VRLLOG - VRL Logistics Limited Share Price

During the earnings conference call on November 4, 2025, management provided an optimistic outlook for VRL Logistics, emphasizing a recovery in freight volumes expected in the second half of FY '26. Key points included:

1. Volume Growth: Management anticipates a sequential growth of approximately 5% to 6% from Q2 to Q3, and around 7% to 8% from Q3 to Q4 FY '26. For the full year, a reduction of 4% to 5% in tonnage is expected, but with steady realizations, overall revenue growth for FY '26 is projected to be around 4%.

2. Realization Per Ton: For Q2 FY '26, realization per ton reached INR 8,079, up 2.9% from Q1 FY '26 and growing 11.6% year-on-year, indicating robust pricing power.

3. Strategic Focus: The company is concentrating on acquiring high-quality contracts and penetrating underrepresented regions. The branch network was expanded modestly, with a net addition of 2 branches, targeting deeper regional market presence.

4. Cost Management: EBITDA for Q2 FY '26 was INR 158 crores, a 17% increase year-over-year, achieved through cost optimization strategies, including improved fuel procurement and fleet utilization. Employee costs rose to 18.3% of total income due to recent salary revisions.

5. Investment Plans: Capital expenditure is projected to be between INR 130 crores to INR 140 crores for the second half, focused on converting leased branches to owned facilities.

Overall, management underscored a commitment to operational efficiency and sustainable growth, supported by strategic investments and a focus on profitable customer relationships.

1. Question: "How has been the trend because of this change in the GST rates? Have you seen any sharp change in the volume at the end of September and during October?"

Answer: Yes, post the August 15 announcement on GST changes, demand in affected product categories improved, but transit times delayed revenue recognition to October. The shift from 12% to 5% GST on many products will boost demand for those, especially since we're at 5%. For Q3, we anticipate volume growth of about 5% to 6%, and in Q4, around 7% to 8%. Overall, due to contract rationalization, we expect a 4% to 5% decline in tonnage for the full year.

2. Question: "Is that number for EBITDA margin sustainable ahead?"

Answer: Yes, the EBITDA margin should remain sustainable at around 19%. Although the employee cost increased due to wage hikes from August, we expect tonnage growth to help maintain our margins. With the expected improvement in volume, we anticipate being able to sustain the margins going forward.

3. Question: "How are we expecting volume growth to come given the drop in branch additions and trucks?"

Answer: Most tonnage decline stemmed from rationalization. We've gained 14% in tonnage from new customers, while existing customer tonnage has shown slight growth. We're focusing on improving service to re-attract lost customers. For Q3, we're targeting a volume growth rate of about 5% to 6%, with continued progress expected in Q4.

4. Question: "Could you explain the rationale behind the recent capital expenditure investment into converting leased branches to owned ones?"

Answer: Our INR 23 crore investment converted 3 to 4 key leased branches to owned facilities. This enables better control over locations and allows us to operate our vehicles efficiently within these areas, specifically in Salem, Ernakulam, and Tumkur, addressing critical needs in those markets.

5. Question: "What will be the capital expenditure in the second half and future plans for hubs?"

Answer: We're estimating capital expenditure of around INR 130 to 140 crores in the second half for branches and transshipment hubs, alongside 10 to 20 crores for other investments, totaling about INR 160 crores. This is aimed at expanding our footprint and enhancing operational capacity.

6. Question: "What percentage of revenue are we targeting for freight cost as we look forward?"

Answer: Fuel costs currently account for approximately 25-26% of our revenue. Even with plans to add more fuel pumps, we expect this percentage to stabilize around these levels for now. Our operational efficiency and bulk fuel procurement strategies have been beneficial in managing costs effectively.

7. Question: "What is our long-term growth target in terms of volume?"

Answer: We typically aim for around 8% to 10% volume growth in a normal scenario. Despite recent challenges, we see a potential for a 4% growth in Q3 and Q4 based on recent trends, including new customer additions and better service to existing ones.

8. Question: "Do we envision any changes in the pricing strategy for existing customer contracts?"

Answer: The rate rationalization initiative has concluded, so no further changes are anticipated in existing pricing. We're focused on maintaining customer service levels and enhancing customer retention to facilitate volume growth without further price reductions.