TCI Express Ltd

NSE:TCIEXP

Earnings Call Transcript 2025-Q1

[Navin Agarwal, analyst]

Good day, ladies and gentlemen. It's my pleasure to welcome you on behalf of TCI Express and SKP Securities to TCI Express Limited's Q1 FY '25 results webinar. We have with us Mr. Chander Agarwal, Managing Director; along with his colleagues, Mr. Mukti Lal, CFO; and Mr. Hemant Srivastava, COO; Surface Express business and Mr. Ashok Pandey, COO; Multimodal Express business.

This webinar is being recorded for compliance reason. And during the course of discussion, there may be certain forward-looking statements. These should be viewed in conjunction with the risks that the company faces. We'll have the opening remarks from Mr. Chander Agarwal followed by a presentation and then the Q&A session. Thank you, and over to you, Chander ji.

[Chander Agarwal, executive]

Thank you Navin ji. Good evening, and welcome, everyone, to Quarter 1 Financial '25 Earnings Conference Call of TCI Express Limited. I would like to thank all of you for joining us here today. We have already circulated our earnings presentation and press release on the website and stock exchanges, and I hope you all had a chance to review it. To start with, I will give you an overview of the business trend and performance, and then we'll hand over the call to our CFO, Mr. Mukti to brief on our financial performance for the quarter. Let me start by giving a brief summary of the economic conditions we encountered during the first quarter of financial '25. In the realm of the global economic dynamics, India's economy continues to remain a little unstable and stable amidst global challenges. Recent projections by the IMF emphasize India's significant role alongside China in contributing to the world's economic expansion for the year '23, '24.

India's GDP recorded a growth of 8.5% in financial year '24. This growth is driven by the digital revolution, substantial government investments in infrastructure, expanding middle class and sustained political stability. India is on the verge of a major structural shift in the growth trajectory with potential to maintain an approximate 8% GDP growth over the long term. Moving on the industry front. Logistics sector is poised for significant expansion, fueled by government investments and policy measures focused on improving transportation infrastructure. These includes major freight routes, development of logistics parks and enhancement of highways, railway and activity. Given this promising industry outlook, we are well positioned to seize the opportunity within the Indian logistics market and deliver long-term value to our stakeholders. Now coming to the quarterly results. Quarter 1 of Financial '25 represented various challenges including market fluctuations and increased costs due to the ongoing multimodal enhancements as well as the interest rates, higher interest rates, labor costs, inflation, that impacted our customers. These factors combined with a temporary decline in volumes due to the general elections and adverse weather conditions led to lower utilization levels and subsequent decline in margins. However, despite these headwinds -- these temporary headwinds, we remain focused and optimistic about the near future. We anticipate stabilization in the coming quarters, driven by evolving logistics demands and strategic initiatives, which will help us capitalize and position as the leading position in the country's door delivery sector. Moving on to the brief update on business developments. During the quarter, we may are - we are making substantial strides in strengthening our multimodal business with a clear objective to increase its contribution to 20% to 22% of our total revenue over the next 2, 3 years. By expanding this segment, we aim to provide more integrated and efficient logistics -- express logistics solution to our customers, enhancing both service quality and operational effectiveness.

Our recent automation of Pune Sorting Center, which spans 140,000 square feet and features in our AI-enabled automated cross-belt sorter has significantly boosted our operational efficiency in Western India. This advancement is a key component of a broader automation strategy. We plan to extend this automation approach in our sorting centers in Kolkata and Ahmedabad over the next 1 year, 1.5 years, further improving our capabilities and service levels. In the rail logistics sector, we have successfully expanded our customer base and opened several new branches, providing excellent services to our clients. Now we are in a position to provide 24 hours, 48 hours, 72 hours and 96-hour delivery schedules. One of our key initiatives this year has been the launch of the Money Back Guarantee scheme. This program sets a new standard in expressivity industry by guaranteeing on-time delivery. This scheme underscores our confidence in our service efficiency and reinforces our commitment to providing exceptional customer service across service modes, including surface, air and rail.

Additionally, TCI Express is proud to be recognized as a Great Place to Work for fourth row in a year, demonstrating our ongoing commitment to a positive and rewarding work environment. As we move forward, TCI Express is dedicated in strengthening in multimodal business with, again, strong focus on serving SME customers through our rail and air express division and branches, supported by the robust asset-light business model and a well-defined growth -- strategic growth plan. We believe that these initiatives and with these initiatives, we are well equipped to seize the opportunity that lie ahead and deliver sustained value to our stakeholders. Our strong leadership team also will ensure that our sales targets and business targets achieved. With this, I would like to now hand over the call to Mr. Mukti to talk about our financial performance over the last quarter.

[Mukti Lal, executive]

Thank you, sir. I am audible?

[Navin Agarwal, analyst]

Yes, your are.

[Mukti Lal, executive]

Yes, please.

So good evening, everyone, and thanks to be joining this call, and I will now give you a prospective of like Q1 updates and run through this presentation for a few minutes and then we will be open the session for the question and answers. So yes, -- so this is like we completed our 8 years after demerger and now our B2B customer is like 97% and 3% we're doing as a B2C. And this is the only express company where we have our own branches. We don't have any franchise across India.

And we also like offering new dynamics of like Sunday delivery, Holiday delivery and some schedule deliveries to customers. And we also like our all operations are like IT backbone. So we're doing like bar coding on packaging, GPS-enabled vehicles. Now started also a new thing where like onboarding all the supplier onto our ERP system where they come and join and submit the bill also. So it is very like highly transparent process where they have the like is a to-and-fro way, whatever they want to say, we can be also say. So that sense and we're doing the right performance evaluation through ERP systems. So this is like new thing we did in last -- in last 3 to 4 months. And this is like we ranked #713 on market based on March 31, 2024. Next, please. So this is like again keep continuing to like focusing on our strength, which is like, again, we will be asset-light business model, and we will be carrying high-value cargo and we keep continue like requirement of low working capital in our -- to run our daily operations. And we have lowest cost structure in India in Express segment. And we continue to focus like and Mr. Chander mentioned, we also launched money back guarantee recently, so we will keep continue. And we also started like putting AI more into our IT operation and every aspect like one-off example like Pune Sorting Center where we put AI based sorting center and everything is automative. And complete trucks out meet is 100% is containerized movement. There is an open truck utilizing for that. And our strategy for the long term would be like continue to focus on automation on our remaining of the sorting center like already we did 21 and remaining 10 to 12 will be due in time to come. Yes. Next, please. So these are like geographical footprint and the same way like our company's branches like reached even 970 plus. Next, please. These are the 2 centers, which like Gurgaon has been started in 2022 and Pune in March 2024. Now Gurgaon and Pune both had streamlined and we are seeing the like -- they just good to be reducing the turnaround time is almost like 40%, and we will keep continue to streamline the things. And this Pune Center is really helping us to be getting the more volume from the West part of India. Next please. Rail express, this is like getting like robust growth in this business. In this quarter, we've grown almost like 30% on a year-on-year basis. So good thing is happening, customer base is encouraging. Now it is leased to 5,000 plus. And we like getting the repetitive orders from the existing customer. And now our next has to be, initially, we started with the big customers and now we want to be inculcate this business or want to spread the business with the SME customers. So that will be -- like it's a sustainable business model, and we can be like growth further faster on that relaxes because, again, we said time to time, it is like high-profit business and also like it is a between service off to air and surface. So it is like we are in the right place, and we want to expand it very well.

Next please. This is C2C. So C2C, again, it is like a niche segment where we go into customer and explaining them and then offering the service and customer is getting this one very well. So it is basically doing like Milk Run. There are two models of that. One is Milk Run within the state and all. And second is like we're picking from the two locations and delivering in one location and vice versa where we're picking from one location and delivering on two locations. And in return, utilizing these trucks to be in our normal transportation. So we also here utilizing more IT-based system where we in showing in advance to our like destination where both the trucks are coming with the C2C service and however it will be like what data will attend and we -- so we, in advance planning for the like more cargo so that can be put in this return truck. This is Pharma Cold Chain and we are not like much aggressive on that business because we restricted ourselves in the Cold Chain Pharma continuously. So Pharma Cold Chain only, we are not like putting our offer on food deliveries or other items. So that's it. Next, please. So this is the like features of recently offered Money Back guarantee where we allowing this to be all the like mode of the transportation surface, rail and air. And it is like Money Back Guarantee where supposing we are not able to deliver we will give back their money as a whole freight to them. So this is also getting very good traction from the customer and it will be like for long-term purposes. It is really also aligning our operations very well because we have to be delivered to customer on time. This is the Q1 highlights. So Q1 really was combination of various things. It's a mixed package on the like sell side and cost side. And so various challenges we face like general election was there and first time we've also seen our sundry customer, SME customer is also looks like impacted due to ongoing high deflation and high interest costs, resulting our share also like slightly changed around 52% to a big customer and 38% to like this SME customers. So that is also going on.

And capital utilized accordingly, as you -- the volumes was less in this quarter. So that's why the utilization of our fleet has also reduced from last quarter of 83% to 82% this time, but it's like -- we ensure you that -- we assure you that it is very temporarily and is already fixed in July 1 and volumes back in here. And we will be like operational efficiency also getting from Pune. So this is a comment from the Mr. Chander Agarwal, already he has given.

So next, please, we can skip here. And there's a financial performance where in this quarter, we almost like degrew by 3.5% and on year-on basis and quarter-on-quarter 7.5%. And accordingly, it's impacted like EBITDA margin by 25% negative and PAT level is also like same way around 28%. So as I mentioned like EBITDA decline because there's two aspects of that as volume has declined due to ongoing general -- that was the general election and SME impact on that. And cost has also like if you noticed on that, our cost has increased almost 250 basis points and main reason of that. We felt that you're aware that airline consolidation is happening and that's why airlines have increased the prices on that, so that has impacted, I think, in overall cost basis is 100 basis points increase in overall cost due to that. Second part of also after privatization of this all airport has happened and that's why this airport charges are also increased by these all airport authorities, so that is also like we've seen in this quarter 1. And on capital expenditure side, we spent around INR 7.5 crores and construction of these ongoing Sorting Center construction at Nagpur and we will be like on the path to be achieving what we have said for this capital expenditure for whole the year because soon we'll be going to start the construction at Kolkata and Ahmedabad.

Next please. So yes, we already explained that. We can go ahead in -- so this is the like quarter -- last 3 quarters' performance. So this is visible here. Next, please. And this is like cash flow. Cash flow is really -- is going very well. There is no challenge on that. In this quarter, we achieved INR 11 crores of cash flow from operations. So this is a competitive analysis given with like other -- our other 5 peers. And still you see one of the -- we are the one of the leading margin profitability with the -- in spite of this lower EBITDA in this quarter, it is there. So this is the -- this we are already discussed and we can skip Navin ji. This is for whole year, which we discussed in last meeting. This is also we can skip -- can skip. Yes. This is our working capital cycle, which you can see our several days has meant 55 days and payable days is meant at 35 days. So even we are robust in balance cycle and it is reduced from 39 to 35 and accordingly net working capital cycle is also like 20 days. So you can understand, everyone can understand like we do run the daily show, we don't get the money. So whatever money we are running deploying back and doing either deploying back to CapEx or we have to be disbursed to shareholders while we on dividend.

Yes, next please. And this is the debt-free status is going on. We will -- we have like zero debt in our balance sheet on -- as of June 2024. This is the balance sheet. So you can see like our balance sheet has marginal increase size from INR 850 crores to INR 858 crores and manually we put the money into an CapEx part. Please, next. And this is a whole year, we can be skip Navin ji. So you can see like in FY '24, we were the leader in margin proposition of EBITDA level as well as that level. So this is like our journey from last 8 years where we like growing from our locations 32,000 to like 60,000 pickup and drop location and then branches now 500 to 970 and Sorting Center not increase much. It is from 26 to 28, and customer base has also increased from 1.5 lakh to like 2.25 lakh numbers in 2024 and recently. And yes, you sell like we have grown sells a new PAT level around 20% in last 8 years.

Next, please. So this is our like strategy and outlook for that. We will keep continuing to focusing on SME customers and accordingly, now we're more focusing in to compensate the cost increase in air mode. We're also focusing on to increase the business with SME customer in air mode as well as in rail mode. And obviously, Surface Express is already we focused on that, and we will keep continuing to putting CapEx and to an automation.

Next please. This is our like 2030 where we want to be in next 2, 3 years, we want to be in Multimodal Express by 2030, we want at least 1/4 share in our overall revenue. And we will keep ourselves as an asset-light business company.

Please, you can be skip. Yes, we can be skip. This is a long-term strategy that we already discussed in last -- so this is the growth driver, like we will be key focusing on digital transformation, where we like putting whatever we can be like make more digitalize from the manual operations. We will keep continuing on that. We're also focusing on green energy where we can be -- how we can we put more like EV vehicles and these other CNG vehicles, we can be -- how we can use more into first mile or last mile deliveries.

Please. [indiscernible] yes. So we first -- on the ESG side, we released our first ESG report, which is also available on our website, and you can all visit that. Yes, please, next. Yes. These are a few of us like in the row as Mr. Chander has mentioned, we get the like in fourth in a year, Great Place to Work Award. And we are India Champion Award from ICM.

Please next. Our ratings are also like stable. And so we have the long-term loan rating from CRISIL rating, though we don't have any loan, but we rate ourselves from the CRISIL, which is a AA- and ICRA has given like A1 plus to us. And these are the three certificates we have. These are market -- this is capital marketing formation as on 20th June, that was a last working days for that quarter. Because last day of this quarter was also again Saturday and Sundays.

Thank you very much. Now we can be open for the like question-answer session.

[Navin Agarwal, analyst]

Thank you very much, Mukti. [Operator Instructions] We have the first question from Alok Deora.

[Alok Deora, analyst]

Yes. This is Alok Deora from Motilal Oswal. Sir just had few questions. First, on the margins, it's come off quite a lot time. If you look at the volumes, the volumes are down around 3% I mean, the revenues but the margins have come off quite a lot. So just some color if you can provide on that, what has happened there. And also, if you could provide the volume figure for this particular quarter?

[Mukti Lal, executive]

Yes. So Alok ji, thanks for that. So basically, one is volume was to 235,000 tonnes for this quarter. And this is almost like volume side, we degrew by 2% only on year-on-year basis. And on margin side, yes, so we mentioned there is two side of things, like one is our volume has reduced, so capital utilization of truck has been reduced by like 1% as directly adding to my cost. So you've seen my cost has increased almost 250 basis point operating cost. So 100 basis points by that and 100 basis points by like airline has increased the prices, which is beyond our control and also like now to -- because this is a high cost or high-cost business. So we really would not -- could not be able to passing on to customers.

So to compensate with that, we are trying to be like get the business from sundry customer where revenue per unit is very high. So that we already started with the new set up and new branches, new team we're already working out for that. And another aspect also like -- we're also expanding our -- this multimodal specifically for air and rail. We're creating in a separate network because you understand like beyond the Tier 1 cities, we earlier like using surface model to be delivered last mile because otherwise, we can't send the vehicle in all the Tier 2, Tier 3 cities for examples, supposing we need to deliver on Haridwar. So today, supposing you get them at around 12:00. So then it has to be go through hub and spoke model to my surface and then deliver tomorrow whatever afternoon time or so.

But now we changed the strategy and want to directly send the material from Delhi to like Haridwar, so that way will be like saving 24 hours for the delivery. So we will deliver the same day delivery, like we get that daily today, and we will be delivered. Same way we're doing for the like rail express also for last mile delivery by creating a network separately. So it will be -- it is giving really good traction to customer and good message to that. And that's why it is a long-term effect basically. So initially, it will be -- it is in serving in our cost. But yes, long term, it will be like stabilized and normalized in time to come, yes.

[Alok Deora, analyst]

So sir, I mean, with around 2%, 3% volume de-growth, we have seen such a large impact on margins. So I mean these are all measures which you are talking would be more from -- more results in maybe 2, 3 quarters' time. So do we see the margins being at current levels only because the demand environment continues to be muted and your volumes could be flattish kind of Q2 in the second quarter. So do we see these margins of 11% to 12% is the new normal? Or just some color or whether you can bounce back very quickly to 14-plus percent.

[Mukti Lal, executive]

Yes so. Very good. Basically, this is, as I said, it is very temporary. In Q2 onwards, our margin, yes, you rightly said back to normal of like 14% plus. And second, volumes -- we are expected because it's a pre-festive season. So we are seeing there was a uptick in the volume and because July was -- we have started with the growth. And August, we are also seeing and like September month would be also like pre-Diwali month. So hopefully, we will be closed this quarter and then subsequent quarter in a growth. So I don't see any challenge for the whole year, what we like anticipated, we will be surely achieve that.

[Alok Deora, analyst]

Just last question. So for the -- considering the 1Q has been very noted and we have been talking about 10%, 15% volume growth in FY '25. So does that number still hold? Or what's the volume growth you are looking at for in FY '25 and maybe FY '26?

[Mukti Lal, executive]

Yes. So for this year, we are hopeful to be get like double-digit growth for the show and next in the range of like 12% to 15% in FY '26.

[Navin Agarwal, analyst]

We take the next question from Jainam Shah.

[Jainam Shah, analyst]

Sir, first of all, on the data point part, if you can share the percentage -- utilization percentage for this particular quarter, our fleet utilization?

[Mukti Lal, executive]

It is 82%.

[Jainam Shah, analyst]

82%. Okay, sir. And sir, I just wanted to check on the top line as a percentage or in the absolute term, how much Air Express will be contributing for this particular quarter or overall scenario in percentage term or in the absolute term?

[Mukti Lal, executive]

So air domestic and air international put together is around 7%, 7.5% of the overall revenue.

[Jainam Shah, analyst]

Got it sir. And sir, similar percentage for the last year would be how much?

[Mukti Lal, executive]

It's the same way, yes. It's the same way. There is no change on that yes.

[Jainam Shah, analyst]

Okay. Okay. Sir and if we see that the Rail Express has grown at around 30%, while our total income around 3% to 4% decline in this particular quarter. So if we just back calculate then our rail or road surface B2B Express would be down by around by 10%. So is this what like -- what kind of challenges that is that we are facing because of this 10% decline in our Road Surface Express B2B part. If we compare it with any other industry players, there has been some single-digit kind of growth has been seen in this particular quarter.

And if we see on a top line or the bottom line is in, last 3 to 4 years has been quite stable for us post COVID. So is this what industry is suggesting? Or are we having some business development activity, which can change this thing? And eventually, we can go more back to 10%, 15% kind of growth.

[Mukti Lal, executive]

So I will be -- yes. So I will be -- well, I will be giving an answer one by one. So basically, there's a decline of 3.5% overall and rail has been growing like 30%, but rail is not significant right now, as I said earlier. So surface has not degrow by like 10%. It is degrow by like over 1.5% only. Otherwise, all services are like same thing, except the rail has grown very well. So that's the one thing.

Second part, come on to like after COVID, we robustly grow. I don't see like in '22 -- sorry, in '22, we've grown around 28% because that was like low base. But subsequently, next year, FY '23, we've also grown around 15%, 16%. And then in last year, in spite of all the challenges, we've grown 1%, even few companies use the industry numbers. They also grow in the same -- similar kind of numbers, but their margin has been fallen now heavily like 50%, 60%, but we maintained our margin because this is, again, put together, if you see a 4, 5 aspects, which we're continuously focusing on and more emphasis on to adding the new services. So that's why like we are in a good place and we are future ready now because you rightly said, so we taken 2 steps for that. First is we started to focusing more on a multimodal, which is we separate like Mr. Ashok Pandey ji is our new COO for Multimodal and then we're creating like a different network to separately from surface to that. Second part, we also initiated to be giving like a separate sales team under the like supervision of Mr. Pabitra Panda. So that's two steps we've taken where we are aligning the things and focusing more into a more sales part. And this is also like started to giving the results in July we've seen and hopefully August will be also like -- we will keep continuing on that. So we are aligning with that. And certainly, we will get the revenue like in double-digit growth in this year.

[Jainam Shah, analyst]

Got it sir. And sir, just last part from my side. So sir, we have introduced this Money Back Guarantee scheme. So is this more of a confidence gaining from the customer? Or has there been any cost that has been booked in this particular quarter any substantial? Or is it just the confidence kind of a thing that we are getting from the customers?

[Mukti Lal, executive]

This is a very good question. So basically, the -- we launched this service in the mid of this quarter. And second thing, you rightly said this is like giving to confidence to customers. So we allowing this service to all three aspects because -- and in this kind of thing, we're always getting this -- usually the service used by like small customers. And where we can we get that good revenue. That's why we launched this service.

[Navin Agarwal, analyst]

We take the next question from Krupashankar.

[Krupashankar NJ, analyst]

My first question would be on [indiscernible]. So Mukti ji if -- for the quarter, I can see that there's close to about 1.5% to 2% -- 1.5% sort of a price hike taken in the quarter. And we have seen that there are certain escalations relating to underlying costs returns across industry to be toll rates or other general inflationary hikes. Is there any further price hike anticipative, which we will be taking to pass through these costs?

[Mukti Lal, executive]

Rightly analyze yes. So basically cost dynamics is also changing in this industry where you rightly said toll cost is also speedily growing like each year allowing to be increasing 7% to 10% and road is improving, but somehow like we've taken like diesel price cut was in last quarter, but this has compensated with the toll increases even more than that. So that's the thing. And on another side, we really could not be found to be increase the prices with customers because, again, they're also facing the same challenge of ongoing inflation and high interest rate, specifically for SME customers, we see. Earlier, we used to get the easily price hikes on that guy, but now they're also facing lots of challenges. So I don't see we will be able to get any price hikes or maximum, we can we get like 50 basis point to 100 basis point and remainder part of this year.

[Krupashankar NJ, analyst]

Understood. Understood. You also highlighted in the presentation or during the presentation that the Pune facility has resultant in incremental customers in the West region. Could you throw some more light on it, sort of a growth, if I were to put around that. Of course, I know that there's been a decline this year, but this quarter, but can you throw some light on what would have been the growth in the West region? And where are the sectors which has performed well versus the rest of the time?

[Mukti Lal, executive]

Yes. So basically, yes, you rightly said. So West is growing because West is including like Maharashtra, Gujarat and all, and slightly declining in South region. And North is doing well and slightly impacted is East region is also slightly impacted.

[Krupashankar NJ, analyst]

So you're saying -- so any numbers you can put across of what would have been the growth in West probably or decline in South, if you may?

[Mukti Lal, executive]

So basically, West reason is also like we have around 1%, 1.5% growth rate. And so accordingly, like North is like flattish and South may be like minus 5% or so, so this way.

[Krupashankar NJ, analyst]

All right. And contribution-wise because West and North would be the significant portion of our business, right? It should be close to about 50-plus percent, 55-plus percent, right?

[Mukti Lal, executive]

So all the -- as mentioned, all three regions put together except East, we have 85% revenue. So this is equally spread actually -- yes.

[Krupashankar NJ, analyst]

Okay. Sir, last question, if I may. The new sorting centers were likely to bring out more efficiencies and better margin expansion prospects, et cetera. And now how long do we further wait for these benefits to come through. Any number you have in mind or any time line?

[Mukti Lal, executive]

So like we earlier also mentioned, so this is giving like very easy and like dependence on labor is reduced, turnaround time is increasing with that in like Western region. So now one corridor has completed like from North to West. North we have like Tajnagar and then West is that. So there's a one-off region where West we get the more businesses.

So in time to come, also like our trust is that now this time of truck has been reduced for this idle time. Now they're able to make more trade. And ultimately, they're giving the benefit to us. So like we're getting the benefit of 25 to 50 basis points in overall basis. And that will keep continuing once we will be adding a more Sorting Center. But over and above, like this is also giving confidence to customers because this is increasing our service level. Second part, this is also a one-off avenue for the revenue where we're getting our weight also on these sorting automated weight. So supposing there is any difference in the weight on lower side, so we can get these directly calculate and then sent to customers. So that is also a revenue stream, we are generating through that. So ultimately, yes, we will get the benefit out of it.

[Krupashankar NJ, analyst]

Okay. Okay. I have one more question, but I'll come back in the queue.

[Navin Agarwal, analyst]

We take the next question from Akash Vora.

[Akash Vora, analyst]

So if I go 12 months back, I think we had also come out with a guidance. I think that we'll be blocking around 1750 or 1800 kind of top line this year. So I think that guidance was shared last quarter itself. But then from that to revenue degrowth this quarter, I mean would you say -- would you consider that we are losing market share or what does it means?

[Mukti Lal, executive]

Well, so Akash, basically, if you see like a number of the all industry players is also same. If you see the like express numbers, I'm saying because all are different, different companies doing different work. So we are not here to any losing any market share because this overall impact on consumption side. That's why volumes are declining for everyone like the express company, you see the numbers.

So I don't see we are losing market share and rather customer confidence in us. It is with us and we will grow like what we are seeing. So we don't have any doubt on that.

[Akash Vora, analyst]

Yes. Also, sir, I wanted to ask how much does the Rail Express business now contributes to our whole top line?

[Mukti Lal, executive]

So it is almost like 2%, 2.5% right now.

[Akash Vora, analyst]

2.5% of the whole revenue?

[Mukti Lal, executive]

Yes.

[Akash Vora, analyst]

Okay. And sir, if I would just like to -- I would just like to understand [Technical Difficulty] And the traction and [Technical Difficulty] end user industries where we are losing out as compared to our previous years?

[Mukti Lal, executive]

Akash, we just missed your question, actually, there is [indiscernible].

[Navin Agarwal, analyst]

Akash, if you can repeat your question please.

[Akash Vora, analyst]

Am I audible now?

[Navin Agarwal, analyst]

Yes you are. Please can you repeat your question. We lost you in midway?

[Akash Vora, analyst]

Sure. Sure. So sir, I just wanted to understand the end user industries or segments where we are seeing good traction. And there, I mean, we have -- we are struggling as compared to our previous years?

[Mukti Lal, executive]

I'm sorry, Akash, we lost in midway actually, has heard your complete...

[Navin Agarwal, analyst]

Are you asking about the sectors in which we have lost business. Is that your question? Because we are missing you.

[Akash Vora, analyst]

Correct, correct.

[Navin Agarwal, analyst]

Mukti, Akash is asking which are the sectors in which we have seen a decline or we have lost our business?

[Mukti Lal, executive]

So basically, yes. So we still seeing there are less volume growth into textile and engineering sector more into that.

[Akash Vora, analyst]

Okay. And which ones we are seeing good growth in?

[Mukti Lal, executive]

So growth is supported by like auto sector. And in few part of like Pharma, we also still -- we're seeing a slight growth on that.

[Navin Agarwal, analyst]

[Operator Instructions]

While others line up the question, we have a follow-up question from Krupashankar.

[Krupashankar NJ, analyst]

Mukti ji, I think going by the trend, I think if you're targeting about a double-digit growth for financial year '25, the second half of this financial year has to be of 15% plus growth. Given the softness in demand, do you anticipate that sort of a growth coming through?

[Mukti Lal, executive]

Yes. So we've taken like various initiation internally like we're strengthening as mentioned, multimodal businesses. And second, we also like created a separate team for the sales on all the level. So we're giving like a whole network from top to bottom, we're strengthening that also. Usually, what happened this industries dive were like operation more. So we won't -- there never happened in that. So we created a separate team as effort to create more sales.

Third thing we like keep adding the branches and the number would be there. Fourth thing we also like putting vertical-wise team where like -- or adding new verticals like we're focusing more on solar one. And then second one, basically in home furnishing is also liking in a good segment where we can -- we are also pushing hard to we get the business from that. So a few things, which is really help us to get the business. And surely, we will be trying to be like touch upon this double-digit growth for the whole year at least.

[Krupashankar NJ, analyst]

Okay. And with respect to branch addition, any number you have in mind or any specific zones where you will be targeting more anything on those lines?

[Mukti Lal, executive]

So we are more focusing on West and North side this time to be improved for other businesses. We've seen internally where we can be like have more opportunity for the business. So we found these two zones where we will be -- we're focusing on that. So more branches like in number, I think we will finish around 50 to 60 branches number addition for this whole year. So it will be also like mix of that. A few branches will be open for the Surface business, a few branches will be open for the Multimodal business.

[Navin Agarwal, analyst]

Let me take the next question from Ronald Siyoni.

[Ronald Siyoni, analyst]

I had a query regarding the margins. So as you said that price hikes wouldn't be much possible for the next few quarters. So majorly, the levers would be on the cost side. But can we improve the cost structure in a short term to such an extent that over the next 2 quarters, we can come back to the margins because I think it will be very difficult to improve the cost structure and the pricing side is a little bit capped. So maybe margin pressures will continue over the next 2 quarters at least for the company.

[Mukti Lal, executive]

Yes. So Ronald ji, you rightly said, so prices like almost capped because we are not really looking to enhance the prices in remainder part of this year. Second part, yes, cost side, we -- there's 2 aspects of that. One is truck utilization, which is directly impacting our costs. So from 82%, we want to be with the volume growth or supposing volume growth was the same even what we have in Q4, then my utilization level will be reached to again 83.5% to 84%. So ultimately, my cost will be impacted or reduced like 150 basis points by that directly. So that's one aspect where we will improve our margin levels.

And second part, I think because we're adding like separate network for this air mode or like rail mode. So that is -- still will be like continue. So -- because this is our strategy for the long term. So that may not be like reduced there. But yes, I think we will be improve the margin level at least 150 to 200 basis points in quarter 2 onwards.

[Ronald Siyoni, analyst]

So 150 bps improvement could be seen if there is a variation of 1% in utilization?

[Mukti Lal, executive]

Yes. Yes.

[Ronald Siyoni, analyst]

Great. And on the follow-up on that Multimodal thing. So over the long term, planning to have multimodal capabilities like Transport Corporation of India. Are we changing our focus to go over from Express and diversify more into, say, have Rail Express as other revenues where growth is much more diversified rather than concentrated. So over the say, next 3 to 4 years down the line, should we see TCI Express being a Multimodal logistics player?

[Mukti Lal, executive]

Chander sir, would you like to answer on that?

[Chander Agarwal, executive]

Yes, I think that's quite possible because at the end of the day, road network is available and the rail network is also available. And so is the air network. But I don't believe that air network is so much of relevance in time to come. Therefore, it will be very critical that we develop a rail network alongside the road network.

I'm not saying that the rail network of the corridors, they will play an important role in our business because they are only for the Western corridor and all that, they're only for containers for export and for commodities. So they are not going to be our main concern or a threat. What will be important is to use the existing network of the railways touching every location. So I think, yes, going forward, we will see further utilization of the -- sorry, the Rail and Surface network.

[Ronald Siyoni, analyst]

The focus surely would remain on Express or there can be moving away from Express businesses?

[Chander Agarwal, executive]

Not at all because Express, again, the margins will only come from Express. Others are all commodity business. I will not get into the commodity business of transportation.

[Navin Agarwal, analyst]

We take the next question from Kunal Bhatia.

[Kunal Bhatia, analyst]

So you just did mention about the cost escalation from the air freight side or from the cost escalation on the airport handling part. So on that account, have we taken any price increases for our customers? And if that you have taken, how much is that?

And my second question is in regards to our overall growth for the current year, what is the kind of growth -- if we just exclude Q1 for the time being, July and August, say, we are almost midway August, what is the kind of growth we have already seen in the 1.5 months, which is passed by?

[Mukti Lal, executive]

Yes. So well Kunal, I will be answering one by one. First question, you asked for the like cost aspect we -- whether we are able to pass on to customer on air mode, this is really -- we couldn't able to pass on because overall airline -- air cost is already in the higher side. So customer will not be -- couldn't allow that. So to compensate that in time to come, we started to be adding like a business from the SME customer, like we're doing for the Surface cargo where we're getting highest corporate. Same way, we also started to bring getting business for the small customers for the like rail and airport.

So we will be keep working on that strategy and come on to like second part on the growth part, yes. So we are hopeful to be getting double-digit growth in remainder 3 quarters of this year. So trend is good, like single-digit growth in July. And hopefully, like this will be like increase further in August and September, much.

And then subsequently, last year was, if you see like quarter 3, quarter 4, there was a muted growth. So we are hopeful to be -- because base is low for these 2 quarters. So hopefully, we will get like good growth rate on second half of this year. Usually, is also happening to second half is always quite good than in comparison to -- sorry H1. So by this strategy, I think we will be achieve what we are seeing here.

[Kunal Bhatia, analyst]

Okay. Okay. And sir, you mentioned that you had an improvement of 40% in terms of turnaround time. So was it specifically only to the Pune Sorting Center or in general?

[Mukti Lal, executive]

No, no, no, in Pune only. Pune and Gurgaon.

[Kunal Bhatia, analyst]

Okay. So sir, in terms of the overall, say, revenues, how much would have been handled through Pune and Gurgaon centers?

[Mukti Lal, executive]

So if you see in and out revenue for the both centers, this is, I think, it is 25% put together in and out I am saying because they set originally also and they set for like the definitions also. So put together, I think it's 25%.

[Kunal Bhatia, analyst]

For Pune and Gurgaon both?

[Mukti Lal, executive]

Yes.

[Navin Agarwal, analyst]

Friends, we're running out of time, and we need to wind up. So request you to forward all your unanswered or follow-up questions to me on my e-mail ID. I've shared it with everyone.

Now I hand over the webinar back to Chander or Mukti for the closing remarks, please.

[Mukti Lal, executive]

Yes, Chander sir, please.

[Chander Agarwal, executive]

Thank you, everyone, for joining us today. We have tried to address all your questions. And if you have further inquiries, please connect with the Investor Relations team and we will be happy to address the same. We look forward to meeting you in the next quarter. Please stay safe and healthy. Thank you once again.

[Mukti Lal, executive]

Thanks a lot.

[Navin Agarwal, analyst]

Thank you. Thank you very much. On behalf of SKP Securities, thank you very much, Chander, Mukti and Hemant and Ashok for taking time out to interact with the investors. We look forward to hosting you again in the next quarter. Thank you very much, and have a wonderful week. Bye-bye.