Navkar Corporation Limited (NAVKARCORP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Navkar Corporation Q3 FY '21 Earnings Conference Call hosted by PhillipCapital (India) Pvt. Ltd. The conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] I now hand the conference over to Mr. Vikram Suryavanshi from PhillipCapital (India) Pvt. Ltd. Thank you, and over to you, sir.

Thank you. Good afternoon, and very warm welcome to everyone. Thank you for being on the call of Navkar Corporation Limited. From the management, we are happy to have with us here today Mr. Anish Maheshwari, Chief Financial Officer; Mr. Nitin Sharma, VP Accounts; and Mr. Kunal, VP Finance. Now I hand over call to the -- Mr. Anish for opening comments, and then we will have question and answer. Over to you, sir. [Technical Difficulty]

The line from the management is disconnected. [Operator Instructions] Ladies and gentlemen, we have the management line reconnected to the call. Thank you, and over to you, sir.

Yes, there is a technical issue, I think, so. So as we're all aware, the novel coronavirus COVID-19 havocked the entire global, leading to a declaration as a pandemic by the World Health Organization in beginning of 2020. In this regards, there were introduced quite severe restrictions in the movement of all citizens, also on the movement of goods on the basis of necessity. The impact of this pandemic was quite severe in the first as well as the second quarter, whereas in the period COVID by third quarter, we noted removal of the restrictions on transportation of person or goods with certain conditions. Such relaxation introduced a noticeable positive impact or business of the company, which will be further elaborated. In terms of revenue and business, this quarter was best in the history of company. And this is clear evidence of normalization of negative impact caused by the COVID pandemic. This was resulted due to joint improvement in all the elements of growth and profitability of the company, means export/import mix, domestic cargo handling revenue, operations of the container movement using real terminals, et cetera. Now coming on the financial updates of the quarter 2 -- quarter 3 FY '21. Revenue of third quarter of FY 2021 is INR 190.04 (sic) [INR 190.0] crores, which is increased by 29.1% on a substantial basis of 31.7% (sic) [31.8%] on year-on-year basis. The increase was due to several factors. Growth in domestic revenue has increased by INR 37.75 crores to INR 42.07 crores, which is raised by 11% as compared to second quarter and in the same quarter of last year. It was INR 19.14 crores and is now up by 120%. EXIM business turnover rose INR 105.88 crores to INR 144.77 crores, which is a rise of 37% as compared to second quarter. Comparing it for the same quarter of last year, it was INR 123.41 crores, which is now increased by 17%. Due to the above facts, the average realization per TEU in EXIM business rose from INR 14,240 to INR 14,603. The operating profit for Q3 FY '21 has increased by [ 28.7% ] on quarter-on-quarter basis to [ INR 72.74 ] crores as compared to [ INR 56.52 ] crores in last quarter. This -- those belongs to improvement in revenue from the operations by 29.1% as similar hike in operations expenses with -- without major increase in the cost of variables as compared to the last quarter. The EBITDA increased in the third quarter by 21.7% from last quarter means from INR 38.2 crores to INR 46.5 crores. This rise was due to growth in the revenue without abnormal increase in cost of operations and administrative expenses in totality. When compared to the same quarter last year, it was fall by slightly margin of 0.2% only. The profit before tax increased in the third quarter by 87.5% from INR 9.6 crores to INR 18 crores. This is due to growth in the revenue by 29% with the increase of total expenses of -- by 25%, also because of the reason the profit after tax increases in the quarterly by 110.6%, means from INR 6.6 crores to INR 13.9 crores. We have seen a positive growth in the volumes for the quarter, with total volumes begin 99,135 TEUs in third quarter, which has increased by 33.3% on quarter-on-quarter basis and decreased by 8% by year-on-year basis. The volumes at Mumbai CFS increased by 28% to 53,999 TEUs in quarter 3 from 42,091 TEUs in last quarter. The current year volumes include 29,587 TEUs from imports, 24,412 TEUs from exports. On a year-on-year basis, the volume at Mumbai CFS declined by 6.6% as compared to same quarter of last year. The volume at Vapi ICD in current quarter were 45,136 TEUs as compared to 32,258 TEUs, which is an increase of 40% on quarter-on-quarter basis. On a year-on-year basis, it is an increase by 33%. The Vapi volumes were mainly driven by the import volumes which is 30,620 TEUs and the exports were 14,514 TEUs for current quarter. Coming on the operations of private freight terminal side, the total trains handled for this quarter was 883 as compared to 653 last quarter, recording an increase by 35.2%. The main reason behind this is increased movement in the EXIM as well as the domestic containers at the ICD. With that I would like to open the floor for Q&A sessions.

[Operator Instructions] The first question is from the line of [ Vishal Doshi ] from Sunshine.

[Foreign Language]

Sorry to interrupt Mr. Doshi. Sir, there is a disturbance coming from your line. I would request you to mute your line while the management answers your question.

Hello.

Yes, Mr. Doshi, I got your first question, which was related to the MAT grade, which we will be going to avail from 2021, '22. From the bracket of 15 years, we are on the [ 5th year ] of Vapi terminal. So from last year onwards we will start taking the MAT benefit.

[Foreign Language] [indiscernible]

[Foreign Language]

[Foreign Language]

Yes, 45 acres still remains same with the company, after COVID [Foreign Language] There's no further improvement. Because COVID [Foreign Language]

[Foreign Language]

[Foreign Language] Because COVID [Foreign Language], there is no further discussions on the same thing.

Okay. Okay, sir. [Foreign Language]

Sir basically [Foreign Language] as you asked me totally correct. But [Foreign Language] so we've been on the positive side. But [Foreign Language] because 3, 4 sectors are working on it. Operation cost [Foreign Language]

Okay, sir. [Foreign Language]

[Foreign Language] They might come back in next 1 or 2 quarters.

Okay. Sir, last question. [Foreign Language]

[Foreign Language]

The next question is from the line of Prateek Kumar from Antique Stockbroking.

Congrats for great results. My first question on like CapEx. So how much we are looking to do CapEx in this year now? And what all we are doing CapEx on like in terms of rail purchase or what else. What would be the total CapEx for the year?

Here we are not having such CapEx for the mechanism of assets. There may be 200 trailers, which we have already been told in last quarter also. 200 trailers [Foreign Language] that will definitely have to take. [Foreign Language] So altogether I will see [ several ] impact of asset side, maybe hardly INR 40 crores to INR 50 crores for new trailers only. [Foreign Language] But we will have to be take certain BS VI trailer and high capability high tonnage [ only ] trailers, we will add in our fleet.

The total CapEx for the year would be like INR 50 crores? And last time, I think, INR 80 crores we said. Is there anything else you're spending on?

No, no, sir. The total INR 80 crores [Foreign Language] because altogether, we are planning for 200 trailers [Foreign Language] So that is not yet done. [Foreign Language] we will add them to our fleet.

And are we looking at any new terminals now because we are probably now going back to growth...

Maybe not looking for the same. If in near future, something will be coming in our mind because market opportunities [Foreign Language] So there are certain companies like Navkar [Foreign Language] they are also in the positive term because [Foreign Language] there is no thought on it [Foreign Language].

And sir, rake purchase, we have had like 2 rakes till now, while we are running...

Frankly speaking, 2 racks [Foreign Language] we have added 2 lead rakes additionally because [Foreign Language].

So out of these I mean, 4 rakes, we are running like in 880 trains, the number which -- I mean, that seems like a very high number. But this is done by...

In totality now, we have 12 rakes. [Foreign Language] and rest all is on lease.

So earlier, there were like 8 on lease. Now we have 10 on lease.

Yes, yes, yes. So right away, if I'll go and take the order on place, so [Foreign Language]

Okay. Okay. And sir, how is like in domestic segment, we've done very well again, INR 40 crores revenue. So that number is growing every quarter now. So how is the new customers? Which are the new customers we are working here? And are they expected to stay with us or they are like onetime opportunities?

No, no, sir. Prateek, there are very good customers, which we added in the domestic also. [Foreign Language] we are adding small, small parties [Foreign Language] so after next quarter I will give the names and all because [Foreign Language] in this quarter, where we can see [Foreign Language] and they will sustain because they got to know without any price hike from the Navkar, they are getting benefited with the on-time delivery. So our model is now more focusing on the same side. We'll give them the best solutions and best services, and that is -- you have seen in our numbers also.

Okay. And which region these players are? Generally, is this like Maharashtra hinterland? Or these are like far away parties, which we work with now for domestic operations?

Pardon?

Which region these customers are? Are these in Maharashtra hinterland? Or like these are like from various parts of country?

So major in Gujarat and Maharashtra hinterland also. Till now we are giving the onward delivery to Aurangabad also. We are getting delivered to Pune, Aurangabad, this side we are giving delivery till Baroda.

Okay. And these are like plain road movement and no late movement here...

Ultimately, they are relatively related to the export also. Somewhere they have export very less. Somewhere they have domestic operations in a very high content. But, yes, it's vice versa business. [Technical Difficulty] domestic in 20%, 25% plain domestic and 75% related to EXIM also.

No, I was asking, are these customers serviced by only road. There's no trains involved here, right?

Yes, yes, train is also involved.

Train is also involved.

Yes.

The next question is from the line of Deepak Poddar from Sapphire Capital.

Sir, I just wanted to understand, like, on the fixed EXIM import and export, the volume, how balanced is that and how going forward you're looking at in terms of balance between export and import? And now that your volume is back, by when you are seeing your pre-COVID kind of EBITDA margin by when you can be back on them?

Sir, I can tell you the same situation will remain for next 2 or 3 quarters. Then we'll definitely reach towards our near to post-COVID EBITDA margins. Because now there is an incremental cost for the manpower supply and diesel. So we are hoping that once the normal quarter will be started after 1 or 2 quarters, then we'll be reaching over there by original EBITDA level. But this is a good sign towards the revenue number, which is best till now from the Navkar history.

Yes. As the balance between exports and imports? Or how is that situation...

You voice is vocal actually.

[Operator Instructions]

Yes. So I was saying the situation, the balance between import and exports, so how is that situation panning out right now?

Pardon? I'm not getting you properly.

Just hold on. Hello? Now it's better?

Yes, definitely.

Yes, yes. So I just wanted to understand the balance between export and import. So how is that situation panning out?

So it will -- see our -- and all this quarter, our EXIM volume mix was 60-40. And past 2 quarters, it was 46-54 and first quarter of this year was almost in the range of 32-68. So now onwards, we are hoping that, that may be in the range of 40-60, 45-55. That will remain continue for next 2 or 3 quarters.

Okay. Okay. Okay. That's great. And then any kind of revenue outlook we have for the next year?

Pardon?

Any revenue outlook we have for FY '22? Next year, now we are closer to the end of this year.

So till third quarter, I think so, we will be -- by the way, I won't be in a position to tell you exact situation, so what will be going on this quarter, but we are definitely hoping that we'll be -- try to cross our last year's number.

No, sir. I was talking about FY '22, next year.

'22 is very early to say anything. I can tell you later, because the situations are -- now I can tell you, December month itself was the highest revenue month for us, correct? So there are 2 definite impact: one is the situation, which was regular in the regularlized for COVID; secondly, the addition in our customer base, correct? So after 2 or 3 quarters, we'll be definitely to -- same in the position, what those customers will be remain continuing for the longer period with me.

The next question is from the line of Rishikesh Oza from RoboCapital.

My first question is regarding our Vapi operations and Mumbai operations. So regarding our Mumbai operations, do we expect to do, again, the same 70,000 or 80,000 TEUs per quarter again, which is right now 50,000? And for Vapi operations, sir, what is the upside now in Vapi? Now that we have seen a lot of growth in Vapi, do we expect the current numbers to develop in FY '22?

So Vapi, I can say you, definitely, year-on-year, we are on the almost 100% plus. Last 3 years, if you see, we have more than -- last year, we have more than 100% this year also, we are more than 100%. So Vapi will be definitely in the growing side. Again, on CFS side, we won't have any particular outlook towards the 80,000, 90,000 TEUs. That's why we are using our facility for the domestic operations. Although that domestic operations is not profitable as compared to the EXIM volumes. But as we have a facility with us, so we are balancing that number with our EXIM as well as the domestic operations.

Okay. Sir, but...

This is Mumbai. Vapi, we are definitely in the -- you will see in this quarter also, Vapi number was 40% on the growth side versus last quarter and 33% in the growth side versus last year same quarter.

Okay. So will this growth -- can I assume, is it fair to assume that this growth rate will stay on for FY '22.

Yes. Till FY '22, I can say you. Our first and core target to reach by '22 more than 2 lakh containers at Vapi.

Okay. So at Vapi?

Yes.

Okay. And sir, can you please tell me the realizations that we had in Mumbai and Vapi?

So on the blended basis if you see, last quarter, our blended basis was 14,200-something in this quarter was 14,603.

The next question is from the line of Ankit Panchmatia from B&K Securities.

Sir, just to understand the structural move or what volume growth we are seeing at Vapi, is this because of the shift of traffic from road to rail and we are providing that service to the customers in a more cost-efficient way? And how are we kind of placed once DFC comes into picture and this whole shift accelerates? First question is that. And second question, sir, if -- maybe a basic question to ask, but the total volumes would sort of include the CFS movement as well as ICD movement as well. So is there any breakup which we can give that what would be a pure ICD movement? And what would be a CFS movement from our existing volumes? These are the 2 questions, which I have.

So I just wanted to give you a second question's answer. I have already been given the -- all numbers separately. I would like to take, again, I will give you the number. And in totality, Q3, we did 99,135 TEUs. Vapi -- I said, Vapi and Mumbai both. Out of which, Mumbai, we did 53,999 TEUs. And Vapi we did 45,136.

Sir, this 54,000 is completely through ICD or this is...

54,000 is completely from the CFS operations. I'm talking to you about the Bombay, correct? And Vapi ICD is having a 45,136 TEUs. And the first question, which you asked me that Vapi movement why the increment was tied, basically, our agenda behind started Vapi ICD was only that to giving the first more advantage over there in the South Gujarat as the entire movement and via Panvel City towards Bhiwandi. So those parties, whoever is working with me now, they are very much satisfied with our services. And that is the reason the more publicity from the entire market, we are getting market -- gaining market share on the quarter-on-quarter basis. And secondly, as we have a rail benefit, so that cost benefit somewhere directly pass on to the party. And third, as you told me the impact of DFCC, after DFCC definitely, it will be on a improvement side because DFCC cost model will be very lesser than the current model.

Sir, if you can provide gross debt as on date or maybe the latest gross debt which is available on our books?

Pardon me? What was that you said?

Gross debt, gross debt number.

Gross debt, all together it's in the range of INR 400 crores.

INR 400 crores?

Yes.

[Operator Instructions] The next question is from the line of Vikram Suryavanshi from PhilipCapital.

I have just one clarification on Vapi. Are we seeing reduction in empty movement for train operation at Vapi, how was it compared to last quarter?

There is definitely -- we are selling the improvement in the export volumes also. So the empty movement is slightly less than the last quarter. There is no such -- very much positive on the empty movements because last quarter, we have an EXIM mix of -- on blended basis, 46-54, which is this quarter, almost in the range of 40-60. So we are using those empties for the onward delivery.

Okay. And we have seen significant change in average realization in Vapi because of the change in mix as well as the change in mix between train and road or last late delivery. So currently, how much is the average realization for even in Vapi? And will that be a structural change going ahead? Or that will be more or less maintained going ahead?

Sir, basically, I can tell you, at Vapi, we are having a per TEU realization of INR 19,800, which was in last quarter, almost in the range of INR 20,000, correct? So this is basically because of the manpower, which we recruited in this quarter, correct? At Bombay, if you see, last quarter, my number towards the per TEU realization basis was INR 9,112, which was in this quarter was almost INR 10,500. So that blend can be changed ahead the situation on the quarter-on-quarter basis because sometimes if you will see the last quarter number, there were storage revenue was a little bit high side, correct, at Vapi. And then these distances there higher than Bombay. So that may be changed, but it will be in the similar end of -- hardly, there may be a change of 3% to 5%, plus or minus.

And how is the utilization...

Or for next 2, 3 quarters, at least.

Okay. And how is the utilization of this warehouse at Vapi? Are we seeing that getting effectively used post-COVID? Or what would be the outlook for value-added services at Vapi?

Today, my volume is 40% growing just because of those services only because we are giving them all the services, all-inclusive in our multi-model transportation work.

Okay. And last question from my side. Basically, for domestic operation, obviously, we are using as additional to increase our revenue and facility utilization. But post-COVID, we are also seeing that a lot of movement is shifting from road to rail because of the reliability of -- and what we have seen the disruption from road side. So domestic movement, structurally, can we see good opportunities going ahead, along with the EXIM trade and what kind of outlook we are looking from domestic in terms of growth as well as profitability improvement?

So basically, I can give you a straight answer of it. Last year, same quarter, that domestic number was INR 19 crores, which was last quarter is almost in the range of INR 37 crores and this quarter is INR 42 crores. So quarter-on-quarter as well as year-on-year, we are on the growing side of domestic operations. I can say there is a slightly less margin from the EXIM business volumes compared to EXIM business volumes from the domestic. So -- but as we told you the last 3, 4 quarters, always, we are [indiscernible] improving our domestic operations. Gradually, once the domestic operations will be in the range of INR 50 crores plus, then definitely, my cost will be remain -- fixed costs will be remaining the same and we profitably be in the higher side and we are having per target.

[Operator Instructions] The next question is from the line of Sachit from Param Capital.

Sorry I joined the call a bit later. Just wanted to check your revenues have gone up, but there has not been any increase in margin. So what explains that? And by when do you expect to get to this like 30% EBITDA margin that you used to report?

Basically, I had already been answered this question, but as you had this call later, so as we have these revenue is ultimately on the incremental side. If you go with the absolute number of profit is definitely in a higher side. But that EBITDA margin, which is getting down by 1.5% compared to the last quarter, due to 2 or 3 major reasons: one is the -- it was a Diwali quarter. That's why we'll have to be incentivized and giving the bonus to the counters. Secondly, the major diesel prices, and third one is the reason of manpower cost because post-COVID manpower is slightly -- positively slightly higher than the regular quarter of -- before COVID. So that may be taking place on the right side after 2 or 3 quarters -- more than 2 quarters, actually.

Okay. And this diesel price impact, how much that impacted your -- diesel price hike, how much that impacted your margins?

So if you see over and all, it may be in the range 0.5%, but it is really giving an impact to us.

Okay. Okay. And sorry, just...

That will be over the EBITDA level.

Okay. Okay. And lastly, what would be your current gross debt position? I think you mentioned this as well. And what would be your CapEx plan for FY '21, '22?

So today, my secured debt is almost in the range of INR 400 crores, including my CC.

Sorry, INR 400 crores?

INR 400 crores. And second thing, as you told me the future CapEx plan, we -- last quarter, we have given the plan of INR 80 crores for this year, not more than that.

Okay. And FY '22?

There is no such plans yet.

The next question is from the line of [ Darshan ], an Individual Investor.

Congrats for a very good result. Sir, do you have any plans for the dividend for this year?

Sir, this year really tough because last year, we were proposed, but due to the net which we have on our book. So we are not yet proposing that but I will -- you ask me, I will definitely put this question again to management and we will answer on next quarters.

As there are no further questions, I would now like to hand the conference over to Mr. Vikram Suryavanshi from PhillipCapital (India) Pvt. Ltd. for closing comments.

We thank the management of Navkar Corporation for giving us an opportunity to host the call and taking time out for interacting with the stakeholders. Thank you all for being on the call.

Thank you so much. Thank you Vikram. Thank you, Joshpal and thank you my all investors.

Yes. Thank you, sir.

Thank you so much.

Thank you, sir. On behalf of PhillipCapital (India) Pvt. Ltd., that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you so much.