VRL Logistics Ltd
NSE:VRLLOG
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Ladies and gentlemen, good day, and welcome to VRL Logistics Limited Q1 FY '19 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sunil Nalavadi, CFO of the company. Thank you, and over to you, sir.
Yes. Thank you. Good evening to all. I'm Sunil Nalavadi, CFO, of VRL Logistics Limited. This call is towards earning call for quarter 1 of the financial year 2019. First I'll highlight about the quarter 1 results as compared to last year same quarter. With respect to total revenue of the company, it is increased by around 7.44% from INR 492 crores to INR 528 crores. And the EBITDA of the company is decreased from INR 78 crores to INR 63 crores and percentage to total income is decreased by around 3.86% from 15.67% to 11.81%. Resulting to this, the PAT of the company decreased by -- decreased from INR 34 crores to INR 24 crores, and percentage to income decreased from -- by 2.22% from 6.78% to 4.56%.In terms of our Good Transportation business is concerned, the Goods Transport revenue is increased by around 9.32% from INR 375 crores to INR 410 crores, and the growth in Goods Transport business is mainly on account of increase in tonnage by 6% and increase in realization per ton by around 3%. The increase in tonnage is on account of increase in business from the existing customers as well as addition of new customers, during the period.With respect to EBITDA of GTB, Good Transport Business, segment is concerned, it has decreased from INR 51 crores to INR 42 crores, and percentage to income decreased by around 3% from 13.6% to 10.28%. The decrease in EBITDA is mainly on account of increase in the fuel rate. The percentage of fuel cost to the revenue is increased from 23% to 26% of GT revenue. And the rate of GT as compared to last year, it is almost increased by around INR 11 to INR 12, whereas our procurement cost has increased from INR 55 to INR 64. We took -- we tried to control this fuel cost by taking some of the measures internally, one is, by increasing little bit quantity of the biodiesel, and apart from that, we increased the purchase of diesel from the refineries and getting some redemption benefit from the designated from across the country -- designated from pumps across the country through IOCL.Due to increase in the fuel rate, the lorry hire charges also increased as compared to last year. In the rest of expenses, we are having better control compared to last year and overall, because of the fuel rate, the margins have been impacted.With respect to Passenger segment is concerned, the total number of vehicles have been reduced by around 23 vehicles as compared to last year. In spite of that the segment revenue has increased from INR 103 crores to INR 107 crores. The increase in revenue is mainly on account of increase in the occupancy level as well as increase in the realization per passenger. The EBITDA of this segment is decreased by around 19% from INR 22 crores to INR 18 crores, and percentage to income decreased by 4.9% from 21 -- from 22% to 17%. Again, this reduction in EBITDA is mainly on account of increase in the fuel rates. And another decrease in the revenue is main -- is on account of decrease in the revenue of Wind Power business, it is decreased by almost around INR 2.5 crores. Since it is a tax exempted revenue, this impacted on the tax liability of the company during the quarter as well.With respect to comparison of our result, this quarter to the last quarter of the last financial year, the total revenue of the company is increased by around 8% from INR 489 crores to INR 528 crores. And growth in revenue is mainly contributed by the Goods Transport and Passenger segment as well as Wind Power business. The consolidated EBITDA of the company increased by around 35% from INR 46 crores to INR 63 crores, and percentage to total income is increased by around 2.34% from 9.47% to 11.81%. Due to increase in EBITDA, the PAT of the company is increased by around 100% from INR 12 crores to INR 24 crores, and percentage to total income is increased by around 2% from 2.45% to 4.56%. The GT revenue in the quarter as compared to the last quarter is increased by around 3.28% from INR 396 crores to INR 410 crores, and growth in GT business is on account of increase in the realization per ton.The EBITDA of the GT business increased by around 5%, from INR 40 crores to INR 42 crores, and percentage of the revenues increased from 10.12% to 10.28%. With respect to Passenger segment, again it is a better improvement as compared to the last quarter on account of, one is seasonality. And in terms of margin also, we expected higher level of growth, but because of increase in the fuel cost so achievement is better than the expected margins.So this is the summary of the financials. Now I request the audience to open the session for questions.
[Operator Instructions] The first question is from the line of Ankita Shah from Elara Capital.
Yes. So my question was on your CapEx plans going forward. Do we continue to maintain the plan that we earlier had for CapEx?
Yes, with respect to CapEx plans are concerned, during the quarter, we added around 120 Goods Transport vehicles, these are related to out of the CapEx plan what we announced earlier. And most of these vehicles are small capacity vehicles, like SCVs and LCVs. With respect to our large capacity vehicles order it was around -- we ordered around 1,200 vehicles. Out of that, around 70 vehicles have been already dispersed. The chassis have been dispersed, and we have to construct the bodies and get registration for these vehicles. And on account of the government policy with respect to increasing the axle load capacity for the time being we hold this order, and we are getting some more clarity from the government authorities to announce our revised CapEx plan.
Okay. So what could be the number of addition that we could do in this year?
No that's what, actually once the clarification comes in, then we are going to announce the revised plan soon.
Okay. Sure. And sir, why this shift in strategy of buying more of smaller tonnage vehicles?
No this -- strategy is not that actually. These are a routine in addition. See basically what happens these vehicles, we faced some of the local delivery issues in some of the major metros. On account of that, these vehicles have been purchased, but this is not as per the CapEx plan with respect to the addition in total capacity of the company. This is -- these are all supportive vehicles to render some efficient way to handle the goods.
Sir, one question on from your annual report actually. Your agency -- number of agencies have declined, but the commission charges have increased. What could be the reason for it, sir?
No. We changed some of the structure of the agencies. Earlier, they used to collect some of the other charges along with the freight charges. Those other charges earlier they used to take into their account, now in GST, because the entire revenue, we have to upload to the investors, sorry, we have to upload the customer's account, so that entire amount is coming to us, and we are giving them to in the form of commission.
Okay. Sure. And sir, one last thing. Your target for tonnage growth in GT segment for this year?
No. Normally, see in terms of target, now we have already achieved 6% compared to last year, and we are expecting better -- good environment in the days to come basically after this e-way bill and other things. So I don't want to mention any percentage, but definitely, it will be better than last year.
Realization also could be safely assumed?
Sorry?
Improvement in realizations also could be assumed safely over the previous year?
Yes. Realization -- actually, in the first quarter, we took increase about 1x and subsequently, again, we are revisiting on the prices. We have already given a call on that.
The next question is from the line of Jayakanth Kasthuri with Dolat Capital.
Sir, in terms of realization per ton, you said, there was 3% increase in this quarter, but your fuel charges were, if I see it like from 55% to 64% it's about 16%. So you aren't able to take, kind of a pass on in terms of, at least, not even 50% of your fuel cost increase, sir. Any specific reason for that?
No. This is basically the average increase, but we increased the rates in a 3, 4 slaps. One -- first increase actually we did for 60% of the customers, second increase again around 15%, 20% like this. And because of the time gap average increases -- average realization improvement is around 3% and it'll give better realization in the coming days.
Okay. Okay. Okay. Sir, and in terms of your occupancy rate for this quarter, for the Passenger segment, what was that? And in terms of realization increase how was it?
Yes, one second. Occupancy. When we compare year-on-year basis, the increase in number of passenger -- overall number of passenger is 0.45%, and increase in realization per passenger by 3.35% from INR 1,045 to INR 1,080, and increase in average seat occupation for the running buses is by 2.16% from 86% to 88%.
Sir, in terms of your -- if I can add in a question, what kind of a clarification are you looking for the axle load norm change so that -- you said you're holding down your purchases.
No, basically, now there are lot of confused opinions coming from various authorities. Basically, we believe on our RTO opinion at the end of the day, since we are going to authorize on a particular vehicle. And we observe that in some of the states especially in UP and all, they are authorizing for older vehicles also for -- to carry the additional axle load permitted by the government. We've shown such kind of documents to the local authorities, they are getting -- what they are telling basically they have to get some detailed government instruction from their own department. So still, we have not got any final confirmation that, yes, our vehicle can carry the additional load. Once that clarification comes then we have to revisit on our [ CapEx ] plan.
Sir, from the media reports and from the press, we hear that it is for the prospective vehicles, that is for the new trucks from what I get to read in?
No. I told you even some of the states actually they are allowing for the older vehicles also.
The next question is from the line of Krupashankar from Spark Capital.
Just wanted to understand on what could be the tonnage growth and the realization growth on a quarter-on-quarter basis? Can you just share that number, please?
Yes. On a quarter-on-quarter basis, the tonnage is almost -- it decreased around 1%, 1.5%. And the realization is increased by around 5.5% to 6%.
And one more thing, sir, I wanted to understand the recent truck corporation, the strike, which happened, had there been any impact on our operations because of this, like we also participating?
Yes. It was impacted on our business also. Basically, what will happen whenever this kind of a strike is called, normally we try to operate as compared to other operators. But this time, actually most of these guys, they came to the premises and they stopped the vehicles, so it impacted on us as well and now post-strike the tonnage is -- handling of tonnage is increased like anything, the booking also increased. Because that whatever tonnage is accumulated during that period, now it is transporting.
Okay. Okay. And the Passenger Transport segment, I think, the impact -- the margin decline is purely because of fuel cost. So again hike expected there or will continue because that being fairly competitive segment, price increase might be difficult?
Yes. It is a very dynamic pricing in case of Passenger, but we always go on supply basis. As and when the demand comes, actually we can increase the rate. But we can't predict we are going to charge this kind of charges in the coming days. See because it's highly dynamic.
Got it. Lastly, on one more aspect, the biofuel procurement. So at this time, I think, in the first quarter it was about -- roughly about 18%. So given that we have been trying to increase our procurement of biofuel, what is the expectation going forward? What would be optimal procurement percentage of total quantity?
See in some period actually we increased the procurement up to 28% to 29%, so that much is possible according to me, and we are trying very hard to get more biodiesel in the days to come.
The next question is from the line of Prateek Kumar from Antique.
Sir, my first question is regards to your Passenger segment -- Goods segment volume growth of 6%. So is it in line with management expectation or is it lower than -- I mean, lower than expectation? Because this company was -- I mean, management was guiding like towards 10% growth earlier. So what has been the difference versus what we were expecting in terms of what has changed to give that lower growth?
No. On a full year basis, actually we are expecting good growth. And in the current quarter, again, because of some of the disturbance and -- see e-way bill, literally it is helping to us. We are analyzing on a ground reality. And even though it is implemented from 1st April, some of the governments again they extended from INR 50,000 to INR 1 lac, and initially it was introduced only for inter-state movement then later on again intra-state. But the authorities should push for a lot of verifications. If they push for verifications, definitely, there are higher penalties on the operators if they make any default or they fail to comply. And some of the reports we are reading in the newspaper also, some of the organized players also they are unable to comply with the new e-way bill. So reason is, it is little bit if we don't have the perfect software to backup and other things, definitely it will become difficult to comply with the e-way bill with respect to the extension of the creation of [ various parts ] of the e-way bill. So government has to or authority have to push for more verification. So definitely it'll be beneficial for us to gain more market share. So we are expecting more of such kind of activities in the next days. So if it happens so definitely our tonnage will increase further.
Okay. So assuming axle load, I mean, -- I think guidance for 1,200 vehicles was also given in the background of 10% growth, which you are anticipating. So assuming this 10% growth doesn't come only for whatever reasons in this year and the axle load norms also help on prospective basis, so we will not be adding vehicles also then?
No, it is not the case. See, we have already added around 70 vehicles, 70 chassis have been already delivered out the 1,200 vehicles what we ordered. And see now compared to the first quarter, again things are improving. And in between, there was some impact on the strike, but after post-strike, the tonnage is increasing like anything. Just we have to wait for some more time. And we need to get some more clarity on the axle load. If it is not applicable for the older vehicles, obviously, we have to have a CapEx where our CapEx plan will be on.
Okay. And sir the impact of, I mean, what was the procurement price on a Q-on-Q basis? I mean, you said, INR 64, I guess, it was like INR 62 in fourth quarter?
Yes. INR 62 to INR 70.
So the cost increase is around 3%, 4% in terms of diesel, price increase you have taken around 6% as you said in GT segment. But margins improvement generally we see like Q1 is like the strongest in terms of GT segment margins and then it starts to taper all through the year. So first quarter only we have started with the, sort of, very subdued margins as in around 10% EBITDA margins?.
No, the fuel price is substantially increased in the first quarter, that's the reason it badly impacted on the margin. And about rate increase also, we did the rate increase on a periodical business. See if diesel rate is increased we have not increased immediately. Immediately in the sense there'll be some time gap. So that's...
So you said you increased the prices by around 6%, on Q-on-Q basis, but the cost increase of diesel is only 3%, INR 64 versus INR 62, 3% 4%, so there is another -- any other cost, which is also increased on...
Lorry hire charges are increased because of the increase in fuel cost.
Lorry hire, so lorry hire also increased because when you -- but we have been incrementally decreasing dependence on lorries, which had been -- I mean on other side, I mean, reducing the impact of lorry hire incrementally, but that has also increased this quarter?
Yes. Because of increasing fuel cost even cost per kilometer of lorry rates have increased.
Okay. And sir one last thing on discounts, so we've been -- we're talking about discount that you -- we have been offering to customers for past 2 quarters, so has that receded now, or we'll continue to give discounts on that front.
That has been stopped in the month of March itself.
So how much further price increase we can expect over, I mean, in the trend Q2 only, like, I'm not talking about future quarters. But, I mean, some staggered impact of price increase should come in Q2 also?
Yes. Compared to last year, it tends to be more than what we did in the first quarter. Because in first quarter, we did 2, 3 price increases, so that will be applied for entire period for the quarter 2.
And, generally, just for a modeling projections, we have that first quarter is like the best in terms of EBITDA margins then it sort of tapers on as I was saying. So we have started at 10%, so would that -- I mean, the main thing or ...?
There is scope of improvement in the coming days. Once I told you about e-way bill and all these things, if government forced to verify then definitely, there'll be good improvement in the tonnage. And since we have increased the rates on a periodical basis 2 to 3x in the quarter, on a full year -- full period basis, it will impact on the remaining quarters.
[Operator Instructions] The next question is from the line of Ankit Panchmatia with B&K Securities.
This is regarding the scenarios wherein we are seeing very much oversupply in the trucking segment or in the freight segment. So the freight hit -- freight rate hikes are -- continues to remain incrementally. People are not being able to take those hikes because of oversupply, so are we seeing that kind of competition in our segment as well? And will we see those price hikes coming in more tougher vis-a-vis the first quarter, which we have taken [ 3-plus ] price hikes?
No. This business model is something different from this freight forwarding business. And the reason is again, due to this hub-and-spoke model distribution network across the different places, so we'll not find at all the competition from the 1 operator, 2 operator, we have to face multiple operators in multiple routes. So I don't think there will be a direct impact on us.
And sir, as you said that 70 pieces are being added in the current quarter. If I were to assume that it's on a retrospect basis, are we still liable to purchase those trucks from the OEMs? Or we can ask them to change the -- or modify the contract? Have we -- do we have that kind of clause with us?
Yes. This is, again, very flexible order that's why we hold the supply right now. And out of the 70 vehicles, still we have to get a registration of these vehicles. That's why we are holding even to some extent registration also to get more clarity. And it's a very flexible order with the Williams as well from the supplier. That's the reason we've instructed clearly now to hold the supply until we got clarity on this.
Sir, have you provided something on the FY '18 balance sheet for this order?
In what way?
Provision in terms of payment to these lenders, have you provided something?
You are saying the capital commitment?
Yes, sir.
No.
[Operator Instructions] The next question is from the line of Abhijit Mitra with ICICI Securities.
So if you can highlight the GT kilometers increase both from a Y-o-Y and a Q-o-Q basis for owned as well as hired that would be great?
Yes. In terms of Y-o-Y, the owned vehicle -- it's overall kilometers increased were around 6% and owned...
Y-o-Y?
Yes. Owned vehicle kilometers increased by around 5.5%. And hired vehicle kilometers increased by around 10% to 11%. In terms of quarter-on-quarter, we maintain similar kilometers and owned vehicle kilometers are -- it's also similar more or less hardly around 0.5% is decreased. And hired vehicle kilometers increased by around 5%, 6%.
Okay. And what would be the percentage of hired vehicle cost to GT top line?
It's around 6% additional tonnage.
Lorry hire charges?
In terms of percentage, the lorry hire charges per kilometer is almost increased by around 4% to 5%.
This is on a Y-o-Y basis?
No. No. No. Quarter-on-quarter basis.
4% to 5% increase on a Y -- Q-o-Q basis?
Yes.
Okay. Okay. This is a percent of GT top line. Right?
No. No. I'm saying the cost per kilometer. Then around that, again, you have to compute the percentage.
Okay. Okay. Do you have the number of lorry hire charges as a percentage of revenue for GT?
Yes. Sure.
For this quarter?
Yes. Yes. This is increased by around 1.31% quarter-on-quarter from 8% to 9.36%. And on a Y-o-Y basis, it is increased by around 0.5% from 8.83% to 9.36%.
8.85%, is it to 9.36%? That's what you said?
8.83% to 9.36%. Yes.
The next question is from the line of Dheeresh Pathak from Goldman Sachs.
So I missed the -- for the GT segment, what is the tonnage growth and realization growth in the quarter, year-over-year?
Yes, tonnage is increased by around 6%.
And realization 3%?
Yes.
And for the Passenger segment, bus operations, what was the volume increase in realization?
Year-on-year, number of passenger travel increased by 0.4% with respect of reduction 23 numbers of vehicles due to expiry of a permit and...
Okay. And what was utilization of running buses?
Average seat occupancy is increased by around 2.16%.
What was it in, like, some increases, what was in absolute percentage like...?
It is increased by 86% to 88%.
88%, okay.
And increase in realization is increased by around 3.35%.
Right. So the Goods segment, the tonnage growth is coming, but it is -- so how much did the strike impact? Like, had the strike not been there, what would have been the tonnage growth?
Yes, it impacted almost around 10 to 12 days in the month of July, July and August.
10 to 12 days. So almost like 10% impact, right?
Yes, but that is recovering now. Almost it is recovered on the subsequent days.
So even without this also the growth would have been subdued on you, right, tonnage growth? I mean I think we were expecting better tonnage growth, double-digit tonnage growth you were expecting because of all this new GSTs and everything?
Yes, around 10%.
Why is this not coming?
On annual basis, we are expecting we can achieve in the subsequent quarters.
What will change -- like why we have not seen so far what are the changes in the next 3 quarters?
One is about the implementation of e-way bill. The e-way bill was introduced from 1st of April. Initially, it is introduced only for the inter-state movement, and subsequently introduced for the intra-state, since the complaint level haven't increased. We're expecting no better shift from unorganized to organized players.
Okay. So what is the GST mechanism. Are we under FCM or RCM.
RCM.
RCM. Will we change it? Or we will remain under RCM?
No, again we have to revisit from 1st April, but till that date we can't change right now.
Okay. So one company just to -- I want to clear my understanding, one company has to choose between one mechanism or you can do it state wise?
No, state wise is also not allowed. It is based on the PAN number base. Say for example, if you change -- if you want to change from RCM to FCM again it is available only from the beginning of the financial year.
Okay, but as a legal entity, we are at least one legal entity, we'll have to choose one or each state, we have every -- different legal entity and can have different mechanism...
No, we have to choose one for the entire state. For all the states, basically.
Okay. So are you planning to change to FCM come the next fiscal?
No, we have to rework on that. Right now, we don't have any such plans.
You're buying so many trucks I thought you should be the most incentivize to change to this.
Yes, but depending on the customer's feedback, this -- we're maintaining this RCM right now.
Okay. So, sir, can you just give us a revised guidance now for FY '19 on the good side like what tonnage growth and what EBITDA margin are you expecting based on the trends that you are seeing now?
No, we will not give any guidance being a service industry.
The next question is from the line of Rakesh Vyas from HDFC Mutual Fund.
I have couple of questions. First one on the proposed change in the axle load. So even if it is retrospective and it is applicable for old vehicle as well, can you just clear the understanding? My understanding was that because in the industry that we have, we have more volume in this cargo compared to the bulk cargo and therefore, even now, the -- on the weightage terms, the vehicles are either optimally utilized or underutilized in terms of tonnage? So that should not ideally impact us in terms of our expectation for newer vehicle addition. Can you just clear that understanding?
No, assume that if it is applicable for -- with the retrospective you said, then obviously, since now, the increase, what the government is proposing, is 20% and 25%. So we may not observe the full benefit, considering our parcel business. And if we want to take a more advantage of that, we have to change some of the mixing of the goods at the time of loading. That we can do because if it is the nature of goods, not only volume, but again we accept some of the weightage goods as well. So currently what is happening, say if I assume that if it's a 20 ton because mix of goods we're carrying around 23%, 24%. So, the actual weight that we carry around 19 to 19.5 tons. [ The axle weight ] will be around 23% to 24%. But going forward, see I assume that for the same vehicle say 20% additional capacity is given, the actual weight itself we can carry up to 24%.
Yes, that I understood, but my thought was that because today of the overall volume that is available on the truck we are optimally utilizing 8 in most cases, especially on the linehaul, and therefore, even if the axle load increase is applicable on older vehicle, the benefit to us will be really marginal. Because one we don't -- so as I understand you will probably do some reworking on the loading of the truck on bulk and the lighter goods. But I thought, I thought the margins -- or the benefit will be very marginal, and therefore, there should not be any reason to not order the newer vehicles. Because one, I'm seeing you are increasing your lorry hire, as well as you are seeing now incrementally some Goods Transportation volume growth as well. So I just wanted to get my clarity on how much could be the benefit because of the retrospective implementation. It may not be more than 4%, 5%, on your overall fleet...
We are doing some internal assessment on that, that's the reason now we kept hold on the new purchases. See, actually some of the routes as we can increase not [indiscernible] depending on the nature of the goods. And actually what is happening, say assume that in some of the routes if we're carrying only voluminous goods. Then definitely we have to change some route patterns and all. Some connectivity needs to be given like this. All these accesses are on to get more benefit out of this, if at all it is applicable for a retrospective effect.
Got it. And sir my second question is on your fuel cost. So INR 64 was the fuel, average fuel cost for the quarter, what was it at the end of the quarter?
In the current quarter?
First quarter, and/or what is it currently?
Currently it is around INR 70, INR 71 on overall basis. Because again it depends from state to state.
Yes. But for us so the comparison that you gave INR 62 blended cost for us in first quarter FY '18, INR 64 in first quarter FY '19.
Correct.
So what would be it now?
Now, it is hardly INR 1 or INR 2 more, not beyond that, around INR 65.
Okay. So where I was coming from is that even during the quarter, my belief is that the fuel price increase was also gradual. And you took price increases or realization increase, which was also staggered. Therefore, even if the full impact of this realization increase comes to in second quarter, the exit rate fuel cost is still higher, so you may not get the margin benefit that you are expecting.
No that's a reason again, subsequently again, we increased.
So in second quarter you will again increase the price.
Yes, there are some little bit increase.
For all the goods or for only fueling, sir?
Around 70% of the business.
[Operator Instructions] The next question is from the line of Prateek Kumar from Antique.
Thanks for the follow-up. Sir, just one question on sequential growth in your Passenger revenues, which is 29%. So how much is the realization increase and Passenger increase there?
Quarter-on-quarter you want?
Yes, quarter-on-quarter?
Yes, quarter-on-quarter increase in number of Passenger is around [ 15% ] and increase in realization per passenger is around 12%.
It's 12%?
Yes. And the occupancy levels increased by around 6% for the running vehicles.
So sir, regarding -- just reverting back on CapEx question. As you have put your plans on hold so, I mean, are we expected to get, I mean, clarity in, like, in current quarter or, I mean...?
No, it will take some more time, because continuously we are in touch with the government authorities. So when clarification comes then definitely, we are going to inform through the exchanges.
So like we were definitely assuming, I mean, in line with your guidance earlier, INR 250 crores for this year, around INR 300 crores for next year. So what is the CapEx till now in the year?
In first quarter, we incurred around INR 14 crores.
INR 14 crores in 1Q?
Yes.
Okay. So I mean, let's say if you get some clarity and if you are going ahead with them...
This INR 14 crores, whatever we incurred, this is apart from what CapEx plan we have already announced to -- through the exchanges with respect to those CapEx vehicle as well as Surat facility.
It's over, almost -- overall total CapEx till date in a FY '19 is how much?
No, I'm having up to quarter 1 now, it's around INR 14 crores.
Okay. So assuming we get some clarity in this quarter on this axle load norms and are we going ahead with the plan, so are we still may likely ended the year at INR 250 crores?.
Yes, immediately we'll inform once clarity comes in, immediately we are going to inform to the exchanges.
The next question is from the line of Ankit Panchmatia from B&K Securities.
Sir, this is regarding this price increase. I just want to understand that to what levels we have the comfort? Because if I understand, our own industry, we do differentiate between our relation and the express cargo to the extent of 30%, 35% price differentiation. So just want to understand that to what levels, because again, on the express side, there are people who are managing completely on the vendor network and do not have their own set of trucks. So just wanted to understand, from your perspective, to what levels we can take this price increases comfortably and keep on paddling the growth?
No, basically when you will see one earlier years also to the extent of fuel price whatever variable costs, not only fuel, we can really pass it on to the customers. But when it comes to increase in fixed cost that will impact on the margin. But in the first quarter of the diesel prices tremendously increased. So we took a call on a periodical basis, instead of raising the prices at one go. So on a full year basis, definitely if any changes in the fuel prices or any changes in the variable costs, definitely we will pass it on to the customers.
Okay. Just a ballpark number, what would be the realization pattern on...?
Ballpark number would around [ 10,000 ] or [ 11,000 ].
The next question is from the line of Krupashankar from Spark Capital.
Just wanted update on the Surat facility. Sir, what is the progress in that particular...?
Yes. Surat facility, now the status is still -- we're getting some documents. We are working on the documents it may complete at any moment. The moment documentation completes then we need to enter into a sale deed. First, we are going to purchase the land, then construction approvals and all, we already got it. We started constructing the godown as well. So once the land is purchased, that is a substantial cost in the overall CapEx then afterwards, we have to incur this building cost on a periodical basis.
Okay. And one more question, which I had was on the tonnage...
Excuse me, this is the operator. Mr. Shankar, sir, your voice is not very clear.
Is it better now?
Yes. Thank you.
Yes. Sir, also on the tonnage group front, can you hint on what are key regions wherein you're seeing good growth coming in or key product lines wherein the growth is coming in?
Basically, we are handling lots of various products. Again, we can't comment on a particular product line or particular line of customers [indiscernible] commodity.
On the region front perhaps can you sort of give anything?
Region front, we can say north side has really good improvement in terms of the compliance levels are also increasing. And we are getting some good demand from the north side.
So -- if can you give -- throw in some number as in what is a growth we are seeing in north in comparison to south and west something on those lines, sir, please, if possible?
No. Right now, I can't comment on that.
[Operator Instructions] Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to Mr. Sunil Nalavadi for closing comments.
Yes. Thanks to all participants.
Thank you very much, sir. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.