Delhivery Ltd (DELHIVERY) Q1 FY23 Earnings Concall Transcript

Delhivery Ltd  (NSE:DELHIVERY) Q1 FY23 Earnings Concall dated Aug. 09, 2022

Corporate Participants:

Sahil Barua — Chief Executive Officer & Managing Director

Amit Agarwal — Chief Financial Officer

Sandeep Barasia — Chief Business Officer

Analysts:

Abhishek Pathak — HSBC — Analyst

Gaurav Rateria — Analyst

Hitesh — CLSA India — Analyst

Lokesh Garg — Credit Suisse — Analyst

Vijit Jain — Citi — Analyst

Saurabh Dugar — Motilal Oswal — Analyst

Shashank Savla — Somerset Capital — Analyst

Alok Deshpande — Edelweiss Securities — Analyst

Abhishek — DSP Investment Managers — Analyst

Abhijit Mitra — ICICI Securities — Analyst

Pulkit Patni — Goldman Sachs — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Q1 FY ’23 Earnings Conference Call of Delhivery Limited hosted by Morgan Stanley India Company Private Limited.

Before we start, we would like to point out that some of the statements made in today’s call may be forward-looking in nature and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. Kindly note that this call is meant for investors and analysts only. If there are any representatives from the media, they are requested to drop off this call immediately. [Operator Instructions]

I now hand the conference over to Mr. Gaurav Rateria from Morgan Stanley. Thank you, and over to you, sir.

Gaurav Rateria — Analyst

Thank you, Nirav. Hello, everyone. This is Gaurav Rateria from Morgan Stanley. Thank you all for joining us for Delhivery’s earnings call to discuss fiscal ’23 first quarter results.

To discuss the results, I’m pleased to welcome Mr. Sahil Barua, the CEO and MD; Mr. Sandeep Barasia, Chief Business Officer; Mr. Amit Agarwal, CFO; and Mr. Varun Bakshi, the Head of Investor Relations. I thank management team for providing us this opportunity to host this call.

I now invite Mr. Sahil Barua to take us through key financial highlights for the quarter, post which we will open the floor for Q&A. With that over to you, Sahil.

Sahil Barua — Chief Executive Officer & Managing Director

Thank you, Gaurav. And thank you all for joining. A very good evening to you, and welcome to our second earnings call. Just a quick check before I go ahead that I am completely audible.

Operator

Yes, sir, you are audible.

Sahil Barua — Chief Executive Officer & Managing Director

Thank you. So the agenda for this call is to walk through our earnings presentation in about 20 minutes and then we will open up for questions. Abhad if you can move to the next slide.

For those of you who are joining for the first time, a brief background on Delhivery. The objective behind Delhivery is to build the operating system for commerce in India, which means we essentially provide the infrastructure, the services and the technology that allow buyers and sellers to transact with each other in the real world. These buyers and sellers may be businesses transacting with businesses, businesses transacting with consumers, or consumers transacting with consumers, both within the borders of India or from India to abroad or abroad to India.

Moving to the next slide, Abhad. A quick snapshot of our performance in quarter one fiscal ’23. We continue to be India’s largest integrated logistics platform. In quarter one of financial ’23, we registered INR1,746 crores of revenue from services which represents a 30% growth over our revenues for the same quarter in the previous financial year. Quarter one financial ’23 adjusted EBITDA margins stand at negative 12.5%. We delivered 152 million parcels in our Express business in quarter one financial ’23, and have delivered close to about 1.6 billion packages since our inception in 2011.

In quarter one financial ’23 in our part truckload freight business, we delivered close to 240,000 tons of freight and have shipped close to 2.5 million tons of freight since financial ’19. We run one of the largest networks in the country and operate close to about 18.9 million square feet of logistics infrastructure across the country. This includes automated sortation centers, trucking terminals, air terminals and fulfillment centers across India. We have over 29,000 active customers who work with us across multiple business lines, which include express parcel shipping, part truckload shipping, full truckload shipping, supply chain services and warehousing and cross-border logistics. 54% of our revenue comes from customers who use two more of our services and we cover 18,435 pin codes across the length and breadth of the country, as defined by the Indian Post.

A quick snapshot of our key operating metrics for quarter one fiscal ’23, which is the column on the extreme right. Between the end of financial ’22, since our last earnings call and the end of quarter one financial ’23, we’ve expanded our pin-code reach from 18,074 pin codes to 18,435 pin codes. Our overall customer base has expanded from 23,600 customers to over 29,000 customers as of the end of quarter one financial ’23. As discussed earlier, we’ve expanded our overall logistics infrastructure from 18.15 million square feet to 18.9 million square feet as of the end of quarter one financial ’23. We continue to have the largest number of gateways, automated sort centers and processing centers among logistics companies in India. We operate 96 gateways across the country, 21 automated sortation centers, 189 processing centers, nearly 3,000 express delivery centers, about 240 freight service centers. And we have an overall team size of close to about 60,000 people across the country.

Moving to the next slide. Key milestones for quarter one financial ’23. The first is one that we had referred to in our communication with shareholders earlier in this quarter, which is the completion of the operational integration of SpotOn. To refresh everyone’s memories, SpotOn was a part truckload freight business that we acquired earlier in financial ’22. The integration was planned in three phases, which I will talk about in more detail through the call, which began in quarter three of the last financial year and the final phase of the integration was scheduled for quarter one of this year. We’ve expanded total infrastructure to nearly 18.9 million square feet and commissioned and taken live our automated mega facility at Tauru, Bilaspur and Haryana which is now fully operational.

We also launched a guaranteed same-day delivery service aimed at direct-to-consumer e-commerce customers across the country. We’ve also launched our consumer-to-consumer shipping application, the Delhivery App, for consumers to book and track consignments in real-time. Our client roster has grown in quarter one as well. We’ve onboarded over 500 new customers in our express parcel business and our supply chain services business continues to see robust demand for our integrated services. We’ve onboarded two of the world’s largest auto manufacturers, a major multibrand retailer, a global electronics major and one of India’s largest paint companies in our supply chain services business. And on the technology front, we’ve been awarded two US patents for our data sciences work for Addfix and UAID, which are our proprietary systems.

So as a quick snapshot of quarter one. I’ll begin with a quick update on the SpotOn integration. The integration of Delhivery and SpotOn, as I had pointed out, was carried out in three phases. It required us to assimilate over 2,000 members of the SpotOn team, about 5,500 customers who were serviced by SpotOn prior to the integration and infrastructure of about 2.5 million square feet which was spread across 350 operating facilities. And all of this was to be brought into the combined Delhivery and SpotOn network.

As part of Phase 1, which was in quarter three of the last financial year and completed successfully in December 2021, our first theme was to integrate clients and teams, restructuring customer contracts for all of the 5,500 SpotOn customers, ensuring parity with delivery and integrating the SpotOn team of over 2,000 people into our organization. As part of Phase 2, which was completed during quarter four of the last financial year in March 2022, we completed integration of client-facing and operations systems which was a full integration of our technology systems, essentially setting us up for moving all operations to a single integrated network in Phase 3. Phase 3 was begun in quarter one, which was the final integration of operations, which included both the infrastructure and the network operations of both companies.

The decision to complete the integration in quarter one was based on certain factors in our business. First of all, on business cyclicality, where quarter one volumes in a financial year are typically lower than quarter two to quarter four. The second was in line with our annual capex cycle. Delhivery typically commissions new infrastructure which goes live in quarter two and quarter three of the financial year and so integrating prior to the commissioning of new infrastructure would allow us to bed in this infrastructure with the combined volumes. The third factor was avoiding monsoon and making sure that we were essentially not disrupted by the rains across different parts of the country. And the fourth was the avoidance of the e-commerce peak season which typically hits us in quarter three of the financial year.

In quarter one, while we started the operational integration, the overall process of integrating the infrastructure and the network took longer than we originally expected. This was down to a couple of reasons. First was higher than forecasted volumes which created bottlenecks at some of our key facilities at the automated gateways in both Tauru and Bhiwandi, but also at some of the facilities where both Delhivery and SpotOn had not established sufficient infrastructure to service incremental customer demand, which included locations like Chennai and Pune. As a consequence, we made the choice to pause volumes from a selection of key accounts and some accounts who had either specific business processes or specific requirements for freight handling until operational parameters were conclusively stabilized. Operational service levels have returned to pre-integration levels. They returned to pre-integration levels within a few weeks of beginning the integration and have remained stable since.

Moving to the next slide, the impact of the integration, which I will talk about in more detail as we go through the financials. First of all, has risen from service stability. Service stabilization took us four weeks longer than originally expected at the start of the quarter, largely due to the automated gateways at Gurgaon and Bhiwandi having a temporary effect on service precision. There were higher than normal service error-related claims from customers that had to be settled during quarter one, which have caused higher revenue provisions during the quarter. And a temporary period of disruption for our pickup and delivery business partners due to a change in their serviceability, as they moved from the SpotOn network to the combined delivery and SpotOn network.

The proactive reduction in volumes, along with the reduction from select clients, also affected us overall in quarter one financial ’23, and we made the decision to maintain capacity across our three key resources, which are staffing, fleet and infrastructure to ensure service stability through the period. And as a consequence, we see slightly higher unit costs, which were elevated during quarter one financial ’23 compared to quarter four of financial ’22. In addition, there are one-time transition costs of the integration, which we expect will normalize over financial ’23. For instance, due to commercial or contractual reasons, we have had to run a certain amount of redundant infrastructure and certain software licenses and there were certain administrative costs from the SpotOn entity that have continued in quarter one. We also paid a one-time compensation to key business partners and channel partners in quarter one to support them through our integration period, outside of which there have been substantial technology and development costs, both in quarter four financial ’22 and quarter one financial ’23 as we’ve integrated Delhivery and SpotOn systems.

The overall impact is what you see in the slides to follow. As you can see on the left-hand side, overall revenue between quarter one financial ’22 and quarter one financial ’23 has grown by about 30% year-on-year, from INR1,344 crores to about INR1,746 crores. The composition of the business has changed slightly owing to the integration effect of the PTL business. PTL, which was 23% of the business in quarter one financial ’22 is 15% of the business in quarter one financial ’23. Express parcel revenues have grown by 34% from INR785 crores in quarter one financial ’22 to INR1,051 crores as of quarter one financial ’23. This is despite seasonality in the Express business where quarter one of a financial year is typically depressed and the exit of Shopee from the Indian market in quarter four of financial ’22. Express parcel shipments grew strongly through this period. We have seen 50% growth year-on-year with Q1 financial ’22 volumes of 102 million growing to 152 million for quarter one of financial ’23. Part truckload freight revenues have degrown by 16% between quarter one financial ’22 and quarter one financial ’23 owing to the reasons I spoke about earlier, where we proactively shut down some client volumes for a period of time and some clients chose to proactively cut volumes as well through this period. Overall freight tonnage de-grew from 279,000 tons of freight to about 234,000 tons of freight in quarter one of financial ’23.

Moving to the next Slide. Our other business lines which are the Truckload business, the Supply Chain Services business and the Cross Border Services business, continued to show robust growth in line with our original plan. The FTL business has grown from INR55 crores of revenue in quarter one financial ’22 to over double that in quarter one financial ’23, registering nearly INR122 crores of freight value transacted. In the Supply Chain Services business as well, we’ve seen about 120% growth year-on-year with quarter one financial ’22 having INR106 crores of revenue, which has grown to nearly INR240 crores of revenue for quarter one financial ’23. And revenue from Cross Border Services, excluding traded goods, has grown from INR51 crores of revenue in quarter one financial ’22 to INR78 crores in quarter one financial ’23 as our integration with FedEx has stabilized.

In terms of adjusted EBITDA, quarter one financial ’23, which is the third column in the table, revenue from customers as discussed, stands at INR1,746 crores. We are broadly neutral at the service EBITDA levels, with a final adjusted EBITDA of negative INR217 crores or minus 12.5%, compared to quarter one of financial ’22 where we had an adjusted EBITDA margin of negative 4%. So a decline in the adjusted EBITDA by about negative 8.5% and compared to quarter four where we made an adjusted EBITDA of INR81 crores, a change of about INR300 crores.

Moving to the next slide. This is a quick bridge on the change in adjusted EBITDA from quarter four financial ’22 to quarter one financial ’23. At the top of the table is the quarter four financial ’22 adjusted EBITDA of INR81 crores. In quarter one of the year, we typically add, as I’ve discussed, manpower, fleet and infrastructure capacity in anticipation of higher volumes between quarter two and quarter four. We added close to INR21 crores of cost in this period, which is 2,500 additional staff, 30 trucks and 85 trailers, which is in line with our sort of larger objective of movement to trailers, and about 740,000 square feet of transportation infrastructure.

As I discussed, we chose to continue and retain existing capacity of fleet, of manpower and of infrastructure in anticipation of service recovery to ensure that service levels stayed stable and to make sure that as volumes went up, client experience was not affected. The overall cost of the under-utilization of this existing capacity is to the extent of INR150 crores in quarter one of financial ’23. And in addition, our annual inflation cycle, which comes from wage hikes and rent escalations, has added up to INR17 crores. So the net impact of B1, B2 and B3 is INR188 crores. In addition, the exit of Shopee, which gave us 22 million parcels in quarter four financial ’22 has an impact along with reduced revenues in the part truckload business of close to about INR60 crores leading to a total reduction in service EBITDA of INR188 crores plus INR60 crores which is INR248 crores, and a minor increase in corporate costs, leading to a total impact of INR252 crores. Excluding one-time integration costs, which include one-time provisions for heightened claims from customers and INR6 crore in payments to vendors as support for quarter one, the adjusted EBITDA prior to the integration cost lands at INR171 crores — negative INR171 crores, and including one-time integration costs, which we do not expect will continue into quarter two and beyond, at negative INR217 crores.

The next slide shows the comparison versus prior periods. In steady state in quarter three financial ’22 and quarter four financial ’22, the business had achieved adjusted EBITDA margins of close to 4% which in quarter one financial ’23 affected by the SpotOn integration stand at negative 12.5%.

The next slide is a detailed breakup of the adjusted EBITDA. Total revenue from customers for quarter one financial ’23 was INR1,746 crores. Total expenses stood at INR2,206 crores. After adjusting for non-cash expenses and adjusting for lease adjustments due to AS 116 and one-time operating expenses such as our IPO expenses and a non-cash, non-operating cost, the adjusted EBITDA stands at negative INR217 crores as discussed, as compared to INR81 crores for quarter four of financial ’22 and negative INR58 crores for quarter one of financial ’22. The adjusted cash PAT for the same period stands at negative INR187 crores or negative 10%, compared to 5% in quarter three financial ’22 and 6.6% in quarter four financial ’22. The adjusted cash PAT bridge is the same as the adjusted EBITDA bridge with more or less the same adjustments.

Finally, in our previous earnings call, there were a number of initiatives that we had outlined for financial ’23. This is a quick update on where we stand on each of those. The first was the integration of the Delhivery and the SpotOn networks. So all three phases of the integration between Delhivery and SpotOn have now been completed. Customers and teams have been integrated, technology systems have been integrated and operationally from an infrastructure and network operation standpoint, both networks stand fully integrated. And as discussed, service levels have stabilized as of the end of quarter one financial ’23 and remain robust. We continue to integrate the networks and grow volume and so we continue to realize network synergies and will launch our economy PTL service through financial ’23.

We are in the process of expanding our overall infrastructure by about 4 million square feet, about 740,000 square feet has been commissioned and delivered. We continue to expand our tractor trailer fleet to its full size of 150 TTs, and have expanded our automated sortation capacity by 35% in this period in advance of peak season volumes. We continue to introduce new automation across our major sort centers and our hubs, have moved fully to system-directed mid-mile operations as expected with the integration of Delhivery and SpotOn. We continue to expand usage of electric vehicles across our entire network and continue to pilot LNG and EVS in our mid-mile operations. Our Cross Border Express product now stands fully integrated with Delhivery and FedEx now code sharing airway bills seamlessly. Our Supply Chain Services business, as discussed, continues to show robust growth, we’ve grown by nearly 120% between quarter one of last year and quarter one of this year with the focus on key industry verticals like auto, chemicals, consumer durables and retail. We have launched a Delhivery Direct to Consumer Academy and are in the process of launching our unified client portal and our merchant panel for small and medium businesses to access all of our products. We launched a Delhivery direct consumer-to-consumer shipping app and are in the process of launching our Orion truckload price discovery and booking application, and are in the process of launching our platform service for global third-party developers along with our SaaS offering in select international markets.

So that’s a brief summary of our financial performance in quarter one of fiscal ’23. With that, I will pause and we are happy to take questions.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Abhishek Pathak from HSBC. Please go ahead.

Abhishek Pathak — HSBC — Analyst

Hi. Thank you for the opportunity. I had a couple of questions. The first one was, we are seeing some sequential pressure in the global e-commerce volumes. Do you see something similar or at least a deceleration happening in the Indian e-com space over the short term in the next two to three years? That’s the first one. And number two, there have been some questions around the viability of the social commerce model and considering we have significant dependence on social commerce platforms for volumes, is this something that the company sort of worries about over the short to medium term? Thank you.

Sahil Barua — Chief Executive Officer & Managing Director

Thanks, Abhishek. Good questions. Let me begin with the first one, which is are we seeing a slowdown in e-commerce generally in India. The short answer to that is not yet. If you look at our volumes they’ve grown 50% a year between quarter one of last year and quarter one of this year, from 100 million shipments to 150 million shipments. Even adjusting for share gains that we have had in this period, I think that does represent growth in the market overall. If you remember in our previous earnings call, one of the things that we had pointed out is that while individual players were likely to see turbulence in e-commerce through this financial year, we are pretty confident that the broad trend for e-commerce continues to be positive. And when you look at the underlying reason, it is simply the fact that e-commerce in India is heavily under-penetrated. Penetration in India is less than 7% whereas comparable penetration for example in a place like China would be north of 20%. And so we expect that there will continue to be a secular shift towards e-commerce going forward. Individual players may certainly continue face turbulence. And from a delivery standpoint, as we discussed, we don’t have a significant dependence on any single client. And so in that sense, there is no impact on our overall volumes as you can see.

Outside of that, I think your second question was around social commerce. I think, the way we look at it is that a variety of players will experiment with different models in e-commerce. However, the broad trend towards buying online will continue. Even players who sort of have been bracketed under social commerce have sort of pivoted to being a mix of social commerce and more traditional big-box commerce. And I think irrespective of the model that different players will follow, the demand from consumers will continue and given that we are the largest player and the most efficient player in the country, our volumes will continue to remain stable. So we don’t see a large risk going forward.

Operator

Abhishek, your line is on mute.

Abhishek Pathak — HSBC — Analyst

Thank you. Yes, thanks for that. Thanks.

Operator

Thank you. The next question is from the line of Hitesh from CLSA India. Please go ahead.

Hitesh — CLSA India — Analyst

Yes, thanks for taking my question. My first question is on you have alluded to the fact that you have gained some market share in the e-commerce space. Can you talk about how much the industry has grown during this quarter? And my second question is on profitability. I mean I understand this is a weak quarter because of the integration issues and also lower volumes, but how should we look at profitability over next two quarters, when the integration benefits starts coming and volumes scale up? So if you can give us some guidance on how margins could scale up from here.

Sahil Barua — Chief Executive Officer & Managing Director

Yes, sure. Let me begin with market share and e-commerce. I think, again, I’ll direct you first to the overall growth in volumes from quarter one of last year to quarter one of this year which is from 100 million shipments that we did last year to 150 million shipments this year. So I think we certainly have gained market share in this period because the industry has not grown by 50% in a year. Between quarter four of last year and quarter one of this year it’s a little difficult to say because of the outsized impact that Shopee’s exit had on the market overall. I think when you include Shopee, it’s safe to say that the market has not grown between quarter four financial ’22 and quarter one financial ’23, whereas when you look at our volumes adjusted for Shopee, we’ve remained broadly at the same 152 million mark. So when you adjust for that, I think we’ve gained some share in the market between quarter four and quarter one.

Your second question in terms of profitability, I think while we are still in the process of regaining volumes and our service levels have remained stable, we have seen recovery of volumes from all of our major customers. The overall recovery will play out through quarter two as well. And so, we remain optimistic about this. But the way to think about our business is pretty simple. As I mentioned in the slide that we presented earlier, Amit, if you can just bring up that slide, Amit or Abhad, the bridge from INR81 crore of quarter four, yes. If you look at this, the biggest impact really on profitability has been point B2, which is under-utilization of existing capacity, which is INR150 crores and the revenue-led reduction in service EBITDA which is the INR60 crores. So, first of all, and obviously the INR46 crores of one-time integration costs.

So first off, obviously, we do not expect the one-time integration costs to persist through the year. The second is, as volumes come back, the under-utilization of existing capacity should disappear and the network should automatically become more efficient. One thing that I should point out is that this existing capacity itself will shrink a little bit going forward because we do continue to carry infrastructure, we do continue to carry certain contracts from SpotOn sort of previous days, which we haven’t yet fully depreciated.

If you can go to the KPI slide for a second, Abhad, at the start of the deck. One of the things that you will see here is that the number of gateways have declined from 123 as of the end of financial ’22 to 96 as of quarter one financial ’23. And similarly, the number of freight service centers have declined from 267 as of the end of financial ’22 to 237 as of quarter one financial ’23. And so as these contracts become available for renewal or for termination, we will continue to sort of consolidate the combined Delhivery and SpotOn network and continue to sort of realize synergies going forward. So that’s sort of how the excess capacity will get absorbed.

Hitesh — CLSA India — Analyst

Okay. Sorry, if I can ask one more question, just a final question. On pricing front, we are seeing some stability on the e-commerce pricing where it has kind of not gone down much. Right. So should we expect the pricing to remain now stable or you will still — because you’re the lowest price in the industry, or you will continue to prioritize market share over pricing, any comments?

Sahil Barua — Chief Executive Officer & Managing Director

See, pricing is a strategic decision that we take at an account level. The difference in pricing that exists between any two quarters could also be because of a change of mix, for instance, or a change of the distance that parcels travel. In this case, there’s obviously a big difference because of the disappearance of Shopee between quarter four and quarter one. We evaluate pricing at every customer level and depending on sort of the customers’ ambitions for growth going forward and what our margin projections for each individual customer are, but suffice to say, I don’t think we will be taking any significant pricing actions through the rest of the year.

Hitesh — CLSA India — Analyst

Great, thank you. All the best.

Sahil Barua — Chief Executive Officer & Managing Director

Thank you.

Operator

Thank you. Next question is from Mukesh Saraf from Spark Capital from webcast. Slide 12, inflation impact of INR17 Cr. Could you let us know which segment this impact has primarily been felt in as they would usually be passed through fuel hikes to customers. Would these costs be subsequently passed through with a lag? Supply chain revenue has grown to INR236 Cr in the quarter. What is the total warehouse space square feet for this segment as of June end? What is the target for space addition in FY ’23, FY ’24? Is there a split between transportation and warehousing for this INR236 Cr or is this entirely warehousing?

Sahil Barua — Chief Executive Officer & Managing Director

Sure. Let me start with the question on inflation. The overall inflation of INR17 crores includes inflation due to wage hikes, inflation due to renegotiation of rental contracts and inflation due to fuel. In the part truckload business, you’re right, the hike in fuel is essentially passed through to customers entirely and so to that effect it doesn’t have any impact on profitability directly. So majority of this comes from wage hikes and rent escalation. Given that we run an integrated network, it affects all of our businesses, sort of in a conjoint fashion, because our part truckload business and our Express business share the same people, they share the same feed and they share the same infrastructure.

In terms of supply chain — I’m sorry, there was a question on would these costs be passed through with a lag. We discussed this earlier. Fuel inflation is typically passed through with a max lag of 15 days to customers, which is in line with sort of regular industry norms.

Your question on supply chain, the revenue of INR236 crores is a combination of transportation and warehousing revenues. The target for space addition in fiscal ’23 is likely to be close to about 1.67 million square feet. However, I should point out that this is a projection at this point in time, based on the pipeline that we have and the contracts that we’ve agreed and sort of as we get closer to real-time commissioning of these and availability of space, this number may change a little bit. But I’d invite Amit, who is our CFO, to comment on question two as well. Amit, if you are on the line.

Amit Agarwal — Chief Financial Officer

Yes, Sahil. Thank you. So our supply chain services business did INR236 crores of revenue in quarter one of FY ’23. Out of this nearly 40% of the revenue was attributable to the warehousing services, and remaining was attributable to transportation. But I want to point out that nearly 90%, 95% of revenue in this segment is a combined contract of warehousing and transportation. It’s not a separate service contract, they are integrated contracts. Sahil pointed out that we intend to add about 1.7 million square feet this fiscal year based on our pipeline. Out of this, we have added about 0.5 million square feet of space in quarter one based on the contracts that we have converted and expansion with existing customers. And the remaining capacity will be added as and when we get very close to the finalization of the contracts with the customers.

Operator

Thank you. The next question is from the line of Lokesh Garg from Credit Suisse. Please go ahead.

Lokesh Garg — Credit Suisse — Analyst

Hi, sir. Just wanted to have your perspective on competitive scenario that you face in the industry. Obviously, there are express parcel companies which are competing which we know, but there are traditional courier companies also which you’ve cited have not pivoted to the e-commerce business. Over a period of time, is it possible that they combined with market — shipment marketplace type companies can actually sort of combine together can pivot to provide e-commerce, parcel services as you do, and thus could rise up the ladder and be more competitive with you? And is that already happening and your perspective around that?

Sahil Barua — Chief Executive Officer & Managing Director

Yes. So our perspective on this is pretty simple, which is that shipment marketplaces have a limited strategic value to the market as a whole. Any player who is a significant shipper is better served by having direct relationships with logistics companies, however, many they choose to have because their shipment volumes are large enough to ensure both appropriate price discovery, as well as appropriate service discovery and they don’t really need the services of an intermediary. This isn’t something that is specific to India, by the way, this is something that is across the world, whether you look at the US where customers continue to have direct relationships with the likes of FedEx or UPS or the United States Postal Services or in China [Phonetic] or elsewhere.

Other piece is, I don’t think that the reason why traditional courier companies have been unable to penetrate the market is the absence of shipment marketplaces. I think the reality is that they have not been able to address this market because the underlying models that they have, are not robust enough to service the needs of e-commerce. Whether it is picking up from a widely distributed set of merchants of variety of different sizes, whether it is investing in infrastructure to go out and build automated sortation centers or running linehaul, these are not sort of physical capabilities that are dependent on shipment marketplaces in any way.

So if the question is can sort of traditional players work with aggregators and gain market share, I’d say that that opportunity is probably extremely limited because that’s an opportunity that has presented itself to traditional courier companies from before the time that Delhivery began as a company, and they failed to capitalize on it and the existence of a marketplace doesn’t make it more viable.

Lokesh Garg — Credit Suisse — Analyst

Sure. Thanks. I have a second question which is related to the three new businesses or segments or services that you have started. One is obviously same-day delivery, other is C2C and third is economy PTL. Now what is the relevant size that we have, either in terms of total parcel opportunity or percentage growth opportunity that you can highlight to us from some of these services? And in economy PTL I have an additional question, as to — economy PTL essentially is a slower PTL service. Today delivery network runs on Express, right, it’s a single-speed network. By introducing a slow service, do you end up confusing the network?

Sahil Barua — Chief Executive Officer & Managing Director

Yes, that’s a very good question. And let me answer the latter question quickly on economy PTL. The way to think about how Delhivery is constructed and why we run an integrated network is, think of us as essentially building a pipe and then figuring out the optimal combination of loads that need to go through that pipe. And so in some senses for us, it’s a question of being able to identify what is the appropriate truck on which took place a part truckload shipment that belongs to the economy PTL segment. So we actually see the economy PTL as a way for us to take up utilization of the Express network. To give you an example, let’s say, we have a truck which is ready to depart from Delhi to Bombay which is 80% full. If we happen to have economy PTL loads which are available and can ride on that truck, then they essentially get to ride for free. As long as the economy PTL is not set up as a completely standalone capability, but is set up subservient to the integrated network, which is an Express network as you pointed out, it’s actually a margin accretive business which delivers a better quality of service to those customers. The second thing is that the economy PTL business typically tends to have larger LR sizes or larger weight per LR that is tendered to logistics companies. And so in that sense, the handling costs are significantly lower for us. And so again it becomes margin accretive.

The size of the economy PTL businesses, the easiest way to think about it, it’s about two-thirds to three-quarters of the overall part truckload freight market in India, because traditionally the Indian PTL market has been an economy out of slow PTL market. Increasingly, though, with an improvement in highways, with an increase in truck sizes with the presence of players like us, the market is shifting from economy PTL towards an Express PTL market. So for us economy PTL is an interesting capability that we will offer to certain kinds of shippers. We will use it to drive up utilization of our network, especially in key geographies, but it’s not really a standalone capability.

In terms of consumer-to-consumer, at this point in time, it’s hard to judge exactly how large that market is because this is a market that again historically is one that has been starved of supply. There aren’t too many options for consumers to really ship intercity from the comfort of their homes. They still traditionally have to walk up to a traditional retail outlet and ship, whereas now they have the ability to do that from their homes. Our volume growth has been pretty robust. In peak, I think including both our direct consumer-to-consumer network as well as our franchise network, we hit close to about 1.5 million orders in a month and that continues to grow. However, I don’t have an exact market size for how big it will be. It’s an interesting capability for us to add, and rise on our existing business and is high margin.

And your last question was on the same-day delivery, that actually is a capability that we’ve added for specific customers. We already provide same-day delivery services. So intracity shipping is already same-day delivery. In this case, all that we have done is open up some of our delivery centers or some of our intermediate processing centers as micro fulfillment locations, where it is possible for certain direct-to-consumer brands to stock fast-moving inventory with us and for us to deliver within four to six hours in a tight catchment area, but again it’s a service that we already provide.

Lokesh Garg — Credit Suisse — Analyst

Sure. If I’m allowed, I have one more question, which is basically the total parcel that you’re carrying, obviously, originate from — bulk of them originate from obviously e-commerce platform, the two large ones and some of the new upcoming ones, such as social commerce and all that. I wanted to just check if you have this number. Are there a meaningful number of parcels now originating from omnichannel merchants, meaning these merchants are not traditionally online but are now becoming online because the need of the hour and you are enabling them to do so. You took one example in the last quarter call, probably Tupperware. Are there a significant proportion of parcels which are originating from these? And the question is important because these are not affected by e-commerce funding situation. These are sort of running on its own scheme, as you said, online buying scheme.

Sahil Barua — Chief Executive Officer & Managing Director

Yes, I am going to let Sandeep answer this question. Sandeep, go ahead.

Sandeep Barasia — Chief Business Officer

Sure. Thanks for that question, Lokesh. So when we look at — when we bucket B2C and SME segment together that actually includes mostly companies that are not necessarily just e-commerce, but also traditional brands that are now starting to actually go online. So again most likely to be unaffected by any funding issues. Plus people who actually are asking us to pick up from store, rather than pick up from warehouse. Now I cannot tell you exactly what number — what is the volume of shipments that we pick up from store versus pick up from warehouse. But is there an increasing salience of shipments coming from non-traditional e-commerce? Absolutely. I know it’s an odd thing to say non-traditional e-commerce, but that is definitely growing. And even on e-commerce, bulk of our shipments do not come from the two large platforms. We don’t actually have that degree of concentration in our business, because we work across all the large platforms including some of the vertical players who are actually quite scaled up as well and quite well funded. So yes, but to your base question, absolutely D2C and SME and omnichannel is clearly becoming a greater salience in our overall business.

Lokesh Garg — Credit Suisse — Analyst

Sure. Thanks. I’ll get back to the queue.

Operator

Thank you. Next question is from the line of Vijit Jain from Citi. Please go ahead.

Vijit Jain — Citi — Analyst

Thank you. Can you hear me?

Sahil Barua — Chief Executive Officer & Managing Director

Yes.

Vijit Jain — Citi — Analyst

Yes, thanks. So I have two questions on the e-commerce business. One, in the same-day delivery offering, is there a pricing differential or significant pricing differential per parcel that exists between that and conventional offering? And the second question related to the price hike that you took with the aggregators earlier this quarter. I’m just wondering to address the aggregators, do you need to do more than that over the next year? Does it include ramping up sales [Phonetic] presence to onboard the long tail, or do you need to build or offer channel integration? So just your thoughts on how you’re addressing aggregators.

Sahil Barua — Chief Executive Officer & Managing Director

Sure. On same-day delivery pricing, yes, same-day delivery is charged at a premium to regular delivery and especially, same-day delivery originating out of microfilament centers is charged at a premium to regular delivery. The premium varies depending on the volume and depending on the specific city in which we are operating because costs for this are different across, for instance, metros versus non-metro cities and we have 15 cities that we are currently operational in.

To your second question, I’ll go back to my earlier answer, which is that we don’t particularly see anything that we have to do differently for clients above a certain size. Customers above a certain size are better served working directly with not just delivery but other logistics companies as well. and typically the systems that they have will be capable of allowing them to manage more than one logistics partner. It also is more effective because logistics partners, whether delivery or other, have the ability to provide greater customization of services when working directly with these customers. So, we don’t think that we have to add any capabilities, those are capabilities that logistics companies have. As far as the aggregators go, they are a good sales channel, not just for us but for all other logistics companies in the market or merchants who are below a certain size. But after merchants cross a certain size threshold, Delhivery and other logistics companies across the country typically will see customers approaching us directly and to integrate directly.

Vijit Jain — Citi — Analyst

Got it. And my second question is just on that comment about the impact of Shopee in 1Q. I think you mentioned 22 million parcels and about a INR60 crore impact on service EBITDA. Did I understand that right, it basically translates to INR27 per parcel of service EBITDA impact from Shopee?

Sahil Barua — Chief Executive Officer & Managing Director

The overall impact that you saw on that slide of INR60 crores also includes some impact due to revenue loss in the part truckload business at constant service EBITDA margin. But broadly for Shopee, I think the numbers will be closer to about INR40 crores to INR50 crores in terms of revenue-led reduction.

Vijit Jain — Citi — Analyst

Thanks. And one final question, could you — just a housekeeping question. Could you give a number for the capex for the quarter and the FCF for the quarter?

Sahil Barua — Chief Executive Officer & Managing Director

Amit, can you take that please?

Amit Agarwal — Chief Financial Officer

Yes. So the total use of cash in this quarter was about INR215 crore. Out of this, about INR75 crores was attributable to cash flow from operations, about INR225 crore was capex and there was about — excluding the IPO proceeds, there was about — net drawdown and some receipt of money from particular investor was about — related to tax indemnity was about INR85 crore. So, adjusting all these things, the total use of cash in the quarter was about INR215 crore.

Vijit Jain — Citi — Analyst

Thanks, Amit. Those were my questions. I’ll jump back into the queue. Thank you.

Operator

Thank you. Next question is from Ankit Jain from Mirae Asset from webcast. Hi team. Couple of questions. Any sense on possible loss of revenue in PTL business for the quarter due to integration? Two, reason behind yield parcel for the coming off in Express parcel business to around 69 versus 72 in FY ’22. Any impact on service EBITDA in core Express business as a result of the same. And third, nature of one-time provision cost of INR40 Cr.

Sahil Barua — Chief Executive Officer & Managing Director

Sure. Ankit, just on the first question, when you are talking about possible loss of revenue, do you mean permanent loss of revenue or only in the quarter? Okay.

Amit Agarwal — Chief Financial Officer

Let’s assume as for the quarter.

Sahil Barua — Chief Executive Officer & Managing Director

Yes. So for the quarter, if you look at our overall — if I can direct you to the slide — Abhad, if you can go to Slide number 3, which has the PTL revenues quarter four versus quarter one. Yes. So if you look at the graph at the bottom right, what you will see is that part truckload freight revenues have dropped from INR482 crores in quarter four financial ’22 to INR260 crores in quarter one financial ’23. So the net impact has been close to about INR223 crores between quarter four and quarter one. A bulk of this was related to the integration-related additions earlier in the quarter and we are seeing volume recovery, and we’re seeing revenue recovery and expect this to continue through this quarter and forward.

To your second question in terms of yield per parcel, the yield per parcel is a mix — is driven by a mix of clients, is driven by a mix of distances that packages are traveling. And so as that shifts the yield naturally shifts across quarters. For example, we are likely to see an increase in yield again in quarter three during the Diwali period, but that’s just a natural cyclicality in the business. In terms of impact on service EBITDA in the core Express business again, if I can direct you to the table that we had put up on the adjusted EBITDA bridge, Abhad, if you can go to that. No, the one which goes from INR81 crores to negative INR217 crores. The under — yes. So our Express and our part truckload businesses as had mentioned share the same resources, whether it is infrastructure, whether it’s staffing or whether it’s fleet. So our mid-mile facilities for example or our trucks are running a combination of Express, as well as PTL. And so a decline in the PTL volumes that are flowing through the network will have a natural impact on overall transportation EBITDA and therefore, if you were to do an allocation would also affect Express service EBITDA in that period.

So the impact from the core Express business has come from the integration rather than a change in yield. The Express business is designed so that the margins are constant irrespective of a change in mix of the network. So, had our PTL volumes remained at their quarter four levels even with the decline in the Express yield because of a change in mix, the margins would have remained constant or would have grown with time.

In terms of the nature of one-time provisions of INR40 crores, these are largely claims which are related to specific outcomes. One is, through this period there were excess damages that were created in our network as the Delhivery and the SpotOn network were combined. And the second was extraordinary package losses or package delays owing to integration issues coming out of Tauru and Bhiwandi where we’ve essentially provided these as discounts back to our customers, which are a one-time integration expense.

Operator

Thank you. The next question is from the line of Saurabh Dugar from Motilal Oswal. Please go ahead.

Saurabh Dugar — Motilal Oswal — Analyst

Good evening sir and congratulations on the integration of SpotOn. Sir, my questions have been answered previously. Just wanted to clarify, like on a Q-on-Q and a Y-o-Y basis, if we remove this SpotOn integration, what would be the EBITDA and margin? And second question would be, what would be the contribution of SpotOn on the overall FY ’23 revenues and FY ’24 revenues and margins? Thank you.

Sahil Barua — Chief Executive Officer & Managing Director

Sure. Again, if I can just direct you to the Abhad if you can go back to the bridge from INR81 crores to minus INR217 crores. Yes. So broadly to your question, if you remove the integration impact on this slide, the costs that disappear are the INR150 crore cost which is under-utilization of existing capacity. Obviously, the INR46 crores, which are the one-time integration costs and a portion of the revenue-led reduction in service EBITDA which we expect will be likely in the range of about INR20 crores to INR25 crores. So INR150 crores plus INR46 crores is INR196 crores, plus about INR25 crores. So essentially we would have been at an adjusted EBITDA breakeven, had we shown zero growth between quarter four and quarter one. So if our quarter one volumes in PTL had remained exactly the same as quarter four, and we take into account the disappearance of Shopee with overall express parcels volume being at 150 million, we should have been at broadly breakeven in quarter one financial ’23. So the costs that would have persisted — the other way to think about it is that the costs which would have persisted would have been the INR21 crore capacity addition during quarter one, the inflation impact of INR17 crores, and a part of the revenue led reduction in service EBITDA to the extent of Shopee’s disappearance, which would have been close to about INR40 crores, INR45 crores.

To your second question in terms of how much the SpotOn from — what I can tell you that the overall part truckload business, if you go back two slides Abhad, please. The overall part truckload business was at about a quarter of our revenues in quarter one financial ’22 and quarter four financial ’22, as you can see, which has declined to 15% as of quarter one financial ’23, owing to the integration. And so our expectation would be that as volumes recover, first of all it would form similar percentage of our overall revenues as it has in financial ’22.

Saurabh Dugar — Motilal Oswal — Analyst

Thank you sir.

Operator

Thank you. Next question is from the line of Shashank Savla from Somerset Capital. Please go ahead.

Shashank Savla — Somerset Capital — Analyst

Hi there, thanks for the opportunity. My question was more on the breakdown of the margins between the different segments. So I know you don’t provide an exact number, but given that a lot of the extra costs have been related to the part truckload business, I wanted to understand if in margin trend in the other businesses is improving over time as your business is getting bigger and bigger.

Sahil Barua — Chief Executive Officer & Managing Director

Yes. So, Shashank, broadly the answer is yes. As you can see, and as I pointed out earlier, we run an integrated network where substantially the biggest costs that are shared between the two networks are the mid-mile costs, which are the trucking terminals and the hub and outside of that linehaul or the trucking network itself. We don’t break that down between Express and part truckload and so obviously when there is a decline in the part truckload volumes, we decided to continue running the trucking network with the same capacities to ensure part service recovery and to ensure Express was not affected. And so there would have been a margin impact on both Express, as well as PTL. As PTL volumes have recovered margins have also recovered across both the Express, as well as the PTL service lines and they will continue to improve as PTL volumes continue to grow.

Shashank Savla — Somerset Capital — Analyst

All right. And the bottlenecks and the one-off costs that you mentioned, is there any impact in the second quarter as well from that?

Sahil Barua — Chief Executive Officer & Managing Director

In terms of the service levels, service levels have remained stable more or less since the end of quarter one of financial ’23 and have remained robust. So we’re not seeing any sort of bottlenecks across the network. I think there continue to be one or two smaller locations where the Delhivery and the SpotOn networks have not been fully integrated and because of sort of the lease terms, we continue to carry redundant facilities, which will be integrated. So one location, for example, specifically will be Chennai, where both Delhivery and SpotOn operate subscale facilities and therefore sub-standard for the size of the business that we intend to run and that integration will take a period of time. But outside of that, we don’t see these bottlenecks continuing across the network.

Yes. And other than that I think your question was do we expect the one-time expenses from quarter one to continue through the rest of the year. We expect some impact…

Shashank Savla — Somerset Capital — Analyst

I was just trying to understand is there any ongoing impact in the second quarter as well from the one-offs or the issues you mentioned in the first quarter.

Sahil Barua — Chief Executive Officer & Managing Director

I think a large percentage of the claims have been settled with customers in quarter one. Some of them will be settled in quarter two. And post that we don’t expect there to be significant sort of persistence of the one-time integration costs. Those will not continue. As volumes recover…

Shashank Savla — Somerset Capital — Analyst

I wanted you to point out that the provisions for them have been made in the quarter one itself.

Sahil Barua — Chief Executive Officer & Managing Director

Yes.

Shashank Savla — Somerset Capital — Analyst

Right, okay. And finally, is there any guidance which you are willing to provide in terms of — or any targets for what your revenue growth or profit — EBITDA margin targets would be for this year or next year?

Sahil Barua — Chief Executive Officer & Managing Director

I think it’s still too early for us to provide annual guidance at this point. It’s important for us to see how the next quarter plays out as well. And then obviously we’re entering the peak season. So we’ll have a much better sense of how the year will play out. In terms of what the economics of the business will generally look like, I think you can look at our quarter three and our quarter four results and our financials for the previous financial year. In that sense, our business is not very difficult to model. We’ve retained the same capacity and as volumes go up, that’s what our margin trend should look like.

Shashank Savla — Somerset Capital — Analyst

Right. Okay, thanks a lot.

Operator

Thank you. Next question is from the line of Alok Deshpande from Edelweiss Securities. Please go ahead.

Alok Deshpande — Edelweiss Securities — Analyst

Hi. Couple of questions from my side. First, I know that you quantified the Shopee impact, but generally speaking, over the last two or three years what is the typical trend of shipment volumes from quarter four to quarter one? So like you mentioned, if you adjust for the Shopee volumes, you could have been in the similar number of 150 million shipments, but historically how does this trend move from quarter four to quarter one? That’s question number one.

Sahil Barua — Chief Executive Officer & Managing Director

Broadly flat, Alok.

Alok Deshpande — Edelweiss Securities — Analyst

Okay.

Sahil Barua — Chief Executive Officer & Managing Director

So in line with [Indecipherable] where the 150 million odd that we did excluding Shopee for quarter four has remained flat in quarter one. What is different this time, I should point out though is that the industry has degrown between quarter four and quarter one, because of Shopee impact.

Alok Deshpande — Edelweiss Securities — Analyst

Right. And even historically would this flat volumes be more because of Delhivery getting more market share, because from an industry perspective I would think that Q1 would be lower than Q4, is that a fair assumption?

Amit Agarwal — Chief Financial Officer

No, there is no reason to assume that because Q1 actually tends to be fairly non-consequential quarter in general, right, because there’s no sales, there’s no festive reasons. April, May, June is actually quite dry in India in all sense, right, because if you have your year-end sales that happens in March, your next round of sales start with end-of-season sales of fashion which in July, followed by Republic Day. Given your Prime Day happens in July, and the Flipkart Founders Day happens in Q2, April, May, June tends to be very, very soft, there’s school holidays in India. There is not much going on in April, May, June. So there is not really that much activity in April, May, or May, June. So it tends to be more or less flat. Last couple of years are not a good example, simply because both the year before — two years ago, would have been impacted by COVID. But in general, it’s flat or slightly below Q4.

Alok Deshpande — Edelweiss Securities — Analyst

Got it. Understood. And the second question is on, there is a statement in your filing which says that some part of this impact on margins and volumes will continue in the next quarter also, that is quarter two. Now are we looking at a very small part of this integration process carrying on in Q2 or are we looking at an impact, which is sort of similar to Q1?

Sahil Barua — Chief Executive Officer & Managing Director

I think we have seen recovery of volumes in Q2, overall, as two things have happened. One is the claims were settled with customers, more customers have started trading. B, I think as service levels have stabilized and as our confidence in the automated facilities increase towards the end of quarter one, we also have started admitting larger volumes into the network. And so, volume recovery has continued through July, and into August so far. That said, like I said, it’s still early, the volume recovery is continuing, we are satisfied with where we at. It’s still a little early to predict exactly what will happen in Q2 because we will have to see how volumes grow in August and sort of the latter part of September when we are approaching the festive season. It’s also a quarter end in September. So we’ll see what the impact of that will be. So there will be some impact which will continue from under-utilization, but we expect Q2 to be better than Q1, yes.

Alok Deshpande — Edelweiss Securities — Analyst

Okay. Any sense as on whether we are guiding on FY ’23 overall? No numbers — no margin number, but are you confident of having an adjusted EBITDA positive FY ’23, any sense on that?

Sahil Barua — Chief Executive Officer & Managing Director

It’s too early to say right now. We have to look at how the rest of the year will play out. And we have to see sort of how volumes play out through the rest of the year. As long as there are no further systemic shocks, I think we should be doing fine. But it’s still early.

Alok Deshpande — Edelweiss Securities — Analyst

Sure. Got it. Thanks a lot guys.

Operator

Thank you. The next question is from the line of Abhishek from DSP Investment Managers. Please go ahead.

Abhishek — DSP Investment Managers — Analyst

Yes, hi, sir, and thanks for the opportunity. Sir, I have just one question just referring to the bridge that will have given, for the PTL segment what revenues. We have seen almost about a INR223 crores decline on a sequential basis. A corresponding impact of almost about INR150 crores except provision and if you include INR140 crores of provision, it’s almost about INR190 crores. Is that a high number because just for a corresponding revenue decline of INR223 crore sequentially, seeing an EBITDA impact of almost about INR150 crores except provision and with provision INR190 crores. Is that a high number or is there something else that you have to look at, just your thoughts?

Sahil Barua — Chief Executive Officer & Managing Director

I think the way you have to look at our business, and we pointed this out last time as well, is that we are an extremely high incremental margin business and therefore, when volumes drop sharply, it’s not unusual to actually see that the drop in the PTL revenues is causing that extent of capacity under-utilization. The other thing to point out is that the capacity underutilization costs that you’re seeing of INR150 crores, also as I had pointed out, include certain facilities that are redundant and some contracts on the SpotOn side, which we will sunset through this year. So to some extent that INR150 crores is also impacted by that. As you’ve seen, we’ve already started the process of deprecating certain facilities, consolidating facilities between Delhivery and SpotOn. We made progress on that in Q1, that will continue through Q2 and our hope is that the bulk of that will get consummated through Q2 and the early part of Q3.

Abhishek — DSP Investment Managers — Analyst

Okay. So to that extent we should also see a very sharp recovery when these revenues come back to maybe 4Q levels and a little higher than that. That was my point that I just wanted to…

Sahil Barua — Chief Executive Officer & Managing Director

Sure.

Abhishek — DSP Investment Managers — Analyst

Okay. The other thing is also, obviously we have seen the increase in corporate overheads as a percentage of revenues a little higher because of the under-utilization, but should this normalize to your earlier numbers of less than 7%, 8% as we normalize over the course of the year? Is that a fair assumption to make?

Sahil Barua — Chief Executive Officer & Managing Director

Yes.

Abhishek — DSP Investment Managers — Analyst

There is no change in that kind of the overhead absorption? Is that you’re confidence that you will be able to maintain those 8%, 7% kind of number going forward?

Sahil Barua — Chief Executive Officer & Managing Director

Yes. Absolutely.

Abhishek — DSP Investment Managers — Analyst

Great. Just the other thing in terms of starting the day service, I just wanted to get an understanding, does that also mean that at some point in time we’ll also have to kind of get into own craters or anything on that sort just be able to provide a daily service on our [Indecipherable]. Any thoughts on that.

Sahil Barua — Chief Executive Officer & Managing Director

Not at all. As we discussed on the last call as well, I think we are one of the largest shippers of air freight domestically on passenger belly. I think our passenger — as passenger traffic has recovered and fleet sizes are increasing, the capacity that’s available to shippers like us is increasing as well as we are a priority partner for all of the airlines in India. So we don’t see the need for us to go out and invest in freighters. Certain segments of the market may remain unaddressable for us by virtue of not having freighters, but those are segments of the market that we don’t feel are large enough or attractive enough for us to really be in.

Abhishek — DSP Investment Managers — Analyst

Great. And just one last question. In terms of — you have mentioned about some of the customer wins, you have mentioned couple of names. I guess, those are relating to the third-party part of the business, right?

Sahil Barua — Chief Executive Officer & Managing Director

That’s right. That’s the supply chain services business. That’s correct.

Abhishek — DSP Investment Managers — Analyst

Okay. And how has been the pricing and your expected yield in that, because now you are a much formidable player and you are also getting — gaining in terms of revenues. So how has been the yield experience as far as the new wins are concerned from the earlier ones?

Sandeep Barasia — Chief Business Officer

Are you referring to supply chain yield. See, supply chain services — yes, so Supply Chain Services yield, one client versus another client are not really comparable because the kind of movements and the kind of work we do for a client might be very, very different from a client and also the requirements from warehousing and what’s the requirement from warehousing actually varies a lot. The degree of primary and secondary movement varies a lot. So they’re not strictly comparable. But as I think earlier question was asked and Sahil pointed to that, that are the other businesses actually improving in their overall margin performance, supply chain is experiencing the same thing at an overall level. So, we being able to price better, we are able to get a better margin out of that business. But you can’t really — it’s not like a parcel, where you can actually compare one parcel versus another parcel. But the quality of the contracts are definitely improving as we get more and more contracts.

Abhishek — DSP Investment Managers — Analyst

Great. Thank you so much for answering, and wish you’ll all the best. Thank you so much.

Sandeep Barasia — Chief Business Officer

Thank you so much.

Operator

Thank you. Next question is from the line of Abhijit Mitra from ICICI Securities. Please go ahead.

Abhijit Mitra — ICICI Securities — Analyst

Yes, thanks for taking my question. I hope I am audible?

Operator

Yes, sir, you are.

Abhijit Mitra — ICICI Securities — Analyst

Yes. So again, I’ll just go back to that bridge between INR81 crores and negative INR217 crores, just to sort of check my understanding. So the negative INR150 crores of underutilization of existing capacity, essentially has four components, right? So you have capacity creation in search of future demand, that’s typical of Q1, looking into Q2, Q3, Q4, so that would be probably recurring every Q1. Second is, your redundant capacities of SpotOn, right. what you will sort of gradually taper down, inclusive of employees, I guess. I think employees also I can see a lowering trend. Third is normalcy of volumes in PTL. Now, this looks like a one-month impact. You’re expecting normalcy in June. But the customer volumes are slow to sort of resume. And then fourth impact on account of sudden drop in Shopee volumes. so these are the four impacts. Right. And depending on normalization of each of those four things, your will sort of see this INR150 crore play out over the rest of the year.

Sahil Barua — Chief Executive Officer & Managing Director

That’s correct. The incremental capacity additions that you refer to as the first of the four is the INR21 crores that we have pointed out here. That is the typical sort of normal capacity addition that will happen in quarter one.

Abhijit Mitra — ICICI Securities — Analyst

Okay.

Sahil Barua — Chief Executive Officer & Managing Director

So, under-utilization of existing capacity, which is the INR150 crores is, as you had pointed out, the excess capacity that was created for two reasons. One is continuing to have redundant infrastructure between Delhivery and SpotOn. And the second is that as volumes drop sharply we decided to continue to keep that capacity to stabilize service levels of parcel, and which has sort of played out because serviced levels have been stable since the end of quarter one and remained robust throughout. So that will normalize through this year. The third obviously is the inflation impact, which is again an annual cost that we’ve taken. And the final one, which is the revenue-led reduction is because of Shopee, that’s correct.

Abhijit Mitra — ICICI Securities — Analyst

Yes. And just to sort of focus a bit on the KPIs, I think there is a slide where you have beautifully depicted the KPIs. So, there is one item which is revenue per square feet. So here my sense is, we have taken only the warehousing business. Is it my understanding right? You have not taken the transportation part within the supply chain.

Sahil Barua — Chief Executive Officer & Managing Director

Amit, can you answer this question?

Amit Agarwal — Chief Financial Officer

Yes, you are right. This is only the warehousing [Speech Overlap]

Abhijit Mitra — ICICI Securities — Analyst

Here you are actually breaking it up into warehousing and transportation, right?

Amit Agarwal — Chief Financial Officer

So, the transportation revenue per square feet corresponds to the revenue divided by the square feet of transportation infrastructure we operate. And warehousing revenue attributes to the warehousing revenue divided by the warehousing square feet we have.

Abhijit Mitra — ICICI Securities — Analyst

So warehousing component within the supply chain business?

Amit Agarwal — Chief Financial Officer

Yes.

Abhijit Mitra — ICICI Securities — Analyst

Got it, got it. That’s all from my side. Thanks.

Operator

Thank you. Next question is from Aditya Mongia from Kotak Securities from webcast. Given the majority market share in Express parcel that Delhivery has, what is the end game for Delhivery’s market share within 3PL players over the next few years? And what 3PL market share does it make sense for Delhivery start going pricing? Any sense of timelines for the same to start reflecting in the financials? What is your stance on prospects of utilizing your PTL infrastructure capacity towards growing slow PTL business? Would that not be return or margin dilutive versus deploying such capacity to grow Express PTL business faster?

Sandeep Barasia — Chief Business Officer

So, Aditya, hi, it’s Sandeep. Thank you for the question. Let me answer the first question and then Sahil maybe you can come back for the PTL portion. On express parcel, we are the largest player in the market, we have the largest market share and we been gaining share in the market. I think it’s hard to say what the logical endpoint is for market share for us, because while customers need a redundant partner, it’s not clear whether they need three partners and four partners and whether at some point we thought customers will have 20% shares or 25% shares for each partner, but we are breaking that and we have customers who actually give us 70%, 80%, 90% share of volume and we have customers who give us 35%, 40% share of volume. So I think our objective is going to be to continue driving down cost and improving service level, and then tactically pricing into the market to see how much of that we want to gain from a share perspective and how much of that we want to invest towards — actually how much do we want to keep as margin, and we’ll continue doing that over the next few years.

And it’s not — I don’t think we have in mind a logical point that at a 30% share we will start pricing up or 35% share, we will start pricing up. I think there’s clear opportunity for us to gain share and we’ll continue to gain share. We clearly see opportunity to further rationalize cost and bring efficiency into the system and as long as we see that, there is no reason for us to keep not gaining share. At what point do we start pricing up, I don’t know whether it’s the question of whether we need to price up or to actually make money or make margins. It’s actually how much more efficiency can we get for the system. So there is still more we can push through the pipe efficiently before we have to start actually pricing up. I think the benefit of this is going to be that there’s going to be a point at which our pricing ability versus competitors will actually be very, very differentiated. And then you will see the real share gain for us. And there is no limit to how high that can be, at least we are not setting a limit for ourselves. So I think that’s where we have to focus on. I don’t think in the short term the game is of having to increase prices. We can get margin through reducing cost and putting more through the pipe. And that’s what we will do.

When will this start reflecting in the financials, Sahil mentioned couple of times today already, we are an integrated network with high incremental margins. I think both PTL, Express PTL and the Express parcel are to play in tandem for that to start reflecting effectively in our margins. Sahil, do you want to talk about part truckload and how you think about that?

Sahil Barua — Chief Executive Officer & Managing Director

Yes, it’s a good question. On utilizing the PTL infrastructure capacity, I think I would just point out one thing which is that it’s not the PTL infrastructure capacity, it’s the combined capacity that we’ve created in mid-mile operations, which is the hubs as well as the trucking network. And the way to think about how we will grow the economy PTL business, the way we think about it is that it’s not — I will repeat double bold and underline that it is not is standalone capability that we intend to build. So the objective is not to go out and compete with traditional economy PTL players, where it’s sort of fairly fragmented and large space and to build an independent economy PTL business. There are certain locations which where Express network services, where it is possible for us to drive up utilization of the vehicles by developing an economy PTL business, because in those locations an express PTL business may not exist at all. And in some locations where, for example, the average utilization provides us enough space to go and develop specific accounts in specific verticals, which we are aware of. And sometimes the shippers end up having a combination of Express PTL and economy PTL requirements, which our intention is to serve.

Operator

Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.

Pulkit Patni — Goldman Sachs — Analyst

Thank you for taking my questions. My first question is, if you just take a step back and look at on the PTL side, in Q1 FY ’22 we did 279,000 tons. That number after SpotOn is now 239,000 tons. So I mean, while I understand there has been integration issues, but how come the volumes are even below what we used to do per SpotOn. Sir, if you could just help understand that better because without SpotOn we could have done similar numbers, if not more. That would be my first question.

Sahil Barua — Chief Executive Officer & Managing Director

The 279,000 tons — can you just open up that slide please, Abhad. Just to be clear, the 279,000 tons per quarter one of fiscal ’22 will be pro forma. So that will also include SpotOn. The Delhivery standalone volumes are not 279,000 tons. So in that sense, Delhivery — when you compare the Delhivery business to quarter one financial ’23, the business has grown in the same period. The reason for the decline is essentially us cutting out volumes in specific locations. The two highest volume locations from which we cut out volumes were where we have the largest automated gateways to allow the network to stabilize, which were out of our gateway in Tauru and out of our gateway in Bhiwandi. And therefore, also cutting out certain locations which connect into these major locations. So, for example, Pune connects via Bhiwandi. And so making sure that we provide a standard service quality and cut volume. So that’s why you see the cut in volumes in quarter one financial ’23.

Pulkit Patni — Goldman Sachs — Analyst

Makes sense. And a related question on realization. Once the integration of SpotOn fully complete, is there a possibility we could have higher realization given that some of this also is the realignment of clients, etc, or do we expect realizations to be [Technical Issues]

Operator

Sir, the line for the participant dropped.

Sahil Barua — Chief Executive Officer & Managing Director

I think his question was do we expect realizations in the part truckload business to remain broadly constant? I think again realization in the part truckload business, and I’m answering this for the benefit of everybody else on the call, is again a mix of all of the different clients who form the part truckload business, it’s a combination of a mix of our corporate, our retail and our small and medium businesses. And as those percentages change, the realization of the part truckload business changes as well. That said, pricing in the part truckload business is something that is sort of well discovered. It’s a market that has existed for a long period of time and so to that extent what we do is to follow market pricing. Our approach will be similar to what we did in Express which is to be the most efficient player and therefore, over a period of time, either have margins which are super normal compared to other competitors in this space or to pass on pricing benefits to customers.

Operator

Thank you. And I’ll hand the conference over to Gaurav Rateria from Morgan Stanley.

Gaurav Rateria — Analyst

Hi. Maybe I can just chip in one question here. On the PTL volumes, where are we now versus the normalized volumes? By when we expect to get back to the 4Q levels? And a related question is that for the fiscal ’23, would PTL volume would remain constant or it will kind of — has still potential to grow because we have lost out some time now?

Sahil Barua — Chief Executive Officer & Managing Director

I think, Gaurav, it’s still early to say. We have, as I mentioned, seen service levels be completely stable since the end of quarter one financial ’23 and the operational issues at Tauru and Dhiwandi have been sort of conclusively dissolved. Those have remained stable into quarter two so far. We don’t anticipate any disruption coming from this. The reason I’m not yet going to provide a forecast on what our volumes will be for the year, or what our recovery will be, is that one of the hypothesis we had is that as the Delhivery and SpotOn network combined and as we’ve discovered efficiency by combining the two networks and additional capacity, we might be able to grow faster than we had originally planned as well. But at this point in time, let me put it this way. The operational issues are behind us. We’ve settled claims with our key customers in quarter one, whatever few claims were left will be settled through quarter two. We are seeing volume recovery through quarter two and we’re quite satisfied with where we are at. And we’ll see sort of at the end of this quarter how the rest of the financial year will play out.

Gaurav Rateria — Analyst

All right. Second question was on the synergy benefit on integration and upgradation of the network on trailers. When does that really start to flow into the margins and any quantification of integration-related benefit that we can see?

Sahil Barua — Chief Executive Officer & Managing Director

So, as I pointed out in our previous earnings call also, Gaurav, our aim was by the end of this financial year to, first of all, take the combined PTL business post-integration to the pre-integration margins that SpotOn had. So that continues to remain our target. There is no change in that target, the integration issues of quarter one notwithstanding. And then to start discovering synergies because I think that’s the period that it will take for us to eliminate all redundant infrastructure to ensure that there’s complete consolidation of facilities and teams. So that process is underway. That continues to remain our target, which is to get the business to pre-integration SpotOn standalone margins in this financial year. And then to start discovering synergies. In terms of tractor-trailers, we continue to induct tractor trailers across our network. As you’ve seen, we have inducted close to about 30 tractors and 85 trailers in quarter one. We will continue to do that and as volumes are going up those tractor trailers are replacing relatively less efficient 32-foot single axle and 32-foot multi-axle vehicles and so that movement will continue through the year. And the difference in costing, for example, in line-haul between the tractor-trailer operations and the 32-foot single and multi-axle trucks can be as high as 25%. So we expect to continue to see those efficiencies as tractor-trailers come in.

Gaurav Rateria — Analyst

Got it. Those are all the questions I had. So on behalf of Morgan Stanley, I thank the management team of Delhivery for the detailed insights and their time. Thanks everyone else for joining the call. Over to you, Nirav.

Operator

[Operator Closing Remarks]

Sahil Barua — Chief Executive Officer & Managing Director

Thank you all for joining.