VRL Logistics Limited (VRLLOG) Earnings Call Transcript & Summary

Yes. Good afternoon, everyone. I'm very happy to welcome you all to Spark Capital's Eighth Annual CHAMPS Conference. We're delighted to have Mr. Sunil Nalavadi, CFO of VRL Logistics, with us today. I'll pass it over to Sunil, who will take us through -- update us through the -- what's happening around right now in the industry and with VRL specific. And then we'll move to the Q&A from there. So Sunil, it's all yours.

[Audio Gap] They are restricted to their operation into certain states, certain routes like that. But we are the pan-India operators in less than preclude segments across in the country. And when it comes to infrastructure facility, yes, we are much different as compared to other operators. Most of the assets are owned by the company, and we hardly depend on outsourced vehicles. And when it comes to the warehousing storage facility is concerned, wherever critical areas are there, actually, we are having our own infrastructure facility. In the rest of the cases, we are depending on the high premises. And always, we used to say that this is unorganized sector, highly contributed by the unorganized people. And only GST and e-way bill can change the picture of the industry. But even though GST is introduced in the year 2017, there were no much things happened until last year, you can say. But now what is happening because of strict compliances on the part of e-way bill and GST compliances, now there is a very good scope for the automation players in the industry. So that's what actually is resulting even in our results in the past quarter. And similarly, considering this good movement across economy, we are expanding our network also. We are planning to add around 100 branches in the near future within a period of 1 year. And almost around 20, 25 branches have been already commenced. And the rest are the places we have been identified. And shortly, these commencements will start the operations. And basically, another major thing recently, what happened always that was a concern for us was the fuel price. If you see the fuel price last 2 years, the substantial, there is an increase in the fuel price. But when it comes to the things at a normal stage, we are in a position to deliver highest EBITDA margin, even though there was a pressure of fuel price. Now what is happening, the government has taken a good initiative. They have reduced the burden of tax on the fuel. So that is giving a lot of advantage for us to have a cost mechanism, our cost control mechanism, definitely, we can do in a much better as compared to earlier so that the marginal maintenance or expansion is possible in the near future. And when it comes to the volume growth, recently, we did around 40% year-on-year growth in all these things. That is only on account of a lot of transformation, a lot of addition of the new customers. And even some of the products we were unable to carry earlier, now we are in a position to attract or the customers are shifting even commodities of -- even customer belong to those commodities are shifting to us. It shows that basically the operator or customer, they are giving more importance to compliance rather than the cost savings or something like that. And when it comes to efficiency is concerned, yes, we are one of the highly efficient service providers at a very good cost optimum level. That's the reason definitely we can compete with these unorganized players. All these days, they were into advantage because still, there was not much of a pressure from the compliances end. Now since they are facing the pressure, definitely, we are having advantage in the days to come. So that we are very optimum or pessimistic about -- we are very optimistic about the volume growth and margin expansion in the days to come. And the other segment is the bus segment. Again, there also -- so because of this COVID situation, there is a slow improvement in the bus. But considering the recent development, we are hoping that, again, it is back to its original shape. So with these initial comments, now I request the participants to ask any questions to have a more clarity.

[Operator Instructions] So until we get people on the queue there, I'll just start off with some questions. So like you mentioned that you are seeing a good amount of growth now and probably some of that is coming from the unorganized players who are facing a lot of pressure, so I mean, do you think the situation will kind of stay this way? Because as the cycle progresses, as the economy progresses, we'll probably again see what, say, happened about 3, 4 years ago where you'll see that funding of vehicles becomes a lot more easier. You'll see a lot of first-time buyers buying trucks. Obviously, the CV OEMs are also pushing some volumes. So how does that situation change? Because -- is this like a temporary situation where you're gaining share from unorganized? Because even after GST came, we didn't immediately see any of this benefit. We are seeing the benefit now after maybe 1.5 years of really tough time for the unorganized space. So what's your view on, say, how can this situation remain over a longer term?

Yes, definitely, it will remain for a longer period. The reason is suggest I want to give how the GST implementation has been started. In the year 2017, it has been implemented. They immediately, after the GST, lowered impose. Then absolutely, there are no verification, no check posts across the country. For a 1-year period, there were no check posts. Earlier, prior to GST, there used to have an entry-exit check posts in each and every state. So all those check posts have been abolished, and they have given very free hand to the traders or even the people who are involved in the movement of the goods. So many people have taken that advantage. So that's the reason, actually, we were unable to get good demand from the market or we're unable to add new customers also. And after that, the e-way bill has been introduced. Again, there were certain exceptions in the e-way bill. Initially, when we see the law for each and every transaction, e-way bill was required. But later on, what did it -- again, they have given an exception of INR 50,000. If the invoice value less than INR 50,000, then no e-way bill required. And some of the states, actually, they expanded this amount even up to INR 1 lakh. So a lot of people have taken advantage. Now what is happening in the last 2 years, again, the government has introduced e-invoicing. Now before the transaction, if the turnover is above certain criteria, say, INR 100 crores initially they brought in, so they have to upgrade each and every invoices. So before the transaction takes place, the information will flow to the department. Now based on the GS number, the department people can easily verify that how much purchase he has and how much sales he has done. They can compare it very easily. That's the reason -- now what is happening, instead of going through unorganized people with the e-way bill issues, the e-invoicing, tracking, everything, now they want to ship to the unorganized players because they are more cost effective. When it comes to comply transaction, we are more cost effective as compared to the unorganized people. That's the reason actually the new customers, new product we are in a position to carry.

Sure. Sure. Sure. So I understand that. But sir, we've also heard similar expectations when GST came in, when e-way bill came in. And the government, yes, they did dilute some of those laws, which didn't really benefit us, but are we confident that this time around, there wouldn't be any roadblocks, and this time around, you will continue to see this benefit that we're seeing? That's largely the question, actually.

Yes, definitely. See, that's a reason. Now you won't believe, this law is controlled by the dual authorities, another point I just -- I want to mention. Earlier, interstate transaction completely state was going to have a control on each and every transaction. Now what is happening? For every transaction, there are 2 things. One is CGST, another is SGST. Even at an intrastate moment, it will be IGST. Again, IGST, there will be a share of each and every state. Now that's the reason. For every transaction, there will be 2 dual authorities who are controlling the things. Now just I want to give an example. Say, like in states like Bihar, UP and some of the Jharkhand, we were unable to establish our branches over there. We tried many times, again, we failed because the highly competition from the unorganized people who are highly concentrated on an unauthorized or noncompliant things. Now what is happening, since it is a dual control, even the state authority is not having a proper control, but central authority can bring proper control on the transactions. But seeing each and every state, even the state authorities are bringing proper -- analyzing the transaction, everything is happening. That's the reason we are in a position to open branches in those areas. And just I want to mention one of the products, let's say like leather products from the Kanpur, Bhanpura, Agra and surrounding areas. We were unable to get good kind of a leather product transportation. Since from inception, since in our last 40 years' time, we competed, we offered good rate, everything we did, but we were unable to get because we want everything perfect. [indiscernible] correct method. Now what is happening? There is a lot of demand we are getting from those areas to transport those commodities to across India. You see the change?

Right. Right. No, that's very interesting, sir. Before I move ahead, I think we'll take a question from [ Sachin Shah ].

Thanks, Mukesh, and hello, Sunil-ji. Hope you had a good Diwali and wish you a happy new year. How are you, sir?

Yes. Good, sir. Thank you.

Okay. So Sunil-ji, just one thing, basically more on a broader side to understand. See, barring these last 2 couple of quarters, if I see the last 3, 4 quarters -- I mean, last 3, 4 years of our results, one of the big challenges that we were seeing is that although we were able to get the load, we were not able to get our margins. And probably we were -- maybe because we were not able to pass through the higher costs or whatever -- whether it was sometimes fuel costs or operating costs or whatever. And probably one of the reasons at that time was maybe the demand/supply was kind of a mismatch that the overall economy was not doing so well. And whereas the supply of the trucks was already there. And then obviously, the government also allowed extra load. You know that there was a regulation about in 2018, '19. So that also increased the capacity by default by 15%, 20%, all of that happened. So -- and now is the situation where the demand/supply is more in favor of the truck owners like you? Because earlier, what used to happen is that companies which used to outsource the trucks, they were a little better off the new because they had a pass-through, whereas you had a fixed cost. Do you see that the commercial vehicles today, the demand/supply is very, very close in terms of the load is probably more and that's why the pricing power has come back to you? Would you assign some weight to that?

I think he's having some connectivity issues. We'll just hold on once again.

Sorry for the disruption.

Sunil, were you able to hear me? Were you able to hear my question?

No, sir. If you repeat it to me...

Yes, yes, I do that, sir. I thought so. Okay. So sir, what I was saying is that barring the last couple of quarters, if we go back the last 4, 5 years, although we were getting a decent amount of load, but we were not able to get the margins because the pricing pass-through was not happening. And probably one of the reasons is that because there was a lot of demand/supply mismatch that there was more capacity and probably some of the companies which were actually outsourcing trucks, they were in a much better position compared to us where we had a high fixed cost because a large part of our is all own trucks. Do you see that changing today? Like over the 4, 5 years, now the demand has probably grown naturally, and obviously, the supply over the last 2, 3 years has not increased barring whatever that extra load that the government had allowed, 15%, 20%? So do you see that has played some role in the current last 6 months? And now that the economy is picking up and the overall load -- I mean the demand/supply is better? Is that the reason why our margins have got better?

Yes, definitely, since if volume starts growing, there are a lot of advantages. One is the utilization part of the vehicles, basically, the turnaround time of the vehicles will improve. If we see the number of kilometers, the kilometers have been drastically improved in our owned vehicles in the last few months, in the last quarter or even at some of the quarters of last year also. So those things start -- only the support will be -- if the volume growth should be there. The volume should be there. So in last 3, 4 quarters, after this COVID situation, after the first lockdown, that scenario has been changed. Since there is a demand, since there is a volume, the turnaround time of the vehicles has been improved. And even the additional extra load what the vehicle used to carry, in the normal scenario, we used to utilize, say, around 5% to 6% of the additional permits given by the government, even though the limit was around 15% to 20%. Now that limit has been announced to around 12% to 14%. So that carrying capacity of the vehicles has been improved. And if the volumes are more, we can do a good mix of the product within the space availability of vehicles to see that effective the load-carrying vehicle should be more. Basically, the revenue per trip should be more. So all these things have been improved in the last quarter. And that -- or those things also supported, too, expansion in the margin.

Okay. And -- so the volumes for us has gone up. Our utilizations have gone up, as you said, at every truck level or every vehicle level. Is it a function of we gaining market share? Or the overall industry has actually seen the higher volume? That's what I wanted to understand.

See, there are 2 things. Again, we got the -- volumes from the existing customers also increased. And even we get addition from many of our new customers.

Okay. So it's a combination of both.

Combination of both. Yes.

Okay. And at the ground level, when you see some of the other peers in your industry, whether it is unorganized or organized players, are all of them having a better time now compared to the last 3, 4 years as an overall trucking industry?

Yes, definitely. But some of the operators, so what is happening, they're unable to start or rebound their business. Say, people who are having 10 vehicles, 15 vehicles, 20 vehicles, they stopped in between their services because of the COVID, because of the heightened burden and even the [indiscernible] working capital, all these things. So such people, say, they used to do it as a family business. So most of the small operators now actually discontinued their operations, and they are concentrating on other -- they diluted in their business.

Okay. So that part of consolidation has already happened in the industry, you're seeing.

Yes.

And then what would happen to their trucks? Would their trucks would be still flying on the roads or the trucks are not flying on the road?

Yes. And now instead of doing the business on their own, they are giving it on a higher basis to some other operators.

Sir, but then the trucks are already there, then there is no consolidation.

Trucks are already there. But here, what will happen, the people who will take an advantage is the large players. There is a scope for vehicle for the large players.

And the large players will have some pricing discipline, is what you are seeing, compared to the smaller player?

Yes.

Okay. Okay. And the other thing that I wanted to understand is that we had also seen -- I mean, I'm not saying we as specific but as an industry, we have seen a lot of competition. Pricing, particularly, I would say, cutthroat kind of competition from the start-ups, which were funded by the private equity players. And they keep on coming out with some new strategies and those kind of things. How is the competitive landscape from that side? Has that softened now? Or is it still very aggressive?

No. Basically, say, initially, some of the -- most of our customers [ know on ] and refer that, actually, we got an offer from these operators stating that their rates are cheap and we are going to see [indiscernible] and things like that. We are not seeing such kind of a movement or any [ odd moment ] from the customers. The reason is actually their mode of operation is completely different. One is it is a B2C or they may go for -- even though if it is LTL, they may go for immediately for express cargo rather than the general parcel what [ we are really ].

Okay. Okay. So the segments where the start-ups are there are 2 different segments compared to where VRL is there.

Yes.

Okay. So in a same substance, we are definitely seeing a sharp economic pickup as far as the volumes are concerned. Is that a good conclusion?

Yes. Yes. Yes.

And this would be across industries or any specific sectors that you are seeing a more rebound?

Yes, it is across industry, but some of the industry, because of this COVID, has been impacted very badly like textiles in the world. Now they rebound back to better than the normal situation.

Next, we have a question from Rahul Agarwal.

So my question, I want to understand how many of your customers would be on kind of a spot rate basis? And how many would be on contractual basis?

Yes. Basically, just I want to mention the category of the customers. We are having 3 mode of booking offers to the customers. One is a paid booking, which normally the working customers. That is constituting around 10% to 12% of our business. Again, this is noncontractual. And another mode of bookings were having to pay. The customer has to pay the freight before taking the delivery of the goods. It is almost around 60%, 62% of our business. Again, this is a noncontractual. The contractual business is around 18% to 20% of our total volumes.

And these contracts would be for what time frame?

Normally for a period of 1 year.

And these are -- so how are the freight rates in your contractual terms? So is it on cost plus or how do you put that way?

Yes, always it is a cost plus. And again, we have to compare some competitive pricing also. But the thing is in case of contractual customers, the pass-on of costs and even if we did the savings in the costs, actually, we have to pass it on to the customers. Say, for example, fuel escalation clause is part of the contract. If fuel price increase, we have to pass on that additional burden to the customers. If there is a reduction in the fuel price, even that benefit also, we have to pass it on to the customers. That is applicable for around 20% of our business. So rest, 80% of the business, actually, we do not have any contract. The price is completely determined by us.

Sir, my second question on that is then if 80% is noncontractual and the current fall that has happened, have you passed on fully on that portion or it's still pending?

Yes. We -- see, directly, we have not reduced the rate, but we are working on a route-wise basis, customer basis. We're studying the competitors. Based on that, actually, we are taking a call. But there is no complete reduction of our rate or whatever savings we save. There is no reduction in the rate in proportion to that.

So then you could be making a windfall in the second half, which may normalize or may not normalize.

We are passing on a step-on-step basis, not completely at one go.

Yes. So that's why I'm saying, sir, historically, right now, last quarter margins also are kind of at the upper end of what we have reported in our history. And on top of that, you are saying you have not passed on for the fall. So there is more upside to be seen in the second half. Is the assessment clear or not?

Yes. But in October, also fuel prices increased, but we have not increased the rates. But because of increase in the volumes, still we are maintaining the margin, even in the month of October. See, definitely, see, these are the costs. Again, whatever savings will be there, it will be pass it on to the customers on a gradual level, not at a one go. [indiscernible]

And your growth is mainly in this contractual customers or it's across?

No, it is across. It is across.

And you mentioned textile, it is driving a lot of [indiscernible], right?

No, earlier, prior to this COVID, it used to contribute around 16% to 18% of our volumes. Now it is back to that level. So in COVID, actually, it gone down even at around 7%, 8% to the total volumes. So that bounced back to the normal.

Okay. And sir, can you just give me a sense of your incremental additions that you're planning? And what will be the mix in terms of, let's say, like rate or if anything that you're planning on that front as well?

In terms of vehicles you are saying?

Yes.

Yes. Basically, see, every year, in a normal course, we are adding, say, around 200 to 300 vehicles. Even for the current year, also around 300 vehicles will be added. And some of the good number of vehicles have been added in the first half. Then again, that addition will continue in the second half also.

What will be the mix in terms of the tonnage and in terms of whether electric also are considered?

No, electric, again, it's the local vehicles. These are all small one tonnage vehicles, which we are using for local pickup and delivery. Those are all supporting vehicles. Those will not be on the route basis. But overall mix of the vehicle in case -- in terms of tonnage, see, again, the larger vehicles will contribute more in the fleet because hub-to-hub operation, even major route operation, those vehicles are required.

Okay. And in terms of your hubs expansion, anything on that front?

The number -- hubs are not going to change, but the space of the hubs are changed in many places. Say, like, Chennai, we changed the delivery chain. Hyderabad, recently we changed from 2 lakhs square feet to 4 lakhs area. And Surat, it was the last 2, 3 years back. And similarly, in Salem, we changed. The last space expansion is very -- expanded drastically in the hubs, but not in number of hubs. Number of hubs are not -- no more number of hubs are required. With these kind of -- with the addition of 1 or 2, definitely, we can cover a pan-India operation. But space of these hubs have substantially increased in the last 1 year.

So incrementally, the space is again for more aggregation? Or are you using for warehousing and also services?

It's completely for aggregation and sorting of the commodities. Basically, when we go ship to the new premises, what will happen, there will be additional space for the initial period. Only for those period, actually, we give it on a sublease basis to other -- either some of the consumable product, whatever it is. Actually, we give it on a sublease basis for storage temporarily. So once our volumes have increased, then again, that additional space also will be used for our business.

Okay. Okay. So I remember seeing in your Bhiwandi, those facilities that you have those 3PL kind of segregated areas.

Exactly.

But you're saying vehicles are not...

What we did in Bhiwandi is still -- that place is on sublease basis for a 3PL operator. And we did a double tracking and all these things to increase the space. Since it is our own property, that is advantage.

Yes. Yes. Yes. So something like that on the Bangalore side also, I thought your plan.

Yes. Bangalore, that offer is -- currently, that warehouse is around 5 lakhs square feet area. That owner wants to sell the property. Still that the examination of the documentation and all, it is happening, but we are not finally decided on that one. So once the things are -- everything is clean, then definitely at appropriate time, we will inform through exchange.

Okay. 5 lakhs currently, so around 100 crores.

Yes, it was totally around 27 acres of land, and that around 5 lakh warehouse is there. And we are using this facility from the last 10 years. And one of the biggest warehouse in our case also.

Thanks, [ Rahul ]. So just in one of the points you are mentioning that you are expanding your branch network as well, and you had also -- last time around, I think when we spoke, you were mentioning that you're looking to increase the branch network in the north and in the east side of Eastern regions as well. So could you give some sense on, number one, what was stopping us so long from increasing our branch network in these regions? And number two, now how is the traction there? What's the target in terms of branch addition? What key markets you're targeting there? Is it like end market driven? Is it like you have some particular -- like textile or some particular segments that you're targeting for these branches?

No. Basically, see, even after the GST, we were having a plan to expand these branches. But considering, again, the ground-level realities, we delayed our decisions. Now based on the recent trend, how the things are happening, how the transactions happening in those areas, actually, we did a proper survey. So based on our report, we are hoping that, definitely, we can expand our business into those areas. So based on that, actually, we decided to open the branch. And moreover, just I want to give an example of how these new branches will help. One is the origination of the product from these branches. That is an additional business, what we get from sourcing from those areas. Then apart from that, all our -- rest of our 900-plus branches, what we are having today, even these branches can book commodity to those areas. Say, for example, recently -- yes, receiving consumables to those particular area. So it can give growth on both the sides. So that's the reason now what happened recently, we opened some of the branches in, say, Kashmir, the same in Baramulla and all. Certainly by opening of the branches, the demand came across from all the branches and those started booking to those areas. Even though there is no booking, booking has been started from that area. But rest of the branches started doing business to those areas. Similarly, like Tripura and all, actually, we opened 1 or 2 branches. Again, there is a good demand from rest of the branches to those branches. So considering these things, definitely the volumes are going to increase in those areas, not predominantly that sourcing of goods from those areas, even the rest of the branches will support to those areas.

Okay. Okay. But do you use your own vehicles for this, sir?

No, not precisely. Not precisely. See, for example, if we are unable to have a proper load, then we engage if it's a one side load, for example.

Yes, that's why I asked.

[indiscernible]

Yes, because if you're not able to expose -- yes, yes, yes.

See, our strategy is always if both side return loads are there, then only we engage our own vehicles. Otherwise, we engage outside vehicles.

Okay. Okay. Okay. So until these branches stabilize, it's fair to assume that we'll continue to use outside vehicles for these newer regions that we are targeting.

Yes. Yes. Yes.

Okay. Okay. And sir, secondly, I'm sure you've been asked this question many times in the past with respect to the express service. We have sorting centers. We have the branch network, and we have presence in the metros and even on the Tier 1 cities. So what is exactly stopping us from getting into the express parcel business as well? Because, I mean, the numbers we see, they look better on the express side of it. Growth is also quite good there. And what we are reading is that the industry is also expanding a lot on the express side of it. So I think in the past, we did start the priority service, but we haven't really expanded that to a material number yet of our revenues. So what's the plan there? Is there a different infrastructure required? Could you give some sense on that?

No, nothing like that. See, for example, even in our case, whatever door-to door delivery service we are providing. See, earlier that used to contribute around 20%, 25%. Now that ratio has increased to around 40%. So it is a similar service we are already offering to the customers. But in our case, what will happen, most of the customers will expect some kind of a storage and delivery point. See, most of the customers, in our case, that is a drastic, major change between other operators and us. See, none of the operators still enable express cargo. They don't have proper storage facility at the delivery places. But here, what will happen, we will go with the customers. We provide -- as per their requirement, we give proper storage facility in all our delivery areas.

Right. Right. Right. But when you say door-to-door, is that also time specific in terms of delivery? Because that's what express largely provides in terms of very -- turnaround time, and they give a time guarantee kind of supply of service.

See, our majors are better than the [indiscernible] in case of door-to-door. But officially, we are not sitting there. This has to be delivered in this place or this time. Just I want to give you another example. One of the -- they are into -- again, have a multiple stores across India. And recently, we added the customer. Last 1 year, actually, we are providing service to them. There is a substantial shift of their commodities to us based on the service level. Earlier, they used to carry their goods with express cargo.

Right. Right. Right. So -- but what stops us from officially saying that we will deliver in 24 hours or 36 hours? What stops us from doing that? Because we are having a lot of experience. We know the trucking industry very well. We have the infrastructure as well. That probably gives us better pricing power is what I would assume. So any color?

I think we see, even our realization has more or less -- because of delivery service, it is more or less equivalent to these express cargo service. See, even mix of general parcel and express cargo relations are not far behind the express cargo relations.

Okay. Okay. Okay. And the type of cargo you move on the regular LTL and the type of cargo you move on express or what you call door-to-door, is that very different? Even if the customer is the same, do the customers want to move certain type of cargo on express and certain type of cargo on LTL?

No, there's not much difference. Not much difference. See, we can mix these commodities into one vehicle. See, that is going to see -- for example, if we give commitment on each and everything, so basically, again, you have to establish certain line of vehicles in all these things. There may be, again, underutilization of the vehicles and all these things. So other than that, see, there is a better optimum level, we are easing the sources by mixing both kind of commodities.

Right. Right. Right. Got it. And so I think in one of the calls before, you had mentioned that sectors like textile, electronics, also pharma, together construed about, say, 40% of overall VRL's revenues. And I think textiles was among the larger ones, maybe 15-odd percent. So that mix, you think, can change? Or do you think that will stay the same? And what's the -- what other new, say, sectors that we are targeting there?

Basically, some of the commodities like the [indiscernible] and all the [indiscernible] what we call, we were unable to carry such commodities earlier. Now those commodities are coming in a big way. And similarly, like coconut product. Earlier, again, because of this invoicing point of view and all these, we were unable to get these commodities. Now we are getting these commodities to transport from, say, Karnataka to across India. Similarly, I mentioned about the leather products also. So as a percentage-wise, it will not be major. But in terms of the number of -- weight or number of volumes, what we'll handle will be substantial. Overall means that -- see, that's a reason even textile, say, around 16%, 17%. Best of all, commodities contributing around 6% to 8%. It will not make major difference in the percentage of mixing of commodities. But overall, we'll -- increase in commodities definitely give boost to us.

Okay. Okay. Okay. And if I just -- you'd also mentioned about -- in one the answers today, you had mentioned about how per truck you are able to increase the number of trips or probably revenue per truck. I don't know how do we look at that. So first thing is you would mention lead distances. So we have asked you this in the past also, but you have said that lead distances haven't changed too much in the past. But now are you seeing some change with your storage facility and also with these new branches like what you've mentioned in newer areas in the north or even in the east? Any kind of sense you can provide on the did distance change we've had in the last few quarters?

Yes, definitely -- see, again, since we are operating huge number of trips and a number of routes, see, on an overall basis, it will not make a major change in the -- percentage-wise. But one thing is -- what is happening, there is a lot of demand is coming for interstate movement for us compared to what intrastate commodities what we carry.

Okay. Okay. Right. So that is resulting in some increase in that lead distance is what you're saying.

Yes. Yes.

Okay. And when I look at -- again, when I do a simple calculation of looking at revenue per truck, and what we've done is very simply taken your goods segment revenue and divided it by the average trucks that you have at the end of last 2 quarters, we've typically ranged at close to INR 1 million. Even if I look at it from like FY '17, FY '18, FY '19, we've ranged close to INR 1 million. For the last 2 quarters, I mean, I'm ignoring the first quarter because of the second lockdown. But if I look at the fourth quarter and the second quarter, we're at INR 1.2 million. To an extent, fuel prices also have gone up. So that also will result in this 20% increase that we have seen in per -- revenue per truck. But it hasn't gone up too much beyond that. I mean, I would have expected it to have gone up a lot more given the way the margins have moved. So is it to do with own truck versus outside truck? Or what exactly is this revenue per truck number? How do we look at this?

I mentioned about -- see, how the kilometers have changed. See, and even the carrying capacity of the vehicle earlier, even though our [indiscernible] loads have actually increased, we are in a position to be around, say, 6% to 8%. Now it has increased to 12% to 14%. See, the more volumes, again, we have more flexibility to carry the goods.

Right. So then even this INR 1.2 million is still understated. I mean you're saying that it can become much better from here given the fuel price pass-through, plus the tonnage per truck, plus lead distance, all of those put together, even -- so the revenue per truck can still go up further from here?

No. Again, see, this fuel price has come down now. That impact will be there.

That will be there.

Yes. And that benefit has to be passed through -- costs passed on to the customer. But slowly, not like -- I don't want to go not have any contracts or something like that. That effect will be there. See, there is a substantial reduction in the fuel price. When we calculated aggregate how much the price has been reduced, see, prior to this reduction in the tax rate, it was around INR 95, INR 96 per liter we used to take our procurement cost. Now that has been reduced to around INR 80, INR 81. There are substantial savings in the fuel price. So gradually, we will pass it on to the customers because, again, the volumes also has to be picked up.

Right. Right. Right. And so then to look at it, based on our growth that we probably plan to do over the next 1, 2 years, the truck addition should actually be -- I mean, are you like understating the truck addition that you have mentioned close to maybe 100 trucks or -- that you're saying, could it be actually...

300 trucks, I mean.

No, sorry. I mean per quarter, it is less than about -- less than 100 trucks that you were saying. Yes. So 300-odd per year. So could it be actually more than that? Because if I just look at revenue per truck and if I maintain it at, say, INR 1.2 million, then revenue growth wouldn't probably be as strong as we were thinking that it will be. So could the truck addition be actually much higher?

Definitely, we take that call. The CapEx plan in our case is very short-term decision. For example, this demand in vehicle, we can add those vehicles. See, if -- in next 1 year, if we had -- 1 month, if we had -- if we require another 100 vehicles, you can place order today. In 1 month, those vehicles will be on the road. So we do not have that kind of a long-term assessment and all this, it is not required in our case for a vehicle addition. If demand is very high and we are unable to get a higher vehicle, and higher vehicle is costing us more, definitely, we can ship to own vehicle by adding -- by placing more orders for the own vehicles. So even also some time to give a CapEx plan for the next -- it will be always a difficult question for me. Because for us, based on the situation, based on the requirement, always, we define the CapEx plan.

Right. Right. Right. I mean I understood that fact that it can actually be a very quick decision on adding trucks.

Yes. Yes.

The OEMs are obviously quite desperate to sell trucks. So that shouldn't be [ an issue ]. Rahul Agarwal actually has another question.

Yes. Sir, I wanted to understand this -- the utilization that you have, let's say, between hub-to-hub and hub-to-spoke, what are the rates right now?

See, hub-to-hub always -- see, other than kilometer, always we use at an optimum level, 100% capacity. And hub-to-spoke, around 65%, 70%, you can say, 70%, 75% sometimes.

And do you have traffic moving from, let's say, some bigger spokes to -- between them? Or it's always from the spoke to the hub?

Yes, there are certain movements which operate only from spoke to spoke also. See, how it works is in Bombay, for example, [ Marcil Bandar ] is a major area for us having a good number of commodities or volumes. From there, actually, to Bangalore, to Hyderabad, we're having a direct service. It will not touch even to the -- any of the transshipment hubs. Directly, it will be able to deliver a branch. There are certain rules in that way also. But it depends on, again, volume.

Okay. And just lastly, you have an exposure of 20% in the west. Is that correct?

Yes. West is around 20%.

Sir, but GST and all, I just wanted your views on how do you think that portion will pan out.

No. The west -- just I want to give you an example, again, the Surat example only, which is that is a major center and Mumbai also for that matter. See, for example, Surat, we are carrying commodities. In one truck, actually, we are carrying goods belonging to multiple customer, multiple routes. So for example, if a material needs to be delivered in Andhra Pradesh, the Surat vehicle will carry commodity from Surat hub to [indiscernible] transhipment hub. And in [indiscernible], again, it will distribute to, say, around 50, 60 locations surrounding to [indiscernible]. So how real is alternative for this service? Similarly, even from Mumbai also, the commodity work we are getting Mumbai, we have to distribute across all our branches in Mumbai and surrounding areas. Similarly, commodity is what we are [ transporting ] from Mumbai to outside also same thing. So for our commodity, our nature of customers, the DFC is not alternating. These commodities has to be moved by [ rurally ]. For example, if any such kind of advantage is there, if any kind of a mix or mechanism we can adopt to save their costs or something like that, definitely, we are the first people -- again, we will adopt by using the rail in our system.

Okay. And sir, your additions that you mentioned are going to be mostly new trucks, then it's going to be a mix of secondhand also because a lot of people are defaulting, right?

Always we add a new truck. We never buy the secondhand vehicles.

Okay. Okay. No, I thought with the default and the unorganized facing troubles...

But still -- see, our vehicles are itself is different. See, length-wise, it should be more maybe lighter vehicles, and these vehicles should be suitable for our business. But in case of outside vehicle, they have a static model. It should be suitable for all kind of commodities, all kind of routes. Sometimes they use it for carrying of cement. Sometimes, they use it for carrying up parcels. It's not like that. Actually, our vehicles have meant for parcels. We will not get similar vehicles from the market.

Your payment terms, anything changed in the trend that you are looking at? Or it's pretty much the same?

To whom?

So most of your customers would be SMEs, right?

Yes, I told you, see, these are paid and to pay. Actually, we are getting the right amount in advance. Only the contractual customers were having a credit period of, say, 30 to 90 days. And if you see, overall, the receivable date, in our case, is hardly around 11 to 12 days.

Okay. So no change.

SME is around 90 to 120 days or more than that.

Mukesh, I have one question. I'm here. Sorry, I'm not able to [ click ] the hand icon. But Sunil-ji, while you have answered this question previously, but for the sake of repetition and pardon me for the same, if a player like Delhivery wants to enter into your segment, what all it needs to do to be a real credible competitor? Because I'm coming from a perspective that when they started, they started only with delivery for Amazons and Flipkarts of these worlds, but then they ventured into full container loads and that's what they are trying to expand. And logically speaking, given the growth aspiration which typically these [indiscernible] companies have, less than container load is a logical extension to the same. So just wanted to understand what will be the steps which will be required for them to complete to get up to a service level which is up to your standard? So answer on that front will be very helpful, sir.

They need to have experience according to me. The way we are always having experience in the industry over a long -- in the case of experience. Similarly, they should have that kind of experience to do this business.

So one, obviously, experience will help them in better service level. But from an infrastructure perspective, is it a hub-and-spoke model which creates a biggest mode for you? Or is it connected with customer? Because the customer connect, nowadays, everyone has a mobile phone and an app. So customer connect -- I don't know, probably I'm completely wrong here. SMEs are different from a retail customer. But what -- as from an infra perspective, because money is not an issue for them, so -- and pricing is also not an issue for them. So...

Now you gave an example of -- see, just you mentioned this I want to take that name, delivery. There was another company, Rivigo. Actually, they started at the same time. And they come with all infrastructure, B2B, everything. What is their position today?

Yes. So they focus on a different model, the railway relay model, which we wanted to do.

Yes. But ultimately, you see the kind of their growth in revenue or kind of commodity volumes where they were heading, we do not know.

Sure. But -- so I understand...

My answer is, see, having the -- backed by the money, having backed by the funds, that is not the only solution or things which will provide solution to everything. You need to have many things to become a successful person in our business. So similarly like this less than preclude model, with all this back of infrastructure and all it needs, experience also, we should know how to utilize those infrastructure as well. Simply having the infrastructure will not help.

The only thing -- sorry, and I'm trying to extend this point, but the only thing working for them has been reasonably good utilizations when it comes to delivery from an Amazons and Flipkarts of these worlds. So in those cargoes, again, the efficiency of the system is very critical. Sorry, sir.

That's a reason they are a B2C segment. See, I made on [indiscernible] what they are doing, it is completely B2C. When it comes to B2B, it is a different scenario [ also ].

The perception here is B2B will be much easier than B2C, but -- okay. I'm not 100% sure again here, but -- okay. I will leave it to you. I will take it off-line sometime later with you. It's okay.

Yes, please.

Sir, if I may kind of just extend that question a bit more. I mean I'm not looking at the new age guys. But if you look at the existing companies, like Transport Corporation of India, for example, are expanding into LTL. And you also have CJ Darcl, which has kind of a partnership with the -- South Korea's largest LTL player, CJ Logistics. What we understand is that they have kind of said that they want to get into LTL in a large way, and they are expanding that business there. So I mean these are not start-ups. These are existing players. And from FTL, they want to expand their LTL presence. Do you see that increasing competition? Or do you think that, again, that's more unorganized share is what they are taking? How does it change life for you?

See, in the current scenario, just if you see our industry size, it's actually -- it is a huge market size. And it's highly contributed by the unorganized people across India. Now there is a scope for each and every [indiscernible] player in this industry. Not only we are [ relief ], any other PCI, whoever. Each and every operator is having the scope to increase their volumes or expand their business in this sector because the industry -- the conversion ratio is very high. The shifting from unorganized to organized is very high. So many people analyze -- and people if they come and start a similar kind of business, they will have a growth. The interstate side, it will be used.

Okay. Okay. So by that logic, even if a delivery wants to aggressively get into the part truck load business or the LTL business, you're saying that it would not have a material impact on, say, pricing or market shares for you is what you're saying.

That's hard still to handle. There are different commodities, different customer unit, a different kind of experience. If you are sitting into those criteria, definitely, you will have a scope to expand your wings.

Okay. Okay. Okay. Understood that. And I think we're just coming towards the end of our time. But just last few things is one is technology. Again, I mean, like what people were asking, I mean, obviously, one of the big areas that the start-ups like delivery focus on, and they believe that the customer acquisition is actually better for them because they harp on the technology side of it, how they're improving the experience for the customer by providing their technology. How are we placed there? Usually, we don't talk much on that. While we might be having our own technology there, but we don't really talk much there. So it will be really good if you could give a sense on that, how we are placed in that space.

See, for example, in case of technology, whatever kind of technology solutions are required to the clients, we are providing to them. See, that's the reason even some of the big clients actually were with us because we are providing optimum solution to those people to monitor their transactions, everything. So B2B requirement, whatever technology support is required, we are supporting to the customers. But B2C, what the technology is required is much different. We do not have that kind of a solution. But B2B, whatever required, we are providing optimum solution to the clients. That's why even if you say last question was there -- because from the long last 10, 15 years, we are actually having those customers. Absolutely no point in time they face that there is a lack of technology, we are unable to get this information, that information. There are absolutely no such complaint from the customers.

Right. Right. Right. That's very good to hear, sir. I think we've taken questions that we got on the chat as well as from the participants. We can conclude the call here, I think, sir. Thank you so much for your time and patiently explaining that and taking the questions. Thank you so much, sir.

Thank you. Thank you, Mukesh-ji.

Thank you, sir.