DALBHARATNSEOctober 20, 2023

Dalmia Bharat Limited

7,882words
156turns
18analyst exchanges
4executives
Management on call
Puneet Dalmia
MANAGING DIRECTOR, DALMIA BHARAT LIMITED
Mahendra Singhi
MANAGING DIRECTOR AND
Dharmender Tuteja
CFO, DALMIA BHARAT LIMITED
Rajiv Bansal
PRESIDENT & CHIEF TRANSFORMATION OFFICER, DALMIA BHARAT LIMITED
Key numbers — 40 extracted
rs,
he industry, as we started building our capacity ahead of time. In the last three and a half years, we have added about 17.2 million tons per annum of Cement capacity, which is about 65% growth over
17.2 million
ed building our capacity ahead of time. In the last three and a half years, we have added about 17.2 million tons per annum of Cement capacity, which is about 65% growth over the Financial Year '20 Cement c
65%
a half years, we have added about 17.2 million tons per annum of Cement capacity, which is about 65% growth over the Financial Year '20 Cement capacity. With the ongoing Cement expansion a
56 million
ement expansion and the acquisition of Jaypee Associates' Cement assets, we are expected to reach 56 million tons by the end of this fiscal. You are already aware that Singhiji has successfully completed hi
6.2 million
on, friends. Starting with our Operating Performance: During the quarter we delivered a volume of 6.2 million tons and revenue of Rs. 3149 crores which translates to a YoY growth of 6.6% and 6% respectively.
Rs. 3149 crore
perating Performance: During the quarter we delivered a volume of 6.2 million tons and revenue of Rs. 3149 crores which translates to a YoY growth of 6.6% and 6% respectively. Like the previous quarter, weakn
6.6%
d a volume of 6.2 million tons and revenue of Rs. 3149 crores which translates to a YoY growth of 6.6% and 6% respectively. Like the previous quarter, weakness in south prices has persisted which led
6%
e of 6.2 million tons and revenue of Rs. 3149 crores which translates to a YoY growth of 6.6% and 6% respectively. Like the previous quarter, weakness in south prices has persisted which led to a sl
68%
on for our Company. Having said so the trade sales for the Company improved during the quarter to 68% which was primarily driven by Southern region, and that too with a complementing increase in th
88%
For the last three quarters our low-carbon cement mix has consistently been at a healthy rate of 88%. In fact, Q2 of last year, it was 83%. For the last five quarters our CC ratio has been at 1.71 o
83%
arbon cement mix has consistently been at a healthy rate of 88%. In fact, Q2 of last year, it was 83%. For the last five quarters our CC ratio has been at 1.71 on average. We will continue to follow
2%
otprints further. On the cost side, our raw material costs have increased moderately by 2% YoY to Rs. 785 per ton of Cement production due to an increase in slag and fly ash rate by almost
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Guidance — 20 items
Coming to the power and fuel cost
opening
“Going forward we have ongoing work for 2.9 million tons Cement grinding capacity in the South which in totality will come by March '24.”
Coming to the power and fuel cost
opening
“2.4 million ton in northeast by FY'26 also would be coming up.”
Coming to the power and fuel cost
opening
“And we will be happy to answer all your questions in the Q&A following his remarks.”
Dharmender Tuteja
opening
“For FY'24 we expect the total incentive accruals to be around Rs.”
Moving to the fixed costs
opening
“15 crores additional depreciation charge will be taken in the next quarter.”
Puneet Dalmia
qa
“And this is the structure where I will be the MD and CEO of the operating company as well.”
Puneet Dalmia
qa
“We are quite confident that we will be able to conclude this transaction by the end of this fiscal year.”
Sumangal Nevatia
qa
“And the third part is from next quarter onwards can we expect to continue or going back to old ways of growing at least one and a half times the market which has been guided in the past quarters?”
Puneet Dalmia
qa
“We expect that we will continue to grow faster than the industry in the coming year despite the short-term blip.”
Sumangal Nevatia
qa
“So, when we say Q4 onwards that means this year, we will continue to kind of underperform and then maybe from next year we should kind of expect the recovery?”
Risks & concerns — 5 flagged
So, that, as per the accounting policies, includes the fixed cost buildup in the inventory, so which will get corrected in the coming six months which may have an impact of about Rs.
— Sumangal Nevatia
Dharmender Tuteja So, they remain volatile but yes, we expect it to be around similar levels.
— Saket Kapoor
So, I think, the challenge in the Southern market is Telangana and North Andhra Pradesh and that's not a place where we are investing.
— Puneet Dalmia
Secondly, I think we have won some coal mines in auctions, and I think our fuel cost as those mines come into production will become less volatile.
— Puneet Dalmia
You know, as these mines come into production our coal prices will go down; will go down in the short term, given where we are today, but it will become less volatile, for sure.
— Puneet Dalmia
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Q&A — 18 exchanges
Q
Hi Thank you for the opportunity I have two questions first Singhi ji thank you for your contribution to the sector not just to the company we have learned a lot from you. I just want to understand the management structure post these changes. So, Mr. Dalmia currently holds the MD position in both the entities. So, would that be the structure or are we looking to make some more hires, or we will continue with the current structure?
Puneet Dalmia
Can you please repeat the question? So, as you would be taking over, Mr. Dalmia as the MD of the operating unit DCBL as well. So, would we continue with that structure? Or are we looking to hire externally for the MD? No, this is going to be the structure. Mr. Singhi is transitioning and he will continue to be associated as a Strategic Adviser to me in the group. So, there will be complete continuity. And this is the structure where I will be the MD and CEO of the operating company as well. My second question is on the Jaypee acquisition. Now, this has been delayed a couple of times. So, what
Q
Good Afternoon and thanks for the opportunity my first question is on the volumes if you could share what is the tolling volume in this, the number which we have reported?
Mahendra Singhi
It’s a total 3 lakh tons in the quarter. So, continuing on the volume part, I mean, this looks like the second quarter where we have lost market share, whereas in the last call, we did share that there is some strategy which did not work out and we are kind of changing and from say Q2 onwards we will kind of recover the losses. So, if you could just explain a little bit on these three parts, one, what has gone wrong or what is not working? What are the changes we are doing it? And the third part is from next quarter onwards can we expect to continue or going back to old ways of growing at leas
Q
Good Afternoon thank you for the opportunity So, my first question is on incentives. So, in the last two quarters, at least the incentives receivable has been moving up. So, is there any specific plant on which you are accruing incentives and receipt is getting delayed?
Dharmender Tuteja
Yes, see it normally depends on the allocation of the budget by the concerned state governments. But we expect that it will catch up in the coming second half. So, for the year as a whole, we expect that whatever accruals will happen will also get collected. Sure, and freight cost dropped quite sharply this quarter what is the reason for that? I am looking at a QoQ basis, is there any one-time railway freight incentive or anything that came through? As Singhi ji explained in his remarks that we have reduced the lead distance to 277 kilometers compared to about 300 plus in the corresponding qua
Q
Good afternoon, my first question is on your leverage expectations so if you are able to close the JPA deal in FY'24 versus Rs. 1,500 crores kind of net debt, do we expect our net debt to cross like Rs. 5,000 crores or what is that number which we are looking at in terms of net debt?
Dharmender Tuteja
Yes, net debt will cross let's say the current limit which you are seeing at Rs. 1,500 crores, but of course we still expect net debt to EBITDA to be at least 1:1 in the current year. 1x? Yes. So, that would mean like the net debt to EBITDA, so net debt around maybe something in the range of Rs. 3,000 to Rs. 4,000 crores which the peak net debt which you are expecting? Yes, please. And regarding freight costs, is there any element of freight subsidy in Northeast which is also part of cost and which is like changing on a quarter to quarter basis or there is no component there? No component of f
Q
Hi Thank you just couple of questions, first a clarification question, considering the volume growth that we have seen for Dalmia in this quarter is it fair to say that Dalmia did lose market share in some of the markets it operates in just clarification on that.
Mahendra Singhi
It may be in just two states of East where we might have lost but otherwise our market share has gone up in South and it has gone up in Northeast and the Central definitely, we have taken up 3 lakh tons share. Secondly, on power and fuel cost there is obviously moderation in fuel costs this quarter. Where is the fuel cost inventory right now compared to spot? And is it possible to see more fuel costs moderation in the coming quarters? Dharmender Tuteja Yes, currently the rate is about 1.58 which has gone to the consumption this is the blended rate. And we expect some marginal reduction in the
Q
Thank you for the opportunity, I just wanted to ask you that since now we will be adding another 2.9 million tons so what is the new CAPEX for our total organic expansion? And also, if you can provide, if there has been any update on the FY'24 and FY'25 CAPEX guidance? Dharmender Tuteja First part question, can you repeat?
Jashandeep Singh
So, what is the total CAPEX for our organic expansion now from 43.7 million ton to 49.5 million ton? Dharmender Tuteja I will come back to you, but on the second part of the question the current fiscal year guidance is about Rs. 6,500 crores total CAPEX including about Rs. 3.500 crores for Jaypee acquisition. And on this second question, so, we have seen strong price hikes in the South and some reversal in East, so if you can give a sense on how the current prices are, that would be great? So, one I would say that the East for us price have not slided down they are holding, and we are able to
Q
Thank you, I have three questions, so everything is interrelated. So, just trying to ask, so on the volume front for this year FY'24 previously we talked about our 15% to 17% kind of growth for this year. So, in the first half, we are already 9.6% and we are expecting that volume to improve in the second half. So, broadly what would be the, at consol level one can think of the volume growth? Second, considering as you mentioned the price hike in East Rs. 40 to Rs. 50 and in the South if you can specify would be great if our channel checks rates are Rs. 30 kind of price hike is already kind of
Mahendra Singhi
First I must complement your whole analysis exercise and you are generally right that yes prices have gone up in the South, and we are quite hopeful that it will continue. And based on this definitely there will be a positive impact on EBITDA on Q3 performance, but at the same time it wouldn't be right to predict any number. But on the volume front broadly any broad range or where one can think of this FY'24 in terms of the growth for us? I feel that we will be better than the industry. Okay , got it the other thing is in terms of the CAPEX for FY'25 would be Rs. 3,000 crores to Rs. 3,500 cror
Q
First question pertains to the fuel cost which you mentioned 1.58 is for the Q2 in kcal?
Dharmender Tuteja
Yes, it is. This quarter, yes 1.58. Yes, this was in the second quarter, right? Yes. And Q3 numbers are they similar to Q2 or there is some softening which is possible? Dharmender Tuteja Marginal softening, you can expect on the consumption side. And coming to the demand, in the first half, we have grown by around 10% and if we exclude the Jaypee contribution, the volume growth would be close to a 7% to 8%. So, for the full year you are saying that you will look to grow higher than the industry and for sub-industry growth would be north of 10%. So, are you looking at a strong volume growth in
Q
Good Afternoon everyone and congratulations on good set of numbers, My First question from my end on the Eastern market again so, just wanted to get an update on the end market consumption since a peer of ours has been highlighting subdued demand from two major states mainly West Bengal and Jharkhand. So, is that also impacting our growth in the Eastern state?
Mahendra Singhi
To some extent, yes. So, any kind of update or any kind of expectation when do you expect a good growth coming in from those markets? We have observed that normally after the puja festival, etc., it should be brighter. We have seen it and our assumption is that the same will continue. And secondly, in terms of regional expansion, while we are expanding materially in the Eastern and Southern region, no further expansion plans are yet planned in the West region, even after Murli having achieved a healthy utilization level for us. So, going on to our next expansion plan maybe, do we remain open f
Q
So, I had two questions. One was on market share and second on the Jaypee deal which you have already answered. But my question is can you give us numbers on region wise growth rates for Dalmia? I know we have lost market share in Bihar, what is the other state we have lost market share? Correct me if I am wrong. And YoY, we still growth YoY basis for the second quarter?
Mahendra Singhi
We do not share market share region wise and state wise. Okay you don't share but what are the two states that we have lost market share? Little bit in West Bengal and, North Bihar.
Q
Continuing with my earlier question, given the capacity utilization is only 60%. And I believe there was an interim target of 75 million tons by FY'27 can we expect a rethink on that expansion plan now, given that the current capacity itself is taking time to ramp up?
Puneet Dalmia
We take these decisions based on our long-term conviction about growth in the Indian market. And I don't think a few quarters of lower utilization has changed our fundamental conviction about the Indian opportunity in this decade. So, I do not think that we are going to make long- term decisions based on a couple of quarters. So, no, this is not going to impact our thought process. Thanks for clarifying that and also, any update on the East mining land, I believe you were adding onto the surface rights by acquiring more land over there. Presently we have sufficient limestone deposit also the p
Q
Firstly, about this other income component, it's regarding the dividend received from your subsidiary. So, if you could explain the nature which subsidiary we have received this dividend? Dharmender Tuteja You are talking about the receipt of dividend in Dalmia Bharat Limited?
Saket Kapoor
Yes, the other income component I needed the granular detail for the income component of Rs. 85 crores for the quarter. This is at the consol level. So, consol level includes dividend from Dalmia Bharat Sugar, and also the treasury income on our treasury investments and including whatever NCDs are recoverable from Hippo Store as well as Sarvapriya, so, the interest on that. And the major component from Dalmia Sugar dividend income? Dharmender Tuteja That is a small component, that's very small component. On the cost of material consumed Q-on-Q we have seen an increase. So, what explains this 3
Q
Thank you, you had mentioned that you are focusing on a branding exercise. So, with that what kind of volumes are you targeting one for FY'24 and subsequently for FY'25?
Puneet Dalmia
I think we will share with you this guidance once we are ready, I think right now it suffices to say that we are looking at increasing our utilization and growing faster than the industry. On the pricing aspect what is the quantum of the price, in the East you mentioned it’s 40 to 50. South is about 30 to 40. Is that correct? In the South the trend is Rs. 30 at the moment. And in your opinion in both the regions how sustainable are the increases given that they have come after a while? Let us wait and watch only. Also, what was the lead distance during this quarter? 277kms. Thank you.
Q
Could you give us a perspective of the trade demand and the non-trade demand, how the infra and real estate is panning out across those East and South? And also, how is your profitability between trade and non-trade moving?
Mahendra Singhi
I would say that our trade volume has grown and more profitable in the South we have been able to grow to 68%. And profitability definitely is always a bit lower in institutional sales, that's what I can explain to you. How much lower would that be? What would be the current difference between trade and non- trade for you? It varies from place to place, and those numbers cannot be shared please.
Q
Thank you for the opportunity Can you please put some colors on investments in this RHI Magnesita? What are we thinking as of now?
Puneet Dalmia
We have no investment in RHI Magnesita in Dalmia Bharat Limited. But we are holding a significant stake in that company, right? It's not a part of this company. So, can you please throw any lights on our RHI business, what is the outlook and what we are thinking on that? Dharmender Tuteja We had divested the DBRL shares so currently our stake in RHI is zero. So, DBRL holds the economic stake in RHI. Yes, from a company perspective asking you that what is the overall like view from the top Management’s perspective? Dharmender Tuteja Let us not discuss in DBL Call.
Q
Congratulations on great set of numbers Mr Dalmia, just want to understand Dalmia has always been a cost leader in all the micro market that we operate in and there are multiple factors that drive that. So, when you think about from your medium-term perspective, next two to three years to your long-term guidance that you have given up being 100% renewable, where you are 29% today. Similarly for lead distances and energy consumption per ton of cement and power cost, electricity cost per unit of electricity, any medium- and long-term target that you are working with, given that your blending rat
Puneet Dalmia
So, I don't think we can share any target right now on this call, but all I can say is that our renewable mix will expand in the total mix. Secondly, I think we have won some coal mines in auctions, and I think our fuel cost as those mines come into production will become less volatile. Currently, we are very exposed to imports and the Rupee/Dollar exchange rate. You know, as these mines come into production our coal prices will go down; will go down in the short term, given where we are today, but it will become less volatile, for sure. And I think, finally, we are just looking at how to opti
Q
What is our current product mix between the PPC, OPC, PSC and PCC at a company level because this time in the annual report you have not given this number?
Puneet Dalmia
I think we have already shared that our blended cement mix is 88%. And we have also said that over the next few years we want to move to an even higher percentage and hopefully 100% low carbon cement. So, I think that is the guidance that we can give as of now. As far as a product mix it is you will not give for the future prospects between the products PPC and PCC and PSC at the blended level, so that's why? So, Raghav, we have given this number previously on an annual basis you will get the number from us. But quarter-on-quarter, it's not possible to share it over the call. This time the lea
Q
Once again I thank all of you for joining this call and your interest in Dalmia Bharat Limited. I wish you and your families a very Happy Dussehra and a Happy Diwali in advance. And look forward to continuing our interaction in the next year. And once again, thank you for your interest.
Management
Speaking time
Mahendra Singhi
27
Moderator
20
Puneet Dalmia
20
Dharmender Tuteja
9
Shravan Shah
8
Amit Murarka
7
Prateek Kumar
7
Rajesh Ravi
7
Saket Kapoor
6
Jashandeep Singh
5
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Opening remarks
Puneet Dalmia
Thank you and good afternoon, everyone. I want to start by wishing all of you and your family members a very Happy Navratri. It gives me immense pleasure to welcome all of you to the Q2 Financial Year '24 Earnings Call of Dalmia Bharat Limited. After almost a decade of reforms under the leadership of the current government, our country is transitioning from a reformed stage to a growth stage. As the GDP of India expands, Cement and the Building Material sector will automatically become a direct beneficiary. The Indian economy is undergoing a large-scale metamorphosis and a young, ambitious and massive middle-class is already seen to be driving the much-needed consumption story. I am glad to say that we were one of the first ones to foresee this upcycle in the industry, as we started building our capacity ahead of time. In the last three and a half years, we have added about 17.2 million tons per annum of Cement capacity, which is about 65% growth over the Financial Year '20 Cement capa
Mahendra Singhi
Thank you Puneet ji Happy afternoon, friends. Starting with our Operating Performance: During the quarter we delivered a volume of 6.2 million tons and revenue of Rs. 3149 crores which translates to a YoY growth of 6.6% and 6% respectively. Like the previous quarter, weakness in south prices has persisted which led to a slight drop in the realization for our Company. Having said so the trade sales for the Company improved during the quarter to 68% which was primarily driven by Southern region, and that too with a complementing increase in the low-carbon cement sale. For the last three quarters our low-carbon cement mix has consistently been at a healthy rate of 88%. In fact, Q2 of last year, it was 83%. For the last five quarters our CC ratio has been at 1.71 on average. We will continue to follow this path in order to enhance our resource efficiency and reduce our carbon footprints further. On the cost side, our raw material costs have increased moderately by 2% YoY to Rs. 785 per ton
Coming to the power and fuel cost
During the quarter, our power and fuel cost declined to 26% on a YoY basis to Rs. 1,140 per ton of Cement production. As Puneet ji mentioned, our fuel costs declined due to $60 per ton of petcoke correction and fuel consumption cost compared to Q2 FY'23. But as you all know, the fuel prices have inched up again from the set bottom of about $105 to $110 to now the spot being $130 to $135. Other Items, which majorly added to our cost efficiency is the increase of renewable energy consumption to 29% from 18% in Q2 FY'23. During the quarter, our sales team has been able to bring down lead distance from 308 kilometer to 277-kilometer YoY, but most of it got offset by the levy of busy season surcharge for the month of July, and some one-time railway incentive which were there in Q2 FY'23, but not in this quarter. Sequentially under the freight costs we saw the benefit of lead distance reduction., and the upliftment of the levy of busy season surcharge in August, September. And also, in the l
Dharmender Tuteja
Good afternoon, everyone. Let me quickly give you the key financial updates before we open the floor for questions and answers. With regards to the incentives the accrual during the quarter is Rs. 63 crores while collections during the quarter is Rs. 25 crores. For H1 FY'24 the total accrual stands at Rs. 141 crores and collections at Rs. 64 crores. The incentive receivable as of 30th September stands at Rs. 785 crores. For FY'24 we expect the total incentive accruals to be around Rs. 275 crores to Rs. 300 crores.
Moving to the fixed costs
Our employee costs have increased by Rs. 37 crores to Rs. 226 crores on a YoY basis, primarily due to the annual increments and increase in the number of headcounts owing to the addition of new capacities across different locations. The other expenses have however remained flattish at Rs. 472 crores on a YoY basis. Our depreciation during the quarter has increased by Rs. 69 crores on a YoY basis. Of this total increase, Rs. 40 crores pertain to certain components of plant and equipment which are being replaced as part of our overall debottlenecking projects. I mentioned this during our Q1 Earnings Call as well as in that quarter there was an additional depreciation impact of Rs. 57 crores this is a one-off charge and around Rs. 15 crores additional depreciation charge will be taken in the next quarter.
On the debt side
Our gross debt has increased by Rs. 907 crores during the quarter. And the closing debt stands at Rs. 5,294 crores as on September 30th. At the same time, the cash and cash equivalents have increased by Rs. 615 crores. As a result, the net debt of the Company has increased by Rs. 292 crores to Rs. 1,500 crores. The net debt to EBITDA is 0.59 times as on 30th September. With regard to the capital expenditure, we have spent close to Rs. 611 crores during the quarter and Rs. 1,517 crores during H1 FY'24. With the commercialization of our 2 million Cement plant at Sattur, Tamil Nadu our grinding capacity has increased to Rs. 43.7 million tons while our clinker capacity has also increased by 0.5 million ton to 22.2 million tons. Our total budgeted CAPEX spends during the Financial Year '24 could be around Rs. 6,500 crores of this about Rs. 3,500 crores for Jaypee and the balance Rs. 3,000 crores for the organic expansion, including the expansion projects at Northeast and RCW. The Board has
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