CONCOR will maintain a 34% margin in FY21: V Kalyana Rama, CMD
Being in the essential services, we never closed any of our depots during the lockdown also. We were working continuously. We also took the movement of essential commodities like pulses and food grains along with railways and that helped many people. I am very happy that we could give this service to the nation. As far as business is concerned, yes, there is a slowdown everywhere.
V Kalyana Rama, Chairman & Managing Director, Container Corporation of India Ltd. (CONCOR), talks business activity and demand revival, Q4FY20 results, order book, closure of 15 terminals on railway lines, divestment, and its participation in Atmanirbhar Bharat among others during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts:
Q: Tell us about the way the business activity has picked up, of course, some disruptions have occurred due to COVID, and also tell us about the demand that you are seeing in your business?
A: Being in the essential services, we never closed any of our depots during the lockdown also. We were working continuously. We also took the movement of essential commodities like pulses and food grains along with railways and that helped many people. I am very happy that we could give this service to the nation. As far as business is concerned, yes, there is a slowdown everywhere. COVID had an impact on the industry as well as on export and import. Despite this impact, there was some drop in the number of the last quarter of the last financial year (Q4FY20). At present, the business is OK and I will not term it as dull but is not at the full stream.
Q: If we have a look at your numbers than there was a pressure on the revenue but interestingly margins were maintained around 30%. What helped you in maintaining the margins and what is the outlook for future and do you think that these levels are sustainable?
A: I will reply about the sustainability part of the margin and they are sustainable because our business model is not to get into a price war with any of the competitors. We provide a quality service. When the going gets tuff, we got competition there are some 17-18 players of which some are very active others are not active. They would like to give dip discounts but we not going in that model. We are going in the model where we maintain our margins but provide a full quality service, which is a complete package. Our quality and service levels are the main attraction for maintaining our market share. Of course, there is no doubt that last year because of a lot of pressure we lost some market share. But instead of going after the market share, we maintained our margins, there was some pressure on our top line but our bottom line remained intact to our margins. I am sure that this year also we will be able to maintain 32%-34% margin levels. On the operating level, some expenses are increasing in the form of input costs because of the policy changes. So, we are working on those things, how to negate those things and get into the bottom line with robust numbers.
Q: Tell us about the kind of order book you have at present and what is your outlook on that front and have entered into talks with big clients from where you can get a big chunk of business?
A: Our order book is not like any construction company. We don’t have a longstanding order book. We are into the business of logistics and it is an everyday business. However, we are trying to create a sense of continuity and longstanding and understandings mainly with various shipping lines and the customers. Now, we are trying to do a five-year agreement with the shipping lines with a clear term, so that everyone will have clear visibility of the next five year, how various schemes, internal relationships and commercial relationships will go on. We have started this and receiving a lot of response to it. I don’t want to name the container shipping lines, who all have signed but you can count that whosoever is in India almost all of them have signed the agreement with us.
Q: How the closure of the 15 terminals that you have shut down on the railway line will benefit you and how you will manage your business? About a particular land, it is being said that the charge that Railway takes on it under the revised charges that became effective from April 1 makes it unviable and it could add a lot of pressure on your finances. Please explain to us the situation and how will you tackle it?
A: I will explain you about the 15 terminals but let me clarify that you are mentioning about one particular terminal, which you are not naming it, so I don’t want to make any guesswork on it. But, there is no such terminal which is becoming unviable to us because of any change in this land-licensing policy. So, wherever we found that the viability will not be good there we found an alternative way of doing business. And, we stopped doing business at these 15 terminals. We closed on these 15 terminals and made it very clear, in fact, we gave notice to the exchanges and all our customers and investors. We made it amply clear that we are not losing any business by closing these terminals and have found the alternatives. We have also explained which alternatives will be utilized for the closed terminals. It helps (i) for the investors to understand how the business will run in the future and (ii) for the customer to look at the alternative terminal if he is looking at the terminal which is getting closed. So, these things have been taken care of. Now, whatever terminals are left on the railway line at this juncture on this date is not unviable.
Q: How many terminals you have on the railway lines and can we expect that more of these terminals can be shifted or some changes can be brought in place on them in the near future? I was talking about the Tuglukabad facility that people have pointed out where outgo will go up to Rs 300 crore as supposed to Rs 40 crore that you were paying earlier. Is it true?
A: We were giving more than Rs 40 crore. This Rs 40 crore mentioned in the last year’s balance sheet has happened because of some adjustment that we can do. Otherwise, the Tuglakabad normally pays around Rs 100 crore plus. Yes, it will go up to Rs 300 crore plus but it doesn’t give any strain on us. Besides, as of now, we are having 29 terminals on the railway lease line and there is no second wave of the closure of any terminals. Whatever we had to close and shift the business, we did it and now we can take that these 29 will continue for some time.
Q: What is the total outgo to the railway line from these 29 terminals?
A: The policy has been just announced and we have been having discussions from the railway authorities. So, things are not very clear. As of now, we can say that the outgo will be around Rs 400 crore but that is not final. So, the final figure we will be able to tell only at the end of this year when the complete policy clarity will come and we may make some representations to the minister of railways and discussions are going on it. The finality will come only after the discussion comes to an end and then we will be able to give you a correct number.
Q: CONCOR has been chosen for divestment and the government is seeking to offload 30% stakes in it. What is an update on the divestment in terms of respective bidders and companies?
A: From my side, no comments because I am not the man to talk about the divestment of this company. That is the job of a different department and I think that you can get correct information from that department, which is better. As of now, there is no comment on this from my side on this particular thing.
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Q: Lot of talks is happening on Atmanirbhar Bharat. Tell us about the plans of CONCOR looking at the opportunities in this space? What is your outlook for new business opportunities that CONCOR can tap and which kind of partners you will look forward to adding on to make yourself strong and robust?
A: Three years back we were more a container transport company and an inland container depot service provider. So, we used to call ourselves having three services transportation, warehousing and clearance services. Now, we are into many things. A year back we started coastal shipping and we continuously provided service for one year but coronavirus had a lot of effect on the particular industry. So, we stopped temporarily our services and will again restart that. So, the coastal shipping is one extension for the natural extension for our services, where we are providing connectivity completely from North to South and East to West. So, we will be connecting East and West through coastal shipping. So it is a service where we will be providing complete enter model, wherever it is possible, we will do road, rail and sea route. We are getting into distribution logistics. This is a very big thing. In fact the government also, the honourable Prime Minister has mentioned that supply chain management is going to be the main key from a growth perspective in respect to India. We are in that business and see a lot of opportunities there. And now, the entire shopping and marketing will change to online-mode more and more. So, the requirement of warehousing will increase a lot. As such, India had a lot of warehouse requirement earlier also because per capital warehousing availability in India is much lower when compared to the developed nations. So, we are developing 20 distribution logistics mode in addition to our ICDs. These 20 are on a complete asset-light model with partnerships out of which 3 hubs have been awarded and some big companies are coming and at this stage, I can’t announce but they have a lot of interest in that. So, we are sure that with all these 20 distribution logistics centres will be opened up in the next 2-3 years. We are trying to create something like 50 million square feet of warehousing space, which is very big. As on date, CONCOR has got around 4.5 million square feet warehousing. So, now, we can understand that how much extra warehousing space we are creating.
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