ACLGATINSEQ2 FY23November 10, 2022

Allcargo Gati Limited

7,230words
111turns
14analyst exchanges
4executives
Management on call
Pirojshaw Sarkari
CEO, GATI LIMITED
Vikram Suryavanshi
PHILLIPCAPITAL
Anish Mathew
CFO, GATI LIMITED
Anish Matthew
Chief Financial Officer for Gati Limited. We will have opening comments
Key numbers — 40 extracted
84 million
ption in both urban and rural India. The e-Way bills generation recorded an all-time high of over 84 million in September, 2022 signaling a strong boost to economic activity on the back of a festive season.
13%
and cost. NLP, the National Logistics Policy targets to reduce the logistics cost from a current 13% to 14% of GDP to single digit. This augurs well for the road Logistics sector as it shall reduce
14%
st. NLP, the National Logistics Policy targets to reduce the logistics cost from a current 13% to 14% of GDP to single digit. This augurs well for the road Logistics sector as it shall reduce the ove
215%
siness has delivered a solid improvement in EBITDA for H1 FY23 showcasing a significant growth of 215% on a year-on-year basis. The performance is in line with our expectations and stated strategy. We
Rs. 21 crore
with the segment growing at the fastest pace and achieving its highest ever quarterly revenue of Rs. 21 crores after several years. Our pillars for delivering performance remain consistent with a strong focu
Rs. 435 crore
sults for the second quarter of FY2023. For Q2 FY23 consolidated revenue from operations stood at Rs. 435 crores as compared to Rs. 399 crores for Q2 FY2022, indicating a growth of 9% on year-on-year basis.
Rs. 399 crore
f FY2023. For Q2 FY23 consolidated revenue from operations stood at Rs. 435 crores as compared to Rs. 399 crores for Q2 FY2022, indicating a growth of 9% on year-on-year basis. EBITDA for the same period stood
9%
tions stood at Rs. 435 crores as compared to Rs. 399 crores for Q2 FY2022, indicating a growth of 9% on year-on-year basis. EBITDA for the same period stood at Rs. 28 crores as compared to Rs. 18 cr
Rs. 28 crore
r Q2 FY2022, indicating a growth of 9% on year-on-year basis. EBITDA for the same period stood at Rs. 28 crores as compared to Rs. 18 crores registering a growth of 53.4%. Pre-exceptional PBT stood at Rs. 7 c
Rs. 18 crore
wth of 9% on year-on-year basis. EBITDA for the same period stood at Rs. 28 crores as compared to Rs. 18 crores registering a growth of 53.4%. Pre-exceptional PBT stood at Rs. 7 crores for Q2 FY23 as compared
53.4%
A for the same period stood at Rs. 28 crores as compared to Rs. 18 crores registering a growth of 53.4%. Pre-exceptional PBT stood at Rs. 7 crores for Q2 FY23 as compared to Rs. 6 crores for Q2 FY22, r
Rs. 7 crore
8 crores as compared to Rs. 18 crores registering a growth of 53.4%. Pre-exceptional PBT stood at Rs. 7 crores for Q2 FY23 as compared to Rs. 6 crores for Q2 FY22, registering a growth of 18.9% given in the
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Guidance — 20 items
Pirojshaw Sarkari
opening
“With sales acceleration we continue to prioritize our MSME and retail business while aiming to increase the wallet share of our key and strategic accounts to help our profitability.”
Pirojshaw Sarkari
opening
“We anticipate that these hubs will add up to volumes for the coming quarter.”
Amit Dixit
qa
“Is it possible to give more color on the more specifically can we expect certain unlocking of receivable as the year goes by?”
Amit Dixit
qa
“So, what kind of receivable number can we expect by end of FY23?”
Pirojshaw Sarkari
qa
“One of the use for the funds that will come in moving forward also will be that we have a working capital debt right now.”
Alok Deora
qa
“The margin of guidance which you had given of around reaching 10% by end of this year, so that we are on track with that or any changes there?”
Alok Deora
qa
“So, when we will be making similar margins in air as well.”
Gautam Gosar
qa
“The guidance which you've given for the EBITDA margins of 9% and going forward, taking it to 12% to 15%.”
Gautam Gosar
qa
“Does that include other income or without other income, the margin guidance?”
Gautam Gosar
qa
“Basically, the interest on fixed deposits will be included in the margin guidance which you have given right?”
Risks & concerns — 4 flagged
As our infrastructure grows, we will then make sure that corresponding volume also grows because in the current infrastructure it was very difficult for us to manage increased tonnage.
— Pirojshaw Sarkari
First wanted to understand on the demand trend, how has it been for the festive season for us and also in October and do we see the same revenue run rate continuing in the second half of this year, because we have been getting some signals of some slowdown in selected pockets?
— Alok Deora
I'm not seeing for the express industry, a real slowdown.
— Pirojshaw Sarkari
It's a big challenge because as we grow the large business each large business gives us much larger volume than what an MSME and a retail gives us.
— Pirojshaw Sarkari
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Q&A — 14 exchanges
Q
I have three quick questions. The first one is, is it possible to quantify the EBITDA of Surface Express and Air Express businesses separately without taking other income into consideration?
Pirojshaw Sarkari
Like I was saying that we don't measure our EBITDA margin separately for our Air and Surface products because we have combined operations on the ground and we only measure our gross margins on the product separately. Our gross margins on both these products are very similar. Okay fair enough. The second question is in H1 FY23, receivable has gone up by Rs. 734 million while payables have also gone up by 221 million. Is it possible to give more color on the more specifically can we expect certain unlocking of receivable as the year goes by? Anish you want to take this question? So, receivable I
Q
A couple of questions on my side. So, first being the e-Bay bill generation in the second quarter compared to the first quarter was around higher by 6.5% while the tonnage handled by Gati quarter-on-quarter is higher by 1.5%. Is it the right way to compare? Some comments from your side? That's my first question.
Pirojshaw Sarkari
As I have been saying this for now few months that at Gati we are developing our infrastructure so that we can increase our top line and not reduce the serviceability of that increased volume. In the meantime, what we have done and is very evident from the numbers is that we have been concentrating on increasing our profitability. Therefore, although the growth quarter-to-quarter has been only 10%, you can see that the EBITDA is up by 53%. As our infrastructure grows, we will then make sure that corresponding volume also grows because in the current infrastructure it was very difficult for us
Q
Just had couple of questions. First wanted to understand on the demand trend, how has it been for the festive season for us and also in October and do we see the same revenue run rate continuing in the second half of this year, because we have been getting some signals of some slowdown in selected pockets? Just your thoughts on the Express B2B side.
Pirojshaw Sarkari
In spite of the fuel prices being held and also the inflation as you see, we saw a good demand for the festive season, specifically in the automotive sector and the consumer durable sector and we did the highest ever tonnage in the month of September which was even more than 100,000 tons and that is with the same capacity that we have. October having so many festivals had lesser working days but if you see the revenue per working day it has remained the same. I'm not seeing for the express industry, a real slowdown. In fact, we see the trend continuing for the month of November too. The margin
Q
I have one clarification. The guidance which you've given for the EBITDA margins of 9% and going forward, taking it to 12% to 15%. Does that include other income or without other income, the margin guidance?
Pirojshaw Sarkari
It depends on what you call other income. For me when I generate cash in the business and get interest on that cash it is other income. But if it is extraordinary income no. The answer is no. Basically, the interest on fixed deposits will be included in the margin guidance which you have given right? Yes.
Q
I have a couple of questions. Sir, our surface express business, for tonnage-wise on Q-o-Q basis we just did 1.5% growth. So, what was the reason for that? And as asked by the earlier participant, since our capacity was constrained so for the coming quarters could you guide us the volume and how it will pan out?
Pirojshaw Sarkari
If you really look at my first quarter results our growth in the first quarter was higher than what the general expectation in a first quarter of a financial year is. And this was because there were certain competitive elements for which we had got more volume and therefore growing our second quarter business looks a small growth 1.5% but it is a large business. It is just because in the first quarter we got that additional growth due to competitive, what should I call, disruption. So, I hope I've answered your question. Moving forward we are very buoyant that we have now got our Bombay hub up
Q
First question I just wanted to understand, like one of our direct competitors which is listed, few months back it opened its Gurgaon hub and seems to be doing well. From a competition perspective how does it really affect us? Like even that is a very big hub, so does it really directly affect us? I just wanted to understand from a business perspective.
Pirojshaw Sarkari
25,000 crores is the organized market size and an equal if not more unorganized market size. There is enough room for all the players to grow in this market. We have to convert the unorganized to organized and that is the way all of us should be able to grow more than the market rate of growth. Secondly, I was just looking at your surface express tonnage and revenue, Q1 and Q2. So, there seems to be a slight decrease in realization is my understanding, Q-on-Q. What would be the reason for the same? The slight increase or decrease happens depending on the lanes that the customer gives us. There
Q
My question is a little more tilted towards the client mix which you already mentioned before. I want to know going forward in the next two quarters or even in the year how does that mix look like for you? And second, which segment has contributed the most to your EBITDA expansion or was it just a function of increasing efficiency through whichever mediums you all have done.
Pirojshaw Sarkari
I keep repeating the same answer over and over again and I will do it once more for you. We clearly have a focus on MSME and retail. That does not mean we stop getting new business or better wallet share from the large customers. Basically, if you have to optimize cost, the one factor that you have to keep in mind is capacity utilization. And capacity utilization is a direct derivative of volume. So yes, the large volume does help us to reduce costs on our major cost which is our network. It's a balance between both yield and cost reduction which has given us our gross margin.
Q
I just have one remaining question. We have been extending the timelines for hubs like Pune, Hyderabad, Cochin in our PCP in the last couple of quarters. Any reason for that?
Pirojshaw Sarkari
I have given timelines for Bombay and Bangalore. Yes, both of them have been extended. Bombay specifically by more than a couple of months. Basically, Bhiwandi is a challenging area, and we can't really have control over the construction since these are all built-to-suit done by the investors and landlords. But happy to say that we have started shifting in today over there. Bangalore specifically is because of the rain. There have been some torrential rains and therefore the plinth which was supposed to come up much earlier took more time because of the monsoon. Having said that we are always
Q
You've given very precise, targets for EBITDA margins for year end and in long term. So, at what revenue level would you achieve that, that's my first question?
Pirojshaw Sarkari
There are two kinds of margins that we speak about. One is the contribution of gross margin and the second is the EBITDA. Expansion of the gross margin and revenue increase, combination of these two will expand the EBITDA because we have now reached the stage in below gross margin costs where they will be directly proportional to the revenue. They are not variable. So, we can leverage that with the increased gross margin and revenues. When I talk about my 3,000 crores exit rate with a 12% to 15% EBITDA margin that is basically the first target that we have set for Gatiets when I came into the
Q
I wanted to understand firstly that you have given a medium-term guidance on where you want to take the EBITDA margins of the business but when I look at the depreciation cost and in context of the hubs that we intend to add over the medium-term that has been going up and the way the accounting is; depreciation also accounts for the lease rentals that we pay on our long- term leases. So, in that context how do you expect the depreciation cost to increase over the medium-term? And in context of that where do you expect the PBT margins to be in 2 years’ time?
Anish Mathew
Well, I think your question is directly related to the PBT margin. So, I would put it this way. The depreciation accounting or IndAS accounting is getting reflected in the EBITDA and equal amount is getting off-set that is depreciation line. Net-net that it's not going to be having a major impact on the PBT line. You would be giving a credit to your EBITDA line on account of IndAS but you will be debiting depreciation as well as interest charge in the below EBITDA line. So, net-net as you know the PBT line would more or less is going to remain the same. There will be marginal increase or decre
Q
Can we say that we have capacity constraint? Is it like we have less number of trucks or is it more to do with the efficiencies in the hub centers?
Pirojshaw Sarkari
It is more to do with the space and the way some of our old hubs have been constructed. Nothing to do with transportation. Transportation capacities can be increased or reduced because we are an asset light company. So, even if I double my tonnage, I can manage the transportation today. It is the hub centers. For example, and I'm repeating something here, in North we had three separate hub centers earlier and a single truck had to unload and load from three hub centers before it moved out of Delhi. There was tremendous inefficiency there and each of these hub centers had hardly five docks each
Q
I had a couple of questions on the fuel station side. Could you just give me the timeline as to when will the fuel station be divested completely and how many petrol pumps do we own currently right now?
Pirojshaw Sarkari
So, we have three fuel stations. If you can help me with timelines when we deal with the Oil Ministry, I would be very happy. It’s on a lighter note, please don't take it seriously. In the first quarter con-call you had mentioned that there were certain assets that were held for sale and we were in various stages and we were going to receive some money in Q2. So, have we received any money from them? Could you just update on that? AHS, we have sold many properties and the total amount of money realized on account of sale of assets held for sale for 6 months, 30th September is Rs. 67 crores. Th
Q
I had just one question, small question. While we have seen the growth of express industry post GST and what we're also seeing is a lot of supply chain getting realigned and emphasis based on the secondary distribution. Now we exhibit upbeat expectation on revenue growth over the next 3-4 years being upwards of 20% for the industry. Are you seeing any specific end users’ sector which are adopting Express Logistics in a much faster way or are you seeing any specific indicators on the underlying sectors? That's something which I wanted to pick your brain on?
Pirojshaw Sarkari
So, what I was saying is traditionally the industries that used to use Express Logistics was auto industry specifically for the aftermarkets business which is the spare parts and components business. We used to also see pharmaceuticals using Express Logistics to reach their goods to their distributors and C&F agents. But there is a big change now happening with the advent of e-commerce. A lot of the consumers and brands are using e-commerce to reach sorry using B2B express logistics to reach the warehouses of the e-commerce companies so that their goods can ultimately reach the retail customer
Q
So, thank you everyone for attending this call. If you have any more questions, you can either contact SGA who is our Investor Relations company or Ankit who heads our Investor Relations. Thank you very much.
Management
Speaking time
Pirojshaw Sarkari
40
Moderator
16
Anish Mathew
9
Dhaval Shah
7
Riya
5
Nidhi Babaria
5
Amit Dixit
4
Alok Deora
4
Pradyumna Choudhary
3
Saloni Hemani
3
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Opening remarks
Vikram Suryavanshi
Thank you Renju. Good afternoon, everyone. On behalf of PhillipCapital, I welcome you all to Q2 FY23 earnings conference call of the Gati Limited. We are pleased to have with us management team represented by Mr. Pirojshaw Sarkari (Phil) – Chief Executive Officer and Mr. Anish Matthew – Chief Financial Officer for Gati Limited. We will have opening comments from the management followed by the 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 a Quarter 2 FY23 Earnings Conference Call. We have uploaded the results, press release and presentation on the stock exchanges and company's website. I hope everyone has had an opportunity to go through the same. Along with me I have Mr. Anish Matthew, – our Chief Financial Officer for Gati Limited and our Investor Relations team. I will start by sharing the industry and business overview and then will hand over the call to Mr. Anish Matthew to discuss the financial performance for the quarter. Strong demand supported the second quarter of fiscal year 2023, driven by growth in the key industrial sector and led by an uptick in consumption in both urban and rural India. The e-Way bills generation recorded an all-time high of over 84 million in September, 2022 signaling a strong boost to economic activity on the back of a festive season. With government initiatives such as National Logistics Policy and PM Gati Shakti
Anish Mathew
Thank you Phil. Good afternoon, everyone and a very warm welcome to our Q2 FY2023 earnings call. I will now take you through the highlights of financial results for the second quarter of FY2023. For Q2 FY23 consolidated revenue from operations stood at Rs. 435 crores as compared to Rs. 399 crores for Q2 FY2022, indicating a growth of 9% on year-on-year basis. EBITDA for the same period stood at Rs. 28 crores as compared to Rs. 18 crores registering a growth of 53.4%. Pre-exceptional PBT stood at Rs. 7 crores for Q2 FY23 as compared to Rs. 6 crores for Q2 FY22, registering a growth of 18.9% given in the presentation. For the half year ended September, 2022 consolidated revenue from operations stood at Rs. 866 crores, registering a growth of 25.5%. EBITDA stood at 52 crores registering a growth of 175.3% as compared to H1 FY22. Pre-exceptional PBT stood at Rs. 11 crores as compared to a loss of Rs. 6 crores in H1 FY22. Our express business has been delivering strong performance with reve
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