things take long time with the railways. first they do a job. then there
are inspections, safety audits and it takes long to get clearance.
management would want operations one full quarter because the interest
rates kick in from the quarter they start operations.
Is it fair to assume from q4fy16 pawarkheda logistics park would start commercial operations
Finally, some good news. Rail approval received.
hopefully management will put up some presentation for investors
Wouldn’t really worry about that at the moment.
Earnings themselves will show huge improvements as KMLL earnings are reported in subsequent quarters. Not sure what to expect from march 16 quarter but after that it will definitely catch market fancy.
Disclosure :- This is the top holding in my PF currently. Hence my views may be biased. Do your due diligence before you consider an investment in this business.
Concor is also planning to setup a number of multimodal logistics parks? Is there a chance that these would affect KTIL’s performance. Also, since Concor has a nationwide presence along with presence in Ports, wouldn’t it add more value to customers?
I can’t see how existing projects will be affected significantly. Management has already admitted to the pressure on liquid storage so we can’t expect margin expansion on that front. Other than that I fail to see any significant risk to KMLL business
Dear Sachit,
Could not locate the announcement from the link provided. Also a separate search on the BSE website showed nothing. Can you repost the link or attach the document here. thank you for your efforts.
regards,
SSK
Disclaimer- not invested but tracking closely
Link is the same, I just rechecked on BSE website. I think you may be searching just for day announcements when. Please select ALL when you search for KTIL announcements
Hello,
I have written a stock story:
Kesar Terminals and Infrastructure Ltd.
Cmp: 362.90 Market cap: 190.64 cr.
Background:
Company was incorporated on 21th jan 2008 as a wholly owned subsidiary of Kesar enterprise ltd.
The company has subsidiary Kesar multimodal Logistics ltd which has expanded into logistics and is developing a composite logistics Hub at Pawarkheda, Madhya Pradesh which includes facilities like Private freight Terminal (Rail Terminal), Warehousing and storage terminals, container freight station and cold storage warehouses.
According to latest update dated 29/2/2016, the company has 88.3 acres of land which includes the development of an entire range of infrastructure, rail sliding for cargo and container movement, rail side warehouses, inland container depot, cold storage, food grain warehouse and development of common facilities for putting up agri-processing units.
Core business:
A.) the company’s business is like renting liquid storage facilities to importers and exporters near Kandla port
B.) They also have inland container depot for cargo and container movement, railway terminal and storage for cold chain and food processing cold storage, warehouses, agro based industries value addition service, truck terminal.
C.) Traders of fruits, vegetables and other horticulture produce will have facility of cold storage of 40,000 quintals in the Madhya Pradesh hub.
Bullish viewpoints:
a. Company specific:
According to latest notification, the terminal can now be considered as an operational and it would be developed in 2 phases out of which 1st phase has now become operational.
The company currently operates 2 bulk liquid chemical terminals at Kandla, Gujarat having a combined capacity of 127000 Kilo Litres with a total tank of 64 tanks which includes specialized tanks, such as stainless steel tanks, tanks equipped with heating and insulation facilities and coated tanks which stores speciality products
The company has about 10 acres of land on long-term lease basis at Kakinada port in Andra Pradesh. The company plans to put up both dry cargo warehousing and bulk liquid terminals facilities.
GST passing would be again a boost for Kesar Terminals and Infrastructure
b. Industry specific
The Govt. t’s thrust towards domestic manufacturing is expected to redefine the product flow pattern, increasing volumes will lead to shift from containized movement to bulk movement which creates a huge opportunity for liquid bulk handling at Indian ports
There are in total 13 major ports and 200 non-major ports comprising almost 55% of country’s trade volume. There is a huge transmission from handling typical break and bulk type cargoes to handle specialised cargoes like liquefied Natural Gas and hazardous chemicals due to this inefficiency there is huge opportunity in this segment.
The industry has high entry barriers due to high investment cost in land near ports, constructions and govt. approvals regarding high hazardous chemical storage.
Bearish viewpoints:
Long term borrowings are now 89 cr, of this 11 cr for terminal business and Rs 75.44 cr for Kesar Multi Modal ltd. business at the rate of 11 % to 13.25% p. a. which are payable in 16 to 28 quarterly equal instalments starting after the moratorium period ranging from two to three years from the date of first disbursement of the respective loan.
Capacity constrains
Lack of adequate infrastructure
Revenues are concentrated from kandla port
Any regulatory restrictions may affect the company as well as industry.
Share-holding pattern:
Promoters 59.92%
Corporate 5.74%
Public 27.47%
Fii 0.02%
Dii 4.9%
Others 1.95%
Market cap Free float 76.25
Valuation:
IN CRORES
Mar-15 Mar-14 Mar-13
SALES 42.26 36.24 29.85
SALES% 16.61 21.41 -
EBITDA 25.51 21.64 17.49
EBITDA% 60.36 59.71 58.59
NET PROFIT 14.51 11.00 8.39
NETPROFIT MARGIN 34.34 30.35 28.11
NET PROGIT GROWTH 31.11 31.91 -
EPS 27.61 20.95 15.98
DIVIDEND 3.50 1.50 4.50
Feedback please
Good attempt there smehta,
I’ll like to know more about all the bearish points you have mentioned other than debt concerns.
I’m not sure why you think there is inadequate infrastructure or capacity constraints especially when KMLL phase 1 with PFT is to go operational and there is phase 2 planned in near future.
Also since KMLL phase 1 is about to go operational, revenue flow will start from there, possibly more than the total revenue so far.
Disc :- I’m not implying that there are no possible negative scenarios but above mentioned bearish viewpoints seem backward looking rather than forward looking.
Bearish Points:
But after both the phases in operation, the concern points would be lowered.
Regards
Good attempt smehta.
Once we have a framework of attempting to write a stock story and keep doing it with various companies it helps one in clearing the investment thesis in one’s mind. It also helps one to re visit the investment thesis later on when the question of booking profits or losses arises.
Coming to KTIL, once the KMML phase 1 becomes operational, there should be substantial bump up in revenues and profits. What kind of capacity utilisation happens at Powarkheda needs to be seen.
thank you sir,
Receiving comments from you boosting confidence in me. would keep doing the same.
Thanks again
Debt has been cleared?
Can you please point me to the source where you received this information from?
Sir,
The intention about debt point was clear according to the above point mention in my stock story.
The debt is not cleared still it is a concern.
Samkit Mehta
Hi smetha,
Nice write up. I recently went through this company and read its AR,understood the business and went through the VP members comments. Its a great business. Among the various concerns which we see here, one of them is about high debt. Company has to invest 145 crores in the new venture. Out of this total 50 crores is funded by KTIL (42 cr as share capital and 8 cr as advances). So the rest 100 cr is debt from YES bank. There can be two scenarios -
Scenario 1 -
Business fails completely - company makes a loss. But, that would be restricted to 145 cr only because this is not a manufacturing concern where it has to manufacture any product. One all the facilities are in place, you just have to provide service and collect the rental incomes. But, 145 cr is not your loss, because more than 60% of your investment will be in land and building. The rest of the 40% will be in other infra/machines like cranes, railway lines, etc. You can expect a loss of 50-60 cr. But, what is the probability of happening this. The project has been delayed because of the strike made by the railway officers. They know that the railways (govt) will lose their business and ultimately they will lose their jobs if the private player is allowed to operate logistics business in competition with them. Moreover, its a PPP agreement, so we should be comfortable that it is govt itself who has planned this for long term benefit of the local economy. Management is not mad to invest 145 cr in a project which they feel might not work (even a probability of 5% is high to help the management cancel the project here).
Scenario 2 -
Business is successful - Currently, company’s bulk liquid business is generating 40 cr of top line and 14 cr of PAT for 40 cr of capital employed. Management has told in one interview which I read somewhere on Equity master that they expect the same EBITDA margins for the new business as well. So, with a capital employed of 145 cr, we assume 145 cr of top line. Discount this to 100cr. EBITDA should be 100cr * 60/100 = 60cr. On the 100cr loan company has to pay 11 cr interest and other 10-12 cr as depreciation (assuming 40-50 cr as land where no depreciation is provided). Company should make 39-40 cr of PAT. The probability of success is very high.
So the growth prospects are good. We need to track this story closely.
Here what i want to understand is if this 145 cr is only phase 1 expense or phase1 + phase2 total.
Disc - invested.
Would like to do the same. I have applied for kesar multimodal private ltd. annual report, funding loans and many more from tofler. Would be receiving within 24 hour and will get back soon
Thats gr8 step. Go on and share the details once you have.
Some concerns till date and what we think about them -
1). What would be the OPM of the new business? - 60% confirmed by mgmt…
2). What about the KML operations? - Mgmt has told that KML will contribute 25cr. to topline for FY16 and thereon will add (100cr +) every year. So finally the business is going to operate on full capacity. Till now, only warehouses were given on rent. Now, railway and road logistics business will start. Further, cold chain facility and other services will also pump in additional revenues.
3). How much is the total capex? - Total capex is 145 cr only (for both phase 1 and phase 2). For that they have already taken 75 cr of debt and pumped in 50 cr as equity and advances. Total 125 cr pumped already.
4). Risk at the Kandla plant? - New competition is growing Pipavav port and other private ports on the west coast. This will definitely impact the business of the company, but mgmt was sure of retaining the current margins in future also. This is because still today the highest import/export of crude oil and other chemicals take place from kandla port. This is what my father in law told me who works at IOCL as a top level executive. He also overlooks the port activities among other responsibilities.
5). What about the other two expansion stories? - Kakinada is on track and company will have to re apply for the license at Pipavav port (which they will get easily). The development will start after the phase 1 comes in operation. So, the activity should start this year.
Do provide your suggestions / correct me if wrong anywhere.
Disc - Invested.
Phase 1 of the Pawarkheda facility has already begun operations from end-January. At the AGM, management indicated that it would get a topline of Rs 15-17 cr after the first full quarter of operations. But then with just two months of ops in the first quarter, topline could be just around Rs 5 to Rs 10 crore. Interest liability will kick in, so management could report losses in the fourth quarter. The extent of losses would depend on the rate of interest at which the loans have been availed.
At the AGM management indicated that company had got loans at concessional rates since the facilities to handle agro products were constructed first. If I am not mistaken, rate of interest was around 4 per cent. So interest outgo for Rs 75 cr of debt would be Rs 3 cr for whole year or Rs 75 lakhs per quarter. I find this hard to believe!
Also one has to see how 100 per cent FDI in marketing of food products announced in the latest budget plays out. If KMLL ties up with some foreign investor like Walmart, the returns could be huge.
Right now we are shooting in the dark. I think we have to wait for at least two quarters and the next AGM to see how things are panning out.
