Mahindra Group Expects Profitability in Express Business Amid Cost Efficiency Focus

Mahindra Group anticipates its express business will soon become profitable, focusing on increasing volumes for cost efficiency. This shift is expected to enhance the overall profitability of its logistics sector. Mahindra Logistics Ltd (MLL) acquired Rivigo's B2B express business in September 2022, integrating it into MLL Express Services.

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MLL reported a 33% decline in consolidated profit after tax, dropping to Rs 10.7 crore in the September quarter from Rs 15.9 crore the previous year. Despite this, losses in the Express business decreased by 32% year-on-year due to ongoing cost optimisation efforts. Additionally, EBITDA losses reduced by 10% sequentially, according to the company.

Focus on Volume Growth and Efficiency

The company emphasised that increasing volumes remains a priority as it aims for an EBITDA breakeven point. "The revenue growth is there. What we have not met expectations is in our profit performance and that is primarily driven by the acquisition of Rivigo, now the express business," stated Amarjyoti Barua, Group Chief Financial Officer at M&M Ltd.

Barua highlighted that achieving cost efficiency in the express business requires a certain volume level. Inefficiencies, such as ensuring truck loads exceed 50%, have been identified. The focus now is on regaining volume in the business while balancing efficiency with commercial intensity.

Profitability Goals and Future Outlook

Barua expressed optimism about achieving profitability by year-end once volume strategies are effective. "Once we get that volume, the cost leverage will come through in a big way," he noted. This improvement should contribute to the overall profitability of Mahindra's logistics operations.

While challenges persist in the express segment, other parts of Mahindra's portfolio are performing well. Many subsidiaries previously affected by global conditions are now profitable, according to Barua.

The company's strategic focus on volume growth and efficiency is expected to drive profitability across its logistics business, with positive outcomes anticipated by year's end.