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Apr 15, 2015 02:30 PM IST | Source: CNBC-TV18

Giving exit option to equity partner via IPO: VRL Logistics

Vijay Sankeshwar, chairman & managing director, VRL Logistics says the company sees huge opportunities in the logistics space and aims to use Rs 86 crore of the money raised in buying new vehicles.


Vijay Sankeshwar, chairman & managing director, VRL Logistics, says the company is launching an initial public offer (IPO) to give an exit option to equity partner New Silk Route (NSR).


Sankeshwar adds that the company sees huge opportunities in the logistics space and aims to use Rs 86 crore of the money raised in buying new vehicles.


Below is the verbatim transcript of Vijay Sankeshwar’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.


Sonia: I was just going through your revenue performance over the last four years and it has grown quite a bit from Rs 700 crore that used to see in FY10 to about Rs 1500 crore this year. Can you just take us through what the performance could look like over the next couple of years in terms of what growth rates are you looking at?


A: Last 38 years we have grown by Rs 2 lakh turnover first year to Rs 1700 crore. However, as per Securities and Exchange Board of India (Sebi) rules we cannot speak future planning and figures. So, we are very conservative on that. If you look at our nine month performance, we have made a profit of Rs 72 crore.


However, there is a huge opportunity in the logistic sector because of the new government policies, ‘Make In India’ and a lot of Foreign Institutional Investor (FII) coming in to India. So, logistic is gearing up. Even in bad days, previously also, what we have quoted four years, we have grown by 15 percent in those recession periods also.


Latha: Your margins are much better than the competition – Transport Corporation of India (TCI), Gati are all showing margins of 8 percent and 6 percent – your margins are at 13.5 percent. What makes for this difference?


A: Our model is totally different, their model is totally different. They are outsourcing the vehicles and everything they outsource like software, etc. However, we do ourselves. We save a lot of money and efficiency will also be there.


Latha: So you should be able to maintain this gain?


A: Maintaining own vehicles will cost about 30 percent less. Also, building our own body to the trucks will cost about Rs 1 lakh less per vehicle. Quantity of diesel we are purchasing from India where we are getting about every Rs 1 per litre savings. All these factors will count. Our model is totally different.


Latha: In this offer are you raising money or is it a divestment?


A: Our main purpose of IPO is to give exit to the equity partner New Silk Route (NSR). Majority of the dilution is coming from NSR.


Latha: So you are not getting anything for the company?


A: No, we are getting about Rs 117 crore for the company.


Latha: What will you do with it?


A: About Rs 86 crore we are spending for purchase of vehicles and about Rs 28 crore approximately we are repaying the debt.


Sonia: Between the goods transport and the personal transport business where do you see higher growth in the next three to four years?


A: Growth will be there but I cannot tell what is the exact growth that will happen.


Sonia: From hereon for your own company where is the higher potential of making better margins and better growth, is it in the goods transport or the personal transport?


A: Our core business is parcels only but part load and less than full truckload that is our core business. Our 80 percent of the revenue contributes from that. If you take it profit wise, both passenger as well as cargo are the same, profit making.


Latha: As a person who is operating in South India especially in the Hubli region, are you getting a sense that business environment is improving because all the mining bans have been removed? Also there will be more import of coal and iron ore as well for the domestic industry. Has business generally improved?


A: General business is improving and shortly goods and services tax (GST) is coming so there are huge opportunities. Any small, SME or big companies, they don’t want to depend on so many transporters. They want a single window. So, organised players have a better edge over next few years.


Latha: Have state governments or have corporations already approached you’ll with this idea that GST will come so we want to reorganise, are you seeing a lot of activity from corporations, companies?


A: A lot of saying is there because I am meeting all sorts of people from top to smaller end. So, there is a good response for GST coming in and so many evasion of tax and hassles what we are facing now going from one state to another state, that will be hassle free. Movement of vehicles will be faster, tolls are going to be abolished so the time taken by transportation will come down at least 10 percent so utilisation of vehicles will also go up by 10 percent.


Latha: Is there an improvement on the ground purely because of mining activity or anything? Already in the last six months have you noticed any pickup in demand for truck?

A: There is a pick up in the transportation business. 10 years GST people are talking but new government is doing everything on war footing. We hope it will come.

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