Mahindra Logistics shifts strategy, focuses on enhancing profitability

Mahindra Logistics which was driving growth through acquisition has decided to temporarily halt this strategy for the next 12 months, after the investments made in inorganic expansion over the past three years affected the company’s profitability.

The company’s yearly profits fell 21% to Rs 27.42 crore in FY23 from Rs 34.57 crore in FY22, while net revenues shot up 25.6 per cent to Rs 5,128.29 crore, as against Rs 4,083.03 crore a year before.

Now the company will focus on enhancing profitability, MD and CEO of Mahindra Logistics, Rampraveen Swaminathan said adding that “In recent years, we made three acquisitions in line with transforming 3PL; we want to build our cross-border express, last mile, and reinvent and reimagine mobility. For now, our decks are set, and we will scale them, sweat them out; therefore, there is no intent or outbound interest in further acquisitions in the near- to short-term, or near to mid-term. “

So far, the company has spent close to Rs 347.4 crore in acquiring the businesses, and is planning to scale it up in the coming 12 months.

The end-to-end third party logistics (3PL) solution provider has completed the acquisitions of  60 per cent stake in ZipZap Logistics Pvt Ltd, a last-mile logistics service provider, for about Rs 72 crore; a 100 per cent stake in the B2B express business of Rivigo Services, a logistics firm, for Rs 225 crore; and a 100 per cent equity capital acquisition of Meru Cabs, a ride-sharing company, from its parent Mahindra & Mahindra (M&M). The all-cash deal size is Rs 50.4 crore.

Although the company will not be exploring any inorganic deals, it has announced that it will look into any interesting opportunity that comes up.

On the revenue front, the logistics player is confident of clocking a turnover of Rs 10,000 crore by FY26. “We saw growth coming from automotive and discrete manufacturing; however, the consumer and e-commerce businesses grew slightly slower as a result of the cyclic dip,” Swaminathan said.

Expansion across segments

 Currently, owning 19 million square feet of warehousing space across the country, Mahindra Logistics planning to expand its footprint. It is looking to add approximately 2 to 2.5 million square feet of warehousing space annually, and to develop around 30 million square feet by FY27, given that the existing level of growth is sustained.

On top of it, the company will also continue to expand its EV cargo fleet.

“Probably around 20 per cent of our last mile is EV, and another 10 to 15 per cent is CNG; we intend to have a 40 per cent electric fleet by 2026 i.e., we plan to have 3,000-4,000 EVs.”

Mahindra Logistics currently owns an electric cargo fleet of 1,300 EVs. The MD noted that once the company crosses the threshold of 2,000 EVs, it will explore a partner model.

In fact, the company has, in the recent past, introduced a four-wheeler offering, allowing it to carry more volume, and is now working to launch a two-wheeler offering soon.

“We are piloting a two-wheeler-based electric vehicle service. Our view is to provide two-wheeler, three-wheeler, and four-wheeler-based assets to optimise our services.”

For the next 4-5 years, Mahindra Logistics estimates its annual capex to be around 2 per cent of its topline. “We think our existing model doesn’t require more than our estimates.”

Along with its continuous investments in EVs and CNGs, Mahindra Logistics is also piloting LNG, and is in the process of looking at some hydrogen-based platforms for line haul.

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