TCI | TCI share price: TCI continues to show growth in both sales and net income: MD
We have witnessed the recording of a generation of healthy electronic invoices. The logistics industry must grow well in terms of revenue, at least that’s what it indicates. What is your growth target for fiscal 22?
We had given a guidance of 15-20% on the top line and 30-40% on the bottom line. In the first six months we exceeded this target, but we maintained a bit of caution as we weren’t sure if there would be a third wave and how that would affect consumer demand as well as supply. While we’re on the right track right now, I think we’ll have to see how this variant of the virus plays out over the next few months in terms of demand and supply. Right now the volume seems to be up there! After Diwali there is usually a slight lag that occurs, but it tends to accelerate towards the end of the year when we see good growth and momentum. Some areas are already showing this as we speak.
We assume that operating expenses must have increased slightly and mostly due to the increase in the cost of fuel, we want to understand how you are handling the same and how you have taken price increases to lessen the impact of the increase. fuel prices?
There are a lot of increases in input prices not only in fuel prices, but we are also seeing increases in lubricant prices, tire prices, driver wages, tolls, etc. All this has had an impact on the cost structures of the logistics industry as a whole and not only of the road sector, but also of rail, cabotage as well. However, we have back-to-back contracts with our customers where if an increase occurs in some input costs including fuel, we will also get a corresponding increase in our rates.
So a lot has happened already and we have been able to pass on some of those increases that have happened over the last few months. In addition, it did not affect our margins in any way. We continue to see growth in terms of revenue and bottom line.
Speaking of the opportunities opening up in the logistics space, many new service sectors seem to be emerging. What is TCI working towards and what do you think will be the next growth engine for the company?
Logistics is one of those sectors that is on the cusp of change due to the change that is happening in the industry. Change is happening with our customers and demand is coming from all kinds of areas. It is clear that consumers prefer omni channels, which means that at the backend level your warehouses must change and must go not only to retail channels but also to online channels. So we have to set up distribution centers, etc. This is a big change from a demand perspective and has led to a huge demand for organized businesses like us.
The second is the fact that our customers increasingly want to outsource logistics and outsourcing would not only mean road logistics or warehousing, but they are talking about multimodal logistics. We offer them both road, rail, maritime services and we offer a combination of multimodal services and that also generates a lot of growth and will generate a lot of growth for the future.
The third aspect concerns regulatory changes such as GST, electronic invoices etc. which lead to the formalization of the sector as a whole. Again, they drive volumes and business for companies like ours, which are in the organized industry and have a structure in place, so that companies can claim their GST benefits and so on.
Last but not least is the development that is happening on the infrastructure side. Any type of development, whether it is the construction of new highways, new ports, railways like the DFC corridor, etc., will have a direct impact on the improvement and efficiency of logistics, this which means that it will attract more business to organized players. We can see that there are several sectors and several regions where logistics for the coming years seems to be a very attractive sector.
Multimodal infrastructure as a growth opportunity and the recently launched PM Gati Shakti National Master Plan for Multimodal Infrastructure are likely to play a major role. How important do you think this is and how is digitization creeping into the way you do business?
Initiatives like the PM Gati Shakti program are absolutely fantastic because they create a platform where a product, a cargo, can move regardless of the mode of transport seamlessly across the country. We also know that today in our country, 60 to 63% of our goods go by road, 20 to 25% by rail and the rest is other modes of transport. This is not the right combination for the competitiveness of our country as a whole. We have to turn more and more to cheaper modes of transport like railways, cabotage, etc.
The PM Gati Shakti program will definitely help build that connectivity and build that platform. The second aspect about this is that many companies are turning to green logistics. By looking at less carbon emissions and moving from road to rail to sea, we are reducing the amount of carbon footprint. We will see a lot of companies thinking about moving towards multimodal for green logistics as well.
The second part of the question around the digital transformation related to our sector is that there is a lot going on in this space. Customer expectations for online food deliveries etc. have also fueled the fact that there is an expectation of higher quality of service from logistics companies and some things like tracking have become quite standard in our industry. Now we see the evolution of the introduction of many more new things in logistics and over time things like drones and the increased use of IOT etc. will also be a game-changer for our sector. So all in all a very dynamic scenario when it comes to using IT in logistics.
You raised a very interesting point about green logistics. What are your plans?
The reason we are very excited is that customers want green logistics and therefore we have to evolve as well, which means that we offer them these different solutions from road to rail to sea and a combination of both. . We have our own services for the roads. We have our shipping lane business where we own vessels that operate on the east coast and west coast coastal shipping routes. We also have a joint venture with Concor to manage rail logistics, container movement and we offer transparent solutions to our customers.
All services are internal to us, we do not outsource them. This gives us a little advantage when we offer these services.
Are you planning to acquire a fleet of electric vehicles in road transport and maybe looking to expand it as well?
It’s true. So the five- or seven-year evolution of the trucking industry is a bit like this, where the first and last mile have less distance. Electric vehicles do not yet have this range. So there may also be a certain amount of CNG and LNG vehicles. Long distances are likely to see CNG, LNG and hydrogen as the next fuel for the entire industry. All of this could lead to the transformation to green energy in the logistics sector.
What are your extension projects?
The expansion plans are that each year we would like to spend Rs 150-200 crore in terms of investment. For the next three years we intend to spend around Rs 500 crore to buy new ships or trucks, rail rakes and building warehouses and that would be the expense.
It is very difficult to determine market shares in our sector because it is quite fragmented. It’s a $ 200 billion industry, but it’s very difficult to know the exact market share of each of the sectors I mentioned – highway, rail, or supply chain solutions. But we are certainly growing faster than the market growth and therefore there is a positive gain in terms of market share.