GATEWAY - Gateway Distriparks Limited Share Price

Management Outlook and Major Points:

Outlook:
Management remains cautiously optimistic, expecting growth from the Western Dedicated Freight Corridor (WDFC) becoming fully operational (JNPT connection by late 2025/early 2026), which will reduce transit times, enable double-stacking, and shift road cargo to rail. They anticipate improved margins and volume growth in the rail business post-DFC. Snowman Logistics aims to recover through cost optimization and expanding its 5PL distribution network. Gateway plans to expand its rail-linked ICD network, though land acquisition delays persist. Geopolitical factors (Red Sea crisis) and commodity-specific challenges (scrap, waste paper) remain near-term headwinds.

Key Points:

1. DFC Benefits:

   • WDFC to boost efficiencies (30-hour JNPT transit vs. 72 hours currently), double-stacking, and margin improvement.
   • Focus remains on EXIM trade via Western ports (Mundra, Pipavav, JNPT). Eastern DFC (EDFC) less relevant for current operations.

2. Market Share & Volumes:

   • Market share gains in Delhi NCR (17%), Sahnewal (~27%), and Uttarakhand (30%) despite volume declines in Ludhiana (-20% YoY) and Uttarakhand (-30% YoY) due to scrap/waste paper slowdown.
   • Rail EBITDA/container stable at Rs.9,600; CFS EBITDA/container at ~Rs.1,270.

3. Expansion & Challenges:

   • Plans to add 2"“3 new ICDs (greenfield/brownfield), but land acquisition delays persist. Jaipur ICD stalled due to legal issues.
   • Snowman targets Rs.800"“900 crore revenue by FY27 via warehouse expansions (Kolkata, Krishnapatnam) and distribution growth.

4. Snowman Logistics:

   • Q3 net loss due to Amazon contract termination and cost inflation. Focus on cost-cutting and contract renewals. Margins expected to stabilize at 18"“20%.

5. External Factors:

   • Red Sea crisis disrupts container availability/freight rates, impacting export competitiveness.
   • Pricing pressure in Ludhiana (5"“15% discounts) due to weak scrap demand; stable pricing elsewhere.

6. Financials & Capex:

   • Gateway's FY25 capex ~Rs.30"“40 crore (maintenance) + Rs.250"“300 crore for new terminals.
   • Snowman's expansion funded via debt/internal accruals.

Question 1:
Can you highlight the benefits from the Dedicated Freight Corridor (DFC) and when it will be fully operational? What TEU growth can be expected in the next three years?
Answer:
The Western DFC is partially operational, improving turnaround times, double-stacking, and reducing imbalances. JNPT's connectivity is expected by late 2025. Full operationalization could shift road cargo to rail, boosting margins and volumes. TEU growth will depend on market adoption post-DFC completion.

Question 2:
Why is Gateway not operating on the Eastern DFC, and are there plans for facilities there?
Answer:
Gateway focuses on Western DFC due to its alignment with EXIM trade via ports like Mundra and JNPT. Eastern DFC caters more to domestic/bulk cargo. No immediate plans exist for Eastern DFC expansion, though future terminals may emerge.

Question 3:
How does the Snowman acquisition's accounting treatment impact financials?
Answer:
Snowman's transition from associate to subsidiary triggered a non-cash, notional gain of Rs.390 crore under accounting standards. This is a balance sheet adjustment, not affecting cash flows or taxable income.

Question 4:
What caused Snowman's net loss, and how is it being addressed?
Answer:
The loss stemmed from higher labor/electricity costs and Amazon's shift away from dedicated warehousing. Snowman is renegotiating contracts, cutting costs, and diversifying clients to improve profitability.

Question 5:
How has market share and EBITDA per TEU trended in Rail and CFS divisions?
Answer:
Rail market share improved YoY (Delhi NCR: 17% vs. 16%; Ludhiana: 27% vs. 21%). Rail EBITDA/Teu remained stable (~Rs.9,600) despite discounting, aided by double-stacking (40% vs. 38% last quarter). CFS EBITDA/Teu was ~Rs.1,270.

Question 6:
What are Gateway's expansion plans for new ICDs, and why is Jaipur delayed?
Answer:
2-3 new ICDs are under evaluation, with announcements expected next quarter. Jaipur is stalled due to unresolved land litigation under Delhi Adjudicating Authority.

Question 7:
How is Snowman funding its Rs.150 crore capex for Krishnapatnam and Kolkata facilities?
Answer:
The expansion is primarily debt-funded, supplemented by internal accruals (~Rs.20-25 crore equity portion). Kolkata's Phase 1 (5,900 pallets) completes this quarter; full capacity (15,000 pallets) will take 1.5 years.

Question 8:
How has the Red Sea crisis impacted volumes and outlook?
Answer:
Red Sea disruptions persist, with rerouting via Cape of Good Hope increasing freight costs and transit times. No direct volume correlation yet, but lower rates post-resolution could boost export competitiveness.

Question 9:
Will Gateway increase stake in Snowman or delist it?
Answer:
No immediate plans to raise stake beyond 51% or delist. The focus is on stabilizing operations post-acquisition.

Question 10:
What explains stagnant EBITDA/Teu despite higher double-stacking?
Answer:
Discounting in markets like Ludhiana (5-15% rate cuts) offset double-stacking gains. Margin improvements depend on JNPT-DFC connectivity, Jaipur's launch, and fixed-cost absorption via volume growth.