total transport systems ltd Management discussions


Forward looking statement

Statements in this Management Discussion and Analysis of Financial Condition and Results of Operations of the Company describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events.

The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include changes in government developments within the country and such other factors globally.

The financial statements are prepared under historical cost convention, on accrual basis of accounting, and in accordance with the provisions of the Companies Act, 2013 (the Act) and comply with the Indian Accounting Standards as pronounced by the Institute of Chartered Accountants of India (ICAI) from time to time. The Management of Total Transport Systems Limited has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements, reflect in a true and fair manner, the state of affairs and profit for the year. The following discussions on our financial condition and result of operations should be read together with our audited financialstatements and the notes to these statements included in the annual report. Unless otherwise specifiedor the context otherwise requires, all references herein to "we", "us", "our", "the Company", "Total" are to "Total Transport Systems Limited".

ECONOMIC OVERVIEW Global Industry

The global logistics sector has undergone significant changes in recent years, driven by advancements in technology, changes in consumer behaviour, and increasing globalization. With the rapid growth of ecommerce and the increasing global trade, the logistics sector is witnessing significant demand for its services.

The global logistics market size reached a value of almost USD 9.96 trillion in the year 2022. The logistics market is expected to grow at a CAGR of 6.3% between 2023 and 2028 to reach a value of almost USD 14.37 trillion by 2028. The Asia Pacific is the leading regional market for logistics across the globe.

The sea freight forwarding market is expected to grow at a Compound Annual Growth Rate (CAGR) of around 4.5% during the forecast period of 20212026. The growth is primarily attributed to the increasing demand for sea freight forwarding services from various enduse industries such as automotive, healthcare, and consumer goods, among others.

The global logistics market is driven by the substantial growth in the ecommerce industry. This can be ascribed to the considerable rise in the sales of goods via online retail channels, which is further enhanced by the convenience offered by these platforms at a better price. The market is further aided by the efficient functioning of online deliveries with logistics.

In addition to this, various ecommerce platforms offer easy return and refund policies, which has resulted in an increase in the demand for reverse logistics processes with flexible services like tracking facilities. Besides, increasing focus on sustainable development has led to an accelerating demand for green logistics that offer sustainable transport solutions.

Source: https://www.expertmarketresearch.com/reports/logisticsmarket#:~:text=The%20global%20logistics%20market%20 size,USD%2014.37%20trillion%20by%202028.

Indian Logistics Industry

Multimodal Logistics has a bright future in India. India has the geographical advantage of being well positioned to emerge as a hub for a variety of products. However, for a strategic growth in this industry, longstanding issues, like improvement in road and rail infrastructure, creation of modern warehouse facilities and streamlining of customs formalities need to be improved. Provision of value added service, which are basically unique and add efficiency and effectiveness to the basic service capabilities of the firm. These value added services have evolved due to forced innovation due to differentiated offering, for growing and surviving in competitive markets. End of life regulations of vehicles also need to be implemented to encompass cargo vehicles and ensure better efficiency and reliability.

Retail prices of petrol, diesel stayed unchanged and remained at highs but had no bearing on domestic freight movement during last twothree months, likely due to higher inventory filling at retail stores, more volume led growth in FMCG companies due to lower commodity prices for certain products and higher ecommerce shipments. Current quarter also saw growing footprint of ONDC network (higher on boarding of stakeholders like Amazon, Snap deal). While primary sales from PV auto volumes remained flat during the quarter and tractor grew 23%. Ocean freight charges saw continued cooloff during the quarter to pre pandemic levels mainly led by lower demand on AsiaEU and Asia to America trade lane.

Container prices also cooled nearly 50% YoY (e.g. in China down 47% to $2284, down 55% in Singapore to $1951, etc). However, container trade within Asia has been growing strongly on the AsiaMiddle East route (new services from Hapag Lloyd, Cosco, OOCL, CMA CGM Group and creation of new Asia shipping region altogether from Maersk.

Overall, freight players saw higher fleet utilisation, due to higher stocking of inventory and increased trucking movement. Retail petrol/diesel prices also remained largely range bound (in spite of lower crude oil prices) that will likely result in stable margins for logistics companies (passthrough of petrol/diesel prices). Warehousing volumes (higher valueadded activities like sorting, bill generation, etc) is also expected to show positive traction, led by favourable volumes from segments like ecommerce.

Increased digitisation of customers is also leading to greater D2C volumes for logistics firms.

India is one of the emerging markets across the world. Due to the diverse population, the demand for an ECommerce platform is rising. The expansion of digital purchasing has been pushed by changing consumer habits during Covid19. The Indian logistics sector has been rapidly growing in recent years, driven by increasing consumer demand, rising ecommerce sales, and government initiatives to improve infrastructure With the increasing popularity of ecommerce in India, the logistics sector is seeing a surge in demand for its services, particularly lastmile delivery.

According to Indias ecommerce logistics report, in 2021, the size of the Indian logistics market grew by 4%, and it is expected to grow at a CAGR of 5% from 202227, generating market revenue of USD 633.6 billion by 2027. The future of transportation & logistics in India is expected to drive warehousing demand and industry trends in the ecommerce logistics market are turning towards reverse logistics.

Moreover, the increasing purchase from crossborder and cheap shipping costs for consumers is anticipated to grow the market. Many players such as Amazon provides free nextday delivery on orders over a certain threshold, as well as paid sameday delivery to certain localities in India. On the other hand, numerous major elements will aid expansion, including the growing middleclassincome population, high Internet penetration rate, robust transportation logistics network, advanced digital payment systems, expanding techsavvy youth population, and strong government support.

The Indian logistics sector is expected to see increasing merger and acquisition activity as large players look to consolidate the market and expand their services. As the demand for ecommerce and the food industry grows, the logistics sector in India is expected to expand its warehousing and cold chain capabilities. The Indian logistics sector is also expected to adopt new technologies such as IoT, blockchain, and AI to improve efficiency, reduce costs, and enhance customer service.

Overall, the Indian logistics sector is poised for continued growth, driven by government initiatives, increasing demand, and technology adoption. While challenges such as infrastructure gaps and a fragmented market remain, the sector is expected to see significant development and consolidation in the coming years.

Source:https://www.globenewswire.com/en/newsrelease/2022/10/28/2543606/0/en/TheIndianECommerceLogistics

Industryisexpectedtogrowbymorethan20CAGRinthenextfiveyearsMakreoResearch.html

Government Initiatives

In recent years, the Indian government has initiated several initiatives to promote the growth of the multimodal transportation sector. For instance, the government has launched the Sagarmala project, which aims to modernize and enhance port infrastructure and connectivity, and the Bharatmala project, which aims to develop a highquality road network across the country.

In a bid to strengthen Indias logistics sector, the government has initiated key policy reforms in recent years, such as infrastructure status, LEEP, National Logistics Policy and Gati Shakti. While improvements are already visible, we expect these measures to further pave the way for enhanced logistical efficiencies, cost reductions, technological upgrades and a better modal mix. Infrastructure status and LEADS

: In Nov17, the government awarded the logistics sector infrastructure status which allows for better credit availability at easier terms, larger funding limits, increased loan amounts and longer loan tenures. At around the same time, it added a logistics division to the Department of Commerce to bring in interministerial coordination and expedite the logistics development process by way of policy changes, streamlining existing procedures, identifying bottlenecks and gaps, and introducing technology in the sector. In 2018, the government launched a Logistics Ease across Different States (LEADS) survey, which assesses the viewpoints of various users and stakeholders across the value chain (shippers, terminal infrastructure service providers, logistics service providers, transporters and government agencies) to understand the enablers and impediments to Indias logistics ecosystem. It encourages states to establish institutional mechanisms to facilitate ease of logistics access via coordination with private players and amongst themselves.

Gati Shakti: To improve coordination amongst infrastructure projects, expedite execution and reduce costs, the government of India launched the PM Gati Shakti scheme in Nov21 as a national master plan for multimodal connectivity to economic zones. The master plan will integrate 16 ministries in a joint committee to oversee investments of Rs 100tn budgeted by the government toward the scheme.

National Logistics Policy: In Sep22, the government launched the National Logistics Policy (backed by Gati Shakti) as a comprehensive measure to further improve sector productivity by: integrating multiple stakeholders at the national and state level, developing multimodal logistics parks (MMLP), modernising warehousing using technology, promoting the startup ecosystem, bringing in a transparent regime for freight charges, improving trucking and road transport, attracting freight for railways, and

Promoting other means of transport.

The governments overarching target is to draw down logistics cost from the current 14% of GDP to 810%, with the cuts equally distributed between transportation and inventory cost. This will help streamline the sector and consequently boost job creation, exports, ease of doing business and capital flows into the country.

Healthy industry outlook: According to RedSeer, direct logistics spends in India are expected to log a 9.1% CAGR from US$ 216bn to US$ 365bn by FY26, fuelled by the governments manufacturing push and rising consumer demand. Rail is forecast to lead the way at 14% CAGR, with the revenue share of freight transport improving from 14% to 19%. Warehousing is likely to follow at 9% backed by rising 3PL adoption and ecommerce penetration. Given a conducive demand and policy climate, we model for a 20%/31% revenue/PAT CAGR for our coverage over FY22FY25.

In future, the multimodal transportation sector in India is expected to grow significantly, owing to the increasing demand for efficient and costeffective transportation solutions. The governments continued efforts to modernize and upgrade transportation infrastructure, along with the increasing adoption of technology, are expected to further enhance the sectors growth. Additionally, the development of new transportation corridors and the implementation of policies to encourage private sector participation are expected to drive growth in the sector.

Indian Container Market

The India container market size to be valued at USD 10.3 billion by 2028 and is expected to grow at a compound annual growth rate (CAGR) of 1.7% during the forecast period. The growth can be attributed to the increase in maritime shipping on account of an increase in trade agreements across nations. The market is expected to further grow over the forecast period on account of the expansion of the ecommerce industry, digitalization in container shipping, and rising demand for specialized containers. Moreover, an increase in demand for commodities and rapid urbanization are expected to fuel the market growth. Significant developments in commercial vessels and innovation of cargo ships equipped with the latest technologies such as navigation systems, advanced sensors, and other components are expected to drive the demand for transportation through ships, in turn propelling the growth of the container market.

In an attempt to reduce dependency on China for container requirements, Few domestic players have selected ten strategic locations for the production of containers on a pilot basis. A major growth aspect for both international and domestic businesses will involve optimizing the internal logistics chains within the organization. This opportunity is expected to fulfill the demand for containers in India.

The factors driving regional market expansion include expanding demand for cargo transportation via ports, growing trade agreements, rising demand for specialized shipping containers by the defense sector, and automation in container shipping. For the trading of goods, several trade agreements have been negotiated between developing and industrialized countries. As per a report published by IBEF, almost 95% of the trade volume in India is handled by maritime transportation. https://www.grandviewresearch.com/industryanalysis/indiacontainermarketreport

About Total Transport Systems

Established in 1994, Total Transport Systems Ltd (TTSL) is a wellestablished Company in Indias cargo market. Through a robust network of partners, the Company has made a strong foothold in the logistics industry in the country.

TTSL specializes in logistics business keeping a focus on our core business activities namely consolidation of Export cargoes, deconsolidation of import cargoes, full container loads and air freight from India to worldwide destinations. As a nonvessel Operating Common Carrier, the Companys consolidated shipping is rated among the top customers of almost all leading shipping lines operating in the region. This reputation has ensured the Companys competitive rates & space with major liners for consolidated shipments on a regular basis. The Company specializes in the business of Airfreight, LCL Forwarding for both exports and imports. TTSL has sizeable market share in Indias LCL segment and the Company is one of the market leaders in cargo consolidation. In addition to such services, Total continues to focus on timely delivery, diversification of its service portfolio, sustained longterm relationships with its clients, and extending valueadded services over and above simple logistics. The Company is equipped with a MultiModal Transport Operators License for servicing its customers requirements. It also has a Federal Maritime Commission (FMC) license. These licenses help the Company scale new businesses and geographies. These efforts have enabled the Company to win long running contracts as well as garner accolades in the Industry as amongst the best groupage traffic in India. Moreover, the Company is wellpositioned to leverage the changing trends in the logistics industry. It represents worlds 5th largest consolidators network named "I Cargo Alliance" with 166 offices in 89 countries The Company has two wholly owned subsidiaries CP World Logistics India Pvt Ltd and One World Logistics Pvt Ltd. Incorporated in 2010, One World Logistics offers services of last mile, rural mile and rural B2B delivery. The Companys robust business model along with its latest ERP and SaaS for technology back up gives an added advantage. It operates under the brand "Abhilaya" with a focus on last mile delivery especially for Amazon, Flipkart and FedEx with a target to work with other ecommerce players at PAN India level. It is an ondemand lastmile delivery solution provider offering techenabled delivery solutions for Ecommerce, Restaurants, FMCG, Pharma and online & offline retailers.

The Company has entered into a Joint Venture agreement with Seedeer (Hong Kong) E Commerce Company Limited to form a Joint venture entity called a Seedeer (India) Ecommerce Private Limited to gain access to the worldwide global supply chain activity of Seedeer locally in India. All these services provided by the Total group help the Company to scale new heights of success. This is enabled by specialized skill sets, local insights and experience of its devoted management team.

The Companys wide reach and superior logistics capabilities helps it provide endtoend services. Such expertise and superior quality of service has led to increased confidence of its marquee clients.

FINANCIAL OVERVIEW –

The financial performance of the Company for the year ended March 31st 2023, is as follows: ,

Total revenue from operations at Rs 590.27 crore for the year ended March 31, 2023, as against Rs. 583.23 crore for the corresponding previous period, increase of 1.21%. Decreased freight rate was the main reason for revenue being flattish. The EBIDTA (earnings before interest, depreciation, and tax, excluding other income) was Rs. 14.62 crore for the year ended March 31, 2023, as against Rs. 16.42 crore for the corresponding previous period, a decline of 10.94% mainly due to lower revenue and higher employee expense on account of onetime bonus.

EBITDA margin decreased to 2.48% in FY23 from 2.81% in FY22. Net Profit was at Rs. 4.65 crore in FY23 as against Rs. 9.08 crore in FY22. Net Profit margin decreased to 0.79% in FY23 from 1.56% in FY22 EPS was Rs.3.47 in FY23.

Volume wise comparison of summary is given below:

Vertical

FY 2023 Volume in Unit FY 2022 Volume in Unit

Sea Export:

FCL

8,100 TEU 6,464 TEU

LCL

2,58,413 CBM 2,56,970 CBM

Sea Import:

FCL

1,646 TEU 1,547 TEU

LCL

1,52,017 CBM 1,46,285 CBM

Air Export

909 Ton 1,128 Ton

Air Import

215 Ton 190 Ton

RESOURCES AND LIQUIDITY

As on March 31, 2023, the consolidated net worth stood at Rs. 77.63 crore and the total debt was at Rs. 16.53 crore. The cash and cash equivalents at the end of March 31, 2023 were Rs. 10.97 crore.

The net debt to equity ratio of the Company stood at 0.07 as on March 31, 2023.

OPPORTUNITY & THREATS

Opportunity

Ecommerce growth: With the rise of ecommerce in India, there is a growing demand for logistics services to handle the transportation and delivery of goods.

Infrastructure development: The Indian governments focus on infrastructure development, including the construction of new highways, ports, and airports, presents opportunities for logistics companies to expand their services.

Warehousing and distribution: As more companies enter the Indian market, there is an increasing need for warehousing and distribution services to store and transport their products. Total Transport is focusing on increasing its number of stations and warehouses in order to carter better services to its clients.

Lastmile delivery: The lastmile delivery segment is a significant opportunity for logistics companies in India. With the increase in online shopping, there is a growing need for efficient lastmile delivery services.

International trade: Indias growing importance in global trade presents an opportunity for logistics companies to expand their operations and provide services for international trade. Total Transport is working successfully on its roadmap of extending geographical boundaries.

Overall, Total Transport System Ltd can effectively capitalize on these opportunities and have a significant potential for growth in long term.

Threats

Regulatory challenges: The logistics sector in India is subject to a complex regulatory environment, with different rules and regulations at the state and national level. This can create compliance challenges for the company operating across multiple states.

Competition: The logistics sector in India is highly competitive, with many established players and new entrants vying for market share. This can lead to pricing pressures and reduced profit margins for TTSL.

Geopolitical risks: Indias geopolitical environment can create risks for the logistics sector, including trade disputes, political instability, and security risks.

The Company is focusing on developing strategies to mitigate these risks and ensure longterm sustainability.

SEGMENT WISE OR PRODUCT WISE PERFORMANCE

The Company is engaged in the business of Consolidation/deconsolidation of cargo freight forwarding, logistics, warehousing and transportation along with last mile delivery business. The Company is dealing only in this single segment and hence segment wise performance is not applicable to the Company.

RISKS AND CONCERNS

Like every business, the Company faces risks, both internal and external, in the undertaking of its daytoday operations and in pursuit of its longerterm objectives. A detailed policy drawn up and dedicated risk workshops are conducted and key support functions wherein risks are identified, assessed, analyzed, and accepted / mitigated to an acceptable level within the risk appetite of the organization. The risk registers are also reviewed from time to time.

The Company faces the following Risks and Concerns:

Credit Risk

To manage its credit exposure, TTSL has determined a credit policy with credit limit requests and approval procedures. Company does its own research of clients financial health and project prospects before bidding for a project. Timely and rigorous process is followed up with clients for payments as per schedule. The Company has suitably streamlined the process to develop a focused and aggressive receivables management system to ensure timely collections.

Interest Rate Risk

The Company has judiciously managed the debtequity ratio. It has been using a mix of loans and internal cash accruals. The Company has well managed the working capital to reduce the overall interest cost.

Competition Risk

This risk arises from more players wanting a share in the same pie. Like in most other industries, opportunity brings with itself competition. We face different levels of competition in each segment, from domestic as well as multinational companies. The Company has created strong differentiators in project execution, quality and delivery which make it resilient to competition. Furthermore, the Company continues to invest in technology and its people to remain ahead of the curve. A strong, stable client base consisting of large and midsized corporations further helps to insulate the Company from this risk.

Liability Risk

This risk refers to our liability arising from any damage to cargo, equipment, life and third parties which may adversely affect our business. The Company attempts to mitigate this risk through contractual obligations and insurance policies.

INTERNAL CONTROL SYSTEMS AND ADEQUACY –

The Company implemented proper and adequate systems of internal control to ensure that all assets are safeguarded and protected against loss from any unauthorized use or disposition and all transactions are authorized, recorded and reported correctly. The Company also implemented effective systems for achieving highest level of efficiency in operations, to achieve optimum and effective utilization of resources, monitoring thereof and the compliance with provisions all laws including the Companies Act, 2013, Listing Agreement, directions issued by the Securities and Exchange Board of India, labour laws, tax laws etc. It also aimed at improvement in financial management, and investment policy. The System ensures appropriate information flow to facilitate effective monitoring. The internal audit system also ensures formation and implementation of corporate policies for financial reporting, accounting, information security, project appraisal, and corporate governance. A qualified and independent Audit Committee of the Board of Directors also reviews the internal control system and its impacts on improvement of overall performance of the Company.

HUMAN RESOURCES

The Companys HR philosophy is to establish and build a high performing organization, where each individual is motivated to perform to the fullest capacity: to contribute to developing and achieving individual excellence and departmental objectives and continuously improve performance to realize the full potential of our personnel. As on March 31, 2023, Company is giving direct employment to 352 employees.

OUTLOOK

The initiatives taken by Government of India is expected to create significant growth for the logistics sector. The integration in the form of a multi modal network of transport and warehousing will lead to increased efficiency in the transportation and storage of goods throughout the country. By focusing on the digital aspect, the governments aim is to upgrade the existing system that will lead to faster, better communication with fewer errors that will benefit the sector significantly. The plan has a strong monitor system with periodic audits in order to check the implementation of policies and application of required corrective measures.

With the aforementioned initiatives, India intends to raise its ranking in the Logistics Performance Index to 25 and cut bring down the logistics cost from 13% to 8% of GDP, leading to a reduction of approximately 40%, within the next five years. These goals were set by the National Logistics Policy. This would guarantee the logistics industry acts as a growth engine and a major factor in upgrading India to a US$ 5 trillion economy.

However, it is important to note that the growth rate may vary depending on various factors such as economic conditions, trade policies, and global events that may impact the global supply chain. The COVID19 pandemic, for example, has had a significant impact on the sea freight forwarding market, leading to disruptions in supply chains and a decline in trade volumes. Nevertheless, as the global economy recovers and trade volumes pick up, the sea freight forwarding market is expected to see steady growth in the coming years.

With the increasing adoption of automation and artificial intelligence, the logistics sector is expected to become more efficient, costeffective, and customerfocused. Lastmile delivery is a key area of focus for the logistics sector, as far as increasing emphasis on sustainability to reduce environmental footprint and operate more efficiently, we invested in 50 EV scooters for the ease of delivery leads to timely delivery of orders, all of this in turn generating higher and better operational mix.

We continuously focusing on exploring new technologies, new ideas and ready to adapt as per changing market conditions to stay competitive and profitable in the long term.

Overall, the logistics sector is expected to grow and evolve.

Source: https://www.ibef.org/blogs/indiasgrowinglogisticssector https://www.expertmarketresearch.com/reports/logisticsmarket#:~:text=The%20global%20logistics%20market%20 size,USD%2014.37%20trillion%20by%202028.

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations 2018, the Company is required to give details of significant changes (Change of 25% or more as compared to the immediately previous year) in key sector specified financial ratio.

STANDALONE

CONSOLIDATED

PARTICULARS

F.Y. 23 F.Y. 22 Variation F.Y. 23 F.Y. 22 Variation
Debtors Turnover ratio 6.73 6.25 7.69 6.88 6.47 6.34
DEBT/EBIDTA 0.66 1.41 53.35 1.10 1.57 30.11
Interest Coverage ratio 8.33 9.66 13.76 4.24 7.95 46.67
Current Ratio 3.04 1.70 79.40 2.53 1.69 49.96
DebtEquity Ratio 0.37 1.17 68.59 0.61 1.44 57.69
Operating Profit Margin 0.13 0.11 22.61 0.13 0.11 19.97
Net Profit Margin 0.03 0.02 19.46 0.01 0.02 43.98
Return on Net worth 0.82 0.78 4.39 0.32 0.65 49.71

COMMENTS ON RATIO:

1. Since in this year our dependability on Cash Credit limit is reduced & at the same time EBIDTA has gone up.

2. Reduction in profit of subsidiary company has affected Interest coverage ratio.

3. Reduction in debt is due to substantial reduction in freight rates affected Current ratio

4. Reduction in debt is due to substantial reduction in freight rates affected DebtEquity ratio

5. Reduction in profit of subsidiary company has affected Net profit margins ratio & Return on Net worth ratio.