DALBHARAT - DALMIA BHARAT LIMITED Share Price

The outlook provided by the management of Dalmia Bharat Limited during the Q1 FY26 earnings conference call emphasized a positive economic outlook and the potential for significant growth in cement demand. Management highlighted that India's GDP is expected to grow at 6.5% for FY26, with cement demand anticipated to increase by 6% to 7% due to strong government infrastructure spending and a recovering housing sector.

Key forward-looking points include:

1. Expansion Plans: Dalmia Bharat plans to add 14 million to 14.5 million tons per annum of cement capacity, bringing total capacity to approximately 63.5 million to 64 million tons by FY28. This includes a 3.6 million ton clinker unit and associated grinding units in Belgaum and Kadapa, as well as a potential greenfield project in Jaisalmer.

2. Investment Strategies: The company is focused on building a pan-India presence, and investments will be funded through a mix of internal accruals and debt, maintaining net debt-to-EBITDA below 2x. The anticipated capital expenditure for FY26 is INR 4,000 crores.

3. Pricing and Realization Improvements: Despite a slower start to the year, the management believes that cement prices in key regions are stable and that the realization improvements are outpacing prices, with a reported 9% quarter-on-quarter improvement in net sales realization (NSR).

4. Cost Reduction Commitments: Management committed to reducing costs by INR 150 to 200 per ton over the next two years, focusing on renewable energy investments and logistics optimization.

5. Continued Market Discipline: Management indicated a focus on profitability over market share, ensuring that improvements in price positioning would not come at the expense of margin dilutions.

Overall, Dalmia Bharat's management expressed confidence in the company's growth strategy and in the potential returns from investing in India's expanding economy.

Here are the major questions and detailed answers from the Q&A section of the Dalmia Bharat Limited Q1 FY26 Earnings Conference Call:

1. Amit Murarka (Axis Capital): "Could you just talk a bit about the market share losses and how do you plan to arrest it?"
Puneet Dalmia: "The story varies across states. Our priority is balancing volume growth and profit margins. We're improving price positioning and ensuring profitable growth by enhancing sales quality. Our brand strength and deeper distribution are increasing sales productivity, and we plan to continue this strategy across markets in the coming quarters."

2. Ashish Jain (Macquarie India): "How are we thinking about capacity and the hesitance to go all out on addition?"
Puneet Dalmia: "We are committed to expanding but are strategically assessing different scenarios, including our acquisition of the Jaiprakash Associates. While we can proceed with Jaisalmer expansion, we want to review how acquisitions unfold before fully committing to projects. We're also preparing for a larger capacity by 2031, focusing on prudent growth tied to market dynamics."

3. Devesh Agarwal (IIFL Capital): "Can you provide the current gap in pricing between you and competitors?"
Puneet Dalmia: "Gaps are state-specific, and our goal is to become the top price brand while ensuring profitable growth. We won't disclose specific regional gaps but are focused on enhancing brand value, ensuring good margins, and strategic pricing."

4. Ritesh Shah (Investec): "Can you clarify your focus on sales productivity amidst increased discounts in the market?"
Puneet Dalmia: "We are working to strengthen our market presence and brand positioning. While we've historically offered discounts, it's essential for long-term growth to stabilize brand value, which sometimes requires short-term trade-offs. We're selectively improving distribution discipline and pricing."

5. Rahul Gupta (Morgan Stanley): "How is Dalmia seeing pricing sustainability despite weak demand?"
Puneet Dalmia: "We're optimistic that pricing discipline is growing. As demand increases and consolidation occurs, pricing power will improve in the industry. Our long-term view remains steadfast despite short-term fluctuations, focusing on strategic investments."

6. Kunal Shah (DAM Capital Advisors): "Can you explain your strategy for grinding units at Kadapa versus other potential locations?"
Puneet Dalmia: "Economic viability drove our decision to consolidate operations in Kadapa. By focusing capital on strategic locations and reducing overhead, we ensure balanced and efficient market service without overextending financially."

7. Prateek Kumar (Jefferies): "What position do you see your net debt in, factoring in expansion projects?"
Dharmender Tuteja: "With our announced projects, net debt may rise to about INR5,000 crores, which aligns with our capital allocation policies. We're cautious in our debt accumulation, ensuring it's sustainable relative to EBITDA."

8. Rajesh Ravi (HDFC Securities): "What sort of incentives do your Northeast plants bring?"
Dharmender Tuteja: "These plants could provide a 200% incentive on fixed costs for 20 years, roughly translating to INR100 per ton company-wide over time."

Feel free to ask if you need any further details or information!