Container Corporation of India Ltd
NSE:CONCOR
Container Corporation of India Ltd
NSE:CONCOR
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Good evening, everyone, and welcome to the Q3 FY '22 Earnings Call of Container Corporation of India. We have the management today being represented by Mr. V. Kalyana Rama, Chairman and Managing Director and his entire team. I'll now hand over the call to Mr. Rama for his initial remarks, post which we'll open up the floor for Q&A. Over to you, sir.
Thank you. Good morning, all of you. So I'm happy to share with you that we had another very good quarter in Q3. The overall top line is one of the best ever for Q3. Only just short of -- a little short of the Q4 last year what we got the highest ever top line. So this year -- this quarter, we ended with INR 19 crores. And there is good margins maintained. Even though there are issues about content availability and the import, export things we could maintain the volumes and [ interim ] also, and there is a growth. Even though growth is not very high, just maintained around, I think, 4% growth we could get over the corresponding quarter of the last year. And the domestic, of course, there is a good growth, and that is continuing domestic volumes. We expect that to continuously grow, continuously grow in the domestic sector. In fact, that's a very encouraging thing. The -- as all of you know, the margins in domestic, we kept on building our margins over the last 4 -- 3, 4 years, and we are able to maintain that margins at that level. So with this, the EXIM domestic business, we definitely see overall -- we will be crossing 4 million TEUs business this year. I think we already crossed the handling figures of 3 million TEUs till now combinedly. And we are very sure that we'll be crossing 4 million first time in this year. In infrastructure, we are keeping in pace with the demand, and we added 16 rigs in this year til now. And these 16 rigs, let me share with all of you that there are high capacity rigs. They're call BLC rigs, which can carry 80 tonne payload. The rate what we are using or other rates are at 61 tonnes payload or 68 tonnes payload. In fact, we are converting all 61 tonnes into 68 tonnes. And by the end of next financial year, everything will be 68 tonnes payload. But these new rigs are 80 tones payload. The advantage of these new rigs is that we'll be able to increase our double stacking on the [indiscernible] DFC. On DFC, these rigs are permitted to run with 80 tons payload. And the [indiscernible], which started in this quarter is the second half started Swarupganj that is near Palanpur. So we are now doing double stack between Swarupganj and Kathuwas also. This has been allowed by railways. The commercial notifications have come, giving the benefit of double hubbing as well by the railways. So the double stack possibilities have increased. If we see the double stacks in this particular quarter, they have gone to 1,000 trains. I think maybe this is the first time where we did 1,000 plus double stacks in a quarter. So the growth in the double stacking itself is over the last year is 30% in the quarter-on-quarter. And in the corresponding 9 months, if we see, it is almost 50% -- 46% to be precise. So this is the growth potential, which we were discussing and we were hoping that DFC will bring in now that is coming into a reality. Dedicated Freight Corridor is giving 2 advantages. One is the time sensitivity. So there is sort of transit assurance for the customers. And second, more opportunity is the double stacking because higher payload running is now allowed. And your company is already acquiring these higher payload rigs only now. And we are the only one now operating is higher payload rates as of now, 16 rigs with us. And in this year, I think, we will be -- trying to add at least another 20 rigs. So we are continuously monitoring the production processes at 3 locations where these wagons are getting manufactured. So we are hopeful that we will be able to add at least another 20 rigs. We are [indiscernible] on that. So that increases the number of rigs of this company also. As on date, I'm speaking to you, we are having 362 rigs. We are trying to take them to 380 rigs. And with the demand increasing, as I said, infrastructure, we are trying to keep up with the demand. So we already released orders for the container manufacturing within India, domestic manufacturing for 6,000 containers to 4 new container manufacturers. Another 2,000 also, we will be releasing into domestic manufacturing. And we are coming out with the tender for 10,000 containers. So company is on -- is having a plan to acquire around 18,000 containers in the maybe next 8 to 9 months. So next year, again, there will be additional rigs we'll be adding definitely. So that we are keeping our infrastructure in line with the demand. As I mentioned in the guidance, we are expecting 15% increase in our volumes. As of now, we are, I think, 17% up over the last 3 years. And top line, we will be touching -- I already given that guidance, INR 7,500 crores, we will achieve this year. And PAT will be plus INR 1,000 crores at the end of this as a 9 months. You have seen that PAT is INR 805 crores as of 9 months. So we will be definitely crossing INR 1,000 crores PAT. So things are very good that're happening. One new development, which I will be sharing with you that what we are talking of movement of bullk commodities, commodities in bulk in containers. That we did a little bit of movement about 4 lakh tonnes of food grains last year, but we were doing a lot of experiments with the movement of cement in bulk in containers that we completed our trades. We are now going for commercial exploitation of this. We are expecting good market in this. This next year, this will be a reality of movement of cement in bulk in containers. The market available in the first year will be anywhere between 5 million to 10 million tonnes. So we are now readying ourselves with the containers and the rigs for that moment so that when the demand comes, we would like to pick up the entire demand without losing any demand -- market demand there. So to give you a flavor of what this will be like in domestic. Today, we are owning 37,000 containers, and we will be doing maybe this year around 12 million tonnes. In the 9 months, we did 9 million tonnes. How much we did? 8.45 million tonnes of domestic cargo in the 9 months. So we are expecting this year, we may end up maybe around 12 million tonnes here and there. So this -- another 10 million tonnes is we are expecting, we will be requiring more number of containers. That is what your company is doing. We are continuously trying to build up the infrastructure. And on the terminal front, new terminals, there is one at Paradeep, and at Varnama, and at Dahej, they are almost nearing completion and we'll be any time starting operations there. They are, again, going to be a good business potential terminals. And as of now, I think there is nine terminals under development and we are further exploring the possibilities of strategic locations where we have to build our business. So this is all about your company in a nut shell. Thank you. Please open up for questions.
[Operator Instructions] The first question is from the line of Ankita Shah from Elara Capital.
Sir, is there any update on the land lease policy to be approved by the ministry?
As I said, there is no update, still the work is in progress.
Okay. any timelines?
Earlier, we have given our workings and now it is the Ministry and the government -- there are other ministries involved in. So they are working on this.
Okay. On the domestic business, there is definitely a strong growth in volumes led by the new initiatives that you've mentioned. What is the potential growth that we can expect going forward? Will it continue at this run rate? Or can we expect better? And also realization growth potential here?
Realizations will be at the same level. See, the realizations because it is -- we are competing here with the road sector. The realizations will completely continue, maybe continuing at this level. But as far as growth potential, with the new things, what I talked of, once we got the requisite container and rolling stock with us, so it will be more than what we are seeing now. The growth potential in the near future will be much higher compared to the present one what we are achieving.
Okay. Okay. Current, if I look at first 9 months, hello? Am i audible? Sorry. First 9 months, we've seen kind of 40% growth in the first 9 months. So on a year-over-year basis, what kind of growth do you expect in domestic volumes?
That guidance, I'll give you at the end of the year. But as I said, it will be definitely a strong growth. You can expect that once -- see, here, the issue is that we have to bring the infrastructure. So the infrastructure is -- today, we got some challenges on that because procurement from China has got some issues. We are working on all of them. So, once we put the infrastructure, the growth will be definitely better than this in the near future, in 1 or 2 years as a percentage-wise. Then the base will increase the percentages automatically will -- they get flat end.
And just lastly, you can help us with the originating volume and the market share?
That any other people will ask, we'll come out with that. You can note down. So we can go to the next question?
The next question is from the line of Indrajit Singh from HDFC.
Just 1 question, extension of the previous one. With a more containerization of bulk commodities and volume increase, is there a scope for the segmental margins in domestic to increase from current 8% to 10% level? And where do you think it can be in 3 years' time?
As I said, I think I already mentioned this. The margins what we are operating, 10%, 12% is the normal margin. 8% to 10%, today, we are coming out with domestic sector. This 10% margin is normally a good margin in any logistics business. Of course, we have good margins on the EXIM segments. And in domestic sector, there will be more volumes, more numbers we will see definitely the profit in absolute terms is increased, but as a margin thing, I don't see a big upside on that. We'll continue to have the same level.
The next question is from the line of Bharat Sheth from Quest Investment Advisors.
Sir, in your initial remarks, you said on the cement side, additional volume of around [ 5 million, 10 million ], I did not get it properly. So if you can explain in which is a route that we are envisaging that domestic business will grow?
This is some cement company to their consumption market. It is all over India. You see the cement hubs. We got 2 hubs in the south, one at Tadipatri and one in [ Malkav ]. And one Cement hub in [ Villas four ]. There is one cement hub in the Rajasthan. So from all the cement hubs, there will be demand for this moment because the cement is produced entirely in bulk, and [ consumption ] is 70% in bulk. Because there are no means to transport in bulk today, only 10% is transported in bulk and rest of the thing is bagged and de-bagged at the consumption end. So there is a natural demand for this, only thing is, we should be able to give them the logistics with the ease, it will not be too much of cumbersome logistics. That is what we were working on, and we are now sure we come out with the solution. So we are expecting. When I said 5 million to 10 million tonnes, the share of the market in the bulk cement, it is only around less than 5%. So 70%, what I'm talking is equal into something like 220 million, 230 million tonnes. So, now you can understand even if we achieve 10%, it is less than 5% of the bulk cement potential.
Okay. And this will be largely utilizing this DFC route in first or...
No, not DFC. That has nothing to do with the DFC. The cement hubs, as I said, are at different, different places. So their consumption markets will be around 500 to 600 kilometers. So we will be moving to the consumption markets from the cement manufacturing places.
Okay. And in this domestic market, we were working on 3PL then going 4PL. So what stage we are now in that business domestic?
That is definitely on the cost, but the 3PL, we want to develop a BBB model, and there were a lot of interest. But because of COVID, things are actually taken a back seat. So still -- COVID, the third wave is going on. So once this thing settles down. Definitely, there is a big market in the 3PL because 3PL logistics are not provided for the industrial [ goods ] anywhere. But to go to -- in that direction, we already started doing business solutions within the company. Now our idea is to develop on the distribution logistic notes. But at the beginning, we started providing business solution services. That is an extension of what we are doing. So it is an end-to-end solution to the customer, complete solution. We'll pick up the cargo from the doorstep and deliver the cargo at the doorstep. If it is EXIM, then we will deliver the container in the port. All the things are taken care of, including clearances, forwarding everything. We are now trying to do that with the stakeholders with us.
And sir, last question. Because of COVID, there was a substantial disruption in EXIM trade, unavailability of container and container getting stuck. So what stage -- I mean, what is now status? And how do we see improvement in that will help us?
See, the improvement is now the availability of slots is good. Container availability improve, but the import volumes have not gone up. Exports are doing well. So that the pain point of the exporters not getting the containers and not getting the slot, that, I think, to a large extent, got eased out. So there is not much of pain for the exporters. The volumes was -- unless the industry picks up in India, that the import volumes won't pick up. Once that picks up, then there is a good growth potential in EXIM side. And we are able to maintain.
And that will also bring down the empty running cost, correct?
The empty running cost, yes. Empty running cost, in fact, it has come down. If we look at the empty running cost in EXIM, there is a continuous improvement. In the Q3, we could bring it down to INR 22 crores this time. In this year itself, it has come down from INR 26 crores to INR 23.5 crores to INR 22.4 crores. That is definitely, empty running improvement, that is coming because we have now added one more hub and we increased our double-stack running and more empty containers we are bringing in. So there is a balanced traffic. Even though there are no imports, we are moving a lot of empty containers from port into the Interline.
The next question is from the line of Atul Tiwari from Citigroup.
Sir, I mean, the originating volumes, if you could share on the EXIM and domestic side?
Originating for EXIM for this quarter is 549425 TEU and domestic is 97,097, total 646522.
646522. Okay. And sir, my second and last question is, if you could very briefly repeat what you said about the bulk movement of commodity. My line had actually dropped, I could not hear you clearly. Has railways allowed like a number of commodities there? And how much volume can we do in terms of number of containers?
What I was telling about the bulk commodity, movement of commodity in bulk is that there is -- commodities are to move in bulk, either we require special containers or if a methodology to move them in the normal GV containers. So we developed a methodology to move them in normal containers instead of procuring any special type of containers. Special type of containers will always involve empty running back to the loading point. Whereas these containers, we can definitely put them into [insdiscernible] wherever we can do that. So there's more flexibility. Railway are allowing the movement of cement in bulk in containers. They already given the circulars. The commercial policy has come out. Food grain is allowed and other commodities, there is good potential. We can move any commodity in bulk. The method what we developed using flexi-bags, we can move not only cement, food grains, we can move industrial starch, we can move other raw materials, which are not allowed in containers. There are only very few commodities which are not allowed to be containerized by Indian Railways, that is minerals and ores, so that we are not aiming. They are not required to be put into containers. So all the products which require to put into containers, even fertilizers, you see they get bulk -- they get bagged. But again, if they're looking at the consumption pattern of fertilizers, there is quite a substantial percentage of fertilizer, which doesn't require to be bagged because there is a mixing of fertilizers, preparing compound fertilizers at the consumption end. So that market, we are now working on what are the numbers in that. So even that is a potential thing for this. So at this moment, we limited our commercial working to cement, bulk cement. And as I told Bharat about the numbers, there is a huge number. But what we are aiming at is around 10 million tonnes market. That's a good number for us because our domestic business, as on date, is around 11 million to 12 million tonnes. So if we can add 10 million tonnes to domestic, we'll be like doubling our domestic volume.
The next question is from the line of Deepika Mundra from JPMorgan.
So firstly, just on clarification. You mentioned the task of 4 million TEU. By when are you targeting that kind of volume?
We are targeting this in this financial year because already, for the first 9 months, we have crossed 3 million TEUs. So in the last quarter, we expect to do more than 1 million. So it will be 4 million TEUs for the financial year.
And sir, any longer-term targets on the volume growth?
That we will give you for next financial year. Once this year is completed, we will tell you what we are aiming at.
Okay. And sir, the new terminals being added, can you give some time lines for those, and also the land policy or the land procurement, how is it being done for the new terminals?
Yes, all the terminals beyond 2006. Now for the last 15 years, the land is owned by CONCOR. So any new terminals is coming up, it will be our own land. We purchase it. Or else if we take some land from any government authority to either on a long lease, not on the LLF basis. It will be 30 years or 35 years lease, onetime payment. In the new terminals, we are working on 9 terminals at this moment, out of that 3 terminals we are commissioning this year. This financial year, that is before March 31.
The next question is from the line of Nitin from Green Capital.
This is Nitin Shakdher from the Green Capital Single Family Office. Sir, I just wanted to get a sense, if you could help me with the specific market share at the different ports, What's 9-month ended share at JNPT Mundra, Pipavav, et cetera?
Yes. Sanjay?.
The JNPT, actually, we have a market share of around 61%. But if we take down the -- take out the private share, which is for a very short distance 100 kilometers, then our share becomes more than 76% as JNPT.
This is one important thing all of you understand because that market segment, we are not interested. It is a movement of 20, 30 kilometers where there are no margins. We are not interested to enter into that segment. So the figures which we -- if you take that segment, then it is looking at the percentage is less, but we are not at all interested in the segment. We don't want to get into that segment. Without that segment, our margins -- our share is 77%.
And Mundra, it is 46%. Pipavav, 52%.
Okay. And the rail share out of all this at JNPT and Mundra will be how much and Pipavav, rail share?
Rail share is, at JNPT 19%; Mundra, 27.5%; and Pipavav, 70%.
Okay. So there is an increase in the market share over the subsequent quarters from what I can see on the figures, correct?
Yes. There is increase in our market share.
The next question is from the line of Achal Lohade from JM Financial.
My first question is with respect to the Swarupganj commissioning, if you could elaborate a bit in terms of how does it work in terms of savings from a cost efficiency perspective or from volume growth perspective, how does this help? And #2, with respect to the DFC, if you could help, given now we are operating on the DFC to a great extent. Any color you can provide with respect to efficiency and margin improvement on account of that?
Go ahead.
Swarupganj actually helps us in many ways, but still that as CMD sir has already pointed out, at present, Nhava Sheva is not on DFC. So by bringing the imports from Nhava Sheva to Swarupganj, we are double stacking between Swarupganj and Kathuwas for which we have got a special permission for double-up from railways. And secondly, for the Jodhpur ICD, we are able to do double stacking from Swarupganj upto Mundra and Swarupganj to Pipavav, in import export both that we are extensively using, and that is also increasing our margins for Jodhpur ICD, and which is also beneficial for the company. And in Swarupganj, we have done 100 double stack rates in last quarter. And we commissioned only, I think, 1.5 months back and that we have done 100 double stacks already. So it's quite beneficial for the company.
So here, what I will add toward further to Sanjay said, as I mentioned in my introductory remarks, the new rates which we got is 80 tonne payload rigs. So that gives us the opportunity to do double stacks of even domestic loading between Swarupganj and Kathuwas. That is around 550 kilometers. That improves our throughput, our margins. So we got a lot of domestic loading from the Gujarat area, which we can move into Swarupganj and can make double stack and bring up to Kathuwas and then further single stack will move. So that 550 kilometers, there is an increase in our margin. So this is another opportunity, which we are now working on, and it is a new thing that's bringing domestic containers into double stack.
Right. And on the question with respect to the benefit of the DFC?
I think I told this, you are again repeating the same thing. There is a time sensitivity cargo, which is coming on to the DFC because there is a [ transit assurance ] available. And we don't record numbers. So that don't ask me what will be the margin [indiscernible].That is your job. You please do that.
Got it, sir. If you could help with the data point, sir, with respect to lead distance and the empty cost?
Which costs?
Empty, cost of empty running, sir?
Cost of empty running for the 9 months period is in ISO EXIM, it is INR 72 crores. And for domestic, it is INR 147.6 crores. So total is around INR 220 crores.
Right. And the lead distance?
Lead distance.
Sorry, lead distance, okay. Lead is for EXIM it is 698 kilometers and domestic, it is 1,395 kilometers for 9 months.
The next question is from the line of Bhavin Gandhi from DSP Mutual Fund.
Just wanted a clarification. You mentioned about double stacking on domestic route. So these are not mixed trains, right? These are just domestic trains running independently?
No, no. They are mix trains. Domestic and EXIM mixed between Swarupganj and Kathuwas.
Okay. So railways have allowed the mix trains also now? I thought it was not the case earlier?
No. for railway -- it is Container. Railway, there is no thing like EXIM containers and domestic containers.
The next question is from the line of Prateek Kumar from Antique Stockbroking.
First question is on capital expenditures. So with these rigs and commissioning of terminals, as you suggested. Are we looking to close that INR [ 700 ] crores for FY '22 as suggested? Or if could be like...?
We already spent more than INR [ 500 ] crores by this quarter. We -- now the CapEx spending till the end of this quarter is...
INR 525 crores.
INR 525 crores.
So what will be full year expectation now?
Fully your expectation?
[indiscernible].
We may touch around INR 700 crores. So we gave a forecast of INR 500 crore, but we may touch INR 700 crores.
And sir, what about the -- how is the volume mix changed at ports for the quarter?
Volume mix, what do you mean by volume mix?
Like the JNPT, we do around 30%, Mundra, we do around 40%. So how is the mix in current quarter?
Yes. I already told. JNPT, our market share on the rail movement is 77%. When we take out the segment where we are not at all interested, the moment from JNPT to 30, 40 kilometers area. So we don't want to enter that business. That's no [indiscernible] -- there is no margins and the rates get wasted. In rail operations, let me tell all of you friends, the terminal retentions are a major thing in that. So the running and terminal retention, if it is not in the ratio of 60% to -- 2:1, then the rate realizations on the rate investment will be less. So we don't want to get into business where it is less than 2:1 retention. So 2 should be running time and 1 should be retention. And that is what we always [ aim at ].
Okay. And just last question. While cement as a segment will -- which you are targeting for future growth for domestic. What generally has been fueling growth in past 9 months in terms of domestic? I understand certain new initiatives, but any specific commodity, which we have added or some commodity which is growing...
We added a lot of commodities. We added industrial salt, we added tiles. We added the new loading points, food grains. So there is -- it's a bouquet of commodities. When I talk of cement because it is one single commodity where we are trying to get a major chunk of share of the domestic. Comparatively, what we are doing now, almost 70%, 80% we are aiming at getting from one single commodity. We are doing cement now also, but that is very less.
The next question is from the line of Bhoomika Nair from DAM Capital.
Sir, I just wanted to check in terms --, you may see -- look at Mundra rail share, you mentioned around 27%, 28%. Now with the DFC operational for that Gujarat port connectivity, how do we see the rail share improving, while obviously, our market share is fairly healthy, but more from a rail [ coefficient ] kind of increasing further?
Rail [ coefficient ], it -- see the imports are less as of now. And mostly it is empty containers. We move a lot of empty containers because of the scheme what we have given. Now this rail share, I can't give a guesswork to this, but definitely, it will increase because the transit assurance is coming to the customers. So more people will definitely prefer. But then there will be some sort of operational constraints still there on the railways because of the network problems of DFC as added from Palanpur. We are in Palanpur, there are some operational constraints. The work is going on in railways. So once that operation constraints go away, we may see an increase of another 5%, 6% in the rail share at Mundra also.
So you mean the feeder route from Palanpur to Mundra port?
Yes.
And when is that expected to be completed, sir?
No, no. There is no work on that, but there are certain pain points in that those roads. Now they are trying to -- railways are working on them. They are giving inputs there. Once they are completed, then the market share at the Mundra port will increase.
Fair point. And sir, on the JNPT connectivity, by when is that expected to be completed?
I don't want to answer this. I think you get connected to DFCCIL people and ask this question. [indiscernible] I think June [ '22 ].
Got it. Got it. Sir, the other aspect is we gave a good update on what is happening with Swarupganj and Kathuwas, et cetera. But there were several other MMLPs that we have put up, particularly in the Eastern region, which is Chhattisgarh, Orissa, also in terms of [indiscernible]. So can you give kind of what are all these MMLPs broadly kind of revenue generation? Or what is the likely revenue generation that we're seeing from these MMLPs?
I told, Bhoomika, that 3 MMLPs we will commission this financial year, [ Parvati ], Dahej and Varnama. Varnama is Baroda basically, it is Baroda. So there these 3 are good business potential MMLPs. So there -- and 6 more are now under construction. So there, they will come up. Like Bali, we are already working. Bali, we are expecting the customs working to start in this financial year. That will also add volumes there because, as of now, Bali we are doing -- Bali is Goa, we are doing only DPE, DPE. So you see our company continuously keeps on working these things. New MMLPs, these 3 MMLPs will be added. Now as far as the growth potential numbers, we don't give specific numbers for these things. but there are good business potential MMLPs, which will definitely add in numbers to the overall volumes.
The next question is from the line of Mukesh Saraf from Spark Capital.
So first is on the EXIM side. I think last time around, you had mentioned that we've taken INR 1,000 price hike starting October. Just wanted to check, has it come into effect? Because when you look at the average utilization per container, it is largely similar sequentially 2Q and 3Q. So is there some -- will it take some time for it to come into effect with all customers or...
It's already in effect. Try and understand we've moved a lot of empty containers at discount.
If you look at our chart of earnings and expenses, it is some of the -- not in the road that is other operating income. If you've seen my results, you just compare December '20 to December '21. December '20, we earned INR 38 crores of other operating income and December '21 we earned INR 125 crores. [indiscernible] the numbers, these are -- nearly INR 70 crores, we have earned on these 2 charges that will, [indiscernible] right? And there is one more chart that we are adding and we are putting in the [ CKD ], There are also an incremental [indiscernbile] job. But this quarter, we have got incremental [ INR 212 crores ]. So [indiscernible] stores we have owned which we have accounted for in other operating income. And as [ CMD ] has mentioned, there is yes, there is some margin we are taking in empty running that -- after we are giving to the shipping liners. But in return, we are getting good margins here as well as a shore loading on the outward direction to the port. I hope I have clarified?
Yes, sir. Understood. Understood. So the price hikes have already come into effect. There's -- and there's no more effect of that, that we'll see from here on?
That's not a price hike. That is only in the [ bouquet ] of high pricing, we keep on gaining something here and there.
Right. Understood.
Yes, it has given me more money.
There will be effects of that in the next quarter also because last quarter, last financial year, Q4, this price increase was not there.
Right, sir. Looking at it sequentially, sir. I understand on the Y-o-Y basis, absolutely. My second question is, sir, you mentioned DFC will benefit, obviously, higher payload on double stacking, but also the transit assurance. So have we -- I mean, can we look at what percentage of our rates we are right now running? Or we are providing this transit assurance already? And how much will this go up to when the full Mundra connectivity happens on DFC?
The transit assurance now we are now trying to provide all the rigs, but actually, it is not happening for all the rigs. So as of now, if you ask me, it is happening around 30%, 40% transit assurance. So there the operations because recently started around 3 months back. It's still to be smoothened out at the junction point of the Indian Railways and DFC. So once they get smoothened out, the transit assurance will be almost around 80%, 90%. That is a big influx point for getting more containers on to rail.
Right. So that will drive the shift from road to rail basically to an extent?
Yes, yes.
Okay. And so how long can we -- will this take? Sir, just a broad time line on getting to the 80%, 90% transit assurance?
Maybe another 3, 4 months or 6 months. Because what we are now trying to invest our own shunting locos at this point to lease the operations. So we are in the process. That may take maybe 4 to 6 months.
The next question is from the line of Ashish Shah from Centrum Broking.
Just one question on the domestic segment. You've seen the EBIT per TEU declined a little bit from the second quarter to the third quarter level, while the volumes have actually expanded. So any color if you can provide on that?
[indiscernible]. EBITDA margin, it has come to [indiscernible].
[indiscernible].
[Foreign Language] Margins are at that level. But one is the depreciation for new rigs and empty running costs. So proportionate allotments we do among different segments. So it's more of an accounting thing that there is a dip in the margin in the domestic.
Sure. And, indicatively, sir, would the margins on the domestic side remain at where we are seeing at the Q3 level, so these could improve as we go ahead?
You can see it [indiscernible] Q1, Q2, Q3, these levels, if you add on, and in the 9 months, you can see that around INR 5,200-odd is the margin. So you can expect the margins to remain the same level, INR 5,200 crores, INR 5,500 crores. This is more of an accounting matter friend. So we will be accounting for depreciation. We'll keep accounting for new terminals, capitalization, amortization. So that -- how proportionately, we are going to distribute to domestic, that affects the number. Otherwise, absolute margins wise, yes, it is around INR 5,000 plus per container. This what you have to do is, when you look back, in 2016, we were having only around INR 850 per container as domestic margin. So that is what we've built up in the over the last 5 years to bring the margins per container from INR 850 to INR 5,000-plus while picking up the business as well.
The next question is from the line of Jayesh Shah from OHM Portfolio.
This land license fee, I just missed out from problem at my end, I thought this issue was settled at 6% and now it is being revised to 7%. Is this linked to interest rate? How often can railways keep raising it because we thought 6% land license fee, there for their own sector?
We are clear. So let us understand the rules very clearly. The [indiscernible] percent escalation is on the base price of the total land value, okay?
Okay.
For the dynamic thing is 7% enhancement in the base value of the land, at 6% even fixed. So today, if the value of the land is INR 100. This year, I will pay INR 6 on that, 6%. Next year, that INR 100 will become INR 107.
Okay. So this is a yearly escalation based on whatever the land revenue?
Dynamic [ ports ] the 7% enhacement in the value of the land.
Okay. So that is as per the ratable value calculation, is it?
Absolutely. 6% [indiscernible] over the updated value of the land. I think I have made it clear to you.
Okay. Okay. And secondly, when you're talking about setting up these new terminals, broadly by what extent our capacity go up? We're just trying to get that sense. I'm not talking of guidance for next year, but does it really -- are we right in terms of thinking that your capacity would go up by whatever, 20%, 30%, 40%? Or it would actually result in margin increase you were explaining?
Capacity expansions are -- we can do capacity expansion even with the existing terminals. We do a lot of innovations in that. We can go vertical space utilization. So to put it very simple, there's 3 new terminals what I'm talking of, will add a capacity of, let's say, another 2 lakhs TEUs [indiscernible].
Okay. Okay. And have you finalized the expansion for next year or this will be done later?
That let us discuss once this financial year is completed.
The next question is from the line of [indiscernible] from JPMorgan.
Just a couple of questions. Firstly, on the haulage charge discount. I understand that it's set to expire in April 2022, and then we also have provided certain discounts to our customers. So just trying to understand the overall policy thing. If there is any representation by the industry to extend the discount, I mean, the timelines? And if not, what can be the potential impact or margin level for us?
Okay. If you look at margins, there is no impact. I think DF will explain you that? Maybe Manoj, you explain that first then, we'll answer it?
So you understand this, whatever we have been giving in discount through this empty running in internal direction.
Mr. Manoj, can you hear me? I'm sorry to interrupt you. Sir, we are unable to hear you. You are sounding from a distance.
Okay. Now I am better?
Yes. Please, go ahead.
So the scheme that in [indiscernible] is that we are giving the discount in [indiscernible] and direction from the port. But at the same time, the benefit that we're getting financially is, we have given a condition that whatever empty we are bringing to our depot,it has to be loaded back from my depot only. So that is giving the 100% assurance in the outward direction to the port. So that has given me a lot of more business and what we used to get last FYs. And this option was there for them to go out to other depots or road mode also. This is #1. #2, as you mentioned or somebody mentioned that we have already gone for INR 1,000 each [indiscernible] in our total charges, which is applied on these empty containers also once they are loaded from here. So in the financial calculations, I am positive in the margins, despite having this team, but let us understand that we have given a condition that whatever comes to my depot in empty running direction free of cost, it has to be loaded to my depot only. And that financiers are giving me good benefit than what I was getting in the other regime. We'll take a call end of the year. CMD will talk about it, and we'll make our strategy for it fresh after the end of this financial year, we have announced already that for this financial year, financial year -- In fact, we liberalized it. And with the scheme last quarter that more than 75% -- if you do 10,000 plus, each shipping line, we'll be giving you a 75% discount. And then we have 100% discount scheme also based on the volume. And we will take a look by the end of FY.
I get. So essentially, if I -- if my understanding is correct, if we take a relook at the numbers post April '22, we are able to extend it or not extend. Is that understanding right, sir?
No, it's like -- if you're asking whether the industry and the customers, are they asking for the extension of this. There are always a demand to extend the scheme without any doubt. So there is a demand for extension. Now we are working out as explained by DF. So this is a very positive thing. And we got positive response. We got good business, our margins increased. Our absolute profits increased because of these schemes. So taking all these things, before the end of the financial year, we will definitely announce the scheme for the next financial year. So that there is a continuity for the customers. So when you mentioned that at the end of the financial year, that means, what is effective for the next financial year, we will be very clear with the customer. And they're not any doubt in their minds so that those customers who have come to us will be with us.
Okay. Understood, sir. And sir, my second question is on the rig procurement side. I understand that we are going for higher capacity rigs and all with the [ BLCS ] and BLCM -- So just trying to understand with respect to the speed limits on DFC and also on non-DFC or sideways. Is there any...
[indiscernible] has too much a technical thing here. Railway is too technical. So let's understand in basics. We are procuring only BLCS, no BLCM. All new procurement is VLCS, which can carry 80 tonnes payload. The BLCM carries 68 tonnes payload. And it's a payload that is the weight we can put on the wagon, okay? So 12x extra, we can carry. That gives a lot of opportunities for us, #1. #2, BLCS on DFC, it can carry that 80 tonnes payload with 100-kilometer speed. And this -- all BLCS wagons are 100 kilometer speed and our Indian railways, they are running over 65, that is absolutely not a problem because average good strength speed on Indian Railways is less than 30 kilometers. So that is not at all an impediment. BLCM what I talked is, we got a stock called BLC, which is 61 tonnes payload, which was [ inducted ] long back, maybe to 20 years back, continuously were inducting. We are upgrading them all into BLCM. Already we upgraded almost 140 rigs. Some rigs left out, they will be upgraded by the end of the next financial year. So we will have only BLCM and BLCS in our stock, okay?
Understood, sir. And I was asking about the speed limit if railways has approved it, the highest speed limits on the DFC?
[indiscernible] I already told speed limits are 100 kilometers, but the trains run at 30 kilometers average speed. So that is not at all an impediment and that is not a point of concern for anyone.
The next question is from the line of Shrinidhi Karlekar from HSBC.
I have a question on dwell time. I just wanted to know what are typical dwell time at CONCOR's terminal in EXIM business? And sir, how are they different in export and import like?
I think you are not following the CONCOR. We announced the scheme almost 2 years back that we give freedom of 45 days to the loaded containers and 90 days for empty containers. And we are continuing ...
No, no, I'm aware I just want to know when an exporter tried to send a container to a port, by the time it enters CONCOR's terminal and by the time it leaves CONCOR terminal, what is a typical time? This is more from a time study, not the warehousing. I am aware of that 45 days [indiscernible].
[indiscernible] we clear immediately. That is why customers come to us. Our clearance of port is mostly within, I can say, 2 days from the time the container...
Yes. So that 2 -- I just want 2 days. Is that 2 days, is it?
Listen to me, first of all, why you come to conclusion. On the import side, it is around 2 days and export side, we clear within a day, 24 hours.
Okay. Fair enough, sir. And sir, I just want to know, is it a function of volume? I suppose it's a function of volume and how frequently you run trains between terminal and port, right? So does DFC change these numbers?
You are not able to frame your question. I will explain the DFC gives that time sensitivity due to the cargo. So there is a transit assurance. So more and more numbers will get booked with us. But anybody running on Indian Railways, they have to run these numbers because they train -- not less than 80 TEUs have to be run. But if less than 80 TEUs, you have to pay ideal freight to railway. That is a rural, commercial rule. So we always have a 80 TEUs plus we are minded to trade. We get those numbers. That is how this company is going, okay? Thank you. I think moderator, please the last 1 or 2 questions, we'll take now it is 1 hour.
Sure. Sure, sir. The next question is from the line of Aditya Makharia from HDFC.
This is Aditya from HDFC Securities. Sir, just one question. You mentioned that you're focusing more on domestic. And currently, most of our cargo comes from the western side of India. So is it fair to say that now your mix will become more on the eastern side because a lot of the domestic cargo actually happens -- a lot of the domestic movement happened on the eastern side?
No, it is not so. I don't know where domestic movement happens all over India. So when I said we will be working on cement. Cement is in clusters. Cement clusters are there are 4, 5 clusters in India, one in Western India, two in South India, one in Chhattisgarh. So these cement clusters we'll be concentrating. There is one small cluster in Eastern India also. So the domestic cargo -- now this cement business will be all over India because cement consumption is all over India. And also, please don't misunderstand when we see where emphasis on domestic. It is not that EXIM, there is no emphasis. EXIM, there is always emphasis. Whenever the EXIM growth is there, we will be taking up the demand. In domestic, we are working on a particular segment, which is going to give us good volumes. Okay?
Okay. And second thing, sir, if I look at a 3- to 5-year view as the mix of domestic goes up, the margins today are very healthy at 24%, 25%. And in general, the margins in domestic have been lower because you compete with road. So to that extent, will structurally margins come down?
As an analyst, what you look at? You look at return on capital. Isn't it?
Yes.
[ PAT ] is the absolute numbers, what PAT we are going to do. Now percentage is 1 statistics, which speaks of as I were top line, what is my margin. So by absolute numbers, we'll go up. By [ ROC ] will go up. Whereas my margin percentage as the top line will definitely come down because domestic, as it increases, the margin percentage-wise will be less. But my absolute number will go up. The last question, moderator, please.
Ladies and gentlemen, this will be the last question for today, which is from the line of Vikram from the PhillipCapital.
Sir, what was the rail freight margin for this quarter and 9 months?
See, the rail freight margin for this 9 months is around 32%. So just, Manoj? As Manoj explained to you, there are some charges we are collecting as other operating income. Basically, we are freight based only. But we put the bouquet of charges in different ways so that there will not be too much of emphasis on one thing. So if I take those INR 1,000 increases, which I have not done in freight but have done as other operating income. Rail freight margin is coming to around 32% for the 9 months. For the quarter also, it will be something like around 32%, 33%.
Ladies and gentlemen, as this was the last question for today. I would now like to hand the conference over to Ms. Bhoomika Nair for closing comments.
Yes, sir, thank you so much for the entire team and giving us an opportunity to host the call and also all the participants. Thank you very much, and wish you all the very best.
Thank you.