The Ramco Cements Ltd Q3 FY2023 Concall Summary

Key Takeaways

• Record revenue, volume-led: Revenue crossed ₹2,000 crores for the first time, driven by 19% volume growth and a rising premium product mix.
• EBITDA up YoY despite cost pressure: EBITDA rose to ₹294 crores from ₹238 crores YoY, absorbing a 169 bps rise in average borrowing cost and elevated fuel expenses.
• Kolimigundla stabilising, clinker logistics easing: The new plant hit ~55% clinker utilisation in its first quarter; cement grinding stabilised in December, so clinker shipments to distant Tamil Nadu grinding units will now decline.
• Cost reduction runway is tangible but back-end loaded: Management quantified ₹200–300/ton of power cost reduction potential once WHRS, wind captive conversion and fuel price normalisation all land, but each lever depends on approvals or market conditions.
• What to watch next quarter: Whether the promised sequential fuel cost decline materialises, progress on the TNEB wind captive approval, and any update on the Karnataka greenfield land acquisition.

Volume & Demand Environment

• Broad-based demand: Individual house builder and infrastructure segments both performed well. The Union Budget’s ~₹14 lakh crore allocation to PMAY, railways, urban and transport infrastructure is expected to sustain momentum over the medium term.
• Regional mix steady: The east-south volume split held at the same level as earlier quarters. Tamil Nadu grew 12% this year against a decade CAGR of 4–5%.
• Premiumisation accelerating: Premium cement share rose to 26% from 23% YoY, with absolute volumes also higher. The “right product for right application” strategy is winning approvals in new projects and is expected to improve contribution by more than ₹5–10 per bag.
• Non-trade push: Management is adding focus on non-trade customers, noting that non-trade pricing tracks trade pricing closely and carries no big discount.
• Next-year volume confidence: Management expects volume growth “more than normalised 10%,” driven by new infrastructure projects, new project approvals, and the non-trade push.

Management: "Any number you will be interested we will do that."

Pricing & Market Dynamics

• Sequential improvement: Prices improved in Q3 versus Q2 across both east and south markets; variation quarter to quarter reflects market mix and price mix.
• Volatility cuts both ways: Management pushed back on the assumption that prices only decline, arguing current levels are unviable for many players and an uptick is possible anytime.
• Competitive landscape in Tamil Nadu: On competitor grinding capacity additions, management noted that no new clinker capacity is being added in the state: competitors will bring clinker from outside, and “I do not see the dynamics to change dramatically.”

Management: "The prices are very volatile. We cannot assume the prices will only decline. There are chances the price will go up also because these prices are very unviable too far many players."

Cost Structure & Efficiency Levers

• Freight cost sequential uptick: Outbound freight rose ~₹20–25/ton sequentially; total freight (inbound + outbound) up ~₹50/ton.
• Alternate fuel share collapsed: Dropped from 25–30% to sub-10% because availability is inconsistent and some alternate fuels interfere severely with the pyro process.
• Fuel cost Q4 outlook: Flat versus Q3 at same average prices; versus Q4 last year, will “definitely come down” compared to Q4 last year.
• Other expenses run rate: Expected to remain in the same range going forward; advertisement and travel stepped up this year versus COVID-restricted prior year.

Management: "Once this is uncertainty is over, we are confident there is a scope to reduce by INR 200 to INR 300 per ton."

Capacity Expansion & Projects

• Kolimigundla integrated plant: Clinker load factor ~55% in Q3 and improving; cement grinding stabilised in December. Thermal power plant and railway siding expected in FY24. Clinker movement to Tamil Nadu grinding units will decline from coming quarters as cement production ramps up locally.
• RR Nagar third kiln: Commissioning before end of March 2023; incremental clinker will serve both Tamil Nadu and Kerala, eliminating clinker movement from Ariyalur and saving transport cost.
• Odisha grinding unit (0.9 MTPA): Civil construction started; expected completion in ~9 months, i.e. by September 2023.
• Dry mix products: One unit started production in Tamil Nadu in December 2022; another Tamil Nadu unit expected by February 2023; remaining two units in AP and Odisha in FY24.
• Karnataka greenfield (Bommanahalli): Land acquisition prepared but awaiting government approval; no timeline. Management may expedite land purchase if cash flow improves and non-core assets are sold.
• Tamil Nadu limestone auction: Awaiting government notification; no update.
• No new capex envisaged: Management is not planning additional capital expenditure beyond the current pipeline; the capex slide was removed from the presentation this quarter but guidance is unchanged.

Balance Sheet & Capital Allocation

• Debt reduction begun: ₹150 crores of debt repaid in Q3; deleveraging has started.
• Borrowing cost up sharply: Average cost rose to 7.13% from 5.44% YoY, reflecting the 225 bps repo rate increase during the year.
• Working capital: Some release occurred in Q3, but no further release expected in Q4 because pet coke prices are flat and contingency stocks are maintained.
• Non-core land monetisation: Land banks identified for sale, estimated at ₹300–400 crores; inquiries floated; may happen this quarter and in coming quarters, but no timeline given because large land parcels involve negotiations.
• Growth vs. deleveraging trade-off: Management acknowledged the need to balance market share growth with debt reduction, stating current debt is manageable for the capacity base and all obligations can be met without default.

Management: "We have to balance between the growth and market share. See there are many players, who are growing in the market. We also should not lose our market share."

Guidance & Commitments

Key Metrics