Orient Cement Limited (ORIENTCEM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Orient Cement Limited Q1 FY '25 Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Sahadeo from ICICI Securities. Thank you and over to you, sir.

Thank you, Aditya. On behalf of ICICI Securities, I welcome you all to the Q1 FY '25 Earnings Call of Orient Cement. From the management, we have with us, MD and CEO, Shri Desh Deepak Khetrapal. Without any further ado, I hand over the call to Mr. Khetrapal for his opening comments. Over to you, sir.

Thank you. Thank you, Navin, and a very, very warm welcome to all of you who joined the call right in time. We are waiting for a few more people to come, but I think it's unfair to you people who already joined in to wait any longer. Once again, as always, extremely grateful to all of you for the time that you find and show interest in our company. In terms of highlights, I'm sure all of you have seen the numbers that we published yesterday for the quarter. What has not come in the numbers, I will mention upfront because -- that's always a positive for any company, and we are extremely proud of the fact that in the recently completed survey that was there for great place to work, which basically many of the top companies are participating in. Not only have we been certified once again as a great place to work for the fifth competitive year. But year after year, actually the trust scores are moving up. And we are -- right now, at a trust score of 93 which is one of the highest that we've seen anywhere. And not just that, we -- if you look at these across sectors, we are now in the top 50 companies with top scores like this -- top 50 for a company like cement, I mean, we're talking about the survey which is across all industries, the entire universe of the company -- the industry. We are the top 50. Within the cement sector, we are the only one in top 100. And in the building products and cement sector, [indiscernible] the India's #1. So it's like I said, a formation of the kind of company and the kind of culture we built in the company. And perhaps that one culture of trust. Secondly, the complete sense of ownership by our team members is what sort of keeps engaging the performance that we keep reporting to you all the time. So that's an upfront thing. Second thing, which I really don't know whether I should be talking about it, but since I am the spokesperson, I will also mention that similar organizations who built this to work along with great managerial institutes, they have a process in which they pick up a few people from the closet. It's not as big as list as the great place to work survey does. But a short list in which I personally have been given the title of the most trusted leader for the second year. I mean last year also I had got one, this year again, I've got it. So it's more for information than in -- it does sort of will make new field good that whatever I think I end up doing -- the people, the cost [indiscernible] let me do the strategy and they would follow it, but without questioning it. Thank you. Coming back to the highlights for the quarter. The -- I think the slowdown in the cement sector is visible from the fact that DIPP data also has come out. It has actually shown flat growth over last year. This is for the, let's say, the country as a whole. But in terms of nuances, if you see, obviously, some regions have had more growth and some actually have degrown with fairly large numbers. Although the DIPP data doesn't get us that, but we do know that markets in Telangana, markets in Karnataka, at least in our area of operation has been softer markets, not just now, for many quarters now. What's unusual about Q1 quarter this year has been the fact that even Maharashtra total demand, including Mumbai City, the demand is down over last year. And that's more to do with I think what -- pan-India regions have obviously remain diverse in the national level election for the central government. There, obviously, is a heat wave that we saw this year, May, especially was extremely intense, which in some of the districts actually the construction work had to be stopped by the local authorities with the collector because it's inhumane for people to be able to do outdoors work and construction is outdoor work. Come June and the kind of rains this year we had in the month of June, across all of our markets, across Maharashtra, Mumbai -- we will be aware of that. Including then, I would say, markets not just in -- even the regions like Gulbarga, for example, this year has got really, really good rains. But that meant during the time and raining so heavily, the construction activity does slow down. So all that put together, obviously, has hit the industry in terms of the total demand in our market, there has been [indiscernible] degrowth. And the slowdown -- I'm sure all of us felt the slowdown have actually started somewhere in the middle of Q4 FY 2023. And this got worse with the extreme week and the general elections and the other points that I have made out just now. In some markets like Pune, for example, there was a strike by the people who get aggregates to the construction industry. Absolute aggregates -- you can't carry on construction at -- so multiple factors that the fact is that we have struggled and we -- one thing that I would certainly like to point out is that this quarter has really been what I will call a real test of our grith and our commitment to our strategy of actually sticking to profitable business and not chasing volumes and the cost of margins and loss of value. I mean we are here to create value for shareholders but if you start doing business and moving value for the shareholders is something that we don't subscribe to. And we try to defend our pricing even during the time when the prices were actually low. And that obviously has come at the cost of volumes being lower. So while I have mentioned that in our market, the demand has gone down, but I think our degrowth of 15% over last year, certainly, we've seen unreal large growth even in our markets. And as you know, we [indiscernible] 15% degrowth over Q4 is 31% degrowth simply because Q4 [indiscernible] drop there. So 15% degrowth is unusual over last year. And we, obviously, in rupees crore is also based similar degrowth -- of similar degrowth as volume basically indicates that our price realizations have actually been stable. We've seen industry results. And I think any company which operates in our markets, if you look at, they have actually lost realization per tonne on the cement we have sold. We have more or less kept it stable. There is around 1% over last year, but sequentially keeping it steady around the same level as I think I mean major thing, which is -- I take price because we play with a decided strategy and this strategy is not new. Most of you who are regular on the call that we address every quarter, you will know that for the past many quarters, we've been talking about our strategy to shift our brand positioning upwards and not prices for product, which is cheap. Now I mean in a difficult quarter, you start lowering your prices in an immediate reaction to the pressure then the brand positioning that, in our case, is a still work in process, we haven't quite got there and brand position shifting -- brand position often takes a number of years. We are well on the journey and we didn't want to [indiscernible] the journey at this juncture by dropping the prices and going the same way that everybody else was going. But that is right. The reason behind we, not being able to keep up with the volumes of the industry but we are happy that we managed to maintain our sales. And maintaining the sales obviously -- sorry, the price [indiscernible] enabled us that despite 15% degrowth, despite fall in prices in the market, we managed to sustain our profitability, we are roughly the same as we were last year, which I think is something which I definitely want all investors and analysts take not of. It's not an easy strategy. It is a continuing strategy to the rest of the industry. And I would say some would call it risky, but I call it a bold strategy to say, there is another model of running cement business within the industry, which is -- most of the people are following the same track and we decided that no, we are not following that track. We've set up our own strategy. We stick to it. We maintain our prices. Volumes will come when we start getting the, let's say, orders which give us the kind of minimum threshold of contribution that -- I think this is perhaps, again, I'm just bearing your attention to the fact that last many quarters, we've been saying that we -- give us orders unless you meet out threshold level of contribution, net of everything. And in this quarter, we found many more orders which we had to refuse and the result [indiscernible]. The key nuance here is that even when we are saying that give us volumes in our cost for pricing, we are not being silly in doing things which can actually hurt us in long run. What I mean by that is we realize that the consumer market or trade market, if you lose the market share, it's very difficult to regain the market share because the consumer sector is brand-driven. They hire loyalty brand and things like that. And if we actually don't feed them and don't retain our market share, it becomes very difficult [indiscernible] B2C market back to us. So we've actually been aligning our prices with the trade sales with the industry leaders. We're not obviously aligning a prices in category B brand or category C brand. We have come in the category of [indiscernible] brands, and we are allowing our prices with them and staying competitive with them. And we obviously don't want market share that we will do [indiscernible] level of price -- category C brands or B [indiscernible] brand. But when it comes to B2B business, we have realized that B2B customers, actually, are not loyal to the brand, they are more driven by the high quality of cement will the price being right? So the current stake when we realize with the market prices in B2B was very, very low, and we're not happy with the margins that we were given. Those are the order to refuse. So obviously, the -- we worry about moving market share in the consumer market should not be carried in the mind but B2B, yes, we get up volumes and we know when the time is right, either a cost come down or the price become better. Those are the competitive prices in the B2B customer value every order, every month is based on what some of the [indiscernible] I just wanted to assure all of you that is not a policy, which is without the nuance, which we meet [indiscernible]. The -- I think from -- the results that are published and many -- most of the companies -- any company [indiscernible] exposure to the market as is similar to ours. I don't think there's any 1 company in the industry which would have reported an increase in EBITDA per tonne over last year same quarter. And we were at about INR 650 crores last year, we were around INR 750 crores this year, which is I think something that I would like to point out to all of [indiscernible]. B2C, I have told you that we have retained our market share debt, those we are not leaving. And I still believe that adding capacity, which I think some of the industry leaders have been very aggressive about, I'm sure I don't need to name them, all of you know. So these large players, leading players who have been adding to capacity, I think their priority today seems to be increased capacity utilization to stretch the assets that they've got. While we see that strategy on their part to stretch the assets and sell more volume in the market, their aggression to this more volume is keeping the pricing in the markets on the lower side, more so on the demand, in any case, it's not robust enough. So the only option for people [indiscernible] them is to either spend to the pressure of very low prices and start losing money -- little losing money or to follow their own strategy and policy of making sure that this business being done is not [indiscernible] in the loss. That's our philosophy at our company that we are following, I just thought I will highlight that to give you the [indiscernible] We would like to make money on healthy [indiscernible]. While the market conditions are what they are, it's the fact that many other smaller players also like us, we are all struggling with the larger volumes which are coming in now from the newly acquired capacity like the industry leaders. And not just that, some of them being -- who have now have plants which are closer to our core markets, we're believing to see that from far away distances, the volumes are coming into our core markets and they are having at the prices which are lower than our. I wouldn't name the branch, but there are some of the leading brands that we've always known in our life in the India cement industry, who in the market will be selling their cement at 10% to 15% less [indiscernible] that the price of Orient Cement?. That is the reality. I can take pride in the fact that we have a position which, even at our price, still [indiscernible] the strategy of some [indiscernible] brand is all selling the way down our own pricing is something that is a matter of concern for the certain but also shows how the position of the market is. [indiscernible], we have accepted the pain of lower volumes while depending on pricing and profitability -- more important is also, as I mentioned, the brand positioning at what price are you available in the market? And that we don't want to disturb as I said, that is -- dislocate or derail our lump sum strategy but the thing I would like to also assure all of you that we are monitoring the market dynamics very, very closely. And we will ensure any responsibility management has to do that in this process, we don't create lasting risks for the company in terms of market [indiscernible] that's been maintained. We -- again, we keep talking about premiumization and keep talking about the [indiscernible] our; brand. The fact of the matter is that despite whatever challenges we've had in the market in some of the overall demand, the growth that we have seen in our premium products is once again an evidence that the products that we've created and what we've launched in the market at a fairly significant premium. I think our premium in the market is the highest on our premium brands. Despite that price gap over a normal cement, which [indiscernible] very good quality. In Q1 of this year, the overall proportion of our premium cement put together at least 23%. And we are very close from the beginning when we started, our target initially is 10%, then we said we want to go to 25% and 23% has already been achieved. I'm quite sure by the time the end of this year, we will hit the target 25% of [indiscernible]. Navin, [indiscernible] on the call right now. I'd just like to remind him, when we were launching our first cement brand in 2018, Navin's question to me was what's your ambition for the premium filing? Because obviously, it seems [indiscernible] of that time was something quite not expected in the cement industry. And I don't know whether Navin would recall, my promise to him was my bold [indiscernible] would be that Orient Cement actually should be selling only stronger than nothing else. Remember that, Navin?

I do. I do.

So on traffic, let's see how long it takes us that we are here in the direction [indiscernible] We are not deviating from that strategy. It's not a new strategy. I'm not saying it because we lost volume in this particular quarter. I'm saying -- I said it about 6 years ago. And that kind of a strategy needs execution, which is unwavering. [indiscernible] that we agree that we keep making progress quarter after quarter. Now coming to a little more detail that all of you are available [indiscernible]. In Q1, the -- our overall sales [indiscernible]. We have sold 68% of our Q1 volumes. And in South, it has been 24%. Obviously, we're still even higher than what it was earlier. The degrowth, obviously is largest in our southern markets, which is Telangana and Karnataka, where we sell most of our cement in South India which is a fairly strong double-digit where as Maharashtra, it also in terms of total, our sales to Maharashtra was 68% as a proportion of our total sales. But in this year, the degrowth in Maharashtra for a 5.5% over the last years compared to high double digits in Telangana and Karnataka. B2B sales in to -- slightly higher because the consumer market in [indiscernible]. at a very, very low level. And the OPC as a percentage of our total [indiscernible] cement continues to be begin 45%, 47% in that range. I think the last investor call, I had updated a little -- very early may I said that on 29th of April, the second phase of our basic recovering -- the balance [indiscernible] also has been conditioned. So happy to now report that with the [indiscernible] recovery, which became fully operational and available to us in the 2 months, which is month of May and June. And the solar power that we've been receiving, our total, I would say, green power component in Q1 has reached a higher 24%, which is ever highest. We are in a good position today. The benefits from rate recovery in Q1 as well, despite the fact that part of it was available only for 2 months. And also the production is not because basic recovery actually gives you a lot more benefit when we are gaining the [indiscernible] all the time, which obviously the low demand has not been possible and we have to shut down in place also. But despite that in the first quarter, the gain [indiscernible] recovery is close to INR 9 crores. And the -- solar has given us a net benefit over INR 2.5 crores. So these are the benefits of going green at the same time, giving value to shareholders. Our plans for expansion of solar power, which we have taken the approval from shareholders [indiscernible], our Jalgaon plant out of [indiscernible] that we've proposed, 3.4 is already operational. How small is it left with, it should be operating any day now. The Chittapur, the thing that we were actually putting up about 70 megawatts. That unfortunately has been delayed a little bit for us, and that will come into operation, I think, in maybe 5 to 6 weeks' time, but mid-September, we expect the solar at Chittapur also to start contributing. So once Chittapur also comes in and [indiscernible] recovery, I think the proportion of green power that we're using will go up even higher. So that's a breakup on how we are doing power. In Q1, the power and fuel costs for us are down to INR 1,337 for [indiscernible] cement, which is down from INR 1,571 in Q1 of last year. So obviously, there is a significant drop. And sequentially, again, there is a little bit of gain there in Q4 of last year, we were at INR 1,351 which is now down to INR 1,337 which I mentioned. And this -- let me remind you, INR 1,337 is despite the fact that we are doing in the high 40s as a percentage of OPC lending, which takes a lot more power. Our product mix right now is adverse because the OPC sales are much higher than what we would like to happen. The blended fuel cost for us has been in this quarter is INR 1,785 per million [indiscernible] and some people want to call it [ 1.785 ] [indiscernible] that we typically are [indiscernible] INR 1,785 -- last year in the same quarter was INR 2,100. And -- but in quarter 2, quarter 3, specifically sequentially, it's almost flat, [indiscernible]. The fuel mix, all of you remain curious about, getting questions later, so we call out right now. It's a domestic coal is 40%; pet coke, 32%; alternative fuels are 18%. Yes. So that's the mix that we have. The fuel mix in TSR terms [indiscernible] pet coke gives us a lot more of [indiscernible] value per ton. So then it has become 31% coal and 56% pet coke in terms of [indiscernible]. But in terms of making up most of the industry reports were 40% and 42% In [indiscernible] and if you go as per calibrate, 31% coal d 56% pet coke. In terms of -- the total [indiscernible] I have already mentioned, it's already 24% than it was last year same quarter 12%. I only updated you about the more solar power that are coming through very small part left [indiscernible] balance will come in September. That will be a very small part in this quarter, but thereafter start becoming available. For us, ultimately [indiscernible] in this particular quarter have been slightly lower at 13% on AFR basis, which last quarter was 16%. But if you compare our sales with last year, you were at 5% only. So from 5% to 13% we keep increasing our efforts to maximize usage of opening fees. So as I mentioned to you, there is the benefit that we have achieved from that has been very, very significant -- that's the wrong number. I'll come back to you. Look, that have been obviously more than double of what we consumed earlier automated [indiscernible] over last year. In terms of other metrics that people want to [indiscernible], in this particular quarter, I mean, overall power -- heat and power has been similar, but some marginal increase in [indiscernible] simply because the machines are not running full and because of low volumes, there are lots of stops and starts [indiscernible] some inefficiency. There's some slight increase. And the power total [ consumptions came in at 62.7% ], which was sequentially [indiscernible] 61.7%. So lower volumes can thus give us more inefficiency. On the heat consumption, we are marginally lower. Like there's a marginal increase there. Heat consumption for the company as a whole [indiscernible] Q1. So the breakup, [ if you people need ]. Power cost for us in this particular quarter has been at INR 397 per tonne of cement vis-à-vis Q4. That is [ sequentially the Q1 ], but if you look at last year, it was INR 456 [ and below ]. It's down to INR 397 now, almost INR 60 drop largely coming in from the waste heat recovery that we've installed at Chittapur. Fuel cost per tonne is -- I've given you the purchase price calorific value, but I'm talking in terms of rupees per tonne of cement. The fuel cost is down to INR 939 from INR 1,113 last year and INR 915 in preceding quarter. So in all this, as you would see, in terms of efficiencies, we keep sustaining. In terms of promised renewable power and green power, we are doing our job. Alternative fuels, I've already mentioned, we've doubled over last year. Our premium brand strategy seems to be panning out quite well, and we continue to follow our strategy of not trying to downgrade our brand in the market. That leaves me, I think, with some updates on the projects before I open to questions. Our project [indiscernible] last time, I had mentioned that we were struggling with the application to be moved, for environment clearance for our Chittapur plant, which has been overdue. The fact of the matter [ is still the ] central elections, [ that ] elections [indiscernible] new government got formed. Somehow, the minutes of the public hearings that we have already conducted, [ they could not find ], but after that, they have come in. And based on the -- all the paperwork, our applications for environment clearance for expansion of capacity there and also for expansion of mining, both of them are already on the [ portal ] of ministry of environment and forests. There are some delays here because obviously central government will -- got formed recently. Ministry -- there's a lot of reshuffle [ and bureaucracy ] that will happen. We are still expecting that, hopefully, in the meeting that they will hold, perhaps towards of -- end of August, our application would be coming up before the committee [ or presentation ]. And indeed, all the paperwork has been done, so it's a question of now going through the process of presentations to the committee in Delhi, to ministry of environment and forests; and thereafter, a few more weeks before we get the approvals, which will enable us to then start taking further actions for implementation of the project. So there is progress there. For Sarni [indiscernible] that the one term which we wanted altered. We understand formally that the Board has agreed to our request, but we have received no formal intimation as yet. Only after the formal intimation is received by us we'll make the necessary disclosures to the authorities, but right now progress is there. It's looking promising, but we'll wait till we get an official letter from the Madhya Pradesh [ power generation corporation ] confirming that the terms [indiscernible] are acceptable to them. So again, not too long because, with Board meeting [ got over ] about 2 weeks ago -- so very soon, the minutes should be out. And thereafter, we should get formal letter. On the forest clearance for Devapur mines. Again all the process is already filed and has finally reached the minister of forest in Telangana government, so that minister has to just now sign the file and send it across to Delhi, to MOEF, for the -- for evaluation by the central government of all the forest conservation measures and all that we put together. That -- again we're at the very last stage of clearance now. Because once it moves from Telangana government, it's like I said, through -- rest of the [ government has been ] processed. [ Particularly ], the minister forward to -- forward it to Delhi, so only thereafter we'll talk about things. So by -- as I said earlier, the priorities remain Chittapur capacity expansion because we keep seeing more and more demand coming from that. And also, to improve the situation for capacity utilization of existing [ fields ] itself, increasing capacity of clinker, for me, would be the next priority. There's no change in the priority. In terms of CapEx, I think, seeing that we're already in the month of August, and even if take 3, 4 months before we can start doing some activity, the CapEx that I keep promising seemed to be sort of something which keeps getting pushed back. And I personally don't think there will be too much of a CapEx outflow on the projects at Chittapur. I mean it could be just a couple of hundred crores or something [ when we ] start giving advances to people to mobilize [ and things like that ], but the real investments will perhaps, most of them, will come into next year because -- currently we certainly will start construction activity. And a similar thing. I think that Sarni also will take about 6 months, for the [ grinding unit ], for us to start some activity. So on the CapEx front, I think we'll have a lot of cash with us by the time we start the [ heavy loading ] investment, but in the meantime, in any case, we are beginning to touch base with some banks to see whatever money we need to borrow to complete these 2 projects at a total cost, as we keep talking about, [ nearly ] 2,000 crores between Chittapur expansion and Sarni. So we are ready now, but the delays in government clearance have been delaying our project execution [indiscernible]. But unfortunately, I couldn't help it. And in the meantime, the demand has also not been that great, but we miss a lot by not being able to add more capacity. So that's, to my mind, all the updates that I wanted to share. And I will open the forum for questions, and we're happy to answer. Thank you [indiscernible]. Thank you for your patience.

[Operator Instructions] Our first question is from the line of Keshav from HDFC Securities.

Sir, I just want to understand the Chittapur and MP expansion which was earlier expected in H2 FY '26. Now in all likelihood, that will slip to FY '27. Is it a right [indiscernible] understanding?

Look. Okay, it could be early FY '27. I'm not able to say because I still don't have the clearance. All the clearances [ are not in hand. That's not a little bit of ] [indiscernible]. It is probable that -- Chittapur certainly -- is the clinkerization and the grinding all put together. Sarni [ is the simpler place ]. It is already in the -- inside the premises of [ the power position ]. And the grinding unit should normally take less time than at full integrated capacity, but yes, your anxiety perhaps is well placed because I still don't have all the clearances that I need to start [ operational preview ].

Understood. Got it. [ A few ] operating metrics number like trade share and lead distance for this quarter...

Lead distance, as we keep saying, is -- it's marginally higher. Still it -- we continue to be in the [ region of 310, 320 ]. We have not validated that at all. So then there is not much difference in terms of the business travel. And in terms of freight costs also, we are more or less [ straight over ] the previous quarter. The question was [indiscernible] other one thing that you had mentioned...

Trade share.

Trade share. For us -- just one second. I did mention that B2B sales is perhaps 56%, and balance 44% will be trade, yes.

Okay, understood. Last question from my side. I want to understand. How is the demand now shaping up in Telangana market, which has been pretty weak? So we are seeing high double-digit degrowth. Any signs of pickup? Or when will it happen?

Well, during the monsoons, in the case, the demand is further lower -- I mean the fact of the matter is what we've seen of this quarter, so far. The demand actually continues to be very soft all across, not just in Telangana, but Telangana the market, we still have to see real signs of demand picking up because, the necessary support and the atmosphere that needs to be there for people to start doing more investments and thereby increasing the demand, as of now, signals are still to emerge. We continue to remain worried about Telangana demand.

Understood. Got it. So what sort of volume growth you are guiding for this year. Earlier, you're guiding 8%, but that doesn't look now achievable, so what is the revised...

If you permit me, I think -- let me go through this a little bit more. And we've already had 15% degrowth in Q1, right?

Right.

Q2, as of now, I think we'll struggle to make the same as last year. So if the first half of the year does not give us the required growth, obviously the full year forecast needs to be relooked at. I'm going to wait till the monsoon gets over because the advantage with heavy monsoons, the intense monsoons, the kind we are having right now, is that, post monsoon, the demand picks up very sharply. Now that is the normal trend that we've seen in the past. The 2 things happen. One, there's a lot of pent-up construction which did not happen because there were intense rains. One is that. Secondly, the extensive rains also cause a lot of damage to infrastructure and housing, so a lot of demand comes from the repairs work itself, right? So why would -- why we would expect, given the past trend, we -- the demand to pick up in the second half, but I'll perhaps hold my forecast for now and see how the markets behave by the time the monsoon is ending. So next time we'll meet, I'll give you better idea. Right now it's [ whatever I told you will be like darts on the board ]. There's no data that I have to base on to say, "I'll grow by this much in this year."

Our next question is from the line of Sumangal from Kotak Securities.

My first question is on this quarter's performance. Now in the opening remarks we compared with the last year same quarter, but just want to know if that is appropriate because, if memory serves us right, it's last year we had something around 25 crores, 24 crores of impact because of extended shutdown at Chittapur. So that is around INR 150 on a per tonne basis...

No, no. 25 crores is never the cost of shutdown. To shut down only cost around between 8 crores and 10 crores, never 25 crores.

Okay, but there were some adverse logistics and fuel mix because of the shutdown, so overall I think the impact was around 24 crores, if our notes are correct.

Well, that is your calculation. I'm not privy to that.

Okay, okay, but was there any shutdown and any sort of maintenance-related activity this quarter?

See some small maintenance activities have happened at both the plants but not a full plant shutdown yet, but it's not that [indiscernible] maintenance costs on [ mainly ] running the plants.

Okay, okay, understood. Sir, with respect to our mining lease in Rajasthan, has there been any [ start-up land acquisition ] happening there? If you could just share some update on that.

No. We have still -- we are still in negotiations, but we've not closed any deals for the land in Rajasthan, not till now.

Understood. And sir, from the -- as far as 2Q is concerned, is it possible to share how was the price environment currently in July? And I mean, year-on-year, should we continue to see volume decline given the adverse weather? Or we should now come back to growth from 2Q onwards.

As I mentioned in -- while answering the previous question, I did say that, during monsoon, we have actually seen July also has been soft, very, very soft, both in terms of volumes and in pricing. August first 5 days, same thing is continuing. I think today I was hearing from some of our markets that the rains are not there, after many days. Because there's going to be -- it's rained every single day, at times, very sharp; at times, not so sharp, but in our markets the rains have been persistent. We obviously -- I did mention that, while monsoons always present a struggle in terms of volumes -- and I have just said, in case you heard the previous answer, but we are struggling during the monsoon period. And we'll perhaps struggle to meet what we did last year in this particular quarter, but the expectation is, post monsoon, the demand has -- post good monsoon, demand has always been far stronger. I just say that just 2 minutes back, so I would repeat that again for you. We do expect the demand to rise sharply once the rains stop because the construction activity has been held up. There's a lot of pent-up catch-up work that needs to be done. And there'll be a lot of repair work necessary which has been caused by extensive and very heavy rains, to roads and to places. So it's the repair work itself creates [ the latest on ] demand for cement.

Understood, sir. Is it possible to quantify the pricing, how soft it is on a sequential basis in July?

I would say it's in the region of 2.5%, 3% in July over the previous quarter.

Our next question is from the line of Rajesh Kumar Ravi from HDFC Securities.

Sir, am I audible?

You are but slightly [indiscernible]. I have to really -- struggle to hear...

Yes [indiscernible], yes. Is it better now?

A lot better. Thank you.

Yes. Sir, my question pertains to, first, on the expansions program. You mentioned that the clearances and all is delayed for Chittapur. So for FY '25, versus 1,000 crore CapEx which we had guided earlier, what are the probable CapEx which will happen in FY '25?

Again the, okay, first question [indiscernible] I'll say just a couple of -- maybe 200 crores to 300 crores, not more than that...

Okay. So in that, you mentioned 100 crore [ already ] will go towards Chittapur. And this MP, what sort of CapEx you are building in the same...

In FY '25, I don't think that Sarni would be more than 25 crores, 30 crores, not more than that.

Only 25 crores. And Rajasthan, nothing expected...

Rajasthan, only that it all depends on land purchase. That will -- certainly we'll keep trying. And in this year, [ we had ], but land deals, when they start happening, they can happen really quickly. But I'll still say, maybe 100 crores for Rajasthan, I'm keeping with me. And we may invest in Rajasthan [ but acquisition ] of land purely.

And similarly, for Devapur, you're not expecting anything to happen this year.

No. The moment stage 1 clears, forest 1 clearance comes in, that's about 130 crores, INR 140 crores that I've -- in fact, I've talked about more. I've talked about typically in the 150 crore, thereabouts, that we will have to pay to the government to finally get the stage 1 clearance, convert it into stage 2 clearance. That has to happen in this particular year. That's very, very critical for us.

So that is around 125 crores you are building for the same.

Take 150 crore.

150-odd crore, okay. And if I look at just your brownfield expansion potentials at both this Devapur and Chittapur, what are the peak capacity potential at both these locations even if you do it gradually?

No. See the -- as I mentioned, the plan is to put up another 3 million tonne cement capacity at Chittapur, same to what we have today. We would like to double that straightaway, right, 3 million to 6 million, okay? Devapur is divided in 2 parts. One is the clinkerization at Devapur. And second is the grinding capacity, right? So -- because at Chittapur we do entire grinding on site, but at Devapur we are going to be putting up this 2 million tonnes grinding unit, in Madhya Pradesh, that we speak -- or Sarni is the name of the location we are going to bring it up, right? And to that extent, Devapur, we'll do clinker expansion and only 1 million tonnes of additional grinding. The two -- right?

Yes.

That's the consideration. And I would rather do Sarni first so that my -- even existing utilization of clinker in Devapur right now is a little low, so my [ hurry ] would be to go to a new market, using Sarni as a grinding unit; and increase the capacity utilization [ and scale of ] Devapur; and parallelly, once that grinding will start [ ramping ], then come back to Devapur to do the clinker application.

Correct, correct. And the project cost which you had earlier enumerated, 2,000 crore for MP and Chittapur combined, will that remain? Or...

MP and Devapur, you mean.

MP and Devapur -- sorry. [indiscernible] is how much? MP and Devapur together is 2,000 crore, you're saying...

No, no, no. I think that will be slightly higher than 2,000. Because we did talk about, at Devapur, putting a waste heat recovery plant. Also we have to put up a wagon tippler and some of the infrastructure, but -- Devapur has adequate infrastructure, but Devapur [indiscernible]. But Devapur will come later, right, like in -- right now let's focus in on Chittapur, for 1,500 crores; and 500 crores for Sarni [indiscernible]. Then in terms of projects, there are 2 different projects where, totally, CapEx will be around 2,000. So when you were saying, I got a little confused. Well, Chittapur and Sarni are not connected, but...

Correct, correct.

[indiscernible].

[ Mathematical addition ] will become 2,000 crores between the 2 of them.

Okay. And Devapur, any number for the program that your clinker -- additional 2 million tonne clinker and 1 million tonne grinding, waste heat and the [ surplus system ] that you're trying to -- ballpark, what sort of CapEx would be in FY...

I think, by the time we'll complete it, it will be more like 1,700 crores, 1,800 crores, it will become.

Our next question is from the line of Navin from ICICI Securities.

Sir, a couple of questions. So first is on prices. And I know that you never give a guidance on prices. You've said you've always maintained that [ cash ], but since consolidation, the likes that we are seeing in South, do you think there's enough consolidation that has -- already there to hope that prices should improve? Or in your view, what could be that one trigger, so to say, or one event that can lead to improvement in pricing scenario at a broader industry level?

Navin, that's a very tricky question for me to answer because people who are doing the consolidation have their strategy known to only themselves. So how do I answer that? I mean look. End of the day, pricing [ an ] industry where capacity utilization pan India still remains -- struggles between 70% on pan-India basis, right? The only way prices become stable is when people accept the fact that trying to sell to the market more volume at a lower price does not help anyone. It does not help that company. It does not help the rest in the industry also. Now that's rational thinking, but when the business decisions start getting driven more by -- not so much by immediate profits but either longer-term strategy of saying, "I will win, but in the short term, I don't mind losing," as long as that approach remains, it's very difficult to sort of -- in a way, for somebody who is on the sidelines like me, to comment which will be that event in which people will regain the priority for profitability being the topmost priority. And here we have the industry leaders. And we know there are 2 large groups. Both of them are right now in the mode to acquire more and add to their capacity. Even organically, I think they are building more capacity, right? And when they build more capacity, if they decide to prioritize their volume push higher, prices will always [ remain in the threat ]. That's a fact, right?

Right, right.

So in this aggression on adding to capacity both through acquisition and through organic construction and also to utilize all that capacity when the industry is not growing at that pace would always be detrimental to pricing. That's what our learning is. A particular trigger, it's difficult to say what the trigger would be. If -- it's just the normal business that, if we are adding capital, what -- mainly adding capacity, what are we doing? We're actually investing more capital of the shareholders.

Right, right.

If we say we are not so keen on improving the return on that capital, we are more interested in getting market share and getting the volumes in, then we are chasing a different target compared to what the shareholders would want.

Right.

Shareholders want their investment to be profitable and accretion to their wealth, right?

Yes...

So that's the business -- that's the [ theory of ] business that I have learned. And I've sort of seen that's the only thing which [ finally ] works in the long term, but there are periods in the industry, in any industry, or in the market where these things are given a go by -- in pursuit of some of the business strategies which may be rational from that company's perspective. I'm nobody to criticize that because they're investors [ and they're a ] company. If they decide, "It's okay for us," to reduce the return on capital that they're [ employing ], their strategy. There's nothing that anybody can say about it. This is that battle between investing more capital; and reducing costs, return on capital [ employed ]. If that is the strategy, it can come -- only come by a loss to the entire industry, not to just one company.

Understood, understood. Sir, my second question then was about the -- like, a strategy stance for Orient. And as you already mentioned, that there are 3 sites that like our CapEx is being -- going to be pursued. First is, of course, Chittapur; and simultaneously then, Devapur; and some -- along with the land acquisition. And maybe a project in -- is in sight in Rajasthan as well, so from a strategy perspective, since these are like big ticket CapEx planned, is there somewhere a thought that we can -- because there are companies who have done that, that we can monetize the limestone [ lease ] in the Rajasthan beds, which is not our core market as of now; and gain or rather strengthen our market presence like we are doing, like prioritizing Chittapur and then Devapur? So is there a thought process that we can look to monetize the limestone in Rajasthan?

Navin, I can only talk about the strategy as approved by the Board, which I think at a particular time, everybody was very, very concerned that we must try and diversify our markets because we are too much south in Maharashtra. We should go -- and Rajasthan is our only opportunity available to us at -- I would say, at an -- at no cost of having to acquire limestone mines in another market because today, these days, the mines come to you through [ auctions ]. And they put additional costs on you. Rajasthan is our best opportunity to actually diversify our markets at costs which are not crazy. I don't think our Board is even considering the possibility of monetizing the Rajasthan mines, no.

Understood, sir, understood. And sir, my last question is: For the Devapur location, can you just please remind if, the limestone that we get there, the royalty is standard, at par to the industry rate? Or is it linked to some IBM-related formula now or for the expansion that we are looking at?

No. Devapur mines are the same royalty as what -- everywhere is the same, which is fixed by the central government. And that's [ maybe in the middle ]. If, let's say, the new supreme court ruling, which has come recently, which has given powers to state government to levy more tax to it -- now that will create, I think, state-to-state variation. That might have the potential, depending on where the state wants to levy more taxes, but I am telling you the situation, as it persists -- is -- it pertains today, it is same INR 80 per tonne royalty on limestone mining that everybody pays in India, including us.

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Thank you. My always sort of [ end way ] is just sort of thanking all of you to patiently hear me out in the start and asking question which enabled me to clarify situations further. Thank you for keeping faith in us. I know we are playing with a [ contrarian ] strategy to the rest of the industry. And what we can promise to you is that, every decision that we take, we are accountable to all of you. We'll come back and keep explaining to you how we are doing it, why we are doing, but the goal all the time is to make sure long term of this company is being protected through whatever actions that we can take as management of this company. Thank you for support -- and trusting us. Grateful to you. Thank you.

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

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

Thank you, sir.