Snowman Logistics Limited (SNOWMAN) Q4 FY23 Earnings Concall Transcript

Snowman Logistics Limited (NSE:SNOWMAN) Q4 FY23 Earnings Concall dated May. 29, 2023

Corporate Participants:

Sunil Nair — Chief Executive Officer and Whole-Time Director

Balakrishna N — Chief Financial Officer

Analysts:

Yash Tanna — ithought PMS — Analyst

Harsh Shah — Dimensional Securities — Analyst

Saloni Hemnani — Molecule Venture — Analyst

Nitin Shakdher — Green Capital Single Family Office — Analyst

Pranay Khandelwal — Alpha Invesco — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Snowman Logistics Limited Q4 FY ’23 Earnings Conference Call. [Operator Instructions]

We have with us on this call Mr. Sunil Nair, CEO and Whole-Time Director; Mr. Balakrishna N, CFO; Mr. Kiran George, the Company Secretary.

And I now hand the conference over to Mr. Sunil Nair. Thank you, and over to you, sir.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Hi. Thank you. Good afternoon, everyone, and thank you for joining us for our Q4 FY ’23 earnings conference call. We appreciate your presence today. We hope that you have had the opportunity to review statements and earnings presentation, which have been made available on the exchanges and our website.

This year has been a remarkable one for Snowman Logistics as our financial performance has not only recovered but surpassed the pre-COVID level. We are pleased to announce that our diligent efforts, strategic initiatives and strong execution have enabled us to achieve outstanding results. We have witnessed a significant rebound in our operations, demonstrating the resilience and adaptability of our business model. We remain focused on capitalizing on this momentum and continuing to deliver exceptional value to our stakeholders.

During the year, Snowman Logistics achieved a significant milestone by establishing fifth-party logistics services catering to renowned brands like IKEA, Baskin Robbins and Tim Hortons. As a 5PL provider, Snowman Logistics offers comprehensive end-to-end supply chain management solutions, optimizing efficiency and reducing costs for its clients.

We also inaugurated a 50,000 square foot warehouse in Shoolagiri, Tamil Nadu, which is specially dedicated to serving the chemical segment with a pallet holding capacity of 4,000 pallet positions. We are fully equipped to cater to the storage and handling requirements of our valued chemical industry clients now.

We are immensely proud of the achievements and milestones we have reached throughout the year at Snowman Logistics. We would like to express our gratitude to our dedicated team, valued clients and stakeholders for their unwavering support. As we move forward, we remain committed to delivering exceptional results, innovation and operational excellence in the dynamic logistics industry.

Now, I would like to hand over the call to Mr. Balakrishna N, CFO.

Balakrishna N — Chief Financial Officer

Thank you. Good afternoon, everyone. We are delighted to announce a robust financial performance for Q4 FY ’23. Our revenue experienced significant growth, reaching INR1,162 million, which demonstrates the effectiveness of our business strategies and our success in capitalizing on market opportunities. This represents substantial progress compared to the same period last year when our revenue was INR780 million.

Our EBITDA also exhibited notable improvement, raising to INR256 million, marking a 42% year-on-year growth from INR180 million in the corresponding quarter of the previous year. This announcement underscores our commitment to optimizing operational efficiency and cost structures. Additionally, we experienced a remarkable turnaround in our PAT, recording INR51 million. This positive outcome reflects our dedicated focus on profitability and sustainable growth.

On an annual basis, we achieved outstanding results with revenue amounting to INR4,252 million, demonstrating a substantial growth of 1.5 times compared to the previous year. Our EBITDA clocked INR961 million, representing a growth of 1.3 times compared to FY ’22, which signifies our consistent delivery of strong financial performance. Moreover, our PAT experienced significant growth, reaching INR134 million, a substantial increase of 7.8 times from INR17 million in the previous year. With a solid financial foundation, industry expertise and a focus on innovation, we are well positioned to capitalize on market opportunities and drive continued success in the dynamic logistics sector.

With this, I would like to open the floor for Q&A sessions.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Thank you.

Balakrishna N — Chief Financial Officer

Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Yash Tanna from ithought PMS. Please go ahead.

Yash Tanna — ithought PMS — Analyst

Hi. Good afternoon. Am I audible?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yeah. Yes, you are.

Yash Tanna — ithought PMS — Analyst

Yeah. So thank you for the opportunity and congratulations on a good set of numbers. My first question is on the warehousing segment. Our margin dipped from about 22% last quarter to about 10% this quarter. So what was the reason for this? And on these lines, so for the full year, we have done about 10% return on capital employed in the warehousing segment, which is — I believe, it is a little lower than some of the newer warehouses that we’ve opened. So will it be a fair assumption that over a period of one to two years, the warehousing segment can show 15% to 18%, or those — that range sort of an ROC on a sustainable basis?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yash, sorry, we are not able to connect with the numbers that you are quoting. In case of warehousing business, our EBITDA for Q4 is 48.36%.

Yash Tanna — ithought PMS — Analyst

Okay. All right. I’m talking about the PBT margin, which is mentioned in the result.

Sunil Nair — Chief Executive Officer and Whole-Time Director

PBT?

Yash Tanna — ithought PMS — Analyst

Yeah.

Sunil Nair — Chief Executive Officer and Whole-Time Director

PBT margin, that’s at company level, right? You are not talking about the warehouse level.

Yash Tanna — ithought PMS — Analyst

Right, right. Sorry, my bad.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Okay. So see, the PBT, as you can see that with the induction of store distribute business, which is the 5PL services business, we are able to optimize our warehousing and transport resources better. And also, we are able to charge a little premium there. So that is what has helped us in last couple of quarters to have better numbers. We, as of now, have three clients in this category as I mentioned in my opening remarks. We were setting up our IT systems to be able to handle this business, which is now set up. So as we start growing our 5PL business and alongside the transport and warehousing, we expect this number to look much better, if that is what is your question.

Yash Tanna — ithought PMS — Analyst

All right. Got it. And second question is on the transportation division. So what sort of growth rates and margins are we looking at in this segment? And since I believe we don’t need a lot of capital for this segment, I believe that the denominator that is the EBIT can grow much faster than the capital employed and, thus, ROC can expand further in this line of the business. So any numbers that we are targeting here?

Sunil Nair — Chief Executive Officer and Whole-Time Director

So see, with our introduction of the technology platform, which we talked about, which is called SnowLink, where we are aggregating the market resources, we have had a growth of 54% as compared to last year in terms of revenue from this market aggregation. From INR35 crores, we have reached INR55 crores of top line this year. And the margin typically when we do the aggregation from market is anywhere between [Indecipherable] and our transportation for this year stands at Q4 is 8% and YTD is 7% margin. As we increase our market aggregation, we expect it to grow to a couple of more percentages in the coming year.

Yash Tanna — ithought PMS — Analyst

All right. Got it. And one last question, if I can. So now we are on a growth path and we have good cash generation and since I believe the management has said that they do not wish to sell stake in Snowman any further gateway, so is there any discussions around increasing stake by the promoter group in Snowman?

Sunil Nair — Chief Executive Officer and Whole-Time Director

So as of now, that is not something which is shared with us, it is GDL decision. And maybe when you get into a conference call with GDL, you should ask this question.

Yash Tanna — ithought PMS — Analyst

Right. Sure. Thank you. These were my questions and best of luck.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Thank you so much.

Operator

Thank you. The next question is from the line of Harsh Shah from Dimensional Securities. Please go ahead.

Harsh Shah — Dimensional Securities — Analyst

Hi, sir. Can you help me with the volume of pallets handled for Q4 FY ’23 and full year FY ’23?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Volume of pallets, one sec, I’ll tell you. So we have — you wanted us to the pallets we build, right?

Harsh Shah — Dimensional Securities — Analyst

Pallets handled.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Pallets handled, okay. So one sec. Yeah, so we — so I’ll tell you, we build 13 lakh pallet positions. Typically, with one turn a month, you can say 13 lakh pallet positions were handled — physically handled.

Harsh Shah — Dimensional Securities — Analyst

13 lakh were handled.

Sunil Nair — Chief Executive Officer and Whole-Time Director

1.1 lakh pallets per month on an average.

Harsh Shah — Dimensional Securities — Analyst

Last year, we did around 13.61 lakh. So have we degrown in terms of pallets handled?

Sunil Nair — Chief Executive Officer and Whole-Time Director

No, pallets handled — you mean physic — you are saying inward, outward, is what you’re asking?

Harsh Shah — Dimensional Securities — Analyst

Yes, sir, actual pallets that we handle and we build to our clients.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Okay. In that case, it is 1-point — so pallets handled is the handling revenue that we talk about and pallets build is the storage revenue we calculate on. So in terms of handling revenue, 1.5 million means 15 lakh pallet positions is what we have handled.

Harsh Shah — Dimensional Securities — Analyst

Okay. And build, you say 13 lakhs.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yes.

Harsh Shah — Dimensional Securities — Analyst

Okay. And can you break it further down into how much of the pallets that we have handled is dry and how much would be the cold storage?

Sunil Nair — Chief Executive Officer and Whole-Time Director

So 20% is dry and 80% is temperature controlled.

Harsh Shah — Dimensional Securities — Analyst

Okay. And also, I needed number for Q4 FY ’23, pallets handled for Q4.

Sunil Nair — Chief Executive Officer and Whole-Time Director

One second. Q4 is 3.4 lakhs pallets positions build.

Harsh Shah — Dimensional Securities — Analyst

And handled?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Handled is 4 lakhs — 4 lakhs pallet positions.

Harsh Shah — Dimensional Securities — Analyst

Okay. And on the trading and distribution side, the margins have come out pretty well at around 8%. So earlier, we used to guide it somewhere between 5-odd-percent. And since last couple of quarters, we are at 7%, 8%. So would you revise this guidance or you expect this to trend down going ahead?

Sunil Nair — Chief Executive Officer and Whole-Time Director

No. Where is 8%? There is no 8% in Snow Distribute. We are at — in Q4, it is 2-point-some percentage, 2.5% in Q4.

Harsh Shah — Dimensional Securities — Analyst

EBIT margin?

Sunil Nair — Chief Executive Officer and Whole-Time Director

EBIT Margin?

Harsh Shah — Dimensional Securities — Analyst

Yes.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Which slide are you referring?

Harsh Shah — Dimensional Securities — Analyst

This is in the segmental disclosure, where you give segment wise data. Revenue of INR30 crore and EBIT of INR2.4 crore.

Balakrishna N — Chief Financial Officer

So hi, Bala, here. See, this percentage what you’re referring to is at a gross level basically. But if you allocate all overheads and all, our margins will be at 2.5% to 3% for the distribution model.

Sunil Nair — Chief Executive Officer and Whole-Time Director

So Harsh, when we referred last time 3% to 4%, we were talking about net margin and this 8% is a gross margin.

Harsh Shah — Dimensional Securities — Analyst

What are the expenses that would come below this 8%?

Sunil Nair — Chief Executive Officer and Whole-Time Director

After this, there will be IT cost, there will be people cost.

Balakrishna N — Chief Financial Officer

Common costs, basically.

Sunil Nair — Chief Executive Officer and Whole-Time Director

All overhead costs.

Harsh Shah — Dimensional Securities — Analyst

No, because when I referred to your segmental result, it is typically EBIT, earnings before interest and tax. And then, we — then you add other income and less only finance costs.

Balakrishna N — Chief Financial Officer

Then, there is another called other unallocable expenditure. You should refer that.

Harsh Shah — Dimensional Securities — Analyst

Okay. So that needs to be deducted. So after netting that, you are saying it will be around 2% to 3%.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Correct.

Harsh Shah — Dimensional Securities — Analyst

Okay. And for the transportation business, since our platform is now already established, what is the number of vehicles that you expect to build there and what kind of growth can we expect in this segment going ahead?

Sunil Nair — Chief Executive Officer and Whole-Time Director

So this financial year, we will be adding 50 trucks which will be owned by us, and we’ll add another 100 trucks which will be leased under SnowLink business model.

Harsh Shah — Dimensional Securities — Analyst

So earlier, a couple of years back, we were pruning our own vehicles, because we — I believe, we were making losses there. So now, there’s this change in strategy. You’re adding owned vehicles. So what is the rationale behind that?

Sunil Nair — Chief Executive Officer and Whole-Time Director

No, there is no change in strategy. As we communicated earlier also, there will be specialized trucks which are basically to cater to our end-to-end customers, which will be always owned by us. And rest common trucks will be always leased. Now since most of our trucks are getting old, we need to have some new set of vehicles. So we have added 50 trucks. As you know, we were having almost 500 trucks. We brought down the count to 239 now. So going forward, at any point in time, we would have anything around 200 trucks owned and rest will be leased. So by the end of next year, we should be having close to 500-plus trucks, out of which 200 will be owned and rest will be leased.

Harsh Shah — Dimensional Securities — Analyst

Okay. And on the blended basis, as you mentioned that the leased vehicles earn anywhere up to 10% to 12% margin and since our blended margin currently is around 78%, then I believe that we might be making loss in the owned vehicles. So going ahead, once all the vehicles become profitable, what kind of EBITDA margin can we expect in this business on blended basis?

Sunil Nair — Chief Executive Officer and Whole-Time Director

As I told you, for the coming year, we are targeting 10%. That’s the immediate target. We don’t want to have further years’ estimate as of now, because it all depends on how the market shapes up and how many vehicles we can onboard through SnowLink business model.

Harsh Shah — Dimensional Securities — Analyst

Okay. And last question for the warehousing segment, you said the split is 80/20 between coal storage and dry warehouses. Going ahead, over next three years horizon, at what rate you expect to increase your capacity under both of these segments?

Sunil Nair — Chief Executive Officer and Whole-Time Director

So by default, it is expected to be same 80/20. But since we have also got into chemical storage and we are getting into contract logistics where large accounts will be onboarded even if it is dry, but very similar nature of operations, it may change a little bit, but it will be around 80/20 only.

Harsh Shah — Dimensional Securities — Analyst

At what rate will we be increasing our capacity?

Sunil Nair — Chief Executive Officer and Whole-Time Director

We will be increasing at the rate of 10% to 12%.

Harsh Shah — Dimensional Securities — Analyst

And for this current year, what is the increase in realizations that we have taken? And going ahead, what kind of realization do we — can we expect for us to continue?

Sunil Nair — Chief Executive Officer and Whole-Time Director

So this year, with the introduction of Snow Distribute, where, as I told you, we have commanded a little premium, the realization has gone up to INR1,500 as against INR1,407 last year, so 7% growth.

Harsh Shah — Dimensional Securities — Analyst

And can this run rate continue going ahead?

Sunil Nair — Chief Executive Officer and Whole-Time Director

At least 5% is what we are targeting in this financial year.

Harsh Shah — Dimensional Securities — Analyst

All right. Thank you so much. I’ll join back the queue if I have any questions. Thank you.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Thank you.

Operator

Thank you. Next question comes from the line of Saloni Hemnani from Molecule Venture. Please go ahead.

Saloni Hemnani — Molecule Venture — Analyst

Yeah. Hi, sir. Am I audible?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yeah.

Saloni Hemnani — Molecule Venture — Analyst

Hello. Yeah. Sir, I have a question regarding your 5PL business. So as you mentioned that your margins on a gross level are 8% and after cutting down some expenditures, it comes down to 2% to 3%. So I wanted to understand the rationale behind focusing on the segment. Is this going to be purely a scalability game where we are focusing on getting onboard with big clients and getting the volumes in? And what sort of margin trajectory do we see going forward in this segment?

Sunil Nair — Chief Executive Officer and Whole-Time Director

So see, when you do a 3PL operations where you are an end-to-end partner, you own up all the accountability throughout the distribution network. And in case of this 5PL operations also, you are doing more or less same thing with an additional responsibility of either sourcing or providing your IT technology. So you are becoming an integral part of the customer organization, which increases stickiness and interdependency and, thus, commands a little premium. So 3% on a product cost is much better than even 5% on the logistics cost. So that’s the rationale behind why we are pursuing this. As you can see, this has helped us increase our pilot ASP from INR1,400 to INR1,500. So this is the main reason we are targeting this. This also helps us grow our business faster with respect to the growth of the customer.

Saloni Hemnani — Molecule Venture — Analyst

All right. That answers my question. Thank you so much, sir.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Thank you.

Operator

Thank you. [Operator Instructions] The next question comes from the line of Nitin Shakdher from Green Capital Single Family Office. Please go ahead.

Nitin Shakdher — Green Capital Single Family Office — Analyst

Hi. Good afternoon to the management. And excellent set of results and bounce back, so once again very good to see. My question is on relation to healthcare and pharma segment and industry offtake from that and agriculture. Can the management talk about why the industry was a bit soft and a bit degrowth there for the financial year? Hello? [Technical Issues]

Operator

Please stay connected, ladies and gentlemen. I will check with the management. Ladies and gentlemen, we have the management line connected back again. Mr. Nitin, the management has got your questions, they will now begin to answer the same.

Nitin Shakdher — Green Capital Single Family Office — Analyst

Okay. Thank you.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Okay. Hi, Nitin. Sorry, something wrong with the technology. So your question was on healthcare and pharma. I have not added any clients this year. And while we participated in certain bids, because of cost reasons, we could not get those leads. There is no reduction as such in the business. All the clients are with us. Only thing is in terms of percentage ratio, their contribution has come down because other verticals have grown better. So that’s the reason we are on with our healthcare and pharma plans. We are revisiting on the cost structures how we should be structuring it.

Nitin Shakdher — Green Capital Single Family Office — Analyst

So is this in relation to cold chain transportation or any difference on the business on that, considering healthcare and pharma has a lot to do with the cold chain transportation?

Sunil Nair — Chief Executive Officer and Whole-Time Director

No, it is with respect to both warehousing as well as transportation.

Nitin Shakdher — Green Capital Single Family Office — Analyst

And is this similar for agriculture trend, because agriculture is also a bit soft? Any particular reason for that?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Agriculture is by design, because that’s one vertical which is the lowest yielding vertical. So our focus always is to move as much as possible our capacities from agri to other verticals, so that our realization per pallet is better.

Nitin Shakdher — Green Capital Single Family Office — Analyst

Okay, sir. One last question. If I go through the cash and cash equivalents and the bank balances previous year versus this year, now both balances were INR15-odd crores on cash and cash and bank and bank balances. And now, the balances are far lower. So where are we seeing — is it investments have increased or — from what I can see? Or is there something that the deployment has been very aggressive in terms of the cash?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Hi. See, the cash and cash equivalents is INR46 crores around there in the balance sheet. Out of that, INR43 crores is placed in the mutual funds just to avoid the ideal status and get some return from the mutual fund. Also, we — as you — just for your information, we are going for an expansion plan in current year. So this cash will be handy during the year expansion.

Nitin Shakdher — Green Capital Single Family Office — Analyst

Okay. So I’m assuming that these mutual funds are debt mutual funds, or are they equity mutual funds?

Sunil Nair — Chief Executive Officer and Whole-Time Director

These are debt mutual funds.

Nitin Shakdher — Green Capital Single Family Office — Analyst

Debt. Okay. Thank you for the clarification and all the best. And once again, congratulations for the excellent set of result and bounce back. Thank you.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Thank you very much.

Operator

Thank you. The next question comes from the line of Pranay Khandelwal from Alpha Invesco. Please go ahead.

Pranay Khandelwal — Alpha Invesco — Analyst

Hello. Thank you for this opportunity. I wanted to ask this particular question. A few calls back, I think we mentioned that we’ll be benchmarking ourselves to a company called Sysco Corp. And looking at their strategy, it seems that they did a lot of acquisition. So is that something Snowman will also be looking to do?

Sunil Nair — Chief Executive Officer and Whole-Time Director

I’m sorry, if you don’t mind, can you repeat your question, please?

Pranay Khandelwal — Alpha Invesco — Analyst

So I wanted to understand, a few calls back, our company mentioned — hello, can you hear me?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yes, yes.

Pranay Khandelwal — Alpha Invesco — Analyst

So a few calls back, our company mentioned that we will be benchmarking ourselves to Sysco Corp. I think that was when we were starting our 5PL segment. And their strategy, Sysco Corp’s strategy was to acquire a lot of companies and become sort of like a conglomerate. So is that something Snowman will also be looking for going forward, like acquiring a lot of small players and aggregating them under one roof?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yeah. So you are right, we are following Sysco model where they became a complete food service distribution company. And on that line only, we started the 5PL [Indecipherable] As of now, our focus is to expand 5PL services and integrate as much as possible with our customers as well as our suppliers. We do not have any immediate plan of acquisition, but we’ll think about it maybe a couple of years down the line.

Pranay Khandelwal — Alpha Invesco — Analyst

So if we will — if we are to do an expansion, it will be like a greenfield expansion rather than going for acquisitions. As of now, that’s what the model is, the strategy is, right?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yes. For a couple of years, yes. It will be purely developing more businesses with the existing set of customers and developing more product range from the suppliers.

Pranay Khandelwal — Alpha Invesco — Analyst

All right. And also, can you just give me sort of an idea as to which sectors are better yielding and which are lower yielding? Like you said that agriculture is a low-yielding segment. So which would be the ones which are better yield, more margin accretive?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Okay. So top ones which yields better to us are typically QSRs, ice cream — dairy and ice cream, and meat, seafood and poultry are the top ones, which gives us better yield. And average would be FMCG, e-commerce and pharma. Agriculture is the lowest one. But coming to the categories, in case of dairy, there is one product called butter, which also is a low-yielding product, which is high volume, low yield. So butter and agriculture is the lowest yield product as of now.

Pranay Khandelwal — Alpha Invesco — Analyst

All right. Thank you.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Thank you.

Operator

Thank you. [Operator Instructions] The next question comes from the line of Harsh Shah from Dimensional Securities. Please go ahead.

Harsh Shah — Dimensional Securities — Analyst

Hi. Thanks for the follow-up. Sir, coming back to the trading and distribution, the 5PL business, last three quarters we’ve been doing revenue of around INR28 crore to INR30 crore. We’ve mentioned that we are catering to three clients. So going ahead this year, how many clients do you expect to add to this at your tally? Because I remember in one of the calls, you were referring that you do GMV of almost INR10,000 crore in your warehousing and transportation business. So at what rate one can expect for this business to grow? And how many clients are we in discussion with which we can add?

Sunil Nair — Chief Executive Officer and Whole-Time Director

So see, while we have a GMV of INR10,000 crores, most of it are the ones which are exporters and we do not have much value add for them. But good 20%, 25% is somewhere where we can add a lot of value. So now, since our IT system is in place, we are going little aggressive on this. I’m not sure because usually this is a big change for customers, because they have to do away with a lot of activities which are being done in house and outsource that to us. So it’s long-term strategic decisions. And usually, it takes time for the organization. So from a realization point of view, I am not sure how much time it will take, but we are hoping to add at least a couple of clients in this year and seeing that we grow this vertical by at least 40%, 50% this year.

Harsh Shah — Dimensional Securities — Analyst

Okay. And then returning back to the segmental information which we have given. So there is this unallocable expense of INR4.4 crore for this quarter and INR27 crore for the entire year. So are these majorly corporate overheads or attribute — obviously, it’s unallocable, so are these mainly corporate overheads and what hedge will this fall?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Hi. This is majorly the overheads part. It includes people’s cost and it includes IT infrastructure, the major part is that.

Harsh Shah — Dimensional Securities — Analyst

IT infra?

Sunil Nair — Chief Executive Officer and Whole-Time Director

IT infra and the people in the common costs.

Harsh Shah — Dimensional Securities — Analyst

You have employee cost and then — so employee cost, you are not dividing in the segmental expenses.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Which cost?

Harsh Shah — Dimensional Securities — Analyst

Employee cost.

Sunil Nair — Chief Executive Officer and Whole-Time Director

You see, there are always direct cost that is taken care in the segmental. I’m talking about, corporate, the leadership team and management is here, that is some cost where you will not be able to allocate it. So when — I’m just giving you a reference. So whenever there is unallocated cost, we will not be able to divide them in key picture. Only the direct cost is the one which will be shown above the segment result.

Harsh Shah — Dimensional Securities — Analyst

Okay. And the IT infra spend which we are doing, are these one-time in nature or these will be recurring?

Sunil Nair — Chief Executive Officer and Whole-Time Director

It’s a recurring, the support cost basically.

Harsh Shah — Dimensional Securities — Analyst

Okay. And you mentioned that you do around 2% to 3% in distribution business, out of — which works out to around INR1.8 crore of additional expense per quarter below the EBIT. There is INR7 crore expense on annual basis. So I believe in the sourcing, we mainly did procurement and distribution. We just procure goods and distributedistribute it. So what is the INR7 crore expense for that line item over turnover of around INR60 crore which we have done — INR85 crore?

Sunil Nair — Chief Executive Officer and Whole-Time Director

May I know where you are referring INR7 crores figure.

Harsh Shah — Dimensional Securities — Analyst

No. You said that in this trading and distribution, you do around 2% to 3% margins on net basis when it comes to around INR0.8 crore of net profit for the quarter.

Sunil Nair — Chief Executive Officer and Whole-Time Director

So…

Harsh Shah — Dimensional Securities — Analyst

INR30 crore — for the quarter, I mean. INR30 crore multiplied by 2.5%.

Sunil Nair — Chief Executive Officer and Whole-Time Director

See, I’ll tell you on net basis, we got INR3 crores. INR2.8 crores is for the year where we made the money on net basis in Snow Distribute.

Harsh Shah — Dimensional Securities — Analyst

For the entire year?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Entire year, yeah, INR3 crores.

Harsh Shah — Dimensional Securities — Analyst

INR3 crores?

Sunil Nair — Chief Executive Officer and Whole-Time Director

INR3 crores, yeah. And what you are seeing here is INR5.67 crores in the segmental reporting, so roughly INR3 crores is what for the year is a common cost attribution to this segment.

Harsh Shah — Dimensional Securities — Analyst

Okay. So that is merely an apportion of cost?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yes.

Harsh Shah — Dimensional Securities — Analyst

And it’s done based on turnover?

Sunil Nair — Chief Executive Officer and Whole-Time Director

We will not be able to allocate, that’s the reason we have kept it down. But if we have to apportion based on the turnover, it will come to roughly 3%, turnover. And…

Harsh Shah — Dimensional Securities — Analyst

So if I…

Sunil Nair — Chief Executive Officer and Whole-Time Director

Now only lower I would say. It’s a — this is a concentration, yeah.

Harsh Shah — Dimensional Securities — Analyst

Okay. So if I have to look at this business on gross basis, we did INR2.4 crore in the current quarter on revenue of INR30 crore, which is 8%. So on gross basis, can we continue to expect these margins for this segment?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yeah. It all depends on the product mix again. See, the Tim Hortons — the growth of Tim Hortons — because you know that the clients composition right now is Tim Hortons, Baskin and IKEA, where the product composition changes and we do also have a product where 4% margins we yield, also we yield the 10% margin. So on an average of [Indecipherable] basis, I would say 6% to 8% is what where we can — gross level can maintain.

Harsh Shah — Dimensional Securities — Analyst

Okay. And then can you apprise us on the size of this opportunity if we talk outside your own GMV? What — how scalable is this business and which are the other players in India which does this business? And if you have to look at this business over the next five year or even 10-year horizon, how scalable this opportunity is?

Sunil Nair — Chief Executive Officer and Whole-Time Director

See, scalability of this opportunity is very, very, very big, because what we are doing indirectly is we are trying to replace the distributor concept in most of these businesses. So typically, what happens today is an FMCG company would manufacture, use a transportation company to reach it to regional warehouses and then some large company — large 3PL company would be operating the regional warehouse and then they will use another transporter to reach it to state warehouses and some small company would be operating state warehouse and then, from there, it goes to distributors and then the distributor delivers it to retail. So we are trying to see that we as single party does everything for them.

So from an opportunity point of view, yes, it is very, very big. But at the same time, it has lots of complexities attached to it and a big change management from the customer side. So while we say it is going to be slow, but the ticket size is going to be big in this case. Like you can see in last one year, we have reached a good number of INR85 crores, INR86 crores. So the ticket size is bigger. Decision making is going to be a little slow. So accordingly, we are pursuing this opportunity.

Harsh Shah — Dimensional Securities — Analyst

Okay. Understood. Thank you so much.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Pranay Khandelwal from Alpha Invesco. Please go ahead.

Pranay Khandelwal — Alpha Invesco — Analyst

Thanks for a follow-up. I wanted to know if you can guide us on the expansion plans that we may have for the year. Are we looking for any — setting up any new facility or anything?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yeah. So we are — as I told you, we are buying 50 trucks. And in addition to that, we’ll be setting up warehouse in Kolkata, which is around 5,000 pallet provisions. We are also planning to set up one warehouse in Bhubaneswar, around 4,500 pallet positions. We will also be setting up a warehouse in Lucknow, which is going to be around 4,000 pallet positions. So these three warehouses will be constructed in this financial year.

Pranay Khandelwal — Alpha Invesco — Analyst

So I believe Kolkata was already on the — in the pipeline for some time. So has there been any progress that has been made over there? Like, where are we in that?

Sunil Nair — Chief Executive Officer and Whole-Time Director

So Kolkata, we had purchased land last year. And this year is what it was budgeted for the construction purpose. So we were doing the land development activities last year. And now in this board meeting, it is approved and we are now going to go ahead with the construction part for all the three locations.

Pranay Khandelwal — Alpha Invesco — Analyst

So would we be — would these facilities come online like mid year or we are expecting them to come online by the end of the year only and then start adding on to the revenue after in FY ’25?

Sunil Nair — Chief Executive Officer and Whole-Time Director

Yes. So they will add revenue in FY ’25 only. They will be ready by the Q4 of this year.

Pranay Khandelwal — Alpha Invesco — Analyst

Thank you.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Thank you.

Operator

Thank you. [Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Sunil Nair — Chief Executive Officer and Whole-Time Director

Okay. Thank you so much for all the participants and we look forward to connect with you very soon. Thank you so much.

Balakrishna N — Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]