ACLGATINSEQ1 FY2023August 08, 2022

Allcargo Gati Limited

7,696words
95turns
10analyst exchanges
3executives
Management on call
Pirojshaw Sarkari
CHIEF EXECUTIVE
Anish Mathew
CHIEF FINANCIAL OFFICER – GATI LIMITED
Vikram Suryavanshi
PHILLIPCAPITAL
Key numbers — 40 extracted
46%
he new financial year on a good note with our revenues of our core express business increasing by 46% year-on-year and 13% quarter-on-quarter basis and we have seen improvement in our margins and pro
13%
on a good note with our revenues of our core express business increasing by 46% year-on-year and 13% quarter-on-quarter basis and we have seen improvement in our margins and profitability. The conti
₹14000
dustry however our estimation suggests that the surface express industry would be in the range of ₹14000 to ₹15000 Crores and then there is CIN: L63011TG1995PLC020121/Gati Ltd. Plot no 20, survey no 12,
₹15000 Crore
ever our estimation suggests that the surface express industry would be in the range of ₹14000 to ₹15000 Crores and then there is CIN: L63011TG1995PLC020121/Gati Ltd. Plot no 20, survey no 12, Kothaguda, Kond
₹ 7.5 Crore
years. The increasing trend in e-way bill which are currently at its highest monthly run rate of ₹ 7.5 Crores 63% of which is intrastate and balance is interstate are strong leading indicators of this shift
63%
ncreasing trend in e-way bill which are currently at its highest monthly run rate of ₹ 7.5 Crores 63% of which is intrastate and balance is interstate are strong leading indicators of this shift. The
₹431 Crore
ter of FY2023. On revenue front, our consolidated revenues from operations for Q1 FY2023 stood at ₹431 Crores as compared to ₹299 Crores in Q1 FY2022 a growth of 44% year-on-year. Our surface express busine
₹299 Crore
ront, our consolidated revenues from operations for Q1 FY2023 stood at ₹431 Crores as compared to ₹299 Crores in Q1 FY2022 a growth of 44% year-on-year. Our surface express business revenue increased from ₹
44%
operations for Q1 FY2023 stood at ₹431 Crores as compared to ₹299 Crores in Q1 FY2022 a growth of 44% year-on-year. Our surface express business revenue increased from ₹229 Crores to ₹337 Crores in Q
₹229 Crore
es in Q1 FY2022 a growth of 44% year-on-year. Our surface express business revenue increased from ₹229 Crores to ₹337 Crores in Q1 FY2023 up by 47% year-on-year basis. The tonnage for the segment grew by 55
₹337 Crore
a growth of 44% year-on-year. Our surface express business revenue increased from ₹229 Crores to ₹337 Crores in Q1 FY2023 up by 47% year-on-year basis. The tonnage for the segment grew by 55% year-on-year.
47%
Our surface express business revenue increased from ₹229 Crores to ₹337 Crores in Q1 FY2023 up by 47% year-on-year basis. The tonnage for the segment grew by 55% year-on-year. Post our revised focus
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Guidance — 20 items
Pirojshaw Sarkari
opening
“With this upbeat performance, we expect to further gather momentum-entering 2023 with an agenda of outpacing the industry growth rate.”
Pirojshaw Sarkari
opening
“We are also planning similar mega hubs across the country and its plan to go live some in FY2023 and some in first half FY2024.”
Pirojshaw Sarkari
opening
“Post this infrastructure amplification we will be able to cater to our customers with industry leading turnaround times with improved service levels to manage their logistical requirement in an efficient manner with higher OTIF deliveries.”
Pirojshaw Sarkari
opening
“We are happy to report that the project is going in full swing and is expected to be completed in the next 12 to 18 months.”
Pirojshaw Sarkari
opening
“However, we will be implementing the same in various modules for which some have been implemented and some are in trial and pilot spaces and will be implemented from time-to-time basis This digital transition will help us to improve our efficiencies in front-end platforms like sales acceleration digital payment, data science and customer service with enhanced integration with backend for better lean and efficient operations in terms of network decision support, hub optimization, etc.”
Anish Mathew
opening
“We envisage higher operating leverage play out in the coming year and aim to improve gross margins to targeted levels of 32%.”
Anish Mathew
opening
“With all our efforts dedicated towards increasing scale and efficiencies, we believe we will be able to increase the margins going forward.”
Ankita Shah
qa
“And we remain on the target of 9% to 10% for this year margins.”
Pirojshaw Sarkari
qa
“Yes, as we increase our gross margins and top line, we will leverage the cost as I had said we believe that we have reached a cost level below the gross margin, which will be now static for the next growth that we envisage in Gati.”
Pirojshaw Sarkari
qa
“Having said that some of them we have preponed to so for example we were luckily in Nagpur we found the ready facility so we will be starting our Nagpur new hub again by September and we also did a similar thing and are happy where we were lucky to find a new hub in Guhawati which we will be starting sometime in August and September.”
Risks & concerns — 5 flagged
No not really, so for us there has been an increasing trend month after month, we have not seen any slowdown really happening yet due to certain market condition in the month of May there CIN: L63011TG1995PLC020121/Gati Ltd.
— Pirojshaw Sarkari
To give direct attribution of revenue growth for one hub becomes extremely difficult because it is a networked business what does really tend to happen is that customers who were giving us a lesser share for North India have definitely started giving us more share of their business for North India because they now believe that our service has improved in North India because of the super hub.
— Pirojshaw Sarkari
Pranay Roop Chatterjee: And most of my number related questions have been answered so I will just shoot again a broad question, which might appear weak, but I will go for it anyway.
— Pirojshaw Sarkari
And Sir in the quarter reported in the June quarter we would have seen the impact of steep increase in ATF prices on your EBITDA so do you think that would normalize going forward now the prices starting with correcting.
— Dhaval Shah
Plot no 20, survey no 12, Kothaguda, Kondapur, Hydrabad-500084 even predict although you and I read the same economic times everyday I think it is very difficult for us to predict what is going to happen with some lady going to Taiwan and some gentlemen going to Russia right.
— Pirojshaw Sarkari
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Q&A — 10 exchanges
Q
Thank you and congratulations on a good performance. Sir wanted to check on the client mix that continues to remain the same around 58% they are being contributed by key enterprise accounts so what are the efforts that we are taking on this side to change the mix and what is the progress on the same.
Pirojshaw Sarkari
Our mix stands at 58% and 42% right now 58% key accounts and major accounts and 42% SME and retail there are initiative that we have already started seeing to increase the SME and retail mix one of them being that we have now engaged a consultant who is come in and is going to help us redesign our franchise model which is existing today and increase the penetration into the tier two, tier three cities mainly where the retail business comes from and have more franchises that can get up this business. As you know at one point of time, a few years back Gati was the leader in the retail business o
Q
Good evening Sir and congratulations on decent numbers. Just wanted to understand in this quarter we have seen mainly a 50% plus growth in volumes and our revenues also growing by similar kind of a number so there has been no realization growth is that currently because of some change in the mix of shipment handled any color on that.
Pirojshaw Sarkari
Thank you for the question. I just respond that to the earlier questions stating that it is a combination of the yield that has brought about the growth on the revenue and of course, this combination coupled with optimization in cost has brought about a growth in the gross margins. As far as the mix is concerned if you are talking about the vertical mix we have not yet seen success on the mix change because we are growing our KEA software however, the focus is definitely to grow the SME and retail. Having said that I think our sales team has done a phenomenal job in increasing the KEA EBIT for
Q
If I were to answer your first question I think the most important element in a B2B business is the network that means the reach that a company has whether it is to pickup the shipments or to deliver the shipments and I think Gati over the last 30 years takes pride in having developed one of the deepest and largest network in the B2B business in India and the second I think more important or I would say second most important is the trust that Gati creates with their customers I think that is very important in an unorganized industry creating the trust factor that the customer will be told the
Pirojshaw Sarkari
No correct, so that is what I am saying there are five clear national payers in the B2B business and the two that you had spoken are within those sides. Unless you have a good be it large network, you are not go and to be able to be playing in the B2B business and it takes a lot of time and money to develop a network, which is reliable and dependable in a country like India especially in the surface network region. Coming to the second question if I followed your question correctly you asked whether Gati is going to be in the contract logistics was that your question what exactly was your ques
Q
Hi! Sir, thank you for taking my question I just wanted to ask on gross margin side even on a Q- on-Q basis we have increased our gross margins I know it is a combination of both the volume and the value I just wanted to know is there any like despite having an extremely higher diesel CIN: L63011TG1995PLC020121/Gati Ltd. Plot no 20, survey no 12, Kothaguda, Kondapur, Hydrabad-500084 cost in this quarter like which was almost ₹100 plus how would we able to manage in this specific quarter and going ahead what would be our target for FY2023 and 2024.
Pirojshaw Sarkari
Sorry I did not get your question what cost you said ₹100 Diesel prices in this quarter were above ₹100 for the entire quarter, which was highest ever now it has come down but despite having the highest diesel cost how are we able to manage this type of, we were able to improve our gross margins on a Q-o-Q basis. This is before a large proportion of our customers are on BPH which means that they are on a diesel formula when diesel increases that portion of the rate goes up and when diesel goes down that portion of the rate goes down and I think the sales team has done a fantastic job of making
Q
Sir on your tonnage growth in the surface express business that seems better than the industry and also the competition so just wanted your thoughts on the same that if you have gained any market share and is it sustainable.
Pirojshaw Sarkari
I think one of the things that I have always said before also is that the good thing about Gati is that every single vertical of ours we have at least 7 to 8 of the top ten customers of that vertical as customers for ourselves. Our share of business in those customers was low when I came into Gati what we have managed to do is we have managed to increase the penetration with the same customers and get a much larger share from them. These are customer who had seen Gati in the Gray days also so they had that confidence in Gati but in over the last few years service had deteriorated and therefore
Q
To give direct attribution of revenue growth for one hub becomes extremely difficult because it is a networked business what does really tend to happen is that customers who were giving us a lesser share for North India have definitely started giving us more share of their business for North India because they now believe that our service has improved in North India because of the super hub. What has really helped us is the 89 docks that we have in Farukhnagar so when we have three different hubs basically those three hubs put together had about 40 odd docks and we could only lower unload truc
Pirojshaw Sarkari
If you were to ask me where we were one year back I would have said we are now five on ten today we would be on 7 or 7.5. Pranay Roop Chatterjee: And lastly the large part of the improvement would have happened in north India and we would expect more improvement in the rest of the India as customer so is that a fair statement. CIN: L63011TG1995PLC020121/Gati Ltd. Plot no 20, survey no 12, Kothaguda, Kondapur, Hydrabad-500084 No that is not a fair statement the improvement has happened all over India it is not just that you increase or consolidate hub and your entire India service improves ther
Q
Sir, my question is you had mentioned that there were some constraints in terms of handling peak volumes at some of the locations and the new hub in mark will help the new growth constraint. So if we were to grow at double digit volume from the current quarter case do we see any constraint or is it contingent of our new hub coming in or we think that we can grow in double digit volume even from this quarter base we have entire hub all the hubs being rolled out.
Pirojshaw Sarkari
If I were to answer this question in two ways, one is if I remain status quo I cannot grow double digit. The second answer is if I wait for the hubs to come I will miss out an opportunity so what we have done especially now because we know that we are approaching season time as you know season starts end of August and goes up to November especially in our business what we have done is we have enhanced capacity by temporarily leasing excess space wherever we found that we had choked up last Diwali. This will make sure that we do not chock up and our service level remains the same so we have alr
Q
Great set of number congratulations for that. Sir just one clarity I wanted to understand you mentioned in terms of increasing the EBITDA margin and EBITDA absolute from here is my understanding correct that any incremental revenue adjusted for variable cost that straight goes to EBITDA are we now the fixed cost are in place and then incrementally all goes to the bottom- line is my understanding correct.
Pirojshaw Sarkari
I would say almost correct as we build out new hubs there will be some incremental lease cost that will come in but otherwise yes you are correct. And secondly, Sir you mentioned about winning back the business from your old customers so the loss of business would be for those organized players the large five organized players or it would be from the unorganized side. I do not understand loss of business form organized players. So the business which you won back from the customer so your competitor would have lost that business. Yes, I got it now. No definitely, it is from the organized player
Q
Good afternoon Sir Congratulations on good set of results. Sir I wanted to understand this gross margins little bit because as you said that we have been winning customers back and mostly key accounts so but the mix has not change ours is the last year or sequentially also if you are winning those accounts also so yields would be little bit lower so maybe margins a bit lower so both things are not adding up with respect to the increase in gross margins you are having. Unless and until you have shutdowns some routes for those accounts and restructured replaced with another.
Pirojshaw Sarkari
Maybe I am repeating myself but gross margin is a combination of both yield volume and the cost optimization what we have done over the last one year as we have first concentrated on increasing and bettering the service levels for our customers whenever the customer comes up for renewal we have been successful in increasing our yields even if it is the key account which we are now confident because our service has gone up and therefore we have been able to increase the yields in our key accounts also. At the same time there is huge optimization of network cost and pickup and delivery cost that
Q
I will take this opportunity to thank every one of you for joining the call we will keep updating the investor community on regular basis for incremental updates on your company. I hope we have been able to address all your queries for any further information kindly get in touch with us our strategic growth advisors our investor relations advisors. Thank you once again and stay safe. Thank you all.
Management
Speaking time
Pirojshaw Sarkari
41
Moderator
12
Dhaval Shah
9
Ankita Shah
7
Depesh
6
Alok Deora
5
Nidhi Babaria
5
Dhwanil Desai
4
Anish Mathew
3
Ronald Siyoni
2
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Opening remarks
Vikram Suryavanshi
Thank you Rutuja. Good afternoon and very warm welcome to everyone. On behalf of PhillipCapital, I welcome you all to Q1 FY2023 earnings conference call of Gati Limited. We are pleased to have with us management team represented by Mr. Pirojshaw Sarkari (Phil), CEO and Mr. Anish Mathew, CFO for Gati Limited. We will have opening comments from the management followed by question-and-answer session. Thank you and over to you Phil Sir!
Pirojshaw Sarkari
Thank you Vikram. Good afternoon and a very warm welcome to everyone on our quarter one FY2023 Earnings Conference Call. We have uploaded our 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, the Chief Financial Officer for Gati Limited as well as our investor relations team. We started the new financial year on a good note with our revenues of our core express business increasing by 46% year-on-year and 13% quarter-on-quarter basis and we have seen improvement in our margins and profitability. The continuous efforts of infrastructure augmentation, integration of technology for efficient operations, realigning our systems and processes as per the requirements of the business and more over focus on customer delight have been the key pillars to this performance. With this upbeat performance, we expect to further gather momentum-entering 2023 with an agenda o
Anish Mathew
Thank you Phil. Good afternoon everyone and a very warm welcome to our FY2023 earnings call. I will take you through the highlights of financial results for the first quarter of FY2023. On revenue front, our consolidated revenues from operations for Q1 FY2023 stood at ₹431 Crores as compared to ₹299 Crores in Q1 FY2022 a growth of 44% year-on-year. Our surface express business revenue increased from ₹229 Crores to ₹337 Crores in Q1 FY2023 up by 47% year-on-year basis. The tonnage for the segment grew by 55% year-on-year. Post our revised focus on air express business revenue stood at ₹18 Cr, 2.2 times higher than last year same quarter. The growth was largely driven by tonnage growth. SCM business declined by 10% year-on-year at ₹10 Crores. Revenue share from MSME and retail accounts stood at 42% in Q1 FY2023 in line with our strategy to increase the share of revenue from this category closer to 50% levels. Our total volumes in GKEPL stood at 2,78,598 metric tons for Q1 FY2023 up by 55
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