Ultratech Cement S/Gdr

Ladies and gentlemen, good day and welcome to the Ultratech Cements Limited Q4F826 earnings conference call. As a reminder, all participant lines will remain 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 this conference call, please signal the operator by pressing star, then zero on your touchtone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Urtul Garga, Chief Financial Officer, for opening remarks. Thank you, and over to you, sir.

Thank you. Good evening to everybody. I want to begin not with numbers, but with where we stand as a company, because fiscal 26, in my view, is a year that will be looked back on as a genuinely significant in AltaDeck stories. And fiscal 27 started with an achievement of major milestones. Altotec crossed 200 million tons of cement production capacity in India. A first for any company in a single country outside of China. Let me put this in context. We reached 100 million tons in 2019, added another 50 million tons in five years by 2024. And we completed the journey from 150 to 200 million tons in less than two years. This is a feat even more remarkable since we are a full year ahead of our targets as what we had set for ourselves. Let's be clear on what the number means. It's not simply a headline. It's an expression of a strategy to build scale that compounds in cost efficiency, in market reach, in raw material security and in sustainability. Every ton of capacity we add reinforces every ton that came before it. Let's look at our position globally. Outside of China, Ultratec is today the largest cement company in the world by sales volume. And we are the only cement company anywhere in the world to have over 100 million tons of production capacity within a single country. We are 200 million tons. These are not rankings we have stumbled into. These are the results of a very deliberate strategy. Disciplined organic growth, timely acquisitions at the right price, and a relentless focus on execution. From somewhere 65 million tons in 2016 to 200 million tons today, we have more than trebled our capacity in a decade. our next horizon is already set. We have committed to add a further 37 million tons, which will take us over 242.5 million tons in a phased manner by fiscal 28. Now, I want to speak to something that is very much on everybody's minds, the conflict in West Asia and what it means for us. Whilst I have given an indicative chart in our presentation on where the impact of these rising prices could be. Let's be straightforward. It's a real headwind on fuel costs, packing bags, and freight, on certain import-dependent supply chain, on near-term sentiment in some demand segments, and the way all oil prices are, we could see an increase in domestic prices of petrol and diesel. The government's monthly economic review for March 2016 also acknowledged that the outlook has become slightly uncertain. And yet, India's structural growth story is entirely intact. Government's case is exploring. Infrastructure execution continues. Housing demand is robust. IMF has also raised the growth forecast for the country. Just to rattle some numbers out for you, India... did approximately 10,660 kilometers of highways in fiscal 25, and has maintained the pace in 26. The PMA housing program is driving cement consumption at scale. That tells us something important about the underlying demand base. On the construction cost environment, cement prices have been largely stable in the last financial year with movement of maybe 0 to 5%. Steel prices have seen volatility. West Asia situation is near-term cost moderator, not a structural demand reversal. And we believe Ultratech with our domestic strength, our 1.8 gigawatt green energy platform, our scale-driven cost efficiency is better positioned, much better positioned to manage through this environment as well. Fiscal 26 was a year of extraordinary execution. We crossed 200 million tons. We completed van migration for both India Cement and KSRM ahead of schedule. We continued building our green energy capacity and we delivered volume growth and improved profitability. We said we would do things, these things, we have done them and we enter Fiscal 27 in a stronger strategic position than at any point in our history. Let me look at the Q4 performance and the full year performance. And we'll also share some insights on the integration stories and our cost efficiency program. Consolidated sales volumes, as you have already seen, has crossed a rocking 44 million tons this quarter. Most important aspect about it to note is that Ultratech as a brand year on year has grown 19%. Nobody can take away that thunder from us. Realizations improved during the quarter. Raised payment pricing sent in about 2.5% in most logger fees supported by an improving trade mix and premiumization. A blended payment share, premium portfolio contribution, Both moved higher, which is a conscious and a deliberate strategy going forward. EBITDA per ton, excluding acquired assets, is at 1296 per ton for the quarter. For the context, this metric was 1225 in Q4-25. The trajectory has continued. On an aggregate basis, we have reported 1253 rupees per ton in Q4-26. This, if I were to split between India and overseas, thanks to our UAE operation doing very well, they have contributed substantially. But India has been no less. Remember, the India capacity is almost 196 million tons during this year. If I were to remove the aberrations of West Asia crisis, we have achieved a productive pattern of very close to Rs. 1240 per ton. What am I knocking out from here? The last month increase in cost of bags and impact of exchange loss, the highly volatile and the frantic devaluation of rupee that happened in the last month. So, I believe we have done very well on EBITDA platform as well. A renewable energy platform has been growing from strength to strength. Today, we are almost at 43% of our power needs being met from green sources. We are committed to reach about 85% of our power requirements from green energy by the end of fiscal 2030, and we are very confident of reaching that position. On the fuel side, we are actively managing our mix, optimizing between petcoke coal, alternative fuels, and increasing the share of domestic coal wherever possible. On the logistics strand, our lead distance has reduced to 367 kilometers. Our ever-expanding bulk terminal network, including the new Dachnau facility and other facilities are helping us reach the customer faster, thus helping us reduce our lead distance and our overall costs. Let me spend a few minutes on the two acquired businesses. The progress is, I believe, fantastic. RAN migration. 100% RAN migration has been completed at the end of March 26. In Second quarter fiscal 26, we were at 31% of ICL volumes and 55% of case around volumes were carrying out at a grand. December 25, they had moved to 58 and 59%. We have completed at the exit of March 26, 100% grand conversion. The EBITDA trajectory. India Cement Tabitha of Rs. 497 per ton in Q4-26, up from Rs. 333 in Q2 and Rs. 305 in Q3. Sequential improvement every quarter since acquisition. This quarter, the company declared a PAT of Rs. 60 crores for the quarter, which has been after a very long time. And this Rs. 497 at Vida Patan, please understand how we read it. We, as you know, under the related party transactions, we had put in place a tolling arrangement. ICL or India Cement manufactures and sells the Ultratech brand, but does not carry any direct marketing and distribution costs. Those sit with us at the consolidated level. At Ultratech, we charge a markup per bag on ICL volumes, which offset that element on a net basis. So, India's underlying operational progress towards Ultratech system is much higher than 497 per ton. And the price improvement, selling price improvement that happened in the southern markets will give it a further boost. The investment phase is now underway. We had committed 1592 crores for India Cements for efficiency improvement plus another 400 crores for CAPEX on capacity expansion. This definitely is going to take us over 1000 rupees per ton as committed by the end of fiscal 28. We are spending 400 to 500 crores for case around. Cement assets, they are already operating at thousand fees EBITDA per ton more or less in line with the other cement operations in South. These two assets today represent about 13% of our consolidated capacity. They are moving from integration drag to earnings contributor. As the cost improvement matrix matures, they will be a meaningful and growing source of group level EBITDA accretion. Let me now look at how we see fiscal 27 and beyond. We expect a sustainable volume growth of 7-8% per annum. The structural drivers are firmly in place. India's urbanization story, the government's infrastructure commitment, you would have read About Mumbai city itself spending about $50 billion in improvement of infrastructure. The female housing targets, rising rural demand, none of these have been diluted by the West Asia crisis. These are very strong structural forces and Alta Tech is better positioned than anybody else to capture that demand in the long term. The near-term environment has its complexity. Our lead distance has reduced to 367 kilometers. Our ever-expanding bulk terminal network, including the new DuckNow facility and other facilities, are helping us reach the customer faster, thus helping us reduce our lead distance and our overall costs. Let me spend a few minutes on the two acquired businesses, because the progress is... I believe fantastic. Brand migration, 100% brand migration has been completed at the end of March 26. In second quarter fiscal 26, we were at 31% of ICL volumes and 55% of KSO RAM volumes were carrying AlterTech brand. December 25, they had moved to 58 and 59%. We have completed at the exit of March 26, 100% brand conversion. The EBITDA trajectory. India Cements EBITDA of 497 rupees per ton in Q4 26, up from 333 rupees in Q2 and 305 in Q3. Sequential improvement every quarter since acquisition. This quarter, the company declared a PAT of 60 crores for the quarter, which has been after a very long time. And this 497 rupees, please understand how we read it. We, as you know, under the related party transactions, we had put in place a tolling arrangement ICL or India Cement manufactures and sells the Ultratech brand, but does not carry any direct marketing and distribution costs. Those sit with us at the consolidated level. At Ultratech, we charge a markup per bag on ICL volumes, which offset that element on a net basis. So, India Cement's underlying operational progress towards Ultratech system is much higher than 497 per ton. And the price improvement, selling price improvement that happened in the southern markets will give it a further boost. The investment phase is now underway. We had committed 1592 crores for India Cements for efficiency improvement plus another 400 crores for CAPEX on capacity expansion. This definitely is going to take us over thousand rupees per ton as committed by the end of fiscal 28. We are spending 400 to 500 crores for KSORAM cement assets. They are already operating at thousand rupees EBITDA per ton more or less in line with the other cement operations in south. These two assets today represent about 13% of our consolidated capacity. They are moving from integration drag to earnings contributor. As the cost improvement CAPEX matures, they will be a meaningful and growing source of group level EBITDA accretion. Let me now look at how we see fiscal 27 and beyond. We expect a sustainable volume growth of 7% to 8% per annum. The structural drivers are firmly in place. India's urbanization story, the government's infrastructure commitment. You would have read about Mumbai city itself spending about $60 billion in improvement of infrastructure. The PMA housing targets, rising rural demand, none of these have been diluted by the West Asia crisis. These are very strong structural forces and Altertech is better positioned than anybody else to capture that demand in the long term. The near-term environment has its complexities. Nobody knows what will happen tomorrow, what will be the new comment that gets made which could move the markets. We will wait and watch. On the integration side, we are through the hard work. Both India Cement and Kisoram are fully migrated to the alternate brand. Cost improvements are underway. And fiscal 27 P&L will start reflecting the benefits of this investment. I should definitely mention about the dividend the board has discussed, debated, and proposed. Our balance sheet remains robust with a net debt EBITDA of 0.94x at a consolidated level and 0.92x at Ultratech India level. This gives us financial flexibility to continue investing in growth without compromising on returns to shareholders. We have already started charting out our growth story beyond 240 million tons and will come back to you next year. The Board has recommended a dividend of 240 rupees a share for fiscal 26. This dividend has been stress-tested against retained earnings remaining adequate for all planned investments and commitments. Credit metrics and debt covenants are unaffected by the proposed distribution. We'll maintain our leverage below 1X year after year after meeting our growth CAPEX. And our growth CAPEX requirement is not shrinking. We see a plan of investing around 8,000 to 10,000 crores every year for the foreseeable future. Future CAPEX pipeline remains fully funded and the growth story is intact. It's a cumulative outcome of disciplined capital allocation, operational excellence, and consistent strategic execution over many years. We know it, you know it, our operating cash flows are growing and our board has already taken a stance of improving the returns to shareholders. You would have seen our dividends grow from 10% of profits in 2020 to 37% of profits last year. And today we are where we are. Dividend is not simply a financial transaction. It is a communication of our confidence and commitment to our shareholders and investors. It says, we are confident in our earnings quality, in our forward outlook, and in our ability to generate and sustain value. We are not keeping cash on balance sheet out of uncertainty. We are sharing it because we can and because we have planned carefully enough to do so without any constraint. I want to close with something very simple. Ultratech has made commitments to investors on capacity, on integration, on brand transition, on cost efficiency, on sustainability, and on returns to shareholders. Year after year, we have delivered on these commitments, F526 being the top-notch performer. We said we would reach 200 million times ahead of schedule. We did. We said we would complete brand transition for ICL and KSRM. We did, and a quarter early. That consistency of delivery, ladies and gentlemen, is what defines us as a tech. And it is what will continue to define us in the decade ahead. Thank you, and we are now ready for your questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Rahul Gupta from Morgan Stanley. Please go ahead.

Hi, thank you for taking my questions. First of all, congratulations on hitting 200 million capacity. domestic capacity and a very good set of numbers. I have three questions. First, just continuing on the capital allocation point that you made, Atul sir, thanks for the clarity on that. Just to be clear on this, is it fair to say that given balance sheet strength and you funding your CAPEX through internal accruals, we may see payout ratio staying higher for the foreseeable future?

I think so, but it will depend on the board and company's performance. If we perform, you know, if the cement markets do well, I think it should be possible.

Got it, got it. That's very helpful.

The most important point, Rahul, I would want to make is And I think I already said it, but I want to repeat, next few years, we are in 26 till 2031, I will see 8,000, 10,000 crores of CAPEX happening from our balance sheet every year. And as the operating cash flows grow because of our existing size, existing capacities, delivering more and more, the size of operating cash flows keeps increasing making it very easy for the company to reward its shareholders.

That's exactly the point. Very, very helpful. My second question is on realization. You to some extent have clarified how realizations have been better this quarter. Your share of trade has improved, direct sales have improved and brand transition of acquired assets also ramped up fully during the quarter. So am I missing something over here or is it the brand transition completion has helped in giving you the edge in terms of realization during the quarter?

Significantly, because if I were to look at, let's say, India Cements volumes for the quarter of 3.12 million tons, non-Alkatech volume was 0.39 million tons only. So, we have had and everybody knows that, you know, AltaTech enjoys a premium positioning with brand transition that has definitely helped. Jamal, do you want to add to that?

Yeah. Very good afternoon. And I would add further what Atul said. Fundamentally, I think it is working on all engines. There are a number of moving parts in the cement actually. One, yes, of course, the grant transition is clarified, which is rightly so. But there are so many other, at least four, five, six critical moving parts, which also helps to improve the efficiency and, at the end of the day, resultant into the improved cost structure of the higher properties.

Got it. And my final question is first of all thank you so much for sharing data on slide six. Now my question is that in one of the slides you have mentioned that other OPEX got some impact of the West Asia crisis. Can you help us quantify what that would be and how should we see June quarter assuming the current situation continues?

So firstly, on slide six, I've just given an indication which what could be a potential impact, and this cannot be analyzed for the quarter. So please don't panic too much. And yes, in the last quarter, the immediate impact was because everybody has inventories of fuel, so nobody would have really felt the heat of rising prices of fuel, but bags became a crisis in the month of March, and everybody got impacted. The cost went through the roof, and our incremental cost on bags was approximately 90 crores, which is reflected in other costs for the quarter, on account of bags costs going up. Hello?

Any color on how should we look at power and fuel cost for the June quarter?

I don't think there will be too much of an issue in the June quarter and I will urge you, Rahul, to fly down to the White House and do something about it. I don't think so. It will be too much of a pain. Prices are going up because the reality is selling prices have also been increased to take the, to cushion the impact of rising input costs. Another important, you know, one-off, which we are not even, you know, talking about, but the fact is the way rupee devaluated, I have $950, $950 million of foreign currency borrowings, right? $950 million of foreign currency borrowings fully hedged but when you have to do a mark to market you have to take the impact of that currency into accounts. It hits your EBITDA. 94.85 was the dollar rupee to dollar. 31st March it corrected it strengthened by almost 1.8 sort of It corrected on the 2nd of April 1.8, but we have to account for the dollar borings at 94.85. So, no, still, it's a debit to the non-cash debit to the P&L, but so be it.

Got it. Well understood. Thank you so much and wish you all the best, sir.

Thanks, Lal.

Thank you. Ladies and gentlemen, in the interest of time and fairness to others, we request you to restrict to two questions per participant and rejoin the question queue. We take the next question from the line of Phulkit Patni from Goldman Sachs. Please go ahead.

Sir, thank you for taking my questions and commendable results. Very good quarter. So my first question is, you spoke about brand conversion having completed it in March. Could you highlight between March end and now how much has been the impact of this on India Cements and Kesaram?

So, you know, Kesaram, if I look at January-March quarter, it was already operating at 1,000 plus EBITDA per ton. And everything else remaining the same, India Cements will improve further. Because, again, I called out, out of 3.12 million tons, only 0.39 million tons was non-AltaTech brand. 2.73 million tons already rebranded. So, everything else remaining the same, the impact will be felt on this, you know, less than half a million tons of volume in Q4. Having said that, price improvements and the real efficiency and integration benefits will start flowing now. To better explain, Phulkit, now it will be one product which is leaving from all the nine factories of India Cement. As compared to earlier days, there were multiple brands going on, not just two, but there were more than two brands going on. So the real efficiency which will be visible in logistics now, seeing this operation will be visible now, my performance will go up further in terms of earnings potential from India.

This is very clear. So secondly, I'm just following up on the question from the previous participant on the slide six where you speak about the impact of West Asia conflict. And while clearly, you know, longer term you've been able to manage costs really well, et cetera, I'm just wanting to understand, these costs are quite meaningful because you mentioned in one of your remarks saying that, you know, these are manageable. I just want to understand, like, based on just rough math, this looks to be fairly high in terms of its impact. So any mitigating measures that you can highlight which gives you confidence that you'll be able to manage through this?

Yeah, there are several measures and for the sake of confidentiality, I might not be able to reveal trade secrets. But, you know, diversifying my sources of procurement, identifying your opportunities to deal with the situation, doing long-term contracts for fuel, which are going to be beneficial to us now. Last two years, our long-term contracts were going against our decisions, were unfavorable. These will become favorable for us, and nobody has them. So Altotec will be one step ahead. Again, bags may we have... nearly 150-odd suppliers across the country. And when there is a volume advantage for a supplier, obviously their inclination to service a high-volume customer is much higher. Diesel impact, nobody knows. We are waiting. It might surface. It haunts next month. We'll have to wait and watch.

Fair point, sir, fair point. Maybe can I slip in one more question if you allow? Yeah, yeah, go ahead, go ahead. Okay, sir, this is, you've mentioned the capex you've incurred on your cable and wire business, and I know the numbers are small, but just to get an understanding, 800 crore out of 1800 crore has been spent. Does it mean we are on track for an end-of-the-year launch?

Yes, yes, and since you cover this sector in so much detail, You know what the implication is. I don't have to spend so much money.

Yeah.

Sure. It speaks for itself. And my guess is we should be on track, on time. We had committed Q3. In the first month of Q3, we might launch instead of waiting for December.

Super. Thank you, and great results as always. Thank you. Thank you.

Thank you. We take the next question from the line of Pratik Kumar from Jefferies. Please go ahead.

Yeah, I'm Dini, sir, and congrats for getting to this. My first question is, can you discuss sequential improvement in your performance stepping out into national operations, which was also done well during the quarter?

Sequential as in quarter to quarter? What do you mean?

Yeah, quarter to quarter, like how much is the, I mean, it seems like international operations have also contributed to sequential improvement of overall.

Yeah, so, you know what, but there are only 5 million tons of capacity. One thing is that before the war broke out, they were operating at 100% capacity utilization. There was a drop in capacity utilization, which went down to about 80%. Now with the permanent peace program being there, capacity utilization has started going up. Prices have started going up. So they're doing well for themselves, but the bigger thing, Prateek, is that it's only 5 million tons. I have had 1,250 rupee of EBITDA per ton in India on a much higher volume. Of course, I'm knocking off the impact of exchange rate and cost of bags, which we had to face. UAE operations are all bulk volume, so there's no bag cost over there. Without, okay, accounting for all the expenses in India, we are still at 1200 rupees per ton out of the 1253 average. per ton. UAE, I believe they are doing well now. Volumes are picking up. Prices have not fallen. And knowing the UAE economy, I think they will be the first one to turn the leaf, come up with some new programs for reviving the economy.

Obviously, the UAE operations benefit from the construction demand wherever

Yeah, yeah. And sequentially, UAE had a EBITDA of 267 crores in Q3 and 278 crores in Q4. So it's a stable journey.

Oh, so it's stable Q1Q, EBITDA of UAE operations? Yeah. Okay. The question is on, I mean, can you speak to a pending efficiency improvement program which you have given 185 to PGS?

Actually, I forgot to talk about it. I should have come to my hand on the table and told you. I promised and we have delivered. So we are at almost 185 rupees per stand on nominal basis. We have completed. And all these programs which are there, which will take us beyond 300, whilst we have committed 300, because I'm keeping a let's say an emergency or a buffer in my pocket, but I think we will deliver higher than 300 bucks. Is this what you're looking at? So, yeah, we are looking at a number higher than 300 bucks, but on fiscal 27 also we should cross significantly higher. Without giving a number up front, I have a paper in front of me, but yes, we will deliver higher than $300 by fiscal 28. I've highlighted all the parameters and how they are getting quantified and measured. I don't know what else to add further.

Sure, thank you. These are my questions.

All right. Thanks, Sadiq.

Thank you. We take the next question from the line of Amit Kumar Muraka from Access Capital. Please go ahead.

Yeah, thanks for the opportunity and congratulations on a great result. Just on the couple of data points, I just wanted to understand better. So in the presentation, you mentioned that your other brand sales volume was 7.4 million times in FY26. So is it fair to assume this number will be close to zero in 20 years given that full transition has happened?

Yeah, yeah, yeah.

No, 7.34 in 26 and 0.52 in Q4. Okay, 0.52 may say, 0.39 was India Cement and Balance was Kesaram Old Brand. So this is all gone now. Next quarter you won't see it. Yes, almost zero.

Great, great. And also on the trade-non-trade mix, it seems to be now 65-35, which I think is a bit higher than 70-30 earlier. So, again, like on this mix particularly, would it be because in the presentation, I'll see that the industrial infrastructure was a bit muted in the quarter, but still this number is a bit elevated. So, I want you to understand, like, is this going to be now a sustainable mix, or would you like to kind of take it higher again?

I have seen it fluctuating between 65%, 67%, 68%. Yeah, this has been the narrative or this has been the broad mix. And what you saw in infra two red marks that we have given is again a temporary last quarter because things got over in one, let's say, Gujarat when the high-speed rail project has parts of it, the work is coming to an end. That's why you saw a red mark there. But otherwise, I'm sure the government, the way everybody knows that infrastructure is the foundation for growth, it will keep on happening. West, I think I'll have to create a darker green color for infrastructure going forward because the way Mumbai, and I'm quoting the newspapers, Yesterday or day before, one day earlier, when the newspapers gave a summary of how Mumbai is shaping up, 2035 will be totally new phase of Mumbai, $60 billion being spent here. So things are happening in the country.

Understood. And just one last question, if I may. Also on the clinch conversion ratio, it's now 1.48x. How much more can it go to, let's say, in the next one to two years?

We have targeted to reach about 1.54x. That roadmap is already there. And let's see how things shape up beyond that.

Got it. Thanks. That's all from me, and best of luck.

Thank you. Thank you. We take the next question from the line of Indrajit Agarwal from CLSA. Please go ahead.

Hi, Mr. Daga. Thank you for the opportunity and great set of numbers as always. Two questions. In the last few weeks of March or early weeks of April, have you seen any concerns on availability because of the conflict, be it bags or petco? No.

No problems. Our dispatchers have not suffered at any location in the country bag availability as not been a crisis. It has become expensive, but it is not a crisis.

Second, barring cement, all other building materials have become a lot more expensive, as you mentioned steel, if you look at PVC or other commodities as well. Is it causing a demand concern for the overall IHB segment?

Too early to say that. We have taken increases for cement Industry has taken price increases for cement in the month of April. And by and large, we don't see a slowdown in demand. Everything can be explained. People will have an explanation, too much of heat, because of which there's a slowdown. But election, yeah, Bengal and Tamil Nadu elections resulted in a slowdown just before the last 15 days you see a slowdown. But generally, I think The undercurrent remains strong.

And lastly, if I may, for your best estimate, what would have been the industry growth for March quarter?

Six to seven percent is what my learned team over here tells me. Thank you.

Thank you. Thank you. We take the next question from the line of Jashanteet Singh Achadda from Nomura.

Please go ahead. Hello. Good morning, sir, and thank you for the opportunity, and congratulations on a very good set of numbers. So my first question is regarding India Cement. As you have highlighted, that 100% brand integration is done.

And, you know, you also highlighted that that will be a small portion of volume growth under India Cement brand.

I just wanted to understand that the data of incremental EBITDA per ton for reaching 1,000 EBITDA per ton, how much of that will come from the cost-efficiency measures that you are undertaking and, you know, realization improvement? So if you can give a sense of, you know, because I believe most of your human bodies are already selling under an ultra-tech brand. So how much more potential is there for realization improvement and how much cost-efficiency measures will be there? That's my question. Yes, . So first and foremost, cost improvement programs, and again, I'll go back to my earlier commentaries. January-March 28, you will see all the efforts on CAPEX converting into efficiency improvement. We are still seeing 200 per ton of efficiency improvement, which will come into the kitty of India Cements. Now, it all depends. Second point, and I'll come to one more aspect that you raised. How do we look at the earnings from the volume of India Cements? Mind you, there is 200 rupees of EBITDA per ton on India Cements volume, which is sitting in Alphabet Books. The 497 for the quarter and because of the During the quarter, gradually the transition was done. It's not exactly 200, but about 176. Total is 670, okay. So we have reached a number of 670 per ton on India cement. Now if price increases along with efficiencies, new capacity addition, operating leverage, everything will take us beyond 1,000 rupees per ton.

Understood, sir. Understood.

And I'll ask my second question.

It's a two-part question. So first is how you are looking at, you know, rural demand. How is that rate has been in the, you know, March quarter and in April also how you are looking at rural demand.

And secondly, I know in this, I understand that at the scale at which it operates, you know, you will have multiple measures to mitigate this cost increase. But let's say without those measures, what sort of realization improvement will be required to maintain the margins? These are my observations. So you have asked three or four questions and I'll restrict you to two questions. So the last question I will eliminate because that's a very difficult question and difficult to quantify. As far as rural demand is concerned, We have operated at 90% capacity utilization across our network. Some plants would have operated at 95% and 100% also, and averages all across the country we are operating at more than 80%. If you marry this point to the fact that our trade mix has not diluted, we are 66, 67, hovering around those numbers only, which means my rural demand has continued to stay steady. I hope that answers your question. And, you know, too early to talk about the important aspect, you know, cash flows in rural markets improve with good crops, which helps the rural demand. And too early to say now for the quarter how things will pan out in the remaining three months, remaining two months, we will see. As for your other point you mentioned, it's a moving target, you know, costs. Let's say bags from 9 rupees to 15 rupees a bag, that's a 6 rupee delta which has already happened. So that much price increase is required. Similarly, fuel. Fuel is a very difficult one. At least this quarter, I don't expect my fuel cost to go haywire. We were at 1.81 or... 1.77. Sorry, 1.77 per kcal. Max, it might go to 1.8. So that's the only... And I'm just throwing this number off the cuff. I don't remember exactly where we will land at. The biggest impact which was there in our EBITDA profile was exchange. $94.85 and today it's 94, sorry? 94.2, it had come to below 93 also. Quarter end reporting what is required remains to be seen. So, price increases that have already happened will, in my view, sustain the profitability.

Understood, sir. I know you don't like answering, you know, prize-high questions, so I was trying to hide it. But thank you so much. I'll turn that to you.

Yeah, I was a slightly smart. Thanks. Thank you.

Thank you. Ladies and gentlemen, a reminder, please restrict to two questions per participant and rejoin the question queue. We take the next question from the line of Ritesh Shah from Investec. Please go ahead.

Hi, sir. Congrats for a good set of numbers. I have four questions, if you allow. Okay.

Sir, two A and two B. One is India Cement. You're doing the right things.

When do we see the day when we actually merge it? I understand there are a few legal cases which are there, but any timelines over here? Second, not so related, RBC, it's something which the group has pursued. Any assurance from you that Altratex balance sheet won't be touched or it's something which is ring-fenced? I'll just wait over here. If you allow, then I'll go for that. So, the second question, I think our chairman himself had said Altratex balance sheet is ring-fenced long ago when... aspersions were made about Ultratech supporting idea. I think those are the days I'm going back. Not a penny has moved from Ultratech balance sheet for any other purposes. So we remain committed and again, as I said, unless you missed the point, I have 10,000 crores of CAPEX happening every year at least for four or five years going forward. That's about 50,000 crores of incremental KPEX. So my operating cash flows is meant for meeting my KPEX requirements and for my shareholders. So there are those complicated legal issues which we have inherited. We, as I mentioned, we don't want to take any risks with Ultratech, the main company, and our main board. Once we are able to, and we are trying our level best to get those cases closed because they are donkey's years old cases and there's been no movement, nothing. Once we are convinced that there is no risk to us, we could look at the next phase of integration. Sure. Sir, I'll just try my luck. Sir, third question, RMC, we have done very well. What's the end goal over here? I think the number of plants, revenue growth, revenue growth is more than volume growth. What is correct that we are doing over here? And eventually in plants to monetize this particular business, that's on RMC. Second, sir, ESG, clinker factor you indicated our target is 1.54X. I just wanted to get a sense by what year is this? And how do you see the industry's ratio equaling to 1.54x going forward? I understand we are OPC heavy and we have historically maintained that whatever we do, we will have clinker backing at 70%. Is it something which will change going forward or we continue to play on the same hypothesis? We will always be fully clinker backed. Second point, 1.54 is our target to reach the fiscal 28th. I don't want to comment about the industry, but all I can say is Ultratech is a far stronger company in all aspects as compared to the rest of the industry. Quarter after quarter, I don't have to say enough data, but actual data which is available, if you just sum up, the performance of the cement industry. The rest of the industry put together an alter-tech on one side. We have delivered growth higher than the industry, a bit up a ton higher than the rest of the industry. So this doesn't come by, you know, magic. All the efforts, whether it is clinker conversion, which means composite cement, which gives me more profitability, RMC or all other aspects of our business which we are doing or which help us to be far ahead. As for RMC, RMC is an integral part of our business. I don't see a need or don't see that thought process as of now to monetize it. We are eventually targeting the number of plants.

We are 3% of the volumes. Is there a target to go to 6% in three years?

Not really in terms of percentage, but yes, it will continue to grow because RMC is the future growth engine. Obviously, the more and more urbanization is happening, I think the RMC is going to be... I think we are invested for the future, to be honest, to meet the requirements.

And if you look at our UAE business, it is zero trade sale. It's all sales to RMC people. So, or globally. US market or anywhere else you see, they are globally back cemented. So, RMG is an integral part of our offering and of our business model. Sure. Sir, I have one more question. This is 10A. Okay. Next one. Thank you. Thanks.

Thank you. We take the next question from the line of Denayton from HSBC. Please go ahead.

Thank you very much, sir. Congratulations on a great number

One question we keep on getting from investors over the last few months is that the other industries, industries like steel and agri and PVC, have taken aggressive price hikes in the face of cost pressures. But the cement industry has struggled to raise prices significantly. in November, the price hikes have been relatively muted, even if demand has been strong. What would you attribute the cement's relative underperformance versus other building material industries in terms of making price hikes?

Fragmentation of the industry is as sweet and small answer, Pinar, that I can give you. Yeah, I think that would sum up everything.

So, sir, just taking that point forward to the second question, assuming, sir, that the Middle East conflict stays where it is, we have pet coke at $160, these oil at $100 a barrel for this remainder year, does this mean that the industry would struggle to pass on fully the cost pressures eventually this year?

No. We are already passing on the – if every industry is passing on the cost, so are we. March, you know, somebody had asked me why prices are not going up in the month of March. March is never a period to increase prices because it's a volume period. Price increases always happen. And every industry has its own fabric and own pattern of behavior. July, September, monsoons impact cement industry only. So price increases generally are seen in the first quarter of the financial year, not in the last quarter of the financial year. And besides, obviously, demand supply is always there. If demand is robust, prices go up. And you are there. I am also here. We will meet again next quarter. We will talk and we'll demonstrate. I think Ultratech will be steps ahead in terms of performance.

Got it. Thank you very much, sir.

Thanks again.

Thank you. We take the next question from the line of Rashi from Citigroup. Please go ahead.

Thank you. Just on your point that the fuel cost will go from 1.77 to 1.8 in the quarter, this is due to your long-term contracts, right?

Multiple things, long-term contracts, inventory, sourcing, changing the fuel mix, multiple things.

How long will your contracts and inventory last? I'm just trying to understand that should the situation persist wherein petco prices sustain at like the 160, 160 plus, when do you start feeling the impact?

July, September would be some ripples that you will see, again, which we will be able to manage better than the industry because of our supply contracts. and domestic sources, of course.

But these end the war early, Rashi.

Why are you wanting it to prolong?

I'm just trying to gauge that on your supply contracts, how do these work? Do you have them going on? I mean, it's a continuous rotation. Therefore, this can persist?

Yes, it can persist. It will persist. Okay.

And on the packaging side, between the fourth quarter to now, what is going to be the data?

Fourth quarter to now, roughly 9 rupees a bag.

Yeah, fourth quarter to now, there was some increase and there was some decrease also. So I would say it should remain in the same range.

Not 9, sorry, 6 rupees a bag, sorry. 9 to 15, so it's about 6 rupees a bag.

Essentially, the price hikes that the industry has taken should be, in your opinion, adequate for you to offset.

Yes, yes. Yes. Okay.

And just on the industry demand, you mentioned that the industry demand likely grew at 6% to 7% in this quarter. Yeah. Folio numbers, again, similar? 6.3.

6.5 is what my colleagues tell me for the folio.

And your volume, I mean,

Oh, we would target double-digit growth.

Okay, got it. Okay, thank you.

Thanks. Thank you. We take the next question from the line of Ashish Jain from Aquari. Please go ahead.

Hi, sir. Good evening. Sir, my first question is the price height is sufficient to offset cost. In that, you are factoring goal cost also or just packing cost

given coal you said will not impact in june all i'm factoring in everything okay okay okay so secondly you know uh except for if you take dollar to 100 rupees that i have not fact i'm not factoring in which is at the end of the quarter and diesel as well which we will know when we will know yeah yeah that has not been factored in

Earlier on the call, I think you said that there is a mark to market hit on your Forex loan. Can you quantify that and is it above EBITDA?

What do you mean above EBITDA? It's part of my cost. Yeah, it's within EBITDA. It's not an extraordinary item, not a finance cost.

It is a hit to EBITDA.

Yeah, hit to EBITDA. Can you quantify that? About 140. 30 rupees a ton.

120, 130 rupees.

Okay. Secondly, you also said that packing cost impact was felt only in March month.

And if I heard you right, you said it is 90 crores just for the month. Did I hear you right?

Yes, you did. So shall we assume that that's the run rate which will continue given there is no relief on packing cost? No, because as Jamal also mentioned, prices have stabilized. We have built volumes of our inventories and doing alternate sources. Mind you, nobody I think would have as many sources like Ultratech does. We have almost 150 suppliers across the country supporting us with bags. We are doing some other things also to ensure we are able to source bags and maintain costs. So 90 crores was a hit, which was a, you know, the cost of the bag had gone up further also beyond 15 rupees. Then it stabilized to 15 or even, today it would be 13 or 14. Yeah, it's marginally reduced. So not 90 crores cost, cannot be analyzed. Okay. We have taken care of that with price increases.

Right.

Sir, just on pricing, if you can, shall we think that given the kind of cost inflation and all, price hike is here to stay or you are seeing some pushback in terms of the channel or demand impact? Are you seeing that kind of concern? I believe it's here to stay. Because, you know, this is impacting every... cement player in the country in every nook and corner. It's not a one-off. It's not one region. Everybody is getting impacted. So everybody wants to protect their balance sheet and P&L. Sir, my second question is just on India Cement, the 1000, even some of the bits of India Cement is getting booked in Ultratex standalone, your 1000 rupees per ton guidance includes that or that is what India Cement can eventually report you to in spite of the tolling ability? I am sorry, I missed your question, what did you say?

Some of the dicta per ton of India cement is getting booked in Ultratech standalone because of the tolling arrangement and you know the sales being done by Ultratech.

The 1000 rupee guidance which you speak for India cement include that one which is getting booked in Ultratech or it is pure India cement dicta per ton which will come purely through cost savings and all? Yeah, so all inclusive. So you say 800 in India cement books and 200 of that coming in Alta Techbooks. But again, Ashish, don't get disheartened because when we have committed 300 rupees of cost improvements and already delivered 195, ask the size and do the second decimal. And I'm also saying that we will do more than 300 bucks. So That gives you some indication of... No, no, for sure. Yeah, yeah.

So, actually, just, you know, on the long term, you know, while you kind of clarified that 10,000 crores will be the capex for UltraTech, you know, the cash generation will be much higher than that, in my assumption, at least.

So, how should we think about... You just saw what the board did, and I clarified. I think you were not there on the call when I spoke about dividends. Very thought through strategy by the board. Enough. We have presented enough position to the board before they came to the conclusion that yes, it's now time to reward the shareholders. Thank you so much.

Thank you. Thank you. We take the next question from the line of Satyadeep Jain from Ambit Capital. Please go ahead.

Thank you. Just a follow-up question on the dividend. I think to see that special dividend, you have a lot of confidence in the cash flow that's significantly higher than what the CAPEX is looking at. So can we expect, because this is a special dividend, can we expect like a target on the dividend payout or I missed part of it in the initial just trying to understand or maybe increase the dividend rate and this is also in the context of sometime back when we saw the wire and cable investment and you mentioned that any other investment by independent material industry for the next five years Althratex is not looking at this seeking confirmation that We're looking at 10,000 crore KPEX in any incremental dividend cash flow. So 10,000, sorry, I'll be finished first, yeah. 10,000 crore KPEX incremental cash flow will go as a return of capital to shareholders. Is that understanding correct? And should we not look at higher dividend rate or maybe a target of return of capital? So I have my KPEX plan, as I also mentioned,