Shares of VRL Logistics Ltd gained over 6 percent on May 22 after the company reported a threefold surge in net profit for the March quarter.
The stock hit a high of Rs 707.80 on the BSE in the early hours of trading. At 1.06pm, the scrip was quoting Rs 698, up 6.2 percent from its previous close, while the benchmark Sensex climbed 0.24 percent to 61,879 points.
VRL Logistics reported a 244 percent surge in net profit to Rs 193.18 crore for the March quarter compared with Rs 56.19 crore for the same quarter in the previous year. Total income of the company advanced 17.04 percent to Rs 702.88 crore for Q4FY23 versus Rs 600.55 crore a year ago.
Goods transport (GT) revenue for the fiscal jumped 22 percent, while for the quarter it rose 17 percent. This growth can be attributed to strategic planning, the addition of new branches and customers, and a strong economic revival, leading to increased demand from MSMEs and corporates.
The board approved a dividend of Rs 5 each for the fiscal 2023 and also gave the in-principle approval to slump sale of its transportation of passengers by air business. This slump sale is subject to receipt of all applicable clearances and approvals from the concerned regulatory authorities.
The firm made a few strategies for its business which involved maintaining focus on higher-margin GT business, expanding geographic presence in untapped markets, prioritising volume growth, adjusting freight rates as necessary, and successfully executing planned fleet additions.
Following the recent sale of its bus business, VRL has transformed into a pure-play goods transport (GT) player that focuses on the highly profitable less-than-truckload (LTL) segment. VRL's goods transport segment's tonnage growth is expected to be driven by multiple factors. The addition of new branches (184 new branches added in FY23) will contribute to tonnage growth, particularly in new geographies.
Analysts expect there will be an increase in the number of customers as there is a growing need for a pan-India service provider, which will contribute to tonnage growth. Additionally, VRL is likely to gain market share from smaller unorganized competitors due to increasing compliance requirements.
The firm sold its bus segment business last year while its wind segment sale was done in the last quarter. Analysts believe the sale of the bus segment and the wind segment would be positive for VRL. "It would be able to better focus on the high growth GT business. Also, the cash accruing to VRL with this sale (Rs200 crore post tax) would be used to partially fund the capex of truck fleet addition," Motilal Oswal Securities said in its latest report.
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