Captains Speak     

Published: December 31, 2024
Updated: December 31, 2024

Gateway Distriparks

The company has weathered Red Sea crisis

“Gateway Distriparks has planned a Rs 400-crore expansion programme to acquire or construct three more inland container depots (T&D) as part of its rail freight business.” Announcing this at a conference call organized to discuss the company’s performance during Q2FY25, Prem Kishan Dass Gupta, Chairman and Managing Director, added that this expansion plan is expected to be completed within the next 2 to 3 years. Meanwhile, the company will be phasing out of its container freight station (CFS) business and will not be investing in the sector anymore. He made it clear that “our CFS business has bottomed out and there is no scope for any further investment, except for some small capex and maintenance & repair.”

Referring to the company’s performance during Q2 FY2025, Mr. Dass Gupta said, “As maritime trade remains impacted by the Red Sea crisis and geopolitical issues, we’ve demonstrated resilience and successfully managed to increase our volumes through marketshare improvement in certain regions in the rail vertical. Q2 demonstrated strong sequential growth across volumes, revenue and EBITDA, compared to Q1. Additionally, the enhanced double stack capability at ICD Faridabad marks a strategic advancement that will elevate our service delivery and strengthen our competitive position in the NCR region.”

According to him, throughput for Q2FY25 stood lower at 3.26% to 1,86,715 TEUs, with that of the rail vertical down 7.85% to 92,733 TEUs and that of CFS up 1.74% to 93,982 TEUs. For H2FY25, the throughput was down 3.95% to 3,58,163 TEUs (rail down 8.29% to 1,74,776 TEUs and CFS up 0.58% to 1,83,387 TEUs). The company has demonstrated resilience and successfully managed to increase its volumes through marketshare improvement in certain regions in the rail vertical, despite maritime trade being impacted by the Red Sea crisis and geopolitical issues. The enhanced double stack capability at ICD Faridabad marks a strategic advancement that will elevate the service delivery of the company and strengthen its competitive position in the NCR region.

STRONG Q2FY25

According to him, EBITDA/ TEU for the rail business in Q2FY25 was Rs 9,800/TEU and that for CFS was Rs 500-1,300/ TEU. Q2FY25 demonstrated strong sequential growth across volumes, revenue and EBITDA, compared to Q1FY25. The Q2FY25 volume was 13% higher than Q1FY25, and that was not because of macros but due to an increase in marketshare in certain markets such as Ludhiana.

Maintaining that “H2FY25 will be better than H2FY24, Mr. Dass Gupta added that “the company expects that the benefit of marketshare gain will reflect in revenue and absolute profits going forward, along with efficiency improvements.” Double stacking has also increased and now accounts for 38% of rails operated. The Faridabad terminal is also now on direct double stacking. Some of these benefits have reflected in EBITDA/TEU. But the company is also to share such benefits with customers to retain and increase its marketshare. The company has to maintain the right balance to improve/retain marketshare as well as profitability. EBITDA/TEU may see some bit of downward bias as the company is passing on some benefits of double stacking with customers to gain marketshare in certain regions, depending on the competition. But overall, the absolute EBITDA will go up in H2FY25 with the benefit of the marketshare gain coming through. The marketshare of the company in the NCR region was about 17-18%, and in Ludhiana about 20-21%. The setting up of the Jaipur terminal has been delayed due to the inability to acquire additional lands required.

Referring to the process of monetization of CFS land parcels, Mr Dass Gupta said that revenue realization of CFS in Q2FY25 stood lower by 23% to Rs 6,916/TEU. This is largely due to ground rent going down for the last 3 years. Further, the change in the revenue recognition policy has also had an impact; discounts were earlier counted as part of revenue and are not recognized now. The Punjab Conware litigation is also impacting the CFS business. The labour cost in the Mumbai CFS is also high. The rail business Realization/TEU is Rs 35,543, up 12% yoy. The busy season surcharge by IR (10% of haulage charge) was not there in Q2FY24, but Q2FY25 has the additional charge, escalating the realization/TEU. The competition is intense in the rail business as well, he noted.