VRL Logistics Limited (VRLLOG) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to VRL Logistics Limited Q3 FY '25 Earnings Conference Call hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Alok Deora from Motilal Oswal. Thank you, and over to you, Mr. Deora.

Thank you. Good morning, everyone, and welcome to the Q3 FY '25 Earnings Conference Call of VRL Logistics. So today, we have with us Mr. Sunil Nalavadi, the CFO of the company. So I'll now hand over the call to Mr. Nalavadi to give some opening remarks and discuss on the performance, and then we can take up the Q&A session. Thank you, and over to you, sir.

Yes. Thank you, Alok ji. Good morning to all participants. I'm Sunil Nalavadi, CFO of VRL Logistics. I welcome all of you once again for the earning call for the quarter 3 of financial year '25. This is sequentially a very strong quarter marked by substantial revenue growth, improved profit margin and robust cash flows, demonstrating efficient implementation of increase in freight rates, control on cost and strategic executions in many aspects by the management of the company. As communicated during the last call about the increase in freight rates, we have successfully implemented the freight rates like across all sectors and geographies. This exercise has resulted into bring back our operational margins at optimum level, along with maintaining growth in volumes. Apart from the increase in freight rates, the management of the company undertaken many steps to control the key operational costs, such as increase in quantity of bulk purchase of fuel directly from the refineries at lower cost than the market value. Key route mapping to minimize reaches of consignments to multiple transshipment hubs before reaching to end destination, which resulted into increase in efficiency in the movement of consignments, increase in kilometers of the own vehicles, minimize the loading and unloading expenses and minimizing the dependency of the hired vehicles, et cetera. Due to these steps, we reached to the -- one of the highest ever EBITDA margins in the current quarter. On year-on-year end basis, the revenue of this quarter has increased from INR 739 crores to INR 831 crores with a growth rate of around 12%. The growth in revenue is mainly on account of increase in freight rate across all the sectors and geographies in June 2024, due to which the realization of freight per ton increased by around 11% from INR 6,670 per ton to INR 7,390 per ton. The growth in revenue is also on account of growth in volume by almost 1% from 1,091,000 metric tons to 1,104,000 metric tons in the quarter. The growth in volume is from enhancement in our branch network in Goods Transport business. Year-on-year basis, we added around 60 branches, and we continued our initiative to increase the number of branches in the current quarter and added around 10 new branches. The EBITDA has increased by around 78% from INR 97 crores to INR 172 crores and percentage to revenue has increased from 13% to almost around 21%. We reached EBITDA at optimal level again, and this is mainly on account of increase in freight rates by passing all incremental costs, which were impacted our margins in the past. Further, the margin improvement is also due to good control on fuel expenses, which is a major cost of operation in our business. We further increased the bulk purchase quantity in the current quarter from 22% to almost around close to 40% to the total quantity consumed. The fuel procurement cost per liter is reduced from INR 89 to almost INR 84. And on an overall basis, the fuel cost as a percentage to the revenue is reduced from 30% to 26% in spite of increase in quantity consumed. The improvement in the operational efficiency in the current quarter also leads to improvement in EBITDA margins. We saw major efficiency improvement in vehicle utilization by improvement in kilometers per vehicle, increase in turnaround time of the vehicle and load factor carrying by each vehicle. This has supported us to reduce the dependency on the hired vehicles, due to which the lorry hire charges are decreased from 7% to 5% to the revenue, even no addition of own vehicle capacity. The rest of the expenses, even though increased in absolute terms, the percentage to the revenue are reduced due to increase in freight realizations. The improvement in EBITDA leads to increase in EBIT and PAT margins in the current quarter. The profit of the company has increased from around INR 13 crores to close to around INR 60 crores and percentage to revenue has increased from 1.8% to 7% in the current quarter. On a sequential basis, we have seen further improvement in terms of revenue growth and improvement in the margins. The revenue is increased from INR 802 crores to INR 830 crores and the growth in revenue is contributed by increase in freight rates and realizations are improved from INR 7,241 per ton to INR 7,390 per ton, which has increased by almost 2%, with a growth in volume by around 1%. The EBITDA margins also improved from 16% to 21%, mainly driven by increase in the freight realization, decrease in fuel cost due to lower procurement cost on account of increase in bulk purchase from the refineries and improvement in efficiency due to route mapping control on hired vehicles, et cetera. Further reduction of fixed expenses such as employee cost as a percentage to the revenue also reduced due to improvement in realization. And on account of that, EBITDA margins have been improved. With this, we reached a revenue of around INR 2,375 crores for the 9 months for the financial year '25 with a growth of around 11% on year-on-year basis, with a net profit close to around INR 109 crores, which is almost more than the full year profit of the last financial year. Further, our business in B2B focus -- our business is a B2B focused LTL business with a customer base of around 9 lakh customers covering with wide range of sectors. Our key strength is having a different mode of collections from the customers and [indiscernible] of our LTL business is on paid and to-pay basis, collecting the freight on the spot from the customers immediately after the booking or before -- after the completion of the service. Our receivables days from the customer is hardly around 11 days to 12 days and which is lowest in the industry as compared to other operators. Considering the improvement in turnaround time of the vehicles and control on usage of hired vehicles, we moved slower on vehicle CapEx during the quarter and invested around INR 10 crores. During this 9 months period, including the current quarter, we did major investments in land and building properties to effective investment of our cash flows for the future growth. As we briefed about the investment in Bengaluru transport hub facility during the previous call, we have completed the transaction in the last quarter with a total investment of around INR 231 crores. The same was funded by low-cost debt at 8.6%, and we borrowed INR 185 crores for this investment. And remaining amount is funded through internal accruals. The total area of the property is around 112,000 square meters, which is almost around 27 acres, consisting of a ready-made warehouse spread in 482,000 square meters. And the immediately financial benefits for these transactions are: one is the reduction in annual rent by almost around INR 15 crores rental expenses have been reduced. And we are getting a third-party rental income of around INR 1.5 crores in a year. And we kept some deposits, around INR 9 crore deposits we kept with the earlier owners that has been realized now. And moreover, we -- during this last 10 years to 12 years in the lease period, we invested a lot of facilities over these assets like internal road work, fuel station, weigh bridge, solar installation, et cetera. And around INR 3.5 crores outstanding amount of those assets also became our own assets as of now. And because of this, the ROU, the right-of-use assets and lease liabilities, which accounted under Ind AS 116, which has been reduced. The ROU is reduced by around INR 27 crores and the lease liability is reduced around INR 29 crores. Out of the total investment of around INR 214 crores, around INR 178 crores is related to the land value itself, which is non-depreciable even for the future period. So there will not be depreciation costs related to this investment. And one of the key factor is about the low-cost debt we borrowed at 8.6%. If we calculate the total interest payable on this loan amount, which is lesser than what the rent we used to pay on this facility. Apart from these investments, we also invested around INR 43 crores in Mangalore to expand our existing transshipment facilities. And in Mysore also, we invested around INR 21 crores. Due to the above CapEx, the net debt of the company reached to around INR 469 crores. But considering our good cash flows, which we are earning almost around INR 90 crores to INR 100 crores in a quarter, we will use these cash flows for repayment of debt in the future periods, and we are expecting drastic reduction in the debt level in coming quarters. Experiencing of this strong financial performance of the company, and we are expecting similar performance in the coming quarters with the growth in revenue as well as profitability, definitely we can deliver strong financial results in the coming quarter as well. With this brief introduction, now I request participants to go for question-and-answer session.

[Operator Instructions] The first question comes from the line of Amit Dixit with ICICI Securities.

Congratulations for a very strong performance in a very testing quarter for your peers. A couple of questions from my side. The first one is we saw, of course, the realization picking up significantly as highlighted by you during the last call. My question is, is the entire price hike being absorbed in the market and whether there are few areas where you expect that realization can further go up during the next quarter? And also on the volume front, we saw that growth was little bit slower. Is it expected to pick up in H2 -- sorry, in Q4? This is my first question.

About the increase in rates, yes, we covered almost all areas. Now in the new structure, what we did basically, we simplified our -- the rate structure. Earlier we used to charge one is a basic freight, along with that we used to collect other charges. Now we simplified very much on the freight structure. One is we used to collect additional toll charges, additional freight on value from the customers and we used to collect some door delivery charges as per the fixed formula and all. Now what we did basically, we simplified these charges and we added in the freight rate so that we can communicate to the customers very clearly that this is inclusive of all these expenses and this is a total chargeable freight to the customers. So because of the simplicity, the customers are understanding very quickly about our rates. And it is becoming very easy for us to convince the customers about the increase in the rates. Now earlier we were having lot of terms and conditions also to the customers, say around 35, 40 conditions depending on the products. Now even those terms and conditions have been brought down around 10 to 12 conditions. So because of this, now our team is able to convince to the customers about our new rates structure. And even the customers are accepting or convincing about why we increase the rates. So because of this reason, this rate increase is a sustainable model and the realizations will continue even in the future. When it comes to the freight volumes, volumes, yes, whenever we take a rate hike, little bit disturbance will be there in the market. But in our view, since we have increased the rates in 2 year -- 2 quarters back in the June '24 itself, now most of the customers have been accepted and now it is stabilized. So considering this fact, going forward, in Q4, actually we can maintain the volume with the similar growth of around 1% or 2% or lower single-digit. But overall revenue growth will be there in the range of around 12% to 13%. But when it comes to say about Q1 or Q2 of the next financial year, again we can expect the volume growth in the range of around -- at least around 8% to 10%. And moreover, now what is happening because of -- as I said, we brought a lot of efficiency in the route mapping and other things. Our service has become very fast and people -- our customers are acknowledging our service that it is very fast now. And another major change or difference between other competitor to us is about the safety of the consignments, since we are using our own vehicles across all the routes. And our claim ratio, if you take a damage or theft ratio, it is very, very minimum as compared to other operators. That's the reason the trust or reliability with those customers is very high. So with this backup, we are very confident that again volume growth will reach to around 8% to 10% from Q2 or Q3 of next financial year.

The second question is...

[Technical Difficulty] Mr. Dixit, sorry for interrupting. Can you please come in the range because your voice is breaking.

Yes. Is it better now?

Yes, please go ahead.

Yes. Sure. Second question, on the Bangalore hub, so while you have highlighted the financial benefits very aptly in your PPT and prepared remarks, is it possible to also give some qualitative stroke, quantitative aspects of the operational benefits that we will get from this hub?

Yes, basically given those operational benefits also mentioned in the slide. Basically now we are having a workshop facility over there, which we are doing only some repairs and maintenance, which are very minimum activities what we are handling today. Since that property has been converted into own properties, then we wish to create a satellite workshop over there so that even it will handle some major repairs and maintenance to avoid vehicle bring back to hub for major maintenance. So it will give a lot of maintenance on the spot to the vehicles because majority of the vehicles reaching to this hub for distribution across south. And moreover we are providing them vertical storage stacks also. Currently, what is happening because of the rental premises, we cannot do any internal structures over there. Now considering our own facilities, then definitely we wish to create some vertical stacking and because of that the additional space will be created. Now the square feet area for that entire warehouse is around 5 lakh square feet area. With this vertical stacking, again the total storage area will be automatically increased without further investment in the warehouses. And moreover, currently, the labor work what we are doing, it is completely -- some forklifts and other machineries we are using and we are using manual methods predominantly. Now again we can bring out a lot of machinery installations. The belt -- conveyor belts and all, installations, that again bring back efficiency in the loading/unloading pattern. Again it may reduce the overall hamali charges or loading/unloading service going forward. And moreover the biggest advantage of this property is about the solar panels. Currently that the existing owner earlier he was not permitted us to install the solar facility over there. Now entire roof actually we can use for solar -- implementation of the solar panels, and we can generate a good electricity for our forklifts and other equipments what we are using. And moreover some of the smaller EVs also, electric vehicles also using for local delivery. Even we can create a charging facility over there for -- by using the solar energy. And moreover currently again there are -- there is some empty space also like parking space and all. Again effectively, we can use these spaces to give further benefit in your --- in our future operations.

[Operator Instructions] Next question comes from the line of Lokesh Maru with Nippon India Mutual Fund.

Congratulations, sir, on excellent set of results. Two, three points from my side. First one being, this year we have taken steep hikes in realizations, right, for the last 2 quarters -- since last 2 quarters. And as we enter next year, you already highlighted in your comments that realization hike is going to be sustainable every year. But if you could throw some color that if our expectation on volume front is 8% to 10%, same time next year, do you think we'll be able to achieve that 13%, 14% revenue growth even 5% extra hike? Or next year should be the one where we work only with volume growth per se in your opinion?

Yes. Basically, we are expecting the revenue growth in the range of around 12% to 13% even in the next financial year, which will be the combination of the increase in the realization as well as the volumes. See, how it will happen is in the current quarter, we did a revenue growth of, say, around 12% year-on-year basis. In this, majority of the contribution is coming from increase in the realization, the increase in the freight and around 1% is coming on account of increase in the volumes. In Q4 also, the Q4 and next year quarter 1, the similar trend will come. The realization contribution will be very high in the overall revenue growth and the volume growth contribution will be in the range of lower single-digit. But by that time, our rates will be stabilized in the market and actually, we can convince more and more customers even we are doing aggressive marketing. And because of simplification of the rates, we are expecting that the acceptance from the given new customers will be very high. So with that hope actually, we are expecting that even in Q2 and Q3, our growth will be in the range of, again, around 12% to 13% in the overall revenue.

So again, a key driver which you mentioned was route optimization and the speed that we have achieved now, the turnaround times and deliveries. If you could help understand was this like a year-long process, which we are -- the result of which we are seeing now? Or was it strategic which happened last quarter? And what -- operationally, what has changed per se?

Yes, it is a continuous process. See, we cannot define any time line for this. So the reason what I'm saying here is depending on the loads or tonnage availability in each area, accordingly, we design the route. See, for example, to give one example, even I have mentioned in the presentation also, we shifted our Ahmedabad transshipment location from old premises to the new locations. Earlier, we used to operate with 2 warehouses. Now we shifted to 4 lakh square feet single warehouse. Here, what actually we did, the entire movement of goods from Rajasthan, Punjab, Jammu and Kashmir and some part of the Delhi and surround, Himachal Pradesh and all. Earlier, most of the consignments used to go to either Ambala transshipment hub or to the Delhi transshipment hub for further movement. Now what we are doing instead of, say, for example, if material is moving from, say, Jammu to Coimbatore, earlier Jammu material used to come to Ambala, Ambala to say Bangalore transshipment, Bangalore to again Coimbatore. Now what has happened that material directly will come to Ahmedabad and go to Coimbatore. So almost we are avoiding 1 or 2 transshipment hubs in most of the routes wherever we are getting a good volumes. So this exercise will continue. And even we are analyzing in such a way that wherever 2 transshipment hubs are there, we are restricting to 1. And wherever the booking branches itself are contributing very high volume, then directly that material will go to the delivery station rather than reaching to any transshipment hubs. So because of these initiatives, the vehicle turnaround time, the utilization levels are increasing.

Understood, sir. Just a few more questions, if I can take. Two, 3 things. One is what is our savings per liter compared to retail because of our 40% direct procurement? That is 1. Number 2, number of branch additions has been lower for the year -- for the 9 months compared to what we planned out for, start of the year. If you could throw some light on that? And number 3, on CapEx side. CapEx for -- this year has been very heavy on CapEx, right? So some guidance on FY '26 would help. That's all from my side.

One is the difference between the retail and the bulk purchase is almost around INR 5 to INR 6 now and because of the lower crude oil price. And again, the bulk purchase price changes every day. So depending on that moment, this savings also varies. And about the branch expenses -- branch expansion are considering, see, every quarter, again, we are planning at least around 20, 25 branches -- new branches. So that effort or that process will continue even for the next year. So on a full year basis, definitely, we can open around 80 to 100 branches even in the next financial year. And when it comes to the capital expenditure, see, currently, this year, the majority of the investment in this land and building in 3 locations because of that, the CapEx has increased. But the normal CapEx on the vehicles will be in the range of at least around INR 150 crores to INR 160 crores even in the next financial year.

Next question comes from the line of Mukesh Saraf with Avendus Spark.

Congratulations on a great set of numbers. Firstly, on -- again, going back to the volume versus pricing. So you did mention that second half next year, you will start seeing some volume growth. So based on that, basically, these customers who have right now, not engaging with VRL, they have gone back to, say, unorganized kind of operators? Or what has happened there, sir, because of the price hike that you have done?

See on a temporary purpose, actually, they shift to the other operator, either it may be organized or unorganized, predominantly the unorganized people because the good thing here is since our network is expanded across all the country and many remote places also we are having branches. Most of the organized players, actually, they do not have a reach to the remote places. So even in our rate increase, we did in such a way that wherever our service level is very high, wherever our network is very reachable to the end users. So based on that, actually, we did increase in the rates. So considering these facts and considering the temporary shift of these customers, even in some of the customers, they are already saying that they have already acknowledged delay in the service and all. Some of the customers feedback is in such a way that: "we are unable to trace our consignment in other transporter, kindly book our consignment henceforth whatever rate it is." That kind of feedback also we are getting from the customers. And moreover, because of the number of branches widely spread in our case, we are not collecting additional outer delivery area charges from that, ODA charges from the customers. So our rates are fixed, 1 branch to 2 branches. So that it is very easy to accept from the customer side that they've already know that what is the transport or logistic cost in VRL. But in other cases, what will happen, at the final billing, they charge ODA and other charges, which they cannot assume at the time of booking. So these are the differences.

Got it. Got it. And I mean, in terms of management strategy, I mean, do you -- and these are the situations where you might have to cut back on some prices if say -- I mean, basically, you have in the last couple of years also taken price hikes, but we haven't seen this kind of a margin improvement because you mentioned in the past that the entire pricing has not been absorbed by the customers. This time, maybe you have enforced it a bit more. But how much does the management -- how long are you willing to go without, say, volume growth? Are you willing to go with 1% volume growth for a longer time this time? Or if, say, volume growth doesn't come in, you will be forced to cut prices?

No, our strategy is very clear. Actually, see, we are expecting that based on whatever feedback we are getting from the ground, we are expecting that the revenue growth will be range of around 12% to 13%, again, which will be the combination of volume and the freight rates. So initially, the volume contribution will be lower. But as and when we cross another 1 or 2 quarters, again, the volume growth will be picked up very high. That's what we are expecting. And we are expecting that the margin maintenance, currently, we reached around 21% EBITDA level. But going forward, definitely around 18% of the EBITDA range -- around 18% we can maintain.

Got it. Got it. And secondly, fleet addition, I mean, we have seen that you've scrapped more trucks than you've added in the last 2 quarters. So your -- actually, the total fleet that you have, net addition has been negative this last 2 quarters. Any sense on that? I mean, is it because temporarily, you're going to see lower volumes and you want to increase your own vehicle running that you're not adding trucks right now?

No, there's again temporary this one mix -- change in the mix. And moreover, now what we are doing is, so some of the vehicles which are closer to the 15 years and all and which are very high capacity like 28 tonnage and all. So we have scrapped some of those vehicles and added the vehicles which are in the range of around 20 tons, 24 tons, which are more suitable across all routes. That's the reason that overall, the tonnage capacity has been a little bit impacted. But because in terms of the number of vehicles, actually, we added more vehicles. Around 300 vehicles have been added in the 9 months, and we scrapped earlier around 200. Because of change in the vehicle capacity that overall the tonnage capacity is a little bit impacted. But even going forward, the vehicle addition plan is -- will continue. And depending on the load factor, see, again, the plan of vehicle addition is, it's a continuous exercise. See depending on the load factor in each transshipment hub, we take a stock and we decide to add the vehicles. So based on that, we are expecting that around INR 150 crores, INR 160 crores CapEx. Anyway, it will be there even for the next year only for addition of the vehicles.

Okay. Okay. Okay. And sir, every quarter, you do mention the amount of tonnage that the new branches have given you. This time you have not. So -- and we have seen only 1% growth. So can we assume the new branches also has not seen volume growth? Or is it that the existing branches have seen a significant decline and the new branches have just offset that?

No. New branch, again, the contribution is in the range of around 3% or so, to the total tonnage.

Next question comes from the line of Harsh Shah with Veera Holdings.

Sir, my question is again on the volume growth side. So if I look at last 5 years, we have grown our volume at around 8% CAGR. And during the same period, our branch addition has almost been [ increasing ] similarly 830 to almost 1,250 branches where we are today. So is it fair to assume that volume growth is fully subject to branch addition and there won't be any [indiscernible] any organic growth in the existing branches that we have or have we reached a sort of saturation point on that front?

No, no, volume growth obviously it's more contribution from the existing market alone. With the new branches actually we have taken an initiative to open new branches in the potential area that is giving additional contribution to the volume. But if you see overall market trend, see even on the MSME sectors, for example, which is a major contribution to our overall tonnage, that segment is suffering very high. And we are hoping that given in the current budget, the more trust has been given to MSME sectors and the rural economies and agriculture sector. So even from these sectors, we are getting good volumes, and we are expecting that because of these government initiatives, we may get good volumes. So it is not basically from the increase in the branches, but even from the existing areas also overall contribution is coming, means we are seeing some growth. So in the future, what will happen since because of the government initiative and because once the rate increase is stabilized, from Q2 onwards, the next financial year, again we are expecting growth in all the areas, all the geographies.

Sir, if I have to ask it the other way, sir, today, if you stop expanding new branches at 1,250 and say you keep your branches same for the next 2 years, do you still expect that you can see volume growth from these existing branches only?

No, I'm not getting your question, please.

No, my question is, hypothetically, if we assume that we don't add any new branches, we are at 1,250 branches today and say for next 2 years we don't add any number of branches, we will still be able to grow our volume?

Yes, definitely. Definitely, we are still able to grow volumes. Because what will happen, these -- the recent added branches in the last 2 to 3 years, those growth will be very high in the coming days. Those are all new geographies where actually we added. Those contributions will be more. And apart from that, even the contribution from the existing branches, the existing market also, our existing customers, depending on the growth in GDP, again, it will contribute addition to the volumes.

Okay. And just last question is on the margins. This quarter has been, I mean, it's like highest ever margin that we have ever clogged at 20%. And since we have taken the price hike, and you said you have introduced lot of efficiencies in your businesses and we're also expecting volume growth going ahead. So is it fair to assume that this 20% kind of a number could be sustainable going ahead?

No, As already communicated the sustainable EBITDA margins will be around 18%.

18%. Okay. Okay, sure.

With a growth in the top line of around 12% to 13%.

Okay. Understood.

Next question comes from the line of Rohit with Samatva Investments.

Sir, I just have one question. How much is the express part or the door-to-door delivery part of our entire business?

See, we do not have a express, but we are having a door-to-door service. Out of our total volumes, almost around 34% to 35% of the volumes are door pickup, door delivery.

Okay. And sir, the price hike...

In this, again, the major contribution from -- is coming from the contractual customers. The account quality customers, what we call around 15% to 16% of the total volume, it is completely door pickup and door delivery.

And these price hikes that you have taken since June, you were able to pass it on even for these door-to-door service. Am I right?

Yes, to some of the customers because most of these contracts are due for the renewal from the month of April. And in the current quarter, actually, we are interacting with these customers to renew the agreement. There actually, we can see some additional realizations in the current quarter. But anyway, see wherever again, some overall factor, it may not boost more into the realization.

Next question comes from the line of Ankita Shah with Elara Capital.

Congratulations on a very good set of numbers. This vehicle addition for next year will continue to be in the similar range going forward?

Yes, around INR 150 crores, INR 160 crores, what I indicated, that kind of a CapEx we do even next year.

But that would include branch additions also, right? So on number of vehicle addition would be how much?

No, for branch addition, there is no capital expenditure. It's all -- only we open a branch and we engage -- we open branches in the leased premises. So most of those expenses are charged to P&L account only. But only on -- CapEx is on the vehicle side.

So we can assume around 200-odd vehicles approximately that could be added?

Yes. Each vehicle cost will be around INR 40 lakhs. So total investment will be around INR 150 crores to INR 160 crores. Around 200 vehicles, yes, what we are expecting. Yes.

Yes. Got it. Also, sir, on the biodiesel consumption which is high this quarter, is it likely to continue at this level?

No, biodiesel is not there, madam. Actually, we are not at all purchasing any biodiesel. This is -- the bulk purchase fuel has...

Yes, sorry, bulk purchase, I meant bulk, will that continue?

Yes, it will continue. And now what happened, the -- compared to retail price versus the bulk purchase price, it is -- the gap is very high now. That's why the benefit is coming. But the bulk purchase is purely depending on the crude oil price and that price changes every day depending on the crude oil prices.

Okay. So as long as that gap is there...

Yes. As long as that premium will continue, then this quantity will continue, and it may increase a little bit also.

Got it. And sir, last question, have you gained market share? And do you have any numbers around market share number?

See, on a overall business side, yes, some of the products actually we gained. And basically, again, it is out of the GST compliances because of increase in the compliances because the government is further going to strengthen this verification of the transactions. And again, the one good development what the government has done now, even whatever invoices we are raising today, the charge or liability will automatically come [ later ]. Not only the e-invoices, they are fixing the liability also. So because of that, the compliances are further increased. And we are expecting that, again, because of this new customer may be added to our foray.

Okay. And number of unique customers is around 9 lakh or has that...

Yes, around 9 lakh customers we are having as of now. And gradually, it is increasing.

Next question comes from the line of Ankur Kumar with Alpha Capital.

Congrats for a very good set of numbers. Sir, I wanted to understand regarding you are saying -- as in we did 20% margin this quarter, but you are guiding that sustainable should be around 18%. But given we have taken so much price hikes and the customers have also accepted it, why are we expecting our margins to reduce on that front, sir?

No, basically, see, as I said, the major contribution of around 2% to 3% is coming on account of the fuel charge because of the fuel efficiency. Because the bulk purchase what we are buying, that gap is almost around INR 6 to INR 7 as of now. So if at all, any changes into these rates, then it will directly impact on the margins. Because of that reason, on a sustainable basis, around 18% is maintainable. That's what I said.

So for FY '26, we should work with the assumption of 18%?

Yes.

Got it, sir. And sir, any -- what are the CapEx plans for this full year as well as next year?

In current quarter, again, there will be lower in vehicle CapEx. But next year, on a full year basis, around INR 150 crores, INR 160 crores, what I said. The -- why again, the vehicle CapEx, always it is linked to our tonnage. So we analyze this movement in tonnage and engagement of the outside vehicles periodically. Accordingly, we decide the number of vehicles which needs to be added. Since the tonnage is almost hardly 1% or 2% growth, then because of that, again, addition will be lower. But once again, it is a normalized growth will come, say again, the CapEx will be added.

So sir, in terms of our total vehicles, what will be roughly utilization rates at which we are working right now?

See, hub to hub operation always it is operating with full capacity. See, there out of 6,100 vehicles, hardly hub to spoke, we are using around 1,000, 1,100 vehicles, but remaining all vehicles are operating between the hubs. There, the utilization is fully at 100%. And one more development, what we are doing in the current quarter is even earlier we were not monitoring the vehicle utilization between hub to spoke. Now we are creating a mechanism in our system that even the utilization of the local vehicle should be optimum. That exercise is also going on. And we are unable to quantify exactly what will be the savings. But definitely, there will be savings in that front as well.

Next question comes from the line of Sandesh Shetty with HSBC Securities.

Am I audible?

Yes.

Sir, just wanted to check on the additional CapEx that you incurred because of investing into Bangalore facility, Bangalore, Mysore and Mangalore facility. So sir, if you can give up the breakup of how the CapEx is spread and also the increase in debt, so how much of debt has come because of this investment? And how do you progressively plan to reduce this debt? Like is it a 2- or 3-year plan? Or how do you plan to reduce your debt? That would be my first question.

See, on Bangalore property, out of INR 214 crores investment, we borrowed INR 185 crores and which is repayable over 1 year moratorium is there and 9 years repayment. And the cost of the debt is around 8.6%. And normally, in all our cases, most of the cases actually we prepay the debt. There is no pre-closure service in any of our loan agreement. So because of strong cash flows, we may repay this loan much prior to the tenure what the bank has offered. And similarly, for Mangalore property also, total investment, we did around INR 42 crores. And for that also, we borrowed some amount. And going forward, again, it will be repaid. See, currently, the net debt is around INR 465 crores, INR 470 crores. See, basically, our repayment plan is every quarter, we are generating almost around INR 90 crores to INR 100 crores free cash flows. So over and above CapEx, definitely, these cash flows will be used for repayment of debt only. So considering this debt, the debt level will come down drastically in the coming period.

Okay. And sir, second question is on the lorry hire charges that has come down around 2 percentage points. Do you think that this is sustainable over a long period because of the route optimization and everything? Or it can again come up...

It is sustainable. We may see further improvement in, again, dependency on the lorry hire, but this is a sustainable savings.

Next question comes from the line of Vikash Khatri with Aviral.

First, congratulations on a wonderful result. My question is regarding you mentioned that our benchmark damage and theft are lower than industry or other players. So what's the delta over there? Second question related to it, if our damages are lower, safety is higher and with a dense branch network, are we able to attract more loads from the organized express player like the [indiscernible]?

Yes. Basically, see, our services, again, in the door-to-door service, definitely, we are having some of the very good customers over there. Totally, we are having around 1,200 to 1,500 very strong corporate. Actually, we are servicing them. And most of these customers, the first step will come about the safety of the commodities. So because of our own vehicle, because of the covered vehicle, because of the train drivers in our operations, the claim ratio is very low. And even we are carrying some of the very valuable commodities also, which are so easy to [ trade ] or anything, say, like cashew nuts or even the black pepper, all these materials. So most of the customers are with us on these commodities.

And what's the difference in damage ratio any benchmark?

See damage ratio in our P&L itself, we are showing it as a separate line item. The overall claim, including whatever fire incident, et cetera, in a year, it is not crossing even INR 2.5 crores to INR 3 crores out of INR 3,000 crores turnover what we are handling, which is lowest.

Next question comes from the line of Anshul Agrawal with Emkay.

So my first question is on -- my first question is on pricing. Am I audible?

Yes, yes, please.

Great. So my first question is on pricing, sir. Our pricing strategy earlier used to be that we used to have certain discounts on the new branches. Is that continuing?

Yes, yes. Wherever -- see our structure has been that [indiscernible] wherever there are no return loads and all, there actually, there will be lesser price. It is not that actually from/to rates will be stable. For example, we've opened this Northeast area. To Northeast area, our rates are high compared to the rates from Northeast area to Rest of India.

Got it. So the discounting strategy to attract volumes at new branches that remains the same, if I got this correct.

Yes, it was there earlier also, and it will continue now also.

Got it. Second question is on the bulk procurement of fuel, as a proportion of our total fuel requirement, how higher can we grow? Can we go to, say, 50%?

Yes. Now it is around 40% level we are using. See, average our daily consumption is around 3 lakh liters of fuel. Out of that 40%, we are directly using from the refinery. And we are expecting that it is at a peak level, but there are -- there is still scope to increase around another 3% to 5%.

Okay. And what proportion of our existing fleet would be older than, say, 15 years now?

15 years around, say 700 vehicles. But out of total capacity you take say around 6% to 7% of the capacity is older 15 years.

Got it. Just a follow-up on that, sir, you mentioned that we'll expend about INR 160-odd crores on vehicle CapEx next year. That would be roughly a gross addition of 400-odd vehicles, right? And we'll say scrap another 100, 200. So net additions will continue to be around 200, 250 vehicles. Is that math correct?

Yes.

Next question comes from the line of Vikram Vilas Survanshi with PhillipCapital India Private Limited.

What is the current turnover limit for e-invoice now?

E-invoice again is INR 5 crores now.

Okay. And in terms of I think most questions are answered, so just to get sense on how is our EV addition in last mile basically?

No. Currently, see we are doing a lot of exercise with OEMs on the EV front. Once they create a sustainable model, then we are going to add. So still that product has not come into the market. We are awaiting.

Okay. And any thought on LNG trucks basically for long haul and all.

Yes. We are putting efforts in all the angles. But wherever it will fit to our model, then definitely -- once the acceptable model comes and definitely, we are the first people to invest on the vehicles.

Next question comes from the line of Rajarshi Maitra with InCred Research.

So my question is on employee cost. So any plans on salary hikes going forward? So when and what kind of a hike is expected? Yes, that's my question.

No, currently, that plan is not there. It may come about Diwali season or something -- during Diwali period or something, we may think about it.

Okay. And how much -- whether it will be like a 5%, 10% hike -- 5% hike or a 10% plus kind of hike?

No, we have not worked out anything on that front as of now. And moreover, on the routine basis, we promoted a lot of people. And continuously, even if you see on absolute terms around INR 1.5 crores to INR 2 crores salary cost is increasing. But these costs will not -- these promoted people within a 1-year period and all will continue as it is. So these people will not come again sit in for an incremental list.

Thank you. Ladies and gentlemen, as there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Yes. Thank you all participants. Thanks for your questions and hope that I replied it properly. If any clarification or anything directly you can call me. And as I said, definitely, we are having one of the best quarter now in terms of financial performance. And we are expecting that similar performance will continue even going forward on a sustainable basis. And currently, the debt level is high because of our good investment for the future growth in terms of properties. And considering our cash flows, again the level of debt will come drastically in the coming 4 quarters. That's what we are expecting. With this, actually, I wish to thank everyone and conclude this call. Thank you.

Thank you. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.