After a year, logistics firm GDL, is looking again for private equity investments of Rs 200-300 crore for the expansion of its rail subsidiary, Gateway Rail Freight.
After a year, logistics firm Gateway Distriparks Ltd (GDL), is looking again for private equity investments of Rs 200-300 crore for the expansion of its rail subsidiary, Gateway Rail Freight.
This time, the company says it is confident of finding a suitable investor in calendar year 2009. GDL had attempted to get a PE investor in 2007-08, but abandoned the plan around April 2008, after the stock markets fell.
“We have re-started the process and are getting positive responses from both Indian and international investors and will definitely close the deal this year,” Prem Kishan Gupta, deputy chairman and managing director, GDL, told DNA.
GDL will stick to its plan of diluting about 15-20% of stake for the investor.
Although liquidity crunch is gone and investors are more optimistic now, Gupta added that valuations would not be the same as 2007.
A Mumbai-based analyst who requested anonymity said although PE deals are happening in this space, the concern would be valuations. “Will they be able to get the specified amount or lesser by diluting 15-20% is a concern,” she said.
Gateway Rail is expected to achieve operational break-even in FY10, as the company will be operating with an increased capacity. “We will be operating 17 rakes as compared 12-13 rakes in the past year, which will lead us to break even. Besides we did not have any cash loss at ebidta level in FY09” said Sachin Bhanushali, president, Gateway Rail.
However, the analyst quoted earlier feels GDL’s rail business would not be able to achieve this. “They are losing cash at the net level now and once the unit starts capital expenditure for expansion, break-even would get deferred,” she said.
The rail subsidiary operates 15 owned and two leased rakes, mostly on year-long contracts with customers. Domestic cargo accounts for 76% of the cargo carried by Gateway Rail and has average margins of 34-35% against exports/imports, which has 17-18% margins.
Gateway Rail plans to add more capacity with the proceeds of the PE placement. “As soon as we get the funds, we will order more rakes and we are constantly in the market to get leased container rakes,” Bhanushali added.
The rail unit will invest Rs 50 crore in FY10 for the development of its three inland container depots at Faridabad, Garhi and Ludhiana.
For FY09, GDL reported revenue growth of 23.4 % to Rs 203.6 crore and profit after tax growth of 24.7% at Rs 93.8 crore, despite a marginal reduction in volumes, particularly in the last quarter of FY09.
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