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

Good evening, ladies and gentlemen. I am Komal, 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 quarter 4 and 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, Group CFO. [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 to all of you again. I would like to request Mr. Vineet Agarwal, Managing Director, TCI, to give some opening remarks and start the earning presentation. Over to you, sir. Thank you.

Thank you, Komal. Thank you, Ashish. I do hope all of you are safe and are doing well in this tough times right now. We are all with you. So we have all gone through a lot of pain in the last few months, so we empathize with you. And again, thank you so much for being present today in this earnings presentation call. If you can go forward, please? So this year has been a very challenging year. However, the company has really come out with exceptional performance. This is dedicated to our team who have really, really worked very hard across the country, across various conditions to really bring about this kind of performance. So I would like to, again, commend the team and thank them for the spectacular performance that we've had. In terms of the group overview, you are aware of this, so I'm not going to repeat this more and more. You've already seen -- many of you have seen this. The group has several -- 3 companies that are listed, TCI, TCI Express and TCI Developers. And together, all 3 companies now have a market cap of about INR 8,000-odd crores. Next slide, please. I would like to talk a little bit about what's happening with the industry as a whole. And there are several growth drivers for the industry. Clearly, consumer-driven growth is very, very obvious with the kind of pressure that we are seeing in terms of movement towards online shopping, the fact that customers are wanting instant gratification versus customers looking for longer periods in terms of delay in terms of getting what they want. And people are putting -- that is putting a lot of pressure on supply chain also in the country. This is going to have a major impact in the long term. The other impact is from our customers' perspective. They are looking to increase their outsourcing. Clearly, the demand for technology and the demand for certain things like, for example, during this pandemic, more warehouses has increased, and they're also looking for multimodal solutions. So the pandemic has also had quite a good change towards customer orientation towards logistics as well. And I think supply chains have become a buzzword today, whether you take it from the company perspective or from the medical fatality perspective, from all perspectives, supply chain has become very important, not just a world mode, more so more in terms of the action that's happening here. From an industry perspective, the industry is still very, very fragmented. Consolidation is still very low. There are lots of positive things that are happening, especially with the growth of our industry, growth of GDP. We'll see that the industry will grow as fast as possible at that space as well. And things like the national logistics policies also clearly hinting that logistics is going to be very, very critical for a nation like ours, where we have a higher cost of logistics costs as a percentage to GDP. The government has also introduced and has been introducing several measures. Clearly, GST, e-way bill, the sectors all pushing formalization. There is, of course, a lot of infrastructure push that is there from the MMLPs, the DFC, et cetera. And of course, the new schemes around boosting domestic supply chain, specifically with many companies, the 2 were China Plus One strategy, PLI and Aatmanirbhar Bharat are all going to create a very, very robust environment for logistics industry in the times to come. Next, please. So embarking on our company strategy, we would like to essentially be India's leading integrated multimodal logistics service provider. And the idea here is to provide a full range of services that we have to various methods and various products that we have across the company, and essentially align ourselves more and more with what the customer wants. Our principle in our business is something that we call as core COI which is customer focus, ownership, responsiveness and empathy. And we want to use that -- the value system that we have in creating an impetus for customer system. So in terms of -- that's a broad strategy. I'll talk about some of the USPs that we've been able to create in the last several decades, and some of these are -- you know this, but these are very specific in terms of understanding how our company is looking at growth in the logistics market. Next, please. So we are amongst the only company in the country, which has this huge range of customized services that we provide from the -- from all kinds of modes of transport to all kinds of specific and specialized services. We have a very strong vendor ecosystem. We can provide a single window solution with a control tower and also building operational efficiencies for customers. We service all the major verticals in the country. We also, in some cases, handle very large accounts for many of these verticals that you see. And overall, the range of services has helped us to really build several large and dedicated accounts with our customers. We have several accounts that are more than INR 10 crores plus INR 50 crore plus or INR 100 crore plus in terms of business that we do with them on a yearly basis. So we are focused on -- in terms of the large customers, but we're also focused in terms of providing, even the MSMEs, all kinds of services under one single tools. Next please. An example of this is a customer where I cannot name them specifically, but we've been providing a large range of services to them, to this particular group in India. And from multimodal services, where we've been using -- providing them chemical logistics, using ISO tanks, which are very specialized ISO tanks. Now this is moving not just by rail but by road as well. We handled some of their -- almost all the large volumes in terms of the chemicals. We run their food, some of the food processing business logistics, which includes warehousing as well as meeting multi-temperature vehicles. We also have used our freight business for some kind of FTL and NDL services where they need constantly. And all of these are run through a key account management system with a single window solution for them with a control tower kind of a scenario. All the operations are at very high quality levels as well as very high KPI and SLA levels, because some of these -- this particular industry that the customer is part of -- is a process industry, and they really cannot look at any kind of delays in terms of their production and also are looking to typically sometimes get economies of scale and better cost structure. So we have been able to help them in the last several years in building a very, very comprehensive solution across all their businesses. There are many such case studies. I just wanted to highlight one specific here, just an idea of how we've been able to move from design to execution for many of these customers. The other thing that we have is a strong multimodal network. Again, this is all in-house. For the capacity that we've been able to create in the last decade or so, around this has been quite large. So for example, if you start in a clockwise direction, we moved more than close to 2 lakh EUs in the last year, and this is across all modes of transport, be it sea, road as well as rail. We were among the only companies other than the government companies that has moved more than 1,300 trains last year, so that's more than almost 4 trains a day. And these are full rates that we have moved last financial year. As you know, we have 6 ships and the output of 10,000 trucks at any given time. With our own -- we also have our own 3 AFP rates as well for movement of auto. So we've been able to get a very strong multimodal network across the country using ICDs of our joint venture partners as well as many other ICDs that are easily available. We've seen that customers are now looking more and more for these solutions, because they feel that we can be used a different mode of transport other than road to, not just bring down the costs, but also provide green logistics to their own entities. So it has been a great experience, and we'll constantly update you on what's been happening in the last few years in this -- as we build this further. Again, the organization, with its 52 years, have been very strong in terms of incubating businesses. You've seen that the company had started many other entities, which were demerged in the late '90s. And subsequently, we had the Express business had got demerged. Our developer's business got demerged. And simultaneously, internally, you've seen we've grown the Supply Chain Solutions business, the Seaways business, the Cold Chain business. All of these essentially indicate towards a high level of innovation that we bring towards customer or based on customer orientation. We are constantly on the visual as to what our customers looking for, what are the potential growth areas. Now there are several that we've identified, in the next few years, that are potential high-growth opportunities. And you would see that these also align very much with what's happening in the marketplace as well. I'll start with the chemical and the pharma side. We know that the disruption with China as well as the fact that more and more companies want to be positioned here with the China Plus One strategy, and the fact that chemical industry in India is starting to mature in terms of the supply chains. We've seen a great opportunity there. We've built some assets of our own with ISO tanks, gas tankers and so on. And we've also been positioned with -- and got very high-quality certification through responsible care with Eco, PESO and other licenses as well. So we're very compliant and use our multimodal network very efficiently to really service the specific industry. In this pandemic, we've seen the agri plus value chain has really taken off because of the fact that consumption has not come down. This is a sector that we have been doing a lot of work, but now we feel there is a lot more opportunity to look at the entire value chain from seeds and fertilizer to the final product that needs to move. And again, we've used multimodal here quite a lot in the -- during the pandemic, in the first wave, we were moving a lot of food grains, whether it was grain or chana and other items across the country for using our rail network as well as the sea network. We've been able to work with tractor companies a lot in the last 2 years, providing them spare parts, yard management, et cetera. We've been working on the final -- on the finished food products as well, movement of edible oil and so on. So again, when we looked at the supply chain, the balance sheet for the agriculture sector, we saw that it is massive. And the scope is massive, and we have a good orientation towards it. The other sector, you've already seen our potential in terms of the way that we've handled e-commerce with our fulfillment centers as well as we are running actually high Six Sigma level quality activities in some of our warehouses, which include value-added services as well. So this sector will also continuously keep growing. Cold Chain business has now started to mature in the country. We are feeling that the movement is now towards costs -- from cost to quality more and more. And also, we've seen that food delivery and other such areas have grown quite a lot during this pandemic as well. And we've also established a joint venture that has happened in the last few months where we've had Mitsui Company that has come in with a 20% stake into our Cold Chain subsidiary. So we've been able to build a good traction with some excellent customers. We've also started vaccine movement here. So the potential here is also quite massive as we look at it. The one very interesting area is the neighboring countries. We've seen that not just the BBIN, which is Bhutan, Bangladesh, India, Nepal. But the CMLVs, which is the Cambodia, Myanmar, Laos, Vietnam, all of these countries are -- the linkages are also increasing as we see with the government. Government is also investing into a lot of projects there. So we see the likes of L&Ts and Kalpatarus of the world who are going to these neighboring countries and also building projects there. We have our own subsidiaries in Nepal, Bangladesh and also underway in -- the process is underway in Sri Lanka. And we'll have offices in all the major border of this, so Nepal border or the Bangladesh border. The other countries, we are in the process of building slowly. Our ships do go to Myanmar and are bringing in pulses as we speak. So the potential in this with multimodal, again, we moved several rigs to Bangladesh also is quite immense going forward. Next, please. Last but not the least, in terms of where USPs are positioning from a technology perspective. We are very strong in terms of technology with our own systems. So from almost all our operations are completely on -- not just on the cloud but also on mobile. We have a central monitoring system with a logistics control tower. Where we are, for example, you're getting GPS data from more than 25-odd GPS providers through APIs. We have a digital transformation team in place. We are working on several areas around RPA, data analytics, et cetera. We are doing work around ML. Not yet on AI, but certainly, ML-related work or business intelligence tools are used quite a lot. Our in-house team is extremely strong and has built capabilities in the last several decades. We also have deep customer relationships, management systems through portals and apps as well as for suppliers. So it's a complete holistic approach to technology that we've been using. I think we have to also think about the evolution of technology in the supply chain business. I think sometimes we get over-awed by the fact that customers -- if you are getting a product let's say from Zomato and you are seeing that every 10 minutes where the status is, B2B customers don't necessarily want that kind of a status update. They want to know exceptional updates that -- is there a problem with any shipment that has happened. And once the shipment reaches where -- has it reached properly. So the approach that we have is a little different. The tracking that we do is high-G, but the tracking is such that it is not -- it is part of the customers' interface that they're dealing with rather than in your face all the time. So that we've seen is a good response. The response that we brought from customers has been much better. But obviously, there's a lot of things that we can do here because technology is evolving very, very fast. Next please. In terms of the highlights for this financial year, as you know that quarter 1 was very weak with the lockdowns in April and May. But the company bounced back in the last 3 quarters and the last quarter was a record quarter for us. And as you can see, the consolidated revenues grew by almost 34%. The cash flow that we have is -- had been quite good in the last year. We've been able to get -- compress our receivable cycle as well as we've been able to get some income tax refunds and dividend inflow, which has helped us to actually reduce our borrowings substantially as well as we have a lot of cash still available on our books out of the -- on the limits. So access to our limit is still very high and only 32% of the limits have been really utilized in the last -- have been utilized at the end of the financial year. Our pipeline is very robust with the customer connects that we made in the last year. As you know, we made calls to several lakh customers in the first quarter itself, so that we are able to connect with them and ask them how they were doing. And as you have seen that our integrated play has really shown that it is effective and we are very strong in terms of handling any kind of issues that come up, whether it is the cycles that come from economic cycles, whether the pandemic or any such change in the environment or any kind of macro shocks that are -- that happen, we are quite able to handle it. Now I'll go into division-specific results. This is the freight business. So the 3 main businesses of our freight, supply chain and seaways. I'll talk a little bit about their industry segment and where we are positioned. So as an industry, you know that the freight business is -- a lot of it is fragmented, but the customer needs are changing. They are wanting both FTL and LTL, mostly moving towards anywhere to anywhere kind of a model, and that's where we have the strength, and we've been able to provide a key account management system to many of them as well. Next, please. So in terms of our strengths, we have -- this is our bread and butter in terms of when we started this company. We service from [ lay ] to Nagercoil. We have our own offices, the strategic hubs are there. We provide very specific on-demand FLC kind of products for safe transportation, and our NPL business has also picked up. So there are customers who want all kinds of solutions. So there is one specific customer who says that I have 15 plants where I need to move FTL and LTL from those plants to project sites; plus, I need you to pick up material from my third-party vendors who are my -- who I get my job work done. And I want you to bill all of them into a single location. So again, this is quite complex, but we do such services and we have [ camps ] that manage these, including providing e-invoicing and a single control tower as well. The business did quite well in last quarter. As you know, Q4 FY '20, that is March '20, the business was hit hard because the lockdown started around the 22nd, 23rd of March. But this year, we've been able to claw back quite rapidly and have been able to reach up to almost the same levels as last year in terms of our revenues. It is short by about 8%. But in terms of the margin structure, it's almost the same levels as well as the ROCE has also improved. In the first 2 quarters of the last financial year, we were facing challenges with MSMEs, and our LTL business had trouble . But we've seen that, that has picked up in Q4 and did fairly well. Our target towards getting to 40% in the next 2 to 3 years is in place, and we will get there with the kind of efforts that we put in terms of marketing as well as building the necessary hub infrastructure. Next, please. You know about the supply chain industry in general. It is quite a fast-growing industry and has a lot of potential. There are, of course, elements of supply chain. A lot of people think of supply chain only as having warehouses. It is much more broader than that. The supply chain industry typically covers the complete gamut of services that we provide to our customers with -- from conceptualizing to network design to, really, execution, and that kind of capabilities that we have are also quite unique here. There is a lot of demand here in terms of customer expectations, and there has been no customer that we have failed in the last several decades of running this business. Our supply chain business, as you know, has a large portion of the auto-related segments. So there is auto, there is the -- in the consumer auto business, the industrial auto business and then the agri auto business. So all of these 3 areas are being quite robust. And we have the only company that really runs a complete multimodal network when it comes to outbound logistics for finished vehicles in the country. These are some of the yards that we have. We, of course, you are aware of the large warehousing footprint also that we have in the country where we run warehouses for FMCG, consumer durables, e-commerce fulfillment centers, all through a combination of full-fledged, full suite of services through a control tower kind of a setup. So the business grew at 40% in the last quarter. This is because of a lot of movement that happened, not just in the auto, but in all segments. The margins also grew double in the last quarter. The last year -- the full financial year, we grew marginally, but EBITDA is closer to about INR 100 crores for this business, and ROCE has kept up a little bit. But essentially, capital increased because we added some rigs, the 2 rigs that have already come in and a third rig is under plan. So business has started to pick up here. In terms of the storage area under management, we have the 12 million square feet, which translates to about 112 cubic feet of space. Now there are some warehouses that are at ground level, which means that about -- storage about 6, 7 feet, and there are lots of -- there are else, which go G+6, G+7 levels. So this is a rough calculation in terms of what we have done in terms of cubic feet capacity usage that we've had. One interesting thing that we also have is 250 acres of land that is under yards that we are managing today. Again, this is very, very unique, and these -- some of these yards are multi-customer yards where we do all kinds of activities from storing the finished products for the auto industry to doing predelivery inspection, T&A, invoicing and final last mile delivery also, from these yards. So again, our unique strategy has been put in place from the auto perspective there. We are not just looking at inbound logistics but also the outbound logistics very strategically and creating a more sort of a protection -- like a fortress around the business, so that we are able to really get maximum out of that auto business. You also know that we have only less than 10% market share in the automotive logistics. So the ability for us to grow in this business is just massive as this business auto supply chains grow and mature in the country. The next business, the Seaways business. Our shipping -- cost of shipping is only 6% of the transportation model mix today in the country. The potential, again, here is quite massive, and we are seeing customers wanting to use more and more Seaways to not just reduce cost but also move towards green logistics. A lot of the coastal areas will see increase in manufacturing facilities as well with SEGs, et cetera, coming up. And of course, the neighboring countries, the support that we can provide using the coastal shipping network as well. So it has been a great supplement to our overall business. And clearly, the potential here is quite massive. Our own business has now 6 ships. As you know, we sold 1 ship in the last financial year, and these ships operate, 2 on the West Coast from Kanda to Cochin and 4 are on the East Coast, which is going to Myanmar on the return but also touching a fourth player, and it's going from Chile in buy side. We also have more than 8,000 containers that are underutilization by us. These are all different kinds of containers. And essentially, these also help us in -- some of these are our own -- almost more than half of these are what, 5,500, 6,000 containers are our own containers. So they help us in actually capturing a lot of customer business directly as well and helps us to keep our margins afloat. Next, please. The business in the last quarter grew at about 23%. And overall, we had a marginal growth. Ships were under dry dock in the last year and also, of course, we sold 1 ship in mid-February. So that reduced the output to some extent. Our East Coast business is, of course, less compared to our West Coast in terms of the ratio of roughly 60-40. The margins in this business are slightly compressed due to higher depreciation. However, it is also because the fuel prices in the last few months have been going up quite rapidly. So I would think that the overall EBITDA margins should be maintained at this level. However, we do have some dry docks also planned this year, and that might have an impact as well. We are also on the lookout for our new ship. Unfortunately, what we were planning to buy in Q4 of FY '21 has not happened yet, and ship prices are really accelerated. And right now, it doesn't make sense for us to acquire a new vessel at these prices since our earnings are all in rupees, but the acquisition will be in dollars. So there could be some losses there if we do acquire ships at this price. So we are waiting for the right opportune time, and we have taken an [ attrition ] in the Q4 of this year. Our joint ventures did quite well. This is a number that are available in our balance sheet, as you know. So the CONCOR joint venture grew at about 70% in the last financial year, and definitely about 4x to 5x jump in terms of profitability as well. Cold Chain business grew at 40% again, starting to look positive as well. With the joint venture partner coming in now, we should see more [ acervation ] in the business. The Transystem business de-grew at about roughly 20%, mostly because the business that we do here of Toyota, that got affected to some extent. Next, please. In terms of the overall financial highlights, from a consolidated basis, Q4 was a record quarter, both in terms of stand-alone as well as in terms of consolidated numbers for revenues as well as PAT numbers. You know that we have an exceptional items in this quarter of roughly INR 3.5 crores, which includes about INR 90 lakhs for asset write-down for our overseas ventures and about INR 2.5 crores roughly write-down for our wind power. And for the full financial year, also the overall exceptional item is about INR 13.9 crores versus about INR 9.9 crores. So without that, also, we are seeing that there has been -- if we include those numbers, the growth in terms of profitability is much higher. Only in terms of stand-alone numbers is our revenues slightly lower than last year. So our strategy of consistency in our business, because of the various businesses that we have from our freight, supply chain to see this is what helps us to keep looking at our profitability measures. If you see from FY '16 to '21, we have grown -- we have tripled our margins as well as you've seen that our debt equity ratio has come down to extremely low levels. ROCEs are a little bit flattish because of the -- some amount of CapEx that happened in the last year also, but also because the first quarter was quite badly hit and return on network is also moderated slightly. But we definitely are looking for a better year this year to improve some of these numbers. In terms of our dividend payout, the company has declared a 65% final dividend, which means a total dividend of about 125%. We are maintaining almost 15 -- between 10% to 15% payout ratio. And perhaps despite also increase in the next year as we see how the conditions improve in the next financial year. Certainly, quarter 1 is -- has been challenging. It's partially challenging at least. April was far better than last year. Clearly, last year was a complete lockdown. May is starting to look better, but -- May is challenging, I'm sorry, but June is starting to look better in terms of outlook as well. I think a lot of things will depend upon how states open up and how vaccination happens. So that will build confidence in terms of the next growth opportunities as well. We are highly rated with CRISIL at AA positive and -- with a positive outlook, I'm sorry, and ICRA short-term rating is at A1+. We are very strongly positioned from our social responsibility perspective from the HSE, health, safety, environment or ESG, whichever way you look at it, and especially on the safety aspect, our Safe Safar aspect has been working very, very strongly across the country. Next slide, in the last financial -- in this last few months, we've done some exceptional work. Our team has done exceptional work around mission critical movement of oxygen and vaccines. You can see over here are -- we have delivered more than 8,000 tonnes so far of LMO to various hospitals across the country. These are, of course, using some of our customers that we are working for, but we're ensuring that our vehicles are running absolutely 24/7 as much as possible. Our vehicles -- or the empty vehicles were also airlifted by the Indian Air Force to move faster as well as we've been moving oxygen [ slingers ], concentrators, vaccines and other life-saving products. As an organization, our thought leadership is very strong. We continue to start building other reports, et cetera, that are there, and of course, the award and recognition is on a regular and continuous basis. In terms of the outlook for the full year, right now, we feel we can get to about 15% top line, about 20% bottom line, but we will see how things progress in the next few weeks and how things come back. Clearly, we want to keep a tight roll on the receivables, because with this second wave of lockdown, we think that there could be some organization that could have challenging times with their own working capital. So we have enough leverage on our books to ensure that we are able to grow as well as ensure that we have enough capital available. We are looking at a decent CapEx plan for the financial year -- the upcoming financial year, because we feel that we can anticipate the next cycle of growth now with this vaccination, a sector that's going to fall in place hopefully in the next few months. We spent about INR 110 crores. And if you see that we are amongst the only logistics company in the country that has had spent more than INR 1,400 crores in the last 1.5 decades and still grown in terms of our profitability and ensure consistency in terms of overall growth. So the CapEx that were essentially going to building some center, hub centers is a sector, also warehouses, where our capacity has come down. Of course, Q4 of this year, we have a plan for a ship of about 80 crores. Containers is about 40-odd crores. We would add another rig in the last -- in this year as well as some new trucks, et cetera. So overall, we should look at about 200 and -- between INR 200 crores and INR 225-odd crores of CapEx for the full financial year. So these are the points we had. If you have any questions, we'd be very happy to take that. Maybe we -- Ashish you can put in the -- yes, the 21 (sic) [ Q&A ] segment.

Thank you, sir, for the valuable insights.

[Operator Instructions] So the first question is from Mr. [ Sridam ].

[ Sridam ] from Ratna Traya Capital. Sir, my question is, how are SMEs starting at this point of time? And what is the proportion of SME for our freight division? So that is my first question. My second question is on how prepared are we to leverage the opportunity in DFC, where you had mentioned that we have a JV with CONCOR. If you can elaborate a bit more on that, it will be helpful.

Yes, sure. So our SME base is mostly working, say, on the LTL side of the business, which is about 33-odd percent of the business. So I would say 80% is SME there. And in the FTL side of the business, we would also think there is a reverse possibly about 20% would be SMEs. So yes, there are some challenges with some of them, but I think it's not extreme right now. It's still things that we are observing what is happening. So there are some companies who are doing job work for companies are feeling the pressure right now because raw material prices have gone up or they've not got the payments from different -- their principals, et cetera. But the challenge is not that deep yet in our sense. The second is on the DFC, it's clearly something that we'll be able to use towards our advantage, because we don't have to own portions of the DFC to really be efficient. For us, DFC is really an element of as being a common user there. So we can use that facilities to our advantage by moving our own rigs to that network or using the joint venture to move our rigs there. As well as you can put a container at the -- at one of the locations and deliver it at the other location and pick up by -- to first mile and the last mile can be by road. So it's clearly an advantage for us.

The next question is from Mr. Mukesh Saraf.

My first question is on the supply chain...

Mukesh, can you speak a little louder, please? I can't hear you.

Yes. Is this better?

Yes.

Okay. Sorry. So my first question is on the Supply Chain division. We still see that about auto is about 80% of this revenue, and this has been this way for last few years. So just wondering how have we kind of -- or what are we doing with respect to reducing the cyclicality and the fact that you had highlighted about e-commerce and the other businesses. So how are we approaching this space in order to reduce our exposure to autos?

Yes. So I think we have to look at the business a little differently rather than just think about it as an auto-focused vertical, because the 3 areas in that are the consumer auto. So consumer auto did not fare as well last year, especially the 2-wheeler but the person mobility increasing more and more, we definitely see a lot of growth opportunities there. Then the commercial side of automotive, which is the earth moving equipment or cranes and so on and so forth, those have gone reasonably well in the last financial year as well and even before that. So that continues. And the third is the agri auto side, which is also the tractors and combines and other such equipment that move. So that has done quite well last year. So what happens with these different areas of focus actually help us in mitigating any year that is not very good for one specific kind of automotive business. So overall, it's been quite good for us in terms of this specific management. We have grown in pace with the automotive growth rates in the country. We have a range of services that is quite unique. We have, as I said, a very low market share still in this business, so the capacity and the ability to grow is very large. And so I do not think the cyclicality is the factor that we should think about so much. But more so the fact that auto supply chains are the most mature supply chains in the country today. So that is an area that we feel that will continuously help us as we grow in that business. So yes, the issue in terms of building other business is also very high with our e-commerce and the warehousing and the other capabilities. But notwithstanding, this is also something that we are very confident to grow going forward.

Right. And just in continuation with that, I mean, you had mentioned 10% market share. So here, we are talking about the auto companies still doing it in-house and, hence, the market share is low? Or do we have to kind of gain market share from other players to grow? I mean, apart from the industry growth.

It's a combination of both. It's a combination of -- and the third factor is that many parts are sometimes delivered by the supplier themselves. So it's CIF, and in that case, they use some local companies perhaps or some of them run through VMIs, vendor management inventory, which is that they might have their houses close to the plants and there, they supply. So various models exist. And the share that can be acquired is not -- it's from all these factors. It's our ability to sell better and create value for the customer is what will drive more growth.

Sure, sure. And my second question is again on supply chain. I mean, we're seeing a lot of new entrants in the space, especially the companies that were, so far, focused only on e-commerce. So you have deliveries, you have express these -- you have a lot of these names who are now looking to pivot into this supply chain business. Have you already started seeing some bit of competition? I mean, although it's still a nascent industry, but have you started seeing now more vendors trying to get that particular contract? Or that is still not the case?

No, we've not seen them specifically in this scale. Because I think the understanding there is that some of them are focused and working towards maybe some consumer sectors, and they call it supply chain. So I think the understanding what is supply chain is also missing. So let's say, if the names that you use over delivery, saying that for a pickle manufacturer, I am picking up the material. I'm also sorting that material and delivering it to customers. Is that supply chain? Not really. So it is a lot more complex than that, just that simple order fulfillment. It will go beyond to network planning, to supply chain design, et cetera. So yes, I think the majority in this business with new entrants is very low right now. And I think it will take -- certainly take a lot more time.

The next question is from Mr. Preet Nagarsheth.

Right. I just wanted to congratulate Vineet, Ashish and everyone at TCI, I think, phenomenal numbers given the odds. The question I wanted to ask was in terms of improving the margins. I think -- Vineet, if you could share what your plans are or if there's any guidance that you can give in specifically improving margins for all these 3 key verticals.

So I think what has happened in the last financial year is quite unique also in some ways, because the -- things went quiet only in the first quarter itself and then a lot of catch-up had to happen in the next few quarters. And we are seeing some of that in this quarter as well in this financial year also. So I think the guidance that we have is typically the same that we've been maintaining for many years -- for many -- for the last 1 or 2 years and at the EBITDA level at about 4% to 5% for the freight business for about 10% to 12% for the supply chain, about 25% to 30% -- about 25-odd percent for Seaways business. So see, I think a lot of factors are up in the air, as you would appreciate in this financial year also. So we want to be a little bit more careful in terms of how we approach the financial year and really give you more accurate guidance perhaps a little later.

Right. Because, Vineet, I think over the last couple of years, I think the margins have kind of followed a similar trajectory. I understand last year was a one-off, and you're seeing that similar or lesser days being affected during this year. But in terms of your concrete plans or, let's say, a 2-year horizon, or 3-year horizon, do you envisage moving these margins up a bit more from where they are at?

Yes, yes. Of course. Clearly, the idea is not just to grow from a volume and value perspective, but also from the margin perspective. And those are a function of many things, function of economies of scale in some businesses, a function of CapEx in some businesses like Seaways, function of market conditions in some businesses like freight. And overall, how are we able to utilize our working capital limits, all the factors that we have much better. So it's an ongoing challenge to keep increasing the margin. And I cannot really specifically tell you today that, yes, we are looking at a 100 basis point or 200 basis point improvement, but it is on target in terms of between a 50 to 100 basis point increase yearly.

Right. I wanted to ask if a demerger on the supply chain side is something that you're looking at given the size that it has achieved. Is that something that you would be considering over the next couple of years?

No, not really. And in fact, if we were, we won't be able to share it also, right? So not really, because you've seen that the consolidated business has a lot of potential in terms of acting as a hedge to each other during times when one business is not doing well. So that consistency we have, the fact that we are able to use the supply chain business very effectively with a lot of clients as a key account business with large control tower kind of scenarios is something that will now start to play out more and more as we are seeing supply chain in the country maturing. So I definitely think that the story is much deeper and much longer that can go on the rest.

The next question is from Mr. Prateek Kumar.

My first question is, so some of -- I mean, I think the investors have often complained about cash flow generation. And I think we had a record cash flows this year, so many congratulations for that. So how do we target -- like how do we see cash flows going up like operating cash flows at INR 300 crores this year? How do we see cash flows moving forward? Would they grow in line with like profit growth if you are, like, projecting? Or there was some one-off which had like sort of boosted, like, cash flows in particularly last 2 years?

The one-off was not substantial to say that, yes, we did get income tax refunds, et cetera, which were unusually large. But overall cash flow, as you know, is a function of [ really ] more and more in terms of the operations that we have and how fast are we going to do the turnaround in terms of cash, the cash-to-cash cycle. So I think some of the external factors could help also. Last year, for example, some external factors did not help which was that if we -- there were businesses that were pending with our clients, because they said our offices are shut and we cannot process those bills. That's also happening now, for example. But as we are moving towards e-invoicing, I'm hopeful that some of this cash flow cycle will improve. It's also a function of CapEx. So last year, we had about INR 100 crores of CapEx. This year, the CapEx is slightly -- is double in terms of our plan. And also, of course, it'll depend upon if we do buy the ship or not and how it plays out towards the end of the year. But yes, so overall, I think the cash flow would be in line with the top line and the bottom line, predictions that we have.

And yes, Prateek, adding to this, our higher CapEx in the previous year is also actually helping us now, because our depreciation is being there. So it's not only the net cash flow. If you look at the operating cash flow as well, this is also kind of -- have a higher number than the previous years.

[Operator Instructions] The next question is from Mr. [ Danawit ].

Congratulations for our great year and the way you have managed the P&L and balance sheet in a very tough year. So 2 questions. The first one is, if I look at the basic building blocks of our business...

I'm sorry, Danawit, can you be a little louder, please? I can't hear you.

Sure. Is it better?

Yes.

Okay. Vineet, if I look at the building blocks of our business and what we have done so far, we are a 14%, 15% ROCE company, right, and we continue to invest money for growth of the tune of anywhere between INR 120 crores to INR 200 crores. So my question is how do we move in our journey from this 14%, 15% ROCE company to say more [ like 19% ], 20% plus. Any road map around that will be very useful.

Sure. So Ashish, if you put the next slide 22. I'd just put it on full slide, please. So if you see that we've been constantly adding capacity in CapEx. If you see from FY '17 from INR 1,000 crores of capital employed to -- it's about INR 1,300 crores of capital employed. But the -- roughly the incremental increase is almost double in terms of profitability from INR 80 crores in FY '17 to INR 150 crores in FY '21. So capital employed went up by 30%, but returns went up by almost double. So the idea here is that, yes, we are looking to improve the ROCE numbers, but the ROCE numbers will also be important if -- we will not be so important if there's no growth, if there is no profitability growth, profitable growth. So we are also looking to ensure that we have the profitable growth over time, which means that we have to keep investing into the business constantly as well. So that would continue. I think this -- ROCE will start moving up as some of the assets keep maturing. There is -- all our businesses are close to 20% in terms of ROCE. We have the others factor that brings in, which is the land and building that we have in some areas, some of the investments that we have. That is bringing down the ROCE to some extent. But overall, the businesses are all very robust. If you think about the business per se, all of them are doing good in terms of their expected ROCE. Certainly, they can improve, and they will improve over time. But I think the factor that we have to make CapEx is essential also to our business.

Okay. Got it. And one more question. So I think you called out the same, especially the Cold Chain business and your JV with Mitsui So if you can...

Sorry, we lost you there. If we can?

I think he's dropped.

[ Danawit ], sorry we really can't hear you maybe you can log back in please. We can take the next question.

The next question is from Mr. Jasdeep Walia.

Sir, you seem to be very bullish on the Cold Chain business. Any long-term sales target you could give us? And the quantum of investments you would be making in the business for the next -- from next 3 to 5 years' perspective?

So yes, the business is -- has a lot of potential. I think the growth rates that you're seeing is something that we want to -- it's coming off from a small base. So yes, it's only about INR 36 crores business. So we are looking to grow at 25% to 50% growth every year-on-year over the next few years. Capital employed is also low. Once we get the investment from the joint venture partner, some of that will go into CapEx as well, which is related to building cold storages as well as having the right amount of trucks. We have a combination of own plus market trucks as well so that we are able to really optimize on the fleet. And so yes, I don't have a number in terms of the CapEx plan yet, but we are in the process of building that for the next few years. But definitely, a 25% to 40% top line growth for the next 3, 4 years. Jasdeep, you're on mute.

Mr. Jasdeep, are you listening there?

I think his question is now finished. I think he got his answer.

No, sir. It's not finished, I'm sorry. I can't unmute myself, sorry. So I'm getting the businesses -- Cold Chain business is in its initial stages. So one can't expect a reasonable ROCE number. But when do you think that you could start making a reasonable electric company level ROCE from this business? At what kind of scale?

It's too early to say. As you can see, as you yourself rightly pointed out, it's a very early state business. It still under incubation. So give us maybe next year or so, we should be able to give you better outlook in terms of what's happening. But certainly, the business has turned around, and we are cash positive, as you can see.

Got it. And sir, what kind of -- at what valuation is Mitsui coming in? And what kind of capability Mitsui is bringing in? Because I would imagine you would have all the capabilities and now some cold chain business. So what's the incremental capability is Mitsui bringing on the table?

So the business is valued at about INR 63.5 crores is what -- that is the value that Mitsui has coming. And that -- the capabilities that they bring us their global expertise in cold storages across the world as well as the linkages with many clients globally also in the space, be it on the cold side as well as on the agri food side. And their expertise is very, very deep and global, including introducing us to many potential customers that are trying to come to India as well as process management also in some. So we -- our objective there is high quality. And when we go towards high-quality, a company like Mitsui will definitely help us in building that capacity, that capabilities more and more.

Got it, sir. Sir, can I ask one more question? Or should I come back in the queue?

No problems. Go ahead.

So one final question on the Seaways division. The quarter-on-quarter scale-up in revenues is quite substantial. So if you could just take us through the major factors driving that kind of growth in this quarter?

So the last quarter, the -- we had no ships on dry dock in -- so that helped us quite a lot. And also, though we -- we sold our 1 ship in the middle of the year, middle of February, middle of the quarter, but we are still able to generate a good output. Also some sectors, the western sector, for example, freight rates have gone up quite substantially, because there is a shortage of vessels as well as containers in that area. So that has helped us also to shore up the -- both the revenues and the margins.

[Operator Instructions] The next question is from Mr. Vikram Suryavanshi.

Sir, I think can you highlight on the growth of what we can achieve in the freight business? Because earlier, there was a concern about working capital management, but the kind of working capital management, what we have seen is quite remarkable. Will that enable us to grow quite aggressively in trade business also? And having the competition in this COVID time, particularly have we seen that smaller players are finding it very difficult to compete and probably they may not be able to take a large part of the business on their own and can tie up with players like us? So how do you see that competitive scenario post this COVID and growth on freight business?

Ashish, can you go to the freight performance side, please? So what we've seen that even in the pandemic period last year also, the freight business did well, because we were able to start up quite fast compared to competitors when it came to the hubs, et cetera. I think the core philosophy works quite well. At that point in time, we had labor that we supported the -- although there was a complete lockdown, we still paid them. We ensured that they -- and that really helped, because when we had to start up these -- the labor was still there. The workforce was still there when we could -- when operations started. So it's a long-term culture issue that has an impact, not just on this business, but on all businesses also. That positive culture, we have not laid off any single question. We have given increments, not just last year financial year, but even this year. We've given ease-ups. So it's an overall culture that has an impact, and I'm just taking a slight diversion to what you mentioned about freight. But the highlight is that there is a certain amount of growth that should continue. We are looking at definitely an [ improved ] 15% top line growth in this business also barring what happens in Q1. We have -- some of our hub centers are now falling short in terms of capacity. So you're seeing that we are definitely building some amount of capacity with new facilities. Working capital management is critical in this business, as you rightly pointed out. So it has been flat. In fact, it has been coming down in the last 2 years because of also the mix changing, as I've also said in the past that as the LTL mix changes, we will see definitely beneficial benefit in terms of ROCE. I was confident of actually getting to the 20% ROCE this year, but the first quarter it was quite hard, and we were not able to get there. But the challenge for the division is that they have to cross 20% ROCE for this year, at least. So we're looking forward to a good year also with the kind of traction we have seen with many of our clients. You're on mute, Vikram.

The next question is from Mr. Depesh.

Depesh from Equirus Securities. Sir, you mentioned a robust pipeline for the integrated logistics services in your press release. So if you can elaborate on that, please, and what kind of growth are you looking at in the supply chain management business? And if you can share any warehouse capacity increased targets you have for the next 2, 3 years?

So the aspect of complete integrated logistics is something that we've been selling for many years to our clients, and we see good traction there. I think we have to be careful in terms of what kind of businesses that we take. Some of our competitors have really gone ahead and taken a large chunk of some businesses there. I would say you have to be careful also in terms of the industry, because there are some industries like the consumer durable sector where the, for example, the transportation rates are absolutely at the lowest possible level. There is no value addition that happens in that movement or there is the kind of warehousing spaces that some of them have are of really poor quality. So you don't create a lot of value there for your customer also for the business itself. So some of them might take those businesses that are lost and think that they're going to build margins. In our past 6 periods, we've seen that some of these other logistics companies taking up these businesses not really doing too well. So we are quite cautious when it comes to certain kind of large-scale logistics projects that we take up, because we want to see -- selection of the right industry is important, and we are not really into revenue buyouts. See, many of these entities are doing revenue buyouts. They're trying to get revenues and say that we'll scale up and we'll be able to get economies of scale and so on and so forth. We've really seen that has not worked in the industry, because the margins are quite low. Also, you don't really get a large chunk of the market right away. If you see, like, the taxi market. Now an Uber and Ola can really call on 50%, 60% of the market there because that market is not as fragmented. And the way people can move there is much easier. But the logistics market, you cannot really take up 30%, 40% of the market share by revenue buyouts. It's not easy. We've seen companies who have come, the likes of the Rivigos and Black Box, who have really struggled also because they've not really been able to understand the business and the market. So we are -- we have a robust pipeline. We've been talking to a lot of clients for the 3PL/4PL kind of activities. I cannot really specifically share what will translate, because the time taken for the maturing of some of these contracts is much longer. And with COVID, we've seen some customers really taking a step back also there's lots of companies, as you know, have had cases also in the companies, and some of these things have gotten delayed. We don't have a specific warehouse target -- growth target. I don't think that is the way that we look at the business. We look at the business more in terms of providing solutions to clients, and it means that in that solution, we might even end up reducing the warehousing space for them and moving towards a big capacity utilization. That also might happen. So I think not specific targets around warehousing for sure.

Understood, sir. The second question on the Cold Chain business, you explained the growth targets, but can you please highlight what kind of EBITDA margins you'll make here or you're targeting here? And will there be any synergies with the TCI Express now that they've also gotten into it? And -- or do you think that will be a competition for you going forward?

No, the supply chain -- the business in cold chain is essentially a 15% to 25% EBITDA margin to us depending upon the year and depending upon how the business -- what contracts we get. There's no competition with TCI Express. TCI Express does only some of the last mile for very, very small packages, which TCI cold chain does not do. So really speaking, no competition there.

The next question is from Mr. Krupashankar.

I have 2 questions. The first one is on supply chain business. I just wanted to understand on the e-commerce part of the supply chain business. So are you targeting or giving services to be talk to? Or is it more towards the long tail of e-commerce? Are the services limited to new fulfillment centers or sensor things like line haul and last mile, which have also been taken over last [ quarter ]?

So yes, we are doing work with all companies and yes, we are doing work with the top companies as well, as well as some of the other companies where we are running the e-commerce lines for them, which is a fulfillment line from the existing warehouses. Because as you've seen that a lot of companies are also changing their such retail stores are shut, they're moving more and more towards omni-channel, and that's where we've been able to service them. We do provide some middle mile kind of services and including, in some cases, some amount of last mile also, where it is a little bulkier products, not necessarily for the small packages, et cetera. And yes, when the products come to the warehouses, we do a lot of value add, which could be checking the products, some amount of tagging, getting et cetera, as well as returns management because, as you know, e-commerce also has a large returns management aspect, and we do manage that completely as well for many clients.

So just to follow up on that, so do you see e-commerce as the second largest vertical perhaps in the supply chain business versus next-day business. Is that a good [ possibility ]

I would call it as retail. I think supply chain -- sorry, I do would call it e-commerce specifically, because retail is a better terminology, since it is such an evolving business. So yes, I would think retail is amongst the top 3 segments in our supply chain business.

And my second question was on the Seaways business. Just wanted to understand your -- can you give -- firstly freight rates have firmed up and you've seen a little bit of an increase. But in the last year, we had seen that there was oversupply in the market and which the freight rates fairly competitive. Now if you do have plans to add a new ship at the end of this year and in this stock of -- account of [ it all ] you'll also be looking at the push of spring banks. You see that overall, given that you have also stated that the acquisition price of a ship can go up, do you see that ROCEs perhaps can be -- can come down in this space or margins can be impacted with the again, shipping freight rates' collapse?

So freight rates, actually, there was not overcapacity in the last year. That was only in the first -- I think 2019, '20, there was a bit of overcapacity. Also, in the first quarter, we had decent movement happening, because the road transport was shut. So it did -- as we've seen the business still grew at about 7% in the last financial year. And freights rates have actually moved up quite rapidly on the Western coast as well as on the Eastern Coast. So we are seeing good traction there. So really -- and maybe it's a little slowdown now, but it's not going to necessarily keep being slow over the full year is our estimate. Also, clearly, because fuel prices are also on the higher side, that would reflect into higher container pricing as well. Yes, the price of a new ship will factor in -- will have an impact on ROCE. And also when the ship comes in and when we are able to deploy it and how fast we are able to optimally utilize it will have an impact on ROCE for sure. So yes, that is -- remains to be seen in terms of the acquisition price.

The next question is from Mr. Srinivas.

Congrats on finishing the year quite well. I -- just broader question on this COVID. Now when you compare what is happening today and look at what happened last year, can you give some color on how it is similar or different with respect to business in each of the verticals? Last year, you -- the maximum impact was felt in supply chain and followed by freight, and Seaways was less disrupted. Broadly, what kind of trends are you seeing, say, in May and as we speak, compared to this thing? And in the guidance that you mentioned of 15%, broadly, what kind of normalization path have you assumed with respect to COVID? Is it like things getting back to normal by end of June or like what kind of buffer have you built into the guidance exactly?

So this time around, the -- there is no disruption in the supply chains to a great extent, which means that last time everything has been shut completely. So that had an impact on factories and so on and so forth. Our freight business also didn't do too well in the first quarter last year. So I think this year, because the lockdowns have been more gradual and more state specific, we are seeing a little bit more uncertainty in terms of when things will open up. However, we do have plans from, let's say, the auto companies that some of them already started opening up in this week. And in the next week also, they're all opening up next month as well. So the visibility is and those uncertain when they'll open up, but at least some of the larger entities, their visibility is slightly better as we are seeing. Some amount of MSMEs will certainly have a bit of a struggle. If the government spending continues the way that it did in the first half of the year, we should see that some of the projects will get completed or projects will start moving where machinery and other equipment needed. So that will help our freight business as well. We do see traction, of course, with the Seaways business as well as with the rail business. So that should pick up. So normalization for us would mean that perhaps more in terms of closer to the festival season, typically after August when we can see more movement. Typically also, even during the year, these are some slow months anyways, because of post year-end as well as because of the monsoon sector. But August onwards, things do start picking up. And also with vaccination accelerating, hopefully, in the next few weeks, we should see more consumer confidence coming up and, hence, consumer confidence building up and hence growth, potentially, from August, September onwards.

[Operator Instructions]

Yes. Sorry, I think I went on mute and I was not able to unmute. So Vineet, if I understood it correctly, the impact this time is relatively moderate compared to last year across all the segments? And then our assumption is that in 2, 3 months or around the festive -- beginning of festive season, things will get back to normal, that's...

Yes. Yes.

Okay. And then other one was you mentioned in your opening comment that you may have to take some more write-offs in some, I think, Seaways or some segment. But could you just elaborate? I couldn't quite understand what you meant by that.

No, no, no. We don't have any write-offs planned. We -- whatever had to be done has been done already in our wind power or in the other overseas businesses.

The next question is from Mr. Prateek Kumar, as he were disconnected previously.

Sir, I just want further clarification, like your sister company, TCI Express in the conference call but, like, quite aggressively talking about a new segment, T2C Express in full chain. They gave some targets also of INR 500 crores revenue in full chain, which seems like a very aggressive number. And then there was a lot of discussion around T2C Express. I believe that T2C Express is something we also do, which where they mentioned about milk-run from manufacturers to customers. So are our business and their business starting to coincide and will start competing with each other or they are doing very different or...

No, no. I think the milk-run that is -- happens for us is more on the inbound side. For Express, it could be some on the outbound side. So really speaking, there is no really any kind of correlation in that, and these are separate segments. We as a group think about a lot of opportunities in the logistics and sometimes they might feel that they are coincidental to each other. But in reality, there is a niche that exists in many of these spaces, which we are able to -- because we have a customer orientation, we are able to pick up many of those things.

And what about cold chain? Because they have also added like, I mean, like things -- we are also thinking about very aggressive numbers, but they also seem to have at least told about very aggressive numbers, I mean to Street.

No. There -- as I explained also, it's more on the last mile side and also on some of the smaller packages side. Again, there could be some movement -- there's some work that could happen on the food delivery and the last mile of that also perhaps, but I cannot comment on that from that company's perspective. But certainly, there is potential in even the last part -- last mile also for small packages in cold chain. You've seen today also, for example, if you're ordering something like chocolates, that's coming in a small box today with -- in a fold setup. So like this, that's a very small last mile kind of activity.

Okay. One question on your short-term borrowings this quarter. By year-end had fallen very sharply, So is this a permanent thing? Or is there some general squeeze to vendors?

I will take this question. So Prateek, there is no kind of a squeeze, in fact, in the vendors. We have very vendor-friendly policy in terms of payments and other kind of treatments. Vendor payment days is only 20 days, while some of the competitors have a more than 50 or 60 kind of numbers. This is because of that the extra cash flow was there, and we are able to realize our datas quite sharply. And so this is a kind of a temporary thing as the business would move further, this would kind of reach to some 50%, 60% of utilization driven.

Okay. And one last question, sir, on COVID impact. So I mean, just an indicative thing, I mean, based on general what we hear from industry, most of the businesses are down 20% to 30% versus March levels or even higher. So that would be reflection for logistics industry also like around 30% decline from March quarter levels, our revenues would be for this, just indicative number directly?

March is anyways highest quarter from the logistics business for the country, including over a year as well for us as well. So -- and then the first quarter of the year is the weakest quarter generally as well. So -- and if you see in a normal circumstance also, the fall is around 20%, 25%. So perhaps because of the lockdown sector, it might be a little bit more, but I think that would be a possible anticipated number for the industry as a whole. I cannot specifically comment about us.

The next question is from Mr. [ Romit Nachbar ].

I just wanted to check, you mentioned that the ship CapEx is Going to happen towards the end of the year. The balance, INR 140-odd crore CapEx. Is it expected to be front-loaded? Or is it more towards the '22, '23 numbers?

So the hub centers sector are under construction and the construction period is over time. Obviously, it doesn't happen right away. So over the course of the year, we'll see some of that CapEx inquiry. The trucks and the rates, as we are expecting the rate possibly in Q1 and some trucks acquisition might happen in Q2. So some of it will get, I guess, partially front loaded. Yes. So it's more or less happening throughout the year versus any front-loading for us.

Okay. And what I really wanted to actually also get at is that you are projecting about a 15% growth for the current coming year. Does it factor then this kind of CapEx or not really?

See, some of our CapEx has more long-term orientation except for the ship, which is a direct correlation in terms of output -- CapEx to output. That is an even expected on in Q4. So the impact of that is much, much lesser on the overall targets for 15%. So this is more in terms of the existing capital that we have employed. We should be able to grow at 10% to 15%.

The next question is from Mr. Nitin Agarwal.

This is Nitin Agarwal from the Leeds Bank Limited. First of all, congratulations for your quarter 4 numbers. So my first question is regarding, you have guided the CapEx plan for the FY '22. So how would you plan to finance your CapEx? Because what I have seen in this quarter, you have reduced your debt aggressively. So would it be that maintainable in the future?

Yes. Of course, we've been reducing the debt means that we have capacity to borrow more. Also the cash generation is quite high also with the profitability. So overall, we would think that our half of this will get financed through debt and half of it through internal [ and others ]. So we shouldn't -- can't have any problems with that.

The next question is from Mr. Alok.

Hello? Am I audible?

Yes, yes.

Go ahead.

Yes, sir. So congratulations, firstly, on the great set of numbers. Sir, just I had one question. How has been the movement in terms of activity in April? Because if we see a lot of these indicators expanding that April has been a little on the weaker side in terms of logistics activity probably because of the COVID second wave. So how it's been for us? That is number one. And also, how's the freight rates movement been? Because there is one association which will give the freight indicators what ground level it suggests, that the freight rate has not come off so much also in April as what the media articles are suggesting.

So April, I would think has been more on the normal side as it is usually there, because it's a difficult fall after March that happens. And -- but then there were, of course, issues that started in the middle of April with lockdowns and cases increasing. So that did have an impact to some extent. Now as I said earlier, it's not been a complete lockdown. I think this time the government has not really distinguished so much, except for some big cities between essentials and nonessentials. So regular movement has happened from supply chain perspective, from a regular supply chains of the country. So I would say a marginal impact on April so far is what we've seen, but definitely a larger impact in May. In terms of freight rates, I think you're absolutely right. The company -- sorry, the organization really has, I would not say, much credibility in terms of really commenting on freight rates across the country, because they really don't have a national presence. And I agree with you to really come off to that extent as it has been mentioned. Very few sectors, it might have come down a little bit, but mostly it's been on the higher side only because we know that fuel rates are still high. We know that the capacity expansion has not happened. We know that there are -- the cost of new trucks is quite high still. So these are lots of factors where freight rates have first been higher.

Sure, sir. Just one last question, if I may, just add to the previous question. So sir, in terms of the Supply Chain segment, so even the auto -- from the auto segment, we have been hearing of production cuts to the tune of 10% to 15% in April, and then you continuing until now. So our supply chain segment is around 73% linked to the auto segment and actually depends on how the production is taking place there. So that segment, can we expect some sort of softness in the Q1 and maybe probably until Q2?

Again, I cannot comment specifically, because Q1 is not over yet. And we are seeing that some of the plants have started production. We've also seen that, as I explained, we have various elements of the automotive supply chain that we work in from tractors to other equipment. So those are also moving still. So I think overall, it's too early to predict it, but we have an internal sense of what's happening, but I think it will be unfair to give that forward-looking statement yet on what will be the real impact. And also, there is still a lot of uncertainties.

Thank you, sir. Here comes to the end of this earnings call. Thank you so much for joining and gracing us with your presence. Take care, stay safe and healthy.

Thank you.

Thank you, Komal. Thank you, everyone. Take care and stay safe, please.