Allcargo Global (NSE:AGL) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Allcargo Global Limited Q1 FY 'twenty seven Earnings Conference Call. We have with us the senior management team of Allcargo Global Limited, mister Ravi Jakar, director strategy and group CFO, Allcargo Group, mister Stephen Dunn, global CFO, Allcargo Global, mister Sanjay Punjabi, Investor Relations, Allcargo Group. Please note, this call may contain some of the forward looking statements, which are completely based upon company's beliefs, opinions, and expectation as of today. These statements are not guarantees of company's future performance and involve unforeseen risks and uncertainties.

0:48 The company also undertake no obligation to update any forward looking statements to reflect the developments that occur after statement is made. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Ravi Jakar for his opening remarks. Thank you and over to you sir. Yes. Hi, thank you. Good afternoon, everyone, and thank you for joining us on Allcargo Global Limited's first quarterly earnings call subsequent to our listing as an independent entity.

1:38 We appreciate your interest in our company and business and look forward to discussing our performance for the quarter as we progress through this call. I'll talk about a few macro headlines and give you a bit of a perspective on how business is trending before handing over to my colleague, Stephen Dunn, for more financial highlights. Speaking of the macroeconomic environment, we are all aware that there's a crisis going on in The Middle East, which is impacting trade and is naturally impacting our volumes also negatively, and that has remained so for the last five to six months. At the same time, we have seen corrections in inventory levels and that has led to some momentum in freight flowing through the other trade lanes.

2:29 And as an outcome of that, we have seen sequential improvement in most trade lanes for our business, whether it's Transatlantic, Trans Pacific or some of the inflation trade lanes as well. As an outcome of that, we have seen incremental volumes in both LTL and air of the magnitude of about 5%. While on the FCL, we have seen a quarter on quarter growth rate of about 1%. Marginally, lower growth rate on FCL is also coming from the fact that FCL business has higher contribution of the Middle East, Africa region, which is impacted by the war. And therefore, the negative pull of the Middle East region has a slightly more bearing.

3:14 Otherwise, broadly, the trend is similar in terms of seeing volume expansions sequentially across all the trade lanes, across all the products. The other element, which has now remained as a constant in the background is the Russia Ukraine war and some of the other minor geopolitical disturbances, which have ensured that the global economic environment has remained more flattish, and it hasn't changed much over the last twelve to eighteen months. However, we do see that over the last three, four months, there has been marginal improvement in the trade environment with volumes picking up for some of these key trade lanes. And then like I mentioned, perhaps half of our growth is contributed by market growth and half of our growth in this quarter is contributed by market outperformance.

4:11 The other aspect that I would like to highlight is that the capacity on the carrier side has been somewhat more constrained with all these disruptions. And as an outcome of that, the freight rates prevailing over the last few months have been on the higher side and which is what reflects in our revenues as well as freight being passed through in our some of our operating costs as well. What we have been able to do besides marginally benefiting from these tailwinds over the last few months, we have also focused a lot on company specific initiatives on how we could keep our costs under control and not just mitigate the inflationary measures, but also perhaps bring down the costs over the last year's base using opportunities on both technology led automations, replacing some of the work with agentic AI and also continuing our drive to have more and more resources based in lower cost geography, which is made possible by our continued focus and investments in creating one single system for finance, HR, operations across the globe.

5:30 So that's the trend that continues for us on the business side. As we move forward, we are not taking into account any significant improvements in the economic environment as we prepare for our business strategy. Some of these geopolitical events are completely unpredictable and rather than pivoting any of our plans to an outcome driven by an end to the Middle East conflict or end to some of the other conflicts, our focus entirely remains on operating in the environment as a business opportunity presents and then trying to stay focused on improving our efficiency. We have brought down our loss making trade lanes, focus on container utilization. And all of these factors contribute to improve gross profits per unit of cargo that we carry. And like I mentioned, combined with the focus on staff and admin costs using tech and process excellence and offshoring are the key focus areas for us to maintain and continue to see marginally improved profit performance.

6:39 So that's in a nutshell on the operating environment and some of our core business strategies. And before we come back to questioning on these and some of the other broader points, I would now hand over to my colleague, Stephen Dunn, the CFO for the company, to take us through some of the financial highlights. Pete? Thank you. The first quarter of FY 'twenty seven reflects continued progress in our financial performance over the same period last year and sequential quarter. As highlighted, improving trade conditions supported volume growth across our businesses. This translated into consolidated revenue of 3,522 crore for Q1 of FY 'twenty seven, representing 5.8% year on year growth and 20.8% sequentially.

7:27 Gross profit stood at INR733 crores, up 2.5% year on year and 6.5% quarter on quarter. More importantly, our continued focus on yield management, procurement efficiencies, process optimization, cost control and productivity improvements has resulted in a significant improvement in profitability. EBITDA for the quarter stood at INR33 crores compared to a loss of INR31 crores last year in Q1 of 'twenty six and EBITDA of INR17 crores in Q4 FY 'twenty six. At the other level, losses reduced significantly to INR18 crores compared with a loss of INR77 crores in the corresponding quarter last year and a loss of INR33 crores in the previous quarter. Similarly, pre exceptional PBT improved to a loss of INR 24 crores versus a loss of INR 92 crores in Q1 of FY 'twenty six and a loss of INR 36 crores in Q4 of FY six.

8:26 Profit after tax also improved substantially to a loss of INR28 crore compared with a loss of INR87 crore a year ago and a loss of INR44 crore in the immediately preceding quarter. Another encouraging aspect of the quarter was the continuing strengthening of our balance sheet. We further reduced higher cost standalone borrowings to $2.72 crores as of 06/30/2026, the pleased the made flexibility. While We there are is a lot of work to be done, the direction of the travel is encouraging. The combination of recovering trade volumes, disciplined commercial execution, structural cost initiatives, AI debt productivity enhancements and a continued focus on cash generation positions us well for a sustained improvement in financial performance.

9:23 We remain committed to delivering profitable growth and creating long term value for all of our stakeholders. With that, we will be happy to take your questions. Thank you very much, sir. We will now begin the question and answer session. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Participants, if you wish to ask a question, you may press star and 1.

10:31 First question is from the line of Kiran from Table Tree. Please go ahead. Thank you so much for the opportunity. I have two, three questions given this is the first call. Sir, I know it seems very familiar in terms of talking LCL and all the industry terms. If you could just explain, given this is the first call exclusively focused on Allcargo Global. If you could just explain the business model in simple terms for everybody to understand because this gets recorded, it's in transcript, so people can read about the business model. If you could just explain for the next two, three minutes of how the business economics and the business model work, that would be really helpful. I know we have read through the presentation in terms of end to end from shipping to air freight, but just in your own words, you could just explain that would really helpful.

11:23 Sure. If you can add your other questions as well so that we can respond together. Sir, the second question, it depends on the answer on the first question. So please, please go ahead. Yes. So primarily, we operate in the international shipping and air transport business. As you can see, the mainstay of our business is LTL consolidation, which is less than container load consolidation. What we do is the cargo either moves by air, which is what is captured in the air freight part of our business, but it's a small segment in our business. The ocean freight gets carried in containers, as you would know. There are two kinds of businesses in there. One is full container load, wherein customers booking the entire container for moving from point A to point B.

12:16 And the second part is LCL or less than container load cargo, which means that somebody might be working one cubic meters or five cubic meters or two cubic meters of cargo. And we receive these cargoes across a global network of 2,400 direct trade lanes that we operate and many more indirect trade lanes that we operate. So think of it as somewhat like how you are on an airline, you're booking a seat and not charging the entire aircraft. So it's still more like charging the entire aircraft, which is like charging the entire container saying that, okay, I want to move my cargo. And it's still like you're just buying a seat on the plane. And with, of course, it's not being one standard seat, but you're almost like filling up different cargoes into the box.

13:04 What we do is we run committed services, which means that, let's say, every Friday, there would be something going from Port A to Port B or every fifteen days or sometimes daily, we would have something going from Sichangai into Tokyo or so these are like regular sailings that we operate across different port payers and customers, which in case of LCL business are largely forwarders, book this to us. So that's the core business model in terms of what we do. The biggest advantage here is that for running these services, you need to have enough load to provide regular services, which becomes a huge entry barrier. And therefore, across these markets, there are only a handful of global players, and we are the market leaders globally holding about 14.5% market share in this business.

14:00 Over the last about seven, eight years, we have focused a lot on technology. We are perhaps the only company in this domain operating with our own in house operating system, our own digital platform, which now account for 70% of our export bookings and our own in house teams on data science, AI and other tech initiatives. So an unmatched global scale, market leadership and volumes that we carry and a leadership in tech and digital aspects is what puts us ahead of the competition in an environment, which is also brings in challenges in terms of anti barriers to the DNA process. Perfect. No, this is really helpful.

14:47 Thanks for that. Sir, the second question that I had was given and this is probably a recurring question to you in private conversations, but given the large shipping lines and a very heavy busy shipping line, there is what you call insourcing. So the Merk of the world insource a lot of heavy duty shipping lines leaving third party shipping lines like us into the lower volume traffic is what I basically understand. Again, this is my very rudimentary fundamental understanding on the business. If you could help correct the notion or maybe throw a nuance on the notion about these large shippers themselves in sourcing a lot of very high volume, high margin business, leaving only the sort of crumbs, so to speak, on the shipping line for people like us.

15:41 Is that the wrong understanding? Or help me correct that, please. Yes. I would comment on that, that is not the correct understanding. And not just this business, I think any business in the world across manufacturing or services will always have a high volume, low margin or a low volume, high margin business. You tend to operate on thinner margins when it comes to customers who buy at scale from you. And typically, what tends to happen is that some of the biggest accounts, which run into possibly several 100,000 deals of requirements would engage increasingly more and more with direct shipping line, but those are high volume FCL business that is conducted. Our mainstay is LCL. We are talking about moving cubic meters of cargo, and this is the highest profit margin business in the entire ocean freight segment. And shipping lines carry a very small, tiny fraction of this business.

16:39 Got it. Understood. Then the easier and the more local question, sir, how confident are we to kind of do a gross margin of 22%, 23% in this business? Do you see a large section of business still continuing to gain share on LCL or are there other modes of transport that we have found the niches where there's high margin which helps us push the gross margin to 22%, 23%? Because our cost base right now roughly INR2800 crores per year, sir. I I think Q1, maybe there'll be some efficiencies of INR100 crores, INR50 crores because of AI and all the optimization that you're seeing. So just if you could paint a picture around the gross margins and the cost base as well. That's my final question and then Ghislain back in the queue. Yes. So in our business, the gross margin honestly does not hold any significant value because gross margin means your profit in percentage terms. In our business, a significant amount of our cost is ocean freight, which is extremely volatile and can vary significantly, and this largely serves as a pass through cost.

17:48 And therefore, typically, in the higher freight environment, you would tend to see that margins would come down, while in reality, that's a better situation for us because we are making higher returns on capital employed, and we are generating higher profits as well. While on the contrary, when freight rates tend to go down in subdued economic environment, our gross margin could expand in percentage terms. But in reality, that means that we are operating on lower gross profit and the profit also goes down. So the way we have always explained this business over the last twenty years earlier as part of Allcargo Logistics and now as a new company is that you have to look at gross profit per cubic meter or gross profit per TEU. That is how we even do our operational budgeting. So revenue is not a relevant line item, interestingly, in this business. And what we look at is we try to maintain a gross profit per cubic meter on the LCL business, gross profit per TEU on the LCL business, and that is what we call as a yield.

18:46 And that yield is what is the driver. So we typically, even when, let's say, any particular country or branch is making a budget, they would say this is the volume which I want to do and at this yield, which means that there's a gross profit I want to achieve. Revenue is often an implied number because the ocean freight rates can fluctuate. So that is how we look at. So that's how one should read through the numbers as well, looking at gross profit relative to the volume. Got it, sir. So you're talking about years then. So essentially, the years normalizing is when we'll actually see the numbers. Got it. Sir, from a cost base perspective, are we at INR 2,800 crores per year? Is that the rough number that we should model in? So I would say that 15% of our business sits in India, approximately.

19:37 80% to 85% business sits outside India. And now the biggest cost contribution comes in from ocean freight, which largely operates in U. S. Dollar terms. And the local staff and admin costs operate in local currencies. A significant part of that would be in euros in European countries. And USD is the second most important currency in the global basket, driven by U. S. As well as many other countries, which have their currencies pegged to USD or are range bound. So the cost in rupee terms can tend to vary depending on where rupee is. Usually, internally, we use a dollar because that's the more dominant currency in both cost and revenue side. So typically, when analyzing trends, dollar could be a better currency to look at for comparing past year versus this year as compared to rupee because rupee would tend to be more volatile in context of the global P and L.

20:42 Got it. Got it. Got it. So you would much rather say cost terms and dollar terms. I'm just trying to understand, sir, in terms of, I mean, outside of the rupee depreciation angle, I'm just trying to understand, will we be roughly here in terms of cost because your presentation talks a lot about cost cutting measures in AI and everything else? So So I'm just trying to understand what's the percentage share that you're looking at? Yes. So one line response to that would be that our intent is to keep the costs flat in dollar terms. And so therefore, only increase that you would see would be on account of translation of the global cost from U. S. Dollars into rupees as we report in Indian rupees. But then there will also be corresponding benefit on the revenue side because there also dollar would convert into rupee. So if you're looking at only cost as a line item, take off the rupee depreciation more likely or in certain cases, unlikely appreciation.

21:38 So you just adjust for the rupee dollar adjustment, and the intent is to keep it flat in dollar terms. Got it, sir. Got it. I'll jump back in the queue, sir. Thank you so much. Thank you. Next question is from the line of Chetaniya from Amaltas. Please go ahead. Hi, good afternoon, and thank you for this opportunity. This is in continuance with the question that the last participant asked. This is regarding the gross profit for TEU that you discussed. I just wanted to understand that from the numbers, if I look at your historical numbers, it seems like after the boom of COVID cycle, these yields have fallen quite significantly starting FY 'twenty four. And I think in FY 'twenty six, I think you made a loss.

22:39 So I just want to understand what are the cycles and is this industry cyclical because if I look at the longer history, doesn't seem to be, but after COVID, the numbers seem to suggest that these numbers seem to suggest that it's cyclical. So if you could just talk about it. Yes. So a few comments on in response to that question. First, as you could see from the most recently reported numbers, the volumes have been down across products. As we reported, we have seen approximately 4% decline in LCL volumes and a double digit decline in the AR and FCL volumes, which means that volumes came down across the board. And despite that, on an year on year basis, the gross profit has moved upwards.

23:27 So that kind of speaks about the direction in which yield has moved. There were a couple of years when the yields were significantly high during post the COVID period. So those about twenty one to twenty four months, you could, to a certain extent, call out as an exception because the freight rates had significantly increased and that led to higher margins in FCL as well. But on an overall basis, if you look at leaving those two years out, the yield has continuously improved over a period of time. It's largely the volumes that have remained subdued in the last, I would say, almost now a couple of years on the back of the economic environment and further caused by geopolitical disruptions.

24:12 But on the yield side, we have actually moved upwards. And like I said, even in the most recent quarter, if you look at the volume and the gross profit, then the yield would point towards a positive number. And the second thing you spoke about the cyclicality. So I would say that it does not follow any cyclicality as such, but it closely shadows the economic and the trade environment. And therefore, any disruptions that could come into play, such as those caused by tariff barriers last year, war in The Middle East this year. Some of these would have a bearing on the global economic and trade performance, and that would reflect in the performance of the business as well. Now naturally, over the longer history, such events have less frequent.

25:05 And what we have seen both on the positive side on economic boom driven by economic stimulus during the COVID or the downward trends on account of geopolitical crisis, Both negative and positive events have become far too frequent over the last five years. And therefore, there seems to be higher volatility in the global economic and trade environment. And but I would say that now at least over the last couple of years, we have seen the industry bottoming out in a way on the volume side. And I would say that our base case is that we assume that nothing much changes for the next twelve months, and which is why we try to increase volumes primarily by chipping in a little bit on the market share and then starting to stay more focused on how can we negotiate better contracts, how can we improve utilization, how can we reduce loss making trade lanes, improve property on trade lanes. And a host of these measures, which can allow us to incrementally improve the yield and also then keep the cost constant, and therefore, we continue to drive the profitability. So our focus is more inwards because the excellent environment is not in our control.

26:14 But it's rather than cyclical, it's more of significant disruptions and positive and negative volatility that we have seen, which hopefully should be lesser. But I mean, I could not really comment on that as there's no certainty on how the geopolitical environment shapes up. Regarding the last point, I would like to highlight that at in the depreciation in our business is largely on account of, if you go back into the history, the way the company has grown, we have also grown on the back of various acquisitions. And therefore, there's goodwill on the books. There are a lot of other noncash assets, which also depreciate. As a business, it's an extremely asset light business with hardly any capital assets owned or even the CapEx investments are a tiny fraction of the company's P and L. And therefore, most of the depreciation would be noncash in nature. And in fact, over the coming quarters, we intend to provide a bit more perspective on that. And which is why while one could look at negative numbers, the business has actually generated cash in the recent times. And even on overall basis, if you look at the last couple of years, we have sequentially brought down the debt on our books, which has been an outcome of cash generation with both operating business initiatives and some of and plus some

27:45 of the asset divestment initiatives as well. Yes. So I hope I was able to give you some perspective on your question. Yes. Very helpful. Also, I wanted to understand the difference in the unit economics between the LCL and the FCL and the Air Cargo business. And you may correct me if I'm wrong because I don't have the entire data set with me. It seems like since quite a bit of yours, I would say, since 2016 or 2017, the LCL volume seem to be flat and all the growth has come from LCL and Air Cargo. And I may be wrong here because I don't have the actual numbers with me, but this is what I could deduce on the annual report. So, a, what is the difference in unit economics of... Between these businesses? And has LCL stagnated or has that also been growing? Is there a structural issue over there or not?

28:43 Yes. So one, naturally, LCL being the most niche business would tend to be having highest profitability as compared to FCL, which would be lowest of the three products, and Air would sit somewhere in the middle. In terms of the growth rates, you would find FCL business having higher compounded growth rates, primarily on the account of coming on a low base. But like I mentioned, in the addressable market, globally, we hold about 14.5% market share in LCL. In LCL, that number is not even 1%. So it's a highly fragmented market, and our contribution or our share is much smaller. In terms of the growth, actually, if you would observe, you would find that the business had steadily grown on the LTL business as well.

29:31 But over the last two years, there's been a contraction of volumes. And now in the most recent period, like I mentioned, over the last six months, the Middle East Side has further had a negative impact on the volumes and which is what has led to. So if you see where we stand today, we are almost 10% below on the LCL volumes to where we were a couple of years back. And last two years, when moment has been quite worse, the actual volumes possibly for the industry have come down by almost 13% to 14% because we will be outperforming what we do, 4% roughly or maybe slightly more than that on the overall volume side.

30:16 So I would say that the decline in the volumes is across both LCL and FCL over the recent couple of years. But because we have a dominant position in LCL, that impact becomes immediately visible in our P and L. While FCL, because we are expanding into new countries, we are opening new markets, we were growing at a much higher growth rate of, say, 18%, 20% over a period of almost seven eighty has continued. So now when you reduce 14%, 15% from 'twenty, you still get to four five But on the LCL side, you would typically tend to see a negative impact. So I would say it's not a stagnation, but it is growth in different dimensions and then offset by the subdued economies. So for example, the decline in volumes would have come from some of our most mature markets in Europe in the recent times, even U. S.

31:08 Compared to volumes which we were handling. But at the same time, we have seen growth in emerging markets in Latin America, Southeast Asia, India as well. So but the two have been kind of offset in a certain way. And as the economic situation rebounds, you should see the growth come back in. In general, the thumb rule is that the LCL business tends to grow and which has been true for last ten odd years and is likely to be true for the next five years as well as the LCL business tends to grow roughly at about 2x the FCL growth rate. Now there is opportunity for us that in LCL because we already have a dominant position in some other markets. If the industry is growing at 2x of the FCL growth rate, maybe we can grow at 2.5x or 3x, somewhere broadly in that range. But in the FCL, even if the industry is growing at x percent, we can even grow at 3x, 4x or 5x purely because we are still not present in many markets and many opportunities are there. So in terms of growth rates, the FCL potentially can be higher growth rates. But then LCL is what is the most niche business, highest profit margins, lowest working capital and therefore, the most profitable business and hence, the mainstay and also the most important strategic focus for us.

32:21 Okay. So if I understand it correctly, LCL would be the trigger for the profit numbers to start showing up, right, the growth in LCL volume? Absolutely. I have one more question, if you don't mind me asking or I can join back the queue as well. Sure, you can go ahead. I'll try to be brief so that we can have other also comment. Again, this is a question you mentioned, it's an asset light business, but you have quite a bit of debt on your books. So is that against any assets or acquisitions or is that working capital debt? And in terms of return on capital, is your internal target for return on capital in this business? What do you think can be generated from the operations that you run and compared to because your historical numbers have been quite good. So I'm just trying to understand what we should expect going in the future.

33:14 Yes. So as far as the debt is concerned, it has primarily been, one, towards the working capital. And secondly, it also pertains to some of the acquisitions historically as a business historically did acquisitions and also expanded the business and healthy working capital while continuing to pay out dividends to shareholders. So those are the two factors contributing in there. In terms of return on capital employed, I would reference for an immediate guidance. But if you would look at the historical numbers on this business, the return on capital employed has been always north of 20%. And definitely, we need to be heading back to that zone broadly, exact guidance I would reference from, maybe we'll try to provide in the coming quarters as we put across projections for the future years.

34:13 Next question is from the line of Dhruv S. From LEO Capital. So my first question is, sir, could you help us understand the sustainable margin profile of the business? Historically, margins have been like we have seen volatility with rate rates and rate cycle. As the business normalizes, what do you see as a sustainable long term EBITDA margin? And what are the key factors that could drive if it's higher or lower from here? Like I mentioned, the gross profit margins in terms of the percentage terms and by the same logic, EBITDA margins in percentage terms are not very relevant to the P and L in this business. In terms of the gross profit per unit of volume, we believe that the current levels can be sustained.

35:02 So any incremental growth that you would see in volumes would be a direct multiplier on the gross profit. And on the cost side, the intent is to keep it flat in dollar terms. And therefore, that should create an operating leverage and an impact on the EBITDA. That's the way to look at this business, I would say. Okay, sir. Thank you. My second question is given the ongoing geopolitical disruptions, changes in trade routes and increasing supply chain diversification, how are you thinking about the medium to long term growth opportunity for the business? And do you see this disruption as a structural opportunity for volumes and market share? Or are they like likely to remain near term headwind for growth? Yes. So I would say that, like I said earlier, geopolitical conflicts cannot be predicted, at least by us on the business side. And therefore, we go in with the assumption of no significant growth over the next twelve months, and we plan our strategy based on that to chip in at the market share and control more on the cost side. From medium to long term, personally, I would say one would tend to reading on various expert commentary. One would expect the Middle East crisis to end at some point in time, whether it's three months or twelve months, no one knows. But when we talk about mid to long term vision, my mind is three to five years, I would think that this crisis will be behind us.

36:27 And hopefully, there should be some revival in the economic environment, and that should mean that the trade flows can possibly regularize. From our business perspective, at this point in time, we are focused on cost. And currently, with all the acquisitions and organic initiatives, we are well present across all the key markets globally. And therefore, any tailwind that comes in by way of economic growth, we should be well positioned to capture that. Okay, sir. Thank you so much. Thank you. Participants to ask a question, you may press star and one. Next question is from the line of Ahmed Madhav from Unifi Capital. Please go ahead. Yeah. Thanks for the opportunity. I hope I am audible.

37:16 First, to understand the business as a whole in terms of volume side, if you look at global trade, though there have been disruption, but the volumes have been broadly steady if we read from the top shipping companies globally. But for us, the volumes have declined. If I look at year on year basis, LCL about 4%, FCL around 13%. What explains the volume de growth compared to the broad based global trade, which has been more or less flat? How should one understand this volume growth? Yes. So when you're looking at the global trade, often, the commentary includes both the loaded and the empty repositioning containers as well. As far as the LCL business is concerned, it has degrown by a higher number than what we have degrown by, if you look at any at a global level. On the FCL side, the degrowth on our numbers for this quarter would be higher because we have a significant contribution coming in on the FCL business from Middle East. And that's one region which has been what's impacted by the current disruptions.

38:32 So that is why I would say the overall global decline in FCL business would have been lower than us. But on the LCL, on a year on year basis, the industry has declined more than our decline on the year on year basis. And how should we categorize the LCL business volume growth fundamentally over medium to long term? There have been a lot of views in terms of getting disrupted because a shipper will want to integrate that service also into their business. And then there are other arguments that you provide a lot of services, lot of operational intensity which goes into your business. Question from from comes absolutely no alternative except air freight, which is a much more of expensive alternate.

39:26 Somebody who's wanting to ship one, two or five cubic meters of cargo. And to give you a perspective, an average shipment size is roughly somewhere in the range of three to four cubic meters in our global business. Somebody wanting to ship one, two or five cubic meters of cargo has only two options, to ship it by LCL or to ship it by air when you're talking about the cross country trade. So there are no alternatives for shippers in terms of the mode of transport. In terms of who they could use. Like I mentioned, it requires think of it as running an airline network. Now if you only have demand for 10 passengers every day from city A to city B, you cannot run a flight. So for an airline to operate, you need to have enough demand to be able to deploy an aircraft. Similarly, for a shipping company, it needs to have enough demand on that particular trade lane to be able to deploy a daily once in three days or a weekly or a fortnightly sailing.

40:23 And that requires a tremendous scale of operations because having the consistent demand is not something which can be replicated in short time. And which is why if you see the global networks, all the key global players are the ones which you can date back to the last century. So that's how I would put it across that there are no alternatives per se. Within these set of LTL players such as us and others, those who can continue to drive operational efficiencies, reduce cost of service and embed technology to integrate well with the shippers, those would tend to win in the long term. For us, ex of Middle East, what will be our volume degrowth? You mentioned that Middle East had an impact for our overall FCL volume growth. So ex of Middle East, can you give a range? What will the number be?

41:16 So barring the Middle East, I would say we have grown across our Transatlantic trade. We have grown into Latin America. Those are the two key markets which are on the positive side on the FCL business. Middle East is what has been low. So which means that both volumes in and out of Middle East have been growing significantly. And also, that has an impact on the other regions to some extent, for example, North Asia, which includes China for us, is the biggest contributor to FCL volumes into Middle East. So they would also have seen a negative impact on that. But some of the other markets like Transatlantic and business into Latin America has seen growth for us over the last year on year.

42:03 And can you comment on how do you see the near term volume growth? Should it improve from the Q1 base or the current volumes should more or less sustain? So like I mentioned earlier, the base case that we are running is a continued marginal uptick in volumes for the next few months, which is a difficult trend in the industry. You tend to see marginal uptick up to a couple of months prior to Christmas, and then the volumes tend to get flatter or be a little subdued around the Chinese New Year, and they tend to pick up after that. Now we expect the similar trajectory to be followed this year, but no substantial growth given that some of the challenges on the economic side still persist as an overhang. So I would say marginal incremental volumes is what we are forecasting.

42:57 And on the back of other initiatives, slightly more compounded positive impact on the profitability side would be our anticipation. And in terms of the freight cycle, right, if I go through the company's commentary on earlier, how far as the group was fully consolidated, that it is a pass through in terms freight rates and we have seen freight rates materially growing somewhere between 3030% and maybe it will be different based on geography. How should one look at our gross margins in terms in context of the global freight cycle is? Should we try to correlate? Should we not correlate? And if not the case, then what can enable us to improve our absolute gross profits, which will eventually mean that overall bottom line is healthy? So how should one think about it?

43:51 Yes. So I think, like you rightly pointed out, the gross absolute gross profit is what we focus on rather than the percentage margins. Now what happens is two things here. One, on the revenue, while it's a pass through cost, it tends to does have a close resemblance to the P and L, and I'll explain to you why. On the LCL business, if the freight rates are high, you would tend to have more demand because a higher freight rate means it's a higher demand. Now higher demand and less supply means that we are in a situation to improve our container utilization. Now our cost per what we pay for to the shipping line is the container. What we charge for is the cubic meter inside the container. So typically, what we tend to observe is in higher freight rate environments, we tend to see marginal improvements in our utilization, which leads to improved profitability.

44:38 On the FCL side, that, to some extent, has profitability bearing not exactly proportional, but it has some bearing as we try to factor in the working capital cost and take the quotations up or down. So in a typically higher freight environment, the FCL margins also will tend to expand. So on the back of increased utilization and on the back of slightly improved margins, there, you would find a correlation between the profitability and the freight rates. Though in theory, we are moving the freight rates in the path through cost. But like I explained, these are the factors. In terms of the absolute gross profit, if you observe over the last seven, eight years, we have improved our yield considerably, which is the gross profit per unit of volume that we handle. And how we've done that is a multitude of factors.

45:26 Earlier, ten years ago, we were largely doing ocean port to port. We have gone into much more door deliveries. We are offering first mile, last mile connectivity on many of these cargoes that we handle. Then we have created scale at which we're able to negotiate better terms with the warehouse contractors where we operate for consolidating and deconsolidating the destuffing the boxes. We have done a lot of network optimization, significant percentage of business historically could be sitting in the loss making trade lanes because of utilization not being better. A lot of technology process practices have been used to significantly improve the gross profit per unit of cargo that we handle. And that is something which we believe would continue at the same levels. And the expansion in absolute gross profits in the months, quarters or years to come would be primarily driven by volume. So we our intent is to maintain the yield that we have currently and grow volumes and which lead to the gross profit expansion and while maintaining the cost to create an operating leverage on the profit. That's the outcome of strategies that we are working on.

46:35 Then ideally, in the current quarter or in the like last couple of quarters, your gross profit should have moved up considering the freight rates have moved, but that we don't see in the P and L. So like I mentioned, if you see Q on Q, our volumes moved by about 4.5% to 5% in LCL and Air and the FCL moved by about 1%. As we have historically stated, the LCL and the FCL breakup is about twothree, onethree, which means that on a compounded basis, the direct correlation GP should have grown somewhere in the range of about 4%, 4%, 4.2%.

47:20 Compared to that, the gross profit has grown about 6.6%. The extra 2.5% is largely coming from slightly marginal impact of the freighted environment and some of the efficiencies brought in as well. Sure. And lastly, cost structures, I mean, we had $70.05 crores SG and A if I combine the OpEx and implied cost. That run rate should remain the same. It shouldn't go up. Is that fair assumption to consider? So I think I responded on the same question a while back. So just to reiterate, our intent is to keep the cost flat in dollar terms. Dollar is the more standard operating currency, both for our revenue and operating costs with on the employee side, some costs sitting in European Union, which are have been appreciating and then some sitting in India and some other markets have been appreciating.

48:15 On a holistic basis, dollar, actually, the single most relevant currency on our basket of revenue and cost. So in dollar terms, intent would be to keep the employee expenses and the admin expenses flat over the coming couple of years. That will be the intent. Just last question. If I look at the historical profitability and even pre COVID, there were a couple of years during COVID, which were phenomenal for us, but pre COVID for this business was more or less stable in terms of what EBITDA you are generating. And even you mentioned about 20% ROC profile of the business steady state. But to achieve those historical metrics you had in terms of EBITDA and what ROC profile you mentioned, the delta that needs to come into P and L is like significant.

49:06 So how should one imagine that will be coming? Will that take a long journey in terms of improving volumes, pricing, cost, etcetera, everything or the normalization can be relatively quick? So I will put that across on the trade normalization. In terms of the absolute quantum, we should be in the right range provided we see another, I would say, just a ballpark, maybe a 12% to 15% growth on volumes from here should put us in all the right desired trajectories. Now that 12% to 15% volume growth from here would be some part of that can come through market share gain, but a good part of that will have to come through the trade rebound as well. Now if trade rebound happens sooner, then it can be faster because market share expansion will only happen at a certain pace over the years. So a combination of those two would define where so if the economic environment changes favorably, we could reach there much quicker. If it remains like this, it may take a bit longer than I would put it. But that's the broad ballpark target at which things would start looking very different.

50:32 Next question is from the line of Kiran from Table Tree. Please go ahead. Yes. Thank you so much for the follow-up. Sir, we keep talking about gross profit per yield and EBITDA, sorry, gross profit per ton and yields. Is there any particular yield number that we look at? I mean, from what I could read, we have 14,700 TEUs in FCL. LCL, if I divide with roughly 30, we have 68,000. So just trying to understand, are you looking at any particular yield number that we should kind of model in, in terms of a range? So I would say that the CBM and TU wheels are very different because LCA and FCL business are fundamentally different. What we do offer for better insights to our investors and analysts is we provide a monthly update, which would comment as the company has now got listed earlier, we used to provide it as a business update. Now it will come in for the company update starting this month, wherein we provide so while we cannot provide absolute numbers, we provide a scale, which means that if the yield was one hundred one year ago, how has that progressed over the last twelve months?

51:54 So that can give you a good directional trend on the yield across LCL and the FCL business, which we should be providing in our monthly update that we shall release from the company's side. Got it. Got it. Understood. Then the second follow-up is, I mean, we spoke about being asset light, but we have a short term debt of about INR900 crores as of March 26. Actually INR1300 crores, I'm not considering the lease liability bit of it. So we have short term borrowings about INR $9.18 crore. So just to understand, when we say asset light, this doesn't include working capital because INR 1,000 crores debt approximate INR 1,000 crores debt is quite a huge number. So that is one part of the question. The second part of the question is, given you've done a lot of acquisitions, amortization and everything else, how does management think about acquisitions going forward?

52:48 Are we saying, look, let's integrate and grow the business first for the next eighteen months and then look for acquisitions? Or will you continue to acquire business when you come across? So those are the two parts of your question. Yes. So to respond on the first part, the debt is largely working capital debt. And we've also historically invested in acquiring different businesses and capital has been deployed towards that, while profits have to a large extent also being distributed and paid out as dividend to shareholders. In terms of the acquisitions, we have done strategic acquisitions over the years to enter into new products or new markets. At this point in time, we do not foresee any need for any further markets. We are present in all the relevant markets. We are present in all the products that we want to be.

53:39 And with the network trend that we have over the last couple of years, we have grown more organically. So even in new markets, we entered by hiring new teams for new products as well as for entering into new markets. So at least in the near term, the strategy is to grow by investing in people and not buying businesses. Perfect. Thank you so much. And this INR900 crore of working capital debt, are you looking to reduce it? Or will it be steady state here? So some part of this is also not interest bearing as it gets offset by the cash sitting on books as well. And being a global company, sometimes moving cash across borders may not be most efficient. So we do work with a single global bank in many countries, wherein cash sitting on the books also acts as a cover against this. So you can also look at the cash balance against this debt, and therefore, the net debt is almost so almost 40% of this or slightly more also with the cash sitting on books. So therefore, the net debt is effectively 60% of the number that you mentioned.

54:45 Further, we intend to increase that significantly over the next two, three quarters itself by: one, focus on reducing the working capital on the balance sheet secondly, some noncore asset divestments, some of the real estate that we may still own, which we don't need to own and a few other measures on the working capital improvement. See, the net debt number, which I would say call out as the more relevant number looking at debt net of cash, should come down significantly over the next two to three quarters. And we'll provide an update in the coming quarter and subsequently on how the net debt has trended for this business over the last trailing four quarters. Thank you so much. All the best.

55:34 Thank you. Next question is from the line of from Unifi Capital. Please go ahead. Yes. Two, three follow ups. Firstly, on December, in the presentation, you have disclosed stand alone net debt number as of June end. Can you give what is that consolidated net debt as of June end? Yes. I'll request my colleague Steve to respond to that. Steve? Yes. So the consolidated debt is around about $940,000,000 to cross at the end of the month the March the June quarter. And the debt at the moment?

56:29 Net debt is around about $570,000,000 Yes. Okay. Sure. Secondly, you spoke about the selling some of the noncore assets. Mean, I think since the listing, there was one such transaction which we saw with your group company. Can you elaborate a little bit more what sort of asset, what sort of sales one can consider those assets to be? Would say these would be some of the warehousing and office assets that we own, which combined could be just a very ballpark number, would be somewhere around 10,000,000 to $15,000,000 all combined. Okay. Into $15,000,000.

57:20 Sure. Yes. That's it from my side. Thanks. Thank you. Ladies and gentlemen, we will take this as the last question for the day. I now hand the conference over to Mr. Ravi Chakar for closing comments. Yes. Thank you, everyone, for joining on the call, and we remain excited talking about our business and providing more perspective to our shareholders and analysts. I would strongly recommend that you be in touch with our Investor Relations team, Sanjay Punjabi is the person reach out to. If you have any insights on the business in terms of we'll be always happy to hear from you and take your feedback. And also any questions that you have, we tend to not provide any selective information, but always open to understanding what questions come more often to investors and analysts' mind. And based on that, continue to update our quarterly presentation to include more and more insights as we can help you to understand the business. So please feel free to reach out to Sanjay and the team, and we'll be happy to provide more details. Yes. Thank you all.

58:31 Thank you so much, sir. On behalf of Allcargo Global Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.