AEGISLOG — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

DIRECTOR, AEGIS LOGISTICS LIMITED · MR. MURAD MOLEDINA – CFO, AEGIS LOGISTICS

MR. MURAD MOLEDINA – CFO, AEGIS LOGISTICS

LIMITED · MS. PAYAL DAVE - INVESTOR RELATION

MS. PAYAL DAVE - INVESTOR RELATION Aegis Logistics Limited November 19, 2024

Moderator · Conference Operator

Ladies and gentlemen, good day and welcome to the Aegis Logistics Limited Q2 & H1 FY25

Thank you very much.

We will now begin the question and answer session.

The first question comes from Vikram Suryavanshi from PhillipCapital.

Please go ahead.

Vikram Suryavanshi

Just to confirm that Mumbai liquid storage capacity which will be built for Rs.

250 crores.

Will it be part of the JV or standalone?

Murad Moledina

Will be standalone.

Vikram Suryavanshi

Even JNPT also?

Aegis Logistics Limited November 19, 2024

Murad Moledina

No, JNPT will be in the JV.

Vikram Suryavanshi

What is the status?

I think I just want to re-confirm this liquid capacity expansion of Kandla 25000, then Bangalore 71 and Kochi?

Murad Moledina

Mangalore is ready and it should be commissioned any moment.

Kandla is in progress and Kochi is already completed.

Vikram Suryavanshi

And Kandla when it is expected?

Murad Moledina

Kandla should also happen by this FY25.

Vikram Suryavanshi

You gave an update about Mangalore and Pipavav already by FY25?

Murad Moledina

Correct, Yes.

Vikram Suryavanshi

That's perfect.

And in case of ammonia, how is the asset turn compared to gas business and does it require special approval process just to get more idea on the business?

Murad Moledina

No, the permits are similar.

Of course, the infrastructure does have additional equipment to cater to the specific requirements of ammonia.

The turnaround is not as much as LPG but the rates are higher for the throughput.

So, it is more like liquid business where it is more based on static capacity and the rates generally are 2.5x to 3x the rate of LPG throughput.

Vikram Suryavanshi

And last question from my side is about we have opportunity of retailing in LPG, but are there similar opportunities for ammonia or it will be more like institutional sales?

Murad Moledina

We are exploring, so it's too early to say anything on that but we are exploring.

You cannot say retailing but industrial distribution kind of volumes maybe possible.

Moderator · Conference Operator

Thank you.

The next question comes from Kumar Saurabh from Scientific Investing.

Please go ahead.

Kumar Saurabh

So, my question is regarding the DRHP which has been filed.

If you can highlight how is going to be the structure and won't the current company will become more of a holdco because bulk of the business will go to this JV which will get listed.

So, from current shareholders of Aegis Logistics perspective, how do you see the transaction if you can elaborate on it?

Murad Moledina

We have just filed the DRHP today and we will discuss more in the coming quarter as far as DRHP is concerned.

We have already said earlier that the equity infusion into the JV will be Aegis Logistics Limited November 19, 2024 value accrued into the holdco because we are eliminating interest cost which is a very high cost for infrastructure companies.

So, even though minority interest might increase, it will be compensated by the decrease in interest cost as these funds will be used to pay the debts.

So, the holdco in that case will remain unaffected therefore because the debts are going, will go off the books.

Kumar Saurabh

And one bookkeeping question, how the profit from this JV currently flows into Aegis Logistics?

That is question one.

And second, a request, once we have spent, let's say one week, all of us can go through DRHP, we can have a call just to discuss that and then nuances of that like you discussed one when we had the Vopak JV that would be great?

Murad Moledina

So, the JV consolidation happens line by line on account of it being a subsidiary.

Even after the IPO as and when it happens, we will have management control and it will still get consolidated line by line.

So, there will be no change whatsoever.

Secondly, DRHP, we are very near because this time we did earnings call a little late on account of Diwali and certain we were also a little occupied.

So, we will have our next call very soon and I think that will be end of January.

So, we'll discuss more at that time.

Kumar Saurabh

Yes.

Sure.

So, last question, I think you have also recently filed for expansion in the hydrogen capacity.

Any details about that?

How much capacity?

When it will go live?

All of that.

Murad Moledina

We have not filed anything on hydrogen as yet.

So, I am not sure.

Moderator · Conference Operator

Thank you.

The next question comes from Rajit Aggarwal from Atharva Investment Managers.

Please go ahead.

Rajit Aggarwal

It's a pleasure to interact with you.

I just had some quick questions regarding the liquid capacity.

If you can just help me with the location-wise capacity and what is the expansion.

I somehow keep missing the total capacity and the expansion being planned.

I can quickly say out the capacities loud and you can confirm it's the correct one?

Murad Moledina

I think it is better that you look at the specific slide which is in our investor presentation which gives port wise capacities in the pie chart.

So, there cannot be anything different than that.

It will be much easier if you look at our H1 FY25 investor presentation.

Rajit Aggarwal

Is that the one which has been uploaded, I am sorry I am missing that pie chart in that presentation.

Aegis Logistics Limited November 19, 2024

Murad Moledina

Or what you can do is this time there was some restrain on us on account of this DRHP file.

You can look at Q1 FY25 where you will definitely find it and it is very clearly the splits have been given in case of gas as well as liquid, port wise capacity.

Rajit Aggarwal

Alright, sir.

I have the presentation also in front of me.

Murad Moledina

Slide 48.

Rajit Aggarwal

Right.

Thank you.

It's the same, right?

Whatever there is, it's the same?

Murad Moledina

Yes.

It will not change.

Rajit Aggarwal

And the expansions?

Murad Moledina

Expansions also given in the slide.

If you look at the investor presentation, the expansions have also been mentioned.

The expansion is in JNPT, which is 100,000 approximately.

There is 71,000 odd in Mangalore, 25,000 odd in Kandla.

And Mumbai we have just said 150,000 is yet to begin.

These are the current expansions which are happening in liquid.

Rajit Aggarwal

And the ammonia one you mentioned, 25,000 as well, right?

Murad Moledina

Yes, in Pipavav, Yes.

Moderator · Conference Operator

Thank you.

The next question comes from Rajesh Agarwal from Moneyore.

Please go ahead.

Rajesh Agarwal

Sir, recently the allocation of natural gas APM mechanism was introduced by the Government of India.

So, if the CNG prices goes up, will it benefit our distribution volumes?

Murad Moledina

There is always competition between fuels.

So, problem for one fuel is always an advantage to the other fuel.

But in spite of that, LPG has always been cheaper than natural gas but this will make it more attractive.

Time will tell how this affects our volume and contributions.

Rajesh Agarwal

Currently, how much it is lower by from CNG, LPG?

Murad Moledina

It keeps changing but it is generally between 10% to 20% difference, it will always be there.

Rajesh Agarwal

Always be there.

Murad Moledina

Because of the calorific value which it has more than natural gas by 25%.

Aegis Logistics Limited November 19, 2024

Moderator · Conference Operator

Thank you.

Our next question comes from Amit Vora from Homeopathic Clinic.

Please go ahead.

Amit Vora

I am an individual investor and thank you to everyone for giving me the chance.

My question is sir regarding are we confident that this year also this current FY25 will achieve 25% growth as compared to FY24?

Murad Moledina

We will try our best.

So, what we have always given a guidance is that in the 5-year period, average CAGR growth will be 25%.

So, it is not necessary that it will be exactly 25% every year, but we are very confident that in the five years period from FY22 to FY27, because of the infrastructure that we are undertaking, we would be in a position to achieve an average CAGR growth of 25%.

Amit Vora

Sir, one more question about AVTL as an individual investor, we don't have the technical knowledge like an analyst or something.

If you can as an individual investor make us understand something about AVTL?

Murad Moledina

Look at the website which is gone live and you will be able to get the details.

Moderator · Conference Operator

Thank you.

Our next follow up question comes from Vikram Suryavanshi from PhillipCapital.

Please go ahead.

Vikram Suryavanshi

So, basically this Mumbai capacity which is coming will it be part of Sea Lord Container facility which already have the subsidy?

Murad Moledina

Aegis Logistics Limited.

Vikram Suryavanshi

And that Rs.

250 crores will be expansion including land and everything or will it be land will be leased from the port?

Murad Moledina

Land is leased from the port.

Vikram Suryavanshi

Okay, so basically Rs.

250 crores will be more on the asset side only and the land will be leased.

Murad Moledina

Yes.

Moderator · Conference Operator

Thank you.

The next question comes from Kumar Saurabh from Scientific Investing, please go ahead.

Aegis Logistics Limited November 19, 2024

Kumar Saurabh

Sir, my question was on ammonia.

I am sorry, it was not hydrogen.

For ammonia, you've done a filing and it says it will go live by FY26. So, what is the asset turn and what is the kind of margin expected out of that business?

Murad Moledina

We have just stepped into ammonia business, including the terminaling.

So, like I have already said, that it is more like liquid business, which works on the static capacity.

And the revenue rates are generally 2.5x to 3x the revenue rate of LPG.

EBITDA margins are similar, around 90%.

And that is the way it is.

Kumar Saurabh

And sir, what is the opportunity size in this business?

Like I am not asking for one or two year, but in terms of long run, based on your study, what is the opportunity size for you?

Murad Moledina

45% of India's energy needs are by unprocessed biomass.

So, there is something called energy transition that is happening.

It depends on the pace at which there is a transition from dirty fuel to clean fuel.

Ammonia is a clean fuel.

It is non-fossil.

It is also a carrier of hydrogen.

So, it has got lots and lots of pluses, which makes us believe that there will be a growth in this sector.

But we are not in a hurry.

As the market will mature, we will undertake development of these ammonia terminals at various ports.

Moderator · Conference Operator

Thank you.

The next question comes from Kunal Bhatia from Dalal & Broacha Stock Broking Limited.

Please go ahead.

Kunal Bhatia

So, I just wanted to know what's your outlook on the sourcing volume because this time it was slightly below expectations.

So, what's your outlook on the sourcing volume?

I will ask a follow up later.

Murad Moledina

Yes, sourcing volumes do not move my EBITDA needle.

The margins are very, very slim as far as sourcing business is concerned.

We do sourcing business to provide value addition to our customers as and when they need.

So, the business does not depend, the profits do not depend on sourcing business.

So, we only do that and it is always back to back.

So, when we are able to get value for our customers, we source LPG for them.

These are very big customers like the national oil companies and other big companies.

So, wherever and whenever we are able to provide them value, we do that, but it has not a great significant contributor to our EBITDA.

Kunal Bhatia

And my second question was in regards to this IPO which we have planned.

So, post this IPO, could you give us some sense on how much would be our stake in the new entity which is listed and how will it affect the current shareholders of Aegis Logistics?

Murad Moledina

Like we said, we have just filed it today.

So, you can look at the DRHP and next time when we meet on an earnings call, you would have absorbed a lot of data and we would be in a position Aegis Logistics Limited November 19, 2024 to talk in more detail.

So, our upcoming earnings call will be sometime in January.

I think that's a better time to talk about this.

We have just about filed it a few hours ago.

Kunal Bhatia

I understand the filing has happened today, but obviously the planning of this would have happened since a long period of time because if the current shareholder...

Murad Moledina

We are not at liberty to talk as of now.

So, let's just give us some time.

Next time, like I said, we'll be able to talk.

But I've already explained that this IPO proceeds will be used to pay the debt and therefore interest will go down, which will compensate the minority interest increase that is going to happen.

And the dilution both the partners would be doing equally.

So, all of it will not come to any one partner, the dilution.

And we would obviously be doing in two phases equity issue.

So, all of it is not going to happen in the first phase itself.

I think I will limit myself to this now when we discuss more in the coming earnings call.

Moderator · Conference Operator

Thank you.

The next question comes from Vinith Jain from Siddh Capital.

Please go ahead.

Vinith Jain

My first question is, is there any further update on the Kandla-Gorakhpur pipeline?

Murad Moledina

It is progressing well and I think sometime mid of next year it should be commissioned.

Vinith Jain

Q3, can we expect some business to flow through that?

Murad Moledina

No, we hope so.

Let us see.

Vinith Jain

Sir, one clarification, the ammonia site is in the JV or the standalone, sir?

Murad Moledina

Ammonia will be in the JV.

Vinith Jain

And post the IPO of Aegis Vopak, the standalone will be left with a lot of cash.

So, what do you plan and have you already planned anything or can you give some idea over here?

Murad Moledina

Yes, we are always holding a lot of cash for a lot of opportunities that we believe are there.

As and when these opportunities crystallize and we are ready to undertake, we will do the disclosures and talk about it.

But there are always opportunities that we look at, but only when they mature and we are ready to undertake, we then disclose and discuss with our investors.

As of now, whatever we have disclosed, the CAPEX coming up are the ones that we are doing.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, we would take that as our last question for today.

I would now like to hand the conference over to the management for closing comments.

Aegis Logistics Limited November 19, 2024

Raj Chandaria

Thank you for all those interesting questions.

I hope we were able to answer them.

And of course, we will have another opportunity in a short period of time once in January.

We're quite optimistic about the direction of the company's future.

We continue to see the possibility to improve utilization and favorable product mix.

And we will keep you updated every quarter.

So, thank you very much for joining our call and we'll speak next time.

Thank you.

Moderator · Conference Operator

Thank you.

On behalf of Aegis Logistics Limited, that concludes this conference.

Thank you for joining us.

You may now disconnect your lines.