VRL Logistics Limited to acquire existing Transhipment Hub at Bengaluru

The Board of Directors of VRL Logistics Limited at their meeting held on Saturday, 23rd November, 2024 (04/2024-25), had approved the proposal for the purchase of the existing Transhipment Hub occupied by the Company on Lease basis at Bengaluru. The said premises comprises of Land bearing Property No:150300700300200518, Sy No. 97/1 and 100/1A1 measuring an aggregate area of 27.30 Acre situated at Billanakote Village, Kuluvanahalli Grampanchayat, Somapura Hobli, Nelamangala Taluk, Bengaluru Rural District, Bengaluru, Karnataka ("Property"). The constructed structures thereon comprise of a Godown measuring approximately 5 lakh sq.ft. as also other amenities such as Canteen Building, STP, Fuel Pump, Weigh Bridge, etc. apart from workshop and ample vehicle parking space.

The Company has been in possession of the said premise on lease basis since over 10 years and has been using the said property for its transshipment operations at Bengaluru.

The Company is operating its transshipment hub at Bengaluru in the said premises for more than a decade. Critical consignment routing activities such as aggregation of bookings, storage, destination sorting, vehicle placement etc. are undertaken here on a 24 x 7 x 365 basis.

Over the years, we have made significant investments such as Fueling Station, Weigh Bridge, Solar installation, floor strengthening etc. The Management is of the opinion that Purchase of the said property would be beneficial for its operations in the long run.

The said hub is critical to the Company's South India operations and the owner sought to dispose off the said property given his old age and perceived inability to monitor it going ahead. The availability of the said premises is critical to our operations and owning it would ensure the continued availability for the Company's purposes. On an average around 3000 tons gets handled at this transshipment hub daily, which is amply demonstrative of the importance of this hub within our overall South India operations.

The said property comprises of Land bearing Property No:150300700300200518, Sy No. 97/1 and 100/1A1 measuring an aggregate area of 27.30 Acre situated at the Property on which the hub occupies an area of around 5 lakh sq.ft. There is room for scaling up the hub capacity. Along with the same all other related utility aspects such as fuel pump, weigh bridge, canteen, etc. have been constructed with significant financial outlay over the years.

Some of the tangible benefits of ownership of the said premises are summarized in the below points -

- Savings in lease rentals - Presently we are paying a monthly lease rent of Rs.1.31 crore including GST. Thereby the annual savings would translate to Rs.15.72 crores (Being a Goods Transport Agency Service provider under Reverse Charge Mechanism @5% of GST rate we do not take input credit of GST and GST is completely expensed by us). We would also save upon the potential lease rental enhancements that become imminent under a lease arrangement going ahead.

- Continued availability of the premises given that the owner seeks to dispose it off and uncertainty over a third-party acquirer consenting to continue our existing arrangement on lease basis for a long term.

- Due recovery of our investments made over the years in useful amenities such as Fueling station, weigh bridge, solar installation, STP etc.

- A readymade setup for our Satellite workshop which can now be scaled up and fitted with requisite advanced vehicle maintenance infrastructure given that we would own it thereby reducing pressure on the centralized Hubballi workshop.

- A part of the said premises has also been let out to a third entity by the Seller which entails a present-day monthly rental income of Rs.0.12 crore per month (Rs.1.49 crore annually) which would henceforth be accruing to us. We would also have the option of making the said entity vacate thereby providing us with an immediate additional area of around 64,000 sq.ft. of hub area.

- Hub scalability by investing in infrastructure enabling vertical stacking, installation of mechanized material handling technologies and other initiatives to improve operational efficiency.

- The corresponding values of RoU Asset and corresponding Liability thereagainst accounted in the books of accounts as mandated under in AS-116 would stand reduced.

Apart from the above, ownership of the land and structures will provide the Company with greater control and flexibility in managing and upgrading the facilities, ensuring operational continuity without dependence on external lease arrangements.

The size and location of the property make it ideal for future expansion plans to support the Company's growth objectives. This decision aligns with the Company's long-term strategic vision and commitment to optimizing operational efficiency while securing critical assets to support sustainable growth.

The said hub is located right along the Mumbai - Bengaluru (NH-4 / AH 47) and offers unmatched connectivity to the southern states and is ideal from a surface logistics point of view connecting the Southern states to Western and Northern India. The said area is also located adjacent to the proposed Queen City township planned by the Government. The new Bengaluru airport being planned would also come up in the near vicinity of this facility. The Somapura Industrial Area and the upcoming Vasantnarasapura Industrial Areas are also located near the said facility.

Also, if the Company were to purchase land and develop its own Transshipment hub of a similar size with present day facilities, it would end up spending much more than the transaction value. This effort would also entail a timeframe of anywhere between 2-3 years at the earliest.

The Company has incurred a total sum of Rs.229.30 Crores (Rupees two hundred twenty nine crores and thirty lakhs) inclusive of Stamp duty and Registration charges. The Absolute Sale Deed was executed today, i.e. 07.12.2024, at the office of the Sub-Registrar, Nelamangala, Bengaluru.

The Company has availed term loan facility from HDFC Bank to the tune of Rs.185 crores and balance consideration out of internal accruals.

Shares of VRL Logistics Limited was last trading in BSE at Rs. 539.25 as compared to the previous close of Rs. 546.45. The total number of shares traded during the day was 2868 in over 418 trades.

The stock hit an intraday high of Rs. 546.05 and intraday low of 538.00. The net turnover during the day was Rs. 1549872.00.

Source : Equity Bulls

Keywords

VRLLogistics INE366I01010 TranshipmentHub