mahindra logistics ltd Management discussions

OVERVIEW

Mahindra Logistics Limited (hereinafter referred to as MLL, the Company, We, Our) is one of Indias Largest integrated Logistics soLutions provider. We provide a wide range of customised, technology enabLed soLutions for suppLy chain management and mobiLity. Our core capabiLity is our range of Logistics and mobiLity services, which we integrate into soLutions for enterprise cLients Leveraging cLass-Leading technoLogy, infrastructure, processes and human capitaL.

We principaLLy operate on asset-Light business modeL. Majority of the assets, especiaLLy vehicLes and warehouses, necessary for our operations are owned and/or provided by a Large network of our business

associates under different modeLs. The Company aLso depLoys third party contract empLoyees, provided by a group of strategic manpower providers. This technoLogy enabLed, asset-Light approach enabLes scaLabiLity and flexibility of services to offer customised Logistics and mobiLity soLutions to our customers across diverse industries.

We operate in two distinct business segments, SuppLy Chain Management (SCM) and MobiLity Services. Within the SCM business, we provide Contract Logistics, B2B Express, Last MiLe DeLivery & Freight Forwarding services to our cLients. In MobiLity, we provide Enterprise MobiLity Services, Cab on Demand, Airport Pickup & Transfer, Outstation and Upkeep services under ALyte and Meru brand.

BUSINESS LINES

MLL operates under 5 distinct business Lines, with each business having dedicated operations, incLuding saLes, deLivery, human resources and finance. The businesses coLLectiveLy leverage and share infrastructure, including Information Technology, Project Management, Solution Design, Warehousing Assets and others. The Go-To- Market strategy is focussed on providing customers the flexibility of individual services or integrated solutions, combining multiple service lines. The synergies between our core business & acquisitions in other parts of supply chain makes us uniquely positioned to provide end-to- end integrated logistics solutions and strike the right baLance between customisation and scaLabiLity.

We operate through a pan-India network, comprising 14 offices and 650+ clients and operating locations. We have a large network of 1,500+ active and longstanding business associates who support us with vehides, warehouses and other assets and services. We serve 500+ domestic and muLtinationaL companies operating across industry segments, including Auto & Farm, Manufacturing, E-commerce, Consumer Goods, Pharmaceuticals, Telecom, and Commodities. We manage 19+ Mn sq. ft of warehousing space spanning our network of muLti-user, buiLt-to-suit warehouses, stockyards, processing centres and cross-docks. We operate in-factory stores and Linefeed at 40+ manufacturing locations. Our express network serves 19,000+ pin codes throughout the country. We operate a fleet of 1,300+ EDeL EVs, enabling sustainable last- miLe deLivery across 19+ cities.

Contract Logistics (3PL) Business

The business provides customised, end-to-end logistics soLutions, incLuding inbound & outbound fuLL-truckLoad (FTL) transportation, warehousing solutions, in-plant Logistics, just-in-time services, returns processing, distribution, and other vaLue-added services to our cLients. The 3PL business often Leverages our other services Lines to provide integrated soLutions to our customers.

Cross Border Logistics

We also offer cross-border logistic solutions like Ocean freight, Air freight, Air charter services, Break-bulk & Customs cLearance, through our subsidiary Lords Freight (India) Private Limited (LORDS). During financial year 2022-23, we have grown our presence in global forwarding space with expansion to Dubai & UK.

B2B Express business

With a network of 17 Processing Centres (PCs) and 200+ branches pan-India the business provides time-defined, Express/Part Truck-Load (PTL) transportation and vaLue added services to customers through a hub-and-spoke model, consolidating load from enterprise customers and business partners. In 2022-23, we completed the acquisition of the PTL business of Rivigo Services Private Limited (Rivigo). On completion of this acquisition we now serve over 19,000 pincodes across the country with over 12,000 pincodes being serviced directly. The technology stack enables differentiated customer service and reduces our cost-to-serve through better freight Lane optimisation, Load management, hub process management transLating into Lower deLivery times and improved level of service quality.

Last Mile Delivery Business

The business provides a range of last mile delivery solutions for clients using EV and ICE vehicles. The LMD business provides B2C distribution, fulfilment and deLivery services for our enterprise customers in E-commerce and FMCG/FMCD segments. We operate independent and customer-dedicated deLivery stations, integrated with deLivery in over 200 Locations across the country. We have grown our presence in EV Last Mile space with expansion of our EDeL services which offers muLtipLe offerings for customers using 3W and 4W assets. During the year, we expanded our fleet to over 1,300 vehicLes, operating in 19 cities. During 202223, we acquired 36% stake in Hyderabad-based ZipZap Logistics Private Limited, a tech-enabLed, Last-miLe Logistics service provider operating under the Whizzard brand. The investment expands our footprint, technoLogy capabiLities and offerings for micro-fuLfiLment.

The EDeL EV fleet has cumuLativeLy covered 18.5 Mn+ km in the Last one year of their operation and saved 2,500+ tonnes of CO₂ emissions. Whizzard currentLy enabLes seamLess handLing of 60 Mn packages per year, across diverse segments. It caters to 3,000+ pincodes through its micro-distribution centres & fuLL-stack tech capabiLities.

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 deep understanding of customer needs gained from serving across diverse markets, we have established solution designs and development processes to specifically cater to complex requirements of our customers supply chains. Through our portfolio of offerings across sectors, we emerged as a one-stop shop for our customers, with capabilities to design, execute, improve, and optimise logistics related activities across the value chain.

Mobility business

Our MLL Mobility business provides end-to-end transport solutions in both B2B and B2C segments.

We offer a wide range of services covering Enterprise Mobility Services, Cab on Demand, Airport Pickup & Transfer, Outstation and Upkeep services under Alyte and Meru brand. B2B services are offered across India to 250+ clients in Information Technology (IT), Information Technology-enabled Services (ITeS), Business Process Outsourcing, Financial Services, Consulting, E-commerce, Telecom and Manufacturing industries. We provide integrated suite of services right from rostering to biUing through multiple contractual and vehicle offerings as per customer requirements. B2C services are offered across 5 major airports in India through Meru brand. We provide assured rides through dedicated booking counter at airports with kerbside pickup and well-maintained cars with trained and groomed chauffeurs.

Our services are offered through a fleet of Sedans, Sports Utility Vehicles, Buses, and Tempo Travellers through a large network of 400+ business associates across 25+ cities. We also offer services through owned Electric Vehicles fleet in selected cities both in B2B and B2C segments

We offer fully integrated technology services such as application-based interactions for route planning and optimisation, round-the-clock Control Tower Operations (CTO) for tracking vehicles and passengers and EV telematics. We have strengthened our focus on safety, hygiene, and compliance to create differentiation in our offering. Some of the measures we undertook in this regard include multi-level safety and compliance checks, safety training, rewarding and recognising our employees and drivers for building a culture of safety, detailed incident analysis and reporting, among others.

Subsidiaries, Associates and Joint Ventures

• Lords Freight (India) Private Limited (Lords), our 99.05% subsidiary, provides international freight forwarding services for exports and imports, customs brokerage operations, project cargo services and air 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, including freight movement through ocean and air, custom clearance, transportation to transit warehouses and mother warehouses.

• V-Link Freight Services Private Limited is a wholly owned subsidiary of the Company, based out of India with a branch office in Dubai. It will undertake supply chain management activities starting with Air Charter business in Dubai. It will help us establish international presence and unlock next phase of growth.

• MLL Global Logistics Limited is a wholly owned subsidiary of the Company, based out of London. It will undertake supply chain management activities starting with Freight Forwarding for imports and exports originating out of United Kingdom. It will help us establish international presence and unlock next phase of growth.

• 2x2 Logistics Private Limited, our 55% subsidiary, 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 us as its primary customer.

• MLL Express Services Private Limited (Formerly known as Meru Travel Solutions Private Limited) is a wholly owned subsidiary of the Company and provides B2B express logistics services under the brand name Rivigo by Mahindra Logistics. It has a pan-India network of operations currently covering over 19,000 pincodes across the nation.

• MLL Mobility Private Limited (Formerly known as Meru Mobility Tech Private Limited) is a wholly owned subsidiary of the Company. It is in the business of providing B2C transportation services and corporate transportation solutions to companies in various sectors such as BPOs, Banking, IT, and ITeS in ride hail segment. MLL Mobility also has a large number of Electric Vehicles in its fleet.

• V-Link Fleet Solutions Private Limited and V-Link Automotive Services Private Limited, our wholly-owned subsidiaries are engaged in the business of providing employee transportation services and operates fleet of vehicles which are aggregated from third parties.

• ZipZap Logistics Private Limited (Whizzard), an associate company, is a tech-enabled last-mile delivery logistics company, which operates an intracity distribution network for digital commerce and last-mile delivery services. With its full-stack digital capabilities and over 125 micro-distribution centres, Whizzard caters to 3,000+ pincodes across India. We acquired a 36% stake (on fully diluted basis) in Whizzard on 8 April 2022.

• 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 during 2018-19.

INDUSTRY OVERVIEW AND TRENDS

Overview of the Global economy

The global, economy was on the path of recovery, but economic outlook shifted after the Russia Ukraine conflict broke out in February 2022. The conflict further disrupted the global supply chains and led to a surge in inflation and prices of critical, commodities. In response, central, financial, institutions around the worLd responded with tightening of monetary poLicy to curb inflation which Led to increased borrowing costs and weakened growth. High inflation is now getting reflected in muLtipLe Leading indicators of gLobaL economic activity.

According to IMF, worLds economic growth is expected to sLow down from 3.4% in 2022 to 2.8% in 2023 before picking up to 3.0% in 2024. The growth in 2023 is expected to be the Lowest since 2001, except for the downturns in 2008 and 2021 due to the financiaL crisis and COVID-19 pandemic, respectiveLy.

Despite experiencing a strong recovery foLLowing the pandemic, gLobaL trade is now sLowing down due to severaL chaLLenges faced by the gLobaL economy. The WorLd Trade Organisation (WTO) predicts that the voLume of worLd merchandise trade wiLL grow by 1.0% in 2023, compared to 9.7% in 2021. According to the IMFs WorLd Economic OutLook from October 2022, the growth in the voLume of worLd trade (goods and services) is expected to decrease from 10.1% in 2021 to 4.3% in 2022 and further to 2.5% in 2023.

Overview of the Indian economy

The Indian economy bounced back after its encounter with the pandemic and has shown strong growth in the first haLf of 2022-23, which was faster than other major economies. As per Latest estimates from the Ministry of Statistics & Programme ImpLementation, the growth in reaL GDP during 2022-23 was estimated at 7.0% as compared to 9.1% in 2021-22. CapitaL expenditure (CAPEX) of the centraL government, which increased by 63.4% in the first eight months of 2022-23, was another growth driver of the Indian economy.

As per the Economic Survey of India (2022-23), further support to economic growth is coming from the expansion of pubLic digitaL pLatforms and measures such as PM Gati Shakti, the NationaL Logistics PoLicy, and the Production-Linked Incentive schemes to boost manufacturing output.

Indias economy is doing weLL, with private sector investment, normaLisation of suppLy chains, and growing exports. However, India has aLso had to deaL with the task of controLLing inflation, which intensified with the gLobaL financiaL crisis. RetaiL Inflation was above the RBIs toLerance range in 2022 before the pressure started easing in November 2022 and cooLed down to 5.6% in March 2023.

Going forward, India needs to focus on medium-term chaLLenges such as securing technoLogy and resources for energy transition and skiLLing its youth for the 21^st century economy, whiLe staying the course on fiscaL consoLidation at the generaL Government LeveL. With continuous efforts during the Last severaL years, a strong pLatform has been estabLished on which the superstructure of a middLe-income economy can be constructed.

Indian Logistics Industry - Size & Structure

The Indian Logistics industry has experienced significant growth in recent years, driven by factors such as the rise of e-commerce and increasing demand for transportation and warehousing services. The industry is estimated to be worth around US$ 215 Bn, with a CAGR of approximately 10% between 2019-2025.

The industry can be further sub-divided into key sectors, incLuding transportation, warehousing, freight forwarding, express delivery services and other Logistics services such as container logistics, cold chain logistics, coastaL shipping, and so on. Road transportation is the dominant mode, accounting for over 60% of the market share, followed by railways, air, and sea transportation.

~US$ 215 BN

INDIAN LOGISTICS INDUSTRY SIZE (BETWEEN 2019-2025: CAGR OF 10%)

The Logistics sector typicaLLy contributes 8-20% of a countrys GDR However, in India, Logistics costs are higher compared to developed countries. For instance, the US spends 9.5% of its GDP on Logistics, while Germany is even more efficient at 8%. This difference in Logistics costs can be attributed to lack of efficient inter-modaL and multi-modal transportation systems. Therefore, there is significant potential for the development of more efficient and effective systems to improve Logistics in India. Tapping on the potential, India has witnessed advancements in Logistics landscape Like implementation of GST, improvement in road infrastructure and high degree of automation Leading to significant improvement in Logistics efficiency.

We provide customised transportation and warehousing services, incLuding contract logistics, B2B Express, Last Mile Distribution, and Freight Forwarding services. Contract Logistics market is expected to register a ~15% CAGR and reach Rs 1,50,000 Crores market by 2025-26. It is a highly fragmented market; top 10 players take up only 15% of the market share. There are many 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 and integrated Logistics solutions.

The key sectors served by logistics service providers include auto and auto ancillary, consumer goods, specialised transportation for certain metals and minerals products, e-commerce, engineering and capital goods, pharma, and telecom. Engineering and auto activities remain largely inbound focused, whereas e-commerce, telecom, pharma, and consumer sectors have a high share of outbound and distribution logistics. Moreover, there is an increased focus towards technology and automation as key differentiators driving processes, efficiency & optimisation.

The B2B express market in India is one of the fastest growing with an expected CAGR of 15%. The market size is expected to grow to Rs 24,000 Crores by 2026. Presently, the express industry accounts for 3% of the total surface transportation market. The segment is organised as compared to contract logistics with major pLayers accounting for 70% of the voLume. Increasing demand for Direct to Consumer, Omni-channel fuLfiLment and high adoption by MSMEs & small brands is helping the segment grow.

The freight forwarding market is estimated to be around ^ 40,000 Crores in India and is projected to expand at CAGR of 8% over the next five years. The key industry segments contributing to the freight forwarding market are food and food processing, pharmaceuticals, engineering, textiles, chemicals, and auto industries. The sector is expected to grow steadily over medium to Long term on account of the governments push towards infrastructure development, manufacturing self-reliance under the Atmanirbhar Bharat vision, growing imports and exports, and major companies adopting a China+1 manufacturing strategy.

Last MiLe DeLivery registered a CAGR of 25% and is expected to reach ^ 36,500 Crores by 2026. The Last MiLe DeLivery market in India has been growing rapidly in recent years, driven by the growth of e-commerce and the increasing demand for faster and more efficient deLivery services. In addition, the Government of Indias initiatives such as ONDC, Make in India, DigitaL India, and SkiLL India are expected to boost the segment. Last MiLe is the most expensive component of suppLy chain. It is highLy compLex with high service LeveL requirements.

Key Government Initiatives

Logistics cost as a percentage of GDP for India stands at ~14%, significantLy higher than those in deveLoped countries (7-8%). This can be attributed to certain inefficiencies in the industry, such as Lower transportation speed, higher transit inventory, theft and damages and a skewed modaL mix. CurrentLy, road accounts for ~70% of transportation (by voLume), whiLe raiL, ocean and air coLLectiveLy account for the remainder.

Infrastructure Status

Logistics sector was granted infrastructure status in 2017, aLLowing the sector to have access to funds at easier terms with enhanced Limits.

National Logistics Policy

The NLP aims to cut Logistics cost by haLf to be near gLobaL benchmarks by 2030 by reducing the cost of Logistics from 14-18% of GDP to gLobaL best practices of 8%. The key buiLding bLocks of the poLicy are DigitaL Integration System, Unified Logistics Interface PLatform, Comprehensive Logistics Action PLan, and E-Logs (Ease of Logistics Services).

Open Network for Digital Commerce (ONDC)

ONDC is an open e-commerce protocoL set up by the Ministry of Commerces Department of Promotion of Industry and InternaL Trade (DPIIT). ONDC couLd unLock economic growth by heLping buyers and seLLers overcome the chaLLenges in digitaL commerce through interoperabLe networks, unbundLed systems, and decentraLisation of data. It wiLL Lead to organisation of Logistics sector and seamLess muLtimodaL deLivery. With digitisation, price visibiLity wiLL improve across the suppLy chain and higher deLivery voLumes wiLL support the pLan of reducing the overaLL Logistics cost.

Multi Modal Logistics Parks (MMLP)

The MMLP will combine several, types of freight transportation through highways, raiLroads, and inLand waterways. The MMLPs was designed to provide several capabilities, including freight gathering and distribution, and to provide seamless intermodaL freight transportation. Users wiLL also receive value-added services including custom clearances and IT services, as weLL as storage and warehousing solutions. A total of 35 multi-modal logistics parks with a capital budget of ^ 50,000 Crore are pLanned for the country.

Gati Shakti

PM Gati Shakti MasterpLan was Launched by the Government of India in 2021 with the purpose of creating a worLd-cLass, seamLess muLti-modaL transport network in India. Since Launch, 13 State Logistics poLicies have been notified and upLoaded on Department for Promotion of Industry and InternaL Trade website

Dedicated Freight Corridors

This project invoLves construction of the Eastern and Western Dedicated RaiLway Freight Corridors (DFCs), having a cumuLative Length of over 3,000 km. It aims to reduce overaLL Logistics cost by improving average speed of the raiL freight trains, increasing the freight carried per trip and Linking of ports for faster freight movement.

Bharatmala Pariyojana

BharatmaLa Pariyojana was 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. Progress on the project was deLayed due to the pandemic as weLL as issues reLated to cost overruns and Land acquisition. It is expected to be compLeted by 2026.

Sagarmala Programme

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 were identified and are under various stages of impLementation.

Production Linked Incentive Scheme

The PLI scheme is a major poLicy initiative by the GOI with an outLay of 1.97 Lakhs Crores in subsidies and incentives to boost manufacturing across 13 criticaL sectors.

In addition to the above, initiatives were due in areas of Labour poLicies, poor Last miLe connectivity, Land acquisition hurdLes, promoting the use of technoLogy and driving standardisation across the sector.

1.97 LAKHS CRORES

SUBSIDIES AND INCENTIVES BY GOI

Key trends impacting the sector

Logistics industry had been undergoing a transformation, which got accelerated due to the pandemic. From shifting consumer behaviour to advancements in technology, government push for infrastructure & sector formaLisation, foLLowing are some of the key trends that are set to shape the future of logistics in India.

Changing channel landscape driven by changing customer behaviour

Customers have become more informed, seek better experience, and prefer to have the option of purchasing across aU sales channels with consistent experience across them. Supply chains across industries have been witnessing a paradigm shift to new channeLs Like e-commerce & Quick commerce, which have registered muLti-foLd growth compared to traditionaL retaiL channels. Emergence of Direct to Consumer (D2C), Direct to Retailer (D2R), Direct to Kirana (D2K) models and fulfilment via Open Network for Digital Commerce (ONDC) are poised for exponential growth.

Increasing adoption of multi-modal logistics

Development of multi-modal infrastructure is important for the complete overhaul of Indias logistics from point- to-point movement to the hub-and-spoke model. Over the past year, several large Indian and multinational companies made significant investments in developing multi-modal capabilities. There is a need to leverage rail, sea, and inland waterways more effectively to optimise overaH logistics costs and bring it at par with advanced economies. We expect a steady shift from road transportation to other modes driven by favourable Government initiatives (Gati Shakti), infrastructure buildup (dedicated freight corridors), and increased customer awareness.

Emerging consumption centres to drive new fulfilment models and hubs in Tier 2/3 cities

Tier 2 and 3 cities accounted for more than 60% of total e-commerce orders in 2022, growing at a faster pace compared to Tier 1 markets. There is a growing appetite among shoppers to buy everything online, from electronics, apparels to packaged goods. With increasing connectivity due to improvement in the infrastructure & democratisation of technology, these cities are set to be the next growth drivers for most of our key end markets.

Supply chain diversification - shift in global trade flows due to China+1 strategy

COVID-19 pandemic and recent geopolitical events have highlighted the risks of relying on a single supplier. Cross border supply chains have become a key focus areas for many companies having a global presence. These are companies, diversifying their supply chains through onshoring, nearshoring, and friend-shoring. India stands out as an attractive option for manufacturing, owing to its strategic location, a large domestic market, Low labour costs, and production linked incentives announced by the Government. The Government has also been negotiating bilateral trade agreements with 20 nations. This creates an opportunity for freight forwarders to expand their footprint into cross-border trade.

Higher demand for integrated solutions

Companies are looking at improving the overall efficiency of their logistics operations in the process of streamlining the entire supply chain. Focus is on reducing costs through optimised network footprint, optimised inventory, deployment of best-in-class digital tools, higher degree of automation, and standardisation of operating procedures across the entire network. GLobaL companies Looking to expand operations in India are looking for a single point of contact to make logistics hassle free. As a result, there is a growing demand of strategic partnerships with logistics solution providers with end-to-end capability to deliver on network optimisation, cost optimisation, service fuLfiLment, risk management and customer deLight.

Technology & automation have become critical differentiators

In the post-CoviD environment, there is sharper focus on improving the predictabiLity of suppLy chains. Companies are now focussing on granuLar and muLtivariabLe dimensions of their suppLy chains. As a resuLt, Logistics Solution Providers are focussing on supply- chain orchestration by buiLding operationaL efficiency with significant investments in the technoLogy infrastructure. SeveraL use-cases of digitaL technoLogies, such as bLockchain, robotics, automation, and predictive anaLytics have come up to support innovative business models. We believe that technologies like Internet of Things (IoT), drones, Automated Guided Vehicles (AGVs), augmented reality (AR), and marketplace platforms will see greater adoption in the future.

Sustainability emerging as business-critical

Amid global concerns around climate change, sustainability has become a Board-room priority across major industries. There is an increasing commitment by companies and governments to reduce their carbon footprint and become more sustainable. Organisations are assessing the social and environmental impact of their suppLy chains. Logistics forms a core eLement of any enterprise activity and has a high carbon footprint. As a resuLt, there is a growing demand for green Logistics with focus on fleet electrification & use of renewable energy across the suppLy chain.

The Indian mobility market is estimated to be 1.22 Lakh Crores with a fragmented structure. It is divided into B2B (valued at 16,400 Crores) and B2C (valued at ~^105,800 Crores) segments. About 85% of the B2C market is a local taxi market, which is highly fragmented and, therefore, remains non-addressable. Our addressable market, including Enterprise Mobility Services, Cab on Demand, Airport Pickup & Transfer, Outstation is estimated to be 40,000 Crores

B2B segment has been on a positive trend, recovering from the restrictions during pandemic. Year-on-year growth in 2022 for office leasing space has been 40%. Further, mobility in IT, ITeS, BFSI and BPO sectors is expected to improve in 2023-24 with return to office being normalised. We anticipate a shift in the market from being a vendor model to end-to-end mobility solutions provider, enabled by improved service quality, safety, and green transport solutions.

MLL, through its brands Alyte and Meru, operates in the B2B segment of Enterprise mobility and On-call services. IT, ITeS, BFSI, BPO, Consulting, E-commerce, and manufacturing sector clients are the primary target customer segments for the enterprise mobility services. The market is highly fragmented and is primarily served by local and regional players. We envisage a significant degree of consolidation in this market, enabled by rising service quality and safety requirements and growing demand for green transportation solutions, which local players find challenging to provide.

MLL, through its brand Meru operates in 5 airports through dedicated counter for airport pickup, Outstation, and Ride-hailing. B2C segment is fuelled by the recovery in air passenger traffic to the pre-covo levels. Airport business also saw a significant shift towards electric fleet mobilisation. Meru along with Alyte business will enhance our range of mobility solutions with strategic focus on enterprise customers and electric mobility.

Key trends impacting the mobility sector

Increasing demand for EV fleet, with push from Government & airport authorities

Demand for eLectric vehicles fleet is driven by the rise in fueL prices, incentives roLLed out by the centraL and state governments. Both centraL and state governments have taken muLtipLe initiatives, in the form FAME subsidies, tax exemptions and reduction in custom duty on Lithium batteries, to promote manufacturing and adoption of eLectric vehicLes. Government is pushing the major fleet operators to expand their eLectric vehicLe fleet and convert their 40% of vehicLes to eLectric by the end of 2026. From a totaL cost of operation and Low maintenance cost perspective, EVs have become favourabLe to conventionaL fueL vehicLes, especiaLLy after the adoption of the more stringent BS-VI regulations. Inadequate charging infrastructure or Lack of options in products are no Longer seen as hindrance to adoption of EV. However, the battery Life and range of the vehicLes, is Limited to 250-300 kms with a fuLL charge, is a key impediment in accelerating the adoption of EVs as a taxi.

40%

ELECTRIC VEHICLES BY END OF 2026

Recovery in air passenger traffic and growth in business travel

Air traffic voLume at Indian airports in 2022-23 saw a growth of 70% over 2021-22. Further air-traffic voLume is expected to increase by ~17% in 2023-24. Business traveL has aLso witnessed a strong recovery with employees returning to office and corporates returning to business-as-usuaL mode.

Post pandemic supply challenges

When the pandemic hit, it created huge dent on the taxi industry. It made most of the fleet owners to reduce the operations and many drivers found other jobs. Post pandemic, the sudden increase in airport traveL and office commute has Led to a severe shortage of taxis and drivers to meet the demand. Now with the demand at pre-pandemic LeveL, many fLeet owners have tried to

attract more drivers by increasing the wages or reducing the subscription fees to make it easier for the drivers. Though, the shortage is a temporary probLem that shouLd be resoLved as more drivers acknowLedge the demand for rides.

Disintermediation across value chain

Both consumers and competitors are working towards removing or reducing intermediaries from their operations. Many pLayers in this segment have invested in technoLogy pLatforms and done away with the traditionaLLy outsourced roLes of trip management, route optimisation, and so on.

Long-term shift to hybrid work model

As per an industry report, many companies shifted to flexibLe workspaces for ~20-25% of their workforce after positive experiences with remote working during the pandemic. This move wiLL reduce the demand for empLoyee transportation services. Likewise, extensive use of videoconferencing during the pandemic has ushered in a new acceptance for virtuaL meetings, which may further dent business traveL and empLoyee transportation services.

Service line expansion by competition

PopuLar ride haiLing companies Like BLuSmart, OLa and Uber focussed on empLoyee transportation services. They introduced new commute options for corporates to support empLoyees returning to work, enabLing them to book rides together to traveL to work as weLL as business charter services, whereby companies can reserve a dedicated fLeet of vehicLes provided by third-party fLeet partners for their empLoyees and customers. SimiLarLy, other B2B pLayers offering empLoyee transportation services are expanding to on-caLL and outstation services. Rapid metro infrastructure expansion is aLso Leading to innovative service Lines Like micro-mobiLity, for transportation to and from the metro/raiL/bus stations.

PERFORMANCE OF OUR KEY FOCUS MARKETS

WhiLe 2022-23 witnessed growth across most sectors, it was slower than anticipated due to impact of high inflation & slowdown in major global economies. This was the first fuLL year without any major impact of CoviD, after a gap of two years.

Contract Logistics

Auto & Farm

OveraLL retail. saLes saw a robust doubLe-digit growth, Led by 4W Passenger VehicLes with easing semi-conductor shortage & improvement in product avaiLabiLity. 2W industry continue to stay impacted, with saLes stiLL beLow pre-pandemic LeveL. EV penetration in the sector has been at 4.5%, and it is weLL set to grow. The 3W category maintained an outstanding year-on-year growth. CommerciaL vehicLes saw significant recovery in 2022-23, with ~30% growth over previous year. Farm sector remained steady in 2022-23, with domestic tractor saLes growing at 12% Y-o-Y. However, unexpected rains and haiLstorms in northern and centraL India have impacted the Rabi crop and deLayed harvesting, which couLd impact the ruraL sector.

OveraLL, growth in 2023-24 is LikeLy to sLow down due to high- base effect, inflationary pressure, frequent price increases & reguLatory pressure.

Consumer & Discrete Manufacturing

The FMCG industry witnessed a subdued voLume growth due to demand softness in rural markets. The sector was hit hard by high inflation levels forcing companies to go for successive price increases. Demand for discretionary items was moderated. DurabLes saw voLume growth in 2022-23 with demand improving after a soft festive season. Pharma sector remained steady, with a growth of 9-10% in 2022-23. Significant uptick in Telcom on the back of 5G network expansion.

Manufacturing witnessed expansion at a sLow pace, however sector remained reLativeLy strong due to continuous uptick in domestic demand. Increasing capitaL expenditure by both private & Government companies & easing suppLy constraints have boosted order books of capitaL goods pLayers.

E-commerce

WhiLe the sector grew exponentiaLLy over the Last four or five years, 2022-23 witnessed moderation in voLume growth. We also witnessed shorter peaks, and significant demand dispersion during the year. There has been increased consoLidation and sLowdown in network expansion across Large e-commerce marketpLaces, affecting the LeveL of outsourcing in these businesses. There was a significant shift from inventory which Led to pure marketpLace modeL. However, discovery and purchase of products through sociaL media (sociaL commerce) continues to rise, primariLy Led by Tier 2 and Tier 3 cities.

Freight Forwarding

The Freight Forwarding business saw a Lot of change throughout the year, especiaLLy in the second haLf. Non- POL merchandise exports were flat and imports were up 11% over previous year. Cross border freight prices remained under tremendous pressure, with index prices dropping as much as 80% over the previous year. While the slope of the correction has moderated, the broad pressure continues to sustain.

B2B Express

As per industry estimates, B2B Express (Surface) grew by 10.5%. The growth rate has tapered down due to high inflation and slowdown in the second half of 202223. Automotive and Pharma segments growth rate was higher compared to e-commerce and consumer electronics.

Last Mile Delivery

Last Mile is the expensive component of the supply chain, it contributes ~50% of the total transportation cost. It is complex and demands high service level requirements. As a result, there is an increasing trend of outsourcing in Last Mile, especially with the rise of E-commerce, Quick commerce and D2C brands. There has been an increasing adoption of EV Cargo vehicles, which is expected to grow further in 2023-24. Industry witnessed sluggishness in Last Mile network expansion during the second half of 2022-23, with many startups who dominate the Quick Commerce & D2C space, struggling to raise funds due to the funding winter. This has led to higher pricing intensity in the sector. Further, ONDC is likely to disrupt the market, which may drive the prices up in the short term.

Mobility Sector

B2B segment is on resurgence with most companies reopening and resuming office. We have also made an aggressive effort to add new customers and revive old accounts through both organic and inorganic approach. We could also notice that there is a significant shift towards electric as corporates are looking for sustainable commute for their employees in the form of green transportation. MLL has a strong base of 250+ corporate clients to facilitate this demand-led transition to EV. B2C segment is also on a strong trajectory with airport business return to pre-coviD levels and increase in demand for inter-city operations. We are also aiming to expand our airport business to newer cities with electric vehicle fleet.

OPPORTUNITIES AND CHALLENGES

Opportunities

Opportunity to address growing demand from Tier 2/Tier 3 cities through a network of Built-To-Suit (BTS) warehouses

Companies have been consolidating their supply chains foLLowing GST implementation and this has led to leasing of large-format warehouses. Production Linked Incentive (PLI) scheme announced for key sectors by the Government is expected to further boost local production, fueling demand for Grade-A warehousing facilities. There has been significant uptick in demand for consumer products from Tier 2 and Tier 3 cities due to rising disposable incomes and share of elite and affluent households.

Opportunity to take advantage of growing demand for fulfilment in Direct-to-Consumer space

Increasing digital adoption has led to a rise of omnichannel retailing. This is necessitating several companies to redesign their supply chains. SmaH businesses and new brands are increasingly going Direct to Customer (D2C), while larger brands are starting their online brand stores and exploring Direct to Kirana (D2K) channels. With an increasing number of channels, companies are facing a challenge in managing the complex requirements to support B2B and B2C fulfilment. This has presented us with an opportunity to provide integrated fulfilment and distribution solutions, including express and last-mile delivery. We are also witnessing a rising trend of quick commerce (10 to 30 minutes delivery) across segments like food, pharma, and grocery. This, in turn, is fueling the demand for micro fulfilment centres located near key consumption pockets. With significant experience across consumption-led sectors, a strong tech base and diversified service offerings, we are well positioned to take advantage of this opportunity. The acquisition of Whizzard & Rivigo wiU enhance our presence and capabilities in the Last Mile delivery & express logistics, respectively.

Opportunity to offer multi-modal services to our customers

Government Launched the Gati Shakti MasterpLan to reduce inefficiencies and optimise Logistics cost to make it competitive and at par with advanced global economies. As a part of that plan, there has been significant push to enable seamless intermodaL freight movement. We are witnessing linkages of ports, rail and road through the hub-and-spoke model; and creation of logistics parks around Dedicated Freight Corridors (DFCs). Several companies were exploring the option of transporting goods via other modes like rail, inland waterways, or sea/coastaL shipping to drive down their overaLL logistics costs. We have been offering muLti-modaL services, e.g., raiL transportation to auto and farm sector customers; and are constantLy evaLuating the scope of expansion of these services to customers across other sectors as weLL.

Opportunity to capitalise on growing demand for cross-border logistics

Cross-border trade from India has been on a rise because of strong economic growth and improving competitiveness. This trend is expected to pick up momentum due to companies choosing India as a preferred destination for manufacturing (China+1), and boost to manufacturing through the PLI scheme. This wiU lead to an increased demand for freight forwarding services.

With end-to-end capabiLities in freight forwarding through our subsidiary Lords, we are weLL poised to take advantage of this opportunity. We win also be starting our operations in key international markets of UAE & UK, to expand our international presence and cater to the demand on key trade Lanes originating from these countries.

Services and technology Integration

Owing to increasing supply chain complexities, customers are demanding integrated and managed logistics services. As a result, we are also evolving to move up the value chain by providing tailor-made solutions to cater to specific needs of each sector, thereby expanding their share of wanet. Companies are exploring the use of self-guided vehicles, drones, robotics, augmented reality, IOT and Big Data to improve operational efficiencies. Integration of edge level technologies and predictive intelligence in the service offerings can Lead to exponential benefits.

We are in the process of creating an integrated tech stack LogiOne which can be customised as per customer requirement and address various complexities of their supply chain. To drive innovation, we Launched the third edition of our start-up incubation programme, CATAPULT, under which, we have partnered with promising start-ups to deveLop and scaLe innovative Logistics soLutions.

Leading green logistics portfolio

Logistics and transportation are key contributors to overaLL carbon footprint, estimated at as much as 13%- 15% in India. Companies are reLying on Logistics soLutions provider and Looking for strategic partnership to jointLy reduce the impact of emissions arising from their suppLy chain.

At MLL, we have undertaken severaL sustainabLe initiatives, focussed on carbon neutraLity, circuLarity, and resource conservation. We have depLoyed eDeL EVs for Last-miLe distribution, which has Led to a significant reduction in CO2 emissions. We are investing in the areas of energy conservation and sustainabLe packaging to create a win-win soLution for our customers and us. We have joined the Science Based Targets Initiative (SBTI) to buiLd a cLear set of metrics, which can be transparentLy measured and aLigned to specific projects, heLping us reaLise our vision of becoming carbon neutraL by 2040.

Increasing demand for EV fleet among corporates & airport authorities

The Government of India has created favourable policies for the promotion of EVs under FAME-II. EV technology is well suited for mid-range shared mobility applications. With companies focussing on moving towards a sustainable way of doing business, EV as a medium for employee transportation is gaining traction. Moreover, airports are also looking for avenues to reduce their carbon footprint, by preferring EV ad option in taxi services.

From a total, cost of operation and maintenance perspective, EVs have become favourable to conventional fuel vehicles, especially after the adoption of the more stringent BS-VI regulations. Inadequate charging infrastructure or lack of options in products are no longer seen as hindrances to adoption of EV. MLL, through its Meru brand, owns fleet of EVs deployed at major airports and corporate parks across India to serve our existing and new customers, thereby driving the sustainability agenda.

Challenges

Drop in cross-border freight prices

After reaching record Levels in 2021-22, Ocean freight rates started to decline in the second half of 2022-23 and dropped by ~80% compared to previous year. Apart from capacity increases & easing of supply chain logjams, this drop also signals waning consumer demand across major global economies. Air cargo freight was also impacted, with prices dropping ~30% over previous year.

Rising crude oil prices leading to high transport costs

Severe volatility in crude oil prices resulting in fuel prices reaching an all-time high in India impacted our transportation business in 2022-23. Crude oil prices continue to stay volatile because of geo-political tensions

Slowdown in Ecommerce network expansion

E-commerce companies are consolidating warehousing space due to volatile volume & over-capacity. E-commerce contributed 4% to total warehousing leasing in the first half of 2022, down from 23% in the first half of last year, according to data from property-consultancy firm Cottiers. Demand peaks during major festive sales in 2022-23 were much shorter than expected.

Talent and labour challenges

Availability of skitted manpower has been a chattenge, especiatty during demand peaks. This increased labour costs due to demand-supply mismatch. As we focus on new capability development, creating the pipeline of talent in critical areas and enhancing the culture are critical levers, which could impact our long-term growth.

Challenge in supply of Grade-A, compliant warehouse

While demand remained robust in 2022, warehousing market was restricted with supply with a 20% decline

over previous year. Cost of construction remained volatile during the year and the rental yields did not keep up pace, thereby putting profitability pressures on warehouse developers and logistics solution providers like us.

Pricing pressure from customers

Rising input costs due to increase in commodity and crude oil prices made most of our customers focus on cost rationalisation. This led to increased pricing pressure on us. Increased pricing pressure was witnessed in Contract Logistics & Last Mile Delivery. We are addressing this challenge by focussing on value addition and driving cost-reduction initiatives across the organisation.

Impact due to deferred Return to Office (RTO) in mobility

Post-pandemic, most customers in our major end- markets had their employees partly working from home by creating flexible working policies, or some have moved to a permanent work from home option. Hybrid models and permanent work from home will slow down the recovery of enterprise mobility. Though we diversified into new business segments to tackle this challenge and moved our focus from predominantly serving the IT/ITES and banking sectors to e-commerce and manufacturing.

SEGMENT WISE PERFORMANCE

The following is a tabLe illustrating the breakdown of our consolidated revenue from operations, across the business segments that we operate in, for the periods indicated.

	2022-23		2021-22
Key matrix	Amount (Rs in Crores)	% of total revenue from operations	Amount (Rs in Crores)	% of total revenue from operations
SCM (3PL, FF, Express, LMD)	4,867.72	94.92%	3,938.68	95.12%
Mobility	260.57	5.08%	202.08	4.88%
Revenue from operations	5,128.29	100.00%	4,140.76	100.00%

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

Key matrix	2022-23 (%)	2021-22 (%)
Transportation (3PL, B2B Express, LMD)	67.43	61.50
Warehousing and value-added services (3PL)	20.33	22.75
Freight forwarding	7.15	10.87
Mobility services	5.09	04.88
Total	100.00	100.00

BUSINESS STRATEGY AND OUTLOOK

In 2019-20, we had defined our vision of becoming a ^ 10,000 Crores Logistics service provider by 2025-26, delivering exceptional customer experience through differentiated, technology enabled solutions. To achieve this vision, we defined our strategy to grow in profitabLe markets through four core strategic platforms. By the end of the reporting year, we managed to put the strategic pieces in pLace. The focus for next coupLe of years wiU be to drive execution & realise synergy benefits to achieve the vision.

Expand network services portfolio of B2B Express, Last Mile Delivery & Freight Forwarding

B2B Express

B2B Express Logistics continues to see strong tailwinds as customers focus on deepening delivery networks, enhance digitaL adoption, and invest in agiLe suppLy chain.

During the year, we acquired B2B express business of Rivigo, one of the leading express logistics companies in the country. The acquisition gave us the access to pan-India express network, with 17 Processing Centres (Hubs) & 200+ branches covering 19,000+ pincodes and best-in-class technology stack.

The process of integrating Rivigo with existing MLL express network has been progressing weLL. The focus area for next year is to turnaround Rivigo, scaLe-up voLumes and reaLise synergy benefits.

Last Mile Delivery

Last Mile Delivery is expected to witness high doubledigit growth on account of evolving customer needs. Quick commerce and Direct to Customer (D2C)/Direct to Kirana (D2K) models are driving the next phase of growth in the Last-miLe deLivery space and has created a large market for micro fulfilment. Last year, we acquired a strategic stake in Whizzard, thereby strengthening our value proposition in delivery, distribution, and fulfilment as a service. During the year, we also expanded our flagship EV cargo delivery business EDeL, with 2x increase in number of vehicLes depLoyed for sustainabLe Last miLe deLivery. We are Looking to expand geographic presence, complete integration with ONDC and improve operationaL capabiLities to enhance our offering and consoLidate our position in the segment.

Freight Forwarding

The business remained under significant pressure of downward pricing corrections throughout the year. However, we were able to mitigate that to some extent through volume growth across our Air and Ocean products. During the year, we decided to scale and derisk the business through geographicaL expansion. As a part of the same, we pLan to Launch charter operations from Dubai in 2023-24 which wiU help us strengthen recovery in this segment. Similarly, operations from our UK subsidiary is expected to provide momentum for the next stage of growth. We are also evaluating options for strategic partnerships to gain market share in key trade lanes.

Mobility

Continue to expand our services on on-caU, intra-city movement and expanding offerings for enterprise transportation services. We are also focussed on expanding the city coverage of our airport services and on-call services.

Focus on providing differentiated and integrated solutions

Supply chain complexities increased significantly in the recent past to address changing consumer preferences and demands.

With higher complexities across the supply chains, our customers want solutions that optimise their end-to-end needs from imports, inbound transportation, storage, outbound transportation, distribution, fulfilment, right up to returns processing and reverse logistics. We have developed sector-specific solutions, revamped our sales and solution designing organisation aligned to our key end markets, and enhanced our sales processes and technical capabilities to offer such solutions to our customers.

Growth in solutions will be also be enhanced with integration of offerings from the strategic acquisitions made during last two years with the core business. In Mobility we are focused on driving greater integration across services to enterprise customers to become their one-stop shop for all enterprise mobility. Additionally we are focussed on creating niche tech-enabled solutions for segments such as repair & maintenance.

Drive operational excellence by focussing on standardisation, enhanced customer experience and functional excellence

We are continuously working towards establishing best- in-class processes and systems across the organisation. Our Centre of Excellence team works towards standardisation of operations across sites, developing functional competencies, and exploring avenues for automation and innovation at our sites. We continue to develop and adopt consistent and common operating systems focussed on safety, workforce management, productivity, and process excellence. We are also focussed on enhancing and integrating our solution design capabilities to deliver consistent experience to our customers from design to delivery.

During the year, we revamped our customer service process to make it more proactive. We have been working on Salesforce CRM implementation, to deliver seamless experience across the customer journey, right from onboarding to problem identification & resolution. We intend to nurture our relationship with customers and become a strategic supply chain partner.

The transportation service line contributes significantly to our operations. We source our fleet from a large network of business associates spanning the country. We have built robust processes in partner selection, onboarding and development and have several programmes in place aimed at improving partner loyalty, service quality and performance. We continue such investments in our partners to build long-term, mutually beneficial partnerships.

There has been a consistent trend of supply chain consolidation in our industry post GST implementation, and we continue to take advantage of this opportunity. We have contracted large, multi-user warehouses at strategic locations across India. These multi-user, smart warehouses are built to suit the highly flexible needs of end markets. We plan to keep expanding our network of built-to-suit (BTS) warehouses over the next few years, achieving 6 mn sq. ft. capacity of built-to-suit warehouses by end of 2023-24. As on 31 March 2023, our BTS warehouse capacity reached ~4.4 Mn sq. ft., and we are well on track to realise our 2025-26 aspirations.

In MobiLity, there is a continued focus on operational exceLLence with a high impetus on vehicLe and driver safety, enhanced service-level assurance and digitisation on operating processes. This wiLL enable us to enhance service quality and also reduce the TCO per trip.

Digitisation and innovation

Over the past several years, we made consistent investments in digitisation and technology to augment and optimise our operations to serve our customers better. In 2022-23, we started the development of our flagship integrated tech stack LogiOne. LogiOne tech stack wiLL house our in-house Transport & Warehouse Management system, Ocean & Air freight management system, Express & Last MiLe suite coupLed with optimisation suite for Load & route management. Data from aLL the systems wiLL fLow into a centraL data Lake, where the Data AnaLytics Layer wiLL run aLgorithms, process the data, and share vaLuabLe inputs suppLementing our operations and decision making. Through LogiOne we pLan to remove redundancies in various Legs of suppLy chain and enabLe seamLess operations for our customers

To capitaLise on emerging technoLogicaL trends, we Launched piLots to incorporate technoLogies Like drones, AGVs, and loT in our business. We Launched CatapuLt 3.0, our start-up incubation programme, with the aim of cocreating new and innovative soLutions for suppLy chain industry with upcoming start-ups. We aLso commenced the deveLopment of MLL TechnoLogy and Automation centre in our upcoming BuiLd-to-Suit warehouse park in Pune. This centre wiLL focus on the deveLopment of automation systems, test use-cases and acceLerate depLoyment across our operating sites throughout the country.

In the MobiLity business, technoLogy pLays a key Lever for customer experience and route profitabiLity. Our technoLogy focus remains on these key areas. With enhanced focus on customer services as weLL as enabLing greater inter-operabiLity of fLeets across different service LeveLs, we are abLe to increase the vehicLe utiLisation. Thereby enhancing earnings for driver cum owners (DCOs) and enhancing EV fLeet utiLisation.

RISKS AND CONCERNS

We are committed to recognising and managing the risks our business is exposed to (internal, and external.) and have put in pLace mechanisms to handLe the same proactively and efficiently. We recognise that these risks couLd adversely affect our ability to create vaLue for all stakeholders and have taken steps to mitigate the same.

The major risks that our company is exposed to

We depend significantly on cLients in the automotive industry and their performance. The automotive numbers incLude the farm segment, whose performance has improved over the years. The concentrated dependence on the automotive industry hence reduced. We took steps to diversify into other industry segments, mainLy focussing on consumption Led businesses and over time, have reduced its dependence on the automotive industry.

We depend on a Limited number of cLients, incLuding parent and promoter, Mahindra & Mahindra Limited and other Mahindra Group entities. This exposes us to a high risk of cLient concentration. We continue to take steps to create a Larger base of customers. In addition, we are Leveraging technoLogy and innovation to achieve cost efficiencies for customers, which resuLts in Long-term reLationships with them.

We operate 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, we create vaLue through integrated technoLogy-based soLutions, transport network-based soLutions, and skiLL deveLopment of empLoyees.

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, our compLiance obLigations with diverse and compLex Laws and reguLations are significant. FaiLure to compLy with the same exposes us to various impLications - financiaL and otherwise. ALso, some of these Laws are subject to different interpretations, which makes compLiance difficuLt. We are committed to compLying with aLL statutory obLigations as appLicabLe to it from time to time.

The assets necessary for our operations such as vehicLes, warehouses and workforce are owned or arranged by our business associates. We depend on them 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, we continue to deveLop muLtipLe business associates for every region, incLuding deveLoping different commerciaL modeLs to attract business associates.

We deploy many workers at our in-factory stores as weLL as 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.

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.

With inorganic acquisitions, we face the risk of integration effectiveness. SLow ramp up of anticipated voLumes and deLayed synergy on technologies impacts the cash flow and revenue. To mitigate this, we continue to optimise the operating costs and overheads across all businesses and integrate technology architecture investments.

We face the risk of high volatility in cross border freight prices due to variation in suppLy-demand scenarios, triggered by high inflation and geopolitical conflicts. This creates pressure on margins and cash flows. As a mitigation measure, we keep a dose track of freight rates on key trade lanes and focus on volume growth to offset the impact of price reduction.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The management of the Company is committed to ensuring effective internal control systems commensurate with the size and the complexity of the business. We have 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 and make them more effective are shared with respective process owners, following which requisite changes are made.

We invest in various IT initiatives to automate controls to the extent possible and minimise errors and lapses. The Audit Committee reviews the adequacy and effectiveness of our internal control environment and monitors the implementation of audit recommendations.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The financial, statements were prepared in compliance with the requirements of the Companies Act, 2013. We adopted the Indian Accounting Standard (IND AS) from 1 ApriL 2016.

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

Standalone Financial Information 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. Our paid-up capitaL as at the end of the year was at Rs 71.98 Crores compared to Rs 71.87 Crores as at the end of the previous year. The increase is due to the issue of 1,05,412 equity shares on account of exercise of options granted under our EmpLoyee Restricted Stock Unit PLan 2018 during the year.

Retained Earnings

The retained earnings i.e., surpLus in the statement of profit and Loss as on 31 March 2023, was at ^ 423.93 Crores compared to ^ 372.62 Crores as on 31 March 2022.

Borrowings

Borrowings as on 31 March 2023, were ^ 150 Crores compared to NiL as on 31 March 2022, on account of working capitaL demand Loans from the banks during the year ended 31 March 2023.

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 ^ 554.59 Crores as on 31 March 2023 compared to ^ 487.54 Crores as on 31 March 2022. We foLLow the asset-Light modeL to execute our operations and the capitaL expenditure of ^ 70.67 Crores incurred during the year was mainLy on account of the purchase of materiaL handLing equipment for warehousing services, eDeL vehicLes and other IT equipment and software. The addition due to Right of Use Assets under IND AS 116 was ^ 204.76 Crores.

Trade receivables

Trade receivabLes as on 31 March 2023, were at ^ 451.38 Crores, which amounted to 10.12% of our revenue from operations compared to ^ 405.67 Crores as on 31 March 2022, which amounted to 11.17% of the revenue from operations. Continued focus on coLLection throughout the year heLped us reduce the receivabLes at the end of the year.

Results of operations

Revenue from operations

We were engaged in providing integrated Logistics services in two distinct segments i.e., SuppLy Chain Management (SCM) and Enterprise MobiLity Services (EMS) untiL 30 September 2022. Consequent to saLe/transfer of the Enterprise MobiLity business to MLL MobiLity Private Limited effective 01 October 2022, we operate in a singLe segment i.e. SuppLy Chain Management (SCM) - Goods transportation service, incLuding warehouse management service.

Revenue from operations increased to ^ 4,458.90 Crores in the year ended 31 March 2022, from ^ 3,631.08 Crores in the year ended 31 March 2022, with 22.80% increase.

Other Income

Other income mainly comprises interest income from fixed deposits, 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 ^ 9.56 Crores in the year ended 31 March 2022, to ^ 12.04 Crores in the year ended 31 March 2023, was primarily due to 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 decreased from 7.77% to 6.48% in the previous year. The increase in absolute value was mainly due to an increase in headcount and annual increments.

The increase in depreciation and amortisation expenses is due to the impact of capitalisation of assets done in the current year and increase in amortisation of rentals under IND AS 116.

Operating expenses were at 85.06% of revenue from operations in the current year as compared to 84.98% in the previous year. This mainly included freight and related expenses, labour and related expenses, warehouse and related expenses and rent, among others. Operating expenses increased marginally in view of acquisition of new customers.

Profit before tax for the year ended 31 March 2023, was at ^ 80.44 Crores compared to ^ 32.69 Crores in the year ended 31 March 2022, registering a 146.07% increase. Similarly, profit after tax was at ^ 64.53 Crores in the year ended 31 March 2023, compared to ^ 24.44 Crores in the year ended 31 March 2022, registering an increase of 164.03% over the previous year.

Consolidated financial information

The consolidated financiaLs incLude financiaLs of our eight subsidiaries i.e., Lords Freight (India) Private Limited, 2x2 Logistics Private Limited, MLL Mobility Private Limited (formerly known as Meru Mobility Tech Private Limited), V-Link Fleet Solutions Private Limited, V-Link Automotive Services Private Limited, MLL Express Services Private Limited (formerly known as Meru Travel Solutions Private Limited), V Link Freight Services Private Limited, MLL Global Logistics Limited, one joint venture entity i.e. Transtech Logistics Private Limited and one associate entity i.e. Zipzap Logistics Private Limited.

Consolidation of our and MLLs eight subsidiaries financial statements 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. Entity method of consolidation is used for joint venture entity and associate entity. The consolidated financial statements are presented in a separate section.

The consolidated revenue from operations was Rs 5,128.29 Crores in the year ended 31 March 2023, as against Rs 4,140.76 Crores in the year ended 31 March 2022, registering a growth of 23.85%. Consolidated profit after tax was at Rs 27.42 Crores compared to Rfs 15.06 Crores registering a growth of 82.07%. Profit after tax for the year attributable to non-controlling interest was at Rs (1.65) Crores as against Rs (2.49) Crores in the previous year.

Key ratios and changes therein

Key matrix	2022-23	2021-22	Change y-o-y
Current Ratio	0.98	1.11	(11.71%)
Debt Equity Ratio	0.72	0.07	928.57%
Debt Service Coverage Ratio	1.41	4.52	(68.81%)
Return on Equity	4.74%	3.22%	47.20%
Inventory Turnover	7.64	6.55	16.64%
Trade Receivables Turnover	5.25	4.86	8.02%
Trade Payables Turnover	4.56	4.31	5.80%
Net Capital Turnover	(228.13)	33.92	(772.55%)
Net Profit Margin (%)	0.53%	0.36%	47.22%
Return on Capital Employed	8.95%	9.56%	(6.33%)

Debt-equity ratio increased to 0.72 times in the current year from 0.07 times in previous year due to increase in the borrowings during current year.

Debt Service Coverage ratio reduced to 1.41 in current year from 4.52 in previous year due to increase in the interest and debt during the current year.

Return on Equity (%) improved from 3.22% in previous year to 4.74% in current year on the base of higher profit for the year.

Inventory Turnover increased from 6.55 times in previous year to 7.64 times in current year on the lower base of inventory and higher utilisation during the year.

Net Capital Turnover changed from 33.92 in previous year to (228.13) in current year on the base of negative average working capital on account of increase in the current liabilities.

Net profit in the current year improved from 0.36% in previous year to 0.53% in current year on the base of higher profit for the year.

HUMAN RESOURCES DEVELOPMENT

In pursuit of MLLs vision of becoming a ^ 10,000 Crore Logistics Service Provider by 2025-26, the Human Resources function plays a significant role in achieving the targeted deliverables by enhancing overall employee experience.

There has been a strategic focus on priorities Like nurturing innovation, enhancing team probLem soLving capabilities, building future talent pipeline, and leveraging analytics for people decisions to enable the organisation gain competitive advantage. We have strengthened various initiatives linked to Third Party manpower and Business Partner management to ensure seamless engagement and harmonious work relations. Our employer-employee relationship is characterised as fair, just, trusting, and caring. This has been assimilated into the empLoyee LifecycLe through continuous reinforcement via communication pLatforms and the celebration of success stories. The HR function drives excellence by digitising work processes and using technoLogy to drive engagement, efficiency, simpLicity, scaLabiLity, and empowerment.

The organisation has been certified Great Place to Work for the second year in succession, with a higher score compared to the year before. There has been a considerable improvement in Trust Index and Culture Audit score which signifies the relationship an employee shares with the organisation, own job, and coLLeagues at work. The CuLture Audit has aLso heLped us benchmark the variety and quality of people practices in the organisation compared to other companies. Based on the insights received from the previous survey, we had Launched severaL initiatives to drive engagement and improve the Trust Index score. The survey aLso showed that the organisation has robust processes for overaLL empLoyee deveLopment, coLLaboration, incLusion, and providing support throughout the LifecycLe. WhiLe the overaH employee perception about the Company is positive, we intend to strengthen this further by designing and institutionalising industry-leading practices.

We launched the MLL Code of Conduct in 2022-23, with focus on core values and behaviours that create a deeper sense of purpose. The Code of Conduct is articulated to be simple, inspirational, unique to the organisation, reflective of its reality, and aligned to our vision.

We have been digitising HR process through our HRMS pLatform Nectar Darwinbox. It has simplified the overall employee lifecycle, with easy data navigation, efficient workflows, and lower turnaround time for processing transactions. We have successfully deployed face recognition-based attendance capturing of blue- collar workforce to drive higher levels of automation and process efficiency. We re-launched our employee engagement intranet portal Hive with best-in-class interactive features. It provides a single window for communication of organisational events and ensures that employees are updated on latest developments. Through this interactive platform, member of the Company Leadership Team share various organisational updates such as quarterly performance, key achievements, and the way forward. Townhals are conducted every quarter, where employees across locations join virtually. They get to ask questions directly to the leadership team and seek clarifications on pertinent issues.

Creating an immersive work culture

To create a highly engaging and conducive work environment, we have been focussing on enhancing the employee experience across four dimensions: leadership development, performance management, talent management, and employee engagement. The talent management framework ensures accurate talent identification, necessary role deployment, accurate performance evaluation and focussed leadership development in line with our vision. Talent assessment and identification of functional competencies ensure that talents are developed for future roles through functional and leadership capability building. We have identified, mapped, and evaluated functional competencies which will further strengthen the talent identification and development process. Proficiency levels are calibrated and initiatives on capability building and talent acquisition have now become competency based. We continue to focus on strengthening leadership pipeline through crucial conversations about succession planning.

Managing performance through fair calibration of efforts

We have made several enhancements in the performance management process as weU as career growth and compensation practices. With the launch of the Performance Management Policy 3.0, various processes were reviewed and revised policy was implemented after considerable dialogue with the leadership team. The calibration process which was decentralised over the last year has created higher levels of ownership with calibrators assigned by the leadership team to evaluate performance. The Appraisal Grievance Redressal mechanism ensures that the principles of fairness are applied when addressing employee grievances. The process is run with considerable rigour in a timebound and effective manner so that employees are provided with a forum to have their concerns about the appraisal process addressed. The Unnati framework supports both appraisers and appraisees in having meaningful appraisal discussions and drives higher ownership for all stakeholders. 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.

Innovative skill building and development opportunities

Functional and Leadership capability buiLding is an important Lever in our quest to ignite success. We foLLow the BuiLd v/s Buy approach, where the focus is on developing internaL taLent through taLent management initiatives and buiLd business/functionaL capabiLity. Learning management system was Launched during the year, which offered over 21,000 courses on Leadership, behaviouraL and technicaL topics. The Harvard Manage Mentor pLatform was Leveraged for its diverse content. In addition to this, we aLso offered courses on Udemy.

The AXLERATE pLatform was created in 2018 to drive functionaL capabiLity in suppLy chain and operations management. The focuss was to deveLop an outside-in perspective about best practices from the industry. We coLLaborated with NITIE for functionaL capabiLity buiLding, where the AXLERATE 2.0 moduLe was roLLed out based on inputs received from business Leaders across the organisation. The moduLes cover industry-best practices as weLL as working knowLedge in areas Like suppLy chain, Logistics, warehousing, stores Linefeed, transportation, and inbound/outbound operation

The organisation is committed to deLiver exceptionaL customer experience through differentiated, technoLogy enabLed soLutions. To empower Account deLivery managers, we have designed FLEX programme to hoListicaLLy deveLop their functionaL and Leadership capabiLities in a structured manner. Through this high impact Learning journey, a common operating system wouLd be created so that aLL Account DeLivery Managers can be pLaced on the same pLatform and impLement Learnings at their respective Locations. The content for FLEX programme is deveLoped and deLivered by internaL facuLty so that it is contextuaLised to the requirements of the organisation.

To enhance the probLem-soLving capabiLity of senior Leaders in the organisation, Prapantaran, the Six Sigma BLack BeLt certification programme was Launched. Projects Linked to optimisation, cost reduction, productivity enhancement, among others, have been depLoyed. The programme uses advanced probLemsoLving approaches and statisticaL tooLs that enabLe empLoyees to soLve compLex business chaLLenges and achieve significant business impact. It was designed for participants to identify opportunities based on chaLLenges in their function, invoLve key stakehoLders that they partner with, and impLement projects to achieve business resuLts.

Supporting employees across locations

Harmonious work reLations are an essentiaL eLement in driving customer service exceLLence. We understand that empLoyees working across different Locations face distinct chaLLenges. Hence, we have created various forums where empLoyees can ask questions and share feedback. As part of our empLoyee reLations Sanjeevani framework, the Location HR team has reguLar HR Connect sessions with permanent, fixed- term contract and third-party empLoyees to understand their concerns and resoLve their queries. EmpLoyees get to ask questions and raise concerns during one-on-one or group interactions with the Location HR. Their queries are tracked aLong with the time for resoLution. These HR connect sessions are ideaL for empLoyees to gain cLarity on various poLicies and processes.

Considering the feedback received from empLoyees, we have revamped our Reward and Recognition pLatform by benchmarking best practices in the industry and revising our offering accordingLy. Reward and Recognition has now been digitised through Nectar Darwinbox, our HRMS pLatform, and it incLudes features Like spot recognition, onLine redemption option, notifications to various stakehoLders in the team as weLL as appreciation boards, which has enhanced the empLoyee experience and provided an opportunity for efforts to be ceLebrated at an organisationaL LeveL. This has created higher aLignment with organisationaL priorities as empLoyees feeL appreciated for their contributions and the reward mechanism enthuses them to achieve more.

Fostering diversity and inclusion

We encourage and vaLue diversity amongst our empLoyees, vendors, business partners, contractors, customers, and communities. Women representation in Logistics sector is minimaL and requires creation of a taLent pooL with equaL representation of women through various pLatforms. We have taken severaL initiatives to attract women candidates and buiLd a taLent pipeLine from the miLLenniaL taLent pooL. Hiring persons with disabiLities, the veteran community and the LGBTQ community has reinforced MLL as an equaL opportunity empLoyer. We have embarked on an ambitious target of increasing the diversity ratio for which we have invested in sourcing taLent from unique taLent pooLs and ensuring that there is equaL representation across the diversity spectrum.

WhiLe a five-year pLan was created from 2017-18 to 2022-23, a revised three-year road map has been created to enhance diversity, inclusion, accessibility, and equity which has been further supported by a Diversity Council to review current and future opportunities in this arena. This has been done keeping in mind existing initiatives and focussing on specific areas that wiLL drive an inclusive culture in the organisation. Inclusive is one of core vaLues at MLL, it aLLows us to increase our exposure to varied thought processes, knowLedge streams and broaden our outLook on the business. It has heLped us create an environment of incLusion and participation, where quaLities of equaLity, fairness, and dignity are aLways fostered.

The second career programme Udaan provided women, who had gone on a career break, with an internship opportunity to faciLitate smooth transition back to the industry. Based on current openings and suitabiLity for open positions, many of them are provided with fuLL-time empLoyment upon the compLetion of their internship. We have focussed on the expansion of existing sources of hiring and began a communication campaign to create higher visibiLity. Job portaLs Like LinkedIn and Naukri were Leveraged to source women on a career break as weLL as buiLding an empLoyer brand amongst this taLent pooL.

EmpLoyees have compLeted their e-Learning programme on the Prevention of SexuaL Harassment (POSH), and a moduLe on Diversity & IncLusion. AdditionaLLy, manager sensitisation programmes on unconscious bias and gender stereotypes, were Launched in an instructor- Led training format. We invited subject matter experts in the D&I space as weLL as women Leaders who have achieved corporate success, to share their insights and experiences with the Leadership team. Infrastructure AccessibiLity Audit was conducted at the Head Office and the recommendations have been impLemented. There is a focuss on Women and PRIDE CircLes, where insights are captured in a detaiLed report and submitted to the management for review. Gender NeutraL Washrooms have been created at various Locations. We aLso ceLebrate various diversity and incLusion events Like Veterans Day, InternationaL Transgender Day of VisibiLity and participate in Trans EmpLoyment MeLas and severaL other events. WhiLe the PRIDE EmpLoyee Resource Group (ERG) has been piLoted and Launched, severaL other ERGs are scheduLed for roLL out in next year.

We aLso made progress on other spectrums - hiring and incLusion of PeopLe with DisabiLities, LGBTQ community, and Armed Forces veterans. The Veteran EmpLoyment

Engagement and Retention Program or V.E.E.R to train and depLoy retired armed forces veterans in operations saw the third batch getting inducted successfuLLy. The LGBTQ incLusion poLicy was Launched during the year to cover empLoyees from the LGBTQ community under medicaL insurance, adoption Leave, and compassionate Leave poLicies. We ensured that their experience throughout the LifecycLe is memorabLe and productive. The POSH poLicy was revised and made a gender-neutraL poLicy, to signify the incLusion of aLL. We signed up with the United Nations Womens Empowerment PrincipLes (WEP). This was a boLd step taken in the direction of advancing gender diversity in our workpLace, marketpLace, and communities by focussing our efforts on deveLoping and impLementing action pLans for gender equaLity strategy. By aLigning with the 7 WEP principLes, our priorities focus on hiring, empowering and retaining women and peopLe from across diversity spectrums.

Being a compliant and equitable employer

Statutory compLiance with 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 the case of business partners providing third-party workforce, to ascertain LeveLs of compLiance. Training on statutory compLiance is imparted to the members of the HR team and business partners to enhance their competency LeveLs. We adhere to aLL Labour-reLated LegisLation and offer equaL and ampLe opportunities to aLL our empLoyees. 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 are concerned, we have unions representing our on-roLL empLoyees as weLL as third-party empLoyees at some Locations. We ensure that the right to freedom of association and coLLective bargaining is exercised by having biLateraL discussions. The same is recorded and honoured under Long-term settLements.

keeping a close eye on engagement efficiency

Engagement of workforce is criticaL for business success. An engaged and productive workforce can be created by identifying the root cause of probLems in the empLoyee LifecycLe, poLicies, cuLture and peopLe process. Various initiatives to address these gaps are Launched to enhance empLoyee experience. To assess the engagement LeveLs of such a Large workforce, we administer the Mahindra Cares (MCares) engagement survey for its on-roLL empLoyees. Based on the philosophy that your culture wiH determine your success, the Mahindra Group has created an ecosystem of engagement that is anchored by its core purpose: We wiLL chaLLenge conventional thinking and innovativeLy use aLL our resources to drive positive change in the Lives of our stakehoLders and communities across the worLd, to enabLe them to Rise.

The MCares resuLts are shared with managers and their teams to initiate action pLanning. Brainstorming sessions are conducted with the team in the absence of the manager to ensure open diaLogue and debate within the team. Specific action pLans are made with set accountabiLities and timeLines for compLetion. Action pLanning is done at 3 LeveLs: Business/Function LeveL, CLuster/Department LeveL and Location/PLant LeveL. Action pLans are reviewed by HR/Business Heads periodicaLLy (monthLy) region-wise. Trackers and status reports of compLetion percentage are pubLished across the Company by the CoE team and shared with managers as weLL as their teams. EmpLoyees thus are updated on actions taken as per commitments made by the team and their respective managers. At the end of the financiaL year, a finaL status report is shared comprising the actions compLeted. In addition to existing pLatforms under the purview of MCares action pLanning, specific opportunities are identified for departments where the score was Lower than the average score.

Projects Linked to capabiLity buiLding, hygiene action pLanning, communication, organisationaL deveLopment for functions or business units with Low scores, Leadership deveLopment, and taLent management were 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, remote working, internaL job posting and re-hiring.

Prioritising the health and wellness of our people

EmpLoyee heaLth and weLLness is of primary importance and we work to optimaLLy manage their weLfare. The Swayam initiative, which was Launched in the previous year to drive heaLth and weLLness across Levers of financiaL weLLness, physicaL fitness, personaL counseLLing,

nutrition counseLLing, sports, and yoga had a positive impact on empLoyees work-Life baLance and engagement LeveLs.

We have partnered with an externaL vendor to provide a digitised pLatform to participate in various heaLth and weLLness programmes that are designed to create higher visibiLity. OnLine fitness counseLLing services, fitness chaLLenges, workout regimens, among others, have been designed to drive engagement as weLL as enhance fitness LeveLs. In addition to this, engagement programmes and contests are conducted with specific themes so that empLoyees can compete towards higher fitness LeveLs. An externaL agency is empaneLLed to provide counseLLing services to empLoyees by trained counseLLors, who remain confidentiaL. The engagement scores received from these surveys have seen consistent improvement in the Last few years, and we are focussed on sustaining the momentum.

CounseLLor Speak Series was organised to support empLoyees deaLing with anxiety, heLping them manage their mentaL heaLth effectiveLy. We aLso arranged for free one-to-one nutrition counseLLing and financiaL counseLLing sessions to support empLoyees in managing their heaLth and finances better.

CAUTIONARY STATEMENT

Statements in this Management Discussion and AnaLysis and in the AnnuaL Report describing our objectives, projections, estimates, expectations, pLans or predictions and industry conditions or events are 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 our operations. These incLude economic conditions affecting demand and suppLy, government reguLations and taxation, naturaL caLamities and so on over which we do not exercise any direct controL.