Speaker #1: Ladies and gentlemen, good day, and welcome to the earnings conference call of Dalmia Bharat Limited for the quarter ended September 30, 2026. Please note that this conference will be for 60 minutes, and after the management discussion, there will be an opportunity for you to ask questions.
Speaker #1: Please note that this conference is being recorded, and the transcript will be put up on the website of the company. As a reminder, all participant lines will be in the listen-only mode, and should anyone need any assistance during the conference call may signal the operator by pressing star then zero on your touchstone phone.
Speaker #1: Before I hand over the conference to the management, I would like to remind you that certain statements made during the course of this call may not be based on historical information or facts and may be forward-looking statements.
Speaker #1: These statements are based on expectations and projections and may involve a number of risks and uncertainties, such that the actual outcome may differ materially from those suggested by such statements.
Speaker #1: Today on the call we have with us Mr. Puneet Dalmia, Managing Director and CEO, Dalmia Bharat Limited; Mr. Yatin Malhotra, CFO, Dalmia Bharat Limited; and other senior management of the company.
Speaker #1: I would now like to hand the conference call over to Mr. Preston Gaville, Head of Investor Relations, Dalmia Bharat Limited. Thank you, and over to you, Mr. Goyal.
Speaker #2: Thank you, Neerav. Good evening, everyone, and thank you for joining us today. I hope you had an opportunity to review our financial results and presentation.
Speaker #2: We have uploaded the statement. Let me now hand over the call to Mr. Dalmia for his opening remarks. Thank you, and over to you.
Speaker #3: Thank you, Preston. It is good to be back with all of you. As we discuss our Q2 results, I will begin by talking about the headline shaping the world around us.
Speaker #3: The Russia-Ukraine war, the Gulf crisis, tariffs, financial and bond markets, and El Niño— the world is going through multiple uncertainties. It seems that this has become the new normal, something we all have to live with day in and day out.
Speaker #3: I'm happy to see how India is navigating these geopolitical challenges remarkably well, with its fundamentals intact and strengthening. The country has demonstrated resilience in absorbing unprecedented external shocks while staying firmly on its growth path.
Speaker #3: The Q1 GDP was a case in point, where the economy grew at 7.8%. Fiscal and policy measures, including sustained public spending and efforts to absorb the impact of rising fuel prices, have helped cushion domestic economic activity and consumer sentiment from external shocks.
Speaker #3: We can see this reflected in a range of indicators. The RBI revised its financial year 27 GDP growth estimate upwards to 7.1%. GST collections remain close to record levels while manufacturing output continues to show strong growth.
Speaker #3: Cement demand has also remained robust, growing in high single digits on a year-over-year basis during this quarter. This was supported by continued government capex spending, along with relatively low rainfall in several parts of the country.
Speaker #3: In the first five months of the year, the central government has spent around 42% of its budgeted annual capex, the ministries of road, transport, and highways, and railways had also utilized around 45% of their respective annual budget outlays during this period.
Speaker #3: Providing a meaningful impetus to cement demand. Having said that, rising inflation and the potential onset of a rate hike cycle pose near-term risks. But I believe India's growth story is much bigger than the near-term challenges we see today.
Speaker #3: The country is strengthening, growing, and aspiring. Just like India, we at Dalmia are also building a stronger and sustainable organization for the future. Despite near-term challenges, we remain firmly focused on executing our strategic priorities across the board.
Speaker #3: I'm happy to mention that we have recently lit our new clinker line at Belgaum and commenced trial runs ahead of schedule. This additional capacity will help us deepen our presence in our stronghold markets of Karnataka and Maharashtra.
Speaker #3: As I couldn't think of a better time to bring this capacity online we look to commence commercial production ahead of the peak demand season in Q4.
Speaker #3: Our expectations at Pune and Kadappa are also progressing as planned, and are expected to come during financial year 28. Taking our total capacity to around 67 million tons.
Speaker #3: The Central India story is another exciting one which is unfolding. Based on our initial integration experience, the assets are in good shape, and our teams are working relentlessly to restart operations and ramp up production as quickly as possible.
Speaker #3: At Reva, we have restarted mining operations while both the clinker line and the cement mill are steadily ramping up under trial runs. While Q2 saw some initial teething issues, as we continue to build on network and stabilize plant operations, I'm confident that we are on track to achieve a 35 to 40% utilization of these assets by end of financial year 27.
Speaker #3: Another area I would like to touch upon is our sales strategy. While the East and North East markets remained subdued during the quarter due to severe floods and heavy rainfall, we saw healthy momentum in both the South and West markets.
Speaker #3: With growth approaching double digits, our focus on strengthening our brand position remains equally strong. Premium product share continues to increase, and we expect this trend to deepen over the coming quarters, as we continue to drive this initiative of premiumization.
Speaker #3: Our recently launched premium offering received exceptional response from the market, prompting us to accelerate its rollout into newer markets. Let me briefly touch upon the current operating scenario.
Speaker #3: Elevated crude oil prices and rising input costs have been testing the resilience of the entire industry. With crude prices remaining above $100 a barrel, and maritime disruptions continuing, international pet coke prices have surged to over $180 per ton.
Speaker #3: Against this backdrop, I believe we have managed the impact reasonably well through fuel mix optimization, better planning, and several other initiatives. In the first half of the year, we have seen war-related impact of around $220 per ton on variable cost, with additional pressures from key input materials such as packing bags adding another $100 per ton.
Speaker #3: While pricing in Q1 helped us absorb some of these cost pressures, the environment was relatively challenging in Q2 in a few key markets. Prices remained steady in South and West, while East pricing was under pressure amid subdued demand.
Speaker #3: That said, we are now beginning to see a more encouraging price trend. Both September and October have seen healthy price increases, helping us recover a part of the cost inflation.
Speaker #3: We are hopeful that the positive momentum will continue going forward. While these industry cycles may come and go, our long-term strategic priority remains firmly anchored.
Speaker #3: Maximizing returns from existing assets, expanding in a calibrated manner to become a pan-India player, while maintaining a strong and healthy balance sheet. And underpinning all of this is our continued investment in our people, processes, and organizational culture.
Speaker #3: As we continue to march forward to chase our vision, one of my key priorities is to build a future-ready organization with a strong leadership team and deep capabilities.
Speaker #3: In that spirit, in a planned transition, effective 1st January 2027, Naveen Tiwari, our Chief Marketing Officer, will transition as a key advisor to me on strategic initiatives and projects.
Speaker #3: Over the past year, he has helped deepen our engagement with channel partners, sharpen our market positioning, and strengthened our sales capabilities. Thereby strengthening the foundation for the company.
Speaker #3: As part of this transition, Yatin Malhotra, our CFO, will take on additional responsibilities for sales and marketing, along with his existing responsibilities for the finance functions.
Speaker #3: Yatin joined Dalmia Bharat Group in March last year and has led various enterprise-level initiatives since then. I'm confident that his familiarity with the Dalmia way of working and his C-level experience over the past 11 years across various consumer-facing organizations provide the right combination of business strategy and financial management.
Speaker #3: I wish him well as he takes on this additional responsibility. Our focus remains clear: strengthen our brand positioning, deepen our market reach, and further build our sales capabilities to generate strong returns from for our shareholders and support the next phase of growth.
Speaker #3: I'm confident that these changes will bode well for us as we look forward. Thank you, and over to you, Yatin, for the financial updates.
Speaker #1: Thank you, Puneetji. And good evening, everyone. Building onto Puneetji's comments, India witnessed healthy demand trends during the quarter, supported by strong public spending and resilient consumption.
Speaker #1: Below-normal rainfall in several parts of the country also allowed construction activity to continue for longer, providing further support to cement demand. We benefited from these trends in our South and West markets. On the other hand, the East and North-East were considerably weaker, impacted by heavy rainfall.
Speaker #1: Having said that, we are now seeing demand picking up well across these regions also. In line with the regional trends, our volumes grew 4% during the quarter, on an ex-central basis.
Speaker #1: Overall volumes rose 3%, to 7.1 million tons in the quarter. I would also like to highlight the progress we are making in strengthening Dalmia's brand in the market.
Speaker #1: We have deepened our engagement with channel partners and refreshed how our brand shows up in the marketplace, with a new look across our holdings, packing bags, and other brand touchpoints.
Speaker #1: As part of this journey, we have also taken another important step: Konark, which has been a cornerstone of our portfolio and a trusted brand for decades, is now being phased out as we sharpen our focus on premiumization.
Speaker #1: This marks an important milestone towards reinforcing our brand positioning and building a stronger more unified Dalmia brand. Let me now turn to our quarterly performance.
Speaker #1: Since our Central India operations are still at a nascent stage, I will take you through our performance excluding the central markets. Prices remained largely stable across regions, unlike the usual moderation that we see in Q2.
Speaker #1: However, the East witnessed some price corrections amid subdued demand, reflected in a roughly 1% quarter-on-quarter decline in our realizations. Incentives during the quarter declined to ₹25 crore, with relatively lower production at plants where incentives accrued.
Speaker #1: However, we expect expect this to normalize as demand picks up. Collections during the quarter remained healthy at 53 crores. We are already seeing cement prices inching up steadily, with prices in the South and East currently around rupees 15 per bag higher than Q2 average.
Speaker #1: This should provide some support in offsetting the rising cost pressures. Moving to costs, our total costs in the quarter increased by roughly ₹260 a ton, on an ex-central basis.
Speaker #1: Let me take you through the key factors driving this increase. Variable costs increased by around ₹200 per ton. Higher fuel costs alone contributed around ₹100 per ton, while inflation in key raw materials added another ₹30 to ₹40.
Speaker #1: During the quarter, we also saw a meaningful change in the regional mix, with lower volumes in the East, resulting in an additional adverse impact of ₹50–₹60 per ton.
Speaker #1: With external cost pressures persisting and an impact of around ₹75 per ton in Q3, however, at the same time, the adverse mix impact seen in Q2 should get reversed as the regional mix normalizes.
Speaker #1: I would also like to highlight one additional point. As you are aware, following the recent amendments to the MMDR Act, the mineral bearing land tax is no longer applicable, with effect from August 22.
Speaker #1: These payments have been discontinued in Assam and Meghalaya from that date. While they continue to apply in Tamil Nadu. We are engaging with the relevant authorities to facilitate its discontinuation.
Speaker #1: Until then, the impact of this tax continues to be reflected in our raw material cost. Separately, the amendment to the MMDR Act has also resulted in a significant reduction in our contingent liabilities by roughly 198 crores, and the liabilities now standard 931 crore.
Speaker #1: Consequently, contingent liabilities as a percentage of net worth have declined to almost 5%, which is among the lowest in the industry. This reflects our continued focus on strengthening governance and proactively managing potential liabilities.
Speaker #1: Renewable energy remains an important pillar of our cost efficiency initiatives, and we are making strong progress on this front. Over the last five years, we have scaled our RE capacity from 63 megawatts to roughly 450 megawatts today, significantly increasing the RE share to 52% in Q2.
Speaker #1: Going forward, we will continue to accelerate this transition with more RE capacity getting online over the next few quarters. In line with this transition, we have impaired around 97 megawatt of thermal power capacity this quarter, where operations have been discontinued.
Speaker #1: This has been done in three of our existing plants, which do not include the central plants. Logistics is another area where we continue to innovate and find efficiencies.
Speaker #1: Despite the impact from the diesel price increase of about ₹20 per ton in this quarter, our cement freight cost has remained largely flat. Clinker freight has also declined, led by efficiency and regional mix change.
Speaker #1: Coming to fixed costs, comprising employee costs and other expenses, the increase was about ₹168 per ton. Of this, approximately ₹140 per ton was attributable to under-absorption of fixed costs due to Q-o-Q decline in volumes.
Speaker #1: While the remaining increase was largely driven by higher shutdown costs during the quarter. As volumes recover, under-absorption should normalize over the coming quarters.
Speaker #1: Putting it all together, the decline in realization by about ₹49 per ton, combined with cost increases of approximately ₹259 per ton on an ex-central basis, resulted in EBITDA per ton declining to ₹746.
Speaker #1: On a reported basis, EBITDA per ton stood at ₹698, reflecting a dilution of roughly ₹50 per ton due to central plants. We expect this dilution to increase to about ₹100 to ₹125 per ton in Q3, as Rewa commences commercial production.
Speaker #1: Before it progressively reduces as central operations scale up. During the quarter, we reported exceptional items aggregating ₹339 crores. I have already spoken about the transition from the Konar brand and the impairment of captive power plants.
Speaker #1: In addition to this, we have implemented a separation scheme for eligible employees at a few units, resulting in a one-time provisional charge of ₹57 crore.
Speaker #1: Briefly touching upon our ongoing projects, we are making good progress on our expansion plans. The trial run at Belgaum's clinker line was initiated ahead of schedule. The 3 MTPA cement mill is also expected to go into trial in the next couple of weeks.
Speaker #1: Both Pune and Kadappa are also progressing as planned. During the quarter, our organic capex stood at ₹909 crore, taking the H1 spend to roughly ₹1,420 crore.
Speaker #1: Capex guidance for the full year remains unchanged at ₹3,200 to ₹3,400 crore. At the end, I would say that we firmly believe financial discipline gives us the resilience and flexibility to navigate challenging times.
Speaker #1: As Puneetji mentioned, maintaining a healthy balance sheet remains central to our strategy and is one of our foremost priorities. Guided by this, we remain committed to maintaining leverage below 2 times on a sustainable basis, which will create a strong financial foundation for Dalmia's next phase of growth.
Speaker #1: With that, I would like to thank you, and now we can open the floor for questions and answers. Thank you.
Speaker #2: 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 the touch-tone telephone.
Speaker #2: 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.
Speaker #2: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from Prateek Kumar, from Jefferies, India.
Speaker #2: Please go ahead.
Speaker #3: Hello. Yeah. Yeah, hi, Ken. Am I audible? Yeah, so.
Speaker #2: Yes, go ahead, you're audible.
Speaker #3: Good evening. My first question is, while The Hill had elaborate discussion on the various line items in terms of our EBITDA per ton performance in the quarter, excluding the Central India performance also in this quarter, our company’s performance looks weaker than all four other companies which have reported results, including our regional peers as well.
Speaker #3: On all volume growth, pricing growth, and EBITDA per ton, so are we, like, kind of—and we have seen this in the past also—the volatility in your performance is higher than some of your peers.
Speaker #3: Does this reflect the could you reflect like positively on a second half performance versus like let's say in two Q performance?
Speaker #1: Thank you, Prateek. You know, I think I explained quite a bit in my commentary. Let us we'll have to break this into pieces. There is one the one reality is the reality of demand in East and Northeast that has actually led to, I would say, relatively lesser growth for us.
Speaker #1: And if you were to dissect the cost side—if you look at the fixed cost absorption, per se—because of, I would say, relatively lesser growth, it has given a hit of roughly ₹100 to ₹120 per ton.
Speaker #1: So, structurally, if you were to see, I think there is nothing which would worry us too much. I think we are pretty much in line with the industry in terms of the cost impact across line items.
Speaker #1: I think this the regional seasonality impact, leading to a fixed cost absorption impact, is the only story of our financials. Which I am which I am sure that we should be able to, you know, get back on track very soon when the demand bounce rebounds.
Speaker #1: So that's the way we see it. So I think this is yes, we would have been happier with a little more growth, but I think we look forward to a much better H2.
Speaker #1: And we have all the strategies, you know, playing out well for us. So we are hopeful that we will have a much stronger H2 in front of us.
Speaker #3: Thank you. And another question is on your fuel cost. You mentioned about another ₹75–80 of fuel cost impact, which you achieved for the third quarter.
Speaker #3: Based on $180 fuel, is this the peak impact that you're looking for at the company, or is this something you expect to continue until January, and then another round of inflation could hit the business?
Speaker #1: Actually, it's a very difficult thing to guess. You know, at the end of Q1, we thought we had already seen the peak, and now we are looking at a different peak.
Speaker #1: So we are taking it as it comes. Right now, based on whatever bookings and whatever, you know, foresight we have into this topic, we're looking at roughly $75 to $80 in Q3.
Speaker #1: And I would rather not hazard a guess on Q4 right now. We'll let us see how things evolve.
Speaker #3: Thank you. I have more questions. I'll get back to the queue.
Speaker #2: Thank you. Next question is from the line of Amit Murarka from Axis Capital. Please go ahead.
Speaker #3: Hi, thanks for the opportunity. So, just the first question is on the JP asset. If I got it right, did you mention that there will be a ₹100–₹125 per ton realization dilution in Q3 because of the ramp-up in Central India?
Speaker #1: Yeah, so I mentioned that the EBITDA dilution in Q3 would be in the range of ₹100 to ₹125 a ton. In Q2, we saw an impact of roughly ₹50 a ton.
Speaker #1: You know, in my last call, I mentioned that we are targeting to be near break-even in central assets by the end of FY27.
Speaker #1: And we are aspiring to reach Dalmia standard-level EBITDA by the end of FY28. So we are chasing those two big goals, and in the interim, we might see some dilution.
Speaker #1: It was 50 in the last quarter, and roughly 100 to 125 in the coming quarter, the one that we're living in right now.
Speaker #3: Okay, I'm just wondering, over the 100, 125, and dilution—is that at the company level, you said, right? That pricing dilution. So we see the pricing.
Speaker #1: Sorry.
Speaker #3: EBITDA.
Speaker #1: I'm saying EBITDA dilution, not the NSR dilution.
Speaker #3: Oh, okay, okay. Okay. EBITDA dilution. And could you then also, like, roughly give some breakup of the numbers—possibly also, like, what, how much would be the realization kind of gap between your eastern markets and your central 4A? And what is really the strategy to ramp up these assets?
Speaker #3: Will it be in trade or non-trade?
Speaker #1: So, you know, we have a capacity of 5.2 million tons, and I think we have enough and more spaces to expand across all segments.
Speaker #1: So, you know, the bigger picture with central assets is that it is the right strategic fit. We have done these assets; we have run these markets.
Speaker #1: We have been present in these markets, so I think we will have to go all guns blazing. We have to solve everything that needs to be solved—both on the manufacturing side, logistics side, and the sales side.
Speaker #1: So, I would not pick and choose any one point as the most critical one. I think all of them, put together, will give us the results.
Speaker #3: Okay, okay. Sure. And, like, fair to say that in the second half of FY27, possibly the central assets will make maybe ₹200–300 EBITDA per ton loss.
Speaker #3: I mean, given that 125 is the impact, just maybe by 5-6 percent of the volume in Central in the second half.
Speaker #1: I would not give an exact number. As I said, I will continue with the same story. We are targeting to break even in Q4 of this financial year.
Speaker #1: So, let us see where we can take it.
Speaker #3: So the entire capex will get commercialized in Q3? I mean, the ₹28-50 crores that you paid, as well as the ₹300 crores for refurbishment and all, or will it be staggered?
Speaker #1: So, what we have paid should get capitalized, and for the balance, capex as and when those projects get completed, we will be capitalizing them.
Speaker #3: Understood. Okay, sure. I'll come back in the queue. Thank you.
Speaker #2: Thank you. Next question is from the line of Inderji Tagarwal from CLSA India. Please go ahead.
Speaker #4: Hi. Thanks for the chance. A couple of questions. First, on the organic business, you mentioned 75, 80 rupees fuel cost impact, and assuming the entire operating leverage or under absorption of fixed cost reverses, then on organic cash cost, should go down by 70, 80 rupees per ton in four third quarter.
Speaker #4: Is that understanding correct? Plus, we get the benefit of pricing increases.
Speaker #1: Yeah, that's pretty much right.
Speaker #4: All right. And the impact of the Central India asset will be, on an overall basis, 50 plus 120, right? That is 180 per.
Speaker #1: No, total. Total. So, 50 will become 120. So, overall impact is roughly 120 to 125.
Speaker #4: All right. And at what utilization level does that break even? So, does that 40 percent utilization that you aspire to achieve break even at that level?
Speaker #1: Inderji, I would not go into that detail of the Excel sheet, but I think let's target break-even, and I think closer to the date, we can inform you more about the utilization.
Speaker #4: Sure. And fair to assume in Q2, you wouldn't have sold anything from JPA, right? It's all...
Speaker #1: It's a big sell, but.
Speaker #4: Oh, how much would have been the volume? Anything meaningful to change that 3% growth number?
Speaker #1: I think Q2, you know, had various sorts of things happening—very heavy monsoons in that part, floods. There were, you know, plants that were sort of getting their act together.
Speaker #1: The markets which we are nurturing, and where we are developing the network. So, I would not read too much into Q2. I can tell you that, again, we have been in these markets for the last two to two and a half years.
Speaker #1: We have never vacated, so we have an active network that we can always bank on, and we are developing that further. And as you would know, when you capitalize certain things because commercial production is still not done, a part of those volumes is actually not reported as volume.
Speaker #1: They are actually put as a part of the commercial, in terms of the fixed assets—CWIP, actually. So I think let's have Q3 numbers, and then we can talk about growth and volume.
Speaker #1: That's the way I would put it.
Speaker #4: Sure. And any further impairment we can expect, or is it all done, right—in terms of exceptional?
Speaker #1: Yeah, so I don't think there is any other impairment lying out, but we will see. You know, this is a regular assessment that we keep doing about our assets.
Speaker #1: As you know, we have taken the things that were obvious to us in the previous quarter, so there is nothing more that is lined up as of now.
Speaker #4: Thank you so much.
Speaker #2: Thank you. A request to all participants: please limit yourselves to two questions, and rejoin for a follow-up. The next question is from the line of Rahul Gupta at Morgan Stanley.
Speaker #2: Please go ahead.
Speaker #3: Hi. Thank you for taking my question. Two questions. One on the JP assets: you talked about the dilution could expand to 100–225 rupees per ton in the next quarter.
Speaker #3: Now that you have a fair assessment of the assets, can you also help us understand what kind of costs we are looking at to restart these assets?
Speaker #3: That's my question number one.
Speaker #1: So, when you say ‘cost,’ what exactly are you alluding to?
Speaker #3: All costs associated with restarting the assets.
Speaker #1: So we have to run the plant. We have fixed costs to take care of, and we have variable costs. As I said, in the early days, a lot of efficiency capex is being done.
Speaker #1: So the cost curve right now is high because we have the legacy cost to take care of, and the volumes are still yet to come.
Speaker #1: But I think that's a part of the entire business model. So current cost is not a reflection of where we are heading. Once we stabilize this and reach Q4, I think we'll have much more clarity on these numbers.
Speaker #1: And then we might be able to share it with you. We'll see.
Speaker #3: Got it, thank you. My next question is on your volumes guidance for the second half. Now, you did allude to the fact that East and Northeast struggled because of unseasonal weather conditions.
Speaker #3: So, once these weather conditions improve, once we are in the seasonally good demand period, at the same time, your volumes ramp up from the central assets.
Speaker #3: How should we look at the second-half volumes from here on?
Speaker #1: I think we should look at second half volume growth in line with the industry. I would just put it at that. I think we have maintained that position.
Speaker #1: Internally, we are trying to chase aggressive targets. But for you to pick a number, let's take industry growth as the number that we are chasing.
Speaker #3: So that's for the organic business, right?
Speaker #1: Yeah.
Speaker #3: Okay. Thank you so much.
Speaker #2: Thank you. Next question is from the line of Satyadeep Jain from Ambit Capital. Please go ahead.
Speaker #5: Hi, thank you. This first question on the MMDR, I just wanted to understand. I think you mentioned that Tamil Nadu is still accruing those charges, and not in some other states.
Speaker #5: What's going on? Maybe can you allude to what's going on in Tamil Nadu, especially?
Speaker #1: In Tamil Nadu, the government has still not made the changes in their process and the portals that we have to use. So we are still, you know, supposed to pay the sales before we take out the limestone.
Speaker #1: So, I think that is a discussion which is actively being pursued with the government. And right now, we were expecting this cost to go away.
Speaker #1: It has not gone away yet. And let us see how this happens. I can just tell you that we are working with the government.
Speaker #1: So, make sure that we can, you know, get the benefit of this change.
Speaker #5: Okay, second question from me. I just want to understand the leadership transition. You mentioned specifically that the finance and marketing functions rolled into one. What's the intent here?
Speaker #5: Is this a long-term solution you're looking at? And what's the intent here with this transition?
Speaker #1: No. As I said in my remarks, this is a planned transition. We have immensely benefited from Naveen's extensive knowledge and expertise, particularly in multi-industry distribution practices, organization and team structuring, channeling engagement, and premiumization.
Speaker #1: And he has played a very significant role in strengthening our capabilities and approach. I think, you know, currently, we wanted somebody who understands the Dalmia way of working and who understands business and finance to take this role.
Speaker #1: But, you know, over time, I think we want Yathin to be more focused on operations, and we will eventually, you know, get somebody to be the CFO of the company.
Speaker #1: So, but right now, for a temporary period, I think he will continue to oversee both functions.
Speaker #5: Okay. Just one quick question, if I may. On the JP assets, you operated these assets in the past. Now that you've come back, and the market structure also some companies have added capacity.
Speaker #5: Are you—what changes are you seeing in the marketplace or your understanding of the asset? Is it more or less similar in terms of operation and market structure as you build out your distribution there?
Speaker #1: I think we have got, you know, no surprises. I think we knew the asset quite well. It is just that, as we said right in the beginning, this is a multi-year bet.
Speaker #1: And, you know, we have been trying to get into the central region for quite some time. We are very excited about the demand prospects in this region over the next five to ten years.
Speaker #1: This both MP and UP have almost 25 percent of India's population living here. And I think there are going to be you know, huge investments here.
Speaker #1: The Ken-Betwa River Linking project is almost ₹40,000 crore plus. The Noida airport and the, you know, build-out of the industrial corridor there is going to be huge.
Speaker #1: Just huge population as they become more prosperous. And, you know, there'll be much more building of houses and rural demand as well. So we are very excited about this region.
Speaker #1: We have huge infrastructure which JP had built up. There are railway sidings, there are captive power plants, and there is sufficient land. You know, as I said, we have our own mining lease.
Speaker #1: Next to this, so you know, once we ramp this up and bring it down to the Dalmia cost curve, there's an opportunity to do brownfield expansion here, as we are doing in Belgaum and Kadapa.
Speaker #1: So this is a very strategic asset. You know, and it takes time to you know, bring it down to the Dalmia cost curve which which we are making investments for.
Speaker #1: And also, you know, it is going to take some time to ramp up, which we’ve already guided you on. So, I think we are very happy that, at least, we got in.
Speaker #1: It takes four to five years to build a new greenfield plant—acquire land, et cetera. It has really accelerated our entry into this region.
Speaker #1: And it is one more step to becoming a pan-India player. So, you know, we like these markets. It's strategically attractive. It is a good fit into our strategy.
Speaker #1: And you know, yes, in the short term, we have to execute well in terms of making additional investments to bring costs down, and also build our brand, strengthening our brand and distribution in this region.
Speaker #1: So I don't think there are any major surprises.
Speaker #2: Thank you.
Speaker #5: Satyadeep, I'll request that you come back for a follow-up question.
Speaker #2: A request to all participants: Please limit yourself to two questions and rejoin for a follow-up. The next question is from Naveen Sadeo of ICICI Securities.
Speaker #2: Please go ahead.
Speaker #6: Yeah, good evening. Am I audible? Hello? Yeah. Okay, thank you. Thank you for the opportunity. So, two questions. One is on the leadership change that you mentioned.
Speaker #6: So, effectively, Mr. Naveen Tiwari resigns and then becomes an advisor to you? Is that the way one should look at it?
Speaker #1: I don't know. I mean, what that means, I think.
Speaker #6: No, I'm just trying to understand. I'm sorry, I didn't mean to interrupt you. I was only trying to see how the shift from being completely hands-on to taking on roles in sales, marketing, and logistics happens.
Speaker #6: I'm just looking at your slide 36. He becomes advisor, so not involved in day-to-day operations. Is that understanding correct?
Speaker #1: Yes. That is correct. And I don't I I will not say it like I I would say he will be more involved in continuing to provide the continuity in the strategic footprint that he blueprint that he has created in terms of how to build distribution, how to create channel engagement, et cetera.
Speaker #1: And, you know, I will take his guidance wherever I feel it is required. He’s a valued member of our team, and I think he will—this is a planned transition, as I told you.
Speaker #1: You know, right from the very beginning, we had thought through it like this only. So I think he provides a strong platform and continuity to build that platform.
Speaker #1: Naveen is an internal. Yathin is an internal person. He knows business. He knows, you know, he's been involved in some of these, you know, initiatives very well.
Speaker #1: So, I think we get continuity from an internal person to further build on what Naveen has created, while continuing to get Naveen's guidance as we go forward.
Speaker #6: Okay, thank you. My second question then was just a clarification on the impact from JP, which Yathinji mentioned. So, when you say impact of ₹50 per ton that we have seen in this quarter, the simple arithmetic comes to ₹35 crore.
Speaker #6: Impact—that's what you're talking about? Because when you say 100 to 120 impact in coming quarters, how should one... I'm just trying to understand the arithmetic. If you can provide any clarification?
Speaker #6: Thank you.
Speaker #1: Sorry, are you talking about Q2 or Q3?
Speaker #6: That's my worry. Because when you say the impact of ₹50 in Q2 is on a volume which is slightly lower, Q3 of course you will do a much better volume. So, I'm just trying to understand how one should look at it from an impact perspective.
Speaker #6: Thanks.
Speaker #1: No, I think in quarter three, we will have higher volumes here, right? But we will have higher volumes both on the central side and on the central side.
Speaker #1: But the bigger point is that in Q2, we still have a lot of costs that are getting capitalized because we are still under trial runs for the plant.
Speaker #1: So, Q3 will have a full-fledged cost impact once we go for commercial production and capitalize the plant. Hence, the impact in quarter three is higher.
Speaker #1: So, that's the reason for that 100 to 125 outlook.
Speaker #6: Thank you.
Speaker #2: Thank you. Next question is from the line of Hitesha from Invest Tech India. Please go ahead.
Speaker #7: Yeah, hi. So, thanks for the opportunity. I just wanted to touch upon different cost heads. In the presentation, you have indicated rupees per Kcal for the quarter.
Speaker #7: I just wanted to understand your strategy on fuel mix, and how this rupees-per-kcal will actually evolve for, say, the next quarter or two.
Speaker #1: Sorry, could you repeat the question, please?
Speaker #7: Yeah, my question first is on fuel inflation. How should we look at this number in the forthcoming quarters?
Speaker #1: So I think we have reported, you know, a cost as roughly ₹1.66 per million kilocalories. And we expect this to go up by roughly ₹0.20 in Q4 based on the outlook that we have in front of us right now.
Speaker #7: Answer for the next quarter?
Speaker #1: This Q4?
Speaker #7: Yep.
Speaker #1: As I said in the beginning, we have not estimated Q4. It's a moving target for us right now, so it's too early for us to comment on that.
Speaker #7: Right. And just a follow-up. What is the fuel mix right now? If you could split between petcoke, local, imported thermal coal, and EFR? And is there any scope of increasing EFR further?
Speaker #1: We have done we are doing whatever best we can do, but we don't share the fuel mix details beyond this. So but I can tell you that, you know, in terms of optimizing the fuel mix, our high EFR percentage, you know, bodes well for us.
Speaker #1: And we are doing whatever best we are able to do.
Speaker #7: Sure. And secondly, on packing costs, you have indicated granule pricing in the slide. There's a very steep spike. How should we look at this particular variable?
Speaker #1: I think in quarter three versus—sorry, quarter two and quarter one—we have had the same packing costs by and large. So, we expect this trend to continue right now.
Speaker #1: We have not seen any signals that Q3 would be higher. But again, it's a very evolving space, so we will have to also watch out for that.
Speaker #7: Sure. And lastly, would you like to comment on the pricing for the month of October? Is it higher versus the average or compared to September?
Speaker #7: Any qualitative comments will also help.
Speaker #1: As I mentioned in my commentary, we are already roughly around ₹15 up in our core markets versus the average of September. So we have seen some positive trends in the last few weeks.
Speaker #1: And we will see how it pans out. We are hopeful that this trend will continue.
Speaker #2: Thank you, Hitesha. I'll request you to come back for a follow-up. Next question is from Siddharth Narotra from Codex Securities. Please go ahead.
Speaker #7: Thank you, sir, for the opportunity. Sir, after we get the JP assets and the BGCL asset as well, we would be close to our 75 MTPA target, which we had outlined earlier.
Speaker #7: So, I just wanted to understand from a longer-term perspective: how do we think about capacity adds and our annual capex run rate thereafter?
Speaker #1: So we are as you know, we are we will touch 67 with all the three projects, you know, central, Belgaum, Kadappa. BGCL would be as in when it happens, if it happens, we would be touching roughly 70.
Speaker #1: So right now, you know, we are not in a rush to make any further announcements. We had said 75 by FY28. If we touch 70, I think we will be pretty okay.
Speaker #1: And once, you know, you would appreciate that right now, we have roughly 20 million tons of capacity that we are bringing online at various stages.
Speaker #1: And, which entails roughly ₹10,000 crore of capex broadly. So, only once we are a little more stable with our Belgaum and our Central, maybe after a couple of quarters, we can come back to you on the next steps.
Speaker #1: But as of now, you know, we are comfortable with where we are.
Speaker #7: Understood, sir. And secondly, how should we think about incentives? Given the fact there's almost a ₹20 crore decline quarter-over-quarter, how should we think about it?
Speaker #7: When do we go back to prior levels? And how does the run-up to the prior levels look?
Speaker #1: I think the incentives I think we should go back to prior levels in in in this quarter and the coming quarters. You would appreciate incentives.
Speaker #1: There is nothing which is very subjective out there. It is basically, you know, what plants—as I said, East was a little tough region.
Speaker #1: We have some incentives in some East plants who hence it is a lower number. Plus, you know, as you would appreciate in the initial part of a project, there is a lot of ITC that can gets consumed with the GST incentives.
Speaker #1: So these are all questions of timing, I think. But we should be able to be back on course in Q3 and Q4 onwards.
Speaker #7: Understood, sir. Just one last question. Given the fact that it was also pointed out that we seem to be doing a bit worse than our peer in the East region—
Speaker #7: Is there any, what I would call, discrepancy between the different markets within the East itself? Say, for example, on a state-wise level—are there certain pockets in which we are underperforming?
Speaker #1: I think we should not—we need not go into those micro details. I think we have a task in front of us. I think, yes, a few of our peers might have performed better.
Speaker #1: I think we will we will we'll perform better from where we are. So we are focusing on, you know, uplifting the entire sales sales performance in the coming quarter.
Speaker #1: So let's keep it at that only.
Speaker #7: Thank you. Thanks, sir. And all the best.
Speaker #2: Thank you. Next question is from Sarthak from DSP Asset Managers. Please go ahead.
Speaker #7: Hi, good evening. Am I audited?
Speaker #1: Yeah.
Speaker #2: Yes.
Speaker #7: Yes. Thank you. Thank you for the opportunity. So I was just going through the balance sheet, the consolidated balance sheet. And I could find that under the intangible assets and the development, the the amount is almost quadrupled from 150 odd to around 600 odd crores.
Speaker #7: I just wanted to understand what is driving this particular increase. If you could explain, that would be great.
Speaker #1: So, as you are aware, the JP acquisition happened in May. We are in the process of doing the final valuation and PPA for those assets.
Speaker #1: It's an interim number that has been added based on the current assessment, and by and large, this value reflects the mining rights, which would be a part of the overall valuation.
Speaker #1: But I would just say that, you know, we have got a one-year window. We are in the process of finalizing the valuation and the PPA.
Speaker #1: And once we are able to, you know, close that activity, we'll have much more firm numbers. But as of now, that increase in intangible is on account of the mining rights of the JP assets.
Speaker #7: Okay. Because, as far as I can understand, these mostly comprise ingrown mining rights or that. But yeah, I think I'll correct separately for this.
Speaker #7: Yeah, that's what I think. Thanks.
Speaker #2: Thank you. Next question is from the line of Sravansha from Daulat Capital. Please go ahead.
Speaker #7: Hi, sir. Two specific questions. First, when we said that we will be growing in line with the industry at a core level, so this would be—we are looking at 7–8% kind of growth for the industry.
Speaker #1: Yeah, that's our take on the industry.
Speaker #7: And, and, and any ballpark idea in terms of, for JP, how much at that absolute level the second half the volume should be?
Speaker #1: As I think Puneeji also mentioned, the 35 to 40 percent capacity in Q3, or at least by the end of Q4, is what we are trying to chase.
Speaker #7: Okay. And the ₹15 hike that we said from the September average, this will be only in South, or East, South, and even in Central also?
Speaker #1: We are heavy on South and East. We are looking at this increase in both these core markets.
Speaker #7: Okay. And on the profitability front, just to clarify what Naveen was trying to understand, so what we are saying is, in the third quarter, there was a ₹100–125 impact because of the JP, and at the same time a ₹75–80 increase on the power and fuel on the core front.
Speaker #7: So roughly around 200 rupees kind of a increase. So net net just trying to understand the the the 15 rupees price hike given if we we are able to do seven, eight percent at a core volume, the the profitability should be improving on Q2 basis in the third quarter.
Speaker #7: Is that the right understanding?
Speaker #1: We are pretty hopeful that profitability will definitely improve in Q3 on account of multiple factors. Number one, as I said, we had the fixed cost absorption story of roughly ₹120.
Speaker #1: That won't be there. We had a regional mix story of ₹50 to ₹60. That should not be there. So we have roughly ₹150 to ₹200 per ton available just in cost, you know, mixed angles.
Speaker #1: Mixed in volume. On top of it, this ₹15 should convert into roughly ₹220 to ₹230. And there would be some headwinds on cost.
Speaker #1: But I think we should—we're hopeful that if this price trend continues, we should be touching 1,000 plus something in Q3. But it's too early for us to comment.
Speaker #1: Let us see how the price story unfolds.
Speaker #7: Okay, okay, okay. Just one last question. In terms of the net debt, then how should one look at it? Because previously we were looking at 2 to 2.5 times net debt to EBITDA.
Speaker #7: So now we are already slightly above the two times. So, how can one look at the net debt to EBITDA?
Speaker #1: I think we have repeatedly said this: that we are committed to a healthy balance sheet. And as I said, you know, we are not going to announce any more capacities till we have got Belgarm and Central that can come online and we start, you know, generating cash.
Speaker #1: So we are cognizant that 2, 2 and a half—we don't want to cross this. Right now, the number is an amalgamation of a lot of stories. You know, we are at the peak of our debt because of the recent acquisition, and the quarter volumes in the EBITDA have been relatively lower.
Speaker #1: So I think this is like a peak, fully cognizant, and we should be in the ballpark of this line.
Speaker #2: Thank you. Shravani can come back for a follow-up question. The next question is from the line of Jashandeep Singh Chaddha from Namora. Please go ahead.
Speaker #7: Hello, thank you for the opportunity. Go ahead. So my first question is, you know, if I look at your blending mix as well as your C-to-C ratio, it appears to have deteriorated.
Speaker #7: And it makes sense because your East, especially Northeast markets were impacted by the floods and adverse weather conditions. So I just wanted to understand what will be your ex-East, you know, growth or how how will be the utilization of, you know, other regions?
Speaker #7: If you can, you know, shed some light on that.
Speaker #1: We have always stayed away from sharing our regional capacity utilization and growth numbers, so we stick to that story.
Speaker #7: Okay, sir. Okay, no worries. And second thing, you know, over the last couple of years, Dalmia was trying to reduce around ₹150 to ₹200 per ton cost, even when JP was not in the picture.
Speaker #7: I just wanted to understand how the company is progressing on that, because if I look at your renewable expansion as well, it seems to have saturated.
Speaker #7: Or, you know, further will be coming in line. I'm sure about that. But right now, it seems to have saturated. So I just wanted to understand, what are the other levers of cost control, where costs can go down?
Speaker #7: Examples of JP as well, if you can, you know, let us know. Or at our entire company level.
Speaker #1: When we close FY26 and we met you guys, we had said that, you know, we had demonstrated – actually, ₹150 to ₹200 crore has been delivered over the two years that we promised.
Speaker #1: Then we had made a statement that every year, 50 to 100 is a continuous activity. It is not a milestone which is, you know, a fixed milestone.
Speaker #1: If we were to look at this quarter also, you know, we said that despite inflation, we have been able to improve our logistics cost.
Speaker #1: So, I think actions across cost line items are a permanent part of our way of working. Your point is right; you see, it's stagnated. But I think there are a lot of things that are going to go online in the next few quarters.
Speaker #1: So you will again see an uptick in that number. So, I can just tell you that, you know, cost initiatives as I said, are a part of life.
Speaker #1: And we have demonstrated a few, and we'll keep demonstrating as we go forward.
Speaker #7: Right, that makes sense. Just one clarification: the ₹15 price hike that you mentioned was across all regions, so at the company level, right?
Speaker #1: Yeah, that's pretty much average. Yes.
Speaker #7: Okay, thank you. Thank you, sir. I'll join back with you.
Speaker #2: Thank you. Next question is from Raghav Maheshwari from Equitas Securities. Please go ahead.
Speaker #8: Hi, sir. Thanks for the opportunity. I just wanted to understand—as Puneet ji also highlighted in the opening remarks—that in the East and the Northeast, we have not grown very fast.
Speaker #8: But the sum of peers who has also grown the higher single digit whose market share is more than 70 percent of their sales coming from the East.
Speaker #8: And the channel check also suggested South is also grown by the 10 percent at least for the quarter two. So where we went wrong in the terms of volume growth, where if the industry and the sum of peers grown in the East and South, both, and we have not performed in the both the geography, the can you highlight on that point?
Speaker #8: Either we share or lose the market share, or something is wrong. Can you just highlight that part? Look, look. I will share it.
Speaker #8: I think, look, you know, first of all, these regions, you know, they suffered with excessive monsoons. I also think that we are progressing on our premiumization journey.
Speaker #8: And as I said in my opening remarks, we are phasing out Konark. We are also looking at how to harmonize volume growth with profitability.
Speaker #8: So, I think there are multiple things which are in progress right now, and I don't think we want to comment on our strategy micro market by micro market.
Speaker #8: So overall, as Yatin also pointed out, there have been you know, some fixed fixed cost absorption issues in this quarter. And one quarter by no means is the, you know, future outlook of the company.
Speaker #8: I also think it was a shutdown quarter, so some of the costs, in any case, due to plant shutdowns, have been higher this quarter.
Speaker #8: So, there are a lot of one-offs in this quarter which have happened. And I think it is important for us to, you know, just stay the course and execute our strategy consistently over the next few years as we go as well.
Speaker #8: So, there is no new news in this quarter other than the fact that we have to remain consistent in what we've outlined, and we will see the results.
Speaker #8: We are very confident over the next few quarters as we stay the course. Done, sir. And last point, sir: when are we expecting the Belgaum cement capacity will get operational? As I think, the Pune grinding unit is already delayed by a couple of quarters.
Speaker #8: Then what is the plan for Belgaum clinker utilization? Or are we on track for the Pune grinding as well?
Speaker #1: Raghav, as we've mentioned earlier, we are on track for all the expansion plans. Belgaum clinker line—we have already started the trial run ahead of schedule.
Speaker #1: The cement mill is also expected to commence its trial run very soon. So, we believe that over the next few months, we will start commercial production, which will benefit us in Q4.
Speaker #1: Pune will remain on course to get online in Q2.
Speaker #8: Got it. Thank you.
Speaker #2: Thank you. Ladies and gentlemen, we'll take the last question from Kirijare from Nirmal Bank. Please go ahead.
Speaker #7: Hi, thanks for the opportunity. Just, you know, coming back to Raghav's question—see, when there is a cost rise, obviously, the industry knows they will take a price hike to absorb the, you know, cost rise.
Speaker #7: And, you know, our bottom line numbers will be good only if our top line grows. And here, over five years, I can see our capacity utilization has not improved.
Speaker #7: I can say it is in between 60% and 65%. It is a fact that we are entering into the central market. Things are looking good.
Speaker #7: But only to confirm, it's capacity utilization. If my capacity utilization is not performing well—as per the industry player, let’s say, Novo—Novo’s capacity utilization is very good, I can say.
Speaker #7: In other southern players also, their capacity utilization is good. Where exactly we are lacking—means, you know, as Raghav mentioned, are we losing market share anywhere?
Speaker #7: See, if it is not losing market share, somebody else is taking the market share, right? So, how are we going to increase capacity utilization going forward?
Speaker #7: And second most importantly, as sir mentioned, the there are a lot of one-off in this quarter. So can you quantify that kind of what is that one-off which will not be reflected in third quarter?
Speaker #7: These are my questions. Thank you.
Speaker #8: Let me address the capacity utilization point. I think that's a fair point, in terms of our utilization having to go up.
Speaker #8: And I think we are very focused on that. And as I said, there are two or three things that we are doing. One is, we are balancing profitability with volume growth.
Speaker #8: The second thing is that, you know, I personally think that it is going to be very, very difficult to put up new plants at this, you know, price point in the future.
Speaker #8: So maybe some of our plants have come a little bit ahead of schedule, and we have to ramp up our sales capability, distribution, and brand at the same pace.
Speaker #8: But, you know, just executing projects in India and commissioning them itself is a, you know, big value add. And I don't think you can replicate plants at this cost, you know, in the in the future.
Speaker #8: So I think from a strategy strategy perspective, yes, you know, you know, creating capacity to serve the market, which I think is going to be huge in India.
Speaker #8: Because of infrastructure, because of structural demand factors like housing, infrastructure, private capex, etc., at some point in time, that will also come.
Speaker #8: Is the right strategy. Now, you are absolutely right that, you know, some of our execution has to be faster. And again, as I said, which we are focusing market by market, you know, location by location.
Speaker #8: So, you know, we are quite confident that this is the right approach. And yes, there are some learnings which we will learn and correct upon.
Speaker #8: So you know, I don't see a couple of years as a as a, you know, a challenge in in a long journey. And the good news is all capex, all investments have been done.
Speaker #8: And now, as volume ramp-ups happen, as, you know, margins improve, there is going to be a huge growth in profitability without further investments. So all investments have gone in the ground and we are quite confident that, you know, it's going to yield results soon.
Speaker #8: Now, regarding your one-offs, I will let Yassin know.
Speaker #7: I think the one-offs you answered, you know, if you were to pick up pick up two line items for the quarter, I think there is a regional mixed story.
Speaker #7: And that is something that impacted our numbers, and there's a fiscal absorption story. So, beyond that, I think both of them will get reversed in Q3.
Speaker #7: So I really see us focusing on what we have to do, what we can control. And I think this market story would just reverse in Q3, is the way we look at it.
Speaker #7: So that's that's our view on the one-offs. Unless you're talking about the balance sheet, which I've already explained as one-offs. So can I can someone expect a 70, 72, 73 percent kind of capacity utilization in FY 28 and 29?
Speaker #8: I would rather hope so. I think let's wait and read there peacefully, and then we'll talk.
Speaker #2: Thank you very much. Ladies and gentlemen, we'll take that as the last question. I will now hand the conference over to Mr. Dalmia for closing comments.
Speaker #8: Thank you very much for your interest. I wish you and your families a very happy Diwali, and I look forward to seeing you in the new year, 2027.
Speaker #8: And Happy Diwali, Happy New Year, and a great festive season to all of you. Thank you.
Speaker #2: Thank you very much. On behalf of Dalmia Bharat Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
