VRL Logistics Limited — Q2 FY26 earnings call

Call held 4 Nov 2025

Management summary

VRL Logistics demonstrated resilience in Q2 FY26, achieving 17% YoY EBITDA growth and 39% YoY net profit growth despite a strategic 11% tonnage decline from exiting low-margin contracts. The company saw a 4% sequential volume recovery and improved realization per ton. Management is optimistic about continued volume growth in H2 FY26, driven by new customer additions and operational efficiencies, while maintaining strong EBITDA margins and investing in owned infrastructure.

Highlights

  • Total income for Q2 FY26 stood at ₹804 crores, broadly flat year-on-year.

  • EBITDA for Q2 FY26 grew 17% YoY to ₹158 crores, up from ₹136 crores in Q2 FY25.

  • Net profit for Q2 FY26 increased 39% YoY to ₹50 crores, compared to ₹36 crores in Q2 FY25.

  • Tonnage declined by approximately 11% YoY due to strategic exit from low-margin business, but showed a 4% sequential recovery.

  • Realization per ton improved by 11.6% YoY to ₹8,079 in Q2 FY26.

  • H1 FY26 EBITDA margin was around 20%, with PAT margin improving from 3% to 6.4%.

  • Capex for H1 FY26 was ₹43 crores, with ₹23 crores for converting leased branches to owned facilities.

  • Net debt reduced to ₹304 crores from ₹396 crores at March 2025 end, and ROCE improved to 18% from 14% in FY25.

Key financials

  1. Total Income ₹804 Cr 0%YoY
  2. EBITDA ₹158 Cr +17%YoY
  3. EBITDA Margin 19.6%
  4. Net Profit ₹50 Cr +39%YoY
  5. Tonnage Growth -11% -11%YoY
  6. Realization per Ton ₹8,079 +11.6%YoY

What they filed

Q1 FY27: revenue up 18.1%, net profit up 62.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue799 825 809 744 797 −0%827 +0%853 +5%879 +18%
EBITDA133 166 187 152 151 +14%170 +2%177 −5%187 +23%
Net profit36 59 74 50 50 +39%65 +10%72 −3%81 +62%
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.

Segment breakdown

  • Less-Than-Truckload (LTL)
    89% Revenue Contribution
  • Full Truckload (FTL)
    11% Revenue Contribution

Guidance & targets

Volume

  • Tonnage Growth Volume · Q3 FY26 · Medium confidence 5-6%
    again, there will be improvement in the range of at least around 5% plus, 5% to 6% what we are expecting.

    — Sunil Nalavadi, Chief Financial Officer

  • Tonnage Growth Volume · Q4 FY26 · Medium confidence 7-8%
    And in Q4, there will be a growth in tonnage by at least around 7% to 8%.

    — Sunil Nalavadi, Chief Financial Officer

  • Tonnage Reduction Volume · Full Year FY26 · Medium confidence 4-5%
    And on a full year basis, the overall there will be a reduction of around 4% to 5% in tonnage.

    — Sunil Nalavadi, Chief Financial Officer

  • Long-term Volume Growth Volume · FY27 onwards · Medium confidence 8-10%
    we are expecting to grow at least around 8% to 10% in the volumes going forward.

    — Sunil Nalavadi, Chief Financial Officer

Revenue

  • Revenue Growth Revenue · Full Year FY26 · Medium confidence 4%
    But if the same realizations will be maintained, overall the revenue growth for the full year it will be around 4%.

    — Sunil Nalavadi, Chief Financial Officer

  • Revenue Growth Revenue · Full Year FY26 · Medium confidence 4-5%
    And on a full year basis, definitely we are expecting around 4% to 5% revenue growth on a full year basis

    — Sunil Nalavadi, Chief Financial Officer

Margin

  • EBITDA Margin Margin · Future · High confidence around 19%
    we will be maintaining the EBITDA margin in the range of around 19%.

    — Sunil Nalavadi, Chief Financial Officer

  • EBITDA Margin Margin · Full Year FY26 · High confidence around 19%
    with the maintenance of the highest level EBITDA in the industry of around 19%.

    — Sunil Nalavadi, Chief Financial Officer

Capex

  • Investment in Branches and Transshipment Hubs Capex · H2 FY26 · Medium confidence INR130-140 crores
    in the second half, we are expecting that there will be investment of around INR130 crores to INR140 crores for the investment in the branches and transshipment hubs.

    — Sunil Nalavadi, Chief Financial Officer

  • Other Capital Expenditure Capex · H2 FY26 · Medium confidence INR10-20 crores
    And apart from that, there will be around INR10 crores to INR20 crores other capital expenditure.

    — Sunil Nalavadi, Chief Financial Officer

  • Total Capital Expenditure Capex · H2 FY26 · Medium confidence around INR160 crores
    So in second half year,, we are expecting the total capital expenditure of around INR160 crores or so.

    — Sunil Nalavadi, Chief Financial Officer

  • Vehicle Investment Capex · Next Financial Year · High confidence in next financial year
    then we will invest in the vehicles in next financial year.

    — Sunil Nalavadi, Chief Financial Officer

Cost

  • Vehicle Running Repair and Maintenance Cost as % of Revenue Cost · Future · High confidence around 5%
    No, it will be maintained at around 5% or so. The vehicle running repair and maintenance cost is around 5% of the revenue. It will be continued at this level.

    — Sunil Nalavadi, Chief Financial Officer

  • Fuel Cost as % of Revenue Cost · Future · High confidence 25-26%
    So definitely the percentage of the fuel expenses will be at 25%, 26%.

    — Sunil Nalavadi, Chief Financial Officer

  • Professional Fees Increase Cost · Q2 FY26 · High confidence INR2 crores
    Purely on the professional fees, around, say, INR2 crores is increased.

    — Sunil Nalavadi, Chief Financial Officer

  • Professional Fees Recurring Cost · Next Quarter · High confidence nonrecurring
    No, it is nonrecurring. It will not be there in the next quarter.

    — Sunil Nalavadi, Chief Financial Officer

Risks & concerns

  • Short-term demand moderation due to GST policy changes

    medium

    Temporary impact on volumes in Q2 FY26 as customers adopted a cautious stance following GST-related policy changes, viewed as a transitory phase.

    Management acknowledged

  • Tonnage decline due to strategic rationalization

    medium

    Tonnage declined by 11% YoY in Q2 FY26, primarily due to deliberate exit from low-margin business, but management expects recovery from lost customers and new additions.

    Management acknowledged

  • Increased employee cost

    low

    Employee cost increased to 18.3% of total income (from 16.9% last year) due to salary revision in August, considered a strategic investment.

    Management acknowledged

Q&A highlights

3 direct
Impact of GST rate changes on volumes and future outlook Direct
Subsequently, yes, demand of these products have been improved. And since we are accounting the revenue based on the delivery basis, most of these revenues have not been accounted in September because of at least around 4 to 5 days transit time from the date of booking. So some of these revenues have been accounted in the month of October.

Clarifies the temporary nature of demand moderation due to GST changes and provides a positive outlook for volume recovery in subsequent quarters.

Asked by Alok Deora

Volume growth strategy given reduced fleet and branch additions Direct
No, just I want to clarify that most of the tonnage decline is because of some of the rationalization exercise we did. And we are expecting that there will be most of turnaround from the customers which have already been lost because they are not getting expected service from the other transporters.

Explains how the company plans to achieve volume growth through customer re-acquisition and improved utilization, rather than just fleet expansion, aligning with a profitable growth strategy.

Asked by Mukesh Saraf

Long-term volume growth and pricing strategy Direct
No, basically, what is happening now because of this temporary whatever rate rationalization exercise we did from the last year and because that there is a certain variance in the tonnage growth. But otherwise, in the normal scenario, we are expecting to grow at least around 8% to 10% in the volumes going forward.

Provides insight into the company's long-term volume growth aspirations and confirms their commitment to maintaining rationalized pricing for margin sustainability.

Asked by Achal Lohade

3 min read 7 chapters

Detailed narrative

Q2 FY26 Performance and H1 FY26 Overview

VRL Logistics reported a total income of ₹804 crores for Q2 FY26, broadly flat year-on-year. Despite this, EBITDA grew by 17% YoY to ₹158 crores, and net profit surged by 39% YoY to ₹50 crores. For the first half of FY26, total income grew 1% YoY, while EBITDA reached ₹316 crores, translating to an EBITDA margin of approximately 20%. PAT for H1 FY26 more than doubled to ₹100 crores, with the PAT margin improving from 3% to 6.4%.

Strategic Tonnage Rationalization and Volume Recovery

The company experienced an 11% year-on-year decline in tonnage during Q2 FY26, primarily due to a deliberate exit from low-margin business. However, management noted a positive 4% sequential recovery in volumes, indicating improving demand and the return of some previously lost customers. Realization per ton significantly improved by 11.6% YoY to ₹8,079, reflecting the focus on profitable contracts. New customer additions contributed 14% of Q2 tonnage QoQ and 20% YoY, while existing customers showed a 2% QoQ growth.

Margin Expansion and Cost Optimization

EBITDA margin for Q2 FY26 was strong at 19.65%, driven by cost optimization efforts. Fuel cost as a percentage of total income reduced from 28.6% in Q2 FY25 to 25.6% in Q2 FY26, aided by increased bulk procurement from refineries (41% vs 35%). Lorry hire charges also declined from 5.7% to 4.4% of total income due to better fleet utilization and route optimization. Employee cost, however, increased to 18.3% of total income (from 16.9% last year) due to salary revisions, which management views as a strategic investment.

Capital Expenditure and Network Expansion

VRL Logistics incurred a capex of ₹43 crores in H1 FY26, with ₹23 crores specifically allocated to converting leased branches or hubs into owned facilities in key locations like Ernakulam, Salem, and Tumkur. For H2 FY26, the company plans further investments of ₹130-140 crores in branches and transshipment hubs, with an additional ₹10-20 crores for other capex, totaling around ₹160 crores. This strategy focuses on enhancing company-owned infrastructure, predominantly funded through internal accruals.

Impact of GST Rate Changes on Demand

The quarter saw short-term demand moderation due to GST-related policy changes, particularly impacting consumer durables, electronics, and garments. However, management highlighted that the reduction of GST rates for many commodities to 5% or 0% (from 12% or 28%) benefits organized players like VRL. Specifically, the limit for 5% GST on ready-made garments and footwear was enhanced to ₹2,500 per piece/pair, leading to increased demand for these products in October.

Operational Efficiency and Fleet Management

The company's own fleet stood at 5,782 vehicles in September 2025, down from 6,158 last year, reflecting rationalization of older, less efficient vehicles. Initiatives like route optimization and improved turnaround times are enhancing existing fleet utilization. VRL is also focusing on direct branch-to-branch transportation to reduce loading/unloading at hubs, aiming for 6-7 hours of improved vehicle utilization. Door-to-door delivery service now contributes around 40% of total handling, up from 15-20% previously.

Future Outlook and Long-term Growth Strategy

Management expects freight volumes to improve in H2 FY26, with Q3 seeing 5-6% QoQ growth and Q4 7-8% QoQ growth. For the full year FY26, a revenue growth of around 4-5% is anticipated, with EBITDA margins maintained at around 19%. Looking further ahead, VRL Logistics projects a long-term volume growth of 8-10% from FY27 onwards, driven by new customer additions, incremental volumes from existing clients, and deeper market penetration.

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