Dalmia Bharat Limited (DALBHARAT) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the earnings conference call of Dalmia Bharat Limited for the quarter ended 30th June 2026. Please note that this conference call will be for 60 minutes -- this conference call is being recorded, and the transcript will be on -- 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. 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. On the call, we have with us Mr. Puneet Dalmia, Managing Director and CEO of Dalmia Bharat Limited; Mr. Dharmender Tuteja, CFO of Dalmia Bharat Limited; Mr. Yatin Malhotra, CFO of Dalmia Cement Bharat Limited; and the other management of the company. I would now like to hand the conference over to Mr. Prassan Goyal, Head of Investor Relations. Thank you, and over to you, Mr. Goyal.

Thank you, Michelle. Good evening, everyone, and thank you for joining us today. I hope you had an opportunity to look at our financial results and the presentation we have uploaded -- let me now hand over the call to Mr. Dalmia for his opening remarks. Thank you.

Thank you, Prassan. Good evening, everyone. When we last spoke, the global economy was navigating an increasingly uncertain economic environment marked by supply chain disruptions, heightened commodity price volatility and rapid technological shift. Since then, those uncertainties have not only persisted, but in many ways, have become the new normal. Yet India remains one of the fastest-growing major economies globally with an RBI growth projection at 6.6% for financial year '27. Despite maritime disruptions, industrial production and exports have performed well. GST collections reached an all-time high of INR 6.3 lakh crore in Q1 FY '27, underpinning strong domestic consumption. Public CapEx remains another key pillar supporting economic growth. Capital spending in the first 2 months interest to 21% of the annual budgeted out. long-term capacity creation. In is use stayed within the RBI comfort range, but uncertainties rounding the progress of monsoon due to potential effect of alumino continues to warrant close monitoring. These factors may create short-term fluctuations, but do not alter the structural growth drivers of the Indian aconthis backdrop, I believe the cement demand will also grow at a healthy rate of 7% in this financial year. Zooming into the first quarter. Cement demand was stronger than most of us expected. For Dalmia, however, the quarter was someone detail as several of our key markets underwent state elections. such periods typically result in a temporary moderation in construction activity with project execution slowing during the detection cycle -- despite these market-specific challenges, we have delivered a robust volume growth of 9% on a Y-o-Y basis. More importantly, this growth was accompanied by a marked improvement in the core of our sales. And the share of premium products in our portfolio has moved to a healthy number of 25%. During the quarter, we introduced Weather365, our premium plus offering, which has received an encouraging response from us. I believe this launch will further strengthen our premiumization journey and enhance the quality of our revenue over time. This quarter was undoubtedly influenced by elevated input costs. Yet, I'm pleased with the progress made through disciplined pricing and decisive cost management. Pet coke prices surged to nearly $160 per tonne before moderating to between $130 and $135 per tonne, well at pre-walls of $110 to $115 per tonne. In response, we intensified our efforts across procurement and operations through better planning and inventory management, diversification of sourcing and optimization of our fuel mix. Collectively, these initiatives generated savings of more than 10 cubics per tonne during the quarter. At the same time, price increases of about INR 10 crores to INR 50 in the south and INR 15 to INR 20 in each markets, enabled us to pass on a significant portion of the input cost inflation. As a result, EBITDA tonne improved sequentially to INR 155. As we consolidate our brand position and cost leadership consistent and meaningful initiatives, I'm confident that we will continue to deliver profitable growth in the quarters ahead. Now shifting gears to our capacity expansion plans. I'm particularly excited with the addition of JP Cement assets to our portfolio. This acquisition 5.2 million tonnes of cement capacity supported by 3.3 million tonnes of clinker capacity in the strategically important Central India region. This asset also offers meaningful opportunity expansions. It's a great strategic fit for Dalmia as it strengthens our presence in a key growth market and another important step in our journey to becoming a truly pan-India company. I'm equally encouraged by the speed and efficiency of the integration. We commenced operations at the China grinding unit and started trial production run at Rewa claim per unit in 50 days of completing the acquisition. A testament to the quality of our execution. The Albian already established a strong brand presence in the region with the continuous ceiling of markets since the past couple of years. This positions us well to deepen our market penetration and unlock the full potential of these assets in the coming quarters. With this acquisition, along with our ongoing expansion projects at Belguan, Kadappa and Puna. Our cement capacity will read about 67 million tonnes by quarter 3 of financial year '28. We are working on some more projects, which will be announced in due course. Before I conclude, I would like to say there is at an inflection point where we are adding capacity, diversifying into new regions, fortifying our brand position and strengthening our cost leadership. I'm deeply encouraged by what we have accomplished the spa and even more excited about the opportunities that lie ahead. As we continue to make meaningful progress on our strategic priorities, building a high-performing organization, accelerating automation, advancing our sustainability agenda and upholding the highest standards of governance will remain a key focus area enabling us to build a more agile, efficient and future-ready enterprise. Before I hand over to Dharmender, I would like to take a moment to congratulate him on a highly successful tenure as CFO of Dalmia Bharat. Under his leadership, the company has delivered robust growth and strengthened its initial strategy. I wish him the very bes. Thank you, Dharmender and over to you.

Thank you, Puneet, for his time words. I also thank you for having reposed trusting me and for your continuous guidance and support. It has been a privilege to serve the company through an important phase of growth and transformation. I'm pleased that we have been able to enhance governance standards and establish a disciplined capital allocation framework, maintaining a strong balance sheet. I would also to thank our Board members, as team, my dealers and team members in other solutions and all stakeholders for their excellent cooperation and support during my tenure. Transition of my role to [indiscernible] over the last 15 months has been a senior post as the company is entering into exciting phase of excited growth, I'm sure that then is perfected to take the organization to greater heights of success. Coming back to my opening remarks, I wish good evening to everyone present on this call. I will start with an overview of our operating and financial commence during the quarter. As per analyst, [indiscernible] cement demand for the industry grew by about 7% Y-o-Y in quarter 1. The first 2 months saw modest growth by meaningful improvement in June, supported by the return later to construction sites, for selections along the delayed monsoon. Despite a disrupted quarter for our operating regions. We delivered a robust growth of 9% on a Y-o-Y basis. If we set aside the one-off impact of [indiscernible] last quarter. This is our third straight quarter of healthy growth. Revenues from operations improved by 5% Y-o-Y during the quarter, INR 3,890 crores. grown by sales volumes. Realization grew 6% Q-o-Q, supported by healthy price increases, higher premiumization and strengthening brand position. During the quarter, we grew INR 5 crores in incentives and corrected INR 60 crores. Tencent outstanding at the end of the quarter was INR 822 crores Incentive approval should remain in a similar range of INR 45 or INR 50 crores per quarter in the next couple of years. This quarter was largely impacted by cost escalations coming from the Asia concept, while input costs have moderated on their levels the recent surges in hospitalities will remain a key factor insurancing cost trends in the near term. During the quarter, our raw material cost per ton of production increased 12% Q-o-Q to INR 823 primarily due to increase in the limestone basin cost and other cost havens. Our fuel cost per ton of production increased by 10% Y-o-Y to INR 1,035 reflecting the sharp escalation in fuel sites. As may be highlighted earlier, we responded proactively by implementing a series of measures, including strengthening inventory learning and optimizing fuel sourcing and mix officially. These initiatives help to meaningfully mitigate their backdrop fuel cost inflation and reinforce our cost competitiveness. And the input costs remain above peer levels, we expect [indiscernible] to stay elevated in Q2. The blended fuel cost during the quarter increased Q-o-Q on 1.36 per kg to 1.4 per kg. Further, 48% of our gas consumption has been sourced through renewable energy. This year will continue to base as we add more renewable energy capacity to the -- during the quarter, segment freight per ton of dispatches has remained largely flat on Q2 visits. Clinical fetal detections has increased 11% Q-o-Q due to higher clinker movement through growth during the quarter. Coming to [indiscernible] component. Employee costs increased 13% Q-o-Q to INR 245 crores, primarily due to the incremental impact and certain one-off favorably and one-off available impact in Q4 last year. Other stances rose 3% Q-o-Q to INR 62 crores on account of sharp increase in backing prices from about 9.5% at almost 14% back in -- while prices have moderated from the quarterly average, they continue to remain well above the historical levels. EBITDA pardon improved to INR 1,035 during the quarter. On absolute basis, EBITDA declined 11% Q-on-Q INR 85 crores. as the benefit of improved realizations was offset by lower volumes and higher costs arising from external headwinds. Now going to 1 of victories. Other income increased for this INR 19 crores, mainly due to the mark-to-market gains on treasury investments. Capes during the quarter increased by 12% Y-o-Y to INR 361 crores, mainly due to the capitalization of Homebase unit in January -- for full year FY '27, we expect that petition to increase by INR 100 crores as we commission the acquired JP plant and commercialize build-on capacity. It was increased by INR 30 crore INR 250 crores in IFRS 28 with the commissioning of Kudappa and f[indiscernible]. Finance costs during the quarter increased by 36% Y-o-Y INR 47 crores increase in gross debt owing to acquisition funding. The average cost of debt has been ranged down at about 7%. Okay. Exceptional item of INR 182 crores, primarily includes expenses towards standouts and commission fees and above overheads in tune by the company with the acquisition of [indiscernible]. Turning to capital allocation priorities. We successfully completed the acquisition of the JP Cement assets on May 2026, at an enterprise value of INR 2,850 crores. The transaction was funded to a prudent mix of debt and internal approvals. In addition to this we are further investing to enhance the operational performance of the acquired assessment, including installation of 18-megawatt locate facility at the Rewa plant. We have made an encouraging start to the integration process. We expect deals to begin contributing meaningfully volumes from third quarter onwards. At the same time, we are steadily embedding Dalmia operating practices across the facilities with a strong focus on improving efficiency and enhancing proactivity. Our Malcom expansion project is also progressing ahead of [indiscernible] commission commence commercial in the next 6 months. At Kadapa and Pune, site action is underway with contractors who mobilized to begin civil and mechanical work. Excluding the cost and acquisition, we have spent about INR 50 crores on CapEx spend during the quarter. Our CapEx maintenance for 2 is expected remain at around INR 3,200 crores to INR 200 crores, in line with our earlier guidance. of this project would be roughly INR 200 crores, while the balance of [indiscernible] maintenance, JP catch CapEx and other ROI projects. Our gross check at the end of the quarter increased to INR 9,100 crores, primarily due to the risk while debt increased to INR 4,400. Importantly, even after funding this acquisition, our leverage stood at 7x comfortably below 2x net debt-to-EBITDA, demonstrating the strength of our balance sheet and disciplined approach to capital allocation. With this, I open the floor for question and answers. Thank you.

[Operator Instructions] Thank you national with senate -- the first question is from the line of Navin Sahadeo ICIC Securities.

Congratulations for a good set of numbers. My first question is about JP. And again, congratulations that deal, it was mine along and finally we got -- my question is do it 50 is the drive for the asset, and there is 100 million in line. So regarding this limestone, I wanted to understand if we have the energy and required to access this 100 million tonnes in control, if not what is the land that will be required in approximate cost? Or the company has a backup plan that since your mine, as you mentioned in the presentation, is very in close proximity to this existing we can not really bother about buying that land, if at all, the prices tend to shoot up. If you could just help us understand baked on limestone reserves than costs associated with it?

So I think Navin mix of both. Number one, Yes, we have reserves in the visibility, and I think it is not the geodetion for us. Having said that, what land already exists with the JP or ramp-up for the item -- and land procurement to keep securing our results is a part of the process in any plan that we run. So I think it's a continuous activity. We get go to go in the initial few years. We have an adjacent asset already available, and then we keep expanding the land to organize this further.

But any ballpark number that's so much cost because we just to understand the total, let's say, cost to this acquisition, will be additional like to get this entire 100 million tonnes will be INR 100 crores or INR 500 to INR 1,000 crores, any bottlpark number today.

I don't think you can indicate an exact concern that we right now in the process of assessing this. And for any tactical purposes, this will happen gradually. So this is not like a onetime hit this won't come into -- so there's an ongoing process.

Sure. My second question then was about like the client capacity kind of a mismatch in the Eastern region, and now it's more so in the Northeast because we have surplus clinker there, but not much. grinding. I believe the existing East also the cation the way down, we have more grinding there, but less clinker. So how are we looking to utilize or make optimal utilization of the Northeast clinker plant that we commissioned, I think, a quarter or 2 back? So are there more grinding units coming up investment goal or to be had? How should 1 look at utilization of that asset?

So for the Northeast sales, I think that commentary consistently has been. We believe in the potential of the geography, we have invested ahead of time in clinker and branding. Yes, we have a little excess clinker available in that base. And as -- in our journey to trans and expansion, setting up a branding unit somewhere that being the unit is on the table. We have not yet announced that exact project. So I can't detail it beyond this -- but I think balancing the clinker from Northeast and sedans digital branding is there on the agent.

The next question is from the line of Amit Murarka from Axis Capital.

So the first question is on exceptional expense that highlight crores. Just in like on our asset acquisition value of INR 250 crores, it seems at 7% of the acquisition cost. So just wanted to understand it better that how much of these stand duty and with other expenses that have been out?

Amit, I think it's been a couple of months since we have entered this transaction, there is a lot of activity that is going on in terms of testing the right standard-duty amount and other institute costs. We have taken a provisional conservative number basis the preliminary assessment that we have done so far. I don't think the number will -- will be the final number. I think give a couple of months. Anyhow, we have to do this entire registration in the next 2 months. So I think by the end of next quarter, we'll have more clarity on this. But I can just say that this is a provision of conservator end up being a little better than this.

Sure. And also, could you just give some guidance on the ramp-up of the Central India asset swap utilization looking in Q3, Q4 in FY 2028?

Okay, that -- as Pune mentioned, and we've also given it out in our Investor Day, in the first 5 days, in the first 20 days, we got the first branding unit up and running. Then we started the trial done at [indiscernible] so it's a topic that we are attempting to with atone urgency. Having said that, I think we will give it some time for it to stand on this slide, and we will be able to give a little more realistic estimates once we have taken a fleet control of the set in the market and might be we are hopeful that we tinge utilization in a few quarters, but no guidance as of now. it.

Sure. And kind of last question if I put in. So what's the expectation on cost now given that they have a good sense of the coring and all like what is the outlook for Q2 and then forward prior today, I think even more clear on the Q2 is going to sort of pan out. But now we, again, are in very determinant times.

Again, I can give an estimate that we're looking at the $78 increase in terms of input costs, I would say that the tail impact that was supposed to come and it -- but as things that's evolving, we will have to reassert this number. So let us see how this pans out for us and for the industry. just to be clear, is the excluding negative operating leverage in Q2. I'm just telling you the macro headwinds, negative operating leverage is a part of parcel of will come and so that's a separate discussion.

Sure. Thanks, I'll come back -- the next question is from the line of Kunal Shah from DAM Capital.

Yes. So first on the JPA ramp-up it, I understand a bit early -- but could you just explain or give some insight on what was the quantum of volumes we would have done in F '20 sites to the existing to protein markets of JP from existing plants like is the network still active? And can we be sort of capitalize the ramp of G Sobi Ponal, what was the second part of the question? No. What I'm trying to understand is how much volume would we be selling to the potential JP, let from our existing plants in East. it'sIs that numbers, if you could help, like during treat would be the quantum of it? And if work over there is still net is still active sort of can we capitalize it to ramp up the quickly.

So the answer to your second question is definitely yes, I think we have been very cautiously getting at market. So we have a decent presence in terms of network and brand -- and the answer to the first question is that I would rather not give exact numbers of how much is sold in central market from East. So yes, that's it.

Understood. Second, a company would be adding almost 40% capacity in that will be the quantum within like 1.5 years -- and along with like the potential turnaround the Easton market, how to think of volume growth outlook over the next 2 years? Like could you put any guidance over there?

Kunal, we really believe the industry per se would grow 7% to 8%. I think we should be -- for the organic numbers, it should be in line with the industry but it is in line with the industry. And so the additional capacity as we ramp up I think will give additional volumes. So I think we can put 200 together on the one. I can just tell you that as we said, JP, we are entrenched in the market so that the get-ahead start Belgamore the capacities come in. Again, it's a market that we know like the back of our hands. So for us to ramp up should not be an issue. We are hopeful that we're delivering decent both organically and also with the determinant.

Understand -- and lastly, just 1 keeping. Look, in terms of 9% volume growth during the quarter, the operating market give some bit of bearing our operating markets like East and South and Northeast, what would be the blended growth in those markets and versus talk how that, so in our early days, not all these are out, our guess is that we would be at least 200 to 250 higher than the industry.

But I think once the numbers are also we can understand better.

The next question is from the line of Shravan Shah from Dolat Capital.

Sir, just put to more sense in terms of the capacity -- so obviously, with the JP and the ongoing expansions, we will be close to 6 million tonnes by Q3 -- so 1 on this, we have mentioned that not as we will be adding a broad idea, let's say, even if we announce now also by FY '28. And can we add 2 million to 3 million tonnes there? And second, in terms of previously, we were looking at to 75 or 28. So particularly the distention tonnes -- so will that now be in FY '29 1 can look at. I understand we will be announcing, but broadly, -- it will not be coming in FY '20. That is kind of a clear that way 1 can look at?

I think the way I would see this is that the path is clear, the date the milestone was is definitely something we're looking at, but an indicative milestone at 67, we are very clearly on that path. The scanning unit, as we mentioned, as you also mentioned, you should take us in the vicinity of soon. whether it happened in the last quarter of 2018 or first half 29 it doesn't change the game too much. And as you would appreciate, Sean, we are right now in the midst of executing roughly CapEx of -- including if I were to see JP because we are stabilizing -- so we are handling 17 million -- 16 million to 17 million tonnes at this peak. So we have to be careful how many in front we open. I think once we have this settled and I think give us a couple of quarters, you might enter get more announcements from us. But if the base we see it generally be a pain place to FY '21 in roughly 110 million odd tonnes. That path is clear. So a few quarters there and they actually don't make too much of a distance on this.

Okay. So -- and also previous let's say, of 70 to 67 and even by a 2 million, 3 million tonnes or 70 million by quarter then the next 4 years, 2930, 31 in 3 years, we need to kind of add 40 million tonnes. Do we still kind above want to achieve 110 million tonnes by 31 because given that to achieve that we need to do a significant -- and obviously, the net debt will significantly rise. So are we also kind of thinking that even will not minded to reach by F35 also. still speaking that 31 we to reach 110 million tonnes.

I think this is I think I've already said in many of my earnings calls earlier that this is a directional number upon how the industry is doing, we can calibrate as speed, we can dial it up or dial it down. So like a couple of years here, there it doesn't matter broadly, the direction is pan India and the direction is going to be around 10 to 110 million to 130 million tonnes. So I think you can see how the industry was, let me see how the macro situation. And I think based on that, we will remain flexible. We have said this earlier also, and we are seeing this now also. So let us take the example of 75 our earlier target first financial -- and now we are going to get close to it in financial year portion year behind schedule on a. So I would say that we will be disciplined about our capital allocation. We will be very focused on our strategy. and we will focus on growth, which is financially accretive and making sure that our balance sheet is as resell not but the banks sir, that's what the feedback also wanted to give the delay would be better. Yes, I'm just completing the -- so that's what the bank is. So we should be looking at the balance sheet, which should not be minding in terms of dealing -- the focus was to keep on using the existing assetization and people improving the balance sheet. So that's the sales and -- so let's sure we will be going to the end of November.

The next question is from the line of Siddharth Mehrotra Kotak Securities.

I just wanted to say the INR 2,400 crores number. The patient is to Yes.

Actually, I don't think the CapEx would change this number significantly. It's a over INR 200 crore range. And we will be in the vicinity of this number even including the JP CapEx because even if we start either project, the cash will not happen immediately. So you can pick up the same number, including the so.But definitely, this is not with the bulk INR 28 crores, INR 50 crores. So that is on top of it. But all the [indiscernible] if you can see startup as fixes is a part of the that's organic. -- mechanic is on the way.

Okay. Understood. I just wanted to clarify, in the we gave over to investments and resource on deal we noted a number of around 5% or us, including for [indiscernible] and efficiency almost on amounted that estimate will be in they're not materially different, but this is a [indiscernible] gradually. But I don't think -- there are a lot of nuances and even any of the plants that we run, the plants that we've done, it is an evolving thing for us.

So -- but I can tell you the 550 is the niche of the thing on the table. Let us give us a few quarters changing to this. And then we will keep adding as and when the reserve.

Understood, sir. we also highlighted that we can grow our capacity there by around 2 million tonnes or numbers of ballpark estimate on the time line will you actually think of expanding capacity in the required as?

Again, Siddharth, very early in the day. Give us some time, let us get a little more acclimatized with where we are. That is fitting my okay agenda, but that will happen sequentially. We can't jump the [indiscernible].

Understood. Secondly, I just noted that the nasal engines slightly put forward with the startup of line -- so in fact, the due to balance or balance sheet situation? Or are we sit also running delayed on the operational side of in terms of execution?

We had some phasing travels on the execution start point and that is the reason. So Pune is not something that we have done for balancing our balance sheet right now. it's a new place for -- I think we get more time to sort out certain issues, but I think we are back on track.

Got it, sir. And first of all, just die, do we expect to grow in any of the industry around 7%, 8% or now that we have key assets would be more optimistic offer slightly higher numbers.

I think in that position outside of acquisitions or new capacities, we want to grow and in the industry. We actually want to do more, but you can take the guidance in line with the ins -- and whatever the added capacity either by acquisitions or new projects that should be on top of it.

[Operator Instructions] we'll take the next question from Pinakin Parekh from HSBC.

So my question is on cement prices. we have seen after some time Easterners is going through and sustaining. This still remains below other regions in Pan India -- so in your view being asset in insomnia, what will it pay for this price gap to narrow? I mean, given what's happened in Bengal recently, -- can we expect the price capital narrow this year? Or is it more like the next 2 to 3 years where pricing gaps in other regions can narrow?

Well, I can -- we don't have an answer that what will it take to make the prices take I think it's a very dynamic part of the industry, and I think you know this as old as I endpoint. So we are hopeful good sense rail and need a sale the better prices can happen as you know, but let us see how band. We have no other take on the stocking. What we can tell you is that as a brand, we work on premiumization and the topics, so whether it is premium products or whether it is premium pricing, that has been very strongly as what goes to market price is something we us to see together.

Got it. The next question is from the line of Satyadeep Jain from AMBIT Capital.