UltraTech Cement Ltd (ULTRACEMCO) Q3 FY23 Earnings Concall Transcript

UltraTech Cement Ltd (NSE:ULTRACEMCO) Q3 FY23 Earnings Concall dated Jan. 23, 2023.

Corporate Participants:

Atul Daga — Executive Director and Chief Financial Officer

Kailash Chandra Jhanwar — Managing Director

Analysts:

Indrajit Agarwal — CLSA — Analyst

Pinakin Parekh — J.P. Morgan — Analyst

Ritesh Shah — Investec — Analyst

Sumangal Nevatia — Kotak Securities — Analyst

Prateek Kumar — Jefferies — Analyst

Raashi Chopra — Citigroup — Analyst

Amit Murarka — Axis Capital — Analyst

Pulkit Patni — Goldman Sachs Group, Inc. — Analyst

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

Navin Sahadeo — Nuvama Wealth and Investment Ltd — Analyst

Girish Choudhary — Spark Capital Advisors (India) Pvt. Ltd. — Analyst

Rajesh Ravi — HDFC Securities Limited — Analyst

Rakesh Vyas — HDFC Asset Management Company Limited — Analyst

Shravan Shah — Dolat Capital Market Private Limited — Analyst

Ritesh Shah — Investec Bank plc — Analyst

Sanjay Nandi — Ratnabali Capital Markets Ltd — Analyst

Girija Shankar Ray — Systematix Shares & Stocks (I) Ltd. — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the UltraTech Cement Limited Q3 FY ’23 Earnings Conference Call. We must remind you that the discussion on today’s call may include certain forward-looking statements and must be therefore reviewed 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 subsequent development, information or events or otherwise. [Operator Instructions]. Please note that this conference is being recorded.

I’ll now hand the conference over to Mr. Atul Daga, Executive Director and CFO of the company. Thank you, and over to you, Mr. Daga.

Atul Daga — Executive Director and Chief Financial Officer

Thank you so much. Good morning, and welcome to everybody to our earnings call for Q3 FY ’23. This quarter, if I can sum up in a few words, it is much ado about nothing. That is what I would want to describe the quarter that has gone by.

Coming to the brass tags, volumes are good, costs remain extended and prices are stable, though we would have wanted them to be better. The focus of the industry is now shifting on to managing its costs, and let’s talk about the emerging scenario on costs. The biggest one, of course, is fuel, and there are multiple factors that we need to keep in mind. The ongoing war situation, as you know, is one of the reasons for global fuel supply upset. The only silver lining is that we have seen peak prices behind us and don’t expect too much of volatility. A small decline in prices of fuel and we start celebrating. This is not the wisest thing to do. These small corrections are still significantly higher than the normal cost and quite often temporary. And like the stock markets, it is not possible for everyone and anyone to catch bottom prices only. Second factor, of course, is China. As you’re all aware, China has gone through the most turbulent time with COVID, and industrial activity has come to a grinding halt. The economy has just opened up, and I’m sure the consumption will rise. Some news article said that 80% of the country had been already infected with COVID. The population has not grown at the pace at which India has grown, and India has become more populated than China now. China in spite of their own capacities has always been net importers. So as and when the industrial activity picks up in China, there could be definitely increase in imports in China, which will impact the overall global supplies of fuel. Third important factor to keep in mind is that there are no new pet coke capacities coming up globally, and cement capacity in India is on the growth path. So in the long run, we don’t expect any significant softening in fuel prices. As I said, the worst is behind us. So I’ve spoken about costs. Now let’s look at the brighter side, demand. As expected, we are seeing the Indian demand surge at a fabulous space. First three quarters have already generated a double-digit growth for us. And January-March quarter seems to be on a solid footing. Infrastructure story of the country is booming as also the urban real estate continues to do well. This is where I believe UltraTech has got its expansion strategy bang on and as always, a highly valued accretive strategy. Our target is to start the next financial year with close to 130 million tons of capacity. Capacity utilization already improved to 83% in this quarter — in the reported quarter, and we expect it to go up further in the last quarter of the financial year. In fact, if I go back in the last few years, January-March have been typically 95% or 100% capacity utilization. And the way things are going, this quarter should be no less.

Government focused on developing good quality infrastructure bodes very well for the Indian economy and cement industrial life. All the highways and DFC corridor that has been developed will help move goods at a lower cost, lower wear and tear of vehicles, which will ultimately help improve efficiency and reduce costs. Airports in India have been growing their network slowly and steadily. Smaller towns are getting connected. The last I heard was a plan — a government’s plan to increase the network of airports in India from 137 to more than 200 airports. Metro networks are already commissioned or under implementation in 27 cities in the country and 17 more are on the drawing board. The natural extension of all this infrastructure growth is an improvement in demand for urban housing, and we are already seeing that right now. I believe we will see a strong growth in cement consumption in the country with all the infrastructure growth happening. The other point to keep in mind is that the demand for OPC cement will remain strong and perhaps grow over the years. This is where yet again, UltraTech is very well placed. As I mentioned in the earlier part, the first nine months have already delivered a double-digit growth, and this Q4 remains strong, and the future quarters also are expected to remain strong. Typically, [Indecipherable] tell you about our expansion plans, the way things are going. We have already commissioned 6.8 million tons during the first nine months and will commission close to 10 million tons in the next few months. Further, work has already commenced in full swing on the Phase 2 expansion of 22.6 million tons. Long lead item orders have already been placed, and civil work has already started at most of the sites. We should be able to deliver this capacity expansion on time by ’25, ’26. Prices, it’s — the commentary is half complete if the prices have not spoken about. But we do not see a significant move in prices. I guess the demand seems to be so good that the industry is focusing on operating leverages at the moment. But in the current scenario, where several players might not have supplies to cater to the rising demand, prices seem to be safe. Unfortunately, higher prices than the current levels are required to cover the cost pressures. With the increasing capacity utilization, we expect prices should firm up. Sustainability continues to be our focus. We continue to march ahead in increasing the share of green energy in our overall fuel basket. With technology on pump storage and battery storage in the offing in the next few years, we are confident of reaching the milestone of 50% of green energy in our overall basket by 2030 and thus — thereby reducing the requirements on fossil fuels.

To conclude, I must share with you that cement industry in India and UltraTech seem to be going strong. Thank you so much. Over to you for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. The first question is from the line of Indrajit from CLSA. Please go ahead.

Indrajit Agarwal — CLSA — Analyst

Yeah. Good morning. Thanks for the opportunity. I have two questions. First, on the mix between trade and non-trade. Has it changed significantly quarter-over-quarter? And with elections coming ahead and infrastructure spend, as you correctly highlighted, picking up, do you think that non-trade would pick up more in this calendar year than what we have seen calendar ’22?

Atul Daga — Executive Director and Chief Financial Officer

Yeah. First, to your question on our mix, we hover around 66%, 67% [Technical Issues] quarter might be up or low, this particular quarter, we were 66% on trade and blended was about 68%. So the interesting points to first, Indrajit, is our trade ratio was 66% and blended was higher than the trade ratio, which means that blended cement is going in other areas — in markets other than trade as well. Secondly, I already mentioned, we expect OPC or non-trade segment OPC sales to continue to remain strong as India sees the surge in infrastructure growth.

Indrajit Agarwal — CLSA — Analyst

Sure. Thank you. My second question is, if you can throw some more light on the Super Dalla unit, where exactly are we on this, what is the point of contention and what exactly is the road ahead? I understand you have intent to arbitration, but what are the key milestones that we should look for?

Atul Daga — Executive Director and Chief Financial Officer

I mean so — the matter is sub judice right now, so I wouldn’t want to color anybody’s mind. It’s under arbitration and perhaps will go through its own — find its own way, I would say, once the arbitration is over.

Indrajit Agarwal — CLSA — Analyst

Okay. Thank you. I have more questions. I’ll join back.

Atul Daga — Executive Director and Chief Financial Officer

Sure.

Operator

Thank you. The next question is from the line of Pinakin Parekh from J.P. Morgan. Please go ahead.

Pinakin Parekh — J.P. Morgan — Analyst

Thank you very much, sir. Sir, I have two questions. First is your commentary on pet coke. Now even at current thermal coal prices on a per kcal basis, pet cokes still remain relatively attractive, but you did highlight that given structurally, India’s larger capacity addition and no pet coke capacity additions globally, pet coke prices are unlikely to decline materially. Does this mean that at an industry level, the INR1,000 energy cost per ton, which the Company was seeing and the industry was seeing, which is now at INR1,800, we are unlikely to revert back even if coal prices were to come up 10%, 20%, 30% from here and the new normal is structurally higher on energy cost front?

Atul Daga — Executive Director and Chief Financial Officer

You are absolutely right, Pinakin. I think this is the new normal, coal costs from $70, $80 are now on a converted cost basis more than double. So 10%, 20%, 30% reduction will still not yield those numbers. I remember we had seen INR950 a ton energy cost also. So we — there is — in the near future, that does not seem to be a likely scenario. I don’t know what will happen, how the world will change once and if the Ukraine war is over. So as of now, we are in a situation of extended fuel prices.

Pinakin Parekh — J.P. Morgan — Analyst

Sure, sir. My second question is on cement prices. Now if we take a 12- to 18-month view, you have commented at the beginning of your — at the call that even though the industry is seeing strong demand growth, the industry seems to be focused on meeting demand and you do not expect prices to move. Now from here, starting from March, April, you will be bringing on capacity. There will be other players who will be bringing on capacity. So at that point of time, the incremental supply is higher. And if the industry is struggling to take price hikes now when demand is in double digits, what happens to pricing in the latter part of FY ’24 when there will be large new capacities on the ground, shouldn’t prices correct from here then?

Atul Daga — Executive Director and Chief Financial Officer

I wouldn’t expect that because I believe that the demand will continue to remain strong and in this fiscal ’24 reelection, things should remain stable. I’ll require Jhanwar Ji to add further.

Kailash Chandra Jhanwar — Managing Director

Yeah. So good morning to all of you. One, obviously, the new capacity is going to be added by us as well as by the other players. But as you know, the new capacity generally takes its own time to ramp up actually. And particularly, we all know this is going to be the election year, not only for the center, but a number of state governments. I think that demand would be likely to be reasonably good, strong, robust, so we don’t think there would be unusual pressure on the pricing. But yes, you never know how the overall market set out.

Atul Daga — Executive Director and Chief Financial Officer

So, Pinakin, to [Indecipherable] also mentioned is that there shouldn’t be any undue pressure on prices. I would — if I were to put it on a chart, it would be stable to rising trend only.

Pinakin Parekh — J.P. Morgan — Analyst

Sure. Sure, sir. And sir, just last one qualitative comment if you can give us the double-digit demand that the Company saw in this quarter, how much would be driven by government spending on infra or the government projects? Would it be half? Would it be two-thirds? I know you cannot have an absolute number, but broadly just trying to understand the trend.

Atul Daga — Executive Director and Chief Financial Officer

Our institutional sales have been good. And during the course of the call, I’m asking my colleagues to figure out a number and tell you. You have anything right now?

Kailash Chandra Jhanwar — Managing Director

Yeah, the government [Speech Overlap] is spending, particularly the major segment is from the road and other segments. So it is somewhere maybe 18% to 20%, not more than that actually. Other is [Speech Overlap].

Atul Daga — Executive Director and Chief Financial Officer

[Speech Overlap] retail demand continues to drive growth. Now if you have grown 13% and maintained a 66% retail therapy, then it’s balanced and moving in the same direction, nothing untoward.

Pinakin Parekh — J.P. Morgan — Analyst

Sure. Sure. Understood. Thank you very much, sir.

Operator

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

Ritesh Shah — Investec — Analyst

Yeah. Hi, sir. Thanks for the opportunity. Sir, my first question is on Dalla. Can you just explain to us basically what’s led to the arbitration what we are looking at right now? And secondly, what are the assets under contention? That’s the first question, sir.

Atul Daga — Executive Director and Chief Financial Officer

So the asset under contention is Dalla Super unit, which we had already acquired. And as I mentioned earlier, right now, the matter is sub judice, under arbitration. So let’s just get — let’s complete that, and then we can discuss it further.

Ritesh Shah — Investec — Analyst

Right. Sir, can you just basically highlight what is the capacity over here? Is it [Technical Issues]?

Atul Daga — Executive Director and Chief Financial Officer

That’s 2.3 million tons of clinker.

Ritesh Shah — Investec — Analyst

And sir, would it also have 150 million tons plus of limestones basically when we bought from JP and JP bought from UltraTech from [Technical Issues].

Kailash Chandra Jhanwar — Managing Director

I don’t think we should guess because still the limestone is under the forest litigation actually. So as Atul said, it’s metal litigated actually and would be unfair to talk much about those things because nobody knows what kind of reasons would be there.

Ritesh Shah — Investec — Analyst

Sure, sir. Sir, my second question is, how should we look at basically the situation in Himachal Pradesh. Have we got some increase in market share over there? Because I think other leading players, they have some tussle with the transporters. So are we making good out of the scenario? How should one understand it? Or should we also hope that there could be some reduction in transport costs overall for the industry?

Kailash Chandra Jhanwar — Managing Director

Yeah, just to answer your question. So first of all, once there is a shutdown of any plant actually belongs to any one of us actually in the industry. The natural supply happens from the different players actually. So if somebody assumed that by the closure of the plant temporarily because of the transport union problem, actually, there is — I don’t think there is a major swing in the market share or anything else. Yes, some here and there supply gets improved for a [Indecipherable].

Atul Daga — Executive Director and Chief Financial Officer

Temporary phenomenon.

Ritesh Shah — Investec — Analyst

But sir, are we watching for a reduction in freight costs like what we have seen in Chhattisgarh earlier, I think [Technical Issues] they talk economics and basically, they can actually play a hardball with the transporters. So what is our thought process? Or are we okay to pay, say INR10 plus per kilometer per ton? How are we looking at the situation?

Atul Daga — Executive Director and Chief Financial Officer

Ritesh, we are watching the market, and we will see how to deal with the situation.

Kailash Chandra Jhanwar — Managing Director

Nobody is okay to pay, but you know that it’s a problem since last — not one decade, it is from two, three decades actually. [Speech Overlap].

Atul Daga — Executive Director and Chief Financial Officer

So, we’ll wait and see.

Ritesh Shah — Investec — Analyst

Sure. I have two more questions, if you allow, I can go ahead, sir, [Speech Overlap].

Atul Daga — Executive Director and Chief Financial Officer

We will let others take the questions [Speech Overlap]. Yeah.

Ritesh Shah — Investec — Analyst

Sure, sure, sir. Thanks.

Operator

Thank you. The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.

Sumangal Nevatia — Kotak Securities — Analyst

Yeah. Good morning, everyone. I joined the call late, so I just missed in case it was discussed. I just want to get some sense on the cost deflation that we expect in, say, fourth quarter. And also, I mean, with domestic coal availability improving, does it really swing the needle for us on cost in the medium term or very little reliance on that?

Atul Daga — Executive Director and Chief Financial Officer

So domestic coal from [Indecipherable] perspective is used very limited. It is mostly used for power plants. And so we had a high cost curve Q3, I expect the fuel cost to be lower in Q4 for us as well.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. Okay. Sir, any quantification, I mean, just any broad range?

Atul Daga — Executive Director and Chief Financial Officer

I don’t want to give numbers for the future.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. So other than coal cost, fuel cost and say, operating leverage, any other cost items, any deflation in any raw material [Speech Overlap]?

Atul Daga — Executive Director and Chief Financial Officer

Others are benign. Others not too much. Fuel is the most — the biggest driver right now. Other point, which I can add, is on logistics front, when this quarter, the busy season surcharge was brought back. Effectively, our logistics play has been good to be able to absorb that cost and continue to deliver more or less around the INR1,200 per ton overall freight cost. This is in spite of that busy season surcharge getting added, which would be a significant portion.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. And I was a bit surprised to see that fly ash cost index also rising consistently. I mean any color, I mean, what’s happening there? And is it like any temporary phenomena, which is likely to [Speech Overlap].

Atul Daga — Executive Director and Chief Financial Officer

[Speech Overlap] it’s all about availability, if one particular power plant is shut down, then suddenly there is a surge in prices and availability is an issue, but you won’t see prices coming down because the number of thermal power plants in the country is not going to go up and fly ash consumption will keep going up.

Sumangal Nevatia — Kotak Securities — Analyst

Got it. Got it. And Atul sir, just if I could get your, say, margin expansion outlook in the medium term, say FY ’24, do we expect energy cost normalization and operating leverage to play a bigger part or prices also should contribute equally and [Speech Overlap].

Atul Daga — Executive Director and Chief Financial Officer

I think it should be a wholesome game. All the levers will have — will play. It’s only about which lever — which vehicle runs faster than the other. So you will have operating leverage advantage, for sure. Hopefully, the fuel cost should remain range bound. We don’t expect them to grow, spike up dramatically the way that spiked up earlier. Prices should remain stable. I think you must have heard the comments earlier. Prices should remain strong — should remain stable or in an upward move only.

Sumangal Nevatia — Kotak Securities — Analyst

Got it. Got it. And just one last question. I mean [Speech Overlap].

Atul Daga — Executive Director and Chief Financial Officer

Can you come back?

Sumangal Nevatia — Kotak Securities — Analyst

Okay. I’ll, sure. [Speech Overlap]. Okay. Thanks and all the best.

Operator

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

Prateek Kumar — Jefferies — Analyst

Yeah. Good morning, sir. My first question is on your foreign [Phonetic] fuel cost. On — in your presentation on the energy cost trend slide, we have given this pet coke index, which seems to have corrected 20% or 15%, 20% from the peak seen a couple of quarters back, while our energy cost index seems to be slightly higher. So does that — I mean, just imply like we could be like looking at 20% kind of correction?

Atul Daga — Executive Director and Chief Financial Officer

So, it is a catch-up game. So we had exhausted our old contracts and low-price procurement. October/December was our highest cost of fuel. I expect the curve to again narrow as we progress in the future years — future quarters.

Prateek Kumar — Jefferies — Analyst

But just looking at the green line in that chart, our index has gone up from 131 to 175 from — for energy cost while the other line of pet coke had come back from 204 to 203, so [Speech Overlap].

Atul Daga — Executive Director and Chief Financial Officer

So the next quarter onwards, this 175 will also start dropping. So you will see that correction happening.

Prateek Kumar — Jefferies — Analyst

Okay. So that seems like a large benefit, which might be [Technical Issues] coming on like from the next quarter?

Atul Daga — Executive Director and Chief Financial Officer

Yes.

Prateek Kumar — Jefferies — Analyst

Okay. Sir, secondly, on price comment of yours remaining strong or stable, so like in 2019, we saw like prices because of the strong volume trajectory pre-election year, industry was not able to take major price hikes. So is this something which we are indicating that prices may remain like totally flat in first busy season and the industry might not be looking to reclaim what profitability they want achieved in FY [Speech Overlap]?

Atul Daga — Executive Director and Chief Financial Officer

Beyond a point, I think everybody wants price improvement, price increases given the cost curve, so at the same time, nobody would want to lose on their market share. And typically, in a very high-growth time frame, focus will always be on meeting the demand, so I don’t expect prices to crash, correct, but stable to upward move is what I could expect. When and how much is very difficult to quantify.

Prateek Kumar — Jefferies — Analyst

Sure, sir. And the last question, would you have like region-wise utilization and pricing data for the quarter?

Atul Daga — Executive Director and Chief Financial Officer

I don’t have it right now. I’ll give it to you later.

Prateek Kumar — Jefferies — Analyst

Sure. Thank you, sir.

Operator

Thank you. [Operator Instructions]. The next question is from the line of Raashi Chopra from Citigroup. Please go ahead.

Raashi Chopra — Citigroup — Analyst

Thank you. I have two questions. One is on the basis your commentary on pricing as well as costs. From an EBITDA per ton perspective, where should we kind of see it settling on the [Technical Issues] number one?

Atul Daga — Executive Director and Chief Financial Officer

It should cross the four-digit mark for sure. I would expect January market sale should cross four-digit mark.

Raashi Chopra — Citigroup — Analyst

Okay. Okay. Thanks. And the second is any sort of update on your expansion to 200 million ton [Technical Issues].

Atul Daga — Executive Director and Chief Financial Officer

Yeah. So we have gone to the drawing board. Right now, the 22.6 [Phonetic] is under execution, which will take us to 156 [Phonetic]. And once the concrete plan is ready, we will definitely announce it. So ’28, ’29 [Technical Issues] it’s a little too late, but ’28, ’29, ’30, we should touch that mark, for sure.

Raashi Chopra — Citigroup — Analyst

Thank you.

Atul Daga — Executive Director and Chief Financial Officer

[Indecipherable] in place, land is in place. It will be, again, a mix of greenfield/brownfield. So we’ll present the complete picture.

Raashi Chopra — Citigroup — Analyst

Sorry, just to add to that, will it include any inorganic as well or you can do greenfield/brownfield to reach 200?

Atul Daga — Executive Director and Chief Financial Officer

We can do greenfield to reach our milestone. Inorganic is always a talk of opportunity, but I cannot really forecast on that.

Raashi Chopra — Citigroup — Analyst

Thank you.

Operator

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

Amit Murarka — Axis Capital — Analyst

Hi. Good morning, Mr. Daga. Just a couple of questions. Firstly, on the working capital release in the presentation, you have mentioned the INR500-odd crores of release in Q3. So how much more can we expect in Q4?

Atul Daga — Executive Director and Chief Financial Officer

Q4 should also give a higher release only because it’s a high volume, high conversion — cash conversion quarter. So we should — this quarter, we ended with a negative working capital of close to INR125 crores — INR124 crores. I think this will just go up. There are — I’m glad you asked this question. There are some moneys, which are stuck, which we are trying to get released. This was the upfront fee payment, which was made and then central government issued the order for paying back the upfront fee, unutilized upfront fee. It is at various stages of clearance in various states. So that will also help improve my working capital.

Amit Murarka — Axis Capital — Analyst

Okay. Got it. And in the last quarter, you mentioned your fuel [Phonetic] inventory had increased to 55 days. So is it coming back to normal levels now?

Atul Daga — Executive Director and Chief Financial Officer

March, we will — so if we get opportunistic transactions, we will spike up our inventory, but we’ll remain anywhere between 45 to 50 days. That is the norm that we want to follow.

Amit Murarka — Axis Capital — Analyst

Right. And the second question is on blending ratios. Quite encouraging to see your consistent improvement in blending ratio. So it’s already gone to 1.42 time. So is it because even the nontrade side of the business is accepting more of blended cement or is it more a push of blended cement in the trade channels only?

Atul Daga — Executive Director and Chief Financial Officer

No, it’s a mix of everything. Firstly, consuming flyash to the maximum possible, not going a 0.01% beyond the permissible limit. Second is, obviously, the advocacy program which we continuously run, trying to convince the institutional players to buy blended cement from us because it’s not that they don’t blend. They do the blending, so I think it is our core competency and their core competency is construction and not blending, so people are getting convinced, some institutional players are taking [Indecipherable] cement from us.

Amit Murarka — Axis Capital — Analyst

Right. And is there any number in mind that, let’s say, one year, two years down the line, we should be 1.5 times or anything like that?

Kailash Chandra Jhanwar — Managing Director

It will be a desire to definitely reach 1.5 times, but 1.42 times we have already reached, so maybe 1.45 times would be the next step to look for.

Amit Murarka — Axis Capital — Analyst

Got it. Thanks. That’s all from my side. Thank you.

Operator

Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs Asset Management. Please go ahead.

Pulkit Patni — Goldman Sachs Group, Inc. — Analyst

Yeah. No, it’s not asset management. It’s the research side. Atul sir, my question is on pricing. Would it be fair to assume that it is not one or two players because of whose behavior prices are down? Is it just broadly excess supply in the market which has come into being in the last two to three years? Would that be a right assumption?

Atul Daga — Executive Director and Chief Financial Officer

You’re putting me in a fix, Pulkit. Let’s meet for a cup of coffee and discuss it.

Pulkit Patni — Goldman Sachs Group, Inc. — Analyst

Sure. Okay. Sir, second question is despite our debt coming down, interest costs cost has gone up. This is just because of the interest rate readjustment?

Atul Daga — Executive Director and Chief Financial Officer

So marginal impact of interest rate, but bigger is accounting on foreign currency revaluation. So we have $400 million of dollar bonds and lease charges, yeah. So the various foreign currency components have to be — although it is fully hedged from the date the liability is crystallized, but accounting requires revaluation, so it’s a revaluation. So cash flow versus accrual, there will be a big gap.

Pulkit Patni — Goldman Sachs Group, Inc. — Analyst

Got it. And sir, just very quickly, international operations, everything back to normalcy in terms of Sri Lanka, etc., now?

Atul Daga — Executive Director and Chief Financial Officer

The good news is Sri Lanka is back. I think I have somewhere around INR65 crores overdue still to be received, but should get cleared by February and volumes have started picking up. Government is continuously giving additional LCs so that we are able to increase our exports. It’s fallen to nearly one-third, but I’m sure in the next couple of months or two or three months it should be back to normal.

Pulkit Patni — Goldman Sachs Group, Inc. — Analyst

Good. Thank you so much for that.

Operator

Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead.

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

Hi, sir, good morning. Sir, my first question was some of the comments you made earlier in the call in terms of the share of OPC rising, flyash cost being sticky, and even on fuel cost and all. So all of this is deflationary in nature. So based upon that, are we of the view that structurally prices will go higher in India? I’m not talking the next six months, 12 months and all, but do we need that or we have to settle with lower profits…?

Atul Daga — Executive Director and Chief Financial Officer

No, no, it is required. Everybody is raising prices. So prices are required. Otherwise, there’ll be a huge amount of pressure on the margins and especially for players with lower margins will have problems. So my expectation — my sense is prices have to go up, otherwise how will the industry be able to cover its costs and make money.

Kailash Chandra Jhanwar — Managing Director

At least it must cover the additional cost actually, so at least the normal margins are maintained.

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

So normal margin, Atul sir, what you mentioned four-digit, is that what we should think is a normal margin.

Atul Daga — Executive Director and Chief Financial Officer

Yeah. Four-digit is a normal margin. Four digit is also wide range. I would love to inch back to 1,400, 1,500, but right now the focus would be to reach anywhere between INR1,000 to INR1,200.

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

In calendar ’23 you mean?

Atul Daga — Executive Director and Chief Financial Officer

Okay, Ashish.

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

Okay. Sir, secondly, can you just quantify the impact of railway peak season surcharge this quarter on a per tonne…

Atul Daga — Executive Director and Chief Financial Officer

So it was — I’ll have to get it worked out and I think I’ll ask Ankit [Phonetic] to communicate to you because it was implemented middle of October. So I’ll get that impact sent to you.

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

No. So my question basically was also then what has happened for us to maintain our overall costs at least on freight side?

Atul Daga — Executive Director and Chief Financial Officer

I’m glad you are giving — are you giving us a compliment?

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

Yeah, obviously, because the freight cost hasn’t gone up as much, so is there something which is…

Atul Daga — Executive Director and Chief Financial Officer

Yeah, so nobody asked, but we have managed our lead distances very well. So the market mix, plant-to-market combination, how we service the market is being handled very well, lot of work has been done on improving efficiency at the ground level, turnaround time of vehicles, and throughput on vehicles, reduction of demurrage, wharfage, you name the lever, every lever is being pulled in the right direction. Just for records, our lead distance dropped to 413 kilometers this quarter as compared to 428 kilometers in the previous quarter. So that also helped a lot.

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

Sir, if I can just squeeze one more question. On pricing, whatever we had collated, it seemed like pricing should be up quarter and quarter. So is it a regional mix which has changed this quarter, or if you can give some color on…?

Atul Daga — Executive Director and Chief Financial Officer

So you will see region-wise we are a pan-India player, so you might see lesser impact on our P&L as compared to our regional players. So just wait for some more results, you’ll have more clarity.

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

But our growth, was it more strong in any particular region?

Atul Daga — Executive Director and Chief Financial Officer

Next question, please. Ashish…

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

Sure, sir.

Atul Daga — Executive Director and Chief Financial Officer

We can talk separately.

Ashish Jain — Macquarie Capital Securities India Pvt Ltd. — Analyst

Sure, sir.

Atul Daga — Executive Director and Chief Financial Officer

All right.

Operator

Thank you. The next question is from the line of Navin Sahadeo from Nuvama Institutional Equities. Please go ahead.

Atul Daga — Executive Director and Chief Financial Officer

Navin Sahadeo from?

Navin Sahadeo — Nuvama Wealth and Investment Ltd — Analyst

Yeah. Hello. Good morning. Am I audible? Hello.

Atul Daga — Executive Director and Chief Financial Officer

Yeah. The name has changed, Navin.

Navin Sahadeo — Nuvama Wealth and Investment Ltd — Analyst

Yeah, right sir. Edelweiss is now renamed to Nuvama Institutional.

Atul Daga — Executive Director and Chief Financial Officer

Okay, all right.

Navin Sahadeo — Nuvama Wealth and Investment Ltd — Analyst

Right. So, sir, two questions. First is, of course, on the prices. Now in North India, the demand seem extremely good, the largest player — large capacities in the region there are currently shut. So there couldn’t be more ideal a situation to take price hikes more so in January with the beginning of busy season — busy construction season as we call it, yet there is some downward pressure — marginal downward pressure. It’s completely different to what generally can be expected. So what’s really — is it just the high competitive intensity which is driving or there is more supply that we are not able to really get the best price?

Atul Daga — Executive Director and Chief Financial Officer

No, I think not — the prices are not going down, prices are stable. The market is just absorbing all — the demand is getting serviced. That is the good part. And the moment — month of December, we were at a 92% capacity utilization. The moment industry starts going up and above 85% capacity utilization, there is no reason why prices will not go up. And history has it, every January, March quarter, if the capacity utilization at the industry all India level goes up beyond 85%, then it jolly well can happen this quarter also, prices will go up.

Navin Sahadeo — Nuvama Wealth and Investment Ltd — Analyst

Yeah. No, fair. I would love to see that. Just that so far into January I’m saying we are 23rd Jan, yet no news absolutely of any major price hike or even small price hikes from any part of the country. So just a little worried that if you are not able to take price hikes in busy season, should it not be a worry in the lean season?

Atul Daga — Executive Director and Chief Financial Officer

Let’s see. I am sure the marketing people are working on it, so we’ll have to wait and watch.

Navin Sahadeo — Nuvama Wealth and Investment Ltd — Analyst

Sure. Sir, my second question is about the cost. Now your presentation you’ve given blended fuel prices of $200 being flattish quarter on quarter. So just a few clarifications, first of all. This $200, is it includes both kiln and CPP and all the domestic coals [Phonetic] and entire mix that we have put together or it’s only for the imported portion?

Atul Daga — Executive Director and Chief Financial Officer

Kiln.

Kailash Chandra Jhanwar — Managing Director

Kiln and imports.

Atul Daga — Executive Director and Chief Financial Officer

For kiln, so fuel going into kiln essentially.

Navin Sahadeo — Nuvama Wealth and Investment Ltd — Analyst

Sure. So this $200, at current spot rates would be how much, sir?

Atul Daga — Executive Director and Chief Financial Officer

Should be one 175, 180 now.

Kailash Chandra Jhanwar — Managing Director

Yeah.

Navin Sahadeo — Nuvama Wealth and Investment Ltd — Analyst

Understood. So that kind of a decline we can ballpark see in Q4 then. Perfect. That’s what I wanted to check. Thank you so much.

Operator

Thank you. The next question is from the line of Girish Chaudhary from Spark Capital. Please go ahead.

Girish Choudhary — Spark Capital Advisors (India) Pvt. Ltd. — Analyst

Hello. Yeah, good morning. Thanks. My first question is on our capacity commissioning timeline. So guidance for the year was around 17 million tonnes, and like you mentioned in the PPT, you have commissioned 6.8 million tonnes. So if you can just guide us when can we see this remaining 9 million tonnes to 10 million tonnes?

Atul Daga — Executive Director and Chief Financial Officer

So in the next 45 days, most of the capacity is getting commissioned.

Girish Choudhary — Spark Capital Advisors (India) Pvt. Ltd. — Analyst

Okay, got it. And secondly, if I look at the demand slide which you have put out in the presentation, slide number 5, rural demand seems to have moderated especially North, Central East. So if you can just help us with the rural mix this quarter versus last quarter and also what are you seeing currently in terms of rural demand? Is it picking or has it changed?

Atul Daga — Executive Director and Chief Financial Officer

So a trend in this particular quarter has to be — your views or analysis has to be restricted to this quarter. Next quarter it will change. And the way I think my analysis, interpretation of crops is that the harvest has been good, cash flows will be good. So April-June you will start seeing rural demand in our charts also back to green instead of orange.

Kailash Chandra Jhanwar — Managing Director

And even the MSPs…

Atul Daga — Executive Director and Chief Financial Officer

MSP is also being improved, I’m told. Yeah. So things are positive for rural market. There’s nothing — the only handicap which rural markets run, I would say, time and again is monsoons. If monsoons are bad, then things go haywire. Luckily, India has been having a good spell of monsoons over the last few years, so things are going good on the rural front.

Girish Choudhary — Spark Capital Advisors (India) Pvt. Ltd. — Analyst

Fair, fair. But if you, sir, then just help us with your rural…

Atul Daga — Executive Director and Chief Financial Officer

In this chart, my only — in this chart of ours, my only concern is the infra central where no new projects were announced. Everything has gotten more or less completed. And that is why suddenly we saw a complete slowdown. But the moment — and I think that government — UP government is pretty aggressive in its growth ambition. So the moment they are back on new projects, this red spot will also disappear.

Kailash Chandra Jhanwar — Managing Director

Yeah. And particularly now from March or April onwards, this Ganga Express Highway…

Atul Daga — Executive Director and Chief Financial Officer

That itself will trigger demand growth.

Kailash Chandra Jhanwar — Managing Director

It just started. So it will give some relief to the central actually in terms of demand.

Girish Choudhary — Spark Capital Advisors (India) Pvt. Ltd. — Analyst

Got it. And lastly, if you can just help us with the rural mix this quarter.

Atul Daga — Executive Director and Chief Financial Officer

How much?

Girish Choudhary — Spark Capital Advisors (India) Pvt. Ltd. — Analyst

Rural mix?

Atul Daga — Executive Director and Chief Financial Officer

62% of trade, sorry, and trade was 66%.

Girish Choudhary — Spark Capital Advisors (India) Pvt. Ltd. — Analyst

Okay, got it. Thank you, sir.

Operator

Thank you. The next question is from the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead.

Rajesh Ravi — HDFC Securities Limited — Analyst

Yeah. Hi, sir. Good morning. Two questions. First on the fuel cost. Would it be possible to share the numbers on per kcal the average fuel cost for the quarter?

Atul Daga — Executive Director and Chief Financial Officer

INR2.6 per kcal.

Rajesh Ravi — HDFC Securities Limited — Analyst

Okay. And this is against Q2, what was the number?

Atul Daga — Executive Director and Chief Financial Officer

Q2, INR2.5.

Rajesh Ravi — HDFC Securities Limited — Analyst

Okay. And basis the $200 now trending toward $175, can we expect a similar cool-off in your per kilocal numbers?

Atul Daga — Executive Director and Chief Financial Officer

It should.

Rajesh Ravi — HDFC Securities Limited — Analyst

Okay. And is it like, with most of the players in Q4, would be looking at good correction in the fuel prices. That may also subdue price rise pressure from the companies because margin expansion can be taken care of on account of this fuel price savings — fuel cost savings.

Atul Daga — Executive Director and Chief Financial Officer

It’s a marginal saving only because I would love to have fuel costs back to $80, and we are still talking about more than double. So $200 to — a 10% reduction in fuel cost does not really help me improve my margin expansion. So prices need support to — prices need.

Rajesh Ravi — HDFC Securities Limited — Analyst

And on the electricity generation cost, what sort of savings, where are we on a per megawatts — per unit of electricity generated, sir?

Atul Daga — Executive Director and Chief Financial Officer

In terms of cost per unit?

Rajesh Ravi — HDFC Securities Limited — Analyst

Yeah, cost per unit.

Atul Daga — Executive Director and Chief Financial Officer

It’s around INR5?

Kailash Chandra Jhanwar — Managing Director

INR5.9.

Atul Daga — Executive Director and Chief Financial Officer

INR5.9. Sorry, it’s close to INR6 per unit.

Rajesh Ravi — HDFC Securities Limited — Analyst

Okay. So there you’re not seeing major inflationary impact despite…

Atul Daga — Executive Director and Chief Financial Officer

Yeah.

Rajesh Ravi — HDFC Securities Limited — Analyst

Okay. And second on the working capital side, we see that September quarter your noncash working capital number shot up to almost INR4,000 crores versus INR700 crores, INR800 crores in the preceding reporting periods. And in this quarter, December, you have seen a pool of around INR400 crores in that out of this INR4,000 crores. So are we seeing — and you guided that in Q4, there will be some higher savings compared to INR400 crores. So what sort of number — are we looking to go back to a noncash working capital levels below INR1,000 crores.

Atul Daga — Executive Director and Chief Financial Officer

Our ambition would definitely be to increase the negative working capital, which was INR125 crores. Yeah, INR1,000 crores seems to be doable.

Rajesh Ravi — HDFC Securities Limited — Analyst

Okay. Great, sir. Thank you. All the best.

Atul Daga — Executive Director and Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Rakesh Vyas from HDFC Asset Management. Please go ahead.

Rakesh Vyas — HDFC Asset Management Company Limited — Analyst

Yeah. Hi. Good morning, Mr. Jhanwar and Mr. Daga. Two questions from my side. First one, if you can just also talk about price trend between trade and nontrade in last quarter and how is it trending now? That’s the first question.

Kailash Chandra Jhanwar — Managing Director

As far as the prices are concerned, I would say, it’s by and large in a stable zone actually. Definitely we would have loved to have the better prices, but I don’t think there is a major change in that trend actually. The trade prices are marginally up, actually marginally. And then nontrade is also in the same direction marginally up. But not there is any significant change in that trend actually.

Atul Daga — Executive Director and Chief Financial Officer

So what Jhanwarji is saying is a pattern continues to be the same.

Rakesh Vyas — HDFC Asset Management Company Limited — Analyst

Okay, got it. And the second question unfortunately again is on pricing itself. Mr. Daga, you maintained that fourth quarter we should see improvement in our profitability upwards of four digit. But given the context that the cost essentially, especially on the energy side, will see some cool off, you will probably also have better operating leverage moving into 4Q, I’m still unable to understand as to why industry is not looking at reasonable price hikes in this context itself because cost in particular you highlighted will not moderate significantly as we move forward as well and fourth quarter is generally the best quarter in terms of utilization. So if 4Q is going to be only a better proposition compared to 3Q marginally, then FY ’24 doesn’t look very great.

Atul Daga — Executive Director and Chief Financial Officer

Rakesh, you want EBITDA improvement or no?

Rakesh Vyas — HDFC Asset Management Company Limited — Analyst

We do.

Atul Daga — Executive Director and Chief Financial Officer

Let’s focus on that. We’ll deliver EBITDA improvement. [Indecipherable] let us also work.

Rakesh Vyas — HDFC Asset Management Company Limited — Analyst

Okay. But you sounded very conservative in terms of your commentary moving into next 12 months or so. That’s the only concern I had.

Atul Daga — Executive Director and Chief Financial Officer

Don’t be concerned. Industry is in good hands.

Rakesh Vyas — HDFC Asset Management Company Limited — Analyst

Great, sir. I wish you luck for that. Thank you so much. Thanks.

Operator

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

Shravan Shah — Dolat Capital Market Private Limited — Analyst

Thank you for the opportunity. Sir, what was the fuel mix for this quarter? And in terms of the capex, previously we said that the INR6000 crores to INR7000 crores capex for next — till FY ’25 yearly basis. So is that remains the same?

Atul Daga — Executive Director and Chief Financial Officer

Yeah. The capex remains the same, I think anywhere between INR6,000 crores to INR7,000 crores is what we will spend. Fuel mix?

Kailash Chandra Jhanwar — Managing Director

89% imported coal and petcoke was the fuel mix for this quarter in kiln.

Shravan Shah — Dolat Capital Market Private Limited — Analyst

Okay. And in terms of the — you already mentioned that the remaining 9.9 million tonne out of 19.9 million tonne, the first phase expansion, the entire will be to start by fourth quarter. So what about the clinker? I think 6.4 MTPA clinker is also pending from that 19.9 million tonne.

Atul Daga — Executive Director and Chief Financial Officer

There will be a thirds clinker and — [Indecipherable]. Yeah, only one clinker is pending.

Kailash Chandra Jhanwar — Managing Director

Yeah. No, only one small debottlenecking of Maihar plant is pending. Otherwise, we have commissioned all the other clinkerisation units actually, though the cement production is lower, so which we’ll make up in this quarter.

Shravan Shah — Dolat Capital Market Private Limited — Analyst

Okay. And out of 22.6 MTPA likely to come by FY ’25-’26, so how much and where we can see 2 million tonne, 4 million tonne to come in FY ’24 itself?

Atul Daga — Executive Director and Chief Financial Officer

We will target early ’25 to start commissioning.

Shravan Shah — Dolat Capital Market Private Limited — Analyst

So any capacity to come in FY ’24 out of the 22.6 million tonne next phase of expansion?

Atul Daga — Executive Director and Chief Financial Officer

Not at the moment.

Shravan Shah — Dolat Capital Market Private Limited — Analyst

Okay. Okay. All the best. Thank you.

Operator

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

Ritesh Shah — Investec Bank plc — Analyst

Hi, sir. Thanks for the opportunity. Sir, two questions. One is you have indicated a slide on construction chemicals, also you have indicated it’s 50-plus products and growing. Just wanted to understand if you can spell out any numbers? That’s one. And what’s the overall gameplan in this segment, say, three years out?

Atul Daga — Executive Director and Chief Financial Officer

So this year, if I look at an annualized run rate, we should be clocking INR800 crores to INR1,000 crores and continuously growing. At the same time, we will look at consolidation opportunities in — because these are very small consolidation opportunities. In case something lucrative comes by, we will consider that. The biggest play for us for construction chemicals is it gives the — what should I say? It gives our offering or a complete offering as part of a building solutions play, and for dealers it gives them something additional to do instead of just selling cement. So the focus is to build onto the stickiness which construction chemicals will bring to the table.

Ritesh Shah — Investec Bank plc — Analyst

Sure. And sir, my second question was on logistics. Is there anything different that we are doing now given there’s a lot of new capacities which are coming up across the industry, anything more on coastal freight or anything more on adding number of silos? Sir, anything worth that you would like to highlight?

Atul Daga — Executive Director and Chief Financial Officer

See, these are very, very micro things. So whether a silo needs to be added, it does get added as and when required. Ocean movement is obviously restricted to our coastal markets only. We are moving from our Gujarat plant to down south right up to Colombo. We are adding a bulk terminal at Tuticorin Port that will further bolster our supplies to the rich Tamil Nadu market. There’s a lot of digitalization effort which is under play, which is helping us optimize our logistics cost. Today, each dealer, each regional manager of ours or a territory manager of ours knows where the truck is, what time the truck will reach the destination, and how much time it will take to unload, and whether it’s — which ultimately helps improve efficiency. So there are a lot of efforts which are being — lot of investments being done and efforts being put in to improve efficiency of logistics which is now visible.

Ritesh Shah — Investec Bank plc — Analyst

Sure. Sir, just a related question. Does DFC change things for us? Is it a viable proposition or it’s still somewhere out before it actually becomes viable? And are we doing anything to make it actually viable for us?

Atul Daga — Executive Director and Chief Financial Officer

DFC?

Ritesh Shah — Investec Bank plc — Analyst

Yes, sir.

Atul Daga — Executive Director and Chief Financial Officer

Yeah. So nothing as yet. There are small movements which have started, but I have seen governments big plans of increasing the rig sizes, capacity of the rigs going up, which will definitely help move bulk cement in a big way. So my guess is we’ll have to wait for a couple of years more before it crystallizes into yield [Phonetic] benefit.

Ritesh Shah — Investec Bank plc — Analyst

Sure, sir. Thank you so much. I’ll jump back. Thanks.

Operator

Thank you. The next question is from the line of Sanjay Nandi from Ratnabali Investment Private Limited. Please go ahead.

Sanjay Nandi — Ratnabali Capital Markets Ltd — Analyst

Yeah. Thank you for the opportunity, sir. My all questions got answered. Thank you so much. Wish you all the very best, sir.

Atul Daga — Executive Director and Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Girija from Systematix. Please go ahead.

Girija Shankar Ray — Systematix Shares & Stocks (I) Ltd. — Analyst

Hello. Thanks for this opportunity. Yeah. All of my questions are answered, but if you can tell me which region we have sold more volume this quarter.

Atul Daga — Executive Director and Chief Financial Officer

We have sold everywhere more, don’t worry.

Girija Shankar Ray — Systematix Shares & Stocks (I) Ltd. — Analyst

Okay. Thank you, sir. Thank you very much.

Operator

Thank you. The next question is from the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead.

Rajesh Ravi — HDFC Securities Limited — Analyst

Hi, sir. Just one follow-up question. This others when you report where you say construction chemicals, UBS and exports, you mean this is all noncement revenues exports? Is it including any exports from India, as in cement exports from India?

Atul Daga — Executive Director and Chief Financial Officer

Yeah. It’s very small, about 40,000 tonnes, which goes to Sri Lanka essentially, our own bulk terminal.

Rajesh Ravi — HDFC Securities Limited — Analyst

Okay. So to say…

Atul Daga — Executive Director and Chief Financial Officer

Next quarter…

Rajesh Ravi — HDFC Securities Limited — Analyst

Sorry?

Atul Daga — Executive Director and Chief Financial Officer

Next quarter onwards, I’ll give the break up.

Rajesh Ravi — HDFC Securities Limited — Analyst

Right, right, great, so that we can track the…

Atul Daga — Executive Director and Chief Financial Officer

Commercial chemicals is gaining shape.

Rajesh Ravi — HDFC Securities Limited — Analyst

Exactly.

Atul Daga — Executive Director and Chief Financial Officer

It’ll be important for us to highlight it.

Rajesh Ravi — HDFC Securities Limited — Analyst

Great, great. And the same number would you have for this others number for March ’22 quarter, please?

Atul Daga — Executive Director and Chief Financial Officer

March ’22 quarter.

Rajesh Ravi — HDFC Securities Limited — Analyst

Exports and others.

Atul Daga — Executive Director and Chief Financial Officer

Last quarter presentation is there.

Rajesh Ravi — HDFC Securities Limited — Analyst

Okay. Thank you, sir. I’ll get it from there.

Atul Daga — Executive Director and Chief Financial Officer

Yeah.

Rajesh Ravi — HDFC Securities Limited — Analyst

Thank you.

Operator

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

Shravan Shah — Dolat Capital Market Private Limited — Analyst

Sir, just a follow up on the WHRS, so by end of this, how much more we will be adding till March and then for FY ’24, how much more we will be adding WHRS?

Kailash Chandra Jhanwar — Managing Director

30 megawatts this quarter.

Atul Daga — Executive Director and Chief Financial Officer

December quarter?

Kailash Chandra Jhanwar — Managing Director

No, in last quarter we have added 16 megawatts in WHRS. In March quarter we will be adding another…

Atul Daga — Executive Director and Chief Financial Officer

30 megawatts, which will take us to what total?

Kailash Chandra Jhanwar — Managing Director

238.

Atul Daga — Executive Director and Chief Financial Officer

238 megawatts. We should end with 238 megawatts of WHRS by March ’23. And there will be further addition because in the next phase of expansion of 22 million tonnes there is in all the clinkerisation units, we will have WHRS as well.

Shravan Shah — Dolat Capital Market Private Limited — Analyst

Okay, okay. And sir, any broad idea in terms of the — we have previously mentioned that 15 million tonne to 16 million tonne clinker will be there part of 22.6 million tonne expansion. Which region — because previously for 19.9 million tonne, we have given the break up. Here are the breakup is not available. So any…

Atul Daga — Executive Director and Chief Financial Officer

It was provided in our last presentation where we gave the detailed geography, geographical analysis where the expansion is coming.

Shravan Shah — Dolat Capital Market Private Limited — Analyst

No, sir, we mentioned about the grinding unit and not the clinker — where the clinker is coming.

Atul Daga — Executive Director and Chief Financial Officer

So I’ll ask Ankit to give it to you separately, instead of we rattling out numbers here. We’ll give it to you separately.

Shravan Shah — Dolat Capital Market Private Limited — Analyst

And lastly on the employee cost, sir, last quarter we mentioned that because of the incremental cycle, our employee cost has increased in Q2. But this quarter also the employee cost remained on the same — rather it should have a decline on Q2 basis. So will this INR694 crores odd employee costs quarterly is the new normal.

Atul Daga — Executive Director and Chief Financial Officer

No, once our increased compensation takes place, that becomes the norm for the next future quarters also.

Shravan Shah — Dolat Capital Market Private Limited — Analyst

Okay. No, I thought there may be some one-time incremental bonus would be there.

Atul Daga — Executive Director and Chief Financial Officer

No, nothing one-off, Shravan. It’s normal increments.

Shravan Shah — Dolat Capital Market Private Limited — Analyst

Okay, okay. And in terms of the other expenses, sir, do you want to highlight anything where we can see a further reduction in the other expenses?

Atul Daga — Executive Director and Chief Financial Officer

We are continuously making efforts and you will see it in our results.

Shravan Shah — Dolat Capital Market Private Limited — Analyst

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

Atul Daga — Executive Director and Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]