SHRI KESHAV CEMENTS AND INFRA LIMITED (530977) Q3 FY23 Earnings Concall Transcript

SHRI KESHAV CEMENTS AND INFRA LIMITED (NSE:530977) Q3 FY23 Earnings Concall dated Feb. 09, 2023.

Corporate Participants:

Supriya Madye — Investor Relations

Venkatesh Katwa — Chairman

Analysts:

Anupama Butra — Ariane capital markets — Analyst

Raj — Arjen Partners — Analyst

Heyman — Individual Investor — Analyst

Miboshe — Coaching Research — Analyst

Imani — Suraj Research — Analyst

Siddhartha Ahluwalia — Individual Investor — Analyst

Sandeep Mane — SM research — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Q3 FY 23 Earnings Conference Call of Shri Keshav Cement and Infra Limited hosted by Kirin advisors. [Operator Instructions]

I know when the conference over to Miss Supriya Madye from Kirin Advisors. Thank you and over to you.

Supriya Madye — Investor Relations

Thank you. Good morning, everyone. On behalf of Kirin advisors, we invite you to the Q3 FY 23 conference call of Shri Keshav Limited. For this year’s performance of Q3, we have on the management, Mr. Venkatesh Katwa, Chairman. Mr. Vilas Katwa, Managing Director, and Mr. Deepak Katwa, Executive Director and CFO.

For his opening remarks I now hand you over to Mr. Venkatesh Katwa. Thank you, and over to you, sir.

Venkatesh Katwa — Chairman

Good morning everyone. Wish you all a very safe, healthy and prosperous 2023. I welcome you all to the third quarter financial year 2023 conference call for Shri Keshav Cement and Infra Limited. Shri Keshav Cement and Infra Limited is the Karnataka based cement company having two business verticals. One is a cement division with the current capacity of around.35 million tonnes with two manufacturing units and the second division being the solar power of capacity 37 megawatts which is close to the cement plant.

Cement demand is robust on backup increasing spend on housing and infrastructure. Your company servicing in tier three segment typically North Karnataka, South Morris and go origins and will not advantageous position to be benefited by the rising demand in the region of its presence. The company has three basic advantages apart from the locational advantage, the abundant supply of important raw materials limestone, capitalist power generation whose cost is less than 1/4 or 1/5 of the market price as on date. And were able to meet the rising demand in the area by saving in terms of site cost because we’re closest to the market.

Demand is robust, it has allowed us to take a price hike of nearly 5% will be reported accordingly. To the industry outlook in there a lot of potential for development in infrastructure and the construction sector and cement sector is going to be largely benefiting from this development. Also, on the back of rising rural housing demand, the consumption of cement in India has been growing consistently and it is one of the cheapest products to buy in terms of rupees per kg of material. Strong expansion in this sector which is fully recovered from the COVID 19 pandemic shock is another main demand drivers for the cement industry.

As a result, there is a strong potential for an increase in long term demand from cement. Some of the recent initiatives such as development of 98 Smart Cities is going to provide a great fillip to the industry which it has already begun to show the results within the budget of 2023 around 33% increase in the capital investment outlay to 10 lakh crore this goes very well for the demand for building and construction material. The future is definitely optimistic with the strong demand outlook.

So, typical business outlook for our company or for the company management is working on the plan to increase the capacity from current.1 million to 1 million tonne by adding only the balanced equipment which are basically focused to reduce the power and fuel consumption. And that plan is based on strategy where a new set of new machinery will be added set of machinery will be modified to achieve reduction in power and fuel consumption and also a given increase in personnel. We expect substantial improvement in revenues with curtailment in operational expense Just improving the profitability. Currently, our industry doing very, with old technology wouldn’t be considered a burning of in a very efficient manner.

Most of the larger industries who have done this kind of modification about 10 years back are enjoying the benefits. All that we’re doing is investing in the same technology and coming at par with most of the major plans. Now, let me give you a suite of news performance. I’m very happy to announce that the revenues have increased by over 20% to 34.8. On this model, given the data has gone up to 10.44, which is up by 9.36%. And better pad has been at 1.39 crores Ups being at 1.16. This and this I looked at the nine months versus responding to the nine months of previous financial year, revenues have gone up to 93 crores, almost with 17.2% increase revenues from solar the mission have almost doubled to around 15 crores from a race and from the stores.

This is typically an addition of new 12 megawatts, which was commissioned in December 2021. So, EBITDA for nine months has gone up to 28.70 crores, which is up by nearly 9.0%. And Pat has gone up the 29 crores which is almost 23% As in the similar corresponding previous financial year, the DPS Commandments being at around 24 feet within pressure. With this, I conclude my discussion on the company and what are we looking at?

How we really had to do this any questions anyone might have? Thank you.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The ever first question from the line of Anupama Butra from Ariane capital markets, please go ahead.

Anupama Butra — Ariane capital markets — Analyst

Yeah, good morning. The first question is regarding fuel power and fright freight costs, if you can quantify for this quarter versus last quarter and similar last year’s quarter, this is my first question. And the second question is like, there’s going to be robust demand considering government initiatives and so many other initiatives. So it can be a game changer for small to medium scale companies, but just wanted to understand what are the company’s strategies and plans to capture and tap this upcoming opportunity? So yeah,

Venkatesh Katwa — Chairman

So first question, I missed on somebody because So did you want the power price of the this quarter compared to the last quarter?

Anupama Butra — Ariane capital markets — Analyst

Yeah, fuel cost and freight costs, in fact, lead times can give us some data points.

Venkatesh Katwa — Chairman

So, the fuel costs typically, which is why you see our cost of raw Motors has gone up by nearly about 60 to 70% is primarily on account of increasing the fuel cost. That is, because up till now, we were using the old coal stock, which we thought was possible last year. So this quarter, we have completely switched over to petroleum coke, because utilizing coal, or buying coal, at the current prices would not be feasible when the company has done some kind of a modification to the plant about to cost back so that we could use entirely petcoke.

Just like all the other major plans, the cost of petcoke itself also has gone up not as high as coal, but there’s two branches. For example, in the last quarter, the coal that we use, the base price of coal was around 8,000 rupees per tonne. And then this quarter we have used petcoke is average price is around 16,000 rupees per tonne. Because even the petroleum coke has very high carbon value compared to the coal, but still there is an absolute increase in the cost of fuel, which is why we tend to see that the cost of raw materials gone up to these figures.

So, as far as the logistics is concerned, in a significant manner, most of the logistics is out of the purview of this balance sheet because the company has been selling significant almost 80% of the cement by the X line basis. So, even whatever increase or decrease in logistic cost, you know, available in the market has been successfully passed on to the customers. So, I do not have an exact price increase data per se, but since we haven’t been in most of the production X planned bases, we have shifted ourselves against increase in the site cost. So, did that answer your question?

Anupama Butra — Ariane capital markets — Analyst

Yeah. So, in terms of logistics cost like you mean to say 100 customers.

Venkatesh Katwa — Chairman

Correct, since we sell most of the cement on X plan basis.

Anupama Butra — Ariane capital markets — Analyst

Okay. Okay.

Venkatesh Katwa — Chairman

So, typically, we asked the rest to take the, they get the other benefits and it goes down. We also don’t do research it goes up [Indecipherable] And the second question you asked was regarding how are we going to adapt to the changing scenario and expected demand.

Anupama Butra — Ariane capital markets — Analyst

Yeah. I mean, you have a lot of opportunities coming. So, for companies like C sharp and other medium, small to medium companies, it can be a game changer.

Venkatesh Katwa — Chairman

Absolutely, absolutely. So, there was a time when that was beautiful, but now what is happening is efficiency is going to be the key. For example, logistics do definitely play an important role for the final price on the retail side. So, if a major plants have to supply cement in my market area, this pending not less than about 1800 rupees to 2000 rupees per metric ton, as opposed to what I’m spending around six or what my customers will be paying around 600 to 800 rupees per metric ton. So that delta benefits I tend to get and with this company is also planning on modernizing the plant.

So that not only there is a fuel and a power efficiency, there is an increase in production. So at 1,000,000 ton level, you could build for larger infrastructure investment projects, which the company is not able to do right now, because of sudden inefficiencies because the plant being old, which was a plant purchased in 2007. This plant was built in somewhere in 1980s. So now that with a modification, we will be at par with the cost of production with all the major plans, and then the death benefit will have.

We will be able to supply to the bigger markets like [Indecipherable] Bangalore, which the central district of right now because of lower EBITDA margins compared to other plants. So our recession comes from local market exchange. But in spite of that, we have a very good brand image in the local area. You know, we sell almost at par with tier two brands. With the expansion, we look forward to capture better and a bigger market. Thank you.

Anupama Butra — Ariane capital markets — Analyst

Okay, Thank you so much [Indecipherable] Thank you.

Operator

Thank you. We have a next question from the line of Raj [Phonetic] from Arjen Partners. Please go ahead

Raj — Arjen Partners — Analyst

[Indecipherable]

Operator

Mr. Raj, we are able to hear you.

Raj — Arjen Partners — Analyst

That was good.

Operator

Yes.

Raj — Arjen Partners — Analyst

I am intending to ask how to expect before so, how would you say the figure would look like?

Venkatesh Katwa — Chairman

I couldn’t get the word exactly. How does work look like?

Raj — Arjen Partners — Analyst

Now it’s fine. [Indecipherable]

Operator

No, it is breaking.

Raj — Arjen Partners — Analyst

Now it’s fine? Hello, can you hear me now?

Venkatesh Katwa — Chairman

Yes.

Raj — Arjen Partners — Analyst

I am intending to ask how will your FY 24 going to look look like from sales and everything margins.

Venkatesh Katwa — Chairman

Okay. So FY 24, since the expansion what we’re doing will show up as a full capacity in FY 25. FY 24 will certainly be better than the correct FY 23 only because of two main reasons. The cost of power generation will keep going down as we keep repaying on the interest, and the selling price of power will keep going up. And with the utilization of petcoke companies hoping to better his performance in FY 24. But still we will not have seen an expanded capacity then, but to some extent, there is going to be improvement in efficiency as well as in production.

Raj — Arjen Partners — Analyst

I have also certainly expected expansion which you are doing. So it will be into the system from FY 25 onwards, right?

Venkatesh Katwa — Chairman

Correct. So, expected completion date is around March and April 2024. We’re keeping about, you know, one or two months as a teething issues if FY 24, FY 25 should show the full capacity.

Raj — Arjen Partners — Analyst

Full capacity. All right. Thank you. Have a good day. Bye.

Venkatesh Katwa — Chairman

Thank you.

Operator

Thank you. We have a next question from the line of Heyman [Phonetic] an Individual Investor. Please go ahead.

Heyman — Individual Investor — Analyst

Hi, sir. Good morning.

Venkatesh Katwa — Chairman

Good morning. Good morning, Heyman.

Heyman — Individual Investor — Analyst

Sir, I have 2% related to both cement and solar. So, my first question is related to solar. We have invested around 190 [Indecipherable] in solar from FY 18 till date. So, what is the total ROI which we have till now in solar?

Venkatesh Katwa — Chairman

ROI for solar is slightly higher side, can’t say the exact figures, but our EBITDA is coming in the range of, so this year for nine months our EBITDA for solar is around INR25 crores, and with the last quarter being added up around INR32 to 35 crores EBITDA is expected from solar. So you could say, you know, return on investment would be around three to four years or so, [Indecipherable].

Heyman — Individual Investor — Analyst

So in four years, we have [Indecipherable]

Venkatesh Katwa — Chairman

Correct. Or in five years, sorry. Yeah.

Heyman — Individual Investor — Analyst

Five years, okay. Sir, in terms of cement in FY 18, our capacity utilization is 88%. And from 88, we came up to 7% in FY 20. So, any particular reason for that.

Venkatesh Katwa — Chairman

So, FY 18, we were operating at a point of 1 million ton capacity. We are almost 90% capacity utilization. After the expansion of nearly three times the, you know, capacity utilization has come to around 63% last financial years FY 22. So this FY 23, we will be battling it. In fact, by this quarter capacity inflation was around 73%.

Heyman — Individual Investor — Analyst

Okay, so only because the capacity increased, we consider dropping utilization.

Venkatesh Katwa — Chairman

Correct. Correct.

Heyman — Individual Investor — Analyst

But there is no drop. So there is no —

Venkatesh Katwa — Chairman

There’s no drop in the quantity or sales, only the capacity relation because there we have to calculate utilization against the rated capacity.

Heyman — Individual Investor — Analyst

Okay. Sir, one thing I want to understand regarding this solar. We are doing the and we thought probably EBITDA per year. So what how much percent we are using internally and how much we are selling outside for the current capacity?

Venkatesh Katwa — Chairman

Around 40% were utilizing in just 35 to 40% were utilizing inside and we’re selling nearly 3% outside. But with the expansion of 1 million tons, we’ll start consuming 90% inside and 10% will continue to sell outside. We still our own capacity in solar for 1 million tons.

Heyman — Individual Investor — Analyst

Sir, what is our targets, sir, from FY 25 onwards? What will be our target of capacity utilization, target 1 million ton?

Venkatesh Katwa — Chairman

Even if I go by 60% utilization for the first year, we are operating from around three to four networks with better EBITDA margins, because so whole project is based on concept of [Indecipherable]

Heyman — Individual Investor — Analyst

Okay, okay. So if we calculate 60% utilization in the past, we can identify our EBITDA be INR60 crores if we can collect a 1,000 rupees per ton. Is that right, correct?

Venkatesh Katwa — Chairman

Yes, yes, that is what we’re looking at. Yes.

Heyman — Individual Investor — Analyst

Here is where I have major creditor. When we start increasing our capacity for solar internally our solar EBITDA comes from. So now [Indecipherable], but then FY 25 will come [Indecipherable]

Venkatesh Katwa — Chairman

No. No solar EBITDA is based on the value at which even similar distance per capita consumption also is taken as a value for solar. So which is why my cement EBITDA is around two and three hundred rupees. Precisely because I have considered the cost of power at the price what I’m selling outside. So, EBITDA for solar will continue to remain as this. This 1000 rupees what we’re talking about, it is considering the cost of power at around 7 rupees, which is what is really but the other good like book.

Heyman — Individual Investor — Analyst

Once the. EBITDA in. The main thought must or the opinion solar note that will. Get captured cement EBITDA. So the WW continue.

Venkatesh Katwa — Chairman

Alright. So, I will clarify that point cement solar EBITDA of 30 to 35 crores will continue even if you’re utilizing 90% power inside the event EBITDA I’m calculating in assuming the power cost of my sell price. Okay, insurance if you’re taking the details, the capital power generation in stuff. If you’re taking evidence based on only what I’m selling my cement EBITDA will go from 16 currently about five to 5 crores what you have to nearly about 90 crores. In the direction of the catalyst and, what you’re thinking. I’m submitting solar EBITDA assuming the capital consumption is sold at a price to internally.

Heyman — Individual Investor — Analyst

Okay, now I got the answer, thank you so much.

Venkatesh Katwa — Chairman

So 1000 rupees EBITDA target what we have done for cement is because that includes the cost of power if I don’t hav the cost of power my meter partisan reach almost two times a piece, but yes, I hope I could clarify that.

Heyman — Individual Investor — Analyst

Yes, sir. Understand. This the capex still increases do we have good number of dealers in larger cities like Bangalore, Mumbai.

Venkatesh Katwa — Chairman

Typically, I would– so what happened is my first target was going to be institutional buyers, a lot of our the government buying, which I’m not able to do right now because of limited EBITDA, and that I haven’t had to get to my existing dealers and institutional buyers of long term buyers, and that quantity which I’m not able to service at the current capacity. So I will continue to hold my local area almost 80% of my sales, maybe 20% I will look outside the home market.

Heyman — Individual Investor — Analyst

Okay. Okay, that’s it. I don’t have anything else. Thank you so much and all the best for this year.

Operator

Thank you. [Operator Instructions] We have a next question from the line of Miboshe [Phonetic] from Coaching Research, please go ahead.

Miboshe — Coaching Research — Analyst

Thank you. Congratulation on good setup number. Sir I have two question related to expansion. How we are finalizing the fundraise for the expansion?

Venkatesh Katwa — Chairman

Sure. So, just last week, the entire foundation has been done the project cost is around 125 crores and bank has agreed to fund 80 crores, the rest of 45 crores we are raising equity right preferential issue. Evident to negotiate you know, to return some soft commitments, so most likely next couple of weeks we should be able to close it.

Miboshe — Coaching Research — Analyst

Okay. So, ATC it will be the debt funding and around 40, 45 will be from the presence equity. Okay. It should to date– that is what level — what rate we are finalized?

Venkatesh Katwa — Chairman

I have to still receive the sanction letter from the bank but from my internal resources around 9.1% is the rate of interest what they have indicated on the committee table. So unless I get it on hand something beyond this [Indecipherable]. So our current debt is– outside debt is around 152 crores on the books outside debt [Indecipherable] terminals. motors that are excluding working capital.

Miboshe — Coaching Research — Analyst

So as FY ’22 you had a outside debt to total debt of around 200 [Indecipherable] out of Israel was the TCRs of outside addresses of promoters. Is that correct?

Venkatesh Katwa — Chairman

Okay, FY ’22 around outside debt 172 crores. Coming from optometrist loan and working capital that one [Indecipherable] has come down to around 154.

Miboshe — Coaching Research — Analyst

Okay. Okay. Got it. So this 150 is that with what cost?

Venkatesh Katwa — Chairman

Most of it is because of solar around —

Miboshe — Coaching Research — Analyst

Yeah, that I got it. But what is the interest cost for this?

Venkatesh Katwa — Chairman

Right now it is 9.55%.

Miboshe — Coaching Research — Analyst

9.55%.

Venkatesh Katwa — Chairman

That is planned to be reduced to 9.1%.

Miboshe — Coaching Research — Analyst

Okay, we’ll get your overall old chunk will reduce to the 9.1. So, once it is, we are assuming the debt is coming in. So, what will be the total debt including with the promoters contribution after the expansion?

Venkatesh Katwa — Chairman

So, after the expansion what typically is happening is what all the promoters that in the books we are converting that also in B to B especially fortify close what we raising. So, the equity conversion at the time of preferential should be 45 crores from the investors around 30 crores promoters will be investing by converting the unsecured debt into equity. So, typically in books will expect around 75 crores liquidity to come and around 80 crores debt to short buy after the closure of potential issue and not much.

Miboshe — Coaching Research — Analyst

Okay. So, overall debt will be around 150 plus 80, right?

Venkatesh Katwa — Chairman

Yes, 150 plus 80 is 230 is going to be debt and it will be from current 50 and the 30.

Miboshe — Coaching Research — Analyst

Got it. So, what will be the promoter we will be holding after the conversion and retention if you have done any calculation, approximately?

Venkatesh Katwa — Chairman

Sure, approximately right now, we are holding the promoters holding about 73% goes likely that you will vote around 64 to 65%.

Miboshe — Coaching Research — Analyst

Okay, apart after conversion also.

Venkatesh Katwa — Chairman

Correct.

Miboshe — Coaching Research — Analyst

The conversion you’re planning will be about the same as preferential price or it will be a bit different.

Venkatesh Katwa — Chairman

Normal, same price.

Miboshe — Coaching Research — Analyst

What EBITDA is it?

Venkatesh Katwa — Chairman

[Indecipherable].

Miboshe — Coaching Research — Analyst

Okay. Okay. So on the expansion, this is how much time it will get to the plant up and running. If I think I think you’ve answered in some of the previous question, but I just want a bit more clarity, if you will, what will be the lead time for the equipment and all? And how much time it will take to let’s say a trial run to the stabilize the plant it will be to be the fully operational.

Venkatesh Katwa — Chairman

So typically, as of now, based on the negotiations and you know, assurances from our suppliers, typically it will take about 14 months from first deck to first bag out, but some part of the work we have already begun with the internal resources. So moment the funding is flowing in the full work to start by end of March. So we are talking about 12 months, our target is to complete by March 24 you could take a grace of another couple of months just in case.

Miboshe — Coaching Research — Analyst

Okay, okay. Okay. So, I think you’ve seen in your presentation also five, six equipment that we will be needing. So, on the proper internal approach, what you have started on which equipment you have started working.

Venkatesh Katwa — Chairman

Some of the efficiency equipment like what is known as we have a cement plant. So, we are changing the dynamic separator by which the fineness of cement will increase, we could add more additives by way of slag, thereby reducing the cost of production by around 4% to 5%. So, that is something which we will, you know, I think most likely by March — April 2023, we should be able to commission that. It’s small project around the pipe fasting for that should get completed in next two or three months.

Miboshe — Coaching Research — Analyst

Okay, okay. No, sorry, I was just taking bit more time. Two questions related to Q3 numbers. So, what was your average EBITDA per ton for the Q3?

Venkatesh Katwa — Chairman

Q3 average cement EBITDA was around 245 rupees.

Miboshe — Coaching Research — Analyst

245 [Indecipherable].

Venkatesh Katwa — Chairman

Yes. That is an industry around the 1000 rupees to a 100 rupees. That is like [Indecipherable] because our power unit– we have a power and fuel efficiency. And I’m having all positive numbers only because of solar, which will continue to stay with me. But now the management have wants to fix the cement EBITDA problem which can be done by, you know, modernizing the equipment.

Miboshe — Coaching Research — Analyst

Okay, okay. Okay. So In this, I can see a bit of a dip in the price margins. So, EBITDA has grown but the path has declined. So what was the reason behind that

Venkatesh Katwa — Chairman

That is, typically again due to change in — change in fuel costs. So fuel costs have been very erratic.

Miboshe — Coaching Research — Analyst

I mean to say — your EBITDA has increased on a quarterly basis — alignment basis at a slightly declined, not in much but slightly declined. So any particular reason? So your Q3 [Indecipherable] has gone from around 1.6 to 1.4 in August previous year.

Venkatesh Katwa — Chairman

Yes, I can see that mainly because of the — because of the EBITDA increase. [Indecipherable] — finance costs.

Miboshe — Coaching Research — Analyst

Yeah. So, yeah. Any that increased? Or what was that? Because I think that has reduced during the year. So while the guidance was increased, was the time wanted to understand that.

Venkatesh Katwa — Chairman

Okay, so since we have already started with some internet tours, work on some of the equipment, we have utilized the overdraft limits or the higher level compared to the earlier quarter. So if you look at the reflection of our own replimat, it has less than 50% in Q2. But in Q3, it has this 80% inflation because, you know, funds, since we’re utilizing from internal accruals those are the funds were which are parked in our documents, active use, so that impact will show up in the interest cost.

Miboshe — Coaching Research — Analyst

Okay, Okay. Okay. So I think, going forward, when our debt is increasing, so how much impact and how much we can sustain? I just wanted to understand what amount of debt servicing we can do easily.

Venkatesh Katwa — Chairman

Currently, we are paused to on very high on one policy GCF. So you’re talking about post expansion?

Miboshe — Coaching Research — Analyst

Yes. Yes. Yes, post expansion.

Venkatesh Katwa — Chairman

Post expansion will be much much — you know, the repayment capacity will increase by nearly three times higher. Like, current EBITDA put in is around INR250, and we are targeting for that. And with that, you know, in fact, banks, we’re on a 10-year repayment schedule. Looking at our DSCR, banks wanted to give us only five years.

Miboshe — Coaching Research — Analyst

Oh —

Venkatesh Katwa — Chairman

— ideas here are very high profitability. Somehow, we finalized on negotiating, we continued for eight years now.

Miboshe — Coaching Research — Analyst

So it will be the same banker. I think KASRA [Phpnetic] is your primary banker, correct?

Venkatesh Katwa — Chairman

The only banker, yes. The sole banker. So we are not letting [Indecipherable] — go anywhere else, in any case.

Miboshe — Coaching Research — Analyst

That’s great. That’s very interesting.

Venkatesh Katwa — Chairman

History of not a single day defaults on a single rupee be delayed Inception to Date. And our bankers know about it.

Miboshe — Coaching Research — Analyst

It’s a bit. So any — any chance of changing the structure of fundraise like reducing debt, if you are getting a good commitment from the restaurateur have any chance of changing the structure or your pipelines for the at 4045 [Phonetic]?

Venkatesh Katwa — Chairman

Yes, so this is what is going on banks, after which even with EBS repayment, or DSR was passing on 3.5 times. So they did the — taking from us that in case we have surplus cash flows that we utilize towards closing the loans. Yes, the management will look at doing that the moment we have surplus funds, which is very high possibility from FY 25 [Phonetic]. And that would be unless — no, we want to go for another expansion on additional capacity. That will be the division we want to go.

Miboshe — Coaching Research — Analyst

Okay. Okay, sir. Thank you so much, and all the rest for the expansion in the further years.

Operator

Thank you. We have a next question from the line of Imani [Phonetic] from Suraj Research [Phonetic]. Please go ahead.

Imani — Suraj Research — Analyst

Hello.

Venkatesh Katwa — Chairman

Hello.

Imani — Suraj Research — Analyst

Am I audible?

Venkatesh Katwa — Chairman

Yes, Imani [Phonetic]. I can hear you.

Imani — Suraj Research — Analyst

Good morning. So my questions are, today we are selling solar power after expansion would be possible for company to sell solar power. How would it impact our margin?

Venkatesh Katwa — Chairman

Yes. So typically, even now, the EBITDA calculation that I’m speaking for showing on the document is — including the consumption that we are doing. For example, when I mentioned segment EBITDA of Purim INR50, that is considering the cost of power even though it is free of cost for us in house. But I have can consider the cost of power at the price that we are selling outside. So, with the expansion of course, our sale of power will go down from current about 60% to 65% to less than 10%.

But then the benefit of that we will be gaining in cement. So, cement you know, solar EBITDA will continue to show as it is, even when we consume it internally. That is because part of it, we are filling it outside. If you look at present EBITDA, what we are generating it is higher than you know, about INR14 per [Indecipherable] and it’s only because the cost of power is you know, less than [Indecipherable] right now. Yes, after post expansion, we will be consuming 90% of the power in house and EBITDA for solar will continue to show.

Imani — Suraj Research — Analyst

Okay, Okay. And now, the question is solar revenues is almost doubling [Indecipherable]. Can you please explain in terms of capacity and future outlook as far as revenue contribution is concerned?

Venkatesh Katwa — Chairman

Did you say ready mix concrete?

Imani — Suraj Research — Analyst

Yes.

Venkatesh Katwa — Chairman

Okay, the solar has doubled only because the new capacity was added in the last year financially and I think in queue towards Q3, we added 12 megawatts, which was almost 50 was an addition, which is why we see that increase in sales in solar. So, regarding ready mix concrete, it is a great new opportunity for our cement plant, not only does it give you a very high top line, this applies for if we were to use the entire cement into making RMC which is a possibility our top line increases by nearly four times because each was six or seven bags can produce one cubic metre of ready mix concrete. Company is looking into that direction, but right now, the focus is only on expansion and once the expansion starts taking shape, that is something the management different look into.

Imani — Suraj Research — Analyst

Okay. And my last question is as consolidation of feminine capacity is happening in industry, would you like to sell Finland division at attractive prices as offer?

Venkatesh Katwa — Chairman

You’d be surprised but you know, they say everything has got a price this is a very good price. Yes, management will definitely consider it if it adds to the wealth of the shareholders. But you know, at this point in time management is completely focusing not on increase this capacity, we have existing land because which where you can add another 2 million capacity. And another good news has been this the railway line which is passing existing to my boundary, which will be laid down in next couple of years. So that could be used as a price for a cement plant. So when everything all that comes up, we’re expecting a valuation of a plant to go high. But at that time, maybe we could look at any possibilities.

Imani — Suraj Research — Analyst

Okay, Okay. Thank you, sir. Thank you so much. All the very best. Thank you. Thank you.

Operator

You have a next question from the line of Siddhartha Ahluwalia, an Individual Investor. Please go ahead.

Siddhartha Ahluwalia — Individual Investor — Analyst

Hello, good afternoon. Two questions to ask. So my first question is, what is the quantum of price I’ve taken.

Venkatesh Katwa — Chairman

Quantum of what?

Siddhartha Ahluwalia — Individual Investor — Analyst

Price — price I have taken.

Venkatesh Katwa — Chairman

Quantum of price — there are around 4.6% is what we have noticed compared to Q2 and Q3. Around 110 visitors per 10 is what is showing on our books compared to Q2.

Siddhartha Ahluwalia — Individual Investor — Analyst

Okay. And so, what is the capital expenditure for plants capacity expansion through equipment balancing and modernization.

Venkatesh Katwa — Chairman

So the capex cost is 125 crores, to increase the capacity from.35 million tons to 1 million tons that is around $25 per ton compared to industry standard of $150 per ton, if we had to set up a greenfield project, one of the reasons why we have so low capex cost is because some of the equipment we had modified in 2018 expansion, keeping in mind is 1 million ton future expansion, the land is not bought new, we have sufficient power from our capture units and you know, the entire support structure the laboratories restores, everything’s intact, we’re only modernize the kid and increasing the grinding capacity because of which the capex cost is low. So, the product cost is around 125 crores, with 80 crores being raised from the bank and the rest only 45 crores from equity from referential issue.

Siddhartha Ahluwalia — Individual Investor — Analyst

So you mentioned additional length. So, is it in completely?

Venkatesh Katwa — Chairman

No, no, we’re not buying there is no requirement of an additional land asset we will be doing will the existing factory from accidentally.

Siddhartha Ahluwalia — Individual Investor — Analyst

Okay, and how it will be funded?

Venkatesh Katwa — Chairman

So funded about out of 125 crores project cost 80 crores will be funded by the bank and the remaining 45 crores by equity by raising to a preferential allotment.

Siddhartha Ahluwalia — Individual Investor — Analyst

Okay, and what is our EBITDA per ton, is it still low in comparison to industry? No,

Venkatesh Katwa — Chairman

We are extremely low our EBITDA per ton is around 245 rupees this quarter or in the two to 50% this nine months compared to industry average of around 1000 to 1200 rupees that is mainly because like I mentioned at the beginning the plant is very very old, which is why we are trying to correct now. So far my fuel consumption is almost 30 to 40% higher than the industry standards. My power consumption is almost 80% disassemblers that is because I’m driving old very old ambassadors with a very very bad average which is what we are trying to fix in this motivation.

Siddhartha Ahluwalia — Individual Investor — Analyst

Okay, and how much capacity is now being used?

Venkatesh Katwa — Chairman

So it is 70% this quarter.

Siddhartha Ahluwalia — Individual Investor — Analyst

Okay, Thank you.

Venkatesh Katwa — Chairman

Thank you, Siddhartha [Phonetic]

Operator

Thank you. We have the next question from the line of Sandeep Mane from SM research, please go ahead.

Sandeep Mane — SM research — Analyst

Hi, good morning, sir.

Venkatesh Katwa — Chairman

Good morning, Sandeep.

Sandeep Mane — SM research — Analyst

For my first question is, can you please share with production myself [Indecipherable]

Venkatesh Katwa — Chairman

Sure, So for Q3, we were able to reduce and send around 65,400 tons compared to Q3 of previous year which was around 51,550. So, for nine months ended, it is one lakh 32,000 tonnes in Q3 FY 23 For nine months compared to the previous nine months of the previous year, around 168,000 tonnes, there is an increase of around 10%.

Sandeep Mane — SM research — Analyst

On a bigger margin action, they need to create what what’s the data point languaging and in this point, it is 29.8. So, can you explain the reason for calling the trigger margin and what you expect for FY 23?

Venkatesh Katwa — Chairman

Typically as as margin has reduced mainly because of the change in the fuel cost. So even though we think Q3 FY 22 company was using coal as the main fuel in Q3 is changed to petroleum coke, even though so, in Q3 FY 22. We could only use coal. petroleum coke price always about 20 30% less on per kilo calorie basis compared to coal. So, petroleum coke is always lesser, but we could not use it in the last year. We did some modification and we started using it from Q2 onwards. Q2 of FY 23 onwards.

So once we consumed the old coal now, when we shifted to petroleum coke, even though as today’s based on today’s prices, even though Petcoke prices are lesser on absolute cost, they’ve increased compared to the potency of the previous sale, which is what has impacted our EBITDA margins, it would have significantly impacted but had not had there not been solar some of it is recorded because of addition capacitor solar.

Sandeep Mane — SM research — Analyst

Well, what is the production costs for Q3 and nine months?

Venkatesh Katwa — Chairman

What is what?

Sandeep Mane — SM research — Analyst

What is the average production costs of Q3 and nine months?

Venkatesh Katwa — Chairman

Q3 and nine months, right. I couldn’t calculate it on this basis. But hold on a second just do a quick figure on the app set it no in balance sheet it will show up I would say it could have production costs could have increased a little bit compared to Q2 Only if we look at cement again because the same reason what I mentioned.

Sandeep Mane — SM research — Analyst

Well, what about the debt reduction? Any project on that?

Venkatesh Katwa — Chairman

Our debt reduction, yeah. So, at this point in time the company is looking to expand like the you know, the sense of you will be taking more debt this financial year, but yes, after the expansion is complete, we would expect we will that will be the first choice to go if we have to look at surplus funds, unless we want to invest in some product to access have more solar capacity or more cement capacity company will utilize the excellence surplus funds course designation from FY onwards. What most of the debt that we see on the books is because solar, which is very typical. And you know, if I subtract this debt, less than 25% of debt was chosen for cement.

Sandeep Mane — SM research — Analyst

Okay. So why don’t you use different [Indecipherable]

Venkatesh Katwa — Chairman

Know, if we have to separate on a company basis, then we will have to set up an SP. As of now, they’re two different divisions. You know, they’re both in the same company. So, we have to be showing the consolidated results. In Segment wise that will show a B, segment wise the distinction on the on the debt side.

Sandeep Mane — SM research — Analyst

Okay. Thank you. Thank you.

Operator

Thank you. [Operator Instructions] As there are no further questions, I now hand over the call to Supriya from Kirin advisors for closing comments over to you.

Supriya Madye — Investor Relations

Thank you all the participants and their management team for organizing this conference. Thank you for any further queries you may reach us at research@kirinadvisors.com Thank you so much and good day.

Venkatesh Katwa — Chairman

Thank you all.

Operator

[Operator Closing Remarks]