Orient Cement Limited (ORIENTCEM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Orient Cement's Q3 FY '22 Results Conference Call, hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Krupal Maniar, ICICI Securities. Thank you, and over to you.

[Audio Gap] [ to everyone ]. On behalf of ICICI Securities, we welcome you to the Third Quarter Earnings Call of Orient Cement Limited. On the call, we have with us Mr. Deepak Khetrapal, MD and CEO; and Mr. Soumitro Bhattacharyya, CFO of the company. And at this point in time, I'll hand over the floor to Mr. Deepak Khetrapal for his opening remarks, which will be followed by interactive Q&A session. Thank you. And over to you, sir.

[ Good morning ], everyone, and welcome to our earnings call for quarter 3 FY '22. It's always good to sort of meet so many people. And earlier, we were not doing it, but I think now it's becoming habit with me also as well as with all of you, so here we go. Well, coming to Q3. I guess all of you, even more than we, have perhaps seen the results that have been coming out from cement [indiscernible], so far. And I think the -- it's well known that it's been a rather soft quarter for the industry as a whole. And so to that extent, yes, we are aware that it -- not only was it a soft quarter. [indiscernible], but still let me touch upon the main reasons being, I think, the extended rains which continued as well into November -- or October and, beyond that, into November also in many parts of the country, not just some parts, but [ our parts ] of the market were quite roughly affected by it also. And again typically we do expect the labor shortages which happen till about Diwali, until about [indiscernible] time. And soon after [indiscernible], we start [ getting a bit the required ] labor coming back to construction sites, but this year, surprisingly, that didn't happen. It took much longer than it should have. And then there were [ signed issues ] in some markets. There was a construction ban due to pollution in Northern India and things like that, so obviously it's multiple factors coming and hitting, but even all said and done, the fact of the matter [ is, yes, the ] industry has struggled during Q3. In our case also, you will have noticed [ when we're actually ] reporting the total volumes, which are at [ 12.18 lakhs ] that we reported. On year-on-year basis, it's nearly 10% down. And we obviously are not happy with the figure of 10% down, but I'll explain what happened. And even sequentially, we are down 5% [ on the surface ] but knowing that in the previous quarter we had not very large but still some quantum of clinker that was sold in the previous quarter, which obviously [ somewhat immediate and new supply is not our idea of business ]. So if we didn't take clinker, [ the total cement sales ] are down sequentially just 3% and not 5%. And in terms of the revenues, they've been pretty steady to slightly [ form ], but the volumes have been hit and there's no getting away from that. So let me just tell you the -- our perspective on the volumes being down and how we still feel that we've done the right thing. We have done the right thing not because the entire loss is caused by the market. Partly it's been our very conscious call. And some of you who -- may have read our earnings release that we send out every quarter. See, this quarter, when we started, we knew that the fuel costs and fuel supplies also -- there were anxieties because Indian domestic mines had to still recover from the rains and the availability on day-to-day basis was rather uncertain. And we at our company somehow were very anxious about the escalating -- we had the fuel, but we -- also, rather than taking the decision on sales based on what we call historical cost-price as it gets booked into the P&L, we were taking our decision on where to sell, where not to sell based on the replacement costs of the coal because we didn't want to go wrong just sort of utilizing the coal stocks that we had and then suddenly getting hit by such a large increase in coal costs. So that was a major driver where we -- and as a result of that, what we did was we kept our margin on -- or our actually keen eyes on margin on, [ I don't know ], almost every ton of coal that we are consuming. That became our mantra. Rather than saying I want [indiscernible], I'm saying, "How does it pan out in terms of usage of coal," and that's what -- you maximize that. So this focus on realizations, [ when I say ], and obviously margins led us to, obviously, picking and choosing markets where we sell very carefully. Chasing volumes, which typically we -- I will say [indiscernible] [ habit in the ] cement industry. We try to sort of contain that habit in our company. Not just this quarter, but even earlier [ in the year and this quarter ], it became a lot sharper. And we sort of chose a sales mix which will protect our margins per ton of coal that we were consuming. And in that sense, we chose not to sell to some of the markets which we -- which are noncore for us. And the first thing that I want to reassure every one of you is that we haven't lost any market share or any volumes in the markets that we prefer to operate in. So whether it's our markets in Maharashtra, our markets in [ Telangana ], our markets which are in the [ right ] parts of Karnataka, those markets, we actually have fully supplied on the maximum that we could. And we've gained market share in those markets. The markets -- and for example, the markets we gave up, where every month every quarter, we -- on a regular basis, we supply some cement to our -- especially markets -- like for example, Kerala [ is one of markets ] where we do not have our own sales network. We don't [indiscernible]. We just have some large [ sellers ] to whom we supply the material, and then they sell. It's under [ our brands, in our brands ]. Everything is done, but by the time the cement reaches Kerala, [ the net of realization ], the earnings are much lower. So in this quarter, we went like very, very low in Kerala. Similarly there are some markets where the difference between the trade and nontrade price has become very large. And in certain markets which were again far off from our plants, we chose not to sell to the B2B segment. B2B segment, as all of you would appreciate, is largely a price-driven market. There your branding, your [ surveys ], your quality of cement -- as long as you meet the minimum required quality standards, beyond that, the B2B customer is not wanting to look at other things. So we chose not to supply to those markets and, in that sense, didn't join the other brands who were lowering the [ pricing they do and effectively ] booking the volumes. And the comfort that we have with not catering to those markets in 1 particular quarter or a few months is [indiscernible] because, knowing that those markets are price sensitive -- I'm talking [ due to the ] market. We can -- any time, we can move into those volumes and pick up the -- into those markets and pick up the volumes again. So it's not [ a stretch to our ] ongoing share in the core markets and our strength -- or brand strength in the markets that -- like I said, that we choose to operate in. And we are quite sure that, at the moment, we have the comfort, with fuel costs, we would be able to go back and pick up those. The same B2B customers [indiscernible] without sort of any major concern. This strategy, by the way, is also supportive of what -- the strategy we adopted not now, for the last 2, 3 years, are slowly gradually improving our realizations. What we term as building a price gap between us and the [indiscernible] brands, which historically we have a legacy. We've suffered lower pricing compared to the market leaders, and we have not been happy with that. And we've been briefing all of you from time to time that -- so in that sense, picking up the -- let's say, the priority towards price realization in our core markets where brand strength is strong, where [ service strength network ] is strong. That also got further strengthened by our, let's say, sticking to that even when we were sort of losing perhaps a little more volume than we would like to, but given the fuel insecurity, I think we were better off changing the strategies. As a result of that, you'll see, while the volumes are down, but -- the overall fall in EBITDA in terms of rupees crores or even in terms of EBITDA per ton -- I think we managed to sort of stem the tide which was there in the market which sort of hit the profitability of the industry as a whole. And [ most ideas will have come out and formed ], but the hypothesis on which we worked perhaps has been the right one. And we're actually quite encouraged that we followed the right strategy, but the key thing we have to remember is we have not given up anything in our core markets and our preferred markets. And the key driver here was for us the replacement cost of fuel, whether it's coal or pet coke. And we've sort of very consciously stayed extremely focused on contribution per ton based on the replacement cost of coal. And that's what -- [ the roles ] have to be sort of seen and understood in that background. A little bit more flavor on Q3. Well, the month of October actually was a good month to start with. We were quite encouraged. In November, and like I said, this became a surprise, both in terms of rain and in terms of constructions, we were not [ doing that ]. And what I call -- we hit an air pocket in the month of November, which significantly picked up and improved in the month of December. So the mix -- if we are low on volumes in the quarter, I think most of that low volumes emerged in the month of November when the situation was very, very critical on many factors. So just a little bit more color on the quarter. Not every month was bad. October was very good. December has been good, not very good. And November was a little air pocket, from where we have recovered largely. So that's the -- in terms of the -- that strategy now, the way it pans out is, if I sort of share with you, our trade sales are very close to 60% this year, which last year, in the same quarter, our trade was about 52%, so which again it proves what I just told you, that we actually gave up the markets which were in the B2B segment. And as a result, our sales mix actually showed an improvement of 60% in terms of the trade sales. And I think, in terms of the blended cement, again a similar kind of improvement is with us, where we -- as in total, blended -- if I look at blended cement, [ it was 66% ] this year vis-à-vis about 63% last year. So that tells you how the strategy was designed and how it was played out. In terms of other details, I would perhaps talk about the -- partly the -- while our, let's say, trade sales and blended sales are looking better, it's -- again, one is by -- ignoring the parts of the B2B market was obviously reducing the denominator. And the percentages looked better, but [ it ] also has to remember that we have been working on this conscious strategy not just to improve brand positioning and the -- or price gaps but also in terms of completely overhauling our go-to-market strategies overall in our channels, picking up the right channel partners. Wherever we find that the channel partners do not have the ability to sustain our strategy of improved brand positioning, improved realization, we've been sort of replacing them with better-quality dealers [ and all ]. So there's a lot of work that has gone on, which is sort of reflected in the mix that we are having. The -- in terms of when we look at the YTD volumes on the whole, you will see that, despite following similar strategy, the YTD volumes are 20% over last year, in the first 9 months. I'm sure the industry also is around that level, so we can see that we haven't been sort of lagging behind on YTD basis. And as far revenues are concerned for our company on YTD basis, we're 28% up over last year. Again partly it's a function of the market pricing being better, but again to a significant and -- extent it's also a result of what I just mentioned to you, our strategies to improve price realization, our strategies to sell in the markets which are more profitable/which give us more contribution for and -- what we consume [ with costs ]. Cost escalation has been going on and we are all aware of that. So it's not just the price realization that is higher. It's completely coming from market forces; also coming as a successful conversion of our efforts and strategy has improved the results which the market is beginning to give to us and, hopefully, very sustainable. Obviously, with, I mean, higher costs -- sorry, with higher volumes [indiscernible] 20% higher over last year, obviously some of the things in terms of what we call other expenses which have largely fixed costs, like maintenance costs, for example, do go up when the volumes go up. And plus, in Q3, another reason for our other expenses looking higher than last year and -- are -- is also the fact that in this quarter, from the month of October, we also started resuming our advertising campaigns. A new TVC had been released. A lot more support has been provided to even the BTL activities with -- or the dealer [ counters ]. And also, because of that, in this quarter, if we look at last year's advertising versus this year's advertising, we just doubled investment. So that is another part, but it also leads to better brand positioning and better realization, so we intend continuing with our strategy. And having given up some of the difficult markets, as I mentioned, there is some improvement, although not really dramatic or large improvement, some improvement also in terms of average distance [indiscernible] [ covered ] in this quarter. So that's the qualitative comments about it. On the basis of, let's say, numbers that have been printed, [ you do know that our ] EBITDA is down 17% over last year and nearly 12% from last quarter. The PBT, again, at INR 67 crores is significantly lower from Q2 which was at INR 85 crores, INR 86 crores. In the previous year, also they were INR 84 crores, but on YTD basis, when we see YTD basis, obviously the -- our EBITDA is around INR 290 crores versus INR 180 crores last year, so improvement of about INR 110 crores. As the percentage -- it's the numbers, but -- and percentages [indiscernible] what we're happy about is we have INR 110 crores more in hand or in pocket to [ service on debt ] and keep moving. The YTD PAT, if you have seen, that INR 190 crores, which is nearly [ 67% ] higher than last year. Realizations this particular quarter have been [ 5,053 ], which is sequentially also up 5.7%, and nearly 14% [ higher than ] last year. As I said, it's a mix of market support and also our internal strategies that we've been trying to implement with great amount of [ diligence ]. The -- another thing that -- again I'm basically going by what the published figures and data is. We are also happy that we followed the strategy on power and fuel, which seems to have given us a lot better, I will say, cost efficiency in terms of the cost push that the markets have experienced. Our -- not that our power and fuel costs have not gone up. They have gone up, but I don't think they've gone up by as much as they have gone for the rest of the industry. And a key factor there which has played in our favor that has led to, again like I said, the improvement in profitability happened because we focused on contribution per ton based on replacement costs. So a large part of that is the fact that, if we consider our fuel mix, while coal and pet coke obviously have started becoming expensive, the AFR, if we [indiscernible] look at our kilns, which we use let's say [ the 3 fuels ] to produce clinker before we [ blend in the cement ], we're only looking [ at change of our ] AFR percentage this quarter is as high as 18%, which is something which we feel very, very happy about. And I would think it's a good, let's say, overall strategy to adopt for everybody, but we know it's a function of where your plant is located, availability. And also, at times, the AFR that traditionally [ we have been using thus ] starts becoming [ unremunerated ] if it becomes [ too excessive in the ] market. So we're happy to be at 18% of our clinker fuel being alternate fuels, which has given us a huge amount of cushion vis-à-vis the coal and pet coke cost increases that have happened. And we intend continuing with that effort. On the packing costs side, yes, partly it's been because we had to spend money in buying bags because bag and plastics have remained very expensive in the market, but part of the average and the packing freight costs that we reported going up is largely also a function that the volumes have been far lower. And part of the packing costs which typically is done on [ trucked ] basis using contractors and contract labor, we do have some minimum guarantee commitments. And in -- sometimes when we do not end up dispatching -- or packing and dispatching [indiscernible] cement, obviously the fixed costs get divided by the number of tons [ we serve, so ] number of [ packed and ] freight packing forwarding, as we report, is looking higher, partly bags; partly, like I said, the fixed costs getting absorbed by lower volume. And some -- and others have been in part, I mean, cushioned a little bit by the fall in diesel costs, but even then for the quarter as a whole, the diesel costs have still been higher. They started coming down [ in the states ] and became stable because the reduction is coming up. So that's been a relief, but even then there have been some, I think, fixed costs I've already mentioned, largely to do with pricing and in terms of the higher volumes leading to higher need for maintenance. EBITDA, we calculate at [ 919 -- INR 918, INR 919 ] ballpark. It's less. It's lower than before, but I think it's a fairly modest fall compared to what we've seen the industry and the markets [ showing us ]. We have obviously continued to repaying our debt. Our debt, and -- or Manish or Soumitro, you can correct me if I'm going wrong on the debt, which as on 31st December was a little over 500 crores. As we speak now, as on 31st January, it's -- already stands at about 450 crores, which includes, by the way, the deferred sales tax liabilities [ around that also in part of this loan ]. If you didn't count that, our net debt today will be [ about 425 crores ]. So I'm just calling out to Manish and Soumitro [ today ] so that, if these numbers [indiscernible] we are obviously [indiscernible] around [ 5 crores, 10 crores ], in that range, but that's the situation as I have seen it. What else is a matter of interest? As usual, [ real ] dispatches, this year, we've managed to go to 21% against 18% in the same quarter last year. And blended cement, as I did mention to you, is now high 60s. StrongCrete has been our -- part of our key strategic initiatives. I'm glad to say that [indiscernible] [ was sort of ] -- well, we took some time crossing the hump of our first target, which was 10% of our trade sales. In this quarter, we -- StrongCrete has actually touched 12% of trade. As it is, trade sales were higher, the proportion higher. Within that, the StrongCrete [ sales is ] 12% higher. So if you look at the -- our overall asset mix, that's becoming healthier now with more blended cement and even more StrongCrete. Trade, I already mentioned. In term of market mix. Because we ignored some of the [ far-off markets ], obviously slight movement on [ invest ], which I think we've been reporting on 54%, 53%; this quarter going up to 55% [indiscernible] slightly lower because obviously Kerala market and Tamil Nadu [ are states that ] where we chose not to sell. [ So percentage ], we have dropped there. And [ central ] also because Madhya Pradesh didn't give us enough [ joy to sell ]. So we also -- deliberately, some parts of the pockets, some market, we didn't supply. So [ central ] is down to 9% [ from what then that ] we've been continuing to do. That's on the quarter and the performance. On the projects side, I'm happy to confirm 2 things. One, the investment that we have made in AMPSolar has become productive. The capacity has been put up. And Jalgaon plant has started receiving regular power supply from the solar investment, which again is part of the reason why we've been able to push on the power and fuel costs this quarter. Because from October onwards, we started getting solar power. Second piece of news, which all the investors have been sort of wanting to hear: the waste heat recovery plant at Chittapur, the order has been finalized. And we are -- or we've ordered a gross capacity of [ a little over 10 megawatts ]. So that's a project which is now on order. And from -- let's say, anywhere from 14 to 15 months from now, we should start getting much better reduction in our power costs [ on whole when the recovery ] plant starts giving us power. And then in terms of the other expansion plan that we have for the Tiroda grinding unit, which I did mention in last call that we have signed an MOU. So we've not only -- we've moved ahead with some of the works. So we applied for environment clearances. And we already have the [ POR ] which had been issued by MOU, and now the rest of the work can start. And for Devapur expansion, we are now in the process of compiling all the data [indiscernible]. And the Devapur mines happen to be in the forest area, so obviously the clearances required for those mines are a little more complex. So we are currently in the process of collecting all the data [ with the forest entries ] and flora and fauna. And all those studies will have to be done, so we are in the process of [ we are doing ] the data compilation for that so the studies can be completed. In the meantime, we should be moving the application for environment approval of the Devapur expansion plans within this quarter. I know I'm talking in February, so hopefully, within -- by the end of this quarter, we should be able to apply to -- for environment and forest clearance for the mines at Devapur. So that work is also moving ahead. I think -- in terms of the initial sort of remarks and the updates from my side, I think I've done practically everything that I could. And I open the forum now to questions. Thank you.

Deepak, just one small point on the debt refinancing, if you want [indiscernible], yes.

Okay, okay, okay, yes. No good point, Soumitro. I would have let you speak, but I know how you are struggling with your fever and your throat, so let me do that on your behalf. So what -- another thing which we managed to do. See, our debt, as we've been reporting -- whatever we reported in the end of last quarter; and the previous quarter, the end of Q2, during the quarter, we realized that the debt which was contracted to be repaid by -- what we mentioned earlier, by some even -- by even 2030 [ up till 2031 ], because it's a long-term debt, it was locked into a much higher rate of interest. And these [ have, in any case, steepened ] the debt. Last time, I had confirmed to everyone that we had prepaid every liability that was due up to FY '25. And we realized that, if you're paying it faster, why are we paying at a higher rate of interest which is applicable to long-term debt? So obviously we created an opportunity. And that long-term debt which was there has been completely repaid. And part of that for refinancing, we borrowed money from another bank at a significantly lower -- I mean as low below 6% now is the cost of the remaining borrowing that we have, in the range of about 400 crores. So while I have reported the debt to be there, but -- it's at a much lower cost now. And the old loans which were there from consortium of banks, every loan -- every penny has been repaid, except in one banker who's lent money to us. And that's repaid in -- it's scheduled over the, I think, next about 10 quarters or so, which I think again we have the option to prepay if we have the cash flows; and if we are not able to deploy that money in -- let's say, in the expansion plans. So thanks, Soumitro, for reminding. So debt has been completely refinanced at a much lower cost. And the net, I think, benefit that we have in terms of percentage [indiscernible] is around 1.6% reduction [ now given ] the previous borrowing [ cost-wise ]. So that's very large savings again on the interest costs. It will not appear in EBITDA, but it is definitely there in our PBT improvement.

Yes.

And on that point, since you reminded me. I know that question is going to come up. So while -- we have mentioned to you that the Tiroda [ POR had been issued ]. And also, in terms of Devapur, we should be able to move on the environment application soon. So we've tried to sort of schedule. Not going too far away, but out of the total investment of a little over 2,000 crores that we're seeing these 2 projects are going to take, our current estimate is that, in FY '23, our total disbursement on those 2 expansion plans could be in the region of 700 crores, 750 crores or thereabouts. So that's I'm looking at the cash flow [indiscernible] [ the applicable obligation ]. Even if we were to sort of start borrowing money, at least FY '23 end, we should be at an EBITDA [ of sort of ] 500 crores, including when we started doing [ those ] projects. And as we complete those things in FY '24 or assuming things will come in, but -- in the meantime, like I said, it's -- that's a question of improving cash flows and watching how everything is going. So that's the other bit [indiscernible] questions would come later. So these are the [indiscernible] upfront. Hopefully, that satisfies that curiosity also. Thank you.

Thank you. So do we begin with the question-and-answer session?

Yes, please.

[Operator Instructions] We have the first question from the line of Mr. Roshan Paunikar from JM Financial.

Sir, firstly, on your strategy. So you talked extensively on the [ cautious stand and ] strategy to focus more on trade sales and more [ regularity in ] sales, and the results show the benefits of the same. The question is, is there enough depth in our core markets to support our strategies? Or would we have to go out of our core markets [ to demand that ]? And do you have a target sales mix in your mind? And what are the time lines for the same?

Look. If you talk about depth in core markets, I mean, one of the largest core markets that we have is actually Maharashtra. And Maharashtra is the largest cement-consuming market in the country. So in terms of depth, I don't think there's a worry because even in Karnataka, where we are a rather recent entrant, there's a lot of depth in the -- in market like Telangana, perhaps not as much as Maharashtra and Karnataka, but there is enough depth there. And in terms of the targets, typically speaking, look, again, we get limited by what the market, for example, trend is. Maharashtra -- let me talk about our market. And I guess we are aware that while Maharashtra is [ part of one ] market -- but if you go to a market like Bombay, it largely is nontrade market. If you come to Pune, it's largely [ an OTC ] market, right? So some markets have a particular characteristic which is actually having to be catered to the -- almost [indiscernible] big or small, how big or small you are. So a limitation from that perspective, but given those constraints, we obviously would be targeting for our sales mix in the next 2 years to move -- like I said, we are around 60% now. We would like to certainly take it to about 65%, 66% within the next 2 years while looking at the constraints which exist in the market. So it's not that we are saying suddenly we'll be at 80% of -- on trade sales [ or 80% on mid market ]. And in terms of -- so that's on trade side. On the blended cement, again, it's now a function of how much we are able to keep ramping up our StrongCrete, which I mean, around last year, we were selling at 7% of our B2C sales. Now we're at 12% already, so it's a significant traction is being seen. And we would certainly like to now take the next target for StrongCrete at about 15% of our trade sales, which we would like to achieve in the next again 2 years. So that's a brief answer to your question. Thank you, Roshan.

Yes, yes. That's helpful. Just a second question, on the cost front, sir. We've seen an incremental impact coming into this quarter. So based on the consumption patterns of the current cost mix; and what we have procured and the coal that -- which we have procured, the fuel -- the incremental fuel, do you expect the costs to have topped out? Or do you expect there will be some more incremental impact coming into the fourth quarter as well?

Roshan, we -- the fact of the matter is these are things on which we go by the markets. And when we spoke earlier, all of us somehow were quite convinced with an expectation that, from November, mid-November, onwards, the fuel prices actually should start falling. That was the assumption because the European demand for -- peak demand for winter coal, winter fuel requirements had been met. And then suddenly there's a dislocation of mines in Indonesia. There was something else happening, supply chain, the [ ships ] availability, consumer problem, so the full situation has been a little dynamic. It seems to have peaked out as of now, but let's not forget there are other challenges emerging on the emerging basket in if, let's say, there is any escalation on the Ukraine matter between Russia and U.S. And we don't know where it might end up. So the expectation [indiscernible] and the things should start easing soon, but politically some of the developments are at least keeping me a little bit anxious, saying let's wait and watch; hopefully, not flare up because the world can't afford any escalations there. But those are clouds that we -- like I said, we have to just watch and see because none of us have any control on that, but barring something like that, it does seem as if energy costs should now start easing.

[Operator Instructions] We have the next question from the line of Rajesh Ravi from HDFC Securities.

Sir, my questions -- there are 2 questions from my end. First is on the alternative fuel. You mentioned it is around 18% in this quarter. Is that correct?

Yes. [ For my cement and material production ]...

[indiscernible] -- yes, for your material production or [ work in fuel ]. So does it include [ the ignite ] also? Or is it all the, like, waste materials, industrial waste on all which you are consuming?

Yes -- no [indiscernible].

[indiscernible]. So this is relatively one of the highest among all the industry participants. So is that understanding right?

Well, I do not have access to their numbers as analysts do have [ moderated ] access, but I think 18% is pretty good.

[ Correct ]. And sir, coming to Maharashtra situation now. Given that 2 -- 3 companies have [ initial capacities ] in this quarter itself; latest one, [ Chettinad's ] [indiscernible] units getting operational. And earlier, in January, we had Dalmia [indiscernible] [ lighting ] their plants. So we understand Maharashtra is 33 million tons installed capacity, 10 million ton now getting added on top of that. How will that change the dynamics for players like Orient which is -- which has almost 45% to 50-odd percent or 40% to 50% exposure to Maharashtra markets?

Well, Rajesh, the fact of the matter is competition will keep going up in every market. We know that. And the only thing that we then depend on -- upon is our ability to meet the competition side of competition, but yes, there will be stress in the market when people who are putting additional investments, additional CapEx are beginning to push more volumes in those markets. It will, I mean, definitely lead to dynamics, again, which are beyond our control. And we'll have to rely on our internal resources; and our quality of product, branding and penetration in the market given our long-standing [indiscernible] partners and all. So we will have to rely more on that and we -- and stay watchful. There's no way we can wish competition away from [indiscernible], okay? So we'll have to wait and watch on how much volume they'll be able to pick up and how much time and how much goes from various players. We are not the only players. And it might be 50% of my volumes, but Maharashtra state volume [ might be ] very small there, right?

Correct.

And the large players are others, not us. My 50% volume is nothing in Maharashtra markets. We will have to see how much of stress has to be encountered and finally absorbed by each player, but obviously we remain concerned. But we don't run away. I mean then I wish -- I mean I'll remind you. When -- again, every time when we say when we're putting the Chittapur plant, similar question, how will you compete? There are so many large [ players ]. [indiscernible] started coming out about what we will do [indiscernible]. We'll have to kind of watch and do our business. We can't run [ there. I mean ] we have to run our business.

Okay, great. So we just wanted to -- I understand, sir. This competition is [ a similar ] factor. And obviously you're inching up on your trade mix, which increases [ obviously ] persistency of sales. So just wanted to get a sense on your volume trajectory in terms of -- amid all this heightened competition, how do you expect on the existing capacities your volume to ramp up at? Any view that you'll grow at 8%, 10% over next 2 years? [ Anything that ] you would want us -- to share?

See, the -- again it's a question of when we say growth. If, let's say, competition becomes higher in one particular region, one particular market, we try and make sure the #1 is [indiscernible] and fight [indiscernible] we can, but when it is definitely a question of more supply, then we also diversify our markets. In the last 3 years, if you noticed how much increase we have taken in [ central ] volumes, which were never existing for us -- how much [indiscernible] reaching out even in markets like [indiscernible] [ than with ] other markets which we were never touching earlier? We go into those markets. So all of us have sort of a way of spreading ourselves, our arms; and thereby keep making sure that we are selling cement to the extent that we need to. So the overall growth for the company, I don't think [ we're giving a transition ] just because some new players are coming to Maharashtra. And let's also not forget, given the kind of years that we've had last 2 years and given kind of budget we've had yesterday, Maharashtra volumes [ are able to stay constant ]. We are also going to grow, [ okay ]? So let's not forget that. It is [ one bright side ] we'll be focusing on. Internally, we have to focus on what is the demand-side growth.

I agree. Demand is critical because in cement you cannot [ dump ] volumes irrespective of the...

Absolutely. And if you ask me, given the thrusts by the government, by the [ financiers ] yesterday in the budget, the infrastructure sector to housing sector augurs well. And I'm quite sure the market -- as of now, even if we look at next 5 years, my own thought -- and that's why we're not slowing down on our growth plans. My own belief is the demand may -- demand growth will outstrip the supply growth in the next 5 years. That's where I am coming from.

Okay, great, sir. And just as a last question: Have you mentioned trade -- sorry, your blended cement share for third quarter or for the 9 months?

I did say that 67% number I gave out, yes, actually in high 60s.

In high 60s for the quarter, or for the 9 months, sir?

66% for the quarter. 9 months, we'll share with you later [indiscernible], but for this quarter, it's 66%.

We have the next question from the line of Raghav Maheshwari from AMSEC.

Sir, can you just share your mix?

What mix?

Fuel mix.

Fuel mix, okay. As far as the -- our fuel mix, [ about ] 18% is AFR, and coal at 63% and pet coke at 19%, this quarter.

Okay, but sir, 63% coal is the imported coal, or the domestic coal.

It's mixed.

[Operator Instructions] We have the next question from the line of Uttam from Axis Securities Limited.

Sir, our realization in this quarter has been very good. Sir, do you think this realization can sustain going forward? And is there any [ pipeline ] that you have taken in the month of January, if you can [indiscernible]?

I guess the current realization -- current means what we reported on last quarter. I guess you mean that. Because there's a big difference between the realization that we had in Q3; and what was there in November, December. December, the realization was a lot lower in the market because the prices have gone down. So obviously Q3 realization numbers that you are seeing for anyone in the industry anywhere in any part of the country, it's not valid for the month of January. And as far as we are concerned, in January, we have had just about slightly higher than the exit price in December but definitely lower than Q2 pricing.

Okay, okay. And sir, earlier, we had guided for a volume guidance of [ 25% ], so how do you see the volume guidance going forward [ as well this year ]?

Well, now obviously the -- what has happened in Q3 has taken all of us by surprise. None of us sort of expected volumes to be so low. So the -- I mean, end of the Q3, YTD basis, we are what -- [ just about 38 lakh tons ]. Well -- so obviously I'm not sort of, in a way, irrational in trying to sort of assume or to tell you that we'll be able to do 22 lakhs tons in the month or in this particular quarter. Not happening. That's very obvious. We will still try to do and match the volumes that happened for us in this quarter last year, market supporting. It's a big question of how the markets go, but last year also, the markets actually suddenly -- from about mid-February to end March, the markets just -- I don't know what's the right word [ to describe ] [indiscernible]. So if that happens, we obviously would want to do even more, but unless there is [ a big short ] in the market, we would like to at least do the nearly 18 lakhs tons or thereabouts of sales in this particular quarter, which should just leave us at about 56 lakh, 57 lakh tons for the year. We are not likely to touch 60 lakhs that we were targeting.

Okay. And the last question, sir: what kind of CapEx we are going to do in FY '22...

I -- about 700 crores to 750 crores is what we expect next year.

Yes. And sir, in FY '22, sir?

FY '23 would be perhaps [ about 1,400 crores ] roughly.

[indiscernible] this year only, FY '22.

This year, well, the total might be just about, what, under 60 crores, somewhere between 50 crores and 60 crores.

Between 60 crores and 70 crores, yes.

Sorry...

Between 60 crores and 65 crores, I will say, yes.

Yes, yes, all right. So the CFO is clarifying for you, from -- between 60 crores and 65 crores, yes.

Yes, okay, sir.

We have the next question from the line of Dhiral from PhillipCapital.

So now when you have decided to front-load your CapEx in FY '23 -- so by when we can expect Tiroda plant [ to get commenced ]?

It will happen. I had said, within FY '24, it should get done, so hopefully -- we'll obviously try to make sure that it's operating by December, the fourth quarter of FY '24, but like I said, the [ POR ] has been issued, the environmental approval. It is something that -- beyond our control, but largely we have [ earlier assumed December ]. Within FY '24, we should be able to commission that.

But it should be in maybe H1 FY '24. Or do you expect it to get commissioned maybe in late FY '24?

I -- as I said, our target is that it should be operational at least for 1 quarter in FY '24. That's what our target will be.

Okay, okay. And sir, you also mentioned earlier that our Jalgaon plant [indiscernible] [ at lower ] capacity. And now there's rising competition -- so how you are going to optimize the overall Jalgaon plant.

I'll -- as I said earlier, we'll have to see how the market is developed, for there is no -- see, these things are too dynamic. And almost every day, every week, every month, we find a way to keep surviving in the marketplace. If you have a magic formula, please tell me. I can't pack my plant and take it anywhere else. I'm there. I am going to be there. And we'll find a way to fight the market competition, but I can't tell you anything more than that because we don't know how the whole thing pans out with -- and again like I said, we are not the only player in Maharashtra. There will be stress, and we'll have to find ways and means of staying competitive and keeping the -- my facility utilized there, right? I have no option. What will I do? I can't tell you right now. We'll see how much pressure comes; and what kind of strategies, what kind of tactics the competition deploys in the market. And we will try and do our best to sort of stay competitive. That's all that I can do.

Okay, okay, got your point, sir. Sir, on the debt part particularly: So any debt reduction by FY '22 end? As of now, the debt is something like 450 crores. And you said that, by FY '23, even after this [ 750 crore ] CapEx, we will [indiscernible]. So FY '22. And any debt that we are further going to [indiscernible], sir?

As I said, the debt which is [indiscernible] now total is about -- not counting the sales tax deferred [ line ], it's about 420-odd crores, 425 crores [indiscernible]. I mean, given the -- like I said, if the market stays around the, let's say, levels of volumes and pricing as we expect it to, we should be able to reduce this debt, let's say, from the current 425 crores to maybe about 350 crores by the end of the financial year, [indiscernible]. That's what we will try.

Okay. And sir, last one, [ the distance part ]. What was [ our lead distance ] this quarter, Q3?

I have said it's somewhere a little over 300 kilometers. We've not been giving very specific numbers for every quarter, but it stays within a little over 300. At times, it becomes 10, 15, 20 kilometers more. At times, it's 10, 15, 20 kilometers less, but it's definitely a little over 300 this quarter also. But I will say it's a significantly lower number compared to this quarter last year.

We have the next question from the line of Indrajit from CLSA.

A few questions. First, when you mentioned that you would strive to do volumes in fourth quarter equal to the same quarter last year: We have seen for the industry as well utilization was very strong, particularly in the month of February and more so in March last year, so do you think that the industry as a whole will be more like flattish, plus, minus 1%? Or do you think that industry -- for the country as a whole could grow over what we did last year, same quarter?

Honestly, this is something which -- not now. I'll -- what -- I've said that in the call that we did on the last full financial year results. And I said the kind of quarter we've had -- I'm talking on Q4 of FY '21. I said that it's unlikely that we'll get a repeat of that. That was [ the anxiety ]. So then to my mind, it should be flattish to maybe a very small growth because that quarter was just too large. I personally -- I mean I'm open to that, if it grows. And if we're able to get more volumes, we will have the capacity [ immediate ], not a problem, but -- I would be surprised if that happens, but I'll be happy if it happens.

Sure. That is helpful. Second, on your point of pricing currently being higher than last quarter. Would you...

Sorry. [ Let me say that ]. Don't disclose, [ please ]. I said, from Q3, pricing is lower in this quarter and so far.

Q4 prices are lower, so far...

Yes, yes.

But [ from what was exit ], it should be higher. Is that understanding correct?

From December exit, it's marginally higher, but from Q3 perspective, it is lower.

For the quarter. And would you say that the trade prices have done better? I mean this calendar year, like the last 1 month or so versus what we have for nontrade. I mean, has the pricing competition been more for the institutional segment? Would you sort of say that...

Yes, absolutely, spot on. And that's the reason why we chose to not sell to some of the customers there, because the gap between trade and nontrade had become too large. And with the nontrade B2B prices being so low, we didn't think that we should be burning our coal and supply cement [ to them that cheap ]. So yes, you're right. The trade prices have done a lot better compared to nontrade. See, we have to understand the bandwidths in the market. For many brands, to improve trade -- improving trade sales is not an instant fix. You need to manage too many things, including creation of brand positioning, including your supply chain, including your channel network, your service. A lot of things need to happen before your trade sales improve. Nontrade sales is a little bit easy. Go and quote a INR 5, INR 10 discount to somebody else. [ You can even pick up the order ]. So nontrade sales is easy to pick up and easy to give up. Trade is more difficult. And that's where -- most of the situations in the market, you will actually find -- because trade sales is more difficult to achieve and also increase, from that perspective, the resilience of the companies is -- and that's why all of you want us to sell more and more to trade. That's exactly the reason, and that's where our efforts are right now.

Sure. That is helpful. And would you be able to give any sense on how was your power booking cost versus purchase price, particularly for fuel, in the last quarter in the sense how much higher has -- your purchase price would have been versus what you booked in P&L in 3Q?

Well, as of now, I think we are just about flattish now. We have procurement costs and a bit -- costs in Q3 are very close to each other, [ no major difference ]. Because we still believe the prices are too high, so we are not booking long term. We are just sort of managing our requirements as we go, all right? If we were to book or -- let's say, a shipload of pet coke coming from anywhere outside of India, I'm still reluctant to do that because I think the prices are still too high. And I'm sort of making do with, somehow, managing my fuel requirements based on multiple sources. And that's why it's so dynamic, but if I was booking it -- if I were to book pet coke's import today, I should [ probably know ] how much it's costing more, but I'm not going there at all. I'm managing my fuel needs through, I mean, a multipronged strategy. And I'm just managing my costs better.

But pricing aside, availability has not been a concern, right? And in the sense of supply chain or booking orders, that has not been a concern, right?

It's the -- because supply chain has been also part of the concern, that's why the prices are also so high. The prices get -- the moment availability becomes better, the prices will start coming down. So it has a linkage.

[Operator Instructions] We have the next question from the line of Ashish Jain from Macquarie.

Sir, I just had 2 questions. Firstly, the outlook on demand that you shared for Q4 given your comment that coal cost hasn't necessarily come down. So does it factor a similar strategy in Q4 where you're targeting the more profitable markets and all? Or now we are looking at a more normalized level of supplies from our end as well.

Well, as of now, like I said, the -- unless we get the fuel costs and fuel availability [ comfort ], we would want to keep pushing more and more of trade sales and maintain prices rather than chasing volumes...

So [indiscernible].

Yes, yes, correct, correct.

Okay. So sir, we haven't seen any material improvement in demand either versus December. Well, what I understood is that, December anyways, demand has rebounded. How is January faring versus December...

Well, normally we don't give out our -- let's say, our sales or dispatch numbers of a month of the quarter which [ we're not delivering for ], but I can give you a general sense of the industry. Our feeling is the January demand should be just flattish; or slightly better than December, not significantly better. It does look very flattish right now.

Yes. Sir, secondly, just one housekeeping question on the Devapur clinker. Is the time line -- so I think our -- the time line we had shared was fiscal '24. Is that -- we still stick to that. I know nothing would have changed in a quarter or 2, but given we are still at an approval stage and all, given the location of the mine, do you think '24 is aggressive target we have? And -- or it's a more realistic thing given some of the other preparations that we may be doing already.

Well, it is an aggressive target, as you mentioned, but we are doing everything too to make it possible. It is an aggressive target. It's not an easy target. You are absolutely right, but we have no reason to give it up at this stage. We still have [indiscernible]. We are monitoring and watching. I think [ we should be able to do it ].

Right, right, right. Great, okay. And sir, lastly, any update on the Rajasthan mine? Has anything moved in the last 3, 6 months since we last spoke on it?

On informal basis, lots of things have moved. The government in Rajasthan has finally come around, saying we have to [ respect the new law ]. It's a very funny thing, that you asked the question. [ As you know, the ] -- it's very difficult to explain. So now the officials -- obviously it's not a government fund. Unofficially, informally these people are saying, "Look. We've always been wanting to do your [indiscernible] by transferring the mining lease [ environment ]." And we are saying there is -- we have not asked for a transfer. "You [ asked for a ] change of name in the mining lease." And they say -- now they are saying, now that the -- [ we're doing extra charges ]. I mean we don't know why they're still insisting a change of name. And why didn't we accept transfer? And you think because it's not a technical matter. It is a court order has actually said, whatever volume, the name of Orient Paper [ will be in the name of the instrument ]. It is a change of name. It is not a transfer. So that minor [indiscernible] [ dispute. And then I said then ] because it is [indiscernible] name change. Why do you insist on a transfer? But I think it's moving ahead. And the fact that they're saying, "Please accept the transfer and we will sign it today," I'm just trying to settle. Why don't you actually follow the court order which was passed in 2012?

Right, right, right.

Yes. It is actually a change of name. It is not transfer.

And sir, so -- right. No, I get it. So sir, there is 0 ambiguity on the [indiscernible]. It is more about in what form and format it happens...

That's correct. No, no, absolutely, absolutely. No, no, the -- I think on -- from the informal discussions, we know that Rajasthan government is now prepared to let us have the mines. [ We'll settle that ].

[Operator Instructions] We have the next question from the line of Rajesh Ravi from HDFC Securities.

Sir, on the Q4 volumes, you have in -- last year, Q4, was around 18.5 lakhs, so a 90%-plus utilization versus around 60% utilization which we have seen in December. So is that -- this confidence coming in is also reflected in your January performance, that you will be able to deliver 90% performance, close to that, which would lead to such volumes?

Rajesh, if you're indirectly asking what I've done in January, I'm not telling you...

No. [indiscernible]...

Okay. So all our segments -- and last year also, the volume pickup actually happened in February and March. January, it was not as big [ as where we want. So we're not ] equal [indiscernible]...

[ It's not spread that equally ] in the 3 months.

And, so we were able to ramp up the utilization and supply to the market very quickly last year, and I see no reason why we should not be able to do this.

Okay. So this confidence remains that February and March could be much better and then you'll be able to match volumes...

Correct. And so [indiscernible] we were operating at 60%. [ How were you suddenly ] operating 90%? We did it last year also. It's not new.

Correct, correct. From 70%, you went up to 93%. And secondly...

[indiscernible].

Great. Second is the CapEx. You mentioned that you're -- [ therefore you are ] targeting that aggressive CapEx, which remains [ focused ]. And also this Maharashtra is running -- it is also the time line is what you are [ posting in your ] earlier time line, the [ 2 million ] tons.

Yes, yes.

Okay. And what I understood, this year, your CapEx will be less than -- around 50 crores, 70 crores; next year, 750 crores. And for FY '24, this will go up to 1,400 crores, 1,500 crores [indiscernible] is on track by FY '23 end?

FY '23 and thereabouts, yes. Maybe it slips into -- really by a month or 2 into the [indiscernible].

That's okay. So FY '24, you will be able to get full benefit of the plant [indiscernible].

Correct, correct, correct.

We have the next question from the line of Shrey Gandhi from Arihant Capital Markets Limited.

Just one question. This will be the last question I'll be -- because -- and then I have another meeting. [ It's 12 ] already. I need to be leaving for the next one. So I'll take this question from Arihant.

Am I audible, sir?

Yes.

Yes.

Yes. Sir, I just wanted to understand regarding the margins perspective -- from the margin perspective that like we are able to normally maintain the margins now. I mean, FY '21, it was around 23%, 24%. So can we expect the margins to like be in the [ same playground? Or it's been ] 25% to 30% of -- [ like of FY '22 and '23 ]?

Look. In our industry, it's very difficult to -- I mean we do sort of report percentage margins, but frankly, percentage is less reliable in our industry. It's more around EBITDA per ton, rupees per ton, right? And that's why we've always maintained that we would keep targeting [ thousand rupees tons -- per ton ] of EBITDA. Because the moment you take percentages, the prices and -- but -- may sort of -- and because prices are the denominator there, the change in price will affect the percentage. But for me, what matters more is how much -- how many [ hundred or how many thousand rupees per ton ] of EBITDA I'm making. I mean that's the real money, right? So we'll keep targeting EBITDA per ton of -- [ 1,000 to 11,000 ] is what I have said and we are still maintaining.

Thank you, sir. As there are no further questions, I would now like to hand over the call to the management for the closing comments.

Well, the -- I think, in terms of closing comments and -- all I have to do is thank everybody for their time and attention and for very keen interest because, no matter how much all inclusive I want to make my initial summary, even then, there are some key questions that come up. That shows the interest of all the participants to come to this call. I remain thankful for that. I am thankful for their interest in our company. Thank you, everyone, for joining us again this quarter. And see you maybe late April, I mean, again. Thank you.

Thank you, sir. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thanks, everyone. Thank you. Bye-bye. Bye.