MAHLOGNSEOctober 25, 2023

Mahindra Logistics Limited

12,668words
71turns
11analyst exchanges
0executives
Key numbers — 40 extracted
12%
pply chain space. Our strategy always has been built around the hypothesis that transition from a 12% to 14% GDP level for logistics cost to 8% to 10% as envisaged for the government requires focus a
14%
ain space. Our strategy always has been built around the hypothesis that transition from a 12% to 14% GDP level for logistics cost to 8% to 10% as envisaged for the government requires focus and incr
8%
een built around the hypothesis that transition from a 12% to 14% GDP level for logistics cost to 8% to 10% as envisaged for the government requires focus and increased infrastructure, improved regu
10%
ilt around the hypothesis that transition from a 12% to 14% GDP level for logistics cost to 8% to 10% as envisaged for the government requires focus and increased infrastructure, improved regulatory
9%
has been a continuing period of resilience and recovery over the total auto retail, growing from 9% year- on-year, passenger vehicles retail in the first half of the year hit an all-time high of mor
1.8 million
n-year, passenger vehicles retail in the first half of the year hit an all-time high of more than 1.8 million vehicles, exceeding the previous record, which was set last year, around 1.7 million vehicles. On
1.7 million
of more than 1.8 million vehicles, exceeding the previous record, which was set last year, around 1.7 million vehicles. On a year-on-year basis, that represents approximately a 6% growth. The passenger veh
6%
last year, around 1.7 million vehicles. On a year-on-year basis, that represents approximately a 6% growth. The passenger vehicle industry has continued to grow over the last two years but has been
rs,
sitive sign across the board. After the substantial impact of inflation in the previous fiscal years, the rural market is showing better signs of recovery this fiscal year. Obviously many FMCG compani
142%
pril to September '23 in the first half of this year, domestic air passenger traffic increased by 142% to nearly 113 million passengers, right. So that's been a strong uptick. The increased demand for
113 million
er '23 in the first half of this year, domestic air passenger traffic increased by 142% to nearly 113 million passengers, right. So that's been a strong uptick. The increased demand for air travel, along wit
20%
ell positioned in the enterprise mobility space, right, public market leadership across more than 20%, 22% market share across the 7 big cities which we serve and therefore, we are optimistic that as
Guidance — 20 items
Rampraveen S
opening
“Still, we are seeing a consistent improvement with our clients and expect the industry to recover through the upcoming holiday session.”
Rampraveen S
opening
“And going forward, we have removed reporting warehousing yields for express and other services.”
Rampraveen S
opening
“And it's back on the pathway to profitability, and we expect to see further growth in coming quarters as we are going to at fleet expansions in that part of the business.”
Rampraveen S
opening
“We started our first air charter in September and expect a further pickup in that business through the second half of the year.”
Rampraveen S
opening
“And there will be a continued carry of this, as we had mentioned, but we remain focused on getting to EBITDA breakeven by the end of this year as EBITDA aspiration made out earlier with all of you as well.”
Rampraveen S
opening
“In the upcoming quarter, we hope to complete the second tranche of investment in Whizzard, which should make us a majority company and will consolidate the business.”
Rampraveen S
opening
“That acquisition will be contingent on profit closure of terms, which we have signed with Whizzard promoters and other regulatory filings and requirements.”
Rampraveen S
opening
“We reported a PAT positive quarter for the Q2 F '24 and are on track to remain PAT positive for the full year, as indicated earlier.”
Rampraveen S
opening
“So, we are close to breakeven, which we hope to achieve by the exit of this year.”
Rampraveen S
opening
“And at the time of the Meru acquisition, we had indicated we will be able to combine the business and estimated to make it profitable at the end of FY '23-24 and remain on track to deliver the integration and synergy value.”
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Risks & concerns — 15 flagged
Let me begin, the automotive sector as this year has unfolded, India's autos retail sectors embarked on kind of a note of cautious optimism.
— Rampraveen S
But demand in the ECD segment, especially lighting and mahindra LOGISTICS fan, remained fairly weak.
— Rampraveen S
After the substantial impact of inflation in the previous fiscal years, the rural market is showing better signs of recovery this fiscal year.
— Rampraveen S
Obviously many FMCG companies are focused on building the yields or the prices as there has been challenge of an increase in raw material costs and frankly some increase in logistics expenses over the last couple of years with the continued impact of high fuel charges.
— Rampraveen S
In the recent past, of course, we have seen some slowdown as the post COVID fuelled growth has started kind of flattening out.
— Rampraveen S
And that's been important for us after slightly weak Q3 and Q4 of last year in terms of order intake.
— Rampraveen S
Q2 is a seasonally weak quarter generally.
— Rampraveen S
And we also continued to see pressure on ocean freight prices and higher levels of competition across the board.
— Rampraveen S
We also focused heavily on increasing our service levels, the challenge we had during the integration.
— Rampraveen S
So there is pressure on the engagement to win back the customers and drive the volume growth, while we continue to enhance service levels and drive the network growth and yields across the board.
— Rampraveen S
The Express business reported a quarter of a revenue of INR87 crores, which largely reflected the consolidated impact of the erstwhile MLL business and the Rivigo business.
— Rampraveen S
That growth is a function of both underlying market growth and the impact of the transfer of the enterprise mobility business from MLL-to-MLL Mobility, which happened in the second half of F '22-'23.
— Rampraveen S
However, without the impact of MESPL business, the gross margin was around 11.2% and 150 basis points improvement on a comparable basis to Q2 of F '23.
— Rampraveen S
So if you see our contribution margins are still positive, you would note that our contribution margins declined quarter-on-quarter but reflect the impact of the higher transportation costs without adequate volume there.
— Rampraveen S
Some assets, we shut down a fulfilment center in the western part of India as part of our customer consolidation and that had an impact of approximately 20 to 25 basis points of EBITDA and the rest of it largely was for the large part, a mixed level issue.
— Rampraveen S
Q&A — 11 exchanges
Q
Hi, Good Afternoon. So, sir, I had a couple of questions first. One first one on MLL Express. So, we have seen that quarter-on-quarter, there has been a marginal increase in the revenues, but the profitability has gone down quite, I mean, the loss has increased further. So what's our view here because this kind of the festive season we have entered now where volumes are expected to be on the higher side, then again, it could be slightly muted. So, this profitability trajectory, if you could just highlight here because earlier in the last call, we had mentioned about a breakeven by mid-third qu
Rampraveen S
Sure. Is there any other question, Alok? I can take them together then. So this was on the Express side. Second was on MLL standalone as well. If you just look at the EBITDA margin on MLL standalone, that has also come down on a Q-o-Q basis. So just your thoughts on that? Sure. So let me take the first one first, because that's a question probably the other shave as well. As I mentioned earlier, compared to Q1 of the year, we have invested substantially in getting our service levels back Alok. We saw a regulation in our net service levels in the quarter. Getting service levels back in our busi
Q
Yes. Thank you for the opportunity. I have two questions and they're sort of related. I would be very grateful for your thoughts on the organic opportunity versus inorganic pursuits. And secondly, the domestic India opportunity versus your international initiatives that is sort of one stand of question. The second question is any learning as an institution from the Rivigo acquisition and other acquisitions and other key takeaways. And thirdly, how are you insulating or managing management time and bandwidth in the turnaround of Rivigo, so that you are able to do justice to the organic opportun
Rampraveen S
Namit, thank you for that question. It's always good to get questions from you. So let me try and get through that in some order. Organic opportunities versus inorganic opportunities. I think, it's a good question. And thank you from our perspective right now, as I mentioned earlier, we are not out there in the market looking for any further inorganic. So first, I want to clarify that. We had always laid out three years, four years ago, that as an integrated services provider, we are looking at four main services, right, third-party/contract logistics, freight forwarding, cross- border, B2B Ex
Q
Yes, hi, sir. Thanks for the opportunity. Sir, there has been always an industry commentary that Express Business and Contract logistics, 3PL SCM business will have some synergy benefits. So, as we have acquired the Rivigo, we might be giving our Express part of that 3PL business to some other counterparties. How has been the things has moved for this part of the business in last one year? and how we are looking at, apart from external volume growth, has there been any growth that came from internally from this kind of synergies?
Rampraveen S
So, thank you, Jainam. And there is not too much of insource. So, first question. I think there isn't a huge insourcing left. Back in 2021, we had started our own express services internally, and therefore, we didn't have a high market share, but we are serving a fair number of our express requirements locally in-house, right. And therefore, the process of insourcing has already started. And before we did the MESPL acquisition, there wasn't a huge amount of outsourcing. We do sign up new outsourcing partners on the Express side, but that's a lane-specific or geography specific strategy, becaus
Q
Thanks for the opportunity. Sir, in 3PL business, how much is for auto versus non-auto segment?
Rampraveen S
Yes. auto is around 68% for the quarter. That includes the Mahindra businesses and the non- Mahindra businesses. Auto and manufacturing are around 68%, 70%. Close to 70%. That is for the 3PL business only, no? Yes, for the contract logistics business. Okay. And then, non-auto segment, how much is from the e-commerce and consumer durable? No, we don't report that specifically every quarter, but I would say at a bellwether level, it's probably half and half, right? I think the consumer business is around 15% or14% and the e- commerce business, excluding last mile delivery is around 17%- 18%. Oka
Q
Yes. Sir, can you highlight about absolute revenue in terms of warehousing? We have given per square foot, but in terms of absolute revenue and growth and how is the outlook?
Rampraveen S
Revenue from warehousing services for the quarter was around INR246 crores. I think I mentioned that in my comments and that's largely on the 3PL side. As you know, we use warehousing for express and last mile also, but we don't count the warehousing revenue, right? So, the revenue for warehousing solutions is around INR246 crores. I don't have more specific confirmed numbers, but it's around INR246 crores in a quarter. Got it. Thank you, sir.
Q
Hi, Good afternoon and thank you for the opportunity. One question on the mobility business, Ram. On the return to work, I think what I was looking at broadly is that in FY'19, this segment was generating about INR385 crores of revenue, and now you add Meru's overall operations on top of that. Assuming it comes back to the levels of FY'19, can we expect somewhere a 25% higher number vis-a-vis FY'19 numbers in FY'25?
Rampraveen S
Hi Krupa, good to share the question. But just to put some context, I think in 2018, '19 which was peak year for the mobility business, we had INR370 crores of revenue and that's around 4% PAC in the MLL business. And at that time, I think, corresponding revenues in the Meru business was around INR55 crores. On an accounting basis, platform revenues have probably been higher. mahindra LOGISTICS The business was reporting a loss. So, consolidating this at a revenue level, that's been on INR420 crores to INR430 crores, right? And obviously, with return to work happening now, we should start an u
Q
Hi, Alok.
Alok Deshpande
Hi, Ram. Good afternoon. Three questions from my side. First, on the Express business, so the opex cost that we have, I'm simply going by the difference between revenue and EBITDA here. This opex of about INR110 -INR112 crores. Now, as the revenue ramps up, can we consider this as an absolute sort of floor, is there any chance of this opex going down by any chance, maybe due to any one-offs or anything of this sort due to or you see this number going up? Why don't you finish the questions, Alok, and I'll answer all of them together just in the interest of time. Okay. The Second question is on
Q
Hi, good afternoon, Ram. Just one question. I heard your commentary around the contract logistics business, around autos, FMCE, e-commerce. Basically, we have had about 5% odd top line growth in the first half of the year. One would have expected this business to continue growing at closer to say, mid-teen levels more from a medium-term perspective. So, is there going to be a pullback to double-digit growth in the second half of the year, or is this more or less the sentiment that is likely to show up in numbers for the full fiscal year as well?
Rampraveen S
I think it's a good question, Sumit. And there are a couple of things if you look at the quarter- on-quarter velocity of growth has been around 6%. I think last quarter we told you that we did see a bunch of the churn impact coming in. and the focus is on ensuring that we will get that velocity to maintain the velocity, right? Order intake has been positive; therefore, I can't call out saying this full fiscal will be in the 12% to 15% growth level, Sumit. But if we take out the impact of the Bajaj volume and some of the churn, I think by the end of the year, we should be running this. Our run
Q
I just have two questions. So, if you can help me with the volume number for B2B express renewals for 2Q? And how much do you expect to close this year by 4Q, one? And second, how has been the order spend in 3PL business for the quarter versus Y-o-Y? mahindra LOGISTICS
Rampraveen S
So, Ankita, I don't have the exact forwarding volume number, but if you reach out to our team, or SGA Investor Relations we should be able to get that out to you. Don't have to write off the cuff. I know that all well, as I said, our volume did grow 3% on a Q-o-Q basis sequentially. But if you reach out, we'll give you a more specific number. I think on the contract logistics side, the quarter's order intake volume was north of INR100 crores. So that has been accelerating itself. We had a weak Q3 and Q4 last year, because of some of the churn happening. And I think the Q2 last year was very st
Q
Just one part you missed, I think for the B2B Express business, what level do you think will close this year in terms of volume, tonnage?
Rampraveen S
Yes. So, I think, as I said, our aspiration is to be able to get back and to regain a full recovery of the volume loss. So we have under 20%, 25% growth to go there, Ankita. So, I think I mentioned it earlier in a question in response to, I think, Alok's first question on express. Okay, got it. Thank you so much.
Q
Thank you, everyone. I hope we've been able to answer all your questions satisfactorily. However, if you need any further clarifications or want to know more about the company, please contact our team or SGA Investor Relations advisors. On behalf of my colleagues at MLL, I wish you all a very happy Diwali and hope the year and the festive season bring happiness to you and your dear ones. Every year during the festive season, millions of our delivery associates across our industry will call you at home to deliver festive joys. These delivery associates are the backbone of our industry and our c
Management
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Speaking time
Rampraveen S
26
Moderator
13
Abhishek
5
Alok Deora
4
Jainam Shah
4
Alok Deshpande
4
Krupashankar NJ
3
Sumit Kishore
3
Ankita Shah
3
Namit Arora
2
Opening remarks
Shogun Jain
Thank you. Good afternoon, everyone, and thank you for joining us on the Mahindra Logistics Limited Q2 and H1 FY '24 Earnings Conference Call. On the call today we have Mr. Rampraveen Swaminathan, MD and CEO; Mr. Saurabh Taneja, CFO and the senior management team of MLL. I hope everyone has had a chance to view the financial results and investor presentation recently posted on the Company's website and stock exchanges. We will begin the call with opening remarks from management, followed by an open forum for Q&A. Before we begin, I'd like to point out that some of the statements made during today's call may be forward-looking. A disclaimer to that effect was included in the earnings presentation. I'd like now to invite Ram, MD and CEO of MLL to make some preliminary remarks. Over to you, Ram.
Rampraveen S
Thank you, Shogun and good afternoon, everyone. I hope all of you had a good Dussehra and Vijayadashami break. I am, of course, joined today by several members of our management team, including our new CFO, Saurabh Taneja. having on board. Saurabh joined us a few weeks ago. He comes to us with significant experience across the finance domain. He has worked in the audit and the corporate side and has worked closely as part of leadership teams in growth- oriented businesses. So we are happy to have him on board. And I'm sure you all get a chance to engage with him more in the coming months. I also trust you all had a chance to view our presentation and financial results, which are available in the stock exchange and our Company's website. As I normally do, I'll provide a short update on the external environment, our end markets, performance across our five business segments, supply chain, mobility and some key operational highlights. Finally, I'll discuss our financial performance in Q2
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