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Transport Corporation of India (TCI): Healthy volume growth led by restocking post GST

  • Prices increased to adjust for cost push - Road freight operators including TCI have increased prices in 2QFY18 to pass on the impact of higher diesel prices. While road freight rates have not increased in tandem with the increase in diesel prices until now, any sharp increases in crude prices would result in sharper increase in road freight rates in the medium term. The coefficient of increase in road tariff to increase in diesel price was 0.4-0.5x in the last few months. This is likely to increase if crude prices firm up further.
  • Volume growth healthy,  led by festive demand - Volume growth for TCI's SCM division was healthy in 2QFY18 on early festive season demand and restocking post GST implementation. The key sectors that contributed to demand were primarily in non-auto segments like retail. TCI expects 3QFY18 to be slightly sluggish sequentially in the absence of any festive demand and restocking impact of GST. However, multi-national clients should help in offsetting some of the sluggishness in 3QFY18, given that they have to meet yearly targets