GST will lower product costs by 10-15%: TCI

Vineet Agarwal of Transport Corporation of India (TCI) says there was some improvement in demand during the festive season, but it fell almost immediately.

The Goods and Services Tax (GST) if passed will help Transport Corporation of India (TCI) in smoother movement of trucks across states, says managing director Vineet Agarwal. Speaking to CNBC-TV18, Agarwal says GST can help end users by lowering product prices by 10-15 percent. Furthermore, Agarwal says there was some improvement in demand during the festive season, but it fell almost immediately. Below is the verbatim transcript of Vineet Agarwal’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18. Sonia: Hypothetically, if and when the goods and service tax (GST) bill does get passed what kind of befits will your company see in terms of supply chain, XPS division or freight or seaways in terms of the cost coming down can you quantify that for us in anyway? A: Essentially, what has been studied that once GST comes about there should be a 10-15 reduction in cost of products. Now how will this come about? Essentially what will happen is – consider a company that has let us say five manufacturing plants all over India and today they have may be 25 warehouses virtually in every state because of the CST and essentially to save taxes. So, the distribution matrix is 5×25 so there is a lot of movement going to these 25 warehouses. Once GST come about the taxation structure becomes common. So, you don’t need to necessarily have 25 warehouses. You will probably have warehouses closer to the consumption centers. Hence you might have closed to maybe 15 warehouses. So, now your distribution matrix is changed from 5×25 to 5×15 so that has two major impacts. First – is that kind of warehouses that you would need would be much larger. Instead of 25 warehouses now you have consolidated that in to 15 warehouses which means larger space, more management, better visibility of inventory hence lower cost and better economies of scale. Secondly, the movement that will happen between these locations would increase because volume is a same but it has now been concentrated into 15 locations. So, that movement would mean there is a hub-and-spoke kind of movement. That could be multi model; it could be by road, by rail, by sea so that you get better cost efficiencies and hence lower prices. The other thing that will happen hopefully with GST is that the movement of trucks between the states should improve. We should have smoother movement; we should have faster movement and less waiting time at the borders. So, all of this will have a direct impact on companies like us. Transport Corp stock price On December 03, 2015, at 11:52 hrs Transport Corporation of India was quoting at Rs 315.00, down Rs 2.2, or 0.69 percent. The 52-week high of the share was Rs 330.00 and the 52-week low was Rs 198.50. The company’s trailing 12-month (TTM) EPS was at Rs 10.60 per share as per the quarter ended September 2015. The stock’s price-to-earnings (P/E) ratio was 29.72. The latest book value of the company is Rs 74.52 per share. At current value, the price-to-book value of the company is 4.23.

http://www.moneycontrol.com/news/business/gst-will-lower-product-costs-by-10-15-tci_4437341.html

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