CRISIL said that the operating income of TCI Express increased to Rs 1,241 crore in fiscal 2023, with year-on-year growth of 15%, supported by growth in demand for express delivery. However, growth was seen to be sluggish during the first half of fiscal 2024, with year-on-year growth of 4% due to slowdown in the manufacturing sector.

The earnings before interest, tax, depreciation and amortisation (EBITDA) improved to Rs 195 crore in fiscal 2023 from Rs 175 crore in fiscal 2022, supported by pass-through of cost embedded in contracts and cost rationalisation by TCI Express.

The company has been able to maintain healthy operating margin of 15.5% in the first half of the current fiscal. Operating margin is expected to improve above 16% over the medium term, supported by increase in rates. The financial risk profile also remained healthy given negligible debt as on 30 September 2023.

The company has moderate capital expenditure (capex) of around Rs 100 crore per annum over the medium term, which will be utilised towards setting up and upgrading sorting centres, resulting in improvement in scale and profitability.

The capex is expected to be entirely funded through internal accrual. Liquidity was healthy with cash and cash equivalent of Rs 59 crore as of September 2023. The expected net cash accrual of over Rs 130 crore per annum should be sufficient to fund capex and incremental working capital requirement.

The rating continues to reflect the company’s healthy operating efficiency, strong market position and robust financial risk profile. These strengths are partially offset by its modest scale of operations, low cash flow diversity and exposure to intense competition.

TCI Express started independent operations on April 1, 2016, in line with TCIL’s strategy of demerging the express division (XPS) into a separate business entity. The division was operating as a business unit of TCIL since 1996. TCI Express caters to diverse express delivery requirements, including domestic and international parcel services, with connectivity across road, rail and air.