VRL Logistics Limited (NSE: VRLLOG) Q4 2025 Earnings Call dated May. 22, 2025
Corporate Participants:
Sunil Nalavadi — Chief Financial Officer
Analysts:
Alok Deora — Analyst
Mukesh Saraf — Analyst
Pranay Roop Chatterjee — Analyst
Achal Lohade — Analyst
Rahul Agarwal — Analyst
Harsh Shah — Analyst
Raghav Ghosle — Analyst
Krupashankar NJ — Analyst
Jainam Shah — Analyst
Anshul Agrawal — Analyst
Sandesh Shetty — Analyst
Nishant Chowhan — Analyst
Presentation:
Operator
Ladies and gentlemen, good morning and welcome to the VRL Logistics Q4 FY ’25 Earnings Conference Call hosted by Motilal Oswal Financial Services Limited. As a reminder, all participant lines will remain in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touchstone telephone. Please note that this conference is being recorded.I now hand the conference over to Mr Alok Devra from Motilal Oswal Financial Services for opening remarks. Please go-ahead.
Alok Deora — Analyst
Thank you. Good morning, everyone, and welcome to the Q4 FY ’25 earnings conference call of Logistics. So today, we have with us Mr Sunil, the CFO of the company. I will now hand over the call to Mr to provide some opening remarks and discuss on the performance and then we can pick-up the Q&A session. Thank you, and over to you, sir.
Sunil Nalavadi — Chief Financial Officer
Thank you. Yeah. Thank you, Mr. Good morning to all participants. I’m, CFO of VRL Logistics Limited. I welcome all of you once again for the earnings conference call for the quarter-four of financial year ’25. This is again a strong quarter marked by revenue growth, substantial improvement in profit margins and robust cash-flow.
On a year-on-year basis, the revenue of the quarter has increased from INR772 crores to INR812 crores with a growth of around 5%. The growth in revenue is mainly on account of increase in realization of price per ton increased by around 18% from INR6,724 per tonne to INR7,944 per tonne. In addition to the fried hikes implemented in the earlier quarter of this year, in the current quarter, we further analyzed most of the business transactions or contracts with their contribution to the margins and potential addition to the overall tonnage of the company. In this process, we identified certain low-margin business and discontinued such businesses which impacted on the tonnage.
In view of the same, we reached higher ever EBITDA and EBITDA margins in our business in the current quarter. We reached a volume of around 10 lakh 6,000 metric tons in the current quarter and the negative growth in tonnage is due to discontinuation of a low-margin business in the current quarter. On a year-on-year basis, we added around 84 branches and these branches contributed around 1% to the total tonnage. We also closed around 40 branches considering the potential of these branches business can be served from the adjoining branches. We continued our initiative to increase the number of branches in the current quarter and added around five new branches.
Apart from this, the management of the company undertaken many steps to control the key operational costs such as increase in quantity of bulk purchase of fuel directly from the refineries and key route mapping to minimize the number of loading and unloadings, which resulted into optimum utilization of our own vehicles and drastic reduction on defendency of the high-end vehicles. The EBITDA is increased by around 74% from INR109 crores to INR189 crores and percentage to revenues increased from 14% to 23%. Further, the margin improvement is also due to good control on fuel expenses, which is major cost of our cost of operation in our business. And we further increased the bulk purchase quantity in the current quarter from 31% to 42% of the total quantity consumed.
The fuel procurement cost per liter is reduced from INR87 to INR84. On overall basis, the fuel cost as a percentage to the revenue has been reduced from 29% to around 26%. The improvement in operational efficiencies in the current quarter also leads to improvement in EBITDA margins. We saw major efficiency and effective utilization of our own vehicles. This has supported us to have a control on the dependency on the higher vehicles due to which the larger charges has been reduced from 8% to 4% to the revenue. The rest of the expenses either in-line with the revenue or reduced as a percentage to the revenue due to increase in freight realizations.
The improvement in EBITDA lead to increase in EBIT and the net profit margins in the current quarter, the net profit of the company has increased from INR21 crores to INR74 crores in the quarter and percentage to revenues increased from 3% to 9%.
On a sequential basis, the revenues decreased from INR831 crores to INR811 crores. The growth in revenue is impacted due to decrease in volume by 9% from 11,400 tonnes to 10 lakh 5,000 metric tons in a quarter. The decrease in volume is on account of discontinuation of a low-margin businesses and due to which the realization is improved by almost 7% from INR7,390 per ton per tonne to INR7,944 per ton. Due to improvement in realization, the EBITDA margin has improved from 21% to 23% from INR172 crores to INR189 crores. And the improvement in EBITDA margin is also due to increase in bulk purchase of fuel quantity from 39% to 41%. However, the purchase cost per liter is increased from INR83 to INR84.5 due to increase in rates by some of the state governments. The overall fuel cost as a percentage to the revenue is reduced from 26% to again 25% and due to further control on the higher vehicles in the current quarter also supported the improvement in EBITDA margins by 1% and the remaining costs were more or less in-line with the revenue.
On full-year basis, the revenues increased from INR2,9009 crores to INR3,186 crores and increase is mainly due to improvement in the realizations. The realizations are improved due to increase in freight rates from the second-quarter of the last year and a thorough analysis of business contracts in terms of margins and discontinued some of the low-margin business in the quarter-four. The realization per ton is increased by 10% from INR6,782 to INR7,315 rupees and the volumes are maintained at around 42,72,000 metric tons despite the substantial increase in the realizations.
The EBITDA of the company is substantially increased in financial year ’25 from INR414 crores to INR598 crores and the EBITDA margins improved from 14% to 19%. The increase in EBITDA is due to increase in realizations, decrease in fuel costs, air service and control on the remaining expenses, which are more or less in-line with the revenue. Due to increase in EBITDA margins, the net profit of the company has increased from INR89 crores to INR183 crores. With the improvement in profitability, our cash generated from the operations — operational activities increased from INR409 crores to INR587 crores. And with having good control on working capital, our post-tax net cash generated from operational activities has been increased from INR423 crores to INR558 crores.
These cash flows numbers are subject to the — in the AS accounting entries. The strong cash flows mainly through the internal accruals of the company, which led to low robust expansion in the company, a robust expansion plans of the company and the current year’s strong cash flows enabled us to make major capital expenditure of around INR440 crores in a year, including investment in purchase of some of the facilities at Bangalore, and Mangaluru along with our capital expenditure on the vehicles. The investment in Bangalore transshipment hub is having its own business advantages with better financial metrics, which have been already shared during our quarter three results.
The strong cash flows enabled the company in maintaining optimum debt-equity ratio of 0.4 times to the equity with a total net-debt as of 31st March of around INR396 crores. We wish to inform you that there is a considerable improvement in the return metrics as well. The return on capital employed has increased from 10% to 14%, including the lease liability as a capital employed and the return-on-equity has increased from 9% to 18%. Considering the improvement in margin and the robust cash flows of the company, the Board of Directors recommended INR10 per share as a final dividend for the financial year ’25, which is subject to approval from the shareholders in the ensuing Board meeting. With this final dividend, the company declared highest-ever dividend of INR14 per share and reflecting the company’s strong financial performance and commitment to delivering value to the shareholders.
Further, our business is a B2B local focus on a less than INR2 crore business with a wide range of customer-base of around 9 lakh customers covering with wide range of sectors. Our key strength is having the different mode of collections from the customers and 85% of our less than crore business is on either paid or two-pay basis, collecting the on spot from the customers immediately after the booking or after the completion of this service. Our receivable days from the customers is hardly around 11 to 12 days and which is lowest in the industry.
The company experienced a strong quarter with a robust increase in freight relation and notable improvements in the profit margins, supported by operational efficiencies, cash-flow from operations remain robust and positioning the company well for future growth and investments. With these achievements and positive outlook, we are confident that in maintaining the momentum going moving forward. We also would like to emphasize that the reduction in volume is temporary scenario for a quarter or two and the growth of the tonnel or the tonnage growth will be back as usual normal from quarter three, that’s what we are expecting. Considering the wide range of customers and sectors where we are operating, we are expecting that we will put all our efforts to perform better in the industry.
With this, I would conclude my initial remarks. Now I would request all the participants to question-and-answer session.
Questions and Answers:
Operator
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question comes from the line of Mukesh Saraf from Avendus Spark. Please go ahead.
Mukesh Saraf
Yes, sir, good morning, and thank you for the opportunity. First of all, congratulations on great margin performance. So just on the lines of what you were mentioning with respect to discontinuing some of the low-yielding customers. Could you kind of, first of all, help us understand if this activity is done from your side or is there more such a cleanup or discontinuation that we can continue to see going-forward?
Sunil Nalavadi
No, most of the activities have been already done. Actually, we started this exercise at the beginning of the March itself since most of the agreements are due for the renewals. And even apart from this contractual customer, even some of the commodities also we have given some special conditions. So considering the contributions and considering the margins in those businesses, we have taken a step to cut-down those facilities and again pushing for the growth in volumes.
Mukesh Saraf
Right, right. So just trying to understand that now that you’re done with this cleanup, could you kind of help us understand what steps are we taking to get back some of the volume growth back-in the system? Because the way I’m seeing, I mean, we’ve added 84 branches, but these branches have so-far yielded just 1% growth in the tonnage. So what steps can we take to, say, get back, say, single-digit, high single-digit volume growth?
Sunil Nalavadi
Yeah, basically, we would want to concentrate more on a healthy growth in the volumes. That’s our primary objective as of today. And to increase the tonnage, definitely, again, we are putting more concentration on the increasing branches also. We are planning to add again, 80 to 100 branches in the next financial year as well. And the branches which have been already opened in last year and prior to that, again, we will put to increase tonnage from those geographies.
Mukesh Saraf
But yeah, I mean, finally, you might be dependent on the general economic activity. And I think in the last few quarters, you have mentioned that hasn’t been great. So if the activity doesn’t improve on-the-ground, is there anything that we could do, say, any new segments, any new geographies, you know, any new services that we might want to kind of provide? From our side, what can we do to revive some of this growth?
Sunil Nalavadi
Yeah. Obviously, on the geography front, as you are aware, actually where most of the cases — new branches are opening in the untap market, there actually we are expecting some good contribution from the volumes. And even in the current year, if you see wherever the Eastern sector has been performed very well. So again, that concentration of untapped market is going to be continued. But as you said, the overall economic conditions again, it is not up to the market — up to the mark as of now. So considering those developments, so our tonnage growth will be dependent on the future days.
Mukesh Saraf
Right. So just lastly, if the tonnage growth remains weak and if competition kind of — obviously, you’re competing with unorganized operator, so if competition keeps their pricing low and our tonnage remains weak, will we kind of go back to some kind of pricing cuts to get back some volumes or are we okay with again another year of say flat to weak — flat or weak tonnage while we’ll continue to maintain this kind of pricing and will not go back into those low-margin businesses again.
Sunil Nalavadi
Yeah, considering all the aspects, actually we did this rationalization in the freight rates. So definitely, we will maintain these rates going-forward. And so this rationalization has been done keeping the competitiveness in this particular sector particular route. So keeping in mind all the aspects actually we did this exercise and we will continue these relations.
Mukesh Saraf
All right. All right. Understood. Great, sir. Thank you so much and all the best.
Operator
Thank you. The next question comes from the line of Pranay Rup Chatterjee from Berman Capital Management. Please go-ahead.
Pranay Roop Chatterjee
Thanks. Good morning, everyone. Am I audible?
Sunil Nalavadi
Yeah.
Pranay Roop Chatterjee
My first question is on the wider demand. You were touching upon it in the previous answer. So keeping aside the impact of your voluntary client accretion, if I may Call-IT that, keeping aside that, in your existing clients, let’s say, who were with you even one year back, two years back, in those clients, are you seeing a general sentiment of demand coming back, volumes increasing? Is there even early signs of something like that happening where we can confidently say most of the sector is going to grow in upcoming years. Are we there yet or we still have to wait-and-watch.
Sunil Nalavadi
Yeah. No, contribution from the existing customers is very nominal growth. It is in the range of around hardly 2% to 3%. But in the current scenario, what happens since we try to maintain the realization and we to stick on to the — our pricing terms. So intentionally, actually we closed some of the low-margin businesses discontinued. And among these customers, again, they are approaching with our pricing terms and all. So going-forward, see, we may not get the equivalent volumes, but at least we get some volumes from such customers.
Pranay Roop Chatterjee
So my question was more on the wider market sentiment with the context of consumption categories being sort of muted for the last year and a half. So any sense you can give us
Sunil Nalavadi
That growth is a very low-single digit number, it’s hardly in the range of around 2% to 3%.
Pranay Roop Chatterjee
Got it. And my last question is on pricing. So obviously, I’ve already commented that you will try to maintain the current prices. My question is incrementally FY ’26, ’27 and beyond, basis your latest contract structures, how can you increase pricing further? I’m not saying you will, but what are the occasions? Like is it linked to — is it 100% of all your contracts across clients linked to input prices like fuel or you can take voluntary price hikes as well, probably like you did in Jan last year. So how should we think of price hikes and when it might happen in future?
Sunil Nalavadi
Yeah. See, always our price increase is depending on the margins. If you see the rate increase what we did in a quarter — kind of quarter one or beginning of the quarter two in FY ’25, it was completely based on our margin structure. The margins have been dipped in-quarter one only because of increase in the cost. So apart from the fuel cost, there are many expenses, say, like employee cost and even the toll charters across the country and many governments have been increased, especially in Karnataka and some of the states, they increase the permit fees on the vehicle. Vehicle tax rates have been increased. So considering these aspects, in the industry itself, actually, we are the first movers on the rate hikes. Even on a future dates, depending on our cost structure, we will take a call on the increase in rates.
Pranay Roop Chatterjee
Got it. Thanks a lot, sir. I’ll get back to you.
Sunil Nalavadi
Yeah. Thank you.
Operator
Thank you. The next question comes from the line of Achal Lohade from Nuvama Institutional Equities. Please go-ahead.
Achal Lohade
Yeah. Good morning, sir. Thank you for the opportunity. Sir, first thing, you know, in terms of the volumes, what you mentioned is that you have led to the low-margin segment. So was it for the entire quarter? You said we discontinued only from early March. So if you could give us a sense as to what is the — what was the contribution of this particular segment from a full-year perspective in the past?
Sunil Nalavadi
No, basically, we started this exercise in mid-February and we analyzed all the contracts. And subsequently, we informed to the customers that considering the existing price versus what the realization and how much they are contributing to the overall volumes. We informed to the customers and we informed our new rate structures also. So whoever actually not accepted, we discontinued such business from the March.
Achal Lohade
Okay. So that means their contribution was there in January and February?
Sunil Nalavadi
Yeah. The moment it started in February, actually they even shifted to some of the other operators.
Achal Lohade
Okay. So which means it started from February itself and March got accentuated. And by March-end, you have fully done with that segment. Is that understanding right?
Sunil Nalavadi
Yes. Yes,
Achal Lohade
Okay. Now, you know, if I were to ask you in terms of like-to-like growth, if you remove that customer segment or that particular segment from the base quarter as well and for the entire quarter in March, what the growth would look like? Would that be flattish? Would that be a growth or would that still be a decline?
Sunil Nalavadi
No, without this exercise, we were expecting a decline of around 2% to 3 percentage in tonnage?
Achal Lohade
Okay. So is it fair to say that the core business, the core segments still seeing a decline or is that understanding that marginally in the range of around 2% to 3%.
Sunil Nalavadi
Okay. And when you say we are looking for growth, how do we look at any particular segment, geography? Because you did mention about the branch addition, but we have seen the branch addition in the past hasn’t really contributed a lot. How do we see that you know what will drive the growth? So basically overall, the economic sentiments are weak in the country and if you take the real-estate volume growth even from the existing customers is not up to the mark. So with this actually we are putting you know all our efforts or to gather or acquire more-and-more customers and especially we have opened more of a branches in untapped market
Achal Lohade
Okay. So that brand
Sunil Nalavadi
Will be an expert. These are all the contribution is small branches. See, initially, we cannot expect good number of volumes from these branches. But over a period of, say, two to three years, definitely we can develop good base of volumes from these branches.
Achal Lohade
Okay. And if I were to ask me, sir, the branches what you opened, say, three years back, what is their contribution now? Is that, 15%, 20%, 25% or 5%.
Sunil Nalavadi
Yeah. Three years back and accumulately, if you take, the new branches contribution is at least around 8% to 10% of the total volume.
Achal Lohade
Okay. Okay. Understood.
Sunil Nalavadi
See, just around the years back, we are having around 930 940 branches. Now we reached almost around 1,251 branch. So these additional branches contribution is at least around 8% to 10% to the total volume as of today.
Achal Lohade
Understood. Understood. Sir, in terms of the — when you said the realization growth is not up to the mark from existing customer, what do you mean? You’ve taken a — if I remember right, 6% to 8% price hike, right? So if you could elaborate a little bit on this particular you statement?
Sunil Nalavadi
Yeah. See, basically what we did, we increased the rate by almost around 8% to 10% in the beginning of the quarter two in the FY ’25. And during that exercise actually for non-contractual customers, so we increased our card rate and considering some of the commodities also, we were given a concession, those concessions have been continued. And for contractual customers, what we did actually we increased the rate as and when those quotations or agreements are due for renewal. Since most of the agreements due for renewal in the month of March and before renewal also what we did, we decided in the month of February that we analyze each and every business transactions, either it may be the commodity transactions or some of the contractual customers where exactly the realization is there. And we did some modification.
Just to give you example, even in the cloth commodities also, I think we were not — we are not having any agreement with such customers. But earlier, we used to give some free storage facility to them for at least around 30 days, 60 days, 90 days in some of the sectors. But considering the increase in the rent, considering the cost of that particular space, we reduce those number of days. Even the such additions have been impacted to some extent on the volumes.
And now and on a contractual customer on the rate front, actually we clearly said that these are the well-studied structure of rates what we defined and these are all substantiated with the customer that why we putting the new rates rate considering cost of operation, cost considering that particular route, storage activity, so many factors. So with that, even if such kind of a explanation that some of the customers are not accepting, we said voluntarily discontinued such quantities.
Achal Lohade
And by and large, all these customers — the customer negotiation is done.
Sunil Nalavadi
Sorry.
Achal Lohade
Just a follow-up and I’ll follow-up. I’ll fall-back in the queue. Sir, by and large, all the customer negotiations are done or it’s still going on? Like 80%, 90% is done?
Sunil Nalavadi
The negotiations and the rate structure exercise rationalization of the rates that exercise has been already completed?
Achal Lohade
Done. Sure, sir. Thank you. I’ll fall-back in the queue for follow-up. Thank you.
Operator
Thank you. The next question comes from the line of Rahul Agarwal from Bandan AMC. Please go-ahead Rahul, if you can please unmute your line and ask your question.
Rahul Agarwal
Hello.
Sunil Nalavadi
Yes, sir.
Rahul Agarwal
Yes, sir. So, this the customers that we have discontinued, may say how many would be the ones we would have acquired maybe last one, two years and how many would be like our old customers wherein we know there will be no one?
Sunil Nalavadi
No, most of these customers are old customers because whatever the new agreements we entered after the rate hike, actually we enter most of the agreements with increased rates only. So these — some of the customers are old customers with us.
Rahul Agarwal
And broadly, dominating with sector?
Sunil Nalavadi
Not specifically sector. These are all mixed with all the sectors. And as I said, even so the changing policy in some of the textile materials also impacted, it is contribution in all the sectors. Not precisely no particular sector, but most of the sectors are related to like hardware and electronic items such commodities, even FMCC routes.
Rahul Agarwal
Okay. And second question from my side is, for FY ’26, then you mentioned that ex of this also, you would have grown at volumes at minus 2% or minus 3%. So for this year, should we consider that maybe 2%, 3% volume degrowth, 6%, 7% realization growth and a margin at the current levels, is that a good outcome that we should work with?
Sunil Nalavadi
Yeah, on a full-year basis, yes, see, initial first two quarters, we are having a more visibility as of today. And we can give more clarity after the quarter two.
Rahul Agarwal
Yeah. But broadly this type of margins which is like 20 plus is that something which we have historically not seen to sustain at least for the — it sustains for a quarter or two, but for the longer-term, it doesn’t sustain. So how do you view that? Is it that we have now sustainably reached 20% plus kind of margins or you think there could be volatility in that also?
Sunil Nalavadi
No, at least around 19% 20% that’s what we are expecting to maintain, but more clarity will be given after the quarter two. But initially the quarter one and quarter two, there will be a dip in the volumes, but be more or less maintain the margins.
Rahul Agarwal
Okay. Okay, sure. Thanks a lot and all the best to you, sir.
Sunil Nalavadi
Thank you.
Operator
Thank you. The next question comes from the line of Harish Shah from Rida Holdings. Please go-ahead.
Harsh Shah
Yeah, hi. Good morning, sir. Sir, my question is more from — yeah, from competition point-of-view, if you look at one of the listed peers who are also into partial truckload business, now they witnessed almost 19% volume growth in this quarter for this particular segment. And then when I look at the yield per KG, it comes to almost about INR11, whereas we are somewhere around INR8. So just wanted to understand, we are seeing 11% volume decline, the other listed player is seeing volume growth of almost 19% and they are also doing better realization per tonnage. So just trying to understand this difference between our.
Sunil Nalavadi
No, the realization it depends on route also since we are having a lot of this internal state movements as well where the realization is less. In the sense margins will remain same, but since the distance is less, the overall realization will look lesser than those operators. But most of their route structure is always the long-haul operators. That’s a key difference.
Harsh Shah
And sir, how about you extend the discrepancy between — because they are at 19% volume growth, we are at 11% decline, which would mean that they have taken significant amount of market-share, plus they have also reported very good profitability in this quarter. So just wanted to understand on that.
Sunil Nalavadi
Yeah, this volume decline essentially we have decided and we annualize some of the contracts, as I said and we voluntarily decided to discontinue such business because of the low margins.
Harsh Shah
Okay. Okay. Okay. Thank you so much.
Operator
Thank you. The next question comes from the line of Ragav from Aequatus Investment. Please go ahead.
Raghav Ghosle
Good morning, sir. I just had one small question. What are the sectors that have contributed to growth in this quarter specifically? Sorry. What are the particular sectors which we have catered to which have contributed to some growth in this quarter specifically.
Sunil Nalavadi
So there are no specific one is the sector-wide growth as such, we are not depending on any particular sector. But since most of the sectors have been impacted on the tonnage because of discontinuation of some of the businesses.
Raghav Ghosle
Is that I asked this question because normally we depend more upon FMCG kind of movement, but because that was muted, I wanted to gauge our understanding which sector has contributed to some growth in this quarter and which we can foresee for the next few quarters to grow.
Sunil Nalavadi
No, basically, you see in that case, sector-wise contribution from each is not a considerable in-markets. So and textually is contributing major commodity. And again in that also we did 8% negative growth. And next comes to agriculture and food products, again, that has grown negative by around 6%. Like that. In metal and hardware growth is minus by almost around 13% quarter-on-quarter.
Raghav Ghosle
Got it. Got it. Fair, sir. Thank you so much, sir.
Sunil Nalavadi
Yeah. Thanks.
Operator
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star and one. We take the next question from the line of Alok Devra from Motilal Oswal Financial Services Limited. Please go-ahead.
Alok Deora
Yes, sir. Just wanted to understand after all these adjustments, we’ll see volume growth under pressure for 1H at least of ’26. So if we look at the full-year, what kind of volumes we could end-up with, what could be the realization like because the price act benefit will go out after the first-quarter and you know some realization benefit will be there because of this restructuring which you have done on the individual accounts? And secondly, what would be the margins sustainable margins ahead because we did 23% this quarter. So FY ’26, if I want to sum it up into volume growth realization and margins, then what it would look like.
Sunil Nalavadi
No, since this rationalization exercise has been done in the last quarter, so this negative growth — year-on negative growth will continue at least for the first two quarters and we can see some improvement in tonnage from the quarter three onwards. Since quarter-four tonnage has been already dipped, we may have shown some good growth in the quarter-four.
On a full-year basis, again, the more clarity will come after the quarter one or quarter two. So depending on how the customer approach and all actually we can give more clarity. And with the realization is concerned, we would like to existing — maintain the existing realizations throughout the year.
Alok Deora
So you mean 8% realization could be there for next year for FY ’26?
Sunil Nalavadi
Realization around 6% it will come 6% to 7%
Alok Deora
Sure. And what about margins, sir? This 23% margin which we did in 4th-quarter, how that could shape up in next year considering the volume trajectory and your realization everything?
Sunil Nalavadi
See volumes again the quarter one, it will be maintained around a good margin. But subsequently, what will happen, again, we have to consider some increment to the employee cost and other things. So based on that, the margins will be depending on these cost structures
Alok Deora
So any guidance you want to give 20 — could it be like 20% range for the margin for this year?
Sunil Nalavadi
That guidance can be more clarity will come at least after a quarter or two.
Alok Deora
Sure. Got it. Got it.
Sunil Nalavadi
Yeah.
Alok Deora
Yeah, I think that’s from my side too. Thank you.
Operator
Thank you. The next question comes from the line of Khrupa Shankar from Avendus Spark. Please go ahead.
Krupashankar NJ
Yeah, thank you for the opportunity. Sir, one question from my side. Given that we are anticipating weakness in the tonnage, just wanted to get your sense around the capex number for the next year. Is there — while you did allude that scrappage of old vehicles will be quite limited going ahead, but we have seen close to about 300 plus cycles getting scraped this in FY ’25. Just wanted to get a sense on how do you see FY ’26 on your fleet procurement as well as if any capex towards a network like buying a hub or expanding your network, etc.
Sunil Nalavadi
So considering our good cash flows, again, the investment in vehicles will be in the range of around INR140 crore INR150 crores that will be there. And some most of these capex will be for the replacement and with some minimal addition in the capacity. And apart from that, we are considering again good cash flows and lower debt level, again, we are looking for investment in some of the properties, around one or two properties.
Krupashankar NJ
Okay. So-far, what I can see is that you’ve taken Bangalore,, Bangalore and Ahmedabad. Any specific areas where you can hire it? Is it increasing your capacities in the north and the East market because there is a growing demand over there or is it the existing markets where you’re trying to expand based on-demand?
Sunil Nalavadi
See, there are some exercises are going-in the Kolkata, actually we are doing some exercise and in Pune also, we are searching some property. In Salem, we are searching property. But nothing has been crystallized as of today. But definitely there will be one or two property addition will be there in the next year.
Krupashankar NJ
Got it, sir. Got it. That’s broadly from my side, sir. Thank you. Thank you very much.
Operator
Thank you. The next question comes from the line of Janum Shah from Equirus Securities. Please go-ahead.
Jainam Shah
Yeah. Hi, sir. Am I clearly audible?
Sunil Nalavadi
Yes, sir.
Jainam Shah
Yeah. Sir, just wanted to understand one part. As you are saying that our 85% of the customer are or paid customer, so rest 15% are our contractual customer, correct? Yes. So sir, just wanted to understand on this part. As you are saying that we have started taking contract-by-contract rate revision and that’s where our realization has increased and tonnage has dropped. But if you see on a Y-o-Y basis, our tonnage has dropped around 10% plus. And if we see 2%, 3% is something that we are expecting, that balance 7% is because of this contractual customer maybe not coming — maybe not giving us business going-forward. So out of 15%, 70% volume growth, does it mean that we have lost 40%, 50% business from our contractual customer because two paid customers, there will not be any contracts and we’ll be getting branches only.
Sunil Nalavadi
No, that understanding is totally wrong. As I said, it is not only contractual customers, even some of the business transactions in the sense we have given certain concessions to certain commodities. Just I gave an example of textile, we were giving a lot of this storage facility, even 60 days, 90 days free storage. We’ve got to cut-down some of the storage facilities. And in some of the goods, actually, we were not collecting the additional charters like loading and loading channels we used to collect. Some of the stationary channels we used to collect we are collecting from the normal transition, but we have given concession to certain customers. So those concessions have been built. Been for the non-contractual customers.
Jainam Shah
So sir, assuming that this customer that we have taken back or all these facilities would have been core customer for us given that we have given them this kind of facilities only when we would have expected those overall industry or those customers to give us more-and-more volumes going-forward, does it not going to impact our volumes drastically over next few quarters?
Sunil Nalavadi
No, that excess has been done and already the tonnage has been stabilized as of now. And these are voluntarily intentionally, we decided to withdraw those facilities considering very low-margin from those sectors.
Jainam Shah
Got it, sir. And the facilities that we would have better owned, let’s say, for warehousing, we would be giving for three months. Now we are giving for, let’s say, one month or only. So those facilities have also been given back to the, let’s say, vendor or anyone or we are still holding those facilities and cost is still incurring on that?
Sunil Nalavadi
So those again the discontinuation of certain and all that exercise has been done. And moreover, these facilities or concessions are in-line with other operators in the industry. That is another spend. So actually, nothing — nothing of these concessions are providing by the other operators in the industry.
See, just to give some clarity on the textile. We are most of the textile business actually other than the organized players, they are depending on the unorganized service providers. And those operators actually are not giving facility what we are giving. So considering these factual things, we are hoping that again those customers will come back to us.
Jainam Shah
Got it, sir. And sir, just last one thing. As we have said earlier that we have taken 6% pre-take and rest of the realization increase is mainly because of the other cost which is being builded up in our billing part. So fair to assume that particular thing will continue going-forward as well as and when other cost increases will of course pass it on, but our normal freight rate will be the same going-forward.
Sunil Nalavadi
Yeah.
Jainam Shah
Okay, thank you so much. That’s it from my side.
Operator
Thank you. The next question comes from the line of Anshul Agarwal from Emkay Global. Please go-ahead.
Anshul Agrawal
Hi, thank you for the opportunity. Hope I’m audible.
Sunil Nalavadi
Yes, sir. Please tell me.
Anshul Agrawal
Great. Sir, my question is on this bulk procurement of fuel. We’ve already reached 41% of our consumption. Can — do we have levers to further improve this number to say about 50% or so?
Sunil Nalavadi
Yeah, we already consuming at an optimum level, but we are putting our own effort to — see currently we are operating with seven own petrol pumps. Now we may add another one or two going-forward. But again, it all depends on the volume in that particular area. So there’ll not be no substantial improvement in these numbers, but at least 41% plus can be maintained.
Anshul Agrawal
Okay. And secondly on external or you hire charges now with volumes being rationalized, if that is how I can put it, our external lorry hire charges have also been optimized with the increase in volumes, if at all they were to come in from H2, would these external lorry hire charging also bump-up?
Sunil Nalavadi
No, we are expecting there will not be much increase in the outside vehicles because some of the tonnage has been already now decreased. But considering the capacity what we’re having as of today, there will not be major increase in the lorry even though tonnage will increase from Q3 onwards.
Anshul Agrawal
Okay, we expect lorry I charges to be at around this 4%, 4.5% mark-on sales. Got it. Just one last question on volumes, sir, if I may. Any lead indicators that we may be on the lookout to expect volume growth coming in since H2 or would it continue to be better monsoons in southern region or any such lease indicators that you would want us to track to see if H2 volume rate — is actually volume growth?
Sunil Nalavadi
Yes, see one thing I would like to mention here that we will put all-out effort to increase the business. Whatever opportunities are there, actually we wish to put an effort and grab such businesses. But ultimately, it should be healthy business. That’s what our motor as of today. And considering say good economic conditions you turn out after the quarter, 1/4 two good monsoon what you are mentioning and some good industrial growth, definitely that will support and definitely we can accumulate those volumes going-forward. But about the exact growth in the volumes and how it will be turned out, more clarity we can give after the quarter two.
Anshul Agrawal
Yeah, thank you. All the very best.
Sunil Nalavadi
Thank you.
Operator
Thank you. We take the next question from the line of Sandesh Shetty from HSBC Securities. Please go ahead.
Sandesh Shetty
Hello, sir. Am I audible?
Sunil Nalavadi
Yes, sir.
Sandesh Shetty
Sir, you mentioned regarding capex that you will be looking at around INR140 crores INR150 crores in-vehicle procurement and you’re also looking at investment in certain properties. So sir, a ballpark, what would be the capex — full-year capex for what you’re expecting for FY ’26? And will it be similar for FY ’27?
Sunil Nalavadi
No, this property capex actually we cannot define as of today. So basically, definitely we are having the surplus cash-flow and we wish to invest these surplus cash flows in good facilities, considering the long-term benefits. But again, defining the exact amount as of today is and when the transactions are crystallized, we can give those numbers. But for the time-being, any funds will be used for the reduction in the debt?
Sandesh Shetty
Okay. And sir, also, can you further explain what are the steps you’re taking to expand your footprint in the North region and because — because now that you have rationalized on the customers, can you further elaborate on that? What steps are you taking with respect to geographical expansion to drive volume growth?
Sunil Nalavadi
We are expanding our branch network over there. And moreover, we are highly marketing on some of the commodities, which geographically contributed. Like as we said, in the Northeast sector, earlier we used to depend only the commodities which are consuming to the Northeast. Now actually we have — we are concentrating on the products like tea powder and tea products. Even we have — analyzed those things and we have identified the customers and we have already finalized the rate structure with them. So we are expecting some growth from such products. Like that.
Actually, whenever wherever we go to the regional places, one is the product we analyze in that market, which are the product potential products which we can add into our services. So based on that actually we identify the customers and increase the tonnage.
Sandesh Shetty
Okay, sir. That’s it from my side. Thank you, sir.
Operator
Thank you. Ladies and gentlemen, we take the last question from the line of Achal Lohade from Nuvama Institutional Equities. Please go-ahead.
Achal Lohade
Yeah. Thank you for the opportunity. Sir, if I understand what you’re saying, essentially you are saying we want to sustain this margin. So margin is our core focus. Have I understood right, like 18% 20% margin?
Sunil Nalavadi
Yeah. Actually we want to concentrate on the healthy business. See, margin again as I said, there are some employment — employee cost is going to increase going-forward and there may be some changes in certain cost structure. But relation we will be maintained.
Achal Lohade
Sorry, I’m more you know, asking from a thought process or strategy perspective from next one to three year perspective, but if I see earlier we did pick-up this low-margin business, pushed volumes, obviously had some impact on the margin, but we were growing the volumes. Now today, we have decided that we will focus on the healthy of volume — profitable profitability, so to say? And that I’m just curious to know, is that a number, 18% 20% range? Is that a ROCE you have in mind when you decide what pricing you should offer of whether to take that volume or not to take that volume?
Sunil Nalavadi
No, now this first-quarter, definitely there will be good EBITDA margin. So similar to like quarter-four because there are no major change in the cost structure. From the quarter two onwards, there may be change in certain percentage in employee cost because it is due for increment. So based on these changes in the cost structure, a of EBITDA margin will depend. But however, the realization per ton will be maintained.
Achal Lohade
Okay. Understood.
Sunil Nalavadi
And clarity will come on the margin again after quarter two?
Achal Lohade
Sure.
Operator
Ladies and gentlemen, we take the next question from the line of Chauman from GOG BNP Paribas. Please go-ahead.
Nishant Chowhan
Hi, sir, am I audible?
Sunil Nalavadi
Yes, sir.
Nishant Chowhan
Yeah. So my question is typically only on the staff cost. So if I notice probably over last four years, our employee costs have been growing by something around 16% CAGR, while our revenues are growing by 12%, 12% 13% Asia and also our employee sales as a percentage of revenues has been increasing to almost say 150 bp over last four years. So going ahead, I mean, if we are in a particular scenario where the volumes are not going to be strong enough. And if we continue to grow employee cost by say a similar rate, don’t you think that would have an impact on negative — how much negative impact would that have on our margins?
Sunil Nalavadi
Yeah, definitely that will have an impact on the margins. But ultimately, we have to give increment to the employees also. And last the regular increase whatever happened, these are all increased because of some internal promotions and some of the shift of employees to the newer geography. That’s the reason. But as a regular process, actually we are considering the increase in the employee cost in the second-quarter.
Nishant Chowhan
Okay. And sir, what would be the nature of these employee costs? Are they like more fixed-cost or are they like in some way more related to the
Sunil Nalavadi
Cost in nature, fift in nature? Other than drivers, rest of all, employee cost is in fift in nature.
Nishant Chowhan
Okay. Understood, sir. Thank you so much.
Operator
Thank you. Ladies and gentlemen, with that, we conclude the question-and-answer session. I now hand the conference over to the management for their closing comments.
Sunil Nalavadi
Yeah. Thank you each and everyone. Basically, there are a lot of questions on the volumes and profitability numbers. So considering these the rationalization exercise what we did, we can give more clarity on these numbers once we complete either quarter two or quarter one or quarter two. So with that, actually we wish to conclude this call. Thank you.
Operator
Thank you. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines