Transport Corp.

Transport Corporation of India Limited reported a consolidated top-line growth of 9.5% for FY26, falling short of its 10-12% guidance, with bottom-line growth at 10.5% against an anticipated 12-15%. This miss was primarily attributed to higher-than-expected cost pressures. Management noted that while the overall economy remains strong with 6-7% growth, they anticipate inflationary pressures and potential demand corrosion in the coming months due to rising raw material and fuel prices, and softer consumer durable sales.

The company highlighted a strategic and market-driven shift towards multimodal logistics, with rail and sea increasingly replacing road transport. This trend is being accelerated by rising diesel prices and increasing cost structures in road transport. TCI is actively facilitating this shift, particularly in auto logistics where hub-to-hub movement has largely transitioned to rail, and currently utilizes 6-7 hired rakes daily from railways.

The supply chain business, now TCI's largest segment, demonstrated robust growth of 14% for the full year and 11% in Q4, despite a higher base in the previous fiscal year. The segment's EBITDA stood at 9.6%, consistent with its historical 9-11% range. TCI is making continuous strategic investments, with the FY26 warehouse equipment budget more than doubling to 43 crores, to support new contracts and capitalize on a strong pipeline, while prioritizing profitable growth.

The freight business faced significant headwinds, resulting in a 14% decline in EBIT for the full year and ROCE reaching its lowest level in 6-7 years, primarily due to competitive pressures and rising costs. However, Q4 showed a positive sign with 13% growth, indicating a potential turnaround. Management is focusing on the Less-Than-Truckload (LTL) segment, which now constitutes 63% of the business, and expects improved profitability despite a short-term lag in passing on fuel price increases.

The seaways business had a strong quarter, successfully passing on a 100% increase in bunker prices observed in March. For FY27, the company anticipates a top-line growth of 5-10% with stable bottom-line margins. TCI plans to significantly expand its capacity by adding 15,000-16,000 tons from two new ships expected to be delivered in Q3 and Q4 of the calendar year, with a budget of 237 crores allocated for ships this fiscal year, including an advance for a potential third new vessel.

TCI's CAPEX for FY26 totaled 370 crores, with notable investments in warehouse equipment and advances for new ships. The company maintains a healthy financial position with a cash surplus of approximately 250 crores. The dividend payout for FY26 was slightly higher than the previous year, remaining within the 15-20% range, reflecting a balanced approach to capital allocation while supporting growth initiatives.

Management acknowledged various macro risks, including rising input costs, potential demand slowdown, and labor challenges, particularly affecting MSMEs. However, they emphasized that TCI's extensive business diversification across multiple segments and its unique multimodal solution capabilities provide insulation from external shocks and competitive pressures, enabling the company to capture value across growing sectors.