Low fuel prices and cost management aided profit growth in the third quarter of FY16, said Vineet Agarwal, MD of Transport Corporation of India (TCI).Logistics provider firm, TCI reported 10.65 percent profit growth to Rs 18.90 crore. However, the company’s income from operations declined marginally to Rs 551.46 crore in Q3 as against Rs 555 crore in the same quarter a year ago. Agarwal said the topline growth was hit by weak macro numbers and Chennai floods in the quarter gone-by. The company has revised its revenue growth guidance to 10-15 percent in FY16 and topline and profit guidance to 10-15 percent for FY17 on back of expectations of strong economic growth. The de-merger of its XPS business is expected to be complete by April-May this year, he said adding that the company has received required permissions from the market regulator SEBI. Below is the verbatim transcript of Vineet Agarwal’s interview with Nigel D’Souza and Surabhi Upadhyay on CNBC-TV18.
Surabhi: I am looking at the total numbers, there is a contraction in the topline but your profit is slightly on the higher side. If you could just tell us what were the factors at play, particularly your XPS, your express services division which you have been very bullish on, but this time around we have seen a slight contraction even there?
A: As you know, the Q3 of the year, we had a lot of macro shocks. One was the overall in November itself the IIP numbers were very poor, production was very low across the country and of course there are a lot of holidays at that point in time. December we were hit by the impact in the Chennai area, the South, where the volumes came down. So, overall, Q3 was very disappointing in terms of topline growth and that had an impact on even our express division, the XPS.
However, that is I would think as an anomaly because quarter-on-quarter (QoQ), year-on-year (YoY), quarter (Q3) results did impact us. However, the profitability went up because the fuel prices started to come down and they have sort of stabilised and that has helped us to have more predictability in terms of our cost structures. Also, we have helped by keeping our cost under control, our employee cost and other substantial costs under control.
Nigel: When exactly are we going to see some growth then on the topline? Even the last quarter I think you were sounding reasonably optimistic that we could see some growth going ahead. However, as you said XPS, yet again down close to around 2 percent, the freight division as well, that is showing a de-growth over there. So, it is not looking too good on the whole. Do you think that in the next quarter at least we could see some growth on the XPS business particularly?
A: Yes, for sure. The Q4 is our strongest quarter of the year. The January figures are slightly better and going forward, February and March should also be better. However, there is an overall slowdown and it has been very disappointing in this whole year that we have not been able to see good growth. Almost all sectors are really down, we are seeing good growth coming from areas like ecommerce or certain consumption kind of sectors.
However, overall the B2B part of businesses, the industrial movements, the consumer durable side, those things are still quite slow and that is not reflecting just in our numbers but also a lot of other companies. I do expect this Q4 to be slightly better.
Surabhi: Let me get to the numbers in that case since you are sounding a little more cautious now then when we last spoke. The earlier guidance that you had given us for overall business growth was around 15-20 percent for FY16 as a whole. The guidance for the freight division was 10-12 percent in our last conversation and the guidance for the XPS division was 15 percent. Now, are some of these numbers at risk because of the slight slowdown that you mentioned?
A: Absolutely, that was the start of the year and in the last call that I had with you guys, I made it very clear that we also revised our numbers and we have looked at now 0-5 percent growth on the topline.
Nigel: One final question in terms of guidance. What is your guidance for the remainder of this as well as if you could throw some light on the kind of guidance you are going to work with for FY17 as well?
A: So, our revised guidance is between 0-5 percent topline growth for the full financial year and for the full financial year the profit estimates should be between 10-15 percent. For FY17, we would look at, at least a 10-15 percent topline growth given the economic condition is expected to improve and a similar line in terms of growth in profitability.
Surabhi: What is the progress on the de-merger of the XPS division? Can we expect some finality on that within the financial year?
A: No because the process has started. We have got approvals from SEBI and the process with the stock exchanges has also started. So, it would not happen in the financial year but it would possibly happen between approximately by April-May.
(Copy edited by Rishma Kapur, interview transcribed by Priyanka Deshpande)
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