TCI confident of double-digit growth in FY24 after slower Q1: MD Vineet Agarwal

Vineet Agarwal, MD of TCI, said that the consumer demand should pick up due to a good monsoon, which augurs well for the company.

Transport Corporation of India (TCI) is confident of meeting its guidance of 10-15 percent growth in both topline and bottom line in this financial year after a slower performance in the first quarter.

Managing Director Vineet Agarwal told Moneycontrol that the logistics and supply chain solutions provider does not foresee any major impact from growing headwinds in India’s exports and e-commerce segments.

He said there has been traction in warehousing, third-party logistics services, and emerging vertical solutions and heavy demand in the automotive segment.

"Weakening of exports does not affect TCI as we don't do a lot of export-import business. However, the weakening of exports does have an impact on the domestic market, where we have seen a slowdown. But the impact on us has been very limited," Agarwal said on August 2.

He said consumer demand should pick up due to a good monsoon, which augurs well for the company. Agarwal said TCI is secured against any fall in e-commerce sales because it only provides warehouses and is not involved in last-mile delivery.

"We have contracts in place to provide space in our warehouses to customers, which come with a minimum guarantee clause. Even if some space is not utilised, as volumes may be lower, we are protected," Agarwal said.

Supply chain

He added that logistics companies that added capacity to boost last-mile delivery in anticipation of bumper e-commerce sales in 2023 may feel a greater impact of the slowdown in trade traffic and fall in e-commerce sales.

Agarwal said TCI's freight business is expected to slow and contribute to about 40 percent of the topline, from 47-48 percent in the first quarter.

Agarwal expects TCI's supply chain business to grow faster, buoyed by demand from the automobile industry. About 40 percent of revenue could come from the supply chain business in 3-4 years from 30 percent in the first quarter of this year.

Operating margins are likely to remain at the 11.5 percent level in FY24, although margins for its seaways business may come in at 30-35 percent in FY24 from 43-45 percent in FY23. However, this will be made up by a rise in margins in the supply chain business.

"Volumes in our seaways business have remained stable, but freight rates have fallen in line with fuel prices, due to which margins may see a contraction," Agarwal said.

TCI plans to spend Rs 350 crore in FY24 to boost capacity for the next four years and acquire a ship. The company’s capital expenditure was Rs 125 crore in FY23. It spent Rs 45 crore in the first quarter.

"Our plans to acquire a ship have been pushed to 2023-24 as we could not negotiate a reasonable price. We are hopeful of completing the acquisition by the end of 2023," Agarwal said.

TCI plans to buy a ship for Rs 75-100 crore and spend Rs 25-40 crore on containers.

TCI reported a 6 percent year-on-year rise in consolidated net profit to Rs 83.2 crore in the first quarter, while revenue rose 5.1 percent to Rs 949.8 crore. The earnings before interest, taxes, depreciation, and amortisation margin widened despite a fall in global freight rates.

Agarwal reiterated that he expects customs and cargo movement clearances to be available on the government's Unified Logistics Interface Platform (ULIP) in the next two-three quarters.

As part of the National Logistics policy launched in September, the government integrated 17 digital systems from seven ministries on ULIP. It also integrated data from the National Industrial Corridor Development Corporation into ULIP.

ULIP will be used for inventory management, digitised document generation and exchange, track and trace, grievance redressal, risk-based import clearance, and ease of cargo movement in India.

TCI shares fell 0.3 percent to Rs 759 at the close on the BSE on August 2, when the benchmark Sensex lost 1 percent. The company’s shares have gained about 22 percent so far in 2023.