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00:00We have TVS Supply Chain Solutions with us joining in where we are joined by, we are
00:07joined by Mr. Ravi Vishwanathan, the MD of the show and the Ravi Prakash, Mr. Global,
00:13the Global CFO.
00:14Hello and welcome to the show.
00:15Good afternoon.
00:16Thank you for having us.
00:17Now, I'll start off with the Q1 performance now.
00:23So this is the third quarter wherein we've seen the profitability continuing.
00:27I want to understand from you, what is the road ahead in terms of the profits and as
00:32well as the revenue growth picture, if you can give us an outline for the whole FY25.
00:37Thank you.
00:38And I think it's been a good quarter one.
00:40We had a very good performance from a revenue growth perspective.
00:44For the first time in many quarters, we had a double-digit revenue growth, the company
00:49growing at almost 11% to 2,539 crores.
00:54That was encouraging with the fact that we grew across both our segments, be it the integrated
00:58supply chain solution services and the network solution segment.
01:02Both the segments grew handsomely 8.1% on the ISCS and 14.6% on the NS segment.
01:10So we are extremely buoyed by that.
01:13And that led to our PBT growing for the fourth consecutive quarter.
01:20So over the last four quarters, we have built a very strong momentum, both in our revenue
01:24and in our margins.
01:26And that is resulting in our PBT growth.
01:30Our outlook going forward is to continue on this momentum and we expect to have double-digit
01:37PBT and hopefully end the year on a very good note across the next three quarters.
01:47Specifically, I would say what is encouraging for us is that on the network solution side,
01:53we see significant growth in our volumes.
01:57And that's again something which we have witnessed after about three or four quarters of flat
02:01volume growth.
02:03And this has contributed very handsomely to the global forwarding business, which resulted
02:08in the 14.6% growth in the network solution business.
02:12So overall, we are very confident about our revenues and our continuing momentum in our
02:20profitability.
02:21All right.
02:22So the growth momentum to continue, can you quantify in terms of percentage, what is the
02:27growth number that we should be looking out for in FY25?
02:32I would probably not hazard a guess at this point in terms of our guidance in that sense.
02:40But what we are confident of is to continue the momentum and deliver the profit numbers
02:45that we are very confident of.
02:48So a double-digit profit number across the four quarters is really what our focus is.
02:54As we continue on our journey to ensure that we are among the top 50 global supply chain
03:01companies over the next three to five-year period.
03:04So that is really the focus of the company.
03:07What gives us the confidence at this point in terms of that vision is the very strong
03:12pipeline that we have here, over 4,000 crores of analyzed revenue in the pipeline.
03:18And the quality of the pipeline is something which we are extremely, extremely happy about.
03:25Very significant large deals, which are now part of the pipeline, gives us the confidence
03:31that we'll be able to grow on this momentum that we have built.
03:36If you look at outsourcing itself as a trend in the Western countries, it is something
03:40which we started participating in a more concrete manner over the last two to three quarters.
03:49And if you look at what has happened, if I take the UK as a market, our average deal
03:57sizes used to be about two to three million pounds, and that has increased about nine
04:02million pounds in the last 12 to 15 months.
04:05On the back of the very large deal that we signed with one of the utility companies in
04:09the UK.
04:10Similarly, in the US, our average deal sizes have significantly increased from about $4,
04:17$4.5 million to almost $10 million, so more than twice in terms of the deal sizes.
04:24And that's coming on the back of the fact that we are now participating in a significant
04:28amount of tech-led large deals.
04:32Right.
04:33That is quite interesting to understand, and thank you for the break up over here.
04:36But I also want to understand one thing which stood out in your past conference call was
04:40the 4,000 crore of pipeline opportunities that you've seen.
04:44Can you explain us when we can expect to see this in part of our revenue?
04:48What is the kind of conversion that we are looking at for this one?
04:52Right.
04:53I think over the first quarter, we announced quite a few significant wins with a very large
04:59aftermarket solutioning in the Asia-Pacific market.
05:04We also announced a win in India with commercial vehicle manufacturers.
05:11So we are converting many of these deals, and that is really feeding into the revenue.
05:18So about 246 crores of revenue for the first quarter has come on the back of new wins that
05:25we have had.
05:26So our revenue in this quarter coming from new business wins have been about 246 crores,
05:30which is roughly about 10.5-10.6% of the previous quarter's revenue.
05:35So I think our revenue momentum is significantly assisted by the tailwinds coming from the
05:44pipeline conversion.
05:45All right.
05:46That's fair.
05:47Now, if I want to look at some of your segments over here, so again, I want to understand
05:52more on the India side, if we take the integrated supply chain solution over here.
05:56I want to understand, we have seen this trend in Q3, Q4, as well as Q1, we've seen a 6%
06:02decline in Q1.
06:03I want to understand what's the scenario building here?
06:05What's the kind of outlook that we should be watching out for?
06:09I would say Q1 was a soft quarter from an India perspective and probably reflects most
06:16of the industry.
06:18I would be very, we are at least confident of India, especially what we saw in the budget
06:27and the boost that the budget has given to the manufacturing sector, which in many ways
06:32will feed into the supply chain business.
06:34So we are confident going forward, hopefully the festival season and beyond will give us
06:39the required momentum for us to have significant differential growth in India compared to what
06:47we are seeing in the rest of the world.
06:49Now coming to you, Mr. Ravi Prakash, I want to understand the margin pressure that has
06:54gone in the network solution business.
06:56So the last three years, if you had to see, 4.7% in FY24 as compared to 7.4%.
07:02Now, Mr. Viswanathan did mention that, you know, there was a volume pickup over here.
07:07So going forward, can we expect the margin recovery also to come back in picture in this
07:12segment?
07:13Yes, it will be.
07:16But probably we are about a couple of quarters out.
07:18What has happened in the network segment is we have two businesses on the freight forwarding
07:22side rates as well as cost has gone up because of the Red Sea situation and therefore margins
07:28are getting impacted.
07:29And the second part is we have a business called the IFM Integrated Final Mile, which
07:34we had already communicated earlier is in the process of a turnaround.
07:38And we expect that to probably start giving results from Q3 of this year onwards.
07:44So we are conscious of the fact that we need to get back to the margins that we had in
07:48the past.
07:49And we should start seeing that happening from Q3 of this year.
07:54I also want to point out, even though the question was on the segmental margins, that
07:58overall, as a portfolio, the profitability this quarter, we made 13.7 crores, which is
08:06a 100 basis point improvement in PPT margin versus the same period last year.
08:11So even though one of the segments is kind of holding firm, the other segment, which
08:16is integrated supply chain solutions, is helping us deliver better margins.
08:22So year on year it was 100 basis points, which is in line with our medium term goals.
08:26Our medium term goal is to grow margin 50 to 100 basis points every year.
08:31So as a portfolio, we are quite comfortable that we can get there.
08:34All right.
08:35Mr. Ravi Prakash, I want to stick with you.
08:37I want to understand the outlook which is going on with some of the major cost line
08:41items over here, be it the freight, cost rates, the volume outlook over there.
08:46What is it currently, if we go and compare it to the Q4 picture, how are the cost items
08:52looking at the major ones?
08:55If I compare with Q4, a couple of quick changes have happened.
09:00You will see that the business mix in some of our supply chain contracts has changed,
09:04and that is reflected in the material cost going up.
09:08And that is fine, because we are actually doing more value-added work in some of our
09:12geographies, and that is driving material costs.
09:15But as a gross margin, we are still able to manage it.
09:18On the freight side, very clearly you will see a growth in freight costs, because what
09:23I talked about earlier, the Red Sea situation.
09:26Volume has been good, but then the freight costs have also been up.
09:30We expect this elevated freight cost to continue, like I said, for a couple of quarters.
09:35Probably by the end of this calendar year is when we can maybe hope for moderation,
09:39but it's honestly anybody's guess.
09:42What we are doing from our perspective is, in the supply chain side of the business where
09:47we have strong revenue momentum, we are focusing on operating leverage to deliver margins.
09:52On the network segment where we have cost pressures because of external reasons, we
09:56are focusing on internal productivity.
09:58And as a portfolio, I keep coming back to what we had said, we intend to continue to
10:03deliver the 50 to 100 basis point margin improvement.
10:06The freight cost moderation, maybe we can see it building up from the quarters coming
10:13forward as well.
10:14But now, I want to understand, what are the CAPEX plans, if you have to look at, any of
10:18you all can take this up, the CAPEX plans for the overall year that we are looking at.
10:23And even if we go forward, this is a second part question to this.
10:27What is the mix that we are looking at in our segments?
10:29Are we expected to see integrated supply chains being more than the 55% level that we are
10:35seeing?
10:36In general, there is a lot of momentum on the integrated supply chain solutions, even
10:40for the last few quarters.
10:41And we are quite encouraged by it, because this is a segment where contracts are sticky,
10:46they are long term, they are predictable.
10:50We expect to see strength in that segment.
10:54How it will pan out in terms of mix, probably difficult to predict beyond what we are right
10:59now, but we expect the segment to do well.
11:01Now, to support this growth, there would be some CAPEX required, normally, we have about
11:081% of our revenue being spent in CAPEX, unless we come across a very major strategic project
11:14where we may have to lay out one time CAPEX.
11:17At the moment, we would say that for this fiscal, we are probably at about 1%, until
11:23if we come across any large project, which requires an outlay, which we'd be willing
11:28to do, because the company's balance sheet is in a pretty strong position right now.
11:32Our debt, actually gross debt has come down, our interest cost has more than halved over
11:36the last 12 months.
11:39And so we are actually in a pretty good position to use that flexibility to invest in CAPEX
11:47if required.
11:48So 1% is the level that we are looking at for the CAPEX for this year going forward.
11:53But that was the final question.
11:55Thank you, Mr. Vishwanathan, and thank you, Mr. Ravik Prakash, for joining and sharing
11:58your insights on TVS Supply Chains and the outlook forward for the business.
12:03Thank you.
12:04Thank you.