Rail business to be key driver for Gateway Distriparks

MUMBAI: Higher realisations from container freight stations (CFS) business and increasing share of high margin EXIM in rail volumes helped Gateway Distriparks to maintain its growth momentum in the September 2011 quarter. As revenues from the existing CFS are likely to remain flat in the near term, rail business would be the key growth driver for the company.

The CFS segment continued to be the main contributor in profits for the company in the September 2011 quarter. It contributed 82% to the company’s net profits, while rail freight and cold chain segment contributed 15% and 2% respectively.

Despite a muted growth in volumes, higher realisations led to jump in revenues by 47% Y-o-Y in the CFS segment. Realisations increased primarily on account of increase in value-added services like warehousing. Volumes in the next halfyear are unlikely to increase since capacity utilisation is around 80 to 90% at its various CFSs. The company’s CFS at Kochi is expected to commence operations by the end of this financial year.

However, volumes at Kochi CFS are unlikely to improve in near future due to the shortage of Indian flagged vessels necessary to move cargo between coastal ports as required under Indian Cabotage Law. As a result, foreign large vessels currently prefer Colombo for transhipment to send goods to smaller Indian ports. The company is also in process of acquiring land for its new CFS at Chennai. The company expects this CFS to be operational by next eighteen months.

In the rail segment, rise in volumes and higher contribution from the EXIM space increased company’s net profit by Rs 5.1 crore in September 2011 quarter. The rail business had turned profitable in the third quarter of last financial year. The share of EXIM segment was 76% to the total volumes, which the company intends to increase to 80% in future.

In coming months, rail volumes are set to rise as the Inland Container Depot at Faridabad commences operations next quarter. The company plans to ramp up its cold chain operations by doubling its capacity to 37,000 pallets by end FY12. This, however, will continue to remain the smallest segment for the company.