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

Good evening, ladies and gentlemen. I am Naina, moderator for this conference call. Before we begin with, I would like to extend my warm welcome for joining us today for the discussion on the financial results for H1 financial year 2021, and addressing investors' and analyst queries. On board, we have with us today Mr. Vineet Agarwal, Managing Director, TCI; and Mr. Ashish Tiwari, Chief Financial Officer. [Operator Instructions] Please note that this conference is being recorded. I would now request Mr. Ashish Tiwari, Group CFO, to embark on this meeting. Thank you, and over to you, sir.

Thank you, Naina. Good evening, ladies and gentlemen. Again, I'm welcoming you all to this earning call for FY '21 first half. Today, we will begin with the opening remarks from Mr. Vineet Agarwal, on the business and the industry; followed by our earnings call presentation. I hope that you would have got the copy of the same along with the invitation. It is also available on the -- our website, tcl.com. Now I will request Mr. Agarwal to just give us opening remarks.

Thank you. Ashish, can you please put up the presentation. Good evening, and thank you for coming today, joining us today for our earnings call -- for our 6 monthly earnings call. It's a difficult circumstances, but we are all here, and we are here to answer all the questions that you might have related to our business. So let me start off by first talking a little bit about what is TCI for some of you who have joined us for the first time. And then I can get into specifics related to divisions or what has really happened in the last 3 months. So TCI is a 62-year-old organization, and it's a group with moving more than 2.5% of India's GDP. We move through about 12,000 of our own trucks, and we have got close to 7,000 people on the payroll. Next slide, please. This is the group overview in terms of the divisions as well as the joint ventures and other group companies. So there are 3 major divisions, which is the Freight, Supply Chain Solutions, Seaway; and 2 joint ventures, which is CONCOR. We have 1 for rail logistics with CONCOR and with Mitsui for automobile logistics called Transystem. We have subsidiaries of -- called TCI Cold Chain, and subsidiary in Bangladesh and a subsidiary in Nepal, and group companies of Express and developers. Next slide, please. We have a very illustrious Board with many people from different walks of industry -- in different industries, and which helps us to really look at things from different perspectives as well as ensure that we keep up with the highest corporate government standards. Next slide, please. Again, as a company, we are a thought leader as well, with a lot of our publications that really go out to the market as well as to the industry, and we also are a benchmark in many ways. Next slide, please. The logistics market size, as you all know, has been growing and is -- typically glows in line with GDP growth. But in the last few years, the kind of growth that we've seen in this industry is more towards the formalization of the industry. More specifically with GST coming above, we are seeing that the fragmentation, though it still exists, is still -- it means that there are opportunities for larger companies to operate even more and more. And we operate in various segments from our FTL, LTL, rail, 3PL and shipping, which is mostly costal shipping. Next slide, please. So in the last few months, of course, being a very, very challenging time, we've been able to ensure that we've been very responsive, not just towards our employees as well as -- but also to our customers. So from an employee perspective, we have not cut anyone salary. We have not removed any person from the organization. And we've also given the bonus that is typically due at this point in time. And we are also in the process of considering an increment for the year. Because we feel that this is the time when a lot of employees have stood up and been on the ground and assisted with our customer -- assisted our customers in getting their cargo moving in terms of getting their warehouses, operational and so on and so forth. So this is a -- has been an excellent time in terms of employee response, and we want to also clearly recognize that fact. From a customer perspective, the huge number of calls that have been made, the e-mails that we have sent, the virtual video conferences that we have done have ensured that we have a very solid pipeline that is coming for the next few months as well as our receivables have been also in a good -- has been in good shape. So we are using this particular connect that we made with customers and see how we can leverage, not just now for this financial year, but how we can look at the next financial year and growth going forward. From a vendor perspective, we've not held anyone's payments and made every payment on time and before time, in some cases, to ensure that we are able to get the support from vendors, be it at a labor and warehouse level where we are operating for, let's say, e-commerce players, and they've really scaled up, and they want more and more people to assist in the operations, or from our vendors who operate trucks for us in many places. So they've been able to -- we've been able to use that and respond very quickly to all our customers. Next slide, please. So in terms of growth drivers, some of you must have seen this from the last year's presentation -- last quarter's presentation, rather. There are sectors that are seeing tremendous growth, like the agriculture sector, food processing sector, pharmaceuticals, chemicals. And of course, there is some shift that has started to happen towards different modes of transport. So it's not just road transport, but rail and coastal shipping has also picked up quite a lot. Especially when we are seeing in the food grain movement, et cetera, since the government has mandated that for free food grains till the end of this month, if I believe -- if I remember correctly, that has really helped in procurement and movement via using different modes of transport. We've also seen in this period, now, at least in the last 2 months, stocking and restocking taking place on the automobile side, on the retail side. And certainly on the e-commerce side, a huge amount of growth has been witnessed. All our customers are demanding additional space. Well, some -- in some cases, safety stock. A few cases where they have looked at consolidation, but definitely looking at larger warehouse spaces. In terms of long-term drivers, we definitely believe in the India story, not just because of the fact that we have a large domestic market, but also there is a possibility with the government's intervention, using things like the PLI, production-linked incentives, and others to attract global value chains to India. And when that starts happening, we, as a company, should also benefit in some form or the other for logistics. Other trends that are very visible other than e-commerce, of course, is the omni-channel. Even this festival season, we've seen a lot of people have, perhaps, gone to markets, seen things, but really gone back home and ordered things online, or maybe has seen some ad somewhere and ordered online, or seen some online ad and ordered off-line, gone to the store. So various omnichannel aspects have been very, very visible in the last few months. I mentioned a little bit about multi-modal transport. And specifically on digitization, we are seeing a lot of initiatives by the government. And we, as an organization, have also been involved with the Ministry of Commerce, where they have a logistics secretary and a wing, in trying to see how we can digitize a lot of the processes to make things from an ease of doing business in India better, how can it be streamlined and smoothened? So there's a lot of activities already happening in that space also. And we think those are also great drivers for us as an organization. Next slide, please. On the broad USPs that we have versus many of our competitors, is the ability that we are providing a huge range of services, diversified operations, and we've seen that specifically during this pandemic that we were able to deliver using these various modes of transport, having the range of services from a basic transport to complex warehousing as well. Next slide, please. Amongst the other capabilities that we have in terms of complete design of supply chains. And we are seeing that some customers are coming to us and saying that, can you do this for us? Why don't you add this additional aspect? And we are seeing that, that scope is just going to grow and accelerate. We also couple this up with our digital solution, so that we have a platform where they can also view all of these things that we are doing. And accordingly, the interaction for us is more digital as we go forward. Next, please. As a company, we've always believed in the light-to-medium asset model, and I think that is mostly visible. So if you see our freight businesses on a light asset model, and our shipping business is on a heavy asset model, and the supply chain is somewhat in the middle. And this has had a good benefit, specifically even in this time where we've been able to bring some of our own trucks to operations, where we have not been able to find market trucks. And on the other side, some of our competitors have really faced challenges to have -- when they have had too many trucks, because that has been difficult to control, not find drivers and not get those trucks on the road. We've also seen this is a time when some of the suppliers do have come together with the vendors and have cartelized. So in several cases where companies have no assets, we've seen that happen as well. And we think that the model that we've adopted from a light-to-medium asset should help us in the long run. Next slide, please. I mentioned about multimodal transport. There's not -- I cannot emphasize more and more about the impact of this now. The growth in this area is immense. We are seeing a lot of demand for our services, be it on the coast, be it on -- via rail and a combination of road, rail, sea. We have been accelerating this growth opportunity by putting in more people, business development teams and also solution development teams because sometimes the customer is not clear as to what is -- how can they move towards multimodal transport. In fact, just before this call, I was on a call with a particular customer, and they have movement of fly ash, for example. And they are saying that how can you use fly ash through a multimodal network? Because today, fly ash moves on a regular rail network, and it tends to fly off, and it's an environmental concern. So can you put some liners or something to design a solution using containers, so that we are able to not only move it multimodal, but also be environment ready. So like this, we are seeing demand for lots of different types of industries wanting to use multimodal transport. Next, please. From a warehousing perspective, we've rapidly increased our footprint where it comes to not just the closed warehouses that is the -- inside the box that, we call, for not just e-commerce companies, FMCG companies and so on, but also build large yards across the country. And wherever the -- wherever our customers feel that their production -- to get their production there locally to their dealers, et cetera, is going to take time, we've created yards for them. And this has really helped because customers have been able to capture sales in -- at the right time and also to make deliveries to their further customers very easily. In some cases, customers have also bypassed dealers because it is easy to build directly as well to customers and save that extra margin. So we are seeing this as a good growth area of creating these multiple yards. And that in, coupled with our multimodal network of, let's say, using in the automobile space, the rakes that we have for movement of cars, et cetera, is creating a unique network, which is of multimodal in nature, which is also quite -- and is also sustainable for the future. Next, please. From a basic freight perspective, we are amongst a few companies who have a national network, which handles all LTL and FTL. In this time, some of the large customers have also looked at a more frequent movement of cargo versus just FTL. So we have helped them in many of these using our hub centers. And though some SMEs, MSMEs have taken a little longer to come back on track, but otherwise, we are seeing that our LTL business is almost back to normal at pre-COVID levels. Next, please. I mentioned a little bit about technology in terms of what we are doing. Next, please. So in the first half of the year, we have lost about 1/4 of sales as compared to the last financial year. Obviously, this is mostly because of the last -- first quarter of this financial year. Profitability is a little bit lower, about 1/3 lower compared to last year. But the last quarter, Q2, has been quite robust, as you've seen, and we expect this to continue. Next, please. This is division-specific financial results. And if I want to specifically talk about what's happened per division, from a freight business perspective, we have seen that volumes have come back in quarter 2, and we are at just 9% negative over the full financial -- over the last financial year. Though the margins are slightly better and we see that this trend should continue in terms of business growth as well. So industries -- some industries have picked up specifically on the textile side, a little bit pickup we are seeing because -- perhaps because of restocking that has happened, a lot of the dairy product movement, food grain movement, [Audio Gap] metals movement, all this has happened in the last quarter a lot more. And hence, we are able to catch up in -- to a great extent. LTL business still is lesser than the 33% in the last financial year, but we expect to catch up going forward as well. The other -- if you can just go back, Ashish. I think the other thing that we are seeing here is, of course, the freight rates are started to move up a little bit because of the fuel price hikes that have happened or rather fuel prices have not come down. So demand had been higher and, hence, some stretching has happened on the few -- on the rates as well -- freight rates. Though we feel that this will also keep growing because freight rates will keep increasing, capacity expansion has not happened too much. A lot of capacity has been recycled or rather second-hand sales of trucks, et cetera, are much better than primary sales of long-haul contracts. We've seen good growth in the short-haul and the medium-haul, but not necessarily the long-haul in the 6, 7 months in terms of sales. So it -- the next 2 quarters could be slightly tight from a cost perspective, but that is mainly to be seen in terms of how much capacity expansion happens on the purchase of new trucks. Next, please. On the supply chain side, you can see over quarter-over-quarter, we've had a 2.3% growth, and this is in line with the growth that we are seeing with the automobile sector. As you know, this division has -- about 80% of our business, comes from the auto sector. Of course, growth in e-commerce, in warehousing and other areas have also helped us keep up the growth. And we are quite confident that we will make up the lost quarter in this financial year itself. Overall, as you also know, that we've added 2 rakes for automobile transportation in this space, and that has started to also give us good results. On the Seaway side, volumes are higher than last year by about 9-odd percent. This is because of an addition of 1 ship that happened last year, and the -- so over last year, we are seeing that benefit in this quarter. But one of our other ships was also under dry dock. We are still seeing high demand from the western sector. One of the ships that we were planning to buy in Q2, we've not been able to purchase, but we're looking to get this possibly in Q4. So that was more or less in line with what we've been saying of adding a new ship between every 12 to 18 months. So here the trends are very positive. Fuel prices have also come down quite substantially over the last 6, 7 months. So that is bunker rates. And that has helped us to ensure that we are keeping up the margins. Next, please. Our joint ventures, the rail business, as I said, the demand has been very high. So the growth in this half year has been almost 70% over the previous financial year. And we hope we can see that this growth is possibly going to continue with the demand that we have in terms of the pipeline, et cetera, so far -- currently. The cold chain business has grown about 21% odd in the first 6 months. And our Transystem business is down by half because of -- clearly because automobile sector has not done too well. Our debt-to-equity ratio is very comfortable. We have been only -- utilized only under 50% of our working capital limits currently. And we've been able to reduce our debts by about INR 100 crores in this quarter as well. So you can see that the overall capital employed is also lower compared to last year in this period, and all the numbers seem to be good. We've also got our re-rating done -- rather, our ICRA rating A1+ has been reaffirmed by that. Next, please. This is the overall results. Margins are more or less in line with -- is slightly higher than last year of the same period, and revenues are almost at the same level -- so as -- if I compare Q2 to Q2. But on H2 to H2 levels, revenues is still down about 23%. So the other -- in terms of guidance, what we feel for Q3 and Q4 is that overall, as a company, we should probably get to 80%, 85% of our FY '20 levels, both in terms of revenues and in terms of profitability. The trends indicate that we should be able to get there. And depending upon how the last quarter goes, if you remember that we lost about INR 100 crores of sales in March '20 this year because of the lockdown, et cetera. But hopefully, if things are okay, we should be able to make up some of that losses in this financial year and reach that 85% levels of FY '20. So that's all I had. If you have any questions, please -- sorry, [Audio Gap] the CapEx plan, CapEx is at about INR [ 150 ] crores plan versus about INR 111 crores that we spent last year, and about INR 30 crores that we spent in the first half. So we do expect about INR 125 crores to INR 150 crores of expenditure. If we are able to purchase a new ship that is under plan. So if that happens, we should be able to get INR 125 crores to INR 150 crores roughly. Thank you so much, and we are very -- we are happy that you've joined us. Please let us so if you have any questions. Thank you.

[Operator Instructions] So the first question comes from Mr. Preet Nagarsheth.

I would like to better understand, maybe if you guys are planning to take advantage of the vaccine opportunity that might be there, given that the cold chain business is growing. So if you can shed some light on that?

Certainly. So vaccine logistics is an important factor, and we believe that the requirement will not be only from a cold chain perspective, but from an overall, maybe, warehousing perspective as well. See, we do not know yet whether the vaccine will be fully requiring a cold chain or not. Even requiring a cold chain, what aspects would be required? But we are definitely thinking about it and planning for the same. I cannot tell you exactly what we're doing, but we definitely have plans for it, and we've started our work already and created capacity.

Okay. Alongside that, could you also shed some light on the cold chain business, when you say that you may feel this could be a long-term driver for the business I think in the last call. So given that the agri reforms have come in, how do you see cold chain developing from here?

So cold chain is a very interesting business because in the last 10, 12 years, the amount of capital that has come into this business has been huge from a PE perspective, and that has meant that we have overcapacity in some areas of cold chain. So what our strategy has been that we are not going ahead and buying more and more trucks or creating new warehouse capacity, et cetera. But we are going in a manner of using some strategic assets, as we do with our all other businesses. That creates some strategic assets, but also a lot of vendors or companies that we can get from -- who can work with us together rather than owning those assets. And growth areas that we've seen, we've started work for a cloud kitchen or a dark kitchen, as they call it. We've started work in the area of an FMCG company. We started in a chemicals company. All these companies require cold chain. And we see good growth opportunity here. So definitely, in the next few years, we see this as a growth driver for us. And simultaneously, when we are getting some customers, let's say, the FMCG customers, I'm talking about, we actually have built a large warehouse for them -- rather got a large warehouse for them, which is dry warehouse. So along with the dry warehouse, there is a cold storage warehouse. So like these kind of solutions that we are able to provide, we have -- we get a lot of inquiries and, hence, it becomes a good driver for us.

The next question comes from Sayan Das Sharma.

Hope you are doing well. This is Sayan from BOB Caps. Sir, basically, 2 questions on the SCS segment. First of all, if you can highlight individual segment-wise, how the auto -- how do you see the auto demand panning out, sir, across 2-wheelers, 4-wheelers, commercial vehicles? In individual segments, how do you see the auto demand? And do you see the recovery that you have seen over the last couple of months? Do you believe that, that is mostly a festive-led transient factor? Or do you expect that to continue also? Would love to get your views on that, sir.

Sure. Thank you, Sayan, and hope you're well as well. So what we have seen in the auto sector is that the demand has been high, and in some cases, extremely high because of the fact that many of them have launched new products or there is restocking happening because of BS-VI. So something has definitely triggered that. Clearly, we also know that there are -- because of social distancing norms, there is a demand for smaller end cars, et cetera, or for bikes, which has increased quite a lot. So these trends are quite visible. And we are hopeful that this will continue, though there is some signs that it might not be that high. But I think right now the sense that we're getting is that post Diwali, we'll get a better view of what is happening. But I think some of this will -- you might see a slight dip in December because it's a model change here. As you know, that we move to 2021, so some companies might not -- some people might not buy a new vehicle in December. But otherwise, we feel that it should continue subsequently. On the other segments in supply chain, e-commerce has been growing very rapidly. We've added more capacity also on many of our clients. And as you know, some of these guys are having not just now 2, 3 days sales, but month-long sales. So month-long sales means that we are continuously active with our clients. And I think the only let up will happen post Diwali. So our teams are working at full tilt at all of these locations. On the FMCG side, the demand has been a little bit on the flattish side at the urban area because we service mostly urban areas, because I think in the past people have been stocking up adequately during the lockdowns, et cetera. On the consumer durable side, again, we've seen huge push specifically. I guess some of it was IPL driven, some of it was festival driven, some of it was this pent-up demand driven, some of it was a need-based driven, which is essentially that I need another smartphone at home because my children need to study or a laptop and so on and so forth. So I think many of these things have happened, and that has pushed consumer durables to record levels at our warehouses also. So that's predominantly the main segments in supply chain.

Also wanted to get a sense on the supplies. In the segment -- the non-auto segment, how has been the client additional traction, sir, during this pandemic and now that we are somewhat out of the worst of the pandemic? Do you see that there is a [ lane ] up in the number of customers that you are talking to or that we are adding in our client roster?

Yes. So we have -- client additions are high as well as the same client also adding additional capacities also there. As we talk about, there are 3 types of clients. One is a client where in that -- then in that same facility, they're adding more capacity. So it could be a manufacturing plant that is ramping up their capacity or in the same warehouse we are adding more capacity. The second is that client giving us a new facility or new location. So that's the other part. And the third is a brand new plant. So in all the 3 areas, we've seen good growth. And I think it will continue. The traction is there more on the FMCG side, more on the chemical side as well as on the latter, on the last case, which is new customers. And on the expansion side, more on the e-commerce type of businesses.

One last question from my side, if I may. I mean if I look at -- based on the difference between the Freight segment numbers on the consolidated statement and stand-alone statement, I see that the Rail business seems to have done well. And you have also highlighted in your presentation that in H1, the growth has been 68%, which is pretty phenomenal. I understand the rail is growing faster than road this year due to multiple reasons. But what is actually leading that superlative growth, sir, in the Rail segment?

So clearly, it's the fact that we are able to give them solutions to various aspects of their problems. And some of these solutions were given during the lockdown period when road was not available to them. So they have -- we've sort of made them aware of those solutions, delivered on those solutions and that has made them very happy to work with us going forward. So what I mentioned previously is there is a perhaps a permanent shift for some types of clients towards rail logistics completely. And that is one factor. Second is a lot of food grain movement has happened all across. I gave the example last time of an entity that we are working with in Rajasthan. That has been contracted by the government to supply chana to South India. So we -- and they have contacted us, and we have moved that chana from -- by rail and then subsequently by sea to the South -- to South India. So like this, food grain movement is the other factor that has been quite high. The third area that we work with in rail is also the metals -- I'm sorry, the chemical space. And there, we've seen chemicals business has been robust across the country in all areas. So that growth has also contributed to some amount of growth for rail.

The next question is from Mr. Srinivas Seshadri.

Vineet, hope you are doing well. Sir, first question is, again, just continuing on this -- the CONCOR JV. It's good to know that even quarter-on-quarter, it has grown, I mean despite last times kind of very strong scale-up. So one question there is that the margins are around 2% or so. So I just wanted to understand if the business model is such that we basically -- our responsibility is more kind of booking the business, and then we get some percentage margin on that? Or is there any kind of a scalability on the margin with respect to revenue going up?

So the -- basically, it's a volume game. And the -- it's not just booking. I think the very important factor here is developing the right solution for clients. And that solution development takes a lot of time as well as a lot of engineering in terms of how we are able to provide those solutions. And then, of course, the execution. Because, let's say, a rake comes in, rolls into a plant, and there are 90 containers that need to be loaded, and then dispatched, coordinate with the railways, coordinate with CONCOR, coordinate with the client. So it's not so simple. We do a lot of handling also using stackers, reach stackers and other handling equipment. And in some cases, when these rakes are going into ports for export, we also help in some amount of customs clearing as well. So it's quite a comprehensive and end-to-end solution. And some cases, whether the rake is moving directly from plant to the port, it's fine. But there are lots of cases where we have to do the first mile and the last mile as well. So that also adds to the complexity. Now for all that complexity, the margin that we have is -- certainly is constrained. But with volume growth, we are seeing that this will start improving as well. Unfortunately, we have to get a fixed rate from railways, and we are -- that input cost doesn't change much. So it only how much we can derive value from the customer by these value-added services, will we be able to enhance the margin structure. And I don't believe that this will keep increasing. The ROCE on this business has already exceeded 25%. So from a return perspective, the business has become quite attractive.

Okay. Okay. And the ancillary services you talked about, that is being done by the JV itself or that comes more through -- directly through the TCI business?

So some of those services, they outsource directly to the market, wherever they find the cheapest possible solution. And in cases where they get value out of TCI, they will use that. So they'll work on arms-length basis.

No. What I was asking was, are these services being given by the JV? Or are this by TCI? I mean apart from the transportation bit itself, whatever you talked about in terms of the, say, the handling loading or customs clearance and all those other ancillaries?

Yes. They're provided by the JV. Yes.

JV. Okay. Okay. Sure. And second question was on this supply chain. Last time we discussed you're talking about some kind of a subverticalization of the auto business and trying to get more customers and do better mining of those customers. So if you could give some broad update on what has happened during the course of, say, this particular financial year, in terms of what have been the wins? I mean, qualitatively, if you can talk about -- without naming, that would be useful to understand how the efforts are panned out?

Yes, sure. So like the segmentation that we have in automobile is the consumer side, which is the 2-wheeler, 4 wheeler; then we have the agri side; and the third is the commercial side, which is the earth moving equipment as well as the tractor -- sorry, the earth moving equipment and commercial vehicles. So I think what has happened in this course of this last 6 months is that all of these have had a -- and that diversification has also helped us. So in the beginning of the year, we had a lot of movement for tractors, et cetera. So though April, May was very poor generally, but tractor movement was happening, as you know, agri sector was booming, so we got that benefit. Then over the course of the last -- in the middle, somewhere May, June, July, August, we saw a movement of earth moving equipment companies where some road projects started, so there was some demand happening. There was some movement that happened in some of the border areas and so on and so forth. So we'll be operational throughout of that. And then in this last half of the second quarter, August, September and now on October onwards, we are seeing that the first element, which is the consumer automobile business, has picked up. So again, a lot of the business was at a miniscule level and has scaled up because they were not operational or they do not have enough -- they were not using enough capacity. But in net-net, it -- we don't have many new customers. We have a few new customers, but mostly it is the existing customers that have picked up growth and have grown. So that is a continuing factor that we are seeing. And fortunately, with having all these 3 and all these 3 pies has helped us immensely in this period. And hence, you can see on the Q2, we actually had a positive growth over last year.

Okay. Okay. Sure. Just 1 more question on the guidance or -- I mean I don't know whether you call it guidance or a broad indication. But you said that you were kind of still hoping to reach about 85% level of last year despite the second quarter having ended on a positive note. Now if I look at the -- how the second half had been -- last year, the second half also was not very good. And especially in the fourth quarter, because of the COVID, you lost some sales. So I mean when I look at the ask rate for the second half based on, say, reaching 85% level, that implies a drop of nearly 12% in this second half versus the second half of the last year, which seems very, very conservative. So I mean I just wanted some view on whether -- are you anticipating any kind of headwinds in the third quarter or the fourth quarter beyond like what we see in the current numbers, which makes you quite kind of vary on, still giving a very modest guidance?

See, I think what -- we don't know as to what kind of impact might be there on the -- both on the demand and on the supply side because it's a very, very awkward year as you've seen with every customer. Now rest of the world is also going through different second phase of lockdown, et cetera. We don't expect that to happen here. But at least there could be local level disruptions, which I talked about, maybe when you have those demand and supply waves. So demand side, there could be some issues there, some markets will not react or suddenly people might say I want to save more and some negative sentiments might come about. And on the supply side, many factories get shut down because of COVID cases and -- or areas get shut down specifically, but not largely. So what we feel is there is a lot of uncertainty. And based on that uncertainty, it is better to be slightly conservative and not go over aggressive. The second aspect is we also have to be very cautious about credit at this point because there are lots of customers, who are now just coming out of the moratorium and there could be possibilities there, where there could be challenges in terms of receivables. So there could be chances of more aggressive business growth, but we have to be careful not to really let our guard down and lose money eventually because of receivables. So that is a balance that we have to keep, and hence this slightly conservative note.

Next question comes from Mr. Prateek Kumar.

My first question is regarding your employee cost. So that has dropped by around -- I think around 12%. You mentioned that we have not changed our employee base or changed salaries. So is there any other line item other -- which has impacted or resulted in cost savings year-on-year? And what is the more sustainable number going forward of this number? We should go back to INR 38 crore, INR 40 crore number on a quarterly basis?

So employee cost on quarter-on-quarter basis is, in fact, slightly higher than last year. If you see on September of just a stand-alone was [ 1,898 ] in September '19, and it is 19 -- sorry, I think I was on mute. What I was saying is that employee cost is at September '19 on quarter 2 for the stand-alone is at [ 1,898 ] roughly versus [ 1,983 ] in this current year. So we're already ahead of the last year's number on a quarter-on-quarter basis. Most of the impact happened in the first quarter of the year, where, of course, the CMD and the MD had not taken their salary as well as there were a lot of long absentees, et cetera, and those people -- and there were, of course, some people who did not -- have not joined back because they've moved to their hometowns and so on and so forth. So I do not expect this number to sort of come down anymore. I think we have already started recruitment again because we are seeing growth potential. So both on the MBA side, we've recently given letters to almost 75 MBA students that we had interviewed pre-lockdown. And we've started getting them on board already. And at the lower level, we've also hired already almost 250 people, and that is directly on the payroll, and we are adding more people. So I don't expect this number to be lower anymore.

The Next question come from Mr. Vittal.