shreeji translogistics ltd share price Management discussions


OVERVIEW

Our Company, Shreeji Translogistics Limited, is a Pan-India surface logistics and parcel delivery service provider. With more than two decades of experience in freight management, logistics solutions and warehousing services, our Company has made a significant progress along the highways of India. The Company has grown into a large integrated national logistical solution provider, catering a wide range of logistical requirements from Import-Export Container Movement to Bonded Trucking Movements. The various types of services provided by the Company include Full Truck Load Transport Services (FTL), Parcel and Part Truck Load Services/ less than Truck Load (LTL), Import-Export Services and Bonded Trucking Services, Warehousing & 3PL services Our Company caters to all types of segment leaders; serving a broad range of industries, including the e-commerce, fast-moving consumer goods (FMCG), white goods, food, textiles and apparel, furniture and fixture, pharmaceutical, plastics and metal industries.

INDUSTRY STRUCTURE, DEVELOPMENT AND OPPORTUNITIES

The Indian logistics sector is primarily categorized into four segments comprising:

1. Transportation (Road, Rail, Air, Water-ways)

2. Warehousing (Container Freight Stations and Inland Container Depots)

3. Freight Forwarding

4. Value Added Services

The logistics industry is considered a crucial sector to boost National as well as International Trade as a consequence of digitalization and globalization. The logistics and freight industry is evolving rapidly and regarded as the backbone of the economy as it ensures quick, efficient and economical transport of goods across India and many commercial sectors rely on it.

The logistics sector in India has today become an area of priority. One prime reason for the same stems from the reason that years of high growth in the Indian economy have resulted in a significant rise in the volume of freight traffic moved. The large volume of traffic has provided for growth opportunities in all facets of logistics including transportation, warehousing, freight forwarding, express cargo delivery, container services, shipping services etc. The growth path also suggests that increase demand is being placed on the sector to provide the solutions required for supporting future growth. Strength of the logistic sector is likely to be one of the key determinants of the pace of the future growth of the economy.

Logistics sector globally has a market size of over USD 5.2 trillion as per a report from IMARC group. On an average, sector accounts for anywhere between 8-20% in various countrys GDP. Indias logistics market is estimated to be around USD 210 billion. The domestic logistics market is growing at a faster pace than the economy and is expected to maintain its CAGR of 8-10% in coming years. As per various reports, logistics sector contributes to around 13% of the GDP in India. Last decade has witnessed multifold changes in logistics landscape like implementation of GST, improvement in road infrastructure and high degree of automation leading to improvement in logistics efficiency. It is estimated that these reforms have led to around 200 to 300 BPS improvement in overall logistics cost to GDP ratio.

At present, the logistics market is dominated by road transportation sector and the trend is expected to continue in future. Share of road transportation is around 60% of total cargo movement in terms of tonnage in spite of it being the second costliest mode of transport.

The warehousing market in India is estimated to be worth USD 1 2 billion in 2020 and is growing at a faster pace. The growth in warehousing market is driven by various factors such as rising share of Indias businesses in the international markets, demand for greater storage, rise in e-commerce businesses, etc.

With the rise in competition, value-added services have become a necessity as against a luxury service provided by clients to their customers. The value-added services include picking, packaging, MIS reports, analytics service, mobile updates and online GPS enabled tracking, e-mail alerts among others. As the competition in the express logistics industry increases, value added services are expected to play an ever increasing and important role in future growth of various companies.

As an industry moving to keep up with shifting consumer demands, particularly those driven by technology and innovation, there is a range of challenges and opportunities that transportation and logistics companies will encounter in 2022.

Logistics management is a subject of research that has been grabbing the attention of educators, professionals and practitioners over the past couple of decades. Efficient logistics management can lead to reduced operational costs, better delivery performance and enhanced customer satisfaction levels, henceforth, making an organization more competitive in terms of quality, cost, flexibility and delivery.

The rise in e-commerce, not only in the tier-2 and tier-3 cities, but also various towns spread across the country, has become the major driver in growth of logistics industry. Further, the National Logistics Policy also aims at enabling seamless transport of goods across the country. The industry today is at the cusp of technology- led solutions, which, in the forthcoming period, will usher in greater efficiency in operations. Additionally, Government initiatives such as Make in India, and Atmanirbhar Bharat and Vocal for Local will continue to push the creation of a robust logistics framework in the country. Further, growth in the cold chain and container segments is also expected to boost the logistics and warehousing industry.

SEGMENT-WISE PERFORMANCE

Full Truck Load Transport service is the Companys core business and in this space, the Company has been a trusted name for Time-Bound Deliveries.

Bonded Trucking Service, which was a new concept introduced in India in the year 2000, was initially started by the Company in the year 2002 and now the Companys Bonded Trucking Division has grown to another level. The Company has been providing Custom Bonded Trucking services for almost two decades and its services have been greatly appreciated by the Airline Industry. Recently, the Company was honored with ‘Premier Bonded Trucking Operator award at the India Cargo Awards 2022.

Further, the Company has recently expanded its logistics business by setting up a new vertical of Car Carrier Transportation in South India. under a Strategic Partnership. Here, we transport the finished automobiles i.e., Car from Original Equipment Manufacturers (OEMs) to Dealers providing Last Mile Delivery on specific Car- Carrying Trailers.

The Company owns and operates a strong fleet of commercial vehicles consisting of 290 owned trucks and more than 400 outsourced trucks. The Company operates different types of trucks on the basis of design and size along with varying capacities. Our Container Trucks are used for transportation of parcels, white goods, FMCG, etc. while our Platform Trucks are mainly used for import export containers and also for transportation of heavy duty goods like automotive parts and machineries. With more than 3 decades of experience in freight management, logistics solutions & warehousing services, the Company has made a stalwart progress along the highways of India.

Overall, the Company has seen a huge growth in Revenue in FY22 across all its services in comparison to FY21.

Services Y-o-Y Growth %
Full Truck Load 35%
Parcel & Part Truck Load 37%
Bonded Trucking 75%
Import-Export 49%
Others 101%
Overall Y-o-Y Growth % 52%

RISKS, CONCERNS, THREATS AND STRENGHTS

Inspite of growing at a rapid pace, the Indias logistics industry has its challenges.

The major challenge businesses are facing now is pandemic related which has forced industries to step back and review their strategies, operations and processes. Organizations have realized that they need to build networks and/or channels that will allow them to adapt quickly and easily in a changing environment. Organizations will have to build systems that can optimize costs, accelerate reaction times and diversify channels. For networks to adapt quickly and function smoothly, it is also important to build agile teams willing to change and adapt rapidly to the external environment. Swift reaction to disruptions can hasten change and minimize damage. We believe that your Company would easily adapt to any given change being witnessed across markets as owing assets and operating offices across the country provides it with the requisite flexibility and option to moderate or reorganize any changes to freight movements.

Existing infrastructural and cost inefficiencies need to be addressed as well. The state of the countrys infrastructure has been on the radar of the policy makers and it is expected that there will be considerable development in this direction.

The Companys business operations are totally dependent on the road network in India. There are various factors that affect the road network such as political unrest, bad weather conditions, natural calamities, regional disturbances or even third party negligence that can affect the condition of trucks. Even though the Company undertakes various measures to avoid or mitigate such factors to the extent possible, some of these have the potential of causing extensive impact on operations and assets.

Fluctuations in fuel price, input costs especially those related to tolls as also others like rent, AMCs etc. have a significant bearing on the Companys profitability margins. These represent a significant portion of the operating costs and any inability to pass on the same in entirety affects profit margins adversely. In particular, the cost of fuel has increased in the recent years regularly and fluctuates significantly due to various factors which are beyond our control. Historically, the Company has been in a position to pass on predominantly or at times even completely such increases to customers through periodic increase in service rates. However, the ever present volatility represents a considerable threat to our result of operations.

The Company competes against the competitors by effectively ensuring consistent service quality and timely services at competitive prices, thereby strengthening its brand over the years. The Company believes that its large network and comprehensive service offering as well as its established reputation will enable it to compete effectively in the market.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate internal audit and control system commensurate with its size and nature of business to ensure operational efficiency, accuracy and promptness in financial reporting and compliance of various laws and regulations. The Audit Committee of the Board of Directors reviews the Internal Audit Report and the adequacy and effectiveness of internal controls periodically.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The consolidated performance of the Company for the financial year ended 31st March, 2022 is as follows:

The Service Turnover of the Company was Rs. 16540.67 Lac during the year under consideration as compared to Service Turnover of Rs. 10797.87 Lac during the previous year, representing increase of about 53.18 %.

The depreciation and amortisation expense was Rs. 385.60 Lac as against Rs. 430.92 Lac during the previous year. The finance cost was Rs. 408.35 Lac as against Rs. 421.47 Lac during the previous year.

The consolidated net profit after tax for the year is Rs. 918.90 Lac whereas the consolidated net loss after tax was Rs. 102.66 Lac for the previous year.

KEY FINANCIAL RATIOS

Ratio 2020-21 2021-22 % Change Explanation for Significant Change (i.e. change of 25% or more)
Interest Coverage Ratio 0.77 3.96 414.23 The increase in Operating Profit and lower interest expense in current year compared to preceding year has resulted in improvement in the ratio.
Operating Profit Margin (%) 1.82 7.84 330.77 There is variance in Operating Profit Margin as there is Profit Before Tax in current year compared to Loss Before Tax in preceding year.
Net Profit Margin (%) -0.89 7.22 -915.10 There is variance in Net Profit as there is Profit in current year compared to loss in preceding year.
Return on Net Worth -4.52 27.73 -713.33 There is variance in Return on Net Worth as there is profit in current year compared to loss in preceding year.
Debtors Turnover 2.97 3.67 23.44 N.A.
Current Ratio 1.38 1.49 8.57 N.A.
Debt Equity Ratio 1.97 1.40 -28.62 There is decrease in debt amount because of increase in principal component and reduction of interest component by repayment of loan.

Note - PBT ratios are considered after exceptional items.

Inventory Turnover Ratio is not applicable to the Company, as the Company is primarily engaged in the business of Transportation Service. There are no significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in other key financial ratio, like Current Ratio, Debtors Turnover Ratio therefore, explanation for the same have not been given.

HUMAN RESOURCE DEVELOPMENT

As on 31st March, 2022, the Company has employed 277 employees based in different locations across the country, majority of which are located at our registered office and regional offices. Additionally, the Company employs casual labourers and temporary labourers on daily wages for loading / unloading of the goods according to its requirements. Administrative employees play an important role in our centralized support services such as load planning, accounting, information technology, business development and human resource functions. The Company has developed a decentralized senior management structure in order to ensure timely decision making which is key to our operations.

Despite the large number of employees as also considering the widespread geographical operation of the Company, your management feels proud to state that the employer - employee relations remained extremely cordial throughout the year. There were no instances of strikes, lockouts or any other action on part of the employees that affected the functioning of the Company. It is noteworthy that there is no Employee Union / Trade Union / Union within the organization.

The recruitment, training and retention of qualified drivers are essential to the Companys growth and to meet the service requirements of the customers. In order to keep the drivers motivated, the incentive schemes are provided on a monthly basis and include incentives based on distance travelled, fuel efficiencies and meeting delivery and / or route schedules.

FUTURE BUSINESS OUTLOOK

The Indian logistics sector has witnessed robust growth. In fact, it steadied, post the onset of COVID-19 - courtesy of the rising retail and manufacturing ecosystem in the country. The average middle-class consumer is better informed and capable of spending more money on lifestyle needs. In the coming years there will be a rapid and impactful growth in the Indian logistics sector as there are great investments made in infrastructure development and the enhancement of operational efficiency in the industry. Cloud computing has enabled the building of integrated logistics platforms and marketplaces. Tech-driven logistics companies are enabling transporters and shippers to do business online, optimise operations through automated process support, conduct online payments, and document digitally. Modern technology-driven integrated logistics platforms, and service providers are spearheading the new normal of transportation.

Recently, there has been an unprecedented push towards infrastructure development in the country. Roads, warehouses, ports and dedicated transport hubs are being planned and built. With greater export volumes and connectivity between manufacturing centres and markets, the logistics volumes are on the way up.

The future outlook for the express logistics industry specifically, is positive owing to several government initiatives that are actively being executed. These include the National Logistics Policy, the National Air Cargo Policy, the National E-Commerce policy as well as the dedicated freight roads. In an attempt to propel the growth of the logistics sector even further, the Government has also actively invested in Logistics Parks and included several initiatives in the Government Budget.

With increasing road infrastructure including Bharatamala Pariyojana and the Sagarmala Projects, the Company intends to expand the Cargo Business. The Company also intends to set up warehouses in western regions of India to gain advantage of increased demand for warehousing facilities by the customers for storage of their cargo/ goods. The Company also intends to enter into temperature- controlled services and ambient distribution business segment i.e., the Company plans to own refrigerated freezer trucks and arrange for the transportation of the customers products from point of sourcing through Reefer Vehicles or ambient distribution vehicles. The Company has started tying up with e-commerce companies like Amazon and intends to tie up with more for last mile delivery for their products. The Company also intends to expand its Car Carrier Transportation vertical so the western, eastern and northern regions of the country in the near future.

CAUTIONARY STATEMENT

Statements in the Management Discussion & Analysis describing the Companys objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.