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Looking for acquisition opportunities in the rail space, says Gateway Distriparks CMD Prem Kishan Gupta

He added that his company will look to spend around Rs 200-250 crore as capital expenditure in the next 12-18 months in its railway operations.

August 04, 2022 / 06:18 PM IST
Prem Kishan Gupta, Gateway Distriparks’ Chairman And Managing Director

Prem Kishan Gupta, Gateway Distriparks’ Chairman And Managing Director

Gateway Distriparks is betting big on its railway operations and is aiming for a major acquisition opportunity in the space in the next few months.

“We are looking at an acquisition, especially in the rail business. Some conversation is going on, but we will only be able to know in the next couple of months,” chairman and managing director Prem Kishan Gupta told Moneycontrol in an interview.

He added that his company will look to spend around Rs 200-250 crore as capital expenditure in the next 12-18 months in its railway operations.

He said that his company was interested in bidding for the government’s stake in Container Corporation of India (CONCOR) till last year but due to a lack of clarity around the government tweaking the railways’ land use policy and the land licensing fee, they were no longer interested.

Edited excerpts:

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It has been six months now since the amalgamation of Gateway Distriparks (with Gateway Rail Freight). What advantages have you seen in your operational efficiencies?

After the amalgamation, there are a couple of things. First, the company now has a leaner structure. All the finance, IT, HR, project, everything is managed by one single team. We don’t have different teams.

The sales force is also cross-selling the ICD (inland container depots) product as well as the container freight station services which we couldn’t do earlier due to related-party transactions.

Operational efficiencies have also kicked in. We are now able to shift equipment between our ICDs and freight stations which has resulted in a lot of cost savings.

We expect cost savings to be at least Rs 10 crore a year due to the amalgamation.

Has relisting Gateway Distriparks met your expectations given that the stock listed at Rs 75 but the market expectations for relisting was around Rs 90?

I cannot speculate on what the market says or what various reports say about our company. However, we saw most of our institutional investors sticking with us, including both foreign investors and domestic shareholders. These investors make up around 50 percent of our shareholding and we are happy to have the support from these investors.

What are the targets in terms of revenues and margins that Gateway Distriparks is looking to achieve in 2022-23?

We are targeting double-digit growth of around 12-15 percent in our topline and margin growth of around 2-3 percent from our current levels of 25-26 percent levels.

Our revenues in April-June were muted and we could have achieved more. Rising fuel costs between March and May had an impact on our revenues and margins and we even didn’t take any price hikes in the period so that hit our topline. Furthermore, Indian Railway stopped offering discounts on inland haulage charges from May 1, so this impacted our margins as well.

But we have undertaken price hikes now and don’t expect any drop in volumes in the coming few quarters.

How much investment can we see from the company for its rail operations in the coming few years?

We are looking at an investment of around Rs 200 crore to Rs 250 crore as capital expenditure in our railway segment in the next 12-18 months.

We are also in discussions for a major acquisition in the railway space as we expect this to be our biggest growth segment in the next few years. Conversations are going on, but we will only be able to know in the next couple of months.

Has the Western Dedicated Freight Corridor helped reduce transit time?

The average time taken has come down significantly because of the Western Dedicated Freight Corridor. We are able to transport cargo on our double-stack trains between Gurugram and Mundra in an average of 30 hours compared to above 40 hours before.

It takes less than 24 for import trains and about 36 hours for export trains but we need to bring down the time to below 24 hours by the end of 2022-23.

Last year you were looking to sell your stake in Snowman Logistics. Have any companies expressed interest in the stake?

We are no longer looking to sell our stake in Snowman Logistics. We were looking to sell our stake in Snowman because we wanted to use the money from the sale to reduce our debt. But we have now managed to raise money in other ways and Snowman is a profitable business and at current valuations, we are not looking to sell our stake in the company

Are you still interested in the government’s plan to privatise CONCOR?

No, there is still no certainty over the land licensing fee of Container Corporation of India.

The speculations around the land licensing fees of CONCOR have been going on for two years now and we are now looking to expand our footprint in other avenues. We are no longer interested in bidding for CONCOR.

How have the political disruptions in Sri Lanka affected transhipped traffic globally? Have Indian ports benefited from the unfortunate disruptions at Colombo Port?

Not really. Transshipment volumes have increased to the International Container Transshipment Terminal, Kochi, in Vallarpadam. But volumes to most other ports have increased organically and not because of disruptions caused in Sri Lanka.

How have container rates fared at Indian ports in the last few months? What is the expectation going forward?

Freight rates had gone up last year tremendously. Then there was a small dip. Then again, it went up earlier this year. But there has been a correction in the last one or two months.

We don’t expect any further fall in shipping freight rates in the near future as a number of ships are still getting stuck in China due to COVID-related disruptions.

High fuel prices are also contributing to high freight rates so we only expect freight rates to fall once crude prices fall and supply chains across the world get better.

There has been a growing push from the government towards controlling a large chunk of the cargo movement in the country, be it with the Indian Railways looking to control around 50 percent of freight, etc. Do you think such a move is good for the industry?

I think the steps taken by Indian Railways to increase their cargo handling capacity will help improve the efficiency of transportation in India.

It also presents an opportunity for companies like us to take a significant chunk of cargo. Furthermore, last-mile connectivity will always be done by road transporters, and not operating on long-haul routes will also reduce their overhead costs. So overall, the industry will become more efficient.

Plus, more private players are coming up in the railway transport industry and are competing with Indian Railways.
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