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As India-China ties thaw, logistics and supply chain management company Transport Corporation of India has zeroed in on buying two cargo ships from China for $38 million ( 320 crore) to bolster its operations, especially along the domestic coastline. The company ordered two new cellular container vessels, which are typically designed for transporting containers, of about 7,300 deadweight tonnes (DWT) each from Chinese shipyards. The ships are expected to be delivered in two years.
TCI plans to use them to carry cargo along ports spanning the east and west coasts of India. “We have placed orders for two ships with Chinese shipyards that are expected to be delivered to us in 2026. This will help us tap the Indian coastal waters that remain highly underutilised with only 6% of the country’s cargo moving through it," said TCI managing director Vineet Agarwal.
TCI placed orders for its ships from overseas because of inadequate domestic manufacturing capacities. To strengthen its operations immediately, TCI is also exploring the purchase of a large second-hand cargo vessel. "We are also on the lookout for a second-hand ship in the marketplace.
I am not sure when this capacity addition will happen, but it is something that we are very actively pursuing," he said. Also Read | India and China firmed up an agreement on patrolling and disengagement of troops along the Line of Actual Control in eastern Ladakh in a major breakthrough to end an over four-year standoff. Following this, directions were issued to revive bilateral dialogue mechanisms, signalling attempts to normalise ties that were hit by military clashes in 2020.
Apart from Chinese shipyards that offer a definitive cost advantage and faster delivery schedules, TCI is exploring options from shipbuilders in Japan, South Korea and other countries to get a deal for second-hand ships. Agarwal said TCI is pursuing ship acquisitions keeping in mind the future growth of seaway operations. The maximum growth for the company is expected from its supply chain solution offering, which is its biggest revenue provider after freight operations, accounting for almost 40% of total revenue.
Although TCI’s seaway operations have grown by almost 20% this year, its small size reduces its contribution to revenue. Growth in the freight and supply chain segments have been 10% and 15%, respectively. The company is also looking at warehousing.
Also Read | “We are seeing good potential coming from areas like quick commerce and some of the FMCG companies...
We are running warehouses for many of the large FMCG, FMCD, retail and other types of customers, and we are definitely seeing good traction there for us...
we are providing services inside a warehouse, like inventory control, order fulfilment and then delivery to the B2B side, which, let's say, could be a wholesaler or a distributor...
We have about 15 million square feet of warehousing space that we manage, and we own about 2-3 million square feet of this," Agarwal said. TCI also plans to expand its overseas operations. It has an office in Dubai and its aim in the Middle East market is to expand its chemical logistics operations.
The company may add Sri Lanka to its operational map, aiming to become a major logistics player in South Asia. TCI already operates in Nepal and Bangladesh. Agarwal said that though the Middle East crisis has increased overall freight costs, it has helped TCI improve margins and get higher cargo volumes for coastal movement.
Several ships that operated in Indian coastal waters have moved to the Middle East, creating a shortage of ships for supplies within the country. This provided a new opportunity to TCI to strengthen its seaway operations. The addition of new ships by 2026 is expected to help TCI here.
The company had placed orders for two ships in FY24 but the shipyard in Japan cancelled at the last minute. Last October, TCI signed a contract with Nakanishi Shipbuilding Co Ltd for two cellular container vessels of about 7,300 DWT each, totaling about $35 million. The cancellation of the contract led TCI to reassess its ocean fleet acquisition plan.
Also Read | TCI reported consolidated revenue of 1,131.4 crore in the July-September quarter, a growth of 12.6% from 1,004.
8 crore a year earlier. Earnings before interest, taxes, depreciation and amortisation (EBITDA) stood at 151.9 crore, a 15.
2% increase from 131.9 crore. Profit after tax rose 22.
2% to 107.3 crore. Agarwal said the company expects to maintain a 10-15% growth in both its top line and bottom line this year.
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