Sagar Cements Limited (502090) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. We welcome you all to this 3Q FY '21 Results Conference Call of Sagar Cements Limited. We have with us from the management Mr. Sreekanth Reddy, Joint Managing Director; Mr. K. Prasad, the CFO; Mr. Rajesh Singh, the Chief Marketing Officer; and Mr. Soundararajan, the Company Secretary. I would now like to hand over the call to Mr. Gavin Desa of CDR for his opening remarks. Over to you, Gavin.

Thank you, Manish, and a warm welcome to everyone participating in the Sagar Cements Q3 and 9-Month FY '21 Earnings and Investor Conference Call. Manish has already introduced the management, so I'll just say that we will begin this call with opening remarks from the management, following which we will have the floor open for an interactive Q&A session. I would just like to point out that some of the statements made in today's discussions may be forward-looking in nature, and a note to this effect has been stated in the call invite sent to you earlier. We trust you've had a chance to go through the communications sent out yesterday. I would now like to hand over to Mr. Reddy for his opening remarks. Over to you, Sreekanth.

Yes. Thank you, Gavin. Good morning, everyone. And I wish you a very Happy New Year and would like to welcome to Sagar Cements' Earnings Call for the Quarter ending December 31, 2020. I will begin the discussion with key highlights across our markets with regards to the demand and pricing scenario, following which I will discuss other specific developments. Starting with demand. Steady pickup in the housing and government infrastructure projects has resulted in consistent demand across our markets. Project execution has picked up pace once again, yes, following the completion of the monsoon season. Talking about specific markets. Demand in Andhra Pradesh is expected to remain steady on account of increased government spending. Tamil Nadu, Kerala and Karnataka governments is also expected to increase their spending on infrastructure projects on account of the impending elections, which should help sustain the demand momentum in these regions. Telangana, though, we expect the demand acceleration to moderate in light of slowing down of the government projects. Moving to the East, specifically Odisha, yes, we expect demand to remain relatively steady. As far as the West is concerned, while we haven't seen a significant pickup in the demand as yet, yes, we expect the trends to improve going forward in line of the pickup in the overall infrastructure activities. As far as the prices are concerned, we are seeing prices marginally softening in South and West. In Eastern region, with the impending new capacity additions, also resulted in price being a little more -- price drop is a little more pronounced on a long-term basis, though we expect the demand and realizations to remain steady in light of the government's push towards the infrastructure. Moving on to Sagar-specific developments. Yes, we are pleased with our performance for the quarter, steady demand and realizations across our key markets and started delivering revenue growth of around 39% over the previous year. Profitability as well improved on back of our consistent efforts towards cost rationalization and improving operational efficiencies. Yes, investments undertaken in the recent past towards building the captive power plant pipeline and the waste heat recovery system along with some modernization has started playing dividends for us. Also, the commissioning of Satguru and Jajpur should not only help us in further rationalizing our freight mix but also aid us in enhancing product mix as well as accessing faster-growing markets. I'm pleased to say that work on Satguru and Jajpur is progressing as per schedule, and we expect the units to be commissioned before end of Q2 FY '22. Moving on to our financial performance for the quarter. On a consolidated basis, revenue from the operation stood at INR 364 crore as against INR 262 crore generated during the corresponding quarter last year, higher by almost 39%. Better realizations and steady volumes resulted in driving the growth. EBITDA for the quarter stood at INR 104 crore as against INR 20 crore reported during Q3 FY '20, up almost 426% year-on-year, moving to better realization and better cost management. Average fuel cost stood at INR 785 per tonne as against INR 821 per tonne reported during Q3 FY '20. Optimization of thermal efficiency, coupled with the lower fuel cost, resulted in lower per tonne of fuel cost. Freight cost for the quarter stood at INR 740 per tonne as against INR 714 per tonne during Q3 FY '20. Profit after tax for the quarter stood at INR 50 crore as against a loss of INR 9 crore reported during Q3 FY '21 (sic) [ Q3 FY '20 ]. From an operational point of view, Mattampally plant operated at 48% utilization level, while Gudipadu and Bayyavaram plant operated at 80% and 62%, respectively, during the quarter. As far as the key balance sheet items are concerned. The gross debt as of 31st of December 2020 stood at INR 636 crore, out of which INR 529 crore is a long-term debt and the remaining constitute the working capital. The net worth of the company on a consolidated basis as of 31st of December 2020 stood at INR 1,213 crore. Debt equity ratio stands at 0.44:1. Cash and bank balances were at INR 78 crore as of 31st of December 2020. That concludes my opening remarks. Yes, we will now be glad to take any questions that you may have. Thank you again.

[Operator Instructions] We have the first question from Gaurav Birmiwal.

Sir, I just wanted to ask a bit more on the drop in power costs. So you mentioned that you have stocks for 2 more quarters. So will we see similar power costs for the next 2 quarters, too? Or will it marginally inch up? I mean I just wanted to know if your low-cost stock has been depleted. And the second part was what are the current petcoke and oil price trends, sir. I mean how much should we build in going forward? I mean how much can they increase?

Yes, as stated earlier, yes, the low-cost petcoke for us would exhaust by end of this month. But fortunately, we could quickly act on the lower imported coal cost, which we stocked all the way up to end of June. The current -- yes, the current coal cost for us, stock is at 6,100. But what you have to remember is some imported coal. In the presentation, what we have done, yes, we have -- we said that petcoke average landed cost until Q3 of FY '21 at 6,814. Yes, the current Australian coal will be procured around $57, which would last all the way up to June. Yes, we expect on average around INR 50 to INR 55 incremental cost could go up for the current purchase, yes, which is roughly around 16%, 17% over the previous quarter, whereas the current ongoing imported coal price is at around $72. In our case, we have $57 coal lasting all the way up to end of June. So all in all, we expect around INR 50 kind of an increment on the account of power and fuel cost for the Q4. Hope, I have answered the question.

Yes, sir.

Our next question is from the line of Gunjan Prithyani.

Yes. I just wanted to check. I've got into the call a little later. Have you -- could you give us some sense on how -- you mentioned in your presentation that second half has seen some improvement on demand. So if you can talk about where you are seeing the demand improvement, which markets in particular. And if you can also lay out the growth expectations, like you usually do, to give us some sense on markets recovery.

Yes. See, our view, again, is very limited to the Q4 because -- given the COVID impact and we are just -- markets are just coming out of that. But I think we should end up the year in the markets that we operate should end up being anywhere between 7.5% to 10% lower than the last year. The markets of AP, Tamil Nadu, Karnataka and Kerala are fairly doing well. The only market that we have seen slightly slow down is the Telangana market, the primary reason being that the government spends in most of the other places are relatively higher compared to Telangana. Again, the outlook for the next year, our internal assessment, again, which needs some correction in due course of time, the impact probably has taken us back by 2 years. So we feel that the coming year, we might, at the best, go back to last year. And then a year later, probably, we will go back to the FY '18, '19 kind of a number, which was one of the best years that we have seen in a long term, yes, which makes us believe that the next couple of years, the demand is likely to be relatively better. But it would take at least 1.5 years for us to go back to the best year that we have seen in the recent past, which is 2 years back. This is primarily because of the government spend. This is primarily -- rest of all the other private spend in the housing, they have been steady. They have been steady. That's one of the reasons why the drop has not been very, very significant even during a very, very difficult time.

Okay. So essentially, you're saying that F '22 goes back to F '20 and F '23 goes back to F '19 is how you're looking at the market right now?

Yes, Gunjan.

And within that, Telangana is one market which is lagging, whereas you are seeing recovery in AP, Tamil Nadu and Kerala. Is that understanding correct?

Yes.

Okay. Got it. And the second question I had on the capacity side, are you seeing anything on the ground in any of the regions relevant to you?

See, I think South, as indicated earlier, one major capacity addition that is due is Ramco's in Kurnool. And we expect the ramp-up from Chettinad as well as Penna over the next -- in the current year to probably all the way up to Q1. East, of course, I think over next year to 1.5 years, we are expecting an incremental 10 million to 12 million tonnes capacity addition. These are the 2 regions where we have reasonably good vision. We don't expect any major changes to happen over the next year in the other place where we are coming up, which is in Madhya Pradesh. Yes, beyond that, of course, there have been announcements where UltraTech is adding up on more grinding capacity in that. This is where we track closely. So that would be our understanding of those markets in terms of the supply.

Okay. Just last question from my side on when you're seeing the demand come back. Is there any change in the competitive intensity that you're sensing because it's after quite a while that South markets are seeing some uptick? So any change there?

No. Let me clarify. I don't think we are seeing any uptick, Gunjan, in the market.

So let me say normalization from what we saw such a big dent.

No, we are going to be anywhere between 10% to 12% lower in South either way, I mean, compared to last year to this year. And fortunately, we are not expecting any surge in supply from any new capacities for the current year at least until middle of next year. So from a supply side, we are not seeing anything majorly getting into the market but for some other players who are trying to push for incremental kind of volumes in these difficult markets. But fortunately, they are a minority. Markets more or less have been very similar for more than a decade, so nothing much is new in terms of the supply. So looking from a competitive intensity perspective, yes, there are some players who are trying to ramp up, but that, fortunately, did not alter the market equation significantly. So we have seen some amount of competitive intensity in non-trade, but trade market more or less has been very, very steady. That's one of the reasons why the prices did not dilute like how they used to fluctuate in the past. Not for a minute I'm telling that prices remain at a high -- elevated level, but they did not dilute as they used to happen in the past.

The next question is from [ Krutika Mishra ].

If you could throw some light on the outlook of cement prices, that would be great. If you can share what is your outlook on cement prices.

Yes. I wish I had a very straight answer. We generally -- internally, we work with multiple scenarios. So we strongly think that if the volumes are going to be very similar to last quarter, we don't expect major changes in the pricing environment. Yes, the other good scenario could be, if volumes remain lower than what it has happened during the Q3, I think we expect pricing scenario to be relatively better. But if there is any attrition to this equation of people trying to push more volumes into the market, yes, we expect a drop in the prices. Yes, fortunately, 1/3 of the quarter is already done, so our other vision in the market is that the dilution is not much from the December exit prices. Some of the markets, for the second fortnight of January, we have already started seeing at least INR 5 to INR 8 kind of an increase in AP and Telangana markets. And the rest of the other markets either are flat with a positive bias. But all said and done, I think January month more or less is going to be very, very similar or slightly negative compared to December. But one important and good observation that we have seen is the AP and Telangana markets which got diluted by almost INR 15 to INR 20 at a retail level. We started seeing -- though it's in the early stage, but we started seeing INR 5 to INR 10 kind of an increase already post-festival season. If it gets sustained, everything, price trends may be flat to better than what we have seen in Q3. But we -- as stated earlier, yes, we operate on these 3 scenarios. If there is surge in volumes into the market, like in the past, our experience has been that the dilution could be there. Yes, if volumes don't come back aggressively, yes, it could be flat to some kind of positive bias, [ Krutika ]. Yes, beyond this, it's always a challenge because, yes, that's one area where we are not able to predict that well.

The next question is from [ Jainam Mehta ].

Okay. Congratulations on the superb quarter. So I wanted to know what are some capital allocation decisions that we can expect. Like I mean I'm pretty sure you know that the stock is cheap on a valuation basis as well. So can we expect a buyback or anything like that soon?

Yes, Mr. [ Jainam ], I can only talk to a certain extent where we know for sure, we have no plans for a buyback at least for some time. Yes, we strongly believe that we are undervalued stock. But yes, our job is to work mostly onto the -- so we are a growing company, so most of the capital is allocated for growth as well as optimization. Right now, from our Board and from most of the large stakeholders, we know for sure that there are no intentions for a buyback at this point of time.

Okay. And my other question was if you could -- it would be great if you could just shed some light on the CapEx for the quarter.

Yes, now this year, as indicated earlier, our CapEx planning for the full year was somewhere close to around INR 400 crores to INR 450 crores for the current year. And we are implementing 2 projects, out of which we have already done INR 300 crores in the current year so far. Likely that we might end up spending under INR 125 crores in the current -- next 2 months, that is in the current quarter itself. That leaves us with another INR 125 crores to be spent, yes, which is likely to happen over the next 2 quarters of next financial year.

The next question is from Ritesh Shah.

Sir, my first question is, you indicated 10 million to 12 million tonnes of capacity addition. Can you please break it up company or plant-wise?

Yes, I never told 10 million. So you're talking about the Odisha market?

Yes, sir. You referred to incremental capacity additions in the region. You highlighted Central India not much except for UltraTech. And in Southern India, you referred to Chettinad and one of the plants at Kurnool of Ramco. So I'm referring to that.

Very happy to give the breakup post this call because there is no point in reading out the numbers. We know for sure ours is 1.5 million. There is UltraTech, yes, but we'll be more than happy to share that off the line.

Done, done, done. Sir, my -- perfect. Perfect. Yes, that sounds good. Sir, my second question is there has been a lot of new capacity which has come in of late in Southern and Eastern India. I'm referring to 2 large players. How has the industry responded to absorbing this capacity? That's one question. And the second question, related to this, is has there been any major shift in regional trade patterns given pricing is a bit depressed in Chhattisgarh market and, obviously, there will be a lot more material moving. So is there some abnormality in pricing or trade patterns on back of this recent commissioning and expansion?

Yes. See, I can only comment where we operate, Mr. Ritesh, so I cannot -- unfortunately, I don't have a handle on the other regions as much as I should. But yes, in South, we have not seen a major shift either way because I think we -- the Chhattisgarh market has always been the same. So there has not been much of a change. But we have not seen Chhattisgarh material coming to South. And South market was a relatively better place when it comes to pricing. I mean it's natural that prices might be looking higher or way higher related to that market. But I think freight and the other logistic challenges have always constrained from those interregional movements. For example, even in East, the pricing, that probably is one area in the entire country where East is not doing very well on this side. In fact, that's one place where prices look to be very, very unfeasible and difficult to sustain at current low levels. But we have not seen the Eastern volumes coming into South, at least the northern tip of South. Earlier, we have seen a lot of material used to come from Chhattisgarh and Odisha into Vizag, but we have not seen that happening in a major way, at least this time, no. I'm only commenting for the last 3 quarters. But the last 3 quarters, 50% of it has been a very, very difficult kind of an environment. So that doesn't say much, but we have not seen a major shift in the interregional movement so far. Though there are some shifts which are likely for a short period because the long-range freights, above 1,000 kilometers, there has been some optimization and rationalization of railway freight. So we keep hearing that some amount of South material actually was splashed into the Central region, but that still is a very, very negligible volume is what we hear. Again, this is what we have observed. But we have not seen a major Eastern flow of material coming into South or far-up markets. But what we have seen is some of the players -- South players going into the Central region. But that looks to be a very, very limited kind of an event, not something which is a huge kind of a shift. I don't think it is a very strategic shift, but I think it's more an opportunistic kind of a shift.

That's very useful. Sir, just last one question. Still will be about fine print on the new mining regulations. Sir, how will it impact capital allocation for Sagar? And how do you see, say, a few specific variables like rationalization of royalty, stamp duty and specific aspect of [ sale ] overall for Sagar and for the industry? That's the last question.

Yes. From the first read, again, from the very first read, I think that really facilitates some amount of mergers and acquisitions because they -- it looks to have removed the big constraints especially for the limestone, yes, where we had the transfer rules applicability, where there was a huge upfront cash investment. And even the OpEx was getting impacted because the royalty was almost 80% additional. So on the face of it, I think that's an extremely welcome move. In our own case, yes, we would want to study it whenever there is an opportunity. And if it comes by the same way as we have understood, yes, we would not think twice to march the good part of the world to get BMM into Sagar because that was one of the constraints that we were facing from the merger, because that would have optimized some amount of income tax outflow because there are recuperating parcels that are available at BMM. That probably post-merger, we may have some optimization opportunities there. But we would want to study and take a call on that. Secondly, I think it will definitely help us look at options a lot more because, from a business planning perspective, with OpEx and CapEx getting rationalized on these regulations, it should help. The only negative flip side is the -- a lot of mines which are in PL stage or PL due for conversion to ML, yes, some of us have -- do have some peers which have been long awaiting for conversion to ML. I think there, it's not issue of companies but most of the governments have kept it for -- pending for whatever -- some small peers that we have had, they were waiting for more than 7 to 8 years for them to get converted to ML that have not happened. They -- that probably is one area which we thought they should have given some more time. But that stands -- looks like stand cancelled. But it looks favorable from an M&A environment. So that should make some small, little additional push towards consolidation. Yes, that was a constraint which was existing before. Yes, with this ordinance/act, it should help some additional consolidation to happen into the market, Mr. Ritesh.

I have more questions. I'll join back the queue. And specifically interesting aspect on BMM merger.

The next question is from the line of Indrajit Agarwal.

A few questions from my side. One, you talked about several aspects of demand. While you talked about the infrastructure, how are you seeing the other levers of demand, so to speak, the IHB segment or rural shaping up in the areas that you operate?

Yes, I think our comment is very straightforward. I think the IHB and the rest of the market is where housing market has been very, very steady. It has been stable. Yes, I would not comment on whether it's a metro or a nonmetro market. I think we are way beyond that because in Q1, it was more rural or the nonmetro market. Q2, metro market actually picked up. Now more or less, we are back to the old system where we don't generally look at metro or nonmetro markets at all. Yes, the IHB side and especially on the housing side, things are normal. Yes, the only positive thing that we are seeing is the government demand. I think that actually, for us, is a very, very positive surprise. Especially the Andhra government, when they initially had the discussions and the projections they made, we were skeptical. But to our surprise, I think they're very near to what they have projected. So that -- and along with that, the Tamil Nadu government, Kerala government slowly started picking up in a big way. I mean that, for us, is a very, very positive surprise.

That's helpful. On power costs, you have explained in detail. So what I understand is fourth quarter procurement cost could be about 15% higher than third quarter just because you have this low-cost petcoke, low-cost imported coal. Now if you were to mark-to-market at current coal price or current petcoke price, what could be the kind of increase that we can see from third quarter level, it could be like 2020, 15% plus?

The normal course -- Mr. Indrajit, see, we are simply doing one simple arithmetic. See, in our own case, this probably may not be applicable to the entire industry. Our procurement costs are per on per kcal, was at INR 0.91 to INR 0.92 for petcoke for Q3. Yes, the same thing in our own case, it went up to INR 1.08 for the Australian coal on a per kcal because that would rationalize what we consume. Yes, this in a normal course, again, yes, what we have got the current spot rates, yes, we procured it at $57. Yes, that actually moved to $72 now. So that in a normal course would have increased to anywhere between INR 1.21 to INR 1.22. So for us, it remained anywhere between 15% to 18%. The current spot prices look anywhere close to around 25% to 30% from our procurement pricing. Again, our procurement price for Q3 also was relatively lower because we have been buying 6 months ahead. This is related to our procurement price. I exactly don't know -- this cannot be applicable to the entire industry.

No, sure. That's helpful. That's really helpful. And again, a similar question on freight. So there has been diesel price increase, but a large part of freight cost is also the truck rentals and all. So do you think diesel price aside, the truck rental part, are you seeing upside pressure on that? Or those have now more or less stabilized?

In our case, the contractors have been stable. So we have not made any corrections to -- other than fuel prices over the last 1 to 1.5 years because there were significant changes that were done in the previous increase that we have taken, if we had to make adjustments to the tollages, yes, we had to make adjustment to the tire rates, we had to make adjustments to their own other operating costs other than fuel. For last year to 1.5 years, we were only making adjustments to the fuel. Again, this is very specific to us. Yes, that -- I don't think I'm addressing for the industry. Yes, what we have seen in June, the diesel price was close to around INR 78.39. Yes, by October, it moved to almost INR 80 per liter. And January -- start of January, it was INR 80.29. But middle of January, it is already at INR 81.39. So what -- yes, in our own case, the increase -- the last increase that we have taken was from July 1. From then to now, yes, we have seen a shift of almost close to INR 4.50 to INR 5. That effectively has made us increased by 3.5% to 4% on an overall freight cost. But this is very dynamic going forward because if prices move up, yes, we take every week kind of a course correction. I don't know where it will end up. But from June to now, from 1st of February, we expect these rates to go up anywhere between 3.5% to 4% in our case. We have not made any corrections to the other, other than fuel costs so far. There is always the ask from the transport contractors, but so far, yes, we have not made any corrections in that regard. If it all, if we have to make, probably we'll be constrained only from 1st of April after better understanding of what other costs would have gone up in their case. But right now, we are only taking the fuel correction.

Sure. This is very helpful.

The next question is from the line of Girish Choudhary.

Firstly, on the debt, we have seen an increase of around INR 100-odd crores from September levels. And we did generate EBITDA of INR 100-plus crores. So if you could just highlight the CapEx and also the operating cash flow for generation during the quarter.

Yes. Girish, see, as indicated in our CapEx, we have done so far INR 300 crores so far currently. Likely that we might end up putting another INR 125 crores on the CapEx side before the end of this financial year. That leaves us with another INR 125 crores to INR 130 crores for the next financial year, which is likely to be completed by middle of next year. That is in the H1 view, end of H1, we should be completing the entire CapEx. So the current net debt is at around INR 558 crores. So we might end up the FY '21 with a net debt of anywhere between INR 675 crores to INR 700 crores. Peak debt could end up anywhere between INR 750 crores to INR 775 crores by H1 of -- end of H1 of FY '22. So now the cash flow scenario is very simple, Girish. Yes, as mentioned earlier, we make 3 scenario base. But we think a minimum EBITDA kind of a generation should be anywhere between INR 70 crores to INR 75 crores for the current quarter, so basis that we have done the overall kind of a plan. Any change to that cash flow would alter things accordingly. But we think that we might pick out somewhere around the middle of next year with a net debt of anywhere between INR 750 crores to INR 775 crores, [ another way ] to kind of an estimate, Girish.

Got it. That's helpful. And secondly, you did also mention on some of the cost trends especially on coal and freight. But in terms of other raw material costs, what are you seeing, fly ash, maybe slag and also the packaging cost? Because we are hearing there's some inflation with respect to fly ash and slag as well.

No, except for the freight correction, we have not done to any basic material, Girish. We have 2 months to go for the current year. Our internal material is all available. So for us, we are not expecting any major cost to change on the raw material side at least for the current year. But for sure, during the coming Q1 for the next year, yes, we may have to make these inward freight adjustments because the material for the current year is already there with us. But with the diesel price, the way it is, I'm sure we have to make some for the inward freight. But it also might influence some amount of their mining costs. But we are good for Q4. For Q1, yes, we probably need some additional time before taking a call when it comes to the other raw material increases, but it is likely that it could go up. It is likely that it could go up, may not be very significantly. Yes, very specifically talking about the fly ash, yes, the fly ash cost peaked out during the Q2 because some of the thermal stations in our neighborhood from where we procure our fly ash were down primarily because of the seasonality and the electricity offtake was very minimal. But on that count, things have improved. So things have improved. So even some small corrections here or there should not make fly ash cost going beyond what we have already incurred so far. Slag, we have to wait and watch, in our own case, yes, our sourcing points. Yes, but for the inward freight cost adjustments, we don't expect any major changes, but we still have to wait until somewhere around start to middle of April for us to really know how those material costs are going to change. Internally, we prepared ourselves for 3% to 5% cost changes on any of those materials, Girish. But we have to wait until the time for us to understand how it is going to shape up on those material.

The next question is from the line of [ Kunal Shah ].

Congratulations, sir, on a very good set of number. Sir, just one question from my side. Hypothetically speaking, if Sagar had to operate the Jajpur asset in the current pricing and cost scenario, what would be the kind of certain profitability that you would be able to generate?

Yes, [ Kunal ], I think we discussed this issue even in the earlier calls. Yes, we simulated a scenario which was very similar. Yes, barring that it actually has already touched the worst-case scenario that we have put, I think we should still end up getting somewhere around INR 300 to INR 350 EBITDA per tonne.

The next question is from Amit Murarka.

Sreekanth, just a couple of things. Firstly, on the realization, I don't know if it's been discussed already. So this quarter, the per-tonne realization seems to have dropped 6% Q-o-Q. So I was just trying to understand, is there some mix effect to that, like more governmental volumes or something like that to it? Or is it purely market pricing fall?

Amit, see, I think that question has 2 parts to it. One, definitely, prices have softened, but I will not attribute the entire drop in realizations to only the pricing scenario. In our own case, the market spread as well as the government -- institutional and the government sale also has got increased. So it's a mixed bag. It's softening of pricing along with the government supplies being incrementally higher compared to Q2 and, at the same time, a slight shift towards from a more [Audio Gap] into the institutionals here. I think it's a mixed bag. It has been a mixed bag. But for sure, yes, we stayed away from very competitive kind of a price environment on the non-trade side. That's probably one of the reasons why the drop was not as significant as the price has been in some instances. Especially the non-trade price, the price drop has been quite significant across some of the markets that we operate. Yes, we shied away from those markets. Trade prices, I would put it have been very stable. They have not been flat, but they have been very stable. Yes, seasonal correction was there. And from on-season, we have not seen that increasing. The drop is not as significant as it has been in non-trade. So trade prices more or less from on-season to off-season, they got corrected. From an off-season to on-season, yes, they did not correct back to higher side, they remained there. So that's one of the observations that we've had in the markets that we operate. East, as you know, that we have seen a drop. We do sell some volumes. There, we have seen quite sharp corrections on the pricing front. Some of the other markets that we have seen, either prices remained flat with a slight negative bias, but it was not a big drop. Our drop realization is not -- does not reflect a huge price drop. In certain segments, there has been a huge price drop, but our realizations have dropped on other accounts also because of the distribution pattern, regional mix as well as the -- some segments' results.

Also like one more thing, I was just wondering like -- so generally, if you look back on the pricing state-wise and all that, generally, Odisha market pricing has been better than, let's say, AP and Telangana pricing. But in the last 6, 8 months, actually, it's been the reverse. Particularly in, I mean, recent December month, it was quite stark, wherein price dropped further in Odisha, whereas it was relatively better in AP and Telangana. So how does that change in the -- like generally, the trade balance between these adjacent states and the flow of material and all that?

No, Amit, the prices in South have been good, so I would not like to compare with state to state because, most of the time, yes, people only look at the gross pricing and get carried away with they being better and all. Yes, we need to make the freight adjustments, right? So our own observation is that our markets in AP have always been better than the markets in Odisha, irrespective of where it was. That was the case for many years. If you look at decadal pricing also, the worst of the AP market was probably at par with the best of the Odisha market. That has been the historical kind of a number. Though optically, some of the prices look relatively higher, but cost of these markets are also high. So when you normalize or rationalize or whatever you might call, the Eastern prices have relatively been lower compared to the markets that we operate in South, Amit.

Okay. And on the power and fuel side, just to confirm, you said that you expect a 15% Q-o-Q inflation in 4Q. So that would roughly be about INR 100 to INR 110 per tonne, let's say?

No, now we have to be very specific. Yes, we expect it at a clinker level, that kind of a number, Amit. But when it comes to conversion and all, probably, we should incur anywhere between INR 50 to INR 60 kind of an increase on a power and fuel cost on a per tonne of cement or per tonne of material that we sell. Yes, up to clinker, you're right, it probably would increase it by 15% in our own case because that has been a shift for us. The fuel cost would get increased by 15% at a clinker level. When it comes to cement, yes, our conversion ratios at all drag this down to somewhere around 7% to 8% on a higher side.

Sure. Sure. That's helpful.

The next question is from Bhavin Chheda.

Congrats on a good set of numbers. Sir, just an overall update on the industry. So as we see the numbers, AP, Telangana was close to 30 million market. It grew in double digits. And last 2 years, we are seeing over 20% fall. So while on that market, what's your outlook? When should we be back to that peak 30 million consumption on a year basis? And second, I would ask on the Odisha market, which has suddenly seen very big growth numbers and operating at all-time high consumption numbers. So what is happening particularly in Odisha market? And how long do you think this high growth can sustain in Odisha market?

Yes. Now specific to AP and Telangana, sir, our view is that we went back by 2 years. And even historically, pre-election years typically tend to be lower -- or higher compared to the post-election years. So I think over the next 2 years, we'll again come back to kind of pre-election kind of years, so we think that it would take 1.5 years to 2 years from now to go back to those numbers. I mean that's what we strongly think it would take that much time for it to go back to that number. Going back to Odisha, Odisha has always been growing, sir. I mean Odisha is one state -- or some of the states in the East we're consistently growing at least close to 10% consistently over more than 7 to 8 years. So Odisha is no exception. The problem with the Odisha market is more to do with the supply rather than the demand. So that actually took it all on the pricing environment now. Now how soon this will recover, it is anybody's guess, sir. But at the current level of pricing, it's very, very unfeasible for all the players. So we think that the prices have to correct upward sooner the better. How long it is going to take, honestly, I have no answer. I have no idea how soon it is going to take. But we know for sure at this level, I don't think anybody is making money.

The next question is from your line of Prateek Kumar.

I have a few questions. Firstly, like poat some grant, there have been some pickup in pricing in South. Has there been any reversal in like Odisha or that has -- like has remained in downward trajectory, which was there at the start of the month?

Prateek, yes, our observation in AP market and Telangana market is the retail pricing definitely has picked up. Yes, I think Odisha pricing has been falling -- I think, dropped. I don't think it has dropped further. I think it is stable right now, but we are watching it a lot more closer because, for them, there is no break. The festival is not a state festival, so we have not seen a drop, but prices are at a very, very unfeasible and at a very low level. So fortunately, we think that it has bottomed out. It might roll down by another INR 1 to INR 2. Beyond that, I think people would be aggressively losing money from here on.

Okay. And just confirming on your CapEx, sir. So have you -- I mean on the INR 800 crore 2 expansions, have you incurred INR 550 crore until December? Just wanted to confirm this number.

We are near that number, Prateek. So we did spend -- yes, we have spent almost close to that number. In the current year itself, probably, we should be ending up at INR 425 crores.

Right. In freight cost, we have seen some decline on a Q-on-Q basis. This is related to lower lead distance, as mentioned in the presentation?

Yes, Prateek. I think it is very clearly stated. Diesel price has gone up, but in our case, the lead distance has come down. So…

And sir, on freight, in this power and fuel cost, the understanding is not very clear from a like-to-like basis. How much has been the increase which we have seen in this quarter from power and fuel like-for-like number?

Well, in our case, it has come down, Prateek. It has come down by almost 5%. That's what we have indicated even in the presentation, Prateek. Because for us, it's to do with the mix, it is also to do with the -- some alternate fuel usage, so we were -- yes, we were blessed that the power and fuel effectively has come down for us even on a quarter-on-quarter.

But that would have some inventory effect, right? Or even adjusting for inventory, we have…

Right. Prateek, it's kind of a mixed bag. Yes, the inventory, as mentioned, for us, the inventory cost, holding costs had been steady because the low-cost fuel has been there with us for quite some time.

Okay. And just one question on your trade mix. What is the current trade mix versus like last quarter?

Yes, I think we are very similar to how we have been last quarter, except for a small basis point drop. Non-trade slightly got increased, Prateek. Non-trade got increased during -- because of the government exposure.

Sir, what would be those numbers?

Yes, can I revert?

Sure. Sure. Okay.

Thank you.

[Operator Instructions] The next question is from the line of [ Sanjay Nandi ].

Congrats on a good set of numbers. Sir, correct me if I'm wrong, like just could it like as of now, the Australian coal is trading at $72 per tonne vis-à-vis -- whereas the current petcoke price is hovering at around $100 per tonne. So is it feasible for us to shift on from that petcoke to the Australian coal or we are still sticking on to that usage of petcoke?

Yes, Mr. [ Sanjay ], as mentioned earlier, we've already -- yes, we have the low-cost petcoke all the way up to end of this month. That is end of January. We have stocked up with Australian coal, so we will be switching over from the low-cost petcoke to Australian coal starting from first week of February itself. The petcoke -- again, these are all the offers that we have received. Yes, from what we've understood, yes, the current Saudi petcoke is available -- yes, the Saudi petcoke offer is at $107. The U.S. petcoke is at $115.

U.S. petcoke.

Spot rates that we have received for Australian coal is at $72. RB2, South African RB2 is at $80, and RB3 is at $63. Yes, but we have stocks, which we procured the Australian coal at $57, lasting all way up to end of June.

[Operator Instructions] Sir, just one question from my side, sir. So as you indicated for the Jajpur plant, can you also give us an indication on what could be the profitability levels in the Satguru plant as per today's pricing and the cost structure?

Yes. Manish, what you have to remember, we are only trying to make an inference about the current price. Current price is fairly healthy in the markets that we have estimated. So I'll stick to, yes, the current cost structure and the current price. I think we should make an EBITDA per tonne of anywhere 1,500-plus kind of -- in those regions that we operate to the cost structure that we have. Yes, I'm trying to be conservative on the current pricing. The current price continues the way it is for the next 6 months. And we get it, I think even 1,600-plus is a possibility. But with the current environment in terms of the price as well as the cost input -- input costs, yes, I think 1,500 is a possibility there at EBITDA level.

Okay. And sir, on the time line front, we should be commissioning both by September? Is there some -- [ May ] or earlier…

Satguru, it looks like we are slightly ahead of time, but I'll still stick to September. Yes, Jajpur also, we are going to be on time. Probably maybe 15 days is what we'll factor in for Jajpur. Satguru, it looks like we are going to be at least a month ahead of time is what we have. But we will -- closer to the date, we will be happy to come -- we are more than hopeful to commission much before September. That's what I would like to stick at this point of time.

Sure, sir. Sir, so can we model a 45% to 50% kind of utilization for both these plants for this year -- for the 6-months period?

Yes, for the first 6 months, I think, yes, we think 50% is a possibility for both the assets, yes, which roughly would translate to 0.25% for the full year next year.

All right, sir. That's it from my side. [Operator Instructions] We have the next question from [ Hiten Boricha ].

Hello, am I audible now? Hello?

Yes, please go ahead.

Sir, my question is on the petcoke prices. You mentioned the current petcoke price is around $100 per tonne. So what was the price in Q2 and Q3 last quarter? Like I just wanted to understand what is the price increase in the last couple of quarters of petcoke.

Yes, [ Hiten ], see, I think we have presented in the slide for the presentation about what has been our procurement cost, right, from Q1 of last year, in rupees per tonne on a landed basis, Mr. [ Hiten ].

$60 more or less.

Yes, the indicated price, again, I'm just trying to give you for convenience, it's around $60-odd.

$60-odd in Q3, right?

Yes. No, but in Q3, yes, it is -- it's a weighted average that we have reached all the way up to Q3, [ Hiten ]. It has been procured over a period of time. The current petcoke prices, what we have indicated is not at $100, sir. U.S. petcoke, we have received at $115. And Saudi, yes, we have received an offer at $107. But those are very expensive. So we switched over to the Australian coal, as mentioned earlier. Up to June, we have enough stocks available with us, which we procured at $57 on an average [ CIF ], Krishnapatnam Port.

Okay. Okay. So sir, can you throw some color like what is the outlook? Can we expect the petcoke prices to cool down in coming few quarters? Can it be back to those levels?

I have absolutely no clue about how they are shaping up. So for the next 6 months, we were informed by some of the players that we regularly track, who have been our traders, who have been our advisers, that next few months, probably highly unlikely that prices may cool off. So we ended up buying slightly ahead. For the next 3 months for sure, we believe that there may not be a significant kind of changing in the pricing environment.

Okay. Okay. That was helpful, sir.

The next question is from the line of Mudit Agarwal.

My question is related to the power source for Satguru plant, whether it is completely through the grid power or we have planned to put any WHRS or captive power plant or any solar, we have a plant for that?

Yes, Mr. Mudit, that plant actually comes with a 5-megawatt waste heat recovery system. So it is also getting entirely commissioned with the plant. It typically needs close to around 9.5 to 10 megawatt of connected load. So 50% of it or close to 40% of it is actually coming from the waste heat recovery. We are planning for the 1-megawatt solar plant, which probably will happen 6 months post commissioning. The residual power is coming from the grid. Yes, grid, part of the state incentives, it is at a discounted price for the first 5 years.

[Operator Instructions] As there are no further questions, I would now like to hand over the call to Mr. Sreekanth Reddy for his opening -- for his closing comments. Sorry, sir, can we take one last question? We have from Karthik.

Yes, sure. Sure, Mr. Manish.

I just wanted to clarify one thing. You had said that in TN and Kerala, you do expect the demand to start picking up, and we are probably just about 4, 5 months away from the elections. Despite that in 3Q, we have seen a 5% Q-on-Q drop in lead distance. Would that suggest that the demand from TN and Kerala were probably weaker in 3Q? And what would explain that?

Yes, Mr. Karthik, what you have to remember, for us, the drop is primarily because of realigning the dispatches from the interunit itself. In the earlier quarter, because of the maintenance, we moved material from Mattampally all the way to South Tamil Nadu. That's why reorienting the freight drop would happen. See, that's one of the advantage for the locations that we have. So Gudipadu, as indicated, it's operating at 80% in the last quarter. So that we could shift the material back to Gudipadu, that itself optimized our freight. Yes, we don't go all the way to Kerala because our exposure to Kerala market is very, very limited because even in the southernmost plant that we have, which is Gudipadu plant, is reasonably far from Kerala market, Mr. Karthik. So the freight drop is primarily because of the shift in the -- despite of the material from interunit adjustments. That's it.

Great. So sir, which means that in 4Q, if you were to see a revival of demand in TN ahead of elections, the lead distance per se need not increase because you have kind of optimized your transportation schedule already?

Yes, Mr. Karthik, we are already operating close to 80% at Gudipadu, so we don't expect a major shift when it comes to the lead distance as far as we are concerned.

Thank you. I would now like to hand over the call to Mr. Sreekanth for his closing comments. Over to you.

Yes, we would, once again, like to thank each one of you for taking your time for joining the call. Yes, we hope most of your questions have been answered or addressed. Yes, please feel free to connect with any of our team at Sagar or CDR just in case if you have any questions, further questions, we will be more than happy in doing it. I would also like to wish, on behalf of Sagar Cements, to each one of you a very happy and a prosperous new year. Stay safe. Thank you again. I would also like to thank Manish for coordinating this call and for handling this call excellently. Thank you again. Have a nice day.

Thank you, sir, and thank you, all the participants. You now can disconnect the line. Thank you.