To address the challenges arising from difficulties in its profitable maritime and freight operations, Transport Corporation of India (TCI) has found comfort in the strong performance of its automotive division, which contributes to approximately 70-80% of the company’s supply chain business.
TCI, a prominent integrated logistics company in India, has reported a consolidated net profit of Rs. 83.2 crore in the first quarter of FY24, up from Rs. 78.6 crore in the same period last year, marking a year-on-year increase of 5.9%. The company’s consolidated income from operations in Q1 FY24 reached Rs. 958.3 crore, reflecting a 5.5% increase year-on-year.
During this period, TCI experienced substantial growth in its supply chain division revenues, which surged by about 21.3% to Rs. 346 crore. Conversely, the company’s high-margin maritime business faced a decline of 19.3% in Q1 FY24, amounting to Rs. 117 crore. TCI’s freight division, which remains the company’s primary business segment, saw a modest increase of 4.6% to reach Rs. 393.6 crores, primarily influenced by seasonal factors.
The automotive industry’s contribution of approximately Rs 1000 crore to TCI’s total revenues of Rs 3,800 crore in the previous fiscal year, FY23, underscores its significance.
Additionally, Transystem Logistics International Pvt. Ltd. (TLI), a strategic joint venture between TCI and Mitsui, consistently delivered impressive results within the automotive segment. In Q1 FY24, TLI experienced a remarkable surge of 57.6%, achieving revenues of Rs 225.3 crore, with a net profit of Rs. 33 crore for the same period. The investor presentation further revealed that TLI’s revenues in the previous fiscal year witnessed a substantial growth of 42.2%, reaching Rs 692 crore.
TLI offers comprehensive logistics solutions to Japanese automotive manufacturers and suppliers operating in India, including just-in-time production part delivery, efficient warehousing, timely distribution of spare parts for after-sales service, and CKD container transportation, among other services.
Auto Logistics to expect a substantial growth in FY24
Auto logistics is expected to grow by 10-15% in FY24, according to Vineet Agarwal, TCI’s Managing Director, who anticipates steady growth in the automotive segment, highlighting the company’s confidence in this sector’s potential.
TCI, with decades of experience in the automotive industry, provides a wide range of services to original equipment manufacturers (OEMs), component suppliers, and dealerships.
The company has strategically placed warehousing hubs and facilitates last-mile delivery across various locations through railways and roads. It has a strong presence across various segments, including two-wheelers, three-wheelers, four-wheelers, commercial vehicles, tractors, and earthmoving equipment companies.
In addition to domestic operations, TCI is actively involved in the complex logistics of importing and exporting auto parts globally, including both finished goods and completely knocked-down (CKD) vehicles.
TCI’s executives emphasized the significance of these opportunities within the context of India, the world’s fourth-largest automotive market, with substantial room for expansion due to low vehicle penetration compared to other countries. The growing middle-class population and ongoing infrastructure development are expected to boost vehicle sales in India, further contributing to TCI’s growth.
The automotive industry plays a crucial role in the global logistics market and the Indian logistics industry, which is currently valued at about US$ 15 billion and expected to grow at a CAGR of 10-12% in the coming years. Factors such as e-commerce growth, infrastructure development, and supply chain management’s increasing importance will drive the Indian logistics industry’s growth.
Regarding the CAPEX plan, estimated at approximately Rs 375 crore for the ongoing fiscal year, Vineet Agarwal emphasized that a portion of this investment would go towards expanding capabilities within the automotive segment. TCI presently operates three dedicated automotive rakes for transporting finished goods and plans to add another dedicated rake by the end of the fiscal year while expanding its truck fleet.
In conclusion, as the freight services business transitions from unorganized sectors to more organized ones, creating a favorable growth environment, TCI expects its supply chain division to maintain its upward trajectory, driven by the thriving automotive sector. However, the company’s highest-margin segment, Seaways, is projected to experience a stagnant phase in FY24, pending the addition of a new ship.
TCI has effectively addressed challenges in its sea and freight operations by leveraging the impressive performance of its automotive segment, positioning itself for sustained growth and profitability in the fiercely competitive transport industry.