Navkar Corporation Limited (NAVKARCORP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Navkar Corporation Limited Q1 FY '21 Earnings Conference Call hosted by Prabhudas Lilladher Private Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Viral Shah from Prabhudas Lilladher Private Limited. Thank you, and over to you, sir.

Thank you, Faizan. Good afternoon, everyone. I welcome all the participants to the 1Q FY '21 results conference call of Navkar Corporation Limited. We have with us Mr. Anish Maheshwari, Chief Financial Officer of the company. We would commence the call with the opening remarks from Mr. Maheshwari to give an overview on the company's performance. Over to you, sir, and thank you.

Thank you so much, Viral and Prabhudas Lilladher. I'm having with me my team -- from my team [ Satish Sharma ], [ Nitin ], they both are heading the account and [ Kunal ] from finance team. So good afternoon, everyone, and a very warm welcome to present on the call. We hope that you and your family are doing well in this era of COVID-19 global pandemic. The novel coronavirus that spread rapidly across the globe was named COVID-19 by the World Health Organization and declared as a pandemic. The effect of this were to enforce lockdown initially in few areas and then extended to states and even nationally. The lockdown in India began on March 22nd of 2020, and was continued during the first quarter of the FY 2020/'21. I'm pleased to share that despite several challenges imposed by COVID-19, our over and all performance has remained satisfactory. During lockdown, disruptions in transportations were the key elements due to driver shortage, it has not been easy as we kept up movement of goods from the port and terminals into the CFS across the country. Our team played a very important role, despite all the challenges. They actually delivered a fantastic results to the customers who were in dire need of recreation cargo from the port into the CFS and the ICD. The company management had made an assessment of the impact on business and financial risk on account of COVID-19, though the impact of the COVID-19 pandemic of future business operations of the company may be different from that estimated as at date of [ approval ] of these financial reasons considering the uncertainty in overall economic environment, the management does not presume see any risk in the company ability continue as a going concern, and there is high possibility of meeting their liabilities. During the period of quarter ending June 30, 2020, there is observed a decrease in revenue of the company and other consequential expenses owning the national wide lockdown for COVID-19. This is because of movement of container containing cargo related to essentials commodities was on priority during the lockdown, and there was limited scope of movement of cargo related to nonessential service -- nonessential commodities. Now I just wanted to be sharing the data related to financials update of Q1 FY '21. Revenue for Q1 FY '21 is INR 121 crores, which has declined by 22% on the substantial basis and 11% on a Y-o-Y basis. The decline has been mainly led by the volumes, which has decreased by 36.5% as compared to Q4 FY '20 and decreased by 44.9% compared to FY '21. The main reason behind -- and however, the average realization was increased and the main reason behind increasing average realization was due to EXIM mix changed. Q1 FY '21 EXIM ratio was 38 point -- 38% versus 62%. Exports was 38%, and import was 62%, whereas in Q4 FY '20 EXIM ratio was 49-51. Exports were 49% and import was 51%. The overall business operations impacted by 22% in this COVID period. The operating profits for Q1 FY '20 (sic) [ Q1 FY '21 ] has decreased by 35% on Q-on-Q basis to INR 40.44 crores compared to INR 61.76 crores in Q4. Now I just wanted to sharing the data related to operations. We have seen a fall in the volumes for this quarter, with total volumes being 59,051 TEU in Q1 FY '20 (sic) [ Q1 FY '21 ] decreased by 36.5% on Q-o-Q basis, 44.9% Y-o-Y basis. The volumes at Mumbai CFS decreased by 41 -- 46.1% to 31,842 TEUs in Q1 FY '21 from 59,096 TEUs in Q4 FY '20, of which 19,340 TEUs were from import and 12,500 TEUs were from export. On Y-o-Y basis, the volumes at Mumbai CFS declined by 55% as compared to -- Q1 FY '20. The volumes at Vapi ICD in Q1 FY '20 (sic) [ Q1 FY '21 ] were 27,209 TEUs as compared to 33,891 TEUs, a 19.7% decrease on Q-o-Q basis. However, on a Y-o-Y basis, it has declined by 8.8% the Vapi volumes were mainly driven by the imports volume, which were 17,507 TEUs, exports were 9,702 TEUs for Q1 FY '21. On the PFT side, the total trains handled for the quarter was 515 trains, which was declined by 14.3% as compared to Q4 FY '20. The main reason behind this is due to domestic movement at our CFS as well as ICD. Now I just wanted to open the floor for Q&A session.

[Operator Instructions] The first question is from the line of [ Sanjay Kothari ], individual investor.

Thank you, Anishji. [Foreign Language]

Okay, no worries. [Foreign Language]

[Foreign Language]

Okay. Okay. [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Sir, [Foreign Language] capacity is in the range of around 25,000 to 38,000 containers per annum and we are assuming that from there we will be getting a business of 7,000 to 10,000 TEUs additionally this year. Due to COVID, last quarter, [Foreign Language] fully. But as said moving forward, that will be fully operational by September quarter.

[Foreign Language], okay. [Foreign Language]

[Foreign Language] Then from next year, we will be utilizing that.

[Operator Instructions] The next question is from the line of [ Aditya Kamre ], individual investor.

Can you hear me? Am I audible?

Yes, you're audible.

Yes, yes.

Yes. Sir, 1 question is, do we see any kind of bottoming out in the volumes for the first quarter? Or is it going to stay like this?

Now practically, definitely, I can tell you, port movements are also on the improvement side. If you see, there was a decline at port around 38% on peak of May, which has improved by another 20% and last August was -- declined by 18%, and which is also -- we are seeing in our case also, we are in a positive and improvement side.

All right. Great. All right. Good. The second question would be, I want to ask what is the business effect that you had because of the government banning on the Chinese imports?

Pardon? You are not audible. Can you speak little louder?

Yes. So the government has been banning Chinese imports, right, since the lockdown.

Yes.

So I want to know what kind of business effects that we have on that? Or to what extent we can have?

So we are not getting any clear sense on that because right now, in COVID, that entire -- June quarter was entirely affected from each of the area of globe, correct? So by second quarter, we'll get to know exactly what is the impact by Chinese import or export was made.

[Operator Instructions] The next question is from the line of Deepak Poddar from Sapphire Capital.

Yes. Now sir, in spite of the COVID scenario, I think we did a decent revenue this quarter. And now when do you expect this normalized revenue? I think earlier, you mentioned by September, October is what we are looking for normalized kind of revenue to start kicking in. So has there been any change on that, sir?

I can tell you one thing. As we were told earlier also that normal realization towards the revenue side will be from third quarter of this year, and we have stated that also. There are certain challenges towards the EXIM mix. They may -- we have seen in June quarter, EXIM mix earlier was around 45 to 55 was the ratio, but which has drastically changed. Imports were very much high in this quarter. And going forward, when the situations will be going normalized, then that EXIM mix, again, getting changed and that will be giving us a proper sense, how the business will move ahead after the quarter 3. But we are very much positive because we are -- in last 2 months, if you see, if I'll compare with the quarter 1, April, May, June to July, August, the train is in improvement side. So going forward, definitely, we are also hoping that, that improvement will remain in order.

Okay. So is that the reason like our gross margin was 33%, so it is mainly because of EXIM mix because your average ASP were higher, but still your gross margins are lower, right?

Yes. The reason we are telling you, because what happens in last quarter, our domestic movement was totally sort of like -- in quarter 4, my domestic realizations was INR 30 crores, which was only INR 8 crores. And the major reason behind that is what my trains were getting empty. So I will see my train movement only changed by 14%, correct? And our operations were changed by [ 22% ], 25%. That is the main reason. One reason is that. Second one, the diesel prices was a little bit in the higher side. Third reason which I can elaborate here. Expense side, our salary was in a positive side from quarter 4. We are not cut down any salary. In fact, we are giving increment to our employees. And second thing, we were incentivized also to our employees, whoever working in a COVID situation, because there are several drivers, there are several labors who were coming each and every day after 11th of May. So they were not even taking any single leave or any kind of a -- we will have to research any kind of a replacement. So we just sured right, that driver is not going back to their home or they'll stay with us. So we incentivized them. That was also the -- there were very minimum impact on cost, but there was also the impact.

Okay. Understood. Okay. Understood that part. Now -- so do you expect like, once our revenues normalize, even our gross margin or the EBITDA margin, do you expect it to normalize or because of these changes you expect it to be on the -- like what we -- last 3, 4 quarters, we have been stable at 30% kind of a EBITDA margin. So do you expect that level...

Actually, June quarter was very unexpected quarter for everyone. So there is definitely improvement, but we will getting the exact sense after this quarter or the quarter 3. Because EXIM mix also will be going changed. Export will be start from here also. The local operations will be also start. That may take time because in Maharashtra itself, you can see the 100% operations are not yet started. But factories are started in last quarter itself. From June onwards, there are several factories were started only. So that will have gradually improvement side but we will getting actual sense after the second quarter.

Okay. But -- I understood that. But in terms of train movement that you mentioned, has the utilization level increased, like the one you mentioned that it was going empty. So it's like more traction on the trains in the -- on the domestic side?

Last quarter, what we did because diesel prices were on a same price bond. So we used our same because in March quarter, we were having 2 trains, which was owned by us also. So we were utilizing our train efficiency in a proper manner. And going forward, we are looking for the same because we heard from ministry also that they are pushing DFCC [Foreign Language] model in a very fast mode.

Okay. Okay. So going forward, you expect a similar kind of train?

Yes, yes, yes.

[Operator Instructions] The next question is from the line of Viral Shah from Prabhudas Lilladher Private Limited.

A couple of questions from me as well. Sir, when you look at in terms of strategy...

Mr. Shah, sorry to interrupt you, the audio is not clear from your line.

One sec. Is this clear?

Now it's audible.

Yes. Sir, in terms of strategy of ramping up our volumes at both the CFS or ICD one at Vapi and one at Mumbai. So what is our strategy for ramping up the volume at both the places, sir? One. And secondly, have you seen the pickup in volumes at the new CSF (sic) [ CFS ] terminals [indiscernible] identity? And that is also helping?

So over and all, DPD movement is in a positive side if we'll compare with the last quarter, which I had already been told. In May month, it was extreme decline by 38.8%, which is now 18.7%, correct? So there is a improvement in the port side on our all windows.

No, no. That is agreed upon, sir, but just wanted to understand from a strategy point of view, and that is not from a quarter point of view, it is from a long-term 2, 3 years perspective, where do we expect our -- are ramping happening significantly at Vapi and Mumbai both the terminals?

So basically, what I just wanted to tell you, in this COVID situation, there are several parties which was added additionally in our export and import side. Due to COVID, there were several problems with the other players, several problems with the transporters, several problems with the CHA. And as I -- in my opening comments also, I really congratulated our team they were grasping from there, and we added some more parties with COVID situation and which will going forward also the same train because in this extreme situations, there are several parties, they will come to us and tell about their nonmovement of cargo story. And we cater them in a specific manner, and our team was helping them to take their cargo on time. And there is -- after June, there were specific parties that would come to us and tell us to running their factories on a timely basis. So I can tell you, in this situation also, our operations were in a very positive and handled by the team, and it will be definitely giving benefit to the company in going forward. And once the situation will getting normalized, then that benefit will be showing in our numbers also.

Fair enough, sir. Sir, secondly, sir, could you harp on the deal more on the actuation? Or what you did recently? So what is the strategy there? And how we want to ramp it up? And we would be spending any CapEx out there or not? And lastly, what is the structure of the deal?

So basically, there is no such -- first of all, as you told, if there is any further CapEx, there is no CapEx. There is no -- not at all any CapEx. And we're just getting the award for that ICD in March. And after that, there was a COVID's era. So right now, our target is taking 5,000 to 7,000 containers per year from there. So that will be in addition to our existing business.

Okay. And what will be the arrangement in [indiscernible], sir?

So arrangement is that we'll have to give them INR 10 lakh ICD as rent per month and the rest all are in incentive basis.

Okay. And sir, at what -- at -- breakeven would be at what, 2,500-odd TEUs there?

Sir, breakeven, if I would like to be grow in there, it will be on only 500 to 700 containers.

Fair enough, sir. It's really helpful. And lastly, sir, in terms of our issues. So basically, we have been hearing lot about drivers issue being there. There would be some supply side constraints as well. So have -- has that been resolved completely as of now? Or still that issues persist? And whether the price hike or -- because there will be some amount of incentive...

Mr. Shah, sorry to interrupt you. [Operator Instructions]

Yes.

Yes. Sorry, sorry. so thank you, Faizan. So basically, to start with, sir, I was just having 2 more questions, and then maybe we can start with other participants as well. One is on the constraints on the supply side because we would also be having some issues like driver issues would be there, supply side constraints will be there. So has that been resolved currently? And obviously, there would be some amount of cost to that acceleration would -- which would have happened. So are we able to pass this cost acceleration as well? So this is 1 question. And I have 1 more. That's it.

So basically, this is really a dicey question, but I can tell you, till now, we are managing our operations in a annual side. So there are certain challenges, which is still there. But we ensure to our drivers and the other employees whoever in the operation side to safe and secure, they are -- we are ensuring that to them for their safety and security both. And we are -- on timely basis, we are incentivized them. So there is definitely challenges, but we are taking care of it.

Fair enough, sir. Sir, lastly, we had planned in the past to buy some rakes on our balance sheet as well. So is this -- is the plan still on? Or still, we would be happy to work on that leasing model, which we...

So we have 2 rakes right now. That's what we have -- we had it in last year also but now we are not thinking much about that line. We just wanted to be sure first stability of the business for further 2, 3, 4 quarters. And I can assure that for next 1 year, we are not thinking much on it. There's no further CapEx, we are thinking of.

The next question is from the line of [ Anirudh Dikshit ], individual investor.

Yes, sir, just wanted to ask regarding the CapEx position in the quarter, this quarter, what was the CapEx done? And what is the total net base?

Sir, there was no CapEx done in last quarter. There is single -- there is no -- not at all single rupee CapEx made in last quarter. And that will remain current is the same was March 31, 2020 it was in the range of INR 437 crores, and which is now also the same, INR 437 crores, INR 438 crores.

The next question is from the line of Vikram Vilas Suryavanshi from PhillipCapital.

Sir, just can you share what was the revenue at JNPT and Vapi separately? And if you can give what -- within that, what was EXIM revenue and domestic DPD revenue?

Yes. So Q1 -- yes, I'll just give you the data for the fee. Our revenue for Q1. I think if we take the numbers in totality for Q1 at Mumbai, we did 31,842 containers, at Vapi we did 27,209 containers. And top line wise, our total revenue at Bombay is INR 56.92 crores and Vapi is at INR 54.31 crores. And domestic, in totality INR 8.49 crores. This was in last quarter, INR 29.73 crores versus INR 8.49 crores. And revenue last quarter was at Mumbai, INR 56.09 crores, and this quarter was INR 56.92 crores, and at Vapi was INR 67.88 crores last quarter, which was in this quarter INR 54.91 crores.

Okay. And what was the revenue for domestic and DPD, JNPT or Mumbai terminal?

Makeup of INR 8.49 crores, Vapi will -- domestic is INR 5.58 crores and Bombay, it was INR 2.91 crores.

[Operator Instructions] The next question is from the line of [ Sahil Chopra ], individual investor.

So I want your thoughts on the expansion of JNPT port. So how do you think this will impact the company and the CFS industry as a whole going forward?

So for JNPT port, I think so that expansion will be remain -- continue after this year itself. Because we are not getting any sense on that. And if there is no further expansion and the business will remain same capability, then the operations, which was earlier will be took place by third or fourth quarter that we are assuming. And once the quarter-on-quarter information will get in from the port as well as our side, then after also we can elaborate the same.

Okay. And can you just provide me the CapEx, estimated CapEx number and the tax rate for next 2 years?

So you are talking about us?

Yes. Yes. So CapEx...

So right now, there is no such CapEx, which we are looking for because in this COVID situations, we are maintaining our operations first. That is our core target. Once the situations will getting normalized, then after, we'll think about it. Right now, there is no such plans.

Okay. And what about tax rate?

Tax rate will be remain same because at Bombay, we are -- in our MAT and Vapi we are not taking MAT yet, which will be started by 2021/'22.

Yes. So I'm asking about '22 and '23 onwards, what would be the expected tax rate? Like...

Sir, '21/'20?

'22 and '23.

'22 and '23 it will be 17.5%.

I'm sorry?

17.5%.

[Operator Instructions] The next question is from the line of Prateek Kumar from Antique Stockbroking.

Sir, can you just elaborate a bit on higher interest and depreciation expense reported this quarter?

Depreciation you're asking about?

Depreciation and interest expense, both the...

Interest is basically due to the -- we are provisioning ourselves for interest because there is no clarity still from the bank as well as RBI. So we took provisions for the same because in the COVID period moratorium we added. So we make the provision interest on interest -- interest is because of that high. And secondly, depreciation, any -- as we start moving on both the trains and March, it was not fully operational, and there was a moratorium from bank itself. So we have started depreciating those assets from this quarter. That's why it's in a little bit high side.

Right. And how would the empty running, it impacted the cost this quarter? How would that be trending in Q2?

So last quarter was actually change in EXIM mix, as I told on earlier questions also. Earlier, our EXIM mix was in the range of 50-50. And sometimes it may 45% exports, 55% imports, 55% imports, 45% exports or there were changes in EXIM mix. But in this quarter, it was extremely changed by 62% and 38% so that was the reason our empty running of trains were much high, which will be, again, depends on the EXIM mix, but gradually, it will be on the improvement side. Because exports are also in a safe from this July and August months.

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Viral Shah for closing comments.

Thank you, everyone, for participating in the call. I especially thank the management of Navkar Corporation, and Mr. Anish Maheshwari, for giving us an opportunity to host the call. Thank you, everyone. Anish, sir, any closing comments from your end? Over to you, sir.

Yes. Thank you, everyone. And we just wish to taking care of you and your family in this COVID pandemic situation. That is only from my side. Thanks to Prabhudas Lilladher also. Viral, thanks to you too.

Thank you, everyone. Thank you, Anish sir. Thank you.

Thank you. On behalf of Prabhudas Lilladher Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.