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TCI Express Ltd
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Good day, ladies and gentlemen, and welcome to TCI Express Limited Q1 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Navin Agarwal, Head Institutional Equity at SKP Securities Limited. Thank you, and over to you, sir.
Good afternoon, ladies and gentlemen. On behalf of TCI Express and SKP Securities, it is my pleasure and privilege to welcome you to this financial results conference of TCI Express Limited. We have with us Mr. Chander Agarwal, Managing Director; and Mr. Mukti Lal, Chief Financial Officer. We will have the opening remarks from Mr. Agarwal, followed by a Q&A session. Thank you, and over to you, Mr. Agarwal.
Thank you. Good evening, everyone, and welcome to the Q1 Financial '22 Earnings Call of TCI Express Limited. I would like to thank all of you for taking out the time and joining us today. I hope you and your loved ones are staying safe and healthy. I will start with the industry and business overview for the quarter, and then I will hand over the call to our CFO, Mr. Mukti, to discuss the financial performance of the company for the quarter. Our earnings presentation has been uploaded on the website and stock exchange, and I hope you've had a chance to review it. As we all know, it has been more than 15 months since the COVID-19 pandemic hit the country. And the pandemic has had a far-reaching impact on both personal lives and businesses. It has dynamically changed many business models across the industries and sectors. With the ongoing vaccination drive, the recovery momentum has started, but we were hit by the second wave, which has again impacted the economy -- the economic recovery in Q1 financial '22. During the quarter, the index for industrial production saw a significant decline in output for the month of April and May, consecutively. Manufacturing was down by 12.5% in April and 10% in May, and similar trends were witnessed across key industries. Similarly, e-Way bill's generation after reaching its peak in the month of March had declined 17% for the month of April to INR 6 crores and INR 4 crores in May. And overall, it was down 33% quarter-on-quarter. The logistics industry was impacted due to the slowdown in manufacturing activity, coupled with the timing difference in the lockdown restrictions between the different states, had further impacted the interstate movement of goods. Despite the challenging marketing conditions -- market conditions, TCI Express is better prepared this time to mitigate the pandemic impact on the business and continue to deliver stable top line performance while maintaining strong margins and profitability. Our revenue from operations stood at INR 223 crores, registering a growth of 151% year-on-year but declined about 20% Q-on-Q. Our EBITDA was INR 34 crores with margins very strong at 15% as compared to 4% in the same quarter last year. The EBITDA margin was lower compared to the previous quarter due to slightly lower capacity utilization of 83.5% in Q1 as compared to 86.5% in Q4. And this was primarily due to the different lockdown timing and restrictions in different states and, of course, the increase in employee costs because of the annual appraisals. However, it is important to note that our asset-light model and ownership of branches has allowed us to maintain strong margins and profitability even in the most challenging times. During the quarter, we have achieved another milestone as our Pune sorting centers had received the necessary regulatory approvals and is now operational. It will also improve operational efficiency by improving the turnaround time. We had incurred a CapEx of INR 16 crores mainly towards Gurgaon sorting center, which is expected to be fully operational by Q3 financial '22, as communicated earlier. Furthermore, we have added 15 new branches mainly in the North and Western region to cater to the growing business demand from the SME customers. In terms of expanding our service offerings, we're capitalizing on our experience and learnings from Surface Express and had recently launched 2 new services: the Cold Chain Pharma Express and C2C Express, and both have started to contribute to the top line. I would like to highlight that through our Cold Chain Pharma service, we have transported 50 lakh vaccines and 10,000-plus oxygen concentrators to the far-reaching corners of the country.Sustainability is a core pillar of our long-term strategy. And as an organization, we are committed to reduce our carbon footprint and start using renewable resources of energy. With this in mind, I am pleased to announce that TCI Express has become the first logistics company in India to install solar panels on its sorting centers. Pune will be the first to see that operational, and all the sorting centers will be energy self-sufficient going forward. Now looking ahead, I am confident of the tremendous growth opportunities for the express industry due to the government initiatives in strengthening this -- the industry as well as investments in infrastructure development by the government and -- to penetrate deeper in Tier 2 and Tier 3 cities. Furthermore, vaccination drives are going on in full swing. And with the government, businesses and individuals now being better prepared to navigate through the pandemic, we remain optimistic of the recovery as the economy grows from negative to positive. And the TCI -- and TCI Express is well positioned to cater to the growing opportunities and gain market share. I would like to hand over the call to Mr. Mukti to discuss the financial performance of the quarter. Thank you. Over to you, Mr. Mukti.
Yes. Thank you, sir, and good evening, everyone. Now I would like to take it forward and discuss the financial performance of the company. So our revenue from operations stood at INR 223 crore for the -- this Q1 as compared to INR 280 crore in the previous quarter and INR 89 crore in the same period of last year, significantly higher. At this time, the country was under micro lockdowns, which helped the businesses to remain operational. However, interstate movement of goods was faced with the certain challenges. The revenue increased by 150% on a year-on-year basis and declined by almost 20% on a Q-on-Q basis. Our utilization level was 83.5% during this quarter as compared to 86.5% in the previous quarter. Our EBITDA was INR 34 crore as compared to INR 4 crore in the same period last year and INR 57 crore in the last quarter. This decline in EBITDA was due to impact on top line as well as an increase in employee benefit expenses on account of annual appraisals. However, we have been able to maintain strong EBITDA margin of 15% with our ability to pass through flat cost to customers. Net profit for the company was INR 24 crore with margin of 10.5% compared to INR 1 crore with margin of 1% in Q1 of FY 2021. During the quarter, we had incurred a CapEx of INR 16 crores towards our Gurgaon sorting center, and we are focused towards making it fully operational in the next 6 months with automation. Our Pune sorting center is now operational from June, which has increased our capacity and focus on West region. I would like to reiterate that -- the fact that we have been able to maintain healthy cash flow despite the challenges faced. And during the quarter, we were able to generate cash flow from operations of INR 34 crore. As we are an asset-light business model, we continue to strengthen our presence across the country and maintain a strong balance sheet and create value for our shareholders. So thank you very much. And now I would like to open the floor for Q&A. Over to you, please. Yes.
[Operator Instructions] We have a first question from the line of Alok Deora from Motilal Oswal.
Sir, just had a couple of questions. One, just wanted to understand how has the situation been on a month-on-month basis? Like how -- have you seen any significant improvement from July onwards and some part of June as well? Because of COVID second wave impact had -- the impact had come down. So have you seen any sort of positive development there? And secondly, also the margins, while they are still healthy at around 15%, they have still come up by nearly the 19% level, which we saw in the last quarter. So what's the sustainable margins now which we are looking at over this year and even the next year? If you could just highlight that.
So question 1, situation month-on-month, yes, it is increasing. It is on the upward trend. I'm not seeing anything negative so far. Margins, you see, there's something -- of course, dynamic of your overall growth. So since we had the lockdowns, we saw that the volumes had dipped. And of course, it's a function of that. So when we see the volumes pick up, we will also see the margins go up back to the same levels of 17% to 18%.
Sure. And sir, also, did we have any kind of impact due to the fuel price change? Because in the opening remarks, what we understood is it was mainly because of the employee cost increase. So any fuel price change also impact would be there in this 400 basis points drop, which we have seen on a quarterly basis?
Very less impact of fuel. And the salary increase increments is very essential in these times. And I think we would only -- we would be the only logistics company in India that would be doing that. So if you look at the trade-off, we did not substitute one for the other. We also gave increments, and we also passed on the diesel fuel price. So I think it was a good mix and match.
So customers actually will be -- as in, we were able to pass on the price increase. So...
Correct.
Okay. Okay. Sir, just last question from my side. Any change in our guidance or outlook based on how the first quarter has been? Because in Q3 and Q4, we have seen pretty strong rebound and the outlook on -- yes.
See, it's like this. Q3 and Q4 are perfect example of how the economy was behaving. So if the economy is behaving fine, then the -- then we will not be shy of 2-digit -- early 3 figures but -- early [ 30 ] figures, even [ 30 ], right? So I think it's all depending on the economic level of the country. And as it grows, we would also grow in tandem.
Sure, sir. Sir, just one last question now. What's the CapEx guidance for this year?
CapEx is still -- we will maintain at about INR 100 crores or something. And -- yes.
[Operator Instructions] The next question is from the line of Arpit Shah from Stallion Asset.
I've got one question. In the last call, you had mentioned that you wanted to double your business in the next 4 or -- 3 or 4 years roughly. And your profits would only go up in last 3 or 4 times. I just wanted to understand how would that happen? Because in Q4, we had margins of close to 80%. And that is the highest margin that we have ever get. So the only thing is, margin is actually going to 25%, 30%, and you see a lot of optimization in the next 3 or 4 years. How do we go [indiscernible]? How do we go from INR 100 crores to INR 400 crores in the next 4 years?
So first of all, the top line will be a component of the economy. And similarly, if we were able to double our revenue, which is, let's say, it will be about INR 1,800 crores or INR 2,000 crores, I don't know, in 4 years, INR 2,000 crores, then the margin on that would be -- EBITDA would be around INR 400 crores. So I think -- and Mukti, you want to also include your reply in this?
Yes. So rightly said, sir. So we will be -- do like -- yes, if we double our revenue, our margin will be almost 4x of that. So supposing we are right now INR 1,000 crore, we will be making INR 2,000 crore revenue, and PAT level will be more than INR 300 crores.
INR 300 crores PAT level, okay. And what kind of margins level we will have? Like last quarter in Q4, we had a revenue of INR 280 crores and we did have margin by 18%. I don't think that was a peak quarter sales, right? So typically, in this quarter, what percentage of margins the company can actually go to in terms of sorting and with kind of automation?
Your voice is not clear actually.
Hello?
Yes.
Yes. In Q4, you had a revenue of INR 280 crores and EBITDA margins of around 19.5% to 20%, okay? That was not the peak inside the company. If there is a peak revenue valuation and peak utilization of your trucks and we have sorting and kind of automation also, what would be your peak margins look like? Would it be 20% or would it be higher?
So in last Q4, it was a kind of a very good example. We had the right kind of revenue and right kind of utilization of our trucks. And we had like 19%-plus margin levels. So we -- you will be seeing -- next 3 quarters, we will be achieving even more than that. So whole year, we want to be -- keep the margin in the range of 17% to 18% the whole year. And our peak, by 2025, at least we want to be reached on a 22% kind of percent of EBITDA level. And in our case, EBITDA and PBT does not have any big difference because we don't have the -- we don't have any interest cost, and depreciation cost is also not so high. So it will be directly contribute to my PBT. And ultimately, whatever comes added back. So by this, we want to be also increase the -- it will be happen by 2, 3 contributing factor. One is, obviously, we will be keep increasing our annual prices with the customers. That is now a standard practice in our company. And second thing, utilization of trucks, last quarter, we had done around 86.5%. So we want to be first to be reach in the range of 89% to 90% and which is achievable, yes. So that's it.
And what kind of competitive advantage TCI Express is building against some of your key funded players in that space? Because some of these players will be entering where you are present. What kind of corporate advantages we are building around that? And any kind of technology that we are using and kind of technology we are implementing so we can get a larger number of plants which are [indiscernible]?
We are actually not -- we think nobody is entering the B2B space. I mean, everybody is entering the B2C space. Even the latest listing by that food delivery company is in B2C. And all the other key players are entering the B2C for last-mile delivery, which also has a short-term run rate. So I think B2B is still very difficult to enter, to operate. And technology is something which is, at least in TCI Express, it is the foundation and the backbone of the business. We use AI and data analytics, without which we cannot function. If you log into our ERP, it's all that information available, and that's possible through data analytics. And we are now looking at also getting artificial intelligence for deciding the branch distances and which customer, mapping and all of that. So the technology is all integrated. The CRM is integrated with data analytics, which is integrated with GPS, which is integrated. So it's all integrated. Nothing is stand-alone. And yes, hope that answers your question.
Got it. Got it. And just one last question I had. Regarding your new fleet, which is going to be a much larger...
I can't quite hear you.
Hello?
Yes. Can you talk a little like slowly? Yes.
Yes. You're planning to include a larger fleet, larger trucks for our fleet. And this will be -- almost around 45%, 47% of our fleet [indiscernible] which broadly adds to the margins. So where are you on that?
I didn't understand. I didn't get the last part. What were you saying? I heard the large fleet, 45 something.
Yes. So we are planning to have larger fleet, larger trucks in our fleet, right? And I think by your statement, there are 45% to 47% of our...
My apology, but your voice is not clear kindly, please. We are not...
[Operator Instructions] We have a next question from the line of Dhruv Jain from AMBIT Capital.
Sir, I have 2 questions. One would be data keeping question. If you could share the tonnage for this quarter?
Yes. So tonnage for this quarter is 1.75 lakh ton.
Okay. And also, I had a question on the branches. So I see that in this quarter as well, we've added about 15 branches. And over the last [indiscernible] on a branch expansion mode. So I wanted to understand, how does the maturity pattern of this branch behaves? As in, when will the branch typically reach a peak revenue? And how do you see this number of branches expanding as you take the path of INR 2,000 crores revenue in the next couple of years?
Did you understand?
No, I didn't understand. Like, the INR 2,000 crore, what, revenue? How will I get the branches?
I mean, how many branches do you look to add? Are you looking to add over the next couple of years? And wanted to understand that when does a branch -- typically, after we set up, in which year it hits kind of maturity level in terms of the -- no, it hits the peak kind of [indiscernible]?
So peak depends on the economic activity, first of all. So there is no like set time line or it's not like a run rate where you hit a certain business volume and it will stop growing. It's not like that. It's continuous, number one. Number two, how do we plan our branches? What was that your question?
Yes. How do you plan your branches and how many branches do you plan to add in the next few years?
So next 2 years, we are planning to add about maybe 200 to 250 branches. And how we are adding them is based on where the manufacturing companies are coming up and the SME companies are situated.
[Operator Instructions] The next question is from the line of [ Shalini Gupta ] from Ashika Securities.
Sir, can you hear me now?
Yes. Loud and clear.
Okay. Sir, I wanted to ask because see, during the quarter [indiscernible] we found that a lot of [indiscernible] and you have delivered like 130% [indiscernible]. [Technical Difficulty]
Now I can't hear you. I don't know what is happening.
Ma'am, there is some network issue. We are losing you in between.
Okay. Can you hear me now?
Yes. Now it's okay.
Okay. So I mean, I was just asking, like, sir, through the quarter also, we had a lot of lockdowns. So how come -- and SMEs and MSMEs are the majority of your business. So how come they were not impacted? Because finally, everybody's business was impacted because of lockdowns, which, I mean, the lockdown itself started in May. But offices were shut before that as well. So I mean, if you could just please explain that.
So the kind of SME that we deal with are not the ones who are mom-and-pops shops who deal in cash. They are far larger manufacturing companies. And even if their offices were shut, the -- at the back end, the plants are operational. So that's not an issue. And we saw that, again, the same situation that the SMEs were first to bounce back and compared to the larger companies. The larger companies also had their annual maintenance shutdown in the months of -- they used that lockdown period for their annual maintenance lockdown. So a lot of the activity we saw with the large companies, auto companies especially, scaled up. But SMEs were actually were active, and we really benefited from having them. And MSMEs is not a large scale of our business. It's 15%.
Okay. And sir, my second question -- last question is that, I mean, this -- the business you're in, which is logistics, B2B also, is hypercompetitive. And you -- earlier in the call, you had said that nobody is entering the B2B space, the express logistics. So I could not clearly hear your answer. If you could please just help me understand as to where your competitive edge lies in this hypercompetitive industry.
Our competitiveness lies in B2B, which requires a hub-and-spoke model. And to build a hub-and-spoke model, it requires -- first of all, before billions of dollars, it requires knowledge, local country knowledge, which billions of dollars cannot buy. So I think that is something which is very difficult and -- to approach manufacturing companies. And to create a sustainable model, which can go through these tumulous (sic) [ tumultuous ] times and when the times are good to kind of like ride the wave, is very important to build that business that way. And B2B business is something which also depends on manufacturing, mostly on manufacturing. So as long as the manufacturing is stable, is growing in the country, B2B business will also grow.
[Operator Instructions] The next question is from the line of Rahul Sony from SMIFS Limited.
Congratulations for the good set of number. So couple of questions from my side. First of all, what is your current tonnage handling capacity? And how it will move over next 2 years post the operationalization of your new sorting center and addition of new branches?
Mukti?
Yes. So Rahul, this is basically -- if you see, all sorting center are not the storage center. They are just on a -- they have to be material come in and out. That is the only function we have. The question is that, how we will be make them as more efficient? And that's why we are putting automation -- started putting automation in this center. And like example is putting a -- one time, material is staying like 15 hour or idle time is 50 hour. We -- our endeavor to bring it down to 6 to 8 hour. So that way, in the same capacity, we will be more revenue or more tonnage. That is the one aspect of that. And second aspect of our trucks, so trucks addition is also very dynamic. In this quarter, this truck utilization level was 83.5%. And in last quarter, it was around 86.5%. And our endeavor to -- in next 2, 3 years, we want to reach on utilization level of these trucks level at least 89% to 90%. So this way, we will be -- keep our costs under control and further bring it down. So like our operating margin this time is around -- in last year, we achieved 33.5%, which we're now planning to, in this year, to achieve at 100 basis points more, like 34.5%, yes.
Okay. And sir, if you can provide some more details on your revenue breakup side? Like what was the breakup between your SME and corporate clients and also in terms of sectoral exposure?
Mukti?
Yes. So here, revenue is -- from SME and corporate, it is almost 50-50. And we also want to be keep that ratio, though profitability with the SME customer is higher than corporate customers. But yes, obviously, big customers giving this -- corporate customer giving this volume, big volumes, and small customer is giving the good prices. So we have to be maintain this mix and match. And another aspect of sectorial is either this, the 55% revenue is coming from our 5 sectors. And these are basically auto, pharma, engineering, textile and electronics. So these are the major 5 sectors we are capturing.
So the contribution of this sector was more or less same compared with the March quarter?
Yes.
That we also want to be maintained. We don't want to be depend on a particular one sector. And that is actually a strength of our company. We want to be 3, 4 kind of diversification. One is number of customer, SME versus corporate. We want to be maintain a good balance. Second one, diversification of sectoral revenues. That is also we want to be -- not want to be dependent on one particular sector. Third one, zone-wise, revenue will also not depend on a particular zone. It is highly, highly, widely diversified in each zone. And fourth thing, on supplier side, also, we are not depending on particular supplier or route or vendor. We are highly, again, diversified in that sector also. And that is always help us to come through with all kind of challenges and ultimately help us to improve our margin levels continuously. And it will be -- this -- we will be continue to go on time to come also.
Sir, one last question on your gross margin.
[Operator Instructions] The next question is from the line of Alok Deshpande from Edelweiss Financial Services.
Yes. Can you hear me?
Yes, Alok, please.
Yes. Yes. My question...
Alok's line just got dropped. We'll move on to the next question. That is from the line of Depesh from Equirus Capital.
Sir, your rental costs in FY '21 was around INR 30 crores. So just wanted to understand what will be your savings in FY '22 once the Pune and Gurgaon both commence operations? On an annualized basis, if you can give that number, please.
Yes. So I think this year, we will be -- have the same kind of cost because sometimes some percentage of increase is also happening. Plus, we are also expanding branch network. So we will be keep adding the branches, and that rental will also be time to time is adding. So it may be more or less, maybe same. Or like Gurgaon, we will be add on after in Q3, basically. So we will not be able to save that for -- rent for the full year. Pune, we add on like last month of this Q1. So this way, I think we will be keep that same kind of amount in amount-wise, yes.
Got it. And sir, going forward, say, in FY '22 or '23, which locations are you targeting for creating of bigger sorting centers?
Yes. That is very good question. So we -- next target would be like Chennai, Nagpur, Kolkata, Mumbai. So these are the major locations we are planning to have in the next 2, 3 years.
Got it, sir. And sir, you have -- given that you have transported around 50 lakh vaccines and all of those numbers, but can you give what kind of revenues from the new service offering, that is C2C and Cold Chain, did you see in first quarter?
So revenue is not significant to be disclosed right now. But yes, we are gaining the markets there and our complete focus on pharma industry only. We are not going for other like food industry and all. So our complete focus is on pharma basically. So we are gaining market share and also adding the customers in this sector.
Got it, sir. And sir, any rate card increase you have taken for this year as you do every year, like the base rate card increase apart from the fuel inflation?
Sorry, come again?
Any rate card increase that you take every year apart from the fuel inflation that you passed through? Any base rate increase that you have taken for this year or you're planning to take this year?
Yes. Yes. So this is a very good question. So we have really increased around 2% impact is there for rate hike with the customers.
You already taken in April and May, you're saying?
Yes. Yes. In this Q1, I'm talking about.
The next question is from the line of Kunal Bhatia from Dalal & Broacha.
Congratulations on a great set of numbers. Sir, just wanted to know in terms of volume, so last year, same time, we had a total volume tonnage of 73,000 tons, if I'm not wrong?
Yes. Correct. Correct number, yes.
Okay. And sir, how about in Q1 FY '20?
'20, I don't know. I need to recheck it. I will be separately give to you, please.
Okay. Okay. And sir, my second question is in regards to -- after the Pune sorting center, what would be the total -- a, what would be the total square feet which we would be having? And secondly, also, you did mention about the improvement on the turnaround time. So if you could give some sense on that. What is it currently? And how has it improved? And my -- yes. Yes, sir.
Yes. So on Pune sorting center, we just started on last month of this quarter only, in June only. [indiscernible] has yet not put in this center. First, we will be put the automation in our Gurgaon one. We also mentioned in our last call that we updated that thing. Firstly, we will be put automation in Gurgaon. Then subsequently, we will be put in Pune. So I think we will be able to put the automation in next year. Turnaround time is -- it is very early to say something because it just started in this Q1. So I think revenues will be -- once this volume will be pick up in this quarter or subsequently, then we will be get that benefit. Certainly, we will be, I think, like get a benefit of like 50 basis points in overall cut in my cost.
Okay. Okay. And sir, just finally, wanted to just reconfirm. You did mention that at about INR 2,000 crores of revenue, say, by FY '25, what kind of EBITDA are we expecting?
So we are expecting an EBITDA in the range of 21% to 22%.
21% to 22%, okay. So from INR 142 crores, which we have in FY '21, we are expecting about...
INR 400 crore plus.
INR 420 crores. Okay. Okay, sir. Got it.
The next question is from the line of Deepak Lalwani from Unifi Capital.
Sir, my question was on the H2 numbers. So as the economy is on a gradual recovery, what is the kind of growth that we are seeing in the H2 of this financial year, given that last year, the base was set quite high for our company?
Yes. Chander, sir?
So I will say that if you look at the growth for this year in H2, if it's in the range of 7% to 8%, I'm not sure. I don't know what will be the impact of third wave, when it will be. People are saying it will be before Diwali. So I don't know, very hard for me to comment yet. But going forward, I think if things are in, well, progress, then I feel that we would have growth, top line growth definitely. And bottom line will be accordingly.
Okay. Got it. And sir, the value-added services which you have added in Cold Chain and C2C Express, what will be the contribution of these services in H2?
So again, it's very difficult to say. If the third wave comes in, these things will be a big question mark. But our goal is to maintain our profitability for this year, what we have given, the guidance that we have given and also the top line. So -- but as a product-wise, I do not see much of a challenge in growth.
The next question is from the line of Prit from Wealth Finvisor.
I think the only question left for me to ask was, are we right now at, say, 86% utilization or still at the 83 percentage mark?
No. No. So that was very temporarily we have in the Q1 because we faced the challenge of timing difference in each state for the lockdowns. Last year, you can say we may be fortunate or we were fortunate or unfortunate. All India was equally closed down or under lockdown. But at this time, there wasn't a highly, highly difference. Like North India and West region maybe open up, then Southeast, going slightly longer for that because they have the more cases there. And still, they are under pressure or under lockdown situations in some places. So that's where this utilization level has been come down to, around 83.5%. And in July onwards, we already reached on a pre-Q4 level.
Okay. Got you. Okay. One other comment is that recently, Gati has mentioned that they are also looking to follow a similar strategy of automating their sorting centers and spending a lot of CapEx on that. Sir, I remember in the past calls, I think, Chander, you had mentioned that you may be looking out to acquire Gati's customers and hopefully increasing the top line via that route as well. So any...
We are definitely all out in getting our competition customers because customers -- because they are not -- they are having a lot of internal issues. Our competition has a lot of the internal issues with corporate governance, with finance, with a lot of other issues that they have. And what that company, what they announce and what they actually do is -- are very, very different. So you will see over time as to what they're going to do because -- and what they have announced, how much of a match or a mismatch is in that. That's all I can say for that competition.
The next question is from the line of Krupashankar from Spark Capital.
Am I audible?
Yes.
Yes. Just one question from my side. So I wanted to understand on your next CapEx link, wherein you're setting up sorting centers in Chennai, Nagpur, Kolkata and Mumbai, I just wanted to get a sense that this -- at present, are these sorting centers operating at full capacity? And in terms of turnaround time, what you're anticipating on a 50 bps or perhaps in the Pune sorting center? Would it be fair to say that around 20 to 50 bps would be the expansion with the incremental sorting centers getting modernized? Is that a fair assumption to make?
Yes. So Krupashankar, you rightly asked that. So whenever we will be go in a newer one, we will be put our effort to make them automated from -- since day 1. And yes, you rightly said whenever we will be go, we will be improve our efficiency. And turnaround time will be faster for that. Ultimately, how it will be worked? So like one truck is idle for my sorting center like 7, 8 hour right now. Tomorrow, supposing it will be only idle for the 4 hour. So it will be reduced from 8 to 4. Ultimately, their trip in a month will be increased. And they will be -- whatever they save on that side, they will be passed on to us. So that is the one thing. Second thing, my customer experience will be also increased. So that's why we will be get the -- we will also able to get the right kind of price in future. And continuously, we will be able to get that. So we have a very internal strategy to how we will make this as a success story and get the right kind of achievements, yes.
Sir, yes, I understand that part. But my question was that improving the turnaround time in one sorting center is a fair thing despite. But wouldn't the efficiency would come in if you're pairing your hub to hub, and both the hubs are operating in an efficient manner. So is it -- my question was more relating to, is it fair to say that as and when you add in or modernize more and more sorting centers, that is when you would see a significant portion of margin expansion coming through? Is that a...
It works also independently because you see that every sorting center is also an operational excellence hub where material is coming in. It's like an airport where planes are coming in from different cities and departing to different cities, arrivals and departures. So the faster you can do arrivals and departures, you'll have -- you can save on labor cost also through automation. So there are multiple factors that we have to look at. And if my North is able to speed up the turnaround time, then the materials will reach faster to South India, to West India, to East India. So overall, one sorting center will start giving that benefit also. So when you have a culmination of all these other sorting centers, for sure, it will be giving out a very good result.
Okay. Got it. And one other question was on the revenue guidance, and sorry if I missed it. Last time around, for FY '22, you had guided for a 40% revenue growth for FY '22. So is there any revision in the guidance?
Not really. We are stick with these guidelines, what we had given, because we have not seen any significant reduction in our revenue in Q1. And hopefully, Q2, Q3 and Q4 will be robust for us. So we will be keep intact on that.
The next question is from the line of Ronald Siyoni from Sharekhan.
Yes. Am I audible?
Yes.
Yes. So sir, I just wanted to understand the competitive dynamics. Like when Gati had lost market share and TCI Express had picked up and become a leader. So at that point of time, whether it was the only company to increase the market share significantly or will we also be proportionately able to increase that share? This is the first thing. And second one -- yes, if you can.
So definitely, our market share will be the highest in the country in time to come because we know the underlying problems, as I mentioned before, with the competition. They have a lot of issues and which they don't -- which easily said than can be done. To clear out their past problem, they will take another 3, 4 years. And I can comment on them on -- or anyone. They have management issues. They have finance issues. A lot of issues are there. Technical know-how is missing. Strong management issues -- strong management is missing. Who is -- where is the driver of a company? What is his background? Is it an international freight forwarding or is it express Indian, Indian express? A lot of things matter in that sense, and we are now geared already for a higher market share. We have always been conservative in declaring our market size because of the unavailability of data. But as I go forward in collaboration with NITI Aayog and all the other industry data, I'm quite sure that by H2, and I would have a fairly bigger market share than other competition.
So you also are including the market leader in these comments like...
Absolutely, there is no doubt about that. The simple thing is when you increase branches, what happens? How many companies have you heard in the country that in 5 years they have announced, I have opened -- they have opened so many branches or they're doing this sort of action. Everybody is talking only about getting out of their problems first, and then only will they be able to establish themselves in the market. So your first comment about some others taking on the business, sure, that company can possibly pick on the company of -- the business of the company which is not doing well. But at what pricing? That pricing was also you have to look at. Now if you look at -- if you study the data correctly, that pricing was for throwaway price, lower than FTL pricing. So that sort of thing is not required to do market share, unless you want to be a Zomato, and you have INR 4,000 crores losses or whatever, I don't know.
Yes. And the second one would be like going ahead, like everybody is targeting SME segment and SME revenues. So going ahead, what do you see, like a shift of market share between the players getting the growth or the market...
See, I'll tell you one thing, very example -- very clear example. You had a Rivigo, which came, which tried to take market share from everybody. And what did the SME customer do? He folded his hands and said, "Please, we cannot work with you." And they all came back to us. Same thing, when these companies, new companies or old companies try to get into the SME sector, there is a certain degree of knowledge that you need to have for doing that business, which companies like what we have mentioned do not have that. They don't have that approach, the branch approach. They have the -- maybe the franchise approach. Now when you have a franchise approach, the SME does not usually go very easily to the franchise in the express trucking business. So I think that is a big factor and if you look at the organizational structure also as to how the SME reacts.
The next question is from the line of [ Ayush Modani ], an individual investor.
Yes, sir. So I wanted to have a query on -- a couple of queries. So like I heard a BlackBuck is also in the trucking. So it's a start-up. So I've seen that it has a model of -- asset-light model of -- everything is same for BlackBuck and TCI, mostly, on most parameters. So although it is not profitable, but we are profitable as a TCI. So how do we see the competition from, like you said, Gati and all their management and all those issues? But BlackBuck is a youth of starting up. And it has bought customers like Vedanta, Tata, Asian Paints. And recently, a week back ago, they received a good amount of funding also. So how do we see the competition like these -- those type of start-ups? Like...
Right. Mr. [ Ayush ], let me tell you about the industry. In express industry, you -- we do not have the need of something like a BlackBuck. BlackBuck is a vehicle provider. If you have different fleets, you have like truck [Foreign Language]. They deal with the truck [Foreign Language] and then they provide to the transportation companies. Or anyone who wants the trucks, they provide that. So they do not have any customers as such. And if -- any customer, like a logistics company, like ours, never uses BlackBuck because their pricing is -- again, it could be more than pricing. It's a question of stability that the truck that they provide, if it's usable or not usable, if it's there or not there, if they could steal the material or not, their -- so their business model is totally different. It is not at all in sync with what we are doing. Our -- we have the customers in our hands. We have the operations in our hand. They're -- we are a company which is run on computers, which basically has -- tries to match buyers and all that. So that's the clear-cut distinctions of what they are doing and what we are doing. We did not have hub-and-spoke -- they do not have a hub-and-spoke mechanism. So that's the number one point. And second is that funding, sure, I mean, they are like the other companies, which are in the limelight for getting funding and getting unicorn status. But here, we have a different goal altogether. We want to give value for shareholders by actually giving dividends.
The next question is from the line of Hatim Broachwala from Union Mutual Fund.
Sir, my first question is on the new businesses which we have sort of introduced. So I can understand that we cannot give any near-term guidance. But even it will be helpful if you can give some sort of long-term guidance on the new businesses.
Yes. So we actually -- we also mentioned in last time, we want to be that these other services, including everything, next 4, 5 year, we want to be make them around 20% to 25%. Right now, we are at around 10%, other -- these are the other services. And that's why, yes.
Sir, what are -- is included in other services apart from that Cold Chain and the other business which we have launched? Was it all included?
I'm talking about surface and nonsurface. So surface, we have around 90% business. And 10%, we have the air and other all, including air domestic, then air international and then Cold Chain. Now this is pharma Cold Chain and C2C.
Sir, just to understand, the Cold Chain storage and C2C, the margins, would it be same as...
It is not a storage. It's not cold chain storage.
Sorry, Cold Chain transportation and the C2C business, that will be -- what sort of margins one can expect? Is it the same as our existing business? Or it will be different than our existing business?
Yes. Margin is -- we -- whatever business we are going to start, we will be keep in mind the margin has to be improved from the current levels. So you never compromise on a margin level. So whatever we are adding on, it has to be on the same level or even more than that from the current levels.
Okay. Okay. Sir, my last thing is I was not able to get this tonnage number for this quarter.
Yes. It is 1.75 lakh ton.
The next question is from the line of [ Ravi ], an individual investor.
Can you hear me?
Yes.
All right. So my question is slightly from the longer term. So apart from our core business growth plans, what are the government initiatives and policy changes that can really boost not just our company's business, also the overall logistic sector?
So government should focus on fuel pricing; and number two, the quality of trucks that we have in India.
Okay. And anything on -- which you mentioned in your presentations repeatedly, like [indiscernible] logistics...
Sorry?
I was hoping some light on -- which you mentioned in the presentations, multi-modal logistics parks and national logistics policy.
Yes. So that -- these initiatives, whatever government is taking now, this is very helpful for the whole industry. And government is also putting their highest budget outlay on road sector development. They started making India initiative. Then they also increase the extra load in trucks. Third one, they're also putting highest effort to bring up this all SME or MSME and -- so these ways you see there. And also now, the new one is a PLI Scheme. So these -- all things will be improved on manufacturing in India. And ultimately, it will be benefited to express companies like us for the long term, yes.
All right. Just one small question. So if I'm not wrong, we launched the Cold Chain Express this year only, right?
Sorry?
We recently launched Cold Chain Express, right? We were not offering it last or before that?
Yes. Yes, we're just offering -- yes, we started in the last quarter.
So any particular reason which stopped us from offering this service before the, let's say, COVID or -- COVID era or before the vaccine opportunity arised?
I could not understand your question. What you're saying? Your voice is not clear actually.
Can you hear me now?
Yes.
Yes. So I was trying to understand what stopped us from offering the Cold Chain services before COVID and vaccine opportunities?
Yes. So the simple reason was that we were doing pharma logistics, pharma express. And the demand of Cold Chain came now only. Earlier, before this, there was not much demand for the Cold Chain Pharma Express. So because of that, we started now.
We have the next question from the line of Abhijit Mitra from ICICI Securities.
Congrats on a good set of numbers. So my question is on cost. I was just trying to understand the cost element a bit more. On the other expenses ex rent, I think the biggest contributor for cost savings last year was the decline in travel expense. I think it dropped from INR 10 crores to INR 2 crores. Now as revenue ramps up, how much of this will come back and how much of this is sustainable is what I wanted to understand. That's my first question. Second question is also on the square footage that we have today, both on -- under owned as well as under rented category. If you can give the numbers, current numbers, that would be great.
Yes. Very good question, Abhijit. So on other expenditure side, you rightly said, we have very good reduction of another expenditure, like, almost we have reduced more than 20%. And in this year, this tempo will be continued. And still, we will be low what we have in FY '20, before COVID period. So I think we will be maintain that because now we -- whatever we have done, we have done on a sustainable basis. Like we have done virtual meetings, we have the virtual to -- virtual conferences, virtual training, so -- virtual docket and virtual billing, digital billing, digital collection. So various things we have done for the permanent and for the longer term. So I think we will be -- what expenditure we incurred in '20, we may be reach even in -- by '23 or '24.
Okay. Okay. That's great. Yes, that's great. And in terms of area that we have under owned and under leased category as of, say, FY '21 or Q1?
Yes. It is -- actually, it is not important for us. We are not gauging this in -- on this basis, actually. We just think how we can -- we make our turnaround time reduce on that. So area for us is not so much important. Important is the -- how we can be make improvement in efficiency and ultimately reduce the turnaround time on that because there is no storage facility we have. So how fast we can be through the material, that is important for us. So we're really not looking these figures internally also, not so much.
The next question is from the line of Rahul Sony from SMIFS Limited.
Sir, I just wanted to understand one thing regarding the gross margin. Despite the increase in the revenue in -- during the last quarter, our gross margins have declined by 315 basis points, while our realizations have moved compared to last year. So are we not be able to pass on the fuel price increase during this quarter?
So you are comparing with Q4?
No. Comparing with last Y-o-Y.
No. So Y-on-Y basis, you can't be compare because that time, revenue was very low. And that time, we achieved our gross margin of 36%. And that was temporary because all India was closed down. So we -- the capacity utilization level was very high on that time. And mix of material was also different actually. Because sometimes mixes of different sector is also important. Some sector is giving the good profitability. Some sectors, not giving what kind of return load we have. So various sectors has worked there. So now we are very clear and we are able to -- whenever diesel is increasing, even it is a positive arbitrage for us always because we are getting the right kind of increase from the customer and in turn or in vis-a-vis, we are not passing on the same kind of -- to our supplier side also. We have some gaps there. Obviously, because -- so like supposing vis-à-vis, the increase is 10%. So we will be trying to get 10% from the customer. And in turn, we not will be give the suppliers like equal to 10%. We maybe give like 6% or 4%. I'm just giving an example of that, yes.
The next question is from the line of Prit from Wealth Finvisior.
Yes. Can you give some comments on the progress on the automation? So you mentioned that Gurgaon is where the automation will be carried out first, right?
Yes.
Now what is the -- because given the lockdowns and all, are there any delays in getting that?
Yes.
Hello?
Yes. Sir, please go ahead.
You have Prit? So...
We take on the next question.
Yes. Sorry, I'm just able to -- I just got here.
So we actually -- we -- yes, it is rightly said, we will be first put that in Gurgaon, and it is not delayed. It will be operational in Q3.
So when you start Q3, you will operationalize it and it will be operationalized as an automated center?
Yes.
The next question is from the line of Radha Agarwalla from B&K Securities.
I just wanted to know if you could just reiterate your revenue guidance for FY '22 and FY '23.
So we -- revenue we are targeting in the range of 35% to 40% over '21. And then subsequently, we want to be in like 18% to 20% like by '23.
As there are no further questions from the participants, I would now like to hand the conference over to Mr. Chander Agarwal for closing comments.
Thank you, everyone, for your participation. And I am delighted to continue offering the best express service in the country with my well-established team. And I look forward to having a call again next quarter. Thank you.
Thank you, everyone.
Thank you.
On behalf of SKP Securities Limited, that concludes this conference call. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.