Key takeaways of the conference call

Business operations on the standalone parent company is GATI International and Gati E-commerce. While the express distribution & supply chain business was hived off into a JV company i.e. Gati- Kinetetsu Express (Gati-KWE) the shipping division was hived off into a 100% subsidiary. The cold chain business is under Kausar India.

Consolidated net sales for quarter ended September 30, 2012 was lower by 7% to Rs 298.03 crore and with EBITDA margin contracting by 260 bps (to 5.7%) the EBITDA was lower by 36% to Rs 17.05 crore. Impacted by exceptional expenses (net) of Rs 4.82 crore (compared to nil in corresponding previous quarter) at PBT level it was a loss of Rs 1.11 crore compared to a profit of Rs 7.78 crore in Q1FY12. Eventually at net profit level it was a loss of Rs 7.79 crore against a profit of Rs 4.5 crore in corresponding previous period. EO items for the quarter is on account of loss on sale of an old cargo ship Rs 6.06 crore.

Gati KWE (Express Distribution & Supply Chain) has registered a revenue of Rs 209.5 crore (up 5.63%qoq from Rs 198.4 crore in Q4FY12) as this business in existence for the last 2 quarters. The EBITDA margin on sequential basis expanded by 300 bps to 11% and the EBITDA thus increased by 46%qoq to Rs 22.3 crore.

GATI KWE - at the time of hive off business to JV a debt of Rs 330 crore is transferred and of which about Rs 136 crore has been repaid in last two quarters. With this the total debt of GATI-GWE came down to Rs 194.3 crore as end of Sep 2012 compared to Rs 218.1 crore as end of June 2012.

The Express Distribution & Supply Chain business is expected to register a quarter on quarter growth of 7-8% in current fiscal.

GATI International - Company entered into core-carrier partnerships with key airlines for cost efficiencies. Built user specific Value Added Services capabilities and CHA opportunities. Strengthened its worldwide distribution network for wide reach through Log net alliance. The division will cater to the growing trade markets of automotive, pharmaceuticals, telecom and electronics sectors. Going forward, there will be increased focus on Trade lanes between China-India, Hong Kong-India, Singapore-India & Germany-India. It will also build upon business on the India-SAARC region and Ocean Freight Product development for Africa.

Gati e-commerce - E-commerce is the next big thing at Gati given its unmatched reach, exceptional cash-on-delivery capability and largest distribution network will aggressively build up the network and capability to service the B2C and C2C segments. The company is already catering to some top notch large online retailers, Home Shopping Channels and providing franchisee solution to multinational brands.

The company embarked on ramping up its capability in e-commerce to deliver 12000 packages per day in current fiscal.

The company's e-commerce is expected to generate a revenue of Rs 40 crore in 2012-13 with PBT margin of 5%.

Gati-KWE is expected to register a growth of over 20% yoy going forward through synergies and improve profitability through cost efficiencies. The JV will provide access to global customers with key focus on automotive, pharmaceutical, engineering and manufacturing sectors.

Kausar India that comprise pan India distribution service for temperature controlled frozen foods and chilled products with cold chains has increased its Reefer fleet size to 165 as end of Sep 2012. Going forward, it expects to expand its Reefer fleet size to 200 and invest in 2-3 cold storage units by June 2013. The company expects to ramp up the cold storage units to 17-18 units and fleet size to 350 by 2015. The company has placed orders for reefers and the capex in this regard for FY2012-13 is Rs 30-40 crore and if the cold chain also materialize it will be higher.

Kausar India propose to develop customized cold storage units to cater to temperature sensitive products and as a business strategy it will focus on primarily on organized retail including food chains, pharmaceuticals, dairy products, agro products and FMCG.

Gati Ships, the wholly owned shipping subsidiary has registered a loss of Rs 14 crore in Q1FY13. Since cargo handled is not at optimum level and with fixed overheads the shipping division incurred an operating loss of Rs 8 crore adding the loss on account of old ship it is a net loss of Rs 14 crore at subsidiary level.

Gati Ships as on April 1, 2012 had 4 vessels including three owned vessel and one vessel on financial lease. Out of the three owned vessels, the company has sold one old vessel in Q1FY13. Since the old vessel sold has a higher Book Value the difference between BV and sale realization is booked as loss.

Shipping subsidiary has no debt other than the financial lease for one ship. Net Asset Value of shipping subsidiary currently is Rs 80-100 crore.

The shipping subsidiary continues to face serious challenges on business and operational fronts. Having completed the first step of hiving off this business into separate 100% subsidiary the company plans to invite a strategic partner to bring in equity and a turnaround.

Shipping subsidiary is expected to reach a breakeven point next quarter with its strategy of moving one vessel to West coast and deploy it on Kochi-Kandla route. If this move pays off the company might end up with a small profit. Currently the company operates on Chennai-Andaman-Yangoon sector.

The Standalone Company comprising International & E-commerce businesses is expected to clock revenue of Rs 140 crore for current fiscal.

Of the total standalone debt of Rs 267 as end of June 2012. Out of the Rs 178 crore the company received from equity dilution in GATI KWE it has used Rs 125 crore to repay debt and it has enough cash with it and repay another Rs 25 crore during this fiscal.

In Q1FY13 the freight forwarding business revenue was Rs 18.3 crore and the company expects this business division to end current fiscal with a revenue of Rs 90 crore in current fiscal.

FCCB- The Company has now renewed the FCCB and redemption is now on Dec 2016. The company intends to repay some part of FCCB and negotiation is on in this regard.