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Business News/ Companies / News/  Transport Corp to acquire two cargo ships worth $40 mn in FY25
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Transport Corp to acquire two cargo ships worth $40 mn in FY25

TCI is looking to expand its overseas operations in the Middle East and add Sri Lanka to its operational map later this year or early next year

Transport Corp is exploring options from shipbuilding operations in China, Japan, and Korea, expecting to finalize a deal in the second half of the fiscal year. (Image: Pixabay)Premium
Transport Corp is exploring options from shipbuilding operations in China, Japan, and Korea, expecting to finalize a deal in the second half of the fiscal year. (Image: Pixabay)

NEW DELHI:Logistics and supply chain management company Transport Corporation of India (TCI) plans to acquire two cargo ships worth $35-40 million in the current fiscal to bolster its seaways business. 

TCI is exploring options from shipbuilding operations in China, Japan, and Korea, expecting to finalize a deal in the second half of the fiscal year. 

“We placed orders for two ships in the last financial year but unfortunately shipyard in Japan cancelled it at the last minute. We are looking at placing new orders somewhere else, possibly in the second half of the current fiscal," said Vineet Agarwal, managing director, TCI, in an interview with Mint.

To strengthen its seaway operations immediately, TCI is also exploring the purchase of a large second-hand cargo vessel, as new ships take around three years of delivery time. 

"…we are also on the lookout for a second-hand ship in the market place. I am not sure when this capacity addition will happen, but it is something that we are very actively pursuing,"  he said.

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Last October, TCI had signed a contract with Nakanishi Shipbuilding Co. Ltd., Japan, for two cellular container vessels of about 7,300 deadweight tonnes (DWT) each, totaling around $35 million. The cancellation of this contract has led TCI to reevaluate its ocean fleet acquisition plan.

“We are looking overseas for ship acquisition as there is still a gap in what is available from domestic capacities. Shipyards in China, Japan, Korea and others are being explored," Agarwal said.

TCI's capex plans

TCI has allocated 75 crore in FY25 for its ship acquisition plan, which will be used for making advance payments to shipyards once a deal is struck. The remaining amount will be paid over the next few years through internal generation and bank credit. 

TCI has a cash balance of about 400 crore for expansion and strategic initiatives, Agarwal said.

Currently, TCI’s fleet comprises six ships with a total DWT of 77,957 tonnes. Three of these ships will need replacement in the next three to four years, prompting the acquisition plan.

Besides the ship acquisition, TCI is looking to expand its overseas operations in the Middle East, where it has set up an office in Dubai. 

The company also plans to add Sri Lanka to its operational map later this year or early next year, aiming to become a major logistics player in the South Asian region. TCI already operates in Nepal and Bangladesh.

“Our plan is based on following the customer strategy. So, we have set up our base in countries where our existing customers are demanding certain services. The expansion in the Middle East will continue in the next year or two with more business opportunities that are arising from there," Agarwal said.

TCI expects a 10-15% growth in revenue and profit this year, and is confident of maintaining this level despite market uncertainties due to global conflicts. Regional business growth is anticipated to contribute significantly to this growth, Agarwal said.

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In FY25, TCI plans to invest 375 crore, with 75 crore allocated for ship acquisition to support its seaways operations, which currently contribute around 15% to revenue. 

The company also intends to spend 100 crore each on new warehouses and offices, new trucks and automotive rakes, and other assets like containers and warehousing equipment.

Last year the company had proposed a capex of 275 crore but ended up doing only 120 crore as parts of the investment were contingent upon a ship acquisition contract that fell through.

About 40-45% of TCI’s revenues come from freight business, 40% from supply chain business, and the remainder from seaways business. 

In the January-March quarter, TCI reported a 25.4% year-on-year growth in consolidated net profit to 103.3 crore. Net revenue grew 10.2% to 1,078.9 crore during this period.

“TCI has delivered a stellar performance, spurred by growth in key sectors such as automobiles, engineering, temperature-sensitive products, alongside promising developments in new-age verticals," Agarwal said adding that he expected strong improvement in performance post election. 

Chemical logistics is a key area TCI is focusing on, anticipating significant growth over the next decade as India integrates into global supply chains.

Last year, maximum growth for TCI came from the supply chain business, driven by a strong performance in the automotive segment, which accounts for 75% of the business in this segment. “This has driven our growth both in topline and bottom line," Agarwal said.

Shares of Transport Corp traded at 911.85 apiece on the National Stock Exchange on Friday, up marginally amid a largely weak market.

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ABOUT THE AUTHOR
Subhash Narayan
Subhash is the infrastructure editor at Mint and tracks the momentous developments taking place in the space that is fast changing the Indian landscape. He feels that reporting has been a passion that provides the necessary adrenaline rush and keeps you going.
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Published: 17 May 2024, 10:00 AM IST
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