Gateway Distriparks Limited (GATEWAY) Earnings Call Transcript & Summary

[Audio Gap] [Operator Instructions] Reminder before we proceed, we request everyone to include their firm name alongside their name in the Zoom display. Today on the call, we have Mr. Prem Kishan Gupta, Chairman and Managing Director. Mr. Samvid Gupta, Joint Managing Director. From Gateway Distriparks Limited, Mr. Kartik Sundaram Aiyer, Chief Financial Officer; Mr. Rajguru Bagel, Chief Business Officer; from Snowman Logistics Limited; Mr. Padamdeep Handa, CEO and Director; Mr. Raghav Garg, Chief Financial Officer. Ladies and gentlemen, we will now directly begin the question-and-answer session.

[Operator Instructions] Our first question comes from the line of Jainam Shah.

This question is related to the Gateway Distriparks. So what we see is that volume for the ICD spent was quite on a Y-o-Y basis. Just wanted your thoughts on the market share part. Is it something that market has grown like this and we have maintained our market share because of all these west asia crisis that has been happening or we lost something or we gained something? What is your view on this particular thing? And how are volume is expected to behave, let's say, balance of the fiscal?

So the market share is intact only. The market has degrown in the markets that we operate in. Basically, it's due to the war situation only that's been going on since April. There's still uncertainty in the middle there was a cease-fire, but it happened like -- attack started again. So it's led to disruption and everything. We don't know when it will clear up, but we're still positive in long term. And we're hopeful that for the year, we can still close out on double-digit growth.

On the medium-term perspective, while we have guided for, let's say, 10%, 15% kind of growth during last con call. How we are confident on that part, along with that, how DMC has been panning out which has started from, let's say, last 1.5 months, how we are seeing the change after the connection to the JNPT and how confident we are for showing get say double digit or is it the market growth? Is it some market share improvement for us? Is it new ICD, which is getting added in near term, how we should look at for like less next 2 to 3 years' time?

So in this -- right now, it's only dependent on this war situation. Once that clears up, then double digit will be easy to achieve for us. We had the traction going before April -- before February rather. And then after the situation, that's when we saw a dip in volumes. And new ICD is coming, that did further add to our growth. So -- and those should be operational by 2028. Ankleshwar, they have received their initial customs permission, and we should be operational there for EXIM operations by September. And we're looking at new locations as well for both domestic and EXIM. So we're positive on the long term. DFC, I can hand over to Rajguri, he can explain on that.

Yes. So the last connection, which was pending on the DFC stretch now it is complete. So in fact, we were the one who started the first double stack from JNPT towards NCR. So given the situation, it is too early to say because then there were some bad weather conditions at Mumbai because of that, there was some restriction came into effect. So we are also waiting and watching. So maybe it will take a couple of more months to see the cargo shifting towards the JNPT. But now if we look at after this West Asia crisis, where in import dried-up in the month of April, May. There has been some improvement on the import side from June, July onwards. But we need to see how now Mundra and Pipava ports, they are going to cope up with the congestion because ultimately, we also experienced some congestions at the port and towards major ports. So eventually, JNPT will have that opportunity to get some of the cargo from these ports as well as some conversion from road to rail, but it is very early to say.

Got it, sir. Any updates on the Indor ICD.

Yes, we'll be operational by 2028. We've also bought some...

My bad, sorry, on the Jaipur ICD.

Okay. I'll just finish on Indore, one other update was that we've acquired 2.5 more acres. So now we're at 26.4 acres roughly. Construction is ongoing in an or we've already awarded some tenders due to rain a bit slow. But after, say, September, we'll be in full swing construction. On Jaipur there's no update. We've given it in our notes also that the last hearing took place, but it is another date was given. So it's still listed for final arguments in September now. We're hopeful that it can get closed within a hearing or 2.

Got it, sir. Sir, just last one question on the taxation part. So as I understand that the reported tax rate has gone up to 25%, 26%, whereas our tax outgo is still stable at 17%, 18%. How much this met credit would be available for us to continue the 17%, 18% cash tax outgo like maybe after 2, 3 years or whatever will be the time line by when we'll be paying 25% full tax rate like as for your assumptions?

We will be paying at the rate of 18.8% for at least 7, 8 years a large amount of accumulated back credit, which will be utilizing.

Just on the taxing also, while it's coming in the books as like a 15% decline in PAT. Actual cash tax outgo hasn't really changed that much. that's only increased by about maybe INR 1 crore or INR 2 crores compared to last year.

[Operator Instructions] Our next question comes from the line of Aditya Mongia.

The first question that I had was what is your exposure to JNPT as an overall volumes that you handled on the rail side?

Currently, it's about 5%, but we are hopeful that this will increase going forward, especially as we add Ankleshwar and Indore, both are very dependent on JNPT. Most of the volume is JNPT only. So as those operationalize, our JNPT share should increase. But even without those in our existing mix also, there's an expectation that more volume will shift towards JNPT as the DFC is now operationalized and shipping lines may take a call, but maybe after this disruption is over.

Understood. While we do not know the specifics of your EBITDA, but TEU on the rail side, it seems as if that quantum on the rail side has not been growing and potentially declining. So while you're maintaining our market share, it is coming at lower and lower profitability. Is that assessment right? And what needs to be done to [indiscernible]

It's a function of the volume mix also saw a decline in imports and increasing exports while maintaining the same one would be lower margin for us. So a little bit of the port imbalance also specifically within Mundra and Pipava has also been there, lower double stacking, higher under frame, higher running all contributed to a lower real EBITDA in this quarter. But as volume goes back, we expect that this will come back up and get back into the old range that we have. Also, there were impact of fuel and very high minimum wage increases. Just for example, Haryana had an increase by 35% in minimum wages, try to pass it on to customers, but there's a time lag in that, although Fuel also, most of it we've been able to pass on. So that impact will be more visible in Q2.

But that -- could you give us a sense of your market shares across the key regions and the double stacking [indiscernible] as to how much has it gone down over the last couple of quarters.

The market share remains like the same trend that we had earlier with specific figures we've been reporting. On double stack, basically, we're at 39% so it has dipped a bit from last year where we were at like 40% to 42%, depending on the quarter.

Understood. I guess maybe the last question on my side. As in the CFS business is going over and doesn't benefit from Western DFC getting commissioned. Is there is an endgame in plant because you do have very large land parcel near BT and other CF uses. So can you just repeat the question? You said that it's not connected to DSC doesn't help? And then the second part was? I'm just saying the CFS business is expected not to see a positive u-turn because of DFC and the numbers that we -- is there any purposes of either improving that business or potentially selling lands.

So we undertook an exercise, but we didn't get the right valuation. This was about 1.5 years ago. And since then, we've not been actively looking because we reached about a net debt 0 position earlier in the year when we paid out the special dividend. So there's no really compulsion to sell the CFS business. If some very good deal comes for it, we're still open to it, but we're not actively looking for it out there. it doesn't help with the DFC, but some volume improvements have come in the CFS as well as with this fuel and wage hike we took a pricing in ease. So a little bit margin improvement possibility is also there, which you might see again in Q2.

Our next question comes from the line of Neeraj Mansingka.

My question is that what was the trend of volume growth rate in June and July month which will explain us the industries ratio.

So June was similar only. Even July is similar. We can't give specifics because this is a Q1 coal and being listed, we have that decision. But I mean, broadly, the trend remains the same. Market share remains intact. -- arrivals have been good, but actually July volumes got impacted because of the weather. So there was a lot of restrictions on double stacking and even operations at the port were both congested as well as restricted. So there were 1 or 2 days and then again, it operates, then 1 or 2 days, again, they take restrictions. So all the CTOs have faced that during July.

But then what brings your confidence that your lending growth rates will pick up once the -- some uncertainties in the global political situation is over.

So the pipeline is there, plus we're focusing on domestic as well as unclear operationalizing by Q2, that will all add into our volumes. And I gave the caveat also that this is subject to global macros.

Understood. But can you give some color on Ankleshwar how it will increase the volumes for you and how can it add to EBITDA.

I mean it's going to be a new EXIM location for us. So it's -- right now, it is served by only one ICD, which is full. So everything excess, we would be in a position to cater to it. And bring it to the ICD operating out of that. So that will be a direct addition to our revenue and EBITDA by adding more volume.

And how much Ankleshwar volume right now?

So right now, it's 0, EXIM has not started. It will only start by end of September.

No I'm asking the other ICD, which is operating.

Okay. That would be doing about 5,000 TEUs, is our estimate, but that data is not public.

Okay. And what is our estimate that we can do?

So it takes time to ramp up because you have to add some shipping line BL points and everything, but we also estimate that within 3, 4 years, we should be doing a similar number.

[Operator Instructions] Our next question comes from the line of Abhishek Jain from Arihant.

I wanted to know that basis the existing land bank, which we have what would be the approximate market value of that land back as of today. And going forward, over the next 3 or 4 years, where do you see the growth coming from apart from the ICD Indore in the ramp-up of ICD Jaipur, Indore and Ankleshwar ramp up.

We don't keep assessing land on market value because we're not in the real estate business. But that being said, we do have rough ideas and people do approach us for purchase of land, but it's very high compared to the book cost. If you look at it, just for example, our Garhi land, it's about 85, 90 acres that would be valued. I mean, does residential towers coming near us and all. So that would be valued anywhere outright purchase at like INR 25 crores, INR 30 crores per acre. If you do some other kind of -- like if you become a builder and do it, I'm sure you can plot it and sell it at exponentially higher than that. So our overall land bank is about 475 acres across India in prime locations. Most of them -- some are industrial locations, some are port leases, but most of it is freehold. So the value is there. And the growth part, you mentioned the 3 locations that plus we are looking at more locations as well as increasing our dometic presence. Right now, domestic we'll be doing only about it's like 500 containers a month roughly. We could be increasing that to a lot higher when we have more of our network in place.

Okay. And another thing is that over the -- like in India, apart from in -- terms of competition, CCI would be the biggest player, right?

Yes.

[Operator Instructions] Our next question comes from the line of Abhishek Jain.