Transport Corporation of India Ltd (TCI) Q3 FY23 Earnings Concall Transcript

Transport Corporation of India Ltd (NSE:TCI) Q3 FY23 Earnings Concall dated Jan. 30, 2023.

Corporate Participants:

Ashish Tiwari — Group Chief Financial Officer

Vineet Agarwal — Managing Director

Analysts:

Ravi Kumar Naredi — Naredi Investment — Analyst

Unidentified Participant — — Analyst

Prit Nagar Seth — — Analyst

Srinivas Sheshadri — Mirabilis — Analyst

Alok Deora — — Analyst

Aman Vij — Astute Investment — Analyst

Shivaji Mehta — — Analyst

Krupa Shankar — — Analyst

Keshav Garg — Counter Cyclical PMS — Analyst

Shalini Gupta — — Analyst

Harshal Mehta — ICICI Direct — Analyst

Chirag Shah — — Analyst

Ronald Siyoni — — Analyst

Presentation:

Operator

Good evening, ladies and gentlemen. I’m Simran, the moderator for this conference call. I would like to extend my warm welcome to all of you for joining us today. Today, on behalf of the management, we have with us Mr. Vineet Agarwal, Managing Director; and Mr. Ashish Tiwari, Group CFO. [Operator Instructions]

I would now request Mr. Ashish Tiwari to embark on this meeting. Thank you, and over to you, sir.

Ashish Tiwari — Group Chief Financial Officer

Thank you, Simran, and good evening to all of you again for for joining this call. As usual, we will begin with our investor presentation and followed by the questions.

Now, I would request Mr. Agarwal for earning presentation. Thank you. Over to you, sir.

Vineet Agarwal — Managing Director

Thank you, Simran. Thank you, Ashish. We’re just putting up the presentation. Again, I would also like to extend my heartiest welcome to all of you at this Investor Presentation — Investor Call for Quarter Three of TCI. We would of course put up this presentation onto the stock exchanges as well as on our website. So I will — Many of you are already familiar with the company so I will not get into too much detail about what we are as a company, but I will get into specifics later on, and we’ll be happy to look at your questions. So let’s go ahead, please.

I think the logistics growth drivers really do not change much over quarter-on-quarter, but certainly what we’re seeing is that the consumer trends for this particular quarter are little weaker than the previous quarter. Post the Diwali, things tend to slow down a little bit as we are aware, is because there is a stocking that has happened and then some amount of reduction in consumption happens. May be some impact of higher interest rates is also starting to be felt a little bit on the consumer side. But predominantly on the B2B side, which is where we are active, we are really not seeing any kind of a slowdown or any kind of a degrowth happening. We see order book from many of our engineering company is very, very robust. We see the status of almost all the metal side of the businesses also relatively robust. So generally speaking, we’ve not experienced anything which is structurally different on the B2B side. Some of the impact of the government spend [Technical Issues] on infrastructures is also having a very positive impact. I think related to, for example, movement of infrastructure equipment, like the JCB’s and others of the world, those are also doing quite well. So, no major trends that are — that have changed over the last quarter, but certainly the pressure to grow is also quite high in the system.

Next, please. As a company, we are quite well focused. If you are aware with our range of services that are — that many of our customers want on a continuous basis. So we provide for almost all the major verticals, as well as the single window concept, as well as control towers for many, many of them.

There are multimodal network. So as you know, it’s part of our strategy and part of the growth plans that we have — that we have, and that has been continuously — is being enhanced continuously. The full rake movements in the last nine months have gone up by more than 30%. A lot of this is, of course, automotive rake movement as well. And so this continues the strategy to move towards multimodal is in place and it is having an impact.

On the container side, the management — the container movement has been slightly lower. I guess, some of it because of our CONCOR business, which is — but it has done better over the last quarter, if not in the first six months. The ship size and the quantity all remain the same. We’ve been — We manage our — from 55 yards, which are automotive — for the automotive logistics and terminals are for the container management. We are positioning ourselves to some interesting and high growth segments like chemicals, agriculture, renewables, cold chain, and also our neighboring countries. So these are good growth prospects in the next few years, which we will capitalize on.

The operations are highly technical — technology-driven and I did present last time, for example, which is also on the next slide is what we are doing in terms of control tower for a large heavy electrical goods company where we’re providing a combination FTL, LTL services, and including now in the next quarter perhaps even warehousing services. So we are managing a lot of the order processes, etc., through various control parameters as well as through a control tower for greater visibility and planning for both ourselves as well as for the customers. And just to inform you, we’re doing this for many, many other customers right now as we speak across the country.

The last quarter had been one of our highest ever quarters. On a consol level, we did about INR973 crores of revenue. This, as I said, almost all the high-frequency indicators are pointing towards good growth. So our various divisions — almost all divisions contributed to it. Overall, we feel that the — with higher interest rates, there is a little bit of a tightening in the market for credit. But for us as a company, our net borrowing remains zero and we have additional gas surplus also available.

Now I’ll take up specifically division wise results. So, you know already about the division structure so I will not get into that. But the freight business grew at about 14% in the quarter. Again, over the full nine months the growth has been almost close to 20%. The margins are maintained even though the LTL business is starting to catch up, but it is not completely there as compared to what it was in the previous years. So we are confident of achieving this 40% odd by 2025. But for the time being, there is definitely a little bit more business that’s happening on the FTL side rather than on the LTL side. Nevertheless, we have been able to keep up the margins to almost the same level. What is good is that the ROCE’s of this business has really kept up with the growth. So we are at almost 25% plus now, which has moved up from the 17%, 18% a few years ago. And we are quite confident in that even though with — there is some inflationary pressure that is there in the system, but even then we should be able to keep maintaining the ROCE’s also.

From a supply chain perspective, again the business has grown quite robustly by almost 21% in the quarter and about 26% — 27% in the nine months. Of course, this is clearly that the auto sector has picked up quite a lot and we are seeing good growth and good demand also in the next few quarters with new orders as well as specifically in the area of EV.

Yes, the margins are a bit lower comparatively, it’s because the movement has been quite heavy when it comes to the last mile as well as the finished goods movement, and hence that is typically at a higher cost structure. So, but we are hopeful that it should normalize in the next few quarters. EBIT margins are, of course, maintained at the same levels. The ROCE is a bit compressed at 18.7%, but again we are quite confident that for the full year we should cross 20%.

On the Seaways side, all our four ships were under operation. So that was a good trend. Business grew at about 12% and for the full year — for the nine months we have also grown at about 11%, even though there is no international volume — literally no international volumes in this quarter. So, as I had said in the last quarter in the meeting as well, that the volumes are quite robust and it — the margins are not too dependent on the international margins only. It is — a lot of it has to be our — based on our operational efficiency. As you can see that some margins have come off, which was expected from a percentage perspective, but the quantum has gone up to — in the — at the EBITDA level. At the EBIT level, yes, we have a INR10 crore — about INR9 crore drop in nine months. But again, as I said, this was expected. Normalization is about 30-ish, 30%, 35% of EBIT levels. So I think we should be able to maintain that going forward as well.

We don’t have any more drydocks in this year — this financial year. We have a drydock in quarter one of next year, but, and ROCE’s are maintained in excess of 40%, which I think will continue as well.

Amongst the joint ventures, the CONCOR joint venture has in the first — after the first six months where business was slightly negative, it has picked up and the first nine months have been — we have a positive growth. For the full year, we do expect it to be at the same level or slightly higher than last year. Margins are more or less maintained.

Cold chain business also — we’ve rationalized some of the portfolio there. There were some businesses related to short-term businesses that were there in cold chain, which we have let go, and hence our business growth has not been that high compared to last year. So with the base effect, I think we should possibly end at the same level as last year also.

Our Transystem joint venture has done quite well with a 42% growth and margins are also higher than — than last year also. Overall, at a standalone level, we have a 21% — 21.7% growth on the topline and 18% growth on the bottom line, which is at the PAT level. You might see that the PAT for the quarter is higher at the standalone level versus the consol level. This is because we have — we received a dividend of about INR19.6 crores net of TDS in this quarter from our joint venture company, which meant that the number was offset in the consol level in terms of the share of the profit of minority interest. So, but the effect is at the standalone level, we do have a good growth of about 23%. If we remove this number of the dividend that we’ve got versus the dividend in the same quarter, we still have a growth of about 10% to 15% on the bottom line even though the Seaways margin has come down.

So as we’ve been saying that even if Seaways margins does come down, the other businesses will compensate as the cycles keeps changing, which we are seeing. So we are able to definitely demonstrate a consistent growth in our businesses on a regular basis irrespective of the market trends. Some of the key performance indicators are all looking good. ROCE is at 24% plus. The RONW is at a 23%, and EV EBITDA is at the excess of 10% — 10 times.

The Board decided on a dividend of 125% for this quarter, which makes it a total of 250% for this — for six months — for the nine months that has gone by, which is about 16%, 17% of the complete so far the payout. And the — depending upon what the profit for the last quarter could be, the Board might take a view on whether they want to enhance the dividend further accordingly.

Our ESG norms, we are quite stringent on them and we are quite — we are following a lot of — following on a lot of areas. For example, we’ve converted a lot of our older trucks into CNG vehicles also and we have a fleet of 200 CNG fleet within the company. We’ve also added several areas, several rooftop solar plants which are helping us in energy conservation as well.

So the — clearly the impact of capex is there, which means that we cannot — we’ve not been able to grow faster on the Seaways side of the business and that is because you’ve not been able to add a ship. Again, the prices of ships do remain exorbitant as well as they are not easily available. We’ve done a capex of about INR81 crores, INR82 crores so far. We expect that to be roughly about INR125 crores, INR130 crores for the full year going forward, which means that some of this capex will shift to the next year. We do not have — We clearly have a visibility that we will not be able to now purchase a ship in Q4, neither we think we’ll be able to buy it in Q1, possibly in the end of Q2 as we have — might have some visibility around Q2 FY ’24 is when we have some visibility. But nevertheless, some of the other capex will continue and we do expect that — that we are able to sweat the assets that we have right now on our balance sheet much better.

Thank you so much for your presence today, and I look forward to your questions.

Questions and Answers:

Operator

Thank you, sir, for the valuable insights. Ladies and gentlemen, we will now start the question-and-answer round. So the first question is from Mr. Ravi Kumar Naredi. Sir, please go ahead.

Vineet Agarwal — Managing Director

You are on mute, Mr. Ravi Kumar.

Ravi Kumar Naredi — Naredi Investment — Analyst

Yeah. Hello?

Vineet Agarwal — Managing Director

Yes.

Ravi Kumar Naredi — Naredi Investment — Analyst

Your capex plan for financial year ’23 is INR315 crore, while we able to do INR82 crore capex so far. As our capex is low, it will impact our current year as well as financial year ’24 growth working. So what other way you plan for company how you overcome this situation?

Vineet Agarwal — Managing Director

So the growth will get affected only to some extent on the Seaways business, but otherwise all the growth plans remain intact. And as you can see that all the other divisions are doing relatively well. We also see lot of growth opportunities in the joint ventures, in the automotive joint venture. For example, with Toyota, the cold chain joint venture, the CONCOR joint venture. All of them have very high potential. And as I said, we are also incubating a lot of sectors. So those are also very attractive right now in terms of growth opportunities. So I do not see that growth for the — for FY ’24 will be severely negatively impacted. There could be some minor impact because of the non-addition of a ship, but otherwise we do think growth should be robust.

Ravi Kumar Naredi — Naredi Investment — Analyst

Okay. Secondly, you have declared the result at 2:45 PM. Your Investor presentation comes 3:25 PM. So what is the necessity to make the concall at 4:00 PM, where less than 30-minute you had given to us. We also need to read a lot of between the lines. So what is the necessity to make the call immediately after result?

Vineet Agarwal — Managing Director

So basically we use to upload the presentation after the call always, last time and even before that also. Reviews [Phonetic] were available as the Board meeting finished within the set with time limit allowed.

Ravi Kumar Naredi — Naredi Investment — Analyst

My request is that you make a concall at 5:00 PM, 6:00 PM. What is the necessity [Speech Overlap] in 30-minute you are making con?

Vineet Agarwal — Managing Director

So, Mr. Naredi, we’ve already given the results [Speech Overlap]

Ravi Kumar Naredi — Naredi Investment — Analyst

You understand that how many concall today?

Vineet Agarwal — Managing Director

We do not know how many concalls are there today, sir. But what I’m telling you is that we have given the results well in advance for you to study. Yes, the presentation might have come out late. If you have any further questions post this call, please call us up, we’ll be very happy to answer anything that you have. Sorry for this delay. Thank you.

Ravi Kumar Naredi — Naredi Investment — Analyst

Please understand, why you do not give — Same problem I have raised last year concall — last quarter con call, why you are so early in concall? I do not understand.

Vineet Agarwal — Managing Director

No, I’m sorry, sir. Last year we did not — Last year we had one full day before you — we had given the time. Mr. Naredi, we’ll take up your questions. No problem. We’ll take up your questions after call as well. You can call me. We will take up for it. Thank you.

Ravi Kumar Naredi — Naredi Investment — Analyst

Okay.

Operator

Thank you, sir. The next question is from Krupa Shankar. Sir, please go ahead.

Vineet Agarwal — Managing Director

We can’t hear you, Mr. Krupa Shankar.

Ashish Tiwari — Group Chief Financial Officer

He logged out. Please take the next question, Ms. Simran.

Operator

We will now begin with next to Mr. RRR’s [Phonetic]. Sir, please go ahead.

Unidentified Participant — — Analyst

Hello? Hello?

Vineet Agarwal — Managing Director

Yes, yes. Please go ahead.

Unidentified Participant — — Analyst

Hello. [Foreign Speech]

Vineet Agarwal — Managing Director

Yes, yes. We can hear you.

Unidentified Participant — — Analyst

[Foreign Speech]

Vineet Agarwal — Managing Director

Sorry. I think we had can’t hear him. His network is poor. Okay. Simran, please take the next question.

Operator

We next begin with Prit Nagar Seth. Sir, please go ahead.

Prit Nagar Seth — — Analyst

Good afternoon.

Vineet Agarwal — Managing Director

Hi, good afternoon.

Prit Nagar Seth — — Analyst

Yeah. All right. So, Vineet, what I wanted to understand was that, the ROCE’s on the freight has gone up substantially from about 17%, 18% to 24%, 25%? You say that it is sustainable at these levels. So what has led to this increase in ROCE’s?

Vineet Agarwal — Managing Director

So, one is that, you know, in the last few years we’ve not done any capex on the business in terms of adding new trucks, etc., or whatever. So one is that. The second is that the — we are able to sweat the money better in terms of the receivables. So most of the assets there, capital employed is essentially on working capital. So since we are able to sweat it better, that’s — that’s the other advantage. And the third is that the margin structure is also changed because of LTL being added on. So that — with increase in LTL, we are seeing that the growth is — growth in profitability is there, which means that the cash flow is also better. So all of those factors have led to an increase in ROCE.

Prit Nagar Seth — — Analyst

So will this trend continue with a, say, a target of reaching 40% in by FY ’25?

Vineet Agarwal — Managing Director

No. I think that’s — the 40% is LTL, not necessarily 40% in ROCE. I think inflation.

Prit Nagar Seth — — Analyst

No, I meant exactly that.

Vineet Agarwal — Managing Director

Right, right, of course. That continues. That continues, yes.

Prit Nagar Seth — — Analyst

Okay. The other question I want to understand is that, because we’ve not been able to do the capex we’ve planned to because of ships being extensive and other things and you will have the additional cash flows coming in next year in terms of business. Do you plan any kind of buyback, given that the cash is going to be generated on the books and you will not deploy it in capex?

Ashish Tiwari — Group Chief Financial Officer

No, we don’t have any plans for a buyback. I think what will happen is that the moment we start looking at — start the capex, the additional cash flow will automatically flow out quite fast. So, really speaking, it’s not prudent. We have not looked at buyback at this point in time.

Prit Nagar Seth — — Analyst

Okay. Which means, you already have plans to utilize the cash that is being generated for this year. Even for last year there was a surplus and the subsequent year.

Ashish Tiwari — Group Chief Financial Officer

Correct.

Prit Nagar Seth — — Analyst

Once the ship comes into play —

Ashish Tiwari — Group Chief Financial Officer

That’s right. Correct. You’re right. So see, the working capital limits are at zero right now. We have more than about INR140 crores, INR150 crores of cash on our books. Maybe some additional cash gets generated. But the moment you hit — start hitting the capex in terms of buying the ships, etc., I think all of that will go away. And then we can easily leverage by our working capital limits or by borrowing. So that’s why — I think the buyback will be a little bit of a short-term play versus looking at the next few years capex, we will need the cash.

Prit Nagar Seth — — Analyst

Right. Vineet, one other question is on the trends. So you mentioned certain amount of slowness that you’re seeing in terms of vis-a-vis expectations you may have. So, do you have any sense in terms of FY ’24 where this is headed? Or do you stick to the 10%, 15% guidelines that you normally give?

Vineet Agarwal — Managing Director

We have not come out with the guidelines yet, Prit, for the next year. But I think — my sense is that it might be a slightly slower year comparatively. I think it’s the election year also. It has also has a lot of other factors with COVID impact also receding. So might be slightly slower year. But I think I’m quite confident that the infrastructure spend will continue and which will — which does have a trickle down effect on our many, many sectors.

Prit Nagar Seth — — Analyst

Wonderful. Thank you, Vineet. Wish you guys all the best.

Vineet Agarwal — Managing Director

Thank you.

Operator

Thank you, sir. We are happy to take everyone’s question. I would request all to please start with your name accordingly with your organizations name. The next question is from Srinivas Sheshadri. Sir, please go ahead.

Srinivas Sheshadri — Mirabilis — Analyst

Hey, hi. Am I audible?

Vineet Agarwal — Managing Director

Yes, yes. Please go ahead.

Srinivas Sheshadri — Mirabilis — Analyst

Yeah. Hi, this is Srinivas from Mirabilis. Hi, Vineet. Hi, Ashish. Firstly, just want to start with cold chain. See, we have been at the — like INR14 crore, INR15 crore kind of turnover for a few quarters now. For the, I mean, it’s quite an emerging segment and our kind of belief was that the growth would be kind of much faster tracked. So just wanted to understand the constraints that we face. Is it like the investments that we made we need to invest more in the infrastructure or the vehicles and so on? Or are there other things which we need to put in place in order to kind of reaccelerate the growth in the segment?

Vineet Agarwal — Managing Director

So, thank you for the questions, Srinivas. The cold chain business at INR15 odd crores of at a quarter level is only for this last few quarters. Both in the last year has been almost, as you saw 60% plus. So yes, it’s a little bit of a base effect. The second is that, as I said, we are rationalizing some businesses. Some e-commerce guys on the cold chain side were not doing too well, so we dropped off those customers because we wanted to protect our margins. There are many cold chain companies today in the market that are not even making money.

So, for us, as I always maintained, we will slowdown growth if necessary to maintain our margins in almost all our businesses. Because protecting margins will lead to long-term growth and long-term sustainability of any business. So, for that matter it’s a short-term correction. But the growth prospects are massive, as you rightly said. And we have some very exciting contracts that we’re working on, which we hopefully will convert in quarter one of next year and see that benefit going forward.

Srinivas Sheshadri — Mirabilis — Analyst

Okay. Okay. So from first quarter we should start seeing some growth revival in this?

Vineet Agarwal — Managing Director

Certainly, yes.

Srinivas Sheshadri — Mirabilis — Analyst

Okay, sure. The second one is on the supply chain. See, there is good growth in industry volumes, you have also grown quite well in the last quarter. But the margin seems to kind of been at that level. So wanted to understand, is getting an operating leverage a challenge in this segment in a sense that with increasing volumes to customers demand, like lower pricing and pass-through of operating leverage or how does that dynamic work for us in this segment?

Vineet Agarwal — Managing Director

So, I think it’s just straight away incorporating what I just said previously. But no — but in the long-term what is happening here is that there is a certain amount of — In the short-term there is a certain amount of growth that we’re seeing and — but what will also happen is that this will start normalizing in Q4 and going forward. So, we should be able to get to the higher margin structure. But one thing is there, if you see the EBIT level, things are still okay. We have to say slightly better in the last nine months comparatively. Even on the topline growth is about 26%, 27%, but the EBIT level growth is about 30% plus. So that way the overall margins is maintained. There are years, as I’ve always said that the margins will oscillate between 10%, 12% on an EBITDA level. So that’s what continues here as well.

Srinivas Sheshadri — Mirabilis — Analyst

Okay. And here has the — just to a follow-up on this, has the competitive intensity changed in any way, like in the last six months to nine months or so?

Vineet Agarwal — Managing Director

No. I think it’s consistent. There is nothing which is exceptional I would say. But it’s continuous — From a quarter-on-quarter, nothing major has changed.

Srinivas Sheshadri — Mirabilis — Analyst

Okay. Okay. Sure. Thank you. That’s all from my end. Wish you best for the rest of the year.

Vineet Agarwal — Managing Director

Thank you.

Operator

Thank you, sir. The next question is from Alok Deora. Sir, please go ahead.

Alok Deora — — Analyst

Yeah. Good evening, sir, and congratulations on decent numbers. Sir, just had couple of questions. First is, the Seaways ROCE. What would be the ROCE if we were to calculate that on market value or the volume of the ships which we have today? Any broad number if you could indicate?

Vineet Agarwal — Managing Director

So, basically, if we have a — this 45% ROCE, and shipping prices, obviously, would be kind of a double or triple. So that at times actually you divide the ROCE. So it would be 16%, 17%.

Alok Deora — — Analyst

16% to 17%, is it?

Vineet Agarwal — Managing Director

Yeah.

Alok Deora — — Analyst

Hello.

Vineet Agarwal — Managing Director

Yes, yes.

Alok Deora — — Analyst

Hello.

Vineet Agarwal — Managing Director

Yeah, we can hear you Alok.

Alok Deora — — Analyst

Yeah. got it. And also, just wanted to understand now the — You know the freight rates have come off quite significantly — the shipping rates. So how are we seeing that? Because you mentioned that the ship rates have not come down. So just, you know, when do we really see the ship rates come down now because the freight rates have come down quite significantly, if you were to see what it was like one year time.

Ashish Tiwari — Group Chief Financial Officer

Alok, we are not able to hear you properly.

Vineet Agarwal — Managing Director

I got your question, Alok. I think on a domestic front the rates are not affected too much by the overseas rates. So, yes, the overseas rates have come down, but domestic rates have not had an impact. Domestic rates are a function of the fuel prices, the bunker prices rise, which as you have seen that they remain high. And the second is also because of the demand and supply. So since demand is quite robust on the Western Coast as well as on the Eastern Cost, the prices are evenly maintained. So I think, we’re not seeing anything coming off right now on the rates. But again, if fuel starts coming down and more capacity comes into some of these sectors, we might see the rate coming down a little bit. But as for now, in Q4 also we are looking to maintain the rates.

Alok Deora — — Analyst

Sure. Just one question on the container rail sides. So we have the JV with CONCOR. So if the divestment were to go through, how does that impact or it is like, doesn’t impact us?

Vineet Agarwal — Managing Director

We can’t say. It’s too early depending upon who the new partner is, what the intension is with this JV and what can be done and not done. So, I think it’s very speculative to comment on it right now.

Alok Deora — — Analyst

Got it. Got it. Just one last question. I might have missed if you would have answered this before. So if — assuming the ship does not come through in the — till the third quarter of next year, then what kind of seaways revenues we are looking at for next year, the growth?

Vineet Agarwal — Managing Director

So I would think about a flattish growth even if there is no ship addition till then because assuming that rates might come down little bit, but capacity remains same. So I think more or less we should look at a very marginal stationary type of growth. But margins should be almost at the same level, slightly –at that 30% EBIT level.

Alok Deora — — Analyst

30% EBIT level. So the current margin should continue?

Vineet Agarwal — Managing Director

That’s right — rhat’s right.

Alok Deora — — Analyst

Sure. Thank you. That’s all from my side, sir. Thank you, and all the best.

Operator

Thank you, sir. The next question is from Aman Vij. Sir, please go ahead.

Aman Vij — Astute Investment — Analyst

Yeah. Good afternoon, sir. My first question is on the Seaways division. So we have been at this around 78,000 deadweight ton capacity for long. So, what kind of addition are we targeting in the next, say, after six months?

Ashish Tiwari — Group Chief Financial Officer

So our plan is to look for another — between at 20,000-ton to 30,000-ton ship. So that is being looked at. So every year that should be the kind of — kind of new addition. But after maybe I think two or three years, we might have two years or so, we might have to scrap a ship also. So net addition would be lower then. But let’s assume that about a 20,000 odd tons of capacity addition per year going forward for the next three years, four years.

Aman Vij — Astute Investment — Analyst

And in terms of pricing — So if you take this example only, say for example, 30,000 or 20,000 deadweight tons. So what has been the increase in the price of the ship and at what levels do you expect the pricing will come down before we pull the buy trigger.

Vineet Agarwal — Managing Director

Well, the price is still remain at 2 times, 2.5 times of the price that we when bought the previous ship of the same size and of the same build. So it is still quite high. The second is the non-availability of ships also because there are no sellers in the market yet. But I think, even if it is 30%, 40%, 50% higher than our previous buy price, we might pull the trigger. So, but the availability has to be there. So both these factors have to fall in place.

Aman Vij — Astute Investment — Analyst

And in case, say, the pricing doesn’t correct and it remains at 2 times while the availability improves. So in that case, does the ROCE’s of the business or the IRR, will it change drastically if we have to even buy in the worst case, say, at 2 times the price or we will then just stop, we’ll wait for further correction?

Vineet Agarwal — Managing Director

I think again this a quite speculative because we will not be — we have to see what the fuel prices are, we’ll have to see some — there are obviously a very large macro event happening right now with the Ukraine war. So there are — there’s certain uncertainties that are there today. If those uncertainties remain, then that 2 times increase — 2 times price might not be justified. But if there is things that are calmer, then it might be justified also. So I think, closer to when it gets to that stage, we can take a call.

Aman Vij — Astute Investment — Analyst

Sure, sir. On the supply chain business and even the freight business. So on topline, do we expect for next year, obviously, do we expect that 10% kind of minimum level can we get and maximum you are still guiding for 10% to 15%. So these two divisions, if Seaways doesn’t grow, have to grow faster for us to get that 10% to 15%. Your thoughts on the same?

Vineet Agarwal — Managing Director

Yeah, we are growing at that level. If you see, supply chain has anyway grown at in excess of 25% plus and freight has grown at 15% plus. So I think that growth rate trajectory will continue as well, even though we might have a slightly higher base effect, specifically in the supply chain business. But I’m quite confident that we should exceed that 12% to 15% type growth for both the divisions.

Aman Vij — Astute Investment — Analyst

Yeah. And just two questions. On working capital side, any change you have felt in any of the division? Or is it the same?

Vineet Agarwal — Managing Director

No. Certainly, the freight business we’re seeing some trends of slower growth rate because we have a — clearly there is some impact on some business, some companies where they have slowed down their credit cycle and because of higher interest rates perhaps. But otherwise, all the other businesses we haven’t seen any impact on slowdown in receivables.

Aman Vij — Astute Investment — Analyst

Sure, sir. Final thing, long-term you have guided like 10% to 15% topline and bottom line faster than this. So do we stick with that for the next two years, three years, or do we think now of topline and bottom line will grow at 10% to 15% only?

Ashish Tiwari — Group Chief Financial Officer

I think the last quarter we had — last year FY ’23 guidance was 10% to 15% on the topline, which we revised in the six months, to say, it will be 15% plus on the topline. On the bottom line we had maintained the 10% to 15% because we were coming off from a very high base with the shipping business increasing, shipping margins improving. So I would — I think stick by this 10%. As I said, we have yet to give the guidance for FY ’24. But I think, 10% to 15% on the topline and about 10%-ish on the bottom line should continue.

Aman Vij — Astute Investment — Analyst

Sure, sir. These are the questions from my side. Thank you.

Vineet Agarwal — Managing Director

Thank you.

Operator

Thank you, sir. The next question is from Shivaji Mehta. Sir, please go ahead.

Shivaji Mehta — — Analyst

Hi. Am I audible?

Vineet Agarwal — Managing Director

Yes.

Shivaji Mehta — — Analyst

Hi. Thank you for the opportunity. I had a bookkeeping question on the tax rate. Just trying to understand why is it so low at about 14% and what can we assume going ahead?

Ashish Tiwari — Group Chief Financial Officer

You’re talking about tax-rate?

Shivaji Mehta — — Analyst

That’s right.

Ashish Tiwari — Group Chief Financial Officer

Okay. So this is because of the fact that the Seaways business they only have that tonnage rate and which is kind of very low numbers, single-digit numbers. The rest of the business which is supply chain and freight division, they have a taxable income. And that’s why the tax rate is hovering between 10% to 12% right now. And sometime in some quarters you would see that number would go up and down because that based on the contribution of Seaways business to the overall margins.

Shivaji Mehta — — Analyst

Right. Makes sense. Another question on the Seaways business. Why are we not looking to kind of do the international business here? Just trying to understand what really prevents us from doing the international business?

Vineet Agarwal — Managing Director

So, on the international side, I think we are — we did or do some opportunistic businesses when we went to — do go to Myanmar for some return cargo or we did a few other voyages. But see, I think the domestic market itself is so strong and has so much capacity that we can deploy here with the government thrust also on multimodal logistics with the Gati Shakti program, with everyone talking about ESG benefits with using coastal shipping. Clearly, we see a massive growth opportunity in the domestic market.

The second is that, you are not — you don’t see the huge variability that you have in the international markets in the domestic market. With container rates suddenly shooting up 300%, 400% and is only falling down also in at phase. So that gives us a lot of predictability in the business. So but, opportunistically if we find something once in a while we’ll definitely try to optimize our fleet utilization, but otherwise I think the domestic market has very, very a strong growth potential.

Shivaji Mehta — — Analyst

Right. Thanks for that. Just one last question on the freight business. So, we have been guiding for that 10% EBIT margins here. But however, if you analyze your — historically over the last 14 quarters we’ve just been able to cross the 7% mark, I think just about once. So trying to understand what — how confident are we of getting to that 10% range? And by when can we expect that to really happen?

Vineet Agarwal — Managing Director

10% EBIT on the supply chain? I don’t think we have guided for that. We’ve guided for 10% on the EBITDA level, not at the EBIT level.

Shivaji Mehta — — Analyst

Okay. My bad, yeah. Right. I think that’s on the EBITDA level, yeah.

Vineet Agarwal — Managing Director

Yeah.

Operator

Thank you, sir. The next question is from Krupa Shankar. Sir, please go ahead.

Krupa Shankar — — Analyst

Hello. Yeah, is my line clear?

Vineet Agarwal — Managing Director

Yes, yes. Please go ahead.

Krupa Shankar — — Analyst

Yes. Thank you for the opportunity. Just a couple of questions from my side. First is on the LTL side. [Indecipherable] you’ve mentioned that you will be targeting about 40% by FY ’25. We are seeing multiple growth tailwinds in LTL business, which can at least strive a faster growth for the organized players. At least that’s a ground level check what we had done — concludes to. I just wanted to understand, is it likely that this business is going to see a strong 15%, 20% growth, which can further — And given that you’re also talking about weaker FTL growth perhaps in the next year led by macro overall that you will achieve this number thereby your overall margins in this business also expanding. So is it likely that you can achieve this in FY ’24 itself?

Vineet Agarwal — Managing Director

I don’t think so. I think what happens there is that there is a lot of pull and push when it comes to certain in the LTL business itself. Yes, you can have a 15%, 20% growth, but then we have to remember that 65% of the remaining business is also growing at 10%, 12%. So that’s a much higher number quantum wise. So, and there is an equal demand for FTL services as well as LTL services. I gave you two example of the company and large electrical — heavy electrical business that is really consolidating its logistics and asking us to do both FTL and LTL across the country. So there are lots of such good potential customers were we will normally get the LTL growth, but we will also get the FTL growth. So I think it’s a less. I think this is more realistic if you look at FY25 at most versus [Technical Issues]

Krupa Shankar — — Analyst

Okay. And second question is on the electric vehicle services which you had talked about for supply chain business. I mean, is it — you’re doing the entire leg of inbound, in plant and outbound? Or is there any specific leg you’re catering to in this ecosystem? And if you can perhaps throw some light on the what are the further changes or what is the difference between the ICE ecosystem versus the EV ecosystem, which this year has created a niche?

Vineet Agarwal — Managing Director

So actually on the electric vehicle versus ICE engine, the rate that is carried is the same actually because the battery rate being so high. So you are involved in the inbound logistic for a lot of companies. The construction of the vehicle itself, means that there are parts that are coming from all over India — main suppliers all over. So that is happening. And then, of course, we’ve involved in the last mile as well — sorry, the finished goods transportation, CBU transportation and then finally the last mile as well. So we are involved [Technical Issues] of the business. It’s not any specific area only.

Krupa Shankar — — Analyst

Okay. So you’re not seeing a substantial substantially delta coming in because of addition of newer EV’s. So what I’m trying to drive here is, perhaps the new EV cliental or your, let’s say, the engineering cliental what you had talked about, is going to boost the supply chain revenues over the medium term. Is that something which should be higher than the overall company growth?

Vineet Agarwal — Managing Director

No. I don’t think so. I think it’s — some of this happens as a replacement. As you are seeing also that there is a capacity that is there, which is — and sorry, the consumption that is happening is of the combination of both ICE as well as the EV vehicle. The overall market is growing, yes. So we are growing with that. So I don’t think it will be extremely incremental on top of the current trends that we have. So it will be line with the market trend only.

Krupa Shankar — — Analyst

Understood. Last question from my side was on the Seaways business. You did mentioned about the operating efficiencies in the Seaways business. I mean, it was quite surprising to see that the margin expanding without any international operations. Is there any — what were these operating efficiencies and is there any scope for for further expansion from these levels is something which I want you to talk?

Vineet Agarwal — Managing Director

So, I think operational efficiency is one aspect, but predominantly all these ships were under operation. There were no ships that had gone for drydocks. So the whole quarter we got all the ships operating and hence we saw good — a strong business growth trends that we had. So that’s one. Secondly, I think the freight — the fuel prices as you can see in the graph there also has come down little bit. So that had plus a little bit. Thirdly, I think, because all the ships were running, there was no weather-related disturbances, like in monsoon, etc. So all those things are all okay. So I think just generally, the — it was one of those good quarters. But you see that at the margin level things came off a bit, but that as we have been guiding also versus [Technical Issues]

Krupa Shankar — — Analyst

Okay. So it’s more of a function of everything playing or rather no spoil sport in this quarter which is what is driving the margins. And this can be — gives us the best margins which can — which is — when can get a current set of capacity.

Vineet Agarwal — Managing Director

Possibly, yes, yes.

Krupa Shankar — — Analyst

Great. That’s it from my side. Thanks a lot. And wish you the best.

Operator

Thank you. So there are no further questions. Now I hand over the floor to Mr. Ashish Tiwari for closing comments.

Ashish Tiwari — Group Chief Financial Officer

Yeah. I think we can wait for a minute if any question is there, otherwise we can wind up the call.

Operator

Okay. Sure, sir. We have Mr. Keshav here. Sir, please go ahead.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, my name is Keshav Garg, and I am representing Counter Cyclical PMS. Sir, I’m new to the company. So pardon my ignorance. But you said in your commentary that you are expecting ship prices to come down significantly and then you are planning to go ahead with the purchase of a new vessel. And also you mentioned that in a few years we have to scrap one of our old vessels. So, does it not make sense that at this price we can dispose off, sale off our old vessel and then when the price is correct, which we believe that they will, then can purchase back the same at lower prices. Sir, does that makes sense?

Vineet Agarwal — Managing Director

I think you make logical sense, but it doesn’t work always that way. Some of these ships are — is required for a business opportunity. The money that we make from actually running the ship is going to be far more than actually selling the ship. And it’s not so easy to buy and sell ships. So that’s why I think we will stick with the current capacity.

Keshav Garg — Counter Cyclical PMS — Analyst

Right, sir. And sir, also in our freight division I understand that our model is to outsource and not to purchase the fleet on our own books unlike our competitors. So, but let’s assume that if the economy starts picking up and starts growing at 8%, 9% and freight rates then increase. So then how does this model of outsourcing, I mean, will we be able to pass on the, I mean, our increased fares to our customers? Or the — or our peers who have in-house fleet of around 5,000 trucks, they will be able to under guard us since their utilization will increase and it’s a fixed-cost model for those who are owning the whole fleet. So how does that compare during a time when the economy is growing fast and freight rates are burnt?

Vineet Agarwal — Managing Director

So someone with a fleet can have that short-term advantage, but I think we have to think a little bit on the long-term. And what we have seen it with a long-term perspective with our profile of company, the ROCE is that we have are essentially a function of not having that much fleet on our books. So the long-term trends are that we’ll be able to maintain the margin and grow the business, but it could have a little bit of a short-term impact, which again I think from a market perspective we are mostly into FTL where some of our — we have 65% into FTL, whereas a lot of our competitors are the one that you are specifically referring to is mostly into LTL. So yes, there could be some short-term benefits, but our strategy around having no assets on this — in this entity has so far helped us.

Keshav Garg — Counter Cyclical PMS — Analyst

Sir, thank you very much. That’s all from my side. Best of luck.

Vineet Agarwal — Managing Director

Thank you.

Operator

Thank you, sir. The next question is from Ms. Shalini Gupta. Ma’am, please go ahead.

Shalini Gupta — — Analyst

Yeah. I just wanted to understand. I mean, when I look at the reported numbers, the EBIT margin for the shipping business is actually far lower than what it was in the — on a Y-o-Y basis. So why would that be?

Vineet Agarwal — Managing Director

It’s because last year we had a lot of income from international shipping which we don’t have this year, which was at a very high margin. And we’ve been guiding that this will come off also.

Ashish Tiwari — Group Chief Financial Officer

And Shalini, also we have a higher depreciation run rate as compared to last year, right? So you would see that on the EBITDA level the margins are kind of little better, but the EBIT they have been kind of on a lower side.

Shalini Gupta — — Analyst

Yes, sir. That’s very nice. Thank you, sir.

Ashish Tiwari — Group Chief Financial Officer

Okay. Thank you.

Operator

Thank you, sir. Thank you, ma’am. The next question is from Harshal Mehta. Sir, please go ahead.

Harshal Mehta — ICICI Direct — Analyst

Hi, sir. So CONCOR has recently started working on with this some cement players. Wherein they have — they intend to provide complete multimodal solution to them. And they’ve also guided for like nearly doubling on their volumes due to cement players. So we have — we have a JV with CONCOR. So do we see synergy with them in our any of our segment like freight, Seaways, or even in the CONCOR segment, because growth is quite visible on their, like domestic segmental. So can that have some kind of a spillover effect in our company?

Ashish Tiwari — Group Chief Financial Officer

Maybe a little bit, but I’m not so sure how much and how will they try to position this particular aspect. I think the cement business, what they are talking about has a good potential to grow on the domestic front. But again, there are some challenges there as well to ensure that you look at the last — first mile and the last mile properly done. So yes, there could be some opportunities for our joint venture also. But let’s see how they playout. But we are also involved in a lot of other segments as well as cement also, other domestic front like chemical logistics and food grain logistics, etc., metals also. So those tend to — those are also continuously growing. So we definitely see opportunities there.

Harshal Mehta — ICICI Direct — Analyst

Thanks, sir. That’s all from my end.

Operator

Thank you, sir. The next question is from Chirag Shah. Sir, please go ahead.

Chirag Shah — — Analyst

Hi. A few questions from my side. The first is on Seaways business. If you could tell us what would be the market value of the current fleet? That’s the first question. The second is, if you could just highlight was how if freight rates behaved in the last couple of years? So compared to where they are today, what could rates have been, let’s say, a year ago, and about three years back? So that is the second question. And the third was in terms of, you highlighted that growth next year could be about 10% and it seems that Seaways growth might be flattish because you will have a drydock. So I’m assuming, will that growth be led equally by the other two segments or do you see faster growth in a particular segment? Those were my three questions. Thank you.

Vineet Agarwal — Managing Director

So on the reverse, if I have answered those questions, I think, yes, the growth will come from the other divisions and we do expect that. So, from all the divisions as well as the joint venture companies. On the freight rates, the last three years of freight rates have been more or less the same because the last two years or so when fuel prices have gone up. And so that also has a reflection in terms of the capacity that was not there because a lot of capacity shifted overseas as well. So that meant the freight rates have been maintained.

Maybe a few years before when the fuel prices were quite low, the bunker prices are quite low, the freight rates were probably at 25%, 30% lower, but I think that was — we don’t expect that to happen so soon. But, yeah, so that’s on the freight rates side. On the market value of the ships, we don’t know the exact market value. What is the book value, Ashish, of the ships currently?

Ashish Tiwari — Group Chief Financial Officer

Sir, INR240 crores.

Vineet Agarwal — Managing Director

Okay.

Ashish Tiwari — Group Chief Financial Officer

And one more point here is that, so today when we go to the market and search for a ship, actually it’s a nine to 10 year old ship, right? And so it’s really not comparable with our book value because they are also kind of older than this nine to 10 years, right?. So basis that, I think, one question was there on the ROCE part as well. And that if you buy a nine to 10 year old ship, actually we have a better and high rate to amortize the ship, right? So that way it would have — it would not impact the EBIT margins if the life of the ship would be higher.

Chirag Shah — — Analyst

Sir, my question was, if to an earlier participant you mentioned that the — if you were to mark-to-market the value of the ships and return on capital employed would come down by towards 16%, 17% and the value of the ship should be roughly two to three times. Is that a correct interpretation?

Ashish Tiwari — Group Chief Financial Officer

No, it is not like — it’s just kind of a arithmetical and critical questions. So what I’m trying to make out the point here is that the ship market value which is sitting in our book value actually we don’t know. We don’t know today. We only know that if we are going to buy a ship, which is nine to 10 year old, right, which is five to six year younger than the ship which has sitting in our book-value would be how much. So that’s how actually we are correlating the cost.

Vineet Agarwal — Managing Director

I think what he is trying to say also is that the current market value of the ship is undetermined because of the kind of ships they are in terms of the age profile, etc. So we have not gone out in the market and asked. We have not also found out. We don’t know the pricing of such ships. Typically, there might not be a lot of pricing. So the book value itself is a reflective of the current pricing of the ship I think. If there is a new ship that you buy, which will be obviously at younger ship as well as at a higher cost, then clearly that will impact the ROCE.

Chirag Shah — — Analyst

And when would be the next time that you would have to scrap a vessel?

Vineet Agarwal — Managing Director

So that would happen in the next two, three years I think as I had mentioned. I don’t know the exact date, but I think will be most likely end of FY ’25 or ’26, if I’m not mistaken.

Chirag Shah — — Analyst

And just to summarize your earlier answer in terms of rates, rates have been flat for the last two years. And if you look at it roughly about four, five years, it wouldn’t be — it would be up by about 25%. Is that the broad way to understand?

Vineet Agarwal — Managing Director

That’s right.

Chirag Shah — — Analyst

Fantastic. Thank you so much.

Vineet Agarwal — Managing Director

Thank you.

Operator

Thank you, sir. We have the last question from Mr. Ronald Siyoni. Sir, please go ahead.

Ronald Siyoni — — Analyst

Yeah. Good afternoon, sir. Just, you know, sticking on the macro front, like you had highlighted that we have seen some kind of sluggishness. Not only in this particular sector, but over all so we have been seeing some kind of sluggishness in real estate or building materials sector, or exports in railways or containers. So this kind of macro factors still you are very much optimistic and I look forward to a good FY ’24. So I wanted to understand what are the basic drivers for you? Is it diversification in other sectors as you had highlighted? Or you are seeing some kind of reversal in interest rates for the next — in the second half of next fiscal year? So what are the positive drivers or triggers that would help survive or improve your growth rate versus sluggishness in the macros?

Vineet Agarwal — Managing Director

So, you’re absolutely right that the — some of the things that you highlighted specifically around the growth, around new verticals or new areas that we already there, as well as the general growth in the market is. I mean, GDP will still grow at whatever 6%, 7%, right? So 6%, 7% means that there is still growth happening even though it might be slightly slower. So that itself is an opportunity. The second is that we have a very, very small share of the overall market size — marketplace. So we are constantly taking market share from our competitors also. So that itself is another growth opportunity that is happening.

And then the integrated offerings that we are doing while moving customers from road to rail to sea and so on so forth, those are the areas of growth opportunity also. So clearly the marketplace is there. There is a lot of interesting trends there. And those should help us in keeping up the growth pace. Even though overall macro scenario, as you rightly said, might be a bit sluggish.

Ronald Siyoni — — Analyst

Yeah, thank you very much, sir, and best of luck.

Vineet Agarwal — Managing Director

Thank you, Ronald.

Ronald Siyoni — — Analyst

Thank you, sir.

Operator

Thank you, sir. There are no further questions. Now I hand over the floor to Mr. Ashish Tiwari for closing comments.

Ashish Tiwari — Group Chief Financial Officer

Thank you, Simran, for moderating this call and my sincere thanks to all of you — all the participants to taking out time out of this busy schedule and call session. See you in the next quarter. Thank you. Take care.

Vineet Agarwal — Managing Director

Thank you. Thank you, everyone.