Gati Ltd
NSE:GATI
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
96.05
132.35
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Gati Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day and welcome to the Q4 and FY '22 Earnings Conference Call of Gati Limited hosted by Equirus Securities. This conference call may contain forward-looking statements about the company which are based on beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. [Operator Instructions]
Please note that this conference is being recorded.
I now hand the conference over to Mr. Depesh Kashyap from Equirus Securities. Thank you and over to you, sir.
Thank you, Liz Anne. Hi, everyone. On behalf of Equirus Securities, I welcome you all to Q4 and FY '22 Earnings Conference Call of Gati Limited. We are pleased to have with us management team represented by Mr. Pirojshaw Sarkari, Phil, he's the CEO; and Mr. Anish Mathew, CFO for Gati Limited. We'll have the opening remarks from the management followed by a Q&A session. Thank you and over to you, Phil, sir.
Thank you, Depesh. Good afternoon and a very warm welcome to everyone on our quarter 4 and FY '22 earnings conference call. We have uploaded our quarter 4 FY '22 results presentation on the stock exchange's and company's website, and I hope everyone had an opportunity to go through the same. As mentioned, along with me, I have Mr. Anish Mathew, Chief Financial Officer for Gati Limited, and our Investor Relations team.
The year gone by was the recovery year from the impact of COVID-19. We have observed that the logistical requirements and services, especially from the organized players, have increased during and post COVID-19 period. Despite challenges during the period, we have been able to realign our systems and processes as per the requirements of the business and have been able to manage it very efficiently, keeping in mind all the safety requirements of our people and customers. We have been able to maintain our share of business in the Express Distribution and simultaneously offer customized logistical and supply chain solutions to our customers with this enhanced integration of technological [Technical Difficulty]
Ladies and gentlemen, the lines of Pastika (sic) [ Pirojshaw ] has disconnected. Please stay connected while we reconnect the speaker.
Ladies and gentlemen, thank you for patiently holding. We now have the line for the speaker reconnected. Over to you, sir.
Okay. Sorry about that. So now let me start by giving some insights on the logistics industry.
Logistics remains an integral part of the overall development of the economy. We have been seeing higher emphasis by government on improving the logistics network of India by creating the right infrastructure and policies for the overall benefit of the industry, with key emphasis on bringing the logistics costs down as a whole.
Currently, India's logistics cost is as high as around 14% of the GDP, which the targets are to reduce to 10% over the next 5 years. This reduction will be led by multiple initiatives like good infrastructure, increase the compliance and efficient digital backbone, whereby organized players would slightly have an upper hand as they would focus on reduction of indirect costs like pilferage and wastage, inventory carrying costs and reduced time and transit by better utilizing the logistics network through scale and efficient and lean, tech-based operation.
The Government of India has also announced PM Gati Shakti, the national plan for multimodal connectivity. This initiative, essentially a digital platform to bring roadways and railways together, holds tremendous potential to enhance logistics infrastructure and consequently reduce the logistics cost.
We have been building capabilities in various areas in our organization to capture a dominant share of this market shift from unorganized to organized players. The generation of e-vehicles, which are now hitting a monthly run rate of above 7.5 crores versus financial year '22 monthly average of 6.5 crores and 5 crores in FY '21, is a testament to the above players.
Talking about the current quarter, January 2022 realized India's highest single day rise in infections in the third and ongoing wave. Delhi experienced some disruption in regular operations due to night curfews, state government restrictions and others, following which over January and early February, consumption and restoration of inventory were impacted -- impacting our revenues in a large way. Having said that, there has been surge in volumes and revenue from March onwards, which was one of the highest monthly run rates for us.
Gati, being the pioneer in the express logistics business and network leader in logistics with almost 99% of government-approved pin codes covered and almost 670 offices across India with our wide reach across multiple location and hubs in various parts of the country and deeper customer engagement, we are very optimistic for the future.
FY '22 also marks 2 successful years of completion of Allcargo acquiring Gati. We have successfully covered pillars of: a, debt reduction; b, capture market share loss; c, defocusing on noncore assets; and d, attract industry's best talent. Entering FY '23, we have embarked upon GATI 2.0 transformation journey, which I would believe -- and brief as follows.
We have specifically laid out 5 key aspects for our GATI 2.0 journey: digitization, sales acceleration, infrastructure, operations and increasing talent pool.
Digitization. We are using automating a number of processes, back-end infrastructure, front-end communication which enables faster execution and decision-making. Our proprietary software, GEMS 2.0, will integrate many major functions like finance, CRM and management data for report generation and performance analysis. This would further lead to [ MLAI ] related decision-making for which we now have a focused team in place. The team focuses on route optimization, faster turnaround capability, which would accelerate from hereon in FY '23. Several tools like our Gati Genie chatbot, digital payments solution and organization-wide ERP system, robust tracking systems and sophisticated software powered by Salesforce for CRM and automation are being implemented for seamless movement of cargo.
Our sales acceleration strategy is playing out well, and we are able to capture more and more MSME accounts, which will add up to overall growth of the company with better margin profile. With our focus on the key accounts and adding more and more wallet share from these accounts too, we are also able to acquire few new large accounts which can become potential key accounts in the next 2 or 3 years. Alongside MSME, customer addition is also encouraging.
We have set up a new sales structure focusing on cluster-based approach for MSME. Our key focus area would remain SME stroke MSME segment, which is the second largest contributor with 21% for financial year '22.
Sales acceleration has two levers to play. One is accelerating volumes for which we are now ready with our enhanced infrastructure capabilities. And second one is on yield management for which we now have a separate team in place. The team has initiated renewal of contracts for KEA, which are realizing an average price hike of 5% to 7%, expected to roll out in this financial year.
We have been building state-of-the-art infrastructure. In December '21, Gati launched its largest surface transshipment center at Farukh Nagar over 1.5 lakh square feet and connecting to all major national highways. With no inconveniences of concession, the STC has been designed in compliance with green norms. The facility has been equipped with capabilities to process short-haul cargo deliveries in North India as well as long-haul cargo movements on a pan-India spread. The next 2 hubs with similar facilities and scale will be operational in Mumbai in the first half and Bangalore in quarter 3 of financial year '23, followed by Nagpur, Indore, Hyderabad in later FY '23 and, of course, Cochin and Pune in FY '24. Under Phase 2, this network would then be propelled with automation capability.
We have been working in tandem with our IT team to simplify our operations to accelerate the margins. We've been working on focusing on reducing cost per KG, more engagement with customers for wallet share addition, customer retention and new customer acquisition, efficiently planning our infrastructure and hubs to manage flex and peak capacity, thus increasing throughput and achieve scale.
Lastly, we have been able to retain and add more and more to the talent pool at Gati at all levels in the organization, giving us long-term, sustainable growth visibility. In the years gone by, Gati has launched an employee stock appreciation rights plan. We believe that this would foster our group culture of entrepreneurship with a purpose, and each employee would work towards unified goals of building Gati a stronger brand.
The Board has also discussed its rationale for evaluating structure of related businesses to align with strategic objectives of simplicity, greater financial flexibility, sharper capital allocation and strategic independence, basis of which the Board has approved the evaluation of restructuring options and appointment of consultants and advisers. This is at a preliminary stage at current moment, and we shall engage with our partners, KWE, and plan next steps. At the same time, we would also keep our investors updated on the steps from hereon. The vision would always remain to create value, bringing out synergies from existing capabilities of the group.
We also focus on few other ongoing initiatives like launching electric vehicle fleet for the first- and last-mile delivery, ease of doing business with Gati, improving corporate governance and CSR activities for our contribution towards the society.
With this, I would like to hand over the call to Mr. Anish Mathew, our CFO, for financial and operational highlights in quarter 4 and FY '22. Over to you, Anish.
Thank you, Phil. Good afternoon, everyone, and a very warm welcome to our Q4 and FY '22 earnings call. I'll take you through the highlights of financial results for the quarter and financial year ending FY '22. Firstly, I would cover the performance for the quarter.
Our consolidated revenues, including other income, for Q4 FY '22 stood at INR 387 crores as compared to INR 409 crores in Q4 FY '21, down 6 percentage compared to same period last year. Our Surface Express business revenue increased from INR 300 crores to INR 304 crores in Q4 FY '22. Revenue share from MSME and SME and retail accounts stood at 42 percentage in Q4 FY '22.
Gross profit. Our gross profit for Q4 FY '22 stood at INR 95 cr as compared to INR 104 cr in Q4 FY '21.
Our GP margins for Q4 FY '22 stood at 24.7 percentage. The margins were materially impacted by performance in January, which impacted the overall margins for the quarter. The exit gross margin for the quarter are about 27 percentage, which comforts and make us confident of reworking to [indiscernible] sooner.
EBITDA. Consolidated EBITDA for Q4 FY '22 stood at INR 13 crores, up by 32 percentage year-on-year. EBITDA margins for Q4 FY '22 was up by 100 basis points. Realignment of our operations and synergies across verticals with operating leverage play out. We are optimistic of margin increasing going forward.
Now coming to full year FY '22 performance.
Consolidated revenue, including other income, for FY '22 stood at INR 1,505 crores, a growth of 14 percentage year-on-year. Surface Express revenue for FY '22 grew by 26 percentage and stood at INR 1,151 crores from INR 916 crores (sic) [ INR 930 crores ] in FY '21. Our SCM revenue stood at INR 48 crores. Our Air Express revenue stood at INR 52 crores, a growth of 58 percentage year-on-year. Revenue share from MSME, SME and retail accounts stood at 43 percentage for FY '22.
FY '22 gross profit stood at INR 356 crores as compared to INR 335 crores, a growth of 6 percentage with a gross profit margins of 23.7 percentage. With all our efforts dedicated towards increasing scale and efficiency, we believe we will be able to increase the margins going forward to a targeted range of 29 percentage to 30 percentage.
For FY '22, EBITDA stood at 50 crores, gain by 32 percentage compared to same period last year. The EBITDA margin went up by 50 basis points, 3.3 percentage. However, our core B2B business EBIT -- core B2B Express EBITDA margins [indiscernible] nearly 4 percentage.
Our focused approach of reducing debt has yielded results. Our debt has reduced by INR 11 crores for Gati-KWE from INR 166 crores in FY '21. Also, our cost of debt has significantly reduced from 9.2 percentage in FY '20 to 8.2 percentage in FY '21 to 7.2 percentage in FY '22. Lower interest cost and approaching too an asset-light strategy will be adding up to the PBT in the near future. We have been consistently providing other key comparative performance indicators in our investor presentations. One can refer to that for more details.
With this, I would like to open the floor for questions and answers.
[Operator Instructions] The first question is from the line of Rahul Jain from Credence Wealth.
Hello? Am I audible? Hello?
Yes, Rahul, you're audible.
Sir, just to understand a couple of things. One, on the top line, our Express business volume had a 3% year-on-year growth and 4% degrowth on quarter-on-quarter basis. In fact, the volumes have in this range of about 2 lakh 50,000 to 2 lakh 60,000 for the last 3 quarters or so. So going ahead, how do we look at this tonnage to move in?
Just one more observation linked to this. In the previous call, you had mentioned about that we had been working for almost 15, 18 months for the recycle of Gati with regards to various pillars which you've been consistently talking about. And also, you mentioned that the operations also we are trying to bring to a level whereby the customer taken back in the brand and you sacrifice margins for the same. So considering both those, Gati top line volumes have been in the range of 250,000 265,000 for last 3 quarters plus you had mentioned that we are trying to get back the face of the customer in the brand, so where do we see (sic) [ sit ] today in that journey? Are we done with the operations to the satisfaction of our customers? So while you're on this [Technical Difficulty]
Sorry, Mr. Jain. Mr. Jain, we have lost the connection for management line. Please stay connected while we reconnect the management.
Ladies and gentlemen, thank you for patiently holding. We now have the line for the speaker reconnected.
Mr. Rahul Jain, may you repeat your question for the benefit of the management team?
Sure, I'll do that. Yes, sure. And sir, in last 15, 18 months post the new management coming in, we have been working on various aspects, as has been consistently spoken by you in the previous calls with regard to various aspects as we mentioned about GATI 2.0. You also mentioned in the previous call about getting your operations back to a level so that the customer face is back in the brand, which has been such a great brand for last so many years. You mentioned that -- so in this journey of getting back the customer, getting the face back, and where do we stand today so as to drive the volume? Because you mentioned in previous calls that once we are done with this [indiscernible], we see volumes see a decent growth.
So going ahead in FY '23 and '24, where do we see our volumes growing? Because another observation is the Express business volumes have had a degrowth of 4% quarter-on-quarter and a 3% year-on-year growth, but in the last 3, 4 quarters, the volumes have been in the region of 250,000 to 265,000. So if you could guide us on the tonnage numbers, the volume growth, how do we look at it on the Express business. That is my first question.
Okay. So if I were to look at year-on-year for the financial year '22, we have grown our volume by 24% and our revenue by 23%. And this is basically numbers that I'm giving out for GKEPL, which is the operating Express joint venture, right?
If you are looking at the consolidated numbers, you have to also understand that there is the petrol pump business in the consolidated numbers where we had 2 additional petrol pumps in the previous year which were moved out in the first quarter of the previous year and, therefore, the revenue of those 2 petrol firms is not being carried on for this financial year.
Having said that, we are anticipating -- this year, if there is absolutely no COVID coming back, we are anticipating a very strong growth for us at Gati. We should grow at least double as to the market growth of the express industry. Even the last quarter of this year, had January not been a bad month, so which it was basically because the North India business was absolutely down, and for us at Gati, North India is our largest zone, because of the COVID, we would have been a much better exit for the quarter of this last year.
So as far as Gati GKEPL is concerned, we are set. And I think both the exit month of last year and the first month of this year have already shown us very good growth.
Sure. And sir, with regards to the SME business, we have been quite talking about the potential being there in MSME sector, and we have been also working towards that sector, as you've been talking about. So in the previous call, you mentioned about that we plan our ratio of key enterprise-to-SME-to-retail in the region of 50 to 30 to 20. That is what kind of targets you have been talking to your salespeople for FY '23. So how do we look at the SME business going at considering that what I observed from the presentation percentages in our SME business has practically remained flat for last 6, 7 quarters? It's been in the range of about INR 80 crores to INR 90 crores. Somewhere in one of the quarters, you got INR 100 crores. In fact, in the current quarter, it was almost down 15% to 20%. So how do we look at the SME business going ahead? Are you seeing some traction over there now?
Absolutely. So when we did the restructuring of our sales force, we have put a lot of emphasis on both SME and retail, and we are targeting both SME and retail combined business to be at least 50% of our total business. We have taken steps within the organization both from sales resources as well as from marketing budgets being focused on the SME and retail for this ensuing year, and we will see traction in both SME and retail business.
So we see a larger growth coming in from SME segment now going ahead?
SME and retail put together, yes.
Sure. The last question, sir, with regards to the gross margin. So good to see improvement on the gross margins in the current quarter, and we have been guiding about 29%, 30% margin in FY '23. So can we see a good improvement going ahead, say, quarter 1 was with some sharp improvement?
So yes, we have worked upon the network centralization, which I spoke about a couple of quarters before. Our single largest direct expense is the network cost, which is basically our line haul and feeder costs, coupled with our pickup and delivery costs. Both these put together are almost 65% to 70% of our direct costs. So these, definitely, we are looking at optimizing them, and you will see us reaching our targeted goal of 29%, 30% this year.
The next question is from the line of Ankita Shah from Elara Capital.
Sir, I wanted to understand more on the KWE margins. So if we just compare with Gati, employee and other expenses is a huge expense for us as compared to KEA. So are we doing -- or taking any specific measures on these two segments which can help reduce the costs?
So over the last 15 to 18 months after Allcargo took over, there has been a huge reduction and optimization of the employee costs. For us as an organization and as a group, the thought of compliance and governance is very high. The way we would like to increase our margins, and I'm sure you're looking at increasing the EBITDA margin by asking me this question, we would, as an organization, want to do that by increasing our volumes and revenue so that we can leverage the existing employee costs.
Okay. Okay. Got it. Also, one question was on the assets that are held for sale. What does that include? And is there any further diminution in value of assets, lessened, in case of exceptional items, provisions related to any other old subsidiaries which are divested or are noncore? Anything that is still pending and that we can expect in FY '23?
I will let Anish answer that question. Anish?
Yes. So we have taken for this current quarter INR 5.4 crores on account of this diminution of those assets that we'll move from the PTE to assets held for sale. Apart from this entry of INR 5.4 crores, that no other diminution which will happen because most of the assets between [ held for sale ] have been categorized barring few assets.
So largely, what are the assets in the assets for sale?
Can you just repeat the question?
Which assets have been there in these assets for sale, sir?
Well, we have mostly land, okay? There are a couple of properties, 3, 4 properties, which have basically being given as a collateral to IDFC. There is a case pending at IDFC. So barring those 4 assets, 4 or 5 assets, we have classified everything into a AHS.
Okay. And by when can we expect those to get monetized?
Well, I think we are in the process of kind of discussions with multiple vendors. And I think since the assets relate to land and building, normally it takes a longer time. But we hope to kind of get most of the assets liquidated during this quarter. But having said that one, it's very important to know that, I mean, selling land or building is not that easy, and we also would need to kind of look at a really optimum price. So we have to recalibrate internally before we kind of dispose of the assets.
Okay. And one more. What is your gross debt in consol and KWE that's presumed? [indiscernible]?
The gross -- one minute, please. The gross debt is around INR 160 crores.
In -- INR 160 crores in...
INR 155 crores. This is including the public deposits plus the normal working capital loan.
This is on consol?
This is on consol basis. So in fact, again, all is basically in the Gati-KWE. Gati as a standalone is having it at a gross of around INR 10 crores to INR 12 crores.
Okay. Okay. So largely it's in KWE?
KWE, yes. And on a year-on-year basis, we have reduced the loan. I think we have repaid close to around INR 15 crores on a year-on-year basis.
Okay. One more on the SCM segment. Why have we seen a decline in the supply chain management business for the year?
So basically, there are a couple of businesses in the supply chain segment that kind of contracts got over and we have not been able to renew them. At the same time, there was a pipeline which got converted. So you will see the revenues of the new pipeline come back in the first quarter of this year.
The next question is from the line of [ Rajat ] from Icon.
As we can't hear from the current participant, we will move on to the next. That is from the line of [ Deval Shah ] from [ DBS Capital ].
Sir my question is more regarding to the charges which we have, again, taken, say, I believe, so -- in order to defend our market share. So I just wanted to get a sense on that. So are we undercutting ourselves so -- our competitors to defend our market share? Or -- and what is the strategy on that?
So our strategy of market share is never going to be and will not be undercutting competitors, okay? We believe that there is a large market in the business that we are in.
We do two kinds of growing of market share. Number one is trying to convert the unorganized market to the organized market, and there is a huge amount of unorganized market out there which we convert. The second is based on our brand reputation and service. Of course, convert business from competitors by giving them value-added services. We provide our customers a very high standard of governance in what we commit to. And therefore, these are the two ways that we want to grow our market share.
Okay. And my second question is on -- more on your competition. So the recently listed company, [ Dare ], has spoken about their technology capabilities. In fact, [ Dare ] want to say that they have almost more than 500 professionals from the field of engineering and data sciences. And they've also created the [ NASH ] infrastructure. So they are saying a lot about their technology capability. So how we are positioning ourselves in this particular space. Or anything that -- in this competition? I just wanted to get a sense on your thought process on this.
So Gati has been on its own digital journey over the past 18 months now. We have introduced a lot of digital processes. I can name a few. We have introduced digital payments. We have introduced the Genie, which is a bot service where you can, on WhatsApp itself, get your tracking and queries answered. We've also included Salesforce both for our sales as well as our CRM. And we are also going to be embarking upon our back-end operating system to be digitized. We are also looking at talent being brought into the organization. We already have a pool of talent with a few of these data analysts and engineers who are sitting day in and day out and helping us with our digital journey. So in short, Ravi has recognized that we have to get ourselves digitized and kind of that's the only way that we will be able to make sure that our customers are satisfied.
Okay. And sir, my -- just a question from your earlier answer. So when we are saying that we are targeting 50% business from SME and retail, so I wanted to understand. So how -- SME and retail, they have any attributes? So any difference on the margin profile or the stickiness of the client? So how they are different in that sense.
So basically, the SME and retail segment goes deep into Tier 2, Tier 3 cities. And from an operational point of view, Gati has a very deep network where we can today enable these SMEs and retail by picking up their shipments on time and getting them delivered. We are using this network to make sure that we reach out just the way we have been delivering for our key accounts and our strategic accounts, deep into Tier 2, Tier 3 cities. We are now strategizing on picking up from these Tier 2, Tier 3 cities where most of the SMEs and retail lie. This is a concerted effort that has been put in, and we'll see results coming out soon.
The next question is from the line of Avadhooot Joshi from Newbury Capital.
I have two questions. We are expanding our reach in different cities through these rented warehouses. I just want to know how the mechanics works over there about the rentals. When is the increase in rentals? Because the increase in inflation, the building cost of that warehouses might have gone up and whether it will be reflected for us also in rental costs. That's the first question.
And second question, about the cash flow from operations. When I look at cash flow from operations, it has turned negative because of the receivables. If you can throw some light on that. That's it.
Anish, would you like to take that?
Yes, so I can go with that cash from operations here. Yes, cash from operations depositor we had block supposedly, how they had blocked the capital in the receivables. Receivables have increased by INR 55 crores. We have kind of put a good system in place right now to kind of bring down the DSO to kind of a benchmark level. We've kind of made some organization restructuring wherein the collection team would be reporting to the finance as against the earlier structure of reporting them to the sales team. So I think with this structural change, we would be able to kind of bring more robustness in the process, and I think we should be expecting there to be a much better recovery of -- on the debtors going forward.
And what could be the time line for this, for these receivables coming down? And what level would you like to have it at?
So currently, the DSO is at the 66. We would like to kind of bring down to kind of in the range around 50, 55. And we expect that to be done in first to second or max by third quarter.
And on...
For the first part of your question, while we are looking at setting up STCs, these are our basically our transit hubs as we call them, yes, we are moving from some of our owned properties to leased properties. But I suppose the Ind AS accounting takes care of [ advertisation ] because these are long leases of 8 to 10 years that we take positions in. And therefore, the adjustment on your -- both EBITDA and PBT takes place on the calculations that Ind AS provides. Having said that, the whole idea is to create capacity for the future so that when we start -- or rather, when we have already started growing our business, we don't have any jams into our hubs, as had happened in the past, maybe in the month of October of last year when we saw a little rise in volume during Diwali.
Next question is from the line of [ Risha ] from [ R.S. Capital ].
Sir, Gati is a known brand. Coupled with the data that we have from our customers, so long, and given the deep presence and focus, what are the challenges you see in achieving the targets that you set for yourselves currently in current situation?
So there are a couple of challenges. One is it's become a [indiscernible] now out there. You don't know when COVID hits back suddenly and, like I said in January, what happened to us because of North India coming to a standstill. And then there is this fluctuation that keeps happening in the fuel prices. Suddenly, you increase the fuel price by INR 10, INR 12, and suddenly you reduce it by INR 7, INR 8. And there's a lot of convincing that needs to be done with both our trucking partners as well as customers. So you're just about doing, one, convincement, then another thing happens when you're kind of going back convincing why you do not reduce.
Having said these two things for Gati, particularly the challenge that I face is that my infrastructure growth has to be much faster because as I grow my volumes, my current infrastructure is not having capacity enough to take that volume growth. And therefore, we're looking forward to our super hub in Bombay and Bangalore happen soon so that at least three regions and big markets get covered fast.
We have seen a tremendous change in our North operations after Farukh Nagar has come in, both from process as well as cost optimization, and we look forward to Bombay and Bangalore happening soon.
Okay. And then secondly, to fuel our ambitious growth plans, how much additional capital will be required? Or will it be fully from internal accruals going forward?
This will be fully from internal accruals moving forward. We are an asset-light company, and we will make sure that all our growth is fueled by internal accruals.
Okay. And the last thing, I just want to clarify. Given a lot of cleanup expenses in terms of onetime exceptional expenses, so going forward, will we see more of this? Or is it the end?
Anish? Hello, Anish?
I'm sorry there, I was muted. I'm sorry. Yes, I think we have seen the end of the exceptional items. Almost all the major exceptional items have been kind of provided for in the books, okay?
And also, this income tax and the pending case, so what is the status on that?
Well, are you referring to the contingent liability?
Yes, yes, yes.
Yes. Contingent liability related to the IT, you're referring to the goodwill.
There is a [ mariner ] case, you mentioned, INR 22 crores. I'm...
Okay, that's related to the provisioning actually which we have made for the quarter, right?
Ye, yes.
Yes. So there are two items with that one. There's a INR 22.4 cr of exceptional item. One is the GST provision which we have made. That is for INR 17 cr. And the other one is related to the devaluation of your assets which we have moved to assets held for sale. That's a INR 5.4 cr.
Okay.
so this is not income tax. This is basically in the -- a part related to GST. And this is...
And sir, one more. A direct tax with regards to the [ Vishwas Act or not ]? So that is settled completely?
Yes, that we have paid up completely. So there is no item with respect to the Vishwas scheme, which has been going as an expense in the current year. We have booked all of those as exceptional items in the last financial year and which got paid off during the time.
The next question is from the line of Harsh Jhanwar from Centrum PMS.
Sir, I wanted to know, are you planning to merge the ACCI division of Allcargo with Gati? And if yes...
Sorry to interrupt, sir, we are not able to hear you clearly.
Hello? Is it better?
A little better.
Yes. I just wanted to know, are we looking to merge the ACCI division of Allcargo with Gati business? And if yes, what is the key reason behind that?
So as I said in my note, the Board has approved the valuation of restructuring options and appointment of consultants and advisers. We are at a preliminary stage just now. Of course, if you ask me conceptually, Contract Logistics and Express logistics go hand-in-glove, and the customers more and more want a single operator who can take end-to-end fulfillment of their finished goods. So we are evaluating this. We have a partner with us, KWE, and we will be in discussions with them very soon.
The next question is from the line of Ronald Siyoni from Sharekhan.
I had a two questions. Like you alluded about 5% to 7% price hike. So recently, there has been a fuel price cut also. So in that kind of situation, when you see fuel prices coming down, would you be able to take price hikes with the customers?
So basically, we have a fuel mechanism with our customers. When the fuel goes up, the mechanism kicks in and there is a formula with which the hike goes up. And when the fuel comes down, similar mechanism kicks in and the price goes down. Having said that, this is not 100% with all customers. There are many customers where we have to negotiate and then we get on to a price hike or a price reduction.
Since -- in the past 2 months, there has been considerable fuel hikes. We have kind of negotiated with a lot of customers and brought certain hikes. I think with this current reduction, we will be waiting and watching what happens next before we take any kind of business.
Okay. Okay. So that would much more depend on the movement of fuel prices and on negotiations.
The second point was that if you are seeing volume growth to more than double versus the industry growth of express even if we expect a 15% growth in GKEPL and gross margins of 29% while other costs remaining as it is, then if margins are near around 8%, so do we see such kind of operating margin uplift from, say, 3.7% in FY '22 to 8%? Or would it take 2 years also to reach 8%?
In fact, I said -- at the beginning, I answered 1 question where I said 9% to 10% end of the year.
Okay. Okay, great. And other thing on -- the other income portion has been high during the quarter, similarly for depreciation. So I understand depreciation will more be of an Ind AS impact because of higher leasing -- of leasing. And same with interest expense, I hope. But why has been the other income higher, sir, during the quarter?
Yes.
Anish?
The other income is higher on account of write-backs. So we had around INR 7 cr of write-backs, old payable write-backs. So that's the reason, I think, for the change from INR 2.25 crore to INR 10 cr.
The next question is from the line of Alok Deora from Motilal Oswal.
Sir, I just wanted to get a sense on how is the demand shaping up in April and May so far. Because what we get -- what we understand is that the demand has been a little soft post March. If you could just indicate on that part for the SME demand as well as demand from the e-commerce side.
Well, so at Gati, March, April and continuing in May, we are seeing the demand pretty high. It is growing and growing by the month. So that is what we are experiencing at Gati. Now one could either say that we are taking a larger share of the market or the general demand is high. I cannot comment on the general demand just now because different industries are going through different cycles. But for us at Gati, we are seeing growth.
Sure. And any change in -- if you look at e-commerce driven -- any mix you can highlight on where we are seeing the high...
I think I have consistently spoken about this, that we had -- do not do B2C e-commerce business in Gati. We only do B2B business.
Sure. And just one question. So this diesel price change. So what we understand is -- so this price hike will happen when the -- I mean, the change in the freight rates, do you take every start of the month? Or how does it actually work out?
So we look at freight rates on a fortnightly basis in Gati.
Sure. And the suppliers which we have like the fleet operators, they would also be revising it at that point of time?
Right.
The next question is from the line of [ Rajat ] from Icon Financial.
Hi. Am I audible?
Yes.
Okay. Sir, what were the utilization levels in surface business in this quarter or the full year?
Our capacity utilizations are measured in various ways. We have capacity utilizations in our line haul, we have capacity utilizations in our feeder, we have capacity utilizations in our hubs. But I can only tell you this, that quarter-over-quarter, we have been increasing our capacity utilization, and we will continue to do that.
Sure. Sure. There is a metric called DIFOT, delivered in full on time. Where do we stand on that metric? How is it compared to the last year?
I think our DIFOT in the last quarter of the year has been far better than the previous 2 quarters. And that's one measure which looks at end-to-end service results. As an organization, we use DIFOT as an internal measure. Unfortunately, earlier, Gati to give it out as an external measure. We are going to move from DIFOT to a time and transit measure for the external world.
Okay.
But like I said, our last quarter, DIFOT has been better than the previous 2 quarters.
And on a full year basis, how was this FY '22 compare to FY '21?
Better than FY '21.
And how much room do you think there is to improve this -- on this metric? Or have you broadly reached our optimal levels?
No, there is still good room to improve on this metrics, and this is one metric where you continuously have to keep innovating and optimizing and improving.
Sure. Sir, the other question was on the realizations. So if you simply divide the revenue by the tonnage that we did in the surface business, so I think realizations have dipped in this quarter. So any particular reason for the same?
I didn't get the other question.
Mr. [ Rajat ], are you done with your question?
No, I asked another question. Can you hear me?
Sorry, I didn't get the other question.
So I was saying the -- in this quarter, our realizations have dipped on a sequential basis. So what is the reason for the same?
So basically, like I said, for the month of Jan and early February, our largest market and best realization is from North India, and that's why you see a little dip in realizations this quarter.
Okay. And sir, with regards to Air India, what kind of liability may come upon us if you lose the case?
Anish?
We don't expect any liability. I think we have won this, I believe, in multiple forums, talking about the [indiscernible] in our favor. So at this point in time, we even have not made any provision because the chances of winning as to this case is very, very high.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Depesh Kashyap for his closing comments.
Yes, thank you, sirs, for giving us this opportunity. I think, sir, if you have any closing remarks, please go ahead.
So I'd just like to again thank everyone for joining the call. We will keep updating the analyst and investor community on a regular basis for incremental updates regarding Gati. I hope we have been able to address queries. For any further information, kindly get in touch with our Investor Relations team. Thank you once again and stay safe. Thank you.
Thank you. Ladies and gentlemen, on behalf of Equirus Securities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.