Gujarat Pipavav Port Limited (GPPL) Earnings Call Transcript & Summary

Good morning, everyone. This is Manish Agnihotri, Company Secretary of Gujarat Pipavav Port Limited. I'm joined with Mr. Girish Aggarwal, Managing Director; and Mr. Santosh Breed, CFO. We will start with the opening remarks from Girish and then it will be followed with comments from Santosh on the financials, and then we will open for Q&A. Okay, Girish.

Thanks. Good afternoon, everyone. GPPL delivered another strong quarter. Very quick highlights of the quarter. Our revenue increased year-on-year by 7 percentage points. Our absolute EBITDA was higher by 21%. Operating margin improved by 800 basis points to 63%. Our EBIT improved by 25%. Our net profit, however, declined by 18%, but that was because of one-off approximately INR 52 crore provision that we took again for the adverse judgment that we received in our old IOCL matter. Else, it would have been a 42% improvement on our net profits as well. On this judgment, we are now taking legal advice for the next course of action, bases which we will decide what to do, but would be prudent, we took the entire amount as a provision. Quick highlights for the entire financial year. Our revenue was higher by 8%. Our net profit was higher by 21%. Without the provisions, it would have been higher by 38%. Our EBIT was higher by 19%, EBITDA higher by 14% and margins improved by 300 basis points year-on-year. On an annual basis, our container volumes grew by 6% to 808,000 TEUs. Our liquid grew by 24% and RoRo grew by 141%. The Board has recommended a final dividend of INR 3.7 per share for the financial year '23, '24. Thank you. Santosh?

I think all the key numbers have been covered. So let's open the floor for questions. Manish?

Okay. The floor is open for questions. Mohit, please go ahead with your question. We can't hear you.

Can you hear me now, sir?

Yes.

So my first question is on the -- can we just talk about the container outlook for this fiscal? Last year was pretty muted. How do you think about the next fiscal? And I think the other terminals have done better. India has grown at a better rate last year. But I think our growths are muted, right? And how do you see the impact of the Red Sea going forward?

So your question is a little unclear, Mohit, but are you asking the outlook for container market?

I'm asking about the outlook for the container market and also the impact of the Red Sea. Is it abating now?

Yes. So in terms of the container market, you're right, and we kind of talked about it in the last analyst call as well, where we did see an impact on our performance. We've seen this quarter our container volumes degrew by 5%, but predominantly, it was the westbound trade because of the Red Sea impact. As we move forward in the year, we are still seeing challenges because of the Red Sea, at least from our perspective. Essentially, the transit times -- the longer transit times have resulted in shipping line changing their network and redeploying our vessels, we are seeing increased skips from various services. This quarter, potentially continuing over the next quarter simply because of the tonnage constraint that we see in the shipping lines. Difficult to overall quantify the impact. We believe that as we move forward, this will ease out, and we would see, again, potential growth in the container business.

Understood. My second question on the LPG terminal. Can you just please update the status when we speak this capacity to get commissioned? And what is the expectation of capacity ramp-up as we move forward?

So the expected commissioning on the liquid jetty is roughly Q3 of next year. So essentially, between October and December '25. That's how we've seen the time line in terms of commissioning. It's a 3.2 million metric tons jetty. In terms of capacity, it will completely come onboard immediately, then we will see how we work on the growth in terms of volumes, but then the entire jetty would be ready by between October and December 2025.

Is it fair to share that all the evacuation pipelines, everything is ready and there is no hurdle on that front?

Yes, yes.

Understood. My last question is on RoRo. The RoRo numbers have moved up sharply. How do you charge -- can you just give us a color on the tariff which you tariff for the RoRo?

So we have -- I don't know what you mean by that, but either -- I mean if you have customer contracts, we don't really share our tariffs with our customers.

Broad numbers per RoRo, how much you charge roughly per number, broadly?

So basically, we have special contracts, right? And then the marine services.

We don't practically give out the customer commercials. So we can't share that.

Thank you, Mohit. Deepak Maurya, go ahead.

Are you able to hear me, please?

Yes.

I had a couple of questions. Firstly, on the operating expenses, there seems to be a significant decline during the fourth quarter. Could you probably provide some color on what drove this decline? And is it kind of sustainable? And secondly, if you could also speak about the dry bulk volumes, which are down 31%. In the previous call, we discussed you mentioned that coal is something which you have for the time being, at least, consciously decided not to take in or handle. May I know what is the current status on that?

Yes. So I think both the questions are related. One on the dry bulk volume, the drop is mainly driven by the lower import of fertilizers. So there has been overall lower imports which -- in the country for fertilizer. That is also reflecting in our numbers. Our coal, as rightly pointed, is still not being handled. So we'll have to wait for some time when we basically decide when to start there unless some permission to be received. On the operating cost, the main driver for low operating cost is a dry bulk volumes. So the handling cost for dry bulk has been lower, in line with the volume.

Okay. May I just -- clarify on the coal part, you mentioned about some permissions. Could you please provide more context as to what is it that is holding you back from handling the coal volumes?

We made a conscious decision last year not to handle coal because of certain operational reasons. We will continue not to handle coal at least for this quarter as well as next quarter and then we'll come back to say that we intend to handle that.

Okay. That is clear. And on the previous caller's question on the container outlook, you mentioned that shipping lines are skipping port calls to GPPV because of the Red Sea disruptions and the erratic transit times which are there. So where are the volumes being handled? I'm sure there are container cargoes which have to be loaded and offloaded from your hinterland. But if those volumes are not being evacuated or delivered via the services which come to your port, is it basically meaning that those volumes are not being handled or delayed?

No, no, it's not delayed or not being handled. You're absolutely right. So essentially, what's happening is because of the increased transit time as well as we've seen situations of whether -- like disruptions in China, Singapore, Dubai. So a lot of shipping lines kind of do a transshipment potentially at Colombo and then move out and then there's a feeder, which brings in the import cargo either from Colombo or from other transshipment ports, so that the mainliners continue on their path and catch up for their time. So that's why there are large skipped calls. What is -- also, of course, that means is the export cargoes are fundamentally up North can get shipped from Pipavav to Mundra, which we've seen has happened to some extent. A lot of ICD cargoes still continues to come to us. But in general, that's one reason for the decline of container cargo by 5% this year. The other is that we lost the transshipment service, which was a Maersk Jade service, which was a transshipment product, which we kind of canceled and they changed their network. And hence, that volume also doesn't come to us and doesn't go to anybody because it's a transshipment call.

Thank you, Deepak. Achal, please go ahead.

Can you hear me?

Yes.

Okay. Sir, if you could help us with the realization for the quarter and for full year for container and the bulk.

Yes. So for container, the realization is in the range of around 8,000 to 8,600 per TEU and full year, it is 7,500 to 8,400. For dry bulk, it is in the range of 450 to 700 for the quarter as well as for the year.

Okay. So with respect to their tariff hike, what you had rolled out from 1st of January, has it been fully reflected? Or still a few of the customers are yet to accept the increase?

So there are a few customers which are yet to increase, and that will happen gradually.

So is it fair -- I mean, if I remember the number right, what is the increase in the blended realization on that count to about 3%?

Yes. It should be in the range of around 3%. You're right.

Understood. The second question I had is, what is the growth in terms of EXIM for the quarter and for the full year for us?

Achal, we don't really split between with the cargo mix, so I'm not going to share a specific number on the growth of EXIM and the others.

Any ballpark number like high single digit, mid-single digit...

But in general, as we said, the transshipment has reduced. The EXIM has increased, transshipment reduced because we lost the Jade service.

Okay. Understood. Possible to get some sense with respect to the market share, how it has evolved over the last 3, 4, 5 years? Have we seen a loss of market share or we have just maintained the market share?

Probably maintained the market share over the last 3, 4, 5 years.

Okay. Understood. Any outlook on the margin part with respect to how things are shaping up with respect to product, different segments?

We believe that this financial year, we will at least expand our margins, EBITDA margins, by at least 200 basis points. And EBIT should be expanded by at least around 7 percentage points.

Understood. And just one more question pertaining to the development of the DMICDC near the port, where is the -- what is the status now? How soon do we expect it to kind of start generating cargo for us given we are the closest port for that?

You said what?

For the Dholera region, we heard a lot of announcements being made with respect to newer capacities, new manufacturing set up there. So in terms of your expectation, how soon can it start contributing to our numbers?

So I mean Dholera, very clearly, we are the port of choice. I think there are some announcements that have been made. I have a feeling that at least in this coming financial year, there will be no additions from Dholera. I do expect, however, as we start to move towards FY '26, we will start to see some benefits flowing in.

Understood. Sir, one more question, if I may, with respect to the container. Obviously, you have highlighted the skipped calls and the impact of that, but in general, are you seeing any signs of pickup with respect to import or export side or things remain as they were during the quarter?

Things are, in general, as they were in the quarter, however, there are certain clearly positives, which are around our Middle East trade. The Middle East trade is strong, continues to be strong and is growing. In terms of Europe, we believe it is not strong. Also, U.S. has been resilient. I think the inventories post the Red Sea conflict, I think people have started building their overall U.S. market. So U.S. market has not declined as was expected but has been resilient, so we believe that that will continue to do that. In terms of our Far East and Southeast market, that continues to be steady.

And would it be possible to get a mix? What would be that mix, Middle East, Europe, U.S., Far East for us?

We don't really share those numbers, but we have a service, Maersk service for Middle East. We have a Maersk service for U.S. and several services for Far East. But I don't know if we have that news at this stage.

So most of the services are on Far East oriented. So of course, we are almost 50% to 60% on Far East side.

Understood, understood. And just last question, sorry, I'm saying last again once again. But in terms of the services, I presume that most of the carriers are calling Pipavav Port in some or the other fashion. Is that the right understanding? Or there are certain liners which are yet to work with us at this port?

MSC doesn't work with us at this point in time.

Okay. The rest all are there.

Yes, all the large ones.

Priyankar, please go ahead.

My first question is regarding the IOCL issue that you were speaking about. So first thing, for FY '24, can you give me the split of the exceptional items? So essentially for the full year, how much was due to this IOCL? And what was due to the, let's say, cyclone repairs? And parallelly, again, harping back on that IOCL legal issue. So it seems like the verdict came in May, if I read from the notes to accounts. So is there some follow-on, let's say, exceptional expenses that can be booked in FY '25 and what will be its quantum?

So Priyankar, as Girish mentioned in the opening remarks, over INR 52 crores is towards the legal case and the rest is -- balance is towards the cyclone repair cost. That's one. We have taken all the required provisions already in the books. As Girish mentioned, we are looking at options. We are taking legal opinions. So if it all something comes up in subsequent quarter, it should be an upside.

So it is completely booked. So nothing more would be taken at least on this issue in FY '25?

That's right.

Okay. Then my second point is, so regarding like this particular year, compared to the previous years, the dividend payout seems to be slightly on the lower side. So what's your commentary on the dividend payout, given that probably we may be entering into a CapEx-intense phase like $90 million CapEx that you are saying on the liquid berth and then maybe later on other CapEx of expansion. So what should be the broadly dividend payout ranges that one can expect?

Why do you say it is on the lower side?

So this time for the full year, it's INR 3.7, right?

INR 3.7 is the final. There was an interim dividend of INR 3.6.

Okay, okay. Sorry, I didn't exactly notice that. But coming to the part here that on the later year -- later part, so for example, like you are going to relatively -- like the CapEx would still be there, like $90 million, bulk of it would be in FY '26 and some bit in FY '25. So would that dividend payout still remain at this high levels?

We cannot comment on what would be the dividend level as we move forward. Our policy, however, has been that we kind of give out 100% of our net profits as dividend to our shareholders. That policy, at least in the near future, we don't expect to change. The $100 million is already provided -- I mean we will do it from our cash reserves and internal approvals. We believe that's easy to do at least as I see it, our cash balance, cash flow was in excess of $100 million. So we don't expect any impact of dividend payout in the near term because of the liquid jetty expansion.

Okay. And just on the liquid jetty since we came on that. This 4Q, the volumes were quite strong, like almost 0.38 million, 0.39 million tonnes in the fourth quarter. So is this quarterly run rate sustainable for FY '25? So like in FY '25, can we be potentially be seeing a volume closer to, let's say, on an overall year like 1.6 million tonnes at this run rate?

No. I think what we should assume as a full year volume would be in the range of 1.3 million and 1.4 million metric tons. It's essentially because of the mix. At times, when we get a mix, which is higher on HSDs, the throughput is much, much higher at roughly 650 to 700 versus LPG, which is 250 to 300 versus the things like bitumen, et cetera, which are sub-100, right? So the run rate is also reflective of the mix that we got in this quarter. But overall, based on our assessment, our numbers will be more around the 1.4 million metric tons for the financial year.

Sir, just one more question. So what I heard from the container that you are telling that this transshipment service by Maersk Jade has been canceled. So you don't have to give the exact figure, but what is the, like, let's say, a percentage-wise, volume impact because of that in a broad range?

So roughly was a 3,000 moves, which is about 4,500 TEUs per month type of a service.

Okay. Thank you, Priyankar. [ Nidhi Shah ]?

Am I audible?

Yes. Please.

My first question is that the concession for the port is kind of succeeding at 2028. Do we have any updates on the renewal part?

We're in the election season. I mean my update remains as it was last time. I think things have progressed in a very good manner. We do hope to hear the right things. But till the time it happens, we do not want to comment on anything, but there are no red flags. But there's not been further discussion in the recent past just to say because of the elections.

All right. All right. Sir, also, the share of net profit of associates this time has dropped, especially in the quarter. Could you kind of outline why that would be?

Yes, for the associate company, there are some cost allocations which were done by the railways. So arrears of the earlier period have been charged in the quarter and that's the reason for the drop.

All right. All right. And if I could, I just had about one or two more questions, if you don't mind.

No, we don't. Please carry on.

So what is the rail coefficient of all our cargo? Basically, how much do we use the road and rail services for our cargo? Like if you could give me the split on that?

Roughly 65-35, rail-road.

Okay. So rail is 65% and road is 35%.

That's right.

Okay. Do we see any improvement in that in the near future? What is our outlook plan?

I think it's quite high at least at this point in time. There could be marginal differences here and there, but a substantial change is not expected at this point in time. Typically, in fact, we increased our cars. Last month, we did 31 rakes, which means 1 rake of LNG rake of car carriers into our port. Fertilizer continues to be or most of the dry bulk continues to be transported by rail. Liquid LPG continues to be transported mostly now by rail. And on the container traffic, again, it would be roughly the same ratio of 65-35. So I think -- and that's the ratio between our volume from the hinterland and [indiscernible] market volumes that we handle, so the local volumes mostly will continue to be handled.

Okay. And from what I understand, RoRo you use mainly rail service, right?

No, not mainly, but we started using rakes or 1 rake. All in average comes down to the port. So this is Suzuki transporting from up North directly into port.

All right. All right. And my last question would be is that do you have any guidance for volumes or revenues, EBITDA anything for the coming year?

Yes. So I mean my guidance we'll give for EBITDA margins, we believe we will improve our EBITDA margins by at least 200 basis points this financial year. Also our absolute EBIT should go up by around 7%.

Thank you. Mr. [ Siddharth Prakash ].

Yes, I just have one quick question. Could you give me like a brief -- could you briefly explain how port charges may vary based on geographies? Like what would an Indian port charge may be compared to something in Singapore or China?

I would not have that information, Siddharth. It just completely depends on many factors. And that is an important question.