TCI expects 20-30% increase in EBITDA margins

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TCI expects 20-30% increase in EBITDA margins

Vineet Aggarwal, ED, TCI expects a 20-30% raise in EBITDA margins. On the company’s capex plans, he said, "This fiscal we have kept a budget of Rs 150-160 crore, bulk of it going in for a purchase of a ship if the market conditions improve. We are also looking at investing Rs 25-30 crore in trucks and Rs 25-30 crore in creating new warehouses."

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » RELATED NEWS Plan IPO to dilute 20% govt stake: Telecom Consultants Capex delayed due to slowdown in freight: TCI ALSO READ See latest News about TCI Industries See previous management interviews See what other Experts & Brokerages are saying about TCI Industries BSE | NSE 01/01/70 Are Mutual Funds betting on ?

Vineet Aggarwal, Executive Director of one of the largest supply chain management companies, TCI , expects a 20-30% increase in EBITDA margins as against 7.6% last year. Commenting on the company's capex plans, he said, "This fiscal we have kept a budget of about Rs 150-160 crore, bulk of it going in for a purchase of a ship if the market conditions improve. We are also looking at investing Rs 25-30 crore in trucks and Rs 25-30 crore in creating new warehouses and new hub centres."

Here is a verbatim transcript of the exclusive interview with Vineet Aggarwal on CNBC-TV18. Also watch the accompanying video.

Q: How have volumes been over the past two to three quarters? There have been the proverbial green shoot terms being used. How are you seeing trade and volumes pretty much domestically pan out over the last two to three quarters? Has there been a bit of an uptick from what you saw in October and December?

A: September was one of the highest months for us in 2008. But consequently the volumes have been dropping. It is only last month, in July, that we actually saw an uptick in volumes. That is also corroborated by the Index of Industrial Production (IIP) data.

So, across the country and sectors, we are seeing some movement and that started somewhat last year. We are hopeful that going forward with the festival season coming in and general demand picking up, this should get better.

Q: How much would you say demand has picked up, say Quarter-on-Quarter (QoQ) or Month-on-Month (MoM), however you have the numbers? Is the demand enough to ensure that more trucks will be purchased because we see some kind of improvement in truck share prices?

A: Yes, I think there are two aspects to it. One is, clearly the fact that there is a certain amount of demand that is going to come in. We must remember that last year this was a time when we were having a lot of growth. So, we are coming off a high-base effect up till September. So, we will have a little bit of slower percentage increases in volume going forward till October-November when we receive higher increases.

The increase in CV sales has been consequently because of the increase in the depreciation rates up till September end. So, there is a push that is coming there. Simultaneously, because of anticipated demand as well as a change in the way people manage their supply chain, where they are outsourcing a larger number of trucks and their movement to logistics companies like us; we see that there would be a certain shift. We are also looking to buy close to Rs 25-30 crore worth of trucks maybe 300 odd trucks in the next 15 months.

Q: So does that mean your Rs 160 crore capex plan for FY10 is still on track?

A: Yes it is. In the last three years we have spent about Rs 200 crore. This fiscal we have kept a budget of about Rs 150-160 crore, bulk of it going in for a purchase of a ship if the market conditions improve. But other than that, we are looking to of course invest Rs 25-30 crore in trucks and another Rs 25-30 crore in creating new warehouses and new hub centres. So, going forward we will continue with this capex.

Q: What would your likely margins be in FY10? Will there be an improvement over FY09?

A: Last year, we had an earnings before interest, taxes, depreciation and amortization (EBITDA) margin of 7.6%. Going forward, we do expect a 20-30% increase in the EBITDA margin growth.