Mahindra Logistics Limited (MAHLOG) Earnings Call Transcript & Summary

Good afternoon, everyone and thank you for joining us on the Mahindra Logistics' Q3 FY '21 Earnings Conference Call. We have with us Mr. Rampraveen Swaminathan, MD and CEO; and Mr. Yogesh Patel, CFO of Company. I hope everyone got an opportunity to go through our financial results and investor presentation uploaded on the company's website and stock exchanges. We will begin the call with opening remarks from the management, following which we will have the forum open for questions and answers. Before we start, I would like to point out that some statements made in today's call maybe forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you yesterday. I would now like to invite Ram, MD and CEO of Mahindra Logistics Limited, to give his opening remarks. Over to you, sir.

Thank you, Shogun. Good afternoon, everyone. I trust all of you and your dear ones are well and keeping safe in these challenging times. As Shogun already stated, I hope all of you had a chance to look at our results and the presentation, which has been uploaded on the stock exchanges and the company's website. As always, in my opening comments, I will share some updates for the industry, how our end market segments are performing and we'll also touch upon operational and financial performance for the quarter cost and 9 months of FY '21. Overall, the quarter under review saw a continued acceleration of our strategy, focused on delivering customized integrated solutions to enterprise customers and supply chain and mobility. During the quarter, we reported our highest quarterly revenue levels with contributing to EBITDA impact. Let me talk a little bit about our 2 segments: supply chain; and mobility. Beginning with the supply chain segment. In the supply chain segment, the broad recovery we saw in Q2 has continued to accelerate itself in Q3. In addition to structural improvements, growth was driven by consumption returning to pre-pandemic levels, accompanied by the the uptick in the festive season. While the growth has been witnessed across all our end markets, let me touch on each of them individually, beginning with the auto, farm and engineering business. On the Indian automobile sector has been trying to cope with the slowdown even before the pandemic, which was obviously aggravated by the outbreak of COVID-19, and the sector has now gradually been making a recovery. As companies pick up pace despite these challenges, we saw a strong turnaround in the auto sector in the third quarter. Rural -- and that flow through our demand as well. Rural and semi-urban demand continues to remain robust on the back of higher Kharif output better cash flows and strong rabi sowing, translated in the strong demand for tractors over the last few months across our OEMs, including M&M. During the quarter, we saw a continued uptick volumes driven by these factors and accelerating in some measure by the festive season. Auto OEMs have shown strong improvements, and the industry across has done well, especially in Tier 2 and Tier 3 cities, translating to positive volume growth for our customers and in turn for our -- us -- for us as well across all our accounts. Our auto volumes were impacted to some extent, unfavorably, the supply chain challenges in some of our key OEMS. But overall continues to show a strong underlying trend. Our farm demand remains extremely strong in the quarter with strong growth in all our OEMs in that sector. And obviously, we saw some offtake in the southern part of India in preparation for Pongal and the festive season there. In the manufacturing, engineering side outside auto and farm, our volume growth was visible. Growth was driven both by expansion in existing accounts as well as increasing volume from new accounts. On the flip side, one of our larger auto OEMs in Maharashtra announced a shutdown of their operations on the part of the sale of their manufacturing operations in that area, that shutdown is effective December 31. This will have some impact going forward, but we estimate that to be offset with new accounts, which we have commenced business with. Moving on to e-commerce. E-commerce continues to see really strong growth as all companies start accelerating the shift towards digital channels. Market places have also increased their focus to adding more suppliers to their systems and platforms. In Q2, we saw an underlying improvement in addition to pent-up demand on the back of the pandemic as e-commerce came to the floor as the preferred mode of shopping for many. As you look at Q3, the e-commerce platforms continue to gain popularity as customers see the convenience and safety of having their purchases delivered at their doorsteps. In this quarter, we saw a strong demand, right? Especially given the peak driving volume in October and November. So we did see some unfavorable impact because of supply chain challenges from East Asia, which had some impact on durables and electronic products, which have -- where we have a strong presence. For our business, we saw 3 positive trends. Firstly, peak driven volume with higher volumes for our processing and fulfillment solutions and an increase in transportation volume. Secondly, we saw a strong focus from our customer partners to expand coverage. And this was something really with the service with our Flex and pop-up solutions, which we talked about last quarter as well. Lastly, we have been able to develop and expand our presence in groceries and essentials products and launched some fulfillment centers for those signings in the last quarter, and we'll do so this quarter as well. As we look into the future, we expect the demand from e-commerce will continue to grow. We have strong customer partnerships and fundamentally push COVID customers, who continue to adopt the convenance offered marketplace in digital channels. We also expect to see a strong growth in electronics and heavy and bulky products in the coming quarters. Moving on to the consumer space or what we call consumer, pharma and telecom. We continue to see positive traction in durables, FMCG, pharma and apparel, while volumes clearly have saw -- exceeding to pre-pandemic levels. The festive season has also been a catalyst for some segments such as apparel, which has shown strong growth for us. Post pandemic, most companies in FMCG, durables, apparel, pharma have had to review their distribution fulfillment models with increase in attention to omni-channel systems and digital channels. Consequently, companies and our customers, have been redesigning their supply chains with higher focus on digitization, multimodal fulfillment and B2C models. And all of those have translated interest is a good uptake for us as well. Telecom services have been -- now in the telecom segment for us has remained sluggish, despite the growth in the sector. Most of our customers have been focusing on -- working on the 5G upgrades. And therefore, there's been a sluggish volume trend in the short term. But we expect that, that will be followed by a spurt in demand that in the near future as companies start accelerating that move towards 5G. As all of you are aware, India has launched, what is arguably the world's largest COVID-19 vaccination program. COVID vaccine distribution present several opportunities for logistics companies such as ourselves around domestic warehousing, transportation, cross-border logistics and last-mile delivery. The initial phases are obviously closely monitored by the government with distribution, last-mile delivery largely through government managed systems. Our special handling skills, the need to maintain product integrity and monitoring the movement of vaccine closely are some requirements, which enables 3PL companies and logistics players to maintain and provide a significant value proposition. We have not seen a significant flow through or a material flow through of volume from COVID-19 in Q3, but we remain focused on building long-term cross-border solutions for pharma companies, who are manufacturing vaccines and also supporting them on primary storage and distribution, and we expect to see some flow through of that starting the next financial year. And lastly, let me talk a little bit about commodities and bulks. Our strategy for this segment, and we have covered this earlier, remains focused on selective customer partnerships, where we can offer strong customer value through inbound and distribution, leveraging network optimization. And we continue to remain focused, right, on that strategy, while also trying to ensure profitable growth and positive cash yield from the segment. So overall, I think it's been a strong quarter for us from an end market perspective and it's a trend line we hope to continue to accelerate as we look forward. At the supply end or the back end of the supply chain business, there we have seen -- we have obviously seen some moving parts there. The freight forwarding business continues to see some level of tighten like globally freight forwarding rates has seen a strong surge, and this has impacted rates on East Asian and European with more blunt sailings by several carriers. This trend is expected to continue in the near future. I think we've done a strong job in using technology and analytics to be able to forecast our business and manage the supply side well there, but requires continued engagement there. In the domestic market, line haul truck availability has been impacted by fuel price hikes, seasonal demand pick up and liquidity crunch, which many transporters are facing. The farmers' strike has had some impact to our operations in North India, especially with the movement of the close to Punjab, Haryana and Jharkhand. These trends have put pressure on our cost, but we have been able to maintain our contracted service levels with customers and have cost reduction programs, which have largely mitigated the impact of this. Overall, across the segment, we have seen an uptick in demand for integrated customized solutions. During the quarter, we were able to score some key wins. For one of India's largest consumer durable companies, we are -- we will be starting providing end-to-end supply chain solutions, which manages the entire supply chain from vendor to distributor. We also have expanding our distribution solution in North India for a large pharma company. We went live during the quarter with a leading defense manufacturer, providing them some comprehensive warehouse management services. And on the e-commerce side, one of India's largest marketplaces, we have commissioned a large grocery fulfillment center in Eastern India. We also -- we're also partnering with a large food distribution marketplace with solutions for the upcoming grocery initiatives. For the -- in the auto outbound business, we have one business with a large leading European OEM as their exclusive distributor for their passenger cars and SUVs. Most of these accounts predictably have not seen an impact in our revenues in the quarter just passed and as typically with our programs and new accounts that is a lead time before they start hitting our financials which they believe 3 to 4 months based on the nature of the solution in the program. Although we continue to see that strong uptick in terms of order intake, right, built around our -- kind of our strategy around customized integrated solutions, with a strong biased towards fulfillment logistics. So with that, let me move on to the enterprise mobility segment. Our enterprise mobility business as all of you have seen from the results remains severely impacted by the pandemic. Most companies are continuing to follow work-from-home policies, and this has impacted the number of commuters and our trip level. While those headwinds continue to be there, we have made an aggressive effort to add customer accounts from manufacturing e-commerce companies, and this has helped offset the sharp decline from IT enabled services and banking, which is our traditional markets for mobility. It will be several quarters, we believe, before we see a full recovery. But we believe the long-term dynamics of shared mobility for both work to home and business travel demand remains positive. We have been focused and we continue to be focused on driving cost optimization and service expansion and we'll sustain that strategy while a recovery curve emerges. Let me now talk about our financial performance for the quarter ended December 31. Our revenues for Q3 increased to INR 1,047 crores compared to INR 908 crores for the same period last year, up 15%. Revenues were sequentially on a quarter-on-quarter basis, up by 26%. Revenue from our supply chain business contributed 96% of our total revenues and enterprise mobility contributed around 4% in Q3 FY '21. Our gross margin for Q3 stood at 9.9%, which compares to 10.3% for the same period last year, a decline of 46 basis points. The year-on-year GM decline was impacted by 2 primary factors. First be the volatility in transport supply due to fuel pricing availability resulted an impact in margins and transport and that had an impact on our overall mix. Second is new projects which we have launched during the quarter, also have a typical margin ramp up and had slower margins as the start-up phase. We expect our new project on margins to stabilize in the coming quarters, as we had seen for projects which got launched last quarter as well. Our EBITDA for the quarter is at INR 55 crores compared to INR 44 crores in Q3 FY '20 and INR 46 crores in the sequential quarter of Q2 FY '21, an increase of 20% sequentially. Adjusted EBITDA for ESOP and RSU charge stood at INR 57 crores in Q3 FY '21. Profit before tax is up by 17% from previous INR 21 crores to -- in last year to INR 25 crores in Q3 FY '21. Our PAT was up by 24% to INR 18 crores and PAT margin -- sorry, PAT was up by even by 17% to INR 18 crores, and PAT margins in the quarter stood at 1.7%. PAT adjusted for the RSU charge was up by 9 -- 8% from $18.37 crores to INR 19.9 crores. Our proportion of revenue from the Mahindra Group comprised 49% of our total revenues in Q3 FY '21 compared to 48% in Q3 FY '20. Let me talk a little bit about the segment of breakup of revenues as well. Revenue from supply chain, obviously, increased from INR 817 crores to INR 1,098 crores in the quarter just passed. Enterprise mobility segment revenues stood at INR 36.9 crores for Q3 FY '21, down to approximately 60% from a comparable quarter last year. The supply chain segment revenue has obviously seen a continuing impact of our strategy execution as well as the overall recovery and the uptick in the festive season demand. Our revenue from the Mahindra Group Supply chain business increased from INR 424 crores to INR 508 crores, a strong improving performance, driven by both a continued acceleration of farm business and by recovery in the auto business. Our non-M&M SCM business grew from INR 392 crores to INR 501 crores in Q3 FY '21. This was obviously driven by our compute growth in commerce, freight forwarding and consumer and pharma verticals. Growth in e-commerce and consumer segments continue to see a increases of demand and because of deeper penetration with existing customers and our continued growth in our integrated services portfolio. Our warehousing and value-added services for non-M&M SCM, which is a core strategic focus has grown from INR 121.9 crores in Q3 last year to INR 164 crores in Q3 this year, registering a growth of 34%. Share of warehousing and value-added services in the non-M&M SCM business has reached 33% in Q3 FY '21. We can truly see obviously strong growth across all parts of that segment, including auto, e-commerce, consumer and pharma and freight forwarding. We tend to -- our focus on maintaining our cost and cash flows on remains strong, cash and cash equal at the end of December 2020, was INR 188 crores compared to INR 113 crores at the beginning of this financial year. Before I open up for comments, let me just stop off by talking a little bit about our broader strategy execution. As we have done over the last 9 months and the quarter just passed, we remain focused on executing our 4 strategic platforms. Our first platform is our focus on integrated solutions, and we continue to accelerate that growth, as you can see in our numbers, with a strong order intake for integrated distribution, fulfillment and sortation solutions and network optimization. We continue to expand on our targeted services lines in addition to our historical strength in line haul and mid mile transportation, we have seen strong growth in our freight forwarding business, which has continued to grow through this financial year and has actually registered a 19% growth in the quarter just passed. Our express services have grown by over 40% in the year-on-year in the quarter, which is competitive. And during the quarter, we also launched EDEL, our electric vehicle based last-mile delivery solutions. Initial customer feedback on that has been extremely positive. We also continue to provide our customers multiple offerings through expanding set of of real-based services, and we've seen a strong growth there as well. Our third strategic platform is operational excellence, and we continue to invest in developing deeper functional capabilities, driving cost reduction and expanding our warehousing equipment. During the quarter, we have contracted further built-to-suite warehousing infrastructure in Northern India and near Mumbai as would have noticed, we are -- that we expanded our warehousing footprint by 1 million square feet during the quarter. And over the next few months, the several -- 2 sites are likely to be commissioned. Our fourth and last platform is digitization and innovation. We have launched several new systems this quarter with upgrades to our transport management system, a new warehouse management system just focused on fulfillment logistics. A new HR management system and an integrated site management platform. Through the mobility sectors cataleptoid incubator programs, we are partnering with 9 companies, focused on technology, innovation, automation and transformation, last-mile distribution and warehousing. The quarter past has been strong and improving quarter driven by the exceptional efforts of our entire team, focused on delivering results and continue to invest in our partners and communities. We remain pretty optimistic about the future economic environment, continued recovery and hope the upcoming budget will be catalyst for future growth. With this, I open the floor for question and answers.

[Operator Instructions] The first question is from the line of Depesh from Equirus.

Congratulations for good numbers. So if you look at the Mahindra & Mahindra overall volume for the third quarter, it is shown as low single-digit growth. While your growth in Mahindra supply chain business is 20%, which is more like your farm equipment volume growth. So just wanted to understand how to read this? And it will be helpful if you can give a set of contribution from the farm equipment, passenger vehicle et cetera? And has the mix changed dramatically this quarter?

Yes. So I would say that, I mean if you look at our overall growth, which is roughly around 20%, clearly, stronger growth, Depesh from the farm sector. Our farm sector volumes grew to over 30% during the quarter. And so obviously, that has been a strong catalyst for our overall group performance on the M&M side. That's not -- you bear in mind that volume by itself not a direct correlation. Since we run miles, it also depends upon the distances covered, the destination, the lanes which we are -- which we want the vehicles on and the transportation services on. But broadly, in farm definitely was a stronger contributor on from a growth perspective. Overall, though, I think our balance remains a great move towards the auto side. The auto segment for us did grow at double-digit as well, driven both by growth on inbound network optimization services, we provide them, growth in spare parts as well as outbound of vehicle movement in the auto side. So a combination of those things I think did result in -- and kind of a double digit growth in the auto side as well. From a portfolio perspective, we are still waited more heavily towards the auto side then the farm side on the M&M business.

Understood. Secondly, sir, I just want to understand the increase in the depreciation of the interest cost in the quarter 3 numbers. Your presentation mentions that this is on account of higher volumes on the warehousing services. Can you please explain that? And how should we think about it going forward?

Yes. I think the commentary is right but i'll probably -- Yogesh, I'll ask -- I'll let Yogesh take that more speciation. Yogesh, you want just talk some detail on that?

Okay. I was on mute. Depesh you'll have to repeat that question for me please?

Just want to understand the increase in the depreciation and the interest on the quarter 3 numbers. Your presentation says that it is because of the increasing volumes so that I didn't understand.

Yes, sure. So I mean, if you recall post adoption of Ind AS 116 which came up last financial year, the lease charges, which we pay for our warehouses now gets accounted under depreciation and amortization line, combined with interest line. So these -- I mean, earlier, this -- these charges were directly in as rental cost or direct cost it self so that piece is -- I mean, in our share of business, also, have you noticed over the years that we have had quite a bit of shift in revenue mix or business mix where we have higher component or growth in warehousing services itself. So that piece -- cost related to that piece does get accounted under these 2 line items, and you see the growth there in as well.

So does the lease charge increase the volumes?

The volume from a space perspective, volume not from a unit handled perspective.

So this is a base going forward, this is how it should be going forward also?

Yes.

I think Yogesh has -- just to add to what Yogesh said as our warehousing-based solutions businesses growth, you will just see the increasing amount of square feet of warehousing and therefore, you will see that having representation on 2 line business's.

And sir, one thing that's why because of warehousing space is like kind of decreased to 17.2% from 17.3% last quarter, but the depreciation number hasn't increased. So that's why I was working what is driving this. Is this because of Flexi warehousing solution, is that also coming into play?

So Depesh last quarter's number was around 16.4% 17.35%. Because unless and until you had added that launch of BPS what we had mentioned as well. So those BPS what we had launched was in the quarter towards the end so the full quarter impact of that came in.

The next question is from the line of Ashwini Agarwal from Ashmore Investment Management.

Congratulations on a good set of numbers. A couple of things. In your opening comments, you referred to a large auto customer who's shuting operational effective December 31. So obviously, this impact flows into Q4. Can you give us a sense of how large this might be relative to overall revenues?

So Ashwini. No. So, yes -- so we have shut down -- so the operations impact in our business, we provide them stores and line felid services in their plant near Puna and the overall financial impact of it in the broad scheme of things is very marginal. It's one of our smaller contracts and therefore, it's already offset by new business, which we have won Ashwini.

Okay good to hear that. And second question is, on your people transportation business, I mean, it's already reduced to a fairly small number and I'm guessing that, this will take time to get back up to normal levels over the next 3 to 4 quarters as more and more companies seem to be talking about flexible attendance at work especially in the IT and IT space. So as our core warehousing and logistics management and various other businesses increased, would it make sense to continue with this business line, which has been very volatile and has been a source of pain for a couple of years now?

Yes, Ashwini, it's a good question. And I think I mentioned last quarter that we will, at the right time, to a broader strategic assessment of the business. At this stage, what our hypothesis is that this is a 12 to 15 months, 3 to 4 quarter window, right? Once the vaccine settles down, in order of priority, I think people will obviously choose public -- choose personal transportation and shared mobility over public right? We also believe that companies and employees on companies as they come back to work will also have having higher action on safety and security. So while the next 3, 4 quarters will be challenging for the mobility space, there are 2 positive tailwinds. One I think is that we are the market leader in that space. So we expect that when the recovery comes, we will probably gain strongly from that. The second thing, obviously, is that once the industry will see some amount of restructuring within the competitive landscape as potentially the fewer players emerge out of that situation. And therefore, we are optimistic that over the next 3 quarters, if we -- if you continue with our strategy, Ashwini, we will still have a pretty strong and robust business. Now -- and that kind of our hypothesis around that because you look at saying, how can you expand the business. So I talked a little bit in my opening comments about how we are focused on e-commerce and manufacturing in order to diversify our segment base. Last quarter, I talked to you about the fact we're launching some on-call -- we launched on-call services and tried to do some service line diversification. This quarter, we will invest in doing market diversification. So we are making the tactical moves to supplement now this -- kind of the strategy of slugging it out with cost optimization and kind of these initiatives and waiting for the recovery to come out. Now from an overall scheme of things, obviously, we are now at 96% supply chain logistics company and we are only 4% on mobility. So one has to strategic look at saying, what's the best way to structurally balance these markets and this segment, right? And that's something which we will strategically look at the leadership of the company in the coming few months.

Okay. And last question, I wanted to ask was on your express side and on the B2C side, my understanding was that historically these were kind of large packages, especially on the B2C side, last-mile delivery, where you would do washing machines and large-format televisions, et cetera. I also heard you talk about doing a new contract where you're doing some fresh food supplies and things, these are B2B right? B2C continues to be limited to these large-format deliveries?

Yes. So we do -- so I think, Ashwini ,we have said earlier, we are largely do our express business is a B2B express business, and we provide that as a integrated portfolio. And our last-mile delivery business has historically been dominated by large package, right? Heavy bulky stuff. We do, do some movement of small process, but it's not a very large part of our revenue base and on that mix continues right. With EDEL, we are obviously seeing and expecting to see some expansion in that small package volumes because we are in many use cases, now we're able to demonstrate how an EV-based delivery system is both sustainable and cost-effective to our customers, right? And we are seeing some early traction on that. The coming quarters, we'll probably talk to the quality of that strategies rollout. But that will be one beach head for seeing with some increased growth in B2C. But otherwise, our strategic focus remains on to B2B. And the reference I had in the growth -- on the food delivery company was really around working with them on the grocery side of the business, not on the local food delivery side of the business.

[Operator Instructions] The next question is from the line of Ankur Periwal from Axis Capital.

Congratulations on a good set of numbers. So first question on the warehouse a bit. Now there is a good revival that we have seen across the segment here, not only non-M7M but overall as well. So your thoughts there. One, as Yogesh earlier mentioned, a ramp-up of the last big warehouse, that has also been contributed here. But it is also Flex solution that we had started in the last quarter, which is contributing? What I'm coming from is whether this will be a base case, let's say, warehousing revenue for us, given this business is more sticky. And here on, probably there should be growth or there could be some one-offs?

Yes. So without getting into the [indiscernible] side. What I would say Ankur, is that, that's the, we expected to continue to see growth there. Right. And obviously, we are -- we talked about the payer contracting or obviously more warehousing space in multiple markets. And we have a strategy to build a nationwide spine in our warehousing footprint. So that's something which we expect to continue to see growth on. And as far as Flex solutions are concerned, you -- we believe that providing customers resilient and flexible supply chain solution is critical and is the new normal. As our customers try to expand reach, try to densify their network, but also deal with volatility in demand, there is a need to bring on and turn down capacity at short intervals. Therefore, we expect the Flex solutions as a model of -- as an offering for us and a solutioning offering for us. Will continue to be one of our stable offerings going forward. And it's increasingly now,Ankur moving away from just being a festive or a peak thing to really being a network expansion strategy as well. So somebody goes into, let's say, West Bihar and says that we want to actually drive penetration in the market. And can we actually turn on a short-term fulfillment or a forward of some kind to kind of provide short-term penetration. And once we see volume, visibilty and traction to then put in larger and more terminal network nodes there. So I think we tension to see this as a way of doing network expansion and also as a way of managing peaks and kind of volume ability.

Sure. So Ram, just a clarification. In your earlier opening remarks, you did mention scaleup in the integrated solution offering. We will be offering transportation as well as warehouse and maybe even freight forwarding here. Is that also a contributor to the growth there or that is still a small portion in the auto business?

So our integrated solutions with a new -- it's an articulated vision, which we developed as a business last year, saying that we want to actually put a significant amount of energy around driving that to our customers. We believe that all our customers have unique and individual supply chains, which flow from their individual strategies as businesses. So therefore, they do make customization. At the same time, as they increased variability and volatility. There is a need and value of integrating different elements of supply chain, warehousing, distribution, inbound transport so even within distribution between part truck load, full truck load and what is -- and we're uniquely positioned to provide that Ankur. So a lot of our newer business wins are actually accelerating around integrated solutions. So in my opening comments, for example, I talked about several of those wins. For example, grocery, we are doing FC plus, we are doing delivery, right, the end-to-end solutions for consumer durables company, that's everything that includes their entire warehousing, sortation processing, pan-India network, our par infrastructure, combined with its primary and inbound distribution plus secondary distribution to the retailers and dealers. So more and more, I think we are seeing that play out with our customers. I don't have the specific number Ankur, and I can say that to respond to it off-line, but you will -- but it is an increasing share of our order intake.

Just one last question. From a revenue ramp-up perspective and I'm referring both new as well as the older customer, will it be fair to say that all the client additions that we would have done in FY '20 would have start contributing to our revenues or there is still some bit of that is pending and there could be scale up there.

So I think it depends on the service line, Ankur. So on express, line haul transportation, and freight forwarding, I think the translation of win to order so what we -- that we measure -- we have a metric on more order to revenue ratios in terms of latency, those are pretty immediate. So those are probably a 30 to 60 days based on the nature of the service. But anything which is an integrated solution or warehousing base takes a longer period of time. So obviously, most of our order intake in Q1 and Q2 is reflected in our numbers. And you are seeing some of that show up in the growth, which you see there. In addition to the seasonal aspect, which flows to our existing volumes -- existing assets or existing property. A lot of the Q3 order intake is set to flow.

Your next question is from the line of Manish Goyal from Enam.

Congratulations on very good set of numbers. So just clarifying on ease of charge in current quarter in Q3 FY '21, is there any ease of charge, just want to clarify?

Yogesh, can you respond to that?

Yes, pretty much. Manish here is, I mean, you know our theme, what shareholders had approved is for 4 years. So this is third year underway, and there is a charge there.

How much is that for Q3 and for...

Would be around -- for 9 months, would be around INR 7 crores.

And for this quarter?

INR 2.5 crores.

Okay. And Ram, just on the -- sorry, Yogesh, just woke up again on depreciation number. See, as looking at the Y-o-Y number on service addition, it is just only 4%, whereas our depreciation increases quite significant increase even on if we see quarter-on-quarter basis also, it has gone up. So I believe, even last year, we had this IndAS 1 and 6 adoption already done. So I'm just wondering I like this quarter, Y-o-Y, depreciation is up 29%, whereas warehouse addition is 24%. So where there is a disconnect?

So, Manish. So on depreciation, I mean, I see -- I mean, the earlier question, probably I was explaining from a quarter -- I mean, sequential number perspective, but if you look at it year-on-year perspective, I mean, the depreciation has -- what a regular depreciation will be there of the 6 assets, what we would have invested in a so you know that services business is there is only places where we have invested capital and I mean, if I were to look at my last years, expand per se, it was a little over INR 50 crores. So depreciation of that, which not have existed in last year would have come and added in this year at it. So from that perspective, if you take this up, I mean, it will have components of both of these together. Second thing, Manish, when you should also have an edit for you here, the way those things come up is the older warehouse space where you have a declining scale on which amount is recorded. So newer ones can get additional higher charts.

Okay. And what will be the CapEx so far? Yes, I increase is also a concern of our investments into technology-related investments. So just on the current year, what will be our CapEx?

In 9 months cumulative INR 40 crores, I mean, INR 39.5 crores.

Okay. And just want to squeeze one more question. Just to get a sense on the mix of our non-auto business. I believe earlier, it was like e-commerce and consumer was roughly 50%. And so that number seems to be -- was remaining constant at 13% despite our revenues growing there. So just would appreciate if you can give us more clarity as to the breakup in our non-auto business and now which I believe trade forward is also growing. So if you can throw some more light into the breakup? That is one. And second related question in terms of 20 customers, we used to share a number earlier in terms of what the distributed contribution. So maybe if you can give us some concept as to how is the top 20 customers contributing all the new client additions, what even was referring to, so how is it shaping like new tape addition on, say, 1-year or 2-year going that we've always been growing in consolation from customers?

So think Manish, I think logistics elements in e-commerce, consumer and/or consumer and our fanfold increases together now Manish be close to around 75% of our overall revenue, right, on the non-M&M side, right? So those are strong activation in that story. So there is an happening there. And I think there is an overall net happening as well. So the tide is increasing across the board. And so the guide is growth at the level of the grid is increasing in all segments obviously, a percentage as in period of costs dramatically. One area that we have obviously seen is the commodity segment and is declining as a percentage of our overall non-M&M business following in -- which reflects our broad strategy, which I've talked about. So that's one. In terms of our top 20 accounts, top 20 accounts right now are a little bit less than 16% of our revenues. So obviously, that reflects both the account additions we have done. We have obviously added several accounts, which are all contributing to our business line, but it's not changed dramatically our larger accounts some of our marketing markets are pretty concentrated in terms of industrial orbit. And we can do this and within our existing accounts as well. So top 20 accounts today are probably a little bit less right but overall, this reflects both expansion in existing business, but also the addition of new accounts.

The next question is from the line of Prateek Kumar from Antique Stockburning.

Congrats for great results. My first question is, can you explain this last mile delivery venture this more in detail. So is this last mile, we understand were we not in last mile delivery earlier, and now we are looking to expand with this EVs? And how is this -- I mean, we are focused -- I mean, we are assessing more on EVs are making this business more remunerative. So would that not be had basin using ID vehicles. So I wanted this clarification on the last segment?

Do you have any other question

Second question is on -- I mean, on the remarkable growth for like on Mahindra So is this -- like October was like significantly strong because of e-commerce active sales or like the growth was -- remained part of it is similar in all the 3 months?

So I answer the first -- the second question. Yes. So I would say our revenues were -- the reason we flat across the 3 months. Obviously, we did see the Diwali month between Dussera and the Diwali itself, I think you've seen a higher blip when we would see our revenues, let's say, if I measure on a weekly basis, they were generally we do see that plus 60% 2021 in like that. We saw far size flattish -- a more flatter trend with obviously a peak in the weeks where Diwali and Dussera in. On the non-M&M side of our business, obviously, on a strong side of the business both in M&M and non-M&M, that's always a slightly to how the Diwali peak, but also had the unwell purchasing on the pharma sector is typically happening every year and therefore, at that patent. In terms of retail so I think our last business and I think actually answered this question earlier. In last-mile delivery, we have focus on the B2C side, we have a last year in the tenodesis special care by our business. On the B2C side, they have largely been, I think, a company we have been focused on larger appliances, durables, electronics and so on, where we have had a strong value proposition, where we do both the delivery station and the delivery sells, right, the physical last mile transportation, deliver to your house or home. We have been doing small package, right, or mid package last mile delivery as well, but exceeding smaller content. Over the last year, what we found is many more customers have been trying to figure out how to make that last mile remain sustainable and more carbon neutral. Obviously, as that business grew at 25%, 30% a year, for us, it just draws down from the growth of customers at as well. So it's -- as becomes a bigger agenda, many more customers have been saying, listen, can you provide us a solution around that. The challenge has been that as we have the right quality of assets but also having services, which deals customers and provide them the testator them, right, because you have to optimize the network and optimize the delivery routes, right, and not just having a base in itself is not enough. So we see there has some strong opportunities that we kind of work both in terms of product specification, which is a with a bit of 500- to 600-kilo payload with a larger cubic box, and therefore, allows you to manage a larger number of packages. wheeler allows us to have a very small basin footprint and allows a lot of flexibility to move in and out of delivery stations, in and out of apartment and so on. So the platform itself provides we expect provides us a degree of And then, of course, we provide a service, right, which is variable or based or based or tip rates rather than just giving like a monthly ranking kind of model. So that provide customers a lot of flexibility, and this is a lot more of B2C delivery. So this is no electrical appliances and so on. This is a lot of small package delivery. And therefore, the base on the growth of businesses, the share of our B2C last night delivery was growth. The value proposition to our customers, which are marketplace, there's other companies in FMCG, et cetera, who are doing small pack delivery to retailers of the end homes is really around providing them and sustainable Bale providing a lot of the contracting flexibility and the network flexibilities we have today with ICE in with the sustainability in fibers, which electric video competitive or comparable prices.

So our business partners will buy these inputs, which they were not buying earlier, and we continue to operate the way we are operating?

Yes. So we will have -- we are buying some amount of the vehicles in the initial say parcel. So over a period of time, it will be a partner-driven model as the rest of our business.

Our next question is from the line of Susmit from Motilal Oswal Asset Management.

My first question is you laid out in to year for a new company. That would be fair to say that you're even be 40% were out to sustain operation?

Yes. Shut, I -- can you just repeat the question, I can't hear you.

FY '26 of INR 10,000 crores revenue, so what would be the mix of warehousing and

Yes. So I think especially the feel is that, first of all, we see all of this as supply chain management, right, because we don't really own warehouses that provide warehousing based processing and storage solutions to our customers. Now if you ask a question saying that as a 3PL, we provide transportation, prorate on to solutions, there it's forwarding express line haul last mile. I electric now last mile or we provide warehousing based -- I mean crop plan warehouse-based solutions or we provide integrated sectors. So those are the kind of 3 elements in our basket broadly. And if you to ask me how much would be warehousing based and integrated solutions? Yes. So in our bridging of around INR 10,000 crores, our vision would be to have around 40% of our business come from pure-play warehousing and integrated section. So the combined warehousing and distribution to provide customers the unique end-to-end solutions of different bands.

The following up on that, what would be the assume that INR 4,000 crore revenue would see 5x by housing or is there a significant point?

Yes. I mean the 2 parts to it. I think, as you know, there are solutions which don't create long-term warehousing space. So I would say the 3 parts. First of all, just on your our question on footprint. Obviously, there has been increase in warehousing or on per se, right? So that's going to grow right, and we have to go to look to support this kind of projected long-term volume growth. Now if you are not executing to that we will have obviously pull out some the footprint. Now in addition to long-term footprint, we also take short-term solutions, footprints, which are like our Flex solutions. And those don't necessarily count is a long-term print suit because we had an led them as demand comes in and goes out, right. So they're not long-term sustainable footprint, but are just more short-term contracts in that sense where we see a real -- but there will be a bond linearity in the sense that for warehousing footprint will obviously grow at a slower clip than our overall revenue growth because of our shift towards integrated solutions. So when you do integrated solutions that combines warehousing and transportation. So for example, when we do a last-mile delivery of appliances when you do delivery of appliances marketplace or for consumer durables company, such as, what we are doing is we are running a warehouse, you have extatic where we store and process the equipment. But they also do transportation of that material into the warehouse and transportation delivery from there. So if you actually take the overall shape of business until, let's say, it's $100, INR 100 of revenue from that account of the operation, the warehousing part of that will probably be the rest 35%, 40%. The actually a transporting service, transport service. And what we do is you blend that all together into a similar service make for our customer. They compose that and there is a transportation piece and a warehouse in an analytics piece, which is all combined together. So footprint, therefore, as that grows, there will be nonlinear growth of revenue, but will actually lag that growth, right? So that -- if you ask me after us our if you're looking at a provision purpose are you going to increase warehousing debt? No, that will be a nonlinear point where revenue growth was obviously outpace the supply growth because of the transportation element in the our Integrated Solutions book. And

My last question is, first, one from the first of SCS started have you got any -- have direct in output easily or not creating goodness, having planned for that to be

I'm sorry. So I apologize.

The line is breaking a bit.

Can you just repeat can you just repeat that question?

Yes. I'm sorry, yes. So have you seen market, right? So the impact that we expect has one in the next year or 2? And have you heard from many clients to comp?

No. Trial runs have started. I do mean have obviously participated volume movement is yet to transition. I think to take a step back, I think we've seen that shift towards multimodal happening. And we've addressed this, obviously, on con calls and meetings earlier as well. I think multimode very well in a use basis. It is not always mean that there's going be a complete flip over of a switch from road today, right. And we have been supporting our customers with module solutions for quite some time. So if you look at the auto side, a lot more of vehicles are not transported through in this year, we've actually transported a lot of tractors as well through multimodal rail platform. So that is something which we are providing that solution or service for our customers already, in fact, the honorable Minister piyush Goyal, some of the tweets which he shared on tractor movement through rail, et cetera, was all services which we are providing for customers like M&M. So we've already been doing that. And then obviously a guidance but movement will move from NMGs from -- or under the AFT policy towards AFTs right. So you will see some of that shift happen now, but I think we're well geared to be able to actually manage and bid opportunities around.

The next question is from the line of Mukesh Saraf from Spark Capital.

Firstly is, again, a continuation to this integrated solutions that you were talking about. Just trying to understand, I mean, currently, for the warehousing business that we are doing, so basically, it means that there is somebody else doing the inbound and outbound or by the customer himself is doing the inbound and outbound. And so just trying to understand what would -- why weren't we doing already number one? And what would drive us to do that? So I mean is it something to do with, say, some ERP integration or customer getting confidence in-house doing end to end? What will exactly drive that, sir?

Yes. Mukesh, great question. I think the dominant change has been the creation of -- is the opportunity, right. So a couple of things, I think, have happened, right, in our marketplace. Historically, customers, I think, in India, from a risk perspective, would prefer to actually vulcanize the contract Let's say, a truck company of the inbound movement and company or noncompetitor the warehouse companies see the IT movement or it can express company for FTL, they make another company for FTL movement. And then I think the idea largely was in most -- was that you really want to derisk yourself and not grow all your eggs in one basket because you saw the downside of the upside of combined at. There were a couple here doing it, but very -- went far between. I think to try things have changed over the last few years. First one, I think has been extremely has been that the GST coming in, people have the opportunity to restructure the distribution infrastructure. But I think will larger warehouse and they start distributing more quietly, they actually have to take -- there to be more accountable for the in right? And therefore, there's a far greater need to say, how they sequence all this together effectively. The second thing is that what we've seen as digital keeps growing and now with forward happening is this incredible proliferation in channel. So if you are an apparel company like an you are now selling to modern trade like lifestyle or shopper stop, you are selling to exclusive brand outlets, you are selling online and you're selling to So some of them go with FDA, some of them go for truckloads, some of them just go in small package for, right. And interestingly, with time, these channels are junking themselves around volume, right? So it's not like it's a predictable pattern anymore. You could have November where you have one channel being very large volume at December where also channel is growing. And then you can have in January where all channels are growing in volume. So I think customers have realized that there's an incredible pressure on building in response to supply chain. And therefore, given these 2 parameters, the question is, how do I manage this a lot better. And a lot of our customers are obviously talking about this and the risk of missing delivery and fulfillment is greater is pretty large as well. So can we integrate all of these in a way where we get better inventory control, greater customer service stronger resilience within our supply chain, so we can respond to variability a lot harder, right? So those are, I think, external changes which are cashless assuming the cash for this opportunity for the lack of any other word. Now there are companies in our competitors who have definitely been doing that or company. We been doing purely on the fulfillment side of e-commerce and the players who have been doing bits and pieces in different What a change in our end, obviously, has also been -- obviously, as you've done our study started to work, we find that this was a core area where we could create value. Mahindra Logistics is well positioned because we have a large self-service lines. So we are uniquely positioned because we do FPLs. We do a mid- mile, we do PTL, Express. We now electric, we do freight forwarding. So we have -- and ensuing the warehousing and processing side, we have the turns. We have pop-ups. We have long-term storage solutions. We have EBITA contract manufacturing. So we believe that we are an embedded portfolio of different services, which allows us to create this value proposition more actively. In the strategic trust on doing that, and that's is asking the 2 ends of it. There's a demand side, which I think is by external factors and then internal move towards leveraging our existing capabilities and adding on to them, both expanding service lines. And of course, we're building the technology platform because today, we are able to integrate across all these service lines with unified technology platforms, which provide end-to-end visibility which allow us to do integrated and outcomes and the more opportunity do a lot more in analytics as well to bring supply chains in an integrated fashion alike. a longest answer to first question, but...

No, that was helpful. So just on continuation. So is it fair to assume that it's like a low-hanging through where you go to our warehousing customers and offer the transportation part of it as well and is it like a low-hanging fruit? And hence, you can see at least much of a new customer getting added for integrated solutions, existing customer kind of you spending on the transportation side of it? Can that happen really quickly? Like you said, we are seeing the benefit of that.

Cases not a low-hanging approach. It's a lot of work, obviously, hard work, but you to integrate all these solutions, right, and actually make them dance and time go together, right? So there are -- so you had -- there's a lot of capability development are in layer process layer as well as a technology layer to put all that together. There's also change from a customer end because while customers see the increasive benefits of this if you are going to partner end-to-end, you're also, in some ways, taking in risk across your entire supply chain. You can -- for us is a big response because we are the contracted performance business. We're in a marketplace where you just come and order a vehicle and the vehicle doesn't come in your problem, right. Along with these contracts from KPIs and SLAs and therefore, one has be very deliberate in and provide the solution. One has also got a very deliberative offering and solution to our customers. But it's not only will it have a big impact on our business. We also have the response of ensuring a impact on their business, right?

For the business substantially on delever. So strategy, and it's not a land grab, right? We are celebrate to ensure that we are attracting the right propositions with the right capabilities.

Right. Right. Is it also fair to assume that the integrated solution that we will be offering would a higher margin than just transportation plus warehousing because you mentioned that, that is that a lot more there's a check involved, et cetera.

Yes. I would say that I think the 3 things. I think 1 is compelling. So Strata, I think 1 is if it benefits. It's a lot more -- drives a lot more customer retention because they're providing more integrated portfolio of services. And therefore, you're able to get in customers because you're providing a larger value proposition is higher. The second thing is that you obviously will see a blend of warehousing and transformation-based services. So the only deal of this is the ability to get the higher-margin potential warehousing services with the velocity of transportation. So transportation always has a higher return on capital employed business, those margins are a bit lower. So our EBITDA planned we provide the operation to create a more attractive and finance profile. And the third thing which is actually as you do logistics is an The direct cost is actually greater is equal to the indirect cost, right? Because a lot of the being able to do all of it together, allows us to do -- remove inefficiencies from systems. So simplistically, if we can run the warehouse into transportation, you manage your ship better, therefore you resource the work a lot better, you don't have detections of we put part utilization and productivity than to improve. The technology allows you to plan the way you run your operations a lot more effectively. So there's a lot of opportunity to eliminate this, right, which builds our margin profile over a period of time.

We'll take one last question. We'll take the last question from the line of Gandhi from Mutual Fund.

Congratulations on your numbers. I just had a quick question on the figures that you've covered. Any metrics that you can provide with an since adopting a success heavy approach in the initial cases like I to logistics, just any sense on how much CapEx would go in respect to that as well? Any details that have to expect to that would be helpful.

Sure. So I would -- so I think first, I think I shared this on some other platform as well, but we do expect that over the next 2 to 3 years. We've built a norm company-owned fleet around 3,000 vehicles. And we expect that it will be INR 100 crores, INR 150 crores in terms of revenue has the potential at intact, clearing our initial velocity from our customers, both in e-commerce and other platforms, your interest is pretty strong on it, right. demonstrated in many cases the or package delivery to our customers or and therefore, we are busting the belief that the on a cost, right? Now in terms of more industrial auto business, in that fleet, a very small percentage of it, again, the initial space is actually basically assets we are buying. The fleet overall largely is going to be a part right? So over a period of time, as the speed is out, I think you will see that it can take a very normal characteristic. We will remain an asset-light operation, right, in large part. There will be a very small critical mass of of company-owned assets. And therefore, like I'll also say that our business has been profitable, right, overall price positive contributions from 0, right. We have been able to build -- had some start-up costs. But beyond that, more consistent operations on the first few weeks, our business has meeting financial targets. And therefore -- and consumption does not carry the cyclicality of the auto industry. So I do were to So there are 2 differences. One is the assets are not that expensive. You have to same subsidy most of these 3-wheelers cost comment INR 3 lakhs range. And therefore, the asset cost itself is much lesser. And the second thing, which is there is that consumption markets don't have the cyclicality with sometimes out of us. And you have seen some of that impact in our Q2 utilization in the last 18 months, but you obviously have taken a different utilization as that also volumes have come down. Now that is the scenario, which doesn't really play out so much because consumption by intrinsic a less difficult end line, of course, you need to have a of situation, but on a large part, is a lot more secular in a streamline, right? So we expect to see long-term utilization as well. They on towers from the financial characteristics of this. I don't know if you want as anything I missed, but if you have a feel a year now.

And just a follow-up on that also. Going forward, as the acetate and these technologies the cheaper, like how do you expect that to affect our metrics we continue in account in the future. How would that help us manage our costs as well as pricing strategies to for the consumers compared to the price reason?

So I think that -- I think the 2 trends, which are because of the positive trend is the hydrocarbon based fuels may not really get cheaper in the long term, right? So I think you've seen that the sharper increase in the recent parts, but waste probably stabilize, but will still remain -- I mean you some going out under $10 a BOE, right? So I think -- I mean you have this black swans, but trendy won't happen beta large part. So you'll see a bit of a close there. I think so in terms of the technology change in as well, obviously, I mean we are going to see the costs coming down, right? But you're also going to see vehicles becoming more not ice vehicles and attracted to. So both of those will bring down the capital intensity in the business, and that's actually a positive time line. That's one of the reasons why the we feel this investment initiative is important for us because in last-mile delivery and fleet applications, we think that over a period of time, as EV becomes more cost effective, there is a natural propensity towards using electric, right. Urban logistics is inherently slow speed -- requires slow speed, high maneuverability, the cost-efficient solutions. And electric in many days, supports that intrinsic quite well, right? If a has been some of the capital cost and the belief that -- and obviously, the applicability of that cost structure to different use cases. So with we are believing will be able to prove even with this cost structure that we can actually, in many use cases, be comparable, not price comparable, right? And obviously, our CapEx costs come down. There will be -- we will continue to see, obviously, I think a higher upside for electric vehicle-based solutions in the cargo and fleet space. seen last mile deliver the sweet spot, less than a ton payloads. So is really a sweet spot or EVs actually are good solution within a 200 kind of kilometer range. So we're optimistic about it overall.

Thank you very much. question to the last question. I would now like to turn the conference back to the management team for closing comments.

Well, thank you, everyone. I hope we've been able to -- thanks for joining us today. I think we be able to answer all your questions on However, should you need any further clarifications, if you like to know more about the company or follow-ups to the questions, which you raised today, please feel to contact our team or Investor Relations advisers. Like all of you, I think, a top to the budget will be a great catalyst for the year ahead. And once again wish you all a very happy New Year and thank you taking the time to engage with us. And thank you for taking the time to join us to be on the call. Thank you.