UltraTech Cement Ltd (ULTRACEMCO) Q4 FY23 Earnings Concall Transcript

UltraTech Cement Ltd (NSE:ULTRACEMCO) Q4 FY23 Earnings Concall dated Apr. 28, 2023.

Corporate Participants:

Atul Daga — Business Head, Executive Director & Chief Financial Officer

K. C. Jhanwar — Managing Director

Ankit Asawa — Vice President, Accounts and Finance

Analysts:

Shravan Shah — Dolat Capital — Analyst

Sumangal Nevatia — Kotak Securities — Analyst

Pulkit Patni — Goldman Sachs — Analyst

Indrajit Agarwal — CLSA — Analyst

Ritesh Shah — Investec — Analyst

Amit Murarka — Axis Capital — Analyst

Prateek Kumar — Jefferies — Analyst

Raashi Chopra — Citi Group — Analyst

Navin Sahadeo — ICICI Securities — Analyst

Rahul Gupta — Morgan Stanley — Analyst

Ashish Jain — Macquarie — Analyst

Devesh Agarwal — IIFL Securities — Analyst

Keshav Lahoti — HDFC Securities — Analyst

Anupama Prakash Bhootra — Arihant Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the UltraTech Cement Limited Q4 FY ’23 Earnings Conference Call. We must remind you that the discussion on today’s call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the Company faces. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statement on the basis of any subsequent development, information, or events, or otherwise.

As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Atul Daga, Executive Director and CFO of the Company. Thank you, and over to you, sir.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Thank you so much. Good evening, friends, and a very warm welcome to you on this earnings call for UltraTech for our quarter four FY ’23 earnings.

First and foremost, my apologies for the last-minute delay in the time for the call. What I guess? And nobody is work-from-home these days. So you will be attending call from office and hopefully have a good evening after the call.

I don’t have too many comments today. And I’ll be more than happy to rather engage with you and answer as many questions as possible. Because performance speaks louder than words. And if there’s any further clarification needed beyond our numbers, more than happy to answer. But few quick highlights for this quarter. We sold — this quarter and this year, in particular, we sold 100 million tons of grey cement from India in the last 12 months. This is a very unique feat. It’s just — it’s not just a number because it requires collaborative effort, energies from all angles, from all sections of the Company, which encompasses almost 55 physical plant locations that — manufacturing plant locations and 235 RMC plant locations. 50 rigs being dispatched every day, 12,000 — more than 12,000 trucks being dispatched every day, and more than 100,000 channel partners supporting this network along with, of course, the employees who’ve toiled day-in, day-out to make this happen.

And it has been a consistent performance. It’s not that a last-minute thought process or last month effort. Month-after month, quarter-after-quarter, I think the Company has done — put enough fabulous effort to deliver these 100 million tons. I think we feel tremendously proud about it and I thought of sharing my sentiments with you.

Talking about our expansion. The Phase 1 of expansion is almost complete. There are two plants, two or three smaller upgradation land, brownfield expansions, which are under trial and will get completed before the end of this quarter. We have till April to —April 23, we have commissioned 17.8 million tons of capacity. That’s a number to reckon with.

Phase 2 expansion of 22.6 million tons is in progress. And as of now, we expect to reach our next milestone of 156 million tons by June ’25 or before we close off ’25, ’26.

Talking about cement prices because last time everybody was inquiring about prices. We did not see too much movement in prices in this quarter. And rightly so because this quarter is all about volumes and you saw huge amount of growth. We’ve delivered a 15% growth overall in this quarter.

Fuel prices is the next big element to talk about. Fuel prices have been softening. Pet coke has been softening. Coal continues to be pretty strong — still pretty strong. In spite of whatever softening is happening, we are not yet celebrating because coal is still trending high, and China, to my mind, has still not started importing. China, as in when — it all depends on how global markets perform with China coming into operation.

One more highlight is about our cash flows. We spent almost INR6,000 crores on capex this year. This kind of trend is expected to continue in the next two, three years. Most important and interesting aspect about our cash flow generation has been that we have had a positive cash flow after meeting all capex requirements, working capital requirements, dividend payments as well, and yet we have deleveraged. Small bit, but that’s — that goes a long way to tell how powerful and how diligently we’ll manage our cash flows.

With regards to green energy, we have ended this year with 210 megawatts of WHRS and 345 megawatts of renewable energy. We are on track on our ESG targets, having reached 557 kgs per metric upper — 557 kgs per ton of cement as compared to when we started this year, we were at 582 kgs per ton of cement.

Last point, which I would want to talk about is demand. Demand in the country seems to be very strong. We ourselves ended the year with 84% capacity utilization, the quarter at 95%, and the month of March was a record-breaking 100% capacity utilization.

I’m glad to tell you that the momentum has been maintained in the current financial year in the first month, which means that the opening batting has been good and I hope the middle order and the tail will also perform equally well.

With that, I would hand over to you for questions. Thank you so much.

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 — Analyst

Thank you, sir, and congratulations on achieving the 100 million plus volume for this year. Sir, couple of data points and the questions, sir, to — in terms of the data points, the lead distance for this quarter and kcal cost for this quarter and how we see this kcal cost in the first quarter of this year and the second quarter?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

So the distance we have given in the presentation was about 413 kilometers and 2.5 kcal is what we have reached in this quarter. Let me not go into the next quarter because the quarter is still going on.

Shravan Shah — Dolat Capital — Analyst

But in terms of the broad — but broadly, how do we see in terms of the — for the reduction in power and fuel cost?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yeah, it should be softening.

Shravan Shah — Dolat Capital — Analyst

And any number we want to put?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

We will not be able to give any number.

Shravan Shah — Dolat Capital — Analyst

On the, sir, capacity front, so you have already mentioned that remaining 2.1 million ton will be commissioned in this quarter. So out of our — the next page 22.6 million ton, how much will be added in FY ’24, and how much in FY ’25?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Let’s stick to the results for the quarter, please. And we will update as and when we make significant progress on our projects. We will update everybody.

Shravan Shah — Dolat Capital — Analyst

Okay. And in terms of broadly, if I look at so this close to 14.4, we have already added, including this April. So in terms of the growth in volume for FY ’24, is it fair to assume that 50%, even if I assume the utilization for these new capacities for this year, so 7 million, 8 million tons from here end up deals 5 million, 7 million [Phonetic]. So easily, we should be seeing a 12% plus kind of a volume growth for this year.

K. C. Jhanwar — Managing Director

K. C. Jhanwar here. So first of all, I think the volume growth has linkages not only with the plant, but it’s a overall market dynamics, supply-demand kind of situation. So even if the plant is ready to produce, ready to fire, but it has to be an economical market to service. So it’s a very volatile and very, I would say, beyond prediction that what kind of volumes would be able to sold in the marketplace, either from existing or from the new capacity.

Operator

This is the operator. Sorry to interrupt you. The line for the current participant has got disconnected. We’ll move on to the next question from the line of Pinakin Parekh from JPMorgan. Please go ahead.

Pinakin Parekh — JPMorgan — Analyst

Thank you very much, sir, for the call. It’s a very strong operating performance, 15% year-on-year volume growth. So far it seems that UltraTech has massively outperformed the PLs in terms of volume growth. Given that UltraTech has added a lot of new capacity, is it fair to say at this point of time that the growth differential of 400 to 500 basis point over industry would continue in FY ’24 for UltraTech in terms of sales volume?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yes, and I can believe so.

Pinakin Parekh — JPMorgan — Analyst

Okay. Thank you. Second question is, sir, you mentioned at the beginning of the call, INR6,000 crores tax for the next three years broadly. So that INR18,000 crores capex from ’24 through ’26, is it only on existing capacity of Phase 2? Or does that include some of the next phase of expansion?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

I think two, three years got spoken in the casual flow, but our 22 million tons of capex is about INR12,800 crores. That’s what I was referring to.

Pinakin Parekh — JPMorgan — Analyst

Okay. So at this point of time, FY ’26, the third year of capex does not include…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

But as we had announced by the time we complete this phase of growth, we will — we would’ve announced during this year the next phase of growth wherein we would have capex cash flows also. I don’t have a number on that, so I don’t want to comment on that.

Pinakin Parekh — JPMorgan — Analyst

Understood. Thank you very much, sir.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yeah.

Operator

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

Sumangal Nevatia — Kotak Securities — Analyst

Good evening, sir, and thank you for the opportunity. First question on the volume growth. Now with strong volume growth, if you could just share what would be the industry growth in [Indecipherable] and is it particular region where we gain market share or is it across regions?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Sumangal, this year, we have operated at 95% capacity utilization on a base of 120-odd million tons. Then we have grown — performed uniformly across the length and breadth of the country. So we’ve done uniformly well, plus here or minus here, tolerance level of 2%, 3% plus minus might be there.

Sumangal Nevatia — Kotak Securities — Analyst

Understood. So it’s not just because of north region where because of some plant closure, we would’ve had some extra…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No. So that’s very small capacity, and I’m talking about 126 million tons of capacity and not 5 million tons of capacity now.

Sumangal Nevatia — Kotak Securities — Analyst

Got it. Sir, second question, this Nathdwara merger, I mean, is it possible to quantify what could be the benefit of merger in terms of accumulated losses and also in an operating…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No. I think it is more of consolidation that we want to carry out and have a one single set of book. They were — we were waiting for cleanup of all the non-core assets, which we have completed. There were few past legal cases, which we have completed, and now it’s a clean set of books ready to get merged with UltraTech.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. So no meaningful, I mean, benefit on…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No. Because — no, synergies we have already tapped into. It was for all invent purposes, working as a single between Nathdwara management team was common, brand common. Wherever synergies had to be drawn out, we have drawn out. So it’s more consolidation of numbers. In my presentation, when you see our India operations, I think the only change might happened at the terminology India operations might undergo with change. No, you still continue calling it India operations, sorry. So there’s no change. It’s a legal consolidation that we are going through.

Next question, please.

Operator

Thank you. The next question is from the lion of Pulkit Patni from Goldman Sachs. Please go ahead.

Pulkit Patni — Goldman Sachs — Analyst

Sir, thank you for taking my question. Sir, given the fact that the utilizations are very high already, and if my understanding is right, the bulk of your new capacity now is going to come in FY ’25. FY ’24, there’s not much capacity addition. How — what would your view be on pricing in that backdrop for us and for the industry?

K. C. Jhanwar — Managing Director

Thank you, Pulkit. K. C. Jhanwar, this side actually. So, yes, our capacity in FY ’24 definitely would not be — may not be that substantial. But let’s see because how it’s about ultimately. But some other players are obviously adding the capacity. But Pulkit, as you know, in our industry, it is very difficult to predict the demand actually, say, I’ll give a live example, 15 days back, we were hoping [Foreign Speech]. But one time morning, you start some slowdown and kind of thing, but that’s not a permanent feature actually. So it all depends actually. But holistically, I would say it’s likely to have the good demand, maybe anything between 7% to 8% kind of thing. So obviously, I don’t think there will be strong pricing power would be in the hands actually. So — but it all depends actually how the capacity utilization set out actually.

Pulkit Patni — Goldman Sachs — Analyst

Sure, sir. So cost is going to be our friend for the next six months is the way you look at?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yeah, correct. Costs will definitely be our friend. And I believe just adding further to what, Jhanwar, as you mentioned, if capacity — see what is happening is while we are doing a capacity utilization of 90%, 95%, all India capacity utilization is still not rising to a meaningful level. All India, all industry capacity. And my firm belief is that and I mentioned it on several occasions, when all India capacity utilization starts going around 85%, then you see different kind of performance levels. So yeah, there is still some time.

Pulkit Patni — Goldman Sachs — Analyst

Sure, sir. And any indication on costs in terms of spot fuel prices? How should we look at the next couple of quarters in terms of power and fuel costs?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

They are volatile whilst they are in the downward project. But currently, there could be a spike also, as I was specifically mentioning about fuel costs, which — pet coke has been softening, pet coke has reached almost $150 or $160. Coal on the same calorific value basis. Coal still continues to trend around $170 to $180. These have softened globally. The atomic power generation has gone up in certain parts of Europe, which is easing the pressure on fuel prices also.

But when — as and when China starts importing and they will open up, they are opening up already. March was a phenomenal performance in China. They started importing. Sucking out coal supplies from Australia, from New Zealand already, but we have not yet seen a big impact on the overall fuel prices. I will not start celebrating yet, as I mentioned earlier on fuel prices. They are softening, but they could make a reverse trend also.

Pulkit Patni — Goldman Sachs — Analyst

Sure, that’s useful. You’ve been the most guarded in terms of any comment on fuel prices versus your competition, but that’s it from my side.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

All right.

Operator

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

Indrajit Agarwal — CLSA — Analyst

Hi, sir. Good evening. A couple of questions from my side. First, again, going back to coal and fuel cost. Have we been changing our strategy at all in the sense of sourcing? Have we changed our mix meaningfully or like coal, are we sourcing more from U.S. rather than Australia right now? Or it broadly remains the same that it was maybe a couple of quarters back?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Australia for us has never been the main source of coal. It becomes uneconomical being the distance and U.S. has been always the main source of imported coal. I mean, pet coke and coal, depending upon pricing, but spot prices cannot determine that, the moment we are able to cite some trends, we try to tell the balance towards either of the fuel, whichever makes economic sense. Last quarter for that matter, we were 52% pet coke, and we can go up further depending upon how the prices behave.

Indrajit Agarwal — CLSA — Analyst

Now, as we are seeing prices declining, are we looking to reduce our inventory of coal pet coke? Or we still want to be well prepared for any production uptick that we are like…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No. Irrespective of prices, inventories have to be carried. We do what, 40, 45 days — 45 days of inventories can’t take a risk or suddenly if there’s a — got some mine shut down or anything. Suddenly, if supplies are not available, then our operations will suffer. This is a long-distance, long-lead item. So we can’t compromise on inventory levels. It can be very speculative.

Indrajit Agarwal — CLSA — Analyst

Sure. And a couple of questions on the waste hit side. So we had a target of 318 megawatt by end of FY ’24. Are we still on track for that? Can we like…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yeah, we’ll exceed that. I think so. ’24, we’ll exceed that.

Indrajit Agarwal — CLSA — Analyst

This fiscal. So we will be like 34% green share that we had guided by…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yes. That is so we are very confident. We would — because see green share — the non-investment base is alternate fuel. We are continuously ramping up our alternate fuel, which ultimately forms part of my guidance on 34%. So it could — we will definitely.

Indrajit Agarwal — CLSA — Analyst

Sure, thanks. My last question is on the clinker conversion ratio. We are at about 1.41 time. So not just in the near to maybe five, seven-year horizon. Do you see this moving more towards 1.7 times so the industry accepts more blended cement? Or you think there will be a sharp distinction between the infrastructure projects which will continue to have higher OPC? Do you — are you seeing any…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

There are two sides of the coin to this. One is with infrastructure, continuously being the bellwether of demand, demand — the consumption of OPC will continue to remain high, which means the conversion issues cannot improve dramatically. However, there is a lot of advocacy, which is happening around blended cement usage in infrastructure projects. Depends on how successful the industry is to percolate that message down. And you could see improvement in overall conversion norms.

Indrajit Agarwal — CLSA — Analyst

Sure. Thank you so much.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

But 1 — 1.6 — I can’t do the math around 1.6, one point — this quarter ended — 1.41 was average, but quarter ending was 1.42. We have once in a while catch higher than 1.42 also, and in the near future, maybe 1.5 could happen.

Indrajit Agarwal — CLSA — Analyst

Sure. Thank you so much.

Operator

Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.

Ritesh Shah — Investec — Analyst

Hi, sir. Thanks for the opportunity. A couple of questions. Sir, first one is on the legal side. Sir, how should we read 0.8 notes to accounts pertaining to the Dalla asset?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

The Dalla asset, it’s under arbitration, let that process get completed, we’ll then take over that asset.

Ritesh Shah — Investec — Analyst

Sir, can you specify on how much is a cement and clinker over there, the asset, which is under arbitration?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Sorry, 2.3 million ton clinker only. No grinding capacities at that location.

Ritesh Shah — Investec — Analyst

And sir, corresponding limestone?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

The limestone mine would be about 100 million tons over there.

Ritesh Shah — Investec — Analyst

Okay. Perfect. Sir, you wouldn’t like to comment anything on the course of action incrementally or possibly how it landed in arbitration?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Good point, Ritesh. Next question, please.

Ritesh Shah — Investec — Analyst

Sir, next question, any specific cost initiatives besides the green power and AFR that we are working on, either on lead or moving from road to rail or exploring more of coastline, DFC, anything?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

I think it’s — this topic might take half an hour of discussion by itself, but there are lots of initiatives that the organization is taking, whether it’s on digital ways of working, which is helping reduce our operation costs or optimizing my lead distance or optimizing my freight costs. There are lots of initiatives. I think the leading question would be, you might ask me what is a target number? I don’t have a target number because these are continuous improvement programs.

So we have improvement programs happening in our maintenance costs, in our power consumption. Some are investment led. Some are improvement and efficiency. Mining operations for that matter, they are dedicated specific of — specific task force and actions being taken to improve the cost of mining. So every — you named the fieldwork is continuously on. There’s never a status quo that we would reach.

Ritesh Shah — Investec — Analyst

Correct. Sir, just last question. You indicated we are positive on demand. You also indicated, I think, batting order, middle order, and tier will follow and we are a bit on volumes. Sir, my question is — and you also indicated at the India level, utilization level is still not at the desired level. Sir, what will be the probability for the cement prices to remain at the current level if the costs goes down and what you indicated utilization at the India level is not at the desired level?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

You tell me that. You are there in the field. What will happen?

Ritesh Shah — Investec — Analyst

Sir, prices go down, logically. But I would like to have your thought, sir.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No. I think there would not be too much pressure on prices. I don’t believe so. We have seen in the heat of the January, March quarter, if volumes are so high, then prices should have corrected. These prices, they’re not correct. We have maintained our prices as we were in the last quarter. So nobody wants to just crash prices for volumes.

Ritesh Shah — Investec — Analyst

Sir, adjusting for seasonality. Automatically, it will come off?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Sorry.

Ritesh Shah — Investec — Analyst

Sis, adjusting for seasonality. Technically, it has to come off because volumes will down.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

July, September quarter is always a weak quarter. But my sense is otherwise, price should remain still low.

Ritesh Shah — Investec — Analyst

Sure, sir. I have more questions. Sir, I’ll join back the queue. Thank you so much.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Thank you.

Operator

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

Amit Murarka — Axis Capital — Analyst

Hi. Thanks for the opportunity. Just a couple of questions though, firstly on demand slide around the various demand drivers that you present shows a relatively weak performance by the infra and commercial segment, whereas the housing segment is what is driving the demand. So with the healthy budget, which we’ve seen for FY ’24, like are you already seeing the infra segment also picking up or still slightly shut off now?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yes. So one important aspect, which — and I’ve mentioned it in the comments also is when the harvest time happens, the normally labor availability goes down for the infra projects, and that’s where new project taking off also is slow. So it’s about new projects not taking off at a point in time, which result in a mild slowdown. I think a sneeze should not be considered as a flu. So it’s a very mild thing. But given the impetus on infrastructure that the government has, given the fact that this is election year, I believe demand will continue to grow very strong.

Amit Murarka — Axis Capital — Analyst

Okay. Understood. And also on exports like this quarter, you see — shown a higher exports volume and so as the Sri Lanka situation, fully normalized now or how have you placed…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yes. I think it’s almost normalized and we’ve started getting back our volumes. We’ve — at the peak of the problem time, we had almost INR250 crores outstanding from Lanka, everything. The last penny has been received. Volumes have started picking up. The economy is started picking up. So we are — our exports are also growing now.

Amit Murarka — Axis Capital — Analyst

And the subsidy financials in the presentation you have disclosed other expenses have actually almost come down to zero in Lanka. Is there any major change in the like operating structure which you have made there?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No. What is this, Ankit?

Amit Murarka — Axis Capital — Analyst

The other expenses line item, this is in Slide 34. It shows that it was INR84 crores last year. It is INR6 crores this year.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No. I’ll have Ankit to get back to you on this, Amit.

Amit Murarka — Axis Capital — Analyst

Okay. Okay, sure. And just last question, like on the fuel cost, you mentioned $194 consumption cost right now. What we understand is on the spot level, the pet coke costs have dropped to like around $140, $145 per ton. So like by when will these current spot prices start reflecting? Generally like it’s 45 days that you take to consume the fuel…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

I would give about two months.

Amit Murarka — Axis Capital — Analyst

Okay.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Just one second, the clarification.

Ankit Asawa — Vice President, Accounts and Finance

Amit, that other expenses include expenses because last year in Lanka, there was a currency depreciation, which was very high.

Amit Murarka — Axis Capital — Analyst

Okay. Understood. Okay. That’s all from my side. Thanks.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Thanks.

Operator

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

Prateek Kumar — Jefferies — Analyst

Hi. Good evening, sir. [Technical Issues] My question is on pricing.

Operator

Sorry to interrupt you, Mr. Kumar. The audio is unclear from your line. Please use the handset mode.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Are you on speaker, Prateek? It is better.

Prateek Kumar — Jefferies — Analyst

Yeah. So my question is on pricing.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yes, please.

Operator

The line for the current participant has got disconnected. Ladies and gentlemen, in order to ensure that the Management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue.

The next question is from the line of Raashi Chopra from Citi Group. Please go ahead.

Raashi Chopra — Citi Group — Analyst

Thank you. At the last quarter, you had mentioned that fourth quarter the EBITDA per ton will cross INR1,000 and then more medium term, you are expecting INR1,000 to INR1,200. So obviously, you’ve delivered on the fourth quarter number. But what are the thoughts on the INR1,000 to INR1,200 medium term given the way costs have come up?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

I believe we deliver on what we commit.

Raashi Chopra — Citi Group — Analyst

So I think my question is, is it upside to that?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Upside to what?

Raashi Chopra — Citi Group — Analyst

INR1,000 to INR1,200 medium term?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Oh, well, I wouldn’t want to count it so soon. Let Q1 play out, we’ll see then.

Raashi Chopra — Citi Group — Analyst

Okay. Also, the green power in this quarter, was it 20%?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

15% — no, sorry, 21% total team power. 25%, sorry, my bad, sorry, 25%.

Raashi Chopra — Citi Group — Analyst

25%.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Which includes WHRS plus renewables plus AFR.

Raashi Chopra — Citi Group — Analyst

Right. And what is the working capital release in the quarter?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

In the quarter, how much is about the capital release? INR2,300 crores in the quarter.

Raashi Chopra — Citi Group — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Navin Sahadeo from ICICI Securities. Please go ahead.

Navin Sahadeo — ICICI Securities — Analyst

Hello.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Hi, Navin.

Navin Sahadeo — ICICI Securities — Analyst

Right. Thank you. Thank you for your opportunity. Sir, two good questions. One, are there any efficiency measures or any other special initiatives the Company is taking on other expenses front? Because on absolute basis, even at let’s say a volumes of nearly 32 million tons, the total amount is actually less than what we saw at — even when the volumes were just 23 million tons. So I understand it is partly fixed, partly variable. So I’m just trying to understand, are there any initiatives or any efficiency gains, which have been factored here?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No. Navin, there’s nothing extraordinary. I think I would say it’s an operating leverage play. And if I’m trying to think that the biggest other expenses would be something like advertisements. So that I really cannot predict or cannot have a standard flow, depending upon events when campaigns are run. So that could be better for yo yo. You might see in this quarter, the other expenses are slightly higher because there’s a huge amount of ad spend. Could be. And other than that, there’s nothing abnormal, which comes to my mind.

Navin Sahadeo — ICICI Securities — Analyst

Sure. And sir, just directionally, well, of course, previous participants have — did ask you about pricing and fuel costs. My just one question directionally, April as a month on terms of realizations would be better versus the march quarter or would be a tad lower? How would you look at it directionally?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Directionally, good.

Navin Sahadeo — ICICI Securities — Analyst

Sorry, I didn’t get you.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Does mic didn’t get me? It’s positive direction. It’s not declining, so.

Navin Sahadeo — ICICI Securities — Analyst

Understood. Great. That’s helpful. Thank you so much.

Operator

Thank you. The next question is from the line of Rahul Gupta from Morgan Stanley. Please go ahead.

Rahul Gupta — Morgan Stanley — Analyst

Thank you. Thank you for taking my question. Daga sir, I have a couple of questions. Sir, if I do back off the envelope math or it suggest that fuel cost would come down by around 15% over the next two quarters. Of course, assuming everything remains same. Is that a fair understanding? And secondly, given fuel costs have surprised positively on spot basis over the past few months, is it fair to accept that the focus would be, again, on volumes and the positives that one would get from fuel prices would be offset by the cement prices during the year?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

I lost your first question. What was your first question here?

Rahul Gupta — Morgan Stanley — Analyst

Sorry. What I was alluding to was when I do my back off the envelope math, your fuel cost should decline by around 15% over the next couple of quarters. But of course, this is assuming everything remains same.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

If everything remains the same, then the match could work. But spot prices are never on the spot. They are changing on a daily basis. If the trend is continuously down south, then yes, you will be proven right.

Rahul Gupta — Morgan Stanley — Analyst

Yeah. And just to take this point forward, does that mean we get more leeway to play on or focus on volumes, sorry for the word, the expense of cement prices during the year, even we have support from cost?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Rahul, ultimately, we play for EBITDA per ton, not for single lever. And nobody in the right sense, in the right mind frame would want to lose on EBITDA per ton.

Rahul Gupta — Morgan Stanley — Analyst

Okay. It makes sense. Thank you so much.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Thank you.

Operator

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

Sumangal Nevatia — Kotak Securities — Analyst

Yeah. Thank you, sir. I got disconnected. Sir, first question on the capital structure with a medium term. Now, we’ve deleveraged quite impressively without compromising on growth. So now as we are approaching net cash, should we expect a higher payout or we will look to accumulate cash on books over the next two, three years?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

One is this year, our dividend payout is almost 22% of profit. We — it will keep on going up steadily as a percentage of profit in my view. Further, Board will take a final call. But the — reading that I have is, it will keep on improving.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. Okay. Sir, over the last several years, we’ve been quite active on M&A. I mean how is the landscape now? Are there meaningful assets still on the block or it’s largely going to be organic going forward?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

See, we believe in India, growth story and we want to continue to participate in India growth story. So we will grow whether organic or inorganic is a second thing. And inorganic is always opportunistic. It also has to — in my definition, it has to give us a profitable growth opportunity. In that scenario, we’ll examine it. If it does not make sense, we’ll drop it.

Sumangal Nevatia — Kotak Securities — Analyst

Okay. And just one last thing on April prices is not very clear. I mean, since the month is almost over, is it possible to share some regional sense on how the prices have moved versus March?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

I don’t want to comment on month-to-month numbers.

Sumangal Nevatia — Kotak Securities — Analyst

Okay, got it. Okay. Thank you. And all the best.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Thanks.

Operator

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

Prateek Kumar — Jefferies — Analyst

Yeah. Hi, sir. Sorry, my call got disconnected. My question is on clinker capacity. So you were quoting like 84% utilization for cement for FY ’23. What would be your clinker utilization for the year? And what is your clinker capacity post this first days of expansion?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Just one second. You asked difficult question, so we have to — what is the clinker capacity? So clinker capacity utilization was about 91% Q4 FY ’23.

Prateek Kumar — Jefferies — Analyst

So what would be that for full year? You said 84% for full year for cement, right?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yeah. So what are you asking?

Ankit Asawa — Vice President, Accounts and Finance

83%.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

For what?

Ankit Asawa — Vice President, Accounts and Finance

Full year.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Cement is 84% full year. Clinker is 83% full year.

Prateek Kumar — Jefferies — Analyst

And what could be our clinker capacity?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Clinker capacity, do you have a number guys? Surprisingly, we don’t have a clinker capacity number immediately. I’ll give it to you separately.

Prateek Kumar — Jefferies — Analyst

Okay. So second question is on pricing. So last quarter, was there a material difference in regional pricing trend?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No, no, it almost remained flat, a rupee here or a rupee there within regions.

Prateek Kumar — Jefferies — Analyst

Okay. So there is no change in competitive intensity in any region specifically…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No.

Prateek Kumar — Jefferies — Analyst

And lastly, on other expense. So other expense growth seems lower on an year-on-year basis versus volumes. That’s largely related to — I mean, as you comment on operating leverage benefit, but is there some expense which is missing this quarter?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No, nothing is missing. Nothing has been stopped. It’s purely operating leverage.

Prateek Kumar — Jefferies — Analyst

Sure. Thank you for taking my questions.

Operator

Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead.

Ashish Jain — Macquarie — Analyst

Good evening. Sir, my first question is in on this 25% green power that you send, can you break it up between how much is green power and how much is WHRS?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

6% was renewable energy, 15% was WHRS and balance would be alternate fuel. No, sorry, RE power in the grid. So RE, renewable energy is high. 15% is WHRS and balance is renewable energy.

Ashish Jain — Macquarie — Analyst

Okay. And sir, AFR, is it even cheaper on a calorific value basis or whichever ways you measure is more about attending the green target that we have?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No, we take calorific value basis. [Foreign Speech]

Ashish Jain — Macquarie — Analyst

Sir, secondly, on WHRS, like you had this target of 324, which you said you might exceed. But once we go to INR150 crores, what is the potential on WHRS we have because it should be increased substantially with the kind of clinker we are adding. Is that right? Because the reason I’m saying otherwise, your share on green could decline in case we don’t match it with incremental WHRS. Just want to understand where we stand on that.

K. C. Jhanwar — Managing Director

Yeah. Ashish, actually I would put this. And now all the new plants are done with WHRS actually. And as far as new plants are concerned on a — about 55% power can get generated from WHRS for the new plants. So average obviously certain old plants where there is no possibility or layout does not permit or there are other challenges. But new plants can give up to 55% of value.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Further to that, Ashish, we are not adding any thermal power capacity. So balance, we are depending on grid as India improves in terms of power supply and PLF grid supply is becoming a safer way of supplying — absorbing power in our units. So irrespective of organic capacity going up or WHRS maturing on our current capacity, future capacity will remain balanced with green power.

Ashish Jain — Macquarie — Analyst

Sir, if I ask this differently, so the 324 number, if my understanding was right, it was based on the 111 million ton capacity basis. And — is that right? Or this included this — or is it based on 134 million ton? I’m not clear about that.

K. C. Jhanwar — Managing Director

So on 130 million ton, it was around 303 megawatts.

Ashish Jain — Macquarie — Analyst

Right. So once we go from 130 to 155 or 154, we should be adding roughly another 100 megawatts, is that right?

K. C. Jhanwar — Managing Director

Around 60, 65 megawatts, which will take us to 360, 370 megawatts.

Ashish Jain — Macquarie — Analyst

Oh, cool. Okay, got it. Thank you so much.

K. C. Jhanwar — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Devesh Agarwal from IIFL Securities. Please go ahead.

Devesh Agarwal — IIFL Securities — Analyst

Yeah, good evening, sir. Thank you for the opportunity. You did mention that probably pricing may not go up, but given your high utilizations, do you think that the share of premium product in your overall mix can go up and that can support the pricing?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yeah, it is already going up. We have crossed 20% in terms of premium products and which also directly, indirectly help absolute realization — average realization.

Devesh Agarwal — IIFL Securities — Analyst

Any targets, sir, for FY ’24?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yeah, I’ll tell you at the end of ’24.

Devesh Agarwal — IIFL Securities — Analyst

On a net basis, how much more do we earn out of premium products?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Incremental margin on premium product, there are multiple — do you have an average number? Just one second. So my colleague tells me INR10 a bag would be an average earning. There are multiple products that clearly is 200 bucks per ton.

Devesh Agarwal — IIFL Securities — Analyst

Understood. Okay. Thank you, sir.

Operator

Thank you. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.

Keshav Lahoti — HDFC Securities — Analyst

Hi, sir. Congrats on great set of numbers. I just want to understand one thing. If I look back your kcal costing, you are industry leader on many operating fronts, but kcal of their value add is picking about 2.06 in this quarter and you are at 2.5 kcal. So will this difference narrow down in upcoming two, three quarters with the corporate understanding?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Some mysteries can never be solved. Having said that, our largest footprint is in all the infrastructure projects. You name a infrastructure project where UltraTech is not present. And that is where the whole tilt is because we are supplying OPC as compared to other players who are not supplying so much of OPC. Everything has a challenge.

Keshav Lahoti — HDFC Securities — Analyst

Okay. Got it. As you again reiterated your stand at once the industry capacity utilization, which is 85%, we get a pricing power, but somewhere that thing does not play out in quarter four.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

You see only three or four results have been published. You’ll have to wait for other results to come out. Then you’ll know what the average capacity utilization of the industry is. Clearly, we operating at a significantly higher base and higher capacity utilization. We would’ve gained — I believe we would’ve gained — we would’ve made significant inroads in the market.

Keshav Lahoti — HDFC Securities — Analyst

Yeah. Like if you operated it, let’s say near 100% in March. So obviously, I believe industry might be above 85% in March, but that pricing is still missing. That’s what I’m trying to understand.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No. But I don’t think India is operating at 85% plus as yet.

Keshav Lahoti — HDFC Securities — Analyst

Okay. Got it. One last question from my side. You are talking about 34% green power. Can you give a ballpark number? How much is by WHRS and how much will be green power?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

6% [Phonetic] was our target on WHRS and 9% or 10% was a target on green renewable energy.

Keshav Lahoti — HDFC Securities — Analyst

Okay. Thank you. That’s it from my side.

Operator

Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.

Ritesh Shah — Investec — Analyst

Hi, sir. Quick three questions. First is where are we on RAK? Post RAK, how has the mix shifted top two volumes versus what we source from RAK and has our market strategy changed specific to white cement and wall putty? That’s the first question. Second is on construction chemicals. What was…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

I will forget. Let me just take one-by-one question. So you said, where are we on RAK. RAK is in Ras Al Khaimah and it’s very much there. So we have — sorry, that was a bad joke. But I think the operations are now coming under control. We started — we have started rebranding the entire RAK output into Birla White. Birla White bags are already in place at RAK White. And they are shipping Birla White as a product from there. Prices for white cement have seen a consequent improvement in the country. There is a consequent improvement in our market share as well in the white cement space.

Ritesh Shah — Investec — Analyst

Sir, is it possible for you to quantify…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

This was a strategic investment, which to my mind is playing right at the moment. Sorry, what?

Ritesh Shah — Investec — Analyst

Right. Sir, I think we were at just right about 50% and we had indicated we could increase the state further. So any timelines on going to 80% or 100%? That is one. And you indicated on market shares. Sir, possible for us to quantify something?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Going to, sorry, what?

Ritesh Shah — Investec — Analyst

Sir, RAK stick. Sir, capacity utilization. Sir, economic interest.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

So we are working on it. Hopefully, in this financial year, we’ll be able to consolidate — make it our subsidiaries.

Ritesh Shah — Investec — Analyst

Okay. And sir, on market share, you indicated that market share has increased. Possible for us to quantify?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

No, I don’t have that data, but very — the very fact that I am importing that white product as a product name is out of the market and it’s got replaced by Birla White, clearly, there is a market share gain.

Ritesh Shah — Investec — Analyst

Sir, construction chemicals. Any headline numbers for the fiscal revenue and EBITDA and any other…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

EBITDA is not measurable. We have clocked about INR550 crores of revenues in construction chemicals this year.

Ritesh Shah — Investec — Analyst

Sure. And sir, we had plans on capital manufacturing over here, any updates over there?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

So there is a lot of captive manufacturing happening in all our construction chemicals.

Ritesh Shah — Investec — Analyst

Sir, you had indicated we’ll put up more plants across our factories and the revenue…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

That’s what I meant by captive manufacturing, we have both models, a lot of places we are using because it doesn’t require so much of space. We are using space available in our factory premises depending upon the closest to the market or doing contract manufacturing outside. Do you have a number of locations that we are present in today with our contract manufacturing plants? How many plants we have? Ritesh, I’ll announce on the call if your questions are over.

Ritesh Shah — Investec — Analyst

Sir, two more quickly.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Just one second, Ritesh. Just one second. What’s the number of plants ballpark? Just one second, sorry. I’ll let you know, Ritesh. Let’s not waste time.

Ritesh Shah — Investec — Analyst

Yeah, sir. Just a quick data point, sir. Same thing on RMC, any change in strategy? We have the numbers for the full year, but are we upping the number of accounts that we should look at…

Atul Daga — Business Head, Executive Director & Chief Financial Officer

We are going full steam ahead on RMC. We have already reached 235 plants. March, we ended with 231 plants and further few more plants would have got added in April. We will continue to grow and hope to double this number very soon. And 39 physical locations that our contract construction chemical manufacturing is happening.

Ritesh Shah — Investec — Analyst

Sir, just two quick ones. Bulk cement terminals and railway sidings, what’s the number right now? And do we have any numbers targeted for the next two years?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

What was the first one you asked?

Ritesh Shah — Investec — Analyst

Bulk cement terminal and railway sidings.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Bulk terminals is 7 and rail aheads almost 300.

Ritesh Shah — Investec — Analyst

Sir, targeted numbers for next year?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Don’t have a target number and the bulk terminals are as part of our 22.6 million tons, there are two more bulk terminals planned. One in UP and –one in Karnataka and one in UP.

Ritesh Shah — Investec — Analyst

Sure, sir. This is helpful. Thank you so much.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Thank you.

Operator

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

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Amit is not there. Let’s take the last couple of questions, please.

Operator

If there is no response, we’ll move on to the next question from the line of Anupama Prakash Bhootra from Arihant Capital. Please go ahead.

Anupama Prakash Bhootra — Arihant Capital — Analyst

Thank you for taking my question. So I have a specific question on Eastern region. So wanted to understand your perspective as far as east India markets are concerned and the Company’s plan in Eastern region for coming here?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

We will continue to grow in the Eastern markets. Eastern market is one of the most deep markets in terms of growth potential, highest density of population, lowest level of development that still continues to plague that market. So there’s a huge amount of opportunity that we see in the Eastern markets.

Anupama Prakash Bhootra — Arihant Capital — Analyst

So like what kind of capacity expansion is the company is planning coming here?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Those are 22 million tons that we have announced, close to 5 million or 6 million tons is coming up in the Eastern markets. We are today present with almost 22 million tons of capacity in the east, which will go up by 5 more million tons in the next two years.

Anupama Prakash Bhootra — Arihant Capital — Analyst

And how much like clinker backing for the team?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

We are always clinker-backed.

Anupama Prakash Bhootra — Arihant Capital — Analyst

Okay, fine. Thank you so much. That’s it from my side.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Thank you.

Operator

Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead.

Ashish Jain — Macquarie — Analyst

Hi. Sir, in your presentation, in Slide 24, you have given breakup of capex and various heads. Can you build some color on what is the other capex and strategic investments?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

So strategic investment was RAK White, ESG, largely WHRS, and all the capex, which are power saving related, which help me reduce our AFR investments.

Ashish Jain — Macquarie — Analyst

What’s that?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

That would be balanced modernization. There is huge amount of stuff which would keep happening in a live operation. It could be some building also or some large modernization. Anything is possible. Various infrastructures will be there.

Ashish Jain — Macquarie — Analyst

Okay. So WHRS is part of ESG and not in those capex?

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Yes, absolutely.

Ashish Jain — Macquarie — Analyst

Okay. Thank you so much.

Atul Daga — Business Head, Executive Director & Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]