Aegis Logistics Limited (AEGISLOG) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. Welcome to Q1 FY '22 Earnings Conference Call of Aegis Logistics Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involves risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anish Chandaria, Vice Chairman and Managing Director of Aegis Logistics Limited. Thank you, and over to you, sir.

Thank you. I will be presenting the quarter 1 results for the current financial year, FY '22. It was a below par set of results for quarter 1, really affected by the peak second wave of COVID in April and May, especially on the gas business side. Fortunately, as I will explain, sales volumes are already picking up in quarter 2. That means from July onwards. But quarter 1, April, May, June, particularly April and May, were affected by the peak second wave of COVID. Let me go through the figures. Total revenues for quarter 1 were INR 678.1 crores versus INR 636.4 crores a year earlier. Total EBITDA for quarter 1 was INR 114 crores versus INR 118 crores a year earlier, a drop of 3% year-on-year. Normalized profit before tax for quarter 1 was INR 90.3 crores versus INR 92.2 crores a year earlier after adjusting the earlier figure for the employee stock purchase plan of last year. So that's a drop of 2%. I just want to make it clear that from this year onwards, including quarter 1, the employee stock purchase plan -- there is no more expensing for that. So that will fall out of the figures. But obviously, to compare on a like-for-like basis, we have to adjust the previous year's quarterly figures for the noncash charge of the employee stock purchase plan. Profit after tax for quarter 1 after all minority interests, that is net profit after tax available to Aegis shareholders, was INR 66.4 crores versus INR 71.8 crores, again after the earlier figure last year, adjusting for the employee stock plan. So that's a drop of 7.5% year-on-year in net profit after tax after all minority interest. Let me go through the segment analysis as usual, which will explain what was happening in the underlying business segments, starting with the Liquid Terminals division, which remained strong in quarter 1 as it has throughout the COVID crisis. In fact, again, another record revenue figure for quarter 1, INR 66 crores for quarter 1 versus INR 55 crores a year earlier, a rise of 19% year-on-year in revenues. And EBITDA was also very strong, INR 49 crores for Q1 versus INR 40 crores a year earlier, a rise of 23% year-on-year in EBITDA for the Liquid Terminals division. Again, it shows the efforts of the past expansion in capacity, which we have carried out paying off in increased revenues and increased EBITDA. And of course, the commissioning of the new capacity in Mangalore and in Haldia, which started to show results in quarter 1. Just to remind everyone that we had a project of 50,000 kiloliter expansion of capacity in Mangalore and 54,000 kiloliters in Haldia. So some of those revenues are already in quarter 1, and they will continue to be sustained throughout FY '22, which will add to the Liquid Terminals division revenue growth and profits growth. So as I said, actually, the Liquid Terminal division performance are very healthily in quarter 1. But the Gas division was affected, again, just like last year at the same time, around this time of COVID. Of course, last year, there was a national lockdown. This year in April and May, there was no national lockdown. Of course, there were various state curfews and state lockdowns and all that. But April and May particularly when cases were rising to 400,000 a day in India, we were affected in all segments of the Gas division, which I'll go through the volume figures in 1 minute. Let me just quickly finish the revenues and EBITDA figures for the quarter 1 for the Gas division. Revenues in quarter 1 was INR 612 crores versus INR 581 crores a year earlier. The EBITDA in quarter 1 for the Gas division was INR 65 crores versus INR 78 crores a year earlier. So a drop of 16% in the EBITDA of the Gas division. And as I said, this -- the impact result in all the market segments that we have in the Gas division. Let's start with the LPG throughput volumes. It was 568,000 metric tonnes of throughput volumes in our 3 terminals of Pipa, Haldia and Mumbai in quarter 1 versus 700,000 metric tonnes a year earlier, a drop of 19% year-on-year. And all terminals, Haldia, Mumbai, Pipa throughput volumes did fall in the face of this second wave. Quite simply, there were less ships and less powders ordered from the public sector units in all 3 terminals, particularly in April and May. There was a bounce back in June as the COVID issue started to reduce, but April and May was definitely affected. In addition, there were 2 major cyclones in -- which affected both Pipa and Haldia ports in quarter 1. Now I would like to say that our terminals actually were not affected. There was no real damage in either Pipa and Haldia in our terminals. But it was more the 2 ports, they sustained some damage, particularly in Pipa. And the impact was really more in terms of reduction of shipping when those cyclones hit because obviously no one could bring ships during those days. So that was the impact of the cyclone. But industrial sales, now the next segment, industrial sales in quarter one, which is part of our retail distribution segment, was 22,271 metric tonnes versus 7,414 metric tonnes. So that actually was a very big rise of 200% year-on-year despite the COVID, which suggests that at least private industry, unlike last year when we had a national lockdown, private industry kept going in terms of their consumption of gas. So that was reasonably healthy. Autogas, however, was 3,567 metric tonne in quarter 1 versus 2,944 metric tonnes a year earlier. So still a rise of 21% year-on-year compared to last year's lockdown, but still much lower than quarter 4 figure, January, February, March of 2021, where we sold 5,926 metric tonnes. So 3,567 metric tonnes in quarter 1 of FY '22 was lower quarter-on-quarter, but obviously still higher than the previous year. So there was impact of COVID on that. Clearly, less movement of people, so less use of autorickshaws and taxis. That obviously would affect the Autogas business, but not as much as when we had the national lockdown last year. Similarly, the cylinder business, the commercial and domestic market segment, sales in quarter 1 were 5,039 metric tonnes versus 2,553 metric tonnes, again, 97% rise year-on-year, which was affected by the national lockdown last year, but still lower than the 6,430 metric tonnes in quarter 4 of FY '21. So 5,039 metric tonnes in quarter 1 of this financial FY '22 is still lower quarter-on-quarter, but higher year-on-year. And sourcing was 100,000 metric tonnes in quarter 1 versus 158,000 metric tonnes year-on-year sourcing of gas. So the summary is, I think, primarily the COVID second wave did affect every market segment for LPG sales volumes compared to the previous quarter, quarter 4. Some positive sales figures year-on-year. But obviously, if we have not had the second wave in April and May, it would have been better. Let me talk about the outlook for quarter 2 and the rest of FY '22. Now we have some good expectations for the Liquid division throughout the rest of the year, including in quarter 2 and the rest of the year, obviously, because of the new capacity that we have commissioned in Mangalore for 50,000 kiloliters and in Haldia 54,000 kiloliters also. So that -- and that business, every terminal, whether it is Kochi, Mumbai, Haldia, Mangalore, et cetera, Kandla, they're all operating well. Pipa remains -- Pipa Liquid remains the only one which is still below expectations in terms of capacity utilization. But all the other terminals have been strong throughout COVID and remain strong in Q1 of FY '22, and we expect that to be sustained throughout the year. So that's positive. Now for LPG volumes, gas volumes. For Autogas, we're already seeing signs of a bounce back in quarter 2. Obviously, July is almost over. So we're actually seeing a good bounce back in Autogas. It started already in June. That is the tail end of quarter 1, but it has risen already the sales volumes in July. And we expect further increases in sales volumes in August and September, assuming that there is no third wave of COVID, which I don't know if there will be, but right now things are definitely better than April and May. So at the moment, the expectation of our marketing team is continued volumes growth -- sales volumes of Autogas. In fact, we are now hoping to see a recovery to pre-COVID sales levels in the second half of this financial year. That is in second half of FY '22 from October onwards. So some bounce back already seen in quarter 2, July to September. But we are actually now looking for the first time in 18 months for growth beyond COVID sales in August going back to pre-COVID sales level time in terms of Autogas. Again, assuming that there are not so many COVID restrictions and people begin to move around as they were. Similarly, for the cylinder segment, again, we are seeing a recovery in quarter 2 in sales volumes in July from the quarter 1 levels, again, due to less impact from COVID. There are more news of LPG in hotels, restaurants, et cetera. So there is going to be a positive bounce back in quarter 2, it looks like. July, we've already seen that. And we expect there to be further growth in sales throughout FY '22 as a result of not only less restrictions, but also because we have expanded the dealer distribution network throughout this last 12 to 16, 17 months. And for the -- finally, for the LPG logistics throughput volumes. The throughput volumes in Haldia, Mumbai and Pipa, again, in quarter 2, just like the other ones, the other segments, we are seeing a bounce back in sales volumes from the quarter 1 figures, which is hard to see. Obviously, that is July figures, but the expectation in terms of the order book for August and September in terms of what we expect is positive. And we're expecting to see better volumes in quarter 2 and further increase in volumes in the second half of FY '22 due to the following factors. One, there's normally a better seasonal demand from quarter 3 onwards, which is Diwali time, et cetera. That's normally the case. We also expect to see more rail throughput in Pipa once the Jetty modification work is over in -- by Gujarat Pipavav Port Limited to allow partly loaded VLGCs. So we expect that to kick in, in the second half of the financial year with the BPCL rail throughput particularly increasing as well as IOC as -- because if they are able to bring VLGCs into Pipavav Port, that will make a big difference to the rail throughput volumes in Pipa compared to what we are seeing today. And of course, the commissioning of the Kandla LPG terminal in the second half of the financial year FY '22, which brings me to the projects update. And of course, just a reference to the Vopak deal, which we announced a couple of weeks ago. First, let me start with the Kandla LPG project. The project work is getting back on track after the hiatus of quarter 1. You recall in the last earnings call, I said in quarter 1, we did have a problem with manpower. During the peak COVID levels of April and May, there was actually difficulty in many of the contractors in terms of manpower and also the lack of oxygen, which affected the construction work. So we'll see slowdown on the project, but I'm pleased to say that now those factors have dissipated. And we are mobilizing as we speak to contractors, the manpower, for the final push to complete this project. And we hope to see the commissioning in quarter 3 of this year, FY '22. That means mechanical completion of all work by end of quarter 2 and then the commissioning in quarter 3. And that should be positive for throughput volumes for the Kandla LPG in the second half of the year. We've also announced a major deal with Vopak, which I referred to. And now we're going through the conditions or the conditions precedent and the various milestones for closing, which we expect in the next 6 to 8 months to close that deal, and I think really nothing else to say on that. We've explained the deal. But even before we closed the deal with Vopak, the Aegis is already not waiting around. We're starting to execute the joint business plan of expansion in our terminals business. So nothing to say today, but we will be obviously -- as and when we can implement the various projects, et cetera, in that joint business plan in Vopak, we will not wait for the closing, but we will start implementing that in this year, FY '22, itself and then, of course, beyond that in FY '23 once the joint venture starts, which I'll remind everyone, 51% of the earnings for the joint venture will be consolidated into Aegis earnings. 49% will be Vopak. But 51% of the earnings of the joint venture, Aegis Vopak Terminals Limited, most likely from next year. But FY '22 will remain Aegis business while we close the deal. Okay. That really closes my presentation. We can now take some questions.

[Operator Instructions] We have the first question from the line of Depesh from Equirus.

Sir, throughput volumes growth has been lagging the Indian LPG imports over the last 6 quarters now. And this quarter, your market share seems around 16% of the overall LPG imports, which is the lowest in the last 3, 4 years. So just wanted to understand what are the reasons for the same that you're underperforming in this thing.

Yes. I mean I think that's correct what you said. I think there are specific factors. But all terminals, whether it is Haldia, Pipa as well as Mumbai, we did see in quarter 1 less ships and less cargoes. But I don't -- I think it is temporary because we -- as I said, we already see in quarter 2 a healthy bounce back starting in July, and so there's no particular factor. It's just that ultimately depends on the public sectors, which means IOC, HPCL BPCL, where they want to import the cargoes, which terminals, et cetera. But there was no -- I don't think there's any particular concerns because we're already seeing a good bounce bank. So let me go through very quickly. Haldia, without going into specific numbers, we now know -- of course, BPCL has already gone out to their own terminal, which was the case since December of 2020. But we are seeing rising volumes from HPCL, which is the anchor customer in Haldia, in quarter 2, a bounce back from quarter 1. And they have indicated to us that throughout the year, there will be growth. And so we have a good forecast from HPCL in terms of volumes. It will not replace all the volumes of BPCL immediately, but we are already seeing a bounce back in volumes from quarter 1 as well as replacing some of the loss of the BPCL sales. And that, of course, we expected and we will continue to see, we think, in FY '23 and beyond the further growth from HPCL this year. So Haldia actually this is. Mumbai has already bounced back very strongly in quarter 2. In fact, in June, it's already started bouncing back, so not April and May, but in June itself. But July is seeing further growth. So Mumbai is looking very strong, going -- using that Uran-Chakan pipeline and et cetera. So we remain confident in Mumbai that, that's good. And Pipa, as I said, I think the railway movement is going quite well. We signed up 2 customers, IOC and BPCL, but BPCL is facing challenges right now in doing more throughput that they want to do because they've indicated they want to do because of the lack of ships. So there are specific factors on the Jetty, which is why we have been working with the port to make those modifications. Of course, it's their project in Jetty, which I mentioned. Once that is over and we have a clear time line from Pipa Port as to when the Jetty modification was to be over, then we will be able to handle partly loaded VLGCs in Pipa for BPCL, IOC, et cetera. And this sheer number of ships can then increase and therefore the throughput volumes in the second half of this financial year. So I think there are some specific factors in Pipa, which will now change probably in the second half of the year. But Mumbai is looking strong, and Haldia is now looking strong as well. So I think we don't see any major concerns. And then, of course, once we commission the Kandla LPG project, that will give a big boost to the volume. So we do expect -- just to complete the picture. We do expect to see a good volumes growth in our LPG division in FY '22. But there are some specific challenges that we had to deal with in April and May because of COVID. But don't expect -- we don't expect any major problems in terms of volumes growth, taking all the factors into account. So after being affected by COVID, et cetera, but I don't think that will really be -- of course, I can't predict COVID. But I don't expect that to badly affect the throughput volumes in the year as a whole now. But we're already seeing the first signs of a bounce back in June and July, and we expect that to continue in all the terminals.

Got it, sir. Sir, secondly, given the delay in the Kandla terminal, what is the expectation for volumes in FY '22? Because the PPT still mentions 1 million tonnes. So I just wanted the updated number now.

Yes. I think we are obviously 1 quarter delayed from the -- earlier we thought we would be able to commission in quarter 2. Now it will most likely be quarter 3. So I think pro rata, we probably -- we've been budgeting around 700,000 tonnes. So pro rata probably will be 1 quarter less than that if you just look at it. So because it will really be Q3 and Q4 rather than Q2, Q3, Q4. So that's what we see. But I think I will be able to have a better sense once we actually commission the terminal because it really depends on the customers, how soon they really want to get going is -- once that terminal is ready. So after make -- in the October earnings call, we'll probably have a better sense. But for now, I would probably just by taking out 1 quarter because we are delayed on 1 quarter, quarter 2 and probably adjust downwards. But we might be able to have more clarity by October.

Sure, sir. Sir, lastly, the EBITDA per tonne for gas handling that you normally mentioned around INR 1,000 per tonne, that seems to be lower this quarter. Is it a correct observation? And secondly, the LPG prices have moved up 30% Y-o-Y. So what kind of EBITDA per tonne are we making in our distribution business?

So yes, on the -- I don't really recognize that because the EBITDA figure is on the throughput. That seems to be stable because all the rates are the same. So I don't know where you get that. But -- so I think that has remained stable. All the rates are the same, so they haven't changed. The -- as far as the -- on the distribution business, yes, international LPG prices have increased, not as much as crude oil has increased. In fact, we were discussing in the Aegis Board meeting yesterday very same issue. But the distribution margins have actually remained quite stable and quite good. That's the nature of the business. But what was affected was the sales volumes, not the margins. The margins has remained quite stable throughout.

[Operator Instructions] The next question is from the line of [ Rajat Setiya from iThought Financial ].

Sir, there are a lot of discrepancies between the press release related to the deal that Vopak has come out with and what we have heard from you. Could you please clarify on the same?

Yes, we have actually -- in several calls, we have actually explained exactly how it adds up. I'm going to ask our CFO, Murad Moledina, to explain again. We have Murad Moledina on this call. But it all ties up very well. Murad, do you want to give the usual accounting of the Vopak amount in euros and the rupee amounts that we have given -- like you have given?

Yes. Yes, yes. To very simply put it, and we have explained several times in past calls, that the Vopak press release talks of 3 numbers, EUR 153 million, EUR 115 million and EUR 40 million. If you add all the 3 and convert into rupees, that is what we have said is what we are going to receive out of the deal, INR 2,766 crores. So it matches.

So then the follow-up is that this EUR 153 million that you are talking about, actually, as per that release, it says Vopak and Aegis have arranged this financing.

Yes, yes. But that is going to come entirely to Aegis for the JV transaction.

No, no. So it will come to Aegis, that is understandable. However, is this debt going to be on the books of JV?

On the JV Co, yes. So what both the partners have decided is going forward, JV Co from day 1 would be -- conservatively get to a maximum debt gearing ratio of 0.5% to 0.6%. So this debt is going to remain over the lifetime of the JV Co, and that is why the clarification given by Vopak.

Just to make sure that I have understood it. So we are saying we will take EUR 153 million of debt in JV and then that EUR 153 million will come to Aegis as part of the consideration, right?

Right. Yes, yes.

So that essentially does not convert into -- so basically, we are raising debt in the JV and then paying ourselves. So essentially, the effective valuation of the JV -- of the deal in fact goes down. Is that understanding correct?

No, that your understanding is wrong. The whole consideration amount is INR 2,766 crores, which Aegis is going to receive. And you see the conduct of JV Co from day 1 is what has been decided how the capital structure is going to be formed. So that is how it will conduct itself. So whether you take it out of projects, which the JV Co do or the -- so debt and equity has been predecided between the partners, and that is how it is going to function. So that has got nothing to do with what amount we are going to receive. So what we are going to receive out of the transaction is INR 2,766 crores. The reco, which you asked for, is what we have clarified to you.

Sir, I understand. What I'm saying is that -- so okay. So other way of saying -- looking at this would be the JV partner is going to give only -- I mean the payment from their side is going to be, whatever, like INR 2,700 crore minus EUR 153 million, right? Because EUR 153 million essentially is coming from the JV as debt, correct?

Yes. Yes, you can say that, but it's not that simple. So I've explained to you what was...

Do you -- sorry to interrupt you, sir. Sir, sorry to interrupt you. So in other ways, can we also say that EUR 153 million -- since we are going to own 51% of it, so EUR 153 million [Foreign Language] 51% [Foreign Language] debt [Foreign Language] and then we are paying ourselves as cash, correct?

Again, you are looking at it in a different way. I have said it very simply that how the JV Co structure -- capital structure is going to be conducted that has been explained. So that debt is ever going to remain. So there is no payback of that debt because that is how it will be dealt. So there is no outflow of that debt. That is how the capital structure of that JV Co has been structured. What you are trying to say is not actually that what is going to happen.

So what do you mean...

Can I put it in my way just to close this conversation? So the way we have structured this deal, okay, and it's quite explicit, is that, yes, there will be certain amounts of payments by Vopak to Aegis, which are the figures that you quoted in euros, which are for buying equity shares in the 49% of the joint venture company. That is actually correct. And then there are these payments after 3 years of an additional up to EUR 40 million paid by Vopak to Aegis. So that's clear. And then when we negotiated the whole thing as the deal and the restructuring, we had -- as far as Aegis is concerned, we had a certain target cash amount that we wanted to take out of the transaction. And obviously, it was then a question of, okay, what is -- and this is discussed with -- explicitly with Vopak over a few months, what is an appropriate capital structure, as Murad, rightly said, for the joint venture company? That's the next part of the discussion. And clearly, zero debt was not acceptable to us or to Vopak. Because why would you have all these assets and infrastructure with zero debt? That's not an appropriate capital structure. So we ended up negotiating. We said, "Look, we have certain conservative gearing ratios." They had certain ratios. Anyway, finally, we compromised. And we said, "Okay, 0.5:1, debt-equity ratio of 0.6:1, 0.5 or 0.6:1." That's the maximum. And with all the assets that we have, therefore, that translated into this much debt in the JV Co, which, as Murad said, because the JV Co is throwing off a certain amount of cash, we expect that to be maintained almost on a perpetual basis. That is a reasonable debt-equity structure. And then we said, okay, then that amount of debt, that's bank debt, let's say, that we raise in the JV Co, which both parties, Aegis and Vopak, will be working to a range. In fact, that work is already going on right now. That we will be taking into Aegis as part of the transaction. So we will be extracting that additional cash, hence, the INR 2,766 crores. So that's the way the deal was negotiated. We wanted a certain amount of cash to be taken out of Aegis, and this is the way we structured it. Why did we want a certain amount of cash? Because this allows Aegis in its own balance sheet to have that cash in order to be able to reinvest. As required, Vopak will also be able to -- will be investing in the JV Co because they have a large CapEx program of up to INR 4,500 crores to JV Co. So both shareholders, Aegis as well as Vopak, from time to time will be required to fund that CapEx setting. But we wanted to keep the cash in Aegis rather than just let it sit in the JV Co, and that's the way we structured it. Plus, it also gives Aegis the flexibility. So when we are discussing with Vopak other big-ticket projects, then we have the financial firepower with that INR 2,766 crores to be able to put our share of the money up. Let me remind all listeners that we've never had the ability at Aegis to have this size of balance sheet or financial firepower to be able to actually deploy into those projects, but we now will. So I think it gives us a very strong balance sheet in Aegis Logistics Limited, and gives us the ability to not only fund our share of the INR 4,500 crores of CapEx that the joint venture company will need to do as required, but it will also allow Aegis to take advantage of future projects that we will do jointly with Vopak. And that's what it's all about ultimately, this whole deal, and why we did it with Vopak, by the way, was not to generate cash, but it was all to say, "Okay, how can we actually, together with the world's largest tank storage company, how can we jointly do more projects, faster projects, using and actually have the financial strength to be able to invest in those projects, which will give future profitability to Aegis shareholders?" And that's really the basis. So I hope that clarifies. I think we've been through this several times even in previous calls. But the numbers add up, and that's the way we structured it, so that we would actually extract this amount of cash, this INR 2,766 crores in Aegis as a result of this transaction.

Understood. Understood, Anish. So basically, for any future CapEx in the JV, JV would be raising more debt because this debt will essentially be going towards the deal consideration to Aegis, correct?

That's right. And of course -- exactly. And as I said, for the future CapEx, we can -- depending on making sure that we don't go above that 0.5:1 debt-equity ratio, if we can raise more debt in the JV Co as long as we remain within that limit to fund that further CapEx, we will. Of course, the JV Co will be throwing out its own free cash flows, which will also go towards that CapEx. But then there is the 2 shareholders, Aegis and Vopak, will -- are ready to put in further and will have to put in further amounts. We'll see whether it be in the form of equity, whether it be form of shareholder loans, whatever it is, or preferreds, so whatever it is. But both shareholders will make sure that the JV Co can fund its CapEx program of up to INR 4,500 crores. And we fully expect to recycle some of that INR 2,766 crores into the JV Co and Vopak will do its share of 49% pro rata.

[Operator Instructions] The next question is from the line of Rajesh Kothari from AlfAccurate Advisors. Mr. Kothari, we're unable to hear you. As no response, we move to the next question from the line of [ Sriram Rajaram from Ratnatraya Capital ].

Yes. I just have one question from my end. This is regarding the minority share of EBITDA. So post Vopak deal, what would be the percentage of assets that would be taken on in terms of minority? If you can give some broad rates in terms of EBITDA that we use.

Yes. Again, we've answered this question on several other calls, but you were not on the call. So I'll ask Murad because he has all the figures there with him. Murad, do you want to just answer back the question about what share of EBITDA will go out into the joint venture company from...

Yes. As per the estimates of FY '22, we estimate around INR 90 crores of EBITDA to go to Vopak from this deal, from the businesses which are being put into the JV Co.

Okay. Absolute amount is INR 90 crores?

It's -- that's the estimate from FY '22 projections, yes.

The next question is from the line of Jayveer Parekh from Sunidhi Securities & Finance.

My question has already been answered.

The next question is from the line of [ Ankit from Bamboo Capital ].

Sir, if we look at the [indiscernible] to INR 2,500 crores plus from this -- post completion of this deal from the JV as well as strong Vopak. And if we talk about the JV, we have CapEx plans of, let's say, around -- the ballpark figure that you gave in the last call of around INR 2,500 crores to INR 4,000 crores to be spent over the next 3 to 5 years. And even if you assume there is a 1:1 debt-equity requirement in JV for funding this project, it will not be that significant to deploy the entire INR 2,500 crores plus debt we will be receiving. And apart from that, over the next 3 to 5 years, we'll be generating -- Aegis stand-alone will be generating cash flows and even the JV will be generating significant cash flows. So any thoughts on returning this capital to the shareholders? And how do we plan to deploy such a huge cash that we have on stand-alone basis? I know it's still early days for you to decide. But if you can broadly throw some light on whether giving money back to the shareholders will make more sense than deploying this money into the business?

Yes, I'll answer that directly. First of all, let me just clarify one thing, which I think you got it wrong. Remember, we said very clearly that the debt-equity ratio of the JV company will -- is a cap of 0.5 to 0.6:1, not 1:1. We will not be making more to fund the INR 4,500 crores of CapEx if we go above that thing. Therefore, there will be a requirement of both shareholders, Aegis and Vopak, to recycle -- for Aegis to recycle some of that cash amount into the INR 4,500 crores of CapEx -- up to INR 4,500 crores of CapEx because we will not go above the debt-equity cap of 0.5:1. That's the first thing. Second thing is, yes, you're right, there will be a certain amount of free cash flow from operations thrown off by the JV Co. Of course, we will be -- the Board will decide. Aegis Vopak Board will decide whether some will go into dividends. And bulk of it, yes, will be going into the debt service of that debt, which we're going to take that we can start in the JV Co. So there will be some of that. And some will go into the CapEx of that INR 4,500 crores. So that's the balance that we will have to judge. But there's no question in our mind that both Aegis and Vopak will have to pump in further funds into the joint venture company in order that we do the projects. Now let me be very clear on this. The whole point of this deal with Vopak is to actually do implement those projects as fast as possible as long as they are commercially viable and high-return projects. The whole -- what you will all like to hear, as Aegis showed, is, presumably like we, is that we can accelerate the growth, and therefore, the profits ultimately once those projects get commissioned as long as that regarding high-profitability projects, which they are. And so we want to make sure that both Aegis -- of course, Vopak can say for itself, and the joint venture company itself can fully fund at -- on demand actually when those projects happen. We don't want to be scrambling around for months on and saying, "Oh, how are we going to fund those projects?" So as soon as we can do those projects, finance will not be constrained from either Aegis, Vopak or the JV company because the whole goal is as soon as we can physically do it on the ground, implement those projects, one constraint will not be there in terms of finance. Management constraints will probably not be there in the sense that now we will have the bench strength of Vopak Global to help us, including -- and by the way, even before the deal is closed, I can say this. The Vopak projects team have already been in touch with the Aegis projects team looking at some of those projects that we have to start working. So even though the financial transaction is not closed yet, the work has already started between Aegis and Vopak. So ultimately, it's all about delivery and execution on the ground. That's what is going to result in extra profits for Vopak as well as Aegis, 51%, and doing it as fast as possible, and that's how the whole deal has been structured. So I hope that explains the thing. But the clear thing is debt cap of 0.5:1 in the joint venture company that will be conservative. Both shareholders have written that into the joint venture shareholders agreement that we will not go above that cap. But therefore, both shareholders understand, Aegis and Vopak, to fund as required those CapEx plan, not only for the next 5 years, but beyond. But of course, the next 5 years is the most clearly defined...

Yes. So second question on this requirement, on this INR 4,500 crores CapEx plan that we had in the JV. If you look at it, sir, Kandla or Haldia, largest terminal, and that did not consume -- that consumed hardly INR 400 crores of capital. So just I know it's still early days, but such huge deployment of capital even for setting new terminals. We'll not be needing such huge capital. So any broad color on what kind of CapEx spend we will be doing in the JV that will require such huge capital over the next 3 to 5 years?

Yes. Sure. Actually, the whole clip is this, that we will be doing bigger-sized projects than what Aegis has -- was doing in the past. But we'll be also doing different types of projects, not just LPG terminals or liquid terminals or the size that Aegis has been doing. So you're absolutely right. If we look at Kandla LPG project, the CapEx was INR 350 crores. If you look at a Mangalore liquid terminal project, 50,000 kiloliters. The ticket sizes were much smaller. That's what Aegis could do. But now that we have tied up with Vopak, what we've jointly agreed was over 8, 9 months of discussion, is that now we can actually jointly do much bigger-sized LPG terminals, other types of projects and multiple projects, including connectivity projects like railway gantries all at the same time. But we will also -- you asked for flavor. We'll also be doing -- I'll just give you an example, things which Aegis has not been doing in the past. For example, this is in our presentation of the deal. You can look at that on the website. We'll -- the 2 partners, Aegis and Vopak, will be looking to invest in Jetty construction. That's not anything that Aegis has ever done in the past with all those type of costs. And why are we doing that? It's so that we can actually have more, for example, LPG throughput to allow VLGCs to come in. This is going to be important. That's a constraint that we have to increase the throughput volume. So we'll be investing in perhaps 1 or 2. Already, those projects have been identified. Let's see whether there are 1 or 2, but 1 is almost certain. The other types of projects that Aegis has not done, which is now going to be in the scope of the Aegis Vopak joint venture, will be what Vopak Co industrial terminals -- industry liquid terminals. And what this is, is something that Vopak does in other countries of the world, but they would like to introduce into India. That they build something like 0.5 million to 1 million kiloliters of cubic meters of storage dedicated to a large multinational customer that they have, let's -- for sake of example, let's call it a petrochemical customer who basically outsources to the Aegis Vopak joint venture, the whole building an operation of logistics infrastructure dedicated for them to -- in their complex. So it's almost like a terminal within their complex. And those are large ticket sizes, 0.5 million to 1 million kiloliters. The whole of Aegis today is in terms of liquid terminal capacity is -- I think the current figure is over 800,000 kiloliters. So just -- and we are talking about in this up to INR 4,500 crores doing at least -- sorry, not at least, doing a couple of those industrial terminals. And so those are not just pulled out from the air. These are deals that Vopak has been working on as far as India is concerned and with particular multinational clients of theirs. And of course, we have to see whether those deals happen or not, but they think that they will pay good. And hence, there's a range of INR 2,500 crores to INR 4,500 crores. So I hope that shows you that this joint venture with Vopak enables Aegis to do projects of a different size and do types of projects that we've not done before, including the VLGC Jetty, including the industrial terminal -- liquid terminals as well as bigger-sized LPG projects that we have not been able to do in the past. And that's the benefit of Aegis and Vopak working together, all of which if highly profitable, will result in greater profits for Aegis, ultimately 51% of it, in Aegis, in a condensed time frame of 5 years rather than taking 10, 15 years. And what I've said in the last couple of weeks is, look, never in the history of Aegis had we seen that type of CapEx program of INR 2,500 crores to INR 4,500 crores over a period of time. And we talked in hundreds of crores over 2 years. So the reason we can do that is we're going to do it together with Vopak, and that will ultimately result in profit growth for -- earnings per share for Aegis shareholders.

Can I just add one comment here, which answers part of the question that [ Ankit ] had?

Yes. Raj, go ahead.

Yes. You said there was another part of your question, I believe, the earlier part, which is other than the joint venture growth opportunities, which you alluded to in the deployment of that cash, your question was also that as far as Aegis shareholders are concerned, what would they see that because Aegis as a stand-alone entity will also have substantial cash inflows on an ongoing basis from its retained businesses. And of course, it will be sitting on a fairly healthy cash balance as well. I think your question was -- the first part of your question was what about Aegis shareholders directly. And I think 2 things I would add to what Anish has just commented. Obviously, Aegis is going to be focused on expanding its retained businesses, the retail LPG business and any other opportunities which come up. So we'll definitely be looking at that. And the second point is that the Aegis Board has -- in terms of capital return policy to shareholders already has a fairly established dividend policy. And we intend to continue growing our dividend every year in line with what is reasonable and in line with the profits growth of the company. So the Aegis shareholders will definitely not be forgotten, but our objective is obviously to continue to deploy capital in profitable and with this high return on invested capital projects.

Yes. And can I just add? Sorry, I -- now, Raj, that I remember the first part of the question, and I will just add to what Raj said. Absolutely right, which is that we think now at Aegis with the Vopak deal but also the business that Aegis retain, 100%, which is the retail LPG business as well as Mumbai terminals, particularly the LPG terminal, we think that there is also growth -- a lot of growth there. And in other words, Aegis, through its joint venture with Vopak, as well as its existing business, 100% owned businesses, there are enough projects and profitable opportunities and acquisitions out there to deploy into that, which will be rewarding to shareholders rather than just return capital to shareholders in the form of buybacks or dividends. That is absolutely our policy, that we think there are great profitable opportunities out there, which we can get high returns. If -- the day when we have run out of things to invest in and grow, then yes, then the question may come, okay, let's have higher dividends and Aegis will stop being a such a growth company. But that's not -- that day has not come yet, and we're nowhere near that. I think the whole point of the Vopak deal was actually to enhance the scope of profitable growth opportunities, and we believe that we've been able to kind of at least show people the direction which we're going to go. And there's -- and I think, ultimately, that's good for all Aegis investors and shareholders to see that the company can actually deploy capital into high-growth and highly-profitable opportunities. But we're nowhere near running out of that for many years to come, and I think that's what at least people would like to hear, that Aegis is actually putting its foot on the growth pedal rather than taking it off the growth pedal.

And the kind of projects that we have -- that you alluded to, large storage tanks or petrochemical companies, do you think with this kind of capital you might also be able to -- and the technical expertise of Vopak, you might also be able to reduce the construction time lines and getting approvals? So let's say, such a large project and normally we are seeing for our previous projects, we usually take at least 2 years to construct and getting approvals and all. So the time line for construction of these projects, can that also be reduced with Vopak's expertise?

I don't think so because Aegis has -- that's Aegis expertise, and we've proven that we are amazingly fast in terms of how we execute these projects under -- in these conditions as well as in terms of the costing of these projects. In fact, one of the things that attracted Vopak to Aegis apart from having the network of assets that we already do is its project execution capability because it's recognized by Vopak as this is really, quite frankly, excellent performance. So that's the strength that Aegis brings to the table. I don't think that that's something that we'll be able to tremendously improve because it's already at a very high level. But what will help is -- what will help with Vopak is the sheer number of projects that might be going on simultaneously throughout the country, in different parts of the country. We will need more project strength. We will need more people. And the good news is, as I said, Vopak projects department already is -- already helping out. So we'll just have more people to be able to do multiple projects. And we don't have to just do 1 or 2 projects at one time. We can do multiple projects. And the faster we can do multiple projects and deliver them on the ground, the faster it translates into profits, which is what we are all interested in. So I think that's the benefit of Vopak, but not really increasing the speed of revenue. Murad, do you want to just comment on that because you're very much involved with the projects team as well?

Yes. Yes. You're right that Aegis has been the best in the business of execution of projects. And as far as Vopak is concerned, I think, yes, they will give us technical expertise on projects, which will help us maybe to -- like we have said to get into new products as well as to improve if there is any room to do so in whatever we have been doing in past years. Yes.

The next question is from the line of Himanshu Yadav from Edelweiss.

Two questions. One is, Anish, do you think FY '23 -- the throughput volumes will be able to cross 5 million tonnes? And second, a clarification from Murad. I mean you said the -- for FY '22, estimated EBITDA share to Vopak is around INR 90 crore. I mean how have you arrived at that? Because in the deal call, you said INR 248 crores is the EBITDA, which is for the assets which are kind of going into the JV. So I mean how is this INR 90 crore math works out?

Yes. Okay. Let me take the first one, and I'll ask Murad to answer the second one. On the first one, obviously, I'm not going to give targets for FY '23 in terms of LPG throughput volumes in this call or publicly. We don't do that, give very specific forecast of that. But listen, let me put it this way. If you go to our slide, just 1 minute, let me see where that is, which is the throughput capacity slide, Slide 12. We are -- once the Kandla terminal is ready, we will have a capacity of -- able to handle 9.6 million tonnes of LPG. And last year, we did an actual throughput of below 3 million tonnes, I think. I can't remember the figure. It was 2.9 million or 2.8 million tonnes, something like that. So the whole goal will be to drive towards, first, the full capacity utilization, 9.6 million tonnes. I'm not going to give, as I said, the forecast of FY '23. But it's going to depend on how much throughput we can do full year of operation in Kandla in FY '23. It's obviously going to continue to depend on the Pipa railway throughput and all those issues. Haldia will increase. So what I'm saying is that the whole game plan is how to increase from 3 million or 2.9 million, 2.8 million last year towards that full capacity utilization. It's going to take some time. There are specific things that we need to do in Haldia. There are specific things we need to do in Pipavav, further things we need to do, which actually is part of the plan with Vopak. But the faster we implement those things, which is in the business plan, some of them are connectivity issues, the faster we can get those throughput volumes. And the way I would best describe it is we want to make all the terminals of Aegis and Aegis Vopak, the LPG terminals, the most preferred terminals to be used by IOC, HPCL, BPCL as the main users of these terminals. And the way to do that, we know exactly what we have to do. Basically, it's to make sure that they have the lowest delivered cost of LPG, but there are still things we need to do to get to that stage. So I think that's what we're about, and I think you will see over the coming years -- I don't want to just say FY '23. You will see rising figures of throughput volumes, not because I say so, because Aegis is a nice company and Vopak is a nice company, but because the users, the customers realize that this is the most efficient way and the cheapest way of delivering LPG to where they want it. In other words, their bottling plant. And there's a whole host of things we need to do, some of which are already underway, some of which will be implemented over the next year. Now for example, Kandla LPG, just last point, the work that we're doing right now is to ensure the pipeline connectivity into the Loni pipeline, for example, that work is going on. So that we do give the customers that lowest delivered costs to where they want it. So things like that. These are all the things that we are building into our terminals. Just building a terminal is not sufficient. We have to do various things to make sure that they become the most competitive LPG terminals in India. Not there yet, but that project work is going on. And with the help of Vopak, we'll be really doing even better as far as all those things are concerned. So I don't want to be tied into a forecast for FY '23. But what I would like to say is that the whole goal now of, not only the joint venture Aegis Vopak but of Aegis itself is to having built this capacity and we're going to be building more capacity, LPG capacity, is to drive up those throughput volumes, which ultimately result in higher profits for Aegis and Vopak and together. That's really how this it will work. The second question in terms of the EBITDAs and all that, I'll hand it back to Murad to explain again one more time.

Yes. We have explained this in our deal call and I'll again repeat. INR 248 crores is the total EBITDA of business in this joint venture. However, large part of it is Haldia LPG business, in which Vopak is taking only 24% stake. So as such, if you then accordingly calculate, it is INR 90 crore EBITDA, which is going Vopak's way.

Sure. Understood. Yes. So Anish, thanks for the explanation. Other way of putting my question is, I mean how reasonable do you think is our estimate of having 1 million tonne run rate in the first year of operation for Kandla?

Well, if you look at it on a first year of operation rather than quarter by quarter, I think we still are comfortable with a range of 0.7 million to 1 million tonnes, I think, on a -- without looking at quarter-by-quarter but on an annualized basis. So I think we are comfortable with that. As I said, the most important thing is to complete the project as fast as possible and to make sure that pipeline interconnection is there. That is absolutely -- to the Loni pipeline because then it almost becomes -- let me be careful not to say no-brainer, but it becomes a very -- an extremely competitive way of delivering LPG to where the customers want it. That's the conversation that we've had with the customers. So that's why we're comfortable with that 0.7 million to 1 million tonne as the first full year of operation we do that. But the project is not over. We are still completing that work as we speak, but we are confident that we will be able to hit that budget that we said. 0.7 million to 1 million tonnes, the first full year of operations of Kandla. And by the way, that's also the -- in the business plan of the new Aegis Vopak joint venture company in terms of these budgets and financial plans. So they -- Vopak is also, should we say, endorsed that figure.

Ladies and gentlemen, due to time constraint, that was the last question. I would now like to hand the conference over to Mr. Anish Chandaria for his closing comments.

Actually, this time, maybe I'd prefer Raj, he could summarize [indiscernible]. Raj, if you can just summarize what we talked about as far as FY '22 and beyond, that would be probably quite resourceful.

Yes, certainly. So I think, obviously, we're not particularly happy with the Q1 of this year. Anish explained in detail some of the reasons behind the lackluster performance. But we are seeing -- definitely seeing signs of a bounce back and return to more normal business conditions, and getting on that base is getting our strategy back on track. Obviously, the announcement of our strategic partnership and joint venture with Vopak is going to have a significant and major impact on every quarter and every year going forward, given the plans that we have and the capacity and capability both from a financial and managerial perspective to capitalize on the opportunities of India back on its feet. These opportunities and the growth plans obviously will not materialize every quarter in strict cadence, but there is a clear plan. And I think I'd like to convey to all our investors that we are extremely positive and confident on the outlook for the company despite some setbacks that I think most companies have had in recent months. But we are very confident as far as the future goes. So I think that's it from my side. Thank you.

Thank you very much, members of the management. Ladies and gentlemen, on behalf of Aegis Logistics Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.