TCI chalks out strong capex plan over three years; defers FY22 capex

With container vessel rates having surged in the last few months, Transport Corporation of India (TCI), had to partly defer its capex plans for FY22.

“Our FY22 capex plan was aggressive for marine asset buying but had to defer those plans. Out of the Rs 225 crore capex planned, only about Rs 75-100 crore will be executed this fiscal,” Vineet Agarwal, managing director at Transport Corporation of India (TCI) told Business Standard.

At present, the company has two container vessels deployed on the west coast and four on the east with a total capacity of 77,957 deadweight tonnage.

Going ahead, however, the company has chalked out a strong capex plan over the next three years.

As part of this plan, the company is keen on augmenting its marine assets for coastal container cargo as it sees coastal shipping growth to 215 million tonne by 2025 from about 86 million tonne now.

“Over the next three years, the idea is to add a coastal container vessel every year. Apart from this, there will be sizable investment in containers as we plan to add about 1500 containers annually. So our focus on marine assets capex is quite strong,” said Agarwal.

Currently, TCI, the integrated multimodal logistics and supply chain solutions provider, owns 8000 containers. The company’s seaway division revenue in the September quarter stood at Rs 13,433 crore, up 17 percent sequentially and up 44 percent year-on-year basis, indicating a growing business scenario for the segment.

Despite an almost debt free position, the company aims to fund its upcoming capex largely via internal accruals. As on September 30, 2021, the company’s debt-equity ratio stands at 0.07 from about 0.63 in FY18, which is the lowest in the last four years.

Alongside, with a dedicated freight corridor (DFC) project planned, TCI is hopeful that the project would give the much needed upside to usage of railways over roads where transportation costs for the latter works out to be much higher due to increased fuel prices.

“Rail is green logistics so not just cost lower. As part of our three-year capex, we also would be looking to invest in Automobile Freight Train Operator (AFTO), which are specialized trains to carry vehicles,” said Agarwal.

TCI already has invested in two such specialized trains and in six months ended September 2021 has moved 692 rakes as against 561 rakes in the corresponding period last year.

With presence in the trucks segment with more than 12,000 trucks owned, third-party logistics player TCI sees increasing fuel prices a concern for its margins.

“In some contracts, we are passing on the fuel price hike to the customers but it is a concern for players like us as it eats into our margins. The only way we aim to mitigate the impact of this cost is by having topline growth so that there is a balance maintained,” said Agarwal.

Other than marine assets and rail investments, TCI would be looking to up its capacity in warehousing and hubs across the country which would be a combination of new facilities and upgrade of existing ones.