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Transport Corporation of India Ltd
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Good evening, ladies and gentlemen. I am Komal, the moderator for this conference call. Before we begin with, I would like to extend my warm welcome to all of you for joining us today. On behalf of the management, we have with us Mr. Vineet Agarwal, Managing Director; and Mr. Ashish Tiwari, Group CFO. [Operator Instructions] Please note that this conference is being recorded.
I would now request Mr. Ashish Tiwari to embark on this meeting. Thank you, and over to you, sir.
Thank you, Komal, and good evening to all of you. I hope you are doing fine. And thanks again for joining us today in between your busy schedule for calls and the results. As usually, we are beginning with our investor presentation and followed by the questions.
Now I will invite Mr. Agarwal for the investor presentation. Thank you. Over to you, sir.
Thank you, Komal. Thank you, Ashish. Can you please put on the presentation, Ashish. So good evening, and thank you for joining us today on this investor call. It's been a very interesting quarter for us. Actually, Ashish if you go back to the previous slide. This is a very nice depiction of what we are doing as an organization in terms of all kinds of modes of transport and all kinds of services across the country and across different parts of the SAARC region. It's just an indication of a depiction of what the organization is all about. Going forward, I think a lot of these -- a lot of this information is already known to you. So, I would not repeat it.
As I said, the quarter has been quite interesting over the last year and so all these trends that we are seeing, the growth drivers are all playing out as we speak. Certainly, post the second wave last year, we've seen a good jump in terms of both revenue growth and certain amount of profitability as well. And the trends in terms of consumer-led trends have, as we have been seeing are accelerated. The customer trends in terms of outsourcing has increased quite a lot also because what kind of -- the kind of slowdown that happened in COVID or the kind of changes that have happened to supply chain during COVID has prompted a lot of customers to really look at their supply chains. And now we are seeing a lot of RFQs in pipeline as we speak.
All the government-related trends are also quite interesting in terms of new areas to, for example, the Gati Shakti rail terminals that have come up, the 100 terminals with a very flexible approach. We've also seen the National Logistics Policy should get announced by the Honorable Prime Minister this year -- this month, in fact, as per news reports. So overall, and the push towards e-invoicing, as we read that e-invoicing above INR 10 crores is now mandatory in the next month, I think, from 1st of October. So, we will definitely see that many of these trends that will play out towards helping our organization as well, the formalization of the economy, the changing consumer trends and the growth and the impact of infrastructure. They're all positive for us.
The organization has -- as we've always talked about, a strong range of products and services going forward. We can see that in this chart, next slide, Ashish, so this is really capturing broadly all the activities that we're doing in all the verticals that we are serving. And in fact, what the customers are really getting out of this from a single window solution as well as a certain level of operational efficiency. We have various tools that help customers to go through to -- in their journey of logistics, we are able to provide them as many services as possible.
We have been building a strong multimodal network for the last few decades and last decade or so, sorry. And that has essentially resulted in the work that we're doing on rail logistics. In the last month, we have loaded more than 100 trains for just automotive movement. So, the kind of thrust that is there from rail logistics from our side has increased tremendously. You are aware of the 6 ships that we have on the coastal waters. And on the road side, we have a large container base as well as handling a large amount of PUs as well for all types of customers. And we do operate out of 55 and 60 terminals across the country.
In this process of growth, we are constantly incubating new businesses. We've talked about cold chain, how that has become a new joint venture for us. And going forward, we also see areas like chemical and pharma, agriculture, renewables and SAARC also growing very, very rapidly in the next 2 to 3 years. The logistics today cannot be run by -- without an IT system and a very strong IT backbone and that is not only at our operational level, but we've also created at centralized monitoring systems, control towers. And simultaneously, we are also engaging in digital transformation with several projects that are underway. And maybe we'll share towards a little later, I don't if it's the next slide, but something about operations that we are doing for some of our clients related to technology.
Yes. So these slides are not there in the presentations that are uploaded because these are proprietary and customer-centric. So, this is for a dark kitchen for a customer where we do pickups for the -- all the SKUs that they have from home products to bakery items and so on. And they are stored at 2 locations, and they are almost 25 lakh units that are there. Some of them are stored at ambient temperature and some of them are stored at minus as well. And the idea is that they have to -- we have to really make them into pods like the boxes that you see at the bottom of the screen and send them to various locations where then it is then distributed further. So, these are -- they go into the kitchens actually. So, this is a very interesting business that has picked up and we have been able to provide all the services at a very high degree of efficiency.
The next one is a project that we are doing for a large chemical company, multimodal logistics where we are actually integrating the entire operations and the visibility that we have for the operations to the client is towards the control tower. That control tower is visible to us as well as to the customer in whatever areas they want. When they place an order for, let's say, a container movement by rail, they can see the order processing, one-set container or the whole bunch of containers that are moving on the rail. They can track that on our site as we're getting the APIs from the railways.
Subsequently, they can also see what orders are -- or what containers are lying where across the system and simultaneously, we are -- since there is also a road element in it, the trucks have GPS. So, when they are getting delivered to the final customer of our -- of the chemical company, they can also see where that container is. This overall management of the various applications from different sources is all integrated through a middleware and customer is able to see all of that.
What we are also trying to do and is to link the customers' ERP to our ERP so that we are able to even do digital billing in the future. This is a very progressive customer that is looking to do digital billing and that is so -- versus many customers who just want physical bills even though it is mandatory to get e-invoicing. So again, this is some of the capabilities that we have and we are doing this for many other customers as well. This has been our best quarter in terms of revenue growth ever. The last quarter, typically, Q4 for us is the highest quarter, which was around INR 905 crores in terms of consolidated revenue. We're a shade higher at INR 908 crores. This is -- I think some of it is because of the fact that we have -- a little bit of 2 factors. One is that last year, the base was lower.
The second is the momentum that we had from Q4 continues as well. Clearly, there are some mix trends that we see because of inflation. A few sectors are getting affected, but not to that extent. And I think we will see more of that in the next few quarters. But otherwise, we seem to be in a good place. Our net borrowing still remains at 0 though. We are sensing some delays in market payment in terms of liquidity because I guess many companies have increased their working capital as well and also interest rates have gone up. So, they're delaying payments. However, it has not affected us negatively so far. And clearly, the trends that we have are very much aligned to what the strategy is. And clearly, the fundamentals are playing out.
Now, I think the freight business here. The freight business, I won't go into details about the -- each of the businesses. I guess you are aware of them. So operationally, the business grew at about 30-plus percent in the quarter versus last year and the margins are at the same -- though slightly lower in terms of EBITDA, but EBIT margins are at the same level as last year. There is a little bit of a slowdown that we are seeing with the MSME clients. So, we feel that there could be some impact with the LTL shift, but we should be able to catch up in this quarter as in this -- the projections are that we should get to that 40% levels again by '22-'23. The freight rates are up in many sectors, Ashish, if you can go back, please.
The freight rates are still higher in many sectors across the country, but it has -- we have a little bit of a lag when it comes to pass-through of the costs, but we've not lost any -- we've not had any losses because of that. The ROCE remains at 20-plus percent. Last year, as you know that we grew the ROCE above 20%, and we will maintain this number going forward.
The supply chain business has seen a remarkable jump in terms of volumes as well, with a 33% jump. Clearly, the auto sector has started to come back, as I mentioned. In the last month, we had more than 100 trains that we moved for automotive. That continues. That's an ongoing trend for the year. So, we will cross more than 1,000 rate movements by -- for automotive segment in this year. So, this -- as a company, we are truly becoming very, very multimodal. The auto rates are clearly helping us to offset some of the fuel price impact that has happened. Though the EBITDA margins have again come down here, but EBIT margins are almost at the same level. This is a little bit of perhaps a seasonality issue right now. And also in the larger contracts, the pass-through might be a little longer. So, we will definitely see the numbers coming back in the next 2, 3 quarters.
The trends are also very good. We have a lot of demand from customers on not just the automotive side, but even in the non-automotive side, we have -- we have won several contracts from large FMCG companies. We have also looked -- we are also in the fray for many large contracts right now. And I think those are things that we will perhaps share more and more as -- through the year. The Seaways business clearly has a large potential with Seaways only, coastal shipping being only 6% of the national movement across the country. So, there is potential in this business. As I've been saying that we've not been able to acquire a ship because of the asset prices being very high, the business would have grown much faster. But nevertheless, it has grown substantially over the last year in the same quarter. The prices of container rates have not really come down too much because on the domestic upfront. Yes, there has been some softening on the international side, but it has not come down that much yet.
The cost structure is also moving up with the cost of sulfur fuel -- low sulfur fuel increasing quite rapidly in the last 2, 3 months. We have 3 ships that we go for dry dock in this financial year. One has been completed, one should get completed in the next few days and then the third one will be heading out. So, our estimate is that within the first 6 months of the year, all 3 ships should really finish their dry dock as well. And the joint ventures have done also reasonably well. TCI Concor grew at about 8% from last year with profitability almost at the same level as last year.
We have seen good traction in terms of customers and we are trying to work with certain types of customers that are more long term in nature rather than some contracts that typically come for short-term growth. On the cold chain side, business has grown by close to 30% over the last year. Some -- it is, of course, at a lower base, but the trends are also very interesting. I showed you the example of a dark kitchen as well. The Transystem joint venture has grown quite a lot with about 85% increase and the profitability is also back to the same levels as last year. We do expect with Toyota, which is a principal customer here, this business to do exceedingly also.
In terms of the overall financial highlights at a consol level, revenues are up by about 30-plus percent and profitability is up by about, PAT is up by 66%, again, driven largely by the Seaways business, but also strong growth coming from all the other businesses as well. The ratios are all looking good. The capital ROCE numbers are at 25-plus percent, RONW numbers are at 22-plus percent. The last year consol PAT was a significant jump. And our guidance of 10% to 15% top line and bottom line continues.
Even though you might think that this -- the growth is quite high, the reason why we are sticking to the 10% to 15% is because from Q2 onwards, we'll see that the base will change. And also perhaps in Q4, there could be a little bit of a slowdown is our anticipation. But yes, I think we would relook at the numbers again post Q2 in terms of how things are. I think on the ESG front, the work that we're doing on multimodal logistics is quite remarkable compared to many of our competitors. So, we'll definitely see this as a really, really important driver for us in the next few years.
In terms of CapEx plans, we have about INR 300 crores of CapEx that is in the pipeline. The -- as I said earlier, also the plan to acquire ships are underway. We've not been able to get it yet. But as we are seeing the global container prices softening, we should see some improvement in our ability to buy the ships. Otherwise, some of the CapEx has started. And I think the other things we should be able to definitely cover in the next 3 quarters, barring the ship purchase and the containers associated with it. We do expect the festival trend to really help us in next -- the stocking that has already started.
We are very proud to also announce that we were the only logistics company from India that has won the National Logistics Excellence Award. This is the first time the government of India under DPIIT and the Ministry of Commerce has really started the logistics awards and TCI is the only company -- domestic company that has won 2 awards for best service provider for warehousing and for cold chain services. This in terms of the excellence that our team provides to customers throughout the year.
Thank you again for joining us. We're open to questions.
[Operator Instructions] So, the first question is from Mr. Ravi.
Hello. Are you listening me, sir?
Please go ahead.
How much growth and margin we are expecting for current year? Will you give net profit margin or EBITDA margin for current year also?
May I know your organization please.
My name is Ravi Naredi. I am from Bhilwara. I am very long shareholder in TCI Express and TCI company, both.
Mr. Ravi, our -- as I said, our guidance is 10% to 15% on the top line and bottom line, and we are sticking by that right now.
But this first quarter, you had given 68% growth. So, 66% growth. So, 10% to 15% is too much low?
We -- as I said, the full year trends we have to see and Q3 -- Q2, Q3, Q4 last year -- last year was quite good as well. Q1 last year was, as we know, we were dealing with the second wave. So things were a lot slower. So, we are looking at a little bit more on the conservative side in terms of. And as I said, the impact of the -- perhaps a global recession, perhaps the slowdown that might come because of that and maybe some inflation pressures could have an impact on Q4 of this year. So, our projections are showing that 10% to 15% at this point is reasonable. And as I said, Q2 -- after Q2, we will review it again.
And how shipping business performing with neighbor countries? Is Sri Lanka problem impact us in any way?
No, not at all. We do not go to Sri Lanka. We go to Myanmar sometime and that business continues. We do make occasional trips to Myanmar.
So, their pulses are still we will import from there?
That's right. So, that government has allowed pulses import from Myanmar till 30th or 31st of March next year. So, that opportunity still exists.
And sir, last question. Now please tell in which segment, we are planning to grow more like trucks or container or coastal cargo ship or cold place?
I think it's very difficult to tell you that we'll grow only in one segment. Clearly, the growth in Seaways comes from the moment we add more ships. So, that's definitely a capacity issue. But in the other 2 segments, growth comes from acquisition of clients and that is an ongoing process for us and as well as in the other joint ventures and so on. So really speaking, no, we don't have a specific target saying that this division is going to grow faster or more and so on. But yes, we see growth coming in all the segments.
So, when ship delivery will come?
We don't know yet. We are still waiting for finding the right opportunity to buy the right ship?
The next question is from [ Mr. Alok ].
Congratulations on a decent set of numbers. Sir, I just wanted to understand, so the shipping business, you mentioned about the 3 ships coming back in the system by start of quarter 3. So, what kind of revenues we are looking at from that particular business now for this financial year?
No, they are not coming back in Q3. In the sense that one ship went and came back already, second ship is coming back in the next few days and the third ship. So before Q2 is over, all 3 ships would have finished their dry docs. So, then we are ready for the full year - for the next half of the year in terms of whatever opportunities are coming. So overall, we expect the business grew quite substantially in the last year, and that was -- a lot of it was because of value growth and some amount of volume growth. I don't expect a lot of volume growth in this coming year and a little bit of value growth. So, I think a 10% to 15% top line growth and around the same in terms of bottom line is what we're expecting.
And also in the -- if we look at the freight segment or the share of LTL has increased to 65%, perhaps that's the thing which is reflecting in the lower margins as well. So, you mentioned about that moving back to 60%, but what's the reason for such a change? And how has July been for us in that particular segment?
So, I cannot really mention what specifically happened in July, but I think definitely tell you that the trends are moving back towards the LTL business. The MSMEs did feel a lot of crunch because of increased inflation and input prices going up. So, we saw that there was a little bit of a shift from the -- from that segment. So -- but I think this is going to come back in the next 2, 3 quarters. And also added to that point, the festival stocking has happened -- started to happen and that is -- a lot of that is based on, of course, MSMEs moving cargo.
Just last question. So, coming back to the seaway segment, again, the margins have been pretty healthy. And in the presentation also and in your opening remarks also, you mentioned about some return load from Myanmar. So, has that continued in a big way? And how are the freight rates moving there? Because what indications were there that things are -- the margins will sort of come down and kind of normalize, but it has continued to stay elevated even in the quarter. So...
Yes, I think we -- our thought process was that we would like to -- we would have -- it would have come back -- come down really, but it did not, to some extent, and I guess it's positive for us. The freight rates are continuing in terms of -- they are still at the higher levels. We've not seen it come down yet. So, I think we are still bullish for the next 2 quarters.
I would request you to start with your name and organization name followed by your question. The next question is from Mr. Krupashankar.
This is Krupashankar from Spark Capital. First off, a question on the Seaways business. While you did mention Vineet that things are progressing quite good. But looking at the sulfur price or low sulfur prices, you've seen a sharp jump in June. And given that -- I just wanted to understand, is there a price hike which has already taken? Or is there going to be a lag in the contracts, which will be executed in the second quarter, given that it's seasonally weak? So, can you expect that margins can fall off the cliff on a sequential basis?
I don't think it will fall off the cliff, but it can soften a bit because of higher input prices. And -- but volume growth can -- it does get affected a little bit because of [indiscernible] are happening. So that will get impacted. But I don't expect it to really fall off the cliff. We are not seeing that yet. You are on mute Mr. Krupashankar.
Yes, sorry, I was not able to unmute myself. There's one more -- so continuing with that, then perhaps we're seeing that other crude derivatives have softened. So, herein also, you will see that correction should happen. And eventually, given that you are expecting more growth in the Seaways business driven by realization growth. My question was more revolving around is price fully a function of the sulfur prices or is there anything else which is driving it, given that volumes are also softer?
Yes. You're right. The price is not driven only by the cost of fuel. It's driven by demand and supply. And we've seen that globally the demand and supply for container vessels as well as container ships has oscillated and, in fact, now softening in many parts of the world. So -- and even the large shipping lines have also indicated that prices could start softening rapidly in the next 2, 3 months. So that demand and supply gap in India, which means to a large extent domestic logistics perspective. So that value erodes [indiscernible] too much. On the international side, that is the Myanmar, et cetera, we've not seen price [indiscernible] come down, but not to that extent. So [indiscernible] to be able to be quite comfortable in terms of margin. As I said, it might soften a bit, but it will not fall off the cliff.
Another question.
Yes, please go ahead.
I think he dropped out. Maybe we'll take the next person.
The next question is from Ms. [ Pooja Nagersheth ].
Actually, this is Prit Nagersheth [indiscernible] Anyways, my name is Prit Nagersheth. I'm from Wealth Finvisor. So, the question, Vineet, I wanted to ask is that what percentage of the business do we have from Myanmar of the total ship base business that we have?
It's not very large. It's very small. And as I said, it keeps fluctuating from quarter-to-quarter. So, it's -- it doesn't have a large impact. It's more -- the domestic market is quite robust and that is what helps us in terms of keeping up the growth both in profits and revenue.
So, which means that post 31st of March then if this is not continued by the government and this business drops off, it will not have a material impact?
Not really. It is not -- material is anything beyond 10%, 20%. It's not going to have that kind of impact. Not at all.
The other question I had is that if you were to identify a ship, how much lead time would it take for you to get one operational?
Well, the ships are typically second-hand ships. So, they're already operating on the global waters when we buy them. So really speaking, sometimes it depends on the ship, maybe we have to do some kind of repair work, et cetera, before we fully operationalize it. But it entirely depends upon. Sometimes it's just you bring it and you start running it literally. And you have to also get containers along with it. Clearly, containers are not easily available to buy, but they're available to rent. So, we would typically do that. So, let's say, if it's 1,000 TEU vessel, it would typically have 3,000 containers along with it. So, 1,000 at the origin port, 1,000 on the ship and 1,000 at the destination port. And that's how we will operationalize it. So, it doesn't take very long to get it operationalized. What is important is that if it's a 1,000 TEU ship, are we able to get 1,000 TEUs right away. As we can see in the marketplace currently, yes, there is a large demand and we can -- if we get a ship, we should be able to get a full load quite fast.
The other thing is on the freight side, you mentioned that there'll be e-invoice requirement post INR 10 crores of turnover. So, how do you see that helping the freight division?
Well, it's for all businesses. So, not necessarily affecting freight only, but even seaways because there are lots of smaller customers also use maybe 1 container or whatever. It helps every business because of formalization. It means that a lot of customers have to deliberately invoice as well as deliberately use the e-Way Bill system, et cetera, and which means that they will not use the other transporters, the non-organized guys, et cetera. So, that helps us quite a lot since we have a national network, we are a company with a legacy of 64 years. So, there are lots of -- everyone trusts us when we are doing work with them. So, the formalization of the economy is a direct benefit to organizations like us.
And lastly, are you seeing any decrease in the competitive intensity from all the start-up players?
No. Competitor intensity never decreases. I think even if there are no direct competitors, you always have some imagined competitors because otherwise, you'll never will -- you'll get too complacent. So, I think really speaking, we've not seen less intensity in any form. There are companies that come very aggressively because they have a lot of money and then they slow down a bit, somebody else comes or somebody is coming with an IPO. So, they want to take more revenue, so they'll do revenue buyouts. So, there all kinds of competitors that are there.
The next question is from Mr. Aman.
This is Aman Vij from Astute Investment Management. I have 2 questions. First on the supply chain division. So, what we understand is that supply chain can be broadly divided into 2-part; warehousing and say, the other distribution business and warehousing is a very good margin business, maybe double digit. So, if you can explain the reason for this low margin in the division. And over a period of time also, do we expect only this 5%, 6% margin business? Or can this number improve drastically? This is the first part of supply chain.
Yes. So, I don't expect it to improve dramatically. We've always maintained that the EBITDA margins for this business is between 10% to 12%. It's a little lower in this quarter because there's been a high volume growth that has happened. And also, as I said, we're moving a lot of cargo by rail as well. So, there is perhaps a little bit of margin fees that has happened. But I think we will catch up in the next few quarters because of the economies of scale also.
Typically, when you are growing the supply chain business, you also create a lot of bench strength in terms of having people available to -- the moment you suddenly have a new contract, you want to ensure that it is -- we are ready for those contracts. And that would mean that you might create some bench strength, you might create some extra capacity and so on. So, that's why it is a little lower, but I'm confident that we'll come back. If you see so many of our competitors, they are even worse off. I mean our 10% EBITDA is unheard of even with large other competitors where they don't even have -- even with a completely asset-light model, they don't even have that kind of EBIT levels. So yes, I think we are confident that these numbers will come back.
Next question is on the freight division. So, we saw a 30% kind of growth this year. So, if you can broadly talk about what was the volume growth in this part?
So, we don't split on the terms of volume and value, specifically because there is LTL, which is not necessarily going by only by weight, they also go by volumetric movement of cargo. So, I don't have a specific number in terms of sharing what has been the volume versus the value growth. But certainly, value growth is much higher than volume growth for us. It's always been the case because we are always doing some kind of value-add or the other. The business, as I also mentioned last year it was -- we were in the middle of the second wave. So, that subdued the business and specifically in the MSME place, we saw a little bit subdued work. The freight business also acquired some large contracts in the first quarter of the year and that has started to play out also as we speak.
So value, if one is obviously more LTL share and we providing better service. But does value growth -- higher value growth also signify that majority of it was just the price increase because of higher rates of the petrol-diesel?
Some of it is clearly because of that, that you have higher purchasing because of fuel price increases. But some of it is also because you are able to give a certain service sector, which other competitors are not able to. So yes, it's a combination of both.
Final question on this train rake sea business, which you are talking about scaling to almost like INR 1,000 crores for the full year. If you can talk about what was the number last year? And is there opportunity to keep scaling this business even further?
Yes. I mean if you see the slide around multimodal, Ashish, if you can just put that up, please. In the last year, Slide 6, last year, we did full rake movements of -- couldn't recollect, but I think...
Close to INR 1,100 crore or something.
Right. Okay. So, in terms of that, we are definitely quite ahead in terms of the movement. So, yes, this is a number that we'll be able to see and track for the next quarters.
And you see this kind of growth continue...
Yes, we do.
The next question is from Mr. Yash.
This is Yash Tanna from ithoughtPMS. I hope you are audible. Firstly, congratulations on a good set of numbers. I think you partially answered this question, but I had a question on the Seaways division. So, Seaways will be having -- so we'll be having these ships from Myanmar till next year. And even the freight -- I mean, the shipping rates are quite high. So, this year would be a very high base for us for the next couple of years. So, how are we thinking about the Seaways segment growth from a 3- to 5-year perspective? I know we are adding a ship, but then this forms a very high base this year from the very high base. So, how do we see it going forward?
Yes, you're right that it's a higher base that we are coming off in this financial year. But what we see in terms of growth opportunities is clearly when we add more capacity, you will see more growth coming with 1,000 TEU ship or a larger ship that comes in, it certainly adds to volumes -- volume as well as value for us. So, the intent is to add that as soon as we can and the visibility is more towards Q3, Q4 of this year, for that addition to happen. So yes, so I think that's one way to look at it. And of course, the other thing is that the softening of prices might not have -- global prices might not have that much of an impact in India because still the demand is quite high. So, I think the local -- the coastal shipping business continues to remain strong and that's where we should see a reasonable value growth.
So, we would expect the shipping rates to remain, not go back to the COVID level, something even for the next 2, 3 years?
Well, 2, 3 years, I cannot say yet because fuel is an interesting and important component as well and of course, capacity. So, I think it will be a combination of how those trends are and how fast capacity comes into the market. So, I think definitely, in this year, I think we should be able to maintain the margins.
And probably next year onwards, we'll have the new ship additions of growth would continue at similar levels?
That's right.
The next question is from Mr. Sunil Kothari.
Congratulations Mr. Agarwal for such a -- really commendable job. Sir, my question is -- I have 2 questions. One is very interestingly, you mentioned the sentence that you just don't think about existing competition, but including imaginary competition, which is really something very different I heard from some CEO like you. So, what I understand is the way you created barriers or more, it looks very difficult, not impossible, but very difficult for somebody to penetrate and disrupt your size of and your capabilities in your business. So, what is the factor or which are the area where you feel you should be keeping watch or which other barriers you are creating, which becomes very difficult for somebody else to easily penetrate and come and perform profitably? Some thought process from a longer-term point of view?
Yes, I think there are -- and thank you for the question, Sunil. My -- our thought process has always been to keep a watch on competition, wherever, whatever they're doing. And there are businesses that when they see the kind of growth that we have, they also want to get into areas like this. So, what -- there are several ways that new entrants start coming in. One is clearly PE funded money. And there, they have a -- they play with that money, so they are buying revenues and they are entering the system and disrupting things. And we see that on a constant basis that is happening. Some might have a disruptive technology initially, but maybe not that is going to last. It is quite -- many we have seen are quite easily replicable also. Then there are companies that are looking to go for IPO, et cetera and there they start buying revenue also. And again, we've seen this in our history in the last 10 years, many new companies that have come in, they have just initially just bought revenues so that they are able to show that they have a good growth framework, but it doesn't remain.
And then there are companies that we think will get into some businesses. There are -- I don't want to name names, but there are large business houses that are thinking about doing logistics services and logistics businesses and so on and they keep exploring ideas and options around it. And that's what I mentioned about companies that -- competitors that could be imaginary where they could enter it. So, we have to be, again, constantly aware and vigilant about what's happening in the marketplace. So yes, we have a system where we are able to get a lot of information because we have this base of large customers as well as -- large customers as well as branch offices where we channel all this information and we are able to think through that. We are not perfect, but there's a lot of learning that is always -- we are trying to build in.
Sir, second question is, very -- your macro view on your -- so many customers and sectors you serve. So what's your feel about the economy macro trends of your sector value. So, general view will be very helpful.
So, our thought process is that from a macro perspective, India has a lot of potential for the next decade, 2 decades. The consumption power is increasing quite rapidly. The government is spending very heavily on infrastructure. The ease of doing business is also improving. All of these factors means that formalization of the economy will increase also quite rapidly, which means that organized companies like us and trustworthy companies like us should do well. Simultaneously, on a short-term basis, we are seeing sectors like textiles, automobiles and certain consumer-driven sector is also now picking up steam because of the festival season coming up and also because of a good monsoon. So, I think this year looks interesting and good, but there are certainly headwinds from an inflation perspective as well as from a global recession. So, perhaps in the next year could be a little softer, but India trend seems to be quite attractive still.
The next question is from Mr. Omkar.
Vineet, this is Srinivas from Mirabilis. Firstly, thanks for presenting those case studies, it will definitely help us understand your business a bit better. Just reading through your annual report wanted to kind of get more color on a couple of things. One is, it looks like the overseas subsidiaries like the Bangladesh, Nepal, et cetera, there will be slightly better activity last year. But wanted to understand how do you see basically, is there any bigger opportunity there because their scale is still very small. So, is there any bigger opportunity there over the next 2, 3 years to build businesses based on either cross-border or even local kind of logistics opportunities? That's the first question I have.
Absolutely. I think the reason why we established companies in places like Nepal and Bangladesh, it was exactly for that reason to see cross-border opportunities, which are end-to-end and seamless. So for example, one of the case studies that we've not presented and we perhaps might next time, is that for an automotive company that was usually using road services to get to Bangladesh, we are now providing them for their component movement through containers via rail. And that has saved them at least 30 to 45 days in terms of transit time, in terms of the delays that used to happen. So, they are moving to a little bit of just-in-time, not exactly, but instead of having a large stock of components, they are now able to move with a lesser stock of components and essentially more predictable behavior in terms of the production that can happen in Bangladesh. So -- and we provide a complete end-to-end. The containers are ours, sourced from our Seaways division.
The client is an automotive client of supply chain. The rail business is, TCI CONCOR is being used for the movement of the rakes. And TCI Bangladesh is doing the final delivery. So here, you can see the synergy from all the businesses that we have really coming into play. And these are the kind of opportunities we see accelerating in the next few years. There are headwinds, of course, countries like Sri Lanka, of course, is facing a large, huge challenges. And we are sensing some of that in Bangladesh and Nepal as well. So, it could be a little bit of a short-term thing, but long term, we definitely see high growth potential.
And like maybe some color there on what could be the potential? Because right now, like if I add Bangladesh and Nepal, both put together or also like less than INR 20 crore turnover. So -- but broadly, when you as a management team think about the larger opportunity there how do you kind of envision over a longer period of time?
But you have to see that the turnover of those companies is not reflective of the business that we are doing, because let's say, there's a container train that's moving from Ahmedabad to Dhaka, 80% of their journey is in India. So, a lot of their revenue is also being booked in the Indian companies. And then some part of that gets booked into the Bangladesh side and so on. There's a -- depending upon the client, that's how things happen. So, what you're seeing is just a tip of the iceberg in terms of the business that we are doing.
The other one was just wanted to clarify, like you gave a number of these IT-enabled offices like last year number was 1,400 and the year before was 900. So, just want to understand if you opened a lot of offices? Or is it like you have digitized many of the offices? And secondly, I guess this metric is more relevant to your freight business in terms of having that wide network of pickup and drop-off points of cargoes. So, any color on how much this network itself...
Yes, I think there was some correction in those numbers. I think that's more a little bit reflective of that. Sorry, but also this is -- the difference is this is including the -- this for the group, which includes Express offices as well. But the number, yes, does move up and down a little bit as I've been talking that there are a few places that we are opening new offices and there are places the maybe the industrial development is not happening in that zone, so we're shutting down the office. For example, Jewar is a new airport that's coming up in -- near Noida. So, we've opened an office there because in anticipation of business that will happen there as well as there's business already happening there. So, like this, this plus minus of offices is continual effect.
And finally, just the point you made about this e-invoicing for less than INR 10 crores kind of shipments. So, do you see this as a large opportunity just like which happened with GST when we started the e-invoicing. Is there a large market out there which can get formalized if, say, this e-invoicing and the compliance of it also becomes a bit more stringent? Just some assessment of what the opportunity is there. Maybe helpful.
I think the opportunity is more from a process improvement because when we think about e-invoicing, we mean that you get a digital invoice and you process that right away. What has happened in the -- currently, what happens is that not only are we sending digital invoices to our customers, but they are also insisting on physical invoices, along with physical PODs. Now that's a whole different process issue because you have to -- now the truck has got from Ahmedabad to Guwahati and then he wants a physical POD so that POD has to travel all the way to Ahmedabad and get billed. With the bill, we have to attach the POD and then submit it to the customer and these are tactics to delay payment. They want to just increase the credit cycle.
The moment we start doing e-invoicing with digital PODs, et cetera, and a lot of customers have -- several customers have started that, we will see that the process will improve. And when the process improves, our credit flows will improve, which means that there could be customers willing to look at the ERP integration also with us, as I talked about, that chemical company. So, it just makes things much more faster and smoother. And the moment you start linking ERPs, it's very difficult for competitors to come in because you need to have that kind of IT capability to link to get the APIs and consequently work with them. So, I think the linkages are quite deep the moment you do e-invoicing.
And does that also have any implication on the debtor days that you have had historically? Can that really change the picture there?
Yes. I mean, but I don't think it will be dramatic, but yes, it's a progressive thing. It will definitely have some positive impact.
The next question is for Mr. [ Vikas Katwe ].
So, myself Vikas from [ Amiral Consulting ]. So, Vineet sir, I have 2 questions. One is around 2 case studies, which you have shown. One was of the dark kitchen. This is definitely a revenue stream. Second was your control tower. Control tower, you are using it as a value-add for the customer? Or can we see it as a revenue stream as a supply chain control tower going forward for the customers? That can become a revenue stream.
No, it is both for the client. It is not only a tool for monitoring and being -- and having greater visibility and transparency, but also revenue stream, because ultimately, what will happen is customers will once you see the comfort in operating, they will start diverting the business to us. And also, we can also see that, okay, these are the areas where there is a higher demand. And we can suggest to the customer, this is the optimal way of moving their cargo. So yes, it will become a revenue stream as well.
It means revenue enhancer, not as a product from the TCI portfolio, supply chain control tower?
Yes.
And second question is regarding freight. So what's the Q-o-Q growth? And how is the share of LTL moving within the freight? Last time you said, I think, around 35%. Is it improving or same or declining?
You're talking about sequentially.
Sequentially.
Sequentially, this is usually the best quarter for us. And that's why perhaps I don't have the exact number here, but it might be slightly lower than the Q4 number. And of course, there has been a little bit of a shift from LTL to FTL in this quarter because of, as I said, MSME business has been a little slower because of their own issues. But as I said, it will start picking up. And by the end of 2023, we're looking to hit 40%.
So, marginal dip in the share of the LTL or significant dip?
That's right.
The last question of this call is from Mr. Krupashankar.
Yes. Am I audible? Is this line better?
Yes.
So, just one question from my side. So Vineet, in the annual report, your commentary has mentioned that there is -- customers now moving from a just-in-time to just-in-case, thereby increasing inventory, leading to higher usage of warehousing space. I mean -- but potentially, what we have seen is that the consolidation of warehousing was supposed to bring down the overall inventory levels. So my question is, where are these key sectors you're seeing a trend of increase in inventory and adopting just-in-case strategy on the whole?
I think all customers are also talking about that. You see FMCG customers have a higher inventory stock in many places because they really don't want to lose sales or even some consumer durables, they don't even have the SKUs available because, for example, one of our consumer durable companies where we operate warehouses, they don't have the larger TVs available. I mean amazingly, it's the larger TVs that are getting sold more and more than the smaller TVs. So clearly, there is a challenge in terms of even availability, forget about having more stock in some cases. So yes, broadly speaking, I think customers are a little flexible right now on inventory. And I think also the cost of inventory is quite lower at this point in time. So, they are able -- they wanting to stock a little bit more.
So, this is more of a near-term inventory shortage and replenishing that and perhaps may not be perceived as a long-term strategy? Is that the right understanding?
See, what has happened is a classic case what we learn in supply chains in courses, et cetera is the whiplash effect -- the bullwhip effect, sorry, not whiplash. The bullwhip effect, which means that the moment there was a certain demand. By the time you service the demand, it's gone and you have suddenly a lot of inventory or the reverse happens. There's no demand and you pushed a lot of inventory and it has just increased a lot. So, lots of things around the bullwhip effect has actually happened globally. And we see this kind of real discrepancies in stocks globally, either there has been excess or there has been a shortage. So, I think this -- with COVID, this is continuing. And now with perhaps the U.S. getting into a recession, we might again have some other disruptions as well. But I would think that it will be at least a year, if not a little longer before things come to a reasonable level of optimization.
Now, I hand over the floor to Mr. Ashish Tiwari for closing comments.
Thank you again to everyone for joining the call. See you in the next call for quarter 2. Thank you.
Thank you, everyone. Thanks.