Nuvoco Vistas Corporation Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Volume roars back, price lags: Volume grew 16% YoY as demand recovered post-monsoon, but cement prices hit three-year lows in key markets and consumed all the quarter's cost savings before a late-December recovery.
• Vadraj Cement acquisition is the new growth axis: Winning the bid adds a path to 3.1 crore tonnes capacity by Q3 FY27 and entry into Gujarat/Maharashtra, with NCLT approval expected in 6-9 months.
• Cost engine is firing at multi-quarter bests: Blended fuel cost of Rs. 1.45 per million cal is the lowest in 13 quarters, and Project Bridge 2.0 has delivered Rs. 50+ per tonne YTD, but price weakness erased the P&L benefit this quarter.
• December exit price gives a Q4 tailwind: Realization at December-end was 6% above the quarter average, and management says recent price increases are sustaining, setting up a stronger Q4.
• What to watch next quarter: Whether the December price recovery holds through Q4, the pace of Vadraj's NCLT process, and the commissioning of the Jajpur railway siding in Q1 FY26.

Vadraj Cement Acquisition

• Deal structure and timeline: Nuvoco won the bid as successful resolution applicant under the IBC process; the filing with NCLT was completed two days before the call. Management's optimistic timeline for NCLT approval is six months, with a worst case of eight to nine months. The Rs. 1,800 crore payment happens only after NCLT approval, expected around Q3 of this calendar year.
• Capacity path to 3.1 crore tonnes: Post-acquisition, Nuvoco will reach 3.1 crore tonnes per annum cement capacity by Q3 FY27. The plan is to operationalize one mill first, then the clinker line. Additional capex of Rs. 900-1,200 crores over 18-24 months is needed to make the assets fully operational.
• Strategic geography unlock: Vadraj gives Nuvoco a platform in the West (Gujarat and Maharashtra), where it will become the third-largest player by combined capacity. It also releases capacity in the North, letting the company participate more aggressively there.
• Volume ramp profile: Management expects 0.1 crore tonnes from Vadraj in FY27, 0.2 crore in FY28, and 0.3-0.4 crore in FY29. The clinker line may later be debottlenecked from 10,000 TPD to 12,000 TPD, replicating the Risda kiln experience, though the timing is vague: "at some stage in FY27 and FY28."
• Funding and debt guardrails: The Rs. 1,800 crore payment is a debt buyout, not capex; the Rs. 1,200 crore asset rights payment is capex. Management was explicit that FY26 and FY27 capex "cannot be Rs. 2,000 crores per annum, not possible." Over the next 2-2.5 years, internal accruals, cash flows and profitability improvement are expected to fund the capex programs. The company remains mindful of debt levels and will ensure all NVCL covenant conditions are always met.
• Deal risk acknowledged: Management conceded that a reversal is "possible" given recent issues at other acquisitions, though it believes its due diligence was exhaustive and the reasons that hampered others may not apply. It added: "I cannot rule out any hiccup which may come on the way."

Jayakumar Krishnaswamy: "We were very clear that Nuvoco will start this expansion plan the moment we hit our internal target of Rs. 3,500 to Rs. 4,000 crores of debt level. And in between Vadraj happened, and then we did a cost benefit analysis of the value by Vadraj as well as our own investment. We found the Vadraj being very economically attractive for us, and hence we went for it and then successfully bid for it."

Volume & Demand Recovery

• 16% volume growth, broad-based: Volume reached 0.47 crore tonnes in Q3, with double-digit growth in both East and North markets and the company growing ahead of the market in both. Growth came from Bengal and Jharkhand opening up after a tepid period, and from Chhattisgarh where the internal "Vijay Chhattisgarh" program entered previously unserved markets.
• Trade mix and premium products held steady: Trade percentage share stayed at 71% for both Q2 and Q3. Premium product share remained at 39%, with management insisting it did not compromise the mix to chase volume. In Chhattisgarh, microfiber achievement was well into double digits.
• Macro tailwinds building: The slowdown in domestic economic activity bottomed out in Q2 FY25 and has recovered gradually, aided by festive demand and a pickup in rural activity. A record Kharif harvest and increased Rabi sowing are contributing to rural economy improvement. The Union Budget for FY26 is expected to prioritize infrastructure, with economic experts projecting a 30% increase in infrastructure allocation.
• Q4 outlook is confident: Management said it is "on a very strong wicket as we enter quarter four" and "pretty optimistic that Q4 overall demand should improve for industry, and certainly for our Company." The key driver to watch is the pickup in unspent capital expenditure at both central and state levels.

Jayakumar Krishnaswamy: "I just want to assure you that we were always committed to premium products. We pride on our ability to sell premium products in the country. I think that's the DNA of the Company and I do not think we will move away from the basic DNA of the organization, even in this quarter we have not moved."

Pricing & Realization

• Prices hit three-year lows: Cement prices in key markets plummeted in October and November and remained subdued for most of the quarter. Price improvement was observed only towards mid-December. Management called it "the only wet blanket in this quarter."
• Cost savings erased by price: The realization reduction "simply chewed away all the cost savings which we did," per management. The positive offset: December-end realization was 6% above the quarter average, and price increases taken in both East and North markets around mid-December are sustaining into the current period.
• Q4 setup is stronger: With the December exit rate 6% above the quarterly average and price increases holding, the company enters Q4 with a better realization base, provided the trend sustains.

Jayakumar Krishnaswamy: "The only wet blanket in this quarter was prices kind of went to probably three years low in East as well as North... the December end realization was 6% of the quarter realization. So, we ended the quarter very strong."

Cost Performance

• Fuel cost at 13-quarter low: Power and fuel cost per tonne reduced 6% QoQ, with blended fuel cost at Rs. 1.45 per million cal, the lowest in 13 quarters and among the lowest in the industry. AFR consumption increased from 8% in Q2 to 10% in Q3, with Q4 expected to see much more.
• Logistics savings stacking up: Distribution cost per tonne declined 3% QoQ. Lead distance reduction delivered ~Rs. 50 per tonne, handling cost reduction added ~Rs. 20, and the Sonadih railway siding is now moving 4 rakes per day (up from 3), with a target of 5 rakes to eliminate road movement of clinker from Sonadih. Raw material cost reduction contributed another ~Rs. 50 per tonne.
• Project Bridge 2.0 on track: The cost efficiency program has delivered a reduction upwards of Rs. 50 per tonne YTD. Management indicated Q4 cost savings could be about Rs. 75 per tonne, up from Rs. 54 at the nine-month mark.
• Structural logistics advantage building: The Jajpur railway siding is in an advanced stage, with the last 100 meters of track to be laid, and is expected to be operational from Q1 FY26. This will enable cement movement from Jajpur into South Bengal via rake.

Balance Sheet & Debt

• Net debt declined Rs. 151 crores QoQ: The reduction was mainly driven by release of working capital. Net debt has fallen consistently from Rs. 5,495 crores in December 2021 to Rs. 4,350 crores in December 2024.
• Internal debt target before expansion: Management had set an internal target of Rs. 3,500-4,000 crores of debt before starting the next growth phase. By end of this year, debt is expected to be at Rs. 4,000 crores "and thereabouts," a level the company considers comfortable to kick-start growth plans. The Vadraj opportunity was evaluated against this framework and deemed economically attractive enough to pursue.
• Long-term slag supply agreement: Nuvoco continues to be better placed on raw material cost due to its long-term slag supply agreement. On slag procurement for the new Gujarat operations, management has no current conversations underway and will observe the trend of blended cement in Gujarat before deciding strategy.

New Products & Premiumization

• Concreto UNO Concrete gaining traction: Launched in FY25 across Bihar, Bengal and Jharkhand, positioned as a top-end product priced higher than the highest-priced product in the market.
• MBM portfolio expanding: The building materials business introduced three new products under the ZERO M brand: Tile Adhesive T5, Tile Glitter, and Tile Bonder. Tile adhesive, construction chemicals and cover blocks continue to see improving sales.

Guidance & Commitments

Key Metrics