IDirect MahindraLog IC

Mahindra Logistics (MAHLO)
CMP: | 338 Target: | 415 (23%) Target Period: 12-18 months BUY
August 28, 2019
Non-auto client additions to aid growth…

MLL is one of the largest 3PL players in the country, with over 650 clients
and operating locations. The company operates an asset light business with
Initiating Coverage
investment in assets (vehicles, warehouses) being done by ~ 1500 business s
Particulars
partners. Post GST implementation, the 3PL industry is expected to grow at Market Capitalisation (| cr) 2,414.9
16-18% in the medium to long term, amid a change in perspective of 52 Week High / Low (|) 605/326
manufacturers whereby higher proportion of logistics operation are being Promoter Holding (%) 58.5
outsourced to specialised 3PL players like MLL. We expect its SCM segment FII Holding (%) 17.3
(90% of revenue) to grow at 8% CAGR to | 4062 crore in FY19-21E and PTS DII Holding (%) 11.0
segment (10% of revenue) to grow at 13% CAGR to | 492 crore in FY19-21E. Dividend Yield (%) 0.3
Sustained revenue growth accompanied by a gradual improvement in
margins would provide thrust to earnings growth in FY19-21. We expect EPS Key Highlights
to grow at 16% CAGR to | 16.1 in FY19-FY21E. Hence, we initiate coverage  3PL industry expected to continue its
on Mahindra Logistics with a BUY recommendation, with a target price of growth momentum over next few
| 415/share (at 26x FY21). years (16-18%) and reach ~US$11
billion by FY21
Scalable asset light model amid huge market opportunity  Asset light business with investment
in assets (vehicles, warehouses)
being done by ~1500 business
MLL is one of the major players in the nascent but rapidly growing Indian partners
3PL industry (~US$6 billion in FY17) that has been growing at 18-20% CAGR
in the last few years. Growth is driven by a higher proportion of logistics
 Expect EPS to grow at 16% CAGR in
FY19-21E
operations being outsourced by manufacturers to 3PL players. MLL Price Chart
ICICI Securities – Retail Equity Research

possesses key success enablers like bouquet of end-to-end logistic services,
asset light model & presence in high growth industries along with support 17000 700
of anchor client (M&M) enabling it to grow in line with industry growth. 600
16000
Non Mahindra SCM segment to drive revenue growth 500
15000 400
MLL’s revenues are expected to grow across its three segments, with non-
14000 300
Mahindra SCM segment growing at 12% CAGR, buoyed by healthy client
200
addition and moderate growth in revenue per client. On the Mahindra group 13000
SCM segment, MLL is expected to moderately grow at 6% in spite of the 100
expected pressure in sales of automotive and farm equipment in the short 12000 0
term, the growth is mainly led by the rising value added work performed by Nov-17 May-18 Nov-18 May-19
MLL within the AFM group and growing penetration across various BSE 500 Index Mahindra Log (RHS)
companies within the Mahindra Group.
Rising client dependence on MLL to provide competitive edge Research Analyst
Increased revenue share from the non-Mahindra business (especially FMCG, Bharat Chhoda
[email protected]
e-commerce) would enable higher warehousing revenues, providing higher
gross margins and translating into higher profitability for the company. Harshal Mehta
Considering the rising importance of services like inbound, outbound and [email protected]
in-factory logistics along with prospects of performing further value added
services, enabling 3PL players to get a higher wallet share of the clients
business with increased client dependency, we initiate coverage on
Mahindra Logistics with a target price of | 415/share.
Key Financial Summary
ss
| crore FY17 FY18 FY19 FY20E FY21E CAGR

Net Sales 2,666.6 3,416.1 3,851.3 4,098.6 4,554.3 8.7%
EBITDA 76.3 119.7 151.2 168.0 200.4 15.1%
PAT 45.6 64.0 85.6 94.6 114.6 15.7%
P/E (x) 53.0 37.7 28.2 25.5 21.1
M.Cap/Sales (x) 0.9 0.7 0.6 0.6 0.5
RoCE (%) 18.7 23.4 25.8 24.7 25.5
RoE (%) 13.1 15.3 17.2 16.3 16.8
Source: ICICI Direct Research, Company
Initiating Coverage | Mahindra Logistics ICICI Direct Research
Company Background
In FY2000, Mahindra & Mahindra (M&M) Ltd set up its logistics business as
a separate division, which served the transportation, warehousing and in-
factory needs of M&M Ltd. Mahindra Logistics (MLL) was formed in FY08
while the logistics business of M&M Ltd was transferred to MLL. Initially, the
company grew its operations by catering to a limited number of clients. Post
its business transformation exercise via a strategic consultancy firm in FY15,
it has reached over 650 clients and is operating in locations in FY19. The
company operates in two segments i.e. i) supply chain management (90%
of FY19 revenues) and ii) public transportation system (balance 10%).
In FY15, the company acquired a 60% stake in Lords Freight (India) Pvt Ltd
(LFI), which is primarily engaged in the business of freight forwarding and
warehousing logistics services. LFI clocked | 174 crore in revenues in FY19.
Subsequently, it increased its stake in Lords from 60% to 82.9% in FY19.
Also, in FY15, MLL partnered with Indian Vehicle Carriers Logistics (IVC) to
form 2X2 Logistics Pvt Ltd. The JV is primarily involved in automotive
outbound solutions for two and four wheeler industries. Currently, the JV
owns 150+ vehicle carriers. MLL also acquired a stake in Boston based
Transtech Logistics (ShipX), a software as a service (SAAS) based transport
management solution (TMS) platform provider, which serves the SCM
automation needs of 3PLs, shippers and transporters.
Exhibit 1: Key Events
FY2000 FY09 FY11 FY14

•Logistics •Logistics •Achieved
business set business of |1000 crore •Investment by
up as M&M Ltd revenues Normandy and
separate transferred Kedaara AIF
division of to MLL •Enters e-commerce
M&M Ltd segment
FY15 FY16 FY18 FY19
•Business •Enters into •Completes •Acquires

transformatio business IPO of stake in
n exercise by contract with company Transtech
strategic one of India's •Achieves | Logistics
consultant largest steel 3400 crore (ShipX)
•Lords conglomerate consolidated •Increases
acquisition revenue stake in
•2X2 logistics Lords from
JV formation 60% to 82.9%
Source: Company, ICICI Direct Research
As on FY19, MLL achieved revenues of | 3851 crore, of which SCM

comprised | 3466 crore and PTS | 386 crore. Further, M&M’s portion of
SCM’s revenues was at | 2100 crore (61% of SCM revenues) with non-M&M
at | 1366 crore. Subsequently, revenues of transportation and warehousing
from the M&M SCM segment were at | 1934 crore (92%) and | 166 crore
(8%), respectively. Revenues of transportation and warehousing from the
non-M&M SCM segment were at | 1012 crore (74%) and | 354 crore (26%),
respectively. Overall, transportation and warehousing mix comprised | 2954
crore (85%) and | 520 crore (15%), respectively, of SCM revenues.
ICICI Securities | Retail Research 2

Exhibit 2: Business segments
Mahindra Logistics Ltd (|3851 cr)
Business segments
SCM (|3466 cr) - 90% PTS (|386 cr) - 10%
Mahindra SCM (|2100 Non-Mahindra SCM

cr) - 55% (|1366 cr) - 35%
Transportation Transportation
(|1934 cr) - 50% (|1012 cr) - 26%
Warehousing Warehousing
(|166 cr) - 5% (|354 cr) - 9%
On the basis of clients, Mahindra group constituted 56% (~| 2157 crore) of
MLL’s revenues whereas non-Mahindra clients comprised 44% (~| 1594
crore). Auto and farm segment dominates the Mahindra group pie (ex-
Mahindra PTS) at 90-95% of Mahindra group revenues. On the non-
Mahindra client side (ex-non-Mahindra PTS), auto comprised 25% while e-
commerce, engineering, consumer durables, bulk and pharma formed
~15% each of non-Mahindra (ex-non-Mahindra PTS) revenues.
Exhibit 3: Business segmentation based on clients
Mahindra Logistics Ltd (|3851
cr)
Client based segmentation
Non-Mahindra Client (|1594 cr)

Mahindra Group (|2157 cr) - 56%
- 44%
Auto and Farming - 48-51% Auto (~|340 cr) - 9%
Others - 3-5% Engineering - 5%
PTS (~|57 cr) - 2% E-Commerce - 5%
Pharma - 5%
Cons Goods- 5%
Bulk- 5%
PTS (~|329 cr) - 9%

Management Profile
Zhooben Bhiwandiwala
Chairman and non-executive Director
Zhooben Bhiwandiwala joined the Mahindra Group in 1985. He has over 31
years of experience in finance, legal, significant cross border M&A, HR,
marketing, strategy and other commercial functions. He had been involved
with international operations, investments in new businesses, start-ups, joint
ventures and mergers and acquisitions during his deputation to international
assignments in Mahindra Group. Mr Bhiwandiwala is currently the President
- Mahindra Partners and Group Legal and a member of the Mahindra Group
Executive Board. He currently heads the Mahindra Partners division. He is
on the boards of several Mahindra & Mahindra group companies. He has
been on the MLL board since April 28, 2009.
Pirojshaw Sarkari, 51 years

Chief-Executive Officer
He graduated from the University of Mumbai in 1987 with a bachelor’s
degree in Commerce. Also, he is a qualified Chartered Accountant. He has
also completed a course on Mahindra Universe from Harvard Business
School, Boston. Prior to joining MLL, he served as a managing director in
UPS Jetair Express Pvt Ltd and UPS International Inc, Philippines. He joined
MLL on April 1, 2010.
Rampraveen Swaminathan, 54 years

Chief-Executive Officer (Designate)
Mr Swaminathan has two decades of relevant industry experience spanning
the automotive, paper and energy sectors. He has a strong track record of
leading businesses including as CEO and MD of International Paper APPM,
a publicly listed company. He has done his MBA in Finance and Strategy, TA
Pai Management Institute, India and holds a bachelor’s degree in
accounting, from the University of Bangalore. His other stints include
positions with the Tata group, Cummins and Schneider. He is expected to
become the CEO and KMP of the company from October 1, 2019,
succeeding existing CEO, Pirojshaw Sarkari.
Yogesh Patel, 54 years

Chief-Finance Officer
Yogesh Patel was appointed chief financial officer of the company with effect
from September 1, 2018. He is a chartered accountant and has ~20 years of
experience in finance. His areas of expertise include pricing and commercial
structuring, procurement, treasury, etc. Mr Patel has held senior leadership
positions in finance with organisations like E&Y (Director –Finance), IBM
(Country Finance Planning Manager), Wipro (Vice President – Finance).
Sushil Rathi, 54 years

Chief Operating Officer
He currently manages the supply chain management business. He holds a
postgraduate diploma in Industrial Engineering from National Institute for
Training Industrial Engineering. Prior to joining MLL, he worked with
Anantara Solutions Pvt Ltd, Premier Automobiles and Satyam Computer
Services. He was awarded with the supply chain visionary of the year award
by Kami Kaze. He joined MLL on March 21, 2011.

Industry Background
Logistics plays a key role in any organisation, mainly due to its influence on
customer satisfaction and costs, thereby providing a competitive edge to a
company over its peers. As per Crisil estimates, the Indian logistics industry
is expected to grow at 13% CAGR to | 9.2 trillion in FY20 from | 6.4 trillion
in FY17 (estimated). Transportation dominates the share at ~88% in FY17
(estimated) while warehousing constituted 12% of the pie. Globally, in
developed economies, the warehousing component is much higher than in
India (upwards of 20-30%). Road transportation and warehousing in India is
fragmented in nature, with unorganised players dominating the pie.
Exhibit 4: Indian logistics industry FY17 (estimated)
7% 1%
4%
1% Road freight transportation
Rail freight transportation
16%
Coastal freight transport
Cold chain warehouse
Warehouse
71%
CFS/ICDs
Source: RHP, ICICI Direct Research
Overall, logistics players can also be segmented on the basis of origin of

service provider and types of services it provides.
Exhibit 5: Logistics players
1 PL Logistics services carried by an In-house team
2 PL Logistics player providing either transportation or warehousing services
3 PL Logistics player acting as a single vendor for all logistics related services
4 PL Logistics player which coordinates activities of various 3PL to a company
Source: RHP, Crisil Report, ICICI Direct Research
The 3PL business formed ~6% of the total logistics industry and is expected
to grow 16-17% till FY21E, mainly due to increased outsourcing trend,
higher value added services, increased scalability, etc. 3PL comprises about
one-fifth of the logistics spend of various sectors and is expected to rise to
one-fourth of the logistics spend.
Exhibit 6: 3PL market size
80000 74000
60000 55000
40000
| crore
40000
20000
0
FY17 FY19E FY21E
3PL market size
Source: Company, Crisil Report, ICICI Direct Research
Automobiles dominate the Indian 3PL share whereas highest growth is

expected to be seen in the e-commerce, consumer durables and organised
retail segment.

Exhibit 7: Sectors employing 3PL

3PL market size (| cr)
Expected CAGR between
Sector FY17 FY19E
FY19-FY21 (%)
Automotive Components 10800-11200 13900-14200 10-12
Cars and UV 6600-6800 9100-9500 10-12
Commercial Vehicles and tractors 2500-2700 2900-3100 8-10
Two and three wheelers 5400-5600 6900-7100 13-15
Engineering 300-500 430-500 20-22
E-Commerce 5900-6200 9970-10000 30-32
Consumer Durables and FMCG 2000-2200 3100-3200 24-26
Pharmaceuticals 2200-2400 2600-2800 8-10
Bulk 800-1000 900-1100 6-8
Organised Retail 2700-2900 4500-4700 29-31
Telecom 20-40 30-40 -
Source: RHP, Crisil Report, ICICI Direct Research
A supply chain management logistics model (that employs 1PL, 2PL, 3PL
and 4PL) consists of an arm of a) inbound logistics, b) within factory logistics
and c) outbound logistics. Inbound relates to transport of raw material to the
factory while outbound relates to transport of finished product to the
warehouse/distributor/retailer. In and out movement from factory and
between warehouses is called primary logistics while movement from
warehouse to distributor/retailer is called secondary logistics.
Exhibit 8: Supply chain management model
Source: Company RHP, Crisil Report, ICICI Direct Research
Exhibit 9: Services provided by SCM
Source: Company presentation, ICICI Direct Research

PTS industry: The people transport solutions (PTS) business relates to

transport services provided by corporates for exclusive usage by
employees. The cost is borne by the corporate and not the employee.
Exhibit 10: Types of transportation
Source: Company RHP, Crisil Report, ICICI Direct Research
As per Crisil estimates, the PTS industry is expected to grow at a CAGR of

8.5-9.5% to | 8500-9500 crore in FY20E, mainly driven by IT and Information
Technology enabled Services (ITeS) sectors. IT and ITeS sector (3.8 million
employees) are the biggest users of PTS services.
Exhibit 11: PTS industry size
12000
9000
9000
7000
| crore
6000
3000
0
FY17 FY20E
PTS market size
Source: Company RHP, ICICI Direct Research
The strong growth prospects of PTS can be attributed to the increasing

employee base of the IT and ITeS sector, shift of office to suburban areas,
an emerging trend of corporate shuttle buses, etc. Large organised players
with a technology platform and dedicated fleet are expected to grow at a
faster rate than only fleet provider players as companies outsource their
entire PTS function to a third-party player.

Investment Rationale
Indian logistics growth expected to outperform global peers
The India logistics market accounts for 13-17% of the country’s GDP spend.
As per a Knight Frank report (India warehousing market report 2018), this is
double the logistics cost to GDP ratio in developed countries, such as US,
Hong Kong and France (6-9%), lower only to China (18-19% of GDP) as the
Chinese economy is primarily driven by industrial sector (46% vs. 20% in
US and 18% in India). As per a McKinsey and Co report, of the total logistics
costs, indirect costs comprise 40% share, which includes theft, damage,
inventory carrying costs and losses in transit. In contrast, in developed
countries, these comprise nearly 10% of logistics costs, mainly due to an
efficient supply chain.
Exhibit 12: Logistics as percentage of GDP
18
16 2
14
12 1 6
10 4
8 0.5
6 3
4 8 9
2 5
0
India China US
Transportation Admin/others Warehousing
Source: TCI Express presentation, ICICI Direct Research
As India is in its initial stages of evolution compared to its peers such as the
US and China, it has the potential to grow at higher rates for a longer period
of time, before it catches up with these countries.
Exhibit 13: Evolution of logistics sector
Source: Knightfrank research

As per Crisil Research, India’s road freight traffic is expected to continue to

grow at 6-8% CAGR in FY20-24. At the same time, rail freight is expected to
grow at 7-9% in the same period, led by the commissioning of Dedicated
Freight Corridor and uptick in economic activity.
GST implementation aids greater adoption of 3PL model

The replacement of multiple taxes on manufacture, sale and consumption
of goods and services to a single tax regime is expected to greatly benefit
the organised logistics sector on both the transportation and warehousing
fronts. Post the GST bill implementation, clients have been able to benefit
from input tax credit over the tax charged on transport of goods and
services, when they deal with a tax compliant logistics player. Over the
medium to longer term, GST & E-way bill are expected to result in a shift of
market share in favour of organised players. This is on account of the fact
that unorganised players are expected to become less competitive owing to
increased cost of compliance providing an opportunity to larger organised
players to capture a higher market share on a sustained basis.
On the transportation front, previously, services provided by the Goods
Transport Agencies (GTA) were liable to pay service tax via a reverse charge
mechanism (RCM), in which the receiver of goods and services is
responsible for paying the taxes. The GST regime respects the previous tax
regime while the GTA may also opt to pay via forward charge mechanism
(FCM). Mahindra Logistics has migrated from RCM to FCM, by convincing
both its clients and supply side players (transporters) to move to FCM,
thereby deriving benefit of input tax credit.
Exhibit 14: GST tax regime
1) Reverse Charge Mechanism
Supplier Transporter Recipient

(GTA)
•No GST •No GST •GST paid to

charged charged the Govt and
no Input Tax
Credit
2) Forward Charge Mechanism

Supplier Transporter Recipient
(GTA)
•GST charged to •GST charged to •GST paid to

GTA and paid recipient GTA and can
to the Govt avail Input Tax
Credit
On the warehousing front, one of the biggest changes that GST

implementation has brought to the supply chain of various businesses is the
consolidation in the warehousing sector. Earlier, on account of various
indirect taxes (octroi duty, entry tax, CST), instead of operational efficiency,
tax efficiency was the key parameter in setting up warehouses. This had
resulted in setting up of multiple inefficient stocking and distribution location
in each state. Post implementation of GST, warehousing has moved from
being “tax-efficient” to “supply chain efficient”. Thus, the number of
warehouses has drastically reduced (moved from being more region
specific to centrally located) and become bigger in size at strategic locations.

Exhibit 15: Changes in supply chain post-GST

1) Pre-GST scenario
State 1
Regional Distributor/
warehouse stockist
Factory
State 2
Regional Distributor/
warehouse stockist
2) Post-GST scenario
State 1
Distributor/
stockist
Factory Central
warehouse State 2
Distributor/
stockist
Typically, post-GST, supply chains are being designed in such a way that
the run from the factory to the central warehouse has reduced while the
secondary run from the warehouse to the regional distributor/stockist has
increased. Thus, the challenge before various companies remains two-
pronged: i) optimise the supply chain so that assets do not remain
underutilised (i.e. trucks carrying capacity not efficiently utilised) and ii)
higher investments into building bigger warehouses, tracking capabilities.
Outsourcing of various supply chain activities has a beneficial effect on both
players, the client and the 3PL firm. It is a “win-win” game, as it helps the
client to focus on its core capabilities of manufacturing, building brands, etc.
On the other hand, it helps the 3PL firm achieve greater scale and optimal
asset utilisation i.e. lower empty running costs, network optimisation, etc,
thereby, lowering logistics costs for all clients. Thus, a shift in the supply
chain model provides an opportunity for 3PL players like MLL to optimise
routes, locations and provide customised logistics solutions to its clients.
Asset light MLL well poised to capture 3PL growth opportunity

Assets required by a 3PL player for its functioning depends on four functions
a) transportation, b) employees c) technology and d) warehousing. MLL
selects its business partners that own these assets, based on past
experience, financial condition, service commitment and track record on
performance on KPIs. Overall, the company has ~1500 business partners,
which cater to its requirements in the SCM, PTS division. MLL has also set
up business partner development and loyalty programmes to motivate its
existing business partners to contribute more assets while improving
service quality and performance and also expand MLL’s network of business
clients.
Transportation: The road transportation segment in India is characterised by
an average low fleet ownership and is highly fragmented. MLL has contracts
with various truck owners, truck and fleet aggregators, passenger vehicle
owner and aggregators. The company typically has long term partnerships
with these players. They provide MLL access to various vehicles like 1-tonne
to more than 40-tonne capacity. The large fleet provides MLL with flexibility
to scale up its operations whenever required and cover various routes and
enables MLL to avoid heavy investment into assets before entering into a
dealing with existing and newer clients. The business partner is required to

carry out safety checks and preventive maintenance of the vehicle for longer
vehicle life.
Exhibit 16: Transporter operating cost structure
1% 5%
8% Fuel
Tyre
7%
Toll
Human
12%
60% Investment
Government
7%
Other expenses
Source: ICRA, ICICI Direct Research
MLL helps its business partners like small fleet operators to gain more
business, reduce idle time and provide training to drivers. By having a fuel
pass through clause with its clients, MLL is able to cover the volatile fuel cost
(biggest cost for fleet owners) for the transporter.
Manpower: MLL being a 3PL service provider is in a people intensive
business with 17840 employees (including permanent, fixed term contract
and third party payrolls). As on March 31, 2019, Mahindra Logistics had 3631
permanent employees on its payroll, with a median salary of | 3.2 lakh.
Exhibit 17: Growth in MLL permanent employee base
4200 25
3631
3500 20.6 3004 20.9 20
2656 17.7
2800
2256 15
2100 1747 1871
13.1
10
1400
7.1
700 5
0 0
FY13 FY14 FY16 FY17 FY18 FY19
Permanent employees Growth (%) (RHP)
A significant chunk of the total employee base comprises temporary and

fixed term employees, who are recruited, trained and retained by third-
parties (MLL business partners).
Exhibit 18: Segmentation of 17840 employees (FY19)
8%
20%
Permanent employees
Temporary employees
Fixed term contract
72%
In addition to the recruitment of several employees, MLL has also been

enhancing its return on employed human capital (both permanent and

contractual workers). MLL was able to earn a return of $0.74 in FY19, from
earlier $0.71 levels in FY15.
Exhibit 19: Human capital RoI (%)
76.0
74.0 74.1 74.2
73.3
72.0
70.0 70.7
68.0
66.0
65.0
64.0
62.0
60.0
FY15 FY16 FY17 FY18 FY19
Return on Human Capital (%)
Technology: Network optimisation and establishment of an asset light

model for 3PL players relies greatly on technology usage. Hence, there has
been an increasingly greater adoption of it among logistics players.
Technology enables real time monitoring of operations and consignment
deliveries from control towers, which are connected to various hubs and
spokes. The company continues to invest in technology, both internally
developed and through external partnership. MLL spends | 25-30 crore each
year as capex (majority of which goes towards building technology). Major
MLL investment in technology includes:
a) Transportation monitoring system (TMS): Provides control over
transportation operations, which includes planning, vehicle
allocation, vehicle traceability, route and freight optimisation and
reduction in billing cycles for clients. MLL has developed two
varieties of TMS i) MILES (transportation of finished automobiles) ii)
MyCargo360 (deployed across all industry verticals)
b) Central Control Tower System (CT): Provides enhanced control over
transportation operations and is used along with TMS and enables
MLL to provide entire segment of logistics activities to clients (e.g.
from production plant to central storage facility)
c) Mahindra Warehouse Management System (MWMS): It is an
internally designed system and is used to manage warehouse and
logistics operations. It can interface with multiple client’s ERP
systems and enables MLL to operate multiple clients in a single
warehouse as well as single client in multiple warehouse
d) Other platforms like solutions design systems, E-auction platform,
etc

Exhibit 20: MLL technology platform
Warehouse: MLL operates warehouses across India. As on FY19, the

company operated on 15.3 million square feet (mn sq ft) of space. MLL also
manages its client’s warehouses (roughly 35-40% of overall managed
space). All remaining facilities have been acquired by the company on a
lease or license agreements with third parties. MLL typically enters into three
to five years contract with its clients while the lease and license agreement
matches the warehousing arrangements with third parties (five years with
an option to extend for another five years with infra players).
Exhibit 21: Warehousing space (million square feet) and lease rentals paid (| crore)
80
67.4
70
56.6
60
50 39.9
40
30
20 13.5 15.3
10.0
10
0
FY17 FY18 FY19
Warehousing space (million square feet) Rent (| crore)
Mahindra warehouse can be split into various subcategories:

a) Multi-user warehouses: Provides space to multiple users and
operates on a variable cost model with fixed minimum prices for
services. These are typically used as regional distribution centres,
satellite warehouses with certain large format warehouses in central
locations
b) Built to suit warehouses: Built based on client needs. These are
typically used in central distribution centres or regional distribution
centres and allow consolidation synergies due to economies of scale
(suited to a client)
c) Stockyards: Used for storage and further transportation of finished
vehicles (operated 50 stockyards in FY19). Provides services such as
inventory management services

d) Cross-docks and network hubs: Used to feed component and parts

into manufacturing plants across India as various parts are collected
from several locations and consolidated at the cross-dock facility
Group companies provide multiple opportunities to grow

Mahindra group is a conglomerate of 130 plus companies and is diversified
over 20 industries and countries. The brand enables the company to build
long standing relationship with its several business partners (that helps it to
stay asset light) and also acquire a large number of non-Mahindra clients.
Exhibit 22: MLL FY19 SCM revenue bifurcation
| 1366,cr 39% Mahindra Group SCM revenues

| 2100,cr 61% Non-Mahindra SCM revenues
However, the group also provides MLL with an opportunity to cater to its
wide number of companies. MLL currently caters to four of its companies
while M&M auto and farm segment (AFS) comprises ~90-95% of MLL’s
revenues. MLL currently captures a smaller wallet share (lower than 25-30%)
of the estimated potential groups spend. Thus, going ahead, the other
Mahindra group businesses (non-AFS), are expected to increasingly
contribute higher share of MLL revenues.
Exhibit 23: MLL Mahindra group SCM revenue bifurcation
5%
AFS
Non-AFS
95%
Within the AFS division, MLL’s growth is dependent on the type of vehicle
getting produced (2-W, 4-W, CV, tractor, etc), location of manufacture (more
than 10 locations across India) and the demand pattern. For example, MLL
gains greater revenue if the vehicle is produced in the south location and
higher demand is seen in the east location (i.e. greater miles to transport the
vehicle). Over the years, MLL has been able to provide almost entire logistics
services for the Mahindra group’s AFS division. MLL now also competes for
newer entity JVs formed by the Mahindra group in diverse areas like solar,
defence, retail, auto-components, etc.
We expect the Mahindra group’s SCM revenues to remain largely at 57-59%
in FY20 and FY21. This is in spite of the expected subdued volume growth
in automotive and farm equipment, led by the rising MLL share of value
added services per vehicle (including higher in-factory logistics) and higher
contribution from the non-AFS pie.

Exhibit 24: MLL Mahindra group SCM revenues (| crore)

6% FY19-21 CAGR
2500.0 2338.4
2100.0 2171.3
2000.0 1820.0
1419.0
1500.0
1000.0
500.0
0.0
FY17 FY18 FY19 FY20E FY21E
MLL Mahindra Group SCM revenues
MLL focus on client acquisition to drive SCM sales ahead

Auto comprises roughly 25% of the MLL non-Mahindra SCM revenues while
the rest of the pie is equally distributed (~15% each) between e-commerce,
engineering, FMCG & consumer durables and pharmaceuticals & bulk. As a
3PL entity, MLL has historically possessed expertise in the auto segment
[just-in-time (JIT)] inventory practice), which it is actively seeking to replicate
in other high growth segments. On an overall SCM basis (both Mahindra,
non-Mahindra) share of auto has come down from ~85% in FY15 to ~66%
in FY19. The management expects the trend to further continue, going
ahead.
Exhibit 25: MLL non-Mahindra SCM revenue pie
15%
25% Auto
E-Commerce
15% FMCG & Consumer Goods
Engineering
15% Bulk
15% Pharma
15%
MLL served 650 plus client and operating locations in the non-Mahindra
SCM segment in FY19. Post GST implementation, MLL has witnessed
changes in the clients’ organisation of logistics and supply chain networks,
which also provides it an opportunity to gain more clients as MLL can assist
them to optimise their new routes, supply chain and provide value added
services. For example, e-commerce can provide opportunities for labelling,
boxing, un-boxing, inventory management, bill generation, etc.
A diversity in service portfolios allows the company to service existing and
potential clients across multiple industry verticals. In SCM business, MLL
serves clients such as Volkswagen India Pvt Ltd, Vodafone India, Thermax,
JSW Steel, Ashok Leyland, Siemens, Bosch, BMW India Pvt Ltd, 3M India
and Mercedes-Benz India Pvt Ltd in the automotive, engineering, consumer
goods, pharmaceuticals, e-commerce and bulk industry verticals,
respectively.

Exhibit 26: MLL non-Mahindra SCM clients
MLL offers customised logistics solutions developed by the solutions design

team that improves supply chain elements for its clients, including service
levels, cost, quality, scalability & visibility. They also plan & design
transportation networks and can remodel storage layouts to bring efficiency
in clients warehousing and in-factory logistics operations. MLL boasts a
client retention rate of 100% for top 25 SCM, non-Mahindra group clients.
Exhibit 27: Opportunities for MLL in non-auto sectors

Sectors Opportunities for MLL
E-commerce Trend seen in putting up smaller warehouses near consumption centres for quicker
deliveries. MLL can service these smaller warehouses (less than 1 lakh square feet) that
have been set up by e-commerce players
FMCG, Retail & Cons 1) Post GST, to put up a large distribution centre and integrate the company server IP
Durable with the logistics player to have visibility
2) To service the rising need of distributor such as increased visibility and predictability,
once order is placed by them.
Engineering Customised service required as parts are costly, differ in size
Pharmaceuticals 1) Reduction in C&F agents serving to various states and consolidation of warehouses
2) Transportation constitutes major share, hence requires greater optimisation in post
GST scenario
3) Complex distribution chain, in case of exports, 3PL can provide integrated end to end
logistics
Bulk Cost sensitive towards handling of raw material (makes up 18-20% of sales) and hence
requires greater optimization of truck run
We expect a net addition of 35-40 clients every year till FY21, backed by its
strong brand pull and satisfaction of existing customers. The MLL non-
Mahindra SCM revenue is expected to grow at 15% in FY19-21E to | 1820
crore, led by strong customer addition, gaining share from competitors and
increasing wallet share from existing clients (by outsourcing existing
functions and further providing value added services).

Exhibit 28: Non Mahindra SCM revenues (| crore)

12% FY19-21 CAGR
2000.0
1723.6
1491.7
1500.0 1366.0
1256.0
952.8
1000.0
500.0
0.0
Non-Mahindra SCM revenues
SCM margins to benefit from higher warehousing

As part of its SCM business, MLL consults and designs supply chain for
clients, ranging from transportation, warehousing, international freight
forwarding and other value added services. MLL’s SCM segment, on a
blended basis (both M&M group, non-M&M businesses) can be segmented
into transportation (~85% of SCM revenues) and warehousing (~15%) in
FY19. Further, M&M group’s SCM pie can be bifurcated into ~92%
transportation and ~8% warehousing with the non-M&M SCM segment into
74% transportation and 26% warehousing. Typically, MLL’s Mahindra group
SCM segment deals in delivery of finished vehicles (outbound: inbound
roughly at 75:25), which requires higher transportation component (inbound
for auto usually deals in delivery of spare parts and ancillaries to the auto
manufacturers). On the other hand, MLL’s non-Mahindra SCM has been
seeing the share of revenues of newer clients from warehousing at 40%.
Exhibit 29: Net additions in warehousing space
20
17.8
16.5
15 15.3
13.5
10 10
0
Warehousing space (million square feet)
Gross margins in transportation are between 6% and 8% compared to 10-

18% seen in case of warehousing. In case of transportation, gross margins
are dependent on the scale of operations i.e. higher vehicle runs at optimal
loads, as driver salary, insurance is fixed. Therefore, for a 3PL company,
greater gross margins from transportation segment depends on the number
of runs as well as on the route and network optimisation, so that truck run is
optimised for load and is not empty in both directions of the run. On the
other hand, an improvement in gross margins in warehousing is time bound
(efficiency through learning and doing the same stuff again and again),
region dependent, type of warehouse (Grade A warehouses can demand
even better margins than usual).

Exhibit 30: Trends in gross margins

20
Gross margins ranges in
10-18% levels
15
Gross margins ranges in
6-8% levels
10
0
Transportation Warehousing
PTS division expected to remain strong

In the public transportation system (PTS) division, MLL primarily serves the
IT, ITeS business process outsourcing, banking & financial services,
consulting & manufacturing industries. Crisil defines PTS as transport
services provided by corporates for exclusive use by their employees to
commute from home to office and back. These services are generally
outsourced to third parties with the cost being borne by the company.
PTS services are offered by MLL using its network of 500 business partners
that provide the company with buses and drivers. It also has a presence in
150 plus client and operating location across India. Certain key clients in
India for MLL PTS business include Tech Mahindra, AXISCADES
Engineering Technologies and ANZ Support Services India Pvt Ltd.
MLL’s PTS division is expected to grow at 13% CAGR in FY19-21E led by a
rising employee base, regulations required by companies to provide safety
to its employees and lower transportation costs to clients by optimisation of
routes and connectivity using MLL’s technology platform.
Exhibit 31: MLL PTS division (| crore)

13% FY19-21 CAGR
600.0
492.2
500.0 435.6
385.5
400.0 340.5
295.1
300.0
200.0
100.0
0.0
PTS revenues

Inorganic routes open to build capacity in freight forwarding

MLL has two subsidiaries viz. 2X2 Logistics that provides logistics and
transportation services to OEMs, to carry finished automobiles from
manufacturing locations to stockyards or directly to distributors. The other
subsidiary, Lords Freight is its freight forwarding arm (acquired in FY14), in
which the stake has been recently increased to 83.9%. Its service offerings
include air freight and sea freight forwarding operations for exports and
imports, customs brokerage operations, project cargo services and charters.
Lords is a member of a worldwide partner alliance (WPA) and world cargo
association (WCA) freight forwarding networks.
Currently, freight forwarding makes up 5-6% of revenues of MLL. The
management expects it to reach 10-15% of revenues, going ahead. The
increase in capacity is expected via both the organic and inorganic route.
This would catapult the organisation to a level where it can provide services
in line with its peers. Expansion in international freight forwarding would
enable the company to provide its clients a global reach.
Exhibit 32: MLL subsidiaries (| crore)
200 177.8 174.4
150
100 75.0
66.8 59.2
52.7
50 37.8
16.0
0
FY16 FY17 FY18 FY19
2X2 Logistics Lords Freight

Financials
Revenues expected to grow at 9% CAGR to | 4554 crore in FY19-21E
MLL’s blended revenues are expected in grow in double digits, with non-
Mahindra SCM segment growing the fastest at 15% CAGR, buoyed by
healthy client addition and moderate growth in revenue per client (both top
20 and ex-top 20 clients). On the Mahindra group SCM segment, MLL is
expected to grow at 6%. This is in spite of the expected moderation in sales
of automotive and farm equipment in the short to medium term, led mainly
by the rising value added work performed by MLL within the AFM group and
also increasing its penetration across various companies within the
Mahindra Group. The PTS segment is expected to grow at 13%, mainly led
by continued outsourcing of logistics related activities and higher employee
addition within IT and ITeS firms. On an overall basis, we expect blended
MLL revenues to grow at 9% CAGR to | 4554 crore in FY19-21E.
Exhibit 33: Revenues expected to clock 9% CAGR in FY19-21 to | 4554 crore
5000
492.2
4000 435.6
385.5
340.5 1723.6
3000 1491.7
| crore
1366.0
295.1 1256.0
2000 952.8
1000 2100.0 2171.3 2338.4

1820.0
1419.0
0
MLL Mahindra Group division MLL non-Mahindra SCM division PTA division
EBITDA margins expected to grow 20-40 bps each year to 4.4% in FY21E
MLL reached margins of 3.9% in FY19 from 2.9% in FY17 (an increase of 100
bps in two years). Higher margins in the SCM segment are dependent on
optimisation of transportation as the MLL network grows (also applicable in
case of PTS division) and higher efficiency through skill based handling of
the newer warehouses (timebound). Thus, MLL’s growing investments in
technology are expected to help the company stay asset light as well as
optimise its operations (higher truck utilisation, lower idle asset time, etc),
thus lowering costs. We expect EBITDA margins to grow 20-40 bps each
year to 4.4% in FY21E. Hence, we expect absolute EBITDA to grow 15% to
| 200 crore.
Exhibit 34: EBITDA expected to grow 16% to | 200 crore
250 5.0
200.4 4.4
200 4.1 4.0
3.9 168.0
3.5 151.2
150 3.0
| crore
2.9 119.7
%
100 76.3 2.0
50 1.0
0 0.0
EBITDA EBITDA margins

PAT expected to grow at 16% CAGR to | 115 crore in FY19-21E

PAT has grown at 37% CAGR in FY17-19 to | 86 crore in FY19, led by the
strong growth in the MLL SCM and PTS businesses with a 100 bps increase
in EBITDA margins. We expect capex to remain range bound at | 25-30
crore. Thus, the business is expected to stay asset light. Thus, the interest
and depreciation component will likely stay low and not impact the expected
strong operational performance, which would likely lead to PAT growth in
sync with EBITDA growth.
Exhibit 35: PAT expected to grow 16% to | 115 crore
140 3.0
114.6 2.5
120 2.5
2.2 94.6 2.3
100 85.6 2.0
1.9
| crore
80 1.7 64.0
1.5
%
60 45.6
1.0
40
20 0.5
0 0.0
PAT PAT margins
Return ratios, free cash flows to remain strong, going ahead

MLL primarily being an asset light company deals with multiple business
partners to procure the asset it needs (drivers, trucks, buses, etc). MLL
clocked RoE & RoCE of 17.2% & 25.8%, respectively, in FY19. Going ahead,
we expect return ratios to remain strong at similar levels, led by a continued
strong operational performance and lower capex requirements.
Exhibit 36: Return ratios to remain stable
30
25 25.8 24.7 25.5

23.4
20
18.7
17.2 16.3 16.8
15 15.3
%
13.1
10
0
RoE RoCE
Similarly, with the end of volatility in cash flow related to the GST
implementation era, FCF is expected to remain strong at | 120 crore in FY21E
(implied 5% yield).

Exhibit 37: Free cash flow yield expected to remain strong
150 6.0
119.5
5.0 5.0
100 78.7 4.0
60.8 3.3
3.0
50 2.5
| crore
2.0
%
1.0
0
FY17 FY18 FY19 FY20E FY21E 0.0
-50 -25.3-1.0 -1.0
-57.3-2.4 -2.0
-100 -3.0
FCF FCF yield


Risks & Concerns

High dependence on auto sector in SCM segment
MLL’s exposure to the auto sector is ~66-68% in the SCM segment.
Although it has reduced the exposure from 85% in FY15, yet the exposure
remains concentrated. Further, with a slowdown in auto sales expected in
the short to medium term, if the company fails to bring further value added
services in the segment or penetrate into other businesses within the
Mahindra group or bring in more clients from non-auto segments, it could
impact its operational performance. Also, a significant slowdown in auto
production in the long term can lead to lower demand for the logistics
company. Seasonality of auto sales, adverse developments like low rainfall
along with perception of Mahindra group as a competitor by OEM clients
could also negatively impact MLL revenues.
MLL serves in fragmented, competitive industry
Segments such as transportation suffer from large oversupply, with truck
aggregators having low barriers to entry and exit. Also, it is commoditised.
Thus, clients can also have low switching costs to competitors, if the service
levels deteriorates. Also, segments such as PTS can suffer from competing
modes of public transportation like car-pooling services (which employers
may reimburse).
High dependence on business partners for staying asset light
Non-availability or delays in obtaining hired vehicles or breakdowns, on-
road repairs or service interruptions may result in a loss of orders or delays
in delivery of goods, any of which could lead to client dissatisfaction and
loss of business. Also, with expanding business in other geographical
locations in India, there may be a shortage of business partners that meet
MLL’s quality standards and other selection criteria. As a result, the
company may be unable to engage a sufficient number of high quality
business partners in a timely manner.

Valuations
Asset light model within underpenetrated segment
Increased revenue share from the non-Mahindra business (especially FMCG,
e-commerce) would enable higher warehousing revenues, providing higher
gross margins and translating into higher profitability for the company.
Considering the rising importance of services like inbound, outbound and
in-factory logistics along with prospects of performing further value added
services, enabling 3PL players to get a higher wallet share of the clients
business with increased client dependency, we initiate coverage on
Mahindra Logistics with a target price of | 415/share (at 26x FY21).
Exhibit 38: Valuation summary

Sales Sales Gr. EPS EPS Gr. PE EV/EBITDA RoNW RoCE
Year
(| cr) (%) (|) (%) (x) (x) (%) (%)
FY17 2666.6 29.2 6.4 26.8 53.0 31.3 13.1 18.7
FY18 3416.1 28.1 9.0 40.3 37.7 19.8 15.3 23.4
FY19 3851.3 12.7 12.0 34.2 28.2 15.7 17.2 25.8
FY20E 4098.6 6.4 13.3 10.2 25.5 13.8 16.3 24.7
FY21E 4554.3 11.1 16.1 21.1 21.1 11.0 16.8 25.5

Financial Summary
Exhibit 39: Profit & Loss Statement (| crore)
(Year-end March)/ (| crore) FY18 FY19 FY20E FY21E
Total Operating Income 3,416.1 3,851.3 4,098.6 4,554.3
Growth (%) 28.1 12.7 6.4 11.1
Freight Expense and Charges 3,001.0 3,372.4 3,590.4 3,980.4
Gross Profit 415.2 478.9 508.2 573.8
Gross Profit Margins (%) 12.2 12.4 12.4 12.6
Employee Expenses 229.1 263.8 278.7 305.1
Other Expenditure 66.3 63.9 61.5 68.3
Total Operating Expenditure 3,296.4 3,700.1 3,930.6 4,353.9
EBITDA 119.7 151.2 168.0 200.4
Growth (%) 57.0 26.3 11.1 19.2
Interest 3.8 3.5 3.1 2.4
Depreciation 19.7 22.0 26.4 29.6
Other Income 5.9 7.6 8.2 9.1
PBT before Exceptional Items 102.1 133.4 146.7 177.4
Less: Exceptional Items 0.0 0.0 0.0 0.0
PBT after Exceptional Items 102.1 133.4 146.7 177.4
Total Tax 36.8 46.8 51.4 62.1
PAT before MI 65.3 86.7 95.4 115.3
Minority Interest 1.3 0.8 0.8 0.8
PAT 64.0 85.9 94.6 114.6
EPS Growth (%) 40.3 34.2 10.2 21.1
EPS (Adjusted) 9.0 12.0 13.3 16.1
Exhibit 40: Balance Sheet (| crore)

(Year-end March) FY18 FY19 FY20E FY21E
Equity Capital 71.1 71.5 71.5 71.5

Reserve and Surplus 348.5 426.8 508.5 610.2
Total Shareholders funds 419.6 498.2 580.0 681.7
Minority Interest 7.0 5.7 5.7 5.7
Total Debt 26.2 28.5 23.5 18.5
Deferred Tax Liability 3.6 0.0 0.0 0.0
Long-Term Provisions 0.0 0.0 0.0 0.0
Other Non Current Liabilities 14.8 16.4 16.7 17.0
Source of Funds 471.1 548.8 625.9 722.9
Gross Block - Fixed Assets 120.7 145.3 165.3 185.3
Accumulated Depreciation 59.2 78.3 104.8 134.4
Net Block 61.6 67.0 60.5 50.9
Capital WIP 0.6 2.6 2.6 2.6
Fixed Assets 62.1 69.6 63.1 53.5
Investments 50.1 87.9 89.6 91.4
Goodwill on Consolidation 4.3 4.3 4.3 4.3
Deferred Tax Assets 17.7 18.7 18.7 18.7
Other non-Current Assets 123.2 120.3 122.7 125.1
Inventory 0.0 0.0 0.0 0.0
Debtors 520.0 631.7 617.6 686.3
Loans and Advances 146.1 202.7 204.7 206.7
Other Current Assets 0.0 0.0 0.0 0.0
Cash 66.0 70.0 123.9 219.2
Total Current Assets 732.2 904.3 946.2 1,112.2
Creditors 486.3 600.1 561.5 623.9
Provisions 3.3 5.2 5.3 5.4
Other Current Liabilities 28.9 51.1 52.1 53.1
Total Current Liabilities 518.5 656.3 618.8 682.4
Net Current Assets 213.7 248.0 327.4 429.8
Application of Funds 471.1 548.8 625.9 722.9

Exhibit 41: Cash Flow Statement

(Year-end March)/ (| crore) FY18 FY19 FY20E FY21E
Profit/(Loss) after taxation 64.0 85.6 94.6 114.6
Add: Depreciation & Amortization 19.7 22.0 26.4 29.6
Add: Interest Paid 3.8 3.5 3.1 2.4
Net Increase in Current Assets -106.4 -168.2 12.1 -70.7
Net Increase in Current Liabilities 95.2 137.8 -37.5 63.6
Others -64.4 14.3 0.0 0.0
CF from Operating activities 11.9 95.0 98.7 139.5
(Purchase)/Sale of Fixed Assets -37.2 -34.2 -20.0 -20.0
Long term Loans & Advances 0.0 0.0 0.0 0.0
Investments 8.5 -25.3 -1.8 -1.8
Others 10.7 -54.3 -22.1 -22.1
CF from Investing activities 19.2 -79.7 -23.8 -23.9
(inc)/Dec in Loan -1.8 2.3 -5.0 -5.0
Dividend & Dividend tax -12.9 -12.9 -12.9 -12.9
Less: Interest Paid -3.8 -3.5 -3.1 -2.4
Other 3.1 2.7 0.0 0.0
CF from Financing activities -15.3 -11.3 -20.9 -20.3
Net Cash Flow 15.9 3.9 54.0 95.3
Cash and Cash Equivalent at the beginning 50.2 66.0 70.0 123.9
Cash 66.0 70.0 123.9 219.2
Exhibit 42: Ratio Analysis

(Year-end March) FY18 FY19 FY20E FY21E
Per share data (|)
Reported EPS 9.0 12.0 13.3 16.1
BV per share 58.8 69.8 81.3 95.5
Cash per Share 9.3 9.8 17.4 30.7
Dividend per share 1.8 1.8 1.8 1.8
Operating Ratios (%)
Gross Profit Margins 12.2 12.4 12.4 12.6
EBITDA margins 3.5 3.9 4.1 4.4
PAT Margins 1.9 2.2 2.3 2.5
Inventory days 0.0 0.0 0.0 0.0
Debtor days 55.6 59.9 55.0 55.0
Creditor days 52.0 56.9 50.0 50.0
Asset Turnover 28.3 26.5 24.8 24.6
Return Ratios (%)
RoE 15.3 17.2 16.3 16.8
RoCE 23.4 25.8 24.7 25.5
RoIC 25.9 28.3 29.5 35.4
Valuation Ratios (x)
P/E 37.7 28.2 25.5 21.1
EV / EBITDA 19.8 15.7 13.8 11.0
EV / Net Sales 0.7 0.6 0.6 0.5
Market Cap / Sales 0.7 0.6 0.6 0.5
Price to Book Value 5.7 4.8 4.2 3.5
Solvency Ratios
Debt / EBITDA 0.2 0.2 0.1 0.1
Debt / Equity 0.1 0.1 0.0 0.0
Current Ratio 1.3 1.3 1.3 1.3
Quick Ratio 1.3 1.3 1.3 1.3

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the analysts' valuation for a stock
Buy: >15%
Hold: -5% to 15%;
Reduce: -15% to -5%;
Sell: <-15%
Pankaj Pandey Head – Research [email protected]
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Mahindra Logistics (MAHLO)

Non-auto client additions to aid growth…

ICICI Securities – Retail Equity Research

Rising client dependence on MLL to provide competitive edge Research Analyst

| crore FY17 FY18 FY19 FY20E FY21E CAGR

FY2000 FY09 FY11 FY14

FY15 FY16 FY18 FY19

•Business •Enters into •Completes •Acquires

Source: Company, ICICI Direct Research

As on FY19, MLL achieved revenues of | 3851 crore, of which SCM

ICICI Securities | Retail Research 2

Exhibit 2: Business segments

Mahindra Logistics Ltd (|3851 cr)

SCM (|3466 cr) - 90% PTS (|386 cr) - 10%

Mahindra SCM (|2100 Non-Mahindra SCM

Client based segmentation

Non-Mahindra Client (|1594 cr)

Auto and Farming - 48-51% Auto (~|340 cr) - 9%

Others - 3-5% Engineering - 5%

PTS (~|57 cr) - 2% E-Commerce - 5%

PTS (~|329 cr) - 9%

Source: Company, ICICI Direct Research

ICICI Securities | Retail Research 3

Pirojshaw Sarkari, 51 years

Rampraveen Swaminathan, 54 years

Yogesh Patel, 54 years

Sushil Rathi, 54 years

ICICI Securities | Retail Research 4

Source: RHP, ICICI Direct Research

Overall, logistics players can also be segmented on the basis of origin of

Source: Company, Crisil Report, ICICI Direct Research

Automobiles dominate the Indian 3PL share whereas highest growth is

ICICI Securities | Retail Research 5

Exhibit 7: Sectors employing 3PL

Source: Company RHP, Crisil Report, ICICI Direct Research

Exhibit 9: Services provided by SCM

Source: Company presentation, ICICI Direct Research

ICICI Securities | Retail Research 6

PTS industry: The people transport solutions (PTS) business relates to

Source: Company RHP, Crisil Report, ICICI Direct Research

As per Crisil estimates, the PTS industry is expected to grow at a CAGR of

Source: Company RHP, ICICI Direct Research

The strong growth prospects of PTS can be attributed to the increasing

ICICI Securities | Retail Research 7

Transportation Admin/others Warehousing

Source: TCI Express presentation, ICICI Direct Research

Source: Knightfrank research

ICICI Securities | Retail Research 8

As per Crisil Research, India’s road freight traffic is expected to continue to

GST implementation aids greater adoption of 3PL model

Supplier Transporter Recipient

•No GST •No GST •GST paid to

2) Forward Charge Mechanism

•GST charged to •GST charged to •GST paid to

On the warehousing front, one of the biggest changes that GST

ICICI Securities | Retail Research 9

Exhibit 15: Changes in supply chain post-GST

Source: Company, ICICI Direct Research