Staying on course

Published March 14, 2022
Saira Awan Malik, President, TCS
Saira Awan Malik, President, TCS

“In 2018, we realised that there was a need for strategic realignment between the shareholders and the management,” says, Saira Awan Malik about her journey from being a corporate lawyer to the president of TCS.

Ms Malik had joined the board of directors of TCS in 2016, after practising in London for about six years. In that process of realignment, there was a parting of ways between the previous CEO (who was also the president of the company) and the vision the family had for TCS. Eventually, Ms Malik stepped into the role of president.

“My objective is to work closely with the management so that this situation of misalignment does not arise again. My role is that of strategic guidance and liaison while backing the full C-suite of management. I am a continuation of my father’s values,” she says while explaining her role.

TCS was founded by a former Pakistan International Airlines flight engineer, Khalid Nawaz Awan, in 1983. And has become the biggest player in the logistics industry. While there is a lack of market data, Ms Malik estimates that the company’s market share in the express courier segment is 60pc.

With the rise of e-commerce, the courier business has moved away from document delivery to parcel delivery. Lately, it has become an intensively competitive space where a lot of start-ups have mushroomed that deliver last-mile solutions, often funded by venture capitalists (VC). TCS is still a market leader but with a smaller share of about 35-40pc. The remaining pie is segmented among many players.

During the season of 11/11 sales last year, TCS made up to 1.3-1.5m shipments a month

The startup culture starts up with a big contest among all the players, said Ms Malik dismissing the competition. “Initially, VC funding is spent on customer acquisition instead of profitability. They scale up and usually, it’s a winner-take-all game with one or two left standing,” says Ms Malik while keeping the option of buying out a startup on the table.

“In the early stages, startups are virtually indistinguishable from one another. They need time and runway to prove the value and feasibility of their model. They have to add a value that we cannot add ourselves,” she adds.

“Our greatest growth is coming from the e-commerce vertical at the moment,” says Ms Malik. The e-commerce market in Pakistan is estimated to be about Rs140 billion, growing at the rate of 25pc, year-on-year. TCS’s e-commerce segment growth has outpaced the market by several times as the vertical is growing 2x-3x times. “From handling about 400,000 e-commerce parcel deliveries a month, we are easily north of a million now.”

This stems from TCS’s ability to handle large volumes which a lot of smaller players struggle with. “During the (November) season of 11/11 sales last year, we made up to 1.3m to 1.5m shipments a month,” says Ms Malik.

About 2pc of the country’s retail sales take place through e-commerce. Pakistan’s internet penetration is roughly 54-54pc. Among those who have internet access, a quarter made their first purchase during the pandemic, explained Ms Malik.

E-commerce parcel deliveries are complicated and costly — the whole cash-on-delivery cycle means billions of rupees in payments that have to be managed. Plus, tracking returns on the doorstep is another challenge. Hence, TCS is focusing on other areas as well.

Overall, the logistics industry operates on very low margins. “Our net profit margins range from 3-5pc. Though some of our competitors don’t have to pay taxes, we get taxed on our topline (4pc) instead of our bottom line. In a way, growth is punitive for us though it is not deterring us,” she says.

Ms Malik confirmed that TCS’s topline was Rs14.5bn in 2018 with a growth rate of 10-15pc. Back of the envelope calculations indicate TCS’s annual revenue was in the ballpark of Rs21bn in 2021 and it paid roughly Rs826m in taxes.

Speaking of other opportunities, Ms Malik talked about third party logistics with the rise of q-commerce and e-commerce that has extensive warehousing needs. “TCS is already positioned among the top five in that regard and we are looking to ramp that up. This includes end-to-end fulfilment from picking it up from the factory to storing it, to delivering it to the customer, while managing inventory and returns.”

TCS is also focused on multi-modal transportation in terms of providing solutions for cross-border trucking as well as aviation. TCS is the first company to get a Transport International Routier license, which is an international convention that allows cross-border trucking without custom checks, decreasing costs and time. “This makes us well-positioned to benefit from the China-Pakistan Economic Corridor,” underlines Ms Malik.

Published in Dawn, The Business and Finance Weekly, March 14th, 2022

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