Navkar Corporation Limited (NAVKARCORP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Navkar Corporation Limited Q1 FY '22 Earnings Conference Call hosted by PhillipCapital (India) Pvt. Ltd. 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 the guarantees of future performance and involve risks 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. Vikram Suryavanshi from PhillipCapital (India) Pvt. Ltd. Thank you, and over to you, Mr. Suryavanshi.

Thank you, Nirav. Good evening, 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, Finance; and Mr. Kunal, VP, Finance. Now I hand over call to Mr. Anish for opening comments, and then we will have a question-and-answer session. Over to you, sir.

Good afternoon, everyone. Thank you so much to PhillipCapital for giving us an opportunity to take the call. As we all are aware, coronavirus COVID-19 has affected the entire globe leading to its declaration as pandemic by World Health Organization beginning 2020. After a span of few years (sic) [ months ] the things are gradually improved and entered into the new normal with the positive outlook throughout the year FY 2021. We all were affected by this and due to have a second wave the impact was there in the quarter 2 in terms of increased cost of operations that we have observed that revenue was...

Sorry to interrupt you. Sir, your voice is coming a little muffled.

So revenue was at similar levels with a moderate increase of profitability. The elements of revenue coming during the quarter are as follows. In case of ICD and PFT, volume of import containers, imports containers declined by 23.36% strong 37,462 TEUs to 30,368 TEUs on Q-o-Q basis from 17,507 TEUs on Y-o-Y basis, the same is now up to 42.35% and the volume of export container handled increased by 12.39% from 17,345 TEUs to 19,797 TEUs on Q-o-Q basis. And from 9,702 TEUs on Y-o-Y basis the same has increased by 51%. In case of CFS PFT, volume of imports containers handled stands at 30,364 TEUs from 32,388 TEUs on Q-o-Q basis, which has declined by 26.25%. And from 19,340 TEUs Y-o-Y basis, the same is now up to 56.98%. And volume of export container handled declined by 12.86% from 28,728 TEUs to 25,455 TEUs on Q-o-Q basis. And from 12,500 TEUs on Y-o-Y basis, the same is now -- the same is up by now 50.89%. Number of trains handled increased by 324 in last quarter to 312 at CFS PFT and from 823 to 766 at ICD PFT, which is an overall decline by 6.4% on Q-o-Q basis. Comparing the same with Y-o-Y basis, the trains handled were 141 in CFS PFT and 374 in ICD PFT, which is overall raised by 52.23%. EXIM turnover total -- EXIM turnover declined from INR 168.28 crores to INR 163.01 crores Q-o-Q basis, means a decline by 3%. It is a rise by 47% from that same quarter of last year, INR 111.13 crores. Company is committed to the path of growth to expand the client and EXIM as well as the domestic turnover. In terms of revenue business, the quarter was best in the history of the company. There were challenges in the COVID era but the profile of the company was positive in terms of growth in the company's business volumes. Now I'll just comment to the profit figures for Quarter 1 FY 2021. Operating profit of current quarter stands at INR 70.16 crores in a comparison of INR 68.69 crores in precedence which you saw a mild increase of 2.1%. EBITDA margin of current quarter stand at INR 45.96 crores in a comparison to INR 40.83 crores [indiscernible] which shows a rise by 11.18%. The rise in EBITDA margins belongs to reasons as such. There's a big reason behind that is the Government of India Ministry of Railway issued a rate of -- rates circular of November 24 of 2018 through which it has reimbursed levy of terminal charges at INR 20 per ton on both inward and outward traffic. Pursuant to this circular, the company has booked this refund as other income amounting INR 3.29 crores. In last quarter, there was a booking of notional losses of INR 2.56 crores on a loss of sale of old vehicles. The same was noted in the Other Expenses. There was no such severe impact in the current quarter. The depreciation cost of company increased by INR 2.2 crores in the current quarter as compared to last one. The reason for the same was decline in the depreciation cost of the last quarter due to revision of the useful life of railway sidings at the location of ICD in line with that as CFS. Apart from this, the depreciation effects of our asset capitalization of purchase during last quarter also contributed to such rise. Profit before tax of current quarter at INR 21.75 crores in comparison to INR 14.82 crores on a Q-o-Q basis and net of INR 9.85 crores negative in Y-o-Y basis. Profit after tax of company stand at INR 12.59 crores in comparison to INR 8.15 crores on a Q-o-Q basis and at INR 12.76 negative crores on Y-o-Y basis. The tax expenses rose from INR 6.68 crores to INR 9.16 crores on a Q-o-Q basis. This includes the change of account of rise in income tax provision due to the rise in profit of INR 2.63 crores to INR 6.5 crores, out of which current tax is INR 3.88 crores and net credit realization of INR 2.63 crores. Now coming to the area of borrowings. I'd like to state that the borrowings from the bank and financial institutions had by the company declined by INR 18.14 crores from INR 502 crores at 31 March 2021 to INR 484.72 crores as on 30 June 2021. There was normal payment of installments without taking substantial any borrowing as we all did by the cash flow of the company. Apart from this, the company also made payment of advance EMI in respect of term loan by INR 10.67 crores. After [ mention ] of the above point, I would like to say that the company's performance in growth of revenue was at par and the impact of profit is likely due to the factors mentioned above. Due to the impact of second wave of COVID-19, there was a continuous sense of abnormal items of expenses in current quarter, as was in last one. Because of this, there is only a mild increase observed at the level of operating profit. Looking at this, company hopes that in upcoming periods the impact of growth will be visible both in revenue as well as the profit side as the situations end up gradually in complete normal phase. Now I would like to open the floor for the Q&A session.

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

Congrats for the good results, sir. Sir, have you started taking the MAT credit from this year onwards?

So that MAT credit we'll be utilizing from this year, but we will evaluate first this year's profit after second quarter. Then only we'll decide that EDI will be [indiscernible]. So we'll be going by the next 15-year cost benefit analysis. Then after we will decide that if we'll have to go for EDI margin or not.

Okay, sir. And my next question is about the expansion in any of the locations which you have mentioned, sir. So any progress you've made on that? Or any time line you have on that?

So basically on that I just wanted to tell you, it was a long-term strategic plan for the company. Now as we were working on the ICD Tumb from there we will be having a reach of around 200 to 250 kilometers range. At the same time, from Bombay CFS, we are more into the domestic operations towards the northern Maharashtra. Looking at that, and now we were having operations in the domestic market also. So we were making a strategy for next 3 years. We will be -- try to find some concrete solutions over there. So once it will be finalized, we'll definitely come to the market and as well as will be intimated to the exchanges.

Okay. And my last question is about the custom area notification where you mentioned last year there is an increase in custom area notified. So what could be the potential impact you are seeing or the opportunities you're seeing in that because of that.

So basically, notified area would have to be proposed to the customs, and with that I can say our operations towards Vapi you can see, where we have around 35% [indiscernible] year-on-year. So looking at that, we just take the additional notified area over there. So if we required any kind of a customs mandate or open mandate over there, that's why we did that. And once we'll be having potential business over there, then we'll definitely share to the market.

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

Sir, my first question is that when and how are we going to achieve EBITDA margins of around 30% plus?

So if you see in last quarter, we were having -- our EBITDA margins Q4 was 19.12%, which is now 21.3%. I can say that once the situation will get normalized, correct, because till now also there are certain restrictions to the movement of labors and movement of truck drivers and other things. So once that will be getting normalized, then after only we'll be in the situation to share to the market how we'll be getting that earlier -- the past margins on EBITDA, which was around 30%, 31%. So from here, if you'll ask me, a couple of quarters will take till the situations normalize. Then after, we'll definitely try to catch it up.

Okay. And also are we looking for the same kind of revenues for the full year? Can you share a revenue guidance for this year?

So basically, if I tell you, our -- this is the historical if you see our top line is INR 221 crores approximately. So historically it's not a problem. The last 3, 4 quarters if you see there is [indiscernible] Q1. Apart from that, second quarter, third quarter, fourth quarter and this year's first quarter, there is a consistency to maintain that kind of a level of top line. Expenses, definitely we are trying to [indiscernible] there. We will be getting more benefit on the operating [indiscernible] to reduce the operating cost side. Then after, I can say this will be either similar kind of margins for full year.

Okay. But revenues, we are on track, right?

Yes, yes, definitely.

Okay. And my last question is, sir, on the CapEx side, what will be the impact on debt? Any debt outlook regarding to the CapEx, how much we are infusing debt?

So basically, what we would like to do, as the past question was like the same, we were announcing that we were going to make new ICDs in 2 other locations, 2 different locations. One is in northern Maharashtra and second one we are planning near to Mundra Port. And the reason behind that is, what I know, that those ICDs or those CFTs with the multi-modal logistics park will be in a smaller level, not on the same level which we have Bombay and Vapi. So we'd like to be leveraging these assets also with those facilities. So future loan, I will give you the guidance, for next 2 years, I can say, if we start the projects in the next 6 months, then 2 years will be the moratorium, correct? And new debt will be introduced in next 2 years will be INR 200 crores. At the same time, in the next 2 years, I have a repayment of INR 225 crores. So in those 2 years, if we calculate it, there is no such impact on the additional borrowings, which will be on a similar level of the borrowing levels. And at the same time, I'll be having 2 other facilities with me to leveraging existing as well as the cross-selling business for all 4 facilities.

[Operator Instructions] The next question is from the line of [ Jatin from Alpha Capital ]

Congrats for a good set of numbers. Sir, if I was looking at your PPT, so volumes have gone down on Q-on-Q basis but our revenues have gone up. So is there some realization benefits? And how is the current quarter progressing on that front?

I can say EXIM volumes were getting slightly down comparative to last quarter. But at the same time, if you'll ask me, our domestic volumes, at Mumbai CFS we started business with different kind of commodities like fertilizer, iron steel. So in that, we were catering the northern Maharashtra as well as, as I told you, South Gujarat versus the [ neck ] region of the Gujarat. With those, last quarter we were having a domestic volume in turnover capacity was around INR 41 crores, which in this quarter is almost INR 49.5 crores. So there is slightly dip in the EXIM volumes, but at the same time our domestic operations were getting up almost in the range of 50% to 70%.

And sir, any guidance on the current quarter? How are things going on, both in terms of volumes as well as realizations?

So basically, if I give you the guidelines, we -- as we all know, after DPD, all the CFS businesses were vanished, correct? So what we did with our facilities, to run our business, we just come up with the model of domestic business also. In that, we're having now contract with ArcelorMittal, JSW. Now we have a long-term contract with Smartchem, Deepak Fertilizers. So our core focus for PFS, if you ask me, on the domestic side and the business will be in a growing side at the domestic side. And ICD, I can say it will be in a similar line for a couple of quarters, then it will be in a jump side. And the EXIM volumes if I'll ask -- if you see the CFS side, it will remain same. There's no such impact -- positive impact on the ICD EXIM volumes. But yes, I can say domestic volume will be in a positive side for each and every quarter from here onwards.

Sure, sir. And sir, on tax rate, we are paying more than 40 -- we're reporting more than 40%, 45% for last 2 quarters. So any color on that front?

So it's a deferred tax impact basically. And yet now we are not taking the MAT credit as well as EDI benefit. For this year, when we evaluate for the next 15 years comparisons between the assessment, then after we will decide will we go with the EDI or will we go with the MAT EXIM.

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

I have one question on your realizations in Vapi -- sorry, Panvel operations that seems to have improved from past 3 quarters and make up around 10,000, 11,000 to over 12,000. What has contributed to this, because that has also helped the overall top line besides domestic revenue?

Participants, please stay connected. Line for the management got dropped. Participants, please stay connected while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Prateek, if I may request you to repeat your question once again for the management.

Sir, I was asking that the realizations in this quarter at the Mumbai PFS has increased. What are the reasons for the same?

So there were 2 major reasons. There the imports were higher than the last quarter comparative to all total numbers, one. And secondly, in this quarter, my domestic volumes expense will suffice for total movement of the [ rails ] That is the reason my operating cost towards the CFS for the EXIM volume is getting down. If you will compare my domestic volumes, last quarter it was INR 10.60 crores, which is -- versus this quarter is INR 13.8 crores.

So how could that have...?

So basically what happens, my operating cost towards the EXIM volumes, which is getting down, that's why my realizations per TEU, which is getting high. Because in domestic -- if 1 leg of operations I did for domestic and 1 leg is for EXIM, that cost is getting half of the total EXIM volumes.

Okay. I have one other question. On your CapEx, so last year we did like INR 120-odd crores CapEx. So with this new leg of expansion of the MSO, so what is the annual CapEx we should expect for '22, '23?

So basically, the new CapEx which we are looking for, this is very early stage to say because now first we'll just take the approval from the Board to leveraging our existing facilities and cross-sell business, which we are going to the northern Maharashtra as well as the Mundra Port, which is not we are getting completely with us because we don't have a facility over there. So we're just finding the facilities in those regions where will be the railway available, which will be a small facility like 30 to 40 acres of land. Once that will be -- that concrete programming will be done then that we will definitely come to market. And secondly, the CapEx for next 2 to 3 years, which we propose for 3 years, will be in the range of INR 300 crores for making those facility.

So when that detail would be available?

Once our land, which we're finding out, once it will be getting down then after definitely we'll come to the market with the entire proposal what we are looking for. Prateek, I just wanted to add over here. For next 2 years my repayment out of INR 477 crores, around INR 250 crores is as a principal in next 2 years. So what we are thinking, if I will start this project from December onwards or this year, current year, then for 2 years I will be having a moratorium available with me, correct? So -- and the interest will be the part of my project cost. So there is no extra burden to my balance sheet for next 2 years, definitely. After 2 years, once my loans will be getting down by INR 200 crores, INR 250 crores, the new loan, if I'll be taking a project of INR 300 crores all together, out of that, if my share is 25%, the new loan will be INR 225 crores for the next 10 years. So the extra burden to the company as far as cash flow concerns will not be the problem. Because from third year onwards, 2023, '24, I have only repayment of INR 90 crores including interest, which is now INR 170 crores including interest. So we are making the plan in accordance to my cash flow's arrangement.

[Operator Instructions] Next question is from the line of Vikram Suryavanshi.

Yes, sir. Sir, basically, can you highlight about plan to add the number of trains because now there is a 5% haulage discount continued for this year also. So are we going to add a number of trains? And second thing, the new terminal what we are looking at Mundra Port, will it be on our own land outside by port because port also has their [indiscernible] land available on a lease basis. So I just want to clarify, will it be our own land or it will be on lease land?

So Vikram, I just wanted to answer. If you see my railway till last year was in the range of 700 to 800 quarterly, which is now 1,000 plus, which will remain continue. And for that we are finding the solutions. Now we are having a [ lease range ] around 12. So as on past calls also I told that if there is a requirement and need, then we will be definitely coming with 3 or 4 trains more, which will be as a part of our CapEx. Secondly, as you told me, we are definitely exploring so many options to cater those market. The reason behind that is because in the Mundra region, if you see past 3, 4 years, after DPD, JNPT business volumes were getting sharply down. Like JNPT volumes were on -- remained same level of 4.5 million to 5 million TEUs versus if you'll see 4 years back, Mundra Port volumes was around 2.5 million, which is now 6 million TEUs. So considering that fact that now on cargo will be going there, so we were finding the area locations near Mundra in the 100-kilometer range. So we would like to cater the entire [indiscernible] Mundra, Hazira ports, point number one. Secondly, in the northern Maharashtra, we were looking at the area of Bhusawal, Chalisgaon, then MP border, where our cargo is going there right from last 1.5 years. So we had seen that movement over there in our domestic operations as well as our agri volumes. Like I'll just give you the one commodity example. In northern Maharashtra, if you see the pulses, so processing pulses over there in that entire region and at the same time, if you see the Mundra Port, near there are tiles hub, there are the marble hub. So we would like to capture these markets. And secondly, as you told me what we are looking for, if we'll be getting land over there on a lease basis, on ownership also, we'll try to get -- find the solutions. The comparison should be like that if the lease amount will be more than high on a year-on basis, then we'll be definitely going for the owning model. And in our past experience, I can tell you, lease model has always been a higher side of the cost. Rather then we will be buying the land over there. Definitely those ICDs or the those PFT or those multimodal logistic parks will be on a smaller level comparative to Bombay or Vapi ICD. With those new locations, we would like to be leveraging current properties for current CFS ICDs as well as the cross-selling market from those markets.

Okay. Okay. So what I understood from your -- what you're saying that Mundra Port CFS is completely new market development?

No, not new. Mundra side, we will be making ICDs, not PFS at all.

Okay. It will be like -- okay ICD, which will be connected...

ICD, it will be in a range of 100 kilometers from the Mundra as well as Hazira or Pipavav ports. All 3 ports we would like to be catering over there from -- which will be our middle locations. And we are exploring the market study, which will be the good place. That stage is going on.

Okay. Understood. Understood. And Vapi predominately will keep coming to the JNPT one?

Yes. Yes.

Understood. Okay. And how is the situation at JNPT port. Like currently, we are doing a run rate of 56,000 per quarter at JNPT. Do you see that now picking up with the economy picking up and second wave is almost now normalizing? And how is the situation for ground rent and pricing at JNPT now?

So basically, if you ask me, on the CFS side, there is no such movement or there in the port also. Because after DPD, every quarter, we have seen gradually down, correct? That's why we would like to be leveraging our specialties with the domestic options and domestic solutions. Now I just wanted to add over here, we are more focusing on the other commodities rather than EXIM. We are focusing on the fertilizer, cement, iron steel, PTA, polymers, oil tanks. These kind of commodities we would like to be focused more, because in this entire region -- last week, we were having a visit from Nayara, which was earlier Essar Oil. They would also like to be tied up with me for 5 trains in a month. So these kind of commodities we would like to be looking for, for the domestic consumption as well as. EXIM is definitely our core business earlier. But nowadays, if you'll see after DPD, our core focus is shifted towards the domestic because we were having the 3 facilities all in Mumbai. If I would like to be levering those facilities, then I will have to change our methodology for the business. This is the core idea for the company.

Okay. And can you give, last question from my side, just more clarity on the kind of domestic business we are handling from Vapi. Because as you said there most of the fertilizer and other cargoes you are handling from JNPT.

No, no. No, fertilizer, we are handling from here Mumbai. Smartchem's cargo is coming into Mumbai where we will -- we'll just stuff the domestic containers and share wherever they would like to be sale. At the same time, we are doing operations for Arcelor from their Dahod plant to Mumbai CFS. And from here wherever they would like to be, like Bushan Steel, Uttam Galva. We will be doing the onward delivery for them. These kind of domestic operations we are doing. At the same time, for EXIM, for domestic [indiscernible] there are certain commodities, like I told you, the pulses, for that we are going to the -- that northern Maharashtra market. So that entire goods, which was processing over there, have come to the Mumbai. So we took [indiscernible] or the other coils from here or other materials from here to the northern Maharashtra and then from there we are taking the pulses. These kinds of domestic arrangements we were looking for majorly.

Okay. And just a last bookkeeping question. What is the total gross debt and cash balance on the balance sheet now?

Cash balance was around INR 21 crores.

And total debt?

Total debt is 400 and -- wait, I'll just give you the exact number to you. INR 484 crores, including [indiscernible]

400 and...?

...84 crores.

...84 crores. That was very helpful, sir.

Thank you so much, sir.

[Operator Instructions]. As there are no further questions, I will now hand the conference to Mr. Vikram Suryavanshi 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, sir.

Thank you so much, sir.

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