Delhivery Limited (DELHIVERY.NS) Earnings Call Transcript & Summary

Good evening, everyone. Welcome to the Q1 Earnings Call of Delhivery Limited. I am Apaar from the Investor Relations team of Delhivery. Before we start, we would like to point out that some of these statements made on today's call will be forward-looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. To discuss the Q1 FY '26 results, I am pleased to welcome Mr. Sahil Barua, MD and Chief Executive Officer; Mr. Amit Agarwal, Chief Financial Officer; Mr. Ajith Pai, Chief Operating Officer; Ms. Vani Venkatesh, Chief Business Officer; Mr. Varun Bakshi, SVP and Head of Part Truckload; and Mr. Vivek Pabari, SVP and Head of Investor Relations at Delhivery. As a reminder, all participants' line will be in listen-only mode and participants can use the raise hand feature to ask any question post the opening remarks. Now I invite Mr. Sahil Barua to take us through the key highlights of the quarter, post which we will open up for the Q&A. Thank you. And over to you, Sahil.

Thank you, Apaar. Can we have the presentation, please? All right. Excellent. Thank you all of you for joining our earnings call this evening on Friday. As always, we'll begin with a short presentation for about 15 minutes and then I'll be happy to take questions. Before we begin, I'd like to place on record on behalf of the entire team of Delhivery, our deepest gratitude to one of our directors, Mr. Srivatsan Rajan, who has served as a Director on the Board of Delhivery for the last 10 years and will be stepping down in September. I'd also like to extend a very warm welcome to 2 new directors on the Delhivery Board: Professor Padmini Srinivasan from the Indian Institute of Management at Bangalore; and Mr. Yashish Dahiya, MD and Group CEO of PolicyBazaar, who will be joining the Delhivery Board from today. So welcome on behalf of the Delhivery team to them. Great. Moving on to summary of results for Q1. We've had an excellent start to financial year '26 with strong revenue growth in our core transportation businesses and significantly improved profitability. I'll walk through the numbers. As of Q1, we delivered INR 2,294 crores of revenue from services, which is about 6% higher year-on-year and about 5% higher Q-on-Q. Total income stood at INR 2,424 crores, a growth of 6% YoY and 5% Q-o-Q. EBITDA margins came in at INR 149 crores or 6.5% compared to INR 97 crores in the same quarter last year and compared to INR 119 crores or 5.4%. So an expansion of nearly 200 basis points Y-o-Y and about 110 basis points Q-o-Q. PAT came in at INR 91 crores, nearly 4%, which is an expansion of 140 basis points from INR 54 crores in Q1 of fiscal '25 and 70 basis points compared to Q4 fiscal '25 when PAT stood at INR 73 crores. We registered strong growth in the Express Parcel business as we discussed earlier. This is also post our acquisition of Ecom Express for which we recently received approval from the Competition Commission of India. The full impact of the acquisition, of course, will begin to show more in Q2. However, we did see significant improvement in volumes even towards the tail end of Q1. Parcel volumes reached 208 million shipments for quarter one, which represents a year-on-year growth of nearly 14% and a quarter-on-quarter growth of 17%. Our PTL business continued to show stable performance. We closed at 458,000 tonnes of freight in quarter one, which represents a year-on-year growth of 15% and broadly flat quarter-on-quarter. Do bear in mind that quarter one typically is the lowest quarter of the year from a PTL standpoint and quarter 4 typically is the high watermark quarter for a fiscal year. Quick snapshot of operational metrics. Pin code reach continues to stay consistent. We are present across 18,857 Pin codes pan-India as defined by the Indian Postal Services. We continue to serve the entire world through our partnerships with FedEx and with Aramex. Total number of active customers have expanded significantly from 35,000 in quarter one fiscal '25 by nearly 8,000 customers. As of this quarter, we closed with 43,000 active customers. Infrastructure continues to remain at about 20.4 million square feet of gateways and fulfillment centers as opposed to 20.1 million square feet in quarter 4. Continue to operate 119 gateways. This includes a few new gateways that have been integrated from the Ecom Express network into the Delhivery network. 45 automated sort centers, 64 sorters. There's a mild expansion in the footprint of the entire freight business. We have 125 freight service centers as opposed to 118 in quarter 4, 161 processing centers, and we continue to expand the Express Delivery network in response to significantly higher volumes anticipated in Q2 and Q3. Total number of Express Delivery centers stand at about 4,500. Team size is expanded to 65,849 people with 52,000 partner agents and 17,000 vehicles on a daily basis. Quick snapshot of financial performance. As I'd mentioned, overall revenue from services grew to INR 2,294 crores in quarter one fiscal '26 as compared to INR 2,172 crores a year ago and INR 2,192 crores in Q4. The Express Parcel business has grown as a percentage of our total revenues on the back of increased volumes towards the tail end of quarter one and stands at 61% of total revenues. The PTL business continues to form 22% of total revenues. Express Parcel revenues have grown 10% Y-o-Y and 12% Q-o-Q. We closed with INR 1,403 crores of revenue in quarter 1 fiscal '26 through 218 million packages delivered, which represents a 14% growth in volume and a 17% growth quarter-on-quarter compared to the previous quarter. PTL freight revenues have grown 17% from INR 435 crores in the same quarter last year compared to INR 508 crores in this quarter and broadly flat between quarter 4 and quarter one. Freight tonnage has grown 15% Y-o-Y from 399,000 metric tonnes of freight in Q1 fiscal '25 versus about 458,000 tonnes of freight in Q1 of fiscal '26. Revenue growth being higher than volume growth implies that yield improvements have continued in this business as well. Supply Chain Services business has degrown Q-o-Q and Y-o-Y. This is driven by 2 factors. One is, as mentioned previously, our exit from providing mother warehousing services to the quick commerce industry, and the second impact from seasonality with one of our major electronics and durables clients. FTL services revenues have remained broadly flat at about INR 150 crores a quarter and Cross Border Services brought in INR 24 crores of revenue in Q1 of fiscal '26. In terms of profitability, profitability continues to expand. The highlighted column on the right refers to quarter one fiscal '26. As discussed, revenue from services stands at INR 2,290 crores. Total service EBITDA came in at INR 298 crores or 13%, which is an expansion of 60 basis points versus quarter 4 of fiscal '25 and an expansion of 190 basis points compared to fiscal '25 on the whole. Express Parcel came in at INR 228 crores of service EBITDA at a 16.3% margin. As discussed previously, we expected continued expansion in parcel margins from quarter 2 of last year, which was our low point at 15.1% and we expect margins to continue to improve going forward. We will remain broadly within the normative range of 16% to 18% in the Express business, as guided previously. Part Truckload margins continue to remain stable. We brought in INR 54 crores of service EBITDA margin in the Part Truckload business in quarter one at 10.7%. This is to some extent affected by India's adjustments as well. Broadly, we anticipate that margins in the Part Truckload business will continue to rise with improvements in utilization of the network. The big change of course is in the [Audio Gap]. We've continued to renegotiate commercial terms with several customers, and as discussed previously, shut down certain unprofitable accounts. As a consequence, margins in this business have improved significantly from 2.2% as of fiscal '25 to 7.2% in quarter 1 fiscal '26. The business brought in INR 15 crores of service EBITDA this quarter. In terms of corporate overheads, corporate overheads continue to remain flat as guided previously. In terms of broad percentage of revenue, corporate overheads have declined from 9.3% of revenue in fiscal '25 to 9.1% of revenue in quarter 1 of fiscal '26. Do bear in mind that quarter 1 fiscal '26 also contains the impact of inflation on wages as this is our increment cycle. Wages have remained broadly constant at INR 114 crores. Technology expenses and general administrative expenses have broadly remained constant as well. We've invested INR 14 crores in new services. These are 2 new services, as discussed previously. One of them is our Rapid Commerce initiative, which is a sub-2-hour same-day delivery service currently present through 20 dark stores in 3 cities, and the second is Delhivery Direct, which is an on-demand intra-city service launched at the moment in the cities of Ahmedabad, Delhi, NCR, and Bangalore. Both of these businesses continue to scale and investments continue to be made both on the demand side as well as on building up supply. The investment levels are currently at INR 14 crores a quarter. This has led to an overall adjusted EBITDA margin of INR 75 crores or 3.3% of revenue and expansion of 80 basis points compared to quarter 4 fiscal '25 when we generated an adjusted EBITDA of INR 55 crores and more than double of the adjusted EBITDA from the same quarter last year. PAT stood at INR 91 crores, or a PAT margin of nearly 4%, an expansion of INR 18 crores compared to quarter 4 of fiscal '25 and an expansion of nearly 60% compared to the same quarter last year. PAT trend continues to be heartening. As discussed, PAT came in at INR 91 crores in Q1, which is significantly higher than the PAT in the same quarter of last year, and the overall trend of improvement of Q1 is from negative 4.4% in Q1 fiscal '24 to 2.4% in Q1 of fiscal '25 to nearly 4% in Q1 of fiscal '26. We believe that the PAT margin will continue to expand through the rest of the year as well. A short update on the Ecom Express acquisition, we received formal approval from the Competition Commission of India on June 17, 2025. The acquisition was formally completed on July 18th and financial consolidation of Ecom Express into Delhivery will be effective from this date. The final purchase consideration, as guided previouslym post the adjustments will be at INR 1,369 crores. From an integration standpoint, the volume and client side integration of Ecom Express is complete. No further volumes flow through the Ecom Express network and we are in the process of reconciling and shutting down the last few shipments which continue to be open within the network. All other volumes have been moved successfully to the Delhivery network and will reflect in Delhivery standalone volumes in Q2. The network rationalization plan is also under execution. On a final basis, we expect to retain 7 facilities through a -- in a combination of transportation and fulfillment operations. A significant portion of the network of Ecom Express has been rationalized and shut down, and we anticipate that the entire network shutdown will follow the plan previously discussed. We have also begun the process to exit the non-Express businesses of Ecom Express and anticipate that we will complete these exits by quarter 3 of this financial year. Just a quick snapshot of Express Parcel volume growth. As you can see, volumes have consistently been on an uptrend throughout this calendar year. The deal with Ecom Express was announced towards the end of March. We've presented a version of this chart previously. We had begun to see an upside to volumes in April and May. I'm pleased to announce that, that has continued through June and has significantly -- gone up significantly into July, and our belief is that this trend will continue through the rest of this quarter. Do bear in mind that this is an unusual year. The peak season this year will be -- is expected to be in the middle of September. So unlike last year, a large portion of the peak will be seen -- the impact of a large portion of the peak will be seen in Q2 and the early part of Q3. So that's a quick summary of our results. So broadly speaking, highly positive quarter. We're very satisfied with where we've landed. I think big questions last time were really around the integration of Ecom Express, and as mentioned, I think we've completed that integration quite successfully, and overall very happy with where volumes have trended as well, and obviously the expanded profitability. So very well set up for the rest of fiscal '26. With that, I will pause. Happy to take questions.

Thank you, Sahil. [Operator Instructions] The first question is from Sachin Salgaonkar.

Thanks, Apaar. Congratulations on a good set of numbers. I have a few questions. Let me go through the questions all at one time and then I'll hand it over to you guys. Number one, Express volumes have increased this quarter, but we did see the yield coming down. So is there a way to look at it that the incremental shipments which have come are largely come at a lower yield or there's something else which is going out here? Number two, after your Ecom Express consolidation, what impact should we see on the overall volumes of Delhivery? And I'm saying that because the follow-up question out here is, have all volumes moved in one queue or are there incremental volumes which could be moved in 2Q, and if any, could you help us quantify or understand what range that could be? And similar question is, what could be the impact on yields and margins from current levels after the E-Express consolidation? And lastly, Sahil and team, thank you so much for sharing the shareholder letter and your views across businesses. One sentence you guys mentioned was quick commerce has created a material opportunity for our PTL division in the immediate term. Again, would love to understand what you guys mean by that? Anyways you could quantify the upside opportunity out here?

Sure. Thank you, Sachin. So I'll go one by one. On Express volume versus yield, so fundamentally, the drop in yield -- so yield is a function of volume mix, which is a function of clients, which is a function of the weights of packages and the distances that they travel. When I look at the overall weight per package across our Express business, consolidating both small parcel as well as heavy, there is a double-digit decline in the average weight per parcel, which is not surprising because obviously there's been growth in the small parcel business. And so, as a consequence of that, yield has shrunk. So it's just an organic shrinkage in yield and has nothing to do with pricing. The yield, as we've discussed previously, it does vary quarter-to-quarter based on these inputs. As an example, during the peak season, we typically see yields go up because there's a larger percentage of heavy packages that come through the network. And I think that trend will continue in Q2 and Q3 as well. So nothing sort of alarming on yield, pricing remains consistent. If anything I believe, as I've discussed previously, that irrational pricing-led compression of yield that previously was a risk factor in the last 2 years is a materially lower risk going forward. One obviously is, as we've consolidated Ecom Express, I think that gives us a certain amount of pricing stability in the market. And the second, as I've mentioned previously, I think independent 3PLs in this space need to cut, burn rapidly and especially in the face of inflating costs. And so we do believe that there'll be no further compression on yields. In terms of Ecom Express consolidation and impact on volumes, what you're seeing in quarter 1 is actually a very minimal impact of volume transition from Ecom Express to Delhivery. Really most of it was only towards the end of Q1, sort of in the last parts of June. The real impact, as you can see in the chart -- Apaar, if you can just go to the chart? Yes, so the real impact actually is in July, which you can see there's a very materially higher trend for July than there has been for June. And our view is that, that's sort of a more representative level of volume that we will be at going forward [indiscernible]. So there's a very large sort of uptick that you should see in Q2. With the new volumes coming in from Ecom Express, I think there's no reason to believe there'll be any negative impact on margins. I think again, as I mentioned, depending on client mix in any given quarter, there may be some impact on yields and there may be a marginal impact on sort of margins here and there. But broadly speaking, we anticipate that margins will actually expand as volumes go up. And so we'll easily be in the 16% to 18% sort of range. In terms of quick commerce's impact on PTL and sort of the opportunity it creates, I think the main opportunity that it creates is brands who work with quick commerce companies, whether it's FMCG companies, packaged food companies, whether it's grocery, whatever it is, there's a large amount of B2B consignments that get shipped to both the mother warehouses of quick commerce companies as well as the dark stores of quick commerce companies. This is a complex delivery process because it involves, for example, taking appointments with the mother warehouse, making sure goods are delivered within that appointment on time and in full. This is a service that Delhivery already provided outside of quick commerce. So it's not particularly different from what we would do for a seller trying to consign stock, for example, to an FBA warehouse or to a Reliance warehouse or a Flipkart warehouse. So it's fundamentally a similar kind of service. Now what's interesting, of course, is that it's now a new sort of channel that has gotten created and a new opportunity for us. What makes this obviously a complex delivery is the process of obviously coordinating with large numbers of quick commerce mother warehouses and ensuring on-time delivery, integrating with their systems to make sure that appointments are delivered on time, managing [indiscernible] of delivery electronically, making sure that POs are properly reconciled between the brand, the logistics partner, which is us in this case, and the mother warehouse or the dark store.    And potentially, it also opens up an opportunity for returns from mother warehouses and dark stores back to brands. So that's sort of the large opportunity that we see and it's actually been a pretty exciting part of the PTL business over the last 2 or 3 quarters.

Just a quick follow-up out here. Since the acquisition of Ecom Express, are you seeing any change in terms of competitive intensity? And I'm saying that because one of the statements in your shareholder letter was for last couple of years there was a poor pricing discipline amongst multiple 3PLs. Anything changed in the near term since your acquisition or that continues to be the issue?

So, the irrational pricing that I've spoken about did exist. And logistics is really not one of those spaces where pricing below cost is a good strategy, as obviously evidenced by our acquisition. But, as I mentioned, I think what we've seen is a reduction in the intensity of price competition. I wouldn't like to necessarily take credit for us having driven sense into the market. I think it's the financial constraints that face companies which price irrationally in the first place. So obviously with the acquisition of Ecom Express, all of the contracts that we've negotiated with clients are at Delhivery pricing.    Of course, clients get volume discounts for giving us larger volumes, but on Delhivery's terms. So the irrational pricing has been cleaned out at least out of what was the erstwhile Ecom Express network. But I do believe that other 3PLs in this space have also signed contracts in the past which are below cost. And as I've mentioned, logistics costs inflate in a very predictable manner.    So wages and logistics, for example, will typically inflate 7% to 8% a year, rentals will inflate anywhere between 5% and 8% a year and fleet costs also inflate at a fairly predictable rate. So the reality is that I think whatever -- whether Delhivery does anything or not, balance sheet constraints will force independent 3PLs in this space to sort of make sure that they're disciplined about pricing.

The next question is from Vijit Jain.

Congratulations on a good 1Q. My first question is, in last quarter, I think you said you are aiming to retain 30% of the volumes of Ecom Express, that was what you were budgeting in your acquisition price. Do you have a sense of what was the volume of Ecom Express as it existed in April, for example, that you've retained? Yes, that's my first question.

You want to ask all of them in a go?

Yes, sure. The second question is you, also last quarter talked about your sense that self-sourcing at some of the other horizontal players was peaking and you expect that to continue to play through. Has that progressed along expected lines as you see players ramping up for the festive season ahead? That's second. The third question I had was, if you can give a broad sense of the category mix that you see on your network in categories that you mentioned are not amenable to quick commerce, so apparel, consumer electronics, home and lifestyle goods, heavy, et cetera? So those were -- those are my questions. And if possible, if you could talk about what will be your recurring costs apart from the integration costs that you will incur, the recurring costs from Ecom Express from 2Q onwards?

Yes, sure. So, in terms of volume retention, our plan, when we -- our assessment of the deal at that time was based on a 30% volume retention of Ecom's volumes. What I can tell you without disclosing sort of specifics is that we have retained significantly more than the 30% that was planned originally. So, which is reflected sort of in the chart that Apaar had shown previously. I think, broadly speaking, we will be close to about perhaps somewhere in the 55% to 65% retained volume already and this continues to rise month on month.    Part of the reason, as I mentioned, is that this has been a tough quarter from a logistics standpoint for other players in this space owing to obviously profitability constraints. And also the reality is the operating environment in Q1 has been pretty complicated with rains and a number of other kinds of disruptions. And so we have seen a flight towards quality. So that's been a positive for us. In terms of change in in-sourcing strategies, I think clearly, we've retained more volume than we anticipated. So as you can imagine, we have gained share across all client types. Earlier, of course, we always used to talk about the fact that we were growing share rapidly with direct-to-consumer and SME segments of the market.    But as I look at our volumes across an absolutely broad swath of clients, we have gained significant amount of share. Including the marketplaces, I think of the 3 key marketplaces, at 2 of them we do see an increased sort of interest in outsourcing to Delhivery. They obviously continue to maintain in-house arms. There's no question. But equivalently, the consolidation towards a quality partner who is reliable, that trend is also visible. At the third marketplace also we have seen an expansion of our share of wallet.    But I think the reality is that until the marketplaces with completely captive arms, and I'm not counting Valmo here, are able to account properly for the cost of doing in-house logistics, the true comparison internally to them also will not be perfectly clear. I think costs are still sort of relatively speaking, lack of a better word, hidden between retail arms and logistics arms. So I -- it's too early to comment on whether there's sort of a very material shift.    That said, I will point out that the same inflationary pressures that I've spoken about that apply to third-party logistics companies, apply exactly as much to first-party logistics companies as well. They aren't exempt from wage inflation and rental inflation. And so, we're very confident that our ability to manufacture productivity gains and efficiencies in our network significantly outstrip other players in this market, whether they're first-party or third-party players. And so the reality is that our cost advantages expand every year.    We've been talking about this since the time that Delhivery's gone public. And I realized that for the first year or so, that may not have shown up in our numbers. But as you can see with the acquisition of Ecom Express and what you see in July and August, I think reality does catch up. And -- so it's a matter of time.    In terms of the broad category mix, I wouldn't be able to provide you a breakup of sort of our volumes by category, but if I take some very, very broad numbers, my sense is maybe soft line is probably about half our volumes. FMCG, BPC kind of categories are maybe about a quarter and the rest of it is just sort of a very broad mix. Grocery is practically 0. Unsurprisingly, it's not a category that we intend to play in.    And in terms of recurring costs, the integration cost, as we've mentioned our envelope, was about INR 300 crores. That we anticipated and we will report that separately in quarter 2 and quarter 3, calling out quite clearly what the specific integration costs from the Ecom Express acquisition will be.    Those will largely be limited to certain people-related costs that will persist through quarter 2 and quarter 3 and certain costs in terms of winding down leases and certain fixed contracts that they've had. As of now, we don't anticipate that we will breach that INR 300 crore limit, but in terms of recurring cost there will be none. No further recurring costs. I mean, because as the volumes go up, it's as if we were expanding the Delhivery network itself.

So, if I can just follow up. So, there is no cost associated with anyone who comes on board. Any cost at all -- That's what you're referring to as none, right?

Yes. Because, Vijit, if we were to do, whatever, X million number of packages compared to, let's say, the 60 million average that we were doing in Q4, we would need to hire people ourselves, right? So it can't be sort of classified as a recurring Ecom Express cost.

The next question is from Sachin Dixit.

Congrats on a decent set of results. My first question is on Supply Chain Services, right? That's a business which seems to have a good mood, but it like hit and miss, it does well for a few quarters. Obviously, you have highlighted multiple times, it's slightly lumpy in nature, it's not linear. But in your shareholder letter, you are talking about roughly INR 1,800 crores to INR 2,000 crores of revenue in 3 years, which I'm guessing is FY'29. So can you talk about what is giving you the confidence that finally that business will see a sustained growth trajectory?

Sure. Do you have more questions?

Sure. The second question was on, again on the volumes piece on Ecom, right? So you have already highlighted that the volume retention is happening at a much faster [ clip ]. So the point being that when we were talking about 30% volume retention, we were expecting the Valmo sort of impact being there and a lot of volume going out.    So what has really changed there? Is it that your -- one of your largest customer is struggling to ramp up capacity or anything, which is why you are in such a better situation compared to where you are, what you were anticipating? That's my second question. And those are the 2 questions that I have.

Sure. I'll start with the second one, in terms of why volume retention is higher than expected. As I discussed, I think when we were evaluating the deal, it was our fiduciary responsibility to take a conservative view of the world. We've been doing this for a while, we are a conservative team, and we've been pleasantly surprised is perhaps the simplest way to put it. The reality of the market, however though is this shift is going to [indiscernible]. I don't think it's a fundamental shift in the sort of strategy that Meesho has with respect to Valmo or Flipkart with respect to Ekart logistics.    But I think the reality is, as the operating environment becomes tougher and as e-commerce principles realize that third-party logistics firms who price below cost merely to get a share of volume cannot survive, there's a flight to quality and over a long period of time, quality players will get rewarded and that's what you're seeing. Fundamentally, Delhivery is a large network which is highly reliable and very fast. The other advantage that obviously is inbuilt within the Delhivery network is that the volatility of tonnage within our network owing to Express is now increasingly very small.    And so our ability to handle large swings in Express volumes obviously is significantly improved by running a PTL business and the benefits of that flow to our Express customers as well. So it's not surprising that clients are choosing to allocate volumes away from lower quality players. I've mentioned this in the past. I do think over a long period of time, Delhivery and Blue Dart are the 2 highest quality networks in the country. And for us, for the specific businesses that we run, in our case a large surface express network and in their case an air network, you will see volumes accumulate towards the 2 highest quality networks.    Pricing can only get you so far, but the reality is that no customer is willing to pay a lower logistics cost for packages to not get delivered. And that's effectively what you're seeing. In terms of Supply Chain Services, I think the fundamental sort of shift in supply chain over the last year has been, as I've mentioned, we've -- as we have done in PTL in the past, as we have done at Express in the past, I have discussed this, as a management team we've been very clear that the ability to make money comes before chasing growth. That's exactly the trajectory that we followed in PTL as well.    If you go back about 8 quarters, you'll remember that we went through a U-shaped curve for PTL as well. The logic was that we would first fix the business and then start growing it rapidly. On Supply Chain Services, we had a number of things that we needed to do. One was really fundamentally renegotiate contracts that had not been priced the way they should have been, get out of sectors that we wanted to explore, but fundamentally have now reached a conclusion that we don't want to participate in.    And that's really the impact that you're seeing. In the last financial year, we experimented with getting into fulfillment for quick commerce and then realized that the inventory issues in that business are fundamentally too large for a third-party logistics company to bear and we've exited that sector.    So, I think what you're seeing now is a business which is starting to resemble what it will look like from a profitability standpoint. I think there's still margin expansion that will happen in the SCS business as we scale. That's a story that will still play out over the next couple of quarters. But what we're getting better at is pricing contracts correctly. The second thing obviously is improving the quality of our underlying software, whether it's our warehouse management systems, our transportation management systems and driving efficiencies through those. So I think that's matured as well.    As I look at our pipeline at this stage, our pipeline is healthier than it's ever been before. At this stage we've got probably close to about INR 300 crores of sort of broad supply chain mandates, which are in various stages of conversion. Conversion in this business can take 3 months, 4 months because it's a long sales cycle. But given our visibility of the pipeline, we're very confident.    Frankly speaking, at this stage, from a pipeline -- pure pipeline standpoint, we probably have more than INR 1,000 crores in the pipeline. Now over a 3-year period, can we convert INR 600 crores, INR 700 crores of that? I think pretty confident that we'll be able to do that. So, fairly confident that we'll get to the INR 1,800 crores, INR 2,000 crores in next [ few ] years.

Got it. Just one final confirmation, if I may. The numbers or the sort of guidances that you have given in the shareholder letter, these are inclusive of Ecom Express impact, right?

Yes. SCS, Ecom Express has no relevance.

No, no, not SCS, I'm talking about generally, you have given, right, service EBITDA margins for PTL, Express Parcel, all those are inclusive of.

Yes.

The next question is from Aditya Suresh.

I have 3 questions if I may. Sahil, first if I can take you back to Slide 6 on your key KPIs. If you can just give us a glimpse in terms of what are the changes we'd expect with Ecom consolidation, the key changes which you'd like to call out? That's one. Second is on the market structure itself within Express Parcel. What is your sense about kind of within 3PL your market share here today, even if a broad -- if it's a broad range, that's -- that'll be great. And where do you think this could settle at in, say, the next, say, 12 months, 24 months?    Third was on PTL. Now here, was that a broader theme about kind of value or volume this quarter? Is that a fair kind of read into kind of what happened this quarter? And then within this margin at 11%, would it be a fair conclusion to say that if volumes expand sequentially, then margins can only expand towards your guidance 16% to 18%?

Sure. Thanks. Aditya. Apaar, if you just go to the Page -- Slide 6. Yes. So, Aditya, broadly speaking, with the Ecom Express acquisition and the July volumes and continuing from here on, I think the big change will really be, one, in the number of Express delivery centers and partner centers. We're currently at about 4,500. My sense is you should see this number at probably close to about 4,750 to 4,800 by the end of the year.    The team size obviously is, it'll go up during the season, it will come down after the season. Hard to say exactly what it will be, but it'll sort of follow broad trends in line with volumes.    From a infrastructure gateway standpoint, you will not see any major change. And that's sort of part of the reason why we wanted to acquire Ecom Express in the first place. We don't believe that we need to significantly increase our Express infrastructure or our gateways or our automated sortation centers to absorb the additional volumes that will come in from the Ecom network.    As mentioned, there are no volumes in the Ecom network at this stage. All of them are coming into the Delhivery network and our network has absorbed these fairly seamlessly. So absolutely no change there.    I think there'll be some expansion of Pin code reach. We're at some 18,857. Ecom obviously had a wider reach than Delhivery did. So some of those will get activated over the next quarter. I don't know exactly what it'll reach, but I mean, let's call it maybe 19,200 or thereabouts.    In terms of market structure, we've obviously gained market share in the last quarter. Hard to put an exact number to it, but my sense is -- and different people have different interpretations of this, but I would expect that our market share would have expanded by probably -- Ecom Express was what, probably about 60% -- 50%, 60% of our size. So our market share is probably expanded by about 25% or so, possibly higher, but I'm not entirely sort of sure.    I think that will become -- I'll give you a much better answer maybe end of Q2, Q3 when things stabilize a bit more. Right now things are still -- sort of influx volumes continue to increase. And where does it settle long term? That's a very nuanced question. Really depends on what happens to the rest of the third-party market.    As I've mentioned previously, the unit economics of other third-party players are unsustainable and we've seen how that plays out once already. Now how that plays out with the other players in this market, I can't say. But there is no road to better unit economics in [ their ] cases. And so the reality is that market share should continue to consolidate towards more disciplined players and higher quality players.    And again as I mentioned, who those players are, is pretty clear. I think the only risk that one could think of is what would happen if first-party players were to try to expand into the third-party market. To which my response, as ever remains the same, it is a tried strategy that has failed and so we don't anticipate that, that's sort of a major risk.    In terms of PTL, it's not so much value over volume actually. The -- if you look at the rest of the industry also broadly speaking, I think most PTL players have seen sequential declines from quarter 4 to quarter one. Minor declines are broadly have stayed flattish. That's largely because Q4 is the peak quarter.    So Q2 and Q4 tend to be larger quarters in PTL. Q1 and Q3 tend to be slightly lower. Q1 also has sort of this artificial impact of 2, 30-day months and there were also disruptions in Q1 for a variety of reasons. One of them obviously was significant amount of rain. There was a certain amount of disruption from Operation Sindoor as well in this period and there have been some festive disruption. So no particular change in the PTL strategy. I think it's just -- overall that's what the market is like. We anticipate that we'll be back to sort of business as usual in this quarter and beyond.

May I just ask a follow-up if that's okay?

Sure, please.

So just on PTL, right? So the guidance is 16% to 18%. Is there a broad tonnage which you all think about which you need to hit to achieve that level of kind of margins?

Yes, I think I will just number, and then I think Amit should just quickly come in on this. My sense is at about 1.5x the size we should be at those numbers. But Amit, please come in here.

So, thanks, Aditya. Roughly at close to about 600,000 tonnes -- 600,000 to 640,000 tonnes of quarterly load which translates to about 200,000 tonnes to 215,000 tonnes of monthly load, whereas we are posting an average of about 150,000 tonnes of quarterly load.   Three things will kick in. One is fixed cost utilization will go down. We will get significant benefits of operating leverage on that. Second aspect is our utilization of our trucking will continue to improve on reverse lanes and a bit of it on forward lanes as well. Tractor-trailer penetration will also increase. And lastly, pricing discipline and churning out of low margin customers will continue to happen. So these 3 things will -- should comfortably give us a 7% uptick on margin.

Next question is from Gaurav Rateria.

Congratulations on a good set of numbers. I have a couple of questions. I will read it out all and then pass it on to you guys. The first is, how much of the benefit of volume from Ecom has already come in the financials in 1Q as the network was unstable and the volumes were coming through to strong players like us?    Second, your comment that you made on incremental Ecom volumes are coming at the Delhivery rates, which my understanding is that could be higher, but then there would have been some volume discount. So, is it fair to say on a net basis there would have been some still pricing gains as those volumes now pass through the Delhivery's network?    Third question is on your comment that you made on PTL on 20% plus annual tonnage growth, while 1Q was slightly short of this number. So what drives your confidence to hit 20% on an annual basis, which means that your ask rate for 2Q to 4Q will be materially higher than 20%? So any anecdotes that help us to understand that what drives that incremental gain? And last question is on -- you mentioned about couple of new value-added services on the FTL segment. So just trying to understand, are these material TAM opportunities? Or are these material gross margin opportunities from company's point of view?

Yes, sure. I'll probably bring in some of my colleagues also since these are good questions. In terms of benefit of volume from Ecom Express, I think I answered this earlier in the call. The impact on Q1 is not that high. It's only towards the end of June that you see some of the impact. So you can see the lift off begin. We've obviously gotten to 208 million packages in Q1, but July obviously has been significantly higher, and we expect that, that will continue. So the real impact will be visible in Q2. And I think, see, network businesses have one other advantage, right, like deliveries, which is that given the kind of network that we are, the more the volume that flows through our network, the more stable the network actually becomes. Most other networks which are not constructed like ours, tend to have a reverse problem, which is that the more volume that goes through them, the less stable they become. But the advantage of a mesh, as we've discussed, is that actually stability is an outcome of higher volumes. And so, potentially, while the obvious immediate impact of the Ecom acquisition will be clear in the Q2 numbers, over the long-term, I think the reality is the opportunity for us is potentially even larger. In terms of the volume discounts to customers, I think -- my colleagues are on the call who deal with customers on a more sort of regular ongoing basis. So maybe Ajith or Vani, if you guys want to comment, please go ahead.

Yes. I'll take that and Vani, you can add to that. I think most of our relationships with customers are based on a pricing volume chart, which is how we've always conducted business. We are not seeing any material changes to that. In some cases, of course, there are adjustments that we do during the year to reflect any change in the clients' business in terms of mix, et cetera, and hence, our desire or their desire to sort of to change the mix for us or to introduce new products at some point. I think, like Sahil mentioned, that has been broadly very, very stable. With the Ecom acquisition, again, like it was mentioned by Sahil, we expect that scenario to remain stable going forward as well.

Yes. I think third question is confidence on PTL at 20%. I mean, see, I'm very confident. Better that you hear it from the horse's mouth. So Varun Bakshi runs this business and I'll ask him to come in.

So Gaurav, first of all, so the growth year-on-year on this business is on revenue terms 17%. So the growth in terms of getting about a 20% growth for the year, it's not going to be linear, first of all. So there will be quarters with slightly lesser, there will be quarters with slightly more growth. Number two, I think as Sahil mentioned when he was going through the presentation, this quarter's revenue got slightly impacted by the accounting adjustments, the Ind_AS adjustments that we need to do to follow the statutory requirements. So adjusted for that, the 17% growth would be slightly higher. In fact, our yields quarter-on-quarter have increased over Q4 as well. So -- And that is a result of -- because there is certain churn of customers which we were voluntarily doing as well. So adjusted for that, I think the business gives us confidence that it would be able to meet the 20% revenue growth expectations that we have for the business. No reason to say anything otherwise at this point.

The other thing, Gaurav, is obviously the impact in Q1, there was a material impact because of Operation Sindoor. There was some impact because of the rains in certain places. And it is getting worse, obviously, year-on-year. But here on, at least the rainy season, the monsoon appears to have died down to a significant extent. And so we should see lesser impact from that. I think so far, the numbers in Q2 are good. July has been fine. So fairly confident. And also obviously your question saying if you grew 15% in the last quarter, why do you believe we'll grow 20% for the year. I think let our Q2 numbers come out. And I think at that stage, things would be a little clearer. In terms of FTL VAS, I think too early to comment. These are important services that bind high-quality supply of trucking into the FTL marketplace. So these are value-added services. For example, simplest one that we can do almost on an immediate basis to do is fuel procurement support to some of our trucking partners. And the other one, obviously, is on-road assistance and control tower services for our clients, which are things that we anyway do internally for Delhivery's own operations. So both of those we will do. These are theoretically large TAMs. But just to be perfectly clear, Delhivery's ambition is not to become the largest retailer of fuel to trucks. I mean, so it shouldn't be viewed in that fashion either. We have very specific strategic objectives for our FTL business. which is fundamentally, first of all, to bring down the cost of trucking procurement for Delhivery's own transportation operations. The second is to be a large input and a very efficient procurement mechanism for our Supply Chain Services division, which is what it is. And then the third obviously is to be an extremely capital-light way for our clients to discover trucking services and especially spot trucking services via our trucking marketplace. So, as long as this allows us to make sure that high-quality suppliers of this service are bound into the Delhivery network, we will provide these. But we have no desire to come and sort of start banging about metrics like we have, whatever, 4 million trucks on our platform or whatever, and we sell fuel to some 75% of them. That's really not the aim.

The next question is from Achal Lohade.

Congratulations for great set of earnings. Sahil, a couple of questions. First, if you could talk a little bit about the utilization of the network, where are we in terms of the efficiency? I know it's got partially answered in piecemeal, but just on a top-down basis? The second question I had was, when we are looking at incremental volumes coming through month-on-month, it's improving. Why would the margins be between 16% to 18%, why not more expansion? If you could elaborate a little bit? And number three, for the quarter, we have seen the other income has gone up to about INR 1.3 billion. So if you could talk about that as well in terms of whether it is sustainable, or is there any one-off we need to note?

Sure. In terms of utilization of network, we've discussed this in the past as well, a single sort of -- much as I would love to tell you that the utilization of the network is 42%, there's no way for me to really say that, because the reality is the utilization of the network differs at various points. Line haul utilization is different, sort center utilization is different, DC utilization is different. And obviously, the numbers for July are going to look very different from the numbers for April, May and June because the volume trajectory has meaningfully changed. But fundamentally, one way to think about it, Achal, is that we did 208 million consignments versus, let's call it, 180 million consignments in quarter 4. And if you look at the spread of distribution centers, we had broadly, I think, 4,450 distribution centers, including partner centers in quarter 4. We have 4,500 in quarter 1. So for whatever, 1% increase in delivery centers, we have had a 14% increase in volumes. All those volumes are delivered through distribution centers. And so, therefore, the utilization of the distribution centers has gone up to that exact mathematical extent. It's obviously a little more -- and you can -- by the way, you can do exactly the same math for sortation centers. You can do exactly the same math for hubs and gateways. We have a constant set of sortation centers. And so, if the volumes have gone up 14%, and we haven't increased the total number of sortation centers, the utilization of the sortation centers, it follows -- must have gone up by 14%. Line haul is obviously the hardest one to talk about, which is the trucking network. Trucking utilizations, because they also depend on sort of the directionality of the loads that one is creating, I think broadly speaking, as I mentioned, trucking utilization has been in that sort of 60% to 65% kind of range. One of the things that has changed a little bit in quarter 1 is that there was a marginal expansion of our tractor-trailer fleet, while PTL volumes were flattish. So there may be sort of a marginal decline in trucking utilization between quarter 4 and quarter 1. The second is that we've also begun experiments, as I mentioned in the past, with double trailers on a tractor. And so there may be a marginal decline in utilization on reverse lanes associated with that to some extent. But it's very hard to put a sort of very scientific number to it. Your question on should margins go up beyond 18% given that there's no sort of adverse movement expected on pricing and the network filling up, I think, as I mentioned, we have guided to the 16% to 18% previously, not because that is what we believe is the theoretical limit of the network. We have operated the network at higher than 18% service EBITDA margins in peak months. But it is a conscious call to share a certain amount of efficiency with clients. Now, whether we will share all of the efficiencies that we create going forward or not, I think, is a strategic choice that we make looking at every single customer. Technically speaking, you're correct, margins as volumes expand -- could expand beyond the 18% sort of range as well in the Express business. The other thing, obviously, as I've spoken about in the past is, that the larger the PTL business gets, the better the margins for everybody. And, therefore, when PTL business reaches whatever, let's call it, 200,000, 250,000 tonnes of freight on a monthly basis, the reality is the Express margins have scope to expand. We also obviously continue to look at new ways of automating our operations, which again have a positive impact on margins. So the way I would look at it is to say, if you must model this, feel free to conservatively model our margins at 16% to 18%. There are opportunities for us to expand it beyond the 18%. So you'll either see that as incremental margins in the business or you'll see it as incremental share of wallet if we choose to pass those benefits forward, but either which way the absolute service EBITDA will continue to expand. On your last question, in terms of other income, I think, again, I'll just ask Amit to comment.

Yes. The increase in other income is primarily due to increase in value of mark-to-market securities due to interest rates going down in quarter 1 of current fiscal year. In the subsequent quarters, we expect this to normalize to our earlier level and maybe slightly go down because the yield curves have gone down. However, as you are aware, we have paid close to [indiscernible] Express on 18th of July, and hence, no further interest income is going to accrue on it. So that will be one change to the other income going forward.

The next question is from Mukesh Saraf.

My first question is on, could you give some sense on the volumes that Ecom has done in first quarter? You had provided some indication on what it had done in the fourth quarter. So it would help if you could tell us the volumes of the first quarter?

I think, broadly speaking, in quarter 1, Ecom Express would have done something like 30 million packages.

All right. And you had mentioned that we're probably retaining, say, around 50%, 55% of the volumes higher than what you had thought earlier. So my question is that probably based on this high retention, your wallet shares with some of the marketplaces would have kind of gone higher. And typically, the understanding that we had is that marketplaces would not want a particular service provider to kind of get too large [ with themselves. ] So is this like a temporary phenomenon until the marketplaces kind of figure out and redistribute these volumes out and hence, you might lose some volumes later on? Or you think this could be sticky going forward as well?