Allcargo Logistics Limited (ALLCARGO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Allcargo Logistics Q3 FY '25 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Ravi Jakhar, Chief Strategy Officer. Thank you, and over to you, sir.

Yes. Hi, good afternoon. Thank you for joining us on this call. I'm joined here by my colleague, Deepal Shah, the Group CFO. At this point in time, we have been focusing on internal restructuring and identifying opportunities whereby we can use technology and other strategies to keep costs in control, that has been the broad focus and would remain so in the next couple of quarters. From a company standpoint, we have the international business and the domestic business. As is visible, we have demonstrated good growth over the last year for the same quarter across all the businesses. On a sequential basis, the international business usually has seasonality wherein it peaks in the September ended quarter, and therefore, it is marginally down on a Q-on-Q basis, while the domestic businesses are improved even on a sequential basis, and that is the reason why we see a strong performance year-on-year on both revenue and the reported EBITDA. As far as the domestic business is concerned, we believe that the domestic market remains flat. So we are not seeing any significant uptick in growth nor are we seeing any decline. The market growth rate seems to be hovering around a 10% sort of a growth rate on the domestic logistics, which is Express and Contract Logistics. A large part of growth is driven by expansion in market share in the Contract Logistics business, which has seen rapid expansion across various business segments that we participate in, ranging from auto and conventional chemical logistics to e-commerce and quick commerce logistics. Of the Express distribution, the revenue has grown in line with the market. However, company's focus on cost optimization has allowed us to improve the profitability. And we believe that going forward, we will continue to see at or above market level performance on the top line, and there should be continued improvement on economies of scale and operational optimization to drive profitability in line with the guidance also provided by the Allcargo Gati management. On the international business, the market environment has been quite unpredictable. There are various global geopolitical and economic events, which shape the global trade. And at this point in time, it is difficult to predict. We have seen in the recent months, there have been announcements of special tariffs by the U.S. government, particularly impacting Canada and to an extent, China. We cannot say certainly the direction of the geopolitically motivated tariffs that may come in on other regions and the impact of the same needs to be assessed. However, in the short term, these measures can lead to a slight reduction in the trade volume. But from a medium-term perspective, there is no impact on the business of our scale since we are present across all the key geographies. So if the supply chain gets reconfigured, typically, the trade lanes may lose volume, and this might get shifted to another set of trade lanes. An example being manufacturing moving out of China into India or Vietnam could mean lower opportunity out of China, but increased opportunity out of Vietnam and India. And as a company that participates in the global trade across all the key markets, we believe the medium term impact to be limited. However, the growth that we were anticipating in the short term on the revival of global trade, that seems to be marginally muted on account of all these tariff restrictions and the overall geopolitical environment. There are a lot of other variables as well. An end to a war in Ukraine would likely lead to the revival of European economy, but that is an uncertain event, and we are not sure which direction that goes. But from an impact perspective, as and when the war situation is de-escalated and the rebuilding starts and the European economic revival happens that will benefit the trade and the performance of our international business operating under the EQ worldwide. So on an overall basis, I would say, on the macroeconomic side, the environment remains good in India and flattish globally. On the company performance side, we have gained market share in the domestic business, like I explained. And on the international business as well, we have performed better than competition. However, given the macroeconomic environment, the opportunity as we see to drive growth and profit could largely come in from optimizing the cost, which is a significant component, if you look at our P&L. And there are a host of measures that we are adopting. One such approach is technology, which is a continued work. The second key measure, which would be more significant in the year 2025, the calendar year 2025, would be around outsourcing and centralizing various operational and support functions. Last year, we had successfully rolled out a common financial system globally, and that now allows us to centralize some of the financial functions. Likewise, we have also set up operational centers in Philippines, Turkey and Mexico, which allow us to centralize resources from expensive Asian economies like Australia, Japan, et cetera. Turkey, for the European countries; and Mexico for U.S. We believe that this will be the year where we will be able to rationalize a lot of positions by outsourcing them from the current base locations to these outsourcing centers. We do not see immediate benefits showing in this year, since there would also be corresponding severance costs and some overlap in transition of resources. However, from a medium-term perspective, we believe that these changes would allow us to bring down our cost of operations and thereby enabling improved profit margins. So these are some of the key initiatives that we have been focusing on. And we believe that we are well placed to continue to be the market leader in the LCL consolidation and also grow on the FCL business as is visible in the volume updates that have been shared on a monthly basis. On that note, I would like my colleague, Deepal, to take you through the financial highlights for the quarter and the 9 months ended December 2024. So over to you, Deepal.

Thank you, Ravi. I will now discuss the performance for Q3 FY '25. The consolidated revenue for Q3 FY '25 stood at INR 4,106 crores as compared to INR 3,212 crores for the previous year, representing a growth of 28% for that particular quarter. For Q2 FY '25, the revenue stood at INR 4,301 crores. The consolidated EBITDA for Q3 FY '25 stood at INR 138 crores as compared to INR 111 crores for Q3 FY '24, representing a growth of 24%. For Q2 FY '25, the same stood at INR 135 crores. Coming to the profit after tax. The company reported a INR 10 crores profit during this quarter compared to INR 17 crores for the same quarter last year and INR 38 crores for the previous quarter, that is quarter 2 FY '25. The consolidated net debt for the quarter ended December '24 stood at INR 614 crores. The previous quarter net debt number reported was INR 553 crores, but that included a dividend cash available of INR 98 crores. So the actual net debt after the dividend payout would have been INR 651 crores; as compared to that, we have INR 614 crores of net debt. So the debt has reduced from INR 651 crores to INR 614 crores. Moving to the segmental performance, I will start by discussing the performance of the International Supply Chain business. The less than container load volume for the quarter ended December '24 stood at 2.2 million CBM, depicting a 2% growth over the same quarter last year. FCL volume for the quarter stood at 170,000 TEUs, up 11% over the same period last year. And the Air volume for the quarter ended '24 -- December '24, stood at 8.14 million kilograms. This represents a growth of 5% as compared to the same period last year. For Q3 FY '25, the ISC business reported a revenue of INR 3,544 crores, representing a growth of 30% as compared to the same period last year. For the previous quarter, ISC segment revenue stood at INR 3,770 crores. The EBITDA for Q3 FY '25 stood at INR 86 crores as compared to INR 72 crores for the Q3 FY '24, representing growth of 19%. For Q2 FY '25, the same stood at INR 79 crores. Moving on to the Express business, operating under the Gati Supply -- Gati Express Supply Chain business. The volumes for Q3 FY '25 stood at 331,000 tonnes as compared to 319,000 tonnes during the same period last year. For the quarter reported revenue stood at INR 392 crores as compared to INR 371 crores in the same quarter last year. The EBITDA for the quarter ended December 2024 amounted to INR 22 crores as compared to INR 7 crores for the same quarter last year. Moving on to the Contract Logistics business, which sits under the Allcargo Supply Chain company, a wholly-owned subsidiary of Allcargo Logistics. The Contract Logistics revenue for Q3 FY '25 stood at INR 127 crores as compared to INR 78 crores for the same period last year, representing growth of 62%. For the Q2 FY '25, the revenue stood at INR 111 crores. The growth has come on back of new client additions. EBITDA for the Q2 FY '25 stood at INR 38 crores as compared to INR 34 crores during the FY '24 -- Q3 FY '24. And for Q2 FY '25, the same stood at INR 32 crores. In line with best disclosure practices, we have been consistently providing other key competitive financial performances and operational indicators in our investor presentation. One can refer that for more details. Thank you. We can move to Q&A.

[Operator Instructions]. First question is from Riya Mehta from Aequitas.

Sir, my first question is in regard to the FCL business, we've seen a good growth there. So which particular regions or which particular sectors are we seeing the growth coming in from?

You're talking about the FCL business?

FCL, yes.

Yes. So the FCL business has seen good growth in Asia and India as well, these are the 2 markets, and then Latin America. These are the 3 areas which have seen good growth. The trends are largely similar for the LCL business as well. Europe has largely been an area of concern from a growth perspective as the economy and trade in that part of the world has not resumed normal level still.

Right. Also, what -- are we seeing a shift from LCL to FCL?

So the LCL to FCL shift typically happens on significant fluctuations in the ocean freight rate. At this point in time, over the last 6 to 9 months, barring marginal seasonality which happened, the freight rates have been reasonably range-bound. So there is no significant shift from LCL to FCL or vice versa, driven by that.

Got it. And what would be the specific sectors or commodities we would see in FCL business?

So we are commodity agnostic, different markets. So if you would look at Latin America, a lot of these are minerals and some agri commodities. But if you would look at India, it would be consumer electronics, auto. In Turkey, these could be textile, garments. So each market would have very different underlying commodity profile on the FCL.

Got it. Also how are things happening? You said Europe is looking concerning. However, we are seeing some uptrends coming from Europe, like companies posting results as well and they're seeing some green shoots. Have you witnessed something -- increase in inquiries or something coming from Europe?

No. So we have not seen any significant change in the activity either in volumes or in bookings at this point in time in Europe. So we have not seen any definitive improvement at this point in time. Like I said earlier, our understanding is that an end to Russia-Ukraine conflict can lead to the revival in the European economy. That is one aspect. The second aspect, which we are believing would lead to an increase in disposable income, both in U.S. and European countries would have been lower interest rates, leading to lower EMI payouts since these countries tend to have high domestic leverage. However, in the current environment, particularly in U.S., with the policy outlook they seem to be taking, it looks like any further interest rate cuts are clearly deferred. So on both these accounts at this point in time, there are no updates. But if something was to change, if the war was to come to an end and rebuilding was to start, that could be a good positive figure for the European economy. In terms of the volume, like I said, at this point in time, we do not see any significant changes.

Got it. Also the 40 feet container utilization since the last 2 quarters, you've been seeing a significant growth on a Y-o-Y basis, the operational numbers which you have been giving. So when do we see this culminating into operating leverage and increase in our margins?

So these have been -- so whenever we are doing more 40s, we have generally been using -- having utilization as a good utilization on these trade lanes. So there has not been any significant change in that sense if you look at the numbers. And we believe that they will remain around the same range. Like I said, the -- on the gross profit side, we are now well equipped in the sense the 40 feet container utilization and some of these sectors are well placed. What has happened is over the last couple of years with the trade outlook being weak and the growth in volumes and gross profit has not really been to the desired level, while the SG&A costs, despite all the reductions, there's always inflationary pressure on that. So that is where we believe the biggest opportunity for this year, assuming that we do not expect significant growth on the volume side, unless there's a change in the economic outlook. We believe the opportunity is to continue to focus on the cost below the gross profit. At the gross profit level, with the current ratio, we believe that similar yields will continue in terms of gross profit per cubic meter and gross profit per TEU on the FCL.

Got it. So any further scope of reduction in cost because I think last couple of calls, you have mentioned that we have already reduced a lot of costs, and we are working at almost optimum level. So do we see any further scope of reduction in cost?

Yes. So in terms of operating efficiency, we have done what could have been done and which is what I mentioned earlier as well. However, like I mentioned at the start of our call, the opportunity lies in outsourcing, which we have started. We did it for U.S. last year. And this year, we have started moving certain positions out of Europe into Turkey and some of the expensive Asian economies into Philippines. So that would lead to savings. And that is to be factored in. But along with that will also come in the severance and restructuring costs in the short term. Once everything is done, the restructuring costs are one-off, while the savings will be permanent in nature. And every quarter, we would provide the severance cost and the estimated incremental profit from these changes in the long run.

What was your current restructuring cost in this current quarter, the severance cost?

So for this quarter, our severance cost was approximately INR 20 crores to INR 23 crores.

And till when do we expect this severance cost to take a hit on us?

I would say that we would move certain more positions in finance and operations functions over the next couple of quarters. And in terms of the end state, I would say the quarter ending December '25 should have no additional severance costs, while we should have some of the benefits coming in from these. That is the broad outlook, but the plans could be a couple of months ahead or behind.

And the outsourcing you have spoken about, that is basically manpower outsourcing or the entire office and everything you will be shifting?

It's like certain activities which are done on ground can be moved to another location, which could be cheaper. At the same time, some positions in the past quarter had also become redundant. So that is an addition to that. So there are these 2 elements. Redundancy, like I said, is already kind of done, and we believe that if we can manage some functions from other places, then that would allow us to create more redundancies on the site.

Got it. And in terms of air, we are seeing very good growth. So how much would this be as a percentage of revenue contribution or something if you could help with some numbers?

At this point in time, it would still be 5% to 6%, and high growth is definitely also because of the lower rates and expansion into many other countries.

Next question is from Rushabh Shah from RBSA Investment Managers.

I just had a few strategy-related questions with respect to Gati. So my first one was it has been over 4 years since you acquired Gati and the turnaround has taken much longer than expected. So now with this new team in place, what specific gaps have we identified? And why do we believe that things are now on track? If you just please elaborate here?

Yes. So 2 points here. I would provide the Allcargo perspective, which is a shareholders' perspective. For specific Gati question, we would need to refer to the Allcargo Gati since it's also a public listed company, and we typically respond to management queries in there. But to provide you a perspective, I would agree that the turnaround is delayed. Nevertheless, if we see the recent performance for this quarter, the reported EBITDA is 3x the last year same quarter and the debt, which used to be more than INR 400 crores when we acquired the company. Today, the company is sitting with a cash surplus of more than INR 200 crores. So there's a significant change from being minus 450 crores or so to plus INR 200-something crores. And this has been made possible by a lot of efforts which have been put in. In terms of the operational parameters, the company was losing market share even after our acquisition because the turnaround does not happen quickly. And like I said, it did take even longer than what we would have anticipated. But over the last 4 quarters, again, on a relative basis, the volumes have also now been growing in line with the market. And in fact, in the quarter gone by, we outpaced the market growth rate. A few other comparable companies are also listed. And there is potentially enough information available in public domain to verify and compare some of these volume performances. And yes, there is almost a new team on the leadership side in Gati. And we believe that there's a strong confidence of shareholders as Allcargo in the new management team, primarily driven by the relevant experience of this team. So if you look at the people who are driving the company today, they're all veterans from the industry and they come in from the similar business with years of successful execution of their plans. So in summary, I would say strong leadership, which has extremely relevant hands-on experience in the business and the performance demonstrated by numbers, be it market share, which has started to grow now or the bottom line, which is important. The reported EBITDA is 3x what it was same quarter last year. So we have confidence that we should now see every quarter to be sequentially improving.

And second thing is the market feedback on Gati services suggests that at the commercial level, we have a strong team with Mr. Ketan and Mr. Uday. However, at the operations level, there is still significant work needed to be done to achieve that consistent service levels. So do you think is there a need to hire another senior person at the operations front?

So this is a management-specific question. But just to advise, we have an extremely capable Chief Operating Officer, who comes in with the experience of managing supply chain for Tata Group companies and has previously worked with Amazon and comes with high rigor and discipline, having served in Indian Navy as well. So -- and in terms of the performance indicators, like I mentioned, there are various parameters, delivering full on time, and various operational parameters that we measure and compare against the competitors. For the last 6 months, I can confirm that we did not have any challenges in terms of the operational parameters, which continue to hold good and at par with the industry standards. During the festive season gone by, we did not see any disruption in our operations. And perhaps Allcargo Gati was the only company in the industry, which did not see any operational disruption during the festive season. Beyond this, perhaps you could join in on the call of Allcargo Gati Limited next time and possibly seek more responses. You could call for a meeting with the management as well. You can place a request to the Investor Relations team for Gati. But broadly, like I said, as shareholders of Allcargo Gati, we remain confident of the current management team being able to deliver the desired performance. And we shall continue to be patient given that there's already been a significant turnaround on the balance sheet and P&L and not just on the subjective part.

And what is the outlook on Contract Logistics? Have you signed any major customers recently or are looking to sign?

So Contract Logistics, we have continued to sign significant contracts, which is why if you see the growth in the business over the last 1 year has been -- let me just check, I think it should be almost 35%, 40%. Let me check the exact number for you. Yes, so if you see the Contract Logistics business revenue growth is 62% on a year-on-year basis, which is extremely high. And the EBITDA has also improved. The one concern which possibly remains in the Contract Logistics business is the white space, which means that we have been growing, but that requires us to maintain some degree of white space, which would get absorbed over a period of time. So currently, while the revenue growth is significant, it is possibly not translating fully into the bottom line given the operating leverage should also play out. That is primarily driven by the white space, which is more of a short-term phenomenon as the business continues to grow and the space gets eased out. So I would say that profitability should improve on account of reduced white space, while on the revenue side, the company is already demonstrating an extremely robust growth of more than 60%.

And recently, there was a press release on this income tax rate. What is the update on that?

So the last week, the income tax authorities had conducted a search, and we have fully cooperated and provided whatever information was sought, and there is no material update emerging out of that. Should there be any update, the company would keep everyone posted.

Next question is from [ Praveen Batra ], who is an individual investor.

Sir, it was actually regarding that income tax search that answer has already been given. So no question there.

We'll move to the next question. Next question is from Naved from Kotak Mahindra.

Yes, actually what about the share price of Allcargo? And even so many companies loss making, their share market capital is higher than Allcargo. So what is the management's reaction about share price and everyday declining 5% [ per day ].

So as management, our focus is on generating profits and making all the relevant disclosures, providing as much information as we can to the investors. We would continue to remain focused on doing that. We cannot make any comment on the share price.

Sir, how long you keep on telling this? Even loss-making company, TVS Supply Chain's market capital is more than 5% above. You are claiming world number -- LCL leader, but your market capital is INR 3,000 crores only.

The stock price or market capitalization are not under the control of the company management, and we cannot offer any comments on that. Thank you.

So as a promoter to retail investor, when the market is such a low everyday 5% or 6% decline for more than last 1 year, [indiscernible] is 52 weeks low.

Like I mentioned, the stock price remains same for retail investors, institutional investors and promoters and is outside the purview of the management. We as management on this call can only ensure that the company across all the business segments continues to remain well positioned, and we would continue to do our best. I cannot comment any further on the share price and would request that you move to the next question.

[Operator Instructions]. The next question is from Vikram Suryavanshi from PhillipCapital.

Sir, while talking about gross profitability in International Supply Chain business and fixed cost, it seems that somehow fixed cost has increased this quarter, if you look at Q-o-Q as well as Y-o-Y. So is there any cost increase what we are seeing in terms of inflation or other network-related cost also apart from what we discussed in terms of restructuring and service?

So one more component therein is a lot of countries also have bonus provisions in the last quarter. And for countries which have performed well, there will be bonus provisions in December because many countries run on January to December. In fact, globally, that business is run on Jan to December from a business standpoint, even though financial years could vary from one country to another. So there would be another aspect, which could see sequentially the December quarter could be slightly higher. Also, we have seen an increase in provisions, which is almost to the tune of INR 8 crores. So there are some of these one-off items as well, which are there in that. But overall, like I said, the inflationary increases, we have been able to offset with optimization and reductions. And we believe that we would continue to be able to do further rationalization by making some of the positions redundant by transferring those functions into a different mechanism, which can be operated at a lower cost from low-cost countries, and therefore, the positions in the high-cost countries can become redundant. So this restructuring would go on for another 6 months. And therefore, we believe that the SG&A cost would remain in check despite all the inflationary pressures.

Understood. And earlier, we also used to get a decent amount of growth with market share gain. So now with our network, how much further scope is there like to improve our direct services as well as market share gain or now it will be more like overall growth -- industry growth basically?

I would say that we made growth on the back of growing in specific countries and markets. And there could be some marginal expansion in market share this year. However, the opportunity lies once there's a turnaround in the global trade. The historical average is about 3% growth rate for global trade, 6% for the LCL trade. In that kind of an environment as the volumes grow, there are many trade lanes which are at the threshold, which we are not able to make direct. And therefore, we are not able to distinguish against the competition. But as the growth environment kicks in, then the opportunity for market share expansion also improves because there are many of these marginal trade lanes, which we can convert to direct trade lanes and expand the market share. So I would say that the -- within this particular year, we could gain marginal market share. But in the coming years, as we see revival in growth, we could continue to expand the market share. And potentially, there is no reason why it can be much higher, like we have shared in the past, our global market share is still below 15%. While there are many countries in which our market share is 30%-plus or even 40%-plus and these include emerging economy. These include mature Western markets, Northern Europe, Southeast Asia, India. Many of these markets, we have 30% or 40% or higher share as well. So there are a lot of opportunities wherein we can grow, but it typically becomes challenging to expand market share in a subdued market environment. So with some tailwinds on the trade side, we can potentially get back to further acceleration and increase in market share.

Got it. And what is our current gross debt and net debt in consolidated?

Yes. Deepal if you could respond on that?

Gross debt and net debt?

Yes.

Yes.

So the gross debt for the group Allcargo and Gati put together, consolidated level is INR 1,233 crores and the net debt is INR 614 crores. So this is EQ and Gati all put together.

All right. And gross debt would be mostly working capital, long term would be much smaller amount?

Yes. So primarily on the gross debt, the breakup is around INR 369 crores for long term and short term is around INR 865 crores, which is primarily working capital directly linked to the business.

Right. And just lastly, on the restructuring side, how is the time line, if you can explain? And...

So we have -- as you are aware, we have already got a nod from the team. We have a shareholder meeting tomorrow for both Gati and for Allcargo. Once we get the approval from the shareholders, we'll file it with the NCLT. Our expectation is that somewhere by April, we should be able to get this approval through. But of course, as you are aware that this is beyond our control, and it will depend on the regulatory authorities. But we are hopeful that somewhere by April, we should be getting the approvals.

So post approval, Allcargo EQ will be separately listed and will that act first and then with the remaining entity we will have, Allcargo Gati will be merged?

Yes, yes. So let me explain. So it's a composite scheme. It's not a separate, separate scheme. So in this composite scheme, the demerger of Allcargo EQ -- the EQ business into -- the international business into a separate entity is happening. The Contract Logistics business from Allcargo is getting moved to Gati and Gati finally, both these businesses after separating out, Gati [indiscernible] Allcargo. All of these will happen through the scheme. So once we get the approval, the date when we actually file the document that will become the effective date. So there are 2 things. One is the appointed date and the effective date. So at the business level, the appointed date it is [ October 3 ] and once filed, that will be the appointed date for the final merger of Gati into Allcargo Logistics Limited. That's the scheme for you. There is a proper presentation with all the detailing available on the website, and it's quite informative if you look at it.

Yes. And just to reiterate all the events would happen at one time where the [indiscernible] Allcargo EQ and rest all consolidates into the single listed entity Allcargo Logistics.

Yes. I think that is what I wanted to get clarity. So it is simultaneously everything will happen.

Right. So listing of EQ will take around close to 3 months after the final filing. This is the time line if you wanted to get more detail on the time line.

[Operator Instructions]. Next question is from Riya Mehta from Aequitas.

How was the ForEx rate impact on business? Do we have back-to-back arrangement? Or how does it work?

So most of our expenses and income on the global trade happen in U.S. dollars, such as our revenue received from the customers as well as freight payouts to the shipping lines. And then we have certain local income, which is on local origin or destination handling charges and corresponding to this, there are domestic expenses such as local staff costs, et cetera. So in general, we have seen that there is a good arbitrage which is inherent in the business model, and therefore, it does not make a significant impact. On the overall basis, since we report our numbers in Indian rupees, there should be an impact on the dollar-rupee arbitrage, which should be favorable to the company in the long run.

Got it. And in terms of freight rate, since we are seeing that the volume has increased, but revenue has not increased to that extent, the realizations have dropped in. So what will be the contributor to it? One, I understand is that the FCL business is related to freight rate and the freight rates have gone down. Any other cause of why realizations have dropped?

So realization in terms of the profit per TEU for the FCL is driven by, one, freight rate; second composition of trade as well, typically longer haul trade tends to be more profitable compared to the short-haul trade. So some of these sectors can lead to variations and fluctuations in the profitability. But I would recommend looking at like a 6- to 9-month average for directional trends in that.

And for LCL business, have you seen any reduction in our gross profit per TEU?

No, we have not seen any reduction in gross profit per TEU for the LCL business.

Okay. Any new geographies we are trying to or new trade lanes, which we are exploring?

So specific to this quarter, nothing since in the prior quarter, we had already initiated a few new developments such as our renewed management team in Argentina, Paraguay and Uruguay. And we have also seen some enhancements in Europe and some parts of Asia as well. But nothing specific corresponding to the current quarter.

Got it. And how are the freight rates currently panning out to the -- post quarter gone by?

[ Count ], they typically tend to increase around June, July when people start preparing for the shipping to arrive in August, September for the Christmas supply chain and they tend to drop. They continue to remain low until the Chinese New Year and pick up a little bit. They tend to strengthen from April onwards until September. So the cyclicity has largely been there for the last 12 months as well, barring which there hasn't been any significant change in the freight rates.

[Operator Instructions]. The next question is from [ Navi Vasudevan ], who individual investor.

Sir, recently, we got the notification from Gati that they want to increase the share capital up to double. So when they're planning to merge? And what is the use of to increase the share capital of Gati?

Your voice is not very clear. Can you please be a bit louder and slow, so we can understand the questions?

We recently got the notification from Allcargo Gati that they want to increase the share capital of 2 years. While they are planning to merge with Allcargo, what is the purpose to increase the share capital?

Yes. So increase in share capital is more of a technical requirement for enabling the scheme of rearrangement, which we have initiated in late 2023 and my colleague, Deepal, spoke about that, that it would get concluded most likely by April. So the increase in share capital is more of a requirement to enable that scheme and which is why it has been done.

[Operator Instructions] Next question is from Riya Mehta from Aequitas.

Yes. Actually, I just wanted some clarity on the term LCL yield index and FCL yield index. How do we calculate this? I understand the base is last year, but what does this mean, the term?

So LCL yield index is the gross profit of the LCL business divided by the total volume of LCL business in cubic meter, and we show a 12-month trend with the -- so called, if you see the data for January 2025, which would be published in the coming week or so, you would see January 2024 as the base run rate, and it would show whether it has gone up or down on a monthly basis for the 12 months. For the FCL business as well, it is -- the yield is the total gross profit from the FCL business divided by the volume in FCL in TEUs. So it is dollar per TEU and dollar per cubic meter shown on a base of 100 for the last 12 months.

Got it. So are we saying that on an FCL volume, we've seen almost 19% growth in the gross profit?

Let me just see. What number are you referring to?

The FCL yield Y-o-Y. I say it's [ 119 ] for the FCL.

Yes, so corresponding to what would have been in the December 2024, it has become -- let me just check. Yes. So the FCL yield shows data over the last 12 months. We would also advise -- so actually, our team has uploaded the numbers for the stock exchanges as well, and we'll come back to you with the exact numbers to be confirmed.

This is not for the quarter?

If you're looking at the monthly updates, then it could be for the month.

No, I'm looking at the quarterly update, so...

Yes. So for the quarter, it would an average of the October, November, December to October, November, December, but let me just recheck on that and we'll come back to you.

[Operator Instructions]. Next question is from Chinmay Nema from Prescient Capital.

Sir, just two questions from my side. Firstly, would you share what is the debt that is attributable to your Contract Logistics business?

Sorry, what attributable to the Contract Logistics? We couldn't hear the word properly.

The debt level, gross and the net debt in the Contract Logistics business.

The total debt at Contract Logistics is INR 37 crores.

Got it, sir. And could you share the cash flow from operations for 9 months from this business?

From this business?

Yes.

EBITDA is INR 38 crores.

So the operating cash flow is around INR 23 crores which is coming from EBIT and noncash expenditure. But as you are aware, this is a growing -- just I'll give you a full color on this. As you're aware that this is a growing business. So there are further investments for capital expenditure and also increase in working capital due to increase in business. So because of that, there has been some investments. So net free cash flow is almost -- it's negative actually, minus [ INR 4 crores ] for the 9 months.

Understood. Understood. And going ahead post the demerger of the International Supply Chain business, how should one think about the debt levels of the remaining entity?

So basically Gati -- Contract Logistics will move to Gati. And what we have seen, if you look at the December debt level, post demerger, what our estimate is, if you look at December numbers and if you look at the demerger, the total gross debt at Gati and which will merge into Allcargo Logistics Limited and the ASCPL which will merge, which will be INR 235 crores with some cash available of INR 141 crores, giving the net debt of INR 94 crores in Gati.

INR 1,000 crores of gross debt and about INR 500 crores of cash leading to INR 500 crores net debt.

Correct. And why the number is not adding up to INR 500 crores versus INR 614 crores is because there's some intercompany ICDs, which will knock off once these entities are merged with each other. But these are estimated numbers, I mean, we've just done a ballpark breakup of post stimulus. Of course, these are moving numbers once we get the scheme. But the numbers which we mentioned are a fair representation of what -- how this will happen, right?

Yes, sir. Just basically trying to get ballpark figures.

Yes. Okay.

We'll take that as the last question. I would now like to hand the conference back to Mr. Ravi Jakhar for closing comments.

Yes, thank you all for joining on this call, and we intend to share as much information as possible, so if you have any further queries or requests for data information, et cetera, please reach out to our Investor Relations team. And wherever it is already in public disclosure, we would be happy to explain to you. And situations where there is information, which is not in public disclosure, we would evaluate and see if we can include that in subsequent quarterly disclosure, so that each and every shareholder or analysts can benefit from the disclosure. On that note, thank you very much. Thanks once again for joining us.

Thank you.

Thank you very much. On behalf of Allcargo Logistics, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.