VRL Logistics Ltd
NSE:VRLLOG
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Good morning, ladies and gentlemen. Welcome to VRL Logistics Limited Q1 FY '23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Mitra from ICICI Securities. Thank you, and over to you, sir.
Yes. Thanks, operator, and good morning to all the participants, and thanks for joining in. We are hosting VRL Logistics management for discussing Q1 FY '23 results. Without further ado, I hand it over to Mr. Sunil Nalavadi, CFO of VLS. Over to you, Mr. Nalavadi.
Yes. Thank you, Mr. Abhijit. Good morning to all participants and as you've been made aware, I'm CFO of VRL Logistics Limited. I welcome all of you once again for the earning conference call of the company for the period ended June 30, '22.
Yes, compared to quarter 1 of the last year, which was impacted due to COVID restrictions, later on, the economic environment was substantially improved across all the sectors in India. In this connection, I wish to state some of the data points released by the Ministry of Finance Government of India. The GST collections have crossed INR 1 lakh crore for every month from July 2021 onwards, and reached an all-time high GST collection of INR 1.68 lakh crores in April 2022, which has been driven by an 11-year high GDP growth as well as tightening of compliance by the government.
The generation of e-label hits all-time high in February 2022, which is around 26 lakhs average e-labels per day from the date of introduction of e-label system. The improved economic environment in the country and the initiatives taken by the government to cut the noncompliant transactions supported us to reach the all-time high revenue in the current quarter. The total revenue of the company reached to INR 720 crores as against a revenue of INR 417 crores in the last year and as against INR 672 crores in the preceding quarter.
The EBITDA of the company reached INR 217 crores as against the EBITDA of the last year of the same quarter of INR 40 crores. The profit for the quarter reached to INR 49 crores as against a loss during the last year of INR 56 crores. The growth of the goods transport business, which is contributing 90% of the revenue, is extremely good in the current quarter as compared to last year. The revenue from each segment reached to [ INR 6 lakh 9 crores ] as against a revenue of INR 385 crores in the last year, which has increased by 58%. And quarter-on-quarter basis, the revenue increased by around 4%.
The increase is due to the Goods Transport business, is on account of increase in tonnage. The tonnage is increased by around 45% and the remaining growth is on account of increase in realization. Apart from the better economic conditions, the increase in tonnage in Goods Transportation segment is also due to expansion in network by the company. During the quarter, we have opened around 68 additional branches. And from April 2021 to to-date, around 157 branches have been opened. These branches have contributed around 8% of the total tonnage in quarter 1 of the current year.
As we always mention that our industry comprises majority of the small field and unorganized operators. To curve on the vision of tax, which were supported by the unorganized operators, the government modified the e-invoicing regulations. On April 2022, all the business entities with turnover of INR 20 crores and above has to compensate generate the e-invoice irrespective of the value of the invoice. And from October 2022, they are proposing to reduce this limit to INR 10 crores and above turnover entities.
We hope that these steps taken by the government clearly indicate that the business transaction needs to be done and compliant and organized rather than the noncompliant manner which were being supported by the unorganized transporters when transportation of the goods. Due to this, we are emerging from the market that many of the commodities transportation, which used to be transported only by the unorganized operators clearly are gradually shifting to us. On account of the shift from the unorganized operators and the expansion in our network, the base of the customer also tremendously increased. It has increased around 4 lakh, it was that during the pre-COVID level. Now the number of customer base increased to around 7 lakhs.
When it comes to the profitability analysis during the quarter, the EBITDA of the group segment increased to INR 100 crores from INR 43 crores and percentage to revenues also increased from -- increased to 16% from 11%. The quarter-on-quarter basis, the EBITDA has decreased from INR 122 crores to INR 100 crores. The diesel cost, which is the major cost in our operation, has increased further in the current quarter. The diesel cost as a percentage to the revenues increased from 29% to 31% on a quarter-on-quarter basis. The increase in fuel cost is due to increase in the procurement cost. The cost of procurement as compared to previous quarter increased from INR 85 to INR 93.
During the current quarter, we are unable to buy the fuel from the refineries, which was around 40% of our total consumption. The same was declined to 25% in quarter 4. And absolutely, the diesel quantity in the current quarter on account of increasing bulk purchase fuel based by the government, due to which we were almost losing savings of at least 2 per liter. The lorry hire charges are also increased in the current quarter on account of increase in fuel base. The cost of lorry hire charges year-on-year increased from INR 25 crores to INR 57 crores, and percentage to revenues increased from 7.42% to 9.37%.
The higher growth in GT volume resulted into higher growth in revenue during the year and the percentage of certain variable entrance cost to the revenue has been declined due to operational synergies in our operations. The one example is the vehicle reversal implemented expenses, which has been reduced from 7% of revenue to 6%. And moreover, the employee cost, which is major fixed in our operation, around 15% of the revenue instead of incremental process conducted by the company in the first quarter -- in January 2022, the cost of -- the employee cost as a percentage to the revenue has been maintained.
The earnings before interest and tax, the EBIT of Goods segment we reached around INR 69 crores in the current quarter. As compared to previous quarters, the margin is declared on account of decrease in the EBITDA margins. With respect to depreciation and accounting is concerned, the company has changed the useful life of the new transport vehicles from 9 years to 15 years based around higher useful lives in the past due to our own maintenance facilities.
The bus operations segment has been turned to positive EBITDA earnings business segments post-pandemic. The bus performance is also better in the current quarter on account of that it is now holiday season. The realization and occupancy levels have been increased and that resulted in increase in revenue and EBITDA margins by segment. Due to the better profitability, the overall net cash generated from operation in the current quarter reached to around INR 100 crores.
The majority of the cash flow used for the purpose of CapEx in the current quarter, during the quarter, we have incurred around INR 85 crores of CapEx, which is predominantly used for addition goods transport vehicles. The net debt of the company has also increased from INR 130 crores to INR 155 crores due to investment in CapEx. To contemplate on the high-growth oriented and high-return net debt goods transport segment, the company has decided to sell the noncore segment. And as a step, we sold the wind power business and one of the aircraft also which the company was loaning.
About the wind power project, the entire consideration has been received in the first week of August and the final documentations are in the process. Considering the shift of goods transport segment from unorganized operator to organized operators, we are expanding and further expanding our network, we are hopeful that the turnover or volumes, what the company has expected are in line. [ Just to expand upon ] surely reduced from third week of May, the full benefit of reduction is going to benefit in the coming quarters. So the diesel cost as a percentage, also, we are hoping that it will be under control or it will be traded in the coming quarters.
Since the realizations are improving on account of route mix, we are hoping that the EBITDA margins will also improve from the current year and the coming quarters in goods transport segment. The CapEx as announced by the company to a purchase of goods transport is currently in the process and will be completed as scheduled. The change in usual length of the growth vehicle will result into lower depreciation charge as a percentage to the amount of investments will result into improvement in return metrics going forward.
So with this, I conclude my initial remarks. Now I request all participants for any queries or questions.
[Operator Instructions] The first question is from the line of Alok Deora from Motilal Oswal.
So just a few questions. First, sir, on the bus segment, we saw significant traction in terms of the revenue as well as on the profitability side. So just wanted to understand, is it sort of some part of is it like a onetime, this thing? Or is it sustainable? I mean for bus segment, what's the revenue, which we are forecasting now for the full year? Because INR 90 crore kind of, almost INR 100 or kind of a run rate, we have not seen since a while.
Basically, this is on account of good holiday season in the current year. And even post-COVID, now the people are traveling and that's the reason in the current quarter, actually, we did a good -- I mean occupancy levels were good and relations were good. So that's the reason the revenue is on a higher side. And going forward also, again, there is a possibility of a dip in the bus revenue.
Okay. So what's the full year number we could look at for the bus segment?
Definitely, as it is the INR 90 crores, there will be average around INR 60 crores, INR 65 crores of our revenue in the coming quarters.
Okay, okay, okay. So around INR 270 crores or so for the full year would be INR 270 crores to INR 300 crores.
Yes. Yes. And even in the month of July post this June, we are seeing that, again, there is a drastic reduction in the revenue because again, the people are taking precautionary steps to travel and they're starting to travel more.
Sure, sure, sure.
And this a onetime holiday season actually that resulted into good revenue.
Got it. Got it, sir. And sir, in this Goods segment, we have seen the margins come off quite a bit, so we understand that we have not taken a price increase despite the diesel price change. So it has impacted, especially in the first half of the quarter. So in the second quarter, we should recoup the margins back to the Q4 run rate or it could take some more time?
It will not be till the start of Q4 because if you see the increase in the diesel price, it has increased from INR 85 to almost INR 94. But after the post reduction of this excise duty also, that much of reduction is not what it is today. And even against the average of INR 94 Q1 cost, now the current average is in the range of following -- again, it is in range of around INR 90. And even we lost some of the benefits of this fuel consumptions from the refinery, there, actually, we used to save almost around INR 2 per liter. That benefit is no longer it is there.
So even I look today, our average cost of fuel, say, in the month of July also, it is in around INR 90, INR 91. So that's the reason. There is some improvement in the EBITDA margin, but not to the extent of Q4.
Okay. Okay. Okay. Okay. Just a last question. So sir, this depreciation because of the increase in the life of the effect, the depreciation is down by around INR 10 crores for the quarter. So is this the quarterly run rate for depreciation going ahead? How should we see that?
Yes, definitely. For this current year, every year quarter, that kind of run rate is going to come. And going forward, it will become again -- see, overall charge to the P&L will be less compared to earlier. Earlier, what is to happen even whatever CapEx we used to incur. Say for example, if we incur the CapEx of INR 100 crores in the vehicles, it is used to depreciate over a period of 9 years. Now in first 9 years, it will stretch to 15 years.
Since we are growing and we're investing in the CapEx, the overall depreciation charge as compared to the investment [ to say the least ].
Got it. Got it. And in this air segment, we have booked below revenue, so there, it's like no further revenues are expected there going forward also? Or it's a small piece, but I just wanted to understand it's 0 revenue for us. right?
That revenue and costs have been allocated as the unallocable segment because it is no longer reportable segment based on the turnover and the assets which are in this particular segment, that's the reason we said there is another segment. And at the time of 2 years, we used to make around say, INR 11 crores so of revenue. It will be half of that.
The next question is from the line of Ankita Shah from Elara Capital.
Congratulations on a very good set of numbers. Sir, my first question is on the CapEx side. We added net 200 vehicles this quarter. So how many more are we planning to add in the next 9 months? And what kind of CapEx outgrowth will we go for this?
And related to that, what would be the impact on leverage -- debt leverage going forward?
Yes. Basically, the CapEx is in the range of around INR 85 crores to INR 100 crores on a quarterly basis. Actually this quarter, we incurred a total CapEx of around INR 84 crores. And predominantly, it is for the goods transport vehicles. So similarly, in the coming quarters also, there is a similar kind of investments. They are around INR 80 crores, INR 85 crores of total CapEx and in the goods transport segment, it will be in the range of around INR 80 crores. And the addition here is actually we added around INR 322 out of that, some of the metals have been scrapped also. INR 320 have been added. And 92 vehicles have been scrapped, the net addition is around 2.2 vehicles.
And when it comes to debt level, we are seeing that will not be increasing the debt level because one is the INR 48 crores, what we received from the sale of import project that has been completely eased for the CapEx purpose. And apart from that, whatever cash flows we are generating on a quarterly basis, say, for example, this quarter, we generated under full CapEx, cash flows. So that considering these cash flows and this onetime reset on account of sale of mill also, even though we invest around INR 80 crores, INR 85 crores of CapEx in a quarter, the debt levels are not going to be increased.
Okay. So this number should be kind of maintained for the full year?
Yes, debt level will be in the range of around INR 130 crores, INR 140 crores.
Okay. And total gross addition, how much are we -- or net addition, how much are we planning for this year?
As we announced, already standards in place, that these are over a period of 12 to 18 months what we said. So accordingly, every month, the addition will be in the range of around [ INR 80 lakhs to INR 90 lakhs ] every month so that every quarter, it will be in around 270, 300 vehicles. And scrap will be there, again, 75 to 80 a vehicle on a quarterly basis, depending on the condition, depending on the business that we face.
75 to 80, you said first or per month?
Per quarter.
Per quarter or strategy.
Yes.
Okay. Okay. Secondly, sir, on this sales consideration, we have booked that in the revenues or other income?
So basically, the sales consideration, we have to account the profit on sale of this project. The profit will be in the range of around INR 7 crores to INR 8 crores. Only that much of amount will come to P&L account. Rest of all will go to -- it is a balance sheet abatement.
And that is adjusted in other income?
Yes, it will be shown as other income in the current quarter in quarter 2. That the transaction is going to be completed in the month of August.
Okay. Okay. Got it. And given the robust growth in volumes in the GP segment this quarter of 45%, do you think that for the full year, you want to revise the number that you've given earlier 20% plus kind of a growth number that you had told earlier? Do you think there is a possibility that we can do better than that for the full year level?
As I said, last year, Q1 is impacted due to some COVID impact. And if you see the subsequent quarters in the last year, the performance is also good. So considering those incremental tonnage as compared to quarter 1 of the last year, and this year, we are expecting on a full year basis, as we said, around 20% volume growth year-on-year basis.
The next question is from the line of Krupashankar NJ from Spark Capital.
First question is on the new branches which you have set up. So you have highlighted that whatever was set up in FY '22 as well as first quarter is contributing less to about 8% of total tonnage. Given that historically, you have been highlighting that more and more branches are coming up in the north and the eastern part, so the lead distance incrementally is this driving 1% decrease in overall realization? So is that how you are forecasting on a sequential basis?
No, the quarter-on-quarter, if you compare the Q4 versus Q1, the overall revenue increase was 4%. Out of that, the growth is 1%. The remaining 3% is on account of improvement in the realization. That relation in improvement is only on account of the growth mix, not on account of increasing the price rate.
Understood. And -- but we don't intend to take any general price hike because traditionally, we have been intentionally price hike taken on an annual basis. Are we not taking any this year?
No, just we are waiting for some more time. Now how the things will turn. But as of today, there is no plan to increase in the price rate. So we are now focusing on the increase in the volumes since we are getting a lot of new customers and new routes we are adding. So rather than increase in the price rate, we are contemplating more on the accumulation of the volumes. That's what is the objective of the company.
Understood. And looking at also the extent of passenger growth in case of seasonal reasons, can you highlight on being the passenger growth for the quarter and the realization per passenger?
Yes, sure. So The capacity utilization has increased to 90% in the current quarter. So in Q4, it was around 84%, and last year, it was around 75%. The realization is the cost of current trading in the current quarter. And Q4 was [ INR 1,022 ] and last year, it was around [ INR 1,400 ].
[Operator Instructions] The next question is from the line of Sanjaya Satapathy from Ampersand Capital.
Sir, you've mentioned that your margin will improve led by better realization. You also said that it is mostly because of the route mix. I cannot really understand this aspect but are you saying that there are some routes which are more profitable than others?
Basically, when it comes to the long haul, since we're opening a branch in the untapped market especially Eastern and Northeastern market, so basically, here, what happens, these are all additional new tonnage what we are getting. But for these new tonnage, no need to investment further in our fixed expenses. Only that related to those branches in use. So for example, if it comes to the common fixed expenses like our employee cost, and even for the for the vehicle taxes what we are paying. And similarly, the insurance expense is what we are paying to the vehicles. And apart from that, the corporate expenses what we are incurring. Even though the tonnage is increasing, say, around 20%, 21% or whatever tonnage addition on account of the expansion in the network, corresponding or in proportion to that these expenses will not increase -- that's the reason the proportion of these expenses will come down as it reached to the revenue.
So definitely, we will have savings on these costs and EBITDA margin will improve. And apart from that, you'll see more number of branches are open, more number of routes are open in the network, then we will definitely have a better utilization of the vehicles and the kilometers of the vehicles will be better. So on account of this, again, there is a possibility of reduction in certain variable costs also as a percentage to the revenue, for vehicle maintenance expenses that even driver payments.
Understood. And sir, you have not taken price hikes despite the steel price hikes. Is this because of the competitive intensity? Or it is a deliberate strategy to kind of take market share and we just grow through volume-driven efforts?
It's a deliberate vision at the management side. Basically, how it is happening now, there are a lot of things happening at the government side, even they want to see as our industry is totally comprised almost around 70%, 75% of the contribution is coming from the unorganized operator. And even on the other side, government is increasing a lot of these compliance procedures.
So considering these things, many of the customers, especially as they are looking for an easy solution and they want to come under the complied network. So we want to gain out of this. On account of this, whenever we approach to the new customers, we cannot go with the higher rates and all these things. So considering this environment in the market, we want to maintain the flat rate as usual to grab more number of customers into our foray to increase our volumes further.
Understood. And lastly, if I can just take it considering this new strategy, unlike in the past where your medium-term volume growth is to be somewhere around mid-single digit. Can we expect your volume growth to be consistently above 15%, 20% range going forward?
Yes. In at least next 3 years, we are expecting our tonnage growth will be in the range of around 20%.
Understood. Understood. And with some amount of margin improvement because of operational efficiencies?
Yes. The moment volume starts increasing, we will have more flexibility on the expense side when we can have a better control on the expenses, and that will result into increasing the margins.
The next question is from the line of Abhijit Mitra from ICICI Securities.
Yes. I hope I'm audible. Just to understand, yes -- so just to understand some dynamics there. So your branch additions over the last 3, 4 quarters has been upwards of 100. So it's more than a 12%, 13% addition in branches. But your Q-o-Q increase in volumes is charting a 1% to 2% rate. So are we getting ahead of ourselves in terms of CapEx or the volume guidance? Or you feel you can catch up with the remainder of the 3 quarters? You see what kind of trends do you see on the ground in terms of volumes because Q-o-Q movement has definitely slowed down over the last 3 quarters is what you can see.
Yes. So basically, this number of branches, the numbers we cannot -- we should not call into the total branches, and we cannot expect the commercial growth in the proportion to the brand addition. So basically, these all new branches handling a very low quantity as a product. So going forward, the volumes will increase from these places. And these branches have been opened up gradually. It's not on a single day. Even in the last year, see, we started opening of branches on a quarter 3 onwards. So most of the branches are opened after the first half. And current year considering, the growth and the performance of these branches, we suddenly take addition and we opened 68 branches in the current quarter. So basically, what we have done to develop these branches at least if you take -- earlier, we used to take in the range of around 9 months to 12 months to increase the tonnage at expected year at least to reach a breakeven.
Now what is happening? Within 2 to 3 months, these branches are reaching to breakeven. And expected level of volume growth is coming. That's the reason the more volume growth contribution will come in the coming quarter rather than the expectation at an immediate level. On account of that, actually, we are hoping that in the current or even quarter-on-quarter growth is at a very low at a 1% tonnage growth. And even the realization improvement, say, 2% to 3% is on account of these new branches only. So that's the reason, going forward, these branches will contribute more tonnage to our total tonnage, and that may result into increase in the volumes as well as increase in the realization. So that will support the entire growth in the revenue as well as profitability margin.
Right. No, I'm just trying to understand. So then this theme of shift from unorganized to organized, that has sort of played out for the time being? Or?
No, prior to April '22, that we were seeing everything, as I said, the limit was around INR 50 crores. Now it has been reduced to INR 20 crores, and government has already proposed to reduce it to INR 10 crores in the [ rural cities ]. Consequently, they have to generated a new program onwards, which they can do. So these kind of reasons are definitely going to support us. Because for them also, they have to comply and reach and every resolution. So as I said, some of the commodities like coconut product, given some of this -- the cashew nut, and these kind of commodities actually, the growth rate is very high. And these are all on account of shifting our customers from the small fleet and unorganized player to us.
All right. And just last question is 1%, 2% Q-o-Q growth won't help you achieve your 20% target. So you are expecting a significant uptick in...
Yes, we have the growth in the rate of around 4% to 5% quarter-on-quarter, and we are expecting that, again, the season is coming now. The quarter-to-quarter will be much, much more growth to be there. There's a reason sites now, the festival season and all. So more of a commodities actually we are getting now. So we are built on that. We are hoping that the 20th is achievable -- it will be an achievable number.
We'll move on to the next question that is from the line of Alok Deora from Motilal Oswal.
Sir, just wanted to understand, we had given a target of 100 branches in opening 100 branches in FY '23, and we have already done 68 additions in the first quarter itself. So any change in that number now? Or just some color on that.
Yes, these numbers are going to be increased, not difficult to see that. But most of the branches have been opened in quarter 1 because to take advantage or benefit of this season, what is going to come now festival season now. But going forward, the number of branches will not be too succinct. See, around 60 to 70 branches will not be there every quarter, but those numbers will be in the range of around 25 to 30 branch average.
Sure, sir. Sure. And also, sir, just you briefly mentioned in the previous question about July, August. Can you give us some color on the second quarter? Just wanted to understand how has been the volume being after the first quarter ended, I mean, after -- in particularly in July and August? Not really a number, but just from a qualitative sense.
Yes, July actually, we are, again, highest tonnage as compared to last 3 months. And definitely, that 4% to 5% expectation worked quarter-on-quarter you can achieve based on the July turnover.
Okay. Okay. And how about August, I mean, short term?
August is better than July now.
Okay, okay. Great. Also, sir, just 1 last question from my side. So last, we had taken a price hike of around 8% to 10%, if I remember correctly, last year, sometime in June or July.
Yes.
After that, we have not taken, right? Because we generally end up taking once in a year. So any price hike is there around the corner or this kind of hold on to it for now?
No, for the time being, we are holding on the increase in the freight rates. Basically, we want to gain more from the market as of today.
[Operator Instructions] The next question is from the line of Krupashankar NJ from Spark Capital.
Just a couple of more questions. In the presentation, of course, we have talked about expansion of existing branches and increasing branch density in key markets. So just wanted to understand what has changed with the existing markets so that you're sorting of new branches?
Sorry. Could you repeat your question, please?
Sure. Sir, you are also setting up rather than apart from new branches in the untapped market, you're also setting up new branches in existing markets in a few of the key locations. Actually, that's what I could gather out of the presentation. So just wanted to understand the key reason behind setting up more and more branches in the existing locations just because of the unorganized to organized on future seeing because of compliance reasons? Or is there any other driver which you're seeing?
No, basically, see customer wants to have branches nearest to them because in our case, there are having option you want to collect the goods from our branches also. So that's the reason, actually, they will see the branches to be nearest to their business location.
And apart from that, if we do a do a Modi economic mode, for example, we can give service to anyone to anywhere. If our branch, if it is distantly covered as compared to their business location, then again, the cost of operation will be more. Then we have to charge them more or to deliver all these things. So instead of that, wherever there is a lot of these industrial areas and wherever these markets are there, nearest to them if potentially it is there, then again, we are opening branches in those areas.
Right. So it's -- some part of it might be cannibalizing from existing branches, but you get access to newer clients -- newer customers whom you were not tapping to earlier. Is that the right way to understand?
Yes, it is. Yes.
Understood. And second thing is on the biofuel procurement. I do see that the palm oil prices globally have come up substantially. And given that the biofuel procurement looks lucrative vis-a-vis at this juncture, how do you see that going ahead? Will we go ahead and increase procurement? Or is that something you are looking at right now?
No. Currently, we are buying very low quantitative biodiesel almost very, very negligible quantity. And going forward also, always are interacting with the manufacturers. If the price is masking at our expectation, then definitely, we want to be the delay. But still, as of today, also, they are unable to supply at the expected price. So at least we need around INR 5 to INR 6 lower as compared to the retail price. Then only that there will be benefit but by using this vital. Otherwise, they will not be benefit much.
So given that this time around because the primary procurement was curved and the price will still be higher, does that make it a lucrative proposition is whatever trying to...
Definitely, if the product is available, then definitely, we're have the first people to use it. But we are interacting with the manufacturer. Still there are costs of management sharing these are still they are unable to supply the price what we want. Basically, it should be a gap of around INR 5 to INR 6 as compared to the retail price.
Understood, sir. Last question from my side. Sir, you are also seeing that there is a fair bit of increase in organized competition in the space. And I just wanted to get a sense of that. Is it -- are you seeing more of shift just going in from unorganized to organized rather than the competition intensity increasing amongst organized lens. Is that -- how do you view the space at this juncture?
Yes, there is a scope for every operator, every online player, definitely no doubt in that. But some of the results, what we observed over the recent past, when the LTL market, the quantity, what they used to handle earlier, they have shown the lower performance even there is no growth in their volumes. So if we see such kind of a performance, then definitely, we are in a competition compared to them.
Right. But traditionally, being on a pre-COVID basis, when you could see even the LTL market was growing anywhere closer to about 10% roundabouts. If I look at it from a product standpoint. So if you are leading a 20% tonnage growth CAGR over the next coming years and competition for the organized side is also increasing. So the confidence is more that the share -- predominant share will come in from an organizer. Is that a fair understanding at this juncture?
Yes. Just today, if we see the more -- and it is not the case also. See, predominant increase is coming from the [ joint venture ] one. And there is a growth from the existing customers also. And even in the organized level, actually, there are some customers actually they have shifted to us, considering the lower service or service from other autonomous vehicles. It will come out that some of the customers haven't shipped to us. But that percentage is not in the range of, say, around 15%, 20% or something like that. More percentage growth of is coming from the unorganized class.
Right. Okay. Sorry, if I may squeeze in one more question. Just wanted to check, given that your new branches have come up on the Northern and Eastern side. So I just wanted to see, is there a mix of each geography -- has it shifted vis-a-vis what we have seen in FY 2020? If you can quantify what will be the contribution from Southwest versus North and East, that would be really helpful.
Based on the source of the commodities, what we are presenting from different regions, the percentage is not very much. But there will be some changes after 1 year or so because we are more concentrating in this Eastern and Northeastern part. So those reasons will contribute a bit to the overall then. So definitely, at that post 1 year or 2 years period, the percentage will change. As of today, there are not much changes.
We'll move on to the next question that is from the line of Amit Jeswani from Stallion Asset.
I wanted to understand how you've increased pre-COVID from 4 lakh customers to 7 lakh customers. For the last 5, 7 years before COVID, you were growing at 5%, 7% volume growth. Now you're speaking about 20% volume growth. In -- so that's a big change that is happening in this segment. Sir, what kind of margin do we expect? Because there's been margin volatility that we faced this quarter and a heavy margin. It shows that you don't have pricing power on a quarterly level. What do you think, sir, what kind of margins -- EBITDA margin is sustainable? And any guidance for revenues for this year?
The revenue increase will be in the range of around 25% because there will be some improvement in the realization on account of the change in through if the core growth is 20%, then overall, you can see the increase in revenue going from 24%, 25%. And when it comes to margin side, again, there will be improvements. In the first quarter, this is mainly on account of the increase in diesel cost. Post-election in the government has suddenly increased the real prices.
And on account of this increase in the bulk price also is impacted on the other side. That's the reason the resin cost has impacted very well in the first quarter. Since they have reduced the excise rate on the diesel from the third week of May onwards, now that is resulting us to increase our margins. So compared to Q1, again, we are expecting that the Q2 margin should be better. So in my view, definitely this maintenance of an EBITDA margin in the range of 17% to -- 17% is absolutely not an issue.
Got it. Got it. So we've sold our metallurgy business. We have sold 1 aircraft. So we are comping out noncore assets. Any plans on selling the bus business as well? Because then may be a focus logistics there.
See, as of today, we do not have such plans. If any such development, then definitely, we will inform.
Got it. Got it. So you've got excellent ROCs despite being a brilliant -- despite the truck owner as being an asset-heavy model, right? The new investments that we are doing, okay, what kind of ROIC are we reinvesting our capital at? Because we're doing INR 100 crores investment, INR 80 crores, INR 90 crores, INR 100 crores a quarter, right, for the next 4 quarters, so broadly INR 400 crores. What kind of ROIC we should expect on these environments?
See, normally, the payback period according to the internal analysis, it is in the range of around 4 years, 4 to 5 years. So considering those -- the payback definitely, it will be 20% ROIC for the new investment.
Got it. Got it, sir. So -- okay. So we've got very strong operating data. Sir, what kind of dividend payout will you still be able to maintain dividends there you've got INR 150 crores of net debt? Last many years, we are not expanding on capacity. So you're doing massive dividend payout of 70%, 80%, 50% kind of dividend payout of our profit. So just trying to understand the reinvestment structure going forward because this year. If you're saying that you'll do 25% revenue growth, that means our revenues last year was INR 2,400 crores. And this year, our revenue will be closer to INR 3,000 crores. You are saying that 17% EBITDA margin, that means INR 500 crores of EBITDA margin you'll have. And then, of course, that we say. So broadly, is INR 250 crores the right estimate for the PAT this year?
Where actually you have to exclude the bus segment since you are calculating the growth and profitability for the entire turnover. If you see only the group transportation segment, then you will arrive correctly.
Got it. Sir, the bus segment last year was INR 205 crores of revenues. This quarter, if I'm not wrong, you've done INR 100 crores, closer to that. So -- and you said that we'll do INR 60 crores in the next 3 quarters. So that is INR 16 crore, INR 60 crore, INR 180 crore, plus INR 100 crore. You do actually 40% growth in the bus segment also. So okay, no problem. Got it.
Yes. About the goods transportation segment in FY '22, we did the INR 2,137 crores. We should do 25% growth, then it will still around INR 2,062 crores. It's 17% EBITDA be in the range of around INR 460 crores, INR 470 crores.
One more thing, sir. We received INR 48 crores from the wind business and INR 8 crores -- INR 7 crores from the airline charter. So that will decrease the net debt, right? The net debt doesn't reflect the airline and the bus -- sorry, the wind business.
No. That will come in the quarter 2. The amount is received in August 1st week.
Got it. So our net debt -- got it. So we will generate INR 100 crores of cash flows this quarter, okay, plus in Q2, I'm speaking about. Out of the INR 100 crores, we will also get INR 50-odd crores, INR 48 crores from the wind business and INR 8 crores from the charter, the aircraft thing...
No, I want to clarify there. The INR 8 crores have already accounted in Q4. That has been sold in the quarter 4 of the last year. And in quarter 2, this wind power consideration is going to come.
So basically, 100% of our operating cash flows will go into CapEx. That's definitely.
Yes. And this INR 48 crores, we have to pay certain taxes also on the full consideration. So overall, there will be the reduction of our debt in the range of around INR 35 crores to INR 40 crores.
Got it. Sir, my last question to you is about your competitive advantage, right? Because you are fighting with many listed players now like delivery, et cetera but you're also fighting with large unorganized players. What was the reason that we will increase our freight rates this quarter when you knew that diesel prices were going higher. It was not something which you couldn't expect or you didn't know. What was the reason why we didn't increase prices by 2%, 3%?
No. As I told, see, we are adding a lot of these new customers, and you won a lot of new routes also. So considering this environment, this scenario, right now, we want to maintain the price rate. So once the market is acquired, then depending on our cost structure, how the profitability will more certainly we decide on the increase in the rate.
So this quarter also, we've not taken any rate hikes until now.
No.
Got it. So we're taking a short-term risk on our cash flows, which is like a marketing activity.
Cash flow, there is a sufficient cash flow coming. And even we are a debt level and all these things, and we're flexible on the investment side as well on the CapEx. So that's why the focus is now to acquire more market to increase the customer base to grow better -- grow in the top line, the increase in the volumes and all these things.
Got it. So you're thinking some short-term way for long term gain. I got it. Sir, also on the number of your now at 5,000 trucks, my congratulations to you and your team for that. So when do you expect to reach 10,000 trucks kind of number?
We planned already 1,600 vehicle additions. So by end of this year.
It's lapping also, right? So net number I'm speaking about.
It will be in proportion to the increase of the volume. See how the volume will increase, accordingly, the number of fleet will increase.
Got it. Okay. So sir, when I think about long term, do you think that VRL, you said that next 3 years, you are a 20% CAGR kind of story. Do you think long term you can be like a 15% CAGR because there's a massive unorganized market out there. And you are in advantage. You don't burn money, you're cash flow positive. So like aggression and reinvesting for growth is the right strategy, and I fully agree to you. So just trying to understand, do you think that VRL for the next 10 years is a 15% CAGR story, a 20% CAGR story? Or will go back to that 8%, 9% growth level?
That's the reason see we are now visible for the next 3 to 4 years. That's what actually I said. Depending on the further situation, again, the things will change. Consolidation and the whole industry's shape is going to change. That's what I can say.
Got it. Now since October, INR 10 crore invoicing is coming. It's a big advantage for players like you?
Yes. It is.
The next question is from the line of Depesh from Equirus Securities.
Sir, just wanted some more on the industry and how is it shaping up. So over the last 1, 2 years, we understood that the small truckers were facing operational issues due to COVID and organized players like the L1 market share. Now with increasing compliance, again, organized, they look on a strong footing. So 1 to 2 years down the line, how all this will add up, right? So will the small players keep on losing market share? Or they become more compliant and take that market share? Or third, maybe they may join the forces with the asset-light much aggregators and try to gain market share that way. So I just want to understand your thoughts on the market share argument. How much we can more gain and sustain?
So basically, the contribution from the unorganized players also the small site operators is going to come down going forward.
But they will become organized, you're saying that way or they may -- you're saying they will just sell the shops.
No, many of their financial position is not at up to the mark. And most of the operators, they are unable to revamp their businesses. Therefore actually ground level, we are atoning some of the operators. So considering those things, we are seeing that there will be consolidation in the market. The number of operators are going to be reduced substantially in the days to come. So more and more consolidation take place to be towards the organic players and bigger operators.
Got it. And sir, do you have any plans to maybe acquire some of the smaller operators? Or do you basically look to organically grow in your number of patent?
No, no, no. Our policy is to grow organically. See, we can open a more brand -- if ever the opening of, say, 100, 150 branches in a year, it just like adding of a new business or acquiring of a new business equivalent to that. We will grow -- our aim is to grow organically.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.
Thank you all the participants for your questions herein. And basically, most of the questions related to about the future growth of the company. We are very much sure that there will be a volume growth, especially if we wish to concentrate more on our group transport segment. And there, actually, we are more concentrating on increasing the volumes by extending our network and by doing a pressing market to acquire the new customers. And that's the reason, definitely, we are hoping that the volume growth will be 24-plus for the [ coming months ] in the next coming days. And by opening up these new branches in the named or expect in the Eastern and Northeastern market, given some of the flexibility of the number of times per the vehicle inflation front, on account of that, even some of the relations are improving. So considering all these benefits even we are hoping that definitely, we can maintain our EBITDA margin also in a good manner.
So with this, I wish I would like to conclude my word. Thank you. Thank you once again.
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.