Dalmia Bharat Limited (DALBHARAT) Q3 FY23 Earnings Concall Transcript

Dalmia Bharat Limited (NSE: DALBHARAT) Q3 FY23 Earnings Concall dated Feb. 06, 2023

Corporate Participants:

Aditi Mittal — Head of Investor Relations

Puneet Dalmia — Managing Director

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Dharmendra Tuteja — Chief Financial Officer

Rajiv Bansal — President and Chief Transformation Officer

Analysts:

Rajesh Ravi — HDFC Securities — Analyst

Sumangal Nevatia — Kotak Securities — Analyst

Pinakin Parekh — JPMorgan — Analyst

Indrajit Agarwal — CLSA — Analyst

Amit Murarka — Axis Capital — Analyst

Girish Choudhary — Avendus Spark — Analyst

Prateek Kumar — Jefferies — Analyst

Satyadeep Jain — Ambit Capital — Analyst

Anupama Bhootra — Arihant Capital — Analyst

Shravan Shah — Dolat Capital — Analyst

Komal Ladha — YellowJersey Investment Advisors — Analyst

Ritesh Shah — Investec — Analyst

Nishant Bagrecha — InCred Capital — Analyst

Saket Kapoor — Kapoor and Company — Analyst

Prateek Maheshwari — HSBC Securities — Analyst

Navin Sahadeo — Nuvama Institutional Equities — Analyst

Satyendra Gupta — Systematix — Analyst

Surya Narayan — Sunidhi Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Earnings Conference Call of Dalmia Bharat Limited for the Quarter and Nine Months ended 31st December 2022. Please note that this conference call will be for 60 minutes. [Operator Instructions] This conference call is being recorded and the transcripts of the same may be put on the website of the company. [Operator Instructions]

Before, I hand over the conference to the management, I would like to remind you that certain statements made during the course of this call may be based on historical information or facts and may be forward-looking statements. The forward-looking statements are based on expectations and projections and may involve a number of risks and uncertainties and other factors that could cause actual results, opportunities and growth potential to differ materially from those suggested by such statements.

On the call we have with us Mr. Puneet Dalmia, MD, Dalmia Bharat Limited; Mr. Mahendra Singhi, Managing Director and CEO, Dalmia Cement Bharat Limited; Mr. Dharmendra Tuteja, CFO, Dalmia Bharat Limited; Mr. Rajiv Bansal, President and Chief Transformation Officer, and other management of the company.

I would now like to hand the conference over to Ms. Aditi Mittal, Head, Investor Relations. Thank you and over to you.

Aditi Mittal — Head of Investor Relations

Thank you, Mridula. Good morning, everyone. Wish you all a very Happy New Year and I hope that you’ve all had a great start to the year 2023. We welcome you all to the quarter three earnings call of Dalmia Bharat Limited. Hope you’ve had a chance to go through the results and the earnings presentation, which is uploaded on our website and can be downloaded from there.

I will now hand over the call to Mr. Dalmia for his opening remarks. Over to you.

Puneet Dalmia — Managing Director

Thank you, Aditi. Good morning, everyone. It gives me great pleasure to welcome all of you for the Q3 FY ’23 earnings call of Dalmia Bharat Limited. Hope you and your families have had a good start to the new year 2023.

We are meeting at a very opportune time when the government has just laid out the first Amrit Kaal budget, which is certainly a progressive direction by the Government of India to give a boost to a technology-driven and knowledge-based economy within the country. The budget once again reiterates the government’s focus on building physical infrastructure through a massive 33% increase in allocation toward capex, which is INR10,00000 crores, this fiscal and the extension of 50-year interest-free loan to states.

It is also heartening to see how the government has allocated INR35,000 crore towards reaching net zero emissions and achieving energy transition. Green growth has rightly been listed amongst the seven key priorities of the government. Even while the most global economies are showing signs of slowdown, my personal faith and optimism on the economic prospects of India is quite strong. And we truly believe that the next few decades belong to our country.

The cement sector has a very crucial role to play in India’s growth story. And I’m personally very bullish on the long-term prospects of the sector. We remain committed to our interim capacity milestone of 75 million tons by financial year ’27 and long-term goal of 110 million tons to 130 million tons by 2031.

In line with our vision to diversify and build a pan India cement company, we have signed definitive agreement for acquisition of cement assets of Jaiprakash Associates Limited located in Central India. The plants are very strategically located and will give us an entry into a very lucrative high-growth market of Central India. We are very excited about this opportunity as the transaction is at an attractive valuation and comes at a time when we are at the cusp of an infrastructure and capex cycle and private capex starting to kick-in.

Continual optimization of costs is an integral part of our DNA. And this has once again led us to deliver one of the lowest total cost per ton. And an industry-leading EBITDA per ton of INR1,021 per ton this quarter. Even as we grow further, amongst other things, our financial priorities will include improving our capacity utilization, sustenance of our total cost leadership and deliver industry-leading earnings growth and ROCE, backed by a very strong well-capitalized balance sheet.

Dalmia Bharat is at an inflection point, where we have added capacity, diversified into new regions and now I will personally be spending time upon strengthening our organization and building an institution which is scalable and sustainable. As we steer towards building Dalmia 2.0, one of my key priorities will be to invest personal time and resources into our human capital to build leadership teams, which are future-ready and aligned to our long-term goals. We are making collective efforts to multiply our people power and create leaders of tomorrow.

As a part of our ongoing HR transformation, we have, during the quarter, launched a leadership development program called Lakshya [Phonetic], which has a combination of retention cum performance-related metrics and includes personalized leadership, coaching, trainings and career development programs.

We will ensure scalability of our organizations, structure through extensive automation and digitization, review of our key policies and systems, strengthening our compliance and risk framework as per best global practices and increase thrust on fulfilling our ESG responsibilities.

With the swiftness of transformation which I am witnessing across our company and our people, I believe that we are just getting started and the best is yet to come. I am personally very happy with all that we have achieved this far and I’m very excited about the journey that we’ve set ourselves on.

I will now hand over the call to Mr. Singhi to take you through the other details. Thank you. Mr. Singhi, over to you.

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Happy morning, all dear friends. Thanks, Puneet ji for such encouraging thoughts. Friends, let me start by saying that we have once again delivered an industry-leading volume growth of 11.5% Y-o-Y to 6.3 million ton. And our revenues have grown by almost 23% to INR3,355 crores. On a nine-months basis, the volume growth is 17.5% and we are quite hopeful that we’ll be able to deliver at least 1.5 times the demand growth than the average industry.

Our Y-o-Y and revenue growth at 21% is also there. Demand growth was healthy across each of our regions and price was also stable with East showing a recognizable recovery in pricing. In terms of cost, due to the higher cost of input materials, the raw material cost has remained on the higher side at INR804 per ton. The power and fuel cost also increased 29% Y-o-Y to INR1,529 per ton. The conventional cost of fuel did see some respite from being at $215 [Phonetic] during the last quarter to around $195 during Q3. In fact, the purchase cost during the quarter was around $185 and it is expected that during the upcoming quarter the fuel prices could stay around $180.

Our freight costs continues to remain one of the lowest in the industry at INR1,114 per ton. The total EBITDA for the quarter stood at INR644 crore, which is a 57% growth on Y-o-Y basis and it translates to INR1,021 per ton. We are glad that after many subdued quarters due to high inflation, we have been able to manage the cost and have now crossed the threshold of INR1,000 a ton. We remain committed to continuously explore levers of long-term cost saving and are implementing suitable measures that will enable us to retain our cost leadership both in production cost and in logistic cost.

During the quarter, we have commercialized 25 megawatts renewable power, which takes our total capacity to 154 megawatts. During the quarter, renewable power constituted almost 24% of our power consumption met. We remain on track to take our renewable power to 173 megawatts by year end and 328 megawatts by FY ’24.

Another lever which add to cost-efficiency and sustainability is the announcement of our low-carbon cement or blended cement which was highest-ever for a quarter at about 83%. What has really been encouraging is that in South, which has tediously been and is a [Indecipherable] market, we have managed to sustain our low-carbon cement percentage at around 63% which otherwise used to be below 50%. Our teams will continue to make efforts to move to 100% low-carbon cement in all our regions in few years. Friends, we have been able to further bring down our carbon footprints to 462 kg per ton of cement which is probably one of the lowest in world cement sector as well that also matches the target which we had given three years back.

Dear friends, Puneet ji has already mentioned that we have signed definitive agreement for the acquisition of cement assets of Jaypee in Central India totaling to 5.2 million ton of cement and 3.3 million ton of clinker at an enterprise value of INR3,230 crores. We are very excited about this opportunity and as we speak, Jaypee and ourselves are actively engaged in completing the process for remaining part of the acquisition and which we plan as per the framework agreement.

With regards to organic expansion, our ongoing projects are expected to get completed with the targeted timelines. We remain committed to our interim capacity expansion target of 75 million ton by FY ’27 and 110 million ton to 130 million ton by 2031. I do hope that our team will get take all our actions forward so that we always remain cost competitive as well are able to enhance our low-carbon cement production.

Thank you, friends, and now I would request my colleague CFO, Mr. Tuteja, to take over. Thank you.

Dharmendra Tuteja — Chief Financial Officer

Thank you, Singhi ji. Good morning, all. Continuing on the capex, the total capex spend during the quarter and nine months period has been about INR900 crores and INR2,100 crores, respectively. During current full year, as was mentioned in our earlier calls, we’ll be spending close to INR3,000 crores to INR3,200 crores. In terms of incentive, during the quarter, we have accrued income of INR61 crores and during nine months, INR180 crores. In terms of collections, we collected INR25 crores during the quarter and total INR153 crores during nine months. The incentive receivable as of 31 December stood at around INR700 crores.

On the debt side, our gross debt increased by about INR760 crores and the closing debt as on 31 December stands at INR4,050 crores. Net debt increased by INR247 crores during the quarter due to the capex and the net-debt to EBITDA on 31 December was 0.39 times. With respect to our investment in IEX, we will continue to evaluate this and we’ll take appropriate call on divestment at opportune times.

With this, I would now like to open the floor for question-answer. Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions]. The first question is from the line of Rajesh Ravi from HDFC Securities. Please go ahead.

Rajesh Ravi — HDFC Securities — Analyst

Yeah, hi sir. Good morning. Yeah, am I audible?

Puneet Dalmia — Managing Director

Yes, please.

Rajesh Ravi — HDFC Securities — Analyst

Yeah. Congratulations to the team for great set of numbers, all-round performance. Sir, my question first on the housekeeping. Could you share what was the per kilo cal costing in Q3 and how is the scenario in Q4?

Puneet Dalmia — Managing Director

Yes, per kilocalorie for the quarter was around INR2,100 per million kilocalorie. And it looks like that the next quarter would be around this number, maybe 3% to 5% here and there.

Rajesh Ravi — HDFC Securities — Analyst

Okay, great. And how was it in Q2, sir? Versus Q2, how much is the drop you’ve seen?

Puneet Dalmia — Managing Director

Exactly, I may not be able to say, but then maybe again, 3% to 5% only, but exactly I’m not sure of this number.

Rajesh Ravi — HDFC Securities — Analyst

Okay.

Dharmendra Tuteja — Chief Financial Officer

Last quarter it was 2.52 per kcal. And this quarter it is 2.42, there is a marginal drop because of the fall in the pet coke prices.

Rajesh Ravi — HDFC Securities — Analyst

Okay, 2.5 to around 2.4, okay.

Dharmendra Tuteja — Chief Financial Officer

That’s it.

Rajesh Ravi — HDFC Securities — Analyst

And in Q4, you are not looking major dip from 2.4?

Dharmendra Tuteja — Chief Financial Officer

Yeah, the pet coke prices are marginally down the last quarter to this quarter, maybe $4 to $5 per ton, so around similar corresponding drop can be there in this also.

Rajesh Ravi — HDFC Securities — Analyst

Yeah, okay. And yeah, coming to these two plants, what is the status in terms of utilization and profitability.

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

So, utilization is slowly improving and in the month of January, it was around, say, 55% and it’s improving. And the profitability now, prices in Western India, particularly in Maharashtra, they are stable. So now, profitability would be better.

Rajesh Ravi — HDFC Securities — Analyst

Okay, so in terms of costing, are they in line with your company average or waver [Phonetic]?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

It’s higher at the moment and it was expected also, and slowly, slowly we did the best practices as well as higher green fuel and green power, it will come also to the company’s standard.

Rajesh Ravi — HDFC Securities — Analyst

Okay, by when do you expect the cost to normalize to company’s level, sir?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

In another nine to 12 months.

Rajesh Ravi — HDFC Securities — Analyst

Okay. And lastly on the Jaypee acquisition, we see that compared to what you had earlier announced in December, this is more a rational and the operational assets is which you are going ahead with. So this is Dalla Super which was under contention with Ultra tech, that is not part of this current deal?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Friend, earlier one was also very rational, and this is the process in which we are going. So in the first process, we have completed assets which are linked to Rewa and the grinding units at Chunar and Satna and balance are also under the process.

Rajesh Ravi — HDFC Securities — Analyst

Okay, okay. So that will happen little later on. Okay. And sir, in terms of — could you give us what sort of limestone availability is there at the plants and what optionality we have in terms of expansion opportunities and what would be these first year of after you get them acquired, how much time you will be able to start production and what sort of numbers you are looking at, please?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

I would say that there is sufficient limestone availability whatever we have been able to understand. And then second is that, first time, we have been also able to see the operation of the kilns and they are operating as per the stated capacity. So we are quite hopeful and quite bullish that we’ll be able to produce the required quantity of clinker and cement. And as far as expansion is concerned, once we are able to stabilize operations, we’ll surely share with you.

Rajesh Ravi — HDFC Securities — Analyst

Sure, sir, thank you. That’s all from my side currently. I will come back in queue. Thank you.

Puneet Dalmia — Managing Director

May I just request the operator so that there’s only one question asked per analyst so that everybody gets a chance to ask a question.

Operator

Sure. [Operator Instructions] The next question is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.

Sumangal Nevatia — Kotak Securities — Analyst

Yeah. Thanks and good morning, everyone. Firstly many congratulations to the management on progress on multiple fronts, a very strong quarter, the progress on JPA deal and also the divestment of the refractory business. Since I just have chance for one question, I have a question on capital allocation to Mr. Dalmia. Sir, now if you see our IEX stake is almost INR2,000 crores where the last partial divestment happened almost two years back and now also with this successful refractory divestment, the cash equivalent at DBRL is roughly around INR3,000 crores and our stake would be around INR1,200 crores to 1,300 crores. So the question is, I mean, given that we are now pursuing a sizable acquisition, can we now expect some divestment of the non-core assets to fund our acquisition? Because if you see, I mean, if it kind of matches with the size of the acquisition which we are doing in the first phase and if it can be funded through these divestments, it could be a very significant re-rating event for us from a capital allocation perspective. So any broad timeline and direction on this will be very helpful.

Puneet Dalmia — Managing Director

Sumangal, I have — we have already created — we were the first to announce and create a very formal capital allocation policy and framework, which was very detailed. And we are going to be very consistent with that. So I can tell you that we are going to keep our net-debt to EBITDA below 2 and we will ensure that our growth is funded with a very strong and well-capitalized balance sheet. Now, what are the decisions that we will take along the way will be evaluated time-to-time from — by the management and the Board and appropriate calls will be taken. I think, these companies are publicly-listed companies and I don’t think I can give a very definitive and clear timeline in terms of which I will be able to decide this. But I can tell you that we are very strict in terms of monitoring our capital allocation policy and our capital allocation framework and we will be well within that in this phase of growth.

Sumangal Nevatia — Kotak Securities — Analyst

Understood. Sir, our capital allocation policy was quite encouraging, but I mean, at least directionally do we look to keep the gross debt also under control and use these in some time in future? I mean, just broad directional sense?

Puneet Dalmia — Managing Director

Sumangal, I think I’ve answered what I had to.

Sumangal Nevatia — Kotak Securities — Analyst

Okay, got it. No problem. If I can just squeeze in one more question. I mean, on the pricing environment…

Operator

Sorry to interrupt, Mr. Nevatia, may we request you to please rejoin the queue. We have participants waiting for their turn.

Sumangal Nevatia — Kotak Securities — Analyst

Sure, sure, thank you and all the best to the management, yeah.

Puneet Dalmia — Managing Director

Thank you.

Operator

[Operator Instructions] The next question is from the line of Pinakin Parekh from JPMorgan. Please go ahead.

Pinakin Parekh — JPMorgan — Analyst

Yeah, thank you very much. Sir, my question is on the capacity addition roadmap. Now, the company has reiterated the target to reach — a vision to reach 75 million tons by F ’27 and at this point of time, the ongoing projects takes it to 49 million tons by F ’24. If we add Jaiprakash, it goes to 54 million tons. There is still a very material gap of 21 million tons and the timeline’s just three years. So when should we expect — announce — growth projects to get announced or is this 21 million tons going to be pre-dominated by M&A and acquisition?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

In fact, we are doing our groundwork and maybe in a year’s time you’ll be able to know capacity-wise, that how we will be putting up new capacity. So we are confident whatever study we have done that we should be able to reach 75 million tons and, at the right time, we’ll be able to share with all of you also our specific action plan.

Puneet Dalmia — Managing Director

I just want to add to what Mr. Singhi said. Our growth has always been a mix of organic and inorganic. We are going to have a organic plan in place to go to 75 million ton to the extent we think it is appropriate at this point in time. As you know, some of our organic expansions are in progress and we are making a blueprint to further grow it. And the inorganic opportunities are something that we continuously evaluate and I think Jaypee is one such example. I think our focus right now is to complete this acquisition, ensure that we bring it to the efficiency parameters, and the market share that Dalmia hopes to gain in these markets. And only after that, we will examine what makes sense in terms of more inorganic deals.

Pinakin Parekh — JPMorgan — Analyst

Sure, sir, just to understand, is this F ’27, 75 million ton a hard number or is it more like a vision of increasing capacity, it may be a year or two or three years later. How should we look at that, because it’s a very material jump going from 54 million ton to 75 million ton in three years time?

Rajiv Bansal — President & Chief Transformation Officer

Puneet, can I take this?

Puneet Dalmia — Managing Director

Yeah, Rajiv, go ahead.

Rajiv Bansal — President & Chief Transformation Officer

Yeah. So see, when we laid out a vision of 110 million ton to 130 million ton, that is a vision. [Indecipherable] and we wanted to see, given the opportunity in the marketplace, we said we clearly see an opportunity to expedite our expansion. Then we said, firstly getting to the milestone of 49 million ton by FY ’24, which we are absolutely on target to meet and then we spoke about saying that because we have come out with a capital allocation framework and we said we don’t want to inflict [Phonetic] our net-debt-to-EBITDA more than 2, we need to have secular growth. We needed to grow at least at 15% CAGR, year-on-year and that’s the reason we put a 75 million ton target.

Now, it is not a harsh target in the sense that — see that economic condition is still volatile. And also, we, as prudent managers, we’ll keep evaluating the opportunity that we have. But, standing where we stand today, we believe the opportunity is huge. With all the announcements which are being done by the government, you see the private capex, you see the pent-up demand coming, election year coming, we believe that we’re on the right track. But as a prudent management, we keep looking at our strategy based on the risk parameters that these have been defined by RMC and we’ll keep [Indecipherable] plans.

But yes, incremental less [Phonetic] than 75 million ton, it may go up here and there, but given where we stand at, 75 million ton is doable and we’ll do it.

Pinakin Parekh — JPMorgan — Analyst

Understood. Thank you. That’s very clear.

Operator

Thank you. The next question is from the line of Indrajit from CLSA. Please go ahead.

Indrajit Agarwal — CLSA — Analyst

Hi, thanks for the opportunity and congratulations on a good set of numbers, particularly on cost. My question is on the power cost. So you mentioned that your per kcal cost went down from 2.5 to 2.4 odd, but when I look at Slide 14 of the presentation, power cost per ton has reduced from about INR1,500 to INR1,200, that’s a good 25% reduction. So are there — is there a change in mix or anything else that has gone into this cost and how sustainable do you think this reduction is?

Puneet Dalmia — Managing Director

Dharmendra?

Dharmendra Tuteja — Chief Financial Officer

The reduction in the power has also contributed by increasing green power proportion which has increased to now 24%. Previous quarter it was around roughly 15% to 17%. And that is sustainable.

Indrajit Agarwal — CLSA — Analyst

In terms of fuel mix, has there been any meaningful change in terms of pet coke, coal, etc.?

Dharmendra Tuteja — Chief Financial Officer

No, fuel mix continues to be non-pet coke for the power, which is coal — domestic coal, lignite, etc.

Indrajit Agarwal — CLSA — Analyst

Sure, thank you.

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

And like in totality also, if you look at cement plant fuel mix, then yes, pet coke has also broadly around, say, 65% to 69%, but at the same time, other fuels which were comparatively economical, that has gone up and on that account also the cost has come down.

Indrajit Agarwal — CLSA — Analyst

All right. 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

Yeah, hi, good afternoon. So just on power and fuel cost, so that slide mentions that you’ll be going to 69 megawatts of WHRS but for FY ’24, you have a wind and solar plant, but is there any WHRS plant as well?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

There is one WHRS which is work in progress. So that will get commissioned in next year.

Amit Murarka — Axis Capital — Analyst

Sir, so that will take you to 69 megawatts then?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

And thereafter we will have WHRS in all kilns.

Amit Murarka — Axis Capital — Analyst

Okay fine, so there is no scope after that to do more WHRS then.

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

After FY ’24, but then definitely whatever, say, new capacity would be added or the Jaypee capacity would be added, that all would have.

Amit Murarka — Axis Capital — Analyst

And how much savings will come from this in FY ’24?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

That definitely can be shared separately.

Amit Murarka — Axis Capital — Analyst

Okay, I’ll come back in the queue. Thanks.

Operator

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

Girish Choudhary — Avendus Spark — Analyst

Hi, thanks. Good to see this operational performance during the quarter. So on this acquired capacities from Jaypee, if you can throw some more concrete details on the utilization of these plants, the current profitability structure and importantly, how do you plan to ramp up and bring in synergies of the — within the existing capacity — assets of yours?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Once we are able to close the transaction, and we are able to take possession and start operating, then definitely we will be able to share our specific action plan that this is how operations would be optimized, this is how synergy will take place. We are quite hopeful that the quality of plant which we will be inheriting as well as the bucket which we will be in, it would be a very good acquisition.

Girish Choudhary — Avendus Spark — Analyst

Just as a follow-up, when do you expect this transaction to close?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

This transaction is subject to certain specific conditions. So maybe in few months time, that definitive document which we have signed, that should get over.

Girish Choudhary — Avendus Spark — Analyst

Okay. Thank you.

Operator

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

Prateek Kumar — Jefferies — Analyst

Hello. Yeah, good afternoon, sir and congrats for the result, My question is on East region pricing. So there has been like a pertinent improvement in pricing in Eastern…

Operator

Sorry to interrupt you Mr. Prateek Kumar, but there is lot of disturbance from your background.

Prateek Kumar — Jefferies — Analyst

Hello?

Operator

Yes, please go ahead.

Puneet Dalmia — Managing Director

Yeah, now it’s clear.

Prateek Kumar — Jefferies — Analyst

Yeah, sir, sorry. So I was asking regarding there is this pertinent improvement in pricing in Eastern market in past three to five months. It sort of continued into first quarter — fourth quarter as well. Is there any specific reason attributable to this? I mean, while other regions are literally struggling on any price changes, so what has helped pricing in Eastern market here?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Now it looks like that the demand is improving and there are good prospects as well. Whatever, say, few problems, which were there in past in regard to the availability of [Technical Issues] So that is also not there. So because [Phonetic] of that we have experienced better demand and better price also. And we hope that this would continue.

Prateek Kumar — Jefferies — Analyst

Okay. And any major capacities which we have commissioned — I mean small capacity which we have commissioned during this quarter?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

No, please.

Prateek Kumar — Jefferies — Analyst

Sure, sir. These were my questions. Thank you.

Puneet Dalmia — Managing Director

Thanks.

Operator

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

Satyadeep Jain — Ambit Capital — Analyst

Hi, thank you for the opportunity. Just a question, Mr. Dalmia mentioned Project Lakshya to strengthen the management team. I believe, earlier we were looking at succession planning and strengthening the second layer of management team as a potential succession team. How — and then we had some exits, I believe, last year. How — what is the thought behind now looking at that succession planning again? And if there is, what’s the progress on that? That’s the question. Thank you.

Puneet Dalmia — Managing Director

Let me take that. We are — we have to build a management team looking at our decadal vision. So we are looking at like by FY ’31 to be 110 million tons to 130 million tons and by FY ’27 to 75 million tons. We have to look at what capabilities and competencies we need internally to be able to achieve that vision in a sustainable manner. So I think we need to look at what are the enablers to build the scale. We have to look at what will make our business even more sustainable. And on the basis of that, we are starting to plan today. So as you know that a lot of new capacity is being added, we are also doing a very major acquisition in a new market and I think there will be more such events in the next five to eight years.

So looking at that, we are planning, how do we train our people to take more challenging roles? How do we assess them? How do we coach them? How do we support them? And on that basis, we are planning our internal human capital transformation. So we are going to do a lot of metrics, which we will measure. And on this basis, a lot of opportunities will be given to youngsters in the Group. So I think broadly, that’s what I can say. We want to build capabilities for a scalable and sustainable operation of this size and we want to give a lot more opportunity to youngsters in the company. Rajiv, Mr. Singhi, you want to add to this?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

No, I think this is what we are in the process and we are quite hopeful that in times to come also we’ll have very strengthened team which will be able to achieve the vision of 75 million ton and 130 million ton.

Rajiv Bansal — President & Chief Transformation Officer

So if I can just add to what Puneet and Mr. Singhi just said, this is part of the overall organization development and succession planning is a part of that. Succession planning is not only about one year or two years but how do we create a set of leaders who can potentially take over a larger role at the drop of a hat. So we have formed an Executive Council of 11 people, each one of them can potentially take the highest role in the company. We have identified 41 young leaders across different bands and different functions who are the high-potential leaders of the future. So, we are doing in a very structured manner — in a right manner, keeping the next 10 years vision that we have in mind. And I think succession planning is rolled up into all of that.

Satyadeep Jain — Ambit Capital — Analyst

Got it. Thank you so much.

Operator

Thank you. The next question is from the line of Anupama Bhootra from Arihant Capital. Please go ahead.

Anupama Bhootra — Arihant Capital — Analyst

Good morning. [Indecipherable]. So I have a question regarding carbon credits. Since we target to become carbon negative by 2040, so how does it work? Like, do we collect any certificate or do we sell any certificate like any involvement there in the company with the carbon credit certificate?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Presently, there is no industrial carbon market except a little bit voluntary carbon market. So on account of that the industrial carbon market has not got activated. And as per this COP21 agreement, now industrial carbon market may get activated in a year or two. For that right type of mechanism is being worked out and at the same time, even in India also, now, Indian government and Bureau of Energy Efficiency, they are exploring ways and means to create carbon market and once it happens, then definitely whatever projects we would be doing to bring down carbon footprints, that will get — and that will become eligible.

Anupama Bhootra — Arihant Capital — Analyst

Okay, okay, thank you. Thanks, that’s it from my side.

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Thanks.

Operator

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

Shravan Shah — Dolat Capital — Analyst

I need a couple of data points: trade share for the third quarter, lead distance, premium share, fuel mix, so please, sir.

Puneet Dalmia — Managing Director

Dharmendra?

Aditi Mittal — Head of Investor Relations

Share percentage for the quarter was 60%. Lead distance was around 310 kilometers. And on the fuel mix, we used about 70% pet coke, and 16% was coal. And what was the last part that you wanted to know?

Shravan Shah — Dolat Capital — Analyst

Sorry, 70% pet coke, 16% coal.

Aditi Mittal — Head of Investor Relations

And then balance is a combination of lignite, [Indecipherable], some alternate fuels.

Shravan Shah — Dolat Capital — Analyst

Okay. And then, broadly, what’s the TSR, Thermal Saturation Rate for the third quarter?

Aditi Mittal — Head of Investor Relations

I will probably come back to you on that.

Shravan Shah — Dolat Capital — Analyst

Okay, just to again clarify in terms of the capex for this year, we have INR3,000 crore to INR3,200 crore. For the next year, FY ’24, previously we mentioned INR3,500 crore to INR4,000 crore. So is it remains the same, considering the current Jaypee expansion? So out of this INR3,230 crore EV, how much are we planning to do through the date?

Dharmendra Tuteja — Chief Financial Officer

No, so — let me — see, the next year’s numbers we will give you during the April Earnings call. I think right now, it is difficult because as Singhi ji also said, the consummation of the transaction is subject to certain conditions and approval, which we don’t know when it will happen though we hope it will happen in the next few months. So next year’s capex budget, we’ll give you a better picture — a much clearer picture in April.

Shravan Shah — Dolat Capital — Analyst

Okay, and lastly, in terms of the pricing also…

Operator

Sorry to interrupt Mr. Shah, may we request you…

Shravan Shah — Dolat Capital — Analyst

Okay, no issues.

Operator

[Operator Instructions] The next question is from the line of Navin Sahadeo from Nuvama Institutional Equities. Please go ahead. Ladies and gentlemen, the line for the participant got disconnected. We’ll move to the next question which is from the line of Komal Ladha from YellowJersey Investment Advisors. Please go ahead.

Komal Ladha — YellowJersey Investment Advisors — Analyst

Hello. I wanted to know if there is any plan of any price hike in quarter four.

Aditi Mittal — Head of Investor Relations

We couldn’t hear.

Operator

I’m sorry to interrupt, Ms. Ladha, we cannot hear you clearly. Can you speak a bit louder?

Komal Ladha — YellowJersey Investment Advisors — Analyst

If there is any chance of price hike in quarter four.

Puneet Dalmia — Managing Director

Sorry, we are not able to get you, please.

Komal Ladha — YellowJersey Investment Advisors — Analyst

Any price hike — plan for price hike in quarter four.

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

It all depends on how the demand is and how supplies are and, of course, because of the high cost there is effort by us also and maybe and for the market also. But definitely at the end of the quarter only we could share with you that yes, this is what the price has been.

Komal Ladha — YellowJersey Investment Advisors — Analyst

Okay, and capacity utilization for the quarter?

Puneet Dalmia — Managing Director

68%, Aditi?

Aditi Mittal — Head of Investor Relations

58% [Phonetic].

Komal Ladha — YellowJersey Investment Advisors — Analyst

Okay, thank you.

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, few parts pertaining to the Jaypee assets. One is, are there any tax gains that one can actually look at on back of the assets that we have bought? Second is, are there any liabilities, if any, and will the company be ring-fenced? And third is basically what is the status on the balance assets? Thank you.

Dharmendra Tuteja — Chief Financial Officer

On tax side, since it was a plump sale, so whatever cost we incur, so that will be added to the assets — the recent acquisition. So they’re not carrying forward any losses on them because it was a plump sale transaction. And on the liability side, whatever is supply liabilities, that we’ll take over and adjust in the consolidation and balance they’ll retain. So we are not taking over the entire liability. This transaction, as Singhi ji and Puneet ji also told, the remaining transaction documentation is in advanced stage of finalization. We will get done it soon.

Ritesh Shah — Investec — Analyst

Sure, this is helpful. Thank you so much.

Operator

Thank you. The next question is from the line of Nishant Bagrecha from InCred Equities. Please go ahead.

Nishant Bagrecha — InCred Capital — Analyst

Thank you for the opportunity and congratulations on a good set of numbers, sir.

Puneet Dalmia — Managing Director

Thank you.

Nishant Bagrecha — InCred Capital — Analyst

So I have a question, sir. So, recently you have won a limestone block in Nawalgarh, Rajasthan, so they’re having a mineable reserves of around 150 million ton. So any update on the land acquiring there?

Puneet Dalmia — Managing Director

Can you repeat it?

Nishant Bagrecha — InCred Capital — Analyst

So on this Nawalgarh limestone block, any update on the land acquiring there?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

In fact, still, we have to get that required letter of mine from the government and thereafter, we will start that activity.

Nishant Bagrecha — InCred Capital — Analyst

So, for the [Speech Overlap].

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

At the moment, there is no land acquisition on this Nawalgarh buy.

Nishant Bagrecha — InCred Capital — Analyst

Thank you. Okay. So it will take…

Operator

Thank you. The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.

Saket Kapoor — Kapoor and Company — Analyst

Namaskar, sir.

Puneet Dalmia — Managing Director

Namaskar.

Saket Kapoor — Kapoor and Company — Analyst

One general — one question on the general industry sentiment and capacity addition. So for the nine months, industry as a whole, what have been the capacity addition in totality for the country? And how have the average utilization levels moved as per the increased capacity?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

So, it looks like — though, exact number doesn’t come up even from the government also, but it looks like that the capacity utilization for the year would be around, say, 64% to 66%. And this is also based on whatever, say, capacity additions which has happened or which would be happening.

Saket Kapoor — Kapoor and Company — Analyst

But the size, sir, can you give some color what it was for last FY ’21-’22 and how FY ’22-’23 will be closing in terms of the absolute numbers of the greenfield expansion that has — greenfield and brownfield both included?

Dharmendra Tuteja — Chief Financial Officer

Current [Technical Issues] standing at around 40 million.

Saket Kapoor — Kapoor and Company — Analyst

Didn’t get the number, sir. Come again?

Dharmendra Tuteja — Chief Financial Officer

40 million, that is the forecast for the current year that we gave in the earning release.

Saket Kapoor — Kapoor and Company — Analyst

Sir, and on the line item fair charges, we have seen a significant increase…

Operator

Sorry to interrupt, Mr. Kapoor, may we request you to please rejoin the queue. We have participants waiting.

Saket Kapoor — Kapoor and Company — Analyst

Yes, ma’am. I will join.

Operator

Thank you. The next question is from the line of Rajesh Ravi from HDFC Securities. Please go ahead. Mr. Rajesh Ravi, please go ahead with your question. Your line is unmuted. As there is no response, we will move to the next question, which is from the line of Prateek Maheshwari from HSBC Securities. Please go ahead.

Prateek Maheshwari — HSBC Securities — Analyst

Hello, thank you for the opportunity, sir. So I just wanted to check on two things, one is the lead distance hasn’t changed materially quarter-to-quarter, but there is an increase of 8% freight cost. Just wanted to understand what had led to that. Was it any change in the rail share or something? And the other thing, just wanted to get an update on the Bihar expansion as well.

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

So on freight cost, the major cost increase has come on account of imposition of busy season surcharge imposed by the Railways from October onwards. So that’s one of the major account on which freight cost has gone up. In fact, the various other initiatives which we have taken, so we have been able to contain our logistic cost to this extent.

Prateek Maheshwari — HSBC Securities — Analyst

And sir, can you share the rail share at the company level?

Dharmendra Tuteja — Chief Financial Officer

17%.

Prateek Maheshwari — HSBC Securities — Analyst

Okay.

Operator

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

Navin Sahadeo — Nuvama Institutional Equities — Analyst

Hello? Hello?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Yes, please.

Navin Sahadeo — Nuvama Institutional Equities — Analyst

Yeah. Thank you. So thank you for the opportunity. Sir, just one quick question. Sorry, I got logged out. And sorry if this question is repeated. It was about JPA acquisitions. So I’m sure you would have done this due diligence of these assets and hence arrived at this acquisition number of INR3,230 crores. My question is, does it require any more capex on two counts: one is of course to scale, since I believe this clinker — we know these assets are slightly old. So does it require first of all, to get them at par to optimal utilization is one? And second, of course, is capex requirement to bring the overall efficiency at par to the company benchmark? Thank you.

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

As I said earlier, in regard to how to bring up operational efficiencies to our company or group standard, we will share once we are able to go take over and start the operations. At the same time, in regard to starting operations or startup expenses, they will not be much significant.

Navin Sahadeo — Nuvama Institutional Equities — Analyst

Understood, that’s helpful. Thank you.

Operator

Thank you. The next question is from the line of Satyendra Gupta [Phonetic] from Systematix. Please go ahead.

Satyendra Gupta — Systematix — Analyst

Good afternoon, sir. Congratulations on good set of numbers…

Operator

Mr. Gupta, sorry to interrupt, but there is a lot of disturbance from your background, sir.

Satyendra Gupta — Systematix — Analyst

Yeah, just hold on. So my question is regarding freight cost. Though I understand there was a busy surcharge by Railways, but the cost has increased from INR600 crores to INR700 crores. Do you think it will be continuing going forward in the future also?

Dharmendra Tuteja — Chief Financial Officer

Yes, freight cost would be around that number.

Satyendra Gupta — Systematix — Analyst

Okay, and basis going forward, the rail share would remain at 17%, sir, or it will increase?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Maybe I’m just estimating, maybe 18%, 19% only, not much because the rail percentage is higher in case of our East operations.

Satyendra Gupta — Systematix — Analyst

East operations, okay. And how much percentage of East operations we have right now in terms of dispatches over in that region?

Dharmendra Tuteja — Chief Financial Officer

Yeah, region-wise, [Technical Issues] cannot provide.

Satyendra Gupta — Systematix — Analyst

Okay. Thank you. Thank you.

Operator

Thank you. The next question is from the line of Surya Narayan [Phonetic] from Sunidhi Securities. Please go ahead.

Surya Narayan — Sunidhi Securities — Analyst

Hello? Am I audible, sir?

Puneet Dalmia — Managing Director

Yes, please.

Surya Narayan — Sunidhi Securities — Analyst

Yeah, thank you for the opportunity. So most of the questions have been answered, but only one thing, recently the Newcastle coal prices have dropped significantly. So…

Puneet Dalmia — Managing Director

Sorry, repeat again.

Surya Narayan — Sunidhi Securities — Analyst

Yeah, recently the Newcastle coal prices have dropped significantly, around 42% last week. So overall, 48% [Phonetic] from the top. So are we — so my question is, to what extent this coal will be dropping further so that the equilibrium with the pet coke will be available?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Whenever we decide about procurement of fuel, we do analyze the cost whether it’s imported coal from any country, as well as Indian coal and based on that, we take decision for each plant. So at the moment, except in one plant, everywhere we do find that our pet coke is most economical and wherever there are short distance coal which is available in India, we do procure that part. So at the moment, imported coal hardly economical.

Surya Narayan — Sunidhi Securities — Analyst

That is correct, but on the pet coke recently, Reliance has opted out to sell the pet coke to the local market. So cement companies have to possibly import. So what is our case? Are we sourcing pet coke from local sources or we will resort to import altogether?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

We do not buy pet coke from Reliance because of logistic distance and that’s why we do import pet coke and at the same time 3% to 4% we do buy from [Technical Issues].

Surya Narayan — Sunidhi Securities — Analyst

So after this Reliance’s announcement, any spike in the pet coke was seen?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Not to our knowledge. Thank you.

Surya Narayan — Sunidhi Securities — Analyst

Okay. Thanks.

Operator

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

Prateek Kumar — Jefferies — Analyst

Yeah, thanks for the follow-up opportunity. My question is on your net-debt calculation. So sir, basically [Technical Issues] include the impact of investment in IEX, while we don’t include the investments in Dalmia Bharat Sugar and Dalmia Refractory in our net debt calculation, so while all of these three should be non-strategic or like co-investments only, so any specific reason there?

Dharmendra Tuteja — Chief Financial Officer

Dalmia Bharat Sugar as well as Dalmia Bharat Refractories, so these being Group companies, so there is no intent to sell immediately. That is why — and especially the DBRL is part of the associates. So that is not counted as current investment while IEX is current investment. That is why it is counted for debt-to-equity — net-debt-to-EBITDA.

Prateek Kumar — Jefferies — Analyst

So even Dalmia Refractories is not considered in our…

Dharmendra Tuteja — Chief Financial Officer

Because of our stake being more than 20%, so it’s just an associate. So associates, it is not counted in that.

Prateek Kumar — Jefferies — Analyst

Sure. Thanks.

Rajiv Bansal — President & Chief Transformation Officer

Prateek, if I can add, see, sugar is a strategic investment, so irrespective of the percentage stake [Indecipherable], sugar is a strategic investment because in Dalmia group, we believe that cement and sugar are core businesses that we have. IEX is, say, more of a treasury investment which was done many years back and that is something we’ve discussed at length in terms of our intent to dilute over a bit of time. And third is the refractories, and if you remember, we had said that as we come out of our non-core assets, the factories, we had actually done the structuring to consolidate all the assets so that we can get a better value and that we’ve already done. So that is again because segment [Phonetic] company has more than 20% stake, it’s an associate and that isn’t shown the way it is shown. But again, the intention is the same that we want to come out of the non-core assets.

Prateek Kumar — Jefferies — Analyst

Thanks.

Operator

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

Shravan Shah — Dolat Capital — Analyst

Yeah, thank you for the things. One data point, premium share, what was in the third quarter? Second, when we said our rail share has — is only up 17% then the increase in busy season surcharge, how come that can increase overall logistic, that is the freight cost by close to 8% or maybe INR82 rupees per ton?

Dharmendra Tuteja — Chief Financial Officer

Yes, so premium proportion in this quarter was 22%.

Shravan Shah — Dolat Capital — Analyst

Sorry, 42%?

Dharmendra Tuteja — Chief Financial Officer

22%.

Shravan Shah — Dolat Capital — Analyst

22%.

Dharmendra Tuteja — Chief Financial Officer

Yeah, compared to 20% [Phonetic] in the previous quarter. And, with respect to the logistic part, as Singhi ji explained, one major factor was busy season surcharge that extends about INR65 per ton impact. And balance is on account of the — we were having incentive — railway incentive till last quarter and this quarter, so that has now — base has slightly gone up.

Shravan Shah — Dolat Capital — Analyst

Okay, and last, sir, in terms of the pricing schemes, December till now, have we taken price hike in any of the region? And the current pricing, is it lower than the average of the third quarter?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

There is no price increase in the month of January, please.

Shravan Shah — Dolat Capital — Analyst

And current prices is at par with the average of the third quarter or is it lower?

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Broadly, we are there.

Shravan Shah — Dolat Capital — Analyst

Okay, okay. Thank you sir.

Operator

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Puneet Dalmia for closing comments.

Puneet Dalmia — Managing Director

Thank you very much for all your participation and questions. As I said that we are at the cusp of inflection point at Dalmia, and we’re very excited about the future of India and future of Dalmia. So look forward to your continued engagement and guidance and critique. And thank you very much for your participation. Good day. Bye, bye.

Mahendra Singhi — Managing Director and Chief Executive Officer, Dalmia Cement (Bharat) Limited

Thanks, friends. Thanks everyone.

Operator

[Operator Closing Remarks]