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Mr. Vineet Agarwal, Executive Director, Transport Corporation of India (TCI)

India Infoline News Service | Mumbai |

We are optimistic about the future...

Transport Corporation of India (TCI), the biggest division of Group TCI is India's foremost and Asia's leading surface transport company. TCI provides a single window for all cargo transportation services ranging from door to door distribution, time committed high value cargo delivery or handling of over dimensional cargo. This division is equipped to provide total transport solutions backed by its extensive and strategically located branch network, trained work force, warehousing facility of close to 5 million sq ft, a massive convoy of trucks and multi modal transportation capabilities. Today TCI group, with its 48 years of experience, is India?s leading Integrated supply chain solutions provider with a complete range of services. With a group turnover of around Rs9bn, it has a pan- India presence through an enviable network of 1000 fully computerized, company owned offices. A sharp focus on customer satisfaction, astute corporate governance and specialization in key areas, has made TCI the undisputed leader in the logistics industry. An ISO 9001:2000 company, it is listed on NSE and BSE.

Vineet Agarwal, Executive Director TCIL, is the growth driver for the company. He is a young dynamic entrepreneur with an Ivy League education from Carnegie Mellon University in science and economics. He has been involved in churning out new projects like XPS, Logitra; initiating and conceptualizing new joint ventures with Companies like Mitsui, Yanmar to bring new technologies to India and bringing logistics online by launching India?s first portal on logistics.He is also an active member of CII, FICCI, Assocham and AIMA.In addition to this he is also a pro-active philanthropist being the trustee of the TCI foundation involved in welfare of truck drivers through education and financial support.

In a detailed reply to Anil Mascarenhas of India Infoline, Vineet Agarwal says, "We are optimistic about the future and expect to double our turnover in the next 4-5 years." 

The business of logistics is witnessing a sea change. Your comments?

Till a few years ago, the term Logistics simply meant movement of goods from one place to another. However, since the early nineties, there has been a sea change in the role of logistics solutions providers. Recognizing the need and the requirement of businesses today, logistics companies are now seeking to provide complete supply chain solutions to their customers. Therefore, in addition to the basic transportation, they are providing value-added services such as warehousing, inventory management, freight forwarding and express services.

How big is this industry and what are the growth rates being witnessed?

Logistics and Supply Chain management is a Rs600bn (approx) industry that contributes about 13% to the country's GDP. This industry is likely to grow at a CAGR of 7% during the next five years. The sector has grown by leaps and bounds in the last few years. This is attributed to the interplay of various factors which include the boom in the aviation sector, the robust state of the Indian economy, impetus given to strengthening infrastructure and surge in demand for express services. The growth has also been fueled by the change in the mindset of companies who are now focusing on their core competencies and outsourcing not only logistics requirements but the entire supply chain management. Supply chain consultancy is slowly catching up in the business circles, as supply chain consultants through their IT expertise and knowledge of systems are able to deliver precisely the right solution to the unique requirements of companies.

What is the scene with Indian logistics companies?

In the present scenario, Indian logistics companies are continuously innovating and adopting newer strategies to meet the changing needs of consumers. Though 50% of the companies have outsourced activities like transportation, warehousing and customs clearing/forwarding, outsourcing the rest of the supply chain activities is uncommon due to "fears related to poor infrastructure and concern about the 3PL?s* capability.

What trends are we seeing here?

E-Logistics is an emerging trend in the country. IT has become an integral part of the supply chain management industry so much so that more and more companies are integrating IT systems with traditional logistics services. In this age of global competition, GPS (Global Positioning System) Technology is becoming an indispensable part of the Express delivery service Industry. It is used to accurately pinpoint the location of a vehicle. Companies like XPS have developed web-based applications using the latest technology for their Air and Courier divisions to provide real time consignment tracking to the customers.

Do you see more domestic consolidation or global forays?

While many global logistics solutions providers are looking to tap the potential in the Indian market, many domestic companies are striking alliances and joint ventures with overseas companies to combine the best of technology and expertise for their customers. With the opening of World economy and free trade agreements between countries, Indian companies are exploring foreign shores for business

Going ahead what are the factors, which will drive growth for the industry?

The boom in the retail, telecom and the automobile sector will drive the growth for the logistics industry. With the government actively focusing on developing and upgrading infrastructure, transportation by road, which comprises 65% of all transportation in India, will get major impetus. With the modernization of airports on the anvil, the air cargo industry is all set to reach new heights. Supply Chain Management is increasingly emerging as the next big thing.

For TCI what is the outlook and where will the growth come from?

Foreseeing this trend, TCI is targeting one-third of its business to come from basic transportation, one-third from Supply chain consultancy and another one-third from express cargo and courier in the next 3-5 years.

Reactions to the budget - What could the FM have done better for your sector?

The Government should grant the industry status to the Transportation sector. It is a full-fledged industry and forms the backbone of almost all the businesses, especially for automobile, FMCG, pharmaceutical companies. The sector is also the second largest employer after agriculture industry and employs around 37 lakh people. As companies are focusing on their core competencies, the scope of work for Logistics companies has increased from mere transportation of goods; they have a new role to play that of an integrated supply chain solutions provider.

The exclusion of railway freight under service tax is monopolistic and does not provide a level playing field conducive to healthy competition. Even the postal department does not come under the ambit of service tax, even though the nature of services being provided is the same as other courier and cargo companies.

Transporters are neither consignee nor consumer of goods. They carry consignments as Railway, Shipping or Airways carry. When Railway, Shipping and Airways are not included under VAT, transporters should also be excluded.

The government, should reduce sales tax and excise on processed value added foods, remove Octroi, entry tax etc. Industry should be given exemption/subsidies to encourage investment in cold chain infrastructure. Since time-definite delivery is critical, inter-state check post should have a clearance passage for the refrigerated transportation.

What lessons can we learn from other countries?

Surely, a mindset change is very essential. Development of infrastructure is imperative to enable Indian companies to compete globally.

What kind of mindset changes are required in this industry?

Industry is understanding the benefits of outsourcing logistics functions to specialists. For eg the automobile sector has been at the forefront. This has helped the industry to remain competitive and even look at exports.

You have learnt a lot from Toyota's way of working. You have a JV too.

Yes. In 1997, Toyota Motor Corporation and Mitsui & Co., one of the largest global companies as per sales turnover, undertook an exhaustive survey of the Logistics companies in India for a potential tie-up. With its wide coverage, experience and professionalism, market leaders Transport Corporation of India Ltd was the natural choice.

A Joint Venture named ? Transystem Logistics International Pvt. Ltd? was formed between Mitsui & Co. & TCI in 1999. With the amalgamation of Mitsui?s technical know-how and TCI?s Infrastructure and local experience, it was a business partnership, which has proved successful.

Toyota and Transystem follow "Kaizen: continuous improvement."

On a regular basis, certain areas are earmarked and efforts are jointly taken to improve the particular processes and skills.

TCI through its experience has learnt:

  • Adherence to quality

  • Time Management

  • Lean Management

  • Importance of Service Management

  • Vehicle Management

TCI through Transystem has been able to replicate the global standards in India. TCI has pioneered it and has definite plans to expand its application.

What are some of the growing opportunities you see?

The supply chain solutions industry has been growing steadily in the last few years. The boom in the retail sector, the opening of the aviation sector, the liberalization of policies are some of the factors that have pushed growth. With more and more companies outsourcing their logistics requirements and India becoming a manufacturing hub, the sector is bound to witness even further growth. Especially sectors such as pharmaceuticals, automobile, telecom, who thrive on effective and efficient management of their supply chains.

Since 65% of all transportation is by road, there is an urgent need for clearing of infrastructure bottlenecks. With the completion of the Golden Quadrilateral and the NSEW, transportation by road will definitely become faster and safer thereby perhaps leading to reduction in the overall costs in the long run.

And what are the threats?

At present the air cargo industry in India is worth Rs.100bn and it is expected to reach Rs400bn in the next five years. It is growing at a great speed at rate of 30% YoY in India while globally it is growing at only 18%. However, the growth rate can only be sustained if it is supported by adequate infrastructure. Infrastructure bottlenecks are the biggest problem for the air cargo industry, however with the government expediting the process of modernization, it will surely give a fillip to the industry.

In the last one year, there has been an incessant increase in fuel prices. There should have ideally been an 80% increase in freight rates but these have gone up only by 50%. In such a scenario, increase in input costs has to be borne by the transporter.

The diesel cost is 50% of operating cost of a truck. The rest comprises toll taxes, service tax, and wages of the driver. The logistics cost is 13% of GDP while in the developed countries it ranges between 6- 8%.

Which are the growth segments for your company?

We are continuously growing at the rate of 15-20% per annum and are optimistic about the growth in future.

The Express and Courier divisions are the drivers of growth. We have been achieving a growth of 30% in this segment Y0Y and expect this trend to continue in the future as well. We also expect growth to come from our freight forwarding division, XPS Global.

The Air cargo segment is also contributing significantly to the overall revenue of TCI. With the boom in the aviation sector and the impetus given by the government in developing infrastructure at Airports across the country, we are expecting our revenues to grow considerably. We have set our plans to clock a growth rate of 30% per annum for the next 5 years, far ahead of the projected industry growth rate of 10%.

With the increase in demand for supply chain consultancy services we expect substantial growth to come from our Supply Chain Consultancy division, TCI supply chain solutions.

Give us some figures of the market size and your share in the same.

The logistics industry in India is estimated to be around Rs.600bn (approximately $12bn). It is largely fragmented and unorganized the share of the organized sector is only 20-30%. Transport Corporation of India Ltd. is the leader in the supply chain solutions industry with a market share of 1.5%

You have been constantly trying to stress that you are not a mere logistics company. How would you brand yourself?

Traditionally, Logistics was considered a subset of the broader term transportation connoting movement of goods from one place to another. However, in the present scenario, customer needs and requirements are changing day after day and so mere transportation does not hold any significance. Activities like warehousing and inventory management, which were not given much attention in the past, are now focus areas for companies. Nowadays, companies have started outsourcing not only their basic transportation requirements but complete management of their supply chains. This is because companies are increasingly focusing on their core competencies in order to control costs and ensure efficient utilization of resources.

We at TCI have recognized this trend and expanded our business model from mere logistics management to providing complete supply chain solutions to our customers. In the last few years we have invested in various verticals like express delivery services and courier, freight forwarding, supply chain consultancy etc. Though we started as a transport company, we have now emerged as a truly integrated multi modal supply chain solutions provider, the foremost in Asia with wide reach and network encompassing air-road-sea. We are pioneers in this industry, with a strong legacy of over five decades of experience. The strength of TCI lies in providing value added services and complete supply chain solutions to suit the unique needs of our customers in order to enhance customer satisfaction.

Does Inventory management bring in any savings? Which are the areas where cost compression is possible in the supply chain?

Inventory management is a very critical part of a supply chain of a company. Unutilized inventories often result in increased inventory handling, storage and infrastructure cost. They also affect working capital and increase susceptibility to damages, pilferages and wastage thereby increasing manpower costs. Absence of a system of planned inventory leads to low credit utilization.

There are lot of areas where cost compression is possible in the supply chain. It is in effectively managing in-bound and out-bound logistics. Ownership of the logistics chain, for example. Today, the ownership of the logistics chain does not lie with the manufacturer. It is actually with the supplier.

How are your contracts negotiated? How do you hedge against any price rises?

Typically, contracts in India for basic trucking services are yearly with a built in price escalation for any fuel hikes.

What work are you doing in the cold chain business? And Bharat Parcel Guaranteed, Air cargo etc.

XPS, the door-to-door express cargo division of TCI Group is the leading express delivery service company in India. The gamut of XPS services encompasses Door-to-Door Express Surface Cargo (XPS Surface), Express Air Cargo (XPS Air), Express Courier Services (XPS Courier), E-Commerce Solutions, International Customs Clearance, Express Cold Chain (XPS Cold Chain) and Express Freight Forwarding (XPS Global).

XPS has a dedicated Cold Chain division called XPS Cold Chain that essentially provides self-powered and multi-modal, Temperature controlled and insulated containers. It is a value added service provided for transporting perishables and temperature sensitive goods. XPS has tied-up with Yanmar Co ltd & Mitsui & Co. Ltd. of Japan for importing of Reefer Units / Reefer Containers. We provide this service for products like Ice Cream, Butter, and Cheese, Chocolates, Pizza Base, etc., Vaccines, Medicines & Empty Hard Gelatin Capsules, etc. Fruits and Vegetables like Litchi, Mango, Apple, etc. XPS offers this service all over the country.

XPS has a tie up with Emirates Post of UAE since 2004 for delivery of parcels in India. This was first ever Private-Foreign venture for the inbound parcel service "Bharat Parcel Guaranteed". XPS is the Delivery partner in India for this product. This value added service, for the first time, offers to fully refund the parcel charges to the consignor, if not delivered within two weeks of booking.

XPS Air, the air cargo division of XPS has been growing at a rate of 30% Y-O-Y. It plans to invest Rs 50 crores over the next 5 years in Strengthening infrastructure, Technology upgradation and Manpower. Western India is the most important market for XPS Air contributing maximum revenue to its business. Western India is a critical hub for the Automobile parts sector. Through XPS Global, its freight forwarding wing, it transports goods across the globe.

You have often spoken about advantage of trucks as it provides last mile connectivity.

Trucking is a more favoured mode of cargo movement over Railways in transportation as it has the advantage of its "Last Mile Service". The trucking service scores over the railways as it offers both pick-up and delivery at the customers? premises. In the case of railways, since it involves multiple handling, resultantly there are delays. In the present scenario, consumers are extremely time-sensitive and particular. Due to a plethora of options available, they want the best product, at the best price at the right time and place. Therefore, most people are in favour of deploying trucking services. Road transport is a more controlled and portable medium.

How big is the issue of pilferage?

The instances of pilferage is relatively less nowadays. Better roads, highways, technology, and instant communication has helped curb it.

Give a segment wise break up of your revenues? In the years to come how do you see this break up changing?

The transportation division has been the major contributor and contributed 67% followed by the express cargo division at 25.40%.

In the future, supply chain division and the express cargo and courier division will certainly play a major role. We are looking at expansion in these divisions and hope to double revenues.

Where do you get the most margins?

The maximum margins are there in the express cargo business.

Comment on your financials. What growth rate do you expect in the next couple of years?

We have been performing well in the last few quarters with a growth rate of 15-20% and are bullish about our growth in forthcoming months. We are looking at crossing a turnover of Rs10bn at the end of this fiscal. Despite various deterrents like the incessant hike in fuel prices, increase in input costs and sluggish demand, TCI has succeeded in achieving higher profits due to better capacity utilization, increase in internal efficiencies and working closely with its customers.

In continuation with this trend, we are optimistic about the future and expect to double our turnover in the next 4-5 years.

What is your dividend policy?

The Company?s policy towards Dividend payout has been to pay consistent and constant dividend matching with the other players in the industry. The Company has been paying dividend constantly @18 - 20% since last 6years.

What is your message to shareholders?

TCI strives to follow & uphold established Corporate Governance norms to ensure fairness, transparency, disclosure and accountability in its transactions. The Company is committed to maintain global standards of corporate conduct towards its shareholders. The company has taken various proactive measures to serve its shareholders in an expeditious manner. With these practices in place, the company endeavours to build the confidence of its various stakeholders in it, and its Board's integrity. 

TCI views corporate Governance almost like a trusteeship representing a coalition of interests comprising of shareholders, other capital providers, business associates, employees and the society at large.

r* Definition of 3PL - An outsourced provider that manages all or a significant part of an organization's logistics requirements and performs transportation, locating and sometimes product consolidation activities.



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