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

Key takeaways of the call

End market update –  Auto demand across segments are stable except 2W. Expect some moderation in business growth for the company from Auto & Tractors in  H2FY24.   Consumer durables – higher than normal channel inventories in case of RACs. Expect growth to be moderate for rest of the year in case of RAC.  In FMCG, semi-urban and rural markets seen bottoming out while urban markets are growing gradually. overall volume are expected to increase and see growth in integrated solutions demand from FMCG segment. In case of E-commerce the long term prospect is bright but in shorter there is increase in competitive intensity leading with various players opting for EQC solutions.  With demand moderation there was capacity consolidation impacted warehousing volume demand. This led to lower warehousing and solutions by 3PL.  Due to this there was closure of multiple sites in several accounts of the company, but   that was offset by new customer accusation. But the company have whitespace to the extent of 0.5 mln sft of wharehousing.  Ecommerce is some softness and that is cyclical after last few years of strong growth.

The company in FY24 will see slightly slower revenue growth on blended basis.   The mobility business (on fully consolidated basis), despite poor start to current fiscal ending Mar 2024, will turn around and become profitable for full year FY24.  The 3PL business is expected to grow in mid-teens per annum over the next 2-3 years. It would be focusing on improving margin profile in its network services businesses. 

Overall mixed quarter. Despite the slowdown in some end markets, the 3PL, Mobility and Last Mile businesses demonstrated positive traction on order intake and account expansion.  Freight forwarding business is in challenging environment as far as price competitiveness but that was to some extent was offset by volume. FF business is witnessing volume growth on sequential basis but there is drop in prices.

The Express business was in transition phase.  The segment saw 25-30% q-o-q volume drop due to Network transitions, rebalanced lanes, warehouses consolidations, IT solutions alignment as it entered the fourth quarter of Rivigo integration. Earlier, express business combined volumes stood at 4.2 lakhs to 4.5 lakhs while it needed 10-15% volume growth to achieve breakeven. The 10-15% volume growth from acquired level to get it EBITDA positive with target level of cost reduction. The 25-30% drop in volume despite no churnout of customers and all are still working with the company. Confident of ebitda positive as volume start coming back from july 2023.    Still about 25% off from desired level of volume from ebitda positive.  The Express business is almost one quarter away from ebitda positive.    

The segment registered a decline in revenues due to churning in E-com business and the shift of Bajaj electricals account. It is expected to return to growth by mid of this quarter. The segment witnessed significant improvement in margins, although there was an increase in costs due to AS 116 accounting.

In Q1 FY24 the company continued focusing on customer growth and expanding margins across integrated logistics & mobility solutions.  Its continued focus on margin improvement resulted in positive traction in 2x2 Logistics, MLL Mobility and ZipZap Logistics.

The company stared off well interms of order intake in case of 3^rd party logistics. Last quarter (i.e. Q1FY24) it hand order intake of Rs 130 crore (in annual contract value terms). 

Pending receivables of Rs 2.5 crore from GoAir for their crew. On prudent basis took provision for that.  Excluding that that business is close to broke even level.

All warehousing capacity planned/ongoing are on track.

Strategic focus is on scale, integrating supply chain with technology. Focus is to grow the 3PL business at mid teen.

Remain optimistic of positive demand uptick in coming quarters and remain focused on consolidating and leveraging its portfolio.