Dear Members,
I present to you the 41st Annual Report of VRL Logistics Limited for
the fiscal 2023-24. We have commenced our foray in the fifth decade of the Company?s
existence and overall 49th year of my having started this business with a single truck way
back in 1976. It is satisfying to write to you on this occasion and present my thoughts on
the year gone by and my vision for the Company?s future.
I begin by expressing my sincere gratitude to our valued stakeholders,
including our shareholders, customers and employees for their unwavering support and trust
in VRL Logistics Limited. It is your continued commitment that keeps us driving to achieve
more and better for the Company.
Your Company hived off its non-core business activities completely
during the current year. Last year, the "Bus Operations" business was separated
and during the current year the Company concluded the sale of the "Transportation of
Passengers by Air" business during the month of July 2023. Thereby, your Company now
solely operates within the Goods Transportation domain, which is its core competency.
The reduction in e-invoicing thresholds imposed by the Government has
benefited organized players like us as compared to the smaller and unorganized
transporters who form the majority of the Surface Logistics Industry. Customers have
shifted to us in large numbers and have retained their confidence after experiencing our
services.
The focus over the last 18 months or so has been on branch expansion.
During FY 2023-24 alone, your Company has opened 97 new branches. Entering newer markets
poses challenges in terms of implementing aggressive entry pricing strategies and involves
certain amount of gestation time to settle prior to achieving the expected business
volumes. This does require investments on the operational front. However, this is an
investment for the future of the Company and would start yielding noticeable results over
the near medium term.
We have focused our efforts on expanding our footprint across the
country, and the Northern, Eastern and North Eastern states have been a key area of
strategic expansion for us. I am delighted to report that our newly established branches
in this region have yielded substantial business volumes. By establishing a strong
presence in the North East, we have not only tapped into new markets but also facilitated
trade and economic development in these regions. We remain committed to further
strengthening our presence in these states and unlocking their immense potential.
Given the hub and spoke model of consignment distribution being
implemented by your Company, it is of utmost importance also that the transhipment hubs
have sufficient capacity to handle the business volume as also be sufficiently staffed to
ensure that consignment handling is being properly done all round the clock. Your
management thereby is proactively focusing on expanding the transhipment areas at select
key locations to ensure that expected future growth is aptly dealt with, though the same
would put a squeeze on margins in the short term.
Congestion even at a single transhipment does lead to a cascading
effect on the Company?s service levels across the country and your Company did
witness a couple of minor hiccups at transhipments arising due to labour shortages. Given
the inherent nuances associated with the Surface Logistics Industry in India, your Company
too is prone to disturbances being presented by unhealthy competition, labour shortages,
driver shortages, floods, festivals, processions, external strike, severe climatic
conditions etc. We do face and deal with these, then and there, in the most suitable way
so as to minimize any adverse impact to business. Internal challenges presented by aspects
relating to adoption of newer technologies and systems and processes also led to minor
operational blips during the year. The Company withstood all of these and moved ahead.
Your management is also focussing on operational efficiency, cost
optimization and route optimization so as to better today?s performance and make the
Company ‘tomorrow ready? to handle business volume growth over the long term.
These measures would enable the Company to navigate challenges and emerge stronger.
Rapid geographical expansion does present gestation challenges and our
financial performance during the year is demonstrative of this. The reduction in our
margins is largely due to consciously not having passed the increased costs to our
customers to maintain aggressive pricing in newer and existing markets. There has been a
significant increase in all costs such as Toll charges, tyre and spares, lease rentals,
hamali costs, employee costs etc. We have not compromised on expenditure increase in the
interest of maintaining our service levels. However, given the gradual erosion of margins,
taking a price hike is an imminent decision that your Company would need to take in the
coming few months. We would however continue to remain cautious in implementing such hike
as this decision does bring in a temporary fall in business volumes given the large
customer base we have. Remaining associated with us definitely is value additive to our
customers and we are confident of retaining our customers as also adding newer clients to
the Company.
Our aggressive capex push is also being thoroughly reviewed and we are
adopting a cautious approach on this front. Our focus is on improving the utilization of
our owned vehicles and reducing dependency on outside vehicles for longer hauls. A
delicate balance needs to be maintained on this aspect as newer branches and new routes do
present challenges in deployment of vehicles and committing these to such routes. We have
however the requisite wherewithal to deal with these challenges and have put necessary
safeguards in place to ensure optimal vehicle utilization. We would approach the impending
capex cautiously and delay the fleet addition over the short term.
We are also deploying environment friendly Electric and CNG vehicles
for intra city and short haul movements apart from adding bigger vehicles on a need basis.
At the same time, we are also phasing out our older vehicles as a proactive measure. The
vehicles being scrapped are lower capacity vehicles and these are gradually being replaced
with higher capacity new vehicles which also adds to the overall fleet capacity. As a
responsible corporate entity, we have proactively embraced the government's vehicle
scrappage policy. By replacing older vehicles with newer, more fuel-efficient, and
environmentally friendly models, we have not only reduced emissions but also improved the
overall efficiency of our fleet. This initiative aligns with our commitment to
sustainability and reinforces our dedication to preserving the environment for future
generations.
On a prudent note, considering our imminent vehicle scrappage year on
year in the days to come as also the potential that the vehicle scrapping compulsion
entails, we are gearing up to establish a vehicle scrappage unit at our centralized
vehicle facility at Varur in Hubballi, Karnataka. This would be the best of its kind unit
in Northern Karnataka and would cater not only to our in-house vehicles but also outside
vehicles would be procured and scrapped. Though not significant in quantum, I am sure that
business would yield positive cash flows. The imminent implementation of the vehicle
scrappage policy will provide us with opportunities to leverage government incentives and
optimize our operations.
We remain focused on the road ahead and our commitment to challenge
internal benchmarks, improve utilization and efficiency of existing resources,
technological improvements, customer satisfaction, and sustainable growth will continue to
drive us forward. We will seek to invest in latest technologies, expand our service
offerings, and explore newer geographies for volume growth. I remain confident of your
Company?s ability to sustain business growth and set new benchmarks in the industry.
As the world becomes more environmentally conscious, sustainability has
emerged as a key priority for businesses across all sectors. VRL Logistics Limited is
deeply committed to minimizing our environmental footprint and promoting sustainable
practices throughout our operations. We are actively exploring alternative fuels, electric
vehicles, and renewable energy sources to reduce emissions and promote greener logistics.
I would like to emphatically state that our employees, by virtue of
their hard work and commitment, remain the most valuable asset of VRL and that I
appreciate the contributions of each one of you and look forward to the same level of
dedication and zeal in the days to come.
Lastly, I wish to assure that myself and the entire management team of
your Company will continue to dedicate ourselves to bring in business growth and
parallelly drive innovation, foster strong relationships with all our stakeholders and
create sustainable value for the future.
Warm regards,
Sincerely,
DR. VIJAY SANKESHWAR
CHAIRMAN & MANAGING DIRECTOR