Mahindra Logistics

Mahindra logistics showed meaningful growth in warehousing, VAS (value added services)and non auto revenue. Along with some growth in non mahindra revenue.

It has been hit by the auto slowdown. Since it does cater to related logistics and most importantly derives alot of its revenues from mahindra itself.

Mahindra logistics is a business that was built on the parent and now as the company has reached a certain level it has been able to expand itself beyond the parent’s business as a much larger logistics player. Leveraging the parent and the name as well will help it grow and stay stable while growing. Not many companies of its size have this assured revenue stream due to a gigantic parent company.

The other businesses have shown growth and these will slowly derisk the business from the auto industry and further decrease its reliance on the parent’s business (which anyway is not such a bad thing). Another aspect that needs dersiking is its client concentration and over time this too can be done. The business is a scalable platform but today, it is not immune to the auto industry and big clients that form fair chunks of the revenue.

They lost a big client and that impacted last quarters numbers. I’m sure it has had an effect on this quarter’s numbers too. The company should recover as it expands and auto risk should also slowly decrease.

I feel like these risks are not priced in today, however one can make the argument that this business can scale and capture the fast growing 3PL and logistics market in India. The company is expensive if it grows slowly in my view so to speak… (which at the moment it is as it seems to be getting hit by the auto space)

I think we need to keep an eye on how the other businesses are growing (apart from auto & and to an extent the parent’s). Further we need to constantly see the ability of the company to keep costs low by leveraging newer logistics technologies and processes (this they seem to be doing this so far at least).

They have all the ingredients in place to scale and capture the market better than most of their competitors. Let us not forget the 3PL market itself is growing at some 20% cagr. The market should be be worth close to 60,000cr soon and mahindra currently does ~4000cr in top line. The only other meaningful competitor I think is TVS Logistics (they are a private company please verify) There is ample opportunity for them to become much bigger than they are today.


The report matches with your assessment too…

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Latest update

Growth focus intact: New CEO Rampraveen emphasized

(a) focus to diversify customer base across sectors like FMCG, E-com, Pharma and bulk, reducing dependence on auto sector,

(b) asset light model to help in customized logistics solutions and
© focus on warehousing (driven by capacity addition; 1.1 mn sq ft in H1) and distribution logistics (sticky business) augurs well
for gradual margin expansion (click here).

 Focus remains on scaling up non-M&M SCM revenue led by consumer, FMCG, e-com and pharma, given the huge scope for organized players; Auto SCM growth to be in sync with industry revival – greater focus on ancillaries.

 M&M auto revenue (52% in H1) to see some recovery in H2 as (a) BS-VI volume movement to pick up from Q4FY20 and (b) non-farm
segment to see volume addition (healthy Rabi season).

 Operating margin to improve gradually on (a) favorable business mix – higher growth in non-auto vs. auto and warehousing/ distribution logistics vs. transportation and (b) operating leverage benefits, as revenue contribution from new clients picks up.

 People Transport Solutions’ (PTS) performance has been subdued given (a) delays in client ramp-up and (b) initial costs for new client additions. Management expects client ramp-up in next few months, aiding recovery in revenue and margin (back-ended).

 Capex to remain at Rs 0.4-0.5 bn in FY20 (H1 capex stood at Rs 0.3 bn – largely for handling equipment/ interiors for earehousing space additions) to increase on warehouse capacity addition.

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Earnings call highlights

 Auto production and distribution logistics may see some uptick in Q4FY20
led by channel filling for new BS-VI inventory and expected pre-buying.
However, OEMs are facing supply chain issues for BS-VI models which poses
a risk.
 The slowdown in the PV segment appears to have bottomed out with retail
sales picking up. CV demand, however, is likely to remain tepid. Tractor
demand should improve, but management does not expect high growth in the
segment in the near-to-medium term. For MLL, PV is the largest segment,
followed by farm equipment and CV.
 During the quarter, the decline in revenue from anchor client Mahindra &
Mahindra (MM; –18% YoY) was steeper than MM’s own volume decline
(–6.5% domestic sales). This was due to (1) a fall in inbound logistics as MM
reduced purchases to lower BS-IV inventory, and (2) a drop in lead distance
for outbound transportation, with rail gaining share in long-distance deliveries.
 MLL added several clients during the quarter – two tier-I automotive
component manufacturers with multi-product portfolios, large apparel
brands, and a leading pharma company. It has set up a temperature-controlled
warehouse in North India for the latter.
 Focus verticals within the non-Mahindra, non-auto SCM segment – pharma,
consumer and e-commerce – continued to grow at a fast clip (+25% YoY).
Wallet share gain in existing client accounts contributed to ~50% of this
incremental revenue, while new clients accounted for the rest.
 Leading FMCG players are gradually consolidating their supply chain network,
as per management. The company believes it is well placed to take advantage
of this trend.
 MLL remains a critical service provider to its non-anchor clients. It is one of
the top two service providers for its 20 largest client accounts.
 PTS revenues declined as two large customers scaled down their operations.
The company has added some new customers and expects to bounce back to
growth from Q1FY21 onwards.
 The freight forwarding business (Lords subsidiary) has witnessed healthy
growth as MLL was successful in cross-selling its 3PL and freight forwarding
offerings to some clients.
 Management is targeting the addition of 1.5-2mn sq ft of warehousing space
per year going forward.


We have seen a decline in top-line.

Below are the broad details (all nos are 9m comparison)

  • The two broad verticals, SCM & PTS. PTS is broadly flat and margins have decreased by around 150 bps.

  • SCM: this vertical has seen a fall in revenues from around 2500cr to 2300cr 9m ended at consolidated level but margins have improved by around 150 bps.

The break up of SCM (2300cr)

  • Out of this 2300cr, Mahindra revenue is fallen from around 1500cr to 1300cr and Non-Mahindra revenue is up from around 1000cr to 1040cr (marginal increase)

  • Out of this 2300cr, around 1900cr came from transportation revenue, this was down from around 2200cr

  • Out of this 2300cr Warehousing and VAS revenue was around 450cr up significantly from around 380cr

  • Out of this 2300cr around 1500cr came from auto revenue against around 1800cr last year.

  • Out of this 2300cr around 820cr came from Non auto revenue this was up from around 750cr

Based on the above data below are my inferences

The fall in top line can be clearly attributed to a slowdown in auto revenue alone. Since it forms a large part of the business.

This has been contained with rapid growth in the Warehousing & VAS vertical. Warehousing space under mgmt. has also grown fast from 10m sqft in 2017 to around 16.5m sqft YTD.

It seems like Warehousing & VAS along with Non-Auto revenue have been growing well. As this gains we should see lesser dependence on Auto revenues.

Auto slowdown has clearly impacted the numbers and this show turn as the auto cycle revives.

It is not a bad thing that company deals heavily in the auto sector. It is just a risk as all industries are cyclical and some such as auto are more so than others.

It will be interesting to see how Warehousing & VAS grow along with their non-auto business.

I think the two main things to focus on would be Warehousing & VAS growth along with non-auto growth. I do not see the parent as an anchor client being a big risk. But that would also be a metric to track, the % of other clients vs M&M.

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Hi all,
I was doing basic accounting work on Mahindra Logistics. Here are my short notes from FY15-FY19:

  • cumulative PAT ~ 270 cr., cumulative CFO ~ 52 cr., cumulative EBITDA ~ 457 cr.
  • CFO only matches PAT in FY19, in all other years CFO has been negative or lower compared to reported PAT

This generally means money is getting stuck in working capital and the earnings are overstated. On closer inspection, I realized that cumulative accrual taxes from FY15-19 ~ 146 cr. whereas the company paid cash taxes ~ 218 cr. (~71 cr. extra tax paid). I did not find any tax asset of this amount in the annual reports. Does anyone know why company is paying extra taxes?

If we add the extra taxes back to CFO (52 + 71 ~ 123 cr.), this is still lower than cumulative profits of 270 cr. Cash flow statements from annual reports of FY18 and FY19 say that the main difference in CFO and PAT comes because of increase in working capital (receivables increased more than payables).



This is understandable as its a very low margin business and small changes in receivables will have a bigger impact on CFO. But why is the company paying higher cash taxes? Any feedback will be very useful.


ICICI Direct resonates with my personal view on this sector. :slight_smile:

With introduction of newer norms (social distancing) and regulations shoved into the sector, it is becoming challenging to maintain turnaround times for customer for various companies, with increased labour costs. A 3PL company in such an environment can provide reduced logistics costs, better turnaround and also reverse logistics to each client company due to greater efficiency, lower capex and running the operations at better utilisation levels compared to each company internal logistics operations. MLL ended with ~400 clients in FY20 and expects 30-40 client additions each year.

Disc: Invested.


If you compare MLL and TCI Express business model, TCI Express looks more promising. Did you do any comparison of MLL and TCI Express as investment case? Please share your view

They are not comparable. TCI and MLL are comparable as both are in 3PL logistics.

Difference between the domains of a 3PL logistics and Express Logistics is somewhat blurry to me. Following is my understanding. Feel free to correct me.

3PL logistics’ Domain

So, the functioning of a 3PL player stops after delivering finished goods to the retailers, distributors or wholesellers.

Express Logistics’ Domain

  • Scenario 1: Croma Retail needs to supply refrigerators to Mumbai warehouse from its Bangalore warehouse (where the 3PL logistics partner of Whirlpool supplied the goods). [B2B]
  • Scenario 2: If you place an order for a good from a non-Amazon seller, they first had to sent that item quickly to Amazon warehouse for checkup & packaging. Express logistics takes care of this transportation. [B2B]
  • Scenario 3: The e-Commerce site then sends the item to customers at express speed, or arrange a reverse pickup for item return or replacement. [B2C]
  • Scenario 4: An individual sends an item to another individual. [C2C]

For TCI Express contribution of Scenario 3 is around 5% and Scenario 4 is negligible.

Edit: I feel that Express Logistics players may also carry out outbound logistics in case no 3PL player is involved with the Manufacturer.


Disc: Invested in both TCI Express & Mahindra Logistics.

While this will definitely challenge those who are already in the business and are asset-heavy (having their own transport and all that), on the reverse side, MLL will attract new competitors as MLL have showed them a way on how to get into logistics with significantly less startup costs.

If that happens how will MLL handle those new entrants ? If I am right, some has already started to follow their footsteps…


The edelweiss report mentioned earlier has a viewpoint on this

The current and future 3PL players can be categorized as follows…

To answer the question of why MLL might we well-positioned


Very true! M&M Group as the anchor client,Tech Mahindra as the technology partner and the reputation of the group gives Mahindra Logistics a right to win.


I think it means, Anchor Client for Mahindra Logistics is M&M itself being a large conglomerate, by providing transportation for vehicles manufactured by M&M itself and commutation for its employees, for ex.

And yes, Tech Mahindra may be giving Tech and M&M Finance doing it’s bit. But, at the end of the day they can thrive in this difficult sector, which hasn’t had any impressive performer in decades, if they are able to generate the efficiencies, and the industry indeed has that kind of juice.

I think you are talking about logistics in general as 3PL is a sunrise sector.

Logistics sector in general has seen the boom only after the emergence of eCommerce and GST implementation, which also brought with it cutthroat competition fueled by PE money.

Regardless, Bluedart had been a darling of investors from 2003 to 2015 during which its mcap went up 136x with CAGR of 48%! And during the last 20 years it went up 20x with a decent CAGR of 16%.

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Following is what Pat Dorsey has to say about 3PL logistics players in “The little book that builds wealth”.

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You see it as a sunrise sector, is it because of GST implementation and emergence of eCommerce? That would make sense.

An 18% CAGR growth is expected in this sunrise sector. What different does 3PL do that FTL or LTL wasn’t doing all these years. I know a few transporters, they have warehousing ability and trucks, either by owning them or renting them out making them asset light models, they have been around for decades now. How different is 3PL?

The research report quotes:

“We see two key growth drivers: (i) a mindset shift among large clients to outsource
logistics to 3PL players and focus on core business; and …”

They site this as the main reason for growth in 3PL. The same thing FTL and LTL service providers can do? Is the question in my mind. This sounds silly, right off the bat, because I do not see what essential service 3PL might be providing.

I feel as our country’s GDP picks-up transportation will have an important role. I am just not sure where I should invest. VRL is an efficient business, but old school. So is TCI.

No GST implementation has only added fuel to logistics in general. And eCommerce has added another distribution channel for various products. And eCommerce has become another big industry in itself. But none of that led to the emergence of 3PL. 3PL emerged from the need for more coherent logistics operations and the need to outsource more non-core operations. FTL and LTL service providers does only part of the job and 3PL offers more integrated operations. Following screen-grab from the Edelweiss report (page 19-20) drives home this point better.

Hi all,

I am wondering if someone has looked at cash flow statements of Mahindra and why they have paid taxes in excess of what they have provided for. Even accounting for that, their money is getting stuck in working capital. I can understand this as its a new business, any further insights will be very valuable.

@ashwinidamani have you tracked this company and look at their cash flow statements?

I did some work on this last year. My assessment of this B2B business is that it is a low margin business (esp transportation) and while there may be some shift to higher margin warehousing business, the number of players in the space and low business activity will put pressure. Its a business where pricing power is less but once you get a large customer, stickiness is high. Even in Q2FY20, there was stretch in receivables due to weak economy and tight liqidity. Company gave an update few days back that there may be further stretch in receivables which is not surprising given the impact that auto industry saw prior to Covid and post Covid.

PTS business is likely to be impacted in the current environment and probably in the post Covid-19 world. There are many small players operating but limited pan India organized players. PTS business is not a business which seems very exciting.

Mahlog considers TCI and TVS Logistics as its main competitors as they offer integrated solutions and are strong in auto sector. In the transportation side, there are many competitors.

One also needs to bear in mind if M&M would lose market share in auto segment in the BS-6 world and the impact that it may have on Mahlog. My understanding is that Mahlog gets more business from M&M’s non-tractor auto than it gets from M&M’s tractor business.

A positive that I see is that Mahlog has been able to get customers in other industries including consumer, pharma, ecommerce.

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