Transport Corporation of India (TCI), the ₹1,953-crore listed logistics firm, aims to further lower the share of its freight business, which is the firm’s lowest margin segment, to 33 per cent in its total revenue pie, over the next three years.

For the first nine months of last fiscal, the freight segment accounted for 38 per cent of total revenue. The freight division, which is the basic transportation service segment, had an operating margin of 3-5 per cent.

“We are hoping that each of the three key divisions will account for one-third share of total revenue,” Vineet Agarwal, Managing Director, Transport Corporation of India (TCI) told Business Line .

TCI has three key business segments – freight, express and supply chain – of which express and supply chain provide transport-based business with value-added services.

TCI Express, which recorded an operating margin of 8-10 per cent, accounted for 30 per cent of the firm’s total revenue in the first nine months. TCI supply chain solutions, which recorded an operating margin of 10-12 per cent, accounted for 26 per cent share of revenue.

This year, the company will focus on developing newer, specialised services for sectors that are less averse to a slowdown. “This year, generally there’s more focus on retail businesses, FMCG, pharmaceutical, food services including food supplies (cold and non-cold food), regular raw material movement and quick-service restaurant business,” said Agarwal.

For instance, at present, the supply chain division gets 70 per cent of its revenue from the automobile segment, and gets hit when sales dip in that segment.The company also plans to spend a minimum of ₹100-150 crore as capital expenditure this year on buying a new ship, setting up some warehouses, and buying trucks. The 2013-14 fiscal was a difficult year for TCI due to excess transportation capacity in the market and lower cargo volumes, which saw extreme movements in freight.

Last year, TCI’s freight segment saw sharp variations on account of the Telangana issue, good crops (which increased the cost of hiring trucks for TCI), and small increases in diesel prices, which prevented it from passing on the hike to its customers entirely.

In the last two years, when the economic slowdown set in, the company also saw some of its customers taking much longer to make payments. “The credit cycles went up…some customers from capital goods and the infrastructure segments are taking much longer than agreed by contract to make repayments. The usual credit cycles – time to make payments – could be 30, 45 or 60 days,” said Agarwal.

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