Navkar Corporation Limited (NAVKARCORP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the company update on Board meeting held on 16th August 2022 Conference Call hosted by PhillipCapital India 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 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] Please note that this conference is being recorded. I now hand the conference over to Mr. Vikram Suryavanshi from PhillipCapital India Private Limited. Thank you, and over to you, sir.

Thank you, Renu. Good morning, and very warm welcome to everyone. Thank you for being on the call of Navkar Corporation Limited for an event update. From the management, we are happy to have with us here today Mr. Anish Maheshwari, Chief Financial Officer; Mr. [ Nitin Sharma ], General Manager, Finance; and Mr. [ Kunal ]. Before we start with the question and answer about the development, we'll have opening comments from the management. Now I hand over the call to Mr. Anish Maheshwari, Chief Financial Officer of Navkar Corporation Limited. Over to you, sir.

Thank you so much, Vikram, and thank you, everyone, to joining us for the [indiscernible] the deal which we did yesterday. So I just wanted to be brief on the detail of transaction first. The company has decided to [indiscernible] business undertaking situated at the Tumb, Vapi at the [ composite B ], value is around INR 835 crores. And in addition to that, company received around INR 50 crores to INR 60 crores attributable to net receivables outstanding plus the inventory value add on the closing date. So in totality, it will be around INR 895 crores. [indiscernible] the amount company handling our ownership of the company of following assets. We are getting land at ICD building [indiscernible] some of around 8 weeks we are newer to them [indiscernible] system. Certain assets, which we are not transferring them, which is out of this transaction with around [indiscernible], we are not having investment CD license and other plant machinery which is not contributed to the business undertaking. The company also undergoing in the arrangement with the ban for the service of transportation to them next 8 months, 4 months plus 4 months, 4 months were leaving them 100% services with a link. And after the 4 months, they will be gradually put their own transport fee, and we'll gradually shift our fleet to other plant. After getting that above consideration, the company is going to repay the debt of around INR 200 crores and sending the book the premium time in the order of paying 100% debt free. After that, with the EBITDA of this year less this consideration which will be getting from the speed, until we pay the entire debt, then INR 40 crores will be utilizing for our new project and INR 55 crores approximately will be [indiscernible] , which has already been placed on us and loan was already which was not drawn down. So we'll pay there. Then rest of the money, we are planning to make that further attribution to our valuable shareholders. I just wanted to give you the impact of deal over and on the financials. So our core objective behind the deal is monetizing our business undertaking. Out of our total 5 units. So we have 3 units [indiscernible] upcoming. And when we just give the undertaking for our Vapi's facility. With net proceeds, after paying the debt, company will target further expansion to create shareholder value and towards attribution [indiscernible] more the expansion, which is pending for INR 40 crores. And again, I told that rate, which is about INR 55 crores. After the sale of this undertaking Tumb who is with considerable size of business in form of assets based and Mumbai ICD and [indiscernible] . If you consider the profitability of 2023 net profit of companies are about to rise only the comparison to last year. After this transaction, the company businesses will be positively demonstrated by the return on the equity and better return on the capital acquired, reduce of net loss from the books and the intent amount of the net profits, which we quite positive in the financial terms. And company has nothing to do in this profitability in the coming years, but an opportunity to become debt free so that company can look for the better opportunities. The EBITDA of company in 2023 was expected around INR 200 crores, including our -- with the EBITDA which was reduced for this year around INR 218 crores, out of which around INR 51 crores for our EBITDA will be getting less for half of the quarter -- half of the year of this year. Then we'll be getting total amount of INR 35 crores, plus INR 60 crores, which will be available value from the deal. And on that, in totality, that amount is around INR 1,097 crores. After reading the debt, the company will be having INR 400 crores plus cash. And then out of that INR 400 crores, company will be having INR 100 crore approximately for the further expansion [indiscernible] and railway tracks. And taking less of tax and the financial entity for this year on the net cash for a company is remaining around INR 250 crores after the hit is estimated some estimations, which we have made for the -- for our valuable shareholders. And out of that INR 250 crores will be utilizing for the expansion opportunity and we are also thinking about the attrition values for the shareholders. This is all from my side. And I can say we are definitely in some business over there at a EBITDA level -- on operating level at Vapi but at the same time, our Morbi will be generating returns in the upcoming years. One more thing which I just wanted to add for this year, not in EBITDA level, maybe as some of the EBITDA for our transportation sales which will be providing to the business undertaking. So rental numbers will be the remain same and PAT will be the improvement side. Thank you so much from my side, now floor open for question and answer.

[Operator Instructions] The first question comes from the line of [indiscernible].

Yes. This is regarding -- just want to know being that this is a very nice facility, very close proximity to national highway, railway track, you have done of this fantastic facility, why this 47% of this revenue-generating facility you wanted to sell?

So I appreciate your question, but I just wanted to be -- give you some sense and light on it. Since last 3, 4 years, we are trying to monetize that asset at Mumbai. But somehow, value [ propositions ] were not in our line with our expectations. We tried our best for the Mumbai location. But further, when we get this opportunity which evaluate the profits will remain in the improvement side after the repaying the debt. Like yearly, it will grow with my interest cost is around INR 60 crores. And [ credential ] facility from next year onwards, the depreciation will be INR 37 crores. So in totality, INR 97 crores will be adding directly to my profit if I'd be selling this facility and company will be remained 100% debt free. And further that company will be adding INR 250 crores as a cash after doing all the adjustments of repayment of debt and the current loans which will be for upcoming expansion. So we evaluate all in all for our Bombay, Morbi and Vapi facility -- then after a desire will be the clear begin repayment to make the company debt-free and value was also good for our perspective.

So do you think that these 2 facilities of Mumbai will add top line or just saving of this interest cost and this will be sufficient for running the company?

Clearly, practically, I can just want it to be a little bit more here in Vapi, the ICD business we have already been given to the business undertaking. Like We are only giving the EXIM volumes over there. Domestic business, which was in the fringe you see large quarter extent also, our domestic business was almost 46% right side. So we are more focusing on the domestic over there in this region. So [indiscernible] business, it was earlier with us, which is attributing almost INR 120 crores revenue from our Vapi ICD, which will remain the same to the company. So Bombay, which is an online offline, if you see, is around INR 400 crores plus INR 120 crores, so INR 500 crores top line would be almost EBITDA of 22% was INR 110 crores. Now you will see INR 97 crores directly added to the debt itself after doing this transaction. So this was only the core idea. And gradually, our more will be coming in replacing out their facilities, Morbi the past year, which will start of first half -- second half, how much will be starting only. Then next year be the full year for the Morbi. So I can say you down the line 2 years -- 2 or 3 years, Morbi facility will be adding more operating profit over there. And at the same time, if you see last year PAT level, company as having EBITDA of INR 77 crores in 2020 versus PAT was INR 45 crores. '21 was INR 32 crores versus PAT was INR 15 crores, this was a COVID year. '22 the EBITDA was INR 82 crores [indiscernible] of INR 860 crores and PAT INR 67 crores. Although in '23, you could see with the same numbers, our top line will be I will take my Q1 numbers, my top line will be in the line of around INR 800 crores, INR 770 crores. After doing this transition in second half, till then my PAT will be in range of INR 112 crores by setting of interest and [indiscernible] . So first, I can really say it was really a hard decision for company, too. But looking at the value preposition and looking at the numbers and debt side, we were able to do that monetization of land step as today or after a year. So we just take the pricing decisions and is because Morbi will be replacing that facility in 6 or 7 months. And we got this opportunity [indiscernible].

Can I ask 1 more question?

Yes.

Do you have any plan to redistribute the profit which you are -- after repaying debt and everything, to shareholders?

So basically, if you see in my opening comments also, we are already told you that, we will be thinking on the adding monetary value to shareholders. There are some [indiscernible] management will be definitely come to the market once we'll be finalized.

Next question comes from the line of Venkat, an individual investor.

Congratulations on this transaction. So I just have two questions. So on the first question, what I'm looking to ask is like you have taken a transaction decision of selling this unit. But as per the press release statement from the Adani, what I could read is like this is a kind of a game changer. So this is going to add a lot of value and there is an additional INR 125 crores of land bank which is being used for expansions and everything. So what I could see from the press release of Adani is that so in next 2 or 3 years, this particular portion is going to create a more top line value or more sales or more expansion is going to happen here. But why do you company taken a decision to sell this particular unit? Because when I see the future is going to be good because of reducing the debt, why you want to go ahead with this since because why I'm asking this means, during the last transcript on the Q1, what I could read from the transcript business company stated that with the upcoming cash flow which is being generated from Mumbai or the Gujarat all other units, so the company will be reducing the debt. But the statement now it looks like contradict. so that's what I want to ask this question -- first question.

So I give you answer on your question first. Will be even the reason we enter raising their own good if you compare with the Adani's business module and if you will compare with Adani's asset, and we are very small in front of them. And we are also having some limitations to our business, and we are also having some limitations to taking the debt from the market. But Adani as a group [indiscernible] , they have their own railway track. This is a big set up for them. And they are also coming up with the warehousing and all that and all those models. So it will all towards the Adani, there will be definitely is from them because they are coming up with the they are doing so much acquisitions they are doing for regulations also. So for them, definitely that [indiscernible] adding more. I will ask for [indiscernible] . As I told you, it was really a hard distance for us. But at the same time, which we just evaluate that, if we have taken the limitations towards the warehousing or further expansion with the debt, then there may be some limitations for us. So with that thought and one thing which is to for the company I just want to tell you, the deal was in mid since so many months, I can say 2 or 3 months back, we had a start when there were certain things which was not concluded. There was a [indiscernible] there were some [indiscernible] . There were some [ aggregating ] risks. There were some operational things. It's not continue few days back. So then after we just statement opportunity to take this call. Otherwise, if you'll ask me for Navkar after repayment of that and looking further for the Morbi operations, and there is no -- and that deal has wanted to be add over here, we have limitations of only 100 kilometers within the range of ICD, we can do business, which we agree with them. Then after, if there is an opportunity to further expansions for our domestic operations for our business operations, we are open to do. Number two, if you'll see our Morbi as Vapi we made on a highway and on the peak side, at that time, we went around for development of that ICD but Morbi, which we made in INR 200 crores. So our future expansion plan will be like that only rather than we are making big facilities. We are also expanding on a manner -- in a gradual manner, with the cash profits on the transition by the company. So somebody that we can be going more with more debt and we gradually expand. This was the only theme behind it.

Okay. Next question is, how did the valuation of [indiscernible] you said, right, this valuation has been right? Any external vendor who has evaluated this particular valuation because...

So basically, it was basically mutually discussed on a round of 3 or 4x. Then negotiation happen with them. And then after we evaluate that, the number will be at all a negotiation part between them and us. So we were having initially the value which was very high, then they will come to us and then it will. So it was mutually decided by [indiscernible].

Okay. But whatever the company has made an investment over here, it's not a loss. We are selling it with the profit, am I right?

Yes. Yes, sir.

Okay. That's right. Okay. And my next question is are you going to set up any new ICDs? you said we are under expansion plan apart from Morbi. Are we to create any new ICDs with that because you said it's a debt. So you got a INR 250 crore of cash. So what will be the [indiscernible] because we want to do it as soon as possible because it's -- we are not having any sort of cash deficiencies since you have amount of about INR 250 crores. So what is the company's focus? So how it is going to execute?

I will just give a light on that. Our Bombay facility with the domestic operations [indiscernible] Morbi will be coming in third quarter as I told on the last call itself. Then after domestic operations for our sole domestic [indiscernible] ICD which will be with us. Then our more and core focus to complete the ICD at Morbi as soon as possible and start operations, which will be a food-focused. Secondly, the fleet, which was deployed at the Vapi after 3 months, when they will be gradually that shape of the business are getting, then we'll be thinking on those fleet, how would we utilize for Morbi as well as the other [ product ] transportation business. And further cash which we'll be having with the company on that, we'll definitely think some more expansion [indiscernible]. Our core target today, if you ask me, it will be the completing Morbi as soon as possible, start operation over there and synergize all our assets because after this image company will be having more -- in totality, we have total 5 units out of that, we have been selling only 1 business undertaking. All the remaining companies should definitely think about it. And near coming future is still seeing well the opportunity how will we made another ICD or further expansion will coming to the market again.

Okay. My last question is about [indiscernible] . So we could see some 8.9 percentage of the [indiscernible]. So is it safe to assume that post this transaction of this [indiscernible] will be removed?

Yes, sir. After doing this debt, definitely will be removed.

Next question comes from the line of [ Nika Gopani ] from Capital Global.

Yes. Sir, I wanted to just get some more clarity on the numbers that you were discussing. So firstly, in terms of the proceeds for the transaction, apart from the amount that is mentioned, there is also going to be cash that is going to be received for the working capital, right? So if you can just help again, maybe iterate what is the exact cash that will come on the balance sheet? How much debt are you repaying? And then what is the net cash that will remain? That is the first question.

Again. So after adjustment of all our Vapi business, our cash proceeds for this year, which will be contributing PBT finance cost depreciation and the profit which we'll be getting from this business undertaking after selling this unit. So it will be almost in the range of INR 200 crores. Breakup of that, if you will ask me, around INR 180 will be generating on an EBITDA level because half year has already been gone. So Vapi unit in September will be [indiscernible] with us. So in totality, I'll be adding INR 180 crores as EBITDA plus INR 20 crores, INR 20, INR 20-odd crores after adjusting the tax value of those. And then I will be getting in totality INR 835 crores from the deal and INR 60 crores, which we realize, this is just an estimated number. So in deal, net receivables plus our inventory on the closing date, like we have a [indiscernible] containers, on that, whatever may be billing should be done, that they will be paying to us. So that number will be made of INR 50 crores to INR 60 crores. So altogether, our number at the year-end will be around INR 1,090 crores to INR 1,100 crores, out of which we are going to pay INR 700 crores approximately debt. So company will remain around INR 400 crores in the company, out of which INR 100 further expansion, which is pending from the company side like INR 40 crores for the Morbi expansion, Morbi running around INR 150 crores out of this INR 110 crores had already been quoted. INR 20 crores is more there. INR 57 crores -- INR 55 crores to INR 57 crores will have to pay for railway tracks which has already been ordered since last 2 or 3 months. And then INR 24 crores will be finance cost we had less this for the financial year. And then total tax will be main of around INR 23 crores to INR 34 crores. Net cash after a year will be INR 250 crores approximately. This is the number which we have around -- this is all estimated numbers and based on the past quarter, Q1, which [indiscernible].

Understood. So basically, at the end of the year, you will have net cash of about INR 250 crores is what you are currently guiding after prepaying all the liabilities. The second question is simply if you want to understand your numbers for FY '24, when you will not have any contribution from the Vapi asset what will be the full year revenue for the current business that you will have -- the EBITDA for the current business that you will have? And what is the potential that will get added by the Morbi asset? If you could explain that.

Basically, if I'm assuming that the current numbers which we have for the CFS and ICD business, if I'd be getting less at ICD, I can give you the slight highlights on that. And I'll be taking only 5% growth, then our top line at Mumbai will be plus INR 400 crores. And business where we have a domestic business for the Vapi, if I'll be taking 5% only there, then that number will become INR 130 crores. So INR 400 crores plus INR 130 crores, it's INR 530 crores plus Morbi, we are adding INR 100 crores for next year, which is very, very comparably achievable number. So the top line will be a mainly of INR 630 crores to INR 650 crores. This is our assumptions on which we are progressively working on.

Okay. And for the Mumbai business, plus the business that you would have at Vapi, which is the domestic business, what kind of EBITDA margin would you have on a steady state basis in FY '24?

If you'll ask me, if only having a top line of INR 650 crores, then EBITDA will remain in the range of I'll just give you the -- approximately 24% to 25%.

Okay. Okay. So Morbi will basically be a positive margin to the current, let's say, the reported margins, if I understand in the previous quarter was about 22%. So this -- with the addition Morbi...

Net debt will be getting 0 now. So without that company, and it will be on a cash, then you see getting vendor payments easily and where it will be a 2% to 3% additional discounts. So that we are targeting.

Understood. Okay, okay. So that will influence the margin. And just one clarification here. So the business either at Vapi or at Mumbai, the operating margins of both those businesses are very similar to each other, is that a current assumption to make?

We can say that.

Next question comes from the line of Rishikesh from RoboCapital.

Sir, my first question is what was the ad contribution of Vapi?

Pardon?

What is the contribution of Vapi in the profit after taxes for FY '22?

For FY '22, if you'll ask me, Vapi half year if I'll be [indiscernible] that, in totality, it was almost in the range of INR 95 crores.

Okay. So INR 95 crores profit...

On EBITDA level.

On an EBITDA level, it was INR 95 crores.

Yes

Okay. So almost like half.

Yes. So [indiscernible] year that for this year, out of INR 199 crore which we have [indiscernible] INR 54 crores first quarter EBITDA out of which [indiscernible]. It's INR 110 crores to INR 115 crores EBITDA will remain continued with me. Then after the transport service, which will be provided by the company to the business undertaking which we are going to sell, from there we'll be earning around INR 15 crores EBITDA over the period of time. So it will add around INR 135 crores in total to EBITDA.

Okay. But basically, Vapi numbers will be reported for FY '23. And from FY '24 onwards, it won't be reported, if I'm not wrong.

So it will not at all be -- so separately, we are not going to be report that number. But if you see, on a revenue like CFS, ICD and domestic we have separately given. So now what happens CFS, domestic and the Morbi number will be continued from next year. And domestic there, [indiscernible], which will be remain continuing with us.

Okay. Okay. And so whatever profitability or the EBITDA numbers contributed by Vapi, the same kind of numbers can be done by Morbi in next 2 to 3 years, if I'm not wrong.

Basically, what I told you on a call itself, our PAT will be an improvement [indiscernible] now onwards because our interest cost will be getting 0 and the [ addition ] from next year onwards there may be impact of around INR 35 crores to INR 37 crores for the Vapi unit. So almost INR 97 crores which we are assuming after the period of time of our assessment will be added to our PAT itself, [ PBT ].

Okay. Okay. Got it. So I think you said FY '22 would be around INR 110 crores, something of that, I think.

Yes. That is what I mentioned.

Next question comes from the line of [ Yugesh Mittal ], an individual investor.

So I wanted to ask about, why the company has decided to sell a business which is contributing more than -- or equivalent to 50% of the EBITDA contribution. This business has been run for so long. It was the company not able to serve the debt or something, what compulsion had been? And because in the earlier [indiscernible] and the answer was they of INR 95 crore EBITDA contributed by this business. And if we divide INR 835 crores of the proceeds divided by this. It's about only 8.7x multiple of the EBITDA. It seems to be pretty low. -- and in the kind of business where the land value should have been pretty high as well. So it seems the valuation has been very much depressed. Sales plus combined with having you selling the business, which is your major business? And also, given your history of no dividend paying, please explain how the company is visioning in next few years plus this 1 transaction, how you are trying to [indiscernible] shareholders, please.

So basically, I just wanted to be as your question and point number when you asked why the company is going to sell I had already been answered it, but again, I just wanted to repeat it. We just wanted to be monetize our -- of the facilities since last 3 or 4 years. Before COVID itself, we were having a land bank over there in Mumbai. Out of that, also, we tried a lot, but there was a price which was decided by company or not at par. Secondly, which you asked is around 8 plus the multiple which we got. The leverage in the last 3, 4 years, also come we made profits over there. And secondly, there were -- if you ask me there was a pressure of that, there was [indiscernible] of that company was having a sufficient cash to repay the debt. But at the same time, company was not midlife their own wish, their own expansion due to the high debt of the company. So if once the company will debt free then the [indiscernible] will be open for the company. They can be more -- grow more aggressively with the debt-free company, with the cash surplus with further expansion also. So point I can address with that philosophy. Once, any of the assets which we would like to be monetized for our future expansions. So we grabbed the opportunity and we looked at it. And secondly, for future expansions, once the company will have a cash company will do more energetic decisions to take for further expansion [indiscernible] business, for the warehousing business, for the transportation any which way. So this was our [indiscernible] to take care of it. First, we'll be debt-free. Secondly, we'll move gradually and steadily for our expansion plan. It was only philosophy behind it.

Okay. So what is the value of the land of the Vapi thing which is being -- which is being transferred to ICD -- current value of the land approximate...

Current value if you'll ask me, it's a circle, it is very less over there. But we will have to take as a whole business undertaking. So whole business undertaking, we just switch [indiscernible] land is not I will take the circle at over there, which will be hardly INR 30 lakh per acre.

And there will be land and the value of FX plus the EBITDA, which is being generated. Somehow, the valuation seems to be a bit low.

I would tell you, value of land will always be appreciable. That's all the assets which we had made over there is appreciable.

So in that case, but the replacement costs in the current deals will be -- I can understand here. So -- so all right, but still not answerable. -- means still not very clear to me one single asset out of multiple assets of you contributing more than 50% of the EBITDA being sold one fine day, so it becomes very much difficult for me to digest.

As I told you that was really a hard thing for us also, but looking at the value depreciation looking at the debt free company, we definitely appreciate the company and nowadays, if you will see last 2 or 3 years when the COVID situations were coming to the picture. And in that case, the [indiscernible] for company after repaying the debt will be in a more positive side or that will positive side, our ROC, ROE, EPS will be in the positive side. I can understand that...

Yes, but that was very much doable with the kind of cash flow we were generating from the operations.

What I wanted to tell you is [indiscernible] 2 years, you will see we are the operating margins which we generated by the company on [indiscernible] basis. Like we were earning around INR 200 crores on EBITDA level, we were having a repayment of INR 190 crores. So it's a [indiscernible] basis. So there was no problem with the company in struggle where the company was not able to repay the debt. But I can personally tell you that, for a company being with 100% debt free will be made more value for the shareholders. Because they make the liquidity for that company will definitely think about the shareholders, which had already been conveyed to you in the past call also. And secondly, from here onwards expansion, which will be in line of companies with the limitations of the cash, with the limitations -- because for further -- 1 or 2 years we are not looking at a cash debt for the company till the time our Morbi and the railway will be up and running. This is our strategy is paying out. [indiscernible] definitely think about it and we'll be more and more ICD or the other business [indiscernible].

Next question comes from the line of Nirmal Shah from Seraphic Management.

Just one clarification, sir. You mentioned that in Vapi, there is that a range of 100 kilometers within which you can't take the business, right? So that is applicable even for domestic part?

No, no, no, sir. For the business undertaking, the business which we had been given to them [indiscernible], which will -- we have a noncompete agreement with them in the range of 100 kilometers. That's it.

Seraphic Management and Advisory Private.

Okay. No. So my question was you -- they will not touch your business within the 100 kilometers radius? Are you trying to say that?

I'm not going to -- we are not going to open any other ICD within 100 kilometers. Above 100-kilometer I can start another ICD or any of [indiscernible].

Okay. And sir, your -- I mean for next 2 years, you think that you will continue to remain debt-free. Beyond that, again, as a company, you have a philosophy of taking more debt from the company back.

Basically, today, if you will ask me, we are having a philosophy of taking that as no, big no because if our cash flow will allow me to make further expansion plan, then we'll be grow for the same, correct? Is there any further requirement? And is there any opportunity which will be lucrative will be seen, but evaluating that facility because of what level today we -- once the company will become debt-free, then cash profits will be supplied on purpose in 2 years, if I like to make any kind of ICD, which is INR 100 crores of [ the pad ]. After giving dividend also, we'll be having a surplus cash with me around INR 150 crores, INR 160-odd crores. So with that, I can make another ICD. That is the [indiscernible] purpose.

Right. Just a very -- some sort of a philosophy I wanted to understand of the promoters. Like you mentioned that for the last 3, 4 years, you were trying to monetize the land parcels for your Mumbai facility. But the price expectations were not matching, right? And on the other side, there was also looks like at the background, the debt repayment was one of the big focus for the company, and you've got the opportunity to monetize that. But till that time, you could have actually put a stop for your Morbi operation as well, right? Because this will happen right now, you started working on Morbi much before. So that point of time, despite such a long big amount of debt on your balance sheet, you still went ahead with your CapEx plans, right? So at that point of time, that philosophy, what was the philosophy? Because now it looks like you will have a free cash, you can do much more opportunities and all that...

There were no opportunity on the [indiscernible] asset. Nobody comes to me to [indiscernible] to take my ICD.

No, I got that. But the very fact you are saying the philosophy of giving this business for debt repayment, right? Still, you had an amount of debt which was significant on your balance sheet even 1, 2 years back during the lockdown, right? But you are still going out with your Morbi expansion plan, right? At that point of time, there was no monetization opportunity, but you still went ahead and taking further CapEx, taking more debt. And now on the contrary, the same -- with the same logic, you are trying to say that now I've got an opportunity, I want to become a debt free.

So basically, what I [ consume ] is, at that time, if you see, it will compare with my Morbi ICD all together, we are making INR 160 crores to INR 107 crores, right. And the same time, if you'll ask me for the Vapi ICD, which was the biggest expansion for the company, comparative to Morbi expansion. And why we started Morbi at that time because we were evaluating after Vapi. Vapi we had started in 2016. So 4 years, we holded anything for other facility. We started the Morbi after 5 years. You got my point? So behind Morbi, [indiscernible] was very clear, we'll be earning more, INR 100 crore of debt, if I will add INR 100 crores of revenue. So there was a clear [indiscernible] with me. It was a better asset comparative to other asset. So that was only philosophy at that time. And then we get this opportunity to repay the debt. Repay the debt was not only the question. The deal itself was really lucrative for us. Getting INR 900 crores with the asset. So we are earning from 5, 6 years. And we are discounting the next 5 to 6 years, 7 years profit today. So it's a good opportunity for the company. It will remain in a high side.

[Operator Instructions] Next question comes from the line of Abhinav Bhandari from Sohum Asset Management.

Congratulations on the deal. Just wanted to have a few questions. One is, as of March '22 closing balance, what was the gross block of Vapi?

If you ask me for -- if you are asking me for the business undertaking, which we are going to sell in totality?

No, no. In totality, how much was the gross block on our balance sheet? If I remember correctly, it was north of INR 1,200 crores. So if that number is correct?

Yes. It was altogether INR 1,200 crores, out of which the assets which we are not going to them. And if I [ lap ] all the things that, that number will become which we are transferring to this business around INR 800 crores.

Okay. So just to understand this, I think you mentioned initially, but I missed that. So what remains with you is, one is the CTO license, which you talked about. And what were the...

If you are [indiscernible] with me, all racks which we -- which is owned by the company, which is almost in the range of around INR 60 crores to INR 70 crores will be with the company. All fleet, which is almost around 516 to 520, which will remain with the company. And the plant and machinery for which we are not transferring to the business undertaking, which is not required -- essentially required for the business, which will be remained the company.

Sure. Got it. So on our balance sheet, roughly about INR 500 crores, INR 550 crores of capital employed would still remain pertaining to Vapi which you will be moving to Morbi?

Correct.

Got it. Fine. The other question was this 129 acres of additional land that you have. To your mind, how much incremental Adani can expand on this? I mean what would be the overall expanded capacity? What's the scope here to expand?

So basically, if you will ask me this question really tough to answer from my side because Adani can look at the [indiscernible] business, Adani can look at the [indiscernible] operations, they can be expand further on it. That will be dependent on them, how they gradually would like to [indiscernible].

No. As in from a physical capacity perspective, you have 0.5 million TEUs today. From a physical capacity perspective, how much this could be moved up to?

So as we did vertical expansion in past, if you see at Bombay, we did vertical expansion over there in the past, correct? [indiscernible] around 30% to 40% on the same facility.

This you are saying excluding this 129 acres or including this 129 acres?

The land which we are giving them is around 129 acres. It will transfer to them. On that, they can be expand further. And we would like to be [indiscernible] expansion, we would like to be made on other warehousing systems and all. So from here, they can be expand more 25% to 30% capacity enhancement. That is my rough estimations. So they will have their own strategy, they will have their own strength. With that, they can be move 200% also because which kind of a business they would like to be run [ them ], that will be their choice.

Fair. The related question was, today, whatever volumes that you are handling there, how much is Hazira-bound roughly? And how much is JNPT-bound? Broad, broad understanding.

If you ask me, more of 75% to 80% JNPT bound, and 20%, 20-odd percent of the Hazira.

So this 70% volume, which is JNPT bound, won't it impact your business at JNPT? Because that would give them a direct foothold in JNPT also now, right?

Not at all, sir. JNPT because has already been impact after [indiscernible]. So the JNPT business will not be impacted much because much or even I can say, at the same time, the domestic opportunity, which I have today, and I'm adding racks and I have a category 1 CTO license, which was awarded to company in April and May. So I have ability to serve more from my Bombay as well as the Morbi operations. And we can -- wherever we don't have a facility, we can make a tie-up, we can use the [indiscernible] facility [indiscernible].

Sorry, I missed you.

So basically, with category 1 license, I can do renew operations across India, point number one. Point number two. If you will ask me for the transportation activity which we are giving to the [indiscernible] undertaking, so we are assuming that after that also, we'll have to take further [ trust ] towards the Morbi will be utilizing from here onwards. And Bombay, if you will ask me with the domestic market from Morbi, which we had already been told in past through, from Morbi, there is times and domestic movement towards Mumbai is very high. That will again add to my domestic business.

Got it. Got it. And just one last question on -- so how much is the size at Morbi of your ICD? And what is the total investment that you are doing for that, including this INR 40 crores which you said will be putting...

As for Morbi, we have in totality around 150 acres of land approximately, out of which, our first phase development is going on a 90 acres of the land where we had already been almost -- we put in the detail of 70%, 75% work had already been done or there in a Morbi. So if you ask me size, initially, we are making ICD, which will be catering to ability of INR 2 lakh [indiscernible].

Okay. And for that INR 2 lakh, how much we are spending?

In totality for domestic and aging volumes, we are spending INR 150 crores, including land value.

Got it. Perfect. Just one last one. Do we have any land in Vapi or within that 100 kilometers more? Though I understand you can't do this business, but do we have any more land in the vicinity of Vapi ICD?

No, no. In that vicinity, there is no land.

Next question comes from the line of Ravi Mohan [ Makhija ], an individual investor.

Yes. The business operations, after yesterday's modification, whatever has taken place, would it be affected? Would it be diverted to JNPT or how this would be managed. Will it affect the profits in the next 3 quarters?

Which operations you are talking about?

The Vapi operations which were happening. Now that the operations would be shifted well, which ICD would it be shifted, the existing operations which were happening.

Vapi operations will be remained at Vapi itself. the domestic operations which were -- we were doing from the [indiscernible] to our Bombay CFS and that billing was happening from Vapi which will remain same with us from the Bombay CFS.

So once the sale is happening, are you all allowed to carry on business over there?

Which business?

The Tumb ICD.

No, no, no, sir, I am not doing business from ICD. Domestic operations, which we are catering to be that particular reason, from CFS Mumbai [indiscernible] vehicle, which we will propose to going out there from ICD which will be moving from the Bombay itself or from the [indiscernible]. The operations from the [indiscernible] train has come to our place in CFS Bombay, which is [indiscernible].

And then What about -- how the profits would be affected?

No, there is no impact on profits. They have [indiscernible].

Yes. But your Morbi plant is supposed to be operational in end of '23 or '24?

There was 2 different things you, I think, so miss out. You are talking to me about the ICD domestic operations which we are [indiscernible] originally doing from Mumbai will remain with us. So there is no question about Morbi.

Next question comes from the line of [ VP Mundra ] from [ Vivo Commercial Limited ]. Mr. Mundra, please go ahead with your question.

Yes. I just wanted to know by March '24, you plan to do INR 650 crores, right?

Yes, sir.

And your EBITDA would be around 35%.

Yes, sir.

So you are talking about INR 152 crores EBITDA.

Yes, sir.

And what will be your depreciation?

Depreciation will be around 33...

After all your investments.

Around INR 33 crores.

So I would say that it will be making around INR 130 crores PBT.

Yes, sir.

Tax would be around 21%?

21% to 21%.

Yes. So you're making about INR 102 crores PAT?

More than that. If you'll ask me, 6 50 into around 22% [indiscernible] If I'll take on 15% to 21%, it's INR 107 crores [indiscernible] it will be in the range of INR 108 crores and INR 110 crores.

Okay. And by March '23, you would have a surplus cash for INR 250 crores balance sheet. Supposed to pay back March '23 balance sheet, you will have about INR 250 crores cash, free cash flow, right?

It's an approximate number based on our Q1 numbers.

Yes, I presume that after getting all your consideration from Adani and paying back your loans, put together, you will have a net cash flow of about INR 250 crores.

Yes, sir.

After making the investments at Vapi -- not Vapi. I'm talking about Morbi, after making the investments at Morbi, correct?

Yes, sir.

So what I'm trying to say is INR 250 crores, how do you intend to use it then?

So basically, I do a primary comment itself, that will be we are going forward further expansion opportunities. And other than that, we are evaluating how I have to be attributed to the roles that we are further discussing with you.

So your balance sheet will have a 0 debt as of March 23, correct?

Correct, sir.

Asset block would be somewhere around INR 1,600 crores -- INR 1,500 crores?

Yes, sir.

So you have an opportunity to borrow money in '23, '24. So why do you need to carry INR 250 crores in your balance sheet? Why don't you buy back the shares?

So basically that I just wanted to tell you, we are evaluating that opportunity which will be...

Today, cost of money cost of money is around 9%.

Because we don't -- we also don't want to be and the cash in book. We also wanted to be made further business expansion opportunities, we're working on it. And then also on that, also, we are looking at it. So this is really a very banqueting to us also. Once the deal will close, once the amount will come to the company. And then we'll definitely evaluating how we'll have to be moved further on with that cash. But that is really not done. The company is not having any kind of [indiscernible]. The idea is the cost of CapEx -- the cost of equity is the most expensive method of financing any project. So you have a -- you could borrow at about 9%, 10%. And if you take the income tax yield, income tax, so you're basically paying about 8% cost, interest cost. And your cost of equity would be somewhere around 20%, 22%. Any company which makes on return on equity should be around 20%, 25%. Then only that is worth making money in the shares for a promoter and also a shareholder. So you should try to reduce your share capital. To enhance the value of the shareholders, the best thing is to buy back the shares and that you should be doing it every year because you have the opportunity to -- or you should distribute 80%, 90% of your profits if you don't need cash because you have a chance to borrow. Infrastructure projects, you can always borrow.

This is the operator. The line of the individual investor got disconnected. I will take next that is Mr. Mohit Kumar from DAM Capital.

Congratulations on completion of the deal. So my first question, what was the key EBITDA contribution in the Q1 for this asset? And second question is, what will be the gross block of Morbi, was the operation starts? And the related question is that what will be the capacity to which at Morbi we can achieve a few years down the line?

Excuse me. Ladies and gentlemen, the management line is disconnected, please be on hold while we quickly get them reconnected. Ladies and gentlemen, thank you for being on hold. The management line is reconnected. Please go ahead, sir.

I repeat question, sir, I didn't get the answer to my first question was, what was Q1 EBITDA from the asset, Vapi asset?

Pardon?

What was the EBITDA contribution from the Vapi asset for the Q1 FY '23?

Q1 you are asking about?

Yes, sir. Q1.

Q1 total EBITDA was INR 55 crores, out of which we were having around INR 28 crores from this Vapi.

Understood, sir. Secondly, sir, on the Morbi, what would be the total CapEx once it is operational?

It's INR 150 crores will be total CapEx, and we are trying to partial [ COD ] and start operations by [indiscernible] quarter of this year.

And sir, what can you do with the asset which we are -- which is left from Vapi? Are you going to move it to Morbi, is the understanding correct?

Yes, sir. It will be based on the requirement. Is there any further requirement of the be shifted over there? And last, will we come to Mumbai. And based on our requirement and the further business expansion in the business [indiscernible]. Sort of 550, we on fairly assume that INR 200 crore, INR 300 crore assets might move to Morbi, correct.

Sir, what is the capacity which you can expand in Morbi from 0.2 million TEU over the next 3 to 4 years if the business picks up, given the land constant, yes.

Yes. Over next 2 to 3 years.

No, sir, how much you can expand from 0.2 million TEU you, how much you can expand? can you expand to 0.5, 0.6 million TEU or up to 1 million TEU? Is it possible?

Basically, what we'll do is -- in past also, we see our Morbi facility, we will be making 2 lakh containers calling capability over there. And down the line, 2 to 3 years, looking at our [ capability ] utilization because we have a 150 acres land over there. So 50 acres land, again, we can make the same facility or same expansion over there. Is there any requirement to be again doubling the capability over there? Instead of 2 lakh, you can go till 4 lakhs.

[indiscernible] potentially 0.4 million up to 4 lakh TEU.

[indiscernible].

And the land is around 150 acres, correct?

Yes, sir.

Thank you. As there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Thank you so much to everybody and go call and PhillipCapital for giving us an opportunity to the light on our deal. Thank you so much.

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