Aegis Logistics Limited (AEGISLOG) Earnings Call Transcript & Summary

Good evening ladies and gentlemen. Welcome to Q2FY22 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 of date of this call. These statements are not a guarantee of future performance and involve risks and in certain case are difficult to predict. [Operator Instructions] Please note that this conference in being recorded. I now hand the conference over Raj Chandaria, Chairman and MD of Aegis Logistics Limited. Thank you and over to you sir.

Thank you very much, operator. First of all, before we start the formal announcements, I'd like to pay tribute to Mr. Anish Chandaria, our Vice Chairman and Managing Director and my -- we love with younger brother, who passed away on September 11, unexpectedly. He was a formidable driving force in the formulation of the vision and strategy of this company as well as being a great motivator and cheer leader for all of us. His boundless energy and enthusiasm as well as financial acumen will surely be missed by all of us at the company. And as you know, he was in the forefront of communications with our stakeholders. And whatever the news, good or bad, we could count on him to convey it in a balanced and measured manner. That duty now falls upon me, and it is with bittersweet feelings that I, along with our Chief Financial Officer, Mr. Murad Moledina, will be presenting the Q2 results for financial year '21, '22. And I say bittersweet because many of the initiatives that Anish had worked on and talked about and pushed for have indeed materialized or are on the cusp of bearing fruit. Indeed, one of the biggest such initiatives was clinched just a few days before he passed away. And he was very keen to share it with the Board and then our investors. And I will return to this later on during the call, so please stand by. It was a very good set of results in Q2, with profits up significantly quarter-on-quarter as well as year-on-year. While revenue -- total revenues from operations dropped by 6.74% to INR 635 crores versus INR 678 crores in the previous quarter as a result of lower sourcing volumes, EBITDA for the group jumped to INR 148 crores versus INR 114 crores in the previous quarter and INR 125 crores a year earlier. This is a rise of 30% over the previous quarter and 18% (sic) [19%] over the previous year. Normalized profit before tax, excluding the noncash employee stock purchase plan charge was INR 124 crores versus INR 90 crores in the previous quarter and INR 101 crores a year earlier. This is a rise of 38% quarter-on-quarter and 23% year-on-year. While not quite a record, it certainly ranks as one of the best results we've had and puts us clearly back on track. So this quarter really was a very good quarter at INR 125 crores of normalized profit before tax. The normalized profit after tax for the group was INR 101 crores versus INR 72 crores in the previous quarter and INR 78 crores from a year earlier. This is a rise of 40% quarter-on-quarter and 30% year-on-year. And the normalized profit after tax and after minority interest. In other words -- sorry, minority interest. In other words, the profit after tax available to common stockholders, shareholders, was INR 94 crores versus -- for Q2 versus INR 66 crores in Q1 and INR 71 crores a year earlier. This is a rise of 42% quarter-on-quarter and 32% year-on-year. So I think you will agree with me that this is a good set of Q2 results, and I firmly believe that we are back on track. Now I'll go through the segment analysis to show you the underlying reasons for this set of results. As far as the liquid terminal division goes, the revenues for Q2 were INR 64.3 crores versus INR 66 crores in the previous quarter and INR 56 crores a year earlier. That is a slight decline of 3% on the quarter, but a rise of 15% year-on-year. The EBITDA for Q2 was INR 46.2 crores versus INR 48.9 crore in the previous quarter and INR 39.4 crores a year earlier. It's a slight decline of 5.5% for the quarter-on-quarter but a healthy rise of 17% when you compare year-on-year in the EBITDA for this division. So that confirms that the liquid division continues to perform strongly, with the addition of new capacity that we have built in Kandla, Mangalore and Haldia. Now I'll go through the Gas Terminal segment. And for quarter 2, the revenues were INR 570.9 crores versus INR 612 crores in the previous quarter and INR 594 crores in the previous year. The Q2 EBITDA was INR 104.4 crores versus INR 65.3 crores in Q1 and INR 85.3 crores a year earlier. That is a rise of 55% over the previous quarter and 19% year-on-year. Not only did we cross the INR 100 crore mark in this quarter, but a 55% rise quarter-on-quarter shows that we are back, a truly healthy rebound for the gas division with most of the market segments in this division rising, as I will explain now with the sales volume analysis. If I may start with the throughput volumes, the LPG volumes handled at our 3 current terminals of Mumbai, Haldia and Pipavav was a healthy 737,770 metric tons for Q2 versus 567,607 metric tons in the previous quarter and 722,514 metric tons from a year earlier. This is a rise of 30% quarter-on-quarter and 2% year-on-year in the LPG volumes handled at our terminals. Haldia had good volumes and Mumbai with IOC, HPCL and BPCL, all bringing imports was a record as well. I'm pleased to report that the rail gantry at Pipavav, which Anish had spoken a lot about, was operating very smoothly. And the good news is that -- now all 3 oil companies: HPCL, BPCL and IOC have started using this rail gantry because it delivers a lot of cost savings and logistics advantages to that. So in summary, a healthy rebound of throughput volumes handled in Q2 compared to the previous quarter. Now the bulk industrial segment delivered 23,545 metric tons in Q2 versus 22,271 metric tons in the previous quarter and 23,621 tonnes from a year earlier. That is a 5% growth -- a 5.7% growth over the previous quarter and remaining steady compared with the previous year. The commercial and domestic cylinder segment, which sells to the hotels, restaurants and small-scale industries under the Puregas -- Puregas brand and to the domestic household segment under the Aegis Chhota Cikander brand. The Q2 sales were 6,313 metric tons versus 5,039 metric tons in the previous quarter and 4,499 metric tons from a year earlier. This represents a rise of 25% over the previous quarter and 40% over the previous year. And that is a result of our increasing distribution network and the number of bottling plants on a national scale, resulting in this 40% rise in the sales in the cylinder segment. In this quarter, we have commissioned 3 bottling plants, added 15 new distributors and now have a presence in 14 states. Auto Gas sales were 5,987 metric tons in Q2 versus only 3,567 metric tons in Q1 and 4,756 metric tons from a year earlier. That is a rise of 68% over the previous quarter and 26% over the previous year. We were able to commission 5 new stations during the first half of the year. and there are more fuel stations to be commissioned this year, and there's also a good pipeline of around 60 new dealers to be brought onstream in the next 24 months or so. So that is a good, healthy performance in the Auto Gas segment. And I can confirm, as I said -- as I think Anish reported in the last earnings call, that our EBITDA margins have gone up to an average of INR 10,000 per metric ton in the Auto Gas segment. So every tonne that we sell delivers a very good rise in profits, and so -- and we're quite optimistic for this business. Sales volume of the sourcing business was only 59,581 metric tons versus 100,000 metric tons in the previous quarter. This segment has been a little subdued for various reasons during the last year. And though this business does, of course, have small margins. It does bring other logistics advantages. So we are looking forward to a big rebound in the sourcing business next year and I'll give you more details on that later on in the call. So the summary for our Gas division is that there was an increase in the sales volume in most of the segments leading to a 55% rise in the EBITDA over the previous quarter, and we are quite pleased with the performance of this segment. Now if I may turn to the business highlights for the quarter and the outlook for the rest of the year and also an update on capital expenditures and projects. As far as the business highlights for quarter 2, we are pleased to inform you that Fitch a global rating agency has revised our credit rating post the joint venture announcement with Vopak from AA stable to AA positive. I'm also very happy to announce with respect to our sourcing business that we have, in fact, secured international sourcing tenders for LPG from our -- from the national oil companies, for the calendar year 2022, 18 VLGCs, aggregating to 800,000 metric tons of LPG. This is amongst very stiff international competition. And that we have secured those tenders and we'll be delivering those cargoes during the calendar year 2022. And we expect to bid alongside with our partners Itochu Corporation, for more tenders as they are announced. We are pleased to report that Aegis also has secured through auction 2 new land parcels. 2.5 acres additional in Haldia, which we will now refer to as the H5 plot. And most importantly, and I'd like to emphasize this, we have secured 21 acres in Mangalore Port. This was a project that Anish was very keen on, and we have just -- we just clinched it a few days before his passing. And he was very keen to report on this during our board meeting and specifically on this call. Aegis has also signed a 10 years with a 15-year extension contract for the use of 21,000 kiloliters of petroleum storage at Kochi with Shell, the Shell Company. As most of you know, this is a very -- a company with very high and demanding standards of health, safety and governance and so on. And we're really pleased to announce that this is probably the first time we have ever signed a 10-year contract plus a 15-year extension with the company of this quality. During the quarter, our bottling plants at Udupi, Bangalore and Hyderabad were all commissioned, and we expect to commission a further 2 bottling plants at Wada and Jamnagar during this current quarter. Now a couple of important announcements regarding Pipavav port as well. During this quarter, Pipavav port has started work on making their jetty their LPG jetty compliant for handling VLGCs, with completion expected by April 2022. This was always, especially at recent times a constraint at Pipavav, and we're really happy that the port has actually commenced work and it's going fast, and we expect them to complete by April 2022, which will certainly facilitate the more gas throughput at Pipavav. As far as Kandla is concerned, they have also started work on their oil Jetty #7, which will also be VLGC compliant, and that work continues and is expected to be completed by June of 2022. Two important developments in the sort of overall LPG infrastructure for India and specifically very beneficial to Aegis because we are well positioned in both those ports. I would like to mention the progress on -- made by the IHB company. Now for those of you who are not familiar, IHB company is a SPV, special purpose vehicle set up by IndianOil, Henderson Petroleum and Barrick Petroleum, hence IHB, 50% owned by IndianOil and 25% each by the other 2 companies. Special purpose vehicle for constructing and operating the KGPL pipeline, also known as the central of India LPG pipeline. Again, I've mentioned this because Anish had communicated to many of you that this was a very important development for the LPG business in India and for the LPG infrastructure in India. And I'd like to mention that the progress made by the IHB company is quite impressive. And they expect to commission Phase 1 by December of 2022. Now this is the world's largest -- longest LPG pipeline. I believe it's 2,800 kilometers long. And with an annual capacity to handle 8.25 million tonnes and out of which Pipavav has been allocated a capacity of 1.5 million tonnes. And of course, it starts at Kandla as well. So these are good developments that we have -- that I'd like to point out during the quarter and which will have benefits as we go along. The outlook for quarter 3. The Liquid Terminal division is expected to perform similarly in quarter 3 as in quarter 2 with consistent revenues and profits. So no change there. In the gas division, we also expect to perform at similarly high or even perhaps a little better level of sales volumes in quarter 3 as of quarter 2. In short, we expect good performance for the rest of this year. I'd like to give a quick update on the progress of projects and infrastructure. The Kandla project is progressing well and expected to be operational in this financial year. The additional jetty pipeline, LPG pipeline is being installed at Haldia and will increase the unloading rate and therefore, improve the logistics at Haldia for LPG. There is a pipeline connecting the Haldia terminal through the HPCL Panagarh bottling plant, which is also expected to commission work soon. This is, of course, an HPCL project, but we will also be participating in some infrastructure within our terminal to connect this -- to connect the terminal to this pipeline and further improve the cost and logistics for HPCL. There is an additional jetty pipeline, LPG Jetty pipeline that is being installed at Mumbai, and this is expected to commission by the end of Q3, which will also substantially increase our unloading rate from -- at the Jetty in Mumbai and therefore, improve the logistics capability at Mumbai. All other liquid tankage projects are over and, of course, are producing revenue. A quick update on the joint venture with Vopak is going well. The implementation is going well. The joint venture is expected to achieve financial closure on or before March 2022. And now with the Kandla LPG project also nearing completion and given the gestation period of these projects, we think it's really important to kick off the growth plans that had been outlined when we presented the planned alliance with Vopak. So in this context and plus with the developments on -- I've outlined on the land acquisitions that we have done as well as the new infrastructure that is progressing well at the ports and so on. The company proposes as per the business plan agreed with Vopak to proceed with the following expansion projects. We propose to add 175,000 kiloliters of liquid storage capacity, and 100,000 metric tons of gas storage capacity at Mangalore, Kochi, Pipavav and Haldia. Now I think you will appreciate that these are important and significant plans that, of course, we've pre-agreed also with Vopak and were presented in the July call when we announced the joint venture with Vopak. But it's now time to kick off these projects, and we will -- these projects, of course, will eventually be in the Aegis Vopak Terminals Limited. The capital expenditure envisaged for those projects that I mentioned is roughly INR 1,250 crores. And at the moment, we are engaged in the environmental licensing process, capacity, license applications and the engineering drawings are being -- are underway from these projects. So I think we expect good developments over the next few months and in the near term. So I think this concludes my earnings presentation, and we can now open the floor for questions.

[Operator Instructions] The first question is from the line of Rajesh Kothari from AlfAccurate.

First of all, our heartfelt condolences. And I think we'll be missing Sri Anish as much as you are missing. Coming to the few questions, it'd be great, if you can give it -- give some color on how is the utilization in Haldia and Pipavav because I think BPCL post BPCL coming out of the Pipavav, how it was utilized on ramping up well on these 2 things. And Kandla, by when you think it will be operational, the new expanded capacity I'm talking about.

Yes. Okay. So as far as the specific utilization of every terminal and so on, we don't -- as you know, we don't give specific throughput numbers for every terminal. This is sensitive information, and we don't give that. But I would say that Haldia, specifically to your question, with BPCL commissioning their own term in the last year, the throughput rates have rebounded as HPCL ramps up their own volumes. So I'm happy to note that certainly, while there was a decline last year, things are climbing back to our original volume levels. It will take still a few more months, but we are confident that with the plans that HPCL is executing, those rates will come back. Again, Pipavav, very positive development in terms of this rail gantry, which was a long time coming. But finally, we are seeing quite a ramp-up in volumes at Pipavav. And it's, as I said in my earnings it's delivering real solid cost advantages to the national oil companies. And as a result, all 3 of them are now bringing cargoes. And once we get the new VLGC jetty commissioned at Pipavav or once support completes the VLGC-compliant Jetty. The logistics advantages will increase even more. So Pipavav are always ramping up very nicely and excited about that. Mumbai, as you know, operates at a very high level anyway, and we expect to continue the improvement. As far as the Kandla project is concerned, as I mentioned, commissioning the construction and commissioning construction is almost over. Commissioning activities will start shortly. It's a complex project because we are not only connected to the jetty, but also, of course, to other pipelines and for throughput and so on. So and we did have a bit of a setback in terms of the slowdown of construction during the COVID period. So we are remobilized and construction is going on. We expect to commission the terminal during this financial year. So that's all I can say for the time being. But otherwise, it's going quite well.

So is it safe to assume that Haldia basically will come back to the normal levels by fourth quarter, I predict?

Perhaps, Murad, do you want to just jump in here. What is your expectation in terms of next year.

I think. Not fourth quarter of this year, but next year, we can expect the growth is healthy. And we should see the levels coming back by end of next year, yes.

Yes. Yes. I think. He just mentioned exit of fourth quarter. So I think we should plan on the next financial year. Yes. That's right.

So you mean by -- basically by you think I actually didn't listen to what Murad said. You initially said you should expect by the next year, when you said by next year and the [indiscernible] confusion. May I request you kindly clarify.

Yes. So what I said was that the improvement is every quarter, and we can expect to come back to the levels which when BPCL was there by end of the FY '23, which is the next year.

Okay by end of FY '23. Understood. So you are saying basically back to normalcy, it will take another basically 1.5 years, correct? Because right now, we are in -- still in the October. So you are saying by March '23 we'll be back to normal.

Yes, very conservatively, yes.

Realistically. No, let's speak that -- it is known for giving very realistic guidance historically. I request you to kindly be realistic because if you are too conservative, it doesn't serve any purpose.

Yes, it is realistic.

The next question is from the line of Kashyap Jhaveri from Emkay Investment Managers.

[indiscernible]

Sir, your voice -- sorry to interrupt you. Your voice is fluctuating in between…

Yes, sorry. Am I -- is it better?

Yes, much better.

This is better, yes.

Yes, sir. So what I would say is that we are really missing his voice on the call right now. I would sort of say to that extent. Just 2 questions from my side. One, In the business update call, you had given the distinct EBITDA between the business divested to JV and whatever we have retained in the company at the holding level. Would you be able to share the same numbers for FY '21, which have been audited by now? That is the first question. And the second question is on our [ LTC ] business, do you know profitability has bounced back really amazingly well and many congratulations for that. However, if I look at [ still ] volumes, in quarter 2, India as a country imported about 4.9 million tonnes of LPG and we handle about 738,000. So that's about 15.5% market share over there. I've been asking this question for quite a few con calls by now, but every quarter, we see that market share number declining quarter-by-quarter. I understand that Haldia would now be there in the numbers in quarter 1 as well. But versus quarter 1 also, our market share has declined by about 60 basis points. So how do we address that number?

Yes. So I think if I can answer the second question in terms of the general business on LPG throughputs and market share of LPG. We have I think, as Anish has mentioned, sort of set ourselves a vision and a target for achieving about a 25% market share for LPG handled throughout India. And this is with a combination of the ports -- the current port where we have LPG terminals, which is Mumbai, Haldia and Pipavav and of course, the new one coming up shortly. So while -- so the 25% goal is sort of our sort of overall goal and vision. We can't do it just with the 3 terminals. Obviously, we'll have to have more capacity. Specifically, we -- although somebody said normal levels as far as Haldia is concerned, the BPCL terminal was always there. And clearly, they are an important player. They did finally after 6 years, manage to commission their terminal. And that definitely has impacted our market share in the Northeast -- the eastern part of India. We did also suffer some slowdown in volume through Pipavav because of the shortage of midsized gas carriers, and therefore, cargoes were diverted to other ports. But I believe that with the commissioning of the rail gantry and the delivery of logistics advantage and most importantly now, with the construction of the new VLGC-compliant Jetty at Pipavav port for -- for which construction is in full swing. Pipavav will become an important port for India, as I mentioned, it's also connected to the KGPL pipeline, and also it has many other advantages. So that is definitely going to rebound. And Mumbai already, we are a very strong player in terms of market share and so on. So in answer to your question, there are 2 as to what happens to our marketplace -- market share. There are 2 key things which will arrest if I can call it that arrest that decline and in fact, increase our market share, 3 key things. Number one, we expect Pipavav to perform strongly as we go forward because of the 2 reasons that I mentioned. And number 2, as Murad mentioned, the healthier volumes are -- we've taken the BPCL hit the exit of BPCL from our terminal. And now HPCL volumes are building up again. So we expect to get those volumes back. and HPCL has a very strong position in the Eastern part of India. And third, of course, which should push up our market share is the commissioning of the Kandla LPG terminal by the end of this year. So I'm confident that we will move towards our goal of 25% market share of the volume of imports into India. As far as the first question is concerned -- as far as the first question is concerned regarding the specifics on LPG -- on EBITDA and so on. Perhaps you could repeat it, and I could ask Murad, I'm not sure we would have those comparative numbers available on this call. But we may have to do a follow-up.

I can answer that. And I would like to highlight that it was July, after the audited accounts numbers were already announced in May, that we have given the EBITDA numbers. So I think if you refer our transcript as well as the deal...

You said that these numbers were forward numbers, right? I mean what Mr. Anish had highlighted at that point of time. You said about 23x EBITDA valuation also those numbers pertain to FY '21, '22 numbers, right? I want for FY '21, the same numbers.

We will have to -- we don't have it here offhand. So we will have to...

That's perfectly fine. Just one question. Mr. Chandaria, on the market share itself, would you have some idea as to of the incremental gas which would have been imported in the country, which port got the maximum market share? Because like you said, Pipavav can't handle VLGC at this point of time. But if VLGCs were sort of the larger market share in the whole import game, then which particular port would have gotten the bigger market share of gas imports?

I can answer that. I think it is Haldia. Haldia gets the maximum gas LPG unloaded.

The next question is from the line of [ Banka Biswas from Novero ].

Good evening, sir. Again, condolences from my side for the untimely demise of Anish. My question is regarding, first of all, on Pipavav -- so if I heard it correctly, like the first phase of Kandla Gorakhpur you said is going to be commissioned at around the end of the calendar year '22, right?

This is the information we have from the IHB company.

Yes. So does the Pipavav port get connected in the first phase itself? Or is the connection a bit later? And ultimately, how much incremental volumes are you expecting at Pipavav firstly, from this rail gantry plus the VLGC, both of them happening. So that is the near term? And also post this Kandla port will be corrected. So how much eventual steady-state volumes you're looking forward to in that asset?

Yes. So I think the -- Murad, do you have any more details on the [ ISP ]?

Yes, I can update that Pipavav is expected to get connected in the Phase 1, with a capacity allocation of 1.2 million tonnes. Now that's not going to happen from day 1. It all depends on the demand and the requirement of the bottling plant to which Pipavav and KGPL would be connected to. And of course, the construction, how far in Phase 1, they go. But the capacity allotted in Phase 1 is 1.25 million tonnes. And by Phase 2, it will grow up to 1.5 million tonnes. So that is the capacity allotted to Pipavav port. Now we think that this will be in addition to what rail gantry is going to take because rail gantry takes it to the bottling plants, which have rail siding. -- and probably not connected to the pipeline grid, which is being set up. And it is also on the north and said Central India pipeline goes all the way to the [indiscernible] Port in UP. So we think that rail throughput plus KGPL throughput plus road, road works in a radius of 200 to 300 kilometers it is much more economical. And with Pipavav port both able to dock a berth VLGC, there will be no constraint of incoming product. So evacuation, modes are being set up for -- which will be very useful for years to come and the incoming and discharge to the best possible upgrade is being upgraded so that it will be able to berth the largest gas vessel ever. So in coming times, we can hope to up the throughput capacity of Pipavav to 2 billion tonnes maybe. And that is why in the expansion, which has just been announced, Pipavav is there. So we will have to increase the [ piers ] over there from the [ 12 ] and 18,300 tonnes which we currently have, we will come up with specifics very soon.

Since we ...

Sorry to interrupt, sir, I would request you to please come back in the queue. [Operator Instructions] The next question is from the line of Nagraj Chandrasekar from Laburnum Capital.

I out the outset my condolences for Anish's untimely passing away. A question on the CapEx to be done within the JV, the roughly 20% increase to your liquid storage capacity and roughly doubling of our gas storage capacity. Now on the liquid side, we know that Vopak has certain unique technologies to handle difficult to handle liquids and liquids that your customers also demanded you handling more of, will any of the capacity being set up, be for liquids with unique technologies like Vopak brings to the table? And also because of the technology that Vopak has on the gas side, is there any advantage to you on cost on the gas terminal capacity you are setting up in terms of either storage costs or evacuation costs?

I can take a part of that, and perhaps, Murad, you can take part of that. So I think that's a very good question and very pointed question and relevant question. The answer is yes to all of them, that clearly, because of the importance of this joint venture and the fact that the terminaling business is going to be combined essentially with -- with Vopak. Active discussions are happening every day, in fact, as far as the specifics of the liquid tankage and the gas tankage that is being planned for the next expansion because it was all part of the joint business plan that was agreed with Vopak. So for example, I can say that the 100,000 metric tons of gas storage capacity may not all be LPG. They may be other gases that are -- and again, I don't want to reveal too much until we are able to make specific announcements. But -- so that's one. And it may be gasses that we are -- that Aegis is not currently handling. The same thing happens -- arises with respect to liquids. As India becomes a more sophisticated economy, and there are more sophisticated complex liquids being handled with regards to safety and contaminations and so on. Vopak certainly brings that to the table, although we -- Aegis has also prides itself on being able to handle pretty difficult materials. But Vopak certainly brings that. So I think the answer to your question is, yes, the benefits of Vopak to the whole business is not just financial. It is strategic and the ability to give customers exactly what they need. So -- and Murad, do you want to add to that, please?

No, I think you've covered it well.

Sorry sir. I would request you to please come back in the queue. The next question is from the line of Depesh from Equirus.

I'm really sorry for your loss. For the first question, Murad, sir, if you can, you mentioned in the [ PPD ] that the financial closure of Vopak is on track and will happen on [ March '22 ]. So if you can please remind us again, what is the cash coming into Aegis standalone? And what your debt taken in the Vopak JV as of the March '22 you're talking about?

Yes. So as we have said, the cash over a period of 3 years, what Aegis is going to get is INR 2,766 crores. And the debt, as we have mentioned, [ 153 million ], which is around INR 1,350 crores, out of which INR 975 crore will be outside borrowings.

And is this CapEx of INR 1,250 crores will be over and above this or...

Sorry?

There's a CapEx plan of INR 1,250 crores of the joint venture, that will be taken over and above this debt that you have just mentioned in JV?

INR 1,250 crores is growth projects over and above the JV initial operating units, which are going to go into the JV. And this INR 1,250 crores will be spent over a period of 18 to 24 months as the project gets underway and get constructed. And again, to remind you, the capital structure of JV Co is that we will always maintain 0.6% net gearing and we will not exceed 3.5x the EBITDA. So these are the 2 covenants under which the JV Co will operate from day they open till lifetime. So we will accordingly as and when cash is [ metered ] and the JV Co permits under the covenants we would be borrowing for the growth projects. which is INR 1,250 crores.

Got it, sir. And then lastly, the government has mostly discontinued the subsidy from the LP [ senders ] that it used to give. So according to too many articles, the refill rate of the LPs also dropped. Just wanted to get your [ sale ] demand side in the near term. Do you think the demand in this year may decline, LPG total consumption in India?

No, no. We don't think so. In fact, there is an increase, and we believe the demand. And I think our presentation covers it and we stand by that, those are our estimates of the demand curve.

So even if the government...

Can I -- sorry, can I just add one point, which is relevant also. As most of you know, a relatively very short term in the quarter by quarter we have a longer-term view. And most of you know that there is an increasing pressure globally on environmental concerns. And while LPG is still a fossil fuel, it certainly is a lot cleaner fuel than some of the fuels that are currently being used in India, whether that fuel is coal or whether that fuel is furnace oil or any of the other lower-grade fuels that are being used, which are highly polluting. And given the context of energy security and diversity of energy supply and also the global climate pressure -- climate change pressure, I think it's fair to say that LPG will continue to be and continue to grow as an essential part of India's energy mix. And on the contrary, I think you'll see other fuels declining and LPG growing. And yes, I think -- so that's my view.

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

I have just 2 questions. One is, would it be fair to assume that now since you started 1 million tonnes per quarter kind of LPG volumes run rate. So is it fair to assume that we'll only grow from here? And second, I mean, in absence of Anish, I mean who will be responsible for taking these CapEx plans forward in terms of your negotiations with the port authorities and the government and all the stakeholders involved. So what is your plan? I mean, will you be hiring some other experts? Or will the existing teams will be doing it? How will you go about it?

It's a very good question, and thank you for asking. Certainly, as far as the volumes are concerned, I will just ask our expectation of Murad to answer that, but I can perhaps take the second part of the question. On management and it's a very important question that you've raised. Anish's loss, of course, was a huge blow and we continue to feel it every day. But even a couple of days after he passed away, and we had to regroup as the company and put our heads together as to how do we deal with this. And in fact, we had -- Anish and I had discussed this over several years that as the company grows and becomes bigger and more complex, the increasing importance of our management who managed the show on a day-to-day basis in India and the strengthening of that. And I'm happy to say that lone of the positive benefits of -- that has come out of the whole crisis that we passed through with respect to COVID was that the ground management in India, led by our Chief Operating Officer and President, Mr. Sudhir Malhotra; and of course, by Murad Moledina and his team and so on. They have really taken on the mantle of the leadership, the day-to-day leadership. And quite frankly, they are very competent and capable of handling forget INR 1,250 crores. We think that they can handle even bigger challenges than that. And with respect -- especially with respect to the execution challenges of getting permits and licenses and so on. In fact, I can't think of better people to do that. And so I think I want to convey to the community that both Anish and I are really grateful for the -- how well the -- our team in India has performed. I know we've had some setbacks as far as volumes and all that is concerned, but there are many explanatory circumstances. The one thing I have highest confidence in, we have highest confidence is the ability of our team to execute and deliver on the promises that we have made as far as Vopak and all the other projects are concerned.

Thank you. Ladies and gentlemen, due to [ forcety ] of time. I now hand the conference over to Mr. Raj Chandaria for closing comments.

Okay. Thank you very much. I'm sure there are many others, and we will be happy to continue our conversations with investors as and when they require. To communicate the good news of that as far as I'm concerned, we are back on track as far as not only from the point of view of quarterly earnings and so on, but also from the point of view of growth. And removing some of the obstacles, which have hindered us over the last 12 months. I would like to convey that while it appeared that we were really hit during the last 12 months, we've used the time, the COVID difficult times of COVID to make progress on some of the critical infrastructure bottlenecks. All those, as I mentioned in my opening remarks, that Anish was really pushing hard on that while we had some subdued demand during the COVID times, but let's keep pushing on the ground level infrastructure that will make our rebound faster and quicker. And I want to convey that that's exactly what we have done. And I'm quite optimistic that things are -- are looking good and strong for the next period of growth for this company. Thank you very much. Murad, is there anything else you'd like to add to my comments?

No, thank you. Thank you.

Okay. Thank you. Okay. Thanks very much. We'll see you in January.

Thank you very much. On behalf of Aegis Logistics Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.