Gati Q1FY18 Concall Summary

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Macro Environment

  • Cumulative growth in the IIP index for the period April to June 2017 and 30% over the corresponding period last year.
  • GST law came into effect on July 1st 2017.
  • Gati made a zero downtime transition to GST across all their operation subsidiaries.
  • E-Way bill rules are anticipated shortly.

Financial Highlights

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  • Consolidated revenue for Q1 FY18 stands at INR 4,267 million or 426.7 crores.
  •  Consolidated net profit rose by 258% to 18.3 Cr for Q1 FY18 from 5.1 Cr for Q1 FY17.
  • Core express business volumes grew by 5.6% year-on-year and reverse historical seasonality with 4.6% quarter-on-quarter growth.
  • The standalone revenue for Gati is 119 Crores in Q1FY18 , 122 Crores in Q4FY17 and 127 Crores in Q1FY17
  • Standalone EBITDA is 27 Million this quarter against 26 Million last quarter, and YOY it was 108 Million.
  • On the EBITA side, the Firm is flat versus the last quarter and the firm is having a bit of a dip. The reasons for this are as follows
    • e-commerce business has been a bit slow relatively,
    • Cold chain business which is in the building up stage where the firm is building up fleet in their house has given the firm a bit of an EBITDA drag.
  •  PBT has grown versus last year 324% and versus last quarter 116%.
  • Overall debt position has come down versus last year in March we were at 493 crores and in June we have finished at 4,271 million.
  • Foreign currency loans are completely out.
  • The Firm had about $22 million of FCCB that was outstanding and one-third of that has been repaid and two-third have been converted into equity.
  • The other income is somewhere between 25 odd crores whereas consolidated is 26 odd crores.
  • CAPEX plan in the range of 30 to 50 Crores.
  • The firm owns 4 fuel stations.
  • The firm has regrouped FCCB reversals and interest related items
  • Loan given to subsidiaries : 19 Crores
  • In august the firm will convert FCCB loan into equity shares, with 10.8 Million shares.

Business Updates

  • Expects e-commerce business in terms of topline and profitability to change track almost immediately going forward
  • Last quarter the parcels with weight more than 5kg were about 20% and this quarter this increased to about 26%.
  •  6% increase in large packages
  • 70:30 ratio of less than 3 kg and more than 3kg for last quarter, and for this quarter this ratio is 65:35 (65% less than 3 kg, 35% more than 3 kg).
  • Larger packages are strength for the firm and provide more profit.
  • The margins have reduced due to Kausar Business and E-Commerce business

Express Business

  • Volumes have grown by 5.6% year-on-year and 4.6% quarter-on-quarter despite historically the business actually having a seasonal dip in this quarter.
  • Contributes to about 70%-75% of the total business.
  • A business vertical of retail which caters to many SMEs, has grown by 20% in Q1FY18. It has actually grown quarter-on-quarter by mere 7%.
  • The GKE business had an EBITDA of 15 Crores and for Q1 FY17, it was 17 Crores.
  • As per the management this segment is extremely healthy

Retail Business

  • Grew 279 Crores in Q1 FY18 against 265 Crores in Q4 FY17.

KWE Business

  • Earning for Q1 FY17 was 282 Crores.
  • EBITDA around 15 Crores for this quarter and 7 Crores for the previous quarter

Kausar Business

  • Still in Initial Stages.
  • Earnings were 11.1 crores in Q1FY18 versus 10.3 crores 16.18 in Q4FY17 and 11.8 in Q1 FY17.
  •  Delivering a marginal negative EBITDA because it is still building on.
  • The firm is planning to expand their network in the coming time.
  • Marginally negative EBITDA
    E.) E-commerce Business
    •    Earnings were 42.4 crores in Q1 versus 49.9 crores in Q4 versus 58 crores last year’s
  • Q1 has seasonality in the e-com industry given typically the lowest quarter of the four quarters.
  • Through the last 3-4 quarters, a lot of the e-commerce industry had moved towards the smaller weight segments.
  • The firm expects to see change from Q3 onwards when the season hits.
  • Second consecutive quarter where company experienced negative growth in e-commerce.
  • In the year before, the firm has seen 70%-100% growth year-on-year.
  • FY17-18 e-commerce business expected to be around 30%-35% growth.
  • COD share is around 60%.
  • Q1 sale is typically little low but expects Q2 and Q3 to be better as the major players in E-commerce business have got funding

GIETL business

  • The GIETL is a trading solutions arm or subsidiary of Gati.
  • Offers end-to-end supply chain solution to our customers through this subsidiary
  • This segment grew by 60 per cent.
  • In the GST context, this segment is highly relevant
  • Three company is highly bullish for this segment.

Gati Fulfilment Services

  • Planned to start the full-fledged service in this quarter
  • But due to the launch of GST , this launch was delayed
  • Due to GST , lot of sellers were very hesitant to move into a new mode
  • The launch has been delayed by around a quarter

Supply Chain Enhancement

  • Launch of a new product for value-added transportation to complement its existing portfolio of express distribution and warehousing.
  • This helps the company provide an integrated end-to-end supply chain condition which is most relevant in the new GST era.
  • The company is engaged with several marquee customers across industry sectors to bring efficiencies to their supply chain.

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