MAHLOG - Mahindra Logistics Limited Share Price

Management's outlook for Mahindra Logistics Limited is confident and growth-oriented, underpinned by strong fundamentals and strategic initiatives. CEO Hemant Sikka emphasized a commitment to execution as a primary focus. Key forward-looking points provided by management include:

1. Empty Warehousing Space: Management is prioritizing the reduction of 1.5 million square feet of unutilized warehousing capacity. This goal is integrated into the performance metrics of the company's leadership team, aiming for substantial progress in the near term.

2. Operational Enhancements: A realignment of the Consumer and Manufacturing verticals has been initiated, with dedicated leadership for each to enable better execution and customer engagement.

3. Expansion of Express Business: The Express segment represents a multi-decade growth opportunity. The company is committed to optimizing yields alongside volume growth, with a focus on securing higher-quality customers.

4. Financial Strategy: Mahindra Logistics plans to raise INR 750 crores through a rights issue aimed at improving financial flexibility and reducing debt. As of June 30, 2025, total outstanding borrowings were INR 604.06 crores, with expected annual interest savings of INR 40-45 crores from debt repayments.

5. Performance Metrics: The company reported revenues of INR 1,625 crores for Q1 FY26, a 14% YoY increase, bolstered by an 18% growth in the warehousing segment. The Express business crossed INR 100 crores in revenue for the first time.

6. Market Potential: Management noted optimistic signs in the logistics sector, with port volumes and fleet utilization improving, alongside growing demand driven by e-commerce.

Overall, the management's focus on execution, operational efficiency, and aligning with market demands positions Mahindra Logistics for sustainable growth in upcoming quarters.

Major Questions and Answers from Mahindra Logistics Q1 FY26 Earnings Call

Question 1: Alok Deora (Motilal Oswal)
"Can you discuss the lack of profitability improvement in the Express business despite volume growth?"

Answer:
"Express business has many variables influencing profitability. While we've seen volume growth, yield remains under pressure. We're prioritizing better yield by focusing on profitable clients and potentially letting go of lower-yield business. Our aim is to grow volume with quality clients. Moving forward, we'll strategically target customers who enhance our yield, making it more sustainable."

Question 2: Alok Deora (Motilal Oswal)
"When do you expect to achieve EBITDA breakeven for the Express business given market conditions?"

Answer:
"Looking ahead, I believe in the long-term potential of the B2B Express segment. Achieving EBITDA breakeven will require careful balancing between volume and yield. We're still in a building phase but have a strong foundation. Investors should view profitability across all segments collectively, as profitability from other areas will support further investment in Express, which we see as crucial for the future."

Question 3: Ankita Shah (Elara Capital)
"Can you provide the volume numbers for the B2B Express business this quarter?"

Answer:
"We haven't shared specific volume numbers. What I can say is our Q1 volume exceeded Q4 levels. However, tracking tonnage alone isn't helpful; we must focus on maintaining a good yield, which ultimately affects profitability."

Question 4: Jayshree Bajaj
"What are the primary planned uses for the rights issue funds?"

Answer:
"We're raising approximately INR 750 crores, primarily to repay about INR 560 crores of debt spread across multiple entities. The remainder will support growth initiatives. This debt repayment will result in annual interest savings of about INR 40 to 45 crores, enhancing our financial efficiency."

Question 5: Krupashankar NJ (Avendus Spark)
"What are the prospects for the Contract Logistics business, especially in light of recent market shifts?"

Answer:
"Contract Logistics continues to be a cornerstone of our business with 21 million square feet of warehousing. We have strong client retention due to multiyear contracts. E-commerce growth is promising, and we expect increased capacity in festive seasons, especially in Q3, further supporting our logistics growth trajectory."

Question 6: Jinesh Joshi (PL Capital)
"What are we doing differently to reduce white space in warehousing?"

Answer:
"We have renewed our focus on reducing the 1.5 million square feet of white space. This includes a goal checklist for senior leadership. While Q2 might remain static as customer commitments take time, I'm optimistic about our progress in subsequent quarters to utilize this space effectively."

Question 7: Saurabh Taneja (CFO)
"How do you see capital allocation over the next 3-5 years?"

Answer:
"Our strategy has historically seen a capex around 1.5% of revenue, generally ranging from INR 60 to 70 crores. Last year was an outlier at INR 180 crores for fleet expansion. Going forward, we'll be prudent in capital allocation, ensuring strong returns from investments, focusing on segments that ensure profitable growth."