Mahindra Logistics hosted a conference call on Aug 1, 2022. In the conference call the company was represented by Rampraveen Swaminathan, MD

Key takeaways of the call

Demand growth in farm & auto segment, combined with continuing growth in other markets has been strong.

Of the Q1FY23 non M&M SCM revenue of Rs 526.3 crore the share of warehousing and value added services was about 40% (Rs 211.3 crore up 62%YoY) compared to about 32.5% in Q1FY22.  Of the non M&M SCM business about 35% was contributed by auto, consumer and manufacturing; 30% by  e-commerce and rest by multiple industries/markets. 

The company is committed driving growth and building strategic platform on longterm perspective. The company focuses on customer value creation through integrated solutions and network services continues to find greater adoption with customers.

At the same time the company continue to focus on driving cost management, operating cost productivity and  improving capital efficiency. It also focuses on accelerating digital transformation, enhancing human capital and executing our strategic platforms for profitable growth.

Bajaj 89 solutions project nearing full implementation. As indicated earlier, implementation is almost completed by Q1FY23 end and its fully completed in early part of current quarter.  Thus now focus      aggressively on steady state margin enhancement going forward.

Expect to see Demand uptick in existing accounts through greater volume throughput as well as uptick on global in freight forwarding through second quarter. That said external market remain uncertain thus focus remain on driving cost improvement and productivity across the network.

Completed acquisition of MERU Cabs, which is provider of on-call service and airport services. Currently MERU have a fleet of 430 vehicles of which only 180 vehices are powered by IC engine and balance are of modern EV vehicles.

Clients restarting WfOffice resulted in improved performance for Enterprise Mobility business. Expect consolidation in this segment as there is more focus on safety and securing post covid.  Supply pressure across the industry higher cost of operation due to fuel cost, driver cost and vehicle ownership cost due to BS VI emission norm change.

In Enterprise Mobility business, trip levels have come back to about 40% of the pre covid but trip distance in terms of KM have not and continue to be of short distance than normal.  There is not much of Long haul trips. Expect another 3-4 quarter for this business to come back to normal as work from office become the normal.

Space under management as end of Q1FY23 stood at 17.4 msft [warehousing 13.3 msft; stockyard 4.1 msft].  The company is on target of 20 msft of warehousing/stockyard space by middle of next fiscal. This 20 msft is are all multi client spaces. Bespoke space addition is on demand basis.   Of the planned 5msft of space addition about 2 msft space will be added in current fiscal and 2.5 will be contracted.  

Expect volume to be strong in Q2FY23.  M&M is a marquee customers and they have lined up 3 launches. Expects volume growth to be high in M&M business as well as non M&M business.

Considering some uncertainty in demand, the demand numbers in August 2022 will give an idea or direction of how the demand will pan out in H2FY23. 

In terms of order wins the company is optimistic about Q3&Q4 of FY23. The company have won a Rs 200 crore non M&M order and the order win prospects are good. 

Don't do business in negative unit margin in express business.

Q2FY23 will have little bit of carryover impact of Bajaj order. However the impact in Network is a conscious one and will not continue in Q2FY23.

Forwarding and last mile business are of investing area. Broadly the margin of solutions business will be higher than that of warehousing the margin of warehousing will be greater than transportation.

Integration of acquisition in Whizzard (Last Mile Delivery) on track. Last mile connectivity - the company now serves about 4000 pincodes.

Ecommerce had the benefit of crisis accelerated growth. Recent growth are lower in some category in some areas and that trend is to continue. Now focus is more on improving productivity and efficiency rather than network expansion.

Consumer side – durable industry benefit of pent up down. Ac and fan performed well. Commercial institution operation resume improved demand for commercial acs.

Demand growth in personal

Freight Forwarding market is mixed but overall demand is good. Supply perspective some margin pressure. Demand and availability and outlook for USA  and Europe based clients are good.