CONCOR bags 2 MMLP projects worth Rs.520 Crore; likely to post Double-digit Growth next year

CONCOR likely to post double-digit growth next year; says Dr.P Alli Rani, Director Finance/CONCOR

CHENNAI: Container Corporation of India of India Ltd (CONCOR) bagged two new Multi Modal Logistics Parks (MMLPs) on Wednesday. The two projects are going to be set up in Tehi (Madhya Pradesh) and Barhi (Haryana) and their cumulative worth is Rs 520 crore. In an interview with CNBC-TV18, P Alli Rani, Director – Finance, Container Corporation of India said that the company at present is looking at 18 MMLPs all across India and has a capex plan of Rs 6000 crore.

In a chat, Dr P Alli Rani, Director Finance (CFO), Container Corporation, shares her business outlook. Excerpts:

Q: What are the current trends like in freight movement? Has the commodity crash led to a drop in commodity freight movement?

A: The commodity drop has not impacted us. We do not transport iron ore and coal; we transport containers and some other cargo that can be carried in containers. Iron and coal are railway commodities. They are transported by the Railways.

Having said that, we did not witness the growth we’d expected in the first half of the year. During the first half, we were just getting over other difficulties, and then the Chennai floods happened. The floods greatly impacted our volumes in the south.

The export-import imbalance turned out to be another factor. The dip in exports has made things a little difficult for us in terms of running freight trains. We can’t run empty trains; if we did, it would hurt us very badly.

But the good news is that we have been progressing very well when it comes to capex. We have succeeded in getting approvals for two more terminals. This would take our total to 18 as against the 13 we had planned.

So, I think the current tepid phase is temporary. The dip in exports will also pass. The January-March quarter has always been the healthiest for us. We feel we should be able to make up for some of the lost volumes. We are already seeing some sort of a recovery.

Q: What kind of volume growth do you see for the second half of the year?

A: We have downgraded our outlook for this year. We had started the year with 10%-12% in mind. By mid-year we realised that things like rains, agitations had impacted us substantially. So, we brought the outlook down to single digits — 7% to 8%.

For now, I will stick with that target. Next year, I am sure we can definitely go back to 10%-12%. The pick-up in industry and demand seem to support our view. In all, we should be looking at double-digit growth next year.

Q: What is your growth outlook like for the next 18-30 months?

A: I am an optimist. I look at ourselves as an industry that reflects the health of the economy. And my optimism at this point does have solid grounds. Policies, now being put in place, will definitely start having an impact going forward.

In 18 months from now, I am sure we will see a lot of good things happening. The government is also trying to shift cargo traffic from road to rail. That is going to be a great policy help for the industry. Exports are also very likely to catch up over a 18-month period.

The haulage rate hike in last December was a little heavy. But a year has passed since then, and they have not hiked the rate again. I hope there will not be any unreasonable hikes again, because last time’s impact is there for all to see.

The Container Corporation of India (CONCOR) will establish an inland container yard near Nanjangud which will give a boost to exports from Mysuru region. The container depot facility will be established at Kadakola and serve the industries in Mysuru and Nanjangud which is a long-pending demand of local industries. It will facilitate their cargo and freight movement to the port

Q: Apart from container traffic, the other big part of your business is warehouse. What is happening on that front?A: We woke up very early to the fact that there would be a large gap in rail-connected warehousing in India. Three years back, we began planning for it. So far we have spent about Rs 3,000 crore out of the Rs 6,000 crore that we earmarked for a five-year period.

We started off with a plan for 13 logistic parks. We are looking at ourselves more as a multi-model logistics service provider than mere rail transporters. With this in mind, the size of our terminals has been up-scaled by over ten times. The original 25-acre size is now being raised to 250 acres. It will enable us to provide customers with additional value-added services.

In a way, we are trying to provide a consolidated or single-window service for our customers.

Q: Give us some ballpark estimates for 2016 and 2017.

A: In the next 24 months, we should come back to a volume growth of about 14% to 15%. That used to be our traditional volume growth before the recession struck.

If the GST and the Dedicated Freight Corridors come, the growth figures could be truly mind-boggling. In the first year after GST and DCF are put in place, our growth could very well be 100%.

Q: You are generating big cash but not deploying it, which has brought down your return ratios. What is the plan on that front?

A: We are a public-sector undertaking. We follow the government guidelines in this regard. And regarding dividend, it is up to the shareholders.

I believe we have been very consistent, and will continue to be so. Any bottom line growth would reflect additional dividends, as per present government policies. Anything other than that will depend on what our shareholders decide.

Q: What is the capex outlook for FY 17 and FY 18?

A: All infra that we are looking at will have to be set up before the DFC comes. Only then will it make sense. After the DFC comes, only maintenance spends will be required. Capacity of existing assets will automatically go up.

By that time, I think we will have made Rs 6,000 of capex. After that, the likelihood is of a maintenance expense of around Rs 800 crore a year. But the scene could be different if we happen to have more external projects by then.

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