We recently visited the Mahindra Logistics’ (MLL’s) facilities in Pune (in-factory logistics services for Mahindra Vehicle Manufacturers (MVML), JIT/JIS facility for Volkswagen and Warehousing Facility) and also met the senior management team of MLL. MLL believes:
First, significant technical expertise (including track record of handling large facilities) is a critical aspect to win in-factory logistics mandates; secondly, consumer sector will be the fastest growing segment among its four industry verticals (auto, engineering, consumer and bulk) over the next three-five years; thirdly, the firm has identified warehousing spaces in Bhiwandi, Gurgaon, Chennai and Bengaluru, and is hopeful to add 1.5-2mn sq ft over the next one-two years, and fourthly it continues to invest in technology to upgrade its capabilities to gain business as well as improve margins. We do not have a rating on the stock.We visited MLL’s in-factory logistics operations at MVML in Chakan, Pune. This facility is spread over 750 acres and produced 14-15k vehicles a month (peak of 18k in January), which, includes PVs, truck, small commercial vehicles. MLL provides entire in-factory logistics services over the past 10 years (it was demerged from M&M in 2009).
MLL employs about 1,200 people on an average (1,400 at peak), including 800 involved in the operations. We also visited its JIT/JIS facility (caters to Volkswagen and other customers) and warehousing facility (for a large multinational conglomerate). Currently, MLL has four verticals in non-Mahindra segment, viz. auto, engineering, consumer, including e-commerce and bulk. Management believes that growth in consumer and e-commerce will be the highest over the next three-five years as it is one of the biggest beneficiaries of GST. Finished goods products warehousing / distribution for consumer vertical has higher margins as it is linked to the core business of warehousing and distribution (value added services).
MLL is facing stiff competition from start-ups in last-mile logistics, as the latter have become very aggressive and are operating at thin /nil margins. As last-mile delivery can be handled by any entity and does not require any expertise unlike warehousing. So, many start-ups have entered this space. MLL is facing issues in handling 2x-3x volumes in peak seasons as it is extremely difficult to predict the manpower to be deployed, though, company is continuously trying to find a solution.