Nuvoco Vistas Corporation Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Volume down 5% YoY, pricing at a five-year low: A prolonged monsoon, a 19% YoY drop in Union Government capex, and stalled state spending after elections crushed demand, while industry-wide pricing power hit its weakest point in half a decade.
• Cost engine is the offset: Power and fuel costs fell to a 12-quarter low of ₹1.54 per Mcal, and Project Bridge 2.0 delivered ₹50 per ton in operating cost savings, partially insulating margins from the price-volume squeeze.
• Premiumization hit a record 43% of trade sales: The value-over-volume strategy is working at the mix level, with Concreto Uno gaining traction in the East and Duraguard Microfibers trending at 17–18% in Rajasthan and Chhattisgarh, even as absolute volumes fell.
• Debt reduction is on track, with a near-term target set: Net debt stood at ₹4,501 crores, and management expects to pare it to between ₹3,500 and ₹4,000 crores within the next two quarters, aided by the completion of major capex projects.
• What to watch next quarter: Whether demand actually picks up from mid-November as management expects, any firming of October’s yo-yo pricing into a trend, and the pace of the H2 step-up in Bridge 2.0 cost savings to ₹75 per ton.

Demand & Pricing Environment

• Capex freeze hit hard: Union Government capex contracted 19% YoY and state government capex fell 6% YoY. In key states like Bengal, Bihar, and Chhattisgarh, capital spending lost momentum after changes in government, and post-budget schemes had not yet kicked off on the ground.
• Monsoon and housing amplified the slowdown: A severe and prolonged monsoon hampered construction activity, while housing sales dropped 30% in Tier-2 cities, removing a second leg of demand.
• Pricing power evaporated: All India cement prices dipped 4% QoQ, with the East region seeing a sharper 5% drop. Management characterized industry pricing power as "almost the lowest in the last five years in this quarter."
• October offered no clarity: Early Q3 pricing showed both upward and downward movement with no firm trend, giving the industry no confidence in a directional recovery.
• The H2 bet rests on a base effect and post-festival spending: Management targets high single-digit volume growth in H2, expecting construction to pick up after Pooja, Dussehra, and Chhath, aided by a weak H2 last year. Full-year volume growth is targeted at 4%.

Jayakumar Krishnaswamy: "pricing power for industry is almost the lowest in the last five years in this quarter. So, it's a bit sensible to kind of play the premium game rather than to push volumes."

Value-Over-Volume & Premiumization

• Strategy is deliberate, not forced: Management explicitly chose not to push volumes aggressively in markets where pricing is low, such as West Bengal, where high freight makes aggressive participation uneconomical. The company will "never walk away from a market" but will not chase low-price volume.
• Premium product share hit a multi-year record: Premium products reached 43% of trade sales in Q2, the highest in at least six to seven years. In Bihar, Concreto volumes are close to 75–80% of the mix.
• Realization held up better than the industry: Blended realization per ton dropped 2.7% QoQ to ₹5,362, a decline management attributed predominantly to price but one that was lower than the industry average, thanks to premiumization and geo-optimization.
• New products are gaining momentum: Concreto Uno, India’s first hydrophobic concrete, and Ecodure Thermal Insulated concrete, both launched in Q1, saw good traction in Q2. The MBM business introduced Zero M Roof Shield, a waterproofing coating that reduces surface temperatures by up to 10 degrees Celsius.
• Market share loss is acknowledged but unquantified: Management admitted there is an option to push volumes and that not doing so may aggravate share loss, but declined to quantify it, framing the choice as a sensible premium play in a weak pricing environment.

Jayakumar Krishnaswamy: "Certainly, I think we will never walk away from a market, but it is not kind of participating aggressively in the market to ensure that we push volumes in this key market where the pricing is pretty low."

Cost & Efficiency

• Fuel costs hit a 12-quarter low: Blended fuel cost reached ₹1.54 per Mcal, with power and fuel costs per ton down 3% QoQ. At ₹1,046 per ton, management believes this is one of the lowest fuel costs in the industry.
• Bridge 2.0 is delivering on schedule: The cost-reduction program yielded ₹50 per ton in operating cost savings in Q2, and management expects the run-rate to step up to ₹75 per ton in H2 as projects gain pace.
• Distribution and material costs also fell: Distribution cost per ton declined 1% QoQ due to efficiency measures, and cost of materials consumed was down 2% QoQ.
• Infrastructure projects are wrapping up: A new clinker wagon loading system at Sonadih was commissioned to boost rail dispatch and cut costs. A grid integration project across Chhattisgarh units was completed, enabling power cost savings. The Odisha railway siding project is expected by Q4 FY25.
• Clinker expansions are largely done: The Risda clinker expansion is complete at 12,000 TPD. Nimbol has been taken to 6,000 TPD and has already touched 5,700 TPD throughput; the target is to reach 6,000 by Q4 this fiscal. No new major projects will kick off until March.

Madhumita Basu: "H1, we are already trending at Rs. 50. We hope to see some upside on this figure. In H2, we should be looking at about Rs. 75 per ton, given the pace at which these various projects are moving."

Balance Sheet & Capex

• Net debt is down YoY but up sequentially: Net debt reduced by ₹233 crores YoY to ₹4,501 crores, though the September-end figure was higher than March due to cyclical working capital impacts.
• A near-term debt target is set: Management expects to pare debt to between ₹3,500 and ₹4,000 crores in the next two quarters, and to end the fiscal below last year’s ₹4,030 crores. The long-term comfortable operating level is pegged at ₹3,500–₹4,000 crores.
• Refinancing is the fallback for upcoming payments: When asked about debt repayments due in the next 10–12 months, management did not provide a schedule but stated it is "well on the way to kind of ensure payments will happen when it happens" and noted it "always have the leverage of refinancing it."
• Capex guidance holds steady: FY25 capex is expected at ₹300–₹400 odd crores, though H2 may fall shy by about ₹20 crores. FY26 capex guidance of ₹900–₹1,000 crores remains unchanged.
• North expansion to begin soon: The brownfield expansion in the North is expected to start at the end of this fiscal or early next fiscal, with commissioning in about 18 months from the start date. No update was provided on the Chittorgarh expansion beyond what was shared previously.

Jayakumar Krishnaswamy: "We are well on the way to kind of paring the debt to just about less than 4,000, between Rs. 3,500 crores to Rs. 4,000 crores in the next two quarters."

Guidance & Commitments

Key Metrics