AVG Logistics Limited (AVG) Earnings Call Transcript & Summary

Good day and welcome to AVG Logistics Limited Q1 FY '27 Earnings Conference Call hosted by Kirin Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harshil Ghanshyani from Kirin Advisors. Thank you, and over to Mr. Gavi.

Good day on the behalf of Kirin Advisors, I welcome you all to the Q1 FY '17 Conference Call of AVG Logistics Limited. From the management team, we have Mr. Sanjay Gupta, Managing Director and Chief Executive Officer; Mr. Rajesh Rohilla, Chief Financial Officer. Now I hand over the call to Mr. Sanjay Gupta for opening remarks. Over to you, sir.

Yes. Thank you. Good morning. Good day, everyone, and a welcome to AVG Logistics Q1 '27 earnings call. Thank you for joining us today and for your kind continued trust and confidence in AVG Logistics. Let me start by saying that we are happy with the way '27 has begun on has given us a great start, not just terms of business growth, but also in terms of progress, we are making a building a stronger, more diversified and technology-driven logistics business. Revenue grew 6% on year in Q1 while PAT grew by nearly 30% for us. Important point is that profitability has grown much master than revenue. Please tell us that the work we have been doing on execution asset utilization and operational efficiency is beginning to show results. But I would like to look beyond the numbers today -- our focus for '27 is very clear: grow the business by setting of the assets, deepen customer relationships and build new growth engines. During the quarter, we have secured a long-term contract from Aldera Nagpur for the development of 100 dedicated vehicles. This is an important addition to our FMCG business and strengthen our across Western Southern and key Eastern market, including Olisa, Bihar and Darkin, demonstrate that confidence that large customers are placing in ABG to manage their logistics requirement at scale. We also see significant opportunity to grow our business with existing customers. Today, customers are increasing increasingly looking for a logistic partner who can manage multiple parts of the car supply chain rather than simply provide transportation. This plays directly to our strength -- we are using real-time vehicle tracking and our in-house technology solution to give customers better visibility, better control and more flexibility -- for us, technology is not just around by adding another future global service, it is about improving the way we operate and making our business more scalable. At the same time, we are deliberately building the new business around our core logistics platform. Liquid Logistics is on futurity the entire distance because we see strong demand and organized competition. We have already started building capabilities to intent state business meaningfully over the coming years. Customers are increasing for cleaner transportation solutions. We are responding through CNG, LNG and electric vehicle. During Q1, we also entered into a joint venture with Brenna Group to accelerate LNG-powered transportation across sectors such as steel, metal and cement. You see this as a long-term opportunity, not just a sustainability initiative as the customer move towards cleaner supply chain, we believe AVG can play an important role in helping them like that transition. India's logistic sector is undergoing a structural transformation manufacturing is growing, consumption is improving e-commerce continued to expand supply chain are becoming more organized and the government is investing heavily infrastructure and multimodal connectivity. Initiatives such as PM Gati Sakthi and national lot policy, along with the development for freight corridor and logistic infrastructure are creating a much larger opportunity for organizing logistic companies. Recently, the government has also started the DFC dedicated freight corridor where the operation has already started by us through data pricier organization. We have built a pan-India network, a diversified customer base, more than 3,000 owned and higher vehicle over 70 branches and more than 7.4 lakh square feet of warehousing capacity. We are now adding technology specified logistics and alternative fuel capability to this reform. This give us multiple leadership for growth as we said in our previous earnings call, our activity for '27 is to deliver approximately 15% to 20% growth. We remain confident in this objective supported by our existing customer base, new customer pipeline and expansion into a new business segment. We also remain conscious that growth has to be responsible growth. Our focus is on deploying capital against real customer opportunities, improving the productivity of our existing asset and maintaining operational discipline. We want very new investment to strengthen our ability to serve customers and create long-term value. We have also continued to balance growth investment to shareholder return with the board declaring a dividend of INR 1.20 per equity share for '26. As we look ahead, our message is simple. The opportunity in Indian logistic is large and AVG is building the capability to capture a larger share of it. We have a healthy pipeline, new customer opportunity new business segment and a clear strategy for the years ahead. We here remains about the road ahead and confident in our ability to deliver custom growth and create long-term value for all stakeholders. With that, I will now request our CFO, Mr. Rajesh Rohilla ji, to take through the financial performance of year Q1 '27 for the detail of our financial and operational performance. Thank you.

Thank you, sir, and good afternoon to everyone. I will take you through the key financial performance for Q1 FY '27, followed by our operating performance, cost management balance sheet and capital allocation. Let me start with the headline numbers. We reported revenue from operations of INR 132.48 crores in Q1 FY '27 compared with INR 125.02 crores in Q1 FY '26, representing a year-on-year growth of 5.97. What is particularly increasing is the improvement in profitability. PBT increased 24.42% year-on-year to INR 8.71 crores while PAT increased 29.98% to INR 6.46 crores. PBT margin improved by 98 basis points to 6.58% and PAT margin improved by 89 basis points to 4.87%. So while revenue growth was moderate the stronger Growth in profitability reflects the benefit of better operational efficiency, asset utilization and cost discipline. This is an area where we remain very focused -- we are continuously working on free productivity, reducing empty runs, improving freight planning, optimizing turnaround time, improving warehouse productivity in the registry business, these may look like small operational improvements, but together, they can have a meaningful impact on profitability. Customer quality and customer depth are also important to us. We are looking at growth only through new customers. We are not only looking at growth through new customers. We are also working closely with our existing customers to identify additional requirements across geographies and business segments. This allows us to increase well as here while leveraging the network and infrastructure we already have. During Q1, we raised INR 52.93 crores through the right issue. This provides additional resources for working capital and general corporate purpose and give us greater flexibility to support our expansion plan and customer requirements. We are also maintaining a disciplined approach to our balance sheet. As of March '26, net debt was approximately INR 173 crores. Debt equity stood at 0.7x, and the current ratio was approximately 1.97x. With the right issue, we have further strengthened our financial position as we go into the next phase of our growth. Our approach to CapEx is also disciplined we invested INR 52 crores in FY '26 and targeting INR 50 crore plus in CapEx in current financial year FY '27. With additions with requirement fulfilling through the operational lease of the become particularly in EV segment due to heavy CapEx requirements. This is primarily linked to the business opportunity, including additional vehicles for new and long some customer contracts, specialized logistics and technology-related requirements. The Haldi Ram contract is a good example, that deployment of 100 dedicated vehicles is directly linked to a customer requirement and a long-term business relationship. Similarly, investment in EV, CNG LNG vehicles are being evaluated alongside longer-term customer contract giving us better visibility on utilization and returns. Cost management will remain a key priority through the year. We will continue to focus on fuel efficiency, maintenance, fleet utilization, empty run reduction, trade planning warehouse productivity. At the same time, we will remain disciplined on working capital and capital expenditure. Fuel is an important cost for our industry. However, a significant portion of our customer contracts as few escalation clauses which help us manage the impact of change in fuel prices. We also continue to focus on maintaining a balanced approach to capital allocation. On 1 side, we are investing in the next series of growth. On the other, we remain committed to shareholder returns. The Board has declared a dividend of INR 1.20 per equity sales for FY '26 subject to shareholders' approval at the 17th Annual General Meeting. The record date for the remaining eligibility for the dividend is September 18, 2026, the register of Pampers and sale transfer books will remain closed from September 19 to September 2026, both these inclusive in connection with -- we believe this reflects a balanced approach to investing in the business while also returning value to the shareholders. Looking ahead, we remain confident about the opportunity in front of us. The logistics industry is benefiting from the manufacturing growth, infrastructure spending, increasing consumption, e-commerce and formalization of supply chain. The development of dedicated trade corridors, industrial corridors and multimodal logistic infrastructure would create further opportunity for organized logistic companies. In FY '27, management has set an objective of approximately 15% to 20% revenue growth supported by our existing customers, new customer pipeline and expansion into new business segments. Our job now is to execute this plan with discipline. We want to grow, but we want to grow efficiently. We want to add capacity, but we want that capacity to be backed by business. And we want to expand new segments while maintaining the financial discipline that has supported our progress so far. Q1 has given us a positive start. We will remain focused on improving operating efficiencies, standing cash generation deploying capital carefully and building a stronger business quarter after quarter. We believe the combination of our core logistics business, new customer wins, specialized logistics, green can portion and technology is AVG Multi avenues for sustainable growth. Thank you for your continued trust and support. With that, I hand it back to the more for quarter Q&A.

[Operator Instructions] First question is from line of Sakshi Shinde from Shah Consultancy.

I have 2 questions with me. The first 1 is the company has reported revenue growth of around 6% year-on-year -- so what is the outlook for the revenue growth in FY '27.

Yes. Good afternoon. We are very positive about the revenue growth of '27. On the basis of our current business, new contracts signed by us additional fleet capacity, working towards sustainability we are expecting revenue growth of around 15% to 20% for '27. And this growth will come from our existing customers and new customers and new contracts. We have -- I think you are aware that we have added a new fleet and assets in the last year, which will give us the revenue less than in last year. This full year, they are giving the event. So will support higher revenue as they will fully utilize during the '27.

So how much of the growth is organic versus the growth coming from the new customer and the contracts?

We are working for the new business and increasing in business of our existing customers. So our target is to make 15% to 20% growth. So around 7% to 8% growth will come with the new business and around 8%, 10% growth will come through existing customers -- so no contract expansion of our business. The actual contribution may depend on timing of the new context and development of the vehicle. We are sincerely working towards sustainable logistics, which is LNG, EV and CMG. So a lot of vehicles has been ended. And further, we are having a plan to add new vehicles. So overall, growth will come 15% to 20% by both ways like existing customer and new customers.

Is there any seasonality in the business that investors should consider while analyzing Q1 performance?

Yes. In Logistics, there is some seasonality in our business. Generally, Q1 and Q3, normal operating quarters, while for quarter 4 usually have better volume, if you see the previous history, Quarter 4 is always better due to higher demand for some of the industries we serve. Therefore, quarterly numbers should be looked at a number of full financial year. We expect being higher volume in quarter 3 and 4 and overall performance of the year. If you see all our old '26, '25 or '24 this year, quarter 4 and 3 are much better than quarter 1 or 2.

Next question is from the line of Aditi Jain from Wealth Management.

So my question is what incremental revenue and an company generated from the rate recently?

Can you repeat your question, please?

Yes, sure, sir. What the incremental revenue and PAT can company generate from the capital raise?

The rights issue, you are talking about right sum?

Yes, yes, yes.

The rights issue will help us strengthen our working capital position and support our growing business requirement. However, it is difficult to give a specific revenue on or PAT number only against the right issue proceeds. But at the overall business level, we expect incremental revenue and better PAT for new contracts and higher fleet utilization and the CapEx which we have done in '25, '26 and the current financial year. The newer ship will new asset, which we have added, will contribute for a longer period in Chiba surprise, '26, '27, which should support revenue growth and improve pet margins. At the same time, the position will increase due to the adding addition of the new asset. So depreciation may increase during that time. But overall, our profit and incremental growth will come in the company.

Okay, sir, okay. What amount of capital expenditure we are planning to do this financial year?

Last year then, we did around INR 62 crores, and benefit of these assets will come and be seen in the current financial year as well as in the coming years. And for '26, '27, we are planning to do a further CapEx of around INR 60 crores. At the same time, we are also evaluating the leasing of asset to our financial balance sheet. So that will -- our financials will be balanced. Instead of buying we are talking to the companies and financial institute for the media. Our approach for the -- to maintain a balance between asset on the ship and leasing so that we can support business growth while keeping our financial and capital requirement under control. So this year, CapEx will be INR 50 crores, INR 60 crores, and the other assets, we are trying to take on lease. So this will be leading motor will be much better. in few of our view of our balance sheet.

Okay. And can you please brief us about the Haldiram contract? How will the placement of 100 vehicles benefit the company business?

We have received the contract initially we have funded vehicles. That is from lira for their realistic requirement. And last week, on 21st, August vehicles has been already deployed and the remaining vehicles currently under the deployment process. and expected to deploy in the last 1 month or maximum 2 months. And this contract will add to our revenue and provide better revenue visibility as the vehicle becomes fully operational. Since these are dedicated vehicles, it will also help us to maintain better fleet utilization and planning. These vehicles are going loading from Nagpur and going to Southeast and some part of the best also. So as of now, we have signed a contract of 100 vehicles but last week, we met management of Haldiram Nagpur they are asking us to add another 100 vehicles by December '26. So these are repute customer, good paymaster and these are helping us to build opportunity for our additional vehicle requirement in dedicated model in the future.

Next question is from the line of Gael Mata from Ata Securities.