Key takeaways of the call

Revenue for Q2FY19 was higher by 10.9% to Rs 927 crore driven by 10.7% growth in supply chain management (SCM) business revenue to Rs 829 crore and 12.6% growth in revenue of people transportation service (PTS) to Rs 98 crore. Early double digit growth in SCM was driven by 16.9% growth in M&M business revenue at Rs 519 crore with non-M&M (NMM) revenue grew by marginal 1.6% to Rs 310 crore. On activity wise the upside in NMM business revenue came from 25% growth in revenue of Warehousing & other value added services (W&OVAS) to Rs 85 crore. The transportation revenue degrew by 5.1% to Rs 225 crore. On client industry wise while the auto industry revenue was down by 2.4% to Rs 83 crore that of non auto was up by 3.2% to Rs 227 crore.

Just a marginal growth in NMM business was largely due to lower transportation spend by one marquee client who was impacted by change in product mix/trend in his industry. Further the festive season in current year was in Q3 unlike last year when it was in Q2 and this has impacted e-commerce business. The trucker strike in July 2018 against diesel price hike have affected in factory logistics business of the company in Q2FY19.

Going by the negotiation with that marquee client the transportation spend by it has already bottomed out and will not go down further.

Non Mahindra business will register double digit growth for current fiscal with second half register faster growth than first half.

MLL has acquired strategic stake in Transtech Logistics, also known as Shipx, which is working with the company for over 3 years. The acquisition will increase end to end digitization and bring in operational efficiencies. The transaction was consummated in Oct 2018.

Lords Freight - approval for increasing the stake and acquisition of additional shares is underway. Post acquisition of additional shares the stake of MLL will go up to 83.87% from about 73.75%. Plan is being developed to accelerate the growth in freight forwarding business.

For FY19 the company plan to add 1 mln sft of warehousing space and against that it has already added about 600000 sft.

Expanded gross margins by focus on operational efficiencies and better revenue mix.

The company is able to renegotiate with customers when there is disproportionate rise in diesel price as of now. The company is also able to get price hike when the contract comes up for reset.

The GOI launched new logo only credible player will be allowed to use this logo.

The auto sector is facing challenging time with increased ownership cost on account of price hike by OEMs, increase in diesel price and higher insurance premium.

The company won clients in all the 3 business segments of NMM-SCM business and gives high priority and focus for client retention.

Transportation though accounts for over 60% of revenue of NMM SCM business about 80% of customers of SCM avails warehousing and line feed services of the company.

Increased spending on infra and pre election will drive demand for consumer goods.

The company continues to remain optimistic on the growth potential of the sector and are encouraged by the government plans and actions for improving the logistics sector. Mahindra Logistics is working with the government departments, industry platforms and other logistics players in supporting these plans.