Transport Corporation of India Limited (TCI) Q2 2027 Earnings Call Transcript

Before we begin with the... Before we begin, I would like to inform all participants that they are currently in lesson-only mode. Please note that this conference 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, Simran, and good evening to all of you again for joining this call. We have our presentation, which is uploaded on our website, as well as sent to the stock exchange. Just a caveat that all the discussions which are there today might have some forward-looking statements, so they may not be coinciding with the actual performance going forward. Now I will request Mr. Agrawal to quickly have some opening remarks, and meanwhile I am putting the presentation. Thank you. Over to you, sir.

Thank you. Good evening, everyone, and welcome to our conference call. This has been an interesting quarter with good double-digit growth on the top line, though bottom line did not keep up with that same pace. I'll talk a little bit more about it. But the general trend and the feeling is that the things are moving in sync with the current line of growth that we are seeing in the market. And of course, we as a business tend to see things a little earlier than what's happening. And some sectors are showing some signs, for example, a little bit of a pullback that happened in the auto sector, Where the auto sector is expecting, or other people expecting more discounts around the festive season, so that there is some purchase which has slowed down a little bit. But the dispatches have been okay, not as much as last year. So we are coming off from a high base when it comes to the auto sector as well. And the pre-Stalking, pre-Diwali and pre-Festival season also was not as robust, but it still continued. And those also reflected in some of our numbers. Let's start with the presentation. So I think, you know, we can go straight to the, I think many people know already about the company, so I would not go into specifics here. What we would like to hear, just go back, Ashish, please. So this is the whole opportunity play that, where we are today, from all the kinds of areas. Now, some of these segments, which are actually verticals, but are also act like horizontals for us. Example is chemical logistics, which actually not only the Chemlock business does, but also Concord. Similarly, cold chain is like a horizontal and a vertical for us. Because it is applied in many other industries. So it is some of these businesses are very large in terms of their market size, but not necessarily good in terms of their big-time margins. But as we can see, our presence is helping us to provide a bundled service to our customers, which is what I think works quite well on an overall basis. This is an example of a customer that we have in a consumer-stable business where we're actually moving some of their products in bulk via rail and then taking it to a packing facility and then subsequently delivering it literally to the channels directly. Exactly. We don't, of course, go to the final customer, but we go to the B2B customer. And this is an integrated play experimenting with. But the idea is that if you are able to grow this, we can do it pan-India for this customer. It has impacted very positively for the client where they have been able to save rate as well as also move towards more green logistics. It has also helped in product security as well as consistency because there's no multiple handling, which has really helped the customer bring a very clear and clean product to the market. Our technology aspect is continuing to grow and add more value. Now, we basically could talk to you about how we have moved from more visibility to creating intelligence into the system and ultimately integrating all the various legs across the board so that customers get a seamless visibility as well as intelligence across the system. In terms of rail movements were slightly lower than last year in the same first half, but it is still consistent with the high growth, as well as the number of TUs handle is almost the same, though if we see volume-wise things have moved up slightly, sorry, value-wise things have moved up slightly if they have not moved up so much on the volume side. Again, we're present in almost all the major sectors, and especially the growth-led sectors, specifically high-tech electronics, consumption, quick commerce, and so on and so forth. Let's go to division-wise. On the overall performance, the business has grown by almost 14.85%, 15% in the quarter, which is a high growth rate. As I said, some of it has also come because of value growth and not just volume growth. So volume in some areas are a little muted, but value growth has come up because of the increase in freight rates as well as diesel prices that have led to freight rate increases. Some of it is also new contracts that we've got, and they're not necessarily reflecting in the profitability, but they are starting to reflect on the business growth aspect. We have done almost a similar kind of investment in CapEx. The CapEx investment is almost as similar as what we've done the full year last year, the first six months already. And we think this will continue at the budgeted level. The buyback that we offered of 150 crores, about 7,000 people, shareholders participated, and it was quite successful. Next slide. So going forward on the freight business, essentially, the breadth of the offices, the sector, the network continues with at about 11%. We are 11 offices have been open, sorry. And the LTL share is still at about 37%. It's starting to inch up. But we're also seeing recent enough growth in the FTL side. So things have started to pick up a little bit. The EBIT has come down. But as I said, this year is going to be in terms of the overall margin period of rebuilding. So that has started and you're seeing a top line growth about 12% reflecting that also and for the half year, 11.5%. So margins remain lowish to the flattish. But now we're seeing that some of this will start picking up where as you can see the overall from the full year, ROC, the numbers have also started to pick up. Actually, to go back on the freight side, I think we are seeing that enough and more demand coming from certain types of customers on the heavy engineering, on the electrical side of the businesses, but we also, as I mentioned last time, that there is a leadership change, and we are seeing a new drive towards more customers, more involvement across the board. On the supply chain side, the business has grown at about 10%. It is coming off from a slightly higher base. But we've got very strong pipeline in terms of contracts, both on the transportation side, as well as on the warehouse side. Capital employed has gone up significantly because of the continued investment into trucks, warehouses, warehouse equipment, etc. So not the real estate of the warehouse, but on the warehouse equipment and handling systems, etc. So this is a phase of investment for us, and I think it will continue at this pace. Margins are slightly up, as you can see, and we, again, think that some of this growth will continue. Thank you. In comparison to some of our competitors, we are now, we have a large issue of growth on the warehousing side, whereas some of our competitors have grown because of the inherently internal businesses and rather than external market growth. Now, on the market side, there is definitely some cost pressure. We are seeing that from the new RFQs that are coming in. But QuickCommerce continues to have a very strong footprint as well as growth trajectory. As I said, there's a slight slowdown on the sales side of the automotive business, but the pre-stocking, et cetera, continue. But I think the market is still waiting to increase the offtake to some extent. I think maybe there is a little bit of tiredness, feeling that there are not enough new launches, etc., and more launches are happening on the high-end side. So I think some of this is changing. The other thing that perhaps is happening is that the confusion in the minds of consumers, whether they should shift to EV or not. Because with the higher fuel rates, the economics of having an EV improves dramatically. So I think that sense of whether we should move towards EV or not is something that is ongoing. We think the growth drivers are quite strong here, and we will continue to push for that. In terms of seaways, we will be happy to note that yesterday, we took the delivery of the first ship, the first 500TU vessel named TCI C2. It will start, it will now, in the next few days, leave from China and report to India in the next two weeks, three weeks or so, and It is the addition, the second addition to the fleet will happen perhaps closer to maybe the beginning of next year in the first week of first 15 days of first month of January. So they should both be on stream. Last quarter has been very interesting because the fuel Fuel prices really shot up again. The bunker prices, as you can see by the graph, the yellow graph also, and which meant that we also increased some pricing and that you can see the impact on both the volume as well as revenue growth for about 28%. The EBIT growth was slightly muted because of the increase in fuel costs that hit us a little bit. But as I've been saying that we are coming slowly to the moderated margin structure of about 35-40% kind of EBITDA, maybe 38% also. But with the new ship coming in, we'll also start adding depreciation to our costs. But overall, the business remains, still remains very solid. Most of the, all the joint ventures have done reasonably well. The Concord joint venture grew at about 10.5%. Profitability is the same. Coaching business grew at about 50% on the back of new contracts, especially on the quick commerce side. Profitability has also jumped up. It is already double of what it was for the full year. Transystem profitability is slightly muted. And that has also had some impact on the overall financials of the company because the dividends that we received were slightly lower. The outlook for all these businesses remain good. I mean, Concord should grow at 10 to 15 percent, Cold Chain about 40 percent, Transistor about 10 to 12 percent or so. In terms of the overall financial highlights, standalone grew at about 10% top line, console about 12%, and the EBITDA margins are up also slightly, but for the half yearly I'm talking about, for the quarter, of course, is 14.8% on the console, and about 8.3% on the EBITDA. Pat has more or less flat, as I said, the joint venture. Profits were slightly lower this year, so we've not got the full dividends, but we do hope this will start improving in the second half of the year. But operationally, businesses have done reasonably well. In terms of ROC, again, the CapEx has still to play out. So the impact is there in terms of the overall 300-odd cores of CapEx. So hence, ROC is slightly muted for the half year. And return on network is also muted. As you're aware that the buyback happened earlier this month, which essentially we had about 150 crores, about 200 crores of cash that we utilized about 150-odd crores. Apart from that, the overall buyback was oversubscribed by 2x, and we have the promoter holding has subsequently gone up to 70%. There is a certain amount of, of course, debt that we're also starting to take in as the cash reduces in terms of cash flow, etc. And some truck financing, etc. that we'll need just to keep up with the MEZ type of borrowing till the time we start rebuilding the cash results. In terms of the outlook, the margin guidance on the top line remains at 10%, 10 to 12%, as well as on the margin side, because, again, we are at the, on the first half, second half, as you are aware, is always the better half for us. In terms of the overall capex, I think we've been guiding at about 500, 550-ish. I think we should get to about that level.

Thank you, sir, for sharing your valuable insights. Ladies and gentlemen, we will now begin the question-and-answer session. If you have any question, please use the raise hand feature. When called on, kindly start by stating your name and your name and your name. An organization before asking you a question. Our first question is from Mr. Alok Devra. Sir, please go ahead.

Yeah, thanks for the opening comments. So, this is Alok Devra from Otilal Oswal. So, just had questions on the seaways. Yes. So just wanted to understand this quarter, the margins have been, you know, slightly on the lower side. So what should be the, you know, normalized margins, which can be considered? I mean, we have been speaking about the margins kind of expected to moderate. So in this quarter, we have actually seen that. So what should be the new normal margin for that segment? That is number one. Number two is, now with this ship coming in, as in the first ship coming in November and the second is expected in 4Q, what should be the fair estimate on the Seabay's revenue for this year and more specifically for next year? And third would be that, you know, how should we also look at the tax rate now? Because the tax rate would be also linked to the, for the CVS, the tax rate is more on the capacity rather than PBT. So just how the effective tax rate could pan out.

Okay. Well, I think the margin structure, 35-ish percent, 40 percent is what we've been guiding, and that will possibly happen. Again, the first shift, though, will come down in November. Real operations will start by the end of November, and then it will take a few months for it to stabilize. So there could be some little bit operational losses, et cetera, that could happen, which will possibly get absorbed into the overall cost that is there. So, in terms of overall guidance, I think these are not very large ships. They're about 7,500 tons. So, both the utilization of the first ship will be literally for only four months, or the second ship will be literally for two months out of the two ships. So, guidance-wise, the top line, I think, will not exceed, you know, it has grown by about 16-70%, but more in line because of value growth of the rates going up. I think this is the kind of, it will not add substantially to the revenue, but I think, see, the volatility in the market is so high right now. It is just unbelievable. We are seeing that the bunker prices have been oscillating nonstop. Last one month, it's just been going up. Of course, international freight rates are at all-time high, or not all-time, but a very high rate. I was made aware that the container prices from India to US has gone up from $3,000, $4,000 to $12,000 a container. So this is having some impact here. And it could fall as fast as also, because, you know, there is also simultaneously a talk about overcapacity. So it has become extremely unpredictable, the shipping in terms of committing. But, you know, the business for us is very strong because we are a domestically focused company. So I would think that this 15-20% kind of growth for the top line and about 10-15% for the bottom line should continue with the addition of the new ship. In terms of taxation, I don't think the impact is much. Ashish, maybe you can share.

Yeah. So, right now, the taxation is around 9.5% to 10%. I think it should remain on a similar percentage going forward because the other taxable businesses, they would also generate more profits.

Got it. So, sorry, just a follow-up on the margin side. So, what you're essentially saying is that the margins in the CVS would remain largely in line with what has been delivered in the second quarter? Mostly, yes. Got it. Yeah, sure. And, yeah, sorry, please go ahead.

No, no, go ahead.

Got it. So I was just one more question I had on the other segments. So in supply chain, the growth has kind of been slightly lower than what was earlier run rate. So how do we see that kind of shaping up? Because the base is also catching up now. So do we see more like a 10 to 15% sort of a growth rate ahead? Or how do we see this materializing?

Yes, I mean, we are committed to 10-15% more on the higher team side growth for this financial year also. So higher means that above 10% type of growth, 12-13-15%, maybe even 14-15%. But rightly said, the base is still high. And last year, there was a lot of movement that happened because of the sudden push towards post the GST cuts. I think some of that has obviously moderated this year in terms of volume. But we have a very strong pipeline when it comes to both the auto sector as well as warehousing. So, yes, the growth should continue in the teens. Sure.

Just I'll take one last question. So, when you said 15-20% growth on revenue and 15% growth on PAD, that is for FY28 you are indicating, right?

No, 10 to 15, these are all current, 10 to 12% on both top line, bottom line.

And what should be for 28 once these two ships are totally into the system?

I think more on the 12 to 15 side, more on the higher side, for sure.

And EBITDA could be much higher growth because the profitability will be more serious driven?

No, no, but also the overall CapEx. The overall CapEx is also high. So, trucks, railway rakes. We are also in the process of adding one more rake this quarter. So, all that and, you know, of course, there's a hard infrastructure that is being built also. And, of course, the shipping business. So, all of that combined, it will definitely go on. Sure, sure.

That's all from my side. Thank you.

Thank you.

Thank you, sir. The next question is from Mr. Abhinav. Sir, please proceed with your question.

Hi, thanks for the opportunity. Abhinav from Aquitas Investments. My first question was regarding which all the ships are going for dry dock.

So this year we had already completed one dry dock and another ship would be going for let's say mid-March next year. So there would be Effectively two dry dogs in this financial year.

Which ships?

There are two ships, smaller in the size, small ships. One is already completed and another ship is due in the mid of March, next year.

Is it Vijay, the ship? Vijay and Express? Yeah, it's a Vijay, yeah. For the newer ship, the second one, which is going to come in the month of January, what is the route and what kind of traffic or volumes did we expect from that?

On the what, sorry?

On the second ship, which is about to come, just wanted to understand what route would it be sailing through?

So, both the ships we are looking to move on the east coast to different locations. There is some opportunities that are coming up on the Colombo sector, some opportunities coming up on the Myanmar, Thailand, Indonesia sectors. So, it is, but mostly still remains domestic focus. I think opportunistically, we might look at some movement towards some of these countries. But overall, the demand is domestic. There could be some movement between the islands also. So, we have enough demand. It's just a question of deploying in the right sectors for the maximum output.

Alright. And in terms of volume, when you say about these two ships, do we think we are able to attract almost RP utilization in the first world itself? Or do you think that this will take some time to be able to speed up about this?

It will take some time because, you know, when you are buying a new ship, the whole calibration, et cetera, takes a bit of time. So you don't really, if it is a 500 TU ship, we might, containers, we will not load it with 500 containers. We load it with much lesser, that we're testing the ship on a continuous basis. So it will take a few months for it to come into full stream. But we are adding so roughly about 20% of 17-18% new capacity. So that should help in FY28 numbers.

So while we say that we are adding 17-18% capacity, however, the revenue for the shipment, you mentioned it will increase by 10-12%, 12-13%. So can you help me explain why would you feel that?

Yes, because I'm talking about FI28, the full stream will come up because we had 78,000 deadweight tons right now. So we're adding two 7,500 ton ships, which is approximately 17-18%. But the impact of that will come only FI28, not in FI27. So the increase in business for FI27 is about 15-20%. FI28 would be in the excess of 20%. But as I also mentioned in the same breath, that there is a possibility with the freight rates coming down or other bunker prices coming down, freight rates will also come down. When that happens, the pricing will come down. So it is slightly on the unpredictable side, but our basic ideas, basic thought here is that volumes will go up by 15-20% in line with the capacity expansion.

Got it. And for the ships, I think three of the ships were above. We had one extension in FY28. So, any update on them that what we would be doing for that?

Ashi said, the extension is still 30.

Yeah, it is now extended to FY30. And they are there, they are running also because, and the ships are all on very good condition as there is a regular dry docking and other stuff. So we would take an appropriate call as and when it is required. So all ships which were expired, the operational release was expiring in FI 28, that is now extended to FI 30 now.

Oh, perfect. Congratulations. Thank you. Thank you.

The next question is from Mr. Ronak Chen. Sir, T-square.

Thank you for the opportunity. Ronak from Avengers Park. So, my first question, sir, is on the Seawaze business. Could you please tell us that in this quarter, second quarter, what has been the YOY increase in the realizations and what would be the medium-term outlook of these realizations considering the bunker prices stay elevated?

So, I would talk more about the short-term rather than medium-term. Short-term for us is literally month-on-month now because of the rates going up and down. So, the realization is that, as you can see, the bunker prices were hovering around roughly about 70,000-80,000 rupees a ton, One, which has gone up to now 95,000 to 98,000 rupees, so that itself is a jump of almost 20% on the bunker prices, which means that we've also increased the freight rates by not almost necessarily the same amount, but about 10-15%, whatever the market can absorb. Because remember that there are some markets where if the freight rates on the sea go up too much also, customers can shift to rail or to other modes of transport. So, there's a right balance that we have to keep also in the business. Yeah, I hope that answers your question.

Right. Got it. Thank you. And just one more question on the freight business. What has been the pricing-led growth in Q2, considering that we have around 10 to 12% YOY growth in the freight business in the revenue? Out of that, how much would be pricing-led?

More than 50%. Half of it is usually pricing and half of it is volume. In this case, I think it's been maybe two-thirds of it is pricing and one-third is volume.

Okay. Got it.

Thank you. If you recollect in the first quarter, I'd mentioned that we had just started the transmission of leaf rate of the higher diesel prices to our customers. So that realization has started to happen in quarter two.

Okay, understood. Great. Thank you.

Thank you, sir. The next question is from Ms. Shanley. Ma'am, please go ahead. You're on mute. Ma'am, are you there? So the next question is from Ms. Priyanka. Please go ahead.

Hi, thank you for taking my question. I'm from SKB Securities. My question is, like, now that we have taken additional borrowings, so where do we see our debt peaking out for, like, maybe FF28, FF29 going forward? How will our interest rates move? And like the finance cost? And given the two ships that are coming in in the second half, where do we see our depreciation cost going in FI27 and FI28?

Ashishu? Yeah, so right now the net debts company has is around 90 crore to 100 crores. We do have a capex plan of 600 crore. And out of that, probably another 20% or 25% would be from the external borrowing. This we do because of leverage and tax advantage. Next year, also, the EBITDA estimation, if we take roughly 10% increase, so it would be hovering 600 crores. And with, let's say, assuming the same capex, probably it would. So, we may not be needing borrowing as such, but yes, because of the timing difference and working capital, we do need some borrowing, which is we already have some arrangements. It is difficult to tell you now FI28 ending, but FI27 probably would be the net debt around 150 or maybe 200 crores.

Okay. And so, regarding depreciation?

Depreciation is hovering. Again, if you see, it's around 2.5% of total topline. Probably that would be inching to another 2.6%, 2.7% of total topline. Because we do have a capex and, yeah, so that might be some 10-15% increase in the depreciation from the last year level.

And so for capex going forward, like for effect 28, like I think in the last call, you mentioned like you're looking at 1000 to 1200 crore kind of capex for the coming three years. So is that in line?

That was in line. And in fact, we may have some more plans. So probably this year 600 crore was more of a spillover from past years because Because we had a plan of 450 crore last year, and then it was just 300 crore, and then there is a spillover this year. So probably we would have like new guidance maybe coming next year, FY28.

Okay. Okay. Thank you, sir.

Thank you.

Thank you. The next question is from Mr. Pravesh. Sir, please go ahead.

Yeah. Hi. Thank you for the opportunity. My first question is on the C-ways division. Sir, what would have to happen in this division for the margins to, let's say, go back to their levels at which you are operating in FI 19-20 at around 25-26% a bit margins? Because currently we are making around 34-30 to 35, between 30 to 35%. What will have to happen?

So, several things. One is that the overall cost structure related to fuel is going up. So, how much of it are we able to pass on to customers? The second is that when the fuel prices start coming down, volumes can also come down a little bit sometimes. So, we have to be cognizant of that. Third is that there'll be higher depreciation because of the new ships and maybe some finance costs also associated with that. So, that could, all these will perhaps can lead to suppression in margins, but as I've been saying that, you know, 30-ish percent, 30-35 percent to 40 percent is what we think is a reasonable number.

Okay. And what are the long-term plans of the company regarding this division? Because after a very long time, two new ships have been added. So, are there any plans to, you know, add more tonnage in this division?

Yes, absolutely. You know, I think, as has been mentioned, that we have some tonnage that is going to go away in the next few years. We have to continuously build more tonnage on that, not just for replacement, but additional. So the next three, four years, we are today at 78,000 plus another 15,000 next month, next year. So inching towards a lakh ton. And we would like to keep up net. Net should be a lakh ton when we enter 2930. So when we exit 2930, which means that some ships will go and some ships will get added.

Okay. And in terms of our freight division, we have been struggling there. There has been some revenue growth in the recent two quarters. But the other competitors in this division have been growing at a quite fast rate and they have been growing their volumes also. So, what is the challenge that we are facing, especially also in the terms of shifting the volumes towards more LTL side? I mean, when I look at the industry who are doing, competitors who are doing pure LTL, they are able to get more tonnage and more volumes, whether it is VRL, delivery, other players.

So, where is So we don't compete with delivery and I think VRL perhaps is competing a little bit more on the delivery side as well as with the express business. I think they're also taking away some of that little bit of the express side because of the high, because perhaps a little lower pricing that they are offering other than the express companies, which I've been seeing for some time. Our volume growth has started to come. As I said, you know, this was a transition phase that's going on for this year. And we should start seeing this kind of growth. But barring the few LTL players, the overall market is not growing as that fast. Also, the pressure on the margins always remains because FTL margins are anyways suppressed and compressed across the board. So we are starting to pick up and I would keep looking at these numbers every quarter and keep seeing some growth continuously.

Just from the diesel pass-through mechanism, we also work on the asset-light model. So whenever there is a diesel hike taken, do we pass it on to the contractors, the truck operators, or do we keep it ourselves? Because if I look at the EBIT margins, they have been flat for the last two quarters, but the revenue has gone. So I am assuming that diesel pass-through has gone to those truck operators.

Also, because, see, we have some portion of the business that is on vendors, et cetera, since we don't own any fleet. So those vendor rates have to go up a little bit as their cost also keeps increasing. When we are hiring from the spot market, that spot market automatically adjusts to the market rates. So then there is no issue. Then that automatically gets passed on to them. Contract-free customers have built-in increases, so when we are sourcing from the market, automatically the rates are also higher because of the detail price hikes.

Last question. Structurally, as DFC has been completed in June, do you see the effect from five-year, ten-year perspective? What kind of effect it will have on freight division, And let's say from Mumbai to Delhi, if the freight has to go, will it shift substantially to DFC? What kind of impact that will have on our business?

Well, certainly there will be some shift that has already started to happen, but there's also a large amount of volume growth that has been happening. So, or rather the volume growth is continuing. So I think that will not stop. For us, it's not competitive. It's just more, we're going to use them and use that services for our business growth. So, it's positive overall. I don't see it for us as negative. But yes, the market impact could be substantial for fleet owners on certain routes, who operate on certain routes. Okay. Thank you. Thank you very much. Thank you.

Thank you. The next question is from Mr. Abhinav.

Yeah, my question was regarding supply chain solutions division. Like, how do we see demand going forward? Do we see some softness in auto sector?

Demand, as I said, that, you know, we should look at 12 to 13% type of growth in this year and then higher growth in the next financial year. We have a lot of new contracts that are underway right now, and those will start translating into full revenue streams in the next few months. So, we are very confident that this will, this kind of capex also that we've done here will start yielding results. So, overall, top-line code should be in that range, and bottom-line code should be also in that range for the first year or two as we are building capacity.

Okay.

Yeah, that's it.

Thank you.

Thank you. There are no questions at the moment. We can wait for a few minutes to see if any participants would like to ask a question.

Okay, I think there are no further questions. So, thank you so much for joining. I think we are seeing good growth in this quarter. We should continue in the next two quarters. So, we are very confident of achieving our guidance. Thank you again for joining today.

Thank you. Simran, you can conclude the call.

Thank you. Thank you, everyone.

Thank you. And wish you all happy Diwali in advance. Thank you. See you in the quarter three call.