For FY22, the company expects to pay Rs450 crore as LLF, as it intends to surrender two more rail terminals and is also looking at rightsizing at the existing terminals

MUMBAI: Investors in the Container Corporation of India Ltd (Concor) stock heaved a sigh of relief after clarity emerged on the contentious land licensing fee (LLF) issue. The stock rose to a new 52-week high on Monday and ended the day’s session more than 8% higher on the National Stock Exchange.

In a conference call, the management said it has resolved the issue with the Indian Railways. “The overhang of uncertainty on account of land licence fee (LLF) is largely behind us as LLF estimates for the company and Indian Railways appear to have converged. LLF for FY21 seems to be largely settled and is modestly lower than our estimate of Rs590 crore. This is a key positive for the stock,” analysts at Nomura said in a report on 24 May.

For FY21, Concor has paid Rs520 crore as LLF charges on the basis of 6% of the calculated current market price of railway land parcels. The management said that it has surrendered 16 terminals to the Indian Railways. For FY22, the company expects to pay Rs450 crore as LLF, as it intends to surrender two more rail terminals and is also looking at rightsizing at the existing terminals.

Further, the company is working on an alternative plan with the Indian Railways to purchase the 24 terminals on which it operates on the railways’ land for a period of 35 years at 99% of the current market price. The management expects this to cost the company around Rs6,000-7,000 crore and is likely to be funded though a mix of cash on its books of around Rs2,500 crore and external debt.

“While the overhang of land licensing fees is largely out of way, the execution of this alternative plan is the key now. If this works out the way Concor management expects, then it could lead to some significant tax and interest savings. But we have seen in the past that there have been flip-flops between what is said and what is done. From hereon, the up move in the stock will be event-driven, which is disinvestment in this case,” said an analyst with a domestic brokerage house requesting anonymity.

Investors would recall that the LLF issue came to the fore last year when the ministry of railways slapped a higher fee of Rs1,276 crore for 13 terminals. This was much higher than Concor’s estimates of about Rs466 crore. The confusion was also seen as a roadblock to the company’s disinvestment plans. But now with the LLF issue behind, Concor is closer to disinvestment than before, analysts said.

Source : Mint