BSE Sensex: 37607 Logistics Sector update

Please refer to important disclosures at the end of this report

Equity Research August 3, 2020 BSE Sensex: 37607

ICICI Securities Limited is the author and distributor of this report

Sector update

Blue Dart Express (SELL), TP: Rs1746

Mahindra Logistics (HOLD), TP: Rs294

VRL Logistics (BUY),TP: Rs216

Logistics Asset-light service models enjoying a distinct advantage

Research Analyst:

Abhijit Mitra [email protected] +91 22 6637 7289

We analyse the annual reports of three logistics service providers (LSP) – Mahindra Logistics (MLL), Blue Dart Express (BDE) and VRL Logistics (VRL). MLL remains an exciting story in search of execution, while BDE is a story in need of business transformation. VRL appears as a tactical opportunity, as Covid-19 creates a crater out of its competition. The cost increase and capex profile desire more from MLL, BDE and VRL. Ind-AS 116 adoption is helping in operating leverage for all three. Yet, it appears TCI Express scores higher on business sustainability, profitability, pricing power and business complexity. TCI Express continues to be our top pick in LSP space. Business opportunities for the three. MLL’s commentary is a case study in

optionality, opening up multiple revenue streams to deliver growth, while targetingbigger wallet share, integration of services provides and trying to venture into design solution and contract manufacturing. MLL has mentioned in its vision statement that it looks to become Rs100bn logistics company by FY26 –implying a 19% CAGR over FY20-26. A broad spectrum of services has beentargeted to achieve profitable growth, and we did pre-empt such branching out, given near impossibility of growth given valuations of the enterprise. This also increases risk profile and onus shifts towards execution. BDE commentary appears pretty dim with multiple threats from increased belly cargo of commercial carriers and continued threat perception from road. BDE is in need of a business transformation, and more meaningful cost rationalisation. VRL’s commentary was more sanguine, it being a logical beneficiary of the stress that unorganised transporters are going to witness in the pandemic. There is a fair amount of business overlap for VRL with unorganised transporters.

Tighter cost control required than what industry players have shown in FY20. We keep looking at employee costs as it remains the single most important controllable metric. When the impact of technology is yet to be established, any service offering in Indian context has to be looked at from the lens of ‘labour cost arbitrage’ with both BDE and MLL disappointing. MLL has seen ~52% YoY increase in average employee cost (on roll) and 11% increase in average costs of contractual employees. Part of the impact has been moderated by higher usage of contractual employees in the mix. All these, while revenue/employee has fallen by ~6% YoY. BDE has seen a similar trend. Efforts can be seen in improving employee/branchmetric by controlling the increase in the number of employees. However, averageemployee cost increased 14% YoY, after increasing 23% YoY in FY19. Perhaps,some part of the FY19 increase is on account of severance payments and should normalise in FY21 (guessing from increase in KMP compensation of BDE, much lower than average).

In Q1FY21, we have downgraded MLL and BDE to HOLD and SELL,respectively. While we are more opportunistic in MLL, BDE business doesn’t appear poised to take off anytime soon. There’s excess capacity in the system, the ‘Path to Profitability’ – funding squeeze that was supposed to bring in pricing discipline amidst new age startups is again losing steam as SoftBank starts charting its recovery. We have introduced a scenario for BDE, wherein we factor in an extended period of low air cargo volume growth and consequent profitability.

We maintain BUY on VRL as it’s going to be the key near-term beneficiary of consolidation in road transport sector – the current pandemic has exposed a lot of leveraged transporters to balance sheet stress, leading to the possibility of repossession of their trucks once the moratorium ends. This will lead to better competitive dynamics for VRL. Also, EBIT/truck is at multi-cycle lows which, for a strong balance sheet cyclical player implies opportunity.

INDIA

Logistics sector, August 3, 2020 ICICI Securities

2

This page has been internationally left blank

3

Market Cap Rs49bn/US$656mn Year to Mar FY19 FY20 FY21E FY22E Reuters/Bloomberg BLDT.BO / BDE IN Revenue (Rs mn) 31,744 31,751 29,074 32,301 Shares Outstanding (mn) 23.7 EBITDA(Rs mn) 2,855 4,742 3,971 4,742 52-week Range (Rs) 3014/1959 Net Income (Rs mn) 898 223 (542) 65Free Float (%) 25.0 EPS (Rs) 37.8 9.4 (22.8) 2.7FII (%) 2.4 P/E (x) 54.7 220.6 (90.6) 757.2 Daily Volume (US$'000) 410 CEPS (Rs) 91.6 155.5 130.0 150.5 Absolute Return 3m (%) (7.5) EV/E (x) 18.0 13.0 15.2 12.4 Absolute Return 12m (%) (13.9) Dividend Yield 0.5 0.7 0.9 0.9 Sensex Return 3m (%) 12.2 RoCE (%) 16.4 15.3 4.9 11.7 Sensex Return 12m (%) 1.5 RoE (%) 15.5 4.5 (13.3) 1.7



Annual report analysis

Logistics Target price: Rs1,746

Shareholding patternDec '19

Mar '20

Jun '20

Promoters 75.0 75.0 75.0 Institutional investors 13.6 13.6 13.5 MFs and UTI 1.8 2.9 3.1 FIs/ Banks 2.7 2.6 2.6 Insurance Cos. 5.4 5.4 5.4 FIIs 3.7 2.7 2.4 Others 11.4 11.4 11.5

Source: CMIE

Price chart

Blue Dart Express SELL Maintained

Need to reinvent Rs2,066

1000

2000

3000

4000

5000

Aug-

17Fe

b-18

Aug-

18Ja

n-19

Aug-

19Ja

n-20

Jul-2

0

(Rs)

Research Analyst:


Blue Dart Express (BDE) has been able to register a YoY increase in EBITDA/kg and EBITDA/parcel for FY20. Ind-As 116 adoption helped arrest the declining trend, as the metrics declined over 50% and 60%, respectively over the past four years. Gross margins continue to erode (reaching 31.75%, 162bps lower YoY). The decline in rental expenses to Rs4.8bn from Rs14.7bn YoY as recognition of operating leases changed, helping in improving EBITDA metrics. Both parcels and tonnage carried increased 3% YoY. What impresses us is the clear focus on branch/office profitability. BDE has reduced employee/office to <6 from 18 in FY18. Branch profitability could have easily increased, but on an average, employee costs increased 23% and 14% in FY19/20, respectively. We are factoring in 8% tonnage and parcel decline in FY21. We maintain SELL. Can gross margin / shipment chart a turnaround – looks unlikely. FY20 gross

margin/shipment witnessed 8% YoY decline, in-line with realisation decline. There were tailwinds of higher volumes and lower ATF prices in FY20, which allowed BDE to increase charter costs by 4%. This was to ensure Rs801mn PBT for Blue Dart Aviation (BDA). Also, shipment weight per parcel has stopped declining. Management has noted in the annual report that i) “With more belly space being made available in passenger aircrafts in the coming years, more capacity will be added to the air express market further putting pressure on yields and profitability” ii) “Faster and agile speed trucking with growing competition also chips at the air express business” and iii) “the cost of operating at major airports has significantly increased after their privatisation without any improvement in services or differentiators. The problem of insufficient aircraft parking bays, truck docking stations, limited space for express terminals and clearance processes leading to a delay impacting operating costs persists.” FY20 actually witnessed 1.5% reduction in domestic network operating costs, but the threat is well laid out by management commentary,

Focus on branch/office profitability is evident. There is a visible effort in reducing employee per branch and thereby, improving the employee cost as a % of topline metric. While employee costs remain high at 18% of topline, the employee per branch metric has meaningfully reduced to 5.6x to 18x in FY17. This appears as one of the follow-through effects of restructuring introduced last year. While the number of branches increased from 605 in FY18 to 2,173 in FY20, number of employees increased from 10,929 to 12,251. The process of improving branch profitability is diluted by the fact that average employee compensation has increased by 14% in FY20, after 23% increase in FY19. This is despite significant reduction in KMP compensation YoY, perhaps reflecting severance due to restructuring in FY20.

INDIA

Blue Dart Express, August 3, 2020 ICICI Securities

4

What can help BDE compete in express delivery on road? Much leaner cost structure and ‘Path to Profitability” initiative by new age startups working in FTL/LTL, express and ecommerce parcel delivery. BDE is endeavouring hard to control costs; increase in FY20 may be linked to severance. Path to profitability as initiated by funding freeze from SoftBank was increasing hope of reduced pricing pressure from startups likes of Dehlivery and Rivigo. The funding outlook seems to have improved post the stake sale in Alibaba and merger of TMobile with Sprint. WeWork has also guided to be profitable next year. Hopefully, even if funding comes back for competition, it comes back with a caveat of profit.

Table 1: Key metrics to look at (Rs mn)

FY17 FY18 FY19 FY20 FY21E FY22E Comment Offices/Facilities 608 1,025 1,665 2,173 2,173 2,273

Facilities leased (mn sqft) 3.1 3.1 3.4 2.9 2.7 2.9

Rental (Standalone) 12,285 12,987 14,705 4,884 4,529 5,032 The change in rentals due to IndAS116 is what is inflating FY20 EBITDA

Realisation (Rs/kg) 41.8 40.0 42.4 41.1 41.1 41.6 We estimate a moderate increase in prices

Realisation (Rs/parcel) 144.9 141.8 135.2 131.3 131.1 132.6 No of employees 10,929 13,442 13,373 12,251 12,251 12,851 Employees/ Office 18.0 13.1 8.0 5.6 5.6 5.7 Significant reduction

Revenue/ Office Facility 44.1 27.2 19.0 14.6 13.4 14.2

Employee Costs/employee 390,109 334,660 411,344 468,533 449,016 470,858

Increase of FY20 largely reflects severance. KMP compensation increase is significantly lower.

Employee costs/ Office Facility 4.4 3.3 2.6 2.5 2.7 2.7 Average ATF cost (Rs/ KL) 49,323 55,863 68,704 63,895 60,000 60,000 ATF consumed/aircraft (KL) 5.8 5.8 5.8 5.5 5.5 5.5 Parcels (mn) 185 197 234 241 222 244

Weight per shipment (kg) 3.5 3.5 3.2 3.2 3.2 3.2 Weight /shipment has stopped reducing

EBITDA (Rs/kg) 4.1 3.7 2.3 2.4 1.5 2.7 The increase in FY22E is mainly operating leverage.

EBITDA (Rs/parcel) 14.3 13.2 7.4 7.8 4.9 8.6 Source: Company data, I-Sec research


5

Maintain SELL with a target price of Rs1,746/share

We have been factoring a perpetual 10% volume growth for BDE in arriving at our valuations for the company. Given the increased belly cargo and competition from road transporters, what if volume growth disappoints. What if, we are looking at extended period of mid-single digit volume growth for BDE? We have started to factor in such a scenario in our weighted average valuation.

Table 2: DCF valuation of Blue Dart Express (new) – scenario 1 (low growth) (Rs mn) FY21E FY22E FY23E FY24E FY25E FY26E EBIT 361 729 1,166 2,857 3,417 3,932 NOPAT 3,929 4,009 4,194 4,077 4,260 4,469 Capex (1,500) (1,000) (1,000) (1,359) (1,359) (1,359) Change in WC 502 (91) (68) (102) (115) (110) FCFF 2,931 2,918 3,126 2,617 2,786 2,999 Terminal value 44,132 Total 2,931 2,918 3,126 2,617 2,786 47,132 NPV of FCFF 38,370 Net debt 7,946 NPV of FCFE 30,424 Value per share 1,280

Source: Company data, I-Sec research

Table 3: DCF valuation of Blue Dart Express (new) – scenario 2 (10% p.a. growth)

(Rs mn) FY21E FY22E FY23E FY24E FY25E FY26E EBIT 340 1,232 2,364 4,377 6,422 8,112 NOPAT 3,885 4,432 5,198 5,727 6,550 7,630 Capex (3,540) (3,182) (3,016) (1,978) (1,734) (1,565) Change in WC 502 (247) (249) (277) (348) (373) FCFF 847 1,003 1,933 3,472 4,468 5,692 Terminal value 83,752 Total 847 1,003 1,933 3,472 4,468 89,444 NPV of FCFF 63,707 Net debt 11,149 NPV of FCFE 52,558 Value per share 2,212

Source: Company data, I-Sec research Table 4: Assumptions (new) -- scenario 1

Growth (%) FY17 FY18 FY19 FY20 FY21E FY22E FY23E FY24E FY25E FY26E Tonnage 7.7 8.7 7.0 3.2 (8.2) 3.0 3.0 3.0 3.0 3.0 Realisation/kg (2.4) (4.2) 6.0 (3.0) - 2.0 2.0 2.0 2.0 2.0


Table 5: Assumptions (new) -- scenario 2 Growth (%) FY17 FY18 FY19 FY20 FY21E FY22E FY23E FY24E FY25E FY26E Tonnage 7.7 8.7 7.0 3.2 (8.2) 10.0 10.0 10.0 10.0 10.0 Realisation/kg (2.4) (4.2) 6.0 (3.0) - 1.0 1.0 1.0 1.0 1.0


While tonnage growth assumptions are reduced, we have increased realisation profile with the hope that industry players would attempt to maintain profitability in some manner.


6

Financial summary (consolidated) (scenario 2)

Table 6: Profit & loss statement (Rs mn, year ending March 31)

FY19 FY20 FY21E FY22E Revenue from operations 31,744 31,751 29,074 32,301 Direct Expenses 17,662 16,561 15,746 17,142 Gross Margin 14,082 15,191 13,328 15,159 % margins 44.4% 47.8% 45.8% 46.9% Other operating expenses 11,227 10,449 9,358 10,417 EBITDA 2,855 4,742 3,971 4,742 % margins 9.0% 14.9% 13.7% 14.7% Other Income 192 155 165 165 Depreciation & Amortisation 1,279 3,473 3,631 3,511 Gross Interest 427 1,174 1,229 1,310 Profit before tax 1,341 250 (724) 87 Less: Taxes 444 27 (182) 22 Net Income (Reported) 898 223 (542) 65 Source: Company data, I-Sec research

Table 7: Balance sheet (Rs mn, year ending March 31)

FY19 FY20 FY21E FY22E Assets Total Current Assets 9,201 7,809 8,850 11,226 of which cash & cash eqv. 2,687 1,000 2,831 4,699 Total Current Liabilities & Provisions 6,273 6,350 6,061 6,323 Net Current Assets 2,928 1,460 2,789 4,904 Net Fixed Assets 5,885 6,617 6,526 6,198 Intangible assets 1,039 990 990 990 Capital Work-in-Progress 526 160 160 160 Other non-current assets 948 1,123 1,123 1,123 Total Assets 11,326 19,413 18,871 19,035 Liabilities Borrowings 5,028 4,375 6,226 8,077 Deferred Tax Liability (513) (645) (645) (645) Other long term liabilities 1,035 1,466 1,466 1,466 Equity Share Capital 238 238 238 238 Reserves & Surplus 5,540 4,671 3,832 3,600 Net Worth 5,777 4,908 4,070 3,838 Total Liabilities 11,326 19,413 18,871 19,035 Source: Company data, I-Sec research

Table 8: Cashflow statement (Rs mn, year ending March 31)

FY19 FY20 FY21E FY22E Net Profit before tax 1,341 (391) (724) 87 Depreciation 1,279 3,623 3,631 3,511 Non-Cash Adjustments 331 1,307 1,064 1,145 Working Capital Changes 287 (290) 502 (247) Taxes Paid (805) (608) 182 (22) Operating Cash flow 2,433 3,641 4,655 4,474 Capital Commitments (2,874) (1,990) (3,540) (3,182) Free Cash Flow (441) 1,652 1,115 1,291 Other investing cashflow 70 60 165 165 Cash flow from Investing Activities (2,804) (1,929) (3,375) (3,017) Inc (Dec) in Borrowings 1,576 (2,593) 1,851 1,851 Dividend and dividend tax paid (358) (358) (297) (297) Others (427) (451) (1,229) (1,310) Cash flow from Financing Activities 792 (3,401) 326 245 Chg. in Cash & Bank balance 421 (1,689) 1,605 1,701 Source: Company data, I-Sec research

Table 9: Key ratios (Year ending March 31)

FY19 FY20 FY21E FY22E Per Share Data (Rs) EPS 37.8 9.4 (22.8) 2.7 Cash EPS 37.8 (17.6) (22.8) 2.7 Dividend per share (DPS) 91.6 155.5 130.0 150.5 Book Value per share (BV) 12.5 20.0 25.0 25.0 OCF per share 243.1 206.6 171.3 161.5 FCF per share 102.4 153.2 195.9 188.3 Growth (%) Net Sales 13.4 0.0 (8.4) 11.1 EBITDA (18.7) 66.1 (16.3) 19.4 PAT (38.0) NM NM NM Valuation Ratios (x) P/E 54.7 220.6 (90.6) 757.2 P/BV 8.5 10.0 12.1 12.8 EV / EBITDA 18.0 13.0 15.2 12.4 EV / Sales 1.6 1.9 2.1 1.8 Operating Ratio Employee cost / Sales (%) 22.0 23.1 24.5 24.1 Effective Tax Rate (%) 33.1 11.0 25.2 25.2 Net D/E Ratio (x) 0.4 2.6 2.7 2.5 OCF yield (%) 5.0 7.4 9.5 9.1 FCF yield (%) -0.9 3.4 2.3 2.6 Return/Profitability Ratio (%) EBITDA Margins 9.0 14.9 13.7 14.7 Net Income Margins 2.8 0.7 (1.9) 0.2 Return on Equity (RoE) 15.5 4.5 (13.3) 1.7 Return on Capital employed (RoCE) 16.4 15.3 4.9 11.7 Source: Company data, I-Sec research

7

Market Cap Rs21.3bn/US$285mn Year to Mar FY19 FY20 FY21E FY22E Reuters/Bloomberg MALO.BO/MAHLOG IN Revenue (Rs mn) 38,513 34,711 29,830 35,699 Shares Outstanding (mn) 71.6 EBITDA(Rs mn) 1,512 1,583 1,126 1,903 52-week Range (Rs) 449/205 Net Income (Rs mn) 856 544 222 841 Free Float (%) 41.6 EPS (Rs) 12.0 7.6 3.1 11.8 FII (%) 19.7 P/E (x) 24.5 38.6 94.4 25.0 Daily Volume (US$'000) 351 CEPS (Rs) 15.1 17.9 13.6 21.6 Absolute Return 3m (%) 14.7 EV/E (x) 13.8 13.1 18.0 10.3 Absolute Return 12m (%) (25.6) Dividend Yield 0.6 0.5 0.8 0.8 Sensex Return 3m (%) 12.2 RoCE (%) 23.3 13.9 6.1 17.6 Sensex Return 12m (%) 1.5 RoE (% 17.2 10.0 4.1 13.7



Annual report analysis

Target price: Rs294

Shareholding patternDec '19

Mar '20

Jun '20

Promoters 58.5 58.5 58.4 Institutional investors 28.8 28.9 30.8 MFs and UTI 9.1 10.3 8.8 Banks / FIs 0.0 0.2 0.0 Insurance Cos. 0.9 0.6 2.3 FIIs 18.8 17.8 19.7 Others 12.7 12.6 10.8

Source: CMIE

Price chart

100200300400500600700

Nov

-17

Apr-1

8

Sep-

18

Mar

-19

Aug-

19

Jan-

20

Jul-2

0

(Rs)

Mahindra Logistics HOLD Maintain

One-stop shop for Indian logistics Rs298

Research Analyst:


MLL has expressed its desire to enter/expand into i) express logistics organically or inorganically, ii) in plant assembly and line haul for auto and engineering to graduate into external component and product assembly, iii) expand freight forwarding organically into SE Asia or evaluate partnership with global freight forwarders, iv) develop capability in multi-modal segment such as rail-based container transportation, inland shipping, CFS/ICD etc and v) integrated bespoke solutions rather than pureplay warehousing or transport solution provider —we would have liked a better layout of technology preparedness to achieve the same. Including opportunity in enterprise mobility, the strategy has opened up multiple revenue optionalities; execution remains key. The earnings do not look much prospective in the near term and valuations appear rich. Maintain HOLD. Estimates for market potential appear huge – can it transform into earnings for

a leading brand like MLL? It was quite clear from the beginning that a pureplay 3PL in the Indian context will fail to garner the requisite growth and sustain high multiples. Diversification was needed and under the presence of a new CEO, MLL has been able to seed that. MLL looks to graduate into into an integrated bespoke solution provider rather than catering to standalone transportation or warehousingsolutions. Also being able to stich a broader array of supply chain solutions including being able to manage outsourced production processes, has been the ‘elevatorpitch’ for MLL. What interests us is the ~Rs580bn 3PL market size and Rs350bn freight forwarding pie that MLL still believes exists and is up for grab, albeit in a crowded space.

Increasing demand for warehousing and the opportunity for MLL. CY19 witnessed 25% YoY growth in total stock in grade A and B warehousing space in top eight cities at 211 mn sqft. Absorption of grade A and B warehousing clocked 12.5% YoY growth to 36 mn sqft. 3PL and e-commerce companies accounted for 68% of the absorption. Nearly 40% of net absorption was for built-to-suit warehouses. Majority of MLL’s warehousing demand is being met by FMCG and ecommerce as i) MLL gains in business share from C&F (clearing & forwarding) agents and ii) shift towards omni-channel retailing.

New business opportunities. MLL looks to move to FTL and LTL for domestic consignments and FCL and LCL for international consignments, provide custom clearance for international assignments, deliver ODC cargo and with a network of transport providers manage road, air and sea transportation. Express and cross border logistics services offer higher growth, higher profitability and increasedcustomer stickiness and are natural extensions to MLL’s services.

INDIA

Mahindra Logistics, August 3, 2020 ICICI Securities

8

Strategic priorities on enterprise mobility solutions. Launch new services such as enterprise on call business by building an optimal mix of dedicated fleets and developing DCO (Driver Cum Owners) fleets. Launch B2B2C subscription-based services for daily office commute, wherein the end user can self-book, roster and schedule a ride between workplace and home. Develop an integrated tech platform in enterprise mobility (EM) to support asset optimisation, contracting, invoicing, network visibility and other offerings. The scope is much bigger than what is present currently.

Can technology be the real enabler? Control Tower Operations, Warehouse Management System (WMS), Transport Management System (TMS) and enterprise purchase control systems ensure high visibility, efficiency and responsiveness in supply chain management for MLL. They also provide integrated and differentiated solutions focused on end market value chains such as integrated fulfillment and distribution, returns processing, reverse logistics, omni-channel fulfillment, cross-border logistics and other value-added services. Not only to help enable differentiated services, a platform-based suite of services can help reduce customer engagement/acquisition costs while reducing end-user cost savings – that’s the end goal.

Table 1: Key operating snapshot (Rs mn) FY17 FY18 FY19 FY20 FY21E FY22E Supply Chain Business 23,715 30,757 34,659 31,035 26,889 32,267 PTS Business 2,951 3,405 3,855 3,676 2,941 3,235 Total Revenue 26,666 34,161 38,513 34,711 29,830 35,502

Revenue Growth (%) Supply Chain Business 30.7 29.7 12.7 (10.5) (13.4) 20.0

PTS Business 18.0 15.4 13.2 (4.6) (20.0) 10.0 Gross margins

Supply Chain Business 1,718 2,263 2,823 3,182 PTS Business 294 316 408 339 Total Gross Margin 2,012 2,580 3,231 3,521

Supply Chain Business 7.2 7.4 8.1 10.3 PTS Business 10.0 9.3 10.6 9.2 Gross Margins (%) 7.5 7.6 8.4 10.1

Auto 16,224 21,142 24,083 20,049 16,039 18,445 Non- Auto 10,442 13,019 14,430 14,662 13,791 17,057 Total Revenue 26,666 34,161 38,513 34,711 29,830 35,502

Auto % 60.8 61.9 62.5 57.8 53.8 52.0 Non-Auto % 39.2 38.1 37.5 42.2 46.2 48.0 Total Revenue % 100.0 100.0 100.0 100.0 100.0 100.0

Warehousing 3,473 4,169 5,236 6,070 6,088 7,381 Transportation 23,193 29,992 33,277 28,641 23,742 28,121 Total Revenue 26,666 34,161 38,513 34,711 29,830 35,502

Warehousing % 13.0 12.2 13.6 17.5 20.4 20.8 Transportation % 87.0 87.8 86.4 82.5 79.6 79.2 Total Revenue % 100.0 100.0 100.0 100.0 100.0 100.0

Mahindra 14,190 18,180 21,022 17,294 13,835 16,602 Non Mahindra 9,525 12,577 13,637 13,741 13,054 15,665 Total SCM Revenue 23,715 30,757 34,659 31,035 26,889 32,267

Mahindra% 59.8 59.1 60.7 55.7 51.5 51.5 Non Mahindra % 40.2 40.9 39.3 44.3 48.5 48.5 Total SCM Revenue 100.0 100.0 100.0 100.0 100.0 100.0

ROCE 16.8 22.9 24.5 12.5 4.8 14.7 EBIT Margins 2.3 2.9 3.4 2.4 1.3 3.4



9

Table 2: Better cost control is needed

FY18 FY19 FY20

Permanent Employees

4,882 5,106 3,891 Average salary/person

469,316 516,588 788,126

% Increase

20.7 10.1 52.6 Employees (With contracted manpower)

15,585 17,840 17,067

Contracted Employees

10,703 12,734 13,176 Contractual manpower cost/ Employee

174,858 186,501 206,421

Growth in cost of contractual employee

11.9 6.7 10.7 Revenue/ Employee 2,191,928 2,158,823 2,033,831 Revenue/ Employee (% growth) 14.6% (1.5) (5.8) Revenue/ On Roll Employee 6,997,378 7,542,773 8,920,946 Revenue/ Employee (% growth) 27.1 7.8 18.3


Assumptions FY21 topline is expected to decline by 14%, mainly due to weak anchor segment (Mahindra SCM revenue is expected at 20% YoY), while non-Mahindra segment is

expected to see 5% decrease in revenue. We expect a sharp revenue uptick in FY22E due to favourable base.

However, our FY21 warehousing revenue (non–Mahindra) is expected to grow at 4.8% YoY from a stellar 24% growth seen in FY20 and 11.5% YoY decline seen in Q1FY21.

Table 3: Segmental breakup of topline (Rs mn) FY17 FY18 FY19 FY20 FY21E FY22E Segment Revenue

Supply Chain Management 23,715 30,757 34,659 31,035 26,889 32,267 Mahindra SCM revenue 14,190 18,180 21,022 17,294 13,835 16,602 Transportation 12,787 16,741 19,300 15,580 12,313 14,610 Infactory/Warehousing 1,403 1,439 1,722 1,714 1,522 1,992 Auto and Farm 13,814 17,942 20,684 17,048 13,638 16,366 Others 376 238 338 246 197 236 Non - Mahindra SCM revenue 9,530 12,580 13,637 13,741 13,054 15,665 Transportation 7,460 9,830 10,123 9,385 8,487 10,276 Warehousing 2,070 2,730 3,514 4,356 4,567 5,389 T:W (Non SCM) 3.6 3.6 2.9 2.2 1.86 1.91 Auto 2,410 3,200 3,399 3,001 2,401 2,079 Non-Auto 7,120 9,360 10,238 10,740 10,653 13,586 Total Auto (MnM / non MnM) 16,224 21,142 24,083 20,049 16,039 18,445

People Transport Solution 2,951 3,405 3,855 3,676 2,941 3,235 Revenue from Operations (net) 26,666 34,161 38,513 34,711 29,830 35,699


Maintain HOLD We maintain our target price for MLL at Rs294/share at 25x FY22 EPS.

While revenue/ employee declined 6% YoY, average salary of permanent employees increased 53% YoY, while that of contractual employees increased 11% YoY.


10

Financial summary Table 4: Profit & loss statement (Rs mn, year ending March 31)

FY19 FY20 FY21E FY22E Revenue from operations 38,513 34,711 29,830 35,699 Operating Expenses 37,001 33,129 28,704 33,796 EBITDA 1,512 1,583 1,126 1,903 % margins 3.9% 4.6% 3.8% 5.3% Depreciation & Amortisation 220 734 750 700 Gross Interest 35 176 185 185 Other Income 76 140 120 120 Profit before tax 1,334 812 311 1,138 Less: Taxes 468 257 78 287 Net Income (Reported) 856 544 222 841 Source: Company data, I-Sec research


FY19 FY20 FY21E FY22E Assets Total Current Assets 10,660 10,825 10,441 12,233 of which cash & cash eqv. 700 995 1,432 2,010 Total Current Liabilities & Provisions 6,292 6,442 5,490 6,163 Net Current Assets 4,368 4,383 4,951 6,069 Net Fixed Assets 660 2,461 1,953 1,507 Intangible assets 9 10 10 10 Capital Work-in-Progress 26 150 150 150 Other non-current assets 508 573 573 573 Total Assets 5,759 7,777 7,837 8,509 Liabilities Borrowings 556 670 670 670 Deferred Tax Liability (187) (200) (200) (200) Other non-current liabilities 164 1,811 1,818 1,818 Minority Interest 57 54 64 75 Equity Share Capital 715 715 715 715 Reserves & Surplus 4,268 4,731 4,775 5,438 Net Worth 4,982 5,447 5,489 6,152 Total Liabilities 5,759 7,777 7,837 8,509 Source: Company data, I-Sec research


FY19 FY20 FY21E FY22E Net Profit before tax 1,334 812 311 1,138 Depreciation 220 734 750 700 Non-Cash Adjustments 80 262 65 65 Working Capital Changes (265) (653) (131) (541) Taxes Paid (419) (325) (78) (287) Operating Cashflow 950 854 917 1075 Capital Commitments (345) (624) (242) (254) Free Cashflow 605 230 675 821 Other investing cashflow (452) 986 127 120 Cashflow from Investing Activities (797) 362 (115) (134) Inc (Dec) in Borrowings 23 (576) 0 0 Issue of share capital 3.1 0.9 -0.9 0 Finance cost (35) (36) (185) (185) Dividend paid (129) (155) (179) (179) Cashflow from Financing Activities (113) (763) (365) (364) Source: Company data, I-Sec research


FY19 FY20 FY21E FY22E Per Share Data (Rs) EPS 12.0 7.6 3.1 11.8 Cash EPS 15.1 17.9 13.6 21.6 Book Value per share (BV) 69.7 76.1 76.8 86.1 OCF per share 13.3 11.9 12.8 15.0 FCF per share 8.5 3.2 9.4 11.5 Growth (%) Net Sales 12.7 (9.9) (14.1) 19.7 EBITDA 26.3 4.6 (28.9) 69.0 PAT 33.8 (36.4) (59.1) 278.1 Valuation Ratios (x) P/E 24.5 38.6 94.4 25.0 P/BV 4.2 3.9 3.8 3.4 EV / EBITDA 13.8 13.1 18.0 10.3 EV / Sales 0.5 0.6 0.7 0.6 Operating Ratios Employee cost / Sales (%) 6.8 8.8 10.6 8.9 Effective Tax Rate (%) 35.1 31.7 25.2 25.2 Net D/E Ratio (x) (0.0) (0.1) (0.1) (0.2) FCF yield (%) 2.9 1.1 3.2 3.9 Return/Profitability Ratios (%) EBITDA Margins 3.9 4.6 3.8 5.3 Net Income Margins 2.2 1.6 0.7 2.4 Return on Equity (RoE) 17.2 10.0 4.1 13.7 RoCE 23.3 13.9 6.1 17.6 Source: Company data, I-Sec research

11

A

Market Cap Rs13.4bn/US$179mn Year to Mar FY19 FY20 FY21E FY22E Reuters/Bloomberg VRLL.BO / VRLL IN Revenue (Rs mn) 21,095 21,185 19,201 22,529 Shares Outstanding (mn) 90.3 EBITDA(Rs mn) 2,440 2,983 2,077 3,025 52-week Range (Rs) 300/120 Net Income (Rs mn) 919 900 149 976 Free Float (%) 31.9 EPS (Rs) 10.2 10.0 1.7 10.8 FII (%) 4.1 P/E (x) 16.6 16.9 101.6 15.6 Daily Volume (US$'000) 207 CEPS (Rs) 21.3 28.5 20.7 28.4 Absolute Return 3m (%) (9.8) EV/E (x) 7.1 6.8 9.2 6.2 Absolute Return 12m (%) (37.8) Dividend Yield 3.3 4.1 3.0 3.0 Sensex Return 3m (%) 12.2 RoCE (%) 16.3 12.1 4.3 13.5 Sensex Return 12m (%) 1.5 RoE (%) 14.2 14.6 2.6 15.2



Annual report analysis and earnings revision

Logistics

Target price: Rs216

(%) FY21E FY22E Sales ↓ 2.7 ↓ 1.6 EBITDA ↓ 2.7 ↓ 1.4 PAT ↓ 22.7 ↓ 3.4

Target price revision Rs216 from Rs224

Shareholding patternDec ‘19

Mar ‘20

Jun ‘20

Promoters 68.1 68.1 68.1 Institutional investors 26.1 26.1 25.1 MFs and other 21.1 21.4 21.0 Banks & FIs 0.0 0.0 0.0 Insurance Cos. 0.4 0.0 0.0 FIIs 5.6 4.7 4.1 Others 5.8 5.8 6.8

Price chart

VRL Logistics BUY Maintained

A tactical opportunity Rs148

-

100150200250300350400450500

Aug-

17

Jan-

18

Jul-1

8

Jan-

19

Jul-1

9

Jan-

20

Jul-2

0

(Rs)

Research Analyst: Abhijit Mitra [email protected] +91 22 6637 7289

VRL Logistics (VRL) continues to prune branches, leading to closure of 81 non-profitable branches against opening of only 49 new branches. We feel the systemic closure of branches witnessed over the past four years is symptomatic of the problems VRL has inherited with its customer set in search of return load. The other problem in the business model is employee cost. The same, while declining YoY, is still extremely high at ~18% of the topline, which puts VRL at a meaningful disadvantage in responding to challenges at the business level. There is a significant reduction (~200bps YoY) in lorry hire charges as VRL built up spare capacity –timing of fleet addition can be questioned. Overall, we see VRL trying to cope up with the shortfalls in business model and achieving some progress in rectifying the same. We maintain BUY with a revised target price of Rs216/share (Rs224/share earlier). Capex of FY20 could have been curtailed. In FY20, VRL incurred a capex of

Rs1,659.7mn. Of the same, an amount of Rs1,098.9mn was invested in the purchase of new fleet i.e., predominantly in lorries (addition of 520 goods transport vehicles in FY20; small vehicles - 64, LCVs-22, HGVs - 432, tankers -2). Nearly Rs367.4mn was spent on additional buildings out of which Rs313.5mn was spent for building in Surat and Rs.50.mn on additional building in Ballari. A sum of Rs193mn was incurred towards the addition of other capex components which include the cost incurred on additions to aircrafts (Rs54.5mn), plant & equipments, office equipments, furnitures & fixtures and leasehold improvements.

The stress in unorganised sector transporters brings direct benefit for VRL –annual report excerpt. “The Covid-19 pandemic did bring in a lot of financial burden to small fleet owners and many of them have closed their business and resuming normal service in the near future by these operators seems difficult. This is bound to ensure that the freight business being handled by them would be shifted to organized transporters.”

Management maintains shift towards hub-and-spoke operations. “The hub-and-spoke model would find a lot of following in the Indian context. Your Company has been operating on a hub-and-spoke model all along and its experience and expertise in the movement of LTL parcels is unmatched which has enabled it to be at the very helm of this business in India,” VRL will have to reinvent its model or else be prepared to be acquired by a 3PL or freight forwarder.

Passenger transport benefits from plying on more profitable routes. Despite number of buses reducing from 381 to 337, and number of passengers/trips reducing by 14.4%/10% YoY, EBITDA increased by 17% YoY and EBITDA margin increased by nearly 327bps. This is mainly on account of pruning unprofitable routes.

INDIA

mailto:[email protected]

VRL Logistics, August 3, 2020 ICICI Securities

12

Table 1: Key operating metrics (Rs mn) (Rs mn) FY17 FY18 FY19 FY20 Goods Transport Revenue 14,262 15,172 16,860 17,247

Volumes (0.2) 0.2 6.0 6.2 Realisation 5.2 6.2 5.8 (3.9)

EBITDA 1,764 1,864 2,052 2,301 Margins 12.4 12.3 12.2 13.3 EBIT 1,282 1,364 1,521 1,112 Margins 9.0 9.0 9.0 6.4 Passenger transport

Buses 419.0 419.0 381.0 337.0 No of passengers (%) 7.1 - 2.9 (14.4) Average revenue/passenger (%) (3.6) 10.0 2.8 5.8 Revenue 3,262 3,587 3,803 3,437 EBITDA 374 464 414 486 Margins 11.5 12.9 10.9 14.2 EBIT 120 211 166 233.16 Margins 3.7 5.9 4.4 6.8


Table 2: Consistently reducing number of branches, at some point profitability will normalise FY15 FY16 FY17 FY18 FY19 FY20 Number of offices/branches 1,000 1,024 884 911 938 906 Revenue/Branch (Rs mn) 12.8 13.2 16 17 22 19 No of Employees 15,652 19,194 20,986 19,781 19,030 19,698 Employee/branch 15.7 18.7 23.7 21.7 21.3 21.7 Employee costs/person 126,495 127,903 126,788 174,801 192,685 193,170 Employee costs as % of topline 11.8 14.3 19.2 18.0 17.4 18.0 Source: Company data, I-Sec research

Chart 1: Reduced lorry hire charges helped operating margins in FY20


-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

(Rs

mn)

Lorry Hire Charges % of topline (RHS)


13

Table 3: Comparison with TCI Express VRL Logistics (Goods Transport segment) TCI Express FY16 FY17 FY18 FY19 FY20 FY16 FY17 FY18 FY19 FY20 Realisation/te (Rs) 5,271 5,546 5,888 6,173 5,947 11,116 11,404 11,801 12,080 11,727 Realisation/truck (Rs mn) 3.5 3.6 3.7 3.8 3.6

1.9 2.0 2.0 2.1

Realisation/branch (Rsmn) 13.3 16.1 16.7 18.9 20.1

13.6 13.6 14.6 13.4 Volumes (mnte) 2.6 2.6 2.6 2.7 2.9 0.6 0.7 0.8 0.8 0.9 EBITDA/te 764 686 724 751 793 909 941 1,209 1,404 1,378 EBITDA Margin 14.5 12.4 12.3 12.2 13.3 8.2 8.3 10.2 11.6 11.8 EBIT/te 589 498 529 557 383 813 896 1,167 1,365 1,340 EBIT/Truck (Rs mn) 0.4 0.3 0.3 0.3 0.2

0.1 0.2 0.2 0.2

EBIT Margin 11.2 9.0 9.0 9.0 6.4 7.3 7.9 9.9 11.3 11.4 PAT Margin 6.1 3.9 4.8 4.4 4.2 - 5.0 6.6 7.1 8.6 FCF -515 1,298 1,626 -199 1,346 - 143 110 581 618 FCF Yield -3.8 9.5 11.9 -1.5 9.9 - 0.5 0.4 2.2 2.3 ROCE 20.7 14.9 18.4 16.3 12.1 39.8 30.6 35.4 41.7 34.5 SME customer mix

67.8 69.8 69.2

50.0 50.0 50.0 50.5

Net debt to equity 0.6 0.4 0.2 0.3 0.4

0.1 0.1 -0.0 -0.0 Asset turnover on FA 2.4 2.6 3.1 3.0 1.4 - 7.9 5.5 6.0 5.7 Asset turnover on TA 1.9 2.1 2.3 2.3 1.8 - 3.8 3.5 3.6 3.0 Fleet number 3935 4010 4077 4470 4754 - 4,000 4,500 5,000 5,000 Hubs 48 47 47 46 44

28 28 28 28

Branches 1024 884 911 892 860

550 650 700 770 Employee Costs as % of topline 14.3 19.2 18.0 17.4 18.0 - 7.8% 8.2% 8.4% 9.9%

Source: Company data, I-Sec research Realisation/te is indicative of quality of customers/nature of cargo and lead. Increasing number of branches and branch profitability is the only metric that can suggest the health of the road transporter. For VRL EBIT/truck is so low, its normalisation for an asset-heavy player becomes a compelling investment argument.

Maintain BUY with a revised target price of Rs216/share

We have factored in a 10% decline in tonnage volumes for FY21E, given the trends of April, ’20 (hardly any volumes), May, ’20 (at ~20% compared to YoY) and June, ’20 (50-60% of YoY volumes) goods transport volumes. Also, the sharp decline in FY21E EBITDA and PAT is representative of the decline in Q1FY21, which is supposedly the strongest quarter in goods transportation business. We have increased pricing for FY22E given the competitive advantages VRL enjoys.

We have also increased realisation per passenger in passenger transport business for FY21/22E given significant churn in the unorganised sector operators which will lead to better pricing power for VRL. We have maintained our fuel price assumptions for FY21/22E keeping in mind the Rs7-8/litre increase in diesel rates seen across the country of late.

Table 4: Earnings change (Rs mn) FY21E FY22E New Old % Chg New Old % Chg Sales 19,201 19,729 (2.7) 22,529 22,887 (1.6) EBITDA 2,077 2,135 (2.7) 3,025 3,068 (1.4) PAT 149 193 (22.7) 976 1,011 (3.4)



14

Financial summary

Table 5: Profit & loss statement (Rs mn, year ending March 31)

FY19 FY20 FY21E FY22E Revenue from operations 21,095 21,185 19,201 22,529

Goods transport 16,750 17,122 15,282 18,319 Passenger transport 3,787 3,423 3,212 3,493 Wind 221 186 200 200 Air charter 107 198 221 232 Others 230 256 286 286

Operating Expenses 18,655 18,203 17,123 19,504 EBITDA 2,440 2,983 2,077 3,025 % margins 11.6% 14.1% 10.8% 13.4% Other Income 79 103 125 125 Depreciation & Amortisation 1,006 1,675 1,717 1,591 Gross Interest 109 367 285 252 Profit before tax & exceptional item 1,405 1,043 201 1,306 Exceptional Item - - - - Profit before tax 1,405 1,043 201 1,306 Less: Taxes 486 142 51 329 Less: Minority Int. & Asso. Profit - 1 1 1 Net Income (Reported) 919 900 149 976 Source: Company data, I-Sec research


FY19 FY20 FY21E FY22E Assets Total Current Assets 1,999 1,999 2,731 3,210 of which cash & cash eqv. 131 134 968 1,274 Total Current Liabilities & Provisions 492 465 463 467 Net Current Assets 1,507 1,535 2,268 2,743 Investments 1 1 1 1 Net Fixed Assets 7,038 9,896 8,672 8,533 Intangible assets 12 8 8 8 Capital Work-in-Progress 416 44 44 44 Goodwill - - - - Other non-current assets 312 222 222 222 Total Assets 9,287 11,704 11,214 11,550 Liabilities Borrowings 2,090 5,095 4,895 4,695 Deferred Tax Liability 738 440 440 440 Other long term liabilities - - - - Equity Share Capital 903 903 903 903 Reserves & Surplus 5,556 5,265 4,975 5,511 Net Worth 6,459 6,169 5,878 6,414 Total Liabilities 9,287 11,704 11,214 11,550 Source: Company data, I-Sec research


FY19 FY20 FY21E FY22E Net Profit before tax 1,405 1,043 201 1,306 Depreciation 1,006 1,675 1,717 1,591 Non-Cash Adjustments 103 380 285 252 Working Capital Changes (64) (94) 101 (170) Taxes Paid (523) (431) (51) (329) Operating Cashflow 1,922 2,573 2,253 2,651 Capital Commitments (2,112) (1,227) (493) (1,453) Free Cashflow (190) 1,346 1,760 1,198 Other investing cashflow 17 41 - - Cashflow from Investing Activities (2,094) (1,185) (493) (1,453) Inc (Dec) in Borrowings 492 (404) (485) (452) Issue of Share Capital - - - - Dividend paid (381) (980) (441) (441) Cashflow from Financing Activities 110 (1,384) (925) (893) Chg. in Cash & Bank balance (62) 3 834 305 Source: Company data, I-Sec research, *Proforma


FY19 FY20 FY21E FY22E EPS 10.2 10.0 1.7 10.8 Cash EPS 21.3 28.5 20.7 28.4 Dividend per share (DPS) 5.5 7.0 5.0 5.0 Book Value per share (BV) 71.5 68.3 65.1 71.0 OCF per share 21.3 28.5 24.9 29.3 FCF per share (2.1) 14.9 19.5 13.3 Growth (%) Net Sales 9.3 0.5 (9.2) 17.2 EBITDA 4.2 22.2 (30.4) 45.6 PAT (0.7) (2.0) (83.3) 550.7 Valuation Ratios (x) P/E 16.6 16.9 101.6 15.6 P/BV 2.4 2.5 2.6 2.4 EV / EBITDA 7.1 6.8 9.2 6.2 EV / Sales 0.8 1.0 1.0 0.8 Operating Ratios Employee cost / Sales (%) 17.3 17.9 19.5 17.9 Other Operating exp. / Sales (%) 69.6 66.2 67.7 66.8 Effective Tax Rate (%) 34.6 13.6 25.2 25.2 Total D/E Ratio (x) 0.3 0.8 0.8 0.7 Net D/E Ratio (x) 0.3 0.8 0.7 0.5 OCF yield (%) 12.6 16.9 14.8 17.4 FCF yield (%) -1.2 8.8 11.5 7.8 Return/Profitability Ratios (%) EBITDA Margins 11.6 14.1 10.8 13.4 Net Income Margins 4.4 4.2 0.8 4.3 Return on Equity (RoE) 14.2 14.6 2.6 15.2 Return on Capital employed (RoCE) 16.3 12.1 4.3 13.5 Source: Company data, I-Sec research


15

“In case of industry/sector reports or a report containing multiple stocks, the rating/recommendation for a particular stock may be based on the last released stock specific report for that company.

This report may be distributed in Singapore by ICICI Securities, Inc. (Singapore branch). Any recipients of this report in Singapore should contact ICICI Securities, Inc. (Singapore branch) in respect of any matters arising from, or in connection with, this report. The contact details of ICICI Securities, Inc. (Singapore branch) are as follows: Address: 10 Collyer Quay, #40-92 Ocean Financial Tower, Singapore - 049315, Tel: +65 6232 2451 and email: [email protected], [email protected].

"In case of eligible investors based in Japan, charges for brokerage services on execution of transactions do not in substance constitute charge for research reports and no charges are levied for providing research reports to such investors."

New I-Sec investment ratings (all ratings based on absolute return; All ratings and target price refers to 12-month performance horizon, unless mentioned otherwise) BUY: >15% return; ADD: 5% to 15% return; HOLD: Negative 5% to Positive 5% return; REDUCE: Negative 5% to Negative 15% return; SELL: < negative 15% return

ANALYST CERTIFICATION /We, Abhijit Mitra, MBA (Finance), BE, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts are not registered as research analysts by FINRA and are not associated persons of the ICICI Securities Inc. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities Limited is a SEBI registered Research Analyst with SEBI Registration Number – INH000000990. ICICI Securities Limited SEBI Registration is INZ000183631 for stock broker. ICICI Securities is a subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com. ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Recommendation in reports based on technical and derivative analysis centre on studying charts of a stock's price movement, outstanding positions, trading volume etc as opposed to focusing on a company's fundamentals and, as such, may not match with the recommendation in fundamental reports. Investors may visit icicidirect.com to view the Fundamental and Technical Research Reports. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. ICICI Securities Limited has two independent equity research groups: Institutional Research and Retail Research. This report has been prepared by the Institutional Research. The views and opinions expressed in this document may or may not match or may be contrary with the views, estimates, rating, target price of the Retail Research. The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securities is under no obligation to update or keep the information current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this company, or in certain other circumstances. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to change without notice. ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction. ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned in the report in the past twelve months. ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its associates or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts and their relatives have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. ICICI Securities or its subsidiaries collectively or Research Analysts or their relatives do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject company/companies mentioned in this report. ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. This report has not been prepared by ICICI Securities, Inc. However, ICICI Securities, Inc. has reviewed the report and, in so far as it includes current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.

Documents

BSE Sensex: 37607 Logistics Sector update