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Ladies and gentlemen, good day, and welcome to the UltraTech Cement Limited Q4 FY '21 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 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, Faizan. Good morning, and welcome, ladies and gentlemen, to UltraTech Cement's earnings call for Q4 FY '21. I thank everybody for joining in. And I hope and pray that you, your family and friends are all safe from COVID. The second wave is hitting our country badly, and we are seeing cases all around us. We as a company and Aditya Birla Group are doing everything possible to help the people in need. I pause here for a moment to pray for all the people who lost a battle to COVID and for those who are fighting it. Life goes on and so does work. I'll be brief today in my commentary and happy to take any questions in the end, for which our Managing Director, Mr. Keshi Jhanwar, is also present on the call today. This has been a phenomenal quarter, and results of cement companies are speaking for themselves. The Indian economy has shown a strong resilience against the pandemic and the government support has been unparalleled. Cement consumption has been at its best in FY '21, barring the quarter 1 of last year. We at UltraTech have been focused on what we know best, and that is cement. UltraTech has reached a capacity utilization of 93% for the quarter, and March '21 was a record 99%, which is very heart warming and reassuring about things to come. It put all our skill to test to dispatch nearly 9 million tonnes of cement in 1 month. That is on an average, 0.3 million tonnes of cement a day. And UltraTech did it in style. The complexity of the scale of operation is to be looked at in light of the dispatches being done from 54 locations across the country. Considering the Indian cement demand of 350 million tonnes a year, which is roughly 1 million tonnes of dispatches a day needed 0.3 million tonnes of cement. This gives you a perspective about -- of what UltraTech is all about. This is one of the efforts, which has helped us generate a jump in our net profits by 60% in this quarter. We have been leading the markets right and taking advantage of the tailwinds of growth going ahead with our expansion of 19.5 million tonnes. We believe that India is on the brink of a jump in cement demand. Per capita consumption of cement has already gone up from the lows of 190 kgs to around 250 kgs per capita list, which clearly show that India -- Indian cement industry is on an upswing. Our expansion program is on track, barring a bit of a slowdown due to the current wave of pandemic. As the analysis and reports coming in from all over, this shall also pass. The second wave also should come to an end, and we will -- we don't think that we will lose any time in ramping up. And we, on course, who commission over 19.5 million tonnes by the end of March '20 -- March '23, sorry. The input costs have unfortunately also been on the rise, casting a shadow on the profitability of the industry. Spot prices of pet coke, as you know, have shot up from the lows of $60 per tonne to around $125 to $130 per tonne already. Diesel has also been continuously going up, resulting in the 2 biggest cost components that is logistics and power and fuel, putting pressure on the profitability for the industry. We believe that pet coke will start stabilizing as we see the restart of Texas refineries, which had suffered recently due to floods. Also as the COVID vaccination program in the U.S. keeps making progress, there are increasing number of people returning back to work in the refineries, thus helping increase the output in these refineries. This will lead to increase in pet coke production and consequently, pet coke prices should also stabilize, which we believe should happen by the end of -- in the second half of this financial -- this calendar year. Although cost has been hit by the diesel increase, but we are doing everything possible to manage this cost. Logistics is a big science, and we have been investing heavily in digitalization of our logistics network, which has been bearing fruits. And in spite of increase in diesel costs, we have been able to bear the pressure of rising input costs. Demand is very robust and continues to surge from all corridors. While the initial thrust came from the rural market, the infrastructure segment picked up as the government spending gained momentum. And now we started seeing gradual improvement in the urban real estate, no thanks to the pandemic. With relaxation in stamp duties in Maharashtra and some other states, I think, lowest possible interest rate regime and the increase in the need for space. We believe that this growth in consumption will continue. Towards the end of the Phase 1 of wave 1 of COVID, the government had started expediting the projects, making sure that the payments to the contractors are released on time. They continue to do so. But unfortunately, the lockdown pressures are withholding project work. I must talk about cash flow management in UltraTech, which continues to yield with us. Tight working capital has helped good cash flow during the quarter, reducing our leverage by a further nearly INR 2,700 crores. In this financial year, we have deleveraged rapidly reaching a net debt EBITDA of 0.55x from a peak of 3.3x at the end of last acquisition, which was 2018 -- December '18, October-December '18. Towards the end of March '21, we prepaid our long-term loan through the extent of INR 5,000 crores. You will start seeing the benefit of reduction in interest costs on our P&L from quarter 1 on account of these prepayments. As the year progresses, we are confident that there will be some more prepayment that we will do during the year. As already mentioned about our 19.5 million tonnes of expansion, all critical orders have been placed, civil work on all the sites has started off. The second COVID wave has slowed down work a bit temporarily. But as I mentioned, we are hopeful that we will not -- we will maintain our time lines on execution of these projects. For the Dalla Super clinker plant, I'm glad to inform you that we have received a stage 1 clearance from Ministry of Environment and Forest, MoEF. And we hope to complete the formalities by end of September '21. Thus, this gives us confidence that the plant will go on stream before the end of this fiscal year and provide relief to our eastern and central markets requirement of clinker. It's a 2.3 million tonne of clinker plant. In the last meeting, I had told you about our RMC starting to play a bigger and a far more important role, where we are now 132-plant network, up from 109 plants at the end of December '20. In UltraTech, RMC is one of the largest internal customers for grey cement and generates an incremental margin over the grey cement markets. Nathdwara Cement has been doing very well. We operated Q4 with almost 85% capacity utilization, serving the markets of Gujarat and Rajasthan. Century assets have not stayed behind operating at 90% plus capacity utilization. All the operating cost optimization plans are in place, except for the markets of Bihar and Chhattisgarh, where we have -- where we are yet to do the branching. All other markets bank change has happened. Accounting for almost 77% of same Century's output. Chhattisgarh, as we have already mentioned earlier, will continue with the old brand. And Bihar would account for 7% to 8% of the Century plan. You are aware of the amendment in the MMDR act. UltraTech is the only cement company like a good corporate citizen that continues to pay the royalty as per the old MMDR Act on the limestone raised from the acquired cement units. As of March 28, this additional royalty has been withdrawn. And we stand to gain by way of reduction of our cost of royalty that was being incurred. The story of this quarter will be incomplete without telling you about our work on sustainability. We are targeting a reduction in carbon emissions by about 27% at the end of 2032 over the base of 2017. That is the high level of confidence that we have committed to pay additional interest on our U.S. dollar bonds that we raised in the last quarter. And there is -- if we don't meet the emission targets. And there is no better recognition for UltraTech's commitment, this being our made in debt issuance in the offshore markets, the first company from India and only the second out of Asia to issue a sustainability-linked bond and achieving sovereign pricing. That is UltraTech for you, ladies and gentlemen. Thank you, and I hope you decipher my message in the last slide of our presentation. Wish you all a very safe time ahead, and I hand it over to -- hand it over for the questions. Thank you.
[Operator Instructions]. The first question is from the line of Sumangal Nevatia from Kotak Securities.
And congratulations on a great set of numbers. First question, Mr. Daga, is on the balance sheet and on the capital allocation. Now we are impressively deleveraging every quarter. And in a couple of quarters, we would be net cash. And given our expansion plans already announced, it appears that we will be excluding a lot of cash balance on this balance sheet. So in terms of capital allocation priorities over the next 2 to 3 years, can you share your pecking order, whether you would like to keep some cash on books as gunpowder out of any future inorganic opportunities? Or should we start expecting good dividend even now or in case there are any international or global or noncore ambition which UltraTech would like to pursue?
Thanks, Sumangal. I think I should have spoken about our capital allocation policy in my commentary. But let me give you guys an overview. You would have seen that we have stepped up the dividends. The money has to go back to the shareholders. You are absolutely right that the cash flows that we expect in future years will be very good. On 111 million tonnes of capacity with a 71% capacity utilization for the year, the free cash flow was in a 5 -- is close to 5 digit number, EBITDA being close to INR 12,000 crores. That number with 130 million tonnes of capacity is going to go up further. As for international acquisitions or international foray, no, there are no plans as yet. I guess we have enough to do in India. Several markets are wide open for organic expansion. There are -- there will be opportunities for inorganic growth for which we will keep gunpowder on the balance sheet. And excess cash will be returned to the shareholders. I hope that answers your question.
Yes, sir, it does. So second question on the cost front. So looking into FY '22, Mr. Daga, what are the key cost areas which you would keep an eye on or a key risk of inflation, whether it is flat raw material prices in terms of fly ash or pet coke? And so if you could explain us that what is the flexibility for us to switch between alternate fuels and even thermal coal in case pet coke keeps inflating the way it is?
So all our plants are multifuel and highly flexible on switching on an instantaneous basis from pet coke to coal or different grades of coals itself -- fuel mix that has to be managed. That is never a constraint. And in fact, we -- this quarter, we reduced the dependence on pet coke and increased coal to manage the fuel mix, which has helped manage our cost as well. As for these costs, none of them give us flexibility, fly ash, coal, pet coke, diesel. If these are the main cost drivers, as a buyer, we can only strategize, try and give the markets locked-in quantities at the optimal prices. But spot prices are not in anybody's control. So we do our planning pretty solid. And I think UltraTech as a company with its size and scale is very well placed, very well organized, very well connected in the international markets for sourcing in the domestic markets for fly ash. And whatever best is possible, I think UltraTech is able to get the best.
Understand. Understand. If I may just squeeze in one more question on Slide 14 on your demand chart. After many quarters, there is green [indiscernible]. And now in the first quarter, we are hit with COVID. So this time around is rural demand, which has been a key strength area for the industry, is a significant risk? I know it's quite a dynamic situation, but any early thoughts you would like to share, sir?
No. It's too volatile -- too unpredictable with lockdowns. And I mean, life is more important. I think it's now the question of how the country fights this menace of the pandemic. Once that is out, I'm sure history will -- history is very short, like last year, history will repeat itself. We have already seen everybody's authority on COVID. We are already seeing reduction in numbers in Maharashtra and Gujrat and the focus is now shifting to other states. And I'm sure other states will also start seeing recovery. We are seeing demand sustaining and improving in Gujarat and Maharashtra.
The next question is from the line of Vivek Maheshwari from Jefferies.
Sir, a few questions. First, on this limestone royalty, the change that you spoke about. So that helps Century JP West as well as JP all 3? And Binani merger should only happen based on the -- as in the Nathdwara merger should also be now -- should be on the cards, given that there is not going to be any limestone implication. Is that understanding correct?
Yes. We will -- so we still have to do a lot of cleanup on Nathdwara balance sheet. The litigation cases keep popping up everywhere. There are so many cases. And luckily, we have a Supreme court blessing. I don't want to do the merger till we are -- we have absolute clean balance sheet on Nathdwara. So maybe FY '23, we'll certainly go ahead with the merger of Nathdwara, if not by the end of this financial year. So it's a matter of -- it's within our control. And yes, the royalty benefit is there on JP as well as all JP assets as well as Century assets.
Sorry, can you -- could you remind me, sir, JP West, whether limestone royalty is paid on that one as well? Because I think the merger happened probably before the regulation change? Or maybe I'm a bit confused on that.
No, no, no. So you see, we had acquired JP assets. There's nothing called JP West and -- you were talking about Sewagram acquisition. Yes. So Mukesh there's royalty applicable on Sewagram also?
Yes, because the -- transfer has been done later on.
Yes. Yes. So there's a huge amount of -- in fact, you'll be surprised that there is one plant of Grasim transfer, which the government delayed doing the transfer and put penalty -- not penalty, put royalty on that also. So the JP West that you talk about, also attracted royalty. The rest of JP that we acquired, also attracted royalty as well as Century assets.
Okay. Can you -- would it be possible in terms of just quantifying it in terms of capacity, which gets impacted or rupees crores, whatever that number...
You know capacity, I'll give you a number, yes, it's INR 200 crores plus per annum. That's the benefit.
Okay. Great. And that starts right from 1st April?
From 28th March '21.
28th March. Okay. Got it. That was one. Second, on the dividend payout. So you have elaborated in the earlier -- to your earlier response. But just to get it right, so let's say that this year's payout, as in FY '21 payout has been about 19%. Is that what the number -- so broadly, can you...
20%.
Sorry?
It's 19.99% or 20% is what I would look at. And the Board had adopted a capital allocation, dividend policy of ranging from 15% to 25%. So I think we are going to sustain and improve our dividend as a percentage to net profit. So it's -- 20% is here.
Got it. Okay. Sure. That is second. Third, sir, in the last call, you have had indicated that you have, let's say, a low-cost fuel inventory going up to April or maybe early part of May. Can you just give us an update now?
We are managing our inventories and procurement processes procuring from wherever possible. And I can only share with you that our cost will be better than the industry.
Sure. Sure. And lastly, can you just quickly also talk about -- so you have covered demand, but the local restrictions impact, let's say, was there a material difference between April 1st fortnight and 2nd fortnight? And in terms of, let's say, Maharashtra being an example, while construction at site is allowed, but what are you seeing on the ground right now?
It's too unpredictable, Vivek. I don't want to say anything which will be dramatically -- which will change dramatically in the next 10 days. So let's watch this quarter. Let's not take decisions on 1 month, 1 day per se. And I'm sure you guys have your channel checks, the infamous channel checks that you will -- you can figure out stuff. I'm surprised you did not ask any question about my last slide. Anyways.
I'll take it offline with you, sir.
The next question is from the line of Ritesh Shah from Investec.
Sir, couple of questions. One is on...
Mr. Shah, sorry to interrupt you. May we request that you please increase the volume of your phone. Mr. Shah?
Ritesh a little louder please? Can't hear you.
Mr. Shah, please increase the volume of your phone. Mr. Shah, you are not audible, sir.
Sir, I'll just repeat the question. Sir, my first question is on construction chemicals. How do we see it's allowed certainty for UltraTech world? Obviously, the company has a right to win. If you can provide some color on how much revenue is we are churning right now when there's been serious business going forward?
I can't hear anything that you're saying, Ritesh.
Sir, Am audible?
You are audible, but it was garbled. The voice was very garbled.
Sorry for that. I'll just repeat it. Sir, my question pertains to construction chemicals. How do we see this business going forward, specifically when in the company has the right to win? If you can provide some numbers on where we are right now? And where do we see this going forward? That would be useful.
I will reserve our commentary on what we call BPD, Building Products Division, as part of our foray. We are going great guns ahead, and this will become one of the big drivers in UltraTech. Numbers, it's too difficult to put numbers at the moment. We have discussed this in the past also, Ritesh. We are very focused. I have told you about RMC, and I've shown you the numbers this quarter. And RMC is going to go full steam ahead. So is BPD. And when the time is right, I will speak about BPD in much more detail.
Sure, sir. Sir, second question was on RMC. You did indicate that we have increased the number of plants from 109 to 132. But sir, can you allude to here has the industry gone some shift in cost structure or basically the way in which the industry operates, specifically on transit mixtures. Is there a structural change? I think post-COVID, the business model did get reversed a bit. Are we back to normal? How should one look at RMC as a business?
RMC is a big growth engine. And in lighter way, if I can say, we did -- UltraTech decides the future of RMC. But honestly, RMC is going to be a big, big element of construction industry. People are realizing the benefits -- construction sites are realizing the benefits of buying RMC instead of doing -- mixing RMC on site. And that is what is paying off. And this is -- it's how we try and educate and give a better product, better service to our customers.
Okay. Sir, I have more questions over here. Sir, just last question. Under the amendments, one of the things which came out was that the leases which don't have peers on it. Basically, they got lapsed or the sale leases got lapsed. Just wanted to ensure basically, get comfort from you that for all leases which UltraTech has basically, they are sales...
Zero lapses. No, no, no, we did not have any lease lapsing, all are secured.
The next question is from the line of Amit Murarka from Motilal Oswal.
I just -- firstly a question on the capacity update.
Amit, there is a lot of background talk in your -- from your side.
I guess it is better now. So I was asking, could you provide an update on Super Dalla and Bara too?
Yes. I did mention about Dalla Super. MoEF Stage 1 clearance has been received for the plant land. Unfortunately, because of COVID, the next step, which is payment of deals, et cetera, is pending. We hope things settle down, and we will start work on the plant and be ready with the plant by December. And hopefully, January, March quarter should see the production coming out of Dalla Super asset to 0.3 million tonnes of clinker. Bara has already got commissioned -- line 2 has already got commissioned. Railway siding has already got commissioned and that last, I remember, it had reached a capacity utilization of upwards of 70%, 75%.
Okay, sorry. No. And also on the fixed cost, like last year, obviously, post-COVID, we had seen industry cut down on spend. But now again, like we were on a recovery mode, but now the demand is again looking a bit shaky. So can we now expect like spend like whatever dealer promotions are spent and all in other cost cuttings in total.
It's natural. Jhanwar Ji, do you want to comment?
Yes. So I would like to say, yes, it's a very dynamic situation. We have seen that the overall environment has changed after the first wave. Everyone was relieved. But in last 1 month, all we know that things are again in a different -- at different stage actually. So yes, we are quite conscious about that trend. In case the problems continue, obviously, we may have to look for some cost cutting measures again that we did in the past. But yes, it's -- I would say it's little early to conclude that we are going through blast on the other cost assets.
So to supplement what Jhanwar Ji just mentioned, Amit, we have shaped off nearly INR 500 crores over FY '20 because you see there is inflation in every element of cost, even if I assume a 5% inflation, that inflation has been lit, and we are looking at fixed cost at almost the same level as FY '20 only. So there's a saving which is kicked in.
Okay. Sure. And also like on RMC, just had a simple question. In the presentation, you've mentioned the RMC volume is up 31% Q-o-Q. But revenue is up only 8% Q-o-Q. So why would there be such a big fall in realization? I mean just to understand?
No, it's not -- one second. Ankit, can you correct the number?
Yes. So RMC is 32% revenue increase also year-on-year.
No, this is Q-o-Q. Last quarter, revenue was mentioned at INR 620 crore. And in the presentation, the volume is mentioned 31% or 32% of Q-o-Q.
Let me give you a clarification in a moment, we'll go on to the next question. Mukesh, just look up the numbers and be ready with clarification.
And also on the fuel mix, could you share your current fuel mix? Like I guess, pet coke would have gone down.
So yes, pet coke has gone down to 130% and imported coal is up to 60% plus.
RMC and other projects, we give the combined number, which is 18% higher than the last quarter.
Okay, I'll take it offline because last quarter number...
Yes, sure.
Ankit will explain it to you. Thanks, Ankit.
[Operator Instructions]. The next question is from the line of Shravan Shah from Dolat Capital.
Yes. So it's a clarification. On Page #17 and 18, the volume in the presentation. There is some calculation mistake in that. So India operation volume is 26.59 million, oversea is 1.41 million, if we add together, it is not tallying with the consol number. Same is the case with the annual number. So first, if you can tell us, what the exact number consol plus India plus oversee for fourth quarter and for the full year? And it's good that we have shared the number in the presentation on the white RMC, everything. But from the annual number, there is no RMC annual number. So is it possible to share the same way fourth quarter number, we have shared grey RMC, white export for the full year of FY '20? And is there any restatement of the FY '20 annual numbers because gross number does not also tally. So need some clarification on that part.
I don't know how you are calculating the numbers. If you can connect with Ankit offline. He will -- the numbers that we have mentioned in the slides are all audited and accurate numbers. There's no error in the numbers.
Sir, if you...
Any specific clarification you require. If you can connect with Ankit, he will be helping you on that. Between consolidation, a quick clarification. It means consolidation, there is a elimination of intercompany transaction. To that extent, you cannot do a math. Because you see Nathdwara supplies cement to UltraTech. So that, I can't count double.
No, sir, I understand. But even if you just look at 26.59 million for this quarter, India operation number and you add 1.41 million in overseas, the number tallies at 28 million, and we mentioned the 27.78 million. So that is a difference of 0.22 million. And if I look at for the full year, the difference is 1 million tonnes. So that's what I say, it's a clarification. And the request to share the same way the annual number for RMC, white and all this -- the way we have shared on the grey. And the question is -- my question is that most of the things is answered. A couple of -- 2 things. One is what's the trade, nontrade mix for this quarter, for the full year FY '21? And what was it for FY '20 restated now? And what is the lead distance same way for this quarter, for full year FY '21 and the same for FY '20 and 4Q of FY '20.
So trade share is about 67% for this quarter. Lead distance is about 440 kilometers.
What is for full year FY '21?
Full year FY '21.
69%
69%.
69%?
Yes.
What was for FY '20?
Ankit, what was for FY '20 full year?
Atul, that must be lower actually.
We'll just give you exact number, sir.
The next question is from the line of Madhav Marda from Fidelity International.
Madhav, are you there?
Mr. Marda has left the question queue. I'll move on to the next question from the line of Indrajit Agarwal from CLSA.
I have a couple of questions. First, on the utilization levels. As you mentioned, our March utilization was close to 99%. So is there any market where we have struggled to cater to demand for high utilization or we have managed to get through?
If I had more cement to sell, we would have sold more.
Sure. So on that note, you mentioned about kicking the powder drive for inorganic expansion. Do you have a priority order in terms of which regions you would be stocking for assets more? What are your focused areas?
Except for West, where we would get restricted by consolidation, from CCI's point of view. All other markets are wide open. I am keen on Northeast and we are keen on South, we are keep on all the markets.
Yes. That helps. One last question. Current levels, what would be the price differential on land [indiscernible]
Sorry?
The price differential between landed, pet coke and imported coal on a blended basis for us?
One second. If I look at fuel price, consumption rate, about -- I'll tell you percentage gap. Imported -- you're asking about imported coal and pet coke?
Correct.
So there's a gap of about 20%, 25%.
Imported coal is cheaper?
Yes.
The next question is from the line of Swagato Ghosh from Franklin Templeton.
So Daga sir, firstly a very simple question on realization. Your realization was up about 1% Q-o-Q. But from the [Delhi] channel check, the sense that I got was for the sector, it was down Q-o-Q as the pricing increases came in later part of the quarter. So can you just help me understand that how did you buck this trend of realization?
So let me answer the question, your channel checks cover how many pieces? We deal with 60,000 dealers across the country. So what happens is, the price improvement, depending upon which market, what date the price improvements take place will have an overall impact. Let's say, if you are dealing with the regional players and the price improvement has taken place on 25th of March, obviously, they will not have a huge impact. But as a pan-India players, when we are seeing -- we are selling all across. Every price improvement helps -- every price change has a positive or a negative impact.
Yes. So I just want to understand, so was your pricing improvement in line with the overall market improvement like if you look at mine channel checks. I just want to understand did you outperform the market or growth was in line?
We have -- it goes to show we have outperformed the market.
Right. So I just want to like understand whether this is like positives for the quarter? Or can we do it because of our scale and obviously, because of our size, can we like continue to do this every time...
Because of scale, size and the brand, the pricing capability or respect for the brand, is higher than respect for -- or the willingness to pay for a brand B and a brand C. So obviously, price improvement for category A brand is far higher.
Okay. Fair enough. And sir, one other...
It's a sustainable methodology. If that's what your question is. It's a sustainable methodology.
Okay. Got it. Got it. And sir, the other question I have is, because you are the market leader, you have strong market intel. I wanted to get a sense of what has happened to the tail of the market during this last disruptive year. By the tail, I mean the small, small 1 million to 2 million tonne capacity players. Have some of them gone out of market or have they really stressed out...
There has been an impact on smaller players because in the initial period of COVID when we discussed. There was a time -- if there's a food plant company, and if there's a lockdown in one of their plant locations, 50% of their capacity is gone. Right. As compared to that, if there was one plant of UltraTech was in a lockdown situation, we or any large company would have the benefit of servicing its customers from other brands, sacrificing lead distance, but servicing the customer and gaining market share. I made a big statement earlier in my commentary, we sold 0.3 million tonnes a day as compared to 1 million tonnes a day of -- on India. That speaks.
Right. Right. That's definitely huge. I just want to understand when you look at the demand supply for the sector, the supply side, we like look at the 500 million to 570 million kind of a supply number, do you think that the tail might shrink and this overall number might come down if we [indiscernible]
The tail might shrink. Those are the 1 million tonnes and smaller players also 2.5 lakh tonnes, 500,000 tonnes capacity players will shrink, but you will have larger players like UltraTech and other larger players investing in capacity because there is a huge potential. I believe that we will see CAGR growth -- a large CAGR growth in India for a long period of time. These projects which are under execution are very cement-intensive and time consuming. So we will -- India will have a long, sustained period of demand. And capital-intensive nature of cement industry will not let smaller investment sustain. We have the capability of investing and putting up brownfield expansion at a cost of $60, $70 a tonne or even lower. It will not be possible for everybody.
And sir, if I may squeeze in just one small question. On your government project orders, are you seeing any great pricing pressure over the last 1 year because there has been...
No, no, no. Government is focused on project execution and fast-tracking projects, no pricing pressures and pricing now isn't generally long-term contracted prices, will be a government projects. We -- I'm really happy -- or actually, this is the most sensible thing that the government is doing to generate employment, to bring back labor to project sites. So that the government is now releasing payments to the large contractors on time and pushing the credit on execution. And let's not talk about yesterday and day before or in the last few days of COVID. But generally, the underlying current is that we want to increase the execution of -- project execution at the ground level. So that employment generation is also there, and labor is aware.
Yes. Atul, just to add upon, as you said rightly, unlike last year, this is not the case. Because all projects are tactically running, yes, number of labor might have reduced because of some sites say, now maybe 60% labor working. But major projects like road, metro all projects are operational. If I talk about Bombay, the coastal road project is on. So the government is fully committed because this will have linkages to this current government also.
If the person from Dolat Capital is still on the line, 26.59 million plus 1.41 million is yes 28 million. And the number reported is 27.78 million tonnes because 0.22 million is, again, elimination of domestic sales, our cement supply to Sri Lanka. So it's an elimination only. The numbers are not wrong. Yes. Go ahead.
The next question is from the line of Ashish Jain from Macquarie.
Atul, can you give some sense to -- like to give a color of how Infra is doing on the demand side, can you give some sense of how bad rural is as we speak because the impact on rural this time has been much more than what it was last year. And if you can also give some sense of how our volumes would have dropped in April over March? Any sense of that would be very useful.
No, I don't want to comment on 1 month, 1 day, 1 hour of sale. So let's watch this quarter go by, too unpredictable, I know my April numbers, but I'm restricting myself from commenting on them because, let's say, June picks up and whatever work was lost in April or in -- there's a work loss. There's a construction slowdown, no doubts about that. We'll come back to you with the exact numbers at the end of the quarter. As for the infrastructure, Jhanwar Ji already mentioned and yes, all sites wherever possible work, work has not stopped. So this lockdown, slowdown or curfews are not an economic lockdown, economic lockdown is where you have to shut down everything. That has not yet happened in the country. So infrastructure is growing. In Bombay, you see your coastal road project is growing -- continues highways continue, work on metro is continuing. Everywhere, work is going on at a slower pace, but work is going on.
My question is more for rural, what kind of impact you have seen on the rural demand this time?
I don't have a daily number, but yes, there is a slowdown. And I said I don't want to...
It's a slowdown, but Atul just to -- the slowdown, obviously, because we all know there are lockdowns across the country in different parts. So there is a slowdown, but it's not slowdown where there is a huge worry that kind of thing. Yes. Obviously, with all these kind of environment and -- this environment. There is a definitely slowdown. And March and April always, as you know, always there used to be...
Yes. April, in any case, will be lower than March. March is a huge month, right? We did 99% capacity utilization in March. In normal circumstances without COVID also, April would not have been 99%.
Yes. That's a normal trend.
And second, kind of give a sense of region wise, how the pricing moved in March over December? So I know overall number is 1%. But can you give some color on region, about how it moved?
I'll give it to you offline.
The next question is from the line of Gaurav Rateria from Morgan Stanley.
Sir, 2 questions. Firstly, on the market share gains you talked about, the initial part of the year, you benefited from supply side issues, which other plants were facing. But I think every quarter-after-quarter, UltraTech has been gaining market share. So in the recent quarter, there has not been any supply side issues. So what really has been driving the market share gains for UltraTech and which regions, in particular, if you can throw some light, that will be helpful.
Gaurav[Foreign Language]
[Foreign Language]
So we had a capacity utilization of 100% plus in the Eastern markets. 90% plus in all the markets, all the other regions. And a shade under 90% in South, which -- South is always supposed to be laggard, but just a shade under 90% in South, that is a kind of demand, that is a kind of euphoria in cement consumption in the country.And UltraTech is the only -- there's no other company which is in that situation, which -- our diversity of the spread that we have in the country comes to our advantage. So we are able to service customers from anywhere.
Sir, second...
Atul, if I may add. The best part is that service still may happen. The service committee -- recent surveys found that from Central to East from based -- North to East, maybe at certain post, but yes, the service committee is always anxious to our size and scale.
So Gaurav, we are focused on gaining market share, not losing a single -- categorically saying not losing a single order.
Understood, sir. Sir, second question, a great move on dividend of increasing the payout. But I'm just trying to contextualize this in terms of the percentage of free cash flow, it was probably still 10% and that will probably be the case even going forward because of good confidence on the future cash flow. What is the kind of a gunpowder you want to have on the balance sheet to have that optionality of any future inorganic opportunities in the balance sheet?
So my aim is to go net cash on the balance sheet. And irrespective of any gunpowder, if I have to leverage for a year, my free cash flow for 1 year will be, let's say, INR 10,000 crores. So we will deleverage and come back to net cash in a year's time, if we were to leverage. Having said that, we would carry a INR 10,000 crore plus surplus on the balance sheet for any exciting opportunity.
Next question is from the line of Madhav Marda from Fidelity Investments.
Am I audible now?
Yes, Madhav.
Yes. Yes. I just had one question was on the fixed cost side, we had a INR 500 crores saving this year over the last year. I didn't fully sort of understand, you said that in FY '22, we'll maintain it at the same level as FY '20, is it? That's what you said?
Yes. Yes. So if you look at my fixed -- Ankit correct me, Mukesh. My fixed cost for FY '20 was close to INR 5,500 crore?
Yes.
Yes. So I were to do an inflation on that INR 5,500 crore, I should be inching towards INR 6,000 crores for -- at the end of 2 years. But we will maintain INR 5,500 crore.
We maintained INR 5,500 crores in FY '20, okay, understood.
Yes. Yes. That's the way I count my chicken.
The next question is from the line of Sumedha Srinivasan from ICICI Prudential AMC.
Congratulations on a good set of numbers. So my question was on the WHRS capacity that has been announced. I think the results mentioned that we expect to go to almost close to 300 megawatts by the end of FY '23, which is more than the -- more than double of the current capacity that we have. So is this mainly coming up on a new expansion projects that are happening? And what will be the -- I mean, will it come up along with the expansions or after completing it? And what will be the CapEx for this?
All the expansion that we are doing, the integrated plants, we are baking in WHRS in parallel. Today, we have reached 125 megawatts of WHRS. And by '23 or middle of '24, WHRS would be at 304 megawatts. Now the incremental investment, Ankit, Mukesh, can you guys give the number?
Around INR 1,800 crores.
That is the part of overall investment on WHRS.
And Atul, if I may add because wherever new sites are coming, it is part of the -- our CapEx term announced to a more additional...
No additional CapEx. So it's part of the announced CapEx, yes.
Understood. Okay. And what would be the cost benefit that we would be likely seeing from this? And would that be visible from FY '24 onwards, if my sense is correct.
Yes, it will be visible through '22, '23. But if you want to annualize the benefit of 304 megawatts that will be in '24. And the cost of this will become -- WHRS will become about 25%, 26% of our total power consumption. On the current -- I'll give you all the levers, you can do your own math. On the current network, our power consumption is about 1,200 megawatts, and this will be 300 megawatts, 304 megawatts of WHRS. Current cost of power without WHRS would be INR 5, INR 5.5 a unit?
Less than INR 5, sir.
So and -- so let's say, INR 5 a unit is the grid power or our thermal power. We need WHRS power will be INR 0.50 to INR 0.75 a unit. So 25% of my power will cost INR 0.75 a unit and 75% of my power will cost, let's say, INR 0.5 a unit.
The next question is from the line of Bhavin Chheda from Enam Holdings.
Yes. Excellent performance across FY '21. Sir, 2 questions. What was the premium cement now as a percentage of overall total cement sold...
It's about 7% to 8%. 7% to 8%.
And how it has moved over last year?
Over? Last year?
How much was it in FY '20?
Sorry, it's not 7% to 8% is about 10% now. And last year, I think it was 8%.
Yes, I think a little about 2%.
And any internal targets, how this will move going forward, as you are planning higher?
We are looking at going up to 15%.
By when, sir?
This is on the current new products or value-added products, and the company is working separately on identifying and bringing our newer value-added products.
Okay. Sir, just before the second wave hit India, I think majority of the Indian got impacted in April, May. Most of the cement industry projections were close to -- industry projections of 15%, 16%. And obviously, UltraTech being market leader expected to grow ahead of that. Your internal projections on industry still stand there? Or what will be your view going forward?
I would count pandemic as a temporary slowdown. It's an unfortunate one, but I will want to count it as a bad blip. 2 months, we should come back and I'm scared of reading about the third wave and I don't know how long it will go, but we have to take it in stride. So if June -- by June, things become normal, fingers crossed. People are saying by 15th of May, things will start improving and just start subsiding. Let's say, June, things improve, and then we are back on track. The industry is back on track.
Okay. And...
You have to see the project. Now let's say a metro -- let's say you're in Bombay, right? Yes. So Coastal Road project. They have to complete it, and they will push the pedal, whatever slowdown has taken place will be wiped out. So you will be back to normal speed. The project -- project life is not reduced -- project -- the quantity of cement required in a project, the work involved in the project is not going down.It's only a temporary setback in the pace of execution.
Sure, sir. And what about the individual home and it's consumption. Because that forms a very...
It's going up. It's going up. It's going up.
Okay. So you're saying the pent-up real estate demand, last 6 months, what we saw a big pickup in the real estate eventually will...
Yes, we'll come back. If you have started a project, you have done the roof or one wall, you'll not leave it there. The moment labor is available, things at home are all right, things in the neighborhood are normal, I am confident of stepping out and buying some rent, I'll go out and buy cement. Get my contractor back home and do the job. That's the IHB segment.So let's be honest, today, I am scared, personally. I don't want to call an electrician inside my house for any repair work or a mason or the pest control guy. When things normalize, we will start calling. Similarly, when things normalize, the work which has stopped on my house, which I'm building in Timbuktu, I'll start work there. So that's a general philosophy, right?
Sure. Sir, last question, I missed out. You said you want to maintain the net cash of INR 10,000 crores. So that is net cash in the balance sheet? Or you spoke about liquidity...
No, no, no. Liquidity on your balance sheet.
Liquidity. And you -- and technically, you want to be a net cash company, but you're not giving any figure on that?
Yes, yes, yes.
[Operator Instructions] The next question is from the line of Girish Choudhary from Spark Capital Advisors.
A couple of questions from my side. Firstly, on the RMC business, if you could also share the margins which we're making and on the capacity utilization for the year, and extending the capital employment in this business, just to get a sense on the returning profile of this business.
So the last question, first. You will -- far off the chair, if I were to tell you the return on capital employed in an RMC business. It's a very high number. Second question was on -- it will go -- yet, it will go above 25%?
Yes, sir. Above 25%.
Yes, it will go way above 25%. Second question was on margins. Margins, we would have 5% to 7% over grey cement.
After transfer pricing...
On a transfer pricing, that I clarified. It's on a transfer pricing. So RMC is one of the biggest customers for my grey cement. RMC marketing team is separate. And the grey cement marketing team is separate. So grey cement sells -- grey cement marketing team sell cement to RMC at the best possible price. And then they earn a margin of 5% to 7% over grey cement margin.Third point on capacity utilization, there is no concept of capacity utilization in RMC because the transit mixer is not allowed to move 24/7. It can run 13 to -- be run maybe 13 to 15 kilometers distance because we don't want the material to set. So we don't go by capacity utilization percentage. Our RMC plant might be 30 -- what cubic -- million cubic [Foreign Language]
It is 60 cubic meter.
60 cubic meter plant, but that's the sizing of the plant depending upon the customers that we want to service. Capacity utilization is a number to that.
Got it. So that was very helpful on the RMC. The other question was that I had a follow-up from the premiumization, the earlier participants asked. So what we have seen is that in the recent past, we are seeing increasingly many players focusing on this and also talking about premiumization of products moving to 10% to 15% and also targeting closer to 20%.UltraTech, if you see, has the highest price become products, which is UltraTech Weather Plus. So do you think this can slowly get commoditized? Or let's say, can there be some pricing pickup in this part of the profile.
See in this space, it's always an early mover advantage. And when our product has established itself, it is very difficult for somebody else to substitute. So -- and as more and more players copy yes, yet there will be some bit of discounting on the current pricing, but we will have a premium positioning in this product also. Jhanwar, would you like to add something?
Yes. Yes. So Atul -- because the -- fundamentally -- because the brand has it's -- the premium paint, even if somebody new person is coming in these product game. Our premium on the new products should continue to command in the market. That is what the -- success.
Sir, and lastly, If I may. Just the -- I know you shared the...
Can we take on another question?
The next question is from the line of Arijit Dutta from Axis Capital.
Congratulations, sir on strong set of number of numbers. Balance sheet is regulated [indiscernible] and high dividend sales. A couple of questions from my side. Considering cement prices moving up in latter part of Q3 and the full inventory impacting costs will be realized in Q1. Can you give us some guidance on how EBITDA per ton increase will be currently versus Q4 level without considering the operating leverage part. As you said that...
You are asking me to -- Arijit, you are asking me to talk about Q1 '21, I don't want to give you any details.
Some guidance? On the...
I don't believe in giving any guidance. Once we -- whenever we need one-on-one, I'll explain trajectories and show you directions how things are moving, you made your conclusions.
The next question is from the line of Sanjay Barik from Nippon India.The next question is from the line of Prateek Kumar from Antique Stockbroking.
Congratulations. First question. When you said that utilization of an Nathdwara was 85, Century was 90? Was this for annual numbers or for 4Q and what are the...
Quarter. I told you about quarter numbers, yes.
Quarter numbers. So what would be the annual profit per ton, EBITDA per ton for these assets now for FY '21?
Difficult to -- well, Nathdwara, yes, the Nathdwara would be about INR 1,500 a tonne. But the Century asset is very difficult because they are totally synchronized with our existing network in the same markets. Nathdwara -- stand-alone balance -- yes?
So you should target something in the range of 900 to 1,000 for Century, we would have that sort of...
From there, I think, I have already reached about 800. And now INR 60 will be realized from MMDR royalty. INR 64 will come as a year. So 865 will be there. And I'm sure with some -- the pending improvements, brand transition that are happening, we will cross 900 for sure.
Sure. And just second question on your gross debt. We did some absolute gross debt deducting by 5,000 crores as you mentioned. But our reported gross debt to fully INR 2,500 crores lower for FY '21?
So what happened was -- I'll tell you, we paid off INR 5,000 crores. We had done a raising of U.S. dollar bonds, which was INR 2,900 crores. So net number will be -- we had also raised an NCD during the year, which was about INR 1,000 crores. So across that level, you will not see a INR 5,000 crore number.
The next question is from the line of Kamlesh Jain from Prabhudas Lilladher.
Congratulations on good set of numbers now. Sir, one question on the part of CapEx, like say, I do appreciate that COVID has uncertainties there. So how much CapEx can be -- come for FY '22 and '23?
Sorry, you're asking for what? How much CapEx cash flow?
CapEx, yes.
CapEx spend, this FY '22, we will look at INR 4,000 crores to INR 5,000 crores. That will be the bulk of our cash flow. FY '23 might come down to about INR 3,000 crores. And this largely because of the expansions.
And sir, secondly, on the cost part, you have done phenomenal work on the -- particularly on the energy and the trade, which is gone above the cost. Sir, like going forward, like if I see the imported coal cost, it is flat quarter-on-quarter, $76 odd. So going forward, let's say, 2 years, 2 quarters or 3 quarters, so from the current levels, what could be the cost increase we can see for UltraTech?
I don't think we will see cost increases, cost should come down. This is, of course, is not under our control. Luckily, we don't consume petrol, which has gone up to INR 100 a liter. Pet coke will come down, coal will come -- this is what our reading of the be international supplies is.
But sir, given the current prices sustained, so what could be the -- I say, as we have moved to coal to -- at around 61%. So taking that into consideration, I do appreciate that on the freight cost, we can't comment. And their impact has been visible. So -- but on the energy cost side, how much could be the incremental move, which we can see?
No. So what I'm saying, the incremental might be INR 50 here or there per ton, but not more than that. And July onwards, I can't -- it cannot be cast in stone, but second half of this calendar year, fuel prices should come down.
Okay. And lastly, sir, on the overseas. So we have done roughly around INR 250-odd crore EBITDA per. So that's also far better as compared to what the headlines has been there that in Middle East market and the market has not been that strong. But do we see the sustainability on to INR 250 crore EBITDA there? In overseas operations?
Yes. I think -- I'm glad you asked about our UAE operations. The brand is very well established. We would have more than 25% of the market share in the UAE. And we are the best-performing competitor in the UAE.
We will take last questions from the line of Vivek Gedda from HSBC Securities.
So firstly, just wanted to get a sense of the volumes, given pricing trends for UltraTech by rating. I think you people have alluded to that the trends, we have missed that.
I didn't get your question.
I just wanted to get a sense on the volume growth and pricing trends for UltraTech by region.
By region, I think that somebody else also had asked that question, let me give it to you offline, Vivek.
Got it. Sir, secondly, I just wanted to get a sense that with RMC and BPD being your long-term growth engine, what kind of ROE will be target for the consolidated business on a medium to long term? From the current 50%...
Great question. Lovely question to end this session today. We have reached an ROE of about 15%, and I'm looking at taking it at least 2 or 3 bps higher.
And any time screen that I may -- if I may ask?
'25. By '25.
Thank you. 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.
Thank you.