Liquid cargo division to drive growth ahead: Guj Pipavav

Reema: Can you take us through what the volume growth was in Q2 as well as what kind of growth are you expecting going ahead?

A: First, I would speak about liquid cargo because that is a new vertical we have added in this quarter. There, we have done close to 100,000 tonnes and that has been the first time that we have started on the new tank farms which were being constructed by three of the tank form owners at the port.

Out of the three, only two have started, so that has been a significant growth that we have seen today in liquid cargo and bulk also did very well with 1 million tonnes in this quarter and again in bulk if I compare it with the previous quarter we have an increase of 23 percent.

In container volumes we have remained in the same range as the previous quarter and overall it has been a good quarter for Gujarat Pipavav.

Ekta: Where do you see growth coming from for the company the most going ahead? Will that be in the container corp or maybe the bulk and liquid cargo segment?

A: The growth will be in the liquid cargo because that is the new vertical that we have started with and with the third operator also joining in with their capacity, which is expected n the first quarter of the next year (2015), then we will see liquid cargo actually going faster.

In the other two verticals we are in a matured state in the sense of there has been capacity added in container business. So we will see as market grows we will also grow along with the market and even higher.

Reema: The company reported a strong set of EBITDA margins this quarter. It came in at 52.7 percent. Do you think these margins are sustainable?

A: As we are gaining on the volume and we get the economies of scale – the port business is of fixed cost – and as volumes grow, we will see a lot more on the EBITDA growing also. And with the liquid cargo starting now we will definitely have the margins growing.

Ekta: The company has done an earnings per share (EPS) of around Rs 5 for 9 months FY. Analysts expect around Rs 10 entirely for FY15. Do you think that is achievable?

A: EPS of course we all know is derived out of the profit of the company, the net profit. So our focus is to grow on all the three segments: on liquid cargo we will do far more than what we are doing because the capacity is coming on stream and continue with the bulk and containers.

So, as the market keeps growing obviously our EBITDA margins and net profit should grow and accordingly the EPS will show those results in line with what the profitability growth would be.

Reema: Can you tell us what the capital expenditure (Capex) plans are for the company and is the company adequately funded?

A: Capex as advised in the previous two quarters. Also we are embarking on capacity expansion for our container business. We will go from 850,000 TEUs to 1.35 million TEUs and this all would come by first quarter of 2016.

For this we have external commercial borrowing (ECB) funding which is USD 60 million and we have already tied up.

As we speak, all the planning, design, contract negotiations are ongoing and we will see this work happening at the port over a period of next two to three months starting with actual construction taking place there. So by 2016 first quarter we should be ready with our expanded capacity.

Ekta: So you are saying the entire fund amount is tied up, you don’t need any sort of debt or equity on further basis?

A: You are right. The debt is tied up and as and when we will need it we will draw down. Right now the company is debt free. Our balance sheet is good, it is clean and we have a lot of leverage available with us. So when needed we will look at the debt market rather than equity.