UltraTech Cement Limited analyst Q&A

Thank you very much. We will now begin the question -and-answer session. The first question is from the line of Amit Murarka from Axis Capital.

So, the first question is around other expenses. Could you quantify how much was this one -off in marketing spend? And what should be the recurring cost that we can build into our model?

The recurring cost will come back to the normal levels. So I would imagine , if you look at 755 per ton, so average should be around 650 -- 649 was last quarter. Yes, I think 675 per ton is what we should go down to.

Okay. Got it. And generally, like your capacity utilization has been 85% pan -India. But could you break it down between regions as well, like earlier you used to give that comment around regional utilization as well.

Yes. Obviously, everything is around 85%, 1 or 2 regions might be slightly higher. So you would have South and West almost at 85%, 86%. East was the slowest at 80%. The other regions were -- North and West 82% to 85%.

When we -- if you recall, Amit, we had mentioned -- we had taken a target of a 25 -kilometer lead reduction, not realizing that we'll be able to achieve 15 kilometers in the first quarter that we kicked off. So I'm raising the bar for ourselves, and I'm sur e there is more to come, as I mentioned, as our network of our plants increase -- densifies. I don't want to say a number and then again revise it in the next quarter, but it is definitely going beyond the 25 kilometers that we were looking at in the previous quarter.

The next question is from the line of Sumangal Nevatia from Kotak Securities.

First question is on the prices. I mean, it's been continuously weak over the last few months. Is it possible to share what sort of realization or price decline did we witness? And how are July prices versus average? And how should we expect prices to move forward? Do we expect some strength only towards the second half.

I think you answered the question yourself, Sumangal. It's only in the second half of the year that we could see any possibility of price improvements, particularly of monsoon quarters, we wouldn't venture into price improvements per se. What is the other point -- what the other point I totally forgot, Sumangal? Realization -- you were talking about prices. Yes, prices have been softer. We lost about 3% -- 2.4% to be exact, and July has been further soft only.

And July would be versus average would be down 4%, 5%.

What would you mean average?

Average of 1Q versus -- say exit of 1Q July.

About 1.5%.

Got it. So generally, we've been growing ahead of the industry. So how should we look at this quarter? I mean industry demand, what is your sense would have been versus our growth of 6%, 6.5%?

So we would expect about 3% or thereabout. Anywhere between 3% to 3.5%, we need to make some more results to come out, but our intel tells us about 3% to 3.5% growth for the industry.

Okay. Understood. Understood. Sir, my last question regarding the recent corporate action we saw with respect to India Cement. Just want to know if you're in a position to share what is the long-term plan there? And in case we remain at current levels of s take, will we look to get involved in the operations or collaborate in any way?

No, no collaboration. It's a pure financial investment, as we mentioned, noncontrolling financial investment.

Thank you. The next question is from the line of Prateek Kumar from Jefferies.

Sir, my question is on cost curve. So on variable costs, you have highlighted like $149, you like realized cost for the quarter on the fuel prices. How are you looking at fuel cost in near term? You have indicated earlier that will remain in like sort of deflation trajectory for next many quarters. So how are you looking at variable cost ex of your own RE power initiative?

So basically, if I refer to coal costs, essentially excluding RE power, yes, they will go down further. So interestingly, we have not been able to increase our pet coke mix. Pet coke mix was around 37% for this quarter. But going forward, I know for sure that we are ramping up our pet coke mix, which should go upwards of 45% for the remaining period -- for a full year purpose, not remaining period. So we will see an improvement in overall fuel prices.

Okay. And on the other expense and the quantum, you mentioned of elevated marketing spend. So the quantum will be to the tune of like over INR150 crores this quarter, like how much would be like...

I also answered that question. So if you look at -- I would look at it on a per ton basis. This quarter, we were at INR755 per ton.

Management line got disconnected. Please be online while we connect to management. We have the management line reconnected. Over to you sir.

Thank you so much. Sorry about this, we have some issue with Microsoft problems world over today, our telephone lines are also giving some trouble. Sorry about that. Can you pick the next question please?

We'll move to the next question, which is from the line Jashandeep Singh Chadha from Nomura.

I just wanted to understand what's the status of the 6 million ton greenfield projects that we are putting in Andhra Pradesh? I mean, what's the stage they are at, the ones that are coming in FY '26 and '27?

They are on track, our GU Visakhapatnam is on track. Dhule, Nathdwara, is next year, So yes, it's on track. There's only one grinding unit of Visakhapatnam. 3.3 million tonnes

The equipments have been ordered, the land has been...

Yes. Land already tied in long back.

Okay. And sir, I just wanted to understand your view on the Southern market. There are a lot of consolidation happening, a lot of expansion happening, the prices are low. So how do you see - - is there enough volume and demand there to absorb the upcoming capacity in the south market?

Yes. I guess so. In fact, I alluded to how Andhra is going to shape up. That is one of the markets, big markets. So I believe that there will be enough demand rather to absorb all the new capacity coming in.

The next question is from the line of Ritesh Shah from Investec.

Two questions. Sir, you did indicate specific for India Cement, it's a noncontrolling financial investment. I just wanted to understand what is the motivation behind this? Historically, I'm not sure whether we have done anything of the sort. So why right now, how should we look at it -- look at this?

So Ritesh, there's always a start to everything. So that is -- having said that, we found this as a good opportunity to buy in. And I'm sure the way markets are, it should prove to be a good investment.

Sir, my second question is, how should we look at -- I think Jaypee has been put under NCLT. And one of our assets is also under arbitration. So how does the situation evolve for us?

We are waiting to hear back from the RP, but I think the arbitration will continue, and RP will step in the shoes of Jaypee.

The next question is from the line of Indrajit Agarwal from CLSA.

A few questions. First...

Only two questions, Indrajit. No few.

No. Okay. I will zip into two. So the INR 2 per Kcal cost of fuel, while the industry has moved to 1.6, we understand there was some long -dated contract. Can we get to that 1.6, 1.7 levels by fourth quarter?

I would imagine that we will see those kind of levels in the next fiscal year. And Q4 would be far better than the current quarter. Because all those long -term contracts will be over by December, Jan. So not able to put my finger on the exact number for Q4, but we will begin April, June quarter on an absolutely clean slate, very competitive clean slate.

Sure. This is helpful. Secondly, I just wanted to understand more like a bookkeeping question, the accounting for this financial investment. So would you mark -to-market every quarter and whatever the gain/loss, would it be passed to the OCI?

No, it will not go to the P&L, it will go to OCI.

Okay. And it will be mark-to-market every quarter, right?

Yes, it will have to.

The next question is from the line of Rahul Gupta from Morgan Stanley.

Sorry, Mr. Daga to harp again on India Cement investment. Given this is a financial investment, is there a way that you would look to increase stake from the currently stated 23%? Or are you happy with the noncontrolling financial investment of 23%?

Yes, it's a non-controlling financial investment can't go beyond that at the moment.

Okay. Understood. Thank you.

Just the question on the last quarter Atul you had mentioned that you're looking t o reduce your cost by about INR200 to INR300 per ton over the next 3 years and is this still intact this 200 to 300 per tons?

Yes, so I would leave 200 behind and I will start matching above 300 because the way our lead distance is performed I am getting bullish on how things are shaping up and we will have far higher improvements.

Okay so 300 plus.

Yes because if you remember the breakup that we had given we had looked at only 25-kilometer reduction and we have already achieved 15 kilometer in Q1. Given the network of plants that we will have at the end of our expansion plan by -- in the middle of '27 -- more than 70 locations from 54 or 55, 59 locations as of today. It will be a good place to operate. So you will see further reduction in lead distance plus the logistics cost. All our other parameters are working in the right direction.

Understood. And on realization you indicated that July prices are 1.5% softer versus the average of 1Q?

The average or exit one second this too confusing. It's over -- yes over Q1 average.

Okay. And just last you already mentioned this, but I missed it region-wise utilization level what did you say?

It was 82% to 85% between North and Central. 85% to 90% was West and South and East was the lowest at 80%.

Okay. Thank you.

The next question is from the line of Pathanjali Srinivasan from Sundaram Mutual Fund. Please go ahead.

Hi sir. Thank you for the opportunity.

I am sorry to interrupt. Sir we are unable to hear you.

I want to know what is the volume growth guidance for this quarter as in for this year, sir?

We are looking at the industry growth of around 8% -- 7% to 8%, I would imagine and we should be doing double digits for the full year yes for the full year.

Okay, sir. And in terms of capacity like what would be CCI limits for capacity addition? Is there anything, but any reason where you...

As far as capacity is concerned there is no restriction on capacity addition.

Just one second. As far as organic capacity is concerned there are no restrictions.

Okay, sir. And what about acquisitions, sir?

There is no number which is defined by CCI. So they examine case to case.

Okay. Sure sir and just one last question what could our..

Sorry to interrupt you sir. Can you please join back the queue we have participants waiting for their turn.

Okay.

Thank you. The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.

Sir just a couple of data points, trade share and blended cement for this quarter?

Trade was 68%, blended was 71%.

And capex how much we have done and last time we talked about 9,000...

Our cash outflow was about INR2,000 crores. So we will do our INR8,000 crores to INR9,000 crores of capex in this financial year.

Okay. And for '26, '27 it would be INR11,000-odd crores number too?

No 8,000 crores, 9,000 crores only not more than that.

Yes. So for this year, but overall what we initially talked about in terms of INR30,000-odd crores kind of capex?

There could be some retention money etc. So cash flow might not be there, commitment will be completed.

Okay. And then of the green power sir from currently 29.4% by end of this FY '25 and '26 where it will reach?

60% by end of '26, '27 and 40% to 45% by the end of this year.

Okay. Thank you.

Thank you.

Thank you. The next question is from the line of Sanjay Nandi from VT Capital. Please go ahead.

Thank you for the opportunity sir. Sir can you please guide us on the current clinker utilization for this quarter?

Okay. What was cement to clinker conversion ratio sir?

1.46.

Okay. That’s it. Thank you from my side. Wish you all the best.

Thank you. Moderator; Thank you. The next question is from the line of Amit Murarka from Axis Capital. Please go ahead.

Thanks for the opportunity again. S o on the expansion plans while you have given out the schedule for the expansion, is there a similar schedule for green power like when you said it will reach 45% by end by 60%?

As far as WHRS is concerned yes there will be which I can put in our next presentation So I will share it with you. It's all there.

Okay. And you said that WHRS INR0.85 paisa to INR0.90 paisa per unit . Currently captive power, thermal power cost will be coming at what level?

Thermal power is about 7.3.

Okay. And the group captive solar that you're doing that would be what...

Renewable is 4.3.

Okay got it. Thanks a lot.

Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.

He is not there.

Ritesh Shah may we request you to please go ahead with a question.

Sir when we refer to the logistic cost savings, is there any change in mix basically road, rail and sea that we are looking at besides the deal what you indicated?

No, road remains around 75%. Yes, that's the range i f I'm looking at my data sheets, it's about 73% to 75% is road, 23% to 25% is rail and 2% would be sea.

So are we looking to increase sea o r is it more focused on road and rail and basically reducing the lead?

Yes, reducing the lead and efficiency improvement. So it's not just the distance cost, but there's a lot of other costs that is there which helps us drive efficiency improvement of turnaround time, waiting time, loading time etc. So lots of stuff distances, right distances, right amount of travel. Lots of areas are there to improve logistics cost.

Okay. Fair enough. And sir second and one of the companies which has reported so far indicated on a sequential basis there was some tweak on discounting, is this something that we also witnessed or is it something which was more company specific? Is it more of an industry phenomenon?

I don't know about other companies. We don't have such a policy shifts quarter-on-quarter.

Sure. And sir last one sir is there any target clinker ratio that we have in mind whe n we have given a number of INR300?

1.54.

Thank you sir. That helps. Thank you so much.

Thank you.

Thank you. The next question is from the line of Satyadeep Jain from Ambit Capital. Please go ahead.

Firstly on the expansion just wanted to understand Mr. Daga in the UltraTech has obviously been expanding capacity across India. In your experience in the last few years, have you seen land acquisition or regulatory approvals improve or deteriorate and is there any state-specific or region-specific trend you've noticed where it's become more difficult or easier compared to other regions?

No. It's very difficult to point a finger, but it's not an easy process s omewhere it could -- it all depends on the land parcel that -- if it's a private land available, a large parcel is available, it can be done very fast as compared to that. Otherwise, we start buying our land parcels well in advance. Before announcing of ou r projects we would target completing 50%, 60% or even higher percentage of land purchases. It's a slow process in the country yes. Other than that environment approvals etc these are give or take a year window.

Secondly on the inorganic opportunities. When you look at -- and given your own experience there are certain acquisitions in the past the assets that may be out there, some may have an older footprint in terms of technology one stage, two stage, three stage preheater and maybe wet I'm not sure how many of it. Is it possible to upgrade some of these plants into standard similar to the current technology?

I wasn't witnessed the acquisition of L&T assets, but I have seen in my time the assets of L&T that time being upgraded. So upgradations are possible depending upon obviously we would undertake upgradations depending upon the return on investment that is generated.

Okay. Thank you.

Thank you. The next question is from the line of Milind Raginwar from BOB Capital Markets. Milind. Please go ahead with your question. Your line is unmuted.

Sure. We will move to the next question is from the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead.

Sir, my question pertains to this realization. If I look at your Grey cement realization trend, we see that it peaked somewhere close to 5,390 in Q3 FY '23. And thereafter, it has been drifting lower. FY '24, we have seen 40 -odd million ton of capacity additions, as you mentioned and incrementally a few of the under-stress capacities are also being acquired and hence they would be ramping up adding to the volume pressure. Incremental capacity additions are too on a rise. And third point, if I look at yours Adani and Ambuja, Dalmia all of these are talking about INR200 to INR300 incremental cost reduction. So are we headed towards a situation where next 2 to 3 years we may not see any price improvement at all because companies are benefiting from cost reduction and they will be more than happy delivering INR1,000 to INR1,100 EBITDA margin I mean, the frontline companies.

I have a very standard answer to this kind of a question but it's too difficult to forecast beyond next quarter for prices. You're actually to talk about 2 years and 3 years later. So it's very difficult to see how the markets pan out. If the demand is very strong all-India capacity utilizations for - - yes, all India capacity utilization starts going up above 85%, you could see dramatic price improvements. It all depends upon demand and supply. And in the beginning of my commentary, I think I had started off, if you were there when we started the incremental supply will always be chasing incremental demand in the country. That's a very good sign. Rajesh Kumar Ravi; And just last question, how much clinker capacities are getting added in this financial year and FY '25, '26, '27 in line with the grinding additions that are happening?

If you look at the chart, Page 8 on our presentation, there are 4 IUs getting added, green or brown 2 IUs is already commissioned in Q1 each IU would be around 3.5 million tons.

So even incremental additions that would happen would have similar clinker size?

Yes, please.

Thank you. The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.

My question got answered.

Thank you. Ladies and gentlemen that was the last question for today. On behalf of UltraTech Cement that concludes this conference. Thank you for joining us and you may now disconnect your lines.

Thank you so much.