SHADOWFAX

Shadowfax reported a record Q3 FY26 with ₹1,160 crores in revenue, marking a 65% year-on-year growth, exceeding internal expectations. The company delivered 20.6 crores orders during the quarter. This growth was primarily fueled by the Express Parcel segment, which grew 72% YoY and contributed 75% of the total business, and the Hyperlocal segment, which grew 43% YoY and accounted for 17% of revenues. Management attributed this success to active consolidation in the sector and strategic market share gains.

The company achieved an adjusted EBITDA of ₹49 crores in Q3 FY26, a substantial increase from ₹18 crores in the same period last year, representing a 172.2% YoY growth. This translated to an adjusted EBITDA margin of 4.3%, representing a 170 basis points improvement. On an Ind AS EBITDA level, the margin was 5.7%. Net profit (PAT) for the quarter stood at ₹35 crores, yielding a 3% PAT margin, reflecting the organization's continued focus on capital efficiency and operational leverage.

Shadowfax outlined a multi-pronged strategy for continued market share expansion, particularly in the Express Parcel business, targeting gains over the next six to eight quarters. Key drivers include pin code expansion, with 80-100 new last-mile facilities launched monthly to cover the remaining 15-16% of India's 19,000 pin codes. The company is also heavily investing in new customer acquisition, especially D2C brands and SMEs, which are growing at a triple-digit pace year-on-year and offer higher yields.

The company is expanding into new service lines, notably volumetric shipments, which currently generate ₹50 crores ARR and are serviced in only 20% of pin codes, indicating significant growth potential. They plan to launch the white goods category in FY27. CriticaLog, an acquisition from Q4 FY25, is enabling entry into high-value, time-sensitive deliveries for luxury e-commerce, addressing a significant market gap. These initiatives are expected to enhance value-added services and differentiation.

Shadowfax maintains a 'right asset strategy,' primarily leasing and operating 4.5 million square feet of real estate for sort centers and last-mile facilities, rather than owning trucks, citing an abundance of truck supply in India. Capex intensity for the first nine months of FY26 was 4.5% of revenues, projected to be around 4% for the full year, up from a historical 2-2.5%. Management expects Capex intensity to normalize to 2.8-3% over the next two years, eventually settling at 2-2.5% in the long term, as investments in growth capabilities mature.

The company successfully reduced lost shipments from 8.6% in the previous quarter to 6.3% in Q3 FY26, attributing the improvement to network changes and product tweaks, with further reductions targeted. Employee benefit expenses decreased from 9.4% to 8.8% year-on-year, and partner expenses as a percentage of revenue dropped from 54.7% in Q3 FY25 to 52.3% in Q3 FY26, driven by technology-led gig management. Management anticipates steady-state 'early teen EBITDA margins' globally for express parcel companies, with Shadowfax's margins expected to increase by 1-1.2% yearly over the next two years, followed by rapid expansion post-FY28.

Shadowfax projects a sustained year-on-year growth pace of 25% to 30% for the next couple of years, coupled with continuous margin expansion. The company is energized by its recent public listing and capital raise of INR 1,000 crores, viewing it as a new dawn for its growth story. The management expressed excitement about leading the market and leveraging its differentiated play in hyperlocal and fast-growing categories to power its high-growth strategy.