Concor packs a punch

Concor is doing very well today morning, opening over 1.5% higher at Rs.645.10 and going on to hit a new high today also at Rs.664.50; and is now trading at Rs.650 levels.

The stock, playing mainly on divestment theme, is on a much better footing today after clarity emerged on the contentious land licensing fee (LLF) issue. In a conference call with analysts yesterday, the company said that it has resolved the LLF issue with the Indian Railways.

The confusion over the LLF issue came in last year when the Railway Ministry slapped a higher fee of Rs.1276 crore for 13 terminals, much higher than Concor’s estimates of Rs.466 crore and was seen as a major roadblock to its disinvestment plans.

For FY21, the company paid Rs.520 crore in LLF charges, this is calculated at 6% on current market price of railway land parcels. The company said that it has given up 16 terminals to the Railways and what really enthused the market was its guidance for the future – the management said that it expects to pay Rs.450 crore as LLF in FY22 as it plans to surrender two more terminals.

The management also stated that it is looking at alternate options with the Railways to buy 24 terminals wherein it will get a lease for 35 years at 99% of current market price. This is expected to cost the company around Rs.6000-7000 crore and is to be funded via a mix of debt and cash to the tune of Rs.2500 crore.

The move, to lay down its terms of the lease is seen as a positive step – though it remains more outflow in the short terms, in the long term it will help offset inflationary impact while being income accretive. Following this, most fund houses have upped their target price.