The announcements made in the Union Budget has given a push to infra and logistics companies. Even the Railway Budget's focus on rail infra for the freight sector, encouraging private freight movement in the cold storage sector to increase movement of perishables, is likely to benefit cargo companies like GATI .
The stock has gained around 130 percent on YTD basis.
Also Read: Budget shows govt's intent, focus on infra, logistics
Speaking on the potential revenue the company can get from the Budget initiatives, Mahendra Agarwal, MD, GATI, said announcements on manufacturing and freight corridor are positive for the logistics sector. He expects a proper timeline on GST rollout to be the game changer for the sector.
GATI has a current delivery capability of 15,000 packages per day, compared to10,000 a year ago, due to its increasing focus on Tier I & II cities. It plans to expand its capacity to 25,000 packages per day by the year-end.
The company is also looking at expansion of its cold storage business at the capex of Rs 150 crore.
The company has already decided to entirely exit shipping business, said Agarwal, adding that they are exploring options in coastal shipping and inland waterways.
GATI is looking to grow business by over 20 percent going forward.
Below is the transcript of Mahendra Agarwal's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Ekta: Can you put into perspective what were the initiatives that came out for the logistic sector within the Budget and where would you be a key beneficiary from?
A: Our honourable finance minister, Arun Jaitley has presented a very progressive Budget, not only for the whole country but also for the logistic industry. Our company GATI, the leader in express distribution of parcel is going to get greatly benefited by this Budget. The allocation of 37,800 crore for the development of national and state highway, will go a long way in movement of trucks and cargo all across the country.
During the last regime of BJP, the project of golden quadrilateral and north-south, east-west corridor had started, most part of it is completed except couple of 100 kilometers and I am sure with this allocation the four lane highway will get extended to six lanes. The need of the hour is foreign direct investment (FDI) in manufacturing. Our honourable minister has given impetus on this particularly by allowing the product manufactured in the country by the multinational corporation (MNC) to be sold to e-commerce on the net. This also means that all the single brands which are directly imported and not manufactured in this country, will not be allowed to be sold as e-commerce product in this country.
Anuj: If you could quantify the opportunity that exists for the sector over the next two-three years?
A: There is great amount of opportunity because the roadmap for goods and services tax (GST) which has been pending for the last five years has been cleared by the honourable minister and by March 2015 GST would be implemented. As far as quantum is concerned, it will have great amount of impetus and great amount of effect in terms of smooth flow of goods all over the country.
Ekta: I want to focus on the cold storage sector – now private freight movement is going to be encouraged within that sector. Can you give us a sense because I do understand that you have capex which is lined up in cold chain warehouses which is to the tune of 120-130 crore for the next two-three years? How would that benefit to you?
A: We have a subsidiary GATI Kausar where we have 200 temperature control refrigerated trucks at minus 20 degree which move all across the country. We have a plan to invest Rs 150 crore in the next two years time to build ten temperature control warehouses across the country. Our honourable minister has also allocated Rs 5,000 crore for building up of warehouse across the country and he has also given special emphasis on building up of the temperature control warehouses across the country and the wastage that we have, about 35 percent of agricultural wastage across the country, over the time this wastage would come down and we are very gung-ho on the movement of temperature control goods across the country.
Sonia: On the business side of things for GATI, we understand that your entire shipping business has moved to 100 percent subsidiary called GATI Shipping. Can you give us a sense in terms of whether you are looking to completely exit your shipping business, is monetisation of the two vessels that you have on board is on the cards in the near term?
A: We have already decided to exit shipping business. We have sold all our ships except one. This one ship is operating on the west coast between Mundra and Cochin. In the new Budget a lot of emphasis is given on coastal shipping and also inland waterways. We have decided to get away from international shipping but according to the Budget and the thinking in the country, we will take a look whether we should get into coastal shipping and inland waterways otherwise we are out of the shipping business.
Anuj: You may not want to give us any numbers but if you could give us some ballpark figure in terms of growth that you are looking at over the next two-three years?
A: We have made a plan and looking at the growth of in excess of 20 percent year on year. However, for March 2014, we had a growth of 21 percent and growth on EBITDA is double than the growth on the topline because of better utilisation of our warehouses and better efficiency in movements of goods across the country. We are very gung-ho that our e-commerce business which is the last mile delivery that we do, will do extremely well. Our growth on last mile delivery of e-commerce has been in excess of 100 percent year on year and our growth on express distribution of 5.7 million packages per month has been growing in excess of 20 percent.
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