Delhivery Ltd (NSE: DELHIVERY) Q4 2025 Earnings Call dated May. 16, 2025
Corporate Participants:
Sahil Barua — Managing Director and Chief Executive Officer
Ajith Pai — Chief Operating Officer
Amit Agarwal — Chief Financial Officer
Analysts:
Baiju Joshi — Analyst
Krupa Shankar — Analyst
Sachin Dixit — Analyst
Vijit Jain — Analyst
Abhishek Banerji — Analyst
Dhruv Jain — Analyst
Gaurav Rateria — Analyst
Koundinya Nimmagadda — Analyst
Aditya Mongia — Analyst
Presentation:
Baiju Joshi — Analyst
Good evening, everyone. Welcome to Q4 and full-year FY ’25 Earnings call of Delhivery Limited hosted by Macquarie. Before we start, Delivery 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 fact has been included in the earnings presentation shared with you earlier. Finally, note that this call is meant for investors and analysts only. If there are representatives from media, they are requested to kindly drop-off the call immediately.
To discuss the results, I’m pleased to welcome Mr Sail Barwa, MD and CEO; Mr Amit Agarwal, CFO; Mr Ajit Pai, CEO; Ms Vani Venkatesh, Chief Business Officer; and Mr Vivek Pawari, Head of Investor Relations at Delivery. As a reminder, all participant lines will be in listen-only mode and participants can use the raise and feature to ask any questions post the opening remarks.
Now invite Mr Sail to take us through the key highlights of the quarter, post which we’ll open up for Q&A. Thank you, and over to you, Sail.
Sahil Barua — Managing Director and Chief Executive Officer
Thank you, Baju. Good evening to all of you, and thank you for joining us this evening on Friday. I’d like to begin by just placing officially on record on behalf of the entire Delivery management and the entire delivery team, our deepest gratitude to the men and women of the Armed Forces of India. And also specifically to all of the veterans who serve at Delivery. We are grateful to you. I’d also like to welcome Vani. As Chief Business Officer. This is our first earnings call. So welcome to Vani on behalf of the Delivery team.
As usual, I’ll begin with a short 15 to 20 minute presentation, which summarizes results for quarter-four and post that summary, we’ll open up for questions. Upon the slides have disappeared just in a time in the presentation yeah excellent let’s move to the next slide apart.
So broad summary of quarter-four, our expansion and profitability has continued into quarter-four despite headwinds in the industry overall. So very satisfying quarter. This is sort of the highest profitability that the company has declared and possibly one of the first times that quarter-four margins have expanded compared to the quarter three period as well. All-in all, a very strong end to the financial year and puts us in very good position for the next FY.
In terms of a quick snapshot of numbers, in-quarter four, we delivered revenues of INR2,192 crores, up about 6% year-on-year and sequential decline of 8% compared to the peak quarter, which is quarter three. Our EBITDA came in at INR119 crores or 5.4%. This is an expansion of about 320 basis-points compared to the same quarter last year and a sequential expansion of 110 basis-points compared to Q3 of fiscal ’25. PAT came in at INR73 crores, PAT margin of 3.1% compared to a loss of INR69 crores in the same quarter last financial year. So an overall swing of close to INR140 crores Y-o-Y. Our PAT has also tripled from quarter three where we reported an overall PAT of INR25 crores. We delivered 177 million packages in our Express Parcel business year-on-year largely flat and about 460,000 tonnes of freight in our part truck business, which is a year-on-year growth of about 19.4% at a sequential quarter-on-quarter growth of 11%.
For fiscal ’25 as a whole, revenue from services stood at INR8,932 crores and total income stood at INR9,372 crores, a growth of nearly about 10% Y-o-Y. EBITDA margin came in at INR376 crores with an overall EBITDA margin of 4.2%. That is an expansion of nearly INR250 crores compared to fiscal ’24 and a growth of 2.6% Y-o-Y. Overall PAT for the year, this is our first profitable year overall. We came in at INR162 crores of PAT, 1.7% margin compared to a PAT loss of INR249 crores in fiscal ’24.
For the full-year, we delivered 752 million parcels in the Express Parcel business, broadly flat Y-o-Y and about 1.7 million tons of part truck freight, a Y-o-Y growth of 18.7%. The company continues to be extremely well-capitalized. We have about INR5,493 crores of cash-and-cash equivalents on the balance sheet. Obviously, this is prior to the consideration that will be paid out once we receive confirmation from CCI about our deal with Express. In terms of key operating metrics, PIN Code reach for the company continues to remain broadly flat. We service about 18,833 pin codes as of the close of quarter-four fiscal ’25, continue to serve 220 countries through our partnerships with FedEx.
The total active customer-base of the company has continued to expand rapidly. We had 33,000 customers at the same time last year. We ended quarter-four fiscal ’25 with an overall customer count of about 44,000. Overall infrastructure has remained broadly constant, a mild reduction from quarter three as we’ve jettisoned a little bit of peak infrastructure. We operate close to about 20 million square feet of real-estate across the country. Total number of gateways remain constant at 111, automated sort centers remain constant at 45, sorters remain constant at 65. There’s been some consolidation in the last-mile network. Freight service stations have reduced from 130 as of quarter three to 118 as of quarter-four fiscal ’25. The broad DC network remains largely constant at close to about 4,550 delivery centers pan-India and team size remains broadly constant at the 62,000 range.
Spoke about this before in terms of revenue from services, in-quarter four, revenues came in at INR2,192 crores, which is a growth of 6% Y-o-Y. A sequential decline quarter-on-quarter. Of course, quarter three is the peak quarter for our Express business. For the full-year financial year ’25, we’ve delivered about 10% growth in revenues. Revenues have grown from about INR7,200 crores in fiscal ’23 to nearly INR9,000 crores in fiscal ’25. The Express business obviously continues to be the largest part of our business. For the full-year, it came in at about 60% of revenues.
As you can see, the contribution of our PTL business continues to increase year-on-year. The business was 16% of revenues in fiscal ’23 and has now grown to 21% of total revenues as of the end of fiscal ’25. Supply Chain services, truckload services and other businesses contribute about 19% to total revenues. In terms of individual business lines, the Express Parcel business has grown to INR1,256 crores of revenue in Q4 fiscal ’25 with about 177 million packages delivered, broadly flattish Y-o-Y. The PTL business has seen significant growth. In revenue terms, we’ve grown to INR517 crores in Q4 fiscal ’25, which is a 24% growth Y-o-Y in revenue and a 12% growth Q-o-Q, representing massive share gain through this period. Our tonnage has also followed the same trend.
Overall tonnage has grown from 384,000 tonnes of freight to nearly 460,000 tons of freight in Q4 fiscal ’25, which is a 19% growth Y-o-Y and an 11% growth Q-o-Q. Supply Chain Services, the business continues to remain broadly stable. We delivered about INR230 crores of revenue in Q4 fiscal ’25, which is largely flat both compared to the same quarter last year as well as the previous quarter. Truckload revenues have also remained broadly flattish from INR160 crores in Q3 to INR151 crores in Q4. Cross-border services revenues have also remained largely flattish. In terms of overall fiscal ’25 performance, Express Parcel revenues have grown to INR5,320 crores of revenue in fiscal ’25, which is a growth of about INR300 crores compared to last year and growth of about INR800 crores compared to fiscal ’23.
Total Express Parcel shipments came in at 752 million, broadly flattish compared to last year and a growth of about 90 million shipments compared to fiscal ’23. PTL revenues continue to grow strongly. Fiscal ’25 revenues came in at INR1,889 crores, 25% growth Y-o-Y, about INR800 crores larger than we were in fiscal ’23. And tonnage came in at nearly 1.7 million tons of freight, which is a Y-o-Y growth in tonnage of about 20%. Supply Chain Services, while Q4 was relatively flat, fiscal ’25 has been a good year from a growth standpoint.
Overall revenues have grown by about 17% from about INR776 crores of revenue in fiscal ’24 to a little over INR900 crores in fiscal ’25. The truckload and cross-border services have remained broadly flattish. Truckload came in at INR626 crores versus INR609 crores in the previous fiscal and cross-border services came in at INR179 crores versus INR153 crores in the previous financial year. In terms of overall profitability, first of all, for fiscal ’25 as a whole, in the column on the extreme right, revenue from services came in at INR8,932 crores.
Overall service EBITDA margins for the business on an absolute basis have grown by INR43 crores from INR941 to INR984 crores. A broadly flattish service EBITDA, a mild decline of about 60 basis-points from 11.6% in fiscal ’24 to 11% in fiscal ’25. The Express Parcel business obviously had a headwind in terms of extreme pricing actions from competitors at the end of last financial year, which is reflected in fiscal ’25 numbers. Our margins for this business came in marginally lower, 16.2% for fiscal ’25 versus 18.4% in fiscal ’24. There’s been a massive expansion of service EBITDA Y-o-Y in the Part Truck business. The part truck business lost INR46 crores in fiscal ’24 and has generated service profits of INR101 crores, an overall swing of 8.5% in-service EBITDA margin as a whole in fiscal ’25.
Supply Chain Services was obviously affected by our participation in the quick commerce segment, which as we’ve discussed before, we’ve exited on providing warehousing services for overall business came in at 2.2% service EBITDA margin with a service EBITDA of INR20 crores versus INR53 crores for fiscal ’24. In terms of quarterly trends, the big change obviously is in the part truckload business where service EBITDA margins have grown from 3.8% in-quarter three fiscal ’25 to 10.8% in-quarter four fiscal ’25, an expansion of 700 basis-points. This has been driven by a combination of both improvements in yield.
As we’ve discussed in previous earnings calls, pricing revisions were underway all through fiscal ’25 and these have started to play-out. The quarter — this quarter and the first-quarter of the financial year are typically when contracts are renegotiated and we anticipate that this will continue. In addition with increasing volumes, there’s also been improvement in productivity levels across the entire network and improvements in fleet utilization, which have led to the significant expansion in overall service EBITDA.
A similar story for Supply Chain Services as well, which is the direct beneficiary of improvement in transportation margins. As you can see, while the overall annual margin has dropped from 6.8% to 2.2%, as of quarter-four fiscal ’25, we are nearly back at run-rate levels at about 5.4% service EBITDA margins. The Express business came in at 15.9% in-quarter four in terms of service EBITDA versus 15.6% in-quarter three. And overall, this continues to be an overhang from sort of quarter three and from some of the pricing actions that we saw last financial year. We do anticipate, however, that margins will expand in fiscal ’26 and beyond.
Corporate overheads as discussed have remained flattish throughout fiscal ’25. As a percentage of revenue from services, corporate overhead stood at about 9.7% of revenues overall. Our wages have remained largely flat. Marketing expenditures have remained largely flat. Technology expenditures have also remained largely flat. Our adjusted EBITDA, therefore, for quarter-four came in at INR55 crores, which is a margin of 2.5% compared to INR45 crores in-quarter three fiscal ’25, which was at 1.9% and PAT overall has expanded to INR73 crores for Q4 fiscal ’25, a PAT margin of 3.1% compared to INR25 crores in-quarter three fiscal ’25. Overall PAT for the financial year came in at INR162 crores, which is an expansion of INR400 crores or an expansion of about 460 basis-points compared to fiscal ’24.
There’s a quick snapshot of what we’ve been talking about. As you can see, there has been a consistent trend in improvement in profitability. Fiscal ’25 is the first year where all four quarters of the year have been PAT profitable for Delivery and Q4 fiscal ’25 is the highest PAT that Delivery has declared in its history. Overall for — you can see the trend from fiscal ’23 to ’25 as well. We declared INR1,000 crore loss — PAT loss in fiscal ’23. Our PAT has increased by INR1,170 crores from fiscal ’23 to ’25 with a INR162 crore profit and 1.7% margin in fiscal ’25. The other heartening thing and a question that’s often brought up is also capex intensity.
As you can see and as we’ve discussed in prior analyst calls, capex intensity across the business continues to decline sharply. From fiscal ’19 to fiscal ’25, if you can see the trend, we’ve come down from 9% in fiscal ’19 and we’re close to the 6.8% to 7.5% range through fiscal ’20 to ’24 as the network was being built-out. In fiscal ’25, CapEx as a percentage of revenue has dropped to 5.2%. We anticipate going-forward that capex intensity in the business will continue to remain largely stable and slowly taper its way towards our long-term targets of between 3.5% and 4%.
As a quick of the financial performance of the company and the operational performance for Q4, as you’re aware, we’ve also announced a proposed acquisition of Ecom Express, which is currently under discussion with the Competition Commission of India when we await approval. We had put out a detailed note on the delivery website and filed with the exchanges on a document with frequently asked questions about the acquisition. We’ll cover it briefly through this call as well.
So in terms of questions around integration, our belief is that the integration of Express is materially different from our prior integration with, which we had acquired in 2022. The risks of the integration are also materially lower. As we’ve discussed in the note that we’ve put up, there are a couple of key reasons why this is the case. I’ll just quickly recap them. In terms of customers, we have a nearly 100% overlap of customers with Ecom Express. All of the customers that work with Express and with Delivery are already deeply integrated and familiar with delivery systems. And all of our customer-facing business processes, right, from the operational processes to billing processes, collections and reconciliation are equivalent or similar. In terms of relative scale, E-com Expresses volumes are about 40% of Delivery’s express parcel volumes. In terms of overall tonnage or freight carried, the network tonnage of Express is network is less than 20% of Delivery’s total tonnage. By way of comparison, at the time of our acquisition of Spot-on, Spot-on’s PTL volumes were close to two times that of Delivery’s PTL volumes. And so the overall sort of reduction or the overall sort of delta and tonnage between e-com and delivery significantly reduces the complexity of this acquisition.
In terms of network, we expect that limited facilities will be retained and the facilities that we retain will seamlessly be configured as delivery nodes. Our facility retention will largely be limited to locations either where delivery is capacity-constrained or where repurposing an existing transportation facility into a delivery fulfillment center or service center is feasible. No additional technology, no new technology will be required for integration of these facilities into Delivery’s network.
In terms of people, e-com Express is a high-quality network and the E-com Express employees are sufficiently familiar with e-commerce logistics. They’ve been in this industry for a long-time. The regular attrition in deliveries network itself will provide us sufficient room to absorb all of the qualified staff from E-com Express across our operations around the country. Needless to say, at the time of their onboarding into the delivery network, they will also undergo rigorous training via the delivery Academy. Our purchase consideration already includes or factors in about INR300 crores of integration costs. These have been considered and we’d anticipate that we should be well within this envelope. In terms of volumes and retained volumes, our assumptions on retain volumes were fairly conservative to begin with. Our assumption was that we would retain close to about 30% of the volumes of the E-com Express standalone network. From the time that the deal was under consideration up to now in May, we’ve already seen an organic uptick in the volumes of Delivery’s standalone express network.
As you can see, our Jan-Feb daily average volumes are represented by the black dotted line on the left. From there going into March, we saw an uptick in overall volumes as customers began to shift some of their volumes into the delivery network. On formal announcement of the deal, this has continued and has been solidified. The trend in April was marginally higher than the trend in March, which in itself is a new phenomenon. Generally speaking, Q1 volumes are soft and April volumes tend to come in below March volumes. So this is a positive sign. And May volumes on average have been higher than both April and March volumes as well.
So overall, I think from a volume retention standpoint, we remain highly satisfied. The e-com P&L is here. We’ve put out a detailed note on this. The important consideration, of course, is that the PAT number that was reported, which was a PAT loss of INR398 crores for the nine months of fiscal ’25 consisted of also a net loss on fair valuation of CCPS of INR215 crores. Adjusted for that, the overall PAT loss for Ecom Express stood at INR184 crores for nine months of fiscal ’25 and an adjusted EBITDA loss of INR104 crores for the nine months of fiscal ’25. This was already factored into deliveries consideration for the network. In terms of balance sheet, I think the key factor over here is on-property, plant and equipment.
As of December ’24, overall PPE, including capital work-in progress stands at INR464 crores, of which plant and machinery, office equipment, computer and IT equipment stands at INR370 crores. The company has about INR200 crores of automation assets, which are available for deliveries use. A reasonable portion of these are also from Falcon Auto Tech, which is a delivery portfolio company. We do not anticipate any complexities in redeploying this automation equipment across the delivery network. And our belief is that this will sharply influence our own capex plans in fiscal ’27 and beyond.
So that’s a quick summary of overall performance. We’re quite satisfied with overall profitability improvements through this financial year and I think it sets us up very well for fiscal ’26 and beyond. I’ll pause here and very happy to take all of your questions.
Questions and Answers:
Baiju Joshi
Thank you thank you. We will now start with the Q&A. Participants please use the raise and feature to ask any questions. And in the interest of time, please limit the number of questions to two. With that, we will take the first question from Krupa Shankar., please go-ahead.
Krupa Shankar
Hey, hi. Am I audible?
Sahil Barua
Yeah, go-ahead,.
Krupa Shankar
Yeah. Thank you for taking my questions and congratulations on the great achievement with respect to profitability in the PTL segment as well as overall PAT for FY ’25. The first question is on the piece. Just wanted to get a sense that you have significantly outperformed the underlying industry growth in PTL and by far we would be the second-largest player in the ecosystem based on tonnage. I want to get your sense, Sahil on what is the growth runway you’re expecting given that we have reached certain economies of scale?
And the second piece is while yield management, of course, has played a crucial role, can you talk a little bit more about the operating efficiencies which you achieved beyond operating leverage this quarter because you know, just on the Q-o-Q tonnage, is that what is entirely driving the margins, something on those lines?
Sahil Barua
Sure. So yes, our PTL business has obviously been a great story for the last two financial years, especially after the spot-on integration, we’ve outgrown the industry quite comprehensively. I think it’s testament to the overall quality of the network. It’s testament to the overall investments that we’ve made in capacity in automation. And I think we see no reason to believe that our growth runway in PTL is going to be significantly different from what we’ve seen so-far. The market in India is heavily unorganized as we’ve discussed several times. The reality is that delivery is effectively organizing this industry. And as long as you know whatever, nearly 80% of this industry continues to remain organized. There’s very, very large headroom for growth for delivery in this space. We will continue to exploit that.
I think from our standpoint, as you can see and I’ve mentioned in fiscal ’24 throughout my analyst calls and in fiscal ’25, we had a responsibility not just to deliver growth, but also to demonstrate that this growth would come with the operating leverage and the margins that we’ve always signaled. As I’ve always said before, we expect that PTL margins will be similar to the margins that we see in our Express business. And while, of course, we’ve had a consecutive — eight consecutive quarters of improvements in our service EBITDA margins, I think the reality is at 3.8%, there were obviously questions being asked about whether we would ever get to those numbers.
Hopefully, as you can see the quarter-four numbers which have come in at 10.8% and we’ve brought up several times that as the business gets closer to about 175,000 to 200,000 tons of freight, we hit nearly full potential margins. That’s quite visible. I do want to be clear that Delivery’s aim always to begin with is to make sure that we can deliver the profits that we say we do on the revenues that we say we do because generating revenue for by itself is not very hard in logistics. The difficult part is delivering it with profitability. I think we’ll continue to take that approach. Our approach to building capacity will also remain similar. So our anticipation is that as long as we can continue to profitably get accounts as long as we can continue to build capacity in a safe fashion, the growth runway is not affected and neither is the margin trajectory.
In terms of yield management, no yield is not the only driver of the improvement in margins. Yes, yield is one part of the story. Overall, yields have gone up I think, to about INR11.3 per kilo of freight delivered compared to, I think 10.9 in-quarter four of fiscal ’24. Do bear in mind that in-quarter four fiscal ’25, we also onboarded a very large customer in HPCL where the yields are significantly lower actually than the 11.3% yield. So the like-for-like comparison Y-o-Y will be even stronger. I think this reflects two things. One is, as I’ve mentioned, it reflects the success we’ve had in renegotiating poor rates that were signed in a pre-spot on era and that we had to reset. Our team has been doing that for the last two years. And second, to be honest, it also reflects customers’ confidence in the delivery business because we have both delivered 20% Y-o-Y growth as well as delivering improvements in yield through this period.
That’s one part of the story, however. The second part of the story has been also sheer operating leverage, which of course has come from increased tonnage flowing through the network. But remember, saying operating leverage is easy, actually generating it and engineering it is much harder. So this is what you’re seeing here is what is — what is finally coming to fruition is the investments in automation, is the investments in software, in operating systems and in training that we’ve been making over the years. We are the only network which is capable of delivering these massive jumps in growth and at the same time also delivering profitability at the same time. To give you a sense, between fiscal ’23 and fiscal ’25 deliveries PTL revenues have grown by nearly INR800 crores. There aren’t too many PTL businesses in India, which do INR800 crores of revenue at all. So that should give you a sense of sort of how our operating leverage has improved.
And the third, obviously driver apart from operating leverage on just the pure sort of facility and fixed-cost has been a massive improvement in fleet utilization as well. As I’ve brought up several times in the past, one of the hardest problems in trucking is figuring out how to optimize your yield management at a truck level. Our software systems have been maturing over the years and we’ve gotten much better at figuring out what loads go on to what trucks. As we’ve been able to increase the density of loads that are going on to trucks, that’s obviously improving profitability as well. And obviously, the other piece is, as we’ve expanded our sales force, which is something that I’ve spoken about as an impediment to growth in the past, as that has slowly started getting solved, what we’re seeing is that we’re also able to generate business in locations which previously were considered to be sort of smaller locations or reverse locations. And as we are able to generate more loads coming out of these reverse locations, they obviously bring up aggregate utilization across the network.
So it’s a combination of yield improvement, pricing discipline, investments in automation, sheer operating leverage coming from scale, improved fleet utilization coming out of software improvements, better training of the staff on-the-ground. So it’s — it’s a lot of things coming together.
Krupa Shankar
Got it. One follow-up on that, Syl, what would be the fleet utilization levels at the moment in 4Q?
Sahil Barua
You guys ask us questions about utilization in every quarter and every quarter I come back and say the same thing, which is our job as engineers of the network is to make sure that no matter what we think the base is, we can actually improve utilization. So my own estimations of what the available capacity of the fleet is have changed over-time. I think, look, we’ve always said that our utilization prior to Q3 was in the sort of 65% kind of range. Q4 on a similar comparable basis would have gone beyond 70%. But the reality is as we get better at engineering our truck routes, as we get better at engineering our facilities as we get better at designing software that tells us what to load on the trucks. The definition of capacity itself is changing. So you’ll have to excuse me for not giving you a highly specific point estimate. All I can tell you is that fleet utilization has improved quite significantly between quarter three and quarter-four.
Krupa Shankar
Thanks. Thanks for that. That. One more question on the e-commerce piece. Express Parcel, the margin profile is hovering around 16%. Last year, we were close to about 18% or so. I just wanted to understand if this is going to be the new normal at least over the near-term and probably you would see that the margin expansion would kick-in when e-com Express gets integrated. Is that the right way to think about it?
Sahil Barua
Yes. Our primary reason for acquiring E-com Express obviously was because we have extremely high incremental margins as we’ve discussed in the past. Even with pricing pressure, deliveries incremental margins tend to be in the 27% to 30% range. And as you’ve seen in the past, without the pricing pressure, our incremental margins can sometimes be as high as 50%, depending again, of course, on where the volume comes from and where it’s going to. As our network continues to fill-up with the volumes that we retain, we do anticipate that there will be some expansion in overall margins. The good thing in our network because of the operating leverage is that even with gross margins remain broadly constant as volumes increase through the network, the service EBITDA margins will continue to rise.
So yes, as volumes come in, once we finish with the integration, we do anticipate that automotive margins will go up. Now what percentage of that we may continue to pass to some of our deserving customers in terms of sort of what their share of wallet they reward us with or if we want them to actually drive further growth, it remains to be seen. But I think also as you will see, pricing pressure in this industry will significantly reduce going-forward.
Krupa Shankar
Got it. Got it.
Baiju Joshi
Sorry to interrupt. Please go-ahead in the queue. Yeah, sir. Thank you. We’ll take the next question from Sachin Dixit. Sachin, please go-ahead.
Sachin Dixit
Hey, hi, Sahil and team. Congrats on a decent set of results. My first question is with regards to the acquisition basically, right? So with acquiring E-com Express and some sort of market-share being that is also not in a very good shape. How do you think 3PL structure — industry structure evolves going-forward, right? So effectively, it looks like it’s a delivery and maybe someone like a shadow fax and some other smaller players who will rule the roost, does it — how you see it?,
Sahil Barua
I’ll answer this question the way I always have. Delivery has always been more than 100% of the profit pool of this industry. That position has only been strengthened over the last financial year. As we mentioned before at the pricing that currently prevails in the market delivery is the only profitable player in this industry. To the best of our understanding, our remaining competitors with models similar to e-com have also seen an expansion in their losses in-quarter four, which means our competitive positioning continues to be better. I have been public about this. There were too many players in this market in the previous quarter.
Our acquisition of Ecom Express has not changed that dynamic. There are still too many players in this market. And in terms of what exactly will happen, as I mentioned, you know, I — how long can unprofitable players continue to survive in this market is a question that I am not best placed to answer. I think the reality is it depends on how much capital they have left. But I think what this deal has done is it does signal that if you are a loss-making network in Express with no path to profitability, our consolidation is an inevitable consolidation or exit is an inevitable outcome. So I think we are very happy our position will continue to improve. As you can see from our cost advantages, they are not theoretical, they are material. Our service advantages are material because customers don’t reward you merely for having the lowest-cost. And at the end-of-the day, we will continue to grind our way through these advantages and make sure there’s very limited, if any breathing room for any competitors in this space.
Sachin Dixit
Got it. Got it. My second question is with regards to the Rapid commerce foray that we had. Any updates on that? How is it shaping up, how many stores, orders per tax store, et-cetera?
Sahil Barua
I think Ajit Pay is on this call. Why don’t I ask Ajit to take that?
Ajith Pai
Yeah. I think satisfactory in terms of what we had planned. We are in three cities as of this quarter and about 18 dark stores. In terms of orders per dark stores, the older dark stores are now clocking at about 350 to 400 orders per day, while the newer ones, of course have a certain ramp-up time. But it’s early days. We had, I think pointed out that this is something which will take some time and we’re planning an overall number of 50 dark stores over the entire fiscal year.
Amit Agarwal
Yeah. Just to add that these dark stores are nowhere comparable to the size of the typical common stock stores. They are significantly smaller.
Sachin Dixit
Got it, Amit. Just a quick follow-up on the orders per day, right? So we obviously mentioned like roughly at 700 to 800 orders per day is when these breakeven, how much time do you anticipate that to be for the older dark stores to reach?
Sahil Barua
So our expectation is that it will take about four to five months for — for dark store for an individual dark store to get to that point.
Sachin Dixit
Got it. Got it. Thanks, Sajit. Thanks, Amit.,
Sahil Barua
I’ll just add one more thing on-top of that, when we think about our Rapid commerce business, one of the things we’ve realized is that this is not just an exciting form factor for B2C clients alone. In fact, when we started, the thesis was around B2C, but what is becoming particularly interesting is that we now have B2B customers who are saying that they would actually like to participate in a faster form of commerce. So for example, there are players who want to deliver spare parts to various parts of their supply-chain or time-critical machinery to various parts of their supply-chain within three, four hours and so on. And in fact, one of the things that we are evaluating now is how do we open up our shared network to B2B as well? And I think over the long-term as I look at this, the reality is that’s possibly the more interesting part than the B2C part.
Sachin Dixit
Yeah, that makes sense., thanks a lot and all the best.
Sahil Barua
Thank you.
Baiju Joshi
Thank you. We’ll take the next question from Vijit Jain. Vijit, please go-ahead.
Vijit Jain
Yeah, hi, thank you. And congratulations on a pretty good performance on the opex front here. My first question is on the INR300 crore integration costs comment that you made, Sahil. So just trying to double-click into that. Is this mostly payouts related to the locations you would shut-down, et-cetera and those things or does it include the operating losses that the business will incur while you integrate?
Sahil Barua
So it’s a combination of two things, Vijit. One of them is going to be the lease liabilities, which contain lock-ins, we’ve anticipated that the extent of time it will take for us to shut-down. That said, we’ll make every effort to either repurpose facilities within the delivery network as fast as we can or alternatively negotiate with landlords for a slightly sort of shortened lock-in period. We’ve taken the full-cost, obviously.
The second is, yes, you’re right, as the core part of this network, which cannot be shut-down continues to survive and some volumes flow-through, there will be some operating losses that we had factored in. I think we’ve been pretty conservative about the rollback of the E-com Express network and as things stand, I think once we have approval, we’ll be able to hopefully roll-back much faster than that. So it does include a certain amount of operating losses as well.
Amit, you have a more detailed answer, feel free-to come in.
Amit Agarwal
Yeah, that is — that is — these are the two broad categories in which we have accounted for this INR300 crores.
Vijit Jain
Got it. Thanks. Got it. Thanks. And my second question is, so Sahil, to your earlier comment on when you — when you were showcasing the March, April, May weekly order inflows. So you said some clients have already started to move and April and May have had an despite the seasonality being weak, have had some uptick in volumes. So in general, just wanted to understand that because most of these clients are already on delivery, what exactly is happening here to what extent do you believe this is them actually moving from E-com Express to you? I’m just trying to understand how that comment was arrived at?
Sahil Barua
Yeah. So I think what exactly is happening is clients are moving their volumes into deliveries network. And it’s as expected, it has been a very seamless transfer, it appears to be because these volumes have sort of customers can just manifest whatever volumes they want to into delivery in any case. I think customers are obviously looking to balance out their volumes between e-com Express and Delivery. And in some cases, they are shifting certain kinds of pin codes into delivery preemptively. I think it’s a very positive sign that the delivery network has been able to handle these volumes without any concerns whatsoever. In terms of sort of how they are balancing across various logistics companies, I think the reality is most of them are moving volumes into delivery and our overall share of the market is going up pretty rapidly.
Vijit Jain
Got it. Thanks., just on that your current assessment of what volume share, what percentage of you know their volume would you be able to retain?
Sahil Barua
Our estimation when we did the calculation of our consideration was that we would retain about 30% of the volumes within the core Ecom Express network. While I think it’s been two months right now, Vijit, since 1.5 months really since we’ve announced, and I think, you know it’s best to sort of make more definitive statements once we have the CCI approval and things play-out a little more. But let me put it this way. As of now, we remain — we are very happy.
Vijit Jain
Got it. Thank you so much. Those are my questions.
Baiju Joshi
Thank you. We’ll take the next question from Abhishek Banerji. Abhishek, please go-ahead.
Abhishek Banerji
Hey, congratulations guys on a great set of numbers. So first with regards to your Express Parcel business, right? So how are you kind of looking at the in-sourcing trend-right now? And I think last quarter also, you mentioned that it’s probably the worst is behind us. So how do you kind of look at it as we go-ahead? And I mean, by you buying out e-com express, some of the capacity will be vanquished here, right? So would that not mean that a disproportionate kind of share has to come to you because otherwise you don’t have the capacity. If you could just explain this part, it would be great.
Sahil Barua
I don’t really need to appreciate you’ve answered your question.. So the reality is, we do anticipate that we will accrue share that obviously was the basis of the acquisition itself. As I have mentioned in the past, this industry was plagued with excess unproductive and loss-making capacity, not just within Ecom Express, but other players as well. And I think as the capacity in this industry becomes normalized. And the interesting thing with delivery, Andrew, he is the only player in the industry who can do this, while we normalize capacity and reduce it in this industry, pricing of shipping will not go up. In any other industry, if you were to normalize capacity, you would imagine that pricing of logistics would go up. Given our inherent advantages in our cost structure, this will not happen. And hopefully, what that will mean over-time is that customers will choose the right service for themselves, which is the highest-quality service, the one with the highest feed and the one with the most efficient pricing.
In terms of self-logistics, I’ve said this several times in the past, when looked at purely from a dispassionate lens of cost and service performance, self-logistics businesses do not compare favorably with third-party logistics and certainly not with deliveries network. And I’ve gone into this in extreme detail over the last two years. The fundamental logic hasn’t changed. However, if wherever it these self-logistics arms are being run for non-financial reasons, you know in that situation, I suppose they can continue for any length of time. So nothing is fundamentally altered. I think the worst from a self-logistics standpoint is behind us. I think industry will continue to consolidate. I think delivery will get its share and we’ll solidify our position in this market.
Abhishek Banerji
Got it. Now if I look at your capex outlook, Amit always guided for about 5% odd number. Now given you are talking about almost INR170 crore of automation capex line with e-com, how do you kind of see the capex number for the next couple of years?
Sahil Barua
Amit, do you want to comment?,
Amit Agarwal
First of all, I think what we have said and Sail reiterated earlier in the call is that our long-term guidance for the capex is in range of 3.5% to 4%. And what we expect is over next two to three years, the capex on automation equipment should be minimal. Now this, of course is a bit dependent on how much growth we see organically in the market for us post the acquisition. But to put certain numbers in perspective, when we look at e-coms DRHP, I think they filed that they have a capacity to do about 120 million shipment sorts per month, whereas the volume retention that we have factored in our valuation would basically mean that we are retaining roughly only about 15 million per month. And let’s assume there are two sorts, there is 30 million sorts per month.
So in the sense, there is capacity to do, 60 million 70 million shipments per 60 — sorry, before after the devisor about 35 million shipments per month, additional sorting, parcel sorting capacity. That’s a broad number I would put to it that we would carry with ourselves. Now over a period of two or three years as this growth adds on to the business, we should not require to buy parcel sortation systems. We will require to buy bag sortation systems for our PTL and integrated PTL and B2C bag sorting at that point.
Abhishek Banerji
Understood. And in terms of the integration cost of INR300 crores that you spoke about, that one will be, you know, so the cash outgo for you for the acquisition will be only about INR1,400 crores and the rest passes through P&L. And finally, just one more question on the outlook on PTL, you know growth going ahead, given you already are sitting on a very-high base in this year.
Sahil Barua
I think we’ve already answered the question on the integration costs. Amit, is there anything else that you want to recap?
Amit Agarwal
No. That INR300 crore will pass-through the P&L of e-com Express here, right?
Abhishek Banerji
Sure.
Sahil Barua
And in terms of the outlook for growth, again, I have discussed this already. I think our outlook for growth continues to remain positive in the PTL industry. As I’ve mentioned, we’ve added nearly INR800 crores plus in revenues between fiscal ’23 and ’25. That’s the size of a reasonable number of PTL companies in India as a whole. So we will continue to go after this market. I think our belief is that there is a strong trend of movement from unorganized PTL towards organized PTL. I think there are a large number of origins that continue to remain highly underserved by organized high-quality players like ourselves.
And as you can see, we again have very large cost advantages that flow-through and are visible not just in our Express P&L, but also in our PTL P&L. And those cost advantages allow us to service PTL customers across the country with a higher-quality network or faster speeds lower damages and highly competitive rates. So I see no reason for us to have any change in our growth expectations of the PTL business.
Abhishek Banerji
Thanks. Best of luck for FY ’26.
Baiju Joshi
Thank you.
Sahil Barua
Thank you. We’ll take the next question from Dhruv Jain. Druv. Please go-ahead.
Dhruv Jain
Hi, team. Thanks for the opportunity. My first question was on the Explus Parcel business. So in FY ’25, the 3PL market was obviously facing challenges with respect to in-sourcing and weaker demand. Sir, what’s your take on FY ’26? Do you think that the industry can go back to double-digit growth or you think that there could be certain headwinds that still come in the way?
Sahil Barua
I mean very bluntly, I don’t care where the industry goes. I care about where deliveries volumes go. And our anticipation, of course, is that through the acquisition of Express, we will be able to grow faster. As I mentioned, there are two kinds of industry scenarios. One is an industry which is growing, let’s Call-IT, 18%, 20% a year or higher. In that situation, delivery will obviously get at least market growth if not more, because one of the challenges in this industry, of course, is creating capacity and managing capacity and delivery is the only player who has the ability to manufacture productivity and capacity across the country. What also helps is given that we are a freight denominated network, incremental volumes in Express are actually a very small fraction of overall tonnage carried in the network.
And so the amount of extra capacity that we need to create pan-India is very small. So that’s a case where the market does very well. In a case where the market doesn’t do very well and has sluggish growth as you’ve seen in the last financial year and the year before, the reality is that it becomes highly unsustainable for other players to survive. The reality is while the market was growing, several errors in-network design and sort of pricing went relatively unnoticed for our competitors in this space. As we mentioned, the parcel-only network model built around either franchise models or built around sort of highly specific parcel origins is a poor model and it doesn’t deliver profitability. It doesn’t work-in a country like India, is the model that works. And so in a world where parcel volumes remain sluggish, counterintuitively, perhaps Delivery’s competitive position has strengthened further. So the reality is the last two years of sluggish growth have accelerated our sort of share of the overall profit pool of the industry while maintaining market-share. So irrespective of what happens to the market, I think from a delivery standpoint, we are very satisfied with where we are and we anticipate that with this acquisition and consolidation, there will be know additional growth in our parcel volumes
Dhruv Jain
Let imagine starts at 11 lakhs. Hey, and venue goes up to 16 lakhs.
Baiju Joshi
Yes, I think we can’t hear you allowing to talk.
Dhruv Jain
Yes. So the second question that I had was on the customer additions, we’ve seen a very sharp customer addition for delivery over the last year or so. I just wanted to clarify, is this largely the PTL SME push that we’re doing or is this also a lot of addition in the e-commerce business?
Sahil Barua
It’s both on the roof. So in the SME space, the gateway to delivery is effectively delivery one, which is where clients can add 5,000, all of delivery services are both Express as well as PTL, it’s a self-onboarding platform. And so the increase in customer growth sort of is as more-and-more customers discover delivery services, they self sign-on, they serve — we service them both on PTL and on and on Express. I don’t have the exact numbers in terms of what number out of this extra growth has come from Express versus PTL, but it’s both. And some are also coming in through our new service, which is an expansion of Delivery Direct, which is our local service, which is essentially an on-demand three-wheel, two-wheel service that we’ve launched in the city of Ahmedabad and we’ve just gone live in Delhi. We also intend to go-live in Bangalore and in Bombay over the next 45 days. So some of these are also SMEs coming into that platform.
Dhruv Jain
Thanks, I have and all the best.
Baiju Joshi
Thank you. We’ll take the next question from Gaurav Rateriya. Gaurav, please go-ahead.
Gaurav Rateria
Am I audible?
Sahil Barua
Yes.
Gaurav Rateria
Hey, congrats on good execution on profitability. I have couple of questions. My first question is just a little bit of a bridge to understand this quarter profitability as I think last quarter had certain one-off cost on freight cost, which would have normalized. Also, there might have been some actions to rationalize the capacity, which you mentioned in your remarks on service centers, et-cetera, when you’re talking about this quarter.
Second question is on Express Parcel, you alluded to certain pricing actions. Historically, delivery has led any price action. Was it different this time? Third question is on working capital and capex. Great job done. Going-forward, do you think that we have achieved the level of working capital days that we’ve intended to in the past or is there further room of room for improvement? And this capex of 3.5 to-4, is this something that you intend to achieve over the next two years? Just trying to understand the timeline is one year, two year or more like a medium-term outlook?
Sahil Barua
Thank you sure. Amit, do you want to quickly start with capex and then I’ll move on to the other items?
Amit Agarwal
Sure, sure side. So Gaurav, coming first to your working capital, I think on Express Parcel and partnerload businesses, while we don’t disclose each business linewise working capital days. We are fairly close to our target number of days. I think there is still room to reduce working capital days in these two businesses by two to three days for each of them. However, in our Supply Chain Services business, we have a significant room for improvement. Hence, I would expect that over next — over next two, three years, you can expect one to two days improvement on overall business basis for working capital.
On CapEx, I think there is a fair bit of chance that in FY ’27, we will be able to start hitting our long-term capex targets on back of excess automation equipment acquired and that we will acquire an e-com acquisition. So, yeah, it’s fairly possible that in FY ’27 onwards, our capex would be in that 4% zip code rather than 5% zip code and we’ll strive to maintain around that.
Sahil Barua
In terms of pricing, I think, yes, historically, delivery has led pricing in this industry. As I’ve discussed several times, every three years or so, we typically tend to make a big pricing move. I think last year was the one year where we did not lead the pricing move-in the market. As I’ve mentioned, you know, we did see that competition in this industry in order to rest short-term market-share or took certain pricing calls, which at that time and perhaps in hindsight, we judged correctly, our anticipation was that this pricing was suicidal and was untenable because the pricing appeared to be at a negative gross margin. So we waited it out and that obviously reflected in our numbers in-quarter four of the last financial year and that overhang continued through this year, obviously.
I think going-forward, the way that delivery will look at pricing is as we always have, which is when we discover systemic engineered efficiencies that are sensible for us to pass-on to our customers in a neatly sliced form, which means in a complex form that is dependent on origin, destination, the kinds of products they’re shipping, the quality of their customers, the weight of their packages and so on. We will continue to do so because our interest ultimately is in making our clients’ businesses more viable. Fundamentally, in e-commerce, the reality is that logistics is a large input cost and especially if you look at the three large marketplaces and even perhaps one-level below them. One of the problems in this industry historically and why there has been client-led pricing pressure, especially for our competitors is that we essentially service customers who can’t afford our services. And so we effectively have to continue to find efficiencies. Unlike competition in this industry, Delivery has engineered those efficiencies rather than merely attempted to reduce price.
So we’ll take those calls on a case-by-case basis, on an origin by origin basis, on a product-by-product basis. All our clients, of course are eligible and we like to give them volume linked discounts and share of wallet linked discounts as we grow. That’s a carefully chosen decision, however. So hard for me to comment on exactly what path it will take. But let me put it this way. You know, suicidal price, I think in this industry more or less at this point in time has ended because I assume most players have seen the consequences of that kind of pricing.
Gaurav Rateria
Thank you. And the first question that I had on the bridge on the — this quarter profitability with various elements such as normalization of freight costs, some reduction in excess capacity, et-cetera? Thank you.
Sahil Barua
We have an exact draw bridge at this point, but suffice to say, even if freight efficiencies had been discovered in-quarter three, you’re right, we did have excess freight costs that we had carried right at the start of the quarter when volumes went up. But I think even adjusting for that, net-net, there has been an improvement in profitability Q-on-Q. A lot of that is — and if you look at it by way, just in terms of reduction of excess sort of freight centers or excess real-estate, if you go back to the statistics side at the start, the reduction in real-estate is actually not that significant. I think it’s from about 20.5 million square feet to about 20.1 million square feet or thereabouts. So yes, there is some impact, but it’s not as significant. I think the big improvements have come really from organic improvements in fleet utilization, which has been driven both by an improvement because of automation and improvement because of software-led loading of trucks, better routing of the trucks as well and obviously much better and targeted business development. And of course, some of it is down to the sheer operating leverage because of the PTR business.
Gaurav Rateria
Thank you. Very helpful. All the best.
Sahil Barua
Thank you.
Baiju Joshi
Thank you. We’ll take the next question from Nimagada., please go-ahead.
Koundinya Nimmagadda
Yeah, hi, Sahil. Thanks for the opportunity. Three quick questions. Firstly, a bookkeeping one. What would be the percentage of your largest customer today? It was about 16.5% or so number last year, what would that number be today? Would you be bookkeeping question on that?
And the second one is on the Express Parcel realization versus margins. So we see the realizations going up, but margin per parcel has been trending down. Now the thing I was trying to understand is, is this utilization going up due to the change in customer mix? And is that also the reason for reduction in your margins over here?
And the last question is on the e-commerce — on the e-com express integration side. What — I mean, what was the reason why you assumed only 30% retention on the customer side? I mean, what — why I mean, what was the fear out or death in being so conservative?
Sahil Barua
So I think the third question is the easiest. I think an optimist can never be pleasantly surprised. So the reality is it made sense for us to have a conservative basis for the valuation of the asset. And we are pleasantly surprised. So that’s the short answer on e-com Express. In terms of realization versus margin, yes, realizations have gone up, margins have trended down a little bit. You’re right, it is entirely down to parcel mix. It’s not just mix in terms of clients, it’s also mix in terms of weights and distances, both of which also have an impact on overall profitability.
That said, I do want to point out that I know it feels like there’s been a systemic downtrend in margins from whatever 18-odd percent to 16%. But that said, do bear in mind that as a lot of this pricing overhang in this market clears up, there’s no reason for us to believe that we won’t be able to get back to our 18% margin level. So I wouldn’t read too much into this 18 versus 16% at this point. There’s no structural change to the business. There’s no structural change to our margin profile either at this point in time.
And in terms of percentage of business from our largest customer, I think there’s no major swing in terms of percentage of our business coming from largest customer. In fact, as the PTL business has grown, the contribution of largest customer would in fact have reduced. Amit, I don’t have the exact numbers, would you happen to have that?
Amit Agarwal
So Sail, last year we disclosed that our largest customer was about 16% of our revenues, 16%, 16%. I don’t think there is a material change to this number. There would be some decimal change point change here or there.
Koundinya Nimmagadda
Understood. So just on that realization versus margin, as the industry opportunity moves away from the horizontal or the marketplace players, do you see a potential opportunity for delivery now being the largest player after the consolidation perhaps having a significant share, being able to take on price hikes and also drive margins? And also because here you don’t get volumes from a single concentrated customer, the volume aggregation risk also lies with parcel players. So do you think that will also add like a competitive advantage for you?
Sahil Barua
Competitive advantages have not been determined by this acquisition. Our competitive advantages have been built over 14 years, so they will persist. In terms of taking price hikes, as I’ve mentioned in the past, there will be a time in this industry when pricing will begin to float up. As far as delivery is concerned, that will be the day that our productivity gains can no longer outpace inflation. As things stand, we continue to have fairly formidable engineering and software capabilities, which allow us to manufacture productivity ahead of inflation. As long as we continue to do that, I think the right answer for our customers and the right answer for all of sort of India’s manufacturers and traders, whether it’s in B2C, e-commerce or in B2B is for us to bring down the input cost of logistics. As we’ve mentioned, this is essential for our customers to be able to grow their businesses. And so as long as we’re able to manufacture these efficiencies, we will continue to question our pricing and see whether there are ways for us to make it more affordable for our customers. So we’re not at that point yet. That said, as I’ve mentioned, all of this will be subject to absolute margins in our business continuing to grow.
Koundinya Nimmagadda
Thank you and all the best.
Baiju Joshi
Thank you. We’ll take the next question from Aditya., please go-ahead.
Aditya Mongia
Thank you for the opportunity. I’ll go-ahead with my questions. The first question would be on this comment made of new services and related INR6 crore loss that you have booked in the adjusted EBITDA for the quarter gone by. Are these related to your commerce endeavors? And if so, how do things with this loss-making number becoming profitable over a period of time?
Sahil Barua
But yes, it is linked to the, rapid commerce business because a number of the dark stores as they were set-up, there’s about a one month-to 1.5 month period where these are tooled up and where customers begin to consign inventory into the dark stores. So they’re essentially not generating any revenue at that point. It’s not particularly dissimilar to sort of how the fulfillment center in the Supply Chain services business also operates. The only difference in the larger fulfillment centers, of course, is that we are able to negotiate rent-free periods for fit-out and for consignment of inventory, whereas in the dark store business, it takes a little bit of time. The dark stores are also at different stages of evolution, the ones that we currently have in Bangalore Chenni and Hyderabad. I’ll ask Ajit to come in, in just a minute.
The way to look — the way we are looking at it is the oldest cohort of dark stores sort of starting to turn close to breakeven in Q2. And then sequentially as other dog stores get there, this loss should come down. But Ajit, do you want to comment on this in some more detail?
Ajith Pai
No, I think that’s — that’s more or less what the situation has filed. I think the only other point I would mention is that it does take some time for, look for client onboarding due to integration with inventory systems and that’s the other variable which decides how fast the orders are the orders ramp-up.
Sahil Barua
The other thing, Aditya, just to note is that a part of this is also linked to the launch of our delivery, local delivery direct business, which is the on-demand availability of three-wheel and two-wheel forms. We had launched in Ahmedabad and there’s a supply creation phase where there are certain amount of losses that we bear. We’ve also launched Delhi and Bombay, so there will be some amount of burn that will come from those two locations and as those start scaling up, I think our anticipation is once we get to perhaps a couple of thousand orders a day-in these cities, that burn also starts dropping very significantly. We’re already seeing an improvement in profitability in Ahmedabad. Now we’ve launched Delhi, so that will negate some of the gains that we’ve had in. But those are the two sources of the burn overall.
Aditya Mongia
Okay. Understood. The second question that I had was on the partner segment. I just wanted to kind of kind of check with you that as you incrementally want to improve margins from here on, would improving yields have a bigger role to play from here on or improving cost structure? In some ways, I also want to understand what is the sophistication of the customers’ needs and whether yields can be a fairly kind of improved way of us adding value and getting good value on returns?
Sahil Barua
It’s a good question. I think four things will happen going-forward. There’ll be improvements in yields as well as improvements in underlying sort of productivity and operating leverage and scale as the volumes go up. I think the yield story is not done fully yet. We’ve gone from about 10.87% to 11.3 and as I mentioned, the 11.3% in Q4 includes HPCL, which is a shorter distance and hence a lower yield customer. So actual yield inflation has been more than that. I think yields will continue to go up. Most of the new business that delivery is developing on a monthly basis actually is coming in at very healthy yields. I think that’s reflective of customers paying additionally for the express service that we provide. Customers are willing to pay an extra whatever INR1 to INR2 per kilogram for highly reliable express services pan-India.
So it’s difficult for me to give an exact forecast about how the yield will — will look every quarter because as HPCL grows, as we got — as we get more customers like this, short-distance customers, the yield will sort of bounce around a little bit. But net-net, I do think that the yield story is not complete yet. In terms of cost structure, obviously, one of the big things is just straight out operating leverage as volumes go up, margins have continued to go up. But as I’ve mentioned, there are very serious advantages that are now starting to show both because of the automation as well as because of our ability to yield manage the trucks, which is effectively to manage what goes into what trailers.
The other thing, obviously is as our trailer form factors evolve going-forward, which is still something which is in very early stages, we should see other additional benefits accruing to the PTL business. So it’s hard for me to sort of — let me put it this way. The important question at the start was, can the PTL business turn profitable? I think that’s been answered. Can we get to sort of 10% plus kind of margin? I think that’s also been answered. Will we get to our normative margins? I think we’re very confident. Can margins float above even what the normative margins are that we’ve said in the past. I think even that’s now looking like a real possibility.
Aditya Mongia
Understood. One more question from my side. Sahil, this is on the Express Parcel segment. Now as you said, last two sluggish years have made you even more competitive. You’re now adding another acquisition that makes your scale also go up. As you think through what more needs to be done to kind of increase the share of the captives, is there something different that needs to do or is it just a kind of wait-and-watch clean? How should one think through it? Because it’s just — from a cost perspective, that was the only reason why outsourcing and sourcing decisions have to be taken as it’s just becoming a little bit more clearer of how the captives should be thinking about it? And part B of this question is as in at some level, the fact that delivery may be the only large surviving third-party kind of option for captives. Would there be other reasons why captives may think very differently about in-sourcing and outsourcing and how to tackle that situation?
Sahil Barua
So I think in terms of what delivery will have to do differently, I think there are a few things in our discussions with our key strategic customers, and we’ve had several over the last couple of months, I think everyone is looking for kind of for lack of a better way to put it an off-ramp from captive towards third-party logistics and are trying to find the right engagement model. I think there are areas where captives — captive operators have realized that they are particularly uncompetitive.
And so even rather than taking sort of a one-size fits-all reduction in captive share of wallet, they’re taking a more nuanced approach, saying there are certain categories that it makes more sense for a third-party to operate, for example, heavy goods or certain kinds of destinations or certain kinds of distances or certain kinds of origins or certain times of the year. So I think those are discussions that are ongoing. And as I mentioned, I think rather than a wholesale shift from captives, I think this kind of piecemeal shift quarter-on-quarter, quarter-on quarter-on-quarter for the next several quarters is how we will go about it. It’s also more easily digestible than deconstructing an already built-out network.
So I think that’s the form this way. What Delivery will have to do is to build all these capabilities. See, we already have pretty solid capabilities on handling heavy, which is unique to us because of the PTL network. So we’ll continue to ramp that up. You know, some of the marketplaces also are expanding their own service offerings. Some of them, for example, have gone out and retail players have launched marketplaces. Now marketplaces are a specific area of competitive advantage for delivery. So as those grow, our advantages multiply.
The second is some of them, for example, are now trying to do more B2B. Now as they do B2B, that also is something that naturally comes to delivery better. So heavy B2B marketplace volume, certain destinations, those are the capabilities that we’ll have to build. Fortunately, none of them is radically different from what we do today. We just have to sort of identify these opportunities and have these discussions.
In terms of how the captives are thinking, see, it’s the same story. Financially, I’ve said this before, you know, the captive model is more expensive and a franchise-based captive model also delivers less reliable service than the delivery model. I think delivery being the only player or being a major player is not in and of itself something that I think the large marketplaces should worry about. We have a 14-year track-record of being a reliable partner and of being able to build capacity when they need it most. E-commerce is still a highly peaky business. As an example, May is a peak month, there will be — August will be a peak month. September and October will be peak months. December and January are peak months for D2C. And it’s difficult to build a network which has the capability to take all of that and really process it reliably. So I think the worries over-time should fade.
The second is we have a historical track-record of aligning our pricing with their own perspective. And so I do believe that what you’ll see from here on, if you ask me, is a closer, tighter and sort of more fruitful relationship between Delivery and our largest marketplace clients.
Aditya Mongia
Those are my questions and all the very best. Thank you so much.
Baiju Joshi
Thank you, everyone. That was the last question. Please reach-out to the IR team for any further questions. Before we end on behalf of Inquiry, I’d like to thank for the opportunity to host this earnings call.
Over to you, Sal, for any closing remarks.
Sahil Barua
Thank you, Baju, for hosting us. Thanks for joining this slide and bearing with us. As I mentioned before, it’s a strong end to the financial year. We’re very happy with where we’ve ended-up, especially express margins have remained constant despite headwinds in the industry. And in the PTL business, we’ve seen significant improvement in overall margins and also significant growth Y-o-Y. I think the last two years have really been about consolidation. It’s been a slow grind in an industry that’s faced a tough phase. We believe that as this industry consolidates deliveries in a very solid position. And the foundation has been built. We’ve had a good start to fiscal ’26 and hopefully this will continue. So thank you all for joining once again., thanks for hosting us and see you in the next analyst call