Key takeaways of the call

Despite the headwinds of challenging external environment with global supply chain volatility, chip shortages, fuel & commodity cost pressures and continuing waves of the Covid-19 pandemic, the company delivered continuing growth in Q4FY21-22 driven by account acquisition and execution of its strategy of providing customized, integrated solutions to customers.

Auto continued to face headwinds.  Two-wheelers underperformed due to weakness in rural segment. Three-wheeler witnessed a decline. Commercial demand saw an uptick with strong growth for its major customers. Farm and Agro witness a slowdown over a larger part of the year. E-commerce demand was steady but lower than expected. There was a lower level of network expansion from existing large customers. Mid and the first mile were slow. In the Consumer sector, consumer durables underperformed during the first half of Q4. However, it saw an increase in dealer stockings. Demand for ACs recovered with other categories seeing steady demand.

Revenue growth in Q4FY22 was driven by E-commerce, Consumer, and Automotive and Freight Forwarding businesses.

Strong momentum in SCM business has offset the impact of Wave 3 of the Covid-19 pandemic on the Enterprise Mobility business.

The company remain focused on improving operational efficiencies and margin expansion.

With increase in complexities, the margin will improve. Over a period of time the newer site utilisation will increase and boost margin.

Bajaj Electrical Account/project: Project implementation largely on track and require 6 months to optimize the distribution network and currently at halfway stage of this 6 months. The impact on margin by Bajaj project will be lower in Q2FY23 compared to Q4FY22.

Enterprise Mobility – Q4FY22 was subdued due to covid restrictions. But from mid-february the situation improves with easing of restriction and push for return to work programme of customers. 

Warehousing yield expansion in Q4FY22 is largely due to mix change and offering total solutions. Non stockyard capacity has gone up by 21% in Q4Fy21 and that augured well for yield. 

2X2 Logistics, which is car carrier business (outbound for automobiles) subsidiary. Business this year for car carriers was challenging with volatility in fuel prices as well as volume.   For full year FY22 it had a PAT loss of Rs 6 crore. Going forward as market recovers it expect a better flow through for this business and some of fuel price increase comes in for car carriers improving the profitability of this business.

Revenue of last mile delivery, EV cargo, FF etc is about Rs 850 crore and of which FF revenue was about Rs 450 crore and balance are split among last mile delivery, EV cargo etc. The margins of FF increased to 5.5% in FY2022 from 3.9% in FY2021. Net profit stood at Rs. 16 crore versus Rs. 6.5 crore.

FF Mix change in product category (ocean vs. air). This time more of ocean than air. Overall there is double digit volume growth. The realisation is function of mix and destination (or lane rates). The volume outlook focus on service coverage expanding to charter service offerings in air, investing in international operations on ocean side. This will drive volume growth. In near term huge amount of softening is happening in pricing for FF business. The largest FF business customer accounts for 5% of FF business revenue.

EV cargo fleet currently comprise of  800 vehicles up from 300 vehicles at the start. Expect to sustain strong growth.

Warehousing & solutions business contributed Rs. 1000 crore in FY2022. Warehousing has early to mid-teen margins while transportation (full truck load) is 7%. The company added 2.3msf in FY2022 locking rental for the next 5-7 years.

The acquisition of ZipZap logistics (Whizzard) would benefit the company in the last mile business.

Meru: Meru's loss stood at ~Rs. 20 crore in FY2022 although it achieved EBITDA breakeven in March 2022.

The company expects H2FY2023 to show strong growth led by a strong revival in auto and end user industries. H1FY2023 is expected to be muted due to uncertainties and higher oil prices. Expect Non-auto business to sustain strong growth and Auto sector is expected to return to growth in H2FY23.