Nuvoco Vistas Corporation Ltd (NUVOCO) Q2 FY23 Earnings Concall Transcript

Nuvoco Vistas Corporation Ltd (NSE:NUVOCO) Q2 2023 Earnings Conference Call dated Nov. 10, 2022

Corporate participants:

Gavin Desa — Investor Relations

Maneesh Agrawal — Chief Financial Officer

Madhumita Basu — Chief Strategy and Marketing officer

J. Krishnaswamy — Managing Director

Analysts:

Abhimanyu Kasliwal — Joyce India Limited — Analyst

Satyadeep Jain — Ambit Capital — Analyst

Shravan Shah — Dolat Capital — Analyst

Prateek Kumar — Jefferies India — Analyst

Tejas Pradhan — Citigroup — Analyst

Sumangal Nevatia — Kotak Securities — Analyst

Navin Sahadeo — Edelweiss Institutional Equity — Analyst

Keshav Lahoti — HDFC Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Q2 and H1 FY ’21 Earnings Conference Call of Novaco Vestas Corporation Limited.[Operator Instructions]

I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.

Gavin Desa — Investor Relations

Good day, everyone, and thank you for joining us on Novoka Vistras Corporation Limited’s Q2 and H1 FY ’23 Earnings Conference Call. We have with us Mr. Marabito, Chief ChaStrategy of Marketing. Before we begin, I would like to mention that some of the statements made in today’s call may be forward-looking in nature that may be viewed in conjunction with the risk the company is — the company does not undertake to update them. A statement in this regard is available for it in the presentation we shared with you earlier. We will begin the call with opening remarks from Mr. Basu, who wish her the sectors of the business model and strategy and the outlook of the company. For this, we will have the forum open for an interactive Q&A session. I’d now like to hand over to Ms. Bases.

Maneesh Agrawal — Chief Financial Officer

Thank you, Gavin. Good afternoon, everyone, and a warm welcome to the Q2 FY ’20 Earnings Call of NivocoVista. To start off with the cement demand, East has witnessed a healthy double-digit demand growth during the quarter of YY. — driven by housing and rural segments, coupled with lower base effect of last year. Loss region also saw modest demand growth during mainly by housing segment followed by Intra. Strong momentum in urban housing despite increase in interest rate at property prices. indomethacison rural demand and expectation of retail inflation moving although then on near-term demand. In postacute projections by media agencies, India maintenance position as perforce growing nature tenant world. Government continued past CapEx, improvement in capacity utilization in manufacturing and pick up the non credit to sustain the expansion in industrial activities and dialectically related to the cement demand growth in the country.

Cement demand will also continue to witness major support from government tested so on programs like Rabanne, Aasonn mentored and move expense towards major infrastructure development projects. The year is not confident about the India growth story. Regarding to Q2, this being a seasonally weak period, we saw continued softening of prices starting 10 way. Moro, with demand taking out the needs, we were able to take some rice recovery in the half of September and October. Further price hike remains essential to mitigate the impact of torics. With modest demand growth is low, the region didn’t witness any high and voices remained muted during the quarter. If you look at the regional price movement on Y-o-Y basis, new and deliver realization better than the market prices by activating interval with continuous focus on premiumization trade shares and mix optimization. Moving on to cost. The most stocked-out topic. Cost pressures continue to impact the cement during the quarter, majorly led by related fuel prices and initial pressure on one dosist.

While the pools in the pet sizes for a peak period, the potent was short. In we invite we utilize alternative fuels and waste recovery systems more efficiently, along with effective steel procurement and production strategy. As a result, we achieved one of the most efficient power and fuel consumption rates in the industry during the quarter, standing at INR1,554 per ton of cement. — outlook update now on our key ongoing CapEx programs. We are working on unique capacity enhancement projects in rectitudebottlenecking and expanding our demanding in Payara were 1.2 million tonnes per annum gradient, which will take our overall cement capacity to 25 million tonnes per annum. We are progressing well on our sustainability agenda and projects of potential material handling at Retail long. We recently elaborated and published the core processing system and recap, which enabled us to initiate the feeding of all the net Weldon facility is be processing system domino way. Civil work that involved for similar facilities on the road. This will give us the trust to improve our AR to be positive in today’s cost environment. I would now like to share the progress on key sustainability initiatives.

We are focusing on enhancing the use of automotive tiers, improving the share of proposed cement and omics and conserving natural discourse. Happy to say that we are progressing on all these parameters and sharing Europris. As mentioned during previous calls, we have one of the lowest net core footprint in cement industry at INR478 AGCopingotown of cement coat material in FY ’22 duly validated by CII. Sorry, I will litigation cement industry at 47 — ton of time in F22. Our import has improved by about 5% on a Y-o-Y basis to touch 9% in Q2 FY ’23. With the onward investments in the material handling system, we are targeting to achieve an exit rate of 10% by end of the system. We are also one of the largest producers of predestined, — we continue to reinforce cement ratio standing at 1.8x during the quarter. Within 1 year of launch, we are on track on our proposed some, the premium offerings in mind, we can be launched due on our top how late to finished cement in demand market, which is a premium proposed cement. Our ready-mix concrete plants have increasingly certified at to co-level loans. Here, we will be manufacturing part go your product lines.

Ecodis a revolutionary range of low casino green boxes that can reduce the carbon emissions up to 60%. Please touching upon our ready-mix and NGM businesses. Both the businesses are performing well. The a2 operational regiment across the country. Our value-added product mix improved to 30% during the quarter under red. The company remains committed to product innovation and have launched control our premium quality defective solution designed for interiors and scrolling on — in one in building the deal, we have extended our customer reach with expansion into noncement channels and tapping new markets. Moving on to our financial performance for the quarter. Our consolidated cement volumes improved by 15% Y-o-Y to 4.4 million tonnes in Q2 FY ’23. Our revenue from operations improved by 19% Y-o-Y to INR2,401 crores, driven by higher volumes and price increases in both East and North. Quickly commenting on the 3 cement cost elements. Raw material costs per ton increased by 24% Y-o-Y amidst the inflatory pressure on key raw materials like slag Jibson, coupled with the higher consumption of again with our static the share of lending. — opesacost was effectively contained at INR1,564 per ton.

We will continue to focus on optimizing chuan mix, improving AF and internal like higher digitalization of taste recovery systems, and they have been reacting result for us. Distribution costs during the quarter has increased by 8 in Mateiatd higher freight costs. Our consolidated EBITDA for the quarter stood at INR194 crores. We continue to focus on our internal deeper, which is helping us to navigate through these tough times. — broadly touching upon a couple of highlights. Our share of premium products improved by 4 poses on Y-o-Y basis to 38% of total trade volumes, trade mix stood at 72%. Project spread, which is to get synergies with the integration of new risaoperations has been continuously on track. I take a moment now to share great center and high in this investor forum that Nuvo won the Golden costar excellence in corporate governance. This is a testament to our commitment to implement best-in-class governance and management systems. The sanitization ceremony is being cased today. Lastly, I want to spend a few minutes to explain our medium-term plan for the company and where we are today.

It’s been more than a year now since disteandthere have seen a lot of things happening in the industry it. While we have been continuously interacting with you, I would like to take a fall moment on and iterate our time. Balance sheet strengthening remains our key priorities with our efforts focused or bringing down net debt to our corporate level. In FY ’25, we of 25 million tonne players. This provides competent capacity are to sustain near double-digit volume growth on FY ’22 sales volume base, reinforcing our position as the largest cement group in India on a current basis. To support our growth, we continue to invest responsibly for the long term in a fee that is responses to the current economic environment. Our net fees of growth is planned in North and West India. — progressive updates on our expansion project has provided quarter-upon-quarter, considering and calibrating the industry dynamics and company performance. In the meanwhile, we will keep our focus on improving our sales volume to better capacity utilization, variated, timing of our internal levers and relentlessly driving cost optimization program. With this, I’ll relate our opening remarks. I’m joined by Mr. Jaguar Petani, Managing Director; and Mr. Manish Abada, Chief Financial Officer. We are in or together take your questions. Thank you.

Questions and Answers:

Maneesh Agrawal — Chief Financial Officer

[[Operator Instructions] The first question is from the line of Abhimanyu Kasliwal from Joyce India Limited.

Abhimanyu Kasliwal — Joyce India Limited — Analyst

Good day to the management. Am I audible?

Operator

Yes, yes. Okay. Perfect.

Abhimanyu Kasliwal — Joyce India Limited — Analyst

Hello. So I want to ask specifically, I believe Ms. Matamata, Basu right now mentioned that we are hoping to reach a capacity of 25 million tonnes by FY ’25. As the current capacity, I understand is up in the vicinity of 2022, does that mean that we are not looking at great capacity expansion over the next 2, 2, 3 years? That was my first question. The second question was if we are looking at greater capacity expansion, then are we look at organic or inorganic growth? And thirdly, I wanted to look margin expansion. What is the situation? I mean, fuel costs — so they are — seem to be elevated, but is that the only thing we are depending on to see some kind of margin expansion? Or do we have other value addition yet or they are depending on price recovery to take place strongly in October, November. These are my 3 questions…

Maneesh Agrawal — Chief Financial Officer

Thank you for your questions. The first one, in eteperspective. I mentioned that in FY ’25, we would get 25 million tonnes to me. The make or current capacity of 23.8 million tonnes and 1.2 million tonnes binding unit, which is coming up in Sivan.AndIfaterly reiterated, we shall be providing progressive quarter-on-a-quarter outlook on further expansion plan.

Abhimanyu Kasliwal — Joyce India Limited — Analyst

Fair enough. Fair enough. So regarding the question of organic, inorganic expansion doesn’t really arise because it seems that we are not really looking at capacity expansion over the next 2 years. Am I correct in understanding no?

Maneesh Agrawal — Chief Financial Officer

So in not opportunity is something we do not have for evaluation on our case right now about the 25 million tonnes stated capacity base organic growth.

Abhimanyu Kasliwal — Joyce India Limited — Analyst

Fair enough, fair enough. Last, we’ve been — since our capacity is going to remain stable, are we looking at some kind of margin expansion besides price recovery, are we adding some value addition in our products, hoping to earn a higher margin? Or we will remain in the same band that we have been in the past year…I want to…

Maneesh Agrawal — Chief Financial Officer

We are looking at our guidance for sales for this year FY ’22 base, something like 20 million tonnes optimal. So at a 25 million tonne capacity, we have adequate headroom to take double-digit growth for the next 2 years up to FY ’25. So there is going to be valuated about increase in the business. Added to this, of course, we will dive up as have been mentioned, our premiumization, our geo optimization and what volume proved in the 25 million tonnes?

Abhimanyu Kasliwal — Joyce India Limited — Analyst

Okay. this was clear, what is according to the company, what is the current capacity of the company? Right now.

Maneesh Agrawal — Chief Financial Officer

3.8%.

Abhimanyu Kasliwal — Joyce India Limited — Analyst

Okay. So from 23.2% Okay. Thank you very much — thank you very much.

Maneesh Agrawal — Chief Financial Officer

3.8%.

Abhimanyu Kasliwal — Joyce India Limited — Analyst

Okay. So from 23.2% Okay. Thank you very much — thank you very much.

Operator

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

Satyadeep Jain — Ambit Capital — Analyst

Thank you. Good evening everyone. A couple of questions. One on the capacity expansion. Just the company won capable verdict for limestone in North, as we evaluate different options, what you have to look at downsell expansion, maybe the capital cost for that project in North and when could we possibly look at the time line for committing one way or another whether there’s or not to expansion in Nequi the corresponding equipment ordering for that project. Is that something that could happen this financial year? That’s my first question.

Madhumita Basu — Chief Strategy and Marketing officer

Yes. Let me just take that tide. I guess I’ve been speaking about the capacity expansion in the last 2 quarterly calls, — so we have options to grow for loco in our West via Vizada North plant in RajapaAnd as I mentioned in the previous calls, based on the attractiveness of the market and the pricing, we would make a call inter of this zone, while we have clear limestone mines and approvals in Wugang, — the one is Nimbra and Rajat mines in Rajasthan Regina. I already mentioned that it was pending the bipod think some development is happening there, and we would be in a better position to comment on that in the coming quarter. As regards what kind of infrastructure facility, we will plan to expand. If it were not planned now radiation be west plant in filtering in both the cases. And in terms of capacity, it don’t feel obviously very much lower than we take. As we had timing of projects as well as the what we call starting of construction equipment or in,

I have to say that there is no such plan at step right now, like I have mentioned in the previous quarters, based on the company performance as well as the market dynamics, we will take an appropriate call and in every one of this earnings call, we will update all of you about the company’s future expansion plan. As of now, it is the brownfield expansion in the company, which we are up to will take to complete 23.8% to 25 as against a volume of 17.8 million tonnes last year. We still have a growth of 8 million tonnes over the next 2 to 3 years, which is a substantial amount of growth for the company in a period of 24 to 36 months. Lastly, as I mentioned in the previous call, and also Vita mentioned in our speech, the priority for the company is to kind of make the balance sheet healthy. And once the market improves, then we will come back and announce the other mega growth expansion pace.

Satyadeep Jain — Ambit Capital — Analyst

I just want to post a little bit on this. The onsite’s say, 6,000 tonnes a day with a corresponding greenfield Typically, the benchmark we would see for such a product would be about $70 evoke. — it will be substantially lower than $100 per tonne. — would that be correct understanding if you look at the cost of one project…

Madhumita Basu — Chief Strategy and Marketing officer

You are right. I think that’s the kind of backup numbers one we look at. We got 6,000 TPD 1,500, 10,000 PPD, I guess we will take an appropriate call. But as we stand today, — these are the numbers which we also have in mind about the downfield expansion dollars per ton and greenfield expansion out

Satyadeep Jain — Ambit Capital — Analyst

Secondly, on the power and fuel cost, 2-part questions on what longer term, there are 10-odd block set up comortion, cold lots. Would there be — would the work be trusted in bidding for some of these blocks for captioned there’s a lot of incentives from the government for open access, rotate stuff. Is there a possibility if we have to look at more renewables, even from where you are at its relatively high green energy mix you already have at the port for but incrementally, if you have to do are,is there a possibility that the company may look at setting up more renewable capacity or you would look to maybe tie up in merchant producer or even further maybe on the block solar power in the future.

Madhumita Basu — Chief Strategy and Marketing officer

I think 3 points. I think first step is, as one of the — amongst the industry lines, we have WHI all our kids and connected load for AH about 45 megawatt between WHR and CPaas for 23% of the sold capacity coming in. In addition to that, we also have a solar plant in 2 parts of no. What are the steps? As you said, a number of ore blocks are coming up for auction. A year ago, 1.5 years ago, when a couple of blocks came up for open in either we bid for it, but then we couldn’t kind of succeed in the bidding process. But constantly, we are on the lookout for cold blocks in suite that well because our plants are located there. So very much, we would be participating in any option that will come up. Number two is the trust area for the company for fees, setting up alternate processing facility. We now have 2 plants in not post Jet and demo coming January, but both plans will have full-fledged a part reprocessing apace processing. Rise also will have an so.

Once we have the 3 plants running at 3 and 2, we are looking at close promoith these 3 plants, we will get to anywhere about 20% of DFR.But then Sonali and Araneta plastrrently, we are operating at about 3%, 56%. But once we plan to get commissioned, we will look at setting a affability in Sun — the second first prior the company will be to scale at the AFR in fiscal FY ’22. The third third point is repo. As you mentioned, if there are going to be open access options and we partner with somebody or we tie up the bases we get 24 core. We are constantly on the loco and certainly explore that popularity. On our own, we are excluding solar costs for our geos in Panda, Agua and Jasper and also the mobility where we have an option to set up some at 5 to 7 megawatt solar format. So that’s our processes stack. First step is to better follow whenever it happens and we should get it. Second one is to maximize the AFR. And the last one is to look for green power wherever it is amends that we have competitive advantage in the cost for the company.

Satyadeep Jain — Ambit Capital — Analyst

Thank you for — thank you.

Operator

The next question is from the line of Shravan Shah from Dolat Capital.

Shravan Shah — Dolat Capital — Analyst

Sir, the first is on the CapEx for this 1, we have done INR13-odd crores. Last time, you said of INR500 crores to INR600 crores for this year. So what’s the number and for FY ’24, if waste and North expansion, if you don’t go ahead then what’s the CapEx? And if we go ahead, broadly, how much would be the CapEx that we will be spending in 24 and 25 million…

Madhumita Basu — Chief Strategy and Marketing officer

Yes. Thanks,. Last time when we met, and in the call as well as to the prepared call, we had mentioned that we would outlay for the various expansion projects non-field and sustaining CapEx in the company close to about INR570 crores, out of which in H1 this year, we have done in — and most of these projects, whether it is the Babati GU or the gimballing in AF, nadiring at setting and is not debottlenecking as well as AFR. All these projects are on track. And we would, in the next 4 91months, all these projects are going to be completed. And this INR500 crores would be to set up complete all these expansions at the outlook going forward. As regards to the large expansion, whether in the Western in North, as I mentioned in the previous question as well as in the previous call, the timing of the decision is going to be based on the deleveraging as well as the market dynamics and the overall performance of the company. And every quarter, I would government mention, when do we start the Suffice to say that both the places we are in a very good position at the day which is that, we can start vein.

Shravan Shah — Dolat Capital — Analyst

Okay. And currently, in terms of the date, in the first half has increased INR220-odd crores. Last time, we mentioned that this year, we will be repaying INR600-odd crore and INR1,100 crores in next year. And we will be die by FY ’26. So any change in standing this?

Madhumita Basu — Chief Strategy and Marketing officer

So as I mentioned last time that next this year or year INR600 crores, out of which we have already repaired INR300 crores in H1. And with regard to the rise also the numbers are at INR700 crores. So — so we are close to doing repayment this year. As regards to next year, we proved last half of repayment, I guess, we are posed to the repayment next year as well. In case the business environment and industry environment continues to be difficult, open improves. But as of now, our price doesn’t — the fuel rate doesn’t seem to taper down in Q3 and I think in Q3, maybe you can come down. So we’ll have to kind of find a way to rebalance the CapEx expense ratio that we meet all the repayment prices, which I guess we are in good push.

Shravan Shah — Dolat Capital — Analyst

Now on the operational front, in terms of the pricing post September, how much price hike we have seen in our markets…

Madhumita Basu — Chief Strategy and Marketing officer

Like by like we mentioned in 1Q this year 2Q, obviously, prices reduced from Q. There is end of September increase in price, which is something which is not a very increasing time. But come October, some price increase happen. But I have to say in October, we’ve already had a not great price increase on the as well as trade price increase we did 2, 3 days ago east. So is real time. Certainly, we’ll have to find a way to take the prices up to post for the cost inflation.

Shravan Shah — Dolat Capital — Analyst

So sir, broadly, how much increase we would have taken from the other till date?

Madhumita Basu — Chief Strategy and Marketing officer

First October till date, I guess, because it happens in various stages, sometimes you take up and then immediately get corrected. But I think you follow part numbers is a modest number. I think, starting from October till today, we are sitting on nonaware you can look at between INR10 to INR15 in various markets in the East, not much of momentum pricing has happened or the pricing movement has happened in East.

Shravan Shah — Dolat Capital — Analyst

Okay. I need a couple of data points on the fuel mix for this quarter and congestion of core consumption cost per Takai for linkage, non linkage imported coal at for this quarter?

Madhumita Basu — Chief Strategy and Marketing officer

I think to give our fuel mix details for every line item, it is an understand because as we stand today, we can’t get our leakage for is dependent on ECL availability. And every time we release the — to the asset last time during our earnings call, I mentioned that we’ve got an BPaallocationof to 13%. But that certainly has improved between early Q1, nearly early Q2 to Q3. So I think that should — that should improve. But as the edit of other stores, Texas, I can say we say we are operating anywhere between the mass all head out is trending between 25% to 50%. And the balancing all the domestic open market core and does open market cola function of how much like post…

Shravan Shah — Dolat Capital — Analyst

So for Q2, in terms of the consumption cost per Klas, what would be because last time we said the number for linkage coal non-linked for imported coal, petcoke and AF for the Q4 ’23, what would be the number? Just wanted a comparison.

Madhumita Basu — Chief Strategy and Marketing officer

If you want to give me a granular detail of is that’s something which is data, but suffice to say that the power cost, we reported INR15 54 per ton of cement. But again, because the multiple factory multiple types of coal coming in, I think common like this, I don’t think it’s appropriate to give every little detail on every part, every fuel which we are using in all the factories. — you that we are very pleased if you can — if you want more India, I guess our investor relations teams will be happy on a one-on-one call, we can give you details for your market.

Shravan Shah — Dolat Capital — Analyst

So sir, broadly in the Q3, how much test continues and also in Q3, broadly how much we expect in terms of the power and fuel cost because we take the RM also in debt. So you combine put together Mplus power and fuel, how do we see how much decline we can expect in the…

Madhumita Basu — Chief Strategy and Marketing officer

I guess, from across the industry as well as we are part of the industry, I think deposits more or less peak actually. So unless there’s any fares even happen going forward. Whatever is the fuel price existed in August, September, I guess, is existing in October. There has been a marginal reduction about $20 a month and Lagoutte petrol prices went up actually. But suffice to say that preventing rates of mid to end Q2 is what is currently prevailing. But for our company, the positive thing is the ramping of the commissioning of the Apart facilities in resales limbo and also setting up the co processing and preprocessing. — our alternate fuel consumption use case ship all increasing from Q1 to Q2 to Q3 to Q4. And I can give guidance on this by the time it comes in January, February, we should anyway trend between 9% to 10% would be true Fricano the best in the industry

Shravan Shah — Dolat Capital — Analyst

Okay. Thanks

Operator

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

Prateek Kumar — Jefferies India — Analyst

Hello. Good afternoon. My first question is just on commission. So like the side like a fairly muted CapEx in first half, you’re looking to close the year at INR600 crores of CapEx for ’23. Is that right?

Madhumita Basu — Chief Strategy and Marketing officer

You watch a little bit people, — can you repeat the second sentence…

Prateek Kumar — Jefferies India — Analyst

So despite a fairly muted CapEx in first half at INR173 crores, we are still looking at INR5,600 crores CapEx for FY ’23. Is that right?

Madhumita Basu — Chief Strategy and Marketing officer

Maybe 500 crores, we should be able to cut all projects are on steam actually. So it’s happening. And as you will see, many of these projects are based on civil application and retool the equipment ordering for this core brownfield expansion is done. So maybe you or take 3 months here in it, but all projects are happening, the demand expansion, nimble expansion, resi expansion Justine. The on course, maybe you want take INR100 crores, I can’t exactly say that I would spend INR570 crores or INR490 crores, but it will be in the ballpark of growth, give or take INR70 crores, INR80 crores base timing and the progress of projects, nothing beyond that.

Prateek Kumar — Jefferies India — Analyst

And late follow-up — when is the clinical debottlenecking expected to complete and Divani expense in time line?

Madhumita Basu — Chief Strategy and Marketing officer

So there’s not inter expansion from INR10,500 to 11,000 has already happened. Nimble is 45 to 50, 50. Actually speak the civil is done, agregationis are. I guess sometime in March or April based on the season as well as they did know where we can take a shutoff, we will do the hookup of the new systems and the currencies because we need to take a shutdown of 3, 4 weeks. So I guess that’s the — and we have to close based on the demand in the market and the latest of which we have. So it could be neo1 or 2 months for the nimble interest both 50 and 50. But suffice to say, Q2 next year, we should have PDC 57 500P numbers. As regards Divani, public hearing is done. We are just waiting for the easy for us to do the main plant construction. However, the clinker sale and cement side project has already happened because that’s part of the current plant expansion. And our target is, again, by August next year, Divani should also be on stream. So safe to say that when we hit Q3 next year, nor will be 6 million tonnes of seven capacity..

Operator

I think do you have any further questions?

Prateek Kumar — Jefferies India — Analyst

Yes. Just one more question on synergies. So we had the targeted synergy of over ’22 and ’23 with 2 more quarters remaining. So where we are in terms of synergies we had targeted for over this period.

Madhumita Basu — Chief Strategy and Marketing officer

So Prateek, firstly, I would like to reiterate that all programs are identified under internal levers and under execution and government Tigercat. Due to the overall elevated cost pressure, this is not imagic visible at an aggregate level. Some of the key levers would be in terms of higher pedimization opportunity for cross-going — and this, as you will have noted, we been uptaking quarter-on-quarter basis. So largely on ratio take some headwinds going forward. The big project in India reversion, as Vita said, our payment percentage has gone to 38%. The second project was launching Double is not. That has also kicked off. The third project was getting composite cement. That’s also kicked off. The 4 project was cross-sourcing amongst the new Isaac facility. There, I can say if I have to give a ballpark number, 80% of the intended grosses is almost but we are currently reworking the optimizer model to a live optimize every week so that we can maximize the last rupee for optimization. In terms of test practices of raw materials and fuel mix and use of flag and use of gettonactivated is all of it between local news last or 100% completed.

Prateek Kumar — Jefferies India — Analyst

Alright. Thank you for taking my question.

Operator

Next question is from the line of Tejas Prasad from CitiGroup. Please go ahead.

Tejas Pradhan — Citigroup — Analyst

So on the CapEx plan, sir, would you like to quantify a debt level or debt-to-EBITDA level, which you consider would be comfortable for the company to consider starting either north or west expansion?

Madhumita Basu — Chief Strategy and Marketing officer

Yes. I guess we like the communicated last call in the prior call. We would look at a debt level of this company at INR3,000 3,500 crores. And since the time we hit that number, we want oral last scale expansion. With the current expansions will change us going for another 24 months from $17.8 million last year to reach 25 million tonnes to close to about 7.5 million tonnes of headrooms debt for the company to grow and 24 to 36 months is good at a time for us to grow 7 million tonnes over 7 million tonnes. As regards debt as we mentioned, will be between INR30 crores to INR500 crores, we want to go for a large-scale greenfield expansion either in North ores.

Tejas Pradhan — Citigroup — Analyst

Sure. Thanks.And just one more question on your composite cement. Could you share what is the current shares of composite cement in your total sales mix? And if you plan to increase this, what could be the target over here?

Maneesh Agrawal — Chief Financial Officer

Pasaporte is our competitive advantage, and this is a collinear…We are..By that, I got that as positive. So from other cement in our mix currently is about and.

Tejas Pradhan — Citigroup — Analyst

And how much do you want to take it up to according to your plans?

Maneesh Agrawal — Chief Financial Officer

See, capacity building, we will be doing at a 3 million tonne kind of level. Some plants, we will have to progressively take up the volumes. But if you ask for an end state, that would be roughly 23 million tonnes which would be about in market.The component cement is the only lease our goal is to get a CK ratio in excess of 2. So for getting the kiss of to, I guess, compete cement at totes would be about 3 million tonnes would be the target. Overall, company can with the installed capacity credit reported 323 the number we will go to before then he sees to be 18 that we close to about 1

Tejas Pradhan — Citigroup — Analyst

Okay. Okay. Great. Thanks. And lastly, if I may just squeeze in. Lead distance, if you could share, what was it for this quarter…

Maneesh Agrawal — Chief Financial Officer

Our late business in Q2 is close to 335 to 340 kilometers.

Tejas Pradhan — Citigroup — Analyst

Sure. Sure. Thanks.

Operator

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

Sumangal Nevatia — Kotak Securities — Analyst

Yah. Good afternoon. Thank you for the opportunity. So just on a couple of clarification. One for FY ’24. After this INR500 crores, INR600 crores CapEx, what would be the pending or lower CapEx for the existing plants? And what is the level of maintenance CapEx we infer every year?

Madhumita Basu — Chief Strategy and Marketing officer

Typically, our maintenance CapEx anyway, trend INR125 crores to INR145 crores. So that would relate to us. Also, I can have on purchasing land for a milestone in the distant of our mines on losartan you laser a longer period. So that is typically between INR50 crores to INR60 crores, you’re looking at close to about INR200 crores of routine CapEx less will be the carryforward of some little war ago. high 70 is what we want to do, maybe it could be anywhere between 4 to 50. If I don’t take some of these projects get spilled over by 2 to 3 months due to construction activity. There is among INR80 crores, INR90 crores will come from this year, another 20 lower INR30 crores to INR50 crores at the speech. If we don’t take any scale expansion.

Sumangal Nevatia — Kotak Securities — Analyst

Understood. Understood. Sir, second question, with respect to our preference, North and West, we have 2 options. What would be our market presence to start with, number one. And second is, is the balance sheet comfort is the only factor which is stopping on. So once we achieve this INR300 crores, INR3,500 crores kind of a level on the net debt, we can start? Or are there other market factors which we are keeping a tap on to take a decision.

Madhumita Basu — Chief Strategy and Marketing officer

All, let me clarify, there are no market factors. The only factor is, I guess, as an organization, we need to keep growth as well as make alas profitability or we think as a company we need to manage. So certainly, the large-scale growth projects will come once the debt level we are comfortable at INR30,000 crores. So that will be a principal criteria for us to kind of go for the next phase of large-scale expansion. As regards market factors, I guess, as I said, I don’t think we have any criteria to choose expansion based on market factors. Market factors happen industry performance and gold cost will certainly deli one of the key criteria for us to make a expansion…

Sumangal Nevatia — Kotak Securities — Analyst

Understood. Sir, that’s very encouraging to hear the rationality on the leverage side. Thank you and all the best.

Operator

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

Navin Sahadeo — Edelweiss Institutional Equity — Analyst

Yes. Good evening sir. Good evening everyone.Just one question. In your initial comments, you mentioned apart from the Bihani grinding unit, the company is also pursuing with clinker debottlenecking. So if you could just help us that post this debottlenecking, the clinker capacity of the company goes up to how much and by when…thank you.

Maneesh Agrawal — Chief Financial Officer

Me a moment to reiterate the refit projects we have talked about in North post-testing, we will be 6,000. Citan INR5,750 roughly 11,750. And in East of our same-state would be 27,000 is between all the flows. That would take the capacity to up by 8.9% reline.

Navin Sahadeo — Edelweiss Institutional Equity — Analyst

So e-store and capacity is the 8.9 million tonnes post all the port loss our legal capacity will reach to 3.9 after debottleneck. Correct. So you said 8.9% in East 3, how much.

Madhumita Basu — Chief Strategy and Marketing officer

24 million tonnes… Right. So — okay. So total, it’s about — a little shade under 12 million tonnes will be our clinker capacity post expansion. It will be 13 million tonnes, 8.9 million, 3.93 million tonnes of Petercam.

Navin Sahadeo — Edelweiss Institutional Equity — Analyst

Correct. So 13 million tonnes and are usually the maximum, if I see your past performance, the — on an average, the clinker-to-cement conversion ratio that is worth is more like 1.7%. So at full loan utilization, the maximum cement, what you can produce is about 22 million tonnes. My question is only from the point that next year, when you run up to the elections, there is a possibility of a very strong demand. And I’m just trying to understand how prepared are we in terms of — like and of course, there is room for growth now. But if I were to look at it from a slightly longer period of 2 to 3 years, the maximum we can go to is 22%. Is that a correct understanding?

Madhumita Basu — Chief Strategy and Marketing officer

Case rate of capacity is 23.8 million tonnes. The CG is continually increasing. As I mentioned, we are currently running at 1.8 installed capacity is 23.8 million tonnes, and we are adding 1.2 million tons in the value.

Navin Sahadeo — Edelweiss Institutional Equity — Analyst

Thank you…

Operator

[Operator Instructions] The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.

Keshav Lahoti — HDFC Securities — Analyst

Hi. I want to understand what sort of trade share improvement you are targeting in next 1 year?

Maneesh Agrawal — Chief Financial Officer

So our pocket share trade share is 75%. We have currently quarter levels trending around 72…

Keshav Lahoti — HDFC Securities — Analyst

Okay. We have less about the fuel, what I want — maybe I might be asking the question again. What are your fuel mix for this quarter? And what is it costing on at basis?

Maneesh Agrawal — Chief Financial Officer

On can, I can give you our last figure of about 2.6. You would have to reach out to our office for granular.

Keshav Lahoti — HDFC Securities — Analyst

Okay. Understood. Thank you.

Operator

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

Shravan Shah — Dolat Capital — Analyst

Yes. Thank you. Sir, in terms of the RNC, particularly so still we are having an EBIT loss. So to the quarterly run rate this quarter, we — in the last quarter also INR230 crores to INR25 crores, we are doing the revenue. So when can we see start seeing the EBITDA profit and to what extent we can expect. So will RMC will continue to be having the EBITDA loss, even if this year we will be doing 2 INR2,000 to INR1,100-odd crores revenue INR1 crore, then also we will be having the EBITDA loss?

Madhumita Basu — Chief Strategy and Marketing officer

RMC strategy, we have hard EBITDA last actually. In Q2, EBITDA margin is 6% in R&C and we had copanEBITDA othogenevel of EBITDA margin R&T is close to 5.6%. In fact, RSG is safety back to 3 genes for us, getting the revenue of INR420 crores in H1 and EBITDA of about 20 to 24 are leading to 5.7%. So RF me to pre forward numbers. I think by the time we end this fiscal, RSBY ’19 events.

Shravan Shah — Dolat Capital — Analyst

Okay. Okay. Secondly, just wanted to understand in terms of the — because our cost also includes the cost for the RMC. So in terms of the freight costs, particularly, so if I — whatever the absolute number we have given in the P&L deviled by the volume, then it comes to INR1,416. So that is a 11.8% Q-o-Q decline. Though our lead distance remains same Q-o-Q. What explains this decline in freight costs?

Maneesh Agrawal — Chief Financial Officer

Abatement you to refer to investor presentation for the distribution cost, which has already been and justed on all these line items. So in 2013, 76 our per ton. — got increased 8% on our acquired in — so I mentioned that by the at it is a rate-related cost impact.

Madhumita Basu — Chief Strategy and Marketing officer

So whatever the difference is that let’s INR1,300 number what you are seeing, if I multiply that into the volume, whatever the number comes and they actually reported in the P&L, what would be the difference of what explains the difference in the freight cost. Hello? Yes. Please proceed with…

Shravan Shah — Dolat Capital — Analyst

Yes., maybe I have missed during your — the earlier this question, we could do an attract my end. Two questions just on the Perico a broad basis, what was the total cost in Q2 versus Q1? And the sequential fall decline in the logistics cost per ton, what explains this is…Would you please…

Madhumita Basu — Chief Strategy and Marketing officer

On to Q2 was INR2.28 per million cap in Q1 and it went up to INR2.6 crores. As I mentioned, we kind of peaked on the fuel cost now. And from now on, I guess, once the gold prices et cetera some of that silicon, the current trading rate is INR2.6 crore. One way pool be able to reduce this to increased AR assumption in coming under subsequent quarter. As against distribution cost…

Maneesh Agrawal — Chief Financial Officer

You are entering to the distribution cost declined quarter-on-quarter, as you had mentioned in the last call, Rajat there was rate shortage, and we had to mobilize clinker GU. So that is the situation, which improved in the quarter gene. I think there is some noncall at not getting a response from you and graduation.

Shravan Shah — Dolat Capital — Analyst

Okay. So what I think is due to this first is more representative on a normal basis?

Madhumita Basu — Chief Strategy and Marketing officer

Yes, you are right. amenabecause the serious rate shortage because all the Indian railways rates are used for supplying coal to the power plant. So during the call, I mentioned that the big impact because we have close to 50% of rate share. So that one is kind of situation certainly improved in Q2. The report adequate rates. But as we speak, the rate shortage is kind of come back to attest of October. Hopefully, I guess, now onwards, we are expecting better rate availability.

Shravan Shah — Dolat Capital — Analyst

Okay. Okay. Greater from my end.

Operator

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

Satyadeep Jain — Ambit Capital — Analyst

Just a couple of follow-up questions just more to clarify that the intent strategy is that unless the company achieved INR3,500 crores in debt, there would be no announcement for either or as capacity expansion at the unless these net debt that number is achieved.

Madhumita Basu — Chief Strategy and Marketing officer

Yes. I guess even in the prior calls, we have mentioned that as a company, we have to grow, but we divide our large-scale growth launch moment did our debt numbers at between INR3,000 crores to INR3,500 crores — the primary effective now will be to bear the debt. However, we need to grow. As I said a little earlier from 17.8 million tonnes of actual last year, we can still become a $25 million sales company, not capacity company, $25 million of sales can happen in 24 months. And all of us know that to grow about 7 million tonnes over 70 billion. It will not happen overnight. It will take 24 to 36 months for it to happen. So we are sufficiently having headroom to grow the company in terms of volume with the current capacity. — large-scale expansion of a new facility will take time, and that is in turn dependent upon the debt of the company coming to INR3,000 crores to INR3,500 crores.

Satyadeep Jain — Ambit Capital — Analyst

Just want to clarify on this, that given that debt reduction is a function of market conditions with market conditions are supportive, it could happen sooner, but if they’re not, it could take much longer. The target is that the reduction is primarily dedicated on internal cash flows only — that $9 million cash flow to the debt reduction. And what is the linked what is the utilization level you see in not if there is some delay just trying to figure out what — where you’re operating in what in terms of utilization…

Madhumita Basu — Chief Strategy and Marketing officer

Yes. I guess 2 parts. First one, obviously, the phasing of the announcements of expansions be subject to overall performance of the industry as well as our company improved based on the cost inflation. I’m only hopeful that the current trend of not being able to pass on the cost inflation at this cannot be a long-term phenomenon. I think time will come when we’ll have to commentate for the cost inflation. So I think the system we will have to correct the system going forward in the next 1 or 2 quarters. I see that the second bit of CK issue. I think capacity utilization, you will all be aware that our company before the acquisition of bani always operated at 95% capacity utilization. So I guess, one of the key things which we are good at is to run the company at excess of 90-odd percent capacity utilization and still be able to meet the market demand and growth organization. So East is all going to be exhausting the capacity which we have in the next 18 months. Whereas in North, currently, we have a stated capacity of 4.8 tons out of which we are able to sell about 3.6%, 3.7%. But then with Divani coming in and the geo coming in, be a big competitive advantage for us to sell in markets of Genera, Punjab and those regions. — hence, our ambition is to kind of grow the market and not all the way up to excess of 55 million tonnes, even touch close to 6 million tonnes.

Satyadeep Jain — Ambit Capital — Analyst

That was the last question. I now hand the conference over to management for closing comments.

J. Krishnaswamy — Managing Director

Thank you. Thank you for your questions. Just to summarize, cement demand is expected to business a healthy upside in FY ’23 with a strong momentum in housing and government-led infrastructure development projects. While we had a modest price increase in the Eastern region, high fill prices will continue to affect near-term profitability. — watch will remain contest. In the meanwhile, we will continue to focus on internal ever, operational efficiency and remain committed to our ongoing expansion plans. Bateman I remain available for any classification reports to connect with us. Thank you for joining us today.

Operator

More NUVOCO analysis

[operator Closing Remarks]

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