TCI Express Limited (TCIEXP) Earnings Call Transcript & Summary

Good day, ladies and gentlemen. I'm pleased to welcome you, on behalf of TCI Express and SKP Securities to TCI Express Limited's Q2 FY '25 Result Webinar. We have with us Mr. Chander Agarwal, Managing Director; along with his colleagues, Mr. Mukti Lal CFO; Mr. Hemant Srivastava, COO, Surface Express business; and Mr. Ashok Pandey, CEO, Multimodal Express business. This webinar is being recorded for compliance reasons. And during the discussion, there may be certain forward-looking statements, which must be viewed in conjunction with the risk that the company faces. I now hand over the webinar to Mr. Agarwal for his opening remarks, which will be followed by a Q&A session. Thank you, and over to you, Chander.

Good evening and a very happy Diwali to everyone. Welcome to the Q2 and H1 financial '25 Earnings Conference Call of TCI Express Limited. Thank you for taking the time to join us today. We have already circulated our earnings presentation on the website and stock exchanges, and I hope you've had a chance to review it. I will start by providing an overview of the -- during the quarter and the steps we are taking to ensure long-term growth and value for our stakeholders. Following that, I'll hand over the call to our CFO, Mr. Mukti Lal, to walk you through the presentation in more detail. TCI Express showed modest improvement in revenues and maintained its margins sequentially in Q2 financial '25, reflecting the company's efficient operational strategies, innovative service offerings and -- strengthening its position as India's most -- trusted and fastest growing...

Chander, apologies, I need to interrupt you for a second...

Causing supply chain disruptions and -- additionally, lower activity in manufacturing and automotive sectors, coupled with geopolitical -- softened the logistics...

Please just give me a minute. I think there's some technical issue. Bear with us for a minute, we're just fixing it. Thank you. [Technical Difficulty] Apologies for this audio glitch, just bear with us for a moment. As Mr. Chander Agarwal is having some technical issues, so we'll have Mr. Mukti Lal, the CFO, to take over. Mukti, please go ahead.

Yes. So good evening, everyone, and apologies for that. So good evening and very happy Deepavali to everyone. Welcome to the Q2 and H1 FY '25 earnings calls of our company. Thank you for taking time to join us today. We have already cascaded our earnings presentation on the website and stock exchanges, and I hope you have had a chance to review that. I will start by providing an overview of the business trends. So -- and then I will be going through with the presentation. And so TCI Express, in this quarter, showed a modest improvement in revenues and maintained its margin sequentially in Q2, reflecting the company's efficient operational strategies, innovating service offerings, and market adaptability, strengthening its position as India's most trusted and fastest-growing express delivery company. However, year-on-year base, revenue saw a slip dip due to several factors, including like prolonged monsoon rains led to water logging and flooding, causing supply chain disruption and delivery delays. Additionally, lower activity in the manufacturing and automotive sectors, coupled with geopolitical tensions softens logistics demand. So amidst these challenges, TCI Express has advanced on multiple fronts. Our Rail Express service is gaining traction with the customers, contributing positively to margins and is essential as we aim for the multimodal services to make up like 20% to 22% of revenue over the next 2 to 3 years. Automation remains -- Automation remains a key focus, exemplified by our newly automated Pune sorting center, which has improved operational efficiency and reduced turnaround time by almost 40%. We are extending automation to our -- next automation to be like Ahmedabad and Kolkata centers to better handle increasing volumes. This year, we introduced like money bank guarantee, reflecting our confidence in timely delivery across surface, rail, and air modes. This offering has been well received by customers and strengthens our position in express logistics. We are honored to receive like recognition, including the iconic brand of India 2024 and the Rajasthan Business Award for Best in logistics. And -- we are humbled to be named Mr. Chander as an ET Business Leader for 2024. We are pleased to say that we announced our first interim dividend for this year as INR 3 per share, which is 150% on face value. This reflects our commitment to creating value for our shareholders and so is our focus on steady growth and profitability. On our CSR front, we formed TCI Express Foundation and opened our first Jaipur Food and Rehabilitation Center in Lucknow, offering free artificial limbs and other to like almost around 100 individuals so far in -- within a 2-month time. And Shri D.P. -- sorry, P.D. Agarwal Blood Donation Drive 2024, also saw 1,334 participants nationwide. Now as we move into the second half of FY '25, we are optimistic about the future. We anticipate a recovery in demand with the upcoming festive seasons. TCI Express remains steadfast in its commitment into leveraging its strength, seizing growth opportunities, and maintaining a customer-centric approach. So now like we can we start with the -- Navin ji, we can start with the presentation, please. So I will give you like brief for that.

Sure, just give me a minute. Mukti, is my screen visible?

Yes, it is visible, please. So this is our synopsis like we completed -- yes. So good evening, everyone, again. So this is our synopsis of our company, like we demerged this division from the TCI and almost 8 years completed. And our business offerings like 97% is B2B and 3% of B2C. And we are like serving 60,000 location -- 60,000-plus locations. Next, please. So I'm just going through with the things. Like this is our USP where we are continuously following asset-light business model, even in multimodal express also. We don't have any franchisees. We're carrying like high-value cargo and low volume. So this is like high-margin business. And -- we continuously need a low working capital requirement in this business, and it is still keeping like within less than 20 days in net working capital requirement. And still, I think you have like gone through with this presentation. So we have the lowest cost structure in this industry. We're expanding our multimodal services. And we also like -- IT is very important for our kind of business, and that's why we also focus on various aspects, including API, dealing with the customer and getting the automated data and then also like track and trace facility also. And so various things we are doing and completely trucks having like containerized movement and, yes, please -- and our USP to continuously focus on this automation. So yes, next, please. So this is the second automation we completed in Pune, and this is also seamlessly we integrated the system and now their turnaround time has also been reduced in the range of like 30% to 40%. Service offerings are like the same, what we have discussed in last quarter, please. Yes. Next, please. So this is Rail Express. So I just would like to update here. Rail is really growing very fast. And now we have the 5,000-plus customer base in this segment, and we increase -- we almost our route -- we present on around more than 150 routes, and it is increasing day by day. And it's a good thing like repetitive customers is giving the business to us and it is a good profitable and it is like midway of Surface Express and Air Express and giving the same kind of turnaround time, which we're giving in air services. So customers are very happy, and we are expanding very well. This is C2C. So it is also like growing on a steady path, but on a slower growth and not like growing -- like rail is growing. Yes, please, we can skip. Money Bank guarantee, just like giving updates. So it is also -- we're giving this service to all modes of the transportation like surface, rail and air. And this is also customers -- it is basically made for like new customers or -- so that's why it's attracting the customer and giving like then we can be -- they can rely upon our services and then can give the repeat order for that. So it is also getting very good traction from the customer. Next, please. These are the like Q2 highlights. So we have achieved an income of around INR 314 crores income and EBITDA is around INR 40 crores. The PAT level has improved sequentially, so from like INR 23 crores to INR 26 crores, and we declared a dividend of INR 3 in this quarter. And in this quarter, our capacity utilization of the overall fleet is 83%. And in last quarter, it was 82%. So average out it is around 82.5%, which is still below like expected numbers where we want to improve at least to achieve level 85%. So once the volume will be like start to normalize, then we will achieve 84% to 85% again. And although like industry verticals, so still automobile and lifestyle product and some engineering companies is still facing the challenges on the demand side. And overall, consumer demand is still weak, though we have seen some uplift in the demand in a quarter-on-quarter basis. But on year-on-year basis, we have still like flattish numbers and industry is also in the same way, yes. Next, please. Yes. So there is enough -- this is like income we show in the quarter-wise where we -- in Q2 of last year, we achieved around INR 322 crores and now we achieved INR 314 crores. So it is around negative by 2%. And that's why it's also impacted margin because -- but good thing is that our operating margin is intact and is -- or you can say like hit by 150 to 200 basis points. And EBITDA margin has also like down from like 16% to 13% due to like other costs, salary and some admin cost has increased. Yes, please. Accordingly, once the volumes is coming back, then we have to be -- as earlier in the past, we did like whenever we achieve a growth, then we have to be 2x of that, we are earning on a profit margin. So same way, if you see from quarter 1 to quarter 2 story like where our revenue has grown 6% and margin has -- profit has grown almost 14%. These are the H1 highlights. So total income is INR 610 crores and EBITDA is -- we achieved INR 76 crores and PAT is near INR 50 crores. In this -- next, please. Yes, next, please. So this is the dividend side. So we -- like internal policy, we had to be like given almost in the range of 20% to 25% as a dividend payout ratio. So we will be in the same path. In this time, we have given again INR 3. And I think overall, by year-end, we will maintain the ratio in the range of 20% to 25%. Return on capital employed, so we slightly -- like we work out on only like core assets, like noncore assets means basically current investment and like office land, we bought that, we have removed from that. And if you see -- so this is like operational ROCE, if you see it is like in this H1 is 12.5%. And for the whole year, we will achieve around 30% plus, which we earlier achieved. So all numbers are excluding core assets. And same -- return on equity is the same, like again, it's [indiscernible] the number. And in this H1, it is almost 7.5%. And last year, it was around 11%. Cash conversion ratio is again robust. So there is no challenge on that side. Usually, in H1 is low and then full year is always like in the range of 70% plus. Next, please. Yes, it's the same as I mentioned. So on capital expenditure side, we spent almost around INR 11 crores in this H1 because fortunately, unfortunately, we were not able to crack any land deal, which we anticipated at either on Bangalore or Chennai or Mumbai, we were not able to get that. So that's why CapEx is on lower side. And we also yet not started like construction at Kolkata and Ahmedabad that we will be -- soon, we will start for that. Next, please. This is our leverage profile. There we -- like receivable days, as you see, maintained at 55 days and payable days in the range of like 33. And accordingly, net working cycle is 22 days. So it's a very robust profile we have, and we are keeping continuously as a debt-free company status. Yes. This is a balance sheet. So balance sheet, you compare with like H1 of last year to this H1. So whatever added is a CapEx. And so ultimately, it's added around INR 40 crores. So basically, it's conversion from work in progress to capitalization part and less is, I think, is the normal one. Same way, current assets are also like increased. So basically, it is increased because current investment surplus fund has been increased. So basically, INR 45 crore increase is contributed by that only. And on equity side, there is all liabilities and current liabilities are the same. So whatever we earned as a profit is added to that. Nothing like significant on that. So this is comparison with the peer in spite of like our margin has taken a hit like in H1 in spite of that in Q1, even that was like, I think, lowest in margin level. So in spite of that, we are still ahead with the other industry players in the margin profile. Yes, that we can skip, there is nothing new on that, we discussed earlier. So strategic outlook will continue to like we will be more focused on to grow this multimodal services. So we'll keep that. On CapEx side, we plan for -- like I mentioned earlier, also like FY '23 onwards, we have a CapEx plan of INR 500 crores. And till time and like almost on a 2.5 year, we spent almost near to INR 200 crores or INR 180 crores. And remaining INR 300-plus crores, I think we will be spending in the next 2.5 years. And majorly will again go to sorting center automation and IT improvement and all. So that would be the right path ahead. Yes. We can skip that. That can be -- so again, growth drivers for the logistics industry is also like heavily depending on the manufacturing in India and key changes like focus on sustainability is very important. That is growing in India because logistics industry is giving highest carbon emissions. So we have to cope with that, and we're taking so many steps to be -- how we can be like carbon neutralized given in our sustainability report. And second, we will keep continuing focus on multimodal services. Infrastructure development is very important, how it will be placed because cities are like choking and we are really having like weather conditions is also like giving some threat to this business time to time. Please next. This is our leadership team. So this is -- like we put this slide for your like consumption here, how this overall logistics industry has played in like H1. So you see transportation cost is persistent, inflation has really led to higher transportation costs and because 2 component is very important here. One is toll tax and another one is labor cost because as the volumes are muted, so basically, we are bound to increase the labor cost and toll and this is all not mitigated by like volumes. And that's why it's impacted profit margin to every industry player. And another thing you have seen continuously is a decline in manufacturing output. This is -- PMI is like slightly down. And this is also seen like consumption of fuel was not happened. It is like flattish in this H1 over the last year's same H1. And weather condition is also like setback to overall logistic industry, heavy monsoon and the things. [Technical Difficulty]

Mukti, we lost you there for the last...

Am I audible?

Yes, you are.

So these are, again, a few numbers, which as a broader point for this industry. So vehicle sales is also like down or having like very low growth. And so that's why the cost concern and used vehicle demand has slightly risen. And diesel consumption, as I mentioned, is hardly 1% growth over last year same period. And so I think demand would be in like guidance factor. So demand would be like in the similar way, not like -- not be much one and I think moderate one, may not grow in a mid-single-digit kind of growth we may be achieving like in second quarter -- in second half. Next, please. These are our ESG initiatives. Yes, please. Yes, please. These are the award and recognition, I just mentioned on that. Yes. Next, please. We like ICRA and CRISIL has reaffirmed our ratings as again, AA- by CRISIL for the long term and ICRA is getting like A1+, which is the highest one for the short term. And we also keep like certified Great Place to Work for '24-'25.

Mukti?

Yes, Navin. So am I audible now?

Yes. Now, you are. Can we open the floor for the Q&A session?

Yes, please. It's already too late, yes, due to some these technical glitches there.

Yes. As we open the floor up for the Q&A session, now we take the first question from Jainam Shah.

Yes, first on the volume numbers. If you can provide the volume for this particular quarter?

So volume is exactly 250,000 tonnes for this quarter and 485,000 tonnes for the H1 of -- this H1 in comparison to last year, same H1 is getting 492,000 tonnes and in quarter 2 was around 252,000 tonnes.

Got it. Got it, sir. Sir, on the branch addition, I guess, we have targeted for around 50 branch additions. I guess in 1Q, we have added 3. And in 2Q, we added 2. So what could be the guidance for the branch additions? And are we going intentionally slow in terms of branch addition given that volume is not picking up?

Yes. This is true, actually. So basically, we just muted that expansion of branches for the time being because as the volume is not picking up, so we wait and watch, supposing to -- once we start to like getting the volumes and then we will again expand on a very fast mode.

Okay. Sir, in the first quarter, there has been an impact because of the Air Express business as well where our margins have been squeezed during the 1Q. Has there been any impact in 2Q or everything was settled in 2Q where we have passed on cost to the customers?

Yes. So basically, if you see like -- this air business cost is also like impacted in Q2 as well because where -- because that cost is still is on a high side due to the consolidation of airlines and second part privatization of this airport. And third, we're also expanding direct network, as I mentioned in the last call. So that is going on and because the cost has increased, but we were not able to passing on to customer because in this high cost scenario, customer is also not ready to accept that. So that is still continuing this quarter 2 as well for that. So overall, if you see that impacted in 100 basis points in overall cost, remaining cost impacted by like increase in toll tax and labor cost, specifically. And third component to be like contributed in this increased cost is like lower utilization of fleet, which is -- now in this quarter was around 83%. That's why you see we're able to reduce the cost by 70 to 80 basis points sequentially.

Got it, sir, got it. Sir, on the price increase side. So there have been a few competitors, which has increased the pricing from the July and there have been a few announcements that they'll be increasing from the January onwards, which is also in the range of 7%, 8% on an average. So have we done anything on the price increase? Or we are just following the model that we generally follow of around 1% or 2% increase on a yearly basis?

I really doubt on that, what competitors and other industry players saying they will be like giving one notice and they will be able to increase the prices, I have big doubt on that because in this industry, usually it's not happening in that way. Rather, you have to go like sundry -- SME customer is possible to have increase, but big customers, yes, it is not possible to -- the cost -- whatever cost increase that can be passing on specifically on diesel side. But in normal one, annual hikes is not possible to be giving by one notice. So wait and watch situation. If they are able to, then it is good for the overall industry because everyone is facing continuously cost pressure. So I hope -- but we have not yet taken any price hikes, and we will try to be -- start that effort from the -- in last Q4 actually for that. But still, we are not really much optimistic about the price hikes in this, high inflation [indiscernible] and all and muted volumes are there. So really, I do not expect to be any high increase on that.

Got it, sir. And sir, just last one question from my side. Our volume has been, as you said, 2.92 lakhs tonnes versus 2.85 lakhs tonnes. So it has been kind of a degrowth in the 1H. And overall, we have been targeting earlier 15% plus than 10% to 12% last quarter and now in the -- you can say a mid of single-digit kind of a growth that we are expecting for FY '25. This question is for the -- like you can say from next 2 to 3 years perspective, how we are seeing the situation. Our GDP growth of the India has been in the 6%, 7% range. And if we see that, that particular growth is eventually coming down, then how we would be coping up with the competition? And if we are targeting to grow at 7%, 8%, what kind of market share gain we can expect? And what kind of thing that we are eventually doing to have eventually a growth momentum for next 2, 3 years? Because overall, last 2, 3 years have been quite stable numbers and there has not been any increase in the top line. And of course, we have been doing a significantly good bottom line as compared to the competitors, but eventually, that is also getting impacted. So overall, your view for next 2, 3 years' time?

Yes. So as I said, like we grown in '22, '23, we grown like 15%, 16%. So we are not -- this slightly, you can say like not slow down, but it is like muted growth has been impacted -- start to impact in the last year only. And everyone has the -- overall industry has that impact. And this year is also like -- we are also surprising with that because sometimes customer is giving confidence and they're giving like growth numbers, we will give so much volumes to us and ultimately, we were not able to -- they were not able to give what they have committed to us or they even -- because they also have the same kind of problem where they're trying to regrow, but they have not grown in spite of like September supposed to be a very good month for everyone, but that has not gone into that way. You also seeing the like diesel consumption number and all. So this is like I think it's a temporary thing. Again, but this year is a full of challenges in 2 ways. One is muted growth and second part, like cost pressure also. But I think hopefully, in next year onwards, again, we will keep the same guidance for the growth in the range of 13% to 15% as a volume growth and 1% to 2% growth in value. But -- and what is like giving the confidence to us is basically like pipeline we're creating. We're discussing so many customers and customers is giving confidence and they're coming to us and we're expanding this -- we already have opened up the branches like in the last 4, 5 years, almost 200-plus kind of branches. So all -- we are ready with that. Operational efficiency is also fantastic. So once I think volume will start to pick up, then we will be the first one to get that benefit here. But second part, also, like you said, this is industry GDP is growing like 7%. So it's unproportionately growing through service sector and other manufacturing, which is really we are not in that segment, basically, if you see what industries we are serving. This is really all impacted continuously. Last year, we've seen lifestyle companies have not did well. This year is also they are facing lots of challenges. So same way, I think consumer demand is important rather like growth in overall GDP because that also have a different component of that. So I think we will be -- keep continuing like we've grown in a 17% to -- up to like 20%, we grow on a CAGR of almost once before that corona time grown almost 14%. And then in last FY '22, '23, again grown 15%. And so that's way once this will be normalized, we will be growing. Overall industry is facing this pain for that growth numbers. But yes, you -- as mentioned, good thing is that we have not compromised on the margin and margin level is also impacted due to like muted growth only. And due to not like operational things, it is operational cost is maintained, but other costs like salary and other admin cost is slightly bound to increase, and we don't want to be -- give like -- we want to give the increments and everything to our like sales force and everyone.

We'll take the next question from Lokesh Manik.

I wish you a very happy Diwali...

Lokesh, your voice is cracking.

Hello? Yes, is it better now?

Yes, it is. Please go ahead.

Yes, yes...

No, Lokesh, it's not helping.

Hello?

Yes.

Yes. Is it proper now?

Yes, it's better.

Mukti, my question was that a few quarters back, it was mentioned that we had hired consultants for business strategy and expansion. So just a clarification on that as to what is the expense that has come in on that side in the other expense for this quarter 1? And the second is on what is the duration of their consultancy contract, if you can just get some details on that?

Yes, very good. So basically, that consultant is hired to how like expanding the branch network and all and they already did work on that. And then they also given their reports where we have to be like more focus on that. So that, we will be in time to come. But that is not like big cost. We have not given like -- sometime we're giving to other industry players giving to linkage with like what kind of benefit we will take. So -- but we have not given on that way, and it's a very -- not like significant amount.

The duration of the contract, sir, when does it get over?

Yes, that is get over, yes.

Okay. That is over?

Yes.

We take the next question from Alok Deora.

Am I audible?

Yes, you are. Please go ahead.

So I just wanted to understand, you have also given some of details on the volume side. This mid- single-digit growth you are talking about is for second half, right?

Yes.

Okay. Okay. Any reason why the volumes are not coming? I mean, we are seeing some of the other players still clocking a little better volumes. And also, they are talking about price increase, which may or may not materialize entirely. But if we are also keeping the prices stagnant and focusing on ensuring that the volume growth is there, but still volume growth is kind of missing. So just if you could -- in a couple of minutes, if you can just highlight that is it a structural problem where competition is now increasing and it could sustain ahead where volume growth is -- will remain muted ahead? Just some color on that, please.

Yes. So as I mentioned, so basically, there is no structural issues on an overall basis. This industry is growing because there's a lots of opportunity for everyone. And as you -- so basically, I don't think everyone is facing the lots of challenge on the volume side like whether it's a full truckload or LTL or Express or I think -- except quick commerce, everyone has taken the bite on that. So we are not seeing anyone is increasing market share and we are losing the market share to someone else. That is not the case. And we will be still whenever -- other side of if you see price hikes, everybody is saying, but it is not reflecting, I think, in their numbers. So they say -- they are saying because somehow supposing in one customer with 3 players are working and someone is asking, then other volume has to be -- sometimes customer is not willing to pay. So we have not seen in ground at all anybody has increased the prices for any like logistic players. We have not seen at all in the ground. We don't know why everyone is saying, but it is a good thing, supposing they're able to do that, it is like forced to -- it is easy for us to be forced to customer to increase our prices as well. So once we are in a situation of wait and watch because really, we are not seeing that on ground. Once we will be reflecting this in their numbers and obviously, in customer prices, we will be also able to find, but we yet not find. So we will also do the same thing. In the past, we also did -- no one has even able to do that, but we were able to do it because we're doing on a realistic basis, whatever possible we will do. So whenever these opportunities come and they will be able to do that, it is reflecting on customer side as well, then we will obviously push hard for that. Otherwise, no reason for that.

Sir, just one more question. So we -- around 2 years back, we had this thing of Gurgaon center getting automated, then eventually Pune will get automated and more operational efficiency and more improvement in turnaround time and stuff and which would see margin improvement. So at that point of time, you used to talk about 16% margin moving to 18%. So I understand this -- the last 2 quarters were pretty difficult in terms of maintaining your base margin itself. But how do we see those impacts -- those impact actually coming to the profits? Because those margins are actually not improving in line with what benefits were expected out of those centers getting operational.

Yes, your concern is right, and we are also concerned about that. But if you see good thing is there, supposing we will not do the automation, then I think that margin is also not intact. So if you compare it with the others, what their margin has been reduced and what our margin is intact because last year, as you've seen. So efficiency is a completely different part. And there, we also get the benefit of like I said, 25 basis to 30 basis points overall benefit we get from there. And that would be like continue as a story because this is ease out 3, 4 things like labor intensity is down and efficiency is increasing and obviously, that benefit of reduction in waiting time of truck and all that happened and that we will keep continuing on that same strategy in future as well. But other side, if you see, like these all things put together, come together, like muted volumes is nobody has anticipated that much actually. So that is one part. Second part, like high increase of toll is like anticipated because government is now allowing to be increased to 8% to 10% is becoming significant amount for the overall journey cost. Third part, like because as a volume -- labor cost is also government want to be standardized there and want to increase their wages and all. So government focusing very high to be improved that side. So that is also like coming in one way. And because inflation is -- obviously, government's purpose was to keep demand slightly low to keep inflation and all and that's why they also want to reduce the consumption and that happened in very -- that side. So that has really impacted volumes. So put together, if you see -- and now we -- even anticipation of this consolidation of airline, nobody has thought 3, 4 airline will be like consolidated in one umbrella and they will be increased the prices. So that put together has created like this scenario. But still, you will appreciated that 13% margin or 14% EBITDA margin to achieving in an express business is really is a good effort from our team. And obviously, we will be once bounce back with the volumes, we will be still have the same energy and same thought process and strategy to get first to achieve like in the range of 15% to 16% and then again increase on a higher side.

We take the next question from Krupashankar NJ.

Sir, my first question is on the load factors. What you have seen clearly is that over the last 2 years -- the 85% load factor, while volumes have grown from those levels of FY '23. And we have -- our load factors truck level has declined. So are we deploying more trucks or expanding our services, due to which, despite the tonnage growth, the utilization levels are lower. Is my understanding correct? Or is there probably some other reason for these underutilization?

Yes. So that is a very good question. So what happened over the period, we converted all the truck on a higher axle load. So that was in FY '20. I think there's the -- most of the chunk we completed on FY '23 only, and that was after that volumes have not picked up. So that's why this vacancy is there, slight 1% or 1.5% vacancies in comparison to -- Yes, please. Yes. So basically, that's why the only reason because we added the -- like converted these from the like 9-tonne truck to 11-tonne and 14-tonne truck to 18 tonnes. So that truck, we can't be like remove overnight because we're waiting for the volume. So once volume will be come, then that vacancy will be like reduced over the time. Further also slightly change happened on the business pattern, like I also, I think, mentioned in last call where South side and Eastern side is really not doing well. They slightly have more problem in comparison to Western part of India and Northern India. So you are aware this half India is producing and half India is consuming. So that size is also really creating some vacancy for us, and it is -- if you put into number, then you may be like, say, 0.5% to 1% utilization has dropped due to that also.

Got it. So Mukti Ji, then would it be our decision to expand in newer regions, can it be probably shared or probably taken up at a later phase when growth is coming back? Because at this point, with growth not coming in and we are committing capacities expansion towards new capacities, it's putting pressure on our return metrics. So just your thoughts on what is the key reason for continuing this expansion?

So basically, there's a 2 type of expansion is there, one of our branch network expansion and other 2 like capacity expansion of trucks basically. So both are -- if you've seen -- in our case, as to addition of branch, it is like a matter of -- we first analyzing and then opening up the branches because we -- these branches, we are making breakeven point within a 2 months of time. And so that's where whenever like volumes back, so we will again start to be on a very fast mode in -- we're still opening up the branches, but in a slower pace, not like in a high pace. So that is still going on. But once like volumes will be back, so we'll increase the pace for this branch network. Second part, like whenever -- because in our case, supplier side, there is an overflow for that. So we never felt any challenge to be getting onboard our any supplier for the truck. So whenever we have the volume, we can be like onboard them. Otherwise, like I'll mention like 90% volumes we're carrying through these vendor guys, fixed this kind of like engaged trucks and 10% volume we're carrying through the sport hiring. So wherever we have the spurt in demand, so we can hire more vehicles and wherever supposing there is a low demand, we can be like not hiring the sport hiring. So that's why I think this is not the challenge at all on overall basis, whenever we want to be -- and also, it is not like obstacle to be our growth at all.

So what I meant to Mukti Ji was on the hub expansion. So you are intending to take up hub expansion at new cities, right? So that is where probably most of our capital is going to -- or CapEx is going to be tied up over the next 3 years. Is it possible to get that push until we see traction with respect to volume growth?

No, no. So basically, I think I'm not able to make you understand. So basically, CapEx is meant for more significantly for the sorting centers, construction and automation that we will keep continuing because we soon start the construction at Kolkata and Ahmedabad. All permissions are now almost completed. So I think in Q3 end or Q4 will we start the construction. And next year, FY '26, we will be able to complete the construction in these big 2 centers, like -- each one is more in around 2 lakh square feet plus. So that strategy, long-term strategy is there, and we will keep -- continue to be -- make that because we like going to buy the land in Mumbai and Chennai and we're working hard to be like for Bangalore also. So 3, 4 locations, we are already working hard to buy the land. So that strategy will keep continuing. We just I'm saying -- and for the like branch expansion, we don't need to put on any CapEx kind of thing. It's like major is like OpEx, not the CapEx. And for the -- for truck supply is also like OpEx part, it is not a CapEx part at all. So expansion, whenever we having the opportunity for the growth, we will keep adding.

We take the next question from [indiscernible].

Sir, a couple of questions. Firstly, if you can maybe provide a little bit more granular details on what are the key industries impacting the volume growth? That's on the first part? And secondly, in the current backdrop, what would be the revised CapEx guidance, say, for FY '25 and FY '26. If you can give some color on that, please?

Yes, very good. So basically, industry impacting major is highest one is like still continue to lifestyle companies and -- lifestyle and textile companies. And second one, engineering companies. And third one now is, unfortunately, automobile companies are also not -- they have slowed down their production. And second part on CapEx side, if you divide in a like year-on-year basis, so FY '25, we're anticipating because we will start the construction soon. So I think we will be finished the CapEx in this year is around -- in the range of INR 40 crores to INR 50 crores for the whole year. And in the next year, again, in a similar way, where we will be spending INR 100 crores, INR 125 crores in each year. Because in next year, full-fledged construction will start for the -- will be there, and we might buy -- we may buy 1 or 2 land parcel also in similar way on FY '27 as well.

Sure. Got you, sir. Sir, I have just a couple of bookkeeping questions. What is the number of branches in sorting centers that you added in the first half of the year?

Sorry, we have? Sorry.

What are the number of branches and sorting centers that you added in first half this year?

So this sorting center number, we are not increasing. We just had a long-term strategy, we're just converting them from lease to own one and specifically, like out of this 28, we want to be major one, which is in the number in 10 to 12 in all the big cities and the handling in and out volume is almost like 75% to 80%. So we first want to automate them. And out of that, we already fully automated. And next would be Kolkata and Ahmedabad. And I think FY '26 or mid-'27, we will be able to do that for these 2 centers and followed by Chennai, Bangalore, Mumbai and all. So this will be -- that is for the CapEx plan.

And how about the branches, sir?

And branches, we -- in this year, we added almost like not much, 5 branches we added in H1. And this is also meant for like multimodal products.

Understood, mostly in the third quarter and second quarter, understood.

We move on to the next participant, Anshul Agrawal.

Mukti Ji, my first question is on our pricing strategy. I see our realizations have sort of remained flat over the last 2, 3 years. While in the current quarter, we have mentioned that our contribution -- revenue contribution from SME customers have sort of tapered a bit. Shouldn't we think of reducing pricing for institutional customers to attract volumes at this point of time?

Yes. So basically, this price is flattish in 1.5 year only, like in last year and this year, this first half only. Before that, in FY '22, '23, we have taken -- we were able to take almost, I think, 150 basis points overall basis. So that's the only 1.5 years. And because there's a muted growth, that's why we are not going for that. So second part, like supposing we will go for the institutional customer. As I said in earlier call also, there's no price war itself in this industry because customer will keep like 3, 4 competition for the -- anyhow. Whether we will reduce the prices, they will not be the whole volume to us. They want to keep the 2, 3 players to keep competitive edge as there. And also, sometimes, this is not wise to take the whole volume of the one customer because this is giving not good profit to us. As I mentioned, it is like gap in pricing with the institutional customer versus SMEs is also like 25% to 30%. So sometimes we're intentionally keeping like cap on doing the business with big customer. That's why our margin is like intact in this testing time even it is like maintained or slightly dipped. So I think this is not the -- I do not think it is like -- cut the prices and get the more volumes.

Got it, sir. Second question is on the Multimodal services. Are they still margin accretive in nature?

Yes. Yes. This is like rail and air and yes...

And the contribution of these services to our overall top line would be still around 17%, 18% or higher than that?

No, it is the same way, yes. We also have in this space like B2C component also, 2%, 3%. So that is also shrinking for us because we are not going on a bigger player. And small players are like so my B2C component is also like 3% in that. Earlier, it was like, I think if you talk about 4, 5 years back, it was around 5% of overall revenue. So that component, we are -- you can say we are not increasing. So because we're dealing with the customer wherever we have the profit for B2C. So we're dealing with the small customer only.

Possible to share any color around what kind of margins would be making in these Multimodal services or Rail Express business?

It's because this is -- these are the services where we are not utilizing our like network basically from hub-and-spoke model. So basically, hubs are, we are not using it directly point-to-point in case of rail or in case of C2C, in case of cold chain or in case of air. So that's why margin is good and is likely like -- currently, it is around in the range of 15% to 16% EBITDA level, specifically on air and rail.

We the next question from [ Manjeet Buaria. ]

I have 3 questions. First, I just wanted to go back to the industry structure to get my bearings right there. If you could help me with how many people have entered the Express PTL business in the last 10 years? And what are the number of players today in Express PTL who you think are good competition for you in terms of like-to-like services which they offer?

Yes, that is a very good question you asked, Manjeet, Ji. So I think new entrants in B2B, 1 or 2 players, which is really dealing with -- in B2B segment and they're not able to make the money. So they are entrant in that segment and one company has acquired like other company that was also like old one. So I have not seen any much competition where they're like getting market share or they like having a future threat for this industry. I don't see that. But if you see divide in that industry overall, it's like different multiple services and multiple products offerings. Each and every company has their own set of that. Like if you talk about -- so in that layer, one is FTL industry, then is an LTL industry where they are not doing Express, but doing the LTL less than truckload. So there is also overlapping sometime. They want to be our share also as an express share to that, but it depends on the customer whether they want to be lower prices or they want to have good services. So that is like sometimes clashes there. Third thing is the third-party logistics companies are there. So you name all our companies, they're doing inventory management, they're doing inbound and outbound. These are type of the company have different -- and they're majorly doing like, I think, this auto segment warehousing and all major portion, I think, I'm saying. And third thing is express industry is also having dividing in a 3, 4 parts, like one is B2B, second B2C. Now the new entrants are -- this quick commerce and then courier companies. So each and every one is having a different product and a different opportunity for that. But if you see overall express industry in B2B segment on roadside, where our presence and our USP is there. So there is not much player and our direct competition with the -- again, is keep continue with the unorganized player, which is competing with us on a regional level basis and zone wise and all. So that's I think that will be -- it is really -- I don't think it is like wise do we get the share from this unorganized player getting that business. That business supposing we're getting then, we will be reviewing our margin profile. And also like credibility of that customer is also under question and we may be like then bad receivables in our balance sheet. That may be also happen. So we are very cautious. So if you see like 10-year data, our margin is continuously has increased. Our quality of balance sheet has improved a lot and is robust. And obviously, we were like debt-free status and giving continuous dividends.

Okay. But in terms of very like-to-like, as you mentioned on B2B Express side, are there like 3-4 payers who are like close to us in terms of their network and in terms of their reach? And also in terms of more importantly, their service quality, on-time delivery and low damages or losses. So I was looking at how many number of peers like that do you consider as your competitors really?

So it's a listed player, which is having 2, 3 player only.

Okay. Got it. My next question, Mukti, was you mentioned that you have taken calls between institutional customers and SME customers by maintaining a certain mix? Which helps you keep certain healthy margins. I was curious about how does the management thinks about absolute profits? So an institutional customer may be lower on margin but adds to your absolute profit and if you have like spare capacity to utilize, would you still let go of that business because margins would be lower? Or then you look at more absolute profit perspective and take on that business? As long as there is spare capacity, which you are not taking away from SME?

You rightly said, so supposing wherever we have a vacancy in truck, we're obviously getting the prices wherever, whatever price we can get. Like I mentioned, it is from Eastern part of India and southern part of India, supposing there are any volumes, high volume, we are taking that. So I'm not saying we are losing that, but somehow to see that because if I'm -- again, upward flow and like this return flow, this all depends. Supposing I have the more business from the like an upward flow, then you have to lose the money anyhow, if you will not be able to fulfill that truck in return load. So that's why we have opened up the branches, and that's why these branches helping us because in sometimes in these part like down south and upper north and eastern part of India, there is no big businesses are there and no manufacturing is there. That's why we opened up branches to be fill these trucks wherever we're sending. So this is a strategy because we are not like chasing for the absolute profit, but the mix has to be there to maintain my utilization level of a truck is very important for us. This is directly supposing I'm lose that proposition, then my -- this will be taken a hit on my margin levels. Why I'm saying because these are the -- in one truck, I am putting 200 customers business, not like I'm depending on one customer. So that way, I think, is not like a high volume will be helped to be getting the profit, it's not like a mandatory thing or not like sure things, I'm saying.

Got it. I have one last question. Assuming that our cost levels remain where they are and your mix between SME and institutional stays where it does, right, 2 big items, right, at what volume per year and at what utilization should that volume happen for us to go back to 15%, 16% margins? So I'm getting ceteris paribus, all else remaining equal, what should our annual volumes and utilization rate have to be to go back to about 15%, 16% margin?

Yes. So this is a very -- in a simple way, supposing tomorrow, we will grow in the range of 10%, then we'll be back to normal in a 15% plus kind of EBITDA, we will be back to that.

So 10% value growth basically, you will go that?

Yes.

Hence, we take the last question for the evening from Akash Vora.

Yes, am I audible?

Akash, there's a lot of disturbance and your voice cracking.

Hello, yes. Is it better? .

Yes, it is.

So Mukti, sir, now you were mentioning earlier in the call that from certain level inquiries and interaction with your customers, your understanding that they are giving you a strong volume growth guidance in the coming year, FY '26. So what is the...

I just missed like last 2, 3 lines. Can you just?

Yes. Yes. So you were mentioning that you -- through your customer interactions, they were promising you certain amount of volume growth coming in FY '26. So what is -- in what are they promising, like what kind of growth are they committing?

So basically, as we're focusing on 3 parts. One is we're putting like separate sales -- more salespeople on the ground to getting -- so we want to be in a balance out of here. One is more focused on institutional customer to adding new customer, all the competition customers. Second part, like we already have opened up the branches. So we want to be in a more share from the SME customer. And third thing, we want to enhance the customer base in obviously, multimodal product also. So we put together 3, 4 strategy. We want to be like growth and supposing we have anticipation to grow 13% to 14% in volume side. So 7%, 8% volume will come from the existing customer and then remaining will come from the new addition customers. So that's our strategy, and that's why we're working on the ground very hard to be -- and with people are on the street and focusing how we can go door-to-door and ask for the business because this business is not to be like where we sit in our office and people will come to us. Rather, we have to go in there door and ask for the business. So that's -- we are making efforts and enhance our footprint to get more business and sales team has increased for that.

Got it, sir. Sir, 2 numbers, if you could quantify, what are the new customers that we -- how many new customers we have added in the 6 months? And secondly, what is the top 10 customer concentration in our revenue for the first 6 months?

Yes, yes. So basically, revenue constant, if you see like my top 25-plus customer has not giving more than 15% revenue to us. And number of additions, I'm just not remember for that. So one-to-one, I can be like give that number. I'm just really not remember that number right now.

Friends, thank you for your active participation, but we've run out of time completely. And I take this opportunity to invite Chander or Mukti for their closing comments.

Chander, sir, you would like to say something? Okay. So no worries. So thank you, everyone. I would like to thank everyone for joining on the call. I hope we have been able to respond to all your questions adequately. For any further information, we request you to please do get in touch with our Investor Relations team. So stay safe, stay healthy and happy and Shubh Deepavali to everyone. Thank you once again.

Thank you very much. On behalf of SKP Securities, I'd like to thank Mr. Agarwal, Mr. Mukti Lal, Mr. Srivastava, and Mr. [ Pandey ] for the time to interact with the investors. We look forward to hosting you again in the next quarter. Wish everyone a Happy Diwali, and have a wonderful evening. Thank you.

Thank you. Thanks a lot, please.