VRL Logistics IPO: HDFC foresees road freight traffic growing faster due to rail capacity constraints

1. RETAIL RESEARCH
Background & Operations:
VRL Logistics Ltd (VRL) own and operates the largest fleet of commercial vehicles in the private
sector in India (as of May 2012) and is one of the leading pan-India surface logistics and parcel
delivery service providers. It provides general parcel and priority parcel delivery (less than
truckload services, “LTL”), courier and full-truckload (“FTL”) services through its widespread
transportation network in 28 States and four Union Territories across India. Its operational
infrastructure for the goods transportation business as of December 31, 2014 comprised 624
branches (comprising 604 leased branches and 20 owned branches) and 346 agencies across
India, and of such 624 branches, 48 (41 leased branches and seven owned branches) served as
strategic transshipment hubs for its operations. VRL’s goods transportation service business
serves a broad range of industries, including the fast moving consumer goods (FMCG) sector as
well as other industries including food, textiles, apparel, furniture, appliances, pharmaceutical
products, rubber, plastics, metal and metal products, wood, glass, automotive parts and
machinery.
VRL operates through a hub-and-spoke operating model which enables it to transport various
parcel sizes and provide customers with access to multiple destinations for booking and
delivery of goods. Its extensive network enables it to provide “last mile” connectivity to even
remote areas in India. This offers its customers a compelling value proposition. Large fleet,
most of which is o
enables it to serve a diverse mix of consignments.
VRL’s centralized information technology network connects all its branches, agencies,
transshipment hubs and other offices enabling seamless real time monitoring of its operations
and consignment bookings and delivery status. Its centralised accounting systems also enable
it to implement stringent financial controls. It also provides luxury bus services across the
States of Karnataka, Maharashtra, Goa, Andhra Pradesh, Telengana, Tamil Nadu, Gujarat and
Rajasthan. Its bus operations are focused on high density urban commuter cities such as
Bengaluru, Mumbai, Pune, Hyderabad and Panjim, and also connect tier-2 and tier-3 cities. The
wide range of passenger buses in fleet enables VRL to better serve the transportation
requirements of various customer segments. It also operates car carrier vehicles for
transportation of cars, vehicles for liquid transportation, as well as a courier service business
across the State of Karnataka. VRL also has minor business interests in wind power, air charter
services and hospitality.
services and hospitality.
Objects of Issue:
The objects of the Issue are
The Issue comprises of the Fresh Issue by the Company and an Offer for Sale by the Selling
Shareholder. The Company will not receive any proceeds from the Offer for Sale by the Selling
Shareholder and the proceeds received from the Offer for Sale will not form part of the Net
Proceeds. VRL proposes to utilise the funds which are being raised through the Fresh Issue,
after deducting the Issue related expenses to the extent payable by it towards funding the
following objects:-
Requirement of funds and Utilisation of Net Proceeds Rs in Million
Sr
No
Objects of the Fresh Issue Amount
1 Purchase of goods transportation vehicles 674.15
2 Repayment/pre-payment, in full or part, of certain borrowings availed by
Company
280.00
3 General Corporate Purposes *
Total *
RETAIL RESEARCH
VRL Logistics Ltd (VRL) – IPO
Note
April 11, 2015
Issue Snapshot:
Issue Open: April 15 – April 17, 2015
Price Band: Rs. 195 – 205
Issue Size: Rs. 450.45 – 467.4 Crs
Offer Size: Rs.117.0 cr (0.57 – 0.60 cr
fresh issues of equity shares) + offer for
sale of 1.71 cr equity shares
QIB upto 60% eq sh
Retail atleast 35% eq sh
Non Institutional atleast 15% eq sh
Face Value: Rs 10
Book value: Rs 39.38. (Dec 31, 2014)
Bid size: - 65 equity shares and in
multiples thereof
100% Book built Issue
Capital Structure: *
Pre Issue Equity: Rs. 85.53 cr
Post issue Equity: Rs. 91.24 cr
Listing: BSE & NSE
Lead Manager: ICICI Securities Ltd, HSBC
Securities and Capital Markets (India)
Private Limited
Registrar to issue: Karvy Computershare
Private Limited
Shareholding Pattern
Shareholding
Pattern
Pre issue
%
* Post issue
%
Promoters &
Promoter Group
77.21 69.60
Public (incl
institutions &
employees)
22.79 30.40
Total 100.0 100.0
(*=Assuming issue subscribed at higher band)

2. RETAIL RESEARCH
Competitive Strengths:
Pan-India surface logistics services provider and one of the largest distribution networks in India: VRL is a pan-India surface logistics
services provider and is one of the leaders in parcel delivery services across India. Its differentiated service offerings, large integrated hub-
and-spoke transportation network and extensive operational infrastructure, including advanced technology systems, has enabled it to
establish a leadership position in the surface logistics industry with a strong brand across India
Pan-India distribution network enables VRL to cater to a diverse mix of customers including corporate, small and medium enterprises
(“SMEs”), distributors and traders. Its large geographic coverage and operational network also ensures that consignments are spread across
various locations, and consequently any loss or damage to any consignment due to theft, fire, accidents, burglary or other such factors are
relatively low.
Integrated hub-and-spoke operating model ensuring efficient consignment distribution: Integrated and widespread hub-and-spoke network
of VRL enables effective consolidation and distribution of consignments of various sizes, supported by wide geographical presence across
India through branches and agencies. Its hub-and-spoke operating model enables it to transport various parcel sizes and provide customers
with access to multiple destinations for booking and delivery of goods, and provide “last mile” connectivity to even remote locations in India.
VRL’s ability to accommodate a wide range of parcel sizes, weights and types of freight, and transport multiple types of freight over multiple
destinations, enable it to meet all of its customers’ transportation needs and differentiate from competitors.
In-house software technology capabilities: VRL has invested significant manpower resources in its in-house software technology capabilities
and has developed scalable in-house technology systems and software. All its offices, transshipment hubs, branches and agencies are
connected to its central information technology network through an ERP system facilitating real time monitoring of operations and tracking
of consignment. In addition, it has introduced customized software alerts to track vehicle maintenance and optimize load planning. Its in-
house technology capabilities enable it to increase operating efficiencies, improve service quality and maintain stringent operational and
fiscal controls over branch and franchisee operations
Large fleet of owned vehicles ensuring reliable, quality services: As of December 31, 2014, VRL’s goods transportation fleet included 3,546
owned vehicles, of which 1,166 vehicles were less than five years, 2,375 were debt free and 1,235 were fully depreciated. As of December 31,
2014, it owned and operated 455 buses (including 53 staff buses), of which 399 were less than five years, 87 were debt free and six were fully
depreciated. The variety of goods transportation vehicles in its fleet enable to serve a diverse mix of consignments while its range of
passenger buses enable it to serve the transportation requirements of different customer segments. Its regular and periodic preventive
maintenance measures ensure longer vehicle life and provide a higher degree of performance reliability. In the passenger transportation
segment, this also enables it to develop a reputation as a passenger bus operator that provides a safe, on-time, modern and comfortable
travel experience
Dedicated in-house maintenance facilities and availability of spare parts and fuel: VRL has developed a comprehensive preventive in-house
maintenance program designed to increase the life of its vehicles. Servicing and maintenance operations are undertaken at its workshop
facility in Hubballi, Karnataka with several dedicated satellite workshops in strategic locations across India, including in Delhi, Ahmedabad,
Mumbai, Pune, Sholapur, Bengaluru, Salem, Perundurai, Chennai, Madurai, Mangalore, Kolkata, Vijayawada and Hyderabad.
VRL has also entered into spare parts supply arrangements with Ashok Leyland Limited and VE Commercial Vehicles Limited who have set up
dedicated outlets at its Hubballi facility which allows it to source spare parts at competitive rates and reduce procurement timelines. It also
operates two consumer diesel pumps located at Varur and Chitradurga in the State of Karnataka to ensure quality fuel supply and reduced
fuel costs. It also deploys staff at these designated pumps to supervise the refuelling procedure and this arrangement also enables to ensure
enroute compliances of its vehicles.
Dedicated in-house vehicle body design facilities VRL has also developed an in-house vehicle body designing facility at Hubballi, Karnataka
which is equipped to fabricate vehicles with lighter and longer bodies to carry higher payload, resulting in increased margins per vehicle.
Vehicle manufacturers supply chassis based on specifications provided by it and fabricate the bodies for vehicles specific to its requirements
using its in-house designing facility. VRL thereby reduce the overall weight of the vehicles, which enables to carry higher tonnage on the
vehicle without violating permissible payload limits.
Diversified customer base and revenue sources: VRL serves a diverse mix of end markets across several industry sectors. In its goods
transportation business, it serves a number of customers in the FMCG industry as well as in general commodities such as food, textiles,
apparel, furniture, appliances, pharmaceutical products, rubber, plastics, metal and metal products, wood, glass, automotive parts and
machinery. It has a large and diverse base of customers in its goods transportation business, developed around its hub-and spoke operating
model, and serve a diverse mix of end consumers in various industry verticals. In addition, its “paid” and “to pay” customers, primarily small

3. RETAIL RESEARCH
and medium enterprises, distributors and traders, represent a significant majority of its goods transportation revenues. Since it cater to a
diverse customer base, VRL has historically been able to pass a significant portion of increases in operating costs such as fuel prices, toll
charges and other operating expenses through periodic review and increase its base freight rates.
Ability to recruit and retain experienced and qualified drivers: VRL’s ability to recruit and retain experienced and qualified drivers is critical
to its operations. It has followed a strategy of recruiting drivers as full time employees with a defined salary structure, associated benefits
and attractive incentive schemes. Although it faces significant competition in recruiting drivers, it has historically been successful in attracting
and retaining a large pool of experienced and trained drivers.
Track record of growth and robust financial position: VRL strive to maintain a robust financial position with emphasis on having a strong
balance sheet and increased profitability. Its total revenue increased at a CAGR of 20.44% from Rs 7,146.13 million in fiscal 2010 to Rs
15,037.77 million in fiscal 2014, while its profit after taxation, as restated, increased at a CAGR of 18.75% from Rs 287.54 million in fiscal 2010
to Rs 571.76 million in fiscal 2014 As of December 31, 2014, its long term debt equity ratio was 1.09 times. Its fleet size for goods and
passenger transport business grew from 2,730 as of March 31, 2010 to 3,874 as of March 31, 2014: Strong balance sheet and positive
operating cash flows enables VRL to fund its strategic initiatives, pursue opportunities for growth and better manage unanticipated cash flow
variations.
Experienced and motivated management team VRL has been successful in attracting an experienced senior management team with
operational and technical capabilities, sales and marketing experience, and financial management skills. The industry experience of its senior
management team has enabled it to develop its large network of offices, branches, transshipment hubs and agencies, pan-India coverage,
and strong relationship with its drivers and other employees, as well as its agencies. Senior management team is sufficiently empowered in
order to decentralize operational decision making processes and address its business requirements.
Business Strategy:
Increase goods transportation network and fleet size: VRL continues to expand its pan-India network of branches and agencies for its goods
transportation business. It intends to add a significant number of branches in northern, central and eastern regions of India as well as
increase the depth of its existing network in key States. As part of its expansion strategy, VRL also intend to further expand its fleet of trucks.
Increase the proportion of owned transshipment hubs at strategic locations and expand transshipment hub Capacities: VRL intends to
expand its existing transshipment hub operations through significant addition of logistics and storage capacities. It also intends to increase
the proportion of owned transshipment hubs at strategic locations across India to ensure stability of its future operational network and
superior operational control. The availability of owned transshipment hubs will enable VRL to better plan future expansion of its operating
facilities and network.
Continue to improve operating efficiencies through technology enhancements: VRL continue to further develop its technology systems to
increase asset productivity, operating efficiencies and strengthen competitive position. VRL has invested significant resources, and intend to
further invest in its in-house technology capabilities to develop customized systems and processes to ensure effective management control.
VRL continues to focus on further strengthening its operational and fiscal controls and linking its operational processes to centralized ERP
system. It also continue to introduce integrated GPS tracking systems, introduce cost efficiencies through reduction of fuel pilferage, and
developing safety and value added services for its customers and intend to introduce preventive and predictive maintenance software linked
to its vehicles.
Focus on higher margin parcel delivery services: VRL continue to focus on further growing parcel delivery (comprising general parcel and
priority parcel delivery) business, complemented by FTL freight services. Parcel delivery services ensure a diversified customer base, higher
rates per load, and incremental revenues with superior margins. VRL continues to increase its market share of the parcel delivery business in
India through pan-India integrated network, providing wider geographic coverage, faster delivery schedules and reliable services at
competitive prices
Consolidate bus operations business: VRL intends to consolidate its bus operations business and focus on increased margins through optimal
route planning and maximising occupancy levels through increased direct marketing efforts as well as through its commission agents. The
proposed Transport Bill, which proposes a unified vehicle registration system and a simplified system of vehicular and transport permits, will
significantly improve operating efficiencies and reduce operational costs for its passenger transportation business by reducing various
operational hurdles relating to inter-State transportation of passengers, and simplifying the regulatory framework around vehicle permits
and driver licenses.

4. RETAIL RESEARCH
Enhance operational controls to ensure timely delivery and quality service: VRL continues to focus on enhancing operational controls and
cost efficiencies through optimal freight mix, cost management and increasing asset life through preventive and predictive maintenance
initiatives. It also continues to implement various measures aimed at incremental improvement in operational efficiencies, such as deploying
multiple drivers across long distances. It continues to implement security measures and timely service in its bus operations including close
circuit cameras on some of passenger buses. VRL also continues to adopt industry best practices and training for its employees.
Industry:
Transport Sector Growth
In recent years, the accessibility, door-to-door service and reliability have earned road transportation a higher share of both passenger and
freight traffic vis-à-vis other transport modes. As a result, road transportation has emerged as the dominant segment in India’s transportation
sector.
Both freight and passenger movements by road is expected to rapidly expand in the coming years. In particular, freight movement by road
transport is expected to show robust growth over the medium term due to a number of factors, which is, substantial investment in
improvement in national highway network which will facilitate speedy reliable, door to door services and rising volumes of exports and
imports. The major objective in the Twelfth Five Year Plan would be to augment the capacity of various modes of transport and set up an
infrastructure comparable with best in the world. In roads, apart from completing the various phases of national highways development
projects (NHDP) which are in progress, substantial progress would be made in development of expressway network to increase the mobility.
Standards of maintenance of national highways would be further strengthened and a network of six-lane roads augmented and significantly
increased.
The Domestic Freight Transportation Industry
Domestic freight transportation services involve the movement of goods within India. The modes of surface transport include roadways,
railways, coastal and pipelines. Demand for freight transportation services depends upon the size, structure and demographic profile of the
economy. Industrial and agricultural production, along with export-import trade primarily drives growth in the freight transportation
industry. Among modes, this industry is dominated by roads, followed by rail. Over the years, roadways have captured a very significant share
of freight on account of faster service and point-to-point connectivity. During the post reform period (1992-93 to 2004-05) volume of freight
carried by road grew at an annual average rate of 6.5% compared with a growth of 3.6% in rail freight. Over the years the modal split in
freight movement between rail and road has skewed in favour of road. The share of road transport in freight movement which was around
14% in 1950-51 has increased to around 61% while that of railways has fallen from more than four-fifth to less than two-fifth over the same
period.
Industry structure and participants
In India, freight is transported across the country mainly through roadways, railways, coastal means and pipelines. Demand for domestic
freight transport comes from industrial and agricultural goods along with export and import trade. These goods form the primary freight,
calculated in terms of billion tonnes per km (BTKM), which are then transported via road, railways, ships or pipelines. Supply side drivers
include, on road vehicle capacities, modal infrastructure which includes roads, rail, pipelines and coastal shipping; storage infrastructure and
increasing proliferation of the hub-and-spoke model. Another key driver for the supply of freight is the availability of allied infrastructure such
as warehousing, container freight stations, inland clearance depots, cold storage etc. Industrial goods and consumer products then form the
redistribution freight, which is transported from hubs to spokes in the hub and spoke model. Based on the framework, a relationship
between the estimated primary freight movement in the country and growth in industry and agricultural GDP has been econometrically
established.
In India, bulk of freight is transported through roads, whose share in total traffic is estimated to have risen by 8.5 per cent in the last decade
to about 63 per cent in 2013-14. The road freight transport segment is also deregulated and highly fragmented, with small operators having
over 65-70 per cent share. High fragmentation in the industry enhances competition, offering customers better bargaining power. The key
industry participants include the transport operators which are the trucking companies, and which solicit freight and convey it from one
location to another. The transport operators or freight transportation services providers can be broadly classified as small fleet operators
(SFOs) owning up to five vehicles, medium fleet operators (MFOs) owning between six to 20 vehicles and large fleet operators (LFOs) owning
typically over 20 vehicles.
Demand Drivers
Share of non-bulk traffic to increase over the next five years. Non-bulk traffic (mostly transported by road), is expected to grow at an 8 to 10
per cent CAGR during 2013-2014 to 2018-2019, as consumption demand improves, especially for consumer durables, pharmaceuticals and
automobiles. The share of the non-bulk segment in the overall primary freight traffic is thus expected to increase to 57 to 58 per cent by
2018-2019, from 47 to 48 per cent in 2008-2009.

5. RETAIL RESEARCH
Supply constraints faced by railways benefits road transportation. As rail capacity constraints are likely to continue, road freight operators are
in a better position to capitalize on incremental demand in the next 5 years. It is expected that the share of roads in the total freight to
increase to over 65 per cent in 2018-2019, from 63 per cent in 2014-2015, while the share of railways is likely to decline to 26.6 per cent in
2018-2019 from 27.6 per cent in 2014-2015
Outlook
While road freight traffic growth is expected to remain moderate in the short term, it is expected to grow at 8-9 per cent CAGR to about
2,200 BTKM in 2018-2019, from an estimated 1,500 BTKM in 2013-2014, driven by a revival in freight demand. A strong growth in non-bulk
transport by road and capacity constraints faced by the Railways will enable road freight traffic to grow faster
Key Concerns:
Inability to pass on any increase in operating expenses to customers may adversely affect business and results of operations: Fuel costs,
toll charges and rent represent some of most significant operating costs and an increase in such costs or inability to pass on such increases to
its customers will adversely affect results of operations. VRL’s business is characterised by high fixed costs, principally due to the ownership
of goods transportation vehicles and buses. In addition, the GoI has recently deregulated diesel prices in India removing certain subsidies on
diesel prices, and the price of diesel and consequently its fuel cost, have fluctuated significantly in recent periods
Success depends on ability to generate sufficient freight volumes and passenger occupancy: Business of VRL is dependent on the availability
of sufficient freight volumes and passenger occupancy to achieve acceptable margins or avoid losses The high fixed costs that are typical in
business do not vary significantly with variations in freight volumes or the number of passengers carried, and a relatively small change in
freight volumes, passenger occupancy, freight rates or the price paid per ticket can have a significant effect on its results of operations.
Inability to attract, recruit and retain a sufficient number of qualified and experienced drivers may adversely affect business, results of
operations and financial condition: VRL’s goods transportation business and bus operations are significantly dependent on ability to attract,
recruit and retain a sufficient number of qualified and experienced drivers. A shortage of qualified drivers in the transportation industry could
force it to either further increase driver compensation, which could reduce profit margins or hire third-party owned trucks, which may not be
available at commercially viable rates or at all. Therefore, if VRL is unable to attract and retain a sufficient number of qualified drivers, it could
be forced to increase its reliance on hired transportation, decrease the number of pickups and deliveries it is able to make, increase the
number of its idle vehicles or limit its growth, any or all of which could have a material adverse effect on business, results of operations and
financial condition.
Business is dependent on the road network and ability to utilize vehicles: VRL’s business operations in the goods transportation business
and bus operations are dependent on the road network. There are various factors which affect road transport such as political unrest, bad
weather conditions, natural calamities, regional disturbances, fatigue or exhaustion of drivers, improper conduct of the drivers/ motormen,
accidents or mishaps and third party negligence. Although, some of these risks are beyond control, VRL may still be liable for the condition of
such cargo and their timely delivery and any disruptions or delays could adversely affect it and lead to a loss of reputation and/or
profitability. In addition, any prolonged or significant downtime of its transportation vehicles or related equipment caused by unforeseen
circumstances may cause major disruptions to its operations
Any interruption of operations at Hubballi facility may adversely affect business and results of operations. VRL’s Hubballi facility in
Karnataka includes a vehicle maintenance facility in addition to serving as a centralised hub for its operations. The operations at this facility is
subject to compliance with applicable regulatory requirements, and further subject to various operating risks, such as the breakdown or
failure of equipment, power supply or processes, natural disasters, and accidents. Any interruption of VRL’s operations at its Hubballi facility
could significantly reduce its ability to perform maintenance related activities for its vehicles, such as preventive and routine maintenance
and tyre repairing.
Dependent on various third parties for the adequate and timely supply of equipment and maintenance of vehicles,: VRL is dependent upon
certain key suppliers and vendors for its vehicles and equipment including its goods transportations vehicles, trucks, buses, tyres, materials
required to design and build bodies for its vehicles, and associated equipment and spare parts. There can be no assurance that such suppliers
will continue to supply such vehicles, equipment, spares, tyres or other materials in quantities or prices that are commercially acceptable or
at all. Events beyond VRL’s control may have an adverse effect on the cost or availability of raw materials, components and spare parts. In
addition, it has entered into certain arrangements with Ashok Leyland and VE Commercial Vehicles Limited pursuant to which they have
established supply units within its Hubballi facility for the storage and supply of spare parts for its vehicles acquired from them. In the event
Ashok Leyland and/or VE Commercial Vehicles Limited or any other significant supplier discontinue its existing arrangements with such

6. RETAIL RESEARCH
supplier, there can be no assurance that it would be able to procure similar quality vehicles, chassis, equipment, spares and other materials
from a comparable supplier at commercially acceptable rates or at all.
The construction or expansion of transshipment hub and branch network may be delayed or affected by various other factors. As of
December 31, 2014, VRL had 48 strategically located transshipment hubs across India, of which seven were situated on land owned by it. It
intends to expand its existing transshipment hub operations through significant addition of logistics and storage capacities. It also intends to
increase the proportion of owned transshipment hubs at strategic locations across India to ensure stability of its future operational network
In addition; expansion of its operations into other regions of India will require the commitment of additional personnel and/or equipment
and vehicles, as well as management resources. An inability to complete additional transshipment hubs and branches or expand existing ones
within the anticipated time frame and budget may have a material adverse effect on its business prospects and expansion strategy.
Claims relating to loss or damage to cargo, personal injury claims or other operating risks that are not adequately insured may adversely
affect business, results of operations and financial condition Business of VRL is subject to various risks inherent in the goods and passenger
transportation industry, including potential liability to its customers which could result from, among other circumstances, personal injury to
passengers or damage to property arising from accidents or incidents involving vehicles operated by it. In its goods transportation business, it
may be exposed to claims related to cargo loss, theft and damage, property and casualty losses and general liability from its customers. It
typically do not secure insurance coverage for the goods transported by it.
Furthermore, any accident or incident involving its vehicles, even if VRL is fully insured or held not to be liable, could negatively affect its
reputation among customers and the public, thereby making it more difficult for it to compete effectively, and could significantly affect the
cost and availability of insurance in the future. To the extent that any such uninsured risks materialize, its business, results of operations and
financial condition may be materially and adversely affected.
Indebtedness and the conditions and restrictions imposed by financing agreements could adversely affect ability to conduct business and
operations. As of December 31, 2014 VRL has secured long term borrowings aggregating to Rs 2,131.30 million (excluding current maturities)
and short term borrowings aggregating to Rs 1,044.83 million. As of December 31, 2014, its long term borrowings (including current
maturities) was Rs 3,670.16 million and its long term debt-to-equity ratio was 1.09 times. Its return on net-worth percentage was 18.65% in
fiscal 2014 and 21.29% in the nine months ended December 31, 2014. In addition, it may incur additional indebtedness in the future.
There can be no assurance that VRL has requested or received all relevant consents from its lenders as contemplated under its financing
arrangements. Any failure to comply with the requirement to obtain a consent, or other condition or covenant under its financing
agreements that is not waived by its lenders or is not otherwise cured by it, may lead to a termination of its credit facilities, acceleration of all
amounts due under such facilities and trigger cross default provisions under certain of its other financing agreements, and may materially and
adversely affect its ability to conduct its business and operations or implement business plans
Disruptions or failures in information technology systems may affect operations: VRL’s business is significantly dependent on the efficient
and uninterrupted operation of its information technology infrastructure that connects its various branches and transshipment hubs across
India. It is dependent on its in house technologies and processes for a number of functions, including financial and operational controls,
vehicle maintenance, and tracking of consignments. In the event of a significant system failure, its business could experience significant
disruption which could have a material adverse effect on its business, results of operations and financial condition.
VRL operates in a highly competitive industry: VRL operates in a very competitive industry, dominated by a large number of unorganized
players. Increased competition may lead to revenue reductions, reduced profit margins, or a loss of market share, any of which could
adversely affect its business and results of operations If VRL is unable to effectively compete with other participants in the goods and
passenger transport industry, whether on the basis of pricing, services or otherwise, it may be unable to retain existing customers or attract
new customers, which could have a material adverse effect on its business, results of operations and financial condition
Significantly dependent on agencies for procuring business A significant part of VRL’s revenues are generated through its agency network
across India. It is dependent on its agents for various critical elements of business, including consignment booking and marketing activities. It
also typically receive financial guarantees from agents and in case it is unable to procure the same from them in case of default it may be at a
disadvantage and its results of operations may be adversely affected. The loss of some of its key agencies or a significant decrease in volume
generated by its larger agencies could have a material adverse effect on its results of operation and financial condition.
Inability to manage or maintain growth could disrupt business and reduce profitability: Business and operations of VRL has experienced
significant growth in recent years it has also expanded its large pan-India network of transshipment hubs and branches in recent years to 624
branches for goods transportation business as of December 31, 2014. A principal component of its strategy is to continue to grow by

7. RETAIL RESEARCH
expanding the size and geographical scope of its businesses. This growth strategy will place significant demands on its management, financial
and other resources. An inability to successfully manage its growth may have a material and adverse effect on business, results of operations
and financial condition
The increase in the age of vehicles and an increase in the prices of new vehicles may adversely affect business and results of operations. As
of December 31, 2014, 67.12% of VRL’s owned goods transportation vehicles and 12.31% of its bus fleet were over five years. As the age of its
fleet increases, it expects maintenance costs related to its fleet to also increase. VRL may also acquire new vehicles to expand its business or
to manage operational efficiencies and reduce cost of maintenance. If the price of new goods transportation vehicles and passenger buses
increase, it will also incur increased depreciation expenses which may adversely affect results of operations.
Any delay or non-payment by customers may adversely affect results of operations. VRL has a large and diverse base of customers in its
goods transportation business, developed around its hub-and spoke operating model, and serve a diverse mix of end consumers in various
industry verticals. A significant percentage of its customers, many of who are either SMEs, distributors or traders or in the unorganized
sector, follow the “To Pay” payment option, in which the customer does not pay the charges at the time of booking but the person to whom
the goods are to be delivered (i.e. consignee) is required to pay its freight upon collection of the goods Although historically the amount of
non-payment by its customers have not been significant, there can be no assurance that there will not be any significant payment defaults by
its customers in the future, which could affect business, results of operations and financial condition
The decrease in or elimination of government initiatives and incentives relating to renewable energy sources and in particular to wind
energy, may have an adverse effect on the demand for wind power.
Political, economic or other factors that are beyond its control may have an adverse impact on its business and results of operations. VRL’s
performance and growth are dependent on the health of the Indian economy. Any slowdown in the Indian economy could materially and
adversely impact its business, its results of operations and its financial condition.
Profit &Loss: Rs in Million
Particulars 9MFY15 FY14 FY13 FY12
Net Sales 12738.1 14937.8 13255.0 11303.8
Other Income 55.7 99.9 98.3 49.0
Total Income 12793.8 15037.8 13353.2 11352.8
Total Expenditure 10598.9 12872.1 11302.8 9384.7
Operating Expenses 8990.7 10911.7 9626.5 7911.2
Employee Expenses 1456.8 1744.6 1482.6 1289.2
Other Expenses 151.4 215.8 193.7 184.4
PBIDT 2194.9 2165.7 2050.5 1968.0
Interest 449.9 599.1 591.2 651.4
PBDT 1745.0 1566.6 1459.3 1316.6
Depreciation 691.8 866.2 823.4 696.0
PBT 1053.3 700.4 635.9 620.6
Tax (incl. DT & FBT) 336.4 195.0 178.9 -146.6
Tax 332.3 137.4 95.3 84.0
Deferred Tax 4.1 57.6 83.5 -230.5
Reported Profit After Tax 716.9 505.4 457.0 767.2
Extra-ordinary Items/ Minority Interest 0.0 -66.4 0.0 0.0
Adj. Profit After Extra-ord. item 716.9 571.8 457.0 767.2
EPS (Rs.) 8.4 6.7 0.3 10.9
Equity 855.4 855.4 1811.7 707.0
Face Value 10.0 10.0 1.0 10.0
OPM (%) 16.8 13.8 14.7 17.0
PATM (%) 5.6 3.8 3.4 6.8
Operating Profit 2139.2 2065.8 1952.2 1919.1
Material Cost 8990.7 10911.7 9626.5 7911.2
Material Cost / Net Sales 70.6 73.0 72.6 70.0
Employee Cost / Net Sales 11.4 11.7 11.2 11.4
Other Expenses / Net Sales 1.2 1.4 1.5 1.6
Tax Rate on PBT 31.9 27.8 28.1 -23.6

8. RETAIL RESEARCH
Balance Sheet: Rs in Million
Balance Sheet
YE March(Rs. Mn.) 9MFY15 FY14 FY13 FY12
Equity & Liabilities
Shareholders Funds 3368.1 3065.5 2894.0 1873.2
Share Capital 855.4 855.4 1811.7 707.0
Reserves & Surplus 2512.8 2210.1 1082.3 1166.2
Non-Current Liabilities 3101.1 3477.5 3743.4 4827.4
Long Term borrowings 2131.3 2528.8 2851.6 4035.1
Deferred Tax Liabilities (Net) 832.3 833.6 776.0 692.5
Other Long Term Liabilities 88.7 88.7 86.6 78.3
Long Term Provisions 48.9 26.4 29.1 21.6
Current Liabilities 3259.7 3236.3 3014.5 2622.7
Short Term Borrowings 1044.8 1094.3 938.4 729.0
Trade Payables 63.7 93.1 50.2 55.6
Other Current Liabilities 2053.9 1825.3 1655.1 1760.9
Short Term Provisions 97.3 223.7 370.8 77.2
Total Equity & Liabilities 9729.0 9779.3 9651.8 9323.3
Assets
Non-Current Assets 7936.9 8480.0 8217.8 7976.1
Fixed Assets 7092.7 7544.8 7244.0 7047.2
Tangibles Assets 6937.5 7393.6 7100.9 6942.0
Intangible Assets 8.1 9.7 2.0 3.8
Capital Work-in-Progress 146.1 140.4 140.3 100.2
Non Current Investments 1.1 1.1 0.8 1.3
Long -term Loans and Advances 818.8 910.0 966.6 916.7
Other Non-Current Assets 25.4 25.2 7.2 12.3
Current Assets 1792.1 1299.3 1434.0 1347.2
Inventories 166.9 134.8 96.8 87.3
Trade Receivables 883.3 799.6 853.9 785.2
Cash & Cash Equivalents 129.9 150.9 154.4 136.0
Short Term Loans & Advances 258.9 198.1 185.5 151.5
Other Current Assets 353.1 16.0 143.4 187.2
Total Assets 9729.0 9779.3 9651.8 9323.3
RETAIL RESEARCH Fax: (022) 30753435 Corporate Office
HDFC Securities Limited, I Think Techno Campus, Bulding –B, ”Alpha”, Office Floor 8, Near Kanjurmarg Station Opp. Crompton Greaves, Kanjurmarg (East),
Mumbai 400 042 Fax: (022) 30753435 Website: www.hdfcsec.com
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