Ladies and gentlemen, good day, and welcome to Mahindra Logistics Limited Q2 and H1 FY 2025 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shobhan Seth. Thank you, and over to you, Sir.
Us on the call today. We have with us Mr. Rampraveen Swaminathan, MD and CEO, Mr. Saurabh Taneja, CFO, and the senior management team. I hope everyone has had a chance to view the financial results and investor presentation, which were recently posted on the company's website and stock exchanges. We will begin the call with opening remarks from management, followed by an open forum for Q&A. Before we begin, I'd like to point out that some of the statements made during today's call may be forward-looking. A disclaimer to that effect was included in the earnings presentation. With this, I'd like to invite Ram to make some preliminary remarks.
Thank you, Shobhan, and good evening, everyone. I trust you all have had a chance to view our presentation and financial results, which are available on the stock exchange and our company website. I'll briefly talk about the external environment, our end markets, operational highlights by segment, and some key corporate updates for the quarter. Let me conclude by talking about financial performance in Q2 and H1, and our focus areas for the remainder of the year. So as we mark the third anniversary of the Gati Shakti Program, there has been tremendous acceleration in the overall infrastructure and development of the sector. Increased capital investment by the government and the private sector rose from 0.4% of GDP in FY 2015 to approximately 1%, which is around INR 3 lakh crores in FY 2024.
Over the last 10 years, there has been significant progress in development of national highway, which has increased 1.6 times in the last 10 years. The average pace of national highway construction has nearly tripled during this period, rising from 11.7 km per day to approximately 34 km in the current year. Additionally, toll digitization, virtualization, has significantly reduced waiting times at toll plazas, decreasing from around 12 minutes to less than a minute over the last 10 years. Indian ports have also been rapidly expanding the capacity to meet growing trade demand. Since 2014, capacity of major ports has more than doubled. Improved connectivity, driven by coordinated planning under the Gati Shakti National Master Plan, along with a strong emphasis on public-private partnerships, has significantly enhanced India's maritime competitiveness on the global stage.
Reflecting this program's progress, India now ranks in the International Shipments category of the World Bank's Logistics Performance Index. India's ranks have grown from 44 in 2014 to around 22 in 2023. The continued focus on the Gati Shakti Program initiatives are critical for the sector and will continue to drive long-term acceleration for logistics. As India grows towards a $5 trillion economy, the logistics sector's long-term potential will continue to rise. Let me also quickly cover our end markets, and I'll begin with the automotive industry. In Q2 FY 2025, overall passenger vehicle wholesale decreased by 2% year-on-year, but grew around 2% quarter-on-quarter. Passenger vehicle retail sales declined by 3%.
With Q1 key performance also impacted by unusual rains, and the Shradh period in September, which is generally considered inauspicious by customers. In the two-wheeler segment, overall wholesale increased by 13% year-on-year and 5% quarter-over-quarter, which is, you know, a strong turnaround. With domestic wholesale growing about 13% year-on-year and 4% Q1 to Q. On the other hand, commercial vehicle sales remain subdued. Commercial vehicle wholesales are expected to decline by 10% year-on-year and approximately 3% sequentially, driven by reduced activity, by, and a slowdown in infrastructure spending. The light commercial vehicle segment is anticipated to fall by 11% year-on-year, with a flat Q1Q growth. Despite festivals like Ganesh Chaturthi and Onam, dealers have reported slack in performance, indicating underdeveloped market sentiment with flat or negative growth trends.
Adding to this, the unpredictable monsoon weather and inauspicious Shradh period have kind of further dampened sales during the quarter. According to the Federation of Automotive Dealers Association, or FADA, the passenger vehicle dealers are facing historically high inventory days, approximately 80 to 85 days, equivalent around 8 lakh vehicles, worth around INR 79,000 crores, due to aggressive dispatches by OEMs. Looking ahead, the automotive sector remains cautiously optimistic, with Navratri and Diwali falling in the same month, raising expectations for a strong surge in vehicle sales. Our OEM customer base has seen mixed trends, with continuing trend of empty days on non-production days in some cases, offset by continued strength in some other OEMs. Across the board, in our entire customer base, we see a strong focus on inventory improvement and management.
Moving on to FMCG segment, the worst seems to be over for rural markets, although momentum has not picked up significantly compared to the earlier quarter. However, a healthy monsoon has led to a good kharif harvest, which is expected to ease some of the persistent food inflation pressures. Our volume growth is anticipated to remain healthy, especially with the favorable base. As the festive season approaches in Q3 FY 2025, a more sustained uptick in demand is expected. Additionally, a large portion of pricing declines in home consumption categories, such as edible oil, hair oil and personal care products, is now behind us, providing further support for improved market conditions.
While we see our customers showing greater optimism with a strong focus on growth in their networks, at sites and individual locations, volumes remain soft and volatile through second quarter, and we're optimistic about an uptick in the coming quarter. Moving on to the telecom industry, telecom operators announced tariff hikes at the end of Q2 FY 2025, with an impact expected to start reflecting in the coming quarters as well. As a result, performance is expected to improve sequentially, driven largely by the benefits of higher ARPU. Additionally, capital expenditure remains stable compared to the previous quarter, supported by ongoing investment in 5G infrastructure and efforts to densify the rural networks. The strong signals of growing investment from major 5G bearers, players, fares well for value-added services and FTTH, NNI and distribution for the logistics sector.
The e-commerce sector, we've talked about a lot and we're focused mostly in terms of short-term trends. As we get closer to the peak period of the year, the primary focus for the sector has been on adding capacity across the network from major marketplaces. Sales in the early part of Q2 bear even optimism, and we are seeing increased activity. However, at the customer end, the focus remains on improved asset utilization, with overcapacity in several products given capacity additions done earlier in 2022, 2023, and 2024. A particular area of growth remains quick commerce and groceries, with increased focus on expanding categories and the network. These segments also translate into higher growth from minimized fulfillment services. We remain optimistic for the quarter ahead based on demand being shared by our major customers.
The mobility industry has not seen any significant changes. Business travel remains strong, and the leisure segment is continuing to show positive trends. On the B2B side, we continue to see a slow return to office, and there has not been a significant change in the direction, which has been slow but positive over the last four quarters. Let me just move on quickly to our operating segments. In the interest of time, I will not cover all our segments, but we will answer specific queries you have on any of them later on, in the call. I'll begin with third-party logistics, contract logistics business, or third-party contract logistics business. The third-party contract logistics business grew by 7% year-on-year during Q2F25, as several of our new sites showed volume growth.
Our order intake was healthy, with an order intake which of annual contracted of orders intake of nearly INR 200 crores during the quarter. We won several key programs, especially around, you know, fulfillment. For leading cosmetics players, we will be launching four new distribution centers in the coming six months. We also expanded with additional wins in grocery and quick commerce during the quarter, through this with the expanding of fulfillment center network for these segments. While new order volumes have been healthy, lower demand from current volumes and current sites had a damping effect during the quarter, with weak demand both from consumers, from e-commerce and auto OEMs. This has partially impacted the gains we registered from new accounts. During September, we had additional seasonal resource additions for the peak period, which starts for us in October.
This is something which we do annually. This year, given that peak has split itself across two quarters in terms of resource period, we saw a strong increase in September. The additional resources we've added, 6,900 seasonal resource workforce in ramp up of the peak, and that has resulted in higher expenses during the quarter from INR 3 crore-INR 4 crore and impact earnings during the quarter. However, these should be offset in Q3 when we will see higher volumes based on the projections we have received from our customers. We do continue to invest in our warehousing network in the third-party logistics business. Cumulatively, our total warehousing space today is in excess of 21.6 million sq ft. During the quarter, we commenced operations in Guwahati and Kolkata.
Our new BTS in Agartala is under construction and is set to go live with partial operations in Q4. All three sites are anchor client identified, and commissioning has already been completed in Guwahati and Kolkata. Overall, the white space in this business has come down largely compared to the prior quarter. We currently handle 1.1 million sq ft of white space, which has impacted our year-on-year earnings. These are on account of closures, wins of e-com contracts post the 2023 Diwali peak. We have made progress on new sales of that space, and approximately 50% of the white space will be utilized by new orders and new progress should go live by the middle of Q4 FY 2024-2025, and then we'll start to accrue to the earnings from that point onwards.
Moving on to the freight forwarding segment, it was a period of recovery for us in freight forwarding, with growth in tonnage in most of our products other than air import. The growth was driven by new accounts, new account additions, and penetration in existing accounts. During the quarter, there was a more favorable pricing environment, especially in terms of ocean freight, which has provided us a strong improvement during the quarter. While external environment remains volatile, we remain optimistic in the coming quarter, given our acquisition of new clients and the growth we are seeing in some large contracts. I'll now move on to the express business. This was a challenging quarter for the express business. The demand environment, which was challenging in the prior quarter, remained weak, with a lot of volatility and lower volumes from several clients.
While we maintained a very low level and healthy level of account churn, we did see a 7-8% decline in volumes from existing customers, on the back of lower business volumes they had. New acquisitions around 15-2000 tons were also lower than what we had estimated, given the market conditions as we had slower closures and delayed startups on accounts. As a result of these volumes for the quarter were generally flat, Q-on-Q, and there was also a marginal impact due to lower sales to our retail customers, our retail segment. While demand is a challenging situation for us, obviously we had a good quarter, with strong continued improvement in our on-time delivery dates and our service quality to our customers.
However, volatility in sales resulted in challenges for us in the quarter with higher transportation costs, as we saw peak volumes in the end of each month. Overall, this has been a challenging quarter for the express business. It's a business which is a critical part of our turnaround plan, right, both in the last and the current quarter. So it has been challenging because we have lost some ground in the turnaround plan. However, we have made good progress on underlying factors, and we remain cautiously optimistic about short-term volume trends. A few other corporate developments in the quarter.
As part of our overall regional expansion, we are well underway in our Go East strategy, wherein we'll be adding nearly one million sq ft of multi-client warehousing in Kolkata, Guwahati, and Nagpur. This is supplemented by the expansion in 100 hub branches and delivery stations in our express and last mile delivery business, connecting the entire region. This should surely position us very strongly in our sector to serve what is generally considered a challenging part of India geographically. During the quarter, we also launched a new offering called ProTrucking, which is focused on high volume network transportation solutions for large multi-site clients. The offering has seen some positive customer adoption by four to five key customers, and we expect to further ramp up the offering in Q4 and early Q1 of 2025, 2026.
As part of our green logistics offerings, we launched Eagle SCR, which is an industry-leading digital platform for visualization and monitoring of emissions, complemented by our circular operating system, sustainable warehouse, and new transportation services. This will provide customers an opportunity to measure and manage their carbon footprint, especially on Scope 3 emissions. With those general updates, let me quickly move into our financials for the quarter. From a financial performance perspective, and I'll begin consolidated performance of Q2 FY 2025. Revenue for the quarter was INR 1,521 crores, up 11.5% yearr-on-year. Revenue from the warehousing segments were INR 306 crores in Q2 FY 2025, up approximately 19%, from the same quarter last year at INR 256 crores. That includes warehousing and integrated solutions.
Overall, our supply chain management business, including our 3PL and network services businesses, such as freight forwarding, express, and last mile delivery, contributed 95% of our overall revenue, and the mobility business contributed 5% of our overall revenue. Gross margin at a fully consolidated business basis including was at 9.17% in Q2 FY 2025, coming down margin from 9.25% for the same quarter last year. Gross margin without the impact of the express business was 11.4%. EBITDA for the quarter was INR 66 crores, up from INR 54 crores from the same quarter last year.
And overall, for the quarter, we reported a loss of INR 10.8 crores, right, an improvement over the same quarter last year, but a small marginal decline compared to the immediately preceding quarter. Now moving on to components. Revenue for Q2 F twenty-five was for MLL, which was 1,236 crores, as compared to 1,135 crores the same quarter last year, up by approximately 7%. PAT for the quarter was INR 8.5 crores, as compared to INR 18.6 crores for the same quarter in the prior year. PAT was impacted by two broad elements compared to last year. The first one was the seasonal impact of hiring for the peak. Last year, the peak was in Q3.
And the second thing which has impacted us was the white space, right, as we had, compared to last year, when, the 1 million sq ft or so of space, which I referred to earlier, was fully occupied. Loss in our freight forwarding business, revenue for the quarter was at INR 86.8 crores, as compared to INR 52.5 crores for the same quarter last year, up approximately 60%. PAT for the quarter grew sharply to around INR 2.1 crores as compared to a margin about breakeven, for the same quarter last year. Our express business reported Q2 revenues of INR 91.7 crores. We reported under a subsidiary called MLL Express Services Private Limited.
Total losses for the quarter in the express business were INR 24.2 crores for the quarter, an improvement there of around 4% compared to the previous quarter, but the trailing obviously behind what we had initially estimated, or our target for the quarter. The mobility business continues to move on its profitability improvement process. Revenue for the quarter was INR 81.1 crores. It was down compared to last year, largely on the account closure of some accounts and higher vacations, and disruptions in the quarter, which resulted in lesser trips. PAT for the quarter stood at INR 1.6 crores compared to 0.9 crores for the same quarter last year, up by 70%.
Whizzard, which is our last mile delivery business, revenue for the quarter was INR 51 crores, up 46% from the previous year. Last quarter, losses to that point INR 2 crores, the Rivigo acquisition have now completed three consecutive quarters profitably. And we feel good about the scalability of the business going forward. 2x2, which runs our automotive car carrier operations. The business has made a profit of INR 2.02 crores in Q2 FY 2025, as compared to INR 1.4 crores. Okay. Revenue breakup for Q2 FY 2025, the automotive business was approximately 57%, non-automotive is around 43% of our revenues.
As I look back at the quarter, we have been able to start a sharper volume recovery, with 11.5% year-on-year growth. That caps a challenging 2023-2024, where we had seen slower volume growth. Our subsidiaries are showing stronger traction and profitability, managing the long-term plans during the time of acquisitions. We remain focused on driving improvements in CPL to prior periods, driven by our focus on reducing white space and driving more operating improvements and getting the MES experience turnaround back on track after what is a challenging quarter last year. With that, I'll open up for queries and come back towards the end of the call once again.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. The first question is from the line of Mr. Amit Dixit from ICICI. Go ahead.
Good evening, everyone, and thanks for the opportunity. I have a couple of questions. The first one is on contract logistics business. I just wanted to understand the quantum of unabsorbed cost in this quarter, because revenue seems to have grown, but the gross margin has been. So I just wanted to understand that aspect.
Sure. Good afternoon, Amit. Do you want to just give us both your questions, and we'll answer both of them together?
Yeah, sure. So one is this on absorbed cost. The second one is, the potential at Rivigo. What is the cash burn over there, and do we need to pump in more cash at this entity? These are my two questions.
Sure. Let me take this. I'll answer them both of them in the same sequence you asked them. So obviously, we did see volume growth overall in the contract logistics business around 7%. Most of the volume actually came from new sites and new accounts, Amit. And our same site, so the way to look at this business, obviously, is we run you know long-term contracts for our customers and integrated solutions wherever we need transportation. And these accounts have a certain running volume, and then we add new sites every quarter or every year. Because of slightly softer market conditions, especially on the automotive side, and some FMCG customers, our existing customers actually showed some declining volume. And that obviously was one thing which impacts our operating leverage at those sites.
The second thing which we did have a challenge on, but we added new sites which actually drove the revenue growth offsetting that. From a bottom line perspective, I think the two, three broad drivers which impacted us. As I said earlier on, we had some impact because existing sites actually went down year-on-year on volume. That obviously got offset by new sites, but if the volume had not gone down, we were even better off. The second thing which is a challenge has been unabsorbed white space. Unabsorbed white space is approximately 1.1 million sq ft, which is around INR 7.5-INR 8 crores per quarter, in terms of pre-tax level. Okay. The third thing which obviously impacted us was sequentially and year-on-year, Amit, the peak impact.
This year, because Diwali is coming in October, right, we have done most of the resource additions in September. The volume for that resource addition will actually flow through next quarter. We've had some, a total, as I mentioned earlier on in my opening remarks, we've added around 6,500 people, right, on temporary contractual basis across around 97 sites, which we run in e-commerce, 100 sites we run in e-commerce. That has meant that we've had a INR 3-4 crore impact, right, in the contract logistics business. There's some amount of impact on last mile delivery business as well, but that's much smaller, that's smaller. So that's, I think, the broad run-up.
I think it's the big, big numbers obviously are the eight crores of white space, and the three to four crores of the, the pre-season or the seasonal hiring. And that is much of the delta between last quarter, last year, Q4, Q2, and, this year's Q2. In addition, last year in Q2, we had, we had other incomes which were sharply higher because of some one-time settlement of prior period tax cases. But those three are your principal waterfall elements from an earnings perspective. As you go forward, two out of other income will come and go, but I think the other two will basically get resettled. One is the seasonal hiring, which will go away in this quarter. And as I said, we've kind of already sold out half the white space around our current space.
And obviously adding some new accounts as well. The second question in terms of Rivigo, yes, the company is having a cash burn. We are, as you can see, they have reported PAT losses of around INR 24 crores. On a non-cash basis, the losses are around INR 21 crores. Depreciation is roughly around three crores, and that's kind of the burn which we are funding. We have capitalized the company, I think, earlier this quarter. I think you would have probably seen, received our stock filings. We are adding another INR 50 crores of equity in the company. We have a strong governance mechanism based on the long-term valuation into the business and what we put in our initial business plan, and we remain committed to funding the business.
Right, this has been a challenging quarter for the business. We are cognizant of that, but we think the underlying building blocks are in good shape, so we'll continue to invest in Amit, as he drives the scale up.
Do you take any best given regard for Rivigo to turn EBITDA positive, either third quarter or fourth quarter?
No, I think right now, it is very difficult. We need. So I think last quarter also I said the same thing, Amit, and we, you know, we need around 30%-35% more volume, right? Right, between 30%-40% more volume being digested for us to be, do EBITDA breakeven. And somebody asked me the same question last quarter as well, and I said that one of the risks which we carry is that the demand environment is a bit volatile. It was difficult last quarter as well. We were not expecting our existing customers to downgrade, which actually happened this quarter a little bit. And that's happened across all our businesses, frankly, with the exception of Forwarding, our cross-border business, and that impacted the express business a little bit more.
We will need 35%-40% more volume. That's been a consistent number I've said now from the quarter I think we acquired the company, right? And that's a bridge which we need to match to map. I think and right now we are hoping to do that by around four to five months, right? So somewhere in the middle of Q4 is when we should be able to do that. And there will be some burn which we'll have to fund over the next two quarters as well. That's something which we have partially capitalized, so we have put the infusion we had done earlier this quarter, and then we will see how it goes from there.
Okay.
We are, of course, funding this through internal covers.
Thank you so much, and all the best.
The next question is from the line of Janam Shah from Equirus Securities Private Limited. Please go ahead.
Yeah, Janam, good afternoon. Am I audible?
Yes, Janam, you can. Please go ahead.
This question is related to Rivigo part only. If you see, if you go back two years, somewhat where we acquired the Rivigo, our plan to revamp the operation and make it. At the time, right, Rivigo was quite mid of FY 2024, then eventually market was not that great or maybe a few players have become aggressive in gaining the market share or maybe any other reason. The volume growth has not been that much, and eventually we have lost some market share in terms of volume. While we are in the pickup stage, I guess there has been 5-6% overall revenue growth, which we are witnessing, and there has been a cost pressure as well coming from the overall macro environment.
So from this angle, are we looking for any kind of thing which can eventually turn around for the Rivigo in near term, or is it more of a investment vehicle as of now for us, maybe for next few quarters, and then eventually turn it again, profitable? My observation would be that on a Q2 basis, our revenue has increased by somewhat of 2.5-3 CR. But our EBITDA margin, EBITDA has improved by around half of that. So incrementally, 50% EBITDA is flowing through from the additional revenue. But to make it profitable, twelve crore of EBITDA losses is still there. So what would be our overall, let's say, next two, three years perspective on the Rivigo?
So, Janam, I think much of your answer to your question actually is in your question, fortunately. I think what we, when we acquired the company, obviously, we had assumed. So two things have happened there. Obviously, since we acquired the company, one milestone which we missed was around smooth integration of the networks. We obviously had a challenge integrating the networks, which is something which we carried from March 2023 till around August or September 2023, which was probably from the fourth or the fifth month of acquisition till the tenth month. That will take us time to clean up and fix. And since then, from an operational or an offering perspective, we have been pretty robust.
Our on-time deliveries are continuing to improve. We are actually adding more capacity on some lines, on line hauls, to support you know the customer value proposition we provide. So operationally, I think we are in good shape. Obviously, you know we move nearly six to seven crore packages through the network, and therefore, you are not going to get it perfectly right all days. But it's operationally in a good place, right? And that's also reflected in the yields which we're getting from our customers. The challenge for us is to get volume up. Right, volume up is the story. I think from volume, in this quarter, we saw better flow-through from revenue to EBITDA. I think that's probably this quarter slightly on the higher side.
I would generally say revenue to EBITDA flow-through should probably be around 25%-26%. This quarter was slightly higher for us. I wouldn't use this quarter as a straightforward benchmark as well, but we need around that. I think we need 35%-40% more volume, and that's kind of the, that's the thing which will solve for it, Janam, and there's nothing else to it. That means obviously we've got to sell harder, we've got to deliver more in a cleaner way, and we will drive better synergy with the rest of our businesses, because obviously we serve many accounts through the rest of our company and our other segments as well. So we had hoped getting into the year that we would actually have a stronger Q4.
Where we saw some good intake, order intake in Q4, and we are optimistic in Q1 and Q2, but market conditions have been weaker than we expected. That has obviously tailed a little bit through in our pricing, but for the large part, it's affected, I think, our conversion more than our pricing. So at this stage, I think, you know, there is the focus purely is on getting our demand and, you know, to deliver the volume and driving the conversion. If we, if we deliver that well, I think we are, we think our volume will continue to higher upside over the next two years.
From a long-term perspective, I'll reiterate what I've consistently said, that which we do, that, you know, we do believe that from an end-to-end solutions perspective, our part truck load remains a very important lever for, for customer value creation. And therefore, strategically, MRL is very committed to being in this space. We think it is very, very important for our company and its portfolio from long-term perspective. In terms of the value proposition we hope to provide, the segment itself will have secular 13-15% growth. It's been a tough year. But if you look at the segment, it has been among the fastest growing segments within logistics. That's something which I think all of us in the industry can agree to bear out.
And then we think that the, that growth recovery will come back even more in a couple of weaker quarters. And the third thing, of course, is I think, you know, from a valuation perspective, even with the additional investments we have made in, and it's something which, when we made the acquisition at point six or point six seven times revenue, everybody asked us, "Have you got a very low-cost deal?" And we said, "It's kind of we purchased a low cost, but we will invest more," right? To turn around the business. And we're actually running on one time revenue, right? In terms of our total invested capital, debt, and equity in the transaction, which we think is very even including the losses.
That's the level of investment we have made, and we think that's actually a very well-positioned investment value in terms of the portfolio and comps in the market and the industry. I think the focus right now is to get the volume back up, and I think if we can do that, we will be in a good place. We have a good order book. Order book quality is good now. That's one of the things which we had to clean up in the past. And therefore, that's in a much better shape as well, and we just have to execute on better volume. I mean, that's the simple and more. It's easy and difficult, but that's I think the road in front of us.
Got it. Got it. Sir, just one follow-up question. As you're talking about 35% or 40% volume growth, do we have the capacity for this kind of growth?
Yeah.
or we will be adding up new, more capacity for that?
Yeah. I think a mix of that. I think at sites, generally, we have the capacity. That's one of the reasons our profitability grew up. So capacity is two things: It's transportation and it's processing centers. At processing centers and facilities, we have the capacity. We might add a few shifts, right, but by and large, we have the capacity. Transportation right now, the line haul network is running at around 85% utilization, 85% utilization. Utilization came down a little bit this quarter, because we ran more lanes, during that time requirement. So that is the headroom is available in the network, and beyond that, we'll have to add capacity as volume comes.
Got it. Got it, sir. Thank you so much. I thank you so much for the lovely answer.
The next question is from the line of Sharad Singh from Haitong Securities.
Hi, Sharad. Good afternoon.
Hi. Hi, good evening. So I just had one bookkeeping number question. So what was the volume in the express segment for the current quarter?
I think around 64,000, 64,000 metric tons. 66,000 metric tons.
Sixty-six thousand. So, that's... Is it correct to say that over the last quarter, we've seen a dip, a slight dip? Because last quarter, I think we'd mentioned a decline of about 8%, from, like, from quarter on quarter, sequentially. Is that correct? Is there a further dip from the previous quarter?
I think we were down in Q1 vs. Q4, we were down 7.6%. This quarter, we are up around 2% in terms of actual volume moved. So from a yield perspective, the yield was slightly down this quarter because we had a higher mix of enterprise versus retail, and that was an impact. The overall volume in the quarter actually grew by 2%-3%. Pickup volume is actually higher, Sarath. We actually picked up more volume, but delivered volume grew by 2%-3%.
Pickup volume grew by even higher, but given the volatility, the end of month swings and seasonal and weather challenges through the quarter and more holidays, we obviously did not. We had a higher gap between pickup and delivery, but delivered volume is up 2%-3% compared to the sequential quarter.
Okay. And, so for Q3, just, a basic question, can we expect some seasonality for the PTL business as well? In Q3.
I think we're expecting. I mean, to be honest, you know, Sarath, I think that the three parts with the obviously seasonal demand, which comes from our retail network and our existing customers, there is obviously, you know, existing customer account volume, and the third one is new account addition. What I think was a challenge for us in Q2 was just the fact that given the overall economic environment, several of our accounts just down traded us, not because they were down, because we lost them. Their volumes just came down, right? We are hoping that that will come back, that was the biggest immediate lift because those are accounts we're already working on. It's actually volume we service at a higher level.
If you see the dip, if you go back to Q4, so the dip versus Q4 is actually a lot of it is that. So I hopefully that volume will come back. We're optimistic it will come back, and I think it's still early in October to call it, but I think as we get closer, we'll be in a better position in a couple of weeks when we talk about it more clearly. But we are expecting obviously a seasonal lift from our accounts.
Got it. Got it. Thank you for the answers, and best of luck for the upcoming quarters, and Happy Diwali. Thank you.
Thank you. The next question is from the line of Krupashankar NJ from Avendus Capital. Please go ahead.
And thank you for the opportunity. So Ram, couple of questions. First one on the: is there any one-off relating to flex warehousing which has impacted the 3PL margins this quarter?
No, no, Krupa. I think I outlined earlier on. Firstly, I think flex in general has come down in the sector, and interestingly, I think if you notice, you know, our peaks are just getting longer. I mean, I think festive sales are just getting longer, and you will see that across the board, except on grocery and quick commerce, most of the marketplace are running slightly longer sales. And if you look at delivered days from those, you just see a slightly more stretch out on that. So, I think inherently, the current demand for flex is. The demand growth as support is not there to justify flex right now, and a lot of it has just been handled operationally.
So it's not there, and there's no one-off this quarter. I think the impact really compared to last year, Krupa, has been the white space. I think I mentioned there's been white space of around INR 8 crore. Obviously, the additional impact of seasonal hiring of around INR 3 crore to INR 4 crore. Those are the two big headline numbers. There's obviously been lower each site volume that's been offset by some of the growth as well, yearr-on-year. But these are the two big drivers of the 3PL business, churn volume out. I think the seasonal hiring is an issue of September, which should basically you know kind of unwind itself in the coming three months, and we should see an uplift from it as we build up capacity.
And I think the white space or the unsold warehousing, we have contracted more than half of it already, so we should see that come down in kind of over the next couple of quarters.
Understood. Also, Ram, with respect to last mile delivery, are you seeing the trajectory improving substantially from here on? Because, when you look at the CapEx numbers, I was quite surprised to see that the CapEx incremental in the first half is pretty much quite on a higher side in comparison to our past. So is it more to do with this last mile, or can you just give us a breakup per se as to what are the drivers here?
No. So I think from a. So I'll answer the question on last mile per se, because there's really not much of an impact on last mile. Last mile business has grown healthily. I think it's benefited from specific segments we are working on, like grocery, and new account addition. I think the express business, through the express business, we run a very cost-efficient model, and therefore it's not a very capital-dense business. I think during the first half of the year, we have spent an increment in capital that's largely been on account of two things. Firstly, you know, I think, as I, and you can see our 2x2 results at a subsidiary level.
We have added around 75 vehicles to our 2x2 fleet, which is an assetized truck fleet, which we run for car carriers, and that fleet's been fully deployed. I think you'll see the benefits of that showing up in the results partially in this quarter. There's some more headroom to go as the vehicles get fully utilized. I think the second piece of growth has really been that as you've seen our warehousing revenue has grown around 20% yearr-on-year, despite the challenges, and we are adding more offerings and solutions there, and that has seen some amount of capital in the quarter. We have gone live with a couple of new sites in ramp up peak, and that has been the other part, which has added capital as well.
So if you generally see our general capital pattern, Krupa, you go back and including all the stocks for quite some time, we're generally a 65-35 kind of company. 65% in the first half, 35% in the second half, because a lot of our cap addition has been lined up with that festive season. Right? So we are up this year, but if you take out the fleet addition, I think we are still pretty much in line. We do have 1.2%-1.3% of capital investment model, and I think we are generally in that range still, in terms of first half of the year.
I think the second half of the year, we will actually probably see some additional capital investments. We are working on some several large projects, and if those materialize in terms of demand, we should see on a higher capital flow there. We are also looking at kind of some fleet addition, more addition to two by two business. We should also probably, given the strong demand we're seeing in car carriers and some of those things, Krupa, will probably add to our capital addition as well. Yeah, again, as I mentioned earlier, our capital spend is generally driven by earnings growth targets, and we don't approve projects if they're not in line with those targets.
Understood. Thank you, and all the best.
Thank you. The next question from the line of Alok Deora from Motilal Oswal. Please go ahead.
... Hi, Alok.
Hello, good evening, sir. Just a couple of questions. So sir, just few quarters back, you had mentioned that, you know, the tonnage is around seventy thousand or so, and we need to get towards one lakh tons kind of run rate to achieve breakeven. And in the current market scenario, you know, where most of the companies are talking about at best kind of you know single-digit growth, they're recouping thirty to thirty-five thousand tons quarterly. Incremental volume seems pretty far-fetched. So is it fair to assume that this would be much longer run process here? Because unless we reach around ninety to ninety-five thousand or one lakh ton the breakeven seems not happening. So just some thoughts on that. I know you have spoken in detail on TV before, but just if you would highlight it in terms of the tonnage. Yeah.
Now, this Alok, I think all the data points we said are all accurate. I think we had said when we are around 71,000 tons, that's when we 30%-35% more, we said 95,000 to one lakh. The last Q4 of last year, we obviously put it, we are down 7%, in Q1, 7%-8%. We're up 2%-3% this quarter. So that's just like we're getting our baselining all of us on the same page in terms of baselining. We do obviously need to get around the 30% more, which is down from that 65,000, 70,000 or 30,000, 30% more, and that still remains the North Star, if you will, towards the best possible.
In terms of the challenge in the market, I think that challenge, I think the challenges you articulated also are fairly accurate. You know, if I look at last quarter, Alok, I think we, I think we would, you would ask the same question last quarter, and, and we said that we need approximately five thousand tons a month, four, five thousand tons a month of growth every month, to be able to, to be able to hit that number on, on, in terms of, our growth. Last quarter, we did see around two thousand tons of additional order intake, so it was not that the order intake was bad. But our challenge was that our existing volumes traded lower, and that means that we obviously had to reset our volume growth targets to higher levels.
We are investing more in the front end of the organization to drive that a lot more. We're also trying to drive better synergy between our three tier business and our [inaudible]. But the risk on volume remains, right? I think, to the question, I think Jamie asked earlier, and he said... he asked us to give me a timestamp or date, and I said, I think I told him that it's a bit hard to have a timestamp and exact date. I could just give you a date for the sake of giving you a date, but, you know, it wouldn't really help. You know, we do need to get to that 35% volume growth.
I think as we see it right now, this is what we are seeing in terms of the run rate of order intake, what we are seeing in terms of churn levels and what we see as a pipeline, both of converted orders which are yet to trade, and new conversions we have. We think this will basically be a window through February or March. Okay? And as you pointed out, I think the company is expected to break even, you know, towards the end of 2024, right?
And we are now looking at probably breaking at the end of 2025, which is like a 12-month delay, right, based on the current visibility we have. But the volume environment is challenging. I wouldn't undermine that at all. We have people too. It's a challenging quarter for us, but I'd say we have some high probability line of sight to get into that volume by February or March.
Sure. Sir, how is October been in terms of tonnage? Even if you can't share the absolute tonnage, but have we seen the incremental, whatever, two, three, five thousand tons coming in October?
We've seen some marginal improvement on traded volume in the first 10 days, 10, 15 days. I think we will probably get to see that. As you know, I think there are two things here, there's pickup volume and delivery volume. Right. So we have seen uptick on the pickup side, in terms of what we have picked up from our customers. We are seeing some stretch on delivery. So hopefully we will have a better sense of that towards the end of October.
Sure. Just the last question, sir. So, sir, I mean, the first quarter we were down 7% QQ, then we are kind of flattish in second quarter. And now, you know, as per the revised, sort of a guidance in the way that you're telling that by FY 2025 end, we will break even. So that would mean that we are looking at a one lakh or a 90,000 sort of a tonnage materializing by end of this year.
I mean, if we are growing at 2% or 5% or even 10% or even, you know, 15%, that might, growth might not, the tonnage might not really materialize, right? So, because, I mean, frankly, most of the companies are talking about 5% to 10% at best, in the second quarter. So are we talking about a big share of big market share gain here? Because, I mean, 66,000 moving to 90,000 in four, five months, I mean, that seems pretty challenging.
I think, I mean, first, what I do agree with you, that's a challenging task. Just to get the numbers aligned, I know it is 65 in the quarter.
Yeah.
Going from eighty-five to ninety in a quarter, so it's around six thousand tons more per month.
Mm.
Right? So in that sense, it's not a step up change. If you remember, we are still trading 5% lower than what we were in Q4.
Yeah.
Right? So that's kind of part of what we have to get back in. We have to get that number in, and then we have to grow from there. So it is a challenging environment right now. As I said, we know, well, I think this is our best line of sight. There are challenges in volume, for sure. Right, we are, but we have a high probability line of sight, and we are working. Right? Can I guarantee it? Obviously, it's hard for us to guarantee anything, but right, we are working it based on what we see as probabilities, and our pipelines are pretty strong.
Yeah, absolutely. No, the only reason we are, this becomes a very significant part of your,
Absolutely, I understand.
So that's the only thing, because we already delayed by kind of a year.
Yeah.
And still, I mean, we still see it difficult materializing in the next six, nine months. So sure, no problem, sir. That's all from my side. All the best.
Thank you.
Thank you. The next question is from the line of Ankita Shah from Elara Capital.
Yeah, hi, sir.
Hi, Ankita.
Hello. Sir, I want to question this last line that you mentioned, high probability of line of sight. Sir, in terms of volumes of what we've been seeing so far, what will change so suddenly or give you so much of confidence on the growth in volumes? Also, even if I look at your pricing, on an average, your pricing is not very competitive as compared to peers as well. So what is the USP or, you know, I would say, what is the driving this confidence in terms of volume growth from your end, if at all it comes?
Thank you, so I think we're going to come back to same question in different perspective, right? But I think what gives us confidence right now is three things. The first one, I think, is that said earlier on, we are still 5%-6% trading lower than what our earlier volumes were. Like in Q4, most of that has not been shared of, I don't have competitive loss in terms of, of market share of those accounts or share of wallet of those accounts. Those have been accounts which have been down scaling their volumes in general. As those come back and so there is some confidence which we have got from their, conversations with them. That's approximately the 15%-20% of the delta we need to bridge.
The second thing I think is, and you know the industry very well, Ankita, and you've been working with many people. Obviously, when we close orders, we don't obviously get immediate conversion of all those orders. It takes us some time for us to get an order converted into full tradable volume. Given some of the challenges in the market, that period has got stretched out. So if you look at what we have won or signed up in terms of contracts every month, it's probably around five, four, five thousand tons per month of contracts which have already been signed up. But only around a third, only around 30% has actually flowed into our books, right? So obviously, the second part, which gives us confidence, is that we generally bring.
You know, we are not seeing any customer issues with accounts, so we are hopeful that we actually can, that will change into our volumes in the coming three to four months. And the third one, obviously, is new account addition. So if you actually break the six thousand, which I know is a large number and seems very large too, in that, I think the 15% of that is just a recovery from existing accounts we have. Around 40, around the 50% of it is actually driving more volume conversion from contracts we already have signed, right? And the remaining one-third actually is new accounts, which we have to win, right? So that's what gives us confidence. I think on pricing, it's a mixed bag, Ankita. I'm not so much competitiveness of pricing. I think it's in turn, the pricing corridor is large.
On parts of load, I think there are players who are aggressively, obviously, pushing price to get volume. There are people in regional PLs, for example, who actually price it even lower levels. So it's very difficult to, to technically call our competitiveness of pricing without looking at our value proposition. I think our value proposition is simple. Like, we deliver more direct pin codes than many, many others do. Right, and on the delivered, the pin codes, we deliver directly, which is around, you know, 8,000 out of 19,000 pin codes. We actually do have very, very good tags, we believe, very good turnaround times and delivery times. And I think our service quality and our depth quality is pretty good.
Now, that's one of the reasons why I think we don't see much of our any customer accounts actually pushing everything on price reductions. I have said consistently that we will not chase price to do not aggressively use price to build volume. Right, we are confident about our ability to drive the proposition to create volume for the business. You know, and that's something which we'll hold the line on. Right, tactically, of course, that doesn't mean that we will not adjust volume for specific to customers or very large volumes or for specific geographies, where we need backhaul or we need specific volume. But by and large, our approach is not to undercut competition or undercut existing pricing to actually build volume for us. Right, and that's something which we'll remain consistent on.
But that's actually why we think we have line of sight on it. That's like a longer answer, Ankita. The proof of the pudding is in eating it. So.
Yeah.
We've got to wait.
Got it. Sir, secondly, the debt has increased in the first half of the year. Does this already take into account the CapEx and the INR 60 crore of additional investment required, or is it over and above the first half of-
I think, Ankita, almost completely that's taken into account. Obviously, part of the increase is because I said we bought 75 new car carriers, which are quite expensive. For the 2x2, that's fully in the numbers.
Yeah.
I think most of the capital investments we have made in the P&L contract logistics business is completely in, right? And obviously, for the large part, we also do the MLL's funding as well through internal accrual from MLL, and that's largely in those numbers as well. That doesn't show in our data as much.
So the large funding is not included in this?
No, large funding is largely included in the numbers. We do that on approval. We don't borrow for it. We're not, still now we've not borrowed a lot.
But because of core business, we also lost making the obviously everything is going into that only, right? Incremental funding.
Uh.
Core business as well as this.
Ankita, Saurabh here, just to clarify. The core business generated INR 140 crores of cash flow from operational-
Oh, yes. Yes, talk about FC entity.
Yeah. I'm talking about the MLL standalone entity. It generated INR 140 crores of cash in the first half of the year-
Okay.
-which was used to fund, the, you know, the equity funding as well as the CapEx-
Okay.
-financial investment.
Ankita, I think I'll just suggest you can look at the financials in a bit more detail and send us question.
Done. Done, done, done.
Yes.
Lastly, the work from home has not fully recovered. But sir, last year, FY 2024, so we were seeing a growth in the mobility segment, and I think in one of the calls you had mentioned also that, you know, on a large part of the airport business is back to pre-COVID level, then why are we seeing slowdown in the mobility for the last two quarters?
Yeah, it's a good question. I think the, in the express business, the mobility business around 15%-20% of our business is the main brand-based B2C business. Around 80% of it is express, is enterprise mobility. I think during the quarter we saw the full impact. You know, we kind of, our Bangalore-based airport business came down because the contract with the Bangalore Airport was awarded to somebody else, when the renewal came in earlier this year, and that impacted our B2C volume during the quarter. And that impact we're seeing yearr-on-year. The B2B business actually is in very stable shape.
It's not grown as much as we expected because we've not seen a pickup on return to office, but it's in pretty good shape, and that's actually why you see the profitability right in a very stable shape and actually improved yearr-on-year. It's also sequentially in very good shape. We are working obviously on strategies now to expand the B2C business. Obviously, when we lose an airport counter, it has one spike or one sharp dip or one sharp spike. We win an airport, we get a sharp spike. We lose an airport, we get a sharp dip. That setup in a time period impact.
But the core part of the business, which is the larger part of the business, which drives our revenue and earnings growth, is the B2B business right now, and that is the one which I think consistently last year I told you that the B2C business is lagging, but it's growing, right, compared to pre-COVID levels, and I think that's something you can see in terms of passenger traffic data. The B2B business is where the recovery has been slower, and that is still crawling. It's just not, it's just not, we've just not found the second step up. We've got the first step up around August, September last year, and we are still waiting for a big step up to happen again.
Many of our accounts are projecting more employees coming into work on a full-time basis, but we've not seen that so far.
Okay. Thank you very much. All the best.
Thank you. We will take the last question from Mr. Achal Lohade from JM Financial. Please go.
Hello?
Yeah, good evening. Thank you for the opportunity.
Uh, sure.
So, the first question is, you know, on the supply chain business. You know, you did mention that there have been some reduction in customer count and some additions. So, you know, what is the, how many customers we kind of seen unwinding? And number two, what kind of impact it did, it have in 3Q?
In 2Q actually. We are coming to 3Q. I'm sure there will be no impact.
My bad.
I hope so, right? But in Q2, just to clarify, that we've not lost any. We've never drop any customers. We actually had a drop in existing customers' volumes, right? So obviously we run facilities and networks for our customer, and if their volume comes down, the volume we profit comes down, right? So if in our warehouse we deliver, you know, 50,000 packages from there, if their volume comes down, it becomes 40,000, then we obviously, to that extent, lose some margin and revenue from that additional 10,000 that dropped.
Okay.
So during the quarter, we did see that impact. It was a mixed bag across multiple sites. On the automotive side, obviously, as I mentioned earlier, you know, we had more non-production days or no production days in our accounts, and that obviously meant the average revenue from those businesses, many of those we do on a price per vehicle, price per car, price per truck basis. So we obviously saw some impact of that. That was on ... I don't have a specific number. We can pull out a number, but probably I would say it's probably around $200,000-$300,000, 2-3 crores, right, of impact. Right, that obviously got offset by the growth we had in volume, right?
So obviously, we also had a 7% growth in volume, and that 7% growth in volume obviously offset that and a little bit more. That I think was the largest. That was the impact there. I hope I answered that question to your satisfaction.
7% is post the volume reduction in the existing customer, or is it, the-
Revenue, revenue grew by 7%, which obviously had some negative impact on revenue and obviously positive impact of revenue. Generally, what does happen, actually, when we launch a new site, it doesn't get peak earnings on day one, right?
Right.
So, first three to six months, earnings are going to be lesser than peak earnings. And therefore, you will see it's on upward travel. I mean, dollar lost in existing site doesn't always add up to the same margin as a dollar one on a new site.
Understood. Secondly, you know, in terms of the sector index, you did say auto is 57%. Would it be possible to know what are the other two, three large sectors,
So I think, mobility is around 5%, as you know, okay, on the overall company. And the remaining, 40%, 39%, if we split the half, roughly, you know, 20% of that would be, FMCG durables and pharma, and 19, 18, 19% would be e-commerce and then market. E-commerce is served both by our 3PL business, our freight forwarding business, our express business, and our last mile delivery.
Understood. And just one more question, if I may, with respect to quick commerce. You know, A, how large is this for us at this point in time? And, B, you know, in terms of the opportunity, in terms of the growth, you know, how do you see it evolving, and is it margin accretive, margin dilutive for us?
The last one is a simpler answer than margin accretive. I think the way to look at the space actually though is that I think the quick commerce side, we don't do too much of last mile delivery in quick commerce. We largely do fulfillment, right? So as you look at quick commerce, I think that's an important distinction to make. So we are fulfilling into dark stores. We run some dark stores, but we've done very few dark stores in delivery. We have operating model constraints on how we operate that, so we don't do too much of that. On the fulfillment center side, obviously, that drives the number of stores which are there. And that business is very large for us. I don't have an exact number, actually.
You probably can email us, and we can do a more specific number. But we are running, I would say probably around, you know, a reasonable number of fulfillment centers in the space. And it's a growing space for us. I think that space as customers, as the quick commerce companies tend to add more dark stores, right, you should actually see obviously more demand for fulfillment as well, because those dark stores have to be fed by someone. So we are obviously expanding. That's one thing. The other thing I think is quick commerce is also expanding the selection, right? So it's moving from just groceries or food items or kind of the experience with the last mile more to other things as well, like electronics and so on.
And as that selection broadens, the density of fulfillment requirements is also broadens. And therefore, right now we are expanding for a couple of them, and we are setting up several new fulfillment centers for them across multiple cities in the country. I'm not at liberty to talk about specific details. In terms of revenue contribution, actually, if you can send us a note to SGA or Mr. Kenneth, he will send you a note specific to that.
Sure, will do. Thank you so much, and wish you all the best.
Ladies and gentlemen, in the interest of time, that was the last question. I would now like to hand the conference over to Mr. Rampravin Swaminathan for closing comments.
Thank you, all. I hope we've been able to answer all your questions satisfactorily. However, if you do need any further clarifications, do send us your questions. You can contact our team or SGA Investor Relations advisors. Thank you all for your continued interest in the company, and I want to take the opportunity to wish you all and your dear ones a very happy Diwali and a very safe one. Thank you, and thank you once again for taking time this evening to join us.