Sical Logistics Ltd Management Discussions

Management Discussion and Analysis

Overview

Sical Logistics Limited ("Sical" or "the Company"), incorporated in 1955, has evolved over the years into a diversified logistics platform. Its services span overburden removal and coal transportation, integrated logistics, container freight operations, warehousing and distribution, dredging, and a range of value-added logistics solutions. Backed by its parent, Pristine Logistics & Infraprojects Limited, the Company benefits from financial strength, operational synergies, and an expanded customer network. Together, this positions Sical as a forward-looking, technology-enabled logistics services provider, capable of supporting Indias growing infrastructure, energy, and logistics needs.

Industry Structure and Developments

India remains one of the fastest-growing large economies, supported by favourable demographics, resilient consumption, and sustained infrastructure investments. Logistics lies at the heart of this expansion. According to industry estimates, Indias logistics sector is valued at USD 300-350 billion and is expected to grow at a CAGR of 7-8% over the next five years, aided by strong policy initiatives such as the PM Gati Shakti National Master Plan and the National Logistics Policy.

Coal continues to dominate Indias energy basket, contributing nearly 70% of electricity generation. In FY2025, Coal India Limited produced 838 million tonnes, while total domestic coal production crossed 1.0 billion tonnes, underlining the governments emphasis on self-reliance and import substitution. This directly supports demand for overburden removal and coal evacuation. Parallelly, Indias organised warehousing sector is expanding rapidly, with modern storage space expected to double by FY2030, driven by e-commerce, manufacturing, and consumption growth. Containerised trade has also remained robust, with throughput at major ports rising by 7% year-on-year in FY2025, underscoring the need for efficient container freight stations.

While this growth outlook is encouraging, the macroeconomic environment in FY2025 saw GDP growth moderating to 6.5%, due to softer industrial activity, elevated food inflation, widening trade imbalances, and muted private investment. Nonetheless, rising urbanisation, diversification of trade through free trade agreements, and continued government investment in infrastructure provide a resilient foundation for logistics demand.

Business Overview

Sical group operates as integrated logistics services company with offerings across mining logistics, coal transportation, container freight stations, warehousing and distribution, and dredging. While the Company has multiple service lines, its operations are managed and evaluated by the management as a unified business, in line with its integrated approach.

Segment-wise or product-wise performance

In FY2025, Sical group enhanced its execution momentum in mining logistics and coal transportation, supported by medium- and long-term contracts with public sector undertakings. Its container freight stations at Chennai, Tuticorin, and Visakhapatnam facilitated steady trade flows with efficient handling and strict regulatory compliance. Warehousing and distribution services benefitted from rising demand for organised storage solutions, while dredging services contributed to port and marine infrastructure development. Together, these activities reinforced Sicals reputation as a trusted and diversified logistics partner.

Opportunities

The Indian logistics industry is entering a phase of sustained expansion, offering multiple growth opportunities for Sical.

In mining logistics, with domestic coal production surpassing 1 billion tonnes in FY2025 and overburden removal requirements increasing in line with higher stripping ratios, the demand for integrated logistics solutions is expected to remain strong. The governments target of 1.5 billion tonnes of coal production by FY2030 provides long-term visibility for over burden removal and coal evacuation contracts.

Organised warehousing has grown at over 20% CAGR during the past five years and is projected to double by FY2030. Rising e-commerce penetration, higher consumption, and manufacturing expansion under "Make in India" are driving demand for warehousing facilities. This presents significant opportunity with the group to expand its warehousing and third-party logistics offerings.

Containerised trade also remains a key growth driver, with Indian ports handling over 11 million TEUs in FY2025. Increasing EXIM trade volumes and government initiatives to enhance port efficiency ensure strong demand for container freight stations. Recognition of the groups Chennai CFS as a top performer validates its ability to capitalise on this trend.

In South India, rail-linked terminals remain under-penetrated, presenting both challenges and opportunities. Sicals strategy is to develop efficient, customer-centric terminals supported by flexible, technology-enabled solutions tailored to regional demand. By focusing on service quality, operational efficiency, and integrated multimodal offerings, the Company aims to strengthen its competitive positioning even as government-supported multimodal logistics parks emerge as large-scale alternatives. Furthermore, digitalisation, automation, and ESG-compliance are becoming increasingly important differentiators in contract awards. With its technology-first approach and emphasis on sustainability, Sical is well positioned to protect and expand its market presence in this evolving landscape.

Threats

Despite favourable growth prospects, the industry continues to face structural threats.

Uncertainty in regulatory frameworks related to integrated logistics, port operations, and customs procedures may disrupt operations and increase compliance costs. Volatility in crude oil prices poses challenges to freight economics, as contractual escalation clauses may not always allow full or timely recovery, thereby impacting margins. Infrastructure and logistics projects remain prone to execution delays due to land acquisition hurdles, environmental clearances, and local-level disruptions, which can escalate costs and strain financial resources.

Competitive intensity is another concern, with aggressive bidding in large logistics contracts leading to margin pressures. Broader macroeconomic headwinds-such as slower industrial activity, inflationary spikes, or global trade disruptions-can reduce freight volumes, moderate container throughput, and temper warehousing demand, impacting industry participants including Sical.

Risks and Concerns

In addition to external threats, the Company faces business-specific risks that require active management.

Bidding risk is inherent, as most integrated logistics contracts are awarded through competitive tendering. Unsuccessful bids, cancellations, or disputes from rival bidders may impact the order book.

Operating cost risk arises from heavy dependence on diesel, power, and lubricants; this is mitigated through escalation clauses, preventive maintenance, and route optimisation.

In cargo handling and warehousing, maintaining high standards is critical, particularly for temperature-sensitive goods. Any breach may result in customer claims and reputational damage. Macroeconomic risks-such as inflation, rising interest rates, or volatile commodity prices-may reduce demand and compress margins.

Given that operations are largely concentrated in India, the Company remains exposed to regulatory and country risks from changes in taxation, labour codes, or government policies. In addition, global financial instability could indirectly impact trade flows, credit availability, and investor confidence in India.

The group addresses these risks through diversification of services and geographies, building strategic partnerships, maintaining a strong compliance framework, and adopting technology to improve resilience and efficiency.

Outlook

Indias logistics sector is at the cusp of transformation, driven by multimodal integration, digitisation, and sustainability. Sical, with its diversified portfolio, strong parentage, and integrated approach, is well positioned to capture these opportunities.

The Company will continue to focus on strengthening its presence in integrated mining logistics, expanding warehousing and distribution capacity, enhancing efficiency in container freight operations, and building resilience in dredging services. By pursuing disciplined bidding, embedding technology, and prioritising customer-centric service delivery, Sical aims to deliver sustainable growth and create long-term stakeholder value, even amidst external uncertainties.

Environmental, Health, Safety, Sustainability and Governance Initiatives

Policy Commitment

The Company has adopted a comprehensive Environmental, Sustainability, EHSQ, Human Rights and Security Policy that underscores its commitment to reducing environmental impact, conserving resources, fostering a strong safety culture, and promoting sustainability across its logistics operations. This policy has been implemented across all entities within the Sical Group of Companies.

Risk and Compliance Management

The Company undertakes systematic identification and evaluation of environmental risks arising from its logistics operations, including emissions, waste generation, and resource consumption. Environmental Impact Assessment and Control (EIAC) mechanisms have been implemented across operational sites. The EHS team implements safety plans, conducts inspections, and maintains documentation aligned with ISO 14001, ISO 9001, and ISO 45001 standards.

Internal Audits

Periodic internal audits are conducted to assess the effectiveness of the EHS management system, identify non-conformities, and drive continual improvement.

Emergency Preparedness and Response

The Company has established emergency response procedures, including identification of potential scenarios, preparation of response plans, periodic drills, and ensuring the availability of first aid and firefighting equipment at all terminals.

Training and Awareness

Sical places strong emphasis on building awareness and skills among employees, contractors, and partners. Training programmes include first aid, emergency response, safety inductions, electrical safety, fire safety, and mechanical safety. We have integrated Toolbox Talks (TBTs) into our EHS system to foster a proactive safety culture across its operations

Work Permit and Third-Party Inspections

A comprehensive Work Permit System (WPS) has been implemented to ensure safe execution of operations in compliance with ISO standards. Additionally, all lifting tools and tackles undergo certification by accredited third-party inspection agencies.

Fire Safety

The Company maintains a robust fire safety management system comprising firefighting equipment, fire hydrant systems, and emergency evacuation plans to safeguard employees, visitors, and assets.

Incident Management and Corrective Actions

Sical follows a structured approach to incident management. Incidents are investigated using Root Cause Analysis (RCA) and Fault Tree Analysis (FTA). Corrective and preventive actions are documented, implemented, and tracked to closure. A unique Incident Barcode System has been introduced for accurate tracking of incidents by location, equipment, and type.

Waste Management

The Company has established the following waste management practices across its facilities:

• Dedicated storage areas for safe and organized waste handling.

• Segregation of waste into hazardous and non-hazardous streams.

• Adoption of the 4Rs - Reuse, Reduce, Recover, and Recycle.

• Hazardous waste disposal through CPCB/SPCB-approved TSDFs or authorized recyclers.

• E-waste disposal through SPCB-approved vendors.

• Battery waste disposal in compliance with CPCB guidelines.

• Monthly tracking of waste volumes.

• Awareness and training for employees on source segregation and safe handling procedure.

Reward and Recognition (R&R) Programme

To promote a strong safety culture, the Company has implemented an R&R Programme encouraging proactive safety practices, safe behaviour and reinforcing positive behaviour.

Employee Well-Being and Health

The Company organizes periodic health check-up and eye check-up camps for employees and drivers, ensuring workplace health and wellness.

Security Management System

Companys Security Management System is aligned with global standards, including C-TPAT (Custom Trade Partner Against Terrorism) compliance. A comprehensive security policy has been developed for our operations, supported by M/s. SIS India Ltd at all major terminals. Key features of security management include business partner requirements, container security, physical access controls, personal and IT security, incident response, threat awareness, risk assessment and 24x7 CCTV monitoring control rooms.

Grievance Redressal Mechanism

The Company has established a functional grievance redressal mechanism supported by Standard Operating Procedure (SOP) to systematically and transparently address concerns, issues, and complaints from external stakeholders.

Diversity and Inclusion

Sical is committed to fostering a diverse, inclusive, and equitable workplace where individuals are respected and empowered, regardless of gender, ethnicity, age, ability, or background. The Company believes that diversity drives innovation, collaboration, and performance.

Human Rights

The Company upholds international standards of human rights, with policies and practices covering non-discrimination, prevention of sexual harassment, elimination of child labour, employee health and safety, supply chain due diligence, and accountability.

Supplier Code of Conduct

Sical has adopted a Supplier Code of Conduct to ensure that all suppliers and vendors adhere to ethical, legal, environmental, and social standards, thereby extending responsible practices across the supply chain.

Documentation and Recordkeeping

The Company maintains comprehensive EHS records, including manuals, procedures, risk assessments, training records, audit reports, incident logs, and management information systems, ensuring transparency and continuous improvement.

Internal Control Systems and their Adequacy

The Company considers internal controls a cornerstone of its corporate governance framework, with governance principles supporting robust control and audit mechanisms tailored to operational needs. These systems enhance compliance, improve efficiency, assess critical processes, and proactively mitigate risks, fostering accountability and control awareness across the organisation.

The Audit Committee, primarily comprising Independent Directors with relevant expertise, ensures adequate checks and balances for prompt issue identification.

The Company maintains full compliance with applicable laws through robust systems, continuous monitoring, and timely adaptation to regulatory changes. Compliance status is regularly reviewed, underscoring the Companys commitment to ethical conduct and regulatory integrity.

Financial and Operational Performance

During the financial year ended March 31, 2025, the Company reported a total standalone income of Rs. 5,104 lakhs. Profit Before Tax and Exceptional Items stood at Rs. (6,027) lakhs. The total comprehensive income for the year was Rs. (4,414) lakhs, while retained earnings as on March 31, 2025, stood at Rs. (1,95,580) lakhs, indicative of accumulated losses carried forward from previous years.

On a consolidated basis, the Company recorded a total income of Rs. 24,092 lakhs. Profit Before Tax and Exceptional Items was Rs. (4,040) lakhs. The total comprehensive income for the year stood at Rs. (2,593) lakhs, while retained earnings as on March 31, 2025, were Rs. (205,623) lakhs, reflecting the cumulative effect of past losses and the groups ongoing efforts to restore profitability.

Human Resources and Industrial Relations

At Sical, human capital is regarded as a strategic asset and a key driver of long-term business sustainability. The Company fosters a people-centric culture that emphasises performance, safety, inclusivity, and continuous learning across all levels of the organisation.

During the year under review, the Company maintained open and transparent communication with employees, fostering engagement, trust, and alignment with organisational objectives. Focused initiatives in training, skill enhancement, and workplace safety continued to strengthen employee capabilities and commitment.

Looking ahead, the Company remains committed to investing in talent development, enhancing diversity and inclusion, and building a high-performance culture that supports its growth aspirations and operational excellence.

Key financial ratios

Details of significant changes (i.e., a change of 25% or more as compared to the immediately previous financial year) in key financial ratios based on the standalone financial statements of the Company for the year ended March 31,2025, are provided below along with brief explanations:

The changes in these ratios reflect the financial performance and position of the Company during the year and are primarily driven by operational challenges, liquidity constraints, and restructuring efforts.

Ratio	Year ended March 31, 2025	Year ended March 31, 2024	Explanation for variations above 25%
Debtors Turnover	2.42	3.74	The movement is account of decrease in revenue from operations during the year.
Interest Coverage Ratio	0.62	0.46	The improvement is mainly due to higher operating profit before interest and tax in the current year compared to the previous year, despite continuing high finance costs.
Current Ratio	0.36	0.67	The negative movement is on account of entire liabilities to financial creditors being classified as current amounting to Rs. 26,078 lakhs.
Debt Equity Ratio	14.86	5.67	The movement is on account of reduction in shareholders equity due to losses in current year and marginal increase in the borrowings.
Operating Profit Margin (%)	0.25	0.22	Not applicable as the variation is below 25%
Net Profit Margin	(109.50%)	(69.40%)	The movement is account of decrease in revenue from operations during the year resulting in losses during the year.

Details of any change in return on net worth as compared to the previous financial year.

The Return on Net Worth has declined from (48.23%) as of March 31,2024, to (87.71%) as of March 31,2025. The variation of 81.87% is due to reduction in shareholders equity, consequent to the losses incurred during the current financial year.

Cautionary Statement

This report contains forward-looking statements concerning the future performance, operations, and strategic initiatives of the Company. These statements are based on current expectations, assumptions, and projections, and are subject to inherent risks and uncertainties. Actual results may differ materially from those expressed or implied due to factors such as economic conditions, regulatory changes, cost fluctuations, competitive pressures, or unforeseen events.

The Company makes no assurance that these expectations will be realised and disclaims any obligation to publicly update forward-looking statements, except as required by applicable law. Readers are therefore cautioned not to place undue reliance on such statements and should recognise that they involve known and unknown risks, uncertainties, and other factors beyond the Companys control.