The Transport Corporation of India (TCI) is a leading end-to-end integrated supply chain and logistics solutions provider and a pioneer in the sphere of cargo transportation in the country. TCI progressed from being a “One Office, One Man, One Truck” setup to become the country’s leading logistics chain with a global presence, moving about 2.5% of India’s GDP by value. The company has an extensive network of 1,400 self-owned offices, a huge fleet of customised vehicles, warehouse space of 11 million sq feet and a strong work force of over 5,000 people. It has been smart with its finances by focusing on an asset-light business model where 20% of its total fleet is self-owned while the balance is leased. Similarly, TCI has been prudent in managing warehousing space as a majority of it is on lease basis. With its focus to invest less on building the asset base, the company has been able to generate healthy return ratios even in the worst phase of business cycles. Implementation of the GST in the near future is expected to be a game changer and will consolidate the transportation and warehousing space and witness substantial increase in volume growth. TCI is well placed to be a key beneficiary once the GST is implemented as corporates will need a reliable pan India logistics player to manage the supply chains. Also, the impact of taxes on production, distribution and inventory management would ultimately get rationalised. The outlook is bright for TCI with business growth and profit projected at 20% with increased focus on e-commerce and high consumption driven sectors. TCI has recently announced the de-merger of its XPS undertaking working in the e-commerce sector to form TCI Express Ltd which has tremendous growth and profitability potential. Equity shareholders of TCI would be entitled to one equity share of the new company named TCI Express for every two equity share held. The new company would also be listed on the stock exchange and bring profit to the existing shareholder of TCI. At the current market price of Rs 270, TCI trades at a price earnings ratio of 25 times to its FY 2017 earnings. With a second interim dividend round the corner, expected gain in the allotment of shares of the new company and implementation of the GST can propel the TCI stock to appreciate by at least 30% in the next one year.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.