Takeaways from the AGM:
AGM was well attended with many members asking detailed questions on the Kesar Multi-modal logistics project which is coming up at Pawarkheda in Madhya Pradesh.
Management was very forthcoming and H R Kilachand patiently answered queries from shareholders during and after the AGM. Members of the Board were also available to interact with shareholders after the event.
Kilachand indicated that the Pawarkheda facility will begin in the next 15-20 days as the railways are carrying out the work of installing signaling systems and equipment to move rakes into and out of the facility. He blamed the internal politics within the railways for the long delay in the project starting.
When fully operational, the facility will have the capacity to handle three rakes simultaneously. To begin with KMML will handle one rake a day and gradually scale up as demand grows. At present it has the capacity to handle two rakes simultaneously, but the management wants to construct capacity for the third rake right away as bureaucratic delays may hamper expansion at a later stage.
When the facility is fully operational, cargo like cement, fertilizers, textiles etc would be handled.
A big advantage would accrue to KMML if the railways go ahead with the proposal to halt goods handling operations at Itarsi. Because of
congestion, the railways seem to be keen that Itarsi station handles
only passenger traffic. Kilachand hoped that the goods traffic handled
by the railways would move to KMML.
Kilachand reminded investors that the warehousing business is competitive and there are many players. But KMML enjoys the advantages of having a goods rail line passing through its facility.
At present the cold storage facility has begun operations with fruits and vegetables being brought in for storage. Kilachand foresees big opportunity in handling agricultural produce since MP has become the country’s biggest producer of wheat and one of the bigger producers of rice. He expects much of the cargo to move via KMML. Agriculture warehouse measures 16,000 sq mts.
As an aside, Kilachand said the company may look at food processing
business because of the location and availability of the facility. He
added that finance for food processing was available at 4 per cent
interest.
The management is expecting revenues of around Rs 16-17 cr in the first quarter of operations. Expected EBITDA margins at 60
per cent just like in the tankage business.
Company is paying a royalty of Rs 12.7 cr over the next 13 years or Rs 1.2 cr annually to the Madhya Pradesh Mandi Board.
So far company has incurred at debt of Rs 88 crores for the project. Some of the debt is also being paid back.
Kilachand says, KMML will benefit from the Goods and Services Tax.
As for the huge debt on its books, Kilachand says KMML may look at
offloading stake to investors at a later stage when it can get higher
valuations.
Regarding tankage business, company will begin work
on either the Kakinada or Pipavav project once first phase of KMML
begins operations. Company will have to reapply for permissions at
Pipavav, but it has all permissions in place for Kakinada. Company is
paying a rent of Rs 2 lakh per month for the land at Kakinada.
Red Flags
Management is expecting pricing pressure on its core tankage business at Kandla because of several facilities which are coming up at Pipavav and other places. But Kilachand says its tanks are priced competitively already and it would be able to maintain margins.
Tanks have a life of 30 years but they need to be maintained. Depending on what is stored in the tanks, they can even get damaged earlier.
Management is converting mild steel tanks into stainless steel tanks depending on demand.
others who attended are free to add anything i missed.
shiv kumar
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