Shri Keshav Cements and Infra Limited (SKCIL.BO) Earnings Call Transcript & Summary

Good morning, everyone. Myself [ Tejas ] on behalf of Kirin Advisors Limited, I welcome you all for the Webinar of Shri Keshav Cement & Infra Projects Limited. From the management side, we are pleased to have Mr. Venkatesh Katwa, Chairman; Mr. Vilas Katwa, Managing Director of the company. To begin with, I would like to give a short introduction of the company, after which, I will hand over the call to Mr. Venkatesh to give a detailed overview of the company. Incorporated in 1993, Shri Keshav Cement & Infra Limited is engaged in cement manufacturing and solar power generation and distribution [indiscernible] in the State of Karnataka, India. With this, I will hand over the call to [indiscernible]

Yes. Good morning, everyone, and welcome to Shri Keshav Cement & Infra Limited to Q1 FY '26 Earnings Call today. I sincerely appreciate your time and interest in joining us today. Shri Keshav Cement & Infra Limited, what we usually call SKCIL is engaged in the manufacture of cement and power generation from solar industry, primarily in the State of North Karnataka. Our cement plant is situated in Bagalkot and solar plants in Koppal, both in the North Karnataka region of the state. And our distribution network for cement spans in North Karnataka, Coastal Karnataka, Goa and parts of Maharashtra, supported by over 350 cement distributors and 600 retail touch points and over 14 solar power consumers. So let me take you through our performance in Q1 FY '26. We are very pleased to start the year on a positive note. For Q1 FY '26, total income grew by 32.53% year-on-year to INR 41.4 crores, supported by robust cement demand, steady solar power contributions and improved capacity utilization for new kiln commissioned in March 2025. EBITDA rose to INR 10.41 crores, delivering a margin of 25.5%, while profit after tax surged by nearly 74% to INR 3.09 crores. This strong performance reflects the benefits of our capacity expansion, a better product mix and disciplined cost control. The cement segment saw healthy traction from infrastructure and real estate projects in our core markets, while our solar operations continue to provide a stable low-cost energy backbone for our plants. With increase in our cement capacity almost completed and powered entirely by renewable energy, we will -- we are well positioned to capture opportunities in the growing urban centers. Rising public infrastructure spending and continued momentum in housing and commercial construction provide a favorable demand backdrop for the rest of FY '26. Our strategic focus remains on optimizing capacity, deepening green energy integration, enhancing our product mix and expanding into high-growth urban areas such as Bangalore and trying to reach out to Kerala. Before moving into a Q&A session, I extend my sincere thanks to our shareholders, partners, consumers and employees for their unwavering trust and support, which we continue -- which continue to be the cornerstone of our growth. With this, I'm pleased to open the floor for questions regarding our earnings call and thank you once again for being part of us today. Thank you.

[indiscernible] Venkatesh, sir. So with that, now we open the floor for Q&A. Investors you can raise your hand, and I'll allow you to unmute or you can also drop your questions in the chat box. Yes, Priyank, please go ahead with your questions.

Congratulations on commissioning of the new capacity and it's good to know [indiscernible] the rationale for expanding the capacity South market has been volatile most of this capacity expansion.

Priyank, I lost some part of your question. So I heard till the point where it says has it been. Can you just repeat the question real quick again?

So I just want to know the rationale for increasing the cement capacity since the bigger players have also greenfield and brownfield plans to increase the capacities. Do you think this capacity expansion can really have sustained realizations?

Absolutely. So let me come back. The whole rationale for going for this CapEx was basically to increase our EBITDA margins or EBITDA per ton, which is what was lacking because of very high fuel and power consumption. So as expected since the kiln has just started and as we kind of stabilize, the EBITDA per ton has grown now from around hardly INR 100 or less than INR 100 last year to over INR 365 this year -- this quarter. And of course, with the increased capacity, we qualify for a lot of other government-related projects and we are beginning to get some traction and also some sales have been generated for infrastructure projects by the government of -- state government and it will continue to increase as we move on. And I also heard regarding overcapacity in the South. Yes, South is adding significant capacity as well as the realization in the South is not very significant compared to the rest of India. And we are almost huggy backing on the South performance. So for example, the cement prices year-on-year for South reduced by 3%, whereas for SKCIL it reduced by about 1.2%, almost the same. The EBITDA per ton for South-based industries was around INR 560. This data -- and for our SKCIL is about INR 360. This data I have received from various sources where only dominant South players we have taken. And based on that, these are some of the results we have observed. So pretty much...

Sorry, can we expect our company to also reach this figure of INR 560 or near about?

Yes. As we move along, as we stabilize our plant, of course, it has just been 1 quarter and we have not got fully the desired results what we were expecting. But then again, as we continue to operationalize the plant, as we continue to enhance our efficiency, eventually, by another couple of quarters, we should be able to be close to what we see in the Southern region.

And this average realization and stabilization of EBITDA, do you think it will be complete within 1 year?

I believe so, because this year, the whole -- the plan has been to stabilize the plant in such a manner that we reach all the efficiency parameters as was designed to set up this plant itself.

My next question is regarding the solar business. Can you throw some light on whether you are able to sell some power to third parties, merchant power? And what are the rates which the company is able to command on what capacities?

So approximately now solar generation compared to year-on-year almost remains same instead of adding -- in spite of adding 3 megawatt to make it a totally 40 megawatt because we experienced early rains this quarter compared to general rainy season. The realization part compared to Q4, marginal increase in pricing we received from 5.82 in Q4 FY '25, we have reached to 5.98 in Q1 FY '26. So Solar pricing will remain stabilized between 5.9 to 6 throughout the year. And unless there is a change in DISCOM prices, these prices are going to remain stabilized. And solar power generation, as usual, is giving the -- a lot of EBITDA contribution to the reserves as of now. Thank you.

The final question I have is regarding the debt servicing and debt repayments. Is there any substantial repayments coming up in next 1, 1.5 years?

This year -- this financial year, we'll see 3 term loans being closed, out of which 2 -- one has already been closed out of the -- when there is a maturity. One term loan was closed ahead of time. In fact, another term loan was supposed to be closed in January, due to cash inflow, we closed ahead of time. And another term loan will get closed by March. So this year, 3 term loans are getting closed whose initial value is around INR 42 crores plus about -- almost INR 62 crores worth, which was sanctioned will get closed this year. And only this year, we will have a repayment liability highest. From next year onwards, the repayment liabilities will start going down because the term loans are getting closed one by one.

So you are confident that you will be able to close these loans through internal accruals or you'll have to raise some more capital because this is being first year of operations for the cement plant?

I believe so, yes. This year also, with the increase, if you look at the Q1 results and EBITDA margins and cash profits, we are at cusp of the point where our realization will start going up, sales will start going up, profit will start going up and the borrowings will start going down. So I'm pretty confident that for this year, we should be able to repay the loan through internal accruals. And if there is any shortage, the management will always pour in funds when there is a need.

So that means, in effect, you are saying that the company's EBITDA will surely more than be doubled from last year?

This year, definitely, yes, because our first quarter EBITDA itself is around INR 10.5 crores to INR 11 crores. So -- and typically, this first quarter, we had early monsoon. So second quarter is also going steady. And the most we will expect to accrue is in Q3 and Q4 where we should be expecting EBITDA levels where we should be able to service debt and repayment smoothly.

My best wishes to your whole team. You have done an incredible job of trying to fund this expansion more through internal accruals and a little bit from shareholders' help. My best wishes to all of you.

Thank you, Priyank.

[indiscernible]

So my question is around the cement rates. Let's say, with the last year or last quarter, how much cement rate has increased now?

So compared to year-on-year, the cement prices -- so across the year you're saying? So typically, Mr. [indiscernible], the realization has slightly increased in Q1 of FY '26 compared to last year. Last year, only except Q1, Q2, Q3, Q4 were pretty bad, but the increase has been around -- see, all over -- quarter-on-quarter, the price have increased by 7%, but year-on-year, the price have reduced by around 1.2%, pretty much what we have seen in South India. So as of now, being the monsoon for Q2, price have not been so encouraging. But typically, what we expect in Q1, we have seen some increase in prices. So to give you an example, our naked cement prices were around INR 3,433 for Q1 FY '26 compared to INR 3,477 for Q1 FY '25. In spite of that, our EBITDA levels were higher because of the new kiln and the new efficiency that has flown in.

Okay. And how much is the current utilization of new plant? And what is your target for this year and next year in terms of utilization?

Sure. So as of first quarter, 36% is what is utilized because this being the first quarter itself. So we are targeting around 45% this year and then slowly wrap it up to about 60% -- 55% to 60% next year and around 70% in the following year.

And when this new plant has been operated, which month or which, let's say, which week in this quarter?

So only the kiln is operation as of now, which was by end of March 2025. The rest of the supporting equipment are added one by one as we speak. So technically, we have a kiln which can help us produce 1 million ton of cement. So balance in equipment, it will be added online maybe this month and a few next month itself.

Mr. Kush, please go ahead.

Congratulations for the good set of numbers. So actually, sir, I wanted to understand that the new plant is in South India, right?

Correct.

So is it going to impact our growth as the price realization is better and even the demand of cement is better in North and Middle India. So what -- so do we have any CapEx plans going forward?

As of now, for cement, we want to stabilize the existing -- the recent CapEx that we completed. So once we stabilize this plant, then we would consider think of adding another level of capacity. But right now, South is overcapacity. But in spite of that, we are able to -- for example, our year-on-year volume growth is around 42% compared to average South year-on-year volume growth is only 9%. So we are pushing our -- and we are capturing more market than what our South other peers are doing. So as of now, there's no plan of capacity addition until we stabilize this existing plant.

So from it, I can understand that for the next 2 years, like until FY '27, we don't have any CapEx plans, right?

Not in cement, yes.

Yes. So again, if we look at the South market as well, so the EBITDA -- growth in EBITDA is mostly due to volume growth and not because of the value growth, right?

Yes, pretty much, I would think so.

Okay, sir. And what's the growth in our other segments of business other than cement?

Our other segment is solar. Solar last financial year, we added another 3 megawatt. So the total plant is of around 40 megawatts. Around INR 200 crores has been capital expenditures on establishing this plant since 2018. And right now...

How much we have invested, sorry?

Almost around INR 200 crores. I think about INR 195 crores, INR 196 crores is what we have invested in solar projects to set up around 40 megawatts of plant.

Okay. And how much do we earn per megawatt?

So the realization for this quarter has been about 5.98. The last year, entire realization was around INR 5.95, the entire year. So that is a net realization what we are getting because the solar plants are incentivized by the government for 10 years. Another 3 years is to go. After that, there are certain statutory charges will be applicable, but they're not going to be significant once we have our plant stabilized.

Okay. So -- actually, I missed your number. So INR 5.98 is for Q1 or the whole FY '25?

So average price is INR 5.98 per unit. But out of total EBITDA of around INR 11 crores, around INR 7.8 crores is contributed by solar and only INR 3.2 crores is contributed by cement. Solar has always been a highest EBITDA contributor currently.

Okay, sir. So what would be the payback period for us from our solar project?

So solar is project typically about 8 to 9 years, what is applicable to other solar plants in the country.

Okay, sir. And do we see any major OpEx in solar because in maybe 5 years down the line, we might need to change some solar panels?

So there are a couple of things on solar. One is once the cement plant stabilizes, management would like to consider addition of more solar capacity. Plus somehow current evacuation capacity of the solar plants will support a very high -- almost 3x higher generation. For example, if we have 40 megawatts right now, the evacuation capacity of nearly 200 megawatt. So in future, what a lot of other old plants are doing is they're simply changing the panels from the old capacity, new capacity and adding few transformers by which they can drastically increase the capacity. And we would be looking at that kind of a transformation, not right now, maybe about 5 to 6 down the line. Currently, for example, we are using 320-watt peak modules for the existing plant. There will be a point in time where we could expect to reach around 1 kilowatt peak modules. At that time, it will make sense to replace the panels and made some internal infrastructure adjustments to immediately instantly achieve higher generation.

So our payback period would be around 10 years in this?

For the existing plant about 8 to 9 years. But in future, when we -- assuming that the solar panel price do not change, the payback period is going to be lesser because then our existing land, our existing what we call modeling structures and a lot of other infrastructure will remain constant. The only change will be in the panels and transformers. So the investment is not going to be significant. And thus, we would expect lower payback period.

Okay. And do we expect the price per unit to remain same throughout...

This year, yes, because typically, the regulatory charges are done for a year long. So for this year, whatever regulatory charges have been applied in the State of Karnataka will remain same. So I would expect currently in Q1, I have received 5.98. So typically, between 5.9% to 6% is the range what you would reasonably expect for this year, the price -- average price for solar sale.

Okay. And in the whole year, how much we are expecting from solar in FY '26?

So solar will continue to go down now as we keep ramping up on the capacity, solar sale units are going to go down. So once we reach around 60% to 70%, I think almost all the solar capacity will be utilized.

Okay. So what would be the numbers?

What number? I mean...

From solar. The top line from the solar or the bottom line from the solar for the whole year FY '26?

So when I generally give out the solar EBITDA figures, these are all notional EBITDA figures because internal consumption is considered at the price what we are selling outside. But as we move on, the EBITDA figures will get embedded within the cement sales itself, only for the sake of notional EBITDA separation because when we compare cement plant to other cement plants, we will have to compare on cement EBITDA per metric ton considering apple-to-apple comparison. But as we move along once we start consuming entire solar power, there won't be any solar sales. However, cement EBITDA would show a significantly higher per ton basis.

Mr. Bharat, please go ahead with your question.

Congratulations for a good set of results. A couple of questions, sir. First, can you just talk a bit with respect to the institution's orders? I think you were mentioning in your opening remarks about the government tenders. So can you just share some highlight about the progress on the same?

Yes. So last quarter on a mid or I think in the last month, we began to start striking -- having orders from what we call as KRIDL, who does a lot of development work in Karnataka. KRIDL itself is the Infrastructure Development Corporation of Karnataka who builds roads, bridges and the stuff like that. So we were able to dispatch around 3,000 to 4,000 tons last quarter since it was just the beginning. So this quarter, we are expecting to more than double that quantity. And once we establish here, we'll keep adding more such institutions. Only because right now, we have increased capacity and all other parameters we qualify for the -- for such kind of orders, it will start showing up fully another couple of quarters down the line. But already, we have put our foot in the door and we are beginning to get full-fledged orders from them.

And sir, how the realizations will be like with respect to the B2C sales versus the government orders? The cement price remains the same for us?

No, they are a little better because one advantage of institutional buyers is they price the same for certain grade of cement across all the cement plants. So there's no differentiation on the basis of branding. So that works out to be an advantage for us. So compared to a lot of Tier 1 brands, Tier 1 brands tend to give them a discount and those even discounted levels tend to be higher than our realization. So yes, it is going to be at least 10% higher than our existing net realizations.

Right. And sir, like you mentioned that you are targeting 45% kind of utilization on the enhanced capacity. I think we were mentioning somewhere close to doing 50% and above. So has there been any downward revision in the guidance? Like earlier, we were guiding for INR 70 crore EBITDA. So is there any negative revision on the guidance for this fiscal year?

So typically, what happened was we expected the kiln to perform efficiently right from day 1, which of course, we had a little ramping up issues with the kiln. And some of the balancing equipment which will add to the kiln capacity have been a little slow in implementation. So they are almost in the final stages right now because of which we don't want to be over the board. So 45% as of now with the current cement scenario appears to be reasonable. But the way we are trying to market and sell is we are trying to push it as much as possible, even targeting around 60%. Just to be on the safer side, the revision has been done to -- looking at the current scenario. Yes, with a little dip in capacity utilization, there is going to be a little dip in the EBITDA expectations too. So reasonably, we are expecting EBITDA of around INR 55 crores to INR 60 crores this year compared to what we had predicted around INR 70 crores, INR 75 crores earlier.

And on the PAT front, sir, it would be somewhere close to INR 30-odd crores like you mentioned on the last con call?

So PAT, this is something which is important to discuss. What happens in PAT is we have something called as deferred tax liability, which is showing before the PAT figures. So as a management, as the industrialist, we can typically target on EBITDA and PBT. So PAT is a derivative of some of the deferred tax liability, which are most of an IndAS adjustments. So based on what I understand on how deferred tax liability is applicable, so about INR 25 crores to INR 30 crores is what I should expect. Typically, we are expecting very high PAT in Q3 and Q4, which we technically see in cement industry.

Sir, also, we were doing some pilot phase with respect to RMC. So any progress there we have made in this particular respect?

So RMC as of now, we are still studying on the project. I mean, in fact, the study has been completed. We have already the land required for the project. But the project will be initiated once we see some stabilization in the cement plant, which we were expecting earlier. But now with the teething issues that we had in the first quarter, so it might be delayed by another quarter or so.

And sir, when do we see the stability built in like with the balancing act coming in place, so can we see the stabilization of the plant by Q2?

Q2 or max by Q3. I would say, Q2 will be the point where all the stabilization process will be taking place. So you will see some better results in Q3. That is what is the realistic expression that we have right now.

Right. And sir, any color on the CapEx for this year, like any plan of addition in the solar side?

No, no plans on the solar side. There could be a possibility of solar and RMC, but decision has not been taken since we want to stabilize the cement plant first. So if I see complete stabilization by end of Q2, which is expected, then Q3, we would be thinking of CapEx in solar as well as in RMC.

Right. And sir, like you mentioned, there has been an improvement in the realization on a quarter-on-quarter basis. So do you think that trend will continue over the rest of the year? Like particularly with respect to Q3 and Q4, do you see there will be uptick in the pricing realization?

So EBITDA per metric ton has definitely been an uptick. This quarter, we achieved the highest EBITDA per metric ton since inception. For example, in FY '25, the EBITDA per ton was less than INR 100. The year before that it was hardly INR 75 EBITDA per metric ton. This quarter, we reached about INR 365. And this is just the beginning. So once -- as the capacity starts adding up and once we start increasing the capacity utilization, the EBITDA per ton also is expected to grow and start hugging with the South-based plants.

I was asking with respect to naked cement prices, sir.

Naked cement prices?

Right.

So naked cement price year-on-year it has reduced by around 1.2%, but quarter-on-quarter around 7%, which is almost similar to what we have seen in South. So even though Q1 has shown some increase in prices, the Q2 has been very slow and because of early monsoons, very particularly because of early monsoon and heavy monsoons all over the region where we sell the cement. But always, we have noticed in the past that a good monsoon is always followed by a robust demand in cement and then the pricing itself. And if you look at some of the news articles from some top cement plant executives, they are predicting a significant increase in the prices of cement in -- by the end of FY '26.

Right, sir. And just a last question from my side, sir, like with respect to the enhanced capacity which we have and with respect to increasing on the distributor connect, what sort of a progress we have been able to look? Like you mentioned that we were targeting newer territories or newer. So any progress which you have been like for penetrating into those markets?

So yes, I mean, we are doing a lot of digital marketing. We are raising a lot of new loyalty programs and all the other stuff. So simple fact that what we are doing means that -- we started doing this from Q4 FY '25 because of which if you -- for example, average South volumes growth year-on-year was only 9%, whereas we reached 42% growth solely because we are becoming very aggressive to make sure the entire capacity is sold. So this is helping us to build on our volumes. But yes, apart from digital marketing and apart from loyalty programs, we are increasing the areas and we are beginning to see new customers added to the list. So the list goes on. And as expected, it is -- the ramp-up is going on. In fact, the ramp-up is going on as we speak in Q2 also.

Except 300 kilometers areas, we are also looking at newer territories, whether it is market of Kerala or some other states?