Operating Profit Margin To Improve To 14% In FY25: TCI Express CFO

Logistics services provider TCI Express expects its Ebitda margin to improve to 14% in the remaining quarters of the current financial year after the performance in Q1 was impacted due to general elections and heatwave conditions, according to the company’s Chief Financial Officer, Mukti Lal. 

Strategic changes like diversification and automation of sorting centres would help the company achieve a higher operating profit margin. 

Lal also told NDTV Profit that the company’s capacity utilisation is expected to rise to 83-84% in the remaining quarters of FY25.

“We anticipated the first quarter would be impacted due to general elections. But we have already seen an uptick, and we see stable prices going ahead. The utilisation level of our capacity will be increased from 82% in Q1 to the 83-84% range,” Lal said.

Lal projected that the company’s margins were likely to improve and would be around 14% by the end of FY25. He added that the reduction in margins in the first quarter of FY25 was a one-off issue.

The logistics services provider reported a margin of 12.1% in Q1.

“Margin was never a challenge for our company. TCI Express is focused on qualitative growth. We are always ahead with margins, like 15% Ebitda margin, as we are an asset-led company that is directly converting to profit-before-tax (PBT) margins. We will be back to normal and finish with a 14% EBITDA margin in FY25. This quarter was a one-off. We have seen a reduction in margin level, but in the full year we will maintain the same,” Lal said.

Lal added that he sees green shoots in TCI Express’ SME-focused business as things have normalised after the end of the general elections and the improvement in weather compared to the heatwave seen in the first quarter of FY25.

“There's good news for us because SMEs were also on a weaker wicket in Q1 because there was an election. Workers had migrated to their places to cast their votes and second part there was a heatwave. Now that has normalised and now we see greenshoots in SME business and that is also a positive for Ebitda margins,” Lal added.

The company plans to increase the revenue generation capacity of its multimodal business from 17% to up to 25% over a period of 4 to 5 years, according to Lal. He added that the company has also started providing multimodal services to diversify its range of services and enhance the margin level to 18%.

“Our multimodal business is at 17% and our strategy will be to bring it to 22-25% in the long term, over 4-5 years. We want to enhance the margin level in the range of 16 to 18% in the longer term; we want to keep the multimodal products to diversify our service offerings,” Lal said.

“On a longer horizon, we have taken a strategy to automate our hubs and sorting centres; the number (sorting centres) will remain the same in the longer term also but we will automise  them to enhance our efficiency levels. We have already made two sorting automated centres, one in North India and one in West India and these are giving good results. We are able to reduce our holding time of trucks and it is adding to our profits. We will be making a Rs 300 crore capex plan in the next three years,” Lal added.