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Transport Corporation of India Ltd
Earnings Call Analysis
Q1-2025 Analysis
Transport Corporation of India Ltd
The company's first-quarter performance was notably better than anticipated, with overall top-line growth reaching approximately 10%. This exceeds initial expectations of 7% to 8%, signaling a solid start to the financial year despite some economic headwinds. Key growth sectors included supply chain solutions, supported by strong consumer demand in logistics and automotive.
Specific areas of growth have emerged from the supply chain business, which recorded about a 12% increase in the top line. The management predicts annual growth across the business segments will range between 10% to 15%. The Seaways segment is projected to grow by about 10% in FY '25, despite facing challenges such as fluctuating fuel prices and competition influencing freight rates.
Despite positive growth forecasts, the company highlighted the increasing costs impacting margins, particularly in the logistics sector due to rising toll rates, which have increased from 5%-10% to around 20% of transportation costs. This indicates ongoing pressure on profit margins, suggesting a potential need for operational adjustments to maintain profitability.
The management outlined a capital expenditure plan of INR 375 crores for FY '25, contributing to fleet expansion that includes the purchase of two new ships aimed for delivery in FY '27. The integration of these new assets reflects a commitment to enhancing capacity in logistics services, crucial for capturing future growth opportunities in an expanding market.
Collaborations with various joint ventures are expected to bolster growth, particularly in the chemical logistics area due to the ongoing ‘China plus 1’ strategy, where international firms establish operations in India. This positions the company well within high-growth market segments that are increasingly vital for future profitability.
With a solid net cash position of approximately INR 450 crores amid growing revenues, the company appears financially stable. The management projected a Compound Annual Growth Rate (CAGR) of about 10%-15% over the next four years, indicating confidence in their operational strategy despite current market uncertainties.
As the company maneuvers through the economic landscape, challenges like tight inventory levels and cost fluctuations remain, but the outlook for sustained growth is optimistic. The focus on quality growth over quantity will shape strategic decisions moving forward, making it essential for investors to monitor how effectively the company balances these priorities.
Overall, the company shows resilience and potential for growth despite external pressures. Investors might find these factors promising, particularly as the company capitalizes on its supply chain and logistics strengths. Following these developments, the outlook remains cautiously optimistic as management continues to adapt to the changing economic environment.
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Good evening, ladies and gentlemen. I, Simran, the moderator for this conference call, would like to extend my warm welcome to all of you for joining us today. 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, Simran. Good evening to all of you again. Thanks for joining us today. To begin with, we will have our earnings presentation for quarter 1 and followed by a question-and-answer session. The earnings presentation is available on our website. Now I'm handing over to Mr. Agarwal for his opening remarks and earning presentation. Thank you. Over to you, sir.
Thanks, Ashish. Thanks, Simran. Good evening, and welcome to our first quarter's earning call. Can you put that on full screen, please? The quarter 1 for us was slightly better than we expected with the elections going on as well as the post -- the first -- post the year-end, Typically, quarter 1 is a little weaker than it was. We have seen that it was slightly better and almost all the divisions, all the businesses did reasonably well. Generally, there have been some consumer trends at us, which are still weak. MSME is still a bit weak. The impact of all the wars and Red Sea, et cetera, is still being felt.
On an overall basis, the budget is positive. I think the budget is more like a directional document for the year in terms of what is happening, what is -- what will happen over the year in terms of CapEx and so on. But it's not the only thing that we should be relying on, I think, throughout the year, [indiscernible] even the state for that matter have been sharing stuff that is happening in their areas. And it's just one of the documents. The good thing is that infrastructure spend continues to remain high, which will have a cascading effect of 3, 3.5x on various industries.
They talk about building more industrial parks. I think that's also very interesting and should spur manufacturing and generally, employment-related -- addressing employment-related issues is also good, though it's going to be always a challenge in our country to balance what's going to happen with employment as well as with the impact of automation and productivity improvement.
But there are jobs like logistics, which require people on the street. And similarly, there are many other such jobs. So there is -- the trends are good when it comes to the budget and the intent is good as well. Please go forward, Ashish. This is information about the company, which you're aware of. I wouldn't repeat this. There is no specific change here. Go ahead, please.
Again, people who attended these conferences in the past do know that the logistics industry drivers from a policy perspective, from a customer perspective or a consumer perspective and generally from the industry perspective, are all very, very robust. It is the sector that has a direct beneficiary to any kind of GDP growth, any kind of infrastructure growth. Any kind of change in market scenario, market dynamics whether it is consumer trends that are changing, it has an impact on logistics, whether it is our customers, that is -- corporates that are changing or businesses that are changing the way that they run their supply chains, it has an impact on logistics.
Impact on the new sectors that are coming up, whether it is defense, whether it is semiconductors, whether it is chemicals and so on, those all have a very deep requirement of logistics. And as India orients itself more to EXIM trade, we will see logistics industry definitely getting a lot of positive -- has a lot of positive tailwinds.
As a company, of course, being -- having a whole range of services, especially more services that are value-added has been benefit. We've been able to balance that portfolio with the -- when there are trends in terms of 1 sector not doing too well, we see others that pick up, so it has been good from a consistency perspective, the portfolio has definitely helped.
The second USP is the strong multimodal network. There's no company in India that has this kind of network today where we are operating on rigs, railway rigs that we own as well as that we hire from the railways on a regular basis through 60 terminals as well as a joint venture with Concord, a coastal shipping business integrated into the overall business as well as a first mile, last mile through road or just the entire movement through road network also. So the combination of all the 3 modes on a ground level is extremely -- it is one of our modes. It is an area that we've been able to definitely gain a lot of traction and almost 30% of our business now comes through a multimodal business.
Technology is at the forefront from -- in our core business applications, almost everything is run through a deep tech. Our supplier relationships are managed via interfaces as well as we have a higher digitization and automation program that's underway. The interface infrastructure database management is very critical. During this recent CrowdStrike event that happened, we were down for just 15, 20 minutes, and we were up very fast. So -- but that was only one portion of us, not even for the entire business.
So overall, the IT systems are quite robust. We have a very good presence in many sectors from engineering, automotive, consumption, agriculture, chemical, pharma, metals. Across the board, we are doing work in various industry segments and providing solutions, which are very unique to them. We've shared some of them in the past, for example, in the EV space, where we are delivering to the customer directly or even in the agriculture space where we are able to provide or rather in the food processing space where we are able to provide last-minute delivery for some customers and including providing cold storage there as well.
In terms of quarter 1, the highlights are, we've grown at about 10% in terms of top line. The trends look good. Our estimation was anywhere between 7% to 8% type of growth. But overall, it has been better for us. The -- I talked about the service offerings as well as the net cash surplus is now close to INR 450 crores.
In terms of freight business. Next slide, please. You know about the industry segment, the work that we're doing there with our hub centers, single control tower for many, many customers as well as both LTL business as well has -- helps us to keep up the margin profile compared to our entirely FTL company.
Though in the last quarter, we've seen MSME growth has not picked up yet. And hence, our LTL business is still flat. It has not recorded a growth, as a growth that is higher than the FTL growth so that the numbers keep changing that what happened. There is growth, of course, but not as much as been higher than the FTL growth. So but the overall -- Ashish please go ahead. The margins are a little compressed. What we are seeing also is that certain cost structures in the transport business, logistics business has started to increase. One of them is toll. In the past, toll used to be 5% to 10% of our journey cost.
Of late, in the last 1 year or so, we've been tracking this. Toll has almost become 20% of our journey cost. And this is very unique. It has not translated into direct productivity gains because not all the roads are fully developed, not -- it is not true that you are able to gain maximum speeds because you have good highways. There is construction still happening in many places.
The nodes are still difficult to access and there's congestion there. And the first month last month anyway is very difficult. So the productivity gains have not resulted -- the amount of productivity gains that should have happened has not incommensurate to the increase in toll. So this is a concern area generally for the industry as a whole. We do believe that the smaller operators might be getting a little bit more squeezed here.
Capacity addition has started in CV sector. We're seeing that in the first quarter, there was some increase in CV sales. So we feel that with some more capacity addition coming up, we -- as well as some cost increase rather revenue increase because of the season -- festival season, et cetera, coming up, freight rate should start moving up also.
Also, clearly, it depends upon fuel prices. Fuel prices remain firm across. We know that on the sea side, bunker prices are still rising. So there could be some impact on fuel later on as well. But the overall business remains stable in the freight business, though the ROCs, et cetera, have come down. Some capital employed remains high that is working capital because at the end of the month, June, we saw collections were a little weak across all the divisions.
We attribute that some just because it was the first quarter end post elections, et cetera, and also because maybe 29th and 30th was Saturday and Sunday, and some payments did not come through. But we've seen that July has been excellent in terms of payment collection.
So maybe it was just a one-off for the quarter end. Supply chain business remains robust. We are doing a very high degree of value-added services for our clients and that continues to keep growing the business, recorded about a 12% top line growth. with increase in both multimodal automotive transportation as well as warehousing contracts. We spent about INR 90-odd crores in new trucks because in anticipation of new business that is there -- actually contracted new business that is already there. So we do expect this growth to continue. We're looking at closer to a 15% top line growth for the full year. Auto stocks have increased across the board. In the first quarter also, we've seen stocking increase.
Some of our customers asking for additional space in those yards that we have to keep the auto stock but this could also be pre-festival where some stocks will start moving. Certain customers where their products are moving well. We've been able to see good traction and growth. Margins are maintained at the same level as previously. The Seaways business did much better than we expected. The freight rates have firmed up a little bit, typically some ships tend to move away from these sectors if there is high -- if prices are higher in different areas, different countries.
It has not been directly correlated, but we are seeing some correlation there, where some ships have moved away and hence, it creates a supply issue and prices firm up. But we don't see a direct correlation with any increase in international freight rates and the domestic freight rates. Fuel prices have gone up in -- over last year, if you see the last year, but it has moderated a little bit over the end of the year.
This also has an impact on the prices that we get for our containers. Fuel is about 25% of our operating cost in shipping. So in this quarter, we also had 2 dry docks. In spite of that, we were able to achieve the number of voyages that we typically have per quarter. And we believe that this now for the next 9 months, the trend should remain positive as long as some of these rates are maintained.
However, in the end of the year, financial year, we will have another dry dock, which is actually in the last week of March. So it will not really have much of an impact on the margins. The margin structure at EBITDA level is at about 40-odd percent and EBIT at about 30-ish percent, which is something that we think will, again, keep moderating a little bit, but I think about 30%, 35% is an expected range from an EBITDA perspective.
We have ordered for the 2 ships that got canceled. We've gone to a new shipyard and we finalized the order, which was placed last week. The Board approved it in the meeting last week. This is an order for 2 7,300 deadweight tonne each ships, and both of these will be delivered in the year 2026, perhaps at the start of the year FY '27. And the order value is about $38.8 million, slightly higher than what we had contracted in the previous contract. But nevertheless, still attractive for us in terms of the growth prospects by adding this capacity.
We are in the lookout for a secondhand ship. It is still not available. Our expectation is under 3, 4 months, there should be some moderation that might happen with international freight rates and then hopefully, some international ship prices will also come down.
The joint ventures have done reasonably well with CONCOR 13.8% topline growth. Our Cold Chain business has grown about more than 1/3 over the quarter. Profitability is a little stretched because we had purchased new ship -- new -- sorry, new trucks last year, and the depreciation interest is now clawing into the results. But of course, the company remains EBITDA positive and will in the next year or so. This year, we expect it to be flattish. But next year onwards, it should start picking up. Transystem has done reasonably well.
On a stand-alone basis, top line has grown by about close to 11%, similar on the consol level. EBITDA growth at the PAT level -- sorry, at the PAT level, we've grown about 26%. This is because we've received a dividend -- higher dividend than last year from Transystem. In the first quarter last year, we had received about INR 18 crores, INR 19 crores of dividend. This year, we received about INR 33 crores of dividend. So this has had a positive impact on the PAT level. But that gets neutralized at the consol level, which is at -- so we are 10% top line growth on the -- sorry, on the PAT level on the consol level. Our EV EBITDA remains robust at 11.6%. ROCE is about, again, at about 29%. RONW is about closer to 20%.
Nothing specifically has changed here. Our ratings remain the same, and there was no dividend payout in the first quarter. Our ESG goals are -- remain strong. We are looking to -- we have been talking to a lot of our customers about moving towards green logistics more and more, and we are seeing good traction there. We have some interest from customers around LNG trucks as well. So that is something interesting. And otherwise, all the other metrics around ESG are looking good.
Just to highlight here, we are in the -- just go back please, Ashish. We are in the Olympic season, so just at the Sports Academy that we have is engaged in nurturing and training players for national and international sports and at the national level and at the regional level, the kids who are there have won close to 48 medals. So this is our -- we are trying our best to see how we can train people for -- at some stage from the rural area who can go up to the Olympic level.
The CapEx plan of INR 375 crores remains there. We have the INR 80 crores that we budgeted for the ship. The advance for the 2 vessels will be close to about that much. So that will get utilized and rest of the purchases are on track. Thank you. Happy to answer any questions.
[Operator Instructions]
So the first question is from Mr. Alok Deora.
Congratulations on pretty decent numbers in a challenging environment. So first question is on the ship purchase. I mean the -- if we look at the capacity is very similar to what we were trying to build last time. And the cost is up by 15%. I think it's earlier, it was some 34 million, now it is on 39 million. So is there any change in the design or -- and how did that impact the IRRs for the -- from this particular investment? Any color on that?
Sure. Yes. Ashish, can you remove the presentation, please?
Yes, sure.
Yes. So yes, you're right. What has happened is that it's become a seller's market, the access, the buying of ships, et cetera. So shipyards are dictating prices, unfortunately. And so there has been a general increase that has happened, I guess, because of that. Secondly, the IRRs will get pushed by a year. So earlier, we were projecting about 6, 7 years, maybe to 7, 8 years. Again, we're taking it at a very, very conservative level, conservative estimates. So -- but these are ships that are going to last 25 years plus.
So on that basis, these are -- the value of these ships will keep increasing over time as in the replacement value is going to keep increasing. So I think the business is robust. We've been in this business for the last 20 years -- sorry, last 40 years, and hence we think that we should be able to manage this 15% increase in cost.
Sure. And considering that we have done pretty well in 1Q despite the dry docking in the Seaways business, what is the growth now for FY '25 in the Seaways side and also for the overall business?
I would still keep the growth of the Seaways business at about 10%, not exceeding. I was -- we had planned for about flat number, but I think 10% maximum is what we're looking at because we do expect things to moderate out in the next few months also. And once that happens, the freight rates might come down a little bit. We think that fuel will remain escalated. So again, that will have an impact both on the positive side on the revenue side, but also on the cost side. So that means that flattish to 10% is what we think for the Seaways business. Overall business, our projections remain the same at 10% to 15% top line bottom line.
Sure. Just last question. So the margins, which we saw elevated Q-o-Q for Seaways, that would also come down a little bit.
No, I think the margins will probably remain similar with the net-net, it might be a 10% top line bottom line increase.
The next question is from Mr. Pinaki Biloxi.
Yes. Actually, coming to your peer statement, we find that there has been a decrease in the depreciation and amortization expense by about 6% at the consolidated level and by 10.5% at the stand-alone level. So can you please elaborate on this?
Yes. Ashish?
So that's basically on a consolidated level, that percentage got increased because other consolidated entities, they are asset-light. While yes, while in the PCI, we have a supply chain and the Seaways, which is the asset heavy business as compared to the other entities.
Sir, and my next question is actually, this quarter, actually, you have reported a double-digit growth, which is better than what we have reported in the previous quarters of last financial year and one of the primary is the improvement in the Seaways business. So basically, going forward, what is your opinion on this? And how much growth are you expecting in FY '25?
Well, Seaways is 12%, 13% -- 12% to 15% of our overall business, but supply chain is a much larger percentage of our overall business, and that has recorded a 11%, 12% top line increase. So we believe that supply chain will continue to drive growth as well and a 6% increase on freight as well. So it's all the businesses in some manner or the other Seaways contribution is there, but of course, the overall contribution is much lesser.
The next question is from Mr. Vikram Suryavanshi.
So what would be the PO capacity of this ship?
7300 tonnes each.
But the AWT or it be like a in terms of how many POs [indiscernible] currently take loan at [indiscernible].
See, this is DWT. I think it was about 600 TOs.
Yes. 450 to 500.
Approximately 500.
Understood. And in terms of trucks, you're talking about LNG trucks [indiscernible]. So the new trucks support supply chain business, what we are buying -- are they alpha LNG trucks or is the outlook on the sale truck opportunity for us and supply chain where we keep adding fleet?
No. The addition of fleet is a regular ICE vehicles. There are some customers who are talking to us about thinking about how to look at LNG vehicles. So it is not really -- it's not something that is -- that's a regular thing. It's just one of the things that some customers are talking about. So an interesting development to see how the transition will happen. I think, decarbonization is starting to creep up in all customers' discussions, but it is anyway is going to be a very, very small percentage because I think many customers are still going to look at it as a tick in the box rather than something that is a major transition for them. So yes, so it's just very discussion phase, it's very, very [indiscernible].
And your trade segment that you highlighted, sir, about toll price to cost increasing, but it will be pass-through process or...
Yes, it is pass-through. However, the pass-through has not been recorded so carefully, I think, in the last 4, 5 years, when I talk to our competitors also and generally people in the field. I think nobody has realized that it has crept up so fast and that almost every part of the country is not [ told ]. So I think the understanding and the thesis hypothesis around this is being built as to how and where the compensation is coming from or not coming from because all the 4-wheelers have been typically built on fuel price, right.
So where does this come in -- apart from that driver wages have also gone up quite a lot. And we've seen that across the country where -- because as a shortage, we are seeing that driver wages are going up. Simultaneously, repair, maintenance cost is higher, BS-VI vehicles. Anyway, the cost -- acquisition cost of that was a high. So overall cost structure is going through some kind of change, which will start reflecting on freight rates, hopefully in the next few months.
The next question is from Mr. Krupashankar.
My first question was on the supply chain business. Vineet, you did highlight that there are specific segments in the automotive sector, where you have seen a strong momentum with respect to stocking up for festive demand as such. But the outlook more or less on specific sectors are like mid-single digit to, at best, high single digits, right, sort of a growth. We have done quite well in the first quarter. Just wanted to get a sense whether -- are there any specific subsectors in the automotive sector, which is driving new growth momentum, which is much higher than the industry?
Some of the areas of growth are companies that are doing well on the EV side. So I think we've seen some decent growth there. We've seen good growth on the component side because there is exports that is also continuing. We have seen some new customers are being added. We've acquired some additional market share from some customers. Apart from that, you're right that the growth might not be very high.
And I'm not sure if the stocking is happening because of the festival season or because they don't have any option of not stocking because there is clearly -- demand is slightly weaker, but production still continues at a certain pace. So maybe some of that is because of overproduction or whatever be the reason.
I think some consumer demand is soft because of higher interest rates. But we do expect that some of these will start hopefully some of the -- if there is some level of discounting or some level of new product launches that might come up, we might see good growth in the automotive side. But some areas, will definitely be a little flatter for sure.
So it's fair to assume that the pace at which industry is going to grow, we will more or less mimic that number. But apart from that, you will also -- the new business wins is going to drive further growth momentum or across sectors, perhaps.
Well, the sector is growing at what 5%?
Roughly. Yes, Tad bit more than that, yes.
So we are growing more than that on the automotive side because we have probably a 10% market share of the automotive sector today. So we can easily try to crawl some -- clawbacks -- claw some share from our competitors as well as keep growing the new businesses that are coming in.
Sorry, what I meant was, are you winning more business across nonautomotive like your chemicals and -- that's something which I wanted to dwell further bore on. What are the other sectors probably looking interesting for you at the moment?
Oh, yes, a lot of sectors. FMCG is looking interesting. We've got some new contracts there also. We've got some additional contracts with apparel companies. We've got some quick commerce companies. We've got recently, some chemical companies as well. We've got discussions with some other e-commerce companies, so all of those are looking very interesting. Some of them have already fortified, and we'll see those -- that impact. And we've seen some of that. We'll continue to see that income.
One more question, if I may. On the Seaways business, just wanted to get a sense that it's a resi issue, which is driving congestion across ports in most regions. Is it supportive -- supporting the domestic freight rates? Because in the past also, the bunker prices were going up and we were not able to pass it through effectively. So is it more of a transient thing wherein if as the issue eases up, you would see probably the freight rates soften up in the next 3 to 6 months sort of a window? Is that something which you think is a likelihood?
I think there are so many factors here other than this 1 or 2 factors related to what ships might move out, bunker prices, of course. But I think we are at a good -- see, this quarter typically is a little lower also as in the second quarter is because of monsoons. We get a little less voyages during monsoon season. But generally speaking, it should remain robust. This 5%, 10% -- this range of freight rate should continue. If bunker prices soften, we might see some fall in the freight rates. But otherwise, I think it should remain.
The next question is from Mr. [ Vivyash ] Gupta.
Just on the previous participant's question, when you said that you were interacting, let's say, with the quick commerce guys, right, for, let's say, business opportunity. So is it the last mile or is it more the mid-mile logistic because last mile is not something that let's say DCI has done. So what is the kind of engagements?
No, that's not our business segment. We do warehousing. And they are basically warehousing from the inventory management, warehousing, order processing and then sending those orders to the hubs that they have. They have created nodes.
[indiscernible] other warehouse to the last mile warehouses that manage.
Yes. So probably middle mile level, It's [a bit in] middle mile, but the bulk of the revenues will be warehousing.
Understood. Understood. One more question that on the toll that you had mentioned that the cost is now from 5 is now become 20 -- or it is now being computed that it is 20, right? So -- and you mentioned that there is some formula that are being worked out. But has this been already raised to clients and that the costs are going to go up and has there been any movement on there? Or right now, it's just more a study phase that let's first figure out what the cost pass-through -- cost increases are and then initiate discussions.
It's both. I think some sensitization has started already, but mostly, it is theoretical -- it's not theoretical, sorry. It's just building the case around it. We are also working closely with some institutions to do studies on more data, which is on ground data to prove these points. So then we will have a much better framework to talk to our customers.
And to the customers with whom, let's say, we have sensitized or are in discussions, what has been there response as given the whole -- where the costs have gone up for the whole industry, are they receptive to an increase or there is a pushback.
No, I think acceptance of any cost increase is not -- nobody wants it. But I think somewhere or the other, it will get pushed through, hopefully, but it has to be an industry collective ask versus just an individual company that [I was] asking. So the case is being built up, it takes its own time.
Got it. Then some time down the line is my guess. Understood. And just the last thing on the subsidiaries or the JVs. Earlier, we used to mention the PAT number. I understand in the opening commentary, you had mentioned that they are EBITDA positive. But is it possible to share the PAT for all the 3 JVs or the subsidiaries?
I think we can share what is there, what is available, Ashish will share that.
So we also have to kind of get some NOCs from the joint venture partners because whatever the numbers which are available as per the [SCT] requirements, those are there. But to publish in the public that portal, our website, probably that may not be possible. But yes, on the case-to-case basis, I can help you out.
I'll reach out to you, Ashish, for it. Yes, that's all from my side. Thank you and all the best.
The next question is from Mr. Pratik Kothari.
Sir, one question on the freight side. For any past few quarters, you have mentioned that there are some challenges with the quality of customers that we are getting either in terms of working capital or the industry in general, were taking orders at some marginal -- margins, any change in trend? I mean how are we placed and how are we seeing the situation there?
That is an ongoing exercise. I think it's not a onetime thing, but it is continuously churning through the data of customers and looking at the profit profile and the long-term profile, and then we take a call. But as I mentioned, MSME is still a little weak. So it's a trickle-down effect of -- you see what happens when government spending during the election slowed down a bit. Payment was not going through. So it was not going to the larger corporates, which is not going to the MSME subsequently. So that has had an impact, we believe, on the MSME side. And hence, there is a little bit of a weakness there. Hopefully, that should happen in the next -- it should start picking up.
See, MSME development is very critical to the growth of the country. I think we all know that, but we don't really think about it so specifically all the time. When we look at all the PLI schemes and the phones that are being manufactured by various companies, I believe almost 80%, 90% of the components are imported out of that. So somebody told me that there was a lady who was an Apple -- who used to make phones in Apple, she used to assemble the phones at a company in Apple.
And she realized as a very big birth of having components being manufactured. So she started a component manufacturing company, and it's a $32 billion company now. So like this impact of -- on MSMEs to really start thinking about the next level of growth and getting that support from the government and from industry is very, very critical to the growth of the overall industry. It's the depth of industry that is very important, not just breadth, which is coming from international supplies.
And sir, out strength also has been to gain share from the unorganized or the other players. So one point which I've highlighted just to capture this LTL market is we have been increasing our outreach in terms of number of offices that we have a number of people that we are reaching out to. What else would it take for us to go from this 36% to 40%, the medium-term target that we have. What else can we do?
See, I think freight on the street and opening branch network is clearly something which is imperative and which is something that we are going to keep doing. And the orientation to get to new types of customers is also increasing. So all of that is ongoing. I think it's a matter of time when things start reversing.
The next question is from Mr. Jainam Shah.
Yes. Also my question relates to something on the long-term part. So sir, we have guided for 10% to 15% growth last year, we have achieved that, adding same kind of a growth for this year and first quarter has been largely in the same line. We have recently ordered 2 ships as well. We are also in discussion for the secondhand ships. Our balance sheet strength is also there having INR 140 crores of debt, INR 440 crores of cash, net-net INR 300 crores of cash. And we are almost INR 1,000-plus crores, 1,000-plus cr of revenue every quarter.
So by any point in that have we reached a breakout point where we are an end-to-end supply chain having almost exposure to all the segments. And when we can have a very high level of growth as compared to competitors who are either challenged with the top line growth or either with the margins or the bottom line. So all the levers are in place. So what kind of growth we expect from a 3 to 5 years perspective from your side?
The challenge is always to have quality growth. See, all these things that we have done, what you mentioned and you have highlighted, it's not possible if you do not look at quality growth. Quality growth comes at sometimes at a cost, which is of top line growth, perhaps and not really -- and so those are some -- those are things that we tend to balance. We try to keep look out for all the new areas that are there. You might have also read that we have -- the Board has also approved the subsidiarization of our chemical logistics business. So that will be put into a new entity as a hold even subsidiary.
And then we look to seek an international partner if possible in the next few months or year so that we are able to capitalize on the growth that's coming from this segment. Again, we will be very uniquely positioned there as well look at all our joint ventures with the Transystem joint venture with a Japanese company handling logistics for Japanese companies, the rail logistics with Concord, again, a very unique position with Concord being the largest company in this space, the Cold Chain venture, where we are again looking at high value-added kind of clients.
And then the chemical logistics where, hopefully, we'll be looking at a cross-border chemical movement, specifically because the China plus 1 strategy is entailing a lot of international companies to set established in India as well as Indian companies to go overseas as well.
So that will also -- should help that ultimately that entity. So these are looking at high-growth areas, looking at how we can push those growth areas so that we are able to maintain quality growth, which means at some point, we are also removing some businesses on a continuous basis and are dropping off some customers that are there. So yes, I would probably put a 10% to 15% CAGR for the next 4 years on the business as a whole, for sure.
The next question is from Mr. Vikas Khatri.
First congratulations on the excellent results. Sir, as you told us that toll, driver wages, repair and maintenance has gone up, definitely reserving direct impact on the PCI freight business. In the Freight business, we have grown by 5.9% Y-o-Y. What's the average realization growth, whether it's hybrid of per ton kilometer for FTL or per kg yield in PTL blended, what's the realization gain?
So we don't share specific numbers, but on the overall side, it's flat. As you can see, there's no bottom line growth compared to last year, even though we've had a top line growth, so which means that it has not translated into necessary profit on a per revenue increase.
Okay. And second question is related to Cold Chain. What's our fleet size. As you told, we have added it. So I hope most of these will be multi XL or heavy-duty vehicle. What is the fleet side, current fleet size?
About 175 trucks.
The next question is from Mr. Ronald Siyoni.
Yes. Congratulations on good numbers. On the capacity expansion plans, you highlighted the INR 375 crores would be allocated for FY '25. So balance for ship would be around INR 280-odd crores. So FY '26 CapEx, how does it look? Because you would be also expanding on other segments also in terms of freight and trucks and everything. So what kind of CapEx guidance is there for FY '26 at least?
I would think that we would look at about INR 1,000 crores, INR 1,100 crores kind of CapEx for the next 4 years. So there will be some years which will be more, some years will be less. And the new ship order means that it's not that the entire money is going to go in 1 year, but in the next 3 years, the financial years if we go ahead. So it will get distributed, so I would think we achieved 350, 375 this year then another 300-ish next year and going forward, similar.
Okay. And last question, sir, on the business like you had also previously mentioned that some of the express players also you know have been mentioning into the freight business. So are this pressure has increased during Q1? Or you are seeing some easing of pressures from these players?
No, I think this is ongoing. These are not things that disappear overnight. Companies are moving into some direction, it is ongoing. So there's no easing that happens with competitors. We don't ease with our competitors, so I don't expect them to ease also. So it's ongoing here.
The next question is from Mr. Anshul Agrawal.
Vineet, one question on the LTL or the freight business. On one hand, we have data points like toll rates are rising. This would be for the industry as a whole. Because of this, do we foresee a shift from an organized to organized sector -- unorganized to organized players happening in the freight industry. Could you help us with some data points or some early indicators to see whether this shift is happening or not?
Formalization of industry in India is an ongoing process. I think we are seeing that with GST coming in. We are seeing that with e-way bill and we are also seeing that in almost all areas and businesses, digital payments is a big form of formalization, so I think this will also continue to happen in the logistics space, the movement from organized to -- unorganized to organized will continue.
What will change. What is -- I mean, will tolls be one of the drivers to it, not necessarily. It is all the other factors and toll as well because you have managed your cost structure better, smaller players continue to do it. See, sometimes we think of moving in the logistics transport sector from unorganized to organized means there will be many, many larger companies. I don't think that's going to be so easily visible. There will be fewer -- there will be more larger companies, but not that everyone will become a large company.
The smaller guys will continue to remain. Even for example, in very developed markets in the Europe and U.S. also, we have very large fleet operators. But bulk, there's a very, very large group of people who are single operators or people with less number of trucks. So those will continue to remain as well. It's not a structure that is going to change overnight, even with some of these factors.
So yes. So I think for the next 10, 15 years, formalization will keep increasing. Our organized logistics will keep increasing, not necessary that smaller companies or entities will disappear.
Got it. So if I understand you correctly, competitive intensity will not reduce despite shift from unrecognized to organized, then how or when can freight rate shore up? Is it only linked to fuel prices, if fuel prices increase, then only freight rates could shore up? When do we see that?
So competitive pressure will not ease for sure. That will continue to remain, I think, in the industry. Prices of freight [indiscernible] will move up, not just because of the fuel prices as well as the other input costs, but also the quality of work that starts happening. Today, if you start increasing the number of containerized trucks or trucks which have more -- there's more value add in that, then you will see clearly a movement towards higher freight rates. But I do expect the general cost structure to keep moving up actually much more rapidly. Driver shortage is something that's very visible. And that would mean that it would lead to much higher cost structures than just fuel.
So fuel can start falling down from the 40%, 50% to 50% odd as operating cost today to lower numbers. So I think the answer is not just a few, but a lot of other factors that is -- now is more and more visible.
Got it. Just one last question. Are we seeing similar wage hike issues in the supply chain business in the warehousing business as well?
Manpower costs are going up for sure. Manpower availability and the quality of manpower is extremely weak. And when there is schemes like Mgnrega, et cetera, and other schemes, which are more driving employment, keeping employment at the local level means that migration is less and hence, availability of people at warehouses or where even availability of people for deliveries, et cetera, tends to come down. So I do believe there is going to be a continuous shortage there of people and challenges in terms of manpower management. But qualitatively, productivity has to improve, which means that some level of automation also has to come at warehouse level so that, that will drive the productivity.
So a quick follow-up on this. So margin levers or margin protection levers in warehousing or supply chains would be more robust versus your transportation business? Can I make that assumption?
Not necessarily. See, even in the pure transportation business, it's a value addition that drives profitability, right? So it depends upon which company is doing what. There are lots of our competitors who just plain vanilla transportation, A to B, and earn INR 5,000 on every truck, there's no barriers to entry there, right? So that is still will continue. But again, if you are able to do value add, provide customers with a holistic solution, both FTL and LTL like we are trying [indiscernible] control tower sector, you will tend to move higher -- on the higher value and of the freight business as well. And that is an endeavor. So both places the cost levers keep moving, we have to keep moving up faster.
We now have Mr. Krupashankar back with us.
One question on depreciation. Ashish, I just noted that the Seaways depreciation has come off on a Q-on-Q basis. Any specific reason why this should be the case.
Yes. So there is 1 ship, which is now fully depreciated last year. So the impact, which is our noticing in the Q to Q is because of that only.
That would be the trend going ahead as well, is how we should...
Yes.
The next question is from Mr. Alok Deora.
Yes. Well, thanks for the opportunity again just to follow up. So the sell-off LTL and FTL largely remain the same. If we look at last many quarters, then we have been trying to increase the share of LTL. So just wanted to understand what is actually -- why this change is not happening. We have been seeing quarter-by-quarter, this mix is largely the same. And your margins could be very different if LTL goes to be say 70% out of the freight mix. So just some insights on that, please.
Right. Well, 70% is not the desirable value, but definitely 50-50 is a good desirable value. But our target for FY '26 is at 40%. And so I shared a few reasons. Firstly, MSME growth has been weak. I think that has had an impact on this business. Secondly, we've seen some price competitiveness with express companies that have moved into the space as well. And generally, also, last year has been a little weaker on this front, but our plans, strategic plans remain robust. Opening new branches, more sales teams and very interesting new things that we are trying to do even with digitization which is under test right now in places. But let's see, those are things, hopefully should help us start flowing back some share.
Sure. Just one last question. So like you just mentioned that express companies are also taking away some bit of this. So are we also taking away some share from the express guys? I mean, are we putting any sort of very selective service where some kind of express business we can also get or not creating.
No, that's very difficult. See, the value prop for Express is very different from the value proposition that we have. So really speaking, it's not a direct line of competition.
The next question is from Ms. Pallavi Deshpandy.
We can't hear you, I'm sorry.
Yes. So just wanted to understand how do we see the asset turns for the Supply Chain Solutions business, 5 years down the line, how would it look? Would investments be more or less done on the tech side and it improves?
It's not a tech business. It's a more hard core business. So really speaking, there will be continuous amount -- continuous level of CapEx that will happen. So some will be replacement of trucks. Some will be additional warehouse equipment based on contracts that we received the capacity in terms of number of trucks is almost the same, about, 1,000, 1,100, 1,200, but it is just the replenishment that replacement that will start -- will keep happening. So I would think about a INR 75 crores to INR 100 crores CapEx on supply chain year-on-year will continue.
Yes. Second was on the Seaways. What is the kind of asset turns we see for these new ships because of maybe faster voyage time because then on, et cetera.
IRR is about 6, 7 years. So that's the kind of...
Lastly, would there be any one-off income in the JV, Mitsui JV in FY '24? Or there any one-off in dividend or any special.
No, it was not one-off. It is just a business growth. It was good and hence, our dividend payout was good. Hopefully, with the contracts that they have, that should continue.
And in terms of dry docking, in terms of deadweight tonne, is it more or less evenly spread between the years because you had completed FY '25 and FY '24. So are we doing it FY '26 this year?
So dry dock is -- happens as per the rules and which is I think, every 30 months, you have to do a dry dock of a ship. So whenever that comes due from a technical perspective, we undertake the dry dock. So the next dry dock for one of the ships is going to be -- or in this fiscal is going to be end of the financial year closure to the last week of the financial year, which will take about 30 days for it to happen.
Right. No. So since your capacity is concentrated in 2 ships there and then [indiscernible], would that cause a lot of volatility in revenue?
Sometimes it does, but not too much. We move ships around. It's not that they are fixed routes. We can move them from one sector to the other also.
Right. And lastly, in terms of this [indiscernible] the transshipment mode, does that increase of the coastal shipping pie? Or how does that play into the whole sector?
[indiscernible] is more meant for transshipment cargo. I think international transshipment cargo is coming into the country and also that it becomes a hub for feeding into the country. So we don't have any specific plans to operate from that port yet. Has it been any opportunities come up we'll definitely consider it.
We now have Mr. Devansh Gupta, rejoining us with us questions.
Vineet and Mr. Ashish, just one question. So with respect to the shifts that we have, right? So we have 6 ships. I think in the earlier presentations, we had mentioned that to operate on the Western side and 4 operate on the eastern side. And we had also mentioned that the Western side has a better realization compared to the eastern side. So the questions are 2. Is there anything which limits a particular ship to operate on, let's say, Western or Eastern and then why not operate more on the Western side to get better realizations?
And if there is certain, let's say, characteristics of the ship, which does not allow, the 2 new ships that we are -- we have ordered, will they be fungible across both the cost or not. You're basically trying to see what will the realizations per ship or debt weight tonnage going to go up by operating more on the western coast of the country.
See, we balance this. So it's not necessary that it is always that one sector is going to do better than the other. When we see that there is movement on one sector, we're getting better rates. We can move these vessels around, not a problem at all. And similarly, when the new vessels come 2 years, hence, we will see where they can be deployed best. But most likely, we are feeling that on the East Coast itself, there will be a lot of opportunities, including going to neighboring countries. So there's no specific answer for this. I think it's more based on business needs and strategic needs at that point in time.
Got it. So basically, they are fungible and then as the market drives, we will move the ships.
That's right. Exactly.
The last question we have with Mr. Abhijit Mitra.
Yes. Just to go a bit deeper on the SCL side, the supply chain side, see, each year, you're adding around 1 million square feet of AV under management is what I can see. And there has been a substantial jump in revenue per square feet per month between, say, '22 and '23 and then follow it up with '24. So just to understand a bit more as to what kind of additional area or you plan to add over the next few years? And what is the nature of this increase in terms of revenue per square feet per month and how far can it be increased from here?
I'm not sure where you're getting the revenue per month increase from any of the data that we share.
No, I'm just dividing our supply chain solutions, division revenue with area.
No, that's not the way because we -- 80% of our -- 75% of our business is automotive logistics in there, which is not warehousing. And there is a certain percent of business that we do as warehousing, but it cannot be directly divided by the revenues as well as the 1 million square feet that we have. What I can tell you, broadly speaking, is that the addition of square footage is based on new contracts that we get and the contracts are essentially where we make money on the services are not necessarily on the rental of the business.
So we try to gain maximum from as much services as many services as we can provide. So yes, so I think there's no specific correlation with the overall revenue increase with the increase in square footage.
Got it. So in terms of directional revenue, I mean, services plus square footage. So in terms of square footage, is there any plan as to sort of how much you plan to add over the next couple of years? And in terms of services, also is there a sort of thought process as to where it can move in the next couple of years?
Capacity addition happens based on contracts with customers, mostly. We don't build warehouses on speculation. So really speaking, it's -- we don't have -- we don't build many warehouses, mostly they're rented or leased -- and so as we get contracts, we do that. And on the value addition is essentially on contracts where we're working, let's say, if it's a retailer, which is an apparel retailer, they might want to do not just the big pack and invoice to send to their stores, but we might say, look, why don't you do an individual pack which is being sent for e-commerce operations. So the more value addition that you do, the better realization that we get. So it depends on contract to contract.
We have Ms. Pallavi, rejoining us again with your questions.
Yes. So just wanted to understand on this previous question itself, the trains that we operate, that's gone up 50% last year. Does that also -- is that one reason that can explain this higher growth in? And is the DFC also going to aid the growth of the Supply Chain Solutions business?
No, DFC is an element that will help in overall logistics for the country and certainly our businesses that we have, both on the CONCOR side as well as the rail logistics that we provide in the supply chain business. It does help. We don't -- we have not seen a lot of shift towards that they have started to use -- we know that the Eastern DFC, they are using it for more for coal transportation, et cetera. There's some parts have started there on the Western also container transportation has happened.
So this should definitely help the businesses in the long run. But in reality, the growth of supply chain business is a function of not just the increase in rail business, but the overall service that we provide, which is an end-to-end to clients, which could be picking up the first mile as well as the last minute also. So yes, so that's the real business growth that comes in supply chain.
Right. And what would be the share of this commodity. I mean like you said, that's coal there that's moving, but any sense on what would we share in our mix or commodity in our road trait business?
Hardly, we hardly do commodities. We do more value-added businesses, more FG.
We have the last question with Mr. [ Oshi Sagar ].
Just one question. We do [indiscernible] growth in share price. So do we end of prior to 30%, 35%? I know you can't -- you can't put something over -- I mean -- but yes, I just try to pull that.
No, no, we are just talking about what's happened historically. We can't predict what's going to happen to the share price in the future, right.
Yes, I get your point. Absolutely [indiscernible] be it of the retail. Is that what internally [indiscernible] price to -- in the long run?
No, we are not working on trying to increase the share price. We are working on ...
No, not to increase No, that's not the idea here to increase. And it's something where you add value and in turn because the growth -- in the market capitalization overall.
We are trying to do our best in terms of the business with our right strategy, right growth metrics and building more around business it's up to the market to decide whether we're doing a good job or not and whether they want to reward us with it. So we don't look at that. We look at building the business.
As there are no further questions, I now hand over the floor to Mr. Ashish Tiwari for his closing comments.
Thank you, Simran, and thank you to all of you to join us today in this busy regional session. I hope that all the queries have been answered and you would have got a fair idea about the company. In case, you have any further query, please write us back, and we will help you. See you soon in next quarter 2. Take care and thank you.
Thank you.