Release Date: April 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mahindra Logistics Ltd (NSE:MAHLOG, Financial) reported a 15% growth in warehousing revenue for Q4 FY25, indicating strong performance in this segment.
- The company has successfully contracted approximately 1 million square feet of additional space, expected to be fully occupied before Diwali, showcasing effective space utilization strategies.
- The automotive sector, a significant market for Mahindra Logistics Ltd (NSE:MAHLOG), showed positive growth, particularly in SUVs and tractors, which bodes well for future demand.
- The express business showed improvement in Q4 after a challenging Q3, with order intake of new contracts around 5,000 tons per month.
- Subsidiaries like the mobility business and Zip Zap logistics have shown strong profitability improvements, contributing positively to the overall financial health of the company.
Negative Points
- The overall revenue growth for Q4 was only 0.2% year-on-year, indicating challenges in achieving significant top-line growth.
- The express business continues to face challenges, with losses persisting despite improvements, highlighting ongoing operational difficulties.
- Inflationary pressures, particularly in manpower costs, remain a concern, affecting cost management and profitability.
- Global trade volatility and tariff actions are expected to impact demand and pricing, posing risks to the forwarding business.
- The FMCG sector, a key demand driver, continues to face a challenging environment with muted performance, impacting growth prospects.
Q & A Highlights
Q: Can you provide insights on the contract logistics business and its current capacity utilization?
A: Anish Shah, Non-Executive Chairman of the Board, explained that the contract logistics business typically does not have unabsorbed capacity as it builds customized solutions for clients. The company is working to reduce unutilized space, with 1 million square feet of new contracts expected to be fully utilized by September. The focus is on reducing white space and optimizing existing facilities.
Q: What is the outlook for the express logistics segment, given the current market challenges?
A: Anish Shah noted that express logistics revenue was down year-on-year due to volume declines and yield impacts. However, the company has seen an 8% sequential volume increase from Q3 to Q4. The focus is on expanding sales coverage, leveraging synergies with other Mahindra Logistics businesses, and tailoring offerings for quick commerce to drive growth.
Q: How is Mahindra Logistics addressing the warehousing white space issue, and what is the strategy for future expansion?
A: Anish Shah stated that the company has already slowed down expansion plans due to the white space issue. The focus is on bespoke, back-to-back contracts with clients, and no new multi-client facilities have been commissioned since Q3 FY25. The company is taking a cautious approach to future expansion, waiting for market conditions to improve.
Q: What is the company's strategy for improving profitability in the logistics sector, which is known for low margins?
A: Anish Shah emphasized the importance of capital discipline and assetization where appropriate. The company aims to differentiate itself through new offerings like electric vehicles and integrated solutions, focusing on productivity-led value for clients. The goal is to achieve an 18% return on equity by maintaining operational cash flows and margin accretion.
Q: Are there any plans for monetization or divestment of non-core segments within Mahindra Logistics?
A: Saurabh Taneja, CFO, mentioned that the company regularly reviews its investments and strategy. While no specific divestments have been decided, the company will share updates if any changes occur. The focus remains on maintaining capital efficiency and aligning with the group's strategic goals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
