Transport Corporation of India (TCI) is looking at expanding its overseas operations in the Middle East and Sri Lanka in 2024-25 and become a major logistics player in South Asia, its managing director Vineet Agarwal said in an interview.
“We will look to expand our operations in the Middle East and Sri Lanka, countries where our existing customers are demanding certain services. The expansion will continue for the next two years,” Agarwal said.
However, he warned that India will soon start seeing the impact of the ongoing Red Sea crisis on its export and import (EXIM) traffic.
“I’m not an expert on whether this will intensify. But what I can say is that the impact is going to start. We’ll start feeling it soon,” Agarwal said.
He added that EXIM costs have already risen as ships have been forced to navigate through a longer path to reach Europe from India, but as the war rages on things are getting more difficult.
Freight performance
Agarwal guided that TCI’s freight revenues will grow in double digits in 2024-25 after a three percent on-year growth in 2023-24.
Revenue growth in the segment was flat due to mixed sectoral trends but TCI is hopeful that expansion will help the segment grow in the ongoing financial year.
“On the freight side we expect growth, we don’t see any specific reason why that business cannot keep growing. We are trying to shift this segment toward more LTL (Less Than Truckload) from FTL (Full Truckload) and that shift is taking some time, but the segment is robust enough to report double-digit growth,” Agarwal said.
He added that strengthening TCI’s branch network and the increasing revenue contribution from the high-margin LTL market should drive margin improvement in the freight segment over the medium term.
TCI added around 50 branches in FY24 while the share of LTL stood at around 36 percent and FTL at 64 percent in the last fiscal. The company aims to grow the LTL share to 40 percent by 2025.
Its freight segment reported a 70 basis-point on-year fall in Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) margin in FY24, which the management hopes will improve as contribution from the high-margin LTL market increases.
Supply chain business
Agarwal added that TCI’s supply chain business is likely to continue its momentum in 2024-25 after reporting a 14 percent growth in its topline and a slight EBITDA margin expansion in FY24.
“Once the new government is elected we expect that growth in the two-wheeler segment will continue. Some reports have suggested that four-wheelers might slow down a little bit. Tractors should grow with good monsoons. Plus, the government spend on infrastructure should also increase post the new budget when the new government comes in. If that happens, we will see more earth moving equipment going,” Agarwal said.
He also said that in the two-wheeler segment, sales of electric two-wheelers have picked up with the direct-to-customer model becoming a success story for the segment.
Similarly, TCI is looking to drive growth in its Seaways business by adding two cargo ships in FY25, after its contract with Nakanishi Shipbuilding signed in October 2023 to build two cellular container vessels of 7,300 MT deadweight each fell through.
Currently, TCI’s fleet comprises six ships with a total deadweight of 77,957 MT. Three of these ships will need replacement in the next three to four years.
TCI has chalked a capital expenditure plan worth Rs 1,000 crore for the next four years and will look to spend around Rs 250 crore to acquire trucks and rakes and around Rs 400 crore for warehouses.
TCI has a cash balance of about Rs 400 crore for expansion and strategic initiatives, Agarwal said.
The post TCI aims to expand overseas, targeting leading logistics role in South Asia appeared first on India Seatrade News.