going through their website kesar enterprises, parent company of ktil is 77 years old.As you have mentioned snowman was listed with a bang, but ktil is yet to make its move inspite of having the best numbers.calls for patience
@Aksh,
Our projections are estimates based on information gathered through various channels. Again, we believe that these projects will take time to come completely online, hence we believe that conservatively KTIL (consolidated) could triple revenues in 3 years.
In terms of valuations for KTIL - We encourage readers to go through the liquid storage market and see some of the valuations of players(listed and unlisted, domestic and international).
One of the players we completely missed in our report is Aegis logistics that has a play in the liquid terminal business with 384,190KL commissioned capacity and another 120,000KL becoming available this year (Revenues from the 384,190 KL is about 130 cr topline, 87 cr EBITA as per their FY-14 Annual report). The total project cost of building 120,000 KL is about Rs. 123 cr - http://www.aegisindia.com/Admin/Documents/Events_Pdf168.pdf Link: http://www.aegisindia.com/Admin/Documents/Events_Pdf168.pdf )- Slide 10)
We would also like to point out to 2 deals that have happened in this space in India -
http://www.dealcurry.com/20100623-Warburg-To-Invest-Rs-200-Cr-In-Chennai-based-IMC.htm Link: http://www.dealcurry.com/20100623-Warburg-To-Invest-Rs-200-Cr-In-Chennai-based-IMC.htm
https://tankterminals.com/news_detail.php?id=917 Link: https://tankterminals.com/news_detail.php?id=917
We hear that Warburg Pincus got about 8% stake for the 220 cr that they invested in IMC (Assuming 1m KL capacity, they got about 80,000 KL for the 220 cr they spent), also interesting to note on this deal is that IMC revenues was just 69 cr in 2009!)
Vopak - the largest player in this space spent 278 cr. in 2011 to acquire 100% stake in CRL (121 tanks with 247,000 KL, equivalent for KTIL capacity = 135 cr in 2010)
Given the high cash generation capability of this business, coupled with the international consolidation deals that have been happening in this space (pls read capacity that KTIL has and the assets that KTIL has, our estimates for KTIL are 400 cr (about 10x sales) if they decide to sell out.
Another whitepaper on how to value liquid terminal storage business - thesis.eur.nl/pub/7980/BA-Karel%20Doorman.pdf
Please see our next post on some more resources that will help understand this business further.
- a Feb 20152015 a
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@Biju, @Shak, @Aksh,
We believe that the margins for liquid storage business will continue to be quite strong.
A few resources that we are posting for members to go through, pls feel free to provide your comments, suggestions and critique.
Understanding the business - http://almasahcapital.com/uploads/report/pdf/report_90.pdf Link: http://almasahcapital.com/uploads/report/pdf/report_90.pdf
Port Storage Development - Global outlook - http://bit.ly/1wt3BZ9 Link: http://bit.ly/1wt3BZ9
Tank Storage Industry - 2009 presentation - (provides some insights into valuations) - http://www.ilta.org/calendarofevents/AOCTS/2009/SpeakerPresentations/Tony%20Quinn%20Presentation.pdf Link: http://www.ilta.org/calendarofevents/AOCTS/2009/SpeakerPresentations/Tony%20Quinn%20Presentation.pdf
http://www.portlogisticsindia.com/ Link: http://www.portlogisticsindia.com/ & http://portlogisticsindia.wordpress.com/ Link: http://portlogisticsindia.wordpress.com/
www.tankworldnews.com Link: http://www.tankworldnews.com &
http://www.tankworldnews.com/2014/01/13/7-key-tank-storage-trends-for-2014 Link: http://www.tankworldnews.com/2014/01/13/7-key-tank-storage-trends-for-2014
Here is the profile of the heads of projects for KMLL - https://www.linkedin.com/pub/ramesh-nayak/5/4a6/998 Link: https://www.linkedin.com/pub/ramesh-nayak/5/4a6/998 (Profile also provides contact details if anyone wants to take the opportunity to contact him over email/phone)
A hallmark of a good business is to ensure they hire the right kind of people in the management. We believe Kesar Group is doing the right thing by hiring the right people for the job.
https://www.linkedin.com/in/santkharee Link: https://www.linkedin.com/in/santkharee -
yes demand for liquid terminal and storage facility seems to be good in 2014, no sign of slowing down, i found the tank world news interesting, shows the huge potential in this area.q2 to be interestingâŚ
fe http://almasahcapital.com/uploads/report/pdf/report_90.pdf Link: http://almasahcapital.com/uploads/report/pdf/report_90.pdf http://bit.ly/1wt3BZ9 Link: http://bit.ly/1wt3BZ9 http://www.ilta.org/calendarofevents/AOCTS/2009/SpeakerPresentations/Tony%20Quinn%20Presentation.pdf Link: http://www.ilta.org/calendarofevents/AOCTS/2009/SpeakerPresentations/Tony%20Quinn%20Presentation.pdf
http://www.portlogisticsindia.com/ Link: http://www.portlogisticsindia.com/ & http://portlogisticsindia.wordpress.com/ Link: http://portlogisticsindia.wordpress.com/
www.tankworldnews.com Link: http://www.tankworldnews.com &
http://www.tankworldnews.com/2014/01/13/7-key-tank-storage-trends-for-2014 Link: http://www.tankworldnews.com/2014/01/13/7-key-tank-storage-trends-for-2014
Just went through the annual report,They have a head start and locational advantage with the terminal at kandla.They have mentioned a key risk in the report,namely coming of two liquid terminals at pipavav,which is closer to mumbai.There is also a liquid terminal at dahej operated as GCPTCL,run by gujarat government.There are quite a bit of private port players in gujarat and it is easy for them to open a tank farm along with the private port they operate and if ideally located at dahej or hazira,they cater to the industrial areas of south gujarat and maharashtra.Therefore to assume or project earnings into the future would be dangerous atleast for the terminals business.There is no locational moat.
@Harbin,
Thanks for sharing wealth of info. esp. on valuations part. I also came acrossVopak - CRL deal while digging more on thisâŚgives lots of weightage to thegrowth story as Vopak is the largest player in the world in this space.
The fact that these deals were done in 2010-11 at depressed valuations makes KTIL valuation at current price very attractive. It would be interesting to dig more in Warburg Pincus - IMC deal as IMC revenue was just 69 cr in 2009!
@Biju,
Data on Kandla port site doesnât seem to be updated as KTIL has 64 tanks with1,27,000 KL capacity as on today. Two more terminals are coming up at Pipavav by competition.
@Shak,
Thanks for your kind words. Iâm also sitting on huge profit in RS Software and very bullish :).
@Biju,
We believe that building this business takes 10-20 years, also get a captive clientele. We encourage you to go through reports on Vopak, OilTanking.
Pls go through this presentation done by Vopak - http://www.indiamaritimeweek.com/wp-content/uploads/2013/PDF/Parag%20Gupta.pdf Link: http://www.indiamaritimeweek.com/wp-content/uploads/2013/PDF/Parag%20Gupta.pdf )- Pls go through Market view and challenges slides specifically.
@Aksh, @Forum members
Posting a few inputs to understand KMLL. These are inputs on the logistics sector.
You might have seen from our previous posting on the EY report - Link - http://bit.ly/1ptYRyE Link: http://bit.ly/1ptYRyE )- You might have seen that MMLP are the highest in the value chain. With NaMoâs focus on food security and the money that is coming into India we believe MMLPâs are a super focused âMicro-verticalâ Infrastructure play.
Below are a few additional inputs in this sector. Members please feel free to provide your comments, thoughts, inputs, interpretations, critique.
Multi Modal Logistics in India: An Assessment- Knowledge Paper - http://www.ebtc.eu/pdf/130715_REP_Multimodel-Logistics-in-India.pdf Link: http://www.ebtc.eu/pdf/130715_REP_Multimodel-Logistics-in-India.pdf
Multi Modal Logistics Parks: A Key factor for Economic Development of a country - http://www.indiatourismstat.com/article/22/vishwa/fulltext.pdf Link: http://www.indiatourismstat.com/article/22/vishwa/fulltext.pdf
Logi(sti)cally Speaking - Association of MultiModal Transport Operators of India (AMTOI) - White Paper along with E&Y - http://www.indianatie.com/sites/default/files/E%26Y%20Whitepaper.pdf Link: http://www.indianatie.com/sites/default/files/E%26Y%20Whitepaper.pdf
**The above documents will provide you fundamental ways of why, what and how of MMLPâs. **
McKinsey & Co. - Building India - Transforming the nationâs logistics Infrastructure - http://bit.ly/1qBZhEG Link: http://bit.ly/1qBZhEG
Supply Chain 2025aTrends & Implications for India -A joint A.T. Kearney-CSCMP study - http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/supply-chain-2025-trends-and-implications-for-india/10192#sthash.S39DLw2e.dpuf Link: http://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/supply-chain-2025-trends-and-implications-for-india/10192#sthash.S39DLw2e.dpuf
Deloitte - Intermodal and Multimodal Logistics - Knowledge Paper - http://www.deloitte.com/assets/Dcom-India/Local%20Assets/Documents/Thoughtware/Intermodal%20and%20Multimodal%20Logistics.pdf Link: http://www.deloitte.com/assets/Dcom-India/Local%20Assets/Documents/Thoughtware/Intermodal%20and%20Multimodal%20Logistics.pdf
Indiaas Infrastructure - Trends, Projections, Requirements - http://www.kieserling-stiftung.de/_uploads/files/more-than-curry/02whc-bre-051212.pdf Link: http://www.kieserling-stiftung.de/_uploads/files/more-than-curry/02whc-bre-051212.pdf
Business Opportunities in Rail Logistics Parks in India - Study in Indian context - http://s3.amazonaws.com/zanran_storage/www.cbcglobal.org/ContentPages/116502655.pdf Link: http://s3.amazonaws.com/zanran_storage/www.cbcglobal.org/ContentPages/116502655.pdf
Deloitte - National Conference on Container Infrastructure inIndia 2012- Background Paper -http://www.deloitte.com/assets/Dcom-India/Local%20Assets/Documents/Thoughtware/Containerization%20Infrastructure%20in%20India%201402_Final.pdf Link: http://www.deloitte.com/assets/Dcom-India/Local%20Assets/Documents/Thoughtware/Containerization%20Infrastructure%20in%20India%201402_Final.pdf
KPMG - Logistics Game Changers - Transforming Indiaâs logistics Industry - https://www.kpmg.com/DE/de/Documents/Logistics_Game_Changers_Transforming_India_logistics_industry_2013.pdf Link: https://www.kpmg.com/DE/de/Documents/Logistics_Game_Changers_Transforming_India_logistics_industry_2013.pdf
KPMG - Logistics In India -
For the long long long term players - PriceWaterCoopers - Transportation & Logistics 2030 - http://www.pwc.com/gx/en/transportation-logistics/tl2030/ Link: http://www.pwc.com/gx/en/transportation-logistics/tl2030/ 5 Volumes-
Deloitte - Logistics Sector in India - Present situation and way forward - http://www.deloitte.com/assets/Dcom-India/Local%20Assets/Documents/Thoughtware/Logistics%20Sector-Present%20situation%20and%20way%20forward.pdf Link: http://www.deloitte.com/assets/Dcom-India/Local%20Assets/Documents/Thoughtware/Logistics%20Sector-Present%20situation%20and%20way%20forward.pdf
Deloitte - Indian Logistics - Focus on infrastructure creation to sustain and drive growth - http://www.deloitte.com/assets/Dcom-India/Local%20Assets/Documents/Thoughtware/2014/Indian_Logistics_Focus_on_infrastructure.pdf Link: http://www.deloitte.com/assets/Dcom-India/Local%20Assets/Documents/Thoughtware/2014/Indian_Logistics_Focus_on_infrastructure.pdf
Warehousing in India - The smart way- http://www.miebach.com/files/file/pdfs/Press%20Clippings/2012/2012-09_state%20of%20industry_warehousing%20in%20india-miebach%20consulting-web.pdf Link: http://www.miebach.com/files/file/pdfs/Press%20Clippings/2012/2012-09_state%20of%20industry_warehousing%20in%20india-miebach%20consulting-web.pdf
KPMG India - Competitiveness through Efficient Logistics - https://www.kpmg.de/docs/India_Competitiveness_through_Efficient_Logistics2009.pdf Link: https://www.kpmg.de/docs/India_Competitiveness_through_Efficient_Logistics2009.pdf
Please note that we have posted almost 90% of the resources we have used for our study here. We are posting this research to encourage more members to join the discussions.
We would request members to use discretion and not to post these files outside a closed forum.
The next post we will provide details of the KMLL project itself 
- a Feb 20152015 a
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1 Like
@Harbin,
I truly appreciate you posting and sharing almost 90% of the resources that youâve used for your study, which Iâm sure would have come by lots of efforts, not many would do it. Iâm sure this will help members understand the sector better and encourage more participation.
Iâll join you in requesting members to use discretion and not to post these files outside this closed forum.
Waiting for your next post on KMLL project itself. Kindly share Final Concession Agreement between KMLL and Mandi board as well, as I coudnât get hold of it.
By the time, Let me immerse myself in these resources 
Thanks a lot,
Aksh
@harbin, thanks for efforts, cant believe the kind of info you have gathered, am afraid even analyst wouldnât take so much efforts as you have, hats off.There snowman bounces by another 5%âŚi have started increasing my holding in ktil, present level seems lucrative.So Aksh have you made an entry in ktil?
I remember vijay kedia taking 5% stake in Aegis logistics when it was @ 20 odd.He made a 10 bagger of it just in 2 years.logistics is a profitable business, Harbin, am waiting for your info on kmll project.
Hi,
I went through the thread and the annual reports and the numbers from moneycontrol.
Here are the points i noted:
1). Almost all of the capex(95% of total capex) is being done for the subsidiary KMML, where promoters have more interest than in KTIL. Annual report says KTIL has more than 50% shareholding in KML. Assuming it to be 60%, then promoterâs direct holding in KML would be 40%. Promoters also own close to 60% of KTIL, so total ownership in KML is 60*0.60(through KTIL) + 40%(direct) = 76%. Now if i have two companies, in one i own 76% and in other 60%, first one being unlisted and hence i do not need to disclose financials to every tom dick n harry, and apparently i do 95% of my capex in the company where i own 76% rather than the one where i own 60%, what would do u think from the point of view of a stock investor?
2). Also, KTIL is increasing its capacity from 127000 to 134000, hardly 5.5%, nothing to write home about. Moreover business is do is absolutely no-brainer, make a storage house, and rent it out. If i earn good return on the business, what stops my competitors from doing the same? Even management expects the competition is coming, courtesy AR 13-14.
3). ROE we are seeing right now is the result of capacity created many years ago, though results are available from 2009 onwards, i assume that capacity was set up 10 years back i m earning 30% NOW. In the meantime i would have seen 2008-09, debtâs interest, âNOâ competition, blah blah. What would anyone have thought 10 years back when KTIL was going to set up new capacity or increase new capacity?
4). Right now earnings yield is 8.4%, i guess many opportunities are available in markets with much much better risk-return ratios.
I think real opportunity in this stock would be when new capacity would have come, up and running, debt is huge and demand nose dives. Stock would obviously crash and then i would have a look at it again.
Views invited
Ashish
Missed updating that KML isnât profit generating yet, standalone and consolidated net profits are same.
Thanks
Ashish
Ashish,
Can you please elaborate as to how you arrived at the 76% holding of KTIL in KMLL? Which years AR are you referring to.
Also, can you please elaborate on your statement quoted below;
âI think real opportunity in this stock would be when new capacity would have come, up and running, debt is huge and demand nose dives. Stock would obviously crash and then i would have a look at it again.â
What assumptions have you made on the timelines for the project to be up and running, debt numbers and the ability of the project to service this debt and forthcoming demand crash that you predict.
Thanks a lot
I feel the statement given in AR about competitors slowing the demand is just a caution/risk portrayed by the management, this itself speaks about the management being transparent.I donât see a nosedive in demand at any cost(think again, why would they increase production if demand is low? ).The company is 75 years old and i feel they have good management capabilities, the margins will increase going forward. Debts will help in expansion and i think they have the right team to lead going forward.management is doing the right things. overall one can buy at these levels and stay invested.
As per latest AR, KTIL has 99.90% ownership interest in KMLL. I would suggest you to go through 5 years of AR of KTIL and if possible KEL to get the feel of the management with 75 years of history. I think they are ethical, transparent and fair in their dealings and most importantly competent. Let us know if you get to know anything in contrary.
I would also suggest you to go through wealth of resources shared by Harbin Consultants to understand the sector better even if you decide not to invest. There are deals done in the past which makes current valuations quite attractive. Apart from this, peer companies with not so good numbers are getting better valuations. There is also a renewed interest among savvy investors to invest in this lucrative sector.
Itâs obvious that if opportunity size is huge with good returns, as is the case in this sector, competition is going to come up, but it wonât be easy for the new entrant to scale up as there are many entry barriers in place like locational advantage, high initial capital cost, advantage of scale, regulatory mechanism etc. to name a few. This is why many M & A deals are seen in this space as big foreign players are interested in getting a pie of lucrative Indian logistics sector even if that means paying out at hefty valuations. Ecosystem and Govt. policies are quite favorable and, If Iâm not wrong, 100% FDI is allowed in the sector.
Disc: Invested and may add on dips
Hi Aksh, shak,
I went through the annual report of 13-14 once again, i could find this on page 13 of thesame: -->âThe %age shareholding, of the company alongwith its nominee in the equity share capital of Kesar MultimodalL__ogistics Ltd. (KMLL) is above 50%.â
I tried searching for KMLL so that i reach 99.90% figure, i searched for 99.9 too, nowhere i could find it so can u please tell me where i should look?
I didnât mean they r unethical or ethical, my motice was to just share my understanding. If promoter has %age shareholding more in a subsidiary and less in the listed company, and only subsidiary is doing capex n all, it does raise some question. We need to watch out for these kind of cases i guess.
Thanks
Ashish
Hi P Sharma,
Thanks for going through my calculations diligently and cming up with queries. Actually i came across that %age shareholding
KMLL is âover 50%â so i assumed a case of 60%. In case the shareholding is 51%, the percentage ownership of promoters of KTIL in KMLL would be 60*0.51 + (100-51) = 30.6 + 49 = 79.6% and then it would be more skewed ownership.Regarding this: "
"
I did not make any projections, i meant that i wil keep this company on my radar and if, and thats a big IF, such scenario happens, i will have a look at it again, not necessarily buy it as there might be better opportunities elsewhere in the markets.Till that time i will keep on surfing.
Thanks
Ashish
Ashish,
going forward i expect ktil to deliver good returns.
- Ashish, I find your critic of the company to be very fair. It will be a blind ride if one does not question a rosy picture. But Iâll wait for the signs to appear in the forthcoming results before considering a sell. Till then letâs keep a close eye.