MAHINDRA LOGISTICS LTD (NSE:MAHLOG) Q2 FY23 Earnings Concall dated Nov. 07, 2022
Corporate Participants:
Shogun Jain — Chief Executive Officer
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Yogesh Patel — Chief Financial Officer
Analysts:
Mukesh Saraf — Spark Capital — Analyst
Damodaran Narayanan — Acuitas Capital Advisors Private Limited — Analyst
Pranay Roop Chatterjee — Burman Capital Management Private Limited — Analyst
Sachin Trivedi — UTI AMC Ltd. — Analyst
Vikram Suryavanshi — PhillipCapital (India) Pvt. Ltd. — Analyst
Alok Deora — Motilal Oswal Securities Ltd. — Analyst
Abhishek Ghosh — DSP Mutual Fund — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Mahindra Logistics Limited Q2 and H1 FY’23 Earnings Conference Call. We have with us from the management, Mr. Rampraveen Swaminathan, Managing Director and CEO; Mr Yogesh Patel, Chief Financial Officer; and Mr. Shogun Jain, Strategic Growth Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shogun Jain. Thank you, and over to you, sir.
Shogun Jain — Chief Executive Officer
Good morning, everyone, and thank you for joining us on the Mahindra Logistics Limited Q2 FY’23 earnings conference call. We have with us Mr. Rampraveen Swaminathan, MD and CEO; and Mr. Yogesh Patel, CFO, of the company. I hope everyone had a chance to view our financial results and investor presentation, which were recently posted on the company’s website and stock exchanges.
We will begin the call with opening remarks from management followed by an open forum for Q&A. Before we begin, I’d like to point out that some of the statements made during today’s call may be forward-looking in nature and a disclaimer to that effect has been included in the earnings presentation, that was shared with you earlier.
I now invite Ram, MD and CEO of Mahindra Logistics Limited to make preliminary remarks.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Thank you, Shogun, and good morning, everyone. I hope you and your loved ones are doing well and safe. I trust you all have had a chance to view our presentation and financial results, which is available on the stock exchange and our company’s website. Pursuant to queries in past earnings calls, we have expanded the information provided around that three business segments, the 3PL business network services and Mobility as well as details around MLL’s standalone and subsidiary company performance.
Before sharing specific commentary on operations, order intake and key corporate developments during the quarter, just sharing quick update on the external environment and trends in our end markets and businesses. We will then discuss our financial performance in Q2 and H1 FY’23 and our focus areas for the remainder of the year.
Let me just quickly begin with external environment in our end markets. Leading economic indicators just transportation, warehousing and inventory ideally indicate potential performance of the overall economy. Q2 FY’23 market cool-off in key commodity prices, including those of base metals and crude oil as against Q1 FY’23 period, which had witnessed elevation in commodity prices. To curb prevailing inflation, the RBI has adopted a part of aggressive policy tightening. In addition, demand situation has broadly been stable compared to the previous quarter but the rural demand remain muted due to inflation’s impact on disposable income. Input costs, especially those connected to the price of crude oil and palm oil, have stabilized after a period of increase. Due to the stronger monsoon, the going ahead rural demand is being viewed with optimism.
We entered Q2 of FY’23 with an optimistic outlook on demand with the advent of the festive season and some sector level sales, but demand has remained muted across many categories, especially e-commerce. While the sector has seen higher value growth in the momentum in terms of demand, underlying volume growth has been lower than anticipated or forecasted by our enterprise customers. The operating environment remained challenging in Q2 FY’23 from multiple factors. During the quarter, as auto demand went up, we did witness significant shortages in supply of car carriers in some parts of the country, which resulted in a tightening of purchase price and an increase in the trend. Vehicle and driver shortages were also there in some other segments. During the quarter, we saw increases in costs related to our frontline workforce and outsourced manpower, which specifically impacted our 3PL contract logistics business.
International cross-border movement continued to see downward pricing corrections, especially for ocean cargo on the Asian and European lanes. These factors have an impact on revenue and margin for forwarding business. A key announcement or policy shift during the quarter was the announcement of the National Logistics Policy. The National Logistics Policy aims to promote seamless goods movement while also increasing the competitiveness of Indian industries through better logistics infrastructure. While Gati Shakti is focused on the creation of physical infrastructure, the NLP will concentrate on logistics across shipping, storage, inventory and investments in digital systems and processes. NLP is all-encompassing from a strategic view across the problems of high cost and low efficiency and by focusing on building abroad interdiscipline cross-sectoral and multi-jurisdiction framework for improving the logistics ecosystem.
The policy stated objective that increase the competitiveness of Indian manufacturing exports and accelerate the nation’s economic growth by improving logistics infrastructure and reducing the overall cost of logistics. The goal then is to build a world-class infrastructure for logistics, which is on par with many other countries in the world. The NLP thus willing to cut logistics spending from approximately 14% to 16% of GDP today, gradually towards and worldwide average of around 8% of GDP by year 2030. In line with this, the value of the Indian logistics market is expected to [indecipherable] significantly from its current value during the next two years. The new ONGC initiative holds exciting prospects for providing more open services and infrastructure especially in the last mile and we are looking forward to, be part of the same.
Let me now move on in [indecipherable] about our end markets and, of course, beginning with the automotive industry. Since last year, the auto industry has been seeing an uptick in demand with most categories showing encouraging traction. Since demand drive was still functioning and channel filling was observed prior to the festival season, the longer-term outlook continues to remain optimistic. As chip shortages reduced ability to fulfill demand has increased across the board and I think across broadly Inventory has increased leading up to the festive season.
As a result of rising costs for raw materials, of course, many OEMs have reset prices. Also, there is a significant addition of new models which are creating greater pattern of demand across — right across the industry both in terms of SUVs and other passenger vehicles and commercial vehicles. Demand for entry level two-wheelers and PVs continue to remain weak which has been offset by strong urban demand, it’s for SUVs. Commercial vehicle retail fell due the seasonality, but we expect that to be revived especially driven by high infrastructure spending and revival in freight movement as [indecipherable] actually saw a very positive trend in terms of broad freight carriage.
The festive season and lower supply chain issues due to chips has resulted in broader availability and movement of products, as OEMs increase volumes to fulfill demand. The consumer durable industry, after robust summer, the consumer electronics industry traditionally experiences some slowing of activity in this quarter due to seasonal factors, as well as demand moderation because of higher prices and the subsequent reallocation of spending towards other forms of recreation.
Margin pressure has also been witnessed in the industry as a result of cost-related headwinds and increased competitive intensity. Our leading brands and distribution channels are still hopeful that the festive season will see a strong return to healthy demand. Sales of durables on Amazon’s Great Indian Festival and Flipkart’s Big Billion Days have seen an uptick. However, demand for entry-level products has remained weak as inflation has had an impact. The demand for lighting products has not been significantly impacted, then the industry continues to see another bust offtake. The broad softness has persisted in the last few months and we estimate this to continue.
Moving on to the e-commerce industry, the e-commerce industry, the growth has been fueled by multiple factors including better logistics, higher level of [indecipherable], greater technology-driven platforms, increase on main shopping offers and a broader level of digital adoption post COVID. In contrast, the modern Indian logistics sector comprises domestic and international elements with respect to serve the supply chains, and production. During the last few years, there has been a dramatic rise in online adoption and this trend is predicted to continue. Companies that specialize in providing logistics services are directly impacted by the expansion of the industry. Many of the e-commerce companies are turning towards increased outsourcing as a way to rapidly expand network and accelerate order fulfillment.
While our broad long-term macros are positive, demand has been subdued during the festive peaks earlier in the quarter and volume has only shown moderate growth with continued pricing pressures. The significant expansions in the past few years have added a lot of network capacity and [indecipherable] shifted more towards consolidation especially among marketplaces.
Moving on to Mobility. Enterprise Mobility segment is showing pick in demand [indecipherable] work from office policy. And therefore we have seen a 20% to 30% uptick in trip levels. However, work-from-home remains night shift operations which are significant use-case for enterprise transportation and that has impacted the scale and the speed of the recovery. We remain committed to expanding in this segment through a focus on service, quality, safety and optimizing our journey towards electrification.
The frequency of business travelers and personal travel in India has increased dramatically in the recent past as we return to a post COVID environment or post COVID level of of activity there. Overall, we are seeing this flowing to a moderate growth in the enterprise part of mobility business and a 40% to 45% growth in airport transportation-driven services provided by Meru.
If I If I sum this all up, I think across the quarter, we are in the midst of a strong auto recovery, right, the farm environment is stable and demand patterns across other markets are varying with short-term signs that have been more muted. The operating environment on the supply or the cost side has been impacted by inflationary trends in parts of the transportation sector and rising frontline and operating costs.
If you look at our business, our 3PL and network services businesses continue to see growth in volume in the first half of the year and the quarter just gone by. During the quarter, the 3PL business grew by 32% on a year-on year basis and for the first half it grew by 35% driven by strong performance in auto and continued growth in our existing operating sites. We continue to see volume growth and demand for integrated solutions over the past few quarters. The farm sector continues to do well, positive atmosphere prevails, as the kharif harvest approaches and commodity prices remain stable and we are optimistic about growing performance there.
Within the supply chain businesses or the 3PL business specifically, the M&M business grew by 47%, the robust drivers especially on the auto side of the business. The non M&M has seen business grew by 12% driven by continued growth in e-commerce, consumer and other markets. In the second quarter compared to last year, last year was exceptionally strong second quarter driven by recovery from the second wave of the pandemic, and this year, it’s been more muted right and therefore if, you look at H1 growth year-on year, non-M&M businesses for the first half of the year grew by approximately 20%. The share of solutions and warehousing grew by 14% year-on year. Sequentially compared to Q1 of of FY’23, we saw growth in 3PL volumes as well as growth in our network services businesses, Freight Forwarding, Last Mile Delivery and B2B Express grew by 18% on consolidated revenues in the quarter. The freight forwarding business growth has slowed down because of the pricing correction, but underlying volume growth remains robust and positive.
Before I talk about consolidated financial performance. I’d like to spend a few minutes to also talk about recent costs we’re developing and as well as the performance of our subsidiaries. So let me just begin with acquisition of The Full Truckload or express business from — of Rivigo. We recently entered into a business transfer agreement with Rivigo Services Private Limited and its promoters as of September 26, 2022 to acquire the B2B Express business of Rivigo including all rights, titles, beneficial ownership and interest thereof on [indecipherable] sale basis. The scope of the transaction also includes the complete technology stacks and the IT usage of the Rivigo brand.
Rivigo founded in 2014 pioneered the relay trucking model that relies heavily on strong technology — technological capabilities. The acquisition will strengthen our company’s B2B Express business by leveraging and utilizing Rivigo’s large network of 250 plus processing centers and branches covering an area of more than 1.5 million square feet and more importantly actively leveraging the strong technology capability. We believe that there are strong synergies across network team and customer service. Rivigo’s operations network covers more than 19,000 [indecipherable] across India and providing significant opportunity for us to collectively grow the business.
Over the last few years, Rivigo Off Truckload business has had challenges, right. And those especially got accelerated during the COVID period. However, despite the fluctuating revenue levels, we believe the quality of the services remain very strong and underlying network and technology architecture it top-quartile. The revenue generated by Rivigo Express business in FY’22 was INR371 crores. The Express business EBITDA is currently negative largely driven by the operating cost structure. We have very defined plans to drive synergy in combination of the businesses and the focus around cost optimization and then several levers, we are confident the company was beginning begin to generate positive EBITDA in the next few quarters. And then of course we will share progress of that along the way.
During the quarter, we also incorporated wholly-owned subsidiaries, V-Link Freight Services Private Limited in Mumbai, was established in September. The company has an authorized share capital of INR5 crores and INR1 crore in paid-up capital. VFSPL will engage in cross-border logistics supply chain management, freight forwarding and air charter businesses right for our customers in India and across — and outside.
Let me also quickly talk about some of the other important subsidiaries. Meru, the mobility business of Meru, as you all know, has been focused on B2C and airport movement across five major cities in India, while the segment was impacted by COVID and over the over the last few years by varying demand and supply patterns, since the acquisition, the operating rigor and the focus on cost control has started showing results with increased levels of synergy at an operating level between the Meru and Alyte businesses. Consequent to that, in the first half of the year, revenue was INR44.6 crores as compared to INR23.9 crores in H1 FY’22, a significant growth level. Profit after taxes, our losses at the PAT level have narrowed down to INR4.2 crores in H1 FY’23 compared to a loss of INR10.8 crores in the first half of FY’22, right, so significant reduction in our losses as we drive those synergies and cost optimizations.
Whizard, this is a last mile delivery business, which we invested in earlier this year, has been scaling up its operations as well, revenue for H1 FY’23 was INR62.4 crores as compared to INR52 crores in H1 of FY’22. We continue to make investments or support investments in that business to expand the offerings around micro fulfillment and B2C and also invest in expanding the network and the technology infrastructure of the company. As a result of those investments, the company continues to have an impact of that. PAT losses for H1 FY’23 were up marginally from INR1.9 crores in H1 FY’22 to a loss of INR2.8 crores in H1 FY’23.
2 x 2 Logistics, the assetised car business has obviously been seeing disruptions for sometime now, right, over the last year we are due to retrofitment and rebuild reasons, had a substantial amount of the seat offroad. We have started — completed retrofitment for several parts of the fleet and operations have resumed and at the end of the quarter more than two-thirds of the fleet had been redeployed, right, in operations. We continue to make that investment to complete the retrofitment and redeployment of the assets. Overall the car carrier industry is seeing for order positive outlook in terms of demand and we believe on completion of the rebuild — of retrofitment, the business will be well-positioned to show a strong recovery in revenue and earnings. For the quarter gone by, the business has made a loss of INR1.1 crores in Q2 FY’23 which has been marginally better than a loss of INR1.2 crores in Q2 FY’22.
Let me now share consolidated financial performance for the quarter. Revenue for Q2 FY’23 increased by 28% on a year-on year basis to INR1,326 crores. Sequentially compared to the first quarter of FY’23, revenue increased by 11%. Revenue from supply chain management including our 3PL and network services businesses contributed 95% of overall revenue and the mobility businesses contributed for 5% of overall revenue. Gross margin on fully consolidated basis stood at 9.7% in Q2 FY’23 compared to 9.8% in Q2 FY’22. While gross margin was impacted favorably by volumes and underlying cost movements, it was impacted unfavorably due to 2×2 operations, drop in margins of the forwarding business and an increased shift towards in terms of product mix towards full truckload transportation in our 3PL business.
EBITDA for the quarter stood at INR70.9 crores, up from INR49.2 crores in Q2 of FY’22, and PBT on a fully consolidated basis was up 118% from INR7.7 crores in the prior year’s Q2 to INR16.7 crores in Q2 FY’23. PAT was up by 145%, right, to INR11.3 crores in the quarter. These are the consolidated basis. Prior to consolidation of Meru and the share of Whizard, PAT grew by 50% year-on year from INR9.3 crores to INR14 crores.
The proportion of revenue from the Mahindra Group comprised 53% in Q2 FY’23. Let me just also share a few more details around the segment level performance. Revenue from supply chain, it increased from INR978 crores to INR1,263 crores, up by 29%. The mobility segment grew by 15% to quarterly revenue level of INR62.8 crores. SCM revenue has seen an uptick due to growth across our 3PL business and continued growth in our network services businesses.
Our revenue from the Mahindra Group supply chain businesses grew from INR483 crores to INR708 crores in Q2 FY’23. Our non-M&M SCM businesses which include the 3PL and network services businesses grew from around INR495 crores in Q2 FY’22 to INR555 crores in Q2 FY’23. Our warehousing and value-added businesses for the non M&M SCM business has grown from INR201 crores to around INR223 crores, registering a growth of 11%. Share of warehousing and value-added services in non M&M SCM businesses has reached 40.2%.
As we move forward, we will — we remain committed to our long-term focus on growth, right, to consistently lead out our vision for the business which is a combination of strengthening, expanding our core 3PL business, diversifying in service lines around freight forwarding, B2B Express and last mile, right, and remaining focused on building a diversified market mix across automotive, e-commerce, consumer durables, pharma and other. We also remain focused on enhancing capital efficiency, right, the focus on driving down operating costs and increasing the productivity of our business. As we keep investing in some of our newer businesses, right, we are seeing an impact of that from a margin perspective but those businesses we remain confident will turn around in the coming quarters as we’ve seen increased scale and margin expansion, those should accelerate the earnings in the company. In the short term, we anticipate increased demand from our existing accounts, despite softer demand, right, and growth in our global forwarding business, right, and we remain focused on cost reductions and we continue to invest in technology to drive differentiation for our customers, right, and value for our customers.
With this, I will open the floor for questions and answers.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Mukesh Saraf from Spark Capital. Please go ahead.
Mukesh Saraf — Spark Capital — Analyst
Yes, good morning and thank you for the opportunity. First question is on the Express business within your network services. I mean we see that Y-o-Y obviously the gross margins have declined significantly, it was 0.8% positive last year same time and now it’s negative, while revenue growth is about 18%. If you’d give some kind of sense on what — I mean what has led to the margins declining because your peers that we see the numbers, the B2B Express business, they all had around the mid-teens margins. While our scale is still lower, could you give some kind of — there also in relation to this, in terms of the fleet, in terms of the sorting centers, do we have dedicated fleet separately for this business and sorting centers as well or are we able to kind of utilize the existing fleet and sorting centers for this business?
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Yeah, sure. Mr. Mukesh, first, hi, yeah, so I think the Express business from an operating model perspective, we obviously run a collection of hubs serving around 8,000 pin codes directly and obviously a set of extended pin codes across the country. From an [indecipherable] perspective right now, those hubs that serviced through scheduled linehaul, right, which operate between them, these are vehicles dedicated to that business, right, we don’t own the vehicles, we obviously [indecipherable] them but these are — this is a network which operates on a time-defined basis and therefore dedicated to that end of the business. What has changed obviously our margins Year-on year, as you are seeing, you already pointed out right now already, we are in the process of expanding the network right and scaling that up, and therefore through the quarter we have obviously added new locations, new geographies, right, to serve them and as you scale up between the Express business, you’re investing in the network, you are investing in the network ahead of the demand because customers come up after you have an operating offering and I think it was therefore — most of the Express business is through that scale-up period, right. They obviously do have reinvestment cycle.
At the same time, I think it’s pertinent to note that if we look at the Express business at a quarterly level while we have seen swing in terms of margins, if you compare H1 versus H2, right, we’ve actually seen — you would actually see the margins have improved, right. So that’s just an additional data point. Of course, as we complete the Rivigo acquisition, we will drive the integration of our existing Express business and that business together. As you know that’s more strategically been driven by the drive to build scale, right, on the back of strong operating systems and expanded network and really great technology, right, and therefore I think that combined — the combination of these businesses will obviously I think allow us to change the slope of massive expansion of the network but also the movement of margins. We do obviously expect that in the medium-term margins will [indecipherable] will be similar to comps, right, from the market.
Mukesh Saraf — Spark Capital — Analyst
And this is continuation. I mean we are at INR200 crore annual kind of run rate for this Express business and Rivigo is about INR370 crores business that we have acquired. So are we looking at say INR600 crores kind of a number on an annual number, sometime next year?
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
No, so Mukesh, we are actually at — around last 12 months were INR170 crore to INR180 crore revenue. H1 it is actually INR97 crores.
Mukesh Saraf — Spark Capital — Analyst
Yeah, so annual INR200 crores is what I was looking at.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
So roughly around INR200 crores, but if — then you just deal with LTL last year numbers, 180 plus 370 adding up to around INR550 crores, right, it is number for the last financial year and we obviously are looking at your fairly strong growth there but the immediate and the short-term focus is to actually drive really strong service quality and ensure that we protect yield, right, and we are optimizing costs, right, because I think if you look at — to do — this is, I mean if you get integration wrong, you can actually lose customers in this industry as well.
Mukesh Saraf — Spark Capital — Analyst
Right, right. Absolutely right. And just my second question again on the network services, we have also kind of highlighted the Last Mile number there and so just wondering this Last Mile is a dedicated service that we provide aside of the last mile we might be doing the part of our SCM more integrated service, so this is just a dedicated last mile service that we provide?
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Yeah so this is just — this is just — this part of the business the last mile gets sold as a service, right. So this is not a thing we should do an integrated solution level that normally will get rolled up on the 3PL part of the business, delivering stations, delivery associates, electric EV cargo based long delivery service, and the network which is around across more than 120 cities in the country, right, [indecipherable] services. This also if I may add, excludes revenues of Whizard, right. Whizard revenues are not consolidated, combining, as you have seen, Whizard was around INR52 [ Phonetic] crores in the first half of the year and so ew combined both of those, the total last mile delivery business will probably be around — the total magnitude of that would be around INR160 crores on an H1 basis, right, growing at roughly that 20%, 25%, level. Our own last mile delivery business actually grew 55% last quarter, as we penetrated some newer segments like [indecipherable] and so on.
Mukesh Saraf — Spark Capital — Analyst
Got that. And my last one is. I mean we have given indicative — I mean the gross margins for various segments, could you kind of give an indicative gross margins between say Mahindra and non Mahindra and say transportation, warehousing as well. And it will just be helpful in understanding how the mix changes, because we’re seeing a strong growth in automobile and hence Mahindra is going very well and I think transportation also is linked to that. So some things there will help.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Sure. If I just — I think as we mentioned before in prior earnings calls as well, Mukesh, we don’t differentiate from Mahindra versus non-Mahindra account. The margin profiles are driven more by the kind of service norms we do, right, the Mahindra business is lagely full truckload transportation, right, and network it’s right, cross docks and levels of of postponement in the supply chain, right, as opposed to non Mahindra businesses which of course actually have a larger share of warehousing and solutions up around 40% of business, right. So it’s a bit unfair to actually do them from a competitive perspective. What I can say as we have said earlier on is that our transportation businesses generally have a gross margin around a high-single-digit level, right, and our warehousing solutions businesses generally have something in the mid-teens, right. And therefore, that gives roughly what carries theweightage of the margins. Now couple of things. I do want to add here which I think would be the relevant is, one, obviously, you’ve seen, as I mentioned in my opening comments, a fairly significant inflationary impact from a car carrier perspective, right, car carrier shortages have been significant, that has obviously had a trailing impact on margins in the second quarter, right, and will probably flow through a little bit in the third quarter, but we expect that to get rebalanced as our partners add more capacity in the coming months, right, that’s one thing, and of course, we do with the Mahindra business actually operate through a fair amount of — through a combination of management fees or service fees plus the fresh pair of savings. And we try to beat the level of volatility in the network — the level of savings in the second-quarter had been impacted, but that’s something again which we believe will catch up through the rest of the year.
Mukesh Saraf — Spark Capital — Analyst
Right. Got that. Thanks for this, Ram. I’ll get back in the queue. Thank you.
Operator
Thank you. The next question is from the line of Damodaran from Equitas Capital. Please go ahead.
Damodaran Narayanan — Acuitas Capital Advisors Private Limited — Analyst
Yeah, thanks for the opportunity. I hope I am audible.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Yes, you are.
Damodaran Narayanan — Acuitas Capital Advisors Private Limited — Analyst
Yeah. Firstly, thanks for the better disclosures that you’ve come out with this time. So a few questions around that. Firstly, between the Network Services business and the 3PL business, so what is the customer overlap between all the businesses, 3PL, Freight Forwarding, Express, and Last Mile? And a related question to that is, what is the internal management structure to ensure that there is sufficient management bandwidth that can be given to all these different businesses, given that you have dedicated competitors in each segment and there will be different metrics and you are a challenger? So just wanted to hear your thoughts on that.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
So it’s a great question, Damodaran, and thank you for that. I’ll just take them in some sequence, and if I don’t follow your order, please bear with that. So I think just from a customer overlap perspective I think my customers count perspective there’s probably a 25% to 30% overlap across customers. So obviously, we do cross-sell, upsell to our clients across the board.
What I think differentiates these businesses is the way our customers buy these services and what drives value creation in the business. So in the Network Services businesses, a lot of times the customers just buy the basic service itself. There is not — it’s not a multi-service integrated solution. It’s normally a customer wants to move load across countries, wants to actually move packages across geographies by surface, or wants to do Last Mile deliveries in a specific part of the city itself, or given [Phonetic] on a specific state. So they tend to buy services on a service level basis and don’t buy a bouquet of integrated offerings. So the same customer, therefore, buys it very differently at times, and that’s why we actually keep them the way they are.
The second part of it is the way we create value in the 3PL business through integration and solution design and domain level capability. In the Network Services business, it’s really around having the infrastructure and driving utilization and service quality. And therefore, these businesses are kept differently and measured differently because of that.
The other question was around management structure, and obviously, the 3PL — each of these businesses, essentially has an independent or a clear P&L owner, and each of those P&L owners essentially are — mostly [Phonetic] the P&L owners are part of our company leadership team, and they have individual P&L which they have end-to-end accountability to drive. We have obviously programs inside the country which are enabled on driving synergy, both in terms of demand and supply. So, for example, weekly procurement essentially happens through a central group. It supports all parts of the business. We do obviously work on customer account management across multiple service lines. But individually the businesses actually have specific P&L managers or leaders, and they manage the operations — the demand generation, operations, and service quality [Indecipherable]. Hope that answers the question.
Damodaran Narayanan — Acuitas Capital Advisors Private Limited — Analyst
Yeah. That’s I think fairly elaborate. The other question that I had was your disclosures on Rivigo. So can you just give some more color on the profitability metrics? What sort of EBITDA loss is it making right now? And what’s the plan to turn it profitable? Where will you generate the cost savings from? Basically [Indecipherable].
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Yeah. I think from the past perspective obviously Rivigo has always reported numbers on an integrated basis between FTL and PTL. And therefore, the blended numbers are not fully reflective, Damodaran, of the carveout of the business. The way we have done the BTAs, we have specifically carved out sections of the business, parts of business which constitute what we would like to cover in the transaction. And therefore, the blended earnings are not very reflective.
That said, obviously, today the business is probably at a minus 7% to 8% EBITDA level on point of time basis. Now what’s going to drive that value creation in the business on the combined business? So, first of all, I think as Mukesh asked earlier, our combined business is around — the combined Express business is around INR550 crores, INR560 crores and instead of operating two networks, we’ll obviously synergize that network. So increasing higher volume throughput through a combined network is one thing which is actually going to drive obviously lower operating cost at a network operating level.
The second thing obviously is that route optimization and lean optimization across geographies and customer bands are focus areas to drive asset utilization or trip utilization across vehicles, and we expect that utilization of all the vehicles will improve and that will drive down costs.
The third thing, of course, is that we are looking obviously at higher purchasing levels. At MLL we acquire and buy significantly higher level of FTL transport capacity, and that synergy is something which will bring to bear in the combined business and that should give it leverage.
And lastly, the management or the operating structure model, I think just building on what I already commented to Mukesh, Damodaran is we operate on shared services model. Individual businesses are responsible for demand generation, operation service quality, but we don’t really have — but overheads are shared across multiple segments, offers a much larger revenue base. And that should allow us to optimize the overhead structures for the business.
So combined to these three or four broad levers, Damodaran, is what — along with volume growth, as you combine go-to-markets, we expect to be able to get the combined business into a positive EBITDA zone in the coming quarter.
Damodaran Narayanan — Acuitas Capital Advisors Private Limited — Analyst
Sure. Thanks for that. Just one last question from my side. We saw some working capital deterioration this time around. So could you comment on the levels of sustainability of working capital and what’s the reason for this deterioration?
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Sure. Damodaran, Yogesh will take that.
Yogesh Patel — Chief Financial Officer
Damodaran, working capital days as of end of September stood at 13 days, which is in fact a change of two days from what we were earlier when we started this financial year. The main reason, this is the period of time usually middle of the year it balloons up a bit given the customers usually — during the festival season, the payouts towards bonuses, etc., are higher and there is a little bit stretch on the days sales outstanding or the receivables, per se. So that’s the primary reason for this two-day delta work you see in working capital deployed in the company, which as we come towards end of Q3 and then Q4 is always a improving trend from that perspective. But usually this is, I would say, a little bit of cyclicity and a middle of the year phenomenon [Phonetic].
Damodaran Narayanan — Acuitas Capital Advisors Private Limited — Analyst
Yeah. But even if I look at September to September, it deteriorated fairly — it’s almost half. So even — these seasonal issues would have impacted last H1 result as well?
Yogesh Patel — Chief Financial Officer
No, Damodaran, I think if you’re looking at an absolute value perspective, absolute value would have gone up because of the size of business, which has gone up itself. What I was trying to do is trying to explain to you saying that one is the absolute working capital deployed because we are an asset-light company. From that perspective, our predominant deployment in terms of investment in the business will be from a working capital perspective. And as your business volume grows, your commensurate deployment of working capital would be higher.
Damodaran Narayanan — Acuitas Capital Advisors Private Limited — Analyst
Yeah. Yogesh, I’m just looking at the cash flow generated, that’s — it’s INR30 crores for this half year versus INR97 crores for the last half — I mean, H1 FY ’22.
Yogesh Patel — Chief Financial Officer
Right.
Damodaran Narayanan — Acuitas Capital Advisors Private Limited — Analyst
So, there’s a sharp jump in trade receivables around INR235 crores [Phonetic], right? If you’re saying that it’s just seasonal, then that impact should have been there in the last September results as well, September FY ’22. That’s where the question was coming from.
Yogesh Patel — Chief Financial Officer
Right Damodaran, so that last September — with last September’s quantum of business which we are doing, this September’s I’m saying some — if you convert that back to days, right? So I did come back in the beginning itself to say that how does this work with receivables, and that’s the real reason. So I confirmed to you that, yes, that has been thing. And the reason why this is, is cyclicity and be sure of that that this would rationalize. This is the peak season as well as festival season, both leads to this particular delta.
Damodaran Narayanan — Acuitas Capital Advisors Private Limited — Analyst
Sure. So you’re saying that working capital you should not expect any sizable movement in terms of number of days on an annual basis [Indecipherable]. This is just seasonal.
Yogesh Patel — Chief Financial Officer
That’s correct.
Damodaran Narayanan — Acuitas Capital Advisors Private Limited — Analyst
Okay. Thanks, Yogesh. Thanks, Ram.
Operator
[Operator Instructions] We have the next question from the line of Pranay Roop Chatterjee from BCMPL. Please go ahead.
Pranay Roop Chatterjee — Burman Capital Management Private Limited — Analyst
Hi, Ram. Hi, Yogesh. Good afternoon. Can you hear me?
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Hi, Pranay.
Yogesh Patel — Chief Financial Officer
Good afternoon.
Pranay Roop Chatterjee — Burman Capital Management Private Limited — Analyst
I just had one quick question on the same working capital and cash generation. So if I look at the free cash generation in H1 2023, it has been negative and largely because of working capital outflow, which Yogesh mentioned is because of elevated DSOs in the H1 of the year, right? So if I compare versus last year, it’s correct that the DSOs, when you include accrued sales, is elevated, and then it sort of comes down as the year goes by. But what I also see is that your DPOs are worsened. You were able to leverage your DPOs to a large extent in the last two, three halves, but that has normalized right now. Any comment on whether any vendor relationships have changed in terms of contractual DPO numbers? Anything that has happened on that front?
And number two, any comment on free cash generation going ahead? Should we able to see a positive outflow, or due to the new businesses normalizing, we should expect a negative flow for a few quarters?
Yogesh Patel — Chief Financial Officer
Pranay, you’re right. So from a number perspective itself, cash generating from operating activities for first half has been negative close to the INR25 crores number. And on that the payables piece, I think what I mentioned probably from a — there are two, three things happened from a macroeconomic factors. It’s what Ram detailed in terms of our operational metrics itself. One is the whole inflationary effect, which has gone through, which has, from a vendor ecosystem perspective, obviously, there is a little bit more burn in cash from their perspective as they operate. While there is no change in terms from our perspective, our — again, there’s a seasonality, so during this time, even our vendor would expect us to clear this off, per se.
Second is our share of business towards warehousing and value-added services has a larger deployment of manpower and rental fees, which again is — goes in ahead of the cycle from manpower costs does get paid out every month from a calendarized perspective. So these couple of things. But from — again, as I mentioned in earlier question from Damodaran as well that if you were to look at our asset-light business, obviously, is — or the terms what we engage with our customers and vendors, both combined [Indecipherable] towards a particular number of days of working capital, which we steer our business with, and we should get back there. But the reason I think is common here, from the inflationary or availability aspect of supply, be it on the auto carrier side, which Ram mentioned earlier, and the seasonality linked to the festival season where the payables also does get paid out from that perspective. So these couple of things on the payable side.
Pranay Roop Chatterjee — Burman Capital Management Private Limited — Analyst
Got it. Okay. And my second and last question is more strategic in nature. So over the last couple of years, Mahindra Logistics, as a business, has shown increased focus on the Network Services side of things, which obviously, all of them are in investment phase and have limited scale. So right now, we have the Express business, which is at about 0% GM. Your Last Mile is also at a 0% GM. Rivigo is going to get integrated and your Meru Cabs is also scaling up at this point of time. My question is, internally, when you discuss at a consolidated level, do you have a broad, firstly, a revenue target and a broad PBT target in mind? So I understand it’s going to be very difficult to predict bottom line profitability for the next, let’s say, three, four quarters. But at a management level, do you have targets in mind in terms of, look, this is what we would like to achieve out of all entities once they get normalized [Phonetic]. And especially in terms of cash generation, do you have any internal targets of turning cash profitable, let’s say, next year or in two years’ time? So if you could just discuss these high-level management targets.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Pranay, on the cash, I wouldn’t petite the cash metrics which we have seen in the first half are a continuing metric, right. I think we have to just go and look back at the recent and past. I think as Yogesh has already said, we don’t expect the working capital metrics to fundamentally change through this year. There are some parameters that sharpen, especially as demand patterns move across asset classes, right? But broadly, those should be in play.
That said, I think that’s a working capital factor. I think there is a broader portfolio element here, of course, right? So as you know, we have been adding more detail around — for all our benefit. The core 3PL business has also grown quite significantly over the last 3 years, especially in non-M&M share and in non-automotive share as we have built strong positions in consumer and e-commerce, right? And that business, from a margin level is also — is at a pre-investment level in terms of margin as we’ve expanded the warehousing business and tried to build a much stronger differentiation with technology. So that — it’s not like that business has not been a significant focus.
Clearly, the Network Services business is a very important focus for us. We are investing in it. And there is a scale point at which these businesses have an inflection point in terms of earnings. And if you actually look at our three Network Services businesses, the Freight Forwarding business has pretty much already been there. It’s at the 9% and 10% percentage gross margin level. It’s spread across quarters, it’s been growing and now has achieved scale, right? And therefore, that’s what our businesses should look like at scale in the Network Services piece.
Clearly, the Express business is an investment curve, right? And the Last Mile delivery business also our investment curves, both organically and inorganically. Scale is important in this business, Pranay. So we do obviously focus on driving that scale up. And add it all up, I think we’ve always said that we believe that what is critical for us as a company and what we think makes us unique is our focus on being a multiservice business and a multimarket business.
So the last two years in automotive was softer. Our nonautomotive businesses actually grew at a much faster pace. Today, as you have seen some impact of softness in some of our nonautomotive market, it’s automotive which is driving growth. And it’s this balance across sectors, which we have continued to invest in, which we think is very important.
Similarly, balance across service lines is very important. So while we focus on 3PL, sometimes 3PL will grow faster, but at a mature level, as we get the right scale across these businesses, we think the combination of those businesses is what makes more — has created value for our shareholders as well as for our customers because we can provide integrated solutions.
Now in terms of targets, I think each business actually has targets. Obviously, the 3PL business is a more mature business. It has separate cash and profitable targets compared to our Network Service business. But the overall portfolio is headed towards a broader direction, which we have said before as well, that we hope to become a INR10,000 crores company. That’s the aspiration. We’ve put it out there clearly in the public world. And we expect that secularly across segments, we should be able to continue to grow profit to pre-COVID levels. I think our pre-COVID level margins have been on 2% at a PAT level, and we expect to be — our aspirations are to be better than that as the portfolio matures over the next two, three years.
And most of the Network Services businesses should actually look like the Freight Forwarding business at maturity and scale. So that’s — as you know, we don’t give guidance, Pranay, but that’s the closest level of detail I could probably share with you.
Operator
Thank you. Mr. Chatterjee, request you to join the queue for any follow-up as we have several participants waiting for their turn. The next question is from the line of Sachin Trivedi from UTI AMC. Please go ahead.
Sachin Trivedi — UTI AMC Ltd. — Analyst
Hi, sir. Sir, just from one- to three-year perspective, again, not looking for a margin guidance, per se, but the warehousing business or the supply chain business that we operate in, how should we think about, let’s say, if I were to — if I don’t want to go into specific margin number, but what potential that this business will have in terms of profitability because we have scaled our non-Mahindra warehousing business substantially, but yet to see the results of that number — in the numbers since. So just if you can help us understand that side of it because that’s our core of the business and if you can help us with that.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Sure. So I think if you actually look at the business, again, you just need to divide this I think, Sachin, into three parts. So if you look at — because the margin when you see them is a consolidation of all three, but the drivers of the margins are quite different. So if you look at our core 3PL business and if you see the results, you will see that we are at a gross margin of around 11% in the second quarter, and that business historically — so that’s actually been into that 10% to 11% now, it’s probably in the high 10s. We expect to continue to focus on driving margin improvement of the 30 to 50 basis points at an annual level.
Now we’ve not — that business because of AS 116, we have obviously invested on expanding the warehousing network, and there has been a flow-through impact because of the way AS 116 gets accounted. Most of warehousing network actually services that business, okay? If you look at the Network Services businesses, we are roughly now around 20% of our revenue. But those businesses at that segment level are around 5% gross margin because they are in investment curve [Phonetic].
As I said earlier on, at peak, at scale, those businesses should also be at 10% plus in terms of gross margin with lower capital intensity, because we are not investing in the same level of warehouses, etc., which we would do in the warehousing part of our business. And therefore, that business should be at that level. And so as you look at this going-forward margin profile, I think the ramp-ups in different segments are different. The 3PL business is a business which is more core to us, the more established business model, and there we expect to continue to drive improvement in base margin acceleration [Phonetic].
The network businesses are where we are building scale. The growth will also be faster there. So there’ll be two factors, revenue growth will be faster and the higher revenue growth will also drive better margin performance. But that’s the way we drive our two- to three-year view on these businesses, Sachin. And obviously, we break those two- to three years views into more specific targets which are there for the individual businesses on a short-term perspective.
Sachin Trivedi — UTI AMC Ltd. — Analyst
Sure. That’s helpful. Thank you. I’ll fall back in queue.
Operator
The next question is from the line of Vikram Suryavanshi from PhillipCapital India Private Limited. Please go ahead.
Vikram Suryavanshi — PhillipCapital (India) Pvt. Ltd. — Analyst
Yeah. Good afternoon, sir. Sir, you talked about, I think, Network Services and growth and our focus of being a multiservice business. Just trying to understand, within that framework updating outlook on particularly non-Mahindra 3PL side of the business in terms of our focus on client addition and traction with the existing customers in terms of slightly better growth outlook for that kind of business, how we’re looking at there?
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
I think our growth outlook is I think, as we’ve said earlier on, I think the goal is to grow the non-Mahindra businesses, especially our 3PL part of it, by 15% to 20% every year. And to grow the overall non-Mahindra business, including Network Services by north of 25%. And if you look at this quarter, obviously, it’s been a bit lower. But if you look at H1 this year, I think combined — we’ve combined roughly a 20% year-on-year growth despite some of the slightly softer trends from in the recent months around some of our markets. Why I say H1 is important is because last year Q1 was COVID impacted and Q2 was COVID recovery. And therefore, quarter-to-quarter is not as accurate as H1 into H1.
So that growth is something which we are focused on sustaining. During the quarter, we have continued to add clients. This time because we added a little bit more detail around our segment performance, I did not cover acquisition of accounts in my opening comments. But I can share with you that we have continued to expand in — of course, we’ve had — we continue to have strong retention rate at a client number level across our business. And during the quarter, we have actually added more accounts. I think given the nature of the economy right now and the macros, I think obviously, this quarter, we saw more additions in the consumer and manufacturing business where we have added work with both — different manufacturing clients. But we’ve added some contracts in the e-commerce space. I think the pace [Phonetic] of that has come down, has been lower than the past there. Overall, for the quarter, I think we had quarterly order intake on the non-Mahindra side, mostly 3PL of around INR90 crores to INR100 crores of newer contract — on annual contract value basis. So that’s roughly the run rate we were on in the quarter in terms of order intake.
Vikram Suryavanshi — PhillipCapital (India) Pvt. Ltd. — Analyst
Okay, got it. And just to get feedback, the customers, when you talk to the new segments because we are seeing good response from consumer ecommerce or manufacturing, but customers’ ability to go to 3PL partners, is it becoming more and more aggressive, or it is still a slow process and people are taking their own time to migrate? Or how is that response in terms of different verticals, and to what the — basically speed which — is it like as anticipated or still we need to do a lot of work to really bring them on the table? So I just wanted to get that sense and how fast we can see that migration in India, the broader opportunity for 3PL players.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
The auto industry, I think, has always been a higher outsourcing industry in terms of 3PL. I think since GST — I think [Indecipherable]. I think ecommerce has also, as has been — as it was scaling up networks and volumes actually has obviously used a partner model quite aggressively to drive growth. And I think adoption in both those markets is very good. I think consumer durables, FMCG, FMCD, pharma, and other categories there. I think there, historically, obviously, those markets have been served through CFA models. Post GST, I think there has been a growth in traction quite significantly in that space. But it’s a very distributed network. So companies continue to move that — they don’t — very few companies are doing a lift and shift of an entire network. In fact, in the last 2 years, with all the variabilities of COVID, I think that has actually placed a challenge on companies in terms of redesigning their supply chain network because there are new considerations are there.
But I think the trend is fairly — is overall healthy. Our own estimates are, in India right now, the 3PL is around 6% of the industry is our estimate. And we think that given the trend around formalization, given customers’ drive towards more integrated solutions, and recent policy shifts like NLP, we think 3PL will probably become around 10% over the next four, five years.
Vikram Suryavanshi — PhillipCapital (India) Pvt. Ltd. — Analyst
Got it. Thank you very much.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Vikram, I hope that answered your question.
Vikram Suryavanshi — PhillipCapital (India) Pvt. Ltd. — Analyst
Yes, sir, that was helpful. Thank you.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Thank you.
Operator
Thank you. The next question is from the line of Alok Deora from Motilal Oswal. Please go ahead.
Alok Deora — Motilal Oswal Securities Ltd. — Analyst
Good afternoon, sir. Sir, my question was more towards Rivigo. Just wanted to understand, you had recently put up a press release on the delay in the closure of your transaction. So how are we — by when can we expect that coming in? And also, some color on what’s the — how much losses are there in that business? And by when we can see a turnaround there?
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Yes, so I think the — Alok, I think the delay in terms of what you’ve listed out was mostly on account of procedural delays and procedural factors. Obviously, from a governance perspective, we listed them out clearly. We have planned a certain schedule around it, but given that there’s also been a festive season and with Diwali and other vacations have come in, there’s just been procedural delays in that. I think as we stand right now, we probably expect the next — in the next couple of weeks, we will be able to close the transaction subject to all conditions being met from all parties and obvious terms have been adequately met.
Now I think from a profitability perspective, I think I indicated earlier on that the numbers have always been blended. So we don’t actually — are not really reflective of what we think. What we had estimated right now is that probably on a running rate — run rate level, the business is probably at minus — a negative 7% to 8% EBITDA. And that’s what we are hoping. And I think I already talked about the four levers which we are focused on to drive and get to a positive EBITDA level, combined in both our Express business which exists today and the business which we buy from Rivigo Services Private Limited.
Alok Deora — Motilal Oswal Securities Ltd. — Analyst
Sure. So overall, when we see Rivigo financials, it’s at around 45% to 50% loss. So Express business, you are saying it’s around 7% to 8%.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
No, I think that’s not — unfortunately, Alok, that’s actually not what I’m saying. What I’m actually saying is that Rivigo — RSPL operated on a certain blended model in terms of revenue, market, and cost structures. What we have done is we are essentially buying parts of that business. And the parts of businesses we are buying right now are at that kind of EBITDA level. As we buy the business, obviously, we have plans on trying to turn that around and restructure it. I hope that was clearer.
Alok Deora — Motilal Oswal Securities Ltd. — Analyst
Yeah. So actually, I was just trying to understand how much losses their express business has out of the total, because I think they have two businesses, one is the FTL and one is the express.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
I think it’s hard for me to comment on how their reported numbers were. I think that’s probably best for the RSPL management to respond to. And I avoid — I’d just not like to answer that. But as I said, we have given you clarity about what we are buying and roughly at a run rate which it is at.
Alok Deora — Motilal Oswal Securities Ltd. — Analyst
Sure. And also, sir, so we are going to pay around INR225 crores for that business. So how do we see the debt moving, because I think some bit of debt will also come up for this, right, because the operating cash flow might not be entirely sufficient to pay for this.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Yeah. So I think at this point, obviously, the business will be funded through internal accruals and debt. There will be a component of debt, clearly, which is there in the short-term, Alok. At the same time, I think exactly how the overall debt table will work out, we are in the second quarter — third quarter of the year. And we have sustained strong growth this year. So obviously, we have to look at our forward view over the next 12 to 15 months in terms of working capital requirements, organic capital investments, and investments in Rivigo. And we’ll build a consolidated view of that. Right now, we don’t have a specific set of numbers to share. But what I would say, Alok, is directionally, yes, there will be debt on the table.
Alok Deora — Motilal Oswal Securities Ltd. — Analyst
Just last question. So we are having these new businesses which are coming, which are at losses or at lower profitability. So for the next year or next couple of years, do we see the margins being at near about current levels or slightly lower than these numbers? Any ballpark range we can work with because earlier…
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Alok, so I think what I would say is I think it’s — I think every business is a slightly different frequency. So first, I think the 3PL business, I think we shared the margins with you on that, and we expect it’s in a stable basis and it’ll have organic margin improvement focus. If you look at within the Network Services businesses, there are actually 3 different businesses in 3 different stages. The Freight Forwarding business, Alok, is actually at that 10% gross margin level, and we’re scaling that business up. The Express business has obviously been where we are scaling it up now faster through the Rivigo — acquisition of the business from Rivigo. And the Last Mile delivery business is a business which is breakeven.
And I think these businesses each — we also have very different growth drivers for our portfolio, and they compete with different businesses. We compete in last mile delivery with last mile delivery businesses, in express with express companies. So I think it’s not — so I won’t call a specific number in terms of margin on a blended basis. I do believe that we will hold or improve, at this stage, our 3PL and Freight Forwarding margins. The other business is, obviously, as we build scale, we’ll have a multiplier effect from a margin perspective.
Alok Deora — Motilal Oswal Securities Ltd. — Analyst
Sure, sir. Thank you and all the best, sir. That’s all from my side.
Operator
Thank you. The next question is from the line of Abhishek Ghosh from DSP. Please go ahead.
Abhishek Ghosh — DSP Mutual Fund — Analyst
Hi, Ram. Thank you so much for the opportunity. A few questions. For the SCM part of the business, non-M&M, what will be the average tenure for a typical contract?
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
For the SCM part of the business, non-M&M, I think — it’s hard to tell some bellwether numbers like this. But I’ll say the [Indecipherable] warehousing and integrated solutions contracts would probably be between — would be three years an average — plus on average, if I had to take an average representative number. And I think the transportation contracts, depends on how much of network design they have on their FTL side and how integrated it is. But those contracts also range between up to around three years — two to three years. This is standalone transportation contract. If it’s integrated across the board, across transportation, warehousing solutions, it will probably be around three years as an average.
Abhishek Ghosh — DSP Mutual Fund — Analyst
Okay. Why I asked this question, Ram, is because a lot of those contracts which are signed in that FY ’19 levels or 2019 levels must be coming up for repricing now. So how do you look at the margin profile of those contracts? What you were getting in 2019, are you able to get the same margins, or has it improved, deteriorated because of the competitive scenario? I wanted to get some understanding around that.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Good question. I think if you look at our past, at least from the warehousing [Phonetic] and the solutions part, I think you would see that that business has grown significantly actually in the last 3 years. So a substantial part of it is actually not coming up for re-contracting, Abhishek, right now. But that said, I think the net numbers obviously show on net of any churn which might be there. From where I stand right now, I think on an apple-to-apple basis, we are able to, by and large, hold or even improve margins. And what I mean by apple-to-apple is that if your customers do sometimes change the scope of the contract, they do change a number of plants covered, number of locations involved. So those changes do happen. So it’s a very hard thing to perfectly predict. But I would say that if I had to do an apple-to-apple comparison, we are definitely able to hold margins on renewals.
Abhishek Ghosh — DSP Mutual Fund — Analyst
And would it be fair to assume that you have productivity gains in these and there’s a learning curve?
Mukesh Saraf — Spark Capital — Analyst
Yes, that’s why I said we’re able to hold or increase — expand margins, some part of how that gets shared, business productivity benefits, how much we share if the outsource [Phonetic] benefits our clients, etc., is a very case-to-case profit sharing [Phonetic]. But by and large, I think directionally, we do — we are focused on maintaining or expanding those margins. In fact, I would say the margin discipline is something which, on the 3PL part of the business, we are actively holding especially in the current environment. And therefore, we do not — if we don’t meet margin hurdles, we will not probably — sometimes we’ll probably not do contracts, if we’re not able to meet margin hurdles, whether they’re renewals or new contracts.
Abhishek Ghosh — DSP Mutual Fund — Analyst
Okay. The other thing is you’ve spoken about this aspiration of this INR10,000 crores of top line. Is there an aspirational margin, cash flows, ROEs as well, or is it just a top line aspiration?
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
I think at this stage, we do obviously have aspiration — as you know, Abhishek, we don’t have an aspirational top line. We’ve got an aspirational bottom line. But as a matter of policy, we don’t essentially give guidance on that. I think we’ve obviously shared the top line aspiration I think to help — obviously share with everyone how — not just a number but also a staircase to that aspiration and the shape of the revenue in terms of our vision of being not just a multiservice business and a multimarket business, which I think is very important to give long-term diversification.
Abhishek Ghosh — DSP Mutual Fund — Analyst
No, Ram, reason I ask this question is if I just look at your current quarter’s top line and broadly first half top line, and if I just compound it by about 20%, 25% even without Rivigo, you will be there at that revenue target. So that is fairly achievable, and that is fairly visible when we model it. But if I look at your profits from the last peak cycle, what you had seen in FY ’19 of about INR86 crores of PAT, the trajectory is still a lot weaker. So I was just trying to understand from that perspective because if I could just compound the earnings at the current level, you’re there at that INR10,000 crores of revenue. And with Rivigo, I think that should be quite easy. But how should we look on the PAT basis. That was the whole question.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Abhishek, I think why we are — as you can see in our more detailed disclosure now, all our businesses are not exactly at the same level, because we’re investing in growth. The growth will come with the investment. So if you go back to our prior peak number, at that time, we were almost completely purely a 3PL and enterprise mobility business. There is no Network Services at that time. And therefore, today, the 3PL business is still in a pretty stable place. The network businesses within them it’s a mix of businesses, some which are getting to the right level of margin like Freight Forwarding and others which we’re investing.
So as an asset-light company, most of our investments are actually on through the P&L, because we’re expanding networks and are building networks, and we’re putting capacity ahead of demand. And therefore, one has to I think look at the business in terms of peak levels across the portfolio, and prior comparisons are probably more relevant from the portfolio at that time versus the portfolio. I think two, three years ago, when we set INR10,000 crores in aspiration, I think everybody was asking how we’re going to get to a revenue level. So I’m actually appreciative of the fact that you have greater confidence today given where we stand in terms of run rate in the next three, four years. I think we have similar aspirations from a margin perspective as well, and we believe we are confident in our view that we can deliver that as we’re going to scale.
Abhishek Ghosh — DSP Mutual Fund — Analyst
Great, Ram. Thank you so much for this answer, and wish you’ll all the best in this journey. Thank you so much.
Operator
Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for the closing remarks. Thank you and over to you.
Rampraveen Swaminathan — Managing Director, Chief Executive Officer
Thank you, everyone. I hope we have been able to answer all your questions satisfactorily. However, if you need any further clarifications or would want to know more about the company, please contact our team or SGA Investor Relations Advisors. Thank you once again for taking the time to join us for the call, and wish you and your family and your colleagues the very best. Thank you.
Operator
[Operator Closing Remarks]