Allcargo Gati Limited (532345) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Gati Limited Q2 FY '21 Earnings Conference Call. 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 involve 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. Ravi Jakhar, Chief Strategy Officer, from Gati Limited. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and thank you for joining us on Gati Limited Quarter 2 FY '21 Earnings Conference Call. I am Ravi Jakhar, Chief Strategy Officer for Allcargo. And along with me, I have my colleagues, Mr. Bala Aghoramurthy, Deputy Managing Director for Gati KWE; and Mr. Rohan Mittal, CFO and Chief Transformation Officer for Gati; and SGA, our Investor Relation Advisers on the call today. I trust all of you and your dear ones are doing good and keeping safe. I hope you have had a chance to look at our results and the results presentation which has been uploaded on the Stock Exchanges and company website. To begin, I would request my colleague, Bala, to give details about the business. Over to you, Bala.

Thank you, Ravi. Good evening, all. We are having this call after a gap of more than a year. I remember the last time it was, I think, Q2 of the last financial year. So it has been more than a year since the last time we had this call. It is all the more important that we spend time on this call today to help you understand what we have been up to as a company over the last many, many months, yes? The way we shall do this, I shall give you an overview of the broad direction and the thinking, and our CFO, Mr. Rohan Mittal, will take you through the numbers. You can, of course, clarify your understanding post we complete our commentary. So let me start with the highlight commentary. First and foremost, the investor transition is now complete. Gati is now a proud and happy family member of the Allcargo group, with Allcargo having acquired near 47% stake in the mother Gati company. The merger or acquisition, so to speak, is now complete. We have a totally new Board with many accomplished men and a lady as our new directors on the Board, led by Mr. Shetty as the Chairman of the Board. It is indeed noteworthy that our joint venture partner, Kintetsu World Express, has been in full support through this entire transition. KWE continues to hold 30% shareholding in the GKEPL subsidiary, which was the same in the past also, right? Thus, in some way, Gati has become the melting pot of logistics excellence, led by Allcargo at the parent company level and closely supported by KWE at the subsidiary level. In this context, I'm wanting to say is that Gati now stands before the corporate landscape with this new found confidence backed by twin logistics brands, Allcargo and KWE, continuing to support the subsidiary. So that was at the shareholding level and the Board level. At the management, the most important point to note is that this transition has happened without any attrition at the top. The management team is intact. Of the top 100 managers in Gati, we have retained near 95, with hardly 5 people either moving on or being let go, yes? So the management team -- the management talent foundation remains intact. Not only does the management foundation remain intact, this is now further augmented with the best of talent from Allcargo moving in and working closely on Gati with Gati. In this context, I would also like to mention the onboarding of our new Chairman and Managing Director in the subsidiary, the GKE subsidiary, Mr. Adarsh Hegde, whom, of course, all of you would know, is also the joint Managing Director on Allcargo. Also, I would like to mention our new CFO, Rohan Mittal, who is on this call. Both Mr. Hegde and Mr. Mittal have joined the management team of Gati. This is a very big infusion into Gati at a senior management level. In addition, many, many, many other top functional leaders from Allcargo are very, very closely engaged through the newly formed centers of excellence that we have done between the company so that we are kind of getting the best practices being rolled into Gati in every function, whether it is audit, legal, procurement, IT, et cetera, et cetera. To sum up, the transition shareholder, Board level, management level has been handled extremely well, and the company is now settled down into a very different future and that is what we are selectively working towards. To share a little bit of what activities the company has been up to in the last few months. Let me start with first saying the character of management team of the company is in full display as it simultaneously managed 2 significant once-in-a-lifetime events. One, of course, is the once-in-a-lifetime shareholder transition and this coinciding with the challenge, the once-in-a-lifetime pandemic situation. So there were 2 very, very big once-in-a-lifetime events happening simultaneously, and the team did really well to make and execute many big decisions from a long-term perspective, even as we kind of went through these mega changes in the company. The company is now sharply focused on the core express distribution business, and we have unhesitatingly let go of many noncore business verticals. An example I would like to share, we have walked out of freight forwarding in entirety. We have let go of the China subsidiaries. You would have -- you will remember that we used to have a presence in China in the past. We have let go of the subsidiary. We are in the process of exiting from the inventory trading business within another subsidiary that we used to call as GIETL, yes? So there are very big changes that we have actually decided at a business portfolio level, letting go of the China subsidiary, the GIETL subsidiary, et cetera, walking out of freight forwarding and so on. We have also sharply moved out of nonprofitable contracts, be it in e-commerce or even in handful of B2B clients. So we have been sharply focused on this contract gives the required profitability to Gati's business. Thus, very, very sharply focused on growing a profitable core. In addition to these business portfolio changes that I just outlined, we have done many other changes within the organization as well. We let go, believe it or not, of near 1,000-plus headcount from our rolls within 2020. You probably would have spotted the impact of this in our reported financials, wherein the employee costs have dropped dramatically. So a very, very big move on that front. Similarly, we have also moved to control our fixed overhead so that we don't get mortally hurt because of the pandemic blow on the economy at large and, of course, to our own business. With all these changes, we now are present in the market with renewed confidence and a new sense of purpose. Within Q2, our monthly B2B business crossed the 100% mark over last year, and the truck utilizations have improved quite significantly from our historical past. The fixed overheads have been ruthlessly flat, like what I explained, whether it is people or admin overhangs, et cetera. Thus, the overall business profitability, hence, improved for all times to come in future. Finally, I would also like to mention that with all this work happening, we have also embarked on an accelerated business transformation journey. We did announce it when we were getting into it with help from Albers and Marcel, about which Rohan will speak a lot more in detail. So please just hold until Rohan comes onto the call. To sum up, you have all known Gati for many years, but I want to reiterate that Gati is now here in a new avatar in the logistics market. We were, of course, pioneers in our first innings. We went through some internal issues, but those issues are primarily behind us. And we are here back in full form in the second innings in a new avatar. We are confident and hopeful of building from strength to strength hereon. You will see that in the numbers, you will see that in the commentary, you will see that in the way we come across to investors, to customers and every other stakeholder in the market. So with that, thank you, I hand it over back to Ravi, please.

Yes. Thank you, Bala. And I would like to add to that from Allcargo's perspective, Gati is a proud member for Avashya family, and we believe there will be strong synergies, and we have already been experiencing, like Bala touched upon some of these areas, wherein our teams have already started collaborating. Allcargo has been market leader in the global LCL consolidation with our own offices across the world. And now with Gati added to the portfolio, we effectively have a capability to cover the entire world on the exim logistics side and almost every pincode in the country. This provides us with an unmatched competence of delivering door-to-door shipments. Add to that, the synergies across other businesses like CFS, contract logistics, we believe that addition of Gati to Allcargo group of companies would benefit both Gati and the Allcargo companies. It has been an absolute pleasant surprise how we have been able to navigate the COVID challenges, thanks to an absolutely able management team led by Bala, which has allowed not only business to prosper but, like he mentioned, for a very, very important transition to take place in an absolutely effective manner over the last 6 months. So things have been extremely good so far, and we believe that as we move forward with this new found partnership, we should be able to see good times ahead for Gati. In this context, we have taken up this transformation project, which Bala spoke about as well. I would now request my colleague, Rohan, to talk a bit more on the transformation project and also to take us through the numbers. Over to you, Rohan.

All right. Thanks, Ravi. Thanks, Bala. Good evening to everybody who has joined on this call. I hope I'm audible. So basically, Bala has already touched upon what exactly we are trying to do in the transformation program. Let me explain that furthermore. So basically, what we are trying to do in this transformation program is unleash the true potential of Gati and its subsidiaries by reinvigorating the team, reinvigorating our digital capabilities and the infrastructure. There are multiple initiatives, almost 200-plus initiatives that have been identified. The program duration is about 15 months. We are about in the fourth month of this program. And the outcome is already visible to all of us in the form of Q2 results also to a great extent. Some of the things that we are working on, for example, are, we are going in for a complete digital overhaul of the way we do business. I'll give a very simple example, something that has just gone live on our network is WhatsApp-based chatbot program that's called Jeni. And this program is supposed to provide real-time details about customer queries to the customer. This is something which is almost first of its kind in the kind of sector that we're operating in today. This is just an example of some of the digital overhauls that we are doing. As we speak, we are trying to bring in a new CRM, we are trying to launch a new finance ERP. So there's a complete digital overhaul that is happening. Simultaneously, what we are also doing is we are relooking at our network and infrastructure capabilities because of the volumes that we have already started to handle. So what we are trying to do is we've identified some of our key hub locations, and we are now looking for bigger and better facilities to replace those locations. This will not only help us make the entire network more efficient but we'll also be able to increase the supply from our side in terms of the handling capacity, in terms of the transshipment or throughput capacity. Amongst other things, on the finance side, for example, what we've undertaken is, one of the mandates that we've picked up is that we have to reduce debt, significantly reduce debt. And again, the outcome of that is visible. In Q2, we've reduced debt by almost INR 70 crores at a gross level, right? Some of the other initiatives that we've also picked up is monetizing noncore assets. So pre-acquisition when we were discussing with the management of Gati, we had identified certain assets, which the management felt are noncore to the business. So it was very important to sell these assets and use the proceeds to, again, retire debt, retire whatever liabilities are there. In addition, what we've also done is we've taken advantage of the tax amnesty scheme, which was launched by the Government of India. And through that, basically, what we are trying to achieve is that about INR 135 crores of contingent liabilities, which were mostly tax-related, would be down to almost INR 27 crores by taking advantage of that tax amnesty scheme. So these are some of the initiatives that we've already picked up, rolled out. The program, as I said, has another 11 months to go. The broad outcome of this program will be that we would have regained some of the lost profitability. We would firmly back in the driver seat as far as market leadership is concerned, share of wallet is concerned as well as the foundation for the digital Gati would have been firmly laid in place. So these are some of the outcomes that we expect. I will now take you through the brief overview of the consolidated results for the quarter and half year ended 30th September 2020. Revenues for the second quarter of FY '21 was about INR 345.3 crores as compared to INR 441 crores for the same period last year, down by about 20%. Large -- some part of this reduction from last year is also because of the conscious calls that we've taken off exiting certain businesses, that Bala mentioned earlier. On a quarter-on-quarter basis, revenues were up by about 104%. If you look at the split of this business, 81% of the business came from our core express supply chain business. Gross margin stood at about 24.8% for the second quarter FY '21 as compared to 22.2% in the same period FY '20. This is an increase of about 260 basis points. Again, one of the most important reasons for this would be the better utilization that Bala just spoke about a little earlier. Our EBITDA for the quarter stood at about INR 23 crores compared to INR 19 crores in Q2 FY '20. This is a jump of almost 21% on a Y-o-Y basis. Before exceptional items, we've registered a profit before tax of about INR 1.9 crores as compared to a loss of about INR 8.6 crores in the same period last year. On a sequential basis, over the last 3 quarters, we've seen our performance improve substantially. As far as the gross debt is concerned, we are today at about INR 330 crores of gross debt. We are down by INR 70 crores, which we've repaid from the proceeds of the preferential issue that was done as part of the Allcargo acquisition. So we've utilized the money to reduce debt from the books of Gati. And we will continue to, as I said earlier, monetize assets and keep reducing debt. On the cash flow front, our cash flow from operating activities has improved significantly compared to last year. For the half year ended 30th September, our net cash flow from operations was about INR 40 crores compared to INR 20 crores for the same period last year. With this, I'd like to hand over back to Ravi for any closing -- any further comments. Ravi, over to you.

Thanks, Rohan, for taking us through the financials. With this, we conclude our presentation. Now the floor is open for questions and answers. Thank you.

[Operator Instructions] First question is from the line of Ashwini Agarwal from Ashmore Investments.

Ravi, Bala, Rohan, great job. Congratulations. Could you just help me understand how should we look at the Q2 or first half revenue across the major business areas, such as Express, SCM and then you have, of course, the cold chain and some of the smaller businesses. Could you give a division-wide split, please?

Yes, I'll request my colleague, Bala, to throw some light on that.

Right. So within Q2, of course, life, Ashwini, moved month-on-month quite dramatically, okay? So Q1 was a lot of that lockdown and stuff. Q2, July started with the lockdown being nationally lifted and thereafter, there was a, what do you say, slew of local lockdowns imposed by the state government. So that was July month. Thereafter came August and September, right? So month-on-month, dramatic changes happened. I must say, in July, August, we had, in general, I'm not talking at the totality level, I'll come to the division, we were not at 100% of the previous year. We were, let us say, between 85% to 90%. In September, we crossed the 100% mark, which is what I was referring to saying in Q2 we crossed our last year number, okay? So July, August, approximately take it 80%, 85%, 90% in that range, business by business. And then September, we crossed the 100% mark. In all this, the Express business is what ramped up quite sharply. The warehousing business was approximately the same 100% all through the 3 months. The reason being warehousing does not change, right? The ramp-up happened in Express, warehouse was kind of similar all 3 months. The cold chain business actually had a degrowth, and the reason for that, because the ice cream business was completely hurt in this period. And a lot of the cold store book capacity in the store and, of course, the primary refer transportation and secondary refer transportation, there was surplus capacity, not as much demand because of significant demand was actually not there in the form of ice cream and so on. So Kausar alone was a shade lower, Express ramped up through the quarter, warehousing maintained a steady state of 100% right through.

Okay. And the other question is that on -- you mentioned that some of the businesses you've already closed down, you mentioned 2 of them. But from what I recollect, the cold chain is also one business that you're looking to significantly restructure or reposition or exit as the case may be. So what else is remaining to be shuttered, sold or restructured? So what I understand, the core business of Express and supply chain management and then, of course, the warehousing business will continue, but cold chain will go away. Is there anything else that's left that needs to be closed or something?

I would like to come in here. As we have mentioned on some of the earlier calls, on Allcargo earnings call as well, we are evaluating some of the businesses. There is no firm decision or direction on the cold chain business as yet. We continue to evaluate all the businesses. Express is certainly the heart of Gati. And some of the noncore businesses, which would -- certainly we look at opportunity divest, would be businesses like fuel stations, which are there. I would request my colleague, Bala, to add further to that.

Actually, in some ways, it is covered, Ashwini, in Ravi's response. Yes, we are, of course, looking at our businesses. What was an obvious thing to do, we have done. The other parts of the business as they remain, they remain. We always look for value and so on. So I'm saying I would put it that way. Right now, our focus is on the road business. The road business for us is Surface Express, and there is a PTL business linked to that and the higher waste segment. E-commerce also travel from Road. So these, along with the 2 other things, which is your Warehousing and air, these are core businesses of Gati. Cold chain continues to remain in our portfolio. It's not like we have taken any call on cold chain. I don't know where you got that impression. Cold chain continues to remain in our portfolio.

Next question is from the line of Depesh Kashyap from Equirus Securities.

Sir, my question is, if you can give more color about the supply chain business. What kind of industry-wise split you have in this business? And also, I understand that you also have Avvashya CCI business, right, that is more focused towards the chemical, warehousing and all. So do you plan to merge these 2 businesses to gain any synergies out of that?

Yes. So Bala, you would like to answer that?

Yes. So on the warehousing business within Gati, our big clientele base is of 2 different industry segments. One is auto, the second is electronics, yes? So these are the 2 things where we are present in Gati. The reference to ACCI. Of course, ACCI has a much bigger business than what is there in our Gati Kintetsu Express warehousing. ACCI business is much bigger. It is quite focused on chemicals and fulfillment centers and e-commerce. So those businesses continue to remain in the individual verticals as they exist today. There is no immediate comment to give on any merger, et cetera. That is not what it is. They continue to remain in their respective entities as they are today.

Understood. Sir, the supply chain business -- by supply chain, you mean only warehousing activities or you also include transportation within this category?

Actually, by supply chain, we mean only pure warehousing. The -- any -- we have a lot of distribution linked to the supply chain to these warehouses. That gets accounted within our Express business itself because the shipments get handed over to the hub-and-spoke network there on. So when we say supply chain, we mean only warehousing. Other associated parts are accounted in our Express business.

Understood. And sir, you also have 2 different segments, right? Express and e-com logistics in your presentation. So I just want to understand this e-com logistics is also part of the Gati KWE subsidiary.

No. Let me clarify this. Gati KWE subsidiary is the B2B vertical. So all express, whether surface express, air express or even warehousing, these 3 are parts of the Gati KWE subsidiary. The e-commerce business is actually in our mother company, Gati company, that is where the e-commerce distribution lies. Although there is a line haul service which the GKE B2B business provides to Gati. But the business itself resides in the parent company, the e-com business is part of Gati Limited and not part of the subsidiary.

Understood. And lastly, sir, like you gave the last 5-year CAGR numbers. Obviously, your numbers are pretty flattish when you compare to the listed and the unlisted players who are scaled up significantly over the last 5 years. So one of the things that you will change you talked about is the hub-and-spoke model optimization. So just want to understand, are you in talks with clients that you might have lost in the past 5 years? Will it be -- will they be okay to come back now? Or you will target new clientele to gain the market share?

So let me first share, the customer confidence in Gati has always been high. It continues to be very high. As part of the transformation journey that both Rohan spoke about, I mentioned and Ravi mentioned, we have actively focused on expanding our presence in the market. This is both about market share with existing customers. It is also about onboarding new customers, regaining lost customers. So the entire portfolio of it is actually part of this scope. And we are very confident because the Gati brand name remains solid in the minds of customers across the landscape.

Next question is from the line of Anuj Jain from Globe Capital.

Sir, I want to know one -- there are 2 questions which I want to understand. First of all, what are the sustainable margins on which we would like to work in the future, EBITDA margins and then profit margin?

Sorry Anuj, I missed the question. If someone can repeat it. Is there a sustainable what?

Yes, sustainable margins. Stainable business margins on which we would like to work.

Okay. Okay. Let me help answer that. There is definite potential at an EBITDA level for the margin -- gold standard margin to be around 12%, yes? As you are aware, in the past, Gati GKE, we have been reporting over the last 2, 3 years in the range of 6% to 7% kind of EBITDA. We were way below the market and the competition. Without going into reasons about the past, suffice to say, we have every intention, and we are working on it as part of the transformation to kind of move quickly into double digit and target the gold standard. I won't put a time frame to it. But without any doubt, these are established benchmarks, and that is our aspiration, that is our effort.

Okay. And second, as we are into this cold storage and supply chain business, and now everyone is talking about the COVID vaccine and cold storage business. So are we in that -- are we thinking in that line also that we'll participate in that business opportunity whenever it comes? Are we…

Yes. Anuj you're absolutely right. There is a lot of talk in the industry about vaccine logistics. We have reached out to the relevant stakeholders, whether it is in the government, whether it is in the vaccine manufacturer nature, yes? So we have reached out, and we are working actively. Everything depends on, finally, is the vaccine, cold-stored vaccine or an ambient travel vaccine, et cetera. There are different possibilities. I think the definitive statement on this can be made only as time progresses. But suffice to say, we are actively engaged in exploring the opportunity.

Okay. Okay. And I was just listening to the Snowman Company's interview just today. And they were saying that for this vaccine, we need minus 70-degree temperature kind of facility. In India, no one has such kind of facilities. So can you please throw some light on those?

Yes. So if I may add on to this, there are multiple vaccines which are under trial across the world. There are some of them, including one, if I recall correctly, from Moderna in U.S., which requires an extreme low temperature, but most of the vaccines under development are well within the range of minus 20 degrees or higher temperatures. As we all know, there aren't any firm outcome as to which vaccine would eventually be successful and require transportation. So as Bala said, it is difficult, but most vaccines, in terms of number of vaccines out of total trials being conducted, most of them are in minus 20 degrees or higher. Some of them are indeed in those minus 60 or lower numbers as well. And if those vaccines were to be transported, there would be significant challenges as the Indian cold chain -- supply chain is not really truly capable to handle those kind of temperatures. There could be serious challenges. But we would like to believe that there's a greater chance of vaccine logistics requiring minus 20 degrees or higher temperature.

And if it is in the minus 20-degrees range, Gati Kausar, our cold chain arc, is what is suitably placed. If it is even warmer than that, there are other ways to do it, which I'm saying even the ambient that Gati Kintetsu can actually look at. So depending on the vaccine, we have covered most of the space, except maybe the one vaccine which Ravi called out.

Okay. Okay. And sir, one last question. Whenever we look at the results, so there are a lot of many notes -- footnotes in terms of that some money has been received from the existing erstwhile promoter Mr. Agarwal. And there are so many things. It looks, I mean, as if there are so many litigations or receivables and which you have not taken into the P&L. So when can we have that cleanup kind of exactly results or you can say balance sheet where we know exact, now there is nothing in terms of receivables or any litigation or any sort of thing. So I mean are we working on that line also?

Of course, Rohan, you want to speak on that? You want me to speak?

Sure. So Anuj, see, basically, these are elements that were -- that would have been known, right, and would have been discussed during diligence phase. We are actively working with the erstwhile promoters to mitigate some of these issues. Some of them have also happened. So I'll give you, for example, over here. There was an excess remuneration that was to be recovered from the earlier Managing Director. And for FY '17/'18, that entire amount has been deposited by the Managing Director with GKE, right? So all those elements are happening, but see, COVID has been terrible for everybody, right? There's nobody really immune to that. So there are some relaxations, temporary relaxations that may have happened because of that. But rest be assured that the entire management and the Board, I would specifically like to call out the Board over here, is firmly behind closing this cleanup, as you labeled it. We expect that in the next few quarters we should be able to bring this to a closure.

Next question is from the line of Ankit Panchmatia from B&K Securities.

Some questions from my end, sir. I am eagerly looking out for our FY '20 annual report. I think it's not yet filed. So I'm just looking out for that. So some of the key data points which I need from your end, what is the current warehousing space under management for us?

Okay. So let me just give you a sense of the size of the business. Within the overall business that we have, warehousing is actually a smaller portion of the business. It will be of the size of around INR 65 crore, INR 75 crore in that range per annum. I'm saying that is the size of the business. That is what we report in our -- what you call that section-wise reporting, yes? So it is of that size. It is a modest business. We are looking to invest in it. But like I said, the bigger focus right now is actually on Express and everything else. Along with that, we are looking at integrated solutions as relevant to our customer base. So integrated solutions in that space, warehousing falls very squarely in between. So is there, very much there. It continues to give us significant weight in the market.

Right. Right. Sir, just to mean, sir, I was looking out for what million square feet we are currently managing, if I can get this number.

I can share that with you separately, Ankit. I'm not sharing here.

That would be fine. E-commerce, if I recollect right, it was one of the fastest-growing segment within Gati, and we were keenly focused in our earlier avatar into it. Now in the new avatar, how are we approaching this business because, again, it has come into a flavor, it is again ramping up faster. How are we looking at this business within Gati? And what are the -- what are your -- what do you feel what are the prospects for this business going ahead?

Okay. So let me try and address that Ankit. So in the past, we had a significant e-commerce business that was across weight segments, okay? If you remember, Gati originally started with what I would like to call as category C weight segment, which was a white goods and so on. Thereafter, we actually expanded ourselves into the smaller weight segments, the medium weight and then the smaller weight as well. And we actually -- as we expanded, we felt the pressure on profits and the pricing pressure in the market was so huge we are not able to push that. If you recall, our results last year, in, I think, the Q2 call last year I explained, the reason for the performance of last year was that we expanded the e-commerce business, especially to the smaller weight segment. Now if you look at what we published in Q2, on a much smaller base of e-commerce, we are actually having head above water, yes? So we have controlled ourselves to participate only in the category C. We have kind of withdrawn, to some extent, from the category A, the really small ones. Having said that, I must also tell you, we are actively engaged on refreshing our e-commerce strategy. We are thinking through what ways exist for us to participate in a sustainable manner. It can't be that one year it works and the second year it does not work. So we are evaluating as part of the transformation journey, how to participate in e-commerce once again in a sustainable manner for all times to come.

True. True. Sir, if I remember it right, it used to clock a quarterly run rate of INR 60 crores, INR 65 crores. How early you feel you would be able to clock those numbers? Or any rough targets from your end, 2 years, 1 year down the line? Because we are seeing lots of buzz around this, e-commerce sales season has been happening. Just a rough -- your internal estimates if you can share regarding this business.

So Ankit, I really don't want to hazard a guess. This is work in progress. We had a person thinking in the past. We tried year-on-year many different things. I think that was all right to do it at that time. Right now, we are saying how do you build a foundation which can grow by itself and not do a yoyo year after year. You are right, at one time, I think, about 2 years back or just before that, we had a INR 200 crore e-com business. That business itself came down sharply even in the course of last year. And now we have made our choice because we didn't want to hurt ourselves as a business, okay? We have made that choice, and we are reworking for the future. As we get more clarity, happy to share with you. Right now, I think this is a pause button in that sense. Except that, we are very strongly present in the category C, white goods. Whatever is the outsourced volume of category C from the major players, there will still be a significant presence there.

Right. Right. And sir, one more data point. Within Express, if I can get how much is ground and how much is air? If air, I believe, would be much smaller, but then to any rough estimate.

Yes. Air is a much smaller one. Even generally, air used to be small, okay? So I'm saying when Rohan talked about 80% being in the GKE vertical, within that 80%, less than 5% will actually be air. This was small before, but it is right now because we are now getting back into the air thing, as you know, the airlines are only now kind of normalizing operations. So don't make an assessment based on what it is today. We are very strongly committed to Air Express as a business vertical because we have a huge cliental of customers who are actually contracted with us on surface, and each of them has a requirement of something needing to be shipped urgently by air, yes? So we are very, very clear that we will piggyback the air business on the surface. And as a result, we are looking for growth in the air business. Right now, to answer your question, it will be about 5%.

Right. Right. Sir, last one from my side, if I can. Sir, how do you feel Gati, being an Express player, is able to mine Allcargo clients? Or which categories you believe wherein Gati would be able to build synergies with Allcargo? Your take on this.

There are 2, 3, 4, 5 ways, yes? We have already called out the various synergy segments. One is, there are global multinationals, okay, who are actually moving from all over the globe into India. They are big companies, big customers of Allcargo. The thinking around that client base is to be able to offer end-to-end to the door in India, can we give one price. And this only Allcargo Gati uniquely can give. No one else can give a door-to-door price from anywhere in the world to India, only Allcargo Gati can give, right? So this is one model. The other models that we are looking at because Allcargo has many CFS and ICD presence across within India itself. We are actually looking at that portfolio of customers whose were either coming into these CFSs from outside or are getting consolidated from within India to go outside. We are looking at those streams also as potential business streams for us. There is, of course, many other ways of collaborating. As an example, cross-border e-commerce is another very, very big interest area. Although right now, China, India, there is -- I'm saying only so much that is happening. But in general, we are seeing that cross-border e-commerce is now going to expand beyond the China to India lane to other countries to India lane. So that is something that we are beginning to see. And even in that, it will be a combined Allcargo Gati kind of a single product door-to-door kind of stuff. So I think we are uniquely positioned, both with global presence as well as domestic reach.

Next question is from the line of Prateek Kumar from Antique Stockbroking.

Congrats for great improvement in results and turnaround which we're looking at. I have 3 questions. Firstly, sir, can we get data on how much business in terms of revenue we would be forgoing by getting out of businesses which we talked about like China subsidiary, freight forwarding and entry trading business? And were all these businesses loss-making or how much loss could get trimmed at EBITDA level because of all these segments?

Okay. So let me take that. I called out 3 businesses. One was Gati China, second was the GIETL subsidiary, third was the freight forwarding. But some total between these 3 is somewhere between INR 200 crores to INR 250 crores. First statement, none of them was profit making, Gati China was a loss-making venture for us. Our freight forwarding was just about neutral, meaning head-above-water kind of situation, not giving us any joy in the bottom line. It was accruing top line, but nothing in the bottom line. Similarly, the GIETL, accruing top line, nothing in the bottom line. So it's not just about the loss. It is also about wasted management bandwidth in things which are noncore and which don't add value to the investor. So that's the nature of these businesses. Top line impact approximate INR 200 crore, but it is almost all factored in. I'm saying you have seen that between Q1, Q2 -- sorry, between Q4, Q1 and Q2, we have already seen 3 quarters of this going down. So in some ways, it's not a new thing that you will see.

Sure. And sir, we used to share some data on segmental information on e-commerce, Gati KWE and freight forwarding. Anyway, we are now out. So can we get that, say, how is the -- like out of INR 340 crore revenue, how much is Gati KWE revenue for quarter or first half, whatever is available? And then what is e-commerce revenues and quarter revenues in total conservation number?

Rohan, you want to take that?

Prateek, would you want the quarterly numbers or the H1 numbers? Which one are you looking for?

H1 is also okay. The best thing would be both quarters, but H1 is also okay.

So GKEPL, I can tell you the numbers. GKEPL, as far as quarter 2 is concerned, was about INR 262 crores. Quarter 1 was about INR 112 crores. And last year, Q2 was about INR 305 crores. You want the Kausar numbers also?

Kausar and e-commerce numbers as well.

So we are not disclosing e-commerce numbers as a segment result, but I can shed some light on that. Before that, Kausar was about INR 8.34 crores in Q2 FY '21, INR 6.5 crores in Q1 FY '21 and INR 105 crores in Q2 FY '20.

Sorry, INR 10.5 crores.

INR 10.5 crores, my bad, INR 10.5 crores in Q2 FY '20. As far as the e-com business is concerned, as Bala explained, there was a dial down in Q1, and Q2 was also a calibrated growth -- regrowth because we wanted to be very, very certain that whatever business we are doing has to be value accretive, has to be profitable. Because of that, Q1 and Q2 put together would be about INR 10-odd crores in top line, INR 10 crores to INR 12 crores in top line, in e-com specifically.

Okay. We used to do around, I think, INR 25 crore, INR 30 crore for quarterly run rate of revenue. So the amount has been down this year.