Ultratech Cement S/Gdr

Ladies and gentlemen, good day and welcome to the Ultratech Cement Limited Q4 FY24 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 risk that the company faces. The company assumes no responsibility to publicly amend, modify, or revise any forward-looking statements 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. There will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Atul Daga, Chief Financial Officer of the company. Thank you. And over to you, Mr. Daga.

Thank you. Good evening, everybody. One more quarter and one more year has gone by. And at Altotech, we have not got tired of growing. We have not yet exhausted all our resources to keep doing better. This year, again, we have achieved a double-digit volume growth. And how? There's an increase in our base capacity. On a full year basis, we have achieved a 13% growth, and this is the third straight year of a double-digit growth. In the fiscal year 22, we grew 9%, 14% in 23, and again, 13% in the current fiscal year, fiscal year in the reporting. And we are confident to deliver good performance year after year. In absolute terms, we sold about 94 million tons of cement in FY22, which has crossed to almost 190 million tons in FY24. This, I believe, is the power of Ultratex. For Jan-March 24, we grew 30% over the last quarter and 11% YOY in volume terms. We have delivered this performance, obviously, with the rapid growth in the Indian economy. The Indian economy is thriving. and is expected to grow anywhere between 6.5% to 6.8% this current year. And cement and industrial products definitely grow at a pace higher than GDP. To give you a glimpse, a very brief perspective, NHCI spent a record 2,700 crore in construction of highways in FY24, the highest ever capital expenditure so far, a jump of 20% over last year. construction of highways has started to record 1,300 kilometers in 24, almost 34 or 35 kilometers per day. This is the second highest rate at which the construction of highways is being seen in the country. Our growth has been possible only with the support of our 23,000 plus employees, our 1.3 lakh plus channel partners, business associates, bankers, and all other agencies involved. As we grow, we have also increased our pace of growth in the RMC business. We ended this year with 307 RMC plants serving our customers all over the country. RMC consumes almost 2.5 billion tons of cement for us. It still is small and growing very rapidly. India is urbanizing. Vertical houses are increasing, but yet India still remains an individual home builder market. IHBs, as they are called, continue to be the biggest demand driver segment for cement in India. Another unique phenomenon, another important aspect to know about Ultratech, still being an industrial commodity, we have the largest retail footprint in the country with over 3,900 stores at the close of this year. and continuously growing. In quarter four, 16% of our sales were through this retail platform. We call it Ultratech Business Solutions or UBS stores. It is one-stop shop for an individual home builder requirement for all building materials. One thing which keeps everybody on their toes is the growth and supply of cement capacity in the country. Last year, 40 million tons of new capacity was commissioned, but at different points in time during the year, out of which Ultratech had a share of almost one-third. Nothing to get worried about, since demand estimated for Fi23 was 388 million tons, which most likely is around 425 million tons for Fi24. This is another 40 million tons of incremental demand. Point to keep in mind is that incremental effective supply would have been lesser than incremental demand because the new capacity in the country would have come throughout the year and not having a 12-month run. All-India capacity utilization seems to have increased by about 200 basis points to 71%. Ultratech this year yet again has achieved significantly higher capacity utilization for the year at 85%, thus consistently making inroads into the market. Going forward, there might be some amount of moderation in FI25 in terms of demand. However, our belief is that the slowdown should be shorter than earlier years, primarily because private sector housing has also picked up momentum. industry could see a high single digit growth this year as well. Our clinic should be surely doing better. Even though we had a 98% capacity utilization in January, March quarter, please rest assured we will have sufficient capacity available this year to grow and keep growing. We should be adding almost 15 to 17 million times this year and our team's capability of commissioning a cement plant in time and then achieving a vertical start has been demonstrated time and again. To talk about prices, our realizations dropped about 6% QOQ. More or less, this kind of a pattern was observed all across the country. However, an important aspect to note is that on a longer period average, The average prices have increased 3.5% CAGR over the last five years. Costs also have increased about 3.5%. But yet, this differential leads to an improvement in margins. On prices this year, we expect the pricing environment to remain stable or improve only, not going down any further. Let's just talk about costs. At Ultratech, cost efficiency, continuous increase in green power mix, lower fuel costs, increase in AFR, and operating leverage continue to improve our cost parameters. Over the next three years as we grow, you will see the operating costs continue to come down, and we should be seeing a reduction of almost 100 to 300 rupees per ton. Fuel costs, which are always a burning issue, remain at the same level, have stabilized. But we cannot have a concrete guidance on the fuel prices given the large dependence on the geopolitical factors. Our fuel consumption cost for the quarter was 2.03, would be 2.03 per kilocalorie. The cost will keep sliding down during this year with material improvements being visible from January, March 25 onwards only. A quick update on our CapEx program. All our organic expansions are on track. The Kesaram transaction CCI approval has already been received. The plan is to merge with effects on 1.4.24 subject to all regulatory approvals. We are waiting a note from SEBI and SovExchange before we file the scheme with the MCLT. Interesting to note is that they have already refinanced and reduced the cost of their debt by almost 50%. Keeping in mind the potential capacity that we will get from Kesaram in the same market, we have put on hold our Hotgi grinding unit expansion, which was a 2.7 million ton ground-free capacity. We will revisit it at an opportune time in future. Last week, we had concluded the acquisition of a grinding unit in southern Maharashtra, and with available surplus clinker in the state, it gives us a unique opportunity to increase our footprint in the fast-growing state of Maharashtra. Dispatches from this unit have already come in since last two days for AltaTech. Before I conclude, I must tell you that We have started this year with an available, fully available capacity of 146.16 million times. Indian market will continue to grow and we have more capacity coming this year and the next. Our cash flows are strong and will strengthen further. Thank you so much and over to you for questions.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rahul Gupta from Morgan Stanley. Please go ahead.