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Adani Ports and Special Economic Zone Ltd
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Thanks, Karuna. Hello and good afternoon, everyone. On behalf of Edelweiss, I welcome you all to Adani Ports SEZ Limited Q3 FY '18 Earnings Conference Call. From the management, we have with us Mr. Karan Adani, CEO and Whole Time Director; and Mr. B. Ravi, CFO. We will have the opening remarks from the management, post which we will open the floor for Q&A. Thank you, and over to you, sir.
Thank you. Good evening, ladies and gentlemen. Thank you for joining us today on this conference call. I'm happy to present the operational and financial performance of APSEZ for the third quarter and 9 months of FY '18. We have also uploaded a detailed presentation on our website for your convenience and e-mailed it to you all.First let me brief you on operational front. Our outperformance in gaining market share in cargo volumes and container handling continues. If you recollect, during our last call, on November 13, 2017, I had commented that cargo volume in October and first half of November has rebounded and we expect a double-digit cargo volume growth in Q3. As expected, on year-on-year basis, cargo volumes in Q3 of FY '18 grew by 16%. This is against 4.4% cargo volume growth achieved by major ports.During quarter 3 of FY '18, all major commodities handled by us registered a double-digit growth: coal, which grew by 13%; crude, which grew by 10%. Coal volumes at Mundra grew by 9%, at Hazira by 41% and at Dahej by 70%.In container segment, our growth was 29% compared to major ports growth of 8%. Container volumes at Mundra grew by 26%, Hazira 31% and at Kattupalli by 52%. The larger ports continued to grow. Mundra grew by 17%, while Hazira grew by 9% and Kattupalli grew by 45%. Dahej, which had a de-growth in quarter 2, is back on growth trajectory and registered a growth of 93%. We have started handling agri products at Dahej port.Cargo volumes in quarter 3 of FY '18 compared to quarter 2 of FY '18 grew by 11%. This was again led by all-round growth in the major cargo that we handle. While coal grew by 22%, crude grew by 19% and container grew by 7%.During the 9 months of current fiscal year, APSEZ handled cargo volumes of 135 million metric tonnes, registering a year-on-year growth -- volume growth of 7%. This is against 3.6% growth registered by major ports. While containers grew by 22%, other bulk cargo grew by 8%. Today, 62% of our volumes are stable and long-term cargo compared to 61% at the end of quarter 2 of FY '18. Our strategy to diversify and handle all types of cargo at all the ports continue. We intend to handle containers at Dhamra port during the current quarter, that is Q4.Cargo volumes in the current month continue to be in high double digits. We expect this trend to continue. We are confident that our outperformance in gaining market share, both in cargo volumes and container volumes, will continue in the years to come.To reiterate, we expect our cargo volumes to grow 1.5x of all-India cargo growth, and in container segment, our growth will be more than 2x growth of container volumes on all-India basis.We will increase our EBITDA margin to 70% -- we increased our EBITDA margin to 70% in FY '18 as guided earlier, and CapEx for FY '18 will be in the range of INR 2,500 crores to INR 2,800 crores. In FY '18, on a conservative basis, we will be generating a free cash flow of INR 1,200 crores to INR 1,500 crores against INR 670 crores generated in FY '17.In FY '17, we had distributed INR 315 crores as payout against which -- payout, which was 47% of our free cash flow.Next year, subject to board approval, we are looking at rewarding shareholder by distributing similar percentage of free cash flow. This will translate into doubling of FY '17 payout of INR 315 crores. The remaining free cash flow will be used to reduce debt and further improve our net debt-to-EBITDA ratio.Now on financial performance, Ravi would give you detailed financial numbers. Let me give you a brief snapshot. On a year-on-year basis, operating income in quarter 3 of FY '18 grew -- increased by 22% to INR 2,689 crores, while EBITDA after adjusting for ForEx gain or loss increased by 26% to INR 1,784 crores. Margins improved by 400 basis points to 68%. Profit before tax during the same period increased by 48% to INR 1,439 crores and profit after tax for the same period increased by 18% to INR 994 crores, thus translating into an earnings per share of INR 4.8.Similarly, for the 9 months ending December 2017, operating revenue grew by 31% to INR 8,140 crores, while EBITDA after adjusting for ForEx gain or loss grew by 29% to INR 5,277 crores. Margins improved by 200 basis points to 68%. Profit after tax was INR 2,745 crores, thus translating into an EPS of INR 13.26. I will now hand over to Ravi to take you through details of the financials.
Thank you, Karan. Karan has already given the details of -- the snapshot, rather. I'll give you the highlights, both for Q3 and 9 months of FY '18.As usual, we will be -- I'll be trying to bifurcate the operating revenue into the ports, logistics and the SEZ business. Once again, we have uploaded a very detailed presentation giving all kinds of explanations and also the ratio analysis on our website. I'm sure you'd have gone through it. Some of which could be repeated in what I'm going to say now.The Ports operating revenue in Q3 went up by 15% and registered INR 1,940 crores. For the 9-month period, the same Ports revenue was up 8% to INR 5,446 crores. The Logistics income grew by 3% in the quarter and 10% for 9 months. It was about INR 200 crores in Q3 and about INR 600 crores in 9 months. The SEZ and port development, I would say, that combined in Q3 was 100% increase. It registered INR 400 crores and for the 9 months, it was INR 1,650 crores.As you know, our Australia operating income is also being taken into our book for the last about 1.5 years. So that registered about INR 100 crores in Q3 and about INR 300 crores in 9 months. And there is a small other income of about INR 48 crores in Q3 and about INR 140 crores in 9 months. With this, the total income grew by 22% to INR 2,689 crores, and in the 9 months, it grew by 31% to INR 8,140 crores.In the SEZ, there is -- has been small expenses of about INR 54 crores. So if you see the total income after adjusting the SEZ expenses, this has been given so that you can actually tally the numbers appropriately from what we've published, it is INR 2,635 crores, a growth of 19% and about INR 7,700 crores, a growth of 24% in the 9-month period.The total EBITDA registered a growth of 26% and stands at about INR 1,800 crores in Q3 FY '18 and about INR 5,300 crores in 9 months, which is a 29% increase as for the 9 months' period is concerned. The EBITDA margins have -- as always told and promised, have been increasing very consistently. In the Q3 results, the EBITDA margin stands at 68% against a 64% in Q3 FY '17 and for the 9-month period, it stands at 68% as against 66% in the 9-month period of FY '17.And the Ports EBITDA grew from 68% to 70% in Q3, another addition of 200 basis points, and in the 9-month period, it again was 70%, which grew up by 1% from 69%. So again, as we have already said, we will be adding at least 100 basis points to our EBITDA margins year-on-year we said, and we are absolutely on course doing that in the 9 months and should be continuing for the 12 months also.So PBT, profit before tax, after the exceptional item, and I will explain the exceptional item also in the call as well as what was put up in the -- on the web anyway, but the PBT after exceptional item stands increased at 40 -- by 48% to INR 1,439 crores, and for the 9-month period, it's a 30% growth, very close to INR 4,000-crore mark.The gross finance cost, the way it has been published, is flat for this Q3 and has shown a slight increase of 5% in the 9-month period. However, if you give that adjustment of Kattupalli, we're showing about INR 991 crores, which is there as per the published result.And the fact, therefore, you would see that for the 9-month period, it is INR 2,745 crores, which is about flat from what the previous 9 months was in spite of a very large taxation incident in the PAT, and for the quarter 3, it actually registered an 18% growth to INR 994 crores.As told earlier, the cash outflow for taxation is still the max, and therefore, even though that full taxation goes into our P&L in the -- arriving in the PAT, still we have had a flat performance for PAT for 9 months and a growth of 18%.The Port revenue is actually higher, by 15% against the cargo growth of 16%. So there could be a question what it was, but I just have to tell you the adjustment is that last quarter, CT4 volumes were all under APSEZ, we were operating that terminal, but in this particular period, as you know, from May 17 onwards, it is there in CT4 and, therefore, the revenues are not consolidated. And therefore, if you go for the adjustment there, which is about INR 46 -- INR 56 crores on revenue and INR 45 crores on EBITDA. If you adjust that, the revenue growth actually is 18% against the cargo growth of 16% and this is again in line with we already -- we have always said, that it's 3.5% above inflation [indiscernible] is always there and our cargo composition mix always will give us a better revenue than the cargo growth itself. And similarly, in EBITDA, it's an increase of 23% against the cargo growth of 16%.The Logistics front also, the revenue has grown by 10% in 9 months and, as said, 3% in Q3. This was on account of certain realignment of business model in terms of commodities we handled in longer term. And therefore, though the Logistics looks to be almost flat, this is actually a temporary phenomenon, this will continue to do much better in the years to come.One item, which has been shown as an exceptional item in that -- in the results is the Vizag impairment. There were certain newspaper reports and there have been certain questions, which some of you have asked us. Vizag, as you know, has not been profitable. We have been not been operating it for some time now. During the quarter, we have, therefore, taken the impairment of Vizag. Though, of course, the Vizag cancellation or surrendering of the terminal has not yet happened, there are -- we are going towards that. Maybe in the next quarter or 5 months, we probably might surrender the terminal and avenge the losses. And therefore, in order to have a prudent accounting policy and in discussion with the auditors, we have recorded the Vizag impairment and that on a stand-alone basis and also on a consolidated basis has been taken. The impact as a consolidated basis is about INR 156 crores. However, we get back benefit on that of INR 83 crores and, therefore, the real impact on our P&L would be actually only INR 83 crores after taking the tax benefit -- INR 72 crores, sorry.In a similar manner, in the APSEZ, on a stand-alone basis because there is an investment from APSEZ into that company as well as a loan from APSEZ into that company, on a stand-alone basis, the actual net impact is INR 225 crores. Why it does not go into the consolidation is because certain losses, which were there in the Vizag terminal was already accounted for in the earlier period in the consolidated level. That's the reason why at this point in time, the net impact at APSEZ level consolidated is only INR 83 crores.I need to mention that after this, we do not expect any more impairment in that asset. On the contrary, the losses which were there at Vizag would be arrested. And in addition to that, we should be getting -- once the process is complete, we should be getting about INR 200 crores to INR 250 crores as a cash inflow for the money, which we have put into it from the VPT.This is all I have for you. As you can see that it's been a very consistent and excellent performance, I'm sure even after the results, which have been put up on the web, you might be having certain questions. So no now, I throw the line open for questions. Thank you.
[Operator Instructions] The first question is from the line of Venu Garre from Bernstein.
I just have one question. I just wanted to understand from you primarily the source of such a sharp volume recovery in Q3 and the reason why it's sustaining even in 4Q? The reason for -- the reason I'm asking that is because we've seen some degree of improvement in market volumes too, but the gap that you have, is it driven by certain liner new additions that you've had recently, which gives you comfort even for the rest of the year? And the second point is, look, this is a year where at some stage, PSA is going to probably commence operations and also GPPV sort of got back 1 liner from Maersk. So putting all that in light, if you could just explain the market share argument both for December quarter as well as going forward for the year?
Okay. Sure. Thanks, Venu. So our growth has been primarily being dictated by -- first is by coal. We saw a sharp recovery in coal volumes and -- almost a 13% growth, so which was usually going on a de-growth mode. And we are seeing a change in the consumption pattern, and also because of mining -- India Mining not able to keep up with the consumption pattern, we are seeing an import of coal happening, both thermal -- I mean, specifically, thermal coal. And we do foresee that coal will continue to -- will continue for next 1 year, 1.5 years minimum, the growth will still continue. Second reason for coal increase is also the petcoke ban in North India due to pollution -- due to environment reasons. And that has also helped in terms of increasing the import levels of coal. The second growth, which came for APSEZ is from crude volumes. As you know that HMEL, which is -- which has a 9-million-tonne refinery in Bathinda had gone for a shutdown and expansion in quarter 1 and half of quarter 2. So they have come online, and they have -- they are increasing their production over there. And we expect that 9 million will be covered up in quarter 3 and quarter 4. And we expect a further growth over there of another 3 million tonnes next year onwards. The third growth came from container. The container, we saw growth primarily from -- because of the improvement in the manufacturing and the overall production in the country and economy turning around. And the second part of growth in container we saw was from transshipment. So our transshipment growth in Mundra has been almost 40% growth in transshipment volume compared to last year. And that is mainly because MSC has increased their vessel sizes in Mundra on their current services and also second reason is that they have added a new service in Mundra. In terms of your question on GPPV and PSA, I just want to add over here that -- first is that in GPPV, the induction of CI6 service, that is a replacement of the existing service of HSX at GPPV. So currently MOL and Wan Hai operates the HSX service, and HSX service will get replaced with CI6 as COSCO will replace MOL and will join Wan Hai. Thus there is no additional volume which is generated out of that service moving into Pipavav. Second is that shifting of FI3 service from Mundra to GPPV. Maersk will be -- in turn, Maersk is dropping the ME1 service from GPPV, which does a volume of 65,000 TEUs annually. Thus the resultant incremental increase of volume of GPPV will be only 65,000 and not 130,000 TEUs, as what was reported by analyst in the reports. And the third thing is Hapag-Lloyd has only made an adjustment on one of its service, named PSC. The service is expected to commence from April, and this is not likely to increase the volume or shift the volume from Mundra to Pipavav. And on terms of your question on PSA, PSA, the berth is ready, but we don't see that terminal -- I don't know when it is going to come up, but we don't see it happening at least till March. And the second thing is, as I had said earlier, we are working very closely with PSA to see how we can attract more cargo out of GPPV and into Mundra with collaborating closely with PSA. So actually, it is not going to divert cargo, but help more in terms of shift cargo from competing ports to -- from Pipavav and other ports to Mundra.
Yes. On this, I had this question that, look, is it like sort of an exclusive conversation you're having with them because we understand PSA is discussing with others, so is it like...
It's not an exclusive conversation, but it is a sort of we are working on a strategy towards them. So there is no agreement or anything in place in that, Venu.
Okay. Great. My second small question is do we have visibility for CapEx for next year? Anything has been frozen in terms of range now?
CapEx, next year, we are seeing anything between INR 2,200 crores to INR 2,500 crores.
So that most of that will be Vizhinjam...
Dhamra, Kattupalli and Vizhinjam.
The next question is from the line of Nitin Arora from Aviva Life Insurance.
My first question is when we looked at our volumes of 46 -- 47.6 million tonne. Can you tell us how much was just because of this normalization of HMEL, which is not a natural growth in this volume?
Just 1 second. 0.6 million.
0.6 million tonne. Karan, just to ask you -- before I move to the financials to Ravi, just to ask you one more thing on the container that Venu was asking. We have seen -- you already said that like MSC has increased the vessel size. We've seen after 2 years of consolidation, the vessel sizes to Indian ports have increased significantly. We've also seen despite JNPT not able to handle large size, but still sizes are increasing for them. And port of call, let's say, to Jebel Ali has -- and other areas have been reducing and Indian's have been increasing. Now do you see a scenario where, let's say, for this calendar year 2018, a natural growth comes to the port automatically because of this -- because of the sizes getting increased, port of calls globally have been reduced and increasing towards Indian ports. So do you see -- I'm not talking only perspective to Adani, but even for, let's say, GPPV or JNPT, a natural growth comes in, at least for CY '18 because of this argument?
So two things. I don't think so that will help in terms of natural growth, the upsizing of the vessel. That will only help in terms of economies of scale and help in reducing the logistics cost. And second thing is with the upsize -- with the direct cost increasing, what you will have is less of coastal movement and less of feedering movement happening and basically reducing transshipment at other ports, but I don't -- the only way the natural growth will happen and continue to grow is if the economy is growing and if the industrial production increases.
Getting your point. Now, sir, my next question is that -- to Ravi. Ravi, you talked about CT4. We need to adjust that. I mean when we look at our CT1 or, let's say, CT3, which we don't operate, it always comes in a JV. So obviously, that gets knocked off. So looking at the volume growth doesn't give a clear picture because if I look at your volume growth for this quarter, it's about 16%, but the revenue growth is not more than 15% because you're restating the previous quarter numbers because of the other income part. Now if I look at your container growth for this quarter, has largely come from JV terminals, which is CT3 and CT4, which has recently commissioned. So do you see -- do you think that we should look at it adjusting the revenue growth makes sense to us because it's an apple-to-apple comparison now because every -- every other of your terminal is any which way on adjusted basis?
Yes, this was -- this explanation was only for the quarter in order to put it in the right perspective from the previous quarter where the kind of operation was different. Now onwards you should take it in a normalized basis itself, because when we talk about growth, again, in the full year, we would not be giving this kind of statement because most of it would have been on the similar basis. So as for our CT1 and CT2, it's already an established one for over a year. And therefore, it is already taken up in both the quarters in a similar manner, so that will not give the anomaly and people have understood that, but in this particular quarter, I had to give an explanation because it wasn't there in the same manner in the previous quarter. But yes, you're right, after this, it will be like any other JV terminal and or like CT1 or CT3 or CT4, except CT2, of course, where there is also growth and that CT2 is 100% operated by us, so anything which is there in CT2 will 100% go into our top line and EBITDA and bottom line, but in these other things, only the volume gets consolidated, rest of the things do not.
My third question is Vizag now. Can you state what are the remedial actions, which can be taken now because we've seen one more case of PSA now getting challenged, even they want to shut down 1 terminal in India. So what is the remedy here? I mean, what we are saying to the VBG at this point in terms of canceling this and what is written there in the contract, which gives you confidence that we'll get back our cash flows to INR 200 crores to INR 250 crores?
It is there in the -- in the concession agreement itself, there are provisions, which say how -- in a case of termination or cancellation, whatever you may say, how would the formula work in terms of giving back the loan amount, which is outstanding. So it is -- from that angle, it is quite clear, and we've been having discussions with them in the last month or so. We have met up with them in the form of consultation notices, which we have -- not yet reply is given. And so from those discussion and from what is very clearly mentioned in the concession agreement, we do believe that this is a certainty and we should not be seeing any more impairment also for that matter.
And lastly, can you give us -- me the gross debt, consolidated gross debt and cash position and the CapEx spend till 9 months?
No, we don't have -- as you know, this is quarter 1, so we don't give out those numbers in terms of the balance sheet number, it's only P&L. But I think you -- we are [indiscernible] and in March, you will see that. I've already commented in my results that in March, the net debt position will be under 3, the way we've said. So I think that is the time when you will really get the entire details of the numbers.
And just one clarification. I think Karan mentioned about anyone coming back to Adani. Karan, when it move from Adani to Pipavav, what we understood is lot of the volumes already stayed with Adani itself because there was no benefit we saw when the line got moved to Pipavav. They're not even additional volume that they got. And I think today ME1 is not giving more than 20k to Pipavav as of now because lot of volumes already shifted to Adani at that time.
Yes.
The next question is from the line of Ashish Shah from IDFC Securities.
First question is on the Kattupalli, you mentioned...
Ashish Shah, can you speak closer to the phone, please.
Sure, okay. Better now?
Yes, better.
Right. So we mentioned Kattupalli that we're going ahead with an expansion. We plan to handle coal and we set up a liquid terminal there. So could you indicate what is the CapEx there and what is the time lines that we should be looking at? And additionally, for coal, I thought we needed a special permission at Kattupalli because originally it wasn't allowed. So if you can just explain these points?
Sure. So in Kattupalli, we will be starting expansion from next quarter onwards. We are in the process of finalizing the contracts. Phase 1, we are going ahead with liquid tank farm with railway line construction and the bulk handling facility, mainly for fertilizer and agri and steel products. Simultaneously, we are also going ahead putting environment clearance for further expansion of the master plan in which coal will be included. So once that environment clearance is through, then we will start the construction of the coal -- for the coal handling facility. I think in Phase I, that is the liquid tank farm, the railway line and the fertilizer and agri and steel handling facility, we are seeing a CapEx of not more than INR 800 crores -- INR 800 crores to INR 900 crores over the course of 2 years.
Sure. Could you give the broad breakdown of containers across Mundra, Hazira and Kattupalli?
So Mundra -- so in Hazira, our total TEUs for -- total handling TEU for quarter 3 was 131,900. For Kattupalli, it was 127,500 TEUs. And for Mundra, it was 1...
And sir, if it is not too much, if you can break it down by terminals at Mundra.
Okay, sure. So in CTs. In MICT, it was 275,000. In CT2, it was 264,000. In CT3, that is MSC terminal, 363,000. And in CMA terminal, it is 150,000.
Yes. That's great. Just last thing. You know the tax provision, I mean, I know we have been -- we've come out of the tax holiday period and all. But if I still look at the tax provision as compared to Q2, it just looks a little higher. So is there any deficit in the full-year arithmetic, which has gone into this tax provision? I mean a...
Yes, it is very -- slightly higher, about a percentage higher, instead of the 28%, which we've got 28.5%, it is about 30%. But because of the SEZ income, the port development income that we got, on a normalized basis, for -- let's say, for the 12 months as well as for the future, in terms of any additional bulk income like what we get by SEZ might push it for that particular quarter, otherwise the range will be around 28%, 29%.
Around 28%, 29%.
Sure.
The next question is from the line of Nishant Chandra from Temasek.
So for the accounting EBITDA, that is provided on a consolidated this one, right, so it doesn't account for the 2 terminals where we are 50% owner. So what would that number roughly be?
We don't have it right away because we don't give it out, but I think they also have about 60% EBITDA from what Karan just gave you the number of cargo. Normally, it's about $75 per TEU and about 60%, 65% EBITDA, we'll tell you those -- multiply that will tell you those numbers. I think -- but on a year, it's around 600, I mean, about 400, 415 CT3. So maybe it will be about 125 for this quarter, but I can get back to you separately off-line.
Sure, sure. But just going forward because of this Ind-AS migration, would it be possible for the management to include it because to that extent, your reported EBITDA is understated. And I guess the market is also valuing it based on EBITDA. It will be good to sort of have it as part of the Investor deck itself is what I felt.
Sure. We can do. We did debate this internally, and we were probably looking at whether we'll be confusing the market or whether we'll be clarifying it. Now that you have asked it, it looks to be, it will be better to clarify it, which I'll do then.
Yes. The second one was the broad free cash flow translation metric that you had articulated in the deck. So roughly the number that I was getting to was slightly higher than what you had in the deck. So I just wanted to cross-check my math. So I was looking, starting with the EBITDA in the zone of literally INR 7,000 crores for full year and then taking out CapEx of INR 2,500 crores to INR 3,000 crores and a tax of about INR 2,000 crores. So that leaves me -- and I thought I was taking the higher end in all 3 and it gave me about INR 2,000 crores free cash flow. Your number was about INR 1,200 crores to INR 1,500 crores. So I was just wondering -- your number was around INR 1,500 crores. I was wondering if I am missing out any material item in this.
No. Karan just added a small word before that conservative basis, and therefore we -- and he may be aggressive, he was conservative.
Okay, okay, okay, fine. No sir, the point I was trying to understand was whether you're factoring any debt repayments in your free cash flow estimate because I'm not, so I thought I'll just check that.
No. There are actually not much of debt repayments left right now. This particular one, we are having a larger maturity. So that will not really move this number too much.
Okay. Understood. And the last one I had was just in terms of your articulation of growth from a cargo perspective, especially for containers. Are you seeing the growth to be higher on importing side or exporting side? So what's the -- what will be the rough growth rates of exports and imports on cargo, for container specifically?
I think it's hard to give a growth in import and export because each geography has a different parameter. Because in Hazira, we are more export driven than import driven, whereas in Mundra, we are quite balanced. In Kattupalli, we are more import driven than export. So it will be hard to give a -- we can give you port by port on off-line if that is...
Just to get a directional sense, right, in Mundra where again we've seen a reasonable container growth. I'm trying to understand if it is import led or export led. If there is any bias to the growth that you are seeing? Again, directional sense would also be fine for me.
It is actually quite balanced for us. If you look at Mundra, the growth was quite balanced. It was not led by one or the other. It was -- I mean both led the growth actually. So both import had grown as well as export had grown, maybe a percentage here and there. But, otherwise, they were very much in line.
Okay. Lastly on, just in terms of a way the port would benefit from the Delhi-Mumbai corridor, so what would be the current status and what would be the pluses and minuses from the corridor for Mundra as a port?
Sure. Yes. So the corridor is expected to reach Mundra in 2019. That is Phase 1. Phase 2, by 2025, is to reach Hazira. And by 2021 or 2022, JNPT. I think the biggest advantage of the dedicated freight corridor will be that higher capacity. So there will be a lot of shift of cargo, which will happen from road to rail because it is double stack as well as double amount of wagons allowed on a single rail. So from Mundra point of view, it will actually help decongest our roads as well as our entry points because a lot of cargo will then move on rail. And second, this will also further solidify Mundra port for North India cargo because it does not make sense for North India cargo to still go to JNPT. In JNPT right now, still 30% of North India cargo goes there. So these are the big 2 advantages for Mundra port. And Hazira being also on the dedicated freight corridor, so area between Ahmedabad and Hazira, the cargo, which still flows into JNPT, that can also come into Hazira. So that will be another capturing area, which will be of growth for us.
Got it. And in the note, you had talked about CT3 extension. Effectively, it would be like a CT5 equivalent, right?
Yes. That's right.
Any plan to kick off CT6 like entity now because...
We are in talks with few lines. I think we will -- once something is fructified, we will announce it to the market.
The next question is from the line of Bhavin Gandhi from B&K Securities.
Just a couple of them. Sir, on Page 24 of the presentation, there is Other port volume number, there is an Other section, which is showing a INR 319 crore EBITDA. Just wanted to clarify there is no SEZ income in this EBITDA, right?
Which one? In Page 24, you said?
Page 24, Q3 FY '18. The Other section has a INR 319 crores. Is this purely marine income of Mundra, Hazira and Dahej, which has got booked there?
So this is -- so what we did, Bhavin, was that the marine business of the Mundra, Dahej, Hazira and Dhamra were demerged. So this -- the Other section comprises of this Adani Harbour also. So largely this EBITDA is from the Adani Harbour.
Aggregate income.
No, this is not aggregate income.
There is no SEZ income booked in here, right? That is what I want to recheck. Sir, second is, Karan sir mentioned about Dhamra starting container volumes from this quarter onwards. Just wanted to get a sense of what potential do you see of container volumes at Dhamra?
So we see the -- right now, we're just doing a trial. And on a conservative basis, we're seeing a one call in 2 weeks and to start off with, we are looking -- targeting a volume of 30,000 to 40,000 TEUs per year, but we believe that once the road and road infrastructure is ready over there, Dhamra port can easily handle anything between 0.5 million to 1 million TEUs of container.
Sure. And just one final thing on the rail connectivity at Hazira. So what is the status?
We are still in talks with the government. I think it will take another -- I personally feel it will still take another year or 2 to crystallize something and then 2 to 3 years for construction.
The next question is from the line of Parash Jain from HSBC.
Karan and Ravi, I have 4 questions. Maybe, first 2, if I can direct to Karan. Karan, with respect to overall macro recovery, right, be the rebound in global trade that we have seen in 2017, be commentary from some of the liner about how we have seen improvement with respect to container trading in India, which your number also reflect, is it pretty much the first line that you have seen optimism with respect to trade, both import and export across the verticals, be it bulk, be it liquid, be it container? And if that's the case, what sort of commentary are you hearing if this momentum is likely to continue in near to medium term? And second question is that, I mean, there is a clear -- there is a reasonable amount of visibility with respect to your direction on the different part of the businesses. If you can throw some color on how the pipeline looks like or rather if you can remind all of us how the pipeline look like for SEZ going into next 2 year? And with respect to your aggressive expansion plan into logistic, where do we stand as we speak? And then probably I'll get back to Ravi on the other 2 questions.
Okay. Sure. So I think, yes, overall quarter 3, we saw a very good optimism across the board, whether it is -- not only in container but across, whether it's bulk, liquids and partly it is driven by that, I think the effect of GST and demonetization, all of that has settled and now people are focusing more on industrial output as well as increasing the output at the factory. So -- and the second thing, I think, what biggest thing we saw was overall trade scenario across, I mean, the regional trade, especially for India, the regional partners. We are seeing a good, strong upswing over there. And I think that is one of -- that is the major reason why we are seeing such a huge growth. And I think we are quite optimistic that this will continue till -- at least till 2019. I don't see this momentum coming down. In terms of Logistics, we are expanding quite rapidly. We are looking to double our capacity every year, both in terms of ICDs and in ALL. And we are on course on doing that. We have started construction of our ICD in Bangalore. We are -- we've just placed an order for doubling our capacity of rigs. So we just placed an order for another 15 rigs. And so we are quite bullish on this business. And we do see this business growing by almost 100% every year on a continuous basis. I will just give it to Ravi to answer the SEZ question.
SEZ, what we still have got some portion of CT3 extension to be done. So with certain approvals, we haven't yet booked the entire CT3 extension post development income. For the next year and maybe a couple of years, there will be still have the LPG and LNG at Mundra yet to be booked in totality. As you know, we are working on the LNG terminal at Mundra, it is almost ready. And in the next year, I'll talk about the first quarter of maybe FY '19. We should be able to ink all the agreements there, and therefore, that's something which is still an upside. LPG, also, we are constructing there and that's likely to be there in our joint venture, which we're looking at. And therefore, that could be an addition. And apart from that, even in Dhamra, where there is an LNG terminal, that's one development in that too and there is a planning going on wherein they could be in the JV. So these are the probable ones so far as the port development is concerned. Apart from that, the normal land and getting the new people into our SEZ and Mundra has been quite ongoing. Now we see far more traction in terms of interest in setting up manufacturing units, which had actually almost dried up in the last couple of years. I think now there is an investment [ planned ] improvement, and therefore, we do believe that, that normal sense also, which is, maybe around -- we've done many a times 100 to 200 acres, which is totaling to about INR 400 crores, INR 500 crores. Even that should be coming back in the next year, not so in big way, but not in a small way either. So these are the probable ways -- and when we have our budgets and all for FY '19 completed, probably I'll give you a little more color on that. But all these things are definitely likely in FY '19 for sure. FY '20 at this point in time, all the recurring incomes of all these terminals plus the lease, rentals in all itself, at least will give a minimum of about INR 500 crores in FY '19, rather '20 even without any additional port development at all. But port development, which should happen like what Karan said, we're working on CT6. So let's see if something comes up, that will be coming up in FY '20.
Perfect. And, Ravi, just on financial side, given that CapEx or peak CapEx is behind us and given your rapid deleveraging that we have seen, how much room do you see with respect to your gross financial expense lowering either by way of deleveraging? Or is there a room to further price them down, given the resurgent in your balance sheet as we speak?
Yes. So if you're talking about the interest, net interest income, which is there, definitely it should be coming down -- coming down because of deleveraging, and therefore, the interest cost going down in first. And second, the free cash surplus, which may still be remaining after the repayment, will also give us that kind of an interest income, which we have been earning on our free cash flow all this while. So I do think the combination of both these things and plus, we kind of -- the rates, which have already come and the way we have tightened the rates in the shorter term as well as in the long term on a consistent basis will further give us at least about 0.2 -- 20 to 30 basis points of lower interest calculation. So I think a combination of all these things should lead to at least a 50 to 75 basis points tightening of interest costs.
Perfect. And then just -- one last and probably it's more of a housekeeping. Help me understand, I mean, if CT3 and CT4 are now under the new accounting, are considered as a JV and given the amount of volume that you handle in those 2, should we not see profit at that line, which I see flat as we for the third quarter? Am I missing something?
No. That has not been here because of Ind-AS, Accounting Standards. Neither the top line nor the EBITDA that gets consolidated because it will be past that gets consolidated with us and that to 50% of it. So you will not be able to see the growth in the same volume terms in terms of turnover and EBITDA. That is the reason why there are 2 things that we are working on, we are trying to see whether we can do the consolidation of that EBITDA from next year onwards by whatever maybe the agreement that we can look into with our JV partner, one. And secondly, like what we just earlier -- now we just discussed, at least we'll be mentioning the impact of the EBITDA in our results for you to be able to gauge as to what is it that EBITDA addition is not happening. And that will be there in our numbers. So that -- both these things, either of these, definitely in terms of the explanation, we can say that this is EBITDA, which has not been consolidated. That we'll try to put it up in our presentation and put it in our calls. But whether we can consolidate or not, we still need to work on certain things before I can assure you that.
The next question is from the line of Salil Desai from Premji Invest.
This is follow-up to your commenting on coal volumes. Now the petcoke ban has subsequently been lifted. So have you seen any of the coal benefits reversing since then, the volume benefits?
No. So far even in Q4, we have actually not seen any adverse impact of that. We are still seeing a growth in Q4.
Okay. And would you make a guess on why that would be? Or...
Sorry.
Any ideas on why that is continuing or is there some contracted quantities that will be coming in...
I think these are contracted quantities, which are coming in. And I think we'll have to see in Q1 of next year actually if there is any impact on that.
Okay, great. And, sir, just one clarification. I'm not sure if you gave out crude volume numbers for the quarter. If you didn't, can you repeat it, please?
Crude volume has -- I just gave you -- for quarter 3, crude volumes grew by 10%. And on a 9-month basis, crude is minus 11%. On quarter 3, it was a growth of 10%.
This is the -- absolute number would be about what million tonne? The absolute number would be how much? If you can add that...
Absolute amount is 14.24 in 9 months. And in quarter 3, it's 5.58.
The next question is from the line of Vibhor Singhal from PhillipCapital.
Most of my questions have been answered. Just one question. Just needed a quick update on the status on the Vizhinjam port. These -- I mean, where are we in terms of CapEx? How much have we spent? And when we do see it's -- I mean, when do we expect it to start operations? And along with that, if you could just give us the total CapEx that we have incurred till date for the entire group portfolio as a whole?
Vizhinjam is having a 4-year schedule, and therefore, it should be completed in FY '21, maybe calendar of '20 itself. That's what the schedule looks like at this point in time, 2021 for sure. The capital expenditure could be about -- I think, we will end this particular year with about INR 650 crores or so. As you know, the total net of our grant is about only INR 2,400 crores. And I think 1/3 of that or rather a little less than 1/3 of that should be done by year FY '18.
Okay. Sure. And for the whole group, how much is the CapEx that we have done till now in the 9 months?
I think it's lying at about INR 2,500 crores, INR 2,800 crores. I think it's quite -- it is quite proportionate. So I don't have the number, but I feel it could be around INR 2,000 crores.
So for the full year, we'll still do that INR 2,500 crores to INR 2,800 crores of CapEx for the full year?
We continue to say that. Definitely, it will be within that.
The next question is from the line of Kaushal Chandak from Catalyst Global Equity.
Just one question. In Q3, we grew by 11% over Q2. The revenue looks to be the same. Is there any particular reason?
You'll have to see that -- between these 2, the only differential is the SEZ revenue, which is not the same in both these periods, that's why. If we have to release the port revenue, it would still be consistently in the same way as the growth of cargo.
The next question is from the line of Achal Lohade from JM Financial.
Just couple of questions. One was the SEZ income. We have booked about INR 400 crores for the quarter. What is it pertaining to? Is it new lease of land or any port development income, specifically?
This is the extension, Achal.
Okay, okay. So the cost, again, that is only INR 50 crores plus.
Yes, because majority of that was related to our infrastructure wherein we do not have a large cost on that.
Got it, got it. And the second, just a clarification. Karan said that the transshipment, actually volume grew about 40% Y-o-Y. Have I understood it correctly or it's just a 40% of the incremental volume he meant?
No, 40% year-on-year on the transshipment volume. It was transshipment volume what we did last year versus this year.
Yes. If you really have to -- I think what your question probably refers that what would be the proportion of the transshipment of our total -- total container volume. It is still in the vicinity of about 13% or so. That's how we said -- we always said that it will be within that 11% to 13%. Even with this growth, earlier it was 11%, now it is 13%. That's how it is.
The next question is from the line of Jayakanth Kasthuri from Dolat Capital.
Sir, just one question. I missed out on the container volume, CT1 volume standard. If you can provide me that number?
Yes. The CT1 volume for quarter 3 was 276,000 TEUs and for the 9 months, it's 857,000 TEUs.
Ladies and gentlemen, this was the last question for today. And I would now like to hand over the floor to the management for their closing comments. Over to you, sir.
Yes, thanks, everyone. And I'm very happy that we had very good -- good questions and it was a quite longish call, if you really ask me. But one thing I would definitely want to add, it's been -- this is the 36th quarterly call that I have had because I have been here since 2009. Now every quarter, consistently, we have not just performed, delivered on all our promises. Margins have been increasing very, very consistently. So I think if you really have to point out APSEZ has been one of the best and the most consistent performers in the market, it is definitely in our port sector and maybe in the infrastructure sector. Many a times, we have pleasantly surprised the market and the analysts and beaten the estimates of what you have put out. I believe that this is yet another quarter of a similar nature. And we have been promising certain things that we have actually delivered many a times better than that. And we hope to continue with that performance. Thanks for the patience to be and thanks for being with us all this while. Thank you.