VRL Logistics Ltd
NSE:VRLLOG
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Thanks, Ganri, and good morning to all the participants, and thanks for joining in. Welcome to Q2 FY '21 Results Conference Call of VRL Logistics. We have from the management side, Mr. Sunil Nalavadi. We'll be presenting and taking the queries after the initial presentation. So without further ado, over to you, Mr. Nalavadi.
Yes. Thank you, [ Abishek ]. Good morning to all. This is the earnings call of VRL Logistics Limited for the second quarter ended for the financial year 2020-21. First, we would like to mention that out of the challenging circumstances, our company is in a position to recover in the financial performance in the current quarter. On account of proactive steps from the management, we ensured growth in margins and offset the setback course due to pandemic. We reached the total level of the company to INR 442 crore in this quarter, which is around 84% of year-on-year revenue and around 2.72x on a quarter-on-quarter revenue. And EBITDA we reached around INR 89 crores in this quarter as against the EBITDA of INR 76 crores during the year-on-year quarter. And EBITDA margin has improved from 14% to 20%. The net profit of the company in the current quarter is INR 31 crores as against the net profit of INR 34 crores during the year-on-year quarter and a loss of INR 62 crores during the first quarter of this year. Please note that the net profit of the company for the second quarter of the last year is subject to accounting of onetime income tax gain of INR 12 crores on account of decrease in corporate tax rate. The major segment of our company, the Goods Transport segment, which is -- reached the revenue of INR 407 crore, which is around 95% of year-on-year revenue and 2.75x of quarter-on-quarter revenue. Even during this difficult period, we were in a position to increase year-on-year realization per ton by around 10% and reached tonnage to the extent of 85% of quarter 2 of the last year. We reached the EBITDA from [ Duty ] segment to the tune of INR 80 crore in the current quarter, which is the highest EBITDA from this segment in the recent past quarters. The year-on-year EBITDA margin has increased from 13.53% to 19.55%. And in amount, it increased from INR 58 to INR 80. The increase in EBITDA is mainly on account of: one, is increase in realization per ton around 10%, resulted into proportionate decrease in percentage of variable and fixed costs. Proportionate increase in kilometers by own vehicles, out of the total kilometers traveled resulted into decrease in lorry hire charges from INR 37 crores to INR 26 crores. And percentage to revenue is reduced from 8.7% to 6.5%. Increase in biodiesel quantities to ease the pressure of increase in diesel rate, and the rebate on vehicle taxes by the government for the month of April and May, which has been announced later and accounted in quarter 2. The amount is around 60 lakhs in the current quarter. And moreover, because of decline in the volumes in the first half, periodically, we opted for non-use of vehicles. On account of that, we saved one of the vehicle taxes, which is priority payable on these vehicles. And apart from that, during this non-use option period, we have not incurred any expenses on these vehicles; like, there are no tire costs, no driver costs, et cetera. That is also one of the major savings in this current quarter. And another major change in expenses is about a decline in employee cost. This is due to salary cut across all the employees and also reduction in man days working in case of other [ van ] drivers in this period. And apart from that, we got further concession in rent expenses in the current quarter. That has also resulted in the improvement in the EBITDA margin. When it comes to the other segments, which is the bus segment, which is reached INR 17 crores in the current quarter revenue as against year-on-year revenue of INR 74 crores, which is around 23%. And due to COVID-19 pandemic, the state and central governments continue with the restrictions imposed on passenger travel by road even during the current quarter. That's how it impacted on the number of passengers traveled and also on the revenues. When it comes to the net debt of the company as of 30th June 2020, it was around INR 189 crores, and it has decreased to INR 115 crores as at 30th September, in spite of cumulative net loss of INR 32 crores for the first half of the current financial year. This indicates that the company is earning high cash profits in its performance and better working capital management. On account of this, the net cash generated from operating activities, we reached INR 115 crores during the first half of the current year as against INR 127 crores first half of last year. With this, I conclude the initial briefing. And now I will request to the participants for question-and-answer session.
[Operator Instructions] The first question is from the line of Prit Nagersheth from Wealth Finvisor.
So my question is that in general, we are seeing a lower realization. So is that due to lower volume? What is the reason for lower turnover with respect to Q-on-Q? Sorry, am I on the line?
No, I mentioned that in the sector goods unsold, the earnings, the realizations are improved by around 10%, and the volumes are -- we have reached around 85%. We're still 15% short as compared to year-on-year quarter.
Correct. So sir, what I wanted to better understand is that in general, most industry have reported higher volume in a lot of businesses. So then why hasn't that translated into better volumes for us?
Our major segment is about the textile business, which is almost around 15% to 16% of the total volume what we are handling. Still, we are lagging behind almost around, say, 8% to 10% decline in this textile volumes. But because of contribution from the other segment, we are in a position to reach around 85%. And again, the trends are now changing. Again, there are improvements in the -- after this quarter. I'll say, for example, in the month of October, again, we have crossed the last year volume. There'll be some growth in this quarter.
Okay. So one other thing I want to understand is that are you seeing a shift from road to rail? Because in quarter 1, a lot of customers would have used rail given that road wasn't available or drivers weren't available. So are you seeing some of those customers permanently have moved to rail?
No, in our case, the kind of commodities what we are handling, we have not seen any such of shifts from road to rail.
Okay. So you're fairly confident of going back to regular volume levels from this quarter on?
Yes, yes, definitely. And again, this quarter also, what happened, for example, July and August, there was a downturn. But when it comes to September, again, we'll reach our normal levels. The 15% short is on account of July month and the [ divestment ] shortage. And since September, we reached normal. And October, definitely we'll have a positive growth in tonnage.
Okay. One other question, sorry. Is that -- do you anticipate -- I mean there is the current growth -- current growth in demand right now. And it's due to festivities [ in land ] and some of the latent demand. Now do you anticipate that continuing to the rest of the year? Or you anticipate a [ dip ] from December onwards?
Festival season mainly the textile and all such kind of commodity inventories. But when it comes to other commodity like industry and machinery goods and other kind of commodities, definitely the tonnage will continue.
The next question is from the line of Depesh Kashyap from Equirus Securities.
Congrats again for a great performance. Sir, you've talked about market share gains of 7% to 8% in the last quarter. So have you maintained that or gained further? Can you please talk about it?
Yes, definitely. When it comes to the nature of other operators or performance of the other operators, still, they are unable to come forward and start the business as usual, especially the unorganized people. That's the reason actually we gain some of the volume from the market. But in this current quarter also, we maintained that tonnage from the other competitors' tonnage.
Okay. Sir, the [ EPS ] data shows a growth of 25% in the month of October. Like how much did we do? Like anything similar to this?
No, we cannot compare with that. The reason is, again, there are a lot of [ attributes ] are there in the EPS, for example, less than [ 57 ] we will apply. More than [ 57 ] we will reapply. So that's the reason we cannot [ judge ] exactly based on the [ B on B accounting ].
Okay. But will you be in double digits or...
Yes, there is a growth.
Okay. Great. And sir, what is the average procurement cost of biofuel mix diesel versus the conventional diesel that you use? And can you sustain this mix of 53% for second half as well?
Second half, there will be some reduction in the biodiesel because of the temperature. But if you see the procurement cost, say, for example, in last quarter 2, the average procurement cost is around INR 68. And if you see the biodiesel procurement cost, which is around INR 62.
Okay. INR 5 to INR 6 difference, yes?
Yes.
Okay. And sir, the rental concession that you talked about this quarter, how much was it? And will it continue for the full year? And also, the depreciation and the interest cost that has gone down, is it due to this rental waiver only?
Yes. Because of that, the IND AS adjustment around INR 3 crores to INR 4 crores, there is a reduction in interest and depreciation. And this reduction is around 25 lakhs to 30 lakhs per month, and it will continue up to, say, March this year.
Okay. Okay, great. And lastly, sir, any change of thoughts on the CapEx plans for FY '21?
As of now, in current half year, we incur CapEx of around INR 10 crores. This is on account of some modification in the vehicles and the open body vehicle we converted into full body vehicle, such kind of CapEx. And we have not added any vehicles during this half year. And next half year also, we are not looking to add any vehicles as of now. Around INR 5 crores CapEx will continue.
[Operator Instructions] The next question from Prateek Kumar from Antique.
So first of all, congrats on a good set of numbers. So I have 2 questions. So yes. The first one is I just want the bottom line performance as shown in the quarter, is it sustainable for the next 3 -- for 3 quarters? Are there a significant one-off [ redeem ]? I know you mentioned about [ will be going out ]. So just wanted to know whether the bottom line performance can be [ sustainable ] that will be [ something ] -- I mean [ where you will be ].
We reached around 20% in this quarter. But this is -- we can continue in the next coming quarters, around 15% to 16% EBITDA level in 2020.
Okay. Okay. And in the last quarter, you mentioned that the operators with [ peer ] vehicles, they are kind of suffering. So just wanted to know do you see any improvement in market share [ on that ]? Any update on the [ preference ] of the price -- how is it impacting the year?
Sorry, I'm not clear on your question. Can you repeat, please?
In the last quarter, you mentioned that the SME segment, the operators with [ their own vehicles ], they are not able to sustain the business because of the COVID situation, so do you expect there will be some market share gains [ there ]. So I just wanted to know what is the [ situation there ] because in the [ complex mix even transfer ] have not said that we have seen are not in very significant pain, just wanted to see if there is any positive [ development ].
No, that trend still it is continue because based on our market observation, and a lot of our people are facing the problem. One is the fuel price has increased and there is an issue on their working capital. The government is supporting a lot on [ the SME ] sectors. But still, most of the operators are in a problem to restart their business. Either they are siting on a selective routes, they're not on a full sale operation like that. That kind of situation is there. And definitely, these circumstances will -- are going to benefit us.
Okay. Okay. And any benefit on the [ EPS when there are ]
Sir, your voice is breaking up.
Maybe I'll rejoin the queue.
The next question is from the line of Bhavin Gandhi from B&K Securities.
Just firstly on the realization itself, can you elaborate? We have seen truck rentals going up. How sustainable do you think this realization trend is, if you can comment on that first?
Realization, see, this 10% increase on account of 2 things. One is, say, from the April onwards, [ we tel ] increase the rate, and further increase we did after this increase in the fuel price. Now based on these things, now whatever the freight rate increase in the month of April, that may not be sustainable in the coming quarters. So that's the reason what we are doing -- we are not blindly giving a discount across all the bookings. But on a selective basis, again, wherever the customers feel good volume and all kind of things, then definitely, we are offering some concessions in the rent -- in the rate.
Sure. Sure. And second, sir, on the various cost reduction measures that you mentioned, the employee [ vans ], biodiesel, et cetera. If you were to look at what you think will be sustainable here, you already mentioned about the rental reduction to which at the [ end of ] March, which is 25 lakhs to 30 lakhs per month. Other than this, what are the other cost items that one should look at, which will be sustainable going forward?
Yes. One is on employee cost, say, on a month-on-month basis, if we compare the February salary versus current salary for the month of September. The saving was in the range of around INR 7 crores per month. So out of this INR 7 crores, whatever salary cut we'll get up to September, we have -- there will not be any salary cut from October. So that amount will increase to the tune of around INR 2 crore per month. But remaining INR 5 crores may be sustainable until March.
Okay. Any other line items where we are seeing cost reduction, sir? Other than these two?
And about biodiesel, we have identified some source in Tamil Nadu also. So now North India, wherever the vehicles are operating, say, [ after ] Gujarat, we cannot use biodiesel because of this temperature during this period, at least around the 3 months. But in South, actually, we can increase the volume. [ That ] continues here around 48%, 50%, what we are using right now because the percentage is higher on overall basis because the overall diesel consumption is also less because of the low kilometers by the vehicle because of less in volume. Now once we reach a normal, then obviously, the consumption of diesel quantity will increase. Proportionately, we make use -- up to around 30%, 35% [ even ] in this quarter.
Okay. And just one last thing, sir. Can you broadly give us a sense of interstate and intrastate mix of GP volumes, broad [ rate is all right ]?
No, we don't have it, but see especially in the South, West and North -- South and West, we are having both interstate and intrastate. And if we compare other states, other regions, for example North where we having more of an interstate. And again, towards East and South to Northeast, again, most of our interstate movements are there. But West and South are having both interstate and intrastate.
Sir, is there any trend that we are seeing, discernible trend in terms of overall leads for us changing materially up or down over distance which...
Kilometers are increasing.
Are increasing. Okay. All right.
[Operator Instructions]Next questions is from the line of Kaushal Shah from Dhanki Securities Pvt. Ltd.
So firstly, regarding the bus operations, so just can you give us the passenger de-growth as well as the realization movement for the quarter year-on-year?
Yes. About passenger year-on-year in this quarter, it has decreased by around 78% revenue. And this decrease is towards the number of passengers, decreased by around 82%. And there is an increase in realization by around 4% to 5%. Again, the increase in realization is on account of [ sales coming ], because government can put certain restrictions that we have to keep certain seats empty in between the passengers and all. So for example, wherever we used to carry around 40 passengers, we are in a position to carry around 20, 25 people. In that case, actually, we increase the rate per passenger. That's how the realization is improved. But otherwise, if you see overall revenue per trip, it is much lesser.
Okay. Understood.
So half year, the decrease in number of passenger is around 90% and increase in realization by around 2%. And quarter-on-quarter, the increase in number of passengers is around 2.5x and decrease in realization by around 5%.
Okay. Understood, sir. And the second would be on the debt part. So basically, since we have done a significant reduction in debt, can you give us kind of an outlook for maybe FY '21 end or maybe until FY '22, if you have any plans?
Definitely, if this trend continues -- so for example, in the current half, we're -- we did a cash profit of around INR 127 crores. Part of this, majority of the amount, we utilized for the repayment of the debt. Now considering the CapEx plan, we don't have much a CapEx in the coming quarters also. So definitely, that is going to be substantially reduced. See, out of INR 115 crores, it may reach around INR 40 crores, INR 50 crores, around INR 30 crores, INR 40 crores by the end of this year.
The next question is from the line of Krupashankar NJ from Spark Capital Advisers.
Okay. Sir, my first question is on the realization part. You did mention that the realization is up 10%, and the lead commuters also is increasing. Can you quantify what would be the percentage increase in the lead distance? And what is driving this increase?
The lead distance in the sense?
Lead kilometers, your traveling [ positive ] kilometers in comparison to the previous quarter?
Yes. Yes.
So can you -- that would have resulted in the higher realization, right, sir?
Yes, yes. Overall you see is this quarter, the Goods Transport kilometers is decreased by around 8%.
Decreased by 8% Y-o-Y?
Yes, Y-o-Y. And half year, again, it has decreased in the range of around -- yes, around 9% to 10%. And if it is quarter-on-quarter, it has increased around 2.4x.
Okay.
And out of this, see, whatever increase is that. And majority increase -- the decrease is around 8%, but the owned vehicle decreased highly around 5%. That's on account of that, actually, the dependency on the hired vehicles has been reduced, and it has been impacted on the reduction in the [ owned vehicles ].
So is there any trend which you're seeing that there's a higher movement of cargo going in from let's say from the South or West or North? Is there some trend which is seen? Any indication?
The volume from -- yes, the West is increasing and even North is also increasing. But South for that matter, it is -- basically, South to Southwest, we are having a good increase. But South to other stations, there still -- there is no [ response to this ]. We are facing some of the issues like return load from South to this North and West [ iterance ]. There, actually, we are facing some shortfall in the tonnage. That's why we are engaging with [ this ] for the [ repu ] commute.
So -- but you did mention -- so for example, now your realizations on a Y-o-Y basis has gone up about 10%, and your leads have gone down by about 8%. So is it fair to say that the price hikes you have taken have been substantially higher than 10% in the second quarter?
Yes. So again, it is a month-on-month, actually, we did some [ rectification ] in the rates. That [ effect ] will always continue, right.
How is it in October as well, sir? So how are you seeing the trend?
October. Yes, tonnages is -- it is a [ portion of what ] we have shown a growth in tonnage in the month of October. And [ fare ] realization more or less is maintained. Now we have to see [ how it ] for the next quarter will be.
Okay. So sir, in the second quarter also, you would have seen -- you also mentioned that [ the 4 ton ] trucks were not deployed. And due to which, you saved on the maintenance costs and et cetera. Can you just quantify as to how much of the percentage of overall trucks were deployed during the quarter? And what was the average utilization of rate of those trucks?
Again, say, out of share on 4-ton vehicles, 4-ton plus vehicles [ at all vacant ], it was around 600 to 700 vehicles have re-opted for non-use. And now all the vehicles are on the road. That non-use option actually all the vehicles have been renewed, now all vehicles are on the road, we're operating.
Right. And you would have paid salaries to the drivers during that month as well, despite the trucks not being utilized?
No, salary, we -- it is completely on a variable in our case. The driver performed, then only he will get a salary. So that's the advantage because of this non-use, what happened, one -- there is no driver allotment to these vehicles. And second thing, there are no government access to these vehicles. And apart from that, the kilometers -- so for example, other vehicle kilometers, apart from these vehicles, where whatever vehicles we're operating, the kilometers of those vehicles have been improved.
Okay. Okay. And so sir, again, on what would be the utilization. So apart from -- so suppose it's about 3,000 -- 350,400 [ GT ] vehicles, what would have been an approximate utilization level?
Utilization always, it will be 100% in our case hub to hub. See, that's the reason you first say 500 vehicles are allotted to one particular hub. If load is for 300 vehicles, we'll operate only 300 vehicle. The rest 200 vehicles, we will keep it as idle. But we will never -- our transshipment terms will never underload the vehicles. For example, if 28 tonnes is the transshipment, it will carry 28 tonnes only.
Okay. And so again, coming to the next part of my question was that on the composition of sectors. You did mention that textiles decline was offset by other sectors. Can you specify what would be the composition? Is there any mix change in the cargo carried -- and was it [ volume-based ] in nature or...
Basically, in our case, if you see the sector-specific concentration on this sector, it is very less. The only textile, we can mention. And the rest of all sector will contribute not more than the area let's say 7%, 8%. So you see pharma, it is not more than around, say, 7%, 8%. But in the current quarter, what happened, the commodities related to agriculture products and equipment has been increased. And commodities related to the specifics has been increased and commodity related to this agriculture seeds have been increased. And to some extent, pharma and other sectors also increased. But if you see the percentage, the growth is 8%, the change will say around 9% or 10%, maximum. See, last time, it was almost around -- down by around 7%, 8%. Out of 15% what we used to carry last year -- last quarter, we used to carry hardly around, say 8% to 9%. Now we are carrying almost around 12% to 13%. Still another 3%, 4%, wheat is going to improve in the current quarter. That's what we are hoping. And if we see the lower increase from this West, especially the Gujarat [ and all ], most of the textile commodities, we are shifting from these location to South, even within West and North. So textile will come back in this quarter. That's what we are hoping.
The next question is from the line of [ Disis from Delanisis Bank ].
Good morning. Sir, my question is basically on the fleet addition. So look at the situation business conditions right now in the state of the economy and the [ red ] segment, you mentioned in the earlier call that you don't intend to add anything in second half also. So the question is, when do you actually decide to add more trucks into your fleet?
So this completely depends on the tonnage. And moreover, what will happen if tonnage is increased in the month of, say, October, then we assume that our vehicles are unable to carry that much of ton -- load. In that case, actually, we can engage alternative vehicles also. That option is always there. So always, we see that the sustainability in the tonnage for at least around 2 to 3 months. Once the tonnage starts increasing continuously, based on the shortage in capacity, then we add a vehicle. The CapEx plan [ highlighted ] -- is if we order today, say, for example, 2 [ eons ], within 15, 20 days, as soon as they start delivering [ the wheat ], that is not a longer period. That's why we are very much comfortable, and we decide CapEx as and when required.
So essentially, if my understanding is right, then adding a new fleet decision, to a great extent, depends on the availability of those outsourcing third-party trucks also. So what is the latent capacity available in that segment, like to what extent? Is it very, very comfortable today?
Yes it is comfortable because even last year tonnage, from last year to this year, again, we have added some other vehicles. And apart from that, we scrapped some of the old vehicles also. On that level, we are comfortable as of now. If the tonnage start increasing, then further, we have -- for the time being we increase outside vehicles. And if it is a sustainable growth, then definitely we'll grow further CapEx.
Okay. So essentially, whenever you witness tightness in that outsourcing market or the spare truck market, that time only you will decide, then it becomes a major factor, right?
Yes. And moreover, about the percentage of outside vehicles, normally, we can operate up to, say, 12% to 15% also we can reach [ depend on shandal out of these ]. Now that level is hardly around 6% to 8%.
Oh, okay. Okay. Okay. And lastly, what will be the VRL Logistics profitability on those outsourced trucks and will it be significantly different from the owned vehicle?
No, normally, profitability is lower in outside vehicles. That's the reason, actually, we are having our own vehicle as compared to owned vehicle profitability versus outsourced vehicles. The reason is, one is, size of the vehicles matters. And apart from that, the service level is very poor in case of outside vehicles. And the efficiency of operations is less. So considering all these factors, we believe that our own vehicles are much better in profitability. And moreover, the cost reduction what we are doing, especially biodiesel, say, for example, biodiesel what we are using, these biodiesel we cannot use for outside vehicle. There the understanding with the outside vehicle is, it is on a per kilometer. Route to route, [they have a different ] freight rate? And you can maintain the fuel, driver, everything belongs to the truck owner. But in our case, what will happen, we are having a unique mechanism to control all these major operational costs. One is about diesel costs. We are [ happy ] using biofuel. And apart from that, wherever the vehicles go for our own fuel pumps or even fuel pump which have [ been ] a lot [ are set ] for our vehicles. Again, there also, we are getting some kind of a discount. And moreover, wherever we're having our own vehicle from there, we [ wire it ] from the refineries in it. And moreover, our maintenance cost is very low. Our tire cost is very low per [ own truck ] kilometer compared to the outside kilometer. So when we hire outside kilometers, we will not get any benefit of all these things, so cost per kilometer will be much higher. That's the reason always we try to -- less dependency on the outside vehicles.
Fair enough. And sir, lastly, what is the situation on the drivers side, I mean are you -- the drivers which you have, the truck drivers on your roll, are they now back completely before any -- where they were when the COVID hit? Or has there been some [ shortfall ]?
Most of the drivers from the -- are -- came back. And apart from that, there are new people also we appointed.
Okay. So that's not a problem anymore, right?
Yes.
The next question is from the line of [ Katar ] from [ Bedelenda par ].
I just wanted to understand, most of the questions were answered, but in a different way, could you just give some indication of how second half is shaping versus the second half of last year. You said that you expected [ entire ] sector volumes to pick up in the second half. But could you just speak a little more in detail on that on the volume front versus last year? And then how much of the cost will come back operationally, which will get your EBITDA margins back to 15%, 16% versus this onetime 20%?
So I'll explain about EBITDA margin. In the second half, the EBITDA margin will be around 16%.
Okay, which is comparable to the last year, right, second half?
Better than last year. And apart from that, in case of volume, for the month of October, really, we have -- on a growth path. And we are expecting that this trend will continue.
Okay...
And moreover, see the pandemic issue started mid of March last year. The last quarter is totally [ well ] so if there are no lockdown or there are no further such incidents, then definitely there will be better performance in this second half.
Okay. Sir, can you can you envisage growth in the second half versus the second half of last year?
Yes, yes, definitely.
The next question is from the line of [ Vatan Maruthy ] from [ Mutual Omand ] .
Sir, just -- most of the questions are answered. Just 1 broad question from my side. So just from a medium to longer-term perspective, so I understand this year is a bit of a disturbance. And you also shared that you've gained some market share. But from a longer-term perspective as an organization, we have kept certain targets for ourselves about the growth which all segments, which all areas that we are targeting to grow, let's say, from a medium-term perspective. If you can share some color there. Because the larger impression I get is that maybe we are -- obviously, we are active, but maybe there is some level of volume that comes to us, and we accept it rather than being proactive about it, maybe it's not the right word. But if you can share some color as to how actively we are looking to gain market share, new markets, if you can help me understand that.
Yes. Basically, you see what we are doing now. One is on a geographical basis, so for example, even during this pandemic also, myself or Chairman, even our MD, the top management, actually, we visited to most of our locations. In essence we conducted almost around 10 to 12 meetings across the country. Basically, the idea is to understand the local market and gear up our people, the marketing people or branch managers. What are the local products available in that particular geography. How is the inbound and outbound, both the volumes should be increased. That was the target, actually, what we were having during these meetings. So based on those studies, we are having -- we studied certain products. So for example, in Kolkata meeting, we discussed a lot about the [ steep ] order and such kind of commodities. And especially a lot of [ real movement ] happens from this area to the rest of the country. So that's the reason we targeted these product base, and we identified the top customers out of these product, and we are targeting those customers. Similarly, say, for example, cashew, that's how actually we developed cashew market in Kerala and Tamil Nadu. And say, in Gujarat also, we identified [ our all ash ] customers who are basically spending the goods. Outbound goods from Gujarat, we don't have an issue. But we studied a lot of things about how inbound goes to Gujarat. And we targeted those customers across the country, and we are continuously targeting those customers. And definitely, we want to increase business from such customers. So this kind of exercise, actually we are doing across the country, so that our vehicle utilization will be improved both from inbound as well as outbound. So we will not have any tonnage shortage for our vehicle routes also. That is one reason. And second reason, definitely, this will help to increase in the volume. This is now actually, we educated our people. We are targeting on these 6 [ systems ].
Sure, sure. Sir, really comment about the way you guys operate and run the vehicles in more profitability. Just one last question from my side. Is there any target -- medium-term target that the organization has kept for itself that the volume growth or trajectory that you would want to go towards?
No, basically, we normally, we will not fix any targets in our company. That is how the culture in our case, and that's how we developed. Basically, how we go through in the market and all -- we study the market, we study that particular geography. And we continuously force our people to work on it. It is not right seeking certain target, and we will bring some wrong customer base there and the payment terms should be not better. So many problems will happen later stage. That's the reason actually always we give comfort to our people that what's the best they can do in their geography. That's how actually, we push them, we encourage them rather than fixing on certain target center and all our people behind those targets. And based on our analysis, actually this method of operation is more [ precious to us ] compared to the [ switching of certain ] targets and doing the business from the last 40 years. That's how the company has been grown.
[Operator Instructions] The next question is from the line of Kaushal Shah from Dhanki Securities.
Congratulations on the good set of numbers. Sir, I have 2 questions. One is the market share gain that we have done, do you now anticipate that it could be sustainable at the current levels, if not the entire 8%, but even whatever number we can actually sustain. And the second was the new avenues. So while you mentioned that textile segment was a little weak, but we could kind of recoup volumes in some other segments. So going forward, can we expect that the other segments, like, for instance, you mentioned about agri, pesticide, seeds, pharma, et cetera? Will those volumes sustain? Or these are kind of one-off or kind of onetime and these customers could again go back to maybe their earlier logistics providers?
So basically, just I mentioned even earlier also, since these 2 questions have been answered earlier. The thing is -- now whatever shift has been taking place, that will not -- again, those customers will not go back to the original transporters. The reason is, one is they will [ require their current ] tonnage vehicle levels. And apart from that, now the compliance levels have been increased. So for them, actually, when they [ start with us it is ] absolutely about compliances, there is no need to worry about [ either we compliances ], everything the system will take care. Which is not the case [ with another operators ], that's one. And second thing, you mentioned about the product-wise result. That's what actually on just earlier question to your question, I mentioned same thing. Each geography, each area, we are identifying the products both inbound and outbound. That's how actually we are targeting to gain more market shares from the other operators.
Sir, one worry that most people have is about the sustainability of volumes. So what you're really saying is that the volume increase, and you also spoke about the positive growth in tonnage in October and even the current month has been good. So you think the volume growth or rather the volume numbers are sustainable at the current levels? And we will -- of course, the economy, if it kind of sustains, we will also have decent volumes going forward?
Yes, if things continue like this, definitely, there'll be volume growth. There should not be any further disturbance. That [ level ] remains as it is. And if economic continues to at the present level, definitely, there'll be volume growth.
The next question is from the line of Shyam Sundar Sriram from Sundaram Mutual Fund.
This is Shyam from Sundaram Mutual Fund. Sir, my -- you did talk about fleet addition, if at all required. So my question is just 2-parter. One is what will be the normalized replacement fleet we do in a given -- this year? And in case you decide to add vehicles, would you add 2- to 3-year used vehicles or would you prefer new vehicles? That is my first question. Secondly, on the attached vehicle that you take from the market side, generally, what -- you did mention that currently, it is at a lower level, but you may have an option to increase it. Broadly, what is your sense on the marketplace for the outside, sir? Are they also seeing the same kind of utilizations that you are seeing from your own vehicle?
One is talking about the new sales of the vehicles. Actually, in our case, even in the 25-, 30-year vehicle still we are [ have ] in that operation. Basically, because of we are having the preventive maintenance system on these vehicles, so these vehicles can be used for a better life in our case. And the second thing about purchase of the vehicles, as and when we buy the vehicles, we always buy the new vehicles. We never buy the second-hand vehicle because our vehicles are very, very specific for our operation. And the third thing about the outside vehicle utilization and their profitability, et cetera, the utilization levels from outside vehicle is much lesser. The reason is again, these vehicles are not built as per our requirement. One is the length of the vehicle will be high, the weight of the vehicle will be less, so that we can carry more loads in our vehicles compared to the outside vehicle.
Understood, sir. Then just the first part of my question on the -- what is the amount of fleet replacement that we may do this year, sir? Any ballpark sense on that? Is it the usual business...
If we see in 1 year from last half year to this year, we have scrapped almost around -- this year, 86. But overall, around 200 vehicles we kept.
200 vehicles. 200 vehicles.
Yes. Quarterly around 29, 30 vehicles will be scrapped.
Okay. Understood. Understood. Understood. And do you think if there is a scrappage policy or scrappage may increase and we may replace more and more with newer vehicles, sir. Is that something that you're seeing?
Yes. Actually, even last quarter, I made some statement about the scrappage of the vehicles. But it is with respect to, if the vehicle scrappage was introduced by the government, that will -- we have to scrap the vehicle. Otherwise, whatever we are doing all these days, that will continue. It's not being -- if the vehicle is doing good, even 30 years old vehicle is doing good, we'll continue with those vehicles because there will not be high maintenance costs. Even it is as good as fuel average, then why we should not use those vehicles? The efficiency level is same as would have new vehicle, then it is better to use old vehicle.
The next question is from [ Pryam Dashim ] of [ Bolt ] Capital Markets.
Congratulations on a good set of numbers.
Thank you.
One question from my side. If I look at the booking and distribution network that we have, it seems to have come down a little from June. So June, we had about 689 branches and 167 agencies. It's come down to 678 branches and [ 152 ]. Two questions around that. One, what is the logic behind that? And second, does it impact the kind of [ leads ] that we had and if things come back to normal to next year, do you believe that it can have an impact on the kind of volume that it could have handled?
No, no. There's nothing related to the volume. Basically, what happened, we identified some branches. Say, for example, if it is a general branch [ where we ] move say, from Bangalore to Mumbai, all the major cities in this route, actually, we are having our branches. And similarly for one of the stations, which is around 50 to 100 kilometer inside from the highway. And in that case, what -- we will observe those branches' performance very, very carefully because for every pickup and delivery, where to -- the vehicle has to move around 50 kilometers and then it has again to come back to those kilometers. So we identified such branches. And if the performance is low, actually, we close such branches. And because of that, the volume still is not impact because some of these branches, actually, we have them integrated with a nearer or nearby branches. For example, if we have 2 branches in [ the ] location, we made it 1 like that. But about customers responding, all it will continue as it is.
Hello? Hello, Operator, are you there? Operator, can you hear me? [Technical Difficulty]
You may proceed with your question, please.
Yes. Yes. Sir, I have one last question regarding the Surat facility. So if you can sort of help us understand what the performance out of that facility now, how has the ramp-up been and vis–à –vis the investment that we have done, I mean, what kind of returns are, can we expect to see out of that facility over the next 1 to 2 years? Some outlook on that or guidance on that can be helpful.
Yes, because of Surat, so now what happened, so now the textile trend is downturn. But apart from that, actually, our recovery rate are, as compared to other competitors, our performance is much better from Surat because of this facility. The reason is, one is even though the shortfall in tonnage and all these things actually, we can accumulate the goods and move the vehicles, depending on the load factors. And second thing, moreover, we are giving some storage facility to all the parcels which are going back to Surat. So they can store the materials and we can charge the [ merge operator ] after a certain period, and they can take the delivery. Because of that, actually, we have added a lot of new customers from Surat. And because the per customer basis volumes are less, that's the reason actually that textile overall volumes are less. But once it has bounced back, the growth will be much, much better as compared to the other operators from Surat because of this facility.
As that was the last question for this conference, I would now like to hand the conference over to the management for closing comments.
Yes. Thanks to all the participants for your patience herein. Thank you.