SHADOWFAX

Shadowfax delivered a 'phenomenal' Q4 FY26, achieving record growth and profitability. For the full year, revenue exceeded INR 4,200 crores, marking a 69% YoY growth, while PAT surged to INR 112 crores from INR 6 crores in FY25. Q4 alone saw revenue of INR 1,237 crores, up 74% YoY and 6.7% QoQ, with an Adjusted EBITDA margin of 4.7%, a substantial improvement from 0.7% in the prior year and 4.3% in Q3. This marks the first time the company achieved over INR 100 crores in PAT for a full financial year.

The company continued its aggressive expansion, increasing its real estate space by 35% and touch points from 4,200 to 4,700 between September and March. Shadowfax gained significant market share in the 3PL industry, reaching 28-29% for the full quarter, up from 17-18% one year ago. Full-year capex was approximately 4.5% of revenues, with 85% of capex over the last three years directed towards strategic assets like sorting centers and last-mile hubs, indicating a focus on building long-term operating leverage.

Shadowfax's D2C business demonstrated robust growth, expanding 2.5x between FY25 and FY26, and offering 15-20% higher incremental margins compared to enterprise clients. The large shipment capability, covering items like washing machines and furniture, grew 3-4x compared to FY25 and is currently delivering in approximately 6,000 pin codes, with a target to expand to 10,000 pin codes in FY27. The company aims to increase its total pin code coverage from 15,600 to 17,000 by the end of FY27, with a strategic goal to cover the entire country by FY28.

A significant strategic initiative is the expansion into vertical quick commerce, with plans to establish 100 dark stores in FY27. These dark stores are designed for specialized segments such as apparel, beauty, and sports gear, where players often lack in-house logistics. Pilot stores have shown promising unit economics, achieving over 20% gross margins and becoming profitable within 3-4 months, with average monthly revenue ranging from INR 8 lakhs to INR 15 lakhs per store.

AI is being adopted as a core operating layer, driving efficiency in various aspects including routing, rider acquisition, marketing, and accelerating solution shipping. A significant portion of the company's code is now AI-written. Shadowfax's network design emphasizes an asset-heavy approach for 'under the roof' operations (self-owned, automated hubs like OneNCR) and an asset-light approach for 'on the road' operations (crowdsourced network, accounting for 50% of costs), aiming for long-term cost advantage and efficiency.

Management guided for an annual improvement of 100-120 basis points in Adjusted EBITDA profitability until FY28. Post-FY28, as current investments mature, the company anticipates a 'real aggressive jump' in EBITDA, targeting 200-250 basis points improvement annually until achieving early double-digit steady-state EBITDA margins. This improvement is expected to stem from both corporate operating leverage and underlying service EBITDA.

The combined cost of lost shipments and quality check debits stood at 6.1% of revenue in Q4 FY26, a reduction from 6.3% in Q3 FY26 and 5.7% last year. Management acknowledged this as a focus area and is actively working to reduce it to a long-term goal of 4-5%. Efforts include significant investments in technology, such as image recognition systems for reverse logistics and addressing damages in large logistics, which showed 'brilliant green shoots' in the last quarter.