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Edited Transcript of ADANIPORTS.NSE earnings conference call or presentation 4-Feb-20 10:59am GMT

Q3 2020 Adani Ports and Special Economic Zone Ltd Earnings Call

Ahmedabad Feb 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Adani Ports and Special Economic Zone Ltd earnings conference call or presentation Tuesday, February 4, 2020 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Deepak Maheshwari

Adani Ports and Special Economic Zone Limited - CFO

* Karan G. Adani

Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director

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Conference Call Participants

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* Amish Shah

BofA Merrill Lynch, Research Division - Director

* Ankit Panchmatia

Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst

* Ankita Bora Shah

Elara Capital, Inc. - Associate VP of Institutional Research

* Ashish Shah

Centrum Broking Limited, Research Division - Analyst of Infrastructure and Airlines

* Lokesh Garg

Crédit Suisse AG, Research Division - Research Analyst

* Mohit Kumar

IDFC Securities Limited, Research Division - Analyst

* Prateek Kumar

Antique Stockbroking Ltd., Research Division - Analyst

* Swarnim Maheshwari

Edelweiss Securities Ltd., Research Division - Research Analyst

* Vibhor Singhal

PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services

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Presentation

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Unidentified Analyst, [1]

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Hello, and good evening, everyone. On behalf of Morgan Stanley India, I welcome you all to Adani Ports and SEZ Q3 and 9 Months FY '20 Earnings Conference Call.

From the senior management, we have with us Mr. Karan Adani, CEO and Whole Time Director; as well as Mr. Deepak Maheshwari, CFO and Head of Strategy. I request Karan to make his opening remarks followed by Deepak, following which we will have a Q&A session. Thanks, and over to you, Karan.

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [2]

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Good evening. Welcome to the conference call of Adani Ports and SEZ Limited to discuss operation and financial performance for 9 months ended December 2019. During 9 months FY '20, we achieved a throughput of 165 million metric tonnes, translating into a year-on-year cargo volume growth of 8%. This is against 5% cargo volume growth registered by all India ports.

In container, APSEZ handled 4.63 million TEUs, registering a growth of 8%. This is against 4% container growth by all India ports. The consistent outperformance reflects our resilience and ability to grow across all our operating ports.

For the 9 months ended December 2019, while operating revenues grew by 14%, consolidated EBITDA grew by 15%. Consolidated EBITDA margin expanded by 100 basis points to 66%. Port revenue and EBITDA during the same period grew by 11%. Port EBITDA margin continued to be at 70%. Deepak will later take you through the other details of the financial numbers.

Coming to update on acquisitions. Krishnapatnam acquisition is on track and expected to be completed in quarter 1 of FY '21. The equity portion of INR 5,520 crores will be funded through internal accruals and existing cash balances.

Let me now share some updates on operational aspects. In quarter 3 FY '20, Mundra LPG handled volumes of 100,000 tonnes. In quarter 4 FY '20, we expect Mundra to handle additional 150,000 tonnes of LPG. Happy to inform that Mundra LNG Terminal with a capacity of 5 million metric tonnes has commenced operation in January 2020. In Q4 of FY '20, we expect Mundra to handle 300,000 tonnes of LNG.

Coming to Dhamra Port. Dhamra Port in the 9 months of FY '20 registered cargo volume growth of 44%, thus surpassing full year FY '19 cargo volumes of 21 million metric tonnes. Increased rig availability enabled Dhamra Port to handle higher cargo volumes, while Adani Logistics Limited operated 147 rigs under GPWIS from Dhamra Port. Average rig availability in Q3 FY '20 has also increased from 15 rigs per day to 20 rigs per day. The port continues to focus on adding new types of cargo, namely gypsum, fertilizer and clinker imports, which are handled through road.

Coming to update on Mundra Port. For 9 months FY '20, Mundra Port registered a cargo volume growth of 3%. This was on account of higher coal volumes handled for APL and CGPL. The growth at Mundra would have been much higher, but for lower crude volumes. HPCL and IOCL imports were lower, which led to lower crude volumes. In quarter 3 FY '20, at Mundra, we have added 5 new services, which will add 230,000 TEUs annually.

On Logistics, Adani Logistics is on track towards its goal of expanding Logistics footprint across India, building multimodal logistics park, warehousing, rail network and distribution.

Rail volumes handled by ALL in 9 months FY '20 registered a year-on-year growth of 111%. Rail volumes increased due to addition of new rakes, realignment and adding new routes.

Revenue in 9 months FY '20 grew by 56% and EBITDA grew by 186%. EBITDA margins increased from 15% in 9 months FY '19 to 27% in 9 months FY '20.

Adani Logistics Limited is on track to operate 60-plus rakes by end of FY '20. It is currently operating 56 rakes, which includes container rakes, rakes under GPWIS, green rakes under Own Your Wagon Scheme and an auto rake.

Coming to the operations of Adani Agri Logistics Limited. It handled 0.92 million metric tonnes of cargo in 9 months FY '20 and is on track towards a target of 1.3 million metric tonnes in FY '20.

Currently, Adani Agri Logistics has 8 silo units under implementation. In quarter 3 FY '20, Adani Agri Logistics Limited participated in a tender floated by UP State Government for 3 more locations for an addition of 150,000 metric tonne capacity.

With commissioning of Malur Logistics Park in Q3 FY '20, ALL now operates 5 logistics parks. It is also developing a logistics park in Nagpur and warehouses at Kattupalli, Taloja and Mundra, which will be commissioned in H1 of FY '21.

To conclude, APSEZ, with its pan-India presence, has been continuously outperforming Indian cargo volume growth. In FY '20, we expect to achieve cargo volume of 224 million to 226 million metric tonnes, revenue growth of around 13% and EBITDA growth of around 14%. We expect cash flow from operations after change in working capital, investing activities to be in the range of INR 2,250 crores.

Now I request Deepak to take you through the financial numbers.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [3]

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Thank you, Karan, for the introduction. During 9 months FY '20, operating revenue grew by 14% to INR 8,952 crores from INR 7,843 crores in 9 months FY '19, on the back of 11% growth in Port revenue and 56% growth in Logistics revenue.

Consolidated EBITDA grew by 15% to INR 5,921 crores on the back of all-round growth in Port revenue, Logistics revenue and port-led development income.

Consolidated EBITDA margin expanded by 100 basis points to 66% in the 9 months FY '20. APSEZ was developing the Dhamra LNG Terminal, and an agreement was entered with Total for development of the project. Few conditions, which were to be completed, are now completed, and thus resulting in recognitions relating to port and terminal infrastructure development during this quarter.

Depreciation in 9 months FY '20 has increased by INR 213 crores due to capitalization of assets at Mundra, Dhamra and Kattupalli, in addition to the Logistics business.

During 9 months FY '20, interest cost increased because of increase in gross debt from approximately INR 24,500 crores to approximately INR 31,200 crores, which includes U.S. dollar bonds for capital expenditure and rupee financing for acquisitions and increase in onetime issuance repayment expenses.

Healthy growth in cargo volumes, operating revenue and EBITDA have resulted in PBT increasing by 13% to INR 3,987 crores and PAT increasing by 27% to INR 3,439 crores in the 9-month period for FY '20.

Let me give you a short update on Dighi and Myanmar ports. In Dighi, post the selection of APSEZ as successful bidder, proceedings at NCLT and NCLAT are underway. For Myanmar, the construction work has commenced, and we are on track to complete Phase 1 in FY '22.

With this, we open the lines for question and answers.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Mohit Kumar from IDFC Securities.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [2]

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Congratulations on good set of numbers. Sir, my -- I have 2 questions. Sir, firstly, on the crude, the Mundra volumes are impacted by the decline of crude oil volumes from HPCL and IOCL. Sir, has it recovered in the January? And how do you see the Q4 panning out? And are you fairly confident of meeting this bottom line of guidance?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [3]

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So on crude volumes in -- at least in -- we expect IOC to close around 8 -- 7.5 million to 8 million tonnes and HMEL to be closing around 11 million tonnes by end of this year. We expect -- we are very confident in terms of reaching our target of 224 million to 226 million tonnes. That's why it's such a narrow gap that we have given.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [4]

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And sir, second is, what is the status of Dighi Port acquisition? Do you expect it to get finalized by March?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [5]

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Right now, the matter is in NCLT. I think safely said, it would happen in the first quarter of next year, if it does happen.

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Mohit Kumar, IDFC Securities Limited, Research Division - Analyst [6]

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Okay. Sir, last one, the Mundra LPG you have commissioned in this quarter. Sir, is there any guidance in terms of volumes for FY '21 from this particular terminal, which you can provide?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [7]

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So for FY '21, we expect around 1.5 million tonnes of LPG volumes because we've just -- we are about to sign 2 agreements, 1 with HPCL and other with BPCL. So we would be expecting next year to be around 1.5 million tonnes.

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Operator [8]

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The next question is from the line of Prateek Kumar from Antique Stockbroking.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [9]

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I have a few questions. Firstly, regarding the SEZ income. So we have reported slightly higher margins, like, over 90% in this segment this quarter versus generally 70%, 80% or something. So any specific additional income there?

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [10]

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So the SEZ income includes the income which is relating to the fair value gain from the agreement with Total, which is, if you see the Note 5, the INR 434 crores. So that's included in the SEZ income because that's all relating to infrastructure and port-led development.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [11]

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Right. So most of the top line has got converted into EBITDA, like -- so no construction or land development cost. I mean no material and land development cost has been factored there?

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [12]

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That's all factored into the value itself.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [13]

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Understood. And sir, in Logistics segment, your top line, I mean, I understand this quarter you integrated B2B logistics also. I mean you integrated in -- towards the end of last quarter. So this quarter should have full impact of that. Despite that, your top line has dipped quarter-on-quarter and your margins also have, like, slipped versus first half of FY '20. Any specific things to read there?

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [14]

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Please give us 1 minute. So we can look at the data once again. But overall, from a 9-month perspective, if you were to look the AA -- or the overall Logistics business has become INR 677 crores in revenue, where ALL has been around INR 500 crores and B2B has also been around in the range of around INR 100 crores. So there are -- the integration for B2B is in full swing. So you will see the full benefits of that coming through in this quarter.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [15]

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And regarding margins, have also slipped because these are -- I mean, ALL is a higher segment margin -- or higher margin segment. So but despite that, in 3Q, margin looks lower.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [16]

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So the overall margin is in the range of around 27%, and the EBITDA from AALL is around 1/3, which has a higher margin. So on the whole, if you were to look at the margins which are coming from the Logistics business, that would be in the range of around 17% to 20% -- 17% to 22%, depending on whether we're looking at B2B or ALL. So it's largely in the same range of around 20-odd percent for the pure logistics business.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [17]

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Right. And just one question on your Others volume segment. So we have put like 35% growth in that segment. In fact, on a quarter-on-quarter basis, also the volumes look quite stable or, I think, growth there also. So which specific categories are contributing to growth there? And I mean, what are the per tonne margins there versus, like, let's say, how it plays versus crude and container -- sorry, coal and container?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [18]

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So the volumes that we are talking Others is fertilizer, iron ore, clinker, gypsum and minerals like bauxite and bentonite. Generally, the margins in per tonne basis, they're very similar to coal. So they should be -- there's actually no difference versus us handling those versus coal.

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Operator [19]

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The next question is from the line of Vibhor Singhal from PhillipCapital.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [20]

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So sir, my question was broadly made -- on the overall trading volumes and the cargo growth that you see, specifically for Mundra, and also for the overall portfolio that we have. Now given the global weakness that we are looking at the [multi kind] as well, and of course, the overall -- the way global trade volumes that might be impacted. Where do you see FY '21 playing out in terms of cargo volume growth? And maybe some commentary on where could some growth come for us? I know we'll probably be -- we'll mark ourselves to be growth for the overall Indian cargo growth, but how do you see the overall cargo growth for ourselves as well as India?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [21]

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Vibhor, it's -- to be honest, it is very difficult for us to comment on that right now. Because we are itself going through the whole process of assessing how the economy is going to behave in the next 6 months to 1 year and what are the impacts that global trade will have, if there is any. What we can assure you and the guidance what we can give is that we will continue -- even next year, our volume growth will be 1.5x that of the India's trade and -- on overall basis. And container, we would continue to be 2x that of total container growth in the country. So we are not changing that guidance. But exact growth number, I think, it's too early for us to tell you right now for next year. Maybe I think May is the right time for us to tell you exactly what would be that sort of guidance.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [22]

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Appreciate that, but I was not looking for a number per se. I was looking for more additional kind of a thing. So doesn't even -- let's say, your discussions with various clients and various shipping lines, doesn't that also that give you a sense of, let's say, directionally, whether there is going to be more optimistic or negative or maybe slightly weaker or stronger than the current scenario?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [23]

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I think everybody is grappling with that -- with the answer to that, what you're asking. I think to be honest, genuinely, to give you a sort of a intelligent answer, it will take us another 1 month or 1.5 months to come back and tell you directionally whether it's going to be 6%, 8%, 10%, 4%. I mean it will be very hard for us to tell you right now.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [24]

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And I'm sure you'll appreciate that some of the situations are evolving in nature. It's very difficult for us to put our hand out and say this is where things are going to land. So as Karan mentioned, we've always benchmarked ourselves as compared to how we see the overall market growing. And you would see that in our numbers, even this -- in this particular quarter and for this particular 9-month period as well, where we have been in the same range of around 1.5 to 2x the overall growth in the market. And our businesses are resilient. And we think that we'll be able to maintain the same and -- while still continuing to maintain our EBITDA margins.

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Vibhor Singhal, PhillipCapital (India) Pvt. Ltd., Research Division - VP & Lead Analyst of Infrastructure and IT Services [25]

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Sure. Well said. Just one last question from my side. Can I have the gross debt number at the end of the quarter at the consol level?

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [26]

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So as you know that we don't typically end up giving the gross debt number or net debt number at any quarter, that's typically given only 6 months. But broadly to say that our debt levels are -- and our net debt levels are in the same range as what we had said in September.

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Operator [27]

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The next question is from the line of Swarnim Maheshwari from Edelweiss.

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Swarnim Maheshwari, Edelweiss Securities Ltd., Research Division - Research Analyst [28]

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Sir, maybe a tough one, but just wanted to understand, are we facing some disruption in the current container volumes due to this coronavirus outbreak? And also, if you can just quantify what is the percentage of volume that we will handle from the vessels originating and -- from the Chinese ports?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [29]

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Swarnim, the impact of this coronavirus, I think, on the overall trade, and specifically to us, I think it's -- I think, so far, we have not faced that impact. We've not seen that impact coming in. I think the -- how much will it be on a shorter term, that is 3 to 4 months. I think it will take us at least 1 month to understand how the China -- Chinese -- China is reacting to this thing.

In terms of our total volume for APSEZ, our volume is less than 4% which is originating from -- 4% of container volume, sorry, not 4% of overall volume. 4% of container volume is what is originating directly from China. So to be -- we, so far, all the shipping -- we have been talking to our customers, shipping lines. We don't -- we have not seen any realignment or any impact because of this thing as of now. And we don't foresee it till March, at least till March. The guidance what we have given, that has taken all of this into account.

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Operator [30]

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The next question is from the line of Ankit Panchmatia from B&K Securities.

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Ankit Panchmatia, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [31]

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Sir, if I heard it right, I believe that the debt number, we're close to INR 31,000 crores as on December. Sir, just to get your view that if we kind of incorporate Krishnapatnam acquisition as well, what are we targeting for FY '20 exit debt rate or exit debt levels, which we are -- we have in mind?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [32]

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So first of all, I think, we didn't give out a gross debt number. So I just want to correct you there. What we have said is that we're largely in the same range on the net debt basis. If you were to look at our overall plan from a Krishnapatnam perspective, we have said that Krishnapatnam will largely be funded from the cash accruals that we have in our business. And we have had the same discussions, and we have explained our financial strategy to all the rating analysts. And you would have seen that all the rating analysts have continued with the same rating and with a positive outlook for us.

What we do expect is that as we implement Krishnapatnam acquisition and the overall EV-to-EBITDA of an acquisition, because it would logically include the equity value as well, is going to be higher than our debt-to-EBITDA. So we would, for a brief period, end up with a debt-to-EBITDA number which is higher than our typical debt-to-EBITDA, which is in the range of 3% to 3.5%. But having said that, we are very minded that we should by the end of the next financial year come back to the same debt-to-EBITDA, and we continue to believe that the right optimal structure for our business from a long-term perspective is to maintain the strong investment-grade rating that we have. And we'll maintain our leverage ratios and our financial ratios in order to be able to continue with that strong rating.

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Ankit Panchmatia, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [33]

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Right. Right. Right. But sir, just any ballpark exit debt number could be much of a help for us maybe according to you.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [34]

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Sorry, could you repeat that question?

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Ankit Panchmatia, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [35]

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Any ballpark number of debt levels for exit of FY '20 would be much helpful for us according to your rough-cut estimates.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [36]

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See the thing is it also becomes a function of when Krishnapatnam gets consummated. And so we are -- as Karan did mention that it's likely to take place in quarter 1 of the next financial year. But we are trying to see if we can do it even in this part of the year. Hence, it becomes a little more trickier to give the debt number.

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Ankit Panchmatia, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [37]

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Okay. Sir, any rough estimate of size of Dighi Port acquisition? What could that be, any ballpark number on that side?

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [38]

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So from a Dighi Port perspective, we have put in the bid at around INR 650-odd crores. And so the cost of acquisition of Dighi Port will be INR 650 crores.

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Ankit Panchmatia, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [39]

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Okay. Okay. And sir, this guidance, the long-term guidance, which we are talking about of 400 million metric tonnes. This includes our KCPL estimates as well? Or these are -- this would be adding up or building up on this 400 MMT target which we have set?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [40]

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No. So the 400 MMT target was without KPCL. If you see the presentation that we have just sent out, the -- with KPCL, now instead of 400 MMT, our number is coming to -- around 425 MMT, 430 MMT.

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Ankit Panchmatia, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [41]

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Right. Right. Okay, sir. And sir, any update regarding your view of this new coal mining licenses and tweets which are being made regarding coal mining. So do we see the imports steadily getting lowered and domestic coal trying to offset those imports?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [42]

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No. So I think if you see, and as what we've always been saying, that on a steady-state, we would still expect the country to import around 120 million to 130 million tonnes of thermal coal. Because there are power plants on the coastal side, which would require -- which would be beneficial for them to run on imported coal. And second, even with the domestic coal coming in, there will be a mixing of high-value international coal, whether it's South African, Indonesian or Australian coal that will happen. So under -- even on a steady-state basis, we would expect 120 million tonnes to be there as a worst-case scenario, which we had shared in our 5 year -- I mean, when we did the 400 million tonne presentation, in that we had taken the worst-case scenario.

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Operator [43]

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The next question is from the line of Ashish Shah from Centrum Broking.

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Ashish Shah, Centrum Broking Limited, Research Division - Analyst of Infrastructure and Airlines [44]

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My first question is on Kattupalli. We have seen a good growth in the cargo. However, the margin has actually come off. So anything particular to read there?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [45]

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Sorry, just 1 second. So you can see that the overall volume in Kattupalli has increased from 6.53 MMT to 8.01 MMT, which is a 23% increase in the overall cargo volume in Kattupalli. Then there is a onetime expenditure, which is relating to the RFID cost, right? So there is an RFID cost over the 9 months, which has costed us around INR 7.2 crores, and the same thing on the revenue side only adds up to around INR 7.6 crores. So to that extent, it impacts the overall EBITDA margins.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [46]

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But if you see on a 9-month basis, we are more or less in the same range in terms of the margin.

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [47]

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Despite the RFID costs.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [48]

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Despite the RFID costs, yes. So the reason for this quarter would be -- it's a onetime expense. It is not any structural changes.

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Ashish Shah, Centrum Broking Limited, Research Division - Analyst of Infrastructure and Airlines [49]

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Sure. So my primary question was that there has not been any change in the mix or anything like that. I mean the mix is what was -- there could have been some one-off factors why the margin is low.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [50]

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Yes.

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Ashish Shah, Centrum Broking Limited, Research Division - Analyst of Infrastructure and Airlines [51]

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So we should see this margin go back to, let's say, where we were at...

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [52]

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Yes, yes. You should see Kattupalli to be ending around 59% -- 59%, 60% is what you should expect.

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Ashish Shah, Centrum Broking Limited, Research Division - Analyst of Infrastructure and Airlines [53]

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Sure. Sir, secondly on Dahej, obviously, the port cargo has been impacted because of the coal -- lower coal imports and all. But any medium-term outlook you have in terms of what you have to do with the asset because the volume there is not stabilizing, and we were looking at adding some more cargo streams. But despite that, the volume is not really stacking up there.

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [54]

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So to be honest, the way you should look at Dahej is along with Hazira, especially for bulk, because we use Hazira and Dahej to interchange cargo, looking at where we would get profitability as well as where we would look at -- where we can manage excess flow of cargo without incurring additional CapEx at either of the port.

So the way you should -- the way we look at it is Hazira and Dahej are, especially for bulk, they are quite fungible in terms of where you want to move that volume. So we would continue to do that, keeping in mind where we get the maximum value from the customer and where we can -- if we are seeing any congestion, we can divert the cargo without losing it to competition.

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Ashish Shah, Centrum Broking Limited, Research Division - Analyst of Infrastructure and Airlines [55]

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So would you expect this level of cargo to grow from here or Dahej is probably going to be at roughly 2 million tonnes a quarter or about 8 million tonnes, 9 million tonnes annually? Or do you see at some point going to 12 million tonnes, 15 million tonnes?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [56]

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So I would say that -- we would expect Dahej to be around 8 million -- 9 million to 10 million tonnes, not more than that.

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Ashish Shah, Centrum Broking Limited, Research Division - Analyst of Infrastructure and Airlines [57]

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Sure, sir. Sir, lastly, you've spoken about some shipping lines, some -- 4 shipping lines getting added at Mundra. So what is -- what are those shipping lines? And what is the nature of the cargo? Is it EXIM? Is it transshipment?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [58]

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It's all EXIM cargo in nature. Bala will come -- we will give you more details in terms of which are the customer and which are the routes, but it is all EXIM cargo. There is no transshipment over there.

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Operator [59]

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The next question is from the line of [Chintan Parekh] from CRISIL.

As there is no response, we'll take the next question from the line of Ankita Shah from Elara Capital.

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Ankita Bora Shah, Elara Capital, Inc. - Associate VP of Institutional Research [60]

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Sir, I had a question on the other income number, which has been high for the first 9 months at around INR 1,400 crores versus last year already a high number at INR 1,360 crores. So is this number -- how this number is likely to shape up going forward? And what is it that we can read into this?

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [61]

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So this number, as you're probably aware, we have been -- we have raised certain amount of liquidity. We have created it because of the acquisitions which are planned. And hence, that other income is slightly on the higher side because of the investments that we have made while keeping our cash position and our liquidity in order to make the acquisition. You should expect that this number would reduce going forward in the next year as we complete the various acquisitions that we have currently planned.

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Ankita Bora Shah, Elara Capital, Inc. - Associate VP of Institutional Research [62]

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So could it go back to INR 1,000 crores, INR 1,100 crores kind of a range that was there earlier? That would be a safe number to assume?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [63]

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For the next year perspective, yes, it will start declining in any case because we will not be keeping the same amount of cash. And once we complete the Krishnapatnam acquisition, then it should -- we should expect the numbers to come down to the numbers that you indicated.

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Ankita Bora Shah, Elara Capital, Inc. - Associate VP of Institutional Research [64]

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Okay. And the cash outgo for Krishnapatnam will happen in 1Q?

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [65]

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Most probably, yes. Most probably.

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [66]

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Yes. We are waiting for CCI approval. So once the CCI approval is through, we will be closing the transaction.

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Ankita Bora Shah, Elara Capital, Inc. - Associate VP of Institutional Research [67]

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Perfect. And how is the Snowman Logistics acquisition, an update on that front?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [68]

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The Snowman Logistics, we are expecting to buy the promoter stake by end of this month, February end. And open offer -- and the whole transaction would be closed by March end?

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [69]

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Yes.

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [70]

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By March end, we would expect the open offer as well.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [71]

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So we are currently waiting for the letter of offer to be cleared by SEBI. And once that is done, then we'll start implementing the various steps. But we are expecting it in short order.

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Ankita Bora Shah, Elara Capital, Inc. - Associate VP of Institutional Research [72]

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Okay, okay. And sir, would you be able to share the total volumes handled by Adani Logistics by any chance?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [73]

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Yes. You want the rail volumes or...

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Ankita Bora Shah, Elara Capital, Inc. - Associate VP of Institutional Research [74]

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Sir, the total volumes, if you can break it up in rail and other cargo handled?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [75]

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The total rail volume for 9 months is 232,983 TEUs. And where's the terminal volume? Actually, we will send it to you separately, if it is okay.

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Ankita Bora Shah, Elara Capital, Inc. - Associate VP of Institutional Research [76]

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Okay, sure, not an issue. And also, even I had that question on the Q-o-Q decline in the top line and margins for Adani Logistics business. So if you could just kind of help us consolidate the number in terms of segment-wise amount so that we can exactly see where there could have been a miss in the numbers?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [77]

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Sure. I think we will -- we can send you that whole thing separately, if it is okay. We will give you breakup in terms of ALL, AALL, B2B, and -- yes, so we will give you a breakup of that, so that will give you an idea.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [78]

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And just to answer your question about terminal TEUs, the terminal TEUs for the 9-month period is 247,411.

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Ankita Bora Shah, Elara Capital, Inc. - Associate VP of Institutional Research [79]

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247,411 TEUs. Okay. And how does this stack up in terms of Y-o-Y? Just the growth number, if you can share it.

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [80]

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So if you see Patli, which is our biggest terminal, that has grown from 110,000 TEUs to 145,000 TEUs. So that's a 31.6% increase. And overall, including what we have started in Mundra and what we have acquired from B2B, that will go up to an increase of around 39%.

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Ankita Bora Shah, Elara Capital, Inc. - Associate VP of Institutional Research [81]

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Sorry for my ignorance, but -- which is your biggest terminal?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [82]

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Patli.

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Ankita Bora Shah, Elara Capital, Inc. - Associate VP of Institutional Research [83]

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Patli, okay. And our CapEx continues as per guidance, no change there?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [84]

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Yes.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [85]

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No change. Yes.

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Operator [86]

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The next question is from the line of Prateek Kumar from Antique Stockbroking.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [87]

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Sir, can you give a more precise guidelines for commissioning of Myanmar port and Vizhinjam port?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [88]

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I think for Myanmar, it continues to be in the same -- the construction at that -- on Myanmar is continuing. And our CapEx, as we had indicated in the past, continues to be in the same range. And precisely, we are -- we think that we will -- we are trying to get 1 quarter in the year after. But as we have said, we'll complete everything in 24 months. And so we should -- so we will start in FY '22.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [89]

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So it's first quarter FY '22?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [90]

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First quarter FY '22 or last quarter of FY '21. But FY '22 is what we have...

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [91]

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Full year of impact.

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [92]

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Yes. That's right.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [93]

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And sir, the Vizhinjam port?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [94]

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Vizhinjam port would be by end of calendar year 2022, the Phase 1.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [95]

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End of '22. So it's FY...

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [96]

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December 2022.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [97]

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Oh, so it's FY '24.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [98]

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It is FY '23 because it's December '22.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [99]

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Full year of impact then like in FY '24, that is.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [100]

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Yes, yes, yes.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [101]

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And just one question on, how much is the equity investment in this Myanmar port you have, like, I mean, excluding net of...

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [102]

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Sure, sure. So we don't fund projects on a project finance basis, and hence, there is no specific debt-to-equity for any of the 100% subs that we have. It is financed on a corporate basis. So it's completely financed out of the debt or the cash flows that we have at APSEZ. So there is no specific debt equity for that particular project.

But if I may just help you, the total amount of money that we plan to spend on Myanmar in this particular year will be in the range of around INR 1,000 crores and a similar number for next year.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [103]

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Right. And in this quarter, we have -- like other income has remained high, like interest expense fallen like around 17% quarter-on-quarter. You said the net debt number, roughly the same. So the gross debt has like dipped to that extent.

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [104]

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So that's because -- if you go back to what we had announced at the end of the September quarter, there were also one-offs which were coming in the interest expense for that particular 6-month period, which were arising from the premium that we had to pay when we refinanced the U.S. dollar bond.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [105]

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Okay. So that was part of September quarter interest expense?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [106]

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That's right.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [107]

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And for SEZ income for full year, we continue to expect the INR 800 crore to INR 1,000 crore number for FY 2020?

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [108]

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Yes, that's right. We continue with the guidance -- with the earlier guidance.

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Prateek Kumar, Antique Stockbroking Ltd., Research Division - Analyst [109]

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Okay. Just one question on budget. So any takeaway would you have from budget for like port sector or your company?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [110]

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To be honest, we're just focusing on our results right now. So maybe we can do that offline informally.

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Operator [111]

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The next question is from the line of Lokesh Garg from Crédit Suisse.

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Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [112]

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The first question that we wanted to ask you, basically, I am reading the notes to accounts. In Note #6A, there is mention of a contract settlement with a customer. Can you give a background to this in -- as to what -- this is probably the note which was earlier carried with INR 200 crore advance received from this customer, and now there is some settlement which has happened. Can you please share background for this?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [113]

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Sure. So this is the dispute that APSEZ has been having with Mundra LNG Terminal. So that is GSPC and -- GSPC. And this is against the port infrastructure that we have developed for them and the amount payable over there. So right now, we have reached -- we have agreed to go into an arbitration. And part of that payment is they paid INR 333 crores right now, and they would be paying another INR 333 crores in next 1 month's time. And the remaining amount will be going into arbitration with GSPC. Meantime, we have commissioned the terminal so that the volume starts flowing into the port.

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Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [114]

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Yes. What is the remaining expectation amount in this case?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [115]

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It's hard to say -- our -- it's a matter for arbitration. It's hard for us to tell you what will be the remaining amount. What we can say is that our claim is another INR 800 crores on top of what we have already achieved -- what we have got -- INR 1,200 crores, sorry.

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Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [116]

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INR 1,200 crores over what we have got already? This is for the port infrastructure charges that you had to charge this customer?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [117]

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This is for -- yes, so this is what our claim is. Now let's see where the arbitration comes. Once we start the arbitration proceeding, it's -- we have to see where we reach. This is our claim, I'm just clarifying. This is our claim.

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Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [118]

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Yes. And the 1.5 million tonne that you shared earlier in the call is LNG volumes, right?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [119]

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That is LPG volume.

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Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [120]

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What is -- because LNG is also commissioned now, is there a guidance in process?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [121]

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LNG would also be around 1.5 million tonnes.

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Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [122]

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And are there contracts for that, which are already giving visibility to that?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [123]

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No, no. This is what guidance we have got from GSPC. I'm just sharing that directly.

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Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [124]

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Okay. Sure. One question which I wanted to ask you, which is related to your long-term presentation. Earlier when you had shared this in August, you had shared 400 million tonne. But at that point of time, it was ex of Krishnapatnam. Now inclusive of Krishnapatnam, you have revised it to 429 million tonne. And as far as I remember, FY '25 projection of Krishnapatnam was probably closer to 50 million tonne, 55 million tonne. So why is there some kind of pullback if we include Krishnapatnam?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [125]

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That is predominantly because we would have realigned the Kattupalli expansion keeping in mind now Krishnapatnam coming in.

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Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [126]

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So you have pulled back Kattupalli container terminal expansion?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [127]

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Not the container, but the bulk expansion, we would definitely not do right now in Kattupalli, since we already have now Krishnapatnam.

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Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [128]

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And the details of Mundra volumes for Q3 as well as 9 months in containers seems to suggest that CT3, which is the MSC JV, seems to have gone down meaningfully. What is happening? And when can we recover from this?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [129]

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The degrowth is mainly in transshipment volume, not in the EXIM. EXIM volume has been growing quite substantially, actually.

So what we are seeing, degrowth is only on the transshipment because of transshipment volume falling off.

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Lokesh Garg, Crédit Suisse AG, Research Division - Research Analyst [130]

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So why is it happening? Is there a recovery from it?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [131]

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No. It's basically realignment at the shipping line there.

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Operator [132]

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(Operator Instructions) The next question is from the line of Amish Shah from Bank of America.

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Amish Shah, BofA Merrill Lynch, Research Division - Director [133]

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The LNG, LPG, you did speak about 1.5 million tonnes of volumes near term. But I just wanted to understand that given the recent gas licenses awards, over the long term, does that help that side of the business?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [134]

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Sorry, Amish, can you repeat that?

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Amish Shah, BofA Merrill Lynch, Research Division - Director [135]

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So in the near term, you have given the guidance of 1.5 million tonnes of volumes for LNG and LPG. But over a long term, I just wanted to understand that given the recent large gas distribution licenses being awarded by the government, how does it help that side of the business?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [136]

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Sure. As you know that LPG terminal is -- capacity is 3.2 million tonnes and LNG capacity is 5 million tonnes. So with -- obviously, with the recent announcement, we would look at fast-tracking the utilization of those -- both those terminals.

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Amish Shah, BofA Merrill Lynch, Research Division - Director [137]

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Sure, but I just wanted some understanding that, is there some direct correlation that we can draw that once these licenses come online, does the volume definitely go up? And does it benefit our ports?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [138]

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See, to be honest, more than the city gas distribution, you have to keep an eye on the commissioning of the fertilizer plants and the conversion of the refineries from NAFTA to gas. I think you need to look -- keep an eye on those. So the day those conversions happen and those projects are commissioned, the jump in the volume will be much higher than what you will get out of CNG and PNG business.

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Amish Shah, BofA Merrill Lynch, Research Division - Director [139]

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Okay. Secondly, in this quarter, third quarter FY '20, if I look at the Mundra coal volumes, excluding for Adani Power, it seems like a Y-o-Y decline. So is that, again, just some coal realignment amongst your western side ports like Dahej and Hazira? Or is the coal volumes in the near term coming off?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [140]

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No. I think it would be a little bit of realignment between Tuna and Mundra, especially on the trading coal, not anything else.

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Amish Shah, BofA Merrill Lynch, Research Division - Director [141]

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Okay. So as a full year basis, it's not as if we have to budget for a declining trend of coal volumes into the country?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [142]

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No.

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Amish Shah, BofA Merrill Lynch, Research Division - Director [143]

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Okay. And then is the Dhamra rake availability issue completely behind us? Have we maximized on the rake issue? Or are there more rakes that we will probably add in the Own Your Wagon policy? And maybe the volumes can scale up there?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [144]

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So we will definitely look at adding more rakes over there. I would not say that rake issue is -- I mean, rake -- adding new rakes is behind us. We will keep definitely look at adding more rakes over there. And availability-wise, right now, touch wood, we are averaging 17 rakes in Dhamra. And we -- so far, at least till March, we are not seeing any issues over there. And even next quarter, we are -- I mean, next year also, we don't foresee any major issues.

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Amish Shah, BofA Merrill Lynch, Research Division - Director [145]

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Okay. The reason I asked is somewhere in the presentation, you mentioned that there is some cargo, bulk cargo that you've started handling through road. So is it supposed to be by road or is it...

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [146]

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No. It is supposed to be by road.

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Amish Shah, BofA Merrill Lynch, Research Division - Director [147]

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Okay. Okay. And then lastly, my question is around -- maybe it is too early, but there is a lot of land parcel or SEZ around your eastern side port as well like Krishnapatnam, Dhamra, Kattupalli. So is there some holistic planning there, where -- that you can share and should we budget for some additional revenue stream through those SEZ land parcels?

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [148]

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I think you should -- at least in the near term, that is in next 2 years, you should budget for Dhamra LNG. The remaining, right now, we are still in the planning stage, and we will come back to you.

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Operator [149]

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Ladies and gentlemen, that was the last question. Thank you. I now hand the conference over to the management for closing comments.

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Karan G. Adani, Adani Ports and Special Economic Zone Limited - CEO & Whole Time Director [150]

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So thank you very much for -- to everybody for participating in this call. And we look forward to speaking with you. And if you have any specific questions, please do feel free to reach out to either Bala or to Satya, and they will be very -- will be able to help you with any further details that you need. Thanks now.

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Deepak Maheshwari, Adani Ports and Special Economic Zone Limited - CFO [151]

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Bye.