Gujarat Pipavav Port Ltd

NSE:GPPL

Earnings Call Transcript 2021-Q4

[Jakob Friis Sorensen, MD & Director]

I'm quite happy to be here today with you, since -- yes, because despite a lot of challenges, my feeling is that we have done quite satisfactory results. But let's get into the details here. I will hand back the microphone to our host, to Varun, who's organizing this call. Thank you.

[Varun Ginodia, Research Analyst]

Thank you. Thank you so much, sir. Good morning, everyone, and I hope everyone is keeping in good health during these times. And I would like to welcome you all to Gujarat Pipavav Port Limited's 4Q 2021 Earnings Call. We have, from the management, Mr. Jakob Sorensen, CEO of the company; and Mr. Jakob -- sorry, and Mr. Santosh Breed, CFO. In terms of the format of the call, management will give a quick opening remarks and walk over the results, and then we will open the floor to Q&A. Sir, over to you.

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

Thank you, Varun. And Jakob, would you like to start giving a short update on the cyclone and the status at the port? I think that will be helpful for all the investors and analysts on the call.

[Jakob Friis Sorensen, MD & Director]

Yes. Let me do that. I think you would like to hear about what happened. So we had the cyclone passing Bombay last week. And for a long time, we followed it. We had done and activated our normally precautions and contingency plan was activated, but we were following the cyclone. We were hoping that it would move further out to sea and then continue towards passing Kutch and even then actually to Pakistan. But as you know, it's just steered through the straight north into Saurashtra and it hit somewhere east of Pipavav near Diu. And at some point in time, we have recordings from our tugboats that we had continuous winds of 240 miles an hour -- excuse me, 240 kilometers an hour for 4 hours, and it was quite devastating. It knocked out all the power and also communication in the entire Saurashtra. And we have subsequently been challenged in getting both communication and power back. But the good news is, and I call it a miracle, we did not lose any lives in GPPL. We had one injury from one of our crews on a tugboat. We lost one tugboat, which had lost power and which was washed aground and smashed into UltraTech and we lost also a pilot boat which were inside the RNEL area and it sunk, but no loss of life and no loss of major equipment. All our cranes are standing. And you might have seen in the Reliance shipyard next door, one of the big Goliath gantry cranes collapsed and quite a bit of damage as well to roofing and windows and so on that was smashed in by flying debris. But all considered, we had also a number of empty containers that were flying around despite our efforts to hold on to all that. We had 21 full containers with damages due to flying debris that has smacked into the containers. But I think, all in all, it's -- we were lucky, and as I said, no injuries or loss of life. What we have done, in terms of force majeure, first of all, it's very clear that it is a force-majeure situation. But we have chosen not to declare a general force majeure. We are declaring force majeure on contract to contract so that we can have the most relevant discussions with our customers. And in turn, they can have discussions with their suppliers and their customers again. And that's working out. It's a lot of work, but it's working out well. And we have then, to recover, we have procured and commissioned a mobile power plant from Mumbai. It's been shipped in over the weekend and it's being put in place. I don't want to give any dates for when we are up and running, but we have formally said that we expect to be in operation by 1st of June. We have communicated that to our customers. It's looking good so far, but I don't want to jinx it. We are commissioning this power plant. We have the communication up and going. We have had several small vessels in like supply vessel to -- from Adani Welspun to supply offshore rig. And we expect also to be able to handle coal and liquid bulk later maybe over the weekend even. But the first container operation will -- so far, it will be, as we have said already, expected to be by early June, and we stick to that. So we've been out for 2 weeks. And obviously, there are some losses that would amount to damages. There's reasonable damages. There's the things we can't see, but we have, due to the water damages, we have a lot of electrical equipment that we need to check. Some of it is insured. That process has started as well. And then obviously, we have the loss of business due to the business stop. But again, I'm happy to say, for example, the rail was unharmed. And we have been up and running the last couple of days with both evacuation of containers from the port. We have supplied several factories who were worried that they would come to a standstill. They have not gotten to a standstill. And we are also able to receive inbound trains for export and we are doing so. And maybe the last detailed remark is that we also had 137 live refrigerated containers in the port and at all times have they been plugged in with power from our emergency generation, so we don't expect any losses from refrigerated or frozen cargo. So it could have been worse. It was definitely one of these 100-year storms that hits you and we have to rebuild and prepare and make sure that when it comes next time that we are even better prepared. But I think, all in all, all credit goes back to the team in the port. I was in the port last week, and they're doing a tremendous job. And the morale is high and everybody is working together. It's with Army discipline that we are putting back the port and getting back to operation. So let me pause here. And we are ready to start the presentation of the results.

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

Thanks, Jakob. And good morning, everyone. Thanks for joining. I will just take you through the presentation and give an overview of the financial results for the quarter ended March '21 as well as the full year financial year 2021.So can you move to the next slide? Thank you. On the key updates for the quarter ended 31st March '21, this is a comparison with the same quarter last year, and I'm really happy to share these numbers because in midst of a challenging environment, lockdowns because of COVID, we still are able to give a solid performance on the financial side. So when we look at this slide, the revenue was up by 19% year-on-year, and that was mainly driven by a strong performance on the Dry Bulk which has increased by 150% in volumes. Our container volumes were also marginally lower, 1%, but it is almost in line with -- in the last year. And this was, of course, mainly because of both -- sorry, this is mainly because of the coastal volumes, which we had a strong support from. On Liquid, we continue to see a challenge there, 16% lower, but we do have a strong support coming from non-LPG volume, which is actually compensating partially for the lower LPG volumes. RoRo, of course, you see a big number here, but this is coming on a low base, so we still are in a recovery mode. It will take some time. It will be a gradual recovery. And we expect to see some incremental volumes from a scale perspective only in 2022. On the revenue side and the financial side, if -- I already spoke about revenue, but to speak about EBITDA, EBITDA also is up by 15%, EBIT is up by 17%, and the net profit is up by 38%. EBITDA margin, though, was at 60% and was lower by 200 basis points. Now this was mainly because of the cargo mix and the maintenance dredging activity which was carried out during this quarter. So this is an overall low-key updates when you compare March '21 quarter versus March '20. Can you move to the next slide? Thank you. On the volume development, then you've already seen that we had done 195,000 TEUs, of which 117,000 was ICD, so we are seeing a gradual pick up again on the ICD volumes. On the Dry Bulk, we have an extremely good quarter, as you can see from numbers, which is 1.03 million metric tons of cargo been handled. Liquid remaining stable, but there also we expect now, we are working on the VLGC bulk. We already have the rail evacuation in place, so we expect this volume to actually recover from here on. And RoRo, as I mentioned already that it will take some time and the expectation is somewhere in 2022, we can see some good recovery on RoRo volumes. So that's all the volume development. Now I on to the profit and loss account. To give the overview, so I have already covered, in the key update slide, a comparison with the same quarter last year. And that's why I'm going to focus mainly our performance, first, compared with December '20 quarter and then we'll also touch base on our yearly performance. So starting with the quarter-on-quarter performance. The total operating income at INR 1,934 million is lower by 3% due to lower revenue from container and bulk business. For bulk business, though, the total volumes were up by 32% on a quarter-on-quarter basis, fertilizer volume has dropped by 62%. Fertilizer imports were lower during this quarter, mainly because of the seasonality and as well as higher prices in the international market. Total expenses at INR 779 million are lower by 12%. Operating expenses at INR 332 million are lower by 14%. This is again due to lower fertilizer handling expenses in line with the lower volumes. Employee benefit expenses at INR 168 million are lower by 10%. In the previous quarter, there was a one-off special bonus, which was paid to all the employees, recognizing their efforts for uninterrupted operations during COVID-19. Other expenses at INR 278 million are lower by 11% due to higher maintenance dredging expenses in previous quarter. EBITDA at INR 1,156 million is higher by 5% and margin at 60% is 500 basis points higher than the previous quarter. Other income at INR 94 million is higher by 12%, mainly on account of reversal of certain bad debt provision on the recurring of all outstanding dues. The tax expenses for the quarter were lower due to reversal of MAT provisions for earlier years and the net profit at INR 654 million is higher by 20%. So this was the overall performance when you compare March '21 versus December '20. I will[Audio Gap] this financial year '19/'20. As you are aware that financial year 2021 was a year of lockdown due to COVID-19 pandemic. But even in this challenging situation, when you compare our results on the top line, the company has maintained a total revenue at the same level as last year. The total operating income was at INR 7,335 million, in line with last year. Total expenses at INR 3,113 million are higher by 8%. Operating expenses at INR 1,375 million are higher by 8%, and this was mainly due to the bulk handling expenses on account of higher bulk volume. Other expenses at INR 1,067 million are higher by 2% due to maintenance dredging expenses. EBITDA at INR 4,221 million is lower by 5%. Margin is at 58%. This is lower by 300 basis points due to the cargo mix and the maintenance dredging expenses incurred in this year. Excluding this maintenance dredging expenses, the margin would have been 100 basis point up at 59%. Other income at INR 442 million is lower by 13% on account of lower interest income. Net profit at INR 2,181 million is lower by 25%. This is on account of the reversal of deferred tax liability, which was accounted for in the earlier year. So excluding this tax adjustment, the net profit would have been lower by 6%. I'll also quickly touch base on the consolidated financial. So we have our subsidiary, Pipavav Rail Corporation Limited, which has been consolidated. And the share of profit from Pipavav Rail Corporation for financial year 2021 was INR 74 million and the consolidated net profit for the financial year ended 31st March '21 is at INR 2,216 million. I'd also like to inform that our Board of Directors have proposed a final dividend of INR 2.40 per share, subject to approval by the members at the forthcoming annual general meeting of the company. When we look at -- I mean you add this to the interim dividend, then the total dividend paid for the financial year 2021 is at INR 4.50 per share. So this was the overview of the financials. I will -- I'm -- we are happy to take the questions now. So over to you.

[Varun Ginodia, Research Analyst]

[Operator Instructions] So first question is from Mohit Kumar.

[Mohit Kumar, Research Analyst]

Congratulations on a good set of results given the challenging environment. My first question is we'll be losing 3 weeks to 4 weeks, I guess, due to cyclone. Do we have any kind of insurance for loss of capital? And secondly, do we have any insurance for loss of business? That's my first question. And secondly, sir, the bulk has bulked up in this particular quarter, we are -- the run rate was around 1 million tons per -- in the quarter. How do you see, for the entire year, this FY '22 to bulk? Do you think that we can maintain this run rate of 1 million tons per quarter?

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

Mohit -- yes, Jakob, go ahead.

[Jakob Friis Sorensen, MD & Director]

Yes. The first question, I don't want to speculate, but it -- we have strong education. The storm was on the 17th and hope to be up and running 1st of June. So in my calendar, that's 2 weeks as it looks like now. I will let Santosh comment on the insurance questions. Obviously, we are assessing it. But it looks like that we -- obviously, we have lost 2 weeks of operations, but we have a number of customers being so polite that they're actually waiting for us at anchor in front of the port. And we have strong indications from container shipping lines as well that they would support us coming in June. So that side, I'm not so concerned about. Specifically on the bulk, to answer your question, sir, you can see that coal has been increasing and that is because we -- here, in the beginning of this calendar year, we managed to open up the access road between RNEL shipyards between Pipavav Port and UltraTech Cement factory. So they were doing some upgrades of their dedicated cement jetty. And in that period, they have been using Pipavav Port. And somehow, a little bit ironically, with the storm and the cyclone, the UltraTech jetty has now suffered significant damage, so we actually believe that they will now have to rely on us both for import of coal but also for export of cement. So the bulk business for coal and cement will pick up the rest of the year. On top of that, we have our normal fertilizer business, which was also going well, and we have added a couple of new customers. But on the fertilizer front, we are now recovering and fixing the warehouse roof because, as you know, the fertilizer is import of bulk and then we do a bagging operation and we evacuate by rail. That should be up and running in June. We had plans to add an additional new warehouse of 10,000 square meter. But due to the storm, it would not be ready. So we have to expect some delays on adding the additional capacity. But I'm quite hopeful that the bulk business will be back. Santosh, will you comment on the insurance questions?

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

Sure, Jakob. So Mohit, yes, we are covered by insurance. We are part of the global insurance package of the group as well. And this covers the property damage as well as the business interruption. The assessment, of course, is still on. The surveyors were there on the site. So we'll have to wait and see the overall assessment. And then we'll probably know how much of the loss we'll able to recover through the insurance package.

[Varun Ginodia, Research Analyst]

The next question is from Ashish Shah.

[Ashish Shah, Analyst of Infrastructure and Airlines]

Yes. Sorry, this is Ashish Shah. So just had a couple of questions. One is on the bulk cargo mix, if you can just give the breakup of the bulk cargo for the quarter?

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

Sure, Ashish. So coal, what we handled was around 467,000 metric ton; fertilizer was 213,000 metric ton; and then others, which includes mainly minerals, was 349,000 metric tons.

[Ashish Shah, Analyst of Infrastructure and Airlines]

Sure. And the connected question, Santosh, is that is this volume for coal and minerals, is that something sort of a one-off cargo which has come? Or this is something that can be expected to be repeated?

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

So during the quarter, yes, as Jakob mentioned, since the UTCL jetty was under repair, UltraTech jetty was under repairs, so we have seen a surge in their cargo at the port. But at the same time, we do believe that we can continue to attract the cargo to a certain extent and as well as new customers which have been added for both these commodities. Why I said that we continue to attract even the UltraTech one because of the road connected, which has been established between the port and their cement plant, which make transportation quite economical for them. And then that certainly helped them to look at Pipavav Port also an option for importing as well as exporting their commodities. So that's why we believe that we'll continue to see some amount of this cargo to continue to come to Pipavav.

[Ashish Shah, Analyst of Infrastructure and Airlines]

Right. Second question is on the PRCL profitability. Now if you look at the ICD volume, even for this quarter as well as maybe for the December quarter as well, it has been rather steady, but the profit contribution has gone down substantially. So is there any one-off which would have impacted the PRCL profitability that you now want to highlight?

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

Certainly, Ashish. So actually, what is happening right now in PRCL, they are, of course, mobilizing with the Railways to relook at the cost allocation. Because if you look at PRCL, all their revenues as well as the costs are the allocated costs coming from the Indian Railways. And in the recent time, they have seen a significant increase in their allocated cost, mainly on account of the manpower, which has been deployed on the electrification route between Pipavav and Surendranagar. However, the benefits which were expected are yet to materialize because correspondingly, there should have been benefit on significant reduction in the fuel cost. So they have not really seen that coming in. So the PRCL management is dealing this with Indian Railways to contest this that both of this should come at the same time where we should see a reduction in the fuel cost because, I guess, a corresponding increase in the manpower cost. So that is work in progress. But of course, in this quarter, since we have already taken all those costs, that's why you see a drastic reduction in the profit. I do believe this will surely get settled between PRCL and Railways. And eventually, we should see the things coming back to normal with the same number of profits what we have seen in the earlier quarter.

[Jakob Friis Sorensen, MD & Director]

Santosh, if I can just jump in also. Ashish, I think there were 2 explainable root causes here for some deviation. One was that we had settled with PRCL earlier, so there was a onetime contribution from us to them, which was in their accounts. And the second thing is, I believe, and Santosh, you can correct me if I'm wrong and it's not included in this quarter, but they had actually done a considerable contribution to the Prime Minister's relief fund, so those 2 are one-offs.

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

Yes. Of course, when you look at the year-on-year performance, Jakob, you're absolutely right. So actually, just to add, we had a settlement of an old claim, which was settled -- which was upside to PRCL, which was there in the last year. And this year, of course, there was a contribution made by PRCL to the Prime Minister's fund for COVID relief around INR 50 million, which was contributed. So those are, of course, one-offs, as rightly mentioned by Jakob.

[Ashish Shah, Analyst of Infrastructure and Airlines]

Right. Just to clarify. Sure. The settlement amount is a part of FY '20 financials?

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

That's right.

[Ashish Shah, Analyst of Infrastructure and Airlines]

And the contribution to PM fund is for FY '21?

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

That's right.

[Varun Ginodia, Research Analyst]

The next question is from Achal Lohade.

[Achal Lohade, Vice President]

First, if you could help us with the realization for the quarter in terms of bulk, container and Liquid.

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

Sure. So for container, of course, we continue to maintain our realization between 6,200 to 6,600, so that's the range what we have now. Bulk, because of the cargo mix, there is a change, a marginal change in the realization. Now it's, in this quarter, it is in the range of 400 to 500. And Liquid, we continue to maintain at 475 to 500.

[Achal Lohade, Vice President]

Understood. And if you could help us in terms of, for the quarter, what is the EXIM growth for us at our port in terms of the gateway cargo ex of coastal and transshipment, if any?

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

Yes. So Achal, normally we don't split this between EXIM and coastal and we don't really give those kind of numbers. But I would just say that overall, we are able to sustain the volumes because there was a strong support coming from coastal. And because of the challenges in the Far East trade, mainly the concession in the Far East port, then there has been a drop in our EXIM volumes, a marginal drop in the EXIM volume, I would say, I would put it that way.

[Achal Lohade, Vice President]

This is on a Q-o-Q or Y-o-Y basis, sir?

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

So this is all Q-o-Q basis, yes.

[Achal Lohade, Vice President]

Okay. Okay. And how about for the full year?

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

So full year as well there is a marginal drop in the EXIM volumes because -- and as I said, in last year, just to add to this. So last year, we have added -- sorry, this year, this financial year, we added 2 new coastal services, which has helped us to push the coastal volumes, that's one. And I'll also take the opportunity to update all of you that we have also secured new services. So there is one service which was secured for Middle East and one was secured for Far East, which is of COSCO service. Those -- these -- both these services were starting from May this year. So this is a new development, which I wanted to share. Jakob, please go ahead.

[Jakob Friis Sorensen, MD & Director]

No, that's absolutely correct, Santosh. I just wanted to also -- to, Achal, to clarify that in that composition of cargo, we are actually quite pleased that we have next to 0 transshipment because you make no money on transshipment. And the challenge we have often to explain is that some of our neighboring ports in Gujarat, they actually have a tremendous volume expansion. But they are benefiting when you see that there is congestion in Sri Lanka, then the transshipments are moving to that other ports, and that's boosting their volumes. But I doubt they make money in any significance on that. But it leaves us back to this challenge of having to explain the numbers and market share and so on. But it's really more complicated and it's, I think, less relevant for us. I'm glad that we don't have to handle transshipment at cost and much better at focusing on the coastal volumes, as Santosh said, where we have added 2 more services. And import and export, I'm quite optimistic because also what Santosh said. And thank God that we had already secured 2 new services. They are eager to get started before the cyclone here. We have a direct to China-India service, and we have a direct export call from people off to Jebel Ali. So I'm hopeful that we'll see a further boost of our exports.

[Achal Lohade, Vice President]

Would you be able to give any color in terms of what kind of additional volumes it can bring in? Could it be, say, 50,000, 60,000 TEU put together?

[Jakob Friis Sorensen, MD & Director]

I don't think you're that wrong in that number. The service to Jebel Ali is a very attractive connection, but it's a smaller vessel. But the service from China direct, Shanghai to Pipavav, that is a big string. It's the CI1, which is the China-India service on OOCL and COSCO. So it's also a major shipping line. COSCO is being added. I would say they're back. They were in Pipavav, but now they're back. And I think they have quite big growth ambitions in India. So I think you're right.

[Achal Lohade, Vice President]

Great. And just last question, if I may. In terms of the DFC connection, once that is established, do -- would we also have a fair amount of benefit in terms of the shift from another ports or in terms of the underlying EXIM cargo momentum?

[Jakob Friis Sorensen, MD & Director]

Absolutely. I think absolutely. I kept telling that it's a game changer. Unfortunately, now, again, due to the cyclone, we've been a little bit delayed, but it's a game changer. There will be cargo moving from truck and from road to rail. And when we have a longer period of time to get this coordinated and get it stabilized, this DFC will make sure that we have scheduled import, export regular trains and the trains are double-stack trains. They are double size and length. They can go with faster transit time. So what I'm trying to describe to you here is that our customers' supply chain is going to get much more reliable. It will be faster transit times to the Northern market or from the Northern market. Maersk Line just recently started a regular service with train from the hinterland to Pipavav for -- catering for automotives. And I think really, things is going to change. But as you also know, any change takes time. And once we got the DFC fully up and running, I think this is really going to be the game changer for us. And not necessarily taking -- just to extend on your question, not necessarily taking away business from other ports. I think the migration will be from road to rail because the rail product will be much more reliable. And the road product and the truckers don't need to be worried because they can make many more short trips between factories and ICDs. They don't need to drive 5, 6, 7 days and have 2 drivers in their trucks. So I think, for the whole industry, this is going to be a good sustainable game changer. And what I hope is that India will actually gain global market share due to the DFC.

[Varun Ginodia, Research Analyst]

The next question is from Sachin Shah.

[Sachin Shah]

Am I audible?

[Varun Ginodia, Research Analyst]

Yes, you are.

[Sachin Shah]

I just wanted a couple of things. I would like to understand a couple of things. One is the previous point that we were discussing on the DFC side. So when is that getting operational for our circuit? And is it linked to that only when the neighboring port, which is Mundra, also -- when -- so will both the ports get simultaneously started on the DFC? Or we will have some first-mover advantage of, say, at least 1 or 2 quarters? So some more details on that side. That was one. And second, if I remember correctly, about a couple of quarters back, we had some discussions with Gujarat Maritime Board in terms of the extension of our concession agreement. And there was some indication that we would get some sense from Gujarat Maritime Board by the calendar year 2020. Now we are almost first half of calendar year '21, so any update on that will also be very helpful.

[Jakob Friis Sorensen, MD & Director]

Yes. Sachin, let me check that. But first of all, let me just again clarify on the DFC. It's a massive, massive infrastructure. So it's not switched on with one button. It's going to come gradually. But you're spot on because I think in comparison with Mundra, Mundra is much more catering to cargo that's arriving from the hinterlands by truck. And then the truck comes into Mundra from Punjab, Rajasthan, et cetera. And then they potentially wait for a couple of days or longer before they get discharged in the terminal. And then they take a return container back again. What we are operating is a much more planned operation where we have regular trains coming in. And they deliver export cargo to Pipavav and then they load import back again to the hinterlands. And I think that more structured, scheduled, regular, on-timetable operation will become more and more prevailing. So our business model is going to be the winning business model and Mundra will have to adjust, and I'm sure they will because they are very professional people, but they will have to adjust their operation from truck to more rail. But I have to say, at the moment, we know that there's up to 75 rail rigs that are waiting in Mundra to be offloaded, so they have to learn and they have to learn faster than we have to run. So that's what I would say. We will probably be able, a little bit later now -- everybody has been delayed because of the cyclone in terms of go-live for the DFC, but we will be among the first ports to do so, and we know how to do it. When it comes to Gujarat Maritime Board, we have continuously good discussions. And actually, the Vice Chairwoman and MD of Gujarat Board, Avantika Singh, she's visiting the port today. She is inspecting the damages. She's also visiting RNEL and UltraTech and the surrounding waterfront, and we have a very good dialogue with them. I think we have positive indication on the concession extension. And now with the cyclone, we are actually talking about -- with Gujarat Maritime Board about a better planning and an updated master plan for the whole waterfront area, so give us a little bit more time. It's -- still the concession is expiring in 2028. I'm very, very certain that with our very constructive discussions about an extension, and now maybe with the terms and with the scope of the extension, I'm quite sure that we will reach a satisfactory agreement as well. They had indicated that we would get something official here in May, but I also think that we need to forgive them because May has certainly been obstructed by the cyclone. I hope that gives you a little bit of update and hope.

[Sachin Shah]

No, sure. I understand. These are difficult times even looking at COVID environment, so a delay of a quarter or 2 is absolutely understandable. But it's good to know that you are on track and you are pursuing it to get it as quickly as the -- in terms of getting the concession agreement extended as quickly as possible, but that's good to know. Just one more thing. Coming back to the DFC thing, I just wanted to know in terms of the update in terms of our connectivity from our port to the connecting -- our feeder line or what they call the connectivity line to the actually DFC. There was some infrastructure that was getting done in terms of electrification something. What is the progress on that? And when do we actually expect that to start? Can you give us some color on that?

[Jakob Friis Sorensen, MD & Director]

Yes. So it's running already. And actually, we were very, very quick to recover after the cyclone on the rail side, and that is PRCL, which we also discussed earlier today. So that rail link from Pipavav Port up to Surendranagar, where we plug in several places to the DFC, that is run by the company called Pipavav Rail Corporation Limited, PRCL. And that's where we are a shareholder, together with the Indian Railways. And we are running, of course, diesel -- locomotive, diesel engines. And we have been working on the electrification of that track. That has been a little bit delayed now, also thanks to the cyclone, which admittedly have been very, very rough to the electrical installation. It basically -- I was there in the port last week and all electricity masts and transformers have been leveled. I think the DFC -- we didn't have the electric wires up and running yet, so there's less damage, but I expect a little bit of delay. But what that means is that the engines will not be electric to start with. And in fact, I think the railways and the operators have only a limited number of locomotives that are fully electric. But we are running it on the diesel. And we have the advantage now due to COVID that there's less passenger trains on the tracks. And when DFC is fully up and running, then, of course, given the name, it's a dedicated freight corridor also there. We don't have any passenger traffic to consider. And all of that is going to be a game changer, and it's happening. But let's say that it's 3 to 6 months delayed.

[Sachin Shah]

Okay. Just one more thing, the last thing, and I'm going to try and please pardon me for that, but it's my job to do that. So I'm going to try and put some figures in your mouth. With the new 2 services that you are going to start this year, with the -- because of DFC over a period of time, we see that the market share moving from the road to railways and which is going to help Pipavav. So our -- the container capacity, if I remember correctly, is in the range of about 1.3 million. We are probably today doing about 0.8 million. Do we see crossing at least 1.1 million, 1.2 million numbers over next 2 years, in March '23 as things stabilize and as we keep on gaining market share from road and as new services start?

[Jakob Friis Sorensen, MD & Director]

Look, I keep saying 10 lakh, 10 lakh, and I can assure you that we are trying to push that into the 1 million TEU. And we're trying to push that capacity so that we also can argue to our management that we need to do further CapEx. If you recall, we have already plans for upgrading the crane capabilities, and we also have a yard expansion plans. That has to be assessed again because with the DFC, I expect that the yard velocity will go up, and that means that containers will move faster. So we won't have as much dwell time inside the container yard when the DFC is up and running because cargo will come in on time, and it will be evacuated fast again through the container yard. So the capacity assessment, you're absolutely right, we say 1.35 million TEUs on an annual basis. Don't put words in my mouth, but I think the first milestone to pass is the 1 million, the 10 lakh TEUs, and that should be coming before 2023 or -- yes, before 2023 is over.

[Sachin Shah]

That's fantastic. And I hope that your expansion plans also quickly start because they are linked to the concession agreement, if I remember correctly, that was the condition that you put with the Gujarat Maritime Board. So I hope you get the concession agreement extended and you start your expansion plans very quickly.

[Jakob Friis Sorensen, MD & Director]

Thank you very much, and you're right. But as I said a little bit ironically now, because of the cyclone, obviously GMB can see that there's a lot of rebuilding to be done. So I think we are the right party to check that task up right away and get the whole thing rebuilt. And then GMB is also business people and they can easily understand that obviously we need a longer horizon for recovery. So that's quite, in a way, we get help from that cyclone. We have to look at it from the positive side. Thank you.

[Varun Ginodia, Research Analyst]

So the next question is from [ Seetha Raman ].

[Unknown Analyst]

Sir, I want to ask. What is the potential container volumes for [indiscernible]?

[Varun Ginodia, Research Analyst]

Sir, your line is feeble, so I don't think they follow.

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

We are losing you in between. We are losing you in between. Yes, if you can just send your question via chat, Varun can pass the message then.

[Varun Ginodia, Research Analyst]

Yes, so in the meanwhile, we'll take next question. It's from [ Bipul Kumar Shah ].

[Unknown Analyst]

Congratulations for a very good set of numbers. Most of my questions have been answered, but if and when you cross the 1 million figure in container volume, what type of expansion plan is -- what will be the expansion number as far as container volume is concerned? And what type of CapEx are you looking at?

[Jakob Friis Sorensen, MD & Director]

Yes. I think the next step here would be that we need to add one more container berth. And what we are looking at is to reconfigure the container yard. Taking advantage of the DFC, we want to bring the rail tracks all the way into the yard and reconfigure the way we operate. So I think that question will take quite a long time to technically explain. And in terms of the CapEx, I would not have the detailed numbers on top of my mind here as well. But we have some good ideas about what we need to do to expand. And obviously, the best argument we have to put forward to our top management for CapEx and expansions is that we have some good growth numbers and we reach the 1 million TEU, I think that's a trigger point for starting those discussions because we all know that obviously it takes maybe a couple of years as well to construct and to expand. So the timing, the timing itself of the construction and the CapEx is important. And we talked about that a little bit earlier with the last caller.

[Varun Ginodia, Research Analyst]

Yes. So Jakob, the question from [ Seetha Raman ] was what is the potential container volumes per annum from the newly added services that you are looking at.

[Jakob Friis Sorensen, MD & Director]

Yes. I dodged to say that number directly, but one of the earlier callers were putting words in my mouth and he said, whether it was to the tune of 50,000, 60,000 TEU. And I didn't deny that.

[Varun Ginodia, Research Analyst]

Okay. So next question is from Deepak Maurya.

[Deepak Maurya, Associate]

My question to you, Jakob, is about the container volume recovery. I mean I understand the point that your neighboring competitor within Gujarat has been growing driven by transshipment. But even the major ports seem to be doing pretty well with double-digit growth in the March quarter year-on-year, but we've had a negative growth of about 1%. So maybe if you could help us understand what we are missing in terms of the growth trajectory for GPPV versus the rest of the country.

[Jakob Friis Sorensen, MD & Director]

Yes. Okay. So one of the reasons is that, in general, some of the big shipping lines are deploying their big capacities in the 2 major trades that is Asia to Europe and trans-Pacific. So what we have experienced in our carrier -- and one of them, of course, is Maersk Line, but in our carrier group of customers, they have prioritized their space allocation to those 2 major markets, where, as you know, everybody is complaining except the shipping lines, but the rates are pretty high. So they are optimizing their yields, and we have been hurt by that in terms of the volume. I think if you look at volume out of Mundra, Mundra is a much, say, broader-based port with 5 terminals, and they have a number of more shipping lines than we have. And there are some people who are picking up market shares, some of the shipping lines are picking up the market shares that some of the other lines are foregoing because they are pursuing higher yields. So that's where we are basically. A little bit of a passive service provider that just has to adapt to our clients' priorities, but that's really the situation we are in. And I understand that because there had all been many years where the shipping lines have been losing money and sending $500 after each container. Now is their time to make hay, as you say, the sun is shining for them. And we just have to come along. In that scenario, I'm very, very pleased that we are having this diversified revenue streams, and you can see also the bulk business is really helping us. While clearly, our contribution to -- from the container business is the best. And now again, with new services and a broader spectrum of coverage with the 2 new coastal feeding and also the 2 new EXIM services, I actually think we are very well positioned to catch up on that. The market distortion that we are experiencing now is, again, foreseen to level out by the end of this year. But I think that explains a little bit of the situation we are in. Not much we can do about it, and it's actually not also a big surprise. It's -- that's what's happening.

[Deepak Maurya, Associate]

Okay. So if I understand clearly, it is -- what is happening is your carrier group of customers are diverting capacity away from the Indian routes to, say, Asia, Europe and the trans-Pacific, whereas your competitors, including the major ports and the one in Mundra, are making utilization of this vacuum and increasing their market share. And therefore, their volumes are stronger versus your volumes. Is that what I -- you mean?

[Jakob Friis Sorensen, MD & Director]

You're spot on. And what it is, is that our customers are making more money elsewhere. And some of the customer -- some of the shipping lines in Mundra are maybe taking market share. But they're doing that, they're growing on less attractive yield in cargo.

[Deepak Maurya, Associate]

Okay. Crystal clear, yes. And maybe a follow-up on, if I can, with respect to the remark which Santosh made at the beginning of the conference call. I remember you said something about EBITDA margin being lower in the fourth quarter by about 200 basis points because of the cargo mix, which I understand is the bulk cargo. And then you mentioned about maintenance dredging expenses. But if I recall, the dredging expenses had already been incurred in the last quarter, that is in the December quarter. Could you please clarify on that comment, please?

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

Certainly. So you're absolutely right. These are 2 comments which I made. And we also have some maintenance dredging expenses this quarter as well. And so with that, we complete our entire maintenance dredging for this year. And in general, we have seen this happening every alternate year, so we don't expect anything next year now.

[Deepak Maurya, Associate]

Okay. And maybe if you could remind us about how much was the expense last quarter versus how much was the expense which you incurred this quarter so that we can back out the normalized EBITDA margin.

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

Yes. So last quarter, it was INR 48 million. And this quarter, it is INR 20 million.

[Deepak Maurya, Associate]

Okay. That is also very helpful. And finally, on the PRCL earnings, you mentioned that the cost attribution which is happening has been unfavorable to you because of those electrification and other things, and you are reaching out to them to sort it out. Any time frame you see when this can happen? Or will we see a couple of more quarters of depressed earnings despite steady volumes?

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

So let me clarify if I -- I don't know whether you misunderstood this. So this was a discussion between PRCL and Indian Railways. And the cost allocation is from Indian Railways to PRCL. So there's...

[Deepak Maurya, Associate]

Yes, yes, that's what I meant actually.

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

Yes. Perfect. So this, of course, is under discussion with Railways. And it's very difficult to give a time line because Railways will have to look at this not only from PRCL perspective, but all the SPVs which are operating. And of course, that's the discussion. The management is on this, and they have taken either the right levels. So we do expect this to have some resolution in the coming quarters. So I can't really give a time line for that, but we do expect -- it's not the costs going down, but at least the benefit will start coming in, which will be passed on to PRCL.

[Deepak Maurya, Associate]

Appreciate it. And one final question, if I can squeeze in.

[Varun Ginodia, Research Analyst]

Sorry. Sorry.

[Deepak Maurya, Associate]

Okay. I'll jump back in the queue.

[Varun Ginodia, Research Analyst]

Next question is from Ajinkya Bhat.

[Ajinkya Dilip Bhat, Analyst]

Yes, am I audible?

[Varun Ginodia, Research Analyst]

Yes, you are.

[Ajinkya Dilip Bhat, Analyst]

Yes. This is Ajinkya Bhat from Macquarie. Sir, my first question is what is your plan on price hikes in the coming years. So on the container side, if I look at, say, the tariffs in Mundra, I think their container prices are hovering around -- somewhere around INR 8,500 per ton, whereas you are at somewhere around INR 6,500 per TEU. So how much would you hike in the, let's say, in the coming year? And what is the key consideration from your perspective that determines how far you can close this gap in the next few years?

[Jakob Friis Sorensen, MD & Director]

I'm not sure we plan to close the gap and be on par with Mundra. I like the fact that we have cost advantage over them. But if you notice, we took a tariff adjustment last year. And again here, as of 1st of May, we have taken one -- more adjustments. And these have been small 5%, 6% adjustments, which all our customers have been quite fully understanding towards. And as you mentioned, we are still having a nice gap to other ports. So I think we can probably continue to do small adjustments in that direction rather than shock our customers with double-digit increases. I think that all our customers are taking appreciation to that, that we are having a little bit of a business understanding on not to load a lot of things over to them. So I hope that gives you an indication of our policy on that direction.

[Ajinkya Dilip Bhat, Analyst]

Okay. Okay. Understood, sir. And sir, second question is on the GMB, the Gujarat Maritime Board, concession extension. So obviously, we have been hearing about this issue going on for last probably 2 years now, and the decision has kept getting delayed from GMB's perspective. Now my question is, in your view, what is the main driving force why GMB should be taking the dividend today considering that a concession for both you and Mundra runs until 2029 and 2031, respectively, 7, 8 years away at least. Why should GMB -- or why would the bureaucrats in GMB actually take the decision so far in advance? What is the key consideration here?

[Jakob Friis Sorensen, MD & Director]

Yes. That's very easy to answer. And as I said again here, we have now been helped by the cyclone because with the CapEx expansions that we want to do and now with the additional upgrades that we need to do, thanks to the cyclone, obviously we would like to have a longer period of payback. And GMB is fully understanding to that, so -- and if we want to accelerate development and do better things for India, then let's not postpone this and kick this can down the road, and GMB is fully aware of that. And to my knowledge, this is also now on the CM's table. So it's not something that they're trying to delay. They understand that this has a very good driving factor on the economic development of Gujarat. And I think we have some pretty good constructive discussions going on. And Mundra is obviously as keen as we are to find a good settlement. But I understand, from the politicians point of view, then what I understand is obviously that whatever they do, that is going to be a long-term policy. So that is, of course, something that any bureaucrat and politician would like to make sure they take the right decision, so that I fully understand. But we are giving them a lot of good arguments for why they should do this.

[Varun Ginodia, Research Analyst]

The next question is from Prateek.

[Prateek Kumar, Vice President]

This is Prateek from Antique Stock Broking. My first question is on the impact of cyclone. Sir, how do you see volumes like from your customers? Like do you see volume shifting to JNPT and then coming back? Or like these ships are like going back and then they will come back again to like sort of deliver volumes at your port? So is there any formality of volume do you expect or just lesser ton gain to be back?

[Jakob Friis Sorensen, MD & Director]

See, the born optimist would say that actually that volume is waiting for us to start up again and it's coming back. There has been a little bit of diversion and obviously mostly time-sensitive cargo has going through GTI and JNPT or to Mundra for some live reefers. But frankly, if we can start up in the time frame that we have been indicating already to the market around 1st of June, then I would definitely say that we will recover this pretty fast. And don't forget also that, again, in a sort of a bizarre twist of luck, the cyclone came on top of the lockdown. And in fact, several of our customers' customers, many factories were closed. So they don't mind that their cargo is delayed for 2 weeks. And I'm hopeful that we can manage this within 2 weeks.

[Prateek Kumar, Vice President]

Okay. And then you say that container rail operations are still working at the port, but the port evacuation is not happening. So what are these container made of? [indiscernible]

[Jakob Friis Sorensen, MD & Director]

No, I actually said that evacuation is happening, and that has been up and running since last week. So -- but what we have said is that we don't want to have the port inundated with more export as long as we don't have vessels calling to pick up the boxes. But we have evacuated imports into importers without almost any interruptions, so that is happening. And my point here was also to say that the rail link was not damaged, and we are operating with the engines that are diesel-fueled. So even if the electricity is down, we can still run trains on the rail tracks.

[Prateek Kumar, Vice President]

Right. And on Dry Bulk volumes or annual volumes or annualized volume, let's say, if we take this quarter's volume as like a run rate, so would we feel any constraint in capacity handling for this segment, which is, I think, to the tune of 4 million to 5 million tons?

[Jakob Friis Sorensen, MD & Director]

Yes. I'm not good with predicting the numbers there. But as I said, we think that the impact volume-wise will actually be minor because some customers are willing to wait. And so we will regain that volume here in June and forward.

[Prateek Kumar, Vice President]

No. No. I...

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

So to answer your question, our capacity, we don't see any challenge because we have a capacity of 4 million metric tons and then bulk volume. So we don't see any challenge on the capacity front of incremental volumes.

[Prateek Kumar, Vice President]

Yes. But we are already doing 1 million ton, and we are saying that it's sort of sustainable. So...

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

As I said, so annual volumes will be in the range of 4 million to 5 million and we should be able to handle that.

[Prateek Kumar, Vice President]

Okay. And just last...

[Varun Ginodia, Research Analyst]

Sorry, sorry, Prateek. Sorry. So next question is from Swarnim.

[Swarnim Maheshwari, Research Analyst]

I'm audible now?

[Varun Ginodia, Research Analyst]

Yes, you are.

[Swarnim Maheshwari, Research Analyst]

This is Swarnim from Edelweiss. So two questions from my side. Firstly, what's the current rail provision at Pipavav Port? And second is that what is the total share of cargo of Far East in your overall volume mix? And any strategy to this -- on the dependence of the Far East side?

[Jakob Friis Sorensen, MD & Director]

Santosh, will you be able to check that because I just -- I will just...

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

Yes. This is the -- so the rail provision is in the range of around 60%, so 60% on rail, 40% on road. And we do expect, of course, with DFC coming in, build onto this at -- further. So that's what expectation is. And sorry, can you just repeat your second question?

[Swarnim Maheshwari, Research Analyst]

Yes. So basically, what is your total share of cargo from the Far East side in the overall volume mix?

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

So I will say in the range of around 60% to 65% is a Far East volume mix that we have. But now, as you know, we are adding services, of course, with one additional Far East service. So it may go up to that extent. And then we're also looking at multiple other trade links. So we surely are working on balancing this out to what extent it can be done.

[Varun Ginodia, Research Analyst]

We have one last question from Abhishek Ghosh.

[Abhishek Ghosh]

Am I audible?

[Varun Ginodia, Research Analyst]

Yes, you are now.

[Abhishek Ghosh]

Just one thing. In terms of this new rail service, the automotive expertise that the Maersk Line has kind of started from April. Can you just help us understand what's the focus of the link in terms of both providing the last mile or the rail services and can it happen with DFC kind of coming in? And also in some of the earlier comments, I think in November to December period, had kind of spoken about taking other initiatives as well as the Board is concerned. Sir, if you can just help us understand their perspective on development? It will as be helpful from our understanding in these lines.

[Jakob Friis Sorensen, MD & Director]

Yes. I'll take that. I think it's clear that a number of our shipping lines are very keen to get into last mile, as you mentioned, an end-to-end services. And I'm very happy that Maersk Line selected Pipavav for this automotive regular service. And it ties up to what I explained about the DFC. The DFC will enable the customers to redesign their supply chain so that they, by rail, can have a regular, fast transit time that is stable, and they can count on it so they can plan their inventory and their production and their business better. And of course, to have a scheduled regular train with a fixed departure and a fixed arrival and connectivity to certain services, that's exactly the backbone of that. So I think this is just -- it's helping to sustain what I call this game changer of the DFC because you will have every train in the future to be like that. And it's just significant that customers like Maersk, we have also ONE and other shipping lines who are really looking into doing this now. I think we're at the very early starts of this.

[Abhishek Ghosh]

Hello?

[Jakob Friis Sorensen, MD & Director]

Yes, we can hear you. We're still answering your question.

[Abhishek Ghosh]

Yes, yes, okay. No, I thought your line got disconnected in between. Okay. So that answers the question, I guess, so yes.

[Jakob Friis Sorensen, MD & Director]

No, it's sending that signal -- if I can just wrap it up here. It is sending that clear signal that the DFC regular arrival, departure scheduled trains, just like when you take a passenger's airline, you go from Mumbai to Delhi and you know that departure is 11:40, that's how the supply chain will be planned in the future when we get the full DFC up and running. And that automotive train is just a prelude for what to come.

[Varun Ginodia, Research Analyst]

Thank you so much, and thank you so much for answering the questions. I now hand over the call to you for any closing remarks, and then we can close the session.

[Jakob Friis Sorensen, MD & Director]

Yes. But I appreciate all the interest and good questions, and I hope -- in my partnership with Santosh, I try to give the business perspective and Santosh is the world champion of the numbers. But we are obviously quite pleased with this quarter results. And although we have been hit badly by that cyclone, I hope you can also hear that we are quite confident that we will be coming back soon and that the impact is going to be calculated, but hopefully that we can recover some of the volume that has not moved in the last 2 weeks. So with that, I think we are a little bit over time. And I have to run into another meeting here. But thank you very much for the interest. Santosh, anything from your side?

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

No, Jakob. No further comment, but thanks, everyone. And as Jakob mentioned, thanks for joining and asking those interesting questions. Thank you very much.

[Varun Ginodia, Research Analyst]

Thank you. Thank you so much. Take care, everybody.