‘We are revving up non-truck business’

Transport Corporation of India, which started as a one man, one truck organisation in 1958, is today the country’s leading private-sector logistics company with a fleet of 7,000 trucks and operations in several other segments. TCI offers a complete range of logistics services and is all set to change its image from a road transporter to an integrated supply chain solutions provider. Vineet Agarwal, executive director, TCI, spoke to DNA Money’s Archana Shukla about the company’s current priorities and future plans.

How do you plan to achieve Rs2000 crore in revenues by 2010?
We have been growing at 20-25% every year for the past two-three years. As a group, this year our turnover would be around Rs1,400 crore, where the listed entity would be about Rs1,200 crore and the other group companies would contribute another Rs200-300 crore. So, taking a compounded average growth, we would comfortably be above the Rs2,000 crore mark by 2010.

What are your investment plans for the company?
We started our investment plans of about Rs450 crore last year, to be executed in the next four years. Out of this, we have executed Rs100 crore in buying warehouses, ships, IT upgardation, etc last year and the remaining will be utilised in the next three years. The division presented as part of the note was that Rs150 crore will go into warehousing and ships each, Rs125 crore into acquiring trucks and another Rs125 crore into IT requirements.

How do you plan to raise this capital?
We are open to any other fundraising mode; debt is clearly one and as we are at a very comfortable level. We have a consortium of banks led by SBI, Citi Bank, HDFC Bank, which is mainly for working capital requirement. So, we can use them or look at some other company. We would also look at FIIs if the need be. Last September we raised about Rs53 crore through preference share allotment to FID Funds (Mauritius) Ltd.

Would you look at diluting your stakes further?
We do not foresee the need now and do not want to keep funds that are inactive.
We, however, do receive enquiries from a lot of investment firms, which are attracted to our business, mainly because no other company provides as many services under one roof as we offer.

How do you plan to expand your trucking business?
Currently, we own about 1,100 trucks and going forward we want to create capacity for our clients on a dedicated contract basis. The fleet acquisition would be based on our customer acquisition. It is not the number of trucks that might get added but more specialised trucks would be a part of our fleet. We are buying higher tonnage trucks so that instead of buying five trucks of nine tonnes capacity each, we might buy one 45-tonne truck.

Which segment in trucking gives a better margin, LTL or FTL?
In trucking, we work on different segments, lower than truck load (LTL), full truck load (FTL), over dimensional cargo and mail cargo. Margins are good in over dimensional cargo, simply because it is very technical and requires high-end logistics. One needs to plan the route and the cargo, as it carries very huge equipments that need to move in a particular manner. Following this the margins are good in LTL and then FTL.

With railways coming in a big way, will trucking take a back seat?
Ninety-five per cent of railway movements today are commodities and there is life beyond that also — auto, electronics, consumer durables, etc, which require road and air transportation. Other disadvantage is that railways do not have door to door service. Third, railways is not very friendly when it comes to volumes of cargo, they are good with weights.

So, yes they might come up with policies, but to change the mind set of companies like Samsung, Bajaj, Godrej, Maruti, etc is difficult unless they start using railways aggressively. However, as an organisation we feel that rail and road together would do much better, rather than anyone of them taking a back or a front seat.

What is the status of your JV with Container Corporation of India (Concor)?
Concor is the largest player in the rail container movement and we are large in the road transportation movement. The idea of the joint venture was that we provide complete integrated door to door services to our clients. We currently do work with Concor on certain aspects, get some specific rates, some selling together and are trying to build that agreement.

What about your cold chain business?
It is at a very nascent stage. It is developing. However, we have developed an expertise in that because we have been operating for the past 4 years and the kind of services that we provide are superior.

Our trucks are global positioning system (GPS) linked for locations as well as for temperature control, so we can track both. We had used Yanamar trucks on an experimental basis but now we are building some trucks on our own in India, buying the equipments locally and building that.

We own more than 50 reefer trucks. Applying a similar strategy, based on our client acquisition, we plan to double our reefer fleet in the next one year.

What are the challenges in cold-chain logistics in India?
Challenges are different in different countries and in India it is based on how the consumption patterns change. This is when we need to see from where do we buy the produce, what all will we required, where will the cold chain start.

The government policies favour single reefer truck owners by giving some benefits on tax which a company involved in cold chain cannot avail to. Also, the cost of importing some of the cold chain equipments is very high. Besides, cold chain business essentially starts at the farm level and getting to the farm level is a problem. So only if the infrastructure gets to that level we can actually make a difference.

What is growth strategy for warehouses?
By the end of this financial year we would be close to 7.5 million sq ft of warehousing area, which is a mix of owned, leased and rented spaces. We have a capex of Rs 150 crore for the next three years for warehousing and it will add about one million sq ft of owned area.

Beyond that, every year we are also acquiring clients on a rapid pace and depending on client needs we would add about 1-1.5 million sq ft of area every year, leased or rented.

Are the locations finalised?
We are acquiring land in all corners of the country — Gurgaon, Pune, Kolkata, Bangalore, Chennai and Nagpur. We are in the land acquisition process in some places and for getting clearances at others. The land has been acquired in Gurgaon, but clearances are awaited. In Pune we have everything and will start construction soon. We have the land in place in Nagpur.

What’s the reason behind projecting TCI as a supply chain solutions company?
A clear focus from our end is not to be seen merely as a road transportation company. Earlier, trucking used to be about 90% of our business and it is based on a lot of variable factors, such as demand-supply cycles, seasonal variability, etc. These have, in the past, affected our margins a lot, our Ebitda margins used to be about 3-5% in tucking.

Over time, we also realised that customers need complete single window service providers who gives them all kinds of logistics support. The range of services that they need is today much more than trucking.

So the diversification into higher value services or which creates a larger market share of the customer was the strategy. Now trucking has come down to 50-55% from 70-80% some years ago and we plan to further bring it down to 40-45% in the next 4-5 years.

What opportunities do you see in automobile logistics?
We have a joint venture with Mitsui & Co of Japan and the work that we do with them is primarily for Toyota Kirloskar Motors. Apart from that we are the largest player in automobile logistics in India and as part of our supply chain solutions department we do milk run systems for the auto companies.

If you take the entire auto supply chain, there would be either supplying parts to the production units or components or spare parts or transporting the cars to the dealers, we do all.

Have you finalised new locations for your international operations?
Our Indonesia and Singapore offices started operations in 2007-08. Now we are looking at two-three other locations in Asia and have finalised on Hong Kong and Sanghai. It is waiting for approvals, and in the meanwhile we are putting the manpower in places. We expect to start operations in these locations by the end of the first quarter of FY09.

What are the bottlenecks in this sector?
The biggest bottleneck is lack of proper infrastructure. AS part of one of the studies we found that about 300 pregnant women die everyday because they cannot reach the hospital on time.

So, a lot needs to be done in that regards. Secondly, look at the number of regulatory departments that we have as part of the logistics sector—shipping ministry, ministry of surface transport, customs and excise, railway ministry, civil aviation ministry. But there is no single body to coordinate them.

What is TCI’s market share in the Indian logistics industry?
The industry is so fragmented and large that every segment has its own market share. A good benchmark is to say that we move 2.5% of India’s GDP, which shows the kind of business volume we are moving.

s_archana23@dnaindia.net