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Express delivery firm TCI eyes acquisitions to drive volumes

Currently, e-commerce contributes barely 5% to TCI Express's 90% surface business. The rest 10% of its business comes from air transport

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The recently-listed express delivery company TCI Express Ltd, which will sniff for new business opportunities once the government puts in place clear-cut policies on manufacturing and goods and services tax (GST), is looking to spend part of its Rs 300-crore investment kitty on acquisitions to ramp up volume growth.

Chander Agarwal, managing director, TCI Express Limited, told Dna Money they would look at further pushing up volume growth by investing in new businesses and buyouts.

"Our investments will go into developing new businesses – something that we are not already in. For example, e-commerce may hold a big opportunity in the future – maybe in the next 2-3 years. Maybe, air cargo may hold a big opportunity. For example, if we are not in a location, we will need a last-mile delivery company where will go and invest (acquire)," he said.

Currently, e-commerce contributes barely 5% to TCI Express's 90% surface business. The rest 10% of its business comes from air transport.

"At this point, we are not looking at any one (last-mile logistic firm) because there is enough business on our hand to give us the growth. But once the GST dust has cleared, we could look at acquisitions to go for further volume growth," said Agarwal.

Currently, the express logistic firm has 25 sorting centres across the country, of which 18-20 centres are owned by it.

Agarwal said TCI Express intentionally kept growth in revenues from e-commerce vertical low to avoid losses. However, going forward, that may change.

"It (business from e-commerce customers) is very limited at the moment because whatever business we are doing is profitable. The moment there is a very big increase in numbers, the margins reduce and the cost goes beyond control and that is why most logistic companies in e-commerce are bleeding whereas we have a healthy margin," Agarwal explained.

"We can have hundreds of crores of business at tens of crores of losses (in e-commerce), which is not good for my investors. We don't want to grow exponentially at 100-150% because that would mean we have to take operational loss and I don't want to bear that," he added.

TCI Express is expecting a revenue growth of Rs 750 crore in the current fiscal. It has revised its forecast for revenue growth downwards from the earlier 35% to 20% because of the hit on overall consumption due to demonetization of high value currency notes.

Agarwal said his company would double revenues in the next four years and acquisitions could triple it in a decade.

"In the next four years, we will double it (revenues) and with the acquisitions, we could also be tripling it in a decade," he said.

Agarwal said with volume, the current net margin will also go up.

"Our net margin is about 5-5.5%. With all the paperwork and the unorganised sector moving out because of GST, our margins will definitely improve. We will not fight for 50 paise or Re 1 (like today). Business in logistics always grows on volumes; the higher the volume, the more profit you make. It's volume-driven," he said.

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