Mahindra Logistics Limited (MAHLOG.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Mahindra Logistics Limited Q3 and 9 Months FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mandar Chavan from SGA. Thank you, and over to you, sir.

Thank you, [ Udah ] Good afternoon, everyone, and thank you for joining us for Mahindra Logistics Limited Q3 and 9 Months Earnings Conference Call. We are pleased to have with us today Mr. Hemant Sikka, our Managing Director and CEO; Ms. Isha Dalal, CFO, along with the members of the senior management team. I hope everyone had a chance to view our financial results and investor presentation, which were recently posted on the company's website and stock exchanges. We will begin the call with the opening remarks from management, followed by an open forum for question and answer. Before we begin, I would like to point out that some of the statements made during today's call may be forward-looking. A disclaimer to that effect was included in the earnings presentation. I would like to invite Mr. Sikka to share his remarks.

Thank you so much, Mandar. Good afternoon, everybody, and a very happy New Year to you. This quarter marks an important inflection point for Mahindra Logistics. After 11 consecutive quarters of losses, we have turned profitable, a milestone that reflects the decisive actions we took over the past few months. These actions are now visible in our operating outcomes with measurable improvement driven by sharper execution, tighter cost management and a more disciplined approach to growth. I must say that while we are still early in this journey, the momentum is clear, and we are committed to building on it sustainably. A key enabler of this progress has been the stabilization of our leadership and operating teams. We have strengthened alignment across functions, clarified ownership at the ground level and reestablished execution rigor across regions and business lines. This has led to faster decision-making, more consistent operations and stronger customer responsiveness. With a stable and aligned team in place, we are now shifting our focus to driving sustained performance improvement. Scaling profitability remains our most important near-term priority. During the quarter, we reinforced pricing discipline, enhanced contract renewals and sharpened customer level profitability management. We also choose to step away from a few nonprofitable relationships and recalibrated several engagements to reflect the true value of the services that we offer to our customers. These actions are already visible in sequential margin improvement with further upside as ongoing discussions and cost efficiencies flow through. Let me now turn to a few specific business updates. Let me start with MESPL Rivigo, our B2B Express Logistics Services. We saw an uptick of 19% in quarter 3 volumes Y-o-Y while maintaining stable yields level. Our gross margin also expanded from 0.2% in quarter 3 (sic) [ quarter 2 ] to 2.4% in quarter 3. This is clearly the manifestation of the multiple initiatives under execution, resulting in improved service levels for our customers, boosted lane utilization and improved unit economics. This gives us confidence that the foundation of the business is only getting stronger, and we are well positioned for meaningfully scaling this business up. In our 3PL business, Q3 revenue grew by 20% Y-o-Y and our gross margins grew by 27%, a clear indication that our focus on operational efficiencies, rigor and profitable customers is working. Also, we are selectively expanding our own fleet as we see a clear demand on specific lanes. This is in line with our disciplined approach to capital investments based on utilization, yields and our return metrics. On the white space opportunities we had highlighted earlier, the execution remains firmly on track. We expect the impact of our actions to become more visible over the next 3 quarters. But let me reiterate that we remain fully committed to our glide path to almost eliminating our white space by September '26. In our Freight Forwarding business, Q3 revenue grew by 33% Y-o-Y and our gross margins grew by 36% Y-o-Y, driven primarily by improved trade flows, operating leverage and a diversified customer base. I must add here that this is in spite of huge global uncertainties across the trade lanes. This reinforces our view that the business provides a very steady base for improving profitability potential as the volumes grow further from here. In our Mobility business, Q3 revenue grew by 38% Y-o-Y and our gross margins grew by 18% Y-o-Y. Our focus here is on improving the utilization levels for the asset-heavy part of our business. Alyte, you know that we have launched a new brand into our premium B2B offering is part of this business, and we are calibrating our fleet expansion strategy based on the strong return thresholds that we are seeing. In our last mile delivery business, revenue and gross margin declined due to pricing pressures and strategic decisions at certain sites. We are in active discussions with our customer and expect profitability to improve from quarter 4 onwards. At the same time, our focus on operations excellence continues to be recognized. During the festive peak, we won multiple accolades and rewards from leading e-commerce players, including the best quality delivery partner in North India, the best performance in East and South from another client. And similarly, our portfolio, we have received awards for ESG leadership, safety performance from the National Safety Council of India and supply chain resilience during the festive season. With the debt being paid through rights issue, our interest costs have reduced materially, strengthening our profitability profile further. We continue to closely monitor our working capital requirements. Now let me share my view on the broader industry trends. The festive quarter saw a clear uplift in demand across key sectors, supported by festive consumption, GST-related effects and improved micro stability. While the recovery has been uneven across categories, the underlying momentum strengthened meaningfully versus the first half of the year. In logistics, execution rigor, supply chain preparedness and having the right set of customers have become clear differentiators, and we'll continue to focus on this. In Express Logistics, the industry focus is shifting from aggressive expansion to consolidation and improved asset utilization, signaling a more mature and sustainable phase of growth for the industry. Despite global uncertainties, the overall outlook remains positive and has strengthened over the last quarter. So in conclusion, I want to emphasize that the transformation momentum in Mahindra Logistics is real and accelerating. Our pipeline is healthy, our execution engine sharper and our internal performance framework far more outcomes driven than ever before. More importantly, our confidence is grounded not in intent, but in actual delivery in the progress we are already seeing on the ground. With that, I would like to invite Isha, our CFO, to take you through the financials. Isha, please?

Thank you, Hemant. Let me now give a brief on the consolidated financial performance for Q3 and 9 months of F '26. Our revenue for Q3 has increased by 19% on a year-on-year basis to INR 1,898 crores. This has been driven by strong volume growth, particularly in our Auto and Farm business, which caters to M&M and across our Express, Mobility and Freight businesses. The revenue from our warehousing segment stood at INR 345 crores in Q3 F '26 as compared to INR 300 crores in Q3 F '25, up by approximately 15%. Our revenue mix between supply chain management, which includes our 3PL and network services business and the mobility business remains in line with historical trends. SCM contributes 94% of our overall revenue and the mobility business has contributed 6% for Q3 F '26. We have seen a significant consolidated gross margin expansion of 76 bps at the consolidated level with the GM now at 10% in quarter 3 compared to 9.2% in quarter 3 F '25. Scaling profitably remains our most important near-term priority, as Hemant has already called out, and our discipline on pricing, contract selection and renewal and profitability management is reflecting in this margin improvement across several business segments. The year-on-year margin expansion is driven by enhanced profitability in key 3PL segments and in the turnaround journey of MESPL, which has improved gross margin by INR 7.2 crores year-on-year. This consolidated gross margin improvement has also resulted in an improvement in EBITDA, which has grown at 40% year-on-year to INR 102.8 crores, up from INR 74 crores in Q3 F '25. Our reported PAT for the quarter stands at INR 3.3 crores. However, operational PAT is INR 9.2 crores after removing the tax adjusted impact of exceptional items. As you are all aware, in accordance with the new labor code, the company has currently estimated the incremental impact on retiral benefits to be INR 7.36 crores in the consolidated results and INR 4.76 crores in the stand-alone financial results, which has been presented under exceptional items. It is the impact of this item that I'm adjusting while calling out the operational PAT for the quarter. On a stand-alone basis, we had no debt for 31st December, and our consolidated gross debt stands at INR 64 crores. Moving on to segment performance. In the 3PL segment, our revenue for the quarter was INR 1,502 crores as compared to INR 1,255 crores in Q3 F '25, which is up by 20%. This, as I mentioned earlier, is led by strong growth in the AFS segment, followed by the consumer business. Our gross margin for quarter 3 was INR 165 crores as compared to INR 130 crores in Q3 F '25, which is a growth of 27% in 3PL. Our freight forwarding business clocked a revenue of INR 94.8 crores as compared to INR 71.5 crores in Q3 F '25, up by 33%, led largely by volume growth across ocean and air. Our reported PAT in this business was INR 2.4 crores. Again, the operational PAT adjusted for labor code impact is INR 2.8 crores as compared to INR 1.5 crores in Q3 F '25. In our Express business, which is MESPL, our Q3 F '26 revenue was INR 113.6 crores as compared to INR 89.1 crores in Q3 F '25, up by 27.5%. In this business, we have witnessed a 19% year-on-year growth in delivered volumes, along with steady yields resulting out of multiple actions that we have taken. Volume leverage and scale have resulted in a corresponding increase in unit economics, which you will see reflected in the gross margin improvement that I called out earlier. The reported PAT loss in this entity stands at INR 15.5 crores. Again, operational PAT loss is INR 14.5 crores in the third quarter. In our Mobility business, this business has had a very good quarter, driven largely by momentum in the B2B part of the business. The revenue for Q3 F '26 was INR 110.7 crores as compared to INR 78.1 crores in Q3 F '25, up by almost 42%. Reported PAT in this business was INR 1.3 crores and operational PAT was INR 2 crores versus INR 0.8 crores in Q3 F '25. Our last mile business has a Q3 F '26 revenue of INR 82 crores as compared to INR 103 crores in Q3 F '25. The GM has also declined from INR 7.3 crores in Q3 F '25 to INR 2.7 crores in Q3 F '26. As Hemant mentioned last time as well as earlier, we have taken some strategic calls in this business and exited customers or sites that remain unviable for us. This has led to a decline in revenue and in margins in the near term. This is an operationally complex business. And while the rate pressure continues in the near term, with the sustained efforts on rate renegotiation and operational excellence, we expect business performance to witness steady improvement in this segment. Coming to the revenue breakup for the quarter. Auto business contributes 62% of the revenue and the non-auto business contributes 38%. The Mahindra business contributes 58% to our top line and the non-Mahindra business contributes 42%. That brings me to the end of my prepared remarks, and I now open the floor for question and answer.

[Operator Instructions] The first question is from the line of Alok Deora from Motilal Oswal.

Congratulations on good numbers. Just had a couple of questions. First is on the Express business. We saw very strong traction there, be it Y-o-Y or even as against the second quarter. So just wanted to understand what led to this kind of volume growth, which we have not seen since the longest time? And also, was it like because of the GST rate cut, we saw some bump up in volume, which may not sustain ahead? Any color on that? That's the first question. Second question is that despite such high volume growth and revenues in this in a quarterly basis, the EBITDA really has not moved much. So when can we really expect the breakeven to happen here? I mean, what kind of volumes we would require for that? Yes, that would be second question.

Thank you, Alok. So let me answer the second part first. As you have seen that in the quarter 2, which was quarter 2 of this financial year, we had just turned kind of positive on gross margin. This time, we have further upped the gross margin from, let's say, INR 20 lakhs to about INR 2.4 crores in quarter 3. Further, we feel that the actions that we are taking on the ground, which is in terms of driving more volumes, putting more feet on street, maintaining a high net service levels, better engagement with our clients, making sure that our lane utilization, both for volume and weight remain at a very healthy level, ensuring that the backward lane consolidation is again done with various verticals within MLL. So all these are levers that the team is really focusing hard and making sure that we execute a very tight game on this. This is leading to better gross margin and better EBITDA performance, as you have seen from quarter 2 to quarter 3. We are, I would say, not achieved EBITDA positive in this quarter, but I can just tell you that we don't give a guidance, but we are very close to EBITDA breakeven level.

Sure. Just on the first question on the volume, what really happened in this quarter.

So volume is, Alok, better execution. We have engaged with our customers in a more holistic manner. We have internal dashboards that we are now monitoring at a daily basis. There is a very strong rigor which is happening. Our NFL has actually improved month-on-month. So that is also giving better customer satisfaction. So I would say it is multiple levers, which are all standard first principle levers of any business that you execute very well, you satisfy your customers well, make sure you run a tight ship. And that is what is leading us to, I mean, get -- win more and more businesses from our customers. I think that this volume is sustainable, and we should, in fact, do better from here.

Got it. So it was not really the one-off deferred demand in October. It's more -- you're saying it's more a stabilized quarter only. And we would have done a similar run rate in January also? Without -- throughout number, I mean...

Alok, the business is -- varies from quarter-to-quarter because the whole GDP varies from quarter-to-quarter. Quarter 3 is always a high-intensity quarter for us. Quarter 4 is also a good quarter, but I would say that you can't like take 1 quarter and multiply by 4, but it is -- I mean, there is some variability in quarter-to-quarter. All I can tell you is that we are winning customers, we are executing well, and that gives us confidence that we should be able to do better from here.

The next question is from the line of Krupashankar from Avendus Spark.

Congrats on great set of numbers. My first question will be on a clarification. You did mention that the Mahindra Group contribution this quarter was about 58%. What was it last year in the same period?

It would have been in a similar range, maybe slightly lower than that. So it has gone up slightly this quarter.

Just why I'm trying to build on it is because we did see a very strong growth in the 3PL business. Just wanted to get a sense on whether the growth is coming in primarily from Mahindra and the auto piece picking up materially? Or have you seen some traction around other sectors as well? If you can throw some light around that, please?

Yes, sure. So there is no doubt that the volume growth in the M&M business and everybody knows the volume growth there that is also publicly disclosed, does help our business as well since we do service the Mahindra & Mahindra Auto and Farm business. So yes, that has contributed to the strong growth. But there is also a growth in the other verticals, as I called out in my remarks. We don't disclose the growth segment by segment at a 3PL level, but I can tell you that we are adding customers. And as Hemant said, executing well and growing across our various segments as well. But yes, there is no doubt that the growth of the Mahindra business does help us.

Got it. And with respect to white space reduction, I think Hemant you had called out last quarter that there was a 20% reduction. And this quarter, any commentary around how much of white space reduction have we seen? And -- of course, your commentary on by reducing it by 95% by September '26 holds, right? So some comments on that please.

So Krupa, I would suggest that we will not share how our reduction is going on because you would appreciate that any information like this leads to pricing pressure on us. But as I said in my opening remarks, we remain committed to reducing our white space by 95% by September. We are absolutely on track. In fact, we are slightly better on our glide path quarter-on-quarter on this. And you will -- I mean, this -- we are committing that this will happen.

Got it. Understood. Last from my side on the Express business. Now typically, earlier, it was communicated that there is a certain tonnage which was required to achieve your EBITDA breakeven or PAT breakeven. Now while the growth has been quite strong on the tonnage side of things, 19% Y-o-Y growth and you are on path, is it possible to mention what would be the extent of further tonnage required for getting the maximum efficiency with respect to your gross profits or gross margins or what you are targeting?

Krupa, I would suggest that we think about this business turnaround, not in tonnage terms at all. Let me tell you that I can pick as much tonnage as I want from the East of India if I just drop, let's say, INR 3 a kg, okay? I can pick as much tonnage as I want. But that doesn't help the business overall. So I would suggest that we should think about this in terms of both tonnage and yield. I can tell you that while our tonnage has improved in this quarter, we have been able to maintain good yields. And that is what is leading to this good performance financially. I again reiterate that we are very focused on turning this business EBITDA positive, and we are pretty close to it now.

[Operator Instructions] The next question is from the line of Jinesh Joshi from PL Capital.

Sir, I just wanted one clarification. In the opening remarks, you mentioned that in the B2B Express business, our yields are steady. But if I look at the revenue growth, it was at about 30% and volumes were up by about 19%, which essentially implies that yield growth was quite healthy. So if you can just clarify whether yields were steady or have you seen an improvement?

Could you repeat your question? Sorry, we didn't get that.

In the opening remarks, it was mentioned that in the B2B Express business, yields were steady, but volumes are up by about 19%, whereas the value growth in the Express business is 30%, which essentially implies that yield growth was quite healthy. So just wanted to clarify on that part.

Yes. So Jinesh, clearly, we have been able to grow the volumes on stable yield. We have obviously improved our yields over the quarters. But if you slice it specifically by quarter 1, quarter 2, quarter 3, we may not be able to pinpoint a very big increase, but we would say steady increase. But in the previous quarters, we had improved the yields and they are also coming into the overall calculation, if that answers your question. Isha, you want to comment?

Yes, I also just want to clarify. Also to clarify on this holding steady yields part, our yield has been increasing versus last year. When we were pointing out stable yields, we were pointing out also stable yields sequentially versus the previous quarter.

Quarter 2.

Right. So that's not the right comparison.

Did we answer, Jinesh?

Yes, yes. Yes, sir. Yes, sir. That answered my question. Sir, my second question is that if you can clarify, does the group have any Express business piece that is routed through Rivigo? And is it possible to share what proportion of that business is routed in-house versus that is being outsourced currently? Is it possible to share?

So Jinesh, we do serve M&M and the group for Express business. Of course, we do serve, but it is a small part of our overall business, I can say that.

Possible to share any quantum in percentage terms?

Right now, it's almost very, very small.

Got that. One last question from my side. Sir, it has been quite some time since we have announced our JV with Seino. But I think there has been no traction on that side. So can you update about the latest progress over there?

Yes. We -- just let me talk about Seino. So Seino is one of the most reputed logistics company from Japan, and they have some very core multi-decade relationships from some of the big Japanese name that we all know. We are very happy with this joint venture, and we believe that this joint venture can really do very well in India. The team is now in place. We have a Managing Director, which is nominated by Seino. We have a CFO from our side there, and we are gradually scaling up this business. Right now, we don't see any material revenue in this business because with Japanese clients, it takes a little longer life cycle to crack the deals. But I can share with you that we are in active discussions with some very large Japanese companies in India. And with the kind of relationship which Seino brings in the kind of execution rigor which Mahindra Logistics bring in, I think we should be able to show some wins in the next year.

The next question is from the line of Achal Lohade from Nuvama Wealth.

Congratulations, first of all, on great turnaround. Just a couple of questions. First, if you could give us some sense in terms of pricing scenario in 3PL, in Express. One of the comments, Isha, I think you made was the yields are still under pressure. So just wanted to understand because some of the peers have taken price hikes or price increases. Just wanted to understand. And also, Isha, you had mentioned in one of your remarks that we have let go certain business. If it's possible to know any volume impact of that in that segment?

Yes. So let me answer the second part first. So all that volume impact is already subsumed in the results that we have shown you. So all the growth numbers that you see is in spite of us giving us certain businesses away. So it kind of like covers that up. In terms of pricing, I would say, overall, since the economy is doing very well, and we have some very good customers, and we are very happy that our customers continue to do very well. We are not seeing any pricing pressure in terms of any downward pressure. However, we are doing price corrections where we feel that our services are not appropriately priced. We are willing to give some businesses away and also renegotiate with our customers. However, in last mile, we continue to see pricing pressures. As you know, this is the last chain, the guy who brings the packet to your house. This is the toughest part of the business, and it's very difficult to kind of make meaningful profit in this. But we still continue to work very hard on this. I think our overall profitability on this part of the business has also improved, and you will continue to see more improvements in quarter 4 and quarter 1 in the coming quarters. So except for last mile, I don't want to call out any other thing. I think our pricing is relatively very good. And wherever it is not good, we are engaging very, very positively with all our customers and having those negotiations and discussions.

Sorry, just to extend to that question, sir, in terms of this price correction, like are we broadly through or we are not even halfway mark in terms of price corrections across our customer base?

I would say that we are halfway through, but there is still about half work yet to be done.