VRL Logistics to scrap 15% of fleet in ‘lost year’; sees nascent recovery in demand after lockdown dip

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August 18, 2020 11:10 AM

VRL Logistics Ltd., which owns the largest fleet of commercial vehicles in India, won’t buy new trucks and will get rid of old ones to rein in repair costs amid a nascent recovery in demand.

The operator of about 5,000 vehicles, including tankers, cranes and buses, has identified some 700 low capacity trucks for possible scrappage.

VRL Logistics Ltd., which owns the largest fleet of commercial vehicles in India, won’t buy new trucks and will get rid of old ones to rein in repair costs amid a nascent recovery in demand. The operator of about 5,000 vehicles, including tankers, cranes and buses, has identified some 700 low capacity trucks for possible scrappage, Chief Financial Officer Sunil Nalavadi said on a conference call Monday. The firm “hopes” to report a profit for the year started April 1 by cutting costs and halting fresh investment, he added.

That would be an improvement from a loss in the June quarter, the first ever for VRL as India stayed locked down to control the spread of the coronavirus. Daimler AG sees industrywide truck sales in India taking at least three years to recover, an outlook that backs up the central bank’s reading of an economy ravaged by the coronavirus pandemic.

VRL, which is operating at about 75% capacity, gets more than a third of its business from small- and medium-sized firms that are most vulnerable to the economic slump, and plans to remove routes that aren’t seeing enough demand. While business is improving from sectors like pharmaceuticals and farming, demand from textiles and automobiles is weak, Nalavadi said.

The Karnataka-based firm started operations with a single truck in 1976 and its shares rose more than 40% on debut in 2015. The stock has lost 45% of its value this year, set for a third straight annual decline.

“We expect that 2020 will be a lost year for earnings growth,” Chairman Vijay Sankeshwar said in the company’s annual report. “Our first priority is to keep our employees out of harm’s way.”

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