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TCI Express Ltd
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Hi. Good evening, everyone. Welcome to the Q1 FY '24 Results Conference Call of TCI Express hosted by y Emkay Global. We have with us today, senior management of the company represented by Mr. Chander Agarwal, Managing Director; Mr. Pabitra Mohan Panda, Chief Operating Officer; and Mr. Mukti Lal, Chief Financial Officer. We thank them for giving us this opportunity to host this call.
I shall now hand over the call to Mr. Mukti for taking us through the investor presentation. Post which, we'll open the floor for questions. Over to you, sir. Mukti sir, we can't hear you.
Mr. Mukti is joining back. Please bear with us.
I can take it forward until he joins.
Yes. Good evening, everyone. Now I'm audible, Anshul?
Yes, sir, we can hear you.
Yes, please. So good evening, everyone, and TCI Express Limited, we welcome and thank you all who are joining us here today for this Q1 earnings call. We have uploaded our earnings presentation on our website also, and I trust you had a chance to review it.
I start with I will present you a overview of our quarterly performance, the prevailing and projected industry environment and the financial performance of the company for Q1. So highlight is that we started this Q1 on a very positive note, and we achieved a growth of 5% and achieved a revenue of like INR 306 crores. And this growth is basically supported by a strong support from the -- our MSME customer, which is contributing almost 50% to 51% revenue to our overall revenue. And in spite of in a continuous high inflation, our margin has been further improved by almost 30 basis points. And we maintain our PAT level margin on 10.6%, which is the highest in this industry. And our utilization level in truck in this quarter was -- again is around 83.5% plus, and yes.
So this is some extract from our MD's comment on this business. So he -- we, as a management team, we hopeful to -- that manufacturing sector is receiving strong government support, and it is leading to and we anticipating a growth of 13%, 14% in volume and 15% to 16% in my revenue part. And as companies ramp up their production activities, the demand for express logistics is expected to be surged in time to come. And this trend is likely to boost a significant growth in the express logistics industry as businesses rely more into heavily on efficient supply chain management and transportation services to meet increasing demands.
So this is our focus on that.
And you're all aware that like we -- this Pune has already been operational in 2021, and we are now in the process to automate the same. And hopefully, we will get it automated by this full year end and by 2024.
And we are happy to announce that we received this LEED certification for this -- our 2 centers, both Tajnagar and -- for this Tajnagar center. And this is for sustainability basis. They're covering like 3, 4 aspect of that, and we did that well. And that's why they award this LEED certification to us.
So again, after this, our demerger, we completed successfully like 7-year plus. And now our workforce is almost 3,500 plus. And almost we're serving 60,000 locations on basically -- [ 6,000 ] locations for pickup and delivery. And we're expanding our branch network continuously and branches has reached on 950 plus.
Yes, please, next. So our USP and continuously we focusing on improve our operational efficiency, and that's why we more focus on automation including and consistently we drive by asset light model and high-value cargo movement. We need in a very -- working on very low working capital. We have the very lowest cost structure in the industry. We also expanded a similar kind of services since last 2 years. And obviously, we are -- have our own branch network, so we don't have any franchisee, and have the kind of containerized -- 100% is a containerized movement. Yes. And we are now -- the latest one is like we are continuously focused on our automation and one already did and second one will be happen in this FY year-end. Yes.
So this is some -- our network efficiency and service -- what kind of service we are offer. So this is there, yes. And this is the performance, quarterly performance we had like we achieved INR 306 crores revenue with a growth of 5%. Margin has improved by 30 basis points. And PAT level has maintained on 10.6%, and yes.
In current quarter, we have not done a major CapEx of that. And is hardly -- we had done a CapEx of INR 4 crore only in this quarter, and this means basically for spent money on IT equipment procurement and digitalization that we have done. And in this quarter, we opened up 5 new branches, basically in West and South region.
And this is the like performance of last 5 quarters, and you can see consistently, we're improving our margin levels on EBITDA and PBT level.
So this -- our basic strategy, again, to have the diversified client base, corporate and SME, that will be continuing in time to come also. And this is our basic strength wherever we have the challenge supposing in corporate customer, then we get the support from the SME customer, and that will be continued.
And again, we will be keep continuing expansion of our branch network in metro, Tier 1 and Tier 2 cities. And new services are also maturing, and we're gradually focusing on that, and it will become like we have taken a target to be in the range of 20% to 25% by next financial year, and we are focusing on that. And also like government is also taking so many -- I will be explaining later on also in later on slides where government is also giving so many thrust on [ logistics ] sectors strength, and we are doing continuously on that.
And again, my CapEx plan is for FY '28, we want to be spend like INR 500 crores, and this is second year onwards. And last year, we did INR 125 crores and remaining 4 years, including this year, we will be spending remaining INR 375 crores. Yes, please.
This is again strategic for what we did on like taken for the 2025. And we're targeting a growth of INR 750 -- INR 1,754 crores by end of next year. Yes.
This is our GIGA Center in Tajnagar, which is in the size of 2 lakhs square feet, and this is a fully automated one, and we're getting the kind of traction of the customer, and we have improved our operational efficiency there. We're able to reduce our turnaround time almost around 60% on truck side. And once we will be -- this is the only one we have did.
Once we will be doing second one and third one, then we will get the more benefit. With this, we are able to cut down [ direct ] cost almost in the basis of 15 basis points on overall basis. And with the -- so we will keep this strategy going on. And in next, like in 4, 5 years, we will be put like 7, 8 more centers, which will be fully automated.
Yes. This is Rail Express. This is continuously getting high traction from the customer and it is highly profitable business. And our customer base has reached to 2,700 customers right now. And we -- our routes we're doing, that is 125 routes we are serving right now and is getting high growth in this segment, and we are hopefully to be reaching FY '23 -- '25, we want to be reached on at least in the range of 4% to 5% of overall revenue.
This is Pharma Cold Chain. The pharma cold chain is also gradually growing, but we are not thrusting more in doing that because India is slightly cost-sensitive market or price-sensitive market. And we also like focusing only on pharma cold chain. So that's why scope is very limited. So that is going on, but we were at very low pace.
Yes. And C2C, yes, this is a new segment. This is a new -- niche segment, and we almost reached 5% to 6% on this segment, and it is contributing to our overall revenue a very good way. And at time to time I explained that when it is a basically a high profitable business, and we are growing it on a very -- and it is also like asset-light model where we are not putting any CapEx on that and getting good return on capital on that one.
So this is the last, key takeaways we have taken in the last 7 years. And like we increased our locations from 32,000 to 60,000 in the last 7 years. And also like branch network has increased from 500 to 950, and sorting center increased -- sorting centers not increased much but yet from increased 26 to 28. Customer base has also increased from 1.6 lakhs to 2.25 lakhs. And on-site, 7-year track record of profitability like CAGR of, we grown on our EBITDA margin fantastically on 21% and net profit of 24% in last 7 years. And we also maintained 35% of return on capital employed since -- continuously.
This is again, we are a debt-free company, and we will be keeping that status continuously. Yes, we can be -- we already discussed on the last -- we can just skip please.
Yes, this is also, again, our 7 -- 6 years track record you can see here. Yes, please.
Yes, these are key ratios. Again, you can see like we're maintaining 35% plus kind of capital return. Cash conversion ratio, interestingly, is also very high, like we've always maintained in 60% to 70% plus. And that's why we are working on very low capital requirements and hardly our networking requirement is only 15 -- 15 to 20 days. And since last 1 decade, I'm saying, yes.
Next, please. Yes, next. If you see -- compared with the industry players, so we are the highest profit margin generating company, and that will be -- hopefully, we will keep continuing that pace.
Yes. Next, please. So these are the basic -- these are the growth drivers for the Indian logistics industry. And this NLP, and this will be helped a lot to this industry to be integrate the various components of that. And it's the same way GatiShakti National Master Plan and also like help to all logistics companies to boost their businesses and ULIP is also there. And this is also a good news like India's logistics industry has moved up to 6 places to reach the 38th rank out of 139 countries.
And this year's announcement of like multiple infrastructure projects worth INR 108 lakh crore is also helped to improve our road sector basically. And this year, government has pushed like INR 10 lakh crore carve-out for the infrastructure development. And major component will be going into -- in road sector and construction of like 6,600 (sic) [ 66,000 ] kilometers of highways, government has taken that initiatives. And logistics industries employs almost 2 crore-plus people and is a major source of employment. Yes.
This is the management team. There's no big change on that.
Sustainability. We also did part of our annual report in this year, and we give an extensive retail working there, and we will be also -- release a separate ESG report in this year only, I think, within the 1 or 2 months. So we are highly focusing on our management thought. Our MD's thought is that we have to be -- whatever business we are doing, it has to be sustainable on all the pillar of the sustainability, and we're doing that.
Yes, please. And on awards and recognition, we are also continuously happy to announce we're getting various awards in this last 6 months or 1 year time. And part of that is a very honoring time for us.
Yes, please. And this is the -- you can see after demerger, we have given a written of 27% on our share, and that is, I think, every shareholder taken the benefit of that, and we will keep continuing that pace. We will not be led down to our shareholders on that.
Thank you. And Chander, sir, you would like to say something on that?
So thank you, shareholders, for being here and in the investor call, Q1 financial year '24. I'm very happy to see the performance of quarter 1 in the positive direction. Rest of the year will also be in lines with what our expectation is for the year as the economy opens up and gears up for further growth, its aspirations to reach $5 trillion will be definitely conducive to our express logistics business.
With this, I thank you, and we can take on some questions now.
[Operator Instructions] Alok sir, you can ask -- can go ahead.
Sir, I just had a couple of questions. Firstly, on the growth side. So this year, we have grown at around 5% on a kind of an already weak quarter of last year. So what's the outlook on growth now because to maintain a 15% growth for this year, we would be requiring quite a big jump up in the remaining 3 quarters. So just wanted your thoughts on that first?
Okay. So a couple of things. First of all, that we have been -- the economy has been on a -- already on a much higher base growth in the -- since COVID. And that base growth is now equalizing. So -- which means that if we had like 22% profit -- top line, then we had 18%, it's but obvious -- then 15%. And it's obvious that the high baseline is now equalizing. So this is totally in trajectory with the economy growth -- the economic growth. Rest be assured, there's not going to be any change in what we have projected about the 12% to 14% growth top line. And this will be in tandem with the economic growth also.
Yes, Alok, please carry on.
Yes, yes. Just a question on the margin. The margins which have come off quarter-on-quarter, do we see that going back to 16% plus in second quarter onwards?
Yes. This is sure, Alok. Actually, like Q1 has always started as a week and if you see on a year-on-year basis on this quarter, we improved our margin level of 30 basis points, and that will be continuing quarter-on-quarter basis. And as always, margins are slow in comparison to Q4 because Q4 is always the highest margin quarter. So certainly, we will improve this in this year.
Jainam, you can go ahead next.
Yes, am I audible?
Yes, yes, Jainam, please.
So sir, first question on the volume side. So what kind of volume you did in the first quarter?
So volume in this quarter is [ 2,40,000 ] tonnes we did in Q1.
Okay. Okay. And sir, can you bifurcate the revenue of other services during this quarter out of our total revenue of INR 306 crores versus same of the last year same quarter?
So now this all services ratio is like we are earning around 17% revenue from these -- all other services put together. This is like C2C and rail, air, e-com, all put together. Like e-com ratio has been reduced from earlier we were around 5%. Now it is reduced to 2.5% to 5% -- 3% only. And if you put together, it is around 17%. Last year, same quarter, it was around 15%.
Okay, okay. Got it. And sir, like we have given the outlook earlier of around 15%, 17% growth wherein we have taken 2% price hike growth. So how has been the acceptance of those price hikes in the first quarter?
So first quarter, as per plan, yes, we have taken a price hike of like 75 basis points to 1% in this quarter. And hopefully, will be -- further in the remainder part of this year we will get price hikes of around 1% more. So hopefully, we'll be -- did with 2% price hikes.
Got it. Got it. And sir, just last question on the INR 750 crores of our revenue target, so that would be growing at somewhere around 30% plus for this year and next year. So how we are looking at that particular target in the top line?
Chander sir, would like to answer on that?
Can you repeat the question, please?
Yes. So sir, we are standing at around [ INR 1,240 ] crores of revenue last year and around 5% growth we have seen in this particular quarter. So -- and we are targeting somewhere around INR 750 crores plus revenue in FY '25, which will be around 30% plus growth on a Y-o-Y basis for consistent 2 years. That is a growth has been on a single digit for this particular quarter. So how we are looking at like achieving that particular guidance?
INR 750 crores, I'm not sure.
INR 1,750 crores.
It is INR 1,750 crores yes, Jainam, yes.
Yes, INR 1,750 crores. I'm talking about INR 1,750 crores.
So you have to, again, see the level of the economic play, all right? That is very, very important. And again, it is something which is possible to do that much amount of business also, but at what cost? It will just be -- I'll be paying 10x -- we will be paying 10x of the cost, 100x the cost to do that business. So we don't want to be in that level. So if the economy is growing, as I have always said, at 12% this year, then -- sorry, at 6% this year, we will grow at 12%. If it's at 7%, we will grow at 14%. So that is no change in that.
And compared to what it was a while back, things are much different post-COVID. So please keep that in mind that the top line is again -- will fluctuate. What the guidance we had given 4 years ago is very different from where we stand only because of the -- how situation is evolving globally. We never expected the war to happen, which has globally pushed inflation so high, people have stopped consuming.
So I think this trickle-down effect of the high interest rates and everything will possibly be also seen in the economy. But logistics, again, is such a sector that it will keep continue going. It will still -- even if the economy slows down to 5% or I think -- even to 2%, the logistics will keep continuing. So I don't think that it's static or it will be static in other larger economies.
Mr. Krupashankar, you can go next.
Hi. Am I audible?
Yes. Yes, please.
Yes. Yes. A couple of questions. First is on margin specific. I did see that on a quarter-on-quarter basis, that utilization levels have come off. Of course, factoring in the 1Q effect. But margins, of course, have held strong.
So is it -- as in -- is there a contribution from other services due to which the margins are relatively higher? Or is it -- are we seeing benefits of the automation in the Gurgaon facility due to which you have seen that margins have relatively helped it?
Yes. So very good question, Krupashankar. Basically the combination of 3 things. Yes, obviously, we are getting a benefit of this automation. Like I said, the 15 basis point benefit we have taken from that and also like price hikes we have taken from the customer in this quarter. And third one, usually, this 83.5% is also like contributing a good way. This fill factor of our trucks. So these are a combination of 3 things put together, we have been able to benefit of this -- improve this margin level by 30 basis points.
So the -- Muktiji, would it be possible to share, as I could see that you had mentioned in the presentation as well that the new services are maturing. Would it be possible to throw some light on what would be contribution from railways or other services?
So as I mentioned, we are not giving the specific number for these and few new services because these are not big numbers right now. So if I put together in this quarter, we're achieving 17% growth in this sector like put together C2C, rail and cold chain pharma and our air domestic and International and e-com put together.
Got it. One...
But I would like to express here like rail getting good traction from the customer because we're giving the fight to our competition on that and on a very good rates and with a good margin level actually. So we're reducing our customers' rate almost like 2/3 and even more than that and getting the good profits also.
And with the same kind of service level, what we competition giving on air. So that's where customers are happy, but though we need to be -- this is a very niche segment, so we have to be convinced to customers than they taking as a pilot consignment to us. And then subsequently, we have to be -- once they're taking this as a service level, then they are trusting us and then giving the new cargo -- frequent cargo for that. So it will be growing very fast on that.
Got it, got it. One more question from my side is on the pharma side. So what we hear is that the government is intending to propose mandating pharma -- cold chain for pharma sector. That's what was communicated on the TCI call. So I just wanted to get some commentary from your end as to how much of a benefit you are -- you believe we can get with this transition to cold chain for the entire pharma sector?
Chander, sir, you would like to answer on that?
So I have recently been nominated as the Co-Chair for [ FICCI ] Infrastructure & Logistics Committee. And the plans are still being worked on. This is nothing which is set in stone. And of course, if this happens, if it's mandatory, then it will be a good -- definitely a good -- very, very good opportunity for us.
Mr. [ Keshav ], you can go next.
So my question is on branch addition actually. So initially, we used to see figures in the range of 25, 27, 30. But lastly it has come down to single digits, I mean 5, 7. So has the level saturated? Of course, you're noting.
You are on mute, Mr. [ Keshav ].
Next question? We can take the next question, Mukti.
Yes, please.
Yes, please next question.
Next question from Amit.
I hope I'm audible.
Yes, you are audible, Amit.
I have a couple of questions. The first one is essentially, where do we see growth coming from in this -- on all the segments that we operate? Is it from auto? Is it from manufacturing in general? Where do we see growth for this year actually? And in this quarter...
Yes, I would like to answer that. First of all, MSME will play a very big role, okay? And it is something where we have seen that the auto has gone through a very -- like a nice boom. But again, it's a very cyclical industry also. So whatever we are doing with MSMEs that will continue to flourish. We will also see other sectors like IT and technology also being an important role -- playing an important role in going forward. So -- because we don't have all our eggs in one basket, we are very well stabilized to perform as for how the economy is growing in all the industry sectors.
Okay. Fair enough. The second question is essentially on the sorting center in Pune. Now you indicated that you've got 15 bps benefit from the sorting sector in Gurgaon. Now with Pune also coming up, there should be some kind of synergistic benefits also because now between A and -- point A and point B, you will get the benefit. So is it possible to quantify what kind of margin improvement we can expect from both these centers coming on board in FY '25?
Yes. So Mr. Amit, you rightly said, once we will be stable this Pune center, then we will get the right benefit of that because in what we did in -- right now, we're only 1 center, and we are not able to get the full benefit. So once we will be came up with this, and it's synergy would be there. And I think we will be getting the overall benefit of 40 basis points once we will stabilize this operation of this new center.
Of that, already 15 basis point benefit is there. So remaining 25 basis point benefit will also come for that. And basically, there is a 3, 4 benefit of this center is there ultimately. This dependence on labor is reduced. And at the time of these festivals and all, our dependence on labor is very low. And that time, either we have to pay a very higher amount and they maybe go on a leave so we have to be compromised on our service level ultimately.
So that we will be -- in this center, we did very well. And in this festival time, we not face any challenges on that part. Second part, efficiency of this truck will be improved and also improved in this Gurgaon center.
Third thing is customer ultimately is getting the benefit of that because ultimately, we are able to improve our service level due to this automation. And this operational efficiency is a very key factor in any express logistics industry where we fighting on time-sensitiveness and all where we deliver on time, our service level must be like 95% plus. Every customer is expecting from us, and we are able to do with this kind of automation. Yes.
Next is Dalal & Broacha.
Yes, sir, am I audible?
Yes, please.
Yes. So my question is, I want to, first of all, a clarity on the new businesses that you've added that is Rail Express and C2C and all those kind of businesses. Currently, you said that you had a 17% growth Y-o-Y in those kinds of business. So what percentage does it form currently of the top line, the new businesses?
So -- no, I just said it is a contribution of these all revenue put together is 17%. I've not said in the growth.
Okay. So all these new businesses are currently contributing 17% to the top line?
Yes.
And the previous year, they were contributing around 15%?
15%, yes.
Okay. And what kind of growth have we experienced on a Y-o-Y basis?
So again, if you see like rail has a higher growth in there, there the number is very low numbers or -- so that's why it's kind of like in rail, we had taken a growth of like 20% in this quarter and others. So this way, other all services are a similar one to what we are in a surface growth rate.
Okay, okay. And sir, my second question is on the CapEx front. So what is the CapEx that you are estimating to do in this fiscal?
So we're anticipating a CapEx of INR 90 crores to INR 100 crores in this year.
Okay. INR 90 crores to INR 100 crores of CapEx, right, for this fiscal and the total estimate of INR 500 crores until 2028, that remains same, right, which I was asking for?
Yes, yes, there is no change, yes. Absolute correct understanding.
[ Keshav ] you can go next.
Am I audible?
Yes, now audible, please.
So I wanted to check on the branch expansion, which you are doing. So initially, we used to see a figure of around 25, 30 per quarter, but now it has fell down to 5 to 7. So what is the outlook for that?
So basically, this is -- if you always see in the first quarter, we're opening up the low branches because there is a transition period of our all employees from one location to another and all. So that's why we're usually opening 10 to 15 branches. This time, we opened 5 branches because there's some other challenges also kind of we're seeing flood and all. So this is not unusual thing. We will keep a target of opening up 70 to 75 branches in this year -- in the full year, and we will maintain that. Nothing unusual.
Okay. And my second question would be, we had to downgrade our guidance. Like initially, we have given a guidance of around INR 2,000 crores revenue by 2025. And now we have tapered it down to around INR 1,800 crores. I think by this year, we will be closing of around, I think, INR 1,400 crores. So how confident is the management in achieving INR 1,700 crores or INR 1,800 crores by FY '25?
Yes. So our MD has explained on that, we have taken a target initially for INR 2,000 crores obviously, 5 years or 6 years back. And there's all situation depending on the economy, how economies is moving. Everybody has earlier talked about 8% plus kind of growth rate and GDP, and now is maintaining like 6.5%. So you're always seeing our growth is like 2x of GDP growth rate. And we continuously did that, and we will keep continuing, and we will keep INR 1,750 crores revenue, for sure, for -- by FY 2025.
And this is also like you see demand is low by continuous inflation in last 1.5 years. And so kind of like fuel cost is so high, like increased by 60%. Nobody has thought of that. So some situation is arises, which is beyond control, and then we can't do anything on that. And yes, still we did on a like 2x of GDP growth rate, and we will keep going on that.
[ Tanushree ] you can go on.
Tanushree your line is unmuted you can go ahead. I think we will go to the next participant. Yes, [ Alicia ], please go ahead.
Sir, 2 questions. One, the earlier you talked about the margin expansion of about 100 bps annually. Do we believe that is still possible?
Yes, in this year -- Alicia, in this year, we're trying to improve our margin level at least 50 to 75 basis points in this year. And in this quarter 1, we already improved like 30 basis points, and we will keep growing on that pace. Because this is a part of strategies, we had like a strategy to improve my price level, which is we did already like 1%. And hopefully, will be another 1% in the remainder part of this year. Second part, our utilization level of truck will be keep continuing in the range of 84% to 85%. That will be help to us.
Third part, obviously, increasing the -- this portion of this newly added services of like rail and all, we will be able to maintain growing these margin levels of -- like last year, we did around 16%. So this year, hopefully, will be having 16.5% plus margin level on EBITDA level, yes.
And next year, when we're targeting the INR 1,750 crores of revenue, would a 20% kind of margin be possible because that was the earlier aspiration.
No. So in last annual -- in our annual confidence we said, now we are targeting to be 18% because again, if revenue is not achievable, so margin will also come down. So we are taking a target of like around 17.5% to 18% now.
And the competitive intensity in the last 2, 3 years in our segment, especially in the last couple of quarters has increased significantly. Do we feel that is impacting our growth and our margins where we had to revise our guidance downwards or is creating a challenge for us?
I think Chander, sir, will give answer on that. Chander, sir, you would like to answer on that, please?
I don't think that is the case because the segment that the competition is in, they may be saying that they are in the same line of business, but they're actually -- the pricing that they have is more towards the cargo side, they're more towards the freight side kind of business where they are not doing express, but they're doing the freight kind of business.
So I don't think that the impact has been here. The reason why the guidance has come down is only because of the economy, what I keep saying, not -- even with the full -- I'm not sure and what I read is the PLI scheme has been announced how many lakhs or crores investments have we heard is coming in, nothing as of now. So it is totally depending on the way the current manufacturing is moving and the way it will be going as per the inflation and the interest rates move forward.
So with that, we have to understand that our -- fundamentally, the company is very strong, and there is nothing that the company can do, go to the space or something and try to get business with margin. So I think, rest, again, be assured that it is not that competition or the -- structurally, there's a problem. Most of our competition has structured problems, has manpower problems, has no branches. They only do top line to keep everyone happy, but we are not like that. We are a company that will ensure that we are giving full justified return to our shareholders.
Sir, that's the point. We are focused on profitable growth. Competition is focused on growth at any cost and will some way start putting pressure on everybody in the industry. That's what we're trying to understand that is that making us maybe leave unprofitable or less profitable business? Or by competing with them, impacting our ability to do the 100 bps plus margin expansion that we used to work with?
So we started off with that low profit business only, right? We were doing that. The reason why we left it is because it does not add any value for growth. We cannot do any automation. We cannot do any sort of new development. We cannot do AI development. Nothing. So all this, again, is a -- it's basically -- it's the output of profitability.
Now we are also not taking INR 10,000 crores loan or something like that and trying to service the market. But question is that the top line, if you see is, again, it's a fundamental of how the economy is. If I try to get that INR 2, INR 3 business, it will never allow me to grow in a structured manner. I will grow just for the sake of top line growth, and I'm not really keen on that.
And just one last clarification, the newer services that people are talking of, which -- which is 17%, they offer relatively higher margins than our core express business?
No, all margins are the same. It's the propensity for the business to take on competition. The rail takes on the air competition, the air cargo business, which is anyway a dying business in India.
Mayur you can go next.
Am I audible?
Yes, Mayur, please go ahead.
Sir, there have been disturbance at my end. So there is a possibility of some repeat. I have lost a couple of statements. And yes, I'll confirm some of them. So sir, what we are saying now is instead of INR 2,000 crore in FY '25, we will do INR 1,750 crores by FY '25. And instead of 20% margins, we are targeting 18% margins. Is that what I got...
Yes, correct. Yes, correct understanding.
Right, sir. Sir, and it was good to hear that we focus on profitable growth continuously. It's not very easy to downgrade our own estimates a couple of times earlier. I mean earlier, we also had INR 2,000 crores in FY '20. During '19, we had 4-year targets of doubling. Then FY '25, we had this INR 2,000 crores now. So it's okay to downgrade as long as the quality of growth is intact. So best wishes for that. Just wanted to understand, we have large corporates and MSMEs as 50-50 share. What has changed in the last 3 to 6 months that is bringing about this kind of a downgrade in our outlook?
I can answer that question. So you have to look at it from 2 main factors: Inflation and interest rate. From last Diwali, both have been on the rise. And what has happened is, again, because of the reason why Q4 is -- wasn't as -- for the whole economy wasn't as great as again, because the sentiments were very weak. And we should not forget that just because we see 1 or 2 sectors being very glamorous in growth, that the whole economy is doing well. We have to really see what is the situation down the road when we go down the village, when we go and we understand and talk to people, not in the big cities, what's going on.
Yes, people do have enough savings. But the fact is that the companies are not really -- manufacturing companies are not really expanding. They're not putting over a new factory. They're not doing anything rather substantial, yet we are able to ride the wave of the GDP growth and extract the business.
So like I always say, if I want INR 10,000 crores top line, very easy. Our group could have done it long ago. We would have achieved 100 -- INR 1 lakh crore top line also with this kind of situation. Where would we be still with that? It would not be -- we will not pay anything, we not be able to pay -- eat our food the same day without taking a loan. So that sort of situation we don't want to be. And of course, the understanding is that because of these 2 factors, high interest rate and inflation, the entire economy had a very subdued growth.
And the third biggest factor, which I would like to highlight, is that we have emerged -- economy has emerged from a high base, high-growth, high-volume base because of COVID. So that is all now subsiding and that is all equalizing. So you will now see the real growth coming going forward.
So sir, will it be right -- I'm -- just in a different way, I'm trying to -- so will it be right to say that -- so current GDP growth remains that the overall number remains broadly intact, but it is driven by government expenditure. So from our perspective while -- when we say B2B express, our tilt is more on the consumption kind of economy where the growth in other verticals also we see being subdued. So as long as that remains subdued, we are -- our growth trends would be more aligned to that part of the economy and hence, it is -- this is playing out, right? Will it be right...
But we have a backup. We also have MSME a large chunk. So that really takes us forward compared to other companies.
Okay. Sir, any thoughts on expanding ourselves into 3PL or any other segments of the logistics.
I mean we can study the 3PL market, how it is playing out. All the people have -- all the other companies have very large top lines, but they're not able to sustain. They're not able to move forward even with captive business and this and that because logistics is such an industry where the profitability will always be at question. And it will always be at -- of people's minds where India, especially in India, where the cost structure is so high, and the complexity is so high, that making a little bit of profitability is also a big, big challenge.
So I mean, if you look at it globally also logistics companies will not be able to give that kind of return that we are giving only because, again, if we place the same model in another country or another situation, we will also get that top line. But in India, because it is still evolving from VAT to GST and with so much, like, political issues here, that, going forward, is for any industry, is always umpteen task, but yet we are doing it.
Sir, last final question, just to clarify. Sir, do we have any play on supply or transportation with respect to export and import side of the economy? Do we have any alignment there? Or will it be largely domestic and fulfillment and those kind of...
We have international air cargo. And you -- as you know, we all know that international air cargo is again something new that we are doing, and it's growing, but not to the level that we want because, again, the challenges of doing that business from India into India is very, very complex. You can book -- we can book an aircraft also and send material out. But if somebody wants to send material into India, it is so complex to import material that it will -- I mean sometimes, no matter what we say about GatiShakti and all that, sometimes it is kind of like impossible to get the economy or that business growing and going for India.
[ Arush ] you can go next.
Yes, I just wanted to clarify if I missed. What is the FY '24 revenue guidance and EBITDA margin guidance?
So we -- Mr. Harsh, we have like on part of 13% on volume side and 14% to 15% on the revenue side.
Tanushree you can go next.
I'm Karan. I don't know how it is showing [ Tanushree ]. So my question is related to the value chain. First of all, I want to know, the value chain of the businesses, the fast-growing businesses or the major contributing business, which is your surface express and also the rail express. Where we can create the value or expandable margins, expect what we are doing, the sorting centers, other than that.
Chander, sir, you would like to answer on that?
I could not hear the questions completely.
Yes. Okay. Karan can you repeat, please?
Yes. So in a simple word, I want to understand the value chain of our major contributing businesses where we can create the value or hit the value in our supply chain, surface express, railway express, because these are the most profitable businesses as well.
So your question is?
Yes, the value chain of the business.
I don't understand. What about the value chain? What is the value chain?
See the margin expansion...
So I think Mr. Karan you want to know, so basically, if you see there is a combination of 2 type of customers we have as Mr. Chander had mentioned, so we had a 50% businesses from [ MSE ] customers and 50% business coming from the top 3,000 or 4,000 manufacturers of India.
So that's way if you see the value chain is because we carrying the kind of high-value cargo in this industry. And that's why it's value is there, how fast we deliver to their customer it is important. Second importance is there because we're delivering the goods to our customers, customer, like you take the example where we're delivering the goods from Marutis to their dealers and retailers across the India. So that is the value chain we're creating, how with good behavior we're delivering and obviously, on time and obviously, on a debt free. So these kind of things and the fully compliant of e-way bill and everything. So that kind of value chain is there. And ultimately, that's why the high-growth business, and this is growing very fast.
And second part is, these are the similar kind of services. Mode is different. Like in rail, if you take an example, we're moving the goods from the -- through passenger rails. So where what we did, we are getting the -- we're giving the competition to my air business companies where we're diverting their business from air to this rail and why it is having high traction because they are getting a cost reduction of almost 67% to 75% on where they're supposing somebody charging of INR 100 per kg for -- through air, we're charging in rail like INR 25 or INR 30. So that's where -- that's why there is a value chain we're creating for -- through these new services.
Second aspect of that, like if you talk about C2C, this is also in this segment where we like picking the cargo from 2 destination and putting -- 2 location between the cargo and then delivering on 1 location. And then in return, we're utilizing that truck from our normal business from that destination to -- back to this origin place. So that's why there is so many different services having the different value chain for that and different customer profile also there.
In our case, a good thing because we have a highly diversified with our customer base in terms of MSME and corporate, in terms of nondependence on a big customer like my top 25 customers is not giving more than 15% revenue to us. Also like my 5 segment, major segment contributing only 55% revenue to us. So in that sense, we're creating a long, long value chain for all the businesses separately or you can say services separately, yes. I think I hope I answered your question, Mr. Karan.
Yes, fair enough. Next related to the sorting center, I know that is, I think, the profitable kind of thing. The model is profitable, globally as well as about the e-commerce -- large e-commerce business also doing that. But in India, except us any competitive player doing the sorting center? Do you have any fair idea?
Yes. So basically, you rightly said in India, no one has this B2B kind of sorting center in India. We are the first company taking this risk and efficiently we run that show. And that's why we are the first one to launch this. And we are able to like reduce this halting time of truck. Because now the probability of service level is higher. We can understand like earlier supposing my truck is load or unload in 6 or 7 hours put together these 2 activities. Now it is reduced to 1 hour. So you can imagine like 80% to 90% time has cut for that. And dependency on rail is also reduced now.
So that's actually -- this is the -- fantastically customers are happy for that. And this ultimately -- in India, operation -- to create operational efficiency continuously, it is very, very important for any express logistics company. And we with the management's team support and management support, we did with that.
Okay. So as we have the presence in more than 200-plus countries, right?
Yes.
So we are facing competition in terms of this asset-light model because we are more focusing on this asset-light model. So globally, who are players we are facing the competition with? And also they are asset-light model? Most kind of players are also the asset-heavy players.
We are not present in 200 countries. We have agents in those places. And we are doing air cargo import and export. We are not doing -- we have the ability to send material to those countries and pick up materials from those countries and by air only, not by sea.
Yes, yes. Presence is, in sense, we're delivering there. Okay. So yes, that's the benefit of the asset-light model is that, no, that's great, you achieved this thing. In the asset-light model, you are net-zero kind of debt. So that's great. But the overreliance on vendors when we think about the -- some demerits of asset-light models, so overreliance of vendors is the point coming out in the mind. So do you think on the flip side -- when you are the containerized kind of model you have, so on the flip side, do you see anything overreliance on the vendor? Or you see anythings challenge from the vendor side?
Tanushree (sic) Karan, I must tell you that the important thing to note is that we have owned vehicles before. And the -- again, the financial ratios before and after are very different. So I would suggest that you have a look at maybe the presentations before, earlier before listing or maybe talk to Mukti separately as to how it was when we operated vehicles -- when we owned and operated vehicles versus going asset-light.
Also, Mr. Karan, basically, if you see, we are highly diversified on that side also. And that's why this is the fantastically we are running the show. Now everybody is following us. In India, it's a different aspect of that because there is a huge fleet is available. Supply side is so high, and this is easily available.
So what we did, these 5,500 trucks is owned by almost 2,000 people, and we're also taking on a local basis. So that's way if you see this diversification is important in India. Once you're giving a thrust like depending on 100 or 200 people, then this is a problem. So what we did since last 1 decade we fantastically run this show and with such kind of high returns.
Why we are able to do that? Because we have the high diversification of that, because we are not depending on a particular route, we're also not depending on a particular vendor. We are doing like 2, 3 vendors on that route. So nobody can be monopolized on that. Second part, good thing is we are able to get the credit from these guys. In India versus if you see other companies also putting our own vehicle, then I need to put the money before.
So that way, it's fantastically running, and it is a company's DNA where we know how to -- ground level working how to deal with these kind of people. We because -- how we are able to do that? Because we have the highest transparency. Every truck owner knows what kind of cash flow he will be generating on a particular month with start -- before start of this month. So that's way in India, nobody can be projecting that. Supposing one guy is owning truck. So they don't know how much cash flow they will be generating this month. But once they will be did an agreement with us, they know what kind of cash flow they will get. And we give continuously paying the money to them.
So in that sense, various things we did, it is a completely ERP-driven. So there is no question of overdependence on these all the supplier side. We did well. And in each segment, we have different, different kind of -- and again, interestingly, we are -- these all are the individual guys, like only 2, 3 trucks. So that we also did like we are not taking more than 5 to 10 -- more than almost like 7 trucks from the 1 guy. So that's where we did so many things internally and then we are doing this. Yes. I hope I will -- I am able to answer on your question, please.
Last question from Deepak.
Yes, sir, am I audible?
Yes, Mr. Deepak please.
Sir, the lower growth rate that we had in this quarter, if you can explain if it was industry specific, maybe the discretionary side like fashion goods and electronics were on the lower side? Or was this lower growth across all the B2B corporate clients that you have?
Chander, would you like to answer on that? Okay. So basically, Deepak, if you rightly said, there are 2 segments which not did well, like on fashion and lifestyle products that not did well, there's low demand on that. And second part, obviously, everybody heard about this electronics is not moving and it's a slow growth. Like if you see in North India, there's no AC sale at all. So that's why, yes, you rightly said it is segment-wise, like Mr. Chander had said, auto has nicely done well. engineering is keep going, pharma is always all-weather friends. So there is no problem on that. So yes.
Okay. And sir, on your outlook of 13% to 14% growth, if you can break it up for us. For your ongoing business, what should one look at? And for the new business, which is 17% of your sales, what should be the order -- what should be the volume growth that one should expect?
So basically, if you see these other services will be, I think, in year-end, we will not be more than 17.5% to 18% maximum. It will be the same kind of situation would happen. But obviously, we are keep adding the customer, new customers and always, Q1 is. Before COVID times if you see, there's always low growth there. So we will keep continuing to add the new customers and get the business from SME and corporate customer, both space. And now festival season will restart. So I think this lifestyle product and that will also ramp up the demand and all. So we are hopefully achieve that.
Okay. So one should assume that both the segments would grow at a similar rate and not that the new services maybe grow at a higher rate, it will be similar across both these verticals.
Express, may be like rail maybe grow kind of 30%, and C2C also grow like slightly higher, like maybe 17%, 18% risk, I think. Rest, I think, will be in the same way.
Sure, sure. And sir, have you seen any green shoots in the month of June, July, August as we progress towards better time? Are we seeing any revival in the demand?
So demand is continuously like, April month was the weakest month of this financial year. After that is each month-on-month, we are growing on that, what I can say.
Participants, that was the last question for the day. Mukti, sir, if you have any closing remarks, please?
Chander, sir, you please.
I must thank you all for attending the conference call arranged by TCI Express. And I look forward to speaking to everyone again post quarter 2. Thank you.
Thank you, everyone. Thank you, sir.