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Ladies and gentlemen, good day, and welcome to the UltraTech Cement Limited Q1 FY'24 Earnings Conference Call. We must remind you that the discussion on today's call may include certain forward-looking statements and must, therefore, be viewed in conjunction with the risks that the company faces. The company assumes no responsibility to publicly amend, modify or revise any forward-looking statement on the basis of any subsequent development, information or events or otherwise. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Atul Daga, Executive Director and CFO of the company. Thank you, and over to you, Mr. Daga.
Thank you so much. Good evening, everyone, and welcome to the Q1 FY'24 earnings call for UltraTech. This is the third year in the running, seeing a high consumption of cement. Going by the positive movement seen in the first quarter, we are excited to see a double-digit growth in volumes this year as well.
You are aware of the erratic heavy monsoons that we have seen earlier on during the last couple of months, that has hit almost all the regions in the country, resulting in disruption in dispatches early on. But the good part is that the fear of [indiscernible] seems to be subsiding. Things are going well for our economy. FDI is gaining momentum; inflation seems to be under control; fuel costs for cement are on the decline; interest rates rate hikes have taken a pause; infrastructure in India is improving rapidly.
What I can quote -- as one of my friends said, Gods up there seem to be Indian. I want to share some more data points on road infra in particular. The government has given a directive to spend almost 80% of the budgeted allocation of INR 2.7 lakh crores by December '23. Almost INR 1 lakh crores has been spent by mid-June Balance spending of INR 1.2 lakh crores as was advised by the ministry or will be completed on schedule.
They want to achieve a speed of 40 kilometers per day of road construction this year. We'll most likely reach the targeted kilometer per day going by the speed at which the execution is taking place. This quarter was the highest road execution progress. Though new orders were less, but we don't get bogged down by slowing down of orders, which is to my mind, very temporary.
But it's not just a roads, it is the good infrastructure has a captivating effect on overall economic activity in the country and some index who participate in the growth story. Let's talk about our own work. We have commissioned 4.3 million tonnes of capacity till now beyond and going beyond June as well. And our cash flow seems in good shape.
These new capacities will further strengthen our presence in the Northeast and Western markets. As for our cash flows, after a cash spend of INR 1,796 crores on our ongoing capital in this quarter, we have further reduced our net debt by INR 233 crores, which I think is a fabulous achievement. We have completed the first phase of our expansion plan, which was announced in December '20, taking our all India capacity to 131.25 million tonnes.
During the course of various expansion programs, we have identified some debottlenecking opportunities, which will be completed during this year, giving us an incremental capacity of 4 million tonnes, that has spread in 4 or 5 locations as we complete these, we will keep on announcing that.
We expect -- as I mentioned, we should be able to complete all these programs within this financial year, taking our overall capacity from 131.25 million tonnes to 135.25 million tonnes in India. Another very important point to note is the improvement we have made in our clinker conversion factors, specifically included a chart in our presentation, an improvement of 0.04 will generate an additional volume on an annual basis of 3 million tonnes.
Let me now talk about our sustainability agenda, and we take it very seriously. We are fast-tracking our green energy program. For that, we are participating in a hybrid solar wind project of 648 megawatts taking our total renewable energy basket to 1.25 gigawatt by the -- when the program is completed. And also, we have -- we intend to increase the footprint of our WHRS to reach 425 megawatt strong the 232 megawatts that we ended Q1 FY'24 with.
These programs will be completed by the end of fiscal '26. And when all these projects are completed I'm happy to tell you that we have more than 60% of energy as green energy on our expanded base. WHRS accounting for more than 25% -- around 25% and renewable energy, which is solar and wind accounting for more than 35%.
Depending upon the prevailing cost structures at that point in time, it will still be a sustainable addition to our bottom line. Some -- two points which I want to bring to your notice more from a academic interest point of view. Firstly, on fuel prices. Today, Petco is trading around $115 per tonne after a short fling with $100 level for a very few days.
However, most of the time, the spot prices are for ship loading, which is 2 months hedged -- averaged 2 months later and give a 45- to 60-day shipping time, 10-odd days of inland movement and existing inventories of anywhere between 45 to 60 days, it gets into consumption, maybe around 5 or 6 months later from the date you are talking about the -- booking the contract.
Second important point to keep in mind is the moisture loss. For us, the landed cost is almost 10% higher on account of moisture losses, which is what we consume and what we report. Last quarter, on a net basis, our cost was $194 per metric tonne, which has reduced to $178 per metric tonne for this quarter.
Depending on the availability of pet coke, we keep on optimizing the [indiscernible] the quarter -- this quarter, pet coke was about 42%. Another point for your academic interest, we all -- this is about lead distance. At UltraTech, you would have heard our lead distance being more than 400 kilometers. To be precise, last quarter, we were at 410 kilometers.
But an important point to note is that this lead distance includes lead distance for movement of clinkers from the integrated plant to the grinding unit. More important to keep in mind is our ability to serve our customers. With the current network of our grinding units, bulk terminals across the country, more than 120,000 channel partners and a dense network of warehouses that we have, our lead distance from the point when cement is available to service the customer is only 270 kilometers.
This has come down from 281 kilometers last quarter. And I think this is a real lead distance for our customers. So we are practically able to serve any customer around the country within 300 kilometers of our [indiscernible]. And that's why I say we continue to lead by a mile. Thank you, ladies and gentlemen, and over to you for questions.
[Operator Instructions] Your first question is from the line of Amit Murarka from Axis Capital.
The first question is around the new tax regime now. So have you moved to the new tax regime for all entities like including Nathdwara?
Yes.
Okay. And on the fuel cost, like when the consumption cost was $178 in Q1 and spot you said $115. So by Q3, we should expect like assuming $115 continues, we should assume $115 to flow through by Q3, right?
Yes. So $115, if it's a price, you mark it up for moisture losses. So consumption will be $125 to $130. [indiscernible] $120, $125.
Okay. Understood. And what would it mean directionally for your [indiscernible] fuel cost that you were in rupees [indiscernible] or as a percentage?
2.34 was our [indiscernible] cost this quarter.
Okay. And assuming like pet coke of $115, like should it go down to like 1.7, 1.8, like $115 would be [indiscernible]
It is downward. I haven't done the math because the mix will also have a place here.
I would like to add, yes, [indiscernible] pet coke is also not too high because $115 to $125 happened within a weeks -- 10 days time. And as you all know, the availability of the pet coke is very limited, actually, and it's coming -- maybe a part of the pet coke is coming from U.S. So again, there is a time of -- cycle time of about 60 to 65. So it all depends on how much -- what kind of prices set out going forward.
Amit, to add further, it's a very dynamic situation. I had seen one data point and which I can share with everybody. The heat wave, which is going on in China and more parts of the Europe, the coal consumption is going up. Last year, China generated the highest ever power from its coal sources, and they are still consuming only captive coal. Our philosophy -- not philosophy, our hypothesis is that as and when China opens up and they will start importing sometime soon, costs may not remain at these levels.
Okay. Understood. Sure. And early on this [indiscernible] there is a ratio of 1.4x that you achieved, can we now expect like 1.5x, maybe a year, 1.5 years...
It will improve while not able to quantify, but it will improve further.
And also Infra is taking now blended cement?
Very miniscule.
Okay. Understood. And just the last one from me. Like you've already achieved 90% capacity utilization in Q1. Like as we gradually get into Q4, this is 3 quarters down the line, but commissioning, I believe mostly are happening later in '25 and on. So could that [indiscernible] some capacity tightness or unavailability of some capacity to [indiscernible]?
No, I think -- as I also mentioned, there will be surplus cement available from our increase in clinker conversion ratio, the debottlenecking, which will give me additional 4 million tonnes of capacity, and we will try and bring in some more capacity at a much faster pace as and when we are ready, we will let you guys know. But I don't think we will fall short of capacity. We will not lose a single customer.
We have the next question from the line Sumangal Nevatia from Kotak Securities.
The first question is, overall, I mean, a very strong growth in this quarter. If you could just share what is the sense what would have been the market growth and I believe it looks like we have gained market share. So in case you can add some regional color as to which region we have outperformed quite substantially versus peers or the industry?
I think we would have done pretty well across the country because again, 89%, 90% capacity utilization, which means average 85%-plus utilization in most markets, the only market like South where we are -- our base is small. So we would have a lesser impact as compared to that practically everywhere. We would have outperformed by a mile.
Okay. Sir, what would be the industry growth as [indiscernible]
Too early to comment. I would wait for some more results. But certainly, like last quarter, there would be a wide gap between us and the industry.
Okay. Given a Pan-India presence, 20% growth, in some region, we would have grown 15%, 18%, some 23%, 24%. So some regional color you can share?
I just told you, we have [indiscernible] capacity utilization everywhere. We are more than 85% capacity utilization. The bigger point is that the entire country -- all regions in the country, we've shared now South central, are seeing huge demand.
Okay. Got it. Sir, second question on the prices, I mean, do we expect the cost saving to drive margins? Or -- I mean, we are entering seasonally weak period. So should we -- how should we see margins shaping up over the next 1, 2 quarters, given some pressure on prices that we should see?
We have seen marginal [indiscernible] not to rejoice or party, but we have seen price increases in North and West. Some increases in the month of July South and East are still not showing traction in prices. But from our perspective, when we don't have capacity available, our efforts would be to service our customers who are paying the maximum price.
Got it. If I can just ask one more question. Overall growth for the next 5-odd years, if you look at last 10 years, inorganic has been a substantial part of our growth. But now we don't see our main participating in few ongoing acquisition opportunities. So is it that inorganic is largely behind us as far as growth is concerned in future next 3, 5 years should be largely dominated by organic. Is that the right way to think?
No, one or two places which you don't see our name that doesn't mean that you can say, Ultra is not interested. We evaluate opportunities. And of course, given the network that we have, by network I mean our physical plant network. Unless an opportunity is value-adding, value-adding from both growth and profitability, we will not deploy capital in those assets. And yes, we will keep growing. So if not inorganic, organic will lead the way.
Got it. Sir, in terms of market share, there is no constraint. I mean, we can still grow inorganically. There is...
Yes. Barring, I would imagine West -- not West, sorry, East where because the inorganic target sizes will be large, so we will be hitting some roadblocks in East. Barring that, I don't see a challenge anywhere in the country.
The next question is from the line of Pinakin Parekh from JPMorgan.
Yes. Sir, my first question is on pricing. Now earlier in the morning, one of your competitors highlighted that Eastern India, they have lost market share. And they want to prioritize volumes over there. Now Eastern is also seeing a lot of new capacity come through. So in terms of pricing, particularly for East India, what is the company's outlook for the same -- for the remainder of the year?
I think we have mentioned earlier also East with given -- given the kind of growth that Eastern markets have and the new capacities coming in, each will continue to remain very tight market in terms of prices.
Understood. Sir, my second question is that I'm just trying to understand the energy cost [indiscernible] better. Slide mentioned $178 as the consumption cost in Q1, which, at today's pet coke prices, works out to around $125, that's a broad 30% decline. Now pet coke is broadly 40% to 50% in terms of the overall energy basket. If pet coke prices were to sustain at today's level for the remainder of FY'24, should we assume a 30% energy cost decline? Or will the overall energy cost decline be lower than this headline pet coke cost decline because of the other fuel?
Yes. So it all -- if everything remains status quo, and let's say, today, pet coke prices are at $125 and that prevails throughout then, obviously, you would see it translating into a 20% to 30% decline in energy costs. Again, Pinakin, now talking -- I tried to explain the math around it. Spot means 2 months forward loading, blah, blah, blah. So today's spot, which is what July end, will come into consumption only by January. So that's how the math stack up.
We have the next question from the line of Prateek Kumar from Jefferies.
Maybe, sir, my first question is on your recent flow around some change in simple dynamic [indiscernible] required for component cement and this -- also there is on passing on LC3 as an acceptable product.
You are not very clear and audible. Can you speak a little louder?
Yes, is it audible now?
Yes, better.
Yes. So I was asking regarding recent change in regulation or modification regulation on composite cement and then acceptance of LC3 as a product, how does that impact industry and us?
So we are growing big in composite cement. Now composite cement requires 45% clinker. There are some players who are doing much lower clinker, which they will get impacted negatively. We have started with 45% clinker. So we are pretty bullish about it. Composite cement is getting very well accepted in the market. there's one reason why -- one of the factors driving our improvement in our clinker factor. Also, competition is still not settled down across the country. So as it settles down, you could see a further improvement in clinker factor.
Coming to the LC3 Cement, I think it's a long story because on that -- as of now there is identified large deposits where the cement plant can be set up based on the LC3 deposits actually. And obviously, it requires a real high investment compared to the normal conventional cement plant. So yes, it is good for future, but I don't think anything is like...
4, 5 years, 7 year?
So you might not see anything Pinakin for the next 4, 5 years.
Sure. And the second question on other expense. So there were increase in other expense, 4% to 5% on a quarter-to-quarter basis. while volumes were actually lower. So is there any one-off expense which was part of this quarter and was not part of last quarter?
Advertisements were a bit higher. Anything else? So Q4 maintenance was lower and this quarter, the advertisement and maintenance costs were higher. So nothing -- no one-offs. These are routine expenses.
On freight expense, you mentioned in PPT that had an impact because of the cyclone and less profit. So is that only which isn't for increase on a Q-on-Q basis?
Yes, yes, yes. That was one-off impact I will defer though I would not have been there, we would have robbed the market with another 30 million tonnes of sales.
The next question is from the line of Ashish Jain from Macquarie.
Sir, my first question is...
Sorry to interrupt sir, but the line for you is not loud enough. If you could please use the handset and speak closer to the mic, it would help.
Is it better now?
Ashish, you're not very clear. There's a lot of static noise.
The next question is from the line of Indrajit from CLSA.
Few questions from my side. We have reduced our usage of pet coke. Is it just because of availability or on landed basis, coal is now steeper than pet coke for us?
Availability. So on landed basis pet coke is far cheaper in energy terms, which is [indiscernible] it is more about the availability of pet coke.
And what would have been our alternate fuel usage in this quarter?
Not sure how much. 5%.
And how do you see that progressing?
So yes, we have taken a target to grow up to 9% to 10% by the end of next fiscal year. Lot of investment was required, which we have taken up in this financial year, close to INR 250 crores. Yes, close to INR 250 crores of investment is happening in this financial year for shredders and clearing systems, handling systems for alternate share. And accordingly, we are tying up also for alternate share. And if we look at it in volume terms, it's more than 1 million -- more than 1.2 million tonnes of alternate fuel that we are already handling on an annual basis, that's huge volume. But anyway, as a percentage it is what it is, so.
No, that makes sense. And given that we have now embarked on a small form and debottlenecking, any change in our CapEx plan? Or what would be...
We do not have too much of CapEx. So it's all within my CapEx plan.
Next question is from the line of Satyadeep Jain from AMBIT Capital.
A couple of questions. One on the entire renewable energy next just want to understand good [indiscernible], I know this is a subsidiary would be the growth of UltraTech be putting capital to this or will you buy it from outside? And based on where we are, what is the cost difference between the power reduction in renewable assets versus your own CPP. I'm not sure these were CPP or debt. So any difference in [indiscernible]?
Yes, yes. So first and foremost, we will do a group captive scheme. So we have to participate with about INR 297 crores of equity into the SPV. And the second question that you asked was about pricing, so effectively and because we are supplying power to multiple states, average cost -- our landed cost? Average landed cost because there are transmission losses, open access charges, average landed cost would be around INR 5.25 per unit. As compared to that, the cost of power currently would be around INR 8 -- INR 7 to INR 8 per unit.
INR 7 to INR 8 is both CPP and [indiscernible]
Yes, I'm talking about average cost of power for our individual units.
And secondly, on the capacity expansion, one of the peers have talked about accelerating their target that they had earlier the capacity [indiscernible] also mentioned some time back a 200 million target figure. Now that you have visibility for the next couple of years. Would you also look to accelerate given multi-volume growth, market share gain to start date beyond the current one that you have?
No. So, as we mentioned, we are reaching 155 plus more, let's say, 159 already. And we will announce perhaps this -- maybe if not September -- June quarter, September quarter or December quarter is short, our next phase of growth, which will take us further up from 155 upwards. So we are not going by what peers are doing. We are -- game plan is very clear. We see India as a growth market, and we are investing behind growth.
We have the next question from the line of Sanjay Nandi from VT Capital.
Congratulations on good set of numbers. Sir, can you please guide us what kind of drop in the like pet coke prices we can visualize in the coming quarters? Just a kind of guidance.
Very difficult, very difficult. If you can tell me what the index will be 2 days and I will tell you what our price is. Can you? To be honest, it's very volatile. Within 10 days, the prices have galloped up from $110 to $125, which can come down also, it can go upwards. So I have no idea.
The next question is from the line of Amit Murarka from Axis Capital.
Again. So on this next phase of expansion, like the last 2 phases that you've announced, you've seen that the CapEx cost per tonne has been quite low at $65, $70 per tonne on an average. Is it fair to say that the next phase of expansion could be like more greenfield and therefore, the cost could be a bit higher?
No. We will -- because it will be continue remain a mix. And if I look at my next phase -- which one will it be? So I think -- I was just doing a mental math on what is happening. So it will still be a mix of green and brown and cost will be very competitive.
Got it. Got it. And I think earlier, you had mentioned that you have a target of 200 million tonne capacity, of which you are ready for 185 million tonnes. So like that numbers still hold for the potential...
Absolutely, absolutely, bang on. So we will clearly by 2030, we will surely 2020 -- anywhere between '20 to '30, we will reach a 200 million tonne mark. And as I mentioned, the blueprint of our next phase of growth. Phase 3, if I were to call it is almost ready. If you go to our Board, perhaps next quarter, we are giving it final touches. Hopefully, it closes our board next quarter and I can announce in next quarter.
Got it. It's helpful. And also on Super Dalla, is there any update or time line for the arbitration?
Arbitrations never have time lines, it can go on for pretty long.
Okay. Understood. And lastly, on the FY'24 CapEx, like can you just have a refresh on that number? Or do you guys give CapEx guidance?
It will be anywhere between INR 6,000 cores, INR 7,000 crores.
The next question is from the line of Pulkit Patni from Goldman Sachs.
So you had to explain some time back how we are running at high capacity utilization and we would endeavor not to lose out on customers, and that's not a bad problem to have if the demand is so strong. Now given the fact that you are at such high capacity utilization, can you give a 12- to 18-month roadmap of how prices are going to head? I understand it's difficult to predict in the near term, but any sense on....
We will send them Pulkit. So the undercurrent, if I can be standard. The undercurrent in the heavy monsoon months we have seen price increases happening, which it is never heard of. [Foreign Language]. It's INR 2, INR 3 or INR 5 increases have happened in certain geographies and they are sticking. So which is good enough. That's what I'm saying the undercurrent is very strong. And you're talking about 18 months, I'm talking about 9 months. January, March will '24 new election, new capacities available, we will ramp up and we're bringing them more capacity. I already told you about 4 million tonnes coming in this year, some more capacity, we are working break next week, we might try and commission some of our capacities earlier. Markets will be very strong, which will entail price improvements.
Got it. Let's hope for that.
Don't hope. I am telling it's going to happen.
Okay. That's reassuring. My second question is, if I look at your presentation, is it fair that this quarter, you've seen the trade has grown faster than non-trade?
I don't know how you are saying that.
26% growth, I think, non-trade.
Yes, yes. So I mentioned that statement. I'll give you one additional data point that rural markets -- yes, trade market -- rural is 65% of trade, and that is growing at 24%. So yes, trade is growing at a much faster pace. We should catch up.
The next question is from the line of Ashish Jain from Macquarie.
Sir, my first question is on the fiscal '26 green power number that you gave of 1,200 megawatts. So that 60% that you said is not on operational basis, right? That is more on your capacity share, I think? And...
I didn't understand, so you see on -- if I am consuming 1,000 -- require 1,000 megawatts of power, I will have 50% as green power.
Okay. Based upon this 1.2 gigawatt that you said you...
We will reach 1.2 gigawatt of renewable energy and 425 megawatts of WHRS. Both are green. As for 155 million tonne, how much power is required? About 1,200 megawatts of power will be required. So 720 megawatts will be green energy. That way highly remunerative. Nobody asked a question, which is very good. but, yes.
And sir, secondly, in terms of CapEx, what is the CapEx we will need? Is it just the INR 300 crores that you set the equity investment or...
Yes, that will be our participation.
Sir, secondly, in terms of growth on clinker, are we operating close to 100% utilization now given you on cement cases itself, you are at 90% for the quarter. So can you give some sense of our clinker utilization?
It's more than 90% for sure. Actually it is more than 90%.
Got it, sir. Sir, lastly, on power, I just wanted to ask like given our view on power, are we today heavily booking pet coke at the prices available given it is clearly attractive pricing? Or we are still speaking to whatever strategy we have in terms of booking...
No, we are also dynamic. I have increased my inventories. March quarter, we were -- at the end of March quarter, we were 38 days of stock. Today, we are at 58 days of -- we ended the quarter with 58 days of stock. So we are -- because as I mentioned, if you heard me about China, I still feel China might start importing. So prices could rise in the near future.
And sir, for the balance, the 58% of our fuel outside Pet coke, what is the price trend there? Because I think that is mostly imported coal, right? Or is it -- apart from...
Maximum is imported coal. We also have our FSA, which is the linkage coal, but maximum is imported coal. So if I were to look at percentages then 1 second. So 46% is imported coal, 7% indigenous coal, 42% Pet coke, 5% alternate fuel and lignite.
The next question is from the line of Shravan Shah from Dolat Capital.
Most of the question has been answered. Just a couple of things. So,first, in terms of the WHRS so currently 232 and we say INR 425 by FY '26, so by FY '24 or by FY '25, if you can help us how much more we will be adding...
We will have -- By FY '24, we'll reach 300 and I think between '25 and '26, the remaining obviously.
Okay. And same way in terms of the solar and other.
So maximum will come by end of '25.
Sorry, sir, by end of FY '24how much more...
By end of '24, which project, there is maybe 100 megawatts more is in pipeline yes, 60 to 100 megawatts is in pipeline before March '24.
Okay. And for this WHRS, so when we say INR 6,000 crores, INR 7,000 crores CapEx for this year and next year also, I believe, this also improves the CapEx for the WHRS?
Yes, absolutely. It includes my expansion CapEx, modernization, routine CapEx, WHRS CapEx, order and fuel and everything.
Okay. Okay. And sir, when you say we are looking at digit volume growth. So is it fair to say that it should be middle -- mid-teen kind of number that 1 can look at?
I will comment not on that. So I'm already giving you guidance that industry will definitely see more than 10%.
Okay. But in terms of the -- considering the broader cost savings, including the lead distance reduction and everything, on broadly and plus now the power and fuel. So broadly on -- from now onwards, we should be seeing improvement in EBITDA per tonne on Q-o-Q basis?
Yes.Most certainly. Q2 I hope, in spite of monsoon, maintenance costs, I think we should do well.
Okay. But this quarter till now -- since June in terms of the blended realization for us. Still, we haven't -- you mentioned that we have seen a INR 2, INR 5 hike in some places. But on the overall blended basis, until now, we haven't seen any decline in prices for us.
No decline.
The next question is from the line of Navin Sahadeo from ICICI Securities.
Yes, can't hear you.
Sir, the current participant seems to have dropped from the question queue. The next question from the line of Raghav Maheshwari from Asian Markets.
Sir, can you please break down the 640 renewal power into the -- what is the first what kind of the solar and wind power in this?
200 is wind and 400 days solar, if I remember it right. Just give me 1 minute, I'll tell you. If you have any other questions, then I can come back and tell you this.
Yes, sir. Sure. Sir, what is the blended mix for this renewal power at a blended level for this 648 megawatts we are looking for PLS generation for this, particularly [indiscernible]
40%, 45%. [Foreign Language] 200-megawatt is -- wind is 368 solar is 260.
Okay. And sir, last question is from my side for the next 1 and 2 years, where we are seeing the heavy infrastructure demand primarily in the non-trade in the OPC segments. How will you see the price difference between the trade and non-trade versus PPC, OPC? Primarily non-trade and trade.
[indiscernible]
Any chance you will see for the gap reduced between the non-trade and trade further?
Trade prices will go up, yes. Non-trade is already high. The trade prices will go up.
Okay. No further increase in the non-trade is it difficult? Prices in the non-trade?
No, I don't really know that. It all is dependent upon how the projects are coming up and how we can negotiate. Obviously, aim will be to realize more.
Next question is from the line of [indiscernible] Gupta from Nirmal Bank.
Thank you for a good set of numbers. I only had 1 primary question to ask that to see reduce on a lead distance? Could there be a saving which could have been reflected this quarter, Second is we do have a benefit in terms of the clinker conversion because I've seen your presentation to something like 1.44. So while I was expecting that the fuel mix will impact the reduction of the cost will actually be reflected in this quarter. But apparently, it's not to the extent that were expected even at the price has gone by INR 100 per tonne, the impact of the fuel reduction would have offset the reduction in the prices. So and second quarter, obviously, you are saying that we will see improvement in the better per tonne. So what was the tall factors will actually contribute in the improvement of EBITDA per tonne?
So first question was about lead distance. The benefit that we accrue because of efficiency improvement are eroded by the busy season surcharge was won? And any [indiscernible] that was one major item because business premium surcharge kicked in eating our most of the improvement.
Is it -- are we now having a railroad like say 70-30, I'm sorry, correct me if I'm wrong and lead distance surcharge has earlier, it used to be on a seasonal basis, but it's now full year round the year.
It is full year. Yes.
So will that actually -- I mean, will that not be negated, I mean like this must have been factored in the freight costs.
No, this adds on to my 30% row, and it's pretty high, I think, INR 9 -- 30% rail, sorry. On the 30% rail network that adds on to my overall cost, which negate the benefit that we are able to achieve on efficiency improvement. Actually, crude prices or diesel prices have not hardened over last quarter. Your last question is I remember was about there will be -- what will be the drivers for profitability improvement. Of course, other than prices, you will have the benefit of fuel price reduction logistics cost improvement and the increasing green energy share, which has my bottom line.
So will that really reflect in the second quarter number despite...
No, not second quarter. See, the green energy projects are coming up by FY '25. The big projects, which we spoke about on this call will come up by June '25. That is where it will reflect second quarter or third -- second quarter, I would not want to comment because its rain. Third quarter, you will see the benefit of improvement in prices followed by fuel price gain. Logistics, if there are some other levies, which taken or enter, logistics will also drive home the benefit.
Prices I believe, have been actually dampened by a lot of B and C players actually supplying movement of a lot of cement across the region. So I -- I mean, I'm sure you are that positive about the price improvement after facilities. I'm sure there will be some improvement in the price.
Yes, yes.
And I don't think that will be more than INR 5 per bag If at all that happens.
If it is INR 5 per bag on 100 million tonnes, we are selling 2,000 crores bags -- 200 crores bags, so that's a huge amount of money.
But anyway, that will be negated by no improvement in your cost because if you can say that the green power will actually come by FY'25.
This big project of 648-megawatt will commission by June '25. There are several small projects which are getting commissioned during -- as I said about 100 megawatts is another project, multiple -- small, small projects, which are coming in during this year.
So effectively, we will not see much gain coming from the fuel price impact. I mean, just that my calculation on the composition where, as you said, I have something like 46% on the pet coke side, 35% -- 85% on the AFR, but it looks like there is no improvement assets that we'll be seeing in the third quarter on the fuel side, isn't it?
If you we will see an improvement in fuel. We will see an improvement in fuel because of U.S. Fuel prices or the power and fuel chart that you see will be a declining chart in UltraTech.
Yes, because power I believe -- I mean, if I take a 70 unit and ass 6.5, if it goes steadily decreases by in 30 paisa, 40 paisa somewhere there should be, again, significant gain of [indiscernible]
Absolutely.
The next question is from the line of [ Uttam Kumar Srimal ] from Axis Securities Limited.
Sir, my question pertains to your RMC business. This quarter, we have grown by 37%. So this growth will continue for the remainder of the year?
I hope so. And I think it will.
Okay. And sir, how much currently [indiscernible] were operating? And what would be our target for addition of RMC plug in next 2 years?
232 plants are in operation. We hope to reach a milestone of about 300-plus plants by the end of this year, yes.
The next question is from the line of Navin Sahadeo from ICICI Securities.
Am I audible now?
Yes, please.
Sir, a couple of questions. One, on the debottlenecking of 4 million tonnes. So is that got to do with the increase in blending ratio that gives an opportunity or we are having a committed clinker debottlenecking of roughly around 3 or I mean, around 2.5 tonnes, 3 million tonnes, which will help get those volumes?
We have sufficient clinker Navin and these 4 million tonnes is grinding. These are all grinding capacity.
Okay. Primarily, so this debottlenecking is largely on the grinding side.
Grinding, yes.
Okay. Then the other thing I just wanted to ask was about this other operating income. I see in this quarter, it has gone up by almost INR 92 crores on a sequential basis. So just wanted to get some color if there any more booking of incentives that has happened this quarter? Or is it [indiscernible]?
[indiscernible] there is nothing on income tax. There's no abnormal incentive -- one second, my colleague is just checking on it [indiscernible] Pali as a unit started getting its incentive, but that is INR 14 crores or something. That was only INR 14 crores. Operating I think. Nothing. So it's volume linked, maybe I don't really have an answer.
Sure, sure. I just wanted to get a sense because...
No, there is nothing abnormal, nothing abnormal.
Sure. I was just seeing that March volumes were higher and June was sequentially a little lower, but [indiscernible].
Lower that, nothing that comes to my mind which is abnormal, but I will just get the team to double check and Ankit will revert to you directly.
Sure. Sir, just one last bit you said pricing, of course, is healthy in current markets, in fact in some markets you said have seen an increase. So -- and the expected fuel cost benefits, demand continues to grow. So very broadly for an exit FY '24 Q4, like in last quarter of this fiscal, the EBITDA per tonne that we could look at should be -- would you guide something like 1,400, 1,500, kind of a number for that March quarter, of course, things remaining same, the pricing and cost and everything?
No. Everything remaining same, it will improve. I will not guide to a number, but it will be significantly higher from this quarter. Navin, the point is everything remaining equal -- And it's not a static world.
Yes, yes. Of course, I understand that. But like I said you mean.
Things are looking are positive. That's the most important element. I think, Navin, my colleague clarified it's generally incentives, which have started kicking in the other operating income that you were asking..
Sure. So from an annualized -- so let's say from a quarterly run rate INR 200 crores of run rate going ahead?
Should be possible according to this.
Sure. And just one last bit, if I may [indiscernible] You said pricing, of course, in current environment with demand being strong is, of course, looking good and it should pick up coming quarters. But next year, which is like after the elections next year, typically demand may get a little soft like it happened in FY'20 that FY'19 saw a 13% plus kind of a growth, but 20% was just flat. So that happens even in that scenario, would you be confident on pricing? Or it's too hard to talk about?
It's too hard to talk about, but yes, I think the market generally suffering also for a few months after elections.
Ladies and gentlemen, we will take that as the last question. On behalf of UltraTech Cement, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Thank you so much.