Mahindra Logistics Ltd
NSE:MAHLOG
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Mahindra Logistics Ltd
Earnings Call Analysis
Summary
Q2-2024
Domestic air passenger traffic surged 142%, signaling a strong uptick in the B2C airport services business and a promising future with record air traffic anticipated in the upcoming quarter. The company also noted a formal increase in return to office trends among business customers, particularly in IT, which could drive volume and growth. The 3PL contract logistics business showed a 6% quarter-on-quarter growth, overcoming churn with new orders. A positive outlook for festival season and continuous improvement in the 3PL and last-mile businesses was noted, with the latter moving towards an electric future. MLL's acquisition is expected to be profitable by FY '23/'24. However, challenges persist in the Express business, falling behind planned transition, and requiring 20-25% volume recovery in the subsequent months to reach EBITDA breakeven despite the industry's low expectations for volume growth.
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Ladies and gentlemen, good day and welcome to Mahindra Logistics Limited Q2 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Shogun Jain from Strategic Growth Advisors. Thank you and over to you Mr. Jain.
Thank you. Good afternoon, everyone, and thank you for joining us on the Mahindra Logistics Limited Q2 and H1 FY '24 earnings conference call.On the call today we have Mr. Rampraveen Swaminathan, MD and CEO; Mr. Saurabh Taneja, CFO and the senior management team of MLL. I hope everyone has had a chance to view the financial results and investor presentation recently posted on the Company's website and stock exchanges.We will begin the call with opening remarks from management followed by an open forum for Q&A. Before we begin, I'd like to point out that some of the statements made during today's call may be forward-looking. A disclaimer to that effect was included in the earnings presentation.I'd like to now invite Ram, MD and CEO of MLL to make some preliminary remarks. Over to you, Ram.
Thank you, Shogun and good afternoon everyone. I hope all of you had a good Dussehra and Vijayadashami break. I am, of course, joined today by several members of our management team, including our new CFO, Saurabh Taneja. [Technical Difficulty] having on board. Saurabh joined us a few weeks ago. He comes to us with significant experience across the finance domain, and he worked in the audit and the corporate side and have worked closely as part of dealership teams in growth-oriented businesses. So we are happy to having him on board. And I'm sure all of you get a chance to engage with him more in the coming months.I also trust you all had a chance to view our presentation and financial results, which are available in the stock exchange and our Company's website. As I normally do, I'll provide a short update on the external environment, our end markets, performance across our 5 business segments and supply chain mobility and some key operational highlights. Finally, I'll discuss our financial performance in Q2 and H1 F '24 and kind of elaborate some of our focus areas for the remainder of the year before opening up for questions from all of you.So moving on, I think, the macro environment, the first half of the fiscal year has gone fairly well with no notable surprises neither in the Indian or global economies. Of course, we had seen continuing geopolitical tensions in Europe and now more recently in the Middle East. But those really have not had any significant -- have not significantly altered economic carry yet. Inflation rate in India has remained high but has been fairly well managed. Monetary policy had tightened further resulting in higher bond yields, flatter liquidity and rising capital costs. Demand for logistics services, as always, is driven through the untold and underlying sectors and those continued to change, as you can see increased digital commerce, total consumption, industrial activity, of course, and an increased focus on Make in India. These trends are driving a greater focus on visibility and agility and productivity in supply chain as organizations try to respond to these opportunities. And companies are moving towards integrated logistics solutions, right, which is providing them better productivity across the supply chain. Furthermore, increasing consumer demand for Tier 2 and smaller towns requires increased focus on TAT and the reliability compared to more conventional urban consumption centers. This in many ways is the focus -- the core of our focus in the supply chain space and our strategy always has been built around the hypothesis that transition from 12% to 14% GDP level and logistics cost to 8% to 10% as on [indiscernible] the government bears with -- this increase, focuses and requires increased infrastructure, improved regulatory efficiency and higher productivity in the way companies and firms operate their supply chain. Our vision of providing integrated solutions is thus predicated really on the third lever, which is to help our enterprises manage their supply chains towards higher levels of productivity. And this requires moving away from just providing a bouquet of services to integrating into services using technology, process and human capital. So supply chain becomes more efficient in total cost of operations and that has been the core of our strategy over the last few years.And before I talk about our specific businesses, let me give a quick recap of how our end markets are shaping at least from our company and our sectors' perspective. And let me begin, obviously the automotive sector as this year has unfolded, India's autos retail sectors embarked on kind of a note of cautious optimism. The first half of the fiscal year has been a continuing period of resilience and recovery over the total auto retail -- auto retail growing from 9% year-on-year, passenger vehicles retail in H1 -- in the first half of the year hit an all-time high of more than 1.8 million vehicles exceeding the previous record, which was actually set last year, right, 1.7 million vehicles. On a year-on-year basis, that [indiscernible] approximately a 6% growth. The passenger vehicle industry obviously has continued to grow over the last 2 years, but have been evidenced both of the recovery post COVID and the continued response to the sector's focus on diverse and innovative products and services.On the commercial vehicle side, we have seen some uptick in sentiment across our commercial vehicle customers. In such situations and segments we have seen some signs of break-out. But across the board, there has been no big breakout yet and I think across the industry, they are all looking forward to some kind of cuts -- some uptick as we come to the end of the festive season.The consumer durable industry kind of a mixed quarter there. Obviously rising temperatures and slightly weaker monsoon in some parts of the country have led to a rebound in RAC demand and of course in segments like -- in some specific air conditions. But demand in the ECD segment, especially, lighting and -- lighting and fan remained kind of fairly weak. Kitchen appliances sector is still growing though we are seeing a lot of the growth actually in the premium end of the market, right, the entry-level volumes still being fairly muted. Competition in the industry in this market obviously is intense which made smaller players adopting aggressive strategies. And as commodities have cooled off, there has been a more intense price-led competition in the markets. Our structure is diverse, such as increased construction activity kind of an uptick in real estate, the increased capex, and a general trend towards premiumization, growing support, growth across the segment and we are quite optimistic about it as we look at the next couple of years.Let's look at the FMCG segment. The rural market was initially expected to rebound to the lower inflation, rising income levels at the beginning of this [indiscernible]. We've not seen a significant change in many ways, but we are seeing with our clients a consistent improvement and we expect the industry will recover to the upcoming recruiting session -- the upcoming holiday session. And as the pressures relax and government spending increases with an upcoming election, we do see positive move there.On a more positive note for our products specifically, I think we have seen a greater expansion post-GST distribution restructuring by many of our customers. Most of logos which we are working with have now started working on expanding their network again. And we knew that they are becoming more omni-channel in their approach. And this is allowing a faster transition to 3PL providers with stronger technology and integrated distribution capabilities. And compared to a couple of years ago, I think we see a sharp uptick in this both in terms of productivity, right now, and that's a positive sign across the board. After the substantial impact of inflation in the previous fiscal years, the rural market is showing better signs of recovery this fiscal year. Obviously many FMCG companies are focused on building the yields or the prices as there has been challenge of an increase in raw material costs and frankly some increase in logistics expenses as well over the last couple of years with the kind of the continued impact of high fuel charges.And then moving on to e-commerce and I'm not going to talk a lot about the tailwinds in the sector broadly because I think we talked about that many times. In the recent past, of course, we have seen some slowdown as the post COVID -- post COVID [indiscernible] fueled growth has started kind of flattening out. And we've talked about this I think both at our calls and probably at the industry level. The big question always has been whether we are starting to see bidding up in the industry. While we haven't contributed to consolidation in mid-mile, we have started seeing green shoots this quarter as peak approaches. There has been kind of an uptick in terms of bidding activity and, obviously, in terms of order intake as well. And these include demand for CPL, last mile delivery and services institutions and some of these obviously are beyond upcoming peak itself. We believe we remain very well positioned. We have strong partnerships with customers such as Amazon and Flipkart, as well as the strong growth relationships with other marketplaces and quick commerce companies. From a long-term perspective, the sector remains -- the segment remains pretty important for us. India is still underserved from a digital or online perspective and then given the strength of our relations and our network, it's something which we are excited about and kind of upbeat [indiscernible] in terms of offering solutions for this market.And finally, just a quick tap at the mobility sector. The domestic air passenger travel, obviously has doubled -- more than doubled over last several years. More recently I think from April to September '23 in the first half of this year, domestic air passenger traffic increased by 142% to nearly 113 million passengers, right. So there has been strong -- that's been a strong uptick. The increased demand for air travel, along with the start of India's festivals is projected to result in record levels of air traffic in the coming quarter. And that's -- and therefore, we have seen strong traction on the B2C airport services business. More importantly for our business, return to work has -- return to office has become -- has become far more formal across the board. We are seeing, in addition to BFSI, BRS [indiscernible] several our tech -- IT customers and tech customers are to those more pronounced return to work or return to office. And that obviously is something which you can see as regards to an increasing -- increasing volume and growth for us coming from the business. But we remain very well positioned in the enterprise mobility space, right, public market leadership across the -- more than 20%, 22% market share across the 7 big cities which we serve and therefore we are optimistic that as [indiscernible] we should see a bit of a hockey-stick playing as we have predicted will happen in the past.Now let me talk briefly about our individual businesses themselves and I will begin obviously with 3PL contract logistics business. The contract logistics business, as you all know, is finally housing, [indiscernible] through, of course, 2x2 joint venture. The business did have a positive quarter. Order volumes, the momentum and others to remained robust, while increased order intake on consumer and manufacturing e-commerce meant that we were able to start drawing into the churn we saw in the previous quarter. Overall, our business grew 6% sequentially on a quarter-on-quarter basis. As I mentioned in the earnings last year, there had been churn impact especially from e-commerce more than other segments as we saw a consolidation of capacity in the mid-mile and this quarter we have been able to outstrip that churn with new business and that's shown up in our sequential velocity of growth, right, and that's been positive. For the quarter, we had 3PL contract draw this order intake of over INR100 crores on an annual contract value basis, which is our second straight quarter in a row. And that's been important for us after slightly weak Q3 and Q4 of last year in terms of order intake. We remain optimistic that we should see this consolidating further in the coming quarters. During the quarter, we had some key wins including a large program coming into India to establish their India logistics center in Maharashtra. We kind of have started working with J&J for their western Indian -- Western India integrated warehousing and largest distribution solutions. [indiscernible] we launched a program with Flipkart for providing network line haul service across their IWIT network and we also have been selected as a single partner for Ashok Leyland's in-plat logistics services across the 9 plants in India.During the quarter we also commissioned our kind new facility in Bhiwandi which is a multi-client facility of around 6.5 lakh square feet. It is the largest single block facility as we speak in that part of the country. And construction is on plan in expansions in the [indiscernible] region in Kolkata and Guwahati. Our warehousing operations for 3PL alone were around 18.1 million square feet at the end of this quarter. As a matter of note, I think the investor deck also carry specifically our warehousing operations only for the 3PL business, right. And going forward, we have removed reporting warehousing views for express and other services. And [Technical Difficulty] for 3PL particular alone was on 18.1 million square feet at the end of the quarter. Our continued focus on cost reduction has resulted in healthy gross margin improvement on a year-on-year basis. And you'll see that in our warehousing yields as well which are included in the investor deck for your reference.On a sequential basis margins were impacted a little bit by mix as we've seen slightly higher more transportation in the quarter, right. Some peak related costs as peaks are coming a bit earlier this year. And foreclosure costs of one of our e-com sites in India, where we foreclosed a site and took an impairment on the assets, which are invested in that site.The by 2x2 joint venture has continued the ramp up. It's been a positive thing as we have kind of got the feet back on growth. And it's back on the pathway to profitability and we expect to see further growth in coming quarters as we are going to at fleet expansions in that part of the business. So overall the 3PL business has been having a continuing positive quarter, right, given some of the challenges from an overall market perspective.Moving the freight forwarding business, this has been a particularly tough quarter for the forwarding business. Q2 is a seasonally weak quarter generally. And we also -- we continued to see pressure on ocean freight prices and higher levels of competition across the board. In the quarter specifically we also saw some key customer contracts in telecom, especially those services we are providing for the 5G network rollout, those contracts saw a deferral in their volume. Volume, which is expected or kind of forecasters of this quarter actually moved significantly. Those will come back to us in Q3 and Q4. They have been deferred due to customer rollout plans. But that didn't have any significant impact on quarter-on-quarter revenues, right, in the second quarter. On the positive side, despite some fairly intense competition, we have managed to hold on to our margin levels in segment. Our gross margin levels continue to trend well and we are hopeful that -- and the build focus for us is on getting the volume back.During the quarter, we also commenced commercial operations for air charter services. As you will recall, we had launched air charter services in Dubai, a business based in Dubai, in June this year. And we are investing business development through the quarter. We did start our first charter in September and we are expecting a further pickup in that business through the second half of the year. So the forwarding business, why it is going on through a tough part largely in great part driven by broader macros. We are focused on driving the recovery and recovery planning is really focused on volume growth. While you can get some exposure on downside pricing that has largely bottomed out and a big part of the focus is on driving that volume growth, grow some large enterprises and mid-sized companies again.Recent conflicts in Europe and of course the Middle East now point towards some increased volatility in cross-border logistics, but we have not yet seen any immediate impact in pricing or the primary trade names being operated. Coming 2 quarters, we are hoping that we will get back to the higher level of volume growth. Some other deferral we saw on revenue in the second quarter will flow through in the third the fourth quarter and [indiscernible] initiatives to increase our account penetration, both in large enterprises and inside business as we try to deal with some tough industry and other macro trends in the business.I know we haven't talked about the express business, which obviously has been at the heart of our conversation, not -- the part of our conversation in the last earnings call as well, right. We have in the last -- in the last quarter, we outlined some of the challenges we had the integration had been impacted. And there have been delayed due to multiple factors in the speed and the quality of integration.During the quarter, we continued to see some challenges, but we saw broader positives as well. On the positive side, we have seen revenue deal been stable. Realization per kilo across our network has been pretty stable through the quarter and have not seen any declines there. On a delivered volume basis, we saw a 3% quarter-on-quarter growth in delivered volume basis. And during the quarter, we signed up new contracts that should have ideally been on 9% growth if the volume had come in fully. That volume of course has not come in fully because of timing. We signed several contracts through the quarter and there is a ramp-up period. We also, through the quarter, added 27 new retail partners and added 12 new customer accounts on the enterprise side. So we did make some progress in terms of expanding demand conditions though slim and shorter than what we had expected. We also focused heavily increasing our service levels, the challenge which we had during the integration and completed the transition to 1 physical network and technology architecture across the entire express business.Despite this, as I said earlier, our volume growth has been lower than what we estimated in the recovery plan, which I commented on last quarter. As some of you might note, we had indicated that we had seen a volume drop of around 30%, 35% through the integration. We have recovered around 7% to 8% of it. We still have a distance to go. Through the quarter, as we focused on service level improvement, we did our line haul network at higher levels to ensure that service levels are met. And we did that at lower utilization to ensure that service levels were constant or at least were recovered. So operating the network without the volumes which we expected, but higher levels of operations did result in an increase in line-haul costs, and there's a higher cost overrun because of this, which impacted our earnings during the quarter. At an overall level, our margins declined quarter-on-quarter despite higher volume, largely on account of the cost of running the network at a higher level.As we look forward, I think we are running -- we still believe we are running 2 to 6 months behind the initially planned transition. Most of the improvement actions we had put in from a back-end operations perspective are now in play, and the focus is on recovery volume growth. So there is a pressure on the engagement on winning back the customers and driving the volume growth, while we continue to enhance service levels and drive the network growth and yields across the board. And there will be a continued carry of this, as we had mentioned, but we remain focused on trying to get to EBITDA breakeven by the end of this year as EBITDA aspiration made out earlier with all of you as well.Moving on to last mile delivery business. Again, a business section improving quarter despite the intense pricing environment, we have grown 4% year-on-year in the quarter. Underlying volume growth net of pricing impact because we have seen pricing impact, the underlying volume growth was around 8%. We have continued to grow our distribution and service business with focus on niches such as grocery and EV-based delivery services, and that has helped us kind of tighten improved margins during the quarter on a year-on-year basis. We've also seen similar growth in improvement in resort as losses have shrunk year-on-year by more than 40% and on a good path in terms of earnings recovery there. Overall, the immediate focus has been on sustaining and improving gross margin with a broader focus on growth. We are in the process of launching our ODC partnership, which is the partners with the ONDC, which for last mile delivery, which we estimate will go live this quarter. In the upcoming quarter, we hope to complete the second tranche of investment in reserve, which should make us a majority company and will consolidate the business. That acquisition will be contingent to profit closure of terms, which we have signed with reserve promoters and other regulatory filings and the plans.Now lastly comment on the mobility business. Our mobility business is pretty well-positioned as we operate on 6,000 cabs in nearly 14 cities with a network of around 350 business partners. We have shown strong growth in TMS volumes and B2C services across both. And a big part of that growth has been as touched earlier that has happened would get better growth. But we've also seen a stronger level of new client acquisition on the TMS side and a renewed focus on what we call city to airport which supplements the airport facility services. We reported a PAT positive quarter for the Q2 F '24 and we are on track to remain PAT positive for the full year, as we had indicated earlier. Since the Meru acquisition through volume growth and operational synergies, we have been able to move to move that business from being a fairly high loss-making business at the time of acquisition to become profitable on a consolidated basis, reflecting our continuous focus on integration and synergies across our portfolio.Before I talk about consolidated numbers, I'll cover the specific components, MLL stand-alone, which largely comprise the 3PL business. Revenue for Q2 was INR 1,136 crores compared to INR 1,195 crores in Q2 F '23. PAT for the quarter was INR 19 crores as compared to INR 11 crores in F '23. Revenue grew sequentially compared to the Q1 F '24. Profits declined sequentially due to specific elements like the mix moving as well as some onetime charges in the quarter. LORDS and the frame forwarding business revenue for Q2 F '24 was INR 53 crores, down 50% compared to INR 106 crores in the same quarter for the last year. The company was at breakeven level with a PAT of 0.1 crores compared to a PAT of INR 4 crores for the corresponding quarter last year. The Express business reported a quarter of a revenue of INR 87 crores for the quarter, that largely reflected the consolidated impact of both the 3PL, the MLL business and the Rivigo business. Overall, revenues for Express grew by 68% on the back of that combination. As I said earlier on, I've outlined the reasons for our earnings hits and we reported a profit after tax loss, a loss after tax of INR 75 crores for Q2 F '24, which compared to around INR 31 crores in the prior quarter. Mobility business revenue in Q2 F '24 was INR 86 crores compared to INR 22 crores in the same quarter last year. That growth is a function of both underlying market growth as well as the impact of the transfer of the enterprise mobility business from MLL to MLL mobility, which happened in the second half of F '22-'23 of 2022. As I said earlier, we reported a profitable quarter with a part of about INR 1 crore for Q2 '24 compared to a loss of INR 3 crores for the corresponding quarter last year. [indiscernible] commented on this is a matter of significant revenue for the quarter was INR 31 crores as compared to INR 33 crores last year, part loss substantially compared to a loss of INR 1.7 crores in Q2 F '23. We had a PAT loss of around INR 0.4 crores. So we are close to breakeven, which we hope to achieve by the exit of this year. The 2x2 business, which largely serves the 3PL business has done well, and the division made a profit of INR 1 crore in the quarter compared to a loss of INR 1.1 crores for the corresponding quarter last year.I'll now move on to the consolidated performance for the quarter. Revenue for Q2 F '24 increased by 3% on an overall consolidated basis to INR 1,365 crores, up sequentially by 6%. Revenue from the warehousing segment was around INR 256 crores for Q2 F '24. Supply chain management includes our 3PL and network services businesses contributed around 94% of overall revenue, while the Mobility business has contributed to 6% of overall revenue for Q2. Gross margin at a fully consolidated basis stood at 9.2% for Q2 F '24 compared to 9.7% in the same quarter last year. However, without the impact of [indiscernible] business, the gross margin was around 11.2% and 150 basis points improvement on a comparable basis to Q2 of F '23. EBITDA for the quarter stood at INR 54 crores, down from INR 68 crores, right, in Q2 F '24. This again saw the consolidation impact of the consolidation from Rivigo without the impact of the consolidation EBITDA grew on a year-on-year basis. PBT on a fully consolidated basis is down to INR 8 crores, a loss of INR 8 crores in Q2 F '24, and we reported a loss of INR 16 crores for the quarter, largely on account of the carry of the network expansion in [indiscernible]. Excluding the MESPL business, of course, the profit grew in most parts of the business.Before I close out, a few other operational highlights. As I said earlier, construction of new multi-client BTS facilities in Kolkata and Guwahati. These have collectively added around 2.3 million square feet of multi-client, platinum or certified warehousing capacity in the next 15 months. We have further continued to consult our green logistics portfolio. EV service today has pretty [indiscernible] vehicles and we have under 250 passenger vehicles in the mobility fleet. We have operated nearly 28 million green kilometers to-date at the end of Q2 of this year. In addition, nearly 40% of our last mile and mobility fleets are also CNG operated, right, operating CNG in line with our commitment to the sustainable transportation and logistics.We today have over 3.3 million square feet of IGBC on lead certified warehousing as we continue to grow our sustainable warehousing portfolio and almost all of that is carbon neutral or energy neutral. Our one carbon program focusing on developing our client partnerships and supporting their energy transition. This is a digital platform which is fully integrated with the rest of our technology stacks and provides customers online measurement to the carbon footprint and we continue to expand more helping more customers online.During the quarter, we also certified as a great place to work again, reaffirming our commitment to creating a performance driven inclusive culture. And during the end of the quarter, we recently launched an initiative called Delivery Happens to support and recognize delivery associates across the entire logistics industry for the efforts during the upcoming festive season.Before I open the floor, let me just quickly summarize how I think we stand today and our focus for the rest of the year. Our core 3PL contract logistics business is in positive momentum with improving performance at 2x2 logistics. We remain positive with the upcoming festive season despite some cost intrusive trends. The mobility business has now completed the turnaround, which we indicated by the end of this financial year. And at the time of the Meru acquisition, we had indicated we will be able to make the combined business. We estimate that the combined business will be profitable at the end of FY '23, '24 and remain on track to deliver the integration and synergy value. The last mile business is on an improvement momentum, and we believe in electric or a green future for the segment. Today, we operate India's largest EV cargo provider, and we can hope to contract this addition to the acquisition majority ownership in reserve. We'll then start working on accreting opportunities between MLL, last-mile delivery business as a reserve business, and we believe that should further improve earnings across that segment.Our key challenges today clearly are at large and the Express business. As you look at the rest of the year, the focus for us is to get volume growth back. We are putting actions on service level improvements on MESPL, and we now believe that the offering and the network are in good shape, and we have to work closely with our customers to get the volume back. And similarly, we are working on several initiatives to drive growth, volume growth in the forwarding segment as well.With this, let me open-up the floor for questions and answers. And I'll hand it back to the moderator.
We will now begin the question-and-answer session. [Operator Instructions] We'll take the first question from the line of Alok Deora from Motilal Oswal.
So sir, I had a couple of questions first. One first one on MLL Express. So we have seen that quarter-on-quarter, there has been a marginal increase in the revenues, but the profitability has gone down quite, I mean, the loss has increased further. So what's our view here because this kind of the festive season we have entered now where volumes are expected to be on the higher side, then again, it could be slightly muted. So this profitability trajectory, if you could just highlight here because earlier in the last call, we had mentioned about a breakeven by mid-third quarter. So how are we looking at this segment now?
Sure. Is there any other question, Alok? I can take them together then.
So this was on the Express side. Second was on MLL stand-alone as well. If you just look at the EBITDA margin on MLL stand-alone, that has also come down on a Q-o-Q basis. So just your thoughts on that.
Sure. So let me take the first one first, because that's a question from the others as well. As I mentioned earlier, compared to Q1 of the year, we have invested in getting our service levels back substantially, Alok. We did see a regulation in our net service levels in the quarter and getting service levels back in our business is really a big function of reducing tax or turnaround times for our customers. And to reduce our turnaround times, we have to actually run the vehicles more consistently and more regularly, even if the load was not there, right? Because the customers who do give us lots, we have big commitments on tax. And so even if we don't get low, we still have to run the vehicles up substantially.And therefore, that's kind of what is the story of Q2, while we did get the service level up, right? We had to obviously invest more in that period, right, to run those vehicles and that resulted in carrying costs with transportation of us going up substantially, right? And unfortunately, the volume which we envisaged in the quarter did not happen, and that was the problem. So if you see our contribution margins are still positive, but you would note that our contribution margins actually declined quarter-on-quarter, but reflecting that impact of the higher transportation costs without adequate volume there. The money we actually ran at substantially lower levels. Now what are we doing to fix that? I think as I mentioned, our first step -- the playbook is still the same, Alok, which I mentioned earlier.The first step is to get back to an EBITDA breakeven. We are around 30% off on volume to get our EBITDA level. The gap has shrunk. It was 35% at the end of last quarter. It's down 27% now. So our focus is to get the volume back or if the volume comes back Alok, the transportation costs will not go up, right, because the vehicles are having a lower utilization now, right? A large part of our network is running less than 70% utilization. So as the volume comes back, utilization go up, transportation costs will not go up linearly with the revenue and margin growth. And so the big part of our focus is to get that volume back, right? I'll be honest, we had hoped to be at a closer point at the end of the second quarter, the gap would have been lower. That's kind of what we have given as guidance or indications earlier as well, Alok.We are running a little bit behind on that volume growth. We are very focused on it and I think the base is what I'm seeing right now and what we see in the market with festival happening and some other things that are happening in our own service levels getting better. And we're hoping that we will be able to get a point of EBITDA breakeven by the end of this year. That requires us to recover volume around 20%, 25% over the next 5 months or 6 months, which is roughly 4% to 5% month-on-month growth, right? And a large part is getting customers who have dropped their share of business with us back in fold. So we have such a customer programs focused on getting that volume back.But as I said earlier on, we are running behind the ball here a little bit, but a lot of work is there. We have very high confidence that we will be able to get to that point by the end of the quarter, right? So that's my comment on the Express business. Apart from that, I think the Express business has not seen any significant change. We did see and losses on impact in the profits because of a higher level of provision on receivables. As you know, we inherited some part of the receivables as part of the acquisition, and we have taken to them as we get closer to the period of complete the acquisition accounting, we have taken a stronger look at the numbers there and kind of have taken some prudent actions there in terms of our depreciation level.Now going to your other question, which is on the EBITDA level. I think I'll make some general comments there and because Saurabh if he wants to add anything as well there. But I think on a quarter-on-quarter basis, EBITDA did come down on a standalone basis, but as you look on a year-on-year basis, we actually did show an improvement. That impact largely on quarter-on-quarter basis a couple of things there, Alok,. One has been the mixed [indiscernible]. We have seen warehousing revenues were flat to down quarter on a sequential basis. And therefore, we see an uptick in transportation revenues for the quarter. And that means that we will see that impact, right, affecting our EBITDA margins on a stand-alone basis compared to the sequential quarter. We also had a one-time impairment of some fixed assets. Some assets, we shut down and fulfillment center in the western part of India as part of our customer consolidation and that had an impact of approximately 20 basis points of EBITDA, 20 to 25 basis points of EBITDA and the rest of it largely was for the large part, a mixed level issue. I think the more relevant thing actually is obviously a quarter-on-quarter, year-on-year comparison, where our EBITDA compared to last year on flattish income was slightly down and the stand-alone entity grew from INR 64.3 crores to INR 74 crores for the quarter. That is in performance. And similarly, you can see the first half of the year, stand-alone EBITDA grew from INR 127.6 crores to INR 157.2 crores, which is a 19%-ish year-on-year growth on the back of around 4% -- actually a 3% to 4% decline in revenue.Maybe you can also Saurabh if you want to add something or else, we can go to the next question.
Thank you, Ram. I think you've covered it well. Nothing to add from my side.
Just a last point. So MLL Express, we are looking at a 5% volume growth every month, but when we speak to other industry players, the Express market for the full year, they're not talking about even a 10% sort of a volume growth. And so I mean this INR 24 crore sort of a loss in the EBITDA, which we are doing in current run rate kind of a scenario, I mean, if these volumes don't come through, this could kind of be a little extended till next year also?
So obviously, I think Alok, it's math, right? Math is exactly as you pointed out. I think our confidence -- so you're right. I think if the volume doesn't come in, there is obviously this is going to be extended. We have done optimized options for further cost optimization, volume is the big driver. I also concur with your other comments at the industry level there has been a bit of softness on Express and therefore, generally, industry growth is down in the early to mid-teen levels. I think what's important from our perspective Alok is to kind of see where the volume growth is going to come from. And for us, a big challenge really is the fact that the decline which we saw in volume, we did see a 35% drop in volume on the back of the integration and that's all -- most of the customers have not stopped trading with us. Those customers are actually trading with us. There are also customers of us in the third-party logistics business. And therefore, the key thing for us is to bring customers back, right. These are accounts already trading with us. So we're not looking at new account expansions. For new account expansions, we are hoping to acquire only in roughly the same level at which the industry growth respect that. But the key thing Alok is to get back the customers who kind of drop their share of business with us. Now that's why we are confident that we will be able to get that kind of volume growth and it won't necessarily happen 5% month-on-month, some months will be higher, some months will be lower, but that's kind of what we are targeting to focus. But you're mathematically right. If we're not able to deliver that, then there will be an extension to the sum.
We'll take the next question from the line of Namit Arora from Indgrowth Capital.
I have 2 questions and they're sort of related. I would be very grateful for your thoughts on, firstly, the organic opportunity versus inorganic pursuits. And secondly, the domestic India opportunity versus your international initiatives, that is sort of one stand of question. The second question is any drilling as an institution from the Rivigo acquisition and other acquisitions and other key takeaways. And thirdly, how are you insulating or managing management time and bandwidth in the turnout of Rivigo, so that you are able to do justice to the organic opportunity.
I think organic opportunities versus inorganic opportunities. I think it's a good question. And thank you from our perspective right now, as I mentioned earlier, we are not really out there in the market looking for any further inorganic, right? So first, I just want to clarify that. We had always laid out 3, 4 years ago that as an integrated services provider, we are looking at 4 main services, right, third-party contract logistics, freight forwarding, cross-border, B2B Express and last mile and today, we've got the deck in some ways, setting all of the numbers. So there's really no focus on further inorganic in terms of our attention and energy. I can't say there will be inbound interest to us, but there's no outbound interest from us. Just a very straightforward perspective on that.In terms of domestic and international, I tend to look at the international business for the forwarding business, we look at the international business as an important part of that story, because, as you know, a substantial amount of trade into India does not originate in India. The commercial offering are actually outside the country. And therefore, I think a large part of the international operations for the forwarding business need to have, right? And we're doing it cautiously. We're not throwing the kitchen sink at it and therefore, we're waiting for each of them to stabilize. I had mentioned last quarter that we are looking at doing Europe, for example this year. But given the slowdown in some of the international tensions in the Middle East and kind of continuing challenges in Europe, we, for example, have slowed that rollout. So it is a wait and watch learn kind of process. And therefore, I see international mostly there's a set of pilots for the business. And back into 2021, we did pilots in Express in last mile, right, in electric vehicle cargo to establish the business model efficacy and we are doing the same thing on the international side today. So it's not a significant amount of -- it is not intended to be a significant investment at this stage. Though for a longer-term perspective, I think there are broader opportunities that exist globally, but they only happen after we have cemented a strong domestic business, which remains our priority.In terms of acquisition and our takeaway, obviously, I think all acquisitions are the same in some ways and different in some ways. So it's hard to put a specific one-size-fits-all approach. We do have a playbook in the company, both in logistics, and we take some support from our parent as well on this. And if you look at our acquisitions, several of them have gone well. I think the LORDS forwarding acquisition, the barring the short current macro impact has gone by, we've seen strong earnings, working capital and brand value and good integration of the core contract of business. Similarly, I think if you look at what happened with the mobility acquisition of Meru, we've been on track with what we told the Street, we told all of you that we expected in the 18 months, we'll get this back on track. Meru at one time was losing 19, 20, 21 lost, had a PAT loss of INR 19 crores on revenue of around INR 40, right? And we kind of said that we are confident through synergies and build out that we'll be able to kind of fix that and we have, right. We are now at a point that we're confident about the profit companies there. So those acquisitions have gone well. The business, while it's an associate of ours, there's a lot of collaborative work which have happened between businesses and the way we look at different things and learnings and synergies on an ongoing basis. So there are acquisition, some of the acquisitions have gone very well, obviously. I think on the Rivigo acquisition, we've actually taken those earnings and put it into the MESPL acquisition as well. And I think there are some learnings for us, clearly, around network integration around culture management and those are learnings which you obviously are cementing.As I said to an earlier part of your question Namit, on organic versus inorganic, we're not really out there in organic space as it completes the MESPL integration consolidation, we will further sit back and take those earnings into our playbook. And they are good learnings. So the Rivigo acquisition is the first largest one which we did, the earlier acquisitions are smaller and probably we had the benefit of scale or lack of it at the pace at which we did it. But the acquisitions, these are 7, 9-year business models, right, when we lay out these acquisitions and the network acquisition of RSPL was not based on a 2-quarter business case go and went on a 7- to 9-year business case that we shared with our Board and other stakeholders. And while we are behind, we continue to believe that longer term business case is not a well-trained form. If you look at other companies are building networks. There are companies just who are losing money after 11, 12 years of building a network. The Rivigo acquisition has given us probably a 6 to 7-year head-start in that process. There is a bit of a burn. It doesn't take away the fact we not executed very well. We are putting measures to fix that. But the learnings will be consolidated, obviously, over a period of time.In terms of insulating management bandwidth, I think the way I look at it Namit is that we really run a multi-business unit structure. Each of these business units is fairly engaged and help contain from a sales operations perspective. It also has for the large part, except for technology and brand and marketing, except for those 2 and legal even in other areas, we have dedicated to use for each of the businesses. So the businesses are fairly self-contained in that form, right? And the 3PL business leads the solutions for where it then pulls in the other parts of -- other businesses as required. So, it's a very well structured, the self-contained business.Each of the businesses has general managers are -- our leaders, our business leaders and many of them are on this call and we all have an individual pieces to do. And so, the management focus is a bifocal one. There are individual heads for each of the businesses, right, who are focused on delivering to their targets.I think, as you've seen in several parts of our businesses, we've driven improvement, those are teams who are delivering ahead of the curve, right? And are getting there. And obviously, at an MLL group level, we are focused really more, which largely is our core functions, the technology, marketing, finance, legal myself. There are a lot of other stuff go into an enterprise transformation. We are focused, obviously, on providing support to the individual businesses where they're running well on track and providing additional support and involvement for the businesses where they are not, right.And so, today after some amount of higher bandwidth, obviously, gross on the express business as a large part of our functional resources are kind of engaged on working with them, whether it's ops excellence, whether it's transportation. And I forgot to mention them earlier but they're all focused on supporting the businesses, so that's kind of the way we run the thing and therefore it's not a significant bandwidth challenge.We get asked this question at times and obviously on earnings calls and in small -- smaller group meetings as well which, there are -- it's a business of multiple services predicated on one or few individuals and it's really not. It's a fairly elaborate team. And as you can see, many of our businesses are now at sweet spots in terms of getting earnings up and driving the value.So it's something which I have -- this is model which I have a fairly high level of confidence in. Logistics is a fairly hyper local business in the end, and therefore, you need to have empowered teams which are charged and are highly accountable and responsible to deliver results, right. Centralization is not a great approach for us. So, we believe the structure works, and on the large part, I think it's working for us. I hope that answered your 3 questions.
No, it does very, very comprehensively. So I really appreciate your very detailed and candid perspectives on all my questions and all the very best to the entire team.
[Operator Instructions] The next question is from the line of Jainam Shah from Equirus Securities Private Limited.
Sir, there has been always an industry commentary that Express Business and Contract logistics, 3PL SCM business will have some synergy benefits. So as we have acquired the Rivigo, we might be giving our Express part of that 3PL business to some other counterparties. How has been the things has moved for this part of the business in last 1 year? and how we are looking at, apart from external volume growth, has there been any growth that came from internally from this kind of synergies?
So, thank you, Jainam. And there is not so much of insource. So, first question. I think there isn't a huge insourcing lift. I think we had -- back in 2021, we had started our own express services internally, and therefore, we were obviously serving some of the -- we didn't have a high market share, but we are serving a fair number of our express requirements locally in-house, right.And therefore, the process of insourcing has already started. And before we did the MESPL acquisition, there wasn't a huge amount of outsourcing. We do sign up new outsourcing partners on the Express side, but that's a lane specific or geography specific strategy, because even in the -- at a state level and local intra state level, for example, we don't actually -- may not always have the depth which other players have in [ in-volume ] geographies and therefore, we co-load with partners which are there.But I don't see a significant amount of in sourcing benefit because we already were doing it in house and that's kind of what we transfer. What we think is a larger benefit, which is there is, I think when you look at supply chains, they are -- they comprise 3, 4 different things. They do always comprise full truckload volumes, right, they do comprise warehousing. But there is also a substantial part truckload and time-defined part truckload movement which happens.And as India expands consumption to Tier 2 and Tier 3 cities, right? And infrastructure gets better, the propensity to do more part truckload will increase because companies today are often moving full truckload because they find the transportation is unreliable. It takes a lot of time. They think a full truckload gives them better security.But as infrastructure gets better and they go to smaller demand consumption points, there'd be no choice but to increase part truckload. And therefore, having a strong express capability is, in our view, essential to the longer term -- kind of long-term view of the Indian logistics space. And therefore, the synergy will come as you provide more integrated warehousing and distribution services.So today, if you look at, as an example, for Dr. Reddy's in Northern India, we run a fulfillment center across the country. And if you look at what we do, we bring in drugs coming from different Dr. Reddy's plants into that SCU and we run that fulfillment center which is stem controlled. And from that SCUs, the 3PL business uses its own trucks for full truck load, it uses the Express business for part truck load and it uses some air partners for [ airline ].So, those are the kind of solutions which you can do more and more of because we have stronger express power. Our own express capability, especially one which is highly evolved in terms of time-defined deliveries. So the synergy over a period of time, you should see, and we are hoping to -- we believe in the exercise, is the ability to sell more integrated solutions for our clients and be able to win more business with our clients as we provide them better productivity across the supply chain. Today, our customers don't have to work with one company for Express, another company for warehousing, a third company for full truckload, and we are seeing that shift happening.I think if you see some of our bins which we've been reporting, you'll see more and more bins moving towards integrated warehousing and distribution, where express is a very important part.
Got it, sir. And sir, just on one data point question. So, how much of the SCM or consolidated revenues came from the parent group?
From the...?
For this quarter.
I think it's on 53%, but we will send you a confirmation -- We'll send you a more specific number, Jainam. But I think it's around 53% for the quarter and this is for the 3PL contract logistics piece.
We'll take the next question from the line of Abhishek from Dolat Capital.
Sir, in 3PL business, how much is for auto versus non-auto segment?
Yes. So auto was around -- auto is around 68% for the quarter. That includes the Mahindra businesses and the non-Mahindra businesses. Auto and manufacturing is around 68%, 70%. Close to 70%.
That is for the 3PL business only, no?
Yeah, for the contact logistics booking.
Okay. And then, non-auto segment, how much is from the e-commerce and consumer durable?
No, I don't think -- we really don't report that specifically every quarter, but I would say at a bellwether level it's probably half and half, right? I think the consumer and consumer business is around 15% and 14% and the e-commerce business, excluding last mile delivery is around 17%, 18%.
Okay. And sir, in the 3PL industry, penetration is quite low in India, that is around 5% versus global average of 10% and expect a 20% to 30% CAGR growth going ahead. And you have also a good market share of around 6% to 7%. So what is your plan to gain market share in the fast-growing industry, sir?
No, I think, see, all the statistics you have provided are all accurate. The 3PL business, third party logistics business in India is underpenetrated. But the definition also is that it's a mixed bag. When we look at the market, the challenge which we have even in India is that what are the third-party logistics providers do? They essentially provide productivity by integrating different service levels across -- service lines across, right, for a customer.And, in India, the challenges in 3PL penetration has really been the high level of fragmentation in the industry and the lack of regulation. And because of that, delivery quality and capability has always been a problem. And therefore, the Indian industry has always moved -- has always, depending on asset owners and aggregators rather than third-party logistics companies.Now, this is slowly shifting. I think I made a -- post GST, there was a big expectation that that will change at a very rapid pace. That change has not happened at the pace everybody expected because companies found it difficult to move income and networks out completely.And, across India, there's a lot of variability in the ability of us to provide service across India. So a company cannot run with its own trucking -- with direct trucking in one state, with 3PL in a second state, with a CFA in a third state. Companies obviously want to have common fulfillment models, right? So, that actually -- those have been challenges for companies in transitioning towards a more 3PL model.But as I mentioned in my opening comments, I think as we are seeing today, what we are seeing is companies we are seeing far greater consolidation as companies are laying out newer networks, there are -- the 3 big challenges they are looking at: One is how do they bring down the cost of the supply chain by reducing waste. It's not that any company India is very bad at purchase prices. Normally the waste in the supply chain which has to be eliminated.The second one is, companies are struggling to establish supply chains, which are multi-motor, right, Because you have multiple modes of transportation, different kinds of warehouse in there. And the third thing is that demand inherently has become omnichannel. It's not just one traditional network, it is modern retail, it's online. And therefore, companies have far greater complexity in their supply chain. And that is driving a greater transition towards 3PL.So, while I would not -- but I think I would not specifically hold the candle to a 25% CAGR going forward. Over the next few years, we should start seeing that 5% to 6% penetration of 3PL going to around 9% to 10%. And hopefully, within that space as well, a greater formalization because even inside the 3PL space, if you see it, at 6%, 7% market share, we are probably the largest or the strongest position there, because even inside 3PL it's fairly flat bunked with a lot of smaller players. And hopefully, that will actually gives you some better consolidation as well.
Thank you. The next question is from the line of Vikram Suryavanshi from PhillipCapital.
Yes. Sir, can you highlight about absolute revenue in terms of warehousing? We have given per square foot, but in terms of absolute revenue and growth and how is the outlook?
Revenue from warehousing services for the quarter was around INR 246 crores. I think I mentioned that in my comments and that's largely on the 3PL side. As you know, we do not count the -- it is our view that [indiscernible] but we don't count the warehousing revenue right? So, the revenue for warehousing solutions is around INR 246 crores. I don't have more specific confirmed numbers, but it's around INR 246 crores in a quarter.
Thank you. We'll take the next question from the line of Krupashankar NJ from Avendus Spark.
One question on the mobility business, Ram. On the return to work, I think what I was looking at broadly is that in FY '19, this segment was generating about INR 385 crores of revenue, and now you add Meru's overall operations on top of that. Assuming it comes back to the levels of FY '19, can we expect somewhere, a 25% higher number vis-a-vis FY '19 numbers in FY '25?
Hi Krupa, good to share the question. But just to put some context, I think in 2018, '19 which was peak year for the mobility business, we had INR 370 crores of revenue and that's around 4% PAC in the MLL business. And at that time, I think, corresponding revenues in the Meru business was around INR 55 crores. On an accounting basis, platform revenues have probably been higher. The business was reporting a loss.So, consolidating this at a revenue level, that's been on INR 420 crores to INR 430 crores, right? And obviously, with return to work happening now, we should start and underlying inflation per kilometer prices, your hypothesis is right. If we get to full volume on the pre-COVID level, which is what we've been saying as well, Krupa you know this, that we do expect a hockey stick playing out in mobility, and -- so, I'm cautious about calling on a timing for the hockey stick. But we are, I think, definitely seeing a convergence or the start of the hockey stick now, right? How quickly it ramps up is something which is hard to predict because there are some fundamental shifts also happening in terms of work from home.It's not like even though RTO is becoming more significant required, I think the work from home is also a reality. And therefore, there is probably, at least in the long term, there's probably going to be a 30%, 35% reduction in volume happening because of work from home. Right. So, if you take that index, reduce it by 20%, 25% because of a long- term work from home pattern and do a kind of organic CAGR growth, we should -- yes, you'll probably land up at INR 450 crores, INR 500 crores number at least, right. But that's a point, that's an endpoint.The question has always been, Krupa, we have said this earlier on also that that's an endpoint which we do see clearly. The question for us is, how do we kind of get the ramp-up and the shape of the hockey stick? don't know if it's going to be '24, '25, but I'm sure it'll happen at some point.
Sure. Second question was on the freight forwarding business. So I did see that the profitability has weakened quite considerably out here. Any one-offs you want to call or any commentary on profitability coming back to at least on an EBITDA basis at around 3%-odd percent levels in the second half?
To be honest, Krupa, this is -- as you know, this is just a volume play. I think if you look at the details of it, there is not -- it has really been a drop in gross margin dropping down to EBITDA and dropping down the PAT, right.Gross margin percentages actually have held for the large part, because I won't say -- I won't call out a specific improvement because it's a bit of a moving number. But percentage of gross margin have generally held. The question really has been the volume shrinkage, right.If you look at it, we are roughly down 50% on revenue compared to last year. If that that revenue has held and we added INR 56 crores more of revenue with 10.5% to 11%, gross margin, we'd have probably been in the same INR 4 crores [ pipeline ] right? So it's really just a straight volume play.And the key thing for us is to get the volume play back, while we are maintaining discipline in investing in the business as well, right? We don't want to shrink our long-term investments in the business because this correction will happen. This is an industry-level macro thing. So volumes will -- I think I have great confidence in our organization, in our sales teams there, and I'm confident the volumes will come back over the next couple of quarters. It'll take probably a bit more for it to further accelerate itself, but it's just a volume play.
Thank you. The next question is from the line of Alok Deshpande from Nuvama Institutional Equities.
Three questions from my side. First, on the Express business, so the OpEx cost that we have, I'm simply going by the difference between revenue and EBITDA here. This OpEx of about INR 110 crores, INR 112 crores. Now, as the revenue ramps up, can we consider this as an absolute sort of floor in terms of -- I mean, is there any chance of this OpEx going down by any chance, maybe due to any one-offs or anything of this sort or you see this number going up?
Why don't you finish the questions, Alok, and I'll answer all of them together just in the interest of time.
Okay. The Second question is on the core business. I think somebody did ask this a little earlier before. I just wanted to get some clarity on this EBITDA margin going down in the core business or the standalone business. In the last couple of quarters, this Q4 and Q1, we have seen that number around 8% or so. So as we enter festive season, do you see that margins going up in the second half and more closer to 8%-odd or what's your outlook on that?
Sure. So, Alok, I'll take the first one first, the express side of the business. So, I think, to your question whether our total costs are going to remain at that INR 111 crore level, which is, I guess, the way you're concluded that you have sort of taken the EBITDA loss and the revenue, right? And kind of added them up.
Yes, yes.
Right. So, if you look at INR 111 crores, there are 3 parts to it. There is a pure line haul transportation -- there's a pure transportation piece, which is around 60%, 65%. That is, of course, the network, the physical network, which is the warehouses and everything else. And then there is an overhead and management cost, et cetera, which is around 10%.The overhead and management cost, of course, will not change at all. That's kind of pretty much, I think, at an optimized level now. The network cost should not dramatically change. I think we have laid out the network, and we got -- there'll be some puts and takes which happen as we look at expansion. But those are going to be revenue and growth led. They are not just going to be fixed in nature or going to be intrinsically negating.But the key thing for us is to optimize the transportation piece. It's the transportation piece which right now in the transportation, so in the warehousing piece, as the volume goes up, it's purely leverage, right? The operating costs are approximately -- is probably around 30% of this, the cost of running the network, right? That network is probably not going to see a significant amount of cost increases Alok to probably around 1.5x to 2x the current volume, right.And to that extent, we should be able to run it without adding a substantial amount of cost to that, right. So that's just pure leverage for us, which is what I think we've explained to you earlier as well, I think in an earlier call, which was there.
Ladies and gentlemen, the line for Mr. Ram has been disconnected. Kindly stay connected while we try to reconnect him. Ladies and gentlemen, thank you for patiently holding. The line for Mr. Ram has been connected. Over to you, sir. Sir, the participant has left the queue. His questions have been answered. We'll move on to the next question, which is from the line of Sumit Kishore from Axis Capital.
Hi, good afternoon, Ram. Just one question. I heard your commentary around the contract logistics business, around autos, FMCE, e-commerce. I mean, basically, we have had about 5%-odd top line growth in first half of the year. One would have expected this business to continue growing at closer to say, mid-teen levels more from a medium-term perspective. So, is there going to be a pullback to double-digit growth in the second half of the year or is this more or less the sentiment that is likely to show up in numbers for the full fiscal as well?
I think it's a good question, Sumit. And there are a couple of things that I think we are -- if you look at the quarter-on-quarter velocity of growth has been around 6%. I think last quarter we told you that we did see a bunch of the churn impact coming in. and the focus really is on ensuring that we will get that velocity to maintain the velocity, right?Order intake has been positive, and therefore, we should -- I can't call out saying this full fiscal will be in the 12% to 15% growth level, Sumit. But if we take out the impact of the Bajaj volume and some of the churn, I think by the end of the year, we should be running this. Our run rate should be at a double-digit growth level is what I would expect we will be at right?Now, would that be the full fiscal impact? It's hard for me to say at this stage, Sumit. I don't have -- I don't have the numbers except any one number to set really in front of me. But at a run rate level we should be getting back to the double-digit number. I think equally important is we are maintaining, trying to maintain stronger commercial discipline as well, Sumit. So that's something which we are trying to ensure we are trying to enforce. The idea is not growth for the sake of growth. And so that's something which we are trying to be cognizant about.There's tighter pricing we're trying to drive as well, which had some impact on distribution kind of contracts. But, to your broader question, run rate should be in the early teens, definitely net of these kind of adjustments by the end of the year.
[Technical Difficulty]
I'm sorry to interrupt. Mr. Kishore, your audio is not clear, sir. Sir, may we request you to come to the network area. I mean like your voice is breaking.
Just on your broader vision, I know it's a vision but FY '26 getting to INR 100 billion, is there some recalibration required in light of what we've been seeing on freight forwarding side as well as softer growth so far this fiscal?
Yes. Sumit, it's hard to kind of put a specific hold exactly to a specific thing. I think, as we've said, what I do feel very good about is we had laid out a vision of around INR 6,500 crores for the 3PL contract logistics business. We feel we're in good place to get that over the next 3.5 years, right, on a run-rate basis. I think the challenge for us is some of the macros that affected forwarding likely affected mobility, right? And as those macros get reset, there will be hockey sticks which will come back on the forwarding side as well.So, are there upsides which should exist? Clearly we think the upsides do exist? Do I think there's a need for us to right now go back and start reworking those long-term aspirations? No, right. I mean, those aspirations could move a quarter or 2 here or there. It's about doing the things which will deliver those aspirations which are important, right?That still remains very much a focus. We've not tried to be shy about putting the aspiration out. As you know, we put it out in the middle of COVID, right, because we believe that that's a potential of the sector and our business model offers. There is more -- can it move a quarter or 2 here and there? Of course it could. I'm not going to say, there are things we still don't know over the next 3 years could happen, right There was the COVID effect and so on.But at this stage, I think our focus as a management team is to do the things we which will drive that, right? And to see -- that's what we've been doing in the contract logistics business. It's kind of now as a run rate at probably north of INR4000 crores on a rate basis, between INR4000 crores and INR4500 crores on a run rate basis. Can -- we feel good about it? Waiting for it to grow to INR6500 crores in the next 3.5 years, right?Similarly, some of the other stuff has to play out and the intense focus is on getting the leading things done and then we get the right leading things done, Sumit, then we -- a couple of quarters here and there to us does not make a big difference. But if you run it just on the market, on markets being favorable, then you know that probably some say the markets will move against where the number will not hold, right?So, that's kind of my broad answer. We are not in a hurry to change that number or recalibrate it right now. We'll do it at an appropriate stage. Probably at the end of the year, we'll take -- obviously, we take a strategy review at the end of the year and we'll relook it at that point.
Sure. Thank you and wish you all the best.
Thank you. Ladies and gentlemen, due to time constraint, this will be the last question for today, which is from the line of Ankita Shah from Elara Capital. [Operator Instructions].
I just have 2 questions. So, if you can help me with the volume number for B2B express renewals for 2Q? And how much do you expect to close this year by 4Q, one? And second, how has been the order spend in 3PL business for the quarter versus Y-o-Y?
Hi, Ankita, I don't have the exact forwarding volume number, but if you reach out to our team, we should be able to get that out to you. Don't have write off the cuff. I know that, as I said, our volume did grow 3% on a Q-o-Q basis sequentially. But if you reach out, we'll give you a more specific number.I think on the contract logistics side, volume for the -- order intake for the quarter was north of INR 100 crores. So that has been accelerating itself. We had a weak Q3 and Q4 last year, right, because of some of the churn happening. And I think the Q2 last year was very strong. It's kind of in line with Q2 last year. Order intake is in line with Q2 last year. E-com is slightly still lower than Q2 last year. Non e-com is up, e-com is down. But it's pretty much in line with Q2 last year.But what we find is that the bidding activity is very strong right now. So we are pretty confident that Q3 and Q4 will hold. The pipeline is good compared to last year where we saw a fairly big impact in Q3 and Q4 because of some of the churn and the slowdown in e-com sales.
Ms. Shah, does that answer your question, ma'am?
Just one part you missed, I think for the B2B Express business, what level do you think will close this year in terms of volume, tonnage?
Yes. So, I think, as I said, I mean, our aspiration is to be able to get back to that -- to get back a full recovery of the volume loss. So we have under 20%, 25% growth to go there, Ankita. So that kind of -- I think I mentioned it earlier in a question in response to, I think, Alok's first question on expense.
Ladies and gentlemen, as that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you, everyone. I hope we've been able to answer all your questions satisfactorily. However, if you need any further clarifications or want to know more about the company, please do contact our team or SGR Investor Relations advisors.On behalf of my colleagues at MLL, I wish you all a very happy Diwali and hope the year and the festive season brings happiness to you and your dear ones. Every year during the festive season, millions of our delivery associates across our industry will call you at home to deliver festive joys. These delivery associates are the backbone of our industry and our celebrations and I urge you all, if possible, to spend a few minutes spreading kindness to them, providing them a glass of water or some snacks and just thanking them for the work they do.I think it makes a big difference to our industry. Wish you all a very happy Diwali and a prosperous year ahead. And thank you, once again, for taking the time to join us during this call today.
Thank you very much, sir. Thank you, members of the management. Ladies and gentlemen, on behalf of Mahindra Logistics Limited, that concludes this conference call. We thank you for joining us and you may now disconnect your lines. Thank you.