Detailed Narrative
Q3 FY25 Financial Performance Overview
Landmark Cars reported its highest quarterly EBITDA and turnover in Q3 FY25. Total pro forma revenue reached INR 1,668 crores, marking a significant 28% year-on-year growth compared to INR 1,301 crores in Q3 FY24. New vehicle pro forma sales contributed INR 1,421 crores. EBITDA stood at INR 69.5 crores, with a 5.82% margin, while PAT was INR 11.8 crores at a 1% margin, impacted by higher depreciation and Ind AS effects.
Cost Optimization and Inventory Efficiency
The company successfully implemented cost optimization initiatives, reducing personnel expenses to 3.9% and other expenses to 3.5% of pro forma revenue, achieving these targets ahead of schedule. Furthermore, Landmark Cars significantly improved its inventory management, bringing new car inventory down to a near-normal 35 days, which is considerably better than the industry average of 55-60 days.
Impact of New Outlets on Gross Margins
Gross margins experienced a contraction of 800 bps year-on-year and 500 bps quarter-on-quarter. This was primarily attributed to the ramp-up phase of 19 new outlets, particularly affecting the service business. These new outlets currently contribute only half the service revenue of established outlets, leading to a temporary drag on overall gross margins as they scale up to full operational capacity.
EV Market Outlook and OEM Partnerships
Management acknowledged global uncertainties in the EV market but expressed confidence in India's EV penetration growing from approximately 2% to 7-8% this year, driven by new launches from mainstream players like Mahindra, Hyundai, and MG. Landmark Cars continues to be a crucial partner for OEMs, with the new Kia Syros expected to boost Kia volumes by 15% this year, and BYD aiming to sell over 10,000 units in the current calendar year.
Service Business Trajectory and Future Growth
The service business, while currently experiencing slower growth due to the changing car parc of older brands (e.g., declining Honda sales impacting the service pool), is expected to regain its historic growth trajectory as new workshops achieve optimum utilization. Landmark's service revenue is projected to soon reach INR 1,000 crores per annum, marking a significant milestone.
Capital Allocation and Debt Management
Total capital expenditure for the first nine months amounted to INR 125 crores, with INR 70 crores specifically allocated to the 23 new stores. Overall debt stood at INR 560 crores, which included INR 150 crores of interest-free debt for Mercedes-Benz demo cars. The company reported an operating cash flow of INR 200 crores and a free cash generated of INR 25 crores for the nine-month period, indicating prudent financial management.