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

Ladies and gentlemen, good day, and welcome to Q3 FY '25 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 Investor Relations. Thank you, and over to you.

Thank you, Yashasvi. Good afternoon, everyone, and thank you for joining our third quarter fiscal 2025 conference call. Let me start by briefly discussing the broader macroeconomic landscape linked to cement demand followed by a review of our performance and the key events for the quarter. As you are aware that during first half of the fiscal year, macroeconomic environment remains challenging, and India's growth rate turned out to be much lower than anticipated due to deceleration in industrial growth and CapEx. However, high frequency indicators available so far suggests that the slowdown in domestic economic activity bottomed out in Q2 FY '25, and that sales recovered gradually, aided by festive demand and pickup in rural activities. A record Kharif harvest and increased Rabi sowing have contributed to a reasonable performance in agriculture and allied activities, leading to an improvement in the rural economic fortunes. Meanwhile, India continues to be the fastest-growing major economy. Although GDP growth has moderated to 6.4% for FY '25, primarily due to lower CapEx by center and states in the first half of the fiscal, the real GDP growth for Q1 FY '26 is projected at 6.9%, and Q2 FY '26 is projected at 7.3%. The Union budget for FY '26, scheduled to be presented in February, is expected to prioritize infrastructure development. Economic experts project a 30% increase in the infrastructure allocation, reinforcing the sector's critical role in driving economic growth. All this augurs well for cement demand going forward. Moving on, let me first spend some time on the key milestones that the company achieved in the recent period. Friends, we became a successful resolution applicant for Vadraj Cement Limited, which is undergoing a corporate insolvency resolution process and accordingly, letter of intent has been issued. Filing with NCLT has been done and approval to the company's resolution plan is expected within 8 to 9 months. Asset-wise, Vadraj Cement has a 3.5 million tonnes per annum clinker unit in Kutch and a 6 million tonnes per annum grinding unit in Surat, both equipped with equipment from top quality manufacturers. Production from the facility is targeted to start from Q3 FY '27. The acquisition offers a valuable buy and sizable growth opportunity being available at a highly competitive cost of approximately USD 60 per tonne, [indiscernible] recently reported acquisition costs in the industry. By acquiring Vadraj Cement, the company poised to reach 31 million tonnes per annum cement capacity by Q3 FY '27 with 19 million tonnes per annum in East and 6 million tonnes -- 6 million tonnes per annum each in North and West. Net-net, this investment follows the company's drive for growth and diversification. With the strategic acquisition, Nuvoco Vistas is set to expand and consolidate its footprint in the Western region of the country, becoming the third largest player by capacity across the combined geographies of Gujarat and Maharashtra. Additionally, by serving the Western market from Vadraj Cement, the company would also release much needed capacity to meet the growing demand of the Northern markets from its Rajasthan plant, thereby strengthening its competitive position across both regions. The acquisition will unlock significant synergies with the Rajasthan plant, enabling seamless operations in existing markets, optimizing logistics and enhancing overall competitiveness. To reiterate, in line with our future expansion strategy outlined in earlier calls, the Vadraj acquisition meets the time line of Q3 FY '27 and will be achieved at a significantly lower cost, reinforcing our commitment to strategic growth. Let's now focus on our quarterly performance, reviewing our progress and discussing our outlook for the future. In Q3 FY '25, the company recorded revenue and EBITDA of INR 2,409 crores and INR 258 crores, respectively. Allow me to take a moment to highlight the key factors that contribute to these headline figures. Firstly, let me touch upon the volume growth of 16% Y-o-Y to 4.7 million tonnes in Q3 FY '25. Following the challenging conditions in H1 FY '25, demand conditions showed improvement in Q3 FY '25. In response, the company undertook several initiatives to drive strong volume growth during the quarter. However, cement prices in our key markets plummeted the month of October and November and remained subdued for the major part of the quarter. Price improvement was conducted only towards mid-December. Consequently, our realization was impacted during this period. The positive news is that price improvement has been observed in the market. We remain optimistic that sustained demand recovery will continue to support prices moving forward. I'd now like to give an overview of the quarter's performance, specifically focusing on key cement cost elements. Power and fuel cost per tonne reduced by 6% quarter-on-quarter. The company has reached the lowest blended fuel cost in the last 13 quarters at INR 1.45 per million tonne. I would like to emphasize that Nuvoco's power and fuel cost continues to be amongst the lowest in the industry. On the raw material side, Nuvoco continues to be better placed due to its long-term flat supply agreement. Distribution costs per tonne declined by 3% quarter-on-quarter due to efficiency in operations. On cost efficiency program, Project Bridge 2.0 is on track, delivering a reduction upwards of INR 50 per tonne YTD. Turning to our balance sheet. Net debt as of December 31, 2024, stood at INR 4,350 crores, reflecting a year-on-year reduction of INR 183 crores. This demonstrates our consistent efforts towards effective debt management. On a quarter-on-quarter basis, net debt further declined by INR 151 crores, mainly driven by release of working capital. The company stays on course with its objective to bring net debt below INR 4,000 crores to support our future investment. Cement demand. The cement industry has witnessed a recovery following a challenging first half of fiscal '25. After grappling with subdued demand, the industry is showing kinds of improvements driven by improved market dynamics. Going forward, we believe our key driver to watch out for would be pickup in unspent capital expenditure at both center at state level. As of November 2024, the center has INR 5.97 lakh crore in spending CapEx, while states at INR 5.34 lakh crores CapEx spending to be executed. Region-wise, in Eastern states, including states from West Bengal, Bihar, Jharkhand, Chhattisgarh, and Orissa, pending states CapEx on an average is upwards of 65%. This implies significant potential for increased infrastructure activity in the coming months and thereby acting as a catalyst for cement demand. Additionally, rural housing demand is poised for growth supported by a healthy monsoon. Improved agricultural income and favorable rural economic conditions are expected to drive construction activities, further boosting the industry's outlook. With respect to our ready-mix and MPM business, focus on innovation continues. In ready-mix business, Concreto Uno Concrete launched in FY '25 is gaining traction across different markets. The MBM business introduced 3 new products: Tile Adhesive T5, Tile Glitter and the Tile Bonder under the brand ZERO M to strengthen the product portfolio. Additionally, tile adhesive, construction chemicals and cover block continue to witness improvement in sales. On the sustainability front, our commitment to sustainability is a fundamental part of our operations, reflected in our leadership in low carbon emission. The positive emission rate for FY '24 stands at 457 kg CO2 per ton of cementation materially, which is amongst the lowest in the industry. We believe our ongoing sustainability efforts will consistently deliver value to all our stakeholders, including the communities we impact. 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] We'll take a first question from the line of Navin Rameshwar Sahadeo from ICICI Securities.

Sir, my first question was with respect to Vadraj Cement. So if you can just help us understand that you said it's going to take about -- I mean, in the initial comments, Madam did mention that it will take about 8 to 9 months for the deal to get consummated. So if you can just help us understand how much -- once the approval is received, what is the bullet payment that will be due to the process or to the banks -- consortium of banks in general? And thereafter, how do we plan to spend the balance payment? As I understand you're mentioning the acquisition at about $60. So roughly, give or take, it's more close to INR 3,000 crores or so. So if you can just help us understand that part, please.

Okay. Thank you very much for this question. As you would all know, Vadraj Cement is based in Gujarat. They have a clinker unit in Kutch for 3.5 million tonnes of clinker and they have a grinding unit in Surat for 6 million tonnes. Both these plants were operational when they were shut 5, 6 years ago, and then on they have been in idle condition and finally it came to the insolvency IBC route. We successfully bid for it and as mentioned earlier by Madhumita, we have got the LOI in the month of January. So the bid amount was for INR 1,800 crores. And the papers have been sent to NCLT now subject to the approval of the honorable court, which should take 8, 9 months. The payment will happen subsequent to that. And then on based on the due diligence and the various assessments we have carried out in the 2 sites, we'll have a range of spend from INR 900 crores to INR 1,200 crores which would be the money needed over a period of 18 to 24 months to make the assets fully operational. However, we target to operationalize 1 mill initially and then the clinker line. And then the CapEx would be for a period of 18 to 24 months. So we're looking at a INR 1,800 crores of payment post the court approval, and then on another INR 900 crores to INR 1200 crores over a period of the next 18 to 24 months. So that's how it will by around quarter 3 this year, that's when the -- subject to approval of court, that's when the payment will happen.

And sir, my second question then was about how confident are we of the balance payment, as you said, initial payment is INR 1,800 crores, which is the bid amount. But INR 900 crores to INR 1,200 crores, so just wanted to get a sense that have we got, what do you say, some sort of assurance or guarantee from the initial equipment manufacturers? Because you would appreciate that this plant was not operational for quite some time. So of course, you would have looked into it. But my only simple question is if there is a guarantee some sort of with the original equipment supplier that it will not exceed this range of INR 900 crores to INR 1,200 crores.

Obviously when we bid for it, so we have done our homework and that's how we kind of participated in the entire bidding process. So we have fairly elaborate and detailed assessment of both the sites. So we have personally visited the site along with the OEMs. As you know, the lines are all best European machines. You have an FLS line and the [indiscernible] and Siemens Electrical and rest of all the stuff as per the best OEM in almost all cement companies have this kind of technology. Just that these assets have been idle for many years. So they kind of have the wear and tear and not have been operating. So that's the X-factor net. But other than that, in terms of assurances from the OEMs and the technical assessment guys, we were pretty confident of our ability to restart the plant in the time lines which we had in mind. And hence, we've participated in the bid, and that's how we offered and bidded at this level of INR 1,800 crores to acquire the asset.

Appreciate. And just 1 last question, if I may slip in, please. Does this amount, this INR 900 crores to INR 1,200 crores, also include the captive power plant cost as well? Because I believe 50-megawatt of power plant is there. But currently, it is under the JSW Group. So does this cost factor in that cost as well? And are we planning to put in a waste heat recovery? That's it from my side.

Yes. The CPP cost at Kutch is not -- Kutch -- the Vadraj is not part of the deal. So we are currently working on to work out what are the modalities of it. So it's not part of this INR 1,800 plus, INR 900 crores to INR 1,200 crores. It will be above this. The CPP will cost us more than this.

And waste heat recovery is something that we'll contemplate later -- at a later stage?

I'm sorry?

I'm saying, sir, are we planning to do -- incorporate a waste heat recovery plant as well given the kiln size or not required since the grinding unit is too far?

We will do, but it will be on Phase 2 and not the day we start the line. However, INR 1,200 crores does include the cost of WHR.

Next question is from the line of Jashandeep from Nomura.

Sir, my first question is on volume. I mean you have reported strong volume growth. Just wanted to understand from the East market side, so how has the market performed this quarter? And how are you looking at the fourth quarter and FY '26 in terms of volume? And adding to that also, sir, how is the volume mix between East and North? And have you seen more of nontrade this quarter? Just wanted some clarity on that, sir.

Yes. As Madhumita mentioned, after the Q2 and with the ending of monsoon as well as festive season, demand did pick up in both the markets of East and North. And we did fairly well, double-digit growth in both the markets in both North and East. And we certainly grew ahead of market in both the places. Our trade volume certainly picked up. And one of the reason is also the base effect. But in general, we're able to get our volumes in Orissa, Chhattisgarh, Rajasthan, Western MP. These are the markets where we did quite well. We had a broad-based growth both in trade and nontrade. And certainly, we maintained our value strategy. Our premium product percentage continue to be 39%, and that's very -- that's the focus always. I have mentioned in the call that we will never run behind volume compromising on value. We did get our premium product number of 39% as well as the volume in both the markets. And as Mita mentioned, the only red flag during this quarter was prices kind of went to probably 3 years low in East as well as North, and that had a significant impact in the realization bit. But the positive note I always look at is around middle of December, I think we took prices rises in both the markets as well as East and North and certainly, things looked up for us end of quarter. Since question on this will come later, I just want to inform you as well that the December end realization was 6% of the quarter realization. So we ended the quarter very strong and as we entered January with this backdrop of volume growth, with the backdrop of focus on premiumization and also overall improvement in realization, I think we are on a very strong wicket as we enter quarter 4.

Additional data point, Jashandeep, to answer your question. Our trade percentage share remained at 71% both Q2 and Q3.

Just touching upon realization before I ask my second question, Sir your blended realization seems to have dropped around 5% quarter-on-quarter, which is slightly more than what we saw during our channel check. Just wanted to understand, is there a drop in RMX -- RMC realizations also? Or if you can just give me how much your cement realizations have declined quarter-on-quarter, that would be great.

Cement realizations dropped Q-o-Q by 3.6%. But as I mentioned, we ended the quarter with -- December exit realization of 6% over the quarter average. So I guess, the reported number in quarter and end December is 6%. So we have kind of overcome the realization drop of 3.6%. On top of it, we have grown. So I think we entered January on a strong wicket, the good momentum behind us in terms of volume, focus on trade premium. So that's why we're looking at Q4, we are very well placed.

Right. And just last question on this, I mean, in about 6 months we might be seeing a INR 1,800 crore cash outflow, then another INR 1,200 crore cash outflow. So how do we see the net debt? How should the market look at your net debt? How will the trajectory go? Are you looking to take more borrowings expected to increase? I mean, if you can just give clarity on how your net debt will be, let's say, by the end of FY '26. Just trajectory-wise, that would be great.

Yes, I will answer it in a little bit of a detailed one so that I think almost all aspects get covered. In all of our calls in the last few years, we have maintained that we would be comfortable having a debt level of INR 3,500 crores to INR 4,000 crores. And around that time is when we'll kickstart the next growth plans for the company. And even in the last investors' call, I had answered the question from one of the analysts where I mentioned that we will start the next expansion for the company, either in Q1 or Q2 of FY '26. So that's the position we had 3 months ago, 6 months ago. And one of the principal endeavors of the company was to pay down the debt from the IPO times till now. And very happy to report that from December '21, as it is mentioned in the investors' deck, you would have seen in the presentation, our December '21 debt level of the company was INR 5,495 crores and comparable December '22, December '23, December '24, this number has moved from INR 5,495 crores to INR 5,165 crores to INR 4,553 crores to INR 4,350 crores. Every quarter -- comparable quarter for every quarter ending, we have been paring the debt all the time. And the rate -- the trajectory certainly gives us confidence that by the time we finish this year, we would be INR 4,000 crores and thereabouts will be the debt level. And that's our committed number to make the next investment. That is the backdrop of either through Vadraj or through own growth in brownfield expansion. That is how -- we never envisaged Vadraj 3 months ago, 6 months ago. But certainly, we are very clear that Nuvoco will start with expansion plan moment we hit our internal target of INR 3,500 crores to INR 4,000 crores of debt level. And in between Vadraj happened, and then we did a cost benefit analysis of the value by Vadraj as well our own investment. We found the Vadraj thing very economically attractive for us, and hence, we went for it and then successfully bid for it. And the benefits of Vadraj, Madhumita has very well explained that it gives us a growth opportunity in North where I will release capacity and go participate in North more aggressively going forward plus it gives an opportunity for me to go in the West. 6 in North, 6 in West, 19 in East, overall 31 consolidated to be -- continue to be the fifth largest player. The question you asked about how do we kind of fund this deal. So here, we are currently in the process of working out the modalities. Suffice to say, we are mindful of the debt levels in our balance sheet. And I just want to assure the investors that as we do the financing for this deal, which will take minimum 6 to 8 months since NCLT is itself going to take that much amount of time. We are mindful of the debt and we'll ensure that all the covenant conditions of NVCL are always met.

Next question is from the line of Satyadeep Jain from Ambit Capital.

I had a few questions on Vadraj and then one on the quarter. So Jayakumar, on Vadraj, I just wanted to understand from a capital allocation perspective, you -- the company has INR 4,000-odd crores of net debt. Sitting outside, we would imagine that between brownfield expansion in North and this brownfield would be -- given the situation, given the debt on the balance sheet, the less risky option would be brownfield expansion in the area you already know, the asset you already know. This one is an asset which is unknown in a way to you. The entire sea logistics, operating jetty, a very different model, which carries -- and going into an unknown territory to some extent. So how do you -- just want to understand some capital allocation when you're looking at this investment and you're evaluating at this stage, why now? And just not the acquisition itself, at the stage where you are, why this made more sense versus brownfield expansion? That's the first question.

Let me just take that question, Satyadeep. First of all, I guess, -- we have been in the industry for many years. And then certainly, we have the requisite knowledge to start a plant, put up a plant, expand a plant anywhere in the country. So I guess we've got a good set of people, good teams so that the confidence arises from the fact that we have a wonderful bunch of people who will be able to do it. But having said this, certainly, as you mentioned that there is always this jetty element, which we don't have experience plus also it is going into a new territory. Let me address the first question on new territory. Already, we sell close to about 1 million tonnes in Gujarat. So expanding from 1 million to 2 million and above in a span of 1.5 years will certainly happen. But this capacity of 6 million is not going to be consumed in 1 or 2 years. So it can take probably 3 to 4 years for us to consume this capacity. And as we ramp up the capacity from this asset, the -- it's all in the Nimbol facility, which we currently use to feed Gujarat, will get reused in Rajasthan, Haryana and beyond and also with the Bhiwani grinding unit, we are very nicely placed to go up North to grow in that side of the country. Coming to the jetty bit, yes, I acknowledge the fact that we currently don't have experience in jetty operation, but we are mindful of the fact. We will bring onboard experts who know how to operate a jetty and manage a jetty. And they will come on board pretty early in the journey, and so that by the time we start this expansion work, we would have a wonderful team of expert jetty operators who will be onboard and that's how we plan to address this issue.

I wanted to ask a follow-up on this jetty situation. If I look at the only 2 players, I can think of -- and maybe you can correct me if I'm wrong, is UltraTech when we acquired when they acquired the Sevagram. They are already operating in that area. And then largely Ambuja, but barring that, I'm not too sure of too many players being successful. Many players have tried this entire coastal movement and nobody, I can think of has been successful. Maybe just wanted to understand when you evaluated different case studies and how they played out. What do you think went wrong for some of the players? And where do you think you can replicate with UltraTech and Ambuja have been able to do and maybe others have not been able to do? Why do you think you can give you confidence that you can do what these 2 guys have done?

Okay. Quick one Satyadeep, obviously we have done our internal homework. Obviously, we have not ticked all the boxes and we have gone. Suffice to say that with the knowledge which we have and the expertise we planted, we acquired in the organization, we will be able to address this issue. That's the first point I want to make. And in terms of the people who have been successful in that region and, obviously, we've got the place where we operate, there are a couple of other neighbors. And in fact, the topography of the place in such a way that the ocean depth and the [indiscernible] and all are going to be shared between us and the other 2 players. But then we have come to this Borbandar and then you come Gir area and Amreli area and you go to Saurashtra area, then you've got 3, 4 more cement companies who got clinker as well as cement movement. People have tried. Some of them have been successful, some of them have not been successful. So being -- and we are running a company and we are pretty optimistic that we will be able to learn and operate. We've got time. It's not like tomorrow morning I need to operate the jetty. Starting now, NCLT takes a few months from now, 6 to 8 months and then another 12-odd months for the plant to come. They've got time from not end of next year. So that's where we plan to build capability in the organization to try it out, build, what do you call -- bring in recruited people to make this work. In terms of lessons learned, too early for me in this call to tell you what are all the potential lessons. But I promise you that in a quarter from now, 2 quarters from now, once we gain knowledge, I'll be able to share with you our plans. And then at that time, I'll be much more competent to answer your queries.

Just one clarification on this. Is it a fair weather port or an all weather port?

No. It is a fair weather port. Certainly, in the months of -- pre-monsoon months of May, June, July. So normal recommendation is -- cannot move. So it's factored in our plan. So we would either -- there is adequate space in the Surat facility to store -- we have done some calculation. Technically, we need to store about 2 lakh tonnes of clinker. And we plan to have capacity to store that kind of clinker to manage the pre-monsoon area. Otherwise, I guess we will take an external space, some handling costs will increase for those 3 months but certainly, that is factored in the overall plans for the company.

Okay. Just one quick question, last question if I can squeeze on this quarter. Historically, we understood the company was avoiding certain markets where pricing was lower, maybe Chhattisgarh, if I'm not mistaken. Maybe Odisha or West Bengal, I don't recall. And the idea was quality over quantity. And this quarter, it seems to be -- do we assume that maybe some markets where Nuvoco had historically vacated is entering. There's also a change in sales team recently. So just wanted to understand, is there a change in strategy there of chasing quantity volume over pricing. Looking at the numbers, it looks like I just want to check if that is wrong or a wrong assumption?

No, I guess it's a fair question for you because you're observing a 16% volume growth, and I guess you have -- you will have this in mind, how did we -- did we change our strategy. I just want to assure you that we were always committed to premium products. We tried on our ability to sell premium products in the country. I think that's the DNA of the company, and I don't think we will move away from the basic DNA of the augmentation. Even in this quarter, we have not moved. That is why with this 16% volume growth as well our premium products continue to be 39%. So obviously, we grew more in premium products also in absolute volume terms. So there, there is no compromise. But certainly, in the previous calls, you would have heard that in Bengal and Jharkhand markets, I think the demand was pretty tepid in the past quarters. I think that opened up a bit and we sold more in Bengal. We did sell more in Jharkhand. Chhattisgarh, I guess, it's a home market for us. So I won't say there's a strategy shift for us in Chhattisgarh, but I think one of the priority areas I have kept for my company is we have 3 factories in blending facilities, and we are equal to anybody else, any of our competitors in that market. Certainly, we would like to play aggressive not as in dropping price, but using the proper resources for the contribution margin is highest in the market. So we ran a program for Vijay Chhattisgarh in Chhattisgarh, there's an internal program which we deployed, looked into markets which hitherto we did not participate. And hence, we participated. Even in Chhattisgarh, our microfiber is a premium product. The microfiber target for actual achievement for the quarter was well into double digits. So I think there, again, we made good inroads. So in Chhattisgarh, we participated microfiber. In Bihar, we participated with launching Concreto Uno in Bihar, Bengal and Jharkhand. So you will see us coming up with top 10 products, which will be higher than the highest-priced product in the market to maintain our premium position.

Next question is from the line of Shravan Shah from Dolat Capital.

Most of bigger questions have been asked. A couple of data points: Lead distance for third quarter, road/rail mix and, if possible, fuel mix, if you can share?

I will be able to give you our quarter 3 FY '25. Our lead distance is 327 kilometers vis-a-vis Q2 number of 330, 3-kilometer reduction in lead distance. Our road share increased from 60% to 64%. I mentioned that we focus more on Chhattisgarh, so road percentage did increase. Rail share reduced from 40% to 36%. That's all. So it is 54% road share, 36% rail share, 327 lead distance. In terms of fuel mix, as mentioned in earlier part of this call, our rupees per million cal of Q3 stood at 1.45, lowest in the last 10, 11 quarters, 13 quarters, and out of which linkage coal 1.32, nonlinkage coal 1.3, imported coal little bit we used to 2; pet coke at 1.66, AFR was at 1.04. Percentage wise, if you want to know, our coal was 42%; pet coke 48%; and AFR 10%.

Sorry, AFR was, sir, how much?

10%. Q2 was 8%, Q3 10%. This is lower than Q3 of last year, but we were improving in Q4, you will see much more AFR in Q4.

Okay, okay. And in terms of the, sir, from here on the Project Bridge, last time we were saying that we are looking at a INR 75-odd kind of a cost reduction in second half of this year, FY '25. So now how much one can look at in this Q4? How much more is left? And going forward in FY '26-'27, how one can look at in terms of the cost reduction?

In terms of actual rupees, which we will clock in Q4, I can be that 9 months, we are at INR 54. I guess, with the increase in volumes expected in Q4 and all the programs coming to fruition, this number can certainly go up another INR 15, INR 20. So that's the number we will have in Q4. Our Q4 number would be about INR 75, full year number will be a little bit lower than that 9 months is at INR 54, but there are the projects which will certainly continue to next year, the grid integration, power sale as well as increase in AFR, key programs. Sonadih railway siding is completed. So we used to do about 3 rigs per day movement of clinker. Recently, we moved from 3 to 4 rigs, and our target is to move 5 rigs, which would mean that no more of road movement of clinker from Sonadih. Everything will be rig movement. Jajpur siding is in advanced stage of completion. So I think the last about 100 meters of track needs to be laid. So it should be ready in the next 6 to 8 weeks. Come Q1 FY '26, Jajpur should be on. And the last movement of clinker by moving from the siding, which is close to Jajpur into the plant [indiscernible] will happen. Also cement movement from Jajpur into South Bengal will also happen through rig. So those savings will happen from Q1 next year.

Okay. And then in terms of the CapEx in 9 months, how much we have done and what is left in the fourth quarter?

YTD CapEx this year has been INR 299 crores. And I guess in Q4, we should be looking at this Jajpur and a little bit of sustaining CapEx, which should be close to the tune of another INR 50 crores to INR 60 crores.

Okay, okay. So broadly, if I look at Vadraj INR 3,000-odd crores to be spent in '26 and '27 and plus, I think, INR 300-odd crore kind of a maintenance every year, so INR 600-odd crores. So INR 3,600 crores kind of a CapEx one can look at in FY '26 and '27. Is it a fair assumption to look at? And also, if possible, can we see what kind of a volume in the Q3 FY '27 or Q4 FY '27 from Vadraj?

That will be difficult, Shravan, to answer on this call. But I'm looking at a ramp up -- I'll just give you a number which we are working on. Q3 FY '27 is when we are going to be ready with the plant. So I'll get one quarter of FY '27 and then '28 and '29. I'm looking at a very optimistic 1 million coming out of Vadraj in FY '27 and then all it goes to 2 million in '28 and 3 million in '29. The spread of the company will increase because the capacity which gets released from Chittor will be sold in North of India.

Next question is from the line of in Navin Sahadeo from ICICI Securities.

So in the previous question, sir, you did mention about plans for volume ramp-up, which is a 1 million tonne -- 1, 2 and 3 million tonnes in FY '28, '29, '30. Is that what you just mentioned, correct?

1 million -- '27, '28, 1 million. And then '29, 1 million will come out of it, But then that's far and looking currently right now. But if we look at our company, I'm really with the kind of volumes we did last year at 18.7 million, and then the kind of Q3 numbers and overall forecasting for this year. If I hit the indicative number and giving plus/minus 0.1, 0.2, you should always keep. I'm looking at a 10% growth year-on-year from next year, we should have all the way to 21, 23, 25, 27. That's the kind of 2 million increase in sales, which the target I'm keeping for ourselves going forward for the next 3 to 4 years.

Correct, correct. But just from a capacity utilization point of view, I'm talking about specifically Vadraj here. So if the clinker is 3.5, it is only a fair weather port, which means 1 quarter, the impact -- the operations could be impacted. The region is -- both Gujarat and Maharashtra are nontrade-dominated. So if I, let's say, broadly assume a 50-50 mix between OPC and PPC in that market for a 75% clinker utilization. Max what we can extract from this 6 million tonne capacity is about 3.5 million tonnes at its peak.

You're looking at the calculation. I will tell you the way I'm looking at the calculation -- we are looking at the calculation. First of all, if it's what do you call fair weather port. Certainly, I think it is stock linker. That's how all industries work, even in East or shut down and rest of the moment. I always keep clinker stock in Q2 and Q3 so that when Q4 comes, cement industry is also somewhat seasonal. And then certainly, I think every player in the cement industry has the ability to stop and use clinkers. We will also stop and use clinker. So certainly, before the onset of this fair weather period, we will plan in such a way that the clinker movement during -- nonmovement of clinker during those months will not impact our cement production. That's the first thing. There will be some impact. I cannot say everything is going to be hunky-dory in real life. There will always be some gap. So that's the first thing on. Clinker will not kind of spoil -- be a spoilsport for me. The second thing that comes is you mentioned about 50-50 OPC and PPC market. I'm looking at Gujarat market. That 66% what we call, what they call, 40% PPC and 60% OPC. In fact, even conservative than you have taken. You have taken 50-50, I'm taking -- my business model looks at 60-40, and trade to non-trade ratios also about 65-35 is what the -- 40-60 is what I have taken. With all these numbers, the kind of volume that will come out of 3.5 million tonnes, CK ratio of close to about 1.4, 1.5 will take the overall capacity to close to 5 million tonnes, 5 million to 5.2 million tonnes. But one thing we are very clear is, at this point of time, it's 3.5 million tonnes. But our clinker line in Risda factory, when we acquired [indiscernible] came with 10,000 TPD. Today, the line has been debottlenecked to 12,000 TPD. So I think we are not looking at 12,000 TPD in Vadraj on day 1, but I think as we grow the market and we understand the market and ramp up volumes at some stage in FY '27 and '28, and the debottlenecking which you have done in Risda is not like making huge CapEx, about INR 100-odd crores kind of a CapEx where we kind of change the coolers and the blowers and the RPM of the kiln and then in the -- what you call, the air circuits and the back filters. That's how we get of debottleneck. We will debottleneck this line. This is a copy of Risda kiln. So you've got good experience with Risda kiln, same improvement, we will do. Take the capacity from 10,000 to 12,000 TPD at some stage in the future.

Navin, we'll be happy to engage with you on more details on the mix. Just would like to add, our model also factors in, in the trade market, a product like ECC. Because there is access to slag cement in that market and one of the lead players have already introduced this product. We also see in a period of 4 to 5 years, there will be substantial demand from sustainability point of view on the entire industry. Because, as you know, in the Eastern region, there isn't any predominant cost for staying with OPC in the infrastructure. So changes are there. Some of these are factored in. And as I mentioned, you may reach out to the investor cell at any time for greater clarification on these numbers.

I really appreciate the clarity of the operations that you have in mind so early in the scheme of things. So congratulations on that. My last question, is it safe to assume CapEx of roughly INR 2,000-odd crores each in FY '26 and '27?

FY '26 and '27 CapEx, can't be INR 2,000 crores per annum, not possible.

Taking INR 3,600 crores for both years, about INR 1,800 crores would be..

Yes I would spend INR 1,800 crores -- sorry, INR 1,200 crores to get the Vadraj rate, but INR 1,800 crores to buy out is not CapEx. It's financing of the deal. So that cannot be considered CapEx. The CapEx will be about INR 1,200 crores here. And as I mentioned in the previous call, there was a question about what will be the -- how will we expand our brownfield expansion was the question to me last time. And I had mentioned that there won't be any major growth CapExes in any of our plants we need. It will be the sustaining maintenance CapEx, which should be to the tune of about, in fact, one of the analysts had asked, what should be the typical routine CapEx for the company. I have mentioned INR 300-odd crores will be the kind of routine CapEx for the company. And hence, with this kind of CapEx to run the operation and also do a INR 1,500-odd crores or INR 1,700-odd crores to set up brownfield, you would be able to fund the CapEx with the internal cash flows and the profitability improvement in the next 2 years. That's how I had answered the question. Same thing holds good. Just that the location has changed. The level of spend is slightly more, not from the brownfield expression was much expensive than this expansion. Funding of the deal, are working, as I mentioned before. So I think that's the view we have over a period of 2 years, 2.5 years, internal accruals, proper cash flows, improvement and profitability should be able to help us fund this CapEx to cash.

Next question is from the line of Prateek Kumar from Jefferies.

My first question is on your cost. So despite like 4% decline in sizing. Unit EBITDA has actually slightly expanded quarter-on-quarter, largely implying a very sharp reduction in cost trends for this quarter versus last in Q2. Maybe some of it is operating leverage, but there is nearly like INR 200, INR 250 plus reduction in the variable cost for the company. I'm including RM, power and fuel and freight there. So is this like largely due to the cost saving initiatives, which you said like a much lower number. But is there any one-off there? And do you expect this number to like sort of continue? Because in past quarters, we are not seeing such kind of declines on a quarter basis for the company.

The principal components of cost reduction are of 3 folds. One is reduction in power costs. The number at power cost is lowest in 13 quarters of 1.45. That has contributed to the reduction in the energy cost of the company. The second one was reduction in logistics cost close to about INR 50 which comprised of lead distance reduction by 3 kilometers, handling cost reduction of about INR 20-odd, and also maximum utilization of the Soladih siding. That was the second variable. The third variable cost reduction was coming from raw material cost reduction, which contributed about INR 50-odd. So all this certainly contributed to overall variable cost reduction for the company. But as you asked pertinent point, the price drop which happened -- the realization reduction simply chewed away all the cost savings which we did. But the positive thing for me is actually end of December, realization got reinstated by 6% over quarter average. So what we lost in the first 2.5 months of quarter, I reinstated by end of December, which will... [Technical Difficulty]

Prateek, have we responded to your query?

Right. Yes. So you're saying that like this quarterly savings and costs are like sort of sustainable. And next quarter, particularly there will be further benefit of operating leverage. So I mean, based on like, obviously, you've talked about 6% price increase, which is like through January. So like you're not looking at forecast, but like a INR 300, INR 400 swing in EBITDA per tonne in fourth quarter looking at?

Yes. If I can't comment on your numbers, but certainly, I'm looking at certainly reinstatement of realization end of December and in January.

Sure. Okay. And my other question is on Vadraj acquisition. So do you also see -- because we have seen like some recent events related to that. But do you also see any chances of this being, while we have sort of won this acquisition. Any reversal on the whole process and deal not going through?

Possible. Because recent issue, which happened in others, I guess, there are various reasons. So technically, I guess, if somebody wants to put a standard on the work, it is possible. So I guess -- but I don't think in terms of what do you call, the reasons which hampered others issue may not be the reason which will come for us because our due diligence was pretty exhaustive and then the kind of considerations we made were clear. But certainly, I think I cannot rule out any hiccup, which will come on the way.

Sir, I'm asking because for modeling purpose. So we should like sort of look to get more confirmation closer to events prior maybe Q2 FY '26 and then probably you want to model it or like -- how do you think about the same, like kind of a confirmed call, like they are like...

Able to because the NCLT process we have filed only 2 days ago. I guess, typically, it should take optimistically 6 months, in the worst case scenario maybe 8, 9 months. So that's the kind of window we are working on. But I think -- certainly, I think in terms of the modeling and in terms of overall company's outlook for the next 4 to 5 years, I would certainly suggest you to consider the projections which we have factored. But there is always a factor which I don't think we cannot control. But that can happen. I don't think I can comment on that. But certainly, the other way I would look at it, clearly unlikely event of anything happening, our story of expanding through brownfield still holds good, and there we are committed to growing the business in North.

Yes, that's true. But in other case, also, that was the case, but there was like a lot of, I would say, rather time-based, which happened, and this whole process of acquisitions. So that was the only point I was talking about.

No, fair. You're fairly -- you're pretty, I think, right in asking this question. But I think having made all the assumptions and went behind this acquisition and having fructified the deal right now. I think I won't be in a position to say that whether we will lose out or not. But there is always a business that is associated with stuff. So what you're mentioning can be a risk, which as a company which we have gone for it, I will not be able to say that it will happen, it will not happen, but we are confident of overcoming the points. But you can consider it, if you want to.

Next question is from the line of Kunal Shah from DAM Capital.

So just a couple of questions. One, you -- I think briefly mentioned upon this, but is there any discussion with Arcelor in Surat for slag procurement? And could you sort of launch either composite cement or [indiscernible] in Gujarat to sort of create some bit of differentiation?

There's no any conversation with anybody at this point of time, just that the history of this asset when it was set up, whenever it was set up factor that they have some tie-up with the company which you mentioned for slag. And the fact that they are closed by and then they generate slag, there's always a possibility. And Nuvoco being a strong player in East with meeting blended cement has the ability to use slag, this opportunity will always be there. But at this point of time, there is no conversation going on with anybody. But as Mita mentioned, another player has already launched a composite cement in this market. So we -- as we kind of navigate the next few months, we'll observe this particular trend very, very closely and we will plan our strategy based on this and formulate our plans based on how the market is picking up this blended cement and if there is an opportunity to procure slag from people who generate the slag.

Understood. This is helpful. And the other bit is you mentioned in your opening remarks, there is a very big shortfall on the government CapEx, especially until November. But just wanted to understand how is December and January sort of panning out on the ground? Are we seeing sort of a robust pickup or it still remains sort of moderate?

I think sitting at the beginning of the quarter for me to tell how the market demand, I think it will not be appropriate. But certainly, I can vouch for price sticking to the market because that's a published -- that's a number which all of us pick up during trade check. But I'm pretty optimistic that Q4 overall demand should improve for the industry and certainly for our company.

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

Thanks again, Yashasvi. To wrap up, I would like to mention a few more. We believe that the cement sector is witnessing promising demand recovery. The huge unspent capital expenditure from center and state and an expected revisal in rural housing demand aided by favorable monsoon provides a catalyst for the cement demand. The price increase observed in the recent period continues to sustain, reflecting a positive trend, while sustained demand improvement should support prices further going ahead. We are confident in our strategy and ability to execute our growth plans with respect to Vadraj Cement, which will enable us to consolidate our footprint in the Western region. We are excited about our prospects for the future. Meanwhile, our strategic priorities will continue to focus on premiumization, geo mix optimization, enhancing fuel mix efficiency, strengthening our brand and maintaining focus on cost excellence. Prateek, I would just like to add that while we are cognizant of business risks, we repeat we are confident in our approach, strategy and actions we have taken on the Vadraj front. Our Investor Relations team will remain available for any clarification required. Thank you for being with us today.

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