Allcargo Logistics Limited (ALLCARGO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Allcargo Logistics Limited Q1 FY '27 Earnings Conference Call. [Operator Instruction] Please note that this conference is being recorded. I now hand the conference over to Mr. Suyash Samant from Stellar IR Advisors. Thank you, and over to you, sir.

Thank you, Steve. Good afternoon, everyone, and thank you for joining us today. We have with us the senior management team of Allcargo Logistics Limited, Mr. Ketan Kulkarni, Managing Director and Chief Executive Officer; Mr. Deepak Pareek, Chief Financial Officer; Mr. Sanjay Punjabi from Investor Relations. Additionally, today, we have Mr. Puneet Mishra, President and Chief Business Officer from Allcargo Group. The management will be sharing the operating and financial highlights for the quarter ended 30th September (sic) [ June] 2026, followed by a question-and-answer session. Please note, this call may contain some of the forward-looking statements, which are completely based upon the company's beliefs, opinions and expectations as of today. These statements are not a guarantee of the company's future performance and involve unforeseen risks and uncertainties. The company also undertakes no obligation to update any forward-looking statements to reflect the developments that occur after the statement is made. Before handing to the management, I would briefly introduce Mr. Puneet Mishra, President and Chief Business Officer at Allcargo Group. Mr. Mishra brings over 3 decades of leadership experience across the media, entertainment, and FMCG sectors. Prior to joining the Allcargo Group, he held leadership positions at Zee Entertainment Enterprises and Hindustan Unilever. With that, I would like to hand over the conference to Mr. Puneet Mishra. Thank you, and over to you, sir.

Thank you, Suyash. Good afternoon, everyone, and thank you for joining us today. Our results presentation and press release have been uploaded on the website and in exchanges, and hope everyone has had the opportunity to go through the same. As we begin FY '27, our approach to scale Allcargo Logistics rests on a very simple belief. It is simple but not simplistic in the context of our understanding of what drives value for our customers, not easy to execute every day with razor-sharp precision, and it is this. Promised service quality delivered drives volume and when consistently delivered every day, it earns the right to command the right yield or the price. On the Express logistics side, the focus is to deeply instill a service quality obsession in our teams across the value chain, driven by the simple mantra of everyday great execution through brilliant basics. It's powered by our philosophy of one team, one goal, a philosophy that aligns every function across the value chain empowered to deliver customer delight. This is not a slogan for us, but an operating discipline, and it's the foundation of everything else this business is being built upon. That simple systemic discipline is showing up in our numbers, too. Our teams are energized by the dictum, deliver the service and deserve the volume. And this quarter, that has translated into a 6.7% year-on-year volume growth. Behind the simple thought, of course, is all the back-end complexity of a customer segment-led approach to service delivery, made simpler for execution by our significant investments in technology in the end-to-end value chain. And we are driving this volume growth very mindfully with customers who genuinely value our service proposition and quality of delivery and are happy to pay a fair price for it. On pricing, continuing with our customer-centric philosophy, we are equally deliberate. Our dictum within the teams is deliver value, command value. We price on the strength of the service equation we bring to the table. That discipline has delivered a 6.4% year-on-year improvement in yield for the quarter. We are committed to this self-propelling loop of delivering consistent, high-quality customer service, consistently earning the right to win a higher share of their volumes and deserving the right to command the price for this consistently delivered high quality of service. This quarter's numbers are a testimony that our customers appreciate our belief and philosophy, and we thank them for it. It is these simple beliefs that are a source of inspiration and energy for our teams and people across the country, and we intend to build upon this energy and momentum. On the Consultative Logistics business, the story is equally consistent. The business is built on trust and retention, which is built by the consistent service delivery parameters delivered every day. We closed the quarter with service quality adherence of over 99%, and that consistency has led to a 98% customer retention rate. The retention rate is the best proof of the confidence that our customers have in us and in our execution quality. Backed by the power of our service consistency and customer trust, we have expanded our service footprint across diverse industry sectors where existing clients have given us the opportunity to expand our business with them. Our operating philosophy in this business is deliver more from less. It's about delivering more to our customers from less, extracting more through high-quality process design, improved productivity, better space utilization and technology and automation. This quarter, that discipline has delivered a 3% increase in revenue per square foot. So, if I were to leave you with one thought, it would be this. Both businesses are being run against a clearly defined playbook, high-quality customer service as the focal point, volume and customer commendation as the outcome and high-quality yield and profitable revenue as a reward for getting the first 2 right. We're managing both Express and Consultative Logistics businesses as 2 distinct players on the same underlying principle that disciplined service execution is what earns the right to grow and grow profitably. With that, I hand over the call to our Managing Director, Mr. Ketan Kulkarni, who will share the details about the industry and our business performance.

Thank you, Puneet, very much for the very elaborated commentary and putting things in the right perspective. Good afternoon, everyone, to you on the call, and thank you for your continued interest in Allcargo Logistics. I'm very happy and glad to be on the call once again with all of you all. While the global macroeconomic environment continues to be shaped by geopolitical developments and economic uncertainty, India's domestic economy has remained resilient and has become really the tailwind for the logistics industry. According to the IMF, India's economy is expected to grow by between 6% to 7%, supported, of course, by robust domestic demand and continued investments in the public and private sector. The strength of the economy is reflected in our key high-frequency indicators: e-way bill generation about 137 million in June, increasing 14.5% year-on-year, GST collections now nudging INR 2 lakh crores consistently with a 14% growth, together with good consumption, the festive season around the corner, starting from September when the country will celebrate right into December. These indicators reinforce our confidence in continued movement of shipments, goods, warehousing, supply chain activity and hence, organized logistics. Against this backdrop, as we enter FY '27, our strong growth momentum built over the activities of last year and the result in Q1 FY '27 is to deliver a sharper focus on profit and sustainable growth. The strategy is providing the best service, strengthening operational discipline and driving structural cost efficiencies. All this resulted in a consolidated revenue growth of 11.3% over same period last year and a reported PAT of INR 15 crores as compared to the loss of Q1 FY '26. The turnaround has been something that we at Allcargo Logistics are very happy and proud of. Equally important is the investment we continue to make in strengthening our leadership team with organization capabilities, not just in people but in technology, in digitization, in infrastructure and in automation. As our business evolves, the depth of our functions and the depth of our capability will be the important differentiators, and we are differentiating more and more on that. The first quarter reflects encouraging progress on the strategic priorities. We see our playbook being perfectly executed by our teams, and that reinforces our belief of sustainable value creation going ahead further into the 3 quarters. Disciplined execution, operational excellence and long-term customer partnerships will be the pivotal cornerstones of our execution strategy. Thank you very much. And with that, let me hand it over to our CFO, Deepak Pareek, for the financial performance of the quarter. Over to you, Deepak.

Good afternoon, everyone. Thank you, Ketan and Puneet for that start. I'm glad to be on the call with all of you today. So, the first quarter represents another step forward in our journey towards improving profitability while maintaining healthy growth momentum. On a consolidated basis, the revenue from operations for the quarter stood at INR 546 crores, registering growth of 11.2% year-on-year and 6.2% sequentially. This performance was supported by continued volume growth, improved pricing, and disciplined commercial execution across our business. Consolidated gross profit for Q1 FY '27 stood at INR 163 crores, registering a growth of 11.6% year-on-year and 6% as compared to previous quarter. EBITDA for the same period stood at INR 71 crores, registering a growth of 39.2% over Q1 FY '26 and 18.9% over Q4 FY '26. This represents the operating leverage created through better execution, productivity initiatives and focused improved business mix. I'm happy to share that Allcargo Logistics has registered a profit after tax of INR 15 crores as against the loss reported in Q1 FY '26. The Express Logistics business delivered a strong operating performance during the quarter. Volumes increased 6.7% year-on-year to 312,000 tonnes, while realization per tonne improved by 6.4%. The combination of healthy volume growth and better value realization resulted in Express revenues growing 13.5% year-on-year. We believe this reflects the benefits of our focus on service quality, customer engagement and disciplined pricing. With consultative logistics, although warehouse space under management remained stable at 7.5 million square feet, revenues increased 6.1% year-on-year and 6.3% sequentially. This demonstrates our ability to generate better throughput and productivity from existing infrastructure, while continuing to strengthen customer relationships across multiple industry verticals. This improvement in our results reflects the continued focus, we are making in strengthening the quality of earnings and improving the profitability profile of the business. Looking ahead, our priorities remain unchanged. We will continue to invest in initiatives that enhance customer value and operational capabilities, maintain a disciplined approach to costs and focus on delivering sustainable profitable growth. So with that, we now open the floor for questions. Thank you, everyone.

[Operator Instructions] The first question comes from the line of Pritesh Chheda with Lucky Investment.

Sir, can you share what are the margins in the Express Logistics business?

Yes, I'm Deepak here. Let me take the question. Thanks. So Express Logistics, we had a steady growth in margin. If you see this quarter, both the yield effort and the volume growth has shored up the gross margin from the last year number of 25.3% to 26.3%. So there's a 1% improvement in the gross margin of Express business in this quarter.

Sir, I was looking for the operating margin.

That's the operating margin. I have referred on the call.

Your company level margin is 13%, and I asked you specifically because there is a -- I was looking for the EBITDA margin in Express Logistics.

Okay. So EBITDA margin in the Express Logistics...

Meanwhile, I'll ask the other question.

I'll just come back to you. Meanwhile, you can...

I'll ask the other question. So just from say, next 24 months or next 2 years perspective, as a business, what are your key priorities? What will be the capital allocation? And what are the larger goals that as a separate organization post demerger now, have you set for this company? So key priorities, more 24-month goals and the capital allocation policy? Because I think one business is capital light and the other business is capital heavy. So I just wanted to check on that.

Ketan Kulkarni here. I will take the question on the key priorities, goals and pass on the capital allocation question to my colleague, Deepak Pareek, who is the CFO. So the key priorities of the business, as we demonstrated also in our performance is that, number one, growth is a very, very key priority for us. And that growth is formalized in a manner that we will grow faster than the market. So whatever logistics industry growth is, we will be at 1 percentage point above the logistics industry. That's the strive we have for growth. That growth will essentially be based on the 3 key pivots, which I said earlier, operations superiority, disciplined execution, and long-term customer partnerships. The goals are that we continue to improve our margins, the question that you had earlier put to Deepak, gross operating margins, EBITDA margins and profit margins. So we will only take businesses in the aspiration for growth, the businesses that bring value to these 3 parameters and customers see us as long-term value partners. Over to Deepak for CapEx.

So first, I'll answer your CapEx question. So CapEx -- capital allocation. So if you see our hubs and on the Express side, we are well capitalized. There would be constant improvements to the existing infrastructure would be around INR 10 crores to INR 15 crores on the Express business front. On the CL, the capital allocation is a function of new business and warehouse addition of warehouse area under management. So we see significant addition has happened in this Q1, followed by some retiral of area under management. So that has got offset in terms of CapEx. However, on the overall amount, if you see there would be around INR 20 crores on the CL front on the additional CapEx allocation. So that will be the kind of investment which we'll do in this year. And I would come back to your earlier question where you wanted an EBITDA margin breakup of 13% into both the businesses, which is Express and CL. So Express is at 6.2% and at CL, we are at Consultative Logistics, we are at 29.56%. So that's the breakup you're looking at, right?

My last question is on the Express margins. So 6% is a fairly lower margin. So where do we see this margin? And are there any levers for this margins to expand?

So the levers, which if I do a comparison on year-on-year basis, let's say, from the Q1 last year to Q1 last quarter of Q4. So from last quarter, there is a 1% jump, I would say. So the levers we have already extracted in this quarter, and there are further journey, let's say, when we did this 3-year plan vision, which we shared with all of you, we had said it will be 7.5% on the Express margin so that we are looking at in this year. And if you see 10% is the target in that plan, so we are inching up towards that direction. In terms of levers, price is -- yield enhancement is the biggest lever, which we have and which we have effectively used it for a benefit from the Q4 last year and Q1. And steps are done in order to continue that growth of yield, which will help us in enhancing the EBITDA margin here. Not to say what Ketan mentioned on the cost efficiency and operating efficiency that will also add a bit on overall improvement in this margin levels.

3 year is 10% or 3 year is 7.5%.

3 year is 10%.

Okay. And we are at 6% right now.

We are at 6.2%.

The next question comes from the line of [ Pratiti Bhara ] from Param Capital.

Can you please help me understand the other income of INR 14 crores, what does this consist of?

Yes. Deepak here. Yes, other income is a line item which you saw INR 14 crores. It has 3 components. One is the liquidity interest which we get, that's a normal part. One exceptional is the lease closure, which has happened in this quarter. So that's one INR 8 crore amount, which is the other income component sitting here, plus we have received some income refunds and there's an interest component of INR 2 crores. So INR 8 crores is one thing which is on account of lease closure, which is happening. That's the impact there.

So INR 2 crores is refunds and remaining INR 4 crores is the liquidity, am I right?

Yes. You're right. Normally, this number remains around INR 5 crores. So that's the level.

Also our pre-Ind AS adjusted EBITDA comes to around 2.7% after adjusting for depreciation on ROU and lease liability finance costs. Where do we see this number going ahead?

So pre-adjusted number on -- so you're coming to an operating PBT number. So I would go back to our plan, which we already shared with you. We are sticking to that plan. This year, the trajectory on this front is to be in the level of 5% to 6% and improve from there on.

Also one last question, how is the industry growth rate, when we look at logistics?

Ketan here. I'm sure you follow the logistics industry, and that generally grows at a factor of 1.2% to 1.5% of the GDP -- times rather. And you know the GDP is slated to grow between 6% to 7%. So the logistics industry by that factor will be anywhere from -- in the low double-digit range. So that's what we estimate. And within the industry, the breakup from 1.2x to 1.5x is essentially due to the various components of the industry like transportation, warehousing, express, B2C, e-commerce, which generally has much better growth rates than the other components. So that's how we see the industry.

How about Express? How do we -- how has Express grown in the last quarter in the industry?

Express growth would be at about low double digit. And our Express performance, as I mentioned to you, is better than the industry.

The next question comes from the line of [ Chirag ] with Keynote Capital.

We are moving in the direction you have already let us know in the analyst meet that we had a few times back. One thing I wanted to double check was that the gross margin number that you have mentioned for Q1 FY '26, it was about 24%, if I'm not wrong. So can you just check it once again?

So which quarter you are mentioning 24, Chirag?

So as per your Q2 FY '26 presentation, Express gross margin stood for Q1 FY '26 stood at 24% say that has improved to almost 25%.

Yes. So Chirag, I will just give you a backdrop of that. Q2 FY '26, we didn't have the scheme effect because those were the Allcargo Gati numbers which you are looking at. What has happened now from Q3 FY '26, Q4 '26 and Q1 '27, we have an impact of the merger, which was effective from 1st November. So the numbers of these 2 -- 3 quarters have been recasted, which includes the consultative logistics business aggregation into the margin. So, the margin profile has come up to the trajectory of 30% from Q3 FY '26 onwards. So that's the effect of merger, which has happened. I think you are looking at premerger numbers.

Okay. No, fair enough. Second thing I would like to know if you could give a bifurcation of KEA and SME/retail mix in Express?

In the Express KEA, we have -- I think we have been disclosing that earlier. Now I think we had done internally harmonization of all of this, I think -- so KEA continue to be in the proportion of 62% or 63%. Rest all is kind of strategic retail for us.

Yes. And Ketan here. Also the way every organization looks at what is KEA or strategic depends on the lens the organization will have in terms of its focus on the market, in terms of its geographic focus, strategic direction needs to take with large customers. So necessarily or unnecessarily KEA's of Allcargo Logistics would not be comparable to KEA of other logistics companies in the same space and similarly for consultative logistics. But nevertheless, as Deepak said, the KEA that we account for here are at about 60% of our revenue, retail at about 20% and the balance is strategic.