MANAGEMENT DISCUSSION AND ANALYSIS Global Outlook The global economy continued to expand during 2014 at a moderate and uneven pace. Growth of World Gross Product (WGP) was marginally better than the growth in 2013. The global economy is expected to strengthen, with WGP projected to grow by 3.1 in 2015. Six years after the global financial crisis, Gross Domestic Product (GDP) growth for a majority of the world economies has shifted to a noticeably lower path compared to br-crisis levels. Industry Outlook The transport and logistics sector are fundamental to the development of a country. In India, since the 1990s, the transportation infrastructure has undergone a significant change. While in the 90s, the demand for transport grew at an annual rate of 10%, in the last decade, the demand in the transport and logistics industry grew along with the accelerating Indian GDP. This growth increased the demand for practically all transport services. India's Logistics sector is poised for accelerated growth, led by GDP revival, infrastructure ramp-up (railways/roads/ports), e-commerce and Omni channel retail penetration, impending GST implementation and other initiatives like "Make in India". The opportunities have grown across the spectrum -transportation, storage, distribution and integrated/allied services. Integrated multimodal operators are expected to receive a boost with the development of dedicated rail freight corridors. GST implementation and e-commerce promise to alter the landscape for warehousing and 3PL services. Omni Channel and E-commerce Trends The current booming trends in e-commerce and Omni channel retailing have completely changed the conventional retail logistics and have resulted in a significant rise in the volume of freight traffic moved. This large volume of traffic has opened up new growth opportunities in all facets of logistics including transportation, warehousing, freight forwarding, exbrss cargo delivery, container services, shipping services, etc. The alignment of Omni channel would require optimizing inventory and shipping processes to get products to customers as quickly as possible, identify the best operating model and develop an operating model that is capable of exploiting the similarities in order profiles and define order routing, order fulfillment locations and other key elements of the Omni channel fulfillment process. Implementation of GST (Goods & Services Tax) will be a game-changing event for businesses in general and organized logistics players. It would provide a boost to warehousing, supply chain management and 3PL business. It will enable the creation of the common market and permit free and unimpeded movement of goods & services across the country. The anticipated benefits for LSPs (Logistics Service Providers) being consolidation of its network, larger warehouses, larger tonnage trucks, thus overall better efficiencies. This would mean that modern technologies like automatic storage and retrieval, material handling equipment, RFID, etc. will replace typically labour intensive activities, reducing errors in the supply chain and therefore cost. This will make warehousing and trucking in India more or less at par with the Western world and Far East. Add to it, as a result of reduced tax liability, GST will reduce the share of the unorganized sector in warehousing Supply Chain Outlook The manufacturing industry is getting commoditized by the day, especially with Omni channel strategies being adopted by them to approach the customers, supply chain management has become more than a differentiator, a 'lifeline' for survival. VUCA (Volatility, Uncertainty, Complexity and Ambiguity) management for companies has become the norm. This has led to increase in outsourcing of logistics, warehousing, IT sourcing, vendor management and customs, to create value for the companies, brdict and brpare for VUCA for their customers. IT integration and vendor management are two new areas for which companies are tying up with 3PL and Supply Chain solution providers. "Synergizing with 3PLs and LSPs" by outsourcing across the value chain to service the ever discerning customer and consumer is the recognized fact by all companies and brands. Indian Scenario India is one of the largest economies in the world and a major emerging market that has a young population, rising investment rates, large domestic demand and globally competitive firm. Even though, the unexpected global crisis has taken its toll on the economy, it is brdicted that India will become the third largest economy by the year 2025 after China and the USA and has awakened the interest of significant investors. The logistics sector in India has today become a key performance indicator of the economy. One of the primary reasons is years of high growth in the Indian economy. According to the World Bank's Logistic Performance Index (LPI), India is ranked 39th among 150 Multimodal transport refers to the seamless transport of cargo from one point to another via more than one mode of transport typically using ISO containers. Multimodal Logistics can be viewed as "the chain that interconnects different links or modes of transport - air, sea, and land into one complete process that ensures an efficient and cost-effective door-to-door movement of cargo under the responsibility of a single transport operator, known as a Multimodal Transport Operator (MTO), on one transport document". Multimodal logistics serves to interconnect different modes of transport - road, rail, air, water - and therefore improve efficiency and speed of cargo movement. Government's new initiative on the projects like Dedicated Freight Corridor (DFC), 'Sagarmala' and 'Bharatmala' would further enable seamless multimodal logistics services. Multimodal logistics is designed to cut transit times, decongest congested modes and reduce logistics cost. Estimates indicate that Multimodal logistics can potentially reduce costs by 10-25%. Long hauls would yield these savings. Multimodal logistics has tremendous potential to increase supply chain efficiencies. The right policy incentives from the government and interests from the private sector should together go a long way to spur growth in this sector. Rather than just road operators, incentives for users and service providers for adopting multi-modal modes should be encouraged. Road Freight Road transport has been a dominant segment in India's transportation sector and is considered one of the most brferred modes. It accounts for over 60% of freight traffic movement. Easy availability, customized service, door-to-door delivery and cost saving continue to work in favour of the sector. Transport through road network also acts as a feeder to other modes of freight transport - Railways, Air and Sea. Key facts: 1. The trucking industry in India is highly unorganized and fragmented. 2. It is estimated that 20% of the industry is organized. 3. In terms of ownership, 74% are small fleet operators with fleet of 1-5 trucks each. 4. Only 10% are large players with over 20 trucks each. Rail Freight Cargo is transported brdominantly by road and rail in India. Whereas road transport is controlled by private players, rail transport is handled by the central government. Rail is brferred because of containerization facility and ease in transporting ship-containers and wooden crates. Despite having one of the world's largest rail networks and recent privatization of the container rail industry, road transportation continues to grow and gain share from rail, albeit at a slower pace. Key facts: 1. The freight contributes about 65% to the Indian Railway's total revenue. 2. Total freight loading was 1053.54 MT in FY 2013-14. 3. However the rail share in freight traffic has fallen from 88% in the 1950s to about 35% in favor of the road sector due to the former's inherent disadvantages. Sea/Coastal Shipping In India the importance of maritime transport can be gauged from the fact that Indian ports together handle about 95% of India's total trade in terms of volume and 70% in terms of value. Indian ports' traffic increased at a CAGR of around 10% in the last 2 decades and has crossed the 1,000 MT capacity mark. However, in the last 2-3 years, the segment faced a tough economic environment on account of the global slowdown, tardy creation of infrastructure and lack of an enabling policy environment. Key facts: 1. During the last 5 years, traffic at Indian ports grew at a CAGR of around 6%, while capacity increased at a CAGR of 10%. 2. In FY 2013-14, traffic at Indian ports stood at 972.63 MT. 3. The capacity of all major ports as on March 31, 2014 was 800.52 MT against cargo traffic of 555.54 MT handled in FY 2013-14. Inland waterways: Outlook Inland Waterways Transport (IWT) has immense potential for passenger as well as domestic cargo transportation. IWT is best-suited for movement of bulk cargo, over dimensional cargo and hazardous goods. IWT also offers an environment-friendly economic mode of transport compared to road and rail. India has a potential of 14,500 km of navigable waterways for commercial transportation. However, it is an under developed mode of transportation with a share of less than one percent in the total cargo handled in the country in comparison to developed countries like US, China, Germany, etc. The 'Sagarmala' Project shall, inter alia, aim to develop access to new development regions with intermodal solutions and promotion of the optimum modal split, enhanced connectivity with main economic centres and beyond through expansion of rail, inland water, coastal and road services. Air Over the years, an increase in the volume of merchandise trade coupled with stable GDP growth has resulted in a manifold increase in the size of the air freight segment. The demand for air cargo transportation has increased significantly also because of the shortening of product life cycle and increase in demand for exbrss delivery. Key facts: 1. The overall air freight traffic in FY 2013-14 stood at 2.10 MT. 2. The air freight traffic is expected to grow at 5% in next five years. Growth Drivers Growth of the Logistics business is directly correlated with economic activity. Empirical evidence suggests that the Indian Logistics industry grows at 1.5 to 2 times the GDP. With the Indian economy on a revival path, we believe India's Logistics sector is poised for accelerated growth. Infrastructural bottlenecks that have stifled growth of the sector and have promoted inefficiency are being addressed. Building of dedicated rail freight corridors, for instance, will help promote more efficient haulage of containerized cargo by rail. Logistics requirement for e-commerce will grow as exponentially as e-commerce. Specialized needs of the burgeoning e-commerce and cold chain industry will spawn a range of opportunities for niche organized logistics players. With an adoption of Omni channel retailing, more and more sales are driven through digital channels which will force supply chains to adopt new inventory and transportation strategies that support consumers' expectations to buy, receive and return products anywhere, as well as retailers' need to flexibly fulfill demand from Distribution Centers, stores, third-party distributors or via drop shipments. The impending Goods and Services Tax will not only bring in never-seen-before opportunity to re-enter, rationalize and re-engineer transportation and logistics networks in India, but will also unleash a new era of developing logistics infrastructure and taking investments to the next level. Lot of consolidation of warehousing and supply chains are foreseen which are currently fragmented in almost every state. TCI has grown from a single truck plying on a single route to becoming India's leading integrated supply chain solutions provider with a Global brsence. It is with the amalgamation of many diverse forces that a complete solution emerges. As services are getting more and more specialized and segmented, customized solutions are the need of the day. TCI's range of services encompasses the entire gamut of supply chain services from the point of origin to the final end customer. TCI has been continuously introducing new and innovative services. From multi-modal transportation (road, rail, air, sea) to exbrss delivery solutions, from freight forwarding and customs clearances to warehouse management services, each of the services are linked under a single Customer Relationship Management (CRM) system for maximum benefit to clients. Even though for operational purposes, the business verticals operate as individual entities, they come together, creating synergy to offer a broad range of end-to-end customised services to a wide range of domestic and international clients. TCI Freight TCI Freight, the largest division of TCI, offers total multimodal transportation solutions ranging from full truck load, less than truck load, small and Over Dimentional Cargo (ODC) through Road & Rail. TCI XPS TCI XPS is India's leading door-to-door Exbrss Distribution Specialist that handles the diverse exbrss logistics requirements both in India and Internationally. TCI SCS Supply Chain Solutions is a Single Window enabler of Logistics and Supply Chain solutions. It offers customized logistics solutions, warehousing, planning and information management skills to deliver a sustainable solution as a Lead Logistics Provider (LLP). TCI Seaways TCI Seaways division owns four ships which is a key factor for providing strong coastal shipping services. It handles both container and bulk cargo movement along the coastline of India. TCI Global TCI Global provides air and surface transport, inventory management and Exbrss Logistics services at International locations like Nigeria, Brazil, Indonesia, etc. Industry Leadership From one man, one truck, one Company, the cargo logistics of TCI has progressed with the get-up-and-go emergent sectors focused on e-tailing and other subsidiary industries. On par are the logistical requisites - state of the art technology and multi-modal transport solutions that rise above the expectations of the client and through sustained growth have awarded TCI a leadership status. Integrated Multi-modal Solutions At TCI Freight, we provide combrhensive multimodal solutions for any cargo dimension or product segment. Supported by 600 owned offices,TCI Freight offers from Full Truck Load (FTL) to Less than Truck Load (LTL), Sundry, Project Heavy Haul (PHH) while its Rail logistics provide services such as containers, wagons and special automotive wagons to full train movement. For over dimensional cargo, TCI has its own hydraulic axles and trailers. Hi-Tech Modern Fleet A large number of owned and leased vehicles transport goods of varying dimensions. Tracking and GPS technology for shipment and vehicles assures customers of reliability and access anytime, anywhere. For the brcision that logistics industry requires, TCI ensures that Information Technology goes hand-in-hand with multimodal transport solutions. Combined with customer care cells handling all queries efficiently, clients anywhere have access to their shipment with IT applications that cater to the logistics industry. Single Window Solutions TCI Freight's primary Key Account Management (KAM) system is a single window solution for its clients, which operates 24x7 for managing the information flow and tracking. Innovating Everyday To maintain its leadership position and respond to evolving business needs, TCI Freight conceptualizes new services to increase its portfolio and expand its market share. TCI Freight has started a new service specifically for the countries in the SAARC region that includes transportation, warehousing and customs clearance through single window solutions. Performance Recap The revenue growth for the year is 4.8% as compared to the brvious year. We have been able to increase profitability to a certain extent due to strict monitoring of direct cost. Operating Expenses for the year have decreased by 1.2% over the brvious year. Future Outlook We expect a growth of 15% over the coming year. Our business strategy has been modified to reduce losses in the division by increasing the focus on higher margin, Sundry & Less than Truck Load (LTL) business, to utilize the fixed cost of branches, hubs and manpower. Quality & Infrastructure The division is ISO 9001:2008 certified and takes a systematic approach towards continuous improvement. End-to-end services account for speed of delivery and value of cargo, and operations are carried out through dedicated vendors. The methodical internal processes and clientele approach, continuously strive to deliver satisfaction. Equipment like hydraulic dock lifts, mobile cranes and hand pallet trucks at hub centers, ease movement and storage of goods. Technology Complete automation at each step, ensures efficient delivery of services at TCI XPS. With the increase in use of IT applications, misplacement of consignments, claims and general hauling time, is considerably reduced. TCI continues to evolve to stay on par with emergent industry trends and its technologies, especially with the promising IT applications. Time Sensitivity Exbrss implies time sensitive movement. TCI XPS service ensures delivery of cargo through door-to-door, on demand delivery and collections and offers a professional diversification of services such as early delivery, late collections, same day collections and deliveries to all major centers as well as Sunday day and public holiday services. Value TCI XPS walks the extra mile to ensure client satisfaction by providing value added services like Diplomat (non-service location) Delivery, Holiday Service, and Freight on Delivery services with money back guarantee. Diversity Customization of services and flexibility give TCI XPS a distinct edge over competitors. The division serves the unique needs of the different businesses like Automotive, Engineering & Electrical, Telecommunication, Electronics, Pharmaceutical, and Apparel etc. People Over 3,000 committed professionals form the core strength TCI XPS. We have several HR initiatives, including Continuous Improvement Training Programs across all levels. Teams undergo training in soft skills, negotiation skills, competition analysis and product education, etc. Performance Recap TCI XPS achieved 9.8% growth last year and contributed almost 30% to the revenue mix. Operating cost has decreased by almost 20 bps during the year. Claims went down 30%, while transit time was reduced by 50%. To ensure constant contact with clients, across all metropolitan and major cities, the division conducted many Customer Engagement Meets, wherein customers were given a platform for direct inputs and feedback to improve services. Future Outlook We are projecting a business growth of 2022% during next year mainly due to continued growth in FMCG, Pharmaceutical, E-commerce and Auto sectors. The division will continue to improve internal efficiency and focus on e-commerce and high consumption driven sectors. Domain Expertise Whether it is a new organization or an organization seeking to re-engineer its supply chain, TCI SCS drives business efficiencies for clients through deep domain expertise and innovative solutions. It partners with clients to identify cost-benefit opportunities for meeting their unique needs and optimum value creation. What sets us apart is our unique and innovative approach in managing the value chain of logistics where we take a holistic approach linking not only the customer and the consumer but also their tier I, II & III suppliers. Specialised Services to Critical Sectors TCI SCS provides customized, specialized solutions to varied and critical sectors of the economy like Auto, Hi Tech & Telecom (ICE), Health Care, Retail & Consumer Products, Chemicals and Cold Chain. With 8 fulfillment centers, TCI SCS serves the complete e-commerce chain, handling 100,000 unique orders and 20,000 deliveries a day, catering to both B2B and B2C customers. Its recent foray into Cold Chain Warehousing and Distribution of perishable items, takes into account time and temperature sensitivity for transportation of perishable goods. Skilled Workforce The division's highly specialized team of domain experts ensures that TCI SCS offers customized Supply Chain Solutions & Services that are creative, yet practical and realistic.The strong Key Account Management (KAM) team is responsible for single-window services. Safety The division conducts Health, Safety and Environment (HSE) audits by an on board team of HSE specialists and carries out Road Transport Health Safety Security and Environment (RTHSSE). Assets 10.5 Mn Sq. Ft. of warehousing space with own storage and material handling infrastructure enables TCI SCS to provide an expertise in Modern Warehouse and Distribution Center Management across all verticals. The division also has a customized fleet of 1100 carriers including 50 refrigerated trucks. Performance Recap With a growth rate of 13.2%, the division contributed 27.7% to TCI's revenue mix for this fiscal year. The division has emerged as a major warehousing player with specialized warehouse services and capabilities to manage multi-product and multi-segment clients. High growth is reflected in managing E-fulfillment to E-commerce centers and their supporting operations. Future Outlook TCI SCS is likely to grow by 15-20% with improvement in overall economy. The identified growth sectors are Retail - Apparel, FMCG and E-commerce where the Company aims to be a significant player in warehousing Assets TCI Seaways has four ships with a total capacity of 23,317 DWT. The division also owns 2047 marine containers. Three ships are deployed at Chennai-Andaman-Chennai and Vizag-Andaman-Vizag coastal sectors. A new ship was added to the fleet towards the end of the financial year.The new addition 'TCI Arjun' with 10,545 DWT, has been deployed on the West coast from Mundra to Cochin. Coastal Shipping & Multimodal Synergy TCI Seaways offers end-to-end Multimodal logistics solutions thereby creating synergy between road, rail and sea. Coastal shipping services include scheduled services from East coast to Andaman and Nicobar Islands and neighboring countries. A large part of the cargo consists of a variety of products including perishables and general goods. Defense equipment and movement of vehicles also constitute a substantial load. Skilled Workforce An experienced management team and well trained workforce ensure brcision and co-ordination in achieving targets. Skill upgradation of the workforce through training programs and workshops keeps us globally competitive and enables us to provide quality services and professional solutions. Customer-centric TCI deploys its fleet to deliver stable and reliable services. Customers are at the core of all decision-making. Regular MIS reports and regular customer interaction enables the Company to provide tailor-made logistics solutions by utilizing its service portfolio to offer fully integrated shipping solutions. Performance Recap Over the brvious year, the division recorded 5.3% growth and contributed 5.1% to the Company revenues. There were 'Zero' accidents recorded over the year. One of our ships 'TCI Prabhu' was dry-docked and is back in operation. The cost of manning qualified ship crew was maintained at brvious year's level. Future Outlook The division has currently diversified to the West coast catering the Mundra-Cochin sector. As per our expansion plan, we are planning to aquire a new ship to service the West coast. The division has a license to provide service between Chennai and Yangon (Burma). With growing investments and a customer-centric approach, the division is expected to grow by 25% this financial year. End-to-end solutions With over a decade of expertise, TCI Global offers its customers end to end services ranging from customs clearance, international inbound and outbound freight handling (air and sea), primary and secondary warehousing/ redistribution, third party logistics, multimodal (air, surface and sea) services, ODC movements and project cargo. Licenses and Certifications TCI Global holds licenses at different ports for custom clearance and has tie-ups with agents in over 150 countries. Performance Recap The Operations in the transport business for mines (Internal and external) in Macapa have been temporarily suspended in Brazil due to a drastic drop in international prices of Iron Ore. Future Outlook In Indonesia, we have started a new company & operations have started in January, 2015 as logistics service provider for long haulage services with some strategic partners as customers & Vendors. In Nigeria, we are expanding our operations for many more locations. Overall strategy is to consolidate and work towards Key Account Management (KAM) and concentrate on profitable business with focus on select customers. The focus on resource planning and control mechanism in financial matters, have since been intensified. There have been some avenues of cross-selling with other divisions, which would be explored further. |