The AVG Logistics Limited Q3 FY25 Earnings Conference Call was conducted on February 21, 2025, to discuss the company’s financial performance for the third quarter of the fiscal year 2025 (October-December 2024), strategic developments, and future outlook. Hosted by Kirin Advisors, with Jainam Savla as the moderator, the call featured key management personnel, including Sanjay Gupta, Managing Director and CEO, and Himanshu Sharma, Chief Financial Officer. The transcript was formally submitted to the National Stock Exchange of India and BSE Limited on February 24, 2025, and made available on the company’s website (www.avglogistics.com). Held just days before the current date of February 27, 2025, the call provided a platform for investors to engage directly with management, addressing both achievements and concerns.
1. Detailed Opening Remarks by Sanjay Gupta
- Global Logistics Transformation:
- Gupta highlighted the “rapid transformation” reshaping the global logistics industry, driven by three key forces: technological advancements, evolving consumer expectations, and geopolitical shifts. He described technology as a game-changer for operational efficiency, consumer demands as pushing for faster delivery, and geopolitical changes as altering trade dynamics.
- AVG’s Proactive Adaptation:
- The company is actively responding to these shifts, Gupta explained. “We are integrating technological advancements, prioritizing real-time fulfillment of customer needs, and adapting to geopolitical requirements,” he said, positioning AVG as a leader committed to delivering “best-in-class service.”
- Festive Season Boost in India:
- Gupta pointed out that Q3 FY25 included India’s festive season, notably Diwali, which typically sparks a “surge in consumer spending and e-commerce.” This seasonal spike significantly increased demand for logistics services, providing AVG with a favorable operating environment.
- Government Infrastructure Support:
- He tied AVG’s growth to ongoing government initiatives like the PM Gati Shakti National Master Plan and the National Logistics Policy (NLP). “These are driving infrastructure development—new highways, freight corridors, and multimodal logistics parks—to improve connectivity and efficiency,” he said, noting their positive impact on logistics operations.
- Commitment to Sustainability:
- Sustainability was a focal point, with Gupta stating, “Your company strongly supports green logistics.” He emphasized AVG’s focus on rail transport as an eco-friendly solution and hinted at plans to integrate electric vehicles (EVs), aligning with broader environmental trends and customer expectations.
- Key Q3 FY25 Developments:
- Gupta shared specific achievements: “We have added 137 fleets during the 9 months ended December 31, 2024,” boosting capacity. He announced the planned acquisition of a major stake in Kaizen Logistics, expected by Q4 FY25, to enhance capabilities, and a “prestigious order” from a leading heavy infrastructure company (cement, steel sectors).
- Union Budget Alignment:
- He connected AVG’s strategy to the FY 2025-26 Union Budget, citing its ₹2.9-3 trillion railway investment as supportive of rail logistics expansion and EV production incentives as enabling greener operations. “This will enhance sustainability while driving cost efficiencies,” he noted.
- Growth Targets and Vision:
- Gupta reiterated an ambitious goal: “AVG remains focused on delivering 25%-30% annual growth.” This will be achieved through diversification, sustainable practices, and operational excellence, with strategic partnerships positioning AVG “at the forefront of India’s logistics sector.”
- Core Values and Closing Thanks:
- He underscored AVG’s differentiating values: “Our commitment to honesty, responsibility, and customer dedication set us apart in the competitive landscape.” Gupta concluded, “Thank you for your continued support and partnership, which remain pivotal to our success,” reinforcing investor goodwill.
2. Financial Performance by Himanshu Sharma
Himanshu Sharma, Chief Financial Officer, provided a concise yet robust overview of AVG Logistics’ financial highlights for Q3 FY25 and the nine-month period ending December 31, 2024, on a consolidated basis.
- Q3 FY25:
- Revenue: ₹142.44 crore, reflecting a 14.20% year-on-year (YoY) increase.
- EBITDA: ₹26.46 crore, up 14.40% YoY, with an EBITDA margin of 18.58% (a 3 basis point improvement).
- Profit Before Tax (PBT): ₹7.93 crore, a 12.30% YoY growth, with a PBT margin of 5.57% (up 35 basis points).
- 9 Months FY25:
- Revenue: ₹403.81 crore, up 17.70% YoY.
- EBITDA: ₹74.50 crore, a 17.30% YoY increase, with an EBITDA margin of 18.45%.
- PBT: ₹21.61 crore, surging 56.10% YoY, with a PBT margin of 5.35% (up 131 basis points).
Sharma expressed satisfaction with the company’s performance, thanking investors for their trust and emphasizing that their confidence inspires AVG to pursue new heights in the logistics industry. He then opened the floor for questions.
3. Question and Answer Session
The Q&A session featured a range of investor queries, reflecting both optimism about growth and frustration over unmet expectations. Below are the questions and corresponding answers:
Mahesh Seth (Individual Investor)
- Question: “Any new client addition during this reported quarter?”
- Answer: Gupta confirmed, “Yes, we are adding 4-5 new customers in the current quarter.”
- Question: “What is the realization or margin difference in Cold Chain as compared to the normal logistic?”
- Answer: Gupta explained, “If you take an FTL business in the industry, the gross margin is 8%-12%, whereas Cold Chain has a margin of around 20% to 25%-30%, case-to-case basis, product-to-product.”
- Question: “What is your current fleeting cold chain and what is the plan addition for FY26?”
- Answer: Gupta responded, “We have, as of today, roughly 400 cold chain fleets with us by Financial Year ’25 closure. This is a better segment, so we focus on it and plan to add approximately 100 fleets each year. We are number 2 or 3 in vehicle numbers, and we add fleets only after securing customer Letters of Intent due to high investment and the need for long-term commitments.”
- Question: “How are you leveraging your warehousing assets and what is the outlook for warehouse expansion?”
- Answer: Gupta detailed, “We are working on two models: owned assets and leasing. We have around 3 lakh square feet of owned assets, growing 60%-100% year-on-year. Next year, we’ll add 1.5 lakh sq ft, including a 1.25 lakh sq ft warehouse in Orissa, taking us to about 4.5 lakh sq ft. We aim to add 1-2 warehouses annually.”
Suresh Pal (KRSP Capital)
- Question: “In the previous con-call, you said we were supposed to win one government tender valued at Rs. 500 crores by December 15, 2024. What happened to that tender?”
- Answer: Gupta replied, “The technical evaluation is still ongoing, and hopefully, by next week, it will open for the price bid. It’s a government tender, so it’s taking longer due to its high value. We expect clarity by March 10, 2025.”
- Question: “What is the revenue guidance now? You mentioned 40%, which seems impossible without the tender. What do you see?”
- Answer: Gupta adjusted, “We’re now guiding a minimum 20% growth. Our historical growth has been 15%-20%, and we’re confident of achieving at least 20% this year.”
Subhash P (Value Investments)
- Question: “You said 20% growth excluding the government contract. Q4 should close with Rs. 182 crores. Is that possible?”
- Answer: Gupta affirmed, “Yes, definitely. Last year’s Q4 was ₹136 crore, and with FMCG targets rising in Q4, we expect to hit ₹182 crore.”
- Question: “What’s the status of the government contract? Do you still expect to win it, or is it out of our hands?”
- Answer: Gupta clarified, “It’s not gone; it’s under process. We’re following up with authorities, who assure clearance by March 10, 2025. Delays are due to inquiries and paperwork typical of big tenders.”
- Question: “Regarding the second acquisition—Kaizen Logistics and a bigger one—last con-call said March closure. With delays in Kaizen and the government contract, when will the second one complete?”
- Answer: Gupta updated, “Kaizen Logistics is almost complete. The larger acquisition’s due diligence is ongoing; if cleared by auditors, we’ll close it in March 2025. We’re cautious to avoid risks to AVG.”
Nitin Verma (Individual Investor)
- Question: “As an investor for 1.5 years, I’m disappointed. You promised acquisition completion by December 2, but it happened in January. The government tender, 85% sure, is delayed since September. Guidance should be firm, not overpromised. The stock price has suffered. How can I trust you now?”
- Answer: Gupta responded, “I appreciate your concern and apologize for the inconvenience. Delays were due to external factors like government processes. We’ve learned not to overpromise. In the future, we’ll announce only confirmed developments—like receiving the LoI. We’re targeting 20% growth, potentially more with new business, and are working hard to deliver results.”
- Question: “Will Rs. 600 crores happen with 20% growth, or should we expect lower?”
- Answer: Gupta clarified, “As of now, we’re at ₹403 crore, aiming for 20% growth. Q4 could push us close to ₹600 crore if we secure ₹10-15 crore in new business, but we’re not overcommitting. We’ll announce confirmed progress.”
Abhishek Sharma (Individual Investor)
- Question: “Are there specific regions or customer segments where you foresee rapid revenue growth?”
- Answer: Gupta noted, “We’re diversifying into heavy segments like steel and cement, with further announcements to the exchanges soon.”
- Question: “Can you elaborate on expansion efforts in Nepal, Bangladesh, and Bhutan?”
- Answer: Gupta said, “This is existing supply support for current customers, not new expansion.”
- Question: “What’s the revenue and profitability guidance for Q4 FY25 and FY26, considering macroeconomic factors?”
- Answer: Gupta projected, “We’re maintaining 18%-20% growth for Q4 despite missing earlier targets. PAT margins improved from 2.8% last year to 4% YTD, aiming for 4%-5% in FY26.”
Sujeep Samant (Individual Investor)
- Question: “You’ve focused on cement and steel for 2-3 con-calls. What’s the trajectory and guidance?”
- Answer: Gupta explained, “It’s a ₹1 lakh crore market in India due to infrastructure growth. We’ve onboarded 4-5 customers, targeting short routes (300 km) with trains and vehicles. It’s a high-turnover business with good prospects for 2-3 years.”
- Question: “FMCG gives better margins. Isn’t cement and steel lower margin?”
- Answer: Gupta countered, “FMCG payments take 92-100 days, while cement and steel pay in 7 days. Though margins are lower, faster cash cycles with companies like Ultratech and Dalmia boost EBITDA through reinvestment.”
- Question: “Are we buying vehicles or using an asset-light model?”
- Answer: Gupta replied, “Mostly asset-light, but for long-term contracts (8 years), we’re buying EVs and LNG vehicles where market supply is limited.”
Reha Chauhan (Individual Investor)
- Question: “How has the recently secured Indian Railways contract impacted revenue and profitability?”
- Answer: Gupta stated, “It covers 6 routes worth ₹700 crore over 6 years, boosting both revenue and profitability.”
- Question: “Can you share details on capital expenditures and investment plans for the next few quarters?”
- Answer: Gupta offered, “We’re preparing the FY26 budget, which we can share separately.”
Ananya Swaminathan (C Square)
- Question: “How has the multimodal transportation segment performed in Q3 FY25?”
- Answer: Gupta said, “It’s growing 15%-20%, with a 25% increase last quarter. Multimodal is the future of logistics.”
- Question: “What’s the update on LNG and EV adoption and their operational impact?”
- Answer: Gupta detailed, “We’re buying 100 LNG vehicles in the next year for FMCG and cement clients. They offer better EBITDA margins than diesel.”
- Question: “What steps are you taking to improve efficiency and reduce costs in railway logistics?”
- Answer: Gupta explained, “We’re investing in larger trucks to optimize wagon utilization, improving profitability in rail.”
Subhash P (Value Investments)
- Question: “Feedback: Call audio is unclear, and it’s a week after results. Can we schedule earlier? Also, avoid precise dates without buffers.”
- Answer: Gupta acknowledged, “I apologize for the audio and delay due to travel. We’ll schedule within 3-4 days of results and improve audio. We’ve learned not to overpromise—only confirmed updates will be shared, aiming to underpromise and overdeliver.”
4. Key Takeaways
- Financials: Q3 FY25 revenue grew 14.2% to ₹142.44 crore, with a 9-month total of ₹403.81 crore (17.7% YoY). EBITDA and PBT margins improved, reflecting operational strength.
- Strategic Moves: Fleet expansion (137 added), Kaizen Logistics acquisition (near completion), and diversification into cement and steel sectors are key priorities, alongside green initiatives (rail, EVs).
- Challenges: Delays in a ₹500 crore government tender and acquisitions led to a revised 20% growth target (from 40%), disappointing investors and impacting the stock price.
- Management Response: Gupta apologized for overpromising, committing to conservative guidance and transparency (e.g., announcing only confirmed deals).
- Outlook: Targets ₹182 crore in Q4 FY25 (18%-20% growth) and a 4%-5% PAT margin in FY26, supported by diversification and sustainability efforts.