TCI Express Limited (NSE: TCIEXP) Q2 2025 Earnings Call dated Oct. 30, 2024
Corporate Participants:
Chander Agarwal — Managing Director
Analysts:
Navin — Host
Mukti Lal — CFO
Jainam Shah — Analyst
Lokesh Manik — Analyst
Alok Deora — Analyst
Kripashankar NJ — Analyst
Unidentified Participant
Anshul Agrawal — Analyst
Manjeet — Analyst
Akash Bohra — Analyst
Presentation:
Operator
Good day, ladies and gentlemen, I’m pleased to welcome you on behalf of TCI Express and SKP Securities to TCI Express Limited’s Q2 FY ’25 Result Webinar. We have with us, Mr. Chander Agarwal, Managing Director, along with his colleagues, Mr. Mukti Lal, CFO; Mr. Hemant Srivastava, COO of 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, sir.
Chander Agarwal — Managing Director
Thank you. Good evening and a very Happy Diwali to everyone. Welcome to the Q2 and H1 financial ’25 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’ve had a chance to review it. I will start by providing an overview of the business trends being countered during the quarter and the steps we are taking to ensure long-term growth and value for our stakeholders. Following that, I’ll hand over the call to our CFO, Mr. Mukti Lal, to walk you through the financial presentation in more detail.
TCI Express showed modest improvement in revenues and maintain its margin sequentially in Q2 financial ’25, reflecting the company’s effort efficient operational strategies, innovative service offerings and market adapt and profitability strengthening its position as India’s most and fastest growing. Year-on-year revenues slight dip due to several factors, including prolonged monsoon [Technical Issue] that led to model [Indecipherable] cutting causing supply-chain disruptions and delivery delays.
Additionally, lower activity in manufacturing and automotive sectors coupled with geopolitical actions softened the logistic demand.
Navin — Host
Please just give me a minute, I think there’s some technical issue bear with us for a minute we’re just fixing it. Thank you.
Friends, give us a moment we just fixing this audio issue. Thank you. Friends, apologies for this audio glitch, just be with us for a moment.
Guys, Mr. Chander Agarwal is having some technical issue. So we’ll have, Mr. Mukti Lal, the CFO to take-over. Mukti, please go-ahead.
Mukti Lal — CFO
Yeah. So good evening, everyone, and apologies for that. So good evening and very happy Diwali to everyone. Welcome to the Q2 and H1 FY ’25 earning calls of our company. Thank you for taking time to join us today. We have already posted our earnings 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. So and then I will be going through with the presentation. And so TCI saw — in this quarter, showed modest improvement in revenues and maintained its margin sequentially in Q2, reflecting the company’s efficient operational strategies, innovating service offerings and market adaptivity, sustaining its position as India’s most trusted and fastest-growing express delivery company.
However, year-on-year basis, revenue saw a slip dip due to several factors, including like prolonged monsoon rains led to water logging and flooding, causing supply-chain disruption and delivery delays. Additionally, lower activity in manufacturing and automotive sectors coupled with geopolitical tension softens logistics demand. So amidst these challenges, TCI 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 services to make up like 20% to 22% of revenue over the next two years to three years.
Automation remains a — automation remains a key focus exemplified by our newly automated bonus sorting center, which has improved operational efficiency and reduced turnaround time by almost 40%. We are extending automation to our next automation to be like Ahmedabad and Kolkata Center to better handle increasing volumes.
This year, we introduced like money bank guarantee, inflecting our confidence in timely delivery across surface, rail and air modes. This offering has been well-received by customer and strengthens our position in Express logistics. We are honored to recent like recognition, including the Iconic Brand of India 2024 and the Rajasthan Business Award for best-in Logistics. And we are humbled to be named Mr. Chander as an ET Business Leader for 2024.
We are pleased to say that we announced our first interim dividend for this year as a INR3 per share, which is 150% on face value. This reflects our commitment to creating value for our shareholders and so is our focus on steady growth and profitability. On our CSR front, we formed TCI Express Foundation and opened our first Jaipur Food and Rehabilitation Center in Lucknow, offering free artificial limbs and other as to as to like almost around 100 individuals so far in within a two month time. And the CDPA — PD Agarwal Blood Donation Drive 2024 also, so 1,334 participants nationwide.
Now, as we move into the second half of FY ’25, we are optimistic about the future. We anticipate a recovery in demand with the upcoming festive seasons. TCI Express remains steadfast in its commitment to leveraging its strengths, seizing growth opportunities and maintaining a customer centric approach.
So now, like we can be start with the — Navin ji, we can start with the presentation, please. So, I will give you like brief for that.
Navin — Host
Sure. Just give me a minute. Is my screen visible?
Mukti Lal — CFO
Yeah. It is visible, please. So, this is our synopsis like we completed. Yeah.
So, good evening everyone, again. So, this is our synopsis of our company. Like we demerge this division from the TCI and almost eight year completed. And our business of offerings like 97% is B2B and 3% of B2C. And we are like serving 60,000 location, 60,000-plus location. Yeah. Next, please.
So, I am just going through the things like this is our USP, where we are continuously following asset light business model even in multimodal express also. We do not have any franchises. We are carrying like high value cargo and low volume. So, this is like high margin business. And we continuously need the low working capital requirement in this business.
And it is still keeping like within less than 20 days in net working capital requirement. And still, I think you have like gone through with this presentation. So, we have the lowest cost structure in this industry. We are expanding our multimodal services. And we also like IT is very important for our kind of business. And that is why we also focus on a various aspect including API. We dealing with the customer and getting the automated data and then also like track and trace facility also. And so, various things we are doing. And completely trucks having like containerized movement. And yeah, please. And our USP to be continuously focused on shortening this automation. So, yeah, next please.
So, 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 like 30% to 40%. Service offerings are like, the same what we have discussed in last quarter. Please. Yeah, next please.
So, this is Rail Express. So, I just would like update here. Rail is really growing very fast. And now, we have the 5,000-plus customer base in this segment. And we increase, we almost our route, we present on around more than 150 routes. And it is increasing day-by-day. And it is a good thing like repetitive customers is giving the business to us. And is a good profitable and is like, midway of Surface Express and Air Express. And giving the same kind of turnaround time, which we are giving in Air Service. So, customers are very happy and we are expanding very well.
This is C2C. So, it is also like growing on a steady path, but on a slower growth and not like growing like Rail is growing. Yeah. Please, we can skip.
Money Bank guarantee, just we like giving updates. So, it is also we giving this service to all modes of the transportation like Surface, Rail and Air. And this is also customers, it is basically for mean for the like, new customers or one. So, that way is attracting the customer and giving like, then we can be, they can be rely upon our services and then can give you the repeat order for that. So, it is also getting very good traction from the customer. Next, please.
These are the like Q2 heights — highlights. So, we have achieved an income of around INR314 crores income and EBITDA is around INR40 crores. The PAT level has improved as a sequentially. So, from like, INR23 crores to INR26 crores and we declared a dividend of INR3 in this quarter.
And in this quarter, 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 like expected numbers where we want to be improve at least to achieve level 85%. So, once the volume will be like start to normalize, then we will be achieve 84% to 85% again.
And although, like industry vertical, so still automobile and lifestyle product and some engineering companies still facing the challenges demand side and overall consumer demand is still weak, though we have seen some uplift in the demand in quarter-on-quarter basis, but on year-on-year basis, we have still like flattish numbers and industry is also in the same way. Next, please. Yeah.
So, there is enough. This is the like income we show in the quarter wise, where we in Q2 of last year, we achieve around 322 and now we achieve 314. So, it is around negative by 2% and that is why is also impacted margin because, but good thing is that our operating margin is intact and is or you can say, like hit by 150 basis point to 200 basis point and better margin has also like bring down from like 16% to 13% due to like other cost salary and some admin cost has increased. Yes, please.
Accordingly, once, this volumes is coming back, then we have to be as earlier we in the past we did like whenever we achieve a growth, then we have to be 2 times of that we are earning on a profit margin. So, same way, if you see from quarter 1 to quarter 2 story like, where our revenue has grown 6% and margin has profits has grown almost 14%. Yeah.
These are the H1 highlights. So, total income is INR610 crores and EBITDA is we achieve INR76 crores and PAT is near to INR50 crores. In this, yeah, please. Yeah. Next, please. Yeah. Next, please.
So, this is the dividend side. So, we like internal policy we had to be like given almost in the range of 20% to 25% or as a dividend payout ratio. So, we will be in the same path in this time we are given again INR3 and I think overall by year end, we will be maintain the ratio of in the range of 20% to 25%.
Return on capital employed. So, we slightly like we work out on the only like, core assets like non-core assets means basically current investment and office land we bought that we have removed from that. And if you see, so this is like operational ROCE, if you see it is like in this H1 is 12.5% for the whole year we will be achieve around 30%-plus, which we earlier achieved. So, all numbers are excluding core assets and same return on equities are same like again, is pure 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 like in the range of 70%-plus. Next please. Yeah, it is the same as I mentioned. So, on capital expenditure side, we spend almost around INR11 crores 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 is why capex is on lower side and we also yet not started the like, construction at Kolkata and Ahmedabad that we will be — that we will be soon we will be start for that. Next please.
This is our leverage profile and there we like receivable days as you seen is maintained at 55 days and payable days is in the range of 33 and accordingly networking cycle is 22 days. So, it is a very robust profile we have and we are keeping as a continuously as a debt free company status.
Yeah, this is a balance sheet. So, balance sheet you compare with the like H1 of last year to this H1. So, whatever added is a capex and so ultimately is added around INR40 crores. So, basically, is conversion from work-in-progress to in capitalization part and less is I think is the normal one. Same way current assets are also increase. So, basically, it is increase because current investment surplus fund has been increased. So, basically, INR45 crores increase is contributed by that only.
And then on equity side, there is an all liabilities and current liabilities are all the same. So, whatever we earned as a profit is added to that nothing like significant on that. So, these are comparison with the peer in spite of our margin has taken a hit and in H1 in spite of that in Q1 even that was the lowest in margin level. So, in spite of that we are still ahead with the other industry players in the margin profile.
Yeah, that we can be skip is the nothing new on that we discussed earlier. So, strategic outlook will be continue to like, we will be more focus on to grow this multimodal services. So, we will keep that. On capex side, we plan for the like, as mentioned earlier also, FY ’23 onwards we have a capex plan of INR500 crore until time and like almost on a 2.5 year we spent almost near to INR200 crores or INR180 crores and remaining INR300-plus crores I think we will be spending in next 2.5 year and majorly will be again go to shorting centre automation and IT improvement and all. So, that would be the like path ahead. Yeah, we can be skip that. That can be speak.
So, again growth drivers for the logistic industry is also like 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 emission. So, we have to be cope with that and we taking so many steps to be how we can be carbon utilized given in our sustainability report. And second, we will be keep continuing focus on multimodal services infrastructure is very important how it will be placed because cities are like shocking and we are really having weather conditions is also giving some threat to be this business in time-to-time. Yeah. Please next.
This is our leadership team. Yeah. So, this is like we put this slide for your consumption here. How is our logistic industry is played in like H1. So, you seen transportation cost is persistent inflation, which is really led to high transportation cost and because two component is very important here. One is toll tax and another one is labour cost because as volumes are muted. So, basically, is that we are to be bound to be increase a labour cost and toll and this will all not mitigate by the like volumes and that is why is a impacted profit margin to every industry players and another thing you are seeing continuously is a decline in manufacturing output.
This is PMI is like slightly down and this is also seen, consumption of fuel was not happen. It is flat is in this H1 over the last year same H1 and weather condition is also set back to be the overall logistic industry heavy monsoon and the things.
This is also like some broader. So, this is the. Yeah.
Navin — Host
Mukti, we lost you there for the last.
Mukti Lal — CFO
Now is it okay. I am audible? Yeah.
Navin — Host
Yes, you are.
Mukti Lal — CFO
So, these are the again few numbers, which we as a broader points for this industry. So, vehicle sales is also like down or having like very low growth and so, that is why is a cost concern and use vehicle demand has slightly rise and diesel consumption as I mentioned is hardly 1% growth of over last same period and so, I think demand would be in a like guidance factor. So, demand would be in a like in the similar way in the not be like in not be much one and I think moderate one may not be grow in a mid-single digit kind of growth we may be achieving in second quarter, in second half basically. Next please.
This is our ESG you know 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 minus by CRISIL for the long term and ICRA is getting like A1-plus is the highest one for the short term and we also keep like certified great place to work for ’24-’25.
Navin — Host
Mukti?
Mukti Lal — CFO
Yes, Navin ji. So, I am audible now?
Navin — Host
Yes, now you are.
Operator
Should we open the floor for the Q&A session?
Mukti Lal — CFO
Yes, please, please. Already too late. Yeah. Due to some technical glitches are there.
Navin — Host
Yeah. Yeah.
Mukti Lal — CFO
No worries. Please.
Questions and Answers:
Navin
Guys, we open the floor for the Q&A session. Now, we take the first question from Jainam Shah. Jainam? Please unmute yourself and go ahead.
Jainam Shah
Can you hear me?
Navin
Yes, loud and clear. Please go-ahead.
Mukti Lal
Yes, Jainam, yeah.
Jainam Shah
Hi. So, first one the volume numbers if you can provide the volume for this particular quarter?
Mukti Lal
So, volume is exactly is 2,50,000 ton for this quarter and 4,85,000 ton for the H1 of — this H1 in comparison to last year same H1 is getting 4,92,000 ton and in quarter 2 was around 2,52,000 ton.
Jainam Shah
Got it, sir. Got it, sir. So, 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. So, 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?
Mukti Lal
Yeah, this is true actually. So, basically we just mutate that expansion of branches for the time being because the volumes are not picking up. So, we wait and watch. Supposing once we start to getting the volumes and then we will be again expand on a very fast mode.
Jainam Shah
Okay. So, 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 to the cost to the customers?
Mukti Lal
Yeah. So, basically, if you see, this air business cost is also impacted in 2Q as well because where because that cost is still is on a high side because consolidation of airlines and second part privatization of this airport and third we also expanding direct network as I mentioned in last call. So, that is going on and 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. So, that is still continuing this quarter 2 as well for that.
So, overall if you see that impacted in 100 basis point in overall cost remaining cost impacted by increase in toll tax and labor cost specifically and third component to be like contributed in this increased cost is like, lower utilization of fleet which is now in this quarter was around 83% that is why if you see we able to reduce the cost by 70 basis point to 80 basis point in sequentially.
Jainam Shah
Got it sir. Got it. Sir, on the price increase side so, there have been few competitors which has increased the price in from the July and there have been few announcement that they will be increasing from the January onwards, which is also in the range of 7%-8% on an average. So, 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?
Mukti Lal
I really doubt on that. What competitors and other industry players saying, they will be like 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 be go like sundry, SME customer is possible to be have increased but big customers, yes, it is not possible to 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. So, we wait and watch situation, if they are able to then is a good for the overall industry because everyone is facing the continuously cost pressure. So, I hope but we have not yet taken any price hikes and we will be try to be start that effort from the last Q4 actually for that but still we are not really much optimistic about this price hikes, high inflation zone and all and muted volumes are there. So, really I do not expect to be any high increase on that.
Jainam Shah
Got it. Sir, just last one question from my side our volume has been as you said 2.92 like 10 versus 2.85 like, so it has been a kind of a degrowth in the 1H. And overall, we have been targeting earlier 15%-plus then 10% to 12% last quarter and now in the — you can say a bit of single digit kind of a growth that we are expecting for FY ’25. This is question is for the like, you can say from next two years to three years perspective, how we are seeing the situation? Our GDP growth of the India has been in 6%-7% range and if we see that that particular growth is eventually coming down then how we would be coping up with the competition? And 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 a eventually a growth momentum for next two years, three years because overall last two years, three years have been quite stable numbers and there has not been any increase in the top line and of course, we have been doing significantly good bottom line as compared to the competitors but eventually that is also getting impacted. So, overall your view for next two years, three years’ time.
Mukti Lal
Yeah. So, as I said, we grown in ’22-’23 we grown like 15%-16%. So, we are not this slightly you can say, not slow down but it is like started to impact in the last year only. And everyone has the overall industry has that impact and this year is also like, we are also surprising with that because sometimes customer is giving confidence and they giving like growth numbers we will be give so much volumes to us and ultimately we were not able to, they were not able to give the what they have committed to us or they even because they also have the same kind of problem where they trying to be grow but they have not grown, in spite of like, September supposed to be very good month for everyone but that has not gone into that way. You also seen the like diesel consumption number and all. So, this is I think it is a temporary thing. Again, but this year is a 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 of in the range of 13% to 15% as volume growth and 1% to 2% growth in a value but and what is the like, giving the confidence to us is basically like pipeline we creating. We discussing so many customers and customers is giving confidence and they coming to us and we expanding this, we already have open up the branches like in last four years or five years almost 300, 200-plus kind of branches. So, these all we are ready with that. Operational efficiency is also fantastic. So, once I think volume will be start to picked up then we will be the first one to get that benefit here.
But second part, also, like you said, this is industry GDP is growing like 7% so is unproportionately is growing through service sector and other manufacturing which is really we are not in that segment basically, if you see what industries we serving this is really all impacted in continuously. Last year we seen, lifestyle companies are not did well this year is also facing lots of challenges.
So, same way I think consumer demand is important rather like, growth in overall GDP because there is also have different component of that. So, I think we will be keep continuing like we grown in a 17 to up to like 20 we grown a CAGR of almost one before that corona time grown almost 14% and then we in last FY ’22-FY ’23 we again grown 15% and so that’s way once this will be normalized we will be growing. Overall industry is facing this pain for that growth numbers.
But yes, you as mentioned good thing is that we are not compromise in the margin and margin level is also impacted due to mutate growth only and due to not like operational things it is operational cost is maintained but other cost like salary and other admin cost is slightly bound to increase and we don’t want to be give like, we want to be give the increments and everything to our like sales force and everyone.
Jainam Shah
Okay, sir. Thank you so much for the elaborative answer. That’s it from my side and wish you a happy Diwali to the entire team. Thank you so much.
Mukti Lal
Same to you and wish to you.
Navin
We will take the next question from Lokesh Manik. Lokesh? Please unmute yourself and go ahead.
Lokesh Manik
Hello.
Navin
Yes Lokesh, please go ahead.
Lokesh Manik
Yeah. Thanks Navin. Good evening, Mukti ji. Wishing you a very happy Diwali.
Mukti Lal
Lokesh, your voice is cracking.
Lokesh Manik
Yeah. Is it better, now?
Mukti Lal
Yes it is. Please go ahead.
Lokesh Manik
[Indecipherable]
Mukti Lal
Lokesh, its not helping.
Lokesh Manik
Hello?
Mukti Lal
Yes.
Lokesh Manik
Yeah. Is it proper now?
Mukti Lal
Yes, its better. thank you.
Lokesh Manik
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. So just clarification on that as to what is the expense that has come in on that side in the other expense for this quarter 1?
And the second is on, what is the duration of their consultancy contract, if you can just share some details on that?
Mukti Lal
Yeah, very good. So basically that consultant hired to how like expanding the branch network and all and they already did work on that. And then, they also, given their reports, where we have to be like more focused on that. So that we will be in time to come. But that is not a like big cost, we have not given like, sometime we giving to other industry players giving to linkage with the like, what kind of benefit we will take. But we have not given on that way, it is a very small, not like significant amount. And yeah.
Lokesh Manik
But duration of the contracts, when does it get over?
Mukti Lal
Yeah, that is get over. Yeah.
Lokesh Manik
Okay, that is over?
Mukti Lal
Yeah.
Lokesh Manik
Okay, okay. Thank you so much. I’m wishing you a very happy Diwali.
Mukti Lal
Same to you, please.
Navin
Thank you, Lokesh. We take the next question from Alok Deora. Alok, please go ahead.
Alok Deora
Yeah. Hi. Good evening. Am I audible?
Navin
Yes, you are. Please go ahead.
Alok Deora
Yeah, yeah. So, 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?
Mukti Lal
Yeah.
Alok Deora
Okay. Okay. And any reason why the volumes are not coming? I mean, we are seeing some of the other players still clocking little better volumes. And 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. So, 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 is — will remain muted ahead? Just some color on that, please?
Mukti Lal
Yeah. So, as I mentioned, so basically, there is no structural issue on overall basis. The industry is growing because there’s a lot of opportunity for everyone and as you may — so basically, I don’t think everyone is facing the lots of challenge on a volume side, whether it’s a full truck load or whether LTL or Express or — I can expect, except, Q-Commerce, everyone has taking the bite on that.
So, we are not saying that anyone is increasing market share and we are losing the market share to someone else. That is not the case. And we will be still, whenever other side of issues, price hikes, everybody is saying, but it is not reflecting, I think, in their numbers. So, they are saying because somehow, supposing in one customer, we three players are working and one someone is asking, then other volume has to be — sometimes customer is not willing to pay. So, we have not seen in ground at all, anybody has increased the prices for any logistic players. We have not seen at all in a ground.
We don’t know why everyone is saying, but it is a good thing. Supposing they are able to do that, it is like forced to, 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 it because we doing on a realistic basis, whatever possible we will do.
So, whenever these opportunities come and they will be able to do that, it is a reflecting on customer side as well. Then we will be obviously push hard for that. Otherwise, no reason for that.
Alok Deora
Just one more question. So, we, around two years back, we had this thing of Gurgaon Centre 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. So, at that point of time, we used to talk about 16% margin moving to 18%. So, I understand this last two quarters were pretty difficult in terms of maintaining your base margin itself. But how do we see those impacts, those impact actually coming to the profits? Because those margins are actually not improving in line with what benefits were expected out of those centres getting operational.
Mukti Lal
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. So, if you compare them with the others, what their margin has been reduced and what our margin is intact because last year you see. So, efficiency is a completely different part. And there we also get the benefit of, like I said, 25 basis point to 30 basis point overall benefit we get from there. And that is what we will continue as a story because this is ease out three, four things like labour intentionality 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 be keep continuing on that same strategy in future as well.
But other side, if you see, like these all things put together, come together like mutated volumes is nobody has anticipated that much actually. So, that is one part. Second part, high increase of toll is nowhere like anticipated because government is now allowing to be increased to 8% to 10% is becoming significant amount for the overall journey cost. Third part, like, because as a volume, labour cost is also government want to be standardized there and want to be increase their wages and all. So, government focusing very high to be improve that side.
So, that is also like coming in one way. And because inflation is obviously government’s purpose was to be keep demand slightly low to keep inflation under control. And that’s why they also want to be reduce the consumption and that happened in very that side. So, that is a really impacted volumes.
So, put together, if you see, and now we even, anticipation of this consolidation of airline, nobody has thought three, four, airline will be like consolidated in one umbrella and they will be increase the prices. So, that’s put together has created a like, this scenario. But still, you will be appreciate that 13% margin or 14% EBITDA margin to achieving an express business is really the good effort from our team. And obviously, we will be once bounce back with the volumes, we will be still have the same energy and same thought process and strategy to be get first to achieve like in the range of 15% to 16% and then again increase on a higher side.
Alok Deora
Got it. All the best. Thank you. That’s all from my side. Happy Diwali to you and the team.
Mukti Lal
Thank you from our side.
Navin
Thank you, Alok. We take the next question from Kripashankar NJ. Kripashankar, please go ahead.
Kripashankar NJ
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, 85% load factor, while volumes have grown from those levels of FY ’23. And we have our load factors at truck level has declined. So, are we deploying more trucks or expanding our services due to which, despite the continued growth, the utilization levels are low? Is my understanding correct or is there probably some other reason for these underutilization?
Mukti Lal
Yeah. So, that is a very good question. So, you know, what happened at, over the period, we converted all the truck on a higher XL load. So, that was in FY ’20. I think that’s the biggest, most of the chunk we completed on FY ’23 only. And that was after that volumes had not picked up. So, that’s why this vacancy is there. It’s like, 1% or 1.55 vacancies in comparison to load.
Kripashankar NJ
Okay.
Mukti Lal
Yeah, please. Yeah.
Kripashankar NJ
No, no, sir. Please go ahead.
Mukti Lal
Yeah. So, basically, that’s why it’s the only reason. Because we added the, like, converted these from the, like, 9 ton truck to 11 ton and 14 ton truck to 18 ton. So, that’s truck, we can’t be, like, remove overnight because we’re waiting for the volume. So, once volume will be 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. So, you are aware this half India is producing and half India is consuming. So, that side is also really creating some vacancy for us. And it is, if you put into number, then you may be, like, say, 05% to 1% utilization has dropped due to that also.
Kripashankar NJ
Got it. So, Mukti ji, then, wouldn’t it be a decision to expand in your 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. So, just your thoughts on what is the key reason for continuing this expansion?
Mukti Lal
So, basically, there is two types of expansion is there. One of our branch network expansion and other two like capacity expansion of trucks, basically. So, both are, if you see, in our case as a two addition of branch, it is like a matter of, in, we first analyzing and then opening up the branches because we, these branches, we are making a break in point and within a two month of time.
And so, that’s why whenever, like, volumes back, so we will be again start to be on a very fast mode and we still opening up the branches, but in a, like, slower pace, not like in a high pace. So, that is still going on. But once, like, volumes will be back. So, we will be increase the pace for the — this branch network.
Second part, like, whenever, because in our case, supplier side, there is an overflow for that. So, we never felt any challenge to be getting on board our any supplier for the truck. So, whenever we have the volume, we can be on board them. Otherwise, I mentioned, 90% volumes we carrying through this vendor guy, fixed truck, this kind of engaged trucks and 10% volume we carrying through the export hiring. So, wherever we have a spurt in demand, so we can be hire more vehicles and wherever supposing there is a low demand, we can be, like, not hiring than export hiring.
So, that’s why I think this is not the challenge at all on overall basis whenever we want to be. And also, it is not, like, obstacle to be our growth at all.
Kripashankar NJ
So, what I meant to Mukti ji was on the up expansion. So, you are intending to take up expansion at new cities, right? So, that is where probably most of our capital is going to go 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?
Mukti Lal
No, no. So, basically, I think I am not able to make you understand. So, basically, capex is meant for more significantly for the shorting centers construction and automation. That we will be keep continue because we soon start the construction at Kolkata and Ahmedabad. All permission are now in, you know, almost completed. So, I think in Q3 and or Q4 will be start the construction. And next year FY ’26, we will be able to complete the construction in these big two center. Each one is more in around 2 lakh square feet-plus. So, that strategy, long term strategy is there and we will be keep continue to be make that because we like going to be by the land in Mumbai and Chennai, and we working hard to be like on for Bangalore also. So, three, four location, we already working hard to be buy the land.
So, that strategy will be keep continue. We just I am saying and for the like branch expansion, we don’t need to be put on any capex kind of thing is like major is like opex, not the capex. And for the, you know, for truck supplies also like 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.
Kripashankar NJ
Thank you very much for answering my questions. Happy Diwali.
Mukti Lal
Same to you as well.
Navin
Thank you, Kripashankar. We take the next question from Pandanya Nimigada [Phonetic]. Please go ahead.
Unidentified Participant
Yeah. Hi, thanks for the opportunity. Sir, a couple of questions. Firstly, if you can maybe provide little bit more granular details on what are the key industries impacting the volume growth? That’s on the first part.
And secondly, in this current backdrop, what would be the revised capex guidance say for FY ’25 and FY ’26, if you can put some give some color on that, please?
Mukti Lal
Yeah, very good. So, basically industry impacting major is highest one is like still continue to lifestyle companies and lifestyle and textile companies. And second one, engineering companies. And third one now is unfortunately automobile companies are also not they have slowed down their productions.
And second part on capex side, if you divide in a like year-on-year basis. So, FY ’25 we are anticipating because we will be start the construction soon. So, I think we will be finish the capex in this year is around INR40 crores, in the range of INR40 crores to INR50 crores for the whole year. And in the next year, again, a similar way where we will be spending INR100 crores and INR125 crores in each year because the next year full-fledged construction will be start for the — will be there and we might buy, we may buy one land, one or two land parcel also and similar way on a FY ’27 as well.
Unidentified Participant
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?
Mukti Lal
Sorry, we have — sorry?
Unidentified Participant
What is the number of branches and sorting centers that you added in first half this year?
Mukti Lal
So, this sorting center numbers are not increasing. We just as a long term strategy, we just converting them from least to own one. Specifically, like out of this 28, we want to be major one, which is in the number in 10 to 12. And all the big cities and their handling in and out volume is almost like 75% to 80%. So we first want to be automate them and off out of that, we already to fully automated. And next would be Kolkata and Ahmedabad. And I think FY ’26 or mid-’27, we will be able to do that for these two centers. And followed by Chennai, Bangalore, Mumbai and all. So this will be that is for the capex plan.
Unidentified Participant
And how about the branches, sir?
Mukti Lal
And branches, we in this year, we added almost like not much as the five branches we added in H1. And this is also made for like multimodal products.
Unidentified Participant
Understood. Mostly in the third quarter and second quarter. Understood.
Mukti Lal
Yeah.
Unidentified Participant
Thank you so much. I am done with my questions.
Navin
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.
Anshul Agrawal
Hi, am I audible?
Navin
Yes, you are. Please go-ahead.
Anshul Agrawal
Great. Thank you for the opportunity. Mukti ji, my first question is on our pricing strategy. I see our realizations have sort of remained flat over the last two years, three years. While in the current quarter, we have mentioned that our contribution, revenue contribution from SME customers have sort of tapered a bit. Shouldn’t we think of reducing pricing for institutional customers to attract volumes at this point of time?
Mukti Lal
Yes. So, basically, this price is flattish in 1.5 year only, like in last year and this year, this first half only. Before that in FY ’22-FY ’23, we are taken, we were able to take almost, I think, 150 basis point, overall basis. So, that’s the only 1.5 year. And because this is a mutated growth, that’s why we are not going for that.
So, second part, like supposing we will be go for the institutional customer, as I said in earlier call also, there’s no price war itself in this industry. Because customer will be keep the three, four competition for the anyhow. Whether we will reduce the prices, they will not give the whole volume to us. They want to be keep the two, three players to keep a competitive is as there. And also, sometime this is not wise to be take the whole volume of the one customer because this is giving a not good profit to us. As I mentioned, it is like cap in pricing with the institutional customer versus SMEs is also like 25% to 30%. So, sometime we intentionally keeping a like cap on doing the business with the big customer.
That’s why our margin is intact on this, testing time when it is like maintained or slightly dipped. So, I think this is not the, I do not think it is like the right strategy to be cut the prices and get the more volume.
Anshul Agrawal
Got it, sir. Second question is on the multimodal services. Are they still margin accurate in nature?
Mukti Lal
Yes, yes. This is like rail and air and yeah, both are very good.
Anshul Agrawal
And the contribution of these services to our overall top line would be still around 17%, 18% or higher than that?
Mukti Lal
No, it is the same way, yeah.
Anshul Agrawal
Okay.
Mukti Lal
We also have in this space like B2C component also 2%, 3%. So, that is also shrinking for us because we are not going on a bigger players and small players are like, so my B2C component is also like 3% in that. Earlier it was like, and I think if you talk about four years, five years back, it was around 5% of overall revenue. So, that component we are — you can say, we are not increasing. So, because we are dealing with the customer wherever we have the profit for B2C. So, we are dealing with a small customer only.
Anshul Agrawal
So, is it possible to share any color around what kind of margins would be making in these multimodal services or rail express business?
Mukti Lal
Because, you know, this is, these are the services where we are not utilizing our network basically from hub and spoke model. So, basically hubs are, we are not using it directly point-to-point in case of rail or in case of C2C, in case of cold chain or in case of air. So, that is why margin is good and is likely like, currently it is around in the range of 15% to 16% EBITDA level. Specifically on air and rail.
Anshul Agrawal
Got it. Many thanks, sir.
Mukti Lal
Yeah.
Anshul Agrawal
That’s it from me.
Navin
Thank you, Anshul. We’ll take the next question from Manjeet Buhariya [Phonetic]. Manjeet, please go ahead.
Manjeet
Mukti ji, thank you for the opportunity. I had 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?
Mukti Lal
Yeah, that is very good question you ask, Manjeet ji. So, I think new entrants in B2B, one or two players, which is really dealing with in B2B segment and they are not able to make the money. So, they are entrant in that segment and one company is acquired like other companies that was also like old one.
So, I have not seen any, much competition where they getting market share or they having a future threat for this industry. I don’t see that. But if you see, divide in that industry overall is like, different, multiple services and multiple products, offerings. Each and every company has their own set of that, like if you talk about. So, in that layer, one is FTL industry, then is, you know, LTL industry where they are not doing express but doing the LTL, less than truck load. So, there is an also overlapping sometime.
They want to be our share also as express share to that. But it depends on the customer whether they want to be lower prices or they want to have good services. So, that is like sometime class is there.
Third thing is, this third party logistic companies are there. So, all our companies are doing, inventory management, they are doing inbound and outbound. These are type of the company have different and they majorly doing like, I think, this auto segment, warehousing and all major portion, I think, I’m saying.
And third thing is express industry is also having dividing in a three, four part like one is B2B, second B2C. Now, the new entrants are B — this Q 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 roadside, where our presence and ours USP is there. So, there is not much player in our direct competition with the lagging again is keep continue with the unorganized player, which is competing with us on a regional level basis and zone wise and all. So, that’s, I think, that will be really, I don’t think it is wise to be get the share from, this unorganized player getting that business.
That business is supposing we getting then we will be doing our margin profile. And also like credibility of that customer is also under question and you may be like then, bad receivables in our balance sheet that may be also happen. So, we are very cautious. So, if you see like 10 year data, our margin is continuously has increased. Our quality of balance sheet has improved a lot and is a robust and obviously, we were like, debt free status and giving continuous dividends.
Manjeet
Okay. But in terms of, very like-to-like as you mentioned on B2B express side. Are there like three, four players, who are like close to us in terms of their network and in terms of their reach? And also in terms of more importantly, their service quality, on time delivery and low damages or losses. So, I was looking at how many number of players like that do you consider as your competitors, really?
Mukti Lal
So, yeah, it’s a listed player, which is having two, three players only.
Manjeet
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. I was curious about, how does the management think about absolute profits? So, an institutional customer may be lower on margin, but adds to your absolute profit. And if you have like 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.
Mukti Lal
You rightly said so. Supposing wherever we have a vacancy in track, we are obviously getting the prices wherever, whatever price we can get. I mentioned, it is from eastern part of India and southern part of India. Supposing there are any volumes, high volumes, we are taking that. So, I am not saying we are losing that, but somehow to see that, because if I am again as an upward flow and like backward, this is a return flow. This all depends, supposing I have the more business from the like in upward flow. Then you have to be lose the money anyhow, if you will not be able to fulfill that truck in return load.
So, that’s way, we have opened up the branches and that’s why these branches helping us. Because in sometime in these part like down south and upper north and eastern part of India, there is no big businesses are there. No manufacturing is there. That’s why we opened up branches to be fill these trucks wherever we sending. So, this is a strategy because we are not like charging for the absolute profit. But it is the mix has to be there to maintain my utilization level of truck is very important for us. This is a directly supposing I am lose that proposition, then my, this will be taken a hit on my margin levels.
Manjeet
Okay. I had one last question.
Mukti Lal
Because I am saying, why I am saying, because these are the, in one truck, I am putting 200 customers business. It’s not like I am depending on one customer. So, that’s why I think is not like a high volume will be held to be getting the profit is not the mandatory thing or not the sure things I am saying.
Manjeet
Got it. And 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? So, I am getting setter is paribus, all is remaining equal. What should our annual volumes and utilization rate have to be to go back to about 15%-16% margin?
Mukti Lal
Yeah. So, this is a very simple way. Supposing tomorrow we will be grow in the range of 10%, then we’ll be back to normal. In a 15% place kind of EBITDA, we will be back to that.
Manjeet
So, 10% value growth, basically?
Mukti Lal
Yeah.
Manjeet
Okay. Mukti ji, very helpful. I’ll take other questions later. I think we are past time. Thank you.
Mukti Lal
Thank you.
Navin
Thank you, Manjeet. Friends, we take the last question for the evening from Akash Bohra. Akash, please go ahead. Akash, please unmute yourself and go ahead.
Akash Bohra
Yeah.
Navin
Akash, there’s a lot of disturbance and your voice is cracking.
Akash Bohra
Hello, yeah, is it better?
Navin
Yes, it is. Please go ahead.
Akash Bohra
Yeah. So, Mukti sir, you were mentioning earlier in the call that, from certain base level enquiries and interaction with your customers, you’re understanding that they’re giving you strong volume growth guidance in the coming year, that is FY ’26. So, what is the…
Mukti Lal
Sorry, I just missed the like last two, three lines. Can you just — yeah.
Akash Bohra
Yeah. So, you were mentioning that, through your customer interactions, they were promising you a certain amount of volume growth coming in FY ’26. So, what is — what are they promising? Like, what kind of growth are they committing?
Mukti Lal
So, basically, so, we’re focusing on three parts. One is, we’re putting like separate sales, more sales people on the ground to be getting. So, we want to be in a balance out of here. One is more focus on 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 share from the SME customer. And third thing, we want to be enhance the customer base in obviously, multimodal product also. So, we put together three, four strategy. We want to be like growth and supposing we have anticipation to be growth 13% to 14% in volume side.
So, 7%, 8% volume will be come from the existing customer and then remaining will be come from the new addition customer. So, that’s our strategy. And that’s why we’re working on the ground very hard to be and people are on the street and we focusing how we can be go to 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 be come to us. Rather, we have to be go on their door and ask for the business.
So, that’s making efforts and enhance our footprint to be get more business and sales team has increased for that.
Akash Bohra
Got it, sir. Sir, two numbers, if you could quantify, what are the new customers that we, I mean, new customers we have added this in this six months?
And secondly, what is the top 10 customer concentration in our revenue for this first six months?
Mukti Lal
Yeah, yeah. So, basically revenue constant, if you see like my top 25-plus customer has not giving more than 15% revenue to us. And number of addition, I’m just not remember for that. So, one-to-one, I can be give that numbers. I’m just really not remember that number right now.
Akash Bohra
Sure, sir. No problem. Yeah. Thank you.
Navin
Thank you, Akash. Friends, thank you for your active participation, but we run out of time completely. And I take this opportunity to invite Chander or Mukti for their closing comments.
Mukti Lal
Chander sir, you would like to say something?
Okay. So, no worries. So, thank you, everyone. I would like to thank everyone for joining on the call. I hope you 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. So, stay safe, stay healthy and happy and Shubh Deepavali to everyone. Thank you once again for joining with us. Yeah.
Navin
Thank you very much. On behalf of SKP Securities, I’d 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.
Mukti Lal
Thank you. Thanks a lot, please.