Sagar Cements Limited (502090) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Welcome you all to the 2Q FY '22 Results Conference Call of Sagar Cements Limited. We have with us from the management, Mr. Sreekanth Reddy, Joint Managing Director; Mr. K. Prasad, CFO; Mr. Rajesh Singh, the Chief Marketing Officer; and Mr. Soundararajan, the Company Secretary. I would now like to hand over the floor to Gavin Desa from CDR for his opening remarks, and then we can move on with your con call.

Thank you, Manish. Good day, everyone, and a warm welcome to Sagar Cements Q2 FY '22 analyst and investor call. Manish has already introduced the senior management on the call. We will begin this call with opening remarks from the management, following which we will have the floor open for interactive Q&A session. Before we begin, I would like to point out that some statements made in today's discussion may be forward-looking in nature and a note to this effect was stated in the con call invite sent to you earlier. We trust you have had a chance to go through the result communication and documents. I would now like to hand over to Mr. Sreekanth Reddy for his opening remarks. Over to you, Sreekanth.

Thank you, Gavin. Good afternoon, everyone, and welcome to Sagar Cements earnings call for the quarter ended September 30, 2021. Yes, let me begin the discussions with a brief overview of the market in terms of the demand and pricing trends, post which I will move to Sagar specific developments. Demand and subsequent volumes remained steady across our key markets during the quarter. Pickup in housing and infrastructure activities helped us sustain the volume momentum during the quarter. Yes, in terms of the overall sales mix, the overall demand was healthy as various central government infra projects gathered momentum. Trade sales were expectedly a bit low owing to the heavy rains across most parts of the country and very specifically to the markets that we operate. Realizations as well as relative -- were relatively steady across our key markets. However, we were compelled to undertake price revisions to offset the impact of significantly rising input prices. Resumption of economic activities, conclusion of the monsoon season and subsiding of the COVID cases should result in improving the overall pricing environment and also the demand. Going ahead, we remain positive on the business and believe the steady demand from housing, industrial and infrastructure provides strong visibility both in terms of demand as well as the pricing trajectory. Moving on to Sagar specific developments. We are pleased with our performance during the quarter, wherein we delivered a healthy revenue growth of 13% over the previous year. The revenue growth was largely owing to the strong underlying demand in the housing and infrastructure activities across our key markets. The realization were largely stable on back of steady demand. Operating profit and margins during the quarter were expectedly on the lower side given the sharp surge witnessed in the key raw material, and also one-off events like -- we actually have undertaken the maintenance activity across the units that we have during this time. As guided earlier, the prices of petcoke, coal, diesel continued their significant uptrend, in turn denting the overall profitability of the business. While price hikes were announced most part by most of the industry players, the extent of price revisions weren't commensurate enough to help offset the overall impact of the input prices so far. However, we are able to minimize part of this pain this owing to our prudent cost management and procurement policy. Moving on to operational highlights. Another positive development was that on October 27, that is yesterday, Satguru Cement Private Limited, a subsidiary of us, has commenced peak utilization at its newly implemented integrated plant of 1 million tonne capacity in Madhya Pradesh. As informed earlier, the cement grinding and the dispatches commenced on 15th of August 2021. This along with the Orissa project, which is expected to be commissioned by middle of December '21, will not only help us improve our volume growth during the second half of the current financial year, but will also help us in rationalizing our freight expenses and diversifying our sales outside our existing markets. Average power and fuel cost stood at INR 1,330 per tonne as against INR 844 per tonne reported during Q2 FY '21. Elevated prices of coal and petcoke resulted in higher per tonne cost of fuel for the quarter. The freight cost for the quarter stood at INR 795 per tonne as against INR 769 per tonne during Q2 FY '21. The profit after tax for the quarter stood at INR 21 crores as against a profit of INR 50 crores reported during Q2 FY '21. What we would like to state here is there has been a policy change for us. We are no more considering the incentives part of our P&L and at the same time making the provisions for the past. Because the receipt of the incentives have not been up to the mark in terms of timeliness, so we started making the provisions appropriately in this regard. From an operational point of view, Mattampally plant operated at 51% utilization level, while Gudipadu and Bayyavaram plants operated at 80% and 57% respectively during the quarter. As far as the key balance sheet items are concerned, the gross debt as on 30th of September 2021 stood at INR 914 crore, out of which INR 774 crore as a long-term debt and the remaining constitutes the working capital. The net worth of the company on a consolidated basis as on 30th of September 2021 stood at INR 1,334 crore. Debt equity ratio stands at 0.58 to 1. The cash and bank balances were at INR 128 crores as on 30th of September 2021. That concludes my opening remarks. Yes, we would now be glad to take any questions that you may have. Thank you again.

[Operator Instructions] We have the first question from Shravan Shah.

So firstly, a couple of things first. Why -- we were confident that we will be -- Orissa unit we will be starting by September and now we are postponing by almost a quarter. So what are we trying to time it and why the delay? And I think most of the CapEx is done, so why the delay?

Yes. I think the delay is primarily because of this strong situation that actually happened, so that hampered during the monsoon. Yes, we could not work for 15 days. The site is almost ready. So I don't think there should be any further delay than what we have already indicated. The last finishing works which were more outside, yes, we could not progress as per the plan because the monsoon impact was very, very severe. But for that, the entire plant is already in its reasonably complete shape barring the few small minor works that have to happen on the inter silo side -- silo top and as well as the cement silo top, we could not progress because of the monsoon. Yes, those are all the finishing works that are there. And we have cautiously indicated the middle of December, but we are more than hopeful that by end of this month we should be in a good shape to commence the operations itself, Mr. Shah.

So in terms of the volume guidance that we were seeing, 3.6 million, so any downward revision to that?

No, sir. I think we are reasonably sure of the outlook for the -- volume outlook still remains at 3.6 million. Yes, just for your this thing, we have already done 1.73 million for the first half. So 3.6 million is definitely doable is what we strongly think, Mr. Shah.

Yes. So now on the pricing and the cost front. So how much till now in October we have taken price hikes and how much more needed? And on the cost front also -- so everybody knows the petcoke, coal situation. So how much more at our level in terms of the per tonne we can see a further increase? So that's the other question.

Yes. Now coming back to the cost side, sir, there are 2 elements. One is the diesel price hike. I think that -- so far from a quarter-to-quarter, I think there has been a 4% to 4.5% rise in the diesel price hike that got impacted even on the freight side. So if the trend lines remain, so freight is expected to move up by -- in a similar kind of a band. Now more specifically on the thermal side. For us, if you have seen, we ended up using the entire imported coal that has been with us in the inventory. So we are no more left with the imported coal and we are not doing any procurement action on the imported coal side. Yes, we'll continue to use the petcoke. If you have seen in the last quarter, we ended up almost at 60% petcoke. So going into the Q3, we believe that petcoke will come down to 50% and the coal would be the balance and majorly it would be domestic. I think we are expecting the domestic coal to be anywhere between 40% to 45%. Most on the power and fuel cost we are expecting from Q2 to Q3 an increase of only INR 50, primary reason being that we are fully switching over to the domestic coal side. We are fully done procurement for the quarter 3. So the impact is only on the petcoke side. For us, there is not much of an impact so far on the domestic coal. So the domestic coal you said we are -- we believe that the potential increase on the power and fuel is going to be only INR 50 from Q2 to Q3. And if a similar trend continues on the domestic coal, yes, likely that we might still end up with a INR 50 increase from Q3 to Q4 is what we think. But that again depends on the diesel price movements, because freight -- the inward freight is also going to play a role on the overall kind of a landed cost of the coal.

On the pricing front, how much we have taken price hikes and how much more needed?

See, I think how much more is needed, I think the sky is the limit, sir. But let me address what we have achieved so far. From the exit prices of September to the current month, yes, Bangalore we could increase by INR 45 to INR 50 per bag, Chennai has been INR 35 to INR 40, Hyderabad has been INR 40 to INR 45, Vizag is INR 35 to INR 40, Sholapur is around INR 40. Even Pune, though it's a very small market for us, the increase is at INR 40. This effectively on a net basis, sir, would have covered the potential kind of a cost pass-through so far that has happened. Any cost increase from here on should help us go back to a better margin kind of a regime. But with this price increase, we are more or less -- again, I'm specifically talking of Sagar because of the domestic coal ability. With this price increase, yes, it's kind of an effective pass-through. Yes, our struggle is only on the freight side itself. I think from here on the price increase should be directly proportional to the freight cost increases and the fuel cost increases from here on. We have been reasonably successful to cover the ground so far and we hope and wish that the power and fuel cost don't move up beyond what they have already done. With that hope, we more or less could cover the escalation on the power and fuel side. The other inflationary things, we are hoping that should be covered with the potential price increases that are likely to happen going forward.

And sir, last clarification on the pledged shares and debt guidance that we were seeing around net debt of INR 800-odd crores. So are we maintaining that?

Yes, sir. I think our stance has been very clear that we would still be maintaining our net debt some INR 800 crores. Now very specifically to the pledged shares, sir. I think it's part of the promoter family, not the core promoter family. Yes, for their own personal requirement they have pledged. It is not from the core promoters itself. It is an extended family of the promoters.

The next question is from Mangesh Bhadang.

Sir, my question is on the debt side again. So the peak debt you had mentioned, I think, INR 800 crores to INR 850 crores. And we are closer to that. And just before the Board Meeting, I think you had tried to pass on a resolution for increase in debt or issuing the debt. So the purpose of that for the repayment this year?

Mangesh, yes, we don't borrow debt to repay the debt. Mangesh, let me as a policy clearly state that. The primary purpose of potential debt increase is primarily to augment the potential kind of acquisition and forward Capex, if any. And these are of minor nature, sir. I mean, it's an ongoing thing that we keep doing it. Yes, the idea of raising debt is not to repay the existing debt.

So it was not for the existing Capex. It was for the future one. That's...

Yes, sir.

Okay. Okay. And in terms of demand, sir, if you can just throw some light on demand, specifically in AP and Telangana how it is shaping up? So what are your expectations in the second half and overall growth in FY '22?

Yes. Mangesh, when it comes to the demand, I think as mentioned earlier, even in my opening remarks, the demand has been steady. We struggled to service the demand during the Q2. The good news was that monsoon was heavy. But unfortunately, we could not service during that time because of the number of rainy days and the quantum of rain that we have received in the footprint areas of our market was very, very strong. So we could not service the entire demand. Demand has been fairly steady. Our problem with the -- the government demand especially in Andhra and to some extent in Telangana has been extremely strong. Our only concern was about the payment related issues on the government side. So once that gets eased up, we are reasonably confident of the demand outlook for these 2 states, Mangesh.

And sir, lastly, you mentioned that given the usage of domestic coal, the incremental hike in power and fuel cost would be up to INR 50 per tonne for you. And given the kind of price hikes we have seen in October, you think that we can go back to -- say, closer to Q1 levels of EBITDA per tonne?

See, I think our outlook indication still remains as what we have started with. We are confident that the volume of 3.6 million is definitely achievable, and similarly, above INR 1,000 EBITDA per tonne we strongly think is possible, because if you would have seen during even the full H1, we are very close to that number. So I don't think there would be any change. Any price hike from here on, we strongly believe may not significantly alter the margins, but it should be a pass-through in terms of the cost. Yes, if you see the last year margin was close to around 31% to 32%. We should hope we will be close to that. But can we increase the price to match up with that? I have my reservations. But I think -- the good part is I think our customers and the market is responding positively for any cost increases. I think the price is more or less aligned to ensure that it's a pass-through. So that itself is a very good situation, Mr. Mangesh. So given that scenario, we are very sure that with this kind of volume outlook, our EBITDA -- the absolute EBITDA should be very close to of last year. That itself is not a bad number. But anything higher than that, I'll keep my fingers crossed. We are hoping for it, but I'll keep my fingers crossed on that.

The next question is from Amit Murarka.

Just on power and fuel, like these have been kind of moving, obviously fluctuating a lot. So currently, what is the -- is petcoke again cheaper than imported coal after all this sharp jump?

See, I think -- Mr. Amit, I would strongly encourage you to look at Slide 9 in our presentation.

Sorry. Okay.

Yes, where we did indicate the current level of pricing. In our case, it's not just the imported petcoke, but we do have the domestic petcoke available for us from [ CTCL ]. On a landed basis, the current petcoke is at $300. The imported coal is at $245 to $250.

No, no, that helps. Also like on this -- the integration that has started, so congratulations for meeting the time lines there. But like, how is the like situation on that front like given the way the costs are? Central market is obviously also been seeing flow of materials from some southern states...

I think it is similar to the markets that we operate, sir. I don't think it is something very different. Fortunately, the price hikes probably may not optically look like how it has been in the other markets that we service. But I think the current price increase should offset the cost increases also, Mr. Amit.

The next question is from Mudit Agarwal.

You mentioned that you will increase the proportion of domestic thermal coal. So just wanted to check what kind of grades you are keeping over there in terms of domestic thermal coal? And is it good enough to be used in our kilns?

Just to remind you, a few years back, probably a decade back, up to that time, we were not looking at any imported coal nor the petcoke. Very first -- kiln built on this -- any coal that we're using it. Unfortunately, the quality of the coal deteriorated over the period. But we had to do some adjustments in our mix designs. So for the Q3, our outlook is that we should be 50% domestic coal with a 50% petcoke. So that is what our mix design is made for. But our kilns are capable of absorbing 100% of these domestic coal also, because we have material which can -- the mix design can be made to suit 100% of domestic coal. And primarily, when we are talking about domestic coal, in our case it's all Singareni. Of course, with Satguru getting operational, even there we do have an FSA that probably would be coming from the subsidiary of Coal India. But that could be a very small proportion itself. But we do have petcoke agreement even with the IOCL Baroda.

Yes. Two more questions actually on power and fuel side only from my side. So what is the typical inventory that you maintain both for domestic and imported because you already have your entire coal booked for 3Q? So is it more like 3 months? Or how should we...

That usually are stated -- the thing is we look at 90 days as our inventory. But we could not move so much during the Q2 because we were not -- we never had such a strong, good feeling about the price increases, so we did not go aggressively. That got reduced to 60% and we ended up using the high cost imported coal. But as such, we have 60 days forward kind of an inventory. When it comes to very specific -- to domestic coal, sir, our idea is to take whatever comes by. So we should go back to more than 90 days kind of an inventory in due course of time. Q2 was tough. Usually because -- during the monsoon most of the quarries also could not supply at that point of time because some of the -- it gets flooded and -- in the season. And coupled with that, last 1.5 months most of it got diverted to the power plants, rightly so. So the current inventory is at 60. But over next few weeks, I think we should go back to the 90-day kind of an inventory position at various plants of ours, Mr. Mudit.

Sure. One last question. Several of your peers have increased the alternate fuel or green fuel usage. We are still at about 3% kind of...

Mr. Mudit, I would encourage you to look at our integrated report. See, it's not an apple-to-apple comparison, sir. Our disclosure is on TSR. It is not on percentage of alternate fuel. So I think we are probably at par or better than most of my peers. And it's a long way. So we are more than hopeful that we should be surpassing all the best practices that can happen on that particular side. See, the comparison -- and our disclosure is on TSR, sir. That is the thermal substitution rate. Yes, the equivalent is always a challenge because you end up using something which is of a lesser caloric value, but it is voluminous, as a percentage it looks very high. But the real metric there is to look at the TSR, sir.

The next question is from Mangesh.

Sir, the question is on Andhra Cement, so in case if you have looked at that asset for acquisition purposes. Just wanted to know your thoughts on the capacity, the -- or the quality of assets and the limestone life that they have?

Yes. Let me put it like this, Mr. Mangesh. We definitely looked at that asset with a lot of interest, but unfortunately the process did not suit us what they have initially started off. So we did not end up bidding for it. But I believe now the data segment has happened to one other ARC. Yes, we are keenly looking at what is likely that is going to happen post that event. If it comes back into the market, we will definitely be very keen to relook at it. Now let me address the question that you have asked first about the quality of the asset. Yes, the quality of the asset -- it's a street location plant, sir. So there is an integrated plant in Dachepalli and there's a grinding plant in Vizag. Dachepalli unit -- yes, part of the diligence -- fortunately, we had a chance to visit and do the diligence during the first step. The Dachepalli unit is in a very, very good shape, sir. It's a very good quality asset. Of course, like any asset, it needs -- I think improvement is always a continuous process. But as is, there is -- I think the assets of a very, very quality. It roughly has around 150 to 180 million tonnes of limestone resources. A lot of investment went in the past for it to be upgraded. Might need some little investment for it to further get aligned. Going back to the other -- it's a 1.55 million to 1.6 million tonne clinkerization unit, sir, with a 1.8 million tonne grinding capacity. We see there is a good scope for some improvement there with optimization itself and debottlenecking. The other asset is the Vizag grinding station. It's a 0.8 million tonne grinding station, sir. It's a ball mill. But the asset quality is good, though it's old. But it's a ball mill. So we cannot compare with the assets that we have. As you know that our assets are relatively new and a lot more sophisticated. From a Vizag grinding perspective, yes, we may have to relook at and retrofit the asset to align with the quality of the assets that we generally target for. But the Dachepalli unit, which is the bigger of the asset, I think it's in a very, very good shape.

So we already have a presence in the same region, so -- and with relatively lower utilization. So what would be the idea behind looking at that asset?

No, Mangesh, it's more a consolidation of the market. If the asset comes at the right value, we will be very happy to look at it. That has been the core aspect of it. Like any market -- we have been open for all the markets. The idea is we are only avoiding putting up a greenfield or a brownfield for at least -- for next 3 years in South. So if any asset is available in South, we have been always keen. It was part of that thinking that we looked at this particular asset. The interest in that asset is subject to the cost of acquisition also, Mr. Mangesh.

The next question is from Ritesh Shah.

Sir, you said there is a planned shutdown and maintenance impact was there in Q2. So can you just quantify how much impact was there in this current quarter?

Yes, I think it is close to around 8 -- yes, the absolute impact is around INR 5 crores, Mr. Ritesh Shah.

Okay. And sir, since the new capacity has commissioned and another capacity is coming up in the December quarter, so have you seen some cost impact in the current quarter, preoperative expenses and -- so just want to know that.

No, I think it is aligned, sir. I think it is perfectly aligned because the commissioning just -- the clinker commissioning just happened. It is on dot in terms of our internal expectations. So there has not been any changes in that regard as far as Satguru. Coming specific to Jajpur, sir, the impact is very, very marginal because most of the CapEx is done. So there is a moratorium to balance it out. So we are not expecting any major changes to happen on the CapEx side related or on the OpEx side for both these projects. It is very much in line and as per the plan.

And sir, Q2 cost of production is INR 3,612. So how much rise we expect in Q3 considering the fact that the current imported coal price on per kcal basis is INR 294 as per your presentation, and Q2 exit rate was 1.58. So there is almost an 80% increase...

Ritesh, as I indicated, our estimation with the current inventory and the weighted average cost of the power and the fuels that we have, we are expecting a INR 50 increase on the account of -- per tonne on the account of power and fuel from Q2 to Q3, sir. Yes, Q2 was tough from a perspective of the operating leverage was very low. And at the same time, we ended up consuming the higher cost of fuel, that is the entire imported coal we had to use, because we were aligning the mix design to suit with the 50% petcoke and 50% domestic. So we could not have made a recipe which was technically -- theoretically it was possible, but technically it was difficult. So we ended up using the high-cost inventory during the Q2 itself, sir. So the very positive development is we are expecting only INR 50 potential increase for the Q3 on Q2, sir, on the account of power and fuel prices. So we feel better -- yes, better cost management to happen in Q3 vis-a-vis to Q2.

Okay. And sir, as you said, you have taken price hike of INR 40, INR 45 per bag in the October month. So can we expect INR 1,000 for EBITDA per tonne from next quarter onwards considering cutting the impact of cost increase?

Sir, as I mentioned, we got INR 750 EBITDA per tonne for the last quarter. On an average, INR 40 across the board increase has happened. So you have to net off the GST and all. For the entire year, our outlook remains as stated before, 3.6 million tonne and above INR 1,000 EBITDA per tonne. That remains fairly global, Mr. Ritesh.

The next question is from [ Prateek Kumar ]. The next question is from [ Navin Sadya ].

Sir, just one question from me. You said, of course, the industry has already taken a very handsome price hike, and if at all there is a further cost escalation, there will be further price hikes as well. So in the South market, typically where it is like there is a lot of like non infrastructure demand or, may I say, housing demand, so in your opinion at what level demand starts facing some sort of postponement or pressures because of the price hikes in the cement space? That's my only question.

Yes. Mr. [ Navin ], even in the past we did mention the cost of cement -- or the cost of cement in the overall kind of an housing is very, very insignificant. So it is, in fact, less than 2%. I'm not talking of 1%. It could be even less than that. So given the influence of the overall cost of cement in the construction, this price hike definitely should not influence their decision for postponement. I mean, irrespective of what the price of cement, the other building material or all the commodity prices -- I mean, if you have seen -- I'm sure you are packing most of the other commodities. Relatively cement, unfortunately, never caught up with the inflationary trend. We still remain behind the thing. But see, generally, since it's a bulk commodity and it's a commodity which actually people feel right from -- people need right from the first groundwork all the way to the finishing, people get overwhelmed with the voluminous nature of the cement. But fortunately, it doesn't really impact the pocket of theirs. I mean, probably if you look at a midrange house, one luxury TV probably should be much more expensive than the overall cost of the cement, sir. And I'm not trying to exaggerate. It's a fact, sir. Because theoretically if you look at it, yes, we consume -- I mean, it's a -- 15 kg per square foot is the consumption of cement, and you multiply it whatever price that you can imagine and try to go back and work out...

I appreciate that. My...

So I don't think any deferment -- cement price should not really influence the deferment, sir. But unfortunately the other construction material if they go beyond the thing, it might, but definitely not on the account of cement pricing, is what I think. So frankly, if you look at it, sir, I don't think we are touching the historical high prices in spite of such a very difficult scenario. The cement prices are very close to the historical highs, but have never crossed the historical high prices there.

Understood. And just one more question, if I may. South as a region we have seen like been on negative demand side for, I think, over 2 years now. I mean, of course, FY '19 was stupendous, much ahead of the all India growth. But '20, it was much below the industry -- I mean, all India growth. Even '21 because of COVID the impact was far higher. I think even as we speak, South in the first half probably may have fared a little poor versus rest of the regions. So going ahead now, can we see some sort of normalcy coming back? Can we expect above industry or above average growth rate in the second half or maybe over a period of next 1 year? Or do you think there's still -- demand triggers are still missing down the region?

Yes, I think the current outlook that we have, [ Navin ], has been anywhere between 3% to 5% for the entire South to grow. We think it could be higher than that, but not -- definitely not lower than that. Now it's a relative kind of a thing. Where you have better infrastructure kind of a thing, the progress tends to be slower on the infrastructure side. But housing has been a single biggest influencing factor in this region, especially in the markets that we operate, and they continue to grow. So given that, we internally think that the South demand should definitely grow in the current year, anywhere between 3% to 5% is what we think. And in the next couple of years, it should be higher than this, but not lower than this. Except for some states -- the election definitely influences the demand for that shorter period. But medium to long term, we still think that South could be very close to the double-digit growth on an average CAGR. For a 5 to 10 year horizon, we think it will definitely be very close to 7.5% to 10%.

The next question is from [ Prateek Kumar ]. We'll take the next question from [ Veral Shah ].

Sir, my question is, again, pertinent to the South cement utilization. So what is the average cement utilization in South India for the industry as a whole?

[ Actually ], it should be anywhere between 55% to 60%, sir.

Okay. And sir, any big capacity addition in coming years, let's say, next 2 to 3 years in South India?

See, right now, we only go with the announcements, Mr. [ Veral ]. As in the public domain, I think Ramco's clinker plant in Kalavatala which is part of [indiscernible] is due for commissioning I think end of Q3, that is due. And there is a grinding plant of Chettinad in Vizag which just got commissioned. And then public hearing for both MCL and Deccan grinding plants in Vizag [Technical Difficulty]. So these are [indiscernible]. Any new orders that have been placed, I think we'll exactly know by weeks from now. But so far, these are the things which are in the public domain.

Sir, in terms of capacity, how much it would be?

Can you repeat the question?

Sir, in terms of total capacity, how much it would be, including Ramco, Chettinad, MCL and Deccan?

The new this thing -- I think the grinding plants of Chettinad is 2 million. Deccan, I think is close to 1 million and same case with MCL also.

The next question is from [ Ashish Jain ].

Sir, firstly on coal. What is the status on coal supplies from Singareni because you indicated 50%, 60% usage of domestic coal? Are we kind of getting that supply already? Or this is...

We have been getting the supply. But for the last 1.5 month where we had to struggle, one, because of the weather, and the other, because they were -- due to the priority of the power sector, sir. Even in the slide, we did indicate to you that we have 6 lakh tonnes of linkage with them for over next 12 months. So we are more than hopeful -- as the season improves and some amount of relief starts coming from the power sector, yes, we are more than hopeful for us to get. As such, we are -- we have 1.5 month kind of a forward stock of the domestic coal lying in our yard, sir.

Okay. So coal availability will not be a problem, right?

But I think in our case, again, very specifically, I think availability was not an issue. It's only an issue of cost, both domestic and imported. I think that is the case even for most of the payers who are relying on imported -- I think imported coal or petcoke is available, sir, but it's only a question of at what price it is available.

Right. Just secondly, on price hike, you indicated the hikes in South. What's the sense on the pricing in Orissa, because clearly it's the market which is incrementally a growth driver for you?

See, I think the real -- though we are targeting it, we actually started -- indicated to the market that we are looking at a similar kind of a thing, sir. But what we have achieved is only INR 50 per bag. Mind you, sir, we are only into the trade. Our nontrade lines is very, very low. I believe the pressure is still on in the nontrade side.

Right. And sir, lastly, after these 2 expansions, which should get over by December, anything on the organic side that we are thinking, planning to take-up from the next 2, 3 year point of view?

See, on the organic side, especially the brownfield side, for next 2 to 3 years we are not trying to add pressure to the existing market, sir. But from a preparatory side, yes, Gudipadu for the next line. Yes, the public hearing is due on 16th of November. But we don't intend to quickly start it, but we are preparing the work for ourselves.

The next question is from [ Prateek Kumar ].

Sorry I was not able to unmute. So my first question is, how does the domestic coal pricing on a local basis compares to international coal pricing, export pricing?

Yes, [ Prateek ], I would encourage you to look at the presentation what we have shared. On Slide 11, we did indicate, sir. Yes, the -- just to give you a quick -- imported petcoke is at INR 2.94 per kcal. Imported coal is at INR 3.33. Right now, the Singareni coal for which we have the linkage is at 1.50, sir.

Okay -- no. Sorry, I meant -- I mean, isn't domestic -- I mean, Singareni coal is also -- I mean, aren't they looking for any price hikes and aligning their prices with international...

Good question, [ Prateek ]. But I have no answer to that. I wish it remains within this. So historically, they have never aligned with the imported coal pricing, sir. Just 3 months back if you had to look at it, the imported coal was 1/2 or near 1/2 to the Singareni coal, sir. Same was the case with the petcoke. So our belief is that they may not take such a difficult kind of a pricing where people will start looking at the other avenues. If you have seen -- the industry moved away from most of the domestic coal purely because of the quality of the supply. And at the same time, they were more expensive.

And like yourself, are other manufacturers also maybe talking to the Singareni coal more than what they usually do?

Sure, sir. I think that is the case. I mean, there is no exclusivity. It doesn't need rocket science to figure it out, sir. And I think that is the case, Mr. [ Prateek ].

And sir, just one question on pricing. So you mentioned about -- I mean, I think most manufacturers are now indicating of price hikes. So there is -- I mean, while initially in October there was some nervousness if they will go through or not, it seems they have gone through. So I mean, price has also reversed sometimes in November, December because of year-end phenomenon of companies. Is it something which we can anticipate? Or we are now like looking for even more hikes from here and not reverse?

So I think -- see, what will happen to price -- I wish there was a trend line and the trend line remains where we think. But it has never remained in the past. But given the scenario, the cost increase across the board, we think a reversal of what has happened in October looks highly unlikely. I mean -- but in our business, as I keep telling less of rationality and more of market shares and all. So sometimes what goes up typically comes down. But any further higher price hikes from here, I think it is primarily related to further cost pressures only. I mean, beyond that -- still there is a gap. See, I can only speak for myself. In our case, with this price hike, more or less we have -- we could recover. But again, freight is something which is an ongoing thing. But if you look at majorly at the industry side, I think another INR 15, INR 20 gap still exists. So to that extent, we think the prices should sustain and fluctuate from there on. Reversal from here is suicidal for the industry. But in the past, we definitely had those tendencies. But nothing can be ruled out. But given the environment now, I think reversal of October -- what has happened in October, what we have achieved so far, reversal from here looks -- it's actually unfeasible. So given that scenario, we think reversal may not happen from here. Yes, from here on if we attempt for a very high price hike with an objective of getting something, yes, in that -- at the marketplace some kind of volatility could be expected on that account. That is for a potential kind of further price hike that we're going to take from there. But not for what we have taken so far. That's what we think internally, and we strongly believe that might be the case.

So in the meanwhile, if I may ask a couple of questions. One thing that you mentioned that this 6 lakh turn of inventory from Singareni, how long this can last for our -- in terms of our inventory?

See, if you have to go with the mix that we have -- recipe that we have done for the Q2 -- sorry, Q3 and Q4, I think this 6 lakh tonnes with the combination of petcoke should last us for over 12 months from now, Mr. Manish.

So in terms of cost inflation, we are looking at only INR 50 to [indiscernible]...

Manish, let me tell you there is -- yes, so far the domestic coal prices remained in control. So if they remain, I think -- the INR 50 factor is primarily on the account of the freight is what we are trying to factor, because we have locked in -- but the lock-in for the volume. The price is still an open-ended kind of a thing in the argument. So given that -- we strongly believe that this kind of a mix, even if they increase big -- yes, the delta of price increases we don't see it crossing more than INR 100 in our case on power and fuel alone. So bulk of the price increase has actually struck -- probably compared to the larger peers and people who have come with the results so far, probably we are ahead of curve. But from here on, it looks very stable for us.

Okay. And the second question is on Satguru Cement. How is the initial response there, sir, in terms of volumes as well as acceptability in the market?

Yes, I think our volumes have been fairly controlled, sir. The position has been fairly strong. The acceptability has been very good. So we have done close to 50,000 tonnes so far. But nothing much can be concluded with these limited volumes. But one of the best things is that, yes, the acceptance of the brand and the company has been overwhelming. So we strongly think that we should not face any major problem from a ramp-up side, Mr. Manish.

That's it from my side. The next question is from [ Sanjeev Singh ].

I just have one question. In the slide, you have given petcoke price at around 22,000; that translates into, I think, around $300 per tonne. But whatever we have heard is that it was around $220; in the peak it went to $250. So what does it include on the procurement price for [indiscernible]?

Sir, this includes -- this is on a -- see, most of the people get carried away with the FOB prices, sir. In our case, it's on the landed basis. So that's one of the reasons why we have given it in INR, because it has been handling, it also has the freight to reach the site. It also includes all the taxes and associated things also. All-in -- it's an all-in cost, sir.

Okay. But it includes some production cost to your plant also, right?

Yes, sir. To the various locations wherever we use it. It's not one. It's multiple sites. So this includes the freight cost. This includes all the taxes and duties. This includes the handling cost also, sir.

Okay. And just one thing. Can you give some trend on recent -- how demand is panning out recently? So like some people are talking about that demand has taken a hit in the South region in last few days. So any comment on that?

No, no. Let me give you some comfort on the demand side, sir. See, if you look at Q1 to Q2 realization, the effective drop in our case is only 4%. Now that drop is primarily on account of the freight cost, sir. There is a matching -- freight cost increase has happened. So demand was not bad, sir. We could not service the demand because of the weather. Now -- it's a relative term. So for somebody whoever is servicing certain segments, if they had got impacted, probably they -- but the average trend line is that demand has been fairly good. It's a fluctuating type of -- if it rains at some places, obviously, you cannot service or the demand could drop. But the general trend has been -- it's not a bad demand trend line. It could be better. But as such, it is not bad, sir.

So as there are no further questions, we would like to now conclude the call.

So we would like to once again thank each one of you for joining and taking interest in talking to us. I hope you have all your answers for the questions that you are looking for. Please feel free to connect our team at Sagar or CDR. Should you need any further information or clarifications, we would be extremely happy to discuss on them. Thank you once again. Have a good day. Thank you, Mr. Manish, for all the support. Thank you. Have a good day.

Thank you. Thank you, sir. You may now conclude...