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TCI Express Ltd
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Ladies and gentlemen, good day, and welcome to the Edelweiss Securities. We cordially invite you to participate in TCI Express Q3 FY '21 Earnings Conference Call, hosted by Edelweiss Securities Limited. [Operator Instructions] There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Alok Deshpande from Edelweiss Securities Limited. Thank you, and over to you, sir.
Thanks, Malika, and good afternoon, and welcome to all the participants. We have with us Mr. Chander Agarwal, Managing Director of TCI Express; and Mr. Mukti Lal, Chief Financial Officer of TCI Express, to today discuss the Q3 FY '21 results with us. Without further ado, I'm handing over the call to Mr. Chander for his opening remarks. Chander, please go ahead.
Thank you, Alok. Good evening, everybody, and welcome to the earnings call of third quarter of financial 2021 of TCI Express Limited. As this is the first time we are interacting in 2021, I would like to start the call by wishing everyone a happy new year, and I hope you and your loved ones are staying safe and healthy. Our earnings presentation have been uploaded on the website and stock exchange, and I hope that you've had a chance to review it. We will start this call with a brief discussion on industry and company's performance. And then our CFO, Mr. Mukti, will present the financial performance of the company. Continuing the trend of second quarter, third quarter of the fiscal year saw a sequential recovery in terms of macroeconomic indicators. The quarter started with a strong recovery in October with normalization in the economic activity, improved business sentiments, demand also picked up during the festive season, and MSMEs expanded their business and operations. However, in November, we saw contraction in production for coal industry, which has dampening effect on recovery of a few sectors. As per data of Index for Industrial Production, IIP, the manufacturing index listed a strong month-on-month growth of 4% in October, and subsequently declined by almost 2%. And if you look at the sectors, machinery and equipment was up 4% in October, and then declined by 7% in November. This trend was visible in key industries. This trend was also reflected in [indiscernible] generation information. In October, 6.4 crore bills were generated, while in November, the figure stood at 5.8 crores. However, in December, there was a gain, again, pickup in production and demand. With these market conditions in mind, I am pleased to report that in this quarter, company delivered revenue from operations of INR 262 crores, and EBITDA stood at INR 47 crores with margins of 18%. The company posted strong sequential growth of 23% and in revenues support from our SME customers. And we reached near pre-COVID levels. We delivered one of the best profitability margins which can be attributed to not just the control -- cost control measures and the high-capacity utilization in operations but a platform created for sustaining these costs as we go along. We believe we will be able to drive the benefits of these cost acts -- cost saving acts in the quarters ahead and continue to deliver enhanced profitability. One of the main reasons for our performance is the dedication and support of our employees, the most valuable assets of TCI Express. And we would like to inform you that beginning from October 1, 2020, salary increments have been paid to employees. We continue to move forward with our geographic and infrastructure expansion plan. We opened 10 new branches in the quarter, a total of 20 new branches in 9 months. In Q3, we incurred a CapEx of INR 15 crores for the construction of the sorting centers in Gurgaon and Pune. The Pune sorting center construction is complete. And due to delay in receiving the regulatory permission of loan, operations will commence in next quarter, in Q4 financial '21. Gurgaon center, accordingly, will be operational by first quarter of next fiscal, by Q1 FY '22. Our asset-light business model has allowed us to maintain a strong balance sheet, and cash flows were further supported by timely collection from our customers, including the SA. I would like to inform you that Board of Directors have announced interim dividend of INR 2 per share with a payout ratio of 100% on face value and 13.2% on 9 months to the year. We have recently launched the ESG profile of TCI Express on our website to transparently disclose ESG-related information. At TCI Express, a strong governance structure focusing on creating an inclusive workplace culture and implementing environmental-friendly solutions are core pillars of our business and sustainability. You can access ESG-related disclosures on our website, and we will be updating ESG profile on a regular basis. And we keep all stakeholders fully involved at all time. Looking ahead for the industry, we increased allocation of spend and infrastructure development by government as announced in the recent budget and various new initiatives to promote the manufacturing sector will have a positive impact on logistics sector. And as a company, our 2 new sorting centers that will be commissioning in 2021 will be state of the art -- with the state of the art technology, will put us in forefront to serve our customers. Now I would like to hand over the call to Mr. Mukti to discuss financial performance of the quarter. Thank you.
Yes. Thank you, sir, and good afternoon to all of you. I will discuss key highlights of financial performance we achieved in this quarter 3. In third quarter, the momentum of sequential recovery in revenue continued, and we saw recovery in demand during October due to festive season. But in the month of November, businesses and specifically few core industries were again in a graph of slowdown and after a relatively subdued month, it only started on positive path again in December. In Q3 FY 2020-'21, our revenue from operations stood at, as mentioned by Mr. Chander, it's INR 262 crore. compared to INR 213 crores in previous quarter and INR 268 crore in the same period of last year. And the company posted a strong quarter-on-quarter growth of 23% in revenue. We are now at around pre-COVID levels. And in absolute terms, EBITDA was INR 47 crore, and we were able to deliver strong margin level of 18%, which is all-time high in Q3. And it is almost just doubled to what we had in 3 or 4 years back and compared to 16% in previous quarter. So in previous quarter, we also achieved 2% more and 13% same period last year. Improved EBITDA margin was due to basically increase in revenue as we have now scaled back to pre-COVID levels. And second is higher operational efficiency due to cost control measures implemented by a company in the same path. And also due to various initiatives taken on digitalization introduced in process and businesses. And we also continue to maintain high capacity utilization among our fleet, which has further supported our margin levels. So net profit of the company stood at now again all-time high of INR 34 crore with margin of 13%. In Q3, CapEx of INR 15 crores. And for 9-month, total CapEx outlay is INR 41 crores, which is primarily used in construction of -- our ongoing construction in sorting center and automation. We continue to generate strong cash flow in 9 months cash. And 9-month cash from operations stood at INR 85 crore. And so in conclusion, I can say, bearing in mind slight subdued revenue growth on a year on basis, we had a remarkable good quarter. As we move in a new financial year, we are optimistic about the growth prospects of our company as well as economy. As businesses recover, we plan to move forward with financial discipline and prudence by focusing on efficient working capital management, strong cash flow conversion cycle and robust collections from the customers. So thank you very much, and we can now open for -- the floor for the questions and answers. Over to Alok.
[Operator Instructions] The first question is from the line of Lokesh Manik from Vallum Capital.
Just one question from my side. If you can share the revenue mix between the -- from the SME clients and from the corporates, which are mainly volume-driven for this quarter?
Yes. Sorry, I missed your last name.
Sure. The revenue mix between SMEs and corporates.
Yes. So in this quarter, we see almost 52% from the SME customer and 48% almost from the corporate customers.
All right. All right. And this is value-wise or volume-wise?
It is basically value-wise. Volume from the SMEs because, as earlier mentioned, realization per unit from SME is much higher than corporate.
Next question is from the line of Depesh from Equirus.
Congrats for good results. So if you can please give the total tonnage handled this quarter and also in the 3Q last year? And what was the total capacity of your vehicles, please?
So tonnage in this quarter is almost 2.15 lakh tonne. And last year in the same quarter was around 2.25 lakh tonne.
So sir, we have taken a price hike in this quarter was around 3%?
Yes, around 2%, we had taken the price hikes in this quarter as well.
Understood. Sir, secondly, on your gross margins, with that scaled new highs this year, congrats for that. I just wanted to check 2 things. Has your Air Express [indiscernible] that is domestic or international segment, which used to be around 9% of your revenues, has that mix changed this year? And secondly, have the distance traveled by your vehicles drop this year, which is leading to lower costs?
Not really. So ratio in Air Express is the same as what earlier one. And another thing, this travel distance is also not reduced actually because we had a standard route, and every truck has to apply on those routes. So it's really not reduced actually. Earlier we mentioned we increased the weight capacity in existing truck. So that way, actually, we gain the benefit here.
Understood. Sir, lastly, you've added around 2 -- 20 new branches in this 9 months. And also you talked about the salary increment given to employees. But if I look at your employee cost, it is still below the pre-COVID level. So how should we think about it going forward?
So in Q4, it will be more or less same. And next year, yes, as a good gesture management is thinking to give a good high to employees. So that may be reached to back on in '22, maybe reach on a '20 level, on FY '20 levels or slightly like 2%, 3% higher than FY '20.
[Operator Instructions] The next question is from the line of Krupashankar from Spark Capital Advisory.
I had a couple of questions. First 1 was on the volume growth. So clearly, last quarter, you had mentioned that there were addition of new clients. So can you specify as to whether the incremental volumes is coming from these new clients? Or is it -- or perhaps if you can perhaps throw some light on what are the key sectors which is driving the growth and what is the other sectors dragging it?
Chander, sir, would you like to give answer?
Yes. Can you repeat the question?
Sure. So what I was -- 1 thing is on the volume growth. What is driving this growth? What are the key sectors which is driving this growth? And what is dragging it? And also, what would be the contribution of new clients which were added over the last quarter?
Right. So new client base is on the, I think, at this point, about a 50-50 ratio. Usually, when the times are much better, it's 60-40. And this time, it's about 50-50. And the sectors that have really seen an uptake is machinery and tools, the pharmaceuticals, the auto spare parts. But the textiles sector, unfortunately, hasn't really come up to the levels that one would expect. And going forward, I think with the budget announced, we assume that we will also see that the textile sector comes up. So in general, all our verticals that has been in -- that we have been working with have all come back to the pre-COVID levels, except for just 1 or 2.
That's good. Can you also throw some light on how has January been? And what are the -- what is the outlook [indiscernible]?
So January, it was actually much -- was pretty much same as last year, not much difference. But obviously, no improvement also. So February looks slightly better than last year. So I think it's a momentum which is building up, consumer confidence. We know that the whole year, things would not go straightforward. It was up and down. Consumption is still below its -- below the pre-COVID levels. So I think all these temporary shock, something that we are able to sustain with our asset-light model in general, every time we are able to show better profits is because of this reason. Now once the manufacturing starts picking up, then we will see superb top line growth also.
That's good. My second question was on the change in truck dimension. In last quarter, you had mentioned that it was 40% of [indiscernible] converted to the new dimension. So what is your progress there? And have you seen any benefits of this change?
Yes, absolutely, we have seen the benefits. It is already showing in the results in the financial performance. The impact has to be -- cannot be immediate change of the entire fleet because you see the demand is also less. So if we change the vehicle capacity to higher tonnages right away, then we may incur weight loss. So that is a problem that we have to also manage, that we do -- that we calculate. It's not just a plug-and-play system where all the trucks should be just changed to a higher capacity when the demand is lower. So we had bring it very tactfully and doing it appropriately as further demand.
So any percentage which can be provided as to what would be the progress? Or is it remaining at 40% of that?
No, I think it has increased to about 45% to 47%.
Yes, it is correct, yes.
Next question is from the line of Kaushal Shah from Dhanki Securities.
So first part of the question is regarding the CapEx. So over the long period, we had a plan of around INR 400 crore CapEx for the period of 5 years, of which around INR 240 crores is what is expected to be pending. So after this Gurgaon expansion is happening, so what are the plan to that basically if you have done anything?
Mukti?
Yes. So on that, you rightly said, we still have to spend INR 240 crores. And still on automation and remaining construction part, we need to be spent around INR 70 more crore in these 2 center. And the remaining part, around INR 175 crore, we have to be spent like we are already in progress to take the approval in Chennai and in [indiscernible]. And in those, so these locations, are already in pipeline. And we are also looking forward to take the land in Mumbai and Kolkata. So these are the pipeline projects we have for the next 2, 3 years. So we are intend to spend these money in the next 2, 2.5 years.
Okay. Okay. Got it, sir. Sir, and initially, maybe on, say, 1.5 years back, we had a very aspirational target for the branch count also, expansion of branches into the Tier 1 and metro cities to around 1,700 to 2,000 branches. So right now, as if I'm not mistaken, we are at around 800 branches. So what would be the path for the expansion that we were looking at?
I think as disclosed earlier, we'll do -- double our branches in the next 3 to 4 years. So that is very well intact in our plan, and we will do it.
Okay. So this will be again in the metro and Tier 1 mostly, right?
No, Tier 2 also. And Tier 3, again, the problem is that it's very easy to open branches. But then this business volume should happen. So we are only opening where the business volumes are increasing. Now just to give you an example, for you understand, let's say, a city like Jaipur, that has only 1 branch that was open at 10 years ago. But the quantum of business or the number of SMEs has gone up drastically. So we would need a second branch there. So that would give us a better coverage and better business growth also. So I assume that the growth will also come from opening these branches. If we plan to double our business in the next 3 years or 4 years, these branch expansion will assist in that and also maybe possibly help us in more than doubling our business going forward.
Understood, sir, understood. And the second part was regarding basically the opportunity relating to the COVID vaccine. So we had some updates from you earlier when the plan was launched. So any updates regarding that?
Yes. So it is still all under government control. And we are working with the government only on the transportation. And whatever sector the government is opening up, we are getting that as per the requirement. So the initial haul of all the logistics companies opening, this and that and all that, I think that was pretty much very uncalled for because no one knew anything. And we also did not make noise about it because we had no idea also how it would play out. So it is still in the hands of government, and they decide the distribution based on the capability of the logistics company. So we are only doing in certain sectors in South India.
Okay. Sir, any quantification, I mean, if you would like to give it?
Sorry?
Any quantification or any amount that you would like to...
Very hard to say because like if you look at the population, only 60 lakhs have been inoculated by now. So that is nothing for like a 100 crore or 100-plus crore population.
Understood. And last one, bookkeeping question. Sir, what was the traction factor for this particular quarter or 9 months?
Sorry?
Yes. So it is around 86% on -- in this quarter.
The next question is from the line of Kunal Bhatia from Dalal & Broacha.
I had a couple of questions. I just wanted to know, sir, how much was your volume for the 9 months ended FY '21 vis-à-vis last year?
So in this last 9 months, volumes were around 4.6 tonne -- 4.6 lakh tonne in comparison of last year's 6.75 tonne -- 6.75 lakh tonne. So it's down by almost 31% in 9 months.
Okay. Okay. And sir, secondly, in terms of the cost rationalization which we have YTD, how much of this going forward would be sustained? Because we are at an all-time high kind of an EBITDA margins, and we've already crossed our guidance of 1% improvement on a year-on-year basis. So more of sustainable margins, what should be the #1 should look out for?
Yes. I think it is sustainable because now we have also created a basis, a platform basis, where we understand how the costs are going to behave in when business is lower or when business is high and especially when the fuel price is high. Fuel is up almost 20%. So if the fuel is up 20%, most of the logistics companies have not been able to deliver. And for us, we have understood that the -- what it takes, the basic fundamental tool that is required to keep this momentum going, that particular understanding has been fed into the system. So we know exactly how to -- how everything behaves, and we can have that in control.
Right. So like, for example, you did allude to the fact that the employee cost, which has come down to very low...
The employee cost is not so much of a big deal for us. We are anyway very high employee costs. If you look at the industry, if you look at the country, if you look at the companies, it's not high. So that's not my bone of contention. What you have to look at is the operating costs. Our indirect costs are very, very low, even with thousand branches in all the offices and all that. That cost -- that aspect is still one of the lowest in the country and industry. If you look at the operating cost, which is still detail, as to how that will behave going forward.
So we've almost reached like a 68% to sales. So we will be able to sustain that kind of operating expenses?
Yes. So again, you rightly said, last year, we were around 71% in average. And this year, we will finish 68%. And next year, we have taken the target to reduce further by 1% at least. So that will continue. And we're finding the way how we can be, just as Mr. -- Mentioned by Chander, how we are finding -- how we can keep it in control and even reduced. So we are very dynamic internally. And now we have sharpened even analysis on even twice in a month or even sometimes on a daily basis. So this tempo will be continued for the next 4, 5 years, and our ultimate target to reach around 63% or 64%.
Okay. Okay. That's good to hear. Sir, and also, I wanted to -- you generally, you do speak about the turnaround time. So how -- in this 9-month period, how are the turnaround time improved vis-à-vis FY '20?
So turnaround time's obviously been much lower compared to last year and there's multitude of factors, like labor issue initially and then the highway been closed and all of that. So overall, if you see that will get impacted, but this is something which is temporary. This is not here to stay.
So if you were to give a comparative how would we be standing as of now vis-à-vis FY '20.
That is slightly down over last year. So as Chander mentioned, it is impacted basically due to certain reasons, yes, is mentioned.
Maybe only by about 15%, which is not a big deal. Even the customers understand that like a lot of issues have been happening.
And sir, in terms of this warehouse in Pune, so...
That's sorting center, you mean.
Yes, sorry, sorting center in Pune. Could you give some more details in terms of the total square footage and what kind of CapEx entirely spend for this sorting center?
Yes, Mukti?
So in square feet is around 1.5 lakhs square feet. And total CapEx would be -- there is 2 kind of Capex: it is one with construction and another one in automation. So these 2 type of costs would be there. So construction is around INR 25 crore. And then on automation, we will be spent around INR 15 crores to INR 20 crore on that center.
[Operator Instructions] The next question is from the line of Sameer Chuglani from Edelweiss Securities.
So my first question is that can you give some color on what is the margin differential between large corporate customers versus -- as compared to an SME customer? And secondly, do you think e-commerce is an opportunity where you would like to expand or specifically into B2C? So any thoughts on that would be great.
So question one can be answered by Mukti. I'll answer the second part.
Yes. So margin level difference here, a big difference in versus -- SME customer versus big customers. SME usually giving almost 20% to 25% higher margin than to corporate customers. [indiscernible]
Now we have not put our focus on B2C. That's why we have actually shown robust results. And going forward, we'll continue doing the same.
Yes. Yes. So just how much of your volumes would be from e-commerce, even B2B?
E-commerce B2B has not really picked up in India. But I would say that our e-commerce level is about 3% to 4%.
The next question is from the line of Ronald Siyoni from Sharekhan.
So a couple of questions. First one being the competitive intensity, how do you think like some of the listed players are going into Express also and they are also going through asset-light models. So are they more venturing into B2C and avoiding B2B space, something of that sort you are finding? Or you are seeing competition increasing in B2B also?
Mukti?
Yes. So if you see on B2B, there is no intense competition is arising. Whoever is -- they are actually focusing on B2C market because there, it is -- so if you see B2B and B2C, there is -- operation is completely different. Cargo size, if you see package side or is a delivery location or pickup locations, so everything is different. And they are basically focusing on B2C and not B2B.
Okay. So the same level of competition exists as there's no increase in competition levels?
Yes, correct.
Second thing is, any specific sectors you are inclined towards in the space, like you said, machinery, tools pharma, auto are doing good, so -- and textiles. So any of these sectors, 1 or 2 odd sectors which are -- comprises more towards your revenue.
Yes, Chander, please?
So we have also telecom equipment. And then there are many verticals that we are doing. There is also like paints, a lot we see the list. And as per the list what we get in -- one second, I'll just pull that up.
No, sir, only the sector which contributes the highest, the 1 or 2 major sectors which are core of TCI.
So that would be the -- what I mentioned.
So these 3, 4 sectors are the core?
Yes. But then we don't have more than 10% in these sectors.
So no -- okay. No sector concentration. The last one is, sir, you also mentioned in this presentation that there were some issues with respect to government policies in 2 states. So are you relating it to the farmer strike? Or is there some other issues in some states? And what kind of impact has there been due to the farmer strike?
Mukti?
Yes. So farmers, in fact, yes, it is slight impact is there. And thereby, this turnaround time of truck slightly increase in north part of India. As we are working across India and delivering the material crisscross across India, so that is a slightly impact, but no major impact you can see on the results also. So revenues intact, everything is okay.
So there's no any other kind of issue in other states. This was the only thing which you had mentioned?
Yes. Initially, see, last year, there was [indiscernible]. And so I think we are fortunate nothing happened this year. In the beginning of this COVID year, we had some altercations in the border. Then any way, everything was shut, there's nothing moving. So not much changes in the country this year.
The next question is from the line of Arjun Singh, an individual investor.
Am I audible?
Yes.
Congratulations to you, sir, on delivering fantastic results. I just had one question on -- you mentioned different weight dimensions that you've incorporated in the trucks have actually helped you in the gross margin. Could you just elaborate what exactly are we doing with these different weight dimensions? And I'm assuming your vendors have been -- they have been receptive in your suggestions to increase these weight dimensions? Or how has that worked?
Yes. So it is basically -- it is, as you may be aware, government has allowed to increase the axle load in existing trucks. And being a container is the movement company because everything, our material has to be moving a container. So we were not able to take that benefit because government has not given the rules clearly for increase the height or weight of these containers on our trucks or is outsourced truck. So subsequently, they are allowed to increase the size of that container. So we are continuously in discussion with vendors. And wherever we find a win-win situation, where we have increased the size. As we mentioned, it is almost already reached to level of 45%. And wherever we need in the future because we, again, can't be on one go, then it will be overcapacity available here. So once we will be getting the revenues there, we will be put into again this -- change this capacity wherever we need it. And that benefit will be, again, continue to come to company.
Understood. Just a follow-up, is there any quantitative difference or qualitative -- can you justify or tell me like how much percentage increase or how much percentage improvement in your gross margin would be because of these? And let's say the share of increases from 40% to 50%, how much further improvement in gross margin can we see?
Yes. So it is -- if you see gross margin in this quarter, it almost improved 3%, 4%. So we -- out of that, you can say, we can be -- is contributed by at least 1% by this mechanism.
Okay. So -- and you mentioned that over the last quarter, you were at 40%, which has improved 45%. So 5% increase in your truck higher loads is contributing around 1% in gross margin.
Yes.
The next question is from the line of Kaushal Shah from Dhanki Securities.
Sir, just wanted to know your thoughts on the ongoing CapEx exercise and [indiscernible] mentioned a little while back that an additional INR 70 crores, INR 80 crores will be spent. So if I kind of rewind back, one of the key strategy of TCI was being a low-asset company utilizing capital very, very efficiently. Now that we're adding -- we've already added, let's say, about roughly INR 160 crores, INR 200 crores, we're going to add another INR 240-odd crores, maybe another INR 50 crores, INR 70 crores, what Mukti was talking about. How do you see our asset turns improving because of that or our margins because improving because of that? And your thoughts on this entire process of investing in centers rather than leasing them out or something like that?
Yes. So here, actually, you need to be -- you don't need to be seen isolation of these CapEx plan. These are the -- basically is a fundamental for my overall operation across India. So we are seeing what kind of incremental CapEx we are doing or what we are generating as incremental profits also. So if you see, we will keep maintaining the same kind of ROC. And this is actually fundamentally required to convert our manual operation to automation. And for that, we need our control everywhere. And location is also very, very important. So many times we said that location for our operation is very important. That's why we want to be -- our component now is norm, environmental norms. Various regulatory requirements are very, very high. That's why -- because these are the backbone of the company operation. And these are -- we are not going to convert everything. We just want to be convert at least half of the sorting center, which is right now 28 is the numbers. And we have almost 8 is right already in our own one. And remaining 7, 8, we want to be convert further. These are under process. So that is actually our strategy.
So sir, any impact that you see or any number, any quantifiable estimate that you can see where we can kind of put a number to the investment in the sense that can you put an asset turn number on this or maybe a tangible improvement in our EBITDA margin once -- this next 2 years or so once you have done this exercise?
Yes, the same thing. You can't take them as in isolation. It has to be across India, it is giving impact on service levels. Because as we mentioned that we are -- supposing we are having 12- or 15-hour idle time right now for any cargo in the sorting center, that will be able to reduced 6 hour. And that 6 hour will be a phenomenal for an overall operation because my -- booking goods also would be through that. And also, whatever would come for the delivery, that will also be very fast. So ultimately, what targeting we are, now my -- this gross margin level at 32%. And next, our target too is going to 35%. And this center will be helping that to achieve these targets.
Okay. So can we say that 3% improvement is likely purely because of this?
No, no, no. I'm just saying everything. In isolation, I can't quantify this.
Right. But what you're saying is that the throughput will improve?
Yes. Correct.
Service to customer would improve. Faster deliveries to customer would be improving. We can take on more business. Turnaround will be faster. Everything will be -- customer now, if you get some materials in, like, say, 4 days, possibly, you can get it in 2.5 days, which would mean more business. So it's kind of like hard to really quantify, as Mukti was saying. Most [indiscernible] companies for them assets is the number of costs that they have. And there, we don't own a single truck. So from that point of view, it's asset-light also.
[Operator Instructions] The next question is from the line of Prit from Wealth Advisor.
Yes. I think very good numbers. So one aspect I wanted a little bit more insight on was related to what the company would do to gain more market share. And I think, Chander, maybe in the past, you had alluded to maybe having more vertical heads that would try to get some more business in specific verticals. Can you share any update on that or any other strategy that we have any?
Vertical, which is a very small aspect how you can actually increase the business. One of the key fundamentals of increasing logistics business is having more locations. So our continuous approach to opening branches is what will really help us is we are pretty much we know the art of opening branches. We know that going forward, this will be a very big impetus to business growth. The vertical heads will just be a little small picture in the big painting. We have to look at the different products that we would be -- we have launched, that I will talk about in Q4. So I think where there is the integration of all the products, so 1 office can sell 5 products, selling 5 products is where the real growth aspect will come from. That I will speak more in Q4.
Okay. Okay. That looks very exciting. The other question, Chander, I wanted to get your view that has been all these startup companies, say, like delivery and some of the other ones now have started becoming EBITDA positive. So after burning a lot of cash, they have now stabilized the operations. And I think this last year, because of COVID, I think a lot of movement happened that truly comes out. Now they have started announcing plans to service the B2B networks also. So alongside their B2C networks, they want to also address B2B. Now how do you assess that? How do you see that? Do you see the -- still the weight on the ground, do you see any customers moving away from you guys to them?
I'm not really -- because the thing is that one very important business aspect that they are not working on is the price to the customer. Like the price to the customer, they're charging -- they're very premium, very high priced. So with that kind of offering, they will not be able to bed the market. India is a low cost country. And to get that low cost, we have to have the volumes. So I think it will be some time before they actually -- they're able to make a scratch or make even some noise, so it's okay. I mean it's not really -- we don't feel a threat. Our threat is we are now [indiscernible]. That will -- the government is also trying very hard to go away with.
I'm sorry, could you repeat the last part, the threat here?
Are the unorganized segment. Unorganized segment want to do is they buy a truck, they help the manufacturers waive taxes under invoice. And they call themselves express companies. And they also evade GST. So these are the bigger threat to the country and organized players like us.
Next question is from the line of Krupashankar from Spark Capital Advisory.
Continuing on this unorganized segment side, I just wanted to check, you are hearing that a lot of unorganized players were not able to fly during this last 9-month period. So would it be safe to assume that some bit of volumes which are usually going to unorganized has come to us?
It's very hard to say that because the real business growth that can define if that transition has happened has not really happened. So when we see higher growth is when we will be able to calculate. When we see that from the existing customer our largest chunk is coming to us. Already, it is now at 50-50 new customers versus our existing customers. But when we see existing customers go up to 60 or 70 level, 70% level, is when we will -- we can safely calculate that the unorganized segment is shifting to us. So I think that has start happening next year. There is a belief that next year, there will be many companies in NCLT and all that, so I think we will see that shift happening next year for sure. Next [indiscernible] starting now from March itself.
Good. Okay. Sir, second question was on tractor factor. Can you specify -- could you [indiscernible] last year same quarter and last quarter?
Yes. So last quarter, it was around 85% in last quarter. And last year, we also see in kind of 85%.
I'm sorry, in 2Q, it was 85%?
Yes, 85% in Q2. I'm talking about is Q2, it was around 85.5%. And last year is 85%. And in this quarter is around 86%.
The next question is from the line of Arjun Singh, an individual investor.
Just on this point about doing CapEx for our own sorting centers and investing in land also, do you not see that this will actually save us in rentals going forward?
Can you repeat again, please?
No, my question was, initially, when we were only an asset-light company, we were investing for us branches or our warehouses also, we were investing only -- I guess, we were not investing in land. So our rentals would have been higher then.
No, we were investing in land also because we buy the land which is 40, 50 kilometers away. So it's like very low throwaway price, very low price. Logistics, you do not have -- you cannot -- logistics companies that invest in prime land, warehouse and all that will never make money in their lifetime. It has to be really, really low cost.
Okay. So just for my understanding, we were not investing in a -- we were investing in land earlier also, and we continue to do so for our big sorting centers.
Only [indiscernible] main major sectors -- centers, like the top cities like Mumbai, Delhi and all that.
Understood. So our overall rental percentage share should be similar to historically, this new CapEx will not change that much?
Yes, it will not be changed, yes. It will be contained.
The next question is from the line of Dheeresh Pathak from Goldman Sachs.
Yes. Just continue on the last question. So why do we need to invest in the land even in sorting center? Why don't you just lease it out given that, anyways, these are away from the cities?
These are very simple understanding because land is such a thing, when you have the landlord that has been -- that is not organized, they can any day tell you to vacate or do some sort of, I don't know, like local goods and all that. This is India, so we have to ensure that the operations don't get disrupted. A lot of logistics companies that do that have faced that problem. But we as a group since 65 years, we have never faced a problem like that because we know that the main centers have to be under our control. It safeguards from any sort of eventuality that might happen.
Okay. But just for my understanding, the -- it's not that the clients know -- it's not like client-facing outlet. So even if you let go of that land, then you can be somewhere else which is again...
We do not -- so if you have -- it's very difficult, you see, because it's like you cannot build a sorting center which is like 40 gates and with the automation with the machinery inside. You cannot just pick it up and put it somewhere else. So I think it may sound -- I mean it may sound easy just to do that, but if availability is not there, this is not the best. In India, it's like it's go down, what do we get? So we are not operating go downs here. And sorting centers are a different animal altogether. And for that, you need to have that certain right calculation of the height of the platform and height of the ceiling and fire prevention and all of that. So this is on the highway, a lot of factors which matter.
Right. No, that is helpful. I think the practicality is it what you're facing, so that is why you are deciding to do that. One other question is...
We are doing this 55 years now, so we know it now.
This business that other CPL companies do of managing other people's fulfillment centers, specially e-commerce. That business, you don't do in TCI Express. Do you think...
No, we are customer-facing. We don't do any of that 3P and in all that low margin business.
But does your other company, TCI, does do that? Or they also don't do that?
They do that but on a very small scale.
The next question is from the line of Lokesh Manik from Vallum Capital.
I wanted to check if there is any plan to help our fleet owners convert to alternate fuels, probably working with them on that. And we have a good network setup, so we do have an idea and on the point-to-point what is the distance covered and what these alternate routes can be useful. Idea being that it reduces the cost of operation, and then it can attract more volume.
So I don't think alternative use is a viable option in India yet because availability is an issue across the highways. Recently, I drove about 1,800 kilometers on the highway. There is no CNG or anything of that sort from miles, for hundreds of kilometers. I don't think that's the viable option, a; b, the mileage on that is very poor. So if you want to use that within the city, like how Delhi has CNG [indiscernible], that's possible, but not the 100cc. And the truck [indiscernible] there are 50 ranging technology. No way that we can actually look at alternative fuels.
Okay. So there was some talk in the middle for converting these heavy vehicles into LNG or using LNG as a fuel. Do you think that is viable?
No, not really. Not at all. So mileage perspective, diesel would still be quite competitive versus LNG for the long run. Absolutely. There is not enough -- the internal combustion engines [indiscernible] biggest thing you have is drop, is it badly late. If it go up, that means by material customer, materials all got damaged. So big risk. Still the [indiscernible] idea, government has -- they talked about it 20 years ago but really didn't do anything. And other countries is not really taken off. Now the next evolution that will happen is electric only maybe after 20 years or something.
Okay. But that is on our mind. I mean I understand it's quite farfetched. Just is that something on consideration?
We may -- we will do as per what is happening at that point of time. We will not to be a Tesla or something like that. We are not in that -- we want to make money. Tesla may be valued $1 trillion, but they make no money. We don't want to be in that situation.
Fair enough. No, that's it from my side.
The next question is from the line of Rajita Gupta from Paragon Partners.
So I had a couple of questions. The first 1 is on the industry B2B express industry. I just wanted to understand how do you see B2B Express versus non express given that a lot of these companies have a very good idea of their inventory, of their timelines, and they have a month planning well in advance. So I just wanted to understand the express versus non-express requirement on an industry level for B2B.
So I'll explain you a very simple thing. B2B express runs on our hub-and-spoke model. And B2B regular runs on just point-to-point. Okay. So when a manufacturer looks at a B2B express, what they do is they sent multiple shipments for multiple destinations across the country. And then they save on the warehousing costs. And they meet their customer demands as per their requirement. When you send point-to-point, it's no longer for high value. It's never for high-value material, it's always for low-value raw material or maybe like a very, very low-value material or maybe for [indiscernible], things like that. So B2B express has its own value proposition, which is only defined by the hub and spoke model. Now B2B Express is not one of the main reasons why it's difficult to operate is because it's not in hub and spoke model. You need the branches. You need the sorting centers.
Got it. Got it. And could you give some numbers on a split of the revenues between e-comm and the B2B express and the air express revenue this quarter versus roughly last year?
Yes. So you talk about -- you need for our company?
Right.
Yes. So in B2C, our composition of revenue is almost 8% on air side, air express, almost 4% on e-commerce and remaining on surface side.
Okay. And are there any plans to -- I mean what is the company targeting, that it start to have this structure, same -- similar composition?
Yes. So we -- again, India is a road market. So share will be always higher in the road sector. And we are not excited to be increased the business in more into e-commerce sector basically, in B2C. So that ratio would be willing to keep on 4%, 5% only. Here, yes, it maybe reached to 10%. And remaining 85% is almost, again, surface express.
Got it. And just last question from my end would be that any particular reason why the company is not looking to expand into 3PL segment?
3PL is low-margin business. And we don't have any -- like debt stack is totally different. So express business is doing at about 10% PAT margin. 3PL runs at 1%, 1.5% PAT margin. Totally different ball game and which is not in our portfolio.
The last question is from the line of Ankit from B&K Securities.
Sir, just wanted to understand how have been the inquiries from the customers at this point of time. Have you been able to add additional clients during the quarter? And how are we -- because the unorganized market remains in shackles because of COVID, how are the inquiries from the customers shaping up over these 9 months for us?
Yes. So we, again, have the more inquiries from the SME customers. And our focus is also more into that. So though on a -- again, big customer, we are also approaching, but existingly, like top 1,000 customers, we are there. Share may be depending on the various aspects, like always big customer has a 2, 3 service provider in 1 time. So yes, inquiries are more from the SME customer, and our target is also there.
So new client additions during the quarter?
Yes. So it is an SME customer, basically, more.
Okay, okay. And sir, the guidance -- the broad guidance, we used to provide of doubling the top line and quadrupling the bottom line over the next 4 years, that's still the mid impact? And how are we geared up to achieve the same? Any thought process around the same would be helpful.
Yes, Chander, sir?
I didn't get it. Mukti, please answer?
Yes. So yes, that will be intact. We want to be in our double the revenue, yes, for 4 years and triple our profit in a 4-year time. That is intact actually. And under the [indiscernible] as per plan, we will double our profits also. Yes, yes.
Thank you. I would now like to hand the conference over to Mr. Alok Deshpande from Edelweiss Securities Limited for closing comments.
Yes. So thank you, Chander, sir. Thank you, Mukti, sir, for taking out time to do this call with us. And I also thank all the participants who participated with some very interesting questions, having some few questions remaining, but because of lack of time, we couldn't take all of those. Please feel free to reach out to Mr. Mukti Lal for those questions and queries. Thank you again. And Chander, any closing remarks from your side?
I must thank everybody, every participant for listening us out. We strive to be the #1 express delivery company in India and #1 logistics company in India, fulfilling all our customers' delivery needs and our shareholder aspirations. Thank you very much.
Thank you, Chander. Malika, we can close the call.
Thank you, Alok. On behalf of Edelweiss Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.