Logistics services provider TCI Express expects its EBITDA margin to improve to 14 per cent in the remaining quarters of the current financial year after its first-quarter performance was impacted by general elections and heatwave conditions, according to the company’s chief financial officer Mukti Lal.
Strategic changes such as diversification and automation of sorting centers would help the company achieve a higher operating profit margin.
Lal also told NDTV Profit that the company’s capacity utilisation is expected to increase to 83-84 per cent in the remaining quarters of FY25.
« We were expecting the first quarter to be impacted by the general elections. But we have already seen an increase and we expect stable prices going forward. Our capacity utilisation level will increase from 82 per cent in the first quarter to 83-84 per cent, » Lal said.
Lal estimated that the company’s margins would improve to around 14 per cent by the end of FY25. He added that the reduction in margins in Q1 FY25 was a one-off issue.
The logistics service provider reported a margin of 12.1% in the first quarter.
“Margin has never been a challenge for our business. TCI Express is focused on qualitative growth. We are always ahead on margins like 15% EBITDA margin because we are an asset-driven business which converts directly into profit before tax (PBT) margins. We will get back to normalcy and end with 14% EBITDA margin in FY25. This quarter was a one-off. We have seen a reduction in the margin level but for the full year, we will maintain the same level,” Lal said.
Lal added that he sees signs of recovery in TCI Express’ SME-focused business as things have normalised after the general elections were over and weather conditions have improved from the heatwave seen in Q1FY25.
“This is good news for us because SMEs were also struggling in the first quarter due to the elections. Workers migrated to their workplaces to vote and in the second quarter, there was a heat wave. Now, the situation has returned to normal and we are seeing signs of recovery in SME operations, which is also positive for Ebitda margins,” Lal added.
The company plans to increase the revenue generation capacity of its multimodal business from 17% to 25% over a period of 4-5 years, according to Lal. He added that the company has also started providing multimodal services to diversify its service range and increase the margin level to 18%.
« Our multimodal business is 17% and our strategy will be to take it to 22-25% in the long term, over 4-5 years. We want to improve the margin level in the range of 16-18% in the longer term; we want to retain multimodal products to diversify our service offering, » Lal said.
“In the longer term, we have adopted a strategy to automate our hubs and sorting centres. The number (of sorting centres) will remain the same in the long term, but we will automate them to improve our efficiency. We have already built two automated sorting centres, one in north India and the other in western India, and they are performing well. We are able to reduce the waiting time of our trucks, which is increasing our profits. We will come up with an investment plan of Rs 3 billion over the next three years,” Lal added.
