Allcargo Gati Limited
6,969words
103turns
10analyst exchanges
3executives
Management on call
Depesh Kashyap
EQUIRUS SECURITIES PRIVATE LIMITED
Pirojshaw Sarkari
CHIEF EXECUTIVE OFFICER - GATI LIMITED
Anish Mathew
CHIEF FINANCIAL OFFICER - GATI LIMITED
Key numbers — 40 extracted
14%
istics cost down as a whole. Currently India’s logistic cost is as high as around 14% of the GDP which, the targets are to reduce to 10% over the next five years. This reduction will
10%
tly India’s logistic cost is as high as around 14% of the GDP which, the targets are to reduce to 10% over the next five years. This reduction will be led by multiple initiatives like good infrastruc
7.5 Crore
to organized players. The generation of e-way bills which are now hitting a monthly rate of above 7.5 Crores versus financial year 2022 monthly average of 6.5 Crores and 5 Crores in FY2021 is a testament t
6.5 Crore
are now hitting a monthly rate of above 7.5 Crores versus financial year 2022 monthly average of 6.5 Crores and 5 Crores in FY2021 is a testament to the above theory. Talking about the current quarter, Ja
5 Crore
g a monthly rate of above 7.5 Crores versus financial year 2022 monthly average of 6.5 Crores and 5 Crores in FY2021 is a testament to the above theory. Talking about the current quarter, January 2022 re
99%
ti being the pioneer in the express logistic business and network leader in logistics with almost 99% of government pin code covered and almost 670 offices across India. With our wide reach across
21%
ME. Our key focus area would remain SME/MSME segment which is the second largest contributor with 21% for financial year 2022. Sales acceleration has two levers to play one is accelerating volumes fo
5%
The team has initiated renewal of contracts for KEA which is realizing an average price hike of 5% to 7% expected to roll out in this financial year. We have been building state of the art infrast
7%
team has initiated renewal of contracts for KEA which is realizing an average price hike of 5% to 7% expected to roll out in this financial year. We have been building state of the art infrastructur
1.5 lakh
mber 2021 Gati launched its largest surface transshipment center (STC) at Farooqnagar spread over 1.5 lakh square feet and connecting to all major national highways. With no inconveniences of congestion,
Rs. 387 Crore
formance for the quarter. Our consolidated revenues including other income for Q4 FY2022 stood at Rs. 387 Crores as compared to 409 Crores in Q4 FY2021 down 6% compared to same period last year. Our surface
409 Crore
consolidated revenues including other income for Q4 FY2022 stood at Rs. 387 Crores as compared to 409 Crores in Q4 FY2021 down 6% compared to same period last year. Our surface express business revenue inc
Guidance — 17 items
“This reduction will be led by multiple initiatives like good infrastructure, increased compliance and efficient digital back bone, whereby organized players would slightly have an upper hand as they would focus on reduction of indirect cost like pilferage and wastage, inventory carrying cost and reduced time and transit.”
“The next two hubs with similar facilities and scale will be operational in Mumbai in the first half and Bangalore in Q3 of FY2023 followed by Nagpur, Indore, Hyderabad in later FY2023 and of course Cochin and Pune in 2024.”
“We are optimistic of margin increasing going forward.”
“With all our efforts dedicated towards increasing scale and efficiencies we believe we will able to increase the margin going forward to targeted range of 29% to 30%.”
“Lower interest cost and approaching to asset light strategy will be adding up to the PBT in the near future.”
“apart from this entry of 5.4, no other diminution which would happen because most of the asset which we intend to sell has been categorized barring few assets.”
“And by when can we expect this to get monetized.”
“Since the asset relates to the land and building normally takes a longer time but we hope to kind of get most of the asset liquidated during this quarter but having said that it is very important to know that selling land or building is not that easy and we also would need to look at really optimum price, so we have to recalibrate internally before we kind of dispose the assets.”
“We already have a pool of talent with few of these data analyst and engineers who are sitting day in and day out and helping us with our digital journey so in short Gati has recognized that we have to get ourselves digitized and that is the only way that we will be able to make sure that our customers are satisfied.”
“When is the increase in rentals because increase in inflation of building cost of those warehouses might have gone up and whether it will be reflected for us also in rental form that is first question?”
Risks & concerns — 3 flagged
The year gone by was the recovery year from the impact of COVID-19.
— Pirojshaw Sarkari
Why have we seen a decline in the supply chain management in that case for the year?
— Ankita Shah
Having said these two things for Gati particularly the challenge that I face is that my infrastructure growth has to be much faster because as I grow my volumes my current infrastructure is not having capacity enough to take that volume growth and therefore we are looking forward to our super hub in Bombay and Bangalore happen soon so that at least three regions and big market get covered fast.
— Pirojshaw Sarkari
Q&A — 10 exchanges
Q
Thanks for opportunity. Sir just to understand couple of things one on the top line of our express business volume had a 3% year on year growth and 4% degrowth on quarter-on-quarter basis in fact the volumes have been in this range of about 2, 50,000 to 2, 60,000 for the last two quarters or so, so going ahead how do we look at this tonnage to move in, just one more observation linked to this. In the previous call you had mentioned that we have been working for almost 15 to 18 months for success of Gati with regards to various pillar which you had been consistently talking about and also you m
Pirojshaw Sarkari
If I were to look at year-on-year for the financial year 2022, we have grown our volume by 24% and our revenue by 23% and this is basically numbers that I am giving out for GKEPL which is the operating express joint venture. If you are looking at the consolidated numbers you have to also understand that is the petrol pump business in the consolidated numbers where we had two additional petrol pumps in the previous year which were moved out in the first quarter of the previous year and therefore the revenues of those two petrol pump is not being carried on for this financial year. Having said t
Q
Thank you for the opportunity. Sir just wanted to understand more on the KWE margins so if we just compare this year, we are seeing employee and other expense are huge expense for us as compared to peers so are we taking any specific measures on these two segments which can help reduce the cost.
Pirojshaw Sarkari
Over the last 15 to 18 months, after Allcargo took over there has bee a huge reduction and optimization of the employee cost for us an organization and as group the thought of compliance and governance is very high. The way we would like to increase our margins and I am sure you are looking at increasing the EBITDA margin by asking me this question. We would as an organization want to do that by increasing our volumes and revenue so that we can leverage the existing employee cost. Okay got it. Also, one question was on the assets that are held for sale. What does that include and is there any
Q
Good afternoon. So my question is more regarding to the charges which we have taken ideally in order to defend our market shares so I just want to get things on that so are we undercutting our competitors to defend our market share and what is the strategy on that.
Pirojshaw Sarkari
So, our strategy of market share is never going to be and will not be undercutting competitor. We believe that there is a large market in the business that we are in. We do two kinds of growing of market share, Number one is trying to convert the unorganized market to the organized market and there is a huge amount of unorganized market out there which we convert. The based is based on our brand reputation and service. Of course, convert business from competitors by giving them value added services. We provide our customers a very high standard of governance in what we commit to and therefore
Q
Good afternoon. Thanks for the opportunity. I have two questions. We are expanding our reach in different cities through these rented warehouses. I just want to know how the mechanics works over there about the rentals. When is the increase in rentals because increase in inflation of building cost of those warehouses might have gone up and whether it will be reflected for us also in rental form that is first question? And second question about the cash flow from operations when I look at cash flow from operations it has been negative because of the receivable if you can throw some light on tha
Anish Mathew
Cash from operations is positive. However, we have blocked the capital in the receivables. Receivables increased by 55 Crores. We have kind of put a good system in place right now to kind of bring the DSO to kind of a benchmark level. We kind of made some organization restructuring where in the collection team would be reporting to finance against the earlier structure of reporting them to the sales team. With this structural change we would be able to kind of bring more robustness in the process and I think we should be excepting a much better recovery on the debtors going forward. So what co
Q
Sir Gati is a renowned brand coupled with a data that we have from customers so long and given a deep presence and focus. What are the challenges you see in achieving the targets that you have set for yourselves in current situation.
Pirojshaw Sarkari
There are a couple of challenges. It has become a VUCA world, now out there you do not know when COVID hits back suddenly and like I said in January what happened to us because of north India coming to a standstill and then there is this fluctuation that keeps happening in the fuel prices suddenly you increase the fuel price by Rs. 10 to Rs. 12 and suddenly you reduce it by Rs. 7 to Rs. 8 and there is lot of convincing that needs to be done with both out trucking partners as well as customers. So you are just about doing one convincement then another things happens and you are kind of going ba
Q
Hi Sir. Thanks for the opportunity. Sir I want to know are we planning to merge the APPI division of Allcargo with Gati. I just wanted to know are we looking to merge the division of Allcargo with Gati business and what is the reason behind it?
Pirojshaw Sarkari
As I said in my note that board has approved evaluation of restructuring options on appointments of consultants and advisors. We are at preliminary stage just now. Of course if you ask me conceptually contract logistics and express logistics go hand in glove and customers more and more want a single operator who can take end to end fulfillment of their finished goods so we are evaluating this. We have a partner with KWE and we will be in discussions with them very soon. Okay thank you Sir. That is all from my side.
Q
Yes good afternoon Sir. I had few questions like we eluded about 5% to 7% price hike so recently there has been fuel price cut also so in that kind of situation when we see fuel prices coming down would you be able to take price hikes with the customer.
Pirojshaw Sarkari
Basically we have a fuel mechanism with the customers. When the fuel goes up the mechanism kicks in and there is a formula with which the hike goes up and the fuel comes down similar mechanism kicks in and the price goes down, having said that this is not 100% with all customers. There are many customers where we have to negotiate and when we get on to price hike or a price reduction. In the past two months there has been considerable fuel hike. We have kind of negotiated with lot of customers and brought certain hike. I think with this current reduction we will be waiting and watching what ha
Q
Good afternoon. Just wanted to get a sense on how is the demand shaping up in April and May so far, because what we understand is that the demand has been little soft post March, if you could just indicate on that part, the SME demand as well as demand from the e-commerce side? Thanks.
Pirojshaw Sarkari
At Gati March, April and continuing in May, we are seeing the demand pretty high, it is growing and growing by the month, so that is what we are experiencing at Gati, now one could either say that we are taking a larger share of the market or the general demand is high, I cannot comment on the general demand just now because different industries are going through different cycles, but for us as Gati we are seeing growth. Sure, and any change in if you look at e-commerce driven, any mix you can highlight where we are seeing? I have consistency spoken about this as we do not do B2C e-commerce bu
Q
What was the utilization levels, in the surface business in this quarter or the full year?
Pirojshaw Sarkari
Our capacity utilizations are measured in various ways, we have capacity utilizations in line haul, we have capacity utilizations in our feeder, we have capacity utilization in our hub, but I can only tell you this that quarter over quarter we have been increasing our capacity utilization and we will continue to do that. There is a metric called DIFOT Deliver in full on time, where do we stand on that metric? How is that compared to the last year? I think our DIFOT in the last quarter of the year has been far better than the previous two quarters and that is one measure which looks at end to e
Q
Thank you Phil Sir for giving us the opportunity. I think Phil Sir if you have any closing remarks. Please go ahead.
Pirojshaw Sarkari
I would just like to again thank everyone for joining the call. We will keep updating the analysts and investor community on a regular basis for incremental updates regarding Gati. I hope we have been able to address queries. For any further information kindly get in touch with our investor relations team. Thank you once again and stay safe. Thank you.
Opening remarks
Depesh Kashyap
Thank you Lizaan. Hello everyone. On behalf of Equirus Securities, I welcome you all to Q4 and FY2022 earnings conference call of Gati Limited. We are pleased to have with us management team represented by Mr. Pirojshaw Sarkari (Phil), he is the CEO and Mr. Anish Mathew CFO for Gati Limited. We will have the opening remarks from the management followed by Q&A session. Thank you and over to you Phil Sir!
Pirojshaw Sarkari
Thank you Depesh. Good afternoon and a very warm welcome to everyone on Q4 and FY2022 Earnings Conference Call. We have uploaded our Q4 FY2002 results presentation on the stock exchanges and company’s website and I hope everyone had an opportunity to go through the same. As mentioned along with me I have Mr. Anish Matthew, Chief Financial Officer for Gati Limited and our investor relations team. The year gone by was the recovery year from the impact of COVID-19. We have observed that the logistical requirements and services especially from the organized players have increased during and post COVID-19 period. Despite challenges during the period, we have been able to realign our systems and processes as per the requirements of the business and have been able to manage it very efficiently keeping in mind all the safety requirements of our people and customers. We have been able to maintain our share of business in the express distribution and simultaneously offer customized logistical an
Anish Mathew
Thank you Phil. Good afternoon, everyone and a very warm welcome to our Q4 and FY2022 earnings call. I will take you through the highlights of financial results for the quarter and financial year ending FY2022. Firstly, I would cover the performance for the quarter. Our consolidated revenues including other income for Q4 FY2022 stood at Rs. 387 Crores as compared to 409 Crores in Q4 FY2021 down 6% compared to same period last year. Our surface express business revenue increased from Rs. 300 Crores to 304 Crores in Q4 FY2022. Revenue share from MSME and SME and retail accounts stood at 42% in Q4 FY2022. Gross profit, our gross profit for Q4 FY2022 stood at 95 Crores as compared to 104 Crores in Q4 FY2021. Our GP margins for Q4 FY2022 stood at 24.7%. The margins were majorly impacted by performance in January which impacted the overall margins for the quarter. The existing gross margin for the quarter, are above 27% which comforts us and makes us confident of reverting to air. EBITDA: Co