Gateway Distriparks Ltd
NSE:GATEWAY
Earnings Call Analysis
Q2-2024 Analysis
Gateway Distriparks Ltd
The company has allocated a budget of INR 300 crores for the next 24 months, maintaining its previous guidance. This investment covers the establishment of two new locations and the completion of the Jaipur site, along with vehicle replacement and some equipment upgrades. The Jaipur facility faced delays due to elections but is expected to be operational in Q1 of the following year, targeting a 4- to 5-year payback period.
The conversion from road to rail transport is expected to be gradual with an estimated annual increase of 1% to 2%. The company acknowledges the difficulty in predicting precise numbers due to scattered and unorganized data but anticipates that overall macroeconomic factors, such as GDP growth and a rebalancing of exports, will further influence this transition. Additionally, there has been a reduction in double stacking—to about 36% from the previous year's 43%—attributed to a decline in exports. This imbalance has also affected pricing, with a recent 10% increase in revenue per TEU, amounting to an additional cost of INR 2,000 to INR 5,000 per container, which the company plans to pass along fully.
The warehousing business typically sees contract renewals and price increases ranging from 5% to 6% annually during March and April. The company has been adding dry warehouses, which might skew the average realization figure. However, focusing solely on temperature-controlled warehousing, the increase remains consistent at 5% to 6%. The company is striving for operational optimizations and capacity expansion, with a unit-level return on capital employed (ROCE) target in the range of 15% to 18% against the current level of 9% to 10%. To achieve this, the company intends to increase capacity and revise pricing to maintain a growth rate of 5%, ahead of the input inflation rate of 3% to 3.5%.
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Ladies and gentlemen, good day and welcome to the Q2 FY '24 Earnings Conference Call of Gateway Distriparks Limited and Snowman Logistics Limited.
This conference call may contain forward-looking statement about the company, which are based on the belief, opinion and expectation of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that the conference is being recorded.
Today on the call, we have Mr. Prem Kishan Dass Gupta, Chairman and Managing Director; Mr. Ishan Gupta, Joint Managing Director; Mr. Samvid Gupta, Joint Managing Director; Mr. Sandeep Shaw, CFO, Gateway Distriparks Limited; Mr. Rajguru Behgal, President, Gateway Distriparks Limited; Mr. Manoj Singh, President, CFS, Gateway Distriparks Limited; Mr. Sunil Nair, CEO and Director, Snowman Logistics Limited; Mr. N. Balakrishna, CFO, Snowman Logistics Limited. We also have with us Mr. Sikander Yadav, who has been appointed by the Board of Directors as Chief Financial Officer of Gateway Distriparks Limited with effect from the opening of the business hour of November 29, 2023.
We hope that you had the opportunity to review the financial statement and earnings presentation, which have been made available online.
Ladies and gentlemen, we'll now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Yash Tanna from ithought PMS.
So my question was relating to Snowman. So my question was relating to Snowman on the transportation side. We have seen the revenues grow by 10%. But on the PBT, I think we -- there has been some drop in the margins. So I would like to understand why this has happened? And I'm referring to the results release, the results especially.
And the second one, on the [indiscernible] side right? I mean, quarter-on-quarter, we are seeing some degrowth, we have been doing very well on this side of the business. So for the rest of the year, what is the outlook, what sort of client additions are we targeting? Or what will be the growth from the existing clients for the rest of year and probably the next year as well.
This is Sunil. In case of transportation, 2 will be major reasons why the EBITDA or gross margin is lesser than the previous quarter. One is the season is a little lean. Usually, Q2 and Q3 are down in terms of business. So a lot of fixed costs still gets absorbed during the period. And the second reason, we had deployed 50 new trucks by the end of Q1 and beginning of Q2, which took close to 1 month for deployment. So we have absorbed those costs, the standing cost of those vehicles as well in terms of driver and related costs. So that's the main reason.
When it comes to the [ Snow ] distribute business, as you know, we have 3 major clients in this. What we have done, as you can see the growth that we have in terms of the numbers, as compared to last year, we have introduced close to 20 new products to our existing clients.
So there are 3 ways we are trying to expand this business. One is increasing our basket of supplies through the [ 5 p.m. ] services to the existing set of customers. Second is increasing or adding the new locations of these customers. So we have added 1 market for ice cream business, which is in the Punjab. As compared to last year, we added 20 new products for our customers, which are Ikea and Tim Hortons. And we have 3 customers in the pipeline, which we expect anywhere between 3 to 6 months' time for it to materialize and come to our numbers. Thank you.
Right. And on the transportation side, you said that you have deployed 50 new trucks and I think trailers also we have deployed. So what is the strategy going forward in this transportation side, since earlier -- I mean, we are doing asset light because we don't have to absorb these costs, right? And now we are putting up upfront investments in this part of the business. So what is the capital allocation strategy in the transportation side of the business?
So transportation will continue to be asset-light only. So as you know, we had 300 vehicles, which were own. We have reduced it to 260 now. What we are doing is, we are only investing in vehicles, which are very special for us and where we have an end-to-end solution to our customers. Otherwise, we are going and leasing. So today, we operate around 500 trucks in our business, out of which around 260 are leased.
At any point in time, while the 500 will continue to increase, we will have somewhere around 200, 250 own trucks. We bought these 50 trucks to replace the old ones, which were 10-year old, so which -- these replacements will continue to be own trucks.
Right. And the 20 trailers that you all have bought and it's, presentation also this -- this announces Snowman's entry into the trailer business. So is this something more differentiated that you are trying to offer or what is this?
Yes. So this is just an extension. What's happening was, from ports to the warehouses that leg was not attended by us so far. So we are exploring that business as well by deploying these trailers. And if we find it attractive, then we will expand on this vertical as well.
Right. And then this will be a CapEx-heavy investment? Am I right on that?
So being trial, we have invested. But if it works well, then we will also go asset light in this model as well.
The next question is from the line of Bhoomika Nair from DAM Capital.
Congratulations on a good set of numbers. Sir, this quarter, we've seen very strong traction in terms of volumes, both in railways and in the CFS business. So if you could just comment on whether this has got to do with the fact that there was a railway disruption in 1Q, so is there some spillover benefit which has come through in 2Q?
And if you can also talk about commentary and outlook for the second half and how you're seeing the volumes stacking up, et cetera. And also, if you can just comment about the terminals and Kashipur, how it is shaping up? And what is the volume contribution from there?
Yes. It's Sandeep here. So we expect a similar trajectory going forward for the second half as well. So this quarter had a little bit of spillover from Q1 after the cyclones but some of those volumes were also transported by road because [indiscernible] want to wait for their cargo to be delivered because there is a backlog. So some of it came to us, some when to road but we expect a similar number going forward.
Kashipur continue to do about 3,000 TEUs per month but that market is dependent on wastepaper, not on imports. So Q3, normally, if they go for shutdowns on the paper mills, go for shutdown for maintenance. So maybe in Q3, we might see a small dip in imports there but other than that, it's doing well and we'll continue doing as per reductions.
Okay. And how has the rail EBITDA per TEU and CFS EBITDA per TEU, panned out this quarter?
So rail is similar at INR 9,000 only. CFS saw a slight decline. That's at about INR 1,800.
Okay. And recently, when Railways has announced this busy season surcharge, are we kind of passing that on? Have we started taking price hikes, et cetera, for the same? And if you can just comment about what has been the double stacking and with the Dadri bit commissioning, has that helped us in any manner or any other qualitative comments in terms of improvement in EBITDA per TEU.
Yes. So the busy season surcharge was levied on 30th September with effect from 1st October. So there might be a slight delay in some contracts where we have to give a notice but it will be fully passed on to customers. And by November, it will be fully passed onto our customers. And Dadri double stacking doesn't affect us because the terminal is more further East from our locations where we double stack our trucks. So the same alignment continues for us in Faridabad and Gurgaon. Faridabad double stack work is on and that should be there in Q4 but it's already connected to [ DST ], so that is out of the way.
Okay. And if I may just squeeze in another question on terms of new terminals' CapEx, et cetera, that we are looking at and also your thoughts on the high-speed rakes.
Yes. So we're still looking at 2 locations in the medium term but we haven't finalized the location yet. We've scouted some land options but until it's clarified where they are, we won't be announcing them. The high-speed rakes, we have signed up for 3 more rakes which will start deliveries within this month. So by end of March, we should have 3 more rakes added to our fleet and this will be the high capacity, high-speed markets.
The next question is from the line of Aditya Makharia from HDFC.
Congrats on a good set of numbers. I was wondering on the railway side, have we gained the market share from competition?
So it's a similar market share going on in NCR was still at about 17%. Ludhiana, we've actually lost a little bit of market share but that's because now there's a new ICD that's running full-fledged operations. But overall, our volume is still going up. If you look at all terminals, so we're happy with where we are.
And other thing Ludhiana, because it is import heavy, so we have been -- the timing of spot business because it increases our [indiscernible].
Okay. And just a second question, there were some news articles suggesting that Container Corp is giving up some amount of land at TKD because the LLS charges are going higher. So will that benefit us in a material way?
Not really because TKD volumes over time have gone down, so they're probably losing less capacity of the yard. So they can give us that surplus line but it won't make a difference to us.
Okay. And last question, just an update on the DFC. So when will the route, at least the Gujarat leg be completed? And does that then benefit you even for traffic, which goes down to JNPT?
Hi, Rajguru this side. So regarding Western DFC corridor, some 70% is already commissioned. So we are already using the DFC to the extent of around 800 kilometers. The stretch between Rewari and Sanand. So our trains, which are going towards Mundra and Pipavav they're already using this corridor. The second stretch which was commission was between Rewari and Dadri, that was basically for Dadri. And now the remaining stretch between Sanand and JNPT, which is close to 550 kilometers, out of which, there has been 2 stretches, very small stretches, which have been commissioned but there is no point commissioning few stretches, unless and until the entire is completed, which is now left around 450 kilometers. So as per DFCC official stance, they are saying that they are going to complete it by 31st of March but we are expecting that it might further get delayed because there is some work, which is yet to be completed between a couple of stretches.
The next question is from the line of Achal Lohade from JM Financial.
Sir, can you help us with the absolute rail and CFS EBITDA because I presume EBITDA per TEU, what you mentioned, it includes other income. Is it possible to know the EBITDA without other income, sir?
So other income, only INR 2.8 crores. So it's hardly any effect this quarter. So broadly, you can reduce a couple of [indiscernible].
Okay. Okay. Got it. The second question I had, is it possible to get some sense in terms of our first half volumes, how much was actually destined for Mundra, Pipavav and JNPT?
About 95% -- about 90% to 95% is for Mundra, Pipavav and only 5% to 10% is for JNPT.
Right. But within Mundra, Pipavav, what would that split be?
It's 65% Mundra, 30% Pipavav, 5% JNPT, you can take that as a rough average.
Understood. And has that changed materially over the last 2, 3 years, 4 years?
Mundra's volumes have gone up slightly more than Pipavav. JNPT also was maybe at about 15%, which has now come down further.
Okay. Understood. Now the second question I had with respect to the volumes. If we look at the volumes, Q-o-Q, the [indiscernible] has seen a kind of a 14%, 15% kind of a jump. I mean we have grown by about 12%. So is Ludhiana the only factor which is playing out here in terms of the slightly lower than the railways volume growth? Or first of all, is that a right way of looking at the aggregate industry growth number?
So the 14% is for containerized volume that [indiscernible].
Yes, EXIM, it's EXIM, Indian Railways EXIM volumes in million tonnes.
See it can depend all across India, we're talking about. So there are routes where we don't ply our trains. So we have to look at the market growth and then the market share, so our market growth in NCR was at about 8%, whereas our terminal [indiscernible] grew at double that. Faridabad saw some decline. So overall, it balances out and that's why our market share hasn't changed, it's still at 17%. The overall volumes for us are at 12% growth, which we expect to see going forward.
Right. And when you said you're kind of looking at maintaining what you have done already, is that in absolute number? Or is that the growth number you kind of hinted at 12% volume growth for the second half?
12% year-on-year, basically H2 versus last year H2.
Okay, okay. Understood. And about this busy season surcharge, what is the extent? And what is the visibility here? Is that only for a few months? Or is it round the year? Effectively, is that a haulage price increase the railways has taken?
They've done it for 9 out of 12 months. So effectively, it's throughout. The association and industry is taking it up because it increases the cost of logistics for the end customer. And with the shift from road to rail that everyone wants to happen, this is a step in the opposite direction. But for now, it's there to stay.
Right. And the rationale is to cover the increase in cost? Or I mean, is there any congestion what -- for which they are charging the premium?
The situation hasn't changed in terms of congestion but I think it's just for railways to get an avenue to increase their revenue.
Got it. Got it. And can you help us understand in terms of the CapEx, what should we budget for FY '24, '25 and '26?
So for next 24 months, we have about INR 300 crores, still the same guidance that was given, INR 100 crores each for 2 new locations, balance is for completing Jaipur and vehicle replacement and some equipment replacement.
And what is the expectation on Jaipur? By when do you think it will commission? And what scale up can we look at?
We expecting to be operational in Q1 next year. There were some delays in local permissions due to the elections coming up. But Q1, we should be operational. And we're looking at a 4- to 5-year payback overall.
Got it. Got it. Just 1 more question. Sorry, I'm kind of going back to the industry number. Is it possible to get some sense in terms of the total size of the market? How much of that already on rail, how much is potentially can come into rail because of the DFC?
It's very hard because the data is a bit scattered and unorganized. So we have to rely on external reports because there's no central mechanism to look at this.
But any guesstimate you would have, Samvid ?
So road to rail shift will be very gradual, maybe 1%, 2% incremental year-on-year. Then you have to look at the overall macros that will take place on the GDP as well as exports coming back, that should help the imbalance factor also. So again, it's hard to put a number on it, what we can see incremental because of DFC on this.
Got it. And if I may ask a couple of more with respect to double stacking, if you can help us understand how -- what was the ratio in 2Q and vis-a-vis last year?
We're at about 36%. And last year, it used to be more, it was at about 43% last year.
And so this reduction would be because of the imbalance, is that so?
Yes. And the export side has reduced double stacking happening.
Right, right. Would you be able to tell us the mix? What is the mix of imports and exports in this quarter and last year same quarter?
About 58%, 42% in favor of imports. And last year, it was maybe 52%,48% kind of numbers.
Okay. Understood. And just last question with respect to the pricing. You said that you're going to pass on the entire cost inflation with respect to the busy season surcharge. Is that the case even with the others? And what is the absolute increase in the pricing here per TEU?
It's 10%. So our average revenue per TEU is about INR 35,000. So you can, depending on the weight mix, type of container and also it's deliveries and [indiscernible] they have INR 2,000 to even INR 5,000 in some cases per container. And yes, it will be fully passed on.
And if others have also done...
Everyone is passing it on but different dates.
Next question is from the line of Harsh Shah from Dimensional Securities.
The question is for Snowman Logistics. What was the increase in realization for this quarter in the warehousing business Y-o-Y, on Y-o-Y basis?
Yes. This is Sunil here. So as I told last quarter, every year in the month of March, April, our contracts get renewed. And we had a price increase between 5% to 6%. But when we take on a company level average because we have added a lot of dry warehouses recently, the average may not show that. But when we look at temperature-controlled yield versus the dry yield, you see that trend of anywhere between 5% to 6%.
Okay. Okay. Thanks for the clarification because that was the next part of my question, because our blended realization look flattish if I look at last 6 or 7 quarters number. So on a like-to-like basis, if we compare only the cold chain realization use thing, you said it would be better than 5% to 6%, right, only for cold chain.
So that should be anywhere around 5%, if it's the only cold chain [indiscernible] but maybe we will see if we can get back to you with the separate segment-wise numbers, temperature-controlled versus the dry.
You know the blended EBITDA percentage maybe down in terms of the mix of cold and dry, both, so in absolute terms, the EBITDA [indiscernible] increase in the region of [indiscernible]. But percentage wise, you might see [indiscernible] actually is not a gross but both the revenues and margins in cold and dry are, therefore, as on expected lines.
Got it. Got it. And sir, if I look at the return on capital employed for our warehouses business, we have improved marginally, we are at maybe around 9% to 10%. So just wanted to understand, is this the [indiscernible] ROCE for this business, given that we are at already at 91% capacity utilization or is there any further scope, whether we can get to that 14%, 15% kind of market share and what would be the levers for that?
So see, ROCE, when we calculate today, it is at the company level. Whereas most of our overheads, whether it is IT or people overheads are invested for almost double the size of the capacity that we have today. So we are looking at it from a long-term perspective. But if we go at a unit level, the unit level ROCE will be somewhere around 15% to 18%.
For warehousing. And what would be the levers to achieve that 15% ROCE?
At company level, the main thing would be to increase capacity and optimize the overheads as soon as possible and some correction in pricing, which we are going to the extent of 5% year-on-year while our input inflation is anywhere between 3% to 3.5%. So these 2 things will drive the ROCE in coming years.
Okay. And in the cold-chain warehousing space, what is the industry scenario like? Because during COVID, maybe there was some sort of consolidation happening throughout the industry, many unorganized sectors went out of the business. So right now, what is the competition and industry scenario like?
So there is a small amount of investments coming in, 1 or 2 warehouses are being invested by regional operators. So that is continuing. From a demand side, we see good demand, particularly the top 3 segments, which are dairy, ice cream, QSR and the sea food. They have -- they are showing quite promising volume growth. So I mean, while there are capacities coming, there is demand also is there. And we are also aligning our investments accordingly.
The next question is from the line of Krupashankar from Avendus Spark.
My first question is on the rail side of things. Just wanted to get a sense on the underlying market. So given that the commentary of growth in second half is about 12%. Just wanted to understand, given the slowing exports, as well as, what Samvid has mentioned with respect to key sectors witnessing slowdown on the import side as well. What is driving confidence of a 12% growth in the second half? That would be my first question.
So in Q2, there has been some uptake on the export volumes, particularly in NCR region. It's the effect of Gurgaon terminal. So there has been some good movement of export of auto, which has taken place in the NCR region and plus there is also some growth in the [indiscernible] exports, which has led to some growth on the export side. And on the import side, there has been, again, a robust demand of -- because of the robust amount of auto, there has been both growth in scrap polymers and electronic items. So these are the major items which led to growth in Q2.
Right. But going ahead, do you believe that given the growth, which is there or weakness which is there in the export side of things, do you see that imbalance getting skewed in more in favor of imports and that can have a toll on our profitability?
So what we are looking at -- if we look at our October numbers there, like as Mr. Gupta mentioned that due to the maintenance and plant shutdown planned in the month of October, November, there will be some downward trend on the both sides. But we are expecting that in the month of December, things should improve. And with the improvement in imports and as well as exports, we are expecting that our volumes on the both sides should improve. And historically also, we have done good volumes in the month of December that should cater to whatever the downward trend we have seen in the 2 months that should be taken care by the good volumes of December, what we are expecting.
Understood. And with respect to your profitability on the rail side of things, are we still are on course to achieve the INR 10,000 EBITDA per TEU, that is the target, right? Is there any change in that?
No, that right now is still the same. But that will only come in after Jaipur, Faridabad being double stacked and JNPT also being double stacked.
Understood. And last one, if I may. Just wanted to get a sense that, given the commissioning of Dadri to the Rewari piece of DFC, has there been any change with respect to how trade has behaved with respect to movement of goods? Meaning, any underlying change wherein goods were coming to Rewari and then moving onto DFC versus right now, shipments now moving from Dadri itself?
So this was just your operational cost advantage for Concor. Now they can directly double stack from Dadri instead of [indiscernible]. But in terms of competition with us, Dadri is a different catchment area, which we don't really compete with. It doesn't make a difference to our business .
The next question is from the line of Abhijit Mitra from Aionios Alpha Investment Management.
Regarding...
Abhijit can you please switch to the handset? Your voice is very low.
Yes. I think it should be better now. So regarding the rail volumes and overall volume guidance of 12%, as we can see last year, we had a very weak base in Q3 because of one-off tracking laying works with almost 3,500 TEUs, which were lying at the port. So the 12% volume growth guidance that you are sort of giving, it sort of takes that into consideration as well? Or I mean how to look at it?
Yes, there was a slight decline. We're just looking at the whole half because even last year, Q3 volumes went into Q4 then -- so if you just look at H2 and H2 then 12% is what's the [indiscernible] so if we look at it, Q4 last year was significantly higher than Q3, so it evened out.
Got it. Got it. And in terms of, just to be sure if I heard it right, you said that you'll get the volume rolling in from Q1 of FY '25, is that right?
So Q1, it has become operational and it will take about 6 months to ramp up volumes over there. So H2 of FY '25 is when we should start seeing proper volume and revenue coming in from Jaipur.
The next question is from the line of Riya from Aequitas Investment.
Congratulations on good volume numbers. My first question is in regards to Kashipur. So what kind of revenue are we looking from Kashipur in this quarter?
So overall, we have to look at Kashipur, not as a stand-alone entity but Kashipur -- real business is being done from the Gateway Distriparks entity and the ICD business is still a more Kashipur entity as we acquired it. But eventually, we have plans to merge it. So we are doing at about 3,000 TEUs per month over the -- an average revenue for TEU is about INR 40,000.
Okay. And what -- so we were expecting it to reach to around 6,000 TEUs per month. So when do we see this happening?
That is a very long-term guidance that we had given. So we have crossed 4,000 TEUs in 1 month including [indiscernible] but 6,000 TEUs was just to show the market potential and that we can eventually get in 3 years.
And it will take around 3 years to reach 6,000 TEU there?
Yes. I mean, technically, we can increase our volumes right now, but it's at the cost of imbalance. It's already a import-heavy terminal, so we don't want to take further imports. So we'll keep that in mind while growing our volumes.
Okay. And so do we have competition there in Kashipur just like you said in other -- Ludhiana you're seeing some competition?
The 3 terminals there right now, including us and a fourth one is under construction.
Okay. So do you think that the volume -- incremental volume would be easy to reach at the full potential?
Yes. I mean, we should be -- we are on track and we're already doing more than what we had initially thought within this year itself. So we should see the same trend continuing.
Okay. So by the year end, do we see the 3,000 TEU mark volume upwards or more or less you'll be consolidated at 3,000 TEU?
Sorry, by year-end, you're asking what [indiscernible]?
Do we have a milestone basis target for Kashipur that we want to increase it forward? Or for the year-end, we are more or less seeing it will be consolidated at 3,000 TEU, in that level?
You say 3,000 to 3,500 TEU monthly average will be there until the export situation improves. Once that improves and we can start taking on more imports as well and going to 4,000, to 5,000 TEU range maybe next year.
And in terms of [indiscernible]
[indiscernible], Riya, your voice is not audible. Can you speak it louder or come closer to the handset? Riya? As the current participant's voice is not audible, we will now move to the next question, which is from the line of Rohit from Samatva Investments.
So my question is on Snowman Logistics. Firstly, I would like to know the Amazon Fresh part of the business that we have, what are we exactly doing for them, is it only cold chain or does that also include the warehousing part of the business or the dry warehousing part of the business?
So what we do for them is a fulfillment center, which includes frozen, chilled, as well as dry and it also includes fresh fruits and vegetables where we do sorting, grading and packing for them. So complete end-to-end activities in the fulfillment center. We have 4 such fulfillment centers operational as of now, Delhi, Bombay, Pune and Ahmedabad.
Sir I was asking because Amazon I was reading somewhere, Amazon Fresh they are on an expansion spree all over India. So how much of -- are we the only player who is handling it for them? Or like, what would be our wallet share that we have with Amazon.
So there are 2 ways Amazon does their groceries and fresh foods and vegetables. One is hyperlocal where they are tied up with the supermarket chains. So there we have no role to play. And the second one is the product which moves through the fulfillment center to their spokes and from there they home-deliver. So wherever it is through fulfillment center, we are their partners. And as of now, it's only with us.
Got it. Okay. Sir, my second question would be on the transportation part of the business. Could you explain how SnowServe works because that's a profitable part of the segment. So how are we differentiating ourselves with our competitors through SnowServe? And what will be the revenues, if you can give me that number for SnowServe?
Sorry, you said transportation or SnowServe?
SnowServe. So within -- SnowServe comes under -- so we gave our platform to the various fleet owners, right, SnowServe platform?
That's not SnowServe. It is SnowLink.
SnowLink, yes. SnowLink, I'm sorry.
Snow Link is a technology platform where we help various transport operators to come on board with us, and we use their trucks to serve our customers.
And what would be the revenues from that segment?
So the current run rate of revenue is close to INR 50 crores per annum from this technology platform.
The next question is from the line of Amit Dixit from ICICI Securities.
Yes. Congratulations for a good set of numbers. I had a couple of questions. The first one is that you indicated earlier that the CapEx for next 24 months is expected to be INR 300-odd crores. Now given the first half, the CapEx has been much lower at around INR 20-odd crores and Jaipur terminal is also getting completed. So do we expect CapEx to be much higher in H2? If so, what is the number that you would like to guide? That is part A of the question.
Part B, is that if you can split this INR 300 crores into the CapEx for rakes and for terminals? Because I guess there are 2 more terminals you're looking at developing very soon.
Yes. So the 2 new terminals would be INR 100 crores each. So if you remove that, the balance we will spend about INR 40 crores to INR 45 crores on Jaipur. So that will come entirely in H2 this year. Then we are going to -- we've already done it in October about INR 30 crores CapEx on vehicle fleet replacement, which was aging 15 years, and balance will be for maintenance and small upgradation at our existing terminals.
So H2 should see around INR 70 crores. That means INR 30 crores that you have done for this fleet and INR 40-odd crores for Jaipur.
Yes, plus INR 10 crores maybe you can add.
Okay. So the second question is that some of your peers have indicated that they are going to pass on the benefit -- the cost benefit that you get in double stacking to the end customers. Are we also thinking on the similar lines or our better, let's say, the last-mile, first-mile connectivity or other value-added services more than suffice for that?
Yes. So we've been double stacking since 2010, '11. And basically, in our pricing only we build it in to an overall level of discount that we can go to, but we don't offer a specific discount for double stack. In fact, no one in the market is really doing -- offering a specific double stack rate because you can't guarantee if their container will go on the lower stack or upper stack? So it's just a blended discount that we end up passing it. And one more thing which you asked in the previous question, just to clarify, rakes we haven't bought them; we've leased them. So there's no CapEx from the rakes.
The next question is from the line of Sumit Kishore from Axis Capital.
My first question is on depreciation in first half of the year. It seems to be down 8% year-on-year. Is there any specific explanation for that?
[indiscernible]
I'm sorry to interrupt, sir. Can you please come closer to the speaker?
Can you hear me?
Yes, sir, please go ahead.
Basically we have taken [indiscernible]
Sorry for the interruption, sir; your voice is still not clear, sir.
Basically, we had some rakes which we purchased in 2007. So the life as per the schedule and income tax is over for depreciation after 15 years. So those are no longer being depreciated as they are at 0 value. So that reduction has come in.
This is more like a recurring number.
Sorry, I can't understand.
Yes. So this is the recurring number here on, yes, from this piece, yes. Okay. The second question is around the double stacking. We heard the Concor mentioned on their call that Q2 rakes double stack saw an increase of almost 60% on a year-on-year basis. So -- and for the first half double stacking was up more than 30% for them. So just wanted to understand your experience where the volume of cargo carried by Gateway has actually seen a reduction in double stacking. So how do we reconcile the 2?
So it's been a reduction for us because on the export side we're double stacking less, and it's increased for Concor because Dadri got double stacked and they do about 20,000 containers a month from there. So that is added boost for them.
Okay. So once this Faridabad is double stacked for you, what would be the sort of delta in volumes that you will see in terms of double stack rakes?
About 10% of our volume comes from Faridabad. So most of that can then be double stacked.
Okay. Okay. And finally, if I have to think about your volume growth in Q2 on an organic basis, which is -- is it the right way to look at ex of Kashipur because Kashipur was not in the base last year. So if I exclude the 9,000-odd TEUs that you would have done in Q2 for Kashipur, volume growth would be in low single digits. So is that the right way to look at numbers? And why is it so low as compared to, say, the sector is large, where rail EXIM volumes have grown in double digits and even Concor has seen almost 13%, 14% growth.
So Concor's EXIM volume growth year-on-year for this quarter was 3.5% only.
Handling volume. They report originating volumes, which were up almost 14%, 15%.
Is that including domestic or is that excluding domestic?
No, no, excluding domestic.
Okay. I will double-check on that but basically, Kashipur has aided the growth but because of our hub-and-spoke and network advantage, we are able to offer better rates at Kashipur and that's why we've seen a volume growth even within Kashipur compared to before we took over. Other locations, like we mentioned, Ludhiana is down but Garhi is going up and Faridabad is also slightly down. So we have to look at it overall mix basis because then we can accordingly price to the customers.
Right. At the beginning of the year just the impression that we had was that Kashipur is like an inorganic addition and it was not there in previous numbers. So it will help push up growth. The organic growth will get pushed up because of Kashipur, but that does not seem to be the case, which is why I asked the question.
Yes. So other existing locations haven't grown as much as Kashipur has obviously.
Got it. So in case of Jaipur coming in next year in H2, what kind of monthly run rate do you expect from Jaipur after it ramps up?
Next year second half we will probably exit at anywhere around 1,000 to 1,500 TEUs. But long term, we should see 3,000 to 4,000 TEUs out of this location.
The next question is from the line of Riya Mehta from Aequitas Investment.
My question is in regards to double stacking. Could you help us understand the dynamics of it? What happens to the realization and your margins when you double stack? And you said that we can do double stacking at JNPT and Faridabad. So JNPT, I understand it will happen when the DFC will get complete. When will Faridabad happen and what incremental benefit will we get out of it? That's my first question.
And second question is the rakes which we are buying -- which we are leasing basically the 3 rakes, how would it benefit in terms of the realization, like the throughput basically?
So in double stacking, so what happens is that the container which we load onto the upper stack, so we pay only 50% of the haulage to Indian Railways. So -- but that is something -- that is the advantage of double stacking. And how do we do it in the sense, right now we are doing at Garhi Harsaru. Faridabad we are expecting that we are going to do it another 3 months' time. That is what railways has given us an indication, although there is some OHG construction is pending, which we are expecting.
Then what we do is apart from Mundra and Pipavav volumes, which we double stack from Garhi Harsaru, we also carry the JNPT volumes through our Viramgam terminal at Ahmedabad. So that is a stretch; of around 850 kilometers from Garhi to Viramgam. So we double stack it. From there, we send it single stack to JNPT. So that is how, as of now, we are doing double stacking.
And in terms of the kind of rakes, the weight capacity you're asking. So right now, we are having rakes which are having a capacity of 68 metric tons. Lower and upper deck put together we can load up to of 68 metric tons. But the new rakes which we have ordered on a long-term lease, they can carry as high as 81 tonne. So that will increase the -- not only the loadability of the rake, but also increase the double-stack capacity of the rakes also, because there are heavyweight containers, which like scrap and all, which are already 26 and 28 tonnes. So if you load 2 scrap containers, so it is -- already they crossed that particular limit. But once this new rakes are with us, then we should be able to do more double stacking. So that is the advantage we'll be having.
In terms of any numbers, could you help us on how much, in a hypothetical situation, it works at full capacity? How much would it yield, the rakes?
It's hard to say. It depends on the volume mix, what routes we ply it on. But generally, if you see what our existing numbers are, the revenue per [indiscernible] per month is roughly INR 3.5 crores. So we can expect to add that.
Okay. So how much TEUs will this add?
Anywhere from 4,000 to 5,000.
Per month?
This is the capacity that will get added by these 3 [ rakes ] coming in.
The next question is from the line of Aditya Mongia from Kotak Securities.
My first question was more on pricing and margin for the sector. From what I kind of understand, Adani Logistics has been aggressive on pricing for some time and out recent interaction with Concor suggest that they will not fully pass on the busy season surcharge to customers. They've also said that their own margins are pretty high. Are you seeing any pricing moves that are making you little bit wary on the margins for the sector? That was my first question.
General pricing discounts have been happening for some time. And it's an overall marketing depending on that. So Ludhiana right now there are rates that are being cut by our competition. But we haven't offered those type of discounts yet. And in terms of the busy season surcharge, we have acceptance from most of our customers already, about 90% is done, so it will be passed on that cost.
Okay. But no such indications coming to you wherein the margins can come under pressure?
Nothing significant to report.
Understood. The second question that I had was on your comment that DSV in the company's way of thinking would probably add 1, maybe 2 percentage points of growth, okay? This again -- I just wanted to kind of get a sense as to what are the imponderables that you are looking towards when you are coming to this kind of an assessment? What are the problems in shifting from road to rail at a faster pace than this?
So in terms of road to rail, if we look at our specific sector for container only, we have already [indiscernible] reached a level of 70%, 80%. When Indian Railways as the entire number is at say 25%, 30%, the accounting cargo that can't be converted to containers also, [indiscernible] small distance also, domestic also. So everything coming under that scope is that 25%, 30%. So for our specific sector, the growth will be much lesser in terms of shift of road to rail because a lot of it has already happened.
Understood. The other question that I had was, again, your comment on JNPT wherein you basically said that the share of revenues has actually declined over time for you. I would have thought that Viramgam would have helped you in improving their share. So that was one disconnect I had. And post DFC commissioning, would anything change from your perspective as to the share of JNPT in your own numbers?
Yes. So Viramgam helps us optimize our cost out of JNPT, but ultimately it's the end-customer's decision which port to use. So people in North India have preferred to use the Gujarat ports over JNPT because of distance, time and cost. So it's not our decision as such. And going forward, when DFC is connected, we do think that some shipping lines would prefer calling on 1 port rather than 2 or 3 on the western side. So there could be a shift back to JNPT, but we'll have to see how that plays out. Again, it's not in our hands. It's depending on the shipping line routes.
Understood. And the last question from my side. Your CapEx even on a 3-year basis is probably more than the EBITDA that you generate in a single year and your leverage is not very high. What is the kind of capital allocation or maybe dividend distribution policy that you would want to kind of guide investors towards?
Yes. So we'll continue paying the dividends that historically we've paid every year. I mean we've in fact increased it last year and we hope to increase it going forward as well. After taking care of all our CapEx and debt repayment requirements, you would have seen we've also increased our stake in Snowman over the last couple of quarters. So that's one avenue that could be done as well.
The next question is from the line of Janhavi Jain from Axia India.
Yes. So first my question is that you have seen good growth in volume that we have seen [indiscernible]
You're not audible.
Sorry, we can't understand your question.
We can't hear you properly.
Is it better now?
Yes, ma'am, please go ahead.
Yes So my first question is with respect to EBITDA margins. We've seen good growth in volumes but there has been a slight EBITDA contraction. So how do we look at it? And for the like H2, what kind of EBITDA margin should we look at?
Yes, it's been a very slight drop but that really depends and keeps varying month-to-month, quarter-to-quarter depending on the mix of volumes. We expect a similar number for second half also. Until the export situation improves, we don't see an improvement happening.
Okay. The second question is with respect to the 2 new terminals that we were planning to look out for, so any update on that?
No, we're still finalizing. So once we acquire the land, we'll be disclosing to the public of those locations.
Any specific time line on when shall that come -- occur?
No, we don't want to comment on that. We'll only do it once it happens.
Okay. The third question. With respect to Faridabad double-stacking, so -- like is there a delay? Or what is the situation over there?
So the work is done by railway contractors, not by us. So it's not in our hands exactly. The work is happening, but it's expected to finish in Q4.
Okay. Because I think it was expected by October, if I'm not wrong?
Yes.
The next question is from the line of Rishab Somani from Artha India Ventures.
My question is for Snowman Logistics on their segment and operations. So what kind of growth are we expecting on the top line and the bottom line going forward? And what would be the key drivers behind it ?
So as you see, we had started Snow Distribute business last year. And for last financial year, it was the 9 months business and this year it is full. And we are expecting anywhere around 15% to 20% growth coming over last year in terms of revenue because of addition of this business. And since we are investing in expansion in Kolkata, Lucknow and Bhubaneswar, these facilities will be up only by the end of this year or beginning of next financial year. So therefore...
This is all for Snow Distribute?
No, that's about the Snow Preserve, which is the warehousing business. That -- the revenue from those facilities will come only next financial year.
Okay. Can you give -- break down the revenue growth in terms of the segment and the margins that we're looking to sustain in the future?
So whatever is the trend today, the same percentages of EBITDA or margins will continue from a percentage point of view. And as I said, we are expecting a 20% growth over last year in terms of [indiscernible]
Across all segments?
Across all segments, yes.
Okay. And so will this mostly be led by 5PL or are we expecting 20% in all -- or each of them?
No. As I said, it is across all segments. So 5PL maybe slightly more, but we are expecting all the segments to contribute.
The next question is from the line of Yash Tanna from ithoughtPMS.
My question is again regarding Snowman. So what is the utilization levels of the warehouses that we might have opened in the last, let's say, 6 months or the last 2 or 3 quarters, if you could help me with that number?
So we are at about 75% at Siliguri and we are at about 50% in Coimbatore. That is basically seasonal. So this is a lean season for that region. And typically, it would go up to 75%, 80% in a month's time. And there is one dry warehouse, which we had leased a few months back to get into dry business. That is 100% utilized now. It is dedicated to a single client.
This is the Pune warehouse? Sorry. I missed it.
No, it is at Haryana, near Gurgaon.
Okay. Okay. And the Pune warehouse that you commissioned, I think, last quarter or something?
No, there is no -- that's a dry warehouse that we have leased. So it's dedicated warehouse for a client. So it's 100% utilized.
Okay. Got it. Got it. And sir, you spoke about a company-level ROCE improvement and you spoke about the drivers for the same. So I missed that part. So if you could please repeat that. And also on the 5PL side and the transportation side, right, so these are more ROCE-accretive businesses. So as -- are we expecting a higher growth from them? Or are we expecting a similar growth? Because in that sense, if the profitability mix is not changing, how are we expecting the overall ROCE improvement to come?
So see, there are 3, 4 drivers to this. One is we going asset-light in both warehousing as well as in transportation. This we expect to help us improve our company-level ROCE, which is typically the SnowLink as well as the Snow Distribute which is the distribution business, 5PL business, where the CapEx deployment is negligible.
And the second thing is the overall pricing correction that we are driving, where we expect price correction to happen to the extent of 5% to 6% every year as against our inflation of 3.5%. And the third thing is overall optimizing our overheads, which are there in terms of people and the technology where the investments have already gone in, and we have geared up for almost double the revenue that we want to achieve.
Right, right. And any number that we are targeting, let's say, in the next 2 years?
Next?
In the next 1 or 2 years, any number that we're targeting?
So we are working out our next 3-year business plan. So maybe by the next call, we will be able to share some numbers with you.
Thank you very much. Ladies and gentlemen, that was the last question for today. Participants who missed out due to time constraint, they can reach out to the management and SGA for Gateway Distriparks or Churchgate Partners for Snowman Logistics. With that, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.