Delhivery Ltd (NSE: DELHIVERY) Q1 2026 Earnings Call dated Aug. 01, 2025
Corporate Participants:
Unidentified Speaker
Sahil Barua — Managing Director and Chief Executive Officer
Amit Agarwal — Chief Financial Officer
Ajith Pai — Chief Operating Officer
Vivek Pabari — Head of Investor Relations
Varun Bakshi — Business Leader
Analysts:
Unidentified Participant
Sachin Dixit — Analyst
Vijit Jain — Analyst
Adithya Suresh — Analyst
Gaurav Rateria — Analyst
Achal Lohade — Analyst
Mukesh Sarafs — Analyst
Aditya Mongia — Analyst
Ankit Agarwal — Analyst
Kamlesh Ratadia — Analyst
Janam Shah — Analyst
Sunil Mittal — Analyst
Presentation:
Vivek Pabari — Head of Investor Relations
Good evening everyone. Welcome to the Q1 Earnings Call of Delivery Limited I am Apar from the investigations team of Delivery. Before we start, we would like to point out that some of the statements made on today’s call will be forward looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. To discuss the Q1 FY26 results. I am pleased to welcome Mr. Sahil Barwa MD and Chief Executive Officer. Mr. Amit Agarwal, Chief Financial Officer. Mr. Ajit Pai, Chief Operating Officer Ms. Vani Venkatesh, Chief Business Officer. Mr.
Varun Bakshi, SVP and Head of Patrak Load and Mr. Vivek Pavari, SVP and Head of Investor Relations at Delivery. As a reminder, all participants line will be in listen only mode and participants can use the raise hand feature to ask any question post the opening remarks. Now I invite Mr. Sahil Barwa to take us through the key highlights of the quarter post which we will open up for the Q and A. Thank you. And over to you Sahil.
Sahil Barua — Managing Director and Chief Executive Officer
Thank you Apar. Can we have the presentation please? All right. Excellent. Thank you all of you for joining our earnings call this evening On Friday. As always, we’ll begin with a short presentation for about 15 minutes and then I’ll be happy to take questions. Before we begin, I’d like to place on record on behalf of the entire team of Delivery, our deepest gratitude to one of our directors, Mr. Shriva San Rajan who has served as a Director on the board of Delivery for the last 10 years and will be stepping down in September. I’d also like to extend a very warm welcome to two new directors on the Delivery board.
Professor Padmini Srinivasan from the Indian Institute of Management at Bangalore and Mr. Yashish Dahia, MD and Group CEO of Policy Bazaar will be joining the Delivery Board from today. So welcome on behalf of the Delivery team to them. Great. Moving on to summary of results for Q1. We’ve had an excellent start to financial year 26 with strong revenue growth in our core transportation businesses and significantly improved profitability. I’ll walk through the numbers. As of Q1 we delivered 2,294 crores of revenue from services which is about 6% higher year on year and about 5% higher. Q on Q, total income stood at 2,424 crores.
A growth of 6% YoY and 5% Q. EBITDA margins came in at 149 crores or 6.5% compared to 97 crores in the same quarter last year and compared to 119 crores of 5.4%. So an expansion of nearly 200 basis points YoY and about 110 basis points. Q PAT came in at 91 crores nearly 4% which is an expansion of 140 basis points from 54 crores in Q1 of fiscal 25 and 70 basis points compared to Q4 fiscal 25 when PAT stood at 73 crores. We registered strong growth in the express parcel business as we discussed earlier.
This is also post our acquisition of ECOM Express for which we recently received approval from the Competition Commission of India. The full impact of the acquisition of course will begin to show more in Q2. However, we did see significant improvement in volumes even towards the tail end of Q1. Parcel volumes reached 208 million shipments for quarter one which represents a year on year growth of nearly 14% and a quarter on quarter growth of 17%. Our PTL business continued to show stable performance. We closed at 458,000 tonnes of freight in quarter one which represents a year on year growth of 15% and broadly flat quarter on quarter.
Do bear in mind that quarter one typically is the lowest quarter of the year from a PTL standpoint and quarter four typically is the high watermark quarter for a fiscal year. Quick snapshot of operational metrics PIN code reach continues to stay consistent. We are present across 18,857 pin codes span India as defined by the Indian Postal Services. We continue to serve the entire world through our partnerships with FedEx and with Aramex. Total number of active customers have expanded significantly from 35,000 in quarter one fiscal 25 by nearly 8,000 customers as of this quarter we closed with 43,000 active customers.
Infrastructure continues to remain at about 20.4 million square feet of gateways and fulfillment centers as opposed to 20.1 million square feet in quarter four continue to operate 119 gateways. This includes a few new gateways that have been integrated from the E Comm Express network into the delivery network. 45 automated sort centers, 64 sorters. There’s a mild expansion in the footprint of the entire freight business. We have 125 freight service centers as opposed to 118 in quarter four, 161 processing centers and we continue to expand the express delivery network in response to significantly higher volumes anticipated in Q2 and Q3.
Total number of express delivery centers stand at about 4,500. Team size has expanded to 65,849 people with 52,000 partner agents and 17,000 vehicles on a daily basis. Quick snapshot of financial performance. As I’d mentioned, overall revenue from services grew to 2,294 crores in quarter one fiscal 26 as compared to 2172 crores a year ago and 2192 crores in Q4. The Express Parcel business has grown as a percentage of our total revenues on the back of increased volumes towards the tail end of quarter one and stands at 61% of total revenues. The PTL business continues to form 22% of total revenues.
Express parcel revenues have grown 10% YoY and 12% QoQ. We closed with 1403 crores of revenue in Q1 fiscal 26 through 218 million packages delivered, which represents a 14% growth in volume and a 17% growth quarter on quarter compared to the previous quarter. PTL freight revenues have grown 17% from 435 crores in the same quarter last year compared to 508 crores in this quarter and broadly frat between quarter four and quarter one freight tonnage has grown 15% yoyo from 399,000 metric tons of freight in Q1 fiscal 25 versus about 458,000 tons of freight in Q1 of fiscal 26.
Revenue growth being higher than volume growth implies that yield improvements have continued in this business as well. Supply chain services business has degrown QoQ and YoY. This is driven by two factors. One is, as mentioned previously, our exit from providing mother warehousing services to the quick commerce industry and the second impact from seasonality with one of our major electronics and durables clients. FTL Services revenues have remained broadly flat at about 150 crores a quarter and cross border services brought in 24 crores of revenue in Q1 of fiscal 26. In terms of profitability, profitability continues to expand.
The highlighted column on the right refers to Quarter 1 fiscal 26. As discussed, revenue from services stands at 2,290 crores total service. EBITDA came in at 298 crores or 13% which is an expansion of 60 basis points versus Quarter 4 of fiscal 25 and an expansion of 190 basis points compared to fiscal 25. On the whole, Express Parcel came in at 228 crores of services at a 16.3% margin. As discussed previously, we expected continued expansion in parcel margins from quarter two of last year which was our low point at 15.1% and we expect margins to continue to improve going forward we will remain broadly within the normative range of 16 to 18% in the express business.
As guided previously, part truckload margins continue to remain stable. We brought in 54 crores of service EBITDA margin in the part truckload business in quarter one at 10.7%. This is to some extent affected by India’s adjustments as well. Broadly, we anticipate that margins in the park truckload business will continue to rise with improvements in utilization of the network. The big change of course is in the supply. We’ve continued to renegotiate commercial terms with several customers and as discussed previously shut down certain unprofitable accounts. As a consequence, margins in this business have improved significantly from 2.2% as of fiscal 25 to 7.2% in quarter one fiscal 26.
The business brought in 15 crores of service EBITDA this quarter. In terms of corporate overheads, Corporate overheads continue to remain flat as guided previously in terms of broad percentage of revenue. Corporate overheads have declined from 9.3% of revenue in fiscal 25 to 9.1% of revenue in quarter one of fiscal 26. Do bear in mind that quarter one fiscal 26 also contains the impact of inflation on wages as this is our increment cycle. Wages have remained broadly constant at 114 crores. Technology expenses and general administrative expenses have broadly remained constant as well. We’ve invested 14 crores in new services.
These are two new services as discussed previously. One of them is our Rapid Commerce Initiative which is a sub two hour same day delivery service currently present through 20 dark stores in three cities and the second is Delivery Direct which is an on demand intra city service launched at the moment in the cities of Ahmedabad, Delhi, NCR and Bangalore. Both of these businesses continue to scale and investments continue to be made both on the demand side as well as on building up supply. The investment levels are currently at 14 crores a quarter. This has led to an overall adjusted EBITDA margin of 75 crores or 3.3% of revenue and expansion of 80 basis points compared to quarter four fiscal 25 when we generated an adjusted EBITDA of 55 crores and more than double of the adjusted EBITDA from the same quarter.
Last year PAT stood at 91 crores or a PAT margin of nearly 4%, an expansion of 18 crores compared to quarter four of fiscal 25 and an expansion of nearly 60% compared to the same quarter last year. PAT trend continues to be heartening. As discussed, PAT came in at 91 crores in Q1 which is significantly higher than the PAT in the same quarter of last year and the overall trend of improvement of Q1 is from minus 4.4% in Q1 fiscal 24 to 2.4% in Q1 of fiscal 25 to nearly 4% in Q1 of fiscal 26.
We believe that the PAT margin will continue to expand through the rest of the year as well. A short update on the ECOM Express Acquisition we received formal approval from the Competition Commission of India on June 17, 2025. The acquisition was formally completed on July 18 and financial consolidation of ECOM Express into delivery will be effective from this date. The final purchase consideration as guided previously post the adjustments will be at rupees 1369 crores. From an integration standpoint, the volume and client side integration of ECOM Express is complete. No further volumes flow through the E Comm Express network and we are in the process of reconciling and shutting down the last few shipments which continue to be open within the network.
All other volumes have been moved successfully to the delivery network and will reflect in delivery standalone volumes in Q2. The network rationalization plan is also under execution. On a final basis we expect to retain seven facilities through in a combination of transportation and fulfillment operations. A significant portion of the network of ECOM Express has been rationalized and shut down and we anticipate that the entire network shutdown will follow the plan previously discussed. We have also begun the process to exit the non express businesses of ECOM Express and anticipate that we will complete these exits by quarter three of this financial year.
Just a quick snapshot of Express parcel volume growth. As you can see, volumes have consistently been on an uptrend throughout this calendar year. The deal with ECOM Express was announced towards the end of March. We’ve presented a version of this chart previously we had begun to see an upside to volumes in April and May. I’m pleased to announce that that has continued through June and has significantly gone up significantly into July and our belief is that this trend will continue through the rest of this quarter. Do bear in mind that this is an unusual year.
The peak season this year will be is expected to be in the middle of September. So unlike last year a large portion of the peak will be seen. The impact of a large portion of the peak will be seen in Q2 and the early part of Q3. So that’s a quick summary of our results. Broadly speaking, highly positive quarter. We’re very satisfied with where we’ve landed. I think big questions last time were really around the integration of ECOM Express. And as mentioned I think we’ve completed that integration quite successfully and overall very happy with where volumes have trended as well and obviously the expanded profitability.
So very well set up for the rest of fiscal 26. With that I will pause. Happy to take questions.
Questions and Answers:
Vivek Pabari
Thank you Sahil. We will now start the Q and A. Those who wish to ask any questions can use the raise hand feature. The first question is from Sachin. Please go ahead.
Sachin Dixit
Thanks Abbar. Congratulations on a good set of numbers. I have a few questions. Let me go through the questions all at one time and then I’ll hand it over to you guys. Number one, Express volumes have increased this quarter but we did see the yield coming down. So is there a way to look at it that you know the incremental shipments which have come are largely come at a lower yield or there’s something else which is going out here. Number two, after your ECOM Express consolidation, what impact should we see on the overall volumes of delivery? And I’m saying that because the follow up question out here is have all volumes moved in one queue or are there incremental volumes which could be moved into queue and if any, could you help us quantify or understand what range that could be? And similar question is what could be the impact on yields and margins from current levels after the E Express consolidation? And lastly Silent Team, thank you so much for sharing the shareholder letter and your views across businesses.
One sentence you guys mentioned was Quick Commerce has created a material opportunity for our PTL division in the immediate term. Again, would love to understand what you guys mean by that. Anyways, you could quantify the upside opportunity out here. Thanks.
Sahil Barua
Sure. Thank you Sachin. So I’ll go one by one on express volume versus yield. So fundamentally the drop in yield. So yield is a function of volume mix, which is a function of clients, which is a function of the weights of packages and the distances that they travel. When I look at the overall weight per package across our express business, consolidating both small parcel as well as heavy, there is a double digit decline in the average weight per parcel which is not surprising because obviously there’s been growth in the small parcel business and so as a consequence of that yield has shrunk.
So it’s just an organic shrinkage in yield and has nothing to do with pricing. The yield as we’ve discussed previously does vary quarter to quarter based on these inputs. As an example, during the peak season we typically see yields go up because there’s a larger percentage of heavy packages that come through the network. And I think that trend will continue in Q2 and Q3 as well. So nothing sort of alarming on yield pricing remains consistent. If anything, I believe, as I’ve discussed previously, that irrational pricing led compression of yield that previously was a risk factor in the last two years is a materially lower risk going forward.
One obviously is, as we’ve consolidated Ecom Express, I think that gives us a certain amount of pricing stability in the market. And the second, as I mentioned Previously, I think independent 3pls in this space need to cut burn rapidly and especially in the face of inflating costs. And so we do believe that there’ll be no further compression on yields in terms of Ecom Express consolidation and impact on volumes. What you’re seeing in quarter one is actually a very minimal impact of volume transition from Ecom Express to delivery, really most of it was only towards the end of Q1, sort of in the last parts of June.
The real impact, as you can see in the chart apart, if you can just go to the chart. Yeah, so the real impact actually is in July, which you can see there’s a very materially higher trend for July than there has been for June. And our viewers that that’s sort of a more representative level of volume that we will be at going forward. Vi so there’s a very large sort of uptick that you should see in Q2 with the new volumes coming in from Ecom Express, I think there’s no reason to believe there’ll be any negative impact on margins.
I think again, as I mentioned, you know, depending on client mix in any given quarter, there may be some impact on yields and there may be a marginal impact on, you know, sort of margins here and there. But broadly speaking, we anticipate that margins will actually expand as volumes go up. And so we’ll easily be in the 16 to 18% sort of range. In terms of Quick Commerce’s impact on PTL and sort of the opportunity it creates. I think the main opportunity that it creates is brands who work with big commerce companies. You know, whether it’s FMCG companies, you know, packaged food companies, whether it’s, you know, grocery, whatever it is, there’s a large amount of B2B consignments that get shipped to both the mother warehouses of quick Commerce companies as well as the dark stores of Quick Commerce companies.
This is a complex delivery process because, you know, it involves, for example, taking appointments with the MOTHER warehouse, making sure goods are delivered within that appointment on time and in Full this is a service that delivery already provided outside of quick commerce. So it’s not particularly different from what we would do for a seller trying to consign stock, for example, to an FBA warehouse or to a Reliance warehouse or a Flipkart warehouse. So it’s fundamentally a similar kind of service. Now what’s interesting of course, is that it’s now a new sort of channel that has gotten created and a new opportunity for us.
What makes this obviously a complex delivery is the process of obviously coordinating with large numbers of quick commerce mother warehouses and ensuring on time delivery, integrating with their systems to make sure that appointments are delivered on time, managing proofs of delivery electronically, making sure that POs are properly reconciled between the brand, the logistics partner, which is us in this case, and the MOTHER warehouse or the dark store. And potentially it also opens up an opportunity for returns from mother warehouses and dark stores back to brands. So that’s sort of the large opportunity that we see and it’s actually been a pretty exciting part of the PTL business over the last two or three quarters.
Sachin Dixit
Thank you. Sahil, just a quick follow up out here. Since the acquisition of Ecom Express, are you seeing any change in terms of competitive intensity? And I’m saying that because one of the statements in your shareholder letter was the last couple of years there was a poor pricing discipline amongst multiple 3pls. Anything change in the near term since your acquisition or that continues to be the issue.
Sahil Barua
So the irrational pricing that I’ve spoken about did exist. And logistics is really not one of those spaces where, you know, pricing below cost is a good strategy, as obviously evidenced by our acquisition. But as I mentioned, I think what we’ve seen is a reduction in the intensity of price competition. I wouldn’t like to necessarily take credit for us having driven sense into the market. I think it’s the financial constraints that face companies which price irrationally in the first place. So obviously with the acquisition of Ecom Express, all, all of the contracts that we’ve negotiated with clients are at delivery pricing.
Of course clients get volume discounts for giving us larger volumes, but on deliveries terms. So the rational pricing has been cleaned out, at least out of what was the erstwhile Ecom Express network. But I do believe that other three PLs in this space have also signed contracts in the past which are below cost. And as I’ve mentioned, logistics costs inflate in a very predictable manner. So wages and logistics, for example, will typically inflate 7 to 8% a year. You know, rentals will inflate anywhere between 5 and 8% a year and fleet costs also inflate at a fairly predictable rate.
So the reality is that I think whatever, whether delivery does anything or not, balance sheet constraints will force, you know, independent 3pls in this space to sort of make sure that they’re disciplined about pricing.
Sachin Dixit
Very clear. Thank you and all the best.
Sahil Barua
Thank you.
Vivek Pabari
Thank you, Sachin. The next question is from Vijayan.
Vijit Jain
Thank you for the opportunity. Congratulations on the good one. Q. My first question is in last quarter, I think you said you are aiming to retain 30% of the volumes of Ecom Express. That was what you were budgeting in your acquisition price. Do you have a sense of what was the volume of Ecom Express as it existed in April, for example, that you’ve retained? Yeah. So that’s my first question.
Sahil Barua
You want to ask all of them in a go?
Vijit Jain
Yeah, sure. The second question is you also, you know, last quarter talked about, you know, your sense that self sourcing at some of the other horizontal players was peaking. You expect that to continue to play through, has that progress along expected lines, you know, as you see players ramping up for the festive season ahead. That’s second. The third question I had was, you know, if you can give us broad sense of the category mix that you see on your network in, you know, in categories that you mention are not amenable to quick commerce, so you know, apparel, consumer electronics, home and lifestyle goods, heavy, etc.
So those were, those are my questions and if possible, if you could talk about, you know, what will be your recurring costs apart from the integration costs that you will incur the recurring costs from ecom Express from 2Q onwards.
Sahil Barua
Yeah, sure. So in terms of volume retention, our plan, when we our assessment of the deal at that time was based on a 30% volume retention of Ecom’s volumes. What I can tell you without disclosing sort of specifics is that we have retained significantly more than the 30% that was planned originally. So which is reflected sort of in the chart that APAR had shown previously. I think broadly speaking we will be close to about perhaps somewhere in the 55 to 65% retained volume already and this continues to rise month on month. Part of the reason, as I mentioned, is that this has been a tough quarter from a logistics standpoint for other players in the space owing to obviously profitability constraints.
And also the reality is the operating environment in Q1 has been pretty complicated with rains and a number of other kinds of disruptions. And so we have seen a flight towards quality. So that’s been a positive for us in terms of change in, in sourcing strategies. I think clearly we’ve retained more volume than we anticipated. So as you can imagine, you know, we have gained share across all client types. Earlier, of course, we always used to talk about the fact that we were growing share rapidly with direct to consumer and SME segments of the market.
But as I look at our volumes, you know, across an absolutely broad swath of clients, we have gained significant amount of share, including the marketplaces. I think of the three key marketplaces, at two of them, we do see an increased sort of interest in outsourcing to delivery. They obviously continue to maintain in house arms, there’s no question. But equivalently the consolidation towards a quality partner who is reliable, that trend is also visible at the third marketplace. Also we have seen an expansion of our share of wallet. But I think the reality is that until the marketplace is with completely captive arms, and I’m not counting VALMO here, are able to account properly for the cost of doing in house logistics, you know, the true comparison internally to them also will not be perfectly clear.
I think costs are still sort of, relatively speaking, lack of a better word, hidden between retail arms and logistics arms. So I, it’s too early to comment on whether there’s sort of a very material shift. That said, I will point out that the same inflationary pressures that I’ve spoken about that apply to third party logistics companies apply exactly as much to first party logistics companies as well. They aren’t exempt from, you know, wage inflation and rental inflation. And so we’re very confident that our ability to manufacture productivity gains and efficiencies in our network significantly outstrip other players in this market with they are first party or third party players.
And so the reality is that our cost cost advantages expand every year. You know, we’ve been talking about this since the time that delivery has gone public. And I realized that for the first year or so that may not have shown up in our numbers. But as you can see with the acquisition of Ecom Express and what you see in July and August, I think reality does catch up. And so it’s a matter of time in terms of the broad category mix, I, I won’t be able to provide you a breakup of sort of our volumes by category.
But if I take some very, very broad numbers, my sense is maybe softline is probably about half our volumes. You know, fmcg, BPC kind of categories are maybe about a quarter and you know, the rest of it is just sort of a very broad mix grocery is practically zero. Unsurprisingly, it’s not a category that we intend to play in. And in terms of recurring costs, you know, we, the integration cost, as we’ve mentioned our envelope was about 300 crores that we anticipated. And we will report that separately in quarter two and quarter three. Calling out quite clearly what the specific integration costs from the Ecom Express acquisition will be.
Those will largely be limited to, you know, certain people related costs that will persist through quarter two and quarter three and certain costs in terms of winding down leases and certain fixed contracts that they’ve had. As of now, we don’t anticipate that we will breach that 300 crore limit. But in terms of recurring cost, there will be none. No further recurring costs. I mean, because as the volumes go up, it’s as if we were expanding the delivery network itself.
Vijit Jain
So if I can just follow up. So you know, there is no cost associated with anyone who comes on board. Any cost at all. That’s what you’re referring to as none, right?
Sahil Barua
Yeah. Because you know, if we were to do, you know, whatever X million number of packages compared to let’s say the 60 million average that we were doing in Q4, we would need to hire people ourselves. Right. So it can’t be sort of classified as a recurring Ecom Express cost.
Vijit Jain
Got it. Perfect. Thank you so much. Those were questions.
Sahil Barua
Thank you.
Vivek Pabari
The next question is from. Please go ahead.
Unidentified Participant
Hi. Hi. Silent team Congress on a decent set of results. My first question is on supply chain services. Right. That’s a business which seems to have a good mood, but it’s like hit and miss. It does well for a few quarters. Obviously you have highlighted multiple times it’s slightly lumpy in nature, it’s not linear. But in your shareholder letter you are talking about roughly 1800-2000 crore of revenue in three years, which I’m guessing is FY29. So can you talk about what is giving you the confidence that finally that business will see a sustained growth trajectory?
Sahil Barua
Sure. Do you have more questions?
Unidentified Participant
Sure. The second question was on again on the volumes piece on E. Com. Right. So you have already highlighted that the volume retention is happening at a much faster clip. So the point being that when we are talking about 30 volume retention, we are expecting the VALMO sort of impact being there and a lot of volume going out. So what has really changed there? Is it that your one of your largest customer is struggling to ramp up capacity or anything, which is why you are in such a better situation compared to where you are, what you are anticipating.
That’s my second question. And those are the two issues that I have.
Sahil Barua
Sure. I’ll start with the second one. In terms of why volume retention is higher than expected, as I discussed, I think when we were evaluating the deal, it was our fiduciary responsibility to take a conservative view of the world. You know, we’ve been doing this for a while, we are a conservative team and you know, we’ve been pleasantly surprised is perhaps the simplest way to put it. The reality of the market, however, though, is from the past. I don’t think it’s a fundamental shift in the sort of strategy that Misho has with respect to Valmo or Flipkart with respect to Ecart logistics.
But I think the reality is as the operating environment becomes tougher and as E Commerce principals realize that third party logistics firms who price below cost merely to get a share of volume cannot survive, there’s a flight to quality and over a long period of time, quality players will get rewarded. And that’s what you’re seeing. Fundamentally, delivery is a large network which is highly reliable and very fast. The other advantage that obviously is inbuilt within the delivery network is that the volatility of tonnage within our network owing to Express is now increasingly very small. And so our ability to handle large swings in Express volumes obviously is significantly improved by running a PTL business and the benefits of that flow to our Express customers as well.
And so it’s not surprising that clients are choosing to allocate volumes away from lower quality players. I’ve mentioned this in the past. I do think over a long period of time, Delivery and Blue Dot are the two highest quality networks in the country. And for us, for the specific businesses that we run, in our case a large Surface Express network and in their case an Air network, you will see volumes accumulate towards the two highest quality networks. Pricing can only get you so far, but the reality is that no customer is willing to pay a lower logistics cost for packages to not get delivered.
And that’s effectively what you’re seeing in terms of supply chain services. I think the fundamental sort of shift in supply chain over the last year has been, as I’ve mentioned, as we have done in PTL in the past, as we have done at Express in the past, I have discussed this as a management team. We’ve been very clear that the ability to make money comes before chasing growth. That’s exactly the trajectory that we followed in PTL as well. If you go back about eight quarters, you’ll remember that we went through a U shaped curve for PTL as well.
The logic was that we would first fix the business and then start growing it rapidly. On supply chain services. We had a number of things that we needed to do. One was really fundamentally renegotiate contracts that had not been priced the way they should have been, get out of sectors that we wanted to explore, but fundamentally have now reached a conclusion that we don’t want to participate in. And that’s really the impact that you’re seeing. In the last financial year we experimented with getting into fulfillment for quick commerce and then realized that, you know, the inventory issues in that business are fundamentally too large for a third party logistics company to bear and we’ve exited that sector.
So, you know, I think what you’re seeing now is a business which is starting to resemble what it will look like from a profitability standpoint. I think there’s still margin expansion that will happen in the SCS business as we scale. You know, that’s a story that will still play out over the next couple of quarters. But what we’re getting better at is pricing contracts correctly. The second thing obviously is improving the quality of our underlying software, whether it’s our warehouse management systems or transportation management systems and driving efficiencies through those. So I think that’s matured as well.
As I look at our pipeline at this stage, our pipeline is healthier than it’s ever been before. You know, at this stage we’ve got probably close to about 300 crores of sort of broad supply chain mandates which are in various stages of conversion. Conversion in this business can take, you know, three months, four months because it’s a long sales cycle. But given our visibility of the pipeline, we’re very confident, frankly speaking, at this stage of, you know, from a pipeline, pure pipeline standpoint, we probably have more than 1,000 crores in the pipeline now is over a three year period.
Can we convert, you know, 6, 700 crores of that? I think pretty confident that we’ll be able to do that. So fairly confident that we’ll get to the 1800, 2000 crores in sesame.
Unidentified Participant
Got it. Just one final confirmation, if I may. The numbers or the sort of guidances that you’ve given in the shareholder letter, these are inclusive of E Com Express impact, right?
Sahil Barua
Yeah. Ecom Express has.
Unidentified Participant
No, no, no, not scs. I’m talking about generally you have given. Right service, EBITDA margins for ptl. All those are inclusive.
Sahil Barua
Yes, yes, yes, yes, yes.
Unidentified Participant
All right, thank you. And all the best.
Sahil Barua
Thank you.
Vivek Pabari
Thank you. Sachin. The next question is from Aditi Suresh. Please go ahead.
Adithya Suresh
Hi Sahal and team. Thank you for the opportunity. I have three questions if I may. So Sahl, first if I can take you back to slide 6 on your key KPIs. If you can just give us a glimpse in terms of what are the changes we’d expect with ECOM consolidation. The key changes which you’d like to call out, that’s one second is on the market structure itself within Express Parcel. What is your sense about kind of within 3 PL your market share here today? Even if a broad. If it’s a broad range, that’s great. And where do you think this could settle at in say the next say 12, 24 months? Third was on ppl.
Now here, was there a broader theme about kind of value or volume this quarter? Is that a fair kind of read into kind of what happened this quarter? And. And then within this, this margin at 11% would be a fair conclusion to say that if volumes expand sequentially then margins can only expand towards your guidance 16 to 18%. Thank you.
Sahil Barua
Sure. Thanks, Aditya. Papa, if you just go to the page, slide six. Yeah. So Aditya, broadly speaking, with the ECOM Express acquisition, you know, and the July volumes and continuing from here on, I think the big change will really be one in the number of express delivery centers and partner centers. We’re currently at about 4,500. My sense is you should see this number at probably close to about 4750 to 4800 by the end of the year. The team size obviously is. It’ll go up during the season, it’ll come down after the season. Hard to say exactly what it will be but it’ll sort of follow broad trends in line with volumes.
From a infrastructure gateway standpoint, you will not see any major change. And that’s sort of part of the reason why we wanted to acquire ECOM Express in the first place. We don’t believe that we need to significantly increase our Express infrastructure or our gateways or our automated sortation centers to absorb the additional volumes that will come in from the E Com network. As mentioned, there are no volumes in the ECOM network at this stage. All of them are coming into the delivery network and our network has absorbed these fairly seamlessly. So absolutely no change there.
I think there’ll be some expansion of pin code reach. We’re at some 18,857. Ecom obviously had a wider reach than delivery did. So some of those will get activated over the next quarter. I don’t know exactly what it’ll reach but I mean let’s call it maybe 19,200 or there thereabouts in terms of market structure. You know we’ve obviously gained market share in, in the last quarter. Hard to put an exact number to it but my sense is, you know, and different people have different interpretations of this but I would expect that our market share would have expanded by E Comm Express was what, probably about 60, 50, 60% of our size.
So our market share is probably expanded by about 25% or so, possibly higher. But I’m not entirely, you know, sort of sure. I think that will become. I’ll give you a much better answer. Maybe end of Q2, Q3 when things stabilize a bit more. Right now things are still sort of influx volumes continue to increase and where does it settle long term? You know that’s a very nuanced question really. Depends on what happens to the rest of the third party market. As I’ve mentioned previously, the unit economics of other third party players are unsustainable and we’ve seen how that plays out once already.
Now how that plays out with the other players in this market I can’t say. But there is no road to better unit economics in their cases. And so the reality is that market share should continue to consolidate towards, you know, more disciplined players and higher quality players. And again as I mentioned, who those players are is pretty clear. I think the only risk that one could think of is what would happen if first party players were to try to expand into the third party market. To which my response as ever remains the same. It is a tried strategy that has failed and so we don’t anticipate that that’s sort of a major risk in terms of ptl.
It’s not so much value over volume actually the if you look at the rest of the industry also, broadly speaking, I think most PTL players have seen sequential declines from quarter four to quarter one. Minor declines or broadly have stayed flattish. That’s largely because Q4 is the peak quarter. So Q2 and Q4 tend to be larger quarters. In PTL, Q1 and Q3 tend to be slightly lower. Q1 also has sort of this artificial impact of two 30 day months and there were also disruptions in Q1 for a variety of reasons. One of them obviously was significant amount of rain.
There was a certain amount of disruption from Operation Sindur as well in this period and there have been some festive disruption. So no particular change in the PTL strategy. I think it’s just, you know, overall that’s what the market is like. We anticipate that we’ll be back to sort of business as usual in this quarter and beyond.
Adithya Suresh
Thanks. May I just ask a follow up if that’s okay?
Sahil Barua
Sure, please.
Adithya Suresh
So just on PTL, right. So the guidance is 16 to 18%. Is there a broad tonnage which I’ll think about which you need to hit to. To. To achieve that, that. That level of kind of margins.
Sahil Barua
Yeah, I think I will just number and then I think Amit should just quickly come in on this. My sense is at about one and a half times this size we should be at those numbers. But please come in here.
Amit Agarwal
So. Thanks. Roughly at close to about 600,000 tons. 600 to 640,000 tons of quarterly load which translates to about 200 to 215,000 tons of monthly load. Whereas we are posting an average of about 150,000 tons of quarterly load. Three things will kick in. One is fixed cost utilization will go down. We will get significant benefits of operating leverage on that. Second aspect is our utilization of our trucking will continue to improve on reverse lanes and a bit of it on forward lanes as well. Tractor trains penetration will also increase. And lastly pricing discipline and churning out of low margin customers will continue to happen.
So these three things will should comfortably give us a 7% uptick on margin.
Adithya Suresh
Thank you. Thank you for the clearances as always.
Vivek Pabari
Thank you Aditya. Next question is from Gauravar Gaurav. Please go ahead.
Gaurav Rateria
Hi. Thanks for taking my question and congratulations on a good set of numbers. I have a couple of questions. I will read it out all and then pass it on to you guys. The first is how much of the benefit of volume from E Com has already come in the financials in 1Q as the network was unstable and the volumes were coming through to strong players like us. Second, your comment that you made on incremental E Com volumes are coming at the delivery rates which my understanding is that could be higher but then there would have been some volume discount.
So is it fair to say on a net basis there would have been some still pricing gains as those volumes now pass through the deliveries network. Third question is on your comment that you made on PTL on 20% plus annual tonnage growth while 1Q was slightly this number. So what drives your confidence to hit 20% on an annual basis? Which means that your ask rate for 2Q to 4Q will be materially higher than 20%. So any, you know any anecdotes that help us to understand that what drives that incremental gain. And last question is on.
You mentioned about couple of new value added services on the FTL segment. So just trying to understand are these material TAM opportunities or are these material gross margin opportunities from companies point of view. Thank you.
Sahil Barua
Yeah, sure. I’ll probably bring in some of my colleagues also since these are good questions in terms of benefit of volume from Ecom Express. You know I think I answered this earlier in the call. The impact on Q1 is not that high. It’s only towards the end of Q of June that you see some of the impact. So you can see the liftoff begin. We’ve obviously gotten to 208 million packages in Q1, but July obviously has been significantly higher and we expected that will continue. So the real impact will be visible in Q2. And I think see network businesses have one other advantage, right, like deliveries, which is that the, you know, given the kind of network that we are, the more the volume that flows through our network, the more stable the network actually becomes.
Most other networks which are not constructed like ours tend to have a reverse problem which is that the more volume that goes through them, the less stable they become. But the advantage of a mesh as we’ve discussed is that actually stability is an outcome of higher volumes. And so potentially, while the obvious immediate impact of the Ecom acquisition will be clear in the Q2 numbers over the long term, I think the reality is the opportunity for us is potentially even larger in terms of the volume discounts to customers. I think my colleagues are on the call who deal with customers on a more sort of regular, ongoing basis.
So maybe Ajit or Vani, if you guys want to come in, please go ahead.
Ajith Pai
Yeah, I’ll take that. And Vani, you can add to that. I think most of our relationships with customers are based on a pricing volume chart which is know which is how we’ve always conducted business. We are not seeing any material changes to that in, in. In some cases, of course there are adjustments that we do during the year to reflect any change in the client’s business in terms of mix etc. And hence our desire or their desire to, to sort of, you know, to change the mix for us or to introduce new products at some points I think like Sahil mentioned, you know, we.
That has been broadly very, very stable with the E COM acquisition. Again, like it was mentioned by Sahil, we expect that scenario to remain stable going forward as well.
Sahil Barua
Yeah, I think third question is confidence on PTL or 20% I mean, see, I’m very confident. Better that you hear it from the horses market mouth. So Varun Bakshi runs this list. Ask him to come in. Yeah.
Varun Bakshi
Hi. Am I audible?
Vivek Pabari
Yes, Varun, you’re audible. Please continue.
Sahil Barua
Yeah, so first of all, so, so.
Varun Bakshi
The growth year on year on this business is on revenue term 17%. So, so, so the growth in terms of getting about a 20% growth for the year, it’s not going to be linear first of all. So there’ll be quarters with slightly lesser. There’ll be quarters with slightly more growth. Number two, I think as Sahil mentioned when he was going through the presentation, this quarter’s revenue got slightly impacted by the accounting adjustments, the India’s adjustments that we need to do to follow the statutory requirements. So adjusted for that, the 17 growth would be slightly higher.
In fact, our yields quarter on quarter have increased over Q4 as well. So that is result of. Because there is certain churn of customers which we were voluntarily doing as well. So adjusted for that, I think the business gives us confidence that it would be able to meet the 20% revenue growth expectations that we have for the business. No reason to say anything otherwise at this point.
Sahil Barua
Yeah, Gaurav is obviously, you know, the impact in Q1 there was a material impact because of, you know, Operation Sindhur. There was some impact because of the rains in certain places. And it is getting worse obviously year on year. But here on at least, you know, the rainy season, the monsoon appears to have died down to a significant extent and so we should see lesser impact from that. I think so far the numbers in Q2 are good. July has been fine. So fairly confident here. I know. So it’s obviously a question saying if you grew 15% in the last quarter, why do you believe we’ll go 20% for the year? I think let our Q2 numbers come out and I think at that stage things would be a little clearer in terms of FTL VAs.
I think too early to comment. You know, these are important services that bind high quality supply of trucking into the FTL marketplace. So you know, these are value added services. For example, simplest one that we can do almost on an immediate basis and do do is fuel procurement support to some of our trucking partners. And the other one obviously is on road assistance and control tower services for our clients which are things that we anyway do internally for delivery’s own operations. So both of those we will do. These are theoretically large, you know, tams. But just to be perfectly clear, delivery’s ambition is not to become the largest retailer of fuel to trucks.
I mean, so, you know, it shouldn’t be viewed in that fashion either. We have very specific strategic objectives for our FTL business which is fundamentally first of all to bring down the cost of trucking procurement for delivery zone transportation operations. The second is to be a large input, you know, and a very efficient procurement mechanism for our supply chain services division, which is what it is. And then the third obviously is to be an extremely capital light way for our clients to discover trucking services and especially spot trucking services via trucking marketplace. So as long as this allows us to make sure that high quality suppliers of this service are bound into the delivery network, you know, we will provide these.
But we have no desire to come and sort of start banding about metrics like, you know, we have whatever 4 billion trucks on our platform or whatever and we sell fuel to some 75% of them. That’s really not the aim.
Gaurav Rateria
Thank you for the detailed answers and all the very best.
Sahil Barua
Thank you.
Vivek Pabari
Thank you. Gaurav. The next question is from Achal Lohade. Achal, please go ahead.
Achal Lohade
Yeah, yeah, thank you for the opportunity. Congratulations from great set of earnings. A couple of questions. First, you know, if you could talk a little bit about the utilization of the network, you know, where are we in terms of the efficiency? I know it’s got partially answered, you know, in piecemeal, but just on a top down basis. The second question I had was, you know, when we are looking at incremental volumes coming through, you know, month on month it’s improving, why would the margins be between 16 to 18? Why not more expansion? If you could elaborate a little bit.
And number three, you know, for the quarter we have seen, the other income has gone up to about 1.3 billion. So if you could talk about that as well in terms of whether it is sustainable or is there any one off we need to note. Thank you.
Sahil Barua
Sure. In terms of utilization of network, think you know, we’ve discussed this in the past as well. A single sort of. Much as I would love to tell you that the utilization of the Network is whatever 42%. There’s no way for me to really say that because the reality is the utilization of the network differs at various points. You know, line hall utilization is different sort, center utilization is different, DC utilization is different. And obviously the numbers for July are going to look very different from the numbers for April, May and June because the volume trajectory has meaningfully changed.
But fundamentally one way to think about it Anshal is that we did 208 million consignments versus, you know, let’s call it 180 million consignments in quarter four. And if you look at the spread of distribution centers, we had Broadly, I think 4,450 distribution centers, including partner centers in quarter four, we have 4,500 in quarter one. So for a whatever 1% increase in delivery centers, we have had a 14% increase in volumes. All those volumes are delivered through distribution centers. And so therefore the utilization of the distribution centers has gone up to that exact mathematical extent.
It’s obviously a little more. And you can, by the way, you can do exactly the same math for, you know, sortation centers. You can do exactly the same math for hubs and gateways. We have a constant set of sortation centers. And so if the volumes have gone up 14% and we haven’t increased the total number of sortation centers, the utilization of the sortation centers, it follows, must have gone up by 14%. Linehaul is obviously the hardest one to talk about, which is a trucking network, trucking utilizations, because they also depend on sort of the directionality of the loads that one is creating.
I think broadly speaking, as I mentioned, trucking utilization has been in that sort of 60 to 65% kind of range. One of the things that has changed a little bit in quarter one is that there was a marginal expansion of our tractor trailer fleet while PTL volumes were flattish. So there may be sort of a marginal decline in trucking utilization between quarter four and quarter one. The second is that we’ve also begun experiments, as I’ve mentioned in the past, with double trailers on a tractor. And so there may be a marginal decline in utilization on reverse lanes associated with that to some extent, but it’s very hard to put a sort of very scientific number to it.
The question on should margins go up beyond 18%, given that there’s no sort of adverse movement expected on pricing and the network filling up? I think, as I mentioned, we have guided to the 16 point to 18% previously, not because that is what we believe is the theoretical limit of the network. We have operated the network at higher than 18% service EBITDA margins in peak months. But it is a conscious call to share a certain amount of efficiency with clients. Now, whether we will share all of the efficiencies that we create going forward or not, I think is a strategic choice that we make looking at every single customer.
Technically speaking, you’re correct. Margins as volumes expand, could expand beyond the 18% sort of range as well in the express business. The other thing obviously, as I’ve spoken about in the past, is that the larger the PTL business gets, the better the margins for everybody. And, you know, therefore when PTL business reaches whatever let’s call it 200, 250,000 tons of freight on a monthly basis, the reality is the express margins have scope to expand further. We also obviously continue to look at new ways of automating our operations, which again have a positive impact on margins.
So the way I would look at it is to say, if you must model this, feel free to conservatively model our margins at 16 to 18%. There are opportunities for us to expand it beyond the 18%. So you’ll either see that as incremental margins in the business or you’ll see it as incremental share of wallet if we choose to pass those benefits forward. But either which way the absolute service EBITDA will continue to expand on your last question in terms of other income, I think again, I’ll just ask Amit to come in.
Amit Agarwal
Yeah, the increase in other income is. Primarily due to increase in value of mark to market securities due to interest rates going down in quarter one of current fiscal year. In the subsequent quarters, we expect this to normalize to our, you know, earlier level and maybe slightly go down because the yield curves have gone down. However, as you are aware, we have paid close to 1400 express on 18th of July and hence no further interest income is going to accrue on it. So that will be one change to the other income going forward.
Achal Lohade
Yeah, thank you so much. And those were my questions.
Vivek Pabari
Thank you. Achill. The next question is from Mukesh Saraf. Mukesh, please go ahead.
Mukesh Sarafs
Yeah, good evening and thank you for the opportunity. My first question is on could you, could you give some sense on the volumes that ECOM has done in first quarter? I think you had provided some indication on what it had done in the fourth quarter. So it would help if you could tell us the volumes of the first quarter. Hello, I’m audible.
Sahil Barua
I think broadly Speaking, in quarter one, Ecom Express would have done something like 30 million packages.
Mukesh Sarafs
30 million. All right. And you had mentioned that we’re probably retaining say around 50, 55% of the volumes higher than what you had thought earlier. So my question is that probably based on this high retention, your wallet shares with some of the marketplaces would have kind of gone higher. And typically the understanding that we had is that marketplaces would not want a particular, a service provider to kind of get too large with Themselves. So is this like a temporary phenomenon until the marketplaces kind of figure out and redistribute these volumes out and hence you might lose some volumes later on or you think this could be sticky going forward as well?
Sahil Barua
I think I’ve answered this. First of all, you don’t always get what you want. But you know, on a more serious note, the reality is that where will the volume go? The volume ultimately has to be delivered, not merely handed off to the lowest cost service provider.
Mukesh Sarafs
Right?
Sahil Barua
There’s no marketplace or direct to consumer brand or SME or aggregator or you know, international shipper who’s merely going to say as long as I get a 4 rupee discount on shipping, I don’t care whether the package gets delivered or not. But what you’re seeing is not just the impact, as I mentioned, of our cost efficiencies, which obviously also reflect in the fact that we were able to complete the acquisition of E Comm in the first place. But the second is a movement of volume towards higher quality players. And increasingly marketplaces get larger, they will look for a reliable partner.
I mean, I would struggle to think of why Walmart, Amazon or Meesho for that matter would say we’re happy to have an unreliable partner just because we happen to have in house logistics. So I don’t believe that unless we commit, you know, operational harakiri for our volumes to not be sticky.
Mukesh Sarafs
Got that? Got that. Understood. Thank you. And second question is, on the 14 crore investment basically that you’re talking about on the new businesses, could you kind of help us understand probably in the next year or so how this could, how the business itself, the revenues here and how the profitability here could materialize because as of now it’s, it’s literally wiping out the service margins that we’re making on the supply chain business. So first of all, how much this could go up to in terms of losses and, and secondly, how do we see that kind of turning profitable say over the next year or so?
Sahil Barua
I think it’s too early to, you know, these businesses are very small. To give you an example, the on demand intra city logistics market, you read the Red Seer reports or whatever, you know, expect is estimated at some $10 billion. I don’t know whether it’s 10 billion or whatever, but suffice to say it’s very large.
Mukesh Sarafs
Right.
Sahil Barua
Our entry into this market is Approximately, you know, 100 days old. So it’s a bit too early to comment on sort of, you know, what the size of the business for delivery will be and what you know the exact investment levels will be. I think it’s a capability that we think is a significant growth driver. The second thing is that it’s a service that’s valuable to existing customers of delivery. As an example, Delivery Direct also allows you to perform on demand intercity shipping. So actual extension to also allow customers to do on demand intra city shipping.
So I think the investment levels will vary a little bit. It’s the first quarter, let’s go through another sort of one or two quarters. Let the operations for direct for example in Ahmedabad, Delhi and Bombay sort of stabilize. What I can tell you as an example is Ahmedabad is the first city that we launched in Delivery Direct and we are at contribution margin break even in about four months.
Mukesh Sarafs
Right, right, right.
Sahil Barua
Hopefully we’ll follow a similar trend in Delhi and Bangalore. But the reality is that Delhi and Bangalore, you know, four times the size of the bud. So something is still, I think the opportunity is large which is.
Mukesh Sarafs
Sure, sure. Understood. Got it. Thank you. I’ll get back in the queue.
Vivek Pabari
Thank you. Mukesh. The next question is from Aditya Mungya. Aditya, please go ahead.
Aditya Mongia
Thank you team for the opportunity. Three parts to the first question. First Sahil, you were the first time talking about this flight to quality. Obviously there were some factors in the first quarter that were transitory in nature. But could you speak a little bit more on what is something that can structurally drive a trend towards flight to quality? That’s first part. The second part of the question is for you and your peers to be kind of giving good service in this kind of environment. Is it essential to have a partlift load service to balance things out? And if the answer to part B is yes, do you see other players in a manner to kind of survive and grow attacking the part support market from here on quite aggressively?
Sahil Barua
Sure, yes and no. Is it essential to have a part truckload service to deliver high quality service? I think in a world in which you have volatile volumes it helps obviously. But it is not the sole factor that enables you to deliver high quality service. High quality service is delivered by, you know, 14 years of investments in automation, software, teams, training, which is a lot more than just merely running a PTL network. So yes, it does help to some extent, of course. And that’s largely the math is pretty simple. You know, when you do, let’s call it 160 million packages a month and on average they weigh whatever, let’s call it, you know, a kilogram, you’re only moving about 60,000 tons of freight.
Whereas the reality is the part truck, the PTL business is moving 150,000 tons of freight. And so the delta variations when the parcel business spikes on the overall tonnage of the network are pretty small. Whereas if you were running a parcel only network, obviously the delta variations would be larger. But it’s not just a consequence of having the sort of the ballast of the PTL business. It is the underlying network structure, it is the automation, it is the software. And these are investments, as we pointed out, that have been in the making for a long time.
Can other players attack the PTL business? I think one of our competitors has been trying to do that for a couple of years now with hardly any success. So the fact anybody can run a PTL network, I mean anybody can take PTL loads, that’s hardly very complicated. And the answer to that is the markets unorganized. Everybody with everything from one truck to a thousand trucks runs a PTL network. But integrating it with a parcel network is really very hard. Even other players who’ve tried to experiment by putting a PTL player, PTL business together, express players, by that I mean fundamentally run the express and PTL networks on different rails.
And therefore they are not an integrated network. Now the reason why building an integrated network is hard is because you have to figure out complex things like how do you match cutoffs, how do you manage multi piece shipments versus express loads, how do you make sure that the right kinds of goods get onto the right trucks and in a dynamic environment. And that is a materially difficult problem to solve. So will people try to do a PTL business? I think various people will look at delivery strategically and possibly think of it as a sort of silver bullet.
But the problem is that the investments in software, automation technology and team that are required to make this work are highly non trivial. And I actually don’t think that most of those attempts are going to be successful and they actually have not been successful for a couple of years already. So you can try. But you know, and the second thing I think the other thing also is that even if somebody were to, you know, even if we for example, were to give out our entire sort of technical backend, all our people were hired by some competitor, it would still take you years to actually construct the facilities, still take years to actually train the teams and make it executionally possible.
So in theory, yes, obviously over a long period of time any competitive advantage can be replicated. But in practice I think it’s going to be very hard. And then you have to factor in that for existing 3 PLs. This is also the attempt is to try and do this, you know, while balance sheet is shrinking pretty rapidly. So I think the number of real strategic options here are for all practical purposes zero in terms of flight to quality. Can you just help me out? I didn’t fully understand your question. You said what will it take to structurally drive flight to quality?
Aditya Mongia
That was not the question. My sense, the question was that obviously there are some transitory factors like whatever weather, operations hindoor and so on so forth and. But beyond that, are you really seeing some structural factors that are here to stay that are making customers more conscious and starting to think through vendors in a different light than earlier?
Sahil Barua
No, I think as the marketplaces. And who will this really affect? Because in direct to consumer and SME anyway architecture share of wallet to begin with was sort of very high. And so fundamentally there I don’t think there’s been that much change. I think it’s for the marketplaces really where things have become a little bit different. I think as Misho has specifically started doing logistics on their own and they’ve sort of discovered that logistics is, is hard to do. I think there’s a greater appreciation for what it means to create quality in a transportation network and they’re obviously improving the operations in Valmo as well.
But at the same time I think what they want is a highly reliable partner. The second obviously is that the volatility in these businesses also seems to have increased. If we look at quarter one, the inherent volatility in the marketplace volume seems to have increased. Now that could be sort of just a factor of quarter one being the way it was. But again you’ll have peak season, you know, there will be more volatility. And so I think as the volatility goes up, they are finding that other networks don’t have the ability to take that on.
And you know, the more it in some senses, I guess the more variable the weather becomes, the more festive seasons have impact and the more these guys go after growth, the more they will have to sort of rely on high quality partners.
Aditya Mongia
My second question was, was more on let’s say as in the context is that it seems that your existing businesses until unless your team commits some operational hierarchy, are going in autopilot mode that.
Sahil Barua
Way to put it.
Aditya Mongia
But how are you thinking through the. Through kind of investing your time and the company’s financial resources into newer ventures. I’m sure that this is the right time or not, but acquisitions or larger times. Air cargo, how are you thinking through investing time and resources of the company from here on.
Sahil Barua
Yeah. So, you know, I wish an operational business could ever be on autopilot, but it’s really not. I think to create the impression of a business running smoothly, a lot of hard work does need to go in. And so I think a large portion of our senior teams focus, whether it’s mine or you know, Kapilu’s our CTO or Suraju’s our Chro or our corporate finance team, amit or Vivek, etc. Still obviously does go towards making sure that the existing businesses continue to run as smoothly as they need to. There are sort of long term operational challenges that we need to solve even for these businesses.
But in terms of new services that we do need to launch, I think there are a few that we continue to evaluate. Two that we’ve launched as an example are Rapid Commerce and Delivery Direct which is the on demand intra city business. I think on rapid commerce the story is yet to be played out. We have so far launched as a B2C rapid commerce player. Our view is that the B2B market for rapid commerce actually is very large as well. You know, think for example auto spare parts, durable spare parts, tires and so on. These are the kinds of categories that we do want to bring in.
And our view is that actually the B2C business over a long period of time will be much smaller than the B2B business in rapid commerce. And in some senses the economics of B2C will be determined by Delivery’s ability to create a large B2B rapid commerce business. So we will do that. We will continue to expand our cross border express parcel business. I think there’s a growing demand from direct to consumer brands and SMEs for us to open up an economy product for them that allows them to ship across the world. Currently we only provide an express product through FedEx and Aramex.
So we will expand and build that. I think these are the more direct adjacencies. But we do continue to evaluate air freight. We do have a material amount of load that now moves on airfield. We’re obviously not as large as Blue Dot yet, but we’re a very large shipper on aircraft belly. So that’s something that Ajit and his team continue to evaluate. There may be a moment at time, but it’ll make sense for us to make a more sort of decisive move on the air freight side as well.
Aditya Mongia
Can I ask one more question, Sahil?
Sahil Barua
Sure.
Aditya Mongia
Your guidance that is there over the medium term about, let’s say Close to high teens margins in the part of load business. Does that take into account any material change in yields? And I asked for because until last quarter and assume that’s continuing your incremental customers so great value and we’re actually giving you higher yields than your existing customers. That’s the final question from my side. Any upside risks or what is the assumption essentially inside when you think through a certain margin number against the yield assumptions that you have.
Varun Bakshi
So yes, yields will play a role. Yields and the customer mix. So basically as we have pointed out earlier our customer customer mix is still a little less index to a lot of retail customers that are there in this industry. We do lesser of that. So as we increase that which is a higher yielding business more profitable even for us, whatever it is, whatever lesser we do at this point in time as we increase that share the profitability and and the yields will continue to go up. What we have been doing over the last year is is setting up teams geographically at the right place to tap this opportunity.
Well we have done that. We have started seeing results of that. You are seeing those in yields as well.
Sahil Barua
So.
Varun Bakshi
But. But we are far from where we want to be in that. So. So the answer to that is yes, partly because of this and even I think in the existing customers what we have seen over the last one one and a half years, the customers, most of the customers, not all I would say but most of the customers seem to be more quality conscious than chasing that last 2030 peso of pricing that someone can give them better. So in that sense the market is less price sensitive than probably it’s perceived. So in the so.
So we do think even in our existing customers there is a yield play as we as one becomes a better PTL player.
Sahil Barua
Thank you.
Aditya Mongia
That will be all from Mindset and all the very best.
Sahil Barua
Thanks.
Vivek Pabari
Thank you. Aditya. The next question is from Ankit Agarwal. Ankit, please go ahead.
Sahil Barua
Hi, can you hear me? Yes.
Ankit Agarwal
Yeah. Hi team. Thanks for the opportunity and congrats on Gates set of numbers. I just have one question. Sorry to go back again on the insourcing strategy because you have already commented here. No, my question is that given that there are some signs of consolidation in the market with you sort of taking over Ecom Express and there is a sequential pickup in E commerce volumes in Q1 which we normally don’t tend to see given that this is a seasonally weak quarter and you are also saying that volume for Ecom Express has not materially flown to your network in this quarter.
So my question here is that has there been any material change in the strategy around insourcing for one of your largest client? I’m basically talking about Misho because they were the one who were aggressively increasing insourcing levels since last year. So. So can you provide some comments on that? Has there been any stabilization on their insourcing mix? Any. Any sort of color on that would be great.
Sahil Barua
Yeah. I think their insourcing strategy is consistent with what they have said in the past. It is at a level that they seem to be comfortable with. The important thing is that of the significant percentage that they outsource, a larger percentage of that is now accruing to delivery.
Ankit Agarwal
Got it. And similarly, can you comment anything, anything around Amazon Transport Services and E Cart on the same lines? Has there been any change on that front for these clients?
Sahil Barua
I think our volumes, as I’ve mentioned, with all marketplaces, have increased in Q1 and so far in Q2 as well.
I don’t think that represents a fundamental shift in how they think about in house logistics. I think that will take some more time to materialize. But fundamentally, since our volumes are going up, I think as I mentioned, the shift in their thinking appears to be that instead of merely trying to go to the lowest cost provider, they are going to a highly efficient provider with the highest quality.
Ankit Agarwal
Got it? Got it. S. Thanks. Thanks for the answer.
Vivek Pabari
The next question is from Mr. Kamlesh Atalia. Please go ahead.
Kamlesh Ratadia
Hello, can you hear me?
Sahil Barua
Yes, please go ahead.
Kamlesh Ratadia
Yeah, so Sahil, you know, historically you’ve been mentioning that, you know, in E Commerce the incremental margin should be between 35 and 40%. Now that a majority of this revenue which will come from E Commerce will flow through the delivery network, how should we think about incremental margins excluding the integration cost? So on a recurring basis, should we think this would be materially better than the 35 to 40% that you mentioned earlier?
Sahil Barua
The incremental margins that I’ve spoken about in the past are obviously based on a target service ebitda margin of 16, 18%. I think earlier in this call we were discussing this. That’s what we have at work as volumes go up, evaluate client by client, what kinds of potential opportunities we have for shallow wallet gain. And there is a possibility that service EBITDA may expand beyond as well.
Kamlesh Ratadia
Really?
Sahil Barua
Too early to say. I think the easiest way to think about this is that in the absence of any further adverse pricing, you know, as long as that does not continue, and we don’t believe it will continue the reality is that the network’s utilization will continue to go up, you know, as I’ve mentioned, by the end of the year as opposed to 4,500 delivery centers as the simplest example, we will be maybe 4850, 4900 delivery centers which will be an expansion of maybe 6% or so. Now if volumes in the network go up, you know, 30, 40% in this period, that obviously is going to present a massive increase in utilization.
Or last mine delivery costs as an example are probably just the fixed costs are about 10% of total costs and so you would see a pretty significant reduction there. The same math will apply to sortation centers. The same math will apply to gateways and hubs. You know, even if you assume that there are no line haul benefits that are generated. So the incremental margins could be higher as well. But as I mentioned, I think, you know, the Q2 numbers so far are looking great. You know, let’s go ahead. When the Q2 numbers come out, you know, it’ll be sort of much clearer.
Kamlesh Ratadia
Understood. Great. Thank you so much.
Vivek Pabari
Thank you. The next question is from Janam Shah. Janam, please go ahead.
Janam Shah
Yeah, hi. Thanks for the opportunity. Just wanted to confirm one thing. The Ecom Express volume you told about 30 million is for this 1Q or is a particular month 1Q. So sir, just wanted to get your sense on this. Of course our volume has been increased to around 208 million. If we add on our Ecom volumes, Ecom Express volumes it is 238 million. If we see the trend of Ecom Express they have been doing around 500 plus million of volumes in a year. If you just take it on a quarterly basis they have been doing 120, 130 million kind of volumes which has dropped to around 75% in this quarter.
So just wanted to get your sense out of 208 volume. As you commented in the last con call that some of the customers have already started shifting volumes after the formal announcement of the E Com Express acquisition. Out of 208 volume, what could be the volume that has eventually came from the Ecom Express with the customer shifting and what has been the organic growth that we have seen into this particular quarter? If we just I just add back 208 +3 30 it is 238 versus somewhat of 300 million orders that we have done combining E Com Express +Delivery1Q last year that has been a drop of around 20%.
So just confirming this number.
Sahil Barua
So I think let the Q2 numbers also come out. That’s when this will become a lot clearer because the full impact will become visible. As I mentioned, the full impact will take some more time as well to play out because the reality is volumes continue to accrue into the delivery network. As I mentioned, our original assumption was that 30% of the volumes would accrue to delivery and we’re already beyond that and that continues to grow. So the reality is the full impact of the ECOM acquisition is a positive surprise so far and we’ll have more sort of clear information as we go along.
Just a very narrow point on the 500 million. Do bear in mind that Ecom Express and Delivery don’t count shipments the same way. Delivery counts forward and return consignments an RTO effectively as the same as a forward consignment. Whereas ECOM Express’s accounting policy was to count them as two separate consignments. And so the 500 million number was inflated to the extent of the RTO rate. So the actual number was significantly lower than that.
Janam Shah
Got it. And so this retention of whatever we are talking about 50% or more, will it be coming to the delivery standalone and is it safe to assume that at the end of the probably few quarters the Ecom Express will be having eventually a zero revenue as a subsidiary?
Sahil Barua
Ecom Express as of Q2 itself will have more or less zero revenue revenue as a subsidiary.
Janam Shah
Got it sir. That’s it from ic. Thank you so much.
Vivek Pabari
Thank you Jenna. Interest of time we’ll take the last question from Sunal Minhas. Sonal, please go ahead.
Sunil Mittal
Hi, this is Sonal. Am I audible?
Sahil Barua
Yes, go ahead Sonal.
Sunil Mittal
Hi. Hi team. Great set of numbers. Wanted to understand more from a two, three year out perspective. What are the asset turns we look at or we internally evaluate in our finance team and what are the margins that we think that too that this is the asset turn we expect when we compare our balance sheet to our top line our business should be heading to and tentatively what margins we should be at. So that directionally I’m basically trying to get to is that is this fundamentally a 1214 return on capital business two, three years out as the consolidations happen, as the the thesis that style you’re talking about that plays out.
Amit Agarwal
So Sonal, we right now do asset terms of about 2x net of cash basis. When you look at it, we have close to 5,000 crore deployed in hard assets working capital. All of it put together I think closer to 4,500 odd crore rupees. And we do about 9,000 crore of revenue as revenue from services annualized.
Sahil Barua
The.
Amit Agarwal
Target would be to get to roughly about 3x of asset turns for us in Express Parcel and PTL business. Both of them which form bulk of our revenues. Close to 85% of our revenues. The service EBITDA margin as Sahil spoke about is in range of 16 to 18% while there is a potential to be higher. But if we were to assume it at 17 odd percent you just have to deduct the, the the corporate overhead which is right now at about 8 and a half percent and we have guided it towards 66 and a half percent and that will bring you to a just a bit of close to about 11 odd percent for us to do and that’s a turnover of about 3x on on that 11% odd adjusted EBITDA.
So the aspirational return on capital for Express Parcel and PTL business is well above 24% we aspire to do with the acquisition of ECOM Express. Nothing in this changes except the fact that we have front loaded the Capex by roughly about 300 crores. Now this 300 crore rupee capex is essentially not something we are going to put into active use from day one. Many of the sorting equipment etc will be warehoused and will be put into use as and with the capacities, you know long term capacities need to be built in. So nothing with regard to E Commerce acquisition will change the change the way we have you know put in the economics of the business.
Sunil Mittal
Got it. This thanks for this explanation and just understanding the E Com integration with the business we mentioned that we need to up the infrastructure by around 6, 8% from here to maybe next two three quarters out. And secondly Ecom Express volumes we possibly want to capture 30 to 50%. Is it fair assumption that whatever flows basically net of that should be margin accretive should be straight away be flowing to our EBITDA or we would need to add more overheads and there’ll be more costs involved once these one time 300 crore overheads are taken.
Sahil Barua
No, no there’ll be no overheads required to service this additional volume because it’s coming from the same customers. So there’s nothing additional to be done. As I mentioned the 6% increase also just to be clear is in the distribution center network. The last mile delivery centers which are you know out of their whatever 20.3 million odd square feet of real estate that we operate. They’re a very minor fraction of that. Most of the other infrastructure is absolutely sort of perfectly fine for us to absorb the volumes that we. In fact, I mean as you can see we have not expanded the network and have absorbed the volume.
Sunil Mittal
So yes, yes, this is wanted to I think imply that as I. Thanks for explaining that.
Sahil Barua
Just. But just to be clear, it will be less the variable costs of delivery. Obviously what will flow through the margin will be less variable costs.
Sunil Mittal
Understand that. And I think. Last question if I may ask. I think somebody previously was asking you’ve seen a volume growth of around 14 in your express parcel. Has the volume growth with the three ecom players been higher or it’s roughly the same levels as the suburb?
Sahil Barua
No, I think we’ve gained share and you’ll see that we’ve gained share for them.
Sunil Mittal
All right. Okay. That’s it for myself. Thank you.
Sahil Barua
Cool. Thank you.
Vivek Pabari
That was the last question. Thank you everyone for joining us on the call. Please reach out to the investigations team for any further questions. Before we end, I’d like to request Mr. Sahil Barwa to conclude this discussion with his closing remarks. Over to your side.
Sahil Barua
Thank you Aparno. I don’t really have any sort of insightful closing remarks I think. Thank you all for joining on Friday evening at 7:30. Hopefully this was useful and like I said, we’ve had a good start. FY26 Q1 has been great and hopefully this continues into Q2 and beyond.
Vivek Pabari
Thank you. Midith Connect.