Gujarat Pipavav Port Ltd

NSE:GPPL

Earnings Call Transcript 2021-Q2

[Unknown Analyst]

Thank you. Thanks, sir, and hello, everyone. I welcome you all to 2Q and first half earnings conference call of Gujarat Pipavav Port Limited.We have with us from the management, Mr. Jakob Sorensen, Managing Director; and Mr. Santosh Breed, CFO.In terms of the format, there will be opening remarks -- remarks by the management, post which, we will open the floor for Q&A.Sir, over to you.

[Jakob Friis Sorensen, MD & Director]

Yes. Good afternoon. Am I audible?

[Unknown Analyst]

Yes. Yes, sir, you are.

[Jakob Friis Sorensen, MD & Director]

Okay. So yes, my name is Jakob Friis Sorensen, I'm the MD of GPPL. We've just had our Board meeting and I believe also that the results have been uploaded now to the public and to the stock exchange, so that the result is finished.I think given the circumstances which we are still in, where we have COVID and the impacts that, that pandemic is giving both in India, but also internationally, it is my management team's feeling that we have come out here with a good result. And I hope you will also agree with us.We'll be happy to answer specific questions to that extent as we go through this hour together now. Thank you.

[Unknown Analyst]

Sir, shall we open up for Q&A?

[Santosh Breed, GM of Finance & Accounts and CFO]

So we have the presentation uploaded on the websites of the stock exchange. So we can quickly run through that before we get into Q&A.

[Jakob Friis Sorensen, MD & Director]

Yes. Santosh, maybe you want to just highlight the most important financial numbers. I think it's important to say that we continue to deliver good results. Our volumes are down, but we have, especially on container ships that we have also a very strong quarter for fertilizer specifically. And in terms of what has been decided by the Board is to continue with our dividend policy, as you have seen in the previous quarters as well.

[Santosh Breed, GM of Finance & Accounts and CFO]

Yes. Yes, thanks for comments, Jakob. I'll just take it from here. So on key highlights, the key highlights for the quarter has been Dry Bulk volume, which has been a record volume for this quarter, where we have handled around 912,000 metric ton of Dry Bulk, of which fertilizer has been [ 728 million ] (sic) [ 728,000 ] and that has been a record volume. Sorry, fertilizer is 753 million metric ton (sic) [ 753,000 metric ton ]. So that has been a record volume for us.Container, of course, you have seen a decrease of 10% quarter-on-quarter. But I would like to take you to 1 quarter back when there was a significant impact on the volume because of lockdown. And that quarter, we have actually shown only a single-digit drop in volume as compared to the other ports in Gujarat and on the West Coast.So if we look at from that base perspective, then this 10% decrease is not a substantial decrease because we had certain opportunities which came our way in the last quarter and that actually helped us to restore our volumes in the last quarter. So we need to look at it from that perspective on the container volumes.On the Liquid, we are low by 30% primarily on lower LPG volumes for what we handled this quarter. And RoRo, as we have given our expectation on this business stream, we continue to have a neutral performance. Though there is a 38% increase, the total number of cars handled are still less. So it was around 3,000 cars.On the financial performance, then the overall revenue has gone up by 15% as compared to the same quarter and that's mainly because of the fertilizer volume.And then on the EBITDA, there we are up by 8% on the EBITDA as well as the net profit is up by 12%. So we have spoken about the volume already, which is the next slide on the presentation. So I'm not spending time on this.And then the last slide about the financials. So I'll just quickly run through the key numbers on the financials further. So the total operating income is at INR 1,827 million, which is higher by 15%, as I mentioned earlier, mainly driven by the fertilizer volume. Total expenses at INR 798 million are higher by 26% and this is primarily because of the higher operating expenses for handling fertilizer.The employee benefit expenses are lower by 6%. This is mainly due to lower staff benefit expense and the actuarial loss, which has been classified under the other comprehensive income. So we do a half yearly valuation of our liabilities on gratuity and leave encashment. And that's why these adjustments are made on a half yearly basis.Other expenses at INR 235 million are higher by 5% due to mainly because of the energy expenses, power and fuel and also one-off repairs, which has to be undertaken for one of the crane at the port.EBITDA is at INR 1,029 million, which is higher by 8% and margin at 56% is lower by 400 basis points. So the drop in margin, again, is because of the cargo mix. We have always seen this quarter-on-quarter when we have more fertilizer volume as compared to the container and there's some impact on our margin because the Dry Bulk, of course, come at comparatively lower margin than container.The reported net profit is at INR 520 million, higher by 12%. And this also includes a dividend income of INR 38 million, which we have received from our associate company, Pipavav Railway Corporation Limited.And as Jakob mentioned, the Board has approved a dividend of INR 2.10 per share as an interim dividend for financial year 2021.So now we can move on to the question-and-answer session.

[Operator]

[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital.

[Mohit Kumar, Research Analyst]

The first question which I have is more on the outlook for the container business. We -- our volumes have declined 25%, but at the other container ports and the volumes on the other container terminals have seen some kind of traction in Q2. So I'm trying to figure out how do you see Q3 and Q4? And are we -- do you think the volume will come back for us? And that's my first question.

[Jakob Friis Sorensen, MD & Director]

Yes. I think I'll take that, Santosh. First of all, I think we have seen September to be extremely bad. We were talking all the time about this U-shaped recovery and we did see that July was better than June and August was better than July, but then September really gave us a little bit of a worry. But I -- hello?

[Mohit Kumar, Research Analyst]

Apologies, sir, you may go ahead, sir, sorry.

[Jakob Friis Sorensen, MD & Director]

Then I'm happy to say that then after September came October and October was quite strong and we also see some good recovery again here in the November month. So we believe that we are back to the U-shape recovery. September was probably an expression of what happened structurally in the container world, and that is that there are some extreme ocean freight rates that have gone up from 50, 60 and in some corridors, double up, because of the strong rebound, especially from China to the U.S. and to Europe and which has now disrupted the market a little bit and it hurts India because, as I said, the rates are very high and there's also a temporary lack of empty equipment. And that is partly because that equipment goes to China, but it's also because India has not really started a strong import yet. So we don't have empty equipment. That was in September. And I think that is now evening out and it's recovering much better and the outlook, based on what we have seen in October and what we can see here in November and we believe will continue into December that looks much stronger.

[Mohit Kumar, Research Analyst]

Okay. Sir, secondly, on the bulk volumes, which were pretty strong for Q2, what is the outlook for Q3 and Q4? And can you give us the breakup of the bulk between fertilizer and coal and other segments?

[Jakob Friis Sorensen, MD & Director]

It's particularly the fertilizer that's doing very well. So Santosh, you have the numbers in terms of tons and so on. But what I can say is that it looks like we will continue to have some strong bulk volumes on fertilizer. We are evacuating 2, 3 rail racks every 24 hours. And this will continue in the next couple of months. So that's indeed nice to say. I have to say that our margin on the bulk business is not as good as it is on containers, especially on EXIM. But of course, when the containers are down, it is very nice to see that the bulk business is carrying us up and it all helps to pay the fixed expenses.

[Santosh Breed, GM of Finance & Accounts and CFO]

Certainly, Jakob and Mohit, just before I get into the split of bulk, I also want to give a prospective on the container volume. So your observation is absolutely right. On the percentages, what you are seeing is a drop. I touched on that briefly in my opening remarks. But just to give an insight on a better comparison, so when you look at on the West Coast, so most of the ports had a significantly double-digit -- high double-digit drop in the last quarter. And those numbers, if you compare with the current quarter, then you see a substantially high rebound in volumes.As compared to that, as I mentioned earlier, Pipavav has seen a drop of a single-digit, a low single-digit number in the last quarter. And that's why when you compare it quarter-on-quarter, that discrepancy is to be seen in the numbers. So on an overall basis, when I look at the total volumes, which has been done on the West Coast and in comparison to that what Pipavav has done, I'm not overly concerned in this drop in volume, this is -- we see this is a bit temporary because of the lower demand, what is being seen right now in the last -- in the September quarter in India and because of that, the imports coming from the Far East has dropped. As a result of this, the shipping line has done some adjustments to the capacities. And that's why there are some skipped calls which had happened during the quarter. So that's the primary reason why we've seen this fluctuation in the volumes.But as Jakob clearly explained that, that was possibly the -- September was possibly the worst month for us and now we are seeing some recovery already in October and we believe that this quarter should be a good quarter for us from the container volume perspective.Coming to bulk and the split, what you're looking for. So total volume, what we did was 912,000 metric ton on the total bulk volume. Of this, our fertilizer was 753,000 metric ton, coal was 108,000 metric ton and others, which includes mainly the minerals, was 51,000 metric ton. So this is a split on the bulk volumes.

[Operator]

The next question is from the line of Ashish Shah from Centrum Broking.

[Ashish Shah, Analyst of Infrastructure and Airlines]

Sir, first question is on the realizations across the categories. So if can you please help us with that, especially on the container side?

[Santosh Breed, GM of Finance & Accounts and CFO]

So on the container side, Ashish, we continue to maintain our realization in the range of around 5,900 to 6,200. For bulk, it is in the range of 550 to 600. And for Liquid, it is in the range of 475 to 500. And just to add on this, you may be aware that we have taken a tariff increase effective 1st of October. So that number, of course, the realization numbers will flow in the next quarter. This is just for information.

[Ashish Shah, Analyst of Infrastructure and Airlines]

Right. So the tariff is effective 1st of October. So one would at least expect that in the December quarter, the blended realization should probably move up by maybe about a few percentage points, right, 3%, 4%, is the kind of increase that one should look at?

[Operator]

Excuse me, this is the operator. Participant line for the management has dropped. Please stay connected while we reconnect the management. Yes, we have the management reconnected. Sir, maybe request you to please repeat your question once again.

[Ashish Shah, Analyst of Infrastructure and Airlines]

Right. So I'm saying with respect to the 1st October tariff increase, what is the kind of realization that one should expect for the December quarter vis-à-vis the 5,900 to 6,200, what does it look like for the December quarter?

[Santosh Breed, GM of Finance & Accounts and CFO]

So you can consider a 5% to 6% increase on the total revenue, Ashish.

[Ashish Shah, Analyst of Infrastructure and Airlines]

Okay. Sure. Also just one observation on the consolidated numbers vis-à-vis the stand-alone numbers. Typically, we've been reporting a small profit from the PRCL entity. This quarter, we are seeing that the consol profit is a little bit down vis-à-vis stand-alone. So -- and in fact, in first quarter also, it was not down. So any reason why this thing exist?

[Santosh Breed, GM of Finance & Accounts and CFO]

So Ashish, your observation is right. So what is happening is -- so Pipavav Railway Corporation, as you know, is a joint venture between us and Indian Railways. And in the last 2 quarters because of the COVID situation, all of staff, of course, was working from home. And in the past, they used to submit their audited review numbers to us. They could not do that in the last 2 quarters. And that's why we also carried our qualification for the consolidated results for that, right?Now what happened is the March numbers has been audited and there are some adjustment which has been done under that financial year compared to the management numbers what were shared with us. So that adjustment is reflecting in this quarter. And to that extent, it is down.

[Operator]

[Operator Instructions] The next question is from the line of Priyankar Biswas from Nomura.

[Priyankar Biswas, Vice President]

So my question to you is regarding LPG. So during the lockdown, we have observed that LPG volumes were actually quite robust on a pan-India basis. So any reason why LPG volumes were weak in Pipavav? And secondly, the rail gantry was -- rail operations of LPG were supposed to start in this Q3, so where are we with respect to this? And potentially, how much volumes, let's say, can it add in the fourth quarter to the Liquid side?

[Jakob Friis Sorensen, MD & Director]

Yes. That's a very good observation, because you're right, LPG is a stable commodity. We have suffered a little bit, partly because what I'm told is that the medium-sized bulk -- the medium-sized LPG carriers are pretty occupied and a lot of them are going to Kandla and we don't have in Pipavav the facility yet to be able to take the very large gas carriers. That's what we are trying to do at the moment to examine how we upgrade our LPG jetty to be able to take partially-loaded VLGC carriers, which are available in the market and we hope that will bring the volumes back on track again.Regarding the LPG rail siding, it's slightly delayed. We are looking at a commission by the end of this month, but it's certainly taking shape. I'm looking at it every day. So believe me, it's being worked on, but it will be by the end of this month. And that will, again, help us to have our customer agents to focus on Pipavav and bring more LPG through our port.

[Priyankar Biswas, Vice President]

And sir, adding on here. So you said that at this moment, Pipavav can't handle VLGCs, correct?

[Jakob Friis Sorensen, MD & Director]

That's a fact -- yes, that's a fact at this moment. And that we have never been able to do.

[Priyankar Biswas, Vice President]

So at this time, so you are going to upgrade the LPG jetty, so that's what the plan is?

[Jakob Friis Sorensen, MD & Director]

That's right.

[Priyankar Biswas, Vice President]

So if CapEx has been incurred at this point? Or is it a future plan?

[Jakob Friis Sorensen, MD & Director]

That is a -- yes, that's, again, a good question, because it's a future plan, but we are actually already now doing a few adjustments. It's not a major CapEx that we need to do. And it would also be -- our effort would be on a temporary basis to be able to accommodate VLGC carriers that are partially loaded, so that it's not a full VLGC carrier that we can take in because that will inquire higher CapEx. The biggest efforts that we need to do is we need to do dredging to enable that the draft is deep enough for the vessel to come in.So that will be -- I'm, again, pushing this aggressively without compromising any safety, but we are hoping by the end of this month that we would be able to announce this.

[Operator]

The next question is from the line of Achal Lohade from JM Financial.

[Achal Lohade, Vice President]

First question is, I was just curious in terms of the realization number of how -- I mean we see a realization earlier used to be around 6,500 kind of a range, 6,500 to 6,700, kind of a range. If I remember correctly, even for the first quarter, we have indicated more than 6,500. So the realizations are down. So is it that you're talking about the ex of marine? Or is the -- including marine realization you're talking about, 5,900, right?

[Jakob Friis Sorensen, MD & Director]

I think it's the combination of lower container and more bulk with a lower yield. But Jakob, maybe you are the best person to elaborate.

[Santosh Breed, GM of Finance & Accounts and CFO]

Yes. Certainly, Jakob. So Achal, first of all, of course, you are speaking on the container realization, right? And these we have maintained. So even in the Q1, we were in a similar realization range, 5,900 to 6,200. So that has actually not undergone any change. So there's no change in our tariff in this quarter, neither there is any change in any contextual arrangement what we have. So we continue to maintain our realization in that range.

[Achal Lohade, Vice President]

Would you have a similar realization of 2Q FY '20 for containers?

[Santosh Breed, GM of Finance & Accounts and CFO]

Q2 FY '20?

[Achal Lohade, Vice President]

Yes. Y-o-Y, what is the realization?

[Santosh Breed, GM of Finance & Accounts and CFO]

I don't have that right now with me, but of course, I can share with you later. But the key point I want to make here is that the realization over a period of time has been maintained, whatever the variation which we give and the range we give is purely because of the exchange rate variation, since our tariff is in dollars. But otherwise, we have consistently maintained our realizations, Achal.

[Achal Lohade, Vice President]

Understood. Is it possible to kind of indicate the EXIM growth for the quarter for us? And you talked about skipped calls so is it possible to quantify the number of calls skipped and the volumes of those calls?

[Santosh Breed, GM of Finance & Accounts and CFO]

Yes. So the first question, EXIM, so we have almost maintained our EXIM volumes on a quarter-on-quarter basis. As I mentioned earlier that we had a good opportunity last quarter, when things -- there is a lockdown situation, there was an opportunity for us, where one of the customer who was catering to domestic market decided to export those volumes to Far East and we got an opportunity there to take the extra loader and then move those volumes. So if I exclude those volumes typically from the last quarter and then compare our regular EXIM volume, then we have maintained on a quarter-on-quarter basis. So that's on the EXIM volume.In the current quarter, we have experienced almost 19 skipped calls. And that should roughly be around 60,000 TEUs impact on the overall volume. So if these calls will not be there, then we could have seen additional 60,000 TEUs in the numbers what you're seeing now.

[Achal Lohade, Vice President]

So sorry, if I'm asking a basic question. So what happens to these containers? These are -- these containers go to some other ports? Or these are actually -- will come back later?

[Jakob Friis Sorensen, MD & Director]

No. This is lost and this is lost to everybody. What happens is that when COVID happens, shipping lines are not going to sail around for months and months with half-empty ships. So they are adjusting their capacity in terms of laying up certain ships and this is becoming in our translation to what we call skipped calls. So these ships are, in most cases, anchoring up. We had one, actually, anchored up outside of Pipavav for a few weeks. So that means they are simply not sailing around and the shipping lines are doing this in order to reduce their costs, which they won't be recovered from because of the falling volumes.And what you see now is probably the other end of that, you see that the shipping lines are taking a little time to reinstate the capacity. And if I can make an analogy here with the airlines, you -- of course, also you are knowing that international airlines have stopped almost 90% flying in and out. And India is one of the countries affected from that. But contrary to an airplane, which you can probably get on -- back on its wings in a couple of days, it does take a little time to mobilize ships again. And it has, specifically for shipping lines, it's been difficult to move around a vessel crew, again, due to COVID restrictions and due to limited airline capacity.So all of that is now being adjusted and coming back to normal. It's been one of the reasons why you have then seen ocean freight rates go really high. And I think that will even out over the next couple of months. And what we have been noticed so far is that we have only 1 skipped call this month. And in fact, we have an extra loader coming in as well, bringing empty containers to Pipavav. So we are very much on the track to be back to normal again.But to answer your original question -- I hope this gave a little bit of sort of industry perspective into what happens to these skipped calls. But the cargo was never there and that's why you have seen the capacity reduction.

[Achal Lohade, Vice President]

Right. Understood. Understood. Would you be able to give a mix in terms of what is the import and export mix for the second quarter and the second quarter last year?

[Santosh Breed, GM of Finance & Accounts and CFO]

See the mix has remained almost same. So we have 40% of export and 60% import this quarter and it's almost similar even in the same quarter last year.

[Achal Lohade, Vice President]

Okay. Because I was under the impression that given the imports have slowed down into India, would that have some impact on the mix for us? I would imagine imports will be more lucrative than export containers for us.

[Santosh Breed, GM of Finance & Accounts and CFO]

So in terms of the realization, it doesn't matter for us because we're handling the box, right? And all our handling charges are applicable, similar charges for the import box or export box. So that doesn't really impact us. But in terms of your question on the mix, so as we mentioned earlier, that we are having a Far East-based services -- more Far East-based services. And that's why we always have more imports coming into Pipavav. And we continue to see this ratio of 60-40, with slight variation maybe in some quarters, but otherwise, it's always in the same range.

[Achal Lohade, Vice President]

Understood. Just last question, if I may. You talked about some dredging you would require so that need to accommodate the VLGC. So the cost will be incurred in this quarter and what would be the quantum in that case? And is it different from the occasional dredging we need to do or it's the same, it's just a matter of timing?

[Jakob Friis Sorensen, MD & Director]

Actually, yes and no. What we're doing right now is indeed regular dredging and that is ongoing. And that is going on in our container products and so on. What we intend to do is divert that into also include the LPG jetty. So that is not entirely planned, but we want to do that to be able to take that VLGC carrier in. Santosh, how we distribute the cost, can you just comment on that? It's not a major cost is it, it's INR 50 crores, INR 60 crores. Santosh, maybe you would just tell how we normally account for this dredging.

[Santosh Breed, GM of Finance & Accounts and CFO]

So of course, right now, what we are doing is a maintenance dredging, which has been done and we'll continue to do that even at the Liquid berth. If for, of course, we are still assessing if there's a further dredge which is going to be increased which looks like right now, looking at the draft requirement. So that, of course, will be assessed after the maintenance dredging is complete by doing a survey. Then there will be a capital dredging requirement. And that quantification in terms of the spend will have to be determined based on the survey to see how much dredge is required right now. So with that, I'm not able to quantify right now the capital spend, but we are looking at, with the maintenance dredging itself, we should be able to cater to this VLGC. So that's what we are trying to explore now and we are approaching to get success in that.

[Achal Lohade, Vice President]

Understood. This maintenance dredging will be what quantum, would you be able to give that number?

[Santosh Breed, GM of Finance & Accounts and CFO]

It will be in the range of around INR 100 million to INR 120 million. But it will be spread over, not the entire cost is likely to hit next quarter. So it will get spread over because it takes some time to complete the entire dredging, so cost will be spread over.

[Achal Lohade, Vice President]

Understood. And just a last clarification, if I may. With respect to just the transshipment/coastal, could that be in -- the mix could be in the teens? Would that be a fair assumption to work with?

[Santosh Breed, GM of Finance & Accounts and CFO]

Sorry, can you just repeat your question?

[Achal Lohade, Vice President]

The mix from transshipment/coastal, could that be in the mid-teens for the quarter? The mix from...

[Santosh Breed, GM of Finance & Accounts and CFO]

Yes. That's right. It can -- so we have done lower volumes on transshipments. So we don't -- so as we explained earlier, this is just a function of trade. And if the shipping line wants to bring transshipment volumes in the pool, then we handle that. But that's not something what we commercially pursue. And we have done lower transshipment volume this quarter.

[Operator]

The next question is from the line of Manish Agarwall from Edelweiss.

[Manish Agarwall, Analyst]

Just first question, sir, regarding a bookkeeping question basically. On this tax -- effective tax rate, basically, we had mentioned that we have some carryforward MAT credit. So in your assessment, by when will we be able to finish that credit and move to the new tax regime?

[Jakob Friis Sorensen, MD & Director]

Yes, that's a Santosh question here. I think we will do that in '21 and '22, but Santosh, can you just confirm it?

[Santosh Breed, GM of Finance & Accounts and CFO]

Yes. So of course, these are very high-level estimates because we have to project volumes. But then when we do expect to quickly move to that lower tax regime, with a significant high profit in next year. But it will at least -- my bet is that it will take at least 1.5 years. So it will not -- we will start from the mid of next year -- not mid of next -- sorry mid of the next to next financial year. So that is what the expectation is.

[Jakob Friis Sorensen, MD & Director]

So 2021, 2022.

[Santosh Breed, GM of Finance & Accounts and CFO]

That's right. That's right, Jakob. So mid of that financial year.

[Manish Agarwall, Analyst]

Okay, mid of FY '22, basically?

[Santosh Breed, GM of Finance & Accounts and CFO]

Yes.

[Manish Agarwall, Analyst]

Sir, if you could quantify what is the amount of tax, MAT credit that we had maybe at the end of FY '20 itself?

[Santosh Breed, GM of Finance & Accounts and CFO]

I have to come back to you on that. I don't have the figure readily available right now. So I'll have to come back on that.

[Manish Agarwall, Analyst]

Sure, sir. Not a problem. Sir, one question on the CapEx, sir, that we announced last quarter about our cargo -- container-handing facility. Sir, any update on the approval that is required from GMB? I mean because our CapEx is contingent on that?

[Jakob Friis Sorensen, MD & Director]

Yes. So we have an approved CapEx of INR 700 crores, which we still are ready to spend. The discussion with GMB is ongoing. In fact, I'm going to Gandhinagar tomorrow to continue that despite of Diwali, but we have some good talks with GMB. I cannot say exactly when that we will have the green light, but I'm still hopeful that we will, within this month or next month, get something in writing, which indicates that the extension is on its way.

[Operator]

The next question is from the line of Bharani Vijayakumar from Spark Capital.

[Bharanidhar Vijayakumar, Assistant Vice President]

So if I look at your first half container volumes, it's down by about 20%. And if I remember right after the initial months of impact due to COVID, we had a call and we were expecting that our volumes on the container side would be higher than the industry or the competition. So -- but it looks like we are at 20% negative year-to-date. So how do you think we should look at this for the entire year?

[Jakob Friis Sorensen, MD & Director]

Yes. I think I commented on that a little bit earlier, but what we can see is we had a U-shaped recovery when you look at June, July, August, but then came September, which, again, unfortunately, saw a dip in volume and we had quite a lot of skipped calls, but we also saw the other part of the container business, which was a lack of empty containers for export. And what we see now is that October has been very strong. If I'm not mistaken, the volumes were 72,000 TEUs and we look to exceed that here in November and also in December. So we continue the U-shaped recovery and I think it is in line with the industry and other ports. So we're again optimistic that we have bottomed out and things are bouncing back, but it is not a hockey stick. It will be a U-shaped recovery that continues.

[Bharanidhar Vijayakumar, Assistant Vice President]

Sure. So what you mean to tell is the U-shape means it's going to be much steeper for the next few months at least. So for the entire year, the volumes on the container side would be more like down by 10%, probably?

[Jakob Friis Sorensen, MD & Director]

Yes. I'm saying that it's not an L-shape, it's not a drastic rebound, but it's more like a curve that goes further up in the right direction. So I think at the moment, we believe that we will end the full calendar year with about 775,000 TEU. That's less than 20% of the target that we had. And we've been operating -- the way we are trying to mitigate this crisis here. First of all, we have tried to make sure that our people are safe. We have -- make sure that operations were continuously ongoing and we have, at no point in time, declared force majeure. Then we've seen the developments that you have seen in the bulk, which is probably a function of other ports being unable to operate and we had the capacity and we've been able to evacuate by rail.And on the container side, we have been looking at our costs and we were operating in different scenarios. So if the volume drops by 10%, what cost could we take out? If the volume drops by 20%, what cost can we take out? And I think, by and large, we've been quite successful in making sure that we can almost promise you to deliver that margin of 60%, which we have done consistently in the last few years.

[Bharanidhar Vijayakumar, Assistant Vice President]

Right. I think that's actually helpful. So from what I hear you telling is that on the fertilizer front also, it's probably because of our better connectivity through rail and other ports, probably not doing so well is what helped us this quarter on the fertilizers volume spiking to historic levels. Is that the right understanding?

[Jakob Friis Sorensen, MD & Director]

Yes. That's what I think, because other ports have either been full or they have not been able to evacuate because they have lacked drivers and so on. But we have been evacuating 2, 3 rigs within 24 hours every day here in the last few months. And of course, our PRCL, our rail operator, has been very, very happy to see this volume here, now that the containers were not doing as good as normal.

[Bharanidhar Vijayakumar, Assistant Vice President]

Understood. And could I understand a little bit on the tariff hike you have taken in October. So is it on the marine charge? Or is it -- so could you just explain that, please?

[Jakob Friis Sorensen, MD & Director]

Yes. So we adjusted our tariff based on what we could see in the market and we could see other ports had taken tariff adjustments upwards and some even with more than 10%. We have adjusted both marine charges and other service charges to, I think, we are about 6% increase and that has been accepted by all customers without any sort of major discussions about that. Santosh, can you comment on the components, how we have distributed the increases?

[Santosh Breed, GM of Finance & Accounts and CFO]

Certainly, so first of all, the increase has been across, right, we have taken an increase across all the revenue charges in the tariff. There has been a good increase taken on the marine charges as well as the container handling charges. So these are the 2 components where the main increase has been taken. And as rightly said, Jakob, the expectation is around 5% to 6% increase in our revenue because of this tariff revision.

[Operator]

The next question is from the line of Ashish Shah from Centrum Broking.

[Ashish Shah, Analyst of Infrastructure and Airlines]

Yes. Just a follow-up. You did say that -- Santosh, you did say that next year, mid next year is when we are looking to migrate to the new tax rate. But I just wanted to check if clearly in terms of taxation, can we move to a new tax rate in the middle of the year? Or we'll have to be on one of the tax rates and then maybe FY '23 is when we actually move to the new tax rate?

[Santosh Breed, GM of Finance & Accounts and CFO]

No. So the answer was to when we do consume the entire MAT credit. So it was to that. Yes, for the change of the tax rate, it depends on the financial year. So we can't go and do it in mid of the year. So your understanding is right on that.

[Ashish Shah, Analyst of Infrastructure and Airlines]

Yes. So FY '23 is -- even if you consume the whole MAT credit, we move to the new tax rate in '23, right?

[Santosh Breed, GM of Finance & Accounts and CFO]

That's right. That's right. But effectively, Ashish, just to also give you an understanding, so what the calculations, what we are trying to look at here is on a cash flow basis. So wherever we find the actual cash outflow on tax is lower, based on that the decision has been taken, whether we want to opt for a lower tax regime. So far, our calculation shows that we should continue with the higher tax rate, because if we go for the lower tax early, then the net cash outflow will be higher.

[Operator]

The next question is from the line of Swarnim Maheshwari from Edelweiss.

[Swarnim Maheshwari, Research Analyst]

So firstly, I mean how should we -- as we are coming closer to the container crisis, would it be a fair assessment to make that the imports will surge now over the next few quarters and that should help us?

[Santosh Breed, GM of Finance & Accounts and CFO]

Jakob, you want to take that?

[Jakob Friis Sorensen, MD & Director]

Sorry, can you just repeat that question? I'm very sorry, I was just trying to listen here, but I didn't get the entire question.

[Swarnim Maheshwari, Research Analyst]

Yes. Sure. I'll repeat that. So I was just saying that now we are coming closer to the container crisis, that the realignment is almost done. So would it be a fair assessment to make that the import surge will now start, because imports have been weaker over the last few quarters and that should actually help us because we are more import dominant?

[Jakob Friis Sorensen, MD & Director]

Yes. Now I got you. Yes, I would like to say yes, but I think it's not that simple. As you know, we have some geopolitical issues, for example, cargo coming in from China to India is being subjected to additional inspections, et cetera, et cetera. It is not that simple. What we are trying to do in Pipavav is to encourage the shipping lines to bring back empty containers. And in fact, later today, we will encourage them by announcing a small discount on the empty discharge load, just to help India -- just to help exporters get equipments, we're trying to give that little incentive for the shipping lines to bring equipment. Because I do believe that import is picking up and we can see that in the numbers. But then it will take a few weeks for the import containers to arrive and to be emptied and be repositioned where it's needed for an export. So that will take a little bit longer and we are trying to close that gap by induce the import of empty containers.In fact, we have 1 extra loader coming in so far that we have been announced with empty containers that will discharge today -- sorry, in the next couple of days, but I think it will be taking a little bit more time for the container market to even out because there are more factors, there are more factors that goes into that, yes.

[Santosh Breed, GM of Finance & Accounts and CFO]

And yes, just to add to that, Jakob. So on the macroeconomic side, when we look at that, there are indication of some recovery. So what we have seen on the auto sales, the domestic sales, at least are picking up. Likewise, when we look at the inputs coming from the white good importers, so they also have reported that now their factories are running at full scale, which is an indication that the demand is picking up. And with that, we are certainly hopeful that the imports should now keep on going up from here.Having said this, there are still a lot of uncertainties because globally, we are seeing the second wave and countries getting into lockdown. So we're still -- are actually have to wait and see how things pan out. But from India perspective, because of the festive season, we have seen some uptick on the input volume.

[Jakob Friis Sorensen, MD & Director]

Yes. But I think there's some good news on the horizon. There is the talk of a new vaccine. There is -- despite, yes, that, of course, in Europe, for example, there's several countries that are closing down, it's also a little bit seasonality because it's winter now. But I think the buying patterns has changed slightly and people are buying stuff online now. So maybe there's a less impact of this second or third wave than the first one. So it is with a little bit of optimism that we are looking into the future now.

[Swarnim Maheshwari, Research Analyst]

Got it, sir. Sir, second thing is, if you can just provide some update on the DFC, when it is likely to start? There was some delay. So if you can just give us some update on that.

[Jakob Friis Sorensen, MD & Director]

Yes. And this is one of my favorites, because the DFC is going to be a game changer for India. It is on track. The latest what we said was that it will go online in quarter 1 of 2021. It looks like that, that's going to stick. We are working on it here in the port, and also our colleagues, PRCL, is working on the electrification of that railway track from Pipavav to Surendranagar and we will then plug into the DFC itself just around Ahmedabad. And that will be -- it looks like now that will be on schedule for quarter 1 of 2021.

[Swarnim Maheshwari, Research Analyst]

Sir, the point on DFC really is that since we will have some advantage over the Maharashtra ports? So you do expect that this could actually help us to gain some market share with some of the other ports?

[Jakob Friis Sorensen, MD & Director]

Yes. If we are talking among friends, yes, I definitely think that this will give us, especially for the northern market, where Santosh also says that white good manufacturers and mobile phone and a little bit more sophisticated consumer goods are being -- starting to pick up again and we will get that cargo in through DFC and into Pipavav, whereas JNPT will not be enjoying DFC for another couple of years. But I'm trying not to flag that too much because they don't like it when we say that.

[Swarnim Maheshwari, Research Analyst]

Right. No, understand. Sir, lastly, on this -- just 1 clarification question. That was on the tariff hike that we took from 1st of October, what was the quantum actually?

[Jakob Friis Sorensen, MD & Director]

We did an increase of about 6.5%. And I think that is going to be a full effect of that in the last quarter of this year here. You can see in the financial year here, we will have a 6 months effect on that.

[Swarnim Maheshwari, Research Analyst]

So sir, 6.5% actually seems quite steep in the recent years that you see, because I mean we have taken something like 2% to 3%. So any specific thing that why is this tariff hike so sharp? The 6.5% is a pretty steep one.

[Santosh Breed, GM of Finance & Accounts and CFO]

Can I just add a few comments here, sir?

[Jakob Friis Sorensen, MD & Director]

Yes, go ahead, Santosh.

[Santosh Breed, GM of Finance & Accounts and CFO]

So just 2 things. One, of course, as we mentioned earlier, we are taking a tariff hike across all the revenue charges, right, all the tariff items. In the past, which you have seen a smaller increase, it was very specific limited to certain tariff items, whereas here the increase is across all the tariff items. That's one thing. And second thing is we are looking at an overall increase of around 5% to 6%, in that range. So that is the range what we're looking at. And not, of course, 6.5%, but it's 5% to 6% overall increase in our revenue. So that's just one clarification which I wanted to make.

[Jakob Friis Sorensen, MD & Director]

Yes. And I was just going to say that it may seem steep to some, but if you're looking at our big brother, Mundra, then they have increased this year up to 10%. So -- and what we expect, now as we talk about DFC, I am strongly expecting that the rail costs will be adjusted so that the railways will really attract more volume to move by rail away from the roads and away from trucks. And one of the ways is, of course, that they are adding a lot of capacity. But certainly, they should also look at the freight rates. So far, there has been talks in Delhi about it, but they have not been very specific in committing themselves to tariff reductions from CONCOR yet. But let's see. I think it's going to be a game changer, as I keep saying, but the reality is that it's a quite big capacity increase on the railways and who wouldn't like to get more utilization on that?

[Operator]

The next question is from the line of Prateek Kumar from Antique Stockbroking.

[Prateek Kumar, Vice President]

My first question is on CapEx. Can you give the adjusted CapEx number for FY '21? So -- and would that include this dredging CapEx which you talked about INR 120 million you talked about relating to handling LPG vessels? What would be the CapEx number for FY '21?

[Santosh Breed, GM of Finance & Accounts and CFO]

So dredging, which has been carried out, is a maintenance dredging. So it's more of an operational expense and not a CapEx. So that will not come into CapEx. And we expect around INR 100 crores for the financial year, of which the major chunk is happening for DFC. So we are upgrading our internal rail infrastructure and making it compatible to handling electric trains. So that's where the major expenditure will happen out of this total CapEx.

[Prateek Kumar, Vice President]

And like the recovery we have seen in the container segment in Q3, is this equally visible in the LPG segment for the numbers? This quarter was slightly off versus earlier run rate.

[Jakob Friis Sorensen, MD & Director]

Yes. I think we expect the LPG to come back as well. And as I said earlier on this call, by the end of this month or early December, we would be able to start evacuate LPG by rail as well, then our LPG rail siding will go on stream.

[Prateek Kumar, Vice President]

Right. And just 1 question, a clarification on DFC. You said 1 -- first quarter '21. So this is first quarter calendar '21 or...

[Jakob Friis Sorensen, MD & Director]

Yes.

[Prateek Kumar, Vice President]

So it's calendar '21?

[Jakob Friis Sorensen, MD & Director]

Yes. Yes. Forgive me, but I haven't become so Indian. So it's the first quarter of the calendar year 2021. And we are all desperate to get to that, so we can leave 2020 behind us, right?

[Prateek Kumar, Vice President]

Absolutely.

[Jakob Friis Sorensen, MD & Director]

So 2020 used to mean perfect eyesight. But I think after this, it will have another meaning.

[Operator]

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

[Jakob Friis Sorensen, MD & Director]

Yes. Thank you very much. And again, we appreciate all the good questions that you've had to our business. Take a look at the numbers that has been uploaded on our website and I hope that you are satisfied with our service. Santosh, have you anything to say? You want to repeat what the Board decided just now, that we will also stick to our reputation and our commitment to max out on the dividend?

[Santosh Breed, GM of Finance & Accounts and CFO]

That's right. That's right, Jakob. So that's what the Board has already approved, an interim dividend of INR 2.10 per share. So that has been approved in this Board meeting. So that's it from our side. Thank you very much for attending this call and some really good questions. So thank you very much for that.

[Jakob Friis Sorensen, MD & Director]

And thank you for hosting us.

[Santosh Breed, GM of Finance & Accounts and CFO]

Yes.