Hello, sir. This is Prashant Kale from Star Capital.

Congratulations on good set of numbers.

Thank you.

Yeah. Sir, my question is about the governance in the company because if you go through the number of notes, most of the notes are about some tax dispute or something about money stuck somewhere or some claim from some tax authority.

Every year the list is growing. I am little bit worried about the accounting practice in terms of tax and dispute perspective.

The notes are filled with lots of tax claims and disputes. I would like the management view on this and how we are going to reduce this and improve the governance in terms of these tax and other claims.

Thank you.

Hi. We believe in transparency.

That's why we give a very detailed and thorough explanation of all the matters going on. Some of them are questions raised by investors in the past, it's fair that everyone gets the same picture.

If you look at it, we've closed a lot of tax matters also and a lot of them are small amounts also. Certain matters are industry-wide issues, not just limited to us.

Whether other companies disclose them in the same way or not is beyond our control, but like I said, we're more about transparency. If there's a specific concern related to any matter, we're more than happy to address it, but I think more or less we would say we are run very well with corporate governance kept in mind, and it's been commented by other investors also that they're happy with this kind of reporting as well.

Sir, we are happy that company is reporting time to time whenever these types of situations arise. We would also like to see the timely closure of all these matters or sometimes amicable solutions instead of fighting it up to the Supreme Court.

It is better to close them down, sometimes pay the penalty or go with the amnesty schemes raised by government with every few years. It would be good to close some of them which can be closed.

No, we appreciate that. We're also of a similar mindset and if you see last year we closed out a lot of tax issues under the amnesty scheme, the Vivad se Vishwas, with a very nominal payout.

Where we feel there's a merit in a case, we would want to contest it where we think it's worth it. We appreciate your feedback and we'll take that into matter.

Yeah. Sir, one question is that we had 31 rakes for quite some time.

Are we planning to increase them further or we are happy with these 31 rakes?

We've been at 34 now for the last couple of years, and in the investor presentation also we highlighted that we've placed an order to purchase three rakes now. These are the high capacity, high speed wagons.

We've also swapped three of the old capacity rakes for three high capacity rakes. By the end of May-June, we would be at 37 rakes.

By end of May we will get delivery of the three new rakes, right?

The swapping of the three will also be completed by then.

Good. Thank you, sir.

That was my question. Good.

Thank you very much.

Thank you. My question is regarding Snowman Logistics, address to Mr.

Handa. The first question is about the warehousing segment.

If we look at the historical numbers, it used to do an EBITDA margin of around 15% and even went above 20% sometimes for FY21. Now for the past many quarters the performance has been going down and this quarter was the worst.

Can you explain what is happening there?

Hi. In past few years the overall mix of our warehousing has also changed.

If we see the mix, we were earlier predominantly a frozen company. Now we do a lot of chilled and dry warehousing as well, which has brought down the overall margins.

Also the overall microeconomics around has played that part. If you see in last couple of years, they got stable and now we are seeing a little bit of incremental revenues coming, which is looking exciting in times ahead.

Also we have the park-and-pay model which was not there in FY21. That is a pure back-to-back arrangement at a low margin, but it adds to the overall EBITDA.

Adds to the overall EBITDA in absolute terms.

Yes.

Can you explain what the margins in the dry storage would be as compared to the earlier chilled and frozen segment that you were in? Because from above 20%, close to 20% margins, it has moved this quarter to 3%, less than 3%.

That's a significant effect from movement into the pay-as-you-go and the dry storage segments. What was the rationale if you don't get the margins there?

See, the dry storage is typically to address some of our customers who are into quick commerce or typically into QSR business or coffee chains. Thus the margins are lesser with ample availability of dry warehousing around.

Our mathematics is quite different and the margins are very minimal when it comes to dry vis-à-vis the other overall frozen.

Do I get the idea right that the rationale for getting into the dry business was only to fill up capacity that was not being filled by the chilled or frozen business?

No, it is not like that. We create separate dry capacity in the same warehouse.

It is not to fill that, but for the stickiness of the customers who are typically serving the quick-service restaurants or the coffee chains, wherein they keep both frozen and dry in the same warehouse and would want to use synergies of a single unit to service their restaurants. It is something which is imposed and we have to do it to service those sort of businesses.

Thus the margins were lesser. If I say earlier the dry pallet we were selling in the range of ₹600 to ₹700.

Today we sell in the range of ₹850 to ₹1,000 and it is improving every quarter-on-quarter.

Are these dry storage locations separate from the chilled locations, or even in the same facility?

No, most of them are in the same facility.

Most are in the same facility.

Yeah.

Even with lower margins, do you take that return on capital is not compromised because of this? Because maybe you have lower capital employed in the dry facility compared to...

See, when we are designing a new facility, we are incorporating dry as dry only for the facility and we take frozen as frozen. The overall capital employed is also in line to the plan.

Sir. The second question is regarding 5PL.

In 5PL, I understand that you own the inventory that you sort of service, but it doesn't show up on the balance sheet. Why is that?

No, it is showing on the balance sheet. The top line does include the 5PL inventory stock value.

It has the overall traded value.

What about the stored inventory? The top line includes that and that's the traded value for the entire quarter, but the stored inventory as of September, it was only around ₹14 crore of inventory that you had in your balance sheet.

Is that... Yes.

See, we keep only 15 to 20 days inventory with us. The inventory you are seeing in the September results, so that is related to trading inventory only, and that is in line with the number of days inventory we are keeping.

Okay. What is the payment structure for the 5PL business?

How do you get paid? On what terms?

It is different for different customers. It is a very customer-specific P&L or a finance structured.

Who finances the inventory? Do you finance the working capital, or are you paid completely in advance?

See, if we finance the working capital, we charge for that. If we don't finance, then it is back-to-back.

Yes, it varies.

It varies account-to-account. Okay.

Sophie

[Tim Hortons?] was onboarded as a business, right?

How has been your progress with them?

At the speed they have planned their growth, they are now catching up with the numbers and new cafés are being opened. We will also grow along with their new cafés coming up.

One more question on the warehousing segment. If you look at the top line growth, it has been fairly muted.

Why has that been so? Even the capacity additions have been fairly muted.

No, in case you see the warehousing numbers quarter-to-quarter, year-on-year, it is 19% growth, and from last quarter to this quarter also, there is additional 5% growth. In terms of capacity addition, we have added new warehouses in Krishnapatnam and Calcutta a couple of quarters back, and there are new capacities coming up in Pune and some other locations for the coming year.

There's a note in your accounts that says the Krishnapatnam land transaction with GDL is under dispute. Can you explain that, because of some title issues?

We've explained this in the previous calls, but basically GDL bought this land in 2016-17, and at that time there was no dispute. GDL also sold two tranches of land to Snowman before this third tranche.

Again, no issue. On the third tranche, when we were registering the property, there was a claim by the government that this is government land, and a part of it was registered, part of it was government land, and this is an issue across the district with many other people also.

We've appealed in High Court, but till then, Snowman is operating the warehouses without any problems, and GDL also in the last 10 years never faced any issue. We don't really see it being a long-term matter.

Just the last question: do you still intend to spend around ₹100 to ₹150 crore per annum on your capex?

Yes.

How much would be financed with debt?

Majority would be debt, about say 75%, 80% would be debt, but we'll also be looking at built-to-suit expansion. That is without any capex or loan from our side, where someone else develops it and we take it on a long-term lease.

Built-to-suit is the more O&M-like model, right?

Yes, but it's built to our spec specifically.

Built by the customer?

Customer, landlord, warehouse operator, they're different people who own these.

Okay. Thank you very much, and good luck.

Thank you very much. I'm an individual investor, basically I'm investing for my family, and Gateway is actually the top in the portfolio of the 15, 20 stocks we invest across.

I've been following the company for a while, and you have been having some challenges, but what really concerns me about these are the benami issue, though its amount is only ₹8, 9, 10 crore, it may not have a financial impact, but it does give a little bit of discomfort because we would like to really look at the companies which has got a better governance and things like that because we are investing for the family for about 10 to 15 years. That is one question.

Then the second question is that when will the Snowman turn around and will start realizing in the bottom line? Third part of the same question is that in Indore Pithampur you are investing over ₹150 crore for expansion.

Does that as a proper due diligence has been done? Do you see any benami, other challenges there?

Hi. On the Jaipur, we've been disclosing about the issue, what's been happening since the beginning.

It's unfortunate that it happened, but we don't think we've done anything wrong in this whole arrangement. We have lawyers' opinion from the top tax lawyers in the country, and they believe that we have strong merit in our case.

We are hopeful that a favorable order can come in, and then we can resume the Jaipur project. This was a one-off for us, Indore, like you're asking, I don't see any issues happening there.

It's been vetted again properly. It was all direct registry, don't see any issues like benami coming in probably ever again in the company's history.

Regarding Snowman turnaround, we are focused on top line and EBITDA expansion right now, and we're in a growth phase where our capacity is 155,000, we want to take it to 200,000 in the next 2-3 years, and we want to build on that further. We're reinvesting everything.

That's why because of high interest cost, high depreciation, the bottom line might not appear to be there, but on a cash flow generation, it's generating healthy cash flow year-on-year which we're deploying back into the business.

Thank you, sir. I am done.

Thank you.

Thank you.

I am also an individual investor. My question is regarding your upcoming Indore project.

When is it likely to be completed, and what type of capacity addition we'll have?

It should be operational within 2 years, and we're looking at about 120,000 TEUs per year capacity at the terminal.

It should take 2 years. Now you have got the possession of land?

The possession has come. Now we'll apply for conversion of land since this was agricultural land.

Then the rail line is also being built. It's a new rail corridor from Indore to Dahod which will connect to JNPT.

That will take about a year also, and then by the time you get all the final customs approvals, commissioning of terminal, it ends up taking about 2 years, but we'll try to do it a little bit faster if we can.

What type of precaution we have taken so that the story which was there in Jaipur is not repeated here?

We've done proper due diligence. We've done direct registry, we've not used any aggregator.

We've gone and seen the site to see that there's no encroachment, no miners are there, no revenue record road in the middle. Lot less issues, much more cleaner structure doing it straight with the landowners themselves.

Sir, how much of our money is stuck at Jaipur? Can you quantify it, please?

The one with the aggregator is about ₹8 to ₹9 crore.

I think there in notes there are multiple amounts have been mentioned.

The owned land by us is about ₹21 crore. The aggregator land is about ₹8 to ₹9 crore, and then we've deposited with Railways, but then we got the work stopped, it's lying with Railways about ₹5 crore.

That's just the project when it goes through, that will be utilized towards the railway station works.

So ₹21 crore which we have spent for registration in our name, that also has been seized by the government or attached by the government?

No, that is clear. That's why I was saying only the ₹8, 9 crore is under dispute, and that ₹21 crore value has also gone up in time.

Where our investment is secure, and that's why we've not provided for anything in the financials.

No, but it's a loss of business opportunity, no? The land which we are having, we can go with that land and have a smaller footprint, or that is not commercially viable?

No, because you need a 1-kilometer length to make an ICD viable, and without the aggregator land we don't have that, it's not possible to make an ICD without the land that's in question.

Sir, my last question is can you give the margin EBITDA margin for both this ICD and CFS separately per TEU?

As of this quarter, and we announced it last quarter as well that we won't be giving a split between the segments anymore. We will just be reporting a company-wide EBITDA per TEU, which is there in our investor presentation.

For the ease of all investors, we've given last 2 years' historical comparable data, people can see the trend of it.

Okay. You mentioned in your notes to accounts that since we have become debt-free, we are giving a special dividend, right?

I saw some debt, I think around ₹200 crore, or am I missing something?

That is after Snowman gets consolidated, the Snowman debt is also coming in. We had touched a surplus, we had crossed the net debt figure on a consolidated basis without Snowman for the first time in the company, and we have healthy cash flows.

We were sitting on about ₹140 crore as on date. This is after the acquisition of Indore land also.

If you look at us historically, the amount of capex we've done, investment in Snowman, investment in Kashipur, and the dividend paid, we've still generated a good amount. We felt it was right to reward the shareholders.

It's a one-time special dividend. It's not a recurring annual dividend.

Just for clarification, this ₹140 crore is after those ₹200 crore which are visible as a debt in your consolidated accounts?

So 140 is the cash in hand, but there is a gross debt still in the books, but the number that you're seeing is probably with the Snowman figures as well. As of December, if you see, the net debt without Snowman would be ₹200 crore, sorry, gross debt without Snowman would be about ₹200 crore, the cash at end of December was about ₹188 crore, the net debt had gone to zero in January, and thereafter we've bought the Indore land which brought the cash down from, say, around 180, 190 levels down to 140 today.

Thank you.

Thank you.

Hello, am I audible?

Hi.

Yes. Got a chance again.

Questions again on Snowman. First, are there any plans for pricing hikes in the warehousing division?

It is a constant effort which we do at every contract renewal with our customers, and we are seeing the traction in the same segment.

You are able to pass on cost increases and...

Yes, we are able to get those price hikes in all our last contracts which have been done in last 5 to 6 months, we have got the price hike.

Okay. Second is if you could help us with the percentage of warehouses or capacity that is PAT positive for Snowman, and how long does an average warehouse take to reach that stage?

Percentages, as of now I don't have that specific data.

How many number are there? What I'm trying to figure out is at what stage does Snowman start showing up positive PAT figures?

Again, it varies location to location. What we try to aim for is about a 7 to 8-year payback.

It is slightly longer then, but capex costs have gone up in the last few years. Again, these are long-term assets where we run a warehouse for 25 to 30 years, overall project if we look at it, then it's viable, but on a short-term basis you might see not that much PAT.

Okay. This 7 to 8-year payback period, does it also consider any replacement cost for, say, chillers or air conditioning?

Inclusive of that?

That doesn't come in the first 7, 8 years. Normally, maybe one cycle in over 25 years you'll have to replace some of the equipment, but the flooring, racking, normally that's all fine.

Material handling equipment like forklifts and maybe some compressor, chiller you might have to, but not the entire thing.

Okay. The last question, in your notes to accounts number 4, it says that your effective tax rate has increased to 35%, so that's the new rate that can be expected that affects your deferred tax assets?

That was for the previous year, in current year there is no change. Last year we increased from 29 because earlier we were in 25%, and now we fall in 30%, yeah.

30%.

Yeah, 30% plus surcharge, effective tax rate come to 34.9%.

Sir. Okay.

Thank you very much.

Thanks for the opportunity. Am I audible properly?

Hi.

Yes, you are. My question was regarding recently the trade deal which we are signing with US now, how does it impact the business positively because off-late the share of ICDs vis-à-vis CFS has gone up substantially, and if the export activity picks up again, how does it impact our EBITDA per TEU or the profitability?

Hi. After the announcement of this US trade deal, we are expecting a major traction, especially in the exports of handicrafts, textiles, leather, and chemicals.

Right now we have 25% of the total volume kitty we have, export. We are expecting that with this deal, the US-bound exports, they are going to increase.

Again, we are just waiting for the fine print and once the proper deal is signed, then only we'll be able to quantify some numbers. Apart from this US trade deal, we are also hopeful this EU trade deal, there also we are having exposure from 10% of the exports are going to EU countries from our ICDs, there also we are expecting increase in the volumes, especially in terms of exports of handicrafts and textiles.

Okay. Sir, second question is assuming in the second half of this next fiscal year if both EU and US trade goes through, then do we have the enough capacity to meet that kind of export demand that can come up?

Our capacity at our terminals on the rail side is that we can go 4x of our volume with the current land bank. Even on the CFS side, we can still increase our utilization by, say, 20-30%.

CFS is more import-heavy, any export boost there also will help the trailers turn around and reduce our costs, and we can easily handle that. Capacity won't be a constraint.

If you see that earlier also in the call I mentioned we're purchasing three more rakes and swapping out three low capacity for high capacity rakes, we're gearing up for increase in volumes.

Okay. My last question is related to this Dedicated Freight Corridor.

When do you expect this DFC to get commissioned, and in terms of connectivity to JNPT, and how does it improve our business? That's one.

Another question is double-stacking now is 41%. To what extent we can go in case of double-stacking, and how does the business and margins look better if these things go through?

The last connection to JNPT DFC corridor is expected by end of March. Once this gets completed, we are expecting some volume to get moving.

Basically what we are expecting that there will be some shift of Mundra volumes towards JNPT, and we are also expecting that some road volumes might also shift to JNPT, but that is too early to comment on because ultimately it will also depend on the shipping line vessel schedules, how they are going to do it. In terms of double-stack percentage, yeah, we are expecting that it'll definitely increase by at least 2%

to 3%. Okay.

Any revenue margin guidance would like to give for next fiscal year, FY27?

No, see, similar trend basically, but there will be a change in volume mix with domestic and Ankleshwar, and depending on what locations are growing. It's hard to give it on a per TEU basis right now.

If you look at our percentage margins, we'd like to keep the same trend going.

Okay. Thank you very much and best of luck, sir.

Thank you.

Hello, sir. My question is about did they restore the import of scrap paper in North India, and volume of the scrap paper containers gone up, or it is still struggling?

It's been on a similar trend for the last year. 2 years ago there was a dip, and it recovered slightly, but if you compare it with at its peak, then it's gone down still.

Because of the Red Sea crisis, the import of the scrap has gone up, that's the effect. Probably by end of this year, that could be restored slightly because if the Suez Canal volume goes up, and the Houthis don't attack.

Other question is we did not have much operations on Eastern Dedicated Freight Corridor. Have we started any operation on that side?

No, we don't have any presence there.

Are we planning to start anything on that side?

Nothing right now.

Single stack.

It is single stack, and the trade flows for EXIM where we are operate our ICDs are all along the western ports, we don't see us using the EDFC anytime soon.

Okay. Thank you, sir.

That was my question. Thank you very much.

Thank you.