With shared mobility taking a back seat during the pandemic, the supply chain business will drive growth for Mahindra Logistics Ltd (MLL) over the mid-term, said a top company executive.
“Our growth focus will be re-oriented substantially towards the supply chain business over the mid-term,” Rampraveen Swaminathan, managing director and chief executive at Mahindra Logistics, said in an interview. Demand for shared mobility will take at least 18-24 months to return to pre-pandemic levels, Swaminathan added.
Mahindra Logistics, which reported a revenue of ₹3,471 crore in FY20, expects to touch ₹10,000 crore by FY26, as part of its five-year growth plan. The company expects sharp growth in the shared mobility space during the period, as it is a “sunrise segment”, he said.
Betting big on new opportunities around mobility services, Mahindra group created a separate vertical, Mahindra Mobility Services, in April 2020. The business covers Mahindra Logistics, including its B2B mobility division Alyte, First Choice Wheels, or the used car business, besides new acquisitions such as Meru and Zoomcar.
According to a BNP Paribas report, the Mahindra group has set a market capitalization target of ₹20,000 crore for its mobility business by 2025-26 from the existing ₹5,000- 6,000 crore.
“Despite the pandemic, our FY26 target has not changed. A year ago, shared mobility was ₹10,000-12,000 crore market. We had a strategy, which was driven around asset supply optimization, services development, delivering these B2B and B2C solutions and electrifying the network. We were looking at fairly aggressive growth. We had 4% market share and we saw good headroom to grow the business. Now that the market has pretty much tanked due to covid-19, the company’s financial horizons are being revised now,” Swaminathan said.
“However, on a five-year basis, we continue to believe that the (mobility) business has huge potential and that in 24-36 months, it would see a hockey stick growth,” he said, adding that the cost of buying a car for personal commute is still high for an average Indian.
On the supply chain front, which contributed 89% to the company’s revenue in FY20, it is looking to grow in non-automotive areas.
“We are pivoting away from manufacturing and automotive towards consumption and fulfilment. That is more non-cyclical unlike the former. Auto slowed down last fiscal and that impacted our business, too,” he said.
He said Mahindra Logistics is looking to grow its fast-moving consumer goods, consumer durables, pharma and e-commerce verticals among others.
“It also means we will grow more in our solutions business along with value-added services. Our e-commerce and consumer business has been growing at over 20% this fiscal year except in Q1. The warehousing and solutions business within supply chain has also seen that pull through effect and has been growing at 18-20% this year,” he said.
The company’s supply chain vertical comprises warehousing, transportation and freight forwarding businesses. Warehousing alone constitutes about 20% of the business. “We are adding 1.5-2 million sq. ft of warehousing space every year via long-term leasing,” Swaminathan said, adding that freight forwarding is growing 15-20% each year.
“We believe that freight forwarding is uniquely positioned to grow on the back of covid-19 vaccine distribution, besides domestic and cross-border logistics. We plan to make it 10% of our overall business by FY26,” he added.