Ladies and gentlemen, good day and welcome to the Mahindra Logistics Limited Q3 FY 2022 Earnings Conference Call. As a reminder, all participant lines will be in listen only mode. There will be an opportunity for you 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shogun Jain from Strategic Growth Advisors. Thank you, and over to you, sir. Thank you, Tanvi. Good evening, everyone, and thank you for joining us on the Mahindra Logistics Limited Q3 FY 2022 earnings conference call. We have with us Mr. Ram praveen Swaminathan, Managing Director and CEO, and Mr. Yogesh Patel, CFO of the company. I hope everyone got an opportunity to go through our financial results and investor presentation uploaded on company's website and stock exchange. We will begin the call with opening remarks from the management, following which we will have the forum open for a Q&A session. Before we start, I would like to point out that some statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I now invite Ram, Managing Director and CEO of Mahindra Logistics Limited, to give his opening remarks. Thank you, and over to you, sir. Thank you, Shogun. Good evening, everyone. I hope you and your loved ones and colleagues are doing well and safe, as we are in the midst of wave three. I do hope you all have had a chance to review our results and presentation, which are available on the stock exchanges and our own company's website. Today I will provide a quick overview of the external environment in the quarter gone by, in terms of our end markets and overall developments in the logistics industry. We'll follow that with a commentary on our performance, right, and our financials. Right. Given some of the margin challenges we had, we'll dwell a little bit more on that, and then we'll also cover a broad update on strategy and some key initiatives across the company. Right. Let me begin just with the external environment. Overall demand for logistics services and solutions continues to see an improving environment and momentum as companies focus on responding to supply and demand volatility with a higher focus on resilience. We continue to see a strong shift towards multimodal movement, especially both coastal shipping and rail shipping in commodities and the automotive sector. The drive towards network expansion and omni-channel fulfillment is resulting in greater traction in fulfillment logistics, last mile delivery, and increased demand for integrated solutions. Global supply chains remain pretty fragile with shortages in containers, like shortages in sea movement, ocean movement, and air movement, as we all see some impact of geopolitical factors both in terms of demand and otherwise. These factors have created a lot of pressure on our customers' operations as they try to manage a globally disaggregated supply chain in most industries. In these conditions, technology remains a key lever for driving increased efficiency and customer experience across the value chain. Now looking at our specific markets and how they are performing, let me begin with automotive. As we saw in the quarter ending September 2021, you know, the semiconductor chip shortage continues to endure, and a structural improvement is likely to take place only in a few quarters from now. Several factors like OEM price hikes, high fuel prices, have added to the issues of chip shortages, and demand has been subdued. During the quarter, while there was a strong growth in PV sales, these have in some cases been driven from inventory. Demand for domestic two-wheelers also remains subdued. Our business in auto, both M&M and non-M&M, was impacted by the slowdown, given lower volumes compared to last year. The volatility in volumes also had some impact on gain-sharing programs we have with our customers. From an outlook perspective, we expect to continue to see volatility here, with improvements coming through will be in the latter half of the next, financial year. Now moving on to farm and agro. The tractor and ag market has seen a slowdown in the last quarter, and there continues to be an overhang. Due to significant base effects and unseasonal rains, the domestic tractor sector has had a year-over-year decline. This was true for us also, with the volume drop more precipitated in outbound movement due to lower sales, while our customers continue to manufacture tractors, you know, given the upcoming season. E-commerce, which is, you know, the last quarter, marked the most important seasonal peak for the e-commerce segment. Overall effective demand was fairly moderate, and the impact was more pronounced for specific categories like electronics and large appliances. While October showed positive traction, November was marginal and December was pretty muted, owing to off-season sales for ACs, fans, and air coolers. While some categories like dishwashers, laptops, and microwaves continued to witness steady growth, the high base of last year is catching up in those categories as well. Metro and tier one cities saw good demand in the peak, while rural demand was more subdued compared to last year. Multiple factors seem to have contributed to kind of a moderation of demand, including reopening of physical distribution systems and stores, wave two impact on consumer sentiment and larger supply chain issues on large electronics due to the semiconductor problems and the whiplash which that has caused across the world. Moving on to consumer pharma, FMCG and electronic durables and so on. We saw positive momentum here in addition, you know to, you know. As I said earlier on, there was an opening up of markets which I think has helped. That said, in addition to high base, rural demand was affected by inflation in Q3 2022. Rising prices on farm inputs having greater than those on output for having some effect on farmer earnings. We have seen growth in modern trade and e-commerce in these markets. Discretionary categories also saw significant growth aided by improved mobility, increased footfall on premises, a larger number of social events and of course a seasonal uptick in wedding demand. Our own volume showed moderate growth here driven by these factors with more volumes really coming in the first mile and the last and the mid-mile. This was also the first full quarter of the Bajaj project in steady-state form. Despite these external factors, we saw a strong revenue growth flow through coming on account of Bajaj in addition to the rest of our accounts. Moving on to enterprise mobility. You know, due to the continuation of work from home policies and additional restrictions imposed by state governments, the enterprise mobility segment especially, you know, BFSI based customers, you know, that they remain pretty subdued in terms of demand. We have been able to, you know, reprioritize demand towards other segments like e-commerce, right, and other managed services markets. We expect enterprise mobility to remain under pressure, but we made a conscious effort, as I said, to broaden the customer portfolio and that has shown good traction in the quarter gone by. Lastly, let me comment about our international freight forwarding or our freight forwarding subsidiary. Global supply chains remain pretty overheated as I mentioned earlier, with shortages of containers and liner capacity issues. Due to these factors, there is shortage-led inflation in pricing across the board in air and ocean products. The recovery in exports is driving a broader growth pattern with an uptick across all categories. Import pressures remained due to global supply chain issues which we talked about earlier. Overall, the segment is benefiting from a positive pricing environment, though margins do remain under pressure. Now, we continue to show strong growth here and our focus here remains to diversify our offering base and balance the right trade lanes, and work with the right, you know, enterprise customers. Now moving on to the operational end of the business. Despite some of the challenges from a demand perspective, we continue to see positive traction from a revenue perspective in almost all our segments. The auto business was of course impacted along with the farm segment. Right, given the broader macros there has been a resultant drop in revenue from customers, including M&M. E-commerce, consumer, freight forwarding, all these segments had strong revenue growth. We continue to obviously, you know, demonstrate quarter-on-quarter traction in these segments. Overall revenue in these segments grew by 24% on the ACM side, right across the board. We did though have an unfavorable impact on the non-M&M auto piece, as I mentioned earlier. Our warehousing and solutions revenue grew by upwards of 37%, driven by continued focus in this space despite some of the demand challenges we spoke about. We have won several new accounts during the quarter, including a large, you know, distribution fulfillment operation for a big FMCG company in Western India. Distribution fulfillment in Eastern India for a leading garment manufacturer. Inbound to manufacturing and distribution for an EV two-wheeler OEM. We are expanding in the retail space with a multi-brand, with one of India's largest multi-brand retail chains. These projects will go live in the coming months and continue to underline our strategic focus right on solutions. While the demand side showed positive traction, operationally this was a challenging quarter in some other dimensions. You know, muted demand, especially in November and December in e-commerce, affected our volume flow through in many of our sites. This has impacted our operational efficiency, and the leverage we typically gain in earnings from the same. From a medium-term perspective, this additional capacity should see, you know, volume recovery. The peak was also characterized by challenges in terms of manpower availability and cost challenges in several markets and manpower due to COVID and other factors. Combined with a sharp drop in volumes, there was a significant result in additional manpower during the quarter. And while we did, you know, reduce the manpower through the quarter, this did result in additional manpower costs. We have taken effort to address this, but there was a period impact of the same. On the Bajaj account, we have now completed the transition of the account, and we now have deployed a technology-driven supply model across the entire customer base. As we had pointed out earlier, that once we complete transitions, there will be a period of optimization of the supply chain. The way the contract, right, and the contract is structured, you know, post-transition, we have a significant optimization share due across the supply chain. During this period, we typically have higher costs, which we saw obviously in the quarter just gone by. In addition, we also saw an impact of optimization was delayed due to multiple factors, including local disruptions and demand patterns which our customer had. We are now focused on accelerating the same. We expect that, you know, the optimization which was required was scheduled to take 3-6 months, will be done on time. In addition to lower volumes from auto and farm, we did see higher volatility. As I mentioned earlier, this resulted in lower gain sharing on some contracts, though margin, we had some impact of these factors. The above factors did obviously resulted in significant margin pressure during the quarter, due to cost escalations. We have remained focused on both short-term and medium-term actions around the same. We do believe that, you know, from a broader term perspective, the capacity and the focus we are putting right will drive appropriate leverage for us, given that we are now seeing strong volume movement on a quarter-on-quarter basis. In addition to that, I also want to share some other operational highlights for the quarter. During the quarter, we announced, of course, the Luhari warehousing operation, which totally is 1.4 million sq ft, and it is India's largest warehousing facility in a single location among any 3PLs. The first 0.5 million sq ft is already operational, while the other two warehouses are now under construction. We expect Q4 FY 2022 and Q1 FY 2023 delivery for each of those blocks. The new facilities will play a pivotal role in our long-term vision of creating a pan-India network of multi-client facilities, which will manage the fulfillment and distribution of our clients' operations. 2,500 employees and third-party associates will be employed at peak on-site. The facility like all our newer facilities are built to meet our broader sustainability standards, including regulations for liquid discharge management, renewable energy, waste management, and has significant investment in state-of-the-art construction technologies. We've been pleased to actually have the partnership with LOGOS to help us deliver the site. During the quarter, we were also recognized with our Great Place to Work certification. This affirmation continues to underline our investments in creating a diverse and inclusive culture at MLL, where employees can participate in creating a shared future. Our technology investments continued during the quarter. We went live in the quarter with a new platform for freight forwarding, a new warehouse management system, and upgrades to our mobility and transport management platforms. During the quarter, eDeL successfully completed 1 year of operation. During this period, we have operated now nearly 5 million clean kilometers across 14 cities in India. With a fleet which is slowly progressing to 700 vehicles and uptime of over 90%, we are well positioned to provide customers last mile delivery solutions. You know, we have in the past announced partnerships with Flipkart and Amazon to help, you know, work with them on expanding EV-based services, and we continue to expand those relationships. In November, we also announced the acquisition of Meru by MLL, a collection of, you know, 4 companies. With this acquisition, we will add airport ride-handling and on-call services to our enterprise mobility services offerings. Meru and Alliance combined expertise will allow us to offer better B2B and B2C services, right, and gain better share of wallet to our enterprise customers, while delivering on a broader promise of safety, customer satisfaction and long-term sustainability. As part of that transaction, we also will be adding 250 EVs to our fleet. We expect and we are continuing to obviously see a significant recovery in the airport business across the board, but we also expect synergies to come in as we you know integrate the enterprise end of both the businesses. This will drive better asset utilization, greater supplier cost leverage, and improved cost management within our business. Our integration teams will launch those synergy initiatives post-closing of the transaction. Now, let me share the financial performance for the quarter ended 31 December 2021. Revenue for Q3 FY 2022 increased by 7% to INR 1,118 crores compared to the same quarter last year. Our gross margin for Q3 FY 2022 stood at 8.9%, compared to 9.9% in the prior year's corresponding quarter. EBITDA for the quarter stood at INR 50 crores compared to INR 55 crores last year. As a result of that, PBT was down 71% from INR 25 crores to INR 7 crores, and PAT was down by 72% from INR 18 crores to INR 5 crores in the quarter. PAT margin stood at 0.5%. Proportion of revenue from the Mahindra Group now comprised 44% in Q3 FY 2022 compared to 48% last year. If I look at segment performance, revenue from supply chain, the supply chain management segment, increased by 6% to INR 1,075 crores. The enterprise mobility segment underlined a, you know, uptick in revenues and growth there. Overall revenue there was up 16% compared to last year to INR 43 crores. Revenue from supply chain management contributed 96%, and the mobility business comprised 4% of our total revenues. Our non-M&M business grew from INR 501 crores to INR 590 crores, an overall growth of 18%. Right. Underlying that of course we did have a decline in the auto business, but offset by a 24%, you know, overall growth in e-commerce, consumer and other businesses. Our warehousing and value-added services for the non-M&M business grew from INR 164 crore in Q3 FY 2021 to INR 225 crore in the current quarter, registering a growth of 37%. Share of warehousing and value-added services in non-M&M has reached 38% compared to 33% in the same quarter last year. Obviously, we do recognize that while our revenue performance, we feel, has been positive. We continue to see traction there. The revenue profile also, you know, lines up to our broader strategy of driving integrated solutions. During the quarter, we obviously did see margin impacts due to the factors we outlined earlier. As we reposition the core 3PL business towards integrated solutions, we have seen lower volumes in this quarter than what we had set up the quarter for. Lower flow-through impacted leverage and obviously compounded you know higher manpower costs. In addition, the Bajaj account had an impact as you have a time lag between transition and optimization, which we had discussed earlier. These collectively are the primary reasons for the margin pressure which we saw this quarter in warehousing and solutions. Our transportation margins have remained you know consistent, which includes the business from M&A. Overall, across all verticals, we continue to witness strong revenue traction, a continued story now for the last few quarters. We remain upbeat on the new opportunities that we have embarked on, with some of the recent client acquisitions, and obviously are very focused on driving the efficiency in our operations to be able to drive earnings back to our historical trend line. With that, I thank you for your attention, and we'll open up the floor to questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to withdraw 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 will wait for a moment while the question queue assembles. The first question is from the line of Sumit Kishore from Axis Capital. Please go ahead. Hi, good evening. This is Sumit Kishore from Axis. Thanks for the opportunity. My first question is, warehousing and solutions business grew almost 35%, year-on-year. Even the non-auto business saw 24% growth. Just want to understand, you know, how should we look at the scope for operating leverage led margin improvement, in your business model? On a relative basis, would the margin pressures have been higher in, say, transportation, which saw slight dip and, in the auto business, which saw a 6% decline? Yeah. Sumit, do you just have one question? If you have another one, you can put the other one. The second question is, you know, while you have touched upon it, but, you know, we've seen the COVID impact spill over into this quarter. In fact, it was more severe. Would the seasonal manpower costs that you talked about be something to be worried about in the fourth quarter as well? Could you also elaborate on the startup costs for new projects that have driven margin pressure? Basically one tries to disaggregate this 110 basis points of gross margin dip in SCM. You know, how much is really in the more prominent one? Is it freight cost? Is it the startup cost or the seasonal manpower cost, or is it just spread over all these factors? Let me try and answer that. I think in some ways all those questions are related. Sumit, I'll try and give you one answer which covers it all. Right. First of all, I think, you know, if you look at the concept of operating leverage, typically what happens, I think we mentioned earlier, we sign most of our solutions and warehousing-based services contracts with a minimum guaranteed volume. There is a volume flow through which typically works through, right? As we gain more volume, we obviously see greater leverage on earnings because that volume essentially absorbs all the operating costs, right, or most of the costs in terms of facilities, right, something which is more fixed in nature. Obviously this quarter we have been building larger facilities as we look at further growth and further volume flow through to our facilities. This quarter obviously volume turned out to be lesser than what we expected and was at the bottom end of that band. Because it was the bottom end of that band, Sumit, we obviously were not able to get the kind of returns we would typically generate. Right. While revenue was, it was overall incrementally, I think, favorable and showed traction, it was clearly lower than what we're expecting, right? We had set up our operations for higher levels. Revenue did come at a lower level of the band, and the way we've designed and put up many of these fulfillment centers and distribution centers was obviously to take more volume throughput, right? Therefore we saw that impact coming in, right, you know, in fair measure, right. In terms of manpower cost, I think manpower costs were really two parts to the manpower cost situation. I think that will answer partially your other question as well. Part of it was the inflation in manpower costs, which we largely saw in some regions like the South, right. As you know, post wave two, we didn't see migrant workforce coming back, and therefore we had to have significant shortages, right. That created inflation in costs. The second thing obviously was that volume tailed off pretty quickly. You know, we don't We typically, in line with our corporate philosophy, time them for minimum durations of time. Volume tailed off much faster, and therefore we had stranded manpower capacity for periods of time. We obviously hired a large number of people during the peak, right? I mean, this year we went up to nearly 13,000 to 14,000 people, Sumit. That actually ends up being fairly material, even if you end up having a one-month lag or even if you have several weeks of standard capacity, actually becomes quite impactful to us. Right? As you look forward, I think we have obviously need to cut down and retune some of those manpower assumptions in our business and also to work harder on productivity. I think we will not see the excess capacity issue which we saw last quarter. We will obviously see the inflation pattern based on how COVID pans out. I can't clearly say that we will or we won't see it completely, Sumit, given that these are temporary manpower. What I can say is that as we stand towards the end of January, you know, we have shown strong positive traction there during the Republic Day period. Right? Both in terms of cost per km and the daily capacity utilization has worked itself out, right? From an overall margin perspective, I think to your question, I think our transportation business was largely stable. I think last quarter we had mentioned that we had some flow through from a timing perspective on fuel cost increases. All that, as we mentioned in the last earnings call, has actually sorted itself out. I think transportation business is fairly stable from a margin profile perspective. Because the warehousing and solutions business, which is what is supposed to obviously is the richer part of our business, right? What we expect to obviously drive margins was impacted by these factors. I think you also remarked on the start-up costs. I think most, you know, we do have some level of start-up costs every quarter. I think a large part of the start-up costs this year, this quarter was really the costs around the optimization of the Bajaj contract, right? That's a large pan-India contract. We are doing millions of packages, you know, on an annualized basis, right? We transitioned the entire network over the last couple of quarters, and then we have more than a quarter, between one and two quarters, and we've optimized the entire network as it's deployed, given our technology to optimize transportation lanes, optimization transportation systems. We also drive productivity in, you know, in a hugely large number of warehouses and FCs across the country. Right? We'd always planned to have a quarter or two of optimization there, and that's something which is showing up in the numbers this quarter, right? As we stand, we don't expect, you know, that window to overspend, right? It'll probably go on through parts of the fourth quarter. We expect to basically be able to finish that optimization on plan or a little bit ahead of time. If I had to break this all up into what is the contribution of those in terms of overall kind of margins, I would say that, you know, we had, you know, probably a 60/40. 60% of it was really around the peak-related issues, both in terms of operating leverage and higher manpower costs. 35%-40% was because of new project start-up costs, primarily being Bajaj. I hope, Sumit, that answered your question. I just had to make it- Yeah, actually, that was very comprehensive. Just to understand your P&L better, the depreciation increased quarter-on-quarter and year-on-year as well. What was the CapEx in the nine-month FY 2022 period? You know, what are you spending this fiscal and next fiscal probably? I think, Sumit, I think I'll ask Yogesh to answer the details, but I think what we have said earlier on as well, obviously, that the line increase includes the right-of-use assets. Yeah. As we kind of expand our warehousing facilities, you know, that obviously grows in line with that. That's why, you know, the margin, you know, enhancements on our warehousing and solutions business, which we have generally delivered, is critical for us. Yogesh, can you please chip in with the specific numbers? Then we can, Sumit, move on to the next person in the queue. Sure. Okay. Sure, Ram, and hi, Sumit. Sumit, specifically to CapEx per se and our spend up to December would have been around INR 70 crore. I mean, if you would recall, for the year, we had kind of indicated our spends to be between INR 80 crore-INR 85 crore range. That kind of holds good. I mean, up to December, we would have incurred CapEx of INR 70 crore this year. Last year as well, we had incurred a CapEx close to, I mean, INR 85 crore full year CapEx it was. The increased depreciation obviously is a factor of last year's CapEx spend over the year getting amortized as well as what we would have done this year. In addition to it, the depreciation amortization, as Ram explained, also covers the lease cost which gets routed through that account in the accounting structure. That's very clear. Thank you so much. Thanks. Thank you. The next question is from the line of Depesh Kashyap from Equirus Securities Group. Please go ahead. Yeah, hi, sir. Thank you for taking my questions. Sir, your non-core warehousing revenues have increased 34% quarter-on-quarter, while the underlying space has not increased. Just wanted to understand how much of this growth is driven by the Bajaj Electricals contract and how much is driven by the flex warehousing solution that you generally do right in this festive season. Also if you can highlight, like, what are the typical margins you will see in the Bajaj Electricals contract. Given that it's an integrated contract, the margins should be generally higher than the typical retail contract. Is my understanding correct? No, let me just obviously comment on both of those, right? First of all, I think our warehousing has not exactly been flat quarter-on-quarter. Typically, what happens is, you know, we take the end-of-quarter warehousing stamp, the date stamped to the end of the quarter. Therefore, obviously all the warehousing came through by September thirtieth, but it was not necessarily operational fully during July to September. Got it. Okay? Obviously that's something, you know, it isn't all kind of switched with. Effective warehousing, you know, utilized warehousing space did, you know, go up during the quarter because of the time stamping of that. Now to a broader question, you know, in that INR 225 crores jump, you know, which is a 37% jump, how much of that was because of other normal BAU business, not just Bajaj. Business as usual volume versus what was it because of specifically because of the Flex accounts, I would say probably 70/30. Right, 70% of that growth is probably has been our underlying volume growth from a BAU perspective, and 30% of it were probably 25 odd% of it would have been because of Flex. Right? Obviously we are hoping it could have been even higher, to be honest, because of the commentary. I mean, as you have seen the commentary I made earlier, volumes did come in short of what we had planned for. Right. I hope that answers the question. I think, Yogesh, anything you'd like to add there? No, that's correct. It's about that 30/70 split. Got it. Sir, typical margin profile for this Flex solution that you provide and also about the Bajaj Electricals contracts? Sure. I'm sorry, I missed that question. I think Flex is a function of multiple factors, but obviously, you know, our margins, if the volumes do come in as we planned, the margins tend to be, you know, in line with our general warehousing contracts. Right. What we generally do, you know, is on the back of that Flex, we normally also end up picking up your transportation business, which and so it's kind of the integrated, you know, benefit that's coming. On the Bajaj account, I think what we have, your Bajaj account, like all our integrated solution businesses, is a blend of warehousing and transportation, right? At peak, we expect to, you know, earn, you know, margins which are in line or slightly north of our average profiles, right? Obviously that is a curve, right? So the way that kind of an account or any really larger projects happen is you start off and then you have a dip, right, and you carry a certain carrying cost, so you optimize the supply chain and then you actually start margins kicking in. Peak margins obviously tend to be higher than the average, right? Therefore, at that point, we should see higher than typical warehousing and solutions margins, right? Got it. Yeah. Second question is, I just wanted to understand your thought process of the acquisition strategy. Recently you acquired Meru Cabs from your group company, right? Now going forward, like will we wait for one year or so, or we are still looking at acquisitions? And what are capabilities you want to add going forward when you look at an acquisition pipeline? If you can just touch that. Oh, great question. First thing I would say is that, you know, our acquisition strategy has two parts. First of all, I think we don't really look at acquiring order books or revenue books, right? I think what's really important for us is to acquire capability. For us, the capability part of it largely is around technology capital and people capital, right? That's also one overarching thing which I've said this before as well, but I'll just reiterate it for purposes of reaffirmation. The second part is our inorganic strategy from a cap table perspective is not biased towards mobility or towards supply chain. We continue to look at opportunities in both of them, right? Actively, given the strategy of each of those segments, right? On the supply chain side, I think where we are looking at, you know, how accelerating through inorganics is on, I think really three parts. Obviously, we have talked about freight forwarding earlier. It's a business which, as a services end, it's a business which we feel positive about. It's something which we are looking at. We continue to look at the right opportunity there. The second one is around last mile delivery expansion. That's an area where, as we see more traction from our clients, around integrated fulfillment, you know, we have largely been a first mile and mid-mile company on fulfillment logistics. Now, you know, we continue to look at opportunities in last mile if we believe that they bring the right, you know, combination of people capital, tech capital and financial prudence, right, and financial management, which you look on an earnings quality perspective. The third area, of course, is technology, right? We have continued to make investments in technology. A lot of that has been in, as I've said earlier, a cloud-based suite of integrated solutions for different service lines. We continue to look at possibilities there either for partnerships or acquisitions. We have largely been using a partnership model till now, right? As far as the mobility side is concerned, as I think we are keen on primarily focusing on the enterprise segment. The core strategy for the mobility business remains about doing two things, expanding services to enterprise customers, so we can gain more share of wallet, and leveraging that share of wallet to drive supply optimization at the back end, both in terms of ICE and EVs, right? The Meru acquisition was really a fit in that sense. 35%-40% of business is purely enterprise transport management services, which is what Alyte does. That can create synergy, fit. It also provides other services like on-call, et cetera, which allows us to get a higher share of wallet with our enterprise customers. You know, we believe there are some strong opportunities from a supply synergy perspective. Those will probably be more visible once the market recovers fully. Intrinsically, we believe there are strong opportunities to drive tech-driven, you know, supply chain optimization, where we can use the same vehicles, let's say, for multiple services, and therefore utilize it for more kilometers in a month, and therefore drive better margin realization. Understood. Yeah. Thank you and all the best. Thank you. Yeah. Okay. Thank you. The next question is from the line of Mukesh Saraf from Spark Capital. Please go ahead. Hi, Mukesh. Hi, good evening, and hi, Ram. I mean, one of the comments you just made was that on the integrated business, the margins would probably be similar to the company average or probably slightly north of that. Just trying to understand that with your targets r maybe 10,000 crore revenue in, say, FY 2026, and probably a good portion of the business coming from new integrated solution contracts, what kind of margins, I mean, is that average? I mean, is the company-level margins that we're looking at are we looking at a similar 4.5%-5% kind of margins? Because if these new contracts come in only at these margins, then what are the margin levers that we have? Mukesh, it's hard for me to specify an answer. I think if you look at it, I mean, if you look at, you know, the broader growth plan for the company, I think you said, as you said, there is three broad parts. I will skip the mobility piece. That's part A, part C actually. Part A has been the core 3PL business to reposition ourselves more as an integrated solutions player, right? Part B has been to grow some of these service lines where we historically had low share of business. Freight forwarding, you know, B2B express, last mile delivery, and probably kind of create this electric vehicle category in some ways, right? these are the, you know, A, B, and C parts of that kind of roadmap to INR 10,000 crore, right? Now, if you look at, I won't talk much about mobility because your question is driven by supply chain, right. Sure. You know, on the services side, I think on the express side and the freight forwarding side, I think we expect to basically, you know, maintain or sustain the margin levels which we are at right now, right? I think we've fairly been able to moderate, right, and ensure that we are having, you know, reasonably good gross margins in forwarding as well, right? The express business, while we are funding it, will mature to a moderate industry level margin profile, right? The last mile delivery business, as you know, Mukesh, we've said earlier, we are cautious about going there because we have specific margin targets and capability expectations there, right? Now, on the integrated solution piece, which is where I think, which is probably gonna be two-thirds of that whole pie, right? Over a period of time. I think what we've said historically is two things. Where one is that we you know, and I think we're still on that same page. One, I think is at a gross margin level, net of the Ind AS 116 impact. We expect the margin of solutions to be accretive to the gross margin, right? Today I can say that on the smaller and middle, mid-sized solutions we have done, over the last couple of year, over the last 18 months, whether it's been, you know, pharma, whether it's been durables, whether it's been appliances. I think post the correction period which we have, the optimization period, several of those projects are delivering that. Now, that's one lever of benefit, just purely at a gross margin level. The other benefit which you obviously you know believe integrated solutions will bring is around you know around stickiness and size, right? That should actually give us leverage from an overhead perspective, right? The way we look at a business is the we have gross margins which are. I mean, I would leave this quarter aside, right? I mean, just leave this quarter aside. Broadly we'd expect that the margin profile would be slightly on solutions, be slightly better than what we have done in the past. The volume growth which we get through that, you know, should be able to actually start leveling off on our overheads. I think even this quarter, and Yogesh can say specifically, but even this quarter, I think our overheads, you know, you've seen our overheads only grown by 3%, right? On that revenue and bottom-line growth, right? We can see, and it's now probably at 4.6% or so of sales. As that volume growth comes in, we'll actually be able to accelerate the leverage on that line as well. Right. Just to, I mean. From a modeling perspective, Mukesh, probably you and Yogesh can get back to you and have a specific conversation around that. Sure. I will get in touch with him separately. Yeah, I mean, again, just looking at say the last quarter and this quarter. Last quarter we had seen an impact of fuel prices, and that would impact our transportation. I'm assuming this quarter we would have got the pass-throughs for that, and hence the transportation margins should have gone up because diesel prices actually came off in November. In essence, the warehousing margins are actually much lower because the transportation margins would have been up QOQ. Yeah. Probably this should correct is what you're saying after the optimization phase. We should see a significant increase in warehousing margins. I mean, what I would say is, Mukesh, I think I said in the last earnings call as well that we have finished passing through all the fuel increases, right? That is not the problem. Obviously transportation volume is kind of flattish and the Mahindra business is down compared to last year, right? And that is a large part of our transportation volumes as well. At a gross level, I do not know exactly how it has. I may have to get back to you with exact INR values for that. Broadly, as I have said earlier in the call as well, the transportation profile, margin profile was pretty stable, and in line with the past. That's why we called out specifically that most of the challenges or the action or the pressure we have seen in this quarter has actually been on our warehousing and solutions business. Sure. All right. Thank you so much for the time again, Yeah. Thanks. Sure. Thank you. Participants are requested to restrict their questions to two per participant. The next question is from the line of Shyam Sundar Sriram from Sundaram Mutual Fund. Please go ahead. Hi, Tamanna. Hi, sir. Good evening. Thanks for this opportunity, sir. You did mention that, you know, the higher capacity built up in warehousing, expecting volumes to come through was one major factor for the margin drop. What steps can we take internally to plan better so that these incidents don't reoccur? That's my first point. Secondly, you did mention the flex solutions are on similar margins as the standard integrated solution, standard warehousing solution contract. Now, I'm very surprised given the short-term nature and the enormous stress that it puts on your system. Shouldn't this business be a higher margin business? Or is it... I mean, just if you were to think about it, is it even worth doing this business with so much of variability, and, you know, the stress that it brings upon the system per se? This is my first question. Secondly, are there any further startup costs in this first half calendar 2022? Because this was a 45 bps kind of an impact, per se at the gross margin level. Are there any further similar startup costs expected in the first half of the calendar 2022? Thanks. These are my two questions. I'd say. I think let me answer the second part first. I think as I said, Shyam, earlier on also, we carry a little bit of startup costs every quarter, right? That's kind of normal to our business. This quarter we've seen the higher impact of the Bajaj cost, and that network optimization will have an upper hand through the fourth quarter. As we plan right now, we don't expect it to carry into the next FY. That's given the scale of that contract, you know, a 3-4-month pan-India network. We are doing, you know, 800 or 1,000 trips every day across, you know, 11 facilities across the country. 13 facilities actually across the country. Delivering to, you know, more than 700 delivery points. It's a large optimization. That should get done through, as I said, the fourth quarter of this year. Apart from that, I don't expect anything, you know, really to come out. There is a learning curve obviously on scale as well. I think next time, as we do larger end projects, more projects of, on the scale of, these, I think we'll obviously have a learning curve on getting better at optimization as well, right, as more volume comes through. In terms of the flex contracts and the other question you had around optimization. Obviously, I think, you know, as you know, we've been expanding, you know, it. You have to take a call on how you build, you know, warehousing infrastructure and warehousing capacity, right? It is a shift function. It's a step-up function. It's not a linear function, right? Therefore the horizon of planning has to be a little bit longer, right? We can't add, you know, Shyam, 20,000 sq ft every month, right? That's also suboptimal in a different way. It's probably low risk, but probably also creates low return from a long-term perspective. What we have been doing to optimize it obviously is, you know, if you look at our facilities which are Our capacity which is more flow storage based, we have been trying to divert that across some of the newer clients, and that's why we've been trying to kind of get better, you know, square feet utilization in terms of revenue yield. We are hoping to consolidate. We started that work actually already. I think hopefully through this quarter we will see more acceleration of that, you know, with some of the newer businesses which are being picked up. The second part there obviously has been to retune our manpower productivity and recruitment assumptions. That's something which, you know, there will be some volatility which probably will continue basically through individual geographies. We broadly think that at least, you know, we are getting that, you know, under control and the Jan peak thus far has been good, has shown results of the work we have done. Right. I think the capacity issue, very honestly, I think we feel confident about the fact that it'll, you know, kind of play itself out, Shyam. Because as I said earlier on, we have to take positions, we can't just build facilities every month, right? As you build larger facilities, there are long-term productivity and efficiency benefits there, which will start showing up in our margins as well, right? As per the flex question you had, Shyam, I think flex is a combination of different things, right? There are, you know, pure flexes where you're going to middle of nowhere and actually building a short-term flex solution. Those generally do carry a higher margin profile. There are large flexes which are kind of attached to an existing node, which we operate ourselves, right? For example, in Calcutta this year we did a 300,000 sq ft flex for one of our clients, right? Now that kind of touched next to another facility which we operate for the same customer. Right. Therefore, the stress which you spoke about is a little bit different, right? The pricing is a function of multiple factors, and I would say the flex model is also becoming more mature. Shyam, I think we're better both in terms of cost management and of course in terms of the comparative functionality there also is increasing, right? We do get, I think margins that typically, you know, if you don't have any disruptive factors, you do get margins slightly higher than our typical warehousing business. It's not a, you know, it's not a gold rush anymore, let's say that. I hope that. I don't know if that kind of answered your question, but. Yeah, I got your point, Ram. The only question I have is I'm still, you know, wondering. See, our revenues has grown 10% sequentially. We have done very well on that. Nevertheless, our earnings on this higher revenue has been lower than what we did last quarter, right? Which means we are losing money by putting up these flex solutions that have lots of variability. Of course, there is a startup cost element also which is there, but that will ease out. I'm just wondering whether is it worth at the end of the day to have these, you know, variable businesses. That was my limited point. For sure, Shyam. I think the capacity issues exclude the flex point. I would say that your flex is not counted as that capacity expansion I talk about. Okay? The manpower problem was reasonably secular. I mean, typically, I mean, you are hiring very many of these facilities. They are manpower-intensive to some extent, so you normally have, you know, 35%-40% cost of manpower, even in a business as usual basis, Shyam. If not, in some products even offerings even higher. So when you see a sharp escalation there, you know, it does have a tail-through impact. So I would say this quarter for sure, flex was not the problem for us, Shyam. I hope that's probably a good bit, if that's the way I would summarize it. I don't think flex basically had an overhang on our earnings. Sure. Sorry, just one last question, if I may please. Given that there's a sharp inflation in manpower, I mean, not only for us but across all industries we are seeing a much higher inflation in terms of manpower costs. Are there any elements in our contracts with customers that allows us some kind of a passthrough for this, slightly higher than expected manpower costs? Yeah. I think, I mean, the contracts are generally done in multiple ways, Shyam. I think generally, your contracts which are more long-term, like, you know, like Bajaj or some of the other accounts which we do, they normally either carry an index based on minimum wages and so on. Okay? Right? There are contracts where the volumes are given every year, right? Which are manpower driven. There, you know, it's really been, it's where, you know, we do discuss, you know, what the cost impact is. There are some thresholds you cross, then obviously we have a chance to go back to the customer. There are times within which we have to manage the performance ourselves, right? That's why it didn't affect us on flex so much, Shyam. Because on flex we actually have a much more near-term window to that cost structure. Right? On our long-term contracts, on our longer term operations, when the peaks come in and let's say they suddenly result in a spike in costs, it just doesn't affect your flex. Actually, flex probably is better because you're contracted in the short term. It's your base business that actually you see the tail through effect. Understood. Got it. Thank you very much. Yeah. Best wishes. If you take, I mean, you take Bangalore as a location, then suddenly, I mean, you've got 3,000, 4,000 people in existing sites. In the peak actually the small flex side doesn't cause the problem. The inflation across the board causes the problem. Understood. Got it. Thank you. The next question is from the line of Aditya Mongia from Kotak Securities. Please go ahead. Hey, Aditya. Hi. Hi, Ram. Hi, Yogesh. I had a few questions from my side, which I want to take your perspective on. Ram, the first one relates to the warehousing business of yours. Now, I'm just trying to kind of get a sense that when you say that volumes were not up to the mark, was it more of an issue of demand being weaker at an overall level, or was it an issue of competition getting in more and more? Okay. Aditya, if you can, if you want to just give all the questions and we'll try and answer them together. Does that work for you Sure, that works. The other related question was that somewhere you mentioned that your new contracted capacities are all doing fine. They are fairly well utilized. Still, we are saying that our utilization levels dipped because we had planned for higher volumes and we didn't get those volumes. Does that suggest that the older warehouses saw some customers not turning up? I'm just kind of relating it to the competition issue. Let me just explain this. Right? Typically, I think I'll try and do this conceptually. When we kind of contract out the facility, let's say which is X square feet, 1 lakh sq ft, for example, we contract out that capacity. That capacity is contracted out through the year for a certain volume and for some parts of the year for much higher volume. Okay? Right? Now, we don't have any white space or we have very marginal white space in terms of contracting itself. Right? Our facilities are all contracted out. However, what happens is that the contracts basically are built around a certain volume. Now in that volume band, there is a minimum guaranteed volume, Aditya, which happens, right? Then above... That's the minimum guaranteed volume which the customer gives, and then of course you have a higher band in terms of what is your peak capacity, right? Ideally, you make really great margins there. This year the problem was not that we lost sites, right? I mean, all our sites are contracted out. The problem was that if we expected, let's say, 100 units to come, it was actually 85. Right? If you expect it to, I mean, if you compare it to a plant, for example, it's not like a plant was not utilized. The thing was, instead of making, you know, 100 big units of a product, it actually made 85. Right? The challenge for us was that, you know, we did see our peakiest days were still 100. Okay? Typically, the peakiest days tend to last for a longer period of time. This time there was a sharp tail off in terms of volume. In fact, you know, in December, some of our sites were actually below minimum guaranteed volume, which of course our clients paid for the minimum guaranteed volume. So that was the factor which was playing around this. It's not like any of our sites basically. You know, we didn't have a competitive situation, let's say our volume went off to somebody else or we lost a site. Our sites are not actually contracted. What I've said in the past is all that when we have talked about the warehouse contracting, we have said, yes, all our facilities are contracted out. We don't have white space in terms of uncontracted warehousing. But obviously you expect the warehouses to have a certain flow through in terms of volume. This year we had obviously, you know, added capacity in the assumption that these volumes, the volume buildup will happen, right? I think it will. I think this is a you know time of day or time of kind of season factor. Your secular growth will bring in the volume to our facilities, right? At the higher end of that contracted band. This year, unfortunately, we are much closer to the lower end of the contracted band in many sites. The higher manpower cost obviously didn't change the cost basis of those facilities also. We got that. The second question that I wanted me to ask was that it's related to the question asked earlier. There is an element of inflation in manpower cost on additional manpower and maybe on existing manpower as well. Our contracts are structured in a manner wherein we cannot pass them through fully. Should this be treated as an overhang on margins in incremental quarters or let's say even incremental years because these are long-term contracts that we are signing from a warehousing perspective? No, I think, I mean, what I would say, Aditya, there are multiple factors here. You know, we have, you know, we control productivity. Then man total, you know, manpower cost is a function of volume of manpower and cost per person. Right? So one of our competencies, Aditya, is actually driving better productivity. Okay. Right? That's kind of what our solution designs on our dexterity work and our process capabilities already are, always are, and that's what we do in most of our sites. Yeah. Even this year, I think the manpower inflation was specific to some locations, right? I mean, I think I mentioned earlier in my comments, we did see a specifically larger problem in the south, for example, which is where, you know, we do have thresholds which are contracted out as well. But in the south we saw, you know, we've seen a couple of locations where, you know, we saw a large spike. Those are big geographical locations for us, and that was very topical to those areas. We didn't necessarily see it in, you know, in Delhi. We didn't see it in Ahmedabad. We didn't see it even in Bhiwandi or Pune, right? We obviously have a fair amount of capacity in the south, so that obviously didn't impact us. We still believe that, you know, as I said, you know, right now we have returned to our work on capacity improvements. We probably planned for a larger volume and we could have, you know, and you can plan differently as well. You know, we planned for a higher flow through this year because, you know, by most expectations, I think the peak was expected to be higher than what we thought it would. Got that. That clarifies. Last question from my side. So you've been talking about adding capabilities to the bouquet of what Mahindra Logistics offers since the time that you came at the helm. Would you think that that exercise is largely completed and maybe last mile is the only part that the company would think through adding to the capability set? Or do you think a lot more work still needs to be done in terms of becoming more likable to your customer? Sure. I'll answer that. It's, you know, a simpler answer because I obviously have to talk about this more often to my other stakeholders as well. Aditya, you know, two years ago what we said is we, as we reposition the business towards the future, we have to add capabilities in three things. You know, expanding service lines, driving more effort to create, you know, custom industry solutions which are more integrated. The third one is technology capabilities, right? I think from a service line perspective, I think we have established baselines now. We were doing seven or eight services, you know, two years ago. We have now expanded the offerings. Inside warehousing we offered several new service types. On transportation, several others on distribution, on freight forwarding, et cetera, have made progress. I would say there probably the larger challenge right now is what you pointed out, Aditya, which is last mile delivery. Okay? On the technology piece, I think it's a continuous journey. I've said this earlier, we are never done with technology. You know, we did put out an 18-month roadmap to get a fundamental architecture on all these service lines together, which we could integrate in a, you know, efficiently. I think that one is probably 85%-90% done, Aditya. Okay? We should really not see a significant bump up, you know, going forward from a tech investment. There will be, you know, probably a linear expansion on tech or differently. you know, but beyond where we have, I don't see a significant bump up on tech. We may make some investments in, you know, blockchain and a bit more in AI, some on automation, but I think those will be par for the course kind of stuff. On the solution design work, I think, you know, we are, you know, we have done—we are doing some transformation work internally with the help of external consulting, and we probably have another 6-9 months of that work, right, to go there because that's changing processes, people, you know, investing in domain knowledge and then integrating obviously operations and tech into that offering, into those solutions as well. I'll say just to recap, services almost there. Tech, you know, 80%-90%, 75%-80% there. Solutions probably halfway there as well. Got that. Those were my questions. It gives me a chance to think through the company. I'll come back with more questions again. Thank you. Thank you. The next question is from the line of Pranay Rupchandani from Burman Capital. Please go ahead. Good evening, Ram, Yogesh, and everyone present. Let me know if I'm audible clearly. Hey, Pranay. I can hear you. Great. Thanks, Ram, for all the details. I had three quick questions. Firstly, you mentioned that about 60% of the margin drop this quarter could be attributable to your, you know, excess capacity related to your manpower and volume. Now the question pertains to Q4. More on Q4. Given the impact of Omicron, right? How do you see volumes, and is this overcapacity issue behind us, or should we expect some impact of this in Q4 as well? Secondly, on Meru Cabs, right? When do we expect the consolidation to complete in terms of your financials? Given that Meru had INR 18 crore loss in FY 2020 and about INR 30 crore loss in FY 2021, I understand there would be certain rationalizations and, you know, the loss would minimize, but could we still expect, like, a INR 5 crore-INR 10 crore pressure on your bottom line post-consolidation? Lastly, a quick question for Yogesh. There's this item called cost of material consumed in your P&L, which came at about INR 5 crores this quarter. Just wanted to get a sense on what this item entails. Yogesh, do you wanna go first, and then I'll kind of wrap it up on Q4 and Meru. Yeah. I'm just pulling out the financials, what Pranay Rupchandani is referring to, so just I'll Why don't I put them? Let me go first. I think, yes, I would say that most of the, on that additional capacity and the manpower cost piece, I think Pranay, you know, Omicron obviously is resulting in fluctuating volumes. We are not really seeing, you know, volume pickup and there will be some impact of the flow through it in our facilities, through this quarter. What we have done, I think on the people side is I think we've got that under control, Pranay. Right? That's been something which we moved quickly on. We do have production working process standards internally. I remarked earlier on as well, we're just kind of going through the January peak as you see. As you generally know, most e-com customers and others actually have a peak in Jan and obviously things like fans and coolers also start moving around this period. Fans and, you know, that's something which obviously we have been able to mitigate the impact we saw in last quarter on that. Okay? So I heard that. So the manpower side is taken care of. The flow through on volume might still carry some softness. On the Meru piece, yeah, I think you raised a great question, right? You know, and I think you've seen the historical, all of you would have seen the historical results of Meru. Now, what we know, the Meru's existing management has already done has been obviously trying to kind of manage and optimize costs further. Right? What we believe is that as we go in, we expect you know, the three big waves of synergy, Pranay. The first one is a substantial synergy from an overhead management perspective, right? You know, as the volumes have shrunk, you know, we think there's a lot of, you know, all of us have taken cost out. You know, but still overhead typically in the mobility business in terms of tech, sales, marketing, site management, et cetera, remains of reasonable volume. Now we think that's a straight, just do it kind of synergy which we expect to come through. Right? The second piece really is around the fleet optimization. As we, you know, typically both companies are largely asset light, right? Both are businesses. Clearly we expect that our supplier leverage will go up significantly, right? We will be able to use the same cars for higher hours and higher miles and therefore, you know, the marginal pricing is obviously, you know, the price of your last slab with your vendor is always lower than the price of your first slab. Right? That's a synergy which we have, you know, we have evaluated and assessed, and we have fairly good line of sight for that. The third synergy is actually around demand optimization. I think what we mean by that is, you know, it's two things. One is having a wider bouquet of services allows us to go and get better share of wallet, right? If you are General Electric or GE, for example, you know, and we are doing the ETMS for you, we know that you are also doing on-call. You also have airport kind of pickups and drops, right? The second part is gonna be that better supply obviously means that you will have better availability, right? We believe that, especially for the airport and the on-call business. You know, one big lever will be that, you know, we think our supply capability will help Meru have lesser incomplete orders, right? Which is, for example, when you walk out of the Bombay airport, you order a Meru cab and it's not available, right? That cab scenario might not happen because we'll bring our supply capability. Now, put those three together, I think we expect to significantly have better earnings in the business than probably what Meru has had in the past, right? Right. But that said, I think there will be some negative impact, marginal impact, right, in the first financial year, given the current demand environment, Pranay. I'm not in the position right now to fully quantify that, but it should be of course of a much more managed order than what you might be able to deduce from historical, financial statements. Got it. When can we expect this consolidation to complete? Is it Q4 or is it going to flow into next year? Yeah, we are working through the timing of it, Pranay. I think hopefully somewhere between the latter half of this quarter or early part of next quarter we should expect it to get through. I think from a governance perspective, I do believe, and Yogesh you should add, but you can add, but we have already informed, updated the stock exchanges also about the deferral in close. That's correct. At present we are looking at to wrap it up, I mean, the last, we had looked at like within end of February. If there's any change we will again obviously intimate, but right now that's the timeline we are expecting. Got it. Ram, quick follow-up regarding our margins. I get your point. Still, if you try to look in terms of numbers, can we expect it to go back somewhere near Q2 levels or would the Omicron impact keep it somewhere in between? No, our aspiration of course is to try and take it back there. We're working obviously pretty hard on that right now. As I said, there are two, three big impacts. I think the Bajaj optimization costs and the new project you know, which is the largest part of the startup cost, I think that will have an overhang for next Q4. I think from a demand perspective, we do believe that we will optimize while volume flow through in our facilities might be a bit lesser. We will optimize other cost levers to basically offset that, right? I think the manpower cost piece is already under control. We don't think that the Q4, the Q3 issues we had, our BAU business will continue too long, you know, Pranay, for most this quarter and we don't think Omicron will have an impact on that. All right? Because we run a lot of standard high volume nodes, right, for our customers in their network. We also see seasonal optics in some areas, right? For example, on things like fans, independent of Omicron, we will see some seasonal patterns of strength in Q4 as well. Right. Thanks. The last piece I think, Yogesh, if you could. Yeah. On that piece, I mean, we have, I mean, as part of the value-added services which we offer in our supply chain, Pranay, I mean, there is things which we do in terms of, component assemblies at our sites. You know, things like what we used to do in terms of, tire and wheel, in terms of, you know, completing a product or in, farm equipment, certain components also we do. This is the cost of material consumed in delivering those services. From a breakup of, you know, accounting line items, I mean, since this service is now a defined service within that, I mean, that's kind of called out separately. This is a cost of material consumed in delivering the value-added services within supply chain. Wonderful. Okay, great. Thank you. Thank you, Ram, and thank you, Yogesh. Thank you. The next question is from the line of Anupesh Pandey from Edelweiss Financial Services. Please go ahead. Hello, Ram. Hello, Yogesh. Am I audible? Yes, hello. Hi. Yep. Yep. Yeah. Hi. Two questions from my side. First question is on margins. I just wanted to sort of understand the margin mix better across transportation and warehousing. Because if I were to compare the margin profile for the company, which was roughly eight to ten quarters back, and I'm talking about somewhere around mid FY 2020, when you know, this was before COVID, we were at about 4.5% to 4.7%. Now, given the fact that, you know, warehousing has become, you know, nearly 25% of the overall revenue from 15% two years back, despite the startup cost of these new projects, you know, I'm just not able to sort of put this together that, you know, why should the margins be lower than the levels that we were at, you know, nearly 8 to 10 quarters back when the warehousing piece was only 15% of the total? That is question number 1. My question number 2 is, Ram, you spoke also about the volume shortfall this quarter, where the volumes were at the lower end. Now in these kind of contracts, wouldn't the fact that these are variable volume contract or variable price contracts, wouldn't that, sort of, better pricing make up for the fact that, you know, if in a quarter there is lower volumes, still the margins are quite decent? I just wanted to understand this conceptually better. Sure. Let me then answer the second one first, and then I think we'll dial back and let Yogesh pull out some of the data, which I'm sure he may need to pull out as well to answer the first part. Right. But the second part, you know, if you really looked at the way the contract is done, we do, so let's assume a site is contracted for 100 units a month. We will only carry a minimum guaranteed volume of 75, right? Now, typically what happens is that while we have a minimum guaranteed volume of 75, what will happen is that we will actually, based on the customer forecast, you know, be sizing the facility. Two things happen. You size the facility for overflow, right? The second thing which is there is, you know, we will also actually recruit manpower, right, and plan shifts, et cetera, basis a certain volume. When I said that the volume flow-through has been lesser this month, I mean, think about it, if you're more conversant in manufacturing, think about it in that sense, right? Think that, you know, we essentially planned let's say 1,995 of volume. We essentially lined up all our resources for that 1,995. You know, the volume came in at 75 or 80, right? Probably we had. You know, we obviously have, you know, we've been aggressively trying to grow the business and we've kind of gone after volume growth, right? Right, and putting infrastructure and resources to do that, right? What has therefore happened is that you have a certain amount of resources which are standard, right. Some of it, like, you know, your scheduled hours, et cetera, or operating, you know, electricity, et cetera, you can turn off quickly. Some, like, your manpower, you actually do timestamp the contract with your vendors for some period of time, right? If you have contracted them, let's say, on a monthly basis, the volume doesn't, you know, end up for the month, then you obviously end up with standard manpower, which is the point I'd made earlier, right? That's what played out, right? Now, obviously if you are, you know, based on your relationship and your confidence in the planning work which you do with your customers, you size the business for a certain level, right? Which is kind of what we did this year, and that's what was the capacity flow-through problem we had. If the volume had come at 1,995, you know, we would have seen all those resources being used fully, right? Now, the second part, which is what I already said earlier on, that then that 85-90 people, you know, let's say the cost was INR 30 an hour for them. You know, because of some of the inflation it might have become INR 32-INR 35 in specific geographies. Your cost base has increased in some geographies, and then you obviously saw lesser utilization of these resources than what you had planned for. The good thing is that we, as I said, because these are all manageable in some windows of time, we have obviously taken actions on most of that already. Sure. The first question on the margins. Yeah. Yogesh, do you want to go through some color? I don't have my files with me right now, Yogesh, so you may just need to pull out some of it. If you can. I know from a margin perspective, I mean, is it okay if I just, you know, walk you through separately? I mean, I'm just cognizant of, I mean, Ram, your time also as well right now. It's 5:17. Sure. No worries. Yogesh, I'll connect with you later. No problem. Thank you. Do we move to the next question? Thank you. The next question is on the line of Prateek Kumar from Antique Stock Broking. Please go ahead. Hello. Good evening, and thanks for the opportunity. My first question is, would you have FY 2021 numbers for Meru top line PAT, and how have they panned out, like in terms of FY 2022? Prateek, I don't have the exact numbers. I think there will be filings, et cetera, which will cover that. Obviously, I think if you reach out to us separately, you know, we can answer that question more specifically and, unless, Yogesh, you have the numbers handy. I would say that compared to FY 2022, FY 2021, FY 2022 directionally obviously had seen growth for them, Prateek, right? You know, Meru has largely three parts of the business. The first part is the ETMS business, which is 30% or 35% of revenue, which is similar to what we do in Allied. That business has not seen a lot of growth. It's kind of, I think, being fairly neutral. The airport business, which had come down a lot because of the pandemic, has, you know, before Omicron at least, as the volume had started coming back, they had actually started showing some positive momentum on the airport side. Overall, I think revenue was trending, you know, positively, I don't know, directionally for the business, right? You know, in terms of cost, I think there are multiple factors, but I do know that they have also been working on cost optimization. I don't have the exact numbers with me, Prateek, unfortunately for FY 2021. I think if you reach out to us separately, we can definitely cover that with you. Sure, sir. Second, the second question on, like over past 2 quarters, like when you compare Q1 to Q3, our warehousing space has sort of remained stable. In fact, past 4 quarters, warehousing space has remained stable or, I mean, sort of declined because of, I think, some reasons which you highlighted last quarter. Like, when we add the depreciation plus interest, which has a component of ROU assets, that number has grown INR 8 crore over past 2 quarters. I'm just adding depreciation and other expense simply. Why has that happened if we have not added any space? Because that is actually weighing significantly because your PBT in third quarter is INR 7 crore and that incremental INR 8 crore is like sort of having significant impact on your PAT. Prateek, what I'd say first of all is I think, you know, I mean, that is actually just in our view, particularly in connection with scope. Your first point around, you know, warehousing space, I think you will see slight swell, and we added this last quarter, Prateek. I think in response to a question you had only asked in the first quarter, say, and we started breaking down between warehousing and stockyards. You know, stockyards are very low value. They're high space, but they're actually low value and low cost as well. What you would see generally, I think, if you look at FY 2021, we ended with 17.5 million. You could say that there's 18.8 million in Q3 FY 2022. I mean, you're probably reasonably logical that it's only gone from 17.5% to 18.8%. If you actually break that down, yeah, you know, pure warehousing and stores and IT has gone from INR 11 million to INR 15 million. Right? That's been a 35%-40% growth in terms of the space. Right? In terms of pure warehousing, which is where the depreciation actually adds up, Prateek. Right? I think that's the first. I think you had raised this question, so we start giving this breakup last quarter, right, Yogesh? To help you people, we can respond to your questions, to help you understand the underlying factors. That's one. The second thing I would say is that Dep itself carries two parts. It carries a straightforward rental cost, which is really a restatement, right? Our gross margin should actually basically compensate for that. Right? The second thing is there is an Ind AS 116 timing impact because that timing impact was Ind AS 116 frontends the charge. I think Yogesh had explained last quarter also that we saw a INR 3 crore to INR 4 crore impact in this quarter because of that. This quarter also we have seen something similar, I think. Right? Yogesh can probably elaborate on that bit more. But it is not, I think, accurate to You know, while the overall number might have not increased, I think at a category level with and specific to what drives Depesh, Prateek, there has been a fairly significant increase in capacity. Sure. Thank you, sir. That helps. Prateek, in our presentation this time, we have split those two line items also. You would see that the split which is coming in because of this warehouse space rental cost, which is INR 116 crore, and the normal depreciation as well. That will, you know, kind of do that. Another thing is obviously the more costlier space in terms of value-added or more standard warehousing which has got added in. There is another element, the third element I think, just one more thing I'll add on to what Ram said, which is you know certain space which was towards the end of quarter four of last year, which was customer-owned space we used to work out of, you know, which kind of you know translated to our own space. Which also meant that, I mean, you know, from a cost perspective, the space count remains the same, but the rentals would have come in now. Sure. Thank you, sir. That helps. Thank you. In the interest of time, this was the last question. I would now like to hand the conference over to management for closing comments. Well, okay. Thank you all for joining us today. I hope we've been able to answer all your questions satisfactorily. If there are any other queries or questions, you may, you know, reach out to us, right, and our investor relations team, right, at MLL and SGA Investor Relations Advisors. Thank you once again for your interest in the company, and thank you for taking the time to join the call today. Thank you. On behalf of Mahindra Logistics Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.