Finance

Domestic production base for containers top focus: V Kalyana Rama, CMD, Concor

In this financial year, we expect the operating income to increase by 12%.

By Nivedita Mukherjee

Container Corporation of India (Concor), a wholly-owned arm of Indian Railways, is among the firms on the list for strategic sales in the current fiscal. V Kalyana Rama, chairman and managing director, tells Nivedita Mukherjee that the company has a robust growth plan; it is planning to foray into indigenous manufacturing of containers and has laid out a road map for strong top line growth over the medium term.

Your Q4 results showed a sharp 92% dip in consolidated profit, despite top line being strong. What do you attribute the low profitability to?
There were some one-time expenses that we incurred in the quarter. There was a change in the method of charging the land licence fee (LLF) that the Railways levy on us. The Railways took a decision that LLF would be charged on the basis of 6% of the market value of railway land. Earlier, LLF was charged on per-container basis. Based on that the LLF increased from Rs 120 crore in 2019-20 to Rs 520 crore in 2020-21. There was another one-off expense, regarding the assets left over at the 16 terminals that we handed over to the Railways. The asset value of the non-recoverable items on those lands was around Rs 77 crore and we made a provision for it.
So, all put together — the one-off expenses of some old pending LLF issues, the write-off and the difference in our and Railways’ calculation — amounted to Rs 280 crore that we have given provision for in Q4. That has actually brought down the Q4 profit by 92 % to Rs 24.97 crore.

What is the outlook for the current financial year?
In this financial year, we expect the operating income to increase by 12%. As for the bottom-line, I am very hopeful of a 100% growth because all the one-time expenses have been cleared off. We are also heading towards a long-term agreement for the railway land to put an end to the uncertainty over the LLF. The plan is to take over 24 terminals where Concor operates on Railway land. For 24 terminals, Concor will sign a long-term lease agreement of 35 years with the Railways for use of land. This is estimated to cost the company around Rs 6,000 crore. With a cash balance of around Rs 2,500 crore, we are looking at raising Rs 3,000 crore as loan.

Are you on track to start container manufacturing by March 2022 as announced?
The annual requirement of containers will be around 8,000 per year for the next five years. We have already released developmental order (for manufacturing) of 2,000 containers with BHEL and Braithwaite & Co and these are in progress. For the remaining 6,000 containers, we have recently invited bids for domestic manufacturing. The EoI has drawn interest from 59 entities.
We will be selecting only 6 companies, with orders of 1,000 for each. Things will be clearer in two months. Concor is the largest procurer of containers in India, so we thought we will develop a manufacturing base in India.

What are other new ventures?
We are going a little slow on expansion plans since divestment is on the cards. Concor ventured into coastal cargo but that had to be stopped because of the Covid. We wanted to do bulk movement of commodities in containers and are doing it in food grains. The plan is to start movement of cement in tank containers in another six to eight months. We also wanted to start flexi bag containers and are doing experiments in that. There is also the intent to get into distribution and logistics business which we had announced and some people had shown interest.

How important is the recent extension of benefits on the rail freight tariff?
There has been a positive growth in exports and imports in recent months, resulting in shortages of empty containers to cater to the export demand. With the aim of helping exporters and reducing the cost of exporting goods, we launched a scheme from April 1, 2021, of giving 50% freight concession for movement of empty containers between gateway ports and the firm’s inland container depots, container rail terminals and private sidings. Since it became very popular and successful we have now extended this till March 31, 2022. We are working on giving a complete logistical solution and connecting the end dots to make it a seamless experience.

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