JK Lakshmi Cement Ltd (JKLAKSHMI) Q2 FY23 Earnings Concall Transcript

JK Lakshmi Cement Ltd  (NSE:JKLAKSHMI) Q2 FY23 Earnings Concall dated Nov. 04, 2022

Corporate Participants:

Sudhir Anna Bidkar — Chief Financial Officer

Analysts:

Vaibhav Agarwal — PhillipCapital — Analyst

Prateek Kumar — Jefferies — Analyst

Shravan Shah — Dolat Capital — Analyst

Kamlesh Bagmar — Lotus Asset Managers — Analyst

Tushar Sarda — Athena Investments — Analyst

Rajesh Kumar Ravi — HDFC Securities — Analyst

Navin Sahadeo — Nuvama Securities — Analyst

Simran Jeet — Omkara Capital — Analyst

Pad Pawser — Investec India — Analyst

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Dharmesh Shah — Emkay Global — Analyst

Vishal Periwal — IDBI Capital — Analyst

Ankur — Quasar Capital — Analyst

Amit Murarka — Axis Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q2 FY ’23 and H1 FY ’23 Call of JK Lakshmi Cement hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital India Private Limited. Thank you, and over to you, sir.

Vaibhav Agarwal — PhillipCapital — Analyst

Yes. Thank you, Melissa. Good evening, everyone. On behalf of PhillipCapital India Private Limited we welcome you to the Q2 FY ’23 and H1 FY ’23 of JK Lakshmi Cement. I need to highlight that JK Lakshmi Cement is also the holding company of Udaipur Cement Works Limited and therefore this call is also open for discussion about the performance of Udaipur Cement Works Limited. On the call we have with us, Mr. Arun Kumar Shukla, President and Director; and Mr. Sudhir Bidkar, CFO of JK Lakshmi Cement. I would like to mention on behalf of JK Lakshmi Cement and its management that certain statements that have been made or discussed on this conference call, maybe forward-looking statements related to future developments and current performance.

These statements are subject to a number of risks, uncertainties and other important factors which may cause the actual developments and results to differ materially from the statements made. JK Lakshmi Cement Limited and the management of the company assumes no obligation to update or alter these forward-looking statements, whether as a result of new information or future events or otherwise. I will now hand over the floor to the management of JK Lakshmi Cement for opening remarks which will be followed by Q&A. Thank you and over to you, sir.

Sudhir Anna Bidkar — Chief Financial Officer

Thank you, Mr. Vaibhav. And good afternoon ladies and gentlemen for this and welcome to Q2 call for FY ’23. We have with us as Vaibhav mentioned Mr. Arun Kumar Shukla, our President and Director, and also my colleague, Mr. Rajesh Sharma. The results you would have seen, I don’t have to harp on or repeat the results. So to say one time the next keep the floor now open for question and answers please.

Questions and Answers:

Sudhir Anna Bidkar — Chief Financial Officer

[Operator Instructions] We have the first question from the line of Prateek Kumar from the line of Jefferies. please go-ahead.

Prateek Kumar — Jefferies — Analyst

Hello yeah. Good evening, sir.Congrats for the results and perfect management. First question is, can you highlight like versus peers our volume growth have been bit tepid but our realization seems to have a significant difference versus what most companies have reported in the sector. So, is there any material difference in our strategy since past six months, which have handled their realization better versus the peers?

Sudhir Anna Bidkar — Chief Financial Officer

Yes. Good afternoon. Good evening Prateek. I think our focus when it comes to prices and realization has been on a couple of things. One of course, how we are going to optimize the geo mix. So that is one area which we have been focusing on for the last so many months. Second has been the premium product proportion, which we are driving, because we do have some good products in our portfolio and we are trying to take advantage of that. And the third of course, I think other elements like product mix, segment mix also which has been in the focus of our team at JK Lakshmi Cement as a whole to drive realization and the top line.

Prateek Kumar — Jefferies — Analyst

So, what could be our trade mix and focusing mix — currently –, how do we look at —

Sudhir Anna Bidkar — Chief Financial Officer

Rendered cement production is about 67% right and 33% is OPC and trade also we are at about you know 54%, 55% now. There has been good improvement in the past few quarters on account of segment mix, which is trade and non trade and product mix which is blended versus pure cement.

Prateek Kumar — Jefferies — Analyst

How is it staying like in past year and how do you see that moving forward next 12 to 18 months from current mix?

Sudhir Anna Bidkar — Chief Financial Officer

So, Prateek, you’re asking about the outlook, business outlook or the

Prateek Kumar — Jefferies — Analyst

Trade mix, has been now 54%, 55%. I guess it was close to 50%.

Sudhir Anna Bidkar — Chief Financial Officer

Our plan is to take it to beyond 60% in the next maybe 2, three quarters right. And blended proportion to about 72% to 75%. So that is our — what our plan is.

Prateek Kumar — Jefferies — Analyst

And — there is a big focus on overall profits but and — as a business leadership like anyaEUR

Sudhir Anna Bidkar — Chief Financial Officer

I think that we need to focus because that is very important and not only about top line but I think you have to really look at all elements of your balancing, right. So when I said that our focus, major focus is on the top line. Of course, I think we need to grow our volume, we need to grow our volume in the right market. We are our complicatedness is better than others. So this is one. Second, I told you about segment and the product mix, which we are driving. And third, of course, the premium product which we have with us. So this is what the focus is on our top line. Of course, I didn focus this on utilizing our full capacity with earning season or clinker adjacent unit and we are keeping a very close eye on each and every element of cost with our logistics costs. With our fuel costs, fuel mix, or power costs. I think this is what our focus is while we are working consistently on top line improvement but at the same time trying to better our performance in terms of efficiency at the plant and all other various things which takes our cement to the customers.

Prateek Kumar — Jefferies — Analyst

And the last question on your capex project. IUCW — project, the timelines for commissioning of the cement, the status of environmental clearance etc, for that project?

Sudhir Anna Bidkar — Chief Financial Officer

So, for Udaipur 75% civil work has already been accomplished. Our target is to accomplish our clinker areas and unit, we hope to complete that project by March 24.

Prateek Kumar — Jefferies — Analyst

So the clinker plus grinding all by March 24?

Sudhir Anna Bidkar — Chief Financial Officer

That is as of now. The clinker would come a little earlier. So maybe around March and a month or two later is going to be the grinding facility.

Prateek Kumar — Jefferies — Analyst

Thank you, sir. I mean that’s the thing all the best thank you.

Operator

[Operator Instructions] We have the next question from the line of Shravan Shah from Dolat Capital. please go-ahead.

Shravan Shah — Dolat Capital — Analyst

Yeah yeah thank you. Before asking the questions a couple of data points. So first is non cement revenue under RMC revenue for the quarter?

Sudhir Anna Bidkar — Chief Financial Officer

Non cement revenue is INR116 crores and RMC is INR52 crores.

Shravan Shah — Dolat Capital — Analyst

And premium was how much?

Sudhir Anna Bidkar — Chief Financial Officer

Can you repeat?

Shravan Shah — Dolat Capital — Analyst

Premium, last time you said 14% of total sales is a premium product, sir. So, what was in this quarter?

Sudhir Anna Bidkar — Chief Financial Officer

It is more than 20% — it’s around 20% — more than 21%, right, yes.

Shravan Shah — Dolat Capital — Analyst

21% of trade shrinks or the total volume?

Sudhir Anna Bidkar — Chief Financial Officer

Total sales. So 21% is —

Shravan Shah — Dolat Capital — Analyst

21% of total volume is a premium share?

Sudhir Anna Bidkar — Chief Financial Officer

21% of trade is volume.

Shravan Shah — Dolat Capital — Analyst

What was the same number in 1Q FY ’23, last quarter.

Sudhir Anna Bidkar — Chief Financial Officer

I think it was 1.5% lower than this.

Shravan Shah — Dolat Capital — Analyst

Oay 19.5%. Okay. What was the lead distance in the 2Q?

Sudhir Anna Bidkar — Chief Financial Officer

Q2 lead distance just 395 —

Shravan Shah — Dolat Capital — Analyst

Still once again, I want to reiterate the first questions again. Still not able to understand clearly in terms of the realization, the growth that we have seen last six months particularly Q1. We have seen a 12% plus and this quarter only 0.4% decline though you have mentioned but if you can elaborate more, because this is — that’s the thing that is definitely positive for us, but we are still not able to understand. And how do we see, in terms of the pricing, for September, how much pricing, price increase we have seen in each of the states or the region where we operate. So that I want to understand.

Sudhir Anna Bidkar — Chief Financial Officer

So on pricing, you are right, September typically is lower demand wise and hence the prices falls over under pressure. Overall, we see — industry wide we see a decline of about, 5% in the prices, right. Okay. So July, August, price wise, I think there was a lot of pressure, but the September prices revised a little bit during the back end of the month, maybe after 15th or so, right? So we have seen revival of prices towards end of September. And now onward, I think, this is going to — take them because demand is improving, right? So this is on market size. If you really look at our net sales, it has gone up by 8% Y-o-Y, right? And if you compare this with previous quarters, it’s gone down by 3%. Okay. So while industry — our estimation is about 5% lower. We are down by about 3% lower than the preceding quarter, and 8% up with respect to corresponding quarter.

Shravan Shah — Dolat Capital — Analyst

But if I look at our trade sales, share has not increased. It has remained rather from the last quarter, it was 56%. Now it is 54%, 55%. Nothing has much changed in terms of the premium share also 1.5%, but the realization increased. So my — not only my — I think the entire street just wanted to understand in detail in terms of the, if you divide revenue by the volume, the realization growth that we are seeing in the first quarter and the second quarter of this year, it is much, much higher than the entire, all other peers. So that thing we are not able to understand. So my question is on the consol level. So I understand on the stand-alone for last quarter, we have changed the method. But on the consol level, nothing changed, it remains. But still we are not able to understand what is driving our realization growth?

Sudhir Anna Bidkar — Chief Financial Officer

And I’ll tell you, Shravan. I think it’s a very good question. And in fact, you have noticed when I started my conversation the first priority of course is geo mix, right? Typically, our presence is there in north, west and east part of India part of this, right. Prices in western part of India is better. So our effort was to maximize our sales in western part of our footprint, where prices are better. Just for give you — to just elucidate this, non-trade realization or margin increase of west is much higher than trade in, let’s say, some part of north and even a part of east, right? So our focus was to first optimize the geo mix. How we can sell more in the area where our margins are low, irrespective of the segment. So that is what is the first effort is, and that is what we have done in the previous quarter and even repo, right? So our — we are consistently increasing our volume share in this part of geography, where our margins are better, irrespective of the segment.

This is one, right? And then there comes, thereafter, within that area, how we are going to optimize, or maximize trade, right? So suppose we have optimized segment mix or geo mix, let’s say, more sales in western part of India. And when it comes to north, then we are optimizing our trade and non-trade segment. If you go to east, the same way, right? So wherever our margins are better, first, we go for geo mix and then we go for non trade. So it’s the kind of hierarchy which we follow, right? We are not really looking at segment per se, was because why at all, we have divided that sale into segment because of the profitability of margin. If you get better margin in non-trade segment, I think we are not averse of that. And that is what we have done in previous quarters.

Shravan Shah — Dolat Capital — Analyst

So just further more on, does our trade, nontrade price gap in last six months, has it reduced significantly versus Q4 average?

Sudhir Anna Bidkar — Chief Financial Officer

Yes. It has gone down.

Shravan Shah — Dolat Capital — Analyst

How much was the — in Q4 and now in the last six months, how much it has reduced, what is the difference of a gap between what we sell in trade and nontrade, on an average? I’m not asking the exact number, but broadly.

Sudhir Anna Bidkar — Chief Financial Officer

I think Shravan, a range is so wide, average would not be the right one. So I’ll just give you an example. In case of west the gap in trade and nontrade is very low. It’s about maybe about INR200 a tonne, right? If you go to Rajasthan and northern part of it, the gap is about INR1,200 to INR1,400 a tonne. If you go to his sizing, cap is about INR400, right? So averaging would not be the right way of looking at this gap between trade and nontrade. But there is a huge, I think, wide bank. So — and that is why I told you that first focus was to really kind of capture some downtrade also in the western part of our footprint, where trade non-trade gap was the list, right?

Shravan Shah — Dolat Capital — Analyst

Last question is on the power and fuel mix. So what was the fuel mix for this quarter and the fuel consumption cost? Because last quarter, we said INR1,700. And how do we see — though we expected 20% increase this quarter, but it has only the 10%. So how do we see now in the third quarter, the power and fuel cost?

Sudhir Anna Bidkar — Chief Financial Officer

In this quarter, our pet coke consumption was about 48%, 39% was coal and balance was the other. Broadly, it was — around — remain the same in the coming quarters. Cost was, yes, you are right. We had thought that it will go up. But thanks to some additional low-cost inventory, we were able to correlate down to less than INR12,000. Going forward, we see that overall fuel costs going up from INR12,000 to INR13,000 in the coming quarter.

Shravan Shah — Dolat Capital — Analyst

So currently, for Q2, it was INR12,000 and it will increase to INR13,000.

Sudhir Anna Bidkar — Chief Financial Officer

That is what our expectation is in the coming third quarter.

Shravan Shah — Dolat Capital — Analyst

And last on the working capital, sir, we have seen the INR420-odd crores increase in the first half on consol basis. So do we see this once again reducing in the second half, so that if you can clarify?

Sudhir Anna Bidkar — Chief Financial Officer

That is increase in working capital is on account of the stocking of the pet coke and coal, primarily on account of that. So it may — depending on our strategy going forward of sourcing pet coke and coal. It may — it is expected to come down. That is what we believe.

Shravan Shah — Dolat Capital — Analyst

Okay thank you sir and all the best. Thank you.

Operator

[Operator Instructions] We have the next question from the line of Kamlesh Bagmar from Lotus Asset Managers. please go-ahead.

Kamlesh Bagmar — Lotus Asset Managers — Analyst

Yeah thanks for the opportunity and Congrats on a good set of performance. Because I have one question, like since we had changed that volume accounting or volume presentation for stand-alone operations right from Q1 FY ’23. So can you like say, give the numbers for the Q1 and Q2 of last year to have the like-to-like comparison.

Sudhir Anna Bidkar — Chief Financial Officer

Like to like — because it will be a enough for us to give because last time we had accounted for as the clinker sale and all that. So that will not be proper. But for the sake of giving the figures I’m telling you. In the corresponding quarter last year, we had total — on a — you want on a consolidated basis, no.

Kamlesh Bagmar — Lotus Asset Managers — Analyst

Like, say, because what happened that there are some doubts in the market that our volumes in standalone has gone down because we don’t have the like-to-like volumes for the last year on the stand-alone front.

Sudhir Anna Bidkar — Chief Financial Officer

I will give you. On a stand-alone basis, this year, you have the volumes. The — 22.36 is cement sales and 0.69 is the clinker sales. Total in this quarter is 23.05. In the corresponding quarter last year, our cement sale was 20.43. So there is an increase in cement sales by 7%, but clinker has gone down. Last year, it was in corresponding quarter, 1.48%. So that has reduced from 1.48% to 0.69% clinker sales. Overall, it is — this time it is 23.05 last year, it was 21.95. Overall growth is 2%, clinker and cement included. But importantly, cement has grown by 7%.

Kamlesh Bagmar — Lotus Asset Managers — Analyst

And same for the Q1 for last year?

Sudhir Anna Bidkar — Chief Financial Officer

Q1, I don’t have because I have the for the corresponding figure quarter I have kept it ready.

Kamlesh Bagmar — Lotus Asset Managers — Analyst

And sir, lastly, like if we see the — our performance or the margins in this quarter, they have been far better. And the way the gap between our and like for the peers, the margins are like say that the gap is hardly around INR100 now. So going forward, like I believe in this quarter, we had some benefit of low-cost coal, which peers may not have.

Sudhir Anna Bidkar — Chief Financial Officer

Right.

Kamlesh Bagmar — Lotus Asset Managers — Analyst

So going forward, do we see this particular trend going on, like, say, INR150 to INR100 gap because over the years, we had this particular argument that on the logistics front, we are not that competitive as against peers because of our plant’s location in — Ciro. So have you been able to contain that particular impact, are margins going to remain, like say, now the gap is going to remain INR50 to INR100 compared to our peers. So what’s the thought process on that part?

Sudhir Anna Bidkar — Chief Financial Officer

Actually, I can’t comment on the fuel cost of the other players. We can talk of what we are doing, as I mentioned in response to an earlier question, our fuel cost is expected to go from about INR12,000 cost to about INR13,000. I don’t know about the other. But yes, this quarter, we have been able to substantially reduce other overhead. Our endeavor would be to continue to work on that and improving as Mr. Shukla mentioned, the geo mix, etc, which helps us to reduce the logistic cost also doing more of direct dispatches and trying to reduce on the need as — so that should help us to bridge that gap going forward.

Kamlesh Bagmar — Lotus Asset Managers — Analyst

And sir, any measures we are taking in each market to bring down our power cost or anything — any particular effort going on there?

Sudhir Anna Bidkar — Chief Financial Officer

East, we are trying to evaluate the possibility of increasing from the renewable sources, trying to see if we can put additional solar power to reduce the cost of thermal generation and that we are evaluating.

Kamlesh Bagmar — Lotus Asset Managers — Analyst

So how much — what is the potential there? So — what can we do there?

Sudhir Anna Bidkar — Chief Financial Officer

Can do about maybe because of the availability of — we can go up to an additional we can — we’ll need to make some investment. We are evaluating the proposal maybe about 30, 40 megawatt we are trying to evaluate.

Kamlesh Bagmar — Lotus Asset Managers — Analyst

And lastly, sir, just one analysis.

Sudhir Anna Bidkar — Chief Financial Officer

Instead of doing the entire capex in our books, we’ll try to get some implementer implement the project for us and we take a stake in that. Because as of now, the state of Chathisgad — allows the various benefit under the captive route by taking only 26% stake. So we are evaluating as of now. So that could — will come with the concrete plan going forward maybe in the coming — in this quarter.

Kamlesh Bagmar — Lotus Asset Managers — Analyst

And sir, lastly, like, say, on the console side, if we take out the non-cement revenues then it seems that realizations have fallen by INR94, INR95. So it’s not the case that our realizations have not fallen. It has fallen, but to a very nice quantum, that is INR94 — because you have provided the non-cement revenues. So based on that, your realizations have fallen INR94. So is it on the current line?

Sudhir Anna Bidkar — Chief Financial Officer

Yes. Other players who are commenting other colleagues of yours who were commenting was maybe because of non-exclusion of the non-cement revenue. Last year, in the corresponding quarter last year, it was INR92 crores. It has gone up non-cement revenue to INR116 crores. If you eliminate that, what you are saying may be right.

Kamlesh Bagmar — Lotus Asset Managers — Analyst

Yeah thanks a lot sir and great for great set of numbers yeah. Thank you.

Operator

[Operator Instructions] We have the next question from the line of Tushar Sarda from Athena Investments. please go-ahead.

Tushar Sarda — Athena Investments — Analyst

All my questions have been answered.

Operator

We have the next question from the line of Rajesh Kumar Ravi from HDFC Securities. Please go-ahead.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Hello. Yeah hi sir good evening I have a few questions. Some of them have already been answered. Could you share the clinker production number for this quarter?

Sudhir Anna Bidkar — Chief Financial Officer

Sorry. Income.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Clinker production in Q2.

Sudhir Anna Bidkar — Chief Financial Officer

Clinker production in this quarter was 19.47%.

Rajesh Kumar Ravi — HDFC Securities — Analyst

–?

Sudhir Anna Bidkar — Chief Financial Officer

14.69 lakhs.

Rajesh Kumar Ravi — HDFC Securities — Analyst

15.69 lakhs. This is stand-alone, console?

Sudhir Anna Bidkar — Chief Financial Officer

14.69 lakhs.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Standalone or console, sir?

Sudhir Anna Bidkar — Chief Financial Officer

This is stand-alone. And UCW was 3.8 lakhs. So on a consolidated basis, the clinker production is 18.49 lakhs.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Sir, if I look at the purchase of traded goods, that number is sort of considerably. I assume this is with regard to the one arrangement with Canadian Cements. So how is this being accounted, sir, you are booking the sale of clinker to them and the purchase of cement from them and subsequently, sale of that cement is moved into the top line again.

Sudhir Anna Bidkar — Chief Financial Officer

Yes. That will be the way it will be accounted for theaEUR

Rajesh Kumar Ravi — HDFC Securities — Analyst

Okay. AndaEUR

Sudhir Anna Bidkar — Chief Financial Officer

To do that way.

Rajesh Kumar Ravi — HDFC Securities — Analyst

How much would be the volume from this — Kanodia Cements, if that would be in Q1 — Q2 number?

Sudhir Anna Bidkar — Chief Financial Officer

About 70,000 tonnes, right? So we started during this monsoon season. So in the end of August about 70,000 tonnes.

Rajesh Kumar Ravi — HDFC Securities — Analyst

And by March, what sort of number you’re looking looking at?

Sudhir Anna Bidkar — Chief Financial Officer

So we have a ramp-up plan for this outsourced unit. And we have a plan to take it to about 60,000, 65,000 tonnes by March 2024.

Rajesh Kumar Ravi — HDFC Securities — Analyst

So 60,000, 65,000 tonnes per quarter?

Sudhir Anna Bidkar — Chief Financial Officer

No, no, per month.

Rajesh Kumar Ravi — HDFC Securities — Analyst

And this quarter it — 70,000 tonnes. So yes okay. If you’re looking to increase your blended cement by another 600 to 700 bps. Similarly, trade share should go up. So a sharp jump in next see, as you mentioned, two to three quarters. So what are the strategies which are — which gives you confidence?

Sudhir Anna Bidkar — Chief Financial Officer

And the question is not clear.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Am I audible now?

Sudhir Anna Bidkar — Chief Financial Officer

Slightly better, better yes. Yes, yes. Sir, I wanted to understand from 54% trade sales, you’re looking to go up to north of 60% over next two quarters. And similarly, your blended shipment share is also expected to expand and which is a good thing, given that you’re running high on clinker utilization. So what is giving you this confidence in terms of your strategies, distribution? Sudhir Anna Bidkar, JK Lakshmi Cement Limited – CFO I think we are reasonably confident that the steps which we are taking at the ground level that is going to help us. And more so, I think although the efficiency — ground logistics efficiencies, which we are looking at, I think that will also help us to achieve this. So we are reasonably confident that it will help us to achieve our objective of blended cement —

Rajesh Kumar Ravi — HDFC Securities — Analyst

Second question pertains to — and earlier participants have also wanted to know this. In terms of realization, see, we understand sequentially, all markets witnessed pressure on the realization while on a blended basis, your numbers don’t reflect that. But for your own markets, can you give us a sense what was the like-to-like realization form across north, west and east markets for you in Q2 quarter-on-quarter?

Sudhir Anna Bidkar — Chief Financial Officer

I think market-wise, we are not ready with all those realization data. What we have as of now is the consolidated one. Perhaps I think we can maybe we can discuss or send you separately this data.

Rajesh Kumar Ravi — HDFC Securities — Analyst

Sure, sir, I’ll discuss with you on that. In terms of two more questions on the green power usage, what is the current green power consumption and what are the targets from FY ’24 what sort of green power number you’re looking at on consumption basis?

Sudhir Anna Bidkar — Chief Financial Officer

We are working quite intensively on improving our green power proportion. And right now, we are close to about 25% of cement renewable source of energy.

Rajesh Kumar Ravi — HDFC Securities — Analyst

And where do you see this number going up?

Sudhir Anna Bidkar — Chief Financial Officer

So we see that the numbers should go to about 37% from currently, we are at 35%.

Rajesh Kumar Ravi — HDFC Securities — Analyst

You’re already the highest in — and other expenses numbers on a quarter and if I look at quarter-on-quarter, they have come off despite lower volumes quarter-on-quarter. So is there any deferment in the maintenance expense or some other costs, which was building up in Q1 has not come through in Q2. Could we explain the Q2 other expense numbers.

Sudhir Anna Bidkar — Chief Financial Officer

Other expenses have dropped in this quarter, you are right. But a major portion of that is like other expenses includes taking commission stores and spares, which are in direct proportion to the change in the production. So production has fallen so of — but overhead, we have slightly been able to reduce on that. So broadly, the fall is in line with the fall in the production.

Operator

We will go to the next question from the line of Navin Sahadeo from Nuvama Securities. please go-ahead.

Navin Sahadeo — Nuvama Securities — Analyst

Good evening, sir.And congratulations on a very good set of numbers, much ahead of Street expectations. Sir, two questions. One is, are we also looking at or in a way already able to narrow the price gap versus peers because since Shukla-ji in his initial comments said the prime focus is on the top line and revenue. So I’m saying, is there already an implementation or a thought to narrow the price gap? How do you see this?

Sudhir Anna Bidkar — Chief Financial Officer

Good evening, sir.And congratulations on a very good set of numbers, much ahead of Street expectations. Sir, two questions. One is, are we also looking at or in a way already able to narrow the price gap versus peers because since Shukla-ji in his initial comments said the prime focus is on the top line and revenue. So I’m saying, is there already an implementation or a thought to narrow the price gap? How do you see this?

Navin Sahadeo — Nuvama Securities — Analyst

Second question that I had was on the cost front. So of course, I think on the power utilization front in terms of overall energy consumption, I think we are already at a fairly low level, even I think both at the clinker stage as well as at the cement stage. And you said you are looking at adding some base — recoveries or more green, renewable energy per se at the eastern plant. Apart from this, what are the other initiatives which are possible to like pull the cost down further, both from a near term or even it’s a medium-term kind of a thing. What could be those revenues, sir?

Sudhir Anna Bidkar — Chief Financial Officer

Okay. So I think renewable is one part which we are working. It is going to help us to reduce costs. So that I told you that we have — we are already at 35%, will go to 37%. Another big area where we are working on is alternate fuel –. Right now, we are at a not so great level, like about 3%, 3.5% level. Our plan is to take this — a proportion to 10% in the next nine to 12 months’ time. And for that, we have already started developing our capabilities at our integrated units. So that is a second major action which we are taking, right? And the third action also is on how we can really use cost-effective raw materials. So just to give you an example, maybe from mineral gypsum versus phosphor gypsum, right, chemical gypsum versus mineral gypsum for fly ash right, also, I think different sourcing fly at sources and different kind of fly at — availability.

So that is another thing, raw material part also, we are looking at it very closely as to how we can use all those resources to reduce our costs without compromising on our promises to customers. So that is another thing which we are working on. And as you know, I think we are already competitive in terms of heat value, power consumption. But we are not at all complacent, let me tell you. I think there is an endeavor to further reduce this cost element, by two ways: one, of course, straightway improvement of efficiency. Second, also, if we can improve productivity to an extent with some low capex intervention. So these are the few actions which we are looking at.

Navin Sahadeo — Nuvama Securities — Analyst

I’ll just leave this with one feedback. But why JK Lakshmi is taking so many efforts like to spruce up the profitability, it will be really great if like, if you can also have some sort of a quarter presentation, which gives volume data and more importantly, the ESG milestone targets if there are because most of the companies, other cement companies tend to talk about this and investors also incrementally are getting aware of ESG targets and the road map that the company has. I think if you include it in the presentation form, it will really help JK Lakshmi really to — not just the realization graph which you are trying, but also the valuation gap in mind.

Sudhir Anna Bidkar — Chief Financial Officer

We’ll do that, we’ll upload that on the website in near future.

Operator

We have the next question from the line of Simran Jeet from Omkara Capital. please go-ahead.

Simran Jeet — Omkara Capital — Analyst

Congrats to the good set of numbers in a challenging environment to all the management. Sir, I have only one question. I want to understand what is the —

Sudhir Anna Bidkar — Chief Financial Officer

Your voice is breaking, can you repeat your question please?

Simran Jeet — Omkara Capital — Analyst

Sir, I just want to understand what is the JK Lakshmi focus on the debt, to bring down the debt of the — Cement, how the company is focusing on that in the future? I mean because you’re still having close to INR1,000 crores of that mix of long and the short in the good — semi. So that is the only point which I want to understand how the JK Lakshmi team is focusing on bringing down the debt of theaEUR

Sudhir Anna Bidkar — Chief Financial Officer

Basically is in the process of implementing this project of expanding its capacity in clinker of 1.5 million, which will take their capacity to go from 1.5 million to three million and cement capacity from 2.2 million to 4.7 million. Then that project will cost INR1,650 crores — and we are planning to contract and to fund that to a debt equity of 2:1, contracting INR1,100 crores of debt. So basically, we don’t have any immediate plans to suddenly bring down the debt. They already have about INR500 crores of debt based on the existing capex, which they have done in the recent past. And gradually, it will get paid off from their cash flows only. No immediate plan to as such, pay off any debt because otherwise, that will require induction of funds from JK Lakshmi only. We are, in any case, going to fund about INR400 crores through the rights issue, which will come in the next year. So no immediate plan as such. But yes, to the extent possible, we’ll try to pay off from their cash flows only.

Simran Jeet — Omkara Capital — Analyst

— of the right issue is for the Udaipur or for the Jonkoping —

Sudhir Anna Bidkar — Chief Financial Officer

— part finance the expansion project. So out of INR1,650 crores, INR1,100 crores comes by debt and INR550 crores is the promoter’s contribution. And out of that INR150 crores comes from the internal accrual of UCWL — and INR400 crores would be to the right issue size of UCWL. And JK Lakshmi being a 72% holder of shares in UCWL will have to fund a major portion of the rights issue, balance 28% coming from the public.

Simran Jeet — Omkara Capital — Analyst

We’ll go to Lance thank you and all the best for your upcoming visa thank just thank.

Operator

We will move to the next question from the line of Pad Pawser from Investec India. please go-ahead.

Pad Pawser — Investec India — Analyst

This. Hello yes please thank you for the opportunity,Sir, I just had one question that you said that your geo mix is improving and the focus going ahead would be on the geo mix. So can you help me with this, like in this quarter, what was the geo mix in percentage terms that you could share?

Sudhir Anna Bidkar — Chief Financial Officer

So we have divided the different geographies into GY&R we call it green, yellow and red. So green proportion is going up month after month, right? And our green proportion as of 30th of September was more than 55%.

Pad Pawser — Investec India — Analyst

So green is basically blended cement?

Sudhir Anna Bidkar — Chief Financial Officer

No. The green is based on the margin, right? You talked about geo mix, right? I am talking —

Pad Pawser — Investec India — Analyst

So in terms of red notaEUR

Sudhir Anna Bidkar — Chief Financial Officer

Yes. So what we have done is all markets are divided into GY&R, green, yellow and red categories based on the margins which we get, right? We try to sell maximum quantity in G area, right, where margins are.

Pad Pawser — Investec India — Analyst

Okay. So green is right now at 55%. And what was this number last year?

Sudhir Anna Bidkar — Chief Financial Officer

It was about 52%, 53% report.

Pad Pawser — Investec India — Analyst

And yellow and red, if you could.

Sudhir Anna Bidkar — Chief Financial Officer

I think red is, I think, building the fastest, right? So red still is about 12% around.

Pad Pawser — Investec India — Analyst

And this was red was, what was it, red last year, sir?

Sudhir Anna Bidkar — Chief Financial Officer

15%.

Pad Pawser — Investec India — Analyst

15%. Perfect thank you so much.

Operator

We have the next question from the line of Uttam Kumar Srimal from Axis Securities Limited. please go-ahead.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Yeah. I would and Congratulation for a great set of numbers. Sir, my question relates to gross debt and net debt position on a stand-alone basis?

Sudhir Anna Bidkar — Chief Financial Officer

Sorry.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Gross and net debt on a stand-alone basis?

Sudhir Anna Bidkar — Chief Financial Officer

The stand-alone of our total debt on a stand-alone basis is about close to INR900 crores and net is about INR225 crores.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

INR285 crores.

Sudhir Anna Bidkar — Chief Financial Officer

INR225 crores.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

And sir, we have reported EBITDA turnover was around INR600 crores for this quarter. So what kind of EBITDA turn we are looking in quarter three and four since commodity prices also softened.

Sudhir Anna Bidkar — Chief Financial Officer

It is difficult to pinpoint a figure of EBITDA. Target is to ultimately go up to INR1,000 crores EBITDA. But considering the increase in the fuel cost, it may take some time for that to actually materialize. But endeavor would be to ultimately have a 4-digit EBITDA.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

And sir, what has been our rail road mix this quarter?

Sudhir Anna Bidkar — Chief Financial Officer

In east we don’t have much.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

I think rail proportion is the less and maybe — we do not have the exact data we can give you a little later. We’re not carrying that. But I think majority is road only. That way. Only west I think some of the market we go through rail. Otherwise, it’s all road. Okay sir that’s all from my side and. All the best for the future Indiabulls. Thank you.

Operator

[Operator Instructions] We have the next question from the line of Dharmesh Shah from Emkay Global. please go-ahead.

Dharmesh Shah — Emkay Global — Analyst

Thanks sir for giving me the opportunity and Congratulations on good set of numbers. Sir, my first question is on the company’s strategy side from the next two to three years perspective. And if you can just prioritize what are the number one priority and number two priority?

Sudhir Anna Bidkar — Chief Financial Officer

Yes. So I’ll tell you the top level strategy. I will give you, and this is what in fact we are working on. One, of course, I think we are working with a lot of focus and a lot of intent on the top line. And when I talk of top line, then it includes improving volume, it includes quality of volume, which I told you, the geo mix, how we can sell in the right area at the right price, right? Our focus is leveraging our brand because we do have some good products in our portfolio of how we can leverage and really kind of go to the customer with the right value and the right kind of product and services which we have. So leveraging our brand, which we have. We are also working on — I think some of you asked the question of price positioning, how we can really improve our price positioning. So this is also a strategy. There are some milestones which we have set for ourselves. We have started working on that. So that is another one.

And of course, I think blended cement and trade mix wherever favorable, that is what the top line strategies are. And for each and every element, we do have quantifiable numbers as to what we are targeting and how we are going to achieve that. So those things are in place. When it comes to operations, I think our focus is on renewable energy. How we can really take our renewable energy from 35% to maybe beyond 50% going forward. For that also, we have prepared some road map. That which is a combination of solar power plant, wherever possibility of improving efficiency in — WHR, right. Then on fuel, I think our strategy is to improve our AFR, — AFR we are there at about 3%, 3.5% now. How we can really go to 10% at the first place and then to 15%. And for that, I think we have already started working on that. We are also working quite intensively on using digital and technology to drive performance. We had started a pilot project in our kiln as to how — AIML can help us in kind of improving our kiln efficiency and also improving optimal fuel mix.

We have also started kind of monitoring all our critical equipments through this IoT, Internet of Things. So a lot of digitalization, which is happening in the operations side. At the logistics front, our focus is to really work on a lead, how we are going to reduce our lead. And if we really achieve our geo mix target, then I think it is the result of — so this is, in a way, I would say the lag indicator, but the leading indicator, of course, is geo mix. — PTPK is the pure logistics factor, which we are working on how we can reduce PTPK with a lot of analytics and also using technology. So OTM, we have implemented in all our plants, Oracle Transport Management so how we can improve turnaround time. And hence, if we can really work on reducing our PTPK and logistics cost. So that is the other area we are working on. I think a lot of things on customer interface. So using digital, give them a differentiated experience like now our dealers place their order over WhatsApp, right? So WhatsApp — bot we have recently launched. They have got their app, they can place their orders through mobile. They can look at their account statement and all those stuff.

So I think there also, I think, is going to help us to achieve our in a way top line and the positioning which we are seeking for — our focus also is on ESG. I think which combines a host of things, some of the things which I have already mentioned you. But yes, I think ESG front, I think, is one of our focus area where we are going to work on reducing carbon footprint. We have taken a very ambitious target of being carbon neutral by 2047. And right now, just to give you a sense, we are at about 555 kg per tonne of — cement as of today. Our focus is to reduce this and being the — among the best in the industry. So that is another focus which we have. So this is what I think broader, I would say, strategies which we have, which includes, just to summarize on top line, driving top line performance in terms of volume, premium and pricing. On operations, it’s all about operational efficiency using different means like — renewable AFR and digital. On the customer front, using the digital to really give them the right value and get the right value from them. On logistics side, I think using digital and a lot of other methods like OTM and e-bidding those things we are working on. So this is a nutshell, I think, our strategy.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Sir, secondly, — freight distance are broadly flat on a quarter-on-quarter basis. But what does it explain the decline in the freight cost per tonne?

Sudhir Anna Bidkar — Chief Financial Officer

Freight costs per tonne.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

So looking at consol basis?

Sudhir Anna Bidkar — Chief Financial Officer

So looking at consol basis?

Dharmesh Shah — Emkay Global — Analyst

We are trying to increase the proportion of direct dispatches, which is helping us apart from the BTK a– nd other things.

Operator

We will move to the next question from the line of Vishal Periwal from IDBI Capital. please go-ahead.

Vishal Periwal — IDBI Capital — Analyst

Yes thanks for opportunity. More clarity, if you can just provide on the band which you mentioned green, yellow and red. So what kind of — I mean like sales qualify for a green, any particular EBITDA margin or threshold that is there or it will vary every quarter.

Sudhir Anna Bidkar — Chief Financial Officer

So that varies because based — you know that situation is quite volatile, right? So this GYR is dynamic. So typically, right now you cannot really put EBITDA because maybe during quarter 1, EBITDA green would have been different than what green is today, right? So this is based on the band of margins which we have from different markets. And based on that, this is dynamically decided that this is what GY&R is. And typically, those — see, we have a metric of just to give you a little bit more on this. We have a metric of one — this total delivered costs in that particular market and the margin, right? In a way, most of the time, I think this is in the direct relationship. If you are logistics or total delivery cost is low, then typically you’re going to have better margins. Unless you have different market dynamics, where prices are not operating that, right? So we have a metric of total delivered costs and margin and market share. So based on that, we kind of categorize our market in categories of GY&R.

Vishal Periwal — IDBI Capital — Analyst

So just a clarification. So this GYR, it’s not per margin. It is a combination of 3, is it some sort of data you are going.

Sudhir Anna Bidkar — Chief Financial Officer

Right. But invariably, your — TDC is lower, then I think typically, those markets are going to be falling in that in a green category. If market — is entirely different, that is a different issue. But that is, I think, a very rare, right?

Vishal Periwal — IDBI Capital — Analyst

But then you did mention in this call that west has been a better market. So can we broadly say green is something probably west region oraEUR

Sudhir Anna Bidkar — Chief Financial Officer

Yes, you’re right. So maybe I think the green is the west region, Y typically, some of the markets of north and red is the far off market. Yes, you are right.

Vishal Periwal — IDBI Capital — Analyst

And last thing is, can you give clarity like how is the pricing behaving for us in the market. I think you did mention like from September onward, there has been a price hike, which is their — moved also there in October. And can you give us some color like region-wise, which has been better market for us in terms of pricing in this quarter three probably season? September, I think I told you that a little bit inching of prices towards the fag end of the month. October more or less has been flat.

There has not been any increase because of the reasons like demand was again low the Dassara, Deepavali — both in the same month and also prolonged Southwest monsoon, right? But November onwards since I believe that demand is going to pick up, and we do have some initial signs say — initial sense towards that. So prices will definitely likely to go up, I would say, in coming months, which is going to be better than October. But again market dynamics, we — just based on the demand situation, we can reasonably say that yes, prices will go up.

Operator

Thank you. Before we move to the next question, we would like to inform participants that due to time constraints, we will be able to take the last two questions only. The next question is from the line of Ankur from Quasar Capital. please go-ahead.

Ankur — Quasar Capital — Analyst

Congrats on a good set of numbers. Sir, all my questions have been answered.

Operator

We have the next question from the line of Amit Murarka from Axis Capital. please go-ahead.

Amit Murarka — Axis Capital — Analyst

Yeah hi thanks for the opportunity sir thanks for explaining your focus areas and what you intend to do on the.intent of kind of improving the price realization. So I just wanted to understand like how are you going about it in terms of your distribution network? Are you also trying to revamp your distribution network to do the same? Or is it going to happen through the same network?

Sudhir Anna Bidkar — Chief Financial Officer

Thanks. I think very good set of questions. It’s also about — see margin and prices not only in the function of the right case or the right [Technical Issues] also the proper channel, which you have. And I think whoever has mentioned in a lot of write-ups that this also really affects the margins [Technical Issues] so yes, I think we do have a strategy, what we call is the channel strategy. So what kind of channels we are going to set up, like is there going to be a balanced kind of architecture include some big dealers or maybe more midsized dealers and not too long tail, right? Based on the competitive environment and competitive landscape, we do have a strategy to set up a design channel architecture in different markets, right? So what kind of dealers we are going to have. And of course, I think that also is part of our strategy when we talk of improving our volume and premiumness in the market.

Amit Murarka — Axis Capital — Analyst

And but generally, like when you go about like doing some changes in the dealership network, like typically, how long can it take to revamp this distribution channel?

Sudhir Anna Bidkar — Chief Financial Officer

I would not say this revamp. I think I would say this process of metamorphosis is right. It takes time and you do this gradually and in a designed way, right? Because you were in the market and I think revamping, I would not really go for entire revamping right away. Probably I think what you can do is without — just for example, if you want to really grow a certain set of dealers, let’s say mid size or lower segment dealers, then you have your strategy aligned to that rather than — two ways are there kind of improving a set of dealers, either you kind of improve their volume and improve their presence or you reduce the upper one, right? But I would say, I think what we do, I think, we’ll improve all of them. And probably the desired one will be improving much more than the other one. So this is the way we are going about it.

Operator

Ladies and gentlemen, that was the last question for today. I now hand the conference back to Mr. Vaibhav Agarwal for closing comments. Please go ahead, sir.

Vaibhav Agarwal — PhillipCapital — Analyst

Thank you on behalf of PhillipCapital India Private Limited, we would like to thank the management of JK Lakshmi Cement for the call and also many thanks to the parties for joining the call. Thank you very much, sir. Melissa you can conclude the call. Thank you.

Sudhir Anna Bidkar — Chief Financial Officer

Thank you, Vaibhav.

Operator

Thank you, members of the management and Mr. Agarwal. [Operator Closing Remarks]