March29 , 2024

    Mahindra Logistics to focus on improving profitability

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    Mahindra Logistics has temporarily halted its acquisition-driven growth strategy for the next 12 months to focus on enhancing profitability, which has been affected by investments made in inorganic expansion over the past three years, said Mr Rampraveen Swaminathan, MD and CEO.

    Its yearly profits fell 21 per cent to Rs 27.42 crore in FY23 from Rs 34.57 crore in FY22, while net revenues shot up 25.6 per cent to Rs 5,128.29 crore, as against Rs 4,083.03 crore a year before.

    “In recent years, we made three acquisitions in line with transforming 3PL; we want to build our cross-border express, last mile, and reinvent and reimagine mobility. For now, our decks are set, and we will scale them, sweat them out; therefore, there is no intent or outbound interest in further acquisitions in the near- to short-term, or near to mid-term,” he said. The end-to-end third party logistics (3PL) solution provider has spent close to Rs 347.4 crore in acquiring the businesses, and is planning to scale it up in the coming 12 months.

    Its list of acquisitions include a 60 per cent stake in ZipZap Logistics Pvt Ltd, a last-mile logistics service provider, for about Rs 72 crore; a 100 per cent stake in the B2B express business of Rivigo Services, a logistics firm, for Rs 225 crore; and a 100 per cent equity capital acquisition of Meru Cabs, a ride-sharing company, from its parent Mahindra & Mahindra (M&M). The all-cash deal size is Rs 50.4 crore.

    Although the company isn’t exploring any inorganic deals, “if an interesting opportunity comes up, we will look at it,” he added.

    On the revenue front, the logistics player is confident of clocking a turnover of Rs 10,000 crore by FY26. “We saw growth coming from automotive and discrete manufacturing; however, the consumer and e-commerce businesses grew slightly slower as a result of the cyclic dip.”

    Expansion across segments

    The company plans to add close to 2 to 2.5 million square feet of warehousing space annually, and todevelop around 30 million square feet by FY27, given that the existing level of growth is sustained, he said. Currently, it has 19 million square feet of warehouse space across the country.

    Additionally, it will continue to expand its EV cargo fleet. “Probably around 20 per cent of our last mile is EV, and another 10 to 15 per cent is CNG; we intend to have a 40 per cent electric fleet by 2026 i.e., we plan to have 3,000-4,000 EVs.”

    Currently, its electric cargo fleet has 1,300 EVs owned by the company; once it crosses the threshold of 2,000 EVs, the company will opt for a partner model, the MD noted.

    In fact, the company has, in the recent past, introduced a four-wheeler offering, allowing it to carry more volume, and is now working to launch a two-wheeler offering soon.

    “We arepiloting a two-wheeler-based electric vehicle service. Our view is to provide two-wheeler, three-wheeler, and four-wheeler-based assets to optimise our services.”

    Overall, the company estimates its annual capex to be around 2 per cent of its topline for the next four to five years. “We think our existing model doesn’t require more than our estimates.” While it continues to invest in EVs and CNGs, Mahindra Logistics is also piloting LNG, and is in the process of looking at some hydrogen-based platforms for line haul.

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