Mahindra Logistics Ltd Management Discussions.

OVERVIEW

Mahindra Logistics Limited (hereinafter referred to as the Company, We, Our) is one of Indias largest third-party logistics (3PL) solutions providers. We provide a wide range of customised, technology-enabled integrated logistics solutions and corporate mobility services. Our strength lies in our wide bouquet of offerings enabled by our extensive networkof strategically located warehouses and our pan-India transportation network.

As we operate an asset-light business model, the assets (vehicles and warehouses) necessary for our operations are owned or provided by a large network of business associates. This technology enabled, asset-light approach enables scalability of services as well as flexibility to develop and offer customised logistics solutions across a diverse set of industries.

We operate in two distinct business segments, Supply Chain Management (SCM) and Enterprise Mobility Services (EMS).

Our SCM business: We offer customised, end-to-end logistics solutions and services including transportation and distribution, warehousing, in-factory logistics, and value-added services to our clients. We operate through a pan-India network comprising 16 offices and 500+ clients and operating locations. We have a large network of 1,450+ active long-standing business associates who supply vehicles, warehouses and other assets and services to us.

We serve 300+domestic and multinational companies operating in several industry verticals in India, including automotive, engineering, telecom, consumer goods, pharmaceuticals, e-commerce, and commodities. We have developed expertise in providing scalable and customised solutions in fulfilment, cross-border logistics, warehousing, stores and linefeed, yard management, contractual workforce management, just-in- time services, aftermarket logistics, layout, and process design support, returns processing and distribution.

We manage 17+ million (mn) square feet (sq. ft) of warehousing space spanning our pan-India network of multiuser warehouses, built-to-suit warehouses, stockyards, network hubs, and cross-docks. We operate in-factory stores and linefeed at 50+ manufacturing locations. Our express network serves 21,000+ pin codes through 50+ hubs located pan-India.

We have sourced and developed our customised technology systems to provide innovative and cost-efficient solutions to improve transparency and visibility for our clients. With a deep understanding of customer needs gained from serving customers across diverse markets, we have established solution design and development processes to specifically cater to complex requirements of our customers supply chain.

To manage the Companys affairs in a fair and transparent manner, we have adopted detailed and comprehensive governance practices and have established policies related to whistle blower, nomination & remuneration, related party transactions, etc.

Through our portfolio of offerings across sectors, we have emerged as a one-stop shop for our customers, having capabilities to design, execute, improve, and optimise logistics related activities throughout the value chain.

Our EMS Business: We provide technology-enabled people transportation solutions and services across India to 100+ domestic and multinational companies operating in the information technology (IT), information technology-enabled services (ITeS), business process outsourcing, financial services, consulting and manufacturing industries.

The spectrum of our services also include on-call services, green-fleet solutions, event transportation, and subscription services. We offer our services through a fleet of small and mid-sized vehicles, sports utility vehicles, electric vehicles (EVs), and buses provided by a large network of 350+ business associates across 12 cities. We have rolled out a nationwide brand for our mobility service called Alyte. An integrated service platform. Alyte, supports multiple offerings such as employee transport management while customer and network management and utilising a common asset pool to drive efficiency. We offer fully integrated technology services such as application-based interactions for optimised routes, route planning and optimisation engine, round-the-clock control tower operations (CTO) for tracking all vehicles and passengers, and EV telematics.

Our Subsidiaries and Joint Ventures Lords Freight (India) Private Limited (Lords), a 99.05% subsidiary of the Company, provides international freight forwarding services for exports and imports, customs brokerage operations, project cargo services and charters. With an established global network of agents in China, South Korea, Southeast Asia, and Western Europe, Lords has developed capabilities in providing end-to-end cross-border services . These services include arranging for freight movement through ocean and air, custom clearance, transportation to transit warehouses and mother warehouses.

2x2 Logistics Private Limited, a 55% subsidiary of the Company, provides logistics and transportation services to original equipment manufacturers (OEMs) to carry finished automobiles from the manufacturing/assembly locations to stockyards or directly to the distributors through specially designed vehicles. It owns and operates 150+ vehicle carriers and has Mahindra logistics as its primary customer.

Transtech Logistics Private Limited (Transtech Logistics), a joint venture, offers ShipX, a SaaS (Software as a Service) based transport management solution (TMS) platform to 3PLs and shippers. We acquired a strategic stake (39.79%) in Transtech Logistics in the fiscal year 2019.

A. INDUSTRY OVERVIEW AND TRENDS

A.l Overview of the Global Economy

The outbreak of COVID-19 has created a considerable and lasting impact on an already stressed global economy. As of March 2021, 125+ million cases of the virus have been reported and over 2.8 million lives have been lost worldwide. Most countries imposed lockdowns to contain the spread of the virus, resulting in restricted mobility and trade, especially during the first quarter of FY21. These restrictions led to production stoppages, supply shortages, price spikes and inflation across both essential and non- essential goods. According to the International Labour Organisation, 400+ million jobs were lost worldwide between April and June 2020. Major financial markets declined by over 30% from their pre-pandemic levels. The IMF has estimated a contraction of 3.5% of the world economy in 2020.

Governments and central banks globally have implemented unprecedented measures and have announced swift monetary and fiscal policies to cushion the impact of the drop in economic activities, and to fuel future growth. Gradual flattening of the growth curve of COVID cases, steady recovery in economic activities and launch of vaccination programmes have resulted in a strong rebound across major economies in the second half of the year. The IMF projects a y-o-y growth of 5.5% in CY21 for overall world economic output, with 4.3% growth for advanced economies and 6.3% growth for emerging economies. Global trade volumes are likely to grow around 8% in 2021. Flowever, any rise in COVID cases, new mutations and variants, further lockdowns, slower than anticipated medical interventions, potential debt distress and bankruptcies remain as potential downside risks to the growth outlook.

A.2 Overview of the Indian Economy

Indias economic growth rate had slowed to 4.2% in 2019. COVID-19 pandemic further magnified the growth challenges for the economy. As India went into phased lockdowns to curb the spread of the virus, severe demand and supply shocks were created. Demand side shocks included reduced investments, muted demand for discretionary items, low consumption due to income loss, and so on. Supply side shocks included bottlenecks with labour supply, and disruption in both global and domestic supply linkages. The initial economic response of the Indian Government was geared towards minimising disruptions, reviving supply and demand, protecting livelihoods and ensuring business continuity. The Government announced economic stimulus packages in three tranches totalling $420+ billion. The stimulus included a combination of fiscal, monitory, liquidity boosting and administrative measures such as direct benefit transfers, emergency credit line guarantee scheme, emergency health fund, food security measures, collateral free loans and bank guarantees for MSMEs, extension of tax deadlines, loan moratorium, changes in FDI policy and opening of power, defence and space sectors for privatisation. The RBI also announced cuts in repo and reverse repo rates. In the latter half of the year, the Government has shifted focus towards production and consumption revival measures such as production linked incentives, increased capital expenditure and investments in infrastructure development. The Government has also launched Atmanirbhar Bharat Abhiyan to spur growth and achieve a greater degree of self-reliance.

Although the impact of COVID-19 on the economy has been strongly felt, it has been lower than what was initially projected. The years first half saw a strong dip in GDP and all major economic indicators. GDP declined by 15.7% in the first half, but with unlock and declining uncertainty, the second half saw a V shaped recovery with the GDP registering only a marginal fall of 0.1% over the same period last year. Key economic indicators such as GST collections, E-way bills, power demand, steel consumption, and so on, all rebounded to near pre-pandemic levels by the last quarter of FY21, signalling resumption of economic activities. From around 24% decline in Q1 of FY21, Indias GDP showed resilience and gradually entered into positive territory in the last two quarters (0.5% in Q3 and 1.6% in Q4) of FY21. For FY21, Indias GDP contracted by 7.3%.

The Economic Survey of India 2020-2021 estimates real GDP to grow by 11% in 2021-22 fuelled by vaccination drive, higher capital expenditure commitment by the government and recovery across services and manufacturing sectors. India is expected to emerge as the fastest growing economy in the next two years as per the IMF. Plowever, FY22 is likely to remain a volatile year as we continue to witness new waves of COVID cases. Subsequent to the 2nd COVID-19 wave, World Bank has revised the GDP growth forecast to 8.3% in FY22. Economic recovery remains contingent on the effective curb of the virus spread, quick vaccination rollout and continuation of economic activities.

8.3% GDP

growth estimate for FY22

A.3 Indian Logistics Industry - Size and Structure

The logistics sector plays a vital role in facilitating economic activity and trade movement in the country. The sector was estimated to be at ~Rs 19,56,000 crores in the fiscal year 2019-20. It is expected to reach ~ Rs 34,50,000 crores value by 2026, growing at 11-13% CAGR during 2020-26. Short-term growth due to COVID-19 may be slower, but our long-term outlook for the sector remains buoyant.

Based on service offerings, the logistics sector can be sub-divided into road transportation, freight forwarding, warehousing and value-added services and other logistics services such as container logistics, cold chain logistics, coastal shipping, and so on. Road transportation dominates Indias logistics spends, given the vast landscape and reliance on expensive road transportation. The road transportation segment can be further divided into inbound transportation, outbound transportation and distribution, express and last-mile transportation.

Mahindra Logistics serves in the 3PL space, and also provides customised and unique transportation services including line haul, mid-mile, last mile, express and distribution, and freight forwarding services. The Companys total addressable market including 3PL and other services is approximately Rs 1,30,000 crores. The 3PL market is estimated to be ~ Rs 58,000 crores in FY20. It is expected to register a 17-18% CAGR and potentially become an Rs 1,20,000 crores market by FY25 to FY26. Globally, the organised 3PL market is -10% of the overall logistics market. In India, it is -3%, indicating significant room for 3PL adoption. The 3PL market is largely fragmented with a large number of regional players providing transactional services in transportation and storage. We believe that as the industry matures over the next few years, there will be a significant shift from pure- play transportation and warehousing services towards sophisticated, high-value integrated services.

The key sectors served by 3PL players are auto and auto ancillary, consumer goods, specialised transportation for certain metals and minerals products, e-commerce, engineering and capital goods, pharma and telecom. Bulk, engineering, and auto activities remain largely inbound focused, whereas ecommerce, telecom, pharma and consumer sectors have a high share of outbound and distribution logistics.

Typically, outbound logistics is more complex and costly vis-a-vis in-bound logistics, considering the last-mile delivery of final products to various stores and outlets and high replenishment cycles, as compared to other sectors. The auto industry is a notable exception due to its complex inbound supply chain. There is a significant scope for increased 3PL usage within these sectors as they require better supply chain management and exceptional logistics practices to compete effectively. The potential for value-added services is also high as activities such as packaging, labelling and quality control, among others, are increasingly outsourced to focus on core business activities of procurement and sales.

The freight forwarding market is estimated to be ~ Rs 45,000 crores in India. The countrys growing international trade has provided a significant impetus to the demand for freight forwarding. In terms of transportation the sector can be categorised into two modes - ocean freight and air freight. Ocean freight forms the bulk of the market, but air freight has been steadily gaining share. The key industry segments contributing to the freight forwarding market are food and food processing, pharmaceuticals, engineering, textiles, chemicals, and auto industries.

The sector has traditionally been highly fragmented, with several thousand unorganised entities that provide basic services such as brokerage and documentation holding a dominantshare of the overall market. However, recently, the sector has been witnessing transformation, with the use of technology by both new age start-ups and established players to enhance cargo visibility, reducing errors by digitising documentation processes and by bringing transparency in pricing. The sector is expected to witness steady growth in the medium to long-term timeline, on account of growing imports and exports, supported by various infrastructure development measures taken by the government.

19,56,000 Cr

size of logistics market in FY20

11-13%

CAGR from 2020 to 2026

A.4 Key Government Initiatives

The logistics costas a percentage of GDP for India stands at approximately 14%, significantly higher than those in developed countries. The higher costs can be attributed to inefficiencies such as lower transportation speed, higher transit inventory, theft and damages, and a skewed modal mix. Currently, road transportation accounts for approximately 75% of transportation (by volume), while rail, ocean, and air collectively account for the remainder. The Government has undertaken various measures to develop the logistics infrastructure in the country. Some key measures are listed below:

? Logistics sector has been granted infrastructure status in 2017, allowing the sector to have access to funds at easier terms with enhanced limits.

? The government is pushing its Make in India programme. For this purpose, the Commerce Ministry has prepared a report called LEADS (Logistics Ease Across Different States), to benchmark performance across states. The LEADS index ranks states based on nine parameters, including infrastructure, quality of logistics, timeliness of cargo delivery, regulatory process and safety of cargo. The index also provides suggestions for states to improve their logistics performance. The logistics sector is likely to be a beneficiary of such initiatives by way of increased efficiency.

? National Logistics Policy has been drafted to focus on the development of a fully integrated logistics network with best-in-class technology and automation. The National Logistics Policy will enable the creation of a single point of reference for all logistics and trade facilitation matters in the country, which will also function as a knowledge and information-sharing platform. A logistics wing, under the Department of Commerce and Industry, has been created to overcome the issues of high logistics cost, skewed modal mix and lack of integration. A National Logistics Portal is also being created to serve as a single window online marketplace for trade. It will be implemented in three stages: 1) development of an e-marketplace; 2) single window clearance for approvals from 80 authorities; 3) integration of financial services. As of March 2021, the policy is undergoing a review to improve its robustness to handle pandemics such as COVID-19.

? The government launched the National Infrastructure Pipeline (NIP) for the period FY 2020-2025, committing investment of Rs 102 lakhs crores on infrastructure projects covering road, railways, civil aviation, telecom, housing, and others

? Five major industrial corridors, the Delhi-Mumbai Industrial Corridor (DMIC), Amritsar-Kolkata Industrial Corridor (AKIC), Chennai-Bengaluru Industrial Corridor (CBIC), Visakhapatnam-Chennai Industrial Corridor (VCIC), and Bengaluru-Mumbai Economic Corridor (BMEC), have been approved by the government for faster freight movement

? The government has announced the development of 35 Multi Modal Logistics Parks (MMLP) at strategic locations to enable efficient inter-modal freight movement

? Krishi Rail and Krishi Udaan initiatives have been rolled out to improve connectivity and accessibility between farms and agri markets

? Fitment of FASTag has been mandated by the Ministry of Road Transport and highways with effect from 1st January, 2021 to ensure 100% e-tolling at toll booths. FASTag will ensure ease of payments, and reduction of waiting time at tolls

? Over the past decade, India has significantly improved its logistics infrastructure. The government has undertaken several key infrastructure projects, which include:

- The construction of the Eastern and Western Dedicated Railway Freight Corridors (DFCs) having a cumulative length of over 3,000 km. Being dedicated for freight, the speed on these corridors will be much higher than at present on the existing railway lines. The 650 km stretch of the DFCs was inaugurated in FY21 and the remaining stretch is likely to be completed by 2022 end.

- Bharatmala Pariyojana has been launched to bridge critical infrastructure gaps through the construction of 9,000 km of economic corridors, 6,000 km of feeder routes, 2,000 km of coastal roads, and so on under Phase 1 of the project. This is expected to be completed by 2022 with an estimated cost of Rs 5,35,000 crores.

- Sagarmala programme is underway to reduce logistics cost for domestic and EXIM trade by harnessing Indias long coastline and navigable waterways. Over 500 different projects related to port modernisation, connectivity enhancement, coastal community development, and port-led industrialisation have been identified and are under various stages of implementation

- 100 more airports are planned to be developed by 2024 to support the Udaan scheme

Despite COVID-induced hindrances and delays, these initiatives are steps in the right direction. It will take another two to three years to see fruitful outcomes and the overall benefit at the ground level from some of these initiatives. More initiatives are required in the areas of labour policies, poor last-mile connectivity, land acquisition hurdles, promoting the use of technology and driving standardisation across the sector.

Indias logistics cost as a percentage of GDP stands at approximately 14%, significantly higher than those in developed countries. The higher costs can be attributed to inefficiencies such as lower transportation speed, higher transit inventory, theft and damages, and a skewed modal mix.

A.5 Key Trends Impacting the Logistics Sector

For the logistics industry, the pandemic has proved to be both a boon and a bane. On the one hand, the COVID-19 situation has increased financial pressure on a lot of companies in the industry, especially transporters. On the other hand, it has accelerated some key transformations within the sector. COVID-19 showed how stretched global supply chains were, and how that stretch made them vulnerable to disruptions, with a disruption at any point affecting the entire business. To avoid this and to engender greater resilience, logistics in a post-COVID world will need to focus on shortening supply chains and ensuring that goods are delivered across end points quicker. The unavailability of suppliers during the pandemic forced companies to look out for local supply chains to augment shipments from overseas. We see the following trends playing out over the next few years.

Increasing Adoption of Multi-modal Logistics

Over the past year, several large Indian and multinational companies have made significant investments in developing multimodal capabilities. The pandemic has shown the need and opportunity to leverage rail, sea and waterways a lot more effectively.

In many of our key markets such as auto and farm sectors we have seen a steep change, thanks to the increased focus and support from the Railways. We expect a steady shift from road transportation to other modes driven by favourable government initiatives, infrastructure buildup and increased customer awareness and demand. The share of road transport in bulk and auto outbound sectors will be significantly impacted by multi-modal systems.

Cross-border supply chains have also become a key focus area for many companies to facilitate global trade. Through the pandemic, most companies have realised the need to improve resilience, real-time visibility, and end-to-end management of their cross-border supply chains.

Technology Integration to Drive Efficiencies

In the post-COVID environment, there is sharper focus on improving the predictability of supply chains. Customers are now focussing on a much more granular and multi- variable dimension of supply chains. As a result, end-user industries and logistics service providers are focusing on supply-chain orchestration by enhancing their customer engagement experience through digital platforms, building operational flexibility and speed to address changing requirements with significant investments in IT infrastructure. Several new-age service providers have emerged over the course of last few years, who offer digital technologies, such as blockchain, robotics, automation, and predictive analytics to support innovative business models. We believe that technologies like Internet of Things (loT), drones, Automated Guided vehicles (AGVs), Augmented Reality (AR), 3D printing and marketplace platforms will see greater adoption in the future.

Integrating Services and Offerings

Industry players are integrating offerings to expand the wallet share and fill portfolio gaps. 3PL companies are developing competencies in providing express and distribution services through acquisitions and partnerships. Large pure-playtransportand warehousing players are straddling the value chain and redefining their service levels. Private equity funded start-ups are expanding across segments. Evolving consumer preferences with greater expectations of predictable and faster deliveries have resulted in increased adoption of E-commerce, which in turn has impacted the deliverables of the logistics service providers.

Increasing Demand for Fulfilment will Fuel Warehousing Growth

This trend has been fuelled by GST-led consolidation; and rise of e-commerce and omni-channel retailing. The implementation of GST in 2017 has incentivised industries to rationalise and consolidate their supply chains for operational efficiency. Similarly, the industry has shifted to being consumption driven in the last few years and its parameters have also become competitive due to e-commerce and changing customer behaviours. Therefore, the need to focus on customer fulfilment has become extremely important for companies, which translates to an enormous emphasis around urban logistics, last-mile delivery and warehousing.

Emergence of Omni Channel Retail

Consumers now want to purchase across all sales channels and derive consistent experience across them. Accordingly, brands have to ensure that they have distributed inventory across channels, augmented with the right mix of transportation modes. In the future, we will see a transition from bulky orders to smaller orders that are picked and packed; and brands converting retail stores into mini fulfilment and distribution centres. Such fulfilment strategy will also require deep technological integration for order management, inventory visibility across warehouses and stores, route and network optimisation. Smaller brands that do not have the scale and capabilities to manage such complex supply chains and logistics are likely to partner with third-party LSPs who can offer such services. They will also look for compliant, scalable, and flexible multiuser fulfilment centres on a pay-per-use basis.

Third Party Fulfillment Logistics will Continue to Gain Momentum Fuelled by Strong Growth of E-commerce and Omni Channel Retail

A.6 Enterprise Mobility Services-Size and Structure

Enterprise Mobility Services (EMS), comprising employee transportation services and on-call services was estimated to be an Rs 19,000 crores market in FY20, before being impacted by COVID-19. Restrictions on mobility, and shift to Work from Home has led to significant short to medium term shrinkage of the market. We expect the market to recover to pre-COVID levels in the next four to five years despite the headwinds.

IT, ITES, financial services, and manufacturing sector clients are the primary target customer segments for Enterprise Mobility services. Enterprise Mobility sector is highly fragmented and is primarily served by local and regional players. We envisage a significant degree of consolidation in this market on account of rising service quality and safety requirements and growing demand for green transportation solutions, which local players find challenging to provide.

A. 7 Key Trends Impacting the Enterprise Mobility Sector

Increased Adoption of Electric Vehicles for Corporate Mobility Needs

The government has taken multiple initiatives to promote both manufacturing and adoption of electric vehicles. Key policy frameworks that have been launched include National Electric Mobility Mission Plan 2020 and Faster Adoption and Manufacturing of (hybrid and) Electric Vehicles (FAME). From a total cost of ownership point of view, EVs have become comparable to conventional fuel vehicles, especially after adoption of the more stringent BS-VI regulations. Therefore, several corporates are increasingly adopting EVs for their employee transportation requirements.

Service Innovation to Enhance User Experience

Security and safety remain key drivers for enterprise mobility services, especially in light of health concerns highlighted due to the pandemic COVID-19. As the industry matures, there is also a push toward best user experience by providing a greater degree of freedom and flexibility to employees to directly schedule, book and bill for their transportation needs with minimal corporate intervention. This trend is giving birth to several new mobility models such as B2B2C subscription-based offerings and on- demand car rental platforms. This is also leading to increased service standards and bundling of services to provide seamless experience to the end user.

Disintermediation across Value Chain

Both consumers and competitors are working towards removing or reducing middlemen from their operations. Many players in this segment have invested in technology platforms and have done away with the traditionally outsourced roles of trip management, route optimisation, and so on.

B. IMPACT OF COVID-19 ON OUR KEY FOCUS MARKETS

The impact of COVID-19 has been unprecedented across our served end markets. As a B2B company, we saw significant reduction and cessation of operations by many of our customers in April, followed by gradual resumption since May. In the 1st quarter of the year, we witnessed a lot of volatility in customer supply chains. While sectors such as consumer and e-commerce recovered quickly after the initial shock, sectors such as mobility and commodities are expected to follow a gradual recovery path.

1. Auto Sector: The auto sector, already reeling under pressure from a poor FY20, was hit hard by the pandemic. The auto sector performance was also impacted beyond demand by supply-side constraints, both from suppliers in India as well as from overseas suppliers of BS-VI. After a washed out Ql, we saw significant sales uptick in Q2 and a strong turnaround from Q3 onwards. Overall, domestic auto sales (PV, CV, 3Ws, 2Ws) registered a decline of 14% in FY21 vs FY20.

2. Farm Sector: Farm sector performed well throughout the year, on the back of favourable rural demand, good monsoon season, increase in credit and longterm government initiatives to restructure the farm sector. Overall, domestic tractor sales witnessed sales growth of 25%+ as compared to FY20.

3. Consumer Sector: Consumption led sectors saw strong tailwinds after the initial shock wore off. Essential commodities sector was the earliest to recover, followed by FMCG, personal care, and food industries. Retail industry remained under pressure on account of near-zero sales in the early few months, unsold inventory, inability to pay rents, etc. Full recovery of retail sector is expected to happen gradually with return of consumer confidence.

As the pandemic has transformed consumer behaviour buying patterns, there has been a clear shift to online and omni-channels during this period. The internet ecosystem and evolving consumer needs have made new business models viable and have led to the emergence of the direct-to-consumer (D2C) distribution channel. D2C and brand websites have witnessed over double the growth of online marketplaces.

Pharma sector showed a stellar performance in both domestic and export markets; however, the pandemic has been a wake-up call for pharma companies to diversify their supply chains geographically and develop local sourcing units and also adopt alternative strategies for reducing dependency on a single source.

Logistics for the telecom sector has remained sluggish, despite the growth in the sector. Most of our customers have been working on 5G upgrades and therefore current network expansion and upgradation has been slow-moving. We expect that there will be a demand spurt in the near future as companies start accelerating towards 5G.

4. E-commerce Sector: There has been a sharp growth in overall volume of ecommerce marketplaces, with leading marketplaces growing by over 40% y-o-y. A significant portion of this demand emerged from Tier-2 and Tier-3 cities and towns. Marketplaces have also increased their focus to adding more suppliers to their systems and platforms. The segments growth has accelerated the demand for transportation and fulfilment logistics including sortation, fulfilment centres, return processing and last-mile delivery.

5. Discreet Manufacturing and Commodities Sector: Like the auto sector we saw a sharp drop in manufacturing activities for engineering products and commodities in the first quarter of the year, but the sector has been seeing positive month-on-month recovery; and we expect the trend to continue and accelerate once a broader recovery takes place.

6. Freight Forwarding: Capacity reduction and manpower shortages have led to an upward movement in both air and ocean freight rates. Despite these challenges, our freight forwarding business grew phenomenally through focused customer acquisitions and strong execution. In a post-COVID world, the sector is likely to undergo rapid digital transformation to reduce shocks and increase resilience.

7. Mobility Sector: Enterprise mobility segment remains severely impacted by the pandemic. Most companies are continuing to follow work-from-home policies, which has impacted the number of commuters trips.

While these headwinds continue to be there, we have made an aggressive effort to add customer accounts from segments such as manufacturing, ecommerce, among others to offset the sharp decline from IT, ITeS and Banking, which have been our traditional markets in this segment. It will be several quarters before we see a full recovery, but our outlook for long-term dynamics of shared mobility remains positive.

B.l Mahindra Logistics Response to COVID-19

Our Company has adopted proactive and preventive measures at all its locations across India, to ensure employee safety considering heightened concern on COVID-19 and government directives. We implemented work from home for all the employees across the Company during the period of lockdown and beyond. Operating locations barring those engaged in providing essential services were shut during the lockdown phase, adhering to the various local and state government directives. To prepare for a speedy restart of operations post lockdown, we established incident management teams, formulated Return to Work protocols and rolled out Personal Protective Equipment across all our sites.

We expanded our support systems to help our employees manage the virus and its impact on the work site as well as home. We have established a home counselling and home diagnostic medical facility for employees and their families. Clinical services, quarantine kits, monitoring trackers, nutritional guidelines, etc. are being provided to employees under this assistance scheme. We have also introduced a COVID-19 leave policy and have launched vaccine support programme for employees through various tie-ups. COVID Response teams have been setup at central and local levels. These teams are tasked with monitoring and tracking of all COVID cases and assisting with hospitalisation and medical support in critical cases. Nerve Center helpline has been launched to receive and process requests pertaining to relief to those impacted. Oxygen concentrators have also been made available at office locations and these can be availed by our employees or their dependents in need.

We have also launched financial support measures for our employees. Under these measures, employees can get their hospitalisation expenses reimbursed and avail salary advances. In case of death of an employee, an ex- gratia compensation will be paid out to the nominee of the deceased employee. Dependent family members will continue to get medical coverage for a period of three years from the employees demise. The company will also support education of the deceased employeeschildren up to senior secondary level.

To maintain and grow business momentum, we increased focus on accelerating customer acquisition, executing our strategy, reworking supply contracts, and driving cost reduction and productivity improvement across locations. We also undertook measures to improve liquidity by preserving cash and effectively managing working capital.

As a community support measure, we started an initiative called HOPE to provide financial assistance to our driver associates and launched a national helpline for employees and drivers. We also launched a free emergency cab service under Alyte in eight cities, serving over 3,000 people within

40 days of the lockdown. We will continue to engage with our business associates and other stakeholders to improve engagement.

C. OPPORTUNITIES AND CHALLENGES

C.l SCM Business Opportunities

Increased consolidation post-GST, channel shifts are increasing demand for fulfilment and forward logistics solutions in consumption-led sectors

Post GST, companies are consolidating their supply chains for market/ supply chain efficiency, and leasing large- format warehouses. Consumer, retail and e-commerce companies are driving the demand for grade A modern warehouses. These sectors are also increasing their market reach and depth and hence have a greater requirement for fulfilment and distribution services. The rise of omni-channel is also leading to several companies redesigning their supply chains, creating immense opportunities for logistics service providers. Small businesses and new brands are also increasingly going Direct to Customer (D2C) and larger brands are starting their own online brand stores. With rapid development in this ecosystem, especially post-COVID, D2C is expected to witness high growth over the next few years and become $100+ billion market by 2025. Factors such as access to cheap data connectivity, rapid urbanisation, innovative fulfilment models, and easy to set-up tech platforms will drive this growth.

With increasing share of online channels, companies are facing a challenge in managing the complex requirements to support both B2B and B2C fulfilment. With our widespread presence, significant experience across sectors, strong tech-base and diversified service offerings combining Line Hauls, Mid Mile, Last Mile and Express transportation, and warehousing and distribution solutions, we are well positioned to take advantage of this opportunity.

Increasing Focus on Solutions and Managed Services

As the markets mature and supply chain complexities increase, customers are moving from utilising traditional transportation and warehousing services to demanding integrated and managed services. As a result, logistics providers are also evolving to move up the value chain by providing tailor made solutions to cater to specific needs of each sector. Rather than providing piecemeal services, focus is now on optimally combining services to offer a hassle- free and seamless experience to customers throughout the value chain. We are well poised to take advantage of this opportunity and have built competencies for providing solutions like integrated fulfilment and distribution, returns processing, cross border logistics, spare parts distribution, pop-up (flex) sort centres, and so on.

Growing Demand for Express and Cross-border Logistics Services

Growth in consumer, retail and e-commerce sectors has fuelled the demand for time-sensitive distribution services. The disaggregated nature of demand and supply, high variability, and the complexity of returns for e-retail have challenged the traditional distribution operations. Distribution, which was traditionally managed by C&F (Clearing & Forwarding) agents, is now managed directly by companies to increase reach, optimise supply chains, and reduce time to serve. Global e-commerce platforms are enabling Indian companies to sell in global markets, and foreign companies to sell in Indian markets, thereby driving growth in cross-border logistics services. Express and cross-border logistics services offer attractive growth, higher profitability and increased customer stickiness and are natural extensions to our portfolio of offerings.

Vaccine Distribution can Potentially be a Large Long-term Opportunity

COVID-19 vaccine-related logistics presents a large opportunity for us in Exim logistics, in-country primary distribution, and last-mile distribution. Vaccination drives has already started, and the first-year objective has been to inoculate 30-crore people. The exercise will be a multi-year activity and will involve logistics of large volumes both within and outside the country. While the policy and specific contours are still under evolution, we are engaging with several pharma companies to find and offer solutions to them. Challenges

Emergence of Multi-modal Platforms will Impact Share of Road-transport

To improve Indias logistics efficiency and to reduce logistics cost, the government has undertaken several measures to promote the use of multi-modal logistics. We are witnessing linkages of ports, rail and road through hub, spoke and creation of logistics parks around Dedicated Freight Corridors (DFCs). As policy implementation and infrastructure development takes place, a significant share of goods transported by road will shift to other modes like rail, inland waterways, or sea/coastal shipping. The shift would be accelerated in low-cost commodities, which are sensitive to logistics costs and to other categories which are purely transportation led.

Increased Disintermediation across the Value Chain

A large number of technology-enabled start-ups with innovative, asset-light business models are disrupting the logistics market by creating new market segments and capturing the market share of incumbents. Many of these start-ups utilise digital marketplace platforms and data analytics to serve customers directly by removing middlemen from logistics operations. By removing an additional layer, these companies can reduce the total costs of transportation and improve reliability and operational efficiencies.

Continued Service Integration by Competitors

The logistics industry has been witnessing partnerships, acquisitions, value-chain integrations, and capability expansions in the past few years. Competitors are moving towards becoming multi-offering players by making play into adjacent service offerings. This poses a threat to our business; however, it also presents Mahindra Logistics with an opportunity to add services to its existing portfolio and create new offerings.

Margin Pressure due to Funded Start-ups Focusing on Customer Acquisition

Several well-funded start-ups are utilising their funds to acquire clients below cost, thereby causing margin pressure in the industry. Since logistics is a cost- competitive industry, we believe that the strategy of customer acquisition at below-cost is not sustainable in the long run, and technology will have a much stronger role to play in cost optimisation and serving customers effectively and efficiently. We aim to stay ahead of our competition through consistent investments in technology, focus on service quality, consistency and value-added services.

Muted Demand and Volatility in Our Focus Markets can Impact our Business

Our business is significantly influenced by the performance of the automotive industry. Approximately 60% of our SC M revenues in FY21 were from clients in the automotive industry. Due to our dependence on Mahindra & Mahindra Ltd. and the automotive sector, any continued softness or downturn in the sector may impact our business.

The pandemic has resulted in customers focusing on cost rationalisation and reduction, and this has led to increased pricing pressure on us. We are addressing this challenge by focusing on value addition and driving cost-reduction initiatives across the organisation.

FY21 saw severe volatility in fuel prices, and overall costs. Our transporter base also witnessed financial distress. We also saw disruptions due to continued farmers stir. Continuation of such volatility will pose a challenge to our business.

The demand for logistics services is dependent on the general level of commercial activities and economic conditions in India. Any significant economic downturn in India or in the global markets can adversely affect our businesses, clients, and contractual counterparties, especially if such a slowdown were to be prolonged.

C.2 EMS Business Opportunities

EV Solution is Gaining Popularity in Enterprise Mobility Market

The government is promoting electric vehicles (EVs) with plans to build charging infrastructure. EV technology is well suited for mid-range shared mobility applications and several companies are fulfilling a part or entirety of their employee transportation needs by use of EVs. Several mobility companies have raised significant funding and have started EV operations across India. We are also exploring this opportunity to expand our EV offerings.

Increased Focus on User Experience

The customer focus has been seen to be moving beyond just cost and hygiene, towards providing a broader experience. There is going to be even more focus on providing best user experience by allowing greater degree of freedom and flexibility to employees to directly schedule, book and bill for their transportation needs with minimal corporate intervention in post-pandemic conditions. This presents us with an opportunity to build on our current services and provide B2B2C based offerings.

Challenges

Work from Anywhere Poses a Significant Business Threat

Companies are seeing COVID-19 induced work from home as a viable long-term option and many companies might permanently switch to having a significant part of their workforce to work remotely, reducing the demand for mobility services.

Threat of Substitution by Mass Urban Transportation

The development of public transit networks in cities may act as a substitute for the enterprise mobility services we offer. Threat of Disintermediation

Technology based aggregators are innovating and expanding their service offerings to create differentiation and are building their own fleet and working directly with fleet owners, thereby disintermediating the market.

D. SEGMENT WISE PERFORMANCE

Set forth below is a table illustrating the breakdown of our consolidated revenue from operations, across the business segments that we operate in, for the periods indicated.

Segments

Fiscal 2021

Fiscal 2020

Amount % of total revenue from operations Amount %of total revenue from operations
(Rs cr) (%) (? cr) (%)
SCM 3,145.6 96.35 3,103.5 89.41
EMS 119.1 03.65 367.6 10.59
Revenue from operations 3,263.7 100.0 3,471.1 100.0

Set forth below is a breakdown of percentage of revenue from operations with respect to our products and services. Goods Transportation Services continue to be the largest contributor to revenues.

Service offerings Fiscal 2021 Fiscal 2020
(%) (%>
Transportation 67.18 66.03
Warehousing and value-added solutions 20.06 17.49
Freight forwarding 09.11 05.90
Enterprise Mobility Services 03.65 10.59
Total 100.00 100.00

E. BUSINESS STRATEGY

In FY20, we had defined our vision of becoming a Rs 10,000 crores Logistics Service Provider by FY26, delivering exceptional customer experience through differentiated, technology-enabled solutions. To achieve this vision, we had defined our strategy to grow in profitable markets through four core strategic platforms. Despite severe disruptions and challenges to the business, we were able to execute the intended strategies for the reporting year. These are listed in the following sections.

E.l SCM BUSINESS STRATEGY

Over the years, we have capitalised on the expertise gained from serving Mahindra Group companies and have developed strong competencies in auto and engineering industry sectors. Even though the auto sector remains a large and significant market for us, we are also building competencies in serving high growth verticals like ecommerce, consumer, and pharmaceuticals. These sectors will continue to remain high growth in the medium to long term on account of rising consumer demand, and favourable demographics. The supply chain of consumer, retail and e-commerce sectors have higher level of complexity on account of greater distribution, fulfilment and returns processing needs. Bulk and commodity products are a large market but require specific asset categories and primarily transportation services. We intend to focus on auto, engineering and consumer sectors while targeting select accounts in bulk and auto outbound. We intend to grow in these profitable markets by focusing on four core strategies set out below:

1. Expand Portfolioof Offerings and Sharpening our Ability to Design and Deliver Solutions

We provide a variety of services to customers in diverse sectors like auto and auto ancillaries, engineering, consumer, pharmaceuticals, commodities, and ecommerce. We plan to expand the portfolio of our offerings, which support our ability to design and deliver end-to-end integrated solutions.

The express logistics market has registered significant growth driven by the distribution needs of key sectors such as ecommerce, auto, FMCG, FMCD, pharmaceuticals and others. These sectors are key focus markets for Mahindra Logistics and expanding our presence in express logistics would help us expand the share of business in these sectors. We plan to build strong express operational capabilities, and are evaluating several options, including building our in-house express network, acquiring national or regional incumbents, and fostering partnerships with global express firms.

Mahindra Logistics provides in-plant logistics and assembly services to a number of auto and engineering customers. We intend to leverage our strong expertise gained over the years and create a differentiation in the auto & engineering sector by building and expanding our services to provide external component and product assembly, fabrication, painting, inventory management and sourcing.

Over the years, we have built freight forwarding capabilities through our subsidiary Lords. Freight forwarding is an important component of our integrated cross-border solution offering and is critical for serving pharmaceutical and ecommerce sectors. Traditionally, global logistics companies have drawn a significant share of their revenues from freight forwarding services. In comparison, our freight forwarding business currently lacks scale and a comprehensive global presence. We plan to expand our freight forwarding business significantly and are exploring options to build the business organically in international markets. We are also evaluating potential partnerships with international freight forwarding companies.

Mahindra Logistics has built a network of warehouses across strategic locations in India and has developed strong surface transportation capabilities along with first and last mile linkages. Flowever, we do not offer solutions in key multi-modal segments such as rail- based container transportation, inland shipping, CFS / ICD etc. As customers seek one-stop, mode- optimised logistics solutions, it becomes critical for us to offer multi-modal offerings in the future linking sea, rail, road, and air. We plan to leverage our pan-India presence and surface transportation capabilities to form strategic partnerships with major multi-modal incumbents. Such partnership will enable Mahindra Logistics to offer rail and sea-based services to our customers, and to manage and provide 3PL services in logistics parks.

We have made significant progress across these initiatives in Fiscal Year 2020-2021. Our express and freight forwarding services registered positive growth in a weak economic environment. We also launched an Electric Vehicle based commercial last mile service called EDEL for deliveries in select cities. We plan to expand this service aggressively in the medium term through a fleet of owned and contracted EV fleet. We also continue to provide our customers multi-modal services and expanding rail-based services.

Launched Electric Vehicle based commercial last mile delivery service called EDEL for deliveries in select cities

2. Position Mahindra Logistics as an Integrated and Differentiated Solutions provider. Focused on End-market Value Chains

As supply chain complexities increase, customers demand more than just plain transportation or storage services. They want solutions which optimise their supply chain needs from sourcing, inbound transportation, storage, outbound transportation, distribution, fulfilment, returns processing and reverse logistics. With experience gained from serving ecommerce, consumer, and telecom sector customers, we have developed key building blocks for providing integrated solutions. We aim to bring synergies between our various offerings to build a complete set of solutions, tailored towards our key focus markets. To achieve this, we will continue to focus on refining and enhancing our business development and Key Account Management (KAM) processes, developing, and incorporating sales planning tools and creating domain expertise.

Some key solution capabilities that we have built include integrated fulfilment and distribution, returns processing, reverse logistics, omni-channel logistics and distribution, cross-border logistics and tower maintenance services.

In FY21, we deployed nearly a million square feet of short-term flexible warehouse capacity solution for our e-commerce customers. These short-term popup facilities enabled our customers to meet their peak demands without investing in permanent facilities. Our focus on providing integrated distribution solutions also led to winning a very large consumer durable account where we will be providing end-to- end supply chain solutions, managing their entire supply chain from vendors to distributors. On account of a strong value proposition, we saw a healthy order booking across our key focus markets.

3. Build Operational Excellence by transforming our Transportation Capabilities, developing Common Operating Systems, and expanding our Network of Warehouses.

Transportation comprises a major part of Mahindra Logistics operations. We operate an asset light model whereby we source vehicles from our large network of Business Associates. In order to utilize our assets across customers, sectors, and routes, we intend to focus on cross utilization of assets through digitization and network management.

Our Business Associates are key to our continued success. We have been meticulous in our partner selection, onboarding and development process and have rolled out several programmes aimed at improving partner loyalty, service quality and performance. Going forward, we will continue with such investments in our partners.

To launch and scale new businesses, and have world class operations, we will continue to develop consistent and common operating systems focused on safety, workforce management, productivity, and process excellence. We are also focused on enhancing and integrating our solution design capabilities in order to deliver a consistent experience to our customers from design to delivery. To develop and maintain the highest standards of operations, we have also launched centres of excellence focused on developing functional competencies and automation.

Post GST, companies are re-aligning/consolidating their supply chains and we intend to take advantage of this opportunity. We have contracted large, multiuser warehouses in certain strategic locations across India. These multi-user smart warehouses are built to suit the highly flexible needs of ecommerce and consumer companies. These Grade A warehouses will be energy efficient and sustainable by utilising solar power and bio sewage treatment plants. We plan to keep expanding our network of build-to-suit warehouses over the next few years.

We are on track to achieve 4 million square feet of Built-To-Suit warehouses capacity in FY22 and plan expand it to 12 to 15 million square feet in the medium to long term. We brought a large portion of our fleet on to a track and trace platform thereby improving visibility of shipments. We also worked towards improving safety and productivity across sites, defining, and building standards and driving cost reduction.

4. Focus on Digitisation and Innovation by leveraging Technology to create Integrated Business Systems

We have made consistent investments in digitization and technology over the past several years and intend to continue making these investments. We have launched our instance of SAP S/4 Hana Finance and Accounting system called Nucleus which can cater to our unique needs and can be integrated with other systems. We will continue digitising existing processes to improve transparency, data availability, and efficiency. Planned investments in technology systems include enhancements to our Transport Management System, development of our Warehouse Management System, EMS technology platform, and a portal for our Business Associates. In addition, we are implementing an advanced human resources management system. We are also keeping a keen eye on emerging technological trends and have undertaken various studies and launched pilots to incorporate technologies like drones, AGVs, loT and analytics in our business.

In Fiscal Year 2020-2021, we upgraded our Transportation management System, launched a fulfilment focused warehouse management system, a new FIR management system and integrated site management platform. We also partnered with nine companies focused on technology innovation, automation, transportation, last mile distribution and warehousing through Catapult, which is an incubator programme launched by the Mobility Sector.

E.2 EMS BUSINESS STRATEGY

FY21 was a year of defending the EMS business against an extremely challenging external environment. During the year, we made aggressive efforts to add customers from manufacturing & e-commerce companies to offset decline in the IT/ITeS sector. Our long-term strategy for the segment however remains unchanged. With the brand roll out of Alyte, we aim to create a multi-tenancy, multi-offering platform which will serve as an end-to- end platform for all corporate mobility needs. Our longterm Enterprise Mobility growth plans are driven by the following key strategies:

1. Expand EV (Electric Vehicle) Portfolio, Enterprise On-call Services, Event Services and build Subscription Services

Electric vehicle adoption for corporate mobility sector has gained traction as corporates push for more sustainable solutions. EV technology is well suited for mid-range shared mobility applications. Mahindra Logistics current supply is primarily conventional fuel vehicles. We plan to become the first corporate mobility provider to offer flexi fleet of ICE (Internal Combustion Engine) and EVs. Our long-term goal is to have 30% of our total fleet as EVs. We plan to establish an EV supply model and ecosystem by means of partnerships with OEMs, financing parties, vehicle maintenance and off-road support players and charging infrastructure providers. This will help us provide a differentiated offering and will allow for entry into new premium accounts, which smaller players may find difficult to match.

The on-call business complements our employee transportation business. It is a large segment which requires dedicated assets and services setup. Further penetration in this segment allows for customer account synergies and better asset utilisation. We plan to expand our on-call business by building an optimal mix of dedicated fleets and developing DCO (Driver Cum Owners) fleets.

We also plan to expand in event related mobility services including services for conferences, tournaments, festivals, etc. We are building B2B2C subscription-based services for daily office commute, wherein the end user can self-book, roster and schedule a ride between workplace and home.

2. Develop an Integrated Technology Platform Supporting Asset Optimisation and Multiofferings

We are developing Alyte as an end-to-end digital platform which will manage the entire supply and demand lifecycle and use analytics for centralised orchestration and optimal asset utilisation. It will also support modules for contracting, invoicing, and providing network visibility and optimisation.

3. Transform Vehicle Procurement, and Enhance Service Standards to Drive Operational Excellence

Our current model relies more on large-fleet owners and aggregators, which exposes us to the riskof these business associates weaning away our customers. Therefore, we intend to source more from small owners and driver cum owners.

Our technology platform and analytics will help us in route optimisation and network solution designing to drive higher utilisation. We will also continue with our focus on enhancing service standards through programmes aimed at improving reliability and safety.

F. RISKS AND CONCERNS

The Company is committed to recognising and managing the risks it is exposed to, both internal and external, and has put in place mechanisms to handle the same proactively and efficiently. The Company also recognises that these risks could adversely affect its ability to create value for all stakeholders and has taken steps to mitigate the same.

The major risks to which the Company is exposed to are:

1. The Company depends significantly on clients in the automotive industry and is dependent on the performance of the automotive industry. The Company has taken steps to diversify into other industry segments and over time has reduced its dependence on the automotive industry.

2. The Company depends on a limited number of clients including its parent and promoter, Mahindra & Mahindra Limited and other Mahindra Group entities. This exposes the Company to a high risk of client concentration. The Company continues to take steps to create a larger base of customers. In addition, it uses technology and innovation to achieve cost efficiencies for customers which results in long term relationships with them.

3. The Company operates in a highly competitive industry dominated by many unorganised players. Many segments within the logistics industry are highly commoditised and have low barriers to entry or exit, leading to a market with a very high degree of fragmentation. Increased competition from other organised and unorganised third-party logistics or people transport providers may lead to a reduction in revenues, profit margin and a loss of market share. To mitigate this, the Company creates value through integrated technology-based solutions, transport network-based solutions, and skill development of its employees.

4. We have an "asset-light" business model pursuant to which we outsource a large part of our operations to independent contractors for specific services, resulting in the engagement of a large pool of contract labour. As a result, compliance obligations of the Company with diverse and complex laws and regulations are significant. Failure to comply with the same exposes the Company to various implications - financial and otherwise. Also, some of these laws are subject to different interpretations, which makes compliance difficult. The Company is committed to comply with all statutory obligations as applicable to it from time to time.

5. The assets necessary for our operations such as vehicles, warehouses and manpower are owned or arranged by our Business Associates. We depend on our Business Associates for adequate and timely supply of such assets for our operations. Any shortage of such assets may result in additional costs. As a mitigation plan, the Company continues to develop multiple Business Associates for every region, including developing different commercial models to attract Business Associates.

6. We deploy many workers at our in-factory stores and linefeed and warehouse operations. These operations may get impacted by labour unionisation, unrest, and strikes. If labour issues are not resolved in a timely manner, they could limit our ability to serve our clients, and may impact our business.

7. We serve the supply chain logistics and people transport requirements of our clients in India. The demand for our services is highly dependent on the general level of economic activity and economic conditions in India. Our business and operations may be affected by fluctuations in performance of the Indian economy and general economic activity in India.

G. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The management of the Company is committed to ensure effective internal control systems commensurate with the size and the complexity of the business. The Company has established adequate and effective internal controls to achieve its compliance and reporting objectives. The controls are deployed through various policies and procedures. These policies and procedures are periodically revisited to ensure that they remain updated with the changes in the business environment. Polices and processes are regularly tested by internal and statutory auditors. Suggestions to further strengthen polices and processes, or to make them more effective, are shared with respective process owners and changes are made.

The Company continues to invest in various IT initiatives to automate controls to an extent possible, in order to minimise errors and lapses. The Audit Committee reviews the adequacy and effectiveness of the Companys internal control environment and monitors the implementation of audit recommendations.

H. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial statements have been prepared in compliance with the requirements of the Companies Act, 2013. The Company has adopted Indian Accounting Standard (IND AS) from 1st April, 2016.

The consolidated financial statements have been prepared in compliance with applicable IND AS 110 and are presented in a separate section.

Standalone Financial Information

1. Share Capital

The authorised share capital of the Company is Rs 105 crores divided into 10,50,00,000 equity shares of Rs 10 each. The paid-up capital of the Company as at the end of the year was at Rs 71.67 crores compared to Rs 71.54 crores as at the end of the previous year. The increase is due to the issue of 1,33,084 equity shares on account of exercise of options granted under the Mahindra Logistics Employee Restricted Stock Unit Plan 2018 during the year.

2. Retained Earnings

The retained earnings i.e. surplus in the statement of profit and loss, as at 31st March, 2021 was at Rs 366.89 crores compared to Rs 353.57 crores as at 31st March, 2020.

3. Borrowings

The Company continues to remain debt free as at 31st March, 2021.

4. Property, Plant and Equipment and Other Intangible Assets (including CWIP and intangible assets under development)

The property, plant and equipment and other intangible assets including CWIP and intangible assets under development amounted to Rs 348.85 crores as at 31st March, 2021 compared to Rs 224.94 crores as at 31st March, 2020. The Company follows the asset-light model for carrying out its operations and the capital expenditure incurred during the year of Rs 91.62 crores was mainly on account of the purchase of material handling equipment for warehousing services and other IT equipment and software. The addition due to Right of Use Assets from AS 116 is Rs 144.13 crores.

5. Trade Receivables

Trade receivables as at 31st March, 2021 were Rs 408.25 crores which amounted to 13.80% of the Companys revenue from operations compared to Rs 475.52 crores as at 31st March, 2020, which amounted to 14.5% of the revenue from operations. Continued focus on the collection throughout the year has helped Company to reduce the receivables at the end of the year.

6. Results of Operations Revenue from Operations

The Company is engaged in providing integrated logistics services in two distinct segments i.e. Supply Chain Management (SCM) and Enterprise Mobility Services (EMS). Revenue from operations decreased to Rs 2,959.11 crores in the year ended 31st March, 2021 from Rs 3260.90 crores in the year ended 31st March, 2020, registering 9.25% decline. The revenue from the SCM segment reduced by 1.8% whereas the EMS segment reduced by 67.6%. The operations of the Company were suspended following countrywide lockdown announced due to onslaught of COVID-19 which has impacted the Companys revenue. Company has also seen softness in the EMS segment due to COVID related volume reductions.

Other Income

Other income mainly comprises interest income from fixed deposits, dividend from units of mutual funds, gain on sale of units of mutual funds, sundry balances/provisions written back, and interest on income tax refund. The increase in other income from Rs 13.29 crores in the year ended 31st March, 2020 to Rs 15.50 crores in the year ended 31st March, 2021 was primarily due to an increase in investible surplus funds and interest on income tax refund.

Total Expenses

Employee benefit expenses include salaries and wages including bonus, contribution to provident and other funds, gratuity, staff welfare and so on. Employee benefit expense as a percentage of revenue from operations increased to 9.4% from 8.9% in the previous year. The increase in absolute value is mainly due to an increase in headcount and annual increments.

The increase in depreciation and amortisation expenses is mainly due to the impact of capitalisation of assets done in the previous year and in the current year, and also due to lease cost now being partly reflected as amortisation costs post adoption of IND AS 116 during the financial year.

Operating expenses at 84.3% of revenue from operations in the current year as compared to 84.5% in the previous year mainly include freight and related expenses, labour and related expenses, warehouse and related expenses, rent, and so on. Tight cost control and operating leverage have led to an improvement in the operating margin.

Profit before tax for the year ended 31st March, 2021 was at Rs 32.64 crores compared to Rs 80.69 crores in the year ended 31st March, 2020, registering a 59.5% decline. Similarly, profit after tax is at Rs 23.99 crores in the year ended 31st March, 2021 compared to Rs 55.14 crores in the year ended 31st March, 2020, registering a decline of 56.4% over the previous year. Company has recorded losses specifically in first quarter of the financial year due to nationwide lockdown imposed by the COVID-19 outbreak, resulting in pressure on overall PAT for the year.

Consolidated Financial Information

The consolidated financials include financials of the Company and two of its subsidiaries i.e. Lords and 2x2. Consolidation of financial statements of the Company and its two subsidiaries is done on a line by line basis by adding together items like assets, liabilities, income, expenses after eliminating intercompany transactions in accordance with IND AS 110 on "consolidated financial statements". Share of Loss of Transtech Logistics Private Limited has been considered for calculating the Consolidated profit. The consolidated financial statements are presented in a separate section.

The consolidated Revenue from Operations was Rs 3,263.72 crores in the year ended 31st March, 2021 as against Rs 3,471.14 crores in the year ended 31st March, 2020, registering a decline of 5.9%. Consolidated Profit after tax is at Rs 29.18 crores compared to Rs 55.45 crores registering a decline of 47.3%. Profit after tax for the year attributable to non-controlling interest is at ?(1.21) crores as against ?(0.28) crores in the previous year. The operations of the company and its subsidiaries were suspended during countrywide and subsequent regional lockdowns. Even after lifting of lockdowns, volumes from several end markets continued to remain under stress. This has resulted in overall revenue and PAT pressure.

Key Ratios:
Key Matrix FY21 FY20 Change y-o-y
Debtors Turnover (times) 6.39 6.54 -2.34%
Inventory Turnover (times) Nil Nil Nil
Interest Coverage Ratio* (times) 14.70 27.45 -46.44%
Current Ratio (times) 1.07 1.32 -19.23%
Debt Equity Ratio** (times) 0.05 0.07 -21.62%
Operating Profit Margin% 4.56% 4.96% -8.04%
Net Profit Margin%# 0.88% 1.58% -44.17%
Return on Net worth## 5.14% 10.41% -50.64%
Return on Capital Employed* 10.46% 17.53% -40.31%

*lnterest Coverage Ratio (Excluding interest under IND /AS 116) has improved due to lower interest payment on reducing EMI on vehicles loans and lower utilization of cash credit facility.

**Debt equity ratio has improved due to repayment of vehicle loans and lower utilization of cash credit facility.

*Net Profit Margin % has gone down compared to previous year as a result of losses registered specifically in first couple of months of the financial year due to nationwide lockdown and COVID -19 outbreak, resulting in pressure on overall PAT for the year.

**Decrease in Return on Net worth and Return on Capital Employed is due to decrease in profitability.

I. HUMAN RESOURCES DEVELOPMENT

The COVID-19 pandemic and the subsequent lockdown created various challenges with regards to managing business operations and ensuring the realisation of customer expectations and this created opportunities for the HR function to apply alternative thinking to drive engagement, build capability, create alignment and ensure that employees and their families were protected. Delivering profitable and sustained growth has involved the HR function partnering with stakeholders to focus on business priorities through a sharpened focus on the identification and development of talent, grooming future leaders based on succession readiness plans, revisiting key HR policies after evaluating feed back from employees, developing opportunities for career growth and ensuring harmonious industrial relations such that a culture of high performance is developed and sustained.

As a leading 3PL Solutions provider, Mahindra Logistics is a people driven organisation with more than 17,000 employees (on-rolls and off-rolls) spread over 500 client and operating locations across India. With the inherent belief that people are our greatest asset, the employer- employee relationship can be characterised as fair, just, trusting and caring which has been enmeshed into the employee lifecycle. Through continual reinforcement via communication platforms and the celebration of success stories, alignment in the organisation is strengthened. The HR function has ensured that it has driven process excellence by digitising work processes in tandem with policy changes so that technology-driven engagement, efficiency, simplicity, scalability, and empowerment are evident. The digitisation of the HR function took place with the launch of Nectar, an HRMS platform across all HR processes for white collared employees. Nectar has empowered employees with data availability at their fingertips, efficient workflows, and higher turnaround time in processing employee lifecycle transactions. The organisation has also evaluated various vendors for blue collar staff and will be onboarding the new partner subsequently. The organisation also launched Hive, an intranet portal where employees can connect and engage with each other. In order to drive communication further, monthly podcasts were launched to keep employees updated about recent developments in the organisation.

The organisation was highly responsive to the challenges posed by COVID-19 wherein in created empowered workgroups at the central and zonal level. The Incidence Management Teams were cross functional and tasked with the responsibility of defining protocols, monitoring sanitisation activities, tracking employees impacted by the pandemic, managing communication, reviewing Back To Work guidelines and taking decisive action in locations which were impacted. In addition to this, the organisation introduced various policies pertaining to COVID-19 leave, health insurance at the site level, additional homecare facility and vaccination for eligible employees. The collective proactivity of the IMTs ensured that operations were restored keeping agility in mind and employees were provided with a safe work environment.

The organisation revamped its Talent Development Framework and has developed robustness through the insights from development centres that were conducted for critical talent and were segmented into the 9-box

grid. Career conversations occur as per aspirations and succession readiness is aligned to business priorities where the right talent is mapped and developed for the right role. The organisation has also created Functional and Apex Talent Councils wherein talent is mobilised for the benefit of business opportunities. The HR function has also identified, mapped and evaluated functional competencies which have been vetted by an external agency so that there is a global outlook to the process. Proficiency levels have been calibrated as well as initiatives pertaining to capability building and talent acquisition have become competency based. The organisation has also endeavoured to extend the development centres to employees at the level of manager and below so that accurate mapping of talent can take place to create a pipeline from a succession readiness perspective.

The iCoach programme, designed as a leadership development initiative, has successfully enabled the creation of a coaching culture where internally certified coaches coach employees with potential so that they are equipped with the right skills to overcome emerging challenges and achieve their goals. A total of 37 coachees underwent coaching with virtual regular sessions and success stories were published at the organisational level. We put emphasis on diversity and inclusion in this endeavour, wherein women associates have also been considered as coachees so that their professional development is expedited. We are now strengthening the coaching culture further by certifying our leaders who successfully complete the course as International Coaching Federation accredited coaches.

The organisation has fortified its efforts in building leadership and customer centric capabilities of its midlevel managers through Sandhaan, a platform designed to groom future leaders at the mid management level. Based on the premise that Happy Employees create Happy Customers, participants share their learnings with their colleagues and then drive business impact projects by creating Moments of Truth for customers called Sandhaan Moments of Truth. The best presentations are evaluated by a jury and the finalists present their project to the senior leadership team. While the first phase focuses on Leadership Skills and the second on Customer Service Excellence, the third phase was launched by developing an inhouse case study after understanding development areas and opportunities that existed to strengthen the customer experience and managerial skills. 300 + employees were covered via the SANDHAAN virtual platform and were taken through a blended learning experience with online virtual sessions conducted by in-house faculty and e-learning self-paced modules. To accelerate learning, a Learning Management System was launched this year that offers over 7000+ courses on leadership, behavioural and technical topics. 1400+ employees have leverage on unified LMS for self-paced learning, accessing over

170+ courses. The organisation launched virtual Disha, a programme for first time supervisors on the shop floor, to strengthen their ability to manage teams and ensure result orientation with execution excellence aligned to the Mahindra Leadership Rise competencies wherein 1500+ employees were covered via this initiative by leveraging on in-house leaders and faculty. During the lockdown, the organisation focused on virtual learning wherein a total of 1,25,000+ man days of learning were conducted, most of which were virtual in nature.

The AXLERATE platform, which was created to drive functional capability building, has grown from strength to strength covering 2300+ employees via online training on Stores and Linefeed, Warehouse Management, Quality Tools and Lead with Excel. The organisation has articulated AXELRATE 2.0 wherein it will leverage on an outside-in perspective on functional capability building wherein after evaluating various learning partners, NITIE was selected to develop capabilities with an accent into the future. To strengthen the focus on enhancing safety within the organisation, the Behaviour Based Safety Programme was launched to create a culture of safety covering key stakeholders across the organisation like safety committee members, safety leads, safety officers, etc. wherein a total of 5 batches were conducted. In order to enhance the problem solving capability of senior leaders in the organisation, Prapantaran, the Six Sigma Black Belt certification programme was launched this year for 21 leaders wherein they have identified projects linked to optimisation, cost reduction, productivity enhancement, etc. specific to their role in the organisation.

In order to strengthen the culture of recognition and appreciation, especially during the lockdown, the organisation launched virtual Bravo and ThankYou cards wherein stakeholders can appreciate the efforts of their teams in a virtual environment. In addition to this, the organisation has seen 97% utilisation of Uday Awards, the organisations recognition platform. The organisation has also appreciated the efforts of employees who have walked the extra mile during the COVID-19 situation where they managed operations optimally despite adversities.

The organisation has made good progress in implementing its five-year Diversityand Inclusion (D&l) road map through its Second Career Programme for women called Udaan. The entire organisation has completed an e-learning programme on the Prevention of Sexual Harassment (POSH) Act, and 85% of employees have been covered through e-learning module on Diversity & Inclusion. Additionally, manager sensitisation programmes on Unconscious Bias and Gender stereotypes was launched in an instructor led training format. The organisation has also invited external speakers who are subject matter experts in the D&l space as well as women leaders who have achieved corporate success to share their insights

and experiences with the leadership team. Besides gender, the company has made progress in the other spectrums - by hiring and inclusion of People with Disabilities, talent from LGBTQ community and Armed Forces veterans. The organisation also launched the Veteran Employment Engagementand Retention ProgrammeorV.E.E.Rtotrain and deploy retired Armed Forces Veterans in operations. An LGBTQ inclusion policy was launched to cover employees from LGBTQ community in the Mediclaim, adoption leave and compassionate leave policies. The POSPI policy has also been revised to be a gender-neutral policy, to signify inclusion of all.

Statutory compliance of all applicable labour laws is a critical aspect of our corporate governance approach. In that regard, regular audits are conducted with the help of a third-party agency, not only for our locations but also in case of all the Business Associates providing third party manpower, ascertain levels of compliance. Training has been imparted on statutory compliance not only to the members of the FIR team, but also covers all Business Associates with a view to enhance their competency levels. The organisation has also leveraged on eligible candidates under the National Employability Enhancement Mission (NEEM) and the National Apprenticeship Promotion Scheme wherein they have been seamlessly inducted, and their capabilities have been built through focused onboarding. Your organisation adheres to all labour related legislations and offers equal and ample opportunities to all our employees, which is the main stay of our approach to labour practices. Discrimination or biases, in any form, are unacceptable and we ensure and facilitate safe and healthy working conditions for our workforce. As far as workers rights to exercise freedom of association or collective bargaining is concerned, we do have unions representing our on-roll employees as well as third party employees at some locations. Your organisation makes sure that the right to freedom of association and collective bargaining is exercised by having bilateral discussions and the same is recorded and honoured by virtue of long-term settlements.

To assess the engagement levels of such a large workforce, the organisation administered the Mahindra CARES (MCARES) engagement survey for its on-roll employees. Your Company scored a rating of 4.4 on the financial year 2020 survey with high scores across employee alignment, empowerment and recognition. The organisation revamped the Performance Management Policy and launched a revised one based on feedback received from employees and key stakeholders. The launch of a focused calibration process with the involvement of the leadership team, an appraisal grievance redressal mechanism, appraiser and appraisee training sessions and several other initiatives to strengthen the appraisal experience. The organisation also launched an e-learning module on performance feedbacking to drive sensitisation of how to effectively conduct appraisal discussions.

Projects linked to capability building, hygiene action planning, communication, organisational development projects for functions or business units with low scores, leadership development and talent management have been conducted with a closure of the communication loop taking place through the You Said - We Did campaign that reassures employees that their opinions matter and they are an integral part of the change journey. Another important development in enhancing employee satisfaction is the review and revision of key policies like performance management, transfer and relocation, internal job posting and re-hire. The Leadership Speak Series was launched this year to ensure leadership connect with employees during the pandemic, covering over 900+ employees via eight leadership connect sessions. The Swayam initiative which was launched in the previous year to drive health and wellness across levers like financial wellness, physical fitness, personal counselling, nutrition counselling and sports and yoga has had a positive impact on employees work-life balance and engagement levels. Engaging programmes such as #Swayam Fitness Challenge, Swayam Fitness and Flealth nuggets, Swayam Yoga as well as Tax planning sessions were conducted. The organisation has also partnered with an external agency that provides counselling services to employees by trained counsellors which are confidential. We are happy to inform you that the engagement scores coming out of these surveys have seen consistent improvement in the last few years and it is our commitment to sustain the momentum in this regard. During the pandemic this year to support employees manage their mental health and deal better with anxiety, your Company launched Counsellor Speak Series centrally covering 800+ employees and has also launched Nutritionist Speak Series and Financial Expert Speak Series covering 1300+ employees. The organisation also arranged for free one to one Nutrition Counselling, Financial counselling sessions for supporting employees manage their health and finances better.

J. CAUTIONARY STATEMENT

Statements in this "Management Discussion and Analysis" and this Annual Report describing the Companys objectives, projections, estimates, expectations, plans or predictions or industry conditions or events may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results, performance or achievements could differ materially from those expressed or implied. Several factors could make a significant difference to the Companys operations. These include economic conditions affecting demand and supply, government regulations and taxation, natural calamities, pandemics and so on over which Company does not have any direct control.