Good day, ladies and gentlemen. I am pleased to welcome you on behalf of TCI Express and SKP Securities to TCI Express Limited's Q2 FY 2025 result webinar. We have with us Mr. Chander Agarwal, Managing Director, along with his colleagues, Mr. Mukti Lal, CFO, Mr. Hemant Srivastava, COO, Surface Express Business, and Mr. Ashok Pandey, COO, Multimodal Express Business. This webinar is being recorded for compliance reasons, and during the discussion, there may be certain forward-looking statements which must be viewed in conjunction with the risks that the company faces.
I now hand over the webinar to Mr. Agarwal for his opening remarks, which will be followed by a Q&A session. Thank you, and over to you, Chander.
Thank you. Good evening, and a very happy Diwali to everyone. Welcome to the Q2 and H1 financial 2025 earnings conference call of TCI Express Limited. Thank you for taking the time to join us today. We have already circulated our earnings presentation on the website and stock exchanges, and I hope you have had a chance to review it. I will start by providing an overview of the during the quarter and the steps we are taking to ensure long-term growth and value for our stakeholders. Following that, I will hand over the call to our CFO, Mr. Mukti Lal, to walk you through the presentation in more detail. TCI Express showed modest improvement in revenues and maintained its margins sequentially in Q2 Financial 2025, reflecting the company's efficient operational strategies, innovative service offerings, and market adaptability, strengthening its position as India's most trusted and fastest-growing express delivery company.
Sorry to interrupt you for a minute.
A year-on-year, we saw a slight dip due to several factors, including prolonged monsoon rains.
Chander, apologies. I need to interrupt you for a second. Yep.
causing supply chain disruptions and delivery delays. Additionally, lower activity in manufacturing and automotive sectors, coupled with geopolitical tensions, softened the logistics demand.
Please just give me a minute. I think there is some technical issue. Bear with us for a minute. We are just fixing it. Thank you. Friends, give us a moment. We are just fixing this audio issue. Thank you. Friends, apologies for this audio glitch. Just bear with us for a moment. Friends, Mr. Chander Agarwal is having some technical issue, so we will have Mr. Mukti Lal, the CFO to take over. Mukti, please go ahead.
Yeah. Good evening, everyone, and apologies for that. Good evening, and very happy Diwali to everyone. Welcome to the Q2 and H1 FY 2025 earning calls of our company. Thank you for taking time to join us today. We have already discussed our earning presentation on the website and stock exchanges, and I hope you have had a chance to review that. I will start by providing an overview of the business trends, and then I will be going through with the presentation. TCI Express in this quarter showed a modest improvement in revenues and maintained its margin sequentially in Q2, reflecting the company's efficient operational strategies, innovating service offerings and market adaptability, strengthening its position as India's most trusted and fastest-growing express delivery company.
However, year-on-year base revenue saw a slight dip due to several factors, including prolonged monsoon rains led to waterlogging and flooding, causing supplies interruption and delivery delays. Additionally, lower activity in manufacturing and automotive sectors, coupled with geopolitical tensions, softened logistics demand. Amidst these challenges, TCI Express has advanced on multiple fronts. Our Rail Express service is gaining traction with the customers, contributing positively to margins, and is essential as we aim for the Multimodal Express services to make up 20%-22% of revenue over the next two to three years. Automation remains a key focus, exemplified by our newly automated Pune sorting center, which has improved operational efficiency and reduced turnaround time by almost 40%. We are extending automation to our next innovation to be Ahmedabad and Kolkata center to better handle increasing volumes.
This year, we introduced a Money Back Guarantee, reflecting our confidence in timely delivery across Surface Express, Rail Express, and Air Express modes. This offering has been well-received by customers and strengthens our position in express logistics. We are honored to recent recognition, including the Iconic Brand of India 2024 and the Rajasthan Business Award for Best in Logistics. We are humbled to be named, Mr. Chander, as an ET Business Leader for 2024. We are pleased to share that we announced our first interim dividend for this year as INR 3 per share, which is 150% on face value. This reflects our commitment to creating value for our shareholders and shows our focus on steady growth and profitability.
On our CSR front, we formed TCIEXPRESS Foundation and opened our first Jaipur Foot & Rehabilitation Centre in Lucknow, offering free artificial limbs and other aids to almost around 100 individuals so far within a two-month time. The Shri P.D. Agarwal Blood Donation Drive 2024 also saw 1,334 participants nationwide. As we move into the second half of FY 2025, we are optimistic about the future. We anticipate a recovery in demand with the upcoming festive seasons. TCI Express remains steadfast in its commitment into leveraging its strength, seizing growth opportunities, and maintaining a customer-centric approach. Now, can we start with the, Navin ji, we can start with the presentation, please. I will give you brief for that.
Sure.
Yeah.
Just give me a minute. Mukti , is my screen visible?
Yeah, it is visible. So this is our synopsis.
Sorry.
Good evening, everyone, again. This is our synopsis of our company. We demerged this division from the TCI and almost eight years completed. Our business of offerings, 97% is B2B and 3% of B2C. We are serving 60,000 + location. Next, please. I am just going through the things. This is our USP where we continuously following asset-light business model, even in Multimodal Express also. We do not have any franchises. We carrying high-value cargo and low volume, so this is a high margin business. We continuously need the low working capital requirement in this business, and it is still keeping within less than 22 days in net working capital requirement. Still, I think you have gone through with this presentation, so we have the lowest cost structure in this industry. We are expanding our multimodal services.
IT is very important for our kind of business, and that is why we also focus on various aspect, including API, dealing with the customer and getting the automated data, and then also track and trace facility also. Various things we are doing. Completely trucks having containerized movement. Please. Our USP to be continuously focused on this automation. Next, please. This is the second automation we completed in Pune, and this is also seamlessly we integrated the system, and now their turnaround time has also been reduced in the range of 30%-40%. Service offerings are the same, what we have discussed in last quarter. Please. Next, please. This is Rail Express.
I just would like to update here, Rail is really growing very fast and now we have the 5,000+ customer base in this segment, and we increased our route. We are present on around more than 150 routes, and it is increasing day by day. It is a good thing, repetitive customers are giving the business to us and it is a good profitable, and it is like midway of Surface Express and Air Express and giving the same kind of turnaround time, which we are giving in air services. Customers are very happy and we are expanding very well. This is C2C, so it is also growing on a steady path, but on a slower growth and not like in a growing, like Rail is growing. Please, we can skip.
Money Back Guarantee, just we like giving updates, so it is also we are giving this service to all modes of the transportation like Surface Express, Rail Express and Air Express. This is also customers, it is basically meant for the new customers. So that way it is attracting the customer and giving like, they can be rely upon our services and then can give the repeat order for that. So it is also getting very good traction from the customer. Next, please. These are the Q2 highlights. We have achieved an income of around INR 314 crore income, and EBITDA is around INR 40 crore. The PAT level has improved sequentially, so from INR 23 crore to INR 26 crore, and we declared a dividend of INR 3 in this quarter.
In this quarter our capacity utilization of the overall fleet is 83%, and in last quarter it was 82%. So average out it is around 82.5%, which is still below expected numbers where we want to be improved at least to achieve level 85%. So once volume will start to normalize, then we will achieve 84%-85% again. Although like industry verticals, so still automobile and lifestyle product and some engineering companies still facing the challenges on demand side and overall consumer demand is still weak. Though we have seen some uplift in the demand on a quarter-on-quarter basis, but on a year-on-year basis, we have still flattest numbers, and industry is also in the same way. Next, please.
This is the income we show on the quarter wise, where we in Q2 of last year, we achieved around INR 322 crore, and now we achieved INR 314 crore. So it is around negative by 2%, and that is why it is also impacted margin. But good thing is that our operating margin is intact and is, or you can say hit by 150 basis points-200 basis points. EBITDA margin has also bring down from 16% to 13% due to other costs, salary, and some admin costs has increased. Accordingly, once these volumes is coming back, then we have to be, as earlier in past we did, whenever we achieve a growth, then we have to be 2x of that we earning on a profit margin.
So same way, if you see from quarter one to quarter two story, where our revenue has grown 6% and margin has, profits has grown almost 14%. These are the H1 highlights. So total income is INR 610 crore, and EBITDA we achieved INR 76 crore, and PAT is near to INR 50 crore. Please. Next, please. Next, please. This is the dividend side. So internal policy, we had to be given almost in the range of 20%-25% or as a dividend payout ratio. So we will be in the same path. In this time, we have given again INR 3, and I think overall, by year-end, we will be maintained the ratio of in the range of 20%-25%. Return on capital employed, so we slightly work out on the only core assets.
Non-core assets means basically current investment and office land we bought that we have removed from that. If you see, this is operational ROC, if you see it is like in this H1 is 12.5%, and for the whole year we will be achieve around 30% +, which we earlier achieved. So all numbers are excluding core assets. Return on equity is the same. Again, it's grown on the number, and in this H1 it is almost 7.5%, and last year it was around 11%. Cash conversion ratio is again robust, so there is no challenge on that side. Usually in H1 is low, and then full- year is always in the range of 70%+ . Next, please. Yes, the same as I mentioned.
On CapEx side, we spent almost around INR 11 crore in this H1 because fortunately, unfortunately, we were not able to crack any land deal, which we anticipated at either on Bangalore or Chennai or Mumbai. We were not able to get that. So that's why CapEx is on lower side. We also yet not started the construction at Kolkata and Ahmedabad. Soon we will be start for that. Next, please. This is our leverage profile. Receivable days, as you seen, is maintained at 55 days, and payable days is in the range of 33, and accordingly, net working cycle is 22 days. So it's a very robust profile we have, and we are keeping continuously as a debt-free company status. This is a balance sheet. Balance sheet, you compare with the H1 of last year to this H1.
Whatever added is a CapEx. So ultimately is added around INR 40 crore. So basically, it's conversion from work in progress to capitalization part, and less I think is in a normal one. Current assets are also increased. So basically, it is increased because current investment surplus fund has been increased. So basically, INR 45 crore increase is contributed by that only. On equity side, that is in all liabilities and current liabilities are the same. So whatever we earned as a profit is added to that. Nothing significant on that. This is a comparison with the peer, in spite of our margin has taken a hit in H1, in spite of that in Q1 even, that was the, I think, lowest in margin level. In spite of that, we are still ahead with the other industry players in the margin profile.
Yeah, that we can skip. There is nothing new on that. We discussed earlier. Strategic outlook will be continue to, we will be more focused on to grow this Multimodal Express services. We will keep that. On CapEx side, we plan for the, like I had mentioned earlier also, FY 2023 onwards, we have a CapEx plan of INR 500 crore. Until time in almost on a two and a half year, we spent almost near to INR 200 crore or INR 180 crore, and remaining INR 300 + crore, I think we will be spending in the next two and a half year. And majorly will be again go to sorting center automation and IT improvement and all. That would be the path ahead. Yeah. Yeah, we can skip that. Yeah. That can be skip.
Again, growth drivers for the logistic industry is also heavily depending on the manufacturing in India, and key changes like focus on sustainability is very important. That is growing in India because logistic industry is giving highest carbon emissions, so we have to be cope with that, and we taking so many steps to how we can be carbon utilize given in our sustainability report. Second, we will keep continuing focus on Multimodal Express services. Infrastructure delivery is very important, how it will be placed because cities are choking and we are really having. Weather conditions is also giving some threat to this business in time to time. Yeah. Please next. This is our leadership team. Yeah. This is. We put this slide for your consumption here, how this overall logistic industry is played in H1.
You have seen transportation cost is persistent inflation, which has really led to higher transportation cost. Because two component is very important here, one is toll tax and another one is labor cost. Because as volumes are muted, we have to be bound to increase our labor cost and toll, and this is all not mitigated by the volumes. That is why it is impacted profit margin to every industry players. Another thing you have seen continuously is a decline in manufacturing output. This is PMI is slightly down, and this is also seen consumption of fuel was not happen. It is flattish in this H1 over the last year same H1. Weather condition is also a setback to the overall logistic industries, heavy monsoon and other things. Yeah. [inaudible]
This is also some broader. These are.
Mukti we lost you—
Yeah
there
Now it is okay. I am audible. Yeah.
Yes, you are.
These are, again, few numbers which we as a broader points for this industry. Vehicle sales is also down or having very low growth. That's why the cost concern and used vehicle demand has slightly raised. Diesel consumption, as I mentioned, is hardly 1% growth over last the same period. I think demand would be in a guidance factor. Demand would be in the similar way, not be much one and I think moderate one. May not be grow in a mid- single- digit kind of growth we may be achieve in a second quarter, in second half basically. Next, please. These are our ESG initiatives. Yeah, please. Yes, please. These are the award and recognition I just mentioned on that. Yeah. Next, please.
We like ICRA and CRISIL has reaffirmed our ratings as again AA- by CRISIL for the long- term. ICRA is getting A1 +, which is the highest one for the short term. We also keep Certified Great Place to Work for 2024/ 2025.
[inaudible], Mukti.
Yes, Navin ji. I am audible now?
Yes, now you are.
Yes.
Should we open the floor for the Q&A session?
Yes, please. Please. Already too late, yeah. Due to some these technical glitches are there.
Yeah.
No worry, please.
First we open the floor for the Q&A session. Now we take the first question from Janam Shah. Janam, please unmute yourself and go ahead.
Yeah. Hi, can you hear me?
Yes, loud and clear. Please go ahead.
Yes, Janam. Yeah.
Yeah. Hi, sir. First on the volume numbers, if you can provide the volume for this particular quarter.
Volume is exactly 2 lakh 50,000 tons for this quarter and 4 lakh 85,000 tons for this H1. In comparison to last year, same H1 is getting 4 lakh 92,000 tons, and in quarter two was around 2 lakh 52,000 tons.
Got it, sir.
That is the numbers.
Got it. Sir, on the branch addition, I guess we have targeted for around 50 branch addition. I guess in 1Q we have added three, and in 2Q we have added two. What could be the guidance for the branch addition, and are we going intentionally slow in terms of branch addition given that volume is not picking up?
Yeah, this is true actually. Basically, we just muted that expansion of branches for the time being because as the volumes has not picking up, so we wait and watch. Supposing once we start to getting the volumes, then we will be again expand on a very fast mode.
Okay. Sir, in the first quarter there has been impact because of the Air Express business as well, wherein our margins has been squeezed during the 1Q. Has there been any impact in 2Q or everything was settled in 2Q wherein we have passed on the cost to the customers?
Yeah, basically, if you see this Air business cost is also impacted in Q2 as well, because that cost still is on a high side due to the consolidation of airlines and second part, privatization of this airport. Third, we also expanding direct network as I mentioned in last call. Because the cost has increased, but we were not able to passing on to customer because in this high cost scenario, customer is also not ready to accept that. That is still continuing this quarter two as well for that. Overall if you see that impacted in 100 basis point in overall cost. Remaining cost impacted by increase in toll tax and labor costs specifically, and third component to be contributed in this increased cost is lower utilization of fleet which is now in this quarter was around 83%.
That's why if you see we are able to reduce the cost by 70 basis points to 80 basis point in sequentially.
Got it, sir. On the price increase side, there have been few competitors which has increased the pricing from July, and there have been few announcement that they will be increasing from January onwards, which is also in the range of 7%-8% on an average. Have we done anything on the price increase or we are just following the model that we generally follow of around 1% or 2% increase on a yearly basis?
I really doubt on that what competitors and other industry players saying they will be giving one notice, and they will be able to increase the prices. I have big doubt on that. Because in this industry usually is not happening in that way. Rather you have to go like SME customer is possible to have increase but big customers, it is not possible. Though cost, whatever cost increase, that can be passing on specifically on diesel side. But in normal one, annual hikes is not possible to be given by one notice hike. We wait and watch situation. If they are able to, then it is good for the overall industry because everyone is facing the continuously cost pressure. But we have not yet taken any price hikes and we will try to start that effort from the last Q4 actually for that.
But still, we are not really much optimistic about this price hike.
Right
This high inflation, [John and all]. Muted volumes are there. I do not expect to be any high increase on that.
Got it, sir. Just last one question from my side. Our volume has been as usual 2.92 lakh tons versus 2.85 lakh. It has been a kind of a degrowth in the one edge. Overall, we have been targeting earlier 15%+, then 10%-12% last quarter. Now you can see a bit of single- digit kind of a growth that we are expecting for FY 2025. This question is for the, you can say from next two to three years perspective, how we are seeing the situation. Our GDP growth of India has been in 6%-7% range. If we see that particular growth is eventually coming down, then how we would be coping up with the competition?
If we are targeting to grow at 7%-8%, what kind of market share gain we can expect and what kind of thing that we are eventually doing to have eventually a growth momentum for next two to three years? Because overall last two to three years have been quite stable numbers, and there has not been any increase in the top- line. Of course, we have been doing significantly good bottom line as compared to the competitors, but eventually that is also getting impacted. Overall, your view for next two to three years time.
Yeah. As I said, we've grown in 2022, 2023, we've grown 15%, 16%. We are not-- This slightly you can say, not slowed down, but it is like muted growth has been impacted, start to impact in the last year only, and everyone has the-- overall industry has that impact. This year is also like-- We are also surprising with that because sometime customer is giving confidence and they're giving growth numbers, "We will give so much volumes to us," and ultimately they were not able to give what they have committed to us. Or because they also have the same kind of problem where they're trying to grow, but they have not grown. In spite of September, supposed to be very good month for everyone, but that has not gone into that way. We're also seeing the diesel consumption number and all.
This is, I think it's a temporary thing. Again, but this year is full of challenges in two way. One is muted growth and second part, cost pressure also. But I think hopefully in next year onwards, again, we will be keep the same guidance for the growth in the range of 13%-15% as volume growth and 1%-2% growth in value. What is giving the confidence to us is basically pipeline we're creating. We're discussing so many customers, and customers is giving confidence and they're coming to us and we expanding this-- We already have opened up the branches in last four to five year, almost 300, 200+ kind of branches. So we are ready with that. Operational efficiency is also fantastic.
Once I think volume will start to pick up, then we will be the first one to get that benefit here. The second part, also like you said, this is industry, GDP is growing 7%. It is unproportionately growing through service sector and other manufacturing, which is really. We are not in that segment, basically, if you see what industries we are serving. This is really all impacted continuously. Last year we saw lifestyle companies did not do well. This year is also they are facing lots of challenges. So same way, I think consumer demand is important rather like growth in overall GDP because that also has different components of that. So, I think, we will keep continuing like we grew in 2017 to up to 2020, we grew a CAGR of almost, once before that corona time, grew almost 14%.
Then we in last FY 2022-2023 again grew 15%. So that is why once this will be normalized, we will be growing. Overall industry is facing the spend for that growth numbers. Yes, as you mentioned, good thing is that we are not compromising the margin, and margin level is also impacted due to muted growth only and due to not operational things. It is operational cost is maintained, but other costs like salary and other admin cost is slightly bound to increase and we do not want to give. We want to give the increments and everything to our sales force and everyone.
Got it, sir. Thank you so much for the elaborative answer. That is it from my side and wish you a [Non-English content] to the entire team. Thank you so much.
Same to you and wish you. Yeah.
We'll take the next question from Lokesh Manik. Lokesh, please unmute yourself and go ahead.
Hello.
Yes, Lokesh, please go ahead.
Thanks, Navin. Greetings, Mukti Lal. Wishing you a very happy Diwali, a prosperous Diwali to the entire.
Lokesh, your voice is cracking.
Hello.
Yes.
Yeah. Is it better now?
Yes, it is. Please go ahead.
Yes. Good evening, Mukti Lal. Wishing you and your team a very happy Diwali. My question was-
No, Lokesh. This is not helping your poor-
Hello.
Yes.
Yeah. Is it proper now?
Yes, it is better. Thank you.
Thank you. Mukti ji, my question was that a few quarters back, it was mentioned that we had hired consultants for business strategy and expansion. Just clarification on that as to what is the expense that has come in on that side in the other expense for this quarter one? The second is on what is the duration of their consultancy contract, if you can just share some details on that.
Yeah, very good. Basically, that consultant hired to help expanding the branch network and all, and they already did work on that. Then they also given their reports where we have to be more focused on that. That, we will be in time to come, but that is not a big cost. We have not given like sometime other industry players giving to linkage with what kind of benefit we will take. But we have not given on that way, and it is a very not significant amount. Yeah.
But duration of the contract, sir, when does it get over?
Yeah, that is get over, yeah.
Okay, that is over?
Yeah.
Okay. Thank you so much, and wishing you a very happy Diwali.
Same to you, please.
Thank you, Lokesh. We take the next question from Alok Deora. Alok, please go ahead.
Yeah, hi. Good evening. Am I audible?
Yes, you are. Please go ahead.
Yeah. Just wanted to understand, you have also given a lot of details on the volume side. This mid-single- digit growth you are talking about is for second half, right?
Yeah.
Okay. Any reason why the volumes are not coming? We are seeing some of the other players still clocking a little better volumes. Also they are talking about price increase, which may or may not materialize entirely. But if we are also keeping the prices stagnant and focusing on ensuring that the volume growth is there, but still volume growth is kind of missing. Just if you could, in a couple of minutes, if you can just highlight that is it a structural problem where competition is now increasing and it could sustain ahead, where volume growth will remain muted ahead? Just some color on that, please.
Yeah. As I mentioned, basically, there is no structural issues on overall basis. This industry is growing because there is a lot of opportunity for everyone. Basically I don't think everyone is facing the lot of challenge on a volume side. Like whether it's a full truck load or whether LTL or Express, I think except quick commerce, everyone has taken the bite on that. So we are not seeing anyone is increasing market share and we are losing the market share to someone else. That is not the case. We will be still, whenever other side of, if you see price hikes, everybody is saying, but it is not reflecting, I think, in their numbers.
They are saying because somehow supposing in one customer, three players are working and someone is asking, then other volume has to be, sometime customer is not willing to pay. So we have not seen on ground at all anybody has increased the prices for any logistic players. We have not seen at all on the ground. We don't know why everyone is saying. But it is a good thing, supposing they are able to do that, it is easy for us to be forced to customer to increase our prices as well. So once we are in a situation of wait and watch, because really we are not seeing that on ground. Once we will be reflecting this in their numbers, and obviously in customer prices, we will be also able to find, but we yet not find. So we will be also do the same thing.
In past we also did, no one has even able to do that, but we were able to do that because we doing on a realistic basis. Whatever possible we will do. Whenever these opportunities come and they will be able to do that, it is reflecting on customer side as well, then we will obviously push hard for that. Otherwise, no reason for that.
[inauduble], just one more question.
Yeah.
We, around two years back, we had this thing of Gurugram center getting automated, then eventually Pune will get automated and more operational efficiency and more improvement in turnaround time and stuff, and which would see margin improvement. At that point of time, you used to talk about 16% margin moving to 18%. I understand this last two quarters were pretty difficult, in terms of maintaining your base margin itself. But how do we see those impacts actually coming to the profits? Because those margins are actually not improving in line with what benefits were expected out of those centers getting operational.
Yeah, your concern is right, and we are also concerned about that, but if you see good thing is there, supposing we will not do the automation, then I think that margin is also not intact. If you comparison with the others, what their margin has been reduced and what our margin is intact, because last year you seen. So efficiency is a completely different part, and there we also get the benefit of, like I said, 25 basis points to 30 basis point overall benefit we get from there. And that would be continue as a story because this ease out three, four thing as labor intention it is down and efficiency is increasing, and obviously that benefit of reduction in waiting time of truck and all that happened. And that we will keep continuing on that same strategy in future as well.
But other side, if you see, these all things put together, come together. Like mutated volumes, nobody has anticipated that much actually. That is one part. Second part, high increase of toll is nowhere anticipated, because government is now allowing to be increased to 8%-10%, it is becoming significant amount for the overall journey cost. Third part, because as a volume, labor cost is also government want to be standardized there and want to be increased there, wages and all. So government focusing very high to be improved that side. So that is also coming in one way. And because inflation is obviously government's purpose was to keep demand slightly low to keep inflation under control, and that's why they also want to be reduced the consumption and that happened in that side. So that has really impacted volumes.
So put together, if you see, and now even anticipation of this consolidation of airline, nobody has thought three, four airline will be consolidated under one umbrella and they will increase the prices. So that put together has created this scenario, but still you will appreciate that 13% margin or 14% EBITDA margin to achieving an express business is really, is a good effort from our team. And obviously, once we bounce back with the volumes, we will still have the same energy and same thought process and strategy till we get first to achieve in the range of 15%-16% and then again increase on a higher side.
Awesome. All the best. Thank you. That's all from my side.
Thank you.
Happy Diwali to you and the team.
Thank you. From our side, yeah.
Thank you, Alok. We take the next question from [Kripashankar]. [Kripashankar], please go ahead.
Yeah, hi. Good evening, and thank you for the opportunity. Sir, my first question is on the load factors. What we have seen clearly is that over the last two years, out of the 85% load factor, while volume have grown from those levels of FY 2023, and our load factors at truck level has declined. Are we deploying more trucks or expanding our services, due to which despite the tonnage growth, the utilization levels are low? Is my understanding correct, or is there probably some other reason for these underutilization?
Yeah, that is very good question. What happened, over the period, we converted all the truck on a higher axle load. That was in FY 2020. I think most of the chunk we completed on FY 2023 only, and after that, volumes have not picked up. That's why this vacancy is there, slight 1.5% vacancies in comparison to those. Yeah, please.
Yeah. No, sir. Please go ahead.
Yeah. Basically, that's why the only reason, because we converted these from the nine-ton truck to 11-ton and 14-ton truck to 18-ton. That truck, we can't remove overnight because we're waiting for the volume. Once volume will come then that vacancy will be reduced over the time. Further, also slightly change happened on the business pattern. I also, I think, mentioned in last call where south side and eastern side is really not doing well. They slightly have more problem in comparison to western part of India and Northern India. You are aware this half India is producing and half India is consuming. That side is also really creating some vacancy for us, and if you put into number, then it may be say 0.5% to 1% utilization has dropped due to that also.
Got it. Mukti ji, then wouldn't our decision to expand hubs in newer regions, can it be probably shelved or probably taken up at a later phase when growth is coming back? Because, at this point, with growth not coming in and we are committing capacities, expansion towards new capacities, it's putting pressure on our return metrics. Just your thoughts on what is the key reason for continuing this expansion.
Basically, there is a two type of expansion, one of our branch network expansion and other two capacity expansion of trucks, basically. Both are, if you have seen, in our case, as to addition of branch, it is a matter of we first analyzing and then opening up the branches because these branches, we are making break-even point within a two month of time. That is why whenever volumes back, we will be again start to be on a very fast mode and we still opening up the branches, but in a slower pace, not like in a high pace. That is still going on. But once volumes will be back, we will increase the pace for this branch network. Second part, whenever, because in our case, supplier side, there is an overflow for that.
We never face any challenge to be getting on board our any supplier for the truck. Whenever we have the volume, we can be like on board them. Otherwise, as mentioned, 90% volumes we carrying through these vendor guys, fixed, these kind of engaged trucks, and 10% volume we carrying through the spot hiring. Wherever we have the spot in demand, we can hire more vehicles, and wherever supposing there is in a low demand, we can be not hiring than a spot hiring. That is why I think this is not the challenge at all on overall basis whenever we want to be. Also it is not like obstacle to be on our growth at all.
Yeah. What I meant, was on the hub expansion. You are intending to take up hub expansion at new cities, right? That is where probably most of our capital is going to, or CapEx is going to be tied up over the next three years. Is it possible to get that push until we see traction with respect to volume growth?
No. Basically, I think I am not able to make you understand. Basically, CapEx is meant for more significantly for the sorting centers, construction and automation. That we will keep continue because we soon start the construction at Kolkata and Ahmedabad. All permission are now almost completed. I think in Q3 end or Q4 will we start the construction, and next year, FY 2026, we will be able to complete the construction in these big two center, like each one is more in around 2 lakh sq ft plus. That strategy, long-term strategy is there, and we will keep continue to make that, because we going to be buy the land in Mumbai and Chennai. We are working hard to be like on for Bangalore also. Three, four location we already working hard to be buy the land. That strategy will be keep continue.
Just I am saying, and for the branch expansion, we don't need to be put in any CapEx kind of thing. Major is OpEx, not the CapEx. And for truck supply is also OpEx part, is not a CapEx part at all. So expansion, whenever we will be having the opportunity for the growth, we will be keep adding.
Thank you very much for answering my questions. Happy Diwali.
Same to you as well.
Thank you, [Kripashankar]. We take the next question from Pandinya Nimigada. Please go ahead.
Yeah, hi. Thanks for the opportunity. Couple of questions. Firstly, if you can maybe provide a little bit more granular details on what are the key industries impacting the volume growth. That is on the first part. Secondly, in this current backdrop, what would be the revised CapEx guidance, say for FY 2025 and FY 2026? If you can give some color on that, please.
Yeah, very good. Basically, industry impacting, major is highest one is still continue to lifestyle companies, and lifestyle and textile companies. Second one, engineering companies. Third one now is unfortunately automobile companies are also not. They have slowed down their productions. Second part on CapEx side, if you divide in a year- on- year basis. FY 2025 we are anticipating because we will be start the construction soon. I think we will be finished the CapEx in this year is around in the range of INR 40 crore to INR 50 crore for the whole year. In the next year, again, the similar way, where we will be spending INR 100 crore and INR 125 crore in each year.
Because in next year, full-fledged construction will be start for these, will be there and we may buy one or two land parcel also, and similar way on our FY 2027 as well.
Sure. Got it, sir. Sir, just a couple of bookkeeping questions.
What is the number of branches and sorting centers that you added in first half of the year?
Sorry, we have, sorry?
What are the number of branches and sorting centers that you added in first half this year?
This sorting center number we are not increasing. We just as a long-term strategy, we are just converting them from lease to own one.
Out of this 28, we want to be major one, which is in the number in 10-12, in all the big cities, and the handling in and out volume is almost like 75%-80%. We first want to automate them, and out of that we already two fully automated. Next would be Kolkata and Ahmedabad, and I think FY 2026 or mid- 2027, we will be able to do that for these two center.
Followed by Chennai, Bangalore, Mumbai and all. That is for the CapEx plan.
How about the branches, sir?
Branches, in this year we added almost like, not much, it's five branches we added in H1. This is also meant for Multimodal Express products.
Understood. Mostly in the third quarter, second quarter. Understood.
Yeah.
Thank you, sir. I am done with my questions. Thank you.
Manoj, please go ahead. Manoj, can you hear me? We move on to the next participant. Anshul Agrawal. Anshul, please unmute yourself and go ahead.
Hi. Am I audible?
Yes, you are. Please go ahead.
Great. Thank you for the opportunity. Mukti, my first question is on our pricing strategy. I see our realizations have remained flat over the last two, three years, while in the current quarter we have mentioned that our revenue contribution from SME customers have tapered a bit. Shouldn't we think of reducing pricing for institutional customers to attract volumes at this point of time?
Yeah. This price is flat in one and a half year only, like in last year and this year, this first half only. Before that, in FY 2022/2023, we were able to take almost, I think, 150 basis point overall basis. That's the only one and a half year, and because there's a muted growth, that's why we are not going for that. Second part, supposing we will go for the institutional customer, as I said in earlier call also, there's no price war itself in this industry. Because customer will keep the three, four competition for that anyhow. Whether we will reduce the prices, they will not give the whole volume to us. They want to keep the two, three players to keep competitive rates as there.
Also, sometime this is not wise to take the whole volume of the one customer because this is giving not good profit to us. As I mentioned, it is like gap in pricing with the institutional customer versus SMEs is also like 25%-30%. So sometime we intentionally keeping a CapEx on doing business with the big customer. That's why our margin is intact on this testing time. Even still, it is maintained or slightly dipped. So I think, I do not think it is right strategy to cut the prices and get the more volumes.
Got it, sir. Second question is on the Multimodal services. Are they still margin accretive in nature?
Yes. This is like rail and air, and yeah, both are like very good.
The contribution of these services to our overall top line would be still around 17%-18%, or higher than?
Yes. No, it is the same way. Yeah.
Wow. Okay.
We also have in this space like B2C component also, 2%- 3%. That is also shrinking for us because we are not going on bigger players. Small players are like, so my B2C component is also 3% in that. Earlier it was like, I think if you talk about four, five year back, it was around 5% of overall revenue. That component, you can say we are not increasing because we are dealing with the customer wherever we have the profit for B2C. So we are dealing with the small customer only.
Sure. Possible to share any color around what kind of margins would we making in these Multimodal Express services or Rail Express business?
It is because these are the services where we are not utilizing our network basically from hub-and-spoke model. Basically, hubs we are not using it directly point to point in case of rail or in case of C2C Express, in case of cold chain or in case of Air Express. That is why margin is good and is likely like, currently it is around in the range of 15%-16% EBITDA level, specifically on Air Express and Rail Express.
Got it. Many thanks, sir.
Yeah.
That's it from my end.
Thank you, Anshul. We'll take the next question from Manjeet Buaria. Manjeet, please go ahead.
Mukti, thank you for the opportunity. I have three questions. First, I just wanted to go back to the industry structure, to get my bearings right there. If you could help me with how many people have entered the Express PTL business in the last 10 years, and what are the number of players today in Express PTL who you think are good competition for you in terms of like-to-like services which they offer?
Yeah, that is very good question you ask, Manjeet. I think new entrants in B2B, one or two player which is really dealing in B2B segment and they are not able to make the money, so they entered in that segment, and one company has acquired other company that was also old one. I have not seen any much competition where they are getting market share or they are having a future threat for this industry. I do not see that. But if you see divide in that industry overall, it is like different multiple services and multiple products offerings. Each and every company have their own set of that. So in that layer, one is FTL industry, then is LTL industry, where they are not doing express but doing the LTL, less than truckload. So there is an also overlapping sometime.
They want to be our share also as a express share to that, but it depends on the customer whether they want to be lower prices or they want good services. So that is like sometime clashes there. Third thing is, this third party logistic companies are there. So all our companies, they are doing inventory management, they are doing inbound and outbound. So these are type of the company have different. And they are majorly doing, I think this auto segment, warehousing and all, major portion, I think, I am saying. And third thing is express industry is also having dividing in a three, four part, like one is B2B, second is B2C. Now, the new entrants are this quick commerce and then courier companies. So each and every one is having a different product and different opportunity for that.
But if you see overall express industry in B2B segment on road side where our presence and our USP is there. So there is not much player in our direct competition with the again is keep continue with the unorganized player, which is competing with us on a regional level basis and zone-wise and all. So I think that will be, is really, I do not think it is wise to get the share from this unorganized player getting that business. That business, supposing we getting, then we will be ruining our margin profile. And also credibility of that customer is also under question, and we may be like, then bad receivables in our balance sheet. That may be also happen. So we are very cautious. So if you see 10-year data, our margin is continuously increased, our quality of balance sheet has improved a lot and is robust.
And obviously, we were like debt-free status and giving continuous dividends.
Okay. But in terms of very like-to-like, as you mentioned on B2B Express side,
Yeah
are there three, four players who are close to us in terms of their network and in terms of their reach? Also in terms of, more importantly, their service quality, on-time delivery, and low damages or losses. I was looking at how many number of players like that do you consider as your competitors really.
Yes, it is a listed player which is having two, three players only.
two, three players. Okay, got it. My next question, Mukti ji , was, you mentioned that you have taken calls between institutional customers and SME customers by maintaining a certain mix, which helps you keep certain healthy margins.
Yeah.
I was curious about how the management think about absolute profits. An institutional customer may be lower on margin, but adds to your absolute profit. If you have spare capacity to utilize, would you still let go of that business because margins could be lower? Or then you look at more absolute profit perspective and take on that business, as long as there is spare capacity which you are not taking away from SME.
You rightly said so. Supposing wherever we have the vacancy in truck, we obviously getting the prices wherever, whatever price we can get. Like I mentioned, it is from eastern part of India and southern part of India, supposing there are any volumes, high volume, we are taking that. I am not saying we are losing that, but somehow to see that because if I am, again, as upward flow and there is a return flow, this all depends. Supposing I have the more business from the upward flow, then you have to lose the money anyhow, if you will not be able to fulfill that truck in return load.
That is why we have opened up the branches, and that is why these branches helping us, because in some time in these part, like down south and upper north and eastern part of India, there is no big businesses are there and no manufacturing is there. That is why we opened up branches to fill these trucks wherever we sending. This is a strategy because we are not charging for the absolute profit, but the mix has to be there to maintain my utilization level of truck is very important for us. This is directly supposing I lose that proposition, then there will be taken a hit on my margin levels.
Okay. I had one last question.
Because I am saying, why I am saying, because these are the, in one truck, I am putting 200 customers' business, not like I am depending on one customer. That's why I think it's not the high volume will be help to we getting the profit. This is not the mandatory thing or not the sure things, I am saying.
Got it. I had one last question. Assuming that our cost levels remain where they are and your mix between SME and institutional stays where it is, right? Two big items. At what volume per year and at what utilization should that volume happen for us to go back to 15%-16% margins? I am getting ceteris paribus, all else remaining equal, what should our annual volumes and utilization rate have to be to go back to about 15%-16% margin?
Yeah, this is a very, in simple way, supposing tomorrow we will be grow in the range of 10%, then we will be back to normal. In a 15% + kind of EBITDA, we will be back to that.
10% value growth, basically-
Yeah
to go back to that.
Yeah.
Okay. Mukti ji, very helpful. I will take other questions later. I think we are past our time. Thank you.
Thank you.
Thank you, Manjeet. Friends, we take the last question for the evening from Akash Vora. Akash, please go ahead. Akash, please unmute yourself and go ahead.
Yeah, I am audible.
Akash, there is a lot of disturbance, and your voice is cracking.
Hello. Yeah, is it better?
Yes, it is. Please go ahead.
Yeah. Mukti sir, you were mentioning earlier in the call that from certain base level inquiries and interactions with your customers, you are understanding that they are giving you strong volume growth guidance in the coming year, that is FY 2026. What is the volume growth-
Sorry, can you repeat that? I just missed the last two, three line. Can you just Yeah
Yeah. You were mentioning that through your customer interactions, they were promising you a certain amount of volume growth coming in FY 2026. In what range are they promising? What kind of growth are they committing?
Basically, as we are focusing on three parts. One is we are putting separate sales, more salespeople on the ground to be getting. We want to be in a balance out of here. One is more focus on our institutional customer to adding new customer, all the competition customer. Second part, we already have opened up the branches, so we want to be in a more sale from the SME customer. Third thing, we want to enhance the customer base obviously in Multimodal product also. We put together three, four strategy. We want to be growth and supposing we have anticipation to be growth 13%-14% in volume side. 7%-8% volume will come from the existing customer, and then remaining will come from the new addition customer.
That's our strategy, and that's why we're working on the ground very hard to be. People are on the street, and we're focusing how we can go door to door and ask for the business because this business is not to be like where we sit in our office and people will come to us. Rather, we have to go in their door and ask for the business. That's we are making efforts and enhance our footprint till we get more business, and sales team has increased for that.
Got it, sir. Sir, two numbers if you could quantify. What are the new customers that we, how many new customers we have added in this six months? And secondly, what is the top 10 customer concentration in our revenue for this first six months?
Yeah. Basically revenue constant, if you see my top 25 + customer has not given more than 15% revenue to us. And number of addition, I just not remember for that. So one to one, I can give that numbers. I'm just really not remember that number right now.
Sure, sir. No problem. Yeah. Thank you.
Thank you, Akash. Friends, thank you for your active participation, but we have run out of time completely. I take this opportunity to invite Chander or Mukti for their closing comments.
Yeah. Chander sir, you would like to say something on that? Okay. Nobody. Thank you, everyone. I would like to thank everyone for joining on the call. I hope we have been able to respond to all your questions adequately. For any further information, we request you to please do get in touch with our investor relation team. Stay safe, stay healthy and happy, and [Non-English content] to everyone. Thank you once again for joining with us. Yeah. Thank you.
Thank you very much. On behalf of SKP Securities, I would like to thank Mr. Agarwal, Mr. Mukti Lal, Mr. Srivastava and Mr. Pandey for the time to interact with the investors. We look forward to hosting you again in the next quarter. Wish everyone a Happy Diwali, and have a wonderful evening. Thank you.
Thank you. Thanks a lot, please.