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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the KCP Limited Q4 FY '22 Earnings Conference Call hosted by Nirmal Bang Equities Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Mangesh Bhadang from Nirmal Bang Equities Private Limited. Thank you, and over to you, sir.
Good morning, everyone, and welcome to the KCP 4Q FY '22 Results Conference Call. We have with us today Mr. G. N. Murty, Chief Financial Officer of KCP; Mr. B.V.P.S. Chowdary, Senior General Manager, Cement Plant Head, Macherla and Mr. Shri P. Ramachandra Rao, Senior DGM RO. Without further ado, I now request Mr. Murty to discuss his view on the results as well as the industry dynamics. Over to you, Mr. Murty.
Good morning, everybody. I'm G. N. Murty, Chief Financial Officer of KCP Limited. Had a breakthrough [indiscernible] for what we did in Q4 and the entire full year of FY '22. The KCP flagship business is cement, and KCP also has a Engineering unit and a Hotel at Hyberabad and the engineering unit is located in Chennai and Cement is located in Andhra Pradesh in 2 cement plants. We also have a subsidiary in Vietnam and dealing with sugar.
Coming back to the performance of the company. During the financial year, the flagship business cement did very well by reducing a healthy 19% volume growth and reissuing over 71% capacity utilization of the company. The demand continues to be good for the product we manufacture cement in the areas we operate in AP, Telangana and Tamil Nadu mostly. And we also operate in Maharashtra and Orissa and Kerala also.
Demand was good. And bottom line continues to be good comparable to last year, which was exceptionally large year. Profits could be, I mean, managed. But the real issue in the current year, though the demand is -- I mean sales volume was INR 30 lakhs. The prices were also selling prices, but the margins came down because a bit abnormal cost escalation of big coal and other fuel material, including diesel.
I don't know the prices were also good, better than last year. Importantly, what knocked out the EBITDA margin was only coal and the diesel prices. Otherwise, the company did very well on the Cement side. The EBITDA margins last year when I said '21 -- FY '21 was at about 1,100. This year, it was nearly 800. The reduction is mainly due to fuel and -- coal and fuel. And on Q4, we did -- compared to Q3 sequentially, we did very well in Q4 also. Volumes have substantially grown from lakhs of Q3 to lakhs of Q4, that is on sequentially. But the margins have fallen in Q4 like every other cement manufacturers in the country, margins have started going southward, in Q4, mainly because of the coal prices and fuel prices because of the Ukraine war effects.
But compared to Q4 of last year, Q4 of the current year, volumes were more or less a marginal increase was there. That is under cement. Coming to our Sugar at Vietnam, it has done very, very well during the current year where the prices of sugar substantially improving nearly over 20% -- between 20% and 25% net realization. And also volumes going up by 10% during FY '22 compared to the earlier year. The increase is mainly due to the better yield in the sugarcane as well as the measures taken to protect certain domestic industry, again, is the dumping from across the borders of sugar in Vietnam. So all this helped us in getting larger margins and in fact, subsidies started growing over the parent, that is, even it made more profit than even the parent that is KCP Limited.
The subsidiary for information of investor do not have any income tax because of that being categorized as agri product in that country, no income tax. So apart from PBT, both are identical. We made about INR 154 crores of PAT. And the KCP on stand-alone basis overall in India made nearly INR 129 crores, which we declared last year. So the KCP though there is marginal -- some reduction in the country, we were compensated amply by the subsidiaries performance. So overall, at group on the performance of the company was really good even compared to the last Q1.
That is the on the sugar. Sugar -- and we hope that the season would continue to be better in the next year -- sugar. And the risk of cement is compensated by the better performance in the sugar in Vietnam. Coming back again to KCP Limited other units other than Cement, we have a Hospitality unit hotel called Mercure at Hyberabad, which started improving substantially with occupancies, which used to be 50% like that, substantially going beyond 70%, 80%. And also food and beverage section in that hotel also started receiving footfalls because of the increase in travel increased and reduced restrictions due to COVID. So on hotel performance is improving by day, and we hope that the hotel would do well in the next year.
But coming back again to hotel, we also started improving, I mean adding certain attractions in the hotel, like setting up rooftop restaurant and others, which should then improve performance in the hotel. But the concern continues to be the Engineering here, which contributes hardly INR 100 crores of that of INR 1,700 crores of turnover of the stand-alone basis of KCP Limited. It contributes less than INR 100 crores, but the loss contributed is INR 24 crores, and we are INR 22 crores during the current year. The main reason for the loss is not lack of orders in the country, demand is good for engineering, order book is healthy. The main problem is the substantial input price increases continues to rather be companies in some form or other, earlier COVID, current year, the absorbable increase in input prices are causing the harm because once you accept orders, you have to execute it. Otherwise, you have a relationship issue and the continuity of the company, business itself. So we were honoring the customers order, and -- but the order book is quite healthy at over INR 150 crores.
We are sure to receive orders, but we are now becoming choosy because of the cost is substantially more of steel, scrap and fuel. That is only engineering in it. And power is another segment we have. We have all kinds of power: wind, solar, hydel and thermal. Thermal power plant, we started using lesser because of the higher cost of fuel from across borders, Indonesian coal. So we started importing maximum power from the grid, which gives at lesser price than the generating cost because of the abnormal never seen before coal prices. So we are maximizing the thermal power plant capacity. But still, to ensure continuity of production of cement, we need to produce it further or any power cuts due to lack for coal for the power and rating companies. We have to continue the thermal power plant generation to aid in cement production, which gives profit in the net. That is on the power plant.
But the hydel is the one which is the good performance due to continuously good monsoon year after year. And last year, we had one of the good monsoons. And the unit made good profits also. And considering the [indiscernible] price to transfer price we undertake ruling the to other cement making units. So the hydel generation of our 1 crore units is really helping us and reducing the costs are making profits.
And as for the current year estimates of the IMD, monsoon is going to be normal. We expect a similar good performance on the idle. Solar and wind power continues to run at a stable manner because country doesn't have a lack of solar and also wind at Tirunelveli in Tamil Nadu. So Tamil Nadu continues to operate at the levels which was operating for several years in the past. So we do not see any problems in the green energy side of generation, that is hydel, solar and wind power.
Thermal power plant, we continue to run even if it is -- coal is expensive due to consideration of continuing production of the cement. While we have to run the power plant even at higher caution, the country is expected to reduce a good demand due to infrastructure and the other governmental investment and the residential houses picking up substantially in Hyderabad, Tamil Nadu, Andhra Pradesh, everywhere. We hope that cement would receive good demand. As for one estimate, the prices also might improve by about 5% to 7%. It's not an internal estimate, one independent agency cement. So if we see some light of the Ukraine war, as the prices received, hopefully should be better. This is from my side of the word. Any questions I take.
Sir, should we start the floor for questions and answer?
Yes.
[Operator Instructions] The first question is from the line of Ronak Chera from Orega Capital.
Am I audible?
Perfectly.
Sir, I have a couple of questions. One is on the outlook on heavy duty business and KCP. You've already touched upon this. But sir, in your sense, would we start making profit in this division, any tax and what would be our aspiration for the sustain margin in this business?
First thing is on the joint venture, SE/KCP, you might have noticed that we made progress in our joint venture SE/KCP after last year losses. So there is a plus margin in our joint venture, INR 302 crores profit we made there.
On Engineering, which runs a similar business like our joint venture, joint venture makes only sugar machinery and our engineering makes all kinds of large equipment for states, cement, sugar, all kinds of large equipments. So outlook, if you are asking me from demand side is definitely good, no doubt. But the only question is on the cost of production. So if I accept an order for INR 100 now, and assuming costs at INR 90, the cost goes beyond of INR 90, that is the only concern. So we are looking at the input cost in the current year, but otherwise, the order book is health even now and if we open both, we will get orders flooding in. So we are only now choosing because of the cost and outlook is we are -- though I'm not giving any guidance as such, we expect there's a substantial reduction in the losses of the engineering. Hence we were targeting breakeven at least.
Thank you so much, sir. Second, sir, on the capital allocation side, what would be our CapEx plan for the next 3 years and in what areas? This is the first part?
And the second part is, any plans to sell the noncore assets like hotel, power plant, et cetera?
First, I'll answer your second question. There are no plans to sell the noncore assets of hospitality hotel because it is going to make a substantial improvement. And also engineering, which is the order of the day now, we are also trying to explore the possibility of diversifying into other areas. Hopefully, we would -- you people will see a good turnaround. And there are no plans, let me stress, no plans, whatsoever, to sell these assets.
So in the first one, CapEx plan?
CapEx plan, yes. Our company has good cash results in India as well as in the Vietnam, large cash results, nearly 500. Practically, our net to equity ratio at group level is 0, equity and the customer. So the issue of availability of money is there. But now we have certain proposals like installing cost reduction measure, waste heat recovery, but we are yet to inform the stock exchanges. There are various preliminary plans. And CapEx also, we like to take forward certain initiatives once we see the prices. I mean the input prices stabilizing at certain level because we're going to suddenly collect large points of CapEx and end up with some kind of pressure already running business costs. So we -- definitely, we are looking at substantial improvement in the operations and also turnover. Our target is to make it double, but still we have to finalize the plan. We are on the process of finalizing and selecting a few areas, whether they are current, existing business or different things or new businesses. But still, we would like to have a look at the stabilization of the current international volatile circumstances, then I take a call on the CapEx. Yes, we have good plans on hand, but we will take a call, inform all investors through exchange appropriately.
But from a 3-year row, has there been any ballpark number which you would want to share? Not...
Right now I'll not be able to share ballpark number because this cannot be for a month. If I share here, I have to inform the exchange first.
Sure. Sir, and my last question is on cement business. Sir, you mentioned your volumes for FY '22 were INR 30 lakhs?
INR 30 lakhs, yes, INR 3 million, yes.
Yes. Sir, and what will be our EBITDA per tonne post the packaging plant?
Packaging plant is minuscule. It is like the impact on the price, but it should not impact the next year in the cash reduction. But EBITDA per share price is INR 700 crores versus INR 1,100 crore last year.
Okay, okay. And sir, the outlook would be...
In fact, you can take it as INR 800 crores.
Okay. And sir, the outlook would be for the next year given you see that pricing could improve?
The demand side, we expect to be really good in the current year also, that is '23. We expect -- in line with the researcher for internal estimate is also that we will get demand for cement due to various measures. So 90% of our operations are on cement. Various measures taken by the government and the economy to expect it to grow largest in the country by both international monetary fund as well as the Reserve Bank of India, around 8%. There should be no issue on demand. The only concern would be the cost. Cost is the fuel cost. Otherwise, demand says yes, it is going to be good. That is our internal as well as external estimate.
The next question is from the line of Dipen Sheth from Buoyant Capital.
I hope I'm audible.
Yes, sir. You are audible.
So as I see it, the improvement in operations or profitability this year has been primarily led by the uptick in the sugar business, the sugar segment. And all of those profits come in from our operations in Vietnam, correct?
Yes. It is in Vietnam.
Okay. Right. So -- and -- all right. So one is that the -- and we are set for another good year, I would assume, unless something is changed in the recent past?
Yes.
So one part is, of course, that as a result of this increased profitability in the Sugar segment and not a very large decline in cement profitability. The cash reserves at our disposal have increased. And I would assume that much of those cash reserves are in Vietnam.
Yes, sir. In Vietnam, we have about INR 300 crores and remainder we have are INR 200 crores and nearly INR 250 crores of...
Is there a tax implication in repatriating this money in case we want to deploy it in India? In case?
No. In Vietnam, there is no tax repatriation thing, but once you receive dividend in the country, it is subject to even taxes subject to [indiscernible]
Okay. So the only way you could repatriate that money would be through dividends and then naturally, you would be subject to whatever. So there is no withholding in Vietnam, but there will be a tax implication when you bring the money into India from a government of India taxation perspective.
Yes.
Okay. And right now, also a question on the tax bit. At an aggregate level, on the console numbers, the tax rate -- the effective tax rate seems to be low. Am I reading something wrong here? Or could you share some...
You are not at all reading wrong. There is no tax in Vietnam. There is tax at 30% in the country.
Okay. So at a blended level, we -- it looks like we are paying less than whatever 15, 16 points?
Because once the profits were more or less equal, penalty -- the PBT in India and 150 in Vietnam, 154 something, and less than 1.5.
I agree with you, sir. So -- Okay. So I think my other question has already been asked before, and we will wait on the sidelines for clarity on your capital allocation. Because you are sitting on a substantial amount of money now, and it will be very interesting to see whether you can deploy it...
And so management received of this -- I mean, it's a problem to sit on cash also, idle cash, deployed in interest reduction depositing in the banks. Why I have not repaid, you don't see. We can use it for some capital investment. That is our idea, not certainly from first quarter onwards with Vietnam what brokers and destabilizing the entire thing. Today also market crashed [indiscernible].
The next question is from the line of Saket Kapoor from Kapoor & Company.
Yes. Firstly, coming to your last part, you told that market -- I could not get your point. Markets are down 1,000 points. How does that correlate with our investment strategy?
So it doesn't exactly correlate with the investment strategy. But the consequence of the effects in the country are looked -- I mean, are -- frighten the markets. So the market thinks that reserve banks, hawkish stance and market worry about Ukraine war. So this is a combination effect. So how would others feel my decision? See if costs continue to be at elevated level, do I take a call on committing large CapEx? Are funding the large costs. We -- there is the choice between, I mean, allocating funds between the CapEx as well as operational links. This is the basic point. So whether market sees the conflict continue for a long time, is it the effect -- the crash is the effect of that thinking, fed rate thinking or RBI stance, so it's a combination what I mean to say, but my view is limited to thinking that when the fuel prices would come down, then we can take a call on substantial CapEx.
Right, sir. Sir, in the consolidated numbers, you find the other income component of -- sorry, INR 34.20 crores for this quarter. So what attributes to this amount, sir?
It is not INR 4 to INR 6 crores. Standalone...
34 -- I'm talking about the consolidated numbers, sir. On the consolidated for this quarter, the other income stands at INR 34.20 crores.
Other income stands at INR 34 crores at consolidated level?
Yes, sir.
Consolidated net level you are saying?
Yes.
Yes. First point is, we made a substantial interest income because of you are saying, no, we are sitting on deposits. Actually, it comes from the interest income from the deposits at both at Vietnam both and in India.
Okay. But that has been accounted for the entire year for this quarter only because this is a substantial...
No, no. This year, if you see stand-alone it is where dividend will come, stand-alone if you are seeing. Dividend income will -- information of all, I missed to make one point. We received 4 million dividend second time in the Q4 from Vietnam. We received already 2 million in the first quarter of FY '22. Another dose of 4 million we received in the fourth quarter. So you may be seeing large other income.
Right,sir. Right, sir. I got your point. And that gets magnified in the consolidation and then comes the -- our treasury income part that has been booked you are saying, sir.
Sir, if we take your engineering part of asset business, so what comes under the scope of work actually we are doing and which industries are we mainly catering to? I heard you saying about sugar and other sectors. So are we having a majority of this work towards the private customers or public as a unit? Just if you could give us some more color wherein we are facing margin pressures, sir.
Sure, sir. Our heavy engineering and it makes large machinery required for cement, sugar, power plant pressure vessels required by all companies. And we also cater to space and defense. Defense and space may be smaller, but we cater to them. And in this is it government or private set is a combination. But PSUs are also there, like oil companies. And we also have a space organization and defense organizations who are placing orders on us. So you can say 60%, 70% is private players. Balance is government related.
Okay. And sir, has there been any write-back or receivables problem under this category. I mean, If we take the losses for the full year, that translates to around INR 22 crores, INR 21.32 crores and the quarterly -- last -- this quarter, there was a reduced loss of INR 3 crores only. So is there any write-back or receivables part that has gone back, sir?
Some INR 2 crores write-back is there. Because we won a case in power case. So the losses, which were booked earlier were written back because of the reduced demand on the power distribution companies.
Okay. So that is the income for? Had that not been the case, the losses would have been much higher -- a lot higher than INR 2 crores?
Yes. Higher than by INR 2 crores, right. You are right.
Sir, coming to your -- sir then the outlook for the engineering part, I just dwell a minute more about it, sir. Sir, when you say that there is no problem with depth of order, this is only about the inflationary trends that are affecting the segment. So sir, we are not only -- we are not the company who is doing engineering work. There are other people, I think so also that are doing the same work. So where is the disconnect that we are not able to make profit, whether it is the fixed cost that are not getting covered because of the low volume business or old legacy orders where we have gone unhedged because of the raw material mix? And what constitutes the major raw material? Sir, is it the steel part only that plays a major role as a raw material basket in the engineering segment?
Yes. First point is what constitutes major costs. That is steel material, one. Second, I think many engineering units in the country are making more or less losses because of the steel prices, many. If you name a company, I will make a comparison with that company and try to take -- if any current reaction is possible base on the example given by you if you tell me any company.
Sir, likewise comparison, I don't have, but I looked into [indiscernible] engineering numbers. I have looked into Anup engineering numbers if they are comparable. I am not aware of it, so correct me there.
Yes, yes. I will check those, sir. Definitely, I'll take the ideas from you people and check that and try to even correct our units' operations. We are trying to avoid certain other future loss making. If there is any possibility of withdrawing legally from any orders, which because of cost exploration, we are doing that. Within the contractual commercial terms, we are withdrawing already, but we have still large order book.
But one point is the engineering generally making losses. Second point, the input prices are steel. Third point is the future, we hope to break even in the current year. Of course, people also will question me. You said this similarly last year. Suddenly case, it is a problem of steel prices.
Right. What is the order book, sir, as a mark? And what is the order intake for these 45 days of this financial year, if you could give the closing order book?
No, no. In fact, I'm not able to tell you in which party present, but order book as on 31st March is 150.
I'll come in the queue, sir, for the follow-up, sir. I have a couple of them, but I'll come back. May I ask a few more, sir, if you permit or shall I come in the queue.
That Nirmal Bang can coordinate.
That is what the point. Okay. I'm continuing, sir. For the cement part, sir, if you could give some color on what portion of our cement sales are trade and nontrade? And what portion is the blended OPC and the PPC part, sir?
Most of our cement goes to trade only, 70%. Nontrade is the balance. And your second question is blending. We primarily have OPC and PPC fly ash based, not slag based. So that is also nearly 30%, 40%, we are going for fly ash based.
Okay. So only 30% is blended, sir? This is because of the nature of the market we are servicing or any other compulsive non-eligibility?
Sir, first point is between near 30-40, is the blended that is PPC cement. Fly ash availability is there, there is no issue. Market intake is what we look at. If we -- now we have started a packing plant at Chennai. Fly ash is available. They're going to confirm the orders of fly ash sale. So hopefully, we will get distributed fly ash first.
Okay. Sir, this mix will change, sir, over the years? Or this is what the continuity is going to be?
For the years, mix will change towards blended cements.
Okay. So what are we behind, sir, in terms of that? Because that will be -- going to be bottom line completely.
Correct. Correct, sir. See the cost reduction measures are fly ash based. We are also looking, but not yet confirmed plans at blending, I mean, slag, but we are yet to set up any plant.
And on the WHRS front, sir, I heard you speaking, but I missed the point. What is our WHR capacity?
We have a plan of cost reduction. We are yet to inform exchanges about the concrete plans. It's very rudimentary preliminary plans of setting up. We already have one WHR in Macherla running, giving good results. We are thinking on those lines of setting up in our Muktyala, where we have 3.5 million tonnes of capacity.
Okay. So what is our total capacity, sir, including the 2 plants?
Both plants put together, 4.3, cement.
4.3 cement. And the cost of power per unit is on a blended basis?
On inch unit, we import and also make our general tower on power. But what we are doing, we have internal power plants, but we are segregating them as separate segments. We transfer at INR 5.5 based on the discoms price and arms length. So we -- if we have to import power, that is a price plus you contract at maximum demand charges. On an average, it comes to about INR 6.5, including the demand charges.
Generation cost also thermal power plant. Other than thermal power plant, generation cost is hardly INR 2. That becomes a profit balance, about INR 2.5 like that. But see, the thermal power plant, we used to manufacture, I mean, generate at INR 5. But now the costs have gone up much beyond even INR 6, INR 7 because of the Indonesian coal price rise. So that's the cost economics, price economics, rather.
And lastly, on the hotel part also, sir, you did spoke that we have no plans to demerge or divest the hotel. Assessing it is a single unit only, so what kind of synergies does it play with our line of business? There can be a correlation between cement, heavy engineering and sugar is altogether a different aspect. But how does hotel fit into our realm of businesses? And what is the key rationale of continuity of having one single hotel, sir?
Multi-product company where cement may be flagship company, we have multiple products, sugar and cement have no relation. But still, we have sugar also. Similarly, we have hotels, we used to have a large parcel of land, prime land located centrally in Hyderabad. So we -- to make use of that, we started this. When we started, we thought we will make profits. Now those -- I mean, first might come through in the coming years, but making breakeven or even better than breakeven.
So what is this energy? Making use of the land and making profits is the idea, diversifying into cement. See if you see in cement also, in South, you hardly use 60% to 70% capacity. Can you install any new cement plant in South now? Can I venture into installing another cement plant? With large given too many players playing around with only utilization around 70%, unlike north where they use 90% to 100%, so you have to have a look at diversifying your business. That is the idea. In fact, when we set up, the cement was hardly used that capacity of 60, it is not lost. So cement, those days was not good. We went into that. It is only diversification idea.
[Operator Instructions] The next question is from the line of Raj Nahar from Mili Consultants.
My question is about your WHR where you also have your own engineering. You are the first one in -- one of the first ones in the industry to set up 4 megawatts WHR. While all other cement plants in the country either have already operating the WHR or are going into a big way basically, while you are sitting also the comfortable cash position also, so how -- why is this so much time taken for implementing or announcing this project?
We set up our line to only in the year '19 -- '19-'20 was our first year of expansion of cement capacity. So with the KCP limited capacity available, we did not want to venture into large the CapEx, especially when funds were not available that much. Now that funds are available, we are planning certain new initiatives. So better late than never.
The next question is from the line of Munjal Shah from [indiscernible] Wealth.
A couple of questions. One is on the sugar in Vietnam, okay. You have dwelled on it, but how confident are you of these numbers going up this year and following years actually?
The best and present circumstances and also what we foresee, the government is supporting the local industry. And also season seems to be good in the coming years -- coming in this 1 year at least. So we are reasonably confident that we continue to run at similar level based on the climate conditions as well as the political environment.
And second is, if you look at the sugar numbers on a quarterly basis, okay, I mean there's a lot of fluctuations. In some quarters, the turnover is very high, profit is very low. In some quarters. Like Q4, the turnover was only INR 66 crores and EBIT was almost INR 57 crores, okay? So should we ignore this quarterly and look at the yearly numbers? Or is there a one-off in Q4?
I would suggest because sugar being seasonal, highly cyclical numbers you will be seeing, Q2, Q3, there will be some slump, is highly cyclical one. Second point is there are certain actions initiated towards end of quarter 3, which helped the better numbers than the subsequent quarters. That is reloading antidumping duty from [indiscernible]. That was done in latter part. So these were fluctuating conditions was because of the season as well as the additional help coming from the government to the local industry. So better always to average it out of an year.
Okay. And in Vietnam, since you have so much of cash, okay, but is it possible to increase sugar capacity? Or are you looking at some other CapEx in Vietnam?
Two points. One, we are -- we received for setting up ethanol plant some permissions. And we are looking at the available sugar cane to first fill the sugar production. Then based on that, we are going to sell that ethanol plant -- fueled-guided ethanol, okay?
And these are the CapEx plan segment, and we will decide based on this kind of availability, the sowing area, the crop area and the area under the sugar cane cultivation. Based on all this, we'll take a call on ethanol any time.
Second point is we also received an approval for setting up 60 megawatt power plants. We have already set up 30. Again, the availability of Bagassi as well as the biofuel, a slight concern is there in that country. So once -- if we have our own Bagassi, no issues, but we also need to buy biomarkers. So based on that, we will set up 30-megawatt power plant also, because we can export power. That helps the bottom line of that unit. So these 2 plants are there. Apart from that, we are exploring other area well.
Okay. And in terms of market share, okay, in Vietnam, how big is our sugar...
Gloves...
Pardon?
We are exploiting fact certain diversification into your like medical equipment, equipment gloves like in U.K., large behind.
In Vietnam?
Yes, sir, yes.
Okay. And in terms of market share, how big is this sugar venture in Vietnam? Like what are the competition...
There is competition, but the area where we operate, if we produce, we can sell, 100%.
Okay. And we would be amongst top 5 companies in Vietnam in Sugar?
Maybe, but I'm not able to exactly say this. I've to get bid. You can probably separately -- yes, I will find out from our Vietnam branch.
Sure. And second is, sir, means, there were many questions on this also. Just is there a thought process from the management, okay, since now the balance sheet is very comfortable, and we have deep assets, okay? And at least a couple of our divisions which have been making losses, you are sounding also confident that they will turn around maybe this year, next year, okay? So you will have a lot of cash actually. So is there a thought of buyback or something of that sort from the management? Our management is quite happy with the current position and the current valuations at which the shares are quoting actually?
In fact, buyback idea is not there yet. But more importantly, if conditions stabilized, there are CapEx plans to substantially enhance the top line as well as bottom line. And there are CapEx plans where we are yet to formalize those plans. I told you earlier is what we see some kind of stabilization in the economic conditions and the improved conditions. We'll take a call on that. But on buyback, right now, there is no plan as such.
No, sir, we understand because -- we absolutely understand that you won't share details before announcing at the exchanges. But at least as shareholders, or whatever, at least we can get some idea that over the next 3 years, if you have, say, INR 300 crores, INR 600 crores of cash available which division will have the maximum CapEx actually, whether it will be segment or whether it will be heavy Engineering or maybe some other ventures. If you can just highlight, that it would be very helpful.
Yes. Cement, we have to take a call based on the work crowded capacity in the South. So we have to look -- we are evaluating this part. And also Engineering side diversification also we are evaluating. But currently, plans, I'm not able to share anything now because we right now, we have plans to engage, but which area I'm not able to concretely tell you. Because we are yet to finalize those things.
And we also have a change in management in the heavy engineering division, right, a couple of years back. So we had hired some guy from that mark through, some company, I forget actually.
Midhani, Mishra Dhatu Nigam Limited.
Yes, Mishra Dhatu Nigam, and he was with MTAR also, okay.
Correct.
So he is still there? Or what are his plans? Because he's come from a decent background actually, okay, where there was a great hope that the division will turn around much faster than anticipation.
Correct. We will share your concern and he has plans, which might reflect into actuals in this year, next year, most likely this year.
The next question is from the line of [ Saumil Shah from Paris ] Investment.
I had a question on our sugar division. Normally, this quarter, sugar division is it does better compared to the previous quarter, right?
Yes. Right.
But then this quarter, when we look at the revenues from sugar division, it is hardly, say, INR 66 crore or INR 65 crores. What is the reason for that?
This quarter?
Yes.
INR 66 crores, now the season commences in the Q4. And in Q4, let me check our...
Actually, this quarter also is better.
INR 122 crores, no. Where are you seeing this INR 66 crores? Or net profit, you mean to say, profit before tax?
No, no. When I see your results...
Income level is INR 120 crores, sir.
Sorry?
Income level is INR 122 crores.
So when I look at the notification, it is showing sugar at INR 66 crore revenue, segment revenue.
Segment revenue.
Yes. And net -- profit before tax, it is showing INR 56 crores.
Yes. I'll check that once and get back to you.
So what is the sugar revenue, as per your records?
It is, of course, some eliminations are there, so at gross level, before elimination INR 122 crores at the gross level, net level is about profit before tax or after tax is INR 66 crores.
But I think you need to change it. I think there is some mistake in the presentation.
No, no, no. Not a mistake.
Actually, these figures, Vietnam in this record, two segments, one is the sugar business, other is power business, so if you combine both the segments.
So you will not know the power segment separately in your numbers because power is one for the entire group. So the numbers are correct. The bottom line is right.
When we compare it with the year-on-year, last March, the sugar division's revenue was INR 117 crores. And this March, it is INR 65 crores.
Correct. But that is in last year to current year reduction, you mean to say.
Yes.
Last year to current year. And the current quarter number, sir, what I'm saying is broken into power and this. Last year, probably the entire thing is in sugar only, not much of power. But last year, profit margins were better.
Okay.
This year, substantially more 20% -- 25% more.
Okay. Okay. And what was the capacity utilization of sugar division this quarter?
Let us not look at the quarter because of sugar being seasonal. If you look at the entire year, we normally run at about 7,000 tonnes crushing capacity against 11,000.
Okay. So around 60%, 65% capacity.
Give and take.
Okay. Okay. And sir, as the other party who also asked you the similar question. We have a cash in hand of about INR 570 crores.
It is group level.
Vietnam, yes, group level. And the debt, we have about INR 437 crores. So why don't we reduce some of the debt?
In the country stand-alone basis, I have a debt of INR 300 crores, including public deposits. The choice is between reducing the debt or CapEx. Already, we have debt, again, term loan sanction, is required to be liquidated at a return of 7%, 8% or should we go for the investment of the success. This is a choice we have to take. We are going to take a choice now. You understand the logic, no, what I am saying?
No, I understand. But at least, I mean, we can reduce some debt because in India level also, we have about INR 250 crores of cash in [indiscernible]. In Vietnam, we have about INR 300 crores. So if you would...
Maybe, a large cash, yes.
Yes. Okay. And sir, any plans of demerger, is it possible to demerge the sugar division or any plans of such?
Demerge means what? It is already a subsidiary.
Okay, no. I mean the listing of the sugar demerger. Is there a possibility? We can list it separately?
List it in, if we want, we have to list it in Vietnam only, not here.
The next question is from the line of Diksha Abadi from Fort Capital.
So I just want to know, can you give some light on your Power business?
Power business, see we have all kinds of power and the good performers are green energy. The power client is the one where we are showing some losses because of the higher fuel cost. But the power plant, thermal power plant, is set up primarily to meet the needs of cement generation. So we are -- power division is doing well, except thermal power plant because of fuel prices. Thermal power plants, and hydel unit, 4 megawatts waste heat recovery and there was 1 megawatt solar.
The next question is from the line of Vivek Joshi, individual Investor.
I just have 2 queries. Firstly, since we are already seeing so much of cash, and I'm sure that we are getting out of this and more [indiscernible] issue or the grade that you're taking from bankers, there would be a parity and why are we not using it, first of all.
And my second query is, I mean, since we have been making heavy losses in heavy engineering, so are you incorporating any escalation for this issue? I'm sure every other company into engineering does have it in the context? Why are we not having it? And how long do we want to wait for this particular division to enter losses? I mean we have 2 more years. So does it mean to enter losses from [indiscernible].
The first question, you are not properly audible, sir. Second question first, I will answer. Heavy engineering escalation can be incorporated. It depends on -- this unit makes each customer-based orders, it takes. It depends on the relationship and also the terms set by the customer. Normally, more customer access escalation on in engineering goods delivery.
I mean, any equipment manufacturing, no escalation is allowed except civil contracts where diesel price and steel prices are linked. But in our type of business, no escalation, people agree, primarily.
First question, I think you need to repeat on that because there was some disturbance on...
Just relating to the answer that you have given. I know [Technical Difficulty] and each one of them are having an escalation, so I am meeting the [Technical Difficulty] of the company, and the company is there to do business and to generate profits for the investors and not only [Technical Difficulty] and if you are not incorporating, I would suggest that we start doing that.
Right. Definitely. We are also making an attempt like in a similar way. I will take care of this, and I will convey it to the engineering and its head.
On the first question, I would just repeat it. Since we're sitting on so much of cash, [Technical Difficulty] and out to terminating that we post today are bank deposits, I'll be getting about 5%. But if I take a loan, I will end up paying about [Technical Difficulty] on the cash? I mean how long do management would want to see solution by next quarter?
Yes. No. To come back to your first question here. There is an arbitrage between term loans and the return we get 5% to 7%, what liquidated, I think the 2% extra is 1%. But these are the kind of sanction began project evaluation. We are also taking up some new projects. We are in the process of finalizing whether to sit on cash or to liquidate the cash or to invest in new CapEx. We are -- we will finalize this year definitely, a quarter or two.
Okay. So the second quarter, you will have something on paper [Technical Difficulty].
Yes, sir? Excuse me?
By second quarter, you will have something on paper? So you should be concrete as to how we should be using funds.
Yes, sir. hopefully.
The next question is from the line of [indiscernible].
Sir, I just wanted to understand about that sugar thing, because even I had that question that revenue in this quarter in this quarter, sugar, INR 65 crores or INR 66 crores, and profit is around INR 57 crores. And it is something 87%. So just wanted to understand the rationale behind that.
So there is large power segment, which has got consolidated in power segment. So -- and the power segment, normally profits will not be as much as in the sugar. And so -- and if we combine both only, we'll be able to see proper numbers. It is not exactly 87% we get. There is some balancing involved in this. The power segment, there is some lower profits or losses, whereas in sugar, large profits are there.
But in power segment, in fact, I can see -- so what is that amount that one-off...
Yes, yes. I will give consolidated numbers of Vietnam for both power and I mean sugar. It comes to -- the revenue comes to about -- sales comes to about INR 103 crores, including power. And net profits -- and last year also INR 107 crores is there. And net profits come to about INR 67 crores, after difference, INR 62 crores, that is part of the growth of last year. This improvement overall Q3 is primarily due to price realization, sugar only. There is not much of improvement in power.
Sir, I did not understand it. Just I'll ask -- I will just reframe it. In sir, in power segment, in segment results, what I'm saying is there was a profit of INR 7 crores in last year. And this time, it is minus INR 0.8 crore.
That power segment is all inclusive of India as well as Vietnam. Power segment posted losses, yes, because of fuel prices in India. And also Vietnam, there is not much a price increase. So there is not much of an improvement in power sector, above in Vietnam, it contributes to marginally some profit and it caters to the power requirement of the Vietnam industry. That is the last, yes, in power because of normal power plant in the country because of fuel cash escalation.
Sir, I understand that. My question is, you just said something about reclassification or something, which, sir, of power, which is considered into sugar. So can you just put that number? Or can you explain it once again? Sorry, I'm not able to understand it very clearly.
I will give you overall consolidated.
Just -- can you just go through once consolidated?
Quarter 4, all put together Vietnam numbers are about INR 103 crores of revenue, INR, all I'm talking in Indian rupees.
Understood.
Against last year, INR 107 crores.
Understood, sir.
And then profit before taxes is -- even after tax also same INR 62 crores in the current year versus INR 43 crores of last year. These are confirmed numbers, also Vietnam alone.
If you break up in this segment -- look at Vietnam totally, if you break up into segment, you are finding this some disharmony in the numbers. Because the large is in Power, and large profits is in sugar.
Okay, okay. And the second thing, I just wanted to understand about the anti-dumping measures we talked about which have been taken by Vietnam government. So are these sustainable?
The anti-dumping measures, normally, you cannot look at any longer horizon like 5 years like that. If you ask me about this year, yes.
Okay. So this current financial year, it is going to be there.
We expect it to be there, rather, not going to be there.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Yes. First, I thank all the investors for the suggestions given rather than the questions. Questions, I could answer, but one or two suggestions came up, I will definitely convey to our individual unit, next about the feelings of the investors and also the suggestions, some like the escalations and other things and also the enhancement of bottom line. And also the idea on interest reduction or CapEx and the plans for CapEx, all these will be discussed with the management after this call and also with the units. I really thank for the analytical questions posed by the investors, that is one.
Second, I also thank the Nirmal Bang for the excellent coordination made. This is what I would like to say. Thank you all.
Thank you.
Thank you. Ladies and gentlemen, on behalf of Nirmal Bang Equities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.