TCI Express Ltd Management Discussions

31 Logistics Market, Precedence Research.

GLOBAL LOGISTICS INDUSTRY

The global logistics industry is experiencing unprecedented growth, driven by the rapid expansion of e-commerce, technological advancements, and the increasing globalization of supply chains. Another driving factor in logistics market growth is the increasing globalisation of industries. As businesses expand their footprints across borders, theres an ever-growing need for comprehensive logistics solutions that can seamlessly manage cross-border transactions and deliveries. According to Precedence Research, the global logistics industry market size is valued at approximately USD 11.27 trillion as of 2023, and is projected to reach USD 18.23 trillion by 2032, growing at a compound annual growth rate (CAGR) of 5.48%.

Cloud-based Logistics

Cloud-based logistics solutions are expected to revolutionize the industry by providing scalable, cost-effective solutions. By 2033, the cloud logistics market is anticipated to grow to USD 104.62 billion from USD 29.83 billion in 2023, driven by the need for real-time visibility and efficient supply chain management. Cloud logistics enables businesses to manage their operations more effectively, offering real-time tracking, inventory management, and enhanced collaboration among supply chain stakeholders.

Autonomous Vehicles and Robotics

Autonomous vehicles and robotics are set to reduce labour costs and increase efficiency in logistics operations. These technologies are being integrated into warehouses and delivery systems to automate routine tasks, improve accuracy, and speed up processes. The use of drones for last-mile delivery and automated guided vehicles (AGVs) in warehouses exemplifies this trend.

Predictive Analytics and AI

Predictive analytics and AI tools enable businesses to forecast demand, optimize routes, and improve inventory management. These technologies help reduce costs and enhance customer service by anticipating market fluctuations and making data-driven decisions. The integration of AI in logistics is expected to grow, with AI-driven solutions projected to account for significant operational improvements across the supply chain.

Sustainability Initiatives

Sustainability is becoming a crucial focus in the logistics industry. Companies are increasingly adopting green logistics practices, such as using electric vehicles / CNG Vehicles optimizing routes to reduce emissions and implementing eco-friendly packaging solutions. The shift towards sustainable logistics is driven by regulatory pressures, consumer demand for environmentally responsible practices, and the overall push to reduce the carbon footprint of supply chains.

ABOUT TCI EXPRESS

At TCI Express, we are proud to be recognised as one of Indias foremost express logistics leaders. Our commitment lies in delivering exceptional value, offering first and last-mile delivery services tailored to the needs of various sectors. Our extensive, pan-India network enables us to reach over 100% of Indias pin codes, supported by a solid foundation of 28 advanced sorting centres including 2 fully automated sorting centres, 500+ express routes, 2500+ feeder routes, over 970+ branches, 50,000 pickup, and 60,000+ delivery points, as well as a fleet of more than 5,500+ containerised trucks. We have recently expanded our service portfolio by introducing Cold Chain Express Service, Rail Express, and C2C Express Service.

Our focus on expedited freight delivery, especially in the booming B2B industry, has cemented our reputation as a premier delivery service provider. Our infrastructure and services are available on Sundays and holidays, with facilities for late pickups. Our long-term success is rooted in a robust network advantage and industry-leading supply chain expertise. Our extensive service centre network and strong client connections globally reflect this strength. We effectively navigate volatile environments, managing uncertainty and complexity while promptly meeting client demands.

Our core strengths include a diverse business model that caters to all major manufacturing industries, a status as Indias fastest B2B Express Delivery Company, an asset-light strategy that enhances utilisation and cash flow, and innovative technology that improves cargo visibility and data communication, resulting in cost savings. All our branches are company-owned, ensuring adherence to best practices and operating standards.

In FY24, TCI Express Ltd is set to revolutionize express delivery with its groundbreaking initiative, the Money Back Guarantee (MBG), available for all Air, Rail, and Surface shipments. This customer-centric initiative reflects TCI Expresss steadfast commitment to excellence, offering customers an unparalleled combination of reliability and speed assurance. This innovative scheme not only sets a new standard in express delivery in India but also aims to enhance customer satisfaction with its remarkable blend of trust, speed, and convenience. To ensure maximum customer satisfaction, TCI Express offers a 100% refund if a shipment fails to deliver within the committed time frame. This guarantee, along with a seamless online claim/ refund settlement process, provides complete assurance on shipments to customers.

50,000+Pick-Up Points

Vast network of pick-up points facilitating convenient service options for a wide customer base.

60,000+Delivery Points

Extensive delivery network ensuring ef_cient and widespread distribution capabilities.

Diverse Business Model

We cater to all major manufacturing industries, providing tailored logistics solutions that meet the specific needs of various sectors. This diversity ensures stability and growth, allowing us to serve a wide range of clients from different industries.

Fastest B2B Express Delivery

As the leading B2B express delivery company in India, TCI Express prides itself on delivering the fastest and most reliable services. Our efficient logistics network ensures that businesses can rely on timely deliveries to keep their operations running smoothly.

Comprehensive Coverage

With services reaching every pin code in India, TCI Express guarantees comprehensive coverage across the country. Our extensive network ensures that we can deliver to even the most remote locations, providing unparalleled reach and convenience for our customers.

Company-Owned Branches

Our commitment to maintaining high standards and consistent operating procedures is reinforced by our company-owned branches. This ownership model allows us to ensure quality control and uniform service delivery across all our branches.

Asset-Light Strategy

Our asset-light strategy optimizes resource utilization and maintains strong cash flows. By leveraging third-party resources and focusing on core competencies, we can adapt quickly to market changes and maintain financial stability.

Innovative Technology

We enhance cargo visibility and data communication through cutting-edge technology. This innovation helps reduce costs and improve efficiency, providing our customers with real-time tracking and transparency throughout the delivery process.

Automated Sorting Centres

TCI Express boasts Indias first and largest fully automated B2B sorting centre in Gurugram named GIGA sorting centre. Also we have automated our second larget sorting centre in Pune. These state-of-the-art facilities significantly increase our sorting capacity and speed, reducing turnaround times and enhancing overall operational efficiency.

Nationwide Network

Our nationwide network spans over 60,000 locations in more than 750 districts. This extensive reach ensures that we can provide express delivery services to a vast array of destinations, supporting businesses across India. We serve more than 50,000 pickup locations which helps us to broaden our market presence.

Cross Border Express Logistics

Expanding beyond national borders, TCI Express offers cross border express logistics services. Our international network facilitates seamless global trade, ensuring reliable and timely delivery of goods across countries.

Customer Centricity

At TCI Express, customer satisfaction is at the heart of our operations. We focus on understanding and meeting the unique needs of each customer, providing personalized services and support to ensure a positive experience every time.

Last Mile Delivery

Our last mile delivery services guarantee that packages reach their final destination quickly and efficiently. By optimizing the final leg of the delivery process, we ensure that customers receive their goods on time, every time.

Money Back Guarantee (MBG)

TCI Express feels proud to introduce its groundbreaking Money Back Guarantee (MBG), a first-of-its-kind promise in the logistics industry. We stand by the quality and reliability of our services, ensuring that if we fail to meet our delivery commitments, customers will receive a 100% refund of their freight charges. This guarantee underscores our unwavering dedication to exceptional service and customer satisfaction, providing peace of mind and trust in our commitment to delivering on our promises.

KEY OPERATIONAL HIGHLIGHTS OF FY2024

We expanded our reach by launching 25 new branches in key business areas, particularly in the southern and western regions, in FY24.

The Company invested Rs.45 crore to build and automate new sorting centres during the year.

Our newly developed GIGA Sorting Centre, employ a fully automated loop sorting system for oversized freight, making us the first B2B express delivery operator in India to do so.

The operational sorting centre in Pune, spanning over 1.3 lakh sq. ft., has bolstered our services in Western India.

Rail Express, our unique service offering high-value solutions at a lower cost, leads to faster transit times while optimising economies of scale across branches and routes.

We appointed specialised teams to oversee new business offerings and ensure the effective execution of strategies for long-term company growth.

Our outsourced fleet achieved an 83.5% capacity utilisation rate during the year.

To fulfil our environmental footprint commitments, we are reducing conventional power usage in sorting centres while increasing solar renewable energy adoption.

FINANCIAL REVIEW AND PERFORMANCE

The Companys financial statements (on a standalone basis) were prepared in compliance with Indian generally accepted accounting standards (GAAP).

Five Years Financial Summary

Operating Revenue

In FY2024, TCI Express Ltd. achieved an operating revenue of Rs.1253.82 crore, marking a slight increase of 1.03% from Rs.1241.01 crore in FY2023. This growth indicates the companys ability to maintain a stable revenue stream despite market challenges. TCI Expresss strategic expansions, including enhanced automation and increased branch network, have helped maintain its strong market presence and enabled it to outperform industry peers in terms of operational efficiency and service quality.

EBITDA & EBITDA Margin

The Earnings before interest tax and depreciation (EBITDA) for FY2024 stood at Rs.194.40 crore, reflecting a decrease of 3.60% from Rs.201.65 crore in FY2023. This decline happened due to increase in personnel cost which was not compensated by revenue growth. The EBITDA margin for FY2024 stood at 15.42%, down from 16.16% in FY2023, showing a decrease of 4.58%. Despite the reduction in the margins. TCI Express has maintained highest margines when compared to other players in the same industry.

Profit After Tax (PAT) & PAT Margin

For FY2024, the Profit After Tax was recorded at Rs.131.69 crore, down by 5.45% from Rs.139.28 crore in FY2023. For FY2024, the PAT margin was 10.44%, down from 11.16% in FY2023, indicating a decrease of 6.45%. This reduction points to lower revenue growth in relation to manpower related expenses that affected the companys overall profitability. The low growth is due to temporary market conditions, including subdued consumer demand and high inventory levels across various sectors except the automotive industry. However, the companys strategic

29,000+ PIN Cods Served

Wide geographical coverage across India, ensuring service in remote and urban areas alike.

2 Fully Automated Sorting Centres

State-of-the-art facilities in Tajnagar and Pune boosting sorting ef_ciency and reducing turnaround times.

28 Sorting Centres

Strategically located sorting centers to optimize domestic logistics operations.

970+Branches

Extensive national reach with over 970 branches, indicating robust infrastructure and widespread service capability focus on efficiency and cost control measures helped it remain resilient during the turbulent times.

Earnings Per Share (EPS)

The Earnings Per Share for FY2024 was Rs.34.36, compared to Rs.36.24 in FY2023, reflecting a decrease of 5.19%. This reduction is in line with the overall decline in profitability, but the company anticipates improved earnings as economic conditions stabilize.

Receivable Days

The receivable days for FY2024 were 55 days, up from 50 days in FY2023, representing a 10% increase. This increase as the last two days of the year end was holidays (saturday and sunday) and thereby most of the customers finance department were closed which ultimately impacted the realisation. However, TCI Express continues to manage its receivables effectively to maintain robust cash flow.

Net Working Capital Cycle

The net working capital cycle for FY2024 was 16 days, up from 12 days in FY2023, an increase of 33.33%. The extended cycle is reflective of the broader economic environment, impacting inventory turnover and receivables.

Cash Conversion Ratio

The cash conversion ratio for FY2024 was 69.88%, down from 72.90% in FY2023, indicating a decrease of 4.14%.

This reduction is due to slightly increase in receivables, but management remains confident about improving this ratio in the upcoming fiscal year.

Return on Equity (ROE)

The return on equity for FY2024 was 20.25%, down from (17.65%) in FY2023, a decrease of 11.67%. Despite this, the ROE remains strong, indicating effective use of equity to generate profits.

Interest Coverage Ratio

The interest coverage ratio for FY2024 was 119.42 times, up from 102.95 times in FY2023, an increase of 16%. The improved ratio indicates better financial stability and lower risk.

Current Ratio

The current ratio for FY2024 was 2.57 times, up from 2.41 times in FY2023, reflecting a 6.64% increase. This higher ratio indicates good liquidity and financial health, showing that TCI Express has adequate current assets to cover its short-term liabilities.

Debt Equity Ratio

The debt equity ratio for FY2024 was 0.004 times, up from 0.001 times in FY2023. Despite the increase, the ratio remains low, indicating minimal reliance on debt financing and reduced financial risk.

RISK AND MITIGATION

Risk management is a fundamental aspect of our business operations at TCI Express. Over the years, we have integrated comprehensive risk assessment, identification, and mitigation strategies into our overall risk management framework. As a leader in the Indian express logistics industry with an expanding presence in international markets, we are well-positioned to navigate diverse market risks in a dynamic business environment. Our risk management strategies are employed across all management levels and functional areas, prioritising the early detection of potential risks and managing exposure through appropriate mitigation methods. Below are the key risks we encounter and our strategies to mitigate them.

Transitional Damage Risk

In the logistics industry, cargo is susceptible to damage and loss due to various transit hazards, including accidents, truck hijackings, and pilferage. Such incidents could potentially result in significant financial losses and customer dissatisfaction. To counter these risks, TCI Express has taken several proactive measures. Every truck in our fleet is comprehensively insured against damage or loss incurred during transit, ensuring that unforeseen circumstances do not directly affect customers or the Companys bottom line. An advanced surveillance and tracking system monitors shipments in real time to further secure the cargo, alerting the team immediately to any irregularities or security breaches. Additionally, our drivers receive regular training on safety protocols to enhance their awareness and skill during transit, thereby reducing the chances of damage and loss.

Fluctuating Fuel Price Risk

Volatility in global fuel prices poses a significant risk to profitability, as fluctuating costs can disrupt logistics operations and inflate transportation expenses. TCI Express has developed a fuel surcharge system to provide revenue stability. This system helps the Company offset increases in fuel costs, allowing us to maintain consistent profit margins. Additionally, freight rates are revised frequently to adjust for fuel price fluctuations. TCI Express also operates under contractual transportation arrangements to reduce the direct impact of these fluctuations, ensuring a more stable and predictable pricing model for both the Company and its clients.

People Risk

The logistics industry relies heavily on a skilled and dedicated workforce. Staffing shortages and losing key employees can disrupt operations and lead to negative publicity. To mitigate these risks, TCI Express implements innovative staff retention strategies, such as comprehensive health insurance policies and regular recognition programs that motivate employees and create a positive work environment. Additionally, the Company maintains a competitive incentive and compensation structure that attracts and retains top talent while fostering a workplace culture that blends experience with enthusiasm. By prioritising a safe and healthy working environment, TCI Express ensures that employees remain committed and productive.

750+Districts Served

Comprehensive coverage across over 750 districts, enhancing logistical reach and customer accessibility.

5,500+ GPS-enabled Vehicles

Modern _eet equipped with GPS for enhanced routing ef_ciency and security.

195 Countries and Territories

Global delivery service highlighting extensive international reach and cross-border capabilities.

3,100+ Dedicated Staff

Committed workforce ensuring operational excellence and customer service.

Technology and IT Risk

Logistics operations are susceptible to data breaches and network instability in an age of increasing cyber threats and digital disruptions. This could result in losing sensitive customer data or an inability to track shipments effectively. To safeguard against these risks, TCI Express has implemented cutting-edge technology and comprehensive information security policies that protect customer data from unauthorised access. Furthermore, we maintain regular backups and have contingency plans to ensure seamless business continuity even during technological outages. The Company gains access to real-time data that supports intelligent decision-making and efficient network management by employing an integrated IT platform.

Infrastructure Risk

Inadequate transportation infrastructure and poorly maintained storage facilities can severely impact logistics operations, causing supply delays and reputational damage. Recognising this risk, TCI Express has aligned its infrastructure strategy with the governments National Infrastructure Pipeline (NIP) program to enhance the transport network nationwide. Additionally, we have constructed state-of-the-art warehouses and storage facilities at critical nodal points nationwide, ensuring that cargo handling remains efficient and secure.

Competition Risk

The express logistics industry is highly competitive, with companies vying for market share, customer loyalty, and brand reputation. TCI Express could face business losses, reputational harm, and a shrinking market share without a clear strategy. To maintain a strong position, we leverage decades of experience in the industry and maintain a robust brand image through exceptional customer recall. Consistent transport and delivery services across 100% of Indian pin codes, backed by our extensive network of 60,000+ delivery locations, reinforce our reputation for reliability and efficiency.

Business Continuity

Business continuity risk involves financial and non-financial losses, threats or risks that disrupt the functioning of a business. These threats maybe any untoward incidents or disasters that negatively impact an organization. Our organization has put into place a robust Business Continuity Management (BCM) Plan, a comprehensive strategy that ensures organizational resilience in the face of unforeseen incidents that could disrupt our critical business operations. This plan not only gives our organization the structure needed to craft, control, and deploy efficient plans, but it also takes into consideration the unique contingencies, capabilities, and requirements of our business.

ESG & Sustainability Risk

Environmental, social, and governance (ESG) issues can present risks including non-compliance with environmental regulations, negative impacts on communities, and governance failures. Furthermore, unsustainable business practices can lead to resource depletion, environmental degradation, and ultimately, operational and reputational risks. To mitigate these risks, we are firmly committed to operating sustainably and responsibly. Our ESG roadmap outlines key initiatives such as transitioning to fuel efficient vehicles compliant with BS-VI standards and investing in solar panels for our sorting centres, moving towards energy self-sufficiency. In line with sustainability priorities, our GIGA sorting centres at Tajnagar and Pune have been awarded prestigious recognitions, including the LEED Gold certification and the GEM 5 Certification, underlining our dedication to environmentally sustainable practices.

INTERNAL CONTROLS AND ITS ADEQUACY

TCI Express has implemented a robust internal control system tailored to the complexity of its operations. This system includes standard operating procedures, policies, and manuals designed to uphold high ethical standards, ensure transparency in financial reporting, and maintain compliance with legal requirements. The Audit Committee plays a critical role in monitoring the adequacy and effectiveness of this framework, regularly evaluating audit plans, internal audit reports, and risk management systems to ensure continuous improvement and reinforcement of controls.

Additionally, TCI Express integrates a comprehensive risk management policy covering various domains such as corporate, IT, regulatory, operational, HR, and financial risks. The companys internal audit system provides independent assurance, aligning with its risk profile and facilitating proactive risk mitigation strategies. Overall, TCI Expresss internal control systems effectively safeguard assets, ensure legal compliance, and enhance the integrity and transparency of its operations.

INFORMATION TECHNOLOGY

At TCI Express, information technology (IT) is pivotal in our business model, facilitating operational efficiency, improved customer service, and a stronger market position. Our sophisticated IT infrastructure efficiently manages the complexities of our logistics operations while maintaining high transparency. Fundamental innovations like real-time shipment tracking and business process automation ensure accurate, customer-focused services.

We are deeply committed to digital transformation across all business units, investing significantly in innovative technology. Recent initiatives include upgrading our automated sorting centres with AI-enabled systems to improve package handling efficiency and integrating our ERP systems to streamline order processing and enhance the customer experience. We have also adopted a fully integrated mobile application that allows customers to access real-time data, shipment tracking, and personalised support directly from their devices.

Given the increasing threat of cyber risks, we have fortified our network and data systems with robust cybersecurity measures, actively monitoring and mitigating potential threats. Our comprehensive IT risk management framework ensures data security, network stability and business continuity.

TCI Express remains at the forefront of technological innovation, continually incorporating the latest IT solutions into our business model to improve operational efficiency and customer value. These initiatives reinforce our ability to deliver innovative, reliable, and transparent services to our customers and stakeholders.

HUMAN RESOURCES

At TCI Express, our most valuable asset is our people. We are steadfast in our commitment to creating a supportive, inclusive workplace that nurtures employee well-being, safety, and professional growth. This aligns with our strategic goals of delivering superior service, driving profitable business, and ensuring long-term success. We prioritise workforce safety, talent development, equal opportunities, community support, compliance, and good governance, embedding safety and ethics into our organisational culture.

As of the latest fiscal year, our workforce comprises over 3,100+ employees, the majority of whom are permanent. Despite male employees forming the majority, we are working diligently toward improving gender representation, with women constituting 13.28% of permanent employees and 15.17% of non-permanent employees. Additionally, we aim to enhance diversity by increasing the inclusion of individuals with disabilities.

In FY2024, TCI Express conducted numerous training and awareness programs, empowering our employees with knowledge and skills to handle the challenges and opportunities of our business. Topics ranged from technical training to leadership development, fostering a culture of continuous learning.

Our performance review system is comprehensive, with 100% of employees undergoing career development assessments. Occupational health and safety management systems and comprehensive insurance and benefits reflect our unwavering commitment to employee well-being. Procedures are in place to identify workplace hazards, assess risks, and maintain a safe environment.

To prevent discrimination and harassment, TCI Express maintains a robust framework protecting human rights for all employees and associates, with zero tolerance for harassment. Employees have access to multiple reporting channels to address concerns. Moreover, all employees receive wages equal to or above the minimum wage, ensuring compliance with regulations in FY2023 and FY2024.

CAUTIONARY STATEMENT

The statements in the Management Discussion and Analysis that describe the Companys objectives, projections, estimates, and expectations are "forward-looking" as defined by applicable securities laws and regulations. These projections are not guarantees of future performance and are subject to risks, uncertainties, and other factors that could cause actual results to differ materially from those contemplated by the forward-looking statements. Key factors that could influence the Companys operational results include varying economic conditions that impact demand, supply, and price in domestic and international markets where the Company operates, changes in government regulations, tax laws, other statutory modifications, and other incidental factors.