kesar terminals & infrastructure ltd share price Management discussions


BULK LIQUID STORAGE SCENARIO

The Bulk Liquid storage and handling Industry in the private sector acts as a dominant logistic partner in supply chain management framework for both - Primary manufacturers and downstream units in various industries such as petrochemicals, chemicals, synthetic fiber manufacturing, edible / non-edible vegetable oil refinery, power generation, food processing, pharmaceuticals etc. It also caters to the needs of traders of chemicals and edible/non-edible oils who import/export large parcels of these liquids.

The Indian Chemical Industry has a dominant role as a manufacturer of various chemicals for domestic consumption as well as for exports, particularly to the European market where there are restrictions for manufacture of lot of chemicals on safety, health and environment consideration.

This industry is further poised for growth on a regular basis with emphasis on "Make in India" programme of the Govt. of India and increased demand from domestic sector. The Port led modernisation planned for major ports in India would well support the handling of increasing volumes on a year-on-year basis.

In the recent years domestic Oil Companies in the private sector have been hiring storage tanks particularly at port locations. This has been necessitated for the Private Oil Players in the Industry to optimize their logistics & transportation costs of Petroleum products on PAN India basis. This trend is likely to continue and volumes will increase on a regular basis as the Country has got surplus refineries and therefore the imported crude & refined oil products need to be moved to all the corners of the Country from the Port locations.

INDUSTRY STRUCTURE & DEVELOPMENT

Increasing urbanization and rise in per capita disposable income is resulting in a strong growth outlook for several key end use industries. The pandemic has also given opportunity to the Chemical Storage Terminals due to increased imports of raw materials for the Pharma Industries. So, this is going to positively impact the growth of Indian liquid bulk industry. Going ahead, liquid bulk trade volumes are set to grow at a rapid pace. The Governments thrust towards domestic manufacturing is expected to redefine the product flow patterns and to address the mismatch of production versus domestic demand, the export volumes will also keep on increasing.

OPPORTUNITIES & THREATS

As earlier mentioned, the Central Government is taking a number of progressive steps which would promote the growth of the Indian liquid bulk industry. Increase in storage tank capacities at Kandla Port by various Terminal Operators have reduced the utilization in general and have increased competition amongst the liquid Terminal Operators. There is a consortium formed, named AVTL, aggregating terminals of Aegis, Vopak & Friends with a total tankage of about 0.8 MMT in 240 tanks. Apart from this, Aegis has 0.2 MMT storage at Mumbai. This gives them leverage to dominate the market at Kandla.

The total thruput of the Kandla Terminals in the financial year 2022-23 was 0.54 MMTPA. The revenue in the financial year 2022-23 was 33.49 Cr. Inspite of the threats, we could maintain the thruput i.e. utilisation. However, the revenue dropped due to price competition.

Both the Terminal lands lease with DPT have expired and so renewal of the leases are very crucial to keep the business continuity at Kandla for which negotiations are going on. Kesar Multimodal Logistics Limited (KMLL) has got its competitor in the form of CONCOR at Mandideep near Bhopal at a distance of 60 Km. We require more export client to always make full rake movement to make the movement profitable, which is being attempted. For the PFT segment, the Railway Goods shed at Itarsi is operated by Railways which is located in the heart of the City. Besides, we need to hire trucks from outside where the rate is high. This is not making us competitive.

The wholly owned subsidiary of the Company, KMLL has commenced operation in 2016-17 after erecting the facilities of Phase I of the project and has shown marked improvement in the year under review compared to previous years. We have further increased our revenues during the year 2021-22. We have continued our ICD business and also handled FCI rake loading business efficiently throughout the year. However, we could not consolidate EXIM volumes due to huge scarcity of empty containers PAN India basis. We expect to keep this momentum going and are confident of consolidating our turnover further during next year.

PERFORMANCE

The Company as on date operates only in one segment i.e. bulk liquid storage facility, the revenues of which for the current year stood at Rs 3,349.65 Lakhs as against Rs 3,251.03 Lakhs of previous year showing a increase of 3.03%. The Total Comprehensive Income for the year stood at Rs 425.63 Lakhs as against Rs (7,279.51) Lakhs loss.

In KMLL the revenue for Cold Storage and Rail Side Container has gone up by 38% and 43% respectively. However, the revenue for General Warehousing, Railway Rake, ICD Direct billing gone down by 14%, 78% and 81% respectively. The total revenue from FY 21-22 has been dropped in FY 22-23 from 10.02 Cr to 3.47 Cr.

RISKS AND CONCERNS

Every business is exposed to a certain amount of risk and concerns some of which may be regulatory or change in policy pertaining to the business, economic parameters, trade policy and geo-political factors, market risk, governmental clearances and approvals, credit risk, which are difficult to foresee. Currently, the Company derives its major share of revenue from its Bulk Liquid Terminals at Kandla, Gujarat.

Since, the Company is majorly dependent on these Terminals for its revenues, it is exposed to specific risks that are particular to its business and environment in which it operates. The Company manages these risks by following business and risk mitigation practices. The Company has in place a Risk Management Policy.

INTERNAL CONTROL SYSTEM

The Company has an appropriate internal control system for its various functions with the ultimate objective of improving the efficiency of operations, better financial management and compliance with the applicable laws.

The Audit Committee reviews the adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations.

The Statutory Auditors have also examined the internal financial controls of the Company and have submitted unmodified opinion on the adequacy and operating effectiveness of the internal financial controls over financial reporting as at 31st March, 2023. The Company has appointed Independent Internal Auditor M/s. S V Shah & Associates to carry out internal audit of its activities. The detailed internal audit reports are discussed at Iength at various level and thereafter the said reports are also placed before the Audit Committee for review and discussion on yearly basis. No significant deficiency or material weakness in internal financial controls were identified as part of the audit.

FINANCIAL PERFORMANCE

The information relating to the financial performance of the Company is provided in the Directors Report.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The Company firmly believes that trained, talented and engaged employees are the critical differentiators and provide competitive advantage for sustaining and growing the business in the intensified spiral of global competition. As such, the Company continues its focus on high performance, talent retention, employee engagement and focused approach for smooth organizational workflow. The Company has a total strength of 49 people as at 31st March, 2023.

KEY FINANCIAL RATIOS

PARTICULARS

FY2022-23 FY 2021-22

Remarks

Debt Turnover Ratio 9.81 10.03 There is no significant change
Inventory Turnover Ratio 213.35 208.90 There is no significant change
Interest Coverage Ratio 1.81 1.75 There is no significant change
Current Ratio 0.54 0.65 There is no significant change
Debt-equity ratio 0.00 (0.01) There is no significant change
Operating Profit Margin 0.47 0.42 There is no significant change

Net Profit ratio

17.85% (194.69%)

Due to provision made for impairment of investments in and loans to subsidiary i.e. KMLL in previous year

Return on investment

0.04% 0.22%

Due to non booking of notional Interest income on investments in and loan to subsidiary company and lower investments in Mutual funds compared to previous year

Return on Capital employed

15.00 (65.98)

Due to lower earnings and other equity in previous year consequent to provision made for impairment of investments in and loans to subsidiary.

Return on net worth

4.81% (86.43%)

Due to lower earnings and other equity in previous year consequent to provision made for impairment of investments in and loans to subsidiary.

Debt Service coverage ratio

2.27 (11.73)

Due to low EBITDA in previous year consequent to provision made for impairment of investments in and loans to subsidiary.

Return on Equity Ratio

0.05 (0.60)

Due to low Net Income in previous year consequent to provision made for impairment of investments in and loans to subsidiary.

Trade receivables turnover ratio 9.81 10.03 There is no significant change

Trade payables turnover ratio

7.92 4.11

Due to substantial payments being made to Deendayal Port Trust during the current year.

Net Capital Turnover ratio

(3.59) (5.87)

Due to decrease in current assets consequent to transfer of Rs.800 Lakhs given to banks in previous year towards advance for OTS proposal in respect of loans of subsidiary is adjusted in Loan accounts in current year.

FORWARD LOOKING STATEMENT

The above Management Discussion and Analysis Report contain "forward looking statement" within the meaning of applicable laws, and regulations and is futuristic in nature. All statements that address expectations or projections about the future, including, but not limited to statements about the Companys strategy for growth, market position, expenditures and financial results are forward Iooking statements. The Companys actual results, performance or achievement could thus differ materially from those projected in any such forward looking statements. Investors are requested to make their own independent judgments before taking any investment decisions and the Company assumes no responsibility.

For and on Behalf of the Board of Directors

For Kesar Terminals & Infrastructure Limited

Harsh Rajnikant Kilachand

Place: Mumbai Executive Chairman
Date: 29.05.2023 DIN: 00294835