VRL Logistics Limited (VRLLOG) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to VRL Logistics Q1FY27 Earnings Conference Call. 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 this conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Mukesh Saraf from Evendus Park. Thank you, and over to you, sir.

Thank you, Huda. Good morning, everyone. Mukesh Saraf here from Evendus Park. Appreciate everybody logging in to this one QF 527 on this call of VRL Logistics. From the management team, I am pleased to host Mr. Sunil Madhavadi, CFO of VRL Logistics. I will now hand over the call to Mr. Nagawadi for his opening remarks, post which we will take the clear.

Over to you, sir. Thank you, Mr. Mukesh. Good morning to all participants. I am Sunil Nalwadi, CFO of VRN Logistics. I welcome all of you once again for the early conference call for the quarter one of financial year 2017. On the outset, I would like to inform you that we have completed 50 years of service in the logistic industry. Our promoter, Dr. Vijay Sankeshwar, started this company in the year 1976 with self-driven single vehicle with one roof. Today, the company is operating with 6,000-owned vehicles along with the hired vehicles as well. Today, the operations of the company spread across 23 states and 5 Indian territories with around 1,300 branch network. We cater to all the commodity segments with 10 lakh plus customers based. Our vehicles are traveling around 11 lakh kilometers on a daily basis to deliver around 12,000 tons of commodities across the nuke and corner of the country. Further, growth of the company was accelerated after Sri Anand Sankesh was joined as managing director. Along with the rich experience and expertise of the promoters, there is an immense contribution from the team VRL, including the experienced staff, drivers, loading, unloading staff, etc. We are very much thankful to all the shareholders who have supported us, and also to the many individual institutions who supported us either directly or indirectly during this journey. I hope everyone has had an opportunity to review our press release and the earning presentation, which has been circulated through the exchanges. To highlight about the financial performance of the company, this financial year started with a new benchmark in performance. With a historic start, by achieving the highest ever profit for the quarter, approximately 81 crores. For our business, the current quarter was a very challenging period on account of risk posed by the current geopolitical developments and potential thereof to cause volatility in crude oil prices, which resulted into drastic increase in fuel rates and other input costs. The fuel is one of the major parts of operation for our business. And the cost is increased due to increase in the fuel rates and also due to losing the benefit of bulk purchase opportunity during the quarter. The effective decision-making and its implementation process of the company proven that the increase in cost has been passed on to the customers without any impact on the growth in volumes. On year-on-year basis, the revenue of this quarter is increased from 751 croes to 885 croes with a growth of around 18%. The growth in revenue is mainly on account of increasing freight rates across all the commodities and geographies, due to which the relation of freight per ton increased by 9% from 7,852 per ton to 8,546 per ton. The growth in revenue is also on account of growth in volumes by 90% from 9,35,000 metric tons to 10,19,000 metric tons. The growth in volumes is from enhancement in our branch network in goods and production business, and year-on-year basis, we added around one or eight branches, and we continued our initiative to increase the number of branches in current quarter also, and added around 16 new branches. Due to the enhancement in our branch network, we also gained with many new customers. We also recover the connects from the last customers who have discontinued with us earlier due to freight rate rationalization and discontinuation of some of the contracts due to low margins. Please note that the last customers are coming back to us with our current freight rate and the current applicable terms. We also gained volumes by addition of our new contractual customers during the quarter.

The appetite increased by around 22%.

From 158 crores to Rs. 193 crores, and percentage to revenue is increased by 71 basis points, from 21.1% to 21.8%. We successfully maintain the optimum level of EBITDA in the current quarter, despite the challenge on the increase in fuel costs. The fuel procurement cost per liter is increased from Rs. 83 to Rs. 94. However, we mitigated the risk by increasing the freight rates effectively with the growth in volumes. The volume growth with increase of freight rates has resulted into no increase in other costs as a percentage to the revenue, except some increase in vehicle running repair expenses due to increase in driver incentives and also some increase in vehicle higher charges. The improvement in EBITDA leads to increase in EBITDA and FAT margins in the current quarter. The part of the company is increased to 81 crores from Rs.50 crores and percentage to revenue is increased to 9% from 6.7%. On a sequential basis, we have seen further improvements in terms of revenue growth and improvements in margins. The revenues increased from 859 crores to 885 crores, and both growth in revenues contributed by increasing the freight relation per turn by almost 5%. And there is some conflict in volumes by 1.73% in the quarter due to seasonal demand moderation. The EBITDA margin is improved by 36 basis points. From 21.4% to 21.8%, mainly driven by increasing in the freight realization. Further, our business is a B2B less than truckload business with a customer base of 10 lakh plus customers covering with wide range of sectors. Our key strength is having the different mode of collections from customers and 85% of our less than truckload business is on paid and to pay basis, collecting the freight on spot from the customer immediately after the booking or completion of the service. Our receivable wage from the customer is hardly around 10 to 12 days and which is lowest in the industry. The higher cost is resulted in increasing cash flows from operations. The cash flow of the company has been effectively utilized for the purpose of capital expenditure to the tune of 76 crores in the current quarter, mainly for the purpose of addition of commercial vehicles of Rs. 18 crores, and Rs. 49 crores is utilized for the purchase of land and building facilities in the critical locations of our operations. The remaining surplus cash flow resulted into reduction in net debt from 440 crore as of 31 March to 391 crore as of quarter-end. Considering the substantial improvement in the profits and the free cash flows of the company, the board had approved the buyback of shares by the company to the tune of Rs. 280 crore with a per share value of Rs. 320, which is much higher than the current market price. The promoters of the company are not participating in this buyback, and this buyback process is subject to the shareholder's approval. The fleet rationalization continues, with older vehicles being scrapped and utilization of home that is improving. Around 79% of our fleet is debt-free, and 13% is fully depreciated, providing strong operating leverage. Our strategic priorities remain unchanged, profitable volume growth, disciplined cost management, and healthy working capital control. Looking ahead, while near-term macro uncertainties persist, we remain optimistic, improving demand conditions, stronger market initiatives, fleet rationalization, and expansion in under-preceded geographies position, which position us well to drive gradual volume recovery while sustaining the productivity. With this, I would like to conclude initial remarks. Now, I request to the participants to open for personal answers. Thank you.

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 desktop telephone. 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. The first question is on the line of Alok Teora from Mootilal Oswal. Please proceed.

Hi, Sakho. Good morning, and congratulations on really good numbers. Sir, I just had a couple of questions. First is, how much price hike we have taken during the quarter? I mean, the blended realization comes to 9%, but in terms of, have we taken like a proper hike or it's been more tactical due to, or short-term in nature due to, you know, shortage or, you know, diesel costing? Because it's like we have taken a general price increase, what it is like called in the market. Have we taken that kind of price increase which will sustain or it's more of a short term in nature? First question is that. And second, on the volume also, I mean, you know, despite the, you know, low margin customers being out of the system, you know, volume growth trajectory has been very strong at around 9%. So just any thoughts on that, how that could shape up going ahead? Was it because of also a low base or whether this 9 to 10% should be the new normal?

First thing on the prior trade, just I want to give clarity that for Q1-26, our realization was around 7,852, and in Q4, we reached to around 8,147 per metric term. So during the year, just in the last financial year, there is an improvement in realization by around 4%. And from Q4 to Q1, last quarter to this quarter, there is an improvement of 5%. So, both put together, there is a 9% growth in the real estate. In the prior trade hike, what we carried out during the current quarter, is around 5%. Effectively, it has been increased in the real estate. When the crude oil price started increasing at the beginning of the year, in the month of April and or beginning of May, so by that time, actually, our bulk percent has been completely stopped. To pass on that additional cost, we did some rate increase during that time. And subsequently, when government increased the fuel rates, again, we carried out some increase in rates. So, effectively, all put together in a quarter, there is an increase of freight rates by around 5%. And this is a sustainable increase in freight rates. In some of the contractual customers, obviously it is related to the fuel price. Going forward, if any decline in the fuel rates, then obviously we have to reduce some of the rates, and effectively the reduction will be in the rate of around 2-3%, not beyond that.

And when it comes to, yeah,

so what you are basically saying is that the 8500 rupees per turn, that should kind of continue. So, so the growth rate of 9% will, will go down in terms of growth rate by end of this year to more like a 4-5%.

No, only when your price will reduce. Okay.

No, no. I mean, 8,100 is the fourth quarter. So, 8,100, we have taken around 4 to 5 percent, right? Okay. So, 8,500 should be the...

Assume that if there is no decline in the fuel price going forward, so, 8,546 will continue.

Okay, got it, got it, got it, yeah, sure.

And we are looking for further improvement in this 87546 in coming quarter. The reason is the increase in freight rates of what we did, these are all increased in the mid of the quarter.

Okay.

So on a full year quarter basis, if there is no fuel rate change in the next quarter, if there is no decline, then this 87546 will further improve in the quarter.

Okay. Like 1500 rupees or so?

Yes.

Okay. Got it. Got it. And please on the volume side, if you can indicate what actually happened.

On the volume side, see basically, one is, there are, we are opening the branches. See, we rated around 67% increase in volumes. We are expecting for a few years basis. But we performed around 9% growth in the volumes in the current world. The traditional 2-3 percent, again, actually, we gained out of the customers who have lost. We lost some of the customers, but we got an additional terminal. And also, we got the additional terminal from the new customers. But otherwise, based on our branch network response in law, our expectation was around 37 percent. That additional 2 percent is because of recovery from the lost customers, and as well as some of the gains from

the new customers.

So, for the full year basis, what should be the sustainable volume? Because we will also go in second half with a slightly higher base. So, the full year number should be more like 6-7% only?

No, full year basis, now the expectation will be around 8%.

8%, okay. Got it. Got it. Just last question, sir. What's the capex number estimated? Because now we are also...

Yeah, just I want to clarify on the funds requirement. Currently, we are doing the cash profit, the free cash flows in the company is at least around 120 to 130 crocs in a call date. So on a two-year basis, definitely receiving the range of around the 480 to 500 crocs. And out of this 500 crores, the capex will be around, say, 220 to 240 crores, roughly, in a full year basis.

And the remaining

amount will be replaced for this bypass. So, even if we do around 250 or 240 crores capex plus by price, because of our good cash flows, the debt level will not increase. The debt level will continue at the existing level actually. There are some time fluctuations, but at the end of the year, definitely it will reach again at the same level of debt what we are having today.

Got it. So, capex will be called the truck additions only.

Trust and some of the properties, which are in the pipeline.

Okay.

So, in the current quarter, we spent around 18 crores on the vehicles, and around 49 crores on the properties. So, on the properties, we may invest around 150 to 160 crores, and on the vehicles, remaining around 100 crores.

Okay. So, when you say property, you mean the asset which you are currently may be renting out, the hubs and warehouse, that you will...

Yeah, mainly the sorting centers and in the presentation also we have given, out of the 50 transcripts what we are having today, almost around 12 to 13 hubs are converted into own hubs, the own property. So, we identified another 3-4 critical premises where actually we are going to invest.

Got it. Yeah, I think that's all, sir. Thank you, and all the best, sir. Thank you.

Thank you. A reminder to all participants, anyone who wishes to ask a question, may press star and 1 on their touch-toon telephone. I repeat, anyone who wishes to ask a question, may press star and 1 on their touch-toon telephone. The next question is from the line of Krupa Shankar from Aventus Park. Please proceed.

Good morning, sir, and thank you for the opportunity. Sir, congrats on great results. I just wanted to double-click on the volume growth. Now, you did mention that some of your customers have come back. Can you give us some sense around, you know, qualitative comments around what was the reason they came back and if you can further break up the volume growth, you know, if you want to do it probably by new customer versus old customer or region-wise growth, it will be very helpful with respect to, you know, to identify what are the key drivers for your overall growth.

Yeah.

Now, see the year-on-year percentage, just about new customers' addition. Some of the customers we lost also, but overall about new customer addition is almost around 20%. That is the additional tonnage. And we lost around some 16-17% of the tonnage because of some of the lost customers. But there is an improvement in the existing customer by almost 6%. The difference is, out of the 9%, see, around 6% contribution from the existing customers, and around 3% is on the front of new customers, the net of the new customers. It may be because of a brand tradition, it may be because of increasing geography, so many reasons. That's one.

And the second thing about geography, please. See, most again, south is contributing the major tonnage in our case.

And south on a year-on-year basis, we've grown by around 5%, which is contributing almost around 42% to the tonnage. It has been grown by around 5%. The west region, which is contributing around 25% to the total tonnage, which has grown by around 15%. The north is contributing around 21%, grown by around 10%. And remaining is around 10% of... Contribution, which has grown almost around 22 to 25 percent, especially the eastern and northeastern sectors, where actually we focus more on new branches and all, and also base is small as of today. There is overall the 10 percent contribution, which is growing at almost around 25 percent. So, all put together, the overall growth is around 9 percent.

So, given that growth is coming in more from the Neo Geography, has there been also an increase with respect to the leads or distance between the two destinations? Because the overall realization increase, if there is any increase because of NTKM going up, some color on that also.

Yeah, definitely. Because of this Neo Geography in which we are opening, especially in the Eastern and Northeast sectors, Obviously, the lead distance will increase, and that will impact on even the realization improvement.

So, in the previous quarter, on a sequential basis, we have not seen any big change with respect to the NTKM or lead distance, visually distance.

No, the overall contributions of the new brand, it's not beyond around 2-3%. So, on a overall report, it will not be a, you know, major result of that. Thank you.

One question on the margin sort of things. You've seen that Karnataka has implemented the big amount of wage, and so was there any impact in the first quarter to that degree, and is there any impact on operations per se because of this?

No, I'm not clear about it.

Now, will you repeat your question, please?

So, so we heard that the minimum wage impact, especially which was likely to be impacted and implemented in Karnataka. Have you seen any impact in this quarter from that?

The rule has not had come. Actually, many in the trade environment, everyone has, you know, approached the call to hold that particular deal. So it has not effectively started it. But in our case, the impact will not be much. The reason is, we are already paying a good amount of salaries, more than minimum wages to the employees. Understood. Only thing, some statutory contribution percentage may increase, but overall, the salary structure or the impact on the salary will not be much.

Got it, sir. Got it. And with respect to inflationary increase on other aspects, of course, fuel cost is one big impact. Any other cost items wherein there is a one-off element or something which you witnessed in the first quarter?

No, no such cost. Basically, there are two additional costs which have increased. One is the vehicle running cost. It has increased on account of the driver incentive always we keep on, you know, paying good amount of incentive to the drivers, to see that the utilization levels are up to the mark, and because the number of vehicles, number of vehicles have been reduced, you know, most of the vehicles have been scrapped in the last year as well as in this quarter. Compared to increasing tonnage versus water capacity is available with us. So, we all felt some shortage in capacity. And because of that, we engage outside waking. So, there is increasing laurier charge as well. Got it. Apart, there are no major issues.

Yeah, there are no major issues. Thank you very much for answering. I'll get back to the question. Thank you.

The next question is from the line of Jainam Shah from Aquarius Securities. Please proceed with your question.

Yeah, sir. Thanks for the question. The question is more on the long-term piece. What we see in the VRL logistics is that earlier, let's say one or two years back, we were merely a volume-led company rather than a property-led or let's say value-led company. Eventually, we have changed our stance and we have started increasing our price. We have started charging for some services which we were not charging. We have started passing on all the cost increases and that has impacted our volume. But now, even at this higher prices, our volumes are largely back. The question would be, let's say, for next 5 to 7 years timeline, how do we see our strategy? Like, will we value-led or will we be balancing both of this or our focus will be on the profitability? And probably at one, I'm sure you believe that this price hike might stop and will not be able to, let's say, grow the volume because of the price hikes. And if, let's say, our strategy is this, what kind of margins that we will eventually target in this particular environment? Because our assessment was that this quarter might be impacted because of the higher fuel costs, and of course, the bulk procurement has already increased before the retail pricing, despite that the numbers were really great. So how do we see next price spending out in terms of pricing and the volume, and what eventually led to the increase in the confidence regarding the price increase, which is eventually leading to this kind of consistent profitability growth?

So, basically, on the freight rates are concerned, freight rates, rationalization, and withdrawal of low-margin business, all these exercises we completed in the last year, actually. But whatever, you know, the relations are improved in the current quarter, this is mainly on account of increasing the fuel rate. So, because of that, we pass it on to the customers, and the customers' acceptance levels is very high. And it's all because of, you know, the good service that we are providing to the customers. And second thing on the volume side, yes, we are carrying, you know, a lot of activities, basically, the opening of the branches. Just around two years back, our number of branches were hardly around 900, 3950 branches. Now, we almost reached around 1,300 branches. So, basically, we are expanding on the geography side. And we'll... Today, every new branch, actually, the break-even period is very low. Earlier, it used to take around nine months to one year. Now, in five to six months, actually, the branches are reaching to the break-even. The only reason is these branches are connecting with the rest of the network what we are having in India. So, that's the reason if any branch opened, especially in Azharthal or somewhere in the Northeast or any remote places. All branches will support that branch either in terms of booking or delivery. That's the reason the network advantage actually it is carrying out and it is helping us to grow volumes further. And with respect to the strategy of the company is concerned, yes, we are going to increase our network further. That is giving us further confidence to increase in the volume. And that's the reason we are guiding. In last call, actually, I guided around 6 to 7% volume growth. But considering the present volume growth, what we are seeing, and on a full-year basis, we are expecting around 8%. So considering these activities, even for the next 3 to 4 years, we can expect the volume growth in the range of around 78%, based on the activities what we are carrying today. And about the frank increase is concerned, now all exercise, rectification, all activities have been done. The right relation, improvement, or any change will depend on change in the cost. So, accordingly, we will modify the rate and we will go ahead. So, because of these reasons, increasing volume of around the 57% going forward in the next 3-4 years, plus passing on the increasing cost to the customers, definitely will support us to maintain the existing operating profits at a capital level of around 20-21% is maintainable, even for next. Into four years.

Got it, sir. Got it. So, on the capex part, sometimes when we announce for a large truck acquisition and now we are doing limited truck acquisition and we are also doing some of the things on the third part trucks. So, how do we see existing capacity can, you can say, manage the volumes? Like, let's say, 10% increase in the volume from here on, our existing capacity can be managed those things or any broad number that you can say, we are utilizing 100% of the truck. So, let's say whatever additional volume we would be taking, we would be requiring the truck capex. How do we see that particular thing pending on? This is from the view, point of view of the capex part as well as along with the capacity utilization part.

Now, the existing capacity is fully, we are utilizing at an optimum level. Now, whatever new quantity we are expecting, the growth in the finish, definitely we have to add a capacity. So, that much of additional capex needs to be incurred. Otherwise, we have to engage the outside needs.

From the next three years perspective, of course, our volume growth will be similar to, let's say, our capex growth will be similar to our volume growth, but apart from that, the tucking apex, are we looking at any larger capex, like buying out anything very large, which we have done in the FI26, something similar to that, or will it be just a normal capex going forward and will be generating good, you can say, free cash flow for the upcoming years?

See, as I said about the capex, around 200-240 crores every year capex will be there. It is a mix of vehicles and the property. The vehicle will be around 120-140 crores and remaining will be some adding up some property.

Thank you. Thank you.

The next question is from the line of Nitin Jain from Fair Value Equity. Please proceed.

Yeah, thank you for the opportunity. My first question is, why are we utilizing our cash to speak for a buyback and not for further debt repayment, which might, you know, reduce our interest costs and further help the bottom line? And my second question is, what part of our business is contributed by a large issue?

Mr. Zeyer, sorry to interrupt, but there's a lot of disturbance from your line. Can you please check?

Yeah. Is it better now?

Yeah, continue.

Yeah. Yeah. So what part of the business is contributed by large e-commerce players, and what is the outlook for this business for the rest of the world? Thank you. That's all from now.

See, about buyback of shares, see, every year we are paying rewarding to the shareholders, basically in terms of dividends, and historically also we did around three times we did a buyback activity as well. Now, considering the reward to the shareholders, instead of dividend, what we were paying, see, last year we paid almost around $1.75 per dividend. The cash outflow to the shareholders in the last year. Now, instead of that, actually, we are doing buybacks in this year. That's one. And the debt level, it's a very nominal debt level what we are having today. It's hardly around 3 times of the debt equity ratio. So, this kind of a debt level has to be continued concerning the growth and other aspects of the company. And as I said about the free capital and other things, even if we do buyback and capital expenditures, the near-end debt, what we are forcing will not be increased from the current level. And on the e-commerce side, we do not have any e-commerce business. There are some, you know, materials which are going to e-commerce channel might be moving through us, but we ourselves are not doing any e-commerce activity.

Thank you.

Nope.

Thank you. The next question is from the line of Devaraj, an individual investor. Please proceed. Mr. Devaraj, are you there? You properly, Mr. Devaraj?

Hello.

Yes.

Good morning, sir.

Just want to know that as 280 crore buyback, right? So, sir, how does bank balance with respect to 31st March balance sheet? How we will arrive at 280 crore? We will reach that amount by October 30.

Yeah, based on the, you know, further shareholder approval,

then once we decide on that particular day, that amount will be far separately for the buyback activity.

Okay, okay. So in future three months, it will be far, right? Something like that.

Yeah, so already there is some surplus amount which is available in the company, and subsequently whatever internal accruals become, that has, that will be remarked separately for the buyback funding.

Okay, noted, sir. Thank you. Sir, one more question. Sir, you know, DFC is coming up, right, and Western DFC and EDFC. So, sir, can this be an headwind or it will be complementary to our LCL business in future?

Yes, currently, our collaboration with Railway is not much as of today, but considering we are continuously interacting with the Ministry of Railway, and even they are calling for a meeting of all transportors across India. Now, we already completed around four to five meetings with them, in any opportunity. Basically, what they are proposing in their existing network or existing infrastructure, they wish to provide some of the earmarked locations to the transporters. Say, for example, they have already started from, say, Surat to Jharkhand someplace. They have created a facility. So, they want to supply all this textile material, what this Surat material they are moving. It has to be through rail. So, even we are continuously interacting with them, and if it is a beneficial to us, definitely we used to engage with them along with our activities or along with our time position. But at the end of the day, it should be cost effective, and it should be beneficial to the customers also.

Okay. So, basically, our truck can fly on the Indian railway network, and then it will be complementary, something like that, if something works out in future, something like that.

No, what the hub and spoke, what we are talking about. The hub facility, actually, they want to facilitate in their premises.

So that whatever the local hub to spoke,

the transporter will provide the service, but hub to hub, the railway will handle the commodity.

Okay, okay. And, sir, one, sir, just the lease payment, right, in our cash flow statement. So, that is, we pay that amount to the lesser, that amount, and we get the trucks, right? Something like that?

No, no, it is on the premises where we are operating. See, we are having the 1,300 branches. See, out of 1,300, around 40, 50 locations, we are having our own premises. But all the rest of the premises we are operating through, operating through lease premises. The rental payment, what we are making, you know, payment to the letters, based on that, the lease liability has been created in the books.

Okay, okay.

That is in compliance with Indian Accounting Center 116.

Okay, okay. So, basically, majority, it's a rental for the premises, right, or a shipment of whatever in the lease. Okay, okay. Thank you, sir, and thank you for the buyback. Thank you.

Thank you. The next question is in the line of Shivaji Mehta, an individual investor. Please proceed with your question. Mr. Mehta, are you there?

I am audible.

Yes. Yes, please.

Thank you for the opportunity. So on the previous participant's question, you had mentioned that with the DFC, the hub-to-hub will be handled mostly by the railways, and from the hub to the customer location is where the road transporters will be handling that part of the volume. So just try to understand, will this impact our margins in any way? Because the lead distances which we were doing earlier, that will reduce over time. And so that can have a negative effect not only on our total volumes, but also on margins. Is that tweeting correct?

No, it is incorrect. The reason is that we are accepting goods from the customer from booking point to delivery point, end point. The arrangement with railroads and other things, it is our internal arrangement for the movement of the goods, but nothing to do with the customer.

Sir, also on the...

Currently, what DST is handling, it is all the big fright they are handling. Say, like, moment of iron or something like that, which is not relevant as of today. But what the railway is proposing, actually, they want to, you know, integrate Indian road network with railways. And these are very, very, very initial stage as of today. Yes, they are doing on a sample basis in some road. But if it is beneficial, even we are fine with it. We wish to work with railways if it is beneficial, both to the transporter as well as to the customer.

Got it. And just to follow up on this, suppose we do a Roro service, which is roll-on, roll-off with the railways. Does that impact our volume? Will that be a deflationary impact on the revenue? Because you'll have to pass on some of the benefits. In terms of vehicle running costs, etc. So, if we, in the future, you know, do a roll-on, roll-off service with the Indian railways, will that impact revenues? Just your thoughts on the scene.

No, see, it will not be much impact. The reason is, again, the cost will be more or less in a similar way, but only what advantage will be there? It will be a dedicated route or something like that. So, that may bring some kind of... Or, you know, turnaround time improvement, something like that. And ultimately, there are a lot of inflations which are acting. It's just like the fuel price and other costs, even the rental costs, labor costs, everything is increasing. So, impact of these efficiencies and all will not be much more higher.

Makes sense. So, also, you said you'll stop bulk purchases of fuel from the fuel pump directly. Just what was the reason for the same and going ahead, will we benefit from the same?

Yes. The bulk purchase is directly related to the crude oil price. It has nothing to do with the government's price, what they are supplying to announcing the consumer's price. So, bulk purchase is directly linked with the crude oil, and whenever the crude oil price changes, accordingly the bulk price will change. Now, currently, say, for example, the normal diesel is available at around 95 rupees in one location. The bulk purchase price is at least around 15 rupees more than the normal price. In this scenario, we cannot buy the bulk purchase or buying from the refinery. Now what it is happening, the government is subsidizing the difference amount and supplying to the consumers.

Okay, got it.

When crude oil price comes down, at that moment, again, this bulk purchase will come down. If at least around 2 to 3 rupees later than the consumer's price, definitely, again, we start consuming the bulk, you know, consumption from the refineries.

Makes sense. So, also, on the Gulf War, whenever that comes to an end and the oil prices fall back to the normal levels, What kind of a price realization cut will we have to take, assuming a normal scenario?

See, I assume that now the government has increased almost around 8 to 9 rupees in fuel price, right, in this situation. Now, because of that, our increase is around 4%. Now, tomorrow, assume that there is a decrease of 4 rupees in fuel price.

Then, obviously, there will be impact of around 2% in the pricing.

Got it. Makes sense. Also, one last question. Volume growth that you mentioned of 9%, is that continuing into Q2? Are you seeing that continuing or is there some happening?

In July, we already performed around 10% growth in the finish, and we are expecting similar growth, at least around on a full quarter basis, 9% growth is possible.

Well, that's very nice. Just one last question, if I may ask. The FCF that you had mentioned is about, sorry, OCF is around 500 to 600 crores. And since the majority of your branch expansions are done and also vehicles have made, a lot of vehicles have already been added. So just kind of understand, will buybacks be more consistent going ahead? Or are we planning some major capex down the line that, you know, you may have to put in some for that? So just your thoughts are the same.

No, but the reward for the shareholder will continue. Every year, either in a way of buyback or dividend.

Got it. Thank you. I'm wishing you all the very best.

Thank you.

Thank you. The next question is from the line of Demel Hemal Shah, an individual investor. Please proceed.

Good morning. Thanks for the opportunity. Sir, I wanted to understand that the road transport is mixed up, maybe unorganized and the organized sector. Now, looking at the industry that we cater to, what would be the mix of unorganized and unorganized layers in the industry?

So, even today, the area where we are operating, at least around 70% of the contribution is coming from unorganized operators. So, around 30% of the industry is from the organized place.

Okay, got it. And so do we see any kind of concentration in the coming years wherein we could see some kind of mergers or takeovers with the companies having a good lease as well like us?

No, we do not have any such plans. Basically, our operating system, the kind of business, how we develop is totally different. From the operators in India. So that's the reason we are going more aggressively on the branch expansion and georophagy expansion rather than looking for any acquisition. We do not have good opportunities which will match with our business operations. We did that exercise, but unfortunately, the matching is very difficult.

Okay, so that gives a good sense. And so now concluding from what I can figure out is now since we won't go for enough in our economic growth in the coming year, the last part of capital structuring would be rewarding the shareholders one, and secondly, doing our grant in place in places where we aren't much penetrated into. Yes. Also, the cloud that, as you mentioned, contributes around 40-42%. So, do we see more headroom in there? I mean, are we present all over the region or we still have a lot of headroom?

Yes, we started our business from south, so that obviously we are having more contribution from south because we have already established brand in the other market. Now we wish to replicate the similar model in the rest of the regions. So in the western part, we established growth. It is almost now contributing 25%. Now it's also some good contribution.

But still, we need to achieve a lot in these regions.

Like South, whatever we did, we wish to replicate in the rest of the regions, we hope it.

Oh, okay, that's good. And last question for you to extend this, but this agricultural industry aggregator is also a good contributor to our revenues and the volumes. So the recent impact on all that, we are seeing more of the... You see, uncertainty is in the rainfall. So, is that impacting the volumes in that industry and being set off by some other, or we are seeing a normal growth in there?

See, the agricultural sector is contributing around 10 to 11% of the total volumes, which includes everything. See, fertilizers, the agro-equipment, all put together. And currently, there are no much impact, but considering the lower monsoon, it may little bit impact in the coming quarter. Since that's the reason, even though the 9% have been grown in the tonnage, on a full year basis, we are expecting all put together, all sector put together, we are expecting around 8% growth in tonnage.

Okay, so that gives a lot of sense. Thank you very much, and all the best for the future. Thank you.

Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments. Over to you, sir.

Yeah, once again, thanks to all participants. Really, there was good interaction, and definitely, there is a very clear visibility on the volume growth. On a full year basis, we are expecting around 8% of all improved. And the realization, we have already did good work. And these realization, there will be further improvement in the coming quarter because in between we did. So all put together, we will definitely have a good revenue growth in the coming quarters with the maintenance of existing productivity margins. With this, I wish to conclude this call. Thank you.

Thank you. On behalf of Avena Spark that concludes this conference, thank you for joining us and you may now disconnect your lines. Thank you.