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

Ladies and gentlemen, good day, and welcome to the Q4 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 risk 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, Yashashree. Good afternoon, everyone, and thank you for joining our fourth quarter and 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 key events for the quarter. As we all know, the global economic landscape is shifting rapidly, with recent trade tariffs amplifying uncertainties. Nevertheless, India has demonstrated notable resilience, underpinned by robust economic growth, a solid macroeconomic framework, moderating inflation and strong domestic demand drivers. After a muted first half, economic activity picked up in the second half, driven by rise in government capital expenditure. Real GDP growth accelerated to 6.2% Y-o-Y by Q3 FY '25, up from 5.6% in the previous quarter, reflecting a robust economic recovery supported by stronger rural demand from good crop yields. The forecast of above-normal monsoons further strengthens crop prospects for the upcoming Kharif season. These developments collectively point to a favorable outlook for the cement sector. Now I would like to provide you with key updates on Nuvoco's business. This year, we have taken a fresh look at our mission statement as we embark on a growth phase. Our new mission of trusted building materials company, creating value for our stakeholders embodies our commitment to operational excellence and enhancing value for our stakeholders. Coming to a status update on our acquisition of Vadraj Cement Limited, we have received approval from the NCLT for our resolution plan, marking a key milestone in our growth strategy. This acquisition will enable us to reach a total cement capacity of 31 million tonnes per annum by the third quarter of FY '27, further strengthening our position in the industry. Additionally, we are planning to set up a GU at Kutch as we remain very optimistic on the Kutch operations, considering Gujarat government is actively focusing on developing this region. Furthermore, the state government has favorable incentive programs in place to encourage the establishment of cement operations in Kutch, making it an attractive destination for investors. To reiterate, overall, the Vadraj Cement transaction is a strategic value buy and will be funded without a significant increase in our consolidated debt levels. By adding Vadraj Cement assets, we are well positioned to expand and consolidate our presence in the Western region. This acquisition will also allow us to further consolidate our presence in the northern region as the release of additional capacity from the Chittorgarh plant enables us to better serve that market. With this acquisition, we will become the third-largest cement producer by capacity in the combined Gujarat and Maharashtra markets, while also diversifying our operations and further strengthening our competitive position in these key regions. Let's now review our quarterly performance, evaluate the progress we have made and discuss the outlook for the coming periods. In Q4 FY '25, the company recorded its highest-ever quarterly consolidated cement sales volumes, increasing by 8% year-on-year to 5.7 million metric tons, with full-year sales reaching 19.4 million metric tons. While demand was subdued in the first half of FY '25, the second half witnessed a strong recovery. The company acted swiftly to capitalize on emerging opportunities, strengthening its market presence and driving robust volume growth. Consolidated revenue from operations grew 4% Y-o-Y to INR 3,042 crores in Q4 FY '25, bringing full year revenue to INR 10,357 crores. Supported by back-to-back quarters of improving demand in H2 FY '25, the price environment remains supportive. The price hikes introduced towards the end of 2024 were maintained through Q4 FY '25. The company continued to work on premiumization agenda, with premiumization reaching 40% during the year. Additionally, the company maintained a sharp focus on operational excellence. This is reflected in achieving the lowest blended fuel cost in the last 14 quarters at INR 1.43 per mcal, reinforcing Nuvoco's position amongst the industry's lowest in power and fuel costs. On cost efficiency program, Project BRIDGE 2.0 delivered a saving of INR 56 per metric ton in FY '25. Turning to our balance sheet. We have continued to make progress on our deleveraging agenda during the year, reducing net debt by INR 390 crores year-on-year to INR 3,640 crores despite the challenging operating environment. Over the past few years, we have consistently focused on lowering debt, bringing net debt down from INR 6,730 crores in FY '21 to INR 3,640 crores in FY '25. We have committed that once Nuvoco's debt level reaches the range of INR 3,500 crores to INR 4,000 crores, we would initiate growth CapEx. With our debt now within the targeted range, the strengthened financial position places us well to initiate the next phase of growth and commence operations at Vadraj Cement plant by Q3 FY '27. To quote Mark Twain here, the secret of getting ahead is getting started. We are now ready to embark on a significant journey to diversify our geographical footprint. Turning now to the cement demand scenario. As you are aware, FY '25 was a mixed period for the industry. The first half of the year experienced a subdued macroeconomic environment, primarily due to prolonged elections slowing down government capital expenditure and later challenging weather conditions. However, demand rebounded strongly in the second half of FY '25. During H2, cement demand showed sustained growth over 2 consecutive quarters, driven by increased CapEx from both the federal and state governments, which supported infrastructure and housing projects. Correspondingly, pan-India cement prices began to improve from Q3 FY '25 onwards. Most of the price increases implemented towards the end of Q3 FY '25 largely sustained through Q4 FY '25. Capital expenditure by both state and central governments have started gaining momentum. For FY '26, the central government has increased its CapEx by 10% Y-o-Y to INR 11,000 crores, while state governments have planned an average 17% rise to roughly INR 10 lakh crores, providing a significant boost to infrastructure and housing initiatives. Specifically, the central government's allocation for the Pradhan Mantri Awas Yojana is set to increase by 64%, and major states such as West Bengal, Bihar, Chhattisgarh, Gujarat, Rajasthan and Jharkhand have collectively earmarked approximately INR 35,000 crores for various housing projects. Given this planned CapEx from both central and state governments, cement demand is expected to remain robust in FY '26. Looking ahead, sustained demand growth is also likely to support healthy price levels. On marketing initiatives, our premium products continue to be the preferred choice for customers. Concreto UNO and Duraguard Microfiber, our flagship premium products, have shown encouraging growth. We are pleased to share that our Haryana cement plant [Technical Difficulty] fiber, which is helping us expand its availability and reach across the northern market. With improving market conditions, our trade share has gone up to 75% in our mix in Q4 FY '25 from 71% in the previous quarter. Alongside this, we remain active with on-ground engagement programs that resonate strongly with our channel partners and end consumers. The 'Sabse Khaas Pehelwan' initiative in Haryana strengthened the product positioning around durability and strength, while the Kumbh Mela gave us an important platform to create an enhanced experience for our channel partners and influencers. Coming now to the ready-mix and MBM businesses. With respect to ready-mix, we added 2 plants in Ranchi and Nagpur in Q4 and remain committed to driving growth and enhancing market presence across India. The MBM segment provides an opportunity to strengthen our cement channels and garner wallet share of our end users. The company is committed to delivering high-quality differentiated products that drive growth and create long-term value. Strategic outlook for FY '26. As we look ahead, our strategic focus remains on driving growth and operational excellence across all 3 business verticals. Firstly, in the cement business, our priorities will be refreshing our go-to-market strategy to align with our expanding footprint with a clear ambition to drive market share; achieve market leadership in our home markets, while expanding our presence in the Western region; continue to drive premiumization agenda for value growth; deploy efficiency programs to optimize manufacturing, procurement and logistics costs. In the ready-mix business, we plan to expand our manufacturing footprint to support volume growth. Alongside this, we will continue to deploy operational efficiency programs to enhance cost competitiveness. For MBM business, our focus is on accelerating business growth by leveraging the strength of our existing cement distribution network. This will allow us to tap into additional market opportunities. Here too, efficiency improvement programs will be deployed to deliver cost savings. Together, these strategic priorities are designed to enhance our market positioning. We will continue to build competitive advantage through customer-centric culture to delight stakeholders. On sustainability, we remain committed to our sustainability focus. With this, I conclude my opening remarks. I'm joined here by Mr. Jayakumar Krishnaswamy, Managing Director of Nuvoco Vistas; and Mr. Maneesh Agrawal, our Chief Financial Officer. We will be happy to answer any questions that you may have. Thank you.

[Operator Instructions] We'll take our first question from the line of Navin Sahadeo from ICICI Securities.

So congratulations on a good set of numbers. A couple of queries, but let me start by congratulating your sales team first for the wonderful realization increase and also increasing the trade share from 71% to 75%. So indeed, a great job. My first question was in your opening comments, madam, you mentioned that the acquisition of Vadraj will be pursued without any further increase in net debt. So if you could just help us understand or just take us through how do we really plan to do that. Of course, net debt has come down to INR 3,640 crores. But I think there is an upfront payment to be made of INR 1,800 crores to the NCLT or to the bankers itself. And then I think it was guided that INR 1,100 crores to INR 1,200 crores is what would require over 2 years. So I'm assuming that INR 1,200 crores, partly at least INR 500 crores will come this year and the balance next year. So upfront payment is almost INR 2,300 crores, some maintenance CapEx. So I just want to understand how do you see this without increasing the net debt level?

Yes. Thank you for this question. The last 3 years ever since our listing and then our investor call started way back in 2021. One of the things which we have clearly mentioned is we are -- for the size of the company and the size of the business we have, we are comfortable operating with a net debt around INR 3,500 crores to INR 4,000 crores. And our pursuit in the last few years have been to pay down the debt from where we were 3 years ago till now. And this quarter, we reached INR 3,640 crores. And you would have seen every quarter-to-quarter comparison and while year-to-year comparison, every quarter, we have debt levels of the company has been lower than the previous year's quarter. So we have reached the stage. And in the last call, I had mentioned that we had successfully bid for Vadraj and then we are bidding for the NCLT process to happen. And this quarter, obviously, the NCLT process happened and now the ruling is in our favor and then we should proceed on getting investment going. So we certainly earn the right to invest, meeting the commitments which we have made consistently by reducing the debt of the organization. Now comes to how do we kind of find a way to fund this acquisition as well as the rebuild of the facility. In the last call, we had mentioned that the cost of acquisition is around INR 1,800 crores. And our current estimate at that time was to rebuild the Surat and the Kutch facility will be to the tune of about INR 1,200 crores. That was the messaging which I had done in the last quarter. So as we come to the consummation of the transaction, here is what we plan to do. We would find a way to fund this transaction to keep the debt levels of Nuvoco at a reasonable level. What do you mean by reasonable level? Out of this INR 1,800 crores of financing, which we need to do upfront, we will take a long-term debt of INR 600 crores in Nuvoco's books. And then the balance INR 1,200 crores will be through instruments like CCDs and CCPS , which will be on a long-term maturity. Interest cost of this will be at the tag end at the end of the period so that the balance sheet of Nuvoco doesn't get loaded. So Nuvoco will pick up a debt of close to INR 600 crores in short term. And till the financing happens, we will also take a bridge loan of about INR 1,200 crores for a max period of 6 months, but it should be much before 6 months before we complete the payment for the transaction. So in short, INR 600 crores will be on the books of Nuvoco in the form of long-term debt and the balance INR 1,200 crores will be through CCPS and CCDs, which will be long term and not figure in the debt level of Nuvoco. That's the first bid in terms of paying that INR 1,800 crores. The second thing is about the investment of about INR 1,200 crores. I just want to inform all of you in this meeting that subsequent to the last investor call and now, some important positive welcome development happened, which Madhumita mentioned in her speech. We have also identified there are fiscal opportunities available in the state of Gujarat for expanding in Kutch, and we have decided to set up a Grinding Unit in Kutch facility for 2 million tonnes. Hence, the overall CapEx needed to rebuild Kutch facility, Surat facility and also put up a GU in Kutch will now be turned up from the original number of INR 1,200 crores to about INR 1,500 crores, but the time line to do all these things will be in 3 calendar years of FY of 2025, 2026 and 2027. And the phasing of the investments would be in the tune of about INR 600 crores, INR 600 crores and INR 300 crores in the next 3 years, 24 to 30 months. And along with that, to fund this CapEx from internal accruals, we will pay down our capital expenditure to run the current operations to a max of INR 100 crores to INR 150 crores, so that we have adequate cash flow in the organization to fund the CapEx of Vadraj. So that's the sum and substance of how the INR 1,800 crore funding will happen, and also the INR 1,500 crores, which was INR 1,200 crores plus the current change into INR 300 crores of setting up the grinding unit in Kutch, plus also expanding -- refurbishing Kutch and Surat facility. Hope that's clear to you. If you have any further queries, you can ask.

So just on this bid, when we say CCPS, and I'm assuming you're talking about Compulsory Convertible Preference Shares, is it the promoters who will be looking to subscribe this? Are they putting in more money? Or we are looking at an external investor or a combination of both? How should one look at it?

We will have investors who will invest into Vadraj in the form of CCPS and CCD, and at an opportune time with a long-term maturity and when the maturity happens, then we kind of repay the CCPS and CCDs the maturity time.

Understood. And just one last question from me. Are we building in the acquisition or the -- I think that there's a power plant, which is in control of JSW. It's not part of the deal, but it's in the vicinity, and we need it for operations. So are we accounting for that acquisition cost as well?

Currently, we are in discussions for the CDP. The deal is not concluded. But as and when it is done, we'll have to -- we will find a way to incorporate in the refurbishment cost.

We'll take our next question from the line of Prateek Kumar from Jefferies.

Congrats for great results. My first question is on your cost savings. So you have seen like sort of rolled out a few cost-saving programs. If you can quantify how much per tonne basis was achieved in FY '25 as a company? And how are you looking at in terms of FY '26, '27 in terms of any more incremental initiatives there?

Okay. Mita mentioned in her speech that program BRIDGE delivered close to about INR 56 per tonne. That has come through 3 routes. One is raw material costs reduced by close to about INR 5 to INR 8 at a full-year basis. The power and fuel cost from FY '24 to '25 reduced by INR 32, INR 33. And then the distribution cost, which is including of SFC -- okay, I'm sorry. It reduced by INR 130, I'm sorry, I just missed the number there. It's about raw material costs about INR 5 to INR 7, power and fuel cost close to about INR 130. Distribution costs reduced, including the semi-finished clinker movement reduced by close to about INR 100-odd. So all this came through cost savings, which were planned through the railway siding in Sonadi, railway siding in Jajpur, which is more or less complete, but will be completed in the quarter, setting up of alternate fuel systems in Nimbol and Chittor, which brought us the fuel cost down and also ramp-up of the AFR facility in Risda, namely, 3 buckets, raw material cost reduction. Second one is power cost savings, and third one is paring down of distribution costs. Overall, when compared to FY '24 to '25, we had these savings. And Project BRIDGE is one part of the overall cost savings and the Project BRIDGE delivered close to about INR 56 per tonne. And the second part of your question was what is the future targets for us, I think we are targeting with the implementation of full ramp-up of Sonadi Railway siding, full ramp-up of Jajpur siding and also other productivity improvement programs in terms of getting the full benefit of AFR in these sites. We are targeting close to about INR 100 to INR 150 per tonne in the next 2 to 3 years.

Sure. Just a clarification for '25 over '24, you said INR 8 from RM, INR 130 from P&F, and INR 100 from -- so totally like INR 240 kind of savings. Did I get it right? INR 240 per tonne savings from the...

More than INR 200. But overall, if you remember rightly, a year ago, we defined what all items came in the form of BRIDGE agenda. So in the speech, Mita clearly mentioned the BRIDGE agenda, which we announced delivered close to INR 56. But on top of that, programs which are not part of the BRIDGE, which is namely ramping up of AFR and also getting the allied lag and other projects in raw material delivered the balance savings. The BRIDGE agenda typically had new back sourcing model. It had a grid integration program out of Chhattisgarh. It had efficiency improvement in variable cost, and also it had a component of SO percentage increase in sales. All this was part of the BRIDGE agenda. We delivered INR 56 out of the BRIDGE agenda in this year. Over and above the BRIDGE agenda, there was a fuel cost savings, which came through rate variance as well as through AFR improvement, and also enhanced semi-finished goods movement through the railway siding.

Sure, sir. Very clear. My other question is on pricing. So like exit of March quarter saw like some price hikes and in April, some more price hikes. So how is Q1 trending over average of last quarters exactly?

So just to drop the memory that when we did the earnings call in January, I had mentioned that we ended the quarter with a 6% increase in realization. Happy to report that the kind of realization we ended Q3 almost continued throughout the quarter with some changes. But we had mentioned at that time itself that we will see the benefit of price corrections, which we made in Q4, which did happen, and that's one of the main reasons for our improvement in results. Also quite confident that the price increases and the changes which we did in Q4, a large part of it is sustaining in -- as we entered April -- completed April entered in May. But as we stand in the 1st of May, a large component of what happened in Q4 continues to be present in April and as of now in May.

We'll take our next question from the line of Satyadeep Jain from AMBIT Capital.

Just a couple of questions around Vadraj only. Just a clarification question. When you say you're looking at CCPS from external investors, Mr. Jayakumar, have you already -- do you already have an agreement in place with these investors who would largely be -- I'm guessing private equity investors who put in the CCPS. When you say INR 600 crores, you already have an agreement in place?

Yes, we are on term sheet exchange levels right now. As you would know that we signed -- the court order came on 3rd of April. And sometime earliest could be third week of May. We are still working on the various procedural issues with the CCPS with the RPs. Over the next 2 to 3 weeks, we should be able to firm up the term sheets. So we are pretty confident that these 2 instruments, CCDs and CCPS will be concluded before we kind of conclude the deal. In any case, what we have done, as I mentioned in the earlier remarks, while the shake hand has to happen, it might take a week or 2 here and there, we will do a bridge financing to ensure that if the date of paying the money happens, so we would do a bridge financing in the interim. And that's why I mentioned in my speech that we're doing a bridge financing of INR 1,200 crores for a max period of 6 months, but we are fairly confident in completing the CCPS and the CCD road in the -- before the time line which I mentioned.

Okay. Fair enough. Just secondly on the Vadraj, can you -- now that you have completed the formalities for acquisition, you have better idea. When you look at the refurbishment, the entire commissioning of plant, can you maybe walk us through the time lines, the milestones that we can also track from here, let's say, for the next 24 months?

Sure. As I mentioned, the original plan when we did the due diligence as well as the closer to the date when we did a technical discussion with our technical partners, the original scope was to refurbish Kutch and also get the Surat grinding unit going. Along the way, we also realized that the incentives available in the state of Gujarat and so we have changed the scope, increased the scope in Kutch to interunit refurbishment plus also the grinding unit, setting up a grinding unit in Kutch. So the broad time lines for this, obviously, we can [Technical Difficulty] expenditure till the deal is consummated. So I'm assuming in the next few weeks, we consummate the deal. But to get a head start of the place, we have done a couple of repeat trips to the place. We have already appointed a technical consultant who is going to design the plant for us. Internally, we have a very clear-cut understanding of what are all the changes which we need to make in Kutch as well as Surat, namely the -- I'll just give a little bit of a broad highlights of what we are planning to do in Kutch and then I'll talk about Surat. The broad highlights of Kutch being basically many things are in very good shape there in Kutch in terms of the kiln per se, in terms of the CCR, in terms of overall crushing equipment, mines equipment, all those things are -- just needs overhauling, the VRM there, the coal mill as well as the raw mill, all of them, I think we have had all the OEMs having visited and made a technical estimate as well as the cost estimates are ready in terms of how long it will take, how much it will cost to kind of refurbish these assets. The housing is also kind of half complete, residential complex for the employees. The mining area is almost -- equipment is in a fairly decent shape. So a lot of things are in good shape in terms of our original assessment as well as what we saw later. I guess we are very happy that our due diligence was fairly accurate, and we have not gone quite away from the original estimate in terms of what we needed to do. The broad time lines being, as soon as we complete the deal, our target is in the next 6 to 8 weeks, all the purchase orders will be rolled out. And the longest lead time item for Kutch could be the desalination plant and some of the other infrastructure should take typically 12 months -- 12 to 13, 14 months an outside limit of delivery into the site. And then pre-commissioning should start sometime end of Q2 next year. And then by Q3, we should have commissioning completed in Kutch in terms of the clinker manufacturing. The GU per se, again, will start in parallel, but that again should take close to 15 to 18 months. So we should be having a matching time line, give or take, 1 month here and there for the GU to be operational in Kutch. Coming to Surat, while we knew what was available there in Surat, so we now have a clear-cut idea of what all needs to be done in terms of the mill, in terms of the packing line, the truck loaders, the CCR and rest of all the stuff. Again, here again, our current estimate is it should take after the purchase order, which will be released in close to 6 to 8 weeks, anywhere between 12 to 15 months for the mills to be operational. So technically, as we speak, we are timing in such a way that 6 to 8 weeks purchase orders goes before the technical design is completed, contractor mobilization as well as rest of all the stuff can happen in parallel. And by the time we hit Q3 next year, we should be ready for pre-commissioning trials in both the sites and GU should be operational in Kutch end of Q3. That's broadly the time line. When we meet up for the next earnings call, I'll be able to give a little bit more color to the plan, which we are building right now.

Just on the decision to have the GU in Kutch, if you look at coastal transport, would it not have been more prudent to transport linker rather than transporting clinker? What's the thought? I know you also have a rail line you're looking at from Mundra assigned. Just want to understand the thought behind putting up a GU in Kutch than Surat.

No, no, Surat use is very much on. Surat has got 3 VRMs. So, we are going to operationalize 2 of the VRMs from day 1. That's the plan. And certainly, one will be commissioned at the time line. So we are targeting all the 5 regions of Gujarat, Mid Gujarat, South Gujarat, we have the Saurashtra and Kutch, then you have the Banaskantha as well as the Ahmedabad area. All the markets we are targeting. Currently, we sell in Baroda, Surat and Banaskantha. But then with the Kutch facility coming, we are targeting the markets of Saurashtra, Rajkot, Porbandar and that part of Gujarat through the grinding unit in Kutch. And the clinker movement via Jetty will continue to happen in the original plan, which we spoke about in the last call, all the way from Kutch into the Jetty in Surat. And we would be grinding cement and so as well for the markets in South Gujarat as well as West Maharashtra and North Maharashtra.

[Operator Instructions] We'll take our next question from the line of Tejas Pradhan from Citi.

On the like breakup of the refurbishment cost that you have mentioned, INR 600 crores, INR 600 crores and INR 300 crores in 3 years, FY '26, '27, '28, so just wanted to understand, is this just related to the plant start-up? Or considering that, I mean, there is some CapEx to be done in FY '28 as well, whereas the commissioning is expected for third quarter of '27? Is this INR 1,500 crores split into some part of CapEx, which is not required to start the plant? Or is that difference just timing delays of like -- I mean, the delay in making payments to your contractors?

Okay. So it's actually when we are going to start the plant, when I mentioned Q3 kick-starting the facility, we will certainly start the clinker facility in Kutch. End of Q3 will be the GU. Q3 means December FY '27. And also, then comes the Surat. Out of the 3 mills at the first stage, we are going to commission 1 mill because since day 1, we are not going to sell the 6 million capacities. So we need to ramp up the market. So we are not in a hurry to kind of set up all this on the first 1.5 years. So that's why we're kind of phasing the expenditure in such a way -- investment in such a way that get the clinker line going, get the Surat grinding unit going, 1 unit, 1 VRM and also get the GU going, which means this year, FY '26, there will be a set of expenditure. FY '27, there will be set of expenditure. But part of the investment will get into maybe Q1 of FY '28. And hence, the phasing is what I mentioned. All that is needed to get into the market and be in the market will happen by end of Q3 next year, which is FY '27. However, the overall project should be completed -- will be completed not by end of December next year, it will get into another 3, 4 months, which will technically get into FY '28.

Okay. Okay. And just in addition to that, I mean, what would be the pace of ramp-up that you would be expecting over here once you like start the commissioning? How long would it take for you to fully utilize the capacities over there?

Again, I'll go back 3 months ago during our earnings call in January, we did speak about it. I'll just kind of refresh the stuff. Currently in Gujarat, we already sell close to 1 million tonnes of cement in trade and non-trade. And as we speak, we have the facilities in Chittor and Nimbol, which service the entire North market as well as Gujarat. And one of the rationales for Vadraj is to kind of -- it's a value buy and gives us the opening in the West market of Gujarat and Maharashtra, plus also frees up capacity for North when the plant is more or less sold-out next year same time. The thought process being once the Vadraj starts up Q3 next year, the 1 million tonne, which we have been selling in Gujarat during the course of this year, certainly as per market growth as well as our trade channel expansion, this number itself is going to increase. So I'm really giving -- it's not a kind of a number which I am kind of targeting, but I'm just giving a regular course of things, this number certainly would have gone from 1 million tonne to 1.25 million tonne. So the thought process is the 1.25 million tonnes will move from Gujarat. The cement which is spared out of Gujarat will be used in Rajasthan, Haryana, Western MP and up North. So FY '27, Q3 onwards, the capacity which is freed up from Gujarat will get into North. And when Vadraj starts, we will already have a 1.5 million market, which is already developed from our product in North open for Vadraj production. Along with that, during the course of this year, Q3 and Q4 and Q1 next year, we plan to start appointing dealerships in Gujarat, expanding the market, spend behind our brand, spend the network, employ people, establish the channel, create key accounts. It's -- we call it the project WIDE. So this is the project which is set up to kind of expand Gujarat. And when the market -- when the plant is ready, we already have a market, which is 1.5 million tonnes and then a channel, which will be ready by Q3 next year. So in FY '27, half month, probably 0.3 million, 0.4 million tonnes from Vadraj will be sold in Gujarat. And in FY '28, we are targeting a full year 2 million tonne sale in Gujarat. And in FY '29, this will go to higher numbers and then on the buildup habits. That's the kind of target which we have in mind.

We'll take our next question from the line of Parag Thakkar from Fort Capital.

Congratulations for excellent set of numbers. So just wanted to understand that in this year -- this quarter itself, after paying interest, I think your cash profit was close to INR 400 crores. So what I'm trying to say is that how much of the entire INR 3,000 crores you feel that actually, on a cash flow basis, net debt addition due to this INR 3,000 crores in Nuvoco book, as you said, you are just taking INR 600 crores right now. But since Vadraj is your company, ultimately, the investors are going to look at consolidated net debt, right? So I would like to say that you can generate around INR 1,200 crores to INR 1,300 crores cash profit every year based on if the demand and pricing remains favorable, which is looking to be favorable right now. So at the end of the CapEx cycle, again, what your net debt to EBITDA can be? Is there any number in your mind?

At this point of time, end of CapEx cycle 3 years from now, I won't be able to tell you what is the kind of number which we will have. But suffice to say, the target which we have is 3-year cycle from now, we certainly will be back at anywhere between INR 3,500 crores to INR 4,000 crores because that's the number which we have always maintained that we are comfortable carrying a debt of close to INR 3,500 crores to INR 4,000 crores in our books because eventually, we have to grow as well. And when we have to grow, we need to fund the CapEx. And as we have mentioned in the past, we would be targeting a number anywhere between INR 3,500 crores and INR 4,000 crores around the end of CapEx cycle for us to be ready for the next wave of expansion once the Vadraj is done.

Correct. Correct. So basically, you are saying that at the end of this CapEx also, your net debt on a consolidated level will remain at around INR 4,000 crores only because of the internal accruals, which you are generating and funding your CapEx through internal accruals?

If we have to kind of -- okay, I have to do a mathematic modeling for you. If I were to look at the current market condition and the volume growth and the EBITDA per tonne and the overall cash that the business will generate, if I simply one [ swallow ] doesn't count us quantify Q4 into full year and the next 3 years, I won't do that. But still, I would be kind of very balanced in terms of projecting the numbers for the organization because the market conditions may not be the same all the time. But suffice to say that at any given time during the tail end of this CapEx period and also at the end of this CapEx period, our target will be to kind of keep a debt level anywhere between INR 3,500 crores to INR 4,000 crores.

That is very helpful. And just to ask one last question. When you said that large part of the price increases done in Q4 are sustaining and it will flow into -- up till now in April and May, how is the demand behaving after March in terms of volumes?

I won't be able to give a forward-looking statement in terms of volumes as well as how the price will pan out going forward because I mentioned as we stand complete April as well as the threshold of May, we are looking at this kind of number. But as the market estimates as well as our read of market as well as what's being projected for the cement industry, the industry is looking at close to about 7% to 8% volume growth in the coming year. And that's the kind of number which I am foreseeing going forward.

We'll take our next question from the line of Rajesh Ravi from HDFC Securities.

Am I audible?

Troubles on your line, Rajesh. I can hear you, Rajesh, but there's a lot of background noise. We'll take our next question from the line of Shravan Shah from Dolat Capital.

Ma'am, just to get some data point. First is the lead distance for fourth quarter, railroad mix, pet coke share in the fourth quarter and AFR share in the fourth quarter.

Yes, Shravan, I think I've got some of the data points here. So let me take it. Q4 FY '25, lead distance, we did get some incremental improvement stood at 324. The road share was 63%. And what was your third question?

AFR and pet coke, sir.

Okay. So the fuel mix was just coal, 38%, of which 26% was linkage. Pet coke, 52% [Technical Difficulty] depend on pet coke and volumes were high -- operational volumes were high. And AFR was 11%.

Got it. And ma'am, sir, when mentioned 7% to 8% industry demand growth, we said that there was a similar volume growth in FY '26.

Yes. Shravan, the context was how we are looking at the FY '26 growth. As you know that the year has gone by, the growth has been more in the region of 4%. But this has since improved. And our outlook, I shared earlier too, that we see a demand growth of 7% to 8% over 2 or 3 quarters, should also create a favorable environment for prices to sustain. So that's the outlook as of now.

Okay. Got it. And then just to clarify in terms of the -- whatever the way we will be funding the Vadraj, just to put you a simple number in terms of the CapEx at a consol level in FY '26, '27, so obviously, this INR 1,800 crores, whatever way we'll be funding, so that we will be spending immediately by -- maybe by June this and then another maybe INR 150-odd crores. So is it fair to say for this year, FY '26, it would be close to INR 2,200 crores plus kind of CapEx will be there and next year would be kind of INR 1,500 crores to INR 1,700 crores CapEx will be there in FY '27 at consol level?

Shravan, if I might make a request, Mr. Krishnaswamy has been taking this question in many forms, almost 3 times in this call. May I request you to reach out to the Investor Relations department. We'll give you a specific perspective.

Got it. And also, when sir was mentioning that even by the end of third year, we are also looking at INR 3,500 crores to INR 4,000 crores kind of a net debt, I was just wondering how that will be even if I, let's say, look at the way that we were saying 1.5 million tonne volume in the -- for Vadraj in FY '27, then 2 million, 3 million, so 5 million and 6.5 million, even if I take INR 1,000 EBITDA would be close to 650-odd crores kind of EBITDA that we'll be generating. So is it still -- are we confident that at the end of FY, even FY '28, we will be having INR 3,500 crores to INR 4,000 crores kind of a net debt?

Right. That is our operating framework, Shravan, as I said, because we can't be doing a full financial modeling on the call. So do please reach out to us, and we will walk you through the part.

We can add one more thing to Shravan. You are looking at Vadraj. Vadraj is going to be a wholly owned subsidiary of Nuvoco. So it's Nuvoco, which is going to invest on CapEx in the group companies of Nuvoco Vistas Limited and Vadraj Cement Limited. So we have to look at the overall results of the P&L of the company to find out where the cash will come out, how capital deployment will happen. Suffice to say, I mentioned one statement. At the Nuvoco Group level in the coming year, we are looking at a CapEx not more than INR 100 crores to INR 150 crores. Hence, all the money which will be generated at Nuvoco Group will be used to fund the Vadraj CapEx. Hope that meets your question.

Yes. Got it. And the clinker that we have 3.5 million...

You have to join back in the queue, please, as we have other participants. We'll take our next question from the line of Jyoti Gupta from Nirmal Bang.

I hope the performance that you have done in quarter 4 is a spillover in quarter 1 FY '26 as well. And to that -- to this, I want to add, we are adding almost 150 million tonnes of capacity in the next 2 years, '26 and '27.

Sorry to interrupt. Can you speak a bit louder, please? Your volume is very low. Can you use your handset?

Can you hear me? Yes. So we are adding literally 95 million tonnes and at 7% growth, we will have an incremental demand of only 67.9, yet we want 68 million tonnes. How do you think -- is this not going to depress prices going forward? And how do you think we want to manage or be able to maintain our market share going forward?

Jyoti, actually, when we look at the numbers, firstly, you know the kind of operating mix we have. For us, the dominant space in which we need to take a look at these numbers is still in the Eastern region market, particularly in the perspective of FY '26. So here, again, this is a discussion we heard in earlier calls too. There are 2 things we should look at. What is the additional cement capacity that is coming in and what is the clinker-based cement capacity that we are expecting. So if we take a look at the clinker-based, effective clinker capacity during this period, I'm looking at FY '25 to FY '27, clinker in the East will go up from 56 million tonnes to 62 million tonnes to 67 million tonnes. So clinker back cement capacity will go up from an estimated 96 million tonnes to 105 million tonnes to 140 million tonnes. And this -- if you take a look at the percentage growth in the cement demand, even at 8-ish percent 2 years in a row, because that is the outlook we are taking now, the capacity utilization backed by clinker in the East continues to [Technical Difficulty]. So there is not a radical change in the supply situation to dampen the prices. And again, as we said, we have gone through a period in East of serial dips in the demand cycle. This is now improving and the outlook of anywhere between 6% to 8% sustained quarter-on-quarter on a Y-o-Y basis, we feel is a good environment for prices to stabilize.

And what about North now? Because if I understand your regional mix is 60% East and 40% North. We have a lot of capacities coming in the North as well.

Jyoti, that is right. But in the North, the [Technical Difficulty] scope to grow. We are a 6 million tonne player there. It is not that our leadership position in the top 3 is being challenged. So we do believe that there is growth, given our strategic intent and our product portfolio to grow in the North.

We'll take our next question from the line of Sanjay Nandi from VT Capital.

Congrats on a good set of numbers. Sir, can you please throw some light on the pricing front? Like what has been the price movement from the exit of Q4 as we talk to?

Yes. I think from Q4 average to March exit, overall, the realization has increased close to about INR 8 to INR 10 per bag.

So from exit of Q4, it's up by INR 8 to INR 10 per bag, right?

Yes. End of December to Q4, the price realization has increased between anywhere between INR 8 to INR 10 per bag.

And sir, I was asking like from the exit of Q4, like for the March quarter and as we stock in the like second week of, yes...

Yes, we can again look at close to about anywhere between INR 8 to INR 10 per bag increase in the prices from Q4 all the way to Q1 next year.

Okay, from Q4 to as of now, INR 8 to INR 10, right?

That's right.

We'll take our next question from the line of Satyadeep Jain from AMBIT Capital.

Just a couple of follow-up questions. One was you mentioned you would be running lean on maintenance CapEx for the next 3 years, somewhere about INR 100-odd crores. Just wanted to understand this long duration going lean on maintenance CapEx. How does it impact the maintenance and operations of the assets? It's just a relatively low number sustaining for such a long period of time? I just want to understand the implications.

Okay. When I mentioned, Satyadeep, the maintenance CapEx is not maintaining the plant. So these are all routine CapEx, which are there to kind of do debottlenecking, increasing small capacity increases or -- basically, all of them is technically mandatory safety CapEx or improving product quality or increasing productivity. That's the kind of CapEx. Historically, our company spends in the tune of INR 100 crores to INR 150 crores. We used to be less than INR 100 crores before the Emami acquisition. Now with the Emami plant coming in, that number is anywhere ranging between INR 100 crores to INR 150 crores. When I mentioned that the maintenance CapEx is not bearing down the maintenance equipment, maintenance of equipment and repairs and maintenance, that gets into the operational expenditure of the company. There is no kind of compromise on keeping the equipment on ship. All I mentioned was at 19 million tonnes in East and 6 million tonnes in North, right now in this year and the coming year, we don't intend to expand the capacity big time in any place in terms of clinker increase or grinding increase or the AFR, which we did or the siding in Sonadi or the siding in Jajpur, such kind of CapEx, we don't intend to invest in the coming year and the year. However, maintaining equipment is part of the routine expenditure that anyway will incur to ensure that the lines are in good shape. So suffice to say, the philosophy of the company is to maintain the reliability of greater than 98%. And we run total productive maintenance in all our plants and maintaining equipment health and equipment well-being and ensuring equipment productivity continues to be of the highest level, and it is our competitive advantage.

Okay. Just one more follow-up on the marketing strategy. There is now a new marketing team looking at this quarter also. Has there been any change in branding strategy? Is it more status quo so far? Just want to understand, you mentioned price correction. I didn't understand, is it generally industry price increase? Or has there been any brand positioning or something, especially with the new team in place?

The people are there occupying position. So I guess I'm not going to talk about who occupies the share or not eventually. Nuvoco leadership team runs the company where all of us are part of the leadership team of the company. So there might be odd changes always at the top. So I don't think people changing is going to change the strategy of the organization. So we have been consistent with the top leadership for the company. So I want to assure all of you that Nuvoco's strategy in terms of being a premium player, being a blended cement player, priority in slag cement and having a higher trade share and getting a CK ratio, one of the tops in the industry, all those have been consistent for many years. We don't intend changing any of those core principles of the organization. Our brands being Concreto, Duraguard are the 2 flagship brands. That's how we run our organization. On the Concreto side, very happy to report that in fiscal '25, we launched Concreto UNO at a price point of close to INR 35 more than the regular Concreto. And we are very, very pleased in the month of March, we sold 80,000 tonnes of Concreto in the states of Bihar, Bengal, Jharkhand and expanding the same to Orissa going forward. Our target is to get 1 million tonnes of Concrete UNO in the coming year. Along with that, Duraguard Microfiber, as Mita mentioned, we now make in Haryana cement plant to make it available in Haryana, Rajasthan, Western MP, Chhattisgarh and rest of North India. And this product, currently, it used to sell about close to about 16,000 to 20,000 tonnes per month. We have ramped it to about 35,000 tonnes per month. And going forward, our target is to take it to 0.5 million tonnes in the coming fiscal and beyond. So no strategy of premiumization and super premiumization continues to hold good. So if you were to ask me a question, did we do anything different in FY '25? Yes, we did something very, very different in FY '25. Launch Concreto UNO at a price point, which is right at the top in the market, which has got -- and we've demonstrated that it sells at of 56,000 tonnes per month and rolling Duraguard Microfiber through the Duraguard franchisee Rest of India. So these are the 2 salient points. Other than that, Q4 trade share increase versus Q3. Our CK ratio is at 1.72 and above. So all those things continue to hold good. Marketing strategy is strong. Brand strategy continues to be stable and consistent with the past, and we have things in order and in place.

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

Thank you, Yashashree. Ladies and gentlemen, thank you for your questions, which we trust have been well addressed. Our Investor Relations team will remain available for any clarifications required. To conclude, we remain optimistic about the cement demand. As we look ahead, our focus will be on scaling growth and expanding our market footprint. The company will continue to drive key initiatives pertaining to premiumization, geo optimization and cost optimization. This aligns with our renewed mission of being a trusted building materials company, creating value for our stakeholders. Thank you once again for being with us today. Good day to all of you.

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