Birla Corporation Limited (BIRLACORPN) Q1 2027 Earnings Call Transcript

Ladies and Chairman, good day, and welcome to the Birla Corporation Limited Q1 FY27 Earnings Conference Call, hosted by HDFC Securities. As a reminder, all parts of the lines will remain in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal the operator by pressing star, then zero on your touch-tone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Rajesh Kumagavi from HGFC Securities Limited for opening remarks. Thank you. I'll over to you, Rajesh.

Thanks, Ryan. Good afternoon, everyone. On behalf of HGFC Securities, we welcome you all to the earnings call of Pirlo Corporation Limited for Q1 FY27. On behalf of the management, we have Mr. Sandeep Ghosh, MD and CEO, and Mr. Raditya Saragi, Group CFO, including other senior members of the management team. I now hand over the call to the management team for their opening remarks, which will be followed up by the Q&A. Over to you, sir.

Very good afternoon, and thank all of you for joining on a late Saturday afternoon on the weekend, as the weekend is starting. The results already should be before you. The press release is out. We have informed the stock exchange. This quarter, I would say that we have been, to some extent, You know, a victim of our own success. And I'll explain why I say that. Because we had, over a period of time, maxed out on our trade sales, trade volumes, and lender cement volume, which... Unfortunately, that segment did not see any significant price increase. In fact, they saw a bit of a price rollback in the last month of the quarter. Whereas the real gains have come during this period from the non-trade segment, industrial segment, and OPC, which is again not our strong suit as a matter of strategy. We have defocused from OPC because our capacity is, as you know, very high level of capacity utilization. So we focus primarily on blended. So the blended, overall in the industry scenario, since the blended cement realizations didn't go up as much as didn't go up at all in comparison to the non-trade, which showed significant recovery in most markets, especially north and even the center, our relative realization was lower than what was anticipated. We have expected that some amount of price correction will happen during the quarter, and especially since demand was pretty buoyant from the middle of May and June, but we were surprised. That the reluctance on part of players to pass it on to the market, they instead focused on correcting their non-trade and OPC prices and not really touching the trade prices where the gap certainly came down, but overall price levels, I don't want to get into what is our reading of that. But this affected us most in central India. Unfortunately, Central India, for whatever reason, the prices have remained soft practically for the last one year, I would say, because of competition dynamics. And since over a period of time, again, our dependence on Central India or dependence on Central India is very high. And it has, in fact, increased further with the commissioning of Kundalini Line 3. This, I wouldn't say hurt us, but we could not be beneficiary of the increases which were seen in, say, for example, North, and certainly in the East, which, as I see the reports of the many companies, the East-based companies coming through, There has been people have seen a major spurt in profitability over there, but we have a very small presence, as you know, in the east, so we didn't benefit on that. Maharashtra... It's the same story. We have been going in Mukutban, maintaining the volumes, in fact, changing the product mix to get into more approximate markets. We don't want to go all the way up to Bombay, etc., except for the high-value OPC 53, which is sold in that market. We sell a bit of that. We are trying to focus on the closer geography. But we could have, or we would like to ramp up the production further. We have headroom for it. In the last quarter, there were sporadic disturbance in logistics, as you know, for the availability of diesel and trucks, etc., that area. There were periods when there were... Dislocation and logistics, so we lost some volumes over there, so there could have been additional volume gain in Mukurban, which remains an opportunity area for us. Going forward, we think we will be able to take advantage of that. Now, I wouldn't like to, we'll come back to our outlook of the second quarter and the rest of the year, which you know, most of the industry players who've declared their results have already spoken on that. We have certain other marketing plans, which we shall share with you at the right time. Which we are looking at, given the constraints, as I said, of the central region, prices remaining where they are, and if this continues, if the bigger players do not show any interest in raising the trade prices, we have to also revisit some of our strategies, which we have thought, but that will depend on how the market pans out. In terms of costs, I think in terms of our estimates, We have managed the costs reasonably well, given our, again, our geographic spread, our dependence on pet coke being, where it is lower in terms of replacing. I think some places we do have limitations in terms of using domestic coal, which some players have done and been able to, again, on a relative basis from their initial base, they have been able to bring down. So for us, that has not been significant. We have been hurt in... Again, on the petroleum front and our mechanical mining, which happens in Rajasthan, there are, because of diesel costs, etc., some of that has added to our cost basis. But overall, in terms of our assessments, in terms of our estimates, We think we have done reasonably well on the cost. Mr. Saroghi and Mr. Prushti, they will answer that more specifically. As we go forward, second quarter, we are all looking eagerly at how the markets span out. We are almost towards the end of July. So far, we haven't seen any movement in terms of pricing. Due to delayed monsoon, demand is continuing well, but if there are monsoons hit later, one is... One doesn't know how much it will have a carryover impact into the third quarter. If the agricultural scenario is not that good, if the harvest is not that good, but this is too early to predict that, we will look at it when we discuss either in the course of this quarter, we will talk about it, or when we discuss the next quarter's projection. Thank you for my side at the moment. I will leave it to Mr. Sarogi, Mr. Prushti, Mr. Kalidas Pramanik, and all of them there. So you can actually go straight into the questions, and as per your questions, we will take on the respective colleagues will answer. Thank you very much.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

Ladies and gentlemen, a reminder, if you wish to ask a question, please press star and 1. We take the first question from the line of Shravan Shah from Dallad Capital.

Please go ahead.

Hi, sir. Sir, before asking questions, just four or five data points so that it would be better to ask a proper relevant question. Sir, if you can share the Mukundban volume, lead distance. Fuel cost, that is a QQL for fuel, and it capex for first quarter and late date

as on first quarter.

Mukulban volume was 7.5 lakh tons, total lead distance was 3.35, Mukulban lead distance was around 400 km, and KTIL cost was 1.64, what was the other?

And CapEx and NetDef for Q1?

CapEx was around 120 cross.

120, okay. And NetDef, sir?

It gets 2300 crores.

2300 crores. Okay.

Got it.

And the incentive will be at 28 crores?

Incentive, we have actual 33 crores.

Thank you, sir. Okay. So now, sir, as far as in the opening remarks, I have mentioned that whatever is our plus point in terms of the trade, blended cement that are working against us in terms of the, we are not seeing the price hike there versus the non-trade we are seeing. So, given this and also at the same time, the Q2, maybe the way that everybody is talking in terms of the cost pressure would be there. So, two things to want to understand in Q2, given, let's say, the prices as it is, where it is, how much more cost pressure on part-time we can see in the Q2, including everything diesel. Obviously, packing will not be there, but the fuel and the diesel. And overall, last time we said that we are looking at kind of 6-7% or maybe industry kind of growth, and then EBITDA per ton of last time, which is 7.86, but given this, then maybe Q2 will be rooted. Is it fair to say, unless the price is improved, we would be seeing a portfolio F27, maybe a decent decline on the EBITDA button?

I'll start with the initial comment on the realisation. Now, on the face of it, you find that there is a reaction in realisation to reaction of about 40 rupees per time, but you have to see it in perspectives. One, as I said, the incentive book in this portal is about 33 quarts. Now, in the two-four of last year, Total incentive booked for 60 crores. So, on account of lower incentives, there has been an impact of about 50 rupees per time. On the realization, on a different basis. And similarly, on account of several other factors, as we have always maintained there are certain year-end adjustments relating to discounts, etc. So, having regard to all those factors, actually, if we exclude those factors of radiation during the quarter, it's actually gone up by ATU pills on a sequential basis. Okay, number one. Coming to the question you asked in terms of cost pressure, yes, we continue to see cost pressure, particularly fuel, the full impact will be seen in Q2. So in Q2, we expect the cost to increase by 70 to 80 rupees sequentially. And as far as the growth is concerned, we are maintaining our guidance, which we have provided earlier. And as far as the EBITDA for the whole year, it is too early to come in. We are hopeful of, you know, prices recovering in the markets to operate. So it is a great few measures to come in on the EBITDA for the whole year.

Okay. Thank you, sir. I have a couple of questions, but we'll come back in queue. Thank you, sir.

Thank you. We take the next question from the line of Saket Kapoor, from Kapoor and Company. Please go ahead.

Yeah. Namaskar, sir, and thank you for the opportunity. Sir, Rao Gigi, as you mentioned that the capital for the quarter was to the tune of 120 crore. So what have they outlined for the current financial year?

We are maintaining the guidance of 900 crore for the whole year.

Okay. And the debt number at 2300, so what would be exiting the debt figure?

That is, we are not changing our guidance, whatsoever guidance we have given, I think possibly it was around 2,000 or across, so we are maintaining those guidance.

Okay, and sir, in terms of the capex part, for this year we will have the benefit, entire benefit of the Kundalaj line. The grinding one, 1.4 million, that will add to the volume. So how are we moving ahead with our timeline of FY29 of 27.6 metrics and capacity? How are things aligned? Yes, yes.

Whatever guidance we are given, we are not changing, we are on track to achieve our guidance. Okay, in terms of capacity expansion.

Okay. And sir, can you just explain to us, Mr. Ghosh, about the dynamics of trade and non-trade mix that have changed? And as you mentioned that we need to take the court correction. So what has exactly happened?

We have not taken, we don't want to take cost correction in the terms of trade and non-trade. We are very happy with our mix. We are not going to give up trade to go into non-trade. That is not, if that is a takeout, I'm sorry, that's not what I meant. I meant that knowing that we will be focused on trade as per our strategy. And if other players are not willing to take up prices in that segment, for whatever reason of their own, if they are happy to keep the prices low, and not going for price increases, we have to then decide on our own strategy of how to play that market. That is a marketing thing which we are not going to discuss on an open call. But we cannot be dependent on others. You know, for very inexplicable reasons, when costs going up, everything, if they do not feel the need to take up prices in that segment, we will have to figure out how we protect our margins in that segment, which would be, not necessarily by taking up prices, it would be through other measures by which you do. So that is a part of the strategy, but we are not certainly going to change our strategy to reduce trade and increase non-trade.

And the non-trade is pertaining to the government purchases, that is the institutional one. So, as you mentioned, there is a lot of traction in that category. That is what the understanding is. And there is a lower opt-in for the trade segment, that is from the housing and the other segment?

I don't agree on that. If you see the volumes of the last quarter, May onwards, May, middle, May onwards, everybody has sold well. That's why they have got growth. The growth has come from both segments. Delayed monsoons have, in fact, kept the momentum going in rural demand as far as rural housing, etc., is concerned. Because habits were good and people have done. So that has continued. When we talk of non-trade, non-trade is not necessarily just infra demand. There are also real estate, big large estate development. There are other industrial development where it goes. The problem was in previous quarters, in last year, there had been a severe undercutting in the non-trade segment due to which the trade-non-trade gap had increased to abnormal levels. And that was also hurting the trade prices and trade volume because in these markets there is always leakage. There is always spillover from one side to the other. If non-trade prices are very low, some of the material will naturally flow into the trade market and affecting both volumes in trade as well as the realization in trade. The players who have got larger stake in non-trade, they therefore first concentrated on correcting the non-trade prices. Because those non-trade prices were not remunerative on a fewer to compare, on a point-to-point, like-to-like basis. Those who have a higher non-trade component, and if non-trade has improved a realization of 10 or 20 rupees per bag, that translated into the top line better than others. Now, since we are already focused on 85 percent. Practically on blended cement and over 80% on trade. And if that segment hasn't grown up, although we are, our prices were picked wherever, we didn't get that incremental gain. In that, because that segment didn't grow. And because our non-trade component is low, whatever improvement over there, that has only a marginal impact on our overall realization. So that is the point I was making. I would like to, thanks for asking this question. I hope people didn't get a feeling that we are now going to shift towards non-trade from trade. That's certainly not our strategy. We will focus on trade, we will focus on blended cement, not only because it makes commercial sense, but because we think it's a sustainable cement, it's good for the environment, so we are a strong votary of promoting blended cement, and we'll continue to do that.

Just a small point, sir, on the WHRS investment, what is our current capacity and what are we emphasizing for the year? And also, in terms of the other expenses line item, that has moved up from Q1Q basis from 264 crore to 281 crore. So, what explains this jump? I think it's in the, no, the number is 511 to 551 on a control basis. I mentioned this standard number. So, these two points, if you could answer.

Rajat, yes. For WHRS, our present capacity is around 43-44 MW, and there are projects which are in the pipeline, which will further help us to increase to around up to 50, and then, obviously, when the major line 2, which will be coming, there will add another 17-18 MW of WHRS. Right.

On the other expenses part?

That, I think we are checking that.

What is the question, Rai, on the other expenses?

Sir, the other expenses, Q1Q also has moved up from $511 to $551 on a console basis. So what explains this 8-9% jump on a Q-on-Q basis? And just to add to it, sir, this year we will have only the benefit of the Kundalindran line in the volume that is expected, the growth which is expected for this year.

Yes, for them, of course, we will get full benefit this year. And by the other expenses concerns, there is no specific reason because annual increases. The mining has been more, the limestone mining, so that has also had some attribution to the expenses.

Because of the higher cleanup production.

Because of the higher cleanup production, we did our own mining more, which cost of which goes to other expenditure. That's why your other expenditure seems to be higher, y-on-y basis.

Right, sir. And in terms of the incentive for the Kundran Vendelizer, what would be accruing for this year with now the commissioning, or we will first reach an optimum level in volume, then we will start accruing the chain?

So, sir, we are expecting about 130-135 per hour to enter in Mukherjband and Kundangaj.

Right. Thank you, sir. Thank you.

Thank you. We take the next question from the line of Kalan to Bardia, an individual investor. Please go ahead.

If you can please unmute your line and proceed with your question. Since there is no response, we'll move ahead.

We take the next question from the line of Rajesh Kumar Ravi from HCAC Securities Limited. Please go ahead.

Hi, sir. I just wanted to check, you know, the central market now with JPS asset to be ramped up under Dalmia, the competition would only intensify and even and more so, I would assume the non-trade market because this is the easiest early market any player when they ramp up a capacity, they follow through. So, you know, so when non-trade prices would face stiff competition, even trade prices generally don't see a recovery. So, what is the thought in terms of pricing for the second half of this year? Q2 could be a monsoon quarter. I understand, you know, best for the industry would look to keep a flattish pricing. But central, where you have the largest exposure, there the competitive intensity in H2 will certainly be much higher than what we are seeing currently. Any thoughts on that?

We can only expect, as we said, people more enlightened. I have a lot of competition in this market because keeping prices low is not necessarily a formula for, you know, volume growth. If the demand is good, I don't see why there should be space for everyone. Why should people have to keep instead, if they make money, that money invested in brand building will give them far more lasting. You know, benefits than short-term price cuts. So we think, you know, that is a matter which people will take a strategic call. But we have so far, for good or bad, in the last, I can talk with the last three years, we have stayed on course to our stated strategy. We want to do that. And we would like to, you know, as I said, if others are not doing something, they have got their own reasons, we have to cut our own costs. Being a Bengali, I can only say, but it's not that, but, you know, we have to do what is right for us and right for the business.

Understood, sir. And on the capex, any tangible progress or whatever milestones we have covered in terms of achieving this 25 million term capacity, more so from the major clinker unit?

That is as per plan, our EC and other activities, reproject activities are going on, and whatever we have committed last fall, we are maintaining that.

Understood, sir. I will come back in queue. Thank you.

So that's one clarification I think someone asked about the other expense. Here we must clarify that the packaging costs also get included in other expenses. So that is one single most important reason for the anomaly included in other expenses.

Thank you. We take the next question from the line of Shravan Shah from Dollar Capital. Please go ahead.

Hi, sir. Just wanted to check the ongoing expansions, which will be by 529, we are expecting 6.2 million to come in. So roughly out of 4,800 crore kind of a capex was supposed to be there. Out of that, how much we have till now would have spent on that?

It's very low, very minimal, because... No, no. No, we just started the activity, so it's almost nil, you can say, because now the next phase will be starting on the placing the order and other things, that time there will be there.

So in FY28, then this 900 crore capex that we are looking at this year will significantly inch up to close to maybe a 2,500 crore kind of a number.

Yes, thank you.

Okay, okay. And in terms of our Bikram coal, which I just started, just to get a more sense for this year, I think last time we said around 1.2 lakh ton kind of a volume that we can do. And in terms of the costing also 1.05 kcal versus whatever the currently we have in terms of blended 1.6364. So, in terms of the percentage, how much this will contribute the additional, whatever the quantity if you want to rectify in terms of the Bikram. And for next year, how much we can, in terms of the overall fuel mix can increase. So, just wanted to understand how it will help us to save or reduce the power and fuel cost.

See, this year we are going to be about 1.2 lakh, next year we are trying to take it up to 3.5 lakh times. Okay? And the actual saving and all will be a function of the market price.

Yeah, definitely, definitely. But in terms of, let's say, this 1.2 and then 3.5 lakh, so how much currently, let's say, the Bikram is, let's say, zero. So it will reach to how much? 15-20% of the total fuel that we need in terms of the old Petco or about 30-35% just wanted to understand.

No, it is more of like, you can say, this will be more supplied to our CPP in the current scenario, and maybe next year partly it will go to kiln also, but majority will be for the CPP only, and you can say that one third of the CPP goal requirement can be met through Bikram.

Okay, okay, okay, got it. And then in terms of the peak net debt that last time we said 4,000 crore and we will not cross two times net debt, so two and a half times, that we are maintaining, sir.

Yes, yes, yes. We are not changing any guidance whatsoever.

Okay, okay, okay. Got it and hope for the prices recover and we should see a better profitability.

Thanks.

Thank you. We take the next question from the line of Kalan Tubadia, an individual investor. Please go ahead. Kalan, I do apologize to interrupt you, but your audio is not clear. Could you please use your handset?

Karan, are you there?

Yes, my question is, for this financial year, how much growth you are targeting

as CGR percentage?

How much growth? So we are maintaining our earlier guidance of whatever we have given. We are not changing the guidance.

Good morning. Thank you.

We take the next question from the line of Girija Ray from Normal Bank Securities. Please go ahead.

Hi, thanks for taking my question. I have a couple of questions. First, coming to your other expenses. So, for this quarter, on part and basis, how much was the packaging cost impact and what we can expect for next quarter in terms of with respect to your packaging cost? And second question is with related to you said we did a lot of limestone extractions that is a component of your other expenses. So ideally, this is the limestone extraction, but I believe we use industrial diesel, which has the cost of industrial diesel as two terms. So, this is the reason where it is also, you know, impacting the actual, you know, cost of products producing the nine stone. And second, most importantly, this would be a part of our raw material cost, if I think. So, is this the reason that we have taken out from raw material cost and we have added it here in other extensions? That is the reason we are seeing a spike in other expenses. I'll come back with the fourth question.

So, in terms of accounting, the expenses get booked in the natural head. So the raising cost, for example, the legal expense, etc., they get booked in other expenses. The employee costs, the people who are working, they possibly get booked under employee costs. So, it does not get booked under raw material. There are two different types of accounting which are followed by human companies. One type of company, they book it in raw material on a functional account basis. The other type of company, they book under natural health. So, we have always been booking under natural health. And you are right to understand that commercial diesel prices going up does have a... The impact on the railing cost, more so in Chanderia, where we are depending on mechanical mining, so our cost is higher than others on the railing cost also. Coming to the impact of bag, overall impact of bag and fuel in this quarter, because of dual political factors, basically has been in two sections of 150 rupees per ton. And as I explained in the next quarter of my future inter-visit, we expect a further increase in costs to the extent of 72 eqs on account of geopolitical factors.

Okay. So, my next question will be for the industry-wise. See, if I see, there are around, you know, there are a couple of companies, they have defaulted their capacity expansion to FY30, or some of the larger players are actually coming up with their higher capacity by FY28. We saw in FY26, we, over the years, the highest capacity addition in FY26, and even in fact, we are expecting higher capacity addition more than FY26 is in FY28. So coming back to your trade, non-trade mix, OPC, PPC market, and the pricing kind of war is happening, how do you see, despite adding, you know, higher capacity in FI28, how the cement companies are going to manage with the pricing, and is this incremental demand is going to be, sorry, is this incremental capacity going to be absorbed by the incremental demands in next two years? That's it. That's my last question.

See, there are two parts. One is I'm not at all surprised by some people rolling back their plans, because sometimes when people were going very gung-ho, as you've seen, we have really not been so gung-ho in terms of, therefore, sometimes we were flummoxed. By the kind of bullishness shown by others in capacity expansion during that period. So all these things obviously get moderated as per how the market pans out. But that's not for us. But when you're talking about, I don't think there is a price war happening. It is just a question of people being shy of taking price increases because they don't want to upset the equilibrium scheme. Because when you want to make those changes, you do need, you know, sometimes people have to be, you know, they have to sort of make a leap of faith. To some extent, and that depends on individual risk appetite or individual attitude. Now, it changes from time to time. Different companies have their different, so now among the big players, it's not for me to say, you people talk, you hear other people, the players giving out their views. So some people may like to play it. You know, more, just like in test maths, some people hit sixes and some people like to play with, take singles and play with a straight bat for a while for their own reason, if they're doing. So that sort of a thing is happening. I don't see a price war happening. People who will enter the market, luckily these are not new players. They have been there in the business. For a long time in other regions, so they know the limitations of going and undercutting and trying to make a quick entry because they have done it in the past, seen it happening in their market. So I would expect them to be sensible and ramp up, but I don't see them getting aggressive in pricing terms. They might try to do things on the marketing front, acquiring, you know, networks, how they're going to, the kind of monies they put in, in terms of brand building in that area, in terms of people and the rest of it. But I don't see them playing just the price game. To buy immediate volume because these people are also investing a lot of money. They've seen others who have tried to play those prize games in the short term, how they have panned out. In fact, some of the assets people are buying are companies which played that game and burnt their, you know. So, they won't repeat that mistake. These are successful companies who have done that. So, I'm not worried about any kind of price war, per se.

Fair enough, sir. Thank you very much and all the best.

Thank you. We take the next question from the line of Bepul Kumar, Anupchand Shah from Sumangal Investments. Please go ahead.

Hi, thanks for the opportunity. Sir, in view of this uncertain geopolitical situation, are we reconsidering or deferring any of our expansion plans by few years? What are your thoughts, sir?

So, we are already operating at more than 90% capacity. So, as far as we are concerned, we are concerned for growth in the market that we are operating. So, there is no question of any deferral of the capacity addition.

And, sir, regarding other expenses, what is the per ton cost per packaging in this quarter and

what was the same in last quarter?

In this quarter, it is Rs. 269 per ton, and in the previous quarter, it was, the corresponding quarter, it was Rs. 191.

And in last quarter of the last financial year, what was that?

That number is not steady, you can write a picture to us. Okay.

Okay, thank you.

Thank you. Ladies and gentlemen, we think that is the last question and conclude the question and answer session. I now hand the conference over to the management for their closing comments.

Right now, I don't think there is much more to add. We are all looking at things circumspectly. There are various forces at play internally. We've been talking about geopolitics. There is the climate issue in terms of rains, monsoons. So at this point in time, I don't think there is much to, you know, speculate and make any forward-looking comments or anything different from what you've heard from others. We shall wait for things to pan out, and we'll speak to you either at the end of this quarter or earlier if required to give, if we have some significant changes to report or guidance to provide. But thank you once more for joining us on a Saturday afternoon, and wish you all a very happy weekend. Bye.

Thank you, sir. On behalf of HTC Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your line.