ValuePickr Forum

VRL Logistics - value unlocking due to promoter actions

The way I see is, the first communication itself was pretty bad. There was no reason for the CEO to say he doesn’t care what the shareholders view.

Now whether this was a planned move to irk some shareholders?? Not easy to find out. But overall earlier communication of evaluating the option of entering airlines could have been communicated nicely. Now, to recover that mis communication, they are taking damage control action which seems the better thing to do.

@magnet, it is a tough call to make. We are taking about same promoters who made what VRL is today from 1 truck 20 years ago. I don’t know how to evaluate these promoters. They know their business so well that I want to bet my money on them. I was okay with promoters venturing into a new business in personal capacity but I find it hard to accept that they dumped it within 2 months. These aren’t first time entrepreneurs, they aren’t seasoned veterans who are acting like kids.

The company have corrected quite a bit and is very much closer to its all time low, courtesy airline plans :slight_smile: . Though I feel the company is facing a little margin pressure, GST should do good to the company in longer term. On a consolidated basis, the company is quoting around a PE of 15 which I do not feel is over expensive.

The situation is very much closer to DCB, however we all know that it did got back on its legs after a while. I believe the same will happen with VRL. The current correction is a boon or a curse I believe only time will tell.

Disclosure - Invested .05% of my portfolio and looking to increase it to 1-1.5% during the current correction in SIP mode.

Continuing on my last message, I believe VRL should continue to report pretty much the same number as last years unless we see any growth in the economy overall which I think is still at least 2-3 quarters away. As and when the economy starts kicking in, we will see most of the big transport players reporting better earnings. Also the margin pressure was due to salary increase of the employees.

I remain positive on the sector and much more on the company as India moves forward towards improving infra. One of the few sectors where great work and spends are visible.

The company has also been rapidly reducing the debt over the last several years. From d/e 1.24 to 0.5 in 2015-16. GST will improve the overall efficiency of the vehicles (reduce transportation time as it does not have to wait at every post while crossing the states and also because gst is a +ve for organized sector). Also improvement in roads that is happening across the country should reduce the maintenance cost of the fleet.

disc: tracking position. Looking to add more.

FY17 Q3 Results:

Investor Presentation:

Interim dividend Rs 4 declared

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Has anyone estimated how much time will be saved post-GST due to reduced stoppages at checkposts? Every hour saved is another hour that the truck can be utilized on a productive route.

Disc: Not invested, but tracking the sector

This should provide you insight to it

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Thanks. Browsing on the team-bhp forum turned up this

I had a talk with my transporter whose trucks get us material from Gurgaon to Pune, he said that just the removal of checkposts due to GST where trucks crawl and wait in queue has improved average, the 3118 4 axle truck are drawing under 800 Lit for the 2800km round trip against about 950 before GST era, round trips are also within 4 days against 6 days previously

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Promoter VIJAY B SANKESHWAR has sold 20 Lakh shares today to RELIANCE MUTUAL FUND @Rs340, does anyone know for what this sale is for?

Don’t know much, but looks like they are selling shares for Cash. But they also mentioned last time they will remain largest share holders.

Disc: Invested since IPO, around 50%.

Reduced holding by roughly 2.1%

Disc.: Invested.

VRL has given notice for considering share buy back, looks interesting development.

Buy Back announced at a price upto Rs 460/-(CMP 375)

Its very small size, proxy of dividend. And this is through open market purchase upto INR 460/-

A company buying its shares at such a high valuation doesnt suggest good capital allocation.

They are going for open market buy back and 460 is the maximum cap they have put on price. In all probability, they can finish this exercise within a week or two without impacting price much.

Any article citing the mechanism/dynamics of ‘open market buy back’ would be great to learn; request anyone familiar to post a link.

(My search on the net has yielded superficial information - but experiences of forum members would count more).

With Political support of BJP and turbulence environment of Karnataka, these guys will get a better position. What i see is the stock hoovers around 240 - 310 level multiple times. With change in Karnataka assembly position might give some upper edge on doing additional business from the state. Their position in Maharashtra is doing better, hence they are surviving…

Q2 FY 21 Concall Notes

  • The major segment of our company, the Goods Transport segment, which is – reached the revenue of INR 407 crore, which is around 95% of year-on-year revenue and 2.75x of quarter-on-quarter revenue. Even during this difficult period, we were in a position to increase year-on-year realization per ton by around 10% and reached tonnage to the extent of 85% of quarter 2 of the last year. We reached the EBITDA from [ Duty ] segment to the tune of INR 80 crore in the current quarter, which is the highest EBITDA from this segment in the recent past quarters.

  • The year-on-year EBITDA margin has increased from 13.53% to 19.55%. And in amount, it increased from INR 58 to INR 80.

    • The increase in EBITDA is mainly on account of: one, is increase in realization per ton around 10%, resulted into proportionate decrease in percentage of variable and fixed costs. Proportionate increase in kilometers by own vehicles, out of the total kilometers traveled resulted into decrease in lorry hire charges from INR 37 crores to INR 26 crores. And percentage to revenue is reduced from 8.7% to 6.5%.

    • Increase in biodiesel quantities to ease the pressure of increase in diesel rate, and the rebate on vehicle taxes by the government for the month of April and May, which has been announced later and accounted in quarter 2. The amount is around 60 lakhs in the current quarter.

    • And moreover, because of decline in the volumes in the first half, periodically, we opted for non-use of vehicles. On account of that, we saved one of the vehicle taxes, which is priority payable on these vehicles. And apart from that, during this non-use option period, we have not incurred any expenses on these vehicles; like, there are no tire costs, no driver costs, et cetera. That is also one of the major savings in this current quarter.

    • And another major change in expenses is about a decline in employee cost. This is due to salary cut across all the employees and also reduction in man days working in case of other [ van ] drivers in this period. And apart from that, we got further concession in rent expenses in the current quarter. That has also resulted in the improvement in the EBITDA margin.

  • what I wanted to better understand is that in general, most industry have reported higher volume in a lot of businesses. So then why hasn’t that translated into better volumes for us?
    Sunil Nalavadi
    Our major segment is about the textile business, which is almost around 15% to 16% of the total volume what we are handling. Still, we are lagging behind almost around, say, 8% to 10% decline in this textile volumes. But because of contribution from the other segment, we are in a position to reach around 85%. And again, the trends are now changing. Again, there are improvements in the – after this quarter. I’ll say, for example, in the month of October, again, we have crossed the last year volume. There’ll be some growth in this quarter.

  • In our case, the kind of commodities what we are handling, we have not seen any such of shifts from road to rail.

  • Depesh Kashyap
    Congrats again for a great performance. Sir, you’ve talked about market share gains of 7% to 8% in the last quarter. So have you maintained that or gained further? Can you please talk about it?
    Sunil Nalavadi
    Yes, definitely. When it comes to the nature of other operators or performance of the other operators, still, they are unable to come forward and start the business as usual, especially the unorganized people. That’s the reason actually we gain some of the volume from the market. But in this current quarter also, we maintained that tonnage from the other competitors’ tonnage.

  • Rental Cost
    Because of that, the IND AS adjustment around INR 3 crores to INR 4 crores, there is a reduction in interest and depreciation. And this reduction is around 25 lakhs to 30 lakhs per month, and it will continue up to, say, March this year.

  • As of now, in current half year, we incur CapEx of around INR 10 crores. This is on account of some modification in the vehicles and the open body vehicle we converted into full body vehicle, such kind of CapEx. And we have not added any vehicles during this half year. And next half year also, we are not looking to add any vehicles as of now. Around INR 5 crores CapEx will continue.

  • No, that trend still it is continue because based on our market observation, and a lot of our people are facing the problem. One is the fuel price has increased and there is an issue on their working capital. The government is supporting a lot on [ the SME ] sectors. But still, most of the operators are in a problem to restart their business. Either they are siting on a selective routes, they’re not on a full sale operation like that. That kind of situation is there. And definitely, these circumstances will – are going to benefit us.

  • EBITDA margins
    We reached around 20% in this quarter. But this is – we can continue in the next coming quarters, around 15% to 16% EBITDA level in 2020.
    In the second half, the EBITDA margin will be around 16%.

  • Realization, see, this 10% increase on account of 2 things. One is, say, from the April onwards, [ we tel ] increase the rate, and further increase we did after this increase in the fuel price. Now based on these things, now whatever the freight rate increase in the month of April, that may not be sustainable in the coming quarters. So that’s the reason what we are doing – we are not blindly giving a discount across all the bookings. But on a selective basis, again, wherever the customers feel good volume and all kind of things, then definitely, we are offering some concessions in the rent – in the rate.

  • One is on employee cost, say, on a month-on-month basis, if we compare the February salary versus current salary for the month of September. The saving was in the range of around INR 7 crores per month. So out of this INR 7 crores, whatever salary cut we’ll get up to September, we have – there will not be any salary cut from October. So that amount will increase to the tune of around INR 2 crore per month. But remaining INR 5 crores may be sustainable until March.

  • About passenger year-on-year in this quarter, it has decreased by around 78% revenue. And this decrease is towards the number of passengers, decreased by around 82%. And there is an increase in realization by around 4% to 5%. Again, the increase in realization is on account of [ sales coming ], because government can put certain restrictions that we have to keep certain seats empty in between the passengers and all. So for example, wherever we used to carry around 40 passengers, we are in a position to carry around 20, 25 people. In that case, actually, we increase the rate per passenger. That’s how the realization is improved. But otherwise, if you see overall revenue per trip, it is much lesser.

  • Definitely, if this trend continues – so for example, in the current half, we’re – we did a cash profit of around INR 127 crores. Part of this, majority of the amount, we utilized for the repayment of the debt. Now considering the CapEx plan, we don’t have much a CapEx in the coming quarters also. So definitely, that is going to be substantially reduced. See, out of INR 115 crores, it may reach around INR 40 crores, INR 50 crores, around INR 30 crores, INR 40 crores by the end of this year.

Harshit Goel

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