Snowman Logistics Ltd (SNOWMAN) Q4 FY22 Earnings Concall Transcript

Snowman Logistics Limited (NSE:SNOWMAN) Q4 FY22 Earnings Concall dated Apr. 25, 2022 

Corporate Participants:

Sunil Nair — Chief Executive Officer and Wholetime Director

Prem Kishan Gupta — Chairman

A. M. Sundar — Chief Financial Officer and Company Secretary

Analysts:

Abhijit Mitra — ICICI Securities — Analyst

Kaustav Bubna — BM SPL Capital — Analyst

Anurag Patil — Roha Asset Managers — Analyst

Abhishek Nigam — B&K Securities — Analyst

Anand B — BM SPL Capital — Analyst

Bhaskar Chaudhry — Entrust — Analyst

Rohit Ohri — Progressive Share — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 FY22 Earnings Conference Call of Snowman Logistics, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Abhijit Mitra from ICICI Securities. Thank you, and over to you, sir.

Abhijit Mitra — ICICI Securities — Analyst

Thanks, Margaret. And thanks to all the participants joining. Good afternoon. We have today, with us, the management of Snowman Logistics Limited to discuss Q4 FY22 results conference, presented by Mr. Prem Kishan Dass Gupta, Chairman; Mr. Ishaan Gupta, Director; Mr. Samvid Gupta, Director; Mr. Sunil Nair, CEO and Wholetime Director; Mr. A. M. Sundar, CFO and Company Secretary; and Mr. S. Kannan [Phonetic], VP, Finance.

So without further ado, I hand it over to the management of Snowman Logistics for their opening remarks, over to you.

Prem Kishan Gupta — Chairman

Thank you, Abhijit. Good afternoon, ladies and gentlemen. Hope you all are keeping well and staying safe, and I hope you all had a chance to look at the financial statements and earnings presentation uploaded on the exchanges and our website.

Overall, the company has done well in terms of revenue and EBITDA and also the expansion. This was in line with — the expansion was in line with our earlier announcement where we have added 2 new big facilities, one in Coimbatore and one in Siliguri, which though delayed are now fully operational and in the current financial year we will recognize the full revenue of these two facilities. In addition, we have added some drive facilities for the e-commerce business at various locations.

We will give you all the details as we go towards the question-and-answer session and feel free to ask any questions that you have. And with that, I pass it back to the operator to please take up the questions one by one.

Questions and Answers:

 

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Kaustav Bubna from BM SPL Capital [Phonetic]. Please go ahead.

Kaustav Bubna — BM SPL Capital — Analyst

Yes, hi. So basically, I wanted to understand why is this company’s fixed asset turnover in general so low. So even in FY ’21 as we saw on PP&E which you guys reported of around INR332 crores, you’ll did sales of about INR237 crores. And this trend has been there for the last three, four years, as per the financials I see. And even this year, even though you’ll operationalized two new warehouses or you did some expansion in Q4, you’re still at that same fixed asset turnover of around 0.6 to 0.7. So how do you ensure return on capital employed with such fixed asset turnover? And what is your — I mean how do you plan to rectify this issue going ahead and increase this?

A. M. Sundar — Chief Financial Officer and Company Secretary

Yes, I’ll take the questions, Sundar here. See, our industry, this particular industry is definitely asset heavy capital-intensive and fixed assets turnover of one or slightly more than that is the norm, basically because our core business is warehousing and warehousing involves a huge capital expenditure.

The way we are addressing, we also understand that this impacts the ROI in the long run. The way we are trying to address that is to sort of balance it in a way that wherever we can buy land, land is cheap and easily available. We invest in the land. In other places, we try to go for a long lease. This is for the land part.

Then again coming to capex, warehousing normally involves around INR60,000 to INR70,000 a pallet in capex. Here again, we have current warehouses, most of that we have built it with our own investment. But going forward, we are again looking at mix and match here. Wherever possible, we are going in for an asset-light model where the landowner does build-to-suit. He builds warehouses for us. This is on the warehousing front.

Transportation, we are completely moving towards an asset-light model. If you can — if you see, progressively our fleet size has been coming down and in a matter of couple of years we may bring it to almost zero and then only go with market vehicles. So with this sort of model, we per don’t see any problem going forward reaching ROI of anywhere 15% upwards, steady state.

Operator

Thank you. We seem to have lost his line. [Operator Instructions] The next question is from the line of Anurag Patil from Roha Asset Managers. Please go ahead.

Anurag Patil — Roha Asset Managers — Analyst

Thank you for the opportunity. Sir, how much is the new capacity addition in terms of pallet from Coimbatore and Pune facility?

Sunil Nair — Chief Executive Officer and Wholetime Director

Hi. Both put together, we are adding 8,200 pallets. In addition to that, we have also expanded in existing setups wherever we had land. So in last 12 months, we have added another 3,000 pallet positions.

Anurag Patil — Roha Asset Managers — Analyst

Okay. And sir, are we planning any further capex in FY ’23?

Sunil Nair — Chief Executive Officer and Wholetime Director

Yes. So we have purchased a land parcel in Kolkata, where we can build around 9,000 pallet positions in 2 phases. And we are at the stage of seeking building plan approvals. At the same time, we are also going for e-commerce facilities which are asset-light model. We will go for one such facility in North, one such facility in West and one in South. At the same time, one e-commerce facility is under construction in Gujarat, which should be operational in this month.

Anurag Patil — Roha Asset Managers — Analyst

Okay. So how much — what is the total capex for FY ’23?

Sunil Nair — Chief Executive Officer and Wholetime Director

FY ’23, we are looking at anywhere between INR70 crore to INR80 crores.

Anurag Patil — Roha Asset Managers — Analyst

Okay. And sir, broader question on the whole. Do you see the demand outlook for the FY ’23 going forward? And possibility our margin improving to 30% level, how do you see that going forward?

Sunil Nair — Chief Executive Officer and Wholetime Director

See, we are looking at more on absolute terms when it comes to margin rather than percentage because as you know we had launched our technology platform for transport aggregation. So that has given us a 35% growth in transportation. We expect a similar growth in the coming year as well.

So the contribution from transportation will be increasing in the overall revenue, which has a lesser percentage of margin, but it is zero-asset model. So overall percentage in terms of the overall margin may not grow. But in terms of absolute, the number should grow.

When it comes to warehousing business, yes, there definitely we are seeking a lot of, I mean, initiatives where the major one being the price corrections with the customers and we have been fairly successful this year in terms of commanding some price increase, and the other value-added services that we’re offering to customers. So that is something which should contribute a better margin when it comes to be only warehousing businesses.

But with the mix of the typical warehouse that we have been offering, shared warehouses versus the e-commerce warehouse, where it is asset-light model, what matters to us is not the percentage margin, but in absolute terms how much we are growing and the focus is in that direction.

Anurag Patil — Roha Asset Managers — Analyst

Okay, sir. Thank you very much. That’s it from my side.

Operator

Thank you. [Operator Instructions] The next question is from the line of Abhijit Mitra from ICICI Securities. Please go ahead.

Abhijit Mitra — ICICI Securities — Analyst

Yes. Thanks for taking my question. I hope I am audible. Two questions from my side. On a Y-o-Y basis, the growth in warehousing services that we see in your segmental reporting, how much on a percentage terms would be driven by volumes, and how much would be driven by yield, if you can break it up? And also, the incremental top line growth vis-a-vis the incremental EBITDA growth, it seems to be accruing at 10% or less than 10% EBITDA margins. So this is entirely applicable for transportation services. Just wanted to have clarity on these two issues. Thanks.

Prem Kishan Gupta — Chairman

So, Abhijit, our warehousing business grew by 13% year-on-year whereas transportation has grown by 33% when it comes to revenue. The blended is 21% increase in our top line. In case of EBITDA, our warehousing EBITDA has grown by 6% and transportation EBITDA has grown by 110%, blended is 8%. And then we have agency business, which is a small amount. So ignoring that.

So overall, we have an 8% increase in EBITDA and 21% increase in the revenue. We have also written off our QIP expenses in this quarter because of which it is 8%. Otherwise, it would have been around 10%, 10.5%.

So this is the ratio and we believe that the yield that is coming from the warehousing, which is typically — warehousing EBITDA, which is typically 40%, anywhere between 38% to 40%, we will continue to maintain that. And the future growth, we are already operating at around 85% utilization today, including the two new warehouses which we have added. Without that, we should be somewhere around 89%. So we believe that a couple of percentages more can come from utilization or volume as these sales, and around 3% to 4% is what we are expecting from the price improvement.

Abhijit Mitra — ICICI Securities — Analyst

And how would you break that 13% up for this particular year between yield and volumes? The warehousing growth number of 13% for FY ’22 how would that, how would you break it up between yield and volumes?

Prem Kishan Gupta — Chairman

That is typically 10%, 11% with volume and 2% to 3% with pricing. So last year because of the Wave 2, we could not command much. But this year, in last three months itself we could have lot of corrections done. So this year, we’re expecting anywhere around 4% to 5% price correction.

Abhijit Mitra — ICICI Securities — Analyst

Okay, great. And in terms of your volume guidance, it stays the same, which is essentially 2 lakh pallets over the next three years?

Prem Kishan Gupta — Chairman

Yes. So the strategy remains the same. We are also looking at the increase in cement and steel prices and that is where we are echoing a little asset-light model wherever possible. So, on a longer run in 3 years time horizon, yes, 2 lakh pallet positions are still something we are looking at.

Abhijit Mitra — ICICI Securities — Analyst

Right. Got it. Thanks. I’ll come back in the queue.

Prem Kishan Gupta — Chairman

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Abhishek Nigam from B&K Securities. Please go ahead.

Abhishek Nigam — B&K Securities — Analyst

Yes. Hi. Thank you everyone for the opportunity. Just a couple of questions on the new facilities, how are the utilization being till now, and the outlook for FY ’23?

Prem Kishan Gupta — Chairman

In case of Siliguri, we are at around 35% utilization today and we expect that by around September we should be 80%, 85% utilized, and then onwards it will be 85% upwards only.

In case of Coimbatore, we are at 50%, 55% utilization now, and we hope to be there around 85%, 90% by September. So by September, we expect both the facilities to be benchmarked with the national average today, which is 85% to 90%.

Abhishek Nigam — B&K Securities — Analyst

Okay. That’s very useful. And I was just going through the profit and loss statement. Finance costs have been rising a fair bit. Any plan to sort of proactively bring down debt, anything that the management is looking at?

A. M. Sundar — Chief Financial Officer and Company Secretary

No. Actually, finance cost hasn’t in absolute terms, it has not gone up. What has happened is earlier finance costs were being capitalized. Last year, it was capitalized because there were projects in — capital work in progress. Whereas, current year everything has been capitalized and hence you’ll get the full charge of the interest costs. And there is no immediate plans to reduce the debt. In fact, we will be taking a little more debt to fund our Calcutta project. And in spite of that, even with that, we are definitely very lowly geared.

Abhishek Nigam — B&K Securities — Analyst

Okay. Fair enough. So it’s impacted by the startup of the new units at Coimbatore and Siliguri?

A. M. Sundar — Chief Financial Officer and Company Secretary

Yes, yes.

Abhishek Nigam — B&K Securities — Analyst

Okay. Fair enough. And sir, QonQ, it has — if I look at the employee expenses, they have gone up by almost 10%, 11%. Is that because of some fourth quarter bonus numbers or something else has gone in that?

Prem Kishan Gupta — Chairman

Sorry. Come again. I cannot hear you properly. Hello.

Operator

Mr. Nigam, can you please repeat your question?

Abhishek Nigam — B&K Securities — Analyst

Sure. So if I look at your employee expenses, they were around I think INR62 crores in third quarter and it’s up to almost INR70 crores in the fourth quarter. So that increase was mainly because of fourth quarter there are some bonus numbers or is it something else?

Sunil Nair — Chief Executive Officer and Wholetime Director

No, fourth quarter, one is the new warehouses were operational. So definitely the head count has gone up. That was mainly because of that.

Prem Kishan Gupta — Chairman

That’s the main reason, yes.

Abhishek Nigam — B&K Securities — Analyst

Okay. Fair enough. Thank you so much. I’ll come back in the queue.

Operator

Thank you. [Operator Instructions] The next question is from the line of Kaustav Bubna from BM SPL Capital. Please go ahead. Bubna, please unmute yourself from your cell phone and ask your question. We have unmuted your line from here, please unmute yourself and ask your question.

Due to no response, we’ll move to the next question, which is from the line of Abhishek Nigam from B&K Securities. Please go ahead.

Abhishek Nigam — B&K Securities — Analyst

Yes. Sir, I don’t know if I missed this, but on the Kolkata project, if you could give some details in terms of the size, how much capex and timelines, that would be very useful.

Prem Kishan Gupta — Chairman

So Calcutta land that we have purchased can have 9,000 pallet positions. We plan to build it in 2 phases of 5,000 and 4,000 pallet positions. The land development work is going on. We are seeking permission for the construction, which takes couple of months from now. At the same time we are also keeping watch on the steel and cement prices. So depending on all possibilities, we may start construction in next three to four months’ time and it will take eight, nine months for us to construct the Phase 1 at the stage we are at. This will require, with the current steel and cement prices, somewhere around INR40 crore to INR45 crores of investment for the Phase 1.

Abhishek Nigam — B&K Securities — Analyst

Okay. So in terms of time line, it could be broadly about, say, broadly about one year or so?

Prem Kishan Gupta — Chairman

Yes.

Abhishek Nigam — B&K Securities — Analyst

That’s useful. Thank you so much, sir. I’ll come back in the queue.

Prem Kishan Gupta — Chairman

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Anand B from BM SPL Capital. Please go ahead.

Anand B, we cannot hear you. Please unmute yourself and ask your question.

Anand B — BM SPL Capital — Analyst

Hello.

Operator

Sir, can you please speak a bit louder or come closer to the phone?

Anand B — BM SPL Capital — Analyst

Yes. Are you able to hear me now?

Operator

Yes, sir.

Anand B — BM SPL Capital — Analyst

Yes. Since you are starting a capex cycle, what is your free cash flow guidance for the next two, three years?

Prem Kishan Gupta — Chairman

One second.

A. M. Sundar — Chief Financial Officer and Company Secretary

So we should be generating around INR50 crores of free cash flow every year.

Operator

Any other question, Anand?

Anand B — BM SPL Capital — Analyst

No, thanks.

Operator

Thank you. The next question is from the line of Bhaskar Chaudhry from Entrust. Please go ahead. Bhaskar Chaudhry from Entrust, your line has been unmuted. Please go ahead with your question.

Bhaskar Chaudhry — Entrust — Analyst

Hello.

Operator

Yes, sir. We can hear you.

Bhaskar Chaudhry — Entrust — Analyst

Yes. Sorry. So I wanted to check what’s a good standardized kind of PAT margin for this business? Because I mean, at the PAT level, nothing really flows through, although you are still generating FCF. And CapEx is being done now for the next two, three years, so depreciation costs will probably increase. So how should one view the PAT number on a standardized basis?

A. M. Sundar — Chief Financial Officer and Company Secretary

Currently what is happening is we have a deferred tax asset of around INR40 crores sitting in our books. And since that is being written off over the years, that is muting the PAT. Otherwise I think two years down the line we should be having double-digit PAT, around 10% of PAT should be possible, two years from now.

Bhaskar Chaudhry — Entrust — Analyst

But even at the PBT level, sir, INR4 crores on a top line base of INR290 crores, so is it really the deferred tax asset that is creating this?

A. M. Sundar — Chief Financial Officer and Company Secretary

At PBT level, it’s basically the deferred tax asset which is muting the numbers. But other —

Sunil Nair — Chief Executive Officer and Wholetime Director

He is asking after —

Prem Kishan Gupta — Chairman

Sunil, I’ll just make a point that depreciation is quite high. That’s what’s putting the number down. So it’s about INR50 crores of depreciation per year. The deferred tax asset is between the PBT and PAT level, so that will continue over the next three, four years, probably. But we are looking at a PAT of double digits as Sundar was saying within the next two years and it will only improve from here.

Bhaskar Chaudhry — Entrust — Analyst

Okay. And post the capex that you have planned, I mean, what is the internal projection on the depreciation line, maybe after two or three years? And how should one look at that number going up?

Prem Kishan Gupta — Chairman

It will stay a similar number because the old facilities that we had made, that depreciation amount will reduce, whereas this new facility depreciation amount will increase. So, INR50 crores of depreciation per year is something that’s standard for us.

Bhaskar Chaudhry — Entrust — Analyst

Okay. Thanks.

Sunil Nair — Chief Executive Officer and Wholetime Director

Also in case of — I’d just like to add, in case of your first question, because of the Ind AS treatment, accounting treatment for the leased lands, we end up overcharging depreciation and interest in the initial years, which also goes and impacts the PBT as of now. But maybe in few years down the line, it will start benefiting us since we have charged — overcharged in the beginning years.

Bhaskar Chaudhry — Entrust — Analyst

Understand, sir. I’ll reach out separately and maybe like do a deeper dive with you. Thanks.

Operator

Thank you. The next question is from the line of Abhishek Nigam from B&K Securities. Please go ahead.

Abhishek Nigam — B&K Securities — Analyst

Yes. So, I was just looking at the presentation and QSR is a pretty big category overall for you. I assume the decline in the fourth quarter is because of a bit of COVID that we saw in January. I just wanted to check, how is that segment doing now in the first quarter? And overall, what do you expect for FY ’23 considering it’s still trending below FY ’21 levels?

Prem Kishan Gupta — Chairman

Sorry. There is no decline in QSR. Which slide are you referring to?

Abhishek Nigam — B&K Securities — Analyst

Yes. So if I look at Slide 9, so Q3 FY ’22, the number was 152, and that comes down to 129 in the fourth quarter. It’s page 8 probably in the presentation.

Prem Kishan Gupta — Chairman

Page number 8 you are saying, right?

Abhishek Nigam — B&K Securities — Analyst

There it says industry-wise revenue.

Prem Kishan Gupta — Chairman

Yes. Industry-wise revenue, page number 8, QSR Q4 is 172 versus last year Q4 116. So there is a 48% increase in the overall revenue from QSR.

Abhishek Nigam — B&K Securities — Analyst

Okay. I think I have the wrong presentation, maybe. No worries, I understand. How is it doing in the first quarter?

Prem Kishan Gupta — Chairman

Yes, first quarter, so far you’re saying you mean in April?

Abhishek Nigam — B&K Securities — Analyst

Yes. So far in the first 20, 25 days of April.

Prem Kishan Gupta — Chairman

It’s good. April and May are again season for them. June onwards, it starts slightly coming down as schools open and the vacation is over. But season-wise, they are doing good as compared to last year performance.

Abhishek Nigam — B&K Securities — Analyst

Okay.

Prem Kishan Gupta — Chairman

Thank you.

Abhishek Nigam — B&K Securities — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Abhijit Mitra from ICICI Securities. Please go ahead.

Abhijit Mitra — ICICI Securities — Analyst

Yes. Thanks for taking my question. Just to sort of take the thread forward from one of the previous questions, I think you guided that Calcutta 9,000 pallets will incur an investment of INR40 crore to INR45 crores. So increasing to 2 lakh pallets should incur how much investments? Is it a multiple of this or how to look at it?

A. M. Sundar — Chief Financial Officer and Company Secretary

No, 9,000 pallet won’t cost — we said we are going to put up 9,000 pallets in Calcutta in two phases. The first phase is going to be around 4,250 pallets, which is going to — first phase should cost us around INR45 crores.

Sunil Nair — Chief Executive Officer and Wholetime Director

So only for 5,000 pallet we said INR45 crore. When it comes to 2 lakh pallet position, as I told you, we are also looking at asset-light model. So if you ask us today, we are not doing that multiplication of how much will it require because we have some good leads on asset-light model as well.

So today, we are only looking at one year at a time. And as we progress on our asset-light model and we will have to calculate how much capacity can come from that model and then the rest is what we need to invest.

Abhijit Mitra — ICICI Securities — Analyst

Okay. But in general, these pallets, when you sort of guide for this pallets you also including the volumes that you are handling in some conversion form for the e-commerce facilities and the back end or the e-commerce facilities that you are managing say for Amazon, are you including those things and sort of converting and giving that guidance? Or how is that guidance sort of —

Sunil Nair — Chief Executive Officer and Wholetime Director

So we have a business model called SNOWPRESERVE, which is a warehouse setup which is palletized and which is shared by multiple customers. This is where we calculate capacity on a pallet basis, our unit of charge to customer also is on pallet basis. So whenever we talk about pallet, this is typical shared warehouses under SNOWPRESERVE service offering.

The other operating is SnowServe, where we do dedicated warehouses for e-commerce customers or at least dedicated earmark compartments within a warehouse, and that’s where it is completely on a square foot basis, which is asset-light model. We lease a drive warehouse on square foot basis. We invest in terms of setting up the internal equipment’s, and then we start serving customers. Here the measure is a square foot basis and today we have six facilities totaling to 1.4 lakh square foot.

Prem Kishan Gupta — Chairman

So just to sum up, we’re not converting any of the facilities into number of pallets of these sites. So the 200,000 pallets is independent of these Amazon type facilities.

Sunil Nair — Chief Executive Officer and Wholetime Director

Yes.

Abhijit Mitra — ICICI Securities — Analyst

Right. Got it. Got it. But in terms of preference or clarity, is the priority shifting towards this kind of back-end warehouse solutions for e-commerce players instead of putting out direct capex for pallets? Is that the thought or — because I keep on hearing being asset-light, so —

Prem Kishan Gupta — Chairman

It will be a mix of both. We’ll have expansion on the cold storage and where we build our own facilities also, and we will continue expanding this other vertical of dedicated warehouses also.

Abhijit Mitra — ICICI Securities — Analyst

Okay. But the annual capex run rate, the INR70 crore to INR80 crores is a decent enough annual capex run rate to expect in the medium term as in not only ’23 but maybe ’24 also?

Prem Kishan Gupta — Chairman

Yes.

Abhijit Mitra — ICICI Securities — Analyst

Okay. Okay. Got it. Thank you. That’s all from me.

Prem Kishan Gupta — Chairman

Thanks.

Operator

Thank you. [Operator Instructions] The next question is from the line of Rohit Ohri from Progressive Shares. Please go ahead.

Rohit Ohri — Progressive Share — Analyst

Hi, sir. Two questions. First question is related to us SnowLink. We know that it is — SnowLink on its own is profitable, but then the issue is related to the transportation cost. And now with the shift from the regular warehousing to transportation, don’t you think that the fuel cost will be an issue to you?

Sunil Nair — Chief Executive Officer and Wholetime Director

So since SnowLink is platform which is typically a back to back arrangement, the risk is shared here and most of our new agreements with the customers have clear fuel clause with them. And unlike a cost-plus model, this is a minus okay. So typically, what is the price that customer is giving, minus our margin is the price that we offer our partners.

Rohit Ohri — Progressive Share — Analyst

Okay. So the reset of the prices will happen on quarterly basis or half yearly?

Sunil Nair — Chief Executive Officer and Wholetime Director

So in case of dedicated hotel model it is quarterly pricing, and 75% of our revenue today under SnowLink is on a trip basis. So it is for every trip, that is a bidding process that happens on our platform, SnowLink platform for every trip.

Rohit Ohri — Progressive Share — Analyst

Okay. Second question is related to SnowServe and Fraazo. If you can take us through the business model or revenue generation as to how will you go about with this?

Sunil Nair — Chief Executive Officer and Wholetime Director

So SnowServe is an e-commerce solution for us. As of now, wherein we lease a driver was converted into a e-commerce back-end platform in terms of freezer, chiller, packing, sorting, grading, lines and the IT solutions that whatever the customer wants. And Fraazo and Amazon are the two customers who are being served under this platform today.

Rohit Ohri — Progressive Share — Analyst

Okay. But then, how does the revenue sharing or the revenue generation in the system for Fraazo then?

Sunil Nair — Chief Executive Officer and Wholetime Director

The revenue is close to 5% as of now, the revenue contribution. Last year we did — we did INR13 crores revenue from this. And that means — sorry, this year this FY ’22, we did INR13 crores of revenue from SnowServe vertical and we expect it to grow by around 25% to 30% in FY ’23 okay.

Rohit Ohri — Progressive Share — Analyst

Okay. Any increase in the average selling prices that you’ve seen during the year.

Sunil Nair — Chief Executive Officer and Wholetime Director

The average selling prices, as I told earlier, we are expecting anywhere between 4% to 5% this year.

Rohit Ohri — Progressive Share — Analyst

Okay. If I can just go in the balance sheet, there is a statement which is saying, contract assets of INR36 lakhs. What are these related to?

A. M. Sundar — Chief Financial Officer and Company Secretary

These are trips where we have still not got the confirmations on completion.

Sunil Nair — Chief Executive Officer and Wholetime Director

These are in-transit transportation trips.

Rohit Ohri — Progressive Share — Analyst

Okay, sir. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Abhijit Mitra from ICICI Securities. Please go ahead.

Abhijit Mitra — ICICI Securities — Analyst

Yes. I have one more question. I just checked the total pallets that you have handled for the year. So that’s almost 1.36 million. Is the turnaround of 1,17,000 static capacity that you have by the year end, is that the way to look at it?

Sunil Nair — Chief Executive Officer and Wholetime Director

Yes, those many pallet positions we have built, pallet months we have built.

Abhijit Mitra — ICICI Securities — Analyst

Sorry, what was your last statement. I missed it.

Sunil Nair — Chief Executive Officer and Wholetime Director

Build capacity over the year, so 1,17,000 into 12, needn’t be completely 1,17,000. Some locations could be less billing. Some locations could be more than 100% billing. So overall, the total pallets build would be what we are talking about.

Abhijit Mitra — ICICI Securities — Analyst

Okay. So that many turns of the static capacity, the average static capacity for the year.

Sunil Nair — Chief Executive Officer and Wholetime Director

Yes.

Abhijit Mitra — ICICI Securities — Analyst

And essentially that has grown by 10% on a Y-o-Y basis. That’s the way to look at it, right? I mean, when you said that your volume growth in pallets is 10%, this 1.6 million, that has grown by 10% on a Y-o-Y basis?

Sunil Nair — Chief Executive Officer and Wholetime Director

Yes.

Abhijit Mitra — ICICI Securities — Analyst

Okay. Okay. Got it. Thanks. That’s all from me.

Operator

Thank you. [Operator Instructions] And next question is a follow-up from the line of Rohit Ohri from Progressive Shares. Please go ahead.

Rohit Ohri — Progressive Share — Analyst

Sir, would you like to share any guidance for the next two years in terms of the top line. or are we okay with the growth of 20%, 21% on the top line and around 25%, 26% at the EBITDA margin?

Sunil Nair — Chief Executive Officer and Wholetime Director

See as we have set up these two new facilities where the utilization is still to reach our benchmark of 85% plus and also the e-commerce facilities are setup recently in Pune and Mumbai and Ahmedabad will be operational this month end. We look forward for similar growth. We would not like to put a number to it as of now as we are still finalizing few other strategic items.

Rohit Ohri — Progressive Share — Analyst

Okay. But these capacities will be onboard by September, so there should be a slightly higher uptick right in terms of the numbers as to what is around 20%, 21%?

Sunil Nair — Chief Executive Officer and Wholetime Director

As I said, since we are still finalizing few things, we would not like to put a number to it. But our objective is to definitely do better — have better run rate than what we have done this year.

Rohit Ohri — Progressive Share — Analyst

Okay. That helps, sir. Thanks a lot.

Operator

Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Sunil Nair — Chief Executive Officer and Wholetime Director

Thank you, ladies and gentlemen. The management is available if you still have any questions. And they will be happy to answer. Thank you for your participation.

Operator

[Operator Closing Remarks]