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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good evening, ladies and gentlemen. I am 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] Please note that this conference is being recorded. I would now request Mr. Ashish Tiwari to embark on this meeting. Thank you, and over to you, sir.
Thank you, Simran, and good evening to all of you. Again, all the participants, warm welcome to this quarterly investor call. We will begin with opening remarks from our MD and then followed by the presentation. So I will invite Mr. Agarwal for his opening remarks and presentation. Thank you. Over to you, sir.
Thanks, Ashish. Can you please put up the presentation? Good afternoon, ladies and gentlemen, and thank you for joining today's conference -- investor conference for TCI. So I would like to start by giving you a little bit of a brief of the last quarter. The quarter that went by, Q4, was a good quarter for us overall. The last quarter is typically the best quarter for us, and we saw that some of the businesses and all the businesses actually did relatively well. We saw good growth coming from our supply chain business, where we saw automotive growth really picking up, especially in the month of March was quite exciting because we saw good growth in all the divisions across. And typically, what we've also seen is that the core sector remains strong. Though there are certain sectoral issues, of course, cement is a bit flattish, as we know. We know that steel consumption also has increased. But the positive thing about that e-way bill numbers are extremely high, they are moving, which means there's a lot of movement that is happening as well as movement that will continue to happen going forward. GST collection is also very good, very robust, again, indicating that the macro factors remain quite strong. Certain sectors are a little weak, clothing apparel and some of the consumption sector, specifically because of, I guess, maybe some sentiments around the elections as well as the higher interest rates. On the Auto side, barring tractor segment, generally good growth is seen across all segments. There is the increase in the EV side of sales for a lot of customers. The customer discussions around alternative fuels have also increased, which has a bearing on the commercial vehicles sector as well. There is a certain amount of impact that we are starting to see, which is positive, which is the integration into global supply chain. There are lots of clients that are now talking about both an export, that is an exim kind of business opportunity. So I will talk more about some of these things as we go through the presentation as well as when you have your questions.
The business remains solid in terms of the kind of strength that we have with our 6 decades of experience and a very strong manpower force. Next slide.
I think this is well known, but the -- just the impetus around logistics has been phenomenal for the country as a whole. And I think this is going to remain with whichever new government comes in. We do believe that this will have -- there are some trends which are irreversible now in terms of what has to happen in logistics, which is, for example, the spend on infrastructure. Other than that, the consumer trends are always changing. There is a certain amount of demand that is going up and down, whether it is related to quick commerce or e-commerce. And then differentiated logistics services increase is also being felt now, where customers more and more different kinds of services. The PLI schemes are now -- a lot of them are in place. So what we do believe and feel is that, over time, some of these now, we will see production actually start happening for many of these sectors and which will have a direct impact on logistics as well. Just the fact that there is so many cell phones getting produced in India is leading to the fact that there would be a lot of SMEs that need to really supply -- become suppliers to these large companies also. So there is a high potential of growth -- high potential growth opportunity for many, many MSMEs also in this PLI scheme.
Going forward, the company strategy, our USP remains the clear differentiated wide range of services that we have, have been a factor of our consistent growth. We have built in the last decade a very strong, unbeatable multimodal network road, rail, sea. And the entire operations is, of course, tech run. We will also continuously incubating several high-growth sectors like the cold chain and so on, and we will continue to do that.
Going forward, these are the list of services that we have and the sort of verticals that we service today. We are present in almost all the high-end kind of where we are able to essentially extract more value in versus doing more commodity kind of transportation and logistics services.
So energy renewables or aviation defense or even the chemicals side, we've been able to service our customers with a very high degree of value-added services. Customers like all of this because they are able to see a single window solution as well as they get overall operational cost efficiencies.
The next slide is an example of a case of a company that is setting up -- has set up -- FMCG customers setting up a DC. And earlier, the setup was a very legacy-based operations where the overall inventory accuracy or visibility was very poor. The cost was not very visible. And there was, of course, still sale issues that peak time, there was difficult to manage demand, et cetera.
And of course, with stock-outs happening, customers, lots of customers also there. We suggested a solution, which is a completely rack-based solution and we were able to reduce their ADA requirement by 40% and increase all the major throughputs, all the SLAs around productivity, around accuracy, around transit times, around speed of delivery. This is approximately 1.75 lakh square feet facility. And like this, there are several such discussions that are underway with customers across the country around the pipeline is quite strong.
In terms of multi-model from road, rail, coastal perspective. Last year, we moved about 2,300 rigs across the country. And this has increased in the last 3 years from 1,372 rigs. So this is a clear demonstration of movement towards more and more multimodal activities, close to 30%, 35%, 33% of our business is now coming from multimodal businesses.
In terms of the rail operations, just -- I should just go back, please. Rail operations, we are handling -- now handling from about 60 terminals across the country. Ships are touching 7 ports. And the road network, we have 25 hubs as well as 65 yards to service last mile of finished goods for the automotive sector. The network -- this network effect is very unique because this combination of road, which is the -- on the ground network, combined with other assets around rail, as well as sea makes it unique because we are able to move customers across various modes of transport seamlessly.
Technology is driven for our business now. And the core business is -- has a very strong ERP system. We built a cybersecurity layer around it as well as a high degree of digitization that already exists. We are present in many sectors, and some of the sectors that I mentioned here have definitely a larger growth trajectory, and we are able to service them with our specialized specific products. And sometimes even standard products, but they are able to essentially use our services across the value chain across the entire supply chain, actually.
Coming specifically to numbers, the quarter 4 was the highest quarter for us so far. And every quarter has been higher than the previous year's quarter. The diversification of our services has definitely helped. And we also have no net borrowing is at -- still at 0 with about INR 350 crores close to INR 400 crores of cash.
Specifically around the freight business. The freight business for some of you is a business which requires both FTL and LTL. For most customers, there is a need for providing services from any place to any place as well as customers are now looking for more and more digitized solutions. So we do operate control towers for a number of our clients. Next slide.
We have 25 hubs across the country and provides single window solutions to many of our clients. And as experienced at one point, for some customers, we now have bots that read their orders and place them into actionable items, actionable placement of trucks and then subsequent tracking of trucks, et cetera.
The business was slow last year, and mostly because we were not able to grow our LTL business because of competitive pressures. We are seeing that there's some competitive pressure, not just in this business, but also coming from the Express side of businesses, where some of them are starting to move down to lower pricing models, and that has had some impact on the LTL side of business. But we are now confident to push this harder, and we're moving towards 40% not next year, but the year after next. The EBIT margin has come down to 3.4% for the full year, though the quarter is relatively better from a revenue perspective. But from a profitability perspective, it was slightly surely lower than anticipated. The return on capital remains at around 20% plus, and we do expect to maintain this as well. On the supply chain side, the network effect as well as the impact of the kind of services we provide, is very high. We are a company that is known in this business of providing high-quality services as well as driving value for the customer where it come -- whenever it comes to their needs. And we've had consistent growth here for the last 2 decades. And the business, though 75%, is in the automotive and related areas. It still has a high degree of growth because as we know that automotive sector contributes a large percentage of the manufacturing sector anyways. The number of vehicles that we have moved in this or are under operation has increased. The yards have increased as well. We are now handling more than 1 billion parts, production logistics parts every year. And as mentioned, more than 150 trains per month for the finished goods movement of automotive through -- which moved from a Hub & Spoke to our yards. We have been able to enhance our warehouse space to about 15 million square feet. The business did relatively well in the last quarter, grew at about 11%, and the top line for the full year grew at about 14%. Again, the automotive sector has had good traction. Of course, we know that the tractor segment did not do as well and the earth moving equipment, but the other segments have done quite well, including the 2-wheeler segment.
The EBIT margins have moved up a little bit as well as the ROCs have also moved up. On the Seaways side, next slide, is 6% is the current modal mix of Seaways, which the government has planned to increase to 12% by 2030, which includes inland waterways as well. Next slide.
Our capacity expansion has unfortunately not taken place here. And the ships -- 2 ships that we had got canceled. So we are still in the market to look out for buying 2 new ships, and we're talking to new shipyards. Hopefully, the next few months, we should be able to get a better connect on that.
And we will add -- we've added INR 75 crores in terms of the proposed CapEx for this in case we are able to tie up the new ships. Anyway, any such delivery will anyways happen after 2 to 2.5 years. So in the meantime, in the -- by the end of this financial year, early next year, we are also looking on for the second batch.
The business was expected to come down. However, in the quarter -- last quarter, it has moderated. Revenue growth is still flat, but still not negative. Overall, for the full year, it is about 7% negative and 16% on the EBIT levels. Again, this had to come off. We were talking about how we were not necessarily at the optimal levels. And I think we are slowly getting there.
Next quarter onwards, we will see lower depreciation for this business because almost a lot of our ships are getting already depreciated. Fuel prices remain in the last 4 months, actually, fuel prices have again gone up, the bunker prices. And out of the 3 ships that require dry docking in FY '25, we've finished 2 already.
On the joint venture side, our -- the Concor joint venture did reasonably well with a 13% top line growth and approximately 10% bottom line growth, 10% to 12% bottom line growth. The cold chain business grew at about 35%, and the Transystem business grew at about 46%.
The Transystem business has done quite well over this year because of the strong growth trajectory that we are seeing at Toyota.
In terms of financial numbers, standalone numbers for the year are up by 6.3% and PAT numbers are up by 8%. For the consol level, the consolidated numbers for the full year is up 6.7%, and we crossed INR 4,000 crores. The EBITDA has also crossed INR 500 crores at a consol level. And PAT is at INR 354 crores for the consol level. EBITDA remained strong at 13x. CAGR growth in profitability is at 20% and business remains at 24%, excluding the cash element in terms of returns, and roughly about a 20% return on net worth. The dividend payout is about 15% to 20% every year, and this year also that has been maintained. The ratings have not changed. We've added our Dun & Bradstreet rating of 5AA, which is the highest category possible.
We have been doing a lot of work on the ESG side. On the environment side, I've mentioned about how 30% plus revenues come from multimodal and this has increased in the last year. We are producing green points for our clients as well. And vehicles have been converted into CNG. As well on the social side, again, a lot of activities are underway from a road safety perspective. We are providing one of the largest road safety programs in the country today with our Safe Safar initiative. Next slide.
The expectation for the next year is about 10% to 15% from both top line, bottom line. I think we are a little bit more confident this year. We do expect quarter 1 to be not as strong as it is usually is because of elections. But given the fact that the -- it's expected to be a good monsoon, monetary policy might get eased. We do expect this year to have a strong festival season as well.
We are maintaining INR 375 crores budget for CapEx with INR 100 crores odd in hub centers, small warehouses. I mentioned about the INR 70 crores, INR 75 crores for the ships. And trucks and rigs about INR 100-odd crores and similarly about INR 7,500 crores for containers and other equipment.
Thank you so much, and I look forward to your questions.
[Operator Instructions] So the first question is from Mr. Jainam Shah.
Sir, just want to dip down on the growth, revenue and growth -- profitability growth part where you mentioned 10% to 15% growth overall. If you can highlight something on the sector-specific part as well as how the JV is expected to perform in this particular year. And like any bifurcation of this 10% to 15%, any sector or any segment we expect to perform right there, any segment to perform a bit lower or something?
We do expect the supply chain business to definitely do much better. We expect the Seaways business to be a little bit more on the flattish side and the freight business to be slightly positive. And the JVs are also expected to do well. So there should be some contribution from that as well. So it's going to be a mixed bag from all around.
Okay. Sir. And sir, just wanted to confirm this CapEx part. Are we envisaging CapEx for addition of second-hand ships for this year or it will be rolled to the next year? Because in this presentation, I guess this INR 7 crore has been mentioned for the ship CapEx.
INR 70 crores. INR 70 crores is mentioned for -- it's CapEx. Actually, it's incorrect, I'm sorry. It should be INR 70 crores. There should be another 0 there.
So INR 70 crores is the CapEx for any new ship that -- new orders that we might face, and this will be the advance of that order. A second-hand ship is thought about, but we've not taken to the budget yet because we don't have visibility of that. Maybe in the 6-month mark or maybe in the next quarter, if we get a better visibility, we'll certainly add that on.
Got it. Got it. And sir, just wanted to check on one Board resolution that you have passed about INR 200 crore of fundraising through debt instruments. So is it just an enabling resolution? Or are we going forward the increasing debt through these instruments?
No, that's just enabling resolution. .
Okay, we are having around INR 300-plus crores in the current investment. It will be majorly mutual funds, right?
They are mostly commercial people, yes, and some part is in the mutual fund.
Okay. Got it. And sir, as this year would be -- might be lower or even flattish for the shipping business, how we are expecting it to be on a longer term, maybe 3 to 5 years perspective, given that new ships would be added, and there might be some existing ships that might get out of the system as well. So are we looking at the sector from 3 to 5 years' perspective?
Definitely a growth element. The sector should -- sector will grow. The business should grow for us. We are adding capacity because we believe in the sector, and it is very critical to our overall strategy of providing multimodal services.
Government initiatives are quite good. There are ports coming up. There's also only tonnage tax in this business. So it is attractive. If you know the business and you're able to provide the linkages like we have of our branch network as well as the multimodal capabilities. So yes, it is a sector that we are definitely quite bullish about.
Got it. And sir, just 1 last question from my side. In your comment, you mentioned that in LTL business, there has been a competition coming from the Express players as well who are cutting down the rates or maybe charging lower as compared to what they were charging. So how the exit things are going on? Like it is on specific routes or a few specific players are cutting down the rates at the cost of margins or is it like just a temporary phenomena that they are doing.
I do not know if it's temporary phenomena or permanent phenomenon, but I can definitely see that some of our competitors were losing me are -- well, we've not considered them as competitors till now. But we do feel that some companies that are losing money are really trying to get into this space as well to bring down, I mean, just capture market share.
So -- but I think long-term trends have to be seen where we have to keep a watch on those customers that are essentially where you are providing multiple types of services. I think those are more sticky to us. As well as, ultimately, customers see a lot of value in the delivery systems that we have, the fact that we are providing safe, secure services and ethical services, I think that those are things that will really play out in the future.
The next question is from Mr. Alok Deora.
First, on the Seaways division. So sir, what's the status on the secondhand ship? I mean, are we in discussion with any -- any party for that? Or -- and if that comes, then would we be placing the order for the new ship also? Or does that go parallelly? Or if one happens, then the other one takes a backseat?
No. So what -- the first priority is to look for new ships, that is buy them and place the order because it's a little bit more of a long-term play. It is not going to come today. It's going to take 2.5 years to come. So that was the first priority. Simultaneously, we are also looking at secondhand ships. So we are in the market for it. We are looking to see if find something. But it's not very visible. I think with the Red Sea crisis, et cetera, the market has become a lot more tighter. So we are waiting to see how things progress. And hence, we are not adding that to the CapEx yet because it's still very, very tentative. So please bear with us because it is that time where the -- it's really very unpredictable when it comes to visibility for what's available in the market.
Sure. And sir, so assuming this go ahead with the new ship order, which eventually would come by, say, in next 2, 3 years. So what is the growth outlook for the Seaways segment in the current scheme of things because this year, we have seen sort of a degrowth in that particular segment that primary would have been because of the dry docking and lower capacity available and also some correction in the freight rates. How do we see that segment growing in FY '25 and '26?
So in the last year, it did not -- we had a 7% degrowth because we knew that, of course, the rates that we had got in the past because of the post-COVID, et cetera, had to come down and they did come down.
The other aspect was that we did not do international routes as we have done that time opportunistically. The -- however, this financial year FY '25, we again expect the volumes to be moderated. We have some impact because of the dry dock. But then in Q1, all the dry docks will be done, so we should start seeing their impact, the positive impact over the full course of the year. So the expectation for FY '25 is flat. The FY '26 expectation is essentially going to be built on the -- if you are able to acquire a secondhand ship end of the year or early next year. Clearly, we are not factoring in anything for the new ships because they will not come for the next 2.5 years, 3 years -- 2 to 2.5 years.
Sure. So just last question. So our margins on a blended basis as being in that 10% to 11% sort of a range. So do we see that improving here because the Seaways, we don't see much growth coming in, which is the highest margin segment for us. So how do we see the margins shaping up in the supply chain and the freight business ahead?
As I mentioned, supply chain should definitely see a positive growth this year as well, and so should the freight business. So overall, margins should creep up a little bit for sure. It should not -- it will not jump up like it did because of the Seaways margins, but it will certainly creep up.
The next question is from Mr. Krupashankar.
So my first question, Vineet, is on your guidance of top line and bottom line growth. What you're citing is more of a flattish trend in CVS business and LTL, given the competitive intensity in LTL piece of it, freight should marginally improve, but again, most of the growth will come in from supply chain business. But that translates to close to about high teens sort of growth in supply chain business. Is my understanding correct?
In mid-teens to high teens, yes, we -- supply chain, business is about 39% of our overall business today, and freight is about 44% of our overall business. Seaways is only 14%. So that -- the growth there is not going to have a major -- I mean, there's not clearly not a major impact because of that. So yes, supply chain will capture a large part of the top line growth as well as the bottom line growth as well as freight should also see some top line growth. It's not that it's going to be completely flat.
Got it. And now -- and on the freight business. While we had added branches and boosted our infrastructure to get it to incremental demand which was coming our way on the LTL side of things. Is it quite likely that there's the fixed costs, which were not absorbed in FY '24 due to scaling up, you'll see that the margins will revert back to 4%, 4.5%? Or are you expecting the margins to remain at these levels because of competitive intensity?
No, we do expect -- see the margin has also had an impact, not just because of fixed cost but also the shift -- and you're right that, that certain amount of fixed cost increase did happen because of the anticipated growth in LTL business, I mean, that did not come through. Some of that margin pressure came in. But some of that CapEx will -- sorry, some of that capacity addition in the LTL side of the business has happened. And some branch network will get expanded.
We're looking to open another 75 branches this year. That does not add significantly to the cost structure. What adds is the lack of volume in the truck because any truck that goes less -- more empty, you lose more money. So the idea is to see how we can utilize the trucking infrastructure that we have there. And that, fortunately, for the freight kind of business is not exactly always a fixed cost.
It's a variable cost also because we don't -- we employ a truck when we need it rather than in an express business, you have to have the truck. You have to have the schedule, irrespective of whether you need it or not. We do have that on certain routes, but not entirely. So that's why this business has a lot more flexibility. And going forward, with the trust on LTL business, I expect the margins to also start improving. So I think we should get back to the 4-ish percent level.
Understood. One last point on the LTL piece itself. Now with respect to the undercutting of pricing, what you're seeing, how would you rate the price difference vis-a-vis the average yield of the industry? So how much lower is it, and which is resulting in the impact in volumes or rather shift happening to these companies?
I would not be able to give you an exact number. But typically, we are anywhere route wise or just generally 10% to 20% lower than the express type of companies.
No. What I meant was the incremental competition, which is coming in. Now they are also undercutting quite extensively is what you highlighted, right? So how much of a difference would that be, vis-a-vis, our current yields?
Yes. So that's what I'm saying. The price differential is about 20%, let's say 10% to 20%, depending on routes, et cetera. So our yield is lower by that. And hence, they are -- if they are able to bring down their price incrementally down, then they hit our cost structure, which then the customer might want to switch.
So the next question is from Mr. Pinaki Banerjee.
Sir, in the presentation, you are giving a growth guidance of 10% to 15%. But considering the fact that we are in the midst of the elections and also the monsoons setting in, you have also mentioned that Q1 will also be flat. So basically, you are expecting to make up the growth actually will be harping more on the second half of this financial year. Is my understanding correct? I think you're on the mute. Your voice is not coming.
Sorry. I'm saying that, yes, the business is still going on as is, but it's just that sometimes, right now, it's a little slower. However, you are right, some of that will come in the second half also we are expecting the festival season to be better. So yes, but generally speaking business continues, and I think from June onwards, July onwards, it will be at the same nominal levels, I think, as it has been generally.
Sir, your debt levels have gone up from INR 62 crores to INR 150 crores roughly. So what is the actual reason for this?
So we have taken some new loans against the truck purchase just close to INR 50 crores, but it also includes lease liabilities as well.
Sir, sir, last final question. Sir, you are serving various sectors, like agriculture, chemicals, automobiles, et cetera. Sir from which sector are you expecting the maximum growth? Like do you see that automobile has done phenomenally well in FY '23? So which sector are you harping on most of the growth to come form?
A lot of the growth had also come from the automotive sector for sure. Then, of course, we are seeing good growth on the infrastructure side for companies, which include the engineering companies or related segments. And as well as that, there are always new segments that are growing like chemicals and others, which will continue to add to the segment impact.
The next question is from Mr. Sunil Kothari.
Vineetji, broadly, the way I would like to understand is you -- over time, you are always moving higher in the value chain, you are reducing competition by increasing your services and your qualities, so which are the things you are doing to say, keep away this unhealthy competition like full load truck, you move to half load or lower load. And the supply chain system, so many technological investments you are doing. So would you like to understand the entry barriers you are able to create or you will be able to create and sustain this type of margin and profitability?
Yes, entry barrier essentially starts with the fact that you choose the right customer because there are many of our competitors who are essentially chasing growth and not profitability. So when you choose the right customer and you work with the right customer to provide them value, they also appreciate that and they work with you together.
And there itself, then you start to create -- when you create value for them, you create the moat, you create the decision. And value comes from various factors. It could be technology based. It could be the network effect, which is the branch network, et cetera, or the service effect where we have the services or the multimodal effect where we are moving customers to different modes of transport. So all of these factors and ultimately, you provide a solution to client. And they like that, they prefer that, and they remain sticky with you. And that's been our philosophy.
And if you see the last 25 years, the consistency of our growth is essentially based on this platform.
Right, sir. And 1 more question, just to understand this. There are 2 types of customers, 1 is they themselves manufacture everything like Voltas, just for the example, air conditioners. Then second is type nowadays there are many who is increasing outsourcing, there are custom manufacturing, which is going up. So what -- how is the mindset of theirs, which is better customer or where you see opportunity?
See, all types of customers, whether they are self manufacturing or getting manufacturing done outside, contract manufacturing require a robust supply chain. And that supply chain is a factor of movement, warehousing as well as delivery. So all of those things have to be done irrespective.
And if companies are who want to really lead in growth grow their business as a sector, focus very strongly on supply chains. So I think this is an ongoing work with many clients on irrespective of the kind of production model they have manufacturing model they have. They will have -- certainly have requirement for logistics.
Do we have good enough customers from this EMS or contract manufacturing side?
We do work with some of them, and it's -- obviously, a lot of them are starting up and growing more. So there is that working.
The next question is from Mr. Anshul Agrawal.
Vineetji, my question is on the lines blurring between LTL business and Express operators. Is price the only reason why this is happening? Because I always -- because if that's the case, then this seems to be a structural change versus some tactically, some player reducing pricing. Because I was of the opinion that in LTL business, cargo profile defers, shorter routes versus an express route and all that stuff. But is pricing the only reason why we are seeing load shifting from LTL to express operators.
So some of that is pricing, and this is not specific to all industries, but some specific types of companies might want to shift there. But the LTL market is robust by itself because there are a lot of types of products that move in the LTL market, which are not done by the Express. For example, there could be a 200-kilo pump or a small turbine. Now all of that is not really going to be going by Express because it's too expensive.
Similarly, there are other engineering products. So there are some other products that will not go through Express. Sometimes they are a little lower value products also. So I don't think it's a direct competition. I think there are sectoral some types of competition and sometimes on specific routes. So I do not think it's a generalized comment.
Got it. Would you be able to give us some examples around which are the overlapping products or subsegments wherein customers may want to switch from LTL to Express provided the pricing agrees?
So let's say, for example, some apparent type of companies, which were a little bit on the lower value side, and they want to -- now they are using Express because they have brought down their pricing. So like this, a few sectors like that. .
Got it. Got it. Very useful. My second question, if I may. So even in the freight business, is there a contraction in our FTL margins or the contraction is margin is on the back of margin compression in the LTL business?
So there's no margin compression per se in the LTL business. It's just that there is -- well, I guess you can say that because I think a certain amount of fixed cost gets attributed to margins of the yes. So that is there, certainly. And on the FTL side, I think there's a very small margin compression, not much.
And this would be on the back of increased competition in the unorganized market or general slowdown in volume trajectory?
Yes. I would attribute it to just general slowdown, not specifically any higher hypercompetitive situation.
The next question is from Mr. Ronald Siyoni.
Congratulations on a very good set of numbers in a tough environment. First thing on the multimodal mix, which you highlighted at 33%. So if you can tell us what was it last year? And as you had also highlighted that this is a core competency, what is your target going there?
So we are continuously building on this. We have probably moved 100 to 200 basis points over last year in terms of the volume. Of course, as you know, the CVS volume has come down a little bit, so that -- not volume as well as the revenues have come down and hence, the -- it has not grown as much as it would have generally. And anticipated growth is that we will continue to talk to our customers more and more and try to push towards rail services and coastal shipping services. So I'm hopeful that a 100 basis point type of increase every year, 200 basis points will definitely help move this number.
Yes, yes. Yes, I have a strike. And secondly, on Seaways. Like you said 1 main issue because I was under the impression that you were looking for 2 smaller ships and probably 1 secondhand ship. So is it not finalized that either 2 smaller shapes or 1 bigger new ship in the Seaways?
No. As I said, last year, we had finalized 2 smaller ships and we placed the order, but supplier backed out of the order. And so we had -- that got canceled. So we are now looking to again find a shipyard that will accept those orders. So we are still in discussion with some of them.
But it would be a smaller size only, right?
Yes. 2 ships are smaller ships only, yes. .
The next question is from Mr. Divyansh Gupta.
One quick question on the ship order that we have given to that shipyard, Japanese shipyard. So do we have any money stuck with them or everything, no money exposure...?
No money, no money exposure.
Got it. Second question is with respect to the cash flow statement. So if I go in the cash flow statement, there is something -- there is an increase in other assets. And if I look at the last year balance sheet, it was attributed to something known as capital advances, which was at least majorly caused due to capital advances.
So what is this nature of capital advances? Why is it being incurred?
So basically, these are the advances for, let's say, building new warehouses, new hub centers and those are in the building and under construction. So they also categorized as other assets.
Got it. So mostly CapEx-related items which are...
They are all CapEx-related items.
Understood. Understood. And Vineet, third question with respect to the Transystem business, right? So now it is -- which is actually pretty comparable to our freight business, like INR 1,600 crores versus INR 1,000 crores of revenue.
So if you can just -- and growing very fast. So can you give it -- give more light on, let's say, apart from, let's say, Toyota, as you mentioned in the opening remarks, what is driving this business to grow at such a fast pace and without putting more capital employed, our profit has almost increased by 50%. So some light on what is driving this whole business and how it will evolve?
So this business is essentially managing the logistics of Japanese automotive companies, and we -- the primary customer here being Toyota. And of course, Suzuki because Toyota and Suzuki are working quite closely together. The business is actually more akin to supply chain, not freight because it is complex in terms of the logistics services and entirely automotive logistics. So that's the similarity. The business has grown because as you know, Toyota production has grown tremendously and they're doing quite well. And the business does not require additional capital more -- a little bit of CapEx that is required that get self-funded and also the working capital requirement is also self-funding. So does not require additional capital.
And the trajectory for the business remains positive. I think we should look at a 20%, 25% top line growth also for this financial year with a similar growth perhaps on the bottom line as well.
Got it. So is it only Toyota, Toyota plus Suzuki? Or let's say, Toyota is like 70%, 80% or some...
It's a high number, but it's all the Japanese automotive companies both on the OEM side as well as on the supplier side.
Got it. And what is the exact role that TCI plays? So are we running those, let's say, supply chain solution, trucking logistics, everything, or what is our role in the JV versus Suzuki or Toyota's role in the JV?
Suzuki, Toyota are not part of the JV. Mitsui and companies are JV partner, and this is a company where we have come. Yes, can you hear me?
I can hear you now.
Yes. So Mitsui and company is our JV partner, and we have both of our teams have been accounted to that company, which runs the operations there. The business, also the joint venture also outsources some of its logistics to TCI as an operator. But the business is run by its own independent team. .
Got it. So if I have to say that my TC is like TCI is one of the vendors to the Mitsui -- to the JV, but operations is managed by TCI accounted team, whereas Mitsui brings in [indiscernible].
TCI and Mitsui accounted.
Got it. And Mitsui brings in, let's say, the clients or, let's say, whatever they have on-boarded, Toyota is the biggest client for the JV.
Yes. I mean it's 25 years since the JV was formed. So I guess we now have equal role to play both partners.
Got it. And any plan of expansion of more clients in that JV or it's early....
See Japanese customers, Japanese companies today have more than close to 60% market share. Primarily driven by Maruti, of course, and OEMs are also quite large. So there is a large opportunity, and I think the focus around Japanese OEMs really, really helps the company to acquire clients, specifically.
Got it. And just last question. When you -- in one of our earlier discussion, you had mentioned that, let's say, the automobile is 40% of the business for TCI, then this 40% more or less resides in the JV?
NNo, no, no. I said 40% is the manufacturing. Today, India is manufacturing GDP, 40% is automotive sector. So it automatically becomes a large portion of our logistics business.
The next question is from Mr. Vikram Suryavanshi.
Can you just share, I think I missed the branch addition number in trade segment. What was that for full year? And how is the branch addition plans going ahead?
Thirty was added last year, Vikram, and we are planning to add 75 this year.
75?
Yes.
Okay. And basically, if you look at SEM business, apart from the non-net, how is the progress of customer mindset to onboard 3PL players? And which are the segments where we can see fortunately for, say, 3 to 5 years in terms of SEM, basically.
So very good opportunities has in the last, I would say, 6, 9 months, we are seeing a very, very strong pipeline coming up. I mentioned about the case study about an FMCG company. There are several FMCG companies that are lining up for this kind of structural change in their business -- then we are talking to -- there are some e-commerce companies also that are coming up, they have become significantly large also. So we are providing fulfillment services to them.
Consumer durables are also quite active and hot nowadays from a perspective of outsourcing more and more of the logistics. We are seeing chemical companies talking to us about facilities. Retail is also quite attractive, and we are talking to a number of companies there. So we are quite bullish on the overall non-auto sector as well and we're seeing good traction in everywhere.
Okay. And in case of freight business, so is it largely, because I guess we also have regular customers in freight and renew contracts regularly. But is there any significant portion which we come to on a spot basis to us on freight or it is more like routine customers with more like a contract kind of business?
More routine customers, and there are spot customers also that come. I think I don't have a number, but definitely about 20-odd -- 20%, 25% of customers do come on spot basis.
And is there any opportunity to create -- like you might have seen a lot of players come and create platform for truck operators to -- for their convenience for booking and load and all that and since we are in a freight business. So as I already know much better about IT systems. So like any opportunity for the spot business or any creating platform as additional service or revenue opportunity for us, or it's still -- what are your views on that kind of opportunity?
So we operate our own internal apps, where we are -- our requirement is put on that app. And when we have suppliers who are there who have on-boarded on to that, they can bid for that kind of our requirement. So that exists already -- that's been there for many years.
Okay. But is there any potential to monetize this kind of service and expand to larger...
No, no, that's not our business, our business is to service our customers. So there are I think a lot of other people doing that. And we'll -- we might invest into those businesses separately but not monetize it internally.
The next question is from Mr. Vikash Khatri.
My question is 1 thing -- 2 or 3 questions. First is, how in last year, LTL yield has changed. Has it improved because competition is coming so how our yield has improved or gone down? Second is largely a conceptual question since DFC is coming in recently, DFC did trial of the Ro-Ro surveys. We have seen Ro-Ro very successful on the Konkan railway. Do you think impact in 3- to 5-year term on Northwest or Northeast lane because of the Ro-Ro FTL pricing and FTL demand?
See, the rail business, DFC is something is a game changer for the country as a whole, and that would help to move the cargo to more to multimodal network, which is great for the country.
And we -- it's not that it is going to affect us negatively. I think we are piggybacking on this kind of an increase and opportunity as well. So it will possibly lead to some pricing pressure I think because the DFC, you have 2x the kind of length of the train and you do double stacking as well as double the speed. So almost an 8x kind of an improvement in productivity.
So certainly, I think there is space for it to have a very positive impact.
And second question was on the how yield has been more...
Yield has not really changed much. I think we've been trying to maintain the yield structure to a great extent. And I think the loss of business is what has driven profitability to be a little lower on the freight side, or lack of growth of business.
So -- but cost structure is -- sorry, revenue structure remains stable. Also, I think we've been able to push customers for some price increases wherever possible because of inflation.
There are no further questions. Now I hand over the floor to Mr. Ashish Tiwari for closing comments.
Thank you, Simran, and thank you very much to all of you again joining the call. I hope that all the questions have been answered. In case you have any further query, please feel free to connect with me. All of you have my contact number and e-mail ID. So see you in the next quarter again. Thank you so much. Take care.
Thank you, everyone. Thank you.