UltraTech Cement Limited (ULTRACEMCO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of UltraTech Cement Limited. We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risk that the company faces. The company assumes no responsibility to publicly amend, modify or revise any forward-looking statement on the basis of any subsequent development, information or events or otherwise. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Atul Daga, Executive Director and CFO of the company. Thank you, and over to you, sir.

Thank you. Good evening, friends. I am glad to be speaking to you again at this -- at the end of this fiscal year, which, yet again, saw several disruptions and new beginnings. I guess cement is not for the weak-kneed people. I will try and focus on 2 key aspects in this meeting, demand and costs. But before that, I must refresh your mind that cement is always a long-term story. If you believe in it, then don't get disturbed by daily events. Let's look at demand. To my mind, as we have spoken in the past, India is fundamentally on a positive trajectory for cement demand growing at a pace significantly higher than the world. Infrastructure, rural markets, and now, urban housing has also started generating good traction for cement. Infrastructure growth has been one of the key pillars of growth for cement in the country. As part of the budget, government has planned to complete further 25,000 kilometers of roads. Recently, there was an announcement about 220 new airports by 2025. Even if 100 airports were commissioned, you can imagine the amount of infrastructure in and around the airports, the airport itself, will generate demand. On the housing front, the government is doing about 8 million low-income houses this year, which will generate demand from the rural segment. Another positive development is the revival in demand in the urban housing space. As you must already be aware, [indiscernible] top 7 Indian cities has come down to the levels seen pre-COVID as property sales recovered very rapidly in 2021. As for an independent report, in major -- sales have gone up in major metro cities very high. Housing inventory across cities is down to 32 months by end of 2021 from 35 months a year ago. New projects are good -- new project launches are good, and this clearly shows sign for cement consumption will follow. Rural markets are also not going to be left behind. Fourth year in a row, the monsoons are expected to be good this season as well, which should result in a good harvest and improved cash flows for the rural markets. So 3 out of 4 [indiscernible] of demand are humming well. Another question is about driving costs and its impact on demand. I believe that the projects in this will not stop. Construction costs are certainly going up, but construction work cannot stop due to other compulsions, like timelines to complete the projects and associated interest costs. Any further delay might increase the cost further, and hence, the existing projects will continue on their path of execution. What has certainly happened is a new home builder, who has not started construction for the house, may stall because his or her budgets have to be revised with the rising cost of materials used in -- and modules used in construction of our house. This, to my mind, may not be more than 1% to 2% of the incremental demand every year. And within no time, general elections 2024 will be around the corner, which will also boost demand. As per estimates of the real estate players, cement is about 11% of total project cost and has had an impact of less than 1%, whereas all other products have impacted nearly 12% of their costs. On the other cost elements, which is fuel cost, coal and pet coke have risen to unrealistic levels. I believe they should cool down sooner or later. These are really unrealistic prices. There are uncertainties around the Russia-Ukraine situation which is anybody's guess. Crude prices are, of course, impacting our logistics costs, all possible efficiency improvement efforts are being put in place to minimize the impact of rising costs, and there's no choice but to increase the selling prices. April has witnessed recent price increases as well. I must clarify to you our position on white cement. We have acquired a majority stake in a company called RAK White Cement in the UAE. It's a company listed on the Abu Dhabi and Kuwait Stock Exchange. RAK White Cement is a market leader in the GCC region, and synergies with Birla White will boost its market leadership. This is a critical strategic investment to help strengthen Birla White in India. It provides us much needed access to additional capacity to serve markets in the country. White cement market in India is growing at a rate of about 7%. This capacity will help us meet the growing demand. We are now putting on hold the capacity expansion plan in India, which was about INR 978 crores, which we had announced recently. Because we now will have access to RAK White Cement's 9 lakh metric tonne of clinker and 6 lakh metric tonne of white cement capacity. Currently, they are operating at 65% capacity of [ labors ]. Their EBITDA margins are both at about 19.5%. Quality of product is good. Nearly 20% of the capacity is exported to India and 45% is sold in the highly lucrative GCC African market. Birla White will be able to secure white cement and clinker supplies from RAK White to need its capacity shortages. Our unit expansion is on track. CapEx spends have been at a record high of nearly INR 6,000 crores this year, and god willing, we should be able to complete all of our projects in time, all ahead of schedule in spite of the delays caused by COVID-related lockdowns, labor shortages, off-season shortages and other related activities. In spite of this INR 6,000 crores of CapEx, we have yet been able to deleverage our balance sheet by a further INR 2,800 crores, and now, ended the year with 0.32x net debt-to-EBITDA. We are managing and maintaining our working capital on a very tight leash, again, continuing on a negative working capital trend with upwards of INR 1,700 crores in negative working capital that we ended with. So in sum, all is good. All is well that ends well. And I would like to conclude on a happy note, that we have crossed our annual revenues of INR 50,000 crores like an FMCG company, with operating margins as close. Thank you so much.

Can we open the floor for Q&A, sir?

Yes, please.

[Operator Instructions] The first question is from the line of Pinakin from JPMorgan.

Sir, I have 2 questions. First, on price hikes. Now, there have been industry reports of very large price hikes. What we wanted to understand from you, sir, is that as a company, have you taken similar price hikes in both the trade and nontrade segment? And how has demand been in April versus last year? And what has been the impact of price hikes on volumes at this point?

Yes, we have taken price hikes like the industry. Can't be left behind. And your other question was on trade. Nontrade, yes, both the segments have taken a price increase.

And sir, how has April trended so far after the price hike?

April is doing well. Doing better than last year.

Okay. Sure. And sir, my second question is on the media reports about UltraTech being a potential bidder for Holcim's assets in India. What -- how should we read into it, sir?

Like I am reading the newspaper, you're also reading the newspaper, so that's about it.

So is it fair to say that the company is not interested in them, sir?

I wouldn't want to comment anything until the Board takes a decision. So...

The next question is from the line of Indrajit from CLSA.

I have 2 questions. First, on raw material sourcing, particularly fuel sourcing. Costs aside, are you facing any concerns on shipment availability, particularly for imported coal or imported pet coke? Are you -- are the delays longer? And could it impact the production at any point through the course of next 3, 6 months?

Not at the moment. Shipment -- you see, ocean freight is high, but freight availability and supply availability -- supply are not restricted.

Sure. And even for rake availability in domestic, we are facing...

Rake availability has nothing to do with -- it's normal. Currently, the government is -- some railway company will withdraw rakes, you would have read. In fact, 16 passenger trains were shunted out to let coal movement for a power plant. So these kind of things keep happening in the country. This is normal.

Sure. Secondly, while you highlighted fairly detailed in terms of the homebuilder segment demand. But not just cement, every other commodity has gone up and it looks like the cooling office is still sometime away. Even then, particularly in the rural IHB segment, are you not seeing any impact on demand?

April is growing in all segments, so I don't see anything pulling down. So as I mentioned, whatever has already started, it will be financially illogical, otherwise also, illogical to stop the project in between, because whatever you have spent does not get into good maintenance, that also will get spoiled. You will require additional costs to bring it up. Interest meter will be continuously on. So to that extent, only a person who are deciding to build a new house has to redo his or her our own budgets. Instead of doing a 1,000-square-feet house, they might decide to do 800-square-feet house or -- that's for their decision.

Sure. One last question, if I may. Is there any change in fuel mix on a sequential or year-over-year basis between pet coke, imported coal and...

Yes. So we keep playing with the mix. Last quarter, I think pet coke was 20%, 25%. This quarter, it is up around 40%. Today, pet coke landed -- is definitely, in energy terms, is far cheaper than coal. So efforts will be to increase pet coke consumption.

The next question is from the line of Ritesh Shah from Investec.

A couple of questions. Sir, first on white cement, could you please repeat the volumes you did indicate, 20% of that capacity currently caters to India. Sir, can you give that number, please?

So 20% of 6 lakh tonnes, 1 lakh 20,000 is approximately getting imported in India.

Okay. And sir, you also said that we will put to rest the expansion, what we had announced. Sir, how should one read this? Is it because of the limestone?

No, no, no. Because we will have access to RAK White Cement product. That is why we don't want to -- we have spent money on this investment. Instead of -- no need to invest right now on expanding in India.

Okay. But sir, if I had to look at it on a delivered cost basis, still, this would be more meaningful as compared to moving cargo from, say, north to south. So that was one angle that I was thinking of, probably it could be cheaper on delivered cost basis. And the other question was if RAK was supplying to, say, paint majors or other companies, would it mean that they would continue to supply? Or would that material will come to Birla White and this will dictate where to supply? How should one look at that part of the equation?

Yes. Obviously, the priorities will change for RAK White because they will have to cater to Birla White first before catering to other customers.

Okay. And sir, on delivered cost?

Delivery costs, it's cheaper. The freight from [indiscernible] to the ports of India is as economical as transporting from our plant in Rajasthan to Andhra, Karnataka and those markets.

Okay. And sir, just a follow-up. Is there a volume arrangement, the minimum offtake that we have from -- can this 20% do the 50% or more going forward?

There is no minimum requirement, and there is no minimum commitment. So whatever I want, we will want to definitely prioritize for India. And as long as it is value accretive for that company, they will also want to do that. They will also want to increase their capacity utilization. They will also benefit from the expertise of RAK -- benefit from the expertise of Birla White. Birla White is a branded product, far more respected than other products, which are getting imported in the country.

And sorry, will we look to increase our stake over here?

We will definitely attempt to do that.

Sure. Sir, just another question. Anything -- any update on divestments, Binani, fiberglass?

Sorry, I forgot to mention in my commentary, we have completed the divestment of the noncore asset. Funds have already been received on the 30th or 31st March. In fact, we had completed the closing of -- we are done and dusted.

Okay. Perfect. And sir, one last question, if I may squeeze in. Sir, how should one look at fuel inflation into next quarter?

I'm sorry?

Sir, how should one look at fuel inflation into next quarter, given you indicated like the...

$1 million last question, Ritesh. All I can say is your guess is as good as mine. In itself, it's a lottery. Today, you buy at x price, tomorrow, it could be X-minus or x plus. So there is no -- there is no way to predict or forecast how these prices will go. Coal, as you know, from the 300, it came softened in the last couple of months to 50 or thereabouts. It is [ fine ] again.

The next question is from the line of Madhav Marda from Fidelity International.

I just wanted to ask that for UltraTech, in cases we are a potential bidder like from a CCI point of view, are there any particular regions where it is easier or difficult for us just from competition commission...

We'll see if we do it now. Why should we start building capitals in the [ air ]. So I really don't know.

The next question is from the line of Amit Murarka from Axis Capital.

Just first question is like, on FY '23, could you just provide some CapEx guidance?

CapEx guidance, we should be closer between INR 4,000 crores to INR 5,000 crores, which will complete all our ongoing expansion. Plus, whatever other WHRS projects are, there's INR 4,000 crores to INR 5,000 crores.

Okay. Okay. And given that your expansion will be done by the end of this financial year, like, I believe in the last call, you had said that probably, by Q4 you would finalize the new plan to...

Yes.

So what's the status on that?

I'm sorry, finalized what?

As in the new investment plans beyond FY '23. So...

We will come back to you once the Board approves, we are working on our growth plans. Because clearly, we see India as a growth story. We don't want to degrow when India is growing. So we will definitely keep growing. We will expand.

Sure. And what's the status on Dalla Super as of now?

Dalla Super, I know it is delayed, but the latest is that Stage 1 approval was completed and if the file should be moving from UP to MoEF Delhi for Stage 2 clearance this month. Keeping my fingers crossed, we should be able to get the plant in our hands by the end of this quarter -- to June quarter.

Okay. And then probably, another 6 to 9 months to revamp?

Yes, absolutely. Absolutely.

Okay. And last question, like on this white cement acquisition, like will it also help improve or lower the competitive intensity? Because I believe, imports were actually coming in and...

Yes, certainly. Certainly.

Okay. So in that sense, you would probably look to improve the price realizations also in India?

Certainly. Certainly.

The next question is from the line of Pulkit Patni from Goldman Sachs.

2 questions from my side. First, you mentioned in the presentation about $164 of fuel cost. Could you identify this is what kcal of coal? And the reason I'm asking this is that if you look at where coal prices are now, pet coke prices are, I mean, it looks like we are staring at a massive increase in the subsequent quarters. So if you can tell us that kcal, that will help us calculate that better.

About INR 2,000 per million kcal.

Is what you're using for this $164 number?

Yes, yes. Absolutely.

Okay. That's helpful. And secondly, can you also identify, what is the proportion of captive coal that we have right now? And any sense on where that number would be in the next, say, 6 to 12 months?

Captive or FSA coal.

Yes. I mean, linkage plus -- yes.

Should be about less than 20%.

Less than 20%.

Less than 20%. Yes.

Okay. That's it from my side.

The next question is from the line of Prateek Kumar from Jefferies.

My first question is -- I mean, in the opening, as you mentioned that looking to commission everything on your capacity in FY '23. So that would mean like 11 million tonnes clinker and 15 million tonne grinding for FY '23. So can you space out, like, quarter-wise, if you have that data, like, how are you looking to commission during the year?

I've given that earlier also. Let me tell you, just give me 1 second. Quarterly [indiscernible] one second. There is a [ cheap one ], expansion. So towards the end of Q2, we should have another 4 million tonnes, end of Q3, 1.5 million tonnes and Q4 for the balance.

Balance 10?

Yes.

And what about clinker, likewise? 11 million tonne of clinker which you are targeting for '23.

So this includes the clinker also. So clinker was Hirmi, Pali and Dhar. Yes, it should be by Q3.

Okay. So pretty much everything by Q3, including the Super Dalla and the grinding by Q4?

The only thing is Super Dalla, I've been keeping my fingers crossed dealing with this process, it's too complicated. Something or the other keeps surfacing. And I've been promising you guys about Dalla Super since last 1 year. So -- and every time I think I'm at the last mile, but suddenly, a new mile resurfaces. So keeping my fingers crossed, is all I can say.

Okay. And in your presentation for various present [indiscernible] update region-wise commentary. You mentioned that rural housing seems to be doing better in Central West and South and not so well in North and East. And probably, expect -- April is doing well, as well. So this seems to be different versus some of the commentary from industry like [ FMCG ] or auto companies on rural commentary. And you highlighted something in previous comments, but in a detailed mode, like so there's no rural setback for cement sector?

So I'm not seeing any setback. Not, for example, what we saw in Q4 would be a temporary phenomenon because of extreme cold or elections happening in that build. Other than that, it's back to normal. But I wouldn't be able to compare FMCG and construction in the same market, also.

And one last question on your fuel cost. So like [ volume of 12%, ] so $64 versus, I think in 2Q, you said around $160. So is there a mix...

$151 was Q3 and this quarter, was $164? $164, right? $164.

Yes. So comparable number, like, let's say, you would -- I mean, I know that it is difficult to forecast, but like you would have inventory for at least the first quarter. So how could this move like in first quarter '23?

It will go up. I expect at least a 10% increase.

The next question is from the line of Sumangal Nevatia from Kotak Securities.

First question, just want to understand, across the field, what is the inventory days which we carry? I mean, is it like 45 days or 2 months?

So we fluctuate between 45 to 55 days currently by shipment landing. And it may spike up. Otherwise, an average of 50 days is good to hold.

Okay. I understand. And sir, given the current overall fuel situation, blended cement cost versus your PC would, of course, move very favorably towards blended. So I just want to see -- check, is there any impact on your other raw material cost? I mean, what sort of price incretion is happening in flag, fly ash, et cetera?

We have seen inflation across. Fly ash has also gone up. So overall, raw material cost has gone up 6% to 7%. 7%. So you have seen an increase in costs across the board.

Okay. So this is the fourth quarter, and the cost must be still continuing to rise, right?

Not necessarily on these. Like fly ash, it's more of contractual in nature. And you might not see such a high jump again this quarter, but general inflation would be there. Inflation itself is [ 6%, 7% ] now, by the way. Yes, sorry. Diesel is something which is unpredictable, which impacts raw material costs. Limestone raising cost moves with diesel.

Understood. Understood. Just one more question. On the price hikes, I mean, you shared that they have been taking price hikes across. Is it possible to give any very broad quantification region-wise or overall pan-India quantification?

So over what period that rate you're using?

So April versus 4Q average or something like that.

April versus -- 4Q was March. March -- March was 365. So average, if I look at -- for the March, March quarter was around 360, it's roughly around 390 now.

Okay. Okay. And -- okay, understood. And will it be fair to say that -- I mean, some part of cost inflation is yet to be covered. So there will be further attempts.

Attempts, yes.

Okay. Got it.

The next question is from the line of Girish Choudhary from Spark Capital Advisors.

A couple of questions, sir. Firstly, on -- now that the second largest player combined, seeing a potential change of hands. So as the industry leader, how do you see dynamics changing for the industry and then possibly for you. With the potential Indian promoter coming in, will that make you even more aggressive or maybe look at inorganic slightly aggressively? So just wanted to know your thoughts on this development.

We will focus on our growth. As I mentioned, right now, we are reaching 130 million tonnes and the next phase of growth will also kick in because we expect Indian market to be growing. As far as assets changing hands, whoever buys it, they will have to generate returns on that asset and be logical in whatever they are doing.

Got it. But more from UltraTech's inorganic opportunities, given your scale of capacity and cash flow. So beyond the point, I think organic growth might not help. So are you prepared to look at inorganic...

Yes, yes. We keep having opportunities. Unfortunately, why the current new media reports are the talk of the town, but there are smaller assets, which keeps surfacing which we examine, good, bad, I leave it. It has to be a composite asset for us to move forward.

Got it. And my second question is on the region-wise demand performance. So here, again, if I look, East is the only region which is just continuing to see demand decline by 3 consecutive quarters of demand declining on a Y-o-Y basis. So what's happening here? And when do you see demand bouncing back here?

Sorry, I missed your question. Demand, which segment?

In the Eastern region.

Eastern region. So my sense is Eastern region will -- this year, will show the fastest growth again. In terms of volume, there is a lot of inflow, which happens from outside East. Now, capacities will be available in the Eastern market. Our capacities will also surface in this year. So East will grow.

Okay. I think my question was more -- I think this region has seen 3 consecutive quarters of demand decline. So what is driving this deterioration on and then when do you see this...

I think deterioration, yes, there was a sand issue, big time sand issue in Bengal and Bihar a few months ago. There were current rains, which impacted construction activity. These 2 factors, for sure, impacted construction activities.

The next question is from the line of Satyadeep Jain from Ambit Capital.

Mr. Daga, a couple of questions. One on fuel. I think you mentioned, a, pet coke is cheaper on a -- delivered on a per kcal basis. And your inventory is -- cycle is largely like 45, 50 days. Would there -- is there a change in thought recently? Or would there be a change in thought? Would you, given where prices are, either look to layer in more inventory because your maybe, concerned prices may go up? Or maybe, shorten the cycle, thinking prices may actually go down? Or maybe, maintain a status? What -- or can we assume basically that the 50, 55-day inventory cycle will remain not be similar in the coming months?

No, the thing is nobody can predict and it will be gambling if I take a call. So yes, if there are opportunity -- some opportunistic trade available, we will look at those trades. But today, it's quite expensive. So we are maintaining our normal procurement plan instead of gambling on prices. Nobody can forecast. You yourself, maybe it could go down, go up, anything can happen.

Okay. Second question on the next phase of growth that you mentioned. Obviously, the board company is looking at different options. And there is optionality across the portfolio. When you look at the options that sit in front of you right now, if you had to pick maybe certain plants, certain regions ahead of others you are taking order. Is there maybe somewhere you can possibly pull the trigger ahead of others?

I will tell you when we do it. I can't reveal it right now.

The next question is from the line of Navin Sahadeo from Edelweiss.

Am I audible?

Navin, speak a little louder, please.

Yes. Can you hear me now?

Yes.

Okay. Great. Sir, just one question. On the fuel mix, you said pet coke in the current quarter and in March quarter increased to about 40%. And linkage coal, to one of the other participant's question, you said is less than 20%. So roughly, around a little less than 60% is what pet coke and linkage coal put together is. Imported coal, then, should make up for the balance, 40%?

Absolutely.

So this is for kiln. For the captive power plants that we use, what does...

Largely FSA. Domestic FSA.

Largely domestic coal loans?

Yes, yes.

Where there is no much increase or there is a fair amount of e-auction coal also there?

No, there is not much increase. [indiscernible] so linkage prices prevail.

Great. So only the kiln portion is where we see inflation part of?

Yes, yes.

The next question is from the line of Raj Gandhi from SBI Mutual Fund.

He's already gone. So take the next one. You can take the next question, please

The next question is from the line of Rajesh Ravi from HDFC.

You talked about the fuel cost that we are looking at in Q1, and you mentioned at least around 10% increase. However, if we look at the prices which are prevailing in Q1, on a per kilo cal versus INR 1.5, they're already north of INR 3 per kilo cal. So how is that number, for you, looking so cheaper, sir?

It will depend on the fuel mix, the carrying costs, the inventory, which is there. And anybody and everybody could have some advantage or disadvantage.

Okay. Okay. And in your balance sheet also, annual balance sheet numbers that are available, there is a INR 150 crore increase in inventory. So is it fair to assume a large chunk of that would be a fuel inventory?

Yes. Large chunk because it was a price impact on the fuel inventory.

Yes, even that would be one factor. But even in volumetric terms, that would be a number which you are looking at. Okay. And in terms of CapEx, you mentioned that around INR 5,000 crores plus CapEx versus your green initiatives, right, for FY '23?

All included, yes.

Lastly, this Dalla, how much we have spent so far or what has -- what is the amount which need to be spent? This is 2 million tonne clinker, right?

We have not spent anything because we still have to first get MoEF approval. And we have estimated that it would cost anywhere with around INR 200 crores or INR 250 crores to revise a plant.

Okay. And this is -- that's the 2 million tonne clinker, sir? Or is the grinding also, sir?

It is only clinker, 2.3 clinker.

2.3 clinker. Great, sir. I'll come back in queue.

The next question is from the line of Ashish Jain from Macquarie.

I had 2 questions. Firstly, on demand. The table that you put out in the presentation, it has a fair bit of reds this time around. So relative to that, how has the demand changed in the last few weeks, if at all, in terms of the drivers of demand?

April is growing. Y-o-Y, April is growing.

Okay. But like where is the delta coming from versus Q4? Is it -- any specific driver or is...

Q4. I'm saying Y-o-Y. You can't repeat...

No, no, I know. No, no. Sir, I understand that. I'm saying that if I look at the Y-o-Y trend in Q4 and compare that with Y-o-Y trend in April, is there a specific reason for the...

Ashish, I'm not able to track the demand -- sale on a day-to-day basis, which segment is buying. So it is difficult for me to comment on that.

Right, right. Okay. Okay. And sir, secondly, in response to earlier question, did I hear you right that pricing today is INR 30 higher by and large versus Q4 average?

Yes. The exit prices, if I were to say, as of now, they are not average April. But I don't know, that will be higher.

So that would cover us for the cost inflation by and large, I think, going back the number you indicated...

Going in, in the month of May, if the price increase holds for INR 30, then it's good.

Okay. Okay. Got it. Got it.

The next question is from the line of Raj Gandhi from SBI Mutual Fund.

Just going by the kind of cost inflation that we are seeing, any initial assessment in terms of further cement CapEx cost, what would be the impact? And also, we are here in chip shortage and all of that even delaying the cement plant. So in terms of timelines and all on the equipment side and...

So as far as our existing expansion, program is concerned, as I mentioned earlier, there is no delay. And if you were to look at new greenfield project cost, there, I'm sure, the costs have gone up by 20%, 25%.

Okay. Okay. And in terms of timelines and all on the -- because on the equipment side and also, we are hearing a lot of...

No, I don't think so. Because equipment suppliers continue to have enough capacity to my mind. So what you are referring to some insights you might have, which I don't have, as in some manufacturers facing some shortages, whether DCS or something like that, I'm not really aware.

Sure, sure. But broadly, most of the equipment not in the long...

Nobody has warned us.

Okay. Okay. Sure, sure. Perfect.

The next question is from the line of Rakesh Vyas from HDFC Mutual Fund.

Actually, 2, 3 questions, if I may. First one, just a clarification. So you are highlighting, April is better Y-o-Y. But just wanted to check, last year, April was impacted by the second wave in terms of demand. So how should we look at it? And in the context that price hike expectations were already built in the system, post price hike, if you can just highlight as to how demand is trending?

So post price hike, I mean, I'll repeat, Y-o-Y, it is growing. Whether there was an impact of COVID or why should we factor in only negatives? Let's look at it positively. Now, this month is growing. Supply hikes have been absorbed if that is what you are trying to conclude. So your conclusion is right.

Okay. Perfect. Got it. The second question is related to fuel mix. Essentially, the price arbitrage that exists between imported coal versus the rest of fuel basket implies that most of players would be vying for a higher proportion of the remaining basket. And to that extent, how confident are we in terms of maintaining the availability of this mix and maybe, improving it? The context being that pet coke availability is reasonably limited, and so is the concern that we are hearing on the domestic coal side?

Sorry, what was the question?

So question was that, given the price arbitrage that exists between imported coal versus the rest of the fuel basket...

So yes, technically, everyone would look at getting more of pet coke and more of domestic coal. So as of now, as I mentioned earlier, availability does not seem to be a challenge. One more factor which is very important, not from today's perspective, but what happened after Winter Olympics of China, China has announced an increase of a substantial -- I'm reading the number, a substantial increase in their coal production plan.

300 million tonnes.

[indiscernible] wrong number, so that is one. Second is post-Winter Olympics, all their mines, which were stopped for power plants, which were stopped, have started again. So there's a huge amount of -- huge reduction in imports into China, which is making material available for the rest of the world.

Got it, sir. And one last question is around the capital allocation going forward, given that we are expected to generate strong cash flow and our CapEx is going to be fairly stable, and net debt already came down very, very sharply, how should we look at the incremental deployment of the free cash flows going forward?

So this year, again, we have declared about 20% of net profits for shareholder returns. And I believe, this component will keep growing in future years. Next year, for sure, because next year, FY '23, additional capacities will generate additional cash flows. And then, the cash will be used for internal growth. As I mentioned earlier, we are already back on the drawing board for our next phase of growth. So we will look at growth opportunities not just core organic.

Got it. And just -- sir, one last clarification. If I have to look at the adjusted number after accounting for the tax provision changes that we made, in fourth quarter, is it fair to assume that the benefit of tax adjustment changes was close to INR 1,300-odd crores?

INR 900-odd crores. INR 983 crores.

The next question is from the line of [indiscernible] from SBI General.

Hello, am I audible?

Yes, please.

I just wanted to understand. So you have -- what your net debt to a significantly low level of 0.32 for EBITDA. So going forward, you're also looking for inorganic goals. So at what level you will be comfortable putting that net debt level?

I would look at 0.5x as our threshold going forward. However, I suppose there is an organic opportunity, it might spike up, but now, we are confident that given the size of cash flows, we should be able to bring it down within a 12-month period. So -- but otherwise, a steady level of 0.5x is a good number to maintain on our balance sheet.

Okay. So this -- the 3x net debt to EBITDA, we won't see in the near future? Is that in line?

Yes.

Okay. Okay. Okay. That's it for me.

You throw up an acquisition which is so attractive, which they require me to file up 3x, I will do it.

Is there any assets in your envelope?

If you might have something, you tell me.

The next question is from the line of Sanjay Nandi from Ratnabali Investment.

Sir, just to mention, sir, you have taken a price hike of INR 30 per bag. So is it good enough to cover all the inflation that has happened as of now?

So as of now, it looks good. And again, let me correct you. It is not an absolute amount of INR 30 through the month. Multiple price hikes taken during the month, which today, are amounting to INR 30 increase over the exit -- over the average of last quarter. Going in for the month of May, if prices hold, then obviously, the INR 30 increase is available. If costs don't go up further, then yes, we are covered.

Okay. Sir, if we presume like coal prices to stable here so far. So is [ INR 30 ] good enough to cover all those incremental costs?

Yes, that's what I said. Going in, if everything remains same, then we are covered.

Okay. Okay. That's from my side, sir. Wish you all of the best.

Thank you. The next question is from the line of Ritesh Shah from Investec.

Sir, first question. Specifically on this pricing that you have indicated, possible to give some regional flavor?

Sorry, what?

Possible to give some regional favor, you indicated INR 360 to INR 390 at INR 30 bond on an exit rate basis. Is this something which is consistent on a [ calendar ] basis? Or are there some regional trends to pricing where you are, sir?

I think 5% to 10% increase is what I would give you a range across the market, except for South, which is below 5%.

Sure. That's helpful. Sir, my second question is on incentives. Sir, can you put some numbers for the quarter for the fiscal, what we had? And given we have a lot of expansions, which are lined up, how should we look at this number going forward, given most of the industrial policies from the state where we have or where we are setting up capacity, they have a quantum of incentives? So sir, how should one understand this particular variable?

Rajasthan will have incentives, Pali will have incentives, Dhar will have incentives, which is in the expansion. Dulla will -- Maharashtra will have incentives.

Patna [indiscernible].

And Patna will have incentives. And your other question about incentives for the quarter, [indiscernible] give me a number, please. Just one second. Just a second.

Yes. And sir, how should this number trend going forward given the expansion also what we have...

There are multiple plants which are having incentives. Somewhere, the incentive might get completed, somewhere a new incentive will come up. The incentives for the quarter was 100 -- about INR 170 crores. Sorry, sorry, sorry. INR 117 crores.

Okay. Sir, any broad ballpark number if we have to look at the first fiscal -- first quarter of FY '24. By then, all those expansions will be there and commissioning will be done...

But the incentives will get completed as well. So I don't have an exact number. INR 117 crores could go to INR 150 crores or lower. [indiscernible] just one second.

Sir, meanwhile, can you indicate on the completed the year on construction chemicals for how much of revenues? And you had indicated a target of INR 25 billion in 3 years. Any particular [indiscernible]?

BPD, BPD, one second. I have a number. Just one second. INR 100 crores for this quarter. Around INR 100 crores for this quarter.

Sir, for the year?

This quarter. For the year, I don't have the number readily.

Sure. And sir, any progress over here, given you had given a step [indiscernible]...

I am looking at opportunities to acquire some assets. And of course, these are very small ticket size. We will see as and when we are able to conclude.

Thank you. Ladies and gentlemen, that was the last question for today. On behalf of UltraTech Cement, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.

Thank you.