TCI Express Ltd
NSE:TCIEXP
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
968.6
1 435.7
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
TCI Express Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to TCI Express Limited Conference Call to discuss unaudited financial results for the third quarter, 9 months ended, December 31, 2019, and address investor's and analyst's queries. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Chander Agarwal, Managing Director. Thank you, and over to you, sir.
Thank you. Good evening, everyone, and welcome to the Q3 Financial '20 earnings call of TCI Express Limited. On this call, as usual, we will start with the overview of the economy and industry, followed by financial and operational highlights of the quarter. Then I will hand over the call to Mr. Mukti to discuss financial performance in detail. Our earnings presentation has been uploaded on our website and stock exchange, and I hope you have had a chance to review it.The domestic economy in third quarter of fiscal year continued to face slowdown due to weakening industrial activity across sectors. Index for industrial production, the IIP, an indicator of growth of various sectors in economy, only turned positive in November, after 3 years of contraction -- 3 months of contraction, sorry. Yet, the industrial output on basis of end-user goods such as consumer durables, capital goods, basic goods and infrastructure goods are still showing degrowth. Tighter credit conditions in the nonbanking sector also resulted in weakening of domestic demand, subdued private consumption and have impacted the overall business sentiments.IIP growth during April and November came in at 0.6%, from 5% in the same period of 2018/'19. Hence, the lower industrial production growth clearly impacted the logistics sector.Furthermore, the logistics sector also saw moderation due to political disturbance and protests in North and Eastern region, which impacted day-to-day operations.In the light of challenging business environment, I am pleased to report that TCI Express has delivered a resilient performance for the quarter. Our total income stood at INR 269 crores (sic) [ INR 268 crores ], an increase of 2.1% from INR 264 crores (sic) [ INR 263 crores ], in Q3 financial '19. EBITDA was at INR 35 crores with margins of 13.1%.The Board of Directors also recommended a second interim dividend of INR 1.5 per share, and total dividend for the year is INR 3 per share with dividend payout of 16.4% on 9-month financial 2020 EPS.During the quarter, we opened 10 new branches to increase penetration in the metro cities and acquire SME customers. With these, we've added total 35 new branches in the first 3 quarters. Our focus remains -- I'm sorry, this is 57 new branches, not 35. Our focus remains firm on expanding our geographic presence and cater to the SME customer.In Q3 financial '20, we also implemented various initiatives to improve operational efficiency. For example, we have increased axial load capacity in select vehicle categories, which resulted in higher capacity utilization. The current capacity utilization stands at 86%. On to construction front of new sorting centers. In October to December period, National Green Tribunal, NGT, in their efforts to control pollution enforced ban on construction activities in Delhi NCR region. Consequently, construction at Gurgaon sorting center was halted, compliance of regulations. Construction is now back on track after lifting of the set regulations. We expect both of our new sorting centers to commence commercial operations from second quarter of next fiscal year. Due to construction halt, the CapEx incurred during the quarter was lower than the planned CapEx, and we continue to judiciously spend money depending upon the business requirements from time to time.Looking ahead, macroeconomic environment acts as a crucial determinant in the general demand and consumption. And the recent events suggest some stability in the company and beginning of potential recovery. We are hopeful that the government in its upcoming budget will introduce a major stimulus package to revive the manufacturing sector, address low consumption demand and supports MSMEs, which will improve overall business confidence.We continue to pursue a long-term growth strategy, staying firmly focused on our unique value proposition to deliver robust growth in coming quarters. Now I would like to hand over the call to Mr. Mukti to discuss the financial performance in detail.
Thank you, Mr. Chander. So I will present the -- and good afternoon to all of you. I will present the key highlights of our financial performance for this Q3. And so revenue, as just mentioned by Mr. Chander, has grown from -- grown to INR 268 crores from INR 263 crores with a growth of 2%. And this revenue growth was primarily supported by increasing customers owned by small and medium enterprises, SME sector. And in absolute terms, EBITDA has been growing by 11%, and it's from INR 32 crores to INR 35 crores. And EBITDA margin are at now is 13.1% of total income as compared to 12% in Q3 of previous year, which is an improvement of 107 basis points. The margin improvement can be attributed to 2 factors mainly. One is factory cost control measure. And two -- second one is increasing capacity in select existing vehicles, which has resulted in higher capacity utilization and operational efficiencies.Profit after tax was also INR 26 crores in Q3, representing an increase of -- robust increase of 36% on a Y-o-Y basis. And PAT margin is also all-time high at 9.5% in compared to last same quarter of 7.1%.On CapEx side, we were -- we have incurred INR 16 crores in Q3 with a total outlay of INR 23 crores for 9 months in this current year. And this was largely used for construction of our sorting centers and expansion of IT infrastructure.Thank you very much, and we are now ready to address your specific questions, please. Thank you.
[Operator Instructions] The first question is from the line of Prit Nagarsheth from Wealth Finvisor.
I think my question is regarding the top line. So given that the 9-month growth is at around roughly 5 percentage, what do we see as a guidance for the full year? Clearly, it was 10%, 12%. Do we see this now, say another 5-odd percent, in the remaining quarter?
So I think now we would look at it at the single digits, at the top end, maybe 8% -- 8%, 8.5% is what we're looking at.
For the quarter, Chander, or you mean for the full year?
No, for the full year.
For the full year. Okay. So which means you're looking to grow at around 15% in this quarter to be able to get a blended average of 8% for the full year?
Absolutely. Yes.
Okay. So are you seeing already that kind of uptick in January to support that belief?
Yes. January is a little bit -- is not as strong as what I imagined it to be. But again, it's -- we still have a few more days left. And we never know like the cycle is as such nowadays that everybody tries to push out all the materials by the end of the last day. So I do not see a very bleak difference, but there will be higher growth this month compared to last month.
Okay. I see. The other question is, Chander, just curious here, we generally say that the express industry will grow about 1.5x the GDP, right?
Yes. About double the GDP.
About double the GDP. Now if the GDP, say, looking at the data that's been presented, and which may be also not apples to apples here, but for the sake of the discussion, if the GDP, say, is at 4%, then shouldn't we be growing, say, even in quarter 3 at 8% or more? Or how do you look at this? If you can share your views?
No. We also -- when we look at GDP, we look into the inflation component also. And if you really see, the real GDP minus inflation will give you not more than about 2.5% to 3%. And looking at that, I think our growth rate is pretty substantial. All the other logistics companies that I'm aware of are possibly not growing more than 1.5% or actually, even no growth at all. So no growth versus 5% growth in comparison to other companies is definitely showing that the express industry is at a better stage in comparison to the economy.
The next question is from the line of Kaushal Shah from Dhanki Securities.
Sir, if you could just share with us the volume growth and the realization growth, the breakup of the revenue in Q3?
So in Q3, volume growth was merely only 1%, and 1% is realization. So that's the only breakup of that revenue.
Okay. Also, you've seen a drop in our freight expenses. So that is primarily because of this axial load factor where we have carried higher loads, therefore, the freight cost appears to be lower?
So again, it's a combination of 3, 4 our effort, what we are rightly mentioned in 3, 4 calls also. So same thing. Because we are also utilizing highest capacity of our existing trucks, and side-by-side we are also increasing these capacities, what we have just mentioned. So this is also a combination of various things.
Correct. And sir, you've seen a fairly good jump in our EBITDA margins, so what would you say is the sustainable EBITDA margin that we can look forward to?
So I think, in general, we have to understand that EBITDA operational efficiency is, again, also a component of the top line increase, the price increase also. There is -- both of these have a factor to it. Obviously, the price increase you are looking at maybe just 1%, the top line is at about 5%. So in general, majority -- majorly, the efficiency will come only through the operations management. And this is something which we've been doing diligently since 2.5 years, 3 years now.So going forward, I think we can -- we are -- we will take the EBITDA to up to 15% also. It's quite possible in our asset-light industry business model. And also, when we see that -- when we put in the price factor, we put in the top line growth factor and the operational efficiency, I'm quite sure it will cross 15% also in the next few years.
The next question is from the line of [ Siddhesh Shatranj ], an individual investor.
Congratulations on the numbers. So on the face of it, the numbers seem to be quite good. So I've been investing in the company for a long time, and I've been tracking the strategies that the company has been implementing. So I was just going through the note that you have given regarding the NGT halt. So did it impact the quarter -- the top line to a great extent? Could you please quantify it? And what is your strategy moving forward? Like, are you pulling more SMEs into your top line?
Right. So I think starting from the SME point of view, we have already added 57 new branches in 9 months. And our target for this year is about maybe, I would say, another 20 more branches. So in total, we'll add about 75 to 80 branches. And yes, this is one of the main reasons. In Q1 also, we saw the 10% growth that we had was because of the SME growth. Q2, we saw 60% jump in profit. It was because of the SME, again. We have not been seeing the top customers increasing the way our effort to tap these SME customers have been. So SMEs, yes, they will continue to play a very important role, and they have not been catered by any other logistics company in the way we are covering them. So they will hold a good potential in time to come.Your second point on the NGT ban, it did not really affect the top line because you see that is a construction happening separately. Our operations are going on in a separate sorting center. So they are not really affected. And I -- top line is a factor of the more of the economy perspective.
In terms of the EBIT target, if I'm not mistaken, you mentioned that the CapEx target for this fiscal has been targeted to be around INR 80 crores, so it was basically moving towards automation and sorting. And as of now, I would see that around INR 23 crores have been deployed. So are you confident to hit the target of the CapEx?
So we -- in this quarter, this construction is going on a full fledge, so we expected to spend INR 25 crores to INR 30 crores in this quarter. And by second quarter of next year, we mostly will complete this construction. And next year, we will keep the same kind of construction plan, like we want to spend around INR 80 crores or -- -- INR 80 crores to INR 100 crores for the next year because this has also postponed for this year due to these all reasons. So next year, we will also keep the same kind of plan.
The next question is from the line of Pritesh Chheda from Lucky Investment Managers.
Sir, -- Mr. Mukti, you gave the 3 reasons for margin expansion. One you said was the change in fleet to higher tonnage. I didn't understand the other 2.
Yes. So again, the reasons what we had just mentioned, one thing is wherever we had a good revenue, then we had to be higher utilization in my existing trucks, whatever we have. So this utilization has been increased by again 50 basis points. Like, earlier, we are at the 85.5%, now it increased to 86% on an overall basis. So one is that reason. Second reason, what just we mentioned. Third one, wherever because we -- wherever we need a second vehicle, so we are not adding the second vehicle, rather we increasing their capacity there. So supposing, right now, we are 9 tonne material on a particular route and then suppose we now have 12 tonne, so we are not adding another 9-tonne truck, then -- instead, we are using 14-tonne capacity truck. So that's why there is a various dynamic on a various route we are applying, and that's why the personal efficiencies, regularly, if you see, is coming on all quarters and years in the last 3, 4 years, if you see that.
You said the other 2 reasons were warehouse benefits, new warehouses, that was also...
So new sorting center actually come in only 2, 3 locations. So that is also part of it, yes. Because then we are also able to pull through is a very good one. How fast we can vacate the vehicle and unload and load the vehicle. That also is the capacity utilization, which also matters.
Did the 6%, 7% drop in trucking rental or costing for us would have benefited the margin?
No. So that actually is not matter for us in both sides, in upward side also and down side, because these vendors are -- the long-term contract we have with them. And generally, we are not [increasing] for the downside also, and we are also not increasing at the time of freight is on upward side. So it's not really matter for us the short term.
And my last question is, between the 2 conference calls and -- or let's say, the last 3 conference calls of this year, there was growth acceleration to about 9%-type revenue growth rate in quarter 2. And now there is a growth rate of 2%. So if you could throw some more light in terms of these changes in growth rate in terms of any sectoral behavior or any customer-specific behavior that you want to highlight? Because post quarter 2, you were optimistic of accelerating the growth rate?
Yes. Because in first quarter, we achieved 3% growth and then Q2, we achieved 9%, and we were excited about to achieve a double-digit growth for the Q3. So there was not actually majorly -- after -- again, after Deepawali, there wasn't -- no growth happening. And no growth momentum was there. And second thing is also badly affected is protests in the Eastern part of India. There was so -- what happened in India is one side, manufacturing happening in West, North and South side and Eastern side of India generally having the consumption -- highest consumption of that. So we were not able to -- because there's -- protest is going on complete in West Bengal and Assam and Northeastern part of India. So deliveries was hampered there. Otherwise, we could hope to achieve at least a near to double-digit growth, kind of 8%, 9%. So that was the major impact, actually. Really, if you see on industry-wise and there, so again, this auto is -- right now is what they are in a state of mind. So the same thing is going on. But yes, retail has also helped us a lot.And again, addition of SME customer is continuously, we are adding up, and that's why we are achieving the revenue growth.
Any sectoral color? And what is the sectoral import -- dependence of ours?
So again, we mentioned various times. So we -- generally, these 5 or 6 verticals, major vertical, giving the 50% revenue to us. And these sectors are auto, pharma, electrical, engineering and retail.
And the sectors which would have showed you decline or lower growth would be auto and...
So slightly auto only, not the other one. Other one are okay.
Okay. And what makes you believe that you can deliver double-digit growth rate in quarter 4? Or again, that assessment will be like quarter 2 assessment of yours?
So there's 2 aspects of that because we are continuously opening up the branch. So these new branches is also happening -- generating the new businesses for us. And second thing, the CAA protest is coming down on eastern part. So this will also help us to make these -- our deliveries very smooth. So that's the only 2 reasons we have. And otherwise, industry is also going on that way. And third thing, BS VI is also rolled out from the 1st April, so that fast movement will be also increased.
Is East a larger part of your mix?
Sorry?
Is East India a larger part of your sales mix? Or all East, West, North, South are equal?
No, no. Larger part on part of delivery because this consumption is -- highest consumption is going from this -- manufacturing is generally happening in West India and North India and then it is moved to Eastern part of India. So we have to deliver on these parts. Otherwise, if you see revenue generation part, then 85% revenue is coming from North India, West India and South India, and then 15% from the Eastern part of India.
The next question is from the line of Sayan Das Sharma from BOB Capital Markets.
My first question is on the corporate customer segment, if I -- like you highlighted in opening remarks that we have added a lot of SME clients and -- which has, like the last few quarters, helped us grow. My sense is that corporate customer growth is 0 to slightly negative. But overall, if I look at your sectors, like you highlight -- highlighted, maybe auto is weak, but others are still positive in terms of volume if we look at the larger companies, we are -- who are typically our clients. So is it only a factor of slowdown? Or are we seeing any competitive pressure, and we are losing a bit of wallet share among existing customers also?
So I think the most important part is that the top line customers that you're talking reduction, it's not really negative. None of our customers are degrowing. We do not have any degrowth. It's just that the quantum has come down. We are not in the auto segment or directly into the transportation of auto vehicles. So we are not seeing any decline there. What was your second question?
So what I'm trying to get at is, this growth slowdown, growth deceleration that you have seen from Q2, is it only a factor of overall macros being weak? Or is it also the competition is playing a part? Because some of your competitors have become more active...
So competition is taking a bad beating. You can see -- you will see the financial results of most of the other companies. And we have been very prudent in maintaining our cost, not letting it increase. What happens is that as soon as you have low top line, your bottom line gets affected first. You do not get economies of scale. You're not able to get per unit cost lower, but we have passed all those very, very clearly. And that is because of the several reasons. The customer, type of customers we have, the pricing we have, the type of operations we do. So all of these things are -- kind of make it resilient to the micro and the macro economic challenges. What we are -- not really can fight is a political confusion and the creation of that. So that is something we are not -- no companies really can fight that playing in the domestic field.Saying that, I think that if you remove the political disturbances, I will see -- I would have seen a much better top line growth. If I'm looking at almost touching 40% PAT growth, if my top line was better, I could have hit even 60% growth very easily, no problem. But again, it's the political reasons which have, kind of like, slowed down our performance.
Fair point, sir. But your sense is that you could still continue to grow faster than our market and our overall competition?
Absolutely. We are -- our entire team pan-India is geared up. In spite of the challenges, we are the only company which has opened up 57 new offices in India. And we are going to open up to 80 offices by -- in the next -- by the financial year-end, the next 3 months. I do not see any sort of like, if -- okay, the political challenges are immense, like tomorrow there is a holiday. Some people are saying that there could be a strike tomorrow, Bharat Bandh, I'm not sure. So all these things are beyond our control, they are force majeure. And beyond that, the team is very well geared to kind of get that high growth numbers.
Fair enough, sir. Sir, my second question is on the Gurgaon and Pune sorting center that we are about to open in maybe a couple of quarters' time. Sir, basically, if you could highlight what will be the benefits, both on operational efficiency side as well as do you expect to maybe improve our service level and, therefore, attract any new customers? So what is the overall benefit that you see on the business from these 2 automated warehouse spaces coming in?
This is -- this sorting center will play a very important role in connection with the National Logistics Policy, which is reformed, okay? I'll tell you, I'll explain you how. Now by the time we will start operating this sorting centers and all the majority of the sorting centers of this type will come into operation in the next 2 to 3 years, as we have planned the INR 400-crore investment. And by 2023, the Government of India is planning to make a highway from Bombay to Delhi where you can reach in 12 hours. And this is something which we will be using it -- which will be benefiting us because, ultimately, our goal is to increase the speed of delivery to capitalize on the GST, which other logistics companies have not been able to do, and to deliver the goods faster. So we will be in line with what the National Logistics Policy and what the Government of India, the NITI Aayog, is wanting.So the main concept of the sorting center that is going to be about 20% mechanized. Today, material comes into our sorting center, it halts for maybe 10 hours. We want to reduce this to 4 hours so that the material comes in faster and departs faster. It is sorted for pan-India and leaves. So this will definitely bring in -- for internally also will increase the throughput, the speed of the material moving through our channels. And I think, ultimately, when customer is satisfied, we will -- we are bound to get a bigger market share, and that is our ultimate goal.
Right, sir. But if -- does any of our competitors, the larger players who are into air express, do they have this kind of automating -- automated sorting center in your view?
No, they do not have of this scale. They have small couriers for maybe e-commerce, but not the kind we are making.
Fair enough, sir. One last question, if I may? Sir, basically, how is the progress on the International Air Express that you are highlighting that this is a growth area for us? What is the strategy on that, sir?
So this is, again, what I've last mentioned is 1% of our revenue right now. So we are trying hard to scale up this business, and this is a very exciting business, and with, again, highest profitability with that kind of 15% EBITDA margin we are generating in this business. So this will be -- become like we have aspiration of 3% or 4% in the next 3 years of our revenue.
The next question is from the line of Krupashankar from Spark Capital.
I have 2 questions. One, on the new branches. You had stated that the new branches will drive growth coming forward. So just wanted to check -- so as I was saying, the growth which we are expecting in 4Q also will be driven by a new branch addition. So just wanted to understand how much of SME growth are we expecting from these new branches? Because usually what happens is that these are more of collection centers as it takes a bit of traction -- it takes about 6 months or 9 months to gain this traction that you are expecting as soon as possible. So is there a void which we have spotted and we are trying to exploit that?
So on -- if you see on a branch, our branch, we first study in a particular area and then we -- after our all calculations and business proposition, then we open the branch. And basically, what just -- earlier, we also mentioned we are going denser. So we are not opening up the branch on a farthest location like -- but we want -- we opened the branches in a city area, like Mumbai, and we want to be more branches -- that kind of area we want more branches. And these branches generally achieving the breakeven point in 2 months or 3 months maximum. And because to serve as the big customer, we don't need the branch network. To serve the small customer and to collect the material from their doorstep, we need these branches. So these branches certainly will help us to new business in time to come.
Right. And usually, SME customers are typically price-sensitive customers with limited stickiness. So is it more of a pricing-driven strategy, which has led to SME customer addition over the last 9 months?
Sorry, I could not get your last point, what?
Is it more of a pricing-driven strategy, which has led to the SME customer base addition over the last 9 months?
So it's not a pricing strategy, but it's more of where the demand is emerging from. The demand in the top companies is almost nil from the top companies. India is a population that does not rely only on the top companies, right? -- in the top manufacturing companies. You also have the SMEs. And fortunately, we are in that business where we are getting to -- we are able to cater to SMEs. And our company started also from -- by catering to the SMEs. So it is not really a pricing strategy or a top line shift strategy. It is from where the business is coming. So we are able to grab this business from where it is coming. Today, if you go to, say, a top-tier auto component manufacturer, he will first say to reduce his price because his customer is 30% down. So if I start reducing my price, I will not get 37% PAT growth. So what I have to do is change the type of customer. That sort of flexibility I have with my branches unlike other companies.
Understood, understood. And last one on the margin expansion. So I understand that the higher tonnage trucks has helped us in this margin expansion this quarter. So how many of routes have we deployed larger tonnage? And what is the room for further expansion due to this strategy?
I missed your -- I couldn't hear your question properly, I'm sorry.
Sure. So what I am asking is that the higher tonnage trucks has aided our margin expansion in 3Q, so I just want to understand how many of our key routes have we deployed these higher tonnage trucks? And where is the further potential for expansion? Because for example, there...
We have only converted about 40% to 42% of our trucks to that multi-axial load, and we still have a long way to go. It's not like plug-and-play where you just tell the vendor that, okay, you change your truck now, you will do it right away. So on the circumstances that we operate, it's the lag time but we take that opportunity to reduce the cost and to include it in the reduction of cost as we go along. It is not something which is static. All the cost reduction mechanism that we have from axial load to better fleet efficiency to load management, all that is done every day scientifically. So -- and it is something which will go over time, and there is not an absolute number. What it will do is that it is going to give a return based also on the top line growth. So if I have a top line growth of 10%, my bottom line growth can go up to 60% also depending on the kind of environment it is in.Similarly, if my top line grows 20%, possibly, I could be doubling my profits also. So it's a culmination of -- we have -- I have created this business model in such a way that it is shockproof. It is also not very dependent on top line growth, but at the same time, the returns are much better.
The next question is from the line of [ Rishit Shah ] from Dhanki Securities.
So my question would be on the gross debt side. So what would be the gross debt amount as on December and the cash amount?
So gross debt is nothing. We are the debt-free company. We hardly had a INR 2.5 crore loan for the -- basically for higher purchase agreements. So that will be also finished in 1-year time. We just keep this to have a relationship with the banks. And we have the surplus fund of kind of INR 25 crores with us.
Okay. Fine. And regarding basically the new centers in Nagpur and Indore, so what is the progress on that side?
Indore, we will start the construction in -- hopefully, in Q1 of next year. Land has been already acquired and all permissions are in place. Construction will be started in first quarter of next year.
The next question is from the line of Kunal Bhatia from Dalal & Broacha.
Sir, just an extension to the tonnage of trucks, which you mentioned. So if you could just make us understand what was the tonnage available? And how much has it gone up by, so we could get some sense on what was the leverage we got because of this?
So again -- so as just mentioned by Mr. Chander, so it is so dynamic, actually, we do not have the figure right now in front of us. We can -- we provide on a -- separately on a request. So if I say 40% of our fleet, so maybe just 200 trucks is kind of like what we have changed. And the 200 trucks can vary. Some routes have 6 tonnes, have 9 tonnes, have 12 tonnes. So I think it's a little off to say exactly the numbers that you're asking for.
Okay, okay. Sir, and also, I just wanted to know YTD, what was our -- for the 9 months, what was our volume?
Volume growth?
The absolute volume?
So absolute volume is around 6.75 lakhs tonnes.
6.75 lakhs. Okay. Sir, and also, in terms of our tax rate. This time, it was lower than the 25.2%. So any particular reason for that? And what could be -- we assume for the full year?
So full year, it will be 25.17%. Earlier, we have taken slightly higher because there was no clarification on part of surcharge. So base rate was reduced by -- from 30% to 22%. And then there is a surcharge of. So we assume as a 12% surcharge and then there's education tax. So now we -- again, after confirmation and everything we are cleared, and now we restated, so that's why it's hardly INR 50 lakhs difference there in tax amount. So full year, it would be completely 25.17%.
So some adjustment for the previous quarters would come in the last quarter?
Yes, yes. That is the answer.
Okay. Okay. And sir, and finally, in terms of our CapEx, you mentioned for the next year would be in the range of INR 80 crores?
INR 80 crores.
Okay. And sir, the percentage of the SME business used to be around 50%, so -- of the overall revenues. Has that mix changed? Has it gone above the 50% range?
No. Again, it has not significantly changed because our endeavor is also to keep the same balance, actually, 50%, 50%. Because, again, same thing, the big customer is giving the high volume. So they are able to help us to maintain our weight management, and small customer giving the good prices. So that's both customers are important for us. And we want to keep this balance at 50%, 50%. We don't want to increase one side. So they are just like held to each other.
Okay, okay. And sir, the new sorting centers you mentioned would be approximately 20% mechanized, so the existing sorting centers, what would be the percentage of mechanization in that?
No. So new one would be the fully automated, almost 80% would be automated. And currently, we are doing this like a semi-automation in all sorting centers we have.
Okay. So what would be the current level of automation?
So it may be around 40%?
40%, 50%, yes.
The next question is from the line of Vikram Suryavanshi from PhillipCapital.
Yes. Sir, I think most of the questions were answered. Just I wanted to know how is this competition from the small unorganized player now?
Sorry?
How is the competition from the small and organized -- unorganized players?
That is always designed, no? That will remain forever. Hopefully, not actually forever, but they are not really affecting us as much. What is happening is that the large customers, the likes of the top manufacturing companies, they are moving towards them for lower pricing. But that's a temporary shift. So I'm not seeing any major hiccup in those lines also.
Okay. But with this [e-Way] bill, are we seeing any material change? Or that is not actually impacting them at all?
No, that is not really impacting us.
Okay. And sir, just one more, the number of branches we are adding. Typically, what is the size of these branches? And is there any fixed cost we have on these branches? So say, for example, every year, we are adding almost 100 branches, so how much typically is the setup cost for these branches?
So typically, one branch initially we are adding up, which have the area around 500 square feet to 1,000 square foot, depending on the location and what kind of business we have there. And if you talk about fixed cost, there's hardly INR 50,000 CapEx we have to be doing 1 branch. And other one is all are the -- just like variable costs we have like employee costs and running truck costs and all. And that's why -- if you see, that's why I'm saying we are just making 1 branch in the 2-month or 3-month time as on a breakeven point.
The next question is from the line of Ankush Agrawal from Stallion Asset.
My question is regarding that currently we have around 8 old sorting centers and 20 are leased, right?
Yes.
So once this CapEx plan of INR 400 crores is completed, what would be the ratio? Like, how many sorting centers would be owned and how many would be leased?
So owned will be increased from 8 to 18 and 10 will be remaining on a lease.
Ten would remain on lease. All right. And sir, can you give me the branch count for this quarter and the capacity utilization?
So in this quarter, we have made a CapEx of INR 16 crores and in total, up to 9 months, it was only INR 23 crores. And branch until time we opened around 57 branches.
57 branches, 9 months?
Yes. And in full year, we want to be open to make this total number at 80.
All right. So in Q1, the number of branches opened was 10; in Q2 was 15; currently, it was 10, right? So how does it add to 57?
No. So in this -- actually, this has opened more in this quarter, actually.
The presentation states 10, right?
Yes, yes. That is, by mistakenly we mentioned there. Yes.
So the number of branches opened for this quarter...
Right number is 55 -- 57, sorry.
For, sir, 9 months, right?
Yes.
All right, all right. And sir, one thing, like, in con-call of Q2 FY '19, you had mentioned that on the balance sheet currently we have 10 sorting centers, which is currently like owned, but currently, it's like 8, so why there is a discrepancy over there?
Sorry?
In Q2 FY '19 con-call, you have mentioned that on the balance sheet, we have 10 sorting centers. Currently, we have around 8, which are owned. So why there is a discrepancy?
No. I maybe included these 2 current, what is construction is going on, including that, we may be mentioned on that part. Total number would be -- after INR 400 crores spending, we will have 18 numbers.
The next question is from the line of Ankit Panchmatia from B&K Securities.
Sir, good to see a number of branches kind of visible across many of the areas in Mumbai. But sir, just to get your strategy right over here, how do we shortlist an area or a specific location for branch opening? Because some of the branches are visibly at the residential areas. So I just want to get more clarity on what is our strategy? And how -- and why are we going more closer to the consumer versus more closer to the manufacturer?
No. Actually, we are not opening up branch near to residential areas. Our branch is basically in industrial hubs or near to manufacturing units. That's why we are going and our -- and more into -- near to warehouses there where they have to give the goods for the delivery and to pick up from and deliver to other locations. So in -- our strategy is very clear. We have to go denser in the Tier 1 and Tier 2 cities, basically. And wherever we have -- because in cities, if you see, we have to be going door-to-door to pick up the material. And that is a very challenging task in a particular time because everybody wants to give the material from like 12:00 to 5 p.m. in day time. So there is a window of only 5 hours. So that meant there's entry barriers also there in all cities. So we have to cope with these kind of challenges. And that's why also opened the branches to grab more business to go to near to the customer's door, and SME customer basically again. That is our strategy.
In cities, you -- companies which open branches is basically for B2C. And B2 -- our focus is B2B. Growth is coming from there only.
Okay, okay. And sir, how has been the ramp-up from the new customers? I have seen that close to more than 15,000, 20,000 we have added new customers in the past 3 years. So just to get your perspective right on how has been they contributing to the overall business? And if I get the overall bifurcation that new customers versus the older customers, any flavor from your end? How has been the revenue growth from them?
So it is very dynamic. This year, it has been very dynamic. Like Q1, we had addition of new customers and increase of business on the same customer. Then in Q2, we had addition of new customer. I think the new customer component is very active in our company. Until now also, we are adding new customers pretty much on a weekly basis. And this trend will continue because we are very aggressive in the market. So I think to actually quantify it is very difficult. You will have a better number by the year of the -- by year-end that how many were new and what -- how many would be -- were the increase from the same customer.
Right. And sir, what according to you is pushing or is -- or letting us add this kind of customers? Is it our pan-India reach? Is it our capabilities to deliver faster, our persistencies are more better? What according to you is helping us to add this kind of customers and create a customer database?
So a lot of the issues is -- a lot of it is because of our simple, what do you say, simple reason of the branches, no? The more branches you add, the more SME customers you're able to tap in. When we started the company, we do not have any of the top -- large customers as our clients. We started off with the small customers. And I think this sort of -- like this management of not going to very small customers, not going to kirana stores, but going to customers, which are part of the industrial production by index, going to those customers are bringing in the value.
Okay. And sir, as you mentioned that there is a lack of availability of the finance, we have been seeing that the smaller clients or smaller customers or smaller SMEs are not able to get financing from the bank due to stringent norms. So how is our SME base impacted by that? Are we seeing some kind of stress in our receivables or the kind of -- there is a difficulty for them to increase their business aspiration? How are we seeing the SME side of it?
Even in the SME segment, there are all kinds of SMEs. You have a Tier 1, Tier 2, Tier 3, Tier 4. And tier below to a Tier 4 would be your kirana stores. And these -- up to Tier 2 would be all cash guys. So we don't deal with them. And these guys who are selling Tier 1, Tier 2 SME, they are our customers, and they are larger -- they're very large in numbers across the country. And I think the pricing pressure has never come from them. The outstanding -- the credit issue has never come from them. And at the same time, our credit cycle is the best in the industry. So there is no 2 ways about that. Even the top -- if any -- I think, not just the logistics industry, in general, our credit cycle is one of the best.
The next question is from the line of Priyankar Sarkar from HSBC Global AMC.
Just one question regarding the unit economics of your CapEx plan. Sir, I understand that there are 3 components to it. One is that new expansion taking place. One is where you're going to be, which was leased, you're going to be owning that? And third is a technological upgradation, right? So sir, can you please take me through the CapEx per square feet ex of the technological upgrade, what would be the CapEx per square feet for these other expansions?
So actually, we have not analyzed on that way on a 3-part what you are just asking. So if -- usually, if you see to construct any, it depends on also location also, what kind of land, what the area we have. But typically, if you see, there is a construction price is almost INR 2,000 per square feet and then land price. So land price is highly, highly volatile, depending on the location where we want. But yes, we are not getting the land on a prime location. So it is also very economical land we are buying it.
So sir, if I get you correctly, you're saying ex of land cost, the CapEx per square feet is INR 2,000?
Yes.
Sir, that seems a bit on the higher side.
I'm just giving the ball figure, I'm not giving you just like correct number. You can separately ask us for the particular thing, then we will let you know.
No, sir, but this INR 2,000, does it include the technological upgrade or is it exclusive of that?
No. It is including the technological this one.
Okay, sir. I'll...
So again, again -- yes, please.
No, sir. Please, carry on.
Yes, please, please, continue.
No, sir. I mean this figure seems a bit inflated too because when you back-calculate and what you talk to the competition and other players in the market, I mean, roughly it comes to INR 1,600, INR 1,650-odd, but this is INR 400 extra on a per square feet basis. So I was having a discrepancy in this figure, that's why I actually asked this question.
Because in this, if you see, this -- automation in this industry on express industry, nobody has in India. They maybe have these e-commerce companies for the kind of package or envelope they maybe have, and this is a very small kind of CapEx they are involving on automation. But our kind of facility, this is very on higher side. That may be in the gap of that plus also various kinds of supposing fire equipments and then also environmental kind of all clearances and then you'll also make construction about that environment and everything. So that -- if you combine everything, so its cost is around that only. Again, it is also depending on city to city. If you want to be constructed in Mumbai, there is a separate cost. If you want to be constructed in Indore, there's a different cost for all things kind of sand and steel and cement, everything is different cost. So it all depends on various factors actually.
Okay, sir. I'll connect with you off-line to take this forward.
Yes, yes. No worries, please. Thank you.
The next question is from the line of Ronald Siyoni from Sharekhan.
Yes, sir, I had a couple of questions. Firstly, with respect to realization growth, like through 9 months, each quarter, we have seen about 1.5% to 2% in Q1 and Q2. And Q3 is just about 1%-odd growth in realization. So have we decreased prices for the same? And since your guidance of 3% to 4% realization growth, so I guess you would be revising to about 1% to 1.5% realization growth for the full year?
Yes. So again, again, depending on the market conditions also. This time to ask for any hike from the customer is also challenging, though we are increasing wherever it's possible. But we're not adamant for that for our existing customers. For new customer, yes, we are adding up on our prices. And that's why we are able to get this price hikes. Otherwise, you see other players, nobody is able to get this price hikes. And that's our strategy, at least, we had to be achieved by year-end 2% price hike.
Right. Second thing was the cash flows, like you mentioned that surplus you have about INR 25-odd crores. So previously, it was about INR 27 crores. So this quarter, there is a good generation of cash flows, but still your surplus funds have gone down. So I guess, your working capital has stressed during the quarter?
Not really. There are also -- if you see, my DSO is around -- below 50 days, and last quarter was also there. Same 50 days was there.
Yes. But if you say INR 26 crores is net profit, then depreciation is to, what, INR 28 crores, your interest is being...
Maybe because in last quarter in -- if you see in quarter 3, we also disbursed this dividend also, no? That may be the impact only, nothing else. And the effort side is also there, no? In this last quarter, we incurred INR 16 crores. And before that, in 6 months even we just spent INR 7 crores or INR 7 crores, INR 8 crores.
Yes. Okay, okay. And about this Nagpur sorting center, where are we, sir? You had also bought land there?
Yes, in Nagpur also we are about to start our construction in like March month or then it's maybe postponed then first quarter of next year. But again, the permissions are all in place now. And we are finalizing our contractor and all design has been finalized. Now contractor, we are finalizing, and then we'll start the construction as soon as possible for Indore and Nagpur, both.
The next question is from the line of Dheeresh Pathak from Goldman Sachs.
Sir, for 9 -- for year-to-date, what is the volume growth?
So volume growth is hardly 3.5%.
This branches which you add on a regular basis every year, so each branch, does it reach a saturation peak out revenues? And what level is that?
Sorry, we could not get...
I don't think there is any like a peak out thing because it would depend on the number of manufacturing units around it. So there can never be some sort of a complete utilization of the branch.
So each branch would have a different revenue potentials, like you have banks, right? They have -- in order to grow, they have to constantly keep adding new branches to get deposits. So I just wanted to understand from a -- obviously, depending on the catchment area, each branch's potential would be different. But sir, on an average...
You have to understand one thing. Banks -- you cannot compare us to the banks. Banks were B2C. We're a B2B company. We will be where the manufacturing starts.
I was just giving you an analogy that in order to grow, we have to add branches. So is like on a like-to-like, so let's say, branches, which were opened 2 years back, how would their growth compare versus new branches?
It would depend on the location. If you -- if it's in a far-flung area location in India, you would need that possibly not for business growth, but for delivery. So there are many permutations and combinations we have to look at. In Eastern India, we have even until all the -- to the last border of India where there is -- delivery of material happens there. There is no booking, so it's very dynamic. It's hard to kind of like say saturation point or complete utilization of a branch.
Okay. Fair point. And just to understand, like, what percentage of the revenue is where you have direct client relationship? And what percentage would come through, let's say, where you do work for some other 3PL or some other service provider?
We don't want to work for any other 3PL. All of the customers are our customers.
The next question is from the line of Nitin Rao from Alpha Ideas.
Sir, my question is related to reverse logistics. Early in the call, you mentioned that 85% of the sales are from North, South and West and only 15% from the East, and East is primarily a consumption area. So sir, how do we manage the reverse logistics part of it? If you can throw some color, it would be great.
India is still developing the reverse logistics business. People -- manufacturing companies, consumption, consumers, they still haven't like matured enough to understand the importance of it. I do not see it as a very big large component as like say the air cargo business that we have, all the international air segment that we have. So this is something which will grow over time. When the time comes out, when India gets serious on the pollution front and all that, then we will see an uptick in this business.
We'll move on to the next question that is from the line of [ Sarika Thorat ] from Union Mutual Fund.
Just wanted to know on quarter-on-quarter basis, there is a decline in the employee cost, will you explain that?
So actually, if you see in the last quarter, we had a high growth. So there was some variable component was involved that was slightly higher. And in this quarter, revenue growth is low. So that is the only one reason we have. And another thing, some employee-related expenditure also happened on some -- for purposes of giving kind of dresses and all. So that was the only reason. So this is, again, variable -- slightly is variable, that's why it's there. There is no major change on that part. If you see there, a very, very minuscule difference in there.
The next question is from the line of [ Sriram Rajaram ] from Ratnatraya Capital.
You are talking about branch expansion and the growth is coming from...
Sorry to interrupt, [ Mr. Rajaram ]. We are not able to hear you.
Yes. So you were talking about branch expansion and the growth is coming from SME customers. So those customers now who are giving you new business, I mean who are they dependent on earlier for logistics? I mean just want to understand were they using the services of any unorganized player or...
Yes. So they would be with the unorganized guys, and they would be the ones facing GST challenges. So that's where we come in. And we kind of like take on that business.
So in between the organized players, I mean, how are the other players performing? Any sense you could give?
Other players are not -- I mean what...
Gati and [ Safe ] I'm talking about.
Sorry?
Gati and [ Safe ] I'm talking about.
I'm not sure. I cannot talk about other companies actually at this point.
Okay, okay. And so basically, you were talking about the fixed cost for the branch is at INR 50,000. So what is the variable cost like? Because I see a lot of employees are getting added to your payroll. So just want to understand what is the variable cost? And in between, if you could give some breakup between employee and nonemployee expenses for a branch?
So yes -- so [ Sriram ] -- so there's -- variable cost is employee cost and vehicle cost. There is 2 variable costs there. And employee generally what we are -- we are developing under the current branch in charge or branch managers. And then we deploy them in a new branch. So this is our regular kind of practice we have, and we are developing, giving training to them. And then we're putting on the main role. So this is a continuous kind of work we have. And another thing, initially, we -- whenever we opened the new branch, then we put 2 guys. And then we increased wherever we needed according to business requirements.
So if you could give some absolute number, like, how you gave for...Yes, I mean, if you could give some absolute figure to that variable cost number for -- per branch? Like how you...
So it, again, is INR 50,000 per month, not more than that. The insuring initially should not be more than INR 50,000 per month, like employee salary and whatever other running office maintenance expenditure, rent part and everything, yes.
[Technical Difficulty] Hello, Mr. Devang Patel?
Yes. Sir, this 1% price increase that we had in Q3, is this across all segments or it is higher in some subsegments, which subsegments would that be? And in a weak market, what helps us push through this price increase?
So it's majorly coming from the SME customer, not the big one customer. Because majorly, whatever customers we are adding, we are adding on good prices. And that's why it's happening through that only in this quarter.
So what is the price -- range of price increase that we have from new customers? On a blended basis, it's 1%, but for the new customer, how much higher is it?
So it's the same, whatever kind of we are taking, as again, it's very dynamic. I don't have a number right now. So again, it is from across the sectors, but mainly from the SME customer, not from the big customers in this quarter.
Okay. And if Allcargo is taking over Gati, what kind of impact do you foresee for the industry going forward?
I think it will be a good thing. Consolidation will happen because a lot of the Gati customers will come to us. And I think, yes, it's a good thing.
Sir, could you explain why customers would change?
I do not see the -- see, Allcargo is not a B2B Indian company. Their operations are outside India. For them to manage something like this, it's not going to be that easy to fulfill customer demands in India. So I see that it's a positive thing for us.
Okay. And in terms of change in strategy, is there anything that you need to do? Target more urban centers? Because earlier, you are more focused on Tier 2, Tier 3...
No, no. Urban center, there is no manufacturing, no? It's all moving out. So we have to focus on where the manufacturing is going.
Okay. So no change in strategy because of this event happening?
No. Which event?
Change in promoters for Gati.
No, no, no, no. Nothing at all. We are chasing their customers now in full force.
Right. That would primarily be on the SME side?
All, all, all customers.
The next question is from the line of Parimal Mithani from Credential Investments.
Can you hear me?
Yes, yes.
Yes, please.
Yes. Sir, I just wanted to know in terms of -- is there any policy towards dividend payout? Because you've already given 2 dividends, and what is the way forward since -- after a good set of numbers?
So again, it's depending on various factors. But yes, we internally are -- we are on opinion of that to at least giving around 16% to 20% range only.
We are already at 16% or 20% as of right now, sir. Is there any...
It is at 16%, 17%. Yes, right now, even 17%. And by New Year end, we will also keep the same range, around 16% to 20%.
Sir, since we do not require -- you are debt-free, is it not wise to reward the shareholder for -- who has been with you since long time?
So that will happen as we go along. Like today, we are seeing some sort of an economic slowdown and all that. So we will look at it in a more better way next year.
The next question is from the line of Shreyas Bhukhanwala from Canara Robeco Mutual Fund.
Sir, one question was regarding that axial -- higher axial capacities. So is this the first year wherein -- from wherein we have seen meaningful benefits accruing from this?
Yes. Actually, what happened -- so initially, that was benefited to a full truckload vehicle and you can say is open truck. There may be -- they could immediately change their axial load capacity. But because we are running through the containerized vehicle, so size of the containerized vehicle was not clear from the ministry side. And afterwards they had given some clearances on that to increase the size and -- increase the width and size of that vehicle. And that's why this is the first year we are putting effort to make them -- putting more material in our existing capacity.
Okay. So the current quarter was kind of the first one to seeing -- to see such a meaningful benefit?
Yes. You can say that, yes. So we are continuously working and just Mr. Chander also mentioned, we will be keep continuing, it will be going in a year to come also in 1 or 2 year. Gradually, we will convert these all trucks wherever is possible.
The next question is from the line of Prit Nagarsheth from Wealth Finvisor.
Just one question. This is regarding -- we say that we have an asset-light model. At the same time, we are investing in our own sorting center. So that's a shift in strategy. Sir, can you explain what's causing that? What benefits do we get from that?
No. So again, we also mentioned in last 2, 3 calls also. We, again, would be just asset-light company because if we could have the CapEx in the truck, then it will be a high-asset company. But now it's -- because this is our bloodline for our operations. And if you see other size also, whatever we are putting money, it will not come down our this ROC. So this is not the depreciable asset. So it will be ultimately, in longer term if you see, it will also help us to increase my ROC also. And that way we planned that CapEx, and it will improve our capacity utilization and operational efficiency, which is ultimately giving the good margin level. If you see last 4-year journey, we've also grown from 8%, 9% to now 13% level.So we will be sure we will not be -- this not come down our ROC level, ROC level would be continuously on more than 40% kind of ROC we will generate.
Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Agarwal for his closing comments.
Thank you very much for your participation. And I look forward to our next call. Thank you.
Thank you very much.
Thank you. Ladies and gentlemen, on behalf of TCI Express Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.