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Ladies and gentlemen, good day, and welcome to the Earnings Conference Call of Dalmia Bharat Limited for the Quarter ended 30th June 2022. [Operator Instructions] This conference call has been recorded and the transcript of the same may be put up on the website of the company. After the management discussion, there will be an opportunity for you to ask questions. [Operator Instructions] Before I hand the conference over to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements. The forward-looking statements are based on expectations and projections and may involve a number of risks and uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements. On the call, we have with us, Mr. Puneet Dalmia, MD and CEO, Dalmia Bharat Limited; Mr. Mahendra Singhi, Managing Director and CEO, Dalmia Cement Bharat Limited; Mr. Dharmender Tuteja, CFO, Dalmia Bharat Limited; Mr. Rajiv Bansal, President and Chief Transformation Officer; and the other management of the company. I would now like to hand the conference over to Ms. Aditi Mittal, Head, Investor Relations. Thank you. And over to you, ma'am.
Thank you, Stephen. Good morning, everyone. Welcome to Q1 FY '23 earnings call of Dalmia Bharat Limited. Hope you all had a chance to go through the results and the earnings presentation, which we filed with the exchanges. If not, the same can be downloaded from our website from under the Investors section. I'll now hand over the call to Mr. Dalmia for his opening remarks.
Good morning, everyone. It gives me great pleasure to welcome all of you to the Q1 FY '23 earnings call of Dalmia Bharat Limited. Today, as we interact at the first call of financial year '23, I'm happy to share that during the quarter, we have delivered industry-leading sales volume growth of almost 27% on a Y-o-Y basis. From the same time last year, we increased our capacity by 17%. And due to the focused efforts of our team, we have managed to increase the capacity utilization from 64% in Q1 of FY '22 to 69% in Q1 of FY '23. Another area, which is of prime focus for us, is the sustenance of cost leadership. And I'm happy to share that on the total cost per ton of cement, we have achieved one of the lowest total cost at INR 4,360 per ton. What dampened the operating performance is the continuous upward spiral in the commodity prices and the inability of the price increase in our markets to absorb the cost inflation. The average fuel consumption -- average fuel cost increased from $180 per ton in Q4 to $218 per ton in Q1 of this year, which is a 20% increase. Against this, the sales price in our region lagged behind materially with a sequential delta of near 3%. In fact, the exit prices came in below the average prices for the quarter, and this is a trend we witnessed across each of our markets. We have seen that in regions such as North and Central, the price increase has been quite promising. And we believe that in other regions such as West, East and South, the trend should eventually follow. While operationally we continued the great work by our team, on the CapEx side, the ongoing committed CapEx, ongoing committed expansion plan up to 49 million tons is intact and remains on track for completion by March '24. During the quarter, we have commercialized 2 million tons of clinker, 1.1 million ton of cement, and 41.4 megawatts of renewable energy capacity. I will ask Mr. Singhi to take you through these details and all the other operational numbers. Thank you so much, and I will be happy with any questions that you may have later during the call. Over to [indiscernible].
Good morning, friends. Thank you, Puneetji. Friends, our team is making all best efforts to counter various adverse situations in the economy. We have been able to make promising starts on the sales front as growth rate has been 27%, leading to a quarterly volume of 6.2 million tons. The revenue for the quarter has increased by 27% Y-o-Y to INR 3,302 crores. The realization during the quarter improved in the Eastern and Northeastern markets, but South was slightly weak on average. There was, however, a slight sluggishness in the prices as we exited the quarter in end June. From the exit prices, prices have been stable in July, but continue to be on a weaker side due to seasonally sectors kicking in. As a company, returning cost leadership is one of our prime objectives, and I'm glad to share that on a Y-o-Y basis, while cost increased adversely for the entire industry, the adverse delta at 37% was probably the lowest for us. And hence, our variable cost per ton came in at INR 2,224 per ton. Friends, I'm also happy to share that during the quarter, we have been able to install first floating solar power plant of 3.8 megawatt capacity in Bihar. On the variable cost front, we continue to experience the adverse impact of high asset coke and coal prices. During the quarter, our fuel consumption cost increased by almost 20% from INR 180 (sic) [ $180 ] per ton in Q4 of FY '22 to $218 per ton in Q1 '23, though we are now finally starting to see a decline in prices of pet coke and coal, given the average price cost in Q1 stood around $220. The consumption cost in Q2 is likely to remain higher in the range of around $220 before eventually tapering down. We have seen now the pet coke prices hovering around $180 to $190 and the benefit of this we may see in quarter 3. Our freight cost continues to be lowest in the industry at INR 2,096 per ton. So there is an increase of 4% Y-o-Y owing to both diesel price increase and increase in lead distance. The lead distance for the company during the quarter was 311 kilometers. Friends, as Puneetji has said, again, I'm delighted to share that we have emerged as probably the lowest cost producer with total cost of INR 4,360. In our journey for announcing our blended cement, this quarter, we have been able to increase it to 82%. Our various other efforts and initiatives for becoming carbon negative by 2040, we have been able to bring down our carbon emissions to 468 kg per ton of cement, which is probably one of the lowest in world cement sector. With regard to capacity expansion during the quarter, we have commercialized almost 2 million ton of clinker and 1.1 million ton of cement. The region-wise details of clinker expansion and the plant-wise details of cement expansion can be taken from our investors presentation, which is uploaded on our website. Friends, we remain on track to complete this leg of expansion by March '24 and reach 49 million tons. As Puneetji mentioned, we are side-by-side working internally to get our groundwork ready for future phases of organic capacity additions. Now, this year, we are celebrating our 75 years of independence across the country and approaching our 75th Independence Day. I take this opportunity to wish you a very happy Independence Day and also wish you to celebrate 75th year of independence in a big way. Now with this, I would like to hand over the call to our CFO, Mr. Dharmender Tuteja, who will run you through the key financial results. Thank you.
Thank you, Singhiji. Good morning, everyone. Since the major updates have already been covered by Puneetji and Singhiji, I'll now quickly get into the key financial updates. Regarding incentives, this quarter, we have accrued income of INR 58 crores, and the collection during the quarter has been INR 44 crores. The incentive receivable as on 30th June stood at [ INR 633 crores ]. For the full year, including Murli, we expect incentive accruals to be around INR 240 crores for FY '23 and FY '24 each. On the debt side, we have reduced the gross debt by INR 131 crores, and the closing debt as on 30th June stands at INR 3,009 crores. The net debt-to-EBITDA ratio as on 30th June was negative 0.08x. For CapEx, we have spent close to INR 525 crores during the quarter. Our budgeted CapEx spend for the full year is in the range of INR 3,000 crores to INR 3,500 crores, and we remain on track to achieve that number. While we continue to take initiatives to keep our costs under control, our fixed costs and other expenses on a Y-o-Y basis have increased this quarter, primarily due to various plant shutdowns taken in this quarter, new plant commissioned during last year like Murli and Kapilas Unit #2, which were in project phase in the last year first quarter and also increase in packing expenses due to increased volumes and higher granule prices. In continuation of our strategic initiative of turning carbon neutral by 2040 and using 100% renewable energy by 2030 and in furtherance to our addition of 36 megawatts solar power and 5.4 megawatts of WHRS during this quarter, we have at the Board meeting held on [indiscernible] obtained approval to purchase existing wind turbine generators in Tamil Nadu having capacity of 16.5 megawatt from Dalmia Bharat Sugar Industries Limited. In terms of generation of power, these machines are equivalent to 7 megawatts of new capacity. The transaction is on arm's length basis as determined by an independent [ price-valuer ]. The transaction cost is INR 7.66 crores for wind turbines and the associated spares and INR 25 lakhs per year towards even license fee for using 709 acres of land. This has escalation clause of 10% once in 3 years. And this transaction is subject to necessary approvals being obtained from TANGEDCO and state government authority. With this, I now open the floor for question-and-answer. Thank you very much.
[Operator Instructions] The first question is from the line of Rajesh Kumar Ravi from HDFC Securities.
Congratulations on good set of numbers in a tough environment. I have a few questions. First, on the CO2 emissions, which we have seen a strong good fall versus FY '22. Could you explain what is helping you, you're already on the low side, and even in the short-term, you have been able to drive these efficiencies?
I would say, the efforts which we are making for announcing the blending cement or low-carbon cement issue is one of the major factors. Secondly, the way we have been able to enhance percentage of renewable power and green fuel, that is also helping in a big way. And thirdly, the efficiencies which we have been able to put in, in terms of reducing [ fixed ] consumption and power consumption. I'd also highlight that our power consumption of 64 units per ton of cement is one of the lowest in Indian cement industry and maybe globally also. So these all efforts as well better efficiency is resulting in lowering our CO2 emissions.
And what is the cement to clinker ratio, sir, for Q1? And if you could also -- yes, for cement to clinker ratio?
For the quarter, it is 1.67.
And sir, how much was green power?
But month by month, it's enhancing.
Okay. And sir, green power usage in Q1 and AFR usage in Q1?
So these figures you can take offline.
Sure. And could you share on the Murli operations, what is the status? How has that ramped up for you? And what is the total CapEx to be spent for ongoing projects in FY '23-'24 to complete all the projects?
In this year, what we have said is that we'll be spending INR 3,500 crores. And during the next year, Mr. Dharmender, how much is [ better ]?
Sorry, sir. Can you just repeat the question, please?
What is the total CapEx to be spent in FY '23 and '24, including maintenance?
For Murli?
No, no, total, total.
Total budget for this year is INR 3,000 to INR 3,500 for [indiscernible] next year. What we spent in CapEx in quarter 1 FY '23, INR 525 crores.
And status on the Murli operations, has it stabilized fully? And what sort of margins you are making over there currently?
This is the second quarter of operations. I think plant takes about 9 to 12 months to stabilize completely. And we had started the year at -- in the year, about 60% utilization is what we started to achieve as we close the year. So I think we are on track for that.
The next question is from the line of Pinakin Parekh from JPMorgan.
My first question is on the [indiscernible] cost based on Slide 13, $218 a ton in Q1 FY '23, and you mentioned that the [indiscernible] in the second quarter. But based on today's spot prices, what should be this cost in the third quarter, the December quarter by which you will be benefiting from the lower prices?
In my view, this cost can be anywhere between, say, $170 to $185.
Understood. My second question is on the capacity addition road map. We had come out and announced a road map of 2,030 capacity at 110 million to 120 million tons. In the interim, we have seen 2 large business houses [indiscernible] capacity addition plans that they have had. What is Dalmia's view [indiscernible] road map, 49 million tons to 110 million tons because we have not seen follow-up announcements come through so far.
Yes. So, I think, right now, we are just evaluating which regions to invest in, and our announcement plans are a little bit more delayed than what we had promised this year, but we will come back as and when projects get more closer to finalization, and we will announce it.
So just to clarify, that 110 million ton plan still remains on table or would you take a relook at it given the industry dynamics?
No. In fact, we think that SP of Adani is a positive in this sector, it will lead to more consolidation. And our belief is that the sector attractiveness has gone up. So our plan remains intact, the [indiscernible] volatility in the world. There will be some turbulence along the way, but we believe that India is poised very well amongst the major economies. Even despite inflation, our current GDP growth is forecasted to be around 7%, 7.5% this year. I think, as our leadership in the central government has managed, most volatility relatively is much better than other economies, [indiscernible]. So I think overall, we have a big faith in India's future, and we will continue to invest. And we believe the sector attractiveness has gone up and more consolidation will happen.
The next question is from the line of Sumangal Nevatia from Kotak Securities.
The first question is on the renewable power. We are adding really chunky capacities this year in 1Q and during the coming quarters as well. Is it possible to explain us some bit of -- I mean, how do we see cost savings on these and utilization levels in FY '24 from these plans?
Yes. So if you just look at [ operations ] costs without interest and depreciation, it is then just INR 0.25 to INR 0.30 per unit in competent to now presently what the cost base of, say, INR 8 to INR 9 of captive power plants or maybe INR 7 to INR 8 of grids. So this is one part. And we are able to utilize fully the renewable power or the solar power, in future wind power also, because at the moment, whatever power would be generated during the daytime from solar, that would all fully be consumed.
Understood. And I mean, what sort of utilization level should we factor in, 15%, 20% for solar and north of 80% for waste heat recovery?
Yes. So in totality, we'll have about 172 megawatts of power both from solar and WHRS by end of the year. And accordingly, it may be around 16% of that total assumption.
Okay. Okay. Got it. Got it. And just on...
Maybe these figures will be reconfirmed.
Okay. Okay. I'll reconfirm that later. Just a clarification on the power fuel cost, you said $220 was 1Q. I mean, how do we see -- this $170 to $180 for 3Q or that is 2Q level that we are expecting?
Q3.
Okay. And is it possible to share some directional sense on 2Q? I mean, will it keep insulating in 2Q and then see a drop?
So in Q2, it may be ranging around, say, around $200 -- $195 to $200.
Okay. Understood. Understood. My second question is on the future growth. I mean, of course, we are in the evaluation stage as we expressed. But from, say, 50 to 110, I mean, like we have seen in the past, overall, our contribution from inorganic growth has been quite substantial. In the future, are we seeing any inorganic opportunities or the future growth is largely led by organic growth only?
Sumangal, Rajiv here. I think, when we're looking at both fronts, from 49 million tons to 100 million tons to 130 million tons by FY '31. I think it will be a mix of both organic and inorganic. I think, as Puneet was saying in the reply earlier, we see the entry of Adani would probably lead to more consolidation in the industry. And I think there will be a lot of opportunity for even looking at good inorganic assets. So I think we are open to both. I think we'll have to keep looking at all the opportunities in front of us, whether organic and inorganic. But the objective is that we want to be pan-India player and achieve -- reach 110 million tons to 130 million tons by FY '31.
Understood. But I mean, just to extend a small argument, I mean, in the last 5, 7 years, there were a lot of assets which was very obviously on the block, given the balance sheet stress, NCLT, et cetera. I mean, currently, the industry has been one level of consolidation. Going into future, do we see availability of inorganic opportunities or it will be substantially lower now from current point onwards?
So again, very difficult to predict something like this. But I believe that with the interest cost savings [indiscernible] and EBITDA margins are falling and as we'll be announcing large [indiscernible] announcement. There has been, as I have been saying over the last 4 to 5 years, almost 90%, 95% [indiscernible] top 5 players. So smaller players are [ immediately ] in pressure in rising market share. I think we'll have to see how it plays out. But my hypothesis is that we'll see a lot of opportunities from a good asset if we come on the block [indiscernible]. And we just open to door to [indiscernible].
The next question is from the line of Raashi Chopra from Citigroup.
Just continuing firstly from the previous question on the inorganic growth. One is that, a lot of other players are also looking at the inorganic route as well. So while there may be acquisition targets available, would there be enough like everyone to kind of pursue this part one? Secondly is to get to this 130 million tons, even keeping in mind the mix, at what stage would you need to use auction limestone? The first question on capacity.
Puneet here. Look, I mean, M&A is always a competitive process. And I think there will always be some uncertainty. But I think we have been quite decisive in the past, and we have demonstrated our ability to close deals and turn them around. So I think, depending upon the process, depending upon the target, I think we will have to review this case by case, and you will win some, you will lose some. So I don't think the competitiveness of an M&A process will go away in a hurry. I think the only point is that since Holcim has exited India, I expect more competition from domestic players rather than overseas there in the short run. Secondly, I think, in terms of auction limestone blocks, I think our approach is to just keep developing projects, whether they are brownfield or greenfield, some of our land acquisition is in process. And over time, as and when we are ready to announce our projects consistent with our pan-India footprint ambition, we will let you know.
Okay. Just another question. Is there any update on the employee welfare trust that you had created? Anything -- I had not seen any details in the Annual Report, but where we can get some details about the class, what the corporate is, what the use is?
Dharmender, can you take that question?
Yes. The last trust, that was wound up. So that is no more, and that was never consulted in the company. So that is why it never appeared in the books of Dalmia in the past or even now.
Okay. So it's wound up effectively.
The next question is from the line of Amit Murarka from Axis Capital.
So my first question was around the region-wise plant utilization of volume growth. So could you just throw some light on that, given that you saw good growth this quarter?
We will not be able to share [indiscernible], but we could say that we had completely good growth in the South in comparison to East. But in the [ regions as ] Northeast, we have grown, and that has given us a 27% growth during the quarter. And we do expect also growth continuing.
Sure. So my second question is on the mining land acquisition that you're doing. So could you just throw some more light on it as to what exactly is the plan by when will it be done and how much of reserve accretion could happen from this?
You're referring to which place?
The East -- mining land acquisition that you're doing in East.
So that process is already on, and we have been able to get all the necessary government approvals for majority of the land, and we have already acquired some portion of land. So that process of acquiring land is in full control. And we hope that in 1.5 years' time, the whole process will be complete. And maybe in 6 months' time, we'll be able to also start expecting limestone out of it. So that way, I would say, we have full confidence and we have full reserve for many, many years to come.
Okay. So -- but -- and what kind of reserve accretion could happen if you can just give a ballpark sense on that?
Once we are able to fully acquire the land and then close certain [ explosion ], we'll be able to share that. But at the same time, we would say that by acquiring the whole thing, we will be able to get more than 20 years' reserve.
Okay. For the Rajgangpur operation, that is?
Yes, we are referring to that only.
Right. And also just on slag prices, like the cost of clinker production has gone up significantly, like so what is the trajectory that we've seen on slag prices now?
Slag prices are just a matter of one generation or so as well as requirement of various development companies, but we do expect that there may be a 10% plus or minus in -- or maybe 10% increase in slag prices, that's all. But otherwise, what we have understood and what we have seen from our own tie-ups that we will be able to get -- we'll be able to get at right price also.
Okay. But could you just give an indicative like number, is it like INR 1,500 per ton right now or INR 1,700, INR 1,800 per ton, like what is the ballpark range of the cost?
It will be difficult to project those numbers, though internally but it will be difficult to project on this call what would be the number.
The next question is from the line of Prateek Kumar from Jefferies.
My first question is on industry pricing. Well, as you mentioned in the opening remarks that the sizing was lower versus other regions and -- because other regions had better sense in terms of [indiscernible] and you should follow. But clearly, like -- while this sense was prevailed in early part of first quarter, but all of that sense is [ out of the world ] and like now prices are down across regions to probably pre-March levels. So I mean -- so that case of pricing going up because of the pricing, other regions pricing are better. So that probably doesn't stand like so clearly. So any news there on other regions pricing following a decline as well?
I would say that, in South, prices are at the moment stable. And in East, there is a bit sluggishness, but maybe after 2 months when demand goes up, then there may be possibility for better prices.
Okay. Okay. And you say that Adani's entry is positive for the sector. We are particularly high on nontrade segment, like some of the other players. So how do we see an nontrade segment generally playing out with Adani and see ramp-up in this business?
I don't think in fact of Adani group having a wholesale will have any impact on an nontrade segment as such, because the nontrade segment is all based on competition. And on that part, competition will continue there. And then, if you are able to compete the way we have been doing it, we would be losing on that part.
Okay. What is your trade mix for the quarter?
Trade mix for the quarter is 68% -- 63% rate. So it maybe 68%.
68%. And just the number which was given earlier on incentive accruals during this quarter was INR 58 crores, that's right?
That's right.
The next question is from the line of Ashish Jain from Macquarie.
Sir, my first question was on this inorganic growth that you're talking about, like, sir, historically whatever deals and all we have done in this and seen in this sector are predominantly driven by balance sheet concerns of the larger groups rather than weaker industry profitability. So do you see a phase where industry profitability could be under pressure for an elongated time? Because if that doesn't happen, then I don't know why should we see a massive inorganic growth opportunity for any player in the sector because at INR 11,100 EBITDA per ton, the profitability is fairly attractive for the sector. So do you see that concern emerging at all that competitive intensity could increase and there's a prolonged pain on profitability for the sector?
Look, mostly the balance sheets of large companies are fairly strong right now. I think some companies in certain pockets may have some balance sheet strength. And in the short-term, I still believe that there are headwinds in the sector and there is margin compression. This quarter is a monsoon quarter. So, it will be hard to pass on price increases commensurate to the cost spike. But I think M&A, in my view, will not get so much -- barring a few situations, it may get driven -- may not get driven by stress as much as it may get driven by focus on other businesses or focus on other markets. So my view is that in the short-term, there is few assets which may be experiencing stress, but a larger part of the M&A opportunity may be driven by focus on other businesses and focus on other markets.
Right. Sir, if I can just extend that point, I would still have thought that if I look at the cement industry today, for most of the groups, cement is actually one of the leading businesses, right? And in that context, again..
Well, I can't discuss individual assets on this call. I mean, I hope you'll appreciate that. So, as opportunities [ evolve ], all of us will come to know. So I think hard for me to discuss individual assets.
Got it. Sir, secondly, on waste heat recovery, can you give some road map where our waste rate recovery could be, let's say, 3 years, 4 years down the land because even -- and on the '23 target at 16%, 17%, we seem to be on the lower end versus where our peers aspire to be. Can you give like, let's say, '25, '26 road map in terms of how much waste it is scalable based on our existing capacity?
I would say that all our scales will have the waste heat recovery system by end of FY '24, except 1 in South because of heat requirement for raw material there. But otherwise, all our plants would be equipped with waste heat system.
Sir, can you just kind of quantify that in terms of like versus the [ 72 ] in '23, where could that number be in '24 or '25, whatever is a reasonable time frame?
Yes, that can been shared by Aditi offline.
The next question is from the line of Sumangal Nevatia from Kotak Securities.
I have some follow-up questions to Mr. Tuteja on this employee welfare trust area. So just want to understand, you said it has been wound down. When was this done? If you could just share the time line to start with?
And that was done about more than a year ago.
Okay. Okay. And is it possible to share? I mean, what was the share in their possession earlier? And why is it not visible in our treasury shares now?
This trust was never part of the consolidation. So that will never come in the books.
Okay. So -- but there were some shares in their possession. So what is the position? I mean, where are those shares lying right now?
They must have sold this, so that that is a new bar, which most probably will be a new trust. They would have got it.
Okay. Okay. And is there any outstanding loan advances or any other transaction from the parent entity with them now?
No, there's no loan. All the loans are repaid long time back.
The next question is from the line of Satyadeep Jain from AMBIT Capital.
First question on the expansion opportunities. I'm not sure if I invested. Earlier the company had decided to go slow on the Satna expansion and other opportunities in light of the Holcim divestiture. Now that there's more clarity on that front, is the company ramping up the land acquisition on these projects? And when can we expect a formal announcement on go ahead on these projects?
And then, tied to that would be, I think if I heard it correctly, did you say that you're looking at opportunity for growth in other businesses in other regions? If that is correct, what other businesses would you be entrusted in? And if you have to look at different regions for growth and organic growth, are there any regions which would stack up above other regions? That's the first question.
Can you please repeat the question? The voice was not coming very clearly.
Yes. On the first expansion, I think you decided to go slow on Satna in light of the Holcim divestiture situation. Now that we have more clarity on that front, is the management going to ramp up land acquisition in both Satna and Nawalgarh? And when can we expect a formal announcement on the go ahead or announcement for time line for these projects, the next phase of growth? And second, tied to that would be, I think if I heard it correctly, in one of the earlier questions you mentioned, you're looking at other regions and other businesses also as possible inorganic opportunity. What could be the other businesses Dalmia might be interested in if that is correct? And if there are any regions that would be more preferred for inorganic growth over other regions?
No, let me just clarify, Rajiv here. I can't think of anywhere in the call we have said that we're looking at -- in other businesses. So, probably the questions that we are not talking about assets on other business. Having said that, on the land acquisition, as Puneet was saying in his opening remarks, I think we're fully committed to 49 million tons for FY '24 and our long-term vision of 110 million to 130 million tons by FY '31 stays intact. There are a lot of development happening in the industry. The world is far more volatile than what it was about a year back. And we believe that industry would be [indiscernible] they're coming in, they could be very discipline. There could be a little bit of churn in the short to medium term. And [indiscernible] with organic inorganic. I would not like to speak specifically about any project if organic or inorganic opportunity existed. But the [indiscernible] looking at opportunities to expand the footprint throughout the year. And to that extent, whether it's Satna or whether it's [ SLC ] or Northern India, all of them are being looked at actively as we saw early stage.
Okay. Second question would be, I think there has been some slight changes in the CapEx schedule. Are you possibly compared to the earlier expectation ramp down the expansion in Murli and ramped up expansion in Tamil Nadu, is there anything -- is it just market demand/supply that is driving that decision or is there anything operationally with the asset or limestone that is driving these changes in the CapEx?
There is no such feature in which it is happening. In fact, we have thought that to some extent we can enhance our capacity in South and that's why we have added capacity there. And Murli just may take a few more months to start that capacity concern.
Okay. Just one more question -- one quick question if I can squeeze. There was some -- apparently some market share loss in East in the quarter for Dalmia? If I understand correctly, if that is correct, was it because of the debottlenecking on maintenance in Rajgangpur or was it a conscious decision to not send more volumes in the market?
Look, there was no such sense where there was a short of related material. So it was not the case.
The next question is from the line of Sanjay Nandi from Ratnabali Investment.
Sir, can you just throw some light on our renewable power consumption as of now in this quarter, like what kind of capacity opportunity do we have standing as on date, sir?
Please repeat.
Sir, can you just throw some light on our renewable power consumption like what kind of waste heat recovery capacity do we have at the end of the Q1 '23?
[indiscernible] 37 megawatts of recovery.
And the voice is breaking. Will you please repeat once again?
We have about [ 37 ] waste heat recovery.
37. And this we are planning to take it by how much by FY '24?
[indiscernible] By the end of the year, FY '23, our renewable energy capacity is projected to increase to about 170 megawatts. The details -- the complete details are mentioned in the earnings release has been uploaded on the website. You can get the finer details there.
The next question is from the line of Ritesh Shah from Investec.
Question is for Puneetji. Sir, we have given a stiff target of 110 million to 130 million tons by 2030-'31. It involves a [indiscernible]. Now just to remind 2 quarters back and in between, we have Adani's actually open, wherein they have also indicated that they would look to add another 70 million tons in the next 5 years. India growth story is fantastic.
But when we have to look at it from a market share standpoint versus profitability, how do we look at this variable? So the reason to ask this question to you specifically is, the company has a very comfortable balance sheet. And when it comes to execution, nobody is going to question. So, I think we become a key player to determine on market share versus profitability and hence this question to you.
I mean we look at both market share and profitability in the long-term. And my belief is that the sector attractiveness has gone up, as I said earlier. India growth story is something that we believe in. And I think we will do our best to participate in this through greenfield and brownfield projects as well as through M&A.
Now obviously M&A is uncertain. And depending on the competitiveness and the strategic value of the assets, we will discuss at that point in time what is it worth to us and ultimately will play out the way it will play out. So I think it's hard for me to really comment on market profitability in terms of absolute profitability. I think the business scale is important. And we have realized that when we started, like we were 1 million tons, probably one of the most profitable plants in India on a [indiscernible], but on a -- you need absolute profitability and cash flow to grow and participate in the opportunity that it offers. So our scale is very important. There could be blips along the way a few quarters, few years could be depressed. It is a cyclical business. That's the nature of this business. But at the end of the day, unless you build scale, you will not be able to [ put ] the internal approvals to participate in the cash flow and you won't make money in the boom part of the cycle. So, we have also seen how well Ultratech has consolidated. They may have paid good prices for some assets, but once you're able to turn them around and bring them to your own cost structure, reshape the brand, I think we have all those capabilities on bringing the companies to Dalmia efficiency and reshaping the [indiscernible]. So I think after a few years of turnaround, these assets become very profitable. So, my view is that you have to [indiscernible] the sector if you want to participate in the opportunity that India offers. And building scale is a process which could have some turbulence, but it is imperative to participate. So I think we look at profitability and market for the long-term. And we will continue to behave in the same way while maintaining a strong balance sheet. And I think we've also guided that our net debt to EBITDA will remain under 2% in this phase, except if we think of some very strategic, very attractive acquisition, in which we may breach it, but we may again come down to our desired norm. So I think that's how we think about it. I don't know whether I answered your question or not, but I just shared what came to my mind. Rajiv, do you want to add to it? Singhiji, do you want to add to it?
Nothing, Puneet.
Just a follow-up question. Sir, how critical do you think limestone as a resource will be for us in our journey from, say, now to 110 million tons, 130 million tons? Is it something that we'll have to build up incrementally via auctions? Do we have adequate resources even if one has to look at it post lease expiries come 2030? Is this going to be a key determinant, because we have the other variables in place. I think limestone is one missing variable, which if you provide some color, I think it will help a lot.
Look, I can tell you one thing that when we acquired Murli and when we acquired Kalyanpur, these were questions which were asked to us repeatedly. And we have seen that once we get into an asset, there are lots of innovations which are possible to improve the limestone usage because we have very good R&D in our company. We have very good -- very flexible processes in terms of usage of limestone. So many times, the reject ratio has gone down and we have been able to improve the usage of the limestone which other companies were -- the erstwhile companies were rejecting. Similarly, once you get into an area we've been able to buy land, we'll be able to win auctions and we've been able to augment our results. So, I personally think that this is the overrated risk. It is being blown out of proportion. We are very comfortable in all our plants, and we continue to augment our resources in a way which is consistent with the long-term sustainable growth of the company. And I think we will have adequate resource in all our plants. The challenge there in greenfield project, I think there land acquisition is taking longer than what we think it would. And I think that is an area which we need to work upon. And that's an area where there's some delay from our side. But I'm sure with the focused approach of our teams, over time, we will be able to develop these and announce expansion on that. So my view is that for a large part of our organic plan, limestone is not a risk. Land acquisition is a bigger risk. And I think that is something which we are focused on. And it might take a little extra. It might take -- it might be a little bit more expensive than we thought. But in the overall larger scheme of things, I think it is not something which is going to derail the growth plans in any way.
The next question is from the line of Rajesh Ravi from HDFC Securities.
There are 2 questions. First, as a follow-up on the -- what the earlier participant was asking. So, you said that despite this ambitious expansion of 60 million to 80 million tons over next 7 years, what one should be mindful is that until it is a major inorganic, net debt-to-EBITDA will be comparatively in the 2x. Is that understanding right?
Absolutely correct.
Super. And so, even that would mean that initially is the expansion and it could be more comfortable and later on only when you are strong [ OCF ] would be going forward? And second, on the fuel, you mentioned on a $220 on a per ton basis, given that the fuel mix is dynamic and keeps on changing, would it be prudent if you could share the numbers on a per kilo cal basis, how did this number fare in Q1 versus Q4 and where that stands in Q2?
I think we have shared the dollar per ton number of pet coke. This is a good proxy for the INR 1 million kilo calorie. The fuel mix varies from plant to plant. So I think it's a good proxy in terms of...
So what you have mentioned is purely for pet coke, it's not a blended mix of coal and pet coke.
I know, I know, I know, but it's a good proxy. But I think Aditi can -- I mean, that number Aditi can give.
So that $220 million is actually a blended cost of [indiscernible] 2.47 for Q1 FY '23.
And Q4, what was the number?
2.07.
And Q2 currently?
That I would not want to say. But I think [indiscernible].
We'll say in October.
No issues. I'm just trying to -- directionally it will go up in Q2. That is what I'm more keen of. Is that understanding right, before cooling off in Q3?
Yes. So, considering the inventory we maintain and the purchase that we are seeing, which is likely to probably buy a couple of more dollars.
Okay. Okay. Cool. And last question, on the -- Singhi sir was talking about captive generation cost of INR 8 to INR 10 per unit. So, how have these numbers moved, say, over Q4 and Q1 or versus last year to current period?
Wherever we have found that the cost of coal and then cost of generated power is higher than -- to that extent, we have brought down our captive power plant generation and taking the more power either from IS or from grid. So that's a dynamic situation in which we have been able to manage our power and fuel cost [indiscernible].
Okay. And last, the blended number would be how much sir, for this quarter, blended cement production?
It should be around 82%, 80-plus, maybe 1% or 2%, 82%.
The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher.
Sir, one question on the part of capacity addition. I know a lot of questions have been asked on that part. But like say, if you want to break it up, like, say, by 2026 or '27, how our capacities would be coming up? Because 110 million, 130 million tons is the target for 2031, and I appreciate the aggressive view of the company. But like say, the way the land acquisitions are going on the ground and the way we are moving our resources, so by 2026, 2027, how much capacities we see? Because 50 million ton visibility is there. But beyond that, there is no visibility.
We appreciate that. I think we are working on our plans, and we will let you know in due course. We are conscious of the fact that we are delayed by a few quarters on this. But you have to keep some patience, we'll come back to you soon on this.
Okay. And sir, secondly, on the part of like the cost would cool off. But where do you see these margins to get settled in? Would the 1,100 be a good range for the industry to operate as the new competition comes in, they want to expand their market share and all those things going into market. So where do you see the margins getting settling or where the Dalmia is more comfortable with the margin range?
In the past, the EBITDA margin has been hovering around, say, 23% to 28%. And I think that margin would be the comfortable margin. So, at the moment, if you look at the overall Indian cement industry, the margins are now ranging between 15% to 20%, which is the margin we thought comparable margin for us also as well as any company. So definitely we will be looking at the margin around 25%.
And sir, lastly, like ours is the only company in the entire cement sector where we have to more focus on your notes to accounts. Like say, rather than seeing the number, the focus is more to look at the notes to accounts. Like say, can we have like all the adjustments or all the accounting treatments being done at one go, like say, on the goodwill part, we gave those announcement or the -- those -- like statements in our account to note, can we curtail it out because that particular announcement or that particular highlight is not required. So we can't rework on those, like, say, getting that goodwill amortize at one go. I know that in the tax authorities' mind that would look relatively, like say, abnormal, but can't we take one hit at one go and clean up this entire balance sheet?
Kamlesh, Rajiv here. I think it's a point well taken. I think this year we are actually -- we've started initiatives to benchmark our accounting policies, practices with the best in the industry, and not only in the industry but best in the country. And that is something that you will see us working very, very closely over the next few quarters. I think at the end of the year, you'll see us cleaning this up. But it's the feedback well taken, and we will give you an update on this.
Ladies and gentlemen, we take that as the last question for today. I would now like to hand the conference over to Mr. Dalmia for closing comments.
Thank you very much for joining on this call. I wish you and your families a very happy Independence Day in advance. Please fly the tricolor on your houses, and we are proud to be an Indian. Jai Hind. Thank you.
Thanks, everyone.
Thank you. Ladies and gentlemen, on behalf of Dalmia Bharat Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.