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TCI Express Ltd
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Good day, ladies and gentlemen. I'm pleased to welcome you, on behalf of TCI Express and SKP Securities, to TCI Express Limited's Q2 FY '25 Result Webinar. We have with us Mr. Chander Agarwal, Managing Director; along with his colleagues, Mr. Mukti Lal CFO; Mr. Hemant Srivastava, COO, Surface Express business; and Mr. Ashok Pandey, CEO, Multimodal Express business.
This webinar is being recorded for compliance reasons. And during the discussion, there may be certain forward-looking statements, which must be viewed in conjunction with the risk that the company faces.
I now hand over the webinar to Mr. Agarwal for his opening remarks, which will be followed by a Q&A session. Thank you, and over to you, sir.
Thank you. Good evening, and a very happy Diwali to everyone. Welcome to the Q2 and H1 Financial '25 Earnings Conference Call of TCI Express Limited. Thank you for taking the time to join us today. We have already circulated our earnings presentation on the website and stock exchanges, and I hope you had a chance to review it.
I will start by providing an overview of the [ business ] [indiscernible]. During the quarter and the steps we are taking to ensure long-term growth and value for our stakeholders. Following that, I'll hand over the call to our CFO, Mr. Mukti Lal, to walk you through the presentation in more detail.
TCI Express showed modest improvement in revenues and maintained some margins sequentially in Q2 financial '25, reflecting the company's efficient operational strategies, innovatove service offerings and market [indiscernible], strengthening its position as India's most trusted fastest [indiscernible].
Apologies, I need to interrupt you for a second.
Causing supply chain disruptions and [indiscernible]. Additionally, lower activity in manufacturing and automotive sectors, coupled with geographical [indiscernible] softened the logistics market.
Please just give me a minute. I think there's some technical issue. Bear with us for a minute, we're just fixing it. Thank you. [Technical Difficulty]
Apologies for this audio glitch, just bear with us for a moment.
Since Mr. Chander Agarwal is having some technical issue, so we'll have Mr. Mukti Lal, the CFO, to take over. Mukti, please go ahead.
Yes. So good evening, everyone, and apologies for that. So good evening and very happy Diwali to everyone. Welcome to the Q2 and H1 FY '25 earnings calls of our company. Thank you for taking time to join us today. We have already cascaded our earning presentation on the website and stock exchanges, and I hope you have had a chance to view that.
I will start by providing an overview of the business trends. And then I will be going through with the presentation. And so TCI Express saw in this quarter showed a modest improvement in revenues and maintained its margin sequentially in Q2, reflecting the company's efficient operational strategies, innovative service offerings and market uplifting, [indiscernible] its position as India's most trusted and fastest-growing [indiscernible] logistics, company. However, on a year-on-year basis, revenue saw a slight dip due to several factors, including like prolonged monsoon rains led to water logging and flooding, causing supply chain disruption and delivery delays.
Additionally, lower activity in manufacturing and automotive sectors coupled with geopolitical tension softens logistics demand. So amidst these challenges, TCI Express advanced on multiple fronts, our Rail Express service is gaining traction with the customers, contributing positively to margins and is essentially aimed for the Multimodal Services to make up like 20% to 22% of revenue over the next 2 to 3 years.
Automation remains a key focus and simplify our newly automated Pune sorting center, which has improved operational efficiency and reduced turnaround time by almost 40%. We are extending automation to our next innovation to be like Ahmedabad and Kolkata Center to better handle increasing volumes.
This year, we introduced like money back guarantee, reflecting our confidence in timely delivery across our Surface Rail and Air [ modes. ] This offering has been well received by customers and strengthens our position in express logistics.
We are honored to received like recognition, including the Iconic Brand of India 2024 and the Rajasthan Business Award for Best in Logistics. And we are humbled to be named, Mr. Chander Agarwal, as [indiscernible] Business Leader for 2024.
We are pleased to say that we announced our first interim dividend for this year at INR 3 per share, which is 150% on face value. This reflects our commitment to creating value for our shareholders and so is our focus on steady growth and profitability.
On our CSR front, we formed TCI Express Foundation and opened our first t Jaipur Foot and Rehabilation center in Lucknow, offering free artificial limbs and other [indiscernible] like almost around 100 individuals so far in within a 2-month time. And the Shri P.D. Agarwal Blood Donation Drive 2024 also. So 1,334 participants in nationwide.
Now as we move into the second half of FY '25, we are optimistic about the future. We anticipate a recovery in demand with the upcoming festive seasons. TCI Express remains steadfast in the risk commitment into leveraging its strength, seizing growth opportunities and maintaining a customer-centric approach.
So now like we can we start with the -- Navin, can start with the presentation, please?
So I will give you like brief for that.
Sure, just give me a minute.
It is visible, please. So this is our synopsis. Like we completed. So good evening, everyone, again. So this is our synopsis of our company. Like we [indiscernible] this division from the TCI and almost [ 8-year ] completed. And our business of offerings, like 97% is B2B and 3% of B2C And we are like serving 60,000 locations -- 600-plus location. Next, please.
So I'm just going to other things. Like this is our USP where we continuously following asset-light business model even in Multimodal Express also. We don't have any franchises. We're carrying like high-value cargo and low volume. So this is like high-margin business. And we continuously need a low working capital requirement in this business, and it is still keeping like within less than 20 days in networking requirement. And still, I think you have like gone through with this presentation. So we had the lowest [indiscernible] in this industry. We are expanding our Multimodal services. And we also like -- IT is very important for our kind of business, and that's why we also focus on various aspects, including API, we are dealing with the customer and getting the automated data and then also like track and test facility also. And so various things we are doing. And completely [indiscernible] having like. And next, please. And our [ USP, ] we continuously focused on [indiscernible] this automation. So next, please.
So this is the second automation we completed in Pune, and this is also seamlessly, we integrated the system and now their turnaround time has also been reduced in the range of like 30% to 40%. Service offerings are the same, what we have discussed in last quarter. Please? Yes, next, please.
So this is Rail Express. So I just would like to update here, Rail is really growing very fast. And now we have a 5,000-plus customer base in this segment and we increased -- we almost -- our route, we present on around more than 150 routes, and it is increasing day by day. And it is a good thing like repetitive customers is giving the business to us and is a good profitable and like mid-way off, Surface Express and Rail Express, giving the same kind of turnaround time, which we're giving in [ air services. ] So customers are very happy, and we are expanding very well.
This is C2C. So it is also like growing on a steady path, but on a slower growth and not like growing like Rail is growing. Yes. Yes, please, we can skip.
Money back guarantee, just feel like giving updates. So it is also we're giving this service to all -- most of the transportation like Surface, Rail and Air. And this is also customers -- it is basically made for the like new customers or -- so that's why it's attracting the customer and giving like then we can be -- they can rely upon our services and they can give you the repeat order for that. So it is also getting very good traction around the customer. Next, please.
These are the like Q2 highs highlights. So we have achieved income of around INR 314 crores income and EBITDA is around INR 40 crores. The PAT level has improved sequentially, so from like INR 23 crores to INR 26 crores, and we declared a dividend of INR 3 in this quarter.
And in this quarter, our capacity utilization of the [ core ] fleet is 83%, and in last quarter towards 82%. So average is around 82.5%, which is still below like expected numbers where we want to be improved at least to achieve level 85%. So once the volume will be like start to normalize, then we will be achieveing 84% to 85% again.
And although like industry vertical. So still automobile and lifestyle product and some engineering companies still facing the challenges in the demand side and overall consumer demand is still weak, though we have seen some uplift in the demand in quarter-on-quarter basis, but on a year-on-year basis, we have still like flattish numbers. and industry is also in the same way yes.
Next, please? Yes. So there is enough -- this is like income we show in the quarter where we, in Q2 of last year, we achieved around INR 322 million and now we achieved INR 314 million, so it is around negative [indiscernible], and that's why it's also impacted margin because -- but good thing is that our operating margin is intact or you can say like hit by 150 to 200 basis points. And EBITDA margin has also like bringing down from like 16% to 13% due to like other cost salary and some admin cost has increased.
Yes, please. Accordingly, once this volume is coming back, then we have to be -- as earlier in the past, we did like whenever we achieve growth, then we have to be [ 2x ] of that we are earning on a profit margin. So same way, if you see from quarter 1 to quarter 2, [indiscernible] our revenue has grown 6% and margin has -- profit has grown almost 14%. Yes.
These are the H1 highlights. So total income is INR 610 crores and EBITDA is -- we achieved INR 76 crores and PAT is near to INR 50 crore. In this -- yes, please Yes, next, please. Yes, next, please.
So this is the dividend side. So we, like internal policy, we had to be like given almost in the range of 20% to 25% as a dividend payout ratio. So we will be in the same path. In this time, we have given again INR 3. And I think overall, by year-end, we will maintain the ratio of in the range of 20% to 25%.
Return on capital employed. So we slightly -- like we work out on the only like core assets like non-core assets means basically current investment and like office land, we [ bought ] that, we have removed from that. And if you see -- so this is like operational ROC, if you see it is like in this, H1 is 12.5%. And for the whole year, we will be achieve around 30% plus, which we earlier achieved. So all numbers are excluding core assets.
And return on equity is the same, like, again, is [indiscernible] the number. And in this H1, it is almost 7.5%. And last year, it was around 11%.
Cash conversion ratio is, again, robust. So there is no challenge on that side. Usually in H1, it's low and then full year is always like in the range of 70% plus. Next, please.
Yes, the same as I mentioned. So on capital expenditure side, we spent almost around INR 11 crores in this H1 because fortunately -- unfortunately, we were not able to crack any land deal, which we anticipated at either on Bangalore or Chennai or Mumbai, we were not able to get that. So that's why CapEx is low on lower side. And we also have not started like construction at Kolkata and Ahmedabad that we will be -- soon, we will start for that.
Next, please. This is our leverage profile. And there, we, like receivable days, as you've seen, is maintained at 55 days and payable days is in the range of like 33. And according to net working cycle is 22 days. So it's a very robust profile we have and we are keeping continuously as a debt-free company status.
Yes. This is our balance sheet. So balance sheet, you compare with the like H1 of last year to this H1. So whatever added is the CapEx. And so ultimately, it's added around INR 40 crore. So basically, it's conversion from work in progress to capitalization part and less is, I think, is the normal one. Same way, current sales are also like increased. So basically, it has increased because current investment surplus fund has been increased. So basically INR 45 crore increase is contributed by that only.
And on the equity side, there is all liabilities and current liabilities are all the same. So whatever we earned as a profit is added to that. Nothing like significant on that. Yes.
These are peer comparisons with the peer, in spite of like our margin has taken a hit on like in H1, in spite of that in Q1, even that was the like, I think, lowest in margin level. So in spite of that, we are still ahead with the other industry players in the margin profile. Yes, that can be skipped. There is nothing new on that. We discussed earlier.
So strategic outlook, we'll continue to like -- we will be more focused on -- to grow this multimodal services. So we can keep that. On the CapEx side, we plan for like I mentioned earlier, also like FY '23 onwards, we have a CapEx plan of INR 500 crores. And until time and like almost on our 2.5 years, we spent almost near to INR 200 crores or INR 180 crores. And remaining INR 300-plus crores, I think we will be spending in the next 2.5 years. And majorly, we will again go to sorting center automation and IT improvement and all. So that will be the like path ahead Yes. Yes, we can skip that. That can be skipped.
So again, growth drivers for the logistics industry is also like heavily depending on the manufacturing in India and key changes like focus on sustainability is very important, that is growing in India because logistics industry is giving highest carbon emissions. So we have to be [indiscernible] with that, and we're taking so many steps to be how we can be like carbon neutralized given in our sustainability report.
And second, we will keep continuing focus on our multimodal services. Infrastructure [indiscernible] is very important, how it will be placed because cities are like [ chalking ] and we are really having -- like weather conditions is also like giving some threat to be in this business in time to time. Yes, please, next.
This is our leadership team. Yes. So this is -- like we put this slide for you like consumption here. How this overall logistic industries played in like H1. So you've seen transportation cost is persistent, inflation, which really led to higher transport costs and because 2 component is very important here. One is toll tax and another one is labor cost because as volumes are muted. So basically, we are bound to increase our labor cost and toll, and this is not mitigated by the like volumes. And that's why it's impacted profit margin to every industry players. And another thing you have seen continuously is a decline in manufacturing output. This is PMIs like slightly down and this has also seen like consumption of fuel has not happened. It is like flattish in this H1 over the last year, same H1. And weather condition is also like [indiscernible] with the overall logistic industry, heavy monsoon and those things, yes. Yes. There's also like some broader... [Technical Difficulty]
Mukti, we lost you there for the last one.
Am I audible?
Yes, you are.
So these are the again, few numbers, which we had broader point for this industry. So vehicle sales is also like down or having like very low growth. And so that's why the cost concern and used vehicle demand has slightly rise. And digital consumption, as I mentioned, is hardly 1% growth of over the last same period.
And so I think demand would be in guidance factor. So demand would be like in a similar way, not be like -- much one and I think moderate one, may not be growing mid-single-digit kind of growth. We may be achieving like in second quarter in the second half. Next, please.
These are our initiatives Yes, please. These are the award and recognition I just mentioned on that. Yes. Next, please.
We -- like ICRA and CRISIL has reaffirmed our ratings as again, AA- is where CRISIL is the long term and ICRA is getting like A1+, which is the highest one for the short term. And we also keep like Certified as Great Place to Work for '25-'25.
Mukti?
Yes, Navin. So am I audible now?
Yes. Now, you are. Can we open the floor for the Q&A session?
Yes, please. It's already too late, yes, due to some these technical glitches there.
Yes. As we open the floor up for the Q&A session, now we take the first question from Jainam Shah.
Yes. Can you hear me?
Yes, loud and clear. Please go ahead.
Yes, first on the volume numbers. If you can provide the volume for this particular quarter?
So volume is exactly [ 2 lakh 50,000 tonnes ] for this quarter and [ 4 lakh 85,000 tonnes ] for the H1, of this H1 in comparison to last year, same H1 is getting [ 4 lakh 92,000 tonnes, ] and in quarter 2 was around [ 2 lakh, 52,000 tonnes. ] That's the number, yes.
Got it. Got it, sir. Sir, on the branch addition, I guess, we have targeted for around 50 branch addition. I guess in 1Q, we added 3. And in 2Q, we added 2. So what could be the guidance for the branch addition? And are we going intentionally slow in terms of branch addition given that volume is not being up?
Yes. So this is true, actually. So basically, we just muted that expansion of branches for the time being because as the volume is not picking up, so we wait and watch, supposing to -- once we start to like getting the volumes and then we will be again expand on a very fast mode.
Okay. Sir, in the first quarter, there is an impact because of the Air Express business as well. Our margins has been squeezed during the 1Q. Has there been any impact in 2Q or everything was settled in 2Q? [indiscernible] wherein you will pass on to the cost to the customers?
Yes. So basically, if you see like this Air business cost is also like impacted in Q2 as well because we're -- because that cost is still is on a high side due to the consolidation of airlines and second part, privatization of this airport. And third, we're also expanding direct network, as I mentioned in last call. So that is going on. And because the cost has increased, but we were not able to pass it on to customers because in this high-cost scenario, customer is also not ready to accept that. So that is still continuing this quarter 2 as well for that.
So overall, if you see that impacted in 100 basis points in overall cost, remaining cost impacted by like increase in toll tax and labor costs, specifically. And third component to be like contributed in this increased cost is like lower utilization of fleet, which is now in this quarter was around 83%. That's why you see, we are able to reduce the cost by 70 to 80 basis points sequentially.
Got it, sir, got it. Sir, on the price increase side. So there have been a few competitors, which has increased the pricing from the July and there have been a few announcements that they'll be increasing from the January onwards, which is also in the range of [ 7%, 8% ] on an average. So have we done anything on the price increase? Or we are just following the model that we generally follow of around 1% or 2% increase on a yearly basis?
I really doubt on that. What competitors and other industry players saying they will be like giving notice and they will be able to increase the prices. I have big doubt on that because in this industry, usually it's not happening in that way. Rather you have to go like [indiscernible] [ SME ] customer is possible to have increase, but big customers, yes, it is not possible to do cost, whatever cost increase that can be passing on specifically on [ diesel ] side. But in a normal one, annual hike is not possible to be given by one notice.
So we wait and watch situation. If they are able to, then it is good for the overall industry because everyone is facing the continuously cost pressure. So I hope -- but we have not yet taken any price hikes, and we will be trying to be start that effort from the -- in last Q4 actually for that. But still, we are not really much optimistic about this price hike. High inflation [indiscernible] and all and muted volumes are there. So really, I do not expect to be any high increase on that.
Got it, sir. And sir, just last one, one question from my side. Our volume has been a [ 2.92 lakhs ] versus [ 2.85 lakhs. ] So it has been kind of a degrowth in the 1H. And overall, we have been targeting earlier 15%, close than 10% to 12% last quarter. And now in the -- you can see a bit of single-digit kind of growth that we are expecting for FY '25.
This question is for the -- like you can say from next 2 to 3 years' perspective, how we are seeing the situation? Our GDP growth of India has been in the 6%, 7% range. And if we see that, that particular growth is eventually coming down, then how we would be coping up with the competition? And if we are targeting to grow at 7%, 8%, what kind of market share gain we can expect? And what kind of thing that we are eventually doing to have eventually a growth momentum for next 2, 3 years? Because overall, last 2, 3 years have been quite stable numbers and there has not been any increase in the top line. And of course, we have been doing a significantly good bottom line as compared to the competitors, but eventually that is also getting impacted. So overall, your view for next 2, 3 years' time.
Yes. So as I said, like we grow in '22, '23, we grown like 15%, 16%. So we are not this -- slightly, you can say, not slow down, but it is like muted growth has been impacted, it started to impact in the last year only. And even as the overall industry has that impact. And this year is also like, we are also surprised with that because sometimes customer is giving confidence and they're giving like growth numbers, we will give so much volumes to us. And ultimately, we were not able to. They were not able to give what they have committed to us or they even -- because they also have the same kind of problem where they're trying grow, but they have not grown in spite of like September supposed to be a very good month for everyone, but that has not gone into that way. You're also seeing the like diesel consumption number and all.
So this is like -- I think it's a temporary thing, again, but this year is a full of challenges in 2 ways. One is muted growth and second part, like cost pressure also. But I think, hopefully, in next year onwards, again, we will be keeping the same guidance for the growth of -- in the range of 13% to 15% as a volume growth and 1% to 2% growth in value.
And what is the like giving the confidence to us is basically like pipeline we're creating. We're discussing with so many customers, and customers is giving confidence and they're coming to us and we're expanding this. We already have opened up the branches like in the last 4, 5 years, almost 300, 200-plus kind of branches. So we all -- we are all ready with that. Operational efficiency, also fantastic. So once -- I think volume will start to pick up, then we will be the first one to get that benefit here.
But second part, also like you said, this industry, GDP is growing like 7%. So it's unproportionately growing through service sector and other manufacturing, which is really, we are not in that segment, basically, if you see what industries we are serving. This is really all impacted in continuously.
Last year, we've seen -- I know lifestyle companies did not do well. This year also, they're facing lots of challenges. So same way, I think consumer demand is important rather like growth in overall GDP because that also have a different component of that.
So I think we will be -- keep continuing like we grow in a [ 17 ] to up to like [ 20 ], we grow on a CAGR of almost one before that corona time, grown almost 14%. And then in last FY '22, '23, again, grown 15%. And so that's why once this will be normalized, we will be growing. Overall, industry is facing this pain for that growth numbers. But yes, you had mentioned, good thing is that we do not compromise on the margin. And margin level is also impacted due to like muted growth only. And due to not like operational things, it is operational cost is maintained, but other costs like salary and other admin cost is slightly bound to increase, and we don't want to give like -- we want to give the increments and everything to our like sales force and everyone.
We'll take the next question from Lokesh Manik.
I wish you a very happy Diwali. [indiscernible]
Lokesh, your voice is cracking.
Hello? Yes, is it better now?
Yes, it is. Please go ahead.
Yes, yes. [indiscernible]
No Lokesh, it's not helping.
Hello?
Yes.
Yes. Is it better now?
Yes, it's better.
Mukti, my question was that a few quarters back, it was mentioned that we had hired consultants for business strategy and expansion. So just a clarification on that as to what is the expense that has come in on that side in the other expense for this quarter 1?
And the second is on what is the duration of their consultancy contract, if you can just get some details on that?
Yes, very good. So basically, that consultant is hired to how like expanding the branch network and all and they already did work on that. And then they also -- given their reports [indiscernible], we have to be like more focus on that. So that, we will be in time to come. But that is not like big cost. We have not given like -- sometime we're giving to other industry, we are giving to linkage with like what kind of benefit we will take. So but we have not given on that one. It's a very not like significant amount. And yes.
The duration of the contract, when does it get over?
Yes, that is get over, yes.
Okay. That is over?
Yes.
We take the next question from Alok Deora.
Am I audible?
Yes, you are. Please go ahead.
So I just wanted to understand, you have also given some of details on the volume side. This mid- single-digit growth we're talking about is for second half, right?
Yes.
Okay. Okay. Any reason why the prior volumes are not coming? I mean, we are seeing some of the [indiscernible] talking a little bit better volumes. And also they are talking about price increase, which may or may not materialize entirely. But if we are also keeping the prices stagnant and focusing on ensuring that the volume growth is there, but still volume growth is kind of missing.
So just, if you could -- in a couple of minutes, if you can just highlight that, is it a structural problem where competition is now increasing and it would sustain ahead where volume growth is, will remain muted ahead? Just some color on that, please.
Yes. So as I mentioned. So basically, there is no structural issues on the overall basis. This industry is growing because there's a lot of opportunity for everyone. And as you -- so basically, I don't think everyone is facing the lots of challenge on the volume side, like whether it's a full truckload or whether LTL or express or I can expect -- except [indiscernible] commerce, everyone has taken a bite on that. So we are not seeing anyone is increasing market share, and we are losing the market share to someone else. That is not the case. And we will be still whenever -- other side of it, you should see price hikes. Everybody is saying, but it is not reflecting, I think, in their numbers. So they are saying, they are saying because somehow supposing in one [indiscernible], one customer, the 3 players are working and once someone is asking, then other volume has to be -- sometimes customer is not willing to pay.
So we have not seen it in the ground at all, anybody has increase the prices for any like logistic players. We have not seen at all in the ground. We don't know why everyone is saying. But it is a good thing, supposing they're able to do that. It is like force to -- it is easy for us to be forced to customer to increase our prices as well. So once we are in a situation of wait and watch because really, we are not seeing that on ground. Once they will be reflecting this in their numbers and obviously, in customer prices, we will be also able to find. But we yet not find. So we will also do the same thing. In the past, we also did -- no one has even able to do that, but we were able to do it because we're doing on a realistic basis, whatever possible, we will do. So whenever these opportunities come in, they will be able to do that, which is reflecting on customer side as well, then we will be obviously push hard for that. Otherwise, no reason for that.
Sir, just one more question. So we -- around 2 years back, we had this thing of Gurgaon center getting automated, then eventually Pune will get automated and more operational efficiency and more improvement in turnaround time and stuff and which won't see margin improvement. So at that point of time, you guys talk about 16% margin moving to 18%. So I understand this -- the last 2 quarters were pretty difficult in terms of maintaining your base margin itself. But how do we see those impacts -- those impact actually coming to the profits? Because those margins are actually not improving in line with what benefits were expected out of those centers getting operational.
Yes, your concern is right, and we are also concerned about that. But if you see good things there, supposing we will not do the automation, then I think that margin is also not intact. So if you compare this with others, what their margin has been reduced and what our margin is intact because last year, you've seen.
So efficiency is a completely different part. And there, we also get the benefit of like I said, 25 basis to 30 basis point overall benefit we get from there. And that is what we will continue as a story because -- this is [indiscernible] like labor and [indiscernible] is down and efficiency is increasing, and obviously, that benefit of reduction in waiting time of truck and all, that happened and that we will keep continuing on that same strategy in the future as well.
But other side, if you see, like these all things put together, come together like muted volumes is the way nobody has anticipated that much actually. So that is one part. Second part, like high increase of toll is not like anticipated because government is now allowing to be increased to 8% to 10%, is becoming a significant amount for the overall journey cost. Third part, like because as a volume, labor cost is also government want to be standardized there and want to increase their [indiscernible] all. So government, focusing very high to be improve that side. So that is also like coming in one way and because inflation is -- obviously, government's purpose was to keep demand slightly low to keep inflation and that's why they also want to be -- reduced the consumption and that happened in very -- that side. So that has really impacted volumes.
So put together, if you see -- and now, we even anticipation of this consolidation of airline, nobody has thought 3, 4 airline will be like consolidated on 1 umbrella and they will increase the prices. So that's, put together, has created like this scenario. But still you will be appreciate that 13% margin or 14% EBITDA margin to achieve in Express business is really a good effort from our team. And obviously, we will be -- once bounced back with the volumes, we will be still have the same energy and same thought process and strategy to get first to achieve like in the range of 15% to 16% and then again increase on the higher side.
We take the next question from Krupashankar NJ.
Sir, my first question was on the load factors. What we have seen clearly is that over the last 2 years, [indiscernible] is the 85% load factor, while volumes have grown from those levels of [indiscernible] FY '23. And we have real factors and current level has declined. So are we deploying more trucks or expanding our services due to which? And despite the [indiscernible] growth, the utilization levels are lower. Is my assumption correct? Or is there probably some of the reasons for these under utilization?
Yes. So that is a very good question. So what happened as -- over the period, we converted all the truck on a higher [indiscernible] load. So that was in FY '20. I think there's a big -- most of the [ chunks ], we completed on FY '23 only, and that was after that volumes has not picked up. So that's why this vacancy is there, slight 1.5% vacancies in comparison to -- yes, please?
Yes. So basically, that's why it's the only reason because we added like converted these from the like [indiscernible] 11 tonnes and 14- tonnes to 13 tonnes. So that truck, we can't be like remove it because we're waiting for the volume. So once volume will be -- come then that vacancy will be like reduced over time.
Further also slightly change happened on the business pattern like I also, I think, mentioned in last call, where South side and Eastern side is really not doing well. This likely have more problem in comparison to Western part of India and Northern India. So you guys are aware this half India's producing and half India is consuming. So that size is also really creating some vacancy for us and it is -- if you put into a number, then you maybe like, say, [ 0.5% to ] 1% utilization has dropped due to that also.
Got it. Then, would it be your decision to expand in your regions? Can it be probably shared or probably taken up in a later phase that growth is coming back because at this point, with growth not coming in and we are committing capacity -- expansion towards new capacities, it's putting pressure on our return metrics. So just your thoughts on what is the key reason for continuing this expansion?
So basically, there is 2 type of expansion is there, one of our branch network expansion and other 2, like capacity expansion of trucks basically. So both are, if you've seen, in our case, as to additional branch, it is like a matter of in [indiscernible] analyzing and then opening up the branches because we -- these branches, we are making break-in point within a 2 month of time.
And so that's why whenever like volumes' back, so we will be, again, start to be on a very fast mode. And we're still opening up the branches, but in a like slower pace, not like in a high pace. So that is still going on. But once like volumes will be back, so will we increase the pace for this branch network.
Second part, like whenever -- because in our case, supplier side, there is an overflow for that. So we never [indiscernible] any challenge to be getting onboard any supplier for the truck. So whenever we have the volume, we can be like onboard them, Otherwise, like I mentioned, like 90% volumes we carry through these vendor guys fixed this kind of like [ engaged ] trucks, and 10% volume, we are carrying through the [ export ] hiring. So wherever we have a [indiscernible] in demand, so we can hire more vehicles. And wherever supposing there is a low demand, we can be like not hiring than a [indiscernible] hiring.
So that's where -- I think this is not the challenge at all on an overall basis whenever we want to be. And also, it is not like obstacle to be on our growth at all.
So what I meant to you was on the [ hub ] expansion. So you are intending to take expansion at new cities, right? So that is where probably most of our capital is going to, our CapEx is going to be tied up over the next [ 30 ] years. Is it possible to get that push until we see traction with respect to volume growth?
No, no. So basically, I think I'm not able to make you understand. So basically, CapEx is meant for more significantly for the sorting centers, construction and automation. That we will keep continuing because we soon start the construction at Kolkata and Ahmedabad. All permissions are now almost completed. So I think in Q3 end or Q4, we will start the construction. And next year, FY '26, we will be able to complete the construction in these big 2 centers, like each one is more around [ 2 lakh ] square feet for us.
So that strategy, long-term strategy is there, and we will keep continuing to be -- make that because we are like going to be buying the land in Mumbai and Chennai and we're working hard to be like on for Bangalore also. So 3, 4 locations, we're already working hard to be by the land. So that strategy, we will keep continuing. Just I'm saying. And for the like branch expansion, we don't need to be put on any CapEx kind of thing. Like major is like OpEx, not the CapEx. And for the truck supply is also like OpEx part, it's not a CapEx part at all. So expansion, whenever we will be having the opportunity for the growth, we will be keep adding.
We take the next question from [indiscernible].
Sir, a couple of questions. Firstly, if you can maybe provide a little bit more granular details on what are the key industries impacting the volume growth? That's on the first part?
And secondly, in this is the current backdrop, what would be the revised CapEx guidance, say, for FY '25 and FY '26. If you can give some color on that, please?
Yes, very good. So basically, industry impacting major is highest one is like still continue to lifestyle companies, and lifestyle and textile companies. And second one, engineering companies. And third 1 now is, unfortunately, automobile companies are also not -- they have slowed down their productions.
And second part on CapEx side, if you divide on a like year-on-year basis, so FY '25, we're anticipating because we will start the construction soon. So I think we will be finished the CapEx in this year, it's around INR 40 crores -- in the range of INR 40 crores to INR 50 crores for the whole year. And in the next year, again, a similar way, where we will be spending INR 100 crores to INR 125 crores in each year. Because in next year, full fledged construction will be start for these, will be there and we might buy -- we may buy 1 land, 1 or 2 land parcel also. And similar way on FY '27 as well.
Sure. Got you, sir. Sir, I have just a couple of bookkeeping questions. What is the number of branches in certain centers that you added in the first half of the year?
Sorry, we have? Sorry.
What are the number of branches and sorting centers that you added in first half this year?
So the sorting center numbers are not increasing. We just had a long-term strategy. We're just converting them from lease to own one. Specifically, like out of this 28 , we want to be a major one, which is in the number in 10 to 12 in all the big cities and the handling in and out volume is almost like 75% to 80%. So we first want to automate them. And out of that, we already have 2 fully automate it. And next would be Kolkata and Ahmedabad.And I think FY '26 or mid '27, we will be able to do that for these 2 centers. And follow by Chennai, Bangalore, Mumbai and all. So this will be -- that is for the CapEx plan.
And how about the bankers, sir?
And branches, we -- in this year, we added almost like not much, is 5 branches we added in H1. And this is also meant for like multimodal products.
Understood, mostly in the third quarter and second quarter, understood.
We move on to the next participant. I'm sure of was Anshul Agrawal, Please unmute yourself and go ahead.
Mukti, my first question is on our pricing strategy. I see realizations sort of remained flat over the last 2, 3 years. While in the current quarter, we have mentioned that our contribution -- revenue contribution from SME customers have sort of tapered a bit. Shouldn't we think of reducing pricing for institutional customers to attract volumes at this point of time?
Yes. So basically, this price is flattish in 1.5 year only, like in last year and this year. This first half only. Before that, in FY '22, '23, we have taken -- we were able to take almost, I think, 150 basis point overall basis. So that is the only 1.5 years. And because there is a muted growth, that's why we are not going for that.
So second part, like supporting, we will be go for the institutional customer. As I said in earlier call also, there's no price war itself in this industry because customer will be -- keep the like 3, 4 competition for the anyhow, whether we will reduce the prices, they will not [indiscernible] the whole volume to us. They want to keep the 2, 3 players to keep a competitive ways there.
And also, sometimes, this is not wise to we take the whole volume of one customer because it is giving not good profit to us, as I mentioned, it is like gap in pricing with the institutional customer versus SME is also like 25% to 30%. So sometimes we intensively keeping like cap on doing the business with the big customer. That's why our margin is like intact on this testing time event, stated it is like maintained or slightly dip. So I don't -- I think this is not the -- I do not think it is like right strategy to be cut the prices and get them more volumes.
Got it, sir. Second question is on the Multimodal services. Are they still margin accretive in nature?
Yes. Yes. This is like Rail and Air and yes, Mobile .
And the contribution of these services to our overall top line would be still around 17%, 18% or higher than that?
Yes. No, it is the same way, yes. We also have in this space like B2C component also, 2%, 3%. So that is also shrinking for us because we are not going on a bigger player. And small players are like so my B2C component is also like 3% in that. Earlier, it was like, I think if you talk about 4, 5 years back, it was around 5% of overall revenue. So that component, we are -- you can say we are not increasing. So because we're dealing with the customer wherever we have the profit for B2C. So we're dealing with a small customer only.
Possible to share any color around what kind of margins would be making in these Multimodal services or Rail Express business?
It's because this is -- these are the services where we are not utilizing our like network basically from how many spark model. So basically, [indiscernible] are we are not losing in directly point to point. in case of rail or in case of C2C, in case of cold chain or in case of air. So that's why margin is good, and it's likely like currently, it is around in the range of to 15% to 16% EBITDA level, specifically on Air and Rail.
We the next question from [ Manjeet Buaria. ]
Mukti, thank you for the opportunity. I have 3 questions. First, I just wanted to go back to the industry structure to get my bearings right there. If you could help me with how many people have entered the Express [ PTL ] business in the last 10 years? And what are the number of players turn Express PTL who you think are good competition for you in terms of like-to-like services, which they offer.
Yes, that is a very good question you asked, Mukesh. So I think new entrants in B2B, 1 or 2 player, which is really dealing in B2B segment and they're not able to make the money, so they are entered in that segment. And one company is acquired like other companies, that was also like old one. So I have not seen any much competition where they're like getting market share? Or are they like having a future threat for this industry, I don't see that.
But if you see divide in that industry overall, is it like different multiple services and multiple products offerings, each and every company have their own set of that. Like if you talk about -- so in that layer, one is FTL industry, then is an LTL industry where they are not doing express, but doing the LTL less then truckload. So there is also overlapping some time. They want to be our share also as I expressed here to that, but it depends on the customer, whether they want to be lower prices or they want to have good services. So that is like some time classes there.
Third thing is this third-party logistic companies are there. So I met all our companies, they're doing inventory management, they're doing inbound and outbound. So these are type of the company have different -- and they're major doing like I think this auto segment warehousing, and all major portion, I think I am saying.
And third thing is Express industries also having dividing in a 3, 4 parts, like one is B2B, second B2C, now the new entrants the 2 e-commerce and then courier companies. So each and every one is having a different product and a different opportunity for that. But if you see overall express industry in B2B segment on road side, where our presence and our U.S. is there. So there is no much play and our direct competition with [indiscernible]. Again, it's keep continuing with the unorganized player, which is competing with us on a regional level basis and [indiscernible] and all.
So that's -- I think that will be -- is really -- I don't think it is the right advice, do we get the share from this [indiscernible] getting that business, that business is supposing we are getting, then we will be doing our margin profile. And also like credibility of that customer is also under [indiscernible]. And we may be like then bad receivables in our balance sheet. That maybe also happen.
So we are very cautious. So if you see like 10-year data. Our margin has continuously has increased. Our quality of balance sheet has improved a lot and is robust. And obviously, we were like tax-free status and giving continuous dividends.
Okay. But in terms of very like-to-like, as you mentioned on B2B Express side, are there the 3-4 payers who are like close to us in terms of their network and in terms of their reach. And also in terms of more importantly, their service quality, on-time delivery and low damages or losses. So I was looking at how many number of peers like that do you consider as your competitors, eventually?
So it's a listed player, which is having 2, 3 player only.
Okay. Got it. My next question, Mukti, was you mentioned that you have taken calls between institutional customers and SME customers by maintaining a certain mix? Which helps you keep certain healthy margins. I was curious about how does the management think about absolute profits? So an institutional customer may be lower on margin. But as to your absolute profit and if you have like spare capacity to utilize, would you still [ let go ] business because margins would be lower? Or then you look at more absolute profit perspective and take on that business? As long as there is spare capacity, which you are not taking away from SME?
You rightly said so. So supposing wherever we had a vacancy in truck, we're obviously getting the prices wherever, whatever price we can get like I mentioned it is from Eastern part of India and Southern part of India, supposing there are any volumes, high volume, we are taking that. So I'm not saying we are losing that, but somehow to see that because if I'm -- again, upward flow and like this return flow, this all depends on [indiscernible] has more business from the like an upward flow -- then you have to lose the money anyhow if you will not be able to fulfill that drag in return load.
So that's why, we have opened up the branches, and that's why these branches are helping us because in some time in these parts like down south and upper north and eastern part of India, there are no big businesses are there, no [indiscernible] that. That's why we opened the branches to fill these trucks wherever we're sending.
So this is a strategy because we are not like changing for the absolute profit, but the mix has to be there, too. Maintain my utilization, all of the truck is very important for us. This is directly supposing I lose that proposition, then my -- this will be taking a hit on my margin levels.
I have one last question.
I am saying, why I'm saying because these are the -- in one truck, I am putting 200 customers per business, not the like I'm depending on one customer. So that way, I think, is not like a high volume will be helped to be getting the profit, it's not the like a mandatory thing or not like sure things, I'm saying.
Got it. I had one last question. Assuming that our cost levels remain where they are and your mix between SME and institutional stage where it is right, 2 big items. At what volume per year and at what utilization should that volume happen for us to go back to 15%, 16% margins? So [indiscernible], all is remaining equal. What should annual volumes and utilization rates have to be to go back to about 15%, 16% margin?
Yes. So this is a very simple way. I'm supposing tomorrow, we will grow in the range of 10%, then we'll be back to normal in a 15% place kind of EBITDA, we will be back to that.
So 10% value growth basically, you will go that?
Yes.
Hence, we take the last question for the evening from Akash Vora.
Yes, am I audible?
Akash, there's a lot of disturbance and your voice cracking.
Hello, yes. Is it better? .
Yes, it is.
So Mukti, sir, now you were mentioning earlier in the call that from certain level inquiries and interaction with your customers, your understanding that they are giving you a strong volume growth guidance in the coming year, FY '26. So what is the.
I just missed the like last 2, 3 lines. Can you just?
Yes. Yes. So you were mentioning that you -- through your customer interactions, they were promising you certain amount of volume growth coming in FY '26. So what is -- what are they promising, like what kind of growth are they committing?
So basically, so as we're focusing on 3 parts. One is we are putting like separate sales, more salespeople on the ground to be getting -- so we want to be in a balance out of here. One is more focused on an institutional customer to adding new customers, all the competition customer. Second part, like we already have opened on the branches. So we want to be in a more sale from the SME customer. And the third thing we want to enhance our customer base in obviously in multimodal product also.
So we put together 3, 4 strategy. We want to be like growth. And supposing we have anticipation to grow 13% to 14% in volume size. So 7%, 8% volume will come from the existing customer and then remaining will be coming from the new addition customers. So that's our strategy, and that's why we're working on the ground, very hard to be with people on the street and refocusing how we can -- we go to door to door and ask for the business because this business is not to be like where we sit in our office and people will come to us. Rather, we have to go in there over and ask for the business. So that's how we're making efforts and enhance our footprint to we get more business, and sales team has increased for that.
Got it, sir. Sir, 2 numbers, if you could quantify, what are the new customers that we -- new customers who have added this in these 6 months? And secondly, what is the top 10 customer concentration in our revenue for this first 6 months?
So basically, revenue concentration, if you see like my top 25 plus customer has not given more than 15% revenue to us. And number of addition, I just not remember for that. So [indiscernible], I can like give that number. I just really not remember that number right now.
Friends, thank you for your active participation, but we've run out of time completely. And I take this opportunity to invite Chander Agarwal for their closing comments.
Chander, you would like to say something? Okay. So thank you, everyone. I would like to thank everyone for joining on the call. I hope you have been able to respond to all your questions adequately. For any further information, we request you to please do get in touch with our Investor Relations team. So stay safe, stay healthy and happy and [indiscernible] to everyone. Thank you once again for joining with us. Yes.
Thank you very much. On behalf of SKP Securities, I'd like to thank Mr. Agarwal, Mr. Mukti, Mr. Srivastava and Mr. Pandey for the time to interact with the investors. We look forward to hosting you again in the next quarter. We wish everyone a happy Diwali, and have a wonderful evening. Thank you.
Thank you. Thanks a lot, please.