Q1 realisation steady; eye IPL revenue in Q3: India Cements

India Cements posted a dismal performance in the first quarter of FY13 and its profits fell by 39% year-on-year to Rs 62 crore. The company’s sales increased to Rs 1,201.4 crore from Rs 1,056.8 crore during the corresponding quarter last year.

In an interview with CNBC-TV18, VM Mohan, Joint President - Corporate Finance, India Cements said cement realisations have been largely steady in Q1. However, the rise in excise and freight offset the realisation improvement.
India Cements saw -5% growth in monthly sales at Andhra Pradesh but, despite the declining volumes, the company plans to maintain its pricing, informed Mohan.
Besides, India Cements expects some revenue from the IPL team as well in Q3. Here is the edited transcript of the interview on CNBC-TV18. Q: If you can start by taking me through the cement realizations in the quarter and where prices are holding up generally in your key markets?
A: Yes, the realizations have been fairly steady and in fact compared to the first quarter of last year, our gross realization has gone up close to Rs 460. Out of this, nearly Rs 280 has been offset because of the increase in excise duty, freight and handling charges.
At the net plant realization level we have had an increase of about 5% which has actually been compensated because of the increase in variable cost. More or less, we have maintained the margin that we achieved in the corresponding quarter of last year.
Currently, there has been some aberration in prices in Andhra. Hopefully, it will settle down. As far as we are concerned, we have decided to set a reasonable price irrespective of the volume and we are going to sell at that price. That is what our policy is and in fact if you see the volume we have also lost a little bit of volume because of this.
_PAGEBREAK_ Q: Can you give us some sense of what these prices are that you are talking about which you will set and then let the market decide how much volume can happen in Andhra and in Tamil Nadu?
A: Last quarter for instance, our price has been Rs 3,550. That is the net plant realization. That is what we have achieved and this we believe is a reasonable price level. Though we have lost a little bit of volume, we stuck to these prices and sold the volume that we had achieved.
If you see the fourth quarter of last year, we have done about 26 lakh tonnes. This quarter we have just done about 23.8 lakh tonnes including clicker. The reason as I said earlier has been the need for maintaining the prices and that is how we have lost a little bit of volume during this quarter. Q: What is demand like in the Andhra market now?
A: Unfortunately, we have got data till May. Thanks to the CCI order we do not have complete data till June. Up to May we still have lost demand in Andhra Pradesh. There is a negative growth of about 5%. So this is the third year in the reckoning that we are having a negative growth in Andhra Pradesh.
We used to be selling almost 22 lakh tonnes a month about 3-4 years before. Currently, we are selling just about 12-13 lakh tonnes which has majorly impacted the growth in this region. Fortunately, in this quarter there has been growth in other parts of the region and Tamil Nadu, Karnataka and Kerala has contributed to a growth of about 9-10% in this region. Otherwise, as far as Andhra is concerned, we are still seeing negative growth. We only hope things start looking up in Andhra. Q: What about Tamil Nadu?
A: Tamil Nadu has been doing reasonably well till now. It had a growth of about 12-13%. Things are happening in Tamil Nadu. The new government has settled down and new projects are coming up. Hopefully, we will see growth in Tamil Nadu and this is likely to be maintained in Tamil Nadu. Q: You had an EBITDA contribution of more than Rs 20 crore from the IPL franchise this time around. Is that your expectation because you got another season coming up? What kind of contribution are you expecting from IPL this year?
A: It is difficult to estimate. The first quarter is when we play that IPL league. Most of the income gets registered in this quarter. Fortunately, this time around we will also be playing the Champions League. We will be having some revenue in the third quarter as well.
Last year, we ended with Rs 10-15 crore of net revenue. Hopefully, we will be doing this. As far as the Champions League is concerned, we are yet to get our sponsorship revenues. So as far as IPL income is concerned, we will actually be able to report it post that event.
_PAGEBREAK_ Q: Can you talk about this Rs 20 crore write-off that you have taken on the IPL front this time?
A: No, it is not actually a write-off. This is a one-time cost that we had to pay at the time of auction. We had to incur it for getting players during the last auction. Q: Any plans of monetizing the franchise in the near future even through a partial sale or a stake sell?
A: Not exactly. At this point in time we are not thinking of monetizing. We believe it has a lot of value. We do not want to monetize this in a hurry.