Ultratech Cement S/Gdr

Ladies and gentlemen, good day and welcome to the Ultratech Cement Limited Q3 FY25 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 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. Should you need 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, sir.

Good afternoon. and welcome all of you to our earnings call for Q3 FI25. First and foremost, wishing you all a very successful and a happy 2025. We often talk about a lull before the storm. Most part of the calendar 24 was a lull for cement industry for multiple reasons known to all of you, which we have been discussing from time to time. The lull ended somewhere in December on a positive note. The storm is a positive storm, and we have benefited from a continuous increase in demand, which has also boosted the sentiments on cement prices. We have seen a movement in realizations. Q3 average 1.4%. This was QOQ. North and West saw the best performance in terms of price improvements, which was more than 3%. January, we have further seen improvement in prices in Central and West. North remains the star performer, as I said, increasing prices and profitability to the highest. And talking about stars, well, this was an offer on the table which we chose to invest into. I'm talking about our investment in Star Cement. As you know, it's only a non-controlling financial investment. We have been trying to identify opportunities to deepen our presence in the Northeast markets. Hopefully, this investment will help us understand the markets better and what are the opportunities in those markets for us to grow. When we had done the transaction, there were lots of different numbers floating in the market. I want to clarify we have purchased 8.42% in the company at a total investment of 776 crores. Let me now touch upon India Cements. Open offer was subscribed 110% concluded on 21st of Jan at a price of 390 per share. We will now hold about 81.49% equity in the company and there are regulatory processes to be followed to bring it down to 75%, which we will be doing in as per timelines allowed. This will result into our average cost of equity at 359 per share. Net debt in the company as at 31st December 24 is 877 crores, 877 crores. Thus, the EV of the company at our acquisition cost works out to about 12,075 crores for a capacity of 14.45 million tons. I leave it to your calculators and your exchange rate interpretations to derive the dollar per ton cost of this acquisition, which is certainly not $120. It's way below, but it's below $100 per ton. Further added to that, the debt will get reduced with cash generation from non-core assets, which the company has. We have started engaging with our team at ICL and studying the opportunities that lie before us. The initial review gives us an opportunity of de-bottlenecking some of the capacities towards the plants. There is a de-bottlenecking opportunity as well as Some brownfield expansion opportunities exist in another set of two or three plants, which will help us in our growth journey in years to come. Our focus is to turn around the performance of ITL in less than 12 months, starting January 25. There will be some return-based CapEx plants which are being worked upon. As you know, we entered the company only on 25th of December and have not even, not spent even a month studying their operations. Allow us one quarter to revert with our full plans. We are awaiting the last of the approvals for transfer of mines in Telangana and Karnataka and we are tracking every step. There are multiple steps within the transfer formalities We are tracking all these steps and we expect to consolidate the assets of KSORAM within this financial year. Organic Apex. All our project sites are progressing well. The target closing this year at 185 million tons of capacity. This includes the two acquisitions of KSORAM as well as India Cement. Let's talk about demand. Demand seems to be opening up, which is good for the industry. We are seeing it across all sectors. Pent-up IHB demand, infra-growth, urban housing growth. Urban housing growth is maturing or slightly slow, but still continues to consume cement. Rural markets are, of course, driven by the housing demand and continue to grow strong. A point worth mentioning Mentioning here is that rural demand should be positive with the good monsoons that we have seen, good crops, and good harvest, which will generate good cash flows for the rural markets. Capix programs have been gaining momentum from the end of Q3, but it is still a long way to go. There are stimulus for mass housing programs which are coming back. Cement demand clocked an improvement in December 24 after being subdued in October and November. And it's likely to further increase as we speak in the current quarter, quarter four FI25, with a pickup in government capex and demand overall. General government capex which dropped 20% After this, YY growth in 24 was down about 12% in April to November 24. State government CapExes were also down. CapExes by PSUs were also not growing very strong. We believe that the government CapEx will start improving and consequently, cement demand shall start improving from January 25 onwards. Whilst April to November was a slow period for cement demand in India. I believe that the demand momentum is picking up and it will remain strong in the years to come. And Indian cement industry is gearing up to meet the surge in demand in the coming years. At Alta Tech, work is in full swing for adding additional 10 to 15 million tons of organic capacity in the year 2026. This will take us to a 211, 212 million tons of capacity at the end of our expansion program. Talking about our efficiency improvement programs, which are also on course, Blinker conversion ratio of 1.45 for this quarter as compared to 1.44 in Q4 last year. Lead distance is at 377 kilometers this quarter as compared to 400 kilometers when we started this journey on efficiency improvement program. WHRS was at 324 megawatts up from 278 megawatts at the end of Q4 24. As far as WHRS is concerned, we had spelt out our targets to reach 450 megawatts for Ultratech capacities. This target will go up to 511 megawatts of capacity, taking into account the additional WHRS expansion, which will be done at India Cements and Quesoda. 511 megawatts of WHRS, which will be completed by FY27, on our 211 million tons of capacity at that point in time, will account for 24% of our power requirement. Similarly, renewable energy is up at 752 megawatt at the end of this quarter from 612 megawatts. And as for targets, we had given out a target of 1.8 gigawatts by the end of FY27. Taking into account the requirements and opportunities thrown up by ISM and KSORAM, this target is now standing at upwards of 2 gigawatts, about 2.1 gigawatts is what we are looking at to complete And this will support about 30% of our power requirements on the 211 million metric tons of capacity. Lastly, about fuel. At our size of operations, we don't have too much of a choice but to use coal also as a fuel given the overall global supply situation for Petco. However, we have been continuously increasing our Petco consumption with the fuel mix reaching about 58% of petro this quarter. Our fuel costs have come down accordingly to about 1.76 Kcal from 1.84 per Kcal in last quarter. Based on current spot price, we expect our fuel costs to be around 1.7 Kcal in the near future. And to conclude, We achieved an EBITDA permit return of 964. This quarter, we jumped more than 30% over Q2. And we expect further improvements going forward. Thank you. 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 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question from the line of Sumangal Nivatia from Kotak Securities. Please go ahead.