Key takeaways of the call

Q1FY21 saw the company's operations were affected with full impact of nationwide lockdowns and disruptions due to Covid 19 Pandemic.

Significant reduction in industrial activity, widespread Work from Home (WFH) and lower business sentiments has impacted the overall economy and the industry and the company.

In these challenging conditions, the company has delivered a resilient performance with strong customer retention, cost reduction and improved cash flows. Despite the difficult environment, the company went live with several customers during the quarter. The company has partnered closely with its customers in providing essential services.

As customers resume operations gradually in a phased manner with requisite precautions, there was gradual improvement in operations of the company in May 2020 and substantial improvement in June 2020. However the demand remains below pre-COVID levels in most end markets.

Intermittent or local/regional lockdowns impacts the operations of the customers as well as that of the company. This results in volatility in supply chain of customers and disrupt return of drivers and warehousing labourers in several regions. International freight forwarding has recovered but the current uncertainty in trade relations are expected to have an impact for near to medium terms.

Despite these headwinds there are several green shoots with gradual improvement in return of labourers and drivers. By end of Q1FY20 the company's Warehousing and Value-added services has reached an utilisation level of 80% of pre-COVID levels. Significant part of transportation (long mile and mid mile) has seen strong recovery. The Last Mile connectivity and freight forwarding business has reached a more consistent performance near to that of pre-Covid.

Post Covid there will be redesign of supply chain across all industries and that offer immense opportunity for the logistics sector.

Had got momentum on customer acquisition. Couple of launches continued to happen during the quarter. Launched new transportation contracts also during the quarter.

Economic activity has started improving and the company is well positioned to drive recovery in the coming quarters.

The company has grown its customer relationships in E Commerce, FMCG & Pharma, and continue to strengthen its focus on delivering solutions, driving operations excellence and leveraging technology.

Warehouse space under management of the company has increased by 0.25 million square feet during the quarter even as opening of new facilities has slowed down. Three of the new warehousing facilities that are under construction witnessed disruption in work but the company now expect that to get completed and operational by Q2/Q3FY21. These 3 warehouses together are expected to add a million sft of warehousing capacity to the company's network and all this are largely contracted out.

Retaining manpower in transport segment during COVID lockdown has hit the margin.

Seeing strong demand for flexible or short term capacity from customers.

Breaking Q1FY21 revenue on monthly basis there is improvement. Sales in April 2020 was Rs 77 crore and that has increased to Rs 120 crore in May 2020. In June 2020 the sales was Rs 215 crore, which is close to 70-75% of normal monthly run-rate of the company.

Benefits of better mix (increased contribution from WVAS) wasoffset by lower capacity utilisation of warehouses (lower than target) and transport business retaining manpower despite lower sales.

Warehousing utilisation was about 30-35% in first half of Q1FY21 and that improved in second half and exited at an utilisation of 80%. Roughly about a third of it was operating in first half as they are supporting essential products.

As per the contracts as facilities got older the rentals becomes lower. There are also waiver of rentals in the quarter. So this got reflected in depreciation apart from AS 116 impact.

Full year capex for current fiscal was in line with last year even though the spend is low in Q1FY21.

Overall the ratio will reset in favour of transportation in balance quarters of the current fiscal even though it was lower in Q1FY21. Share of transportation declined to 69.4% of SCM revenue in Q1FY21 from about 80.4% in FY20 with that of warehousing increase to 30.6% (from 19.6% in FY20).

Once existing customers come back to normal operations, the share of transportation will recover. Profile of transportation is now integrated distribution. In newer business higher base of warehousing in first few months then only followed by transportation.