Aegis Logistics Ltd (AEGISCHEM) Q2 FY23 Earnings Concall Transcript

Aegis Logistics Ltd (NSE:AEGISCHEM) Q2 FY23 Earnings Concall dated Nov. 10, 2022

Corporate participants:

Rasika Sawant — Investor Relations Partner

Raj K. Chandaria — Chairman And Managing Director

Murad Moledina — Chief Financial Officer

Analysts:

Priyankar Biswas — Nomura — Analyst

Himanshu Yadav — Edelweiss Wealth Research — Analyst

Amar Maurya — AlfAccurate Advisors — Analyst

Digant Haria — Green Edge Wealth — Analyst

Lavanya — UBS — Analyst

Ankur — Philip Capital — Analyst

Dr. Amit Vora — individual investor — Analyst

Bhavik Shah — MK Inches — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q2 FY ’23 Earnings Conference Call of Aegis Logistics Limited. [Operator Instructions] Please note, that this conference is being recorded. I now hand the conference over to Ms. Rasika Sawant from Orient Capital, Investor Relations partner.

Thank you, and over to you, Ms. Rasika.

Rasika Sawant — Investor Relations Partner

Thank you, and welcome to the Q2 and H1 FY 2023 Earnings Conference Call of Aegis Logistics Limited. Today on this call, we have Mr. Raj Chandaria, Chairman and Managing Director, along with senior management team. This conference call may contain forward-looking statements about the company which are based on beliefs, opinions and expectations as of today. Actual results may differ materially.

These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. A detailed safe harbor statement is given on page number two of company’s investor presentation, which has been uploaded on the stock exchange as well as company’s website.

With this, I hand over the call to Mr. Raj Chandaria for his opening remarks. Over to you, sir.

Raj K. Chandaria — Chairman And Managing Director

Okay. Thank you very much. Good afternoon, everyone. I’m joined by our Chief Financial Officer, Mr. Murad Moledina, and we’ll be presenting the FY ’22-’23 H1 results as well as the outlook for FY ’22-’23 and various business updates. Let me start by reminding everyone of our vision for the company. So our vision is to be the leading provider of logistics and supply chain services to India’s oil, gas and chemical industry. And everything we do is aligned to this vision. And let me say that with the successful commencement of our partnership with Vopak and with the successful launch of the Kandla LPG Terminal and the successful acquisition of the Friends Terminal and the growth projects currently under implementation, that vision is certainly coming into clearer focus.

We are now the market leaders in Kandla, Pipavav, Mumbai, Bangalore, Kochi and Haldia. In some cases, in capacity terms, we are the leader in capacity terms, but in all cases in terms of quality, reliability and service. And this applies to both liquids and LPG. And as we enter new locations, I’m confident that the same dedication to quality, reliability and service will move us into market leadership positions in these new ports as well. And we will strive to translate the same dedication to quality, reliability and service in the gas distribution segment as well. I think I can say with some confidence that we are already there in certain geographic markets. And as we extend our footprint, this dedication will follow. Now finally, before I move on to the financial results, I want to emphasize that being the leading provider of logistics and supply chain services to India’s oil, gas and chemical sector, carries with it a duty of care and responsibility to environmental sustainability.

And at Aegis, this responsibility is taken very seriously, and we have now incorporated this into the design philosophy of new gas and liquid terminals in addition to retrofitting older facilities. Now turning to the results. You will recall that we had a solid performance for the last fiscal year 2021-’22. And we are pleased to report that the first half of ’22-’23, i.e., H1, is tracking well to deliver an excellent — another strong performance and — for FY ’22-’23 and to build further on the profit growth that we saw in FY ’21-’22. So revenues increased to INR4,386 crores versus INR1,318 crores year-on-year primarily as a result of higher sourcing volumes. Normalized EBITDA for the group increased to INR347 crores in H1 and versus INR262 crores in the previous year.

That’s a rise of 33% over the previous year and a lifetime high. Profit before tax rose to INR259 crores as compared to INR214 crores year-on-year. That is a rise of 21% profit before tax growth. The profit after tax for the group was INR209 crores versus INR173 crores year-on-year, and that’s a rise of 21%. Now generally, the second half, H2, is stronger than H1, and we therefore believe that this sets us up for robust profit growth during the rest of this fiscal year. Finally, on the basis of the completion of the joint venture transaction and result in a strong cash position, I’m pleased to report that the Board has declared a third interim dividend of INR two per share. This is, of course, a onetime and special in nature on account of this joint venture transaction. So I’d now like to hand over to Mr. Murad Moledina, our CFO, to go through the underlying segment numbers and financial details. Murad, over to you.

Murad Moledina — Chief Financial Officer

Thank you. Let me take the Liquid Terminal division first. The revenue for first half FY ’23 was INR188 crores, a lifetime high versus INR130 crores year-on-year. That is an increase of 44%. The EBITDA for the quarter for this division was INR124 crores, which is again an increase of 31%. Coming to the Gas Terminal division, revenues were INR4,198 crore for H1 versus INR1,183 crores year-on-year. The EBITDA for H1 for Gas was INR223 crores versus INR167 crores on a year-on-year basis, a rise of 34%. We continue to see growth for the Gas division with sourcing throughput and distribution volumes improving. As we now explain the sales volume, starting with throughput volumes, LPG volumes for H1 for three terminals of Mumbai, Haldia and Pipavav was 14.70 lakh metric ton or 1.47 million tons versus 1.305 million tons year-on-year, an increase of 13%.

This was despite lower volumes at Haldia on account of taking upgradation of both the jetties where the group handles LPG. The company had good volumes at Mumbai as it operated at full capacity with IOC, HPCL and BPCL, all bringing imports at Mumbai. The LPG gantry at Pipavav continued to perform well and is delivering considerable cost savings to our customers, which is driving improved volumes at Pipavav. Now coming to distribution, the bulk industrial segment delivered 173,990 metric tons in H1 versus 45,860 metric tons year-on-year, representing a 379% growth over the previous year and, of course, a lifetime high. EBIT margins remaining stable. With Kandla LPG terminal operationally stabilized, we believe that this distribution business will continue to register impressive growth.

The commercial and domestic cylinder segment, which sells to hotels, restaurants and small scale industries under the Pure Aegis gas brand and to the domestic household segment under the Aegis Chota Cikander brand was also higher with H1 sales of 17,310 metric tons versus 11,352 metric tons a year earlier, registering a 52% increase. Autogas sales were also slightly higher at 10,248 metric tons in H1 against 9,554 metric tons a year earlier, an increase of 7%. Margins remained stable for distribution business. The sales volume of sourcing business was 457,960 metric tons versus 159,633 metric tons a year earlier. As reported earlier, this was due to increase in — this increase in volume is expected to continue this calendar year.

With that, I would like to hand over back to Mr. Raj for further updates.

Raj K. Chandaria — Chairman And Managing Director

Okay. So let me then turn to the business updates for the quarter and the outlook for the rest of the year and an update on our capital expenditure plans. So as far as the business updates are concerned, with — during the period, Pipavav four continued its work on making the LPG jetty compliant for handling VLGCs, with commissioning now expected sometime during Q3, which will improve — further improve the competitiveness of Pipavav as a logistics hub. The work continues at Kandla oil jetty number seven, which will also be made VLGC compliant, and we expect it to be completed in this financial year — by the end of this financial year. Work continues on the IHBL — by the IHBL on the KGPL LPG pipeline, which I can — if I can remind everyone, both — to which both Kandla and Pipavav will be connected. All of these key developments, which are slowly maturing, are positioning our Kandla and LPG terminals to be the leading gateways for feeding the key LPG pipelines of India going North and into Central India.

As far as the outlook for the second half of FY ’23 is concerned, both Gas and Liquids segments continue to perform well. And it is our expectation that this year’s profits will continue to grow robustly. We expect our Liquids business, with its leading position in the key ports of India, to perform well for the rest of the year especially in light of good economic growth in the country. And the same applies to the LPG segment. As I have said in previous calls, we are confident that the distribution business is going to flourish and add to our base throughput business. And you’ve seen that in the quarterly — the half-year numbers that Murad has just reported on. As far as the projects update is concerned, I’m pleased to confirm that the project work has now commenced full swing on the expansion projects that we announced last year.

We expect the price of these projects, an additional liquids capacity of 50,000 cubic metric — cubic meters in Haldia of liquid tankage to be commissioned during this financial year. And all the other projects are ongoing. We will keep giving updates in the ensuing quarters. As far as the Aegis-Vopak joint venture is concerned, as previously informed, the joint venture has achieved a successful closure and is performing in line with expectations. We are constantly — the joint venture is constantly evaluating new business opportunities and proposals and are confident that the combination of our strengths, both Vopak and Aegis, will lead to some interesting projects in the future. So that concludes my formal presentation, and we can now take questions. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Priyankar Biswas from Nomura.

Priyankar Biswas — Nomura — Analyst

My first question is regarding can you provide us some sort of EBITDA margin reconciliation for the Gas business. The reason I ask is, so if I assume, let’s say, that earlier guidance that probably the gas logistics business mix is something like INR1,000 per ton, then if I subtract out from, let’s say, your 2Q numbers of the entire normalized gas EBITDA, then what I get is that distribution margins is more like INR2,500, INR2,700 per ton. But I think the guidance was something like INR4,000, INR5,000. So can you help me reconcile on the distribution margins?

Raj K. Chandaria — Chairman And Managing Director

Murad, you want to take that?

Murad Moledina — Chief Financial Officer

See, we have done EBITDA margin in Gas of around INR184 crores. And if you take out INR1,000 which you just said, that would, of course, leave around INR500 crores. Sorry, yes, the sourcing volume is, of course, not included in this, which is at a very small margin. But the combined margins of all the distribution put together, including bulk auto LPG and pack cylinders, is always close to INR3,000 per ton. And I think that is what you are getting in your calculation. So I don’t see any much variant as such.

Raj K. Chandaria — Chairman And Managing Director

Just to add to that — Priyankar, just to add to that, of course, the big volume of the distribution business is the bulk industrial volumes. Autogas and pack cylinders, which are slightly higher margin, are — do not constitute the bulk of it. The bulk of it is the bulk industrial, I think on which margins are in the INR2,500 range or INR3,000 range.

Priyankar Biswas — Nomura — Analyst

Okay. So the bulk, we should probably work with some number of INR2,000, probably, maybe slightly higher, something like that?

Raj K. Chandaria — Chairman And Managing Director

Yes, INR2,000, INR2,500 is probably about the right range.

Murad Moledina — Chief Financial Officer

Just to add here, the new distribution business, which is really in the industrial area of Morbi and industrial clusters, do not have as much margin as when we were doing small distribution business. So this bulk business is always at a margin of around INR2,000. So there is — this is in direct competition with the natural gas, so which is why you will now have to rework with your margin numbers much closer to INR2,500 — between INR2,500 and INR3,000 blended rate.

Priyankar Biswas — Nomura — Analyst

Yes, yes. Then I guess it’s largely reconciled, I mean, about your number. And sir, just one more question from my side. Regarding the OPEC deal cash flows, so if you can just elaborate for the benefit of everyone, like how much money has been received so far? And how does it reflect in the — like the 1H FY ’23 balance sheet, because I’m not able to make it out completely?

Murad Moledina — Chief Financial Officer

Can I take that?

Raj K. Chandaria — Chairman And Managing Director

Yes, please.

Murad Moledina — Chief Financial Officer

Yes. So if you look at the balance sheet, the cash being carried is appearing in three parts; as investment; cash in bank; and bank balance, which is around INR1,300-odd crores. So that’s the cash we are carrying. We have received around INR2,000 crores, out of which, after you deduct tax of around 20%, leaves around INR1,600 crore. And then if you look at borrowings, if you remember, the borrowings at JVCO level has been INR600 crores. And we already were having debt of INR400 crores. So from INR1,000 crores, we have repaid debt of around INR300 crores to INR400 crores. Third reason is that the increased distribution business requires more working capital. So if you look at all the three, you will understand that around INR2,000 crore is what has come in, in addition to whatever cash eaned out of profits during H1. So that is how it appears in the balance sheet..

Priyankar Biswas — Nomura — Analyst

That’s very clear. So that’s all from my side..

Operator

The next question is from the line of Himanshu Yadav from Edelweiss Wealth Research.

Himanshu Yadav — Edelweiss Wealth Research — Analyst

Two questions from my end. One is, following regarding Priyankar’s questions, I mean, you mentioned that since the Morbi business is directly competing with natural gas, and hence, the margins should be a bit lower. So could you just help us understand the visibility on that front? Because I mean, how sticky would you believe these volumes are? And what would be the share of Morbi within the overall volumes that you have reported for the distribution segment?

Raj K. Chandaria — Chairman And Managing Director

Murad, can I just take the first half of that question, and then maybe you can talk about second half? So our belief is that the tailwind that we are receiving from the whole natural gas situation is — has reasonable good and high visibility for at least the next year or two years. I say that because we do not expect the natural gas situation to ease at least for another four to five years because, as we know, the whole natural gas situation has been appended by not only the Ukrainian situation and the stoppage of Russian supplies of natural gas to Europe, resulting in a huge scramble for natural gas from the rest of the Europeans, which has led to this tremendous spike. We do not expect that situation to ease off in the short term.

And so, we believe that this is quite sustainable for a reasonable period of time. I said one to two years because, obviously, I wouldn’t like to predict five years, but we have strong visibility for at least one to two years. And we believe that this is a sustainable situation. In fact, I believe that we will be growing our market volumes more than just the Morbi market and other industrial clusters. I think that the volumes will increase rather than stable.

Himanshu Yadav — Edelweiss Wealth Research — Analyst

The share of volume?

Murad Moledina — Chief Financial Officer

Yes. And just to add, Morbi, out of 173,000 industrial distribution volumes that we have done, Morbi would be somewhere around 35%, 40%. This is in spite of the fact that I think a month Morbi was closed for their annual maintenance which they take up. So we expect these volumes to grow even further in the ensuing quarters.

Himanshu Yadav — Edelweiss Wealth Research — Analyst

Right. Right. And sir, my second question is, post the JV structure, now we are consolidating our JV, so in this quarter, we see a minority interest has around INR seven crores in the profit and loss statement. Could you just give us some color on how to think about that going forward? I mean, as per my understanding, I mean, whatever has flown to the JV part, they do make a good chunk of EBITDA. And accordingly, the biochemicals portion should have been higher, so which — some color and elaboration would be helpful, please.

Murad Moledina — Chief Financial Officer

Minority interest is a complex working. Anyway, just to give a color that we are always very much focused on each and every part of the results and, if you see, minority interest is well contained. This is also going out of the fact that our new terminal Kandla, which has moved to the JVCO, actually is earning more of distribution business and profits which 100% accrue to the holding company. So that effectively puts us in a very nice position. So it’s only throughput. In addition, that is what we have been saying earlier, too. As far as Liquid business is concerned, we have carved out Liquid business of around, let’s say, 600,000 CBM or a little less. But we have also got CRL liquid capacity into the JVCO, out of which we own 50%, and the French acquisition.

So that has somehow balanced the share of which we give to the JVCO partner by the new capacity EBITDAs which are flowing in and coming to us as our share of 51%. So Liquid is absolutely balanced. Gas, most of the profits out of Kandla is from distribution which accrues 100% with the holding company, I think. This is how far I can go to actually in MI. But we are very conscious of each and every part of the results, and we are focused on the EPS very much to deliver what we have always maintained in past, the upside and growth in EPS.

Himanshu Yadav — Edelweiss Wealth Research — Analyst

So sir, would it be fair to assume that this minority interest amount going forward will move in line with the profitability or, I mean, we should not expect any bump up or any lumpiness when it going forward in terms of any surprises beyond normal operations?

Murad Moledina — Chief Financial Officer

If the profits come in more, obviously, the minority interest will increase. But as of whatever is

Q2, in that state, the minority interest is what it is reflected in the results. But as the profits will grow even further more, then obviously, minority interest to that extent will show an increase which you should project for.

Himanshu Yadav — Edelweiss Wealth Research — Analyst

Right. I’ll pass it on. I guess I’ll need to have more clarity on this, so I will follow up later. This is it from my end as of now.

Operator

[Operator Instructions] the next question is from the line of Amar Maurya from AlfAccurate Advisors.

Amar Maurya — AlfAccurate Advisors — Analyst

Just wanted to understand a little bit more on the Gas business volume. So in this particular quarter, auto business volume would be around 10,000 metric tons, right?

Raj K. Chandaria — Chairman And Managing Director

For six months, H1.

Amar Maurya — AlfAccurate Advisors — Analyst

That is for six months, right?

Raj K. Chandaria — Chairman And Managing Director

Yes.

Murad Moledina — Chief Financial Officer

Yes. Okay. So it would be, what, like 50-50 divided?

Raj K. Chandaria — Chairman And Managing Director

Yes.

Amar Maurya — AlfAccurate Advisors — Analyst

And the domestic distribution business, I wonder, would be how much, sir, excluding commercial and industrial, that is Chhota Cikander?

Raj K. Chandaria — Chairman And Managing Director

17,000. We have already said that in the call, 17,000-odd.

Amar Maurya — AlfAccurate Advisors — Analyst

17,000 metric ton?

Raj K. Chandaria — Chairman And Managing Director

Yes.

Amar Maurya — AlfAccurate Advisors — Analyst

That is for six months or for the…

Raj K. Chandaria — Chairman And Managing Director

Six months, H1.

Amar Maurya — AlfAccurate Advisors — Analyst

Okay. Okay. And sir, so basically, if I’m not wrong, in auto business, basically, we used to have the EBITDA pattern of something around INR8,000 to INR10,000, right?

Raj K. Chandaria — Chairman And Managing Director

Yes.

Murad Moledina — Chief Financial Officer

Correct. Yes.

Amar Maurya — AlfAccurate Advisors — Analyst

And in domestic business, the EBITDA parttern is around INR4,000 to INR5,000.

Raj K. Chandaria — Chairman And Managing Director

Yes, a little lower, INR3,000 to INR4,000, not INR4,000 to INR5,000.

Amar Maurya — AlfAccurate Advisors — Analyst

Okay. INR3,000 to INR4,000. So basically, when in the commercial business, I mean, when the commercial business average EBITDA is significantly lower our, sir, or it has gone down significantly lower?

Raj K. Chandaria — Chairman And Managing Director

Let’s just explain that Kandla bulk industrial sales to industrial clusters are not in the — are not at margins which we usually are accustomed to, because these are really, really bulk sales. So that is how we will have to realign to the margins combined for the distribution business.

Amar Maurya — AlfAccurate Advisors — Analyst

Basically, that INR3,000 to INR4,000 range has come down to INR2,000 to INR2,500 range.

Murad Moledina — Chief Financial Officer

Yes.

Raj K. Chandaria — Chairman And Managing Director

Yes. And just so that you are clear that the commercial segment was generally packed in larger cylinders. So when you package a product, the margins are generally a little higher, in the INR3,000 to INR4,000 range. But a lot of this bulk supply to the — out of Kandla and so on is not packed. It’s in truck — tanker trucks, okay? So it’s a different type of — it’s a bulk industrial, sort of small industry supply.

Operator

The next question is from the line of Digant Haria from GreenEdge Wealth.

Digant Haria — Green Edge Wealth — Analyst

My first question is on the general competitive intensity that we are seeing because, yesterday, I just read an article that Adani has bought a majority stake in Indian Oil Tanking Company. And I see that with the Vopak joint venture, we have begun a capex drive where we are adding more liquid as well as LPG storage capacity across most of the ports. So do you see this activity to be intensifying apart from you guys and maybe if Adani has taken over? Or the competitive intensity is not something we worry about today?.

Raj K. Chandaria — Chairman And Managing Director

Look, I think competition is always there in every industry. And to be honest, we welcome competition because our positioning, as I explained right at the outset, is quality, quality, quality, service and reliability. And as far as this — the Liquids business is concerned, this business has been fairly competitive throughout all ports for as long as I can remember. I mean we have tremendous competition. We have tremendous competition in Kandla. We had competition in Haldia. We had competition in Kochi. These are — there are plenty of smaller operators and so on. In the Indian Oil Tanking, this terminal, Indian Oil Tanking Limited, this company has existed for some time. There’s no new capacity that they are building. It’s just one party acquiring somebody else’s stake, Adani acquiring somebody else’s stake. Obviously, Adani is a serious player, and we always respect them.

And — but we are confident that this is not going to change our plans any at all. I mean we are in six, seven ports. As I mentioned earlier, we’re going to be in a couple of more ports, and we will consolidate and strengthen our position. So we are market leaders in all the markets that we operate in. As far as gas is concerned, I think for those of you who follow the company, you’ve seen how we have taken the leadership position now with our port at LPG terminal in Kandla. And as you know, we’ll be building more. And again, not at all concerned about competition.

Murad Moledina — Chief Financial Officer

And just to add here, the acquisition of stake is minority, not majority, as you said. And secondly, this IOCL business is more for petroleum storage, industrial terminals for captive IOC business and needs. So it has a distinction as far as what we being very true a third-party logistics player, where we are not attached as an industrial terminal or to any one customer as yet. So that’s how there is the difference.

Digant Haria — Green Edge Wealth — Analyst

And then one more thing. Raj, you mentioned in the comments before that you see the natural gas demand remaining tight for many years, so just wanted to check that if across the world, a lot of people switch to LPG as a more alternative. Does the pricing differential, is it a threat? Or how do you see the demand-supply dynamics for LPG? I know all of this in the future is a guess, but whatever to the best of your understanding, that would be great for us to know.

Raj K. Chandaria — Chairman And Managing Director

I think we don’t anticipate the whole world switching to LPG. Certainly, India is in a peculiar and unique position, but for the last 50 years, possibly more than 50 years, India has been promoting LPG as a fuel. We were never promoting natural gas as a fuel. So India is a unique market investment that there is LPG being used for industrial and domestic purposes. Most other countries, developed countries, even China and Japan and so on, moved away from LPG and moved to natural gas. Europe, of course, has been on natural gas mainly and America as well. So we don’t see a huge rush to LPG in other markets. I mean there will be some switching but not a huge amount. In India, we are — natural gas is a relatively nascent industry, and so — and extremely price sensitive.

Of course, energy in India, all Indian consumers are extremely price sensitive. So we believe that when you have a scenario where — which countries are bidding for cargoes of natural gas or contracts for natural gas, they have the ability to pay more than the Indian consumers for natural gas. And so that combined with the fact that LPG has been long established for 50 years in this country for both domestic and industrial use, we think that’s a trend that is going to specifically Indian. As far as the supply of LPG is concerned, at this moment, our suppliers, of course, we are joint venture with ITOCHU. We have a pretty good window. We ourselves are now very experienced in sourcing. We don’t see a problem. As you know, when you produce natural gas, LPG comes along with that. So we don’t see a supply constraint too much. I mean prices will move up and down, but actual supply constraint, I don’t see a problem with that.

Digant Haria — Green Edge Wealth — Analyst

So maybe that puts us in a sweet spot. So just one last clarification on — you said that this entire Morbi volumes increased. Is it through the — more through that Magna 410 kg cylinder? Or as you said, it will be more of tankers being supplied there, and they will empty it on their own — in their own system or something like that?

Raj K. Chandaria — Chairman And Managing Director

I think it’s a mixed bag. You have some of the larger players which just take it in bulk, and they have their own tanks on — storage tanks on site, small bullets on site. Some are smaller scale. They have Magna cylinders. Some are even smaller, who have the next one down. I don’t know exactly what was the next one down. Yes, so it’s a mixture.

Digant Haria — Green Edge Wealth — Analyst

Okay. Okay. And if you can…

Raj K. Chandaria — Chairman And Managing Director

Go ahead.

Digant Haria — Green Edge Wealth — Analyst

Yes. So on this one, if — I just wanted to know from like Morbi, how easily — if they were on some other kind of fuel technology, how easily did they adopt to this LPG? Any other clusters that you see where we can grow in a similar way in the coming times?

Raj K. Chandaria — Chairman And Managing Director

Yes. I think we are definitely — there are some customers who are using natural gas, low emission natural gas. They have installed these LPG backup systems. There are some who are converted from dirtier fuels to LPG. So I think we definitely are seeing this and making a big push to convert as many customers as we can onto either use of LPG/propane as a primary fuel. And so we are seeing this happening not only in India, but in other places as well.

Murad Moledina — Chief Financial Officer

Yes. Just to add that a lot of power companies can now look at LPG to spike natural gas while producing power. So that would be another area where we see potential need and growth as far as LPG is concerned.

Operator

[Operator Instructions] The next question is from the line of Lavanya from UBS.

Lavanya — UBS — Analyst

So I just wanted to check on — I got the sense that about 35% to 40% of our volume goes to Morbi. I just wanted to understand what’s the composition of the rest of the segment, which industries and regions form the remaining distribution volume other than this Morbi, like fertilizing — which industries, like the LPG?

Raj K. Chandaria — Chairman And Managing Director

I think there’s a variety of applications. I mean that hasn’t changed much. I mean for example, glass, fiberglass, aerosols, a number of bakeries, a number of industrial applications for using LPG as a heating fuel. So I don’t know, Murad, do you want to add anything?

Murad Moledina — Chief Financial Officer

To add here, that even in different geographies, so now we are selling bulk from Haldia, from Mumbai, from Kandla. So now we have four terminals, all operating full on. And it’s like Mr. Raj said, varied industry is taken — used, in addition to what Mr. Raj mentioned, even steel and auto mobile companies, etc. So it’s a variety and different geographies where we sell bulk, it’s not just Kandla alone.

Lavanya — UBS — Analyst

Okay. Got it. So I just wanted to check this because if there was any shift in any other industry, just like how Morbi has been from LNG to LPG, so if that was helping us in any of the other industries.

Murad Moledina — Chief Financial Officer

We are smiling, because those still remain as potential opportunities to grow even further. So I think we will see some of that happening in near future.

Lavanya — UBS — Analyst

Okay. Got it. And on the Liquid segment margins, so how do you see this going ahead and I mean getting back to normalized levels of how we have seen previously, like 8% to 9% on EBIT terms? So how do you see this improving over the next few quarters?

Raj K. Chandaria — Chairman And Managing Director

I think — sorry, margins on Liquid segment?

Lavanya — UBS — Analyst

Yes, yes, Liquid segment.

Raj K. Chandaria — Chairman And Managing Director

Yes, 8% or 9%. I think it’s higher than that, isn’t it, Murad?

Murad Moledina — Chief Financial Officer

No. EBITDA margins on revenue or what are you looking at?

Lavanya — UBS — Analyst

So I was looking at EBIT margins based on reported or even the EBITDA margins are slightly lower than what we were seeing earlier.

Murad Moledina — Chief Financial Officer

Yes, yes. So EBITDA margins are 65% on revenue, and that is what we have always given advice, that is how liquid should behave. But earlier, of course, were a little higher, and this is expected to improve because we have just taken over Friends Terminal, 0.5 million kiloliters of capacity as well as CRL, which was earlier run by Vopak. We see a lot of cost synergy going forward, and we expect even the mix of the products we store at our different facilities to graduate to more high-value products, which will see a definite increase in the EBITDA margins from the current level. And any increase in revenue from here on will flow directly or mostly into EBITDA, because the expenses are all there accounted for. So we definitely see an improvement going forward in coming quarters over the EBITDA percentage to revenue as far as Liquid business is concerned.

Lavanya — UBS — Analyst

Okay. So any timeline here, sir, that you see?

Raj K. Chandaria — Chairman And Managing Director

I think you’ll see a quarter-by-quarter improvement.

Murad Moledina — Chief Financial Officer

Yes, quarter-by-quarter, there should be an improvement.

Lavanya — UBS — Analyst

Got it. And on Kandla, so how do you see taking the terminaling volume? So as of now, we don’t have any contracts there. Do you plan to keep them open going forward or plan to enter into any contracts in this particular terminal, because it’s a decent size or big capacity for us. So how do you see that going ahead?

Raj K. Chandaria — Chairman And Managing Director

So I’m just going to first start off by saying that you will recall that, of course, Kandla terminal was delayed by implementation, commissioning was delayed by about six months because of COVID and so on. We finally sort of got our first cargo in — at the end of May. And I’m really pleased to say that the way the volumes have step-by-step improved. Today, we are in a position where I think — and I’ll ask Murad to comment on this. And we are seeing…

Murad Moledina — Chief Financial Officer

Yes, yes. As we talk, the first fully loaded ship for one of the national oil companies is being unloaded. And I think in this month itself, probably three ships are already planned and in the first half itself would be unloaded. So that’s a huge jump and a very good sign on things to come. So throughput-wise also, Kandla should be doing well in addition to the distribution business, which it is being near to Morbi and other industrial clusters, there would always be a business of distribution also coming from Kandla. So Kandla is looking really, really good.

Operator

The next question is from the line of Ankur from PhillipCapital.

Ankur — Philip Capital — Analyst

Yes. Sir, just one question from my side. How does the contracting for LPG procurement works? Are these like long-term contracts? Or are these on a month-on-month basis? If you could just help us understand that, that would be helpful.

Raj K. Chandaria — Chairman And Managing Director

First of all, as far as LPG procurement is concerned, which we do to our joint venture with ITOCHU Singapore, they are all on a back-to-back basis. First, we respond to the tenders put out by the national oil companies. And if we win the tender, then there is a specified delivery period, say, over 12 months and the frequency of ships and so on. So once we have won that simultaneously, we will obviously, on a back-to-back basis, secure the ships and the actual supplies. This is all done in coordination with our partners ITOCHU. So it’s on a back-to-back basis, I think. Murad, do you want to just add anything to that?

Murad Moledina — Chief Financial Officer

Yes. No exposure on pricing, inventory, currency, nothing, sitting back-to-back.

Ankur — Philip Capital — Analyst

How does the duration of this contract vary? I mean, is it like [Indecipherable] contract?

Raj K. Chandaria — Chairman And Managing Director

I’m sorry, we weren’t able to hear anything in that question.

Ankur — Philip Capital — Analyst

Okay. Is that better? Can you hear me?

Raj K. Chandaria — Chairman And Managing Director

Yes.

Ankur — Philip Capital — Analyst

Just on the duration of these contracts, I mean, are these like 12-month contract? Or are there any shorter-duration contract?

Raj K. Chandaria — Chairman And Managing Director

Yes. I think generally, there are 12-month tenders that are put out. I mean there may be the odd if in the interim, if PSU need some extra supplies, they might put a spot requirement. But generally, they line up for 12, 12-month periods. January to December.

Ankur — Philip Capital — Analyst

Okay. Sure. I think that’s helpful, sir.

Operator

The next question is from the line of Dr. Amit Vora, an individual investor.

Dr. Amit Vora — individual investor — Analyst

I have a question, that the revenues as compared to the last half year, FY ’22 have improved quite a bit, around to 34%. But I’m not able to understand what is the reason that the profits have not — just as a common man, I’m not able to understand that. If you can help me understand that, what can be the increase in profit is not that much. The sales and revenue have grown up significantly to 34%.

Raj K. Chandaria — Chairman And Managing Director

Murad, I think you can take that one. It’s fairly easy.

Murad Moledina — Chief Financial Officer

Yes. Most of the top line is out of our sourcing business, which is we just spoke about back-to-back contracts for supplying ship loads of LPG, which are down at wafer-thin margin of around $0.50 per ton. So the EBITDA arising out of the sourcing business is very low, though it contributes almost 80% to the top line, which is why you see the disparity between the revenue increase and the EBITDA increase. So these are — this sourcing business is done only as a value addition to our customers. And because we can get these LPG at lower cost than what they are able to procure. So it’s just sourcing, which is why we call it, and this contributes maximum to the top line but minimum to the EBITDA.

Dr. Amit Vora — individual investor — Analyst

Bottom line. Yes. It was really helpful. There’s one just last question. We have been — this is the third dividend for this year, I suppose, for this financial year. So I was of opinion that if you could consider share buyback also because that would also enhance the shareholder value, if it’s possible.

Raj K. Chandaria — Chairman And Managing Director

Yes. Thank you. I’m sure the Board will consider at some point share buyback.

Operator

The next question is from the line of Bhavik Shah from MK Ventures.

Bhavik Shah — MK Inches — Analyst

I just want to understand the capex commentary which was mentioned at the start of the call. So can you just repeat that? And what is the guidance for the full year and for the next year?

Raj K. Chandaria — Chairman And Managing Director

Sorry, could you repeat the first half of the question again?

Bhavik Shah — MK Inches — Analyst

So actually, there were some capex commentary at the start of the call. Just can you repeat that? I just wanted to understand that. And what is the guidance for the FY ’23 and FY ’24?

Raj K. Chandaria — Chairman And Managing Director

Okay. Murad, do you want to take that on the capex? I think we’ve already announced this. Yes.

Murad Moledina — Chief Financial Officer

We’ve already said that we are already undertaking projects aggregating INR1,250 crores at Pipavav, Mangalore and Haldia, of which in this year, 50,000 CBM or kiloliter liquid storage terminal at Haldia, which we call H5, will get commissioned in this year. All others will happen in FY ’24 and FY ’25 depending on the kind of project that is being executed.

Bhavik Shah — MK Inches — Analyst

Okay. So this INR1,250 crores is for like next three years, right?

Murad Moledina — Chief Financial Officer

Yes, you can say that in FY ’23, ’24 and ’25, that is how the capex spend will come into the books.

Bhavik Shah — MK Inches — Analyst

Any other utilization of cash you are expecting?

Murad Moledina — Chief Financial Officer

There are many things which at Aegis we are looking at. So we’ll come up — I think Mr. Raj can add to that.

Raj K. Chandaria — Chairman And Managing Director

Yes. I mean I think one of the reasons that you remember that we talked about as far as the joint venture with Vopak is concerned, we see a huge plethora of opportunities, whether by way of moving into new gases, whether by acquisition opportunities that come to the table, expansion of our existing sites which has not deliver — the market or projects have not yet been crystallized and so on. So I believe that there are tremendous opportunities. And obviously, we have the balance sheet and the cash to be able to move fast as and when these opportunities arise. So I think clearly — it’s fairly clear to me that they will not — there is not a shortage of opportunities and there’s not a shortage of financial resources to execute on those opportunities.

Operator

?

Raj K. Chandaria — Chairman And Managing Director

Thank you very much. So I’d just like to conclude by saying that we’re quite pleased with the way the year is unfolding. We have strong visibility for the next quarter and the quarter after that. Of course, we have longer-term plans as well, but I think I’d like to convey that we have good visibility, and we are pretty confident that we’re going to have an excellent year. So I look forward to speaking with you again at the end of January. Thank you.

Operator

On behalf of Aegis Logistics Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Raj K. Chandaria — Chairman And Managing Director

Okay. Thanks. Bye.