Orient Cement Limited (ORIENTCEM) Q4 FY23 Earnings Concall Transcript

Orient Cement Limited (NSE:ORIENTCEM) Q4 FY23 Earnings Concall dated May. 03, 2023.

Corporate Participants:

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Analysts:

Navin Sahadeo — ICICI Securities Limited — Analyst

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

Niteen Dharmawat — Aurum Capital — Analyst

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Prateek Kumar — Jefferies — Analyst

Aditya Chheda — InCred Asset Management — Analyst

Presentation:

Operator

Good morning, ladies and gentlemen. Welcome to the Orient Cement Q4 FY’23 Earnings Conference Call, hosted by ICICI Securities Limited [Operator Instructions]

I now hand the conference over to Mr. Navin Sahadeo from ICICI Securities. Thank you, and over to you sir.

Navin Sahadeo — ICICI Securities Limited — Analyst

Thank you, Lisa. Good morning, everyone. On behalf of ICICI Securities, I welcome you all to the Q4 and full-year FY’23 Earnings Call of Orient Cement Limited. From the management, we have with us, MD and CEO, Mr. Deepak Khetrapal. So, without any further ado, I hand over the call to Mr. Khetrapal for his opening comments, followed by interactive Q&A. Over to you, sir.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Thank you, Navin. A very warm welcome to all of you who’ve chosen to spend time on this call today morning. With me on this call is also, Prakash Jain, our CFO, and also, Manish Aggarwal, who looks after our Corporate Finance and also, Investor Relations. So, I thought that I will just make people aware that there are others from cement, who are on this call.

My usual customary update on Q4 and the full-year. Let me let me just point out some highlights, which may not be so obvious from the published results, and I think that’s the main purpose of the call. So, as we all know, we had an extremely disappointing Q2, very, very soft H1, but thereafter, I think we started recovering well and Q3 actually showed a much better performance and Q4, I think we bounced back with EBITDA in Q4 of close to INR840 a ton. So, that’s good to be back where we belong. The overall volumes, as all of you know by now for Q4 of 17.2 lakh tons, which is 6% growth over last year and over Q-on-Q basis, preceding quarter, we are up 20%. And I just want to highlight, this 20% growth that you are seeing in our quarter-to-quarter volumes, this is barely any drop in the pricing. Price is barely 0.5% below the preceding quarter. And with that, we are 20% growth. I just want to highlight how important, how significant that is.

On a full-year basis, we have the total volumes nearly 58 lakh tons, up 5%. The main thing which was not, I said which which is not in the published numbers, this year has been a strange year for us because largely, we remain 60% plus towards the trade sales, as we call it B2C sales, that we keep calling it, and our B2B typically has been a smaller part of our portfolio. Which continues to be so, but there is a big skew that happened during the year, that in our markets, we found the B2C demand or the trade segment demand to be a lot lower and because of the price — the demand in B2C being lower, somehow the prices in B2B segment in our markets also suffered and they were very low. And we made a quick pivot, as we keep calling ourselves, the agile organization. So, this year we grabbed the opportunity that is available in the B2B sales and against a 9% de-growth in our trade sales, we actually have grown by 29% in our B2B sales.

Why I’m calling that out is because it has huge implications on the overall, I would say numbers. The B2B sales, as we know is predominantly OPC sale, unblended sale. What that does is, that when you start selling so much more of your proportion of OPC, it actually changes the total capacity that is available to the company, because the Fly Ash is not getting blended with the blended cement that goes. So, when we actually look at these numbers, while we would say that for the quarter, we have — the OPC has actually gone up to about 43%. As a result of that, whatever capacity utilization we talk about, the 80% capacity utilization that we talk about at the cement level, at the clinker level, that amounts to 98% capacity utilization for the company, available in Q4. So, clinker utilization has been 98% or the cement level capacity utilization appears to be just about 80% and slightly more than that. So, which is a big, big, big difference.

And also, in terms of the efficiencies and all, if they go for a toss, because obviously OPC consumes more fuel, more power and things like that. When you do the bottom analysis, we need to remember, it’s not quite an apple-to-apple analysis. So, these are big important nuances behind the numbers that I read-out to you.

For us, in Q4, the trade has been actually down to 51% against the last year of 50 — The trade at 52% against 61% of last year. In Q4, it is 51% this year. In the preceding quarter, it was 61%. So, that’s the big, big skew in our volumes in Q4. The importance of that I’ve already explained. Another very important factor that I want to highlight for all of you is, that despite the significant de-growth that I’ve mentioned to you about in our trade sales of B2C sales, our premium products, that we’ve been targeting only on the consumer trade market, we do not offer them to the B2B segment, in those products, our super-premium brands, as we call it now, StrongCrete, which is up 17% over last year’s volume. And then we, late in the year, we also launched OrientGreen, our another premium brand, which is not super-premium, which is more like premium. It is about INR3-odd less than StrongCrete in terms the pricing, but the positioning of Orient Green is more about sustainability, more about responsible cement. So, if we combine the two, our total growth in premium cement over last year is 22%.

And the StrongCrete’s 17% has come to us despite the fact that in Q1 itself, we had actually decided to, in a market, where prices are difficult to come by, we had actually taken a bold decision to increase the [PE] over OPC of another INR10. Earlier, we used to sell it at INR35 plus EPC. Now, we sell ot at INR45 plus EPC. Despite that, there is 17% growth in consumer segment, where otherwise we have a de-growth. These are things that I just want to draw your attention to. It actually tells us that our brand strategy and our positioning strategy, that we’ve been sort of working on in a very concerted manner, as a long-term process and with the rich portfolio of premium cement as we’ve already launched, it seems that now we have taken roots and are beginning to see the fruits of the hard work that we’ve been doing. And this branding strategy, which to my mind is perhaps, unmatched in the industry, it will actually pay us dividends for years to come.

But at this stage, at times, it does appear that we are investing in the form of lost volumes, that we insist on the prices that our brands deserve, maybe there is some investments that are happening in terms of lost volumes. But we are, as a conscious choice, as a strategic decision, we choose to pursue that and we keep doing it. And I’m just pointing out this thing, because in the overall analysis of volumes and tons and prices, some of these nuances get lost.

I talked to you about the clinker utilization in Q4 at being 98%. Now, if we — just to give you a full-year figure also. It seems that at the cement level, as traditionally as we see, our capacity utilization is at 68%. But if we look at the clinker level utilization, in this last year, we have utilized, total — company’s total clinker up to 78% for the year. Obviously, the one implication, which is very clearly there is, that you have 98% utilization of in quarter, 78% already happening in the full-year of clinker, if you want to keep growing, very quickly we need to take some action to add more clinker capacity. And the clinker capacity that we need to add, I’ll come later on capex, but just giving an indication to you because the clinker utilization, if we look at the full-year, last year, at our Chittapur, Karnataka plant, our clinker utilization is in excess of 100%. So, the capacity addition at Chittapur is now looking absolutely at desperate need. So, we obviously have to very quickly think about adding clinker capacity, starting with Chittapur, compared to earlier, we were thinking about somewhere else. I’ll come to that.

The other realized details on Q4, our realizations on last year, we are up 3%, and like I said, on Q-o-Q basis there is hardly any drop there. Even the full-year realizations are up about 3%. While the cement prices have stayed flattish, what has bothered of throughout the year is the huge spike in costs. And largely, we all know, it is power and fuel costs, which have been going through the ceiling and they have been unrelenting. Lately, yes, we’ve been having some relief, but for full-year, if we look at it, our total costs, which went up by about INR570 per ton, out of that, INR467 is coming only from power and fuel at INR66 is coming from logistics costs. Some of those small contributors to that, some additives to that like Laterite and Gypsum and maybe some Fly Ash cost going up during the year. But largely that’s the cost buildup.

The — on Q-o-Q basis, our total cost of operations in Q4 are down about 5%, but they are higher 7% year-on year, largely as I mentioned, power and fuel and logistics because diesel costs also went up. And this cost increases, I just want to sort of again give you numbers, which are otherwise not there. The full-year, of we look at the AFR, the alternative-fuels that we use, that we keep consuming and we’ve actually been using a lot more of lower-cost fuels like RDF and the municipal waste and things like that, carbon black, for example, which has been classified as an alternative-fuel. But we know that coke, sorry, the Carbon Black is not really comparable in terms of AFR with things like municipal solid waste or the RDF and things like that.

More-and-more focus has been to go towards lower-cost alternative-fuels and also, the hazardous waste, whether from pharma industry. So, hazardous waste, non-hazardous waste, we’ve been trying to bring in, so that even the alternative-fuel that we use are coming at a cheaper cost. The total savings that we estimate for the year from using alternate fuels is in excess of INR40 crores and the renewable power that we’ve been increasing during the year, those savings are in excess of INR10 crores, coming out, partly the Jalgaon investment that we made and also partly coming from the Chittapur, we’ve been sourcing renewable power to open access. Unfortunately, the Telangana government policies are not friendly towards using or buying renewal power and they are leaving no opportunity for us to utilize that at Devapur, till we decide to set-up our own power on our premises, which perhaps might happen later.

In terms of efficiencies, delighted to report that despite — and whatever things we talk about, the huge consumption, as we call the fuel consumption, in a year, where otherwise things have been struggling, our total heat consumption for the company as a whole is under 690 kilocalories per quintal of clinker. The alternative-fuels for the year as a whole have been a little lower in terms of total volumes of alternative-fuel use, but it’s been more on the cheaper, low-cost or negative cost fuel. But, renewable power for the company as a whole for the year has now reached 15%. And encouraged by the benefits that we see of alternative-fuels and of solar power, we are obviously investing more. The plan is that the renewable power for our company by FY’25 end, that is in the next two years should actually become about 35%. And we are also — that we, I think as an outcome of the Board meeting, we had announced that we are going to be investing again in a SPV to add about 21.5 MW DC of solar power at Jalgaon and Chittapur separately.

The Waste Heat Recovery project that we’ve been talking about, which has been under-construction at Chittapur, the construction got over and that plant is right now under commissioning and the reason why we could not do it earlier, although we were planning will do it earlier, but, one is constructing the waste heat recovery plant, but we also need to connect to the kiln to tap into the heat. Now, that connecting the kiln to the waste heat recovery plant needed a shutdown of the kiln which we could not afford in the month of March. So, only in April, when we took the Chittapur kiln for a maintenance shutdown, at that time we took the opportunity of connecting the kiln with the waste heat recovery plant and currently the commissioning is on. Almost 80% of the power that we expect from waste heat recovery should become available to us from, I’m expecting later this month, but if not later this month, at least definitely in the month of June, about 80% will come in and balance 20%, hopefully by July-August, we’ll start getting the balance 20%. So, that’s a huge, huge, huge cost saving initiative that we are taking at Chittapur. The other project which has been gone towards cost-saving, the rake handling system is up and ready. We’ve already brought in the first rake and sort of normalizing that. So, that also is up there.

In terms of market exposure, we, in this year, actually have increased our volumes from Western India, [Technical Issues]. Is there some dislocation?

Operator

Sir, you may please proceed.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Yeah, because I was getting some message that have I have been put on hold. So, that’s why I stopped.

Operator

Yes sir. I’ll get that checked. Please continue.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Yeah. So, in terms of markets, as I was mentioning, our exposure to the Western India has actually gone up to 61% in Q4 from 53% which used to be last year. I’m talking of Western India, with Maharashtra and Gujarat, put together. On full-year basis, our exposure to this now is 57%, up from 54%. So, that means, we sold less to Southern India, more to Western India in this year, and this change has been enabled by the fact that today, our volumes in the Mumbai market and the Pune market, these two markets have been giving us a huge amount of traction. Our brand is being preferred by lots of B2B customers, and that’s where the slight skew further towards West from South has also happened.

On the fuel mix and other details, one thing which I again want to call out is, as on-date, we have been reporting earlier also that we’ve been a water positive company. I’m delighted to report that we are also a plastic positive company now, in the sense that whatever plastic we end-up consuming, packaging or whichever other form, we actually bring in a lot more of plastic compared to what we consume in our process. So, we have not just a water positive company, we are also a plastic positive company, which I think from sustainability and ESG perspective, is a very important development.

In terms of fuel, as all of you know, Chittapur, besides the alternative-fuel that we use, it runs entirely on pet coke and Devapur, the main fuel continues to be domestic coal, with some pet coke as a sweetener, but largely domestic coal and some AFR. Always the question comes as to what is my fuel mix, overall, for the company as a whole in Q4, we have had about 53% of domestic coal, 35% pet coke and balance is largely alternative fuels. The alternative-fuel that I mentioned, lately, we’ve had some problems with one of the major alternative-fuel had become rice husk. But somehow in the Telangana market, there are some issues going on with the government procurement of paddy. Because of it, lots of rice mills, which used to shell and give us the rice husk has not been available. So, that’s been a little bit of difficulty. Hopefully, that will get over soon. But that slowed down our march with the alternative-fuels as much as we would have wanted.

The overall blended cost for the company on kilocalories basis for us has been INR2,110 and this is down from INR2,230 in — sorry, INR2,230 is the full-year. Sorry, my apologies. The blended fuel cost for the quarter four is INR2,110, but for the full-year is INR2,230. That means, obviously, in Q4, the improvement is only visible. But the more important part is, against INR2,230, the blended cost for the full-year, the last year, the blended cost was INR1,486. If you look at INR1,486 versus INR2,230, the increase in fuel costs, which is the procurement cost, which had nothing to do with our efficiency and everything, with that steep hike in fuel cost, if our EBITDA has suffered, I mean this is this is where the data is. In terms of what are the other details, we have overall power and fuel costs, despite this huge increase and with the increase in OPC, which as I mentioned, does consume a lot more of power and heat in terms of producing, our fuel cost quarter-on-quarter in Q4 is INR1,570, that I’m sure, you people would have calculated. And year-on year basis, the increase is now under 19%, because last year Q4, some amount of inflation in fuel cost had already hitting us. So it’s 19% now, which used to be 30% to 35%, and on full-year basis, it’s, let’s say, full-year, it’s 41% up, but on Q-o-Q, it is down to 19%, about what we had earlier.

The prices obviously, fuel cost prices have been softening and the largely pet coke that we depend on, because so many calories are the domestic coal supply there, there’s not much in, but the pet coke prices, internationally and domestically has been coming down. So, that’s been a huge relief. The AFR costs, sort of, obviously, with lack of availability, if we keep using carbon black and AFR, those costs will go up, but we depend more on RDF and more on MSW and hazardous waste. So, using all this strategy, the cost management obviously has been a really solid and in-place and it runs as a good process. The challenge really has been that with the variable costs which have been pushed higher because the power and the fuel and diesel costs, and the market demand also has not been, I would say, so bad. We still have growth and the problem has been our ability to pass-on the increased cost target. And that’s not new in this Q4. That’s been ongoing process throughout the year.

Th Bottom-line of the company in Q4, bottom-line, we mostly restrict ourselves to EBITDA, so we are about 7% lower compared to Q4 FY’22, which is ’22, which is a huge recovery from how far behind we had become. So, Q4 just 7% below last year EBITDA. And in terms of quarter-to-quarter comparison, Q-o-Q basis, we are at 58% up compared to the Q3 EBITDA that we had. On per ton basis, Q4 is close to INR840, up 31% from Q3. But on year-on-year basis, obviously, we are down from INR958 per ton to just over 12% down over last year.

In terms of balance sheet, we obviously have been paying term loans, that project debt we had, which we repaid another INR148 crores. And that project debt is down to just about INR240 crores in our books. And again, there is a quarterly repayment program that we keep respecting. The debt that has gone up on our books, there is an important reason behind it. On 31st March, it seems that our working capital had got streched. And the reason behind that is actually a very positive development that we’ve been able to make. We perhaps are setting some kind of, I would say, world record in our ability to keep running kiln, without having to take maintenance shutdowns.

What I mean by that is, our Chittapur kiln, we had actually recently taken for shutdown, after a period of 23 months, the industry norm is nine months, we then the kiln and we took it down for regular maintenance work after 23 months. While that is one data point which obviously gives us savings in our fixed costs as required maintenance, more important, why I’m sort of mentioning that at this particular juncture, we finally had to take maintenance shutdown of the kiln which last we had actually done in the month of April ’21. And because the markets around that area was still very strong, we had to stockpile a lot of clinker. By March-end, to be able to keep servicing the markets that Chittapur served, even during April, when we would have had nearly zero clinker production. So, that huge pile up of clinker inventory and cement as much as we could stock at the end of March, led to a huge spike in the inventories that we had on 31st March, which obviously needed more working capital and is the skew.

But as I mentioned, we did take the shutdown work of Chittapur during the month of April and by the time we lit up our kiln back into operation, all that excess inventory that we had piled up, had been consumed to cement stock and you’d be surprised, at the end of March, if my clinker stock at Chittapur was 75,000 tons, by 20th March, it has gone down to 2,000 tons. Even now, we have total clinker stock at Chittapur storage of 7,000 tons. So, the blip that you’ve seen in working capital buildup was only to be able to tide through the period that we had for the shutdown there. That’s the only reason why the working capital got stretched and we had to borrow some money from the banks. Plus, obviously, from time-to-time when we import pet coke, it does create a little bit, because when we import, we have to import full ship loads and obviously, when that inventory comes — besides that, which has become a normal cycle, now we import a vessel and that we consume. So, when it comes, we suddenly have a three-month inventory. By the time you import in next month, that also falls. So that’s a cycle, but the clinker exceptional inventory has been already liquidated.

As I’ve mentioned, the project that is about INR240 crores, as we speak, the working capital that could be a little over INR100 crores and in this particular year, we managed to also get part of our incentives, which our Karnataka investment had made us eligible for. So, about INR57 crores of debt we have on the books, which is called debt, but actually it’s a soft loan from Karnataka Government, which is interest-free for the next 10 years and the repayment will start only after 10 years, again, in yearly instalments. So, interest is not available, it is as good as equity, frankly. But still if you include that also, then we would say, the debt is around INR400 crores, but INR57 crores out to that, as I mentioned, is more of incentive then really a loan.

The best news, I think the energy prices, which we have seen the softening in Q4, have softened further during the last quarter. And the challenge that we have is that, when the prices soften, by the time they hit our P&L, there is always a lag. And that’s why last year, despite prices going up in the initial quarter, quarter and a half, we had the benefit of all. Early inventory which was bought cheap. This year, we may have a little bit of struggle with, the prices of pet coke having gone down. The low pet coke — lower-price pet coke, when it only convenes, only then we’ll start seeing the softening. Otherwise, we have to live with what inventory that we’ve got. The good news is that the new pet coke that we booked was obviously about 12%, 13% lower compared to our previous purchase. So that’s again a good price, but maybe by the time we start convening, the prices may come down. So that’s the only risk that we have when we buy fuel in bulk.

The rest of the market initiatives they keep going on. One of the changes again which are important is, led by several factors including non-availability of rakes, and also the railways have decided to re-impose the peak [regiment] charge, and they started laying very warfare charges at the destination. Because of that, we had to relook our logistics mix and for the time being at least, in Q4, the railway dispatches has come down to 16% of our volumes compared to 25%, which was there in Q4 last year. And the full-year rail dispatch has actually come down to 17% from 21% for the full-year.

Little bit of on the prospects looking-forward. If people have seen my introduction on TVs on all, we are targeting, in the current year, the volumes of, I’m saying, it’s the range because, 6.3 million tons to 6.5 million tons from that 5.8 million tons that we did last year. And one thing, which I’m sure all of you who monitor the cement sector, you would know that if we have taken the major shutdown of the kiln at Chittapur, which takes about three weeks when you take it down, as we’ve taken that in the month of April, now it might look a little softer month, purely because the maintenance shutdown comes in the P&L as a very, I would say, bunched up maintenance cost. So, that obviously booked in the month of April. And also to, if I was stocking 70,000-odd tons of clinker at Chittapur, that obviously was not good enough to meet the entire demand. So, we’ve also had to ship many rakes of clinker from Devapur to Chittapur to keep meeting the market demand. So, that obviously adds a huge amount of cost of transporting clinker, which as we all know, at that point, cost about INR800 per ton. So, that obviously has been additional impact during the kiln shutdown period. And thankfully, we kept servicing all of our customers and kept meeting their needs. But we know this impact that happens during the annual shutdown and maintenance shutdown and it’s no longer annual for us. We don’t do it at year-end but a lot more longer, these are bunched up cost, but they get equalized over the year. It may look in the month of April for us, yeah, bunched up or maybe in Q1 also it will have an impact, but for the full-year as a whole, they will get normalized. So, nothing to get worried about.

On the last item that I want to talk about before I take your questions is, capex actually has been slower than what we perhaps had anticipated at the start of the year and multiple reasons. Especially after Q2, we were also quite spooked by where we landed up in Q2 and H1. So, for the year as a whole, against our estimates that we have shared, we could spend only about INR130 crores for the full-year on capex and in Q4, it was barely INR28 crores. So, obviously there is a backlog in terms of capex.

Now coming back to the capex going-forward, as I did mention to you the two reasons. One, at Chittapur, we already consumed 100% of clinker. More importantly, what we are now realizing is, that it was okay as long as Chittapur was ramping-up and we had some spare capacity there. And we could do with essential activities like maintenance shutdown very comfortably. The problem with Chittapur is that it has as of now, only one Kiln, unlike Devapur where we have three kilns, where even if one of the kiln the shuts down, we can keep running the operations. At Chittapur, we have one kiln and that also is being utilized 100% of capacity. There is a very, very clear the need for us to prioritize the expansion of the new kiln and grinding capacity at a Chittapur and we keep seeing very, very strong demand there. We would like to take that up, and if you take, the ambition now would be that at least we start the physical onsite work on Chittapur kiln line sometime in the third quarter of this financial year. And that obviously means that some — the Chittapur expansion would cost us between INR1,550 crores, INR1,600 crores in that range. There can be INR10 crores, INR20 crores here and there, but largely, we say between INR1,500 crores and INR1,600 crores is the total capex there.

Out of which, if we have to really push it very, very hard to get the kiln line in place in time for us, so that we don’t lose the market, perhaps we are wanting to spend about INR600 crores on that project within this financial year. And the few other things that we have to keep doing for example, we are obviously looking at expanding in due course of time, our capacity at Devapur and also, do the greenfield at Rajasthan. For these two projects, we need to do some preparatory capex. For example, in the forest, our mines in Devapur happen to be in the forest areas, and for those of you who are familiar with the forest areas, we have now applied for forest clearance and the moment we get Stage 1 forest clearance, we will have to deposit close to INR150 crores with Forest Department of the government to create, to afforest the compensatory — to compensate for the forest that we will be using to do our mining. So those are all essential. These are all part of the overall capex that we have for Devapur, but I’ve seen some of that obviously, I’m assuming that the Stage 1 clearance, forest clearance will be available to us within this year and that will obviously mean cash-flow, cash outflows, maybe INR130 crores to INR150 crores.

Similarly, Rajasthan, land acquisition process has to start. So, obviously, I’m keeping INR100-odd crores for capex. We acquired land in Rajasthan. So, that the work stays on-stream. So put together, we had also wanted to put waste heat recovery plant at Devapur. And also, I talked about nearly INR10 crores investment which will go into equity for solar power in Jalgaon and in Chittapur. So, all told, INR1,000 crores, INR1,050 crores should be our capex this year if our growth line plans have to stay on-track, and we don’t want to lose market-share.

So that’s, I would say all the highlights that I had to share. And obviously, I’ve tried to answer most of the questions that the audience would normally have, but there is an opportunity for us to start addressing questions as they come. Thank you.

Operator

Sir, should we open up for questions?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Yes, please.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions]

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

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

Hi. Thanks for the detailed presentation. If you could share what was the clinker production for FY’23?

Operator

Sorry to interrupt, Mr. Ravi. Can you use the handset mode while speaking? Your audio is not sounding clear to us.

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

Hello, sir. Can you share the clinker production for FY’23, please?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

The number, I’m not having been right now, but I did tell you 78% of our capacity. I can share the number….

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

On clinker basis you are saying?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

I am saying clinker basis, the utilization for last year was 78%.

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

Okay. Okay.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Yeah.

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

And for full-year, what would be your trade non-trade mix and what are targets?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

See, targets, we obviously would want to get back to more trade as we used to have, 60-odd%, but this year, obviously, that has come down to about 54% and balance we’ve been doing B2B. Target is a function of what we see in the market. This year also, the target was not to go down in B2C, by the way. That was never the target. But if we do not have demand or the prices are not remunerative, then we pivot very quickly, right. So, we will keep feeding the demand that we see in the market. Let me not hazard a guess on that, because if you ask me, I certainly want to do about 65% trade, provided, the demand is there and the price is there.

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

Okay. And sir, two questions. One on the quarterly, if we see the employee cost and other expenses this quarter where very low despite the high volumes, the cost was much lower than INR43 crores normal range. So, how should we look into this? Obviously, it is a balancing number for the full-year and [Technical Issues] normalized run-rate.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

See, partly, Rajesh, you’ve already guessed it. Partly, it always happens, at the end-of-the year, we realize net provisions for year end costs like variable-cost and the bonuses and things like that. And when you see the final results, we know it’s not going to get paid at this level, right. So we reverse some of the number for sure. So it’s partly it’s balancing, but also this, about, I think two quarters ago, I tried to answer this question. We actually have had a fabulous process of developing talent in-house. Now when we had a very senior-level personnel, President of Manufacturing, when he retired in the month of October, we didn’t go out and hire any President of Manufacturing. We had been training. We have been developing our internal people. So, the President of Manufacturing, the new President of Manufacturing was already with us. Same happened with his — so, five-six levels are sufficient within the company, which otherwise would have been more expensive if we had gone out. We actually use our own talent and in-house talent typically turns out to be lower-cost.

So, the month of, for this quarter and even the month of December, we didn’t have to pay the salary the salary that our previous President of Manufacturing used to draw and we have a replacement at a salary which is much lower, because he is younger, he has developed in-house, he will get to that salary, but for the time-being, we are saving, right? So, that’s a process. And another change in the company and that again is happening at another level, same process. Develop your talent, utilize them. Your manpower cost will remain under control. That’s what we’ve learnt and that’s what is resulting in the numbers that you’re seeing.

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

Okay. And sir, lastly on the capex front, if we see FY’23 also, our mid-year target was around INR250 crores for this financial year, FY’23 and we closed the year with INR150 crores. So, on a practical basis, what sort of number one should look at, because Tiroda is not happening, but other projects are mostly brownfield in nature. So, what is the Devapur and Chittapur project capital funds for this financial year?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

So, Rajesh, as we know, Devapur, I have already mentioned many times, we will not take-up Devapur expansion till I have a grinding unit under construction.

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

Okay.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Right? So, whatever we planned to spend, not only on Tiroda but also at Devapur to support, that we had to hold back, because Toroda got canceled. So that’s why, now if I talking about INR1,000 crores in this year, as I had mentioned to you, I’m not talking anything beyond the forestation charges that we have to give to the government. I’m not saying much to be done at the Devapur or the new grinding unit. I’m not implying that, right. THe INR1,000 crores, INR1,050 crores number I am saying is largely to start the kiln construction at Chittapur. Right.

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

Okay.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

And then I said INR150 crores for deposit with the government for forest clearance and INR100-odd crores for Rajasthan land which I think are reasonable to take. right. Tiroda dislocation was a huge, huge thing because of which, because when that got dislocated, there is no point in expediting Devapur construction.

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

And for this Chittapur, what sort of clinker and grinding capacities you’re looking at?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

We are replicating. We have a 3 million ton capacity there with the 7,000 [Indecipherable], 6,000, we will replicate exactly the same thing.

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

Okay. Great, sir. I’ll come back-in queue. Thank you.

Operator

Thank you. We’ll move on to the next question that is from the line of Niteen Dharmawat from Aurum Capital. Please go ahead.

Niteen Dharmawat — Aurum Capital — Analyst

Thank you for the opportunity. Couple of questions. What is the status of the waste heat recovery plant at Chittapur that we expected to commission in the first-quarter of financial year ’24? And how much debt we are likely to take on the books for the capex that we are planning and which is undergoing right now? And third — I’m sorry, go ahead.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

The capacity at — of waste heat recovery which is under commission today is 10.2 MW.

Niteen Dharmawat — Aurum Capital — Analyst

Okay. And this is now on-stream, right?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

No, no. It is under commissioning. It will be on-stream in the month of June. Commissioning. The construction is over. Then, I mentioned that we had to wait for the kiln shutdown to connect it. Only then we can start getting waste heat. So now, waste is being passed on to that and then obviously when you’re commissioning a power plant of any sort, it is a few weeks job before it starts giving you power, because the commissioning activities are fairly hazardous and then they do take time. So, it is under commissioning, it will be operational soon.

Niteen Dharmawat — Aurum Capital — Analyst

Got it. And what is the debt amount that you are likely take for the subsequent capex which is going on?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Niteen, our debt will be geared towards how our cash flows go, right. So, we do have the cash flows coming in. We have no other plans besides, after paying dividends, there are no other plans to sort of do anything. So, we’ll use as much cash internally that we can generate and balance will go for debt. If you’re able to spend INR600 crores, my own guess would be, perhaps that it would be prudent to go for a debt maybe to INR600 crores to INR700 crores in that range. But like I said, that will be for us, the balancing number. We will obviously try and use our own cash flows as much as we can.

Niteen Dharmawat — Aurum Capital — Analyst

Perfect. Helpful. Thank you so much. If I have any additional questions, I’ll come back in the queue.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Thank you, Niteen. Thank you so much.

Operator

Thank you. We’ll move onto the next question that is from the line of Rajat Sethia from ithought PMS. Please go ahead.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Hi. Thanks for the opportunity. Sir, just for clarification, you mentioned that out-of-the total capacity…

Operator

Sorry to interrupt you.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Yeah.

Operator

Sir, can you use the handset mode while speaking. Your audio is not sounding clear to us.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Is it better now?

Operator

Much better, sir. Thank you.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Okay. Thanks. So, sir, because of lack of clinker capacity, we are not able to produce — we won’t be able to produce to nameplate capacity of 8.5 million tons. Is that correct?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

If the OPC percentage remains as high, yes, you are right. 8.5 million — any capacity in the cement industry, we assumed 65% PPC, 35% OPC. If the, I would say the default assumption when we talk about capacities, the moment the OPC becomes way beyond 35%, no company can produce their boiler plate capacity. That’s how it is calculated. So you are right. Your conclusion is absolutely right.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Okay. And with the help of this new clinker capex that we are planning at Chittapur, what will — I mean, what will be our cement capacity then? I mean, will we be able to produce to the maximum of 8.5 million tons?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

My own—

Rajat Sethia — ithought Financial Consulting LLP — Analyst

What capacity do you see that as?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

My own assumption is that these blips of suddenly B2B demand becoming so much higher and B2C going down, these are transient phases. I personally do not think this will sustain. So, whether it happened in this quarter or the next quarter, B2C demand will come back, and then we will get back to around, like I said 60-up% PPC, and 30-up% of OPC. So, I think we’ll resume normalcy within a few quarters. But — and the same thing, if we are going to be replicating the current size of the kiln and the mills at Chittapur, boiler plate will be 3 million tons, assuming that the mix of B2C, B2B or OPC, PPC would come back to what the industry norm is. But for this current aberration, let’s not carry this current aberration as something which is going to last forever.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Sure. So, our total capacity will increase by how much, sir, with the help of this new kiln?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

So, Chittapur, it will increase by 3 million tons. So, 8.5 million tons to 11.5 million tons.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

So, 8.5 million tons plus 3.5 million tons?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Plus 3.5 million tons. Total, 11.5 million tons with Chittapur expansion.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Okay. And sir, you briefly mentioned that about Devapur and you had mentioned that in the past, unless we have the grinding unit at Tiroda, I think we wont add another capex. So, what is the thought process there? I mean, in terms of — what is, I mean why are we not going out with the grinding mill? What is stopping or what’s really happening, if you can help us understand.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Good question. Actually I briefed this in my own opening briefing. Tiroda shriveled away. They said they will not allow us to do it anymore. So, what we have done now is, we are actually in very close discussion with another alternative site in Madhya Pradesh, very close to a power plant. The discussions are one and as you know, when you have a new site in, whenever you need land and the details, you have to examine lots of things. So we have zeroed in on one-site. I would not like to reveal the name at this stage because we are under negotiations. So, we hope that within the next six months, we will be able to freeze the exact site and have the land in-hand to put out the grinding unit. But if it takes us six months to get the land, I don’t think much of capex will happen on that in this year in terms of cash outflow. But we will make the grinding unit and as soon as we start the construction for that grinding unit, Devapur expansion will run-in parallel. So, we want to do it in a synchronized manner, so that we don’t have a mismatch of having clinker, but not the grinding unit or having having the grinding unit but not the clinker.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Sure. So, basically earlier plan was 1.5 million tons of grinding unit and 3 million tons of kiln at the Devapur plant. So, same would be the…?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Let me correct it again. Earlier plan also was that the Chittapur, the kiln that we have, which actually produces about 2 million tons of clinker, which can give up to 3 million tons of cement. So, at Devapur also, line four is planned for clinker capacity of 2 million tons, with 2 million tons of grinding at this Madhya Pradesh grinding unit, which is the alternative to Tiroda and 1 million tons additional banking at Devapur itself to cater to markets nearby. All right?

Rajat Sethia — ithought Financial Consulting LLP — Analyst

All right.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Total capacity 3 million tons of cement. 2 million tons at a remote grinding unit, 1 million tons on-site.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Got it. And sir, what will be the total capex for this one if it begins, whenever, let’s say, next year? Both the things put together, grinding as well as the kiln?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

It will be — Devapur expansion and a split grinding unit, all put together will cost about INR2,000 crores.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

So, INR2,000 crores this and almost INR1,500 crores to INR1,600 crores for Chittapur, correct?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Yeah. Yeah. Yeah. But like I said, that the timing and all, it is likely to be sequential rather than together.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Correct. And Rajasthan, we can assume will be the last one?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

I mean, is it the last one because you know how difficult land acquisition is.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Correct.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

So, because of that, I’m not getting overly ambitious that we’ll be able to get the land within a year and start construction is unlikely to happen. YOu know it and I know it. Even if I say, you won’t believe it, right?

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Sure. Sure. So, what will be our — in terms of debt, how do we think of — what kind of peak debt at any point in time, whether it be in terms debt-equity or debt-to-EBITDA? How do you think about it?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

We stick to our pre-announced, given mandate, which already contains our maximum debt, making debt-equity largely 1.5 within our target for debt-equity. Right. So, 1.5, I don’t think we’ll ever exceed 1.6 in terms of debt equity. So, 1.5 is our comfort zone and also mandated by our Board. In terms of debt-to-EBITDA, we stay between 3, 3.5.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Okay. And sir, at any point in time if, let’s say, I mean, do you envisage going for equity infusion as well?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Yes. If let’s say, the market situation and all these things come together and we believe there is a need for us to put up capacity faster, that obviously cannot be handled through debt and internal accruals alone. In which case, if the new projects, the Chittapur expansion, the Devapur expansion with grinding unit in Madhya Pradesh and Rajasthan, if the overlap, obviously, the current capital, the current balance sheet cannot sustain that. So, obviously at that point in time, we see, if need to be bring in some equity, so that we have more room to leverage the balance sheet and do the project faster. But as of now, like I said, I’m sharing with you, what is clear currently and we keep watching the market, how quickly we can build capacity in Rajasthan and before that in Devapur. That I believe is more finite, because in six months’ time. I’m expecting to have the land in-hand for the grinding unit and should start happening sometime in FY’26, the work and start there.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Sure. Though we plan to have…

Operator

Sorry to interrupt Mr. Sethia. May we request that you return to the question queue. There are other participants waiting.

Rajat Sethia — ithought Financial Consulting LLP — Analyst

Sure. Thanks so much.

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 morning, sir. My first question is on trade mix. So, you said that trade mix has more competition and as a result, we have lowered our expectation versus the…

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

We have not lowered. The competition has not gone up, the demand has gone less. That is different way of looking at business. So competition has always been there. What has made it worse is that the B2C demand went down.

Prateek Kumar — Jefferies — Analyst

Okay. But we generally — I mean, how do you classify this real estate demand in Mumbai market or some of the semi-metro markets in Maharashtra or Pune? Because the real-estate seem to be doing there. So if it’s counted under B2B demand?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Yeah. So look again, predict, as you are aware, Mumbai-Pune market when you say housing demand, those constructions are largely as large projects and they go as B2B sales. Whereas, the same housing, if you start doing in Tier 3, Tier 4, Tier 5, that becomes B2C sales, right. And that’s precisely the reason why my exposure into Western India has gone up. My OPC has gone up because my volumes in Mumbai and Pune have gone up dramatically, right. And that is all B2B and OPC.

Prateek Kumar — Jefferies — Analyst

Right. Okay. Okay. And regarding competition like, year before, like in FY’22 we are like to commissioning Shree Cement, Dalmia, and I think the Birla also in the market. So, are these competition they sort of now easily absorbed in the market and unlikely to impact going-forward or there is sort of still ramping-up and there is major competition for pricing?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

No, I think the new capacities that came up around us, around that and we want to cover. And we were also new capacity. Don’t forget, in 2015, we got commissioned and that’s around the time we had Shree Cement coming up, Dalmia coming up, JK coming up, lots of plant, additional capacities came up in that market as you know. But that capacity, I’m telling you, my Chittapur plant is right now, is running a 100% kiln capacity. So, everything is absorbed. We are not the only ones. We may have done somewhat better than some other competitors, but by and large, that capacity is already absorbed. The schedule for us quite honestly has been most acute around our Jalgaon grinding unit, where there are two the competition to put up grinding units in the market that we used to cater to earlier, right. And as they came in, they obviously have invested money there and they have strategy to penetrate the market and that’s where we start seeing, should we keep selling at prices where there is competition, because don’t forget the split grinding units, whether it’s ours or anybody else’s, clinker needs to be transported to that site and then you have to sell and we typically had been avoiding OPC sales from our split grinding unit there in Jalgaon. Because there is hardly any margin left if sell OPC. Typically, split grinding units are viable or attractive in terms of investment, if you can PPC. Now that unfortunately, has been not the guiding, I would say, philosophy of people who have put up grinding facilities later. And they are happily selling cement cheaper even after incurring INR800 a ton for transport cost. Now what do you do? And we are somehow trying to protect our prices and our contributions?

Prateek Kumar — Jefferies — Analyst

Right. So, I was mentioning about….

Operator

Sorry to interrupt Mr. Kumar. May we request that you return to the question queue. There are participants waiting for their turn.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

No, I will just answer, Prateek that recent ones that have come up are grinding units around Jalgaon, around Khandeshwar as we call it.

Prateek Kumar — Jefferies — Analyst

Right.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

That’s the only current struggle. Otherwise, we are okay.

Prateek Kumar — Jefferies — Analyst

Thanks.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. We will move on to the next question that is from the line of Aditya Chheda from InCred Asset Management. Please go-ahead.

Aditya Chheda — InCred Asset Management — Analyst

Hi, sir. Aditya from InCred Asset Management. What is the cost on debt you’re looking for the capex you would be taking up?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Cost of debt? The only thing I can tell you is that given our strength of balance sheet, and given the way we manage our business, our cost of debt is — it will remain the finest and it will be driven by what the market rates of interest are. I mean, it all depends on what view the Central Bank in India, when you are taking in terms of how they create the interest and things. Hopefully, like I said in the past we borrowed at better delivery rate. I mean we bought at 7% something. Currently, if I go to the market, I don’t think that I would get that rate. It would be higher than that. It’s a function of what are the interest rates in the economy around the time we hit the marketplace. For me to guess, I’ll give that everything depends on the monetary policies with the Reserve Bank of India. I would like to do. We’ll see what the market is. Our [spreads] are extremely thin. That’s what I can say.

Aditya Chheda — InCred Asset Management — Analyst

Sir, and second on volume growth drivers. You mentioned one of your capacity is operating almost at full capacity and the second one is where the competition is sort of hurting. So, the incrementally growth of around 10-odd% in the volume, what would be the key driver there? How do you see that number coming on, especially when you mentioned maintenance shutdown has been taken? So on a full-year basis, how are you thinking about that number?

Rajesh Kumar Ravi — HDFC Securities Limited — Analyst

One is obviously, if there is new competition that has come around the grinding unit, we are finding out ways to respond and we are sort of succeeding with that. Similarly, the markets in Telangana, which have been fairly low, they also sooner than later, they also going into election and Telangana, we expect a large demand growth coming in Telangana, which has been languishing for the last two years. So, we are going by the situation market-by-market, right. And third, more importantly, when I say 100% capacity utilization, it was because of extreme skews which went towards OPC, which I mentioned earlier, is likely to normalize. As that normalizes, then Chittapur is not 100% utilization of capacity. Don’t confuse the two. Clinker 100% does not mean cement 100%. So, if the demand moves back to PPC as it normally should, we have growth opportunity there also. Let’s not get confused. We can’t sell anymore cement from Chittapur. We can. If there is more OPC for me, I can give you another, whatever quantity is there in the market. So, just clarifying, we believe, sooner than later, B2C demand will be back and our PPC sales will go up. One.

At Jalgaon, new competition, we are finding our ways of competing in it and Telangana, which has been a disappointing market for the last two years, during the election, we are expecting strong growth in Telangana. So, that’s my answer. We have capacity in Telangana. We have enough capacity to sell.

Aditya Chheda — InCred Asset Management — Analyst

Got it. Thanks.

Operator

Thank you. Ladies and gentlemen, we’d be taking the last question, that is from the line of Mr. Navin Sahadeo from ICICI Securities. Please go ahead.

Navin Sahadeo — ICICI Securities Limited — Analyst

Right. Thank you for the opportunity. Sir, just couple of questions for the Chittapur line 2 clinker. If you could just clarify what is the status of the clearances and by when are you likely to see the project completion on this please.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

As I mentioned, Navin, I said will start construction in the third quarter. Now, why we are really waiting in the third quarter, is only because of the clearances, right. Applications have been moved and basically we need environment clearances, both for the plant, and for the mines. That process is already on. We are expecting that process to be completed in the next six months and that’s why I said, in third quarter. Otherwise, I would say — if given the current session, I want to start the construction now, I could, right. So, third quarter only because we are awaiting clearances. And once we start construction, the typical construction time, now that it is a brownfield unit, should be, the best-case scenario over 15 months, the worst-case, 18 months. 15 months to 18 months is the time then we will expect this capacity to hit, to be a little available to the market.

Navin Sahadeo — ICICI Securities Limited — Analyst

Correct. Correct. So for, let’s say, once the capacity comes on-board, then as previous participants did ask, that we might then be a little short of grinding capacity, so to say, which you said, we are already looking at a facility in Madhya Pradesh.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

So, again, I mean, Chittapur is independent of the Madhya Pradesh. Madhya Pradesh will be supported by Devapur, Telangana.

Navin Sahadeo — ICICI Securities Limited — Analyst

Okay.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Chittapur, 3 million tons, 2 million tons, still one 3 million tons grinding capacity on Chittapur on-site at the plant. So, when I talked about INR1,500-odd crores of investment, it is not just clinker line, it is including additional grinding line at Chittapur, because there is enough demand around that area.

Navin Sahadeo — ICICI Securities Limited — Analyst

Understood. So, the additional grinding that we looking at is 3 million tons at Chittapur, you’re saying?

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Correct.

Navin Sahadeo — ICICI Securities Limited — Analyst

Oh, that’s helpful. And sir, just one last question then. In the scheme of things, of course, I understand Chittapur is a priority and very rightfully because of high utilizations there, but Rajasthan is nonetheless like, I think a decent sort of a priority. So, when is that? Where is that in sort of a…?You did explain that land acquisition in all is in-process, but if you were to take a slightly, like, view of the next three to five years, then where is Rajasthan in the overall scheme of things and when can one ideally expect broadly the project to start? Thank you.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

To my mind, Navin, I would actually believe that our land acquisition processes will take us about two years. And as we sort of are doing that, obviously, we will also be starting all the processes for the construction activity to start. So, my own guess is a 2 years, 2.5 years minimum before we can start the construction at Rajasthan. That’s bare minimum. And the greenfield project will take us, like I said, 18 months to 21 months. Brownfield can be in 15 months but greenfield, I don’t think will happen less than 18 months, because the railway side and lots of new things to come up which brownfield doesn’t need.

Navin Sahadeo — ICICI Securities Limited — Analyst

Understood. Understood. This is very helpful. Thank you so much.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Thank you. Thank you, Navin. Thank you, everyone.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Navin Sahadeo for his closing comments.

Navin Sahadeo — ICICI Securities Limited — Analyst

Thank you. Thank you, Deepak sir for your — like providing ICICI Securities, the opportunity to host you, and thank you everyone for taking time-out and joining the call. Yeah may please go ahead and disconnect the lines. Thank you.

Desh Deepak Khetrapal — Managing Director & Chief Executive Officer

Thank you, everyone. Thank you. Bye-bye. See you soon.

Navin Sahadeo — ICICI Securities Limited — Analyst

Thank you.

Operator

[Operator Closing Remarks]