Speaking to CNBC-TV18, Sachin Bhanushali, CEO, Gateway Rail Freight said he is confident of sustaining its revenues and margins despite fears of a subdued volume growth in FY16.
Logistics player Gateway Distriparks has announced that its subsidiary Gateway Rail Freight Ltd will set up its fourth inland container depot at Viramgam near Ahmedabad in Gujarat. Gateway Distriparks said the terminal with the railway siding and container yard will be constructed over 35 acres of land and is expected to be operational within a year.
Speaking to CNBC-TV18, Sachin Bhanushali, CEO, Gateway Rail Freight said he is confident of sustaining its revenues and margins despite fears of a subdued volume growth in FY16. Gateway Rail Freight volumes are expected to be low on account of lower exports.
In January, parent Gateway Distriparks said it will sell shares of its units Gateway Rail via an initial public offer (IPO).When asked about it, Bhanushali said discussions are on.
Below is the transcript of Sachin Bhanushali\\'s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Anuj: What is the through put capacity of this depot and what is it likely to do in terms of your over all capacity and your overall numbers going forward?
A: The idea behind setting up the fourth terminal in Ahmedabad essentially is to consolidate our position on the northwest corridor on which we are developing exim terminals for taking care of the requirement of the trade on the manufacturing route of India. At present we are present in Garhi Harsaru in Gurugaon, Sahnewal in Ludhiana and Faridabad in Haryana. These three terminals put together we roughly have a designed capacity of about one million TEUs and at present we have a installed capacity of about half a million TEUs. We are operating at about 50 percent of that.
We normally need to keep at least about 25-40 percent buffer to take care of the peaks of the cyclical changes in the market. The fourth terminal which is going to come at Viramgam will have a capacity of handling 150,000 containers apart from being a second rail hub for us. At present we are operating all our hub operations out of Garhi Harsaru with the second hub we will be in a position to consolidate and reduce our operating cost to a very great extent. So it will be both an operating cost strategic move as well as reaching out to the market by having a new point on the map as well.
Ekta: In fact your margins have improved quite significantly even if you look at your Q4 numbers, it has been a jump of 500 basis points, 29 percent is what you recorded. How much more do you think that you can improve your margins going into FY16 once these operational benefits kick in?
A: The advantage which is available primarily is by way of reduction in cost because of the double stack operations that we do out of Garhi Harsaru, which is being operated as a hub. The market at present is going through some kind of pressure on account of the exports having gone down over a period of last six months. So, the market, the price is also under pressure and the cost has gone up because the imbalances have gone up.
We expect that we will be in a position to maintain the margins that we have demonstrated in FY15 during the FY16 subject to improvement in the macro volumes over a period of next six months. I think the second and third quarter are going to be crucial in terms of export volumes. But, we will be able to maintain the margins at the present level.
Ekta: How are export volumes looking?
A: As of now the export volumes are flat. The international demand for both agro products as well as manufactured commodities out of India is at the lower ebb. The currency should be helping but that doesn’t seem to be giving any traction to the export volume. Lot will also depend on the monsoon contribution into the agro exports which will start picking up from October onwards in the third quarter of the current financial year. As of now it is flat there is no direction in which the exports are moving in particular.
Ekta: So would you expect flattish sale going into FY16 or may be a marginal growth? What would your outlook be?
A: In terms of growth, growth will come by way of our presence in Faridabad terminal which has started just about a year ago. So we will have some volume growth there. In addition to that the imports are showing strength so some amount of traction will be available on account of imports as well. Volumetrically we may be flat on account of the numbness which exists in exports. However as far as the margins are concerned we will be able to retain both percentage margin as well as rupee margins at operating margin level.
Ekta: Can you give us some comparables? How much did you do in terms of import growth and export growth in the previous fiscal as well as volumes totally and how much are you projecting in FY16?
A: The exports over a period of last six months have shown a drop almost of about 20 percent whereas the imports have grown roughly by about 18-19 percent in both Punjab and National Capital Region (NCR) market. So, the overall impact of it is flattish as far as the overall numbers are concerned. But, the increase in imports with corresponding decrease in exports has resulted into capacity being wasted in export direction in order to get the imports from the port.
So, the growth that we experienced during FY15-FY16 as far as the volumetric numbers are concerned, we may not be able to maintain, but as far as the revenue in margins are concerned, we will be able to maintain a similar number during the current financial year. We ended up with Rs 177 crore of operating margins in FY15. The growth that we experienced during that particular year was unprecedented on account of various advantages that we had on account of both the macros doing well, there being a corresponding increase in imports and exports, as well as we were able to harness our costs rightly.
So, all the things happened right as far as the last year is concerned. This year we are already seeing the exports pulling us down as far as our operating cost is concerned. So, we may not get the kind of growth that we have experienced in 2015.
Ekta: You were looking at the rail division IPO. Is that on the cards or where is the status of that?
A: We had mentioned earlier that the private equity investor in the company Blackstone had invoked a mandatory IPO so the discussion with respect to the offer for sale and the mode of IPO are still in progress. So, once that take some shape we will be able to give an affirmative answer and make an announcement in this regards. So as of now the discussions are still on.