Gateway Distriparks Limited: Favourable Industrial Dynamics and Credit Profile Should Lend Support

The company believes it is future ready, with plans of balance sheet management and new capital expenditure in place. GDL aims to invest in Rail linked satellite terminals in North India. Over next 2 years, the company plans to incur capex of INR250 Cr.

Overview of Gateway Distriparks Limited

Gateway Distriparks Limited is categorised as an only logistics facilitator in entire India having 3 verticals that are synergetic and capable of being interlinked – Container freight stations, Inland container depots having rail movement of containers to major maritime ports, and Cold chain storage and logistics. It completed its composite scheme of merger in Dec 2021 to support operational synergies and cost efficiencies and improve cash flow fungibility. As part of scheme, Gateway East India Private Limited initially merged into its then 100% parent Gateway Distriparks Limited and resultant entity subsequently reverse merged with Gateway Rail Freight Limited (owned 99.93% by GDLE pre-merger). After merger, Gateway Rail Freight Limited became ultimate parent and a listed entity after reorganisation. It changed its name to Gateway Distriparks Limited in Feb 2022.

Growth Enablers of Gateway Distriparks Limited

• Solid Results: Growth the company has registered in 2Q22 is yet another testimony. Though India continues to recover from COVID-19, kind of boost it has seen in volumes in both Rail freight and CFS verticals supported it to increase internal revenue and margin targets for FY22. Apart from growth seen in volumes and revenue, the company performed well in terms of EBITDA, PAT and EPS. Margins are supportive of growth plans in future. In 1Q23, the company saw higher revenue, volumes and market share. Growth could have been better but there were lockdowns in China which disrupted supply chain. Focus is on improving profitability by increasing volumes, improving operational efficiencies, and lowering debt and finance cost. Plans are there to expand into more rail linked ICDs in North India. In 1Q23, total income saw year-over-year growth of 4.51% to INR 347.22 Crores and EBIDTA declined 1.05% to INR90.86 Crores. Significant growth of 34.04% year-over-year was seen in PAT to INR58.44 Crores in 1Q23, while PAT margin expanded to 16.83%. The company saw strong year-over-year growth of 16% in FY22 to INR1,373.7 Crores, while total income grew by 18%. Outstanding growth of 137% was visible in PAT to INR223.8 Crores in FY22.  

• Opportunities for Expansion: The company was operational 24/7 without any disruption since lockdown began. It executed several measures to secure continuation of operations. Port and related activities was categorised as one of essential services and the company continues to foresee opportunities for expansion and profit growth in growing containerisation in export-import trade and rail movement, higher participation of private sector in ports and movement of containers by rail, liberalization of Government policies and better foreign trade of the company. Gateway Rail Freight Limited expanded its business relating to operating container trains on Indian railways network. The company was able to put in place fleet of railway rakes/trailers and ICDs. This helped in offering end-to-end solution to customers across India. The company continues to occupy leadership position in Private Container Train Operators. Snowman Logistics Ltd. is listed company since FY15 and it has expanded capacity to become a leading player in emerging business. Though pandemic situation continues, economies continue to open up with fewer restrictions. Higher export – import trade should help in improvement of economy. Growth in port volumes should result in increasing throughput at the company’s CFSs and ICDs. Growth in demand for cold chain logistics business should have a positive impact on the company’s long-term business and profitability. This is particularly true for pharma and food businesses.
•  Strong Credit Profile: Consolidated debt of the company saw a reduction at FY21 end on account of repayment of debt, principally NCDs. Sale of Chandra container freight station, proceeds of rights issue and internal accruals of the company has supported the company in repaying NCDs worth INR2.5 billion. Absence of share pledge of promoter’s stake exhibits that there is some improvement in financial flexibility at promoter level. The company focuses on balance sheet management as net debt has seen favourable movement. Net debt stands at INR345 Crores as at Jun 2022 against INR623 Crores as at Jun 2020.

• Favourable Industry Dynamics: Logistics industry was categorised as essential service across COVID-19 pandemic. This industry was useful for transportation and warehousing of goods for catering to needs of consumers across sectors. Container Freight Stations and Inland Container Depots lent support in helping with flow of goods as ports were getting congested. After initial lockdown period, volumes have risen because of an increase in manufacturing and consumption and now are at pre-COVID levels. Major development which took place was inauguration of first section of Western Dedicated Freight Corridor that should bring in needed capacity for freight movements on rail. This should stem growth for manufacturing sector in this country. Expectations are there that it will help in reducing road congestion and shifting movement of cargo from road to rail. This is expected because DFC will have ability to run faster, longer and heavier trains.
• Optimism Around Pharma and Ecommerce Products: Snowman Logistics now has a pan-India presence, providing comprehensive temperature-controlled warehousing, transportation and distribution services. Demand continues to increase for high quality infrastructure. This principally stands true for pharma and Ecommerce products and the company continues to expect big expansion opportunities in this sector. Given its network, infrastructure and alignment with Western Dedicated Freight Corridor, the company believes that it has necessary resources for capturing growth after there is some improvement in external factors.

Conclusion

In FY21, revenue of the company was INR1,416 Cr. in comparison to INR1,532 Cr. in prior year. EBITDA saw an increase to INR386 Cr. from INR380 Cr. while the company’s PAT was INR100 Cr. against INR99 Cr. during FY20. During FY21, the company achieved throughput of 5.69 lakh TEUs in comparison to 6.52 lakh TEUs in FY20. The company saw a sharp revival in EXIM trade in 2H21, leading to sharp growth in volumes in both CFS and Rail business.

The company continues to work to manage its liquidity profile and has maintained its focus on management of balance sheet debt. The company sold Chandra CFS & Terminal Operators to Team Global Logistics and it plans to continue to operate its 1^st CFS in Chennai where the company managed to handle over 87,000+ TEUs last year. Sale should help in consolidating operations in Chennai at single CFS and should help in improving cost efficiencies & reduce debt. The company has prepaid its INR50 Cr. NCDs from sales proceeds of Chandra CFS. It has also prepaid INR60 Cr. in May ‘20 and INR25 Cr. in Jun ‘20 with help of internal accruals and INR115 Cr. in Sept 2020 through money raised in rights issue. With help of internal accruals, the company has repaid INR20 Cr. in Apr 2021. It has solid asset base, with large cash reserves and Net Debt to EBITDA ratio of 0.86x.

Long-term strategy for rail business takes into account organic & inorganic growth and should help increase containerization of cargo in India.

The company continues to target setup of 2 terminals over next two years and has plans to increase high capacity / high speed rail fleet to 40 plus trains.

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