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

Hello, everyone. Good evening. Welcome to the Q2 FY '26 Earnings Call of Delhivery Limited hosted by AMBIT Capital. Before we start, Delhivery would like to point out that some of the statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. Kindly note that this call is meant only for investors and analysts. If there are representatives from the media, they are requested to kindly drop off this call immediately. To discuss the results, I'm 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; Mr. Navneet Kumar, SVP and Head of Supply Chain Services; and Mr. Vivek Pabari, SVP and Head of Corporate Finance at Delhivery. [Operator Instructions] Now, I invite Mr. Sahil Barua to take us through the key highlights of this quarter, post which we'll open up for Q&A.

Thank you, Dhruv. Thank you, AMBIT team. Welcome to all of you who've joined, and thank you for joining this evening. As always, we will begin with a short presentation and then take questions. But before we begin, as some of you are aware, we've been in the process over the last couple of quarters of rejuvenating the Delhivery Board. As part of this, Mr. Yashish Dahiya from Policy Bazaar and Professor Padmini Srinivasan joined our Board last quarter. In this quarter, as you would be aware, Mrs. Aruna Sundararajan will be stepping down from the Board of Delhivery. On behalf of the entire management team and the Board of Delhivery, I would like to extend our deepest gratitude. Mrs. Sundararajan has been on the Delhivery Board for the last 3 years, and we benefited immensely from her guidance. Also, I'd like to congratulate formally Mr. Vivek Pabari, who will be taking over from Amit Agarwal as Chief Financial Officer of the company and also to place on record our gratitude to Amit. Amit has been one of the longest-serving members of the Delhivery team, having joined us on the 4th of August in 2012 and playing the role of CFO with great distinction and also the key architect of Delhivery going public. Going forward, Mr. Pabari will be leading the finance function. He's already the Head of Corporate Finance and Investor Relations. As a brief summary of the quarter before we begin, this has been a quarter of tremendous growth for the company. As you can see, we completed the acquisition of Ecom Express in Q2 and Express volumes have grown 32% year-on-year. We broke several records along the way, crossing over 100 million transportation orders in September, which has continued in October and also reached our peak dispatch of 7.2 million orders in a single day during this festive peak period. The particularly heartening part is that these records were achieved also with complete operational stability, which has essentially given us an excellent base for quarter 3 in both the Express and the PTL businesses. Profitability of the core business has also remained absolutely stable despite a shift in volumes due to the GST period. And overall, from an integration standpoint with Ecom Express, we will recognize in this quarter about INR 90 crores of integration costs and are well within our overall envelope of INR 300 crores as we had guided towards at the time of the acquisition. To take you through the presentation, I'll invite Vani, who is our Chief Business Officer, to sort of go through the highlights of the quarter. Vani, over to you.

Thank you, Sahil. Thank you, Dhruv. I'll quickly run us through the numbers. So our revenue from services came at about INR 2,546 crores this quarter. That's a significant Y-o-Y growth of about 16% and a quarter growth of about 11%. This came in with an EBITDA of INR 150 crores, again, massive jump. Bear in mind that this quarter also takes on the peak-related costs. So compared to Q2 last year where we had about INR 57 crores, this has jumped up to INR 150 crores. So that's a 5.9% on EBITDA margin. Our Express Parcel shipments showed significant growth about -- we ended the quarter at about 246 million Express Parcel shipments. That's a huge 32.5% growth Y-o-Y and 18% growth quarter-on-quarter. PTL continue to demonstrate stable, steady growth. It's at about 477,000 tonnes. And overall, we ended the quarter with a PAT of about INR 59 crores, which is 2.2% compared to the same quarter last year, where we were at about 0.4%. That's a significant jump in the number of basis points in the profit expansion agenda that we had. The same reflects in H1 as well, INR 4,840 crores of revenue, which is 11% Y-o-Y growth. We had a INR 299 crores of EBITDA, again, a 6.2% EBITDA percentage; INR 453 million of Express Parcel shipments; 935,000 tonnes of PTL freight tonnage; and INR 150 crores of PAT. Our cash and cash equivalents keep us in a comfortable position. We are at about INR 4,200 crores of cash and cash equivalents as we end the quarter. Yes, if you can move a slide forward. Coming to our key operational metrics, our PIN code reach has been consistent at 18,830. We've increased the number of active customers significantly. Same time last quarter, we were at about 38,000. That's a 10,000 increase from there. Same time in Q1, we were 43,000, so again, a 5,000 increase from last quarter. Infrastructure, we've expanded to about 22.05 million square feet. A small part of it is for peak related, but overall, it's shown a little growth. We have about 123 gateways. 50 automated centers. Slight increase in each of these counts. Sorters count has slightly increased to about 74. Freight service centers has increased to about 141. Processing centers have been largely constant at about 160. Our express delivery centers and partner centers together are at about 4,600, 4,700-odd. So that's shown a slight increase, including a little bit for the peak. We've had a team size of 75,000. Again, you see some increase, which is peak related and partner agents of about 64,000, managing a fleet size of about 18,600-odd fleets, right? So that's roughly the operational metrics that we are at. So you can move forward. From a performance point of view, our revenue from services, as I mentioned earlier, is about INR 2,546 crores. It's a healthy 16% Y-o-Y and 11% Q-o-Q growth. You'll see that the contribution of Express has scaled up to about 63%. PTL has been largely stable in the 21%, 22% range, right? And the rest of the businesses continue to grow profitably. Our Express Parcel revenue grew about 24% Y-o-Y and the tonnage grew about 32%. So we ended up delivering about INR 1,611 crores in Express Parcel via 246 million shipments. Again, this was a very healthy all-round growth. We obviously benefited from the acquisition that we had. In addition to that, there's been organic growth as well. And we've seen growth across segments, be it the e-commerce players, be it the D2C players or be it parcels from small businesses, we've seen all-round growth in this segment. PTL, again, freight revenue grew 15%, got about INR 546 crores, and the tonnage has grown about 12%. So PTL freight revenue continues to trump tonnage, which means it's coming in at a very healthy yield. So the team has diligently been expanding the margins here and making sure that it's a profitable growth. We can move forward. Coming to Supply Chain Services. Supply Chain Services, we'll find a blip in the revenue. The revenue is at about INR 170 crores. This is a very calibrated conscious blip as we explained during the last analyst call also. We've been careful about what contracts to be in and what segments and what industry sectors to be in. And as a consequence of that, you will see in the subsequent section that the profitability has grown quite substantially. So our idea is to make sure that we have a very healthy profitable mix, profitable construct, which we can scale this business up to. So Supply Chain Services from a revenue point of view, you will see that it's a calibrated drop of about 14% Y-o-Y, and you'll see a significant increase in the margins in the subsequent page. FTL service ended at about INR 150 crores in Q2 and our cross-border services ended at about INR 38 crores in this quarter. If you can move down. From a service line -- if you look at it from a service line profitability point of view, I call your attention to the box, which is shaded Q2 FY '26. So overall revenue from services, as you see, is about INR 2,536 crores. Our margin percentage has been at 13.2%. Bear in mind that, again, Q2 is a quarter where we have made peak-related investments. So compared to Q2 FY '25 of 9.3%, there's a significant expansion in margin of about -- bringing it to about 13.2%. Again, Express margins -- Express Parcel margins are again at about [ INR 246 crores ], which is a good 15.3%, stable similar to a slight increase from Q2 of about 15 -- last year's Q2 of about 15.1%. If you look at Part Truckload, again, it's 8.5% margin. And notice that in Part Truckload in the first half of FY '26, we've clocked in about INR 100 crores of margin, which is equivalent to the full year last year. So very much in the right direction, yield increasing, and we are looking forward to significantly more expansion in the coming quarters as well. Similarly, Supply Chain Services, it's been a solid story from a profit orientation point of view. The business has been pivoted to good profitability. You will find that it scaled up from 7.2% to about 12.8%. And if you look at the same time last year, same quarter last year, it was at a negative 4.4%. So it's been a significant focus, concerted effort to take it from a negative 4.4% to 2.1% to a 5.4% to a 12.8% this time. So again, if you look at the -- if you look at the absolute margins, which is at about INR 22 crores and INR 15 crores in the last quarter, this half itself, this business has done about INR 36 crores of -- has clocked in about INR 36 crores of margin, which is almost twice all of last year, right? So overall, if you look at the core businesses, we are in a very healthy state. Our core businesses are growing healthily. The orientation towards profit has been solid. All the metrics are in the right direction as far as the core businesses are concerned. Coming to corporate overheads, our corporate overheads have been at about 9.3% as a percentage to revenue. It's largely in the same ballpark range, 9.1% to 9.3%. We've seen some increase in wages, and we've put in some investments in technology as well as tech also sees a little bit of uptick on account of peak and the volumes related to peak. But overall, it's still at 9.3% and in the right direction. As far as investments in new services are concerned, as we discussed last time during the analyst call, we have invested in 2 new businesses. One is the Rapid Commerce business where we do a sub 2-hour same-day delivery. Currently, we are present in 3 cities through 20 dark stores and that business continues to scale up well. The other one is an on-demand intracity service where we have initiated operations in Ahmedabad, Bangalore and NCR. Both of these businesses continue to scale well, and our investment this quarter has been about INR 15 crores in these businesses in line with our plan. All in all, our adjusted EBITDA ends at about INR 83 crores for this quarter compared to INR 10 crores in Q2 FY '25. So we've scaled it up from same time last year from about 0.5% to 3.3%, and we have good line of sight for similar expansion to continue. Also to be borne in mind is that this has been a unique year where some of the peak-related benefits will actually flow in, in October, given that the peak festive season actually started at the tail end of September. If we look at the profit after tax trajectory, our profit after tax has again shown consistent expansion. Overall, for Q2 FY '26, we've clocked in INR 59 crores of PAT compared to INR 10 crores in Q2 last year. So again, a significant movement. If you look at the overall trajectory from about minus 4.4% in Q1 FY '24 and minus 5% in Q2 FY '24, it's jumped last year to about 0.4%. And again, it's jumped this year to about 2.2%. So the focus on profit expansion and the focus on scaling up business with the right levers has played well for us, and we are very, very well positioned for the upcoming quarters. Quick update on Ecom Express acquisition. As you know, acquisition was completed on July 18, 2025. We paid a final purchase consideration of about INR 1,369 crores. Business-wise, the volume manifestation at Ecom ceased during the first quarter with non-Express businesses exit being underway. Now with the revenue transition largely completed, net Ecom revenue for this quarter was about INR 13 crores. Network rationalization plan has been completed. We've retained 7 facilities with about 1.3 million square feet of area. There are unabsorbed facilities still leased at Ecom total to an area of just 1.1 million square feet, and they are primarily servicing Ecom’s non-Express businesses being exited. Financially, monthly corporate overheads at Ecom have reduced by 85% from deal announcement time till end of Q2 FY '26. Assets worth INR 100 crores have been retained on Delhivery consolidated books for long-term usage. And integration cost was about INR 90 crores in Q2 FY '26. It's well within the original estimate. So overall on Ecom, we are quite happy on multiple counts. One is from a customer retention and revenue retention point of view, we had indicated last time that our business case was based on having about a 30% retention. We are well, well, well over that. So that's one. The integration has been seamless. We haven't had any issues from a service or a customer integration point of view. And the integration costs are also well within our original estimate. So all in all, it's been a good seamless transition. Coming to the working capital, we've demonstrated continued improvement in working capital. In particular, there's been very disciplined management of collection. There's been tech usage in claims and disputes resolution, all of which is translating in the numbers that you see on the page. So as of now, we are actually under 20 days, which has been the best ever in terms of net working capital days. And we've also been calibrated in our CapEx spend and in our CapEx intensity. So if you look at H1 FY '26, we spent about 5.1% compared to 6.6% same time last year. And typically, we've seen that the investments are heavier in H1 compared to H2. So we expect to end the year even better. And we are directionally trending in the right direction with our long-term goal of getting to about 4% CapEx intensity. So that's on the capital expenditure. Overall, in summary, we are -- it's a highly positive quarter for us. We -- the integration has been successful. The volumes have trended up very positively. And most importantly, we are very well set up for the subsequent quarters. Some of the conscious calls we've taken in terms of pivoting businesses to profitability has set us up well for the subsequent quarters. And largely, we like where we have landed and how we are set up. With that, I hand this over for any questions and answers.

[Operator Instructions] The first question is from the line of Sachin Salgaonkar.

This is Sachin Salgaonkar from Bank of America. Three questions. First question, again, I wanted to understand a bit more on Express Parcel margins. Last quarter, before the acquisition of Ecom Express, your margins were 16%. The shareholder letter does indicate service EBITDA margins are expected to be in the range of 16% to 18% by end of '26. So how should we think about it? At the low end, are there no benefits from the potential acquisition of Ecom Express? And at the high end, it's more like a 2 percentage point benefit in terms of acquisition of Ecom? Because one would have ideally thought given the fact that synergies are high, margins could have further inched up. Let me pause here and then I'll move on to other questions.

Sachin, why don't you go ahead and ask all 3 questions, I’ll answer them together.

Got it. And of course, a small follow-up in this question is what you guys are seeing from a next 24-month kind of a margin perspective. Is that a conservative way in terms of, Sahil, how you guys are looking at it or one should think about an upside risk to that? So that's the first question. Second question, I wanted to better understand about the INR 300 crore kind of envelope in terms of integration costs you guys talked about. Ideally, in acquisitions, we do see these costs being front-end loaded versus distributed over a few quarters. So any broad understanding or color in terms of how we could think about this entire distribution of INR 300 crore cost because this quarter, we did see a INR 90 crore cost. So I want to understand that is it going to be more back-end loaded or spread across the board? And third, Supply Chain margin, while the opening remarks and your shareholder letter did mention about margins. What I wanted to understand is what has changed for margins to move so drastically up, let's say, from 7.2% to 12.8%. Anything structural which has happened out here, that's where the margins are moved out there? Yes, those are the 3 questions.

Super. Thank you, Sachin. Let me begin with the first one. In terms of margins, normative margins, 16% to 18% in the Express business, we've maintained this for a while. This has always been based on the idea that beyond 18%, if the company feels it is necessary and if -- basis our client conversations, we believe there is additional share of wallet for us to be gained, we typically tend to pass a certain amount of pricing benefits back. As I mentioned in the past, as the competitive intensity in this sector has reduced, number one. Number two, as sort of inflation has caught up with other players in the market, the necessity for us to pass on these benefits has reduced year-on-year. And obviously, with the acquisition of Ecom Express and a more stable industry structure, the need for us to pass this on, obviously, is lower than before. So there's no structural reason why margins cap out at the 18% mark. Incremental margins are significantly higher than the 18% as we start gaining volume scale. And so realistically, yes, in the Express business over time, if we don't pass these benefits on fully, margins can inch up beyond the 18% range as well. Why you're not seeing the uptick in Q2 is for 2 reasons. One is a reasonable portion of the volume actually has shifted into October because as we pointed out in the shareholder note, the announcement on the change in GST rates pushed out volumes by about 7 days. And so we carried an extra cost of somewhere about INR 7 crores because we were building capacity in September. But when we look at the profitability over the September and October time frame, the profitability for the Express business is well in line with our overall expectations. In terms of the next 24 months, I think we believe a couple of things. One is, I think you can see, and this is a discussion we've had in multiple analyst calls in the past 2.5, 3 years that as industry structure consolidates, it obviously, we believe as the market leader, it consolidates favorably towards us. Our overall volume growth, as you can see, has been 32% year-on-year. The e-commerce industry has not grown 32% year-on-year, obviously. So this is market share gain. We expect that our competitive position actually will improve in the years ahead. And so as a consequence, I think as we continue to gain volume scale in the Express business and we continue to grow our Heavy business, there is a possibility for margins in this business to grow, first of all, easily obviously, to the 18% point. And then from there, depending on sort of what we can gain in terms of share of wallet, possibly even beyond the 18%. In terms of the integration cost, the INR 300 crore integration cost was our estimate at the time that we did the deal. This was obviously based on our assessment of lock-ins on the real estate and facilities, the integration costs of people and certain contracts that Ecom Express had signed that we needed to wind down. INR 90 crores of that integration cost has been incurred already. We will have approximately INR 100 crores to INR 110 crores of integration costs over the next 2 quarters. But as things currently stand, our belief is that the total integration costs will be materially lower than the INR 300 crores that we had originally forecast. We have been able to consolidate the Ecom Express network faster than we originally thought about it. We also have obviously had the benefit of increased volumes, which means some of the facilities we've been able to repurpose and bring into the Delhivery network productively. So in fact, I think one bulk of the integration costs or rather for all practical purposes, almost all of the integration costs will be within fiscal '26. You've seen the impact in Q2. There will be some in Q3 and Q4. But beyond, there will not be material integration costs. And b, it will be materially lower than what we originally planned. In terms of the Supply Chain Services business, we've discussed this in the past. And the approach is, in some senses, no different from what we've taken even to the PTL business as we were sort of restructuring it over the last 3 years, which is to first get the profitability of the business right and then to push for growth. So the change indeed is structural. This has come from significant improvements in operational processes, significant improvements in the warehouse management systems. So our technology and our product advantages are starting to show. Also the launch of our transport management system, tighter integration with our Express Transportation and our PTL Transportation business and our FTL Transportation business have led to improved transportation margins for the SCS business as well. So it is sort of essentially just think of it as significantly improved engineering operations, technology and product capabilities leading to incremental margins. So that is a structural shift. Now going forward, I think there are a few growth levers that we have. One, straightaway from an e-commerce standpoint is we have a guaranteed next-day delivery product, which is now linked to the fulfillment center network. This essentially is aimed at direct-to-consumer brands and at e-commerce, and we're already seeing pretty decent uptick. Number two, we have expansion of existing relationships, specifically with players who work with us in the auto and auto ancillary space, for example. And we're in advanced discussions with potential clients in spaces that we already serve pretty well, which is consumer durables and industrial goods and some in the auto space as well. So this change will be structural, and we do anticipate that margins in this space will continue to go up. Last year, of course, our margins in Q2 were particularly affected, and we actually -- I think we declared a loss of 4.4%, largely owing to our entry at that point into Quick Commerce, which is a segment that we've exited.

Very clear on that. Sahil in terms of GST, again, we saw your comments in terms of what you mentioned on shareholder letter. The question is more from a demand perspective. Are we seeing any increase in demand or a pent-up demand where consumers are buying a bit more because of these GST cuts, particularly on the e-commerce side?

There has been some positive impact of the GST cut on the consumer side. We're seeing it by the way, not just in e-commerce alone, we are seeing it even in our -- in certain parts of our freight business. So there has been some uptick overall in terms of volumes. But it's not sort of -- I think it is a festive period in general and so there's sort of high volumes in the September, October period anyway. Also, some of this was -- a part of the increase in demand was also because when the GST rates were changed, I think people consciously postponed consumption for a period of time. So that is why that middle sort of 10 days in September, there was a dip actually in consumption. Some categories, clearly, we saw very, very strong growth during the festive period. For example, consumer durables is a sector which grew very fast, specific brands, which I can't disclose here, obviously, but specific brands, we did see significant uptick immediately after. So there has been an overall a net uptick. We see this even in our Part Truck business to some extent.

The next question is from the line of Gaurav Rateria.

This is Gaurav Rateria from Morgan Stanley. Sahil, I have 2 questions on Express Parcel beyond this year of integration and the market share gain and the benefit that we saw because of consolidation. How should one think about the normalized growth in this industry? Is this going to be at 10%, 15%? Any sense that you can talk about at least more from not like a very medium term, but more like a 12 months kind of a period? And second question is that when you look at the PTL, we were very confident about kind of hitting 20% number on volume growth. First half is around 15%. And I understand there could have been GST issues that you talked about in the shareholder letter. But do you still expect it to be around 20% and the pent-up demand to kind of show that in the second half?

Sure. On the first one, very quickly on market growth and Express growth. Obviously, this year, there's the outsized impact of the Ecom Express acquisition. Our anticipation is that the market, as I mentioned in the past, grows at sort of 15% to 18%, 20% kind of growth rates. I said, earlier, of course, our point was that Delhivery would grow at the bare minimum in line with market growth. That said, I think there are some structural factors which are fairly significant upsides for Delhivery. The first, of course, is the fact that with the growth we've already seen both in the Express business and in the PTL business, our cost structure has improved even further. And so our ability to drive efficiency and our ability, therefore, to differentially gain share of wallet where we would like to has improved. And we will flex that muscle. So we will gain share beyond just the basic market growth. The second thing is, historically, so far, one of the drags on this sector has been companies sort of thinking about doing logistics in-house. And obviously, competitors who have priced below cost. I think with the acquisition of Ecom Express, one of the things that certainly has become clear is that pricing below cost is not a viable logistics strategy. And so other competitors in this space, of course, I think, have sort of say, become more disciplined, which changes competitive intensity for us. Also, I think weaker balance sheets for some of our competitors affects their ability to invest in capacity building aggressively. Also, players who have largely variable cost models, I think when you study their financials, what you can see is that there's no operating leverage at all. Even if companies in this space have been able to generate incremental revenue, they've been able to generate no incremental margins out of it. And so I think at some point, that also strengthens Delhivery's overall competitive positioning a lot. So net-net, that's one big tailwind for us. The other, of course, is that when you look at self-logistics itself, the historical argument from self-logistics players has always been that as they grow, they become more efficient and their costs come down. I think one of the self-logistics arms has declared the same absolute loss that they declared last year. And so I think at some point, the reality is that these costs are going to catch up with all logistics arms. I think you can clearly see from one of the international marketplaces that profitability is one of their core focus areas. And what is very clear is that self-logistics is not the most efficient answer to get there. So I do think that over the next couple of years, you will also see sort of a more judicious use of capital and sort of a decision to outsource certain parts, which are certainly loss-making to 3PL companies, of which there aren't too many. So there's already one fewer than there was last year. And so in that sense, I think that's again a big tailwind for Delhivery. So I think market growth, like I said, 15% to 20%, Delhivery's own competitive positioning evidently stronger than it was last year. We should be able to grow beyond market growth as well. In terms of PTL, yes, 15% is where we are for H1. You're right, there's a significant impact actually of GST over here because ship outs were delayed and pushed out towards end September. This year, at least, so far, we have seen a reasonably sort of strong October. And the Jan, Feb, March quarter usually is the high watermark for PTL. I think we'll be very close. We'll probably get to the 20% growth rate overall. The other focus from our standpoint, of course, on the PTL business has also been continuing to improve our yields. So you can see, I think our yields are up again 3% quarter-on-quarter. And overall, I think we've gained nearly INR 1 in yield over the last year or so, which is very significant. So we will continue to push that. I think what's more important outside of just the volume growth is for us to get to that 16% to 18% kind of service EBITDA margin. And once we get there for us to push growth in the PTL business is not particularly. So no structural change even from a PTL growth standpoint.

The next question is from the line of Aditya Suresh.

This is Aditya Suresh from Macquarie. Sahil, I had 2 questions for you. So first is a theoretical question. So in your -- kind of your press releases in the past couple of months, you kind of referred to this peak volume metric, right, on a daily basis. I mean I kind of look at that and then compare that with the Express Parcel volumes which you've seen. So whilst they're up over 30%, I mean, so the daily run rate, if I may, is more like, say, [ 2.6 million, 2.8 million ] parcels, right? So could you help square that in terms of like how should I think about what you report as a peak volume versus what you report on a quarterly basis? Because effectively what I was reading was that this implies a lot of slack in your existing system. Is that a correct way to think about this?

No, not really, Aditya. So for 2 reasons. One is there's a big gap between Mondays and Sundays, right? You deliver a lot more consignments on Monday than you do by the time you're getting down to a Sunday. So the average of sort of 91 million divided by -- 100 million divided by whatever, 30 days, which works out to some 3 million a day is not exactly correct because Saturdays and Sundays will be very, very low. Mondays will be very, very high. Also, that's just the way more sellers will ship out in a fashion that goods are reaching zone B, zone E, zone C kind of locations on Saturdays and Sundays. And so the Monday available volumes for dispatch are significantly higher. So that's one of the reasons why there's an outsized Monday. In fact, the interesting thing is that I would look at it as saying this -- it's not a question of slack. It's the ability of the network to capacitate correctly for different dispatches, dispatch levels across different days. Without a significant increase in our costs, we are actually able to deliver 7.2 million shipments on a Monday and call it 1.2 million shipments on a Sunday. Because were we actually -- if we had as much slack as the average would suggest, the reality is that the Express business would be nowhere near its 16% kind of margins overall. So this is the way we plan capacity. This is essentially the way that we roster capacity. This is the way our systems orchestrate the movement of goods to the last mile.

Interesting. And just in terms of then -- so obviously, from a market perspective, just on Express Parcel, we've seen quite a few movements, clearly. But if you had to frame what the market looks like today and kind of your market share, could you help us with what your current understanding is?

I think market share, very hard to put exact numbers to it. But let me put it this way. First of all, if you look at it outside of -- in terms of the overall market, including all of the marketplaces and excluding grocery, I think prior to the Ecom Express acquisition, we were whatever, close to about 20%. Post the Ecom Express acquisition, we're probably closer to somewhere between 27% and 30% or so. And in terms of whatever is not outsourced, if I exclude sort of Amazon self-logistics and Flipkart self-logistics, and if you sort of -- it depends on how you choose to take Valmo. But if you exclude Valmo, for example, our market share will be well over half of the market.

Interesting. Can I ask one more, Sahil?

Sure. I have no problem. Go ahead.

So just then on the PTL business, right, this is more specific. I was confused that you saw better volumes, both year-on-year and sequential. You saw better yield, but margin was down, right? So like why was that the case?

Just 2 things. There's 2 reasons why that is. One is, obviously, like I said, there's that INR 6.7 crore additional cost that we had to take during the month of September because volumes got pushed out, we built capacity a little earlier. The second thing is by virtue of being an integrated network, what happens is that when you're building up capacity for Express and Heavies, a certain amount of that cost gets allocated to the PTL business as well. That's part of the reason. But structurally, there's no change to the PTL margins. So these will just rebound once all of this sort of washes out.

The next question is from Sachin Dixit.

My first question is on how do we read this INR 13 crore incremental revenue from Ecom Express? I mean you have obviously stopped manifesting volume there. How are you coming up with this number? And if you really try to do like-to-like, how much of your revenue would actually be coming from the acquisition benefit rather than just INR 13 crores? It seems too low.

It's just that INR 13 crores is just standalone revenue for some contracts which need to be exited. So Ecom was in certain businesses that Delhivery doesn't want to service. That will also just wash out and go to 0.

Understood. So whatever Express Parcel benefit is there, it's already there in the P&L this year.

Yeah, yeah, sorry, I didn't understand that fully. This is not an Express Parcel revenue, this INR 13 crores that is there. This is another contract that they had. There's a lock-in in that contract. We are servicing it and it will wash out.

Sure. Understood. Secondly, on the margin thing that my prior participant has already asked, you mentioned that 15.3% service EBITDA that we delivered in EPS for the quarter will be more or less normalized as we proceed to October. But thanks to a press release, we know that only 3 million extra shipments are happening largely, which includes freight as well, are happening in October versus September. How sharp a jump can that 3 million drive through? Can you give some color what is happening?

It's very significant is what I can tell you between September and October. We do have obviously our October provisional financials, but they're not public. What I can tell you is that September plus October, when looked at together, we are well within the margin range that we would have forecasted internally. The reason why September is slightly lower, and I think your question is good, which is that October volumes are similar to the September volumes. The point is two things. One is a lot of the costs in September are in the early part of the month and the [ 101 million and 107 million ] that we picked up in September and October, respectively are pickup volumes. A lot of the delivery has happened in the first week of October as well and beyond. So there's a certain amount of impact because of that as well. Closures in October will be higher. And also what's happened is by the time we're entering the tail end of October, some of the additional capacities that were built into September are also going to start tailing off a little bit. So the October margins will be better than the September margins as a consequence. And net-net, when you look at September, October, the margins will be higher than the 15.3%.

The next question is from Abhisek Banerjee.

Sir, just trying to understand the jump up in employee expenses, is that going to stay or will it normalize? I mean are there any one-offs there?

The jump in employee expenses is directly linked to the growth in volumes during the peak period. So we did whatever nearly some 35 million more consignments in the Express business and 20,000 more tonnes of freight. So we have more delivery riders. We also opened a few more centers across the country. So -- and we expect volumes. As I mentioned, October volumes have remained very strong. Our forecast going forward also at the moment at least continues to be pretty aggressive. But manpower levels, staffing levels across the company and the operations teams are modulated to whatever is the overall volume that we expect to have at a unit economics level, there's actually an improvement.

Okay. But I'm just trying to understand that, see the estimate that you have given for any employee expenses without the impact of Ecom Express about INR 386 crores for the quarter, whereas that number is INR 426 crores actual, right? So this INR 40 crores, is it going to go down? Are those one-off things? That is what I'm trying to understand. And also in the shareholder letter, you've written about certain facilities where you have to continue paying the rent because there is a lock-in. By when [indiscernible] get sorted.

I think Vivek will just provide the specifics.

Abhisek, you're referring to the P&L column, right, the management estimated [indiscernible] minus INR 386 crores, the INR 40 crores. That corresponds to the integration cost. So that cost will go down. It's not permanent cost.

I think we couldn't hear you for a second, Abhisek. I'll just button while Vivek comes to that. Yeah, go ahead Vivek.

Your voice faded off. So you were answering, the INR 40 crore cost would go away and then Vivek was saying something wherein the voice faded off.

What was your question around facilities?

So you mentioned that you are continuing to pay rent for some of the facilities which you have decided to shut down. I was trying to understand when will that get sorted as in how long were are those contracts?

Different facilities will exit at different points in time. I think there are about three facilities which have a longer lock-in, which will continue beyond FY '26 as well. The rest of the facilities should largely exit by end of this financial year.

Understood. So good, good. The INR 110 crores of additional impact that you spoke about over the next couple of quarters that already factors in these points, right?

Yeah, it factors all of these points. It factors the cost of facilities, people, discontinuing business, overheads, all of those points.

Understood. And what would be [Technical Difficulty] going ahead. Is it reasonable to think of a material improvement in adjusted EBITDA margin [Technical Difficulty].

Material improvement in adjusted EBITDA margins? Sorry, your question was not clear to me.

No, I'm saying that generally every year, there is a material movement in the adjusted EBITDA margin in the second half vis-a-vis the first half. Would you think something similar should play out given the timing of [Technical Difficulty].

Yeah, that typically is the nature of the business. All the fixed capacity additions in the network do happen during the first part of the year, and then they get sweated better during the second half of the year. The volume momentum so far in October, as you would have seen in our release, has continued to remain strong. So if the volume momentum continues for rest of the months of this quarter and anyways, the fourth quarter is a peak quarter for PTL, the combination of these two, if it plays out as how it has played out in the previous years as well, it should ideally lead to the better sweating of the fixed assets, and it should lead to improvement in margins.

Understood. And the parcel yield, there's no reason to think that the Express Parcel yield will fall further from current levels?

Abhisek, we have explained this in our letter as well. It's entirely a function of parcel mix. So it's always hard for us to predict what the parcel mix would be going forward. What we can safely say is that any movement in yields that you see for the coming quarters will be a function of parcel mix, whether it will go up or go down, it's hard to say.

Understood, understood. No, my question is just [Technical Difficulty] lower weight parcels would have happened, so I was coming through that point of view. But I understand.

The next question is from Achal Lohade.

Two clarifications. One, there is a line of INR 20 crores in the other services EBITDA. If you could clarify what that pertains to and how sustainable it is?