Container Corporation Of India Ltd

Ladies and gentlemen, good day, and welcome to Container Corporation Conference Call hosted by DAM Capital Advisors Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded.

I now hand the conference over to Ms. Bhoomika Nair. Thank you, and over to you, ma'am.

Good morning, everyone, and a warm welcome to the Q3 FY '24 earnings call of Container Corporation of India. We have the management being represented by Mr. Sanjay Swarup, Chairman and Managing Director, and his entire team. I now hand over the floor to Mr.

Swarup for his initial remarks, post which it'll open up the floor for Q&A. Over to you sir.

Good morning Bhoomika. I'm joined here by my Director Finance and CFO, Mr. Manoj Dubey; and Director Domestic, Mr. Azhar Shams; and Director Projects, Mr. Ajit Panda. I will just make some opening remarks, and then we'll be open for questions.

First will be that EXIM booking has increased by 13% in Q3 over Q3 of last year and income has increased by 15% in EXIM. Overall handling of CONCOR has increased by 7% for 9- month period over last year. In EXIM, there are effects of geopolitical conflicts, these effects are temporary. We have been in touch with shipping lines and they are quite hopeful that by February first week things are going to stabilize.

In domestic, we are getting very good business, very good demand now all across the country.

And we are well poised to cater to their demand with good container inventory and good fleet of rakes also. The focus area of the company continues to be customer centricity, providing total logistics solution to customers, warehousing and business solutions, including first mile, last mile incidentally, which is giving us good margins also now.

We have deployed 75 LNG trucks at Chennai, Nagpur, Baroda and Ankleshwar, which are giving us good commercial returns and the customers are also very happy. We plan to increase the fleet. We have signed MoU with M/s IGL, in November 2023 for development of LNG pumps at CONCOR terminals.

We have signed another MoU with NTPC Vidyut Vyapar Nigam in December 2023 for solar energy products development at our terminals. We have signed 1 MoU with M/s DB Schenker, which is a leading international trade forwarding company from Germany to expand our range of services in EXIM and Domestic segments.

On infrastructure front, in this quarter, we have added 5 BLC rakes, and now our total additional rakes in this financial year stand at 12, 4 more are expected in this Q4. So as forecast earlier in the financial year, we will be adding 16 rakes in this financial year as per our initial projection.

Domestic container fleet is also increasing, and we are getting almost 400 to 500 containers every month. Now we have more than 41,000 domestic containers and we are commissioning new terminals also. In this Q3, we have commissioned Kadakola MMLP near Mysore, and it is fully ready to give the service to customers.

The company is laying a lot of emphasis on operational innovations, and one of the major is double stacking. In Q3, we have seen a growth of 55% quarter-on-quarter on double stacking and 38% in 9-month period over the last 9 months of last financial year. So, this has actually, in fact, helped us to improve our bottom line and give good, assured transit to our customers.

Lastly, the company believes in technology-based green logistics. On that front, we are having app-based FMLM first mile, last mile, which has been working at 2 of our terminals Ludhiana and Jaipur, and getting very good response of customers. We are working on Ice battery solutions, which is a passive cooling technology. And we are also working on AI-based terminal management system at our flagship terminal ICD, Tughlakabad.

These are my opening remarks. Now I request that questions can start.

We will now begin the question-and-answer session. The first question is from the line of Alok Deora from Motilal Oswal. Please go ahead.

I just had a couple of questions. So one is, if you can provide the originating volumes for EXIM and Domestic?

Yes. Originating volume for this quarter are EXIM it is 525,138, and domestic it is 110,131. Total 635,269.

Sure. And also, sir, the LLF provisioning in this quarter has been quite low. So, we are at around -- and if you look at the 9 months, we are at around INR2.9 billion or so. So, what's the number we are looking at for this financial year?

I will request my Director Finance. He will take this question.

So, for everybody just to give an overview of LLF. We started a new regime from FY 20-21.

So, in 2020-21, we paid and made a provision in total for INR517 crores. For FY 21-22, we paid and made a provision of INR465 crores. FY 22-23 seems to stabilize and in most of the places, we got the rate and clarified with the railways. And things settled at INR392.36 crores. That was for last FY i.e. 22-23.

In the current FY, we were supposed to pay 7% more than this, which comes around INR419 crores. Now this FY '21 and FY '22, we had made an additional provision of INR160 crores approximately for various depots. And wherever the cases are being settled, those provisions are being reversed.

If you look at my note in the results, we have given a clear note that we have reversed INR36 crores of provisions in LLF. So, it is the impact of that. Now going forward to answer the

question. In Q4, we are expecting LLF of around INR100 crores. That takes us to around INR388 crores to INR400 crores maximum for this FY. I hope I clarified the thing.

Sure. So, sir, one is this FY '24, you have taken all these reversals. So, after that, there is no pending reversal...

There are still around INR90 crores for various -- around [5, 6 depots], where still things are being reconciled with the Railways. If it reconciled in our favour, then those reversals will come back to us. It is in favour of the Railways then those money will be paid to Railways.

Sure. So, FY '25 what number we are looking at, assuming there are no reversals? FY '24? '25, '25. '25, it is INR420 crores, approximately the actual payout for this year without any adjustments.

So, you take 7% more. So that comes out to be around INR450 crores, INR460 crores. But there is catch in that also. There are 2 things. One in the last quarter result my Director Project has mentioned to you that we are still looking at rightsizing our major depots like TKD. So those rightsizing are also in process. If we are able to surrender a few portion of the land, which are not productive for us, then there can be a decrease in our total payout, A.

And B, as you know, Gati Shakti policy is already unveiled for the new project where rate was the charges are only 1.5% fixed and there's a variable cost. Now we are also making our representation -- discussions are on that, why not that facility be given to us. If the ministry agrees to us, that can bring up more bonanza for us and that this payout may go down, but they are right now in the pipeline only.

Got it. And sir, just one last follow-up on this. So, in 3Q also, we were going to surrender some part of the terminal. So, any -- we have done that in 3Q or...

Let me clarify on that. On Tughlakabad terminal, where we have about 5 lakh square meters of land, 10% of it is around 39,000 square meters. We have offered surrender to railway on November 6, 2023. That will bring down the cost of LLF in TKD by about INR25 crores.

So, discussions are on for handing over. And we are very hopeful that from 1st of April, the TKD LLF will go down by 10%. Of course, this will be offset by 7% with increase. But our net outflow on TKD terminal will be less next financial year, Number one.

Number two, we have surrendered another small part of land in Baroda terminal to the Railway. After surrendering that terminal and merging the business with our Varnama Terminal, which has started operating in full scale near Baroda. So, these 2 factors we have surrendered in Q3. Similar optimization will continue.

The next question is from the line of Achal Lohade from JM Financial.

This is Achal Lohade here. Sir, with respect to the volumes. Given how it has panned out in first 9 months, how do you look at FY '24? And if you were to hazard a guess for FY '25, how do you look at growth in the EXIM and Domestic volumes?

See, in the FY '24, the guidance that we gave in the beginning of the financial year, we will be able to achieve because of good volume growth in EXIM and Domestic. And EXIM, as I told you, from next month onwards, we should again have a good growth. As in Q3, you would have seen there is a growth of 13% in volumes.

Domestic till now for 9 months has shown a growth of 11%. And we are getting good demand now. We have good container fleet. So, we are very hopeful that we will end the year with around 15% growth in Domestic and around 10% growth in EXIM.

As far as FY '25 is concerned, guidance I will give at the end of the year. But what I can say is that demand is good, and our infrastructure is ready. So, we are very, very hopeful that good growth will continue in FY '25 also, especially with the commissioning of DFC up to Nhava Sheva, which is expected in December 2024, we expect a good ramp-up from road to rail on this segment also.

Understood. Sir, if I were to just ask a bit more detailed question with respect to the DFC connection to JNPT. Is it possible to get some color as to how much of the volume in terms of thousands of millions of TEUs, which is available to us, which is yet to come on rail, whether it is currently containerized or being transported in a bulk form?

See, actually, it will be difficult to give you any number at this moment. All I can tell you is that at present that rail coefficient that JNPT is in the range of 18% to 19%. And all the volumes will not increase immediately when the DFC is commissioned for JNPT. Then in 2 years' time, you can say, the rail coefficient may rise to 25% to 30%. That is the number I can predict at this moment.

Understood. Secondly, if I were to look at the increase in freight rate, if I look at the rail freights per TEUs it's kind of increased by about INR2,000 compared to second quarter. How much of this is on account of the busy season surcharge and how much of that is already passed on, sir?

See, busy season surcharge, we have passed on absolute amount to our customers. But on some streams, which are of strategic importance, like where we have a competition with our road or from competitors. There, we have taken a strategic decision. And part of that, we have retained. Part of that, we have passed on. So, it is difficult to tell you the exact number how much is contributed by busy season surcharge and how much is the actual growth in volume at this moment of time. But all I can say is that we have taken a strategic decision so that we don't lose the business. At the same time, we continue to grow.

Understood. Just a clarification on this, sir. When you say some streams where we have severe competition from roads or other players, would that be 40%, 50% of the volume? Or would that be like 15%, 20%, just?

I'm not able to give any numbers right now. But that also constitutes a sizable volume, and that is a strategic decision our team takes. We get inputs from fuel units, and then we take a decision.

Thank you. The next question is from the line of Yatin Mehta from Fidelity International. Please go ahead.

Congratulations on good set of numbers. So just 2 parts to previous question on peak season, sir? Sir it seems that if I look at your originating realization, the past one has been more in domestic and slightly lesser in the EXIM and, do you think this -- we have been able to manage our profitability because of the double stacking and that is why the realization is kind of looking flattish here?

See, actually, the thing is that in EXIM, whatever business surcharge was there, was passed on to the customers. But you will appreciate that the busy season surcharge was started imposed by Railways from October 1, 2023. Whereas we took 40 days, we gave a margin of 40 days to our customers to pass on that thing to them. And we started our -- we revised our rates from 11th of November. So, 40 days period, we have absorbed that. Despite that, we are giving very good numbers as far as margins are concerned despite this constraint.

Secondly, in domestic initially, there was -- we faced some setbacks when we passed on this busy season surcharge to our customers. Then our team and director himself personally Director domestic, had a one-to-one meetings with major customers, and he did some tweaking based on the strategic decisions that I mentioned earlier.

So, we have revised, and we have passed on some discounts to our customers, various strategies we have used. So based on that, now things are stabilized. So, in Q4, we should -- we are now well poised to have a good growth in terms of numbers as well as financial figures.

Sir, that's very helpful. Just on DFC, you did mention Nhava Sheva getting connected. But we have 6 months of DFC which is connected to Mundra and Pipavav. Have you seen shift from road to rail here? Will it be possible for us to share the rail coefficient in these 2 segments?

Yes. Actually, that's a very nice thing that has happened on Mundra. Volumes have increased as compared to year-on-year existing. Rail coefficient has slightly increased. It has not increased very much, but rail coefficient has slightly increased.

Similarly, at Pipavav also, it is almost same. It has not increased. But from our experience, we are able to see that from our terminal Dadri, which is at in north -- in the national capital region, we have a terminal like Dadri. And from there, we are running timetable freight express trains to Mundra port. In that stream, we have seen sizable shift from road to rail. So that we are seeing, and the customers are very, very happy in fact.

And when their containers reaching in 35 to 40 hours and whereas road is taking more than 50 hours. So, we are seeing a sizable shift. But at this point, I can't tell you the exact number how much percentage has shifted.

Okay. No, that's very helpful. Sir, just one last small question. Domestic profitability for second consecutive quarter is high single-digit domestic EBIT. Do you think this is now sustainable given the scale which we have achieved? Or is there any specific in this which we need to understand?

As I told you that in domestic, we are getting good demand now, especially from South India, only we were sending loaded cargo and in return direction empty was coming. So that has -- in Q3, it has adversely affected our profitability. But now that in South India also, we are getting demand for Western India as well as Northern India. So those empty containers, which were running, now they are coming in loaded condition. So definitely, in Q4, you will see very good EBITDA margins in domestic also.

No, no. Sorry, sir, my question was slightly on a longer term that historically, domestic used to be 5% to 6%. And for the last 2 quarters, we've seen at an average of 10% -- 9% and 10%. Do you think -- given like you mentioned that the empty running is much more lower, there is sustainability of this profitability?

Yes, definitely. It will sustain and it will become better.

Okay. That's very helpful, sir. Thank you.

Thank you. The next question is from the line of Mr. Amit Dixit from ICICI Securities. Please go ahead.

Hi. Good morning, everyone and thanks for the opportunity. I have two questions. One is on capex. Last call, we mentioned that we are confident of reaching INR600crores of capex this year. So just wanted to understand the nine-month FY'24 capex? And is there any revised revision in guidance?

My Director, Projects will take this one.

We are giving a guidance of INR600 crores of capex for FY'24. And we have already achieved -- as per the balance sheet, we have achieved INR474 crores capex up to Q3. We are very confident that we will cross, exceed the guidance given by the next quarter.

Okay. Great, sir. The second question essentially is on...

This is an all-time high capex that we are achieving in this financial year.

Yes, sir. I appreciate that. The second question is essentially that last time we indicated that we have some custom-need containers for FM fast-moving durables, actually. So just wanted to understand the traction on that front, how is the response and what kind of volume growth do you see possibly next year from this particular segment?

For 12-feet containers, we have got 270 sub-containers manufactured at Railway Workshop.

And we are actually -- at present, we are not getting much revenue from that. But our teams are working and trials have been successful. And we are very hopeful that we will be able to build circuits for this kind of containers also, which are mainly catering to low-density cargo.

Yes. Last quarter, you indicated, sir, that we have got 180 containers. So, this time we have got 270, actually, 90 more containers have arrived in this quarter. That is the focus is clearly -- clear on this particular segment. And just wanted to understand what kind of growth we are expecting?

We are getting good growth because this is the segment that we are not able to capture right now. So, it has been our endeavour to get this traffic also on rail. And my Director, Domestic will further elaborate on this point now.

Number one, the railway has to give us route-to-route clarification. This permission for running these 12-feet container, that these 12-feet containers are basically A-class ODC. There is over-dimensional consignment. We have to take permission from the railway. We are in the process of taking those permissions. That is number one.

Number two, you noticed that what kind of loadability as compared to 20-feet normal containers are going to happen in these containers. So, we have done two, three trials. One we have done with Coca-Cola plant. And then second, we have done in IFB plant in Goa. So those trials have been successful. Once these route clearances are in place, so I think this traffic will start. And we are in talk of Reliance also for moving their cargo -- lightweight cargo from their plant in Jamnagar to various destinations. The things are in process. But that anything to start and some new thing is going to start, it certainly takes some time before it gets stabilized.

Thanks a lot for the elaborate explanation. Just last one, if I may. I just wanted to know the empty running cost with certain domestic and EXIM?

Empty running cost in EXIM, just a minute.

You want for the quarter or for nine months? For the quarter, sir.

For quarter -- for EXIM, it is INR35.3 crores. Domestic, it is INR98.8 crores. Total is INR134.1 crores.

Wonderful, sir. That's it from my side. Thanks, and all the best.

Next question is from the line of Bhoomika Nair from Dam Capital. Please go ahead.

Sir, you mentioned earlier in one of your comments that with the Dadri connectivity we have seen and with the timetable trains that we are offering, there has been an increase in the shift of cargo from rail to road because of the better service... Road to rail.

Sorry, road to rail because of the better services that we are providing. Sir, can we get some sense on how the real coefficient has changed in this circuit, what kind of volumes have kind of move which has helped?

See, I don't have the numbers with me right now. But because we are getting good shift, so it is visible. And even some leading shipping lines like Maersk has started retail express train and other lines are also coming for the same. So, we are seeing a shift, which is very, very visible.

I'm not able to give the numbers right now. Maybe we can give you the number later on.

Sure, sir. Sir, the other thing is, can you talk about how your market share has moved in these three ports? And what is the rail coefficient at these three ports of JNPT, Mundra, Pipavav?

I can tell you the numbers. At Mundra, the rail coefficient that we are having is 36% of the total volume moved by rail. And at Pipavav, it is 45% that we are moving. And as I mentioned earlier also, consciously, the company has decided not to pick up the low-margin business because that is not sustainable. So, we believe in giving service to our customers. And at the same time, our products may be a little costlier as compared to other PCTOs. But we believe in giving service, and customers are very happy, and they are with us. And more and more customers are also joining.

And one more thing is the focus of the company is now for customer centricity. All the field staff, including myself, we are meeting personally with all the customers. We are engaging with various chamber of commerce wherever we go. I had recently visited Udaipur Chamber of Commerce. And all of them are very keen to associate with CONCOR. And they see CONCOR as a credible partner for moving their cargo. And this credibility we have earned in the last 30 years giving service to the trade. So, cost and all is not a very, very prominent thing in their mind because the cargo that is there in the containers is worth crores and lakhs of rupees. So, they don't mind paying INR1,000 more if they get good and credible service.

Got it. Sir, just on the FMLM services, what -- I think if I'm not wrong, it was around 30% of the volumes that were being serviced by FMLM. What is the potential increase that we can do to service all our entire volumes can shift to that? And what kind of timeframe do you think we'll be able to achieve that, or any targets that are set on this aspect?

Yes. We have set a target of 80% to 85% in another two years. We'll be able to do that. And we are -- at present, what we are doing is we are using auction-based system on streams. And now one more development has taken place is the app-based FMLM, which has been developed by TCS.

And we are using it at our two terminals, that is Ludhiana and Kanpur -- and Kanakpura, that is Jaipur, which have been welcomed by the trade and in which there is a real-time reverse auction by the bidders and the customers get the best price at the best -- and the service is also very good. Price is also very good. Second thing is the LNG, because we are providing green logistics solution to our customers. So, we have deployed 75 LNG trucks, which have been quite successful.

This is DF here, Bhoomika. So, I can just give you a flavour of what percentage we are gaining financially through this transportation. So, this quarter-to-quarter, my financial numbers in road freight, that is FMLM, has gone up by 63%. And for nine months, it has grown to 40%.

So as CMD mentioned that we are targeting 80% of our throughput through our own FMLM system, which earlier was not a focus for us.

So, something that our partners were doing in a very unorganized manner. So, this is really shooting up for us, and it is going to be cash low for us because margins that we thought is even better in our LNG trucks and all. So, your question is right. There is something which is going to grow for us like warehousing things that we tested in the last 3, 4 years.

Understood. Understood. Sir, just two data related question, if I may. The number of rakes in this particular quarter and the lead distances? Number of? Rakes movement. Double stack rake, sir.

Double stack, double stack. Okay, double stack in this quarter was total 1,376 double-stack trains.

Okay. And the lead distance, sir, for both EXIM and domestic?

Okay. Lead distance is EXIM -- I have for -- what -- you want for the quarter? Yes, sir.

One minute. I have for the quarter. It is -- for EXIM it is 724 kilometres. Domestic, it is 1,413. Total is 827. Both are growing, yes.

Next question is from the line of Pulkit Patni from Goldman Sachs. Ladies and gentlemen, we got disconnected from Mr. Pulkit. Next question is from the line of Achal Lohade from JM Financial. Please go ahead.

Thank you for the follow-up opportunity, sir. Just wanted to check in terms of the market share. Is it possible to get some sense for EXIM? What is the market share for CONCOR at aggregate level? And how has it moved compared to 2Q as well as 3Q of last year, sir?

EXIM market share is around -- in the range of 55% to 60%, which is more or less the same as compared to last year. And as I told you, we -- consciously, we have decided not to pick the low margin business. So that is why we are maintaining that market share and with our pricing policies and growth and giving service to our customers.

Understood. Sorry, I'm hopping on this question, sir. If I look at the railway volume, the railway volume seems to have grown about 12% Y-o-Y for 9 months. And if I look at our originating volume, it has gone up by 7%. So, it appears that there is a loss of market share, but you're saying that there is no -- the market share is pretty much stable. So, am I looking at the right number? Is there a different way of calculating by Indian Railways?

No, you are right. There has been a slight drop in market share in domestic. That is why this has happened. So, you are absolutely right. You're not -- your statistics is correct.

Okay. Sorry, sir, I was talking only for the EXIM segment, sir. EXIM Indian railway seem to have grown 12% for 9 months.

No, EXIM, actually, in fact, we have also grown, but market share is in the bracket of 55% to 60%. It is same.

Okay. Understood. Sir, one more question I had in mind is with respect to DFC. How much of our total volume actually is in and around DFC pocket? And what kind of shift do you see over the next 3 to 5 years? I mean, let's say, hope once JNPT also gets connected, do you see this proportion kind of growing at 20%, 30%? Or it could be just 12% to 15% growth for this particular DFC route cargo?

As you may be aware that around 60%, 65% containerized cargo moves between Western India and Northern India. So that will be especially for the whole country. So Western DFC is catering to this segment only. So, when JNPT also comes on Western DFC, then we will see a very good shift of cargo from road to rail and because it will be economical and it would be faster.

So, as I mentioned earlier, the rail coefficient will increase from 18% to around 25% to 30% at JNPT. So right now, we are not able to give you the numbers that what will be the annual growth rate for CONCOR because 2, 3 years span is a very long span. So, the guidance we will be giving every year. So, numbers I'm not able to give right now.

But I see a very good potential in the coming 3 to 5 years. The JNPT coming on DFC which will be very exciting for us to -- because we are building up terminals also, new terminals we are building on DFC. Already, we have some terminals. So, all of them will be catering to a lot of traffic on DFC.

Got it. Sir, just a clarification. You mentioned 60% to 65% of India's containers are in the West and North pocket. What would be that proportion for us? Would that be similar? Or it could be lower given the significant competition is actually in this pocket only? Our proportion from where, from total? West and North -- West and North pocket.

West and North, our business, we are also following the same trend that 60% to 70% is in this pocket only. 60% to 70%. Understood. And just one question I had with respect to multimodal logistics parks. How many are in -- currently in operations? And how do you see that tally improving over the next couple of years? And as we speak for 9 months, let's say, how much of the revenue is coming from these MMLPs? Would it be possible to get some sense on -- because

there is significant investment which has gone into this and in terms of revenue and profit contribution, if you could guide us how much is that coming from these MMLPs?

Actually, right now, we have 15 MMLPs under operation all on CONCOR land. And we are quite aggressive, quite bullish on developing more and more logistic parks to provide good service to trade. 10 more are in the pipeline at various stages. So, these are long gestation projects. So, we cannot expect that as soon as we construct, they will start giving us profits.

All I can say is the Kathuwas, which was the first logistic park that we constructed, it has become free to us now. Whatever we have invested, more than that we have got. So now whatever we are getting is extra, is the bonus, you can say, not extra.

So, all the logistic parks are in a very vantage positions, where we do proper survey because it would be before constructing the logistic parks. So, we are quite hopeful that all of them will give us very good returns in the future. We are constructing them as futuristic terminals. More than 100 acres of land for each of the terminal.

And we maintain each terminal as a profit centre. But at this point of time, I will not be able to tell you the details how much we are getting from logistic parks. All I can assure you is whatever investments we have made, we will get more -- much, much more than returns what we expected.

Got it. And is there any wide space left -- given 15 already commissioned, 10 in pipeline. Are there any important clusters which are still left over -- left out? Or they are very much captured by now?

We have captured most of the clusters, and 10 more are in pipeline. And keeping in mind the places like, for example, I will give you just one example because other also have questions.

Like in Ahmedabad, we were not having a point for double stacking till now. We have a terminal at Khodiyar, which is a multimodal logistic park, but we cannot handle it double stack trains there. So, we were in lookout for that for some locations, where we can handle the double-stack trains.

I'm happy to inform all of you -- all the investors, that we have found a place that is at a location at Chharodi near Sanand, which is Auto hub also. It's a very, very vintage location, where we will be constructing a multi-model logistic park in 100 acres of land and it will be handling double-stack traffic from Mundra, Pipavav and JNPT in future. So that will be a very, very good location. And it will give very good return to us, the latest in the list.

Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.

Sir, thank you for taking my question. Apology I was dropped off previous line. Sir, just a follow-up to Achal's questions on these MMLPs. And glad you spoke about Kathuwas now being almost free for us. When I look at the last 5, 6 years at your company, where capex has gone up, and it's gone in MMLPs and other infrastructure, what we are seeing is that it is not reflected in your ROEs or ROCEs. Because as a company, if I go a decade back, we were more

in the early 20s. And now we are in the early 10s when it comes to ROE. So can you give us a sense that over the next four, five years, as volume grows, as these logistics park gets better utilized, what is the target ROEs that as a company we need to get to?...

Because while our cash generation has been very strong, given the good business model we have, it seems that the ROEs have been very compressed because of these investments. So, any sense on that will be very helpful, sir.

See as I mentioned earlier also that we are expecting a very good growth in the coming years due to various factors like DFC, good demand in domestic, good fleet of rakes, good inventory of containers and at our terminals at vantage locations. So, I'm quite hopeful that the ROE is going to increase in the coming years.

At this point of time, it is not possible for me to give you the target number that we will be aiming at in the next three or four years. It is quite long term. But I can assure you, all the investors, that your company will give you a very good ROE, which will be more than the best in the industry. I am very, very hopeful.

Sure, sir. Sir, one follow-up question. On double stacking, you mentioned that for the first nine months, we are up from 60% compared to same time last year. Now when I look at our margins and adjust it for -- the LLF adjustment that you do, we are not seeing that reflect in better margins. Is it fair to assume that double stacking is only going to be a function of higher cargo that we get and how many times we break it, but it doesn't really benefit us in the form of margins? Because numbers are not reflecting that. So, a better understanding of that would also help.

Yes. Pulkit, you will appreciate that in the Q3 that you are talking. Q3 actually, we absorbed the increase in 10% rail haulage in EXIM segment for 40 days. Out of the total 90 days, almost half of the quarter we absorbed the increase in rail haulage. Because railway increased the haulage on 1st of October and we passed on from 11th of November, giving a period of 40 days to our customers.

This move, although we sacrificed our margins for some time, but it acts as a very good marketing tool for the company. So, customers appreciated it very much. And they told that in such times, when you have stood with us, so we will be there always with you. This is the comment I got from many customers.

So, it was a strategic move of the company. And secondly, it's a very justified thing. Because if we pass on immediately to our -- to increase to our customers, they will have to bear the loss because the transit time from foreign shores to our ports are almost 30 days.

So consciously, we took a hit. And that was actually partly contributing to drip in margin.

At that time, double stack came as a saviour. It pulled up the margin slightly. But if you compare the margin with Q2, definitely, you will see a drop because of the two factors that I mentioned. Double stack, of course, pulled up the margin slightly, but it's still be almost INR20crores drop as compared to Q2.

But to make an apple-to-apple comparison between Q3 of this year to Q3 of last year, you will see a good increase in margin, around 12% increase in margin is there. I hope it satisfies your question.

Sure, that's helpful, sir. One, just bookkeeping question. What are the rail freight margins for the quarter?

Yes. Rail freight margin for this quarter is 24%. 24% compared to 27% last quarter, the -- I mean, previous quarter.

That is because of the reason I mentioned you earlier.

Next question is from the line of Mukesh Saraf from Avendus Spark.

My first question is on this busy season surcharge. In some form, we have seen this increase in haulage rates by new railways after eight years. So -- and especially now that DFC operational, we've seen this has increased. Should we kind of weigh slightly more into it that this is probably the kind of things to come. It's been eight years how it started increasing haulage rates. And if so, how are -- how is CONCOR or how is the industry looking at it given that this can kind of hamper the road to railway? So, what are your thoughts on this?

Your question is not clear. Can you repeat it, please? You are -- I think audio, there's a problem with the audio.

Sorry. So, what I was asking is this -- is it audible now, sir? Yes, it is better now, please.

Okay. So, what I was asking is this increase in haulage rates by Indian railways is happening after eight years in some form. I mean they're now doing it in the form of busy season surcharge. So, the question is, should we kind of read slightly more into this that this is probably the start of more hikes coming in because it's after a long gap of eight years. And if so, then how is the industry going to look at this whole road to rail shift? Because road freight rates are not going up. And so, the gap between road and rail obviously will go up as you pass through these costs.

Okay. Now I understood your question. We are in talks with the railways on a continuous basis. Now I don't visualize any further increase in rail haulage charges. And 10% busy seasonal charge that they have imposed from 1st of October. I think this is only going to continue for the period defined in the circular.

Apart from that, there will not be any further increase in the near future at least. And this busy season surcharge, we have passed on in EXIM and Domestic also, except for a few strategic streams. So, it has been absorbed by the trade. And of course, there was some disturbance for some time. But now it is solved, in Q4, we get a good volume in physical as well as financially also it will be good.

Okay so the road to rail shift that you're seeing at Dadri, do you think we are kind of seeing the initial, say, low hanging fruits. And from here on, it will be difficult? Or do you expect that road to rail shift to continue even in these coming quarters despite this pass-through of costs?

This will continue. This road to rail shift will continue.

All right. Understood. And my second question is again related to this. How would the role of Kathuwas changed for you sir now? Because earlier you're using it as a trans-shipment hub.

But now with Dadri directly booking the double stack rakes, how is the role of Kathuwas? And are you seeing organic catchment areas there doing well for you?

See, Kathuwas, actually, is now also, it is having a trans-shipment centre for the ICDs at Ludhiana and Tughlakabad and Barhi. So, these three ICDs are still being catered by Kathuwas. So double stacking is being done there. Of course, it has reduced because of Dadri.

But Kathuwas is developing their originating volumes also now. So, we are seeing growth in that originating and destination volumes also. That is also growing at Kathuwas. So, there is a - - at Kathuwas.

Any numbers you can share on the originating volumes for that Kathuwas any broad sets...

Numbers actually, unfortunately, I don't have those numbers for a particular terminal. But we can tell you later on.

Sure. Sir, just lastly, on the Cement business -- domestic cement business. I think your last time, you had mentioned that you're in talks with the Ministry for -- or restarting the bulk cement movement via containers. Any update on that?

Yes. We are continuing our talks with Ministry, and they are also doing some analysis, some calculations, data we have supplied to them. I think we should be getting some news in next financial year.

The next question is from the line of Yaruqh Khan from MoneyControl.

Sir, I just had two small questions. One was -- so going forward, you've seen a lot of container traffics not moved to the Suez Canal and the Red Sea because of the disruptions that have been going there. Going forward, do you expect your EXIM volumes to be impacted by that? I've seen that in Q3, your EXIM volumes were not impacted and you've seen a good growth, 6% growth in EXIM volumes. What would be the impact going forward in Q4 and then in next FY?

In Q3, we have got a growth of 13% in EXIM originating volumes. And the problem at that Red Sea issue. And we are feeling the strain in the current month in January. And we have -- we are in touch with some major shipping lines, and they have informed us that because of this, the containers have to pass through the Cape of Good Hope. So, the transit time has also increased and cost also increased.

So, we have been informed by them that this is going to stabilize by this month end. And from February first week, we should get good imports and good exports also because importers and exporters are in negotiations with the various shipping lines. Because ultimately, whatever orders they have, they have to execute those orders. So maybe it will be costlier and it will be taking more time.

But exporters have to execute their orders, and importers have to get their raw material. So, all these things will stabilize from first week of February. So, we are very hopeful that volumes will again start growing. And that is the indications we have got from almost all our stakeholders. And in FY'25, again, from the month of June, July, we should be getting good exports.

Okay. One -- the other question. So, like just a follow up on the last question that was asked.

You said that you negotiate, you're now to talking to the Indian railways to start transporting cement through open containers again. What are the sort of processes that you will have to get permission for before this process can be started again?

I would like to correct you, it's not open containers. It is a normal 20 feet container in which we had started moving bulk cement. For that, the Indian railways has given us rates that is create all kind rates for moving of bulk cement in normal containers. So that -- the validity of that rate circular was one year. That validity has expired.

After that, that circular in which the special rates were given, that has not been extended. So, we are trying with Indian railways to extend that circular that rates because if that rate circular is extended, then our movement becomes viable. And it can compete with road, and we are able to divert cargo from road to rail.

So Indian Railways is carrying out analysis before extending that circular because they have commercial branch, they have finance branch and they do all the analysis, whether it is beneficial for railways or not. And after that only, they will extend the circular. So, I'm hopeful that they will take some time to do that. And by next financial year, I'm very optimistic that they will extend the circular and we may resume the bulk loading in normal container, it is not open containers.

Sorry about that. Just last question. Any update on the strategic divestment plan for CONCOR?

That is the policy of Government of India. So whatever policy is given by them, we will follow that policy. We cannot comment on that. And secondly, whatever news we are getting is from new channels and from government directives. We are following the government directives.

But having said that, we are doing normal business. We are expanding our terminals. We are expanding our customer base. And we are giving more and more -- introducing more and more services for our customers. And so that the existing customers stay with us, new customers join us. So, all these things are going on. The business is not stopping. As and when it comes, we'll obey the orders of government. Thank you, sir.

Thank you. The next question is from the line of Achal Lohade from JM Financial. Please go ahead.

Sir, thank you for the opportunity. Can you help us understand for this LLF specifically, how many terminals are there and how many terminals have already got renewed under the new policy? Or if you're planning to renew under the new policy? And if you could also help in terms of given their earlier lease duration, how many of them are about to expire over the next two, three years?

We have total 64 terminals. Out of that, on railway land we have 26 terminals. So, it is not possible at this time to give you the exact which terminal lease expiring on which date. It will not be possible for us right now. And as my director initially explained to you, that we are actually following a policy that wherever we close a terminal, we carry out analysis.

And we make a policy that we don't lose our customers by surrendering the terminals to Indian Railways either we shift the customers to nearby terminals or we develop a terminal on our own land near that terminal outside the city limits because we need a big area. So that has been our policy not to lose customers. But strategically, we shift -- we surrender the terminal when it becomes unviable to us. That has been our policy. Lease dates we cannot give right now. We don't have that detail with us.

Understood. But just a clarification. Given the confusion around this LLFs, just a small clarification. Is it accurate to say that if you – you have an option to renew the existing terminal for 35 years at one go or that is not the case?

Yes. That option is there. It is there in the policy. That can be the renewed for the similar period of time.

But in that case, you'll have to surrender that terminal and go for the competitive bidding. Is that understanding right?

No, no. That is not mandatory. We can continue to pay at the 6% rate and retain that terminal for another 35 years.

Go it. And in that case, whenever the rates change for the land, the valuation, it will automatically increase. Is that understanding right?

So now the rate is increasing every year at the rate of 7%. Once the base rates has been found, in 2021 is the base rate. And above that, it is increasing by 7%.

Okay. Okay. So further change in the valuation of that land rate in those pockets is of no consequence. Is that understanding right? No consequence.

No consequence of that. Okay, okay. So, in other way, 440, 450, whatever number you have mentioned, that is probably the Cap. It can only be lower than that as you relook at the excess lands. Is that understanding?

Yes. That is the Cap as far as next year is concerned. But it is increasing that 7%. And simultaneously, we are optimizing by reducing some railway land. So, we'll -- we hope to maintain that level.

Understood. This is very, very helpful, sir. Thank you so much and I wish you all the best.

Thank you. As there are no further questions from the participants, I now hand the conference over to Ms. Bhoomika Nair for closing comments.

Yes. So, thank you very much for giving us an opportunity to host the call and answering all the queries very patiently. Much appreciate to yours and your teams efforts on this. Many thanks and wishing you all the very best. Sir, any closing remarks from your end?

No, no, that's all. I don't have any closing remarks. Thank you very much for your best wishes and for the investors to having faith in CONCOR.

Thank you. On behalf of DAM Capital Advisors Limited, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines. Thank you. Thank you.

Management 1141673000 Container Corporation 3 Abhay Modi 67319602 Helios capital 4 Abhijit Mitra 919372519256 Aionios Alpha Investment management 5 Abhinav Bhandari 919699358293 Sohum Asset Managers Pvt Ltd 6 Abhinav Chari 61389316 BOB Capital 7 Abhishek Rathi 85266920085 North rock 8 Abhishek Verma 9810163352 Fedelity International 9 Achal 918655308260 10 Achal Lohade 66303081 J M Financial 11 Aditya Mongia 9833234463 Kotak Securities 12 Ajit Motwani 9820934229 Dymond asia 13 Akash Kumar 9920804560 TATA AIA Life Insurance 14 Aksh Goel 9830519144 Tara Capital 15 Aksita Thakar 7208211260 Asian Market Securities 16 Alok Deora 9820513792 17 Alok Deshpande 9930075461 Nuvama 18 Amit Dikshit 9839043382 19 Amit Jani 9833805483 Trade link 20 Amit Kumar 8898708990 Determant 21 Amit Premchandani 9619665875 UTI AMC 22 Amit Shinde 61181031 Morgan Stanley 23 Amit Vora 9324201239 Amideep Investments 24 Angad Katdare 9920101018 Sameeksha Capital 25 Ankit Jain 67800305 Mirae Assest 27 Arun Kumar 15103907767 Alpha Street 28 Arun Raman 919176031817 Capital Market 29 Aseem Madan 2269544415 3P IM 30 Ash Shah 9321606200 31 Ashish Agarwal 2249133276 Sundaram Mutual Fund 32 Ashish Bhala 9910164868 Rajgor Securities 33 Ashish Patil 17029131398 Suntech 34 Ashish Salvi 9892881423 UBS Group 35 Atul Toiwari 9819577306 Citi Group 36 Avishek Lakshit 919831477912 Informist 37 Bharat Sheth 2269166701 Quest Investment Advisors Pvt Ltd 38 Bharti Sawant 67800306 Mirae Assest 39 Darshak Lodhiya 919601609500 40 Darshana Mehta 9820860070 Whealth Garian 41 Deep Mehta 2261249059 Bank of India Mutual Fund 42 Deepak Purswani 9920435178 Svan Investments 43 Deepika Mundra 9820788999 MNG 44 Devansh Kothari 918169490121 Aditya Birla capital 45 Dhaval Mehta 9766696245 Aditya Birla AMC 46 Dheemant Shah 69153547 ITI MF 47 Dheeresh K Pathak 919004309200 48 Disha Geriya 9324791509 Ashaka Stock Broking Participants List Total 177 Participants including the Speakers. THANK YOU FOR BEING WITH US Container Corporation Q3FY24 Earnings Conference Call Hosted by DAM Capital January 25, 2024 at 11:30 Hrs India Time 25-01-2024 Page 1

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