Mahindra Logistics hosted a conference call on Feb 2, 2023. In the conference call the company was represented by Rampraveen Swaminathan, MD & CEO.

Key takeaways of the call

Growth in Q3FY234 was driven for services and solutions by Automotive & manufacturing segments continued their growth trajectory, while the consumer and ecommerce businesses did witness a softer demand environment.

Sustained auto sector performance across categories aided the SCM segment.

Demand for consumer durables has slowed during the quarter after the festive season, largely because of the impact of high inflation on consumers in rural areas.

Freight Forwarding faced significant headwinds with rates dropping significantly in the near past. Ocean freight rates are seeing correction. Despite price volatility, witnessed volume growth in Freight Forwarding business.

The 3PL business of the company continues to have traction in margin improvement and cost optimisation and  the company  continued its focus on cost of delivery and overhead optimisations which has led to improved Gross Margins and profitability metrices.

Acquisition of Rivigo’s B2B express business   was closed in November, 2022. The acquisition is making positive progress on customer value creation and cost optimization. The acquisition further enhances technology portfolio for integrated logistics. Rivigo’s annualised revenues are Rs. 350 crore, while company’s express business has Rs. 150- 160 crore revenues.

Excluding Rivigo, Revenues were up 13% y-o-y at Rs. 1285 crore, GM stood at 10.5%, EBITDA at Rs. 77.2 crore, PBT at Rs. 17.9 crores and PAT at Rs. 12.1 crore.

 Other income for Q3FY23 was higher due to interest refund of Rs 2.6 crore on conclusion of an assessment order.   

The interest expense in Q3FY23 was higher due to Rivigo’s acquisition getting completely financed by additional borrowings. Interest expense would be higher in Q4FY23 as Rivigo related borrowings happened late in Q3FY23.

The company over next 2-3 years, like to reach a PAT margin of 2%, which it achieved in FY19.  Target to improve gross margin by 25-50 bps every year.

FY2024 would be a year of turnaround and consolidation. Earnings will accelerate from FY25 onwards.   

 The pricing environment in freight forwarding remains flat to marginally downwards during January versus December. In freight forwarding, volumes are growing in air and Ocean imports while exports may be sluggish due to the US slowdown.

Rivigo  would now focus on 1) consolidation of the network 2) consolidation in transportation 3) productivity improvement, and 4) Optimisation of overheads. Network and transport comprise 90-95% of total variable cost per kg.

Mobility business continues to improve on operational efficiency.