VRL Logistics Ltd
NSE:VRLLOG
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Ladies and gentlemen, good day, and welcome to VRL Logistics Limited Q1 FY '21 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I take this opportunity to welcome the management of VRL Logistics Limited, represented by Mr. Sunil Nalavadi, CFO. Without further ado, I would now like to hand the conference over to Mr. Sunil Nalavadi. Thank you, and over to you, sir.
Yes. Thank you very much. Good morning to all. This is our earning call of VRL Logistics Limited for the first quarter ended for the financial year 2020/'21. As you're all aware, this is a testing time to all of us and challenging year to each and everyone in the world. The environment in the world is distressed with many political, economic and social disturbances and India is not exempted to it. The economic disturbances are occurring through the trade wars among the developed economies, economic slumps across all the sectors. And socially, we all are disturbed due to COVID-19 pandemic and its impact. We have already disclosed the material impact of COVID-19 pandemic in our business by filing, the disclosure through our letter dated 27/05/2020 to the exchanges. With this background, we are in a position to reach the total revenue of the company of INR 162 crores in this quarter, which is around 30% of year-on-year revenue and around 32% of the quarter-on-quarter revenue and incurred a loss of INR 62 crores in this quarter as against the profit of INR 27 crores, and INR 2 crores, respectively, for the year-on-year and quarter-on-quarter profits. The goods transport segment, which is a major segment of our company, has reached the revenue of INR 148 crores, which is around 35% of year-on-year and quarter-on-quarter revenue. Even during this difficult period, we are in a position to increase the realization per ton by around 5%. And rest of the decrease in revenue is on account of decrease in tonnage.The revenue from bus operations segment has reached around INR 5 crores in the current quarter as against year-on-year revenue of INR 104 crores, which is around 5% of the revenue. As we have seen from the past year, the first quarter is always the peak season for the bus segment. We missed that opportunity due to government restrictions for passenger travels on account of COVID-19 pandemic.We have incurred a consolidated loss at EBITDA level to the tune of INR 31 crores, which is contributed by loss from goods transport segment of INR 34 crores and loss from bus operations segment of around INR 2 crores. The management of the company took a lot of initiatives to control on fixed expenditure, especially the rent and employee cost during this quarter, which has resulted in 2 major savings of these costs as compared to the earlier quarters. The same has been benefited to decrease in loss at EBITDA level. The company has incurred a loss at PBT level to the tune of over INR 83 crores as against the profit of INR 42 crores and INR 3 crores, respectively, during the year-on-year and quarter-on-quarter. The loss at PBT level is mainly on account of depreciation amount, which is in the noncash charge to the P&L account and chargeable as separate cost, which is similar to the earlier periods and also loss at EBITDA level. After the tax accounting, the company has incurred a loss of INR 62 crores in the current quarter. The net debt of the company as of 31/03/2020 was INR 177 crores and increased to INR 189 crores as of June 30, 2020. Even though the loss of the company is INR 83 crores at PBT level, the debt is increased only by INR 11 crores due to the cash loss during the quarter is INR 42 crores, which is computed, the loss at the PBT level minus the depreciation of INR 41 crores. Further, there is a substantial collection from the debtors as against credit sales in the current quarter. The company wish to convert these challenges as an opportunity and taking many steps to improve the revenue, control on cost, et cetera, and some of the action points have been highlighted in our presentation. With this, we are hoping that we will reach at least a positive consolidated PAT for the year ending 2020/'21. Now I request to the participants, if you have any queries, please, you can ask.
[Operator Instructions] The first question is from the line of Kaushal Shah from Dhanki Securities.
Sir, most sectors have faced challenging times in the last 4 months. My question was more on the fundamental side. So are we anticipating any changes in our business model because of this COVID situation? That was point #1. Point #2 is, what are some of the sustainable changes that we are making in our model to ensure that in case we face such uncertainties in the future, we are kind of better prepared to take care of them?
No. Basically, there are no changes in the business model. As you are aware, our network is spread across the country and dependency on any sector is very minimum. We are accepting the goods for transportation across all the sectors and especially, wherever the sectors are losing, especially in the auto sector and all, there is an impact on our revenue. Since we are not depending on a particular sector, we are hoping that definitely, any growth in any sector, definitely, it will contribute to increase in our revenue.And with respect to the initiation action points, what the company is taking. As I highlighted, basically, we are reviewing our policies on a periodic basis continuously. And moreover, we are concentrating on our new sales, especially wherever we are -- the tonnage is not coming up to the mark. Definitely, we are increasing more of our marketing activity to reach the new customers. And as well as we are mainly concentrating on the control on expenditure of our fixed expenses, which are impacting on our margins. One is about the employee cost, you can acknowledge that in the current quarter. The employee cost has been substantially reduced. Similarly, we have taken an action point on the reduction of our rent expenses. That also has given a good result in the current quarter and has been almost -- we have received a concession almost around INR 4 crores in the current quarter. In the going forward, the strategy is to focus on the more sales from the new customers with the continuation of business from the existing customers and apart from, control on these key fixed expenses.
And sir, the situation obviously has improved progressively over the last 2, 2.5, 3 months. So if you can just throw some more color on, let's say, our tonnage increase or, let's say, truck fill rate over the last, let's say, 2 months, how it has improved? Or for instance, even the tonnage growth, the addition of new customers, et cetera. Some thoughts on that, sir?
Yes. Basically, if we analyze the last 3, 4 months performance, basically in the month of -- in the last quarter of the March as well as April, there were no much of a business. The business started coming in the month of May and that has been -- again, reached at a good level in the month of June. And if we compare again July and present scenario, the operational levels are substantially increased. So in the month of April, the tonnage was hardly around, say, 4% to 5% over operational level. And whereas in the month of May, we reached almost around, say, 25% to 30% of the operation level. Whereas in the month of June, we reached almost around 60%, 65%. And currently, the operation levels at around 70%, 75%.
So sir, when we say 70%, 75%, this is the truck filled rate, is it?
Yes. Filled, in the sense of the overall tonnage. And accordingly -- what we are doing accordingly, we are allocating the vehicles. And whenever there is excess capacity, just we are halting those vehicles so that there will not be any further expenses on those vehicles.
The next question is from the line of Prakash Goel from ICICI Prudential.
Can you hear me?
Yes, yes, please.
Okay. Fine. I have 1 question with respect to your capital allocation, sir. Like what will be the strategy with respect to like rent or buy considering the fact that you have done good amount of acquisition in past?
Yes. Considering our total capacity of the vehicles, we are having an excess capacity as of now since the operational levels have not been reached at a normal level. So that there will not be any further CapEx until we reach a normal level of operation and further, if we are encouraging or if we are emphasizing that certain growth in the business. So till that, there will not be any CapEx on the vehicle side. And yes. So...
What is the normal level of utilization, if you don't mind?
Yes. As I said, currently, we are using around 70%, 75% of the capacity. Still, around 20%, 25% capacity, still it is idle. So until the tonnage increase to that level, there'll not be any further CapEx.
Second, with respect to a dedicated state corridor, how would it impact your business?
Yes, dedicated, mainly, impact is on the rail transportation and the heavy commodities. So our segment basically is where we are accepting the commodities, the nature of commodities are much different. Basically, we accept parcels from many customers and load in our own vehicle and distribute to multiple locations. So now this direct freight corridor will not impact much on our business.
The next question is from the line of Prit Nagersheth from Wealth Financial Advisors.
My question is, how much percentage of your business is SME or MSME-driven?
So basically, see, what will happen -- there are 2 things in our distribution model. So one is the acceptance of the goods and the other one is the delivery of the goods. So if we see the acceptance of the goods, then most of the commodities we carry from the manufacturing units and even SMEs also. It depends on the sectors. When it comes to textiles and other things, which is almost around 15% to 16% of our revenue, that is only -- mainly from SME segment. And when it comes to other commodities like auto spare parts or machineries and other kind of pharma's, and these are basically from other than SME segment. So that overall, it is a total mix. So one side, it will be the SME sector, the receiving end or at the time of booking, the most of the customers are rather than SME.
Okay. But at a percentage level, would you say your match business comes from SME, 60%, 70%?
We cannot bifurcate in that way because it depends on 2 leg of operations.
Okay. Okay. See the reason I'm asking, that is that because MSME sector has still not picked up to that level, right? The pickup has been more mainly from the other side. So if MSME sectors remain subdued, then what kind of impact would it have on your business? That's the color I wanted to get.
No, basically, as I said, the total if you approximate percentage of the contribution from this segment, will be around 35% to 40%. Precisely, it's very difficult to comment exact percentage, but it depends on 2 legs of operation. But the impact -- the overall contribution, if at all, we want to say that it will be around 35% to 40%.
Okay. My other question is that you're mostly in the line of LTL, right, which is parcel side?
Yes.
Now if you were in the full truck load, would that give you more resilience in such times, where you could have some business coming from there, which is more consistent and needed in such times because bulk commodities were required, even during COVID times? Do you have any strategy of changing your mix? Or is it going to be predominantly LTL?
No, always what we do, we analyze the loading factors from both the ends. One is from booking and the other one is at delivery. So assume that if we are operating from, say, Delhi to Chennai one route. From Delhi, we are, say, getting 100 loads per day, if Chennai is getting, say, around 60 to 70 loads per day, balance 25 to 30 loads, we arrange full truck load. If you see the overall revenue mix in our goods transport segment, the FTL revenue is around 9% to 10%. And during COVID time, wherever we were unable to get a return load of parcels, there we engage vehicles for full truckload. But because of that, the ratio, our mix of full truckload has been changed hardly around 2% to 3%, not beyond that.
Okay. Okay. Got it. The last question I had was regarding the outlook. So you're saying that you are now at 70, 75 percentage levels. So by when do you think you will go back to normal levels?
Prit, that's what we are expecting, if the things continue even as it is without any further disturbance. So definitely, by end of this year, we want to reach at least the PAT level positive figure. That's what we are expecting.
Okay. Okay. But in terms of tonnage, do you think you can normalize, say, by end of the year?
We are expecting Diwali season starts normally or even by the time of December -- November, December, we are expecting that we may reach at a normal level. And moreover, if we see the month-on-month analysis also, the April month loss were higher side. Again, the May has been reduced. June further, it is reduced. And July, we reached at a positive figure at PAT level.
The next question is from the line of Sachin Trivedi from UTI Mutual Fund.
Sir. I guess you can hear me?
Yes, please.
Yes. Sir, couple of questions from my side. First is with respect to the market share. Sir, is there any way we can figure out that -- and these are all numbers that I would be looking for pre-COVID numbers, so not looking at recent times. Just trying to understand, what would be the market share for us? And how do we track that number? And how has been the direction of that market share? And which routes are we doing better or we are losing out?
Yes. Basically, about market share. Since we don't have any organized figures or something like that. So normally, what we do, we analyze the product of a particular locations. For example, for Delhi, the location, we mainly analyze of what are the products from the Delhi, how much tonnage we are getting. So based on that, we will study the competitor analysis, who are the other operators, actually who are getting the load, again, on a route to route basis. It may be Delhi-Chennai, Delhi-Kolkata, Delhi-Ahmedabad, Delhi-Bangalore. So we analyze route wise competitor analysis and accordingly, what are the things we have to do to get the market share. So based on those studies, actually, we approach to the new customers. And similarly when it comes to other locations, say, for example, Surat and all. Surat, again, it is mainly of a cloth segment. Again, we will analyze which are the routes actually we are operating, which are the routes we are not operating. What is the load factor and what is the load factor of other competitors. So depending on those studies, we established the local marketing team at Surat. And apart from that, we'll do the consigning marketing also.See, for example, locations like Bangalore or locations for that matter, Hyderabad, which are the commodities are coming to these cities from which locations. For example, Hyderabad is getting, let's say, a market size is say around 500 load from Surat. Then how much load we are doing? What are the things we have to need to improve our market share? So each area wise, route-wise analysis, we do accordingly, we educate our marketing team, and we try to get the market share.
And sir, so 2 parts. One is, any color on how are we doing as far as market share is concerned? Let's say, I'm asking from 3, 4 years perspective. And second, if I were to ask you from geographical breakup perspective, Southwest, Northeast, how would that be figuring for us?
Basically, see, in terms of geography side, the south market, what we call the 4 states, 4 to 5 states, there, actually, our business is coming around 40%. It is based on the bookings again. 40% of the booking of consignments we are doing from South and around 20%, 25% from West and another, say, 20% to 25% from North, and the balance around 10% to 15%, it is mixed. It is from Central India as well as the eastern and northeastern markets.
And this mix is more or less stable in, let's say, last 2, 3 years?
Yes. It is stable. And during this period, actually as and when this pandemic spread, initially it spread a lot in the north, subsequently west and south. Accordingly, our tonnage mix also has been changed. That's the reason actually we...
No, sir. I am just talking about pre-COVID only, sir. I am not looking at the...
Pre-COVID, there is no much mix -- change in the mix.
Okay. And your comment on market share will -- whether we will be gaining, losing market share across the board, any specific route or...
Definitely, we've seen most of the cases, since we are into this parcel, we monitor the customer database based on their GST number. If we analyze the GST numbers, new GST numbers from a particular area, definitely, there are good growth in the western and north market.
[Operator Instructions] The next question is from the line of Krupashankar from Spark Capital.
Am I audible?
Yes, please.
. Sir, first, my first question was on the geography-wise, the composition. So if my understanding is correct, we have a lot of exposure to the semi-urban or rural markets. And we have also seen that these markets have done quite well. So is it possible to give a mix of how much would be from the metros and how much would be from the -- these markets?
Yes. Basically, the strength of company is having a good network, even the non-metro areas. But if we see the overall -- the metro-to-metro connectivity or the contribution, the overall metro routes can contribute, say, around 20%, 25%. And the balance is coming from other than non-metro routes.
Right. Okay. So given that also you have mentioned that textile contributes about 10% to 15%. You also would have seen other commodities like your agri -- agro-produced related commodities which would have done substantially well. Is it fair to assume, sir, that the traction, what you're seeing right now is coming more from these commodities because textile on a whole or -- is going through a tough phase? So why I'm asking this question is because I want to understand if there are other commodities available which we can use to fill our trucks.
Yes. Definitely. So even though the cloth or textile is impacted in this period, we have done a good tonnage from agri sector and even the pharma sector. And the construction and building materials, especially, the things like paints and other kind of commodities also increased. And there are improvements in some of the electronics and electronic goods.
Okay. Sir, any percentage which you can allow to perhaps on top 3, at least, like agri, pharma, et cetera?
See, textile earlier, it was around 15% to 16%, now we reached around 12%. And food earlier, it was around 8%, now we reached around 12%. Agro commodities, which was hardly 3% earlier, now it has reached to 12%. The spare parts, auto sector, what we are transporting earlier, it was 6%, now it is in the range of around 4%. The machineries and other kind of commodities, earlier, it was 4%, now it is around 6%. The pharma business earlier, we used to do in the range of around 4% to 5%, now it is increased around 7% to 8%. The movement of pesticides, again, earlier, it was 1%, now it has been reached to 3%.
So you're counting pesticides separately, agri separately and food separately?
Yes, yes. Food is normally the food grains and the packed food items, which are not required for cold storage or something like that.
So we're also hearing, sir, that automotive components, its -- aftermarket at least is picking up. But the auto contribution has come off for you. So any challenge on the -- are you seeing that -- is just that the orders are not coming in to that extent?
No, this is because of halting of so many manufacturing activities during this period. That's the only reason. But other otherwise, the moment the manufacturing activity starts again, it will be bounce back.
Sure. One more question on the PTS business. So what's our outlook over there? Because we -- this is going to be a structural challenge as of now. So are you seeing any traction, any reduction in buses expected?
No. That's the reason, what we are doing. We are maintaining these vehicles up to the validity period of the license. The moment validity period is over, then definitely, these vehicle will be scrapped. And apart from that, wherever possible, we are selling to -- we are trying to sell these vehicles. So the outlook is, again, the number of vehicles will come down until the revival in the market.
The next question is from the line of Ankit Panchmatia from B&K Securities.
Sir, if -- just a rough math if I do, and if you are expecting that we would be at a profitable level on FY '21 PAT basis. Sir, what kind of price hikes we are building into this assumptions? Because tonnage, you have been highlighting that these are close to 70%, 75% levels. A, what kind of price hike assumptions we are building in throughout the next 9 months of FY '21? And would the market be comfortable to accept these kind of price hikes? How has been the customer cooperation with us taking into price hikes into consideration?
Yes, the prices mainly depends on the key expenses, that is the fuel cost. If you see from April to June, there was no increase in the fuel costs. But in spite of that, we are in a position to increase the realization by 5%. Again, after increase in the fuel cost from the last few days of June -- last, say, week or for a subsequent period, the diesel rate has substantially increased. So what we did, again, we have taken an increase in the rate hike. So probably, we may realize another 4% to 5% realization increase during that period. So unless again, the changes in the fuel price, we cannot increase the rate. That's one.And that's the reason to have a better control on expenses, that's why we -- if we see, the employee cost has been substantially reduced in first quarter. So similarly, rent expenses also has been reduced. So where ever the possibilities are there. Say, for example, vehicle maintenance, we are changing the schedules of issuing spare parts or maintenance of these vehicles. And we are halting some of the vehicles. So on account of that, there will be a reduction in the vehicle maintenance cost as well. So if we control these costs effectively further, then definitely, we are hoping that we may reach a positive number by the end of this year. And obviously, we are concentrating more on the addition for new customers. Then definitely, we are hoping that the operation levels will further increase in the days to come.
Yes. True. Sir, this new customer addition, we have been emphasizing on this point. This is largely because the other players are not able to fulfill their demand or they are kind of going [ belly up ] due to this kind of scenario. How easy or difficult it is for us to get these new customers during such pandemic times?
So basically, what is happening, this hub-and-spoke model will support us to reach to any from-and-to locations. In case of others, if they don't have this hub-and-spoke model properly or if they are more dependent on a full truck loads or some of the routes, they are unable to reach, where, we can provide a service to the customers. And even during this pandemic, most of the places, we observed that the other customers were unable to accept the goods for movement for certain routes. So we reached -- we approached such customers, even customers approached to us to book such consignments during this period. And we are hoping that those tonnage will continue forever.
Right. Sir, 1 last question from my end. Sir, this rent expense which you indicated, condition of INR 4 crores. This is expected to continue throughout FY '21 or because once thing gets revert, these concessions would kind of slowly, steadily go off? How should I read this?
Yes, obviously, that's the reason. For the month of April, actually, we ask for complete waive-off, where almost around 80%, 90% of the property owners, they have accepted our request and waive-off even for the month of April. And again, some of the property owners, so they have given concession as a percentage for a whole, full year period. Yes, it will continue for -- until the end of this year. But there will not be this kind of reduction in the next quarter, there will be increase, but it will be absorbed by increase in revenue.
The next question is from the line of Depesh Kashyap from Equirus Securities.
Sir, your employee costs have decreased substantially in this quarter. Can you please guide us, like how should we think about it going forward? And the tonnage is coming back, how should the employee cost -- will it be coming back to your Q4 levels or it will sustain at these levels?
No, it will be at a low level. The reason is, for the first quarter, what strategy we applied, basically, we have not removed any employees. What we did is -- always, we used to pay these drivers and coolies, payments are variable based on their performance, they will get. Since the performance was low in this quarter, we have not given any salary for those -- because of the less in performance. And this quarter onwards, actually, the exercise is already on. So we are analyzing the branch-wise performance, branch-wise tonnage. Depending on their performance, the manpower will be allotted. And we do a lot of this reshuffle in manpower across all the branches. That exercise, we are already doing. And moreover, in some of the locations, see, wherever there is a long absenteeism and all, then definitely, we can remove those employees, so that obviously, it will have a reduction in employee cost in the going quarter as well.
Sir, the last quarter, you spoke about that you have cut the salaries and for this particular quarter. But when the things improve, you will take -- you will increase back the salaries. So I just wanted to understand how much was the salary cut in this quarter and what is going to be reversed in the ongoing quarter, please?
Yes, per month, the reduction in salary is around INR 1 crores, INR 1.5 crores, still, it is continuing, and it will continue further. Then once we reach at a normal level, then that will be withdrawn.
Okay. Okay. Understood. And sir, you talked about 70% to 75% tonnage coming back in the GT segment. Can you please help us like, what is happening in the passenger transport segment? And what is the outlook there? Is there any revival happening there?
Passenger, we reached around 20%, 25% as of now. And in the near future, we will -- because the first quarter always -- there has to be a peak season for us. And in the subsequent period, again, the concept of this vacation period and all will not apply this year. So normally, how it used to happen during festival time or during vacation time, normally we used to get good passenger demand, but that will not be there in the current year, that's what our expectation. And the present level, around 20%, 25% or we may reach around 40% in the days to come. It may not cross beyond that.
Okay. Understood. Sir, lastly, sir, can you please quantify the growth in tonnage due to a new customer additions in this quarter? Because I think the tonnage decline is 70%. So if the customer addition was not there, what would have been the decline?
Yes, almost around, say -- you can say 6% to 8% tonnage we got from the new customers.
Okay, sir. And sir, what is the gross debt on the books currently? Gross debt?
Gross debt is -- see, we are having a cash balance of around INR 12 crores, INR 13 crores. And the net debt is around INR 189 crores. So roughly around INR 201 crores, INR 202 crores.
The next question is from the line of Pramod Amthe from CGS-CIMB.
It's good to hear that July you are coming back to normalcy and profitability. Two bigger questions. One, if I heard your commentary right, you are saying your capacity utilization is 75%. But if I have to look at the GST e-way bill per day tally, it seems to be almost back to the near peak level. So where is the disconnect? Do you track this GST e-way bill national wise, where it is almost like 90%, 95% to normalcy as compared to that, you are saying you are gaining new tonnage. So where is this disconnect?
So basically, again, the e-way bill is applicable only on a certain transactions. As I said, if the invoice value is more than INR 57 crores and above, only in those scenarios, the e-way bill is applicable. And apart from that, if we see the other -- this one, the diesel consumption. Overall, the diesel consumption is also reducing. See, I'm not in a position to say that exactly, it is related to transportation. But overall, if you see the collection of GST also, the collection of GST, again at a government level, it has not been reached at a proper level or at a normal level, even though they are increasing in the e-way bill. So there is a gap in government data also.
Okay. So you are saying might be it's because of MSME or the type of freight, which is getting generated, may not be matching to what you are looking at?
Yes.
Okay. And the second one is more about the new vehicle acquisitions. Traditionally, you have never looked at used truck acquisitions ever, if I'm right. Am I right?
Yes. Yes.
But looking at now in BS VI scenario, where the vehicle prices have gone up by 15%, 20%. And there can be a scenario where the stress in the transport system because of the historic high event, you might be getting an opportunity to buy a good second-hand trucks under distress. Would you ever relook at your strategy to do this instead of new buys? Or it's a complete...
We got many proposals from some of the truck owners. And we examined the technical viability of those vehicles and all these things. We did certain exercises on that. But we are not happy with the acquisition because those vehicles will not fit for our operations.
Okay. So you would still continue to evaluate -- so if I understood, you never used to evaluate...
Yes. Good offers come and which are matching to our load factor and certain things in the commodity, what we are handling. If it is a good offer, then definitely, we can look into it. But as of now, since our vehicles itself are not utilizing, so in the near future, such kind of transitions will not happen.
So earlier, you never used to look at the used vehicles. And now you are looking at, is that a fair understanding? Or you earlier also used to...
As always, the proposals will come. See, most of the people who are engaged in vehicles, say, third-party vehicles, even those people will approach us to buy these vehicles. But we have not done those transactions. But whenever this new offer, new things will come, always, we'll do certain exercises on that. If it is suitable, then definitely, we will proceed, otherwise, no.
The next question is from the line of Prateek Kumar from Antique Stockbroking.
Yes, I have a couple of questions. Firstly, so when you talk about the recovery in business volumes, so does this vary from region to region? And do you have a varied pricing power in different regions? When you say like 5% hike, does this vary from region to region? And acceptability of your brand in different regions is different?
Yes. Definitely. See, again, our pricing policies are not static. Always, what we'll do, depending on the load factor and other things, we definitely, we will look into it wherever possible to increase the rate and even as well as decreasing the rates. Say for example, if we are not getting any returns because of the slowdown in the market and all, definitely, we will slash the rate at least to move the vehicle back to the booking stations. That's the kind of exercise we always we will do.
And is there a difference in the pace of recovery, which you mentioned, in the 5 regions you mentioned?
Sorry?
On the difference in pace of recovery of volumes in the 5 regions?
Yes, volume, again, most of these metro cities, the volatility is very high because of these restrictions, the lockdown or seal down. So most of the major cities, that comfort level has not yet come to cities like Mumbai, we are operating at very low level, which is one of the major city for us to contribute to our tonnage. Similarly, that had been happened in the Delhi also, but now the recovery is better. And Kolkata, the recovery rate is very bad. Chennai is also very bad. And Karnataka, for that matter, we did better in June, but not better in July because, again, the government has imposed certain lockdown. So these are -- continuously, it is happening, and we are monitoring the area wise, how to take a call, how to, whether increase rate, decrease rate, how to accept the approach for the new customers and whether we have to do full truckload or LTL. These are continuous exercises we are doing.
And have you closed any facilities in these times permanently?
No, no. See, we have not closed any of the hubs. For that matter, in some of the lower hubs, actually because of suddenly opening the market, we have seen the overloading also. Overload in the sense, the demand was very high. So there is excess load factor was also there. And in some of the locations, yes, there is a short fall, but there actually, we are taking calls, even employees are not coming. And even we have seen a lot of this labor distant problems in these because of the shift of migrant labor to various locations. And we have faced some of the driver problem in the initial period. Now all the things have been normalized. Our operations are happening at a smooth level now.
Okay. And just 1 question on your price hikes, which we talked about, 5%. Is there any -- I mean, what would be the industry price hike as per your view?
They have also taken a similar stand. And operators, actually, they have increased beyond this.
The next question is from the line of Krupashankar from Spark Capital.
Just 1 question, sir, on the driver part. So have you seen any issues as in -- till April, May, how it was? And June and July, and how things are?
In terms of?
Driver availability. In fact, we are hearing that a lot of drivers have not come back to the job and there's acute shortage, so...
Those disturbances were there. During the month of March, most of the drivers have left. The operations here have impacted very bad. And that continued even for the month of April or even for the month of May also, part of the month May. Once the local -- the transportation has been started, especially some of the train facility has been arranged, and local transportations have been allowed, so, after that, most of the drivers, again, they came back and they joined for duty. And for us, another important thing is since they are employees of the company, we are having all their contract numbers, all these details. So directly, our local people have approached those people and get back them on the duty. So currently, at our level of operations, we are having sufficient drivers.
Okay. So if you are anticipating this scale up coming back, again, 90%, 95% of your overall pre-COVID levels. Do you still have adequate drivers? Or would it take some time?
Yes. Even in our normal days, we used to face certain shortage in the drivers, but it is in the range of, say -- daily around, say, some 50, 60 vehicles used to halt because of nonavailability of the drivers. We may reach to that level once the operations are normalized.
The next question is from the line of Alok Deshpande from Edelweiss Securities.
Just a couple of questions. One, on your bus operations segment, I think -- I mean I know that it's a relatively smaller part of your business. But still, what is the outlook there? Because it seems like that's something which will really lag the ramp-up that you will probably see in your trucking part of the business. So any color on that?
As I said, we may not reach the normal level of operations in this current year. So as against a very low level in the first quarter, now the level of operations have been reached to around 20%, 25%. And we may reach around 40% in the next quarters.
Okay. And Sunil, you mentioned that July, because of the -- some normalization coming back compared to the Q1, at least in the PAT level, you are positive now. One question I have is, if you continue at this utilization or maybe only slightly higher than this, do you think that you will be that positive for the whole year as overall at this utilization?
That's what we are trying. We are trying to increase the level of operations as well as to have a control on the cost. So both put together, definitely, we are hoping that we may reach the positive number by end of this year. And moreover, the debt levels, again it will be substantially, again, it will be reduced because there will not be much CapEx. So that will add up to good cash flows in the operations. So those cash flows will be utilized for reduction in debt further. So again, there will be savings in the finance cost.
Sure. And Sunil, just 1 on -- your PPT mentioned about scrapping out the old vehicles, et cetera. So any internal assessment on that, what that number can be, how many vehicles can be scrapped out?
So we did some scrappage of vehicles in the first quarter also. There is -- since the scrappage policy, they are mentioning, say, around 15 or 20 years. There's no clarity yet. But assuming that if it is 20 years, more than 20-year vehicle, if those vehicles needed for higher cost of maintenance or higher cost of repairs and any such kind of thing, then rather than doing the maintenance or repair of such vehicles, we are deciding to scrap those vehicles. So on an overall basis, say, around 700 vehicles we are having 20-plus a year. So those vehicles, continuously we'll monitor. And wherever there will be major expenses, then definitely, we will take a call to scrap those vehicles.
Okay. So the pool that you have identified is 700 vehicles is what you're saying?
Yes, yes. And those are all low capacity vehicles. Their tonnage capacity is not more than, say, around 10 to 12 tons.
The next question is from the line of [ Ritesh Poladia from Girik Capital ].
I believe are 5,000 bus and truck is quite...
Mr. [ Poladia ], I request you to move to a better reception area, please. Your voice is breaking up.
Am I audible?
Yes, sir, now you.
Yes. Sir, are 5,000 bus and trucks, your fleet is built for 10 years age? Am I -- my assumption correct?
Sorry?
Our fleet of 5,000 trucks and buses, the average age would be less than 10 years?
Yes, it is around 9 years.
9 years. Sir, in the annual report, your repair and maintenance, stores, consumed and tires, all 3 put together is about INR 250 crores kind of expense. So roughly about 18 to 20 ton costing about INR 15 lakhs, INR 20 lakhs. So is the 25% kind of a repair expense is reasonable?
So this is including the operational expenses, not only precisely. Since you're adding tire cost. Again, it is not a part of repair, it is operational expenses. And moreover, in the maintenance, also the driver payments are also included in that. So precisely, your repairs and maintenance cost, it is -- which is around 9% to 10% of our revenue.
Okay. So INR 129 crores of repairs and maintenance includes the driver cost also?
Yes, driver cost of around 4%.
Okay. And then INR 380 crores of employee cost, what does that include?
That, only the minimum wages part of the drivers is included in employee cost.
The next question is from the line of Prateek Kumar from Antique Stockbroking.
Sir, just one thing on -- like are you -- have you seen any, I mean, offers from like some companies going down or some small players going down during such times in terms of inorganic opportunity?
No, no. We'll not do that because the kind of operation, what we are doing, there are no other comparables. Comparable in the sense that there are no right acquisitions. So instead of that, we can increase our network, we can increase our branches. That is possible rather than acquisition of the existing operators.
[Operator Instructions] The next question is from the line of Ankit Pande from Quant Mutual Fund.
The incremental working capital that we've been availing, is the securitization process fairly smooth? Or is there some issues securitization against receivables or property. I just wanted to have some clarity there.
For our working capital, there are 2 things. One is the securities of the receivables from the customers and the spare parts, tires inventory what we are maintaining, that is a major security for our working capital limit. For -- on these values, we are having a total of -- limit of INR 105 crores. And currently, we are utilizing only around INR 60 crores to INR 65 crores of this limit. And apart from that, we are having another INR 50 crores limit, which is on the properties. Again, it is a working -- it is a overdraft facility. As in when we need, we can withdraw funds from overdraft facility. And currently, we have utilized around INR 25 crores out of that overdraft facility. And that is securitized by the properties.
All right, all right, all right. And if you could clarify a little bit more on the employee cost. As a percentage of revenue, they may or may not impact very heavily. But to what extent can we continue reducing through the remainder of the financial year?
Now currently, we are incurring the level of around INR 65 crores in a quarter, say, as against around INR 90 crores, INR 92 crores in a normal period of operation. So even if we reach at a normal level, we are seeing the reduction of around INR 10 crores.
Okay, okay, okay. So Q2 and Q3, we'll see some normalization back? Or do you think you can sustain at the current level?
Yes. We are hoping that by the month of December, we may reach the normal level of operations. The fact that it continues as it is. If there are further disturbance, again, we don't know what will happen.
[Operator Instructions] The next question is from the line of [ Raja Kumar V ], an individual investor.
Sir, I just went through your annual report. Your Chairman has mentioned that due to the pandemic, he's expecting some of the unorganized players to go down and that will be an opportunity for VRL. At the same time, I was hearing to the management of the Shriram Transport, where they lend -- they are a big second-hand truck lender in the market. So they have been saying that they don't see a big kind of an impact on the MSME segment. So they are saying that the things are coming back to normalcy. So I just want to know how do we marry these 2 things, 1 management thing, that they don't see a big impact. But I mean you folks feel that you may have an opportunity? So just wanted to have some more color on it. And the second question is on the -- should I ask my second question? Or do you want to respond and then may I ask the second question?
Yes, I would like to respond on this question. Basically, see our comment is -- input is based on what the market studies we did at a ground level on a particular area. Wherever we used to face some of the competition from unorganized players, that has been reduced over a period of time, actually it is coming down. The reason is, one, that their kind of operation or their financial position is not healthy as of now. And many people are facing problem even to incur their routine operational and maintenance expenses or routine running expenses. They are not having the sufficient balance or having the capital to run the business in a normal, that is one. And second thing, during this time, some of the moratorium and all these facilities have been announced by the government. So some relaxation is there as of now. The moment, again, the repayment period -- repayment of loans and all these things started, again, there will be further disturbance in these unorganized players.
Okay. Okay, sir. Sir, and the second question is, you have mentioned that you are still expecting a positive PAT for FY '20, '21. So I was just looking at the math, so you did about INR 86 crores of PAT last year. And your Q1 of last year, you did about INR 26 crores, roughly about INR 60 crores is what you made in the last 9 months of the last financial year. And you're already having a negative bottom line of [ INR 64 crores ] for the current quarter. So which means you're expecting the current year, the go-forward 9 months will be better than the last financial year? Is that's the way I should read the numbers?
Yes. At profitability level, yes, definitely, what we are anticipating.
In other words, see, you expect your current -- the subsequent quarter numbers to be better than the previous financial year. Is that what you are saying?
Yes. Even though there is no -- not up to the mark growth in the top line, we are expecting the profitability levels will improve.
Okay. Okay. Is it because of the pricing -- better pricing you have from...
Pricing is one and control on the key fixed expenses.
Okay. Sir, and how about the scrapping? You mentioned you're going to look at the scrapping of 700 vehicles. I was also looking at your depreciation policy, you depreciate your vehicles over 9-year period. So...
All these vehicles have been depreciated. This was -- normally, we'll depreciate the vehicles over a period of 9 years. And the vehicles which are sitting in the books over 9 years, there is no book value as of now. So even though we scrap these vehicles, we realize some scrappage value. And apart from that, we can use those existing spare parts in those vehicles for the other vehicles. But there will not be any loss in the books because of those scrappage because those vehicles have been already depreciated.
Okay. So would it be a significant number for the 700 vehicle value because the book value is 0...
Wherever we may face a major maintenance cost, only in such scenario, we are taking a call.
Thank you. As there are no further questions, I now hand the conference over to Mr. Sunil Nalavadi for closing comments.
Yes, I am very much thankful to all the participants and yes, a lot of questions have been asked. I hope that I have given a good clarity on those questions. And if anybody wants to have further interactions, please, you can directly call me to my mobile number. Thank you, one and all. Thanks.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.