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.

Yeah, hi. Thank you for taking my questions. I have a couple of questions. First, based on results that we have had until now, we have seen volume surprising positively across the board. Given ultra-tech's positioning in the industry, I just want to understand if the industry is seeing front-loading of demand ahead of elections and monsoons? And if yes, is there a big risk for both volumes and prices over the next few months? Any color on this would be appreciated. I'll have my second question after this. Thank you.

I think I already clarified that there might be a slowdown in FY25 and you put a name to that reason. But however, the slowdown should not be longer on because there are this year practically as we see all the all the verticals, all the engines for demand are firing up. So even if there's a slowdown in one sector of demand, there could be a positive impact on, or the support would be given by the other drivers of demand, private sector housing, rural housing, rural infra, everything is growing. So, and your second point you mentioned about front loading, I think When demand is there, everybody would want to fulfill the needs of their customers and nobody would want to leave an opportunity. So that's the way I would read it, more or less.

That's very comforting. Thank you, Atul sir. My second question is, you had made a point that you would see some deflation in fuel cost last quarter. and we have seen better than expected performance this quarter. So is it fair, based on spot prices, that fuel cost moderation is largely behind us, or how should we look at it from here?

Thank you. You know, again, one more point to keep in mind. Now, the last episode which happened was the Baltimore crisis, the bridge which collapsed, which is slowing down the movement of cargo from that side. So all these kind of events... do have an impact. Now, Iran war happening or anything else happening do have an impact. Having said all of that, we still don't see, and again, I had mentioned in my opening remarks also, we don't see too much of a negative impact on the prices of fuel. Next point to keep in mind is that A spot price is misleading because that spot price comes into consumption almost five months later because take into account the spot price itself is for ship loading at least 45 days to two months later. Then you take the ocean freight time and everything else included four to five months later. That is another point that you need to keep in mind.

Maybe I was not clear. The point I was making that based on we not seeing enough moderation. Yeah, sorry. Listen to me.

So we expect the fuel prices to soften for us continuously. However, you will see a dramatic improvement or substantial, I shouldn't say dramatic, but a substantial improvement from January, March quarter, from January, March 25 onwards.

Perfect. No, this is very helpful.

All right.

Thank you so much.

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

Hi, sir. Good evening. So my first question is, you know, on cost, you spoke about, you know, 200 to 300 rupee decline in the next, I guess, two to three years. Can you give some color on that? What will be the key driver? And does it also factor any impact of lower coal prices? Because that's something which may or may not be possible.

No, these are all controllable drivers, Ashish. First one is, as I have talked about, our blended cement or conversion factor increasing, improving, if you have noticed. This has improved to 1.44, and every decimal counts. That itself by 2027 should bring a large part of the savings. Second thing is our investment in green power continues. Green power would be WHRS and renewable energy. Both of them today stack up to 24%. By 2027, we would have almost 60% or even higher than 60%. being contributed by green power. The cost of green power, WHRS, all of you know, is almost 90% lower than thermal power. And renewable energy would be 40%. 40% are thereabouts lower than thermal power. So these programs are in, you know, Under implementation, so the benefit will come through. As we expand, as I mentioned, 15 to 17 million tons will commission this year, which is 25, and by the end of 27, we will be about 199 million tons, to be exact, 199.6 million tons of capacity. That's global, right? including our UAE capacity. So with that kind of dense network, in India, we would have 70 locations servicing our customers. Naturally, my lead distance will come down. We know we have a plan in place, which will help me reduce my lead distance. Second, next point would be alternate fuel. We are ramping up the consumption of alternate fuel. We are still pretty low, around 5% to 6% only. even if it goes to 15%. And we are investing behind it, so it's not dependent on external factors. We are investing behind it. That will lead to an advantage. And lastly, when we are operating at 200 million tons of capacity, imagine selling 80%, 85% of that volume, their minimum, would generate a lot of operating leverage. All put together, I am pretty confident that we will generate those gains.

Right. So, Atul, can you speak a bit more about the freight cost savings? If you have to quantify that number, what kind of lead business reduction can we think of?

So, we are at 400 kilometers of lead today. Per ton per kilometer cost would be a thumb rule of 3 rupees per kilometer. Even if a 25 kilometer reduction happens, that is what would lead to 75 rupees gains.

Okay, got it. And, you know, just a continuation of this point, so how should we think about, again, I'm not looking for a, you know, as in for a right or wrong answer, but how should we think about pricing in this context? Because, you know, you and, you know, one of the larger players is also talking of a meaningful price cost decline, all sustainable in nature. So how should we think about industry profitability in this timeframe?

Profitability is bound to improve.

Okay.

We will focus on EBITDA per ton, which will be on a northbound journey. And given the, and again, Ashish, I already mentioned in my opening remarks that this year, we expect the pricing, and it's too difficult to predict, but we expect the pricing environment to be stable or be positive only.

My question is not like, forget fiscal 25 for a moment. My question is, you know, with two, three hundred rupees decline, that is a lot of leeway to have a healthy EBITDA pattern and still tweak pricing on the way down. So I was asking more from that point of view, you know, because this kind of pricing is a humongous number, right?

Yeah, so it is, it is. You should compliment, won't you want to compliment us for delivering that improvement?

I would, I would. Let's see that in the numbers.

Thank you. Thank you, Ashish.

Okay, so my second question is on your cash flow. This is the fourth question. No, no, this is the second question. Those are subparts. Those are subparts. So my second question is on CapEx. Like this year, we have, you know, done a phenomenal job of, you know, managing our debt even with roughly 10,000 crores of CapEx. And, you know, we are kind of guiding for a similar CapEx for next year also. So how do we see leverage panning out from here? Do we see any upset as to debt?

Our target is to inch towards net cash on the balance sheet by the end of 2025. Not taking into account the case around debt. But, yeah, if I take that into account, so... 2,700 crores of debt that we have today, we should be inching towards 1,500 to 2,000 crores of net debt, including Kesaram.

Okay, with Kesaram you are saying? Okay, yeah, yeah.

Without that, I am net cash on the balance sheet.

By 2025 end?

Yeah.

So just one last very small question on Kesaram. Do we expect further reduction in interest costs or do you think whatever they have achieved?

Yes, so right now they are on their own balance sheet. Once we get on to our balance sheet, we will look at reducing that cost further. They are now, I can share with you, they were at, they have dropped down to 11.5% or 11.25%. 11.5%, our cost of borrowing would be, in today's time, would be 8% or thereabouts.

Got it, got it, perfect. I'll come back in the queue. Thanks so much.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please restrict your questions to two per participant. If you have any follow-up questions, if time permits, we will take the follow-up questions. The next question is from the line of Phulkit Patani from Goldman Sachs. Please go ahead.

Thank you for the questions. My first question is, if you were to just talk about consolidation in the sector, you mentioned that profitability from here should go up generally for the sector.

We know brownfield capex is happening at much, much lower rates. Does it mean that we see further consolidation from here or we don't see much given profitability probably has bottomed out for the sector? That would be question number one. So, I said about our profitability and not commenting about industry's profitability. I would not be an expert to do that. But maybe you are deriving that comfort from the fact that we've we believe that fuel costs will remain benign and the pricing environment should be positive. So in that scenario, as far as consolidation activity is concerned, there will be players. And it is not about the Indian cement industry. There are players who would want to cash out when the going is good. So I really don't know. As of now, I really can't comment on anything else.

Sure, sir. I mean, they cash out if going is good or if things are getting bad. But either way, I think we'll have to see.

The bigger message is, we are growing. And continuously, year after year, our presence is growing. As I mentioned, we would be physically present in almost 70 locations on our own. Excluding Kesaram? Excluding Kesaram locations, 72 locations. locations with Kiswara. So obviously, and the kind of brand pool and the respect that our product has in the marketplace, there's definitely a preference for Ultratech as compared to another cement. So that would be a message for lots of players. Sure, sir. Sure. My second question is more bookkeeping. This Nadwara scheme of amalgamation Does it show anything? Is it already impacted the numbers that you've published? And will it impact the standalone for us, which means standalone numbers will show better growth, if you could just talk about that? So in my research presentations, we've always shown India operations that was with Nadwara. And in the published results, the statutory publication that goes out, is a consolidated number this year with previous year numbers restated. So my volumes that we have reported are always with Nadwara Cement earlier also. No, that I'm aware. But I'm just asking that the standalone numbers that you have in your official publication, does that include Nadwara or that doesn't? Yes, yes, yes. Because the merger was effective 1st April 2013.

Okay. Understood, sir. Thank you. That's it from my side.

Thank you. The next question is from the line of Rashi Chopra from Citigroup. Please go ahead.

Thank you. On demand, you mentioned that the Indian industry grew at about 9% during the year. What is that number for the quarter, roughly?

7-8% or thereabouts. It should be around 7-8%. Okay.

And when you say that FY25 could moderate, though not a lot, so there you're expecting, again, the growth rate to moderate down from 9%?

For the full year, for the industry, yes, it should be maybe 7-9%, but it should be high single digits. Okay.

Okay. And on the pricing side, have you seen any changes in prices in April or did you slack since March?

There have been sparks of improvement. Across port or a few regions? Several markets. So we've seen in Maharashtra, so there have been positive movements only practically across all the markets except India. North, we have not seen so much. North and west. West is already a well-priced market. So we have seen improvements, marginal improvements in eastern corridor, southern corridor, central. Okay, central also, I will call it flat. So eastern, Maharashtra, south, we have seen improvements.

Okay. Okay. And just only coming back to the fuel costs, I think they're largely stabilized and obviously one can't predict them going forward. In the last quarter, you basically mentioned that we see a decline of about 6-7% of the cost of the next two quarters. The bulk of that has largely played out. So incrementally, what will come will be a function of efficiency gains and the green energy.

No, no, no. If you're referring to fuel costs, like in this quarter also we had fuel costs at $150 per ton, we have to reach a number of $130 when everything remaining same as of current times. This should be traveling to a number of $130 per ton given our mix that we consume. So that's the kind of improvement that you will definitely see in the next three quarters, three, four quarters, yeah.

And that 200 operating, the cost decline that you mentioned, or the cost of the next few years, the 200 rupees decline, that... I won't include the pricing.

No, no. I have narrated all the elements. Those are efficiency improvement. This is pure purchase price. It can go up also or go down. But as of now, indications are that, you know, most unpredictable. But as of now, the indications are that it will not go up.

Okay, thank you. This last trade volume for the quarter was how much? What percentage?

Trade volumes for the quarter? 55% is the mix. Thank you.

Thank you. All participants are requested to limit their questions to two per participant. If time permits, we will take follow-up questions. Our next question is from the line of Amit Murarka from Access Capital. Please go ahead.

Hi, good evening, Mr. Daga. Thanks for the opportunity. So first question is on debt. I see from your presentation that the debt in standalone books has gone down YOY, but in the console books is actually a marginally up and the net The difference basically between console standalone was 1100 crores in FY23, it's 2200 crores in FY24. So just wanted to understand like in the subsidiary books, why has the gross debt gone up so much?

So this was an interest play opportunity that we had where we could raise debt locally and give the money to our subsidiary UAE. which the opportunity was over, so we repaid that debt in India and they have borrowed it locally. So when we had given that money from India to the UAE, it was in the form of preference capital. That's why it would not appear as, you know, that's why the number would look different to you that their leverage has gone up. However, in their books, in the books of the UAE company, they always had that amount of money Earlier, it was a preference capital. Now, they have repaid that preference capital by replacing it with debt rate outside India. Clearly, there is an interest rate arbitrage and opportunity that we have benefited from.

Got it. Thanks. That's clear. And also, the second question would be on KSO Ramzo. I believe the final approval should come soon. So what would be the rebinding strategy over here? Like how would you shift to UltraTech branding in Kesaram? Will it be across markets or region-wise?

So we will come to that. There's plenty of time. Now the final approval, we will get the approval from Serbian Stock Exchange to file the scheme with NCLT Then there are shareholder meetings, creditors meetings on both sides of the company to have both sides of the parties to happen. They have their ROC and their NCLT out of Kolkata. We have Mumbai. So the meetings and orders have to be completed. It will take almost a year. No less, maybe. We will reach a conclusion only by March 25th. We'll look at it after that.

Sure. And if I could just seek a clarification. So if I understood it right, you said the fuel cost would decline, but mostly in Q4 FY25, right?

Okay, let me clarify. So we will see marginal improvements quarter after quarter. And why this is so? Because we had some high-price contracts, which will get completely used up by the end of December. After that, we don't have any high-priced contracts, so we will see much better performance January-March onwards, January-March 25 onwards.

Thank you very much. I'll come back here.

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

Hiya, good evening, and... Thank you for the chance. First corner is on the demand, which I am trying to understand. If you could share what would be the region-wide demand in fourth quarter and FY24, just some broad numbers. And on the presentation, we are seeing East struggling in infra and commercial. If you could just share your outlook on how do we see FY25 for this particular market?

Hello. Sorry, it was a mute. My bad. So, as I see the data, Western markets continue to thrive with a very high double-digit growth. All of the markets were hovering between 6-7% to 9% growth.

Sir, this is for fourth quarter or for the full year?

Fourth quarter. Okay, okay. So east also we were seeing mid-single digit kind of growth? Yes, yes. What our presentation reflects upon is two specific areas. Now this was again incidental because there was some transport strike taking place over there and as we have mentioned earlier also there have been fiscal challenges in the eastern states which are surfacing in low demand in the intra-markets. Okay, okay. And so how different would that be for FY24 as a whole, just to get some perspective? FY24 as a whole, we are looking at only central markets were, central markets were below 10%, all of the markets were high single digits. Okay, and east would have been... I'm sorry, hi, double digits. I'm drunk. Hello? Yeah, yeah, got that. And east would be the weakest, right, among these? No, no, relatively weak because west-south was strong and then east, central, north, I would pick them in the same bucket. Got it, got it. That's helpful.

So my second question, more from a top-down perspective on the market share aspiration that we have. I mean, being the leader, if we've been growing ahead of the market, theoretically it would have some bit of a constant deflationary impact on the prices. So is there a particular aspiration target over the next three, five years which we want to reach and maybe then maintain given our size and leadership?

No, Sumangal, we want to grow with the market. In case the Indian market is growing, we want to be present and participate in that. There is no market share number that we can define or we decide. It's growth as an opportunity that we are looking at.

Got it.

All right. Thank you. Thanks, Sumangal. Next question, please. Hello. Hello.

The next question is from the line of Ritesh Shah.

Yeah, you don't go away.

No, sir.

I was there. Hi, sir. Thanks for the opportunity. A couple of questions. First, what do we make on the status of JPE Super Dollar?

We understand it's under arbitration, but how should we look at the timelines over here? And the second question, again, on the status is pertaining to... Can I just complete the first question? So, it's under arbitration. The matter is subject. I don't want to comment on that. Next one.

Timelines?

I have no idea. Do you know how the court matters and judiciary matters get settled? There's no timeline. Okay. Second, again, on status, on Nathan Valley, basically, that we are planning in northeast. Yeah, so we have obtained the single window clearance. That is the license required. We have identified mines. We are doing due diligence on those mines so that we can fast track our growth in that market.

Sir, any timelines over here?

You will hear from us within this year, within this financial year.

Okay. And sir, at the industry level, can you... Next time.

Let's move on. Sure. Thank you.

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

Hi, good afternoon. Thank you for the opportunity. I have two questions. First question, sir, we are almost at the touching distance of 200 million capacity by FY27, and we will be a net cash company by end of this year. So what next for us? So what are we planning? How do we see the progress from here on?

So India is a growing market. And if there's an opportunity, we will keep growing. We are a very focused cement company. we will grow further. 200 is not the point where we will stop. If India requires more cement, we will give more cement.

And we will have the opportunity to grow.

Yes. Most certainly. We have mines, we have land, and in future years, I'm talking about 2030 and beyond, we will have more mines, more land, and opportunities of growth. It all remains to be seen how India is growing. If India becomes top three economies in the world, then obviously we will also be there to participate in that growth story.

Sure. Thank you. My second question is on petco consumption as proportion has consistently declined. This quarter also we have seen from 44% to 36%. Is it a conscious decision given the cost or is it more about availability?

It's more about availability because, you know, pet coke as a commodity globally is limited in supply as compared to coal. As in when a parcel of pet coke is available, we bid for it. We don't want to increase the prices for pet coke unnecessarily. So it's more about availability, I would say.

So just to follow up, the high cost that you mentioned, that is just for Petco or both for coal and Petco, the earlier contracts?

Coal, coal contracts.

Okay, thank you. That's all from my side.

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

Yeah, thank you for the opportunity. So two questions. First is, of course, on the cost front and 200 to 300 rupees per ton decline over three years is indeed a great number to be looked out for. And you also said that in that your CC ratio or the conversion ratio will play a major role.

So at your presentation, if I'm just taking a look, the CC ratio in FY14 was 1.3.

to where we have come off 1.4, which is a trigger of 1% like, you know, each year. So from that perspective, just wanted to understand that how are we seeing this CC ratio and then in that same context, what is the trade-off impact then on our overall realization as a result of this change or increase in CC ratio?

Very interesting point. So even at 1.4, we are at 1.44, because every penny matters. And from here onwards, we are seeing an increasing penetration of composite cement, which will help fast track that percentage growth that you were looking at. If you had done a CAGR, I didn't see that CAGR. But yeah, going forward, since our composite cement is increasing at a rapid pace,

Sorry, pardon my ignorance, but isn't it the clinker component in composite remains the same?

No, it's lower.

Okay, noted.

So cost of that cement will also be to our advantage. Yeah, so my question really was, of course, then if this can reduce, so that 200 to 300 rupees each year.

So can we take about 100 rupees each year and then in relation to the CC ratio, what do you see the impact or trade-off on realizations as a result of this change?

So realizations, Naveen, have nothing to do with our conversion ratio. It would be a pure demand-supply phenomena. And when I'm giving you a 300 rupee, you know, plan it's not quarter by quarter or year by year it's an end state I am not able to predict how much will you see each year fair point I appreciate that and it is really very encouraging just that one point composite cement would it sell lower than OPC sorry will it sell lower than OPC is the price point of composite cement lower than OPC today it might be lower yes

Fair point. So just one observation. Other operating income, and this is my second and last question. Other operating income sequentially has gone up by almost about 100 crores.

So is there anything related to new capacity commissioning? Is this the run break that we should see at roughly 350 crore or it's purely linked to volumes? No, it's a mix. Everything, you know, there is incentives that... kick in with new capacities, volume play, everything comes to the party.

Understood. Very helpful. Thank you, Sardar. I'll come back and talk to you.

Thanks, Naveen. Thank you. Our next question is from the line of Sardarit Jain from Ambit Capital. Please go ahead.

Hi, thank you. Sardar, a couple of questions. One on Kiswaram after the acquisition. If you look at your market share and asset footprint in that particular geography, Do you think there is potential for you to acquire another sizable asset within the same geography given the CTI constraints? That's the number one question.

Okay, so let's address the number one question. South is a very, very fragmented market. It is, again, for you to analyze which market, which geography, the material is flowing in and flowing out. I believe there will be more opportunities for consolidation for us also in South.

Okay. Thank you. Second question would be questions on capital allocation. As you can see, you're reaching almost net cash position. As you look at deployment on renewable energy, we can see one of the comparatives is actually taking all that capex on its own balance sheet, and the returns seem to be decent. Can we see, I know it's not the core cement business, but it's also vertically integrated in terms of the cost.

I have evaluated it, and the other players are also getting convinced that it is, from financial returns point of view, our method is generating higher returns.

Good captain, right?

Yeah, group capital scheme. Doesn't make sense to block capital and generate lower returns.

Okay. Just one quick question if I can squeeze on the employee cost per ton. Again, one of the other peers, we're seeing the kind of numbers we've never seen in the same industry of employee cost per ton of 150 rupees per ton. The current gap between Ultratech and that number, how is that number possible and is there possibility for other players in the industry to bridge that cost?

Oh, well, if I'm bad, then we'll definitely try and improve further. Thank you for your input.

Thank you so much.

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

My first question is on your M&A. So with the phase one, phase two and three round of expansion, does that restrict you from any region in terms of your M&A and possibility regarding CCI?

You said south is not. What about other regions?

So I think the markets are wide open. Markets are growing also. So I don't see a challenge. It has to be a profitable growth opportunity for us to get into the inorganic market. So there's no CCI issue which can like sort of pop up in any of the market for smaller units which may look worthwhile. We did a very small unit in East. So smaller assets obviously can easily get absorbed. We did one unit in Maharashtra just now. Western markets, we are, if you count Maras as part of West, we are very strong in the Western markets. South, I already mentioned, is, should we, because of the fragmentation that exists in South, we should be able to look at opportunities. So, our second question is on utilization.

We talked about 98% utilization in Q4, and industry has not taken hikes at that point. Utilization thefts How would you see utilizations in like maybe a net trail or Q1 because of the expected deceleration?

There are so many uncertainties right now in the current quarter. I will not be able to take any directional call on how this quarter will prevail. April has gone by. May still has elections happening. June will be... We'll have to wait and watch. I don't want to comment on that.

Lastly, on other expense, is it likely to remain stable queue-on-queue? Is it likely because of operating leverage? There's no 30% increase in volumes?

I would imagine. But there's nothing abnormal. In fact, in our presentation, we mentioned operating leverage is the benefit. So there's no abnormal increase or decrease.

Sure. Thank you. All the best.

Thank you. Thank you. The next question is from the line of Patanjali Srinivasan from Sundaram Mutual Fund.

So thank you for the opportunity. Firstly, I wanted to know in terms of regions, East is getting a huge amount of capacity additions in the next couple of years. So is there any specific reason why this is happening? Because it's kind of an oversupplied region based on my understanding.

You know, East is East remains to be the fastest growing market and there's a huge amount of IHB or a retail demand in the eastern corridor and that is why you see so much of capacity expansion taking place. There are temporary fiscal blips which are there which I'm sure post-elections will get evened out. Okay.

Okay. And just one more question, sir. In terms of realizations, given that it is a peak construction season, why do you think there was a big decline in terms of prices?

More so because the markets were open and nobody wanted to let go of opportunity to service their customers. So nobody was focusing on prices. And volumes would have led to an improvement in profitability. I think that is what we would also look at where our profits are, cash flows are good, profits are secured. That's what matters.

Sir, but our sensitivity to prices is much higher than that to volumes, right?

Yes, you're right. Yeah, so for every one percentage drop in prices... So, it's a standard phenomenon, a science in India, when all India capacity utilization, all India, not one player, two players, one region, all India, of course, all India capacity utilization is higher, then prices go up. And now when costs are softening, I would imagine that the players have not... thought about taking price increases because their profitability is being delivered. Thank you.

Thank you.

Thank you. The next question is from the line of Aman Agarwal from Equirio Securities. Please go.

Yes, sir. Thank you for the opportunity. I just have one question regarding the R&C business. We have seen good growth during this quarter. Just wanted to understand on a broader basis, how do you see as a segment panning out for India? See, what we understand right now, that for India, the conversion of cement to RMP is pretty lower than what Western countries typically see of around 50% plus. So just wanted to pick your views on this. How do you see this segment to grow? It has to grow and it has been growing. Still very small, you have rightly picked it up. And we see a huge potential growth for RMC as a play, and that is why we are also focused on it. When will we reach a 50% conversion? I don't have a science to tell you that, but it's on the right path. Okay, and just a related question on the possible impact on when converted can be converted sold to RNC route. Any possibility? RNC generate an incremental EBITDA. We do a transfer pricing. It's a good proposition. Understood. Thank you.

Thank you. The next question is from the line of Shravan Shah from Dollar Capital. Please go ahead.

Thank you and congratulations on good profitability.

Sir, most of the questions answered just on the green share. So, how do we see this current 25.7% green share by FR25, FR26? I know you have mentioned more than 60% by FR27, but just wanted by FR25 and FR26.

You know, the programs are under execution. I don't have an immediate number for exit March 25, but I'm confident that all these programs under execution will be completed by the time. And lots of the programs are along with our expansion that are happening from the current 140 million tons as we progress to 190 million tons or 200 million tons. So we will see improvement continue. So 60% is definitely happening.

Sorry for 50%.

6-0, 60% or 65% is definitely happening by the end of fiscal 27.

Okay. But from here on in terms of WHRS, how much more is planned to be added in next two years in terms of the absolute capacity?

About 150 megawatts of WHRS will get commissioned.

Okay. Okay.

Okay.

And in terms of the, when we mentioned the broader 32,400 crore kind of a capex over the next three years, so this year we have given a 9,500 crore kind of a capex. So similar 10,000, 11,000 crore capex will be there for 2026, 2027 also.

Yes.

Okay. Thank you and all the best, sir.

Thank you. The next question is from the line of Melind S. Ragenworth from Bank of Baroda Capital Markets Limited. Please go ahead.

Thank you for this opportunity, sir. Two questions. One is, if I look at the other expenditure, whether it is essentially compared to the volume group, that is remaining slightly, you know, people. So is there anything that we need to read into this? No, I think these are normal run rate expenses. If I look at an absolute quantum of money spent, you will see natural inflation. So absolute value of spend has slightly gone up. Which is normal inflation. There's no abnormal expenditure that we are seeing. My question was like, if I look at on a quarter-on-quarter basis, the volume growth is something like 30-odd percent, and other expenditures like 2.5% growth.

So I'm just trying to reconcile that.

I really don't have any particular answer. Mukesh, anything specific? 70% in volume base, remaining are based on fixed. There is nothing more to read into it. These are all routine expenses. Okay. And the second question is, when we speak of the blending or the mix, where we have 4.6 ratio, 1.4 over the past decade.

Incidentally, over the past decade, we have seen infrastructure pie going up.

Again, how do we read this? I mean, is it when the infrastructure pie is going up, our blending pie is going up?

So, anything that, how is, if you can just throw some light on this? So, you know, there is a gradual, first and foremost, when the infrastructure size, it's not that all of them consume 100% OPC, they do a blending themselves also. Part blending they do. Now, that transition is happening, they are leaving the blending to cement companies, so that will help improve the blending ratios.

Assuming that the intra-project is largely driven by the government, realizations then would be, how should we look at the realizations is what I was trying to drive the point.

Realizations are generally stable and consistent in the intra-markets. Okay. In this small thing, if you can see an incentive percent, if you can just read that number. Sorry, what? The incentive in the revenue, if you can just share that number, please. How much is the incentive? It's around 60 rupees a ton. Sorry? 60 rupees a ton. Okay. Thank you. Thank you.

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

I think he has dropped out. Hello, can you hear me? Yeah, can hear you.

Hi, sorry. Thank you for taking my question again. I'm sorry for my ignorance. I want to understand one basic thing. Given you will be broadly doubling your capacity from 100 million ton to 200 million ton in just eight, nine years, is there any major cost improvement on cars because of newer plants being added? I mean, are new plants being a lot more cost efficient? And is there a way we can quantify it?

There is a lot of technological innovation that the team is able to bring about, the expertise that the team has to turn around a project, the design, the calibration of equipment, everything plays in. As we have been growing, we have been learning from our previous experiences and improving further.

But there's no way we can quantify this, right? I mean, there would be improvement, we know, but... You know, the other point to look at... One second, one second.

The other point to look at, you should look at the capex cost in rupees per ton instead of dollars per ton. Then you will see that the reduction is gradual. And all those are efficiencies which the team... brings in, whether it's in negotiations or execution.

Yeah, makes sense. Okay. Yeah, this is very helpful. Thank you. Thank you.

Thank you. Ladies and gentlemen, we will take that as our last question for today. On behalf of Ultratech Cement, that concludes this conference. Thank you for joining us. You may now disconnect your lines.