Detailed Rationale
Crisil Ratings has reaffirmed its ‘Crisil AA/Stable/Crisil A1+’ ratings on the bank facilities of Transport Corporation of India Ltd (TCIL).

The operating revenue has grown to Rs 3,313 crore in the nine months ended December 31, 2024 from Rs 2,945 crore in the similar period last fiscal (~12.5% growth on-year), driven by almost similar growth in each of the three segments of the company - freight, supply chain and seaways.

TCIL’s revenue is expected to grow at a stable rate over the medium term with its focus on improving share of less-than-truckload (LTL) in the freight segment, to provide customer centric customized solutions, deepen presence in new-age sectors in the supply chain division and addition of fleet in the seaway segment. The company plans to add three ships to its fleet, having already given orders to build two ships (expected to be delivered by mid of 2026) and planning to buy a second-hand ship. The company believes that this will well address retirement of ships under regulations on allowability of ship operations based on age factor.

The EBITDA margin (excluding JV Profit) remained stable at ~ 10.2% during the nine months ended December 31, 2024, almost similar to the corresponding period previous fiscal. The segmental (EBIT) margin in the seaways segment has improved from 24.6% in the first nine months of fiscal 2024 to 30.9% in the corresponding period of fiscal 2025, which was partially offset by a decline in segmental margin in the freight business from 3.2% to 2.7% during the same time. Margin in the supply chain segment remained stable at 6% during nine months ended December 31, 2024, compared with 6.5% during similar period in the previous fiscal.

Further, the performance also remained healthy in company’s 49% JV, Transystem Logistics International Private Limited (TLI) which recorded revenues of Rs 996 crore during fiscal 2024. TCIL has been regularly receiving dividend income from the JV’s profit and same is expected to increase to ~ Rs. 60-65 crore in fiscal 2025 (compared with Rs 53 crores in fiscal 2024). TLI is catering to supply chain needs of Japanese automobile players and has grown at a CAGR of 13.8% over past 5 years.

The balance sheet continues to remain strong with Networth of Rs 2,031 crore and gearing below 0.1 time as on March 31, 2024. Company did a share buyback of Rs. 197 crores (including taxes) in September 2024. Despite that and even with capex plans of Rs. 900-1000 crore over the next 3 fiscals, capital structure is expected to remain robust as reliance on external debt is expected to be limited and networth is expected to improve with accretion to reserves. Debt protection metrics like interest coverage and net cash accruals to total debt remained at 39.9 times and 2.8 times in fiscal 2024 and is expected to remain healthy over the medium term.

The ratings continue to reflect TCIL’s leading market position in the logistics business aided by presence across different segments, strong infrastructure and healthy financial risk profile, backed by robust capital structure and healthy debt protection metrics. These strengths are partially offset by sizeable proportion of conventional low-margin freight business in revenue and moderate working capital requirement.

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of TCIL and its subsidiaries and joint ventures (JVs; to the extent of TCIL’s interest) because of business and financial links.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

• Leading market position: TCIL is an established integrated logistics service provider in India. It handles more than 5 million ton of cargo and services nearly 25,000+ customers annually. It is the only player in the domestic logistics industry to offer multi-modal services through road, rail and sea and the only national player having both full truck load (FTL) and less-than-truck load (LTL) offerings.

 

Apart from the original freight business, TCIL has a healthy presence in supply chain solutions and seaways segment. In the supply chain segment, the company provides unique customised and full stack solutions that reduce the supply chain issues of clients. It caters to large players in the auto, consumer durables and retail sectors, among others. The company also has a strong focus in providing supply chain services to speciality chemical players and have recently established TCI Chemlog Private Limited (TCPL) to cater the specific needs of these players. In the seaways segment, the company enjoys a monopolistic position with one of the few companies available from Chennai to Andaman and Nicobar Island.

 

• Strong infrastructure: TCIL operates a fleet of around 10,000 trucks, 3 automobile freight train operator (AFTO) trains and six coastal cargo ships, 8,500 general purpose containers, 650 ISO liquid tank containers, 13,000 cold pallet positions and warehousing space of 15 million square feet. The hub-and-spoke marketing network, comprising over 25 hubs and 900 branches, enables TCIL to handle freight across 18,000 domestic and overseas locations. The advanced vehicle-tracking system and network provided to all branches, unique control tower and customer relationship management (CRM) systems give customers accurate and timely information and help cover any urgent requirements. The strong infrastructure should continue to support business growth over the medium term.
   
• Strong financial risk profile: The financial risk profile is robust and expected to remain stable over the medium term, backed by healthy cash accrual, increased profit contribution from the supply chain and seaways divisions, and gradual improvement in the freight division. Networth has remained healthy at Rs 2,031 crore and gearing below 0.1 time as on March 31, 2024, and both are expected to improve further, with addition of profits and low reliance on debt. The debt protection metrics are robust, with interest coverage and net cash accrual to total debt ratios of ~40 times and ~2.8 times, respectively, in fiscal 2024 owing to healthy accrual and lower debt. TCIL is expected to undertake capital expenditure (capex) of Rs 1,000 crore over the medium term with Rs 350-400 crore to be utilised for procurement of automation equipment and advance material handling equipment ,vehicles, another Rs 350-400 crore for procurement of ships and containers and the balance Rs 200-250 crore for building, office setups, warehouses, land and control centres. The expenditure will be funded by a mix of internal accrual and minimal debt. Despite the capex, the financial risk profile is expected to remain comfortable.

 

Weaknesses:

• Susceptibility to intense competition in the road freight transport industry which also remains vulnerable  to economic downturns: TCIL's traditional road transportation business contributed around 44% to the consolidated revenue (including 49% proportionate share in TLI's revenue) during the nine months ended December 31, 2024. The FTL segment of road freight transport segment remains vulnerable to intense competition from both unorganised players and new-age start-ups, as this segment is highly fragmented and has low entry barriers. TCIL has been focusing on increasing its share of LTL services which is expected to help the company navigate such challenges.

 

Notably, the freight segment operates on low single-digit margins, primarily due to the asset-light business model, however this segment has a healthy return on capital employed (RoCE).

 

Profit before interest and tax (PBIT) margin stood at ~3% in fiscal 2024 and ~2.7% during the first nine months of fiscal 2025, an improvement from 1.5-1.8% 9-10 years ago. In addition, implementation of the goods and services tax has increased the entry barrier and helped organised players gain larger market share. Profitability will remain a key rating sensitivity factor over the medium term.

 

• Large, but improving, working capital requirement: Receivables were 55 days as on March 31, 2024, constituting almost 24% of total assets. This is mitigated partly by closely monitoring receivables through credit control managers and electronic proof of delivery. The cash and equivalent stood at around Rs 300 crore on September 30, 2024. Nonetheless, improving accrual should mitigate any adverse impact on the financial risk profile. Also, working capital intensity acts as an entry barrier for new players in this industry.

Liquidity: Strong

Liquidity is supported by expected net cash accrual of over Rs 500 crore annually, which will be utilised to meet capex partially as well as debt obligation over the medium term. TCIL had cash and cash equivalent of around Rs 300 crore as on September 30, 2024. Furthermore, bank limits remained unutilised for the 12 months through March 2023 as TCIL depended on internal accrual for working capital requirement.

Outlook: Stable

TCIL’s business risk profile will remain healthy over the medium term, supported by comfortable revenue growth, sustained profitability in the supply chain and coastal shipping divisions, and improving efficiency in the freight segment.

Rating sensitivity factors

Upward factors:

• Sustained improvement in scale of operations and operating margin at ~12%
• Sustenance of healthy financial risk profile

 

Downward factors:

• Stretch in receivables to more than 90 days of sales, leading to higher dependence on borrowings
• Weakening of the financial risk profile due to decline in profitability or substantial debt-funded capex

About the Company

TCIL was established in 1958 by Mr P D Agarwal. From a conventional transportation company, TCIL has emerged as India’s largest integrated logistics service provider. It has a network of over 1,000 company-owned offices and more than 3,700 employees. TCIL offers a diverse range of services which are highlighted below:

 

TCI Freight provides total transport solutions for cargo of any dimension or product segment, including FTL, LTL, small packages and consignments, and odd dimensional cargo.

 

TCI Supply Chain Solutions is a single window enabler of integrated supply chain solutions right from conceptualizing and designing the logistics network to actual implementation. The core service offerings are supply chain consultancy, inbound logistics, warehousing and distribution centre management, and outbound logistics. TCI Chemical Logistics Solutions is a subdivision which provides storage of chemicals – liquid, dry and gases – in compliant warehouses and movement in ISO tank containers, gas tankers and flexi tanks by rail, road and coastal.

 

TCI Seaways is equipped with six ships in its fleet and caters to the coastal cargo requirements for transporting containers and bulk cargo.

 

It has formed two JVs: TLI with Mitsui and Co Ltd (Mitsui), which offers high quality integrated logistics solutions to Japanese automotive manufacturers and suppliers in India, and TCI-CONCOR Multimodal Solutions Pvt Ltd with Container Corporation of India Ltd, an end-to-end multimodal logistics solutions provider. TCIL demerged its express cargo division into a separate entity, TCI Express Ltd (rated ‘Crisil AA-/Stable’), with effect from April 1, 2016. TCIL through its subsidiary TCI Cold Chain Solutions Ltd, an integrated cold chain service provider for temperature-controlled warehousing and distribution services, has entered another joint venture with Mitsui in fiscal 2022. Mitsui enjoys global expertise in logistics and supply chain management. It is believed that the synergies created by bringing together the respective resources and capabilities of the two companies will help create more value for customers.

Any other information: Not Applicable

Annexure – List of entities consolidated

Name of entities	Extent of consolidation	Rationale for consolidation
TCI-CONCOR Multimodal Solutions Pvt Ltd	Full	Subsidiary with 51.0% shareholding
TCI Cold Chain Solutions Ltd	Full	Subsidiary with 80.0% shareholding
TCI Chemlog Private Ltd*	Full	Subsidiary with 100.0% shareholding
TCI Holdings Asia Pacific Pte Ltd	Full	Subsidiary with 100.0% shareholding
TCI Bangladesh Ltd	Full	Subsidiary with 100.0% shareholding
TCI Nepal Pvt Ltd	Full	Subsidiary with 100.0% shareholding
TCI Venture Ltd**	Full	Subsidiary with 100.0% shareholding
Stratsol Logistic Pvt Ltd**	Full	Step-down subsidiary with 100.0% shareholding
TCI Global Pte Ltd	Full	Step-down subsidiary with 100.0% shareholding
TCI Middle East Logistics Services L.L.C.***	Full	Step-down subsidiary with 100.0% shareholding
TCI Holdings SA & E Pte Ltd****	Full	Step-down subsidiary with 100.0% shareholding
Transystem Logistics International Pvt Ltd	Equity method	JV/associate with 49.0% shareholding
Cargo Exchange India Pvt Ltd	Equity method	JV/associate with 32.5% shareholding

* Incorporated on September 4, 2024

** Merged with TCIL w.e.f. April 1, 2024

*** incorporated on October 3, 2023

**** windup on August 7, 2023