TCI Express Ltd
NSE:TCIEXP
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TCI Express Ltd
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Ladies and gentlemen, good day, and welcome to the TCI Express Q2 FY '21 Results Conference Call hosted by ICICI Securities Limited. [Operator Instructions]Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Mitra from ICICI Securities. Thank you, and over to you, sir.
Yes. Thanks, Inaya, and good evening to all the participants who have joined in. We have with us the management of TCI Express represented by Mr. Chander Agarwal, MD, and Mr. Mukti Lal, CFO, to discuss the Q2 FY '21 results.So without further ado, I hand it over to Mr. Chander Agarwal for his opening remarks. Over to you, sir.
Thank you, Abhijit, and welcome, everybody. Good evening, and welcome to the earnings call of the second quarter of financial '21 of TCI Express Limited. I wish you and your loved ones are doing well and keeping safe. We will start with a brief discussion on the industry and company's performance for the quarter. And then, I will hand it over to Mr. Mukti to discuss the financial performance of the company.Our earnings presentation has been uploaded on our website and stock exchange, and I hope you've had a chance to review it. The second quarter of the fiscal year brought much needed respite as economic and business activities picked up across the country after the lockdown. There was broad-based recovery across all major industries and sectors. All sequential improvement was visible over these 3 months as businesses began to address latent demand present in the channels and also prepare for the upcoming festive season.July and August were adversely impacted to a certain extent, with September reaching to pre-COVID levels. If you look at the number of E-way bills generated during this period, in July and August 4 point -- in July it was 4.8 crores, and August it was 4.9 crores, respectively, lagging behind the pre-COVID levels. In September, the figures stood at 5.7 crore, which is higher than 5.24 crore of September 2019, indicating returning of normalcy and businesses as well as the latent demand of the previous months during lockdown.I'm happy to report that in this quarter, TCI Express generated revenue from operations despite the challenges of INR 213 crores. EBITDA stood at INR 34 crores, with margins of 16% and profit after tax for the period at INR 24 crores with margins of 11%. The sequential revenue growth of the company was primarily supported by our SME customers as they ramped up their businesses faster than the other large players.Cost control measures and high capacity utilization in operations have helped us to drive profitability. During the quarter, we maintained healthy capacity utilization levels of 87% and the volumes are almost at 78% of pre-COVID levels. And now we expect growth in volumes in the second half of the year.This quarter's performance is a clear reflection of the trust we enjoy among our customers, big and small, and strength of our asset-light model. Our CFO, Mr. Mukti, will discuss the company's financial performance in detail later.During these challenging times, we appreciate the great effort and support of our employees. And as an expression of our gratitude, we have ensured no salary deductions were made until now, except for myself. And we have also paid bonuses for Diwali and we'll start with the salary increments for all employees for the year. We also were nominated -- we also got the award for the Great Place to Work, and we started the benevolent fund for our employees.We continue to move forward with our geographic and infrastructure expansion plans. We have opened 10 new branches in the quarter and incurred a CapEx of INR 9 crores for construction of the 2 sorting centers in Gurgaon and Pune. The Pune sorting center construction will be completed in third quarter of this fiscal year and the Gurgaon center will be completed in the last quarter of the fiscal year. There is a delay of about a month in the project time line, which we all know is because of the health pandemic.In the previous calls, we mentioned our collaboration on various projects to deliver health equipments and, at present, we are engaging with government agencies that are in preparing an advanced logistics plan for delivery of the COVID vaccine when it's available. TCI Express is committed to play a vital role in this initiative.Looking forward, with the economy opening up and business activities resuming, we expect strong growth for TCI Express in second half of the fiscal year as the country gears up for the upcoming festive season. Given our pan-India presence and the asset-light business model, we are well positioned to address demand recovery as we quickly adapt to the rapidly changing environment. This pandemic has allowed us to carefully introspect our business and how we can operate it more effectively and efficiently. The margin improvement is visible in our results, and we are confident of delivering improved profitability for the full year.There is a famous saying: Top line is vanity, bottom line is sanity.With that, I would like to hand over the call to Mr. Mukti to discuss the financial performance of the quarter. Thank you.
Yes. Thanks, Chander sir, and good evening to all of you, please, and I will discuss key highlights of financial performance. Though there was some recovery during the quarter, the impact of COVID-19 would still exist and -- exist in this quarter. And as such, I will focus on sequential comparison, which will be a better indicator of company's quarterly performance. I will also provide figures for Q2 of last year for your reference.Revenue from operations stood at INR 213 crore compared to INR 89 crores in the previous quarter of this current year, with quarter-on-quarter growth of 140%. This was INR 269 crore in the same period of last year, so that way, it's a negative of 21%. In absolute term, EBITDA was INR 34 crore. EBITDA margins were 16% compared to 4% in previous quarter and 12% in the same period last year. So basic reason of this highly improved EBITDA margins can be attributed to these following factors like: recovery in revenue as the economy opens up; and our ability to maintain high capacity utilization; and improve operational efficiency due to cost control measures implemented by the company; and fourth one is the price hikes we get from our esteemed customers.So net profit of the company stood at INR 24 crore and it is a margin of 11%. For your reference, I would like to highlight that in second quarter of last year, net profit margin was 9.6%, but it included component of tax reversal as per the Taxation Amendment Ordinance 2019, which resulted in a reduced effective tax rate for Q2 of last year. Otherwise, it should be -- it could be around 8% of last year's PAT level. So you can compare from against 8% to 11% jump in this quarter.And as operations scale back, the administration expenses will increase, but we expect that a major portion of cost savings will be retained continuing this year as well and next year also. This will help us to sustain current margin going forward. And we also continue to generate strong cash flow. In first half of fiscal year, cash from operations stood at INR 70 crore. Our focus on cash management by improving working capital cycle resulted in cash and cash equivalent of INR 87 crores at the end of this Q2.In first half of year, we incurred a CapEx of INR 26 crores, which was primarily used in construction of our sorting center and IT infrastructure. And our strong -- and we believe our strong capital structure, with cash surplus position, will support our strategic investments and fuel next stage of expansion as economy growth momentum picks up from second half of financial year.Thank you very much. We happily -- now we'll be happy to answer your queries now. Over to you, please.
[Operator Instructions] Our first question is from the line of Sayan Das Sharma from BOB Capital Markets.
The first question is, if you can help me with the absolute volume of this quarter and the same quarter last year, so Q1 FY '21 and Q1 FY '20?
Yes. So on volume, absolutely, volume we achieved in this quarter is 1.80 lakhs tonnes. And in last quarter of last year, same quarter was around 2.35 lakhs tonnes. So it was almost down by 23%.
Okay. And sir, in your opening remarks, you alluded to the fact that the industry indicators like E-way bills point towards a sequential improvement in overall industry, overall about logistics. How was it for us, if you can help us with each of the 3 months in Q2 as well as how was October from a Y-o-Y perspective? And also, which sectors are driving this incrementally better numbers every month?
So May month, if you remember, was like almost peak of the pandemic. And then the government started opening slightly. It was a slow process. So April was no business. May was almost only 90% of the business. And then June was, again, it jumped up to almost, I think, 70% possibly of negative business. So -- and sequentially, it was growing. And I think as manufacturing units were opening up, we saw that the flow of goods has started.The labor situation, which, fortunately, we were not affected, that also bypassed and then that labor situation was with the manufacturers as well. So there were a lot of challenges from not just transportation but more from the manufacturer point of view. And before the manufacturers could start moving the new material, the old material had to be cleared out. So that process was on, at the same time, at that point. So sequentially, we saw that happening.
Right. But would it be possible for you to, I mean, give us a sense on how, basically, September and October have been? Have we gone back to the normal run rate of revenue that you used to have? Or is there still some way to go for us to achieve that? Hello?
Can you repeat the question, sorry?
Yes, sir. So basically, what I wanted to understand is, let's say, towards the end of this quarter, the September or the early Q3, the October month, how was the revenue run rate there? And have we achieved the pre-COVID levels? Or there's still some way to go towards that?
No. So this month, October, was very, very well for most -- for us and then for most manufacturers as well. And going forward, I think it's going to go back to the same level as to what it was, the business cycle. We don't expect that there's going to be a big boom or something coming. The cycle has now come back to its original self. We saw that big pent-up demand get over with the festival, as the economy was opening, it opened to the festival part. So there was a big demand everywhere.But let us also not forget that India still has -- we still have our bottlenecks. We still have our hurdles in the economy. So in spite of that, I do foresee there will be a month-on-month or sequential growth going forward. December, as we look at every time, is going to be a very big jump you see in business and we foresee that, that will also happen. Like 2 months now, the next 2 quarters, December and March will be a big -- will possibly -- if the numbers are good, will be a game-changer.
Okay. Sure, sir. That's helpful. Sir, one last question, if I may. So if I look at other express logistics, yes, I understand that we are not a direct comparable to them because of the change in difference in business mix. And that company is predominantly oriented towards air access, but they have actually been able to post a growth. I understand again, that there can be multiple reasons, difference in customer mix, difference in product mix, but is there any general trend that you are seeing that because road logistics has faced a lot of disruptions in the last few months, some of the fact that you also alluded to, has there been a shift in some cargo mix to air express or rail or any other alternative modes of transport?
Actually, it's a good question. What has happened is that rail is obviously much more expensive than road, right? And air is much more expensive than road. So what we have seen is that majority of the bulky items, like steel rolls and steel coils, they have all moved possibly to the rail for that period of time. But it's not something which is sustainable for a long period because the operating costs in India are very, very high for the rail network. And customers will not pay that. It's just that during that lockdown, rail was the only movement available, those companies, those big companies, they paid that price. But over a long sequential period, they will not be able to sustain it.Getting to air cargo also was the same similar situation. If you look at the air cargo companies where their margins are, it is lower than road margins or even actually the same level of road margins, which possibly means that they have taken the road material in air. But for them also then it will not be sustainable.So I think a lot of companies have tried to do a lot of permutation and combination to kind of like get out of it, but it's not really sustainable. What we have created is a sustainable model over a long time -- a long period of time. We also have something too in the past. But going forward, things in logistics don't change. It's not like there's a disruption happening of sorts and everything because the operating costs are very, very high in India. And you cannot possibly move like a steel roll coil on an airplane or on an express service. So I do not see any change happening there.
We'll take a next question from the line of Prit Nagersheth from Wealth Finvisor.
So I just want to continue with the prior questions because I think those are exactly what I wanted to better understand. So if I go back to my notes for the first conference call, June was running -- when the call was done, July was running at 80% levels. And then September was supposed to be improvement or equal to normalcy. Now if you aggregate those 3 months, then it should be more than 80% or 85% of normal levels. While what we've seen is not that level, we've seen a degrowth of 23 percentage. So are we seeing that -- so basically, is there volume there, which we are not chasing because that would mean it would be at lower margins? What is the growth in...
So 85% -- yes, I'll clarify. 85% not over last year. 85% of pre-COVID levels. You have to -- first of all, if the business is 0, you have to scale it up, right, to bring it to the level of what it was. So that 85% was to bring it to that level of pre-COVID. If you are from -- it was at #8 out of 10. So once it reaches 10, like, for example, in October, it reached 10, as I had also said in my call, or I think in TV interview that it will reach by end of October, we will be back at pre-COVID levels. So it took that time for most -- for us to come back to that level.Now we did not chase, as you also -- your second part of the question, we did not chase any low-margin business at all to fill the top line, there was plenty available, a lot of other people were doing that. But there was no way that we could bend our supply chain network just to fill the trucks or something because we did not even have that proposition of filling the trucks aspect because we are vendor-based, we are asset-light. So we do not have any of the situations, that friendly situation that let's just do everything, move everything, spoil everything.But at the end of it, whatever we did, we saw that the profitability was, again, the highest in terms of EBITDA growth over last year. So it clearly shows that the strategy that we used was not to -- we were doing a wait-and-watch strategy. Now most companies which have shown that they will have a top line growth maybe in manufacturing or something, I'm not sure if it's sustainable. So in our case it will be sustainable now that we are back to the pre-COVID levels.
Okay. So that makes sense, sir. I think the profitability is fantastic. So no two ways about it. So when you say you're back to pre-COVID levels, would you say that October has been back to on Y-on-Y basis at least at the volume level similar to last...
As growth over last year.
As growth over last year, okay, okay. All right. Any price hikes that have been taken?
Mukti?
Yes. So we were able to take the price hikes also in the range of up to 3% from the -- all kind of customers.
Right. So what you're saying is 23% was down, of that 3% was is price hike. So net 20% was down?
Yes.
And any guideline -- guidance that you guys can give right now? Or you think it's too early to give any guidance for the rest of the year?
Very difficult because people are talking about second wave and all that, but I don't think India will have a second wave. But I know one thing that we will cross the profitability from last year, for sure. We've spent a lot of time in reworking our network and reallocating our resources. We -- some of the final things that was roadblocks to a speedier delivery, to closer contact with the customers, we realigned our corporate office, we added -- we even did some shuffling, rejuggling, all of that. So it kind of like gave that momentum that is required to get that growth and that profitability.
[Operator Instructions] Our next question is from the line of Depesh Kashyap from Equirus.
Sir, the same E-way bills generation data we talked about, that shows 21% growth in the month of October. Would our growth be any similar to this? Or this is mainly led by agri-related transportation?
Mukti?
Sorry. Sorry, can you come again, please?
Yes, Mukti sir, the E-way bill generation data that shows a growth of 21% for the month of October. So I'm just asking, will our growth be any similar to this? Or this is mainly agri-related transportation?
No. So actually, we have a growth in a single-digit number.
Single-digit number, okay. Right. Sir, there seemed to be a sharp increase in the freight rates in the month of October, and you talked about like 3% price increase. So do you think our gross margin will come under pressure in the second half?
Not really. If you see freight rates are more -- mostly, depending on the FTL movement, basically full truck load movements basically. And our kind of customer, we have a long-term contract with them. And our cost with our vendors is also the same for the year, basically. So it is not in a situation of at all to under pressure of our margin. We will be -- keep impacting the margin. Whatever margin we even achieve in Q2, hopefully, in full year, we will retain this one.
Okay, that is great. Sir, last question. So your planned CapEx was INR 400 crores for 5 years. Out of which, you have only done INR 146 crore, say, for 3.5 years. Now what kind of CapEx are you looking for the next 2 years?
So in this year, we're anticipating a spend of around INR 50 crores more in the remaining period, remainder part of this year. And I think, hopefully, INR 100 crores in each year, next 2 years, we will do that. So in the next 2.5 years, we will be completing that CapEx plan of INR 250 crores remainder part.
So sir, basically, INR 100 crores means you will be adding around 3 to 4 sorting centers every year, that is the plan?
So we don't add sorting centers. We expand the sorting centers.
Yes. I mean let go off of the previous ones, right? So that's how the plan is?
Yes, right.
Thank you. Our next question is from the line of [ Shanti Patel ] from Shanti Patel Investment Advisers.
My simple question is, for this INR 50 crores, which we are going to spend, what will be the impact on the turnover that is going to be? And secondly, we -- our company is an asset-light company. Can you throw some light on that particular aspect?
Mukti?
Yes. So basically, as we earlier also mentioned, we are expanding our sorting center for the future growth. And second part of that, why we are going for that? So we mentioned earlier also, that is actually part of strategy to convert our lease sorting center into own one to keep a control because these sorting centers are basically -- if you, say, airline, it is an airport kind of mechanism we have in the sorting center, where we collect the cargo and then putting it in the sorting center and consolidate here and then resort it. So these assets are very, very key for us.So in major 10 to 15 cities, we want our control on that and with more automation. So ultimately, we will be able to reduce our turnover time. So supposing, right now, we have an efficiency level of 10 to 12 hours, which can be reduced to 4 to 5 hours. So throughput, we want to be enhanced on that one. So this is the whole idea to have these sorting center converts from the lease to own one.
Yes. And the second question, asset-light company. Could you throw some light on that?
So asset-light, we don't own any single truck. Basic assets or depreciable essence are the trucks, which we don't own any single truck. And other thing also, our ROC would keep continuing on a 40% plus because we are ensuring whatever additional we're adding as a capital employed, it has to generate the revenue, generate the profits to compensate that at least 40% returns on that.
So trucks are rented out?
Sorry?
That -- asset-light means we are not owning any trucks, right?
Yes, we don't own any truck, yes.
So we hire the trucks or we have a contract with the truck owners?
Yes, we have long-term contract with the truck owners.
We'll take our next question from the line of Kaushal Shah from Dhanki Securities.
Sir, if you can just throw some more color on the competitive scenario? You mentioned that TCI October numbers are higher than last year's October. But generally speaking, for Q2, there has been a sharp cut in our volumes. So is that because of a very tight competitive scenario? Or is it because of specific slowdown in some sectors? If you can just throw some more light on that?
No. So our business has not gone away or its competition is taken away. We have ensured that. The manufacturers have not started fully. If you look at manufacturing companies also, they had started almost -- no company has started 100% production. So we obviously went along with them. And like if there were any leftover business, we did not take that because that would be at almost like softly because they're so low in pricing. So we followed our customers. There was no element of competition coming in on or any of that. In fact, competition took a big beating. They were not able to keep up. Logistics, they were -- in road logistics, they were -- had the biggest problem of labor and, at the same time, they had a problem of drivers, which we did not face anything.So this lower volume is not because of the fact that we were not able to do the business. It's just that the manufacturers were not ready to dispatch. So when our customers -- and even if you find a new customer, we had good addition of new customers, their volumes were not full up, now they are getting to be fully operational. So that differential has kicked in. In fact, some garment manufacturers or textile companies have still not got 100% manufacturing levels.So now, going forward, we have to follow the customers. We have to follow the economy. We can't jump it. And once we follow it, we will see the numbers coming in.
Sure. And sir, just next question was on the employee expense. So there has been a fairly decent increase on a quarterly basis in the employee expenses. So should we kind of take this INR 22-odd crore number as a steady number for the forthcoming quarters?
Yes, not really -- yes.
So we also -- management announced to give the increments to our employees for there -- to compensate them. So that's why it will be slightly increased in these 2 quarters.
Okay. So the sustainable number could be around maybe INR 25-odd crore run rate maybe on a quarterly basis?
It maybe around INR 23.5 crore or INR 20 crore, even -- INR 24 crore, sorry.
Our next question is from the line of Lokesh Manik from Vallum Capital.
Just one question from my end. If you can share the revenue mix between the SME customers and the volume customers for this quarter and preferably, if possible, for last quarter as well?
Sorry, what is the question?
The revenue mix between your SME customers and your corporates, which are mostly volume-driven customers?
Yes. So in this quarter, volumes from the big customers is slightly low. So you can -- the SME customer, we have business around 55% in this quarter and 45% from the big customer. Originally, we have 50%, 50% ratio over long term.
Correct. Which is your strategy, which you have been following for the long term.
Yes. And that we actually wish to have that way, 50-50 ratio. In the future also, we will be -- have a strategy to have the same way.
Okay. So for this quarter, it was 55%, 45%?
Yes.
And that has -- again, that was one of the reasons your margins were higher?
Yes, correct.
[Operator Instructions] And our next question is from the line of Ankit Panchmatia from B&K Securities.
Sir, I would like to understand this other costs, which were quite lower on a Y-o-Y basis. So is there a major component, which we have worked upon in -- over this first half of FY '21? And would it remain to be continued at the current level?
Yes. So yes, we discussed earlier also. So there is a cut -- there's no mobility expenditure for employees. There is no various -- discretionary cost is not there. So that will be -- keep continue. And next year, hopefully, it will be again the same thing. We've taken an opportunity and then able to renegotiate our rentals with the landlords and all. So that kind of -- we will keep the same tempo in this year as well and next year also.
Right, right, right. And sir, any indication around new customers added during the current quarter, any particular stream, which is able to ramp up pretty rapidly, like in e-commerce or which segment we are seeing there is growth ramping up from?
No. So we are not -- our focus is not e-commerce. Our focus is, of course, the high-value business that's out there. So the auto components, the pharmaceuticals, we are seeing good growth happening there and the engineering products as well, engineering spare parts.
Right, right. And sir, we are at the fag end of this year's CapEx at Gurgaon and -- any further plans on the drawing board as we acquired land around it? Or any locations in n your mind, which you can highlight over the next year CapEx guidance?
I didn't understand. Sorry, what was the question?
Because we are already through with our CapEx at 2 locations. And in FY '21, we would be live on those locations. So any -- for the next year, we have planned close to INR 100 crores each year. Any guidance around...
Yes. We have not done our -- actually, we have not finished our CapEx in Delhi and in Pune. It's still pending.
Okay. Okay. So this would be what square feet, if I can get the data?
I'm sorry?
This would be what square feet?
So Ankit, we are doing this. As mentioned in our opening remarks, we will be finished Pune by this quarter -- Q3 end. And for Delhi one, we would be finishing at Q4. And next year, we already have a plan for Chennai and -- maybe buying land in Mumbai. And other than that, we have the Nagpur and Indore, and are already in line.
Right. Sir, just to ask this Pune is what square feet and Delhi is what square feet?
So Delhi is around 2 lakh square feet and Pune is 1.5 lakh square feet.
Our next question is from the line of Krupashankar NJ from Spark Capital Advisors.
My first question was on the margin side of things. Sir, can you quantify as to what would have been the proportion of margin expansion, which would have come in from the drivers, which you have stated, which is we are improving operating leverage, your buying sites, et cetera? And how much of it would be sustainable going forward?
Mukti?
Yes, yes. So yes, we mentioned. So that is -- it is sustainable in this few -- because, again, we have taken various efforts, we have done rerouting, we have worked on admin costs also. So that operating margin level has increased from 29% of last year to the 34% in H1, 500 basis points jump we have. And that is sustainable in the remainder part of this year and next year also.
Okay. So is it fair to say that -- of course, mix has also played a part in the 15.5%. So is it fair to say that going further, for the remainder of the year, 15% or 14.5% would be the right number for EBITDA margin?
For the whole year, we will try to keep it around 15% plus, kind of 16%.
That's good to hear, sir. My second question was more to do with the branch addition. Of course, you have added about 10 branches for the current quarter. Can you highlight as to what is the proposition, which you are seeing on the branch addition part over the remainder of the year?
Yes. I I think we'll add only 30 branches this year at about 10 per quarter. So I don't think it makes sense to do more than that.
Okay. Okay. So the SME proportion coming back on track would be more of a function of manufacturers coming back to their fullest extent on a post festive period -- or that's what you're hoping for, right?
We are not hoping, but we are seeing that it's already happening. So during the lockdown also, the first people that wanted the movement were the SMEs. And they didn't have a big problem of plant shutdown and this and that, all those things that larger companies have. So the turnaround time is much faster for SMEs in terms of our delivery to their customer, then our payment receiving from them.So in general, I have noticed that it's always the starting point of anything good are the SMEs. And then, as we grow bigger and everything, then we look at the bigger customers.
Okay. Okay. And I have one more question on the dimension change of trucks, which was recently amended. So how much of our attached fleet would we have seen a change in the size or any benefits derived from it?
30%, Mukti, am I right? 30% or 25%?
So now we reach around, sir, 40% plus.
Okay. 40%. Okay. Good to hear, sir.
[Operator Instructions] Our next question is from the line of [ Sriram Rajaram ] from Ratnatraya Capital.
I just have one question. So what is the current cost differential between road freight and rail freight, let's say, between Mumbai and Delhi?
Sorry, I didn't get that?
What is the current cost differential in freight rates between Mumbai, Delhi, in terms of rail side and...
Sorry, Mukti?
Sorry, I didn't get the question what you say, please. Can you repeat again, please?
Yes, yes. What is the cost differential between rail freight and road freight, let's say, for a key route like Mumbai, Delhi?
Air freight is almost 2x or 3x.
Okay. Can you give some number?
It's possibly 3x.
Like if you take from Delhi to Mumbai on air side, it's around INR 60 plus. And if you take on surface side, it's around INR 15 plus.
And rail?
Rial may be around INR 25. Because, again, depending on whether it is a goods train or whether it is basically a Shatabdi and all, basically a single -- passenger train having super fast services. So they maybe have around INR 30 or INR 25.
Per kilo?
Yes.
Thank you. Our next question is from the line of Prit Nagersheth from Wealth Finvisor.
One other question I want to understand, you mentioned something about working with the government on the vaccine side of things. So can you add more color here, what is that going to be? How much of TCI Express would get engaged for that?
Right. So we have started -- we have not announced officially, but we have started doing cold chain business as well. And I do not take this forum for announcing the start of that. The thing is that we have been working with government bodies, for example, MACO and I am forgetting the other names for transportation of -- understanding this business of how -- we have got the contracts for all India distribution for the vaccine for UNICEF also. And what we are doing is that we are working with companies. We have already been talking to companies in Pune for their possible acceptance of COVID manufacturing -- COVID vaccine manufacturing. So we have already been almost in the -- got into the L1 segment of the distribution from their side. So things like this is happening.And we see that in our cold chain business, that we are doing, though the volume and the top line is very small, we have about 52% in pharma, FMCG is about 4%, frozen food is about 18% and fruit and vegetable is about 26%. So I think going forward, this can be a good project. But the problem is that we are very -- we are stickler -- we are price sticklers, and I do not want to get into the business where companies are paying us freight rates, which are as comparable to lower -- to just to regular freight rates and not cold chain. So I don't want to be in that conundrum. That's why we are very cautious in going forward. And we are also providing reefer vehicles as FTL and mid-run also.So I think we will grow this business, but we will not be in a rush to grow this business.
Our next question is from the line of Abhijit Mitra from ICICI Securities.
Yes. Just to expand a bit more on the last part of the reply. So the FTL and basically the first-mile transportation is a profitable business venture as far as cold chain distribution is concerned, as per you, especially, or is there certain segments only that you are looking at as of this point in time? And is there a scope of sort of expanding this service into last mile or retail distribution as well?
No. As a company policy, as management, we did not do last mile as it is not at all profitable even with the vaccines going forward, even with the vaccine centers opening. What my -- what I have actually told the government is that they can consider the post offices as being a vaccine go-to shop for their COVID vaccines. So we will only -- like e-commerce, we will only focus on the first mile leg of the transportation, and we will not consider last mile at all.
And in terms of profitability, existing rentals are allowing sort of comparable yield to the business that you're already running? Or is there a differential that you see right now?
It is maybe at almost the same level. And of course, because we do not have the volume, we have not bought it down to surface, the current business level. And going forward, it has to happen, it will happen. Once we know that the pickup points and all of that across the country, where it's going to be originating, for example, in Pune -- let's say, hypothetically, if it's going to be in Pune, then it's going to be all over India, then we will have that sort of network set up. We will have that hub-and-spoke network part of it, like a retreat only for this, then the costs will start coming in.So it's actually just a wait and watch process also. I don't want to be too much in a rush. We are studying as we're going along.
As there are no further questions from the participants, I now hand the floor back to the management for closing comments. Over to you, sir.
I thank everyone for participating in this conference call. It has been a tough period in the H1, and we are driven by the fact that we are here to stay for the -- for our customers. And as I mentioned earlier that top line is vanity and bottom line is sanity. So going forward, we will come back, we will cross next year possibly much higher than the yield that we are in, in terms of top line and we hope to cross the bottom line from last year. Thank you very much.
Thank you. Thanks to all, please.
Thank you members of the management. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.