UltraTech Cement Limited (ULTRACEMCO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the UltraTech Cement Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Atul Daga, Chief Financial Officer of the company. Thank you and over to you, sir.

Thank you so much, Rayo. Good morning, good afternoon and good evening to everyone and welcome to our Q1 Fiscal 2026 Earnings Call. Let me straight away dive into burning issues with demand. We believe that the markets have been steady to say the least. Fundamentally, the government spend on roads continues with announcements of some new projects and push for expediting land acquisitions. The government CapEx program has shown a marked improvement in the first 2 months of this quarter on the low base of April, May 24. We are seeing rising state government spends, states like Bihar, Andhra, Gujarat, Maharashtra are doing much better than the other states Y-o-Y. The country has already built 2,108 kilometers of highways in the first quarter of the current financial year, marking an 8.9% increase Y-o-Y. Mega projects like Vadhavan port, some dams, Maharashtra Shaktipeeth, Shaktipeeth Expressway, the 802-kilometer expressway between Maharashtra and South Konkan are starting off. On a full year basis, we believe that the government CapEx will generate a good growth, marked by a low base of fiscal '25. This should be all in all, very good for cement demand. Diving into my -- our current quarter report -- quarter under report. Actually, we had got used to the double-digit growth till fiscal '24 year after year, quarter after quarter and anything less seems to be slow. Consolidated UltraTech Cement has grown at 9.7% Y-o-Y, including Kesoram in both the periods, though for all ends and purposes, Kesoram cement business got consolidated with us or we started managing the operations effectively from 1st of March '25. It's been just 4 months. But as per the NCLT scheme, we have consolidated the financials of Kesoram in the last reported quarter, which is April, June '24 also has been recast to include it in our results. Weather gods, as usual, have been generous this quarter, giving the country relief from the heat waves but the heat waves caused a lot of turmoil in the initial part of the quarter. Early -- the monsoons now having spread across the country will be good for the rural markets. Rural markets continue to be doing their swansong and will be -- we expect them to grow favorably in the future months and future quarters. Urban housing as per some [ IPC ] reports, first half of the calendar has been slow. But the number of deals being signed up, planned purchases already registered and transactions being undertaken, clearly speak about a rebound, which should be visible in the future quarters in the redevelopment market. The development market remains strong for Mumbai and Pune and we are seeing continuous launches of new projects. These new projects, which get launched, would see cement consumption commencing only after 12 months to 18 months of their launch. This is very important to mention because Mumbai as a city might be close to 3% of all India cement demand. One more important point that I want to make at this juncture. We had stated during the last quarter and this is just anecdotal, we have stated in the last quarter that cement demand in the country was around 4% for January, March '25 and there were talks and reports of the growth being actually 6.5% to 7%, from various quarters. Well, I admit I was wrong because considering the performance of 90% of the installed capacity of 655 million tonnes in the country, Q4 '25 was not 4%, was -- but 4.3% growth. This is just to set the record straight about UltraTech and its analysis of the 7 markets. I want to talk about India Cements now, the company that we had acquired on -- concluded the transaction on 25th of December 2024. It's been 6 months or 2 quarters that we have been in charge of that company and the company is on a recovery path, growing and working to the plan. The team has done a full assessment, as mentioned earlier and we will be undertaking a CapEx plan for efficiency improvement -- efficiency and productivity improvement going forward. Most of these projects will have an attractive payback period and will generate positive returns. Projects would include WHRS, preheater modification, cooler upgrades, alternate fuel technologies, to name just a few. Today, the cost of production is higher than average but fiscal '28 will see substantial improvements in operating costs as we complete the CapEx program. We are increasing the renewable energy quotient with 219 megawatts of WHRS and -- sorry, 21 megawatts of WHRS and 219 megawatts of renewable energy, thus taking the green power quotient for India Cements from 3% to 86% of their power requirement in fiscal '28, helping us reduce its carbon footprint. The CapEx programs, the details of which we will definitely share in the next quarter will be all funded with debt and internal accruals and we expect to reach our debt level of under INR 50 crores by the end of the program and thus reaching almost a net debt positive -- net cash on the balance sheet. Fuel costs, as you have always been tracking have been in control which will also help the India Cements -- the operations of India Cements. This performance of India Cements, which recorded about operating EBITDA of INR 400 per tonne was after taking into account the introduction of limestone royalty of INR 160 per metric ton in the state of Tamil Nadu. We are rapidly integrating the operations of India Cements with that of UltraTech getting the advantage of brand UltraTech as we move along and we are confident of reaching an EBITDA per metric ton in excess of INR 1,000 by fiscal '28. Beyond that, we have already started integrating the -- we are nearly completing the integration of Kesoram assets, which have blended in very smoothly with our operations and are on a course for capacity expansion in terms of capacity utilization and improving their efficiency further with WHRS installations. Costs have had some impact. There were global price volatilities. Fuel costs have been higher. In fact, they went up. Pet coke prices consumed during the quarter were slightly higher as compared to previous periods, which is reflected in the overall fuel cost. Other than that, there is nothing much that we are concerned about. In conclusion, I would like to reiterate that UltraTech Cement continues to be well positioned in the Indian cement markets. Our strategic investments in new capacities, cost optimization initiatives and commitment to green technologies position us for continued growth in a competitive environment. We believe our results this quarter demonstrate our ability to adapt to the changing market scenario whilst we deliver on our financial commitments. I'd like to thank all of you for joining us today and look forward to taking your questions now. Thank you so much.

[Operator Instructions] The first question is from Rahul Gupta from Morgan Stanley.

First of all, congratulations on a very good set of numbers. I have 2 related questions, Atul sir. First, we have seen India Cement numbers improving at a fast pace over the past 2 quarters. Now I understand cement pricing was supportive in first quarter. But is there a case that operating performance for both Kesoram and India Cement run faster than your earlier guidance of clocking INR 1,000 per tonne by fiscal '27 and -- fiscal '26 and '28 respectively?

It could happen. Pricing, as such, nobody has a control. As of now, the prices -- as of now, the prices are favorably poised in spite of monsoon, heavy monsoons, the prices have not taken a beating yet, or they hold, I have seen prices improving in July also over the exit quarter. So prices holding up, obviously, could go back -- could go back -- could help us achieve our targets earlier. But besides prices, most important is the integration effort and there's a lot that happens in an integration effort. It's not just pricing. It's right from people, processes, product, quality, logistics, everything is getting integrated, which helps us realize our goals.

Got it. Now my related question is, I understand South price hikes sustained a month after month during the quarter. Now this was also on back of; one, multiple months of unsustainable weak pricing in the region. And second, demand was pretty good in the region during the quarter. Now my question is how should we look South from here? I mean, should this continue? Or is there elevated competitive landscape can bring back what we saw last year? How should we look at the entire region? What's your view on this?

So you want to look south, go north, don't go southwards. That's in the lighter vein. But my sense -- our sense is that the South market is getting consolidated, are in good shape. So we should not feel any negative pressures as of now. Luckily, there are mega projects which are happening in the Southern states. If I look at the markets -- commercial markets for data centers, offices, warehousing, everything is adding up. So it should be good. Let me request Jhanwar Ji to add his thoughts.

Yes. Just to further add upon what Atul said, because one is the South prices were so low actually. So the entire industry suffered very badly in last one year. So that's #1. #2, I think there is a good trigger on the demand side, particularly the change of state leadership in Andhra Pradesh, where the -- now again, the new capital is being planned and lot of infrastructure projects have been announced. Even in the Telangana, which is still not up to the market actually. But there are good green shoots that they will also pick up. So -- and the Tamilnadu is also going for election after some time. So I think South, in terms of demand should do well. And if the demand is good, hopefully [indiscernible].

Yes, prices will remain strong. So South could be your new North.

We look forward to it, sir, all the best. Thank you so much.

Fingers crossed. Anything else, Rahul?

No, I'm good. Not much in the results.

There's so much in the results. I would -- I was thrilled with my results.

No, my point is that your boarding numbers should be good.

The next question is from Raashi Chopra from Citigroup.

Just a question on the realizations that 2.2% increase that you see sequentially, is that -- when you say it's UltraTech brand, that includes Kesoram as well?

No, that's at UltraTech level. Because Kesoram still has its own brand sales and we are fast migrating, India Cements also has its own brand. Of course, India Cement is not included in this number. But this is speaking about UltraTech as a brand. And that's what I've highlighted on the slide also.

So if we were to -- I mean, if you could give us a stand-alone realization as an UltraTech plus Kesoram, not India Cements but UltraTech plus Kesoram, what is that differential sequentially [indiscernible]?

Considering the volumes, Raashi, it might be 0.1% or so lower. That's it. Size is very less. Very small, sorry. So it will be 2.3%, not beyond that, Raashi.

Okay. Got it. All right. And possible to share the building products number for 1Q last year revenue?

One second, if I have it readily. [Foreign Language]. So I don't have it readily. I will announce it. Around INR 185 crores, Ankit tells me that.

Understand. And lastly, what was the CapEx during this quarter?

It has been around INR 2,000 crores. Generally, that's been the run rate every quarter. Plus or minus -- so I don't remember the exact number but it should be around that level only.

Okay. And this is not -- I mean, this doesn't include what you are planning to spend on Indian Cement or what have you spent on Indian Cement?

No, no. So India Cement will fund its own CapEx.

Next question is from Amit Murarka from Axis Capital.

Congratulations on a great result. Just firstly, on the brownfield expansions, like -- so you will be reaching 211 million, 212 million tonnes like -- and I believe like that's going to happen in like 15 minutes -- 15 to 18 months of time. One is like how much more brownfield expansion scope is already there in the portfolio -- in the expanded portfolio? And by when can we expect the next round of expansions to be taken up?

Amit, I think I must have told you also that we are -- the blueprint for the next phase of growth is getting stitched and ready. We will present it to our Board. And before the end of this calendar or best case -- worst case, before the end of this financial year, we will come back with the next phase of organic growth. You'll have to wait for that, let Jhanwar Ji also...

Yes. So the fundamentally, as Atul said, rightly, I can only say that the UltraTech would continue to partner in the growth story of the country. So we all know the cement demand is going anything between 5% to 7%, 8%. So obviously, UltraTech would like to partner in that growth journey. And that is where we have to -- as Atul said, we have to plan out our growth journey on a regular basis.

So Amit, you've got the answer. If industry is growing at 5%, 7%, we will not get left behind to be able to support the growth of the economy and the industry. I've been going around. There are enough opportunities for us, for doing brownfield and greenfield opportunities are also coming up. And this will be our fourth phase of growth that we'll be announcing. There will be a fifth phase of growth which the team has started working now, which will come up at an opportune time.

That's great to hear. And also on the rebranding strategy for Kesoram and India Cements and is there some tolling happening between India Cements and UltraTech?

Yes, please. So the way we are dealing with it, we are, whatever brand is -- whatever output is getting converted into UltraTech brand and the prices that UltraTech is able to realize on that, everything is passed on to India Cement, except for a small margin of which takes care of the marketing expense, which UltraTech incurs, which is roughly INR 10 a bag, or INR 200 a tonne. And if I were to account that component in India Cements' P&L, the reported INR 400 per tonne would actually be INR 458 per tonne.

So you mean to say the volume that you are selling the UltraTech name, that benefit is also being passed on to India Cements' P&L?

Yes, absolutely, absolutely. And Kesoram, there is no pricing because Kesoram sits as part of UltraTech P&L. So there's no differential.

Right. Any volume you could provide, like how much is in Coromandel brand and how much would be UltraTech brand coming out of India Cement?

We are -- so actually, we are -- I wouldn't want to -- want you guys to your mind getting diverted with quarterly numbers because month after month, the volumes are ramping up. And we should be able to conclude the brand transition program before the end of fiscal '27. Next year, we should be able to compete 100%.

The next question is from Prateek Kumar from Jefferies.

Congrats for good results. My first question is on pricing. You said it's like 2%, 2.5% increase in pricing. I guess, is this largely related to South and all? How are the other regions which has panned out during the quarter?

South and East, which had trailed behind took a maximum advantage or maximum gain followed by North and West.

Okay. And you said -- sorry, please continue, sir.

No, no, sorry, I paused you in between. Please go ahead with your point.

I was saying that in July also, you said like prices are slightly higher. So how are that region-wise?

I would say East continues to rise. And we've seen increases in other markets, except North. North and West, we have not seen any increases because they are already very well priced. Other markets are seeing very small increases.

Okay. Is it possible to give out Kesoram volumes in the base so that we can adjust our quarterly base of volumes?

1.58 million tonnes was Q1 fiscal '24 -- sorry, fiscal '25, sorry, my bad.

No. I mean quarterly, like for next 2 quarters also because you'll be giving that without...

Yes, understood. Prateek, I'll ask Ankit to give it to you off-line. I don't have it readily. You want each quarter breakup?

Yes, yes. Okay. Okay.

I'll ask him to share it with you.

The next question is from Pulkit Patni from Goldman Sachs.

Sir, mine is also a bookkeeping question. If you could just break down the volume a little clearer. So 2.18 million tonnes is India Cement and 32.46 million tonnes is the rest of it. Now within this, what is UltraTech and what is Kesoram, if you could help us split that?

It's, 34.64 million tonnes is including India Cements. India Cements was 2.18 million tonnes. Now further splitting is very difficult because we go on market basis and markets could be operating from various plants. So Pulkit, it's next to impossible because when we have multiple plants in the same market, for example, Kesoram, Sarlanagar plant and our Rajashree cement plant, both are in Karnataka. They supply to Karnataka, they supply to Maharashtra and various other markets, becomes a little difficult for us to segregate. I'll request Jhanwar Ji to add further.

No, I think it has been explained very well, Atul. I have nothing to add much because it's a question of the overall optimization of UltraTech, whether it's a product optimization, cost optimization, the market optimization and at time, the customer optimization. So we don't look now as a separate unit or a separate company. The entire focus is fundamentally the integrated approach, what makes sense for the company. That's why -- and at times, some plant is inefficient, we don't operate plant to that extent.

Sir, while I fully appreciate that. What I'm trying to come to is what is the kind of annual volume growth that we are looking at, given the base has changed, it's making a little difficult for us to be able to calculate it, which is why a base number would help. But if not, if you could give us a sense of what's the annual volume growth approximately that you are looking at on a steady state basis?

We would target a double-digit growth given the fact that we have got new capacities into our fold. We would be commissioning -- we have already commissioned 3.5 million tonnes this quarter. We'll get stabilized by the time we reach January, March. We'll have further close to 10 million tonnes further new capacity, close to 10 million tonnes further will get commissioned as we move along. But on the base of fiscal '25, we'll do a double-digit growth definitely.

Sure. Sir, my second question is on your finance cost. Again, at the consol level has come down meaningfully. Is there scope for that to come down more? Has the interest rate been reset across the board? How should we look at that also?

So there's one more reset, which has already -- which has -- last announcement has not yet come in. The last RBI rate cut, which happened has not yet come in. And I believe there could be 1 or 2 more rate cuts within the Indian interest rates, which will benefit us. If you were to ask, my average cost of borrowing would be 7% or...

7% for the previous quarter.

Yes. For the previous quarter was 7%. It will come down as we -- this 7% will come down with the rate cut, which have already been announced and further, if at all, anything happens. So Pulkit, we have also been able to reprice, refinance India Cement borrowings also. They are also getting rated AAA with more or less the same kind of rates, same rates.

Next question is from Ashish Jain from Macquarie.

Sir, firstly, the double-digit growth you spoke about in fiscal '26 is with Kesoram in the base or that is without Kesoram in the base?

With Kesoram in the base. We will -- Ashish, long story short, we will grow higher than the industry.

There's no doubt on that. I was just -- because Kesoram can make a big difference to that. That's, right.

Yes, yes, yes. But not really. Ashish, not really because Kesoram is 14 million tonnes and out of our -- 180 million today? Out of 186 million tonnes, it's less than 8% or 9% of our total capacity, will not make too much of an impact. We'll still be able to grow. The moot point is, we made an investment. So it will generate returns. Yes, sorry. Go ahead.

Sir, secondly, just on capacity, I had 2 questions. One is when we -- if I go back 3, 4 years, when you first spoke about this 200 million tonne target by 2030, if I remember right. Now we have achieved that or we will achieve it much, much ahead of 2030. So how -- would you be able to put a number to capacity that we can think, let's say, in the following 3, 4, 5 years? Because at some point of time, shall we start thinking that there's enough capacity in the industry and that can reflect in our expansion? Or you think we are far away [indiscernible]?

Ashish, let me give you a bigger picture answer. All of us know India requires a lot of growth, lot of cement is required as yet. We are -- whilst we call ourselves fourth largest economy but look at Japan's infrastructure and look at our infrastructure and everything else that is around infrastructure. There's a huge amount of growth potential. And I think next 10, 15 years and I'll request, once I finish, I'll also request Jhanwar Ji also to give his inputs. But there is a long way to -- long way that India will keep seeing growth. And as long as India keeps seeing growth, I don't have a number but we will grow in line with the India's -- with India's growth requirements of cement. Yes, we might reach a saturation point in the distant future. Jhanwar Ji, you want to add?

Jhanwar Ji, sorry, if I can just add one -- I'm really sorry sir, I just want to add one more point. Sir, because we have heard this for many, many years and some of it has played out also in terms of growth. But then I'm just struggling to understand why cement growth is through volatile, let's say, even 4Q, if it was 4.3% growth, means, why are we not seeing that prolonged period of high single-digit growth or, let's say, 7%, 8% growth at least means, if you can also answer.

Ashish, we can have a long discussion off-line to understand what happens in the industry. But there are multiple factors. Last year, what happened and year before last year, fiscal '24, we saw double-digit growth after COVID -- coming out of COVID, the industry saw double-digit growth year after year. Fiscal '25 had its own challenges. If I recall, fiscal '17 had its own challenges because GST was introduced or something, then RERA was introduced. So there have been structural changes in the economy, which have had their share of impact on demand. But structurally, as you see the number of kilometers of roads that need to be done in India is humongous. And once the infrastructure growth comes, the big incentive is all around the development of newer towns, cities, social infrastructure, commercial spaces, et cetera, which will get developed. Jhanwar Ji, do you want to add?

No. That's what I was about to say. Fundamentally, even if you see the demand model or the growth model in any country, actually, once the infrastructure -- the first trigger is infrastructure growth actually. And once the infrastructure growth happens, then as Atul said, just now the housing, social infrastructure in new cities coming, there would be a lot of migration of people moving from cities to the suburb and the distant places because the infrastructure becomes very efficient, commuting from one place to another. So we believe it is going to follow at some point of time once we reach a reasonably good impact structure. #2, because as just now, I said and Atul also explained, we are very clear that the country has a huge potential for the overall economy to growth and the cement is a basic building block. So we would definitely like to partner actually in this growth journey. And I don't see personally at least this growth is going to taper down, at least in next 1 decade actually. Nobody knows how -- and you must have seen that recently, the day before yesterday, even our Road and Surface Ministry, Mr. Gadkari also said that now we are targeting 100-kilometer per day rather than 35. Yes, we have challenges in the country in terms of land acquisitions, slow award of contracts, execution and so on. But I think government is conscious about it and speeding up the -- all infrastructure projects and so on. So huge potential.

Let me delve into one project example, Vadhavan port. It's a 300 million tonne cargo handling capacity. Do you know what is the peak cargo handling by JNPT, less than 100 million tonnes, correct? Yes, somewhere around that. I've done the data. Just imagine at a [ 76 billion ] -- forgetting the value of the project, huge project. Whilst it consumes cement but the ancillary industry growth that takes place, the employment opportunities, the increase in housing income that takes place opens up the floodgates of growth for companies like us. And there are going to be several such projects in the country. I think we will be busy producing and selling cement.

Okay. Great, sir. Sir, just last question on power -- on fuel, will we see further increase? Or we are fine versus...

No, no, no. I think we will see declines now.

I think it should remain in the range bound -- yes, range bound actually. Not really increasing.

This is one element which we don't have a control on. Some global event takes place and prices go haywire, which will impact consumption going forward. So as of now, as Jhanwar Ji also mentioned, range bound or it should not go up, let me put it this way.

The next question is from the Ritesh Shah from Investec.

I can't hear you.

Sir, couple of questions. Sir, first is this...

Didn't like my numbers, Ritesh? Ritesh, you didn't like my performance?

No, no, sir, it's pretty much in line. Sir, a couple of questions. First is intercompany elimination has been mentioned by value and volume. How should we read into this? And how should we look at this number going forward?

So intercompany elimination is between UltraTech and [ ICM ] now, right, or?

RMC.

Sorry, this is between like cement, which is supplied to our own captive consumption for RMC, this is going to be part of life. But on a INR 20,000 crore of revenue, this quarter is about INR 500 crores. On a current scale of operations, you can factor in the INR 500 crore number. Because we are growing our RMCs. We are growing our BPD, construction chemicals. So captive -- we are growing organically on our projects where we consume our own cement. So that elimination has to be done.

Okay. Sir, my second question is, you did indicate on pricing trends. But would it be possible for you to give some color on the trade and nontrade price gap, specifically in South, given what we understand that the price increases on the nontrade side have been significantly sharp versus trade?

I always ask you guys to help me with this information, you know it better than I do.

Okay. Sir, I'll move to the third question. Sir, how should one link Birla Pivot to Ultratech? How are the linkages between the 2 entities? And does UltraTech benefit out of Birla Pivot by any means?

No, not really.

Not really, only it's sometime is the, sometimes if they use our network at times, actually, then it's...

Yes, they have taken over that business. So cement and our products, any other product that we manufacture under our Building Products division, we deal with it directly. They are selling any other products directly.

And sir, any update on wires and cables?

Major orders have already been placed, long-lead items. People have started joining, land lease is being finalized. They're looking at some locations in Gujarat. And I -- last I checked, we are on track. We'll remain within our CapEx plan of INR 1,800 crores. We might have some savings only on that CapEx plan.

Sure. And sir, just last one question. Sir, any specific plans you would like to lay out on RMC given competition is actually moving quite quickly? I'm referring to the unlisted player who is there in the marketplace.

As my late Chairman once said, Mr. Aditya Birla, we are not afraid of the competition. Let the competition be afraid of us. So that's a very serious statement. And I think we are focused on our growth. We know that RMC will keep growing. We are already now 5 -- how many plants now? We have crossed 400 mark this year. We'll keep growing. And Ritesh, you know that they are all margin accretive, which means over and above the EBITDA they generate a contribution.

[Operator Instructions]

Rayo, we can't hear you at all. I don't know where your phone is. Please adjust your mike, Rayo.

[Operator Instructions] The next question is from Navin Rameshwar Sahadeo from ICICI Securities.

My question was on demand. So if I adjust to the volumes of India demand, I think organically, our volume growth is just 2%. And I believe UltraTech grows much higher than the industry. So just wanted to understand, is it that the growth has been...

Go ahead, go ahead, Navin, go ahead. Sorry.

Yes. So my question is, is this observation correct in the first place? And if the industry is nearly flattish in Q1, we are into monsoon season. So then what gives the confidence of a 7%, 8% growth for the full year?

So Navin, let me answer the second part of the question first. More than 40% of -- 40% to 45% of demand for cement in the country is in the last quarter. January, March is the biggest quarter. Second point to make is cement is very, very seasonal in India. The real season for cement starts post festivals, post-Diwali, then post-Diwali actually. So when labor starts returning. So it is effectively -- I don't remember when is Diwali this year but let's say, post middle of November till the heat wave start setting in, the real season is November to April or May. That is the real season for cement. I believe, yes, we will grow much rapidly in the subsequent quarters. As to your point on some numbers that you were looking at. I don't think so that's a number. And Pulkit had asked me this question on the call, I don't have the ability to split hair between what is Kesoram sale because now it's all part of our system integrated. There's one billing mechanism excluding ICL.

Its's a simple arithmetic. I don't see a reason of any confusion actually. It's a very simple arithmetic. From my domestic volumes, I simply reduce India Cement and to last year's domestic volume, I simply add Kesoram. That's a 2% growth that I'm getting.

No. Firstly, I don't like your aggressive tone. Secondly, the way to look at is, if I look at UltraTech brand because as I mentioned, we have been rapidly rebranding UltraTech which has grown 6.5%. So there are -- I know there is -- there will be some amount of jigsaw puzzle in our sales mix because what we will focus on is UltraTech brand sale, which has actually grown 6.5%, whichever way you want to cut it, that's the real number.

Yes. I think because the entire focus is on the sell sometime, it depends on which plant is more accretive in terms of the delivered cost and from where the dispatches are to be made. So it is really difficult to differentiate actually the plant-wise kind of thing. So -- but the brand has grown by 6.5%.

Great. Great. And if I may just ask a second question. Lead distance is like -- very happy to see your lead distance reduction from 384 kilometers in the previous quarter to 370 kilometers as we say. So -- but I'm just trying to see the savings in actual numbers in the sense of 14 kilometers of sequential savings, even if I assume a ballpark INR 3 like per tonne per kilometer, even then that's almost over INR 40 per tonne of sequential savings. Is that -- I'm not able to see that in the numbers. Am I missing anything here, sir?

What is missing?

Reduction in lead distance not reflecting in the [indiscernible].

So when we -- in our graph that we show you, INR 1,182 to INR 1,158, this is a INR 24 saving, which is visible, my accounting might not be as aligned and linear with the costing. That's the only answer I would have. But the fact is, yes, the lead distance has gone down. And if I do the math of PTPK, it should reflect. But besides the lead distance, there are lots of other costs which are attached, let's say, a handling cost, warehousing cost, everything would get added in my logistics cost, forwarding costs, agents involved. So there will be lots of other elements of costs involved. So Navin, maybe I don't think mathematically, it will stack up. You will have a INR 40 benefit. Then there's a railroad, Jhanwar Ji rightly pointed out, there's a railroad mix also. Rail is 40% lower than road cost. Lots of moving parts to this. And as I said, quarter-on-quarter, last time also I had mentioned and we disclosed transparently our savings due to all these efforts. At the end of the year, Navin, we will definitely show the outcome. Quarter-to-quarter it -- next quarter, you never know the lead might go up. It's not necessarily -- 370 kilometers could become 371 kilometers, 372 kilometers, or it could fall further. My hunch it will fall further because as the network of number of plants is increasing, our lead distance will come down.

The next question is from Satyadeep Jain from AMBIT Capital.

Mr. Daga, first question on India Cement and then second was UBS. In India Cement, I just wanted to understand, I think you're mentioning that adjusted for marketing spend, maybe adjusted EBITDA was INR 458 per tonne. Last quarter, you mentioned Southern plants, typically for UltraTech would be lower EBITDA per tonne given lower pricing historically. Given where pricing is, just trying to understand the profitability gap between India Cement and rest of UltraTech plants in South, maybe ballpark directionally? And how do you plan to bridge that gap? We see you have preheater, WHRS, how would -- maybe just some ballpark directional number.

So yes. So as for -- there are 2 ways -- and this is a good question, certainly. The UltraTech brand being generated from ICL plants gets the same price barring the INR 10, which I'm keeping in UltraTech. Cost of production of that output might be still be higher because of the inefficiencies that exist. And as we progress, fiscal '28, the costs also will get aligned, prices will also be aligned. We will have parity between the profitability of ICL plants or UltraTech existing cement plants in the Southern markets. Jhanwar Ji?

Yes. So as far as the cost side is concerned, we have -- once we carry out this CapEx plan actually. And once it is completed, then compared to the UltraTech, I would say it would be almost near to the UltraTech level, subject to some structural differences at the plant to plant level because even despite the modification, you may not able to reach at a UltraTech level plants because there are -- some plants at UltraTech are the most modern and recently constructed plants. But I think we would be, by and large, it would be very well aligned with UltraTech and not a very difference where we should have any worry. That's what I can say.

So certainly, we'll start CapEx work. We'll announce it next quarter. We have not yet completed stitching the program. Next quarter, we start, which is middle of '25, '26, '27 and we will hopefully complete and first quarter of '28, April, June '27, you will start seeing the benefits in the P&L of ICL.

The reason why I'm asking this is twofold. One, these are old assets. So I understand these are all integrated. There is no concept of split grinding generally. And also in Southern part of Kerala, if you see, Coromandel brand is so strong. I'm not sure if it is possible to completely go with UltraTech given the strong recall there. So given all these -- you think 100% of branding can move to UltraTech and given the asset base itself, that the way it was structured earlier with all the preheater and WHRS, you can achieve almost parity with Ultratech on all these efficiencies. Just trying to understand.

Yes, yes, yes. Let me give you the flavor. We have done already the deep dive actually putting number of people, teams, et cetera, identified plant by plant, line by line, what modifications are to be done. And this modification will take us to at what level in terms of heat consumption, power consumption. And that is why with the confidence or with the comfort, I'm saying we would be in the ballpark number of about at least 90% with UltraTech level because we don't have the waste heat recovery system practically anywhere except one plant and so on. We don't have the alternate fuel usage. Actually, we need to optimize in terms of preheater to improve the heat efficiency and so on. So I don't think there is any -- if I may say, honestly, it's any worry to bring those plants at the -- in the range of UltraTech, not at the 100% at the level of UltraTech. But it's a matter of only time. It may take another 1.5 years to, as Atul said, next 2 years' time actually.

So certainly, 2 more points to address. You mentioned the strength of the existing brand of ICL in deep down South. We will evaluate. And as I said, that's why we have kept time in hand to do the integration of our brands. If required, that will continue. If the markets convert, it will transition into UltraTech. It's -- jury is still out. Second point, you mentioned about split grinding units that they don't have as compared to the way we -- UltraTech network is operating. But the way we work, it's on a total delivered cost. We have our own network of grinding units from UltraTech, which will be able to share their capacities because ultimately, we work on a total delivered cost basis. That is the -- and that is why, again, going back to the questions which were raised earlier on the call, it's -- beyond a point, it becomes difficult for us to split hair. But just because we are operating at total delivered cost, by the end of fiscal '27, take a guess, we will be having a network of physically 82 plant locations in the country and rising. South itself, we will be about 60 million tonnes and growing with multiple facilities. So we'll be able to capitalize on our existing network also. Hope that helps.

[Operator Instructions] The next question is from Chintan Shah from JM Financial.

I had 3 quick questions and all 3 on India Cement. So first one is just a clarification of what you mentioned. So basically, the UltraTech rebranding from India Cement, that will be sold to the UltraTech entity and all of that will retain around INR 10 per bag or INR 200 per tonne and rest of it will be retained in India Cement?

That's correct. That's correct.

That's correct. Right? Okay. Perfect. And second and the third one are more strategic. So first is, what is the end plan with respect to India Cement? I mean, considering the synergies and integration, would we, at some point, looking to merger this with UltraTech or do we -- be open to keeping it as a separate entity? And what would be the rationale if you want to keep it as a separate entity? That's the second question. And the third one is...

Pause. Pause. Let me finish the second question. So as of now, we don't know which side we will move. First and foremost, it's very important for us to clean up the India Cements operations, bring it up to speed with -- which is a turnaround of the company, bring it up to speed, align people, processes, product, as I mentioned earlier. And then we will take a call on whether to merge or not to merge. We are fully cognizant of a huge amount of stamp duty that would be involved, why spend money on that. But if it's worthwhile perhaps in '27 or '28 actually, we will revisit the decision. As of now, it will continue as a separate entity.

Got it. Understood. That's very clear. And third and the last question is, I mean, in terms of capital allocation CapEx, while we highlighted right now, we're focusing on WHRS and AFR but will there be a consideration or a scope of further debottlenecking or brownfield or any sort of expansion in India Cement? Or it will be a decision [indiscernible]?

There exists opportunities for brownfield expansion in India Cements also. And as I mentioned, we are now getting ready for our Phase 4 of growth of CapEx. Phase 5 will also be there where we'll see brownfield opportunities of India Cement locations getting tapped.

Next question is from Shravan Shah from Dolat Capital.

Just to clarify, sir, when we say we will grow 10% volume growth in FY '26, this is on 136 million tonnes -- 135.8 million tonnes, that's what we have done at consol level in FY '25?

Yes. Okay. Yes, please.

Yes. So I'm just trying to clarify on that, we are saying a 10% growth. So that means including the India Cement also where maybe we would be doing close to 9 million, 9.5 million tonnes. So if I remove that, then maybe a 3% to 4% kind of a growth would be there, if I take a 10% growth?

If you're wanting to do a math check, then do that separately. I'm not doing the math right now.

Okay. Got it. Second, sir, in terms of the cost reduction, what we have talked about last time, [ INR 300 odd, INR 86 ] we have done in '25. So that remains intact. By FY '27, we'll be seeing another [ INR 200, INR 215 ]?

I don't know how much, whatever we are able to achieve, we will report it. Because as somebody just picked up, logistics cost is coming down. Nobody has asked me or complimented me on the way clinker conversion factor has gone up. That -- can you imagine the quantum of gain, which the operations have now with a clinker conversion factor of 1.49. It's jumped from 1.44 last quarter. So there are lots of efforts, sir, which are happening and which we will report at the end of the year. Month-to-month, day-to-day, quarter-to-quarter, it's next to impossible to measure.

True, true. So I understand, I was about -- sir, lastly, on the CapEx, if possible for FY '26 and '27.

We have close to INR 10,000 crores this year. We'll come back for the next year's CapEx in due course.

The next question is from Raashi Chopra from Citigroup.

Sorry, just following up. No sir, I'm just following up on the previous question. One is, I don't know if I missed this but did you give the industry growth number for this quarter? Last quarter, you said was 4%?

No, no, I didn't give it. I didn't give it.

So what is it -- I mean, what in your estimate would be this number?

We'll discuss it tomorrow, Raashi.

Okay. That is one. Second is this tolling, this tolling arrangement that you have with India Cements, is there -- so when I'm trying to look at the India EBITDA per tonne, that is basically stand-alone plus UltraTech, is there any sort of intercompany elimination that I need to take?

Which means including India Cements operations? Is that what you're looking at?

Yes, I'll put it -- I'll ask you differently. Like last quarter, the India EBITDA per tonne was INR 1,175 in the fourth quarter. Is that number INR 1,230 now in this quarter?

What is INR 1,175, with India Cement, without India Cement?

India Cement.

So that will be INR 1,200.

INR 1,200 include overseas also.

So just one second. How much is it?

I'm just asking about the India EBITDA, India EBITDA, not...

India EBITDA per tonne. I will give it to you, if not on the call, then later on. I don't have it immediately.

Thank you very much. We'll take that as the last question. On behalf of UltraTech Cement Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.

Thank you.