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Edited Transcript of AEGISCHEM.NSE earnings conference call or presentation 3-Feb-20 10:30am GMT

Q3 2020 Aegis Logistics Ltd Earnings Call

MUMBAI Feb 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Aegis Logistics Ltd earnings conference call or presentation Monday, February 3, 2020 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Anish K. Chandaria

Aegis Logistics Limited - Vice Chairman, CEO & MD

* Murad M. Moledina

Aegis Logistics Limited - CFO

* Raj K. Chandaria

Aegis Logistics Limited - Chairman & MD

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Conference Call Participants

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* Ankit Gupta;IndiaNivesh Fund Managers;Analyst

* Anup Lal;Mount Intra Finance;Equity Analyst

* Dipan Anil Mehta

Elixir Capital Limited - Chairman of the Board

* Jiten H. Doshi

ENAM Asset Management Company Pvt. Ltd - Founder and CIO

* Kashyap Jhaveri

Emkay Global Financial Services Ltd., Research Division - Research Analyst

* Pritesh Chheda

Lucky Investment Managers Private Limited - Analyst

* Rajesh Kothari

AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director

* Shaleen Kumar

UBS Investment Bank, Research Division - Associate Director and Analyst

* Subhanu Chakrabarti;SBICAP Securities;Research Associate

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Presentation

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Operator [1]

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Ladies and gentlemen, good day. And welcome to the Aegis Logistics Limited Q3 FY '20 Earnings Conference Call.

This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Anish Chandaria, Vice Chairman and Managing Director of Aegis Logistics Limited. Thank you, and over to you, sir.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [2]

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Thank you. I'll be presenting the Q3 results for financial year '20. It was a superb set of results in quarter 3, up significantly quarter-on-quarter as well as year-on-year.

Total revenues from operations was INR 2,169 crores versus INR 1,320 crores a year earlier. That's a rise of 64% year-on-year.

EBITDA for the group was a huge INR 157 crores versus INR 103 crores a year earlier. That's a rise of 53%, and that's a cumulative INR 402 crores of EBITDA for 9 months of this financial year 2020.

Normalized profit before tax, by which I mean excluding the noncash accounting charge of the employee stock plan of INR 42.1 crores for Q3. So normalized profit before tax, excluding the ESPP charge was INR 130 crores versus INR 76 crores a year earlier. That's a rise of 71% year-on-year. And even that figure of INR 130 crores is much higher than the quarter 2 figure of INR 104 crores, the normalized quarter 2 pretax profit up to INR 104 crores. So this quarter was really a fantastic quarter, INR 130 crores of normalized profit before tax.

The normalized profit after tax for the group was INR 101 crores versus INR 65 crores a year earlier. That's a rise of 55%. And the normalized profit after tax after minority interest, in other words, the profit after tax available to common shareholders was INR 92 crores for Q3 versus INR 59 crores a year earlier. That's a rise of 56% year-on-year.

So I think you'll agree with me, this is a great set of quarter 3 results. We've clearly gone up a level in profits in this financial year, and certainly, in quarter 2 and quarter 3.

Now I'll go through the segment analysis to show you the underlying reasons for this set of results. Starting with Liquid Terminal Division. The revenues for quarter 3 were INR 54.8 crores versus INR 46 crores a year earlier, that's a rise of 19% in quarterly revenues year-on-year. The EBITDA for quarter 3 was INR 35.6 crores versus INR 24.6 crores a year earlier. That's a rise of 45% year-on-year in the EBITDA for this division.

So a very pleasing rise, and that confirms that the new capacity we have built in Kandla, Mangalore and Haldia is really performing now with full terminals and very good profitability. And that's good to see that the operating profits are doing very well in this division.

Now I'll go through the Gas Terminal Division. For quarter 3, revenues were INR 2,113 crores versus INR 1,274 crores a year earlier. The EBITDA was an excellent figure, INR 121.8 crores for 3 months versus INR 77.9 crores a year earlier, a rise of 56%. Not only did we cross INR 100 crores in the quarter decisively, but a 56% rise year-on-year shows a truly healthy picture for the Gas division with all market segments in this division rising, as I'll explain now with the sales volume analysis.

Starting with the throughput volumes, the LPG handling volumes in our 3 terminals of Mumbai, Haldia and Pipa, I'm really pleased with this figure. It was a massive 958,293 metric tons handled for 3 months, quarter 3, versus 572,040 metric tons a year earlier. That's a big rise of 68% year-on-year in the LPG volumes handled in our terminals. And just short of 1 million metric tons in a quarter. And by the way, that is even a very large figure compared to the last quarter, which was 751,000 metric tons in quarter 2. In quarter 3, as I said, it was just short of 1 million metric tons, 958,000 metric tons. So it's a really great quarter.

Haldia was -- Haldia terminal was record volumes. Mumbai with IOC, HPCL and BPCL, all bringing imports like in quarter 2, was a record as well. Pipa was also good. So record throughput volumes handled in quarter 3.

Coming to the second segment, bulk industrial sales that is to -- bulk LPG sales to industrial customers was 26,368 metric tons in quarter 3 versus 23,132 metric tons a year earlier, that's a rise of 14%.

The commercial and domestic cylinder segment, that is sales to hotels, restaurants and small-scale industries, under the Puregas brand, Aegis Puregas brand, and the domestic household segment under the Aegis Chhota CIKANDER brand saw a -- really a big rise of 50% year-on-year. So quarter 3 sales was 6,551 metric tons versus 4,371 metric tons a year earlier. That's a rise of 50%, and as a result of our increasing network -- distribution network and the number of bottling plants on a national scale, resulting in this 50% rise in sales in the cylinder segment.

Autogas was 7,328 metric tons in quarter 3 versus 6,006 metric tons a year earlier, that's a rise of 22%. That's a healthy rise in our 115 gas stations. There are more commissioning of stations on the way, and there's also a good pipeline of new dealers over the next 18 months or so. So that's a good, healthy performance in the Autogas segment. I said, I think, in the last earnings call that I confirmed that our margins have gone up to an average of INR 10,000 a ton EBITDA margins in the Autogas segment. So that's -- every ton that you sell more is a very, very good rise in profits, and it adds to the healthy profitability picture.

The sourcing business in quarter 3. The sales were -- sales volume was 441,848 metric tons versus 273,406 metric tons a year earlier. That's a rise of 62% year-on-year. I should say the outlook for this segment for 2020 is probably less sales volumes than 2019 as we did not win the IOC tenders for Kandla and Haldia, the recent tenders for 2020, which were as we had one in the last year. But we're bidding for other tenders of BPCL, HPCL, et cetera, which are coming up in 2020. So this is a small margin business. But we do expect lower sales volume in 2020 compared to 2019.

So the summary for our Gas division. There were -- there was a big increase in sales volume across the board, leading to a 56% rise in EBITDA for quarter 3, and that's a really excellent performance.

Let me now finally turn to the outlook for quarter 4 and a update on the various projects that we are undertaking. Outlook for quarter 4. Liquid Terminal Division expected to perform similarly in quarter 4 as quarter 3, good high levels of revenues and profits. Gas division, we also expect to perform at high levels -- similar high levels of sales volumes in quarter 3 as quarter -- in quarter 4 as in quarter 3, which is a really good signal to investors and analysts. This -- we expect these kind of elevated levels of profitability to be sustained, and it's not just Q2 and Q3 were good, but we expect this to be sustained, driven by the excellent performance of the Gas division.

Now coming to the profits -- projects update, I'm sorry. The Chakan pipeline in Mumbai is expected to start in February, is going through its final technical approvals. So this will, obviously, be a good source of incremental volumes for the next few years, not only quarter 4 but going forward. But we expect this to start this month in February, subject to the final approvals -- technical approvals.

Also the railway gantry project in Pipa and the 2 new spheres, that project is on track. We expect that to be commissioned in quarter 2 of FY '21, that is in the next financial year. And that's a very important project as well for the future of sales volumes in Pipa. That project is on track.

Next, the Kandla LPG terminal, which is a very large project, which we have ongoing. That's also on track. We expect that to be completed on schedule in Q3, quarter 3 of FY '21. That means October, November, December of 2020. And I repeat, we have budgeted sales volumes for FY '22 of 1 million metric tons. That's incremental 1 million metric tons coming out of Kandla is our budget for FY '22.

So conclusion is that all systems go for Aegis in FY '20 in the current financial year. FY '21, FY '22, FY '23, in other words, the medium term, the next 3 years is looking bullish for earnings per share growth, driven mainly by booming conditions for LPG demand and our capacity increases that I just mentioned.

And finally, the Board has approved an interim dividend of INR 0.5 per share, that means 50 paisa per share with a final dividend to be considered by the Board in May.

So that concludes my presentation. We can now take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) We have the first question from the line of Jiten Doshi from ENAM Asset Management.

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Jiten H. Doshi, ENAM Asset Management Company Pvt. Ltd - Founder and CIO [2]

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Anish, congratulations on a wonderful set of results for quarter 3. And as I see, the next 3 years look very good, which you stated, what would be your plans to use this nearly INR 2,000 crores of cash that you aggregate over the next 3 years? I mean you all are going to face a very good problem. It's a problem, but it's a good problem to have because as we can see through the situation, you all are going to be accruing nearly INR 2,000 crores of cash flow over the next 3 years. And I think this is sets the company in another orbit.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [3]

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Well, I won't -- yes, I won't confirm that figure. But yes, as we have discussed many times face-to-face, I think, first, this, obviously, means a healthy dividend policy, a heavy -- a healthy dividend growth rate that we can take if earnings per share is going up, then obviously, shareholders can also be rewarded. However, I have to say, we are retaining quite a bit of those funds in the company because beyond the projects that we have announced already, which is in the public domain, there are a number of projects that we have -- we are working on right now. So we expect to be able to implement those projects. So there will be -- it's a growth company, and there are -- they -- we will continue to invest in those projects. And I think that's what you would expect. It's because of the excellent conditions in the LPG business, which we expect to continue for a number of years, not the next -- only the next 2, 3 years, but a number of years, we will be investing in those projects, particularly in the Gas division. And not only terminals but also, I should say, we are expanding heavily the distribution network and LPG bottling plant network, actual capital expenditure that we are doing in order to become a national player in the branded retail business of Aegis.

So that's, basically, the direction we're going. More dividends -- in other words, more profits means more dividends for shareholders, but also more growth. But obviously, we will announce those projects as we see. And the clue is, if you look at our investor presentation, let me see which page that is, we have modified our investor presentation, which I hope everyone has seen, and you can actually see some clues as to how we are going to be investing.

For example, we have put there on Page 22, our retail LPG 5-year growth plan. For example, we have actually talked about expanding LPG terminal capacity further beyond what we had already announced. So that gives you a clue as to some of the projects that we would be doing. On page -- for example, on Page 21, there is a map which shows medium-term plan 2020 to '25 to further increase LPG capacity.

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Jiten H. Doshi, ENAM Asset Management Company Pvt. Ltd - Founder and CIO [4]

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So what is the location in South and will we finalize that?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [5]

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No, not yet. Not announced it. So that's why we put that chart. We said 1 additional LPG terminal in the South as well as debottlenecking and possible expansion at existing terminals in Haldia, Mumbai and Pipa. So that gives you a clue as to where some of that free cash flow is going.

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Jiten H. Doshi, ENAM Asset Management Company Pvt. Ltd - Founder and CIO [6]

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So you know you all are -- your execution is world-class. You all are going very quickly and executing all your plans to take your capacity to nearly 10 million metric tons as a throughput -- output capacity. So basically, when do you think you'll hit that capacity, in 3 years' time?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [7]

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I think what I'd like to say is that, let's call it, 3 to 5 years. You are right that we are very fast in executing. But some of the new projects, which would take us to, say, for example, 10 million-plus metric tons. I don't want to fix on that figure of 10 million metric tons because of things that are going on right now. So 10 million-plus metric tons of capacity, I would give it 3 to 5 years because some of the new projects, which are not announced. Obviously, we are looking for land. Obviously, their permissions, et cetera. So 3 to 5 years is probably a good description of the next cycle of investment.

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Jiten H. Doshi, ENAM Asset Management Company Pvt. Ltd - Founder and CIO [8]

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So I think any person who is just putting your numbers together can see that you can grow by 20%, 25% over the next 5 years? I mean, it's a no-brainer.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [9]

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It remains to be seen, but I would say that we are definitely targeting a good and high earnings per share growth for sure.

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Jiten H. Doshi, ENAM Asset Management Company Pvt. Ltd - Founder and CIO [10]

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That's right. And I think that's -- what's actually worrying us is you've already answered that you have enough number of projects on the drawing board, but I think there's going to be thousands of crores of cash over the next 3 to 5 years that you need to deploy apart from giving dividends, which I hope that you all are looking at new projects on the drawing board?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [11]

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Yes, we are. But I'm not going to announce them today.

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Jiten H. Doshi, ENAM Asset Management Company Pvt. Ltd - Founder and CIO [12]

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Fantastic. Wishing you all the very best.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [13]

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We're always looking for a fresh project, but you will...

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Jiten H. Doshi, ENAM Asset Management Company Pvt. Ltd - Founder and CIO [14]

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So that at least you will go to -- remain as a growth company for at least the next 5 to 6 years, minimum.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [15]

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Well, we aim to be a growth company for longer than the next 5 to 6 years, I mean...

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Jiten H. Doshi, ENAM Asset Management Company Pvt. Ltd - Founder and CIO [16]

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Fantastic. Great. Keep it up, all the very best. Wishing you the best for the next quarter and the year ahead.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [17]

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Thank you.

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Operator [18]

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We have the next question from the line of Shaleen Kumar from UBS Securities.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [19]

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Congratulations to the management on a great set of numbers. Sir, you said 1 million tons for Kandla. That's a pretty significant number, while you have proven Haldia as a key successful factor, but the difference was that, in case of Haldia, you had an anchor customer. In case of Kandla, we don't have one. So that 1 million ton, like, have you been talking to your key clients? Or what kind of visibility you have?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [20]

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Yes. So I think I made very clear, and I can add a little bit to that, that in our Investor Day, in November 20, which you were present, I made very clear, and I think, that we are talking to all 3 customers, IOC, HPCL and BPCL every day. We are doing it now well in advance and have been doing well in advance when we commissioned it. Hence, our budgeted figure of 1 million metric tons is not pulled out of the year. It's based on certain conversations, certain discussions with these 3 oil companies.

So the -- and I mentioned in our Investor Day that connectivity of Kandla not only by road but by other means, including pipeline and rail are absolutely crucial to that. So I won't say more, but these discussions are ongoing. They're going well. And by the time we commission the terminal in end of 2020, we do expect that we will meet that budgeted figure in the next financial year, FY '22, of 1 million metric tons. So that figure is not pulled out of the air. But I think that's basically what we expect. We're confident of that figure.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [21]

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For sure, for sure. And just 1 more to -- 1 more question as -- related to same. In the -- in this 2022 for 1 million metric ton, the evacuation -- you have assumed evacuation through all the 3s -- all the 3 ways like road, rail and pipeline or it's limited to 1 or 2?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [22]

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It depends on those discussions, they're still going on. So they're not over yet. So it depends on which ones get settled. But road is for sure. The other 2, which means pipeline and rail, the discussions are ongoing. So we'll see what gets sorted out. But all 3 ultimately are important for Kandla. But we'll see how things work out and set those ongoing discussions well in advance of commissioning the -- almost a year in advance of commissioning the terminal. So we'll obviously be able to give a better update closer to the time. But at the moment, we are feeling positive.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [23]

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Sorry, sorry to harp -- harping on the same thing. Okay, let me put it this way. Assume that you don't get pipeline in next 1 year, assuming -- sorry, sorry. Hopefully, you get it, but let's assume you won't get it. So -- and you get only road, let's say. So still you are comfortable of delivering 1 million metric tons? I'm sorry I feel like I'm sort of...

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [24]

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I think the pipeline and the rail -- and/or rail are really crucial to that figure. So I think it would be -- it might be difficult with road alone. So I think that's the crucial thing. But the reason I mentioned it very publicly is that there's, should we say, a good probability, nothing's done till it's done, but there's a high probability of those things getting sorted out. But nothing's done till it's done.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [25]

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Right, right, right. And can we -- you said, for fourth quarter, you're expecting the same kind of strong quarter as what we have seen in third Q. So can we expect same kind of a quantum of gas volume in the fourth quarter as well as a liquid growth?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [26]

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Well, I mean, obviously, we don't know the exact figure. But when I say we expect similar levels, that means that we've gone to a different level in Q3. And while the number may not be exactly the same as Q3, but we expect similar levels, yes, in 4Q. And the LPG throughput volume is a very key part of the profitability of Aegis. So while I can't forecast exactly to the exact ton, but we would not be expecting to go down massively from those numbers. Obviously, January has already passed. Business is good. When I say we expect to continue with similar levels sustained, not only for quarter 4 but going forward into the next financial year, there will be fluctuations quarter-by-quarter, but we expect to sustain these kind of levels.

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Shaleen Kumar, UBS Investment Bank, Research Division - Associate Director and Analyst [27]

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Okay, sure, sure. Just last one from my side. So if -- understandably, like Mumbai, we almost run full LPG. And Pipavav, there are some constraint related to rail. So is it safe to assume that a significant part of growth in this quarter has come from Haldia?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [28]

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No. Actually, significant -- in quarter 3, not only was significant part of growth in Haldia but significant part of growth was Mumbai as well. Mumbai was much higher in quarter 3 than Mumbai volumes in quarter 2. So we continue to grow in Mumbai, and it will be added to when this Chakan pipeline is done.

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Operator [29]

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We have the next question from the line of Kashyap Jhaveri from Emkay Investment Managers.

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Kashyap Jhaveri, Emkay Global Financial Services Ltd., Research Division - Research Analyst [30]

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Congratulations for really great set of numbers. My first question is on gas side, if you could help with the client contribution in terms of volumes for various OMCs in terms of this year's volume? And by FY '22, what could it look like?

Second question is on Liquid division. First, to give you some -- again, I'll just highlight some numbers. If I look at liquid EBITDA, that was roughly about INR 90 crores, INR 92 crores in FY '17, and it is just about INR 130 crores now, whereas gas EBITDA has almost doubled versus or more than doubled over the same period. If I look at liquid ROCE, that's now about a single-digit number versus 20% if I look at period between FY probably '15, '16, '17. So in terms of liquid, we haven't seen as much spectacular numbers as what gas has done. So if you could throw some light on that division as to what we could do in future? Or what are the plans for that division also to probably fire as much as what gas has done?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [31]

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Yes. So -- yes, 2 questions. First, on the gas breakup of volumes by customer. We don't give that information publicly, but IOC, HPCL, BPCL are 3 customers. There are different levels of volumes that we handle in each terminal. For example, we don't handle any IOC in Haldia, but we do handle IOC in Pipa as well as Mumbai. HPCL is much larger as in Haldia because it's the anchor customer. So we don't give the exact breakup, but the good news is the 3 national oil marketing companies, they are all customers. And they are all importing at various locations. And we -- obviously, we expect that to continue depending on which terminal.

As far as the liquid EBITDA is concerned. Now this is a very important point. Look at the -- you took return on capital employed as a measure. Look at the quarter 3 results. I haven't actually worked out the quarter-on-quarter 3 basis, but we had a record EBITDA in this division in quarter 3. It was something like -- let's see, it was INR 35.6 crores. Now you are absolutely right that if you take a longer period, the EBITDA in this division has taken some time to rise. But quarter 3 was a really good figure of INR 35.6 crores, a record figure on INR 55 crores -- INR 54.75 crores, INR 55 crores of revenue. So this division has as we -- takes a little longer as we commission the terminals to get the right product mix and all that. But I'm saying, actually, Q2 and Q3, you're beginning to see really good numbers in EBITDA. So just the last 6 months, that means Q2, Q3, you are now beginning to see the kind of profitability. So I don't recognize the single-digit figure that, obviously, if you take previous quarters that may have been the case, but we are now approaching the kind of 20% target, 20% return on capital in this division, which I think is reasonable. However, the gas returns on capital are spectacular. I agree with you, they are higher than 20%. And that is a fact. The Gas division is growing very fast. The gas profitability -- division profitability, return on capital is much higher than the kind of 20%, and I think that's wholly good.

So I think that's the fact. And you now see that the Gas division represents more than 75%. I think in this quarter 3, if I see the pie chart, it is 77%, that's on Page 13. 77% of total operating profits is now Gas division and 23% is liquid. Just a few years ago, that used to be 50-50. But gas is clearly growing faster and is more profitable. So I think we expect that to continue.

The Liquid Terminal Division will continue to grow at a slower pace than the Gas division. It will continue to operate at lower profitability, but 20% is still a reasonable target, I think, in terms of return on capital. It just so happens that the Gas division is spectacular. And I think that's going to continue. What you will finally expect to happen is that the overall profitability of the group, which clearly is driven by the Gas division, that should continue, which I said for the next 3 to 5 years. And we will continue to invest a lot into the gas projects. In fact, the CapEx program that we see is limited CapEx in the Liquid Terminals Division. But much more growth in the Gas division.

So I think that's the pattern that you would expect that the Gas division is going to continue to grow very well. And the Liquid Terminal Division will remain as good profits, good cash flow, but not at the kind of spectacular levels to quote you for the Gas division.

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Kashyap Jhaveri, Emkay Global Financial Services Ltd., Research Division - Research Analyst [32]

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And just -- where my question comes from is that given liquid gives us a lot of bandwidth in them or -- a lot of deconcentration in terms of clients, whereas gas is like probably about just 3 customers. So that's why this question that, in liquid, it just helps us diversifying the risk.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [33]

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Yes. I think that's a fair point. I agree with you that one of the reasons -- by the way, the Liquid Terminal Division has been a core business of Aegis for many years. But you're right, it's good to not put all the eggs in 1 basket or 3 baskets. So I think diversification is a good point. However, it's just a fact that the Gas division is growing so fast that you can't really -- the mathematics are clear that if you are growing at such high pace, then it's going to -- increasingly going to take a greater share of Aegis group profits.

But look, on the Liquid Terminal Division, one thing which investors should and analysts should recognize is that there are some growth opportunities there, probably not so much from just increasing capacity, but also the fact that there is more petroleum retailing going on and new and more stations, et cetera, which does need

(technical difficulty)

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Operator [34]

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Excuse me, this is the operator. I'm sorry, sir, there's some disturbance from the line.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [35]

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Okay.

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Operator [36]

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Okay. Please go ahead. It's gone away.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [37]

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Yes. So I was just saying that we do see growth, particularly from petroleum because of petrol and diesel retailing more private entrants and more revival of stations, et cetera. So that means they need more terminals. So I think there is -- there will be continued growth in the Liquid Terminal Division. It just won't be as high growth as the Gas division.

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Operator [38]

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We have the next question from the line of Rajesh Kothari from AlfAccurate Advisors.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [39]

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Congratulations for great set of numbers. My first question is with reference to -- there's some confusion on this distribution business. Your slide mentions on top, rupees, crores; and then in -- below, it mentions volume. So is it volume or is it revenue?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [40]

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Which slide is that? Can you give us the number, slide number?

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [41]

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Yes, I will tell. Let me tell you. I think it is Slide #21 -- LPG volume distribution, Slide #26.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [42]

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26, okay, one minute. Yes. On that slide, yes, what did you...

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [43]

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Sir, on top, it is written LPG volume, and then it is written rupees in crores.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [44]

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Yes, yes, sorry. This, for example, 40 [file or giga] you can confirm, but when we say 41,000...

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Unidentified Company Representative, [45]

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It is volumes, Anish. It is volumes.

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Unidentified Company Representative, [46]

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Volumes.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [47]

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It is volumes.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [48]

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It is metric tons, but I think that the rupees in crore figures, I think, that should be taken out, right?

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Unidentified Company Representative, [49]

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Yes.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [50]

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Yes, yes, yes. Got it. So 41...

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [51]

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That's a mistake. So just take out the rupees in crores, it is actually metric tons.

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Unidentified Company Representative, [52]

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1,000 metric tons.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [53]

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Sure. Sir, is it possible for you to share the revenue?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [54]

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Revenues, I don't have off the top of my head. There are different market segments, different prices. Murad, do you have any rough idea of revenues here. If you can apply it by an -- weighted average?

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Murad M. Moledina, Aegis Logistics Limited - CFO [55]

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No, we don't give that. It is not very relevant in that sense.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [56]

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Okay. Because you mentioned that INR 10,000 operating profit per ton, that is blended or is it for a particular segment?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [57]

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No. Autogas segment, I said, was INR 10,000 a ton, the EBITDA margin. So the revenue figure would be different. That's the EBITDA margin.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [58]

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Yes. but that's for only 1 segment, am I right?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [59]

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And the EBITDA margin which is normally for the cylinder business and the industrial distribution business is around INR 3,000 to INR 4,000 a ton.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [60]

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Understood. Because if I look at your overall Gas division EBITDA and if I divide it by the total volume, then, of course, I get very high realization or EBITDA per ton because retail is also included in this. So I was just trying to understand that how your overall Gas division EBITDA per ton, excluding what I would say, distribution business, how that has moved in this quarter?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [61]

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Well, look, it's pretty straightforward. And we try to be transparent and open as possible over the last few years. So if you multiply the volume figures, which are our sales volume figures, which I always give out, for example, for quarter 3. And we say the EBITDA margin for the LPG throughput volumes is around somewhere between INR 1,000 to INR 1,200 a ton, that gives you the EBITDA figure. Then I'll give you specific volumes for Autogas and you can multiply that by INR 10,000 -- roughly INR 10,000 a ton, et cetera, et cetera, and INR 3,000 to INR 4,000 for the industrial and all that. I think it's [kind of an EPG] model.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [62]

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Got it. That's fine, that's fine, that's fine. My second question is with reference to the FY '21. So as we enter FY '21, I understand that because of the -- this Chakan line, the Mumbai definitely will see good growth. Pipavav will see the -- good growth because of the railway. And Haldia, also, should we see better growth as we move into FY '21?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [63]

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Yes. So if you look at Page 20 of the investor presentation, which I've called the path to increasing LPG throughput volumes. It really says it all there, that we see -- as you rightly said, Uran-Chakan LPG pipeline, which we'll see -- we believe we'll see potential incremental volumes. We believe the railway connect -- inter-connectivity in Pipa will see potential incremental volumes. And new terminal at Kandla, yes. I didn't mention Haldia, but we do expect to see further growth in Haldia, although we have already seen very high levels in Q3, quarter 3, as well as quarter 2. So I didn't mention that in the slide, but we expect Haldia to continue to grow not -- there's no new project right now in Haldia, but we expect that to continue to grow. But it's already at very elevated levels in terms of the volumes.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [64]

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I see. So this Kandla project, which you're mentioning to be completed in Q3. So basically, you are saying by December, the Kandla will come onstream? That's what you mean, right?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [65]

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Yes. October, November, December of 2020, by the end of this calendar year, which means Q3 FY '21, we expect that to be completed.

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Rajesh Kothari, AlfAccurate Advisors Pvt. Ltd - Founder, MD & Director [66]

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And Haldia right now as you are seeing that you're already seeing very good high volumes in Haldia in 3Q itself. So do you think from fourth quarter onwards, on sequential basis, it is difficult to ramp up Haldia beyond that number?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [67]

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At the moment, we -- I kind of said it, generally, we expect continued -- continuation of Q3 kind of performance.

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Operator [68]

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We have the next question from the line of Pritesh Chheda from Lucky Investments.

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Pritesh Chheda, Lucky Investment Managers Private Limited - Analyst [69]

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I have 3 questions for LPG only. One, in this 958,000 metric tons, is there any seasonal element in the volume because when we look at quarter 3 and when we look at 9 months, I know the growth numbers look completely different. And if there is any pent up, which was there for first half, which got filled up in quarter 3?

My second question is, does this 958,000 metric tons include any Mumbai expansion volume, which was on account of that pipeline?

And my third question is, why is the unit profitability in LPG lower? So when we look at per ton basis, the unit profitability is lower and it's like 4, 5 quarters low number at about INR 1,100-and-some per ton. So 3 questions.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [70]

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Yes. So as far as the seasonal aspect of this quarter 3, 958,000 metric tons, generally speaking, the winter months, which means Q3, Q4 can be good. But I have to say, both with Q2, Q3, it's not really seasonal here, something which I was really trying to get across to all of you. Something has happened, which is that, we had a major breakthrough in Mumbai, which I mentioned in Q2, that BPCL in Q2 itself started taking quantities in our Bombay terminal, even though they have their own terminal in JNPT. And the reason is that they realized that the Chakan pipeline is coming, and they started bringing cargoes on industry ships, which IOC and HPCL were also bringing the ships. So they realized that it is far more cheaper and economic to bring cargoes to Mumbai. So that was Q2 and Q3 as well. And so there's a different level of demand. Nothing really to do with seasonality over here. That's as far as Mumbai is concerned. And Haldia has been going very strong as well. That's a result of bigger marketing volumes, distribution network of particularly HPCL. So again, not really a seasonal aspect. So this is a different level of volumes, and we expect this to be sustained and grow further based on what I just said.

As for -- this Q3 figure does not include anything from Chakan pipeline, that hasn't even started yet. So it's already just -- so that's going to result in further volumes once that starts, further incremental volumes sustained over the coming quarters. So that's the really good news that the level that we've already reached of 958,000 metric tons does not even include the Uran-Chakan pipeline; does not include the railway gantry in Pipa, which will be commissioned in Q2 of next financial year, FY '21. These are -- this is all further volume growth that we expect going forward.

I don't really understand the question of unit profitability. I think I've -- the way we have always discussed this is because there are so many different market segments, the best way is, I give you the sales volume figures per market segment, whether it's still in the business, whether it's Autogas, et cetera, or even the throughput business and give you roughly the EBITDA margins per ton, and that gives you -- and those have remained stable or have even increased in the case of Autogas for some years. So I think that...

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Pritesh Chheda, Lucky Investment Managers Private Limited - Analyst [71]

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So Anish, you did that. I took the EBITDA and the throughput KT volumes, and when I do that, the number comes to about INR 1,100-and-some-60-odd per KT as your EBITDA per ton. This is different from INR 1,300, INR 1,350, which you are doing, let's say, since the last 2, 3 quarters, there is this deviation of INR 150, INR 200. So is there anything, which you want to highlight on this lower number?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [72]

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Not really. I don't think so. I have even said

(technical difficulty)

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Operator [73]

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This is the operator. Yes, participant, just one moment, I'll just check the line for Mr. Chandaria.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [74]

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Not really. I have just said that the EBITDA margin was around INR 1,000 to INR 1,200 a ton, right, EBITDA margin on the throughput, which is confirmed by the figure that you said, which is INR 1,150, whatever you calculated. But I think there's a different customer mix with different prices. There's different terminals. So the exact figure will depend a little bit on which terminals were growing more, et cetera. But I think you can take the kind of rough figure, I said, between INR 1,000 to INR 1,200 a ton EBITDA margin. That's basically what it is. But it's -- the main point is, volumes are growing so high. Margins are fluctuating between that range of INR 1,000 to INR 1,200 a ton. But the volumes, 958,000 metric tons versus 751,000 metric tons in the quarter before. That's just quarter-on-quarter, let alone year-on-year, which I said was -- which was growing so fast. So I think the 958,000 metric tons versus 572,000 metric tons a year earlier. So I think the clear message is volumes are going up, margins are very stable, but volumes, that's the real story here. I hope that's clear. And I should also mention that the retail volumes, 50% rise, for example, in the cylinder volumes. It's not only LPG throughput volumes, but even those volumes are going up a lot with stable margins. So message is LPG volumes and all segments are going up very -- in very large percentages. Margins are basically stable.

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Pritesh Chheda, Lucky Investment Managers Private Limited - Analyst [75]

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No problem, sir. Sir, anything in the budget which affects us or benefits us?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [76]

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Well, obviously, the DDT, the dividend distribution tax, has been withdrawn on the companies. So the company will have less tax to pay on dividend distributions. I would say that's the major change. Murad, do you have any other comments on budgetary impact apart from that?

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Murad M. Moledina, Aegis Logistics Limited - CFO [77]

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Yes. We are reviewing the budget as of now. But I don't think other than DDT, everything else is almost the same.

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Pritesh Chheda, Lucky Investment Managers Private Limited - Analyst [78]

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And what will be the taxation for '20 -- FY '20 and FY '21? This is the last one.

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Murad M. Moledina, Aegis Logistics Limited - CFO [79]

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I think on an average, we do 20%. I think that's what would be the case, approximately 20%.

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Operator [80]

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We have the next question from the line of Ankit Gupta from IndiaNivesh Portfolio (sic) [Fund] Managers.

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Ankit Gupta;IndiaNivesh Fund Managers;Analyst, [81]

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Sir, gas prices have declined significantly, around 30% from November. So as per my understanding, sir, how do they affect our EBITDA per ton?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [82]

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So what I've been saying consistently for a number of years, and I repeat again, that our margins, rupees per ton, the EBITDA margins I mentioned are broadly stable because even though prices fluctuate every month, the actual international gas prices, we pass on increases or decreases after 1 month. So that's the way the industry is. So I don't -- in terms of profitability, most important thing is sales volume and margin, stable volumes, not prices. Prices do not really affect our profitability because we pass them on, and the whole industry follows that kind of thing that 1 month after the international LPG prices change in the Indian market based on whatever that was sold.

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Ankit Gupta;IndiaNivesh Fund Managers;Analyst, [83]

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But sir, in Autogas, I believe, the price -- change in prices is a bit delayed, right?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [84]

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It changes every month. So for example, they've just raised the price now based on the previous month's international LPG prices. That is normally set by the public sector. We are not price leaders. We follow their price. They've just raised the price literally days ago. So that's the way it is. But I really don't think investors should get too worried about prices going up and down. That happens, but it's more to do with -- it's like petrol price goes up and down, but it's more to do with sales volume and margins in terms of profitability. As an academic exercise, one can see prices go up and down, but I don't see the relevance in terms of Aegis.

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Operator [85]

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(Operator Instructions) We have the next question from the line of Anup Lal from Mount Intra Finance.

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Anup Lal;Mount Intra Finance;Equity Analyst, [86]

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Congrats for the good set of result. Sir, I just want to ask you that in this current budget, the custom duty on very low-sulfur fuel oil has been decreased from 10% to 0%. So how do you think that what kind of opportunity it will give to you?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [87]

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It's difficult to forecast that immediately. I mean, finally, it depends on customers, which is -- who handle low-sulfur fuel oil. But there's a lot of refined low-sulfur fuel oil, which doesn't come through our terminal. So the very fact that they just reduced the import duty may not necessarily result in more imports because a lot of the product comes from -- which is stored with us is produced by the refineries. By the way, and I can just check this with Murad, I don't think we actually store very much low-sulfur fuel oil in our terminals, actually. So is that the case, Murad? I can't...

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Murad M. Moledina, Aegis Logistics Limited - CFO [88]

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No. We do not. It is not going to affect us.

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Raj K. Chandaria, Aegis Logistics Limited - Chairman & MD [89]

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It's not -- we don't even store most of that. So it's not going to affect us. We store a lot of other products, but that's at the moment -- and that means it's changed from years ago. But we don't store, that I don't think, in any of our terminals.

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Operator [90]

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Ladies and gentlemen, due to time constraints, we will be able to take one last question from the line of Subhanu Chakrabarti from SBICAP Securities.

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Subhanu Chakrabarti;SBICAP Securities;Research Associate, [91]

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I have only 1 question. So as you know that there is currently some major global risk going on with the coronavirus and (inaudible) too. And there is a chance of large-scale volatility that may happen in the chemical prices. So in case and what for -- when something like that actually materializes, how do you think volumes would be affected for the Liquid division?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [92]

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Yes, that -- we have been thinking about it. It's difficult to really comment on it because no one knows, to be honest, the impact of coronavirus. All I would say in terms of overall Aegis business, given that it's highly concentrated as far as LPG and petroleum and many other things apart from chemicals, even if the worst happens, it would have a very minor impact on Aegis. But at the moment, we haven't really seen any impact so far. But even if there was any impact in terms of chemicals, as I said, we haven't seen any impact, it wouldn't really -- it would have a very minor effect as far as Aegis because, as I said, our businesses, our chemicals business, is relatively small part of the volumes now. So -- but difficult to predict exactly what would happen.

Listen, we had episodes like SARS before, we've seen other financial crisis, all that. The business -- as far as Aegis' liquid business is concerned, it's remained pretty stable despite all those things. So that's the historical record, very difficult to predict the future as far as this impact of coronavirus. But as I said, it's chemical volumes and all that is relatively small part of our business anyway. But we -- the business has remained stable historically despite issues like this. So my prediction for what is worth is, I don't expect any real difference this time.

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Operator [93]

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Ladies and gentlemen, we have time for one last question from the line of Dipan Mehta from Elixir Equities.

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Dipan Anil Mehta, Elixir Capital Limited - Chairman of the Board [94]

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My question is regarding the ESOP charges. So by which quarter will the ESOP charge become 0? Is it by this FY '20 or till what -- and what will be the quantum, which is left to be written off?

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [95]

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Murad, can you comment on that?

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Murad M. Moledina, Aegis Logistics Limited - CFO [96]

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Yes. I think the total write-off will be around INR 335 crores, out of which INR 196 crores is done. So balance will be in the next year and 1 quarter of the year after.

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Dipan Anil Mehta, Elixir Capital Limited - Chairman of the Board [97]

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So entire FY '21, you will have a similar charge for ESOP?

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Murad M. Moledina, Aegis Logistics Limited - CFO [98]

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Not full year. It will be INR 42 crores plus -- around INR 90-odd crores next year, and then the balance the year after INR 20 crores, yes.

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Dipan Anil Mehta, Elixir Capital Limited - Chairman of the Board [99]

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So INR 90 crores will be in 4 equal installments over the next 4 quarters? Can you just give us an amount over the next 6 quarters, how this will happen?

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Murad M. Moledina, Aegis Logistics Limited - CFO [100]

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The first quarter of next year will be INR 42 crores and then INR 17 crores...

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Dipan Anil Mehta, Elixir Capital Limited - Chairman of the Board [101]

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No, for Q4, Q4 will be?

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Murad M. Moledina, Aegis Logistics Limited - CFO [102]

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Q4 will be INR 42 crores, then Q1 of next year is INR 42 crores, and then INR 17 crores is next 4 quarters.

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Operator [103]

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Ladies and gentlemen, that was the last question. I would now like to hand the conference back to Mr. Chandaria for closing comments. Please go ahead.

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Anish K. Chandaria, Aegis Logistics Limited - Vice Chairman, CEO & MD [104]

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Yes, thank you. A lot of questions today. I just wanted to summarize again. I think what Q2 as well as Q3 has shown is that we've gone up a level in profitability, particularly driven by the excellent volumes, sales volumes in all segments in the LPG business, all systems go for Aegis in FY '20 in the current year, that means we have only 1 quarter more. But in the medium-term outlook, FY '21, FY '22, FY '23 is looking bullish, and we expect this to be -- continue to be driven by the increases in LPG demand and the increase in LPG capacity that we are building to take advantage of this. Plus, I have to highlight the continued growth in the retail LPG business that we are doing by going national, and people should now start paying attention to the retail sales volumes as well, highly profitable margins, but also the sales volumes, which I remind you, 50% increase in quarter 3 for the cylinder business year-on-year.

So the direction change by the company into more retailing is very, very important and is going to remain a very important growth factor for many years to come as far as the LPG business segment is concerned.

Thank you for attending, and we look forward to talking about the quarter 4 results when they come out.

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Operator [105]

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Thank you, gentlemen. Ladies and gentlemen, on behalf of Aegis Logistics Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines. Thank you.