Transport Corporation of India Ltd
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Transport Corporation of India Ltd
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Good evening, ladies and gentlemen. I am Simran, the moderator, and I'd like to extend a warm welcome to everyone joining us for the TCIL Q2 FY '25 Earnings Conference Call. 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 call is being recorded.
With that, I now invite Mr. Ashish Tiwari to begin with his opening remarks. Thank you, and over to you, sir.
Thank you, Simran, and good evening to all of you again joining this call. I hope that you have got to have financial results and the investor presentation, which is available on the website and also on the stock exchange. A few of our comments might be forward-looking and eventually may not be coincide with the actual performance. So please take all these conference notes with the disclaimer. Usually -- as usual, we begin with the Q2 earnings presentation and followed by the question-and-answer session.
Now I'm handing over to Mr. Agarwal for his opening comments and the presentation. Thank you. Over to you, sir.
Thank you, Ashish, and good evening, everyone, and welcome to this investor conference and call.
It's always been -- it's always a pleasure to meet everyone and especially on the eve of the festival season. The second quarter of the year was anticipated to be not as good as how it came out to be. Generally speaking, things were weak on the consumer side and the consumption side rather. But generally speaking, the industrials and some other areas have done reasonably well.
This year, we expected -- we saw that stocking was slightly better, maybe 5%, 10% better than last year in terms of the festival stocking. Let's see how that translates into this sales in this quarter. Two-wheeler sales are robust. 4-wheelers are weak, tractors are weak. MSME is still a little weak. Interestingly, the impact of these sectors is not too much on the entire -- on all sectors, but some sectors have felt major impact. For us, we are also seeing that production cuts in auto sector has also started. It has started a little earlier than anticipated.
I think that -- we know that there is a lot of stock available across the board, across the country, and that is -- doesn't augur very well for the second half of the year when it comes to the automotive sales. Usually, automotive production cuts happen in the second half, rather in December period, but this time it started a little earlier.
The business that did reasonably well for us was Seaways, not -- well, clearly, domestic rates have gone up because some ships have shifted and the correlation that we felt was limited to international freight rates to India seems to be a little stronger in this quarter because some of these international -- some of these ships moved to international waters, and hence, we were able to really raise prices on the domestic sector. With fuel rates being benign, it helped us from an overall perspective.
These are some of my opening remarks. We'll move to the next presentations. I think some of these things are known. I would just go to -- Ashish, to the next one, please.
I want to talk a little bit about technology. If you just go to that slide, what has interestingly starting to happen is that ULIP is starting to grow much more. And recently, there was a hackathon also that happened for ULIP, where we have participated. Our company is one of the only companies that has really integrated almost 7 or 8 APIs from ULIP directly into our systems. If you want to check driver credentials, we have -- if you want to check the vehicle credentials, we have the an API. If you are checking railway-related tracking where the trains are, we have integrated with something called FIOS, F-I-O-S. If you are checking on the tolls, we have the FASTag integration. And otherwise, we are also working on a few other integrations with ULIP which is essentially our integration is far ahead of many of our competitors. And we are actively participating in seeing how we can actually make this platform very, very useful and universal for the entire industry.
We can go back to the case study, Ashish, please. Here, I wanted to talk -- we wanted to talk to you a little bit about what we're doing specifically around business in our cold chain company. For a particular Japanese food company, we are running the entire outbound logistics for them. So whether it is their -- or whether the trucks that are being run by us or the trucks that are being done by maybe some of our competitors also, they are all managed by us under a single platform, and we are providing minute-to-minute updates to this particular company. The movement is pan India, where the movement is -- we have set up warehouses for them across the country as well as -- they are called cold chain trucks and cold chain warehouses and giving them real-time price -- real-time temperature as well. So there's no compromise on the integrity of the product.
This single a -- single window structured way of working is -- has been quite unique and very well appreciated by the company. It has also become a showcase for them for their global counterparts to see the activities we are doing in a logistically complex country like India. We do believe that these are certain examples that many other customers that we are selling to many customers, and we are doing parts of that with others as well. And they will continue to add value to the overall business that we have and build moats around each of those businesses.
Yes. In terms of the highlights, I think every quarter for the last several quarters, we've delivered -- the quarter that was previous year in the same period, we've delivered a higher growth year-on-year and this continues. We've had a 12%, 13% growth on the topline in this quarter as well. The trends are, as I already explained, they remain moderate, but we have been able to beat that to some extent. The -- I reiterate the fact that the kind of business model that we've built in the last decade is very unique because -- we are seeing that -- and I mean, you have seen that for mostly times when things have not been great. One business has done better. And subsequently, when one business has not done well, the other businesses had in terms of keeping up the momentum. The company remains net debt free and the buyback was quite successful.
In terms of the freight business, this is a weak element right now predominantly because of the lack of growth in the LTL side. MSME is still tight. And as I said, current uptake is not very high there. It is flattish. The ecosystem around development of MSMEs is not happening to that extent. If you see the kind of equipment that we need as a country for manufacturing of solar panels, for semiconductors, the electric manufacturing, EMS businesses, we do not have enough high-quality MSMEs or companies that are able to really supply to the larger companies. We are dependent a lot on overseas on the Chinese market. And hence, the ecosystem still remains small and I would say, unorganized to some extent.
It is something that has had an impact. We are continuously increasing our branch network. We have opened 32 branches. The target to get to 40% next year, next financial year is strong, and we are confident that we should be able to get to that. But yes, business has been muted and profitability has -- is also lower.
In terms of guidance, I think closer to -- with the second half usually being better for freight, we think that we should get to around closer to 7%, 8% to 10% topline, and we should reach the last year's bottom line numbers as well.
The ROCE is also slightly higher than last year is because of elevated credit. I think there is definitively some credit slowdown. Interest rates are starting to play on corporates where they are not paying on time, I guess, because they're finding some areas of reducing cost since now they've been able to mostly maximize all possible areas. So credit is a little tighter here. But again, we are seeing that things are coming back.
Supply chain business has done well on the topline side, 12% on the overall for the quarter as well as for the half yearly. We are seeing, as I have been saying that we should get to -- this business will be the largest business for us in FY '26. The margin structure is the same. It's the same as last year, slightly weaker actually on the EBIT side. This is some investment that we are doing in the new contracts we've got in on warehousing side. The attractive business opportunity that has emerged over here is quick commerce. I think I did mention that last time, but we can talk about it a little bit more later on when we get into question and answers.
The capital employed has also gone up because we've invested into new trucks. And of course, receivables have also gone up. But the business remains very strong with a very strong pipeline that we are seeing on the warehousing side. And hence, a little stretch on the margins because of that bench strength that we have to create for manpower as well as for setting up the equipment as well as setting up the warehouses before the revenues start coming in.
I mentioned Seaways has done very well with a 22% topline increase on the -- in the quarter as well as a 65% increase in the bottom line. Again, as I said, the revenues picked up because of shift of some ships and hence, capacity came down. The fuel prices are stable. The -- we had a little bit less number of voyages, almost the same, I would say, even though this was a monsoon season. We lost a few voyages in the quarter 1 of the year because of dry docks. But now the next dry dock is only at the end of the financial year, that too towards the last 10 days of the financial year. Otherwise, we are clear for the full year now until then for capacity utilization.
The business remains strong with the 40-odd percent EBITDA margins and a high 50% plus ROCE. And joint ventures have also done well with revenues of Concor joint venture increasing by 22%. Profitability also improving. Similarly, cold chain joint has gone up by 32%. Margins are a little tight, but because of the investment we've made into new trucks, we bought 75 new trucks last year. We're also making a major capacity expansion on the storage side of the cold chain business. And we have very new -- some very attractive new customers. I did share a case study earlier also on that. Transystem is doing well about 18%, 20% topline growth and reasonable growth in margins.
Next slide. Net-net, on the stand-alone basis, 10.9% on the consol level or -- sorry, on the stand-alone for H1 and similar numbers about 11.5% on the consol level, and profitability is up by about 25% on the H1 numbers for stand-alone and about 16-odd percent. Some of this is because of the dividend that came in, in the quarter 1 from Transystem. We do think that the guidance that we've given for about 10% to 15% on the topline stands as is. The guidance on the bottom line for the 10% to 15% also stands. I think we will have a look at what happens in Q3. And if we need to revise that, we will certainly inform then.
Ratios are all looking good with EV EBITDA at 15%. ROCs net of cash at about 25.7%. Cash is about INR 280 crores, buyback was about INR 160 crores plus tax. Debt is about INR 100-odd crores, which is essentially all truck-related debts, which are cheaper than using cash. RONW is about 20%.
We've -- as I've said, we've delivered a consistent performance year-on-year, and we believe that we are able to create necessary moats. We are able to keep a watch on what's happening with our competitors as well as react and respond to that. Certainly, there are some competitors that are still actively pursuing a lower cost strategy versus -- sorry, a lower pricing strategy versus a lower cost strategy and hence that puts pressure on us. But notwithstanding, we are able to withhold some of our margins. Dividend payout ratio increased to -- from 125% to 175%. This is in line with overall thought process about -- roughly about 20% out payout for the year.
ESG goals are strong. We continue to invest into that, whether it comes to the environment side where earning green points as well as adding more capacity on the alternative fuels as well as on the other areas.
In terms of our CapEx plan, it stands at INR 375 crores, INR 350 crores, INR 375 crores as we've committed. The ship payout has yet to happen in terms of the advances that will be about INR 70 crores, INR 75 crores and some container orders are also in place. So that will start coming in hub centers. Though it has been a little less, but it will start picking up now. And I think we are looking at INR 325-odd -- between INR 300 crores, INR 350 crores of CapEx for the full year this year. We do not have a visibility yet on the second financial.
Again, thank you for joining and happy to answer any questions.
[Operator Instructions] So the first question is from Mr. Alok Deora.
Am I audible?
Yes, you're audible, but little echoing. We can hear you.
Yes. Yes. Good evening and congratulations [indiscernible].
Your voice is echoing, we are not able to clearly hear you.
Can you hear me?
We can hear you, but the voice is not clear. It's echoing.
I think you have one more device on open maybe. So maybe you can do that and then get on the queue again.
We have Mr. Amit Dixit with us. Sir, please go ahead.
Yes. Good evening, everyone. And thanks for the opportunity. Congratulation for a good set of numbers in very testing times. I have a couple of questions. The first 1 is, if I look at receivables in H1, they seem to have gone up substantially compared to last year same period or even FY '24 as a whole. So just wanted to get better insight that how and why did they go up? And do we expect this working capital that have been built up to be kind of eased off going ahead in H2?
Ashish?
So yes, Amit, I think -- so the percentage increase in the revenue, that is also coinciding with the outstanding percentage increase. So they have not disproportionately increased, but yes, they have increased because of -- as Mr. Agarwal talked about, the tighter credit things and higher interest rates. Some of the large customers, they're just trying to withold the payments not giving on the time. So I think these are some temporary issues, which I think would be resolved in the next half year.
Okay. The second one is on Seaways business. Now if I look at it, the significant margin increase when we thought that okay margins would temper off, but again, we saw this particular division emerging. So just wanted to get the overall sense what is happening over there. While you highlighted in your prepared remarks on the international freight rates being kind of rubbing on the Indian freight rates as well, and all the ships, of course, being engaged. So how do we think about this division for rest of the year?
Some of these things also unfortunately come as a surprise to us because the geopolitical situation really is very fluid. And then what happens is that some of these ships instinctively or opportunistically ship to other routes. And then it creates a capacity constraint and demand on the Western Coast has also been good. So all of these factors have really helped. I'll be very -- it's very difficult to give you a prediction of what's going to happen in the next half of the year. I can certainly say that we are seeing that the geopolitical tensions are not eased.
However, international shipping freight rates have eased a little bit. I think that could be a little bit sensitivity to what is happening with perhaps an indication of global recession or interest rate cuts globally and so on and so forth. So that is starting to happen, but I would not really say that we have a real fix on what's going to happen. But I do expect that we should be able to maintain this or it will go down, but I don't think it will go up too much also.
We have Mr. Alok Deora back with us. Sir, please go ahead.
Yes. Am I audible now?
Yes, please go ahead.
Yes. Yes. Sorry for that. So just a couple of questions. One is in the freight division, if we see the margins have come off and still our mix on FTL, LTL continues to remain the same while we have been trying to increase the share of LTL. So any color on that, what's happening here? Because we have seen almost a 10% decline in EBITDA in the freight division, so how do we see the next 6 months panning out for us in this segment? That's the first question.
Yes. Certainly, it has been challenging, as I've been indicating also for the last 3 quarters -- 3, 4 quarters actually. There is definitely some competitive pressure as well from some companies. There is also the growth is limited and slow. There is -- the cost structure is also a little bit on the inflated side. Overall, with inflation creeping in various areas, including wages, driver wages or toll and so on. So there is definitely a little bit stress that we are feeling, and I'm sure that is also evident in the trucking market per se. So I think that -- what we think that in the next 2 quarters, 3 quarters, these will start to stabilize more and more. The branch network should start helping us. Some sanity might come with some of our competitors, let's see.
But it still remains an area of concern for us. But we are tackling it by putting more people on the streets. We are -- we have developed some customized software to track sales performance and also delivering some very specialized methods of response to customers using apps, et cetera, where we are able to respond to the customer in minutes versus hours when it comes to quotations and customer complaints, et cetera. So there is a lot of effort going on there and we are strategizing to ensure that the business comes back to its normal phase in the next 2 to 3 quarters.
Sure. And if you look at the CapEx, we have done nearly INR 90 crore CapEx in the first half. It's much lower than what we have budgeted. So -- and plus you mentioned that the new ship is not on the horizon in terms of the secondhand ship coming into the CapEx, right? Or that is around INR 80 crores where you have kind of budgeted for that.
So that's for the first -- for the new ship, the advance for the new ship is about INR 75-odd crores. Yes, the secondhand ship is not yet on the horizon at all. That was also not part of the budget anyways.
Right. Okay, got it. So this INR 90 crores we have -- if you look at the each segment, like hub we have done only INR 17 crores. And in some of the key areas we have done very miniscule CapEx of what we had budgeted for. So what could be the realistic CapEx for this year, considering we are almost just like 6 months away?
Well, if that INR 75-odd crores that has to go for the ship, if that would have happened a few weeks ago, then this number would have looked okay. But that will happen shortly, and other CapEx is underway. So I think we -- as I mentioned, that my comments, maybe 300 to 350 is what we're looking at this year.
Sir, just last question. The revenue and profit growth guidance remains same at 10% to 15%. But we have done -- we are doing -- we have done pretty well in the first half and second half tends to be a little better, right? So could we see some upward revision here?
On the topline, I don't expect it to move much. On the bottom line, I think it will be on the former side of the teens. But let's see what happens by Q3.
The next question is from [indiscernible]. Sir, ahead.
With the -- since long, I'm tracking TCI and your management. Sir, what I observed is you are creating slowly, but solidly entry barriers to the competitor yet they are charging lower end customers may be looking at the price and going there. So which are the other area where you feel you require to yet improve, you require to invest and maybe create more moats.
Well, we're already doing that. As you know, we -- all the joint ventures that we create are essentially created to -- we move up the learning curve pretty fast and create barriers to entry for our competitors also create a much more stronger value proposition for our clients so that they are able to stay with us for a longer period on a continuous basis. And then we can start offering them multiple solutions also because the idea is not to just sell them one product, one service, but as many things as possible.
The new area we have last time when we talked about subsidization of our chemical business that is underway and the potential to grow that is extremely large with both domestic and MNC companies as well. And that business has a potential of not just multimodal logistics, but also warehousing, Exim business, and maybe look at a potential JV partner also at some point in time so that we are moving up the learning curve because it has complexities. It's hazardous sometimes is flammable type of material, they require specialized handling, compliance needs to be higher. So that's the whole objective, move up the value chain as much as possible and protect the margins.
Sir, for that, internally, where you feel you require improvement or investment?
Investments are ongoing. It's not that it has stopped anywhere. If we're investing into some warehouses, we're investing it with that purpose to ensure that we are building high compliance warehouses for any purpose. Similarly, if you're buying containers, we are buying chemical containers, chemical tankers, tank containers from China and other places as well. So it is ongoing. It is not -- it is -- we are not stopping any kind of investment or rather waiting for any kind of investment to happen.
Sir, last question is the study in your case you mentioned now is this Japanese food company. I'm sure they must have a look at your capability and service and outcome also. Whatever benefits they must be getting because of they're with you? It cannot be just price. It must be something more. If you can a little bit talk more, will be really helpful.
For the company, product quality is very important because if that -- if the food product gets to the client in a bad shape or it is not of the right quality, then a client is going to complain -- their client is going to complain and then it's not going to -- they will lose out the business. So they are seeing that element that are we able to maintain that high quality of the product. The final -- the product delivery that happens or not. And that's what has prompted the customer to work with us. And yes, you're right, absolutely right. It is not cost.
The next question is from Mr. Jainam Shah.
This is Jainam Shah from Equirus Securities. Sir, my question firstly is on the secondary ships that we are talking about. So is it more like the sellers' market has dried up? Or is it something like that the price point that we are searching for is not available in the market?
It's both.
Okay. So no visibility as of now in the near term of any kind of the ship? Got it. Sir, on the Seaways segment, as you have said that a few of the ships have been transferred on the international waters. Any specific route that you would transfer like in FY '22, FY '23, what I remember is that it had been transferred to the Myanmar route or something. And is it back to the normal level in the Q3 or still some of the...
We have not transferred. Capacity from that sector moved out to different sectors. We don't know where they've gone. But we are -- we remain on our sectors only. We've not moved because we've been able -- our customers are there and they want the services that we are providing to them. So we've not moved out.
Got it. Got it, and sir, on the freight segment, as discussed that our margin has been slowing down or even we can say going down. Is it some unorganized sector as well which can be taking up this market share? Or is it some large someone who is just like you can say, application kind of a provider and matching up the seller and buyer in that case, which is eventually hurting our margins or even...
Not both. Regional players and local players, unorganized players have always been there. But what has added on are some companies who have, I guess, have been listed also who have just got into some kind of express business. And they are not exactly express, but they are in between express and LTL, and they are trying to push down the pricing because of capacity utilization, et cetera. They -- when they -- when the market is slow, then they also have fixed capacity that they have to utilize. So they will drive down pricing then. That's what we are seeing perhaps with some of them.
Sir. And just last one on the quick commerce side that you also talked on the -- indulged during the same. So just wanted to have your sense like is that something that we are looking for next 3 to 5 years perspective to become a big and -- of course, it is smaller in size as compared to our total operation. But overall, how we are looking at it? Is it something that we are taking up market share in that particular thing in terms of warehousing from the dark stores?
Well, it's -- as you rightly said, it's not a very large business, but it's a business to learn from because there is a lot of consumer insights that come into something like this, and we are anyways working for e-commerce companies on the fulfillment side, not on the last mile side. So there is a lot of learning because supply chains also end up changing, whether it is FMCG, whether it is the food supply chain, all of these supply chains go through a bit of change when new business models come in.
So for us, it's a very important learning and it's not that if those companies don't make money, it doesn't mean we don't make money. We, of course, make money because it is a fulfillment model, and it works on a payment basis. It does not work on yes, we are going to work with you. We'll be able to take equity or something like that, no. So it's a service that we're giving and it is certainly an opportunity because what has started to happen is that -- and you must have read about it also, that it's moving from just instant gratification to more solid your weekly or your monthly shopping that you need to do, your grocery shopping, that substantiated amount of purchase has also started to increase, which means a certain number of SKUs will also increase in the future. So that gives us an opportunity that there the fulfillment will keep increasing rather than just working on the short instant gratification few product market.
The next question is from Mr. Pinaki Banerji.
Just a couple of questions, sir. The freight division actually has remained a bit tepid this financial year like 5.5% to 6% growth in primary reserves, which have attributed as a slowdown in the automobile sector because of the stocking up of inventory. So, sir, is it the only reason or is there any other reason attributable to that?
Well, you're talking about freight or...
Freight. In which division does it -- yes, sir? I'm speaking about the slowdown in the automobile industry.
Inventory buildup has happened generally, but topline growth is still there. Bottom line growth is not there because as I said, we've made investments into new areas, new -- sorry, new capacity that is coming up for new contracts. Some of that revenue driver and profitability has not come in yet. So give it quarter, 2 quarters, then we'll be able to see that this should moderate.
Okay. So sir, actually, are you maintaining the guidance of 10% to 12% overall growth, like half yearly, you have done about 12% now.
Guidance for topline is about 10% to 15%.
And just one last question. Sir, in your balance sheet, your current investment is about INR 273 crores actually, do you have any prudent policy on how much of assets we are keeping in liquid investments or such like that and how we are utilizing it?
These are all current investments which are temporary in nature out of the cash flow.
The next question is from Mr. Krupashankar.
Good evening, and thank you for the opportunity. So my first question would be on the supply chain business. I just wanted to get your sense that given that automotive slowdown is evident, and we have been talking about contract wins over the last 3, 4 quarters. Do you see probably that the mix finally would change much more in favor of other sectors and reduce the exposure to automotive sector by FY '25, '26, if things remain tepid with respect to automotive growth?
But if we not change too much, Krupashankar, because it's still a very large segment and the growth, yes, it is accelerating, but we also see some growth in the auto sector. It's not flat for us at all. Spare parts growth is also happening there, new companies are coming up. So those or EV companies are coming up, new capacity is coming up. So it keeps going on also. So the mix is slowly, very, very slowly changing, but you would not see any significant change in the next 2, 3 years.
Is it safe to assume that tractors is a good portion of our supply chain business?
No, no, no. It's not very large.
And the second part to this question was on quick commerce. Just also wanted to get a sense on the rapid growth trajectory. Would you be handling the last mile piece as well? Or is it just dark warehouse, dark store management and something on those lines?
Not even dark store management, from the fulfillment warehouse to the dark stores, the management of fulfillment warehouse and then the delivery to the dark store is, that's all we do. We don't do dark store management. We don't do last mile delivery.
Understood. No, no intention to get out there because it's rapidly growing? Okay. Second question was more on the CVS business. While we do see that the performance has been strong, quite strong in the first half, any guidance with respect to your margins on the CVS business, anything which you would like to highlight this time around?
Well, as I said, it is a bit unpredictable. I think this 40% EBITDA base will probably come down, but it hasn't, so -- but I think 25% to -- 30% to 35% type of EBITDA is still reasonable. But I wouldn't warrant any kind of guess right now on this because it is -- remains a little bit perplexing. But yes, it will not come down. So I think that rest -- you can be rest assured a margin structure is quite stable. There's no dramatic collapse on the -- that is being foreseen or is possible barring a COVID type of situation. But yes, otherwise, it looks still quite robust.
Why I was asking this question, Vineet, is that -- if in the past, we have seen that a sudden capacity addition has impacted the overall pricing power in this market specifically. How are you seeing that volumes are growing at a much faster pace, which can accommodate higher supply if any other competitor also tries to enter, and that way, can it shape our margins drastically is something which I wanted to get a sense of.
No, I don't think so because you're right that it is -- if the global prices start softening and these prices remain high on the domestic, there will be people coming back to the domestic sector. But yes, demand remains robust. It hasn't gone up too much also, but it hasn't gone down. It is on the upward trajectory only. So it should -- we should be able to absorb any new capacity comes in. Some freight rates will come down. That's a competitive pressure that is normal. But then we have enough cushioning available to absorb that.
The next question is from Mr. Manoj [indiscernible]
So my first question is relating to your supply chain business. As you said, by FY '26, it's going to be the largest. So appreciate to add some colors on that, sir?
Well, the growth rate, I mean, supply chain is at INR 800 crores in the first half and 12% growth rate. And if you see freight business is about 800 -- how much Ashish? 820-ish or something like...
840.
840 at a 6% growth rate. So just doing the math with this kind of growth rate for the next 2 years, 1.5 years, supply chain by FY '26 should be the higher -- larger company.
Sir, my second question is pertaining to the -- pertaining to the coastal shipping and Inland Waterways Authority of transportation as government also more worried about the climate change which is happening. So how we are seeing this business to cope up say in the next couple of years for TCL as a company?
Very clearly, that it is a growth area for us. We were investing into it from capacity that is new capacity that's coming in as well as, we will -- we are continuing in a lookout to buy old secondhand ships as well. We have the linkages available. We have the branch network, so we are able to provide end-to-end solutions first mile, last mile. We provide multimodal, be it road, rail, sea, combine seamlessly. We operate at all the major ports. And so we have the customer linkages. So all of these things are very unique to us, and that helps us to ensure that we are going to keep growing. A country like China has 20-plus percent of its movement happening to coastal trade, we had 6%. So -- and we have a very, very large 7,000 kilometer coast lines. Certainly, there is a lot of opportunity. I don't think anyone is going to say that this is not going to be an opportunity. So yes, we'll continue to invest into it.
The next question is from Mr. Anshul Agarwal.
My first question is on the freight division. So when you see, are lines blurring between express companies, FTL, LTL players? We're hearing comments from players across these categories pointing towards the entire surface industry slowing down. But are capacities in these categories, is that fungible that express companies can enter the cargo profile or the routes on which LTL or FTL players operate?
So on the FTL side, I do not think it's -- the express companies can come in easily simply because the FTL market is very unique. It does not move from hub to hub, it move from customer to customer directly. And it's usually a full truckload. So you don't get any benefit when it comes to consolidation or deconsolidation as well as capacity utilization there. It's a full capacity that gets used. It also requires deliveries to very remote basis. Sometimes it has different elements of movement. It requires a pan-India presence as well, but also requires an understanding of the local sourcing market as well as procurement market.
On the LTL side, yes, there are express companies because they have capacity, they can go to smaller customers or customers they can tell the salespeople to go to customers of ours and tell them they will crash the prices, just to fill the belly. And maybe at some point, even drop those customers if they are finding higher value customers. So sometimes this has happened in the past and customers have not liked that. And hence, they too have sticked to companies like us, but everyone wants to control some cost initially. And so some of that movement will happen. It does happen. It has happened. It is happening. However, I do not think this is -- it is -- let's see how long will it be sustainable. Customers -- there are lots of customers that we have who want to give both FTL and LTL to one service provider like us. So we are hopeful -- we have strategized that, yes, this is one strategy to play out with, but otherwise keep ensuring that we are on the street and trying to get the business.
Sure. Just a follow-up on that. But then what is ailing the FTL market in your view, sir? Or is it like a 6 or mid-single-digit growth number for the FTL market a new normal?
The mid-60 is not just FTL for us. It's a combination of both those numbers. We don't give you specific numbers of growth for FTL separately and LTL separately. But it is a combination. If -- so it is also what we decide to grow, how much we want to grow in the FTL market. If you see that the market is very tight and there is -- margins are going to remain tight, then we will not grow that much also because we see that when we have -- some things that could happen, our receivables go up, as you have seen, and margins come down. So we will avoid growth there also in the freight business in the event that we are seeing that there is tightness. And that's conscious. So -- but yes, we have to hit the cycle and then we have to control a little bit more and then improve it. Unfortunately, that's how this business is.
Got it. Very helpful. Just one last question from my side. What will be our strategy to win in the quick commerce business? Will we need to be aggressive, sacrifice margins a bit versus the usual margins that we probably get in our supply chain division in the auto segment? Or do you foresee we'll want to win more business or grow quicker here at the cost of margins?
Again, the same principle. We don't want to grow quicker just because we can grow quicker with cost of margin. This is not our strategy at all. Our strategy is to deliver the right value so that we are able to continue to get the margins. Initially, it might be a little challenging to get there, but we know how to extract margins because we've worked in the e-commerce space. The fulfillment models are exactly the same how it is for any of the large e-commerce retailers in the methodology, process too etc. is almost is exactly the same. So really speaking, the margins do not get compressed at all too much.
We are not on purposely adding too many customers and too fast in terms of sites because we want to see how they evolve as well. They will change their business model also. So we don't want to be sitting on the wrong side of the fence when they change the models. So we are taking a wait and watch approach, but we are also growing simultaneously.
The next question is from Mr. Manoj [indiscernible].
So as far as the present challenging situations are there in the economic level in certain sectors like auto, FMCG and all that. That's what we have discussed during the call. But we do have some green shoots also or the growth drivers also like you have given the case studies of the Japanese company. So do you see some synergies, foreseeable synergies for such companies where we have got the revenue visibility, and we have got a very good margin also?
No. These are not necessarily green shoots. I think there are lots of green shoots. Again, the business growth is there at 10%, 12% topline growth that you have seen is not because of some green shoots only, but because constructively, we have got a lot of business as well, whether it is increasing market share from some customer -- increasing market share in some areas or getting new kinds of businesses. But more than that, it is solution building that is important because this is not just one type of solution that we've done for one customer, but these are multiple types of -- have we just showcased you 1 type of solution that there is, but we have many, many solutions on a daily basis because otherwise, we will not be able to maintain the margin structure that you see in our net-net business. And ultimately, the driver for us is solutions is not going to be only pure-play commoditized transportation. We don't want to do that. We are doing that less and less as we speak. And hence, you see the margin profile remains.
So yes, there are lots of segments that have growth and growth opportunities, which we will continue to tap. We talked about chemicals, we've talked about cold chain, we've talked about defense in the past. So like this, there will be continuously, we are looking at new areas.
Thank you, sir. We have someone joining us from PhillipCapital.
Just as a house keeping question. I hope I am audible.
Yes, Vikram, please go ahead.
Okay, sir. Sir, this 32 branch addition, is it for this quarter or first half because I think we had 15 addition in first quarter.
This is for the first half. So 13 plus 17.
Okay. Understood. Okay.
32 in total. 15, 16, I don't remember the first half and the...
15 was the first half and now 17 in the second half, second quarter.
Understood. And basically, there has been some increase in intersegment revenue. Is it -- now we are using Seaways for our supply chain business also? Or what is that like are like cross usage of our services?
These are all like services inter-sea between supply chain and the freight division as well. And a bit of if/what there because of increase in some of the volumes.
And what was the rate movement and container for first half?
Rate movement? It's there -- if you go to the -- Ashish just go to that slide of multimodal. Yes. So rates has almost the same numbers as last year in the first half. And the TEUs moved is slightly higher or 5%.
Got it, sir. And was it -- will it be able to -- because I think earlier you used to share the profit number for joint ventures also, but that is, I think, the number we could not see.
Yes, we can't share that number. I think maybe Ashish can speak to you one on one.
We have Mr. Alok Deora back with us.
Just wanted to know this Seaways, there will be two things kind of happening. One would be the freight rates could come down as you mentioned. And also your dry dock could be -- would be at the end of the year. So this INR 160 crore run rate of revenue, could that continue in 3Q and 4Q?
Yes, it should continue, it's clearly dependent also that the freight rates will remain stable at that level.
Right. But you would have increased capacity also. I mean, I just wonder.
Capacity was only in Q1. Sorry, you mean from last year, Q4. Okay. Well, I don't remember. Ashish, what ships were under dry dock in Q4 last year?
There was, I think, once ship was in middle of the dry dock.
Okay.
And just from a 2-year perspective, so what we gather is that the freight division is not going anywhere big time in terms of growth or margins, right? So could this business become like a pretty small portion for us going ahead, like, as you mentioned, supply chain would be the biggest segment in 2 years' time and even Seaways as the ship comes in becomes big. So how are we looking at this freight division in totality?
No, we do expect the freight business also to pick up. Again, we are building customized solutions around that. And more and more, it's becoming -- it will become an LTL business, which is higher margin. I mean the ROCs in the business is still quite decent. We're looking at, right now, we had about 17-odd percent, I think, if I don't remember correctly, but we have done 20%, 25% also ROCs in this. So it is -- yes, I think if you just put full slide, Ashish, 27% in '22, '23 and 21% last year. So yes, so it is in the excess of 20% type of ROC business, and we will continue to -- we don't have to put in much in terms of assets. It's only working capital and find the right LTL mix. I think the business should grow.
The construct of capital employed is just working capital. So that also dependent on the interest cycles and so on and so forth. So let's say, if we see the easing of monetary rates probably that would -- ROC would further improve apart from the profit aspect of it.
Sure. Just last question. So competitor like BRL Logistics have taken a price increase at the end of first quarter in the freight business. They are majorly into the LTL side. So I just wanted to understand, are we also looking any price increase or the demand is just not there for any price hike?
Ashish, any thoughts on this?
No, I think -- so basically, BRL might have chosen to have an announcement around the price hike and so on and so forth. But in our contracts and most of the time, we do have cost escalations whether in terms of wages or for supply chain side or maybe the fuel price. So that is always there, cost escalations. And they can be increased on a one-to-one. So it cannot be an announcement that we would like increase throughout all the contracts, probably we may not have that kind of outlook.
The next question is from Mr. Ronald Siyoni.
Congratulations, very good numbers. Sir, I wanted to understand your JVs have been outperforming overall industry growth rates if we see Concor like Exim growth have not been doing well, still a high double-digit growth in Concor, then cold chain also doing very well. Transystem doing phenomenally well. So this business is how they are able to a very strong growth compared to the industry growth rates in which they are.
They are all, respectively in the growth area phases like Concor business competes with the rail business. Again, there are some competitors in that space also. We grow -- we try to grow with the right profitability more importantly. Cold chain business, we are amongst the top 10 companies now. And hopefully, the next 2 years, we should be in the top 3 companies in cold chain business. And automotive logistics, it is the #1 company in India, the Transystem Logistics. So yes, in our -- in each of those spaces, they are competing to be in the best.
And lastly, sir, is there any chance that we could increase our stake or we would have to limit the stake in this JVs?
No, these are strategic stakes that we have and how we've worked on them. So there's no -- there's no question of increasing.
There are no further questions. Now I hand over the floor to Mr. Ashish Tiwari for closing comments.
Thank you, Simran, for moderating the call, and sincere thanks to all of you who joined the call out of the busy season. I think we have answered all your questions. And if you have any further questions, you can write me back. We will see you in the quarter 3 call again. And on behalf of TCI's [Foreign Language], we wish you a very happy Diwali and take care, and thank you.
Yes. I would also like to wish everyone our best wishes for the festival season. Thank you.