Key takeaways of the call

Throughput for Q1FY21 was down by 21% (EXIM down 20%; Domestic up 25%) to 732711TEUs (EXIM 627905 TEUs; Domestic 104806 TEUs) from 926923 TEUs (EXIM 786442 TEUs; Domestic 140481 TEUs) in Q1FY20.

Railfreight margin in Q1FY21 stood at 28.66% compared to 28.16% in Q1FY20.

Margin decline for the quarter was largely due to Land Licence Fee (LLF) but for that the company has maintained its margin.

Recently the company received a demand of Rs 776.89 crore from MoR as the LLF for the year 2020-21 for the Okhla & Tughlabad Terminals of CONCOR at Delhi as per the new tariff order.

The demand of LLF of Rs 776.89 crore by MoR notice for 2 Delhi terminals for FY21 is not as per the new extant policy of it according to the company's assessment. According to the company the LLF for all the terminals on Railway Land for quarter ended Jun 2020 was estimated only Rs 120.67 crore as per the new extant policy. For FY21 the estimation is Rs 480 crore. The company is confident of its calculation of LLF. So the matter is being suitably represented to the Ministry of Railways.

Apart from the two terminals in Delhi, the company has not received any notice regarding LLF.

The company has already returned all railway land that is not required by it. The company has surrendered 17 railway land parcels where the operations can be handled from alternative locations. The company is trying to shift some business to Aurangabad from Bhusaval, where there is no alternative.

Overall the market condition is tough with volumes staying lower. The competition in the market is much higher with lot of discounts going around. So far the company has not cut its margin to garner volume but used the service quality to maintain volume. But as times goes on and Covid situation not getting better, the company has to think of being more competitive in the market with change in strategy interms of margin.

The pricing of the company is not based on cost of operation but based on market condition. So with the market condition being tough the company is not considering any immediate price hike to pass part/full of increase in LLF.

Expect some improvement in Q2 & Q3 and normalcy to return in Q4FY21. Expect manufacturing activity stability by Q3FY21 to bring normalcy in Q4.

There is no change in FY20 year-end volume guidance (of 3 million TEUs for FY21) for current fiscal.

Empty running charges for Q1FY21 is Rs 38 crore (EXIM Rs 21 crore; Domestic Rs16.7 crore) against Rs 48 crore in Q1FY20.

Movement of cargo through road still faces lot of challenges. So there is greater demand for movement of cargo through rail.

Lead distance for EXIM was around 666 km and that for domestic is about 1262km.