TCI sees topline growth at 10-15%, bottomline at 20-30%

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TCI sees topline growth at 10-15%, bottomline at 20-30%

Vineet Aggarwal, ED, TCI (Transport Corporation of India) sees an FY10 topline growth at 10-15% and bottomline growth at 20-30%. He expects to achieve EBIDTA margins over 7.6%. He added that the company’s capacity utilisation levels were at over 90% and current debt-equity ratio at 0.8.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about TCI Industries See previous management interviews See what other Experts & Brokerages are saying about TCI Industries

Vineet Aggarwal, ED, TCI (Transport Corporation of India) sees an FY10 topline growth at 10-15% and bottomline growth at 20-30%. He expects to achieve EBIDTA margins over 7.6%. He added that the company's capacity utilisation levels were at over 90% and current debt-equity ratio at 0.8.

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

Q: We have an internal trucking index here at CNBC-TV18 and it has definitely been showing about a 40% uptick over the past couple of months, number of trucks and trucking activity on the road. What are you observing in terms of on-the-ground activity, volumes and demand in general?

A: It seems in the second quarter of this year, July-September, there is a huge uptick that has happened correspondingly sequentially over the previous quarter as well as almost equal to the compared numbers in the last year, around the same period. In fact September '08 was one of the highest periods where we saw a massive inventory buildup in the system. Subsequently to that, October-November-December was quite bad. This year we have seen this huge inventory coming on specifically for the festival season, which fortunately happened 15 days earlier than last year. So, overall there is a movement in the industrial sectors, amongst all sectors actually. Specifically, in the capital and heavy goods sector, we are seeing a huge move as well.

Q: Could you put some numbers to what you are saying? How much better is the second quarter likely to be in terms of the volume of goods moved? How much better has September been over August and July?

A: If we look at the first quarter of the financial year and the second quarter, we would see between 10% and 15% increase in volumes across sectors. This is also true for our company as a whole where we operate in the regular freight sector, in the express sector and the shipping sector where we have seen this volume trend continuing.

Other sectors that are not growing as fast would be perhaps the commodities, perhaps certain amount of textiles etc. But other than that, in the telecom, pharma, automobile sector, consumer durables we have seen good growth in the last few months.

Q: At what capacity would you be functioning now? Have you seen any possible increase in terms of your pricing power, especially in the freight and the XPS segment because that is the bulk of your revenues?

A: In terms of capacity utilisation, we typically operate at very high levels of 90%+. We only add capacity when that is available kind of capacity that we can move out whenever market conditions change. We have seen that this has been stagnant. We have also seen that there are certain sectors where there is actually a shortage of trucks. For example, the car carriers, because there is a huge movement that has happened in the last few months for the automobile sector, we have seen that the amount of car carriers that are needed has actually come down. So, there is a lot of movement that has happened by rail as well for automobile transportation.

Q: Therefore what kind revenues are you expecting in FY10 vis-à-vis FY09? You're growth pace distinctly slowed down in the FY09 - how do you think it will do in FY10?

A: FY09 consequent to the slowdown we actually had a growth rate of only about 8.5%. This year we are looking to grow between 10-15% both on the topline and about 20-30% in terms of bottomline. Our EBITDA margin last year grew from 6.9% to 7.6% and this year consequently we expect that to grow as well.

Q: Considering that you're expecting this uptick from 8.5% to about 10.5% in terms of revenue growth what are you doing to your capex plans? When I think we last heard from you - you had pulled back your capex plans or halved them at least for the current year - what do you're capex plans currently stand at?

A: In fact we have a board approval of about Rs 150 crore of capex for this financial year and out of that Rs 100 crore would be for a new ship if and when we can find one in the market. But we are increasing our capex on buying trucks example. As you know that trucks i.e. the sale of commercial vehicles have an extended depreciation till the end of September. So that as well as coupled with low financing and an imminent shortage that we see for certain kinds of trucks in the market, we've actually increased our capex for trucks and in fact have bought about 50-60 trucks and going forward another 100 trucks in the next 6-9 months.

Q: So the September depreciation deadline even if that is withdrawn it is not going to really impact you're truck buying appetite?

A: Exactly. It will not and we do expect that to continue because we see a shift in the market. We see a growth trend in the market and that's why we need to have a certain amount of capacity. But we see that across the country we've seen heavy buying of trucks in this month specifically for the depreciation benefit.      

Q: Are you well funded for this or are you looking at tapping the markets?

A: We are quite well funded. Our debt-equity ratio is about 0.8%. We had an investment from Fidelity in September 2007. So, we are quite secure in terms of our ratios. We would look at internal accruals and debt for funding this additional capex.

Q: What would you do by way of EPS you think in FY10?

A: We are looking to grow at 20-30% in terms of EPS. Of course there is no dilution. So that trend should continue.