Mahindra Logistics Limited (MAHLOG) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Mahindra Logistics Limited Q3 and 9 Months FY '25 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mandar Chavan from Strategic Growth Advisors. Thank you, and over to you, sir.

Thank you, Zico. Good evening, everyone. Thank you for joining us on Mahindra Logistics Limited Q3 and 9 Months FY 2025 Earnings Conference Call. We have with us Mr. Rampraveen Swaminathan, Managing Director and CEO; Mr. Saurabh Taneja, CFO; and the senior management team. I hope everyone had a chance to view our financial results and investor presentation which were recently posted on the company's website and stock exchanges. We will begin the call with the opening remarks from management, followed by an open forum for question and answers. Before we begin, I would like to point out that some of the statements made during today's call may be forward-looking. A disclaimer to that effect was included in the earnings presentation. I would like to invite Ram to make some preliminary remarks.

Good afternoon, everyone. Thank you all for joining us today. Thank you, Mandar. Good evening once again, I trust you all had a chance to view our presentation and the financial results, which are available on the stock exchange and our company's website. I think just as part of opening comments, I'll just give you a quick update on how the sector is performing in terms of the external environment, our end markets, in our own operations highlights, things have gone well, things or areas of focus. We'll include an update on the Express business specifically and some corporate actions which are going around the company. Of course, I'll close by discussing our financial performance in the third quarter and for the 9 months of this financial year. Just beginning with the sector. I think the logistics sector is going through a mix period, but has demanded continued resilience despite a challenging macroeconomic environment. While logistics activity showed a sequential uptick with the onset of the festive season. Year-on-year growth remains fairly muted, primarily due to weaker consumption trends. The high cost environment, driven by driver shortages, by elevated fuel prices, increasing interest rates and higher toll charges continue to exert cost pressures for surface logistics and transportation. Our global cross-border trade and geopolitics continue to drive volatility in cross-border freight prices. These trends continue to be visible in the quarter gone by as well. While freight correction on ocean freight corrected themselves in the early part of the quarter, there was softness in pricing for air freight as well. Some liners also increased blank sailing levels during the quarter on a port-specific basis. The continuing volatility has impacted our forward view of contracts and the firmness of the order board across the industry. Demand for warehousing services remain robust, while there is an increase in lead times for construction and deferment of orders by customers, weaker consumption levels are resulting in slower start-ups and deferment by clients across many sectors. E-commerce is a key end market segment and is seeing positive trends with expansion by quick commerce company. At the same time, the growth of quick commerce is impacting the historical supply chain design in the industry, prompting several e-com marketplaces to start redesigning their supply chains and impacting their warehousing footprint. The mobility sector continued to see seasonal trends during the quarter. The third quarter of every year generally tends to be a festive season, and therefore, demand for enterprise mobility is generally lower while it grows in airport and B2C movements driven by more vacation and related travel. This year as well, we saw that turn up in terms of uptick in B2C volumes and a seasonal downturn in B2B numbers. The Noida International Airport and the new Navi Mumbai Airport are significant potential drivers for long-term growth and demand in this segment. So moving on from an sector in terms of specific end markets which we operate in. And I'll begin with the automotive industry. The automotive industry remained positive in passenger vehicles, despite end market offtake being mixed. We especially saw strong performance by M&M with new product launches, which provided a boost to volumes. Our 2-wheeler segment remains muted, but demonstrated some green shoots at specific categories. In both PVs and 2-wheelers, we continue to see an excellent shift towards electric vehicles with a stronger demand growth for EVs, launch of new models and a very strong short-term outlook for that space. The commercial vehicle and auto components showed a more muted or flat growth environment. During the year quarter, we witnessed higher level of NPDs of planned shutdowns across several OEMs in the industry. From a farm sector perspective, Q3 is a seasonally weaker quarter for sector with typically upcoming year changes and kind of a post festive slowdown. This quarter remained consistent with that pattern of prior years, and we saw softer demand in the quarter compared to the preceding quarter of the year. M&M farm sectors, new products continue to gain traction in the market reflecting positively for us. From a consumer perspective, demand in urban markets continue to be muted, with rural markets showing some recovery. Despite the festive season, which is traditionally a period of heightened consumption, demand saw no real significant uplift. A delay in milder winter has also had an adverse impact on sales of seasonal products, while continued weakness in urban general trade channels has further negatively impacted demand. However, there has been a modest sequential improvement and some stabilization. At the same time, premiumization in consumer goods also remains a strong driver for value growth. Moving on to consumer durables. The fan industry has stabilized post implementation of the BEE norms and experienced increasing premiumization in both urban and Tier 1 towns, driven by the growing adoption of BLDC fans. The room airconditioner industry posted robust growth during the first half of FY '25 continuing the momentum from the previous year. Uninterrupted seasonal demand and soaring temperature has led to record demand for cooling products. With the summer season approaching, inventory buildup is expected to commence soon to meet anticipated demand. In other categories of the segment, in FMCG, we generally see moderate growth, especially in the lower and middle category products, while premiumization remains a strong driver for value growth and higher product categories. Rounding off at telecom, the tariff increases in the telecom segment continue to benefit the industry, driving healthy growth in ARPUs and contributing to overall improvement in industry performance. Consequently, capital -- CapEx spend has remained stable compared to the previous quarter, supported by ongoing investments in 5G infrastructure and initiatives to expand and densify rural networks. We continue to see increased network expansion forecast from the major telecom players we are working with, both in terms of network expansion and specifically 5G expansion. From Mahindra Logistics perspective, some things have gone well in the quarter. Despite the challenging environment and sluggishness in the market, our order intake remains positive. Our pending order board for execution in the 3PL contract logistics business is over INR 250 crores in terms of annual contract value. And therefore, we are looking forward to some momentum there in the coming quarters. During the quarter, we won nearly INR 100 crores -- or new orders worth INR 100 crores of annual contract value in the 3PL business. The mobility business won a key contract for the new Noida International Airport, where we should start services as an airport opens up, right, in the coming quarters. The Express business did see an uptick in new contracts, the total contracts signed of nearly 3,500 metric tons on a monthly basis. And we do expect the rollout or the flow-through of that in the coming 4 months. Warehousing volume -- warehousing and solutions volumes grew by 14% year-on-year with stable and improving yields. Our white space at 7% or close to around 1.5 million square feet remains obviously above our long-term targets, and we are working on driving utilization up by Q1 of next year based on some of the orders which have been won. New expansions in the East and West are going well and cumulatively those new expansions, more than 75% of the capacity there is already sold out. Our new offerings for the line haul transportation business, Pro Trucking, has gained strong momentum in customer orders and the auto outbound business, where we actually added fleet earlier this year, is now at full utilization, and it's kind of doing really well for us. During the quarter, we also launched a new analytics platform for emissions measurement called eDeL-EAR, which is an industry-leading platform and provides all our customers data on emissions and optimization opportunities. We also, as part of an overall corporate action during the quarter, released a new brand identity, which integrates all of Mahindra Logistics and subsidiaries into one unified approach to our customers and an integrated value proposition to all our stakeholders. From a technology perspective, we continue to upgrade our LogiOne suite of technology products, with new additions leveraging Gen AI, and we expect the full release of the suite by the end of this financial year. What's not gone well in the quarter and kind of areas of focus for us. Firstly, overall, we saw a mixed impact of the festive season in the peak. The first part of the festive period was really positive, but post mid-November, we did start seeing a softening in volumes and that did effect multiple parts of our business, the 3PL business, the Express business and the last mile delivery business. The Express business was flat in volumes sequentially on a quarter-on-quarter basis despite the new order intake. We obviously had some churn or short-term attrition in volume. These are largely driven by 2 things. We had some operational challenges during the festive peak. As you all know, during the festive period, we do see a surge in demand for delivery associates, operators and so on. And we had challenges on that, which kind of had some impact in service levels across multiple parts of our network. This did impact the customers dropping some volume in the short term. Our volume from our ETL partners is also impacted post the festive peak and across the board, some of our existing volume, customers saw lower volumes which was kind of not as for what we had expected going in. Our estimates, these are not -- these have not been issues of a loss of market share, but really means that our customers are fundamentally seeing lower volume. Cumulatively, those 3 factors have impacted the improvement plan, which we had estimated though we did see a recovery in December. For the quarter, we did end up pretty flat on volume, and Q3 overall looked a lot like Q2 on most segments. The 3PL and the contract logistics business, many of our mature existing warehouse based operations during the quarter has seen slightly lower volume versus last year. This has been the second quarter where we've seen the trend now with same-site volumes being lower, largely reflecting the lower -- the kind of broad consumption slowdown, which we are seeing. This has reduced our operating leverage as we have seen sales growth now coming from new sites, right, which obviously are earlier in their maturity cycle. On a positive note, while volume has been -- on the sites has been lesser than what we thought it would be because of the way we structured our contracts in terms of minimum guaranteed volumes in all our operations, we have not seen a significant downside impact of it. The freight forwarding business was impacted sequentially by lower pricing in Q3 versus Q2. And that's been a price correction across the board, both in air and sea. While we are able to show tonnage air in growth, the volatility in pricing affect our order closure in sea, especially and obviously impacted revenue per TEU as well. So a mixed bag in terms of some things which went well, obviously, some things did not go as well. Let me now move on to financial performance. I'll begin with consolidated financial performance. Revenue for Q3 increased by 14.1% year-on-year to INR 1,594.2 crores. Revenue from the warehousing segment stood at around approximately INR 300 crores, exactly INR 299.6 crores in Q3 F '25 as compared to INR 261.9 crores for the same period last year, a jump of nearly 15% year-on-year. The supply chain management businesses, including our 3PL and Network Services businesses contributed 95% of our overall revenue. And the Mobility business has contributed to 5% of our overall revenue for Q3 F'25. Gross margin on a fully consolidated basis in the third quarter was at 9.2%, 10 basis points up compared to the same quarter of last year. Gross margin without the impact of the investments in the Express business stood at 10.1%. EBITDA for the quarter was -- stood at INR 73.7 crores in up from INR 52.3 crores increase in Q3 FY '24, largely driven by improvement in cost performance in multiple areas, especially in the Express business or Rivigo. Overall losses for the quarter, Q3 F'25 stood at INR 9 crores, right, at a consolidated MLL level. Moving on to component performance, the individual companies. Revenue for -- and I'll start with MLL stand-alone. To remind everyone, MLL, the stand-alone MLL business largely hosts the 3PL contract logistics business and part of our last mile delivery business. Revenue for Q3 F '25 in this entity was INR 1,326.9 crores as compared to INR 1,160 crores for the same quarter last year. PAT for Q3 F '25 was INR 11.6 crores marginally down from INR 12.5 crores for the same quarter last year. Moving on to LORDS, our freight forwarding business, revenue for Q3 F '25 was INR 71.5 crores up from INR 55.2 crores in the same quarter last year. PAT for the quarter of Q3 F '25 was INR 1.5 crores as compared to INR 40 lakhs for the same period last year. Express business revenue for the quarter was INR 89.1 crores compared to INR 95 crores or INR 95.6 crores in the same period last year. PAT losses shrunk to INR 24.8 crores in Q3 of F '25. The mobility business had revenues of around INR 78.1 crores compared to INR 83.9 crores in the same quarter last year. PAT for Q3 F '25 stood at marginally short of INR 1 crore, around INR 0.76 crores. The revenue for the Whizzard entity, revenue for the result on a reported basis for the quarter was INR 42.2 crores as compared to reported revenue of INR 3.2 crores in the last year. Important to note for all of you that in the last year, we had the actual acquisition -- the actual majority, the transaction, which took us to majority consolidation happened in the last end of the quarter. And therefore, the INR 3.2 crores of revenue in Q3 represents a very small part of the full quarter's number. Adjusting for that, revenue grew by around 7% on a normal basis in Whizzard. PAT for Q3 F '25 was INR 0.1 crores as opposed to a loss of INR 80 lakhs for the same period last year. The 2x2 logistics business, which is our outbound logistics business, had a good quarter. Revenue jumped from INR 14 crores last year for the same period last year to INR 25.3 crores in Q3 F '25 and PAT jumped from INR 40 lakhs last year for the same quarter to approximately INR 2.1 crores in this quarter. Overall, across the company, the automotive and manufacturing business is around 58% of our revenue and the nonautomotive and auto and manufacturing and farm business is around 42%, split roughly equally between e-commerce and non-e-commerce, consumer manufacturing durables and so on, and e-commerce are roughly split halfway through there. At an overall level, we continue to make progress in most business segments, as you can -- if you see the component level performance, I think you would see that we've had improvement year-on-year across most of our business segments. The 3PL business is well positioned for growth given the positive order board we have and a slate of new upcoming projects in the next 2 quarters. The cross-border mobility business continue to make structural improvements while managing some short-term volatility in end markets. Our big focus continues to be the Express business, notwithstanding a weaker-than-expected performance in the quarter, which we just went by, we're confident in the actions we have put in will place -- will generate positive items. Over the last 4 quarters, in the Express business, we have been able to reduce our gross margin from minus 13% to a minus 5%, right, on fairly on marginal volume growth. So obviously, for us, the key thing for us now is to drive volume in the business. We have several initiatives which are ongoing, not fully reflected in the bottom line in the quarter we just went by, but things which are confident will have a -- though they are a bit long tail, will flow in through in the coming quarters. With this, I'll open the floor for questions and answers.

[Operator Instructions] The first question comes from the line of Krupashankar with Avendus Spark.

I think on the 3PL business I just had a couple of questions. Given that the order book what you have mentioned of INR 250 crores, which is pending and a INR 100 crores worth which you have won. These are annual worth of these contracts, is it? Or is this over the lifetime of these?

These are annual contract volumes. So obviously, they get -- so they have to get executed on and that's a 12-year -- 12-month run rate of those contracts.

Great, that was one clarification and on the white space of 1.5 million square feet, what is the thought process over there? How do you see the reduction coming in or what would be the average [ level ] of white spaces which would continue, to mean that given the churn or if at all, there are any churn in customer base? What is your thoughts over there.

It's a good point. I think the way we see this, and obviously, we've modeled the network across the board is, we are going to continue to invest in the network because we think that there is a long-term play and we obviously have long development cycles. As I said earlier, even construction cycles have gone up as some of the commodity prices have increased. So we are building to a 24- to 30-month window given the construction cycle. We designed the network repair for roughly 3.5% white space. So we always assume some amount of white space will be there. It's good for us. It allows us to react to customers quickly. It allows us -- there's always customer sites, which are basically demobilized or being newly mobilized and there's kind of interplay time during that for start-up and so on. So we do design the network for around 3.5%. We think 3.5% as a general planning metric is actually very good, right? This is what we have assessed. Right now, we are running at around twice that, right? So technically, we are kind of running at around 1 million square feet extra, give or take a little bit. And as you all know, this big inflection point for us on this happened around Q3 end last year, right, from a contracting perspective and from a financial perspective in Q4, the post peak, one of our larger e-com customers actually foreclosed contracts, so almost all this space, which became was excess largely on account of that. Now where we stand as we stand right to, we are pretty confident that I would say around 700,000 to 800,000 square feet should get sold out basis of contracts we have, should hit utilization somewhere in Q1 next year. So that's kind of roughly when this will get done. There are specific periods along the way, but we expect that in Q1 onwards, we should be able to get 700,000, 800,000 of that done. Bear in mind, we're obviously adding new space as well. So this is on the -- which is there. And that's why this quarter, I reported on what -- how we are on the new space we're adding as well. So we are adding between the Kolkata and Guwahati right? And Puna and Chakan, we are adding under the probably 1 million square feet roughly or so and around 75% of that is already sold, it's under construction, actually client construction and commission. We have probably under 250,000 of that to be sold, but those infrastructure also come up over the next 3, 4 months or 5 months. So we have -- we obviously have some amount of addition coming there as well. So broad and large, I expect that the white space as we go to next financial year, we expect to be between 700,000 to 1 million. I mentioned last year, I think I remember in Q4 last year, you may remember I said that we have now put a pause, we have kind of slowed down some of the new site constructions given the volatility we see in the market. Obviously, a lot of the sites which we are seeing now where construction has begun much earlier, right? So we are -- we have slowed down a little bit in terms of cap [ ags ] on warehousing just given the volatility we see in the market. But the focus item obviously is to be able to sell this out. And I expect that by Q1, we should be at a white space around 700,000 to 800,000. And the rest should get sold out.

The second question was on the Express business, while you have highlighted something about taking new measures to improve the adjusted volumes, which are required to break even. I just wanted to get a sense, given the underlying slowdown in the industry, what is the time frame you're expecting that these measures would start resulting back with a positive coming share on tonnage, addition to your overall operations? And how do you see the profitability shaping up over the next 4 to 6 quarters?

I think what -- let me begin with what has not changed, and tell you about what has changed, because both I do obviously are there. But let me first begin and actually this might be a question which several of you have in your mind. I mean this was not -- this was -- Obviously, we kind of delivered lesser than what we thought we would in this quarter on expense, and therefore, I'm not going to gloss over that issue because I think we came short and we didn't kind of expect to do what we had hoped to do in the quarter. Now let me break that down into 2 parts, right? So from a cost perspective, we are at around 26% contribution margin in the business, 26.8%. And our challenge is the utilization of the network. What we could do in terms of optimizing costs, though that we've already done a fair amount of tax. As you can see, the gross margin has improved by 800 basis points year-on-year in the business. So I don't think there's -- while there is a range of optimization, which will now happen. The optimization is going to be linked to volume growth, okay? So that's the first thing. Now what's happening on volume growth? I think as we enter the quarter, what we still hold on to is that we need around 6,000 to 7,000 tons more per month to basically be able to get to that point where we need to be, add an EBITDA breakeven right perspective and somewhere between EBITDA breakeven and PAT breakeven. But given the way we are right now. So the 7,000 tons which is still the big ask for us. What happened in the quarter as that -- that 7,000 comes to 2 ways. We have to ensure that we are winning new orders, and we are monetizing that, and we have to ensure that we are not losing right, simplistically. The last 2 quarters, we had very stable operations. We actually didn't have a problem in holding our existing clients. I think we had a bit of a problem in the pace at which we acquired new clients. And I've talked to all of you about all the new -- additional things we were doing. On the positive side, that all actually did add tonnage and orders. So we did, as I mentioned earlier on, fresh order intake was around 3,500 to 3,600 tons monthly during the quarter. That's the new contracts we signed. However, the challenge for us was that partially because of operational issues and partially because of the fact that many of our customers just downgraded, we did see almost an equal impact through the quarter on volume. The good news is December, customers have come back, right? So we are expecting that in Jan, Feb, March, we should start getting back to seeing the flow-through of these new orders we have signed. But it is a bit of an iterative situation because as you all know, the current market is actually pretty tough, okay? So what are we doing? I think what we're doing is 3 things. I think, first of all, we are obviously sharpening our offerings and trying to offer some -- start doing some newer offerings which are focused on some spaces which we are not operating in today. So that's the first thing we're trying to do. So we can strengthen that, strengthening our air offering, strengthen some work on our regional offerings. So those are things we are doing, so we can actually capture those niches. The second one obviously is we are putting more -- we're expanding the sales organization, driving more synergy. Last quarter, obviously, we got 3,500 tons of order intake, we need to kind of expand that further. And the third thing, obviously, is we have made some corrections on the operations side because that was after 7 or 8 months of fairly stable operations. We did have a blip around the festive this time and the blip had some flow-through impact. So overall, not exactly -- obviously, not the quarter we wanted to have. We did a lot of work. Our teams did a lot of work on getting new volume in. And I know that they work pretty hard during the festive peak to ensure that our facilities ran well and we help customer deliveries and help customer promise levels. Unfortunately, I think we had parts of network, which got impacted by this. We have upgraded our tech, we upgraded some of the organization levers around there to ensure that this does not -- that we are building more guardrails against this going forward. But that's the [indiscernible] which we have to do for brand. I think as we stand right now, I think if we're able to hold our attrition rate or the churn, even this quarter, if we had held our churn, our volumes would have been halfway up on 35% to 40% to that 7,000-ton numbers, right? So I mean that's what we really have to focus on doing, Krupa, and ensure that we do that. I think one other thing which we have -- we've been asked often is what are we going to do on pricing? And I think on pricing, our approach has still been the same, Krupa, which is we price strategically. Our intrinsic approach is to retain value and not to go into price war or get into a pricing game. But we do obviously price strategically because of size of the account. Those are 3 broad areas that we're working on price-led demand expansion. Obviously expanding our offerings and our coverage in the market. And we're going to improve that good momentum we have seen in new order intake. We can expand that further. And obviously, we had to make a couple of these corrections in operations, which we didn't expect to happen this year, but we did in a couple of pockets see a significant impact because of festive in terms of availability of manpower. And that did disrupt a week of operations, but obviously, in an Express business or a network, it has a flow-through, which is slightly longer. And I just had to answer a lot of Express stuff because it's probably maybe in people mind as well. So I just wanted to take the opportunity with your question to answer that.

One follow-up on that, what would be the extent of equity infusion in the Express business over the next couple of quarters or 3 quarters until we find ground to improve overall profitability. Any projections you have in mind?

At this stage, I wouldn't -- I don't think we've got a specific number in mind there. I think if you want to ask -- I mean, from a forward-looking view, we don't have a specific target there. What I would say, I think is the business is actually -- we put a lot of focus on cash and especially we don't share component balance sheets with you in the third -- at the end of the third quarter, but you would actually see we made a lot of progress in terms of the cash-to-cash cycle of that business. That's been a significant focus. And therefore, the business from an OCF perspective I think is in very good shape. There's obviously the burn which we have to reduce and cut down signify. So I don't have a specific number, Krupa, but obviously, if you're asking why can you -- I'm going to put a couple of hundred crores more. I can raise this for you. So that's the kind of stuff we're not going to do. We are topping up if it's required, but at this stage, I don't have a specific number.

The next questions are from the line of Alok Deora with Motilal Oswal.

Thanks for the elaborate discussion on the Express business. My question is just related to that only. So what we also understand is that even January has been pretty soft and players have been queuing up for gathering volumes and even the price hikes, which are proposed by some players like Gati, et cetera, have not really gone through. So how do we see this now because even in 3Q, which was a festive quarter Q-o-Q performance has been weak, I mean, weaker than Q2. So just some color on that, that when are we seeing the breakeven happening for this? I understand it might not be possible to give a specific quarter, but any time line because last time you mentioned that 5% month-on-month growth would be required for a breakeven. But in the current market scenario, that seems pretty farfetched, if you could just spend a couple of more minutes on this discussion.

I think it's a great question, and I'm glad you asked it because I think as I said last time, and we appreciate that you actually remember that as well. We have said last time the detail, 30% to 35% volume growth. Over 6 months, that will be roughly 5%. And I think through -- and through the quarter, that's why we had hoped to get around 15% order intake growth, right? And we had hoped to actually be able to monetize parts of those as well in the quarter. I think what -- on the positive side happened, Alok, is that, that order intake story kind of stated, right? I think our challenge has been on the churn we have seen. Obviously, there is some pricing competitiveness, which affects that churn as well. But as I said, part of that was actually just our seasonal operational challenges, which we had in the quarter, which did impact some of the volume moving out. So from my perspective, at least, I think the order intake opportunities still exist. Is it a tough market? It's a tough market. It's a very tough market right now. You've articulated that well using a bunch of other industry comps. It is a tough market, but the customers whom we have, have a very strong position with other parts of our business. And obviously, as I said earlier on, we are expanding -- we are focused on expanding our retail partners to improve retail volume. We are -- and attacking some of the industrials a little bit more strategically. And we obviously are looking at launching some new offerings along. Some niches to kind of get that volume in. I'm fairly confident that we will be able to get to that just given what we saw as order intake this quarter as well because these are new contracts we signed. These are not just contracts which upgraded in volume because of festive season. So there's new contracts we've signed. We just have to keep expanding that further. And it's a blocking and tackling game on the ground in terms of sales efficiency. We also have to ensure that our operations are really good, so we're not losing anyone, right? But this quarter as well, we would have actually probably been 10%, 12% higher on revenue at least, on volume at least, Alok, if we had not had some of these operations issues on the backend.

Yes, but just whatever the orders which you have lost, I understand there is a new ordering flow also, but you have lost some orders. That's why it's kind of a flattish Q-o-Q. So whatever you've lost is not really a onetime thing, right? I mean, it's like the industry is competitive, so we lost the -- so we kind of lost the volume side, right? So that could continue in 4Q as well? I mean, when are we going to get a breakeven here? Because looking at the way things are progressing, it could well be by FY '26. And also, we might be in single digit losses or at breakeven in an optimistic scenario because the industry itself is very slow at this point of time.

I hear you, Alok and I think all the things which you have said are all possible scenarios. There's no question on that. What I can share with you at this stage is I think approximately 70% to 75% of our customers who down traded in the early part of last quarter came back in December, right? Now can I be absolutely sure they will stay forever? I don't think we can ever say -- never say never, right. But we are still working on the same plan, which we said earlier. We have -- because [ we need ] to get 3% to 5%, we roughly get 5% month-on-month volume growth. And we have to obviously hold our existing volume and to ensure that we are not allowing any attrition to happen. And obviously, we'll have to probably price some part of that strategically to ensure, especially on the retention side that they are doing it. Given the markets right now, can I perfectly predict that this is the month that's going to happen or that's the month it's going to happen? No, I can't. I mean, it will not be fair, and I would just not be being honest about it. What I can tell you is what's moved in our business, right? The new order intake has been good. It's kind of starting to get in line with what we need it to be. The attrition unfortunately -- and the ops issues have been a challenge for us. We have to get the ops issues under control, which we have done, and to that extent of the ops issues, we have seen the recovery of volume. Some of the down-trading, we are working on getting that back, and I can't say clearly, if you ask me, will 10% come, 15% come, 90% come. But I can tell you that a large majority have started up trading with us again, okay? I still therefore think that we still hold that this is probably -- I'm not sure a F '26 issue alone. But I can't -- it will be reasonable to say that we are not going to be able to get this under control. I think we are still 2 quarters away from EBITDA breakeven at least. That I think is a fair conclusion. Just given our update right now in terms of order intake, the market environment right now, we are probably a couple of quarters away from breakeven. And of course, things could move a little bit here and there, not a little bit. They could move here and there, and that could further impact it. But the way we are modeled right now, we think we are a couple of quarters away.

Sure. just last question. How has January volumes been as against Q3?

Jan has been decent. Jan has not been a blockbuster. I think you made that a thinker with your point. But I think Jan has been in -- has been sequentially a positive move for us till now, right? It is -- obviously, as you know, it is -- this is 28, so I last checked in on the numbers before a public day. But -- as of 24, 23 we were in a better place or a good place. We're not seeing some of the headwinds which other people the industry are talking about. But it is also true that volume is a crawl. Volume is not a sprint, right now, Alok, and that's a fair thing. And obviously, I don't think -- we've not seen a lot of the pricing actions with some industry reports have talked about really showing up on the floor, on the ground. So I think pricing remains tight as well.

The next question comes from the line of Jainam Shah with Equirus Securities.

Sir, just wanted to check that we are having around INR 90 crores of revenue from the export segment. Let's assume that we reached to -- or we grow this revenue by INR 30 crores, INR 40 crores.What kind of additional margin, be it gross margin or EBITDA margin that we can make from the additional INR 30 crores, INR 40 crores of revenue?

Jainam, I think if you look at it right now, I think we are at around 26%, 27% contribution margin in the line hauls business as it is right now. So I think roughly on that, the first step, therefore, is that the contribution margin should largely fall through. There will be some marginal cost increase. But overall, even if that doesn't get better that 26% rate around INR 40 crores would be around INR 10 crores to INR 11 crores of additional margin. In addition to that, obviously, right now, our line hauls are running at around 75%, 76% utilization. Obviously, as that volume goes up, we expect the line hauls will get to the mid-80s. I don't say we can -- mid 80s or late 80s, I don't think we can probably push it beyond that. But that uplift should give us -- we did one down to the correction, Jainam, earlier -- in late last year. We should be able to get that utilization further up, and that should probably add another, we expect another INR 2 crores to INR 3 crores at least of goodness to the numbers. So between -- at that level, we should be expecting around INR 11 crores to INR 12 crores of business overall coming in. And that, I think is -- mathematically look at it, that gets us close almost to the PAT breakeven level as well. Right now we are losing around INR 21 crores, INR 22 crores at a PAT level. We're losing around INR 14 crores -- INR 13 crores, INR 14 crores in the EBITDA level. So that goodness of around INR 14 crores to INR 15 crores actually adds to around -- we expect that the line haul optimization, line haul has done 65% of the cost. So we get 3%, 4%, 5% benefit there. There will be another INR 4 crores, INR 5 crores, Jainam, and that gets us to EBITDA breakeven. So that's kind of the EBITDA breakeven bridge we.

Got it. Sir, just wanted to check, we were doing, I guess INR 30 crores or INR 40 crores kind of a run rate on our Express segment before the acquisition of Rivigo. This number is right?

No, it's not. I think we were doing -- we were growing around -- I think it depends on quarter-to-quarter. But at that time, I think we probably peaked at on INR 27 crores -- INR 26 crores to INR 27 crores on a quarterly basis.

So even if we just round it off to INR 100 crores on a yearly basis on the back of let's, INR 25 crores on a quarterly basis and Rivigo was doing around INR 350 crores of revenue on the Express segment. In total, we were targeting INR 450 crores to INR 500 crores of revenue, whereas we are currently at around INR 90 crores run rate. We have made a high of around INR 97 crores during the last year. My point is that, of course, we are acquiring the customer, some churn is happening, market is competitive. Few other players have acquired the -- I got the company, which is like 4x of the size of the Rivigo. Despite that, they were able to gain the market share. Of course, they are not also making money. We are also losing it out. On what kind of scenario we can even reach to the INR 450 crores of revenue, firstly? And of course, we have been talking about the synergy benefit after the Express business coming into the play. But is that kind of...

Let me just answer your question. I get the question. If you can, let me. Let me first clarify numbers. I think we -- I think our -- I don't remember exactly, but I think our peak revenues in the network business was around INR 92 crores on a full year basis. We acquired the company from Rivigo and so I think there's around INR 340 crores of revenue. So the baseline number is on INR 430 crores, we are actually running below the baseline. So that's clearly a fact. We are running approximately INR 75 crores below the baseline. So let me just -- but I'll confirm your point and also I'll just clarify the numbers. So we are actually on the same page. So what has happened there. I think as we mentioned, when we started, I think as we have been talked through the period, 2 or 3 things happened. We obviously lost some business, which was one part of it. The second part is that we down-traded a lot of the volume because we had issues on commercial payments and so on and so forth. And I think we kind of called out earlier that we've actually dropped -- we dropped some -- and I don't know the exact number, but we dropped probably a couple of thousand tons because of just the orders. The business we've got, we had kind of orders which we didn't like or customer profiles we didn't like. We also -- the erstwhile Rivigo business was actually also doing, right, a lot of retail business where we had to deliver a lot of deliveries outside our network in external areas, which was actually not helpful from a finance profitability perspective. So we rationalized customers, we rationalized network. And that has been a significant part of what we saw in terms of revenue drop. It's also -- I mean if I may say so, it is also part of what helped us improve the gross margin. The gross margin was minus 13%. Part of the way we think it will get to the minus 3%, 4% now. In some parts, it's also because we weeded out some of the stuff, right? So I think you just have to take this into context that I think all revenue is not good revenue, right? We're running a network, some revenue can be bad revenue as well. And I just want to say that because you can take the INR 430 crores as a starting point. But if we look at what I said in our first call, and I think we just go back, we said that we expect the business to be around INR 420-odd crores on a consol basis. That's kind of what we are combining both of these to be and we think we'll grow at 10% to 15% on INR 650 crores. We are obviously taken some of this network rationalization, which we expected in that way, which is INR 650 crores to INR 700-odd crores or so. So I think, therefore, I would just say that the starting point on revenue is just not a complete starting point because obviously, [indiscernible] of that revenue was good and it was a problem for us. I think as we go forward, I think, obviously, we need around 6,000 to 7,000 tons per month more. That's around 70,000 tons a year, which is less -- which is roughly around 1.2% to 1.3% of market share, right? That's kind of what we need to get to EBITDA breakeven, roughly 1% of the market is what we need in terms of volumes. And we probably need another 2% to 3% of the market in terms of volumes to get to where we want to be financially. So we are not looking because the base is small. We are -- but what we have is a position where we have a network which is fairly capable in terms of it, but the base, volume base being small, and that's why there's a bottom. But the volume growth itself, which we need is not -- we're not expecting 10% growth in market share. We need 200 bps of growth in market share over 4 quarters, to get where we need to be, Jainam. And obviously, while we look at the last couple of quarters, we could say, listen, that 200 bps of market share is a stretch because the way the numbers have panned in the last couple of quarters. But it's 200 bps of market share in a market, which we feel we understand very well. So I don't know if I answered your question, but I just want to first calibrate yes, the volume -- the revenue is down compared to the past, what we acquired, but the revenue cumulatively is down in large part because of design and operational issues and volume went down, but we did recover almost all the volume we lost. Almost all the volumes we lost because of integration issues, we have actually recovered that. I think you made a great point about how much you want to invest in a business like this. And that's one of the reasons why we like the Rivigo business, we acquired it because -- while we know we have to talk a lot more capital into it. We also feel that the transaction value allowed us to do it, because we bought it around INR 220 crores, we had the headroom in the business to make that investment because the transaction value itself was low. And we still remain with that hypothesis. Though that the last couple of quarters of execution and I'm cognizant of the fact that we've not delivered what we've said on the earnings calls and we can obviously explain it after the call. But I think it's largely an execution issue, which we need to tighten up the fundamental structural problem with the business.

Sir, just one clarification. I guess during the festive week, you have told that we have not been able to take on the volumes because there has been an operational challenge. So just wanted to check, if we want to grow the revenue by, let's say, INR 30 crores, INR 40 crores. And if our existing network is not able to even do the festive season peak, then there will be, again, a network expansion cost, which we will be doing. Of course, our utilization is at around 75%. If it goes to 80%...

Jainam, I think the network has got 3 parts. It's got infrastructure, it's got vehicle utilization and it's got people, right? [indiscernible] I think what we saw this quarter was during the festive peak we saw a sudden surge or shortage of manpower requirement in sites, which are approximately 13% to 14% of our network, right? So in those locations, we saw a significant sudden surge in manpower costs and a sudden drop in availability of manpower. And that impacted our network operations for roughly a week or so. Obviously, it had a cascading effect because when you are shipping, let's say, from Ludhiana or Ahmedabad or Surat, the pickup there is delivered -- delayed by 5 days, then, obviously, Jainam, the delivery is also delayed by 5 days, right? And that obviously creates customer dissatisfaction. But it is not the fundamental -- I think both our warehousing space and our vehicles allow us to have not all the headroom. So if you want to grow by 40 -- and that's why I said that if you remember what I said earlier, that we will get the contribution margin, which we see today per ton and we'll get some part of the operating leverage in terms of facilities and people and not more than that. And that's why I capped that number at around INR 5 crores. If you mathematic look at it, you could actually make much more. If you assume that the network will -- I didn't spend a single rupee more on transportation or facilities, then obviously, true, a lot more money would come into profitability, but that's not the linear model. There'll be some cost increase, but it will mostly be on the people side, Jainam, the vehicles and the transportation and the facilities should be fairly stable.

Sir, just one thing. Of course, you told about INR 11 crore, INR 12 crores of contribution margin from, let's say, INR 30 crores, INR 40 crores of revenue, additional INR 5 crores from the, let's say, utilization increasing and all. But let's assume that given this kind of market scenario exist for next few quarters, and we have been able to reach to the revenue of let's say INR 90 crores to INR 100 crores only, which is the current range, then what could be the alternative that we can do to have a better EBITDA or PAT margin? Or will this be -- will these numbers will continue in that case?

No, I think if you're not able to drive the viability, obviously, we are -- I think there's a couple of things that, obviously, we do look at. There are other cost leverage opportunities which exist. And then obviously, we have to look at the network itself, Jainam, and say that listen, I've got a network which today is designed to deliver 19,000 pin codes, right. Almost 40% of them -- 35% or 40% of them in network and the rest of them through connections. There's a fairly large cost we run to obviously keep that network capability alive. If we don't see the volume flow through on the network, obviously, we start to have to look at which point is saying, do I rationalize the network capability itself. And so that's the second -- that's the other areas of cost structure, which are there. So there are rings of difference, Jainam. Obviously, there is a -- you can look at these bookends. Worst-case scenario, obviously, is just to take off from where we have been performing in the last couple of quarters. And I get that point. The other book case or end is obviously the one we think we will definitely do. But the reality in between probably will be that some part of volume, even depending on what properties you want the volume will move up, may not move as much as we think, it might not move as fast as we think it could. In which case, we will look at some other rings of defense that should we rationalize the network spread, right? Should we change the way where our fleets are working and kind of change vehicle patterns a little bit more, change the way we are scheduling the vehicles right now. So there are multiple other levers which we can do. They won't solve the problem fully for sure, right? So they won't solve the INR 14 crore, INR 15 crore problem. We'll have to obviously get volume to solve parts of it. But at this stage, we have multiple of those things mapped out, Jainam, its just not something which we want -- at this stage, we're not necessarily in a position to talk about that publicly, but we have several of those mapped out. Obviously, we are also cognizant of the scenario you are calling out in the next 4 quarters, there could be no impact on volume -- improvement in volume and then what will we do. But some of those actions are also underway as we talk.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you.

Thank you, everyone. I hope we've been able to answer all your questions satisfactorily. However if you need any further clarifications or want to know more about our company, please contact our team at SGA -- our team or SGA Investor Relations advisers. Thank you once again for taking time to join us during this call.

On behalf of Mahindra Logistics Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.