VRL Logistics: Navigating Growth with Strategic Efficiency in Q2 FY26

VRL Logistics Limited, a prominent player in India's logistics sector, has demonstrated a resilient performance in the second quarter and first half of fiscal year 2026. Despite facing an evolving market environment marked by changes in GST regulations and a strategic exit from low-margin contracts, the company reported stable financials and a clear path forward. The Q2 FY26 total income stood at INR 804 crores, broadly flat year-on-year, while the first half (H1 FY26) saw a 1% year-on-year growth in total income to INR 1555 crores. Notably, the net profit for H1 FY26 nearly doubled to INR 100 crores from INR 49 crores in H1 FY25, showcasing a significant improvement in profitability.

The company's core Less-Than-Truckload (LTL) segment continues to be the primary revenue driver, contributing approximately 88.9% of total revenues in H1 FY26, with the Full Truckload (FTL) segment accounting for 9.1% and other services making up the remaining 2.0%. This segment mix underscores VRL's focus on its core strengths. While tonnage experienced an 11% year-on-year decline in Q2 FY26, primarily due to the deliberate exit from less profitable business, it's encouraging to note a 4% sequential recovery in volumes, indicating improving demand and the return of previously lost customers. Realization per ton also saw a healthy increase, reaching INR 8,079 per ton in Q2 FY26, a 2.9% quarter-on-quarter and 11.6% year-on-year growth.

Strategic Pillars for Sustained Profitability

VRL Logistics' improved profitability is a direct result of its disciplined execution and strategic initiatives. The company's EBITDA margin stood robust at 19.7% in Q2 FY26, driven by enhanced realizations and stringent cost rationalization. Fuel cost, the largest expenditure component, was reduced from 28.6% to 25.6% of total income in Q2 FY26. This was achieved by increasing bulk procurement from refineries to 40.6% (from 35.5% in Q2 FY25), saving INR 7-8 per liter compared to retail prices. The company plans to further enhance this by adding 1-2 more own fuel pumps in Visakhapatnam and Chennai.

Operational efficiency has also been a key focus. Lorry hire charges declined from 5.7% to 4.4% of total income due to better fleet utilization and ongoing route optimization. The company is actively working on improving vehicle turnaround time, currently averaging 4-5 trips, with a potential for 5-6% improvement. Investments in owned infrastructure are also strategic; INR 23 crores were deployed in H1 FY26 to convert leased branches/hubs into owned facilities in key locations like Ernakulam, Salem, and Tumkur. An additional INR 130-140 crores is planned for land and building investments in H2 FY26, reinforcing the company's owned-asset model.

Expanding Reach and Future Outlook

VRL Logistics is committed to expanding its footprint and customer base. The company's pan-India network comprises 1,243 branches and 50 transshipment hubs across 24 states and 5 Union Territories. Management is focusing on acquiring high-quality profitable contracts and deepening regional presence, particularly in Eastern India. The strategy includes identifying new locations and adding franchises rather than solely company-owned branches in newer areas.

Looking ahead, management expects freight volumes to improve significantly in H2 FY26, supported by new customer additions and incremental volumes from existing customers. They project a 5-6% quarter-on-quarter volume growth in Q3 FY26 and 7-8% in Q4 FY26. For the full year FY26, while tonnage may see a 4-5% reduction, revenue growth is anticipated to be around 4%, with EBITDA margins maintained at approximately 19%. From FY27 onwards, the company expects to achieve 8-10% volume growth. This forward-looking guidance, coupled with a strong balance sheet and healthy cash flows, positions VRL Logistics for sustained growth and value creation for its shareholders.

Financial Health and Shareholder Value

The company's financial health is robust, with cash flow from operations improving significantly to INR 334 crores in H1 FY26 from INR 217 crores in H1 FY25. This strong cash generation has enabled VRL Logistics to maintain a conservative net debt-to-equity ratio, consistently below 0.4x, and reduce net debt to INR 304 crores as of September 2025 from INR 396 crores in March 2025. The company's disciplined working capital management is evident in its low receivable days of around 12 days and a provision for bad debt of just 0.02%, among the lowest in the Indian logistics industry. This strong financial foundation supports consistent shareholder returns through dividends and buybacks, demonstrating a resilient business model focused on long-term value.