“The future is not about stealing market shares from somebody else but the future is really to grow the business and to take a global market share for India. I think 2021 will be on the levels of 2019.”
We have passed about 9 months of the pandemic. In the early days of lockdown we saw congestion at ports, disruption in rail, road movements. Now slowly things have started looking up, exports have begun and the numbers at some of the ports are also growing. So, I would like to understand from you, what is happening at APM Terminals currently in terms of cargo movement? Have things came back to normalcy? How do you see the business as usual coming back to the terminal?
Since the lockdown started on 25th of March, Pipavav Port has actually been running uninterrupted. Because we didn’t have the same reliability on drivers as other terminals do, we were using rail evacuation and we have coastal feedering, we didn’t have the same bottleneck and congestion as you have seen in other ports, and we are very proud of that. We have been running uninterrupted. Certainly, since June, the volumes have come back and we have had several months now with record in terms of bulk specifically fertilizers doing very well, and the container business is proceeding with a U-shape recovery that will take a long time. It started already in April, May, June, July. September was a bad month but then here what we have seen is October, November and we are also expecting December to be stronger – one month stronger than the other. So, it’s a long U-shaped recovery that we are seeing but I am optimistic that the volumes are coming back.
During pandemic, businesses have been impacted badly. Cash flows are an issue and the revenues have gone down. But what I see is APM Terminals Pipavav has been taking some aggressive decisions in terms of expansion, new partnerships, improving the ease of doing business at the terminal. So, let us understand one by one, you have reduced the terminal handling charges for every container by 25%. That’s a very commendable decision, but how does it help the trade, and does it really have an impact on improving the numbers or it is to ease out the burden on the shippers?
It is definitely to try to attract some empty containers that we badly need right now and our customers and the shippers badly need them in India for exports. So, that’s an immediate action we have taken but If I can take a step back as you said, what we have done during the crisis is that we have had some contingency plans and we have executed them quite well. So, we have had a number of skipped calls also because the shipping lines have been reducing their capacity. Because of costs, the volume was dropping. And in a terminal, it is quite a challenge because we have quite high fixed costs and for the nature of it, you can’t do a lot with fixed costs. But we have been quite good at adjusting our variable costs and that has also reflected in our numbers, we have been able to keep up the profit margin and that is mostly cost savings. We have had up to 19 skipped calls in the months. But if you can similarly reduce your expenses, then we can still keep our activities at an acceptable and profitable level.
Coming back then, what we saw is that the demand is coming back. India has been seeing a flux in imports. Now, unfortunately a lot of containers are standing full which have not been cleared yet, and that creates a demand for empty for exports. So, what we are simply trying to do with a very quick action is to reduce our costs for discharging empty containers. We are trying to attract shipping lines to maybe come with more empty containers from the Middle East nearby or maybe even if we can induce an external owner to bring in empty containers so we can cater for the surge in exports. So, I think we will have a couple of more months of wobbly market but certainly the recovery is coming and we are trying to do our part and help everybody to come back to normal.
Another significant thing I have seen is that APM Terminals have tied up with NICDC Logistics Data Services recently and you are introducing integrated container tracking. So, I understand this provides real time visibility. So, how do you want to utilize this technology and what advantage it gives to the customer?
Again, I think, we can thank the pandemic for a lot of things, and one of the things that we have seen is that we have been able to run 24/7. Even customs have been able to work from home and run 24/7 online. So, the digital and the digitalization in our otherwise very conservative industry is moving faster than ever. So, with this initiative to do container tracking, it’s just another step on the route to actually enter into the digitalized world and take full advantage of all the technologies that are available, and which is quite normal to use in other types of business but our port business and our shipping business is very much still relying on paper and stamps and approvals and so on, and we are trying to accelerate into the 21st century, and make use of all this technology. So, it will allow much more visible supply chain.
It will allow a lot of information to be real time, and again this will allow our customers to have a reliable supply chain because what’s also changing is of course, people have not gone to shopping malls and to stores, but they have bought a lot of things online nowadays. So, this is again another change that is brought about by Covid.
Excellent. So that brings me to the most important question which is the expansion plan. I have been talking to a lot of ports and terminals, and many of them have put their expansion plans on backburner because of the pandemic and then no further investments happening. But I see APM Terminals has aggressively outlaid about 700 crores towards expansion. So, what is the expansion that you are planning for and ultimately what will be APM Terminals’ post-expansion?
So, the blessing in disguise again was that I could spend a number of months in the port with nothing much else to do really but to work and accelerate the plans that we have made in June, we were able to put forward some expansion plans in terms of new cranes to keep up our capabilities so that we are on par with other ports in our neighbourhood. We planned to upgrade cranes so that we can reach 21 containers across the ship and accommodate the same type of ships that come to Nhava Sheva, and which can come to Mundra. So, that’s one part of it and I am very happy to say that it was all approved by the board back in June and our local GPPL board approved that expansion also in August. So, this is the money that we are ready to spend. It also comes with some upgrades to our yacht which will include our preparations for the dedicated freight corridor with electrified trains and of course with the expansion of the yacht as we expect the volumes will grow over the coming years.
So, we have now already an approval for spending 700 crores on those two categories that I just mentioned, and that will just be the beginning. We are looking at establishing a Ro-Ro ferry to Hazira. We are looking at expanding our liquid berths so that we can accommodate Very Large Gas Carriers (VLGCs) and there are some expansion plans as well for LPG capabilities in Pipavav port. We are expanding our warehouse to accommodate more fertilizer. So, it’s really all around. And what I am happy to introduce as well is my slogan that is “Gujrat Green Gateway” because a lot of these things which we planned to expand is going to have a very positive environmental footprint and that’s why we think we are entitled to be called Gujarat Green Gateway. As an example, as I mentioned, we are expanding our warehouse for fertilizer, but we are also putting solar panels on top of the roof just to make sure that we can have sustainable energy source and take advantage of the big rooftop that we are creating. So, all we are discussing now with Gujarat Maritime Board is how to expand and how to get our concession extended as well so that we can take a long-term horizon on all these capital expansions that we are planning.
So, do you have any timeline for these?
Yeah, I am hoping that we will have something in writing by the end of the year which will positively acknowledge that we are working and we have a formal process going on for the concession extension and then in conjunction with Gujarat Maritime Board, we think we can have this done maybe by second quarter of 2021. This naturally also means that we plan to build a new master plan for the port in conjunction with Gujarat Maritime Board because this opens up a lot of more doors and I think the timing couldn’t be better. We need to see the economy coming back and we need to send some positive signals to the market in India and for that we have so many plans that we would like to put forward.
Which means that you will be ready by the time the dedicated freight corridor is in place.
That’s correct and the dedicated freight corridor is really going to be a game changer because if you look at how much capacity the railways are injecting there, this will be double track, double stack, double speed, and double lengths of the trains, and we can also carry more weight. So, I keep saying this is really a game changer. It will be a little bit of what we have seen already because of course, during pandemic, we haven’t had so many passenger trains on the railway network. So, we have been able to run trains from Pipavav to Gurgaon for example in 48 hours. But what we will be able to do when we get a dedicated freight corridor is that we will have scheduled trains, departure and arrival just like we have ships departing on arrival on schedule in the port, and that really means something for customers to be able to plan their supply chains and to become much more efficient. I also think there will be a cost reduction because what it means is that with 10 times capacity increase on the railway network, pushing the Indian Railways, CONCOR, and other operators to adjust their prices to attract more cargo from the road to rail, and that should help a lot of shippers in India.
With all these expansions, new initiates of using technology, digitalization, making the port green, what is your message to customers?
Well I think, let’s get through the crisis together, and let’s be ready for the future. I am quite sure that India will become more competitive, we will reduce costs, we will increase efficiency, visibility and reliability, and that means that there should be a cake here that is growing. So, the future is not about stealing market shares from somebody else but the future is really to grow the business and to take a global market share for India and I am very excited about that as you can hear. But I am also quite confident that these plans will become true once we get on the other side of this U-shaped recovery from Covid. I think that 2021 will be on the level of 2019, and I also think that 2020 will become a different expression, you know 2020 means you have perfect eyesight, but maybe that expression is going to change its meaning in the future. But it will certainly be a milestone of change, where a lot of things will change after 2020.
I keep asking this question, what are the lessons that you have learnt during this pandemic, and the moment the vaccine is administered and it is safe to move around, what is the first thing you would like to do?
I would like to see my wife as she is still in Indonesia, but after that I think what we have learnt is that we can achieve so many things. We have for sure embraced the technology we talked about a little bit earlier. We have also gotten confirmed that our plans, and especially contingency plans are quite effective. We have kept our people safe. At the moment, out of our more than 1200 colleagues in Pipavav, we have 30 people who have recovered from Covid, we have 2 in isolation, and we have one hospitalized, and of course, we are praying for those people out of our total population, we have been able to keep our people safe and that is the foundation to be able expand and grow our business; that we can do that when people feel that they go to the office, they can go to their workplace, they can go to the waterfront, and they can come home without feeling unsafe and in a good condition. That’s the most important thing, and then secondly, that we can we can use that offline technology, IT and new inventions and innovations that you have also pointed out. We can put them to practical use so that we can reduce cost, become more efficient and that in turn will generate more business and more volume.
