Good morning, ladies and gentlemen, and welcome to the Q2 FY 2023 earnings conference call of VRL Logistics Limited, hosted by Motilal Oswal Financial Services. As a reminder, all participant lines will be in the listen-only mode, and 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. Alok Deora from Motilal Oswal Financial Services. Thank you, and over to you, sir. Thank you, Michelle. Good morning, everyone, and welcome to the 2Q FY23 earnings conference call for VRL Logistics. We have with us Mr. Sunil Nalavadi, the CFO of the company. I would now hand over the call to Mr. Nalavadi, to give opening remarks and, discuss on the performance of the company. Thank you, and over to you, sir. Yeah. Thank you, Mr. Alok. Good morning to all participants. I am Sunil Nalavadi here, CFO of VRL Logistics Limited. I welcome all of you once again for the earnings conference call of the company for the period ended September 2022. As we indicated earlier, the management of the company is going to focus only on the higher growth-oriented goods transport business. In view of the same, we have taken many steps, including sale of non-goods transport segment, which were part of the company earlier. I also would like to thank the non-promoter shareholders who have supported our decision by voting in favor on our decision of sale of bus operations to the promoter entity. In goods transport business, we are taking many key steps to expand our business at unparalleled growth. The key steps mainly consist of expanding branch network, addition of new customers, increase in infrastructure backup by increasing in our own fleet, enhancement in the space in the transshipment hubs and branches, route optimization in line with the increase in tonnage, et cetera, and this is going to be continued even going forward. As we envisage, we are on a track to increase our volume growth by 20%+ in the current fiscal year as compared to the last year. During the quarter, we have handled total tonnage of around 966,000 tons, which is almost 7% more than the previous quarter and 14% more than the same quarter of the last year. Further, in the current half year, we have handled totally around 18.58 thousand tons, 18 lakh 58 thousand tons, which is 27% more than the last year half H1. With this background, the total revenue of the company reached to INR 733 crore in the current quarter, which is again the highest ever revenue per quarter as compared to the previous quarters. This is resulted into year-on-year growth of 15%, and quarterly basis, the growth is around 2%. The major contribution to the revenue is coming from our Goods Transport segment, and the revenue from this segment reached to INR 650 crore in the current quarter. This is resulted into 14% year-on-year growth and 7% quarter-on-quarter growth. The growth in this segment is mainly from the increase in volume without increasing in freight rates. Apart from the better economic conditions and festive seasons in the current quarter, the increase in tonnage in Goods Transport segment is also due to expansion in network by the company. During the quarter, we have opened around 29 additional branches, and from April 2021, we have opened totally around 188 branches. These branches have contributed around 8% tonnage, which is additional tonnage to the company. As we already mentioned that our industry comprises of mainly of or majority of the small fleet and unauthorized operators. To curb on the evasion of the tax, which were supported by the unauthorized operators in India, the government has modified the E-Way Bill regulations. From April 2022 onwards, for the business entities who are doing the business INR 10 crore and up-- INR 20 crore and above, compulsorily they have to generate an e-invoice. The same limit has been reduced to INR 10 crore from October 1, 2022. This is further going to support us because of the increase in the compliance. We hope that the steps taken by the government clearly indicate the business transaction needs to be done in a compliant and organized way, rather than the non-compliant manner, which were being supported by the unauthorized transporters by transportation of the goods. Due to which we are acknowledging from the market that many of the commodities transportation, which used to be transported only by the unauthorized operators till date, are gradually shifting to us. To name a few of the products, such as coconut products and leather products, the areca nut or supari products, etc. On account of shift from unauthorized operators and the expansion in our network, the base of the customers has been enhanced to 700,000 customers as against 400,000 customer base prior to COVID. When it comes to the profitability analysis during the quarter, the EBITDA of the Goods Transport segment reached INR 101 crore, which is around 8% lesser than the same quarter of the last year and increased by 1.4% as compared to the previous quarter. The EBITDA margin of Goods Transport segment in the current quarter is 15.56%, which is reduced from 19% as compared to the same quarter of the last year, and sequential basis, this is reduced from 16.38%. The detailed profitability analysis, along with the reasons, have been provided in page number 10 and 11 of the presentation. Just to brief, some of the reasons behind it. If you see the year-on-year decline in EBITDA, is mainly on account of increasing lorry hire charges as a percentage to the revenue. This cost is increased from 7.25%- 10.16%. The increase in cost is mainly due to sudden surge in festive bookings during the fag end of current quarter, especially from Surat and Ahmedabad markets. And to meet this requirement, we were forced to engage hired vehicles, since our own vehicles were deployed in other routes and geographies. Further, the lorry charges per kilometer is also increased. The toll charges are impacted in the current quarter, and the percentage to the revenue of this cost is increased from 6% - 7.33%. The increase in toll charges is due to increase in toll plazas, to toll charge rates, and increase in kilometers covered by the own vehicles. The another increase impacted on the margin is on account of increase in the employee cost, which has increased from 13.76% - 14.91%, due to annual increment effective in January 2022. The decline in some of the costs, such as vehicle repairs and maintenance, diesel costs, and other expenses, were supported in increasing EBITDA margins. The diesel cost is under control in spite of no bulk purchase from the refineries, and the cost per liter is less due to reduction of excise duty by the government on periodical basis. The procurement cost of diesel, it was around INR 90 earlier. Now, in Q2, this has been it is almost same of around INR 90 only. The quarter-on-quarter decline in the EBITDA is mainly on account of increasing lorry hire charges as a percentage to the revenue. This cost is increased from 9.37% - 10.16%. The increase in cost is mainly due to a sudden surge in festive bookings during the fag end of the current quarter, especially from Surat and Ahmedabad again. And further, we forced to engage outside vehicle on account of this sudden surge in the demand. Further, the vehicle repair and maintenance charges on account of increasing the spare parts rate was also increased, and the employee cost as a percentage to the revenue has been declined from 15%- 14.91%. On account of the increase in the volumes, since the employee cost is in a fixed in nature, on account of surge in the revenue, the percentage to the revenue has come down. Moreover, if you see the fuel cost, which is declined from 31%- 30%, and this is mainly on account of decline in the overall reduction in the procurement cost. In the quarter one, the procurement cost of the fuel was around INR 93, which has been reduced to around INR 90. I would like to quote another impact in the current quarter on account of sudden increase in the transit tonnage during the fag end of the quarter. Normally, this freight amount is around INR 45 crore-INR 50 crore at the end of each quarter, but in this quarter, this amount is increased to around INR 65 crore. Since this, most of the tonnages are in transit, we have not accounted this tonnage as a revenue in the current quarter, and further, some of the expenses incurred on this transit tonnage has been additionally burdened on the P&L account. In our view, around 50 basis points of margins have been reduced on account of this. The net profit of the company reached to INR 31 crore in the current quarter, and decline in net profit from the run rate of INR 50 crore profit from the previous quarters is only on account of decrease in the bus business. If you see the EBIT of bus segment, it is around INR 17 crore, which has been reduced as compared to the first quarter. The reason is always, if you see the bus region, the first quarter always we see a more demand and more profitability, whereas subsequent quarters, the margins of the bus business will come down. Further, we have, as we presented earlier also, the bus business is facing a lot of competitions, especially from the railways and even on the local air segments. So on account of this, the overall, there is a reduction in the demand or number of passengers which have been traveling less in the quarter two, and even realization per passenger has come down. On account of this, the bus business is impacted very badly in the current quarter. Further, there is a reduction of profit in around INR 3 crore-INR 4 crore on account of the windmill transactions. The windmill transactions have effective from first July to first July, and the profitability of August and the... Sorry, the August and September profitability have been, have not been considered in the current quarter. Because of that, the profitability is reduced by around INR 5 crore-INR 6 crore, INR 4 crore-INR 5 crore in the current quarter. On account of these two impacts, the overall profitability has come down, but in terms of goods transportation business, it has maintained EBITDA and EBIT level profit. Other things that just I want to highlight about the goods transport vehicles, we have purchased around 560 vehicles in the current half year. As we committed the CapEx plan, we are on track, and the rest of the vehicles are going to be added in the coming one year period. By September 2023, definitely this order is going to be completed. The another thing is about the net debt, which is increased from INR 130 crores to INR 164 crores, in spite of increasing in the CapEx to the tune of around INR 170 crores in the first half year. And as we disclosed, the bus transaction is going to be completed in quarter three. And because of this transaction, the company is going to realize around INR 190 crores additional cash flows, net of taxes. And this entire cash flows are going to be used for retirement of the debts. So on account of this, there will be savings in the interest by almost INR 3-INR 4 crores in a quarter... So overall, in a future period, definitely we are expecting that the tonnage will be growing in the range of around 20% on year-on-year basis. And further, the profitability will be maintained. At EBITDA level, we are going to maintain at the range of around 16%. At a tax level, the reduction on a debt is going to be supportive for us to increase at the tax margins. With this, actually I conclude my initial remarks. Now I request the participant to ask questions. Sir, shall we open for the Q&A? Hello. Yeah. Okay, sir. Thank you very much. We will begin the question- and- answer session now. Anyone who wishes to ask a question, may please press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may press star and one to ask a question. We have the first question from the line of Amit Dixit from ICICI Securities. Please go ahead. Hi, good morning, everyone, and thanks for the opportunity. I have two questions. The first one is that you mentioned in your remarks that there was, you know, service, there were services provided due to certain changes that you're booking. However, the corresponding revenue was not booked. Is it possible to quantify that revenue, and will it come in third quarter? And if so, what could be your margins, EBITDA margins for rest of the year? That is the first question. Yeah. In the normal period of operations, or even in the normal festive seasons, which are spread in, months, this transit freight will be in the range of around INR 40 crores-INR 45 crores value. But in this quarter, what happened, this amount has been reached to around INR 55 crores. This entire INR 55 crore has not been booked in that particular transcript in this quarter? Yeah. The INR 55 crore, the transit freight is not booked as a revenue in this quarter. Apart from that, what happened, there are certain expenses which are incurred by the company. Say, for example, if the material is booked from Delhi, the booking office expenses have been increased, the booking, loading and unloading charges have been increased. If it reaches to the transshipment hub, again, transit, transshipment costs have been increased, increased, incurred, and all these expenses have been already charged to the P&L account. See, in our, estimate, if it would have been a normal tonnage, transit tonnage, the profitability would have been improved by around 50 basis points in the current quarter. Okay, sir, that's good. The second question is essentially to do with the revenue growth in this quarter, year-over-year, which has been facing quarter where there has been no increase in prices, and we have seen your costs increasing. So is there any chance of, you know, passing these costs to the customer through price hikes? Yeah, basically, see, we are in an expansion mode as of today, and we are more concentrated to increase the volumes. Because of that reason, we have not taken a call on the increase in the freight rates. And since we are maintaining the EBITDA level at around 16%, we want to continue this strategy even going forward. If the increase in costs are beyond this level, say, sudden increase in the fuel rates or something like that, which are beyond our control or which we are going to impact on, on our EBITDA margins, then we will think about the increase in the freight rates. Otherwise, we want to continue the same strategy, and we want to acquire more, more and more number of customers and more and more and more number of the sectors which were in the hands of the organized, players till date. What is the threshold profitability level that you are considering, beyond which you would consider price hike? Yeah, EBITDA margins, see, our strategy is to maintain at around 16%. And, see, if it is below around 15% or so, then definitely we will think about the increase in the rate. Wonderful, sir. That's very helpful. Thank you all. Yeah. Thank you. We have the next question from the line of Rakesh from HDFC Mutual Fund. Please go ahead. Thank you very much, sir. Just wanted to probe a little bit more on the margins. If I look at your margins, and forgetting about the first half of this year, you have been in the range of what? About 19% to as high as about 20%-21%, in the Goods segment margin for almost seven to eight quarters in the past. And now we are talking about 16% margin. So I'm just wondering, that even with the higher volumes, why shouldn't our margins be going back to previous level? What explains the difference between the 19% margin we were doing and versus 16% we are guiding now? Yeah, basically what happened, see, this 18, 19 or even up to 20% EBITDA margins we reached in the last year, quarter two, three, and four. But subsequently, what happened, the diesel cost has been tremendously increased. But instead of that, actually, we maintained our freight rate. And apart from that, there are increase in other expenses also. If you see the toll charges, it is increased almost around 1%-2% to the revenue, only on account of number of toll plazas has been increased, the toll rates has increased. And, if you see the other costs, the lorry cost is suddenly increased on account of the festive season. But, you know, the employee costs have been increased on account of, the increment which has been affected from, April 2022. See, that 19%-20% which were there for the three quarters, but it is not a sustainable for a going forward or even for a longer period. Since our focus has been shifted more towards acquisition of the new customers and new geography, new market, we want to grow on a top line with a maintenance of a EBITDA level at around 16%. That's what the strategy has been changed internally. So then I want to follow up on the same. Should we take that during those six to seven quarters, the competitive intensity because of the COVID was benign, and therefore you could charge higher margins, and now again, the competitive intensity is higher, and to grow volumes, you need to, you know, give up those margins? Is that the way to think about it? Or is there any other way to think about it? Because you might not be taking a price hike. Does that mean the customers will remain sticky and you would have, I mean, a possibility to increase price hike in future as and when you get an opportunity? No. Basically, see, since we are expanding in the new geography, we want to retain the price. And moreover, once the volumes grows at the expected level, say, around 20%-25%, definitely we will have a operational leverage. And again, see, around 1% or 2% margin expansion is possible at that level. But it is going to take its own time. Until we reach at least around one or two years, around 20% growth, that possibility we cannot see. And once continuously we grow at a rate range of around, say, 20%, then going forward, then we will have a operational leverage. At that level, around 1% or 2% increase in EBITDA margin is possible. Understood, sir. So one last question. Are you undercutting prices relative to your competition as and when you are expanding in the new geographies, or you are at parity? I mean, is there a large difference between your prices and the competition prices? If you can help us understand that. No, basically, in the new geography, considering our service strength, we are offering the competitive rate to the customers. Understood, sir. Thank you very much, and all the best. Yeah. Thank you. Thank you. We have the next question from the line of Dhaval Shah from Girik Capital. Please go ahead. Yeah. Hello? Am I- Yeah, hello, sir. Yeah, hello, sir. Yes, sir, just continuing with the last participant. So you mentioned in the new geography, you are offering competitive rate or the same rate to the competition? I didn't hear it correctly. No, competitor rate. Same rate of the competitors what they are offering. Offering the same rate. Okay. Yeah. Fine. So now this, focusing on volume growth, so in which geographies have you not taken the price increase? And, by doing that, how has, how has your, your rate card versus the unorganized sector, narrowed? No, our rates are not narrower than the unorganized players, especially in the compliant transactions. Mm. See, across the board, we have not taken any price rate increase, either it is in new geography or even in the existing geographies, since our top strategy is to increase the volumes. Mm-hmm. So when it comes to unorganized players, as even earlier I used to say, for the compliant transactions, yes, definitely they will offer a lesser than our rates. Mm. But when it comes to non-compliant transactions, they are, they earn a much of a premium rate. There, actually, we cannot compete with them, and we will not do that business. Understood. Understood. So now, on the volume growth, so compared to the last June quarter, we would have gone into our newer geography, where the distance traveled by the truck would be higher. So your average realization, so if average realization per ton, per kilometer also would be higher. Now, would that mean your revenue growth should be higher than the volume growth? Is my, is my understanding correct? Should that be the way to look at it? No, the realization per ton is a constant at around INR 6,700, INR 6,700 per ton. The reason is, again, there is a growth in the existing market also. If you see the contribution from the new branches or new geography, which is around 8% of the tonnage, additional tonnage we got from the last one year. Mm. But that itself will not change the overall realization rate. Since there is a tonnage increase in the existing market also, the overall realization per ton we are maintaining at around INR 6,700. Got you. Got you. Okay, fine. And now about this debt on the book, and so by when can we see this transaction getting done and, you know, the debt on the books, repaying, repaying the entire debt? As I said, the bus transaction is going to fetch around INR 190 crores, more clear net cash inflow to the company. Uh. We are planning to consummate this transaction within the current quarter, quarter three of this financial year. Okay, okay. So definitely, once this amount came into the company, then again, our financial position will be substantially improved. Uh. Apart from that, our focus will be on the main, on the goods financial segment. On the interest side, since we are going to repay this debt entirely, so we are going to become a debt-free company once this transaction has been completed. Apart from that, every quarter, our savings will be in the range of around INR 3 crore-INR 4 crore. 3-4- That will directly add to our net profit. Yeah, so in this quarter also, you have this, in the interest component, you have this, Ind AS adjustment done, right? ... No, that interest is going to continue- Uh. Even post the debt transaction. But the debt is going to reduce, and whatever interest related to this debt is going to come back. It is zero. Okay, okay. So interest component out of INR 15 crore will be how much? INR 6 crores-INR 7 crores? Yeah, out of INR 15 crores in a quarter, the interest component is around INR 10 crores-11 crores. INR 10 crore-INR 11 crore. Okay, okay, okay. So your actual interest payout is INR 4 crores? Yeah. Okay. And this will, this will, this is what saving you will have? Yes. Okay. Okay, thank you. I'll come back in with you. Yeah. Thank you. We have the next question from the line of Mukesh Saraf from Spark Capital. Please go ahead. Yes, sir, good morning, and thanks for the opportunity. Yeah, good morning. On the presentation, you have mentioned about 8% of your total tonnage in the second quarter has come from the new branch additions that you have done last year and first half this year. So that means, I mean, organically, it's been a lower growth, I mean, 4%, 5% growth. But just trying to understand, you know, how much more can branch network, first of all, expand? I think you've added less than 100 branches, about 100 branches this year, first half. So how are we looking at this branch expansion? And secondly, because of the... Sorry. Yeah. And secondly, because of this new branch addition in newer geographies, how is that, you know, the lead distances, et cetera, may be higher, and so, the realization per ton, et cetera, and how can that be? Because we've had a significantly higher exposure to the west and south, but now that you're expanding, how will that change the numbers? Yeah. So about the new branches, we are having a plan to open, you know, around 30-40 branches every quarter, and this will continue at least for next two to three years. So wherever potential areas are there, definitely we are planning to open the new branches, and these are going to continue. And apart from that, when it comes to realization per ton, as we said, since the lead distance is increasing. But overall contribution since it is in the range, it will be in the range of around 8%-10%. The impact of realization per ton will not be there. Going forward, see, once these new branches is in the range of around, say, 250- 300 branches, then definitely their lead distance will be substantial, and at that moment, definitely we can see some improvement in the realization per ton. Right. Right. Okay, so you, you continue to expect only 8%-10% kind of volume growth because of this branch expansion right now? It, it cannot become, so it cannot be significantly higher, right? Yeah. Once the numbers further increase. And moreover, what will happen, since these branches are opened very nearby, near cities. See, what is happening, we have to spend some more time. See, at least these branches have to required around one or two years to give, you know, substantial growth in the tonnage. Now, what is happening, as a benchmark, we are having at least these branches have to contribute 100 tons per month, and these branches to reach a breakeven. Branches are contributing 100 tons by, you know, within a period of around two to three months and reaching the breakeven. To add to the overall profitability and growth in the tonnage, at least those branches are required at least around two to three years. At that moment, there will be considerable jump in the tonnage contribution from these new branches. Right. Right. That's helpful, sir. Thank you. And, Secondly, I will tell you- Yes. Even earlier, I used to say the new branches, they were, the contribution were hardly around 2% and 5% in the earlier quarters. Now we reached to 8%, and in the subsequent quarters, again, this percentage is going to increase. Right. Right. Got that, sir. Secondly, in relation to this, these businesses going out, the buses, the bus business as well as the power business, is there any possible reduction in the unallocated expenses? You know, at the corporate level, would there be some employees that would move out, or you know, maybe some rent, et cetera, that could come off? Because we do have INR 8 crore-INR 9 crore of quarterly unallocated expenses. So just trying to understand, is there some slack there that we could, you know, kind of, reduce? Supposedly, that expenses is going to come down. Even for the bus segment, see that expense, expenses component is in the range of around 12%-15%. To that extent, those expenses are going to be reduced. And moreover- Okay. Scrapping the vehicles, even on the new scrapping policy, whatever it is going to affect from April 2023, some of the realization of scrap are going to, you know, support for, margin expansion. Especially this will be treated as, this other income, and, that may support the margin expansion in, next year. Right. Right. Right. Got that. And, is there, on the employee cost, is there, you know, an expected increase, you know, in minimum wages, by the Karnataka State Government or, or say, any other gov, state that you are present in? Is there... Because we were reading that there could be a possibility of a very high, you know, high kind of jump in the minimum wages, there. See, currently, when it comes to the minimum wages, anyway, our employees are earning more than the minimum wages. So see, currently the minimum wages is around INR 11,000-INR 12,000 in different states. In Karnataka, it is around INR 12,000 per month. But most of our drivers and other people are earning more than this amount. They are earning; your average earning by the drivers is in the range of around 27+ salary or earnings per month. So once the minimum wages is revised, accordingly, the salary structure of the drivers will be changed, but overall there is not the impact on the company. Okay. Only it will reduce the incentive and operational costs will change. Okay. Okay, okay, okay. Got that. Just one very last one, sir. We have seen your lease liability. Sir, I will ask you to please rejoin the queue. Okay, I'll get back into the queue. Thanks. Okay, thank you so much. We have the next question from the line of Vikram Suryavanshi from PhillipCapital. Please go ahead. Hello, good morning, sir. Basically, I just want outlook on this use of Biodiesel, which we used to have very actively earlier. How is the current situation or outlook going ahead for use of this Biodiesel opportunity? And the second question is that, you know, share this lorry hire at a percentage of sales, but can you give the outside the kilo basis on the kilometer percentage, like, just to get an idea? Yeah, definitely. One is about the biodiesel. I mean, near future, we are not having a business of diesel biodiesel. But in some of the locations we started in the current quarter, but it is very, very small quantity as of now. And second thing about the fuel is now entire fuel is consuming through the retail pumps. Even the bulk purchase is ruled out because of the wholesale price is increased by the government. So once these prices are going to be matched, and once these are going to get a benefit to us, definitely we are the first people to start using of the biodiesel. And the second thing about the highest kilometers, what you said, yes, we'll give that figure to you. If there is a cost increase of around 2% in the lorry charges per kilometer, quarter-on-quarter basis, if you see the cost per kilometer, year-on-year it is increased by around 17%. On an overall basis, the kilometers, the lorry charges we are, we have incurred in the current quarter around INR 57 crore, as compared to the earlier, around INR 66 crore. The number of kilometers in the current quarter is around 5,691,000 km, which are contributed by the higher kilometers, higher vehicle kilometers. Mm-hmm. In the quarter one and quarter two, that has been increased to around 6,528,000 km. Whereas last year, the same kilometers were around 4,039,000 km. Got it. Yeah. Thank you, sir. Thank you. We have the next question from the line of Srinidhi from HSBC. Please go ahead. Yeah, hi, and thank you for the opportunity. First question on the, revenue growth outlook, more importantly, volume growth outlook as we go into H2. I know you guided for 20%. I just wanted to know, how has been the lower threshold for e-invoicing that is starting to kick in from October 1st, resulting into increased inquiries for you? Yeah, definitely there are, we monitor based on the product line. Just I mentioned some of the products which were completely in the hands of unorganized people. These products are shifting to us. And in terms of number of customers, it will be just group of people. In one, like, a corner product in one particular market, is that entire market is going to shift to us, that way. In, in, irrespective of the number of customers, based on the product-wise PPC, there are a lot of inquiries, and, we are doing, and there is substantial increase in the commitment to these products. So that's the reason whatever government is going to take its steps. Now, e-invoicing, INR 20 crore to it is released to INR 10 crore, and we are expecting that all GST-registered people are going to generate an e-invoicing. That something may come soon. So once it happens, even the people who are having a turnover of around INR 40 lakh-INR 50 lakh rupees turnover, they are liable to generate an e-invoice. In that scenario, definitely it is going to support the flow, the online flow. Yeah. And I'm wondering, is this incremental revenue growth that you are seeing because of this formalization, is it a similar margin business or it is coming at a lower margin? Yeah, definitely it is a similar margin business. Because the most of these retail rates we are fixed by the company, we do not have contract with these customers. Just always we used to highlight about this paid and to-pay customers. Yeah. Most of these customers comes under this, this category, paid or to-pay, which is almost 70% of our business as of today. For these customers, we do not have a contract. Those, customers have to follow the rate charge issued by the company. Okay, great. And coming back to your question- Customers in this category, obviously, they have to book as per the company's rate card. Right. Understood, sir. And coming back to the margin guidance, which you said that is, we are expecting about 16% kind of margin. So if you look at this quarter margin, you did up almost 16% margin, and this quarter had a several one-off kind of things. So wondering if, if those one-offs kind of normalize, shouldn't your margin go back to 17%-18% kind of level as we go into second half? Yeah, there is a possibility of around 1% or so, because this lorry charges is going to come down, and even the transit tonnage, what we are talking, that may improve in the next quarter. But the section still around 18% what we are talking, definitely it is going to take a time. So once our strategy of volume increase, you know, it continuously increase around 28% in the next two to three years, post that, definitely we can look, margin in the range of around 18%. Okay, sir. And last one, sir, a bookkeeping question: Would it be possible to tell us how much was the total tonnage you did in full financial year, last year? Yeah, last year, I said, half yearly we did- No, the full year, sir, I wanted. Full year, I will actually separate this, okay? Half year information is available as of today. Yeah, INR 18 lakh something you said, right? Yes. 1,858,000 tons. Full year basis, we did around 3,632,000 tons. 32? Anyway, I will certainly separate you on that, okay? Okay, sir. Okay. Thank you for answering my question, and all the best. Thank you. Thank you. We have the next question from the line of Vikas Khatri from Aviral Consulting. Please go ahead. Hello, good morning. So my question is, the kilometer of running you have given last year, 40 lakh kilometer, to this year, 66 lakh kilometer, increase of almost 65%. Is it due to having any relation with the retirement of your own fleet, that market engagement has increased, that's why your lorry cost is going up? And if so, then, what's the outlook in the coming days, in terms of, old vehicle retirement versus, lorry hire? And the second question is that, you are adding new segments like you gave coconut, leather, supari. What's the impact on the top four contributing categories of the volume like, VRL is known for the cloth, so how that is, moving up, and, how it will be in coming days? The third question is related to your existing [KAR] wind business. So are there any plan to enter in related business like rail freight? Yeah. Just to answer about the lorry hire kilometers, this is the kilometers have been increased mainly on account of sudden surge in the volumes, especially in Surat, Ahmedabad, and some of the locations in Punjab, the Ambala and other places. But this is one of increasing the kilometers, and going forward, definitely it will not be this kind of a percentage. Overall, it will be in the range of around 7%-8%, not in the range of around 10%-11% in terms of kilometers. That's one. How it is with the own vehicle versus outsourced vehicle ratio? Yeah. Okay. Your second question is related to the wind power project. Mm-hmm. The wind power project, yes, it is a one-time investment we did long back in the financial year 2006-2007, only for the tax planning purpose. And, since we got the complete benefit on the tax side and even on the, return on this project, so we, we got a good offer, and we sold that project. And in the near future, we are looking... We are not looking for any such, kind of investment, and our focus will be only on the goods transport business going forward. When it comes to product-wise, yes, the cloth, we are doing around 18%-19% of the overall tonnage, and agriculture commodity is in the range of around 7%-8%. When it comes to the food and FMCG product, we are doing around 9%, and the electronic goods, we are doing around 7%, and the materials, hardware, are in the range of 8%. The major commodities are the cloth, and rest of all in the range of around 6%-8% to the overall tonnage contribution. We are not depending on any particular sector. Even if you see the customer base, we are having 700,000+ customers, and the top customer contribution even is not more than 1% to the revenue. That's how the spread in terms of the customers or even in terms of the product. Okay, thank you. Thanks. Thank you. We have the next question from the line of Sanjaya Satapathy from Ampersand Capital. Please go ahead. Yeah, so thank you a lot for the opportunity. My question is that you're trying to get gain market share through bit of aggressive pricing strategy. So, is that something which is going to be negative for you in the long term because you may get, like to get into partial business or something? No, ours is a healthy growth. If you see, many people are trying to increase, by heavy losses they are incurring and growing in the market. But our strategy is totally different. We want to earn a minimum operating margin and growth. So our growth, what we are seeing, it is completely healthy growth. It is not at all risk for us. Understood. And so, last question is that the promoters are going to buy out this bus business. So how are they going to fund that acquisition? I mean, because there are some speculation that they will sell VRL shares in the open market to raise funds. Yeah, they are planning internally among the promoters, and definitely it is their plan. You know, we don't want to comment on that. Okay. Okay, but when all these transactions likely to get over, that, the whole uncertainty will go away, is there any idea? Yeah, in quarter three, we want to complete this transaction, because we received the shareholder approval by October 30, and definitely we are going to complete this transaction by the end of this quarter. Got it. Thank you, sir. Thank you. Thank you. We have the next question from the line of Ash Shah from Elara Capital. Please go ahead. Thank you, sir, for the opportunity. So I just wanted to confirm one thing. Earlier you mentioned that 75% of the customers are to-pay customers, right? If I'm not mistaken. Yeah. Paid and to-pay. Paid and to-pay. To-pay, okay. Yeah. 25% will be contract business? Yes. Okay. And also, one more thing. So, since the bus segment is going to be carved out into a new entity, so the management bandwidth will be divided between the two. So how, how are we planning to deal on with, the situation, if there is any? Yeah, even currently, see, that bus business is completely running as an independent, professional management. There is a technical team who are running independently, and apart from that, the operations person is from the inception of the bus segment. Actually, he's leading that business, and that person is going to continue as head of this operation. And about the management role, yes, yes, especially on the policy matters, they definitely, currently, their involvement is there. Even with this company, they, since that segment is running. And going forward also, whatever policy level decisions or policy, policy level participations are required, definitely there will be, you know, involvement. But on a day-to-day operations level, there is an independent team who are going to handle it. Currently, that's how the structure is, and even going forward, that's how the structure is going to continue. Okay. Okay, thank you. That's all from my side. Thank you. Thank you. We have the next question from the line of Suraj Nawandhar from Sampada Investments. Please go ahead. Hi, sir, good morning. So what is the timeline to receive your 1600 trucks that we have placed an order with Tata and Ashok Leyland? Sir, can you repeat your question, please? Sir, we have placed two to three quarters ago, we had placed a big order with Ashok Leyland and Tata Motors, around 1,400 or 1,600 trucks, if I may recall. So what is the timeline to receive all those trucks? And when [audio distortion] Sorry? Sorry. Sorry, come again, please. Yeah. So as we informed earlier, this order is going to complete by September 2023, and we are on a track. Okay, okay. By September 2023, all these vehicles will be purchased. Okay. So, is it going to be, statewide delivery, like, every month they are going to give us 50 or 100 trucks or anything? Like, they're going to give us everything at one go. No, no, no. See, see, currently in the quarter one, quarter two, we added, you know, substantially good numbers, almost around, 600, around 600 vehicles in the first half year. This, kind of calculation is going to continue. See, another 600 vehicles are going to be added in next half year. So by that time, around 1,200 vehicles will be added, and another 400 vehicles will remain. That will be added by September 2023. So, sir, can we expect these, well, higher charges to go down substantially in next six to eight months, once we really receive the delivery of all the trucks? Since we are going, on a volume side also, the substantial reduction will not be there, but at least there is a reduction of around 2%-3% on the overall kilometers. Okay. Sir, if I heard you correctly, textile contributes the largest percentage share in volume till today, right? Yeah. It's around 18%-19% of the volumes are coming from textile. So how do you believe a slowdown in textile is affecting us? You know, we are seeing already bad results and low demand from many companies. So how is it affecting us? No, earlier, if you see, the textile is, was contributed, around 14%-15% to the volumes. Now that the contribution is increased to around 18%-19%. The reason is, earlier, as we mentioned, we were not having a proper infrastructure facility at Surat, and we were not having proper branch network in the untapped market. Now, what we have done is from the last, two years, except this COVID, impact, we are having a proper infrastructure at Surat, so that we can book, the cloth material from Surat to across India. Earlier, we used to do only from Surat to South predominantly. Now that has been expanded from Surat to South, Surat to East, even Surat to North. That's how the contribution from the overall textile is going, is increasing. We are not depending on a few customers who are there, which is going to impact on our total volumes. We are depending on the total market, and there are a lot of new customers have been added in this segment. Sir, have you put any number, like an upper cap, like let's say 25% of our volumes, let's say textile is 25% of the volumes, we will stop taking any more volumes from textile because they are, they are dependent on the one sector will increase. So have you put any cap on any particular sector? No, we do not have any cap or any minimum requirement of each segment. See, when it goes to our branches, we handle all kind of commodities. Okay, okay. Textiles and liquid products, we are handling all commodities. That's why we are not depending on any sector, and if you see the next sector, we contribute, contribution, the maximum it is in the range of around 58%. That's how it is widely spread. We are not depending on any customer, we are not depending on any particular product. So our volumes are spread across the industry and spread across the customers. Even in slowdown on some of the products are not going to impact on our overall volumes. Mm-hmm. All right. Thank you, sir. Thank you very much, and all the best. Thank you. Thank you. We have the next question from the line of Krupas hankar NJ from Spark Capital Advisors. Please go ahead. Good morning, and thank you for the opportunity. I had a question relating to your branch addition. If I'm not mistaken, you said you had 13-15 branches added per quarter. So are you seeing that these branches will get added more in geographies where you are weaker? Because typically, like, for example, last year, you added around 40% of your new branches came in the northern and the eastern region. So is there a focus on expanding more branch interval there, or is it going to be again focused on south and west, where we are relatively stronger? No, more focus is on Eastern and Northeast, North market and even the Northeast market. So most of our new branches will be added in those areas. See, South and the Western part, wherever the requirement is there, only in those locations we are going to add a branch. But the expansion model, what we are talking, is that is only in the Eastern, North, and Northeastern geography. Understood. So, the point you were stating earlier that around 100 tons per month is required for breakeven is achieved even in these geographies of North and East. Is my understanding correct? Yes. This 100 tons per month requirement is for each and every new branch, irrespective of the geography. What I meant was, that it's taking over two to three months to breakeven. Is that the case with new branches opened in North and East as well right now? Yes. Or is it... Where we are opening, these branches are taking around two to three months to reach 100 tons, and by that time it will reach breakeven. Whatever expenditure incurred over one or two months, definitely it is burden on the P&L. Got you. Profitability contribution and growth in the turnover will be more realized after one and half years. That time, actually, the real contribution from these branches, the profitability contribution will be emerged. Got it, sir. And the related question is this: so what I can see in the balance sheet is that the lease liability proportionally has gone up quite substantially. That's primarily only because of branch addition, or is there any hubs also which we have renewed lease at a relatively higher cost, which is translating to this higher lease liability? No, along with the branch expansion, we said that even space expansion is required in some of the key transshipment hubs. So that's how actually we carried out in the last six months. And for all these, actually, we have entered into new lease agreements. So because of that, the lease liability has increased. How many hubs have you changed this way? Yeah, in around 10-12 locations in the major areas we have changed. But even at a small scale, like you see, almost around just 29%. And the major changes happened in around 50-60 locations in the first half year. Understood. Understood. Thank you very much. In some of the places like Pune, Ahmedabad, Raipur, Salem, Chennai, Kanpur, Delhi, Kolkata, Pune, Patna, Guwahati, Siliguri, Cuttack. In all these actually places we have enhanced our space, and a lot of volumes are coming in those areas. And one more thing which I want to mention about space expansion, always we will have a, you know, vision that, even after, three, four years, there should not be change in the space. If there is a requirement of 57 sq ft, we initially go for a 100,000 sq ft. If requirement is 100,000 sq ft, then we go for around 100,157 sq ft. We always keep a vision that in the next four to five years also, the space should not be changed. Because of that reason, initially the utilization rate is around 50%-60%. Gradually, the utilization may increase around 70%-80%. Because of this reason also, there will be some burden of expenses in the P&L. Understood. Understood, sir. So all this benefit of operating leverage would be reflected after a year or two, when things scale up substantially. Yeah. Year, year and half year, then definitely the clear visibility to come and definitely the margin expansion is possible. Thank you, sir. Thanks for your explanation, and best wishes. Thank you. We have the next question from the line of Alok Deshpande from Edelweiss Securities. Please go ahead. Hi, good morning, Sunil, sir. Alok Deshpande this side. So, you mentioned about the timeline of this new fleet addition that is going to come. You added about 500 so far in H1, another 500-600 in the next, the second half of this year. So as this addition happens, do you see a possibility till, you know, till you have sort of settled down with all these new additions, that there can be some case of underutilization of capacity while until probably the second half of next year? Or do you think that utilizations are up and running even for some of these new additions? See, the vehicle addition is always based on our requirement. From the date of registration itself, these are, these vehicles are going to be utilized.... So to that extent, the depending on the outside vehicle will come down and, there, there will be utilization of the old vehicles. See, so all the insulation will be maintained even for the new vehicles. So, second question on the sale of the bus operation business. Now, given or assuming this will be completed this quarter, so, should one assume that starting Q4 of this year, that segment will not reflect in your book of accounts, or will that be next year? Yeah. Once this transaction is completed, and from those numbers will not be there. It will be a discontinued business. Understood. Thanks, thanks, thanks, Sunil, sir, and all the best. And similarly, if you see the wind power project now, so this project has been, the effective date was around August 1st. The August and September revenue and profitability have not been accounted in the current quarter. The same similar numbers will appear in the next quarter now, the Q4. Sure, sir. Understood. Thank you so much. Thank you. Thank you. We have our next follow-up question from the line of Dhaval Shah from Girik Capital. Please go ahead. Yeah. Hi, Sunil, sir. Now, given we are expanding so aggressively, will there be, you know, higher increase in the employee cost, you know, in terms of more incentives, you need more manpower, you know, we are also expanding the, you know, might be recruiting more senior people, because the expansion is happening at the rate that we have not seen in the past. So will there be a substantial change in the employee count, the kind of employee we have, the employee mix? Yeah. Again, when we increase the number of branches, then definitely the number of employees are going to be increased. Yeah. We do, you know, a lot of this promotion, we are doing internal promotion to the people, giving promotion to the people who are going to handle these new geographies. See, we are sending some of the expert people who are already in the company, who are very loyal to the company, to these new geographies with all these promotions. To that extent, definitely the absolute amount of the salary is going to increase. But since the volume growth are, you know, better than at a, you know, growing at around 14%, 15%, even 20%, the percentage of salary or employee cost, percentage to the revenue will come down. But in absolute terms, yes, definitely there is some incremental cost into that. Yeah. So employee cost has been around, say, I mean, if you just, this run rate of the current quarter will be INR 430 crore-INR 440 crore, like 430 around. Now, this absolute number will grow at what rate, over the next three-year period? Now, if you see the, you know, first quarter. One second. You were INR 106 crore in first quarter, second quarter, 111. Yeah. So it was around INR 106 crores. Now, in second quarter, it is similar, you know, some around INR 4 crores-INR 5 crores incremental cost will be there every quarter. quarter, INR 4 crore-INR 5 crore. Okay. So for the next two years, every quarter on quarter, you will see INR 4 crore-INR 5 crore additional employee cost, is what you mean? Yes. In the normal scenario, unless we do the incremental at a board level to all employees. But an increment will come, right? Increment is a part of- See, it is not an immediate thought process, because we have already did it in 322. Okay. It is not an immediate thought process. But till that time, definitely around INR 4 crore-INR 5 crore on every quarter, it is going to increase. Because one is, the new branches will be there. We are appointing the new people- Yeah. We need a lot of new supportive staff also. Yeah. A lot of these internal increments to the people who are shifting to the new geographies. Correct. All these expenses are continuous expenses we are doing. And, the more focus is only to establish these branches and stabilize these branches and increase the volume. That is what the strategy is. Got you, got you. And this unallocable income and expense, how will that be after the sale of the bus transaction? There will not be any unallocable. That entire expenses will be treated as only Goods Transport segment expenses. Moreover, some of the expenses are going to shift to even bus operations. So on a net basis, these unallocable around INR 4 crore-INR 5 crore expenses are going to be treated as GT segment expenses. Okay. So out of the expenses reported in the second quarter, INR 4 crore-INR 5 crore will be, will become part of the GT segment? Yes. Okay, and the rest will go off? Rest will go off. Okay. Even we have to adjust unallocable expenses, unallocable revenue also, right? Yes. So revenue, how will that be? Means after adjusting all revenue and expenses, around INR 4 crore-INR 5 crore additional expenses will be there, unallocable expenses. That will be treated as the GT expenses. Okay, net, net figure. Okay, okay. Yeah. Okay, and how much is the gross debt right now on books and cash? The cash is around INR 11 crore-INR 12 crores. Okay. And gross debt? That will continue as it is. Okay, so net is 169. Okay. Okay, okay. Okay, so by March 31st, given that if the transaction happens as expected, there'll be, there will be net cash come. There will be, the debt will be zero? Yeah, we are expecting that. We have to, we have to see the CapEx also. Anyway, the internal accruals we are going to support for this. Okay. This fund is completely utilized for the repayment of debt. Again, there will be savings on the interest. Yeah. Then how much- More stronger, and even on a leverage side, the company will become debt-free company. Yes. So how about the CapEx is due for Q2, Q3, sorry, Q3, Q4 of this year? Yeah, around average around INR 30 crore-INR 85 crore CapEx will be there. That's how it is even there in the Q1 and Q2. That will continue. And, substantially, it is for the vehicle addition, the goods transportation vehicle addition. Okay, and the same figure, same INR 160 crore-INR 170 crore will be spending next year, FY 2023? Yeah, next half year. Sorry? Next half year, because INR 170 crore has been already invested in first half year now. Ah! Okay, and INR 80 crore in- Further investment in next six months, till March 2023. Yeah. And again, further, there is a similar investment till September 2023, on a half yearly basis. Mr. Shah? Post that, again, we analyze how the requirement of the vehicles and all. Again, we will derive our CapEx plan. Mr. Shah, as the line of current participant has been disconnected, we move on to the next participant. The question is from the line of Srinidhi from HSBC. This is a follow-up question. Please go ahead. Yeah, hi. Thank you for the follow-up. So just wondering, is the growth from corporate client is higher than your overall growth for last two quarters? And is the profitability in corporate clients significantly lower than your overall profitability? The proportionate growth will be there. So the contribution will be there in the around 20%-25%, even going forward. See, wherever we are entering into India rupee and even products what we have I have mentioned, these are all, the Paid and To-Pay customers. Okay. And how is profitability in corporate customer lower than your overall profitability? It is, again, similar profitability, because the corporate client is a assured business, and we can plan it properly. And moreover, some of the diesel escalation clauses are there in the corporate client agreement. So price are continuously revising in the corporate client, but that is not the case in Paid and To-Pay customers. Okay. On our overall basis, even margin side, it will be similar margin in accounts customer as well as Paid and To-Pay. Understood, sir. Thank you for answering my questions. Thank you. Thank you. Anyone who wishes to ask a question may please press star and one now. The next question is from the line of Alok Deora from Motilal Oswal Financial Services. Please go ahead, sir. Yes, sir. So most questions have been answered. Just want to understand, so as this CapEx progress, what's the... How much would be the lorry hire percentage now going forward as a percentage of the total requirement? Because the CapEx we have done in one niche also, and now, you know, it's progressing at INR 85 crore per quarter. So this- Yeah, around 6%-7% per kilometers we have to do with outside vehicle. The reason is, in some of the routes, there not be return load, and some of the local, from hub to spoke, actually, we are engaging the hire vehicles. Mm. Those scenarios will continue. Okay. Overall, that is stated in the range of around 6%-7% of the total kilometers from the outside vehicles. Okay. There will be sudden demand in on account of some of the festivals and all. To meet that one-sided demand, actually, we have to engage outside vehicles only. Sure. Mm. Yeah. Okay. Yeah, I think, that's all from my side. Thank you. Sir, we do not have anybody in the queue. Yeah. Just I wish to again give a closing comment. The management is highly focusing on the Goods Transport segment, and there is a lot of expansion in this segment going forward. Our focus is on more on a volume growth. And once volume growth are happening at an expected level, definitely we can maintain EBITDA margins. And currently, our expected, you know, EBITDA margin is around 16% or so, and this may improve around 50 basis points or 1 - 100 basis points in the next quarter on account of some of the key increase in the expenses and, quarter two, especially on the lorry charges or, even on the front of, non-recognition of some of the revenues and incurring of expenses on unrecognized revenues. So going forward, our focus will be more on the revenue and branch expansion and only on the Goods Transportation segment. Since we are having a proper infrastructure backup, we will not face any threat of, you know, scarcity of the vehicles or other parameters in the industry. Apart from that, since our customer base is widely spread, we are not depending on any product. Even the slowdown in the economy or recession, if we are expecting, definitely that is not going to impact directly on the company. So definitely, we are more focusing on the healthy growth, not with incur the losses and grow the business. We are growing healthy. That's what actually I want to give the closing remarks. Thank you. On behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.