Operator: of Delhivery Limited, hosted by Ambit Capital. Before we start, Delhivery would like to point out that some of the statements made in today's call may be forward-looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. Kindly note that this call is meant for investors and analysts only. If there are representatives from the media, they are requested to kindly drop off this call immediately.
Operator: To discuss the result, we are pleased to welcome Sahil Barua, MD and CEO, Vani Venkatesh, Deputy CEO, Vivek Pabari, Chief Financial Officer, Varun Bakshi, Chief Sales Officer, and Navneet Kumar, Head of Supply Chain Services. As a reminder, all participants' line will be in listen mode only, and participants can use the hand raise feature to ask any questions post the opening remarks. Now I will invite Sahil Barua to take us through the highlights of the quarter, and post which we will open the floor for Q&A. Thanks, and over to you, Sahil.
Sahil Barua: Good evening, everyone. Thank you for joining us this Friday evening. Dhruv and Ambit team, thank you for hosting us tonight, today evening. As usual, quick summary of the quarter, and then we will jump straight to Q&A. Broad summary is it has been a very satisfactory quarter. As you are aware, Q1 was a slightly challenging quarter with the volatile macro environment. But Q2 has gone more or less to plan. We have had a record quarter in terms of volumes, revenues, and overall business profitability.
Sahil Barua: Our Express Parcel business delivered 325 million shipments in Q2 FY27, so we are up about 32% YoY. The PTL business delivered 545,000 metric tons of freight, up about 14.2% YoY. Overall revenue from services for the company crossed INR 3,000 crore for the first time at INR 3,066 crore for Q2 FY27, which is up 20% YoY.
Sahil Barua: Adjusted EBITDA came in at INR 123 crore, so 4% of revenues, with PAT of INR 41 crore. The company also continues to be extremely well capitalized with INR 4,676 crore of cash on the balance sheet. Many of the improvements that we have been driving over several quarters, which is in terms of managing capital intensity, improving net working capital position of the business, and also some of our sustained investments in new businesses and frontier areas in AI, engineering, and technology are also beginning to play out.
Sahil Barua: We have released most of this information as part of our shareholders letter, which is now publicly available. With that, I will pause here. Our presentation is also up, but happy to take questions as they come up. Dhruv, over to you.
Operator: Thanks, Sahil. As a reminder, anyone who wishes to ask a question may use the raise hand feature, and we will put you on. The first question is from Vijit Jain. Vijit, please go ahead.
Sahil Barua: Hey, Vijit.
Vijit Jain: Hi. Can you hear me?
Sahil Barua: Yeah.
Operator: Yeah, please go ahead.
Vijit Jain: Yeah, sorry. I was just congratulating you, but my question is on Express Parcel. You have said before that growth in 2027 would be in that 20% to 30% range, probably mid, even upper end of that. Sitting where you are right now, just wanted to know, are you closer to that upper end still? That is my first question, and I then wanted to follow up on a couple of things.
Sahil Barua: Vijit, why do not you go through with all your questions and I will take them all at the same time?
Vijit Jain: Yeah, sure. My second question was, your investments that you have mentioned here, shifting focus on more automation, AS/RS, et cetera. When you compare all of these new investment areas in core business, right, to things like 40-feet trucks and automated sorters that you have done before, those obviously paid off in pretty significant ways.
Vijit Jain: How does this compare in terms of potential scale? Similarly on the revenue side, I wanted to understand, if I look at some of these new initiatives, same day, next day expansion, Delhivery Direct, and financial services, so on, how would you scale them in terms of opportunity that you see in each of these? So those were my questions. Thank you.
Sahil Barua: Sure. Thanks, Vijit. Let me go through these as quickly as I can. Volumes, as you can see, have been growing over 30% YoY. As things stand, the month of October has also been a pretty good month for us, and we are ahead of where we actually expected to be as of this month. What is surprising, I had spoken about this in Q1, is that despite a fairly volatile macro environment, volumes have broadly held up.
Sahil Barua: As things stand, I do not really see any reason for us to revise our estimate of growth. In fact, we are at the moment beyond the upper end of the 20% to 30% that we had guided at the start of the year. So, it looks like we should easily be, the worst case sort of should be that we would be at the upper end of that.
Sahil Barua: I think it is going to turn out to be a reasonable year from a volume standpoint. But again, that said, frankly, US midterm elections are on Tuesday, so let us see how things go. To your second question, let me answer your third question first and then come to the second one, which was on automation, which is a slightly more nuanced question. On the revenue side, see, same day, next day Delhivery, I have spoken about this in the past.
Sahil Barua: Our volumes in this segment are actually pretty significant. The only reason we do not disclose or sort of talk about same-day, next-day beyond a certain point is because when you compare the same-day, next-day volumes to the overall massive scale that the business has, it does not look as large. But suffice to say, our same-day, next-day business is easily north of a couple of hundred crore in overall revenues.
Sahil Barua: What we do also is not just the pure transportation of same-day, next-day services. It is also sort of, in some senses, a part of our Supply Chain Services business, because we also provide integrated fulfillment solutions to vertical brands. So it is a pretty meaningful business overall, but, I am able to say, were we to split out this business, it would probably look like a 300, 400, 500 crore business, all things put together.
Sahil Barua: But we do not disclose it largely because it is, sort of, one, it is fundamentally running on the same network, and B, it is sort of a part of a much larger Express Parcel network. We will continue to invest in building out more of these Delhivery fulfillment centers. We have several across all of maybe the top 15 major cities. So continuing to expand that footprint, continuing to grow the client base over there is obviously a priority.
Sahil Barua: Coming to Delhivery Direct, there are two parts to this business. One is Delhivery Local, which is our in-city, on-demand commercial vehicle renting service. That has actually been a pretty big positive surprise. Our aim was to really get to maybe a sort of 240, 250 crore ARR by exit of this financial year. As things stand, we have already crossed 200 crore and are growing faster than we originally expected.
Sahil Barua: We are also ahead in terms of contribution margin compared to our original expectations. Our original expectations was that CM break-even would happen sort of earliest, maybe, sort of early/middle part of next financial year. But as things stand, it is looking more like CM break-even could happen as early as Q4 of this financial year. So, I am hopeful. We are in 8 cities now.
Sahil Barua: I am hopeful, as things continue, that we should cross even potentially a 270, 280 crore sort of run rate on this. How large could this business be? As I have mentioned before, it is very hard to say. The addressable market for in-city shipping using LCVs is very, very large. There are players in this space already. Porter is obviously a good example of a great company in this space.
Sahil Barua: So it does feel like the headroom for growth here is massive. We also do intercity Delhivery Direct, which is also now, and it is also focused on sort of non-e-commerce, but Express Parcel shippers. This business also is now slowly becoming quite material. It is accessed, obviously, again, through the Delhivery Direct application. And for SMEs, obviously, they use the Delhivery One application. These businesses also today are material businesses.
Sahil Barua: Delhivery Direct for consumers today, for example, is probably running at close to nearly INR 100 crore in maybe about 15 months of focused effort on the business. The international business also has picked up the Saver business that we had launched. We are today hitting probably close to a INR 140 crore sort of ARR in this business. It has actually grown 55% Q-o-Q between Q1 2027 and Q2 2027, and has also broken even at a service EBITDA level.
Sahil Barua: Both of these things have been pretty big positive surprises. Addressable market, again, for economy international shipping is pretty large. Our estimation is, over the next three or four-year period, the economy plus express shipping revenues for Delhivery could end up being a sort of low four-digit crores. This could be a 900-1,000 crore kind of opportunity for us, and a profitable one at that. That leaves us with financial services.
Sahil Barua: On financial services, I think it is better for me to comment once we have all our ducks in a row. A lot of this year has been spent on getting ourselves set up regulatorily to be able to expand this business. We are obviously in the business of eventually being able to extend through partners loans to fleet owners, who can then attach their vehicles into the Delhivery network.
Sahil Barua: Then obviously to launch that for electric vehicles, launch it for LCVs as well, and then also offer other financial products like insurance. Monetization has begun, but at this stage, it is sort of very, very, very early stage. So, it will be better positioned for us to comment end of this financial year. Coming to your second question, which was on automation. See, the tractor trailers and the sorters, I do want to point one thing out.
Sahil Barua: With the benefit of hindsight now, it feels like a lot of the market is looking at our investments in tractor trailers and sorters and saying, "Oh, yeah, these are now slam dunk investments that paid off." But it would be remiss of me to not point out that at the time that we began bringing tractor trailers into India, and similarly, nearly 12 years ago when we bought out practically all of India's sorter capacity, the collective reaction really was that this was an investment that did not make sense, and there was a lot of questioning about whether it would pay off at all.
Sahil Barua: Our view fundamentally on automation fundamentally now is that it is an existential question, because the reality is that the labor environment in India has been steadily becoming more volatile and more challenging. One of the reasons, obviously, is labor availability has been challenging. Seasonal fluctuations in labor availability are pretty large. The second issue is regulation for the workforce has changed quite a lot, and it is quite volatile overall.
Sahil Barua: Minimum wages keep getting revised. There is a whole bunch of compliance that keeps changing, and staying abreast of that obviously is challenging. The third reality is that the impact, it is something that is not spoken about much, but the impact of climate on labor availability and workforce productivity is pretty significant. When we do the math, our view is that Indian labor, when adjusted for productivity, is increasingly becoming uncompetitive, and therefore, as a consequence, the investment in automation is beginning to look better and better and better.
Sahil Barua: The other advantage, of course, is that the price of automation is sort of coming down, and for as people who have invested in this space for a very long period of time, we are also 40% shareholders in Falcon Autotech. We sort of understand how the cost curve for automation works, and we do believe we are at that cusp in terms of new robotic systems that we otherwise would simply have been unable to deploy maybe three or four years ago.
Sahil Barua: We have spoken about both self-developed autonomously guided vehicles for in-facility movements, but we have also begun to pilot and experiment with a number of other interesting robotic systems across our mid-mile operations. My sense is that the paybacks will easily match the payback periods that we are seeing for TTs, that we have seen in the past for TTs and for sorter systems.
Sahil Barua: On the software front, because that is also been one area where investments have been, we have spoken about this in the last four quarters, we have been spending on AI initiatives within the company. Four quarters back, a lot of this was really focused around the software development life cycle. It really was about how do we make our own technology teams more productive.
Sahil Barua: Today, with four quarters of sort of work behind us, we are beginning to finally sort of see fairly material improvements in service and cost outcomes through our AI initiatives. Whether it is a combination of reducing claims, which is one of the sort of more obvious use cases, or one of the less obvious ones, but that has worked out, is improving sales productivity, auto-generating beats.
Sahil Barua: The other one, of course, has been Delhivery maps, which, over the last two quarters, the sophistication it has reached is already saving us $1 million a year, compared to using sort of Google APIs. I think these initiatives are going to pay off even faster. When you look at our overall investments in engineering and technology, I think, one, these are existential and essential for any company that is serious about scaling. I think they will pay off exactly as fast, if not faster, than the TTs and the sorters.
Vijit Jain: Got it. Thank you so much, Sahil, for that answer. Just wanted to check, one question that comes up is, you guys have what are known as unbilled receivables, right? I know those numbers have been coming off. Your working capital improvement has been pretty sharp. In general, because you mentioned something along the lines of that in the letter, do you see more meaningful improvement there from these AI initiatives as well? Ability to kind of bring your unbilled receivables and the like to kind of zero?
