Mahindra Logistics Limited (MAHLOG) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mahindra Logistics Limited Q4 and FY '20 Earnings Conference Call. I now hand the conference over to Mr. Shogun Jain from SGA for his opening comments. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and thank you for joining us on the Mahindra Logistics Q4 FY '20 Earnings Conference Call. We have with us Mr. Rampraveen Swaminathan, Managing Director and CEO; and Mr. Yogesh Patel, CFO of the company. I hope everyone got an opportunity to go through our financial results and investor presentation, which has been uploaded on company's website and stock exchange. We will begin the call with opening remarks from the management, following which we will open the forum for question and answers. Before we start, I would like to point out that some 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. I would now like to invite Mr. Ram, Managing Director and CEO of Mahindra Logistics Limited, to give his opening remarks. Over to you, sir.

Thank you, Shogun. Good evening, everyone. I trust all of you and your colleagues and dear ones are all well and keeping safe in these challenging times. And I hope you all have had a chance to review our results and the presentation thereof by now. I'll begin the remarks by giving a quick update on the COVID-19 impact on our industry and our initiatives and strategies to tackle the same, following which I will talk a little bit about how we see end markets are performing in the fourth quarter and also a short update on how our strategy execution is moving. I'm sure all of you are already aware of the growing impact of the COVID-19 pandemic with the total number of cases in India now exceeding 1 lakh. The spread is pretty unprecedented. And the government is taking -- has been taking all necessary steps to face the challenges presented by the pandemic. The national lockdown from 25th of March has had a large impact on the economy, as you all can guess. And I think it will be sometime before we can fully measure its impact. The pandemic has severely disrupted the demand side and supply side. The effects of the lockdown which was seen across the economy with sectors like tourism, hospitality and aviation being the most affected sectors followed by others such as retail and auto as well. On the supply side, with the lockdown in place, the manufacturing sector as well as the service sector were both shut down as per government directives to prevent further spread the COVID-19 virus. As you can imagine, this has led to disruption in production schedule of the companies and impacted the overall business environment. International trade has also been affected by the COVID-19 pandemic, and we have seen a fairly significant impact on cross-border movement, and especially on ports from the points. The lockdown has also resulted in significant challenges from migrant laborers and workers across industries. And as all of you would have noticed -- have noted there has been a wide migration of these resources. In the last few days with the easing of the lockdown, many of the sectors are resuming operations based on various directives issued by the central and state government. The government has designated green, orange and red zones across the country. And with lockdown restriction will ease in some parts of the country, economic activity is free, but it's still not normalized because different parts of India are in different levels of lockdown. Based on the current situation with regards to the number of cases of virus across the country, obviously, there are still many critical regions, which are -- where the lockdown has been extended, and that has a continuing impact. At Mahindra Logistics, we have been adhering with the guidelines stipulated by the central, state and local government authorities, and ensured safety measures and well-being of all our employees and families well before the lockdown was announced. We have initiated work and actions in early March, a couple of weeks before the official lockdown, and reduced staff across our offices, and launched actions across all our sites. We have been very mindful of the safety and security of all our employees, and that has been of utmost priority to us. We have implemented various measures and have been able to ensure that our facilities are safe and secured. Even we started ensuring appropriate usage of hygiene factors, more sanitizers, have a standard operating process and procedure in February this year. We have also initiated actions to implement social distancing and re-engineering processes in our warehouses and our transport operations. We implemented both from all of our office facilities and before the lockdown has established infrastructure support for all our employees working from home. Through the lockdown, we have continued to maintain sanitization procedures in all our facilities. We have been fumigating and sanitizing operational sites, especially the ones which are supporting essential services. We have been using this lockdown period to do a variety of things to our employees and keep them engaged. We have invested in creating virtual workspaces where employees could be continued to work effectively and have been able to provide robust support for them. Beyond work, from an overall perspective, we also launched a helpline to support our employees, drivers in our network and other business partner resources. We have been working on various systems and programs in our broader ecosystem. We have launched free emergency cab services, driver relief programs and assistance programs under our HOPE initiative. As we start ramping up, there will be a huge focus on return to work. We have defined very specific and sharp protocols for both our supply chain and enterprise mobility sites, operations and employees, as we start ramping up facilities. And there's a huge amount on the leadership engagement to ensure that we are doing the right things the right way in the right time for all our employees. There was a broader impact, in the initial phase of the lockdown through the movement of goods for essential services was announced, there was a lack of clarity, and clarity came down to field level in phases. Due to this, lakhs of vehicles are stranded on the road and drivers are finding difficult to move themselves and the goods to safe and secured location. We launched a national program -- all our vehicles which are stranded and move to safe locations. And within a week of the lockdown, we are able to move more than 95% of our trucks which we're using from our partners to safe and secure locations in our network. Even today, probably 40% to 45% of vehicles do not have drivers. Obviously, the progression of the lockdown, many drivers have handed over access to us and have moved on and trying to travel back to their home locations, and that has been a challenge for us. The other challenge is the movement of migrant laborers. As you can imagine and you have noted, a lot of laborers has moved back -- tried to move back to home locations. At Mahindra Logistics, we have been taking safety precaution. We have ensured full strategy for contract resources during the lockdown period. And we have stayed in the active communication engagement with our business partners and through them -- through their resources as well through the lockdown. And we hope that we'll have a positive bearing on us as we start ramping up operations. There was a huge impact on the scale of operations. Obviously, smaller transporters continue to see further distress. And this would probably accelerate some consolidation in the industry in the coming months. The lockdown has frozen supply chains across multiple sectors, both in production and stockpiling. Through the initiation of lockdown, we continued our operations at low capacities, essentially focused on essential commodities. These restrictions have also limited transactions in the growth-oriented e-com sector. For us, a lot of work which we are doing in e-com was around electronics, heavy and bulky products. And obviously, all of those were stopped because they were not essential products. However, once the lockdown starts to ease, we expect that e-com will actually be a significant beneficiary as there will be move towards digitized marketplaces. And we expect that, that will actually see long-term growth. We also expect that FMCG, pharmaceuticals and related sectors in product lines will start seeing growth. And there will also be an increase demand for additional warehousing space. Let me now just talk quickly about our end-use sectors, which obviously have the bearing on our performance in the -- in this last quarter and more recently now. The COVID-19, no -- moving on to auto, obviously, there has been a significant impact in the auto industry. The auto industry was already under significant pressure for most of the last financial year. And COVID has accelerated that challenge. In many ways, the impact of auto sector started actually in February when China had the first outbreaks of COVID-19, and significantly shutdown operations in China. And that -- since a lot of components and supply chains traced back to China, that has had a significant impact on the sector. SCM amidst the lockdown estimated the plants closure of OEMs and component makers would -- lead to a loss of INR 1,300 crores of turnover for each lost day of operation. So it's a fairly significant challenge. It's also been an impact in March because of the transition from BS-IV to BS-VI. And obviously there is a March cutoff, which also I think it was an additional challenge the sector has to face. Now after 1.5 months, obviously, sectors are receiving permissions from the state and center, and we are seeing a slow and gradual speedup in operations in all our Indian customers. There is some distance from normalcy, but we are actually seeing that coming back, keeping in line SOPs and guidelines given by the center and state governments. There's consistent effort, which we are partnering with many of our customers on, right, and ensuring that they are working and implementing safety norms in terms of social distancing, sanitizing and various other measures as our customers start ramping up operations. Before COVID-19, I think, we were expecting some meaningful recovery by the end of H1 of 2021, but we now believe that this will be pushed to later towards the calendar year, right? And that is assuming the COVID-19 situation starts normalizing, and there are no further significant outbreaks in the coming couple of months. On the farm side, I think there's been a lot more -- there's a reason for lot more optimism. Obviously, there's a stronger monsoon crop. And I know many of the initiatives introduced by the government, right, in terms of giving early permissions during lockdown, adequate economic measures and recent announcement by the Finance Minister auguring well for the farm sector, and we hope that we will actually see a stronger and faster recovery in the ag and farm sector. Moving on to e-com, I think, broadly said, as I stated earlier, I think, this is a challenging period as essentially -- as only essential products were allowed, and a lot of supply chains and nonessential products were shutdown. It was a particularly challenging period because to some extent, supply chains are common and there's a lot of confusion on the ground with all that many local administration on drawing the line in essential and nonessential products are sold through market place and managed through common supply chains. So while there has been a challenging period, right, through the lockdown, and as I said earlier, I think as we come out of the lockdown, we believe that there is a fundamental acceleration of the shift towards e-commerce platforms. And then there is an opportunity for 3PLs to partner more with e-com companies to drive better efficiency and greater spread of their operations across the country. During the short term, there will be some impact on discretionary purchases, but we expect this to recover probably in a quarter's time. And we therefore, and we also see strong growth, obviously in essential products and food items as malls and shopping complexes remain close in the short term, so it's even mix bag. But we do expect broad recovery to definitely happen within the first quarter and in line for the main festive season of the year. Moving on to consumer and pharma, obviously, again, there has been some level of impact. COVID-19 spread did impact business from mid-March, which, of course, there is slow creep down and -- shutdown of operations because of lockdown. But obviously, many sites have remained open, right, because they are in essential services. And as the clarity emerged between essential and nonessential, operations started picking up in a standard way. We have been making -- we have had several sites opening in this vertical through the lockdown. And we've been providing support on essential product categories, those have been operating at much lower levels of utilization. Through the year, we have made strong headroom in the consumer and pharma vertical. We've been deepening our capabilities and growing our business here at a pretty robust rate. And going forward, we expect that this would continue to be there. There will be some transitionary impact, we believe, this -- in the early part of next quarter -- through the early part of next quarter, but we expect that actual reset itself. The only segment, we think there's a larger challenge about is around retail, which we expect maybe see a deeper impact, especially as -- as especially as shopping complexes, malls, all shut down for a protractive period of time. For us, it's in a key market. We have been growing. As I mentioned earlier, we continue to expand our customer base and also increase our share or wallet with existing customers. So with that, it is a broad outlook on our end markets, let me just talk about the financial performance for the quarter ended and the year ended March 31, 2020. So all of the notice revenues for the quarter decreased to INR 812 crores from INR 1,015 crores in the same period last year, down by 20%. For the quarter, revenue was impacted by a decline in auto sector revenues. A year-on-year reduction in the revenues from the bulk segment and the loss of share and some impact of COVID. The reduction in bulk has been a continued impact of the loss of shares we have in large account at the end of 2018-'19. We have referred to that in a couple of earlier earnings calls as well. And obviously, last year, Q4 wasn't particularly strong quarter in that volume from that customer, so we have a larger impact of that. For the full year ended 30th of March 2020, revenue stood at INR 3,471 crores. Revenues from SCM contributed 89.4%, and enterprise mobility contributed 10.6% of revenues for the full year. Our gross margin adjusted for IndAS 116 for Q4 FY '20 stood at 10.4% as compared to 8.8% in Q4 '19, an increase of 160 basis points. Gross margins for the full year stood at 10.1%. EBITDA on a pre-IndAS basis was 2.8% for the quarter. EBITDA was, of course, impacted, as I said earlier, by lower volume for M&M and the COVID-19 impact. COVID-19 had an impact on Q4, both in terms of revenues and profits. We do see an impact on our enterprise mobility business and our consumer business before the national lockdown, especially in the mobility business, as many customers implemented work from home. We also saw an impact on the supply chain business in the last week of the month after the national lockdown was implemented. For the quarter, overall COVID-19 has 7% to 8% impact on our overall revenues for the quarter. EBITDA for the quarter stood at INR 41 crores. And for the full year ended March 2020 stood at INR 172 crores with an EBITDA of 5 -- margin of 5% adjusted for IndAS 116. EBITDA margins pre IndAS 116 are at 3.3% for FY '20. Adjusted EBITDA for the ESOP and RSU charge stood at INR 42 crores in Q4 FY '20 and INR 184 -- in Q4 FY '20, INR 184 crores for the full year FY '20. PBT was down 39.2% from INR 133 crores in FY '19 to INR 81 crores in FY '20. On an annual basis, the decline in PBT was driven by a drop in volume, dominantly from the auto sector, impact of IndAS 116 exchange and ESOP and RSU charge. For the full year, we had negative impact of INR 5.5 crores in PBT on account of IndAS 116 transition. If we negate the impact of IndAS 116 charge of INR 5.5 crores and ESOP and RSU charge of INR 12 crores, our operating PBT on a comparable basis for FY '20 stood at INR 19.6 crores, as compared to INR 139.1 crores in FY '19, down from 29.1%. PAT was down by 36.5% to INR 55 crores in FY '20 and PAT margin for the full year stood at 1.6%. PAT adjusted for the RSU charge is down by 30% from INR 90 crores in FY '19 to INR 63 crores in FY '20. Impact of the accounting standard change, increase in gross margin and EBITDA by INR 15.3 crores and INR 18.6 crores and a decrease in PBIT by INR 0.5 crores in Q4 FY '20. For FY '20, impact of accounting standard was an increase in gross margin and EBITDA by INR 49 crores and INR 56.4 crores, respectively. PBT declined by INR 5.5 crores on account of the impact of IndAS for FY '20. For the full year, proportion of Mahindra Group revenues comprised were at 51% compared to 56.1% in FY '19. In terms of segmental revenues, revenues in supply chain were reduced from INR 3,466 crores in FY '19 to INR 3,104 crores. And enterprise mobility declined by 5%, right, to INR 368 crores in FY '20. SCM revenue was impacted due to continued slowdown witness in the auto industry, and the auto vertical both M&M and non-M&M are somewhat dominant verticals for us in supply chain management. That was partially negated by the growth in our consumer, pharma and e-commerce verticals. Our revenue from the Mahindra Group supply chain business decreased from INR 2,102 crores in FY '19 to INR 1,729 crores in FY '20, largely because of slowdown which I have already referred to. On non-M&M and SCM business grew marginally from INR 1,364 crores in FY '19 to INR 1,374 crores in FY '20. Underlying this movement was the shrinkage in our bulk business, which I said earlier, dipped significantly, due to loss of share of volume in large customer, but that was offset by strong growth in our e-com, consumer, pharma, telecom and freight forward in businesses, which grew despite the slowdown in the auto industry, right, through the year. These verticals have also grown 20% to 30%. On e-commerce, consumer and pharma verticals grew upwards of 25%. It actually grew at 26.5% and 29.6%, respectively. Growth in e-commerce and consumers were driven due to deeper penetration of existing customers, providing them more solutions and integrated services, right, from Mahindra Logistics. Our warehousing and value-added services for the non-M&M and SCM business, which was a part of our focus area has grown from INR 351 crores in FY '19 to INR 436 crores in FY '20, registering a growth of 24% for the full year. Share of warehousing and value-added services in the non-M&M and SCM period grew significantly and has reached 31.7% in FY '20 compared to 25.8% in FY '19. As all of you have noticed, our cash and cash equivalents at the end of March 2020 stood at INR 99.5 crores. Despite the challenges of the COVID-19 impact towards the end of the quarter, we have been able to control cost and managing our cash flows for the period. We have also taken a Board approval for raising funds -- additional funds up to the tune of INR 250 crores, which has not yet been activated and utilized. This has been taken as a precautionary measure to ensure a safety net to our operations in event of prolonged and unforeseen effect of COVID-19, and uncertainty of operations and delays in returning to full normalcy. At this stage, we -- as I said, we do have a strong balance of cash and cash equivalents, and we have drawdown -- which we have already not utilized -- before the -- without considering the additional approval of INR 250 crores. Before I open up for comments, let me briefly talk also about our progress on strategy execution and the immediate environment we are in. During the year, we have remained focused on our key strategic platforms despite the headwinds we have had in the auto industry. Our focus on solutions has helped us grow our warehousing and value-added services. We are keeping our focus by launching new solutions, return processing, pop-up sort centers and distribution -- and integrated distribution services. These are evident in our continued growth in value-added services and in e-commerce and consumer segments. We also started a deep focus on operational excellence with structured programs to reduce costs, increase operational productivity and streamline our warehousing footprint. The focus of these initiatives and focus on -- has helped us mitigate the impact of the volume drop in auto and engineering verticals, and kind of manage our costs more efficiently. We also invested in expanding our offerings in freight forwarding and express that during the year, we expanded our freight forwarding business, strengthening both our air and sea forwarding locations, both towards East Asia and Europe and North America. We've also expanded our export capability. We now provide surface and air coverage to over 12,000 pincodes across India. In the mobility business, we have been developing our on-call business with experienced enterprise customers and deepened our offering there. Strategically, we continue to expand our IT systems and enhance the automation capabilities. We now have integrated various solutions such as AGVs space and IoT systems into our offerings to our customers. We are currently upgrading our SAP, ERP system, which we live in Q1 2021 and enhancing our transport management systems as well. Our continuing asset-light strategy has helped us manage volatility and variability across the business, and we remain committed to that direction across all parts of -- all our verticals. In the fourth quarter, we have added several new customers. And while COVID-19 remains a large part of everyone's mind share, we did add some COMs and expand our presence with new offerings in e-commerce. We are also building deeper solutions in areas such as grocery and pharma offerings in the e-com space. So we have expanded business during that period. Lastly, as I look at the year, I think, I also want to comment about Mahindra Logistics and our contribution beyond just -- beyond business results. We have a proud heritage on focus on ESG and our communities. During the year, our employees continue to invest in our communities with a 63% growth in ESOP on employee social actions and launch of several new programs like Zero Accident Zone. We also expanded our training programs under PMKVY umbrella from drivers to warehouse operators. And last year we have covered more than 10,000 drivers. This year, we will cover more than 7,500 drivers and warehouse operators. This remains a core thought of our purpose and it is a focus of me and my colleagues in the leadership team and our team members at the Board. Before I close off, I just -- I think we live in challenging times and obviously, the national lockdown has had a significant impact on our business. As we have looked beyond COVID-19, and then how to manage -- towards managing, we have been focused on 4 key priorities, ensuring safety, continue to provide essential services, conserving cash and liquidity, and driving improvement and engagement. Through this period, I'm very proud of all our employees and resilience -- and the way we have responded in these uncertain times. And we are working very closely with our customers in ramping up our operations. Strong monsoon, improving rural demand and funds announced by the government augurs well for the farm sector. As mentioned earlier, I'm also confident that we will see a recovery in other verticals such as e-com, in consumer and pharma where we are invested, strongly focusing growing our business. In the short term, there will be supply challenges as well as due to lack of drivers, standard fleet and labor availability, and we are working on overcoming these. So while we will have short-term challenges, we remain confident about our -- on our continued focus on executing our strategy and building up customers and partners over the medium to long term. So with this, I'll open the floor for questions and answers.

[Operator Instructions] The first question is from the line of Mukesh Saraf from Spark Capital.

I hope everyone is safe at your end, sir. Sir, the first thing is just trying to understand the fixed cost for the business. Could you give some sense on the freight side of it on the trucking -- on the trucks, how are our contracts with the vendors? Is it just based on usage? Or you have a minimum guarantee? How are those structured, sir?

Yes. So Mukesh, I think dominantly all our contracts are pay and use. So obviously, we have -- based on the various contracts of the customers, we have SLAs around placements, people safety, new mobilization and so on. But our liabilities are all essentially capped based on usage only. That's the dominant structure we have across our business.

Right. And I mean, with respect to retaining these truckers, is there, say, in the next couple of quarters if the volumes go up, would there be any issue for us to get back these truckers or the vendors for us? Or they would always be available for us?

I think, Mukesh, I mean, I would say that there are broad challenges which the industry is facing as a whole. This is -- and the challenge is we have 2, 3 things. The first one is, as I mentioned in my comments earlier, lakhs of vehicles are actually standard on roads. And we don't have cargo on them. So the first thing has to happen is these vehicles have to march back to the home location, to the destination location. The second challenge is a driver challenge. This is a social and social -- as much as social challenge and economic one because many drivers are also worried about COVID-19, their families are worried. Many of them have already left to go back home. And even the one who will come they actually want to go back home, right, once movement is easily available. So the challenge, I think -- so that's the second challenge. The third challenge is that since the lockdown is being relaxed with -- in different ways and different patterns across India, in many cases, there is no return, in many cases, there is no return load. If we could ship a vehicle, the products from point X to point Y, but there is no return more from point Y back to point X. And so either vehicles get stranded or customers actually end up -- or the price for customers ends up growing quite significantly, going up significantly. So these are, therefore, not a fundamental challenge of capacity available in the market. As you know, there are probably enough trucks available in the market. And even before COVID-19, demand was challenged and expect for some seasonal peaks, there has been softness in the entire transportation sector. So this is underlying capacity problem. This is a very specific the situational challenge we have. And it will take some figure up time before we -- as an industry, you can work through this.

Right. Right. Understood. And sir, my second question is on the warehousing bit. Again, how are these contracts structured there? Are there some minimum guarantees for, say, build-to-suit warehouses? Or do you kind of continue to pay the lease rentals? Or other, if I put it this way, out of your 16 million square feet that you have, how much could be -- where we are having a fixed lease rental payment? And how much would be where we have a minimum guarantee that the customer has given us?

So the way I look at this is best is look at this from a customer, supplier merchant perspective, right? So as you might have seen from an earlier, Mukesh, almost all our warehouses space, a large number of these are custom and bespoke to individual customers. And on all those contracts are typically back to back. So we have -- if we have leased it to our customers as a solution in the next number of years or months, we typically would have a back-to-back clause the large part. There might be some minor deltas around it, but that's kind of the broad construct. And therefore, there is nothing which is white space -- white space in our network is actually -- unsold or unutilized space. But in the context of COVID-19, I think, obviously, there have been no situation thus far that customers have filled off on contracts and left us standard liabilities on leases with our supply.

Right. Right. Right. Okay. So that way -- it's not like a fixed cost for us that way?

No. I think Yogesh will have some better quantification on monthly lease cost. Yogesh, anything you want to add?

No, Ram, just that you have covered rightfully. Mukesh, so wherever we -- only in the BTS, which is under 1 million square feet right now of the 16.3 million, where we have a lease term, which would be disproportionate to underlying customer lease or service's agreement terms. But rest of it all facility has a back-to-back arrangement with the customer tenure itself. So whatever fixed cost we have, we have a recovery of them as well.

[Operator Instructions] We take the next question from the line of Aditya Mongia from Kotak Securities.

I had 2 questions. The first question was more on FY '20 as regards to the way I see through it and your investments for the company, so there obviously were investments made either in human resources or technology. It would be useful if you could kind of point to us as to which sectors were the ones which would have benefited? And the related question would be that now that if we go inside FY '21, are we actually better prepared to gain more in terms of customers in wallet share given the investments in '20?

Great questions, Aditya, and I hope you are safe and well. I will try and answer both of them together because there is a correlation between them. So a lot -- as you are, you have made investments this year, right, in our technology and IT architecture, as in all the key areas, we have made investments in, and those investments really have been on 2, 3 dimensions. The first dimension really has been strengthening our core systems and those objective there has been to drive productivity, improve and continue to focus high kind of level of -- on high levels of controls and governance. And those systems really relate to our financial and materials management that is ERP core, which is the one that is being launched, we already live on it this quarter as we speak. And the second one is an upgrade on our HR and our system, which is also is what we use to time manage our contract resources. And therefore, have a significant impact on productivity and cost. So that's been one lever of where the investment has happened. The second lever is what is an investment across our transport management, warehouse management, freight forwarding and contact resource management system, and if we can upgrade to our telematics infrastructure. So those are 5, 6 areas the investments have been ongoing. And we have expanded locally move a lot of those to our web services architecture, which allows us to platform the service and system, and allows us to add features and manage customer life cycle with more efficiently. The focus there has also been trying to integrate across those systems. And there is -- the different projects are in different levels of completion there. And it will be, I would say, -- 18 to 24 months before the journey is completed. The third lever has essentially been around automation, integrating automation into our IT backbone. So that's where we've invested in things like the automated guided vehicles, we have invested in IoT devices on shop floors. And we have invested on things like automating our MHEs. We're also experimenting with usage of drones. We do some work on -- automate our core integration. So there's a lot of back-end of work, which is happening on automating processes and integrating them into our IT backbone, so we can get more controlled edge of our physical processes. So those are 3 areas, Aditya, where we've actually been making tech investments. I think each of them, as I said, they're all integrated towards getting done in 18 to 24 months. We should then provide us, I think, is a very strong competitive value proposition because we would actually as an architectural level, be able to not only provide great services and individual offerings, but also integrate them into and bring a solution capability across these offerings. So through this year, we have these enhancements in different ones. So as I said earlier, the SAP system did go live this quarter. On the finance side, we have made several upgrades to our transport management system. And we have several new launches, which are still planned during the first half of this year. So that's why the money has been spent to answer your question. In terms of bang for the bucks, yes, I do believe that we are in a better shape than we were earlier. We were not exactly where I have seen all the -- where all we want to be out there, but obviously, in a much better shape, anything I think FY '20-'21, than we were ending FY '19-'20. As we've consistently said, one of our focus areas, we're a wide provider of multiple services, right, where transportation warehouses side or the value-added services side and at least strategic direction for us is to integrate these services into custom bespoke solutions, which add a lot of value to our customers. Technology is a very key part of enabling that, especially in the distribution side. So this is really important and puts us in a good position to win the consumer and e-com space. There are a lot of products -- there are a lot of solutions we give are actual and distributing products, further logistics solutions, it helps us create solutions of cross-border logistics. So in that sense, I think, we are in a better position than we were in the compared to 1 year ago, and I think at a better position because it's aligning to where we want to go business, especially in the environment we are in now. So let me stop there ahead and hope that cover your question.

Absolutely. If you count this as one, I can squeeze another one.

Go ahead. Go ahead, Aditya.

See, you also mentioned another thing. So apologies, I entered the call late. The first thing that I could hear was on consolidation and you're thinking that, that could actually happen in the sector in the next -- in the near term. Just wanted to kind of get a sense of as to how are you thinking about it from the perspective of MLL?

As a Mahindra Logistics level, as I said later on in my comments, we are very committed to be an asset-light company, Aditya. So in that sense, I think, our focus is building strong partnerships. We are continuing to work closely with our supply base and our partners to ensure that we are doing the best of them together through these challenges. And we think consolidation, we obviously provide an opportunity for us and have given our skill in operations to build probably new and deeper relationships on the supply side. On the demand side, obviously, I think, the consolidation might help bring your tightened pricing up a little bit because, obviously, the market -- the demand being very soft, there has been a very challenging pricing environment in some segments and markets. So it may actually play out, but it's hard to see that right now. I think there's probably more things will be on the supply side.

The next question is from Ankur Periwal from Axis Capital.

Sir, continuing with the discussion that we were just having, on the consolidation bit. Now as I understand, the players who are largely focusing on in-house logistics, and I'm talking of maybe slightly bigger players here, medium and larger players, they were the most impacted because of the supply chain disruption overall. So incrementally, have we seen any maybe new queries or some ramp-up across the FMCG or the essential customers that we were dealing with?

Yes. So Ankur, I think it's a good question. And obviously, from a supply -- in the current environment with disruptive supply chain, obviously, we've had a fair number of inquiries, which is coming from a wide customer base. So to that extent, I'd say customer activity remains strong but both in terms of reactive -- in terms of situational demand because of the COVID-19 impact as well as even more broadly. We are seeing inquiries in that sense. And yes, I think some of it is coming because of the challenges people have in terms of their current vendors or their current in-house operational capabilities in managing the supply situation. We are here obviously trying to take a balanced view. We will kind of invest in current relationships and expand in those. We continue to tactically look at expanding new partnership. We will also do that in a very cash and financial efficient way. We are looking at those opportunities from all those 3 lenses, Ankur.

Sure. And on the digital side, the initiatives which you did mention, my understanding is that will help us further penetrate into the client there in terms of the services offered as well as the distribution logistics part. But also from a working capital perspective, because if I remember it right earlier, we did plan to improvise -- to improve our working capital as well and to restrict the number of days, the lack -- the loss of days in between. So on that side, also, have you seen improvement? Because interestingly, our balance sheet has improved from a working capital perspective despite these difficult times in this quarter. So just your thoughts there.

I would ask Yogesh to add some thoughts on this as well. I would say our working capital this quarter has been -- so from an IT perspective, yes, obviously, one of our big focus is on improving, especially in the transportation side, Ankur, improving the speed at which we can do, move towards digital PODs or proof of deliveries and actually integrate a supply system also on the same basis. It would obviously provide benefit across the entire value chain from our customers all the way to our suppliers and ourselves included, and there are the initiatives this year around that, though adoption from customers and partners is still work in progress. Our improvement [ for teams ] just to some extent, and a lot of good work under Yogesh's team, and all our business team really in recognizing early on that it is a COVID-19 situation that creates challenges for us from a working capital perspective. And so we started working very closely both on the receivables and the payables side, right, the receivables and the payables side, especially on -- from a working capital perspective. And I think you see improvement -- we saw improvements in the third quarter, which is going to continue and consolidate itself in the fourth quarter. So as you know, first half of the year, we have the -- we did see an extension with the auto sector service. But we started renewing that in the third quarter, and we saw that kind of really showing stronger benefits in the fourth quarter. So a lot of it is just -- does not necessarily add digital initiative as much as this much more operational focus on the valuation items. Yogesh, would you like to add anything to what I said?

Yes. So Ankur, from -- I mean what Ram explained is absolutely right from what we've been doing, and we've been making significant progress there. From a working capital cycle for receivables, I mean, it also requires that our customers also accept that digital submission from our end. So that piece is what we were working with in parallel as well while we make our systems ready. An interesting thing to note is, during this COVID disruption, is when we're seeing quite a bit of customers also planning, are ready to now accept all working with us, saying, okay, how do we integrate our systems to make sure that the document flow is digital going forward and not physical. So yes, I mean, keeping our systems really helped to get into the next conversation, and our progress will get aided by the acceptance level from customers increasing also now.

Hopefully -- Ankur, as Yogesh said, hopefully, we'll see more traction this year than last year.

The next question is from the line of Ankita Shah from Elara Capital.

Sir, I heard you saying that there will be increasing demand for warehousing going forward. So how much is the plan for space addition for next year? And in that light, if you could show some light on the CapEx plan in terms of investment in technology, warehousing and acquisitions, if any? That will be my first question.

So obviously, on acquisitions, I don't have any specific guidance to give, right? It is not something which we do at all. So that's [ point 1 ]. I think in terms of warehousing, as we said in the last couple of years, we have been in that 1.52 million square feet in the year. And we remain focused on growing the warehousing space. The drivers for it, I think, have always been the same. It's been -- in the last couple of years has been post-GST consolidation timing towards more -- larger and better warehouses, more integrated operations and trying to provide solutions as a bundled warehousing and distribution together by bringing more unique solutions like return processing and so on. So what we see in the near term from an industry perspective, obviously, is with larger growth of e-comm marketplaces and probably restructuring of supply chains, greater demand for warehousing across many end sector supply chains. And that obviously is not just with warehousing but also within logistics solutions. So to that extent, we think there'll be a positive hangover on our business, and we are working towards that in line with our broader growth strategy. And obviously, we are not short of warehousing space from our own business perspective. We don't build -- buy any of the land and the facilities, but we have very deep partnerships with lessors, which have -- which put us in really strong position there. In terms of growth, so that -- in terms of capital spend, I think, in terms of -- and I didn't fully understand that question. Could you just elaborate on what exactly...

Capital spend on -- CapEx spend basically on both technology and warehousing?

Yes. So I think -- I will give some broad comments and Yogesh can add more specifics. So obviously, on both those categories -- on the software side, in our new technology architecture, as I mentioned earlier on, and I think Aditya was asking the question, we are going to a web services architecture. So a lot of our software is actually software as a service. We don't really spend a lot of money upfront in buying more on-prem kind of solution infrastructure. It's something which I think we have mentioned a couple of times earlier as well, but that's kind of the broad direction. So a lot of our expense is actually on the development side. It's not really buying large suites of software. And the stack basically are what we buy, and we essentially buy them as a service in those cases. We obviously buy so much space, right, and so on from partners as well. On the warehousing side as well, a lot of our investment is really only inside the warehouse. So it's on automation systems, softwares, like racks, [ NHEs ], so that kind of investment which actually goes up. And obviously, as you'd be more aware of, we have value-added services. Our capital spend will actually increase, but it is at a fairly productive level. We use these -- we have clear hurdles of return for those projects, and all our investments are in line with that. In terms of specific amounts which we spent in FY '19/'20, Yogesh, can you clarify that?

Yes. So the CapEx spend in FY '20 was around INR 66 crores. And that obviously has correlation with -- predominantly investment has been on the warehousing infrastructure and the insides. So the type of warehousing and the space which we lease would be the correlation. So I mean that becomes a link to what our expense for next year will be.

Okay. And how have the April and May months so far in terms of business in non-Mahindra side of the business? And what is the reason for growth in the subsidiary revenues in strong double digit? Probably, I think it's the growth in the freight forwarding business that has come for the full year FY '20.

So let me talk about freight forwarding first, something which we are quite excited about. So obviously, we have -- we acquired -- we took a position -- or a majority position in this company some time ago. Last year was challenging for the business in FY '18/'19, but '19/'20, we have been able to come back to a strong growth trajectory. And that's being driven by 2, 3 things. First one, as I said earlier on in my comments, we have expanded our offerings to cover more geographies. So we are doing more import and export now, especially to the Western hemisphere, like Europe and the U.S. And that's been expanding our offerings where the right partnerships have been a strong lever of growth. The second lever of growth has been expanding our presence in the pharma segment, more than -- I would say the consumer and pharma segment, both of them. I think we are doing more work today in FMCG durables as well as we have a strategic inroad into the pharma side. And so that, I think, will be the second big driver for us from a growth perspective. And the third one has been integrating the rest of our supply chain business with freight forwarding. So that has been specific operating goal which we took on this year to drive much more integration of the front-end and the solution level. So as I've said in earlier earnings calls, this year, we've done more work on providing end-to-end cross-border solutions for customers. So whether it's on the import side, picking up from a location in China and using a combination of our freight forwarding and our holistic supply chain business to deliver to any customer location in India. Similarly, originating from India and using integrated capabilities to deliver it somewhere in the Midwest U.S. Those solutions are things the architects are using to freight forwarding and other parts of 3PL capabilities together. And that helps us increase share of wallet to many of our existing customers. We have existing SCM customers who are not really using freight forwarding from us. We have been able to gain penetration there. And those factors have driven our freight forwarding growth. In terms of -- so does that answer your question?

And the other part of how has been April and May months so far in terms of the non-Mahindra business?

Yes. So April, May has been -- as you can imagine, has been really tough. And at this stage, it's hard. There's a lot of moving parts we've seen in mid-May, obviously, but there are a lot of moving parts through this quarter. Yes, the lockdown, as I mentioned in my comments, has been quite severe. And for us, a small -- a large part of our business is also in the non-essential category. Anyway, outside the M&M business, we've got a lot of work in auto, e-commerce and consumer. And a fair number of our logos essentially are on non-essential in nature. So the direct thing, there has been an impact on our business. Even the sites which are being open, obviously, we have seen much lower utilization levels. So April, it has been challenging for us on the non-M&M side. Our enterprise mobility also has been deeply impacted by the lockdown. As things have started relaxing, I think obviously, there will be periods that supply chains are still disrupted. They're opening up but they're still disrupted. So there's a lot of volatility still in volumes. So we have to see how the opening up stabilizes, but we are hopeful that next -- we're hopeful that things will start stabilizing in the coming period.

The next question is from the line of Manoj Bahety from Carnelian Capital.

I have a couple of questions. First one is on the balance sheet side, like if I see though, yes, overall working capital, we can see the improvement. But in current situation, if I see like INR 522 crores kind of trade receivables and we have around INR 617 crores of trade payables, so what kind of risk assessment you have done on this INR 522 crores of trade reserve? Because trade payable will ultimately be required to be paid. Or is there anything out of this which is like first collect and then pay?

Thank you. I hope as well doing you're well. Let me ask Yogesh to answer the specifics of it, and then I will supplement his comments. Yogesh, you want to talk about trade receivables?

Yes, Ram. Absolutely, Ram. So Manoj, as you know, we have our entire business model itself of being choice of asset light, et cetera, the way we have conducted. We have traditionally managed to have our DSO and DPO very much in line, too, based on the economics, environmental as well as customer dynamics, which we serve. So from that perspective, I mean, this risk which you refer to would be only if our receivables, which is outstanding, were of any diluted quality as such. This particular thing, I mean, obviously, otherwise, too, this gets reviewed, audited externally as well. But because of onset of COVID, everybody was more serious about what it would be from an asset quality perspective. So this has been retested and reassured by a couple of additional analysis and data points as well. We definitely do not see any disproportionate issue there. So it is just the way our business model is structured. We have good balances carried of amount what you see there. I mean there would be the last few weeks of business which you would have done, plus the last week of March since kind of offices got closed down, et cetera, you would have revenue which would have remained unbilled as such. So this would also be a reason why you would not currently see that this amount has been there in a larger way. But from a quality of an asset perspective or a receivable perspective, this has been tested in a couple of different ways as well in addition. And there, we do not see there is any risk from that perspective.

Yogesh, how has been the experience in terms of collection in April and May? Because this INR 522 crores is a large amount. So just wanted to understand like, yes, you might have tested it in terms of the past experience of the customer. But in terms of actual collection or getting some force majeure notice or some weak customer. So some kind of analysis on this INR 522 crores will be helpful.

No, absolutely, which is what I was explaining that a couple of reason when our external auditors did analyze and certified it as well. And from an April month perspective, if I were to let you know, I mean, the way we -- I mean, we drove enough rigor internally in the system with all hands on the deck kind of thing. But we did reach our targeted collection for the month what we would do in a -- so every month, we kind of, based on our opening debt, what is falling due, et cetera, we draw up a plan. There is a target by business segment, by geography arrived at. And that target, which we had lined up for April, we actually -- this a little bit better than that itself in it. So hence, that kind of reassures us a little bit more.

As Yogesh said, we have maintained -- I think I said earlier in the comments as well that we had good balances at the end of March. We had open credit lines, and we continue to avoid -- we were able to manage very comfortably within that. Our quality of receivables is very good, obviously. A reasonable part of that is the Mahindra Group company themselves. But also in terms of the great other brands, which are all very robust, solid business practices, so we had gone and tested it. And the proof of the pudding is in the eating, right? So obviously, April was in line with what we expected on receivables. So we feel pretty good about that part of the balance sheet for sure. We do have PDDs which are -- and this is more than we cover in that.

The next question is from the line of Manish Goyal from Enam Asset Management.

Just to get more clarification, you mentioned about the 3 broad challenges, like in terms of -- you still have some vehicles loaded and stranded on the highways and also on the driver availability. So would it be possible to give some sense as to how has it evolved since the lockdown in the last week of March until now? In terms of like if you can quantify the numbers that how much like of your vehicles are still stranded. And what is the level of availability of drivers you probably have now? And then the third big challenge in terms of not having the enough return load, so being quite a complex situation for you, but if you can just dwell more on it.

Yes. It's -- this is starting -- obviously, we do this once a week. After lockdown, we had -- our focus was to get all the assets in the safe place. So we continue to march vehicles into what we call safety zones, which are designated stockyards of ours or our partners across India. And we are able to successfully do that and very -- less than 8% or 9% of all our vehicles are still probably in dhabas or petrol pumps, in those kind of places. So we are able to secure all of that. Obviously, as I said earlier in my comments, probably half our drivers, a little bit more than that, as the lockdown progressed, especially after the first few weeks, started trying to find their way back home, right? Some of them who are in the same state, basically, they found it easier to go back home, of course. And some of them across states also had to shift rides and so on and tried to get back home, right? But we are still in touch with many of those drivers. Our partners are still in touch with many of those drivers through this period. So there was -- I think the second half of April was particularly -- I think the middle and second half of April was particularly a tough one because it was really unclear exactly how the lockdowns and all will open up, especially when lockdown 2 happened -- when 2.0 happened. But since then, obviously, things have started relaxing. There's also been a lot more clarity and interstate vehicle movement has been allowed. It's not been easy. There's still a lot of cases of vehicles get stopped, right, despite the government -- repeated government clarification on this. So as things stand today, we are marching the fleet that was stranded towards the end points. So that's well underway. And I think in the next -- in the coming weeks, we'll be able to ensure that all those vehicles are reaching their destination points. We are, of course, calling back drivers from their home locations or wherever they have gone. That's work in progress, and that is actually what's causing the delay. Fortunately, now interstate movement of buses has been allowed. So it becomes a lot easier for drivers who went home can take buses and come back to these places, right? So that's been a focus. And hopefully, in the next few weeks, that will get sorted out. The next wave of challenge will be ensuring that drivers who are with the vehicles today stayed with the vehicles on the way back, right? So there is a risk obviously that drivers who have been stranded will reach their end points and leave. Either we are working closely with our partners and the drivers on that. Through the period, we've done several things to support the drivers, both in terms of relief programs, temporary shelters, even testing them. We've done testing and medical programs for them. So we've done some work with them and also -- and some other assistance programs. So we are hoping that it will translate into a stronger callback of our driver community. But that is still work in progress, Manish, right? And then as far as return load is concerned, I think you've seen a lot of people basically passed on COVID surcharges to customers. So I think through this period, you're obviously going to see some level of price inflation. And it's always higher than this market-based truck as opposed to contracted relationships. We are hoping that we'll be able to mitigate the impact of that. Obviously, if -- we have -- well, I said we have all our partnerships are pay per use. They're also large partnerships. And our company have deep and long partnerships history with our suppliers. So there will be deeper relationship than just a contract, right? And so we are hoping that we can mobilize those vehicles and also manage to mitigate the cost impact, right? But right now, there is inflation and cost increases. And obviously, a lot of that's being passed on to customers.

So you are able to pass it on. Is it fair to assess that you're able to pass it on?

Yes, absolutely. Large vehicles are being passed on. [ Trucks ] are being passed as well in the general trucks as well. It's different by different segment, different asset category, different kind of trucks, different kind of routes. You have different demand/supply issues. But yes, correct, where you see inflation, we are passing it on to customers.

The next question is from the line of Abhishek Ghosh from DSP Mutual Fund.

Just a couple of questions. How are the road freight rates now given the entire issue of driver availability and trucks being stuck in transit? And if you can help us with the spot rates and the typical way that you -- the way in which you work in terms of having contracted. So how are the freight rates movement there?

Yes. I think, Abhishek, as I mentioned earlier, freight rates have been increasing, right? And there has been an underlying impact. And that's been because of 2 reasons I largely pointed. One is the scarcity of drivers. And the second one is the absence of return load. Because sometimes, we are shipping from a green zone to a yellow zone or a red zone and there's no return load from the red zone back to the location. So essentially, therefore, the customers have been charged for both ways, right? So to that extent, there is inflation. And obviously, the inflation on the spot rate is higher. It's hard to use a single number to quantify this, Abhishek, because it depends in a lot on 2 things. One is what is the route you are going on because every route has different hubs and different demand/supply patterns. And the second thing is what is the asset category you are looking at, right? So it depends a lot, right? So if you want an example, on a car carrier, probably you might see lesser price pressure than you might see in a 20-foot vehicle because the demand/supply equation is different or some higher traffic routes will obviously see more pressure. So I will resist the temptation to give you one number which can be used across the board. But there is clearly inflation. For us, as I said, a lot of our partnerships, while they are very structural, obviously, they have a cost per way. We obviously -- when we're negotiating with these vendors, we look at the overall size of the business we are looking at. That is specific to customers, lean, [indiscernible]. And those contracts, obviously, are clean sheet -- got clean sheet cost, right? So we look at costs from a bottoms-up perspective. So we see inflation. We are discussing that with our partners. Actually, in many cases, we are able to mitigate the full -- mitigate part of the impact of it and ensure that the rest -- whatever the impact we see is being passed on to customers.

Okay. And sir, your depreciation on a sequential basis seems to have moved up sharply. Anything to read there?

I think largely driven by the accounting standard sales, but I will let Yogesh answer to that.

Yes. So your question primarily should be versus last quarter, right, Abhishek?

Yes.

So there -- one, there is obviously additional CapEx, which we've invested, and that comes through depreciation cycle as well. However, there was also certain reasons which we had signed for short term got extended. In a sense, we got those contracts with our customers. And hence, our facility providers also extended for a longer period, which then means that we would now have to account for them as per the new accounting standard. So there was this catch-up or a onetime impact as well there. So the delta, which you see in Q3 to Q4, almost 50% came because of a onetime impact. The balance is because of increase in investments, which has gone through depreciation cycle.

Okay. And in your cash flow statement, the line item referring to the repayment of finance fee obligations, that is largely debt repayment? Or it is some other nature?

No, that should be repayment of finance lease obligation, that is only your lease charges only. It's not a loan.

Abhishek, can you probably -- if you can send us a note separately, probably Yogesh can dial you to more detail on this.

I'll do that. I'll do that.

Due to time constraints, we will be able to take one last question. We take the next -- last question from the line of Alok Deshpande from Edelweiss.

Yes. I had a much more fundamental question in these difficult times. See, at a very fundamental level, we are sort of going to clients to sort of convince them to sort of outsource some of their noncore logistics activities. Now if -- I mean given this year is going to be a very challenging year for many sectors, do you think that most of the clients would sort of -- at least the new clients would sort of postpone their decision of outsourcing logistics? Or am I just sort of reading it wrong or they would rather aggressively outsource logistics? How do we see this?

Yes. It's a good question. And I don't think I have a perfect answer [indiscernible] and solving a lot of my life problems. But let me take a shot at giving our best view on this. I think the way we look at this is obviously customers are going to go through challenging times, and they're going to -- and they will probably look at saying whether we want to outsource different areas of work. We just understand, I think, to a large part, most of our customers do already outsource transportation quite significantly. And that is already outsourced today, right? And also on the distribution side when they're distributing products, a large part of the supply chain is also outsourced. So they are not really looking at -- to some extent, therefore, they are not looking at their new outsourcing. Most of our existing customers probably are outsourcing a bunch of that, and we do think that they could ask themselves a make versus buy question. But really, they are not just always outsourcing for cost alone. They're also outsourcing for capability. So obviously, there's the incumbent drive on us to provide more productivity and more efficiency to them, but I don't see it has fundamentally changed the decision of outsourcing in many of our customer's cases. What I think to happen more will be that if their growth plan gets truncated, obviously, they might not expand as much as they might have otherwise expanded, right? So that -- there might be some difference in those plans. But intrinsically, I think what they are already doing right now, I think there will be obviously some that may increase in competition. There will be higher expectations to partner with them to provide them cost and productivity improvements, but I don't feel that will change the fundamental outsourcing choices. Where we think there will be some impact or there could be a broader tangible extent you're -- the lines that you're pointing could probably sometimes be in-plant operations, where all in-plant operations, where customers might see that we already have excessive manpower of their own and they might decide that with the sharp drop in volume, they may decide to in-source the work and not work with partners like us. So that is possibly a trend which we are watching out closely for and working with our customers in that area. But on transportation, on distribution logistics, I don't think the inherent characteristic of outsourcing will change. So there might some definitely in terms of projects.

Sure. That's very helpful, Ram. And just one question on people transportation segment. Now what we are hearing with other IT companies, et cetera, that even after the lockdown opens and even later on, there are plans to have a lot of people working from home later on. So does this kind of decision coming out structurally affect that segment? Because you're not going to have that people going to work then.

Yes. It's a great question. And I think, obviously, there is something which on the mobility side -- let me say this way that on the enterprise mobility side, we have headwinds and tailwinds. The headwinds clearly are the fact that there is a likelihood that obviously return to work will be slow. That is fundamentally return to work. When you say -- it really is work from home and there is a staggered return to work across locations and sites. And therefore, even if some companies fill their offices, they may do it slowly, okay? The second thing is there might be a larger fundamental trend towards the employees working from home. And obviously, there is a lot -- fair amount of press coverage which indicates that headwind as well, right? So both of those are probably more final articulations of what we have already stated. But tailwinds are a couple of things. The first tailwind is obviously that we think depending on segments, our research shows that some level of employees were bound to come back to work. In some segments, work is as much -- work is broader than just coming to work into an office and a cubicle. And therefore, there might be -- on a broader level, there might be -- over a period of time, people may come back to work. The second thing that we are seeing as a big tailwind is that vehicle densities will come down. So what is to happen earlier is in our enterprise mobility business, if we have had a sedan and the sedan would have 3 customer employees, right? Today, what's going to happen, what we're seeing now is because of social distancing, even if we are returning to work, a lot of our customers won't have 3 employees. We will only have 2 employees or even in many cases 1 employee. If it's an SUV, which used to be a 7-seater with 5 passengers or 5 employees, today it's become 3, right? So essentially therefore, what happened is the number of employees, passengers might compress, but the number of trips are not compressing commensurately, right? So the number of trips we may run may actually still be the same, right? Even let's say if you're -- let's say for companies contracting us to move 10,000 employees before COVID-19, even if it becomes 5,000, because they reduce the vehicle, reduce to the half, the number of trips that we do will still be the same, right? So those are the tailwinds. So I think we are seeing a mix of both happening right now and early signs are at best conclusive because I don't think there's one clear secular trend coming from it. Every customer is kind of responding differently at times, right? What we think -- so we'll have to wait for this to settle down. We see the headwinds and tailwinds play themselves out. One thing which I think COVID-19 will do for the enterprise mobility business is I think we'll increase the service standard delivery, right? So over the last few years one of the challenges has been just the vehicle quality is, right, and there is a very wide pricing corridor. So obviously, I think what will happen now is customers are going to expect much better service standards. They're going to expect vehicles to be clean. They're going to expect proper chauffeurs and more drivers. They're going to expect good sanitization of vehicles, good air quality. And what that actually lends well is it does mean much better for organized players like ourselves who are very focused on the value proposition already. So I would say it's a combination of factors, and I wish I could tell you clearly the business and one direction we see. But I must confess that we do clearly see one direction emerging. I think we'll see a period of softness for sure because I think return to work will be slow, right? But thereafter, it's hard to clearly call out what this ends up being. So we are working on multiple scenarios right now, and we are expanding offerings, right, drive better -- drive more innovative solutions, right, and expand our on-call business I talked about earlier and do a few other things to kind of expand the addressable market for us.

We will take that as the last question. I would now like to hand the conference back to Mr. Rampraveen Swaminathan for closing comments.

Yes. So thank you all. I hope we were able to do respond to all your queries. And obviously, as we gear up for revival of demand and the gradual uptick in manufacturing, then obviously, there will be a greater need for logistics and covering at the shortage of drivers and managing short-term increase in capacities and managing the freight price [ dynamics ], which were mentioned earlier, would pose challenge through sector revival. Obviously, across end market, entire value chains have been impacted, from raw materials and packaging, material supply, demand products, manufacturing plants to logistics and to transport and retail. So we expect that all this will probably take 2 to 3 months to kind of stabilize. And we'll be roughly in that window of time before the logistics industry is able to recover post complete lifting of the lockdown. Taking all these into account, I think we are expecting that window for return to normalcy as well. Obviously, for us, the agility of our business model being asset-light and having a strong partner ecosystem, we believe, would help offer catalyst, right, through faster recovery, ensuring safety of our employees. And continued support of our employees with these partners and customers will be very important for us. And we believe that as an integrated system, we will be able to pass through this difficult times and emerge as a much stronger company than ever before. And as I said earlier, we continue to track our execution of our strategy. We continue to make strong progress on those elements. We will continue to focus on share of minds with customers, employees and partners. So we feel strong -- we feel good about the medium and long term clearly while remaining very focused in addressing the challenges of the short term. So with that, let me just thank you all for joining us today. I hope we've been able to answer all your questions satisfactorily. However, should you need any further clarification or you like to know more about the company, please feel free to contact our team or SGA, our Investor Relationship advisers. Thank you once again for taking the time to join us on the call, and I hope you all will stay safe. And wish you all the very best. Thank you.

Thank you very much. On behalf of Mahindra Logistics Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, we will now disconnect the lines.