Transport Corporation of India Limited (TCI) Earnings Call Transcript & Summary

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Thank you, Bharti. Very good evening, ladies and gentlemen. Today, we will start begin with opening remarks by Mr. Vineet Agarwal, Managing Director, TCI, followed by his investor presentation. I hope that all of you would have a copy of that. It is available at the website of the company as well also as at the stock exchange. Now I will hand over to Mr. Vineet Agarwal.

Thank you, Ashish, and good afternoon, good evening to everyone. Ladies and gentlemen, we are sorry that we had to change the date of the -- this investor call from yesterday to today because of the impacting situation in Mumbai due to cyclone. But we are thankful that everything went off well, and not much has happened with Mumbai. So today, we are in different and challenging circumstances not just the organization, but the country as a whole and in that sense, the whole world. And what we are discussing today is, of course, the results for the previous years, but we'll also talk a little bit about what's currently happening, not just in our business, but also in supply chains in the country today. So please do let us know if you have any questions, I'd be very happy to answer them. As Ashish just indicated, we have the presentation online available. Please downloaded it so that I can refer to that as -- I will be referring to that as I speak. So that you are also able to get a sense of what I'm talking about today. As -- I'm moving to Slide #2, which essentially talks about the group as a whole in terms of moving 2.5% of India GDP with more than 12,000 trucks that are operational across the country, combination of owned, leased and rented. Moving to Slide #3. This s a lot about our current divisions that we have, the joint venture, subsidiaries and the group companies. The company has been expanding, as you know, in the last several decades. In about 25 years ago, we were just one services company, which was the freight business. And you can see that in this period, we have expanded quite rapidly in to all and many areas as well. Next, Slide #4, is essentially talking about our Board of Directors. We have a very strong Board of Directors today with a strong independent Board. The latest entrant to this Board is Mr. Ravi Uppal, who is -- who was the MD at JSPL and before that at ABB, L&T, et cetera. He has recently joined our Board, and we have other very strong Board members from their reputation as well as their outlook to business so Mr. Bharat Ram -- Ashish Bharat Ram from SRF; Mr. Vijay Sankar from Sanmar Group; and Mr. Madhavan, who is on the Board of ICICI Bank right now; and Ms. Gita Nayyar, who is also on the Board of the TajSATS company amongst others. So this gives us a very independent view about our strategy and we are quite fortunate to discuss the same with them and look forward to their guidance. Our -- the next slide talks about our corporate governance. And we've been very strong with this. We've been very careful. Our policies are such that are not just employee-friendly, but also, we have certain policies that are, in some sense, unique to the industry as well. And we have kept up with that reputation. In the last year, our ratings have changed and in fact we have become positive from AA- to AA and we have won several awards in many areas. Slide #6. And essentially, I wanted to talk a little bit about the domestic logistics market. As you know, the overall market, though, is very large, it is quite fragmented in several areas. The industry segment that we typically deal with the full truck load and the less than truck load on the road side, our rail joint venture as well as the 3PL business that we have in our supply chain business and our another joint venture called Transystem Logistics. And of course, our Seaway business, which is the shipping business. So the whole idea, the strategy for the company has been that we want to be an integrated multimodal Road logistics service provider. And this is a unique proposition that we bring to the Indian market. In our understanding, there is no company that actually has all these capabilities as a single group and are able to execute this quite seamlessly. Given the fact that there is so much happening on the domestic market, we think our strategy over years will be quite useful for a long-term growth in the logistics sector. Specifics about the market are mentioned in the slide, and I will not get into detail, but I can certainly say that in all the segments that we operate, we're typically amongst the top 3 in each, barring the rail segment, we are possibly in the -- maybe the fourth largest in the container-rail transport. So overall, our strategy has been that wherever we get into, we would like to be among the top 3 in that traffic as well. Moving on, I also wanted to talk a little bit about our -- the current state of logistics in the country and supply chain. I think the word supply chain is the most used word up in this pandemic. Everyone, from the Prime Minister, has been talking about supply chain. And I can say that in the current scenario the supply chains are either very severely disrupted or in many cases, even broken. As you know, road accounts for more than 63% of traffic, freight traffic in the country, and our expectation is that only 40% of trucks are mostly operational across the country. And there could be trucks that are operational at a regional level, more so, but at the national level, the trucks operational is much lesser comparatively. This is, of course, on the basis of shortage of drivers, shortage of labor in many locations as well as because of, in some cases -- in many cases, demand. Demand is also not completed, not entirely available. So companies and factories have not completely started also. You've heard about port congestions, some shipping lines have canceled the voyages. Clearly import-dependent products have been affected. Rail movement has definitely been much better with more than 50% to 60% -- at 50% to 60% levels, though there is a shortage of containers right now and the shortage of crews also across the country. In warehousing, operations have been active in specifically areas like e-commerce and FMCG kind of facilities. Only now that we are seeing that other industries, things have started to move more and warehouses are more active as well. Our sense is that the inventory in the pipeline is getting compressed for essentials because there is a time lag. We think there are companies that have had stock in the warehouses. They have been replenished to some extent, but not to the extent that they have been sold. So there is a gap that has [ come out of what will be ] this gap is 15, 20 days to 30 days, but there could be some shortages in certain areas in some places. This is our estimation. And there is also a bit of pent-up demand currently. And that is also leading to some spurt in sales. How much of that will last, has to be seen because right after this kind of a disruption, our estimation after a few months is there could be a demand contraction, which should again mean that supply chain will get disrupted. So several aspects are in play here, and this will have an impact on the way the supply chains are being done in the country. Perhaps, some companies will go for extra stock in the warehouses, their feedstock, perhaps some companies will reduce the number of warehouses that they have to cut costs. So there would be different implications for different types of customers and different types of industries. We are in talks with many of them, and we are seeing how it plays. I think we are only in the third month of what has happened post COVID or rather during COVID. So it is still early days. The next slide. On Slide #8 is what we have been doing in terms of the business in the last 2 months. Of course, clearly, we created some important task forces to not just implement the SOPs and protocols in our workplace, in the product handling, in the field operations but we also have a very strong audit system in place. We have quarantine facilities for -- in 70 locations across the country. In case if anyone is not well, et cetera, we move them to that quarantine room. Other than that, operations have started in some -- for us from virtually from the day 5 of the -- day 3 or 4 of the lockdown with some warehouses starting up or even movement of essential supplies. In the last 2 months, we have moved close to 2 lakh tons of food grains and agricultural materials, which we would have typically done on an average of maybe 1/3 of that much amount in this period. So our teams have looked at different areas of logistics, which was moving and has been able to move not with food grains but also medicines and PPE equipment. It is our network, plus the strength of the multimodal business that we have that has helped because we've been able to move customers between roads, rail, sea as we have seen that some things are moving more or less than the others. Customers felt that there were some issues with road in certain areas. So we have moved them -- moved the containers by sea as well or vise versa by rail as well. So it has been quite useful to have this diversified portfolio in the last 2 months. Other than this, the connect that we have with customers has become very strong. We not only gave them communication on the pipeline that they had of the transportations, but shared Whatsapp videos on SOPs, and more than 40,000 calls were made in the last 2 months to customers individually to request them for -- to ask them how they were if there was anything that we could help as well as also for business as well as for receivables collection. So that has helped us tremendously. And we have also achieved record collections and our working capital limits that at the start of the year or end of March was at 73% is -- utilization levels at 73% is now down to about 45%. So we have built in more cash in the system as well. In terms of employees, we have had virtual meetings, town hall as well as increase the training coverage that we have with the digital training and covered 2,500 employees in this period as well. We also extended support to partners and other industry players in this time, wherever possible for migrant labors, et cetera in our operations as well as help in policy formulation for the country as a whole. The next slide, Slide 9, I wanted to talk a little bit more about our logistics sector growth drivers. And some of this has changed from the long-term drivers that we've always talked about. And some of them are -- have been augmented in terms of the understanding, it's getting built up further. So from a short to medium term, specifically, we are seeing that agriculture, food processing, pharmaceuticals, chemicals sector, are sectors that are really driving a lot of movement, a lot of growth. We see that this will continue. As mentioned that there is a demand for warehousing for safety stock as well as consolidation of locations where customers are consolidating, they are talking to us for bigger locations. We are also seeing that because people want less touch points, the modern handling system should come about, sanitization, containerization, use of conveyors, et cetera. Again, this will not happen overnight, but this is a process that has started. And I think it's a short to medium term, this will have an impact. And certainly, multimodal is going to get bigger and bigger. This is something that we have felt and said that alternative transportation mode from road onto others will be important. Long-term drivers for India are getting stronger in terms of how we are able to attract global value chains to India, which would mean a certain domestic value chains, we should get stronger. We all, as a country, face issue of importing APIs from China, and we were all stuck in -- some companies were stuck because they could not import it. So these are trends that will lead to creation of domestic supply chains. Again, a big growth driver of the logistics sector in the country. With COVID and with the fact that there is a demand towards less touch, we certainly believe e-commerce, omnichannel, et cetera will grow further. Of course, the government's imperative towards infrastructure development should continue. And of course, we believe that regulatory reforms are going to help companies like us more and more since we are organized and we have the capabilities of moving our operations more digitally as well as be compliant as well as much as possible. Slide 10, and 10 onwards is the key U.S. cities that we have in our business compared to some of our competitors. I'll just mention that quickly. Slide 11 talks about our -- essentially our complex supply chain design elements that we have. We're able to look at the entire customers, logistics and demand and supply chains and figure out how we can design the supply chains for them, customize to them as well as plugging into the network wherever possible. And this is clearly example with the automotive supply chain where we work right from the production to the aftermarket segment as well. The other areas that we have a strong USPs as I mentioned is the multimodal transport elements, example is on Slide 12, where we are able to move cargo between different modes of transport quite seamlessly. So if we have some cargo that is originating in the north of India, we can link it by road or rail to, let's say, the West port, West, one of the coastal port and then subsequently take it on our ships down to the south to any of the destination. So that is a strong capability that we've seen right now as well where we've been able to utilize this period to move between modes of transport quite seamlessly. The other unique positioning that we have is how we operate our 3PL, 4PL, SCM business. It is mostly how we operate is moderately asset-heavy. So we do -- we're not completely asset-light or completely asset-heavy. There are companies today in the last 2 months have been dramatically affected by having a lot of assets on their book. And they have been struggling with getting their trucks or their own warehouses running. And some competitors who have worked with completely no assets have had a lot of issues with getting suppliers to come on board or even when they needed to -- some customers wanted some cargo to be moved or to be operated upon, they did not have capabilities, where we were able to bring in some of our own trucks as well. So this kind of a balanced approach, which is neither asset-heavy or asset-light, has -- and we've seen this for the last several decades how it has helped us as well as control the market pricing as well. We are also good and strong in modern warehousing systems from running e-commerce centers to pure warehousing or even yards for customers. If you see Slide 14, there are PDI activities we do for customers in several yards across the country. Again, this is a capability that we have built in the last few years and integrating it with multimodal transport for the automobile sector has been quite beneficial. One of the other USPs from the road transport sector is actually having a single window for both less than truckload and FTL at a national level. So we are able to generate business for customers, wherever they want either -- or services, either LTL or FTL at the national level. And this is one of the things that is quite unique to us because there are mostly companies in India that are only FTL or only LTL. Last but not the least, the key USP has been technology. Slide 16 talks about how we've been using technology to integrating everything that we do. From analytics and machine learning to sort of run the base of the operations to managing big data as well as all the IoT devices that we have from CS providers to temperature-control mechanisms. We've integrated everything on to apps that we have, both for our own internal teams as well as for customer as well. We have also initiated e-invoicing. Now though the government has not started e-invoicing yet or rather made it compulsory, we Have started e-invoicing as well in a big way and that has helped us to cut down some of the cycles that we have in terms of the cash-to-cash cycle. It is going to take some time because there's not many customers who are accepting it completely, but it's going to certainly benefit in the long run. In terms of moving to results, on Slide 17, we have had a flat growth over the year. It has been a challenging year. In the last few months, we did pick up some momentum. But the last few days of March, we lost almost INR 100 crores of sales because this is a month that we have maximum sales throughout the year. So this has had an impact on the overall top line and bottom line. As you are aware that the bottom line also had a INR 9 crore-odd impairment for Wind Power. But barring all of these things, we have actually done slightly better, I will say, over the last year. And though we -- our trend is slightly lower just in the last financial year. And clearly, FY '21 is a challenging year. But at least the basics are in place, and we can see that there is potential that we have that we can grow the businesses quite rapidly. In terms of the division performances, if I move to freight business on Slide 19, first. The freight business grew by -- moderately only by about 3-odd percent. But we have improved our ROCE here as we committed, that will continue to move up. Again, the last few days, we lost a lot of business, but the ratio of LTL to FTL remains at 1/3 to 2/3. So our hope for this year, our plan and strategy for this year is that we will be able to hopefully maintain the business levels at last year, but trying to push up our ROCEs as well. Our sense is that in this financial year, the SME business is going to be tougher. So the ratio of 1/3 LTL might shift a little bit more towards FTL given that the SMEs are starting up slowly, so -- and they're typically using -- are the users of LTL more and more. Going ahead, in terms of our supply chain business, which actually recorded a negative growth of approximately 9% over the year -- 7.5% over the year. This has come about because of the -- clearly, the slowdown in the automotive sector, which has been hit very badly by not just changeover from BS-IV to BS-VI, but introduction of GST as well as several other factors that have affected it negatively. A good area here that we've seen good growth here is warehousing as well as in the movement of tractors and agricultural equipment. This has done relatively well for us. However, because of lower margins as well as lower revenues, the ROCEs have come down. '17 and '18 -- '17, '18 and '18, '19 were good years for the company, for the division as we grew by 17% on average. So a little bit of the base effect is also coming here. Our strategy for the coming year is that we are focusing a lot towards warehousing and the areas where we should be able to sustain business irrespective of any kind of downturn. And so that will continue. Slide 21 talked about our shipping business. In Seaways we -- as you know, we added 1 ship in October 2019. Because of lower volume for the full year, we have had a moderate growth in terms of the top line as well as the bottom line as well. There has been immense pressure in the last quarter with rates coming down on the West Coast as well as our cost structure going up of a low sulfur fuel. The introduction of the low sulfur fuel actually led to some amount shortages in the market in March, and the pricing went up to more than INR 50,000 a ton, which has now come down to about INR 20,000. However, that period hit us in terms of our cost structure. Though our ROCEs have dipped in slightly because of the ship acquisition so far. The strategy for this year is to continue the growth plans that we have to have the same number of ships. However, some ships are going for dry dock, et cetera, which is a standard process, and we are hopeful that we'll be able to maintain these margins for the year. In terms of our joint ventures, I mentioned that the rail business has been doing relatively well. In fact, in the first 2 months of this year, they have done exceptionally well as well, and they will continue to see this trend towards multimodal transport. Last year, we demerged cold chain into a 100% subsidiary in the line of trying to get another partner there. That process is still on, but the business has grown quite tremendously in the last year. And we feel that now, especially in these circumstances, such businesses will have a long-term impact on the company as we are able to focus more towards consumption side of the economy. The Transystem business, that is a joint venture with Mitsui, we -- the business has come down because Toyota, who is a principal customer that had lower business there. Moving on. In terms of ratios, the debt-equity ratio of the company is at 0.42, very stable in terms of our outlook for cash as well. I mentioned that we are using only 45% of our limits, which is at INR 280 crores, plus INR 7.5 crores of additional limits that we have got from banks currently. We have enough space to move up once the business increases as well as enough credit lines lined up in case if we need to borrow additionally. The ROCE for the overall business has come down clearly because the margins have not really gone up. And we added some CapEx in the last year of the new ship, et cetera. Finally speaking, in terms of the CapEx plan for the year, Slide #26, we are looking to spend about INR 100 crores this year. Roughly, some of them will go into hub centers, small warehouses as well as acquisition of some trucks as well as the rates that we have talked about in the past for automotive carriers. Mostly, this will be self-funded except the places where we can get good funding from the market, so we would take in some debt. But net debt position should not really go up in the fiscal. So in terms of the full year outlook for 2021 is -- unfortunately, we cannot give you a full detailed outlook right now because things are so dynamic and fluid. And I think possibly in the 6-month period, is when we can first talk about how the year will look for the full, in terms of both revenues, in terms of profitability. Certainly, as a company, we are very well focused on the long-term growth of the company. We do not take these -- any short-term bets and are completely focused towards customer connection as well as liquidity management with a very strong team morale. These are some of our thoughts. We'll be very happy to take in questions now. Thank you.

[Operator Instructions] First question comes from Depesh Kashyap from Equirus Securities.

I got few questions on supply chain division. Sir, it would be great if you could give a rough breakout of the transportation in warehouses revenue, please?

Thank you. We do not give a breakup of the revenues of the warehousing and the transportation side of that business because many of -- for us, many of that revenue is interlinked, and it is very difficult for us to split them.

Okay. Sir, for the last 3 years, your warehousing space is largely at 12 million square feet only. So what is your guidance going forward on this?

So the warehousing space, you're right, that has not increased in terms of square footage, but we have definitely increased in terms of cubic footage. Some of the warehouses have been repurposed, where we've been able to use space above in terms of different at various heights. But that has helped the business as well as helped to bring down costs also for customers. So overall coverage of warehousing space has increased. But not necessarily in square footage basis.

Okay. So -- but your guidance like earlier was like 0.5 million to 1 million square feet going forward increase per year. So will that hold true now or leaving track this year obviously?

No, we do not have a guidance for this year, at least in terms of the warehousing space augmentation. I think we will see how it comes about because there are contracts. There are some customers who are not looking at contracts and they're saying, let it be business as usual, whereas some customers are talking about different types of contracts. So it's a very, very fluid situation. I think right now, we do not have a guidance of the increase in warehousing space for this year.

Understood. Sir, also on the supply chain division, like I believe 70% to 75% of your revenues come from the auto sector, right? So can you give a rough split how much is on the 2-wheeler, 4-wheeler of the commercial vehicle segment?

Yes. So mostly, the business, you're right, 75%, 80% comes from the automotive sector, but we have now starting to -- started to split that business into basically 3 areas. One is mobility as a whole, as 1 which includes the 2 wheelers and the 4 wheelers and electric vehicles, et cetera. Then we have commercial vehicles, like the likes of Volvo or Tata Motors and so on. And the third is the agricultural input items. It could be tractors, it could be agricultural equipment and so on. So when we split it into these 3, broadly speaking, I would say, about 60 -- 2/3 of it comes from the first, that is mobility, and roughly about the rest from the others.

Okay. Sir lastly, you're declining the freight segment of 1% is clearly like an outperformance in value. So just wanted to understand what -- which all industries you cater to in this segment? And what will be the industry share -- revenue share of the various industry in the freight segment, please?

For freight segment, we do a lot of work in the engineering sector as well as on the machinery equipment sector. So that business has increased, but we've also created a focus in the last year or so more towards the consumption side of the businesses there, whether it is FMCG companies or whether it is more localized kind of businesses, which are LTL friendly, that has helped us to keep up the margin.

[Operator Instructions] Next question comes from Preet Nagarsheth from Wealth Finvisor.

Vineet. So one question I wanted to understand is that what would it take to breakeven in this quarter? Given that, say, April was very slow and even May, maybe like in 30, 40 percentage terms. How do you look at that?

So again, we cannot really give you details about specifics about business for the month -- for the last 2 months. But I can tell you 2, 3 broad things that we looked at organizationally before we got down -- around the time we got into the lockdown in the first week of April. At that time, internally, our teams had sort of thought from a scenario planning perspective that we should try to hit at 10% to 15% in the month. Of our average monthly business for the last year, 10% to 15% of that in the month of April, maybe about 25% to 30% in the month of May and about 50% to about 60% in the month of June. And that would have essentially meant that we would probably not have a cash loss in the company. Now we have a depreciation of roughly about INR 6 crores to INR 7 crores a month. So that's about INR 20-odd crores of depreciation for the quarter as well. So given all of that, I can surely say that we've done better in the last 2 months in terms of those targets that we had. So we are quite hopeful that our customer connect and all the actions that we've taken will help us to breakeven from a -- or rather not breakeven, it's not the right word, but perhaps not have a cash loss in the month of June.

Okay. But would there also be additional cost-cutting measures that would help you in this, which has been factored in just because of the, say, less of travel or less of other expenses, which normally would have occur?

Yes, certainly. But we do have a certain amount of fixed costs in terms of employees, et cetera. We have paid every employee that has been in the place of posting in the last 2 months. We have not had any layoffs. We've also supported the labor and the migrant community that works with us in all our facilities. So in that sense, there is a certain amount of fixed costs because we are looking at it a little bit from a long-term perspective. And so yes, there could be a little bit of a hit this quarter, but long term, we should be better off.

Next question comes from Sayan Das Sharma from Bank Of Baroda Capital Markets.

Sir, my first question is on the Seaways business. So if I look at your presentation...

Can you be a little louder, we can't hear you.

Is it better now, sir?

Yes, much better. Thank you.

Yes. So sir, what I was asking on the Seaways businesses, you alluded to the fact that there has been a double whammy of realization pressure as well as a cost increase because of the IMO regulations kicking in. So it would be helpful if you can highlight how much was the cost increase that -- because of this regulation? And also, what are your plans? I mean, when do you see that we'll be able to pass it on to consumers? And therefore, go back to the normalized margins that you used to do in the past quarter?

So fuel, in terms of our shipping business accounts about 40%, 45% of the cost structures that helped -- so that went up by about, I would say, the impact on the overall would be about 10%, 15% in terms of cost structure. It is very difficult to pass this on. That was last year, of course, with a hyper competitive situation, it was very difficult to pass on many of these increases. However, fortunately, with the oil prices falling in the month of April and May, this has come down and the realization -- the net realization rather is better.

Okay. Okay sure. Hello?

Thank you.

Yes. Hello? And my second question, if I may, sir. Hello?

Yes, please go ahead.

Yes. If I may, sir, if I look at your Transystem JV, your presentation mentioned that your -- the top line of that JV has gone down by about 13%, 14%. But if I look at the, our profit share in the consolidated revenue, that is -- that is almost similar to last year at around INR 25 crores. So why -- what is this attributed to, this increase in profitability for Transystem?

Again, some of it is better cost management as well as some amount of optimization there in terms of vehicle, et cetera. The second is also the benefit of tax cut, I think we went from 33%, 34% to 25%. So that was some benefit there as well.

[Operator Instructions] Next question comes from Prateek Kumar from Antique Stock Broking.

Hello, Can you hear me?

Yes. Please, go ahead.

Yes. Vineet sir, so my first question is on driver availability and like long-haul operating rate. So we hear that -- I mean, you also mentioned that freight rates have been increased. So the trucks which are attached to us in terms of our procurement from brokers. So have they increased rates, spot rates for your procurement? And as a result, could there be like a disproportionate impact on your margins for your inability to pass on to customers?

No. Well there has been in some sectors, disproportionate increase in the freight rates, for sure, because of the shortage of trucks or a shortage of drivers and hence shortage of trucks as well. Also, many trucks have not moved simply because there's no return cargo. So because of the lack of return cargo, they felt that they do not want to move or they want to take a higher amount from -- at the point of origin. But that has not affected our margins in any significant way. I think what we have done also in this scenario is talk to the customers and explain them the current scenario. And most customers have been quite happy to pass on some additional increase, even though we might not have it in the contract. Though there are always some customers that would probably -- don't do that. But in the long long-term range of things, it's not that significant also right now. So I would say there has not been any major impact on us with the freight increases.

I'll ask alternately also, like, for example, because of some of the smaller operators shutting down, would we benefit also disproportionately? I mean, like in terms of organized segment market share?

Not exactly. I think what happens is that there are some of our competitors at the smaller end who might not be able to approach the clients directly. So that is a change. Perhaps that might happen. But barring that, we feel that the presence of a large group of potential vendors to us is good for the market and good for us.

Next question comes from [indiscernible] from [indiscernible] .

This is [indiscernible]. Sir, you commented on [indiscernible] or is it 1.5x previous rate? And secondly, do you think that, that is the reason why there has been momentum in rail? And once things normalize, how would you foresee the rail-road equation to pan out?

Sure. So we -- I think it's sectoral. I don't think we can say definitively for one particular -- nationally that this has been the impact of increase of freight rate some if sectors have been much more than others. The impact of mango season, for example, from [indiscernible] has been very limited this time. But in some places because of shortage of stuff, for example, in the eastern sector or in the West, where there are a lot many more red zones or containment zones, the freight rates from those zones are much higher. So not -- so there's -- I don't have a national picture in terms of a rate there. In some sectors, in fact, rates are also moderate and lower as it is at this time of the year. So it has not been crazily high. And I think going forward, this -- there could be some factors that could play, which could move these freight rates around. If the government decides to pass on the reduction in the global fuel prices to -- domestically, then we'll see fall in oil prices as diesel prices and hence, perhaps fall in freight rates also. But that doesn't seem very likely currently. And capacity utilization of trucks around the system is also quite low because there is not enough demand yet. So given all of that, we do not expect the freight rates to really go up or significantly come down in the next few months.

Okay. And sir, could you just highlight a little bit on-road rail as in the rail doing better than road right now? Is it -- that just temporary? Or do you think slightly more sustainable going into later in the year and next year?

Actually, it also depends upon the fuel prices. If the road rates will increase's will, then rail becomes more unviable -- oh, sorry, road becomes -- rail becomes more viable. So if road rates are -- go down, then rail is a little difficult to grow -- difficult for them to grow. But the other factor that is in play is the low-touch points as well as the fact that the truck will not -- or rather the rail will not stopped anywhere on the road. So there is a -- I would say, to some extent, a better time guarantee versus roads right now.

Next question comes from Shreyas Bhukhanwala from Canara Robeco Mutual Funds.

Sir, two questions. One is on the pricing. So are we seeing any pricing pressures from our customers? And secondly, on the opportunity from -- like not from consolidation in freight business, like is there a possibility of gaining some market share there?

The pricing pressure is, I think in our business is ongoing. It is never stopping. It never stops really because it is one of the areas that people, customers or other companies look for cutting costs, whether it is in good times or bad times. So that pressure is always on. I think it's a matter of convincing customers how we have been very consensus in terms of how we run the business and how it will help them in the long run. I mean the companies that we work with, for example, in the online space. And if we tell them that we are -- and if you tell us just remove all the people that are there, we wouldn't do that because ultimately, when the -- when businesses ramp up, at that point in time, you need the skilled manpower who is able to identify, let's say, you're picking a shirt which is size 42 in white color versus a size 44 in white color. Now that kind of a difference in productivity, our loss of productivity is much higher than the cost of removing people at wins and fancies of the market situation. So sometimes we have to bear with all of that, and some customers understand that. And like, for example, we did see it happen. In the month of April, the first few days of April, online sales were virtually 0. And now some of our the -- some of our customers are telling us that they want -- that the sales are going to exceed numbers in February and January. So we have to ramp up to that capacity, and we are able to do that quickly because teams are there. So the cost pressures are there always, but I think we are trying to manage that as much as possible. The second is on the market share gain for freight business. I think there is always some scope there. But overall, the market, if we are expecting a negative -- 0 to a negative GDP growth this year, the overall market will be affected. And I think there is certainly possibility of market share gains. But we have to be careful that the gain is not based on lower profitability or higher receivables because this is also a period when receivables tend to go up, and we've seen this in several cycles that in eagerness to do business, you do business with customers that don't end up paying at all. And so we would be cautious to take growth only and until it is -- we are very sure about it.

Sure. And then last on the shipping side, so you said probably despite of the competition on the West side, probably we would be able to maintain our margins, right?

That's right.

Sure. And Sir, lastly, if I can. On the NCD side, you are looking to raise around INR 200 crores? Is it...

That's an enabling resolution that we have to take, it's not something that we intend to do.

Next question comes from Krupashankar from Spark Capital.

I have a question relating to the fixed cost. So can you give me a number as to what would be the overall fixed cost per quarter? Of course, the break-up wise it is not required, but you suggested that the employee cost is a [indiscernible] quantum. But a part from the [indiscernible], the other key risks are quantum.

Sorry, can you repeat that?

Right. So I just wanted to know what would be the quantum of fixed cost per month if it is available?

See quantum of fixed cost is difficult to really identify directly in the sense that manpower cost is fixed, some of land and building is paid for. So of course, there's some interest cost that is there, then certain amounts of admin expenditure, et cetera. But giving exact numbers is not going to be fair, I would still iterate that if we are able to achieve roughly 50% of our average monthly business in the first quarter, then we are able to not have a cash flow.

And my second question is relating to the 3PL operations. So I just want to understand how are the warehousing lease agreement structured? And do we see that given that warehousing is growing at competitively better spaced than transportation. Do we see more of nonautomotive business driving this growth? Or is it more to do with automotive itself with more of value added services?

So, certainly, it is more nonauto growth, online pharma companies are growing. One of the trends, as we said is omnichannel growth. So companies that are in various aspects of their business have not just wanting -- not just -- I mean, various aspects, changing their sales systems are telling us that we don't want to just have [indiscernible], but also a line for e-commerce in those facilities. So regular companies are adding warehousing space with e-commerce capability, and e-commerce companies are expanding space themselves. So given all of that, we are seeing trends of more in the nonautomotive space for warehousing work.

And regarding the lease -- leases of warehousing, how is it structured? Is it renewed on an annual basis or is it on a -- per a 3-year basis or 5-year basis?

Typically, the leases are back to back with the contract that we have with our clients. We do not have any empty warehousing space. And these leases are being accounted in the AS 116 as well. Yes. So one more clarification is that we have around INR 60 lakhs of that impact on the EBITDA level only. And there is close to INR 23 crores of right to use as that has been recognized. You would find in the balance sheet right now.

Next question comes from Ankit Panchmatia from B&K Securities.

Sir, one data point, what would be the contribution from e-commerce segment to the overall business?

We don't have a specific number to share there, sorry.

Okay. Sir, I have been seeing that our margins in the supply chain are close to 6-year low levels and our margins in the freight business are close to 2-year high levels. So just want your flavor on this SCS margins, how are we looking out to improve these margins? What are our steps going ahead?

So one of the reasons to have these various divisions is that we are able to sustain margins as well. So as there are times, when certain divisions do well, certain divisions don't do well based on market and hence, we are able to balance the overall portfolio better. You are right that the margins have come up, '16, '17 is when we [indiscernible] the same margin. [indiscernible]

[indiscernible] in Seaways, when at the company level, you mentioned that 50% of operations is sufficient enough for us to be EBITDA neutral. How would it be for the Seaways business [indiscernible?]

[indiscernible]

Sir, CCR Container Corporation has given away those ships or they've...

Well we do not know the exact detailed status. But we know that they are not operating those ships. They had chartered those ships from Shreyas itself. [indiscernible]

Next question comes from Priyanka Varma from ICIC Bank.

Sir, my question comes from freight segment. Do we have any breakup sort of thing in terms of FTL and LTL in the trade segment?

Yes, 1/3 of the business comes from less than truck load.

Okay. Okay. And how do we see this ratio moving, going forward?

Here, it's going to be a challenge since MSMEs are not doing too well, and we do not expect this ratio to improve towards LTL but deteriorate to some extent, I think possibly we'll do maybe a 70-30 ratio this year.

That would be the last question for the day. Now I hand over the floor to Mr. Ashish Tiwari for closing comments.

Thank you very much to all of you for joining this call. I again apologize for the yesterday's postponement and any inconvenience to you. Take care of yourself, and thank you very much.

Thank you, sir.