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Snowman Logistics Ltd
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So hi, everyone. On behalf of Equirus Securities, I welcome you all to 1Q FY '23 Earnings Conference Call Snowman Logistics.
From the management, we have with us Mr. Prem Kishan Dass Gupta, Chairman; and Mr. Ishaan Gupta, Director; Mr. Samvid Gupta, Director; Mr. Sunil Nair, CEO and Whole Time Director; and Mr. Kannan S., CFO.
I now hand over the call to the management for the opening remarks, post which we can open for Q&A. Thank you, sir. Over to you.
Thank you. Good afternoon to all of you, ladies and gentlemen. I take the pleasure of welcoming you all to the Q4 '22 earnings call -- Q4 FY '23 -- sorry, Q1 FY '23 Earnings Conference Call of Snowman Logistics Limited.
The results were announced. And as you can see, that there is a great improvement in the revenue and the EBITDA and even at the PAT level. We have also announced a dividend of INR 75 per share. Because the company has healthy cash flows, we are reducing our debt. We are incurring CapEx. But at the same time, we have surplus funds to declare a dividend. So that is what we have done. And going forward, that will be our aim to keep on reducing the debt, doing the CapEx from our end and also have a dividend.
Also, at the same time, some new loans will be taken, term loans for new projects, but that will be taken, which can be managed very easily from the cash flows. The company has taken a turnaround in the sense that we have now a base case of where we have our capacity, and our capacity as it stands now is INR 1,30,000 pallets in all both cold storage as well as dry warehouse, which is the requirement of our existing customers and some e-commerce customers who are -- who have approved us. And we are serving them, and we plan to serve them going forward.
I would now hand over the mic back to the -- [indiscernible] to have the question-and-answer session. The management is here to -- and I am here to [ flag ] to each and every queries that you have. So over to you.
If you have any questions, please use the Raise Hand option, and then we can take it forward. Please use the Raise Hand option, and then we can take the questions.
All, just a reminder, if you have a question, please use the Raise Hand option and we can take your questions.
So just to start, if you can just talk about the warehousing growth rate -- the warehousing growth, which has been around 15%, 16% in this quarter. If you can break it up into the volume growth and the yield growth, how do you look at for this full year in fiscal FY '23?
Okay. This is Sunil Nair. See, the overall trend, both in terms of warehousing and transportation has been very encouraging. This is the time when, post COVID, most of the businesses have resumed or even crossed their pre-COVID volume.
So we had around 16% growth in transportation revenue, and 61% growth in transportation revenue, 15% on warehouse and 61% on transportation. The major growth that the warehouse has got is primarily from the better utilization and the yield improvement per pallet. Our utilization as compared to last year, which was around 84%, 85%, this year, Q1 was 89%.
And in case of ASP, we have commanded around 6% improvement in the average selling price per pallet in warehousing business.
In case of transportation, our slow link initiative where we aggregate the market capacities to our tech solution. It has helped us grow well. That revenue as compared to last year has grown by 2.5x. Last year, Q1, we had INR 6 crores of revenue coming from SnowLink whereas this year, Q1, it was INR 16 crores of revenue coming from that business.
So all in all, we see that the QSR sector is doing very well. QSR have improved almost 30%, 35% as compared to last year. And other than the pharmaceutical where we had very high hopes, almost every other segment have shown a promising improvement. Pharmaceutical have been constant with not much change as such.
Got it, sir. And sir, on the margin part, I think the warehousing segment had a margin of around 16%. So what are the steady-state margins that we can look forward to in this year?
Margins, 16%. See, if we are talking about at EBITDA level, we are at 35% in warehousing business and transportation business is 4%. And the weighted at company level, it is at 24%. And we see that we will continue to maintain this as such. We see that the transportation business, which operates at a lesser margin as compared to warehousing will be contributing more on the revenue side. But all in all, we still believe that 24% is what we would like to maintain considering the price increase that we have got in the recent quarter.
Sir, we have a question from [ Mr. Yash Tanna ].
Congratulations [Technical Difficulty]
Depesh, we are unable to hear.
[ Mr. Yash ], we are not able to hear you. Can you please repeat.
Sure. All right. So you've been speaking to your customers about the pricing. So going forward, how should we think about price increases for pallet in the warehousing segment?
[ Yash ], we could hear only your last statement. And if I understand right, you are asking about how does the warehousing pricing trends look like, right?
Yes. Exactly. Exactly. I mean, because since a couple of years, I believe it's not been that great for us. But going forward, how do you think it's going to pan out?
So see, [ Yash ], you are right. Because of COVID, last 2 years, the pricing was quite muted. And before that, we used to get around 3% to 4% price increase, which you just used to cover the inflation. This year, we have already got almost 6% of the price increase, 5.8% to be more specific. And with the trend and the balance pricing, which are under negotiation with customers, we see that one good part is, after the COVID, customers have started recognizing the requirement of compliances, hygiene and cold chain maintenance. And with that in mind, they are a little receptive to the price revisions.
So we fairly have had a good success, and we see that the overall interactions are quite encouraging for us with the customers. So we think that it should be somewhere in the range of 6% to 7% year-on-year. That's our expectation.
And that would be sustainable in the medium term. Let's say, 3 to 5 years, we could get a 6% to 7% year-on-year. Is that...
Looks like, yes.
And what kind of volume growth we expect from this -- from the warehousing segment that we -- you have shown a 16% growth year-on-year, right? That includes the pricing and volume.
Yes. So see, in warehousing, we have a little change in the strategy. What we are now trying to do is, since there is a lot of demand from dry storage for food and pharmaceuticals and we have been getting requests, we also thought of extending support there. So we have added close to 7,000, 8,000 pallets in dry warehousing through leased warehouses where we don't have to invest in the overall CapEx.
So with that intention in mind, we would like to continue to grow at a respectable level in warehousing. While in terms of cold storage, we will be setting up our Calcutta warehouse ASAP, and there will be some small expansions in the existing locations. So we would expect a 15%, 16% growth year-on-year. That's the plan.
That's the warehousing part, right? Okay. Is it okay if I ask more questions or should I come back later?
Yes, it's okay. please.
Yes. So you briefly touched upon the partner, the model. So I'm a bit [indiscernible]. I just wanted to understand this partner model a little better. So this does give us a much better return on capital, right, than the previously opted modeled of us.
Yes, absolutely.
Because -- yes, okay. And what part of the business currently is this business?
See, currently, it is close to 15%.
Okay. And...
Sorry, so let me -- so since we have started this just 2 years back with the e-commerce initiative where we started leasing warehouses and then modifying it to the e-commerce requirement, and now we have extended that to the normal omnichannel warehousing for dry food, it is at 15%. But I think this can grow at a much faster rate than the cold chain where there is no facility to lease and we end up investing in the CapEx and there is a project time of 1 year. So the growth rate in terms of dry warehousing should be much better.
Got it. So do we have any targets or projections that 3 to 5 years down the line, this would be probably 30% of the business or something like that?
I would not like to quote a number to it. But yes, we would like to make it even more than 30%. And because we see a huge potential there. And with our experience of food, most of the food customers have expressed intention to work with us in their dry food requirement also as we are well versed with the food safety norms in warehousing.
Yash, Ishaan here. Just to add on that a little bit. This model that we have started with, it has come by way of -- it's a customer pull that people wanted this service. So we got into it. Going ahead, the way that we are thinking about dry warehousing is that, firstly, it's a good model because it's asset light. So funds are not locked in CapEx. At the same time, the risk is mitigated because the arrangement is back-to-back from where we are leasing our warehouse and to those who we are leasing it too.
So the scalability is quite easy. What we're waiting for is we don't want to get into it without having back-to-back arrangements. So as and when we explore more either new customers or existing customers who have dry requirements, that's how we will be expanding in this business. So at this stage, we won't be able to give you a number, but we're very keen on growing this in a big way. So maybe in a couple of quarters or something, we can give you more clarity.
Got it. That's very helpful, Ishaan. On the debt reduction part, so could you help me with your net debt number as of June? And what are the plans for -- sorry, what are the plans for debt reduction, as you mentioned the e-commerce as well?
So our net debt is INR 90 crores.
Okay.
Sorry, net debt -- Samvid here. Net debt is around INR 93 crores, INR 94 crores right now. And the plan is when there's surplus cash flow, basically, we'll do a split between dividend, loan repayment and CapEx.
If you have a question to the Raise Hand option, and we can take your questions. Mr. Rohit, please go ahead.
Sunil, a couple of questions. What are these factors which give us this confidence of maintaining a growth out of the current momentum of around 20% to 25% on the top line?
See, the confidence is versus the pipeline that we have, the business development pipeline and also in terms of integration that we are doing with our existing customers. There are a good set of customers where we are not the one-stop solution. And they end up using multiple options because we are not offering that particular service or we are not present in that particular location. So with that strategy in mind, where we are getting into dry warehousing and also with the SnowLink, we are offering more transportation services.
As of now, SnowLink, we have not developed a single new client. All SnowLink revenue, 61% increase in transportation have come from our existing set of clients only. And we see huge potential there even with this, our estimation is we are only serving 25% of the transportation needs of our existing set of customers. So we see huge potential there in terms of revenue generation.
In terms of the segmental breakup, if you see, the pharma segment, it is showing a muted growth or it's not growing. And knowing that seafood and pharma, these are slightly higher margin businesses. Would you like to share the reasons as to what exactly is happening in the market and why the pharma segment is not growing?
Yes, one sec, please. Yes. So see, pharma segment primarily takes longer time in their decision-making. And post COVID, as you know, before COVID, complete pharma segment had a strategy on which they were working on. And post COVID, now when things are normalized, the pharmaceutical industries have -- are experiencing a different kind of distribution requirements. And whoever we are in touch with, they are all back to their drying board rethinking and redeciding on how their distribution network should be operating.
We are in touch with some major organizations who are -- and we are also giving inputs to them in terms of how their distribution network should look like. Only thing is pharma being pharma. They take longer time in decision-making. I think 6 months, 9 months down the line, there will be decisions out once they are very clear on how -- what they want to do. And that's when the numbers should show some change.
Okay. So the thing is that they are not able to gauge a situation in the non-COVID kind of portfolio that they have. They are taking time to make decisions, is it?
Yes. So they have realized that pre-COVID network is not working now and it needs to undergo a change. And that change is what they are working on.
Also, Ishaan here, just to add to that. In the last few years, the laws have changed and they've become stricter for the pharmaceutical industry. So a lot of goods, which were used to be stored in dry warehousing and even in the unorganized sector because of stringent requirements, they have to shift to the organized sector and to certain temperature control requirements depending on the product. So those decisions are also now be made by the pharma companies to explore companies like Snowman for their network.
So that shift is taking some time. Of course, the vaccines have dropped compared to the early part of COVID, and it was expected. So we never plan for them to be a big chunk of our product mix for very long.
So that's where it is. A couple more points on that is that this dry warehousing segment, which we are talking about, one of the key customer base that we're looking
[Audio Gap]
of distribution solutions, not just storage or not just transportation, but everything combined. And then also, like you were mentioning that seafood and pharma are some of the highest in customers or the segments for us.
So over time, that philosophy is also changing, where it is not dependent on the category of the product that we serve, but it's more to do with the location and the kind of services we offer to them. Of course, the temperature zone. So it's not necessary that one segment is higher paying than the other. It is more customer-dependent and service dependent now.
Okay. If you see the current split of the revenue, dairy and ice cream seems to have contributed around 25% -- 24% of the total sales, which probably could be because of the seasonality. And when ice creams and dairy products will go off the shelf, so do you think that the turnover will see a bit of a dip? Or do you see that there will be a wide space, if at all, if that is the case?
No. This is seasonality, and there are compensating season that their product takes. So after dairy and ice cream, which is July, August and after that, the festive products, both QSR and FMCG takes over that volume. So this is every year's thing, and this gets compensated. There is a lag of a couple of weeks. But then within that time, it gets compensated.
Okay. And in terms of the planned CapEx with the changes that are coming, what sort of CapEx have we planned for the next 2 years or if you can share that?
So we will continue to invest anywhere between INR 75 crores to INR 100 crores in expansion, which will be a mix of internal accruals and the debts. This will -- anywhere between 12 to 18 months, this is the CapEx that we are planning, which will include our expansion in Calcutta, dry warehouses where we may have to do some customization and the expansion that we plan to do in our existing setup in Pune and Hyderabad.
Okay. In terms of the expansion, any thoughts on what is the utilization of Siliguri brand? Because last time, I believe it was somewhere around 30% or something. And by when do you think that it will reach the peak?
So our Siliguri is at 35% now, and we expect it to reach around 75% in October.
Okay. And this new Calcutta property, which you spoke about, we intended to add in 2 phases, which was around 9,000 pallets probably in 4,000 and then 5,000. So what is the progress on that? And how are we seeing that?
So we got the land conversion approval done. And we -- our Phase 1 will be 5,000 pallets, Phase II will be 4,000 pallets. And we are at a stage where we are taking the building plan approval from the government. Once that is done, we will work on the construction side.
Okay. So there are no issues related to the cost of steel or maybe probably cement, if at all, we're going for construction because we are kind of blending in with the asset-light model as well. So how do we take it forward than from here?
Yes. No, there are concerns that we face with higher costs, but already those costs have started coming down. In the meantime, the land, like Sunil was saying, all the land acquisition and related formalities are getting complete. So now luckily for us, the construction costs have come down, so we'll be going ahead with it.
Like you're saying, we are going to have a mix now going ahead. Some cold storages in key locations, we will be investing into the asset. But especially for dry warehousing, it will be asset light. Even the transportation side, as you know, from SnowLink, it's -- all the growth is coming from our asset-light strategy on it. And some cold storages as and when they are available in future also, we will be taking on asset-light or lease model.
So it will be a mix of both as long as -- we don't want to put the burden of debt or a very tight cash flow from Snowman because while the part is not reflected, but if you can see from our EBITDA, and Rohit, you've been following the company for a few years now, so you know. We have very healthy cash flows, and each are improving. So that's why we are taking this decision that we don't want to lock it up in any one project or something like that.
Sure. So this vision that we had to be at somewhere around 2 lakh pallets. So would you be revising that or you want to curtail that or bring it down?
We won't be revising the figure, but we will be revising the time line definitely because we see more growth and more EBITDA potential in the dry warehousing side now.
So I mean, like will you like extend it by another 2 years. So we had a vision for the next 5 years, so you take it to 7 years to reach 2 lakh pallets now, is it?
It's too early to say right now. We want to see how this pans out. And there's very, very good response coming from the dry warehousing side. So we want to focus energies there.
Apart from just pure warehousing and transportation, there are some more activities that we started getting into so that we can provide a full range of services to the customers. Maybe Sunil can explain that a bit more. But if -- based on that, you will see that it's not now the number of pallets or the storage that we want to grow, we'd rather grow the service component of the business.
Sunil, would you like to...
Yes. So Rohit, what we are planning to do is with the request from customers and the trend that most of the developed countries have followed -- all the countries have followed in distribution, we are getting into offering an end-to-end distribution solution wherein we also own inventory wherever required. And we do the billing and collection also on behalf of our customers.
So with this offering, which is the request from some of our strategic customers, we will be offering a complete end-to-end where the customer focuses on manufacturing and selling only, and the rest is all managed by us, including the billing and collect. So we become the national distributor for them. So this is one thing that we will be starting now.
Sunil, with these value-added services that you are talking about, should we see an uptick in the margins going forward? Currently, it is 24%, 26%. Should we see that we'll reach to our old recovered level margins of around 30%, 32% or so?
So see, pre-COVID margin of 30%, 32% was -- is 35% is still there in the warehousing business only because the transportation revenue is going up, the overall mix is looking like lesser. Whereas our warehousing margins are still at 35%, 37%. So margins have not come down. Margin remains same, only the mix have changed. If you see only quarter-to-quarter last year, our transportation revenue was only 31%, 32% in Q1, whereas this year, Q1, it is 39%. So with that increase you are seeing that the blended percentage has come down, that's only because of the blend. Okay. Otherwise, individual level, the margins have increased in transportation with the asset-light model. And in case of warehousing, it remained same. So there is no change there.
What will happen is with this new service offering even though the merchandise value will come to us as a revenue. Okay. So the revenue will go up exorbitantly whereas our distribution markup, which is our service revenue today, will also increase slightly because of the additional services provided and the related margin that we are asking the customer. So that's how it is going to be accounted. So percentage-wise, it will -- it may look lower than the current one because the revenue will go up. But overall, absolute number, the EBITDA will be much better.
The blended EBITDA, right?
Yes.
Okay. Okay. In some of the previous con calls, we had this ambition or we had this idea of reducing the transportation fleet to somewhere -- to 0. And if you can share what is the status on that currently, how many -- what is the fleet that we have right now? And how much time will it take for us to come down to 0?
Rohit, just to correct that. In the past, we didn't mean that our fleet would go down to 0. What we meant was that we would be only focusing on serving our own customers, and we'll be reducing the fleet. But as we grow, we are not adding the fleet because now we can address that through SnowLink.
So what we want to -- we'll always have some portion of fleet -- of own fleet with us to service key clients and where the service level metrics are high. So the current distribution, how we stand is we have 249 owned vehicles. We have 82 dedicated vehicles with us separately from that. And 150 vehicles are available on a need basis. This is all 82, and 150 are through the SnowLink platform.
So as an overall, we have over 480 vehicles available with us. And this SnowLink portion can be scaled as and when the requirement increase at any time because the market vehicles are available. The advantage is that when we have the market vehicles, we have a financial advantage. Let Sunil -- I'll ask Sunil to explain that to you, the SnowLink advantage.
Yes. See, in case of SnowLink, the thing is the overall risk is back to back in terms of fuel driver, maintenance and all. And hence, what we do is we take care of the responsibility of utilization of the vehicle and the operations in terms of temperature, maintenance, hygiene of the truck, timely pickup, timely delivery and all those things. With that limited exposure to the cost elements, our margins are largely protected, so -- which in our own vehicles case, not the case because, here, we manage drivers, we manage maintenance, fuel, everything.
So we thought that the SnowLink model is better where the small transporters are getting to get into a larger play of distribution and serving larger clients through our network. And at the same time, they take care of their small fleet in terms of maintenance and driver, and we don't have to worry about that.
So financially, we have found that, at a PBT level, the snow link model is better than owning a truck. So as Ishaan said, we will reduce our own trucks, which is, today, 249. We will reduce it, but it will never be zero. Maybe we'll go down to 150 trucks, but they will be very specialized trucks for our strategic customers where we put a multi-temperature truck or some new technique technology. So technology-wise, they are going to be very special trucks, which we will own up.
And what we wanted to at that time and wanted to do at that time and what we've done now is we've deployed zero vehicles towards pure transportation. So we don't do point A to point B cold temperature control transportation. We only use it as an add-on for our existing business.
Okay. Okay. My next question is related to Snow, sir, and we were partnering with some players over there for Amazon as well as for Fraazo in Bangalore and Pune. So if you could take us through the development that is happening over there of Fraazo?
So e-commerce, we have got an increase of 37% quarter-on-quarter last year versus this year. And Amazon, we serve at 4 locations today, which is Delhi, Mumbai, Pune, and Ahmedabad also started now last month. Fraazo, we serve them in Bangalore and Pune. So Fraazo is a very small client, and its contribution in the overall e-commerce is very negligible as of now. They are in the stage of raising some fund. Maybe once that fundraising is done, they plan to have the expansions.
In case of Amazon, now since all the facilities are up and running, they are also working on some renewed offerings in terms of how the competition are offering shorter time deliveries and all those things. So they are working on those initiatives. We believe that it will continue to grow at this pace, anywhere between 25% to 30% year-on-year in terms of revenue.
Okay. Sir, any thoughts on increasing the shareholding -- the promoter shareholding? Because it is somewhere in the range of 40s, and it's been some -- quite some time when -- before the -- and after the Japanese counterparts, they exited. So any thought on the increasing the promoter shareholder?
Yes, we have been deliberating this for quite some time. So that's where the GDL go to decide. So Snowman, we can talk about the dividend or maybe a possibility of buyback in the future. All those things are there. So once GDL Board decides and under the creeping acquisition, if we can acquire some shares that will be -- that is a separate issue, and we'll come back to you on that.
So any thoughts on raising some money via rights issues or something like that so that we can also contribute in the -- as old shareholders and trying to get some reward? I know that you have started with this dividend, and hopefully, that you continue with this distribution policy. Then do you think that we can also contribute as long-term shareholders in the system?
See, we have looked at those possibilities in the past and what we think with the new concept of asset light as well as owning our own warehouses, we are very comfortable right now whatever visibility we have on the expansion plans, because now going forward, apart from owned and leased or asset-light model, the expansion of services, the scope of services has widened like Sunil explained just now.
So our revenue will be increasing and which will be contributing directly into the EBITDA margins. Or -- not margins, I would say, only, but also the absolute EBITDA by extending those services in the new model.
And we feel that there is a requirement for additional firm where, I mean, GDL as a parent company, I mean, it's comfortable now on the debt level and also on the cash flow level. We'll certainly look at whether to raise the fund through a rights issue or, I mean, I don't think we'll get into a QIP discussion again soon. But we have ways and means to have access to funds according to other expansion plans.
Okay. Sir, my last question is related to any place or any location where you've spotted that the pallets are unutilized and you would like to pay it off from the operations?
No, I don't think so that we have any location where, I mean, we'll be disposing of any asset, except for a piece of land, which we have in Bangalore, which is far away from the city and it's a very small piece of plan on the national highway, and that might be acquired by energy anytime.
So we are disposing of that asset. Other than that, we don't have any plans to sell off any of our capacities. We would rather focus on filling up those, and we are very much there both in Siliguri and where with all -- which are at present slightly low -- having slightly lower occupancy. But the timing of their operations starting was not right with the season in those areas where I mean, like, for instance, Siliguri, Sunil told you that it will be going up from 35% to 75% in the next 2 months or so.
Similarly, [indiscernible], we have plans, and these capacities have come after proper studies in the market and the business over there. So very soon, you will see that these locations where the occupancy is low will come up and bring our average occupancy to much higher levels.
Okay. So can you just share some more details on this piece of plant because since you said that it is closer to the highway, it should be getting some more better valuation. Just to gauge a rough idea as to what size or what is the valuation that we might get if this asset is pared off.
No, it's a very small piece of land because already a good part of it has been acquired by National Highway Authority. And so we'll be catching something around INR 2 crores to INR 2.5 crores for roughly an acre.
And how -- what is the property that we have, though, he's saying small can be any number?
It should be an acre.
An acre.
This is already -- sorry, this already -- I mean, there's no operations happening there anyway. It was just empty locations.
Hopefully, that you continue with the growth part and make money for all these stakeholders and the shareholders.
Thank you. If you have a question, press the Raise Hand option. We have a follow-up question from [ Mr. Yash ].
So I wanted to ask -- so we spoke about getting a higher ASP. So previously, you look at 3%, 4%. Now you already got 6%, and we're in talks with our customers. So what has actually changed for us that we are able to command instead of pricing? And I mean, is it because the competitive intensity has gone down? We have started offering something different from the industry. How is this happening?
So see, there is a clear comparison now in the market with respect to the quality of infrastructure and quality of operations post COVID. During COVID, there has been multiple audits and some global audits by the customer side wherein they compare our operations and our facilities with the other options that they explore in certain other locations. And they realize that to maintain this kind of standard, there is a cost involved. And when we are talking to them for the price revision, this time, they understood most of it, which earlier was very difficult to convince them. So I would say that, that is the most important thing that we are experiencing.
Secondly, last 2 years, we had not got much of the increment. So this time, there is some flexibility that they have. So these are the 2 main reasons for this.
And related to the service levels is the fact that in the last, say, 5 years or something like that, we have really invested quite heavily into our technology and our processes. So people -- our customers value that. And those kind of things are, I mean, they are totally unique in this industry, what we are doing compared to any of our competition. The kind of visibility and transparency that our customers get from us, they are not able to get from anyone else. So those kind of things helped with the price increases.
Got it. And is that -- I mean, has there been a scenario where there has been some consolidation in the industry where some capacity has gone off stream due to COVID and pressure on operations and...
Not really. The places are still the same. I mean the competition remains the same. The levels of discounts are actually higher. So when we get to a premium pricing, it's compared to a lower discount in the market also. So the challenges there to convince the customers.
What has happened, though, is that the quality of service of some of the competition has gone down because they've not been able to keep up with cost as things have changed over COVID.
That's helpful. The other thing was -- so what -- so on the partner model now that we have broken Amazon and Fraazo, right, so what is -- how does the contract look like? What is the risk that we lose the customer due to any kind of issue from maybe a service issue or they might find a better partner? Or what is the -- how does the contract look like?
See, the contract is largely back to back where it is fully dedicated warehouse. So we do not assume a risk of any termination clause from customer, it is back-to-back with the vendor. And wherever we are leasing a warehouse for shared use by multiple customers, there, we are going for a longer-term of arrangement with the vendor after adequate studies with respect to demand and pricing in that particular location.
Okay. But if there is one part of this to Amazon, he has a time period which he has committed to the warehouse. Is that right?
Yes. So same time, it is back-to-back signed with the vendor. So if there is a lock-in period of 3 years and contract period of 5 years, same towns are signed by with the vendor also.
Got it. But -- and what is the average tenure of these contracts?
So 3 years to 9 years is the tenure.
Okay. And going forward, also the new contract, they're looking at a similar tenure, right?
Yes, correct.
So that does bring in [indiscernible] in the model?
Yes.
Okay. That's good. That's helpful to know. Although I wanted to ask also a lot of proportion is being contributed by QSR daily. So I -- so not like a 2 or 3 quarter outlook, but I wanted to understand how do you see this industry performing over the next, let's say, 3 to 5 to 6 years? A little bit of a longer term of how QSR [indiscernible] because that growth will basically determine our growth, right?
Yes. So see, QSR and RTC have done well now, and it is primarily because earlier QSRs were mostly dine-in concept, whereas now they have also got into the home delivery model.
So earlier, pre-COVID, they were 5% to 7% as the delivery whereas they are now 30%, 35% delivery. I don't think this is going to go back to the earlier ratio, so this will continue like this. RTC, which is the need of the [indiscernible] now, most of the cloud kitchen use RTC as a raw material where they try to deliver as fast as possible.
So I think both these segments are going to do well. And basis, our interaction with most of the QSR brands in the country, they are all also additionally coming up with cloud kitchen. So they will have their own outlets, but they will also set up a lot of cloud kitchen where their cost of operations is low and the volume is higher. So I think this trend will continue.
That's good to know. But what has been the broad growth rate trends, it has grown like about 80% over the last 2, 3 years or are there...
So the last 2, 3 years, number is not the correct number to consider because most of the -- yesterday, McDonald's, the [ West Hardcastle ] declared a result saying 200% growth. But that is because last year, because of COVID during peak season, the stores were closed. So I think the comparison of last 2, 3 years won't be here, right? The growth rate is not the right indicator.
Agreed. Agreed. So I mean I was just looking for a normalized growth rate if you would have some insights into that.
No. Unfortunately, no, even the QSR guys don't have that estimating properly, no.
Okay, that's -- no worries on that. So the other question was, so you mentioned about INR 75 crore to INR 100 crore expansion plan for the next 2 years. That would be about 1 to 1.5 years of your cash flow, a rough estimate. Post that, do we expect a significant taper down on the CapEx plan? Because then that would result into a significant deleveraging and probably at the higher debt payout. What are the plans broadly post expansion?
So basically, when we are talking about this INR 75 crore to INR 100 crore, we are taking into account our cash flows. We want to keep regular dividends going out to the shareholders. So we're taking those into account also. And our existing debt, which is there, the continuous repayments of that are taking place.
So over the course of these 18 months, our debt will also be coming down. Some of the regular CapEx and smaller items, which we are doing, will be done directly. And then there will be new debts, which we will take, which are, again, smaller size loans for each project, term loans. Because those are available even with the interest rate hikes and everything, they are available at very good rates.
And the repayment of that is in the next 5 years. So we will be able to very healthily manage, the cash flows. And traditionally, also we've never like to keep a very high level of debt. So we'll keep it in line with our, say, debt to EBITDA. The ability to pay down the debt will always be a priority for us.
Sir, you mentioned debt to EBITDA levels of? I lost you there.
Say maybe 1.25, ideally 1 to 1.
Okay. So 1 to 1. Got it. And you also mentioned -- so did you also talk about a significant -- not significant, but tapering down of the expansion after the INR 75 crore to INR 100 crore expansion?
That is still go ahead, but we see more opportunity like I was saying in the leasing in the asset-light side. So our CapEx requirement will go down, but we'll still be expanding in a big way.
Due to the lack of time, we'll take that as a last question. On behalf of Equirus Securities, I would like to thank everyone for participating and thank the management for giving us the opportunity to host the call. Sir, if you have any closing remarks, please go ahead.
I think it was a nice session to have and answer the queries, which everyone has in mind. And as I said, we are set to expand in a different model where asset light, our own warehouse, we have our own fleet, we will have vehicles availability through the SnowLink platform, which is a high-tech IT platform, which people have started using. And the services, the scope of services is being expanded. So the revenue as well as the bottom line will increase.
So with that, I thank all of you. And if there is anything, I mean, the management is always there to answer that. You can approach them whenever you have something to.
Thank you, Depesh and Equirus, for hosting the call.
Thank you, Depesh.
Welcome, sir. Thank you so much. Thank you.
Thank you, everyone.