Logistics service provider TCI Express’s chief financial officer Mukti Lal said the company expects its EBITDA margin to improve to 14 per cent in the remaining quarters of the current fiscal after its first-quarter performance was affected by the general elections and a hot summer.
Strategic changes such as diversifying and automating sortation centers will help the company achieve higher operating margins.
Lal also told NDTV Profit that the company’s capacity utilisation is expected to rise to 83-84 per cent in the remaining quarters of FY25.
“We had expected the general elections to have an impact in the first quarter. However, we are already seeing an upward trend and prices will remain stable going forward. Our occupancy rate is expected to increase to the 83-84 per cent range from 82 per cent in the first quarter,” Lal said.
Lal predicted that the company’s margins will improve and will be around 14 percent by the end of FY25. He added that the margin decline in the first quarter of FY25 was a temporary issue.
The logistics services provider reported first-quarter profit margins of 12.1%.
“Margins have never been a challenge for us. TCI Express is focused on qualitative growth. We are an asset-led company, which directly translates into Profit Before Tax (PBT) margins, and hence we have always led on margins, including 15 per cent EBITDA margin. We will get back to normalcy and expect to end FY25 with 14 per cent EBITDA margin. This quarter is temporary. Margin levels have declined, but for the full year, we expect to maintain the same,” Lal said.
Lal added that things are returning to normal after the end of the general elections and the weather has improved compared to the scorching hot weather seen in the first quarter of FY25, which is a bright spot for TCI Express’s SME business.
“This is good news for us because the first quarter was weak for MSMEs due to elections. Workers travelled to their hometowns to vote and there was also a heatwave. Now it has normalised and we are seeing fresh signs of business for MSMEs which is positive for our EBITDA margins,” Lal added.
The company plans to increase the revenue generating capacity of its intermodal business from 17 percent to as much as 25 percent over the next four to five years, Lal said, adding that the company has also started intermodal services to diversify its range of services and increase its profit margins to 18 percent.
“Our intermodal business is at 17 per cent and our long-term strategy is to take it to 22-25 per cent over four-five years. In the long term, we want to take our margins to the range of 16-18 per cent. We want to retain our intermodal product and diversify our service offering,” Lal said.
“In the long term, our strategy is to automate our hubs and sorting centres. The number (of sorting centres) will remain the same in the long run, but we will go for automation to improve efficiency. We have already set up two automated sorting centres in north and west India and are seeing good results. We are able to reduce the storage time of trucks and therefore our profits are increasing. We have a capex plan of Rs 3,000 crore over the next three years,” Lal added.
