Expect rev growth around 15-20% for full yr: Transport Corp

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Expect rev growth around 15-20% for full yr: Transport Corp

Transport Corp of India has released its second quarter FY11 results. The company has reported their standalone net profit at Rs 442.06 crore versus Rs 357.01 crore, a 24% increase. Their profit after tax (PAT) is at Rs 14.49 crore versus Rs 10.73 crore, a 35% jump.

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Transport Corp of India has released its second quarter FY11 results. The company has reported their standalone net profit at Rs 442.06 crore versus Rs 357.01 crore, a 24% increase. Their profit after tax (PAT) saw a 35% jump at Rs 14.49 crore versus Rs 10.73 crore.

Vineet Agarwal, Executive Director of Transport Corp of India, in an interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar, spoke about the results and his outlook for the company.

Below is a verbatim transcript. Also watch the accompanying video.

Q: While there has been an improvement in your sales and also in your profitability, the margins have been absolutely flat at 8% mark. Going forward, for the next half of the year can we expect an improvement in your margins?

A: The first six months are usually the slowest of the year and the next six months things start to pickup. Overall, the margins in the transportation industry is on the lower side so the typical jump in EBITDA margins will not exceed maybe 50-100 bps. Yes, going forward we do expect the margins to improve.

Q: What is your expectation in terms of revenue for the remaining half of the year because all your segments are doing pretty well in trade?

A: We have seen robust growth in terms of volume over the last half of the financial year. We have seen a volume growth of 10-12% which shows the economy is on the upside. There is a lot of movement taking place but our revenue growth has been much higher because we have been able to get better pricing from our customers.

There was also a diesel price hike sometime back. So taking all these factors into consideration, we have had a revenue growth of about 25% in the first half and going forward we expect the growth to be between 15-20% for the full year.

Q: Operating expenses and other expenditure is also keeping pace with revenue growth. Do you see any improvement in margins in the second half?

A: Yes, because of exceeding volume growth in all our divisions we have had a lot of new contracts. We have hired more people; we have purchased almost 200 trucks in the last half of the year, so these are setup costs essentially. We think that this will help us in getting better margins.

Q: Can you push for some further increase in pricing?

A: The market is very fragmented and extremely unorganised in the basic transport sector so pushing for higher margins is going to be tougher. However, for us the economy as a scale starts to kick in the moment we have more warehouses, more customers and more trucks. That helps us to move the margin up.

We are also moving from the basic transport to value added logistics services in our supply chain solutions division and our express division.

Q: You have demerged the real estate and warehousing facility into a new company. Will you take that company public or add a PE investor? What is the plan in that segment?

A: That will be a new company entirely and we are waiting for the listing which should happen sometime closer to the end of this month. The plan there is to develop the existing properties that we have for commercial and residential use and also get into large scale warehousing parks, multi-model parks where the governments plan is to spend USD 1 trillion in infrastructure in the next few years. This would be an area that would see tremendous growth.