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Sagar Cements Ltd
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Good morning, ladies and gentlemen. Welcome you all to the 1Q FY '23 Results Conference Call of Sagar Cements Limited. We have with us from the management, Mr. Sreekanth Reddy, Joint Managing Director; Mr. Rajesh Singh, Chief Marketing Officer; and Mr. Soundararajan, Company Secretary. We will now start the session today with the opening remarks from the management, and this will be then followed by a Q&A session. [Operator Instructions] I would now like to hand over the call to Mr. Sreekanth Reddy for his opening remarks. Over to you, sir.
Thank you, Manish. Good morning, everyone, and welcome to Sagar Cements' earnings call for the quarter ended June 30, 2022. Let me begin the discussion with a brief overview of the market in terms of the demand and the pricing, post to July move on to Sagar's specific developments. Demand for the quarter was largely benign on the account of challenging environment, inflationary environment, labor availability and heat rate and also unseasonably or rather season being slightly ahead in terms of the rainy season. Subsequently, overall volumes as well remained steady through -- though, they appear elevated on a Y-on-Y basis, largely owing to a low base effect. Despite the muted demand, we have had to operate in a high inflationary environment wherein the price of raw materials remained considerably elevated, which in turn necessitated undertaking price hikes to help preserve overall profitability and the margins of the business. However, given the subdued demand, the industry couldn't undertake the requisite price revision, which in turn led to the profitability and margin compression during the quarter. However, we are now witnessing softening of certain raw material prices and are hopeful that with time and with the demand picking up, we should be able to deliver a better performance going forward. Moving on to Sagar specific developments. Our revenue for the quarter stood at INR 558 crores as against INR 393 crores reported during Q1 FY '22, higher by 42% on a Y-o-Y basis, largely driven by volumes following the commissioning of the new capacities. Average realizations remained largely stable during the quarter. EBITDA for the quarter stood at INR 61 crores as against INR 107 crores generated during Q1 FY '22, lower by almost 43% on a Y-o-Y basis. Margin for the current period stood at 11% as against 27% reported during corresponding period of last year. Margin compression was largely owing to higher input costs. The raw material prices were fairly stubborn during the Q1, which resulted in a margin compression of almost 1,600 basis points. Loss after tax for the quarter stood at INR 13 crores as against a profit of INR 49 crores generated during Q1 FY '22. Average power and fuel cost stood at INR 1,827 per tonne as against INR 1,017 per tonne reported during Q1 FY '22. Innovative prices of coal and pet coke resulted in higher per tonne cost of power and fuel during the quarter. Freight cost for the quarter stood at INR 798 per tonne as against INR 754 per tonne during Q1 FY '20. From an operational point of view, the capacity utilization stood at 57% on a consolidated basis during the quarter. As far as the key balance sheet items are concerned, the gross debt as on 30th of June 2022 stood at INR 1,490 crores, out of which INR 1,293 crores as a long-term debt and the remaining constitutes the working capital. The net worth of the company on a consolidated basis as of 30th June 2022 stood at INR 1,639 crores. Debt equity ratio stands at 0.79:1. The cash and bank balances are at INR 282 crores as on 30th of June 2022. To conclude, I would like to reiterate that while the near-term outlook may be slightly bit challenging, we believe our diversified geographical presence, improved product mix and cost rationalization measures, positions us well to create value for our stakeholders. We also remain on track towards scaling up on our business inorganically. And as mentioned during our previous call, we will be able to share further details on the same in next few months. We are cognizant of not overstretching our balance sheet in our pursuit of changing scale, and we'll continue to work towards maintaining a right balance between the 2. That concludes my opening remarks. We would now be glad to take any questions that you may have. Thank you.
[Operator Instructions] The first question is from Shravan Shah.
First is we've informed in the exchange that we have -- Board has approved the proposal to split the -- proposal for the acquisition of Cement, which is in NCLT. So -- and then in the opening remarks you mentioned in a couple of months, you will have more clarity, but still trying to understand the -- understanding in terms of the valuation, time line when it will be finalized or capacity existing and post the acquisition, what kind of a CapEx are we looking at, when we start seeing the revenue, profitability? Any color would be helpful, sir.
Yes. Mr. Shravan. I'm sure you -- as indicated earlier, [indiscernible] for us. So it is too soon for us to comment on the -- any of the questions that you have asked at this point of time. I'm sure you appreciate that position.
I understand, sir. But...
On the time lines -- on the time line, as indicated [indiscernible] the decision plan needs to be submitted before 18th of August. We should get all the clearances and all somewhere around end of September to early part of October. Now from whatever little diligence that we have done, it looks like it might need 3 months kind of maintenance-related issues before we could start. I mean, this is what I can only indicate at this point of time.
Okay. So in September, if we get a clarity and if we get the asset, then in after 3 months, the maintenance, we can start seeing the revenue flowing in. That's the -- how one should understand.
Yes. I think that's our internal understanding, sir. There is a likelihood that it should take 3 months max on get into the production now -- beginning the production.
Okay. And in terms of the size, the capacity would be 2.5...
That is 2.6 million with 1.8 million is the indicated part and capacity advice.
And the clinker is how much?
Clinker is 1.65 million.
1.65. Okay. Now coming to the operational aspects. So any change in terms of the first coming on the volume per se. So last time we said we are looking at 5 MTPA volume for this...
The outlook remains, as you have seen, even in June, we are very close to that. The outlook is, we took a realistic view, so it remains at 5, sir, for the current year.
Okay. So the incremental volume, as you mentioned last time, it would be from the new -- both the assets that would be the -- giving the group for this year?
Yes, sir.
Okay. Now coming on the pricing, and then I will ask on the costing. So pricing, if you help us in terms of -- it's good that we had a better realization this quarter on Q-o-Q front despite our channel tech, we are seeing a slightly lower growth. So in which states broadly, we -- how much increase we have seen? And now post the June, how do we see the pricing? Any correction we have witnessed? And what's the expectation?
Sir, the realization grew for us on a quarter-on-quarter it's 5%, sir. Fortunately, the realization did not move downward, though, unfortunately, it remains stable, and we did not cover the inflationary kind of input prices, but it remains stable. We believe that even in the current quarter, it might look in a simular kind of structure, though, we are expecting a marginal kind of an increase, but it is too soon. We are just done close to 20-odd days into this July month, sir. And as you know that this quarter, [indiscernible] good that it is raining well for an [indiscernible] the business, Mr. Shravan.
Okay. And now costing, sir particularly [indiscernible] costing. So broadly, how much of further are we expecting cost to increase this quarter? And also the second [indiscernible] coal prices given what we mentioned is a kind of a flattish and current price of imported coal, as mentioned in the presentation, is about 70% high versus our understanding is it has increased throughout April, May, June so far [indiscernible] your understand that?
Sir I think the prices were fluctuating, especially the pet coke has come down by 10%, though, it is at the middle to end of June month, sir, as you would have seen, yes, it dropped by 10%. But unfortunately, it moved from INR 7,000, INR 8,000-odd to INR 25,000 and came down and settled at INR 22,000 as we speak. The good news is that it is trending downwards. So by how much at all, it is too soon. So coming back [indiscernible], sir, though, we are not aggressively procured any of the imported coal. It looks like there is a small reduction, But I think what we have indicated is definitely not as far prices, but the average kind of consumption, kind of pricing is what we have taken. Spot prices have come down a bit. It again varies from place to place and the [indiscernible] Indonesia, Australia and South Africa. Domestic coal for us remained fairly stable, but the availability is a question. Because during the monsoon time, some of the mines get flooded. So it could probably take some more time, before it gets restored. Yet we have good on the stocks, so right now, yes, for the next couple of months, we do have the inventory, but during this quarter, we don't expect a major material movement. So we are good on even on clinker inventory as well as [indiscernible] inventory, sir.
So on total costing per se, for the second quarter...
We're expecting it to be flat, sir. We are expecting it to be flat.
Okay. That's good news that now we don't expect a further increase in the coal prices. Just...
One quarter, we can keep our account, beyond that again it is a challenge. But for the next quarter, we believe it is going to be flat for us.
Okay. Okay. A couple of data points. First, trade share for this quarter was how much?
65, sir.
Okay. It remained the same. And...
Our market mix and the product mix did not change to an extent. So it remains very stable, because we do have decent exposure into the Andhra government volumes.
Okay. As [indiscernible] on the date, as last time mentioned, that our net debt we were [indiscernible].
This debt is inclusive of the debt that we have borrowed for the acquisition. So if we remove, sir, it remains close to that number. The interest cost looks to be elevated at this point of time, but we are posting the interest cost, but once the [indiscernible] I think it will get capitalized. So that's the position for us. The net debt for -- excluding the potential acquisition, will still remain probably 800. That's what we have indicated, and the position remains fairly there.
[Operator Instructions] So in the meanwhile the question comes up, 1 question from my side, sir. Sir, in terms of coal inventory and current coal procurement from Singareni, what is the price that we are currently getting it at and what would be the inventory cost?
Yes. The -- inclusive of inventory cost, it is at INR 2 per 100 kcal, Manish. So that remains fairly stable there. The only variable in this is, again, if we have to go for a far-off mining, this thing, it would marginally go by maybe INR 0.01 to INR 0.04, but the average holding cost for us on the -- is sub INR 2 for every 100 kcal.
Right. Got it, sir. And sir, on the -- any comment on the Russian coal that is coming in -- has started coming in. It's almost 20% cheaper is what we understand. Is that coming on the [indiscernible]?
We have seen some of the coal hitting Vizag port, at least in our operational area. Yes, we have seen it is hovering anywhere between $165 to $170 on a landed -- on a ship basis to the port. Yes, it's definitely looks like it is discounted to the other coals. But we have not sourced any of that, because in our case, it would still be a lot more expensive than the domestic coal. So we are yet to try the Russian coal, Mr. Manish.
Got it. Got it, sir. The next question is from Sanjay Nandi.
Sir, just to mention, like we have inventory for like a couple of months going forward. So like the same pressure will be there for next months as well, sir? Because we are having a high-cost inventory of the coal. So the same thing will continue for the next quarter, right?
Yes, it would remain very similar, sir. Because our challenge is more on pet coke, because we are using 100% pet coke for our Madhya Pradesh plant. And we are using limited pet coke, though, we are using some pet coke at both Gudipadu and Mattampally, but it is limited. That is putting some pressure, but the domestic coal is fairly stable. So -- but during this quarter, the volumes may not be as high. So we should be good to tide over the situation. Given the scenario, we think that the cost should remain flat from Q1 and Q2 should be very, very similar, Mr. Sanjay.
So sir, if the -- like the price drop, which you can see from the pet coke and the international coal as well, like a 15% kind of drop from the peak. So what kind of benefit will be accruing, from which month that will be accruing, like in the Q3 or in Q4?
We typically average it out. So I think the real thing we should get from middle to end of Q3 onwards.
Middle to end of -- and the full thing will come from Q4 onwards, right, sir?
That's the assumption.
Okay. So what is the pricing scenario like? Like the prices have spiked a lot from that May thing to -- because -- obviously because of the monsoon things.
Right now, I can give you up to 15th of July pricing, sir. Bangalore prices have gone up by INR 5 to INR 10 per bag. Cement remained more or less flat, with -- for us it increased by INR 5. Sholapur remained flat. Pune remained flat. [ Bharampur ], there is a slight drop, not slightly, it is around INR 10 drop. Bhuvaneshwar is again a INR 10 drop. Coming back to Telangana, yes, it's more or less flat. Hyderabad, again, we have seen a INR 5 increase. North Coastal AP, that is Vizag, increase is around INR 5. Central Coastal, again, is a INR 5 increase. Rayalaseema, remained flat, sir. I mean this is what is our observation. Again, this is only into the 15 days we are talking of from June exit to 15 of July, sir.
Got it. Got it. And sir, what is the net debt standing in the books, is it INR 1,200 crores?
Yes, INR 1,290-odd crores is -- this includes the INR 500-odd crores that we have borrowed for the acquisition, Mr. Nandi.
Okay. So INR 1,290 crores is the net debt figure including...
Around INR 1,200 crores.
INR 1,200 crores.
Yes, INR 1, 208 crores.
INR 1,208 crores, right. It includes the INR 500 crores thing, which we have borrowed.
Yes.
Yes. Okay. Okay. Okay. Sir, what will the repayment structure going forward?
Sir, it's a long tenure debts is what we are sitting on them. So we have structured, but we would be very happy to share the tenure for each of the loan. We have multiple loans, sir. Each of them have their own tenure. But for us, it's a long-drawn kind of schedule.
The next question is from Sunny Agarwal.
Sir, I would have to understand slightly demand supply scenario from June to [indiscernible ] 15 , especially in the light of where the government is under pressure to, I mean, garner tax revenue, so they may curtail some CapEx at money? And on the other hand, guys like UltraTech, Adani, [indiscernible] Cement they have announced an aggressive expansion plan over the next 3 to 4 years. So just from a medium to long-term perspective if you can throw some light on demand and supply?
Sir, I think the cement demand for the short-term might look a bit challenging, though, it's still growing, but it's growing at mid- to low single-digit kind of number. But long-term looks promising, sir. So most of the announcements that are coming, I think they have to cater to the medium to long-term kind of demand. So our belief is it is still 24 to 28 months away. So by that time, we are more than hopeful that we should have completed the elections and would have been into the next running of it. Our past experiences, the demand shoots up a year, a year-and-a-half or 2 years before the election. So that's what most of us are up gearing for. And the medium-term to long-term looks promising, sir. Historically, the cement demand doubled every 10 years. So if it has to double in 10 years, I'm sure we'll be falling short of the capacity. So for some period, there could be optically looking like an excess kind of a supply, but we are reasonably confident that on a medium to long-term horizon, the gap should actually narrow down or the demand probably should shoot slightly ahead of supply. I'm talking about all India, sir. But if you look at some regions, especially South, I think for next 10 years, probably the supply is going to be more than the demand. But again, the problem with our sector is that we have a much higher name plate capacities, which could be true on the grinding. But the real clinker and the conversion factor would probably may not really as high as it looks, sir. So that might optically making people think that we are having too much of supply, but in reality, the gap may not be more than 10% to 15%, sir, as we speak, which we are more than hopeful that over a 5- to 10-year horizon, the gap should narrow down even to a low single digit is what we think. That's what probably is making the -- some of the sectorial players to invest and be prepared to handle that kind of a situation is what we strongly think Mr. Agarwal.
[Operator Instructions] We have the next question from Amit Srivastava.
I just wanted your thoughts on our new capacity new sales come up from Jeerabad and Jajpur. How is the ramp-up in terms of the volume as well as the profitability? Because if I look at the stand-alone number, the EBITDA portal is INR 650 crores plus, where the console is lower. So it's indicating that these units are not yet contributing in a full phase. So how we are looking at in our future after 6 months or 9 months once the -- actually ramp-up will happen in terms of the profitability? And what is the thought process over there if and it can happen in terms of profitability?
So as you have rightly said, the 2 assets are in ramp up phase. We're doing an average 40% capacity utilization, slightly more than 40% capacity utilization at Jeerabad. Yes, it's close to 46% capacity utilization at Jeerabad on the volume front. Yes, the -- on the technical side, the plant has touched 100% capacity utilization only during the second fortnight of June with the coal and everything -- thermal consumption and everything also getting on full-fledged. The full-fledged basically also were commissioned during the last week of June. So that should help us mitigate on the cost side. And once this off season is over, we are more than confident that the ramp-up at Jeerabad should be much faster than what we initially indicated or expected. Going to Jajpur, Jajpur just started, so the average capacity utilization is -- we are sub 10% as we speak. We were waiting for some of the approvals for some of the products. That is the composite cement and all. We just received the written permission from BIS for that particular product. So with all these approvals coming in, I think post this season, we are more than hopeful that we should reach to 35% to 40% capacity utilization in that particular asset. I think once these 2 assets slowly start getting back to normal, the real margin would start getting reflected. As you have rightly said, the standard on numbers are much higher. There has been a drag because unfortunately, these things did not ramp up in time, though, we have indicated that the ramp-up would take for the second half. Internally, we are hoping that it should have happened slightly below. But in the current year, we are more than hopeful that both the -- operations at both these assets should be stabilized and start contributing rather being a brand.
Yes. It's helpful, sir. Second, sir, just on a follow-up of 5 million tonnes, which you have guided. So there mostly we are taking at growth of incremental, whatever we are looking at is from the newer capacity ramp-up?
Yes, sir. I think we indicated even earlier, the 3.6 million, could and just become 3.7 million in the assets year and the rest around 1.3 million to 1.4 million has to come from those 2 assets. They are comfortably in a position to do that, Mr. Amit. So we don't see that as issue.
Yes. So if the South growth will be better, then we can get further upside on that.
But the issue as indicated, sir, being the industry player, if you look rationally and logically, there are some ramp ups and there are some commissioning that has happened in this region. Growth is in a low single digit in South. So it would be very unfair for us to assume that we will be growing when market itself is growing at a slower pace. So that's one of the reasons why we have clearly indicated that we expect it to be flat for the areas that we operate. And the incremental volume is coming from the places where we have just commissioned, sir. That it would be a bonus, which we are not expecting either way.
The next question is from Himanshu Yadav.
Could you just provide some comments on just pricing situation? I mean we understand that monsoon months is obviously, the demand is seasonally weak, but in terms of if we see some fuel cost reduction coming in or fuel prices decline, do you think these will be absorbed by the companies or players in the industry? I mean is there any -- are you seeing any pressure in terms of passing on those reduction in prices to the end user?
Yes. Mr. Himanshu, I think end users are getting the best of the benefit even at such a high inflationary kind of a thing. The realizations did not move up much. Now really come down, the realization will come down when the price is coming down, I think only time will tell. But our belief is, as you would have seen, the margins have actually come down by less than half of what normally, the industry has delivered. So it's a good function of time, sir, but we internally believe that the realization should go up for us to sustainably survive in this particular market. That's what we internally think. We strongly believe that it has move up to catch up with the inflationary kind of thing. Though the prices -- the input prices looks to come down, but as told you -- as told earlier, there were subs INR 7,000, INR 8,000 per tonne for each of the coal, sir. They are almost 3x more than what they used to be exactly a year back. So -- and they are coming down slowly. So there's a huge pressure on that. Till it normally stabilize, sir, I don't see further reduction in prices. We believe it has to move up for us to survive. That's what is our thinking and belief, and we seriously hope for that to happen.
The next question is from Shravan Shah.
Sir, 2, 3 things. First, in terms of the blended cement, slowly we are inching up, so now at 50%. So last time we said 60% that we are targeting. So that remains the same?
Yes, sir. Because as indicated earlier, sir, the ramp-up at Jajpur as well as Jeerabad should help us achieve that number, should help us achieve that number.
Okay. Second, I just wanted to understand this time, it's good that our lead distance has come down from 283-odd kilometer to 268 kilometers. But in terms of the freight cost per tonne has increased 3-odd percent. So is it fair to assume that the entire fuel cost increase has already there and now we can start seeing the slightly higher reduction in the freight cost per tonne?
Sir, we did indicate that objectively, we intend to be less than 300 and slowly inching towards 275. With the reduction of led distances, it's logical to assume that the overall freight cost should come down. But some of tollages and some of the transport contractors had to be -- we had to compensate for their overheads with this inflation pressure. What you're seeing is only the diesel price alone, sir, but there are other inflationary pressures even for them, for their manpower and the other tollage cost and everything is going up. We do expect the savings. But the bigger saving in our case is the strategically reducing the lead distances. That should be in proportionate that impacting. As long as fuel and other inflationary prices remain constant, we should see a saving. But at this point of time, the other inflationary costs other than fuel are also got adjusted. But we strongly feel think that if all the things remain stable, the freight cost should definitely come down for us.
Okay. Other thing is in terms of that this quarter, we have seen a significant increase in other income from INR 4-odd crores to INR 12 crores plus. So is it the extra bid that we have raised -- maybe have partially used as a treasury gain? So...
Sir, it's a mix of many things. But these are one-offs. These are one-offs. So these are not something, which you should factor. Yes, these are one-offs.
Okay. got it. Got it. And second, sir, a broader thought in terms of normally what our strategy is to keep on doubling the capacity.
Every 10 years.
Yes, every 10 years. So now with Andhra Cement would be there. So we would be 10-plus capacity. So what's the next plan? And when we...
Every 10 year is double, sir. Every 10 years is the earlier indicated was to become 10 million by 2025. And 20 million by 2035. Yes, that remains. That narration remains for us.
The next question is from Rajesh Ravi.
Could you share the regional breakup broadening sales in South, East and Central together and West, any broad percentage, because I just wanted to understand your realization from whatever assessment you have earlier discussed and shared. East market, you have seen strong pricing. West and South, the prices has been more flattish to a few markets have seen price improvement. So where is this 5% realization growth coming in from?
Mr. Rajesh, I will broadly tell you, but the real numbers...
Yes. broadly.
Our Telangana contributes close to 27%, sir. AP contributes 31%. Karnataka 6, Maharashtra 6, Tamil Nadu 12, Odisha 7, Madhya Pradesh 9 and other states remain at 1%, which broadly is in line with what we have done even during the last year same time sir as a percentage. Now specifically going to the realization, which moved up, yes, the Orissa is the only place and the other contributed quite significantly. The places where we were slightly negative were in Karnataka and Tamil Nadu, sir. Rest everything remained flat or positive. We have seen the 6% gain in Maharashtra. But what you should be mindful of this, Mr. Rajesh, is that it also has to do with the product mix change. Because [indiscernible] -- yes, there is a shift. The distances would have changed, the things would have altered. So broadly, I think we will be happy to share those specific details.
Sure, sure. It's more to add with the increase in share of trade, sorry blended cement sales.
No, no, blended cement typically might put downward pressure in terms of realization, margin could be flat or positive, but there have been some sale, higher sale in OTC in certain segments where the contribution would have been higher on the realization.
Okay.
And what you have to be mindful, sir, the AP government supply prices have gone up.
Okay.
It has gone up by INR 15 per bag.
Okay, so that is a major contribitor.
Yes, 1, 5. It is INR 15. But that alone is not, but that also did contribute.
Yes, yes, that also contributed okay. Okay. And second is in terms of the demand number, your assessment about 3 assessments indicates that South market is showing strong traction even if we look beyond FY '21 or '20...
Sir, the problem is not only demand, sir, the problem has been lacklustre demand. So it's on and off, that's actually hitting the pressure on the market. So whatever orders are coming to the market, once is it is not there [indiscernible] tend to pick up at whatever is the price. That indirectly is putting the pressure. So we don't see a big challenge with the demand as long as you see the [indiscernible] deal, because people expect to ramp up very fast, but it has been very stable. It has been very stable.
Okay. And sir, when you talk about subsidiaries, currently only these 2 are your subsidiary, right? The Jeerabad and Jajpur units?
Yes, sir.
And there is, both the Vizianagaram and the Bayyavaram were amalgamated?
No, Bayyavaram was obviously part of the asset.
Correct.
So the Gudipadu got merged last year.
Yes. Okay. So when we look stand-alone number, we are just excluding these 2 units?
Yes, sir.
Okay. Great, sir. So last question on the costing. While your presentation, you are saying that the sequential Q2 costs are much higher in terms of imported coal prices shooting up 70%-plus and all. You're still expecting your cost to be flattish Q-on-Q?
These are 2 things separate. Rajesh, we don't use imported coal at all. So that is impacting our cost [indiscernible] sir. We have just indicated the imported coal prices in general, but we are not using any of it Mr. Rajesh.
Okay. Okay. So because of your usage of pet coke and domestic coal, you are expecting...
Because there is some savings that we have already capturing, but it might be back ended, may not be in this quarter, but it's in subsequent quarter. We expect it to be flat. We don't -- we're not expecting it to move higher or come lower. We're expecting it to be flat.
Okay. And sir, 1 last question. These 2 new entities at EBITDA level and by what -- on what utilization you're expecting them to breakeven at least?
So it's a cumulated question, Mr. Rajesh. It has to do with the realization. Yes, so it is not just the utilization and all, but even realizations move up even at a lower capacity utilization, but our experience is that at Jeerabad even at 50% capacity utilization should help us be EBITDA positive. It should be close to around 40% capacity utilization. That's what if everything involves...
Okay. So Q4, you are expecting those numbers to be achieved?
We are hoping for that Mr. Rajesh.
Sir, the next question is from Tanesha on the chat. After some recovery seen in June '22, how has the demand been in July '22? Has there been any improvement? Also, if you could give some regional flavor?
Yes. Now the demand-related issue, it's a very seasonal issue, Mr. Manish. I'm sure you appreciate that. They cannot get month on a month for at least for this season. As seen, it's too soon, but if I have to compare it to June to first 15 days of this, July, yes, it definitely dropped, because the season is on. So as indicated, though, for the short-term, it looks difficult. But for the long-term, from an economic perspective, it looks very, very promising. Because the rains are much higher than normal is what they have indicated. And all the reservoirs are almost close to the full, a couple of months ahead of time. And that's a good sign for agriculture and the economy. But for the short-term, it looks challenging, because it started raining good 15 days to 20 days ahead of schedule. That is what is making the demand numbers look lower, but that's the season.
The next question is from Amit Murarka.
So just my question is again on power fuel. So from the slide, I can see the numbers are higher than the first quarter numbers. So just wanted to check like the understanding that was there is that the pet coke has come off like from a level of $250 to $220-odd. So why is the spot prices then showing higher than the prior quarter?
Yes, they are what they are, sir. We have not done anything. That's what we have indicated what the spot prices are. That's what we have indicated in our presentation. And our own consumption, sir, they are blended. You know that we do it on weighted average. They are trending down. But by the time the low-cost pet coke -- relatively low-cost pet coke would result, it would be middle to end of Q3 Mr. Amit.
Right. And does this cost that you indicate also include that 10% custom duties, is the landed cost...
It's all in landed cost at each of our sites.
Right, right. And I just missed breakup that you shared of revenue South states, the revenue...
I would share that with you, Mr. Amit. It's optical, so I'm sure it would be a challenge for me to read on, but would be more than happy to share those.
The next question is from Vincent Andrews.
Sorry. I was muted. I have only 1 question. The net debt currently it is at INR 1,290 crores. So what will be the repayment for this including the additional debt that you have taken for FY '23 and '24?
It will be very principal rate, close to INR 100 crores, Mr. Vincent, but it is such a rate for the next 7, 8 years, sir. So our net debt at this point of time is INR 1,208 crores that includes INR 500 crores of money that we have borrowed for the acquisition, Mr. Vincent.
Okay. So 1 more question. So for the Andhra Cement I just want to confirm. The clinker capacity is at 1.65 and landing capacities at 2.6, right?
Yes, sir. See, these are as indicated by the RP, sir, which of course, our people did do the technical. So it is at 1.65 million clinker, 1.8 million tonnes [indiscernible] for Andhra Pradesh.
Okay, okay. And out of INR 48 crores interest cost in this quarter, how much it will be getting capitalized post acquisition?
I think let me give you the precise numbers in due course of time and in offline. Yes, I believe we are expecting that this trend needs to continue for -- even for end of Q3. Once the asset -- the assets that we are targeting to acquire, then it will get capitalized, sir. At such time, I think this would exist in the book. I think close to around INR 50 crores would come from -- this additional borrowing of INR 500 crores for acquisition, Mr. Vincent.
Sir, a couple of questions from the chat box from Mr. Pradeep. What is the fuel mix, domestic coal and pet coke ratio?
Sir, it is 70, 30, sir. It is 70% domestic coal and 30% pet coke.
Sir, next question is from Nikhil Deshpande. Has the entire INR 500 crores acquisition debt fully drawn? And have you received the INR 350 crores from Premjee?
Yes, it's fully drawn, as far as the acquisition funding is concerned, and we received the entire INR 350 crores from Premjee for the equity participation. Yes, we did receive both.
The next question is from Keshav Lahoti.
Sir, your other expenses have decreased by INR 100 million in this quarter. I think it's more to do with the ramp-up of the new plants. So is it fair to assume now in this quarter, there is no one-off expense in other expense?
Sir, as you have rightly said, most of the ramp-up has already completed. Some of the one-off expenditure is pertaining to the legal, pertaining to the acquisitions and all. More or less, we have done with most of them. But even if they are, they shouldn't be very, very much.
Okay. One more question from my side. The fuel mix in Q2 will also be stable?
Yes, sir. I think we are more or less expecting. Yes, there could be a small change where the domestic coal could slightly come down. Pet coke could go up, because we are trying to manage the moisture. So typical pet coke could be a better choice. So we might see a slight increase in pet coke utilization, but by a few basis points only, sir. That could be shifting by few basis points.
The next question is from Shravan.
Sir, in terms of the CapEx, last time, you said it is only INR 30 crores. So that remains the same or...
That remains the same. That remains the same. The maintenance CapEx remains at INR 30 crores.
Okay. And just on the tax rate front, for the full year on the P&L front...
It should be MAT, sir.
Okay. So this is including the deferred tax, we are seeing or...
Yes, sir. It's inclusive, because with the margin of [indiscernible], I think we are back to the MAT and, yes.
The next question is from Harshit.
One question. On the [indiscernible] invent costing, we follow first in first out methodology?
We do the weighted average.
Okay. So the 30%, obviously, pet coke which you use, what is the price at this point of time?
Yes, it is INR 2.17 for the 100 kcal.
So our inventory cost and weighted average costs which we are having right now, it's largely same?
Yes. The shift -- only happened -- the reduction has only happened during the last fortnight or the last week of June. The real impact will be felt only as mentioned in the middle of the next quarter.
And sir, if I may ask how many months of coal, we -- how many months of fuel do we have carry as inventory?
At 100% capacity utilization, sir. We have domestic coal for 2 months and pet coke for around 45 days.
45 days.
We don't operate at 100%. So that would translate to months.
Got it. One more thing, if I may. So the 10 million tonne is something if [indiscernible] goes along with our plan and that 10 million tonne is something which I want to see their event in FY '23 end itself. So just want to understand that the INR 500 crore additional funds which we have, is that largely going to get consumed for this capacity or...
I think what you should look at is this money was earmarked for the acquisition, sir. So -- and that's the debt. Probably the best it could go up by another INR 100 crores more. And that should -- we should start reflecting at 10-plus million tonnes for close to INR 1,500-odd crores on the higher side. That includes working capital.
No, I didn't get the last part. So basically, we reach 10 million tonne by end of FY '23 itself and a large part of debt, which we have the INR 500 crores...
Basically, it's going to remain the same. We are already sitting on the debt for the potential acquisition. So that numbers would not change, but the capacity.
The next question is from Abhishek Lodhia. Is demand elastic to change in price, because we have seen higher volume at higher prices. So does lowering price help to push volume?
For these commodities influence on the overall cost of construction greenhouse or any other project is very, very limited. Historically, we have never seen higher price compressing the demand or vice versa. The lower price actual did. What we have seen is only at a very high inflationary kind of a pressure on the building material. Some small deferment is what we have seen. But we have never seen any correlation vis-a-vis to price -- price to demand, we have never seen any universal kind of a correlation or a cost correlation. We have never seen any of that in the past.
The next question is from Amit.
Just on the fuel sourcing bit, like, generally, I remember in the past, you mentioned that during monsoons, you generally raise your inventory holding and what you said that is, as of now, you would have 2 months of inventory. So is there a change in strategy?
No, we have not changed anything in our strategy Mr. Amit. Since the inflation has hit hard for last 3 quarters, we are not aggressively procuring it, because we always think that once you buy, the prices come down. Yes, it would impact. So we slowly have reduced from 6 months to 3 months now. What we have indicated is that 100% capacity utilization. So -- which we are not doing either way. So this actually is very close to 3.5 to 4 months of our fuel requirement. Yes, we did reduce it from 6 months to close to 4 months or 3.5 months that we have done, because of the very high cost and very volatile kind of pricing regime on those fuels. We would be very happy to revert back to that 6 months as soon as we see some stable kind of a pricing on the fuel side Mr. Amit.
Sure. That's understood. And also on Singareni, like given that the alternatives are so much more expensive, what kind of -- or what is the periodicity of this agreement you have with Singareni?
So these are FSAs which are long-term, but agreement needs to be entered every year. So everything is in place for us for the fuel supply.
Okay. But the pricing can be revised?
Pricing is dynamic. See the FSA is perpetual, only for the supply, sir. It has nothing to do with -- pricing is very dynamic. There is no argument for the price.
[Operator Instructions] As there are no further questions, I would now hand over the call to Mr. Reddy for his closing comments. Over to you, sir.
Yes. Yes, we would like to once again thank you for joining on the call. I hope you got all the answers you were looking for. Please feel free to contact our team at Sagar or CDR, should you need any further information or there are any further queries. We'll be more than happy to discuss them with you. Thank you, and have a good day. And thank you, Manish.
Thank you, sir. That concludes the call. You may now disconnect.