TVS Supply Chain Solutions Limited ($TVSSCS)

Ladies and gentlemen, good day, and welcome to the TVS Supply Chain Solutions for Q4 and FY '26 Results Conference Call hosted by PhillipCapital India. This conference call may contain forward-looking statements about the company, which are based on the beliefs opinions and expectations of the company as on date of this call. These statements do not guarantee the future performance of the company, and it may involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vikram Suryavanshi from PhillipCapital India. Thank you, and over to you, sir.

Thank you. Good morning, and very warm welcome to everyone. On behalf of PhillipCapital, I'm pleased to welcome you all on the earnings call of TV Supply Chain Solutions Limited. We are happy to have management with us here today for question-and-answer session with the investment community. The management is represented by Mr. Ravi Viswanathan, Managing Director; Mr. Vikas Chadha, Global Chief Executive Officer; and Mr. R. Vaidhyanathan, Global Chief Financial Officer. We'll begin call with the opening comments from the management, followed by interactive question-and-answer session. With this, I hand over the call to the management for opening comments. Over to you, sir.

This is [ Kartik ] here. So thank you, Vikram. Good morning, and welcome to -- welcome all of you to TVS Supply Chain Solutions earnings call for the quarter and year ended March 31, 2026. I hope everyone had a chance to look at the financial results, which were posted on the company's website on the stock exchange yesterday. We have with us today Mr. Ravi Viswanathan, Managing Director; Mr. Vikas Chadha, Global CEO and [indiscernible] and Mr. R. Vaidhyanathan, Global CFO. We commence the call now with opening remarks from our management along with the business performance update. It will be followed by an open forum for question and answers. Before we begin a customary remark. I would like to point out that some of the statements made during this call may be forward-looking in nature and must be reviewed in conjunction with the risks that the company faces. A disclaimer to this effect has been included in the investor presentation. And I request and hand over to Mr. Ravi Viswanathan, Managing Director of the company, to make the opening remarks. Over to you, Ravi.

Thank you, Patrick, and good morning to all of you. Firstly, let me welcome all of you once again to our earnings call to discuss the performance for the fourth quarter and year ended March 31, 2026. We have had a spectacular finish to the year, and I'm excited to share with you the highlights of our performance. I'm joined today by my colleague [indiscernible], our Global CFO, who will take you through the analysis of our numbers. And Vikas Chadha, our Global CEO and MD designate, who will walk you through the business updates. We look forward to interacting with you as part of the Q&A session. For the benefit of those participants who might be joining the analyst call for the first time, please note that TVS Supply Chain Solutions is a tech-led and asset-light supply chain solution provider. We have 2 main business segments, namely the Integrated Supply Chain Solutions, or ISCS, and Global Forwarding Solutions, or GFS. We operate across 4 continents, Asia, Europe, North America and Oceania where we offer bespoke and tailor-made solutions in the 3PL space and also offer 4PL services in select markets. For more details about the company, you may please refer to our website, www.tvsscs.com/investor Relations. Coming to the performance of our company. FY '26 marked a strong turnaround year for us. We crossed INR 11,000 crores in revenue with a growth rate of 10.1%. We achieved an adjusted profit before tax of INR 99.3 crores, which is a significant improvement from INR 37.3 crores in FY '25. At the outset, I would like to thank our customers and vendor partners, employees and other stakeholders without whom we would not have been able to achieve these milestones. The highlight of this year has been that our growth has been more diversified and broad-based across regions. In the ISCS segment, revenue from operations grew by 9.6% over last year. Our performance in India has shown strong growth and Europe has had a turnaround performance aided by new business wins and disciplined cost initiatives. This helps in overall performance and improve the profitability. North America business helped improve the top line with a new large project that went live in the second half of last year. Moving to the GFS segment. Revenue grew by 11.4% over last year, aided by significant growth in India volumes, while global freight rates continue to remain under pressure. Our cost initiatives and volume growth in India helped us minimize the impact of the geopolitical situations. Now let me come to the quarterly performance. Our consolidated revenue grew to INR 3,032 crores, a growth of 21.3% year-on-year basis and 11.7% on a sequential basis. This is the first time that the company has hit INR 3,000 crores in a quarter, and it goes extremely well for us. I'm pleased to share that we have delivered on our commitment that we made in the previous quarter on our quarter 4 growth, particularly in the ISCS segment, which showed a strong year-on-year growth of 17.5% and the sequential growth of 15.4%, reflecting new wins across all regions. Regarding the GFS segment in our freight forwarding business, we have previously indicated that while volume growth would continue, margins would remain under pressure. Accordingly, we witnessed strong volumes on a year-on-year basis, led by India ocean freight. The segment has showed tremendous resilience and has grown by 34.8% on a year-on-year basis. It is important to call out that the GFS business continued to operate at structurally lower margins and the global freight industry is currently facing a period of uncertainty influenced heavily by war induced trade discussions across major trade rules. On the profitability front, for quarter 4 FY '26, the adjusted EBITDA was [ INR 222 ] crores compared to INR 161.4 crores which reflected on a year-on-year basis, a growth of 37.5%, a margin improvement of 80 bps to 7.3%. Sequentially, we delivered INR 199.3 crores at a growth rate of 11.4%. For the full year, our adjusted EBITDA stood at [ INR 773 ] crores up from INR 675.3 crores in FY '25, reflecting a double-digit growth of 14.5%. Our new business wins accounted for 12.1% of FY '25 revenues. This, coupled with our cost initiatives, such as Project One, have clearly yielded results, and we continue to pursue these. In the last quarter, we entered into a definitive agreement to acquire Swamy & Sons 3PL that strengthens our capabilities in the FMCG and consumption-led supply chain space in India, and deepens our presence in key consumption markets. The transaction was completed this month. This will be margin accretive for our India business in FY '27. We continue to be a tech-led company and early adopters of technology and have integrated AI and robotics in many of our operations. We have also applied a patent for our unified logistics platform which has been accepted. Let me now hand you over to Vaidhy, our Global CFO, who will take you through the financial highlights for the company.

Thank you, Ravi. Good morning, all. Thank you for joining us today. If I can call it the headline of our performance commentary that one line would be, on a full year basis, revenue grew double digit by 10.1%, adjusted EBITDA grew double digit by 14.5% and adjusted PBT grew by [ 0.66% ]. A few highlights before we get into the detailed financial performance. We delivered a strong performance in Q4 achieving INR 13.9 crores of adjusted [ GBT ] compared to INR 18 crores in Q4 FY '25, and we also grew sequentially by 23%. On a full year basis, our reported PBT stands at [ INR 274.1 ] crores including the [ InVIT ] gain of INR 177.2 crores in Q1. We also generated close to INR 243 crores of operating cash for the year, reflecting the improved profits as low efficient [ verticapital ] management across all the regions. Now I will take you through the detailed highlights of our financial performance for Q4 and the year ended 31st March 2026. Our consolidated revenue for the quarter reached INR 3,032.2 crores versus INR 2,498.8 crores in Q4 FY '25 and [ INR 2,158 ] crores in Q3 FY '26 reflecting a year-on-year growth of 21.3% and a sequential growth of 11.7%. Both the segments have contributed to this growth. The growth in India retail came very strongly at 31.4% on a year-on-year basis needed with strong new business wins as well as significant volume in our side forwarding business. From a segment perspective, ISCS segment delivered strong year-on-year growth with revenue at [ INR 2,834 ] crores in Q4 FY '26 versus INR 1,943.4 crores in Q4 FY '25 and INR 1,979.5 crores in Q3 Fy '26 continuing to show growth -- strong momentum, delivering double-digit growth on a year-on-year at 17.5% and 15.4% sequentially, supported by strong revenue from new business wins and improved profitability. GFS segment clocked a revenue in Q4 FY '26 of INR 748.8 crores compared to [ INR 785.4 ] crores in Q4 FY '25 and INR 736.3 crores in duty FX [indiscernible] marking a 34.8% year-on-year growth, largely led by the growth in ocean freight in India. Side rates continue to be under pressure as Ravi mentioned earlier. For full year, our consolidated revenue stood at [ INR 11,003 ] crores compared to [ INR 9,996 ] crores in the previous year, a growth rate of 10.1%. Growth was led by ISCS segment revenue of [ INR 8,229 ] crores, reflecting a 9.6% growth compared to INR 7,514.9 crores in FY '25. GFS segment reported revenue of INR 2,764.1 crores, reflecting a growth of 11.4% to INR 2,480 crores in the previous year. Driven by strong volume growth in motion price in India as well as new customer wins. Other income for Q4 Fy '26 stood at INR 10.5 crores, lower than INR 13.4 crores in Q4 FY '25. On a full year basis, other income was INR 37.8 crores compared to INR 33.2 crores in FY '25. The movement is primarily due to the interest income from bank deposits. Now moving to the cost structure, price clearing forwarding and handling expenses increased from INR 632.8 crores in Q4 FY '25 and INR 784.8 crores in Q3 FY '26 to INR 813.3 crores in Q4 Fy '26 which is largely in line with the revenue growth in the GFS segment due to the volume growth in the motion side. On a full year basis, [indiscernible] moved from INR 2,816.2 crores to [ INR 35.7 ] crores in line with the business growth. Material related costs increased from INR 465.5 crores in Q4 FY '25 and [ INR 7.5 ] crores in Q3 FY '26 to INR 652.7 crores in Q4 FY '26. [indiscernible] family due to the new business wins in India, an increase in volume in the North America and Europe markets. On a full year basis, the cost increased from [ INR 1,0767.7 ] crores in FY '26 ind in FY '25, as compared to 2014 in [indiscernible]. The movement in the material costs and other lead costs are in line with the change in business in the ISCS segment. Employee costs on a year-on-year basis, employee costs increased from INR 610.1 crores in Q4 FY '25 to [ INR 64.5 ] crores in Q4 FY '26 due to cost inflation and in line with the revenue growth, partially offset by the cost takeout initiatives that we have taken across all the regions. On a sequential basis, it increased from INR 598.6 crores to INR 640.5 crores. Full year employee cost increased from [ INR 2,534 ] crores in FY '25 to [ INR 2,524 ] crores in FY '26 reflecting the impact of annual inflation for new projects that we undertook during the year. Subcontracting costs increased from INR 360.7 crores in Q4 FY '25 and to [ INR 393.9 ] crores in Q3 FY '26 to [ INR 46.9 ] crores in Q4 FY '26. This is in line with the revenue growth from new customers. On a full year basis, of content cost increased from [indiscernible] [ INR 448.6 crores ] to [ INR 1,584.7 ] crores in FY '26. Other expense moved from INR 274 crores in Q4 FY '25 to INR 269.8 crores in Q3 FY '26 to INR 297.5 crores in Q4 Fy '26. On a full year basis, it increased from [ INR 953.7 ] crores in FY '25 to [ INR 1,121 ] crores in FY '26. The increase was primarily driven by higher rental chart during even short-term lease enters and higher repairs and maintenance in the [indiscernible] ISCS segment. Depreciation of write-off used assets and interest on is liability under India 116 increased year-on-year with depreciation increasing from INR 94.2 crores in Q4 FY '25 and [ INR 116 ] crores in Q3 FY '26 to [ INR 18 ] crores in Q4 FY '26. Interest cost on lease digestives increased from [ INR 20.8 ] crores in Q4 FY '25 and [ INR 23.2 ] crores in Q3 FY '26 to INR 24.8 crores for FY '26. The increase in the India 116 costs was due to the second site that went live in one of our key projects in North America market in Q4 FY '26. On a full year basis, the devariation of write-off use assets has increased from [ INR 398.1 ] crores in FY '25 to [ INR 3.4 ] crores in FY '26. And the interest cost on lease liabilities has declined from INR 87.6 crores in FY '25 to iNR 82.9 crores in FY '26. This is [indiscernible] to optimize the lease commitments transition selectively from long-term leases to medium and short form internments. -- wherever operationally feasible. On the profitability front, our adjusted EBITDA grew by 37.5% year-on-year, with the margins expanding by 80 bps to 7.3%. This growth was driven by strong performance exhibited by India and Europe region sequentially as well, adjusted EBITDA grew by 11.4%, demonstrating the consistency of the underlying earnings trajectory. With respect to statement, ISCS has delivered strong performance in Q4 FY '26 with adjusted EBITDA of [ INR 212.3 ] crores in Q4 FY '26 at 9.3% margin, up from INR 164.7 crores at 8.5% margin infrastructure for FY '25 and INR 182.9 crores or 9.2% margin in FY '26. The significant margin improvement in ISCS to make on account of the recovery from the Europe business with India continuing to deliver consistent growth and profitability. GFS delivered an improved performance in Q4 FY '26 with adjusted EBITDA of INR 18.3 crores, a 2.4% margin, up from INR 8.7 crores at 1.6% margin in Q4 FY '25 and INR 17.3 crores, a 2.3% margin in Q3 FY '26. The margin improvement reflects the volume growth in India in the reset of the cost optimization initiatives that we had undertaken in this segment to partially offset the macroeconomic challenges that Ravi highlighted. The segment continues to face natural headwinds reflected in the subdued high rates. We delivered an adjusted PPP of INR 30.9 crores in Q4 FY '26 compared to INR 18 crores in Q4 last year. On a full year basis, the adjusted PBT increased by 166% from INR 37.3 crores in FY '25 to INR 99.3 crores in FY '26, reflecting the results of the growth has [indiscernible] operating leverage. Our reported PBT for the quarter stands at INR 25.7 crores after the exceptional cost of INR 5.2 crores relating to the impact of the new labor code, which is recorded as exceptional items. As I mentioned earlier, operating cash generation stands at INR 243 crores, reflecting the improved profitability and the working capital efficiency. With this, I will take this Vikas Chadha for the commercial update. Over to you, Vikas.

Thank you, Vaidhy, for the analysis. Very good morning, good afternoon, good evening to all of you. Before I touch upon the commercial update, let me first introduce myself. I have 30-plus years of progressive leadership experience driving billion dollar plus P&L operations across dates, industries and geographies I'm absolutely delighted and thrilled to be part of the TVS Group, and I'm looking forward to creating a very healthy shareholder value during my tenured. I would also like to thank Ravi as he retires from TVS Supply Chain Solutions for all his valuable contribution and laying such a strong foundation for me. Now coming to our business development performance and pipeline strength, it has been phenomenal, and it reinforces our growth outlook. In Q4, we recorded new business wins, which is an all-time high in a quarter of INR 523.7 crores, representing 21% of Q4 FY '25 revenue. For the full year, the new business totaled INR 1,206.7 crores, which is 12.1% of FY '25 revenue, a clear sign of traction across key geographies. We are also seeing very strong momentum in the quality of clients that we are onboarding. This year, we added 9 new Fortune 500 customers, taking the total number of active Fortune 500 clients from 91 last year to 100 a significant milestone that speaks of growing relevance of our offerings in the global marketplace. Our order pipeline remains robust at INR 6,100 crores, giving us a view of the road ahead for the coming quarters. Across both our segments, ISCS and GFS, we saw wins from several key and marquee customers. On the ISCS side, we secured mandates from India and major international markets, including a leading Indian electric vehicle manufacturers, top electrical equipment company in India. Multinational provider of home appliances in India, leading Indian value retail chain player, North America base manufacturer of lifting equipment, a global generating and technology solution provider, leading Indian [ NMC ] and IT services space, global information technology measures. These wins reflect the diversity of our expanding customer portfolio, the strength in our tech-enabled execution and the trust our customers continue to place in via supply chain solutions, which acts as a testimonial of our digital capabilities. Particularly India continued to deliver exceptionally well on business development with multiple large strategic wins across automotive, consumer durables and industrial verticals. These wins will drive revenue growth in the quarters ahead, especially in the ISCS business, where our positioning continues to strengthen across production, aftermarket and distribution-led supply chains. On the GFS side, we averaged several marquee customers, including multinational material handling provider, a top global leader in sanitary and bath solutions, global fashion and a better retailer, a leading in the entire manufacturer, leading industrial automation and robotics company. Thank you all for hearing this update. And with this, we open the floor for Q&A.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Sucrit Patil with Eyesight Fintrade.

I have 2 questions. Your first question is how is serious supply chain referring to faster future opportunities in global logistic [indiscernible] housing and supply [indiscernible] why would you call that you deal differencing and sorry to interrupt, we become -- are coming out very clear.

We are not able to -- hear you clearly.

Yes, sorry. Am I audible now? Yes, sorry. Sorry for the delay. I just want to understand, in your point of view, how is the TVS Supply Chain preparing to capture future opportunities in global logistics, warehousing and supply chain technologies thoughtfully addressing challenges such as geopolitical disruptions, rising cost and digital transformations. What strategic levers do you see more important for sustaining growth and maintaining the leadership in FY '27? Just want to understand your point of view.

Thank you, Sucrit. I think it's a great question. I think we've always maintained that we are a tech-led supply chain organization. We continuously keep looking at how technology can differentiate in the marketplace. An outstanding example is a recent engagement that we are involved in paying in Latin America, where we have engaged fairly sophisticated robotic technology, coupled with digital platforms which bring a significant difference from what the customer was used to in -- with an incumbent supply chain provider. I think the key for us is our last name, which is TV supply chain solutions. Our solutioning brings in a significant differentiator in terms of combining technology along with domain knowledge. And that's what is differentiating us in the marketplace. With respect to the geopolitical situation, I think it should give all of our investors a lot of confidence that this organization has been incredibly resilient in a year where there have been significant geopolitical challenges. In spite of that, we have recorded growth, which has been, I would say, [indiscernible] we listed in the [indiscernible]. So we continue to focus on the fundamental character of the company, which is to stay close to the customer, build deep relationships consistently look at how we can cross-sell and add value and bring a technology component to every aspect of our solution. And that's really what is being the big driver for us in the Integrated Supply Chain Solutions space. And you can see from the results that the ISCS growth has been broad-based across our geographies, whether it's Europe, whether it's in the U.S. or in India, we've been able to get spectacular results. And this is coming on the back of some very strong moves that we made over the last 6 to 8 quarters, which we have been sharing in this platform. So we continue to be bullish about the ISCS segment. We believe that our differentiation through technology and our deep customer relationships will help us continue our growth momentum. Vikas just told you about how we have expanded our portfolio from 91 Fortune 500 customers to 100, and we continue to keep a very close tab on that. It's the quality and the depth of our customer relationship, which will differentiate along with the technology, which is infused in all of our solutions. I hope that helps you, Sucrit. I'm happy to take additional questions now or at a later point in time.

My second question to Mr. Vaidhyanathan is from a technical point of view, how is the company optimizing its capital structure to balance growth investments in logistical infrastructure and technology while still maintaining the debt structure especially given the capital-intensive nature of global supply chains, can you elaborate on the framework being used for cash flow forecasting, interest rate risk management and working capital efficiency to ensure liquidity while still maintaining the profits?

Sure, Sucrit. I think there is a lot to be covered. Okay. First, on capital allocation point of view, I think we have a very clear focus. I think our priority is to allocate more capital for the ISCS business. And as we always said, we are an asset-light business, and we don't invest in any fixed assets. Most of our assets are in -- only for some barrels related, and we always follow an asset-light model for investment. And from a working capital point of view, we have an extremely strong cash management as well as working capital management, and we ensure that we have a very tight control on the working capital. And if you look at our overall net debt as of 31st March, it's hovering around INR 350 crores, INR 370 crores. And except about INR 120 crores, which is long term in nature for a specific project, bulk of our debts are all short-term working capital in nature. I think that is how we manage the cash flow as well as the capital structure. And our ratings has been extremely strong, India AA ratings. And we also have -- we take a very, very strategic point of view before we allocate any capital to any new business or new projects.

[Operator Instructions] the next question comes from the line of [ Ankur Poddar ] with [ Swan ] Investments.

Congrats on good set of numbers. My first question is regarding our GFS business. So because of the disruptions in the geopolitical situation currently, are we facing any disruptions in our routes where we operate, which -- so that is the rest of the world GFS? And also, if you can throw some light on how our India GFS and the outlook of India GFS business going forward for FY '27?

Okay. First is, are we in any of the trade lanes, which are in the West zone? The answer is no. But I think, look, -- this is a network business, Ankur, right? So it's really about something which is a hotspot in West Asia could impact any of our trade routes. So we do see disruptions, especially in the smooth flow of traffic. But having said that, the India business has had tremendous growth in this quarter. And we remain bullish about the fact that we'll be able to continue on this momentum given the volumes. We are not particularly worried about sea freight volumes at this point in time as we look outward. But what could be very volatile is pricing. Pricing pressures continue, and we need to keep a very close eye on the pricing in this segment. But we continue to remain bullish about volumes from India. And we on a broad base, I would expect GFS to deliver better than how we have delivered in FY '26.

Okay. Understood. My second question is regarding the [ ALA ] MOU that we had signed recently. Is there any update on that? And do we see any visibility coming in, in FY '27?

Probably too early to say, Ankur, but we just recently signed. So we are early days, but you will hear updates from us in the near future on how we plan to get further into that segment. We clearly have identified defense and aerospace as a great opportunity, and that's the reason why that MOU is very relevant. We continue to work very closely with [ ALA ], who are a very niche player in that segment and we are very keen to participate with us in this market and specific markets. So we will give you an update as this evolves. But I would say we have made progress since the MOU. And hopefully, we'll have more to share in the near future.

Okay. That's great. And finally, if you could just share the growth outlook for your ISCS business also within India as well as rest of the world. So that's Europe and U.S.

1 Sure, sure. Look, I think there a lot of positives. One is the first half we have hit INR 11,000 crores revenue INR 3,000-plus crores revenue in Q4. And I think most importantly replicates that I will leave with you is the fact that we have new revenues coming from business development made in Q4 which is a record. And Vikas spoke about it, INR 524 crores is the revenue that we got from new business wins just in Q4, which represents more than 20% of our Q4 revenues. And that's a very strong lead indicator and a very strong exit as we get out of FY '26 to '27. And I would just say, we have strong wins, which will give us a sufficient tailwind into the first half of the year. And we have a significant pipeline, which are at various stages of conversion and we remain very confident of a double-digit maybe an early teen kind of number for the whole year from an overall perspective. And ISCS will probably be a strong contributor to that.

[Operator Instructions] The next question comes from the line of Disha with [ Safia ] Capital.

So then my first question was on the GFS segment. So I've seen the Indian volumes rise drastically drop for this quarter, what was what were some of the reasons for that? And how has Q1 been so far, sir?

I'll probably not be clear on Q1 as yet, but let me just say, Q4 is on the back of some significant businesses. I think Vikas spoke in his commentary about a lot of new wins that we had this quarter, the volume growth is coming on the back of that. And we continue to get significant new wins in both ISCS and the GFS sector. So I would say we're seeing both volume growth for what we call as encirclement or cross-selling with an existing customers showing growth, but also new customer wins that are fueling the GFS volume growth.

And we do expect this momentum to continue, right?

I remain very optimistic, Disha.

And how should we look at the EBITDA margin for FY '27? Because we have seen high traction on the GFS segment as well. So how should we look at the EBITDA margin?

Disha I'll take this right here. See, on the ISCS, I think right now, you're about 9.3% and we should -- we range on between 9.5% to 10% on ISCS from a margin front of view. And as regulated, with all the large customer wins and also the operating leverage actions that we have taken I think we'll be somewhere between 9.5% to 10% on ISCS.

And for the overall margins of FY '27?

Yes. I mean I think it all depends on, as Ravi said, on the GFS trajectory in terms of the freight rates and all that. But I would say somewhere between -- right now, we are at should be around 7.3%, 7.4% on the adjusted EBITDA. I think a lot depends on how the GFS trajectory moves.

I would just be cautious about GFS given the geopolitical situation. Like I said, we are bullish about the volumes but we have to keep a very close eye on the rates. It's been very volatile, and we'll keep you updated on this as we progress. We have a very clear understanding of how we will get better leverage on the ISCS business. On the GFS [indiscernible] still be cautious because it is all about customer relationships, deep customer relationships. We will continue to focus on going deep with our relationship but there is a difference on pricing, which is volatile. And I will just leave it there because right now, we give speculation if I get deeper on that. I hope...

Yes, yes. Fair enough. And also that you have a robust order pipeline, what sort of conversion are we looking at for FY '27? When do we see majority of orders flowing it?

Our typical conversion like we have said in the past, has been around 22%. So we look at that, hopefully, we keep improving on that. But that's typically what our conversion ratios have.

[Operator Instructions]. The next question comes from the line of [ Rohit Ohri ] with Progressive Shares.

Couple of questions from my side. First one, being on China plus one and the U.S. firms, which are trying to eye India, if you can take us through, which are the sectors with these guys are actually looking at and which would probably be the strongest relocation candidates where you see momentum or anything on the current pipeline, if you would like to share?

So the China is one. We do see a lot of early traction with our existing customers but none of which has got very deep, but you did see a few examples of things that we did with some multinationals, we have shared some of the media, some of the new things that we're doing asset with a large earthmoving equipment company. So we seek actions across the board. There have been some early wins, but I would still keep looking at that space because capital allocated by those customers towards expansion in India is something which we need to keep a close tab on. Given the geopolitical environment, especially the U.S. buyers, I would still wait to see whether there's going to be acceleration on that front.

Is it possible to share that when you compete with these global 3PL players, what sort of operational capability that we portray that the competitors are still underestimating about TVS?

And I don't want to talk about what the confidence is adjustment about it. I think the key strength for us is that we have a very strong relationship with some of the large [indiscernible]. And given that we have a presence in 100 of the top Fortune 500 customer base, it gives us a very strong currency to participate. Second is we have a very strong brand at TVS, and that legacy is something which helps tremendously. And that, coupled with the fact that we have a very strong India person in India story, is really a big driver. So we are in the inviting is on almost every large MNCs foray into India and that's the exciting part for us. India continues to be a very strategic region for us. We continue to see how to continue this acceleration that we see. There are very interesting factors that we see momentum in one of them is the power sector. This is specifically with ultimate power and quite a few multinational companies activities, we are able to now participate.

So we did mention about these new businesses that are coming through and the new sectors, which you just alluded in your previous comment as well, along with our aerospace, defense on maybe energy and renewables. But what are these certifications that you think are critical bottleneck in India currently? And how sticky are these contracts or maybe how deeply embedded are they with TVS supply?

You are talking about existing contracts that we have?

Existing contracts as well as the one which might come maybe in the next 3 years or so?

I mean the existing contrasting is what you create. It's really about, a, I think I spoke about it in my opening commentary on the very deep customer relationships and the flexibility that we have had in terms of in terms of engaging with the customer during different cycles of the business environment, especially the volatile environment that we have seen over the last couple of years. But if you take a look at our relationship and the customer's contract, the average length of our customer contract in India is about 4, 4.1 years. And that is 5-plus years in North America and almost 7.5 years in Europe. So that kind of shows the stickiness of the engagement that we have. So the average length of these relationships are fairly long, and it continues to grow on a period-by-period basis. So that's something which I would talk about from an existing customer perspective. You spoke about certification. Clearly, aerospace and defense is the certification space. And that creates significant both entry and exit hurdles. Our MOU with [indiscernible] is really about leveraging on their global capabilities and the certification that they already have with many of the existing suppliers in this space, and that will give us a competitive advantage as we enter the segment.

On this aero supply chain services, what sort of lessons do we have from the U.K. defense logistics, which you think are transferred to India currently?

I think the key is for us to understand how different organizations work, they are processes, the ability for us to participate in large, complex multiyear deals over the last few years gives us that depth and that's something which is a huge differentiator for TVS SCS because I don't think any other Indian player participates in those kind of engagements. So that experience is something which is which is a huge differentiator. And coupled with the kind of partnership we're trying to engage with a leading global supplier that will put us firmly on a leadership path to participate in some of these spaces in India and beyond.

Sir, on the guidance aspect by FY '29, '30, do you think that I know top line is not an issue for us. But then with the sustainable EBITDA margin may be like 12% or 13%, do you think that we can reach somewhere around INR 15,000 crores by '29, '30.

I will leave that question to Vikas for the future. But clearly, that is something which we have shared with you in the past, right? For us, we keep talking about continuously expanding our EBITDA margins. We have said in the past that the benchmark EBITDA numbers are in the early teens, and that's our aspiration. So we think in the medium term, we should get to 10.5%, 11% in ISCS. And we hope that we can push the GFS margin. Maybe this is not the year but in the next 4 to 8 quarters, move it to closer to 5% and hopefully settle at about 6%, 6.5%.

Sir, last one from my side. If we were to revisit TVS in maybe FY '30, what may which beyond the revenue would convince the management team that the strategy is actually truly worked?

So first and foremost, I think we are focused on profitable growth. So profitability is something which is a very key driver. Our trajectory has been good, and we want to continue on this trajectory. So profitable growth is number one. Number two is continue to mine our existing customers to get deeper into our customer relationships create larger portfolios, which means that we are doing significant cross-sell and upsell. Hopefully, some of the newer segments that we are entering, for example, in India, the acquisition of Swamy & Sons gives us an entry [indiscernible] and the MOU on the aerospace and defense gives us an opportunity to expand our defense portfolio. So overall, if I were to look at it 3 years' end, the verticals that we are today entering into if we can drive similar margins and much higher growth rates in those segments clearly would be in success. And of course, deeper engagement with our customers, which we are very confident now because that's been the essence of the TVS Supply Chain Solutions story and evolution over the last 3 decades.

[Operator Instructions] The next question comes from the line of [ Vikram Suryavanshi ] with PhillipCapital.

Congratulations on very strong numbers, sir. Just wanted could you comment on our -- if you look at segment-wise or profile between India and Europe, it is pretty diversified between automotive, consumer, industrial, health care and other segments. But business was ready dominant only 2 segments. So how is the growth outlook there and then diversification possibility in U.S. particular North market?

So I think for us, the U.S., we do operate on a very strong account-centric plan, right? So we have picked industrial and auto sector as the areas of focus and that has been the biggest growth driver for us. So if you look at U.S. over the last 5 years, it's growing at about 28.3% CAGR. And we really think that the opportunity in the U.S. is with large customers, we should be able to get a significant size of the pipe. Previously, we -- 5 years back U.S. was really a scattered map, but today, we are getting deeper into fewer customers. And we want to grow each of these customers because those are the customers who typically can deliver $50 million, $60 million of annual revenue. And if we can create a portfolio of 4 or 5 such customers, that will give us a very, very strong foundation, on which then we can expand the U.S. market. So our current focus remains on industrial vertical and the auto vertical. There are a lot of opportunities, but we are remaining very focused in mining large customers that we work with are all Fortune 500 customers that we work with in the U.S. and we want to see how we can convert each of these customers into double-digit million closer to $50 million of business over the next 3 to 4 years.

Got it. But apart from this industry [indiscernible], are there any back-end challenges for us to add newer verticals or it is not a [indiscernible].

I think it's really about what we want to focus on. I think we want to make sure that the management bandwidth is really focused on in deepening the relationship and then saying, if I have a product set is it easy for me to just expand that product set and go into customers who have got similar requirements rather than looking at a larger canvas in which we can offer. In U.S. is a very large country, very, very large spend, but we are -- I would say, we need to get to a phase where we have a strong foundation, very strong stories and that's basis on which we will expand. So we want to remain very focused on the kind of sectors we want to get into in the U.S. Having said that, if there are opportunities for us to partner with some of our both tech and nontech partners, we will keep evaluating it. But our focus is really on saying look at auto industry and adjacencies to that.

Understood. And we have very strong new business wins this quarter. So internally, do you have like as a percentage of revenue to target as a new business being an internal target? And do you also look at the customer can chart basically at one of the indicator or any target internally or it's more on new business [indiscernible]?

Being customer churn is something which in this business, especially in the [indiscernible] you will find that there will be -- that's a constant. But more importantly for us, we have been typically at about 10%, 11% of the previous year revenue which is coming in as new business wins. We want to get to a place where we constantly keep increasing that. So this year, we got that number to 12.1%, so 12.1% of FY '25 revenues is what is the new business wins for FY '26. So if we get to about 12% to 15%, I think we know that the engine is working very well, and that would give us the momentum required for us to meet our medium-term targets.

Okay. And the last question on integrated final mile basically don't give separate numbers but in terms of understanding, are we seeing improvement in there also materially or it was like an integrated supply chain, which has driven the profitability? Just to get some idea about between to how things are going?

Let me just ask Vaidhy to answer that. But from our perspective, we have integrated that business, but you can probably well report that particular [indiscernible].

Sure. Thanks, [indiscernible], think as part of the year, we have taken a lot of corrective actions about 4, 5 quarters back, especially with respect to getting the business back on track especially with no strategic price increases that we talked about in the past, including some of the site consolidation, taking out excess cost and all the actions have been completed over even the last 4 to 6 quarters, I would say. And today, the integrated an as part of the ISCS business and a very, very strong headwind.

The next question comes from the line of Kunal Sabnis with Nine Rivers Capital.

First of all, congratulations to the team. All that you have been saying for a while have that around has been seen in numbers for the last 2 quarters. And this quarter has been an improvement over the previous one. So congratulations for that. I have 2 questions. First is on the ISCS business, right? It's heartening to see that ISCS has grown Q-o-Q as well, right about 15% and Y-o-Y as well. So is -- so going forward, considering you have multiple projects into pipeline and scale up of the North America project plus the wins that have happened. Can we see this actually growing at like 18%, 20%? Is there a possibility going forward, primarily on the ISCS, which is a sticky business and then has higher margins?

It's a great question, and thank you for your wishes. We continue to focus a lot on the ISCS business. Do we have the kind of growth? The answer is yes. We just need to say, see how we can increase our conversion ratio of some 22%, maybe to about INR 23 crores, INR 24 crores, 25%. I don't -- I always remain optimistic about it. Will it be an 18% growth I definitely want to expect that. But I want to also set expectations that given what we can see, we are very confident of double digit, we're very confident of teams or even mid-teens in that segment. But I'll just leave it there to say that we -- as far as to get closer to that number that you spoke about do I -- do we have the pipeline? Absolutely, yes. If we can convert some of the larger deals and our conversion ratio increases, I don't see that as a difficult thing, but that's the focus of the company, to see how we can increase the conversion rate of our pipeline.

Got it. And considering the top line is growing and the EBITDA overall, you expect to be flat to positive. Your PBT margin from here on has to sequentially grow, right? I mean, Q-o-Q as well, the PBT margin?

That is the trajectory products in terms of PBT. So we had to get the PBT number growing every quarter. I'm very confident that we will do that.

Got it. The last one is on the exceptional items. Is there any reason why this labor provisioning was not taken entirely in quarter 3 and some has come in this quarter?

Yes, all take it here. See, there was a labor industry, clarifications came in March 16 and after we declared the Q3 results because of which we had to one second to a reassessment and take an additional information. And that was -- that clarity was not there when we closed the Q3 numbers. And as you know, there are still a lot of gray areas and there is a lot of interpretations as well. So towards the reason for that.

Is that entirely taken now?

Yes. So what has or whatever clarification that has come from these that we have completely taken it.

Perfect. And one last thing is on the impairment of the loss on financial instrument, that's a sizable number as compared to your profit, right? About INR 17.6 crores. And that's sort of recurring every quarter. What is this -- what does this pertain to? And how can we sort of -- what do we expect for fiscal '26, I mean how can we project this?

Yes. This is basically what we keep providing base to the expected credit loss for all the customers and the [indiscernible] that we take. I think this trend will more or less be similar because we have a very large revenue side, right, INR 11,000 crores on that this number is not very material. But we do continue to closely monitor. And most of our customers are all highly related to it in the B2B segment, not in the B2C segment. So there are no creditors, but we continue to take as part of ECL credit loss products.

So you have total booked about INR 56 crores for fiscal '26. This sort of rate percentage to revenue should continue. Is that I understand you correct?

Is slightly lower in FY '27 onwards.

It should be lower in FY '27. Okay. Great and wish you luck for the future.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for their closing remarks.

Thank you. Thank you for all of your time, questions and continued interest in our journey. As we look forward to FY '27, we see significant opportunities to strengthen our market position, enhance operational resilience and build deeper relationships with our customers. We also recognize the challenges that lie ahead from the macro to structural shifts in the global supply chain. Our focus remains very clear, executing on our renewed customer conversion growth story and continuing the disciplined implementation of our cost and productivity initiatives which we have set in motion, scaling segments and driving long-term value creation through disciplined customer-centric growth. I would like to personally thank all participants, both present and from the past for your participation and valuable inputs. As all of you would be aware, this would be my last earnings call. I'm confident that under the leadership of Mr. Vikas Chadha, the company would sort to greater heights. I want to thank you once again for your support, and we at TVS SCS, look forward to engaging with you in the quarters ahead.

Thank you, sir. I would now like to hand the conference over to Mr. [indiscernible] from PhillipCapital India.

You have no management of TVS Supply Chain Solutions for the opportunity to host the call and give time out for [indiscernible]. Thank you all for being on the call.

Thank you. Ladies and gentlemen, on behalf of PhillipCapital India, that concludes this conference call. Thank you for joining us, and you may disconnect your lines.