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Ladies and gentlemen, good day, and welcome to UltraTech Cement Limited Q4 FY '19 Earnings Conference Call. We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risk that the company faces. The company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent development, information or events or otherwise. UltraTech Cement reserves the right to block access to any media to whom an invitation is not sent. [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, sir.
Thank you, Sanford. Good evening, and a very warm welcome to this call for UltraTech's Q4, FY '19 results. Well actually, the Q4 results are out of the way, and I guess we can now focus on bigger thing that the country is experiencing. First and foremost, the elections. All eyes are on the results of general elections, which will set the tone for the country's growth and of course for the cement industry for the next 5 years. All I can say is I'm keeping my fingers crossed. Next big thing or an event unfolding is the monsoons. And there's a lot of confusion around monsoons. I think that that's nothing new in India. Initial news were that monsoon will be deficit, and subsequent announcements were made that monsoons will be normal. It clearly shows that the Met Department is as unpredictable as cement industry. Last year also, parts of the country had a dry spell, and there could be drought situation in some parts of the country this year as well. You may be aware that, in some regions, there were construction activities were banned due to acute water shortage last year. We'll have to wait and watch how the Met Department's forecast pans out this year. Forecast for this -- GDP for this year is also robust, upwards of 7%, and our belief is that the cement industry is back on track and will deliver a higher growth this year as well. Several questions has been raised about the source of cement demand. While institutional demand is clearly rising in the country, we are still a retail market. Affordable housing projects have started gaining momentum in several towns alongside the low-income housing program in the rural markets. Besides, the infrastructure demand continues to grow really strongly. Talking about demand, I should also touch upon the new supply situation. During last financial year, 12 million tonnes of capacity, mind you, only 12 million tonnes of capacity was commissioned, out of which, 4 million tonnes were added in quarter 1, 3 million in quarter 2, and 5 million in quarter 3. You all know that the cement plants take time to ramp up, and secondly, with the phasing of new capacity during the year, it does not seem to be too much of a challenge with the new cement demand growing at a pace much higher than the new capacities. For FY '19, thus the effective annual new capacity during the year was around 6 million tonnes only. Our estimate is that the annual demand for cement in the country is around 340 million tonnes. And the installed capacity, the main [ freight ] capacity is around 480 million tonnes. Out of this installed capacity, clearly, there are several plants which are not running optimally or shut down, giving us a lower effective available capacity in the country. We expect 15 million to 20 million tonnes of capacity to get commissioned during FY '20 staggered over the year, and incremental demand during this year will be around 20 million to 30 million tonnes. For FY '19, our numbers tell us that the industry will show a growth of about 13%. This is on the back of 9% to 10% growth recorded in FY '18, which had some economic reforms like GST and RERA and, prior to that, marginal or degrowth in FY '17 because of demonetization. Ladies and gentlemen, don't be surprised in FY '20 if it still delivers a reasonable growth. That should bring a smile to our face. Having spoken about demand and supply, let's understand the input cost scene. As was expected, we have had favorable cost conditions during this quarter. We expect the same trend to continue at least till H1, FY '20 for sure. Pet coke, which is nearly [ 14% ] of our total cost, has seen a reduction in the consumption price of about 7% sequentially. While imported pet coke prices were lower 16%, there was increase in domestic pet coke cost by about 4%. However, these days, the U.S. coal is as attractive as pet coke. So pet coke is not the stand-alone parameter for energy cost consumption. Diesel, which roughly contributes 9% of total costs and 35% of our logistics cost, has also seen a reduction of 6% to 7% sequentially, helping in our road transport costs. UltraTech has about 70% -- close to 70% of its logistics being moved by road network. Selling prices have seen an improvement in almost all the regions in the country driven by strong demand and improving regional capacity utilization. Having spoken about the macro environment about the cement industry, let me now tell you what we have been doing in the company. For the quarter, we have achieved a 4-digit EBITDA per tonne up from around 770 in the previous quarter. This was supported -- this was achieved with an improvement in selling prices, reduction in costs and strong volumes. Also, to our aid were our efficiency improvement program, which is continuously helping us deliver a sustainable reduced cost curve. Besides this, another factor is the accruing of synergies because of the acquisitions done recently in logistics, procurement and operating leverage. Talking about the acquisitions, let me tell you what has happened at Nathdwara Cement. We had completed the acquisition on 20th November 2018. The integration has been completed on a fast track. The operations have been stabilized and helping the company to further strengthen our presence in the north and west markets. Every month has been an improvement, and this quarter generated an operating EBITDA per tonne of INR 830. I have eliminated the one-time ramp-up legal cost and foreign currency devaluation gain, all of which have had an impact of about INR 160 per ton. Obviously, the March '19 exit performance is comforting and reassuring on our investment hypothesis. March '19, we had an exit capacity utilization of 72%. We are working on exiting the noncore businesses to reduce the overall costs of our acquisition and are hopeful to reach a conclusion before the end of FY '20. We have increased the use of pet coke and imported coal from a level -- nil level at the time of acquisition to more than 50% as we operate -- as of now. There is further a program in place to deliver a cost reduction of close to INR 50 per tonne, which should be delivered in the financial year FY '20. A very important aspect to note is that the DFC, the dedicated freight corridor, passes by very close to both these plants, which I hope will improve the dispatches dramatically. An important aspect has been the leverage position. And we are working on several initiatives to reduce our debt. The India business, which is today 94.8 million tonnes of capacity, had a peak debt of INR 19,563 crores in December '19 when we completed the acquisition. With a closing net debt of INR 17,594 crores, we have reached a net debt/EBITDA in India at 2.5x. Needless to mention, this net debt to EBITDA does not include the benefit of operations of Nathdwara Cement for a full year. We always focus on India net debt EBITDA because the overseas operations have a separate debt at a cost of 1.6%, and the debt amount is about INR 2,000 crores, and it's a self-funding debt. Consolidated debt, net debt to EBITDA for someone looking at -- for academic interest is 2.71x.On our sustainability agenda, I must tell you what has been happening in the company. We are now 2x water positive. This means that with our persistent efforts, we have developed sources of water through rainwater harvesting, creating reservoirs and fully secured the requirement of water supplies. As far as power supply is concerned for our 94.8 million tonnes of capacity in India, 1,100 megawatts of power is acquired, and we have fully invested in capital power plants. Not satisfied over there yet, we have now started investing in renewable energies. Today, we have 62 megawatts of effective renewable energy from solar and windmills. This accounts for around 1% of our total power requirement. However, there are additional programs in progress which will increase our effective renewable energy from solar and wind sources to about 10%. Added to that, there is WHRS. During FY '19, we have commissioned 26 megawatts of WHRS, taking our total WHRS capacity to 85 megawatts. There are 4 more investments in progress, which are expected to be completed in a phased manner by mid-FY '21, taking our WHRS capacity to 131 megawatts, which will account for about 12% of our current power requirement. Thus, WHRS and renewable energy through solar and wind will contribute in excess of 20% of green energy that UltraTech will then consume. We are very strong on our CSR initiatives as well. Around our network of more than 50 plants, we are touching the lives of 500 -- of people in 502 villages. And out of these, there are 38 model villages. What are these model villages? These villages have 100% children going to school, no girl dropouts from the education system, 100% immunization and employment for all. Well, this is what is our commitment to society. We should definitely look at our return on capital. UltraTech has been busy investing in the last 5 years. Our capital employed, which stood at 26 -- somewhere around INR 26,000 crores as at March '14 has more than doubled to nearly INR 55,000 crores as at March 2019. Headwinds of our investments have obviously impacted the return on capital, which you all are concerned about. However, having reached the 84%, 85% capacity utilization for last quarter, we have enough gunpowder in our system to meet the growing demand and improve the return on capital. I think we can sit back and relax and now enjoy the fruits of our investment in this up-cycle. I have told you before the best is yet to come from UltraTech, and before I open this session for questions, I think it will all be fair to say that all is well that ends well. Thank you, and have a good evening.
[Operator Instructions]
I think there are no questions.
We take the first question from the line of Sumangal Nevatia from Kotak Securities.
Congratulations on the strong results. First question, Atul, is with respect to Nathdwara volume and margin, if you could share some more detail what was the -- what was it during the quarter? And mainly, I just wanted to understand how it has captured in the stand-alone results versus consolidated?
So first and foremost, if you look at my presentation, Page 22 if I remember it right. Yes, so there we have shown you the results of stand-alone UltraTech as well as India operations. Now India operations includes -- the reason we are showing India operations separately is to add the Nadhwara Cement business along with it. So that will show you the picture of what domestic cement is all about. And we want to eliminate the difference between the 2 entities as far as the financial performance is concerned. Your question about what was the volume, about 9.85 lakh tonnes.
9.75.
9.75 lakh tonnes was the volume from Nathdwara Cement. However, again, that number is misleading because, month after month, we have been ramping up. Average capacity utilization for Nathdwara Cement for the quarter was 62%, 63%, whereas the exit month was 72%. It clearly shows things are on the northbound journey.
Understood. And in terms of further cost reduction, your presentation you said around INR 50, but given that volume has further scope for decent ramp-up in pet coke usage, et cetera, is INR 50 looking a bit conservative, or...
Good question. Next question.
Okay, just another thing on the cost deflation, what quantum of tailwind you think will 1Q and 1H also have? Or a large part of the lag on cost is already reflected in 4Q results?
I think it's all baked in 4Q. Crude, as you know, thanks to Mr. Trump, is not behaving very well. The -- for a lay consumer, also petrol prices have gone up marginally in the last few days. That is, I would say, a black hole. And the other biggest cost driver for cement industry is fuel. I think that is under control.
The next question is from the line of Jithin John from CLSA.
Good evening, this is Vivek. A few questions. First of all...
I have a question before you start, Vivek, for you. Why is it that a different name is used by CLSA, and that Mr. Vivek virtually comes to ask questions every time?
Take it off-line. Okay, my first on the -- on Nathdwara, so I just want to understand, for Slide number 22, but if you just look at stand-alone, can you just highlight, other than purchases, which other line item or any of the line items other than purchase is getting impacted because of Nathdwara on the cost side?
No. Logistics will be one way but one way only. So sorry, because the clinker movement that is taking place, if you were to count the logistics cost of that, that will get knocked off. Obviously, interest income -- interest paid by Nathdwara to UltraTech had to get adjusted. Other than that, let's say SG&A, manpower cost, fuel consumption is obviously direct. Manpower is direct. Marketing is all by UltraTech. So theoretically, there is no marketing overheads or marketing manpower. No, we have actually marketing manpower of Nathdwara on its Nathdwara books. So there is no overlap besides clinker, transfer and related logistics.
And just to get it right between Nathdwara and UltraTech, the clinker gets transferred -- gets sold to UltraTech stand-alone? Or it is the cement that gets sold?
There's two-way movement because of multiplant locations. So from UtraTech Cement, our plant, we can be transfer clinker to be, what is it, Neem Ka Thana grinding unit, from Nathdwara grinding -- Nathdwara integrated plant, we are capable -- we have been able to do -- is transfer it to Wanakbori in the Gujarat. So that is how logistic synergies will pan out for our network.
No, but if that is that case if you're transferring clinker from Nathdwara to UltraTech, then there will be obviously -- after that, there will be no output freight cost for the cement that you are selling and all that. Basically my limited point is INR 830 EBITDA per ton when you said Nathdwara is captured by entirely Nathdwara or a part of this is in UltraTech?
It's 100% in Nathdwara.
So is there anything over and above that UltraTech makes from this or no?
No, no. Vivek, to tell you. So let's call it our management reporting, INR 830 is the benefit which Nathdwara is generating or EBITDA which Nathdwara Cement is generating.
Okay. And any part of that Nathdwara operations, which, I mean, is any part of EBITDA getting captured at UltraTech stand-alone level or no?
No.
So UltraTech is selling its cement at almost 0 EBITDA?
Yes, that's why if you look at stand-alone results will not be correct because of which [indiscernible] not be benefit.
Okay. And which also means that the denominator that we are using in stand-alone, if we reduce it with Binani numbers, then whatever your EBITDA per tonne is almost touching INR 1,100 then at a stand-alone level?
Your math is as good as mine.
Okay, got it. There was another thing on Binani I wanted to ask you. Sorry, Nathdwara, Slide number 22. If we take -- if I -- because the problem is like Binani have given over here, it includes financial other income, right? So if I subtract the INR 2,406 crores minus INR 2,353 crores, I get INR 53 crores. Is that the -- which makes it around INR 540 EBITDA per tonne at Binani.
Vivek, you can take this question off-line with Ramesh. They will explain you the math because there is the other income [indiscernible] in the segment reporting, which has to be knocked off.
Okay, okay. I have a few questions on Nathdwara, I'll do that. One -- another bit is full axle load impact or benefit you have said is captured in the quarter, so there is not going to be anything else that we will see?
No. No. Nothing. Unless we are able to break the monopoly of the transport unions in Kerala and Himachal, there is nothing else left to be captured.
Okay, and that impact was through the quarter? I mean is there -- was it like back ended or...
It's very difficult to say. But I think it's evenly spread out.
Okay, evenly spread out. And last question if I may, again if I take your revenues, the win which you reported stand alone, your revenues of fourth quarter versus third quarter, and I take the unit realization, it shows almost flat trend as against 1% to 2% which you have highlighted in your PPT. What is the Delta? What am I getting wrong?
So, Vivek, I will [ still won't ] tell you the exact number, but there is an increase of 1% quarter-over-quarter on like-for-like basis.
Ramesh, I'll message you.
[indiscernible] the accounting reports have been knocking off certain expenses from the sales, et cetera, will never reflect the selling price -- the way the selling price prevails in the marketplace.
So is Nathdwara impacting this? Or there is an accounting thing which is impacting?
I would say it's purely accounting. And any balance sheet -- not just us, any balance sheet you will look at, assuming a cement bag is selling at $300 throughout the period into the volume will never give you the revenue number on the P&L.
The next question is from the line of Madhav Marda from Fidelity Investments.
One basic question I was just trying to understand that, in the previous quarter, if we see the commentary we were highlighting surplus capacity at the industry level, pricing being challenging, and demand was pretty strong that time as well. But just after a quarter, we're saying that industry is in up-cycle. I'm not able to understand where the industry is. Are we in an up-cycle? Or is there surplus industrial capacity? What's the...
Let me explain to you. First, between Q3 and Q4, I already referred to -- explained that in my commentary, we are like Met Department, right? So Meteorological Department will predict heavy rains and there might be no rains. So that was in the lighter rain, Madhav. However, up-cycle, what we refer to is in terms of demand, and that is -- there was no two doubts about it that the demand is bearish. Demand has always been bullish, and I have been bullish on cement demand, right, since the time -- pre-demonetization. It's only demonetization which put brakes. Otherwise if you go back and see the history of April to September '17 -- '16, April to September '16, the markets were -- cement demand had been started -- started to rise. So you are in the up-cycle ever since then. There have been roadblocks like RERA, like GST, which created a disruption, but the inherent growth exists. That is what is the up-cycle. Up-cycle -- again, I'll repeat from our perspective is volumes growing at well above GDP. That's the up-cycle.
Got it. And is the current level of utilization for the industry in the different regions of the country, is that good enough for a price up-cycle because my understanding personally is that an industry up-cycle corresponds to a price wherever EBITDA per tonne goes up? Am I missing something there? Is...
No. I think, we have seen regional capacity utilization improvements, which is now leading to the industry's ability to postpone the cost pressures. Last year, we were seeing capacity utilization improvements taking place, but the cost pressures were significantly higher. Now, I think that is what is happening. So in fact, Q4 if I look at Y-o-Y, the costs are still higher than Q4 last year. They are significantly down as compared to Q3. So there is a bit of a catch-up that needs to be done yet.
And are the current utilizations in your view sufficient for price above cost inflation sort of scenario for the Indian cement space?
You know one is current utilization and the pain that the cement industry has gone through in the last 2 years. I think so that the -- there is a strong chance of price improvements in FY '20 as well.
[Operator Instructions] The next question is from the line of Rakesh Vyas from HDFC Mutual Fund.
Can you just explain Slide 24, which is the operating EBITDA bridge? Because the numbers that I am seeing is very different from the numbers that are highlighted on the other slides on the mutual cost basis.
I don't know what your question is. Anyway, Ramesh will answer it.
So Slide 24, this per-tonne numbers are based on the blended volume, while the other cost slide is purely for gray cement, and this is why there is a difference between these 2 sets of numbers.
So when we are looking at energy cost reduction of INR 141 per tonne on the base which essentially would be on power and fuel cost around INR 1,100 is almost 13%. I think most of the cost items individually like pet coke, et cetera, has fallen by only 7%. So this is -- so what is leading to...
So this is why you will see the power and fuel cost where we have eliminated impact of increase, decrease in stock. And there is a reduction of 4% only from INR 1,105 per tonne to INR 1,057 per tonne. While on the Slide 24, it says it is on blended basis, and it is not adjusted for the increase/decrease in the stock. That's why this number is coming as INR 141 per ton.
So on a steady-state basis, which should be the number that we should look at?
So we should see that INR 1,057 per tonne that pure -- that energy cost on gray cement basis.
The next question is from the line of Gunjan P. from JPMorgan. Gunjan P. from JPMorgan. As there is no response, we take the next question from the line of Indrajit Agarwal from Goldman Sachs.
A couple of questions from my side. How are the current pricing versus the quarter average? Are they significantly higher or largely on similar levels?
I think the exit prices were higher because the price improvements have taken place during the quarter -- through the quarter.
Sure. That helps. And also secondly in terms of demand, what kind of, so I understand that your average demand that you're expecting, but in the first half, are you expecting because of elections and other factors a significant deceleration of demand in the near term?
No we are seeing that deceleration right now. April and May is not very encouraging. And this I would attribute largely to the movement getting restricted.
One last question, if I may. In one of your slides, you mentioned a PBT breakeven for Nathdwara by 4Q FY '20. What kind of utilizations are we building in for that?
85%, 86%.
The next question is from the line of Mihir Jhaveri from Avendus Capital.
Thank you, my questions have been answered.
The next question is from the line of Bhoomika Nair from IDFC Securities.
Congratulations on a great set of numbers. Sir, on Nathdwara, you mentioned that the EBITDA for the quarter was INR 830, but there is a onetime cost. So is it -- is there -- when I'm looking at the EBITDA number for -- on for India operations, it's actually including the onetime impact?
Sure.
Okay. So as we go ahead, it will reflect the INR 830 plus the INR 50 costs where efficiencies are showing?
Yes.
And that will take you to about INR 880 as...
That will take to INR 880. For sure that's the math. But it's on a 62% capacity utilization. As my capacity utilization goes up, there will be overhead absorption resulting into the benefits of leverage -- operating leverage.
Understood and that is what will narrow the gap between our existing EBITDA per tonne and...
Correct, correct, correct.
Understood. Understood. Sir, on -- while -- how was JP's assets, how has their EBITDA per tonne moved?
JP assets, these are also almost operating -- at a regional level, they are operating at par. We had a surprise in one of the plants, which is Bela MP, where we had to take a major shutdown. I think I had explained that in the last quarter results. Also the shutdown carried through in Jan also. It had carried through in Jan also, but now that plant is on track and delivering costs like any other plant. So we would start looking at April-June quarter for the JP-acquired assets also to operate at a [ 48 ] level.
Okay, and that would help in achieving the PBT breakeven?
Absolutely.
Okay, okay, and lastly, if I may just squeeze in a bookkeeping question on white and RMC revenues for the quarter and for the year?
White revenues INR 536 crores for this quarter as against INR 590 -- sorry, INR 591 crores, not INR 536. [indiscernible] white cement was INR 536, and RMC was INR 591 crores, sorry.
And if I could just get that for the full year as well, sir?
White cement [ will be similar ].
White cement like this...
White cement INR 1,900, and RMC is INR 2,100 crores.
The next question is from the line of Amit Murarka from Deutsche Bank.
Congratulations on a great result. Just a few questions now. Like firstly, what is now the status between -- like has a decision been taken whether part of the expansion is going ahead or you'll be doing...
No, not yet. Not yet. As we are now actually focusing on ramping up Nathdwara. Again as I mentioned, March capacity utilization was 72%. So there is enough material to sell before we commit capital.
Okay, and the Binani -- oh, sorry, Nathdwara expansion then is also kind of -- is still kind of not yet decided?
Not yet decided, no.
Okay, fine. And like, also just to be sure about it, the volumes that you have shared in the presentation is given as domestic volumes. All of it was also stand-alone volume, right?
So -- and Nathdwara volumes were 9.75 lakh tonnes, which is included in our total domestic volume of 20.46 million tonnes or 204.65 lakh tonnes.
Yes, and that's also a stand -- the stand-alone volumes basically?
What do you mean? No stand-alone will be this one? No, 194.9. So 194.9 is stand-alone -- 194.9 lakhs is stand-alone. Add to that, 9.75 lakh tonnes of Nathdwara and total domestic becomes 204 lakh tonnes.
No, what I meant was even the Nathdwara volumes have -- are there in your top line -- stand-alone top line because...
Yes, yes, in the stand-alone numbers, yes, you are right, sorry.
And in the presentation in the slide, it is written or shared that the pricing premium is being realized, so -- for Nathdwara. So is it not fully realized yet?
No, pricing premium is fully realized. The 2 things which are left out as of now is the cost improvement program, which will deliver improvement in margins and capacity utilization.
Okay, and can you also please share the trade/ nontrade kind of absolute numbers?
The trade we had improved to about 65% or 66% -- 66% in this quarter. And sorry, what did you ask?
Yes, that's it. And also the -- what is the blended cement percentage now?
65%
65%.
Okay, and will you be able to share the PPC TSC split in that?
Don't have it readily here. Can you call Ramesh and take it separately?
[Operator Instructions] The next question is from the line of Navin Sahadeo from Edelweiss.
Two questions, first is on this performance, if you could throw some light on the console front. Stand-alone you did explain, but how have the Nathdwara's overseas units done? And even are the other overseas [ ETS star ] volumes? So I just wanted to get a color on these volumes and performance.
Sure, so first and foremost, Navin, you were looking quite dapper on TV day before yesterday, I think, so...
Thank you.
So the Slide 23 which is consolidated, we have not included the performance of the acquired assets overseas because they have been classified as held for disposal. So the total revenues when you look at for Q4 INR 10,739 crores includes our existing UAE operations, India and domestic cement, which is UltraTech domestic and Nathdwara Cement sales. Does that help?
Okay, because I was referring to your recent corporate presentation in that the volumes given for the consolidated entity were more like 18.9. So if -- just the total console volumes for gray for the company if you can help?
But overseas volumes will -- it will add up to about 22.26 million tonnes.
Which includes the white cement and putty also.
And which is how much, [ Mahesh ]?
0.41.
Sorry? 0.41.
Yes.
Yes, so just to request. Atul, sir, heard that since as you said stand-alone -- looking at stand-alone numbers is increasingly not correct because of these interrelated -- I mean intercompany transactions, so it will be helpful if you can also like give these console volumes as well and some more color...
All right. So on the next presentation, we will add the volumes in. So these Page 22 and 23 will be a standard part of our disclosures. I will add the volume numbers also on top. And I welcome any suggestions anybody has to show more color and clarity in case there is -- I thought this was a good job done from our side to explain the numbers. But suggestions are most welcome. I will the add the volume on that, Navin.
And just my second question then was what's the...
No, we are not...
Okay, so second question is about this Bara clinker update. What's the time line there? I think the project...
So Bara is delayed. I expect June end to see light of day because, as part of the contract, JP Associates had been -- has taken a turnkey contract to execute the entire project and hand it over to us. You know the situation with them. There's a slight delay, but I expect that the grinding unit will get commissioned by June.
Clinker, sir, for this?
Oh, the clinker is available in plenty from our Sidhi plant in MP. It is [ 100 ] -- yes, and the other, which is [ Dala super ], so there are -- it's a complicated legal issue. Part of it has got resolved, which is awaiting clearance now from MoEF Delhi. I expect the clearances to come only after elections. And there is one leg, which needs to be completed about mines but we are not extremely worried about that because, once the plant gets cleared, we will start manufacturing clinker from that plant from the existing mines. So the clinker plant should also see light of day simultaneously along with Bara grinding unit getting commissioned.
The next question is from the line of Pulkit Patni from Goldman Sachs.
So 2 questions from my side. One, how much scope is there for further reduction in lead distances without incorporating Century in the fold? So within your existing portfolio of assets. That's question number one.
Yes, also, if you let me respond or I'll forget. Today, we are hovering around 400 kilometers of lead distance. And there is always an opportunity. So today is 400. It cannot be a static number. It could go up or down but hover around in a band of 395 to 405. There is always a possibility as we increase the ramp-up of Nathdwara for it to come down by 10 to 15 -- 10 kilometers max.
And, sir, and Nathdwara is largely catering to West India right now? Or is it catering to North India equally?
It's catering to North as well. It's catering to the Western Rajasthan, which -- where we had a wide situation from our suppliers.
Sure. Sir, secondly, what is the debt repayment that is scheduled in FY '20?
There's hardly anything. INR 500-odd crores. My colleague will give you exact number. So the biggest repayment comes up in FY '22 on the first leg of the JP acquisition borrowings.
INR 535 crores.
INR 535 crores is the repayment due in FY '20.
Okay, and FY '22 would be how much, sorry?
About INR 1,500 -- close to INR 1,500 crores. [indiscernible]. I don't want to give a wrong number. INR 1,535 is what I remember.
FY '22 is 22 [ this time around ].
FY '22, yes, when the big repayment is due.
INR 2,300 crores.
Sorry, I was grossly wrong. It's INR 2,300 crores.
The next question is from the line of Rajesh Lachhani from HSBC.
Sir, we have also heard there are some price hikes taken in the Northeast and central regions in April. So along with the exit rate in Q3 and this recent hike, can you just guide us to what could be the approximate realization level increase compared to the previous quarter?
Can't give price-sensitive information. No, but jokes apart, I don't want to give any forward-looking statements. I think that will have a bearing on the next quarter performance.
[indiscernible] Sir, so separately, so if I look at your balance sheet consolidated, and you have some assets held for disposal with assets with around INR 1,100 crores in it and liabilities at INR 500 crores. So can we assume the assets that are held for sale can get to INR 600 crores?
That's the ambition that we have set out for.
Understood. And sir, last one. So Century has been, I believe, has been delayed by 3 months. So earlier, we were expecting it to come in 1Q, now we are saying 2Q. So any reasons for the [ same ] and can we see further delay in that?
Elections is one reason because we haven't had the NCLT hearing yet. So until the NCLT hearing takes place, I'm not able to put my finger on what date we will able to complete the transaction. Now the process left is NCLT hearing, maybe 1 or 2 hearings, and award the NCLT order. That order gets filed with the mining department for mines transfer, and that completes the transaction. Mine department -- it's not just filing, but there are several approvals within the mines department that have to be taken, which will take at least a month to 45 days after the NCLT order is received.
The next question is from the line of Ashish Jain from Morgan Stanley.
He's not there. Let's go to next. Don't have time.
The next question is from the line of Ritesh Shah from Investec.
Congratulations on good set of numbers. Sir, my first question, sir, if you can give us some sense on the inventory at the system level and at the mid-level. I'm trying to understand pricing which you won't comment on, so I'm asking you indirectly.
Sorry. Asking about what?
Inventory. Inventory.
So channel inventory is never high, 2 to 3 days of channel inventory. And unless there is news about price increase happening, dealers come to know about it, they will pull in inventory pre-price-hike. Otherwise, it's a routine 2 to 3 days inventory anywhere in the country.
Okay. So it hasn't moved up post March end. It still remains at the very same, 2 to 3 days.
Yes. I guess so. It cannot move up because dealers will not take delivery.
Okay. Fair enough. And sir, second thing is you indicated on cost tailwind still first half. You did indicate about pet coke and crude and Trump. Sir, what gives us visibility for next 6 months? Have you already locked in pet coke contracts for delivery for next 6 months or thermal coal what you indicated?
One difference, pet coke and crude are commodities and Trump is a human being. So we have long-term prices at least until H1. That's where I was very confident in making my statement. And after that, we will see what happens.
Okay. And sir, lastly...
But the macro environment indications are that we don't expect fuel, coal and pet coke in any case to go up.
Okay. Okay. Sir, given the macro is so positive, you indicated on 12 million tonnes and 28 million tonnes incremental supply and demand. Sir, then why is the lead distance actually not coming down? One would expect this number to actually come down pretty sharply besides the trade/nontrade mix, which has been improving gradually.
Lead distance, we have seen it reducing from 450 to 400. That itself is a big reduction. And it cannot keep on reducing every time. So for us, for a network like ours, lead reduction will happen whenever a new plant, new location gets added to the network because the entire country, ultimately, will go through a reorganization from our distribution perspective. Otherwise, with capacity utilizations increasing, yes, we start selling closer to the plant, and that could see a lead reduction. However, I cannot ignore our customers sitting long distance.
Okay, fair enough. And sir, last question, you indicated on DFC, it could benefit the Nathdwara asset. Sir, how do you see the implication on a system-wide level for UltraTech, and at the system level, how will eastern and western DFC change things?
DFC will be a big benefit because the [ wagon ] availability will improve. Today, our rail is about 30% or less?
26%.
It's about 26% today. I have seen in the last 4 years rail network availability coming down from 30% to 35% to 26%. And long-distance movement obviously, rail is cheaper mode than road. So once DFC commissioning takes place, rake availabilities will improve, which will help us significantly.
The next question is from the line of [ Vaibahv Suchi ] from JPMorgan.
Gunjan, [ this side ]. Sorry about the issue earlier. I have 2 questions. Firstly on the CapEx, now there is no clarity on Pali and the UNCL expansion yet, so how should we look at CapEx for F '20?
So about -- anywhere between INR 1,500 crores to INR 2,000 crores would be the CapEx cash outflow in FY '20.
So this would essentially be maintenance and...
Maintenance of the bigger project which is going on is the Bicharpur coal block development. There is a bulk terminal that we are developing outside of Mumbai. And there are WHRS plants across 4 locations. As I mentioned, those are the bigger ones. And of course, another stand-alone expansion, which is the WallCare putty plant incidentally in Nathdwara district itself is taking place. Sorry, one more is Bara grinding unit, where CapEx is happening. These are the bigger projects. So to recap, there is Bara, Bicharpur, WHRS, [ bulk ] terminal and the WallCare putty plant. If I were to add them together, they would stack up to 1,000-plus. Just one second. Bicharpur 500 -- 7 -- spent 2370, 150, 150, 225 -- it's 225. So maybe...
INR 700 crores.
700. INR 700 crores will be attributable to these projects. Balance would be all maintenance cost.
Basically, I'm just trying to understand from an F '20 perspective, if you're not looking at any aggressive expansions inorganic or organic. Is it fair to assume that the lot of focus will be on deleveraging the balance sheet and optimizing the mix? Because clearly, we have gone lower on the trade side, and there will definitely be more synergies. So I'm just trying to understand what will be the focus from an F '20 perspective given you kind of now seem you're going to take pause on those expansions?
Deleverage. Deleverage. Deleverage.
Okay. Any target you have in mind in terms of net debt to EBITDA or which is where you want to get to?
Next target. Next haul, it will be definitely below 2x.
Got it. Second question is on this PBT breakeven for UNCL that you've mentioned. Now this PBT breakeven pertains to the debt that is there on UNCL subsidiary, which is...
Yes, on UNCL books as also, we will have a benefit of liquidating the noncore assets which are sitting on the UNCL books.
So that is INR 4,500 crores, right?
INR 2,700 crores is the debt on -- INR 2,700 crores plus INR 1,800. So you have INR 4,500 crores is the debt, yes.
So the PBT breakeven is 2 things from the perspective of this INR 4,500 crores.
Yes, absolutely. So this INR 4,500 crores would get knocked down. So we should look at Q4 number, not annual number. By Q4 next year, where we should be able to now -- by when we should be able to reduce leverage on account of selling all those noncore assets and improving profitability, which will give us a PBT breakeven.
Okay, and last question on this. Other expenses and ASP: Honestly, it's very difficult to see the ASP being flat Q-on-Q. And then I'm continuing to see that your other expenses are coming off whereas the scale of operations is meaningfully increased. So is there something which is structurally -- some efficiencies? Or it is something to do with accounting because other expenses has come off very meaningfully in the last couple of quarters?
It is bound to happen because it's clearly operating leverage advantage that one gets with additional capacities coming onstream. Expenses don't go up proportionately. A simple example I'll give you is TV spends, which are very expensive. The cost doesn't go up unless you increase the number of the time spent on TV. So...
Yes, but even absolute number is coming down despite you having consolidated such large M&As. So I'm just wondering, is there any accounting adjustment...
No, no compared to Q3, in Q4 the maintenance cost is very less.
Yes, sorry, yes.
The major difference between the Q3 to Q4 is the maintenance cost.
Maintenance cost, yes.
The next question is from the line of Anshuman Atri from PremjiInvest.
Congratulations on a strong performance. Sir, my question is regarding the ramp-up of EBITDA on Century. Sir, we have seen very sharp ramp-up on Binani, almost INR 500 on realization and INR 200 on cost. And Century is doing INR 500 of EBITDA. So within a quarter or 2 of consolidation, can we see INR 1,000 EBITDA from Century?
Very nice question. That's all I can say. I cannot give any guidance.
Okay, but is it -- it's feasible?
Yes, you are asking the same thing in a different manner.
Sir, secondly...
But obviously, our efforts will be to improve the performance from where they are.
Okay, sir. Sir, secondly on the north market. So the utilization is significantly higher as compared to other regions. And no new major capacities have been announced. So Pali versus Nathdwara, what would be a priority if...
Nathdwara.
And will it be expanded on the lines of Dhar in a year's time if we announce...
I'm sorry, I missed you, what?
The way we had announced -- we had expanded Dhar in 1 year's time.
Yes, now I think the team will get skinned alive if they don't deliver from here within 1 year.
The next question is from the line of Dheeresh Pathak from Goldman Sachs.
Sir, you mentioned INR 830 EBITDA for UNCL. How much would be captured in stand-alone?
None. None. It's -- everything is UNCL.
The next question is from the line of Ashish Jain from Morgan Stanley.
Sir, first congrats on a great set of numbers. Sir, firstly, this PBT breakeven that you're talking for Nathdwara, which is on a cash basis, I hope...
PBT is after depreciation. So cash basis, obviously, I would achieve earlier.
Okay, and sir, secondly this -- on other expenses, the point that you made earlier. So I understand this quarter had much lower maintenance expenses. But on a more on a run-rate basis, how should we think about the other expenses? Because that number -- because of the one-off in 3Q that dipped quite sharply this quarter. So on a more sustainable basis how...
April-June should replicate; again, July-September will be higher. July-September and October-December will be high because of our maintenance will be spread in those 2 quarters.
Sir, this quarter had any maintenance or it was like close to 0 kind of a number or -- this quarter had any maintenance at all or...?
This is always there. So when we talk about maintenance shutdown, which has to be a long 10-hour shutdown taken for, what -- yes, Krishna.
The small maintenance is going on but major shutdowns are not there in Q4.
And not in Q1 either that's what...
Hardly.
Yes, so shutdown or major maintenance when we call is when the kiln is taken for a shutdown for 5, 7, 10 or even 20 days. That's a major shutdown. So there can always be a breakdown for a day or for a few hours. That is routine operating cost.
Ladies and gentlemen, that was the last question. On behalf of UltraTech Cement, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.