Birla Corporation Limited — Q3 FY25 earnings call

Call held 5 Feb 2025

Management summary

Birla Corporation reported a strong Q3 FY25, driven by the successful ramp-up and profitability of its Mukutban plant and excellent performance from the Chanderia unit. Despite competitive pressures in Central India and lower net realizations due to market mix, the company maintained its H2 volume and EBITDA guidance. Strategic focus on premium products and cost management helped insulate margins, with significant incentive accruals supporting the financial performance.

Highlights

  • Mukutban plant achieved high capacity utilization (high 60s) and became profitable, contributing significantly to overall performance.

  • Chanderia unit showed excellent performance in volumes and capacity utilization, benefiting from trade segment improvements.

  • Maintained H2 FY25 volume growth guidance of 7-8% and H2 EBITDA increase guidance of INR150 per tonne.

  • Successfully maintained price premium in core markets, with 58% premium volumes in Q3 FY25.

  • Accrued INR40 crores in incentives in Q3 FY25, with a total of INR60 crores for 9 months and an FY25 expectation of INR100 crores.

Concerns

  • Central India faced severe competitive intensity, oversupply, and aggressive pricing, particularly in the non-trade segment.

  • Net realization appeared lower due to the impact of Mukutban volumes, which operate in markets with lower pricing.

  • Trade volume declined year-on-year for the 9-month period, attributed to a shift towards non-trade demand in prior quarters.

Key financials

5 periods

Headline

  • Cash Received from Incentives (This FY)
    ₹187 Cr
  • Closing Balance of Incentives (Dec 31, 2024)
    ₹435 Cr
  • West Bengal Incentive (Under Litigation)
    ₹118 Cr
  • Clinker Utilization
    100%
  • Green Power Level (Current)
    26%
  • Pet Coke Price (Current)
    110 USD
  • Lead Distance
    360 kilometers
  • Fuel Cost
    1.5 million per kilo calories

Q3

  • Incentive Accrual
    ₹40 Cr

Q3 FY25

  • Net Debt
    ₹3,000 Cr
  • Captive Coal Utilization
    15%

9M

  • Incentive Accrual
    ₹60 Cr
  • Capex (Spent)
    ₹300 Cr

FY25

  • Capex (Planned)
    ₹500 Cr

What they filed

Q1 FY27: revenue up 7.8%, net profit down 3.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,953 2,257 2,815 2,454 2,207 +13%2,159 −4%2,836 +1%2,646 +8%
EBITDA177 248 534 347 305 +72%293 +18%510 −4%342 −1%
Net profit-25 31 257 120 90 +460%53 +71%295 +15%116 −3%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹500 Cr Cut — optimize cash flow and defer non-essential spend
    • Bihar expansion (part of 5 million tonne capacity expansion)

    Previously planned ₹800 Cr

    Aditya Saraogi: "Capex for the whole year, we are looking at a number of INR500 crores." Rajesh Kumar Ravi: "earlier looking to INR800 crores, which was for the slowdown to INR700 crores, now you are looking at INR500 crores." Aditya Saraogi: "We try to optimize our cash flow. So while we plan, we plan on a conservative basis, but then we try to optimize bulk of it is on account of maintenance capex, sustenance capex. We're trying to optimize whatever is possible to defer, we defer that. That is an ongoing exercise." Aditya Saraogi: "That will part of the 5 million tonne expansion, which we are and we are starting to complete by 2027. And we have acquired most of the land on the location."
  • Debt Net ₹3,000 Cr
    Aditya Saraogi: "Our net debt as of the third quarter is around INR3,000 crores."

Guidance & targets

Volume

  • H2 FY25 Volume Growth Volume · H2 FY25 · High confidence 7-8%
    Sandip Ghose: "First of all, your question in terms of -- we've maintained that, when we are saying the overall growth percentage of 7% to 8% we are maintaining. It's true we are maintaining that. That is not what we are changing, and we are quite confident of doing so."

    — Sandip Ghose

Profitability

  • H2 FY25 EBITDA Increase Profitability · H2 FY25 · High confidence INR150 per tonne (average)
    Sandip Ghose: "And we are also keeping our projection of what we said about H2 EBITDA increase, which we had indicated between first half to second half, H2 average would be about INR150 increase in the EBITDA, and we are maintaining that and no change in that. We will stay there."

    — Sandip Ghose

Capex

  • FY25 Capex Capex · FY25 · High confidence INR500 crores

    Previously INR800 crores (revised to INR700 crores previously) → INR500 crores

    Aditya Saraogi: "Capex for the whole year, we are looking at a number of INR500 crores." Rajesh Kumar Ravi: "earlier looking to INR800 crores, which was for the slowdown to INR700 crores, now you are looking at INR500 crores."

    — Aditya Saraogi

Incentives

  • FY25 Incentive Accrual Incentives · FY25 · High confidence INR100 crores
    Aditya Saraogi: "For this year, as guided earlier, we are expecting total incentive accrual to be around INR100 crores."

    — Aditya Saraogi

Capacity

  • Kundanganj Capacity Addition Capacity · FY26/27 · High confidence 1.4 million tonnes
    Shravan Shah: "And second is for FY '26/'27, given the 1.4 million tonnes, the Kundanganj which will be coming in, if you can also clarify in terms of the timeline, previously you said by Q1."

    — Shravan Shah (referencing management)

Fuel Mix

  • Captive Coal Utilization Fuel Mix · FY26-FY27 · Medium confidence 30-32%

    From 15% (Q3 FY25) today

    Aditya Saraogi: "Our own coal was to the tune of 15% in this quarter. And once Bikram Coal Block comes on field, once that achieved the optimum level of production, it should go up to around 30% -- between 30%, 32% of our total." Aditya Saraogi: "Optimum level will be reached in the next financial year, that is '26-'27."

    — Aditya Saraogi

  • Marki-Barka Coal Contribution Fuel Mix · Once operational · Medium confidence 55-60% of total requirements
    Aditya Saraogi: "Marki-Barka once that comes, it will be around 55% -- between 55% and 60% of our total requirements."

    — Aditya Saraogi

Green Energy

  • Green Power Level Green Energy · 1-1.5 years · Medium confidence 35%

    From 26% today

    Rajat Prusty: "Yes. We are working on the projects. Some projects we have already started working on both in terms of the hybrid solar. So our aim is to reach to the level of 35%. But it will take as you rightly said, it will take another 1 year to 1.5 years."

    — Rajat Prusty

What to watch in Q4 FY25

Q4 FY25 Volume Growth

next quarter
Current 9M FY25 flattish
Target 10% growth to meet H2 guidance

Why it matters

Crucial for the company to achieve its stated H2 FY25 volume growth guidance of 7-8% and demonstrate market share gains.

Shravan Shah: "And if you are maintaining the guidance of 3% to 4% or 7% to 8% kind of a growth in the second half, so we will be needing a kind of a 10% kind of a volume growth in the fourth quarter. So are we confident to do that?"

Risks & concerns

  • Competitive intensity and oversupply in Central India

    medium

    Central India faced severe competition, oversupply, and aggressive pricing, particularly in the non-trade segment, impacting overall prices.

    Management acknowledged

  • Lower net realization due to market mix from Mukutban

    low

    Mukutban volumes, while profitable, come from markets with lower net realization, which pulls down the company's overall average realization.

    Management acknowledged

  • Temporary dislocation from Kumbh Mela

    low

    Kumbh Mela caused some temporary dislocation in limited geographies but is expected to result in pent-up demand and not significantly alter the quarter's overall situation.

    Management downplayed

  • Trade volume decline in 9M FY25

    low

    Trade volumes declined year-on-year for the 9-month period due to a market shift towards non-trade demand in prior quarters, which is now expected to reverse.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
Volume growth for Q4 and FY26/27 capacity expansion Partial
Sandip Ghose: "First of all, your question in terms of -- we've maintained that, when we are saying the overall growth percentage of 7% to 8% we are maintaining. It's true we are maintaining that. That is not what we are changing, and we are quite confident of doing so." Aditya Saraogi: "We are not changing any of our projections. Including the timelines with regards to the future expansion.

Analyst questioned the feasibility of meeting H2 volume guidance given 9M flat growth and sought clarity on future capacity additions beyond Kundanganj, which management largely reiterated existing guidance without new specifics.

Asked by Shravan Shah

Central region demand growth and Kumbh Mela impact Direct
Sandip Ghose: "Kumbh, we think it's a temporary phenomenon. There will be pent-up demand, which will be made up. There is obviously some amount of dislocation in our limited geography as well as movement of things, but that is not going to overall change the entire situation very much for the quarter as a whole.

Addressed concerns about slow demand in Central India and the temporary disruption from Kumbh Mela, providing an optimistic outlook for recovery driven by agricultural demand and government spending.

Asked by Mangesh Bhadang

Capex slowdown and Bihar expansion timeline Direct
Aditya Saraogi: "We try to optimize our cash flow. So while we plan, we plan on a conservative basis, but then we try to optimize bulk of it is on account of maintenance capex, sustenance capex. We're trying to optimize whatever is possible to defer, we defer that. That is an ongoing exercise." Aditya Saraogi: "That will part of the 5 million tonne expansion, which we are and we are starting to complete by 2027. And we have acquired most of the land on the location.

Clarified the reasons for the reduction in FY25 capex plans (cash flow optimization) and provided an update on the Bihar expansion, confirming land acquisition and a completion target of 2027.

Asked by Rajesh Kumar Ravi

Utilization at Mukutban vs. company average and incentive accruals Direct
Sandip Ghose: "Look at the weighted average, boss. Our existing plants operate at a certain level and Mukutban but there, Mukutban is not even 1/4 of our capacity, and over in other places, we are close to operating close to 100%. So that's how the average works out." Aditya Saraogi: "For this year, as guided earlier, we are expecting total incentive accrual to be around INR100 crores.

Explained the difference in utilization rates by highlighting Mukutban's smaller contribution to total capacity and confirmed the FY25 incentive accrual target, with most of it coming from Mukutban.

Asked by Pathanjali Srinivasan

Freight costs and Mukutban's primary market Direct
Sandip Ghose: "Mukutban footprint since our plant is in Vidarbha, the further we go, it increases a little bit. You don't have a grinding unit there. But it's -- overall, we've had to reconfigure some of the GeoMix distribution given the market conditions, and but it has not increased in other places. So it's roughly, we don't see any significant increase in our things. It's only very marginal change." Sandip Ghose: "our primary market for Mukutban is Vidarbha, Khandesh and then going further, if you want to go towards Nasik and Mumbai.

Addressed the slight increase in freight costs due to Mukutban's distribution and clarified that Telangana is an opportunistic, not primary, market for Mukutban, which focuses on Vidarbha, Khandesh, Nasik, and Mumbai.

Asked by Girija Ray

EBITDA per tonne guidance for FY26/27 Evasive
Sandip Ghose: "'26, '27, we are not going to comment, Sanchita. That's too far into the future, we don't want to speculate on that. We have told about this year, and we, for the moment, we will restrict that. We are a conservative company, Sanchita. We don't do too much of future reading.

Management declined to provide long-term EBITDA per tonne guidance, indicating a conservative approach to future projections beyond the current fiscal year.

Asked by Sanchita Sood

Impact of government spending on rural demand and non-trade segment pressure Direct
Sandip Ghose: "We expect those monies to get released and we are seeing that happening and which is going to boost our overall traction in the rural. Rural demand comes from one is individual homebuilders, which is a function of, as we said, the crops, the harvest, monsoons, et cetera, the overall income. And then, the other part comes through rural infrastructure.

Clarified that government spending impacting rural demand is primarily through state and local government initiatives and Pradhan Mantri Awas Yojana, rather than large-scale infrastructure projects, and that these funds are now being released.

Asked by Saket Kapoor

3 min read 6 chapters

Detailed narrative

Mukutban Plant's Transformation into a Growth Engine

The Mukutban plant, previously a source of concern, has successfully ramped up operations and is now a significant growth engine for the company. It is operating at high 60s capacity utilization and has become profitable, contributing positively to both volume and the bottom line. From day one, Mukutban has been selling over 40% premium products, demonstrating the company's ability to establish a strong market position in new territories, primarily Vidarbha, Khandesh, Nasik, and Mumbai.

Strong Performance from Chanderia Unit

The Chanderia unit, one of the company's largest single-location units, performed exceedingly well in Q3 FY25. This strong performance was observed across volumes and capacity utilization, benefiting from improved trade prices. Management highlighted that Chanderia has performed to its potential, and they expect it to further augment the company's results and regain its position as a key asset in the portfolio.

Regional Dynamics and Competitive Landscape

Central India faced intense competitive pressure, oversupply, and aggressive pricing, particularly in the non-trade segment, which impacted overall realizations. In contrast, the northern region experienced the biggest uptick in volumes and prices. The company's strategy in competitive markets was to focus on maintaining price premium, achieving 58% premium volumes in Q3 FY25, and ensuring high capacity utilization. The Durgapur unit in the East also performed well towards the end of the quarter due to improved market prices and demand in Bihar.

Strategic Focus on Premium Products and Cost Management

Birla Corporation has successfully maintained its price premium over peers, especially in the A segment, and increased its proportion of premium volumes to 58% in Q3 FY25. This focus has helped insulate margins amidst competitive pressures. The company also maintains a relentless focus on cost reduction initiatives, with management indicating that the impact of these initiatives will become more visible in the coming quarters. Fuel costs were noted at 1.50 per million kilo calories, and pet coke prices have fluctuated, currently around $110.

Capacity Expansion and Future Outlook

The company is maintaining its H2 FY25 volume growth guidance of 7-8% and an average H2 EBITDA increase of INR150 per tonne. The FY25 capex plan has been revised downwards to INR500 crores (from an initial INR800 crores) to optimize cash flow. The Bihar expansion, part of a larger 5 million tonne capacity addition, is progressing with most of the land acquired and is targeted for completion by 2027. The company aims to increase captive coal utilization from 15% in Q3 FY25 to 30-32% by FY27 and green power contribution from 26% to 35% within 1-1.5 years.

Incentives and Debt Position

The company accrued INR40 crores in incentives during Q3 FY25, bringing the 9-month accrual to INR60 crores, with an expected total of INR100 crores for FY25. Cash received from incentives this fiscal year amounted to INR187 crores. The closing balance of incentives as of December 31, 2024, was INR435 crores, excluding INR118 crores related to West Bengal incentives under litigation. Net debt as of the third quarter stood at approximately INR3,000 crores.

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