Mahindra Logistics Navigates Q2 FY26 with Strategic Recalibration and Green Shoots

Mahindra Logistics Limited (MLL) has reported its Q2 FY26 performance, showcasing a period of significant transformation and strategic recalibration. The company achieved a consolidated revenue of INR 1,685.3 crores, marking an 11% year-on-year growth. Despite this top-line expansion, the company recorded a consolidated PAT loss of INR 10.4 crores for the quarter. Management emphasized a disciplined focus on operational execution, cost optimization, and site-level economics as key pillars for sustainable margin growth.

The quarter saw notable progress across various segments. The Express Logistics business, a key focus area for turnaround, achieved a significant milestone by becoming gross margin positive for the first time ever since its acquisition. This improvement was driven by enhanced operational discipline, cost efficiency, and a refined customer mix. The Contract Logistics segment continued its healthy year-on-year growth, supported by e-commerce and the M&M Auto and Farm businesses. Freight Forwarding volumes grew by 9% year-on-year despite global headwinds, while the Mobility segment saw a 16% revenue increase, bolstered by the launch of 'Alyte Prive,' a new premium B2C service. The Last Mile Delivery business, however, continued to face customer-driven pricing pressure, leading to strategic adjustments in customer mix.

Strategic Initiatives Drive Future Growth

MLL's strategic initiatives are central to its long-term profitability and resilience. A major focus has been on 'white space reduction' in warehousing, with the company successfully reducing over 20% of its white space in the last quarter. The ambitious target is to reduce white space cost by 95% by September 2026, retaining only a minimal portion for immediate customer needs. This is expected to significantly reduce rental costs and improve asset utilization. The company also announced an infusion of INR 50 crores of additional equity capital into MESPL to support the Express business's journey towards becoming EBITDA positive.

In terms of network expansion, MLL operationalized eight new projects across manufacturing and e-commerce, including a 3 lakh square foot facility in Nashik. Repeat expansion projects from key customers like Cummins, Bosch, Amazon, and Flipkart underscore the company's robust customer partnerships and strong execution capabilities. The company's commitment to sustainability is evident in its 'Carbon Neutral by 2040' goal, supported by initiatives such as a 1,500+ EV fleet, solar-powered warehouses, and extensive tree planting programs.

Financial Discipline and Outlook

A significant financial highlight of the quarter was the successful completion of the rights issue, which raised INR 749 crores. This enabled a substantial reduction in consolidated debt from INR 601 crores at the end of Q1 to INR 73 crores by the end of Q2, leading to projected interest cost savings of INR 40-45 crores per annum. This move has significantly strengthened the company's financial foundation, allowing a sharper focus on operational performance and long-term profitability. A one-time charge of INR 4.8 crores for doubtful debts, arising from a customer bankruptcy, impacted the reported PAT, but management clarified that excluding this, the underlying business performance improved sequentially.

Looking ahead, management's focus for the second half of the year remains on yield improvement, operational excellence, customer retention, and network optimization. The company anticipates that lease-related depreciation costs, largely due to Ind AS 116 accounting for warehouse space, have peaked and will remain stable in future quarters. There are no immediate plans for new 'build-to-suit' (BTS) space additions, with future expansion primarily driven by 'ready-to-move' (RTM) facilities to avoid long-term commitments.

Mahindra Logistics is clearly in a phase of strategic clarity and disciplined execution. By addressing operational inefficiencies, strengthening its balance sheet, and focusing on high-yield business, the company aims to solidify its position as a leading integrated logistics provider in India, delivering sustainable value to its stakeholders.