VRL Logistics Ltd
NSE:VRLLOG
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
515.35
795
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Gentlemen, welcome to the VRL Logistics Q1 FY '22 Results Conference Call, hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Mitra from ICICI Securities Limited. Thank you. And over to you, sir.
Yes. Thanks, operator, and good morning to all the participants. Thanks for joining in. We are hosting Q1 FY '22 Results Conference Call of VR Logistics. We have with us Mr. Sunil Nalavadi, CFO of VR Logistics, to discuss the results and follow-on Q&A. So without further ado, over to you, Mr. Nalavadi, for your opening remarks.
Thank you, Mr. Abhijit. Good morning to all the participants. I'm Sunil Nalavadi, CFO of VRL Logistics Limited. And this is earning call of our company for the quarter 1 of financial year 2021, '22. Again, the frequent lockdowns in various states in quarter 1 of FY '22 slowed down the momentum that was witnessed in quarter 3, quarter 4 of FY 2021 and beginning of FY '21 as the second COVID surge in India hit alarming levels. In spite of the difficult stage, the impact on business was better than the first wave witnessed last year as supply chains were well evolved enough to cope with localized and staggered lockdowns. As COVID positivity rate subsequently crossed to pre-COVID second-wave levels, overall demand has been trending better since last week of June '21. During this quarter, the total revenue of the company reached to INR 417 crores as against INR 162 crores during the last year. The increase in revenue is mainly contributed by the goods transport segment of our company. The revenues from goods transport segment is increased from INR 148 crores to INR 385 crores. The growth in revenue of goods transport segment is on account of increasing realization per ton by 14% and balance is on account of increasing tonnage. The revenue from bus operation is also increased from INR 5 crores to INR 18 crores in spite of reduction in number of buses by 46 numbers. The increase in revenue is mainly on account of increase in number of passengers. The total EBITDA of the company increased by 225% from minus INR 32 crores to plus INR 40 crores. And the percentage of total income has also increased from minus 19% to plus 9.48%. The increase in EBITDA mainly contributed by our goods transport segment, which has increased from minus INR 25 crores to plus INR 43 crores, and percentage to revenue is increased from minus 16.67% to plus 11.19%. The improvement in EBITDA is mainly on account of increasing goods transport volumes and increases in freight rates periodically. We're continuously monitoring the diesel rate since the diesel cost is major expenses for our business and accordingly passing the increase in rate by increasing in the freight rates. The retail diesel prices increased from INR 66 per liter to INR 95 per liter, whereas our procurement cost is increased from INR 61 to INR 84. The EBITDA of bus segment also improved from minus INR 5.72 crores to minus INR 3.83 crores. The total EBIT of the company has increased from minus INR 73 crores to plus INR 2 crores. The increase in EBIT is mainly contributed by our GT segment, which has increased from minus INR 56 crores to INR 14 crores. And bus segment EBIT is improved from minus INR 11 crores to minus INR 7 crores. On account of improvement in EBITDA and EBIT, the overall PBT of the company has improved from minus INR 84 crores to minus INR 7 crores. And on account of this, the profit for the quarter is improved from minus INR 63 crores to minus INR 6 crores. When we compare our performance in this quarter to the previous quarter, the performance is impacted on account of COVID restrictions. During this quarter, the total revenue of the company reached to INR 417 crores as against INR 603 crores during the last quarter. The decrease in revenue is mainly contributed by the goods transport segment of the company. The revenue from GT segment is decreased from INR 536 crores to INR 385 crores. And decline in revenue of GT segment is on account of decrease in tonnage by 26% and decrease in realization by 2%. The decrease in realization is only due to change in the route mix on account of extended restrictions in multiple states, impacted on long-haul freight revenues. The revenue from bus operations is also decreased from INR 56 crores to INR 18 crores. And the number of buses were constant at 291 buses. The decrease in revenue is mainly on account of decrease in number of passengers. The total EBITDA of the company has decreased from INR 99 crores to INR 40 crores, and the percentage to total income has also decreased from 16% to 9.48%. The decrease in EBITDA mainly contributed by our goods transport segment, which is decreased from INR 104 crores to INR 43 crores, and percentage to revenue is decreased from 19% to 11%. The decrease in EBITDA is mainly on account of decrease in goods transport volumes that has been resulted into unable to recover the key fixed cost of this segment, mainly the employee cost. As a percentage to the revenue, it has increased from 14% to 19.3%. That is increased by almost 5%. Rent expenses is increased by 1.5%, rates and prices by 0.6% and others by 1%. Even though the diesel cost as a percentage to revenue is increased by 1.4%, the same is compensated by a decrease in lorry hire service by 1.25%. The retail diesel prices increased from INR 86 per liter to INR 95 per liter, whereas our procurement cost is increased from INR 79 to INR 84. The EBITDA of bus segment is almost maintained at INR 3.8 crores. The total EBIT of the company is decreased from INR 60 crores to INR 2 crores. And decrease in EBIT is mainly contributed by our goods transport segment, which is decreased from INR 76 crores to INR 14 crores. And bus segment EBIT is improved from minus 8.67% -- 6 -- INR 8.67 crores to minus INR 7 crores. On account of the decline in EBITDA and EBIT, the overall PBT of the company has decreased from INR 51 crores to minus INR 7 crores. And on account of this, profit for the quarter is decreased from INR 37 crores to minus INR 6 crores. As at 30 June 2021, the net debt of the company is increased to INR 112 crores as compared to debt as at 31st March, it was around INR 101 crores. During the quarter, the company has invested INR 38 crores in the capital expenditure. I'd like to further inform you that the volumes are again picked up at the pre-COVID levels in July. And we also increased the price rate by 10% in last week of June. We are hoping that, again, we will bounce back with good growth wave, with higher profitability margins in rest of the period of this financing year. With this initial remarks, now I request to the participant to ask any questions.
[Operator Instructions] The first question is from the line of Rishith Shah from Dhanki Securities Private Limited.
Yes. Sir, about -- this is the question regarding the bus segment. So in the bus segment, can you just highlight quarter-on-quarter passenger as well as the realization increase or decrease?
Okay. There is a decrease in passenger travel by around 68% and increase in realization by around 19% and decrease in average fleet occupation by 9% and decrease in number of trips by 70%. This is quarter-on-quarter.
70% decrease in number of trips, you said?
Yes.
Okay. So I mean, this was largely on account of the regional lockdowns, is it?
Yes, it is.
Okay. And sir, in the bus segment itself, can you, I mean, just give us an outlook? Or how is it -- I mean, in July, how is it performing? And how do you expect it to continue going forward?
Yes. In bus segment, what happened -- see even though the goods transport segment is allowed to operate during the restrictions, the bus segment was totally halted. And the Karnataka is a major place for contribution in bus segment. So in Karnataka, the lockdown is extended for a major project. That's why the buses have not been operated in first quarter. However, from last week of July -- June, again, the operations have started normally.
Okay. Okay, sir. Sir, and second thing, I mean what was the tonnage number for this particular quarter?
No. We are not sharing any tonnage numbers. Just we are sharing the moments in the tonnage.
The next question is from the line of Vikram Suryavanshi, Capital.
Yes. But if you can just highlight what was the average realization in per -- just to get a sense of pricing environment in challenging time.
See the average realization per passenger, I told increased by 19%. It has increased from INR 921 to INR 1,102.
Okay. Now 1-7?
INR 1,102 from INR 921.
Okay. Got it. And in case of biodiesel, is it because of availability of fuel or is it because of a pricing that it has announced moderated to below target level?
Yes. It is -- both the reasons are there. One is availability, the major -- that is a major reason. Even some of the producers, actually, they are producing in very small quantity. The reason is their raw material cost has been increased. And that's why our quantity of procurement is also lower in this quarter. But we are more focusing on, again, buying from the refineries. So accordingly, the difference between refinery and biodiesel in the range of around INR 323.
Understood. Okay. And last, basically, we were expecting still there is a scope for improvement in textile contribution, at least some settlement. Within textile, our performance now better, particularly in yarn side and all that. So is it now -- are we seeing traction even in that sector? Or if you can highlight between different sectors, how the demand is recovering.
In terms of sector-wise volume, yes, there is a recovery in textile segment. If you see quarter 4 versus quarter 1, there is an improvement of around 3% in textile contribution. And similarly, there is a little bit dip in the agriculture production equipment. This is because of a seasonality. So since, again, monsoons are at a good level at this year, again, we are hoping that there is a good season in the coming days for agriculture products. But there is a good recovery in textile. Even pharma has shown from 3% to 4% growth. And even industrial goods has been shown some 3% growth. But overall, there are no major needs to change in the product, except in these key commodities. So overall, there are decline in the volumes from Q4 to Q1. That's how the volumes also declined.
And last question is on CapEx. Is there is any change in CapEx plan or what kind of a CapEx for full year or next year we are planning? And within that, the mix of EV, what we are now try to add in our fleet? So if you can just give, if there is any revision or kind of CapEx, particularly.
See in first quarter, the CapEx is impaired around INR 38 crores. And the goods transport segment, we have invested around INR 32 crores. And we invested around INR 2 crores for passenger segment also. Some of the vehicles we are buying in passenger, only to maintain some of the key routes, around 18 to 20 vehicles we are buying. Again for the remaining period, yes, again, major CapEx will be for our goods transport segment only. I think on a full year basis, it will be in the range of around INR 60 crores to INR 70 crores as of today. That's what the plan is.
The next question is from the line of Mohit Rathi from CCIPL.
I have one question, regarding this app space. nowadays, there are apps for goods transport as well, both the intracity and intercity. Do we see any kind of competition? Or are we also working on building an aggregator? Can you like comment something on this?
Sorry. Your question is not so clear. Can you repeat the same?
Sure, sir. Sir, nowadays, we are seeing these apps for goods transport in intracity and intercity, both the spaces. Are we like facing any kind of competition from this space? And are we also working on some kind of aggregator or app? Could you comment on that?
No. The aggregator apps is basically to provide information about the availability of the vehicles. So these aggregators will not book the consignment from the customers. Yes, for example, this is going to use full. Even for us also, wherever we are hiring the vehicles, we are using these apps to get the vehicles from the owners. These are not directly competitor to us. These are the facilities provided to know the availability of the vehicle in particular area, either for intracity movement or intercity movements.
Sure. But like if I may add on to that? Does it affect our margin in any way? Because, for example, in food aggregator apps, they will take some margin from the restaurants. So does it affect us in any way?
So since the majority of our operation is through own vehicles, the dependence on higher vehicle is very low in our case. So that will not impact major -- it will not impact much on us.
The next question is from the line of Prateek Kumar from Antique Stockbroking.
My question is on realization in goods segment. You said they have increased by June -- by 10% from June, July onwards. So how is this placed on a year-on-year basis for 2Q?
See, year-on-year, it has increased by around 14% for June quarter.
No. I mean post this 10% increase for 2Q...
No, no, no. This is not a forecast. See the rate has increased in the last week of June. So the major realization will improve in the -- from the month of July onwards. So this 10% is not at all included in this 14% improvement.
Yes, sir. This is what I was asking for the September quarter what would be like -- let's say, we don't increase that further, what would be the implied increase for Q2 on a year-on-year basis?
Year-on-year basis, see, July, we'll compare, it is in the range of around 8% increment in realization. 8% on month-on-month basis. So if it is year-on-year basis, it will be in the range of around 20%.
So assuming we have -- hypothetically, we have like -- I mean 5% cargo book, we can have a 25% revenue growth in 2Q?
Yes, absolutely.
And still flow to like a normalized margins, which we saw like in 2Q, 4Q last year?
Yes. Definitely, the margins will improve because we have taken a price hike and even volumes are also at a pre-COVID levels. So definitely, we are hoping that we will maintain the growth as well as profitability margins.
Okay. And sir, in terms of exercising expectancy to, like 80% of our customers are secondary customers. So how do the competition behave and spans in terms of -- is everyone increasing pricing, or only we are increasing and all the customers affecting the price maybe?
No. Everyone is increasing. Basically, we are a little bit delayed increasing the rate, but most of the people have increased the rate in April/May also. But we have taken an increase in rate in the month of June.
So it's very widely accepted in that sense?
Yes.
The next question is from the line of Mukesh Saraf from Spark Capital.
My first question is on the pricing again. So we have taken this price hike around the end of June. So as of now, has this been in effect for all your customers? Or will it take some time for it to kind of flow into all your customers, even the larger ones, as the contracts get renewed?
The large contracts, basically, we are having a price escalation clause in relation to the diesel cost. See all contracts are periodically changing the rates depending on the increase in the diesel price. So there is no need to increase rates over there. But for remaining customers for -- from -- to whom we don't have a contract, we have increased the rate 10%. So on effective basis, that realization has improved from a month-on-month basis. Compared to June versus July, it has improved by around 8%. Since year-on-year, it has already increased by 14% in the quarter, this 8% realization will be in addition to that percentage.
Got it. Got it. So effectively, we are seeing an 8% increase after you've hiked the prices.
Yes.
Okay. Okay. And secondly, sir, just starting with comments that you've mentioned. You mentioned that the average diesel price for you in the quarter was INR 85. Is that what I heard, right, sir?
INR 85, yes.
Okay. Versus the prices -- retail price is around INR 93, INR 95, or something like...
INR 95, yes.
Okay. So this is a big gap? Or do you see that the -- if you've kind of hit us more this quarter? Because probably we saw...
The comparison is like this. The closing price of a retail price we are taking. Say, for example, as of 31st March or as of 30th [ June ]. But in terms of procurement cost, it is average prices in relation to quantity, what we consumed for the entire quarter.
Right, right. So this INR 95 will hit us now, sir, this quarter. That's what I was trying to ask.
INR 95 is, again, a retail price. But our closing price will be in the range of around INR 85.
Closing price is INR 85, sir? So June closing price, that was average price was INR 85, I thought.
Yes, yes. Average is INR 85, and closing price will be additional INR 2 to INR 3, say in the range of around INR 87, INR 88. Not beyond that.
Okay. Okay. Okay. So there's still that INR 7, INR 8 gap between the retail price and your price?
Yes.
Right, right, right. So you'll not need additional price hike. That's basically what I was asking. So despite this 10% hike that we have taken, even if your procurement price now goes up, based on the closing price of June, it's not like you will need additional price hikes.
So as of now, in our view, this 10% increase will take care of this existing diesel price now, whatever the retail price as of today or whatever market price. If going forward, again, it increased beyond certain level, again we have to take a call on increase in the rates. Even in last financial year, see we increased the rates by 10% in the month of April. That has been taken care by the entire year. That's how it hasn't resulted in a good improvement in the margin on quarter 2 onwards. So similarly, since this 10% will take care of the whatever diesel escalation in the coming days. And moreover, if the volume starts increasing, again the capacity will improve. Utilization levels will improve. And moreover, [indiscernible] fixed expenses will come down on the margins.
Yes, yes. So I was just trying to assess the gross margin side of it. So yes, I get it on the operating leverage side, yes, that definitely, yes.
Yes.
Right. And my last thing is on the higher vehicles, in this April to June quarter, what proportion do you see, sir, higher vehicles?
It has reduced by 1.45%. And on overall basis, the higher vehicle varies from, say, around 9% to 7%.
Okay. 9% to 7%. And this -- I mean, as you said, like as the volumes go up, even this will go up, right, the higher vehicles. It used to be even 14%, 15% at some point in time. So how much do you see this go up, sir?
It'll not increase beyond 9% to 10%.
Okay. You see around that 9%, 10%.
Yes.
The next question is from the line of Achal from JM Financial.
My question is if you could give us a sense in terms of the volume growth once again please for the GT segment on a Y-o-Y and Q-o-Q basis in first quarter?
See volume in first quarter, see, there is an improvement in revenue from INR 148 crores to INR 385 crores. Out of that, the 14% increase in revenue on account of increase in tonnage, and balance is on account of increase in the volumes. If it is some -- yes, Q-o-Q? On a Q-o-Q basis, the volumes have reached by 26% and the realization is also decreased by around 2%.
Right. And if we were to look at June 2019 quarter, how would that number be in terms of volume, absolute volume drop? Just the volume part, please.
No. Last year June to this June, it has improved actually.
The volumes are up compared to July '19 quarter? The June 1, '19 quarter, sir?
Yes, yes.
How much would that be?
It is around 160%, 160%, 170% increase in volume.
160% compared to June '19. Is that so?
Yes.
Okay. My second question, in terms of the margin, so how do we look at the margins internally? Is it -- we look at a particular margin on a rupees per kilometer, per ton kilometer? Or is it percentage being bought with, as such?
No. Basically, it -- again, we do the route-wise analysis and state-wise analysis, basically the moment of goods from one state to other state. And accordingly, we go on fixing the rate. And we study the competitive analysis also in a particular route. So depending on that, we fix our rates. So margin side, what we do is, every month, we keep on getting the MI's report, and we study all major expenses. It may be fuel and it may be other costs, also like the employee costs, maintenance costs, everything. So based on that, if fuel prices is increasing directly, we can increase the rates. And wherever possible, say, fixed expenses, we will try to reduce the fixed expenses, so that margin will improve. But increase in freight rates, basically in a periodic basis, whenever we do, during the middle of financial year, it is directly driven by the fuel price. And once in a year, based on other expenses also, we will take care -- we will decide on the increase in rate based on other expenses other than fuel as well.
Right. But when you look at the hiking the rate, let's say, for fuel, do you look at the margin stability more from percentage perspective or the rupees per the kilometer kind of a number? I'm just trying to figure out in terms of diesel, when it went up from INR 60 to INR 90, does that mean the percent margin will be lower even if the absolute profit could be much higher? Would that be fair assumption?
So June quarter, say for example, percentage to revenue, it is increased by, say, from 30% to 32%. So 2% we have to pass it on to the customers. So that's why on a -- since it is a first increase in the financial year, we have increased by around 10%.
Which takes care of the other expenses also, which...
It takes care of other expenses, and even last price hike we did in the last April, April 2020. From April 2020, we have not increased the rate. Again, we have increased the rate only in June '21. So with the competition, analysis of all expenses as well as the fuel expenses, we increased the rates by 10%.
Understood. Understood. Another question I had, with respect to the competitors. So have you seen in last, say, 12, 18 months, the competitive intensity somewhat means winning or reducing, or it remains as competitive as it was earlier as well. Like I have some of the unorganized kind of shutdown, hold it up or anything like.
The position of some of the competitors in unorganized sector is not so highly intensive because their financial position is not up to the mark as of today. That's why even we are gaining some of the goods market share. And accordingly, from June onwards to July, immediately the entire volumes have been recovered. Even we are expecting good growth in the coming days. So another reason for this is because of low intensity from the competitors in the unorganized market.
Is it any in particular region, in particular segment, or it's across the board?
No. It is across the market.
Understood. And just last question, sir. With respect to CapEx, you did talk about INR 60 crores, INR 70 crores. But if we want to look at more from a medium-term perspective, do you see a substantial increase in the CapEx given the way because the volumes are improving, competition is kind of reducing, are we looking at significant change over the regulatory effects?
Basically, in our case, the CapEx plan we do at a very short-term plan because depending on the movement in the volumes, we have to plan for the CapEx. Say, for example, if things are improved like this going forward, if the volumes are increased by, say, 20%, 25%, then definitely, we need to add more number of vehicles. At that time, again, we can invest on the capital expenditure. But till that time, we are having a scope that we can engage outside vehicle, the moment volumes are increased. So immediately, there's no need to increase our own vehicles. So if that volume continues to increase and if it is a permanent increase in the volume, then we will go for our own vehicles.
The next question is from the line of Chetan Shah from Jeet Capital.
Just one question. In terms of the business mix, specifically in the goods side, can you just give us some flavor about the regional improvement? You mentioned about the industry and the sector specific. But is there any part of the country, which is doing relatively better than the other? And my second question is, sir, the way the infrastructure, mainly the road is improving, does it increase in our throughput or a turnaround time for our vehicle? How is your experience for last couple of years? If you can give some sense on that, that will be very helpful, please.
Sure. So basically, in terms of geographical mix, yes, in our case, the south region is contributing, say, around 40% of total tonnage what we are handling. And the North and West contributing around 20%, and remaining part of the country, around 10%. But during this lockdown restrictions, basically, the tonnage is impacted from south to north and north to south. On account of that, even realization of per ton of goods, transport segment is reduced by 2% in this quarter, even though rates have not been reduced. And when it comes to the turnaround time of the vehicle, kilometer from individual vehicles are increasing. And even in Q3 and Q4, we mentioned very specifically that the kilometers from the own vehicles have been improved. Say -- the improvement is in the range of, say, around 5% to 8%, there is an improvement in the kilometer. But still, we can improve on these kilometers once the tolls have been abolished. The government is planning to abolish the tolls. So once these are abolished, we can -- we are envisaging that another 5% to 6% there is a scope to increase in the kilometers. And continuously, we are monitoring the movement of the vehicles, and we are putting more effort on the driver efficiency and all these things. So we are having a good scope to increase the kilometers.
Sir, one last question from my side. In terms of our fixed overheads, is there any significant improvement in last 2 or 3 quarters? So what we did, say, last year post COVID, and before that also, we were trying to do some efficient improvement. But I'm just trying to understand that -- is there any scope to think any cost over there which can increase our EBITDA margin on a sustainable basis going forward?
See the key major fixed expenses in our case, again, the one is major employee cost. Employee cost, yes, last year, what we did, we did some reshuffling of the employees. We did some recovery -- the salary cut process and all these things. But this time, since the operations were on, we have not done that kind of exercise. Even though overall basis, say, quarter-on-quarter, there is a reduction in the employee cost by around INR 3 crores to INR 4 crores. But there is no further scope to reduce this employee cost. And further, another major expenses is a rent to our various godowns and premises. There also, last time, we asked for each and every one to give a waiver for an increase in the rent or due waiver for rent also. So based on that, our request -- one time, they have given a benefit of -- in the range of around INR 6 crores to INR 7 crores. And in case of vehicle taxes, again, it is another major fixed expenses for us. Last time, we opted for non-use option for these vehicles for a long-term halting. At least 3 months, halting needs to be done for the vehicles once we opt for look at non use. But that kind of circumstances were not there in the current situation in the first quarter. So whatever we are incurring today, there is no major scope to fix these expenses. We have taken almost all steps to have a control on these expenses.
Sir, just -- sorry, I'm just asking one more extra question, just for my understanding. Sir, out of our total goods and transfer business, how much percentage in terms of revenue of tonnage will be a fixed contract long-term with our customer? And how much will be on the spot? Or it is yet if you can just give that number. And how that number have moved in last 2 years?
It is almost concerned. See we are having a contractual customers in the range of around 18% to 20% of our goods transport business.
The next question is from the line of Vikram Suryavanshi from Phillip Capital.
Sir, can you share what was the lorry hire charges in rupees crore?
You want in rupees? One second, please.
It was 7 percentage in this quarter, right, in terms of percentage?
Lorry tariffs, it is around INR 39 crores in the last quarter. Quarter-on-quarter basis, it has been risen from INR 39 crores to INR 25 crores. That has risen from 7.5% to, say, around 6.6%.
Okay. So the absolute number was INR 25 crore this quarter?
INR 39 crores to INR 25 crores in the quarter.
Perfect. Got it. And what I heard is that diesel cost as a percentage was around 32%. Was that right?
Yes, 32%. It has increased from 30% to 32%.
30% to 32% is from Q-o-Q or Y-o-Y?
Quarter-on-quarter.
Q-o-Q? Okay. Understood. And just the last is how we see the cash flow improvement or working capital? So if you can just highlight the -- what was operating cash flow this quarter or how is the total cash balance?
Yes. Cash flows are not improved much in this quarter because, again, we have incurred the CapEx also. If we see cash flow from operations, at the EBITDA level, again, it is a decrease from quarter-on-quarter. Accordingly, it's impacted on the cash flows also.
And last one. Okay. And last one, about scrapping policy. Is there any further development or how you are looking at the outlook post scrapping policy and impact on the market?
This scrappage policy, again, it is effective from 1st April, 2023. So till that date, our plan is wherever we are supposed to incur major expenses for our vehicles, so such vehicles we're scrapping. Say, for example, a vehicle which has already crossed 20-plus years or 15-plus years, which -- on which if we need to do any major expenses or maintenance, we are not doing those maintenance and we are starting those vehicles. That strategy will continue until April 2023.
[Operator Instructions] The next question is from the line of Depesh from Equirus Securities.
Sir, in the passenger segment, we used to have nearly 400 plus buses, which have come down to around 291 buses now. So now that your buses have gotten an all India permit and the outlook is also looking good, so do you plan to scale this segment back to your original levels?
Yes. As of today, see to maintain some good growth, we are adding around 20 vehicles in the current year. And basically, since the life of these vehicles have been increased on account of all India permits for the vehicles, even for the buses, so definitely we will maintain at this level until the things are improved. But once the passenger levels are improved, once occupancy levels are improved, then definitely we will have a more scope to increase the rates also, rate per passenger. But as of today, the strategy is to maintain at this level and to operate at a very premium route. So once the things are normalized and there is no further anticipation of these lockdowns and all, again we can think on investment in this segment. Until that time, we will maintain at the same level.
Sure. Sir, the 20 vehicles that you plan to add in this current year, that is already done, right, in Q1, right?
Yes. We bought a chassis which is in the work in progress. And the major investment has been done in Q1. See, almost around 2 -- INR 2.5 crores we have already invested in Q1. Only some body expenses, we have to invest further in this quarter. It will not be major expenses.
Got it. And sir, also, in your total CapEx in Q1 was around INR 38 crores that you told. So that mainly looks toward the smaller vehicle addition, right? But your total capacity is actually decreased, first quarter versus the last quarter. So just wanted to understand, what kind of volume growth are you building in? And what kind of capacity addition that you did need to cater the volume growth?
No. Basically, see, again, the volume growth we are anticipating in the normal course of business. In quarter 3, quarter 4 onwards, we are expecting around 15% growth in the volumes, see, irrespective of this decline, major ups and downs, in a normal course of business. Say for example, quarter 3, what we did in last year, quarter 4, what we did in last year. Over and above 15%, we are expecting volume growth in quarter 3 and quarter 4 of this year. And CapEx to that improvement, again, see, it depends on vehicles turnaround time and all these things. So depending on that, actually, we will plan for a CapEx. But as of today, the total CapEx plans are in the range of around INR 50 crore to INR 60 crore.
Okay. Just to confirm, sir, the second half was very good for you last year. So you were expecting 15% growth on [indiscernible] volume?
Yes, yes, yes. Over and above 15% growth we are expecting, yes.
And plus around 20% the pricing growth that you have, right, so?
Pricing, 10% is already increased from June, June last week. So this will continue until the major change in the fuel cost. And we are hoping that fuel costs will be maintained at this level. If it is maintained at this level, there will not be increase in the freight rates.
Got it, sir. And then Q3, Q4 last year, like we did a GT segment EBITDA margin of 19-odd percent given those kind of volumes. So if the volumes improve further, do you think the margins can improve further from these numbers?
Yes, absolutely. So from the current level, see, as I explained, in the first quarter, decrease in EBITDA is only on account of fixed expenses, fixed costs. If volumes are increasing, obviously, there will not be much burden of this fixed costs on the margins. So again, we will be back in goods transport segment with an EBITDA margin of around 19%, 20%.
The next question is from the line of Krupashankar NJ from Spark Capital.
I had just one question to ask, sir. So on -- you did mention that the route mix has impacted during this quarter -- so on the realization. So the 2% decline which you have seen in -- on a Q-o-Q basis would normalize from the second quarter onwards, and in addition to the price hike which you have taken, which will effectively about -- be about 8%. So you -- are you saying that the realization should be anywhere between about 10% to 12% on a Q-o-Q increase in the second quarter? Is my understanding correct?
Yes. July is -- compared to June, month-on-month, it has improved by around 8%. There is a scope for further improvement in August and September.
Right. And the route mix coming back to normalcy would also aid this level?
It is almost normal. With that normalcy, there is an improvement of 8% in realization.
Okay. Understood.
Yes.
Okay. Okay. And if I may, one more question. Sir, on your overall growth, what you've stated, on a 15% Y-o-Y in the second half. And as I remember, in the fourth quarter, you had mentioned that you are running at optimal utilization or rather peak utilization of your existing assets and the -- given the CapEx of incremental trucks which will be added will be relatively lower, so is it fair to assume that the hire charges would go up or -- higher than 9%, 10% in the second half if your tonnage is going to go up by about 15%?
Yes, yes, yes. If we will not add a vehicle, then we have to hire the vehicles to move those additional tonnage. Then accordingly, the hire service will increase. But these are all variable costs, it cannot put any pressure on the margin side.
The next question is from the line of Prateek Kumar from Antique Stockbroking.
Yes, to recall this price hike...
Sorry to interrupt, Mr. Kumar. Sir, your voice is breaking up.
Yes. Can you hear me now?
A little better.
So I was asking that we took this to be a 10% hike in June. Just to recall, what -- when was the last price hike? Was it in first quarter last year? Or we have taken like multiple hikes during FY '21?
In April '20, we did a 10% hike. Afterwards, there was no increase in the freight rates.
So this 20% year-on-year increase, which we will possibly see in second quarter '22 will remain as that number for the remaining part of the year as well. So third quarter also and fourth quarter also, you will see like a 20% kind of year-on-year price increase, and this number will not sort of a base because there was no incremental hike in rate this year?
Yes.
And over and above that, we are expecting like a sort of 15% [indiscernible], 15% volume growth in picking up?
Correct.
[Operator Instructions] The next question is from the line of Rishith Shah from Dhanki Securities Private Limited.
So this is regarding just the branches. So earlier, you had mentioned that you are looking to convert some of the agency branches into your own branches. And -- so what is the progress over there? And also, what is the kind of the outlook in the total number of branches for this year you're looking to add?
The conversion from agency to branches will not be major numbers going forward, because whatever agencies we are continuing, these agencies are with the company for a long time and they are showing good progress also. And when it comes to opening of branches here, we are opening up some of the branches, especially in the east and northeast part. That area, actually, we are capturing as of today, because that area contribution to our business is very low as of today. So considering there is a scope for improvement in this area, we are opening some of the new branches. And we may add around 40 to 50 branches in these areas.
[Operator Instructions] The next question is from the line of Mr. Shivaji Mehta, an investor.
Sir, this 15% volume growth guidance that you've given, if you could just give some color regarding any end user industry where you're seeing such -- this kind of a traction? Or is it more broad-based?
No. They are broad-based. See one is geographical improvement, this growth will be there. And so we are adding some of the branches in untapped market. That will give another boost to increase in the tonnage. And apart from that, on account of improvement in the economy and other things, again, on the overall growth, it will come. And moreover, we are highly focused -- doing highly focused marketing as of today. See on a particular area, we are focusing on the inward, outward materials and the movement of the goods from each particular area, each particular market. So it's a highly focused marketing what we are doing as of today. So considering all these things, it is a broad indication that there will be improvement in the tonnage at that level.
Sure. Makes sense. Sir, one last question from my side. I think in the last few years, we've done a lot of efforts in terms of closing down your unprofitable branches, adding newer branches. So just trying to understand, from a slightly more long-term perspective, say, 3, 4, 5 years, what is the volume growth that, after all these efforts that you have put in, that we can target? And now we are now, as you also guided, you're expecting a 15% volume growth. So things are moving. So just from a slightly more long-term perspective, what would be the volume growth for you?
Yes. Substantial, whenever, long-term basis, again, see, there is a lot of shift from unorganized to organized market because of the GST and EV wheel compliance that, kind of, burden is very high to the small-scale operators or even unorganized players. So with that, we are hoping that there will be a good scope to add new customers in the coming days. And definitely, on an overall basis, even after this financial year, there will be a chance to improve the tonnage by around 10% to 15%.
[Operator Instructions]
You can conclude the call, madam, if there are no further questions.
Thank you, sir. Would you like to add any closing remarks?
Nothing. We covered almost all areas. Thanks to all the participants for their patience hearing. Thank you.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.