[0:00]Transport Corporation of India is on our radar now for Q4. The company has seen margin expansion driven largely by their seaways business but there is some slowdown in the revenue growth.
[0:11]To talk more on the Q4 performance, we now have Vineet Agarwal, who's the MD of Transport Corporation of India, joining us now. Good afternoon to you, Vineet.
[0:20]Let me first start off by asking you about your revenue as well as profit growth guidance. Now, you say that you're expecting 10 to 12% revenue and profit growth in FY26.
[0:30]My question to you is, why have you lowered the upper end of the guidance because typically, you tend to give a revenue growth guidance of anywhere between 10 to 15%?
[0:39]Yes, well, thank you for having me. You know, the first quarter of the year is usually a little bit more suppressed compared to the full year, full compared to quarter four.
[0:48]And the guidance is slightly softer because, um, you know, the conflict that has happened recently in India, Pakistan, has actually disrupted supply chains to some extent.
[0:58]Uh, we've seen that some of the factories and warehouses were shut in the northern part of the country. Some labor shifted also to the eastern part.
[1:10]Um, supply chains have been also, uh, hampered. So, like we run warehouses for a few companies and we had to invoke the business continuity processes there.
[1:19]Uh, as well as dealers are not taking enough inventory for cars, et cetera. Business delegations have also slowed down and there is a certain amount of risk factor that has come in.
[1:31]I think this will impact business for the next few, uh, weeks, months. And, uh, this means that the quarter might get a little softer going forward.
[1:38]However, the festival season looks attractive and, uh, um, I think, uh, perhaps how things progress with the first six months, we can probably look at a revision.
[1:49]But a 10 to 12% seems to be more on the ideal number this time. Okay. So, we need 10 to 12% on a conservative side, given the kind of geopolitical tensions that we are seeing.
[1:58]Well, that is as far as the top line is concerned. Uh, what are the sustainable EBITDA margins?
[2:04]We're talking about the consolidated EBITDA margins. You've earlier given a target to be in the range of 10 to 11%. You've ended the FY25 closer a little lower than 10 and a half percent mark.
[2:13]FY26, first couple of quarters, post disruption, where do you expect that to be and H2, do you see a recovery?
[2:19]Uh, yes, I think, uh, the margin side things are a lot more, uh, visible. I guess to some extent because the shipping business has done well.
[2:29]Uh, our other logistics business is, the supply chain business is doing well. Our joint ventures are doing well. So, in that context, the margin structure remains, uh, stable.
[2:37]Um, there could be some pressure as always with the economic situation and some amount of economies of scale not coming in because of the increase in revenues.
[2:47]But not withstanding, uh, we think this guidance of 10 to 12% on the top, on the bottom line also remains.
[2:57]Um, see, I think what has happened is that several factors that used to be earlier, uh, impact in terms of our profitability are reducing quite a lot.
[3:06]For example, fuel prices. Now, fuel prices have been benign for the last several months and, uh, now, in fact, years.
[3:15]Uh, so that has gone away to a great extent. On the road side, toll taxes have gone up quite a lot in the last two or two years.
[3:25]So, that impacts a certain amount of cost structures. But general inflation, general cost of people, um, and other such factors, uh, definitely keep up the cost pressures.
[3:33]Sure. And what is your outlook on the sea way freight rates? And what would be the impact of higher freight rates on your business?
[3:40]Currently, the freight rates are also quite high. Uh, we're not really impacted by international freight rates. So, we are a domestic company.
[3:49]We operate on the west coast and the east coast of India, really connecting nation through multi-modal network. What happens is that when international freight rates are high, as it has been in the last few months,
[3:59]uh, some capacity shifts from the domestic sector to the international sector, which creates a supply constraint locally and hence prices go up.
[4:08]Uh, going forward, I do not expect that if if the geopolitical tensions reduce, then freight rates will also come down globally and hence, uh, over here in domestic sector also freight rates might stabilize a little bit more.
[4:21]So, I our estimation for the full year is that the freight rate should be almost, uh, stable, on the sea base side.
[4:29]Understood that. But so, seaways you're expecting it to be stable, so we can expect stable margins as well over there. We understand.
[4:36]Uh, also talking about the cold chain segment. How did that particular business perform as per your own internal estimates for FY25?
[4:44]What is the target over there for FY26? The cold chain business is actually very attractive right now. Um, we've grown, um, moderately at 50 to 20% in the last fiscal.
[4:55]But we've added a lot of capacity when it comes to new trucks into, uh, cold storage facilities. We're building a state-of-the-art facility in NCR.
[5:04]Uh, we've acquired a lot of contracts, uh, especially not just in the QSR side, in the quick commerce side, uh, in the pharma set pharmaceutical side.
[5:13]But we're also looking at other fast growing sectors like semiconductors, et cetera, where the demand for cold movement will be very, very high.
[5:20]Um, so the next few years, we should be looking at a 15 to 20% kagger in terms of growth and some amount of investment also per year.
[5:29]It is a joint venture that we have with a Japanese company Mitsui, where they own 20%. So, the capacity and the ability to grow this company is extremely high.
[5:40]Well, uh, Vineet, one other hot sector as of now is quick commerce. It has been quite good for you, as you've said in the past. Fulfillment is also growing quite well.
[5:50]Um, so, you know, how much of quick commerce now accounts for in your overall sales. And one more question is actually on the freight division. What is your FTL versus LTL mix?
[6:00]And the outlook on volumes and realizations for Qcom and freight division, can you please elaborate? Quick commerce is not really a substantial part of the overall business.
[6:10]It's a business that's growing, but we do not expect it to become really, really very large as of as a as a business specifically because we operate on a sliver of activity, which is essentially just fulfillment.
[6:23]So, we bring in the merchandise, we, uh, do inventory management and then we supply to the dark stores. So, uh, it's a it's a fast growth business but not really very large in terms of uh, size.
[6:36]Uh, in terms of freight business, our LTL business is about 36% out of the overall, uh, freight business.
[6:44]And, uh, the outlook for this is that we want to increase this to 40% in the next year or two. And the, uh, the idea is that LTL business has a lot more margin compared to the FTL business and hence our focus is, uh, going to be there.
[6:58]Thank you so much, Vineet, for joining us, giving us a sense of what exactly transpired as far as Q4 as well as FY25 is concerned, and the way ahead for FY26.
