Allcargo Logistics Ltd (NSE:ALLCARGO) Q3 FY23 Earnings Concall dated Feb. 14, 2023.
Corporate Participants:
Ravi Jakhar — Chief Strategy Officer
Deepal Shah — Deputy Group CFO
Analysts:
Abhijit Purohit — Analyst
Chetan Shah — Abakkus AMC — Analyst
Deep Jagdish Master — One Up Financial — Analyst
Radha Agarwalla — B&K Securities — Analyst
Ravi Mehta — Deep Financial — Analyst
Kashyap Pujara — Broadview Research — Analyst
Sameer Deshpande — Fairdeal Investments — Analyst
Rushabh Shah — Anubhuti Advisors — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Allcargo Logistics Limited Q3 FY23 Conference Call, hosted by PhillipCapital India Private Limited. This conference call may contain forward-looking statements about the Company which are based on the beliefs, opinions and expectations of the Company as on date of this call. These statements are not guarantees of future performance, and involve risks and uncertainties there are difficult to predict.
As a reminder, all participant lines will be in the listen-only mode and there’ll be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Abhijit Purohit from PhillipCapital. Thank you, and over to you sir.
Abhijit Purohit — Analyst
Thank you. Good afternoon. On behalf of PhillipCapital, I welcome you all to the Allcargo Logistics 3Q FY23 earnings call. From the management, we have with us Mr. Ravi Jakhar, Group Chief Strategy Officer; and Mr. Deepal Shah, Group CFO.
Now without much delay, I now hand over the call to Mr. Ravi for his opening remarks followed by Q&A. Over to you, sir.
Ravi Jakhar — Chief Strategy Officer
Thank you very much. I welcome you all to this conference call. And this is Ravi Jakhar here and joined by my colleague, Mr. Deepal Shah. Let me first take this opportunity to highlight that we have received — the order has been announced by the NCLT on the demerger and it has been uploaded on their website. Because of that, while the process is still underway and we estimate that the companies should eventually get listed with — in around April, we need report the results in a slightly different format, highlighting the continuing businesses, discontinuing businesses and so on.
Therefore, let me first specify that post-demerger being completed we would be having three listed entities. And since it is the mirror demerger, on each share of Allcargo, the shareholders will continue to hold one share of Allcargo and would get an incremental one share each of Allcargo Terminals and TransIndia Realty.
As we will get to see the results in the coming quarters, on a consolidated basis, the results shown here and are as continuing business do not include the numbers for the container freight station and the ICT business, which should be [Indecipherable] Allcargo Terminals. It does not include the numbers for equipment and the logistics park business which should be under the TransIndia Realty and it also does not include the Contract Logistics numbers, which in the coming quarters would see consolidation with the Allcargo Logistics.
So therefore, the INR237 crores EBITDA including other income, which has been seen, only represents a part of what would be the consolidated numbers for the main listed entity apart from the two new demerged entities. And therefore, the right approach to look at the financials for this quarter would be to look at the combined performance, combining all the businesses. And we would provide that clarity in the investor presentation, which we shall be uploading later today.
The idea also is to get all the questions. Considering that there has been a change in format and there could be different perspective, questions and clarification which our shareholders and analysts and investors might have, we’ll be happy to hear all the questions. And to ensure that everybody benefits from the answers and the clarity provided by the Company, we would incorporate the information which we deem important and adequate in the investor presentation to be uploaded later today, which will provide clarity on any points that might be there. So, this is a brief note on the most recent activity on the demerger and the short-term view on how the results have been presented.
Now coming to a more long-term strategic importance, which is around how the business has been performing, I’m glad to state that our flagship business of LCL consolidation, which is the — contributes to almost 70% of gross profit in the international supply chain business, has continued to see market-share expansion. And for the first time, we have now crossed 15% global market share in LCL as we speak today.
However, in the quarter gone by there were disruptions in China which had brought the overall market itself down and therefore they do not reflect in the growth in the number. And if you look at year-on-year, the numbers are flat but one needs to know that market share expansion means that while the industry and the competitor volumes went down for the corresponding periods, we maintained them on a year-on year basis and a deep view at a lower base.
We are already been testing that post-Chinese New Year, China has starting to normalize on the supply chain side. Factories are back in operation. And therefore, for the part of this quarter which is February and March, we would see normal activity and from April onwards, on a quarterly basis, we should see normalized production and supply-chain activities from China, truly reflecting this market-share expansion that we have achieved over the last few quarters.
Another important event which has happened recently is the consummation of Blackstone transaction, which has been pending for reasons beyond our control for a long period of time. And almost for every quarterly call, we’ve been discussing about that. I’m glad to say that, that has now been consummated. PSP has already been signed. And therefore, while on the 31st December, you will notice that the consolidated net debt is already down to only INR130 crores.
Post 31st December, with the Blackstone transaction being consummated, approximately INR295 crores of debt has been eliminated from Allcargo books. And the Company has also received additional cash inflow of about INR135 crores. So, instead of being — having a — holding net debt, we would rather be — get positive. And even if we take into account the outlays for acquisitions recently announced, we estimate that even despite taking into account the investments required for the sale, as we close the financial year FY22, FY23, we would still be cash positive or near-zero net debt.
So, that’s been a big development from the balance sheet perspective. And this means that we will be able to acquire the 30% stake from KWE in the operating express entity. I’m also pleased to announce that we have been looking at focusing on Contract Logistics. And therefore, there was a demerged, which was underway and we have also received the NCLT order very recently. And we would be completing the process for the demerger for that business as well over the coming weeks. And therefore, that business would also get demerged into ASCPL, which as on date is a 100% subsidiary of Allcargo Logistics.
What does not contribute to the numbers in the quarter gone by but would provide further growth opportunities are some of the acquisition, a strategic acquisition that we did in Germany which would be effective from an accounting standpoint from 1st of January, and a small bolt-on acquisition in Turkey to add to our strategic capabilities in Turkey. So, all initiatives would continue to drive growth for the Company.
On the digitization front, we continue to maintain healthy export bookings on platform which are over 63% of the total bookings and that is an industry-leading number, far ahead of the competitors operating in a similar business segment. We have been able to work further on automation, data science-based network optimization, and other initiatives which are allowing us to become more efficient as we grow in the existing businesses further.
What we have done beyond that is we are also looking at launching new products and new trade lanes, and therefore, we continue to invest in building new products, bringing on new people and building new trade lanes. We are looking at significant growth in the AFA [Phonetic] business, which forms a small part of the business and therefore would — on an overall basis may not have a very significant impact, but over the coming years we believe that without any significant capex investment, on the back of our global network, global relationships and synergies of the ocean freight consolidation, you would be able to do some amount of asset-light digital platform backed AFA’s consolidation business as well.
On the trade lanes, we already operate about more than 2,400 direct trade lanes globally, which is by far the highest for any LCL operator or any other carriers globally. We continue to see opportunities on the back of our field. And on the back of technology tools which are now available to predict routes, we are able to launch new trade lanes.
And we anticipate that now we are in a position to add almost 100 trade lanes on an annual basis, which means that we would open up new avenues for growth. In the short-term, it also means that as we open up a new trade lane the utilization levels pick up over a period of time, and therefore there could be some marginal investment. But we estimate that on these trade lanes any new trade lanes opened should be able to neutralize the impact within a 3-month to 6-month window and start making positive contributions thereafter. So from a long-term growth perspective, on the main international supply-chain business, we see continued opportunities for growth and also improving the efficiencies on the back of digitization.
On the FCL business, given the macroeconomic slowdown, we have seen a flattening of volume. And as the market picks back — because currently this is against the backdrop of falling volumes on the trade lanes that we operate in, as the volumes start picking up, as I mentioned, which we’ve already seen from February onwards, we estimate that we should be also able to start back on the growth journey on the volume in FCL business.
From a freight trade perspective, we have already seen that freight trades have come back to the near pre-COVID levels and that normalization in freight trade has impacted the FCL business profitability. As we have been in the earlier calls as well, LCL profitability is largely a factor of continuing [Phonetic] utilization, which continues to remain that way. And on the FCL, we estimated about 15% to 20% drop in utilization on a per TEU basis. And considering the historic average of 20% growth rate, the numbers when you multiply, it remains consistent.
So while the normalization of freight trades has happened, the market being subdued the growth hasn’t come through in this quarter, we estimate that rate — with the trade issues mobilizing from February, the — March onwards on a monthly basis and April onwards on a quarterly basis we should see the growth in volume back in the FCL business, recouping the lost gross profit on the FCL business.
So on an overall basis, if you look at the combined EBITDA, we are looking at a number of about INR340 crores, INR50 crores, which is of course lower than the previous quarter, but is broadly in line with the business projections based on the macroeconomic environment. And we see the performance, as I mentioned, to pickup starting from mid-February onwards and should start reflecting partially for the month of March and fully from the quarter starting April onwards.
The other key part is that we have been focusing on the asset-light district-level [Phonetic] businesses and that is something which continues to work well for us. And even in the Contract Logistics business, we have seen continued opportunities for growth and the growth momentum continue.
On the container freight station business, we have been noticing a recent uptick in the EXIM cargo of the country and we are a direct beneficiary of that, wherein we see the growth in business increasing in line with the increased EXIM cargo growth in the country.
So an overall basis, we see this as a quarter which has had negative impact on account of the macroeconomic environment. But from a long-term perspective, we see this also as a quarter where we demonstrated resilience in our performance, gaining market share and achieving conclusion several strategic initiatives, including the Blackstone transaction and the demerger which would pay way for us, robust growth in the years to follow.
On that note, I invite my colleague, Deepal, to throw light on some of the financial highlights for various businesses. Over to you, Deepal. Thank you.
Deepal Shah — Deputy Group CFO
Thank you, Ravi. So Ravi, like you mentioned, that these results now include discontinuing operations in light of the demerger order. So, these have to be combined — continuing to come — to have a comparative clarity from the previous quarters.
So, I’ll walk you through the financial performance. For the 9-month of 2023, Allcargo Logistics Limited consolidated revenue including the discontinuing operations for comparative purposes and at INR15,301 crores as against INR14,286 crores for the previous year, registering a 7% growth year-on year.
Revenue from continuing operations stood at INR4,099 crores in Q3 FY20 as against INR5,599 in Q3 FY22. Revenues from combined businesses, which includes the continuing businesses, discontinuing businesses and Contract Logistics, so that’s INR4473 for FY23 quarter three.
EBITDA from continuing operations stood at INR229 crores for Q3 FY23 and against INR424 crores during the same period last year. EBITDA from combined business stood at about INR343 crores in Q3 FY23. For Q3 FY23, the Company reported a PAT from the continuing operations of INR124 crores as against what we be proposed to the same period last year.
Now moving to the segmental performance for the quarter, I’ll start by discussing the performance of the main segment, that is the international supply chain segment which is the largest segment which operated under the umbrella of Ecu Worldwide. The segment bonded in Q3 FY23 a revenue of INR3,671 crores as compared to INR5,200 crores from the same quarter last year. Revenue for the 9 months stood at INR13,300 crores, approximately [Technical Issues] growth over the last year.
EBITDA for Q3 stood at INR274 crores as against INR430 [Phonetic] crores for Q3 FY22. Annualized ROCE, which is the most important trucking segment [Technical Issues] that we look at stood at 53% for the international supply-chain business.
Moving onto the Express business operating under the brand Gati, it has continued to deliver solid performance during the quarter. The Company is undergoing turnaround and continues to scale-up operations under experienced leadership and infrastructure amplification. The sales acceleration program has been reaping benefits leading to reduced volumes handled during the quarter.
Express business revenue for Q3 FY2024 stood at INR339 [Phonetic] crores as against INR352 crores, up 7.5% Y-o-Y business. The EBIT for 4Q stood at INR21 crores against the last year which was INR16 [Phonetic] crores, a growth of 31%. With better yield management and operational capabilities, we believe that the Group was progressing well and would achieve the desired course.
Contract Logistics revenue for the quarter stood at almost INR100 crores and EBITDA stood at INR31 crores. Compared to the CFS and ICD segments, we are poised to deliver growth to enhance customer experience with My-CFS initiative and better import-export mix. So, this has reported our revenue of INR175 crores Q3 2023 as compared to INR177 crores for the previous year.
Speaking about the equipment hiring segment, we’ve been continuously working towards moving to an asset-light approach by providing quality services to customers through a combination of owned and leased assets. The equipment utilization stood at 80% as the capacity utilization. We have been consistently providing other key parameters and financial performance indicators in out investor presentation one can refer back for more details as you’ll go towards the end of the day.
With this, I would like to open the floor for questions and answers. Thank you.
Questions and Answers:
Operator
Thank you. We will now begin the question-answer session. [Operator Instructions] We have the first question from the line of Chetan Shah from Abakkus AMC. Please go ahead.
Chetan Shah — Abakkus AMC — Analyst
Yeah, hi, thank you for a detailed thing. Just wanted a — one small data point. Can you give me what is MTO’s TEU equivalent for both LCL and FCL combined, which was roughly INR2.48 lakhs in the previous quarter, what would be this number [Technical Issues]?
Ravi Jakhar — Chief Strategy Officer
So, on the volume side, like I mentioned, the performance for this quarter is flat as compared to the same quarter previous year. As compared to the previous quarter-ending September, the FCL volumes are down about 2%, 3% while the LCL volumes are down about 6% to 8%. And we don’t have the exact numbers getting Investor presentation [Technical Issues].
Chetan Shah — Abakkus AMC — Analyst
No problem. And just one question — or rather let me put it this way, one small clarification. You spoke that the combined EBITDA of about INR340 crores, 350 crores. Are you less referring to a quarterly numbers going forward for the MTO business or Company as a whole? I got little confused with that. I am sorry for that.
Ravi Jakhar — Chief Strategy Officer
So let me clarify. I was referring to the numbers for the quarter, which has concluded on 31st December, so this is not the forward quarter but the quarter which [Speech Overlap].
Chetan Shah — Abakkus AMC — Analyst
Yeah, got it.
Ravi Jakhar — Chief Strategy Officer
…to add the various businesses because currently they’re clubbed into three buckets, continuing businesses, discontinuing businesses and the Contract Logistics which is sitting in none of the two buckets. So if you want to take a view of the future view within the three listed companies but look at the actual performance of December 31, 2022, that is what it would look like.
Chetan Shah — Abakkus AMC — Analyst
Okay, thank you so much.
Ravi Jakhar — Chief Strategy Officer
Pleasure.
Operator
Thank you. [Operator Instructions] We have the next is from the line of Deep Master from One Up Financial. Please go ahead.
Deep Jagdish Master — One Up Financial — Analyst
Yeah, hi Ravi and Deepal. Firstly, congratulations on getting the demerger through. So, just on small request from me. If we could get the investor presentation in advance of the call, that would really help us prepare for the call. So I understand that this time you all wanted some suggestions and — suggestions from us, but even if you had stuck to the previous format, it would have helped us prepare for the call.
And sir, one question as well from me. On the volume side, like you mentioned, the volumes are slightly lower and on the profitability though, on the LCL side, is that broadly maintained quarter-on-quarter?
Ravi Jakhar — Chief Strategy Officer
The gross profit percentage margin would look — appear to be higher, but that is only because the revenue has come down. The way to look [Technical Issues] business would be that you would see that the revenue has come down by approximately INR970 odd crores corresponding to which the operating expenses have come down by INR900 crores. So, that gap of INR80 crores is what the impact, which is again — if we bifurcate it into two parts, one is the actual loss in margin on the FCL business which we’ve been [Indecipherable] normalized, which is what they have normalized now, would be to the range of 15%, 20%, which is one aspect.
And the second impact is on account of growth initiatives invested into new trade lanes, etc. There is the way to look at that number. So when you look at percentage terms, obviously gross profit as a percentage might appear to be higher because the revenue base becomes lower. So, the right would be to look at the gross profit number in absolute term and how it grows over time.
Deep Jagdish Master — One Up Financial — Analyst
So put in another way, the gross profit on a per TEU basis, if we adjust for FCL, so if we look at only LCL, would that broadly be maintained quarter-on-quarter?
Ravi Jakhar — Chief Strategy Officer
So gross profit on LCL basis broadly would be maintained. There’d be a marginal decline on a gross profit per TEU but that would be almost flattish. Like I said, only few trade lanes that have been launched, which would be on low utilization, those would impact [Phonetic] slightly, but otherwise the utilization is the only parameter which impacts the profitability on the LCL. So new trade line plus the marginal decline in the volume, those would be the two factors which impact.
So as the volumes have started to rebound, the profitability for LCL would be simpler than it was in the past, assuming that it continues to remain same, they don’t go up or go down, it does not make a difference.
FCL business, the profitability depends on the freight rates and that directions in the freight rates, that has come down on a [Indecipherable] basis by 15%, 20%, which was what we had estimated earlier.
Deep Jagdish Master — One Up Financial — Analyst
Which you have been also mentioning for the last few quarters, so appreciate that. It’s just that we didn’t have the volume, so just wanted to confirm. And secondly [Speech Overlap]…
Ravi Jakhar — Chief Strategy Officer
[Speech Overlap] we get more questions and perspective and try to ask all of them these [Indecipherable] data points because the format that we have to upload, the numbers in, and the format in which it’ll be most clear to all our shareholders, investors and analysts. That’s why we took a call and then we will upload the presentation later during the day, but your point has been noted.
Deep Jagdish Master — One Up Financial — Analyst
Thanks for that. And so, just if I could get some more color on the volume, so like you mentioned that there have been some disruptions. So, are there any particular trade lanes you can point out to that would have been much weaker in the quarter gone by?
Ravi Jakhar — Chief Strategy Officer
Yes, so primarily from the month of November about — maybe expiring in November first week, so November second week onwards, particularly [Technical Issues] November till end of January, primarily all trade rates originating out of China had a significant impact. And likewise — so whether it was trans-Atlantic — trans-Pacific trade moving from China to America or even [Indecipherable] those were the key trade lanes that were impacted.
Apart from that, there were a few other trade lanes also, particularly ending in the UK, because UK is exceptionally seen reduced trade activity as well, so clear to continue to trade standout in terms of the overall market being down.
From the Company’s perspective, we saw a disproportionate growth in select markets where there have been [Indecipherable] program, so countries like United States, Vietnam, a few select countries in like Indian subcontinent, key [Indecipherable] select markets in Europe. That’s where we saw a disproportionate growth and that is what led to market-share expansion. So, there’ll be many countries, if you break down, wherein we may be up 5% while the market maybe down 20%. So, some of those robust performances is what contained our decline to like I said about [Indecipherable] LCL on a quarter-on-quarter basis and zero percent on a year-on year basis.
Deep Jagdish Master — One Up Financial — Analyst
Understood, that’s very helpful. And do you think that there was a general trend of sort of destocking that’s been happening in many commodity-related sectors? Is that also impacting some of your clients?
Ravi Jakhar — Chief Strategy Officer
So, what we understand is that prior to Christmas, the demand anticipation was weaker and therefore through August and September — or rather through end July to early September, the orders were fewer and which meant that the shipment, which typically follow 45 days, 50 days were not how we typically see a December-ending quarter, which usually is the highest, [Indecipherable] lot of orders usually before Christmas.
However, the actual sales for many quality seem to be much better than anticipation and therefore the inventory levels fell short. I mean, the most commonly heard example is that on the Apple products, because that’s one product which gets [Technical Issues] wherein the issues are more on the supply-chain side. When demand was there, but the products were not on the shelves.
On the general mass consumer products, we believe that the inventory levels are [Indecipherable] like if we talk about products like the [Indecipherable] or tissue paper or those kind of household goods, our understanding of the market and also looking at the underlying strength is that those seem to be reasonably managed from the stock that were there.
But we anticipate that now post-Chinese New Year, the inventory levels are defeated and therefore the inventory restocking would happen, which is where we anticipate that from March onwards the trade should see a pickup on the back of inventories management. And somewhere towards the second half of the year, we should see a more robust growth, taking into account that there are no further unforeseen event of like global catastrophes or wars, etc. That is the broad macroeconomic view that we hear and sense from the underlying data that we have.
Deep Jagdish Master — One Up Financial — Analyst
Sure, perfect. And if I could just squeeze in one more, just one related to your acquisition in Turkey, if you could maybe just spell out your vision and how that could be additive to your overall LCL and FCL in that region?
Ravi Jakhar — Chief Strategy Officer
So that is, to be honest, one of the smallest acquisitions we’ve done. That’s just a strategic acquisition, which allowed us to get the right set of people and some specific trade lanes that we could get stronger on in that geography. And that has allowed in that particular market, though it’s a small market for us right off [Indecipherable], we were able to increase our volumes to nearly — by 70%, 80% on the back of this acquisition. And now when we combine capabilities, we can grow well. But from an overall perspective, this is not something which should make a significant impact. We believe that the German acquisition, considering the importance of the German market in the global network, would perhaps be more impactful in the coming quarters.
Deep Jagdish Master — One Up Financial — Analyst
Perfect. Thanks a lot, Ravi.
Ravi Jakhar — Chief Strategy Officer
Thanks.
Operator
Thank you. We have the next question from the line of Radha from B&K Securities. Please go ahead.
Radha Agarwalla — B&K Securities — Analyst
Hi sir, thank you for the opportunity. So my first question was in terms of the EBITDA number that you mentioned, INR350 crores, for this quarter. So, could you give me a breakup of this EBITDA? How did you arrive at this number?
Deepal Shah — Deputy Group CFO
Yeah, so if you look at the breakup on the continuing business results which have been shown, it is approximately — if you add back the interest and depreciation to PBT, you could see that it totals to about INR237 crores, excluding other income that is about INR229 crores. Approximately INR31 crores would be the Contract Logistics and approximately INR81 crores would be the other discontinuing businesses. Put together, it would be about INR343 crores excluding other income and INR351 crores, including other income. That’s a broad range and you share these numbers in the format so that it’s easy to understand, the investor presentation is there.
Radha Agarwalla — B&K Securities — Analyst
Sir, this — there is one item unallocable and other items. So, if given the quarterly result that you have released, so we can get the EBIT number from that. So in that, that is minus INR53 crores EBIT for this unallocable. So, will this be a part of continuing operations or will it be demerged?
Deepal Shah — Deputy Group CFO
No, so this will get allocated once the demerger is done. So, it’s unallocated at the moment and we are working on the allocations. At the point of demerger, this will — in the respective right proportion will get allocated to the individual businesses.
Radha Agarwalla — B&K Securities — Analyst
Okay sir, and also continuing with the same point, in the press release it is mentioned that some corporate costs have not been allocated to discontinuing operations.
Deepal Shah — Deputy Group CFO
[Speech Overlap] that’s the same thing, that the unallocable, that’s the same that we’re discussing.
Radha Agarwalla — B&K Securities — Analyst
Yes, so is it correct to understand that some part of the employee costs and other expenses are still yet to be removed from the numbers that you’ve reported this quarter and subsequently — or in subsequent quarters some part of it will get removed?
Deepal Shah — Deputy Group CFO
Yes, so please understand that we have been operating these segments as SBUs and there is a corporate cost also there. So as far as the corporate costs are concerned, which we have very clearly mentioned in our results, these need to be allocated and these will be allocated at the point of demerger.
Radha Agarwalla — B&K Securities — Analyst
Sir, do you — I mean I don’t know if you have, but will you have any kind of ballpark number how much is expected to…
Deepal Shah — Deputy Group CFO
[Speech Overlap] — no, that segregation is still underway, so we don’t have any ballpark numbers at the moment to share.
Radha Agarwalla — B&K Securities — Analyst
Okay, sir, on a Y-o-Y basis actually despite flat MTO volume, we have seen that the employee cost and other expenses have gone up. So, if we remove these corporate expenses that are supposed to be removed later on, so how much — how would be these employee and other expenses look like?
Deepal Shah — Deputy Group CFO
So, if you’re referring to the employee and other expenses, primarily on the employee expenses side, like I referred to in the earlier comment, we have been investing in people and new teams and new product launches. So to that extent, those costs would be there. And I’m not sure of — what exactly do you mean by there will be corporate cost. Could you just restate your question please?
Radha Agarwalla — B&K Securities — Analyst
Sir, actually there is — in point number six of the notes chart in the presentation, there’s one statement which states that corporate costs have not been allocated to discontinued operations. So I was wondering whether some of the costs will go to the demerged entity that are currently being shown in other expenses or employee expenses in this quarter.
Deepal Shah — Deputy Group CFO
So I’ll explain once again very clearly that segment reports were as an SBU or here also if you look at the segment reports which were quoted earlier, the corporate costs were not allocated, segment was without the corporate costs. Now, what we have done is that we have very clearly identified that there is an amount of corporate costs which needs to be allocated. And these corporate costs will get allocated through these continuing and — through the discontinuing operations based on certain scientific parameters and that working will happen at the point of demerger. That is what is underway.
Ravi Jakhar — Chief Strategy Officer
And if I can also just add to that, while the segmental breakup will be done, but if you look at — if you move away from the segmental and look at the reported numbers consolidated for the continued business, that basically reflects what would be in the continued business and the remaining part will be in the discontinued business, and which is what like I said earlier, will also provide revenue to EBITDA sort of a breakup between the continuing business, discontinuing business and the Contract Logistics business to provide a combined view. So, we’ll include that. So, hopefully that should be the data point that should help resolve your query.
Radha Agarwalla — B&K Securities — Analyst
Okay, sir. And is there any one-offs in terms of expenses in this quarter?
Ravi Jakhar — Chief Strategy Officer
Deepal, would you like to answer that please?
Deepal Shah — Deputy Group CFO
So, there is a marginal [Technical Issues] million of licensing costs, this is an exception in this quarter. Nothing other than that.
Ravi Jakhar — Chief Strategy Officer
So no significant…
Deepal Shah — Deputy Group CFO
$1.5 billion [Phonetic] or around [Technical Issues].
Radha Agarwalla — B&K Securities — Analyst
Okay, sir, and just one last question. So, currently [Speech Overlap]…
Deepal Shah — Deputy Group CFO
The one-offs as such apart from this is approximately INR9 crores to INR10 crores, some of which [Technical Issues].
Radha Agarwalla — B&K Securities — Analyst
Okay, sir. And sir, just one last question. So given that if we take the January and February quarter — sorry, January and February months, so currently freight trades we can see it is around, like you mentioned, pre-COVID levels of $2,000.
Deepal Shah — Deputy Group CFO
[Indecipherable].
Radha Agarwalla — B&K Securities — Analyst
Sorry, sir?
Operator
Is the management able to hear us?
Deepal Shah — Deputy Group CFO
Are we audible?
Operator
Yes sir, we can hear you. Are you able to hear us?
Deepal Shah — Deputy Group CFO
Hello?
Operator
Ladies and gentlemen, we will reconnect the management. It appears that they are unable to hear us. [Technical Issues] Over to you, sir.
Deepal Shah — Deputy Group CFO
Yeah, thank you. It appears that there was a network disruption. So responding to that, the clarity on the continuing, discontinuing and the Contract Businesses, and providing a combined view of the same should hopefully provide clarity to you as — address your queries. And I believe that you had a follow-up question which we could not hear. So if you could please ask that again? Thank you.
Radha Agarwalla — B&K Securities — Analyst
[Indecipherable], thank you. So sir, if we take flat and — international supply chain volume numbers for this quarter, then the EBIT per TEU comes above 10,000 per TEU. So, how confident are we given that even in January and February there is decline in freight trade by about 15%, 20%. So how confident are we of maintaining this EBIT per TEU of 10,000 plus in the subsequent quarters?
Deepal Shah — Deputy Group CFO
Yeah, so on the current levels, like I mentioned, as far as the LCL business is concerned, the freight rate sensitivity is not there, which is only to the extent of utilization. So as the volumes come back, we would see sustenance and further improvement. On the [Technical Issues] we anticipated 15%, 20%, and almost the same number has already been — impact has already been seen. So, there could be nothing more than 2%, 3% here or there I mean is how we would put across our estimate on what it could look like from here on.
Radha Agarwalla — B&K Securities — Analyst
Okay, thank you. Best of luck [Phonetic], sir. Thank you for answering my questions.
Operator
Thank you. We have the next question from the line of Ravi Mehta from Deep Financial. Please go ahead.
Ravi Mehta — Deep Financial — Analyst
Yeah, hi, thanks for the opportunity. So just on the EBIT per TEU thing, the number looks pretty healthy if you build in whatever volume guidance that you are giving for the quarter. So wanted to know that the Freight Index has been falling all through the quarter. So the entire fall is captured in the performance or there is some spillover effect which we can see January-February of the fall that has happened till December?
Ravi Jakhar — Chief Strategy Officer
So, if you look at the fall and if you look at the continuing business numbers that we have held, while the revenue has gone down by INR979 crores, the operating expenses have also gone down by INR900 crores. So, the date is very minimal and which is basically because the ocean freight rates are largely a pass-through except for the impact on FCL, which as I stated earlier, of the amount of 15%, 20%. So that is the reason why you find that the EBIT per TEU on — the EBITDA or EBIT per TEU would largely get maintained and be impacted more by the — how the SG&A costs are, how growth initiatives are being undertaken, how volume growth gets driven. Those things will impact these numbers and they may fluctuate, but we do not anticipate freight trade to have much impact going forward.
FCL impact which was there, like I said, almost the entire part of that is already captured as on the revenue side and therefore it’s at least to an 85%, 90% already visible. And on LCL, anyways like we’ve stating, it’s dependent upon utilization, not as much on the freight trades.
Ravi Mehta — Deep Financial — Analyst
Okay, so largely everything is captured in FCL for the quarter given the fall?
Ravi Jakhar — Chief Strategy Officer
Yes, and that is the way you see a significant drop in the revenue…
Ravi Mehta — Deep Financial — Analyst
Sure.
Ravi Jakhar — Chief Strategy Officer
…which is much more than the drop in volume.
Ravi Mehta — Deep Financial — Analyst
And one point, probably I didn’t catch it in your opening remarks, probably you were referring to some demerger of Gati KWE into a ACCL or I just missed what probably you highlighted, like you’ve received some NCLT order and probably you are [Speech Overlap] highlight on that.
Ravi Jakhar — Chief Strategy Officer
Yeah, so there are two demergers that you were referring to. One is the demerger of Allcargo Logistics whereby the two business segments to move into Allcargo Terminals in TransIndia Realty. For that, the NBFC with the new companies will get listed in addition to continuing businesses under Allcargo Logistics.
The second demerger which I referred to was the demerger of ACCI wherein we had also shared in the past that we intend to focus on Contract Logistics. And for that demerger, we have already received the certified copy also just recently, like a couple of days back. And we would be now filing that with the ROC and concluding that demerger also. So, this Contract Logistics business would move into ASCPN [Phonetic], which is currently a 100% owned subsidiary. So, there is a second demerger, which was the demerger of contract logistics business from ACCI which was a joint venture that we had. That was the second demerger which I was referring to.
On the KWE, my comment was that we have already approved buying the 30% stake from our Japanese partners, in line with our agreement discussed and agreed at the time of first acquisition in Gati. And I’d also added that we are already having sufficient balance sheet to take care of such investment, keeping the net debt to near zero or cash-positive level. [Speech Overlap].
Ravi Mehta — Deep Financial — Analyst
So just one follow up that ACCI is a 60% or a 70% holding of Allcargo, right, so it will be moved into a 100% owned, you mean to say, you will be consolidating your entire holding into it?
Ravi Jakhar — Chief Strategy Officer
So going forward, the Contract Logistics business, which is being managed by Allcargo, would be consolidated with Allcargo while the — from the coming quarter onwards while the CCI which is the custom clearance business is also a small part of ACCI business, which is not strategic for us. That would be managed by our partners and therefore would not be consolidated with Allcargo.
Ravi Mehta — Deep Financial — Analyst
Okay, and this will be 100% consolidated, the Contract Logistics?
Ravi Jakhar — Chief Strategy Officer
Yes.
Deepal Shah — Deputy Group CFO
And the — post the demerger and the transaction, this will be 100% consolidation [Speech Overlap].
Ravi Mehta — Deep Financial — Analyst
Sure. And any incremental investment that we will have to put because I think we will be increasing our holding from 60% odd to 100%?
Ravi Jakhar — Chief Strategy Officer
As we look at increasing the holdings further, there would be investment for which we would take the Board approvals and we do them — for the time being for the purpose of management there is already agreed that post-demerger with the similar holdings as well, the management of Contract Logistics business will be completely with the Allcargo management team, like how — and therefore, the consolidation will happen irrespective of the shareholding increase happening there.
Ravi Mehta — Deep Financial — Analyst
Okay. And for the KWE transaction that is already done — I think the agreement is done, as the amount that you will be giving to the partner and by when?
Ravi Jakhar — Chief Strategy Officer
So we have been discussing on the timeline. The amount is already frozen and that has been communicated as well. On the timelines, we’re working out what the most appropriate line which is suitable for both partner. And from a cash-flow perspective, like I mentioned, we are already now net cash positive on a consol basis. So, we can do that transaction in the specialty [Phonetic] partners and you’d perhaps share some updates on the timelines. But the amounts are already frozen as [Indecipherable] take place.
Ravi Mehta — Deep Financial — Analyst
So, can you share the amount if — probably for [Speech Overlap].
Ravi Jakhar — Chief Strategy Officer
It was — I don’t recall the exact number, it was about 400, [Speech Overlap], it was around that number.
Ravi Mehta — Deep Financial — Analyst
Sure.
Ravi Jakhar — Chief Strategy Officer
We can –there’s a reference to it in our earlier announcement. [Speech Overlap].
Ravi Mehta — Deep Financial — Analyst
Sure. Thank you for answering my questions.
Ravi Jakhar — Chief Strategy Officer
Thanks.
Operator
Thank you. We have the next question from the line of Kashyap from Broadview Research. Please go ahead.
Kashyap Pujara — Broadview Research — Analyst
Hi, I just missed your volume commentary. You mentioned that volumes are flat Y-o-Y and on a Q-o-Q basis it was down 2% to 3% in FCL and 6% to 8% in NCL. Did I hear it correctly?
Ravi Jakhar — Chief Strategy Officer
Yeah, so I would say that that’s exactly what I said but I would also say that the Y-o-Y number is less relevant because the trade environment has been very different. The Q-on-Q numbers are more or receptive of the current trend. And there it is largely being led by the Chinese supply chain concerns, which led to significant reduction in market prices in China.
And while globally also other markets have seen contraction or flat the number, the overall market has actually shrunk on a quarter-on-quarter basis. This is our internal [Indecipherable] of tracking competitors across all key markets while we have degrown by lesser percentage as we have expanded the market share.
Kashyap Pujara — Broadview Research — Analyst
Sure. But I’m not able to reconcile this, because in Q3 FY22 presentation the LCL volume reported was 2,473,000 CBM and in Q2 FY23 presentation it was 2,374,000 CBM. So essentially if I take a Q-o-Q drop, then it comes to 2,231,000 CBM. So essentially, it points to a 5% degrowth Y-o-Y and not flat Y-o-Y So, I’m not able to reconcile because either the reported numbers are inconsistent or something I’m missing because this is the way it’s showing up.
Ravi Jakhar — Chief Strategy Officer
This you will have to compare with the Q3 FY22 number which we are referring to.
Kashyap Pujara — Broadview Research — Analyst
Q3 FY22, if I take a 6% to 8% drop, it kind of shows Y-o-Y drop of 5% on the overall volume and [Speech Overlap] flat Y-o-Y.
Ravi Jakhar — Chief Strategy Officer
No, so the numbers from Q2, which the September-ending quarter, the drop would be the numbers which I mentioned about 2% to 3% and 6% to 7%, which should be in line. So, if you look at the Q2 FY20, that was about — that much above the Q3 FY22 number. [Speech Overlap].
Kashyap Pujara — Broadview Research — Analyst
No, I plug these very well. It shows both the lower, it shows on FCL and LCL, it shows lower number Y-o-Y. That’s all I’m saying.
Ravi Jakhar — Chief Strategy Officer
So, [Indecipherable] have the exact numbers that’s in the investor presentation. You can refer to be exact numbers and you can please come back to us if there’s any [Technical Issues].
Kashyap Pujara — Broadview Research — Analyst
And obviously resultant EBIT per TEU which now — if I kind of do this math and the resultant EBIT per TEU which is in that 9,800 odd range versus 14,000, 15,000 that you were in the last few quarters, just wanted to understand you. You’d mentioned that the overall rates in the LCL is — hasn’t changed much. You’ve seen drop on FCL and the LCL has not changed much but it was more a function of utilization. Could you just explain that a bit? I’m a bit new. So, if you can just clarify what you mean by this.
Ravi Jakhar — Chief Strategy Officer
Yeah, sure. When you get down to the EBIT level, we are looking at the impact of two key components, one is how the operating margins, the gross profit margins wary; and second is how the SG&A costs vary.
Kashyap Pujara — Broadview Research — Analyst
On gross the profit side, like I was commenting earlier, against the revenue drop of about [Indecipherable] crores and also the approximately opex drop of INR900 crores, the incremental delta is on account of the FCL and investments into developing new trade lanes. But they will typically pay back very quickly in a period of about 3 months to 6 months itself. The trade lanes start operating on a neutral and profitable basis.
The second impact which should come in will be on the SG&A side, wherein the cost would go up on account of some [Technical Issues] that of course happened on account of inflation, but there also as we are expanding into new capabilities, we are building the air-freight, we’re building new trade lanes, there will be some investments going in there as well which typically would lead to growth in business. So, these are the two inputs which would impact the EBIT on a per TEU basis.
Now, as we move forward, the SG&A costs do not grow in the same proportional volume. The gross profit would remain pretty much in line on a per TEU basis. Therefore, the EBIT per TEU number should remain constant or grow from here. That is the broad analysis, which one could look at. Sure. So basically, the realization per TEU which is showing up to be down 20% — close to 18%, 19% Q-o-Q, that doesn’t have too much of a bearing on the EBIT, I mean it’s lumpy, the SG&A and the trade lane investment, which is kind of impacting the EBIT number more than the realization drop.
Ravi Jakhar — Chief Strategy Officer
Yes, there has been an impact on both opex, if you look at — like I said, if you look at the opex also has — but on a per TEU basis, yes, OpEx is almost in line with the degrowth in the volume. For opex per TEU basis there has been a limited impact. The impact is more on the SG&A per TEU, which as the volumes pickup should see an improvement.
Kashyap Pujara — Broadview Research — Analyst
Okay, fair enough. Thank you so much. I’ll connect with you separately. Thank you.
Ravi Jakhar — Chief Strategy Officer
Yeah, sure. And like I said, we’ll provide more information in the investor presentation [Speech Overlap] all the clarifications for questions today.
Kashyap Pujara — Broadview Research — Analyst
Thank you so much for that.
Operator
Thank you. We have the next question from the line of Sameer Deshpande from Fairdeal. Please go ahead. Sameer, [Speech Overlap] hear us?
Sameer Deshpande — Fairdeal Investments — Analyst
Yes. I would like to have a clarification that — it was mentioned that there is a net debt on balance sheet as on 31st December of INR130 crores and after 31st December, we have received some money and then now we have net cash. And again, there will be some outflow and whether we’ll again go in debt or we will be having zero debt now?
Ravi Jakhar — Chief Strategy Officer
Yes, thank you. And let me clarify the number and reiterate. So as you rightly pointed out, as of 31st December, we had deconsolidated net debt of approximately INR188 crores, including all the group companies against which we have delineated the debt to Blackstone as part of the transaction, which is about [Technical Issues] and we also received cash. So, total about INR400 crores impact has been positive and therefore there is net cash of over INR200 crores to INR250 crores on the books on a net consolidated basis.
Now in terms of the business outlays, there is one which is towards the KWE acquisition which is already laid out, approximately about INR400 crores which is there. And from a capex perspective, the business is asset-light and does not have much of capex. And there will be internal accrual, which we’ll continue to accrue for the coming months as well. So if you even — if we take into account the investments into buying out the shareholding from KWE, as of 31st March, FY23, we anticipate that the net debt will still remain at year zero [Phonetic] levels because the current surplus on the cash plus the internal accruals will largely take care of the investments required.
Sameer Deshpande — Fairdeal Investments — Analyst
So, we will be having a roughly zero debt as on 31st March, 2023?
Ravi Jakhar — Chief Strategy Officer
That is right.
Sameer Deshpande — Fairdeal Investments — Analyst
After that, investment for KWE — okay.
Ravi Jakhar — Chief Strategy Officer
Yes, taking into account, like I said, today we are cash positive on INR200 crores, INR250 crores [Technical Issues] be good enough to take care of the INR400 crores investment required for buying the stake from KWE.
Sameer Deshpande — Fairdeal Investments — Analyst
Okay. And now, regarding this clarity about the demerger and everything, we will be getting — the shareholders of Allcargo Logistics currently holding will be getting one share of both these companies, which will be merged?
Ravi Jakhar — Chief Strategy Officer
Yes, it is an absolutely classical mirror demerger. For each one share of Allcargo, the shareholders would continue to hold that one share of Allcargo Logistics and get one share each of TransIndia Realty and Allcargo Terminals, and the demerger process gets completed which we had earlier estimated this will happen sometime between March to May. And we’ve been maintaining the timeline and we are glad that it will be happening in the same timeline. And we expect now it’ll be happening sometime in April.
Sameer Deshpande — Fairdeal Investments — Analyst
So the shareholder — current shareholder will be having three — shareholding in three different companies in April or May, whenever you complete that?
Ravi Jakhar — Chief Strategy Officer
Yes, one more share of Allcargo Terminals Limited and one share of TransIndia Realty, so he’ll have three shares instead of one share.
Sameer Deshpande — Fairdeal Investments — Analyst
Yes. And now this — when I — you mentioned that the operating profit that is EBITDA excluding other income will be INR343 crores. So when I compare it with your earlier figures reported before this reclassification which you have done now in restated figures in this quarter, the — actually the operating profit INR343 crores compares with INR505 crores of the Q3 last year. Is it correct?
Ravi Jakhar — Chief Strategy Officer
Yeah, so last year Q3 was an exceptional quarter and we’d also provided guidance that this is a one-off quarterly back of exceptional freight trades and trade flows, and we’ve provided guidance that, that was not a sustainable number. And if you look at the subsequent quarter which have been giving [Phonetic] INR400 crores to INR450 crores, there has been a more steady performance. This quarter has been on the — exceptionally on the lower side because of the China supply-chain issues. So, that is how I would put it across.
Sameer Deshpande — Fairdeal Investments — Analyst
Okay, but now from February onwards, that is maybe half of this quarter — current quarter this was affected almost 30 days or 40 days, were affected by the Chinese lockdown. But now, after that it has opened up. So this current — coming month and March, we will be seeing good growth?
Ravi Jakhar — Chief Strategy Officer
Yes, so for the quarter — 3 month onwards — from March — from a monthly perspective, March onwards, we are anticipating improved performance. From a quarter perspective, like I said, the lockdown, the exceptional circumstances [Phonetic] around November, so there were about 2 months in the last quarter. This month, it will be — this quarter it’ll be more like 1.5 months, so marginally better. But then, February is also a shorter month. And so therefore, it will be pretty much in line with the current quarter.
But since it starts improving from March onwards, April on the performance should get back in line with the quarter that we’ve been seeing and grow from there on the back of the volume expansion because the market share expansion is already happening. As the market recovers, the volumes will start to bounce-back as well.
And we have also shared guidance from a long-term perspective for 2026, which I would like to reiterate that we would maintain that guidance and which we should be hitting again in the investor presentation.
Sameer Deshpande — Fairdeal Investments — Analyst
So let us hope you are in a position to upload your latest presentation as early as possible. So — because these things — you are — you people are adept in all those things, but to understand these things becomes difficult unless it is properly presented. So, hope you upload it as early as possible.
Ravi Jakhar — Chief Strategy Officer
Absolutely, and the idea is also to ensure that we provide all clarifications and — because this is a very unique quarter with discontinuing, demerging operations. Therefore, we wanted to be sure that we provide everything that’s required in the presentation so that all the shareholders and analysts and investors can get a comprehensive perspective on all the things that matter.
Sameer Deshpande — Fairdeal Investments — Analyst
Yes, because today if we see the reaction in the stock market also, our share was down 20% for some time and then later when I think there was the interview on ET Now and some clarification on it that you showed that the operating profit is around INR350 crores odd as against INR229 crores, then the share has recovered a bit. So, that is thing. When these type of things, extraordinary events are there, as someone mentioned earlier also, it will be better if we give the presentation and then later you can again have some suggestions and next quarter you can improve upon. That will be helpful.
Ravi Jakhar — Chief Strategy Officer
Sure, your comment is noted. And as a Company, we endeavor to — we’re obligated to provide the results in the present format, which we have provided. And I agree with your point that the presentation would quite [Technical Issues] clarification. So, we would take feedback on that. Thank you so much.
Sameer Deshpande — Fairdeal Investments — Analyst
Okay, thank you and all the best.
Operator
Thank you. We the next question from the line of Rushabh Shah from Anubhuti Advisors. Please go ahead.
Rushabh Shah — Anubhuti Advisors — Analyst
Thank you for the opportunity. So, I think till the last presentation we were giving a slide with respect to our management aspiration for 2026 so basically, just wanted to check the revenue and EBITDA guidance which you are giving. That is purely on an organic basis? And with these couple of new acquisitions that we have been doing in Germany and Turkey, will these numbers increase from here on or basically if you can just guidance on the volume guidance you are baking in this whole guidance.
Ravi Jakhar — Chief Strategy Officer
Yes, so the 2026 guidance that we’ve been providing remains consistent and constant. So the same slide, you would see in this investor presentation as well. And that takes into account only the organic growth initiatives and some of these bolt-on acquisitions, which are very small, which are not meaningful. It does not institute any large acquisitions.
So, there could be like $1 million — couple of million dollars there which could be added, but largely this is based on the organic business growth aspirations.
Rushabh Shah — Anubhuti Advisors — Analyst
Okay, and the volume growth that we are baking in these revenue estimates, both in LCL, FCL, if you can give just a rough approximate number.
Ravi Jakhar — Chief Strategy Officer
So I would not be able to comment since the guidance has not been shared. But I can say that we are — and [Indecipherable] restating that we have baked-in the macroeconomic growth factors based on various research reports from different consulting companies and economic research organizations, and we’ve factored in that we’ll be able to continue to expand the market share year-on year. And we’ve been able to do that for the last several years and we believe that we would continue to be able to do that. And we have baked in those assumptions that there is an underlying market growth and on top of that there is a market share expansion which is what is leading us to those numbers.
And as you will see — and this quarter it makes it very clear that the revenue comes down because the freight had normalized, and therefore [Technical Issues] that the 2026 guidance also, revenue growth was subdued because this ocean freight rate normalizing — normalization was quite anticipated.
Rushabh Shah — Anubhuti Advisors — Analyst
Okay, perfect, great. And in terms of your debt levels, the 31st December consolidated debt — net debt number includes — does it includes the payment made for the German and Turkey acquisition?
Deepal Shah — Deputy Group CFO
Yes.
Rushabh Shah — Anubhuti Advisors — Analyst
Okay, and just last one bookkeeping question. So other expenses — consolidated other expenses for the quarter were up roughly 15%. I think in the earlier part of the call, you said that there were some one-time license cost of roughly INR8 crores to INR9 crores, so I believe this would go away from the next quarter. So, can we assume INR180 crores more of a normalized other expenses run rate going forward on a quarterly basis?
Deepal Shah — Deputy Group CFO
Yes, more or less that, but we do keep investing in new resources, etc. But more or less it will be in line of that, yeah.
Rushabh Shah — Anubhuti Advisors — Analyst
Okay, perfect. Thank you so much for the opportunity.
Deepal Shah — Deputy Group CFO
All right, thank you.
Operator
Thank you. That was the last question. I would now [Technical Issues] to the management for closing comments.
Ravi Jakhar — Chief Strategy Officer
Thank you all for joining the call and I hope we’ve been able to provide more clarity. And given the uniqueness of this quarter, we would endeavor to take your comments, questions and position as we approve the investor presentation providing more clarity on all the numbers. Thanks very much for joining in.
Deepal Shah — Deputy Group CFO
Thank you.
Operator
[Operator Closing Remarks]