VRL Logistics Ltd Management Discussions

1. INDUSTRY STRUCTURE AND DEVELOPMENTS

The logistics industry in India is a vital component of the countrys economic landscape, playing a crucial role in the movement of goods and materials across its vast and diverse territories. As the worlds fifth-largest economy and a rapidly growing market, Indias logistics sector has been undergoing a transformative phase, driven by technological advancements, government initiatives, and the increasing demands of a burgeoning consumer base.

The Indian logistics industry is a vast and rapidly evolving sector, playing a critical role in the countrys economic growth and development. Encompassing a wide range of activities, including transportation, warehousing, distribution, and supply chain management, the surface logistics industry in India has seen significant advancements in recent years.

Indias strategic geographic location, coupled with its growing population and expanding consumer market, have made the country an attractive destination for logistics investments. The sector is characterized by a diverse range of players, from multinational corporations to small and medium-sized enterprises, all operating within a complex regulatory landscape.

• Multimodal Transportation: The Indian logistics industry utilizes a combination of road, rail, air, and waterways to facilitate the movement of goods across the country, leveraging the strengths of each mode of transport.

• Warehousing and Distribution: The industry has witnessed the development of modern, technology- driven warehousing facilities, enabling efficient storage, handling, and distribution of goods to meet the growing demands of the market.

• Supply Chain Integration: Logistics providers in India are increasingly focusing on end-to-end supply chain solutions, offering integrated services to optimize efficiency, reduce costs, and enhance visibility across the entire logistics ecosystem.

Rapidly Growing Market: The Indian logistics industry is one of the fastest-growing markets globally, valued at over $200 billion and expected to reach $320 billion by 2025. This growth is driven by the expansion of e-commerce, increased manufacturing activity, and government initiatives to improve infrastructure and ease of doing business.

Evolving Market Dynamics The Indian logistics landscape is undergoing a rapid transformation, with the emergence of new business models, technological advancements, and changing consumer preferences. Third- party logistics providers, startups, and tech-enabled platforms are disrupting traditional approaches, offering innovative solutions and enhancing efficiency across the supply chain.

The Indian logistics industry operates within a comprehensive regulatory framework overseen by various government agencies and policies. This includes guidelines and standards set by the Ministry of Commerce and Industry, the Logistics Division, and the Logistics Efficiency Enhancement Program (LEEP) to ensure safety, security, and fair practices across the sector.

To bolster the logistics industry, the Indian government has introduced several initiatives and schemes, such as the Bharatmala Pariyojana for developing road infrastructure, the Sagarmala program for port-led development, and the National Logistics Policy to integrate multimodal transportation. These efforts aim to improve connectivity, streamline processes, and incentivize private investment in the logistics ecosystem.

The government has also actively promoted the integration of technology in the logistics sector, with initiatives like the Digital India program and the launch of the FASTag electronic toll collection system. These measures enhance visibility, automation, and efficiency across supply chains, paving the way for the industrys digital transformation.

As the Indian logistics industry continues to evolve, several emerging trends and growth opportunities are shaping the future of the sector. Advancements in digital technologies, such as the integration of artificial intelligence, machine learning, and the Internet of Things, are expected to drive increased efficiency, real-time visibility, and data-driven decision-making across supply chains. The rise of e-commerce and omnichannel retail is also fueling the demand for more sophisticated last-mile delivery solutions and intelligent warehousing systems.

The governments focus on developing robust multimodal transportation infrastructure, including high-speed rail, inland waterways, and dedicated freight corridors, is anticipated to enhance connectivity and accessibility across the country. Additionally, the growing emphasis on sustainability and environmental conservation is leading logistics providers to explore alternative fuel sources, renewable energy solutions, and eco-friendly packaging to reduce their carbon footprint.

As India continues to strengthen its position as a global manufacturing and export hub, the logistics industry is poised for substantial growth. Opportunities lie in areas such as cold chain logistics, specialized transportation for hazardous and perishable goods, and the integration of advanced analytics and predictive modeling to optimize supply chain operations. By embracing these emerging trends and opportunities, the Indian logistics sector can enhance its competitiveness, drive economic growth, and meet the evolving needs of businesses and consumers.

As per Ernst & Young report on ‘Envisioning the future of Indian logistics@2047, India?s freight movement is heavily skewed toward road transportation, which moves 66% of cargo (in ton-km). This is followed by rail (31%), shipping (3%) and air (1%). To aid this cargo movement, India has an extensive network of support infrastructure comprising 129+ In-land container depots, 168+ container freight station, and ~300 mn. sq. ft. of warehousing space. The sector handles ~10,000 commodities and employs ~22m people. It is one of the highly fragmented sectors, with only 10% of the sector operated by organized players.

Significance of Roadways in Indian Logistics landscape

Backbone of Transportation - Roadways serve as the primary mode of transportation, connecting rural and urban areas, enabling the efficient movement of goods and materials across the country

Accessibility and Reach -Indias extensive road network provides unparalleled accessibility, reaching even remote and isolated regions, ensuring the delivery of essential supplies and services.

Cost-Effective and Flexible - Roadways offer a cost-effective solution for logistics, with the ability to adapt to changing demands and deliver goods on a just-in-time basis.

Integrating Rural Economies - Robust road infrastructure integrates rural economies with the larger national supply chain, empowering local producers and connecting them to wider markets .

• India has about 66.71 lakh km of road network, which is the second-largest in the world

• Length of 4 lanes and above National Highways (NH) increased by 2.5 times - 18,387 km (2014) to 46,179 km (Nov?23)

• Average pace of NH construction increased by 143% to 28.3 km/day from 2014

• The NH network increased by 60% from 91,287 km in 2014 to1,46,145 km in the year 2023.

Currently the logistics business is highly fragmented and has innumerable participants, including major local players, worldwide industry leaders, the express division of the government postal service, and rising start-ups that focus on e-commerce delivery. The industry includes transportation, warehousing, and value-added services like packaging, labelling, and inventory management. With the advent of technology-driven solutions such as transportation management systems (TMS) and warehouse management systems (WMS), Indias logistics industry has witnessed tremendous development in recent years. These solutions have assisted logistics firms in increasing operational efficiency, lowering costs, and improving customer service. (Source: IBEF)

Overall, while the Indian logistics industry is poised for significant growth opportunities, companies will need to adapt to changing market dynamics, invest in technology and infrastructure, and focus on innovation to stay competitive in this dynamic environment

Material Source : Ministry of Finance, Ministry of Road transport & Highways, E&Y Niti Ayog, India Brand Equity Foundation

2. SWOT ANALYSIS STRENGTHS

With an extensive network around the Country, VRL is able to provide personalized, localized support to our clients no matter where they are. VRL?s core strength is its large size and scale of operations undertaken on a pan India basis with the largest fleet of owned vehicles. We take pride in our extensive fleet of modern, well- maintained vehicles that are optimized for efficiency and reliability. Our diverse fleet includes a wide range of trucks, trailers, and specialized equipment to handle any freight requirements. Our vehicles are regularly serviced and inspected to meet the highest industry standards. With a track record of nearly five decades, we are one of the largest distribution networks in India. We are the only "Asset- Right" organized player in Less than Truck load logistics business in India. Our wider spread provides us greater stability during regional disturbances.

VRL is a well-established brand in the country when it comes to surface transportation and the industry leader in the parcel transportation space. As on March 31,2024, the Company operated with the total of 5994 owned vehicles having carrying capacity of 86405 tons, and several owned premises, including branches, offices and transhipment hubs. We maintain our stand that your Company also occupies the leadership position in the country for Less than Truck Load (LTL) movement of goods and it is only the absence of validated industry data that prevents us from emphatically acclaiming this fact.

The following graph depicts the YoY increase in number of Vehicles and Capacity.

The two major advantages that your Company enjoys over its competition are its well established wide network of branches and franchisees and its owned fleet of commercial vehicles with dedicated in-house vehicle body designing and vehicle maintenance facilities to cater to parcel transportation. Your Company is also the largest fleet owner of commercial vehicles in the Country and the same enables the Company to set unparalleled standards in the movement of LTL cargo in India through Hub and Spoke model in terms of service levels and safety of consignments.

The below figure depicts the Network and Reach of the Company.

The Company presently operates through 1209 branches across 24 States and 5 Union Territories in India and its reach is unmatched for the offering of LTL goods transportation services.

The Company operates through a hub and spoke model which helps in utilization of vehicle capacity to optimal levels. The below figure depicts the ‘Hub and Spoke? consignment delivery model followed by the Company.

The hub-and-spoke model creates numerous benefits, including:

• Continuous movement for loads thanks to centralized handoffs.

• Reduced lengths-of-haul, which improves scheduling, reduces transit time and helps drivers

• Consistent on-time performance, which enhances service levels and ensures products arrive in the right place at the right time.

• Improved driver recruiting and retention- leading to higher service tenure, route consistency, increased transit dependability and performance, and improved safety.

• Reduced costs and enhanced productivity

• Lower carbon footprint, because few empty miles driven reduces wasted fuel and emissions.

• Consistent pricing mitigates the risk of third-party carrier price fluctuations.

• Vehicle utilization: Optimum utilization of vehicles due to efficient load distribution

The policy at VRL is to own its vehicles for offering LTL services as also own significant infrastructure facilities comprising of ware houses and maintenance facilities. We also have a dedicated in-house IT setup which is a significant strength of your Company and the same has rendered a lot of control, cost savings and business flexibility over the years. The entire IT infrastructure of the Company is operated internally and the in-house developed ERP enables the Company to seamlessly operate on an online real time basis across all its business verticals as also integration with franchisees and select customers. Your Company also has built up capability to maintain its owned vehicle fleet internally and the cost savings arising out of economies of scale by way of tie-ups with fuel suppliers, vehicle manufacturers for supply of spare parts, tyres etc., as well as ongoing in-house R&D in this domain have enabled the Company to utilize its vehicles for a significantly longer term vis-a-vis the industry as also at significantly lesser maintenance costs.

Your Company benefits from in-house research and development with a capability to implement its findings and experiment with newer products and technologies on its owned vehicles. Several of its key findings have today been accepted and implemented even by vehicle manufacturers. In combination with own vehicle body designing facility with technology to fabricate lighter and longer bodies, that reduces the overall weight of the vehicle and ensure higher payload, and also with combination of multiple types of commodities handling such as heavy and bulk consignments inside goods carriages, the goods carriages can be utilized at higher capacity as compared to the earlier periods.

Overall, the in-house maintenance facility helps the Company to better utilize its fleet than competition as the vehicles owned by the Company can be used for longer period of time vis-a-vis outside vehicles. Also ~25% of the Goods transportation vehicles are fully depreciated ensuring vehicle fleet availability with no additional depreciation costs. Also ~85% of the Goods Transportation fleet is debt free with no associated finance costs.

Your Company also has a very well diversified customer base of ~9 lakhs plus across the various Industrial Sectors. During FY 2023-24, the Company?s largest customer and the top 10 customers put together contributed only 1% and 3% of the revenues of the Goods Transport business respectively. VRL has the lowest trade receivables in the industry. This has ensured that the Company has no dependencies on any specific customers or product categories. Similarly, there are no geographical or product related dependencies for the business which better insulates your Company vis-a-vis competition.

Your company also benefits from its strategy of procuring fuel to reduce overall expenses. The company has tied up with fuel pumps across India for fueling during transits. RFID tags are used to monitor real time fuel usage. Apart from this the company owns 7 fuel stations across the country and procures fuel directly from refineries.

With emphasis on connectivity, the management have taken the right steps to identify and expand the branch network. Going further this would lead to openings of newer business premises and help into tapping newer sectors from which the company would greatly benefit.

WEAKNESSES, RISKS AND CONCERNS

Infrastructure and Connectivity Challenges: The Indian logistics industry faces significant infrastructure and connectivity challenges that hinder its growth and efficiency. Limited multimodal transportation infrastructure, such as inadequate road networks, outdated rail systems, and underdeveloped inland waterways, creates bottlenecks and delays in the movement of goods. Poor last-mile connectivity to remote and rural areas further exacerbates the problem, making it difficult to reach customers and access markets. Additionally, outdated and fragmented warehousing facilities with limited storage capacity and technology integration hamper the overall supply chain efficiency.

Another major issue is the lack of integrated and efficient logistics hubs that can facilitate seamless multimodal transportation and distribution. The absence of well-connected logistics parks, inland container depots, and dry ports limits the industrys ability to leverage economies of scale and optimize transportation routes. Suboptimal port infrastructure, including limited cargo handling capacity, outdated equipment, and congestion, further exacerbates the challenges faced by the logistics industry.

Addressing these infrastructure and connectivity challenges will be crucial for the Indian logistics industry to achieve its full potential and meet the growing demands of the rapidly expanding economy. Investments in modernizing transportation networks, developing integrated logistics hubs, and upgrading port facilities will be necessary to improve the overall efficiency and competitiveness of the sector.

The transportation and logistics sector is grappling with several structural challenges such as:

? Fuel price fluctuations

? Shortage of trained drivers and labour

? Increase in toll charges due to more & more roads being covered under toll as also frequent increase in rates of existing toll rates on tolled roads

? As the industry is fragmented, there are several intermediaries in the ecosystem leading to multiple cargo exchanges, thereby increasing costs and operational inefficiencies.

? Lack of end-to-end supply chain visibility and ability to track and trace the cargo remains a challenge for the service providers and customers.

The sector is also constantly grappling with inefficiencies, however, because of which the cost of Indian logistics is 13 to 14 percent of GDP (in developed nations these costs amount to 8 to 10 percent of GDP). These inefficiencies stem from three reasons:

1. The two most unorganized sectors dominate the logistics market—road transport and warehousing. Road transport is particularly deeply fragmented—truck owners with fewer than five trucks constitute more than half of all goods vehicles on the road.

2. India?s modal mix is heavily skewed towards road, with 60 to 65 percent of transport happening via road compared to 25 to 30 percent in developed countries, prompting higher costs. The use of inland waterways and coastal shipping is limited, while the containerization of cargo in rail remains minimal.

3. Indirect costs are high and include inventory carrying costs, theft and damages— often because of poor planning, forecasting and lack of proper management of stock.

Your Company, being one of the organized players in this highly fragmented and unorganized market, stands to benefit as gradually businesses realize the costs of inefficiencies that smaller and regional operators present. Such gradual shift can be particularly seen after the post-pandemic economic revival also aided by a stricter GST regulatory environment.

Organizations have realized that they need to build networks and/or channels that will allow them to adapt quickly and easily in a changing environment. Organizations will have to build systems that can optimize costs, accelerate reaction times and diversify channels. For networks to adapt quickly and function smoothly, it is also important to build agile teams willing to change and adapt rapidly to the external environment. Swift reaction to disruptions can hasten change and minimize damage. Given the same as also the very nature of LTL freight being transacted, we believe that your Company would easily adapt to any given change being witnessed across markets as owing assets and operating offices across the country provides it with the requisite flexibility and option to moderate or reorganize any changes to freight movements.

The surface transport industry suffers from an acute driver shortage issue and the said problem also affects your Company. The management opines that this is the single most important factor that affects all the transporters across the country. Your Company is however relatively better placed in this regard. VRL offers best in class salaries and emoluments including incentives to its drivers which help retention of this cadre. The Company also has enlisted its drivers on its payrolls and extends all statutory benefits such as PF, ESI, etc. to its drivers apart from significant insurance coverage as well. The Company offers a good work environment as well and also takes care of their skill development by conducting routine training programs as well as awareness camps for its drivers. Your Company also conducts frequent health checkup and health camps for the drivers so as to make them more health conscious. Shortages however still remain and your Company is striving to further encourage more and more individuals to take up driving profession by visiting potential villages and towns and trying to remove the stigma being associated with the driving profession. The management also propagates at several forums the necessity of a joint industry effort to overcome this problem which is only expected to become more challenging in the days to come.

Lack of owned infrastructure at key centers is another present day weakness in the management?s opinion. The Company has established owned transshipment hubs at key locations like Hubballi, Mumbai, Surat, Mangalore, Vijayapura, and Davangere. Long term leases have also been entered into at key locations such as Chennai, Delhi, Hyderabad, Bengaluru, Pune, Kolkata, etc. Owned infrastructure enables the company to set up good quality maintenance facilities as also better infrastructure for goods movement and material handling. The ownership of premises at such key business locations provides the Company with a lot of flexibility in conducting business operations and the same lead to considerable cost savings and also enables the Company to scale up its service levels. Setting up such owned infrastructure would however entail significant investments which in turn affect the return ratios and the management would need to balance the two so as to optimize stakeholder value as well as to cater to business growth for future. Your Company would consider gradually expanding its owned infrastructure at such key locations in the years to come.

OPPORTUNITY

The present day stabilization of the GST regime has necessitated several documentation requirements to which organized players are better suited. Be it e-waybill compliance and providing necessary information to the customers for their compliances etc.

The mandatory E-Invoicing turnover threshold for business entities is now reduced to 5 crore from 01.08.2023. E-invoicing was made mandatory for business entities with Turnover of 500 crores and above from October-2020. This was further limited to 20 Crores and above from April-2022. Now, with all business entities with turnover of 5 crores and above required to e-invoice, this would further lay emphasis on entities being more compliant. This would present additional business opportunity to your Company as smaller businesses would now scout for better logistics services from a compliance perspective.

The vehicle scrappage policy is a government-initiated program to replace old vehicles from Indian roads. According to the new policy, commercial goods vehicles greater than 15 years will have to be mandatorily scrapped if they do not pass the fitness and emission tests.

The imminent implementation of scrappage policy is being tentatively viewed by the road transport industry as there would be a very significant reduction in the number of vehicles plying on the roads. This however would be a blessing in disguise for your Company. The eventual situation of higher demand for vehicles would work favorably and coupled with the inevitable freight rate hike caused by such policy implementation would lead to a higher margins for the Company. Also, given the internal expertise the company has on the vehicle maintenance front al useful spare parts from the vehicles getting scrapped would be available for usage apart from the one- time salvage income expected. It is pertinent to take note that any such scrappage would also not entail any hit to the Company?s profitability as such older vehicles are fully depreciated.

Your Company has 885 vehicles which are more than 15 years old as of March 31,2024 with a total capacity of 8984 tons i.e. 10.4% of total capacity & 14.76% of total vehicle count. The management has however ensured that orders for higher capacity replacement vehicles are already put in place.

THREAT

Fluctuations in fuel prices resulting from diesel de-regulation, lorry hire charges payable to third party vehicles and input costs especially those related to tolls as also others like rent, salary etc. have a significant bearing on the Company?s profitability margins. These represent a significant portion of the operating costs and any inability to pass on the same in entirety affects profit margins adversely. In particular, the cost of fuel has increased in the recent years regularly and fluctuates significantly due to various factors which are beyond our control. Historically, due to low customer dependencies, the Company has been in a position to pass on predominantly or at times even completely such increases to customers through periodic increase in freight rates. However, the ever present volatility represents a considerable threat to our result of operations.

The Company?s operations could also be affected owing to development of newer policies by the different State Governments of the country. To quote an example, several states / cities have prohibited the entry of commercial diesel operated vehicles that are beyond a certain age. This necessitates the shifting of older vehicles and deploying these over other permitted routes which entails a cost. Also, one can never be certain as to when similar decisions would be implemented across other States and major cities which could affect us adversely.

The Company?s business operations are totally dependent on the road network in India. There are various factors that affect the road network such as political unrest, bad weather conditions, natural calamities, regional disturbances or even third party negligence that can affect the condition of vehicles and cargo. Even though the Company undertakes various measures to avoid or mitigate such factors to the extent possible, some of these have the potential of causing extensive impact on operations and assets.

3. SEGMENT-WISE PERFORMANCE

In FY 2022-23, the company operated in four segments namely:

1. Goods Transport

2. Bus Operations

3. Wind power

4. Transportation of Passengers by Air

The Company over a 2 year period hived off all the non-core segments and now seeks to work solely on its core competency which is Goods Transportation.

From FY 2023-24, the company made a strategic decision to focus only on the High growth oriented Goods Transport Business. For FY2023-24, the revenue from continued operations increased by 9.07% from 264852.18 lakhs to 288862.03 lakhs. Including other income the total revenue increased by 9.27% from 266286.66 lakhs to 290971.85 lakhs

4. OUTLOOK

FY 2023-24 marks a milestone with total gross GST collection of 20.18 lakh crore exceeding 20 lakh crore, a 11.7% increase compared to the previous year as per the press release issued by the Ministry of Finance.

Further, mandatory e-invoicing being limited to 5 Crores and above from 01.08.2023 would further lay emphasis on even smaller entities on being more compliant. In the aftermath of the pandemic, financially strong and organized players stand to benefit at the expense of smaller and marginal players who dominate the industry. This was seen last year as well.

The inherent strength in our business model ensures that the Company is not dependent on any particular customer or industry for its revenues. In these difficult times, the available drivers and vehicles are being selectively deployed for Full Truck Loads and Parcels depending on return load and other ground level position as the situation warrants. We are transacting freight business coming our way and our entire team has existing customers as also potential customers for getting business. We are doing an internal review and are conducting focused state-region level meeting to increase the freight density in the local pockets for growth and we are encouraged by the response to such initiative. During the year 97 new Branches were added. Considering the growth through new branches we are planning to expand the branch network further in the current year and planning to add around 100 branches in FY 25.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and the nature of its operations. The Internal Control function emanates at the Board level and its scope and authority of the Internal Audit function is well defined. To maintain objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board & to the executive Chairman and the Managing Director. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies across the Company. Based on the report of internal audit function, process owners undertake remedial action in their respective areas and thereby strengthen the controls. Significant audit observations and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board.

As regards the operation of internal controls, majority of these have been inbuilt in the internal procedures established by the organization which are also documented internally. These include in details the methodology to be adopted right from transacting bookings, effecting consignment deliveries, etc. and also describes the practices to be followed for the smooth operation of business. Inspection teams are formed at the head office level as well as at the transshipment level and cover the entire branch network of the Company periodically for exhaustive inspection for adherence to the set procedure. Deviation from the laid down procedure is escalated to the Functional heads as also directly to the Executive Directors.

The Company had laid down guidelines, policies, procedures and structure to enable implementation of appropriate internal financial controls across the company. These control processes enable and ensure the orderly and efficient conduct of companys business, including safeguarding of assets, prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and timely preparation & disclosure of financial statements. There are control processes both on manual and IT applications including ERP applications, wherein the transactions were approved and recorded. Review and control mechanisms are built in to ensure that such control systems are adequate and operating effectively.

Other control processes are IT driven and the in-house information technology capabilities ensure that due flexibility is available in the system to further strengthen controls as the case may be. Your management appreciates the need to remain efficient in their workings and recognized their responsibility in establishing controls as also effectively implementing them and monitoring their effectiveness on a periodic basis.

Other control processes are IT driven and the in-house information technology capabilities ensure that due flexibility is available in the system to further strengthen controls as the case may be. Your management appreciates the need to remain efficient in their workings and recognizes its responsibility in establishing controls as also effectively implementing them and monitoring their effectiveness on a periodic basis.

6. DISCUSSION ON FINANCIAL PERFORMANCE W.R.T OPERATIONAL PERFORMANCE

Particulars	Year Ended 31st March, 2024	Year Ended 31st March, 2023
Revenue from operations	2,88,862.03	2,64,852.18
Other income	2,109.82	1,434.48
Total Income	2,90,971.85	2,66,286.66
Profit Before Finance Costs and Depreciation	41,454.01	41,599.84
Finance Costs	7,786.48	5,433.85
Depreciation and Amortisation of expenses	21,616.30	15,914.28
Profit Before Tax	12,051.23	20,251.71
Tax Expense	3,193.80	3,637.96
Profit for the Year(excluding other comprehensive income)	8,906.10	16,613.75

Note: All financial numbers above are for Continued Operations - Goods Transportation

The revenue from Goods Transportation operations increased by 9.07% from 264852.18 lakhs in FY23 to 288862.03 lakhs in FY24. Including other income the total revenue increased by 9.27% from 266286.66 lakhs in FY23 to 290971.85 lakhs in FY24

The improvement in turnover is on account of growth in volumes. Volumes increased by 9.3% YoY and the company?s average daily tonnage reached ~11600 tonnes in FY2023-24. To achieve better growth in tonnage and to capture the new markets, during the year your company did not increase the freight rates. Due to poor monsoon spread, volumes from Southern States weren?t on expected levels. However, there was a significant growth in tonnage from North, East & North East Sates on account of expansion in branch network in these locations helped us in maintaining our overall growth in tonnage at 9.3%. Growth in tonnage in respect of some of the key commodities like Cloth & Textile materials, commodities related to Agro sector, etc were below the average tonnage growth.

Our customer base increased to ~9 lakhs. We believe that the continuous shift of customer base to VRL from unorganized sector will continue as compliance requirements becomes stricter under GST.

Emphasis on expanding our network in FY 2023-24 continued in line with the last fiscal year FY 2022-23. We added 97 new branches in FY24 as compared to 184 branches in FY 23. Apart from this there was an expansion of existing Branch Area/TPT area in key markets like Hubballi, Pune, Trichy, Salem, Indore, Chennai, Varanasi, Kanpur, Delhi, Patna, Guwahati, Siliguri, Madurai etc. Going further, we plan to open more number of branches in the untapped markets. The new branches added in FY 2023-24 contributed ~1.39% to the total tonnage and the new branches added in FY 2022-23 contributed ~6.74% of total tonnage in FY 2023-24. Our strategy of expansion of branch network is going to continue and we plan to add around 25 - 30 branches every quarter, especially in untapped markets.

The below graph depicts the increase in number of branches from FY 2021-22 to FY 2023-24.

On the fleet side, we added 891 vehicles of different capacities in line with our expansion plans to garner more market share and also reduce dependency on third party vehicles. Net addition post scrappage was 323 Vehicles. The below chart presents the capacity wise breakup of our vehicles as on 31.03.2024

- Vehicle numbers and capacity in the above charts excludes Cranes (14) and Tankers(23)

Total Fleet Capacity is 86405 tons as on March 31,2024 as compared to 82657 tons as on March 31,2023

Apart from this we are also currently operating with 216 Trailers with a total capacity of 5433 tons. We do plan to increase the number of trailers gradually. The below chart illustrates the increase of trailors from 10 in FY2019-20 to 216 in FY2023-24

Total Capex incurred in FY24 is 29027.80 lakhs as compared to 41219.91lakhs in FY23 Goods Transport (GT)

GT revenue increased by 9.27% from 266286.66 lakhs to 290971.85 lakhs.

Tonnage increased by 9% while realization increased marginally by 0.11% The increase in tonnage is on account of addition of new customers in the existing branches, expansion in network by opening of new branches in untapped market, focusing on geographic product-wise marketing and shifting of customers from the unorganized transport service providers to organized service providers on account of reforms in GST and E-way bill compliance norms.

Our focus to increase our network to the untapped market by opening of new branches and the shifting of customers from unorganised players to organised players (who are contributing major share in the Indian Transport Industry) will help our growth pattern to continue going forward.

Please refer the below notes in relation to elements of operating cost & Profitability

In absolute terms EBITDA of the company decreased by 0.35% from 41599.84 lakhs to 41454.01 lakhs. When expressed as a percentage to the total income for the year, the EBIDTA margin decreased by 1.38% from 15.62% in FY23 to 14.25% in FY24.

The main reasons for decrease in EBITDA margins are:

Employee cost expenses as a % to total income increased by 1.09% from 15.58% to 16.67% Overall Employee cost expenses increased by 16.94% from 41,485.09 lacs to 48,512.90 lacs. Employee expenses increased due to the company effecting annual increaments from the month of september 23. Also, the number of employees (including drivers) incresased by ~6% due to increase in number of banches in FY24. Apart from this there were internal promotions on selective basis.

The increase in toll charges also impacted on EBITDA during the year. The toll charges as a % to revenue increased by 0.66% from 7.28% to 7.94%. The increase in toll charges is on account of increase in toll plazas across the country from 1257 in FY23 to 1383 in FY24. Apart from this there was also an increase in toll rates and distance covered by owned vehicles.

Loading and Unloading charges as a percentage to revenue increased by 0.41% from 6.31% in FY23 to 6.73% in FY24 due to increase in loading and unloading rates per ton and increase in tonnage.

Rent expense which is fixed in nature is increased by 0.18% from 1.87% to 2.04% due to increase in number of branches & increase in leased space of major branches and TPTs . We increased the space in key locations cosidering our expected growth in tonnge for the subsequent period.

Increase in Kms run by owned vehicles effected increase in expense margin as a percent of revenue of Vehicle Running, Repairs & Maintenance from 4.15% in FY23 to 4.45% in FY24. Tyres, Flaps and Re-treading by 0.34% from 1.96% to 2.30%.

On the other side certain expenses have decreased during the year and supported increase in EBITDA margin as under:

Fuel costs which is major cost in our operation has decreased as a percent to the revenue by 0.28% from 30.43% to 30.14% in spite of increase in Kms covered by the own vehicles in the overall KMs operated. The reduction in fuel cost is mainly on account of decrease in average fuel procurement cost by 2.47%, from 90.22 in FY-23 to 87.99 in FY-24. And also the bulk purchase of fuel from the refineries at a discounted price is increased by 19.51% from 9.33% in FY-23 to 28.84% in FY-24.

Lorry Hire expenses has decreased as a percent to the revenue by 1.58% from 9.29% to 7.71% due to decrease in Kms covered by hired vehicles in the overall KMs operated

The below chart illustrates the EBITDA from FY21 onwards.

Depreciation and Amortization costs increased by 35.83% from 15914.28 lakhs to 21616.3 lakhs due to increase in capex and also increase in ROU as per IND AS 116, on accounting of rental expenses of long term lease agreements for the enhancement in major Branches and TPT space during the year. As a percent of total Income Deprecation increased by 1.45% from 5.98% in FY23 to 7.43% in FY24

EBIT of the company decreased by 22.77% from 25685.56 lakhs to 19837.71 lakhs. When expressed as a percentage of total income, the same decreased by 2.83% from 9.65% to 6.82% due to decrease in EBITDA margins and increase in Depreciation costs.

Intrest Expense increased by 43.3% from 5433.85 lakhs to 7786.48 lakhs. As a percent of total Income Intrest Expense increased by 0.64% from 2.04% in FY23 to 2.68% in FY24 due to increase in debt and increase in lease liabilities on account of addition/expansion of new branches/TPT areas on lease basis.

PBT decreased by 40.49% from 20251.71 lakhs to 12051.23 lakhs.. When expressed as a percentage of total income, the same decreased by decreased by 3.46% from 7.61% to 4.14% due to decrease in EBITDA margins and increase in depreciation and finance costs

The reduction in PBT resulted into decline in Profit after tax of the company by 46.39% from 16613.75 lakhs to 8906.1 lakhs. When expressed as a percentage to total income it decreased by 3.18% from 6.24% to 3.06%.

The changes in the key financial ratio for FY 2024 are as follows:

Particulars	As at March 31, 2024	As at March 31, 2023	Change %	Reason for more than 25% change
Current Ratio	0.54	0.91	(40.68%)	Due to decrease in Inventories, Investments in financial assets and funds parked for buyback of shares which are used for the purpose of buy back of shares in the current year, the current assets have been declined in the current year. Whereas, increase in current borrowings, Lease liabilities, Trade payables, other financial liabilities, provisions are resulting into increase in Current liabilities in the current year.
Debt - equity Ratio	1.10	0.74	48.62%	Due to increase in Non-current borrowings on account of additional capital expenditures, increase in Lease liabilities due to addition of leased spaces during the year the Debt has been increased in the current year. On the other side the Equity is also reduced on account of reduction in capital due to completion of Buy back process in the current year.
Debt Service Coverage Ratio	0.34	0.49	(30.61%)	Due to decrease in profit for the year, increase in interest on borrowings on account of increase in borrowings, increase in interest on lease liability on account of increase in lease liability and increase in repayment obligations on account of increase in borrowings from banks and Financial institutions
Return on Equity	9.25%	39.72%	(76.72%)	Due to decrease in profits for the year
Trade Receivables turnover ratio	29.35	30.87	(4.93%)	Due to improvements in collections from the credit customers in spite growth in revenues
Trade payables turnover ratio	28.71	17.58	63.32%	Due to increase in Net Credit purchases and trade payables
Net capital turnover ratio	(16.26)	(97.06)	(83.25%)	Due to increase in current borrowings, Lease liabilities, Trade payables, other financial liabilities, provisions are resulting into increase in Current liabilities which is proportionately more than increase in current assets and turnover in the current year.
Net Profit Ratio	3.08%	6.27%	(50.85%)	Due to decrease in profit for the year.
Return on Capital employed	9.70%	27.42%	(64.63%)	Due to decrease in profit for the year and increase in capital employed on account of increase in borrowings due to increase in capital expenditure and increase in lease liability due to increase in lease premises.
Return on Investment	8.01%	6.06%	32.11%	Due to increase in rate of returns on investments

7. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT - EMPLOYEE DATA

The total employee strength of the Company as of March 31,2024 was 21557. Given the nature of operations, a significant portion of the said employee strength comprises of drivers, cleaners, garage mechanics and other unskilled employees. Despite the large number of employees as also considering the widespread geographical operation of the Company, your management feels proud to state that the employer - employee relations remained extremely cordial throughout the year. There were no instances of strikes, lockouts or any other action on part of the employees that affected the functioning of the Company. It is noteworthy that there is no Employee Union / Trade Union / Union within the organization.