Transport Corporation of India Limited (TCI.NS) Q2 FY2026 Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I'm Simran, the moderator, and I'd like to extend a warm welcome to everyone joining us for the Transport Corporation of India Limited H1 FY '26 Earnings Conference Call. On behalf of the management, we have with us Mr. Vineet Agarwal, Managing Director; and Mr. Ashish Tiwari, Group CFO. [Operator Instructions] Please note that this call is being recorded. With now, I invite Mr. Ashish Tiwari to begin with his opening remarks.

Thank you, Simran, and good evening to all of you. Thank you for taking out time and joining our quarterly investor call. Before we start the call, I would like to make a disclaimer that some of the statements in this call may be forward-looking and may not coincide with the actual performance. So we will start with the presentation by Mr. Vineet Agarwal and followed by the question-and-answer session. I would invite Mr. Agarwal to just to present and also the opening remarks. Thank you.

Thanks, Ashish. Thanks, Simran. It's good to be back for the quarter. I can see Alok has already raised his hand. So he's already #1 on the queue, but that's okay. So maybe I should just start with questions only. But no, let me give some opening remarks and then share -- also share what's been happening over the quarter. So it was an interesting quarter. I think the beginning of the quarter, we saw some -- a little bit of movement, July, August. And then, of course, once the announcements on GST came, things started slowing down quite rapidly and the first few days of September, et cetera, were quite weak. Then, of course, after 22nd of September, we saw a massive rush either from the automotive side or from the finished goods and the FMCG side. And just the amount of movement that happened was -- just took us by surprise. In our supply chain business, we did record numbers and we are now -- that business is our largest business now, as I've been saying that it would happen. And essentially, what we've seen is that the stocks that had been -- sort of the inventory that was there in the system across the board, some of that got used. And now -- and that too towards the far end of the supply chain, which is post the warehousing, the C&Fs, et cetera, or the yards. Beyond that, some of that started getting used up. Now we -- October also has had the same effect, but now we are seeing a weakening of the push that was there. It's not as strong as it was in the first -- in this last 45 days. But -- and we do not expect November to be that great also because I think -- and December perhaps to be moderated. The one thing that we're expecting things to shift is more on the production side where we believe that some of the raw material needed for production and then subsequently movement from the production units to the next stage in the supply chain is something that should happen more so in the next few months. We know capacity utilization on the industrial side is still around 77%, 78%, and that needs to keep persisting before some CapEx starts happening. The other thing that we are seeing, of course, is that there are supply chain restructuring that's happening by companies where they are insisting heavily on cost reduction because I think a lot of the cost reduction initiatives that companies had started earlier have now been exhausted and they're looking at other areas to where they can restructure some of this cost. So they are on the supply chain side, pushing more towards how to rationalize. Maybe if it is warehousing, how to rationalize warehousing space. If it is the network design, how can they change that. Can they look at different kinds of suppliers. How do they diversify the supply base. Some of the sentiments because of the impending FTAs, et cetera, is also having an impact on supply chain diversity. So these are some of the things that we've noticed. I'll talk about something specifically in each of the businesses. One major impact of GST is the fact that we believe that some of the sentiments might have changed a little bit towards the positive side, if not a little bit more than little, because there is an element of feeling that there is -- we can get more out of our money or the money spent per INR 100 that I spend, I can get more out of it. So at a consumption level, that can help some triggers and -- but it is certainly a sentiment positive. So let's start with the presentation. I think there's no change in terms of this. We are well aware of the logistics industry's drivers. As a company, we are very focused on providing a wide range of solutions through a very strategically developed multimodal network. And of course, we are increasing technology in huge numbers, in a huge way in our company. And of course, we work in all the new as well as high-growth sectors with a range of services, as you can see, across the board and many of them very high-value, high niche kind of services. And again, looking at the new sectors like chemicals, defense, aviation, industrials, we are present in all of them as well as increasing our share very rapidly. Case study is for a renewable energy customer. This customer has just started its plant and the amount of growth that it was having and the amount of throughput it was generating from its plant was very high for either for the road to catch up because they were moving most of the supply through the road network. So that was leading to shortages of trucks as well as the freight rates also moving up because of the demand-supply gap. Clearly, this is also leading to more carbon emissions as well. And the warehouses were not able to keep up because there was so much capacity, so much raw material that was coming in and so much finished goods that were ready. And of course, there was incompatibility with the types of raw materials that they have, which is like chemicals and other products that are there, along with the chips, the solar modules, et cetera. So we started moving from South India to North India using container rail movements as well as we're using a triple mode, which is coastal, we're using our coastal services and moving it to across the country wherever they need it, mostly it's going to the north. We've settled a key account manager there and we are managing warehouses across 6 locations, including a cold chain warehouse for them. And of course, the customer has seen about a 10-odd-percent type of improvement in their cost as well as multimodal movement has reduced their carbon emissions. So this was a solution that we were able to do because of the wide range of services that we have and that is unique to us and no other company in this country. Going forward, we have another interesting case study for a quick commerce company where they required several deliveries from minus 15 to minus 20 across the different PODs, that is point of deliveries that they had. In the past, when you're moving at such high degree, high precision in terms of temperature, you tend to lose the heat -- sorry, you generate heat, and hence, you lose the cooling effect. So as you can see in the yellow graph, the temperature kept going up as the deliveries kept increasing as you move from one to the last one. So we did some significant kaizen where we were able to create inside the truck separate cold chambers so that the temperature is maintained till -- the desired temperature range is maintained till the last point. And replacement has reduced substantially because customers are -- at the POD level, they are seeing that the integrity of the material is maintained when they receive the final material also. So it has been a very, very interesting supply chain development where we are able to use cold chain to do this very effectively. Again, these are places where we are able to deliver very high degree of customer satisfaction as well as retention. As a company, I think some of this is perhaps mentioned and known, single window solutions as well as bringing in all kinds of niche services to the customers. In terms of multimodal capabilities, we've been continuously expanding that. In the last -- on the rail side, if you see, we have increased our rail movement substantially. We did 1,400-plus rail movements last quarter -- last half year versus 1,168. So a substantial jump that we've had. A lot of it is in the automotive side. On the left-hand corner is the container movement. The TEUs handled in the last half yearly is about another 5%, 7% increase over the last year as well as the number of cars handled, CBU that is, has also increased from 172,000 to about 190,000 in the last half. We continue to manage about 67 yards and about 70 terminals and we've saved about 90,000 tonnes of CO2. In terms of IT capabilities, we have now -- our center of excellence is now working -- has been working for several months on several interesting AI/ML projects. And perhaps next time around in the presentation, we will show you an example of 1 or 2 very interesting AI projects. These are essentially areas that we've seen that have really a significant improvement when it comes to manpower productivity as well as in terms of process improvement. So we've been able to implement some of these quite efficiently. And of course, the rest of the things are hygiene as we go forward. Mentioned about all the high-growth sectors we're present in. I think this is all. Let's go forward. Highlights in terms of the quarter ended is that we have had 21st consecutive quarter of growth. We've invested about INR 170 crores in the last 6 months. And out of that INR 140 crores has come from internal accruals. Our liquidity position remains steady at INR 250-odd crores. In the freight business, it remains a bit weak. Still we've had no growth. The good thing here is that the shift from LTL -- FTL to LTL has started and we've seen a 2 percentage point improvement there to 38%. Margins have yet to kick in because some cost structures are still under process. We've also -- some of the growth was subdued because a few contracts were shifted to the TCI Chem Log business. This had to happen at some point in time and it happened in this last quarter. So the growth is muted. It would have had an impact of 2%, 3%, about 1% or 2% in terms of the top -- 2% perhaps additional on the top line growth. Challenges remain. However, we are seeing, as I've been saying that this year perhaps is the end of perhaps hitting the bottom line, we are going to see an uptick here going forward. Otherwise, the challenges around MSME growth, et cetera, remain in the system. I think that is still known. We -- our network expansion continues, though we have not added too many branches this quarter. But in the first half, the branch network is definitely higher than last year also. On the supply chain side, the business has grown at about 17.8% over the quarter and about 14% on the half yearly basis. As I said that the impact of GST rate rationalization has been immense and we've been able to push through a lot of these quite rapidly. The movement has been handled quite rapidly and quite efficiently. We've also seen good growth in warehousing, where the warehousing growth is actually far higher than the overall growth. And most of it is coming from quick -- a lot of it is coming from quick commerce, FMCG companies restructuring, some retail customers coming in and we are seeing that the margins are stable. Capital employed has gone up because we've added about 100-odd trucks as part of the CapEx plan. In Seaways, we had one -- several few less voyages because of ships were under drydock, one also in the last quarter. The growth in margins, even though the revenue growth has been negative is because of the fuel prices being slightly lower. I think that has helped us even with the limited volume, we've been able to get better margins. Of course, all the ships are depreciated and we do not have any interest costs, et cetera. So everything that we earn at the EBITDA level, almost everything goes down to the bottom line. The joint ventures have done reasonably well. In the first half, CONCOR has grown by about 28%. Profitability is a little tight, but I think it's also because of the various changes that are coming about slowly with also competition increasing a little bit more with the likes of Adani and DP World, et cetera, are increasing their presence in the container transportation business. Cold Chain business grew at about 17-odd-percent. Again, good traction there. We've crossed about INR 100 crores in terms of capital employed. We have got some interesting customers in the -- on the quick commerce as well as on the retail side as well. Profitability is muted, but I think this is expected for the next few quarters. Transystem growth is at about 11% and profitability is almost the same. At a stand-alone level, we grew at about 5%-odd, but consol level is about 7.6% for the quarter. The PAT level growth for the quarter is about 6.4% and 5.8% for -- at the consol level. Again, it's been a muted quarter for us because the start had been slightly weak. We started to pick up towards the second half of the quarter. But net-net, I think in terms of our guidance of 10% to 12% on the top line, about 10% to 15% on the bottom line at the consol level stands. In terms of the other numbers, I think ROCE, [ RONY ], everything else is the same, not much change. Next slide. And this quarter, we did not declare any dividend, but we are observing the trends and we will figure out when to declare dividends perhaps in the next quarter or subsequently. CapEx of INR 167 crores in the first half. The budget is INR 450 crores. I think as I've been saying, we should get to around INR 400-ish crores, plus/minus INR 20 crores. The ship-related costs have been essentially related to the 2 orders that we placed. And those orders are -- these are the installments of those orders. So that has gone in terms of the INR 34-odd crores that has been spent. We've seen the good addition in trucks and rigs. And we've ordered 2 rigs also, which will come sometime end of next year. That's all in terms of our presentation. Happy to take questions. Thank you.

[Operator Instructions] Our first question is from Mr. Alok Deora.

So just had a couple of questions. First on the freight business. I mean the margins have been pretty muted even if you observe the last several quarters. So just wanted to understand if things change for the better and if we get even a higher LTL mix, where these margins could end up? I mean what is the potential for these margins because this segment forms pretty big part of our overall business. So just some color on that because this, at the end of the day, continues to be a commoditized business. So are we seeing any real margin changes here or it would be just maybe a 50 to 100 basis points improvement maybe 1 year down the line? That is number one.

So on that, Alok, the -- see the peak margins in this business have been I think 4.5% EBITDA. So that's the peak. However, as you rightly said, maybe it is going to inch up and not jump up. So in the next year onwards, we should see that inching up starting with 100 basis points, et cetera, type of improvement. Secondly, it is about 40% of our standalone business and even lower percentage of our consolidated business. So as a share of the business, it is going down, as you can see. And the -- and there is not many assets in this business. I mean, very -- there are no assets actually really. Only working capital is what we require here. And the rest of it is rentals, et cetera, that is from a shared services perspective. So ROCEs will continue to remain attractive, 15% plus. If we're hitting that, I think we are definitely looking at continuous recycling of that. However, the moment the LTL business starts kicking in further, that ROCE has jumped, as you can also see in 2022 and '23 to 27%. And Ashish just put it on the full slide, please, 27%, 20%. So that 20%, 25% ranges can be achieved.

And in Seaways, I mean, the margins again continue to inch up. I mean we have been seeing a quarter-by-quarter improvement again in the margin profile. So margins which were to normalize almost like 1 year back, that has kind of -- I mean, not come down rather has gone up despite the lower revenues if we compare it with the last few quarters. So what's really happening there? Are these margins sustainable? And if these margins sustain or we have a very strong outlook, then what's happening on the second-hand ship because that could earn us quite good money if those -- if that ship also were to come by and get into the operations very quickly.

Well, second-hand ship is not easy to get. As I've been saying that we've been trying very hard. We bid for a few ships also. We did not get because they kept going up in terms of pricing. So very, very unpredictable. And I think geopolitics plays a big part in this. So we are not very hopeful on the second-hand. We are definitely sure of the new ships that will come next year. We also have a little bit of a time till we are -- we need to retire some of the ships. So in that context, capacity addition will only be positive whenever that happens next year. Margins, as I say that sometimes we are also quite surprised sometimes. But this 35%, 40% is our expected margin structure is what we feel is perhaps the most ideal number.

The next question is from Mr. Krupashankar.

My first question was on the revenue growth side. So Vineet, you did mention that you're aspiring for a 10% to 12% growth on the top line side for the full year. But on the first half, it's been almost about 5% sort of the growth. So the second half expectations, while supply chain is firing all engines, what are the other segments because, Seaways you're not getting incremental capacities. So is it right to assume that freight would bounce back sharply and that is what will drive your top line growth expectation?

So maybe I can hide behind some of the fine print, which is whether it is consolidated growth or whether it is standalone growth of 10% to 12%. So at a consol level, it is about 8%. So we should hit 12% -- 10% to 12% in that because our CONCOR business is also growing already a 27%, 28% increase and the other joint ventures are also firing all cylinders. But yes, I think if you look at a standalone level, perhaps 8% to 10% might be more reasonable. And at a consol level, maybe 12-ish-percent could be more reasonable.

On the Seaways side, any near-term headwinds that you are envisaging with respect to fuel cost or any other incremental capacities coming on board, which can span with respect to profitability or growth perhaps?

No, not really. I think headwinds are essentially typically -- Ashish, can you move that, the top part of the screen or just move it to full screen, please? See, I think if the -- freight rates globally have muted a little bit. But freight rates around the Indian coast is typically still high. So I think what typically that happens is that there is some of the international players that have moved some ships to international waters tend to bring it back to India. And that could happen and that could be a potential headwind. But in terms of capacity utilization, we had full capacity. We don't have -- I mean, we have cargo, but we don't have capacity. So we are -- of course, second-hand ship still doesn't make sense with the kind of pricing because you have to factor in a longer tenure for those ships and not what you see today. So I would think that the headwind would be perhaps more competition. But the next few months is typically the good period also. So maybe we should be able to sustain from -- both from a demand perspective and from whatever supply comes in.

The next question is from Mr. Sunil.

Vineet, do you always [indiscernible] what is impressive is the way you put a case study, the way you create a long-term relationship and bonding with your customer and stickiness. So I just wanted to understand which are the factors other than pricing where a customer leaves us? And whether they leave for just pricing or they create their own setup and they learn from us? What are the factors which you will be careful about or your experience talks about that our customers leaves us and we lose the business?

Yes. Well, our analysis is that 60%, 70% of the customers leave us because of pricing. Then, of course, no company is perfect. If I can tell you that every person, everywhere is perfect and is -- we don't lose because of our behavior towards the customer, I'll be wrong. It happens in all organizations. So some of it happens in our organization also. Sometimes we don't realize what we do, but we are -- we do not deliver to customers' satisfaction and expectation level. So we do certainly lose out there. Sometimes we lose out because customers don't want to give a lot of business to us. They also want to diversify their portfolio to keep other players in the mix so that -- and they might give us a higher pricing compared to the others, but they will still not give us the entire business because they want to keep a diversified mix. So those are probably the main reasons why customers leave us. In terms of solutions, et cetera, we have a wide range and the teams are such that they are able to orient towards customers' needs, but sometimes we can fail also.

The next question is from Mr. Naman.

As most of the questions has already been answered, so I just wanted to know that as the company has just entered into the Eastern region with a new warehouse in the Kolkata region. So like how should we expect it to affect our financial performance? What are the company's plan in relation to this new warehouse? And like if you could just give some color, it would be good for my understanding.

Well, this is just a regular warehouse expansion that we've done. It's a 285,000 square feet facility, a very large one, especially in the Eastern zone. We did not have such a large facility there. So we were invested into it and we've brought this upstream. But it won't have a significant impact on the company as a whole because it's just one more capacity addition out of the 16-odd million that we have in terms of space. So these are small incremental things that we keep doing. It's part of the CapEx plan. So yes, I do not have any -- we do not -- it leads to business, obviously, but will it have a significant impact? No, not really.

And just one last question. Like with the GST rate cuts coming into effect and inflation at like touching new lows, how do you see the demand trend to evolve? And what are your strategies to compete with your competitors?

It's a very broad question. I think our strategy is well known. We are a multimodal -- integrated multimodal logistics solution provider and we are across the board in terms of all the services that we have. And we cross-sell and upsell our services to our customers. So that's the broad strategy. With all the services we have, customers, they are getting positively impacted by GST, they will use our services. So overall, I think I do not see any specific things I can point out and tell you that, okay, this is what is going to dramatically change because of GST, but there are services that they need from us, whether it is warehousing or whatever, we are able to provide them.

The next question is from Mr. Raghunath.

Sir, post the implementation of GST, there was expectation that there will be a consolidation in the industry wherein the smaller players will exit. Sir, is that still playing out?

Slowly, not too fast. But yes, slowly, it is happening.

The next question is from Mr. Pratik.

Sir, one on freight. I mean, what has to happen or what is happening that's giving us the confidence that margins kind of come back next year? Is it just LTL which will drive this or do you see on ground -- I mean, either the competition or SME segment kind of coming back?

I think it's a combination of many things. You're right that some of it will be driven by LTL growth. And that LTL growth is also because of MSME growth. Some aspect of pick-up should happen. As I said, capacity expansion will only start when there is capacity utilization remains at a higher level. So yes, some of it is that. I think the consumption story that we all want to be kickstarted, hopefully, some of that will also come through, which means a trickle-down effect of that. Infrastructure spending by the government should continue at the same pace. And I think the next year's budget should also keep pushing that agenda. And that means there's a very high degree of movement that happens towards infrastructure-related companies, especially engineering companies and electronics, et cetera. So those will drive certain growth. So yes, I think overall, there are lots of tailwinds that should help us in terms of overall growth.

Right. And sir, in the last few quarters or maybe a year or 2, you were investing a lot in terms of branches, et cetera, to capture more of LTL. That I believe is yet to ramp up and cleared.

No, we did about 40-ish branches last year. This year, it's been a little slow. But I think it will start ramping up more towards, I would say, next year.

Right. And just one clarification. On Seaways, you mentioned we also have to retire some capacity next year. I mean

Not next year. It was supposed to be next year, but it has been extended by the government.

Extended by how much, sir?

I think by 3 or 4 years. 2 to 3 years, right, Ashish?

Yes, 2028.

We have the next question from Mr. Divyansh.

A couple of questions. I joined a bit late. So with the GST announcement, what -- at least what came in the media is that people stop -- the OEMs stopped shipping the vehicles to the dealers because their GST structure, they wanted to optimize on it. So the question is that did that lead to, let's say, more revenue in our SCS business because we were storing the vehicles in the yards? Is there any linkage to that which, let's say, drove revenue in SCS division for us in this quarter?

See, we do not make that much money or that much revenues if the vehicles are just standing in the yard. Obviously, the movements help us to drive revenue growth. So yes, the stockyards increased in the last 3, 4 months because capacity that was being produced and inventory needed to be kept in different places, which we did maintain. And some revenues did -- we did derive some of that, but it was not significant enough to say that this was the uptick. The uptick is because of the movements. As you saw the number of rigs that we were able to load. I mean, at some point, we were loading 4 rigs a day, 4, 5 rigs a day across the country. It was that kind of -- in fact, in the last week of September, we loaded almost 7, 8 rigs a day. That kind of movement was happening for us. So it is not because of just the warehouse storage.

Got it. And just this -- let's say, how has been, let's say, this Diwali season has been? Because now, let's say, given 22nd September was the cut-off date and then Diwali demand and everything, which would have spilled over post 30th September. So any, let's say, insight that you can give on this quarter? How has it been both on, let's say, freight because of SME business getting any upshoot or anything on the auto business?

As I said, this has continued till in October also, but we do not see that kind of movement in November, perhaps a little bit in December simply because it is the end of the financial year for several MNCs. It's also the end of -- then March is better because it's a financial year for Indian companies. So I think overall, net-net, we do not think that the kind of jump in volumes we saw will get repeated very soon, not till March. However, the sentiment has changed to some extent, and that should help the MSME, et cetera, growth that you talked about.

Got it. And just the last question. We were planning to get an approval for SUV AFTO or train rigs. Not sure if anything was mentioned, but in the last, let's say, 2, 3 con calls, nothing has been mentioned. Just wanted to check on that.

We did place an order. I think we mentioned it in the last quarter call that we placed an order for 2 such rigs that will get delivered at the end of next year.

Next financial year or...

End of -- I think it's next...

Next financial.

FY '27?

Yes. Mid of -- let's say, mid of FY '27.

We have no further questions. We can wait for some time as the management suggest.

Yes, Vineet, we can wait for some minutes, maybe a minute or 2.

Mr. Divyansh is back with us.

Vineet, just one question on the TCI CONCOR business. Just wanted to understand how does it work? So CONCOR will get the business or TCI generates the business and, let's say, uses CONCOR's infra. So how does a, let's say, sales cycle or revenue generation happen there?

Yes, exactly what you said in terms of the business is generated by TCI. And of course, sometimes we take the help of CONCOR also, but -- and then we use the service -- the infrastructure of CONCOR, whether it is the rigs or whether it is the terminals to fulfill the customer contract. Sometimes the containers don't even need to come to the terminals. It could be picked up from the factory of the customer and delivered to their customer -- to their factory directly via trains or sometimes there is a first mile, last mile element into some of the contracts. And sometimes we do only piecemeal also, it could be 2 containers, 5 containers and things like that also. So there is multiple types of models that we operate in the joint venture.

So when you said that, let's say, that container -- that Adani's entry is affecting, it was for CONCOR business, right?

Exactly, yes.

But then if TCI generates the business, it can also use Adani as a...

No, we cannot have a joint venture. We are -- since it's a joint venture with our own -- with CONCOR, who is an asset owner, we are -- we will work

Can we do it in the SCS business? That was my question. Maybe not CONCOR, but

No, we cannot.

So we are bound to use either CONCOR or no one else, something like that?

Right of first refusal with CONCOR.

And then so how do you see this playing out? Let's say, a private player typically is more efficient than a government player. Do you see any headwind coming? Because you are saying that, let's say, reaching 12% through subsidiaries growth. And if CONCOR is facing competition from, let's say, Adanis of the world, so how can we -- is there a plan to counter that thing?

Well, CONCOR itself is helping us counter that with their strategies in terms of pricing or in terms of the availability of certain terminals. And of course, customers also like us because we have provided an end-to-end solution. So there are -- we have a U.S. piece. So I think we are continuously working on that. There will be some pressures. And also there are certain niches. Each company works on different areas and not necessarily on every area. So some things we do better, some things somebody else does better.

The next question is from Mr. Jainam.

Yes. Sir, this question relates to the Supply Chain segment. What we are seeing is that over the last 3, 4 years, our growth has been in mid-teens. Now it has also crossed, you can say 30% in this quarter, of course, with the GST impact. However, our margins has been steadily coming down from 6.5% to 5.5% kind of a thing at the EBIT level on the consol part. Of course, the capacity addition might be, you can say, having some cost versus no revenue recognition. By what we can -- by when we can expect margin to rebound or is it the new normal to look at this 5.5% or 6% kind of a margin?

Ashish?

Consolidated I think it's also including the cold chain, Jainam. So while the standalone margins are okay, they are constant and stable. Consolidated margin have a cold chain impact where we do have investment last year. So probably their EBIT margins are a little bit under pressure.

There are no further questions. Now I'm handing over the floor to Mr. Ashish Tiwari for his closing comments.

Thank you, Simran, and thank you, everyone, for joining today out of your busy schedule. I know that it's quite hectic for you to join the call. There are various calls. I hope that we have answered all your questions. In case you have any further questions, please write us to e-mail ID, which is given on the investor call. Our next call would be next year for quarter 3. So I want to wish you a very happy New Year in advance and Merry Christmas. Thank you.

Thank you. Best wishes.