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

Good morning, everyone. And welcome to Q3 FY '25 post earnings call of Gujarat Pipavav Port Limited. I'm Manish Agnihotri, Company Secretary and along with me, I have Girish Aggarwal, Managing Director and Santosh Breed, CFO. We will start with the opening remarks by Girish and then we'll open the floor for Q&A. Over to you, Girish.

Good morning, everyone. The revenue for the quarter in comparison with the previous year was lower by 3%, essentially due to lower Container and fertilizer volume. Our total expenditures for the quarter was higher by 13% due to higher bulk handling expenses and one-off expenses incurred during the quarter. Excluding one-offs of INR 117 million, the total expenditure was higher by 2% due to higher operating expenses and annual salary increments. The one-off expenses of INR 117 million are related to R&M, mangrove restoration, onetime IT infrastructure enhancements and employee benefits. Our EBITDA margins were lower by 600 basis points due to higher expenses, excluding one-offs, the margin was lower by 200 basis points. EBIT was lower by 17%. Excluding one-offs, the EBIT was lower by 9%. Container volumes overall were lower by 13% due to the continued Red Sea impact, as compared to the preceding quarter, the volume run rate is consistent. Bulk volumes were marginally lower by 4% from previous year as compared to the preceding quarter, the volumes have increased by 58% due to higher fertilizer imports. Liquid and RoRo businesses continue to deliver extremely strong performances with volume growth of 22% in Liquids and 53% in RoRo. Both the businesses have delivered their highest ever quarterly volumes in this quarter. For 9 months, revenue, EBITDA and EBIT are flat. We have taken a tariff increase of 5%, which is implemented with effect from January '25, considering commercial contracts with customers, it is expected that this will result in a revenue increase of 2% to 3%. From an outlook perspective, Container business continues with a run rate of 175,000 TEU to 180,000 TEUs and this trend is expected to continue in the coming quarter. Liquid volumes are expected to continue its strong performance, maintain our annual volume expectations of 1.4 million metric tonnes. RoRo volumes continues, again its strong performance with an annual expectation in the range of 155,000 to 160,000 cars. Thank you.

Thank you, Girish. We now open the floor for questions. Yes Deepak, please go ahead.

Thank you for taking -- for the initial remarks. I had a couple of questions on the outlook for Container shipping. So the last quarter, when we spoke, we did mention that sequentially we should see some improvement in the Container volumes because -- yes, the loss of the Jade service is definitely -- will have an overhang on the year-on-year. But on the quarter-on-quarter trends, we could see some improvement given that the service calls are stabilizing post the Red Sea. So I mean -- but this quarter we did see that it was flattish quarter-on-quarter. So maybe if you could guide on where we expect it to rebound or recover?

Yes. So I think as we spoke last quarter, we saw green shoots. We moved up from about 165,000 TEUs, if I'm not mistaken, to about 178,000 TEUs 179,000 TEUs in last quarter. That has been maintained. Usually, the monsoon quarter is a little bit seasonally also higher. The fact that we've maintained, I think continues to give me positive signals. I believe as we move forward, the Red Sea crisis is getting potentially behind us. We are seeing or hearing good news. We'll see how that goes. But again, from our perspective, this quarter, we believe we will be in similar ranges of about the 180,000 TEU mark. But as we move forward, I believe things should improve, not which tend -- I mean the risk, of course, is the tariffs that are coming our way, we'll see how that plays out -- or tariffs that may potentially come our way, we'll see how that plays out.

Okay. And when I look at the bulk volumes, I think the quarter-on-quarter improvement was likely because the tender is open for fertilizer and then that started to flow through. So do you expect this to sustain during this current quarter, the last quarter of this financial year? Or should we expect those volumes to taper?

Some of these volumes will taper. This, of course, as you rightly said, the tenders opened up, there was clearly -- the inventory in the country on fertilizer was extremely low. And the government really pushed a lot more import volumes in this quarter, expect some tapering off of the fertilizer volume in the Jan to March quarter. So I'd expect some decline in the volumes.

Okay. And if we could also have some color on the realization range which you give by cargo category typically every quarter, that will be very helpful.

Sure. So the Container, the range is in the range of INR 8,500 per TEU to INR 8,900 per TEU. For bulk, it's in the range of 450 MTs to 700 MTs. And for Liquid, again, in the range of 450 MTs to 700 MTs.

Okay. That's helpful. And then with respect to the operating -- the EBITDA margins, right, you mentioned that even excluding the one-off expenses, we did see a marginal dip. Is that because of the higher mix fertilizers in the cargo?

Yes, that's right. It was due to the fertilizer but also the Container, and the cargo mix too.

Yes. And the statutory update on the concession renewal, if you can.

As, I think, again, everything looks okay. We recently again met the relevant leadership in the Government of Gujarat, again no red flags that have been flagged. So I would expect things are moving in the right direction. But from a time line perspective, it's difficult for us to comment on that.

One last question before I fall back in the queue. A very quick one. We usually have the dredging expenses coming through every 2, 2.5 years. Are we about there? And if so, could you guide what could be the dredging-related expenses in the coming quarters or months?

So we are not undertaking studies right now. So it will be difficult to right now give any number, because studies will tell us on the quantum that is required. But we do expect some dredging costs.

Some dredging costs to come in this quarter, but not the entire maintenance. We expect to dredge one of our berth, but a small dredge, not too much in this quarter. But maybe after this quarter, we'll talk about the further maintenance dredging cost.

Okay. So is it fair to expect that the dredging-related -- a substantial part of the expense will come in the next fiscal year?

Yes.

Priyankar, please go ahead.

So my first question is regarding your Liquids berth that you were expanding. So how far are we through the CapEx on that? And when do you expect the commissioning of that? So if you can answer that first.

So the commissioning is expected now roughly, I would say, Q2 next fiscal year. We're still in the regulatory approval process. Once the regulatory approvals are granted, we will get started. We expect now to start Q1 next fiscal.

So Q1 next fiscal is essentially the construction you were expecting? Or is it just the approval you will get?

Yes, we expect to start our constructions between April, May and June '25.

Okay. And given that we are seeing quite a large increases in volumes that happened in Liquids and there being higher margins. So what sort of outlook do you see if I have to, let's say, ask you in a slightly longer term, like 2, 3 years? Because what I understand is your Port will also get connected to some part of the Kandla-Gorakhpur pipeline as well eventually. So if you can comment on that outlook.

Of course, I think clearly -- there will be a substantial improvement in volumes on the Liquid. That is one big reason that we are going in for additional Liquid jetty. We are connected to the KGP. Hopefully, that gets started, we believe, in the month of April -- between April and June is what we hear at this point in time. One of our partners, Aegis, is already in the process of commissioning additional 48,000 metric tonnes of storage capacity that should also come in line between April and June. The new liquid jetty, we've said is about 3.2 million metric tonnes. So I would expect at least over the next 3 years, at least additional half -- potentially double our Liquid volumes that's how we see it over the next 3 years.

And if I can squeeze in, can you also similarly, let's say, give us an outlook for the RoRo from a more longer-term point of view, because what we are seeing is that RoRo usually did not use to have high volumes earlier. In this last 1, 1.5 years, we are seeing this volume upsurge. So what is the eventual journey for this? I mean, what is driving this volume growth at an underlying level? If you can just elaborate a bit on that and maybe 2, 3 years outlook, if you can give?

Yes, I think the underlying is Make in India. Essentially today, manufacturers like Honda and Suzuki are using capacities that exist in India. In fact, Maruti, is -- you would have heard is already building up new capacities both in Haryana as well as Gujarat. They are now exporting to not even -- not only Middle East and Africa but also to Japan. You would have heard about that. Honda is using its capacity in its Rajasthan plant more for exports. But there's clearly potential capacities there. So rather than using it for domestic, it's more on the export side. So it's Maruti Suzuki. So we believe that this is a structural story in India. It will continue to grow. If I'm not mistaken, Maruti has already announced that by 2030 they should be in a position to export 700,000 to 800,000 cars between them and they also do manufacturing for Toyota, if you know. So I think it's a structural growth story. From our perspective, as I said for this fiscal, we'll do about 155,000 to 160,000 cars. We believe that this will continue to grow over the next 3 years, if you ask me I believe it should double from there.

And just if I can squeeze one more in. When you said that there was a 5% price hike taken in Jan, so is it for Containers only? Or is it across the board that you are highlighting?

Across the board.

Achal, please go ahead with your questions.

Sir, two questions. If you could repeat once again, sorry I missed the early part, the one-off, if you could quantify in the nature.

So INR 117 million, the nature is R&M, repairs and maintenance, onetime mangrove restoration cost, onetime IT infrastructure enhancements that we have done for the port, and employee benefits.

Understood. And the second question. In terms of the EXIM, while you've obviously given some indication already for the fourth quarter, in terms of the outlook, is it fair to say that India port volumes are probably growing at 5%, 6%? Or is it 9%, 10%? And what would be the transshipment mix according to you?

Transshipment mix and in the India volume or in overall volume.

India volume, sir.

I think transshipment is high in one of the terminals in Mundra. We have seen Vizhinjam now coming up. So let's see how it develops. But overall, I think, I mean, the India market is related to grow by equal to the GDP growth, anywhere between 5% and 7% growth, most around the 5% to 6% growth. So we expect that kind of growth in the Container volumes as well.

Understood. And if I were to ask you, in the last 9 months, what would the volume growth be for the country as a whole? And if possible, for the EXIM cargo? Is it the same range, 5%, 7% EXIM cargo growth or it's more than that?

It's not handy with me at this point in time, but it should be in similar ranges.

So effectively, we have kind of maintained our market share. Is that a fair assumption, sir?

No. Our market shares have declined.

Market shares have declined. Okay. And would you be able to quantify how much would that be -- like from what to what?

So overall, India market share now is at around 4%, if I'm not mistaken, it was 4.5% earlier.

And this you are talking about for 9 months or just the third quarter?

9 months.

9 months. Okay. That's very helpful, sir. The other question I had, in terms of the -- is there a case of Port dependency of continuous at the port. We are hearing that there is -- while the DFC lag is working fine, there is -- constraints at the port end in terms of rate movement. I just wanted to hear your thoughts on the same, sir.

So you're saying there is congestion at the port end?

Yes. There are Containers which are pending at the port...

Not at all. Our pendency will probably be the lowest in the Northwest India, for sure.

Is it possible to get a number? What would that pendency be? How do you define what number would usually be and what...

No, I don't have that handy, but I can tell you, there's no congestion at our port.

Nidhi Shah, please go ahead.

So firstly on the question that someone else asked about the growth in Liquids. So would there be forecasts coming in that, and also the Kandla pipeline...

Sorry to interject, Nidhi, but it's difficult to understand what you're saying. I don't know if maybe -- it's not very clear. Can you try again?

Yes. So basically, I wanted to ask about the Liquids only. So given the Kandla-Gorakhpur pipeline that is coming up and also the expansion that is being done by [indiscernible]. Do we expect that the current volumes that we have a say in LPG could double within 2 years?

So within 2 to 3 years, as I said, I mean, we expect the Liquid jetty to come -- the new liquid jetty to come online in Q2 fiscal '26. I mean, '26-'27, right? So after that, in a couple of years, we should expect our overall volumes to double.

And out of the total liquids that the port currently handles, how much of that would be LPG? If you could possibly have a number on hand.

So roughly around 60% is LPG. And rest is other commodities. 60%, 65% will be LPG.

[ Parthiv Thakkar ], can you please go ahead?

I just missed the opening remarks where you gave us the guidance for the full year. So can you just repeat that for Container, Liquid and RoRo volumes and also the realization?

So you want the outlook for volumes for this fiscal year?

This and next fiscal year also if you provide it.

Next fiscal, we'll talk about next quarter. But for this fiscal, we expect RoRo volumes in the range of 155,000 to 160,000 cars. Liquid expect annual volumes at 1.4 million metric tonnes. The Container business, we expect to be, again, 175,000 to 180,000 TEUs in the coming quarter.

Okay. And did you also provide the guidance for realizations for this full year, or the guidance -- or the realizing that you provided where for this quarter?

So the guidance was from the -- it was only for this quarter. So that's the range what we have given.

Anybody else has any questions? Yes Achal, please go head.

Just a quick question. Of the total revenue, how much would be dollar-denominated or dollar-linked for us?

So almost 60% to 65% will be dollar-denominated.

And we don't do any hedging, right?

No.

[ Bharanidhar ], please go ahead.

So I wanted to understand the fact that for the first 10 months in the country, the Container volume growth, be it on the major port side or our competitor is certain high level of 10%, 12%. And in that period, we have, of course, market share, [ also what you ] mentioned. So two questions. So one, what is driving this Container volume growth in India, especially when we have seen the economic slowdown according to you? And also what is the reason for the market share loss?

So we never said economic slowdown -- parameters. Our point of view was that the services that we're handling got impacted by Red Sea, and that has led to the loss plus there was a network change where Jade service was pulled out from the network by Musk and that entire volume was lost. So we never said or talked about the economic slowdown.

No, I didn't tell that you mentioned economic slowdown. I'm just wondering if a country is seeing some slowdown -- that what was GDP numbers and several other companies and sectors are indicating. I'm just wondering how Container volumes are growing at 10% on the country level. So it's more like a macro question.

Okay. So from our perspective, our point of view was that we lost market share because of the reasons that I mentioned. In terms of growth, there are multiple reasons for growth. Some of them are related to, as somebody else was talking about, is the transshipment increase. I mean this 10% increase is overall across the board. There is clearly a transshipment increase in Vizhinjam. There are new ports that have opened up which are taking some volume. There are also, of course, volume increases in terms of the GDP growth of the country which are going to countries -- ports like Mundra and Nhava Sheva.

Got it. Understood. And when you're talking about this 5% tariff increase and the realization that you gave, so is it fair to assume that all the realizations will be up by 5% that you mentioned next year?

No. We said 2% to 3% because of existing contracts with existing customers.

Okay. So net increase would be 2% to 3% at the revenue level?

We expect a net increase of 2% to 3%. Yes.

Mr. Vipulkumar Shah, please go ahead. Mr. Parimal, please go ahead?

Sir, if you can just give us a -- in term of guidance, over the next 2, 3 years, how do you see your business spanning out, and in terms of your Liquid business and RoRo, how do you see it going forward?

So you want to -- I missed that. But Parimal, you're asking the volume outlook for the next 3 years?

Yes. 3 years. So how do you see the business going ahead in terms of your Liquid and RoRo.

Yes, we talked about it. Both Liquid and RoRo, I expect -- no problem, I'll repeat. In Liquid and RoRo, we expect over the next 3 years to double our volumes from where we are today.

Okay. And the Liquid jetty will come in Q2, right, obviously...

Fiscal, yes, fiscal Q2. Next fiscal, just to be clear.

Aditya Mongia, please go ahead.

Firstly, just clarifying on the bulk side of things, we've obviously probably going to see a decline this year, and I understand the high base effect over here. But how do things for the segment over the medium term? You talked about other segments, but not on bulk as much. So apologies if I missed it, but if you could give us thoughts on the moving parts over there from an FY '26-'27 perspective?

Look, Aditya, I think FY '26-'27, 2 years from now, not '25. No, I think for us, bulk has been a stable commodity in the range of 2.5 million to 3.5 million. I would expect similar ranges. There is a potential possibility of some increases maybe next fiscal probably. But it's early to say. We'll probably talk about that in the next quarter -- after the next quarter's results when we talk to you. But I would just argue that dry bulk would be a stable business for us in terms of volumes.

Understood. The next question that I had was more on the Container side of things. So you said that certain new ports have started to impact. Are they impacting our business? And if so, which are these ports that are becoming more relevant? I think somewhere in your commentary you talked about the market share loss for you also happening because of new ports on the Container side coming up. Are they coming up in our vicinity or how do you...

No, no, no. So the India -- I mean this is the overall India share that I talked about, right? So there was a drop in the overall market share, but that's because of the growth that has happened across -- somebody else also pointed out. But our numbers have declined because of the Red Sea impact as well as the network change. So that's the reason for the decline in market share.

And does the Red Sea -- that impact us substantially more than peers and how to think through that?

Yes. I mean it, of course, depends on the services one carries, right? So for us, one of service was the most premium service, which did not use the Red Sea. Most of the businesses like we spoke actually last time as well is that tonnage was -- had to be diverted into that sector, and it was taken out, for example, OOCL, COSCO services, the skips were extremely high relative to the last year. Essentially because of the tonnage taken out from India, but put on to the Red -- because of the Red Sea the capacity has to be kind of matched.

Understood. Maybe a final question on margins over here. So just trying to get a sense from you as a 2%, 3% realization increase that is happening. Is it sufficient to maintain margins beyond the 50% mark? How should we think?

I think certainly helping improve the margin, I would say, because as you know, of the Container business, mainly we have subsided the fixed cost. So any increase in topline certainly helps to impact the low margins.

Understood. So 2%, 3% increase takes care of all inflation planned for the year ahead. That's the way to understand it.

Yes.

Any last questions from anyone? Yes. [ Ginodia ], please go ahead.

Just one question. This INR 117 million one-off that you spoke of, is it part of the other expenses? Or is it spread across?

It's spread across.

Any further questions? Mr. Vipulkumar Shah, please go ahead.

Yes. I just wanted the capacity of our new upcoming Liquid jetty?

3.2 million metric tons.

And what is the existing capacity, sir?

Existing capacity overall is 2.1 million metric tonnes.

Okay. And that will increase progressively once it is commissioned or in the first year of commissioning, we'll reach the full capacity?

No, no, capacity will be -- the installed capacity, as we commission will be 3.1 million metric tonnes, the new one. Both the usage will progressively improve, right?

Okay. So usage of new capacity will not be 100% in the first year itself, right? Is that understanding correct?

Correct.

Thank you. Any questions from anybody else? Don't seems to be the case. Thank you very much for joining, and have a good day.

Thank you so much, everyone.