Snowman Logistics Limited has informed the Exchange about Transcript of Analysts/Institutional Investor Meet/Con. Call held on August 01, 2022.
August 06, 2022
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Dear Sir/Madam,
Sub: Transcript of Conference call
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Please find attached the transcript of Snowman Logistics Ltd-Q1FY23 post results conference call held on 1st August 2022.
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Snowman Logistics Ltd. (BSE: 538635 | NSE: SNOWMAN)
Earnings Conference Call Q1 FY2023
August 01, 2022
Management:
Prem Kishan Dass Gupta
Chairman
Ishaan Gupta
Samvid Gupta
Sunil Nair
Director
Director
Chief Executive Officer and Whole- time Director
Kannan S
Chief Financial Officer
Snowman Logistics Ltd. Earnings Conference Call Q1 FY2023
Deepesh: Hi everyone, on behalf of Equirus Securities, I welcome you all to Q1 FY23 Earnings Conference Call of
Snowman Logistics. From the management we have with us Mr. Prem Kishan Dass Gupta-Chairman, Mr.
Ishaan Gupta-Director, Mr. Samvid Gupta-Director, Mr. Sunil Nair-CEO and whole time Director and Mr.
Kanan.S-CFO. I now hand the call to management for the opening remarks, post which we can open for
Q&A. Thank you, sir. Over to you.
Prem Kishan Dass Gupta: Thank you. Good afternoon to all of you ladies and gentlemen. I take the pleasure of welcoming you all
to the Q1 FY23 Earnings Conference Call of Snowman Logistics Limited. The results were announced and
as you can see that there is a great improvement in the revenue and the EBITDA and even at the PAT level.
We have also announced a dividend of 75 paise per share, because the company has healthy cash flows
.We are reducing our debt, we are incurring CAPEX but at the same time we have surplus funds to declare
a dividend. So, that is what we have done and going forward that will be our aim to keep on reducing the
debt, doing the CAPEX from our end and also you know, have a dividend. Also, at the same time, some
new loans will be taken. Term loans for new projects but that will be taken which can be managed very
easily from the cash flows. The company has taken a turn-around in the sense that we have now a base
case of where we have our capacity and our capacity as it stands now is 1,30,000 pallets in all, both cold
storage as well as dry warehouse which is the requirement of our existing customers and some ecommerce
customers who have approached us and we are serving them and we plan to serve them going forward. I
would now hand over the mic back to the compare to you know have the question and answer session the
management is here to and I'm here to reply to each and every query that you have. So, over to you.
Deepesh: Yeah, thank you, sir. Hi all. If you have any questions please use the raise hand option and then we can take
it forward. Sir, just to start if you can just talk about the warehousing growth. The warehousing growth, which
has been around 15 16% in this quarter, if we're going to break it up into the volume growth and the yield
growth and how do you look at for the full year in fiscal FY 23.
Sunil Nair: Okay, hi, this is Sunil Nair. See the overall trend both in terms warehousing and transportation has been very
encouraging. This is the time when post COVID most of the businesses have resumed or even crossed their
pre-COVID volume. So, we had around 15% growth in warehouse and 61% in transportation, the major
growth at the warehouse is what is primarily from the better utilization and the yield improvement per pallet.
Our utilization as compared to last year which was around 84-85%. This year Q1 was 89%. And in case of
ASP we have commanded around 6% improvement in the average selling price per pallet in warehousing
business. In case of transportation, our SnowLink initiative, where we aggregate the market capacities
through our tech solution has helped us grow well, that revenue as compared to last year has grown by two
and a half times. Last year Q1 we had Rs.6 crore of revenue coming from SnowLink whereas this year Q1
it was Rs.16 crores of revenue coming from that business. So, all in all, we see that the QSR sector is doing
very well. QSR has improved almost 30-35% as compared to last year and other than the pharmaceutical
where we had very high hopes, almost every other segment have shown a promising improvement,
pharmaceutical have been constant with no much change as such.
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Deepesh: Got it, sir. And sir on the margin spot, I think the warehousing segment has a margin of around 16%. So,
what are the steady state margins that we can look forward to in this year?
Sunil Nair: Margins. 16% see, if we are talking about at EBITDA level we are at 35% in warehousing business and
transportation business it is at 4% and the weighted average at company level, it is at 24%. And we see that
we will continue to maintain this as such, we see that the transportation business which operates at a lesser
margin as compared to warehousing will be contributing more on the revenue side. But all in all, we’ve still
believe that 24% is what we would like to maintain considering the price increase that we have got in the
recent quarter.
Deepesh: Understood sir. Sir, we have a question from Mr. Yash Tanna. Mr. Yash if you can just unmute yourself and
you can ask him.
Yash Tanna: So you've been speaking to your customers about the pricing. So going forward, how should we think about
price increases per pallet in the warehousing segment?
Sunil Nair: Yash, we could hear only your last statement. And if I understand what you're asking about how does the
warehousing pricing trends look like, right?
Yash Tanna: Yeah, exactly. I mean, because since a couple of years, I believe it's not been that great for us. But going
forward, how do you think it's going to pan out?
Sunil Nair: So see, yes, you're right, because of COVID. Last two years, the pricing was quite muted. And before that,
we used to get around 3 - 4% price increase, which just used to cover the inflation. This year, we have
already got almost 6% of the price increase. 5.8% to be more specific, and with the trend and the balance
pricing which are under negotiation with customers, we see that, one good part is after the COVID customers
have started recognizing the requirement of compliances, hygiene and cold chain maintenance. And with
that in mind, they are a little receptive to the price revisions. So, we fairly have had a good success. And we
see that the overall interactions are quite encouraging for us with the customers. So, we think that it should
be somewhere in the range of 6 to 7% year on year. That's our expectation.
Yash Tanna: And that would be sustainable in the medium term. Let's say 3-5 years we could get a 6 to 7% year on year?
Sunil Nair: Looks like, Yeah.
Yash Tanna: And what kind of volume growth we expect from, this from the warehousing sector. I mean, you have shown
a 16% growth year on year right that includes the pricing and volume.
Sunil Nair: Yeah, so see, in warehousing, we have a little change in the strategy what we are now trying to do is since
there is a lot of demand from dry storage for food and pharmaceuticals and we have been getting requests
we also thought of extending support there. So we have added close to 7,000-8,000 pallets in dry
warehousing through leased warehouses, where we don't have to invest in the overall CAPEX. So with that
intention in mind, we would like to continue to grow at a respectable level in warehousing. While in terms of
cold storage, we will be setting up our Kolkata warehouse ASAP and there will be some small expansions
in the existing locations. So we would expect a 15-16% growth year on year that's the plan.
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Snowman Logistics Ltd. Earnings Conference Call Q1 FY2023
Yash Tanna: Yeah. So, you briefly touched upon the partner model. So I'm a bit new to the company. So, I was just wanted
to understand this partnered model a little better. So this does give us a much better return on capital, right,
than the previously obtained model of us?
Sunil Nair: Yes, absolutely.
Yash Tanna:
Because, yeah, okay, and what part of the business currently is this business?
Sunil Nair: See, currently it is close to 15%. So, since we have started this just two years back with the E-commerce
Initiative, where we started leasing warehouses and modifying it to the E-commerce requirement. And now
we have extended that to the normal omni channel warehousing, for dry food. It is at 15%. But I think this
can grow at a much faster rate than the cold chain where there is no facility to lease and we end up investing
in the CAPEX and there is a project time of one year. So the growth rate in terms of driver housing should
be much better.
Yash Tanna: Got it, so do we have any targets or projections that three to five years down the line, this would be probably
30% of the business or something like that?
Sunil Nair:
I would not like to quote a number to it, but yes, we would like to make it even more than 30%. And because
we see the huge potential there, and with our experience of food, most of the food customers have
expressed intention to work with us in their dry food requirement also, as we are well versed with the Food
Safety norms, in warehousing.
Yash Tanna:
Got it.
Ishaan Gupta:
Yash, it’s Ishaan here. Just to add on that little bit. This model that, you know, we have started with, it has
come by way of, you know, it's a customer pull that people wanted this service. So we got into it. Going
ahead, the way that we are thinking about dry warehousing is that firstly, it's a good model because it's asset
light. So our funds are not blocked in CAPEX. At the same time the risk is mitigated because arrangement
is back to back from where we are leasing warehouse and to those who we're leasing it to. So the scalability
is quite easy. What are we waiting for is you know, we don't want to get into it without having back to back
arrangements. So as in when we explore more, either new customers or existing customers who have
requirements, that's how we will be expanding this business. So at this stage, we won't be able to give you
a number, but we are very keen on growing this in a big way. So maybe in a couple of quarters or something
we can give you more clarity.
Yash Tanna:
Got it? That's very helpful, Ishaan. On what on the debt reduction part. So could you help me with your net
debt number as of June and what are the plans for debt reduction as you mentioned in the opening
comments as well.
Sunil Nair:
So, our net debt is 90 crores.
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Snowman Logistics Ltd. Earnings Conference Call Q1 FY2023
Samvid Gupta:
So, net debt, somewhere there and net debt is around 93-94 crores right now. And the plan is when there's
surplus cash flow, it basically will do a split between dividend, loan repayment, and CAPEX.
Yash Tanna:
Oh, got it. Thank you, Ishaan. if I have more questions I’ll ask.
Ishaan Gupta:
Sure, thank you.
Deepesh:
Thank you, Yash. Hi all if you have a question please use the raise hand option and we can take your
questions. Yeah, Mr. Rohit, please go ahead.
Rohit Ohri:
Hi, Sunil. Couple of questions. What are these factors which give us this confidence of maintaining a growth
rate of the current momentum of around 20 to 25% on the top line?
Sunil Nair:
See the confidence is basis the pipeline that we have. The business development pipeline and also in terms
of integration that we are doing with our existing customers, there are a good set of customers where we
are not the one stop solution and they end up using multiple options, because we are not offering that
particular service or we are not present in that particular location. So, with that strategy in mind where we
are getting into dry warehousing and also with this SnowLink we are offering more transportation services.
As of now, SnowLink we have not developed a single new client, all SnowLink revenues 61% increase in
transportation have come from our existing set of clients only. And we see huge potential there even with
this, our estimation is we are only serving 25% of the transportation needs of our existing set of customers.
So, we see huge potential there in terms of revenue generation.
Rohit Ohri:
In terms of the segmental breakup, if you see the pharma segment it is showing a muted growth or it's not
growing and knowing that sea food and pharma these are slightly high margin businesses. Would you like
to share the reasons as to what exactly is happening in the market and why the pharma segment is not
growing?
Sunil Nair:
Yeah, so see, pharma segment primarily takes longer time in their decision making. And post COVID, as
you know, before COVID Complete pharma segment had a strategy on which they were working on and
post COVID, now, when things are normalized, the pharmaceutical industries are experiencing a different
kind of distribution requirements. And whoever we are in touch with, they're all back to the drawing board,
rethinking and re-deciding on how their distribution network should be operating. We are in touch with some
major organizations who are, and we are also giving inputs to them in terms of how their distribution network
should look like. Only thing is pharma being pharma, they take longer time and decision making. I think, six
month, nine months down the line, there'll be decisions out once they are very clear on what they want to
do. And that's when the numbers should show some change.
Rohit Ohri:
Okay, so, the thing is that they are not able to gauge the situation in the non COVID kind of portfolio that
they have. There, they're taking time to make decisions, is it?.
Sunil Nair:
Yes, so, they have realized that Pre COVID network is not working now and it need to undergo a change
and that change is what they are working on.
Rohit Ohri:
Okay.
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Ishaan:
Just to add to that. In the last few years, the laws have changed and they become stricter for the
pharmaceutical industry. So a lot of goods, which were used to be stored in dry warehousing and even in
the unorganized sector, because of stringent requirements, they have to shift to the organized sector and to
certain temperature control requirements, depending on the product. So those decisions are also now be
made by the pharma companies to you know, explore companies like Snowman, for their network. So that
shift is taking some time. Of course, the vaccines have dropped, compared to the early part of COVID. And
it was expected, so we never planned for them to you know, to be a big chunk of our product mix for very
long. So that’s where it is. A couple more points on that is that, this dry warehousing segment, which we're
talking about, one of the key customer base that we're looking in that is pharma. Because they're looking
for, you know, distribution solutions, not just storage or not just transportation, but everything combined. And
then also, like you were mentioning that sea food and pharma, some of the highest paying customers are
the segments for us. So over time that philosophy is also changing, where it is not dependent on the category
of the product that we serve, but it's more to do with the location and the kinds of services we offer to them,
of course, the temperature zone. So it's not necessary that you know, one segment is higher paying than
the other. It is more customer dependent and service dependent now.
Rohit Ohri:
Okay, if you see the current split of the revenue, dairy and ice cream seems to have contributed around
24% of the total sales, which probably could be because of the seasonality. And you know when ice cream
and dairy products we go off the shelf. So, do you think that the turnover we'll see a bit of a dip or do you
see that there will be a whitespace if at all, if that is the case?
Sunil Nair:
No, this is seasonality and there are compensating season that the other product takes. So, after dairy and
ice cream, which is July-August and after that the festive products both QSR and FMCG takes over that
volume. So, this is every year thing and this gets compensated, there is a lag of couple of weeks, but then
within that time it gets compensated.
Rohit Ohri:
Okay and in terms of the plant CAPEX with the changes that are coming, what sort of CAPEX and we
planned for the next two years, if you can share that.
Sunil Nair:
So, we will continue to invest anywhere between Rs. 75 to 100 crores in expansion, which will be a mix of
internal accruals and the debts, this will anywhere be between 12 to 18 months, this is the CAPEX that we
are planning which will include our expansion in Kolkata. Dry warehouses, where we may have to do some
customization and the expansion that we plan to do on in our existing setup in Pune and Hyderabad.
Rohit Ohri:
Okay, in terms of the expansion, any thoughts on what is the utilization of Siliguri plant because last time I
believe it was somewhere around 30% or something and by when do you think that it will reach the peak?
Sunil Nair:
So, our Siliguri is at 35% now, and we expect it to reach around 75% in October
Rohit Ohri:
Okay, and this new Kolkata property which you spoke about, we intended to add in two phases, which was
around 9,000 Pellets probably in 4,000 and then 5,000. So, what is the progress on that and how are we
seeing that?
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Snowman Logistics Ltd. Earnings Conference Call Q1 FY2023
Sunil Nair:
So, we got the land conversion approval done and our Phase One will be 5000 pallets, Phase two will be
4000 pallets, and we are at a stage where we are taking the building plan approval from the government.
Once that is done, we will work on the construction side.
Rohit Ohri:
Okay, so there are no issues related to the cost of steel or maybe probably cement if at all we're going for
construction, because we are kind of blending in with the asset light model as well. So, how do we take it
forward then from here?
Ishaan:
Yeah, no, there are concerns that we faced with higher costs, but already those costs have started coming
down in the mean time, you know, the land, like Sunil was saying, all the land acquisition and related
formalities are getting complete. So now, luckily for us, the construction costs have come down, so we will
be going ahead with it. Like you're saying we are going to have a mix now going ahead. Some cold storages
in key locations, we will be investing into the asset. But especially for dry warehousing it will be asset light,
even the transportation side as you know from Snow link, it's all the growth is coming from asset light strategy
on it. And some cold storages as and when they are available in future also we will be taking on asset light
or lease model. So it will be a mix of both. As long as you know, we don't want to put the burden of debt or
very, you know, tight cash flow from Snowman, because while the PAT is not reflected, but if you can see
from EBITDA and Rohit, you've been following the company for a few years now. So you know, we are very
healthy cash flows, and each year they are improving. So that's why we're taking this decision that we don't
want to lock it up in any one project or something like that.
Rohit Ohri:
True. So, this vision that we had to reach somewhere around two lakh pallets, so would you be revising that
or you want to curtail that or bring it down?
Ishaan:
We won't be revising the figure but we will be revising the timeline definitely, because we see more growth
and more EBITDA potential in the dry warehousing side now.
Rohit Ohri:
So, I mean, like, will you like extend by another two years, so we had a vision for next 5 years. So you take
it to 7 years to reach 2,00,000 pallets now, is it?
Ishaan:
No, it's too early to say right now. We, you know, we want to see how this pans out and there's very good
response coming from the dry warehousing side. So we want to focus our energies there, apart from just
pure, you know, warehousing and transportation, there are some more activities that we started getting into,
so that we can provide a full range of services to the customers. Maybe Sunil will explain that a bit more.
But if, you know, based on that, you will see that it's not now the number of pallets or the storage that we
want to grow, we'd rather grow the service component of the business.
Sunil Nair:
Yeah, so Rohit, what we're planning to do is with a request from customers and the trend that most of the
developed countries have followed, evolved countries have followed in distribution. We are getting into
offering a end to end distribution solution, wherein we also own inventory wherever required, and we do the
billing and collection also on behalf of our customers. So, with this offering, which is the request from some
of our strategic customers. We will be offering a complete end to end where the customer focus is on
manufacturing and selling only and rest is all managed by us including the billing and collect, so, we become
the national distributor for them. So, this is one thing that we will be starting now on.
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Rohit Ohri:
So, Sunil with these value added services that you're talking about, should we see an uptick in margins
going forward, like currently it is 24-26%. Should we see that we will reach to our old pre COVID level
margins of around 30-32% or so?
Sunil Nair:
So, see pre COVID margin of 30-32% was, 35% is still there in the warehousing business only because the
transportation revenue is going up the overall mix is looking like lesser. Whereas our warehousing margins
are still at 35-37%. So, margin has not come down margin remain same only the mix have changed. If you
see only quarter to quarter, last year our transportation revenue was only 31-32% in Q1, whereas this this
year Q1 it is 39%. So, with that increase, you're seeing that the blended percentages come down because
of the blend, okay? Otherwise individual level the margins have increased in transportation with the asset
light model and in case of warehousing it remains same. So there is no change there. What will happen is,
with this new service offering even though the merchandise value will come to us as a revenue. Okay, so,
the revenue will go up exorbitantly. Whereas our distribution markup which is our service revenue today will
also increase slightly because of the additional services provided and the related margin that we are asking
the customer so, that's how it is going to be, you know, accounted. So percentage wise it will it may look
lower than the current one because the revenue will go up. But overall absolute number the Ebitda will be
much better.
Rohit Ohri:
The Blended EBITDA version, right? ,
Sunil Nair:
Yes.
Rohit Ohri:
Okay. In some of the previous concalls, you know, we had this ambition or we had this idea of reducing the
transportation fleet to somewhere to zero. And if you can share, what is the status on that currently, what is
the fleet that we have right now and how much time will it take for us to come down to zero?
Ishaan Gupta :
Rohit, just to correct that. In the past, we didn't mean that our fleet would go down to zero. What we meant
was that we would be only focusing on serving our own customers and we'll be reducing the fleet. But you
know, as we grow we're not adding the fleet because now we can address that through SnowLink. So what
we want to do, we will always have some portion of fleet of own fleet with us to service key clients and where
the service level metrics are high. So the current distribution how we stand is we have 249 own vehicles.
We have 82 dedicated vehicles with us separately from that and 150 vehicles available on a need basis,
this is all 82 and 150 are through this SnowLink platform. So, as an overall, we have over 480 vehicles
available with us. And this Snow link portion can be scaled as and when the requirement increase at any
time because the market vehicles are available. The advantage is that when we have the market vehicles,
we have a financial advantage. I’ll ask Sunil to explain that you. The Snow link advantage.
Sunil Nair:
Yeah. See, in case of SnowLink, the thing is the overall risk is back to back in terms of fuel, driver,
maintenance and all. And hence, what we do is we take care of the responsibility of utilization of the vehicle
and the operations in terms of temperature, maintenance, hygiene of the truck, timely pickup, timely delivery
and all those things. With that limited exposure to the cost elements, our margins are largely protected. So,
which in our own vehicles case, not the case, because here we manage drivers, we manage maintenance,
fuel, everything. So we thought that the SnowLink model is better, where the small transporters are getting
to get into a larger play of distribution and serving larger clients through our network. And at the same time,
they take care of their small fleet, in terms of maintenance and driver and we don't have to worry about that.
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So, financially, we have found that at a PBT level, the snuggling model is better than owning a truck. So as
Ishaan said, we will reduce our own trucks, which is today 249, we will reduce it but it will never be zero,
maybe we'll go down to 150 trucks but they will be very specialized trucks for our strategic customers where
we put a multi temperature truck or some eutectic technology. So technology wise they are going to be very
special trucks which we will own up.
Ishaan Gupta:
And what we wanted to do at that time, and what we've done now is, we've deployed zero vehicles towards
pure transportation. So, we don't do point A to point B, cold temperature control transportation, we only use
it as an add on for our existing business.
Rohit Ohri:
Okay. My next question is related to SnowServe. You know, we were partnering with some players over
there for Amazon as well as for Fraazo in Bangalore and Pune. So, if you could take us to the developments
that is happening over there for Fraazo
Sunil Nair:
So, e-commerce see, we have got an increase of 37% quarter on quarter last year vs this year and Amazon
we serve at four locations today, which is Delhi, Mumbai, Pune and Ahmedabad also started now, last
month. Fraazo we serve them in Bangalore and Pune. So, Fraazo is a very small client and its contribution
in the overall ecommerce is very negligible as of now. They are in the stage of raising some fund, maybe
once that fundraising is done, they plan to have the expansions. In case of Amazon, now since all the
facilities are up and running, they are also working on some renewed offerings in terms of how the
competition are offering a shorter time deliveries and all those things. So they are working on those
initiatives. We believe that it will continue to grow at this pace, you know, anywhere between 25 to 30%.
year on year in terms of revenue.
Rohit Ohri:
Okay, so any thoughts on increasing the shareholding, the promoter shareholding? Because it is somewhere
in the range of 40s and it's been some quite some time when before the and after the Japanese counterparts
they exited. So any thought on the increasing the promoter shareholders?
Prem Kishan Dass Gupta: Yeah, we have been deliberating this for quite some time. So, that's where the GDL board to decide, you
know. So, at Snowman we can talk about the dividend or maybe a possibility of buyback in the future. All
those things there. So once GDL board decides and under the creeping acquisition, that we can acquire
some shares that that will be, that is a separate issue, and we'll come back to you on that.
Rohit Ohri:
So any thoughts on, you know, raising some money via rights issues or something like that, so that we can
also contribute as old shareholders and trying to get some reward? I know that you have started with this
dividend. And hopefully that will continue with this distribution policy, then, do you think that we can also
contribute as long term shareholders in the system?
Prem Kishan Dass Gupta: See, we are locked at those possibilities in the past and what we think with a new concept of you know,
asset light as well as you know, owning our own warehouses. We are very comfortable right now, whatever
visibility we have on the expansion plans, because now going forward, apart from own and lease, or you
know asset light model. The expansion of services, the scope of services is widen, like Sunil explained just
now. So our revenue will be increasing, and which will be contributing directly into the EBITDA margins, or
not margins, I would say, only, but also the absolute EBITDA, by extending those services in the new model,
and we feel that there is a requirement for additional funds where I mean, GDL as a parent company, I
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mean, it's comfortable now on the debt level and also on the cash flow level. We'll certainly look at whether
to raise the fund through a rights issue or I mean, I don't think we will get into a QIP discussion again soon.
But, we have ways and means to have access to funds, according to our expansion plans.
Rohit Ohri:
Okay. Sir, my last question is related to any place or any location where you're spotted that the pallets are
unutilized, and you would like to pay it off from the operations?
Prem Kishan Dass Gupta: No, I don't think so that we have any location where I mean, we'll be, you know, disposing of any asset
except for a piece of land, which we have in Bangalore, which is far away from the city, and it's a very small
piece of land on the national highway. And that might be acquired by NHAI anytime, so where we are
disposing of that asset. Other than that, we don't have any plans to sell off any of our capacities. We would
rather focus on filling up those and we are very much there, you know, both in Siliguri and Coimbatore which
are at present, slightly low, having slightly lower occupancy, but the timing of their operations starting was
not right with the season in those areas where I mean, like for instance, in Siliguri, Sunil told you that it will
be going up from 35% to 75% in the next two months or so, similarly in Coimbatore we have plans and these
capacities have come after proper studies and the market and the business over there. So very soon, you
will see that these locations where the occupancy is low, will come up and bring our average occupancy to
much higher levels.
Rohit Ohri:
So, can you just share some more details on this piece of land? Because since you said that it is closer to
the highway, it should be getting some more better valuation. So, just to gauge rough idea as to what size
or what is the valuation that we might get if this asset is paired off?
Prem Kishan Dass Gupta: No, it's a very small piece of land because already good part of it has been acquired by national highway
authority. So we'll be fetching something around two crores to two and a half crores for roughly an acre.
Rohit Ohri:
And what is the property that we have? Though we are saying small, small can be any number.
Prem Kishan Dass Gupta: Roughly an acre.
Rohit Ohri:
Okay, so thank you for answering.
Ishaan:
Sorry, this is already I mean, there's no operations happening there anyway. It was just empty location.
Rohit Ohri:
Okay, so thank you for answering the questions and hopefully that you continue with the growth path and
make money for all the stakeholders and shareholders. Thank you for answering the questions.
Prem Kishan Dass Gupta: Thank you.
Rohit Ohri:
Thank you Rohit for your continued support.
Deepesh:
Thank you. Hi, all. If you have a question please use the raise hand option. We have a follow up question
from Mr.Yash. Mr. Yash, please go ahead.
10 | Snowman Logistics Ltd., Corporate office: No. 54, Old Madras Road, Virgo Nagar, Bangalore, India - 560 049
Snowman Logistics Ltd. Earnings Conference Call Q1 FY2023
Yash Tanna:
Yeah, thank you for the opportunity again. So, I wanted to ask, So, we spoke about you know, getting a
higher ASP. So, previously, you we used to get 3-4% now, we've already got 6% and We are in talks with
the customers. So, you know, what has actually changed for us, that we are able to command instead of
pricing and I mean, is it because the competitive intensity has gone down or we have started offering
something different from the industry, how is this happening?
Sunil Nair :
So, see, there is a clear comparison now in the market with respect to the quality of infrastructure and quality
of operations post COVID. During COVID there has been multiple audits and some global audits by the
customer side, wherein they compared our operations and our facilities with the other options that they
explored in a certain other locations. And they realized that to maintain this kind of standard, there is a cost
involved and when we are talking to them for the price revision, this time, they understood most of it, which
earlier was very difficult to convince them. So, I would say that,, that is the most important thing that we are
experiencing. Secondly, last two years, we have not got much of the increments, so this time, there is some
flexibility that they have. So, these are the two main reasons for this.
Ishaan:
And related it to the service levels is the fact that in the last, say five years or something like that, we have
really invested quite heavily into our technology and our processes. So, our customers value that and those
kinds of things are, I mean, just totally unique in this industry, what we are doing compared to you know,
any of our competition, the kind of visibility and transparency that our customers get from us, they are not
able to get from anyone else. So, those kinds of things help with the pricing increase.
Yash Tanna:
Has there been a scenario where there will be some consolidation in the industry whereas some capacity is
going off stream due to COVID and the other operations?
Ishaan:
Not really, the places are still the same, I mean, competition remains the same. The levels of discounts are
actually higher. So when we get a premium pricing, it's compared to a lower discount in the market also so,
you know, challenge is there to convince the customers. What has happened though is that the quality of
service of some of the competition has gone down because they've not been able to keep up with costs as
you know, things have changed over COVID.
Yash Tanna:
That’s helpful. The other thing was, so, what so on the partnered model, now that we have roped in Amazon
and Fraazo as well. So, how does the contract look like? What is the risk of that we lose the customer due
to any kind of issue, maybe a service issue or they might find a partner or how does the contract work?
Sunil Nair:
See the contract is largely back to back, where it is fully dedicated warehouse. So, we do not assume a risk
of any termination clause from customer, it is back to back with the vendor and wherever we are leasing a
warehouse for shared use by multiple customers there we are going for a longer term of arrangement with
the vendor after adequate studies with respect to demand and pricing in that particular location.
Yash Tanna:
Okay, but if there is one partner, let’s say Amazon, he has a time period which he has committed to the
warehouse, is that right?
11 | Snowman Logistics Ltd., Corporate office: No. 54, Old Madras Road, Virgo Nagar, Bangalore, India - 560 049
Snowman Logistics Ltd. Earnings Conference Call Q1 FY2023
Sunil Nair:
Yeah. So same time, it is back to back signed with the vendor. So if there is a lock in period of three years
and contract period of five years, same terms are signed by with the vendor also.
Yash Tanna:
Got it, but what is the average tenure of these contracts?
Sunil Nair:
So, three years to nine years is the tenure.
Yash Tanna:
Okay. And going forward, also the new contract at a similar tenure, right?
Sunil Nair:
Yes, correct.
Yash Tanna:
So that does bring in a lot of correctability in the model.
Sunil Nair:
Yeah.
Yash Tanna:
Okay, that's good.. Other, I wanted to ask also a lot of proportion is being contributed by QSR and Dairy.
So, not like a two or three quarter outlook. But I wanted to understand how do you see this industry
performing over the next, let's say, three to five, six years? A little bit of a longer term outlook, how QSR will
grow because that growth will basically determine our growth, right?
Sunil Nair:
Yeah. So see, QSR and RTC have done well now. And it is primarily because earlier QSRs were mostly
dine-in concept. Whereas now they have also got into the home delivery model. So earlier, the pre-COVID,
they were 5% to 7% as the delivery; whereas they are now 30-35% delivery. I don't think this is going to go
back to the earlier ratio. So, this will continue like this. RTC, which is the need of the hour now most of the
Cloud Kitchen use RTC as a, you know raw material where they try to deliver as fast as possible. So I think
both these segments are going to do well. And basis, our interaction with the most of the QSR brands in the
country. They are all also additionally coming up with Cloud Kitchen. So they will have their own outlets, but
they will also set up a lot of Cloud Kitchen, where their cost of operations is low and the volume is higher.
So I think this trend will continue.
Yash Tanna:
That's good to know. But what has been the broad growth rate or trends that has grown, like about 20%
over the last two, three years or
Sunil Nair:
So see the last two, three years number is not the correct number to consider. Because most of the,
yesterday McDonald's, the West Hardcastle declared a resulting 200% growth. But that is because of COVID
during peak season, the stores were closed. So I think the comparison of last two three years won't be right,
the growth rate is not the right indicator.
Yash Tanna:
I mean, I was just looking for a normalized growth rate, if you would have some insights into that?
Sunil Nair:
No, unfortunately, no, even the QSR guys don't have that estimation properly.
12 | Snowman Logistics Ltd., Corporate office: No. 54, Old Madras Road, Virgo Nagar, Bangalore, India - 560 049
Snowman Logistics Ltd. Earnings Conference Call Q1 FY2023
Yash Tanna:
. So the other question was, so you mentioned about a Rs.75 to 100 crore expansion plan for the next two
years. That would be the about one to one and a half years of your cash flow. Rough estimate. Post that do
we expect a significant taper down the CAPEX plan? Because then that would result into a significant
deleveraging and probably at a higher dividend payout . What are the plans up broadly post expansion?
Ishaan Gupta:
So basically, when we're talking about this Rs. 75 to 100 crore, we're taking into account our cash flows, we
want to, you know, keep regular dividends going out to the shareholders. So we're taking those into account
also, and our existing debt which is there, the continuous repayments of that are taking place. So over the
course of these 18 months, our debt will also be coming down some of the regular CAPEX and you know,
smaller items which we're doing will be done directly. And then there will be new debts which we will take,
which are again, smaller size loans for each project, you know, term loans, because those are available
even with interest rate hikes and everything. They're available at very good rates. And the repayment of that
is in the next five years. So, we'll be able to very healthily manage the cash flows. And traditionally also,
we've never liked to keep a very high level of debt. So we'll keep it in line with, say debt to EBITDA, ability
to pay down the debt will always be, you know, a priority for us.
Yash Tanna:
Sir, you mentioned debt to EBITDA levels of?
Ishaan Gupta:
See maybe 1.25…ideally one to one.
Yash Tanna:
Okay, so one to one, got it. Did you also talk about tapering down of the expansion after those Rs. 75-100
crore full expansion.
Ishaan Gupta:
No, our plan is still go ahead, but we see more opportunity, like I was saying in the leasing and the asset
light side. So a CAPEX requirements will go down, but will still be expanding, you know, in a big way.
Yash Tanna:
Got it, that's helpful. For now those are the questions. Thank you.
Ishaan Gupta:
Thank you.
Deepesh:
Thank you. Due to lack of time, we'll take that as a last question on behalf of Equirus Securitie, I would like
to thank everyone for participating and thank the management for giving us the opportunity to host the call.
Sir, if you have any closing remarks, please go ahead.
Prem Kishan Dass Gupta: I think it was a nice session to have and answer the queries, which every one had in mind and as I said,
we are set to you know, expand in a different model where asset light, our own warehouse, we have our
own fleet, we will have a vehicles availability through the SnowLink platform, which is a high-tech IT platform,
which people have started using and the services, the scope of services is being expanded. So the revenue
as well as the bottom line will increase. So with that, I thank all of you. And if there's anything I mean, the
management is always there to answer that, you know, you can approach them whenever you have
something to.
13 | Snowman Logistics Ltd., Corporate office: No. 54, Old Madras Road, Virgo Nagar, Bangalore, India - 560 049
Snowman Logistics Ltd. Earnings Conference Call Q1 FY2023
Ishaan:
Thank you Deepesh and Equirus for hosting the call. Thank you Deepesh.
Deepesh:
Welcome sir. Thank you so much.
Prem Kishan Dass Gupta: Thank you, everyone
14 | Snowman Logistics Ltd., Corporate office: No. 54, Old Madras Road, Virgo Nagar, Bangalore, India - 560 049
Snowman Logistics Ltd. Earnings Conference Call Q1 FY2023
For further information, please contact:
***
Kiran George Snowman Logistics investorrelations@snowman.in +91 80 6769 3700
Anvita Raghuram / Bijay Sharma Churchgate Partners snowman@churchgatepartners.com +91 22 6169 5988
Note: This transcript has been edited to improve readability
Regd. Office: Plot No. M-8, Taloja Industrial Area, MIDC, Raigad, Navi Mumbai Mumbai Raigarh MH 410206, India Web: www.snowman.in
Cautionary Statement: This presentation contains statements that contain “forward looking statements” including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Snowman Logistics Limited (“Snowman Logistics” or the Company) future business developments and economic performance. While these forward looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. Snowman Logistics undertakes no obligation to publicly revise any forward looking statements to reflect future / likely events or circumstances.
15 | Snowman Logistics Ltd., Corporate office: No. 54, Old Madras Road, Virgo Nagar, Bangalore, India - 560 049