I had attended the AGM of the Co. sometime back and came back with a feeling that the Co. was poised to grow rapidly from its current level of operations. The Co. has a somewhat chequered history & its young Chairman Rishi Pilani, who has been navigating the Co. through some pretty rough weather in the past, seems determined to change all that! I found him to be both upright and forthcoming. He was quite open to interacting with the shareholders & addressing their queries.
The Co. has two divisions. The logistics division is a high margin business wherein the Co. has storage facilities on various Indian ports to handle liquid cargo like Petro products, chemicals, edible oils etc. It’s current capacity is about 3,00,000 KL in Nhava Sheva, Cochin & Goa. The Nhava Shiva facility in Navi Mumbai (JNPT) which holds about 90% capacity is where all the action is. The port traffic here is heavy leading to high demand for storage facilities. The Chairman said that the Co. was actively considering expanding capacity & would share info as & when it had something concrete to report. He however mentioned that the Co. was in any case looking to further increase existing capacity by increasing the height of the tanks where ever possible.
A word about the business. The demand is so strong that the lessees / tenants themselves are willing to fund capacity increase, repayable against the future rentals! The last phase of expansion at JNPT was so funded. Being a high margin business, the tanks pay for themselves in about 4-5 years. Thereafter, it becomes an annuity business to perpetuity!
The other business is chemicals. This business requires large working capital. I guess having burnt their fingers in the past, the mgt. is perhaps cautious about increasing debt. The Co. is in the process of de-merging the two businesses as there are no synergies between them. The Chairman was hopeful of de-merger by the end of the financial year & was also considering a slump sale if it took longer. My own take is that post the de-merger, the Co. would induct a strategic investor (Why else would it go through the whole de-merger process?)
Going through the filings on the BSE, it appears that the Co. has re-fianaced its earlier loans recently. Such are the cash flows of the business that about half of its current bank loans of about 48 crs, will be repaid by September 2020