Dalmia Bharat Ltd (DALBHARAT) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to the earnings conference call of Dalmia Bharat Limited for the quarter ended 30th September 2026. Please note that this conference will be for 60 minutes and after that the management discussion there's an opportunity for you to ask questions. Please note that this conference is being recorded and the transcript will be put up on the website of the company. As a reminder, all participant lines will be in the listen-only mode, and should anyone need any assistance during the conference call, may signal the operator by pressing star then zero on your touch-tone phone. 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. Today, on the call, we have with us, Mr. Puneet Dalmia, Managing Director and CEO, Dalmia Bharat Limited; Mr. Yatin Malhotra, CFO, Dalmia Bharat Limited, and other senior management of the company. I would now like to hand the conference call over to Mr. Prasann Goyal, Head of Investor Relations, Dalmia Bharat Limited. Thank you, and over to you, Mr. Goyal.
Prasann Goyal (Dalmia Bharat Limited): Thank you, Nirav. Good evening, everyone, and thank you for joining us today. I hope you had an opportunity to look at our financial results and presentation we have uploaded [inaudible]. Let me now hand over the call to Mr. Dalmia for his opening remarks. Thank you, and over to you, sir.
Puneet Dalmia (Dalmia Bharat Limited): Thank you, Prasann. It is good to be back with all of you, as we discuss our Q2 results. I would begin by talking about the headlines shaping the world around us. The Russia Ukraine war, the Gulf crisis, tariffs, financial and bond markets and El Niño, the world is going through multiple uncertainties. It seems that it has become the new normal, something we all have to live with day in and day out. I'm happy to see how India is navigating through this geopolitical challenges,
Puneet Dalmia (Dalmia Bharat Limited): remarkably well with its fundamentals intact and strengthening. The country has demonstrated resilience in absorbing unprecedented external shocks, while staying firmly on its growth path. The Q1 GDP was a case in point, where the economy grew at 7.8%. Fiscal and policy measures, including sustained public spending and efforts to absorb the impact of rising fuel prices, have helped cushion domestic economic activity and consumer sentiment from external shocks. We can see this reflected in a range of indicators. The RBI revised its financial year 27 GDP growth estimate upwards to 7.1%. GST collections remain close to record levels, while manufacturing output continues to show strong growth. Cement demand has also remained robust, growing in high-single digit on a Y-o-Y basis during this quarter. This was supported by continued government capex spending, along with relatively low rainfall in several parts of the country. In the first five months of the year, the central government has spent around 42% of its budgeted annual capex. The Ministries of Road Transport and Highways, and Railways have also utilized around 45% of their respective annual budget outlays during this period, providing a meaningful impetus to cement demand. Having said that, rising inflation and potential onset of rate hike cycles pose near-term risks. But I believe India's growth story is much bigger than the near-term challenges we see today. The country is strengthening, growing, and aspiring. Just like India, we at Dalmia are also building a stronger and sustainable organization for the future. And despite near-term challenges, we remain firmly focused on executing our strategic priorities across the board. I am happy to mention that we have recently lit our new clinker line at Belgaum and commenced trial runs ahead of schedule. This additional capacity will help us deepen our presence in our stronghold markets of Karnataka and Maharashtra. As I couldn't think of a better time to bring this capacity online, we look to commence commercial production ahead of the peak demand season in Q4. Our expectations at Pune and Kadapa are also progressing as planned, and are expected to come during financial year '28, taking our total capacity to around 67 million tonnes. The Central India story is another exciting one which is unfolding. Based on our initial integration experience, the assets are in good shape, and our teams are working relentlessly to restart operations and ramp up production as quickly as possible. At Rewa, we have restarted mining operations, while both the clinker line and the cement mill are steadily ramping up under trial runs. While Q2 saw some initial teething issues, as we continue to build on networks and stabilize plant operations, I am confident that we are on track to achieve a 35% to 40% utilization of these assets by end of financial year '27. Another area I would like to touch upon is our sales strategy. While East and Northeast Northeast markets remained subdued during the quarter due to severe floods and heavy rainfall, we saw healthy momentum in both South and West markets, with growing with growth approaching double digits. Our focus on strengthening our brand position remains equally strong. Premium product share continues to increase, and we expect this trend to deepen over coming quarters as we continue to drive this initiative of premiumization. Our recently launched premium offering Weather 365 has received an exceptional response from the market, prompting us to accelerate its rollout into newer markets. Let let me briefly touch upon the current operating scenario. Elevated crude oil prices and rising input costs have been testing the resilience of the entire industry. With crude prices remaining above $100 a barrel and maritime disruptions continuing, international pet coke prices have surged to about over $180 per tonne. Against this backdrop, I believe we have managed the impact reasonably well through fuel mix optimization, better planning, and several other initiatives. In the first half of the year, we have seen war-related impact of around 220 per tonne on variable cost, with additional pressures from key input materials, such as packing bags, adding another Rs. 100 per tonne. While pricing in Q1 helped us absorb some of these cost pressures, the environment was relatively challenging in Q2 in a few key markets. Prices remained
Puneet Dalmia (Dalmia Bharat Limited): South and West, while East pricing was under pressure amid subdued demand. That said, we are now beginning to see a more encouraging price trend. Both September and October have seen healthy price increases, helping us recover a part of the cost inflation. We are hopeful that the positive momentum will continue going forward. While these industry cycles may come and go, our long-term strategic priority remains firmly anchored. Maximizing returns from existing assets, expanding in a calibrated manner to become a pan-India player while maintaining a strong and healthy balance sheet. And underpinning all of this is our continued investment in our people, processes, and organizational culture. As we continue to march forward to chase our vision, one of my key priorities is to build a future-ready organization with strong leadership team and deep capabilities. In that spirit, in a planned transition effective 1st January 2027, Naveen Tiwari, our Chief Marketing Officer, will transition as a key advisor to me on strategic initiatives and projects. Over the past year, he has helped deepen our engagement with channel partners, sharpen our market positioning, and strengthen our sales capabilities, thereby strengthening the foundation for the company. As a part of this transition, Yatin Malhotra, our CFO, will take additional responsibility for sales and marketing along with his existing responsibility for the finance function. Yatin joined Dalmia Bharat Group in March last year and has led various enterprise-level initiatives since then. I'm confident that his familiarity with Dalmia way of working and his C-level experience over the last 11 years across various consumer-facing organizations provide the right combination of business strategy and financial management. I wish him well as he takes on this additional responsibility. Our focus remains clear: strengthen our brand positioning, deepen our market reach, and further build our sales capabilities to generate strong returns from our for our shareholders and support the next phase of growth. I'm confident that these changes will bode well for us as we look forward. Thank you, and over to you, Yatin, for the financial updates. Thank you, Puneetji, and good evening, everyone.
Yatin Malhotra (Dalmia Bharat Limited): Building on to Puneetji's comments, India witnessed healthy demand trends during the quarter, supported by strong public spending and resilient consumption. Below-normal rainfall in several parts of the country also allowed construction activity to continue for longer, providing further support to cement demand. We benefited from these trends in our South and West markets. On the other hand, East and Northeast were considerably weaker, impacted by heavy rainfall. Having said that, we are now seeing demand picking up well across these regions also. In line with the regional trends, our volumes grew 4% YoY during the quarter on an ex-Central basis. Overall volumes rose 3% to 7.1 million tonnes in the quarter. I would also like to highlight the progress we are making in strengthening Dalmia's brand in the market. We have deepened our engagement with channel partners and refreshed how our brand shows up in the marketplace with a new look across our hoardings, packing bags, and other brand touchpoints. As part of this journey, we have also taken another important step. Konark, which has been a cornerstone of our portfolio and a trusted brand for decades, is now getting phased out as we sharpen our focus on premiumization. This marks an important milestone towards reinforcing our brand positioning and building a stronger, more unified Dalmia brand. Let me now turn to our quarterly performance. Since our Central India operations are still at a nascent stage, I will take you through our performance excluding the Central markets. Prices remained largely stable across regions, unlike the usual moderation that we see in quarter two. However, East witnessed some price corrections amid subdued demand, reflected in roughly 1% QoQ decline in our realizations. Incentives during the quarter declined to 25 crore with relatively lower production at plants where incentives accrued. However, we expect this to normalize as demand picks up. Collections during the quarter remained healthy at 53 crores. We are already seeing cement prices inching up steadily with prices in the South and East currently around ₹15 per bag higher than Q2 average. This should provide some support in offsetting the rising cost pressures. Moving to costs, our total cost in the quarter increased by roughly ₹260 per ton on an ex-Central basis.
Yatin Malhotra (Dalmia Bharat Limited): while inflation in key raw materials added another Rs. 30 to Rs. 40. During the quarter, we also saw a meaningful change in the regional mix with lower volumes in East, resulting in an additional adverse impact of Rs. 50 to Rs. 60 per ton. With external cost pressures persisting and petcoke prices remaining above $180 per ton, we expect a further cost impact of around Rs. 75 per ton in quarter three. However, at the same time, the adverse mix impact seen in quarter two should get reverse as a regional mix normalizes. I would also like to highlight one additional point. As you are aware, following the recent amendments in to the MMDR Act, the mineral-bearing land tax is no longer applicable with effect from August 22nd. These payments have been discontinued in Assam and Meghalaya from that date while they continue to apply in Tamil Nadu. We are engaging with the relevant authorities to facilitate its its continuation. Until then, the impact of this tax continues to be reflected in a raw material cost. Separately, the amendment to the MMDR Act has also resulted in a significant reduction in our contingent liabilities by roughly Rs. 198 crores, and the liabilities now stand at Rs. 931 crore. Consequently, contingent liabilities as a percentage of the net worth have declined to almost 5%, which is among the lowest in the industry. This reflects our continued focus on strengthening governance and proactively managing potential liabilities. Renewable energy remains an important pillar of our cost efficiency initiatives, and we are making strong progress on this front. Over the last five years, we have scaled our RE capacity from 63 megawatt to four, roughly 450 megawatt today, significantly increasing the RE share to 52% in quarter two. Going forward, we will continue to accelerate this transition with more RE capacity getting online over the next few quarters. In line with this transition, we have impaired around 97 megawatt of thermal power capacity this quarter where operations have been discontinued. This has been done in three of our existing plants, which do not include the central plants. Logistics is another area where we continue to innovate and find efficiencies. Despite the impact from diesel price increase of about Rs. 20 per ton in this quarter, our cement freight cost has remained largely flat. Clinker freight has also declined, led by efficiencies and regional mix change. Coming to fixed costs, comprising of employee cost and other expenses, the increase was about Rs. 168 per ton. Of this, approximately Rs. 140 per ton was attributable to under-absorption of fixed cost due to Q-o-Q decline in volumes, while the remaining increase was largely driven by higher shutdown cost during the quarter. As volumes recover, under-absorption should normalize over the coming quarters. Putting it all together, the decline in realization by about Rs. 49 per ton combined with cost increases of approximately Rs. 259 per ton on an ex-Central basis resulted in an EBITDA per ton declining to Rs. 746. On a reported basis, EBITDA per ton stood at Rs. 698, reflecting a dilution of roughly Rs. 50 per ton due to central plants. We expect this dilution to increase to about Rs. 100 to Rs. 125 per ton in quarter three as Rewa commences commercial production before it progressiv- progressively reduces as Central operations scale up. During the quarter, we reported exceptional items aggregating Rs. 339 crores. I have already spoken about the transition from the Konark brand and the impairment of captive power plants. In addition to this, we have implemented a separation scheme for eligible employees at few units, resulting in a one-time provisional charge of Rs. 57 crore. Briefly touching about upon our ongoing projects, we are making good progress on our expansion plans. The trial run at Belgaum's clinker line were initiated ahead of schedule. 3 MTPA cement mill is also expected to be to go in trial in the next couple of weeks. Both Pune and Kadapa are also progressing as planned. During the quarter, our organic CapEx stood at Rs. 909 crore, taking our H1 spend to roughly Rs. 1,420 crores. CapEx guidance for the full year remains unchanged at Rs. 3,200 to Rs. 3,400 odd crores. At the end, I would say that we firmly believe that financial discipline gives us the resilience and the flexibility to navigate challenging times. As Puneet ji mentioned, maintaining a healthy balance sheet remains central to our strategy and one of our foremost priorities. Guided by this, we remain committed to maintaining leverage below 2 times on a sustainable basis,
Yatin Malhotra (Dalmia Bharat Limited): which will create a strong financial foundation for Dalmia's next phase of growth. With that, I would want to thank you, and now we can open the floor for questions and answers. Thank you.
Moderator: Thank you very much. We'll now begin the question-and-answer session. Anyone who wishes to ask a question may may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Pratik Kumar from Jefferies India. Please go ahead.
Pratik Kumar (Jefferies India): Hello. Yeah. Yeah. Hi, can you Am I audible? Yeah, so
Moderator: Yes, go ahead. You're audible.
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