Ladies and gentlemen, good morning and welcome to the VRL Logistics Q2 and FY 2026 Earnings Conference call hosted by ICICI Securities Limited. This Conference Call may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as of the date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participants in the line 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 this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Lohia from ICICI Securities for the opening remarks. Thank you, and over to you, sir.
Yeah, hi. Good morning, everyone. Thank you for joining us today for Q2 and H1 FY26 Earnings call of VRL Logistics Limited. First of all, I would like to thank management for providing us the opportunity to host this call. From management, we have Mr. Sunil Nalavadi, CFO of the company. So without further delay, I would now hand over the call to Mr. Nalavadi for the opening remarks. Thank you, and over to you, sir.
Thank you, Mr. Mohit. Good morning to everyone, and a warm welcome to VRL Logistics Limited Q2 and first half year of FY26 Earnings Conference Call. Just I want to highlight the quarterly performance to start with. During the quarter ended September 2025, VRL Logistics demonstrated resilience and disciplined execution in an evolving market environment. The period was marked by changes in GST regulations and the strategic rationalization of low-margin contracts. Despite these factors, our performance remained stable, with total income of INR 804 crores broadly flat compared to year-on-year basis. The tonnage is declined by around 11% year-on-year basis, primarily due to the deliberate exit from low-margin business, but it's encouraging to note that volume showed a 4% sequential recovery, indicating improving demand and the return of some previously lost customers.
Realization per ton stood at around INR 8,079 per ton compared to INR 7,852 per ton in Q1 FY26 and INR 7,241 as it was in Q2 of FY25. A growth of 2.9% quarter-on-quarter and 11.6% year-on-year basis. The quarter witnessed a short-term demand moderation following GST-related policy changes as customers across sectors, particularly in consumer durables, electronic products, agricultural products, footwear, and ready-made garments, etc., adopted a cautious stance. This temporarily impacted volumes, but we view this as a transitory phase. We expect volume recovery to strengthen in the coming quarter, supported by better traction across key customer segments. Our marketing team continues to focus on acquiring high-quality, profitable contracts and expanding in unpenetrated regions. Our pan-India network remains one of our biggest strengths, comprising 1,243 branches and 50 transshipment hubs.
During the quarter, we added around nine branches and closed seven, and net addition of around two branches, particularly in Eastern India, as a part of our strategy to deepen regional presence and strengthen last-mile connectivity. The EBITDA for the quarter stood at INR 158 crores, up from INR 136 crores in Q2 FY25, a 17% year-on-year growth, supported by cost optimization and improvement in realization. Our fuel cost, the largest expenditure component, reduced from 28.6% to 25.6% of total income in Q2 of FY26, driven by bulk procurement from refineries, which increased to 41% from 35% in Q2 FY25 and improved sourcing. Labour service also declined from 5.7% to 4.4% of total income, following better fleet utilization and ongoing route optimization initiatives.
Our own fleet stood at around 5,782 vehicles as of September 2025, compared to 6,158 last year, reflecting the rationalization of older and less efficient vehicles to optimize maintenance and utilization. Employee cost increased to 18.3% of total income versus 16.9% in the last year, primarily due to salary revision implemented in August to reward our workforce. We consider this as a strategic investment in our people and future growth. The net profit for the quarter stood at INR 50 crores as compared to INR 36 crores, with a growth of around 39% year-on-year basis. For H1 FY26, the total income grew by 1% year-on-year basis, while EBITDA stood at around INR 316 crores versus INR 237 crores in H1 FY25, translating into an EBITDA margin of around 20%, and PAT for the first half nearly doubled to INR 100 crores from INR 49 crores, with a margin improving from 3% to 6.4%.
The Less-than-Truckload segment continues to be our core business, contributing about 89% of our total revenues, while the balance came from the FTL segment. CapEx for first half year ended September 2025 stood at around INR 43 crores, of which INR 23 crores were deployed towards converting leased branches or hubs into owned facilities across key locations such as Ernakulam, Salem, and Tumkur Industrial Area in Karnataka. And the CapEx for the quarter stood at INR 29 crores. We continue to make selective investment in high-potential locations to enhance company-owned branches or hubs, which will be predominantly funded through internal accrual, supported by our strong balance sheet and healthy cash flows. In first half year of FY26, the cash flow from operations improved significantly to INR 334 crores from INR 217 crores, driven by higher operating margins and tighter working capital discipline.
Receivables days remain at around 12 days, among the lowest in the Indian Logistics industry, and net debt of the company stands at around INR 304 crores as compared to INR 396 crores at the end of March 2025. Due to improvement in the margin, our company Return on Capital Employed has reached 18% as against the 14% for FY 2025. Looking ahead, we expect freight volumes to improve in H2 FY 2026, supported by new customer additions, incremental volumes from our large existing customer base, normalization of GST-related disruptions, and enhanced marketing initiatives across key hubs and deeper penetration into newer markets. Our focus remains on operational efficiency, profitable growth, and delivering sustained value to our shareholders. Now, I conclude my initial remarks with this. Now, I request participants to ask any questions. I'll respond at my end. Thank you.
Thank you so much, sir. Ladies and gentlemen, we'll now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use headsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Our first question comes from the line of Alok Deora from Motilal Oswal. Please go ahead, sir.
Yeah, good morning, sir.
Good morning.
Just a couple of questions. First is on the volume. So volumes, how has been the trend because of this change in the GST rates? Have we seen any sharp change in the volume in the end of September and also in part of October? So just first question was on that.
Yeah, basically, the government has announced during the August 15 about indicative changes in the GST. And because of that reason, some of the products, whatever 12% they have stayed with the 12, and 28% to be removed. So those category products have been impacted from August 15 to September 22, until the announcement and clarity from the government. Subsequently, yes, demand of these products has been improved. And since we are accounting the revenue based on the delivery basis, most of these revenues have not been accounted in September because of at least around four to five days transit time from the rate of booking. So some of these revenues have been accounted in the month of October, and the additional volumes have been contributed in the month of October on account of this.
Sure. So have we seen any sustained improvement, or it is more like just those 20 days before the cut, the volumes were soft, and after the cut, the volumes have just kind of compensated? We were compensated.
If we're seeing sustained growth, especially for us with concern, the reason is we are operating at a 5% GST, which is the lowest applicable GST rate for the transportation of goods. Since most of the commodities have been shifted from 12% to 5% or 0%, or in some cases 18% to 5% or 0%, those commodities always focus on how to reduce the cost or how to reduce the Input Tax Credit. Since we are one of the category in the 5% rate of GST, definitely we are expecting good volumes from these category of commodities.
Got it. So sir, in 2Q, we saw this 11% decline. How do we see the trend ahead now? Because I think even in 3Q, we could, because we have let go of low-margin customers. So that's why the volumes have been coming down YoY. So 3Q, again, we'll see a minor decline, or 3Q could be the turnaround in terms of the volume growth coming back?
Yeah, again, in compared to Q1 and Q2, how we improved 4%, but we are expecting from Q2 to Q3, again, there will be improvement in the range of at least around 5% plus, 5% to 6%, what we are expecting. And in Q4, there will be a growth in tonnage by at least around 7% to 8%. That's what is the rough estimate. And on full-year basis, the overall, there will be a reduction of around 4% to 5% in tonnage. But if the same relations have been maintained, overall, the revenue growth for the full year will be around 4%.
Got it. Just last question. Margins, we have taken this employee wage hike and stuff, so margins have been around core EBITDA margin has been around 19%. So is that number sustainable ahead, or we could see some moderation there?
Yeah, definitely, it is sustainable. And employee cost, as we mentioned, actually, we have given an increment from the month of August. There will be one month additional cost will be there in the next quarter, and we are expecting that because of increase in the tonnage, we are expecting that we will maintain the EBITDA margin in the range of around 19%.
Got it. Got it. Thank you, sir. That's all from my side. All the best.
Yeah. Thank you.
Thank you, sir. Our next question comes from the line of Mukesh Saraf from Avendus Spark. Please go ahead, sir.
Yes, sir. Good morning, and thank you for the opportunity. Just continuing on the tonnage side of the tonnage growth side of the business. I mean, when I look at this quarter, the number of trucks that you have come down. So you've not had any gross additions, but you've had some scrap of trucks, and the branch addition also, I mean, YoY, it's down. QoQ is just about two branches that we've added. So I mean, we've not added trucks. We've not really added too many branches, and you're expecting volume growth to start here from 3Q. So just trying to kind of, I suppose, all these three together, how should we think? I mean, how is this volume growth going to come, sir? Like last quarter, you had mentioned some of the customers that had kind of left you, have come back.
Maybe if you could give some more sense on where we are going to start seeing this sequential volume growth from, say, 5% to 7% in the next two quarters that you mentioned? Is it like some regional, any new markets, new sectors, and could you give more color?
No, just I want to clarify that most of the tonnage decline is because of some of the rationalization exercise what we did. And we are expecting that there will be most of the turnaround from the customers which have already been lost because they are not getting expected service from the other transporters. Just to give some clarification on these numbers, basically in quarter one to quarter two, what happened, we lost tonnage from the existing core. The customers who have been lost in the quarter two is around 12% of the total tonnage. But whereas the customer, what we added, the 14% of the tonnage is added because of the addition of the new customers. And there is a growth in tonnage from the existing customer by around 2%. For summarizing all these three, actually, overall, we gained a total tonnage of 4%.
And similarly, on the year-on-year basis also, the tonnage from the new customer is around 20%. That kind of tonnage we added from the new customers. This is mainly on account of the branch expansion exercise, whatever we did in the last few years. Because of that, actually, we are in a position to add these new customers. And because of the rate rationalization, we lost customers to the extent of around 20% of our tonnage. And there is a decline from the existing customer around 10% to 11%. So after summarization of all these three, overall, there is a declining tonnage of 11%. Now, in coming quarters, what is going to happen? Again, the contribution from the new customer, definitely, it is going to improve.
There will be very, very less in the case of the loss of customer on account of rate increase because we have not at all increased the rate from the last two quarters. Similarly, we are expecting that there will be good volume growth from the existing customers. With that backup, actually, we are expecting that at least in quarter two to quarter three, definitely, we are expecting around 4% to 5% growth. That growth will continue in quarter four as well.
Okay. But we'll not need to add more trucks, sir, because our net number of trucks have gone down sequentially.
The trucks currently, what is happening on an overall basis, if you see, the engagement of outside vehicles has been substantially reduced. The lorry service has also came down, and there will be somewhere actually, given there is an improvement is possible in the existing fleet, so that actually, we are going to optimize in the next two quarters, and if required, whatever additional capacity is required to handle the additional tonnage, to that extent, we will engage the outside vehicles.
Right. So we'll have to go back to maybe increasing the outside vehicles, which can impact the margins for that incremental tonnage?
Not necessary, but definitely, there will be synergy in utilization of the existing capacity also. That will add to some margins.
Okay. Understood, sir. And second is on the employee cost. I mean, you said the new wage hikes have been in effect from August, sir, is what you said?
Yeah.
Okay, so basically, 3Q is when will be the full quarter impact of this higher employee cost?
Yeah. There will be another one-month additional cost there.
Right. So it can be maybe about INR 160 crores, sir? I mean, we are at INR 147 in 2Q. So it can be about 160-odd crores, that number?
No. The average increment in employee cost is around INR 60 million per month.
6 crores per month?
Yes. Yeah.
Okay. Understood, sir. Understood. And just lastly, CapEx, I mean, any new hubs, what's the plan there? I think you've added eight, nine hubs in the last year or so, own hubs and things. So any CapEx that is planned to kind of add owned hubs?
Yeah. In the first half year, we incurred a CapEx of around INR 43 crores. Out of this, INR 23 crores is related to the conversion of investment into the branch and hubs. And in the second half, actually, we are expecting that there will be investment of around INR 130-140 crores for the investment in the branches and transshipment hubs. That's what actually we have expecting or estimating the investment in the capital expenditure. And apart from that, there will be around INR 10-20 crores other capital expenditure. So in the second half year, actually, we are expecting the total capital expenditure of around INR 160 crores also.
Got it. Got it, sir. All right, sir. Thank you. I'll get back in the queue.
Yeah.
Thank you, sir. Our next question comes from the line of Disha Giria from Ashika Institutional Equities. Please go ahead, ma'am.
Thank you for the opportunity, sir. So my first question is regarding the cash flow for investment activities that you have highlighted, that the INR 43 crores, it includes around INR 23 crores for lease branches conversion. So could you give some sense on it, like how many branches have been converted from leased to owned, and what is the rationale behind it?
INR 23 crores investment is around three to four locations. And these are all investment not in the hubs, and it is at the key branches. So basically, some of the critical areas where actually we are not getting the additional space of a godown also, and we are unable to operate our vehicles in those areas where we identified those locations and invested into these properties, especially in Salem, Ernakulam, and one industrial area outside Bangalore borders. It is Tumkur. It falls under Tumkur City area. There it is coming up with a very big industrial area. There actually we invested into one property.
Okay. My next question is regarding that now, since there's a kind of a slowdown in branch additions, what is the growth of volume growth that we are seeing in the branches that had been added in last financial year?
No. Basically, the new customer addition, what I mentioned, again, it is from the existing market as well as the new market. So on a year-on-year basis, around 20% of the tonnage what it is contributed, actually, it is all from the new customers. And similarly, on a quarter-on-quarter basis, also around 14% of the tonnage actually contributes from the new customers. So my point here is the branch expansion and whatever product-wise expansion and product-wise some of the policies what company has made, actually, that has been facilitated to do this rate rationalization. Without that expansion, without that branch expansion or network expansion, this rate rationalization was not at all possible. So because of that backup, actually, we are in a position to do the rate rationalization and increase the margin.
All right. Thank you. That's it from my end.
Thank you. Our next question comes from the line of Janam Shah from Equirus Securities Private Limited. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Sir, first question on the employee cost side. So what we have guided was around 2% impact on the EBITDA, 3% for the third and fourth quarter. However, impact has been lower during this quarter. Of course, part of the same has been part of the freight cost, but overall impact has been lower, below 1%. So is it the new normal that we can take into account, or has there been some more increase that we can see from the third quarter onwards? And of course, over the past, what we have seen in employee cost is that we have been doing the hikes and all those things during this third quarter only. So everything has now been accounted for, and this is the new normal that we can take into account.
Yeah. This is a new normal.
And year-on-year basis, just we indicated in the last of our statement. Basically, if you see year-on-year basis, it has increased from 16.9% to 18.3%. That is a change in the employee cost, almost around 1.4%. And there is an increment in vehicle running and repair expenses also. There is a 4.7% to 5.2%. Again, this 0.5% is on account of increase in the employee cost itself. Means the driver's increase, whatever we do, that is most of the cost is accounting in vehicle running expenses rather than employee cost.
Got it. Got it. And sir, what would be the reason for the other expense and other income both going up during the quarter? Is it profit and sale on the sale of assets, or is there any one-off as well? Because the quarterly rental has gone up.
No. Again, loss on sale of vehicle is because of the accounting entry, but similar amount we are realizing by way of sale of scrap material. That income is increased. But there is some of the administrative expenses also increased, like professional fees, and given some of the traveling expenses also increased. On account of that, that has increased.
Got it. Any quantum that you can provide for loss of sale of asset during one H or 2Q and also the scrap sale in the other income that we would have booked?
Yes. Yeah. In quarter two, we accounted yeah.
So, which was the guy not speaking on mute?
Yeah. Around INR 10 crores actually is on account of sale of scrap material, the income. And the loss on sale of assets is around INR 5 crores.
This is a 2Q number or 1H number?
It is first half year, first six months.
Got it.
Only quarter two, the loss is around INR 2 crores, loss on sale of assets only for the quarter, and sale of scrap is around INR 4 crores.
Got it. Sir, from a strategy perspective, your last probably one year and a quarter, so you changed it from a volume-based company to a value-based company. Then we have now been, we can say, being a good profitable company for consecutive quarters. However, one of the key factors has been volume, which has been lagging probably for a few quarters, and growth has not been coming. Rather, it is degrowing a double-digit kind of a number. What market generally asks for is the volume growth moving forward. Is this strategy of being value-based company wherein we focus on the profitability and not on the volume going to continue? Is there any more hikes that we are expecting in the realization which will come?
Is there any, we can say, any still a low-margin contract which is part of the 2Q will eventually go out in 3Q, 4Q, which will lead to a better realization? And along with that, margin trajectory is largely expected to be similar as what we have done in the 2Q?
No. The rate rationalization exercise is already completed. So actually, that has been started in the last financial year, reached. In the month of June or July of the last year, we started. Now, by end of March, April, actually, we completed everything. There will not be any further rate rationalization as of now. But currently, what we are focusing, we are focusing for the increase in the volumes. For that purpose, actually, as I said, we are identifying the customers actually where the. And we are concentrating more on the service to capture more of our additional customers. Not only that, even the customers who have temporarily lost or even they reduce their volumes, slowly actually we are gaining, and we have clearly we are establishing gain in those volumes also.
So that's the reason we are very optimistic that definitely quarter-on-quarter basis, around 4%-5% growth in volume is possible.
Got it, sir. Got it. That's it from my side. Thank you so much.
Thank you. Ladies and gentlemen, anyone who wishes to ask a question, please start the touchtone telephone. Our next question comes from the line of Mr. Achal Lohade from Nuvama Wealth Management. Please go ahead.
Hello.
Yes, sir. Please go ahead.
Mr. Achal?
Hello. Can you hear me? Can you hear us?
Yeah. Please.
Now I'm unable to hear the question.
If you can hear us, please respond, Mr. Achal Lohade. Since there is no response, we'll move over to the next speaker shareholder. Our next speaker is Madhur Rathi from Counter Cyclical Investments. Please go ahead.
Number? Yeah. Please. Sir, so as a percentage of revenue, sir, how much do we see declining over the next maybe two to three years?
No. Will you repeat your question, please?
Okay. Okay. Got it. Sir, our freight and service cost, as a percentage of our revenue, has seen a very good improvement in FY25, as well as we can see it in FY26. Sir, where do we see this as a percentage of our revenue on a steady-state basis maybe over the next two to three years, sir? Can we see further improvement in this number?
No. It will be maintained at around 5% or so. The vehicle running repair and maintenance cost is around 5% of the revenue. It will be continued at this level.
I was asking about the total freight handling and the service cost as a percentage of our sales. So this number you think is?
See, freight handling cost, predominantly, it is a fuel cost. Fuel is contributing almost around 25% to 26% of the cost is related to fuel cost. So there actually, we are having an optimum percentage as of now. And currently, out of the total fuel purchase, around 40% to 41% actually we are procuring from the refineries, where we are saving almost around INR 7-INR 8 per liter as compared to the normal retail price in India. And that price is always fluctuating. So the gap may sometimes it may reach to INR 4-INR 5, or it may reach extend up to INR 10-INR 12 also. But we are expecting that going forward with this kind of a fuel rate about there today. So definitely, the percentage of the fuel expenses will be 25% to 26%.
We are planning to add even one or two more additional owned fuel pumps to increase this quantity from the refineries. Currently, it is around 40% to 41%. With the addition of another two pumps, one in Visakhapatnam and Chennai, we are planning. If these two pumps are started, then again, that percentage may increase around 43% to 44% to the total fuel quantity. There will be some improvement. Definitely, there will be some reduction in fuel percentage once these two pumps will start. On an overall basis, we are having now optimum level. That's the reason the EBITDA level is also around 19% also as of now.
Got it. Sir, do we do a tire retreading in-house, or this is outsourced, and can this be taken in-house to reduce our cost further?
No. We are not doing any retreading, but we are selling the used tires. Up to a certain level, we use it and sell it. And even from the existing supplier also, we are having a buyback arrangement. After the usage, actually, the companies themselves will buy back these tires.
Got it. And sir, on a longer term, sir, what kind of investments are we planning maybe over the next one or two years in terms of new warehouses as well as vehicle addition, if w e can expect over the next two to three years?
Vehicle addition in next half, there will be a very small portion of investments around INR 10-20 crores. Investment will be there on the vehicle side. But we are planning to invest around INR 130-140 crores in the assets, the land and building we are planning. That will be. Some of the locations have been already identified, and some of the properties also finalized. We are expecting that around that kind of investment in next half year. Total CapEx will be in the range of around INR 160 crores in next half year. Considering the volume growth and again, the business opportunities, then we will invest in the vehicles in next financial year.
Got it. Sir, thank you so much and all the best.
Thank you.
Thank you, sir. Our next question comes from the line of Anchit from Emkay Global Financial Services. Please go ahead.
Hi. Morning, sir. Thank you for the opportunity. Sir, you alluded that in H2 as well, we'll not be adding as many vehicles as we probably did in the last few years. Is it that utilization level on the hub-to-hub route? Does that allow us to sort of work with the same set of vehicles despite expecting higher volumes?
Yeah. Basically, what we did, even quarter one to quarter two, if you see whatever 4% the tonnage has been increased, most of the tonnage has been carried through our existing vehicles because of the route rationalization. And most of the vehicles it is an optimum level actually we have utilized. Even turnaround time of the vehicles has been increased. And whatever driver incentives actually we have provided, more of the incentives are related to their efficiency. So because of that, actually, the turnaround time of the vehicles, we are expecting further improvement in these vehicles. And apart from that, because of the route rationalization and connectivity of these particular vehicles, again, we are expecting some improvement in the efficiency going forward.
All right. Sir, what would be the current hub-to-hub utilization levels for our trucks?
See, hub-to-hub utilization always will go with a full capacity. But turnaround time, actually, it may cause some delays are happening. There is further improvement is needed in the turnaround time. We are focusing on those areas to improve the turnaround time so that it can do more loads in a particular time.
Got it. Could you just indicate what is the current turnaround time and what would be our target?
See, currently, on an average, it's doing around 4 to 5 trips between the hubs. On an average, I'm saying. So there is a scope for improvement in that area. Even at least around 5-6% improvement, it will lead to more kilometers by the existing vehicles itself.
Got it. Second question would be.
And moreover, what we are doing, actually, we are concentrating on, again, branch-to-branch transportation also rather than connecting to the hub. So wherever major branches are collecting directly route, say, for example, to give some few examples, we are having one branch in Bangalore. Say, it is mainly for the textiles and cloth materials. So whatever material we are carrying from Surat to Bangalore, so rather than going to the transshipment hub in Bangalore, that vehicle is going to directly branch itself. So that what will happen, there will not be any further loading and unloading in the hub. And directly, that vehicle can be unloaded in a delivery branch and again come back to transshipment hub. Because of this, definitely, there will be improvement of at least around six to seven hours of utilization in that particular vehicle. Like this, we have identified many branches.
The direct branch can take the delivery of the goods. So accordingly, we are exercising these options, and directly, vehicles are going to delivery branches and unloading the goods. And similarly, on the loading front also, wherever the bookings are happening in a major city from one particular branch, where vehicle is directly going from branch to delivery branch itself rather than connecting to the hub. These are all exercises actually we are doing, and this exercise has been started from the last one year. And there is still improvement is possible in this area.
Got it, sir. Second question was on these GST rate cuts or rather hikes for GTAs. The gap between probably the reverse charge and the forward charge mechanism has sort of widened. Does this sort of strengthen the unorganized players? And especially, does this sort of weaken express players' proposition in the PTL space?
Yeah. Definitely. See, the one is not precisely the unorganized. Actually, who are the organized players in this category, 5% category, they are going to get more benefit. Since we are at a 5% GST rate, and definitely, we are expecting more benefit from the various commodities which have been the GST rates have been reduced. And just to give some example, see, I want to highlight that the ready-made garments. Earlier, the ready-made garments, if the garment per piece, if value is less, INR 1,000 and less, it was fall under 5% category. And if it is more than that, actually, it was under 12% slab. Now what happened, always we used to get more of a ready-made garments which are valuing INR 1,000 piece or lesser than that. Now what happened, that limit has been enhanced to INR 2,500.
Per piece, if any value less than INR 2,500, then now it will fall under 5% category, and more than INR 2,500 per piece, now it has been increased to 18%. So because of this, what is happening, whatever commodities are falling in this category, we are getting more demand from these products, and similarly, footwear also, earlier, one pair INR 1,000 and less than INR 1,000, it was around 5%, and more than that, it was under 12%. Now that limit is enhanced to INR 2,500. Now per pair value, whatever less than INR 2,500 is there, we are getting more demand on such products. Even the existing customers actually who are already we are servicing, the commodity of those products in this category have been increased in the month of October.
Got it. Just one last question. Any target for net branch additions in FY26?
Yeah. Definitely, we are identifying more and more new locations. And in the meantime, actually, what we are planning, again, it is very initial stage again. We are concentrating to add some good number of franchises instead of company-owned branch in the newer area. That's what the plan is. We are doing some exercise. If at all that plan is true, then we will add good number of agencies rather than the company-owned branches.
Sure. Thank you so much.
Yeah.
Thank you, sir. Our next question comes from the line of Mukesh Saraf from Avendus Spark. Please go ahead, sir.
Yes, sir. Just one follow-up question. You mentioned about certain spillover from September to October. Could you give some sense on how much that could have been, the spillover? And also, if you could give us how October has been for us in terms of volume.
See, October till the date of the festival, we recorded very good volume. But post that, always most of the business activities will be halted, were halted. And almost around seven to eight days, there will not be much of loading and unloading or any booking and delivery happen. So considering that, again, on a full month basis, there is a reduction in tonnage as compared to last year. But it is in line with what growth actually we anticipated.
The spillover, sir? I mean, what could have been actually in September, which got spilled over to October?
Around 2% of the revenue, 2% of the tonnage.
2% of the tonnage in this quarter?
Monthly tonnage has spilled over.
Okay. After monthly. Okay. Yeah. Okay. Right, sir. Thank you so much. I'll take my leave.
Thank you, sir. Our next question comes from the line of Achal Lohade from Nuvama Wealth Management. Please go ahead.
Sir, this is Achal here. Thank you for the opportunity. Am I audible now?
Yeah, please.
Yes. Sir, the first question I have, you did mention that the customers are coming back to us given they are not getting adequate service. If you could help us understand what percentage is comeback or coming back, how the trend has been in 1Q and 2Q? Let's say if you have lost, if you have deliberately exited 100 tons, how much of that has come back? Any quantification you could help us with?
Yeah. Actually, I indicated the percentage. Now, on a year-on-year basis, in this quarter, quarter two, the contribution from the new customer is around 14% of the tonnage. And the tonnage of the lost customer as compared to last year is around 12%. 12% of the tonnage we lost year-on-year basis on account of rate rationalization.
Right. But when you say new customer, I presume you mean actually not the old customer coming back, right?
Quarter-on-quarter basis is what I'm saying. Quarter-on-quarter basis. See, year-on-year basis, the addition from the new customer is around 20%. And the tonnage lost from the existing customer is around 20%. The customers who have completely left our service. And the decline in the tonnage from the existing customers is around 11%. So overall basis, we lost a tonnage of around 11%.
Sorry. Just to be clear, on a YY basis, 20% is the new customer contribution. 20% is basically the lost volume because the customers completely left. And there is an 11% decline in the existing customer volume. And the decline would be on what account? What is the reason for this steep decline of 11% on the existing customers?
No. Basically, see, for some of the customers, what is happening currently, we are operating, we are handling around 100 routes of the customers. Now, instead of 100 routes, some 50, 60 routes, actually, they will give it to other transporters, and they will continue 40, 50 routes with us. Like that.
Okay. So.
So what I'm saying, they have diverted to other transporters, and some portion, they are continuing with us.
The reason for diversion is because of the price, because of the better service from others?
Because they have stuck with us for a very long time. Now, because of this rate rationalization, temporarily, they have shifted to other transporters, and actually, we are getting the volumes from these whatever actually they have diverted to other transporters. Considering the service level of what other transporters are providing, they are shifting to us gradually.
Right. I was checking on that. That was the next question in terms of if you would have lost, let's say, 100 tons earlier, how much of that has come back?
No. On a quarter-on-quarter.
Only 5%, 10%? Okay.
Yeah. On the quarter-on-quarter basis, actually, the 14% of the tonnage is contributed from the new customers. Okay? And the 12% of the tonnage we lost customers. And there is a 2% improvement from the existing customers in the tonnage. So on account of this, overall, the growth in volume quarter-on-quarter basis is around 4%.
Understood. In terms of the if I were to look at from a medium-term perspective, how do we internally plan? What kind of growth is what you would be content with or not satisfied with? If you could give any sense, is it 15%? Is it 10%? Is it 5%? How do you look at when you are planning for the growth or the infrastructure from next three or five-year perspective? What is the growth you're looking at, and what is going to which any particular sector or industry which is going to drive that?
No. Basically, see what's happening now, because of this temporary whatever rate rationalization exercise we did from the last year. And because of that, there is a certain variance in the tonnage growth. But otherwise, in the normal scenario, we are expecting to grow at least around 8%-10% in the volumes going forward. And even in the rate rationalization also, most of the things have been already achieved now. And based on that, actually, we did a 4% tonnage growth in quarter two. And we are expecting similar growth in quarter three and quarter four also. So like this, actually, from FY27 outwards, we are expecting that at least around 8%-10% growth is possible in the volumes.
You're not looking at reversing your stance on the pricing or margins? Have I understood right, sir?
Not necessarily because we already did 4% growth in Q2, and there will be similar growth in quarter three as well compared to quarter two versus quarter three, and most of the customers are accepting our rate rationalization and continuing business with us.
Right. But at the same time, if I look at the number of what you said, when 11% decline, it also indicates that there is still some inhibition with respect to converting fully to the new price for all the routes?
No. Gradually, it will happen because we don't want to initially. It's happening. Actually, we are identifying the new customers as well. In the quarter two also, around 14% tonnage Q1 versus Q2, it is from the new customers. It is a substantial number.
Are you talking about 14% QoQ growth, or you're talking about 14% of the 2Q volume came from the new customers? What is it exactly you think?
14% came from the new customers.
Okay.
Out of the 14% growth, 14% came from the new customers, and 12% we lost from it is totally lost customers, around 12%. And 2% is additional growth from the existing customers.
Yeah. No. I'll call you separately to understand this better, sir. The other question I had, in terms of the going beyond what we are currently doing, any other subsegment, any possibility for us to get into the express business, and why not?
No. Because express cargo, we cannot start with the existing line of business. And moreover, the express, our service is only differentiated door pickup, door delivery service, which we are already providing to the customers.
So which is what I wanted to extend to. Given we are already doing for part of our cargo where we are doing door-to-door, right? Why not extend that to a broader scale, larger scale?
Yeah. Definitely, we are working towards it. And earlier, the door pickup, door delivery service used to contribute hardly around 15%-20%. Now, it has been reached almost around 40% of our total handling is door-to-door. There is enough growth what we are achieving even in that segment.
What is the price difference, margin difference between the door-to-door and the regular cargo?
Margin will remain same. Only thing is for door pickup, door delivery, we charge extra to the customers.
Understood. And any one-off in other expenses, sir, apart from the sale of the scrapped vehicle-related cost?
No. I'm not getting.
In the other expenses in 2Q, were optimal?
No. The loss on the scrap of some of the vehicles. The another expenses is increase in some of the professional fees and traveling expenses.
How large is that increase in professional fees and traveling expenses?
Around INR 4-5 crores.
For a quarter, INR 4-5 crore is a fairly large number. Can you help us? What is this professional fee, sir?
No. Including traveling and professional fees, what I'm saying.
Right. Okay.
On the professional fees, around INR 2 crore is increased.
Sorry, how much?
2 crores.
Okay. And is that a recurring one, or is that one-off now?
No. It is non-recurring. It will not be there in the next quarter.
Understood. And in terms of QoQ, how does it change seasonality?
I'm really sorry, but your voice is not.
Last question. Yeah. Can you hear me? Is it better? Hello?
Yes. Yes.
Yeah. I just wanted to check the seasonality for our business in terms of what kind of cargo goes in 1Q, 2Q, and 3Q, 4Q. If you could give any broader sense.
See, most of the time, actually, we saw one of Q3 always some of the highest tonnage what we carry, and because of some festival seasons in the end and last year, it was an exception that, yeah, Q3 normally is a good quarter. Otherwise, it's not a substantial variance also, but compared to all four quarters, Q3 always we report some good quarter.
Right. And if you could give the sectoral mix, like how much is agri, how much is garments, textile, in that fashion?
Yeah. Textile is again, which is contributing, say, around 16% to 17%. And the rest comes to the agriculture sector, which is contributing around 11% to 12% of the total volumes. And the remaining pharma, industrial goods, or any commodities, FMCG, all put together, all in the range of around 5% to 6%, more or less, to the total tonnage.
Understood. And any break-up in terms of the large?
Sorry?
Sorry, but we are unable to hear you. If you can hear us, please respond. All right. Since there is no response. Okay. Ladies and gentlemen, due to the time constraint, that was the last question for today. I would now like to hand the conference over to Mr. Sunil Nalavad for the closing comments. Thank you, and over to you, sir.
Yeah. Thank you, everyone, for joining the call today. Basically, we wish to concentrate more on our operational excellence going forward. And further, we are going to add more and more new customers because that is going to give more volume growth in coming days also. That's what actually we have saw in the quarter two as well. And in quarter two, almost around 14% to 15% of the volumes actually we achieved on a quarter-on-quarter basis from the new customers. And not only that, actually around some 2%-3% growth actually we achieved from the existing customers. Actually, we already disturbed because of some of the rate increase, but again, they came back to us. With this, we are expecting again further quarter-on-quarter volume growth in the next quarter as well in Q3 and Q4.
On a full-year basis, definitely, we are expecting around 4%-5% revenue growth on a full-year basis with the maintenance of the highest level EBITDA in the industry of around 19%. With this, actually, I wish to conclude this call. Thank you.
Thank you, sir. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.