Vedanta Q1FY18 Concall Summary


Key Performance Highlights

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  • Significantly higher production quarter-on-quarter at Zinc India.
  • Gamsberg zinc project on track for mid-calendar year 2018 production.
  • First quarter EBITDA at Rs.4,965 crores, represented 40% increase in year-on-year EBITDA
  • First quarter fiscal year 2018 profit after tax of Rs. 1,525 crore is more than double back of last year
  • Delivery savings of nearly Rs.856 million over the last nine quarters
  • Recognized as a role model in the mining sector by FTI Consulting Asia. Overall in India only three companies are ahead on this course scoring 10 on 10 and Vedanta as a joint second with few other companies at 9.1 out of 10
  • Completed merger with Cairn India

Financial Highlights

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  • EBITDA is up by Rs. 1400 Crores, 40% higher year-on-year basis with an EBITDA margin of 36% driven by strong operating performance.
  • Pot failure at Jharsuguda and the TSPL power plant impacted earnings by approximately Rs.500 crores
  • Improvement in the commodity prices held through currency appreciation especially Indian rupee by 4.2% and the South African Rand by 13%, and input commodity inflation impacted EBITDA adversely resulting into a net positive impact of Rs.750 crores on the market factors
  • Attributable PAT before exceptional items, which at Rs.1,525 crores more than doubled over the previous year
  • Depreciation and amortization decreased due to change in depreciation methods consequent to the accounting guidance changes under Ind AS in the oil & gas business effective 1st April and lower mine production at Zinc India.
  • Strong liquidity of Rs.48,000 crores, low gearing and low net debt-to-EBITDA of 0.8x amongst the best-in-class in Indian conglomerates
  • Q-o-Q Finance cost marginally increased due to capitalization of new capacities at aluminium, temporary borrowing at Zinc India offset by lower interest rate and gross debt reduction.
  • Cost of borrowing for the quarter was below 8% at 7.9% lower compared to 8.2% in Q4 FY17
  • Reduced gross debt by nearly Rs. 9,000 crores in the first four months of fiscal year 2018
  • Term debt refinanced 80 basis points to 100 basis points, overall cost of borrowing is likely to be 20 basis points to 25 basis points lower than last year.
  • Blended rate of return on investment for the quarter was around 6.7%, reflecting the interest rate curve as well as the mark-to-mark on the bond investments.
  • The tax rate guidance for the year at mid-20s to 30% as articulated during the May 2017 meetings still holds.
  • The rate of interest on outstanding term loan portfolio was reduced by about 80 basis points to 100 basis points
  • Liquidity of the group remains strong with over Rs.48,000 crores or $7.5 billion of cash and about $1.1 billion of undrawn lines credit
  • The net cash from operations was around Rs.4,100 crores, which was invested back in CAPEX and working capital
  • Net debt post dividends and preference shares stayed at almost the same level more or less over the last quarter

Business Highlights

Zinc Business

Hindustan Zinc (Zinc India):

Vedanta Q1FY18 Zinc India Business.png
  • Zinc India went through a successful transition from open cast to underground mines in thelast 12-months with significant increase in the current quarter volume.
  • Hindustan Zinc business commenced the year achieving mined metal production of 233,000 tons.
  • Cost of production was higher due to the sharp increase and input commodity prices and lower asset realization
  • On track on the goal of achieving 1.2mt of mined metal capacity in fiscal year 2020
  • Underground mining move 80% in the current year before completely transitioning to underground mining in fiscal year 2019
  • Production at SK Mines were at 1.5 mt in new mill contracts to L&T, which will take mill capacity at SK up to 5.8 mtper year
  • Expected production of refined zinc metal in FY 2018 is 950,000 tons. Silver production is expected to be over 500 tons while cost of production is expected to be marginally higher compared to fiscal year 2017

Zinc International

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  • Despite of a plant shut down at Skorpion, delivered a strong EBITDA because of higher sales volume of Black Mountain.
  • Cost of production was higher at $1,690/t due to shutdown at Skorpion.
  • The Gamsberg project is on track for first production bymiddle of calendar year 2018 andphase-1 is expected to give 250,000 tons of zinc production. Phase-2 could be another 180,000 to 200,000 tons.
  • FY 2018 production and cost of production guidance at Skorpionremains unchanged with production of about 160,000 tons and cost of production at $1500/ton.
  • Hosting a Zinc Day is being planned based on good feedback from most of the sell side analyst

Oil & Gas Business

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  • Oil & Gas business continues to deliver stable production volume with higher free cash flows and low operating cost
  • Commenced growth journey on both exploration and development fronts.
  • Co-fields continue to deliver along expected lines with gross production across three assets at 187,000 boepd for the quarter.
  • Rajasthan production was around 160,000 bpd.
  • Mangala EOR continues to deliver strong performance with a volume of 56,000 barrels a day.
  • The Rajasthan asset recorded an uptime of over 99%.
  • Gas production from RDG increased to average of 35 million cuffs per day.
  • Commenced production from two satellite fields named Cambay II and Gudha in Rajasthan.
  • Offshore asset production was at 28,000 bpd with Ravva producing 18,000 barrels and Cambay 10,000 barrels
  • Offshore assets also recorded excellent uptime of over 99%.
  • Operating cost at the lower end among global peers. Rajasthan water flood OPEX was 5.5% lower than Q4 at US$4.3/barrel.
  • Blended operating cost for Rajasthan was also lower by 1.2% at US$6.2/barrel with the polymerized liquid injection at 420,000 bpd in Q1.
  • Raageshwari Gas project- Phase-1 of the project is on track to complete in Q2 which would increase gas production to 40- 45 million cuffs per day
  • Phase-2 is expected to increase the gas production to over 100 million cuffs per day and condensate production to about 5000 boepd by H1 calendar 2019
  • 15-well infill drilling program to commence at Mangala to monetize the reserves early
  • Liquid handling capacity will go up from 950,000 to 1200,000 bpd increasing water injection capacity from about 650,000 to 850,000 bpd.
  • Bhagyam EOR field development is under discussion withJV partner ONGC.
  • The Field Development Plan for Aishwariya EOR is also under discussion with a JV partner.
  • Aishwariya Barmer Hill Phase-1 has been approved and the production is expected commence from July 2017
  • The fiscal 2018, is expected to have steady production volume from Rajasthan at 165,000 bpd with the potential upside from the execution of growth projects.
  • The net CAPEX is estimated to be $250 million with further optionality for a growth project
  • Re-commencement of investment in the exploration and development projects to realize the full potential of the Barmer basin.
  • Target of 500,000 barrels per day has been set for Barmer basin which would contribute to 50% of India’s domestic production.

Aluminium Business

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  • Stabilised Aluminium production run rate of about 1.4 mtper year
  • The BALCO 325,000 tons smelter is fully operational and capitalized.
  • There was on outage at 500,000 tons Jharsuguda-I smelter in April 2017 that damaged 228 out of total 608 pots. 35 pots have been restarted.
  • The second line at Jharsuguda-II has been fully ramped up and capitalized.
  • Realized significantly higher premium on year-on-year basis because of increase in alumina prices.
  • Hot metal costs were $1,727/ton, mainly because of higher import prices for alumina, Indian rupee appreciation, increased input cost and some temporary cost pertaining to pot outages.
  • As production cost of Lanjigarh alumina is much lower than the purchase cost of seaborne alumina, Vedanta is increasing procurement of own and third-party bauxite which will allow to ramp up Lanjigarh.
  • Estimated hot metal cost production in the second half of the fiscal 2018 to be between $1,575 to $1,600/ton.
  • Expected fiscal 2018 alumina production in the range of 1.5 MT to 1.6 MT implying about 50% of alumina requirement is met via captive production.
  • At BALCO mines, expected to ramp up existing capacity of1.8 mt to 2 mt of bauxite in fiscal 2018
  • The company continues to work with the Odisha government on the allocation of bauxite to drive future expansion at Lanjigarhrefinery.

Power Business

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  • At TSPL, all three units have been restarted. Currentlyrunning availability of about 90%
  • BALCO 600 MW and Jharsuguda 600 MW sequentially lower offtake in the first quarter.
  • Long-term power purchase agreements for about 60% ofthe 600 MW capacity of BALCO which are being substantially met and serviced.
  • The 100 MW Nalco power plant is under care and maintenance effective from the 26th May 2017 due to lower demand in southern India. The plant generated a significant cumulative EBITDA of about $170 million over eight years.
  • Observed temporary disruptions in domestic coal supply, which meant some increased power costs.
  • Reduced dependence on importedcoal at BALCO and Jharsuguda despite increasing coal requirements.
  • Secured 2 mt of coal linkages in July during the linkage auctions. This is in addition to the 6 mt that was secured a year ago to ensure longterm security of coal sourcing at competitive price.

Iron Ore Business

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  • Achieved a sales of 2.28 mt and production of 3.24 mt.
  • Production at Goa was lower primarily due to the early onset of the monsoon as well as the temporaryhalt in mining in some areas by the government.
  • Sales dipped due to lower pricing environment and a widening of discount for 56% grade as compared to the 62% iron grade.
  • To improve realizations per ton and narrow the current discounts, working on product upgrade with higher grades so that overall iron content is increased to about 57.7% grade as well as the alumina content is reducedfrom 4.2% to3.5%.
  • At Karnataka, achieved 50% of annual mining cap reproduction of 1.09 mt during the quarter.
  • Sales were lower at 0.42 mt due to muted e-auction sales. Beneficiation of ore, however, has resulted in improved prices at $24/ton compared to $18/ton in the first quarter of fiscal 2017.

Copper India Business

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  • Copper India production was about 90,000 tons of cathodes.
  • Production was lower due to plant shutdown for 11 days for maintenance and 4 days due boiler leakage.
  • Post shutdown the Smelter is operating at high efficiency and is expected to produce 400,000 tons of cathode during the fiscal year of 2018
  • TcRcs has been at $20.08/pound on account of reduction of global benchmark to TcRc rates and lower spot TcRcs. Over 80% of concentrate requirement are sourced through long term agreements.
  • Net cost to conversion was higher year-on-year on account of higher coal and input commodity prices, lower realized asset prices and lower volumes due to the maintenance shutdown
  • Evaluation of expansion of Tuticorin smelter by further 400,000 tons per year is in progress

Industry Overview

  •  Lower commodity prices during the quarterexcept for aluminium where Chinese efforts to restrict excess capacity in aluminiumhelped.
  • Aluminium LME continues to shift to positive buyers for the first time in nearly a decade.
  • Rest of fiscal ‘18 expected to be more of a supply-driven story barring any macro shocks in the global economy
  • India’s strong demand growth for gasoline and diesel is continuing and is likely to continue for the next several years.
  • Over the longer-term, surge in electric vehicles will increase demand for base metals like copper, aluminium and lead giventheir extensive usage in transportation system and also electric batteries.
  • Urbanization and industrialization will continue to drive demand in all of sectors such as construction, transportation and infrastructure.
  • The continued shortage of new supply and the continuous draw down of refined zinc inventories have led to multi-year low stock levels, some ofthem going back more than 10-years.


Arihant Superstructures Q1FY18 Concall Summary


 Financial Highlights

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  • Revenues was Rs.576 million in Q1FY18 while EBITDA was Rs.109 million
  • PAT in Q1FY18 was Rs.49 million and Minority interest was Rs.39 million
  • The company’s target was to sell 1800 flats annually (1.7 to 1.8 million square feet)- 450 per quarter. The company could sell 361 flats
  • Rs.100 Crores sales for 361 flats (333000 square feet)
  • Distribution of 361 flats- 225+from Arihant Anchal, Jodhpur; and rest from Navi Mumbai
  • From Q1FY17 to Q1 FY 2018 basis, there is no improvement 
  • From Q4FY17 to Q1FY18 there is a decrease
  • The project in FY 2018 is Arihant Aloki Project, which is sub Rs.3000 per square feet of product line
  • Projects  in Q1FY18 were from group of lesser margins, like ArihantAloki as well as Arihant Adita where the margins has been relatively lesser than the 25%
Arihant Superstrcutures Q1FY18 Highlights.png

Two different baskets of projects

  • There are two baskets of projects with different behaviour of profit of margins and revenue
  •  Some projects are with margins of 15% and below and some of them are 25% and more
  • Where the project is on area sharing basis to the landowner, it is on asset light model, the margins are comparatively higher
  • In an area sharing or in JDA or in JV or in where landowners, the topline for the sales from our side remains the same, but the expenditure goes down totally to the project
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New members in Company’s Board

  • Two respected people in the industry joined the company's board
  • The additional independent director- Mrs. VijayalakshmiIyer, who is a former Chairperson,Bank of India; and the independent director- Mr. Raj Narain Bhardwaj, who is the former LIC chairman

Effects of RERA and GST

  • There had been a slowdown in real estate sales
  • From the RERA, the after effects at Jodhpur was not that much as the customers were less affected with RERA coming in or not
  • The company completed the second phase launch of Arihant Anchal, which was priced at Rs.22 lakhs
  • The no of flats in second phase was around 400 flats-the company could sell 206 flats in the first 15 days starting from May 1, 2017
  • In Navi Mumbai, people had been vigilant about RERA- the customers had been in a wait-&-watch mode
  • At present, around 4% rebate is being given to old and new clients
  • It appears that it is a matter of only 2%, which they try to get it bargained from the price point of view and be satisfied with the purchase
  • There is a huge burden of GST, as it is being passed on by the developer under anti-profiteering clause

Cash flows

  • Cashflows due to GST had been good in the month of June- People paid up a large amount of due amounts to get benefited from 6% of the total cost from service tax and VAT tax vis-à-vis to the 12%
  • At present, the correction cycle has moved out to around 60-90 days, even 100 days in some projects

Future effects

  • Uncertainty from the customer side how real estate pricing would be post GST,that is after the first quarter and post RERA registration
  • GST as well as RERA effects will fade in the next two quarters
  • There will be a completely different scenario in real estate- in terms of sales as well as implementation of the projects
  • From the point of view of collection cycle, the company hopes there would not be a large lagover

Registration of Projects under RERA

  • The company has registered all the projects, which fall into the category of regulation of RERA
  • Total 14 projects across Mumbai as well as Jodhpur fall in the category
  • The projects, which falls into completion category in Jodhpur as well as in Navi Mumbai are not registered as that was not required after getting the occupancy and the completion certificate once
  • The company has made all the applications on July26, 2017- the last project, which was registered under RERA
  • Registration certificate is being received on daily basis
  • Around 70% to 75% certificates have been received in Mumbai and other are to be followed up in the next 10 to 15 days

Change in process under RERA

  • The RERA regulator used to take seven days initially
  • At present, because of online process, one can give his file where the approval stage has moved across
  • Maximum of the applications of Maharashtra- around 10000 has been filed up in the last one week of July, so it would take little more time than one week
  • RERA is very fast to process up the applications- doing up 10000 in one month

Changes in company procedures post GST

  • For the implementation of the GST, the new chart of masters has been prepared and accordingly the book keeping is being done and accounts are being maintained
  • To pass on to the benefit of the GST input credit, the company has worked out on real time basis on project basis
  • Sale price and construction cost are the two factors, which maps out the total benefit to the company in terms of input credit
  • The company has already written letters to all customers of different projects with the outcome of the maps
  • 3.5% to 5% of input credit to be given as GST discount
  • The method of passing of the discount is not on rate basis
  • The bill format’s example- Say 1 lakh is the bill amount and 12,000 is the GST, so the bill amount would be 1,12,000; GST payable by customer is 8000 and GST payable by developer is 4000
  • Under anti-profiteering act, the company has taken up the right measures, where the department as well as the customer can identify that this is what has been passed to us

CLSS Interest Subsidy

  • The CLSS interest subsidy has to be availed by the flat owner himself directly by doing an application to the housing loan bank
  • People have filed up their cases with SBI Jodhpur where they fall into this category of availing the interest subsidy
  • The company does not have information on the numbers
  • The company has got some of the housing loans disbursed and some are still in process
  • People have applied for the benefits and it takes some time for the process
  • In the next quarter, one people get this benefit, the housing loan would be disbursed to the company

Input Credit

  • The company has kept 0.5% input credit benefit not to be passed- that would be additional cost towards the management setup and consultants and all the administrative work

Company strategy

  • The business development and land department have already got a good pile of projects, which the company are filtering out
  • The company worked on increasing its strength in the last quarter, in workforce for sales, admin and management
  • As of now, around 70 to 75 people are there both in Navi Mumbai as well as Jodhpur
  • People are getting ready for the increasing demand for the affordable housing as well as to cater to the projects, which have kick started marketing/sales as well as engineering
  • The management’s basic principles- affordable housing would be taken on outright basis by purchase of land
  • The company would prefer any project, which is above Rs.5000 per square feet
  • The projects will be taken on an asset-light model, where the company has to shell out less cash for the land payments

Company outlook

  • Company is hopeful of making up the shortfall of 20% in coming quarters
  • Blended EBITDA margins as per projections and the business plans,  is 33%, around 1-2% plus minus,
  • The projection is on the total project and total project cycle
  • This year the company expects to achieve EBITDA margins of say 27%- 30%, which would come to know more clarity only after Q3
  • The company is looking forward for project sales from new launches
  • Arihant Akanksha as well as ongoing Arihant Aalishan, which are within little higher ticket
  • size with higher margins and Arihant Anshula with higher margins

Industry outlook

  • Those companies which would adopt to the regulator and the processes set by it, they would always be in a good position
  • Those companies, which had been doing things not in a proper fashion and did not have any attitude towards servicing their clients, they will face some issues
  • All small companies will go off and the big would remain.
  • Undoubtedly the bigger developers would consolidate and strengthen the position because they are adhering to the act and the regulations

Annual Cycle

  • Real estate season, in reality, starts from October and last till March
  • April, May, June are always vacation period
  • July, August something seasonal,
  • This time due to RERA and GST, it would take one more quarter to get the momentum up
  • The company’s call centre at Navi Mumbai has generated something around 6000 to 7000 leads in the last 1-2 months


Symphony Q1FY18 Concall Summary


Financial Highlights

Symphony Q1FY18 Financial Performance.png
  • Second time in last 20 quarters, Symphony has experienced degrowth in topline
  • Significant reduction in profitability margin
  • Degrowth of 15% in the topline; mainly due to erratic rains in the country
  •  The overall demand of the five new touch series of models was high and these were launched at introductory price, contributing to lower profitability
  •  The company has taken a substantial price hike (15-23%) with effect from 1st July 2017; expecting the contribution margin and EBITDA margin to rise to December’16 level
  • Sales has decreased from Rs.152 crores to Rs.129 crores YoY (15% reduction)
  • Gross revenue down from Rs.158 crores to Rs.142 crores YoY (10% reduction)
  •  EBITDA has decreased from Rs.44 crores to Rs. 32 crores YoY (reduction of 28%); EBITDA margin to gross revenue down by 570 bps to 22.5% YoY
  •  Reduction in PAT from Rs. 31.56 crores to Rs. 24.04 crores YoY (24% reduction); PAT margin reduced from 20% to 16.9% YoY
  • Market share has increased to excess of 50%, from 40%

Impact of GST

  • There was a rate benefit to the company
  • Simplification of business in respect of efficiency in logistics and speed
  • Clear move from the unorganized sector to organized sector in the market and this is expected to accelerate
  • Dramatic improvement in the organized retail; market share of 60-90% in organized retail
  • The tax rate has reduced to 18% post GST, from the overall tax of 21% including the excise duty, VAT and Service tax

 International Business

  • Robust growth in the sales in Europe
  • Opened up new markets in South America and African countries
  • Challenging economic and political environment in Middle East and Saudi Arabia a cause of concern
  • Strengthening of Rupee has also affected the international market
  • Strong profitability and contribution margin of the company helps reducing the impact

Air cooling segment performance

  • Capital Employed increased from Rs. 95 crores to Rs. 171 crores YoY
  • This is due to some inventory build-up at the company level; However, due to the robust booking, the inventory expected to reduce to zero by August
  • Hikes in the advances to the OEMs has also led to increase in the Capital Employed

Geographical performance

Symphony Q1FY18 Geography and Segment wise Results Q1FY18.png
  • Decrease in the revenue in India from Rs. 134 crores to Rs. 110 crores YoY; close to 18% reduction
  • Revenue from rest of the world has increased from Rs. 18 crores to Rs. 20 crores YoY, up by 8.3%


Elgi Equipments Q1FY18 Concall Summary

Elgi Equipments.png

 Key Highlights

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  • The Sales level the company has grown at about 4.5%, the compressor business has grown at 6+% across the world
  • At the consolidated level, grown at about 4.5%. while EBITDA is Rs 323 Cr.
  • The company has lost about 60-odd million in contribution margin at material cost level primarily because of mix variation compared to the first quarter of last year.
  • The company did a minor voluntary retirement scheme wherein about 22 people were retied primarily at the blue-collar level.
  • April was a bit of disastrous month for the company but the company had recovered fairly well in May and more so in June
  • In the Second week of June, the company was hit with the effects of GST due to delayed payments resulting from confusion of postponement of payments.

International Market Scenario

  • US had done well in terms of Medical business, in spite of the confusion of the Obamacare prevailing with the Trump administration.
  • Brazil continues to be a part of a challenge but not due to the operations but owing to the Brazilian Economy.
  • Africa has been marginally better than the last year, but Middle East continues to be a challenge
  • Far East has performed well in terms of the company revenue contribution.
  • Australia has done well and China has continued to sustain at the levels that has been earlier planned.
  • Company is continuing to support and service our customers and parallel are working on a plan to come up with a new strategy for China but that is not going to be immediate.
  • General economic revival in all the key markets in US. US has been doing well for the last almost two to three years.
  • Europe after prolonged thing from 2008 are seem to be coming back
  • Australia after a long pause is beginning to invest, so part of our growth in these markets has been contributed by the revival of the economies and therefore investment in capital goods.

Impact on Compressor Segment

  • Dealer-based business has taken the biggest impact but there have been saviors like Railways.
  • Compressors are 28% but there is some clause, which says partsin railways, is 5%


  • In the month of April, we were significantly strung by our ERP issue and the recovery that compressor business made in May and June.
  • ATS, the automotive equipment business could not do primarily because the concern of many of the customers in terms of GST
  • Post GST what will be the savings that they could potentially have so that kind of dampened things a little bit and many of the passenger vehicle companies that were looking at expansion of the dealership did not go through with it. But June was good, July continues to be good for the company and the lost revenue is forecasted to be recovered.

Impact of GST

  • On an average it is pretty neutral that could be a marginal point, 3.4% increase in ournet cost to the customer.
  • Company has started extending the credit to our dealers and customers due to which the cost has come down.
  • Now distributors are carrying inventory of the old parts where the MRP is higher where as now the MRP is lower. The net difference is about around 1%.
  • In terms of input credit basically the only thing is that the company is receiving a net set off and had a 2% CST, which was our input cost earlier.
  • Spare parts is at 18%.

Dealer Ecosystem and Online Connectivity

  • The online system is still not in fully in place, but the system between the vendors and company is pretty stable.
  • But many of the distributors especially the smaller ones have to go through this new thing of 18 credit and keeping accounts of, so it is also for the company to take credit of miscellaneous expenses.

Dividend from ELGi ATS in Q1

  • First Q1 about Rs.5 Crores is the dividend received in Standalone.
  • Growth in sales of ELGi branded compressors outside India
  • ELGi branded compressor growth in our key markets has been high double digit
  • The dealers cover all industrial segments, hence company does not keep track at this stage of the entry into various markets.

Broad BCG plan

  • Designed and implemented the program, which is basically the go to market program, structured processes, evaluation, and review systems
  • Running this program for a little less than a year and we have covered probably 60%, 70% of the market
  • Small companies, small to medium size or even large companies that are looking at incremental investment

Domestic Indian Economy Plans

  • Share in India is relatively large compared to markets outside. Unless there is a trigger in the economy in India company cannot predict the growth, whereas is in markets where the market share is almost nothing and company is beginning to have a strong presence


Apollo Tyres Q1FY18 Concall Summary

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Financial Highlights

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  • On consolidated basis, the net sales of the company for Q1FY18 stood at Rs. 32.5 billion registering a marginal de-growth of 1% on YoY basis and was almost flat from previous quarter.
  • The de-growth was on account of currency, with rupee appreciation impacting European operation.
  • EBIDTA excluding other income for Q1FY18 was Rs. 2.7 billion registering a margin of 8.4% against 16.4% of Q1FY17. This was primarily in account of sharp increase in raw material prices.
  • Net debt at the end of the quarter continued to grow up as company invested in growth projects and was at Rs 34 billion plus, up Rs 7 billion vis-à-vis end of last quarter.
  • During Q1FY18, the truck tyre sales declined by 10% and passenger car tyres sales increased by 3% on YoY basis.

Indian Operations:

  • The sales for Q1FY18 was Rs. 22.8 billion making a small growth of 1% over Q1FY17. This was a combination of a volume decline of 4% made up by more than 5% increase on account of price increases and change in product mix.
  • Volume of truck segment in Q1FY18 were impacted by both switching of industry from BS3 to BS4 emission norms as well as de-stocking by dealers on account of introduction of GST.
  • EBIDTA excluding other income for Q1FY18 stood at Rs. 1.9 billion, a margin of 8.4% compared to 17.5% of Q1FY17. Huge decline was on account of hikes in raw material prices.
  • Net debt in the stand-alone basis at the end of Q1FY18 stood at Rs. 17.7 billion, up by Rs. 5 billion from Q4FY17’s net debt of Rs. 12.7 billion.
  • Raw material were up by 30% on YoY basis and up by 10% sequentially.
  • TBR capacity for Q1FY18 was around 8000 tyres per day, up from 6000 tyres a day from previous quarter.

European Operations:

  • The revenue from European operation for Q1FY18 is €107 million as compared to €110 million for Q1FY17.
  • The volume growth YoY in Europe was just below 3%.
  • The Dutch operations registered a growth of 3% primarily on account of volume gains in each product category.
  • The Hungary operations have commenced from Q1FY18. Start-up cost of the same would have negative impact on EBIDTA for next few quarters.
  • The Hungary plant is expected to reach capacity of 16000 car tyres a day by the H2FY19.
  • For entire European operations for Q1FY18, the sales stood at Rs. 10 billion making a de-growth of 3.6% over Q1FY17. This was result of currency impact and also Reifencom being lower than previous year.
  • From a medium term perspective, the company expect to have a 20-80 OEM replacement mix for passenger car segment. Currently it is 100% replacement.
  • For Reifencom, revenue for Q1FY18 was €36 million, down from €42 million. Margins for Reifencom were 1.5% for Q1FY18.
  • For Netherlands plant, the EBIDTA margin was 8.5% as compared to 14.5% of Q1FY17.
  • Capacity per day at Netherlands plant is about 18000 to 19000 tyres per day.

Raw material:

  • Prices of raw materials in Q1FY18 were as follow: Natural rubber Rs. 170/kg, Synthetic rubber Rs. 170/kg, Fabric Rs. 300/kg, Carbon black Rs. 65/kg.
  • Prices are expected to decline between 5% and 9% in Q1FY18 on sequential basis and will stabilise thereon.


  • The total truck tyre market in India is about 16 million, of which 45% is radial, a per annum market size of about 7.5 million.

Two Wheelers tyre segment:

  • Profitability of two wheelers will continue to remain decent on account if price being under cutting.


  • The significant drop in other expense is essentially because of cost control, keeping into account the pressure of raw materials.
  • Depreciation expense will go up once the Chennai plant ramps-up. The goal is to take Chennai plant from 8000 tyres a day to 12000 tyres a day.
  • Interest cost in Europe is close to 2% while in India it is around 8%.


Gati Q1FY18 Concall Summary


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

Gati Q1FY18 Financials.png
  • 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.