Ladies and gentlemen, good day and welcome to VRL Logistics Q2 FY25 Earnings Conference Call. As a reminder, all participant lines will be in listen-only mode, and there will be an option to revert 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 touch-on phone. Please note that this conference call is being recorded. I now hand the conference over to Mr. Alok Deora from Motilal Oswal. Thank you, and over to you, sir.
Thank you, Sudhant. Good morning, everyone, and welcome to the Q2 FY25 Earnings Conference Call of VRL Logistics. We have with us today Mr. Sunil Nalavadi, the CFO of the company. I'll now hand over the call to Mr. Nalavadi to give some opening remarks and discuss on the performance, and then we can kick off the Q&A session. Thank you, and over to you, sir.
Yeah, thank you, Mr. Alok D. Good morning to all participants. I'm Sunil Nalavadi, CFO of VRL Logistics. I welcome all of you once again for the earnings conference call for the Q2 of the financial year 2025. This is a strong quarter marked by substantial revenue growth, improved profit margins, and robust cash flow, demonstrating effective cost management and strategic execution in all the aspects by the management of the company. As communicated during the last call about the increase in freight rates, we have successfully implemented the freight rates hikes across all the sectors and geography. We believe that this exercise is a great success to us to bring back our operational margins at optimum level, along with maintaining growth in volumes. And please note that this is the first time we increased the rates without increasing freight rates and created a new trend in the industry.
Our operations were normal during the quarter and we overcame the disturbances such as labor shortage, driver leave, etc., due to the general elections and heat wave phase during the Q1 . This has resulted in improvement in our operational efficiencies, such as increasing kilometers covered by our own vehicles, improving in turnaround time of the vehicles, increase in load factor of the vehicles, control on dependency on hired vehicles, etc. Due to the improvement in our own vehicle utilization, the vehicle hire charges is drastically reduced as a percentage to the revenue, in spite of increasing tonnage and slower addition of our own vehicle capacity. Further, we established better control on the fuel cost by increasing the bulk purchase quantity with the discounted rates. On a year-on-year basis, for the quarter, the revenue is increased from INR 715 crores to INR 802 crores, with a growth of 12%.
The growth in revenue is mainly on account of increasing freight rates across all the sectors and geographies during the quarter, due to which the realization freight per ton is increased by almost 8% from 6,681 per ton to 7,241 per ton. The growth in revenue is also on account of growth in volumes by almost 4% from 1,048,000 metric tons to 1,093,000 metric tons. The growth in volumes is from enhancement in our branch network in goods transport business. Year-on-year basis, we added around 82 branches, and these branches contributed around 2.5% to the tonnage. We continued our initiative to increase the number of branches in the current quarter also and added around 12 new branches. The remaining growth in tonnage is from the existing market, predominantly by increasing contribution from the existing customers.
Even though we saw muted growth in Q2 by most of the companies across the sectors, we are still in a position to show growth in volumes. This is mainly on account of well-established branch network across the country and improvement in service levels by route optimization in key routes and hub connections. The EBITDA has increased by 39% from INR 98 crores to INR 135 crores, and percentage to revenue has increased from 14% to 17%. We reached EBITDA at our optimum level again, and this is mainly on account of increasing freight rates by passing all incremental costs which were impacting the margins in the past. Further, the margin improvement is also due to good control on fuel expenses, which is a major cost of operation in our business.
We further increased the bulk purchase quantity in the current quarter from 30% to 35% to the total quantity consumed. The fuel procurement cost per liter is reduced from INR 87 to INR 86. On an overall basis, the fuel cost as a percentage to the revenue is reduced from 31% to 28% in spite of increase in quantity. The improvement in the operational efficiencies in the current quarter also leads to improvement in EBITDA margins. We saw major efficiency improvement in vehicle utilization by improving kilometers per vehicle and the increase in turnaround time of the vehicles and the load factor. This has resulted in having a control on dependency on the hire vehicles, due to which the hire charges reduced from 7% to 5.5% to the revenue, even though lower addition of own vehicle capacity in the current quarter.
The rest of the expenses, even though increased in absolute terms, the percentage to the revenue reduced due to increase in freight realizations. The improvement in EBITDA leads to increase in EBIT and PAT margins in the current quarter. The PAT of the company is increased from INR 19 crores to INR 36 crores, and percentage to the revenue is increased from 2.7% to 4.45%. On a sequential basis, also, we have seen drastic improvements in the terms of revenue growth and improvement in margins. The operational revenue has increased from INR 727 crores to around INR 800 crores, and with other income, the revenue has increased by around 8% from INR 742 crores to INR 802 crores.
The growth in revenue is contributed by increase in freight rates, and the realizations are improved from INR 6,723 to INR 7,241 per ton and increased by almost 8%, along with a growth in volume by around 2%. The EBITDA margin is improved from 13% to 17%, mainly driven by increase in freight rates and improvement in efficiency in operation from the obstacles faced in quarter one. With this, we reached a revenue of around INR 1,544 crores for the first six months in the financial year 2025, with a growth of around 10% on a year-on-year basis, with a net profit close to around INR 50 crores. With the improvement in profitability and having good control on working capital, our post-tax net cash generated from the operating activities has been increased from INR 209 crores to INR 217 crores.
Further, our business is B2B-focused LTL business, the less-than-truckload business, with a customer base of around 9 lakh customers covering a wide range of sectors. Our key strength is having a different mode of collections from the customers, and 85% of our LTL business is on paid and to-pay basis, collecting the freight on spot from the customers immediately after the booking or completion of the service. Our receivable days from the customers is hardly around 12 days, which is lowest in the industry. Considering the improvement in turnaround time of the vehicles and control on usage of hire vehicles, we moved slower on the vehicle Capex during the quarter and invested around INR 18 crores in the current quarter.
We also invested around INR 43 crores to expand our own transshipment hub facility in Mangalore, and we are planning to add similar own facilities in Mysuru and Bengaluru in coming days. With the improvement in cash flow and lowering Capex, the net debt of the company reduced to INR 259 crores. Considering to return to the shareholders, the board of directors approved an interim dividend of Rs. 5 for equity shares. The company experienced a strong quarter with a robust increase in freight realizations, along with the support of growth in volumes and notable improvements in profit margins supported by operational efficiencies.
The cash flow from operations remained robust, positioning the company well for future growth and investments. With these achievements and a positive outlook, we are confident in maintaining momentum moving forward, both in terms of growth in volumes as well as the realization. With this, I will conclude my initial remarks. Now, I request participants to open for questions and answers.
Thank you very much, sir. We will now begin 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 handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Our first question is from the line of Amit Dixit from ICICI. Please go ahead.
Yeah, hey, good morning, everyone. Thanks for the opportunity and congratulations for a good set of numbers in a very tough quarter. I have two questions. The first one is on CapEx. So if we look at CapEx, it is down 40% if you look on H1 to H1 basis. Now, with the margins improving, it's a normalized quarter, cost efficiency is coming in, and two new transshipments you have alluded to in the presentation being set up. How do we see the CapEx trajectory in H2 and maybe FY26?
Yeah, basically, see, about cash flow, about the capital expenditure, see, one, the vehicle addition is going to continue based on the utilization level. So every quarter, see, we are expecting around 30-40 crores investment in the vehicles. And apart from that, the two facilities what we are planning in Mysuru and Bengaluru, for Mysuru, there will be investment of around 20-22 crores. And for Bengaluru, actually, the total investment will be in the range of around 240-250 crores. And predominantly, the plan of the investment of these facilities is, see, basically, we are having good cash flows. And in the next half year, if you see, the generation from the operational activity will be in the range of at least around 240-250 crores. That is one. And the second thing is we also declared a dividend of INR 5.
So based on this, the investment will be around INR 44 crores will go for a dividend and around INR 240-INR 250 crores goes for the Bengaluru facilities and around Mysuru, around INR 21-INR 22 crores. And vehicles, we can say around INR 40-INR 50 crores. With that, the total investment in the next half year, if these projects are going to be invested, then total investment will be around INR 350 crores. Against that, the cash flow will be around INR 240 crores. So the net debt addition will be around INR 100 crores by the end of 31st March.
Okay. That's very comprehensive. In FY26, what kind of Capex we can estimate?
In 2026, again, predominantly, the CapEx will be towards vehicle itself. Based on the quantity improvements, we will decide on the investment into the vehicles. See, always, if you see, as and when we grow, say, 4%-5% in tonnage, then our capacity will be improved by around 3%-4% in that way.
Okay. Just wanted to understand, sir, that by Bengaluru, the CapEx is so high, INR 240-250 crores compared to Mysuru and the other one.
Yeah, the Bengaluru facility, currently, we are using that facility. The total area of that facility is spread across around 25 acres. And currently, we are paying rent for the same facility almost around, see, INR 1.5 crores per month. We are using that facility, and since the owner is willing to sell that property, and we have decided to buy and invest in that property. And basically, how it is going to benefit is, see, one is we will save in the rental cost itself almost around INR 17-INR 18 crores per annum. And apart from that, we have kept a deposit of INR 9 crores as of today, and we are losing almost around INR 1 crore of benefit out of that also. And the net effective savings to the company will be in the range of around INR 19 to INR 20 crores per annum.
Against that, if you calculate interest, even at 8%, so 8.15%, we are getting a loan proposal at that rate. So definitely, the company is not going to lose even a single rupee by investing into that property. And basically, we can add some more added facility to that own facility, like workshop, maintenance facilities, and all these things. And apart from that, the incremental rental cost over a period of time, actually, we can stop it. So one time, if we invest and after the repayment of the loan, the burden of the interest liability will come down. And moreover, there will not be any threat of shifting to the new premises or locating to the another premises that continuously that property is going to give benefit to us.
Okay. Understood, sir. The second question is on the procurement cost from refineries. Now, we have already reached 35.51% this quarter. So do you think that this is the upper limit or how far we can stretch in terms of procurement of fuel from refinery? And the associated question here is that what is the procurement cost differential between refinery and retail?
Yeah. The refinery is now, we can say it is at an optimum level. There are one or two% changes with it. So considering the spread in network, we cannot increase this quantity. Wherever we are consuming more quantity, only in those places we have established our own points and purchasing from the refineries. And in terms of the price difference, it is between around INR 2 to INR 2.5 per liter difference between the refinery price versus the retail price.
Great, sir. Thank you so much and all the best.
Thank you.
Thank you. Our next question is from Krupashankar NJ from Avendus Spark. Please go ahead. Hello?
Yeah. Sorry, am I audible?
Yes, yes. Please go ahead.
Yes, yes, please. Yeah. Good morning and thank you for the opportunity. So, sir, my first question is on the price hikes, what you have already taken at the moment. You were indicating about 5%-6%, but it has come in at around 8%. Just wanted to get a sense as to whether there was any benefit of mix with the higher lead distance in this quarter due to which the realization is higher, or has there been an entire price hike of about 8% or so?
Yeah, this 8% increase in the realization is completely increased in the price. And what exercise we did in the rate exercise also, one, we did increase in the basic freight rate. And apart from that, we collect some of the other charges from the customers in the same invoices. It may be toll charges, it may be like miscellaneous stationery charges and all. Actually, we revised in those rates also. So considering the revision in those miscellaneous charges and the basic freight, the overall realization has been improved by 8%. And this is purely increase in freight rate.
Okay. So is it fair to assume, sir, that given that you have broken down the freight break-up across toll charges and so on, any increment in toll rates going ahead on an annual basis, whatever we see, will automatically get passed through, or is it like we will continue to take a call on pricing depending on how customers react to it? Something you can throw some light on?
Yeah. Basically, see, always we take a call, not only toll charges. We will see the movement in all the expenses as and when we revise the prices. See, toll charges is one of the part of it. Even in the historical, if you see, whenever the toll charges are increased, actually, we have not increased only the portion of the toll charges. Because again, whenever we have to face the customers, we go with increasing all the aspects of the rates rather than one element of the rate or like that.
I understand. Okay.
Again, it will become the same exercise to convince the customers.
Right, right. And on the point of convincing customers, I think you have grown it about 4%. The tonnage has grown it about 4%. Just wanted to get a sense. You see, last conference call, you had mentioned that in the July month, the growth was close to about 7%. So as in we are gearing up for festive season, what changed after that? Why has it come down quite drastically? Can you throw some light on that also?
No, basically, see, we indicated a growth of around 12% in revenue, but we did more than that, almost around 13% growth in the overall revenue on a year-on-year basis. And moreover, the tonnage increase, as you are acknowledging from the market that many companies are announcing the results now. So most of the companies are declared muted growth or negative growth across all the sectors. So basically, across industry, there is a lower demand. But we are doing additional effort by opening new branches, new geographies, and we are continuously trying to add the new customers. So because of that, actually, we are in a position to reach at least around 4% growth in the tonnage. And apart from that, even if you see some of the logistics companies, we have already announced the results, but most of the companies have declared muted growth in the tonnage.
Got it. Got it. In the second half, any expectations or any guidance on how you are seeing the tonnage growth coming through?
Yeah, definitely, we will maintain some of the tonnage growth. Obviously, see, we have to put our additional effort by opening new branches and new geographies. That effort continuously we are doing. And definitely, see, there will be growth in the tonnage on a year-on-year basis. And apart from that, the realization, definitely, we will maintain this whatever hike in the rates are there. These rates have been already accepted by the customers, and this will be maintained even in the future.
Right. So one more question, if I may. On the tonnage growth side, so just while I appreciate that you have given the branch addition, what was the contribution of the incremental branch addition over the last one year in the presentation? Can you throw some light on, because we have been adding branches over the last three years, can you throw some light on what has been the contribution if I were to take it cumulative basis over the last three years? What would have been the new branches' contribution to our overall tonnage?
We opened almost around close to around 250-plus branches in the last two years. And definitely, these branches are contributing almost around 8%-10% of the total tonnage on a booking basis.
Understood, sir. Understood. Okay. And also, if the tonnage outlook is going to be relatively muted, are we hurrying up with respect to vehicle addition, or could we wait for some more time before adding these incremental capacities on vehicles?
Sorry?
With respect to the tonnage growth overall, we had anticipated earlier at the starting of the year about 12%-13%, but then we turned cautious with respect to truck addition based on the underlying tonnage growth. Is it fair to assume that given that commentary also is quite weak across macro, will you take a very cautious approach to fleet addition, or is it going to be like you're committed to spending that INR 40-INR 50 crores per quarter towards vehicles?
No, basically, it will be a cautious decision. See, always what we do, we add the vehicle only if the vehicles are required for our operations. So depending on the growth in tonnage and the substitute is always available, we can switch over to the outright vehicle on an immediate basis. If there is continuous demand, then we can add our own vehicle capacity. So that cautious step will be always with that. And with that, actually, we are expecting the additional tonnage growth, and accordingly, we have to incur a Capex.
Okay. Thank you very much, sir, for answering my questions.
Yeah, thank you.
Thank you. Our next question is from Achal Lohade from Nuvama Institutional Equities. Please go ahead.
Yeah, good morning, sir. Thank you for the opportunity. Sir, the first question I had was with respect to you have taken the price hike of 8%. Has the competition also followed a similar increase? If not, what is the price difference between us and the competition now?
Yeah, basically, after our announcement, even many companies have announced the increase in the rate, and since that time step, again, other operators are also following the increase in the rates, and for this period, there was a gap, but depending on our service level and the safety of the consignment, and basically, the overall efficiency in the service, then definitely we are the first movers in the market to increase the rate, so whatever we thought on that, actually, it has been accepted by the customers, and we are in a position to increase the rate along with the maintenance of growth in tonnage, but considering this fact, even many other operators are also following this step, and they have already announced some of the rate increase.
Is that a similar quantum, or if it is just one, two, three % types?
Depending on their nature of customers, actually, they are taking the call.
Okay. Sir, I mean, just a related question. What we had seen in the past is that we found it very difficult to increase the price in the past. So what has changed according to you? Where is that conviction coming from that this price increase will go through? And when was the last time we had taken this kind of a price increase, and what was the experience? So how it is different and why it has changed, if you could elaborate a little bit?
Basically, in the past, we used to increase the freight rates only when there is an increase in the diesel price, and the whole industry used to work towards that. Whenever fuel rate increased, only during that time, they used to increase the freight rates, but this is the first time considering the increase in other expenses. It may be toll charges, it may be employee costs, it may be rental expenditures, so considering increasing these costs, actually, we have taken a call to increase the rates, and we are in a position to convince the customers on this aspect, and the same trend is also following by the other operators. See, we are the first movers on the rate increase, you can say.
Correct. So where I'm coming from, in fact, is there a change in the industry structure? What you're seeing, is there less competitive intensity? Have the unorganized segment kind of seen a reduction for whatever reasons? If you could throw some light on that aspect as well.
Yeah. Obviously, see, the customers need a service. If you provide a good service, then definitely we can charge rates or increase the rates. And moreover, even in some of the routes wherever we established or we have entered into in the last two years, especially in the eastern, northeast market, even the northern side, there actually we have given very competitive rates initially. So considering those aspects also, now depending on the attachment of the customers in those areas, again, we have taken a call on increasing rates.
Understood. In terms of the branch addition, you mentioned 250 branches we have added in the last two years, and that contributed to 10% of the volume. Wanted to understand your thought process going forward from, let's say, two- to three-year perspective. How many branches do you think we need to add? Where are the white spaces left? Any particular region, district, any segment?
Yeah. Basically, see, in the next five months, again, we are going to add another 40-45 branches. On a full-year basis, we are planning to add at least around 80-100 branches even going forward. That is what the thought process is, and it is completely into the untapped market, especially in the eastern, north, and northeast market. There actually, even the Indian map, what we presented in the presentation, if you see the number of branches statewide, we are having still very low presence in UP, Bihar, Jharkhand, and Rajasthan, even for that matter, West Bengal, so we are planning to add more number of branches in these areas.
Right. And any experience you could share? How easy or difficult it is to move from south to non-south? Because we hear in the other industry, the experience has been a bit more painful, a bit more difficult one. So any follow-up?
Obviously, we have to compete with the local competitors. And see, they are very strong in that particular route. But thanks to the increase in the compliance levels by introducing this GST, e-way bill, and e-invoice, because of that, now across India, there are same practices. Earlier, there were a lot of differences between the compliances for each state. Now that difference is not there. All the states, every route, every vehicle owner, or every operator in the country has to follow the same rules and regulations. So that is giving more comfort for us to being an organized player. Actually, we can open up branches in those areas.
Got it. Sir, just last question, if I may. With respect to industry mix, let's say for staff or for last year, what is the industry mix in terms of our customer segments? I remember textile is a large market for us.
The product-wise, yes. The cloth and textile which is majorly contributing to our turnover, almost around 16%-18%. Next is followed by agriculture commodities. That is in the range of around 9%-10%. Remaining all pharma industrial goods, the hardware, those are all in the range of around 5%-6%.
Understood. Thank you. I'll fall back in the queue. I have more questions, but I'll fall back in the queue. So thank you.
Thank you.
Thank you. Our next question is from line of Jainam Shah from Equirus Securities. Please go ahead.
Yeah, hi sir. Thanks for the opportunity. Sir, just wanted to recheck on the CapEx part. We'll be doing around 240 for the FY24 other facility and around 30-40 crore, let's say 50 crore for the vehicles. That would be 300 crore in the second term. This is the understanding, correct?
Around INR 350 crores, yes.
Okay. Sir, just wanted to check on the cash flow.
350 including dividend and things, the total cash outflow.
Okay. Sir, just wanted to check on the cash flow. As you told that, we'll be increasing our net debt by 100 CR, whereas our 1H cash flow, we have done around 215 crore of cash flow from operation, but our rental cost, which is part of our interest and depreciation, is almost around more than 95 CR, and our interest cost is around 12 CR, so overall, we are paying 105 CR into this cost. If you deduct them, then our cash flow from operation is around 100-110 CR, then after 350 CR of outflow, our net debt would be getting doubled from 250 level to 500 crore, or something is missing over here?
No, the indirect impact is, yes, definitely around INR 40-INR 50 crores impact will be there, and even after removing that, definitely the future cash flow, what we are expecting, at least around INR 200+ crores we are expecting in the next six months.
Okay. So around 150 crores still there would be an increase in the net debt?
Yeah. The net increase will be in the range of around 100 plus crores, INR 100-INR 120 crores overall.
Okay. So just reaching out on, I just wanted to have your understanding on this. Of course, it's a business decision to have that particular parcel on our books rather than paying on our end. Overall, if you see capital employed at around 1,000 CR, as you are doing this much cash flow of 300 CR, it is getting increased by 330%. Of course, you'll be seeing it from an investment perspective, but market would be seeing it from a return ratio perspective. So is it matching of paying, let's say, 250 CR and getting benefit of 18 crore on a yearly, which is way above our overall generalized return ratio would be more than 12%-13%?
No. Will you repeat your question, please?
Yes. So basically, our capital employed as of now is around 1,000 CR.
Your voice is not clear, actually.
Hello?
Yeah.
Yeah. I'm just saying that our capital employed as of now, as of September, is around Rs 1,000 crore. We are paying, let's say, Rs 250 crore for those facilities. We are getting increased by around 25%, and we are saving around Rs 18 crore rent on a yearly basis. So just wanted to have your thinking on the same, that of course we are saving on the interest. Of course, we are saving on the rent, but on the other hand, we'll be paying on the interest. As long as our return ratios will be diluted, we'll be going forward with this much of high CapEx. So, of course, you are seeing that your outflow from the rent will be decreased, but at the end of the day, net debt effect is coming similar, and our net debt is getting increased. Return ratio-wise, it will be diluted.
So what's your thought on that perspective? Because we are making 13%-14%, whereas this saving would be somewhere around 8%. Now, for the shorter period of time, yes, definitely there will be impact on the return ratios. But if you see the long term, there will not be further spend on these assets. And moreover, as and when we repay the loan, then the capital employed will come down.
Got it. To answer this question.
So there be like we'll be getting benefit from, let's say, medium to long term at least. We will not be adding up any other thing at the Mangalore because this would be enough for next five, 10 years, something?
Yes. Yes. Yeah, definitely.
Got it, and that's it from my side on this question.
See, just I want to clarify on this. See, currently, anyway, it is on the lease property. So based on the Ind AS adjustment, we are already creating provision for the interest and depreciation. Basically, it is a part of the rent only. So going forward, what will happen? Purely the interest cost will be there, and there is a small amount of depreciation because the majority of the portion of this area is the land portion. So on this, there will not be depreciation, and always there will be appreciation in the value. And moreover, there is always threat that there is an increment in higher rental cost because the new airport, what I'm planning, it is very closer to this facility. And it is more since we are operating in more than 10 plus years, we are the hands-on experience using this facility for our business.
And being that Mangalore is one of the key markets for us, that's the reason this investment is very much necessary for us, and it will make good return ratio or good returns even going forward. The reason is one, there will not be threat on the increasing rental cost. And moreover, we can create some additional facility about the maintenance and other facilities in the same premises. And definitely about, see, basically other infrastructure we can invest and we can create more value in the same premises. That's what I'm saying. So that's the reason, definitely we create good value in the company going forward.
Got it. I got it.
Thank you. Before we take our next question, we would like to remind participants that you may press star and one to ask a question. Our next question is from Priyam from KC Capital. Please go ahead.
Hello.
Hello. Ms. Priyam, your voice is a bit muffled. Can you please switch to the handset?
Hello. Am I audible now?
Yeah. Yeah. Please go ahead.
Okay. Good morning, sir.
Yeah. Good morning.
If I understand that your in-store stocking model provides control and flexibility advantages, but do you think it hampers the ability to scale? I would imagine that operation complexity would be very high with such high number of employees in action.
Can you ask again, madam? See, your voice is not clear.
Okay. Hello. Is it clear now?
Yes. Yes.
Yeah. So I understand that your in-store stocking model provides control and flexibility advantages. But do you think it hampers the ability to scale? I would imagine that operation complexity would be very high with such a number of employees in that state.
Yeah. But even if you take other for the whole infrastructure, this kind of employee strength is necessary. And basically, see, all drivers, we are giving permanent employment status to the drivers. Basically, in India, what is happening, most of the operators are depending on the outside vehicles. And the availability of the drivers is an acute problem in the industry. But we are masters in management of the drivers. Basically, we are giving full-time employment to the drivers along with all statutory benefits. So because of the retention of the drivers and other laborers, actually, we are in a position to run our operations very smoothly.
Okay. Got it. Okay. Thank you, sir. Okay. I got it. And sir, next is, who do you think is your direct competitors? Is it just local competitors or any other companies?
Yeah. Considering, see, our nature of business, let's say in petrol market and the area and widespread market what we are having, we are having competition both from the local operators as well as some regional players and national players also. So depending on nature and depending on the customers, we are having different kind of a marketing structure, different kind of the persons to do marketing. In smaller towns and all, actually, our branch managers themselves will do marketing activity. And similarly, we are having an area manager structure. Actually, they are responsible for a particular area to do marketing and retention of the customers also, their responsibility. And in metro cities, we are having an exclusive marketing team. They do a corporate marketing team, especially in Mumbai, Delhi, Chennai, Bangalore. In around eight to 10 cities, we are having marketing teams.
They do exclusive marketing to take care of the corporate clients. So there, actually, the competition will be with the national players. For the local branches and area managers level, there are regional players and local players. They are the competitors.
At national level, who is your direct competitor?
It is not a direct competitor. It is one small leg of operations, actually. See, in the contractual customer, what we disclosed in our presentation, the account customer, which is contributing around 15% to the turnover, there actually we are having the competition with the national operators. But in their case, actually, the 100% of revenue is contractual customers.
Okay. Okay. Okay. Thank you, sir. Okay. Thank you.
Thank you. Our next question is from the line of Vikram from PhillipCapital. Please go ahead.
Yeah. Good morning, sir. Sir, when you said that the improvement in service level and route optimization, can you give some example because I think we have been already doing great work in that area? So is there any further?
Yeah. Basically, just I want to give some highlight about how the kilometers per vehicle increased on a quarter-on-quarter basis. See, in the Q1 , if you see 10 to 15-tonnage capacity vehicle, we used to do around 175 km per day. Now that has been improved by around 194 km. And similarly, in 15 to 20-tonnage capacity, we used to do around 222 km per day. Now it has been increased to 250 km. These are the main segment, more number of vehicles we are having. There, actually, we have seen around 8 to 10% increase in the kilometers covered by per vehicle per day. And similarly, what exercise we are doing, basically, we are working towards a minimum TPT concept in the sense wherever the consignments are reaching around three to four transshipment hubs to reach end destination.
We are planning how to reduce it to two transshipment hubs. And wherever two transshipment, the conveyor belts are reaching, how to make it one or direct from branch to branch like this. This continuous exercise is actually giving good result on turnaround time of the vehicles are improving. And basically, we are avoiding the time which vehicles are waiting for the loading and unloading activities on multiple times.
Okay. Now I understood. And how would be our share of express parcel business?
No, express we do not have. Actually, we call it as a door-to-door service. Basically, almost around 35%-38% of our total business is door-to-door in the sense we pick up from the door and deliver to the door of the customer. That is similar to express cargo.
All right. Okay, sir. Got it. Thank you, sir.
Thank you. Our next question is from line of Pranay Roop Chatterjee from Burman Capital. Please go ahead.
Hi. Good morning. Am I audible?
Yeah, please.
So my question is with respect to your volume growth. So in the first half, we saw about 5.5% growth. How do you see the festive month of October? How has it been for you? And after the festive month, do you see demand having completely fallen off or remaining steady? Just in terms of growth, should we expect similar performance in the festive, or has it been weaker than expected?
Yeah. Festival, see, we did some good turnovers in the month of October, and the good thing is about with the increase in freight rates, so that will give further enhancement on the margin side. That's what we are expecting. And similarly, in the next half year, the turnovers growth will be similar to what we did in the Q1 with the increase in rates, so that will give a lot of boost to our margins.
Got it, sir. Sir, my last question is you gave a broad split of your sectors with clothing and textiles and agricultural commodities being your key segments, so is it possible to split your end sectors into those which are actually showing healthy growth, those who are flat, and those who are actually declining, or is it broad-based muted demand?
Yeah. Now, actually, see, the growth in all the sectors, all the commodities, the growth is there, but key thing is on the geography side, actually, since we opened more of branches in north, eastern, northeast market, there, actually, the growth rates are very high in terms of percentage because the base itself is smaller, and in percentage terms, definitely the growth is in the range of around 17-18% compared to, say, around 3-4% growth in the established market, in the southern and western market.
Okay. So let me understand it this way. So you pointed out that the new branch addition has contributed to about.
No, wait. I will clarify on the product side again. So the product side, actually, we are not targeting on a particular product or particular commodity. So basically, whenever we go into particular market, say, for example, we entered into the Guwahati, whatever materials are available in that area, actually, we will target. It may be agriculture product. It may be pharma product, anything. So always we go with the product available in that particular area rather than having some planning for only agriculture commodity or textile market. We will not do that. We will understand the local market, and accordingly, we concentrate on the products.
Got it, sir. That's perfectly clear. Just to follow up on this, you mentioned that there was a 2.5% contribution from the new branches to your turnovers growth, right? And your overall turnovers growth was mid-single digit, right? So the retail industry discloses something like same-store sales growth, which is basically how much growth on your assets, which you had only last year, and excluding the growth from new. So is it fair to say your same branch growth, the branches you had last year, those have actually remained flat, and the entire growth is only from new branch addition, is that a fair statement?
Yeah. The new branch addition is around 2.5% in the current year, I'm saying, in the last one year growth. But if you take overall last two-year expansion in the branches, then definitely whatever new addition is coming because of the new branches, whatever additional turnovers are coming.
Okay. So is there any signs that you see which says that growth is actually coming back in some of your existing assets? You might actually grow without branch additions. Is that time anywhere in sight, or we are still yet to see that?
No, there is. Again, it will completely depend on how the industry moves. And basically, see, in the current market, if you are seeing a lot of many companies, if you see the product-wise, the key manufacturing or maybe consumer durables and the semi-product, the listed entity data is immediately available, and most of the companies are having a muted growth.
Right. Got it. Got it, sir. Thanks for answering my questions. I'll hand back. All the best.
Thank you.
Thank you. Participants who wish to ask a question may press star and one at this time. Our next question is from line of Alok Deora from Motilal Oswal Financial Services. Please go ahead.
Hi, sir. So questions on the volume have been asked in different ways. Just wanted to understand with this price hike now undertaken, what kind of volume growth we are expecting for 2H of 25, FY25 and FY26? And any further price hikes also we can take in FY26?
Yeah. Just I want to clarify about the turnover and the realization. Basically, we did say almost around 5% plus in the half year. And in terms of the turnover growth, going forward also in next half year, we are expecting at least around 4-5% growth in the turnover with the current realizations what we are having. So by doing this, what will happen? Definitely, our margins will improve further. The reason is the portion of the fixed expenses as a percentage to the revenue will come down. And moreover, since we are doing a lot of efforts on the increase in the efficiency within the organization, definitely that will give additional boost to the margins. That's one. And in 26, by that time, rates will be completely absorbed in the market. We can definitely expect better turnover growth in FY26 from the current levels.
In FY26, could it be like 8%-10% growth or even higher turnovers growth?
Yeah. Again, depending on the industry, it is possible. But definitely, we can expect better turnovers from the current year.
Got it. But sir, this price hike impact has already come in this year. Now next year, the base will also get on the higher side in terms of realization, right? So if we don't take any price hike further next year, then could it be a case where next year our revenue growth would largely be whatever is the volume growth of 8%-10%?
So basically, rate increase, it depends on the movement in the cost structure. And depending on the movement in cost, we will decide on the rates. See, if we are having the optimum level of EBITDA, then definitely, instead of going for a rate increase, we will concentrate more on increasing volumes.
Got it. Got it. So the price hike could come through, but if it does not come through, the volume growth could be less. So on a blended basis, it could be more like a 12%-13% revenue growth could continue in FY26 as well.
Yeah, definitely. Yes.
Okay. Got it. Just one last question. This margin is 16% in this quarter. So is there any sort of one-off also, or this margin could continue in 3Q, 4Q as well?
No, this is a sustainable EBITDA margin. Basically, the reason is this is already we achieved based on the increase in rates as well as increase in the turnovers. And the increase in rates has been already accepted by the customers, and we are going forward further. There will not be anything that actually we may offer a discount or something like that. So that's the reason we are very clear that these realizations are going to be continued. And if these realizations are continued, then definitely our EBITDA margins will be at a current level. The 16% EBITDA is going to be continued even in the current going forward.
Got it, sir. That's all from my side. Thank you.
Thank you. Next is a follow-up question from Achal Lohade from Nuvama Institutional Equities. Please go ahead.
Yeah. Thank you. Sir, just two questions. First, on the fixed expense, if you could tell us of the current cost, excluding if we have to say what is the fixed expense per month for us.
See, almost around 30-35% of our costs are fixed in nature, especially the employee cost is fixed in nature. The rental expenses, which is almost around 8-9% of the revenue, it is fixed in nature, and the vehicle insurance, the vehicle taxes what we are paying, these are all fixed in nature. See, totally around 30-35% of the revenue is fixed in nature.
Understood. And that typically would grow at six-seven%, right? Or could that be even lower than that?
Sometimes around 8% also.
Understood. The second question I had, you mentioned about the 35%-38% of the volumes are door-to-door deliveries, right?
Yes.
In a way, the express parcel, right? So is it exactly like an express parcel business, or is there any further difference? And what is the price difference between us and the, let's say, Gati or TCI Express realization for that particular segment?
See, door-to-door service always our rates and express cargo rates are similar. There will not be much difference because in all the cases what will happen in express cargo, there will be additional cost of door pickup and door delivery. Normally, it is at least around INR 2 per kg higher than the normal rate. That INR 2 is nothing, but it is an additional cost for door pickup and door delivery.
Understood. And what is typically the normal rate per kg?
I just want to clarify. I think you mentioned the other express cargo company, but the difference between them and us is they are highly depending on the corporate. In our case, even on door-to-door delivery, non-corporate business, other than contractual business, see, for example, totally corporate business itself is 15%. The other 15-20% door pickup, door delivery is other than contractual business for us. The reason here is whenever we wish to increase the rate or whenever we want to pass on the cost to the customers, we can do it easily.
Right.
That is not possible in other companies who are completely depending on the contract customers.
Understood. And what's the split in LTL, FTL for us, sir?
Yeah. LTL is around 90%. FTL is around 10%.
Has that changed over last year, last two, three years?
No, it is very similar. Similar mix. And FTL is, again, it is not our core activity. So wherever actually we do not have a return load, wherever vehicle needs to be reached to the original destination, only in those cases we are doing FTLs.
Understood. And just last question, if I may, with respect to whatever the initiatives the government is taking from a regulation perspective, specifically for us, for the logistics industry, whether it is Gati Shakti terminals and so on and so forth, right? Warehouses, etc. Does that benefit us, or it's really no significant change for us?
For us, see, we are into LTL market, let's say, and truckload. See, we are not into the bulk commodities. But on the compliance side, whatever more and more modifications are coming, actually, those are supporting to us. And on the bulk transportation side, whatever modifications the government is doing, it will support on the other end, but not directly to us.
Not for us. Understood. And just LNG truck, what is your thought on this particular? Is there anything we have in terms of LNG fleet and any plans to get there?
No. Yeah. Then when the new product, new commodities comes, always we analyze it very closely. And if it is going to benefit to us, then only we invest into those products. And good thing in our case is we are very closely working with OEMs since we are having a direct contact with OEMs, especially for supply of vehicles, supply of spare parts. Basically, we are into bulk purchase for them. We are the bigger customers for all OEMs. So that's the reason we are working very closely with them. And when any development on this aspect, definitely we are the first people to, if it is beneficial to the operator, then we are the first people to invest into those products.
Understood. Great, sir. This is very helpful. Thank you so much.
Yeah. Thanks.
Thank you. If there are no further questions, I would now like to hand the conference over to Mr. Sunil Nalavadi for closing comments.
Yeah. Thank you very much for all the participants and all your patience here. Basically, definitely we are confident to maintain our growth level along with increasing the rates. So our margins are very intact as of today. And definitely, we are going to continue these margins even going forward. So with these closing remarks, actually, I would conclude this call.
Thank you. On behalf of Motilal Oswal Financial Services, that concludes this conference. We thank you for joining us, and you may now disconnect your lines.