Mahindra Logistics focuses on improving profitability

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

Annual profit fell 21 per cent to Rs.27.42 crore in FY23 from Rs.34.57 crore in FY22, while net sales rose 25.6 per cent to Rs.5,128.29 crore compared to Rs.4,083.03 crore last year .

“In recent years we have made three acquisitions as part of the transformation of 3PL; We want to build our cross-border express, the last mile, and reinvent and rethink mobility. Right now our decks are ready and we’re going to climb them, sweat them out; Therefore, there is neither an intention nor an outgoing interest in further acquisitions in the short to short term or in the short to medium term,” he said. The provider of end-to-end third-party logistics (3PL) solutions has spent nearly Rs.347.4 crore to acquire the companies and plans to scale up the business over the coming 12 months.

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

Although the company isn’t looking at inorganic deals, “we’ll look into it if an interesting opportunity arises,” he added.

On the revenue side, the logistics service provider is confident of reaching Rs.10,000 crore in revenue by FY26. “We saw growth from automotive and discrete manufacturing; However, the consumer and e-commerce businesses grew at a slightly slower pace due to the economic downturn.”

Cross-segment expansion

The company plans to add nearly 2 to 2.5 million square feet of warehouse space annually and develop about 30 million square feet by FY27, assuming existing levels of growth are maintained, he said. At present, the company has a warehouse area of ​​19 million square meters across the country.

In addition, the company will continue to expand its electric freight fleet. “Probably around 20 percent of our last mile is electric vehicles and another 10 to 15 percent is CNG. We aim to have a 40 percent electric fleet by 2026, meaning we plan to have 3,000 to 4,000 electric vehicles.”

Currently, the company’s electric cargo fleet includes 1,300 electric vehicles; As soon as the threshold of 2,000 electric vehicles is exceeded, the company will opt for a partner model, according to the managing director.

In fact, the company has recently introduced a four-wheel offering, allowing it to carry more volume, and is now working on introducing a two-wheel offering very soon.

“We are testing a two-wheeler-based electric vehicle service. Our goal is to provide two-wheel, three-wheel and four-wheel assets to optimize our services.”

Overall, the company estimates its annual capital expenditures for the next four to five years to be around 2 percent of its revenue. “We believe our existing model requires no more than our estimates.” While Mahindra Logistics continues to invest in electric vehicles and CNG, it is also testing LNG and is currently evaluating some hydrogen-based platforms for liner shipping.

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