Mahindra Logistics hosted a conference call on Apr 25, 2023. In the conference call the company was represented by Rampraveen Swaminathan,  Managing Director and CEO.

Key takeaways of the call

Core 3PL business of the company despite slowdown in some end markets, driven by its diversified market segments, has demonstrated positive traction on order intake and margin expansion.

Contract Logistics revenue was up 14% with GM up 150 bps YoY. While auto & manufacturing steady there was slowdown in ecommerce network expansion. Growth in telecom business on the back of 5G launch.

Freight forwarding (FF) business revenue in Q4FY23 was down 35%  impacted by freight price corrections (Ocean freight prices down 80%YoY) but demonstrated volume growth across all offerings.   FF business continues to focus on volume growth and global expansion.  Slope of decline in ocean freight moderated put pressure continues. 

Last Mile Delivery (LMD) business revenue in Q4FY23 was up 13% YoY but GM impacted due to limited volume growth. Quick commerce network expansion slows due to funding winter. Focus on volume growth & synergy with Whizzard.  Given higher price intensity, during the quarter the company cutback several unprofitable locations. 

Mobility revenue for Q4FY23 was up 76% YoY. The  Airport business return to 80-90% pre-covid.   Demand expected to improve in FY24 with return to office being normalized

Adjusting for BEL contract restructuring in consumer business and FF impact the volume and revenue growth was 24% for the quarter.

Consolidation of Rivigo acquisition impacted the earnings in Q4FY23. Excluding Rivigo the consolidated revenue for Q4FY23 was Rs 1206 crore (up 11%YoY) with EBITDA stand at Rs 87 crore (vs. Rs 58 crore) with GM stand at 11.4% (vs 10.1% in corresponding previous period).   PBT  was Rs 24 crore (vs 9 crore). PAT was Rs 21 crore (up from Rs  6 crore).

B2B Business revenue was up 2.5 times on YoY basis due to Rivigo acquisition. The integration program of Rivigo''s 828 express business acquired last quarter remains on track to yield cost and operating synergies in the coming quarters.  Margin improvement plan are in place. Expect EBITDA break even by end of H1FY24.

Overall retail sales witnessed double digit growth in q4fy23 led by auto sector.

Net impact on revenue account of restructuring of Bajaj Electrical account is Rs  32 crore in Q4FY23.

Committed to expanding warehousing space.  Commenced development of largest warehouse park ( of 1 million sft) at Chakan near Pune.    Phase I of about 0.5 msft will be operational by end of this year. Overall the warehousing space during Q4FY23 shrinks by 0.6 msf due to the impact of restructuring of Bajaj Electrical Contract. The moderation largely happened in distributed branch warehousing locations where it has back to back contracts. Expect no residual impact of it on performance of the company going forward. Its Chakan warehouse park will be the largest single facility of any 3PL in Chakan Talegaon belt.

The current borrowings stands at about Rs. 400 crore of which Rs 220 crore is structured long term debt in MSEPL undertaken for Rivigo acquisition while Rs 150 crore is in MLL’s books to support acquisitions like Meru, Whizzard and working capital facilities.

Higher depreciation in FY2023 is attributable to Meru consolidation (Rs 10 crore), MSEPL (Rs 8 crore), IND AS (Rs 27 crore) and others (Rs 10 crore). Going ahead, Meru and MSEPL depreciation will be capped while MLL business will see 7-8% increase.

In Q4FY23 the revenue from Rivigo is about Rs 77 crore. Run rate number will be Rs 350 crore for 12 month basis.

MLL expects the freight forwarding business to get to quarterly revenue run-rate of Rs 112-115 crore during H1FY2025. Once it breaches Rs. 450-500 crore revenues, it expects 3% PAT margins.

The company continues to focus on becoming a customer-led provider of integrated logistics & mobility solutions and towards that goal it sustained investment in Q4FY23 as well.  It continued investments in operational excellence and technology aided in operational efficiencies.

The company remains optimistic of positive demand uptick in coming quarters and remains focused on consolidating and leveraging its portfolio.

Non Mahindra SCM business growth will moderate in near term and see uptick in medium to long-term.

Unseasonal rains impacted harvest of rabi crop in certain parts of the country.

Expects slower growth run-rate in near term owing to slower growth in automobiles segment and a gradual pick-up in E-commerce and freight forwarding businesses.

The express business is targeted for EBITDA and PAT breakeven in Q3FY2024 and Q4FY2024 end respectively.