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Last Updated : Jan 10, 2014 08:54 AM IST | Source: CNBC-TV18

No plans to monetise property assets: Transport Corporation

For FY14, Vineet Agarwal, MD, Transport Corporation of India sees the company‘s topline growing at 10% and bottomline at about 10-15%.

Vineet Agarwal, MD, Transport Corporation of India (TCI) believes that the buzz seen in the stock price of the company is because of re-rating of the stock. The company has changed its business mix and moved towards value added segments like supply chain solutions, express cargo, which not only resulted in improved margins but could also be growth drivers for the company, he adds.

For FY14, he sees the company’s topline growing at 10% and bottomline at about 10-15%.

Year-To-Date Transport Corporation of India has gained 16% and according the one month chart shows it is higher by 52%.


Moreover, the company has no plans as of now to monetise any of their huge assets which include about 300 properties all over India.

The company is at capex of Rs 100-150 crore both for FY14 and FY15, says Agarwal.

Also read: Container Corp eyes 10% revenue growth by FY14-end 

Below is the verbatim transcript of his interview on CNBC-TV18

Q: There was some fund buying, some influential name buying that happened in Transport Corporation of India but is there anything else that the market is missing, any kind of fund placement or anything which should warrant 50 percent stock upmove?

A: I do not think so. I think what has happened is just a rerating of stock. The company has been in business for more than 55 years and in the last few years we have changed our business mix and we are going more into value added segments like supply chain solutions, express cargo etc. There we have seen that margins have improved, the company also sits on huge amount of assets like more than 300 properties all over the country.

Going by the past few months where certain PE transactions have happened in the logistic space, we can see that the company is severely undervalued. Today we are trailing at less than 10 PE multiples whereas transactions have happened in excess of 20-25 plus as well. So, I would think that it is rerating that has happened and not anything other than that.

Q: What the growth in the company will look like. In FY14 what are you likely to close the year in terms of revenues and margins and even for FY15, is it going to get better?

A: The logistics industry is linked to gross domestic product (GDP) growth and we know that GDP this year has been subdued. It has about 5 percent odd growth and that will have an impact on other logistics companies as well and has as impact on us as well.

This year we would grow at about 10 percent at the topline and 10-15 percent at the bottomline level. Margins are under pressure because we have had continuous diesel price hikes, lot of inflation on the system as a whole, chassis prices are up, driver wages are up, toll has increased dramatically all across. Consequently freight has not increased to that extent, so we see a certain amount of pressure but as volume starts coming back, we will see that this pressure should start lifting.

Q: What segment is going to drive your profits? Seaways division for you looks the best but it has a small base. Do you think you can scale it up and could that be the next growth driver?

A: The seaways business is essentially a business that helps to build the other businesses. It is multimodal solution kind of an entity. It is very small business, it has less than 10 percent of capital employed but it also goes through certain amount of cycles.

I would think that the growth drivers are going to be express business and the supply chain business. These businesses are to a great extent immune from the economic conditions because consumers are consuming, hence there is a delivery of eCommerce or there is a delivery of computers or cell phones etc, which the express company looks after. In the supply chain business we do work in the auto sector or with consumer durables or warehousing and other value added services which are on a longer term contracts. So, these businesses together should be the ultimate growth drivers and they also have higher margins.

Q: You have also said that the company is sitting on quite a few assets; you have got 300 plus properties. Any plans of monetising them in the next six months or one year?

A: Not directly because a lot of these properties are currently used for the business as is and over time some properties do come into the areas where we cannot do any logistics activities. When that happens we look at certain amount of monetisation but our current capex includes building, certain amount of hubs and small warehouses for the future.

Q: Any idle assets?

A: None.

Q: In the last two weeks have any funds got in touch with you for a potential placement or anything like that because the stock has run up and we have seen quite a bit of investments in open market?

A: What we believe has happened is that we had an investment from Fidelity which was there before these recent transactions and they sold out 6 percent odd in the open market to certain other institutions. Beyond that we do get inquiries on regular basis from funds etc and we do hold quarterly conference calls (concalls) but no direct interest currently.

Q: Could you tell us quantify the capex that the company has outlined. What it has been for FY14 and for FY15?

A: Last year we had certain amount of capex as FY13 and we could not complete the entire capex because we weren’t able to acquire certain land and properties. So, this year our capex is about 150-200 crore where we think we will end between 100-150 crore and going forward for FY15, we would again look at about 100-150 crore of capex.

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First Published on Jan 9, 2014 05:42 pm
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