Key takeaways of the call

Total fleet of the company as end of Sep 2018 was 13 vessels with a dead weight tonnage of 336573 and of which two were chartered out and 11 were operated during Q2FY19. Volumes handled in Q2FY19 were up by 5.3% Q-o-Q and 11.6%Y-o-Y.

Utilization levels on all the services from North to South and West to East remained at the level of around 90% and on the reverse leg it was around 62% during the quarter. While the utilization levels in North to South was about 90% with reverse leg being 52%. And in West to East the utilization was 94% with reverse leg being higher at 98%.

The average bunker rate for the quarter ended Sep 2018 was Rs 35500/MT (compared to Rs 30500/MT in Q1FY19 ended June 2018) resulting in increase in bunker cost by about Rs 8 crore.

Exchange loss amounted to Rs 1.45 crore due to high volatile exchange rate fluctuation.

Not able to recover the entire increase from the market due to excess tonnage and unfavorable market conditions. The company has increased the prices where ever the market allows it and utilization is not hit and where the market forces are not favorable the company either has fully absorbed or only partially recovered incremental cost and protected its market share or utilization of assets.

The company has increased prices in markets such as EXIM container and Colombo service. New contract increase has been taken into consideration. However, coastal domestic cargo service so as to maintain its market share the company has not increase price as market forces are not allowing any price hike.

The bunker price has started its upward trend in Q1FY19 so there is no need for price increase. The company has increased prices to the tune of 6-7% in EXIM Container (which accounts for about 30% of the business of the company) in Q2FY19.

With freight recovery not in proportion of bunker price increase and rupee depreciation, the company has chartered out extra tonnage to minimize the operational loss as well as for additional foreign currency earnings.

Expect 25-30% cargo growth to come back in H2FY19. Once volume growth kicks in the company will be able to pass on the incremental cost to customers.

The company currently has 3 vessels chartered out i.e. SSL Chennai, SSL Krishna and SSL Balaji. While SSL Krishna & SSL Balaji was chartered out during Q2FY19, the SSL Chennai has commenced its charter from Oct 31, 2018. SSL Krishna is chartered for about 8-12 months period starting Sep 2018. SSL Balaji will up for renewal in one month.

SSL Brahmaputra is already dry docked from Oct 30, 2018 and will come out of dry dock by Nov 18, 2018.

SSL Kolkata, that caught significant fire after an explosion on 13th June 2018 in the cargo area of the vessel, was declared as total loss (Hull & Machinery loss) and the insurance claim is in process. The company has already put up the claim with HMM underwriters on Oct 22, 2018.

Once Brahmaputra comes out of dry dock the company will take out the extra vessel (SSL Ganga) on west coast to east coast.

Expect an EBITDA margin of about 20-22% (compared to 9.93% in H1FY19) for H2FY19 and expects to close FY19 with an overall EBITDA margin of about 15%. Considering not much of price hike and only little room going forward, the company's expectation of over 20% EBITDA margin is largely based on consideration of facts such as fall in fuel cost from Q2FY19 levels, realignment of tonnage and other cost cutting measures bring in fruits. Fuel prices already started showing signs of moving south.

EXIM market continues to be challenging. The volume has gone up in Q2FY19. The focus is on East Coast where the company handles EXIM volume. The second half is always a peak season and the volume will move up and turn favorable for price increase.

Not impacted by cabotage relaxation.

Road prices have also gone up as diesel prices have gone up.

New Service commenced on rotation Haldia-Krishnapatnam-Colombo –Haldia during the quarter ended Sep 2018. This new service has utilization of 97% on reverse leg.