiumization share in the Eastern part of the country, our principal strategy is geo-optimizing and driving the premiumization. At that strategy level, what is different in North, firstly, we have seen the benefit of increasing volumes progressively in this year. Firstly, there was a debottlenecking in Nimbol, which makes available to us more cement from the Nimbol plant itself. Further, recently, we have now seen the addition of the Haryana cement capacity of 1.2 million tonnes. In North, we have been able to stretch our premiumization levels in an industry -- in a market where premiumization barely hovers around 8% to 9%. We are at a 14% premiumization in North. So premiumization, there is a good journey and way forward plan. Primarily in North, we have driven the levers of good market presence, sustained branding and communication program and driving volumes, both in non-trade and in trade. So volume-driven strategy is what remains basic and fundamental. We have length, speed and has had the capability to optimize on these opportunities given the additional volumes which has come in the North. I hope that answers your question.

Yes, yes, Madhumita. Just a clarification on that. When you say geo mix, basically walking away, is it correct to say that you're walking away from markets like Chhattisgarh and Odisha, where you have maybe lower pricing, higher comparative intensity and the lower margins? Is that -- would that be correct in focusing on maybe Bihar, Jharkhand, Bengal where you have Concreto and maybe higher pricing in market?

See, Satyadeep, I think you are a veteran, so price cannot be the only criteria. Obviously, contribution is very, very important. Over some beautiful positive reason, Chhattisgarh and Odisha are high-contribution markets in East right now. So we run a program called Vijay Chhattisgarh in Chhattisgarh to take our numbers in Chhattisgarh to at least 40% more than last year's actual in the coming year. So we got a robust plan to get volume growth in Chhattisgarh within the stuff. And Odisha is currently trending at probably, I won't say historical high contribution margin, but the numbers are very, very attractive actually. In fact, Odisha contribution margins are higher than neighboring states. So our trust in Odisha will improve in the coming years. So within the framework of Bengal, Bihar, Jharkhand, they were the key markets for us in the past. But along with these 3 markets, Chhattisgarh and Odisha becomes an equally attractive market for us to drive volumes and thereby get more contribution.

Okay. What's there on geo mix. So it's geo mix is not tied to any states. As such, you're looking at different states of the certain pockets, did you get better contribution margin...

Chhattisgarh, we've got 3 factories. At one time, it used to be a little of a challenge. The entire industry had some challenge in Chhattisgarh, but I think that's kind of off. And now with the elections happening in Chhattisgarh, we see a good demand picking up in the state. And we have Risda, Sonadih and Arasmeta high-throughput factories, so we would try and maximize road-fed market in Chhattisgarh.

Satyadeep, I'd just like to add a point here. It is very definitely a strategic advantage that we had with the acquisition of the Emami facilities. We have a footprint today across 5 states. And definitely, we would want to be more agile in adapting our tactical plans at the market level.

Okay. Just one clarification question. Lastly, on the routine CapEx, you mentioned INR 500 crore, is that -- and is it sustaining CapEx number without growth CapEx? That seems slightly higher for a 25 million tonne capacity. Would that be right?

No, no. I can't give a breakup of what will constitute INR 500 crores. So it will have land. It will have some growth CapEx. It will have some sustaining CapEx, some overflow from this year to next year. Let's start the year, and I guess I'll come back and maybe during the next call, I'll give a clear picture of what we intend doing in the coming year. So it won't be more than that kind of number, which I mentioned.

The next question is from the line of Jashandeep Singh from Nomura.

Congratulations on great set of EBITDA numbers. My first question is regarding raw materials, especially slag cost. Although I understand Nuvoco has a long-term agreement with Tata Steel -- plant at Tata Steel, just wanted to understand the management can give us directionally especially quantifiably, how much delta is there? I mean how much Y-o-Y slag cost has increased for Nuvoco versus for the industry? Even a ballpark figure helps us understand the delta. My first question is this.

I can talk about Nuvoco. I can't talk about what price other companies have bought. But if you really look at our blended slag cost, along with our long-term strategy with Tata Steel and the spot buying, we ended up spending close to about INR 1,335 per tonne of cement slag cost for us. That was cost per slag, but per tonne of cement. Slag consumption rate is INR 1,333 per tonne. And market rates and spot rates are trending at INR 2,000 per tonne outside. But we have made a very conscious call because the demand has also been a little bit tepid in quarter 3. So we also walked away from high-cost slag. And since we have back-end tie up, so that's where we are in focusing on our own long-term slag. Q3 was INR 1,333, and the 9-month average is at INR 1,430.

And sir, what will be the same cost Y-o-Y last year?

Say it again, please?

Sir, what will be the slag cost one year back?

One year back, obviously, it was high. And one year, Q3 -- 3Q last year was INR 1,319. 3Q this year is INR 1,333, about INR 10, INR 12 more.

Okay. Understood, sir. And sir, just talking about our volume mix, we see that C2C ratio has marginally declined this quarter. Does that mean that the share of North volume was higher this quarter, and it -- what I meant is North and center combined? And what -- with Haryana deal coming in, what can be a sustainable volume mix for ex-East regions? If you can just clarify that.

So Jashandeep, very correctly summarized, yes, the North volumes have had some bit of an impact. But we also have to face the fact that we are just prior to an election period. So there has been a very good uptake in the infrastructure projects. And wherever opportunities have looked attractive, we have called for the business. Haryana cement plant will be 1.2 million tonnes of completely blended cement. So the slight uptake that we have seen in OPC volumes this year would definitely moderate as trade volumes pick up and depending on how the post-election projects and the mix of business settles. Directionally, we have touched a high of 1.82. We are now trending above 1.72, 1.73. So definitely, as capacity utilization improves, we will be driving back to that C/K of 1.8.

Understood. And just two more questions. One quickly, the WHR, have you extracted all the potential savings from them post acquiring Emami, is that completely done? Or is there any incremental savings opportunity there available still?

WHR, in fact, it's not an Emami phenomena. it was a Nuvoco phenomena. So even before we acquired Emami cement plant -- Emami cement business, all kilns had WHR, which we started installing from 2018 onwards. So every single kiln along with Risda kiln, all the 6 kilns in the company have WHR. The installed capacity is close to 45 megawatts of WHR. We're also debottlenecking to improve the WHR capacity by another more 3, 4 megawatts in the coming year. But having said that, all the WHRs are working in full capacity. Just that since the volume is a little bit low, we had to take -- run the -- shut the kilns for some periods of time for de-clinkerization. Full potential of WHR didn't happen. But next year, Q4 and beyond, once all the kins run to market demand, we will get the maximum benefit of WHRs and CPP.

Okay. And what was the CapEx for this quarter, if I missed earlier?

9 months was INR 457 crores. We will end up spending another INR 150 crores, INR 160 crores in the next 3 -- Jan, Feb, March. We'll end up close to INR 600 crores, give or take, INR 10 crores.

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

And my question first pertains to the housekeeping numbers. What was the fuel cost per kilo cal and the fuel mix? And could you also share blended cement share in the production mix?

Rajesh, could you please repeat the second question?

Yes. Fuel cost per kilo cal, fuel mix and share of blended cement.

Fuel cost in Q3 for the company was of INR 1.67 per million cal comparison with Q2 was INR 1.74 and same quarter last year INR 2.74. So we are at INR 1.67 per million cal in Q3.

The fuel mix?

Fuel mix, linkage at 28%, non-linkage 1%, overall linkage and non-linkage domestic coal 29%, pet coke at 56%, and imported coal small 1%, AFR at 14.2%.

Linkage you said is around how much, 25%?

Linkage is 28% and 1% non-linkage.

Okay, okay. And 14% AFR. So this is helping you in terms of your cost stabilization which a few quarters were impacted earlier.

Yes. This is one of the best quarters for us. Even last quarter and even quarter before also we were making improvements, but I guess at INR 1.67, we will be right at the top.

Are you expecting further savings on the fuel side, sir, given the current fuel cost trends?

That will be very difficult. So what are the levers we have? I think the linkage coal rates are more or less kind of bottomed out at INR 1.30 million cal. I don't think it will go below this. In terms of pet coke, there is some scope. As you see, currently, we're booking pet coke at $118 per tonne, which translates to about INR 1.80, INR 1.81 per million cal. Last quarter, we are at INR 1.9 per million cal. AFR also we can improve from current 14.2% to maybe 18%. So net-net, I see a play of about INR 50 going forward.

Okay. Sir, lastly, this market volume loss, which you have seen in Q3, while you have mentioned there's a market demand that have been muted. You have seen a 10% decline. So is this also a phenomena of aggressive volumes from capacity additions, which have happened in the market, and that is why this is an actual market share loss. And this may continue for the next few quarters?

I can safely say one thing. No capacity expansion of the industry resulted in reduction in demand. So I guess that's not certainly the case. And if demands are there, we won't have been sitting tight, not selling. So I guess, it's simple that the overall offtake has been low in each markets in the last 3 months. So I guess once the demand opens, you will see us growing in line with market.

Okay. So this quarter, your volume loss is higher than what the industry declined or it is in line with the industry?

Region-wise, it's very difficult to say. All I can say is from the arrivals, so I guess we track arrivals. So in terms of arrivals, I think, at a broad-based number, everybody's number has dropped.

Okay. Okay. And lastly, on this cement-to-clinker ratio, which has tapered down to 1.72, given that you will be ramping the volumes in Haryana, where this C/K ratio would, obviously, be lower than this ratio. So is it fair to assume that 1.72 or this ratio will remain close around this level for next 1, 2 years?

Rajesh, I just took that question from Jashandeep. I clarified that the Haryana cement plant is a fully blended cement plant.

Ma'am, but yes, it will not be producing slag cement, right, which has a high ratio.

This quarter number has reduced or C/K ratio is a little bit lower, but East will open up, East will open up, we will sell more flat cement, our C/K ratio for East will go to 2.1. North, there will be some changes because of the overall ramp-up of our products in North, because even though we don't sell too much of OPC, still the PPC, whose C/K ratio will be lower than slag cement. But net-net, if you see, our number will go back to 1.8 plus in the 1 or 2 quarters from now.

Great. Great, sir. And lastly, what was the blended cement production, share of blended cement?

Rajesh, we will give you that data point later.

I have to fish out from the records. We'll give you a little later, but our guys will give you.

The next question is from the line of Tejas Pradhan from Citigroup.

Just most of my questions were answered. Just wanted a data point on the lead distance this quarter.

Last quarter, the lead distance was 340, in Q3 it became 342, 2 kilometers increase.

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

About the market growth. So like you used to share the market growth numbers for North and East earlier. So any commentary around that?

I don't think in our calls we have given region-wise market growth. But at least in this quarter, I can stick my neck out and say that East, obviously, market shrunk. North market grew. Our growth technical -- we are small player in North, but with the small player status also we have grown ahead of market. So technically, we have moved our market share in North in the second decimal for sure. East is where market shrank. And right now, I won't be able to comment what has been the extent of shrinkage in East.

Sure, sure. But it seems it's more than 10%, right? And if you grow in North, then this decline is more than 10%.

Yes, obviously, mathematics will certainly deduce to where you're going, but that's how the market has been.

Right. And also just to understand, like when you say that you are choosing to do profitable volumes and all that, so are you then focusing on EBITDA maximization at the cost of maybe market share loss or how do we understand that?

It's a very -- there's no one correct answer on it. So one of the biggest agenda for the organization, which have been consistently mentioning is, we had made a commitment post listing in the first earnings call and then on. One of the key endeavors for our company is to pay down the debt so that we are fit to grow for the next -- we're fit to get to the next growth plan for the company. So a certain decision one has to make. And now making those decisions mean that we don't walk away from markets where we can sell. But if the entire market is in such a place where growth doesn't happen, then our priority is to get value or volume, very -- that's the plan we have been doing in the last couple of quarters. But certainly, one of the principal agenda for the company is to bring the debt levels to a sizable number anywhere between INR 3,500 crores to INR 4,000 crores and they are fit to grow. But in the journey, we had a number of agenda which we have been running, which my colleague spoke about the SPRINT agenda in the first year of listing. And then once we kind of accomplished the SPRINT agenda, of course, the SPRINT agenda has got kind of diluted by the fuel price increase. So net-net, we couldn't get everything out of the SPRINT agenda. But now that the fuel price is under control, we have embarked on the second agenda, BRIDGE, where we're looking at INR 30 to INR 50 improvement in EBITDA on along the various lines of P&L. So our focus will be to improve our EBITDA margins sensibly so that we don't -- for the sake of selling, we don't spoil our bottom line. I'm doing all this thing. End objective is to pare the debt of about INR 3,500 crores, INR 4,000 crores levels and then on get the growth engine going for the company in the medium term.

Understood. Understood. Also, like actually, I was just looking at a bit longer-term numbers actually for you, I mean, both in volume and EBITDA, like I'm just trying to see how numbers have been like when -- since you acquired Emami. And to me, it seems like actually both your volume and EBITDA is actually down in the last 3 years, actually, like if I look at the Q3 FY '21 numbers, it's actually 10% lower on EBITDA as well. So -- and in this meantime, I mean, in these 3 years, I believe we have unlocked some synergies as well from the acquisition. So I'm just trying to understand where has this decline come from in terms of -- I mean, given that synergy has also been unlocked?

I will throw some numbers to you, 1 or 2 numbers. So I think detailed explanation will be very difficult to tell on the investors call. We can engage with you if you can reach out, we can have a detailed conversation. On top of the line since you asked that question, I need to give the right answer to you. Around the acquisition times of Emami, we are very clear that we acquired Emami for capacity. So that brand was not in the same league as Concreto and Duraguard. Hence the per tonne realization of Emami was always lower than this. Our main aim at the time was to acquire capacity, which we accomplished at that time. We've got 8 million tonnes of cement and multiple grinding units in various states. That was the objective of acquisition. Nuvoco became a 23.8 million tonnes, becoming the 5th largest player and one of the leading players in East India. That was the key objective when we acquired Emami. Around that time, our EBITDA levels had -- once we combined both the companies, our EBITDA levels did touch INR 1,200 per tonne in Q4 FY '21. And then on the entire fuel prices happened. And when we delivered EBITDA of excess of INR 1,227 precise was EBITDA per tonne, our power and fuel cost was the best in the industry at that time at INR 785 per tonne. We were the best in the industry at that time, very close to only one other player. But then on the power and fuel cost of the company went from INR 785 per tonne all the way to INR 1,500 per tonne. It happened for the industry, it happened for us also. When this escalation in fuel cost and power cost happened, that kind of washed away all the SPRINT savings. But as mentioned by my colleague in the introductory speech, in the last 10 quarters, if we look at Nuvoco's EBITDA per tonne number, quarter-on-quarter, we have improved EBITDA per tonne and we have more or less reinstated our EBITDA in quarter 3 at INR 1,048 per tonne, which is only a little bit lower than what it was at the time of listing. So we have made concerted efforts to improve cost efficiency, get this SPRINT levers and the BRIDGE levers going, implement various initiatives within the company and take the company from where we were 10 quarters ago to all the way now to INR 1,048 per tonne. And give or take, we can be around this number for going forward as well.

My question is more around like the performance like, before the SPRINT synergy benefit for unlock. So I mean the numbers in that are not being visible in the final EBITDA is what I was wondering.

Very difficult for the call to extend, may I request you to reach out to us, we'll have -- our team will explain with you for all the facts and we will clarify all your queries, please. We have all taken, so I think you can also get to see all the information so that in a transparent manner we will explain to you.

We'll reach out and connect with you, Amit.

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

I have a couple of clarifications. So you said, pricing in fourth quarter is lower by INR 30 to INR 40 per tonne versus December exit or December quarter average? What was that number...

Prateek, there's a disturbance in your line.

Yes. Hello, can you hear me?

Yes, please carry on.

Yes, I was just saying that there was this mention of pricing realization drop of INR 30 to INR 40 per tonne, was this against December exit or December quarter average comparatively?

December quarter, a lot of things happened in September, a lot of things changed in November and December. So one way to look at start and end date of 1st October till 31st December, those of 90 days of pricing fluctuations continuously. But to the number which I mentioned was as we stand on 30th of January, I'm looking at close to about INR 40 per tonne reduction in prices from where we were end of December.

Okay. So versus average, it will be much more lower, so versus exit this is INR 40 lower.

No, but it's stable for the last 30 days, it will continue to be around this number going forward is what is my read.

Okay. Got it. And sir, secondly, on this INR 1.67 of fuel cost on a kilo cal basis, obviously, the combination of various fuel mix which you have. But given pet coke is 56% and current imported pet coke price is around $110 to $112. Is it reflecting that number, spot number or there are more savings which can come in 1Q '25?

These numbers are all based on past procurement not at $118, but at $133. Currently, we are booking at $115, $118. So the impact of the reduced cost of pet coke will be felt in end of Q4 and Q1. You would know we have North and East plant. East operates with only 35% pet coke and North has got almost everything is pet coke. So East will have a big bearing in the overall power and fuel cost of the company, because that is the cement is made and the cost of fuel is also a little bit lower there. So as I said a little while ago, with the levers of reduced pet coke and increased AFR and maximizing our linkage coal, I see a potential of a little bit -- some more reduction in the overall power and fuel cost. But 1.67 can maybe 1.62, 1.63. Beyond that, current levels, it will not go down.

Right. And last question, on your CapEx, have we quantified like the amount of CapEx that you're looking at in North for next round of expansion, is it like to the tune of INR 2,000 crores or...

Not yet. I guess, I will get back to you in the subsequent quarter. Right now, we are still working at the background on a technical design, whether it will be at 6,000 TPD line, 7,000 TPD line, 8,000 TPD line, whether we will have split GU, VRM or ball mills. So this work is currently happening, where it will have railway siding, all those combinations are being worked out. But I guess, we'll get back to you in one of the next subsequent calls.

The next question is from the line of Navin Sahadeo from ICICI Securities.

Very quickly, directionally, it appears that we may have lost market share in the East. Of course, we have done good in North as you mentioned in the comments. So just wanted to understand that will we, as a company, look to regain that market share in the coming quarters or since the focus is also on promoting premiumization Concreto UNO in various markets, we will be like focusing on value over volume in East. Also this is slightly medium term in the sense that there is no major capacity that we are planning in East, at least in the foreseeable future. That's what I think was indicated that other regions can see CapEx, if at all, company has to pursue. So from that perspective, we are consciously focusing on value over volume. Is that a correct understanding?

Terminology is correct, but the context has to be qualified. When the market is down, we have to find a way to maximize monies for the company, and hence, we prioritized value versus volume. We still have 25 million tonnes of installed capacity. And there's a sufficient headroom for us to grow in the East. East, we have 19 million tonnes and North we have 6 million tonnes. So we are nowhere close to 19 million-tonne capacity in East as we stand today. So we've got a good headroom available for us to grow. Once the market opens up, you will see us participating in the race as energetic as anybody else.

Understood. So we will retain the lost market share there in the coming quarters, Correct?

We will certainly participate in the market with full vigor when the market opens up.

Ladies and gentlemen, we will take that as a last question. I would now like to hand the conference over to Ms. Madhumita Basu for closing comments. Over to you, ma'am.

Thank you, everybody, for your participation. Very good questions and some good overall on the time as a result of these questions. To summarize, we remain positive on the demand outlook and significant portion of infrastructure programs are under execution by the government. We shall continue to focus on operational efficiencies and remain committed to our growth projects. We will remain available for any further clarifications that you might require. Please do connect with us. Thanking you for joining us today, once again.

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