Container Corporation of India (CONCOR) announced its plans to surrender a portion of land at its inland container depot (ICD) in Tughlakabad, Delhi, in an effort to reduce its land licensing fee (LLF) payments to the Indian Railways. The decision was shared during a post-earnings conference call.
In the current quarter, CONCOR is set to surrender a portion of land at its Tughlakabad ICD and has already surrendered a terminal in Baroda during the second quarter of the fiscal year 2023-24. The company’s LLF payments in the first half of 2023-24 amounted to Rs 215.57 crore, an increase compared to Rs 191.49 crore in the same period the previous year. However, after surrendering land back to the Indian Railways, the total land lease charge for the full year is expected to be reduced from the earlier estimate of Rs 500 crore to a range of Rs 450-470 crore.
The company’s management noted that the LLF at Tughlakabad ICD is the highest among CONCOR’s ICDs, and by returning land at Tughlakabad and Baroda, they aim to lower the LLF for the fiscal year 2023-24. Despite returning land, CONCOR does not anticipate a decrease in cargo volumes and has made provisions to compensate for the returned land, as evidenced by the new facility in Baroda.
CONCOR pays land lease charges at a rate of 6 percent per annum on the market value of industrial land, with an annual escalation of 7 percent for terminals situated on railway land.
This move to return land at Tughlakabad ICD coincides with CONCOR facing stiff competition from companies like Gateway Distriparks and other container train operators. According to a report by brokerage firm ICICI Securities, CONCOR is losing market share primarily in the western market (Mundra) and the Delhi-NCR market due to competitive pricing strategies and competition from the road transport sector. “In view of less business as well as a sudden abnormal increase in land license fee by Railways, these terminals have become unviable to run from a business point of view,” Concor had said while handing over these facilities to Indian Railways.
Sanjay Swarup, the new Chairman and Managing Director of CONCOR, highlighted that the company reported its highest-ever results in the second quarter of fiscal year 2023-24. In that quarter, the company’s consolidated net profit increased by 21.8 percent year-on-year to Rs 481.76 crore, while revenues rose by 10.5 percent year-on-year to Rs 2,194.87 crore. This growth was primarily driven by a 26.13 percent year-on-year increase in domestic volumes in the September quarter. The company’s EBITDA also improved, reaching Rs 536.93 crore in the second quarter of fiscal year 2023-24, a 17.16 percent increase compared to the corresponding period of the previous year, with an EBITDA margin of 24.46 percent.
The increase in EBITDA margin was attributed to better price realization during the quarter and increased double stacking operations by the company. CONCOR operated 2766 double-stacked trains in the second quarter of fiscal year 2023-24, compared to 2,100 trains in the same period a year earlier.
In the first half of 2023-24, CONCOR invested Rs 284 crore in capital expenditure to procure rolling stock, containers, and rakes. The company expects to exceed its guidance of Rs 600 crore in capital expenditure for the full fiscal year 2023-24.
CONCOR anticipates continued strength in import and domestic volumes for the remainder of fiscal year 2023-24, with a 25 percent growth in domestic volumes expected compared to the previous year. To boost domestic volumes, CONCOR is exploring the transportation of bulk cement and plans to enter the transportation of fast-moving consumer goods and white goods. Trials of new 12-foot-high containers for FMCG and white goods transportation are underway, pending approval from the Indian Railways for transporting bulk cement.
The company is also expanding its last-mile connectivity offerings to increase domestic demand. Currently, around 30 percent of the company’s volumes are handled through last-mile connectivity, a percentage that CONCOR aims to raise to 40 percent in the coming years.
In 2020, CONCOR surrendered 16 terminals with a turnover of Rs 277.50 crore to the Indian Railways due to commercial and business viability considerations. These terminals were constructed on land leased from the Indian Railways. CONCOR handed over empty container parks at its Tughlakabad terminal and surrendered land at its Tondiarpet facility in Chennai, Milavittan in Thoothukudi, and plans to return Railway land at Fatuha near Patna.
