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TCI Express Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '21 Earnings Conference Call of TCI Express, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Mitra. Thank you, and over to you sir.
Yes. Thanks, operator, and good evening to all the participants and thanks for joining in to discuss Q4 FY '21 results conference call of TCI Express. We have with us from the management team, Mr. Chander Agarwal, MD; Mr. Pabitra Panda, COO; and Mr. Mukti Lal, CFO of the company.So without further ado, I hand it over to Mr. Chander Agarwal for his opening remarks. Over to you sir.
Thank you, Abhijit. Good evening, everyone, and welcome to the TCI Express Q4 Financial '21 Earnings Call. I hope you and your families are staying safe amidst the ongoing second wave of the pandemic. And of course, now the cyclone also. It is a very difficult time for many people across the country and my personal thoughts go to all.Our earnings presentation has been uploaded on our website and stock exchange, and I hope you've had a chance to review it. We will start this call with a brief discussion on the industry, the company's performance, and then our CFO, Mr. Mukti, will present financial performance of the company.With all due consideration for the current situation in India today, we did see a normalization of economic and business activity during the last quarter. The growth momentum from the third quarter continued in the fourth quarter as we saw sequential recovery in key macro indicators. There was a strong recovery in the manufacturing sector as reflected in the IIP, or the Index for Industrial Production, where key manufacturing industries registered a strong quarter and quarter as well for year-on-year growth.March '21 was the best month, where key customer industries such as auto, pharma, textile registered a robust growth, thereby driving volumes. This trend was also visible in the e-way bills generation for Q4 '21, which increased by 28% year-on-year and 13% quarter-on-quarter basis.With these market conditions, TCI Express delivered a strong quarterly performance in Q4 financial '21. The company reported a total income of INR 280 crores, growth of about 18% on year-on-year and 6.6% on a sequential basis. The sales were driven by increased business from both SME and corporate customers. We also delivered our highest quarterly EBITDA of INR 57 crores and more than twice as compared to last year.Margin improvement was driven by improvement in both volumes and realizations. In addition, the company was able to pass select cost to the customers as we continue to see increase in fuel prices. Our asset model -- light model has allowed us to maintain high capacity utilization and various cost control measures adopted during the year has helped us deliver strong profitability.In light of strong performance in the second half of the year, the Board of Directors also recommended a quarterly dividend of INR 2 per share, taking a full year dividend of INR 4 per share, with a payout of 200% on face value.During the year, we have opened 25 new branch offices as we continue to go deeper into our key geographies. The SME base is growing fast, and we remain committed to tap the growing business from these customers. We also incurred a CapEx of INR 55 crores in '21, primarily towards construction of our 2 sorting centers.The Pune sorting center is complete, and we are waiting for the regulatory approvals, whereas Gurgaon sorting center is near completion. We are planning to first automate our Gurgaon center as it is closer to our corporate office and coordination. And we wanted to ensure full integration with the automation at a center under the supervision of the senior management. We will implement all the learnings and best practices while investing in automation at our Pune sorting center.I am proud of our employees, they have shown great resilience and determination to ensure business continuity at all times despite the ongoing pandemic challenges. For the continued support, management has decided to give an annual appraisal to its employees, we believe it's in double digits. We believe in creating an inclusive culture at workplace. And as a recognition, TCI Express has been recognized as Great Place to Work for a second year in row.In last 5 years, we have expanded our service offerings and scale up our business to become the leading B2B express in India. In terms of our operations, we have expanded our reach from 32,000 locations in financial year 2017 to 40,000 locations. Branch offices increased now 500 in financial year 2017 to 800-plus branches. And the customer count increased from 1.6 lakhs to about approximately 2 lakhs in financial year '21.From a financial performance perspective, the company has a 5-year track record, consistently delivering enhanced margins and profitability. EBITDA is growing at a CAGR of 22.4% and net profit at a CAGR of 28%. We have consistently paid dividends and continues to high -- to attain higher return on capital employed. TCI Express is a debt free company, and we maintain a strong balance sheet and flexible capital structure to fund our future growth.Now looking ahead, the company has a clear vision to expand its service offerings and create a niche for itself in new segments. I'm pleased to announce that we're expanding our service offerings, and we have recently launched 2 new value-added services called Cold Chain Express and C2C Express. Cold Chain Express looking to cater to the growing demand from pharmaceutical and frozen food packaging companies.The second is C2C Express. We are India's first company -- first logistics company to launch customer to customer express service with the end-to-end transportation, our door pickup and door delivery, multi-location pickup and delivery. Our modus operandi remains the same, that is to have asset-light model and enter into new value-added segments. We have also appointed a separate team to manage these new business offerings, independent teams and to ensure robust implementation of business plans in coming months. With clear strategic direction, TCI Express is well positioned to drive, step up growth in the coming years and create wealth for all our stakeholders.Now I would like to hand over the call to Mr. Mukti to discuss the financial performance of the quarter. Thank you. Handing over to you, Mr. Mukti.
Yes. Thank you, Chander sir, and good evening, everyone, and I will discuss key highlights of financial performance of the company. The momentum of sequential recovery in the business continued during the quarter. We saw a slight slowdown in February month. However, the demand saw a strong recovery back in the month of March 2021. And in Q4 FY '21, our revenue from operations stood at INR 280 crore and compared to INR 260 crore in previous quarter and INR 238 crore in the same period of last year. The company posted a quarter-on-quarter growth of 6.5% and a strong Y-o-Y growth of 18%. And we are now at around pre-COVID level.In absolute term, EBITDA was INR 57 crore, and we were able to deliver strong margin of 20% in Q4 compared to 18% in previous quarter and 12% in same period of last year. Improved EBITDA margins were due to increase in revenue, driven by both SME and corporate customers.And second is higher operational efficiency due to cost control measure implemented by company in recent past. And also due to various digitation initiatives produced in processes and business, we also continue to maintain high capacity utilization among our fleets, which has further supported the margin level. And net profit of the company stood at INR 43 crore with a margin of 15% in this quarter.On a full year basis, TCI Express delivered total income of INR 844 crore from operations, down by 18% compared to last year. However, EBITDA was up by 13% at INR 142 crore, with a margin of 17%. Our company delivered a robust growth in profit after tax of 13% to -- first time crossed INR 100 crore. During the year, we continued our focus on enhancing margins and improving profitability through higher capacity utilization, implementing cost control measures, penetrating deep into the cities and tapping into growing SME customers and efficient working capital management.We continue to generate strong cash flow. And for FY 2021, cash from operations stood at INR 119 crore, which increased almost by 47% on Y-on-Y basis. Overall, it is important to note that our business environment during the year, particularly first half remains challenging. With the economic slowdown, weaker industrial and manufacturing activity across sectors due to the pandemic, despite these challenges, TCI Express has consistently delivered sequential improvement from Q1 FY onward and closed the year on a strong note.As we move in FY 2020, we are optimistic about the growth prospectus of our company with new service offering, as explained by Mr. Chander, and we will remain prudent and maintain financial discipline by focusing on efficient working capital management, a strong cash flow conversion cycle and robust collection from our customers.Thank you very much, and we can now open the floor for question and answer. Over to you, yes. Thank you.
[Operator Instructions] We have the first question from the line of Baidik Sarkar from Unifi Capital.
And congratulations again on the great set of numbers, and I hope your team is keeping well. This seems like consolidation at its core. A couple of questions. Just wanted to get a sense on the supply side. The anecdote, you're seeing that all logistics networks have been kept busy in the last couple of quarters from roadways to air cargo traffic. What's your sense of what exactly is driving this trend? And how much of these volumes do you reckon are being driven by organic traction at the client sense vis-à-vis the smaller and the unorganized players seeding market share?
Baidik, so I think the -- it's been a very interesting scenario that has emerged last year. We saw the air cargo and the rail cargoes really being utilized in a large way because, of course, there was like shortage of truck drivers and all of the truck -- the road blocks and everything. There was -- the highways were not operational, but the airlines were operational, the trains were operational. So it was just a blip. I don't think it was something which changed the dynamics of the Indian logistics industry.So the trend still remains the same, robust as usual, that the roadways is going to be the way of -- the preferred way of transportation in India because ultimately the cost of roadways justifies our low-cost economy. In terms of volume as well, if you talk about our volumes, I think we had a negative growth of about minus 21%. So that is something which came along because of the top line negative.Now the other -- your third part was the supplier from the truck sets, as usual, there wasn't so much of an issue there because we run on ourselves, our operations run on the vendor management system, as you are aware. So that -- and we don't really hire from the market. So that's one of the reasons why we were also able to keep our costs down.
Sure, sure. So as you move on to the next fiscal, Chander, are these margins at 19% defendable? I mean, do we have additional levers in terms of moving to higher axle loads, perhaps pricing? Any thoughts on that? Margins going forward?
So we have to really balance out the axle load with the demand. So if you increase the axle load and the output has not really caught up to the levels of a regular economy, then there will be a serious mismatch. So we don't want to be in that situation. So we plan it as we go along. We do it bit by bit. We don't change the entire fleet to the high cube volume containers. So I think in -- it's a wait and watch situation. We progress and we move along as the economy grows. And this is the biggest benefit of being asset light, as you're also aware.
Got it. So are -- the key takeaway here is that as you invest, margins, I mean, there is a probability that margins might come off in a subtle manner. I mean, should I take -- should I keep better the takeaway?
No. So margins, I don't think any reason for that to go down. Our quest is always to increase it, right? So -- and we've been doing that. So I do not foresee any margins falling. Unless there's like a war or something, I don't know, with China or Pakistan or whatever. Otherwise, we've been battling all the ups and downs, typhoons, cyclones, virus, bandhs, like everything that's possible on this planet happens in India. So -- and we are -- we kind of ride that tide quite efficiently like other companies. So we will be able to maintain and, I think, hopefully, 100% improve also.
And lastly on, has the current phase of lockdown impacted business a lot? Or is it business as usual, especially the last 3 weeks of May? Any thoughts on how April and May have progressed for you guys?
So it's a little difficult to say right now. It's very early. It's still the 17th or 19th, right? So in logistics, everything really picks up after the 21st. So we still have to wait and watch. I don't see it to be a great month, but of course, it's going to be better than last year because last year, there was zero business. So in terms of that, we will be in a better position. And profitability also will be in a better position.
And April, you recon was a regular month.
Oh, yes.
We have the next question from the line of Ravi Naredi from Naredi Investments.
Well, really, Chander, you are doing wonderful to the company as I am old shareholder of the company and seeing your working since last few years and how you wonderful doing the working for the company, and I'm fortunate, I'm shareholder of your company, that is my pride. Now our margin attainment is complete, what do you think, 2 years back, what is new plan or any hike in margin are in your mind?And secondly, in next 5 years, where you see the company in CapEx terms or in business terms? That is my question.
Thank you, Raviji. Thank you for your question. Nice to talk to you again. The -- in terms of CapEx, we will be investing another INR 400 crores, INR 500 crores once this tranche finishes. And we will be at least a INR 2,000 crore company in the next 4 years for sure, which means that our profit will be almost going up 4x. So if our business doubles, then our OpEx will grow further without question now. And business doubling is very easy in India. But to get that right business is what we are focusing on. That is why we have launched these new products also. In fact, as we go along the year, we'll be launching 2 more new products or few more new products, which I will talk about in H2.So I think these new products that we are doing are highly profitable. They have EBITDA of 20%, nothing less than that. And the way we are going to operate it, nobody else in India is doing that. So it will make its own charm, everybody, then you'll see 20 other new startups coming up and wanting to do the same thing. So I think it will be a good progression as we go along.
Wonderful. And sir, this CapEx of INR 400 crore to INR 500 crore in which segment?
So we will be needing -- we are doing these 2, 3 sorting centers now. So we will also need to do in another 4, 5 -- 3, 4 large ones in -- across India. So there, we will be also doing automation in that. So for that, we will be needing about INR 300 crores. And vaguely, I'm giving you an idea. Exactly, we'll come to when we finish Pune and Gurgaon is when we'll be able to give the right number. I think we have already purchased land in Chennai. And Calcutta also is also being finalized. So all these things, when you look at will -- besides that, that the other additional INR 100 crore will probably go in like in IT, in fact development and possibly in advertising and all of that. So we need to start doing all the things that we have not been doing.
Okay. Okay. Really, all the best, sir. And I am fortunate I'm shareholder of your company, sir.
Thank you. We are fortunate also you are with us.
[Operator Instructions] We have the next question from the line of Kaushal Shah from Dhanki Securities.
Congratulations on the great performance. Sir, I had 2 questions. One was if you can share the fourth quarter as it is the full year volumes with us?
Yes. Mukti?
Yes. So for the quarter, we had a volume of 230,000 tonnes. And for the whole year, we have 7 lakh tonnes volume.
Okay. And I think If I'm not mistaken, in the last question, Chander just mentioned that there was a 20% drop. Is it in the volumes?
Yes. Correct, correct.
Okay. So the 7 lakh tonnes is for the full year?
Full year, yes.
Sure. And Mukti sir, you also explained that there was some price increase. And even as we speak, virtually every second day or third day, we are seeing some increase in fuel costs. So what is the price increase that we have taken? And do we plan to maybe take one more increase after?
Yes. Chander sir, you would like to answer on that?
No. Go ahead, Mukti.
Yes, please. So actually, you rightly said that nowadays is a daily phenomenon to increase the prices on diesel. And we've seen in a whole quarter, there is daily increases on that. And we're being a company is fortunate and converted taking it as an opportunity and converting it to as a positive arbitrage for us as we have passed it on to our SME customers fully. And also my -- this customer, which is on credit or big customer, almost 80% we have passed on to them. And on other also, we had taken a price hike from the old kind of customer over and above that, yes.And if you see my -- our operating margin has been improved from -- even from a quarter-on-quarter basis. And if you compare with the last year, that last year we achieved around 29% operating margin, which has increased to 33.5%, which is highest one now.
Right. Exactly. And the last question for Chander sir. Sir, some thoughts on the SME side of the business also. I believe, in your case, more than 50% is SME. Yes. So any thoughts on how that particular segment is kind of tackling the second wave and...
SMEs are rocking. There's no problem at all. In fact, if you see now also when everything opens up, the first guys that is going to -- they're going to zoom up the economy are these SMEs in a large way. So if you see even the big automobile consumption has come down, FMCG has come down. In general, the industrial or the macro elements of the economy, they're coming down. Travel tourism is dead. So it's only the SME which is going to bounce back in a big way. They are flushed with cash. They are flushed with inventory. They want to just go out there and sell.Now a lot of the SMEs have also opened in North India. So that has made a big difference. So we are seeing that there is no drop in number as such in a very large way as we had expected. So SMEs now going forward in June, they'll be the litmus for super growth and profitability. So I have no qualms on challenges in their performance. In fact, our new branches also that we have planned, about approximately 100 this year, will be all centered around them only.
Okay. And if I can just squeeze one last question. So for the current year, apart from SME, any other segments which look promising from a business perspective and where the incremental volume growth can come for us?
I always like to have a very balanced approach in the time of clientele group that we cater to. But I am seeing an uptake a little bit in the pharmaceuticals. It's fine. I mean if people are consuming medicines, if that segment goes up periodically by a percentage or 2, there's no problem at all. So maybe in pharma, yes, I can say that this quarter, we'll see a little bit more action happening. But later when the sickness and the diseases, when they drive down, vaccination sets in, then maybe pharma will balance out. So that is something which is temporary.
We have the next question from the line of Mukesh Saraf from Spark Capital.
Sir, my question was regarding the margins. So if you look at the EBITDA per tonne, just seem to be dividing the EBITDA by tonnage that you've done. In the fourth quarter, we are at INR 2,360. This last year, which was around INR 1,400-odd. So just trying to understand the INR 1,000 jump in EBITDA per tonne. What were the key drivers for this? So the fill factor, if I just go back to what you had mentioned last year, was around 86%. So at this time also, we are at around 86%. So just trying to understand what are the drivers for that.
Mukti?
Yes. So -- well, so basically, we have improved almost 600 basis points. You rightly said we are almost 600 basis point EBITDA margin in this Q4. And that growth actually comes from 3, 4 things come together like one is our -- yes, obviously, utilization level, which has now touched to highest level of around 87% in this quarter. And second thing, we had taken a benefit of this diesel fuel hike that actually plays as a vital role. And this is also -- we are able to pass on to our customers, and it is a positive arbitrage for us. Like we have managed to pass on to slightly lower to my vendors and taking the full from our customers or there is an original gap of rate what I have pass it on to my vendor and what rate I had taken from the customer.And third thing, it is because cost on the last quarter was constant because -- for the employee cost and other fixed costs. And the fourth thing, yes, revenue has sharply increased. So that has also benefited to us in terms of that. These are the 3, 4 things coupled with -- allow us to enhance these margins.
Okay. So just trying to understand the price hike, but sir you're saying that you have taken a hike over and above the legal increase, right?
Yes. Yes. So that -- actually what happened, we also standardized that mechanism to take at least price hike from each and every customer on annual basis over and above whatever fuel hike is there. That practice has actually now started and is working well in favor of company. So whenever every -- whatever contract has come for the renewal, we ask for a hike for that.So this is actually ongoing process for whole year. It is not here, the -- every contract is expiring in a day one-off, the next year or then we have to take the hike. No, it is all or rollover on the -- over the year. It is spread over the year. So whenever it comes for that, we have taken that hike, yes.
Right. So again, in continuation to this, I mean, historically, there was, in general, a pricing gap between TCI Express and maybe some other premium service providers to do that. Do you see that gap have narrowed down significantly now?
No, no, no. Actually, it has again increased because they have taken a very big hike and -- from customers. They've taken advantage of this bad time. They raised their prices very high. That's why they're in a much profit, I could say. We are not able to -- yes, yes, yes. Right.
Okay. Understood. And secondly on the CapEx bit. The plan was to spend INR 400 crores in 5 years. And I think so far, we have -- in about 4 years, we have done just about INR 200 crores. And so what's the plan going ahead? Are we going to see one big year of CapEx this year, in FY '22? Or the plan has just got deferred to another 3- or 4-year block?
Not really. So whatever we have planned, that was in a time -- on time line. And in this year, we will be spending around INR 100 crore and next year also same. And last year, yes, impacted due to that COVID, everything has delayed actually. So now this will be -- certainly, we will try to spend INR 100 crore. And then next plan, we will be tackled once we will be finished. Like as Mr. Chander has mentioned, we will be tackling the next plan for the next 5 years, after 2 years.
Right. Right. Okay. And just one last thing. For the full year FY '21, what was the fill factors? What was the load factor full year FY '21?
86%.
[Operator Instructions] We have the next question from the line of Depesh from Equirus.
Sir, I just want to understand your new service offerings like Cold Chain and C2C, and I think you also started to Rail Express loyalty, right? So just want to understand like your group company, PTI, is already having with TCI Holdings and subsidiaries and they also had a JV with CONCOR, they also provide similar services. So if you can please highlight how your servicing and pricing are going to be different from the one?
So we are actually an express company. So whatever we do has got an express element to it, which means that our EBITDA will not be less than 20%. So Cold Chain is going to be asset-light. We're not going to be investing in any infrastructure or something. There is already the -- we are doing vaccination transportation. We're doing a whole bunch of other pharma company transportation that we're doing, where EBITDA has been maintained at 20%.Similarly, for rail cargo, we started in a small way last year because some of the clients wanted to, let's try that. Now the difference between my other group company and this is that this company is trying to -- which I don't want to talk about much now. Just to give you an idea, it's going to be the middle part between air and road. That's all I can say now. I'll talk more about it in H2.So that space is totally empty in express. So I'm just giving out my business plan. So anyway, so this is the basic difference. And we don't need any of that higher volume business. We will get a good margin business, which will be long term and profitable.
And sir, the C2C Express that basically means the full truck load from the customer to customer, right? So I just want to understand how the margins can be 20% in that kind of business where you don't have...
Mukti?
Yes. So that actually -- well, that's actually not the full truckload. This is a different kind of business where we can be pick for a customer from 3, 4 locations and then also like multi-location pickup and multi-location delivery. So we will not involve our sorting center and branch network into in that. And we will be directly delivered to customers' doors.
If you heard of a terminology called Milk Run. So we have already started doing that in a big way across India. And that will emerge as the main C2C business.
Understood. Sir, last question. The average generation that is there in the fourth quarter is around INR 1,200 is similar to the last quarter, right? So the price hikes that you're talking about, have you taken in like April, May or like you've taken in the last quarter only?
Yes. We have taken in last quarter only. But sometimes, because you this average, you are taking off that. But sometimes is what sector we have catered for that. So that is -- various things depend on that.
Yes.
We have the next question from the line of Prit from Wealth Financial Advisors.
So, Chander, I want to ask further on the C2C business vertical that you spoke about. So when you say that it will be customer to customer Milk Run kind of an offering, so will we be booked through a different portal? Will there be an app for it? Would it follow this...
The beauty of this business is that we have 900 locations, right, 900 offices, where it gives us an option of 40,000 locations. So the clients can actually demand from 40,000 locations to another -- in between that network wherever they want to send. So our branch offices coordinate with each other already. So last year, we generated about INR 50 crore business in this?
Yes.
Okay. So this was like a trial thing how we will set off and everything and how we will be higher that to be asset-light. So all those things were tried and tested. And we ended up doing INR 50 crore business. So when we do it in a full focused way, then I think the potential is going to be massive.Now what happens is that some of the businesses, some of the customers, they have -- they do not have one full truckload for one location. But they'll have a 0.5 truckload for one location and the other 0.5 truck for the other location, close by or not too far away. So they want to send out their material this way. And our network is kind of like enabling them to do that. And this has turn out to be quite successful and taken on very well by the customers.This is very different from the on-the-spot hiring model because this is not really on-the-spot hiring. This is also through vendors. So in essence, we are developing a whole new ecosystem of this business, which is nonexistent.
Okay. So this is like similar to the regular couriers that are around us, where if we want to book something, we'll go and book a parcel and then they will take it forward?
No, then you can -- then we have a TCI Express Surface already doing that, right? But what TCI Express Surface is doing, their customers are doing is that they're sending it to multiple locations, small numbers. Here, we are looking at large numbers. The difference is that. Customer is saying 0.5 a truck. So we don't need to send it to the sorting centers only.So it is self to own. It creates a self-fulfilling prophecy of on-time and super-fast and efficient. So that's servicing them. But the customer may not be wanting that fast service also, but it happens to happen because it's not going through the sorting center.
Sir, where would this customer be doing that? So right now, you're saying such a service isn't available?
So what happens is that this is happening all across the country.
Right. And how do they face this? So they book it directly? Will the customer do...
No. They'll book it through a branch office. Our branch office is the main thing. They are the igniters, the fire igniter for the customer. They are the ones that the customer can go to. So in express, you need a vast network to really do this. This sort of model will be more visible when it gets to a little bit of scale probably in 1 year, 1.5 years' time. Then automatically, everyone will understand. This is like -- within the new economy, there are so many facets of logistics that has not been covered. People always do the same thing, but they don't look deep, as I always do. Like look deep, see where the money is and then go for that. But in India, people like to just cut, copy, paste. And in that, they never end up making money. So here, we have identified these new businesses, and we will push forward.
Okay. So what kind of turnover do you think you can scale this up based on your trial runoff last year? Let's say, INR 50 crores?
See, I don't want to be too ambitious also because the profitability is very important. So if we cited INR 50 crore last year, even if I do INR 100 crore this year, should be okay. It's not -- I'm not going to dive to INR 500 crore. But yes, in 5 years, this will become a INR 500 crore business very easily. There's no problem.
We have the next question from the line of Kanwalpreet Singh from AMBIT Capital.
So the CapEx that you are putting in the sorting center for automation, this is one of the times, if I understand in the B2B Express in India. So I wanted to know, are you catering to newer types of clients here or different kinds of express cargo compared to your previous model? Because as I understand, the turnaround time will be higher and you'll be able to process much more volume outstanding...
Time will be less so, not higher.
Sorry time will be lesser, my bad, for that. So it will be lesser. So are you catering or creating a new segment for customers in this case? And how is this different from your previous customer base?
Mukti?
Yes. So well -- so we -- this is actually -- we are not changing the preference of that cargo actually. We just want to be automate our existing processes at sorting center. Because right now, supposing my cargo is taking 15-hour as a idle time in loading, unloading and then sorting as a manual process. We want to be cut to that at least 6-hour. And that actually, if you see -- enhance my complete life cycle of particular sorting center and also reduce the truck's turnaround time. So supposing one truck making in like 3 trip in a month. He maybe make like that truck maybe make 3.5 trip in a month. So that way we will be again able to cut my cost further.So to improve my efficiency, we are doing this and also want to be cut the manual efforts also like labor and all. That is actually -- sometime on peak, we face big challenges like festival season and all. Volumes are very high and labor turnaround is high that time and so. So we face the challenges. We want to cut that also, this challenge. And yes, it is a showcase to in this Indian economy. We will be the first one to launch this product -- this automation and kind of cargo we are handling.
Right. Right. Sir, any sense on what's the operational expenses incurred down around, if I'm not wrong, INR 25 crores, INR 30 crores for one sorting center. So what kind of operational expenses or IRRs you are looking at from this kind of a project? When would it break even?
Yes, yes. So we have -- if you see there's no kind of, I think, hardly, hardly any below 1% is our operational cost for these projects, which how we understood. And we will be going to operationalize this automation by Q3 of this year. And yes, that is the thing.
Sir, any idea on the IRR or the...
IRR, we are looking for 6 years.
Okay. Okay. So by sixth year, you think the CapEx would reach its peak utilization level?
Yes, yes, yes. Much like. Even we can be achieved earlier, but we -- like pessimistically, we've taken -- or we prudently we've taken as a 6 year, though we are looking into for almost 4, 4.5 years for that.
Understood. So my second question is...
Mr. Kanwalpreet Singh, please come back in the queue. [Operator Instructions]
Okay. All right. Thank you.
[Operator Instructions] The next question is from the line of [ Rahul Toli from SMI Associates Limited. ]
Sir, one thing I wanted to understand how you arrive at this utilization in the logistics business, If you can give a broad picture on this.
Are you talking about our -- is on truckload?
Yes. Utilization rate that you've given.
Yes, yes, yes. So whatever supposing we hire a truck of 11-tonne truck and we are able to fill it up like 9-tonne, that way, we are making this 87% near to that. So supposing we have a capacity of 60,000 tonnes and we are utilizing like 50,000 out of it. Because we are paying to our vendors as per kilometer. So whatever capacity we have, this is realized with us, and that is our risk or profit for us.
Okay. Sir, can you just provide this utilization rate for FY '19, '20 and the volumes also in tonnage?
So please -- Can you give me a separate e-mail? I will provide on that.
Okay. Sure. And sir, my second question is on your new business. Sir, what kind of business opportunity lies in this Cold Chain and C2C Express business?
It's a very good question you asked. C2C business, if you look at it, if you look at the total FTL market in India, FTL, LTL combined, so there, the element of express is missing. And that is where we want to focus on. FTL and LTL that is marketing in India, I think the market size is, I think, maybe $200 billion or something, is all -- not time-sensitive, is not really taking to the needs of the customer. It's a very haphazard kind of a business. So we will be -- the market size is there. There -- that demand is there. And we will now fulfill it.Now Cold Chain, let me tell you that initially in India, the market size may not be that big. But the way we will do it is that -- our only investment will be manpower because we already have the offices. We already have the locations. We already have the IT network. We already have everything that is required. So the cost to get that business will be very less, to generate revenue will be almost nil. So ultimately, it will be a very highly profitable business because it's going to be asset-light. So once we are able to achieve this, I think in 1 or 2 years, you will see that the benefits are going to be coming in. It will be definitely visible.
Okay. So just one follow-up to this question. Sir, what kind of competition will be there means it will be from big organized players or unorganized player?
Unorganized, all unorganized. India is still -- you know the situation right now is that there is so much of availability -- extra availability of vehicles because there isn't enough business. So that business, eventually, that customer that goes to that -- the truck which is standing will want to move to an organized player. So ultimately, we'll be taking share from the unorganized and converting it into this new business without hampering the margins.
Sir, so have not been seen any consolidation even after the implementation of GST in 2017?
Market is too big, very hard to kind of like see that visually. I'm sure it's happening. There are fallouts in the business. But it is not governed, like where you need a license or something. So truck owners come and go. So we don't really can actually average the market penetration or reduction or anything of that sort.
We have the next question from the line of [ Manish Jain ] from -- an individual investor.
Congratulation on good set of numbers. My question was regarding, first, on the volume. We share volume based on tonnes. Is it possible to share based on tonne kilometers, first? Second question was regarding with the -- all cargo now taking over Gati, do we see any change in the competitive landscape?
Yes. First question, I want to be answered on that. We are not calculating our per kilometer basis, per tonne per kilometer. So we're just giving a volume on that because it's across India is very dynamic because our -- you can take other way of around like. Our travel per cargo is traveling at least 1,000 kilometer plus. So we are not working out per kilometer or per tonne per kilometer, yes.And Chander sir, you can reply on that another question.
The second part is -- I think I'm not seeing -- when you say that a company which does not know this business is taking over a business, then I don't know if I should be worried or I should be happy. So I think time will tell that.
The next question is from the line of Prateek Kumar from Antique Stockbroking.
Firstly sir, on CapEx, so we will be looking at INR 80 crore CapEx picture like trying to do like annual number in prior years also. And what would be your CapEx number for this year?
Go ahead.
This year is -- yes, this year, we have INR 55 crore we incurred on CapEx.
Yes. I mean '22.
Yes. '22 and '23, we will be spend INR 100 crore each, yes, in each year.
And the number of -- the CapEx number of INR 400 crore, which you used to mention, that included automation CapEx. It was like we have talked about INR 50 crore additional CapEx on automation that you have mentioned in the presentation.
Yes. This is included in this, yes. It is a part of INR 400 crore.
Right. And sir, just on the C2C business, I just want to add one query. That -- is it some form of 3PL logistics or like some of the 3PL logistics companies do? Is it similar to that? And also some of the Internet companies like India Mart or Just Dial are also looking for logistics partnerships...
No, no, we don't do any of that. So we are target customers. We have known customers. We are GST-paying customers. So we look at SMEs who are solid. We don't know level of transaction if those online things and all that is risky. If they're not paying GST, if they don't have any of the papers in order, then we will be in trouble. So all that, I cannot afford for the sake of our investors.
We have the next question from the line of Deepak Poddar from Sapphire Capital.
Sir, just wanted to understand this FY '22 what sort of volume tonnage that we are looking at? And is there any haircut or drag that you are looking at in terms of tonnage because of the second wave?
Yes. Chander sir, can I?
No. Go ahead, go ahead.
Yes. So we are -- for the FY 2020, we are looking for around 40% revenue growth and with the kind of 35% volume growth on FY 2021, yes.
The next question is from the line of [ Arjun ], an individual investor.
Congratulations sir on a very good set of numbers. I had 2 questions on customers. You have roughly 2 lakh customers, and you've been able to pass on price increases throughout the year. That sounds like a very substantial number of customers to deal with. How do you -- how are you able to manage all of this? Is it -- is the process electronically driven? Or is it driven by different salespeople managing this individually?
So it is basically -- if you see is basically, nowadays is electronically we are doing, through e-mails and all. And every -- my branch, all branches are connected with the customer directly in a local level. And that connection actually done very well for us. And that's why as Chander sir has mentioned, we are able to connect with the customer directly. And we are able to get more business from the SME customer, and that's why we need this big network for that.
So our CRM application is in-house, in-built and it is mobile and it is -- as well as localized, which is connected to a central server. So I don't -- so we have like all sorts of data, which is possible regarding a customer. And we don't need to buy any fancy CRM software or something like that. So of course, this is CRM could and not now, not today. We -- since 20 years, many -- most companies are doing computerization now, but we've already been doing this for like 20 years.
Understood. But sir, when you propose the price change, right, I think this is a floor type of a business, right, customers tend to take their own time, right?
We don't deal with those kind of customers. So yes, yes, we deal with like corporate, organized set of customers, which they respond -- they understand that the fuel is increasing. You look at a company which will impose the pricing because road network was shut, so the other mode was active. But this year, they will not be able to do that. So they will go back to where they were, where they started 2 years ago. So that sort of thing is there. But in our case, it doesn't happen. It's obvious we are always improving Q-on-Q.
We have the next question from the line of Shreyas Bhukhanwala from Canara Robeco Mutual Fund.
Just 2 questions from my end. One was on the Cold Chain business. So you did mention on C2C, how has that been the contributor of the business. Can you -- is it possible to share what has been the contribution from Cold Chain in this year? And how do you look at that business, say, 3 years down the line? What can probably be kind of contribution then?
So the Cold Chain business is something which we just started with the vaccination movement. And we were doing that not because only -- well, I should say only because we have the offices everywhere, and we have that network of hub and spoke. So the vaccine suppliers and even like the buyers of the vaccine in large quantity, for example, UNICEF and all those NGOs, they had to use our service, and they realized that this sort of service is beneficial. So we have tied up with even government, I think, at taluk level where we are supplying the vaccines.So of course, as this is India, it is very unorganized from the government. Everything is haphazard. When things start becoming streamlined, not just for vaccine, but in general, for -- India will become a market for -- high for vaccinations going to the larger population earlier which was missing. This will be a new opportunity, which I foresee.So medication, which is not available going to the B town, C towns. Medicine is low coming to the big cities only. That will change after this pandemic. And for that, you will need Cold Chain and especially Express Cold Chain, where you will need to get the medicine quickly, deliver and leave. You don't need to store. You don't need to do anything. It will be going for quick consumption, right, and quick departure. So that sort of model will emerge for sure because -- in a big way because that we are all doing that right now.
Sure. Sure, sir. Sure. And secondly, on the margin side. So on the gross margin level, we are now almost at 33%. So with probably -- do we see further scope of improvement there over the next maybe 1 or 2 years with better mix or better utilization?
[Foreign Language] When volume kicks in, then you will see that margins improve much better. So when the economy improves and the top line grows, then volumes -- when the margins will start kicking in then you'll see a robust jump. Next year, we have solid plans -- I mean, not next year, this year, we have solid plans for the financial year.
Sure. Sure. So basically, this kind of margins would be sustainable, the Q4 margins, what we have seen?
Mukti?
Yes. So you can't be compared on quarter-on-quarter on the -- each quarter in the same page. But yes, on next year, again, our target is to always to improve at least 100% -- 100 basis point in each year. Certainly, we will be improved on -- yearly basis, we will be improved 100 basis point. That is actually our target.Like in -- last year, we've taken to improve 100 basis point, but we have improved like 500 basis points. So that is in a different task always because we had taken an opportunity in this pandemic time and improved the margin. So now we again take a big leap. And again, for a yearly basis, our next target is to 20%.
Sure. 20% by '23?
Yes, yes, yes, yes.
We have the next question from the line of Aman Vij from Astute Investment Management.
My first question is on the new players, the unlisted players. So some of them have turned profitable and have grown quite well during the pandemic. So any views on the same? Are you seeing any competition increasing from them?
I'm not sure which unlisted player you're talking about turning profitable.
Sir, Ecom Express, although it's not like-to-like, but then delivery is also close to that. Then there is Spoton, which have grown quite well over the last...
I don't think delivery is profitable by any means. They have thousands of crores of losses, right?
Yes. So delivery is still loss-making, but e-commerce...
No. I'm not saying INR 1 crore, INR 2 crore loss, but like thousands of crores of loss. So they will have to do another like INR 20,000 crore, INR 30,000 crore of business to cover that cost. Anyway -- so yes, I don't see any challenge over there. Spoton has been there since '96 because Spoton was called TNT earlier. Then TNT was sold to Samara Capital. So they have not really -- they have not dented any business. But what they have done is that they've captured the low-end market so -- which is okay, which is not a big concern for me. And to be really profitable in this business, you need to be organized, which these guys are not.I've also known that they do a lot of false claims to their investors in all of that to keep getting the money. Please don't quote me, but I think my -- this is what I've heard. So very hard to talk about companies which are not listed and compare myself, TCI Express, to that. Because we have a very strong foundation. And we also have a very strong sense of organization, and our company is also like -- is in the forefront of that. So very hard for me to say about all these guys.
Sure, sir. My second question is on the margin. So sir, 2, 3 years back when we bought -- when we listed, we had that vision of 100 basis point each year, but we have done way better than what we had expected. And like Mukti sir is also talking about say, 20% is now that sustainable number. What has held up even with volume drop, all those things? And you are also talking about this is like the new base. And you are right, also the volumes are still to come. This year, we are targeting 30%, 40%. Obviously, it's on a lower base. What has led to this kind of 20% margin? Or because anywhere in the world, we have not seen these kind of margins in a logistics company.
Yes. Mukti? Are you there, Mukti?
Yes. Yes, sir. Yes, sir. I'm there. So well, I was on mute actually. So actually, yes. So we have -- if the volume grow, then my utilization level will be certainly improved. Second thing, because volume grow then volume grow with the SME customers also. And what we have also earlier said, my profit with the SME customer is very big and are very high in comparison to other corporate customers. That will be also there. Third thing, whenever volume grow, my cost -- fixed cost is also not -- if you know, it is not a big one. It's very ideally very lean cost we are running this complete show. And fourth thing, we want -- we are also going to add these new products, and they are also in a high-margin product, actually. So this way, this -- and fifth thing is we are now very systematic process to pass on the diesel hike that is which we have achieved in the last year also. Sixth thing, we also the renewal -- take the hike on the renewal, every renewal actually. That was earlier missing in our company. These new things happen in company and that giving fruits to us.
So I think one important point is that our costs are very low.
Yes.
Unlike other companies, we are not "Hi-Fi." So that way, we end up being a very pragmatic on costs. And we don't have to show -- we don't have to do anything. So we are there for the long haul. And to be in the long haul, we need to be wary of the costs.
Yes, sir. Just one clarification. So we have taken price hikes with SME and all those things. So any chance of competition can come in given -- seeing this kind of higher margin in the business. So any view on the same?
Of course, they will love to come in. They are trying to come in, but the problem is that you need to have the operations. So if somebody want to -- motorcycle wants to drive at the car speed, he has to buy the car first. He has to learn how to drive the car. Then only will he be able to race with me, right? So that way -- that capability building will take one generation is what I see for these guys. So I'm okay with that.
So you are not seeing anyone trying to undercut you given you have...
[Foreign Language] unorganized segment because they do all that under inviting for all the manufacturers and all that. [Foreign Language]
Due to the time constraint, that was the last question. I would now like to hand the conference over to the management for closing comments.
I must thank everybody for attending the TCI Express Q4 Con Call. I'm delighted with the results that we have posted. We strive to be the leading and the leader in the express industry in the country just not for now, but for generations to come. Thank you very much.
Yes. Thank you very much to all of you.
Thank you. Participants, on behalf of ICICI Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.