Allcargo Gati — Q1 FY26 earnings call

Call held 6 Aug 2025

Management summary

Allcargo Gati reported a Q1 FY26 marked by strategic rebalancing of its Express logistics business, leading to improved gross and EBITDA margins despite a slight volume and revenue decline. The company achieved significant cost efficiencies and saw strong new business additions. Progress on the merger with Allcargo Supply Chain is on track, with a merged entity expected by October, promising substantial synergies. The company remains optimistic about the economic environment and its focused growth strategies in MSME and Air Express segments.

Highlights

  • Gross margin improved by 170 basis points to 25% in Q1 FY26 compared to 23% in Q4 FY25.

  • Express business EBITDA margin improved by 100 basis points to 4% in Q1 FY26 compared to 3% in Q4 FY25.

  • New business addition grew 120% YoY, including top 500 businesses, indicating successful client acquisition.

  • Provision for doubtful debt reduced by INR2 crores and customer deductions improved by INR1 crore due to strong collection efforts.

  • Employee expenses reduced by 10% from Q1 FY25 to Q1 FY26, contributing to cost efficiency.

Concerns

  • Express logistics volume declined by 6,000 metric tonnes YoY in Q1 FY26, though attributed to shedding unprofitable customers.

  • Express business revenue slightly declined to INR357 crores in Q1 FY26 from INR358 crores in Q1 FY25.

  • Air Express segment revenue saw a slight dip from Q4 FY25 to Q1 FY26, though expected to grow faster in coming quarters.

Key financials

  1. Volume Handled 2,99,000 metric tonnes -1.7%YoY
  2. Realization per Tonne ₹11,961 +2%YoY
  3. Express Business Revenue ₹357 Cr -0.28%YoY
  4. Gross Profit ₹88 Cr
  5. Gross Margin 25% +8.7%QoQ
  6. Express Business EBITDA ₹14 Cr -30%YoY
  7. Express Business EBITDA Margin 4% +33.3%QoQ

What they filed

Q1 FY26: revenue down 0.2%, net profit up 156.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY24Q3 FY24Q4 FY24Q1 FY25Q2 FY25Q3 FY25Q4 FY25Q1 FY26
Revenue442 424 355 358 426 −3%392 −8%385 +9%357 −0%
EBITDA15 7 13 19 18 +20%21 +211%10 −28%13 −30%
Net profit-4 19 -6 -2 -1 +66%1 −97%15 +340%1 +156%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

medium confidence
  • Liquidity Liquidity disclosed Cash flows improved in the current quarter, marked by collection from IT refunds.
    Cash flows have improved in the current quarter, marked by collection from IT refunds, which are scheduled in this quarter.

Guidance & targets

Margin

  • EBITDA Margin for Express Business Margin · FY26 · High confidence 6.5% to 7%
    So we are expecting to do 6.5% to 7% EBITDA margins for the quarter -- for the entire year for the Express business? Are we still sticking to that target? Yes, you're right.

    — Deepak Pareek

Volume

  • Overall Volume Growth Volume · Ongoing · Medium confidence Percentage point above market
    Absolutely. As we have been saying in the calls previously too, that we will grow at a percentage point above the market. That guidance remains.

    — Ketan Kulkarni

  • Air Express Segment Growth Volume · Ongoing · High confidence 3-4% CAGR year-on-year
    The guidance would be that this segment grows at about 3% to 4% CAGR year-on-year.

    — Ketan Kulkarni

What to watch in Q2 FY26

NCLT approval and completion of merger

Next quarter (Q2 FY26)
Current Hearing scheduled for August
Target Merged entity from October onwards

Why it matters

The merger will create a single entity for Express and Supply Chain, unlocking significant synergies and operational efficiencies, which is a key strategic initiative.

But now in Q2, we have the hearing scheduled in the month of August, which would actually hear views of all the stakeholders and then the orders are expected in the maybe not August, September, and from October onwards, we would be seeing a merged entity.

Risks & concerns

  • Geopolitical uncertainties and softening consumer sentiment

    medium

    This reflects very strong economic resilience amid, of course, some short-term challenges like the geopolitical uncertainties that we are all experiencing and also a little softening in the consumer sentiment reflected across some industry verticals.

    Management acknowledged

Q&A highlights

7 direct
Volume growth decline in Express logistics Direct
One is that we consciously took a call on some of the customers who are not trading in a profitable manner with us because against that volume drop, you'll also see on a Y-o-Y basis, improvement in the yield.

Explains the YoY volume decline as a strategic decision to improve profitability rather than a demand issue, indicating a focus on quality over quantity of business.

Asked by Chirag

Cost efficiency and network optimization decisions Direct
If you look at the numbers on employee expenses, you would see about 10% reduction from Q1 FY '25 to Q1 FY '26. This reduction has already factored in the increments and the variable pay already factored.

Details specific cost-saving measures and their impact on employee expenses and overall operational efficiency, demonstrating active management of the cost base.

Asked by Chirag

Synergies from Supply Chain business integration Direct
But particularly, if you look at Allcargo Gati and Allcargo Supply Chain, I think the synergies have already started kicking in. There are customers in automotive, in quick commerce, in e-commerce, in consumer durables that currently consume both our services.

Highlights the existing and future cross-selling opportunities and customer benefits from the integration of the two businesses, indicating potential for increased wallet share.

Asked by Chirag

New business addition and customer acquisition Direct
It is 100% translating because when I look at my new business addition that I did, it is 120% more than the same quarter of last year. So a lot of large key customers have been added in the quarter.

Clarifies that despite overall volume rebalancing, the company is successfully adding significant new, profitable business, validating the strategic shift.

Asked by Ashwin Kumar

Impact of Dedicated Freight Corridors on business Direct
So whatever the government does to improve infrastructure is only going to impact us positively. And we welcome any development in terms of dedicated freight corridors. They will only enable long-haul logistics movement and much faster.

Addresses a potential industry disruption, stating that infrastructure improvements are seen as positive and will be leveraged, indicating adaptability to regulatory changes.

Asked by Ashwin Kumar

Status and benefits of the merger between Express and Consultative Logistics Direct
So this merger, I think we have been waiting for long as even we are seeing NCLT proceedings have taken some time... from October onwards, we would be seeing a merged entity.

Provides a clear timeline for the merger and reiterates the expected synergies and expanded service capabilities, which is a key strategic initiative.

Asked by Chinmay Parab

Performance and strategy for the Air Express segment Direct
Air is a growth strategy, point number one. Air is a very strong growth strategy, point number two, because we are a player with very, very little presence in air. So that is the second half of the story.

Explains the strategic importance of the Air Express segment, its current low base, and the potential for faster growth despite a recent dip, highlighting a future growth driver.

Asked by Chinmay Parab

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview and Margin Expansion

Allcargo Gati reported Q1 FY26 Express business revenue of INR357 crores, a slight decline from INR358 crores in Q1 FY25 and INR385 crores in Q4 FY25. Despite this, gross profit stood at INR88 crores, leading to a gross margin of 25%, a 170 basis point improvement from 23% in Q4 FY25. The Express business EBITDA was INR14 crores, with an EBITDA margin of 4%, up 100 basis points from 3% in Q4 FY25, reflecting improved profitability.

Strategic Volume Rebalancing and New Business Growth

The company experienced a 6,000 metric tonne YoY decline in Express logistics volume, a result of a conscious decision to shed unprofitable customers to improve yield. This strategic move contributed to a 2% YoY increase in realization per tonne to INR11,961. Concurrently, new business additions surged by 120% YoY, including significant wins from top 500 businesses, indicating a successful shift towards more profitable client engagements rather than just volume chasing.

Cost Efficiency and Operational Improvements

Allcargo Gati implemented several cost-saving initiatives, resulting in a 10% reduction in employee expenses from Q1 FY25 to Q1 FY26, even after accounting for increments and variable pay. Other operating expenses were maintained at similar levels despite 7-8% inflation, driven by data analytics on transit times, linehaul vehicles, and facility costs. These efforts also led to an improvement of INR2 crores in doubtful debt provision and INR1 crore in customer deductions.

Merger Progress and Synergies

The merger of Allcargo Supply Chain with Allcargo Gati is progressing, with NCLT hearings scheduled for August and a merged entity expected from October onwards. Management anticipates immense synergies, particularly in cross-selling opportunities to shared customers in automotive, quick commerce, e-commerce, and consumer durables. The combined entity will offer a single point of contact for a broader range of logistics services, enhancing customer experience and wallet share.

MSME and Air Express Segment Focus

The company is aggressively focusing on the MSME sector, which remains a core strength due to its extensive reach across 19,000 pin codes and offers better yields compared to KEA accounts. Additionally, the Air Express segment, despite a slight dip in Q1 FY26, is identified as a strong growth strategy. A dedicated team has been formed to drive this segment, with a target of 3-4% CAGR, aiming for growth multiples above the market average due to its currently limited presence.

Economic Outlook and Industry Tailwinds

India's economy is projected to grow at 6.4% for FY25-26, supported by resilient domestic demand and stable economic policies. The logistics sector is benefiting from significant structural investments in multimodal connectivity and government initiatives like the National Logistics Policy and Gati Shakti. Management views these developments, including dedicated freight corridors, as positive enablers for faster and more efficient logistics movements, reinforcing their role as a key trade facilitator.

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