Aegis Logistics Limited analyst Q&A

Thank you very much. We will now begin the question-and-answer session. Our first question comes from the line of Vibhav Zutshi with JP Morgan. Please go ahead.

First question is on the gas segment profitability which has seen a very sharp increase Q-on-Q on per ton basis. So, can you just provide some colour how much was driven by the distribution segment? Is there any one-off? And going forward, what could be the normalized level?

Yes, please. So, if you will look at our numbers, the volumes have surged in distribution business. So that has also contributed on the surge of revenue as well as EBITDA. Second is, of course, the margin that we have earned during the year has been around INR7,000 against INR4,000-odd in the previous year. Going forward, the next year also, we expect the same as the energy prices have risen and so also the margins because of the uncertainty involved. Going forward, we feel the INR7,000-odd margins should be sustainable as beyond '26, '27, we would see our distribution volumes really of a scale that brings procurement efficiencies, which will -- when the prices of energy stabilize or come down, will compensate in terms of margins. So yes, going ahead, we feel confident that these are sustainable margins. And of course, there is a huge upside as far as volume is concerned. Throughput, of course, also will be good in the current year as you will see a lot of multimodal evacuation kicking in, especially the Jamnagar- Loni Pipeline in Kandla, Kandla-Gorakhpur pipeline in Kandla as well as Pipavav, then the rail gantries that we are building. And please keep in mind some of our terminals like Pipavav cryogenic as well as Mangalore cryogenic they are operational for part of the year in '25, '26. So, you will see a full year effect of that. As such, overall, gas EBITDA of course will continue to grow really well going forward.

Got it. Thanks, sir, for the comprehensive answer. Just a follow-up here on the LPG situation. So, it looks like for you, the volumes kind of have completely normalized in June. So, is this understanding, correct? And for the country overall, like when do you expect full normalization because I think you're still down 30% to 50% year-over-year, things are improving, but just your thoughts over here?

We cannot do any prophecy. But yes, I can tell you for sure that things are improving month- on-month. Like in May, the shortfall is down to 30% when it was 50% in April. In May, it has been better, and we expect this improvement to continue, probably in Q2, sometime in Q2, we should see normalcy return back. And mind you, LPG supply source Middle East is not the only source. It's the source of convenience. There are multiple supply source. And of course, the journey time would be a little more, but I think going forward, this situation has a few lessons for everyone to have alternative supply sources which is always there. So, I think this will stabilize soon, maybe beginning sometime in Q2 onwards. And you will see many alternative supply sources going forward because the dependency on Middle East will, of course, reduce as alternative supply source will kick in.

Got it. Got it. And just second question is on capex. So can you just provide the guidance for FY27 and FY28 if possible. I think this year was somewhere around INR800 crores. So, it looks like we'll see a very big jump now, but if you can just quantify what's going on.

We will see a $1.2 billion aggregate capex by March '27 that we have already shared. March '28, we would again see a capex up to INR5,000 crores coming in. This is both organic inorganic as such.

Thank you, and all the best. Moderator Thank you. Our next question is from the line of Anil Sareen with K16 Advisors. Please go ahead.

Hello. Part of my question has already been answered. Just wanted to check, I mean, sir, for further clarity, what was the exact capex in fiscal '26. And what is the exact capex planned for fiscal '27? Furthermore, this $1.2 billion, I suppose it will add up to $1.2 billion. Does that mean that the residual that is fiscal '29 and fiscal '30 would have $3.8 billion of capex.

We have said that capex is 2030, not FY30, please. So, keep in mind, this is still 2030 December. So, we will have FY31 to reach $5 billion. Please keep that in mind. So, you have -- you will see a lot of capex, on the latter half of this 5-year period. So, you will see heavy capex in '29, '30 and '31. And you will have up to '28, we have already said, we will be $1.2 billion and then again INR5,000 crores. So, you add up that to the $1.2 billion. And thereafter, you can spread it out in the next 3 years to reach $5 billion.

One clarification, is Vadhavan port, that MoU included in this capex?

To the extent we are able to execute out there because it all depends on how quickly the port comes up. And the allotment of land and the permits happen. But yes, I suspect that part of it will definitely be included in that 5 billion, but not all of it, I'm sure.

Okay. Great. Just one follow-on. This distribution margin, I mean, if I sort of separate out the 9 month and the -- sorry, yes, the first 3 quarters and focus only on the fourth quarter, there was an unusually sharp jump. You have already answered that this has taken the average up to INR7,000 and the INR7,000 would sustain. But I had a related question that now the southern operations of Bangalore and Kochi, Kochi you're also expanding, are sort of coming into play and with those railway gantries and hopefully, the Cherlapally pipeline also coming into operation. South is structurally starved of gas. Does -- what does that both Bangalore and Kochi and their respective expansions do to the distribution volume in South India as well as for the full part of India taking the total distribution to what level in fiscal '27. And if you can hazard a guess what level in tonnage terms for fiscal '28 we...

Yes, sorry. Yes. So, you have said it right. Earlier, we were doing distribution from Mumbai and Kandla. Now we are doing it from all over the place. So, it includes Mangalore, the newly commissioned cryo, Haldia, Pipavav, Kandla, Mumbai. So that's been -- what is leading to the volume increase. We always had a target of 2 million tons. So, we expect that to reach by '28. And mind you, we are also commissioning ammonia. So, then that means that ammonia distribution would form part of this 2 million gas distribution that we intend to do. So yes, I think that is what it is, South also, East also and West also. We will be distributing gas all over the place because we have now terminals spread out -- and cryogenic in nature, which enables us to do more of -- we have more of an edge, and we can do more of distribution, stock and then sell.

Great. One clarification. Isn't the ammonia capacity already spoken for, it's already assigned to Hindustan Zinc. So where from does this scope come for distribution of ammonia?

One third of the capacity is take-or-pay, two third is available with us as open source.

Okay great. Thank you very much.

Thank you. Our next question comes from the line of Chirag Vekaria with Budhrani Finance. Please go ahead.

Just wanted to get a sense, sir, even if we take the realization at around INR7,000 per ton for distribution segment, yet the profitability in this segment is way off the mark.

Sorry, can you repeat the question? I did not get it.

In the distribution segment, you said the realizations have gone up, right? So, the margins have gone up, correct?

Yes.

So, sir, even if you take that, I mean, the number that you have posted are very strong. So, what explains that sir?

No, the margins are from the results that have been posted, right?

And volumes, of course. Volumes and margins have gone up.

It is what I just explained in my previous answer that this is -- they're expected to sustain on account of volume increase that is going to happen, which will bring procurement efficiency, yes. We were already doing INR4,000. We are at INR7,000. This year, also INR7,000 because Q1 has also done well. So therefore, it is a question of 2028. So that will be supported by procurement efficiencies because the volumes would have grown substantially by FY28. So, we expect INR7,000 to sustain from here on.

Okay. So, this MoU that you're talking with L&T for ammonia terminal, what capex are we looking here, sir?

It depends. We have just commissioned 1 terminal at a cost of INR525 crores. So, if it's 1 terminal, then the same. If there are multiple terminals, they will be in the multiple of INR525 crores.

This is the similar capacity or this will be a higher capacity?

One terminal will be of a similar capacity, but it then depends on what the customer wants.

Okay sir, Thank you.

Thank you. Our next question comes from the line of Neelotpal Sahu with JM Financial. Please go ahead.

You've mentioned about ammonia logistics commencing and ammonia distribution as well. Can you throw some light on the economics of both of these streams in terms of expected utilization levels and margins?

Yes. In the current year, we expect around -- as we do in LPG, we expect around 25% utilization in the first year and thereafter growing at the rate of 30%, 40% year-on-year. Distribution similarly, we expect somewhere around 200,000 tons to begin with and then growing 20%, 30% year-on-year. The margins are for throughput in the ranges from around 2,500 to 3,000. In distribution, it could go up to INR5,000 depending on how the market behaves. We will see what it delivers. And then from there on, we can do our projections. But this is what we expect.

So, ammonia distribution margins would also be like on a per ton basis, INR5,000.

That's what I said, INR5,000 a ton, up to INR5,000 a ton is what we expect.

Got it sir that was my questions.

Thank you.

Thank you. Our next question comes from the line of Kunal Mehta with Incred Equities. Please go ahead.

Yes. So, we have already, so it's like energy prices rising and uncertainty element being built into, so the margins have improved during Q4, expected the same in Q1 of the current year. However, as the volumes also have jumped from around 520,000 to 750,000. That has also brought procurement efficiencies. So, what was 4,000 and what has become 7,000 currently comprises probably you can say part of it on account of volumes and part of it on account of margin improvement. Going forward, as said, that when the crisis is gone, war is no more, and the prices stabilize and come down, by that time, our volumes would have grown enough to get more procurement efficiencies. And therefore, we expect these INR7,000 a year average margin to continue going forward. Also, you don't have to see it quarter-to-quarter. You have to see on an annual basis, Q1 is already good. So, I think somewhat for '26, '27, you are already assured of a INR7,000 average margin realization. '26, '27, '28, it will drive more on volumes.

Do you think this shows an elevated top line as well? I mean just because of increase in the price. So, any idea on how much revenue do we do from the gas distribution? Can you give some sentiment on that?

Yes, volume and price, it's a product of volume and price. So again, repeating the same thing, our volumes are expected to grow really significantly over this year and the next. And prices, even though they stabilize going forward, volumes will take care. So, we expect the revenue also to grow year-on-year.

Okay. Sir, and my second question is on the capex. So, we will be doing capex at the Aegis level, the Aegis Logistics. And then after creating the asset, will we then transfer it to Aegis Vopak, am I right?

Yes.

So, Sir you mentioned in your opening comments that we have got INR5,900 crores of cash on the consol balance sheet. But I think on the stand-alone, Aegis standalone level, there is like, I think, almost half of that. So, I mean, how much would ALL be able to utilize for building the asset? And obviously the. Yes.

Yes, so when you look at cash, don't look at ALL stand-alone alone, you also have to look at cash holding in its 100% subsidiaries. So, all put together will come to INR5,930 crores. 100% subsidiary also, you will have to consider the cash held under those subsidiaries.

Okay. So, this doesn't include the cash in AVTL?

Consolidation includes AVTL. Sorry, consolidation includes all the cash, AVTL cash is not significant.

Okay. And sir, the EPC is done by ALL stand-alone or one subsidiary of ALL?

So, in the consol, do we capitalize at the value at which ALL bills? Or the value at which we sell to Aegis Vopak?

At which ALL bills.

Okay. Sir, thank you so much. I will fall back in the queue.

Thank you.

Thank you. Our next question comes from the line of Amit Kumar with Determined Investment. Please go ahead.

Yes. Thank you so much for the opportunity. Can you hear me?

Yes.

Just one question, sir. Could you sort of quantify any sort of inventory gains that you had in this particular quarter?

No. What do you mean by that? You know there is nothing like inventory gain, which we book in P&L. Yes?

I'm saying that mostly as a storage solutions company, you're basically working for your clients. But as far as your distribution is concerned, you would have some inventory, right? And post the war or during the quarters itself, we have seen crude oil prices, LPG, LNG prices basically go up. So, the value of that inventory during the quarter because of the pricing?

No, no, it is at cost only.

No, I understand that inventory is at cost. Basically, what I'm saying is that because of the spike in selling prices versus relatively lower cost inventory. I don't know how many months of, I mean, how many months of inventory do you keep?

No, no, we keep very low inventory. We are not here to keep more than a month inventory. So, inventories are not long. So, you're right. There is no such inventory gain.

In the month of March, the inventory that you would have sold, you would have bought it in February, right? And at a lower cost and then obviously in March because of the Iran war, because of the Middle East war, the prices basically spiked up.

Not necessary in February. It could be February as well as March cargo coming in.

Okay. So, there is no, I mean, that inventory gain, like you have some of these OMCs basically, which are also kind of refinery and distribution.

No, this is distribution business. So how we do it is that we book orders and then we procure. The margins are higher when there are times of uncertainty because energy prices are higher. So as a percentage, obviously, you will realize more margin because there is an uncertainty element involved. You have to get the product. In times of uncertainty, that is even more, it is difficult. So therefore, in rupee terms, your margin improves because your energy prices are also very high.

I understand that point. Okay. Let me sort of ask this differently. Pre-war versus post-war, what is the kind of price differential that you saw basically? And what is the kind of price jump that you saw as the Middle East basically war started in late February basically?

Prices have gone up of all the energy products from INR54,000 to all the way to INR150,000 back to INR80,000, INR90,000.

Sorry?

Energy prices have very fluid. They have gone up from INR54,000 or INR60,000 per metric ton all the way to INR150,000 per metric ton down to INR80,000, INR90,000 per metric ton. So, it varies.

Okay, understood. Thank you. That’s it from my end.

Yes.

Thank you. Our next question comes from the line of Rajesh Agarwal from Moneyore. Please go ahead.

Sir, my just question, basic question, now government has said today the subsidized the LPG cylinders will be reduced from 9 to 4, then government is taking a step for increasing PNG and all. Will it affect our logistical business? And what gives you confidence of volumes of distribution business increasing? What can be the particular reason? Two questions sir.

Energy in India per capita is among the lowest in the world. We are comparable to Philippines.

Okay.

Second is, it is a developing country. So, there is a lot of dependency on dirty fuel, coal, furnace oil, diesel, wooden briquettes, so many, so many products, which as we develop, we have to transit out. The volumes in such dirty fuel are very large, around 2,000 million tons in coal alone. What are we talking about gas? 50, 60 million tons of natural gas, 30, 35 million tons of LPG. So, there is enough for growth, whatever one may say. You need to have multiple energy sources. So, yes, PNG, natural gas, ammonia, LPG, coal, everything will be needed in such a large country as ours. So, we are a very large country with large population, with energy needs that are going to grow. We need a lot of products as far as energy basket is concerned. And depending on what is the kind of outlook going forward, as far as the environment is concerned, the tilt should definitely be towards the cleaner fuel, which are in nature of gas, namely, like I just said, natural gas, LPG, ammonia. And what are the numbers that we are talking of. Still, clean fuel is very, very small numbers compared to dirty fuel, which are liquid and solid in nature.

One last question, hypothetical question, suppose Hormuz doesn't open for next three months, still we'll be able to recover all old volumes and grow?

Yes, yes. Supply source has to change. LPG is not only available from Middle East; it's a supply source of convenience. But LPG is available from all over the world. Now, it is coming from Canada, America, Argentina, Nigeria, all over the world. So, you will keep getting LPG from...

In this crisis, we have seen a change, substantial changes for us, for sourcing.

There has to be, yes, there has to be, going forward, we will have multiple supply source.

Understood.

Now, can I just add one comment here, Murad? One of the advantages of having high quality joint venture partners like we have with Itochu and with Vopak and so on, it really has given us a tremendous edge in terms of sourcing alternative sources of gas.

Understood, sir. Thank you. Thanks a lot, sir.

Thank you. Our next question comes from the line of Nandan, an Investor. Please go ahead.

Hello, sir. Am I audible?

Yes, sir, you are audible.

I think, I can see from last three quarters, companies are delivering around 50% growth on year- on-year basis. So, my question is, sir, since, I mean, we have a 5 billion US dollar capex plan by 2030 December or FY2031 and assume that majority of the infrastructure will be built by Aegis Logistics or their 100% subsidiaries. Plus, we have a distribution, I mean, segment that is growing well with the margins and the ammonia growth, and there will be growth in the subsidiary, I mean, Vopak as well. So, my question is, sir, I think given the guidance, I think we are getting 25% guidance. I feel it is very, very conservative. I mean, in FY26 also, we have grown 43% at a PAT level. So, I mean, what's the reason for...

We are beating our own guidance.

Why don't you increase the guidance, sir?

No, we are a very conservative company and I think 25% CAGR growth is not small. We have achieved 32% last five years. We definitely, again, reiterate. Now, remember, the base is getting bigger and bigger, larger and larger. When we had first given our guidance, we were at an EPS of INR6. Now, we are at an EPS of INR26. In spite of that, the CAGR growth has not changed. The guidance to the CAGR growth has not changed. So, that itself is big in that sense.

Yes, that's correct. Sir, and my second question is, what's our goal for the ammonia distribution, say by 2030? I mean, FY28 by FY28, you already said that the gas distribution should be at 2 million volumes, including the LPG and ammonia. Probably LPG will be much higher as ammonia is at a new stage. So, by FY30, what is our target for -- if you can provide LPG as well, that will be very helpful as well.

No, so if you look at the DRHP, CRISIL as an independent agency, in the case of Aegis Vopak, I had already said by ‘29, India will have a supply-demand gap in ammonia of around 3 million tons. So, we will try our best to see what best volume achievement we can do by ‘29- ‘30. This will depend on how many terminals we are able to construct and commission, how many locations we get ourselves positioned. So, we are very bullish. We have a partner, Itochu, along with us. They are already now participating in the hard assets also, taking a 10% stake in the Pipavav terminal. So, we are working very hard, but difficult to today project. This is a new product that we have stepped into. But looking at the macros and looking at what lies ahead, we are very bullish.

Thank you very much for the answer, sir. All the very best.

Thank you.

Thank you. Ladies and gentlemen, due to time constraints, we will take that as a last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sirs.

Thank you very much. It's been a very exciting year, a good year for us in terms of the FY26. As Mr. Moledina has indicated, we are confident to maintain for FY27 the same momentum. And in answer just to the last comment about our guidance and so on, I think our sort of philosophy here at Aegis is really to not to overpromise, always to under promise, and hopefully overdeliver. So, that's our conservative management philosophy. But I'm confident that, you know, FY27 will continue the strong momentum that we have. And the longer-term perspective in terms of ‘28 onwards, again, with the strong foundations that we have laid and are continuing to lay and the opportunities that the uncertainty has of the war and so on, actually that has given rise to many more opportunities. So, we look forward to informing you as those come to fruition. So, the record profitability, strong transform balance sheet, and a clear roadmap for the next phase of growth. That's it. Thank you very much. Have a good evening, and we will speak again next quarter. Thank you.

Thank you.

On behalf of Aegis Logistics Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.