Star Cement Ltd (STARCEMENT) Q2 FY23 Earnings Concall Transcript

Star Cement Ltd (NSE:STARCEMENT) Q2 FY23 Earnings Concall dated Nov. 17, 2022

Corporate Participants:

Tushar Bhajanka — Executive Director

Manoj Agarwal — Chief Financial Officer

Analysts:

Vaibhav Agarwal — PhillipCapital (India) Pvt. Ltd. — Analyst

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Amit Murarka — Axis Capital — Analyst

Mangesh Bhadang — Nirmal Bang Institutional Equities — Analyst

Unidentified Participant — — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q2 FY ’23 Earnings Conference Call of Star Cement hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital India Private Limited. Thank you and over to you, sir.

Vaibhav Agarwal — PhillipCapital (India) Pvt. Ltd. — Analyst

Thank you, Ruteja. Good morning, everyone. On behalf of PhillipCapital India Private Limited, we welcome you to the Q2 and H1 FY ’23 call of Star Cement. On the call we have with us Mr. Tushar Bhajanka, Executive Director; and Mr. Manoj Agarwal, CFO of the company.

At this point of time, I hand over to floor to the management of the company for their opening remarks, which will be followed by interactive Q&A. Thank you and over to you, Manoj, sir.

Tushar Bhajanka — Executive Director

Hello. Yeah, hi, good morning all. My name is Tushar Bhajanka, I am the Executive Director of Star Cement. I like to welcome you all to the earnings call of quarter two. I have Mr. Manoj Agarwal with me, who is the CFO of the company. He will take you through the numbers of quarter two and after that we can have a Q&A session. Thank you.

Manoj Agarwal — Chief Financial Officer

Yeah, hi, friends, very good morning. I on behalf of Star Cement Limited, welcome you all to our con-call for discussing our number of Q2 FY ’23 and half year ended September ’22. I would like to clarify that we will be discussing on the historical number and there is no invitation to invest. Having said that now, I will just take you through the Q2 number followed by half year number.

Starting from clinker production during the quarter ended September ’22, we have produced 5.11 lakh tonne of clinker as against 5.49 lakh tonne same quarter last year. So,-far as cement production is concerned, we have produced 8.91 lakh tonne this quarter as against 6.18 lakh same quarter last year. This quarter we have taken a shutdown in both of our clinkers in Meghalaya. Now, I will take you through sales volume. During the quarter we have sold 8.91 lakh tonne of cement as against 6.17 lakh tonne of cement and negligible quantity of clinker same quarter last year. This is as far as cement and clinker sale is concerned.

As far as geographical distribution of cement is concerned, in Northeast, we have sold around 6.54 lakh tonne as against 4.93 lakh tonne during same quarter last year. And as far as outside Northeast is concerned, we have sold 2.38 lakh tonne of cement this quarter as against 1.25 lakh tonne same quarter last year. In terms of blend mix, it is almost 6% of OPC and the rest is PPC. These are the quantitative numbers of the quarter.

Now, I will take you through the financials. The total revenue figure this quarter is around INR593 crore as against INR406 crore, same period last year. As far as EBITDA figure is concerned, this quarter we have done an EBITDA of around INR83 crore as against INR80 crore last year. PAT is INR49 crore as against INR44 crore in same period last year. This is on account of increased tax expenses due to sunset of tax exemption period in respect of our companies Guwahati grinding unit and its subsidiary Star Cement Meghalaya Limited. However, the cash outflow will be met only.

On per tonne EBITDA front, it is INR934 per tonne during this quarter as against INR1,302 per tonne same quarter last year. This is whatever quarterly numbers of this quarter. The total revenue figure for the half year ended September ’22 [Phonetic] is around INR1,258 crore as against INR917 crore same period last year. As far as EBITDA figure is concerned, during half year ended September ’22, we have done an EBITDA of around INR221 crore as against INR182 crore last year. PAT is INR99 crore as against INR115 crore in same period last year. PAT is down due to increased income tax expenses as explained before. On per tonne EBITDA front, it is INR1,183 during this half year ended September ’22, as against INR1,317 per tonne same period last year. These are the quarterly and half yearly number.

Now, I request all of you that if you have any queries, you can ask the same and I will request Vaibhav to moderate the query wherever it requires. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital. Please go ahead.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Yeah, thank you. Sir, first on the volume front, so last time you said we are looking at close to 17% growth, that is of 4 million tonne volume for this year and the next year double-digit. So, would the stand remain same or may be likely to slightly better in this year?

Tushar Bhajanka — Executive Director

You look at the volume growth that we’ve had in quarter two has basically been about — it has been about 42%. So, we have actually been faring much better than what we had actually projected earlier. In this, a lot of our growth has come from outside Northeast. So, we have grown about 91% Y-o-Y in outside Northeast and in Northeast as well as, our volumes have grown by about 33%. So, we do stick to the number that we earlier projected and we do expect that the numbers will be better than what we had set.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay, secondly in terms of the geographical mix, so this quarter seems the Northeast is slightly lower, but we were looking at close to 65% share in Northeast. So, will remain the same?

Tushar Bhajanka — Executive Director

Yes. So, I think even if you look at the numbers this time we have made more than 65% of our sales in Northeast compared to any other previous quarter. Of course the growth in outside Northeast has been better this quarter but even the North have grown. So, in that sense, we are trying to maintain a 25 — 75/25 or 70/30 share between Northeast and outside Northeast area.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. And what would be the number in terms of the trade, sir for this quarter and lead distance?

Tushar Bhajanka — Executive Director

Yes. So, the trade sales, the overall — so we have actually increased our trade sales to about 93% of our overall sales. If you compare it to previous numbers, was about 85% last quarter and 88% prior. So, we have not only led to a higher overall number, we have actually increased the proportion of our trade with the non-trade sales. So, the proportion on trade sales right now is about 92.4%. And regarding the lead distance, the lead distance has increased slightly from 213 kilometers last quarter towards 233 kilometers this quarter, so it has only increased very slightly.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. So, in terms of the premium share, this quarter how much and we were looking at to increase to 10% this quarter. So, for this quarter has it increased to 10% from 8% in June?

Tushar Bhajanka — Executive Director

Of premium products? So…

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Yeah.

Tushar Bhajanka — Executive Director

So, the premium product sales has not shown that kind of a growth. It has broadly remained as about 7% of our overall sales, which was very similar to the number last quarter.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

So, so far in terms of the now pricing, so how the pricing has moved into East and Northeast in second quarter and post-September how the prices has increased in both the regions?

Tushar Bhajanka — Executive Director

So, the pricing has broadly remained the same in Northeast. It has probably fallen by INR10, but not significantly. The pricing outside Northeast has of course taken a hit. So, if you talk about north Bengal area, the pricing has fallen by about INR20 in August month, but then from September month it has been increasing. So even in October or November we have taken price increases in outside Northeast. So, the Northeast prices have broadly remained the same whereas the prices outside Northeast has fallen by about INR20 but now they have again picked up.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

So broadly, post-September, on an average outside Northeast the price increase would be how much? INR15, INR20? Both Bihar and West Bengal?

Tushar Bhajanka — Executive Director

Sorry, could you repeat that please?

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

I am saying post-September, Bihar and West Bengal price increase would be around INR20-odd, post-September?

Tushar Bhajanka — Executive Director

Yes, so, yes, so we have taken a price increase in September and then the price had actually fallen again in October because October was not a good month for any of the cement players because all the festival actually took place in October. So — but now in November again, we have increased the prices by INR10 and we expect that we’ll again increase price of INR10 to INR15.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

So, INR10 to INR15 we are expecting?

Tushar Bhajanka — Executive Director

Yes, yes in the month of November.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Lastly, on the expansion and the capex and the debt front, so in terms of the timeline for 3 million tonne clinker, 2 million tonne grinding in Guwahati and 2 million tonne in Assam. So previously, we mentioned December ’23, January ’24 and March ’24. So, that remains intact, or do we see any delay in terms of commissioning the plant? Because last time we said from August the full construction will start, so has it started? Any update and in terms of the capex, though this — 1H, the capex was only 120-odd — INR127 crore versus where we were looking at INR1,000 crore this year next year. So, what’s the new number?

Tushar Bhajanka — Executive Director

So, we have of course embarked on the capex that you were assessing. Our — commissioning of the plant has already started in Lumshnong for the 3 million tonne clinker plant. We have also started our commissioning of the grinding unit in Guwahati. We have started buying the the land that we require in Silchar for our grinding unit in Silchar. So, the capex is going on full front and we still stick to the timeline that we had assessed earlier.

In terms of the capex outlay, the capex outlay has just started. So overall, we must have in terms of projects, we must have send about INR100 CR. I think the major sending which will happen will start from the fourth quarter of this year and that’s where we expect most of the capex outsource to happen.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

So INR1,000 crore this year we are looking at and then next year also INR1,000 crore capex?

Tushar Bhajanka — Executive Director

Maybe this year, it may not be INR1,000 crores, it maybe about INR700 stores. But it will carry-forward to the next — the capex that we don’t do this year will carry on to the next — next financial year. It will be to aim that our capacities would come by December or Jan., December 2023 or Jan. 2024.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. So — and the peak net debt we were looking at INR500-odd crore, so that remains intact?

Tushar Bhajanka — Executive Director

I’m sorry.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Our peak net debt we were looking at INR500-odd crore, so versus currently…

Tushar Bhajanka — Executive Director

That remains intact, yes.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. And lastly, if you can help on the power and fuel cost. So, in terms of the Kcal, how was it for this quarter and how do we see because previously we were looking at 10% increase in the second half of this year? So, any color on that?

Tushar Bhajanka — Executive Director

So, the power and fuel costs have actually increased. The power in terms of, sorry the fuel costs that we had has increased from about INR1.5 per GCV that you were averaging out earlier to about INR2.1. The main reason for this is of course that the FSA contract that we have are only partially been obliged by the EPL, mainly because of a shortage which is happening throughout the country. So, because of that we had to buy fuel from spot contracts, which is leading to a higher surge in the fuel cost. And the power cost has broadly remained the same. It may have increased by about INR0.5 per unit. And yes, so that is basically the situation that we have on power and fuel costs at the moment.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

So, in second half we see further increase by how much in terms of both power and fuel cost combined put together?

Tushar Bhajanka — Executive Director

So, in second half we see a basic increase of about 30% in terms of the fuel cost and the power cost because it rely on IAS and IAS is not fluctuating as much this quarter two, so the price — the power the power costs has not increased more than 10%.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay, okay. Thank you. All the best.

Tushar Bhajanka — Executive Director

Thank you. Thanks a lot.

Operator

Thank you. [Operator Instructions] The next question is from the line of Uttam Kumar Srimal from Axis Securities Limited. Please go ahead.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Yes, sir, thanks for the opportunity. Sir, my question pertains to our WHRS plant. When this plant is going to completion? This 12 megawatt WHRS plant?

Tushar Bhajanka — Executive Director

Good question. The plant was put to commission by about November but there is a one month delay to the commissioning of the plant, so now it will be commissioning end of December. That is out timeline — the revised timeline for the WHRS plant. So, it should be coming up very soon by next month.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Okay. And sir, what has been our power and fuel mix this quarter because last year — last quarter it was around 90% domestic coal and 10% biomass. So, it remains the same or there has been some change in the fuel mix this quarter?

Tushar Bhajanka — Executive Director

No, so basically, last quarter we of course had 10% of biofuel, which we also have this quarter. But the domestic coal was basically coming from the FSAs that we had. But because FSAs won’t oblige, though we were eligible but we didn’t get it because of the shortage which is happening in Coal India, we had to rely on buying spot auction, we had to participate in spot auctions and buy outside coal at a higher price. And so, yes we have been using the domestic coal but the domestic coal is coming from a different pool than what what we had earlier.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Okay. So, now the situation has normalized or still you’re buying from outside, rather than from — or getting from FSA?

Tushar Bhajanka — Executive Director

So, we are — we still get whatever we were trying to get as much as we can from the FSAs because the FSA contract that we had was of a INR1.5 per GCV. So, we are trying to make sure that we get as much as from FSA but we have to — we have started buying coal from spot contracts other than FSA as well which, of course, is coming at a rate of INR2.9 GCV to the plant.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Okay. So, that’s why in third and fourth quarter power — fuel cost will be higher because you are purchasing from outside?

Tushar Bhajanka — Executive Director

Yes. So, that is correct. Our fuel mix has definitely changed between FSA and auction and I think the fuel cost that we saw in quarter two will also be passed on to quarter three and quarter four.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Okay, okay. And sir, when our Guwahati grinding unit expected to commission? This year or next year?

Tushar Bhajanka — Executive Director

So, the grinding unit, because we are coming with two grinding units, one is in Guwahati and the other one is in Silchar. The one in Guwahati is due to be commissioned in October next year. And the one in Silchar should be commissioning by June 2024.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Okay, okay. The clinkerization plant will be commissioned this year only, the Meghalaya, 3 million tonne?

Tushar Bhajanka — Executive Director

No, the Meghalaya clinkerization plant will also commission by December next year. So, there is no plant commissioning this financial year.

Uttam Kumar Srimal — Axis Securities Limited — Analyst

Okay, okay. Okay sir, that’s all from my side and thank you. All the best.

Tushar Bhajanka — Executive Director

Thank you.

Operator

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

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Sir, again just trying to reconfirm because previously when I ask, you mentioned deadline of all the plants are same, but now since slight change. So, 3 million tonne clinker at Meghalaya will start by?

Tushar Bhajanka — Executive Director

At December 2023 or Jan. 2024.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. And 2 million tonne Guwahati will start by?

Tushar Bhajanka — Executive Director

October 2023.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

October. Okay. So, that is preponed and the 2 million tonne Assam Silchar will be June versus last quarter we were looking at March ’24?

Tushar Bhajanka — Executive Director

Yes, yes.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. And the second thing is in terms of this quarter in terms of the Siliguri utilization was how much?

Tushar Bhajanka — Executive Director

So, Siliguri utilization this quarter was up about 50%. If you compare it to last year same quarter it was about 30%.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. And so we were looking at for the full year — so last quarter, Q1 was 67%, now 50%. So for full year, we were previously looking at 65% to 70%. So, this would be now would be in the 60% to 65% for full year?

Tushar Bhajanka — Executive Director

So — yeah, so I think we should still touch 65% because we all know that quarter two is the worst quarter in terms of volume that we have. So, quarter three seems better, quarter four should be the best. So, in terms of utilization, I think we can average good 65% or above.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. And on the premium share, just trying to continuing, so now 7% share and so, how much increase the premiums share and also previously we were looking at the price gap between the normal and the premium was kind of INR20, so INR400 per tonne and we were looking to increase this from INR20 to INR100 to INR200, so when that can be possible? Any color on that?

Tushar Bhajanka — Executive Director

Yes, so. I think we have — so our share, we are right now launching policies. And we are giving sales [Phonetic], which would lead to an increase in our shares. We are basically focusing outside Northeast, because Bihar has a good market for premium cement. That’s where we’re trying to push the — our premium sales. So, we can target that by end of this financial year, we are targeting premium sales proportion of about 11%. And as per the gap — the price gap between the premium and the PPC, right now the price gap is of about INR25. Of that we have to give about INR5 as discount, so the impact on the NOD, the net of discount price is about INR20 still and we are working towards creating the difference between the PPC and the premium but we have to follow the market trend, so we have to include other players as well and the discounts that they have between PPC and the normal PPC.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay, okay. And just to get it right in terms of the fuel mix, you mentioned that the auction coal that you purchased was higher. So, for this quarter, Q2, 10% you said the biomass, so in terms of the fuel mix if you can help us what was the FSA and the spot or maybe the Nagaland coal share?

Tushar Bhajanka — Executive Director

So, this quarter we had about 10% is still coming from biomass. And we had about 45% of our coal coming from spot contracts which are higher — it has a high cost. And the other 30% to 35% is — mainly coming from the FSA contracts. And the 10% coal coming from Nagaland.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. Just a second. Mostly, done, nothing remains. Thanks. All the best.

Tushar Bhajanka — Executive Director

Thank you. Thanks.

Operator

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

Amit Murarka — Axis Capital — Analyst

Yeah, hi, good morning. So, just on the expansion program, just wanted to have some clarification. So, the size of clinker is 3 million tonne and what is the size of each of the grinding units?

Tushar Bhajanka — Executive Director

It is about 2 million tonnes each.

Amit Murarka — Axis Capital — Analyst

Okay, and the capex, what’s the capex outlet for each of those?

Tushar Bhajanka — Executive Director

So, it is about — so the clinker plant is basically for about INR1,250 crores and the grinding unit would be about INR400 crore for the Guwahati plant, because that’s a brownfield expansion and about INR450 crore to INR475 crore for the Silchar plant because that will be bleaching.

Amit Murarka — Axis Capital — Analyst

Okay, okay. So, in total about close to INR2,100 crores capex?

Tushar Bhajanka — Executive Director

Yes, yes.

Amit Murarka — Axis Capital — Analyst

Got it, got it. And what is the plan like, why you’re saying that long-term you’re looking for 70% Northeast and 30% East? But a lot of the incremental expansions are also happening. I mean at least some of the companies like UltraTech is also looking to be more aggressive in the Northeastern market. So, do you think that this kind of will — you will be able to sustain your volume market share and grow these capacities given this inflow of new volumes?

Tushar Bhajanka — Executive Director

So, I think the belief is that we can sustain these margins plus we are actually trying to increase our market share now. The main reason is that the cost of fuel has increased throughout the country, right. And earlier what we used to — what used to basically happen is that a lot of cement from outside used to be dumped in Northeast, right, by UltraTech or by other players. Whenever they had the capacity or whenever the demand is not picking up in the Mainland India. So, I think now because the quantity — the variable cost has really increased. They’re not finding it that profitable to actually dump in Northeast. So, from that perspective, I think the higher cost are leading to less of dumping in Northeast from outside companies. So, I do not think — and that has been the trend in quarter two as well, so there actually has been less cement coming from outside…

Operator

Ladies and gentlemen, please stay connected. The line of the management got disconnected. Ladies and gentlemen, thank you for patiently holding the line. The line of Mr. Tushar is reconnected. Thank you and over to you, sir.

Tushar Bhajanka — Executive Director

Yeah, sorry about that. I was just saying that the arrival of outside companies in Northeast has actually reduced in quarter two and we see a similar trend in quarter three as well. From our perspective of what is growing within Northeast, there are smaller players in Northeast, which had set up their capacities about 2013, but no one is really expanding at the moment. And I think we’ll again get the first-mover advantage in terms of expansion and if you see here that will have where others are still setting up their capacities and we have already set it up. That would really give us the advantage to get a higher market share, so that’s what we’re really aiming at.

Amit Murarka — Axis Capital — Analyst

Okay, understood, understood. Thank you. That’s all from my side, yeah.

Operator

Thank you. [Operator Instructions] The next question is from the line of Mangesh Bhadang from Nirmal Bang. Please go ahead.

Mangesh Bhadang — Nirmal Bang Institutional Equities — Analyst

Hello, sir. Sir, couple of questions. First is on the demand side, so we’ve seen good volume growth for us in this quarter. I just wanted to have your view on how the demand keeps this year as well as next year in Northeast as well as outside Northeast –?

Operator

Sorry, to interrupt you, Mr. Mangesh, but your voice is muffled and there is a lot of disturbance from your background, sir.

Mangesh Bhadang — Nirmal Bang Institutional Equities — Analyst

Just hold on. I’ll just — is it okay now?

Tushar Bhajanka — Executive Director

Yeah. This is slightly better.

Mangesh Bhadang — Nirmal Bang Institutional Equities — Analyst

Yeah. Sir, just wanted to have your views on what your broad outlook is in the Northeastern and Eastern region?

Tushar Bhajanka — Executive Director

So, I think this year the market in the Northeast has really supported. So, the outlook seems positive from Northeast perspective. Even Eastern markets have really grown in quarter two. So, the — so, I think we are optimistic about how the market is behaving. Of course, we have cost pressures that every company is clearly facing in cement and that will remain a problem. However, we are looking for a good season ahead and we do think that we’ll be able to pass on some of the costs in the price. So, I do see a good season ahead and I do expect Northeast to keep growing in the way it’s growing.

Mangesh Bhadang — Nirmal Bang Institutional Equities — Analyst

So, any number you can assign to the demand growth expectation in these two regions?

Tushar Bhajanka — Executive Director

Yes. So, I think Northeast is, is showing trend of growing about 10% to 11%, whereas the outside Northeast, the market is showing a growth of about 12% and outside Northeast, I just mean, the places that we are chosen, area that we chose, which is basically North Bengal and Eastern Bihar.

Mangesh Bhadang — Nirmal Bang Institutional Equities — Analyst

And sir, last year I think Bihar market we because of the sand issues, the demand was slightly lower. So, you think this time around there will be pent-up demand because of that and could see higher [Indecipherable]? And even in Bengal, I think because of floods we had seen that temporarily the demand was lower. So, all this effect — would this effect the overall demand growth that would pick-up in this year from the low-base of last year? Or do you think that 10% to 12% is the number that is basically, which is prominent?

Tushar Bhajanka — Executive Director

Yes. So, I think — I do not think that we had the problem of the sand problem that we had last year. I don’t think we had it to that extent this year and that’s why the numbers look better. In Bihar, we have actually increased a lot in terms of sales. I think we have increased our sales in Bihar by about 120% this quarter and that’s clearly a sign of the sand issue or the floods issue not affecting us that much.

Mangesh Bhadang — Nirmal Bang Institutional Equities — Analyst

Sir, next question is on the profitability in the Northeastern and the Eastern region. Can you just give a broad outline or highlight how our profitability would look like in these two regions? Specifically, because I think the next leg at least when since Siliguri starts expanding to say 70%, 80% utilization. Largely, the sales would be more towards outside of Northeast. If you can give some color on profitability in terms of EBITDA per tonne in these two regions, that would be helpful? Any broad guidance would be helpful.

Tushar Bhajanka — Executive Director

Yeah. So, I think because trying to answer, it will really be hard to give a number to it. But we — last time we said that we’d like to maintain an average EBITDA overall, EBITDA per tonne for the company to be about INR1,200 to INR1,250 and we’d like to stick to that. Of course it really [Technical Issues]. So, I do not — but I would still say that we’ll aim for INR1,200 per tonne EBITDA overall. In the Eastern region, we of course earn than what we earn in Northeast. Northeast, our margins are about INR1,400 on an average and Eastern region, it is about INR400 to INR500. So, the weighted average comes to about INR1,200 and that’s the distribution of our margins between the two regions.

Mangesh Bhadang — Nirmal Bang Institutional Equities — Analyst

Understood. Thank you, sir.

Tushar Bhajanka — Executive Director

Thank you.

Operator

Thank you. The next question is from the line of from Chandresh Malpani from Nivashare [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Hi, sir. So, firstly, on the waste heat recovery front, is it commissioned and what cost savings do we see from this plant?

Tushar Bhajanka — Executive Director

So, we have set up a 12.3 megawatt waste heat recovery, which should commission by next month. So — and with that currently, on an average we price of power is about INR6. So, you can actually back calculate and it should be a saving of about INR45 crores to INR50 crores.

Unidentified Participant — — Analyst

Okay, okay. And secondly, sir what are — what is our dealer network stand as on-date? Have we increased our network?

Tushar Bhajanka — Executive Director

So, yes, we have increased our network and actually, our focus right now is not that much in outside Northeast, which is actually Northeast, right because there are still many areas in Northeast that we of course can serve better that we can have a higher market share in. There maybe still markets in Northeast thereby where there are white space where we in those micro markets we aren’t serving and our focus right now is entirely Northeast because the capacity that we’re getting are of course in Northeast. And so to utilize the capacity better we definitely have to focus in Northeast. So, we are focusing on dealer appointment. And that primarily will be in Northeast.

Unidentified Participant — — Analyst

Okay, okay. Thank you, sir.

Operator

Thank you. The next question is from the line of Ripam Purto [Phonetic], an Individual Investor. Please go ahead.

Unidentified Participant — — Analyst

Hello, sir.

Tushar Bhajanka — Executive Director

Yeah, hi, good morning.

Unidentified Participant — — Analyst

Yeah, since — like to know regarding that coal, you have said you are sourcing from the FSA and also the Nagaland coal. The Nagaland coal belongs to Coal India or some others and what is the landed cost for that coal?

Tushar Bhajanka — Executive Director

So, the Nagaland coal is actually not belonging to Coal India. It is actually the state of Nagaland authorizes individual mine owner or companies to mining in Nagaland and we buy it through those sources. So, they aren’t owned by Coal India. They owned by private individual companies in Nagaland and the landed cost of Nagaland coal is of about INR2.05 to INR2.15 per GCV.

Unidentified Participant — — Analyst

Okay. And regarding the Meghalaya coal, has any auction been conducted or when will we see any outcome of the coal of Meghalaya?

Tushar Bhajanka — Executive Director

So, I mean there are — that’s a very good question. So, I mean we, right now of course, Meghalaya coal is — no one can mine Meghalaya coal, because there is no structured mining lease, which had been allotted in Meghalaya. But there are individuals who are local to Meghalaya who are applying for mining leases in Meghalaya and if they are successful in getting those mining leases operated then definitely coal in Meghalaya will open up and that of course is a very — that could be a very big savings for the company going ahead.

Unidentified Participant — — Analyst

Okay, sir. So, right now no coal is…

Tushar Bhajanka — Executive Director

Hello?

Operator

Mr. Ripam, we cannot hear you, sir. As there is no response from the line, we’ll will move to the next question, which is a follow-up question from the line of Amit Murarka from Axis Capital. Please go ahead.

Amit Murarka — Axis Capital — Analyst

Yes, thanks for the opportunity again. So, on the current capacity, I just wanted to check like I understand you have 2.75 million tonne in clinker and 5 million tonne in grinding, is that correct?

Tushar Bhajanka — Executive Director

So, we have about 5.6 million tonne in grinding and we have about 2.65 million tonne to 2.7 million tonnes in clinker.

Amit Murarka — Axis Capital — Analyst

This 5.6 million tonne grinding, does it also include some of the tolling arrangements which you had or this is your own capacity, 5.6 million tonne?

Tushar Bhajanka — Executive Director

No, this is our own capacity right now. We’re not renting out or leasing any other rented — any other plants. This is our own owned capacity. Okay, okay. So, those arrangements are no longer being done? Yeah. So, we had earlier, two-three years back we had a plant in Durgapur and we had a plant in Siliguri, but we stopped supplying to Durgapur, so we aren’t serving that market anymore and in Siliguri, we got our own plants, so we stopped renting the plant that we we renting earlier.

Amit Murarka — Axis Capital — Analyst

Got it, got it. So, you in the future also you don’t plan to now get into this arrangement with these expansion that they’re doing now?

Tushar Bhajanka — Executive Director

Not really. I don’t think we are trying to cover market where we need to do that. Yeah, so not, not really.

Amit Murarka — Axis Capital — Analyst

Okay. And if I got your EBITDA per tonne kind of outlook, right you said that in Northeast you are making INR1,400 per tonne and East, you are making INR400 per tonne to INR500 per tonne?

Tushar Bhajanka — Executive Director

Yeah.

Amit Murarka — Axis Capital — Analyst

Great. So, the lower margin is what large part of it because of the logistics cost, right? I mean and not also you have the pricing is lower of course?

Tushar Bhajanka — Executive Director

Yes, exactly. So, it’s mainly because of logistics. Right? So, it is mainly because of logistics and of course the pricing outside Northeast is lower than in Northeast, so that also plays a factor, so, it’s both actually. It’s higher logistics cost coupled with lower prices. And it’s not lower prices for — I mean of course the prices in general outside Northeast is lower, it’s not that our brand charges a lower price, we actually charge [Indecipherable] as UltraTech, outside Northeast India.

Amit Murarka — Axis Capital — Analyst

So, got it, got it. Thank you. That’s all here.

Operator

Thank you. We’ll take the next question, which will be the last question, which is from the line of Shravan Shah from Dolat Capital. Please go ahead.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

So, continuing the previous question, so broadly let’s say for this quarter whatever the our realization was there, on an average for outside Northeast what would be the realization and in the Northeast, what is? So, just trying to understand the pricing difference between Northeast and the East where what we sell.

Tushar Bhajanka — Executive Director

So I mean the difference in realization between our Northeast would be about, about INR1,100 on per tonne, on NOD basis, net of discount basis.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. So, net of GST and everything what we book in the our accounts so that difference would be INR1,100?

Tushar Bhajanka — Executive Director

Yeah, so it will be basically about INR700 to INR800.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. So, INR700 to INR800 in terms of the — what we book in the — report in the P&L?

Tushar Bhajanka — Executive Director

Yeah.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. Second thing, just I wanted to understand in terms of the lead distance. So, what the max we can say in terms of the for the reduction is possible let’s say the Siliguri full utilization of 65% and maybe next if it increases, so to what extent we can reduce the lead distance from currently 233 kilometer?

Tushar Bhajanka — Executive Director

So, we in this, we are actually expecting that our capacity. Right now also, our main focus is in reducing the lead distance and time this out to market closer to Siliguri, because at that point we are focusing much more on profitable and sustainable growth than just selling anywhere and everywhere. So, I think from next quarter as well, you’ll see that lead difference would be coming down and that will be primarily our focus. I cannot give a number just now about what the future lead distance is going to be, but the focus is definitely to serve closer, to serve to a higher profitable market and still not go very far in terms of just for the sake of just utilization.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

I understand we can’t give the number, but broadly can it be 10, 15 kilometers more than that reduction is possible or the reduction would be in the 5, 10 kilometers only, just on the full blended basis for us just trying to understand directionally?

Tushar Bhajanka — Executive Director

So again, I really I won’t be able to comment on that really because I really have to do the math because it won’t be fair for me to just agree to a number, but we definitely will see a reduction of what I can I see. So, but then the lead distance also sometimes increases because of lot of other things, sometimes, [Indecipherable] about working and you have to turn to the other route and sometimes we distance because of that. So, mostly that is very, very common, right because infrastructure is not as good as in mainland India. So, it’s really hard to comment and promise any number for next quarter but I think we should be looking at a decent reduction in our lead distance. And then you’ve already started acting upon it in terms of choosing the right markets and to get out of market where we are not earning much and not selling much.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay. Lastly, sir the data point on the trade subsidy, how much book in this quarter?

Tushar Bhajanka — Executive Director

So, we don’t have any trade subsidy this quarter. That I think the CFO can share better.

Manoj Agarwal — Chief Financial Officer

We don’t have any trade subsidy right now because it has been, long back it has been already been booked subsidy because it is five-year only and it is gone, all are gone, so there is no trade subsidy in books at all.

Shravan Shah — Dolat Capital Market Pvt Ltd. — Analyst

Okay, okay, okay. Thank you.

Operator

Thank you. Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to Mr. Vaibhav Agarwal.

Vaibhav Agarwal — PhillipCapital (India) Pvt. Ltd. — Analyst

Yeah, thank you Ruteja. Tushar, I had a couple of questions from mine in particular. So firstly, because Northeast is already kind of a fragment or clear market dominated by very small player as well there are a number of small players in Northeast and given the consolidation happening in the industry, so do you see any potential of further consolidation happening within Northeast by the larger players? What your comments around that if possible?

Tushar Bhajanka — Executive Director

So, I don’t think right now in Northeast there is any potential to of consolidation, mainly because the smaller plants, because. I think Dalmia will also be aiming to set up a brownfield expansion. Of course right now they haven’t progressed with it. I don’t know of their position in Northeast in terms of setting up a plant but, they I’m sure will aim at setting a plant even as we are setting our own plant. So, it doesn’t make sense for us to unnecessarily go for a acquisition when our own capacity which will be much more efficient than the smaller unit is coming up. So, I don’t think there’s any scope in Northeast for consolidation at the moment. Probably after we get the capacity and there is some pressure on the smaller units then they may be scope.

Vaibhav Agarwal — PhillipCapital (India) Pvt. Ltd. — Analyst

But do you believe that some of the larger players of the country-wide players, they would be looking at Northeast on the geography and they would be targeting some of the existing players? Any thoughts around that? Because a lot of capacity is coming from Mainland to Northeast now is what…

Tushar Bhajanka — Executive Director

Yeah I think the trend of actually cement coming from outside Northeast to Northeast is similar trend of cement going from Northeast to outside Northeast. Whenever we have capacity, there is tendency to go far out. And this theme has been very common in Northeast for 10 years, it’s not the first time UltraTech has sending clinker to — sorry, cement to Northeast. And the send says that the amount of quantity which was coming earlier from outside has actually reduced. So from, for them actually targeting Northeast from outside is not possible.

Now if you come to the point of then acquiring a plant, a smaller plant in Northeast, I don’t think it is very economical for them because the smaller plants are of 0.7 million tonnes, 0.6 million tonnes. I don’t think an UltraTech or an Adani would be interested in something that small. And also the terrain and the kind of problem that one faces of setting up a plant is very different. So, I think for them to kind of invest so much time in a smaller plant and then growing it is something which I do know it’s worth the time I guess.

Vaibhav Agarwal — PhillipCapital (India) Pvt. Ltd. — Analyst

Understood. And one more question with regards to Star Cement, in particular, so despite all the expansions and our roadmap to nearly 10 million tonnes now, we would be quite — in terms of we will be having quite a healthy balance sheet. So, what is your roadmap for Star Cement in medium to longer-term over the say next five to seven years and do you look at Star Cement being restricted only East and Northeast or you are looking at other geographies? Are you willing to evaluate opportunities, organic, inorganic across other parts of the country beyond East and Northeast? Any thoughts on that?

Tushar Bhajanka — Executive Director

So, that’s a good question. So I mean — so in 1.5 years from now, we are trying to set-up about 4 million tonnes of cement and about 3 million tonnes of clinker in Northeast. Right? That will take care of Northeast for the next — for our market in Northeast for the next five, six years, right. And as a company, we are already very cashless and we of course with these capacities and the benefit, the — all these subsidies that we get from these capacities, will have even richer cash inflow. So, we definitely have to get out of Northeast and probably target other areas as well for us to use those cash flows in the best possible manner.

So, we’re right now, also considering other areas outside Northeast, just so that once our capacities come in Northeast, we can keep on the expansion phase and grow outside Northeast.

Vaibhav Agarwal — PhillipCapital (India) Pvt. Ltd. — Analyst

So, any regions which you are currently shortlisting in terms of your future longer-term growth plans?

Tushar Bhajanka — Executive Director

So, we are exploring MP, because that of course is the natural expansion to because that of course is a natural expansion to where we are, we’re in Northeast and setting up plant in MP will definitely help us Bihar better, it will also help us other areas in East, which we don’t serve at the moment. We are also looking at Rajasthan because it broadly, it’s part of North India and North India for us is growing at a faster rate. And we look at other areas as well. It just depends on what is also available because the availability of good assets in cement right now for something that we can acquire given our size is also limited. So, it really comes depends on what is coming our way.

Vaibhav Agarwal — PhillipCapital (India) Pvt. Ltd. — Analyst

So, this is an extended question to what you have just said. So, when you’re looking places outside East and Northeast, is it when you evaluate such opportunities, is it necessary for you that they should synergize with your current operations or are you willing to enter a new geography in all ways possible or it’s compulsory that it should have a synergy with your current operations?

Tushar Bhajanka — Executive Director

That’s again a fair question, right. So, I think it just depends on the possibility which comes, right. We have to evaluate whatever is coming without any bias. Yes, of course, we would have loved if it was a natural extension to where we are at the moment but cement is, I don’t think the synergies that from that we need to bother too much about that synergy. Because the market that we will try to enter, suppose putting up a plant in MP, it would be completely new. So, any which way, we’ll have to brand, we’ll have to do the entire effort as a greenfield project. So, from that perspective the synergy is fairly limited. So, we’re not really bothered about that synergy too much.

Vaibhav Agarwal — PhillipCapital (India) Pvt. Ltd. — Analyst

So, you remain indifferent from that perspective, is it fair to say it?

Tushar Bhajanka — Executive Director

Yes, yeah.

Vaibhav Agarwal — PhillipCapital (India) Pvt. Ltd. — Analyst

Okay. Thank you Tushar, thank you Manoj, sir, thank you for your time. Ruteja, you can now conclude the call. Thank you very much all the participants during the call. Thank you very much. On behalf of PhillipCapital, I’ll conclude the call. Thank you so much.

Operator

[Operator Closing Remarks]