Transport Corporation’s Q3 revenue growth has been dismal at 8 percent (Rs 557 crore versus Rs 515.1 crore). Vineet Agarwal, managing director, Transport Corporation of India says the poor number has come on oscillating volumes.
However, he expects Q4 to be better both on a quarter-on-quarter basis as well as on a yearly basis.
“Companies have started to relook their plans. They are planning capital expansion and are now looking at warehousing, so we expecte much better volumes now,” he adds.
Below is the verbatim transcript of Vineet Agarwal's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: What is the position in the freight division? You have done revenue growth of 9 percent. Do you see this improving in the current or next quarter; are there any signs at all?
A: Overall revenue growth in the quarter has not been that great but Index of Industrial Production (IIP) numbers have also not been that great. We have seen volumes coming back in force, so it has been oscillating to some extent. The freight division has done better than last year; the profitability is four times higher than although from a small base from last year but you have seen the auto sector oscillating, you have seen the other sectors also having mixed growth and that is also reflected in our numbers, but the next quarter that is January to March quarter is typically better and going forward it will get much better from onwards.
Latha: Is it typically better than the third quarter at the moment or is the Q4 better than the Q4 of last year?
A: The Q4 is definitely better than the last year as well and even better than the Q3 of this financial year. There is some pickup that we are seeing. However, a lot of companies have started to relook at their plans, they are talking about capacity expansion, they are talking about new warehouses for example, in the post goods and services tax (GST) scenario, so currently we are in discussion with lot of companies that are coming back and telling us that let’s look at new plan, let’s look at next year at a more positive level. So I do anticipate a lot more volumes going forward.
Sonia: When you say that the volumes will be much better, what kind of growth are you looking at by the end of this year and for the first half of next year because after a long time we have seen your growth rate slip to single digits?
A: The growth rate only has slipped in Q3 of the year. However, for the full year as a whole we are expecting 10-15 percent growth in the topline. The bottomline is going to be better. The first nine months we have already grown by 30 percent odd. We will exceed 25 percent plus level for the full year. The first half of the next financial year should be 10-15 percent better than the previous year and for the next financial year FY16 we are looking at a topline growth of 15-20 percent.
Sonia: Can you extrapolate for us where this 10-15 percent growth will come in from. The freight division has for the last two quarters been doing sub-10 percent growth on the topline, so in terms of segment wise performance where do you see higher contribution from?
A: The express cargo which has grown at about 12 percent odd, the supply chain business which has grown about 18 percent odd both these combined and with the higher single digit growth in the freight division, for nine months we have already done about 11 percent odd. However, so for the full year this year we should be closer to 13-14 percent total topline for the company as a whole.
Latha: Is there any substantial investments you are making in anticipation of a pick up?
A: Yes, we are. The overall capex plan that we have for the year is about Rs 275 crore out of which we will end up spending only Rs 150 crore because of the lack of getting clearances in many places to build warehouses but the next three year plan is to spend about Rs 500 crore of capex which will go predominantly into building warehouses for e-commerce fulfillment, for the GST growth that is going to come in, new trucks, new ships and warehouse equipment as well and in that context we have also raised about Rs 60 crore from IDFC Premier Equity Mutual Fund in this quarter and we got the EGM shareholders’ approval yesterday as well.
Latha: You do not handle cold chain kind of supply chains?
A: We do but in a very small way. We have cold chain refrigerated trucks and we are building a few cold stores but predominantly our expertise is a complete end to end supply chain where we provide warehousing solutions as well as the transportation solutions for all kinds of industries.
Latha: Hasn’t the fuel price cut translated into anything substantial. What was your cut, about 15 percent lower fuel bill?
A: We have not seen a dramatic drop in freight rates across the country. In the last two years commercial vehicles (CVs) have not been added too much; there has been negative growth in the CV cycle. So capacity addition has not been that high, with some uptick in demand we have seen that that has been moderated. The freight rates have not come down because of diesel price reduction.
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