VRL Logistics Ltd
NSE:VRLLOG
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Ladies and gentlemen, good day, and welcome to the VRL Logistics Q4 FY '20 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Mitra from ICICI Securities. Thank you, and over to you, sir.
Yes. Thanks, Nirav, and good morning to all the participants. Thanks for joining in. We have with us Mr. Sunil Nalavadi, CFO of VRL Logistics, to discuss Q4 and fiscal year '20 results. So without further ado, I hand it over to Mr. Nalavadi to take the discussion forward. Over to you.
Thanks, Mr. Abhijit. Good morning to all participants. This is an earnings call of VRL Logistics Limited for the year ended 31st March 2020 as well as Q4 of financial year 2020. I hope all is well at your end and just I begin with the Q4 number, year-on-year comparison. The total revenue of the company has increased by around -- decreased by around 2.82% from INR 514 crores to INR 500 crores. The changes in revenue mainly consists of GT revenue is almost stagnant from INR 416 crores to INR 416 crores. And factors that contributed to maintain the GT business are increase in tonnage by around 1%, and we maintained the realization per ton year-on-year basis. The GT revenue -- growth in GT revenue business mainly impacted on account of lockdown restrictions imposed by the government on account of COVID-19 during the month of March '20. The revenue from bus operations decreased by almost 21% from INR 88 crores to INR 70 crores. And the factors for decrease in bus revenue is, one, on account of decrease in number of buses by 44 numbers as compared to last year and, apart from that, the decrease in passenger also by 25% and increase in realization by around 5%. This is again impacted -- on account of lockdown impacted during the month of March. When it comes to sale of power, it has decreased by around 16%. And the decrease in sale of power is mainly on account of the reduction in wind turbine generators by 1 number in the current year and as well as low wind velocity. The overall EBITDA of the company for this quarter has decreased by around 4.53% from INR 61 crores to INR 59 crores. And percentage to total income has decreased by around 0.21% from 12% to 11.81%. One impact of EBITDA is on account of this Ind AS 116 compliance in the current year. The EBITDA of the company in the quarter has increased around INR 25 crores on account of this and in percentage to revenue is around 5%. The Goods Transport EBITDA of the company has decreased by around 13% in the current quarter from INR 55 crores to INR 47 crores, and percentage to total income decreased by 1.79% from 13.29% to 11.5%. And the impact of the GT EBITDA, one is on account of Ind AS compliance, it has increased by around INR 22 crores and percentage to revenue has increased by around 5.35%. The other factors for reduction in EBITDA is mainly on account of these lockdown restrictions imposed. During this period, actually, we have now earned any income, but we have incurred a lot of these fixed expenses such as rent, salary, compensation to drivers for their en route expenses vehicle taxes, and we have paid some labor compensation for their routine expenses without earning any revenue. When it comes to fuel cost, which is a major expenses of the operating cost, which has increased by around INR 1 compared to last year. And in the current quarter, actually, we depended more on our own vehicle as we hired very less outside vehicles. On account of that, the expenses related to own vehicles, such as fuel vehicle running at deferred maintenance, bridge and toll charges are a little bit increased, whereas it has been compensated with reduction in lorry hire charges. When it comes to passenger EBITDA, it has decreased by around 26% in the current quarter from INR 8 crores to INR 6.5 crores. And percentage to income decreased by around 0.76% from 9.96% to 9.2%. And again, on account of Ind AS, the EBITDA has increased by around INR 2.95 crores, and percentage to revenue has increased by around 4.18%. The other factors to decrease in EBITDA is mainly on account of the lockdown restrictions in the segment, and resulting into change in EBITDA, the PBT of the company has decreased by around 90% from INR 32 crores to INR 3 crores. And percentage to total income has decreased by around 5.69% from 6.34% to 0.65%. Resulting into this, the PAT of the company has decreased by around 89%, around INR 20 crores to INR 2 crores in the current quarter. When it comes to the quarter-on-quarter, the major change is only on account of these lockdown restrictions. On account of that, we lost almost around -- revenue of around INR 50-plus crores in the current quarter. And in terms of EBITDA, it impacted almost around INR 20 crores because of the fixed expenses also. When it comes to full year numbers, the total revenue of the company has increased by -- from INR 2,109 crores to INR 2,118 crores. And including other income, the revenues increased from INR 2,117 crores to INR 2,128 crores. The changes in revenue mainly consists of, one is the Goods Transport segment, which has increased by 2.29% from INR 1,686 crores to INR 1,724 crores. And the factors that contributed to increase in Goods Transport business are, one is increasing tonnage by almost 6% in the current year and the decrease in realization by around 3%. Again, the GT revenue impacted in the current year on account of the lockdown restrictions in March '20. The revenue from bus operations decreased by 9.63% from INR 380 crores to INR 343 crores. Then, factors that contributed to decrease in bus segment is, one is decrease in number of buses by almost 44 numbers in the current year and, apart from that, the impact of lockdown restrictions in March '20. The realization of passenger has increased by around 6% in the current year. So that's how, one, we maintained good EBITDA number in this segment, and the overall company EBITDA has increased by around 22% in the current year from INR 251 crores to INR 308 crores, and percentage to total income is increased by around 2.6% from INR 11.9 crores to 14.5%. And on account of Ind AS 116, the EBITDA of the company has increased by around INR 84 crores and percentage to revenue has increased around 3.9%. The other factors in EBITDA, one is the Goods Transport segment EBITDA, which has increased by around 12% from INR 205 crores to INR 230 crores, and percentage to total income has increased by around 1.17% from 12% to 13.3%. Again, on account of Ind AS of this segment, it has increased by almost INR 76 crores, and in percentage to revenue, it has increased by around 4.5%. And in the current year, we tried to control total key costs, especially the diesel cost by acquiring more biodiesel. And price of the diesel also almost similar as compared to earlier year in the current year. There is no much increase. Further, we also reduced much of our dependency on higher vehicles. So on account of that, the lorry hire charges have been reduced in the current year. Another change in expenses, one is the bridge and toll charges. In the current year, the cash back for usage of FASTag. Earlier -- last year, we used to be around 5% cash back, and this year, the percentage has reduced to 2.5%. And in the current year, some loading and unloading charges to the hamalis also increased because of increase in the hamali rate. Then another major impact on EBITDA in GT segment on account of fixed expenses incurred in the March '20, even though we have not earned any revenue during the lockdown period.When it comes to the passenger segment EBITDA, which has increased by around 18% from INR 41 crores to INR 48 crores, and percentage to total income has increased by around 3% from 10.88% to 14%. Then, on account of Ind AS, it has increased by around INR 7 crores. And percentage to revenue is around 2.11%. The EBITDA of bus segment has increased on account of increase in realization per passenger by almost 5% in the current year. And on account of reduction in the number of buses, the available business have been operated in a good route. When it comes to the PBT of the company, it has decreased by around 25% from INR 140 crores to INR 104 crores. And percentage to total income has decreased by around 1.73%. And the company has elected to exercise the option permitted under Section 115BAA of the Income Tax Act, that is reduction in tax rate. Earlier, we used to pay the tax at 35%. Now the current year, we used this benefit and made a provision at 25%. On account of that, onetime benefit of the deferred tax assets also has been accounted in the books. With this retail, the PAT of the company has decreased by around 1.96% from INR 92 crores to INR 90 crores. And percentage to total income, almost maintained from 4.34% to 4.23%. With respect to the fund position of the company is concerned, we maintained that level at a very healthy level. The debt of the company has increased from INR 128 crores to INR 177 crores in spite of investment in CapEx of around INR 122 crores in the current year and also the dividend payout of around INR 98 crores, including dividend distribution tax. Due to the healthy balance sheet of the company, we are in a much comfortable position as of now in spite of a lot of decals during this COVID-19 constructions. And we wish to focus more on our operations with a growth perspective. With this, I'll conclude our initial remarks. Now I request to the participants for questions.
[Operator Instructions] First question is from the line of Ankita Shah from Elara Capital.
Yes. My question was on the strategy of new vehicle addition, which has been very strong in the fourth quarter. So what was the thought behind this huge addition given that the economic outlook was weak and because of it, significant increase in debt that has happened? So -- and what was the gross addition and scrap payables any that would have been done in the fourth quarter, which shows a net addition of [ 229 ] trucks in this quarter? Any thoughts on the same?
Yes. Basically, there are 3 reasons behind the addition of the vehicles, one, on account of the shift from BS VI to new change.
Sorry, come again, sir. I am not able to hear you.
Shift from BS VI to -- BS IV to BS VI. Hello?
Okay. Yes, sir. Yes, sir, please go ahead.
Yes. On account of that, based on some discussions with OEMs, we have added some vehicles. And most of the vehicle additions are related to the high-capacity vehicles. And apart from that, during the current quarter, we reduced the scrapped vehicle of around 90 vehicles also. The total edition is around 319 vehicles. Out of that, the HGVs are around 270 vehicles. And we scrapped around 90 vehicles, which are the very old and obsolete.
Okay. Okay. And sir, what was the total CapEx that we incurred for the same?
Total CapEx, in the current quarter, it is around INR 36 crores, total CapEx. For the vehicles, it is INR 34 crores.
And for the full year?
Full year, we have incurred INR 211 crores -- sorry, one second. The CapEx for this quarter is around INR 56 crores. Out of that, the Goods Transport segment is around INR 53 crores for purchase of vehicles. And on a full year basis, we incurred around INR 122 crores. And for the Goods Transport segment, it is around INR 111 crores.
Okay. So sir, how are the utilization levels? And is making our model more asset-heavy by adding so many trucks in these current challenging environment, does it make sense?
So basically, this addition we made prior to the imposing of these restrictions. And these are not a major addition according to me. The reason is that we anticipated a similar kind of business. If it all at least same kind of tonnage we would have maintained, we can reduce the outside vehicle portion and we can use these vehicles in a better position. But because of these restrictions imposed, it impacted to each and every business entity in India. So that has been impacted on our business as well. And basically, in the post-COVID also, now the utilization levels are under pressure, especially in the month of April and May. But June month, it is much improved level.
And then your outlook on debt position, if any? Is your asset base gone up significantly because of this CapEx addition only? Or is there anything else to read into it?
What we have planned -- I mentioned 2 reasons because of increase in debt from INR 128 crores to INR 177 crores. The reason is, one is about CapEx, and the other one is on account of dividend. In the current year, we wish to -- we are planning, as of now, with no CapEx as of now. And moreover, there are no dividend plans also until the things will improve. And we are taking a lot of these cost-cutting procedures as well. One is, we imposed some of salary cut on the employees. And apart from that, with spare part articulation and other kind of stuff, actually, we want to -- always we used to do a preventive maintenance. We have fixed certain schedule for the vehicles maintenance and all. Now based on the kilometers and based on the time lines, actually, we are changing some of the schedules of maintenance, so that actually, the paper consumptions can be reduced.
[Operator Instructions] The next question is from the line of Kaushal Shah from Dhanki Securities.
Sir, I have a couple of questions. One is how is the availability of the driving staff, drivers, the assisting staff, like cleaner, et cetera, in the Goods Transport business? On the bus transport business, sir, if you can just share some broad details on the reduction. What was the reduction in the number of buses -- the reason for the reduction in the buses? And how do we see the current environment? Because at least in some parts of the country, bus transport has begun for interstate also. So how is the outlook on that front?
No, basically, when it comes to the availability of the drivers and the loading and unloading people, one good thing, what we are having, all the drivers are on payroll of the company so that, that helped us to directly interact with drivers on a continuous basis. And moreover, most of the drivers are with the company for a long term. So initially, after the lockdown, what happened, since the government announced immediately, most of the vehicles have been stand wherever the position was. Then, during this lockdown period and as well as since after one week, they allowed for the moment of the vehicles, actually, we tried to consolidate these vehicles in our premises, either in transshipment hubs or big branches. And whatever goods were in transit, actually, we have more focus to reach such goods to the relevant delivery offices and transshipment hubs. On account of the availability of the drivers are concerned, see, initially, there were certain hindrances. Basically, once -- immediately after the lockdown announcement, that is one issue, and most of the people, nearby places, they went to their native places. And since we appointed drivers across the country from all the regions, that has not impacted much. But whatever difficulty has happened after this transportation has been opened up, most of the drivers, again, they have gone back to their native places and other things. But the people who were not on the job during the lockdown, again, they come back. So because of that, the availability of the drivers was not a much concern in our operations. Even today, whatever the loads we are getting, actually, we are getting enough of drivers. When it comes to the hamalis, or loading and loading people, again, the same issue. The loading and unloading people, most of the people are migrant workers. So after this train facility has been started, most of the migrant people, they have gone back to their native places. But during that time, actually, our operational people have tried to appoint the local people and do the work. Now again, since the transportation facility has been made to restart, so most of the people have joined now. So that is not an issue. And whatever tonnage we are handling today, we are in a position to move the goods as well as the loading and unloading is happening smoothly.When it comes to the bus segment, the second question, one is what we operate in bus segment is, we can opt for vehicles for non-use. Without paying any taxes and other things, we can use -- take an option for non-use of vehicles. So during lockdown and even current period, based on the schedules, we are paying the taxes to the vehicles and operating. So otherwise, if there are no schedules and we are going for a non-use option, and during this non-use options, we should not move those vehicles. But we -- no need to incur any expenses like taxes and other kind of things also. So that on an overall basis, the bus operations have been impacted very badly because one is even though the bus transportation is allowed, they are putting a lot of restrictions for maintaining social distance. Only 50% of the occupancy is allowed, and we have to charge passenger higher to incur or to get at least recover the operational expenses And apart from that, interstate movement for private people, some of the states allowed, especially Telangana and the Andhra Pradesh, Maharashtra. Some states are allowing, some states are not reliving, then there is no clarity at the government level. So again, because of this, and most of the routes are connected, say, for example, in Maharashtra, it's connected to Pune and Mumbai, and in Telangana, it is connected to Hyderabad. So that's the reason we are taking proper precautions. Even in Gujarat, the major route is Ahmedabad -- Surat and Ahmedabad. So considering these factors, what we are doing is we are taking appropriate steps rather than making a hurry and incurring losses.
Okay. So sir, is it safe to say that the bus operations could be virtually kind of nonexistent in the current quarter, which is the first quarter?
It was there in the April and May, you can say, nonexistent. But from June, it started.
Okay. And on the Goods segment, sir, if you can just share some more thoughts on which are the areas where you're seeing demand sectorally? We also have a new hub in Surat, so are we seeing some activity over there also? And some...
Yes. Basically, see what happened, see, even though the lockdown is open for the entire country, but these major cities, a lot of these red zones and restricted areas are there. Even today, say, for example, if you take Mumbai, we are in a position to operate in the outskirts of Mumbai till date. Recently, from the last, say, 1-week time, actually they are allowing in the entire city also. Otherwise, it was totally restricted. We used to operate only from Bhiwandi. Similarly, in Chennai, the operations were started; again, the lockdown restrictions have been imposed. In Delhi also, again, there are certain issues like this. See, one good thing about us is we are not depending much on any geographical area and routes. So that's how actually it is helping us to at least grow in other routes, but there are certain hazards, like restrictions in these cities and other things.And when it comes to, say, commodity-wise, the product expanse actually we use, that is a major contribution for our business. Earlier, it was around 15% to 16%. Now that has been reduced to around 12%. But the same is -- in case of agricultural goods, pharma, food items, the percentage of contribution has increased drastically.
Right. Right. And sir, one final question, if I may. You spoke about the cost-cutting measures. So if you can just share some more details on that. What is -- I mean are we targeting some percentage reduction? Or what could be on a full year basis for the current year 2021 in terms of all the major expenses? What kind of reduction are we looking at?
Yes, one is about fuel where we want to focus more on, again, for our biodiesel also. That is one thing. And in terms of vehicle repair and maintenance, which is also a major cost, as I said, just we are changing the schedule of maintenance. We are increasing the product for a little bit. So we are targeting to use the spare part for a more life. And apart from that, the employee reduction cost, it is very temporary, but for the first quarter, April, May, June that cut is already there. It may extend further. And apart from that, there will not be any CapEx for this current year. So for CapEx, as of now, we are not planning to incur. And to that extent, there will not be any increase in the debt. And apart from that, about this government facility, especially about taxes and all, actually, they have given some concessions. Initially, we paid these taxes, especially the vehicle taxes and other kind of things. So yes, we want to take those benefits in the current. Basically, it is -- some of the states, they allowed, say, 3 months, there is no tax. Some states are allowed around 2.5 months that they waived off. And especially in some states, like Gujarat and all, they waived off up to 6 months. So we are observing these changes very keenly and taking those benefits also. And in terms of the utilizations are concerned, basically, we are having a sufficient vehicles, own vehicles as of now. So we want to put restrictions to engage with the outside vehicles so that we can increase our own vehicles' kilometers. So these are some steps, actually, we are planning.
Next question is from the line of Alok Deshpande from Edelweiss Broking Limited.
Yes. Yes, 2 things from my side. One is in the disclosure that you had given in terms of the COVID impact a few days ago, you had mentioned about taking on debt to sort of right through this period of Q1. Any color, Sunil, you can give us on what that quantum of incremental debt has come on books this quarter?
Yes, as of now, see, the total debt -- the cost debt is around INR 214 crores. And net debt, again, it is in the range of around INR 196 crores to INR 200 crores. And we have not taken any benefits of moratorium. All the installments have been paid as and when the dues because we were having good working capital control and good working capital, basically receivables and all these numbers are very less in our case. So that's the reason we are having sufficient working capital limits. For the time being, we are using those limits for whatever shortfall in funds. But as of now, the debt level from March to this period, it has increased from, say, INR 177 crores to INR 200 crores.
Okay. So only about INR 20-odd crores is what you've added. And you see that number...
But currently, again, with the current operations, we are not feeling any shortfalls as of now, but we have to see how that is going forward.
Sure. And second question is on the current sort of operational utilization. So I understand that you mentioned that April and May were very sort of negligible quantum of revenue. But in June, based on data that comes out on e-way bills, et cetera, is it fair to assume that we are 50-odd, 50%, 60% of utilization from around time?
Yes. Yes. It is in that range.
Okay. And just one last one. On the hired truck that we do, what percentage of revenue that comes within goods transportation from trucks that we hire?
It's around 8% to 9%. So this third, it'll -- basically, it'll come down in the range of around 4% to 5%, you can say.
But that you could immediately -- once the lockdown started, did you have to pay for that hire for a few days? Or is that...
No, nothing. Of all hire, our understanding is -- with the vehicle supplier is as and when the vehicle will operate, then only we have to pay. Otherwise, no. These are all [indiscernible] attached to it.
Next question is from the line of Krupashankar from Spark Capital Advisors.
Hello? Yes. I have 2 questions. First one is on the -- basically, on our existing model, which is asset led. And we have drivers on our rules, which will enable us to control our supply of trucks in the market. So given that the situation what we saw, wherein the unorganized and the asset-light players were not able to supply much in the market, did you see any massive jump in market share? And if you can quantify, what would be the market share jump?
Yes. I'd say based on the customer profile, what we are seeing, we are adding a lot of new customers. And so through GST numbers, actually, we are analyzing that information in our records, especially in the states like Gujarat, even states like Karnataka and some of the parts of Rajasthan and all, we are seeing a lot of these new customers, which earlier we have not done any business. But see here, what will happen since these are not contractual customers. They are all, again, the paid and to pay customers. So as and when customers will approach to us, we are booking the consignment. In terms of percentage, again, you can say, say, around 8% to 5% -- 6% to 8%, at least we are seeing such kind of GST numbers in our record, the new record.
6% to 8% increase in market share.
Yes. The new customers, which are adding to the revenue.
All right. Okay. And also, sir, we have also seen that freight rates have gone up substantially due to lack of vehicles. So given that we should have -- had a big advantage of the situation, so were we able to charge in a better freight rate on our parcels during this period?
Yes. Considering these restrictions and the lockdown restrictions and other things, yes, we have taken a step to increasing the freight rate.
So what would you recommend...
I cannot -- I don't want to share the exact percentage, but we have taken a step to increase the freight rate.
Okay, okay. So sir, in addition to this, so you did also mention that the contribution of...
But apart from that, you have to also note that -- so along with this freight rate, just I want to mention another point. From the last, say, few days, almost 10 days, every day, the diesel price is increasing. And even some of the states, they are increasing the local VAT rate. So considering all these things, we have taken this rate hike earlier when we started the operations in the current year. But about the recent development, whatever the increase in diesel rates are happening, that we have to take further steps on that. So because of that, actually, we are concentrating more on a biodiesel, and we have to see how this will move in the days forward.
Okay, okay. Also one more question on the contribution of sector, especially given that textiles have seen a decline. Can you, also sector-wise, what are other sectors apart from agri, which have grown? And any percentage or so what would be the contribution to overall revenues?
So sector-wise, again, dependency, as you know, it's a very less compared. See truck is a major around 15%, 16%, but the rest of the segments used to contribute in the range of around 8% to 9%. But agro sector, as I mentioned, it has increased by almost 3%, 4%. And this pesticides and other commodities, that has increased by another 3%, 4%. And some of the commodities like paints and other kind of things, these construction equipment or construction items, which are related to, one is it may be the highways or it may be the paints and other things, those ratios are also a little bit increased. Pharma has increased. But rest of it, say, again, commodities -- most for the commodities are general in nature, say, retail, FMCG, consumer goods. So we are more or less in the same percentage.
So the decline would have been predominantly in the auto segment and perhaps...
But those spare parts, again -- see, we are into -- more into the spare parts since because of the factory of lockdown and all, that is a reduction. And another reduction is on this educational things, like be it printables or some of the kind of stationaries and other things, those have been reduced. So goods percentage has increased, the household, will it be a sanitary item and other kind of stuff, soap, detergents, those kind of items have been increased.
Next question is from line of Bhavin Gandhi from B&K Securities.
I just wanted to check on -- sir, if we look at the usual consumption data, that kind of shows 80%, 85% kind of normalization, when that is not seen in your numbers as well as the e-way bill. So if you can help us understand why is the disconnect there.
Sorry? Diesel consumption...
Yes. So if you look at the oil marketing companies reporting diesel consumption data, that is showing almost 80%, 85% type of consolidation. And there is -- if you look at the e-way bill, there is not so much of a pickup. It's like a 50%, 55% kind of utilization. So what do you think is the disconnect between the two?
Because -- basically, again, it is a larger this one -- I mean if you all -- related to all these manufacturing things, so many parameters. If you -- sector specifically, if you have any data, then I can comment on this.
Sure. No problem, sir. The second part is just wanted to understand on the -- roughly, if I look at the OpEx for the Goods Transport segment alone, which is like around INR 290 crores to INR 300 crores, if you can just explain what could be variable component and what could be roughly -- I mean a broad split would be good just to understand the operating leverage that will play out in 1Q?
See, the fixed expenses are in the range of around, say, 25%.
25% is fixed. And almost 75% is variable, is it sir?
Yes, variable cost. One driver cost and other kind, in our case, again, it is a variable. Even though they are on the roll of the company, we pay based on their performance. The employee cost, which is other than drivers and loading, unloading people and the rent expenses, the vehicle taxes and these things. And some of the maintenance, again, vehicle operates or not, on a periodical basis, we have to incur. Only such expenses are fixed in nature. The other component is insurance also, we have to pay.
Sure. Sure, sir. And just, sir, one more thing. If I just look at your cash flow statement, I just -- just a clarificatory question here. On the operating activities side, we see a big bump up from INR 192 crores to INR 257 crores. And if I look at the -- there is a new line item of principal portion of lease liability and interest portion of lease liability, which is around INR 77 crores. So this has to be netted off from the operating to make it like-for-like. Is that correct?
Not exactly. See, basically, you have to -- one is on -- we have given Ind AS impact separately in the slide. One is on the impact of Ind AS on the finance costs and impact of Ind AS on the depreciation also. So those components -- the depreciation component, actually, you have to reduce in the debt flow.
The next question is from the line of Achal Lohade from JM Financial Limited.
Just wanted to check in terms of mix in SME, non-SME for FY '20.
It is very difficult to say like that. But we are having a revenue pressure based on the contracts, paid, to pay and account customers. You can say, B2B and other than B2C customers. In state of goods transportation around 92%, 93% of our revenue is from B2B. B2B, in the sense, all these customers are having the GST numbers. And hardly around, say, 6%, 7% customers, they don't have GST numbers. And in terms of paid, to pay and account customers are concerned, account customers, which we provide a monthly billing facility, is around 18% of our revenue. And rest of all the paid and to pay.
And to pay means at the time of delivery, is that right?
Yes. At the time of delivery, they have to pay the freight and take the delivery of the goods.
Got it. Alternatively in terms of LTL, FTL, would you be able to give some sense in terms of the mix for us?
The LTL mix, again, has presented -- it is almost around 89% of our revenue. 11% is FTL.
29%?
11% is car carrier and the FTL, obtained in, say, from one factory to other factory belonging to same customer.
Okay. Has the mix [indiscernible] or is there a change?
Yes. During this initial, say, for example, in April, when the lockdown is opened, say after [indiscernible], we focused more on FTL. And again, May, the mix, the more is on FTL and less on LTL. LTL in the sense that portion, we are still -- earlier, if you say, say, 6%, 7%, that has been increased to, say, around 12% to 15%. But again, in the month of June, the mix is more similar. FTL is in the range of around 5%, 6%, and balance is LTL.
Right. Just to reconfirm, you said 11% for FY '20 is FTL/car carrier. It was 6% to 7% in FY '19. Is that understanding correct?
Correct.
Okay. Okay. Secondly, with respect to the mix in terms of our own trucks, which is higher, what has been the mix in terms of tonnage?
The tonnage, we cannot say the mix because some portion, it'll carry in the own vehicle and in some portion, it will be taken in outside vehicle like that it is. It is totally mixed. In terms of, if you say the kilometers or the percentage of lorry or what we say, it is in the range of around 8% to 9%. Now that percentage has drastically reduced in the range of around 4% to 5%.
Okay. In terms of the kilometers, you are saying [indiscernible] in the current year.
Yes.
Next question is from the line of Depesh Kashyap from Equirus Securities.
Sir, in your 4Q FY '20, your lease rental costs seem to have increased to INR 25 crores versus INR 20-odd crores in the previous 3 quarters. So has there been any addition in rental properties in the fourth quarter?
No. That's on account of again the Ind AS, account inventories.
No. Right, so I deducted -- I substracted the Ind AS freight cost and the -- excluding Ind AS freight cost for the fourth quarter. So that number comes to INR 25 crores versus the previous 3 quarters of INR 20 crores. So that means the lease rental payment has increased by INR 5-odd crores in the fourth quarter.
No. Here, what happened -- another thing what happened in the last quarter is, some of the re-workings have been done in the Ind AS. So we have taken a long lease agreement, some classification changes have been done. And that's the reason.
So going forward -- I should take this number going forward, right, this fourth quarter number?
Yes. Yes.
Understood. And sir, during the lockdown period, sir, you talked about the rental negotiation with your landlords. Has there been any update on that?
Yes. Actually, we requested all the landlords to waive off rent for the month of April. And most around 90%, 95% of the landlords have accepted our request. And that one reduction in expenses will happen in the current year.
So that is only for the month of April, you are saying?
Yes. We requested full rent off for the month of April.
As of May -- looking as of May, it will be full rentals?
Yes. In May -- see instead of asking some percentage during this lockdown, say, 10% or 20%, we asked for 1 month completely.
Understood, understood. All right. Sir, you talked about the fixed cost part. So I just wanted to little bit dig deeper. So like you said the monthly fixed cost would be around INR 45 crores, INR 50-odd crores. Is that number correct, sir, for us if I include the employee expenses as the other expenses, so INR 45 crores to INR 50 crores, including rentals?
Yes. For us, [indiscernible].
[ INR 750 crores ]. Understood. And sir, like you highlighted that there has been some salary cuts at various levels. So I just wanted to understand how much this monthly rental fixed cost will reduce post the measures that you've taken?
Basically, the impact is very less because most of our employees are at base level salary. So basically, what we have done is up to INR 50,000, there will be a 10% reduction, up to INR 30,000. INR 30,000 to INR 50,000 -- no, no, up to INR 50,000, 10% reduction; INR 50,000 to INR 1,00,000, 15%; and over and above INR 1,00,000 whoever doing, 20% reduction. That's what actually we did. And the people who are drawing above INR 50,000 are very less portion. So overall, the impact will be around INR 1 crore, INR 1.5 crores per month.
Okay. Okay. And sir, this reduction is only for the lockdown period or for the entire year?
For the time being, lockdown period, then again, we have to think. As most of the people, now the -- they are working. And even wherever the restriction -- restricted areas are there, only in those places, the people are not working. So not again -- see, we have to give more -- in those places, we have to give support to our employees also. And we said, we don't want to cut for a longer period.
Right, sir. Right. Okay. And then lastly, sir, your car carriers -- car base used to be around 101, 102 number. But I see that suddenly it is 0 now in March '20. So have you just totally let go off that business? And what are your thoughts on that? Is it...
Basically, what happened, those permits have been expired. So that's the reason those permits have been -- instead of car carrier vehicles, those have been shifted to the normal goods carriers.
Okay. But you will continue this business, right?
No, car carrier business will not be there. Instead of car carrier, those vehicles will be utilized for normal goods carrier.
Next question is from the line of Ankit Panchmatia from B&K Securities.
Sir, I just want to understand this short rates, which were kind of been seen in the surface side of it, where the rates were higher by close to 1.5 to 2x for a short period in Q1. But sir, was this more to do with the driver availability? Or was it more to do with return loans not available? How are we kind of placing our vehicles in talking in terms of return loads? And how are we seeing that kind of costs related to our vehicles? If you can just share some insights on this.
Yes. See, now the increase in freight rates, what you are mentioning, these are selective loads, not for normally all commodities. Basically, if any pharma commodities are there, which we need to move on urgent basis, then the people have charged it at some point 2x or something like that, but it's not applicable to the other kind of commodities. And when it comes to the utilization of vehicles or rescheduling of the vehicles, in most of the places, again, it is operational, in a sense that not so normal as compared to earlier because if the vehicles are operating between, say, Mumbai to Bangalore, and there will be some factor of load more in Bangalore, some say load factor is less in Mumbai. Accordingly, we have to reschedule vehicle either to the nearby Mumbai place or up to Gujarat or something like that. And in some cases, the load is available in some other cities, and especially, loads are available up to Delhi. But if the return loads are not available, and again, we have to move those vehicles either to Punjab, Rajasthan or some nearby places, there again, we have to operate some kind of empty kilometers also. Those kind of scenarios are there on the ground. And we are hoping that soon, we may get both side load. But those things have happened most in the month of May and even some part of June also. Basically, to make the availability of the vehicle wherever loads available, we run some of the empty kilometers also. And especially in South also, what happened, the good loads were available, say, around that in Hubli, then surrounding Hubli places if any vehicles are there, then we have to call those vehicles to Hubli and load. From those place to Hubli, those vehicles seem to operate empty load.
Right, right. And sir, regarding your expenses, which you said that we are using -- or we are looking out for reducing the repairs and maintenance cost by assessing the spare parts for more life. Sir, earlier -- so is it right to say that this would continue for a good period of time because maybe for FY '21, we will be able to see that the tires, we are able to use for another 6 months or another year. And then this kind of cost synergies, we would continue to look for FY '22, FY '23 as well, where in it would be a new normal for us to use these spare parts for a longer period of time. Is this the thought process within the maintenance team?
We had just mentioned about these empty kilometer and kind of stuff. For example, if the vehicle operate completely with the load, then consumption of these tires and spare parts will be different. If these vehicles operate with some of the empty kilometer, some of the waiting period and all these things, then the consumption parameter will change. Accordingly, our -- the technical team analyzing each -- requirement of each and every spare parts, including tires, then accordingly, the schedule of maintenance, they are a little bit changed. For example, if a particular spare part used to be changed at X kilometer, now they are changing from X kilometer to X plus kilometer, like that.
Right. Right. And just one last question, sir. This kind of aggressive vehicle addition in the last quarter, it's quite surprising. So I just want to understand the whole thought process on the promoter level side. How are they seeking? Are we seeing this as an opportunity to kind of get into the market with loads and tonnage and capture a higher market share? What is the thought process from the promoter level side by seeing this kind of truck addition for us?
No. Basically, see, the addition of trucks are [indiscernible] from changing to BS IV to BS VI because of that vehicle cost used to increase. So based on some discussion with OEMs, we have added some of the vehicles. And apart from that, in terms of the growth strategy of the company is concerned, so as and when required, actually, we are in a position to incur those CapEx because our debt level is at a very comfortable level. We can take [indiscernible] even cash flow point of view, our cash flows are very good compared to the other operators. So that's the reason -- always, we think of growth in a faster level. So that's the reason, actually, if we see the realization per ton in the last year, even though the diesel price is a little bit decreased, but we have overall reduced the realization per ton by almost 3%. That means, actually, to carry more load to concentrate or to acquire more market. But if the outside economic conditions are not supporting to those regions, then we cannot do anything. But in terms of growth perspective, if anything is required, be it CapEx or be it a number of opening of branches, appointment of the employees, we are already -- always open for it. That is not any concern in our case.
Next question is from the line of Prateek Kumar from Antique Stockbroking.
Hello?
Yes, Prateek.
Sir, my first question is on -- so you mentioned about, we have taken some fright rate increase, so is this enough to cover the recent and -- this recent increase in diesel prices? Or do you anticipate further freight rate increase?
No. Without the diesel price, actually, we took a rate hike, the moment operations have been started. But these recent increases are, again, this is a development of last 8 to 10 days after daily increase in fuel price -- the daily changes. And again, it is increasing. Now we have to analyze this information and how to take it forward, we have to think. And moreover -- see, we cannot always increase the rate. We have to steady the market. And moreover, with this kind of operational level, we don't want to take a risk. Again, the operations have to come to normal stage again to increase the freight rate or something like that. So right now, our concentration is more on increasing tonnage, and let us come to that normal level of operations.
Right. And then in terms of impact of this lockdown in terms of recovery, which are the -- I mean except for, let's say, remove the impact of macro cities or the key cities, in general, when we talk about regional level, like not Central, Southwest, East, how -- which region is doing better or recovering better?
South is in a better position compared to other regions. And moreover, since our operations are more related to South, that's why the recovery is on a faster track. Now the rest is the state of Gujarat and all now again picking up very well.
So the new Surat unit is below what we were at like when we started...
During lockdown, absolutely, there were no. But now, the things are improving. Actually, now whatever vehicles -- the vehicles in Surat, we are getting some good loads now.
Okay. And just one question on your receivables. Has that got impacted in any of the 3 subcategories you have?
Receivables, again, as you know, the percentage of receivables compared to our business is very less. And moreover, because of this nonoperational of offices and nonability of staff or something like that, there are certain delays. But again, it will be normal -- we are hoping that it will be normal in the next 1 month or so.
Okay. And one question on -- you had explanation like earlier in one question, your depreciation increase or something related to like Ind AS. Can you elaborate that further, why that depreciation has increased related to Ind AS impact?
So Ind AS, basically, there are 2 changes. One is rent expenses, which earlier we -- whatever expenses for the current year, we need to account it as expenses for the current year. Now whatever these long lease agreements and whatever long lease things will be there, we have to value based on the fair value. Based on the fair value, we have to create assets and liability. And on liability, again, these expenses we have to bifurcate into 2 things. One is on whatever liability we will create, on that actually, we have to account an interest cost. Currently, we are accounting at a 9%. And whatever assets we'll create, on that we have to account depreciation. Because of that, you see the total freight handling and other costs, which have been increased by around INR 83 crores in the current year, and that has been segregated into finance costs and depreciation. And on account of this entry, there is a further loss of around INR 5.68 crores in the current year at a PBT level because of this Ind AS, means whatever the rent we used to pay in the normal course, that is less as compared to the fair value. That's why we have made additional provision of around INR 5.68 crores. But this INR 5.68 crores benefit will come in the subsequent years. As and when the rank will increase, but fair value ranking will be lesser. So because of that, some benefit will be there in the subsequent year. But overall impact of the current year at PBT level is reduced around INR 5.68 crores.
My question was more related to Q4 increase, which we have seen in long-term agreements you mentioned.
Yes. It is totally increased by around INR 25 crores in the Q4. That additional impact of around INR 5 crores in the current quarter.
Next question is from the line of Mukesh Saraf from Spark Capital Advisors.
Yes. Just one question. You had mentioned about how you saw a 6% to 8% jump in the number of new registrations or new customers that you handled. But you did mention that these are not contractual customers. So do you think that as you see the regional players and the smaller players come back in the market, they can move back to them? Or do you think they'll stick to you if you are pricing higher than the usual what they've been paying? Is there some sense on that?
No. That's why I clearly mentioned that these are not contractual customers. These are paid and to pay customers. But things are at a regional level and even at operational level, unorganized people are facing a lot of issues. So one is on the compliance side. Other one is at this lockdown restrictions, they're unable to get back with a normal level of operations. Those issues are there. That's why there are new people, new customers are approaching to us. And apart from that, see, our marketing team going at a regional level or local level, our people are also interacting with these people continuously. And basically, once they come to know about services, the efficiency in services, we are hoping that definitely, we can maintain those businesses.
Okay, okay. And in terms of -- I mean the number of manufacturing companies, et cetera, we've been talking to, there is a general sense that there is shortage of vehicles for them. And I guess these should be typical contractual customers. So was this an opportunity for you? And do you think it's still an opportunity that is open for you to add a lot of contractual customers also because you probably can guarantee better service levels, better time line, given your business model is slightly different? So what is your sense on that?
That's the reason, say, in around 10 to 12 cities, we have instructed the marketing team basically to approach these kind of customers. And definitely, whatever new opportunities comes, then we are the first people to get those businesses and give proper service to those customers.
Okay. Okay. So you expect there could be an increase in such contractual customers?
Yes. Yes.
Okay. And lastly, how is our mix of the priority parcel business, the express business that we locally call? How is that -- is there something, like you mentioned that there is a focus on that and so how is that being prioritized?
No. That's the reason I said, instead of priorities, now we made 2 classifications. One is door-to-door service, and other than door-to-door service. Door-to-door service always, it is on an increasing compared to this other than door to door. The reason is, one is on account of this new e-way bill things also. The people -- the moment we store, again, we have to extend and all these things we have to do. And moreover, one -- the other than door-to-door commodity lies at our godown, then the person who wants to collect those goods actually has to come along with the vehicle, all these things are there. So that's the reason, now most of the people who are having good quantum, they are preferring to have a door-to-door service rather than again other than door-to-door service. So that percentage is always more as compared to others than door-to-door service.
What would it be -- what would that percentage be now, sir?
Say, for example, 6% now overall increase in tonnage. That increase in tonnage of door-to-door is around 8% to 10%.
Okay. Okay. But it's still not very substantial of our overall business in this segment?
Yes, because of these lot of -- see, that's why I mentioned, whoever having a good quantum of business, actually, they want to have a door-to-door.
Next question is from the line of Nemish Shah from Emkay Global.
First, sir, you mentioned that in the month of June, we were currently working at around 50% utilization. Is that...
Yes. Yes.
So what was the utilization at pre-COVID level, say, in the month of Jan-Feb?
Sorry?
What was our capacity utilization in the month of January or February?
Earlier, 100%. Since we operate with a mix of own vehicle and outside vehicle, we always give a preference to own vehicle. Once own vehicle usage reaches to 100%, then only we engage outside vehicles. This is -- I'm talking about the high-capacity vehicles. When it comes to local vehicles, which are operating from hub to spoke, normally, we will not monitor any usage. And these vessels -- on a continuous basis, those vehicles have to operate, whether load is available or not available. Even though lesser capacity, those vehicles have to operate to provide the service sector a last mile.
Okay. And sir, for this quarter, what was the tonnage growth on a Q-on-Q basis in Q4?
Okay. It's almost same. There was no growth in tonnage. Actually, no...
Next question is from the line of Abhijit Mitra from ICICI Securities.
No, just I want to clarify the earlier question. There is a decrease in tonnage of around 7% on a quarter-on-quarter basis. Whatever reduction in the revenue is on account of decrease in the tonnage, and there is no change in the realization.
Okay. So I have 2 questions. If you can help me with your number of branches and number of employees at FY '20 end. And also, just to understand this passenger transport business. So if I sort of look at numbers, it's Ind AS adjustments or those stuffs at EBITDA level, the top line has dropped sort of significantly, almost 10% y-o-y, but your EBITDA is flat. So is there a way of sort of offsetting -- I mean is there some more levers on the margin side that we can have access to? Or is -- I mean how are you sort of allowing your margins to sort of stay same when your top line is dropping? And if you can throw some more insight on that.
Yes. Basically, as and when we reduce the number of vehicles, obviously, there will be improvement in the market. Basically, the number of vehicles -- in that scenario, we operate these vehicles in a good route. So there, the occupancy levels will be on higher side and realization also will be on higher side. That's why if you see the last year on a full year basis, even the top line has decreased because of the reduction in number of buses by 54%. But when it comes to EBITDA level, there is an improvement, except this COVID restriction. Otherwise, in rest of the period, if you see the margins have been improved from the bus segment.
So we were operating loss-making routes. Is that the way of looking at it? Or...
This is not operational loss. There has been less -- a bit less margin business. The competition is a little bit high, but we cannot increase the charges. The occupancy level will be at a very competitive level.
Similar consolidation is possible in the -- similar consolidation is possible in the GT segment as well or no?
GT segment is not like that. I mean GT segment is totally different in terms of the branches wherever we are operating. And again, actually, rates are defining there. In paid and to pay, say, for example, we are having a consolidated rate charge, accordingly the customer has to book. But even bus also, if we -- see, we are declaring the chart. But unfortunately, what will happen, the rate -- daily, you can monitor the rate. But every route actually will come to know what the other competitor is charging and what is our charge. See, we are having some buffer on to charge some premium rate, not beyond 2%, 3% because of our service level, maintenance of roads and other kind of things. But the position of the other operators is worse than our position.
Right. Right. And if you can help me with your number of branches and number of employees at the year-end.
Yes. The total number of branches as of now, 906 branches in goods transportation. Basically, we added around 49 branches in the current year, and we closed some 81 branches also. There is a net reduction of 32 branches in the current year. Again, the impact is what we did [indiscernible] or nearby branches, so those branches have been closed and attached to the nearest branches, like that we did. And whatever, say, like major cities surrounding, like in Mumbai, the new branches are opened especially in major cities like Mumbai, Kolkata, Delhi, Chennai. The surrounding places, which are having more potential.
Right. And number of employees?
Number of employees, we maintain a similar level, say, in the range of around 19,000 employees, including drivers it is, and the number of drivers have been increased on account of the increase in the own vehicles. But we are not appointing the new people or something, just we are managing with the existing staff. And the drivers and these loading and unloading people, you can say just they are also like variable. As and when load increases, just we will appoint more people. But drivers are depending on the number of buses.
Mr. Mitra would you like to give any closing comments?
No. Actually, I'll hand it over to Mr. Nalavadi. So over to you, sir, for any closing comments.
Yes, thanks to all the participants. And I hope that we will take proper safety measures to maintain the hygiene and other kind of stuff. The health is more important as of today to each and every one. So with these remarks, I want to conclude the call. Thank you.
Thank you very much. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.