Hi, good evening, everyone. Welcome to the Q1 FY 2024 results conference call of TCI Express, hosted by Emkay Global. We have with us today, senior management of the company, represented by Mr. Chander Agarwal, Managing Director, Mr. Pabitra Mohan Panda, Chief Operating Officer, and Mr. Mukti Lal, Chief Financial Officer. We thank them for giving us this opportunity to host this call. I shall now hand over the call to Mr. Mukti for taking us through the investor presentation, post which we will open the floor for questions. Over to you, sir. Hi, Mukti, sir. We cannot hear you. Mr. Mukti is joining back. Please bear with us.
I can take it forward till he joins.
Yeah. Good evening, everyone. Now I am audible, Anshul?
That is correct, sir. We can hear you.
Good evening, everyone. TCI Express Limited, we welcome and thank you all for joining us here today for this Q1 earning call. We have uploaded our earning presentation on our website also, and I trust you had a chance to review it. I start with, I will present you an overview of our quarterly performance, the prevailing and projected industry environment, and the financial performance of the company for Q1.
The highlight is that we started this Q1 on a very positive note, and we achieved a growth of 5% and achieved a revenue of INR 306 crore. This growth is basically supported by a strong support from our MSME customer, which is contributing almost 50% to 51% revenue to our overall revenue. In spite of a continuous high inflation, our margin has been further improved by almost 30 basis points.
We maintain our PAT level margin on 10.6%, which is the highest in this industry. Our utilization level in truck in this quarter was, again, is around 83.5% +. So these are some extracts from our MD's comments on this business. We as a management team, we hopeful too that manufacturing sector is receiving strong government support and it is leading to an. We are anticipating a growth of 13%-14% in volume and 15% to 16% in my revenue part. As these companies ramp up their production activity, the demand for express logistic is expected to be shared in time to come. This trend is likely to boost a significant growth in the express logistics industry as business rely more heavily on efficient supply chain management and transportation services to meet increasing demands. So this is our focus on that.
You are all aware that Pune has already been operational in 2021, and we are now in the process to automize the same. Hopefully we will get it automated by this full year end, by 2024. We are happy to announce that we received this LEED certification for our two center, for this Taj Nagar center. This is for sustainability basis. They are covering three, four aspect of that, and we did that well, and that is why they award this LEED certification to us. So again, after this, our demerger, we completed successfully seven year plus. Now our workforce is almost 3,500 +. Almost we serving basically 60,000 location for pickup and deliveries. We expanding our branch network continuously, and branches has reached on 950 +. Next.
Our USP and continuously, we focusing on improve our operational efficiency, and that is why we more focused on automation. Consistently, we drive by a satellite model and high-value cargo movement. We need very working on very low working capital. We have the very lowest cost structure in the industry. We also expanded on a similar kind of services since last two years. Obviously, we have our own branch network, so we do not have any franchisee and have the kind of 100% is a centralized movement. We are now, the latest one is we are continuously focused on our automation and one already did, and second one will be happen in this FY year end. So this is our network efficiency and what kind of service we are offer. So this is there. This is the quarterly performance.
We achieve INR 306 crore revenue with a growth of 5%. Margin has improved by 30 basis points, and PAT level has maintained on 10.6%. In current quarter, we have not done major CapEx of that, and we have done a CapEx of INR 4 crore only in this quarter. It means basically for spend money on IT equipment procurement and that we have done. In this quarter, we opened up five new branches, basically in Western South region. This is the performance of last five quarters. You can see consistently, we are improving our margin levels on EBITDA and PBT level. So, our basic strategy, again, to have the diversified client base, corporate and SME, that will be continuing time to come also. This is our basic strength.
Wherever we have the challenge, supposing in corporate customer, then we get the support from the SME customer, that will be continue. Again, we will be keep continuing expansion our branch network in metro Tier 1 and Tier 2 cities. New value services are also maturing, we gradually focusing on that, it will become like we have taken a target to be in the range of 20%-25% by in next financial year, we are focusing on that. Also government is also taking so many. I will be explain on later on slides, where government is also giving so many thrust on logistic sectors strength, we are doing continuously on that. Again, my CapEx plan is for FY 2028, we want to be spend INR 500 crore, this is the second year onward.
Last year, we did INR 125 crore, remaining four years, including this year, we will be spent remaining INR 375 crore. Yes, please. This is again strategic, for what we did on taken for the 2025. We're targeting a growth of 1,750 for by end of next year. This is our Giga Center in Taj Nagar, which is in the size of 2 lakh sq ft, this is a fully automated one. We're getting the kind of traction of the customer, we have improved on operational efficiency there. We able to reduce our turnaround time almost around 60% on truck side. This is the only one we had did. Once we will be doing second one and third one, then we will get the more benefit.
With this, we are able to cut down my direct cost almost in the basis of 15 basis point in overall basis. So we will keep this strategy going on. In next, in four, five year, we will be put seven, eight more centers, which will be fully automated. This is Rail Express. This is continuously getting high traction from the customer, it is highly profitable business. Our customer base has reached to 2,700 customer right now. Our routes, doing that is 100 and 125 routes we are serving right now. It is getting high growth in this segment, we are hopefully to be reach in FY 2023. 2025, we want to be reach on at least in the range of 4%-5% of overall revenue. This is a pharma cold chain.
The pharma cold chain is also gradually growing, but we are not trusting more into that because India is slightly cost-sensitive market or price-sensitive market, we also like focusing only on pharma cold chain, so that's why scope is very limited. So that is why going on but in very low pace. C2C, this is a new segment. This is a new niche segment, we almost reach on 5%-6% on this segment, it is contributing to our overall revenue very good way. As time to time, I explain that one, it is a basically a high profitable business, we are growing it on a very. It is also asset-light model, where we are not putting any CapEx on that and getting good return on capital on that one.
This is the last key takeaways we have taken in the last seven years. We increase our location from 32,000 to 60,000 in last seven years. Also branch network has increased from 500 to 950, and sorting center not increased much, but from increased 26 to 28. Customer base has also increased from 1.6 lakhs to 2.25 lakhs. On side seven-year track record of profitability like CAGR of, we grown our EBITDA margin fantastically on 21% and net profit of 24% in last seven years. We also maintained 35% of return on capital employed continuously. This is again, we are the debt-free company and we will keep that status continuously. We already discussed on our last. We can skip, please.
This is also again, our six years track record you can see here. Please. These are key ratios. Again, you can see we maintaining 35% plus kind of capital return. Cash conversion ratio, interestingly, is also very high. We always maintain in 60% to 70% plus, and that's why we are working on very low capital requirements and hardly our networking requirement is only 15 to 20 days and since last one decade, I'm saying. Next, please. Next. If you see, compare with the industry players. We are the highest profit margin generating company, and that will be, hopefully, we will keep continue that pace. Next, please.
These are the basic, these are the growth driver for the Indian logistic industry and this National Logistics Policy and this will help a lot to this industry to integrate the various component of that and this is the same way PM Gati Shakti National Master Plan also help to all logistic companies to boost their businesses. Unified Logistics Interface Platform is also there. This is also a good news like India logistic industry has moved up to six places to reach the 38 ranks out of 139 countries. This year's announcement of multiple infrastructure project worth INR 108 lakh crore is also help to we improve our road sector, basically.
This year, government has pushed INR 10 lakh crore carve out for the infrastructure development and major component will be going into in road sector and construction of 6,600 kilometer of highways. Government has taken that initiatives. Logistic industries employ almost 2 crore + people and is a major source of employment. This is a management team. There's no big change on that. Sustainability, we also did part of our annual report in this year, and we give an extensive detail working there, and we will also release a separate ESG report in this year only, I think within one or two months. We are highly focusing on our management thought, our MD's thought is there. Whatever business we are doing, it has to be sustainable on all the pillar of the sustainability, and we're doing that. Yes, please.
And on award and recognition, we are also continuously happy to announce we getting various award in this last six months or one year time, and part of that it is a very honoring time for us. Yes, please. This is, you can see after demerger, we have given a return of 27% on our share, and that is, I think every shareholder taken the benefit of that and we will keep continue that pace. We will not be let down to our shareholders on that. Yeah. Thank you. And Chander, sir, you would like to say something on that?
Thank you, shareholders, for being here and in the investor call Q1 FY 2024. I am very happy to see the performance of quarter one in the positive direction. Rest of the year will also be in lines with what our expectation is for the year, as economy opens up and gears up for further growth. Its aspirations to reach $5 billion will be definitely conducive to our express logistics business. With this, I thank you. We can take on some questions now.
Participants can raise their hands to ask questions. Alok, sir. You can ask. Go ahead.
Hi. Good evening. Sir, I just had a couple of questions. Firstly, on the growth side. This year we have grown at around 5% on a kind of already weak quarter of last year. What is the outlook on growth now? Because to maintain a 15% growth for this year, we would be requiring quite a big jump up in the remaining three quarters.
Yeah.
Just wanted your thoughts on that first.
Okay. A couple of things. First of all, the economy has been already on a much higher base growth since COVID, and that base growth is now equalizing. Which means that if we had 22% top line, then we had 18%. It is but obvious, then 15%, and it is obvious that the high baseline is now equalizing. This is totally in trajectory with the economic growth. Rest be assured, there is not going to be any change in what we have projected about the 12%-14% growth top line, and this will be in tandem with the economic growth also.
Sure. On a.
I am not able to hear.
Yeah, can you hear now?
Yes, better.
Yeah.
I cannot hear.
Hello? Hello? Hello?
Yes, Alok, please carry on.
Just question on the margin. The margins which have come off quarter-on-quarter, do we see that going back to 16% + in second quarter onwards?
Yes, this is sure, Alok, actually Q1 is always started as a week and if you see on a year-on-year basis on this quarter, we improve our margin level of 30 basis points and that will be continuing quarter-on-quarter basis. As always, margins are slow in comparison to Q4 because Q4 is always the highest margin quarter. Certainly we will be improved in this year.
Sure. That's all from my side, sir. I'll come back in the Q&A if I have more questions. All the best.
Thank you.
Jainam, you can go ahead next.
Yeah. Am I audible?
Yes. Jainam, please.
Yeah. First question on the volume side. What kind of volume we did in the first quarter?
Volume in this quarter is 2 lakh 40,000 tons we did in Q1.
Okay. Can you break up the revenue of other services during this quarter out of our total revenue of INR 306 crore versus same of the last year same quarter?
Now, this all services ratio is like we are earning around 17% revenue from all other services put together. This is like C2C and Rail Express, air, E-commerce Express, all put together. Like e-com ratio has been reduced from earlier we have around 5%, now it is reduced to 2.5% to 3% only. If you put together, it is around 17%. Last year same quarter, it was around 15%.
Okay, sir.
Yeah.
Got it. Sir, we have given the outlook earlier of around 15%-17% growth wherein we have taken 2% price hike growth. How has been the acceptance of those price hikes in the first quarter?
First quarter as per plan, yeah, we have taken a price hike of 75 basis points to 1% in this quarter and hopefully we will get further in remainder part of this year. We will get the price hikes of around 1% more. Hopefully we will deal with 2% price hikes.
Got it. Sir, just last question on this INR 750 crore of our revenue target. That would be growing at somewhere around 30% plus for this year and next year. How are we looking at that particular target in the top line?
Yeah. Chander Sir, would you like to answer on that?
Can you repeat the question, please?
Yeah. Sir, we are standing at around INR 1,240 crore of revenue last year and around 5% growth we are seeing in this particular quarter. We are targeting somewhere around INR 750 crore + revenue in FY 2025, which would be around 30% + growth on a YoY basis for consistent two years. Whereas our growth has been on a single digit for this particular quarter, so how are we looking at achieving that particular guidance?
INR 750 crore? I am not sure.
INR 750. INR 1,750.
It is INR 1,750. Yeah, Jainam.
Yeah, INR 1,750. I am talking about INR 1,750 only.
You have to, again, see the level of the economic play. All right? That is very important. And, again is something which is possible to do that much amount of business also, but at what cost? It will just be, I will be paying 10 times. We will be paying 10 times of the cost, 100 times the cost to do that business. We don't want to be in that level. If the economy is growing, as I have always said, at 12% this year, then at 6% this year, we will grow at 12%. If it's at 7%, we will grow at 14%. There is no change in that.
Got it.
Compared to what it was a while back, things are much different post-COVID. Please keep that in mind, that the top line, again, will fluctuate. What the guidance we had given four years ago is very different from where we stand, only because of how situation is evolving globally. We never expected the war to happen, which has globally pushed the inflation so high. People have stopped consuming. I think this trickle-down effect of the high interest rates and everything will possibly be also seen in the economy. Logistics, again, is such a sector that it'll keep continue going. Even if the economy slows down to 5% or I think even to 2%, the logistics will keep continuing. I don't think that it's static or it will be static in other larger economies.
Got it, sir. Got it. Thank you.
Mr. Krupas hankar, you can go next.
Hi, am I audible?
Yes. Yes, please.
Yes. Hi. Good evening, and thank you for the opportunity.
Welcome.
Sir, a couple of questions. First is on margin specific. I did see that on a quarter-on-quarter basis, that utilization levels have come off. Of course, factoring in the 1Q effect. But margins, of course, have held strong. Is there a contribution from other services due to which the margins are relatively higher, or are we seeing benefits of the automation in the Gurgaon facility due to which you have seen that margins have relatively held?
Yeah. Very good question, Krupas hankar. Basically, the combination of three things. Yes, obviously, we are get a benefit of this automation. Like I said, the 15 basis point benefit we have taken from that, and also price hikes we have taken from the customer in this quarter. And third one, usually this 83.5% is also contributing a good way, this fill factor of our trucks. These are combination of three things put together, we have been able to benefit of this, improve this margin level by 30 basis point.
Mukti Ji, would it be possible to share, as I could see that you had mentioned in the presentation as well that the new services are maturing.
Yes.
Would it be possible to throw some light on what would be contribution from railways or other services?
As I mentioned, we are not giving the specific number for these and a few new services because these are not big numbers right now.
Right.
If you put together, in this quarter, we have achieved 17% growth on these sector like put together C2C, Rail Express, and cold chain pharma, and our air, domestic and international, and e-com put together.
Got it.
Yeah.
One more.
But I would like to express here, Rail Express getting good traction from the customer because we giving the fight to our competition on that and on a very good rates, and with a good margin level, actually. So we're reducing our customers' rate almost like two third or even more than that, and getting the good profits also. And with the same kind of service level, what competition giving on air. So that's where customers are happy, but this is a very niche segment, so we have to be convinced to customer, then they taking as a pilot consignment to us, and then subsequently, once they're taking this as a service level, then they are trusting us and then giving the new frequent cargo for that. So it will be growing very fast on that.
Got it. One more question from my side is on the pharma side. So what we hear is that the government is intending to propose mandating cold chain for pharma sector. That's what was communicated on the TCI call. So just wanted to get some commentary from your end as to how much of a benefit you believe we can get with this transition to cold chain for the entire pharma sector.
Chander Sir, you would like to answer on that?
I have recently been nominated as the Co-Chair for the FICCI National Logistics Committee, and the plans are still being worked on. This is nothing which is set in stone. And of course, if this happens, if it's mandatory, then it will be definitely a very good opportunity for us.
Got it. Thank you, and all the best.
Mr. Keshav, you can go next.
Chander,
Hello. You are not able to. Yeah. Please.
Yeah. So my question is on branch addition, actually. Initially we used to see figures in the range of 25, 27, 30, but lastly it has come down to single digits, I mean five, seven. So has the level saturated? Of course, you are not.
You are on mute, Mr. Keshav.
Next question. We can take the next question, Mukti.
Yes, please.
Yeah, please. Next question.
Next question is from Amit.
Yeah, please.
Yeah. Hi. Good evening, everyone. I hope I'm audible.
Yes, you are audible, Amit.
Thank you so much, and thanks for the opportunity and thanks for the presentation, Mukti sir. I have a couple of questions. The first one is essentially, where do we see growth coming from in this, I mean, on all the segments that we operate. Is it from auto? Is it from manufacturing in general? Where do we see growth for this year, actually, and in this quarter we are.
Yeah, I would like to answer that. First of all, MSME will play a very big role. Okay. It is something where we have seen that the auto has gone through a very nice boom. But again, it's a very cyclical industry also. So whatever we are doing with MSMEs, that will continue to flourish. We will also see other sectors, like IT and technology also playing an important role going forward. Because we don't have all our eggs in one basket, we are very well-stabilized to perform as per how the economy is growing in all the industry sectors.
Okay. Fair enough. The second question is essentially on the sorting center in Pune. You indicated that you got 15 basis benefit from the sorting sector in Gurgaon. With Pune also coming up, there should be some synergistic benefits also. Because now between point A and point B you will get the benefit. Is it possible to quantify what kind of margin improvement we can expect from both these centers coming on board in FY 2025?
Yeah. Mr. Amit, you rightly said once we will be stable, this Pune center, then we will get the right benefit of that. Because right now we have only one center and we are not able to get the full benefit. Once we will be came up with this and synergy would be there, and I think we will get the overall benefit of 40 basis point once we will be stabilized this operation of this new center. Of that already 15 basis point benefit is there. So remaining 25 basis point benefit will be also come for that. And basically there is in a three, four benefit of this center is there ultimately. This dependence on labor is reduced.
At the time of these festivals and all, our dependence on labor is very low and that time either we have to be paid to very higher amount and they maybe go on a leave, so we have to be compromised on our service level ultimately. So that will be, in this center we did very well and in this festival time we not face any challenges on that part. Second part, efficiency of this truck will be improved and also improved in this Gurgaon center. Third thing is customer ultimately is getting the benefit of that because ultimately we are able to improve our service level due to this automation. And this operation efficiency is very key factor in any express logistic industry where we fighting on a time sensitiveness and all where we deliver on time.
Our service level must be like 95% + every customer is expecting from us, and we are able to do with this kind of automation. Yeah.
Okay. Thanks a lot for the elaborate answer and all the best.
Thank you.
Next is Dalal & Broacha .
Yeah. Hi, sir. Am I audible?
Yes, please.
Yeah. My question is, I want first of all a clarity on the new businesses that you have added, that is Rail Express and C2C and all those kind of businesses. Currently, you said that you had a 17% growth YoY in those kind of business. What percentage does it form currently of the top line, the new businesses?
No, I just said it is a contribution of these all revenue put together is 17%. I have not said as a growth basically.
Okay. All these new businesses are currently contributing 17% to the top line.
Yes.
The previous year they were contributing around 15%.
15%, yeah.
What kind of growth have we experienced on a year-over-year basis?
Again, if you see like Rail has the higher growth in there's a number is very low numbers. So that way it's kind of like in Rail we have taken a growth of like 20% in this quarter and others. So this way.
Okay.
Other all service are similar one what we have in a Surface Express growth basically.
Okay. My second question is on the CapEx front. What is the CapEx that you all are estimating to do in this fiscal?
We are anticipating a CapEx of INR 90 crore, INR 200 crore in this year.
Okay. INR 90 crore, INR 200 crore of CapEx, right, for this fiscal. The total estimate of INR 500 crore till 2028, that remains same, right, which you have targeted for.
Yes. There is no change. Yeah. Absolutely. Correct understanding.
Thank you, sir.
Thank you.
Keshav, you can go next.
Hello. Am I audible?
Yes. Now audible, please.
I wanted to check among the branch expansion which you are doing. Initially we used to see a figure of around 25, 30 per quarter, but now it has pulled down to five to seven. What is the outlook over this?
Basically, if you always see in the first quarter, we are opening up the low branches because there is a transition period of our all employees from one location to another and all. That is why usually opening 10 to 15 branches. This time we opened 5 branches because there are some other challenges also, kind of recent flood and all. This is not unusual thing. We will keep a target of opening up 70 to 75 branch in this year, in a full year, and we will maintain that. Nothing unusual on that.
Okay. My second question would be, we had to downgrade our guidance. Initially we had given a guidance of around INR 2,000 crores revenue by FY 2025, and now we have tapered it down to around INR 1,800 crores. I think by this year we will be closing of around, I think, INR 1,400 crores. So how confident is the management in achieving INR 1,700 or INR 1,800 crores by FY 2025?
Yeah. So our MD has explained on that. We have taken a target initially for INR 2,000, obviously in a five year or six year back. There's all situation depending on economy, how economy is moving. Everybody has earlier talked about 8% + kind of growth rate and GDP and now is maintaining like 6.5%. So we're always saying our growth is like 2x of GDP growth rate, and we continuously did that. We will be keep continuing and we will be keep INR 1,750 crores revenue for sure for by FY 2025. This is also like, you see demand is low by continuous inflation in last one and a half year. So fuel cost is so high, increased by 60%. Nobody has thought of that. So, some situation arises which is beyond control and then we can't be do anything on that. Yes, still we did on a 2x of GDP growth rate, and we will be keep going on that.
Okay.
Yeah.
Thank you.
Please.
Alisha, you can go on. Alisha, your line is unmuted. You can go ahead. I think we'll go to the next participant.
Hello? Hello?
Yeah. Alisha, please go ahead.
Yes. Yes. Hi, good evening. Sir, two questions. One, we earlier used to talk about a margin expansion of about 100 basis points annually. Do we believe that is still possible?
Yes. Alisha, in this year, we are trying to improve our margin level at least 50 to 75 basis points in this year. In this quarter one, we already improved 30 basis points, and we will be keep growing on that pace. This is a part of strategies. We had a strategy to improve my price level, which we did already 1%, and hopefully will be another 1% in the remainder part of this year. Second part, our utilization level of truck will be keep continuing in the range of 84% to 85%. That will be help to us.
Third part, obviously this increasing this portion of this newly added services of rail and all, we will be able to maintain growing this margin levels of, like last year we did around 16%, so this year hopefully we will be having 16.5% to plus margin level on EBITDA level. Yeah.
Next year when we are targeting the INR 1,750 crore of revenue, will a 20% kind of margin be possible? That was the earlier aspiration.
No. In last annual conference, we said we are targeting to be 18% because, again, if revenue is not achievable, margin will also come down. We are taking a target of around, say, 17.5%-18% now.
Sure. The competitive intensity in the last two, three years in our segment, especially in the last couple of quarters, has increased significantly. Do we feel that is impacting our growth and our margins, where we had to revise our guidance downwards, or is creating a challenge for us?
I think Chander sir will give answer on that. Chander sir, you would like to answer on that, please?
I don't think that is the case, because the segment that the competition is in, they may be saying that they are in the same line of business, but they're actually, the pricing that they have is more towards the cargo side, more towards the freight side kind of business, where they're not doing express, but they're doing the freight kind of business. I don't think that the impact has been here.
The reason why the guidance has come down is only because of the economy, what I keep saying. I am not sure, and what I read is the PLI scheme has been announced. How many lakhs of INR crore investments have we heard is coming in? Nothing as of now. It is totally depending on the way the current manufacturing is moving and the way it will be going as per the inflation and the interest rates move forward.
With that, we have to understand that fundamentally, the company is very strong, and there is nothing that the company can do, go to the space or something, and try to get business with margin. I think rest again, be assured that it is not that the competition or structurally there is a problem. Most of our competition has structural problems, has manpower problems, has no branches. They only do top line to keep everyone happy. But we are not like that. We are a company that will ensure that we are giving full, justified return to our shareholders.
That is the point. We are focused on profitable growth. Competition is focused on growth at any cost and will somewhere start putting pressure on everybody in the industry. That is what we are trying to understand, that is that making us maybe leave unprofitable or less profitable business, or-
It is
By competing with them, impacting our ability to do the 100 basis points plus margin expansion that we used to work with.
We started off with that low profit business only, right? We were doing that. The reason why we left it is because it does not add any value for growth. We cannot do any automation. We cannot do any sort of new development. We cannot do AI development, nothing. All this again is basically the output of profitability. Now, we are also not taking INR 10,000 crore loan or something like that and trying to service the market. Question is that the top line, if you see, is again, it's a fundamental of how the economy is. If I try to get that INR 2, INR 3 business, it will never allow me to grow in a structured manner. I will grow just for the sake of top-line growth, and I am not really keen on that.
Sure. Just one last clarification. The newer services that we were talking of, they said, which is 17%, they offer relatively higher margins than our core express business?
No, all margins are the same. It's the propensity for the business to take on competition. The rail takes on the air competition, the air cargo business. Which is anyway a dying business in India.
Okay, great. Thank you so much.
Mayur, you can go next.
Hello. Good evening. Am I audible?
Yes, Mayur, please go ahead.
Yeah. Thank you for taking my questions. Sir, there have been disturbance at my end, so there is a possibility of some repeat. I have lost couple of statements. Yeah, so I will confirm some of them. Sir, what we are saying now is, instead of INR 2,000 crore in FY 2025, we will do INR 1,750 crore by FY 2025, and instead of 20% margins, we are targeting 18% margins. Is that what I got you?
Yeah, correct. Yes, correct understanding.
Okay. All right, sir. Sir, it was good to hear that we focus on profitable growth continuously. It is not very easy to downgrade our own estimates a couple of time earlier. Earlier we also had INR 2,000 crore in FY. During 2019, we had four-year targets of doubling, then FY 2025, we had this 2,000 now. It is okay to downgrade as long as the quality of growth is intact. So best wishes for that. Just wanted to understand, we have large corporates and MSMEs as 50/50 as share. What has changed in the last three to six months that is bringing about this kind of a downgrade in our outlook?
I can answer that question. You have to look at it from two main factors, inflation and interest rate. From last Diwali, both have been on the rise. What has happened is, again, because of the reason why Q4 for the whole economy was not as great is, again, because the sentiments were very weak. We should not forget that just because we see one or two sectors being very glamorous in growth, that the whole economy is doing well.
We have to really see what is the situation down the road. When we go down the village, when we go and we understand and talk to people, not in the big cities, what is going on. Yes, people do have enough savings, but the fact is that the manufacturing companies are not really expanding. They are not putting up a new factory. They are not doing anything rather substantial.
Yet, we are able to ride the wave of the GDP growth and extract the business. Like I always say, if I want INR 10,000 crore top line, very easy. Our group could have done it long ago. We could have achieved INR 1 lakh crore top line also with this kind of situation. Where would we be still with that? We would not pay anything. We would not be able to eat our food the same day without taking a loan.
That sort of situation we don't want to be. And of course, the understanding is that because of these two factors, high interest rate and inflation, the entire economy had a very subdued growth. The third biggest factor, which I would like to highlight, is that economy has emerged from a high base, high growth, high volume base because of COVID. That is all now subsiding and that is all equalizing. You will now see the real growth coming, going forward.
Sir, will it be right, just in a different way I'm trying to. Will it be right to say that current GDP growth remains at a overall number remains broadly intact, but it is driven by government expenditure. From our perspective, when we say B2B Express, our tilt is more on the consumption kind of economy where the growth in other verticals also we see being subdued. As long as that remains subdued, our growth trends would be more aligned to that part of the economy, and hence this is playing out, right? Will it be right way to?
Right. But we have a backup. We also have MSME, a large.
Right.
So that really takes us forward compared to other companies.
Okay. Sir, any thoughts on expanding ourselves into 3PL or any other segments of the logistics?
We can study 3PL market, how it is playing out. All the other companies have very large top lines.
I agree.
But they are not able to sustain, they are not able to move forward. Even with captive business and this and that. Because logistics is such an industry where the profitability will always be at question, and it will always be at people's minds, especially in India, where the cost structure is so high and the complexity is so high, that making little bit of profitability is also a big challenge.
If you look at it globally also, logistics companies will not be able to give that kind of return that we are giving. Only because, again, if we place the same model in another country or another situation, we will also get that top line. But in India, because it is still evolving from VAT to GST and with so much political issues here, that going forward is for any industry is always uphill task. Yet we are doing it.
Sir, last final question, just to clarify. Sir, do we have any play on supply or transportation with respect to export and import side of the economy? Do we have any alignment there or will it be largely domestic and fulfillment and those kind of.
Yeah. We have international air cargo, and as we all know that international air cargo is again something new that we are doing, and it is growing, but not to the level that we want. Because again, the challenges of doing that business from India into India is very complex. We can book an aircraft also and send material out. But if somebody wants to send material into India, it is so complex to import material that sometimes no matter what we say about Gati Shakti and all that, sometimes it is kind of like impossible to get the economy or that business growing and going for India.
Okay, sir. Thank you and wish all the best.
Thank you.
Harsh, you can go next.
I just wanted to clarify if I missed, what is the FY 2024 revenue guidance and EBITDA margin guidance?
Harsh, we have on part of 13% on volume side and 14% to 15% on a revenue side.
Karan, you can go next.
Yeah. Hi. Hello.
Yeah.
I am Karan. I do not know how it is showing Tanushree. So my question related to the value chain. First of all, I want to know the value chain of the businesses, the fast-growing businesses or the major contributing businesses, which is your Surface Express and also the Rail Express. Where we can create the value, expand our margins. Except what we are doing, the sorting centers. Other than that.
Chander sir, you would like answer on that?
I could not hear the questions completely.
Yeah. Okay. Mr. Karan, can you repeat, please?
Yeah. In a simple word, I want to understand the value chain of our major contributing businesses. Where we can create the value or add the value in our supply chain. Surface Express, Rail Express. Because these are the most profitable businesses as well.
Your question is?
Yeah, the value chain of the business.
I do not understand. What about the value chain? What is the value chain?
See, the margin expansion.
I think, Mr. Karan, you want to know. Basically, if you see there is a combination of two types of customer we have, as Mr. Chander had mentioned. We had 50% businesses from MSME customer and 50% business coming from the top three or 4,000 manufacturer of India. That is why if you see, value chain is because we carrying the kind of high-value cargo in this industry, and that is why its value is there. How fast we deliver to their customer, it is important. Second importance is there because we delivering the goods to our customer's customer. Take example where we delivering the goods of Maruti to their dealers and retailers across the India. That is the value chain we creating, how with good behavior we delivering and obviously on time, and obviously on a debt free.
These kind of thing, and with the fully compliant of e-way bill and everything. That kind of value chain is there, and ultimately, that is why it is a high growth business, and this is growing very fast. Second part is, these are the similar kind of services. Mode is different. In rail, if you take example, we moving the goods through passenger rails. What we are did, we giving the competition to my air business companies where we diverting their business from air to this rail. Why it is having high traction, because they are getting cost reduction of almost 67% to 75% on where they are supposing when somebody charging of INR 100 per kg through air, we charging in a rail like INR 25 or INR 30. That is why it is a value chain we creating through these new services.
Second aspect of that, if you talk about C2C, this is also in this segment where we picking the cargo from two destination and putting in two location. We picking the cargo and then delivering on one location, and then in return, we utilizing that truck from our normal business from that destination back to this origin place. That is why there is so many different services having the different value chain for that, and different customer profile also there.
In our case, it is a good thing because we have the highly diversified our customer base in terms of MSME and corporate, in terms of no dependence on a big customer. My top 25 customer is not giving more than 15% revenue to us. Also my five major segment contributing only 55% revenue to us. That sense, we create in a long value chain for all the businesses separately, or you can say services separately, yeah. I think I hope I answer your question. Yes, Mr. Karan.
Yeah, fair enough. Next, related to the sorting center. I know that is, I think, the profitable kind of thing. The model is profitable globally as well as about the large e-commerce business also doing that. But in India, except us, any competitive player doing this sorting center? Do you have any fair idea?
Yeah. Basically, you rightly said in India, no one has this B2B kind of sorting center in India. We are the first company taking this risk, and efficiently we run that show. That's why we are the first one to launch this. We are able to reduce this holding time of truck. Because now the probability of service level is higher. We can understand like earlier, supposing my truck is load or unload in six or seven hour, put together these two activities. Now it is reduced to one hour, so you can imagine like 80%-90% time has cut for that, and dependency on labor is also reduced.
That's true.
That's actually, this is the fantastically customers are happy for that, and this is ultimately in India, to create a operation efficiency continuously it is very important for any express logistics company. We, with the management team support and management support, we did with that.
Okay.
Yeah.
As we have the presence in more than 200 plus countries, right?
Yeah.
We are facing competition in terms of this asset-light model because we are more focusing on this asset-light model. Globally, who are the players we are facing the competition with? And also they are asset-light model.
We are
Which kind of thing, which kind of players are also the asset-heavy players?
We are not present in 200 countries. We have agents in those places.
Yeah.
We are actually doing air cargo import and export. We have the ability to send material to those countries and pick up material from those countries by air only, not by sea.
Yeah. Presence in the sense we are delivering there. Okay. That's the benefit of the asset-light model is that's great you achieved this thing. In the asset-light model, you are net zero kind of debt. So that's great. But the overreliance on vendors when we think about some demerits of asset-light models, overreliance of vendors is the point coming out in the mind. Do you think on the fleet side, when you are the containerized kind of model you have. On the fleet side, do you see anything overreliance on the vendor? Or do you see anything the challenge from the vendor side?
Tanushree, I must tell you that, the important thing to note is that we have owned vehicles before.
Okay.
Again, the financial ratios before and after are very different. I suggest that you have a look at maybe the presentations before, earlier before listing or maybe talk to Mukti separately as to how it was when we operated vehicles, when we owned and operated vehicles, versus going asset-light.
Also, Mr. Karan, basically if you see, we are highly diversified on that side also. That's why this is the fantastically we are running this show, now everybody's following us. In India, it's a different aspect of that because there is a huge fleet is available. Supply side is so high, and it is easily available. So what we did, these 5,500 trucks is owned by almost 2,000 people. We are also taking it on a local basis. So that's why if you see this diversification is important in India. Once you are giving a thrust like depending on 100 or 200 people, then there is a problem.
So what we did, since last one decade, we fantastically run this show, and with such kind of high returns. Why we are able to do that? Because we have the high diversification of that. Because we are not depending on a particular route, we are also not depending on a particular vendor. We are doing two, three vendors on that route, so nobody can be monopolized on that. Second part good thing, we are able to get the credit from these guys in India, versus if you see other companies, or supposing I own vehicle, then I need to put the money before.
That is why it is fantastically running, and it is a company's DNA where we know how to ground level working, how to deal with these kind of people. Because how we are able to do that? Because we have the highest transparency. Every truck owner knows what kind of cash flow he will be generating on particular month, before start of this month. That is why in India, nobody can be projecting that.
Supposing one guy is owning truck, so they do not know how much cash flow they will be generating this month. But once they will be did a agreement with us, they know what kind of cash flow they will be get. And we give continuously paying the money to them. So that sense, various things we did, it is a completely ERP driven, so there is no question of our dependence on these, all supplier side.
We did well, and in each segment, we have different kind of. Again, interestingly, these all are the individual guys, like owning two, three trucks. So that we also did, like we are not taking more than five to 10 truck, more than almost like seven truck from the one guy. So that is why we did so many thing internally, and then we are delivering the truck. Yeah. I hope I am able to answer all your question, please.
Last question from Deepak.
Yes, please.
Yes, sir. Am I audible?
Yes, Mr. Deepak. Please.
Sir, the lower growth rate that we had in this quarter, if you can explain if it was industry specific, maybe the discretionary side, like fashion goods and electronics, were on the lower side, or was it lower growth across all the B2B corporate clients that you have?
Chander sir, you would like to answer on that? Okay. Basically, Deepak, if you rightly said, there is a two segment which is not did well, like on a fashion and lifestyle products are not did well. There is a low demand on that. Second part, obviously, everybody heard about this electronics is not moving and is a slow growth. Like if you see in North India, there is no AC sale at all. So that is why yes, you rightly said it is segment-wise. Like Mr. Chander has said, auto has nicely done well. Engineering is keep going. Pharma is always all-weather friend. There is no problem on that. Yeah.
Okay. And sir, on your outlook of 13%-14% growth, if you can break it up for us. For your ongoing business, what should one look at, and for the new business, which is 17% of your sales, what should be the volume growth that one should expect?
Basically, if you see these other services will be, I think in year-end, we will not be more than 17.5%-18% maximum. It will be same kind of situation would be happen, but obviously we are keep adding the customer, new customers, and always Q1 is Before COVID time, if you see, there is always low growth there. So we will be keep continue to add the new customer and get the business from SME and corporate customer both phase. Now festival season will be start, so I think this lifestyle program that will be also ramp up the demand and all. So we are hopefully achieve that.
Okay, so one should assume that both the segments would grow at a similar rate and not that the new services maybe grow at a higher rate. It will be similar across both these verticals.
Yeah, accessarily, like Rail Express maybe grow kind of 30%, and C2C Express also grow slightly higher, like maybe 17%-18%. Rest, I think will be in a same way.
Sure. Sir, have we seen any green shoots in the month of June, July, August, as we progress towards better times? Are we seeing any revival in the demand?
No, demand is continuously like, April month was the weakest month of this financial year. After that, each month on month, we are growing on that part, I can say.
Got it. Thank you, sir.
Yeah. Thank you.
Participants, that was the last question for the day. Mukti sir, if you have any closing remarks.
Chander sir, you please.
I must thank you all for attending the conference call arranged by TCI Express. I look forward to speaking to everyone again post quarter two. Thank you.
Thank you, everyone. Thank you, sir.