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

Good evening, ladies and gentlemen. I'm Simran, the moderator, and I'd like to extend a warm welcome to everyone joining us for the Transport Corporation of India Limited Q4 and Annual FY '25 Earnings Conference Call. On behalf of the management, we have with us Mr. Vineet Agarwal, Managing Director; and Mr. Ashish Tiwari, Group CFO. [Operator Instructions] Please note that this call is being recorded. With that, I now invite Mr. Ashish Tiwari to begin with his opening remarks. Thank you, and over to you, sir.

Thank you for introduction. Good evening to all of you. Welcome to this quarter 1 call. I hope that you would have got the investor presentation copy yesterday. [indiscernible] That may not be coming to the actual numbers. With this, I would like to invite Mr. Vineet Agarwal, MD, TCI for his opening remarks and investor presentation. Thank you. Over to you, sir.

Thank you, Ashish. While Ashish puts up the presentation, I think I'll just quickly highlight a few things that have happened in the last few months. And specifically, I think the impact of the conflict that is there that happened between India and Pakistan. I think we feel that in the last -- this particular conflict has had an impact when it comes to business momentum because it has certainly set back some momentum in terms of 4, 5 months because a lot of meetings got canceled, overseas delegations got canceled, some large conferences have been postponed and so on. So it will take a few months for that to come back. We have also heard that the supply chains were disrupted in many places. There were warehouses that were shut and certain places, the business continuity processes were invoked. We also saw dealers in Punjab and other places did not take inventory of vehicles, et cetera. Rigs were also not available. Labor has moved away also from these states. So there is definitely some impact that we are seeing that will have on industry in the next few months from the North sector. However, we are hopeful that this will be mitigated fast. We have also seen that the IIP numbers have been lower, manufacturing PMI is slightly higher. So there is a mixed trend. Some of the customers we've met are also a little skeptical when it comes to tariffs. There have been some delayed plans. They delayed some of their plans. Some of the good news is, of course, that we are seeing the demand for customers remains high. Consumer trends are shifting. They're getting more positive. We are also seeing that the festival season seems to augur well, Monsoon seems to be at least estimated to be good. So in general, some of these things are certainly positive. Let's move on to the presentation. Almost all of you must be aware of the entire structure of the company. A notable point over here is that we have 250 reefer vehicles also in our fleet now, and we have been able to increase our warehousing footprint to about close to 16 million square feet by adding 1 more million this year. Our growth drivers to the industry stay the same. There is a lot of demand for business for the logistics sector, and we are seeing a continuous -- the enablers are in place from an infrastructure perspective, from the multimodal perspective. Consumer demand is also strong when it comes to different services that we can provide from a supply chain perspective. And of course, the China Plus One strategy is definitely playing out. PLI is playing out, and those are areas that we see high growth in the future. As a company, we have some strengths and the ability to really provide a multimodal network. It is absolutely unique to us in our country. The capabilities that we built in the last decade in all 3 modes, road, rail and sea are unmatched and the ability to provide a single window concept with a whole host of services backed by technology is something that is unique to us. We built several modes around it. And we built capabilities around servicing high-growth sectors, chemical for one or the other sectors that are now coming up in the next few years. As I mentioned, the range of services are huge now and we are servicing almost all the major verticals today. I want to share a case study of a quick commerce company that we are working with, where we are doing the integrated food and fruits and vegetable processing. It's almost 1.5 lakh square feet facility with frozen chilled, ambient temperature services. We have 80, 90 trucks that are going in and out every day. And we receive the fresh orders, we clean them, shed them, grade them and create market make value packs. And those are then delivered to the dark store. Now this kind of fulfillment services that we provide are not just for the fruits and vegetables, but for general FMCG merchandise, et cetera, for several quick commerce companies. Now some amount of automation has come in, but this is also a certain amount of manpower-intensive activity. The interesting thing here is that we are able to scale up the operations very rapidly. Today, we are servicing 85 dark stores. And in the future, we can service definitely a lot more also just through incremental output from places like over here. Our multimodal capabilities remain strong. We did 2,500 rigs last year with our 3 trains, plus we handle a lot of trains that we hire directly from the railways as well as CONCOR, the joint venture that we have. So this kind of capability of 2,500 rigs, again, is quite unique to us. It's almost 7 to 8 rigs a day that we are moving. In terms of container movements, the TEUs handled have increased from almost 139,000 to 154. Number of cars have reduced a little bit. We've increased the number of yards that we have from 55 to 67 yards, and we handle about 70 terminals. And we have saved 1.6 lakh tons of CO2 equivalent using multimodal network last year. Technology is ubiquitous to us. We have several cases where we have now started using AI in some operations like for dynamic route management, et cetera. So it's an ongoing process, but the base of this remains strong as always. We are working in many sectors. Apart from the ones that you see, we're also working in the aviation and defense sectors and several such new sectors that are coming up. So these are all very high growth and also have very high barriers to entry because there's a lot of complexity in it. And we think that these are the things that will really help us to maintain a differentiator in the coming years from our competitors. We delivered another quarter of consecutive growth quarter-on-quarter on a year-on-year basis. And the momentum is strong as a whole. Net cash surplus is about INR 235 crores and debt is about INR 100-odd crores. I'll start talking about freight, if you go to the numbers, Ashish. So freight operates from 25 hub centers across the country, now 700 locations. It has been performing weakly in the last year or 2, mirroring some amount of GDP growth, but also SME growth has been very tight and that has also affected our business. We have the market share, the share of business is about 36% out of the overall business, which has not increased. We feel that we are now bottoming out on this business in terms of the margins and things should start looking up now onwards, specifically because of the festival season coming up. And we have a renewed thrust when it comes to the LTL business. The top line has grown very moderately at 4.3% for the full year and margins are, of course, lower than last year. The ROCE is also compressed. The capital employed has gone up slightly because of working capital intensity increase with the FTL business. Again, we have got that back into focus. And we've done some additional work around the LTL side, which I will talk about later so that we can increase that business share. On the supply chain side, the business volume has been good, specifically because we've been able to grow our warehousing business quite attractively in the last year recording single double-digit high growth last year. Tractor segment has started to improve. 2-wheeler is doing reasonably well, but it is still lower than COVID. Quarterly, we grew at about 15% and EBIT growth is about 12.5%. Some amount of bench strength has been created in this business because we are seeing good traction coming up in the next few years. We've acquired some very large warehousing contracts as well. ROCEs are slightly lower because of the capital employed. We've made investments into new trucks and some warehousing equipment as well, as well as working capital intensity has also increased slightly. On the Seaways side, we continue to have the same amount of ships. The 2 ships that we had ordered are scheduled to come between July, August next year, which will essentially feature in FY '27. And that should add to some capacity, but some capacity we might lose also because of aging of ships. There are 3 dry docks that have been planned in FY '26, out of which one has already been completed in the month of April. The business, as you can see, has done quite well. We continue to grow in the quarter as well. The volume growth has not been high, but the value growth has been stable. We are feeling that this year -- coming year also, we are expecting the volume growth to not be there and value growth also to be stable. But the ships have depreciated as well as the fuel prices are also quite flat. So that is also helping us. The margin structure is at the 40-ish percent range in terms of EBITDA. And going forward, I think we should start seeing some normalization. If the conflict in different parts of the world start reducing, we should see the freight prices coming down and hence having an impact on the domestic market to some extent as well as availability of secondhand ships might also increase. Joint ventures have done well. CONCOR joint venture grew at about 32% with some increase in profitability. We are seeing, again, customers coming to us for a lot of opportunities for multimodal logistics. Cold Chain grew moderately at about 16%, but profitability was flat. We've had a lot of CapEx in this, as you can see, with the capital employed being increased, both on the trucking side as well as on the storage side. The second joint venture with Mitsui for automotive logistics has done reasonably well with a 17.2% increase in top line. For the full year, the guidance that we had given for the top line was 10% to 15%. I think we've achieved that on the consol side, but not on the stand-alone side. On the PAT side, we had given the revised guidance of 15% to 20%. We've achieved that on the stand-alone side, but not on the consol side. So broadly speaking, we've achieved most of the guidance that we've given for the last, I think, post COVID, actually maybe even longer, all the guidance has been achieved. The financial indicators are all robust. Overall ROCE is about 24% and RONW is about 21%. The dividend that we gave out in the quarter 2 and 3 interim dividends are the total dividends, which were accumulated to about 400%, which is about 15%, 16% of our overall payout. Our ESG goals remain strong and high, and we are looking at more carbon mitigation through the multimodal network. We have also added some CNG trucks as well as LNG truck as well. Our tool that we develop for transport emission with IIM Bangalore has been certified as an ISO certified standard for measurement, which should become a national standard for India, hopefully, in the next few years. We have had several publications that you are aware of. In terms of the future outlook, we are looking at a 10% to 12% growth on the top line and bottom line this year, slightly subdued compared to last year. The budget, we achieved about INR 300 crores of CapEx in this year out of the INR 375 crores projected. This year's budget, about INR 400 crores, INR 450 crores with almost a similar line, except that the shipping, we'll have to make 2 payments this year versus 1. So that would increase the outflow on the shipping side and some amount of trucks as rigs, et cetera, that also might come in. So roughly an equal amount of money going into land and building trucks and rigs. Happy to answer any questions. Thank you.

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

Just wanted to understand on the Seaways segment. So what kind of growth we could expect considering that there is dry docking in this year, which was not there in the previous year. So what kind of growth could be there? And also if the growth is slightly lower than what we have done in this year, then would the margins also sustain? That would be my first question.

Well, we are not projecting a lot of growth for this year, flattish levels and again, flattish levels in terms of profitability as long as the fuel prices hold. As I said, if there is some fall in freight rates overseas in the international markets, some shifts might come into our sector, which might reduce freight rates a little bit, but that remains to be seen. So geopolitical tensions is a big caveat here, but we are projecting a flattish year.

Just wanted to understand in the freight business, the margins have not gone anywhere in the last many, many quarters, and we have been targeting a higher LTL share, which has not really materialized in a big way. So how do we see this segment now? Should we consider it as a 2%, 3% kind of EBIT margin segment also ahead because the competition is increasing here and also volumes are a little tied up at the industry level itself. So coming 2 years, we could see a similar kind of a growth rate and similar margins for this segment what we did in FY ‘25?

No, I think the business, as I said, has started to bottom out in terms of its -- we do see growth now coming back here. We also feel that there is some element of cost rationalization that has started to happen. So there would be push to increase rates also with customers, and we see the industry also will try to push that as well. So I'm a little bit more hopeful from that perspective. We've also put a strategy in place for LTL business. We've added more teams on the ground. We've automated a lot of procedures and processes. We have looked at higher tonnage trucks so that we can reduce the cost per kilogram. The hubs have become a little bit more modern. We are doing B2B LTL marketing through social media. So we've initiated and instituted a lot of activities so that we are able to keep up the momentum in this and really start inching that 36% share. On the FTL side, things are stable, they’re flat. We keep looking at new customers to go to because every customer that we are ultimately with our competitors do feel that we have the best margin, they try to get in there. So we are constantly trying to upscale the customer, providing them control tower and a unique experience versus working with other companies. Simple things like just the fact that they can send the order online and the order processing happens completely online. These are things that no other company offers really in this space. So using the app or using just a simple login, they can place orders on trucks and so on. As well as they can view their entire movement on a control tower. So these are some things that we are value adding with our customers. And hopefully, that should create stickiness where we can inch up the margins a little bit more.

Just last question. Any update on the secondhand ship, if at all we are looking also for that? Any update or any chances of that coming in this year?

Well, the market remains as it is. We are sensing a little bit of softness coming in. If that starts coming in, we should see some ships available for purchase, but it's still work in progress.

The next question is from Mr. Amit Dixit.

Congratulations for a stable performance in a very challenging quarter. I'm Amit Dixit from ICICI Securities. A couple of questions from my side. First one, if we look at the supply chain business, now here, EBITDA margin has increased Y-o-Y both on quarterly as well as yearly basis. But if you look at the ROCE and look at EBIT margin, they have, in fact, gone down. So just wanted to understand whether it is the case where capital employed has gone up in this particular quarter or year? Or is it a one-off case? Or we have some surplus capacity that we might use in the coming fiscal?

So we have definitely increased some amount of capacity, whether it is new trucks that we've added on or whether we have the capacity in putting new warehouse equipment in some of the new orders that we've got. So some of that had to happen right away. And hence, that you can see the increase in CapEx impacting the working capital or the capital employed in this business. This is also -- we did create, as I said mentioned earlier, bench strength. So there is, of course, equipment, et cetera, that has also been added on. Simultaneously, working capital has also gone up. The business is up by about 15%. So some amount of increase in working capital has also happened. We changed some terms with some customers, and hence, some amount of requirement for working capital has also gone up where the customer used to discount our bills, we stopped that, and hence, some capital employed went up. I would say there will be some increase next year also, as you've seen in terms of the CapEx, about INR 100-ish crores of CapEx for trucks and it's about INR 20 crores, INR 30 crores for warehousing equipment. But let's see how much of that gets translated. But yes, this kind of investment pattern will continue for some time.

ROCE and all might improve or might have bottomed out from here?

Yes. ROCE should definitely look at improving as well since a lot of these will now start playing out for the full year, the CapEx that we've done.

The second one is essentially on the CapEx split on the last slide. So if we look at that split compared to last year, while there is a lot of spillover that we see this year, container in particular, we have seen that we missed the budget and for FY '26, we have projected even lower CapEx. And the second part of the question is that despite our thrust on IT, we are seeing that the CapEx was higher in this category last year. But this year, we are seeing a meaningful cut in the CapEx. So is it on the -- I mean there are a couple of things included, I understand over here. So is it just possible to shed some light on these 2 elements?

Amit, these are quite small numbers compared to the overall INR 12 crores in containers versus INR 17 crores what we did, not very significant. Some of the containers are being built on top of the trucks itself. So sometimes you don't need to really buy specific containers on the side. This number can go up also. It is not that this is sacrosanct. This is a broad budget that we have in place. The other is on the IT side, it's not just IT, as you rightly pointed out also it's warehousing equipment as well. And it's depend on certain contracts. Again, if you are getting several contracts, then this number might go up also. I mean, the budget of INR 50 crores, we exceeded that last year. So there is a possibility that we might increase that as well.

Is there any possibility of curtailing CapEx if market conditions remain as they are and they are quite uncertain at this point in time. So is there a possibility of curtailing this fiscal, [indiscernible] we will try to achieve somewhere plus/minus 5% near term?

The range is usually last time also, we mentioned between INR 300 crores, INR 375 crores. And this year also, we've been saying INR 400 crores, INR 450 crores. It's not really fixed. Some things like hub centers, warehouses, it's not necessary that it will come the time we want it because the approvals take its own time. So hence, it's this is a little bit fluid, not specific.

The next question is from Mr. Pinaki Banerjee.

Sir, actually, first is a hypothetical question here would be where you just mentioned you are using artificial intelligence and automation technology in your process. And as we know that the industry which you are working is a huge manpower-related industry. So will this automation and artificial intelligence be able to rationalize your manpower or be able to lower your operating cost in the future?

It's not very significant in terms of manpower cost, but definitely in terms of overall productivity and predictability type of situation, it can definitely help a lot more. So I would say that this is more in terms of incremental manpower doesn't need to be added too much in some cases. But productivity and the kind of insights we can give to our customers, that improves significantly.

Regarding your freight division, as you see that your share of LTL is now slowly increasing. So sir, actually, can you share what is the operating margins of the FTL and LTL business if it is not an issue?

Well, operating margins are double in terms of the LTL business. It's about 20-ish percent on the LTL and 10-ish percent on the FTL.

Sir, regarding the recent fundraising process, actually, what is the main motor behind this for looking [indiscernible]?

It is just an enabling resolution in case if you need to.

Just last question. Sir, actually, in your balance sheet, your current investments have almost come down from INR 330 crores to INR 171 crores. So how do you utilize it for CapEx-related purpose or some other thing?

So we had INR 200 crores of buyback and of course, INR 300 crores of CapEx and about INR 75 crores of dividends.

The next question is from Mr. Krupashankar.

A couple of questions from my side. First one, you did mention that the Seaways business, you are expecting more of a flattish revenue growth. And the overall guidance on the revenue growth is about 10%. So more pressure on the supply chain business to deliver and also the freight business. So just wanted to get a sense what is the visibility you're seeing on the supply chain business with respect to contracts ramping up? And what is your thought process on the LTL business as a whole going ahead?

Supply chain business, I think the traction seems to be quite decent, and we should be able to grow at that 12% to 15% range this year as well, and that should help to increase the top line. Freight will not grow at that much, 8% to 10%, but supply chain will become the largest business for us this year. And then the other businesses, if you look at our joint ventures are looking at solid growth opportunities, including the CONCOR venture. So consol level, we should be able to cross the 10% mark in terms of the projections. Stand-alone, we might be closer to the lower end of that number. But I think some of the divisions should pull put up some -- I mean, even if Seaways is flat and supply chain is around 15% and freight is about 8%, 10%, we should cross 10%.

But on the bottom line, I think Seaways contributes materially, right? So from that point do you see a margin expansion coming in other segments?

Absolutely. And I think from a consol perspective, Seaways contributes to about -- I'm just looking at the numbers as we speak. Yes, about 35%, 40% of the overall margins.

I think over here, while you did mention that you're positive on entire can system as well as chemical logistics. Just wanted to get a sense on the supply chain business side, any further avenues where things can pick up material? Because when you're looking at 14% to 15% sort of growth in this sort of environment, any sense around whether is this increase in adoption of supply chain contracts by industries? Or have you added any industries to your portfolio? Something probably can help.

One is that warehousing growth has been quite robust for us. And as I said, single double-digit high growth we have seen there. And there, that is one area. In the automotive logistics also, we are seeing good traction. There are lots of new companies are coming up, new factories are coming up and the ability to sell services to many of these clients have increased quite a lot. So net-net, the traction seems to be good. And there is some new industries that have come up also, but not as significant. But I think the way that we operate very high-quality and efficient logistics systems for many of our customers also has helped us to get new business from either when they're expanding or whether whenever we have more new customers coming in. So both from expansion as well as new customers, we get that opportunity.

Lastly, I think on the one data point if you can share, what would be the total proportion of customers who will be using more than one service testing portfolio? Any number?

No, unfortunately, I wouldn't have that.

The next question is from Mr. Divyansh Gupta.

A couple of questions. So in your presentation, the number of trucks that we give for SCS, I think [indiscernible] mentioned 3,500 trucks, which earlier used to be 5,500 trucks. So I just wanted to understand, is there an actual reduction in the number of trucks? And you mentioned that we have made some investments upfront. So how should we read into, let's say, this different direction or let's say, opposite directional things?

So actually, there are a couple of things. One is that 2,500 was more of number of market revenue segment. Over a year, there has been more of better supplier and limited fixed kind of vendors and somehow on top of that [indiscernible]. So the numbers which are actual are close to 3,500 plus. So maybe 3,500 plus 200 [indiscernible]. So 5,500 was not the actual number.

And what would have been a like-to-like number, let's say, last year, not even last quarter but...

It has grown for sure. It has not reduced. Business has grown, so certainly volume a numbers have grown.

So the next question was regarding the chemical subsidiary. So this happened last quarter, I wasn't able to join. So what is a trigger point which, let's say, makes us decide that let us now create a separate subsidiary with a separate CEO or a person looking at it. So is there a particular level of scale and ambition that drives this decision?

Absolutely. I think the way that we look at this business and for any such business, whether it is cold chain or others, was the fact that we've come to an inflection point when that business is now looking at higher growth. And that inflection point is a factor of many things. First is that MNCs and other companies in India are looking at India as a China Plus One option, which means that they're setting up new plants and India is also starting its export import of chemicals. And automatically, when that is starting to happen, we are seeing that companies want a high degree of compliance and a high degree of corporate governance in the way that their suppliers operate in chemical logistics. That's true. And then there are adjacent businesses that come up with chemicals. So chemicals that are being used in different applications and might require cold storages or chemicals that are required heavy movement where we're using rail or certain types of warehousing that is required for chemicals. So now all of these factors start playing in, and we realize that there is a steep learning curve when it comes to, for example, Exim trade or a certain degree of compliance, et cetera. Now that's where we start looking for particularly specifically partnerships or where we can bridge this learning curve faster. And hence, we subsidize this business in the anticipation of a JV partner. And once that happens, we should see good and fast trajectory growth in this sector.

So are we planning to onboard a JV partner sometime down the line and therefore, created the subsidiary?

Yes, exactly.

And what would be the, let's say, overall chemicals contribution to TCI's revenue?

It's not very large compared to the overall business. The subsidiary did about INR 40 crores.

Right now it is INR 40 crores, which is kind of FY '25. But some of the business has remained in the TCI also. So that would come again in the couple of quarters.

Yes. They will all get consolidated into the -- they're all being operated from different entities. They'll start coming -- it's not additional business that is coming. It's the existing business that is going to go into the subsidiary businesses. And then that subsidiary itself is now on its growth path in terms of new business opportunities.

But then this INR 40 crores is for the last quarter or for the whole year, let's say, come back [indiscernible].

Full year, but the business volume is this -- we don't have the full number yet, but this can be 2x, 3x of the actual business that we are doing.

Last couple of questions. So you mentioned in the opening remarks that we are taking some steps for LTL, increasing the LTL business. So can you share some light on that? And the second question, in our presentation, we used to mention that we were moving 2.5% of GDP. Now in the latest presentation, we are saying 2%. I would have guessed that given all the stress, the unorganized sector would have taken a much bigger hit and we should have actually moved ahead. How should we read into this reducing?

So it's not reducing. We always maintain a 2%, 2.5%. We did not specifically say 2.5%. And with GDP growth growing, there is a certain amount of businesses that we don't do. For example, commodities, we don't do. There has been a good growth in steel, cement, aluminum and all those other sectors, but we don't touch those sectors simply because we know there's not enough margins there. So hence, we are concentrating mostly on the higher value cargo. And there, the volume, as you can see over the last few years has been increasing in our system, but perhaps not as fast as GDP growth. So hence, we are saying that, okay, 2%-ish is a more reasonable number to talk about versus 2%, 2.5%. That's the only difference. Second, on the LTL side, I did mention a few things in terms of putting more people on the street. We are rejigging some of the hub centers, providing better fleet there, which is more in terms of bigger trucks so that we are able to reduce the cost as well as sales force automation. We have a lot of applications that we've now built on to the mobile phone of the sales force so that they're able to convert clients faster and measuring productivity of those sales team. So like these are some of these measures that we've increased in the last few quarters. Including branches, we opened 40 new branches. We intend to open 50 new branches this year.

The next question is from Mr. Devang Shah.

Congratulations for a good set of numbers. Sir, my first question is that in the presentation in the recent slide that is showing, you have mentioned the revenue and profit growth outlook somewhere in the range of 10% to 12% that has been guided on an overall basis. And just as far as operating margin is concerned, I mean, we are going to maintain overall basis somewhere close to 10% kind of thing. What's your outlook on that?

Yes, we are maintaining a 10% to 12% on the top line and bottom line in terms of this year.

And my second question is that as far as CapEx is concerned, we have a sufficient amount of reserve on the balance sheet side. So it will be done from the internal accruals or are we going to raise any kind of debt?

Right now actually is -- on the [indiscernible] side we would like to have [indiscernible].

So what would be the ratio kind of thing because we have a good amount of reserve. That's why I’m just asking that what would be the ratio in terms of debt and internal accruals. Anything specific you can throw some light?

70% would be the approximate number.

70% would be the debt?

Yes, 70% would be internal accruals.

And my last question that we are seeing some kind of -- in spite of being a headwind in the economic side, in general, we came out with some kind of good year in this particular financial year. So moving forward, if we see any kind of improvement as far as the current situation is concerned, do you feel that we may have some kind of better show in this particular financial year compared to this current financial year?

See, I think in the past, this has always been a question. And though we've maintained a conservative outlook with a 10% to 15% or 10%, 12% in FY '25 after the first 6 months, we did up our target on the profit from 10% to 15% to 15% to 20%. Now some of this can happen also based on what changes happen. But I think growth in our sector is challenging because you can lose profitability very rapidly with that. So we are very conscious of that. And I will not hesitate to iterate that we are willing to sacrifice some amount of growth if our margins are going to get compressed. So it is important for us that we are seeing a very long-term view, not a 1-, 2-, 3-year view, but even 5-, 10-year view when it comes to the sector. And for that, we see that a reasonable growth amount is good. There will be businesses that will grow much faster. As you are seeing, the CONCOR joint venture grew at 32% this year or the cold chain joint venture at 16%, 17% this year. So like this, there will be certain businesses, which are high-growth segments will grow. Broadly speaking, the core businesses will maintain their profitability as a focus with the right amount of growth structure that is in place.

So you always prefer to be conservative. That's what you are trying to say, right?

It has worked so far, right.

The next question is from Mr. Deepak.

First question is on the Freight division growth that we mentioned of 8% to 10%. Sir, so how are we thinking about growth, like the same clients giving us 8% to 10% growth or new clients? Because in this environment, given the competition, getting new clients seems to be difficult. So any thoughts on that?

It's always a combination of new and old because there are some companies that will expand capacity or are increasing sales. So we'll get some of that. But there's obviously new customers that are available. Let's not forget that we have a very, very minute share of the business. The opportunity is massive in terms of what we can get. So yes, there is a churn that we always have every year. If there are customers that do not give us margins, we tend to drop some of them also. And we lose some contracts because these contracts are also typically 6 months, 9 months, 1 year or 18 months max on the FTL side. And when that happens -- and typically, customers are also looking for that churn because they're looking at a lower cost provider. And sometimes they come back to us. Many times they come back to us when they realize that they are not necessarily getting the service from those companies. So it's a mixed bag always, some churn and some new customers.

On the margin side, since you mentioned that we have bottomed out and you see cost rationalization taking place. So any examples on that? And plus the assumption of rates being increased and the LTL push, when do we start seeing the success from these 2, 3 factors on the margin side?

Well, there are customers today that are saying that they need to move their FTL, but simultaneously, they need to move their LTL also. So I think one definitive solution that we provide to our customers is this kind of movement. They are able to visualize a complete setup, which is a single window solution. So some amount of rationalization starts happening when we are working together with the customer and we're able to pick up higher volumes from -- because if you're going and picking up some cargo, let's say, 5 pieces of cargo from a particular customer and he gives you 10, then you automatically have some rationalization that happens in terms of your pickup cost and similarly on the delivery side. So these are some factors that help. And sorry, what was the other part of your question?

The freight rates being increased at an industry level.

That's not increased much. In the past, the factor was diesel. That is not really playing out so much, as you know. It's more now other factors like toll, et cetera, that has started to go up very rapidly. Now industry has not been able to pass on a lot of this. And it will happen slowly. This year, we understand that the capacity addition in terms of number of trucks is also lower. So that might mean that if there is some demand growth that will happen, we should see increase in prices as well.

On the Seaways division, sir, you mentioned that the revenue should be flat. And on the EBIT, it was a bit -- I needed more clarity. So this INR 200 crores of EBIT that we did this year, should that be maintained for the next year as well? Or do we expect that the freight rates coming down would hamper that?

It can hamper it. I cannot completely say that the -- if there is some freight rates reduction, then there will be some impact on the cost structure also. Yes, that could happen as well. But right now, we're not seeing many things happening on the cost, except for the dry docks that are clear and visible.

On the Tran-system JV, what kind of growth runway has the JV partner given us or the customer given us for this coming year? I just wanted to understand that.

Similar type, a little bit more flattish on the automotive side. A lot of that business is with Toyota and Maruti. So Toyota actually with Maruti cross-badging. So there, the growth is assumed to be a little bit on the flat side.

And sir, last question, the CONCOR JV, the growth is phenomenal, but on the profitability side, it's on the lower end. So just wanted to understand the reason for that? And is there any scope for improvement?

Yes, the business is -- the kind of cargo that we move, there is, of course, some amount of competition. The rates that we get, we get it from CONCOR only. So the movement that we can do on the rate side is less, but the ability for us to provide first mile, last mile and the complete end-to-end solution is something that works for us, and we are able to, hence, grow the business. Margin structure is definitely less. We have less CapEx also in this business. So ROCE in the business is decent. And I would think that going forward with some volume increase, we should see some increase in the profitability also.

The next question is from Mr. Yash Tanna.

Congratulations, sir, on achieving the guidance for the year. So my question is, you mentioned that there will be addition on the Seaways segment in FY '27 and then there will be a few ships that the capacity will go out due to aging. So if you can tell us the net capacity addition that will happen in FY '27 and then probably comment on growth as well since FY '26 will be flattish. How does growth look for the years post that?

So both FY '26, '27, if there's a secondhand ship that we are able to buy, then automatically volumes will increase. So we are keeping that option open. But as it stands, the 2 ships that will come will not increase the capacity at all. It will be a minor increase. We'll have the ships that will go off will be the ships -- so net-net, we'll have some months where the capacity might be higher. The other element is that if there's some rule change that might happen with the government, then the ships might continue, then we'll have a net positive increase in capacity.

Even with the new capacity as of now, there will be no net capacity addition in FY '27?

Yes.

On the freight segment, you mentioned that we are close to bottom of the cycle and margins should be improving. Now I think on the higher end in the previous years, we have done close to 4.5% on the EBITDA margins on the freight segment. Firstly, can we go back to those margins? And if yes, how long would it take?

I think we'll have to give it a few quarters. Let's see how this quarter and the next quarter behave in terms of volumes, et cetera, and then we can be a little bit more confident in terms of how we are going to achieve the plans.

The next question is from Mr. Kondinya.

If you can provide me the split of this INR 89 crores profit from JV which we have given like how much of this is from TCI CONCOR, and TCI Cold Chain? Profit from JV is INR 90-odd crores, which we have shown in FY '25. How much of this will be from TCI CONCOR, TCI Cold Chain if you can provide me the number?

About more than 2/3 is coming from the Tran-system joint venture.

Sir, 2 quick questions. Firstly, on the ground level traction, I mean, notwithstanding whatever is happening on the Northwestern side in the past couple of weeks, are you seeing any green shoots with respect to recovery, either with respect to manufacturing pickup or any opportunities with respect to channel filling inventory in any specific sectors per se? That's the first question. And then the second question is on the guidance front. I mean, when we speak of 10% to 12% bottom line growth and when the shipping is expected to be flat, which is like 50-odd percent of your EBIT mix. So just trying to understand where do we expect to grow? How does the bottom line growth pan through?

So I mentioned that a little earlier that some of the heavy lifting will happen from the supply chain side, but the other joint venture company sector should also help in pushing this growth to that 10%, 12% range. So overall, we should be getting there on a consol level. On a stand-alone level, a little bit on the lower side of on the 10% to 12%. What was your other question?

So the first question was trying to understand if there are any green shoots that you're seeing.

Yes, we have seen some amount of green shoots, but that's more seasonal type. But I think it remains to be seen how the festival season will play out. I think in the next month or 2 is when we start seeing -- by July, actually, we start seeing where the stocking is happening or not. Quarter 1 is typically the lowest and the weakest quarter and with the onset of the monsoons, et cetera. So some movement definitely is there. It's more than last year. I can say that for sure, but not as much -- or rather, I think early days to see whether this is going to continue for the next few quarters.

Sir, among the key industries that you cater to, at destinations where you ship the cargo to, how are the inventory levels now vis-a-vis, say, a year back or maybe prior to FY '24, I mean, how are the inventory levels because that can possibly help, if the inventory levels are lower than historic levels. Are there any indications on that front?

Usually, March is when typically inventory levels get pushed to record highs and then it gets slowly absorbed over the course of the next few months. But not specifically, we are not seeing any inventory. Some of the warehouses that we maintain, manage the production or the inventory levels are moderated. It's not really high or very low also. FMCG side, there is a little bit on the higher side. But otherwise, it's quite okay.

So Y-o-Y, it's still flat is what we can take home?

That's right.

We have Mr. Yash Tanna back with us.

Sir, again on the Seaways side, so assuming that we do not get a secondhand ship due to the market conditions that we have been facing a problem since the last 1 year. Then in that case, if the net capacity addition will be 0 in FY '27, would FY '27 also be a flattish year in case we don't get a secondhand ship?

It could be flat, but it depends also on the freight rates. So as I've been saying for the last few quarters that we are at specifically quite a high EBITDA margin business. And these are not necessarily going to be maintained at a 40-ish percent range. I think we think this 30-ish percent range is more likely for this business.

So then it will be more of a headwind in terms of capacity addition, will also be net flat and then margins will also have a headwind since we are in the upper range of it.

Yes, it could be also. But then if you are able to get another ship, a secondhand ship capacity addition, then that will lead to business increase.

We have Mr. Divyansh Gupta also back with us.

Just a couple of more questions. So ex of JVs, whatever business that we do, would it be possible for you to give a, let's say, industry split of, let's say, from where how much of revenue is coming for the whole year? Like autos is this much and chemicals is this and some other industry is this?

Well, each business is different. So Seaways is different and supply chain is more automotive driven. Freight has a high percentage of engineering products. So really speaking, the mix for each of the divisions is separate versus generalizing it. Incremental growth will come from every segment, every area.

So I wasn't actually asking for incremental. I was just saying FY '25, the year that we have finished, revenue mix by end user industry.

For all 3 divisions combined?

Yes. For the whole company. Not trying to break -- if you break it, then it's great, but I was aiming actually at an overall level.

Well, 75%, 80% of our supply chain business is automotive, which automatically makes that the largest segment irrespective. There's no other sector that is as big compared to and it's also 25% of the manufacturing GDP in the country. So automatically, that is one of the largest segments for us. Then I would probably put engineering and related products into the next category of -- and then we don't see anything which is specifically third, then there are much, much smaller industries that we cater to.

And how much will be, let's say, that engineering thing be in the overall pipe?

Difficult to give you an exact number, but definitely lesser than the automotive business.

The last question is, how much of our business is from a point-to-point more domestic in nature and how much is more export in nature? The question is that, let's say, that China Plus One theme is happening and people are setting up plants here to export what capabilities we already have to, let's say, serve export-oriented Indian economy or we will be still focused on just moving stuff from an interior to a port and then someone else takes up the port to the end destination kind of business?

Not necessarily. I think we are looking to expand overseas, as you know, that we have offices in the Middle East, we've just opened and in the neighboring countries. So some amount of end-to-end trade we are definitely looking at that in some of these countries because some of our customers are in these places. So that's one. In the other parts, we'll grow some amount of freight forwarding, et cetera, wherever needed if we are able to provide a little bit comprehensive solution. And subsequently, then if we are able to, let's say, in the chemical venture, find a JV partner overseas, maybe that partner can help us with the last mile delivery and the freight forwarding part. So in that sense, we are building some capabilities around the Exim piece, but I wouldn't say very intensely. It is growing, but not that we are opening 10, 15 offices every year overseas.

We have our last question with Mr. Nishant.

Sir, my question would be, firstly, on the truck fleet utilization. How has the trend been maybe in the recent quarters or months, if you can provide some color there? And related question would be, would we be looking to add a truck fleet in the upcoming year? And what would that be?

Well, utilization for us is not a problem so much because most of the fleet that we buy are essentially specific to contracts and customers. So they get utilized quite efficiently. And the fleet addition we are looking to do is also maybe some replacement trucks in some of the contracts and in some possible new contracts that we are looking at. So this is a tentative number that we are projecting. And these are all kinds of trucks, mostly diesel, but we are also adding CNG trucks and some LNG trucks as well.

So sir, the net addition, any number you could provide?

There would be a net addition of -- again, I think we have about 1,300 trucks in the system, supply chain mostly, all in supply chain, and maybe another 100, 200 trucks will get net added.

And sir, the last question would be, we’ve seen some softness in the crude prices? So I mean, do we see that as a tailwind going ahead impacting the diesel prices or the fuel prices for us?

No, not yet because the government has not made any changes on the fuel side. We might see some positivity on the bunker prices for our shipping business, but not necessarily in the regular business.

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

Thank you, Simran and thank you, everyone, for joining this quarter call. I think we have answered all your questions. Our investor presentation is self-explanatory. In case you have any further queries, please write us back. We will revert you in due course. See you again in the quarter 1 of next financial year. Thank you.