Transport Corporation of India's Managing Director Vineet Agarwal explains the opportunities available in the logisitics sector
At a time when global supply chains are facing the uncertainty of Donald Trump's second presidency and the Indian economy is witnessing a slowdown, the logistics sector is looking for opportunities to tap growth. Transport Corporation of India's Managing Director Vineet Agarwal says better times are ahead looking at the momentum in the sector.
In this interaction with Outlook Business, Agarwal explains what opportunities are available for logistic players, how quick commerce is presenting new opportunities and where does India stand on green supply chains.
Edited Excerpts
Economy witnessed a slowdown in the first half of this financial year. How has that shaped trends in the logistics sector?
Broadly, the logistics sector mirrors GDP growth quite a lot in the sense that GDP typically has a 1 to 1.5 times multiplier effect. However, the growth of the sector is not always linked to GDP. It is also linked to different things like consumption and infrastructure, as we are seeing. So overall, I would say the first half of the year has been moderate, not that great. But some sectors have seen positive growth, while some sectors are, of course, slightly weaker. Typically, we see that prior to elections and post-elections for a few months, things are usually a little slow. With infrastructure spending, for example, a lot of the money is coming from the government. The government is fronting that expense, but a lot of the money did not flow through to different entities because government funding typically slows down during the election period. So infrastructure spending did slow down and has slowed down on that side.
On the consumption side, we are seeing that FMCG and other areas related to maybe even home building and related activities are also slightly lower. Tractors, for example, on the agricultural side, are slightly lower in terms of volume. Earth-moving equipment, which is also connected to infrastructure, is lower. Things that have done reasonably well are two-wheelers. In the last few years, we had very poor growth in the two-wheeler segment, but now it has started to pick up. We've also seen moderate growth in the four-wheeler segment.
So all of these factors have really played out. And I would say the festival season was reasonably good. There was, I would say, a 5 to 10 per cent higher movement compared to last time, which was also reflected in things like the numbers that showed very good positive growth. So generally speaking, I would say it has been a moderate mix of things. It's not been great, it's not been poor, it's not been extremely poor. That said, going forward, typically what happens is that December is usually the month where things are better for MNCs because they are closing their books. So there's a push toward sales, and a lot of movement happens now. Then in March, the Indian companies close their books, so there’s another push toward sales at that time.
So I would say the next few months from a logistics sector perspective should be decent.
Trump's election has forced supply chain players to gauge impact on operations and business. What is your assessment of the impact on your company?
For us, we are mostly a domestic company, so a lot of our revenues are domestic. Such developments have a very limited impact on us. They certainly do have an impact. The indirect impacts are things like fuel, for example. If there is an impact on global crude prices, it has an impact on India, which has an impact on us directly. But we are able to pass on some of that. But I'm just saying from an impact perspective, that is most obvious and visible. The second impact, of course, is any kind of interest rate changes that happen globally. This has an impact on India also eventually because the currency gets impacted. Like right now, we're seeing the dollar being stronger, and that has a local impact, which has an impact on some exports and on some domestic manufacturers also.
But specifically, I think with the change in the US Government, the anticipation is there will be some amount of protectionism that will come up. Tariffs and other things, which can have an impact on the domestic market also—not just the export market. So what will happen? I think we are all making speculation. It's still unpredictable because we don't know what they will really do.
They can do nothing also; it could be empty words, but it could be action also. So it will depend upon how things are in the next—maybe we'll know in two months.
The positive impact that could happen is if those protectionist measures impact China a lot. Then the benefit could come to India, where some of that manufacturing shift, etc., or the market development in India might improve a lot more. So that could be the positive. Like how we saw with the problems in Bangladesh, we saw that Indian garment exporters have done reasonably well. So, like this, somebody else's problem becomes your opportunity.
In the context of geopolitical volatility, especially in Middle East, have your international expansion plans been affected?
We don't have too many offices overseas. We've opened an office recently in the Middle East with the opportunity that, you know, India and UAE have a free trade agreement. So that has a positive impact on India-UAE trade. Secondly, there are certain types of customers of ours where we follow the customer strategy. Where customers go, they say, you know, because we have our requirements there, can you help us there? And that's where we are also going.
So that is one part. Then I think the Middle East is acting as a gateway for many other countries to come into India, where some valuation is happening there. So that will also be something that will be positive.
So we look at it a little bit more from an India trade perspective only. We're not looking at it from a global perspective—that our customers are going to get some benefit there and hence the Middle East office. Where we'll open next, we don't know yet. But we're evaluating those options and seeing how things will change. But I can't say where we're going to open next.
From logistics point of view, what sectors present the most number of opportunities for TCI?
There are lots of sectors in India that are now going through a lot of changes. Plus, apart from that, there are new sectors that are coming up which are going to require, from a logistics perspective, a lot of support. So, for example, chemicals—if you take that as an area of growth. Earlier, the chemical sector was very limited in India, with a lot of it being an unorganized sector. Now, we are seeing, in terms of logistics, I’m not talking about from the manufacturer's perspective but from a logistics perspective, that with the China Plus One strategy, there are people setting up plants in India as an alternative. And those plants mean that they want to not just service the domestic market—they want to export as well. And there’s imports also coming in. So an example of chemicals is something that is becoming big in terms of logistics.
The second aspect would be domestic logistics itself. Because the Indian market is growing, you need chemicals for everything—from food products to this to that. Everywhere you need chemicals. So, there itself, we are seeing that there is momentum—people wanting good quality transportation, high-quality warehousing infrastructure, and multimodal transportation. So all of these factors play in directly with the growth of this chemical sector. In tandem with the growth, the logistics of the chemical sector will also grow.
The second area that is very interesting is, for example, cold chain logistics. Now, cold chain, we know, is changing—or rather, the demand has been increasing for several reasons. First is the QSRs and food. I think we’ve all started ordering so much from outside and are using that channel. Then the backend network, supply chain networks also have to change. Because if you are now going through a different way to access the customer, the backend also has to change accordingly. So that means logistics will become even more important.
Pharmaceuticals and vaccines require cold chain as well. I think post-Covid, we are seeing this as a very evident thing. Chemicals also require cold chain. There are certain types of chemicals that require being managed at a certain temperature. So, like this, we are seeing that this is another industry that has a huge potential to grow. Again, in tandem, it will grow with logistics as a support sector as much as possible.
And then some of the new sectors that are coming in under the PLI scheme, as we are seeing right now with battery manufacturing or other such areas, like solar. Those are also new. They never existed in the past. Solar cell manufacturing was not there in India. We were importing everything, and people were aggregating in India. Now, we are seeing that people are manufacturing here, which means that there’s a potential for it to become a huge industry by itself.
So that, again, is added on. Battery was also limited to what we were using in various simple applications, like whether it was in a car or whether it was an inverter or something like that. But now, we are seeing that you need batteries everywhere—from solar, if you want to manage your grid, to transportation, to all the other applications. So, that means it’s now becoming a new industry, and the support of transport and logistics will help it grow faster.
And we have to also see that all of these things factor in with sustainability as well. Because today, battery manufacturers have something called EPR—Extended Producer Responsibility—which means that for every battery they sell, they have to bring back an empty battery to recycle. That’s reverse logistics of that also.
So, like this, sectors are becoming more and more dependent on logistics—or, I would say, not dependent on but will need logistics more and more so that they are able to service their customers.
Can you elaborate on investment plans to expand your logistics solutions?
Directly, some investments into our customer supply chains where we are putting up the EV trucks or CNG/LNG trucks wherever they require. We provide solutions around packaging also. And we’re investing in parallel, sometimes with the customers, sometimes by ourselves, also on this on a regular basis. And there’s also buying assets which are related to multimodal, for example, buying ships or buying railway containers as a sector. Those are things also in some ways we are doing the capex or moving towards a more greener supply chain.
So we have a capex plan of Rs 250 crore for FY25, which includes us buying trucks, some investment into warehousing spaces, and investment into two ships that we've ordered in. They will come in 2026, but the advance for the ship has been given—some advance has gone for this year in this, and that's part of the 250 crore capex.
We think for the next five years, four years, a Rs 250-300 crore capex kind of a figure on an average will continue for the company. Some years it might be a little bit more, some years it might be a little bit less, but the range of about Rs 1000 crore in the next four years is something that we're looking to invest. And these will go into these areas, whether it is warehousing space or whether it is IT systems, whether it is ships, trucks, rail containers, and so on.
Quick commerce is changing the shape of India's ecommerce experience. How is that impacting supply chain solution providers like you?
So we do work in the retail space for a lot of companies, and we do not just on the pure retail side but also for e-commerce companies. We've been doing this for many years, and we are continuously adding more areas of providing logistic services to them. Specifically around quick commerce, we are working with companies on the backend fulfillment side.
So from the quick commerce companies' warehouses, the products which are SKUs have to go to the dark stores, and the dark stores then supply to the customers. These dark stores could be, let's say, 100 or 150 in a city. Our job from this fulfillment center is that if this particular dark store says, "Oh, I want this—you know, 10 of these biscuits, five of these detergents, eight of this and that," whatever they want, we will do the order processing, pick it, and then we’ll pack it and deliver it to that particular dark store. From that dark store, when it goes to a customer, it’s not our responsibility. We don’t manage the dark store either—just the fulfillment center.
So every city will require some kind of fulfillment center, and we have many such fulfillment centers that we are already running. Some we’ll create depending upon the need for some of these companies.
In terms of green supply chains, what work do you think needs to be done by the overall ecosystem to move towards more sustainable solutions?
The infrastructure needs to be created, whether it is on CNG/LNG—it’s not there yet. Refueling stations, for example, if you’re moving long distances, it’s very difficult to find CNG/LNG today. Even taxis that have CNG today—you see, the lines are very large at the pumps. That means the infrastructure is not there to refuel so easily and so fast. Similarly, with EV, you need the charging infrastructure to be in place across the country. So those things are. The ecosystem needs to be developed.
As and when the ecosystem matures, we will see proliferation also increase.