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Ladies and gentlemen, good day, and welcome to the ACC Limited Earnings Conference Call hosted by ICICI Securities. This is to remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company faces. The company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basement of any subsequent development, information or events or otherwise. Please note that the duration of the call is for 1 hour. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Krupal Maniar from ICICI Securities. Thank you, and over to you.
Thanks, Mike. Good afternoon, and a warm welcome to everyone. On behalf of ICICI Securities, we welcome you to the earnings call of ACC Limited. On the call, we have with us Mr. Neeraj Akhoury, CEO, India LafargeHolcim; Mr. Sridhar Balakrishnan, MD and CEO of ACC; and Mr. Yatin Malhotra, CFO of the company. At this point of time, I will hand over the floor to the management, which will be followed by interactive Q&A session. Thank you, and over to you, sir.
Good morning. Welcome to all of you to today's investor call. We will move to Slide #5. Our vision is basically to continue to be a bluechip company with the best performance benchmarks, strong brands and leading in innovation and sustainability. We have played and will continue to play a significant role in nation building. Onto Slide 6. We have a strong belief that we need to leave the world a better place as compared to what we have inherited, ESG is at the heart of everything that we do. This flows right from our parent, Holcim. ESG is a part of our culture, which permeates across all levels of the organization. Moving on to Slide 7. The awards listed are a testimony to what we have achieved across the spectrum of the business. Now moving on to strategic priorities. We quickly go on to Slide #10, which is basically accelerating growth, which is basically an update on the capacity expansion. Our expansion in Sindri is fully operational, and it was commissioned in a record time of 9 months. Our expansion at Tikaria also very near completion and is way ahead of schedule. Our integrated unit in Ametha is also progressing well and is on track to start producing tinker and cement by September, October of this year. Even our project in Salai Banwa is moving way ahead of schedule. Moving on to Slide #11. The other aspect of growth is fundamentally portfolio. We are constantly innovating to satisfy customer needs. We are also working strongly to develop sustainable products. Our premium product growth has actually been robust. It's close to 20% this year. And even the contribution of premium products to the overall trade sales have gone up by at least a couple of percentage points this year. With respect to sustainability, a quick update. We had launched ECOPact this year during, I think, around February, March this year, and it's already started delivering about 15% of our concrete business. ACC in India is deeply committed towards developing and driving businesses of sustainable products going forward. Coming to Slide 12. We believe that concrete is poised for high growth. ACC is well poised to capitalize on the same. With respect to the value-added products, it's really done well this year. ECOPact has also done well and have scaled up really well. We are focusing on developing other products to manage the consumer needs and to really drive the sustainability agenda of Holcim and ACC in India. In terms of products and solutions, slide #13 is showing promise. We have doubled the turnover in FY '22. We believe that this vertical has potential for strong growth going forward, and we believe that it will become a significant vertical for us in times to come. Going on to Slide 14. We will continue to invest behind building ACC as the most durable and sustainable building material company in India. You have already seen some of the initiatives that we have taken, whether it's leave behind no waste, whether it's leveraging cricket or really driving the saliency of the brands, whether it's the premiumization agenda or whether it's developing green products like ECOPact. As far as sustainability is concerned, Slide #16, we are the first company in India to sign up for the Net Zero Pledge. All our action plans have been validated by SBTi. We have also been recognized as being industry leaders in the area of sustainability and innovation. Going on to Slide #18. This has actually been an excellent initiative taken by Holcim India. In terms of clearing of the reverse from plastic and leveraging them as alternative fuels in our [indiscernible]. Currently, this initiative has been fructified in Agra. Next on the line is [indiscernible] HP, Himachal Pradesh, which is going to be on the river Beas. We are also in the process of talking to various other state governments to really expand this initiative across. In terms of Slide 19, we've already discussed this. This, again, has been an excellent initiative in terms of managing waste, plastic waste, especially from stadiums where cricket matches have been held. We have basically cleared almost 2 tonnes per day in one of the matches in the India, New Zealand F Series. And again, this basically is, again, used as alternative fuels in our kilns. Moving on to Slide 20. We are very, very clear that we need to leave the world a greener place. So the entire power mix is going to move to a -- we're going to be moving a significant component of our power mix to a clean and green mix. Our current existing -- by 2022, we believe that 16% of our power needs will be met through clean and green, which is fundamentally WHRS and renewables, which is likely to go up to over 40% by 2025. We've also leveraged our global brand Holcim geocycle to really increase the alternate fuels. The TSR percentage also is about 7% today, and we intend to take it up to about 15% by 2025. Even in terms of waste consumed, we've consumed about 11 million tonnes of waste this year. and we are planning to increase it by 50% over the next 3 years. Going on to Slide 21. In terms of CSR, I think we continue to partner with the community in areas of livelihood and education, and wash. Wash and hygiene as an area has really gained a lot more saliency during COVID times. Moving on to Slide 22. As discussed, this is going to be a clear focus area for us. In terms of water positivity, we intend moving from levels of about 1.1x water positivity to 5x by 2030. We are also looking at reducing the quality of water consumed per ton of cement manufacturer. Moving on to Slide 23. ESG is going to be the heart -- at the heart of everything that we do. We have made significant progress across all parameters as far as ESG is concerned. Now our CFO, Yatin Malhotra, will take you through the next section. Yatin, over to you.
Thank you, Sridhar. Good afternoon, everyone. Welcome once again for joining this investor call. We are on the investor deck that we have released. We are on Slide #24. I'll take you through the delivering superior performance section. Move to Slide 25. I think very clearly, we have identified people as 1 of the 4 most pillars of delivering strong performance. Over the years, we have been able to create a strong team, and we continue to invest in the best practices around talent management, whether it is about growth, whether it's about learning, including opportunities with our parent, Holcim, talent exchange program with Ambuja sufficient planning, et cetera. We are committed as a team to diversity, not only gender but also ethnic diversity. And we take pride in the culture of transparency, trust and integrity, along with delivering superior performance for the organization. I move to Slide 26. And here we talk about the second pillar, which we believe very strongly in, and that is all about digitalization. We believe it is the biggest enabler of performance and also in the future would be the biggest differentiator of performance between companies. We continue to work effectively on all the 3 value streams of the business, which is manufacturing and where we continue to expand the plant of tomorrow journey that we have embarked on, basically to drive productivity and safety across our plants. The second pillar where we are doing extensive work on digitalization is logistics and sourcing, trying to become nimble in the way we approach the market. We have various tools for efficiencies, both in terms of cost and processes. And we have got digitalization initiatives around commercial, where basically the intent is to be more seamlessly connected to the customers and better consumer experience is what we are trying to chase. And moving to Slide 27, where we talk about our core flagship project. We have spoken about this in the past also. This is about project Parvat, which is all about delivering cost efficiencies. We have been running this project, as I said, for the last 2 years, and it has given strong returns to the organization, again, across the value stream in terms of whether it is about fuel cost optimization through sourcing or flexibility or reducing utilization or whether it is about RM mix optimization. It is about network optimization, direct dispatches. One big import that we have had is the MSA that we enjoy with Ambuja. That allows a lot of leverage in terms of cost. And also in terms of commercial excellence in terms of revenue management and discount optimization, et cetera. And at the core, as I said, digitalization is the foundation on which a lot of these initiatives are strong. And then I move to Slide 28, which basically summarizes how the year 2021 was for us with the sales of almost 29 million tonnes, which is a growth of 13% versus last year. RMX, we sold 2.81 million cubic meters, a growth of 24%. A top line of INR 584 crores, a growth of 17%. EBITDA, almost INR 3,000 crores, a growth of 27% versus last year. At EBIT margin levels, we were ahead of 15% to 15.2% and expansion of 250 basis points, even in a very, very tough year. And a profit after tax number of INR 1,863 crores, a growth of 30% versus last year. Now I'll move to the next section of our presentation, which is economy and sector update. If I move to Slide #30, it just sort of gives a snapshot of the global sustainability trend. Slowly and steadily, we see sustainability and decarbonization to be the buzzwords across industries across the world. Whether it is driven by what consumers tell us or whether it is driven by what the regulators tell us, what investors' messages we get or whether simply base is the right governance standards that we need to have. This is the direction that we are very clearly embarking on. Sridhar spoke about it. Moving to Slide #31, a quick -- a glance on the overall macro economy outlook. The GDP we saw last year, fiscal year 2022 was 9.2%. And give or take, very clearly the GDP growth can be factored in the range of 7% to 8% in the years to come for the growth market like India. Inflation has been hovering around 5%. And I think with government commitment to fiscal consolidation, I think the fiscal deficit also would be, by and large, under decent check. And if you move to Slide 32, which talks about our view on the sectoral outlook, which will -- the key influences of the demand in cement. Clearly, with government initiative on CapEx and infrastructure segment would lead the overall demand, followed very, very closely by housing and industrial, housing with a lot of money being invested in the housing for all schemes and also with an expected good [indiscernible] outlook. The housing demand is likely to be good in the coming quarters. And even if you look at the industrial and commercial sector, propelled by what the government is doing in the overall trend CapEx, I think the industrial and commercial demand should follow suit sooner rather than later. And now I move to the last section of our investor deck, which is a performance review. If we look at Slide #34, Q4 was a tough quarter. The volume went down 3%. The net sales went up 2%, thanks to the price increase. EBITDA, at INR 556 crores was minus 3%, and overall PAT at INR 281 crores was minus 40%. We need to keep an account that last year, Q4, we had a onetime gain in our tax expense line item. Slide 35, I'll skip. We have discussed that earlier. We go to Slide #36. So if you look at the full year level, net sales, we spoke growth of 17%. EBITDA, up [ 37%]. Operating EBIT is up 40% versus last year, and we dropped an EPS of INR 99.2 per share, which is again a growth of 30% versus last year. Moving to Slide 37, which talks about the performance of the cement business in a per tonne basis. And if you look at the full year 2021, the overall -- if you look at the EBITDA from INR 875 per tonne, we are around about [ INR 1,000 ], we are INR 988 to 1 tonne. So we have added INR 113 to 1 tonne as EBITDA despite a very, very tough year that has passed by. The next slide talk about every single line item of sales and cost. I'll not dwell deeper into that. I think we can look at the slides and we can move on from that. So that pretty much brings us to the end of the investor deck that we had put out. And now we are open for questions. Krupal, over to you.
[Operator Instructions] We have the first question from the line of Navin Sahadeo from Edelweiss.
Thank you for running us through the presentation slide by slide. However, my first question was about the first slide of your presentation, it starts with saying Change The Story and also followed by the 2 cement giants joining hands to produce their strongest product yet, Bubbles. So my -- so 2 parts of this question. One, this Bubbles, do you see it as a CSR sort of an opportunity? Or can we see some meaningful contribution to the P&L as in from the bottom line perspective as well? And second is -- then when we say 2 cement joining -- cement giants coming together, ACC and Ambuja, of course, so are we looking at more products in the cement space or building solutions together to make this entire MSA far more stronger than what it is being thought of or it has been communicated as of now?
I think that's a good question. First of all, I think, as I've said earlier, ESG forms the heart of everything that we do. We have a genuine intent to actually leave the world a better place as compared to what it was when we inherited it. That was the reason why we went ahead with this initiative of actually cleaning up the [indiscernible] Canal in Agra. So the intent is not commercial. The intent is purely from an environmental standpoint to leave -- to actually get rid of the plastic waste. It's incidental that the plastic waste collected from a disposal standpoint is used as an alternative fuel than a kiln, but that's not the primary objective. The primary objectives of this intervention is fundamentally to clear our water bodies of plastic waste. The second question?
We see as more product to...
Yes, yes. So the entire intent right now is to develop products which are more sustainable and greener. Proof of concept, you've already seen ECOPact, which has scaled up from 0 to about 15% of our volumes within a year. We will accelerate not only ECOPact, but some of the other sustainable and green products, both in the cement and concrete space.
Just to add here that most of these new initiatives are also coming to us due to our relations with our group, Holcim. So when you talk about bubbles, this is what we have bought from the other countries of Holcim into India. And we will continue to bring in new technologies as are being used in other countries, which can also help our own country to battle some of these topics. Including in R&D, we will continue to work very closely with the group to bring in world-class products into India.
ECOPact is a classic example of a global brand, which is basically being leveraged in India.
Appreciate. I just wanted to get more color, as you said, it's incidental that like this plastic waste could be used as [indiscernible] in AFR. So does this change the current percentage of AFR? Just trying to understand what commercial benefit that we can get from this PSR initiative.
So too early to comment on this one. Basically, the idea is to expand this initiative across various other river bodies purely from the context of cleaning these river bodies of waste. So as I've said earlier, the next one is Sundar Nagar in Himachal, and we are also exploring some of the other states. Answering the question in terms of PSR independent of this initiative, Currently, the PSR percentage is about 7%, and we intend to take it up to about 15% by 2025 over the next 3 years. This will be a part of that, but the primary driver is not -- in this specific example is not commercial. It's more in terms of cleaning up waste.
Okay. Okay. Then my second question was about, again, the ESG aspect. And here, I just wanted to understand on this waste heat recovery front because every other company, the intensity of waste heat capacity per tonne of cement -- per million tonne of cement is way too high. Like some of the companies with 45 million, 46 million tonne cement capacities have waste heat capacities running to 30-odd megawatt, whereas we had almost 35 million tonne of capacity, only 7 megawatts as we speak. Of course, I'm aware that we are pursuing waste heat at some of the locations, including the new Ametha. But it will be really helpful to understand what's the outlook here, milestone fashion that in 3 years, can it be go to 100? What is the latent opportunity? Can we have a total of 150, 200? Some numbers specific things will really help.
Yes. Good question. See, currently, we are at 7 megawatts. An immediate milestone for 2022 is about 45 megawatts. And by 2025, we intend doubling it. So we should be anywhere in the range of 85 to 90 megawatts of WHRS by 2025.
And what will be the latent opportunity? As in on the current total capacity, how much can we take overall?
Yes. So this will be roughly of the total power consumed. This will be 90 megawatts would roughly be about 25% of the total power consumed by 2025.
We have the next question from the line of Sumangal Nevatia from Kotak Securities.
Thanks for arranging this call. I mean, such calls are very useful for the overall investor community. It would be a very humble request if we can have such calls more often, like every quarter like most other companies do. Moving on to my question. First question is on Project Parvat. Is it possible to quantify some of the benefits that we have already realized? And also in the coming years, what sort of benefit are yet to be realized? And also if we should buy [indiscernible] new head, it will be very helpful.
Yes. Sumangal, this is Yatin. Firstly, to your point of the quarterly call, last year, we said that we will continue with this annual investor calls. We take your input in terms of quarterly calls. Regarding Parvat, Sumangal, I think I mentioned that it is a flagship project that we've done in the organization. This is the war cry against which the entire organization come together. Across the value stream, across all functions we run this. In terms of value, we had earlier given an estimate that roughly 200, this was roughly a year, 1.5 years back, we gave that estimate. What we have already -- we started 2019. In the last 2 years, the total efficiencies that we have been able to flow into the P&L is upwards of INR 300 to 1 tonne. Having said that, a lot of projects are still underway. And if you were to take -- there is no outer limit of a number, but there's definitely in a few more semesters to come, another INR 100 to INR 150 to 1 tonne is something that we're looking at. But this is, again, as I said, there is no full stop in this journey. So we will see as it comes.
Understand. But is it possible to share some hedges under where this remaining INR 150, INR 200 could come in from?
So again, Sumangal, there is no single line item that would bring you a base of [ INR 100 ]. Whether we start about -- talk about our plants, starting from reduction of clinker factor to fuel flexibility to sourcing, to higher TSR to a better raw material mix, geo mix optimization, MSA. So we have put a number in front of us. We are chasing that number. It is broken into many, many smaller pieces. Every piece is a project that is being run in the company, and that is the way we are driving, Sumangal.
Understood. Understood. That's very helpful. Second question is on Slide 12 on the RMC business. Is it -- I mean, we've written that we have aggressive growth plans there and also plan to scale up from global products. Is it possible to share, I mean, what is the existing performance and what are our growth plans over the coming years?
Yes. So currently, we have close to 80 plants. Because of COVID in the last 2 years, we went a little -- our intent was to be a little careful in terms of expanding plants. Now that hopefully, we are -- the pandemic is passed us, the intent is to basically double the number of plants over the next 3 years. So we strongly believe that concrete is poised for high growth. And our strategic intent is to make sure that ACC becomes the concrete company of India, which means doubling of plants in 3 years, improving profitability and a dramatic increase in the contribution of green products to the overall mix. So we are very clear that this is going to be a growth engine for us in the next 3 years. So as I've said, we'll be more than doubling the plants over the next 3 years. And in terms of profile of cities, so we were earlier present in the top 15 cities. The idea is now to expand into the next 50 cities in the country.
Understood. And what sort of investments and return do we look into this business?
So Sumangal, it's Yatin again. Investment, unlike a cement plant, RMX is not a very high capital-intensive plant for us. So the returns typically are higher. It's more about the ability to drive demand and be present to make the right supplies. So it's a high-return business for us. And as we expand, it should have more positive contribution in terms of the returns that we generate for our shareholders.
Okay. Understood. I have a couple of more questions regarding the quarter, but I'll join back the queue.
We have the next question from the line of Ashish Jain from Macquarie.
Sir, my first question is on ESG. Like, if I look at ACC on carbon side, we are already the most efficient player in India, and we have a fairly aggressive target of reducing emissions. So I want to understand what is the road map to achieve that? And what is the contribution or the support they're getting from the parent on this front?
Okay. No. So I think we have clearly -- as I said, not only have we signed up for the Net Zero Pledge, but we also have milestones till 2030 clearly listed out. So very clearly listed out across various elements. So -- for example, we have an intent of reducing the -- it is broken up across elements as far as these various scopes are concerned. And we are basically leveraging the parent company very well, whether it's in terms of developing green products, whether it's in terms of looking at alternative ways of reducing clinker, whether it's in terms of leveraging our global brand geocycle to dramatically increase the contribution of PSR or alternate fuels to the mix. So we are looking at -- we have clear milestones across. And we -- as I've just given you some examples, we are also looking at leveraging Holcim across the entire value chain to really bring down the carbon dioxide emission, whether it's products, whether it's technology in plants or whether it's leveraging Geocycle as a brand to increase the usage of waste in our kilns.
So sir, are like some of these technologies, like readily available with Holcim? Or do you think each plant, each country will be very different on this journey?
So it's -- in some cases, it could be plug and play. In some cases, we pick the basic concept and adapt and modify to local conditions.
Sir, my second question is on the premium product thing. Like if you see in the last 2, 3 years, pretty much most of the large players have started talking about premium product and all. So I had 2 questions there. One, can you just help me understand how are we differentiating us versus others, if that is relevant? And secondly, what is the market feedback on this? Is like -- is the consumer cognizant of it? And is it translating into better realization, better profitability? Or is it more of just gaining market share kind of a strategy there?
Okay. Good question. I think the first part is I'll give you the numbers. So premium product has grown by close to 20% last year, which is significantly higher than the growth of base cement. Second is even if I were to look at the contribution of premium products to the overall mix, it's gone up from levels of approximately 25% of trade sales to over 27%. So that clearly tells you how the performance of premium products is in the market. This has actually being driven by us. We would like to believe that in terms of percentage contribution of premium products, ACC would be amongst the relatively higher, better-placed companies. As far as commercials are concerned, there is a significant difference between the EBITDA per ton of premium products and base products. Yatin, would you like to comment on the numbers? Yes? No. So there is a commercial -- 1 is, obviously, when you're looking at premium products, you're also looking at addressing specific consumer needs, but also there is a significant positive impact on margins as you keep selling more premium products.
Okay. Okay. Got it. Sir, but can you just quantify in terms of pricing, maybe EBITDA, you may not want to comment. But from a pricing point of view...
It will be about anywhere between INR 30 to INR 50 higher than base cement, ballpark.
And this is finding fair acceptance with consumer channel?
Yes. Yes, it is.
We have the next question from the line of Ritesh Shah from Investec.
A couple of questions. Sir, first is how should one look at the company's incremental capital allocation and the growth opportunity? I think the parent is quite -- basically, if I look at the commentary from Holcim, they're quite clear on delivering growth, bolt-on acquisitions as well as things on the solutions and product side. Sir, how should one look at the Indian entity specifically? We have brand, we have cash on the books. But when it comes to growth and capital allocation, sir, how should we understand that?
Yes. Ritesh, so this is Yatin and I'll try to answer your question. Well, capital allocation, for us, I think pretty much the tone, tonality is similar to what you see in our parent, Holcim. Growth is the area for us, area of focus for us in all directions. We -- yes, we do have a decent amount of cash on our balance sheet. And you see us expanding significantly now Ametha project is underway. Hopefully, it will see the light of the day sooner rather than later. We have more CapEx plans in the pipeline, capital allocation, the capital is being kept for those pursuing those growth plans. Bolt-on acquisition, opportunities in the market, something that is always on our mind. We keep our ears and eyes open. I would not want to comment anything more than that. But trust me that growing and expanding is one -- is the core thing that we chase day in day out. And along with that, the capital is not only for growth. We spoke about ESG. Sridhar have spoken enough about it. We are putting money behind what we believe is right. We are putting money behind efficiency projects that we are driving across the organization and that also add to the overall part of our journey. So capital for us, I think we need to do all the right things for business, capacity, ESG and efficiency, all 3 of them.
Sir, just to take this forward, but how should one look at it beyond the announced projects? You indicated that focus is on growth, but the balance sheet is too sweet to actually call to make something out of it. Or if I have to put it the other way around, there have been recent amendments on MMDR, which indicates that if you have a historical view and if you don't put it to use, it is something which will actually be taken back by the government. So when we come across such situations, what is our philosophy on the growth? Like give back the lease back to the state government or go ahead and expand?
No, so we are very clear that we want to expand. If you've seen the proof of concept in the last 2 years, it's basically whether you look at expansion in [ Sindri ], Tikaria, Ametha or WHRS or Salai Banwa. So there is very -- we are very, very clear that wherever we have limestone deposits, we intend expanding. And we are also actively scouting and discovering certain geographies for more limestone deposits in order to grow. So our parent company clearly believes that India is a growth story and we are committed to investing in India to grow, whether it's by virtue of capacity, whether it's by virtue of investment in ESG, whether it's by virtue of investment in RMX, whether it's in virtue of investment in brands.
Okay. Sir, my second question is on limestone. I just wanted to understand from a sustainability point of view, what percentage of our leases could actually potentially face expiry by 2030? And the recent win that we had at Kannur, how does it fit on overall scheme of things? To my limited understanding, I think we had certain limestone issue at Maddurakai lease. Is this something which is an offsetting variable to that? How should one look into this aspect of limestone and sustainability?
So first of all, there is -- first of all, if I were to look at it, Kannur is an independent thing. It just basically secures limestone for Wadi for a few decades to come. So that's a completely independent thing, and we've basically been declared as successful bidders for the same. So as far as the other plants are concerned, we don't see a limestone issues, so as to say, per se, across the plants. Maddurakai is a completely different issue. Yatin, would you like to comment on Maddurakai?
Yes. So Ritesh, Maddurakai limestone, Maddurakai, we took that impairment last year Q4, basically on account of the process that we were following and the economics of the entire clinkering process that we had in that location. It was not a question more of limestone. It was more about the economics of running the clinkering unit, and considering the entire supply-demand situation in that part of India, that was the theme that we took.
And sir, on lease expiry by 2030, at the company level, how do we see that?
We do not see that as a stress. We do not foresee any issue in that. I think we -- all our integrated units are fully covered for the limestone availability for quite a long time. Yes, that is not ahead for us.
We have the next question from the line of Rashi Chopra from Citigroup Global Markets India.
Most questions have been answered. Just on cost inflation, not from an efficiency standpoint but more from a point of [Technical Difficulty]
Sorry, your voice is...
Raashi, we cannot hear you.
Can you hear me now?
It's very much better. Could you come closer to the mic?
Yes, I think you can -- madam, please ask us your question. I hope we are able to hear it. Yes.
Just on cost inflation from a coal sector standpoint, where do you think the next quarter or the Jan to March quarter is going to settle in the following quarter [indiscernible] for you specifically?
It's -- Raashi, this is one question we wouldn't like to speculate on that because you are aware of the volatility in the overall fuel space. So really, I wouldn't like to hazard a guess or give any guiding statements or any forecast as far as fuel prices are concerned. I think from a strategic standpoint, we are very clear that we will not speculate and we will do back-to-back buying. And so that we are in a position to capitalize on any opportunity that may come up. And second thing is that we have invested in ensuring that our plants are flexible in terms of the kind of fuel that they can basically use. So these are the 2 aspects that we are looking at as far as fuel is concerned, but very difficult to forecast or predict which way it will go.
We have the next question from the line of Amit Murarka from Axis Capital.
So question was more around the strategy of 2025, which the parent has announced a few months back. So in that, like there's a focus to import the Sustainable Solutions business and as the solutions product business. And actually, the cement as a [indiscernible] how the business is actually targeted to kind of become relatively smaller. So firstly, what are the kind of opportunities you think you have to kind of launch in the products which the parent has recently gotten into roofing solutions and all? And secondly, in terms of the cement expansion, so the focus on cutting down on CO2 footprint, plus like making cement in the overall price smaller, could it impede newer investments in India for -- like for you?
Okay. So first of all, I think as far as India is concerned, we see a huge headroom for growth in cement as well as ready-mix concrete. Because unlike the developed world of countries like China, India is highly under-indexed as far as per capita consumption of cement is concerned. So very clearly, you will see investments will happen both in cement as well as RMX going forward. You also proof of concept is the kind of expansion plans that we basically embarked on. Second, as far as products and solutions are concerned, as of now, we're focusing on waterproofing solutions, clusters and ad mixtures. So I think each market is very unique, and this entire building material market is fairly localized. So if at all, if there are any learnings or products that can be picked up from the global markets and brought to India, we surely will do it. But currently, we are focusing on these 3 verticals. It's a very small vertical for us today. The intent is to invest this and make it meaningful. But to answer your question, cement and RMX will continue to be a dominant part of ACC's portfolio in the foreseeable future.
Sure, sir. Got it. But also my related question was that like because the parent is focused on like reducing the CO2 footprint, and cement, as you know, is still seen as a polluting industry. So quoted in that context, even though I agree there is potential for growth in India, but could it like make -- prove it difficult for expansions?
No. So even within cement, there is a lot that needs to be done to reduce the carbon dioxide footprint, the emissions, whether it's in terms of the products that we have, whether it's in terms of the technology that we use in plants, is in terms of the alternate fuels that we use, whether it's in terms of the waste that we use in our plants, whether it's in terms of the footprint that we optimize to reduce the time that vehicle spend on the road. So even within cement, without getting -- without comparing cement, concrete and products and solutions, even within cement, we believe that there is a lot that can be done and that will be done to basically reduce the carbon dioxide footprint going forward.
So you don't think it will at least be difficult to get approvals at the parent level for these expansions then?
No, no, no. Not at all.
Amit, the group is committed to grow in India. Cement is going to be the engine of growth for India. So there is no -- there's not even an iota doubt on that.
Yes. Sure, sure. And lastly, on the new grinding unit which you are planning, like what could be the rough time lines for that?
Which one?
Amit, which line...
The UP...
Sometime around Q1, Q2 next year, we should see that plant really firing.
We have the next question from the line of Satyadeep Jain from Ambit Capital.
A couple of questions, one on capital allocation, follow-up to previous questions. When you look at growth beyond Ametha, do you have brownfield optionality across your portfolio or the next phase of growth beyond Ametha would also be largely greenfield? And partly, it is to tie up with the huge auction premium of 190% that ACC has paid for [indiscernible]. And given the high ROCE target of 10-plus percent that Holcim ultimately talked about in the Capital Markets Day, what is the thinking there in some of these high premium acquisitions? Is it -- does the management believe that certain things will play out in these acquisitions will ultimately delay the return above the [indiscernible] pay that Holcim has? So that's the first question and content.
So let me answer the first question about capital allocation and what the future fees would look like. Right now, we are processing a lot of options in terms of expansion plan, and there would be a combination of green and brown. We would not want to comment on that. As Sridhar mentioned, securing limestone reserves or/and putting our current limestone reserves to use is the key priority. And surely, Ametha is just a start. Moving to your second point about the premium that we have paid, maybe I would request Sridhar to comment on that.
So we believe that it's a strategic importance to us, and I don't think there are too many limestone deposits left in that area. So given the strategic importance and Limestone is a scarce commodity, we all know that. So given the fact that we -- it's of strategic importance and there is certainly going to be a supply consent of limestone there, we feel that, that's a strategic choice to make in, which is why we have stated our intent of making that choice.
And just to add, this is Yatin again. From a commercial perspective, we are pretty clear that even with this premium, obviously, we are in the business of creating return for the shareholders and we will not let go of that agenda.
Yes. Okay. Secondly, on the MSA, the company's share in Rajasthan before this novel guard actually comes up in 2 years, is extremely low. Ambuja share is significantly higher. Is management looking at increasing share in some of these markets where the current share is low? And if that happens, how does the MSA work? Would Ambuja get compensated in some other markets as ACC market, some products in Rajasthan? That's the second question.
So specifically on Rajasthan, I think we have -- between ACC and Ambuja, we have 3 units. We have Lakari for ACC, we have [indiscernible] for Ambuja and we have [indiscernible], which has just got commissioned a few months back. The idea is to basically leverage all the 3 plants to maximize capacity utilization and minimize logistics cost for both the OpCos. And that is going to be the guiding principle of MSA between both the OpCos, wherever we operate.
Yes. And just again -- just to add, this is Yatin again. There is nothing that needs to be compensated at MSA, and this whole design of MSA is incremental margins to both the companies. So it is only after the exhaustion by one company that it is offered to the other company. Hence, the mechanics of the MSC operations are very clear that it is incremental to both.
We have the next question from the line of Pinakin from JPMorgan.
I have 3 questions. First, just to dig deeper on the CapEx. So one of the key investor pushback over the years has been that ACC, and to an extent, even Ambuja have not really invested in growth and even as the cash keeps on accreting. Now the Ametha project is welcome. But can you give us more concrete numbers in terms of the outlook for capacity addition over the next 3 years or 5 years, what kind of growth can we see? What is the volume target in terms of capacity? Because many of your peers -- in fact, all your peers have given out multiyear capacity addition project time line.
The strategic intent is to move down current levels of about 34 million, 35 million to anywhere between 45 million and 50 million over the next 2 to 3 years.
25 million to 30 million tonnes for the current 34 million tonnes, right, sir, over the next 2 to 3 years?
Yes.
So that should mean that more project announcements should come through post the Ametha expansion?
Yes, absolutely. It is done when we do our final evaluation of all the investments of opportunities, we will be coming up with our next wave of the expansion.
Sir, my second question is on cost. Now, we obviously appreciate that the commodity pricing environment is extremely volatile given what's happening with energy prices. But if we were to assume that energy prices remain where they are, basically coal, pet coke and diesel, and you have a project Parvat and MSR going on, do 4Q cost reflective peak? will cost even move higher? Or will they move lower if depending on how these variables interact?
Could you please repeat -- articulate your question again? Sorry, we missed the last portion of your question.
1o basically, if we assume that wet coal, coke and thermal coal prices don't change for the rest of the year, you will have tailwinds from your project Parvat. So if we take Q4 cost as a starting point, will cost in CY '21 be higher versus 4Q? Or will it be lower?
So I would just say this is pretty much -- it's a pretty hypothetical question. I understand your question, but we are not -- we really can't speculate that which way the year is going to be headed. Yes, we are at the peak of cost, but let us see how it plays out. And we will react to that.
Understood. And my last question is on cement prices. Sir, can you give us a sense of what happened in your key markets in Q4 and how prices are in the current quarter? Because obviously, it seems that consolidation benefits did not flow through to the industry in terms of cement prices on the ground in the previous quarter. So just trying to understand how things change or they remain as lackluster.
Yes. So difficult to comment on the future, but in terms of what happened last quarter, the price increase was muted and it was grossly insufficient to really mitigate the impact of the fuel price increase. Now this is one area which we ally cannot speculate on the future. Whether it's the input cost increase or whether it's the price increase, it's really difficult to predict as of now. But yes, in the last quarter, the pricing increase for us was significantly lower than what the receivable cost in second was.
[Operator Instructions] We have the next question from the line of Rajesh Ravi from HDFC Securities.
Could you please explain the CapEx -- or break the CapEx for the central market expansions and how much of that is pending? And what do you see the CapEx outflow for this year and next year?
Sorry. So you want the breakup of the capital allocation for the substantial market project? That's what you want?
Yes. Yes. I think the total project cost was INR 3,000 crores. How much of that is already spent and how much is pending?
So Rajesh, this is a work in progress for us. Yes, it was -- we had an estimate of in the ballpark of INR 2,800 crores. But the world has seen a lot of inflation. There have been some areas for us to attend to. So there is a tad bit higher amount that we're looking at right now, but I would packet that. Right now, we are not giving any new number, but we are executing the project at the fastest speed possible. Take it from us. What was the second question, Rajesh, if you could come back on that?
So how much CapEx would be spent this year? Because what we understand is most of the spending projects should be operational this year itself? So we want to understand how much of the CapEx is to be executed this year.
So again, if you look at our last 3-year CapEx from a level of around INR 400-odd crores, we are -- in the year 2021, we were north of INR 1,100 crores. We almost triple that CapEx amount. And if you were to pick up the entire essence of what we have been saying, investment in capacity, in ESG and efficiency is the core. I would again not hazard a number to be put on the table, but that is our #1 priority.
Okay. And the time lines for the 3 blending -- 2 blending units and the integrated plant?
So Tikaria -- as Tikaria is near about completion, as I said. Ametha, both the integrated unit and blending unit should be operational by September, October. Salai Banwa it will be operational towards the end of Q1 or early Q2 next year.
Okay. And on the project Parvat, you mentioned that over last 2 years versus Q1 '19 to CY '21, you have seen INR 300 contribution on a per tonne basis, right? So that is a margin improvement that is reflected in the numbers. But if I look at CY '19 to CY '21 margin expansion is close to around INR 230. So would that mean that you have faced other cost inflation or pricing pressure, whereby excluding the project Parvat benefits your margin would have contracted?
So Rajesh, you are absolutely right. Margins is a sum of many small parts. Parvat is one significant piece of them, but that is not the entirety. So price and other inflation factors, you rightly said, are the other inventory factors.
Okay. Okay. And on the AFR, you said you're expecting to double it to around 15% by 2025?
That's correct. That's correct. You got it right.
Okay. And last question on the CapEx again. You are saying that over the next 3 years, you're targeting total capacity of around 45 million to 50 million. So this is what you're looking at to be commissioned capacity over the next 2 to 3 years?
That's correct.
And which markets would be your focus market over the next 2 to 3 years?
See, from a strategic standpoint, given the market attractiveness and what we believe is our right to win, East and Central India will continue to be focus areas for us going forward.
Okay. And these capacities which are coming up in East and Central market, U.S. and other companies, do you believe they may have some pressure over the next 2 to 3 years in terms of realization?
No. So -- okay. So again, to answer this question, first is, first of all, at an India level itself, India is highly under-indexed on per capita consumption of cement as compared to rest of the world. Even within India, if I look at it, East, is the most under-indexed as well as far as per capita consumption of cement is concerned. So that itself, we believe, gives us huge headroom for growth in the coming times than the Eastern markets. And we have committed to a long-term play in India. So the short-term blips really don't matter. We strongly believe that both East and Center are poised for growth, given the per capita consumption of cement in these areas being low.
Okay. Okay. Great, sir. And this would be a mix of both organic and -- sorry, brownfield and greenfield expansions, Central and East markets?
That's correct.
We have the next question from the line of Sanjaya Satapathy from Ampersand.
Sir, I mean, most of my questions have been answered. Again, my question relating to market share, so how do you really see your market share shaping up in the near to medium term? Will it be entirely driven by the capacity? Or there is something more to it?
So it will be driven by capacity primarily also investing behind the brand to basically gain share.
And as far as margin is concerned, and ACC, of course, has done a good job. But is there any significant scope to bring down the margin differential with other leading players?
So as I said, our stated intent is to also really be the -- to basically to be the best as far as performance benchmarks are concerned. We strongly believe that Parvat is a journey, and we will continue to look at all elements of the value chain to really bring down the costs. That's a journey which is going to continue in full earnest even going forward. We understand there is a gap, and the entire intent is to bridge the gap over the coming few years.
We have the next question from the line of Kamlesh Bagmar from Prabhudas Lilladher.
I have one question on the part of your CapEx. So like if we see UltraTech, your leading peer, and if I compare your CapEx, like say, our CapEx is even lower than the maintenance CapEx cycle, and we have 2 like -- even in ACC, we have a large greenfield project which we are doing. But even like, say, if you see this INR 600 crores, we have a spend that is around 5% of the total CapEx cost. And apart from that, like even going forward, do we have guided that in Ambuja, we want to increase the capacity to 50 million tonnes. And even in ACC, we are talking about that. But the way other peers are talking, working on their capacity announcement or the giving orders to the equipment supplier, we are nowhere there, sir. So that is not giving the visibility on the side that how committed we are on the capital expansion side, capacity expansion side. No doubt that under your leadership, things have changed tremendously. But on the capacity expansion, honestly, we are not seeing the things on the ground, at least on the announcement or the real education side.
So Kamlesh, this is Yatin. Before I hand it over to Sridhar to respond, let me first make it very clear. On this call, we are responding to what we are doing in ACC and there, we're talking Ambuja also. We will stay clear of commenting on how we look versus others and , et cetera. We have clearly stated if you look at our performance over the last number of years, I think the proof of concept is already there. Significant increases are happening in our CapEx and we are committed to do more. I think Sridhar has made some statements clearly indicating significant investment, whether TSR or capacity, et cetera, et cetera. And I would now request Sridhar, maybe if you want to comment on the other point.
Okay. I think what you were saying, hopefully, I believe there's also a sense of discipline of announcement with ACC and Ambuja have, which is far more robust and far more real than many other announcements that we also hear in the industry. So when we say we are going to expand, Kamlesh, it will be only after a proper approval process, both from the Boards as well as internal working here. That's part of our [indiscernible], Kamlesh. I think so far, if you see whichever announcements we have made, we have accelerated those projects. You saw Sindri or Tikaria in ACC, Sindri in ACC. I believe in my -- I hope I am -- what I'm saying is right, is one of the fastest projects ever executed. And same, I'm sure when we come in the trial production of Tikaria. Even looking at the corona year, it was one of the fastest project to be executed earlier. There are projects, at least one project which Ambuja has announced. The last announcement where we are waiting for the environment clearance. Once we get that, which is -- we believe because of elections and so on and so forth. Once we get that, you will see the actions in the same speed. I assure you, to add to this not only committed to you, but to everybody in this call, that whilst we have committed the CapEx to be done, it will be done only after all internal decisions have been taken and all internal clearance is there to execute that at the fastest speed is possible.
Yes. And lastly, like just continuing on the capital capacity, I mentioned only. So like in the near term or over next 1 year, which are all -- how much capacity are we looking to expand? No doubt you have guided your 2025 capacity expansion plan. But at least, like, say, on the near-term side, like one year...
So we have clearly stated between Tikaria, between the current projects which are work in progress, we should be close to 40 million tonnes over the next 14 to 15 months.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Krupal Maniar for closing comments. Over to you, sir.
Thanks, Mike. On behalf of ICICI Securities, we would like to thank the management of ACC Limited for providing us this opportunity to host the call. And I would like to thank all the participants for joining the call. Thanks. Thanks, everyone.
Thank you very much, the members of the management and Mr. Maniar. Ladies and gentlemen, on behalf of ICC Securities, that concludes today's conference. Thank you all for joining us, and you may now disconnect your lines.