VRL Logistics is an Indian logistics company headquartered in Karnataka. It has the largest fleet of commercial vehicles in India's private sector. This proposal analyzes VRL's corporate governance, social obligations, costs of equity and debt, weighted average cost of capital (WACC), and capital structure over the past 5 years. It finds that VRL has decreased its debt-equity ratio over time from 1.2 in 2014-15 to 0.2 in 2018-19 by taking on less debt and relying more on equity financing. This provides advantages like lower financial risk and interest costs but also disadvantages like lower returns from financial leverage. The WACC is calculated to be 3.29% based on current capital weights

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CORPORATE FINANCE PROJECT PROPOSAL
PRIVATE TRANSPORT SECTOR
VRL LOGISTICS LIMITED
Group 7:
NidhiAgarwal – 19DM123
Adarsh NJ – 19DM015
Gurpreet Singh Sethi – 19DM075
ManikandanBalaji – 19DM101
Archika Singh – 19DM047
Altamash Hasan – 19DM027

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TABLE OF CONTENTS
S.no PARTICULARS PAGE NO.
1 Introduction 3
2 CorporateGovernance 4-6
3 Social Obligation and Image 6-8
4 Cost of Equity, Cost of Debt 9-10
5 WACC 11
6 Capital structure 11-13
7 Reward to Shareholders 14
8 Conclusion 15

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INTRODUCTION
VRL Logistics Limited, previously known as Vijayanand Roadlines Ltd. is an Indian corporation
which is headquartered in the district of Hubballi in Karnataka. The corporate have operations
in and around 22 states and 5 union territories across India. The company is also known to be
the largest fleet owner of commercial vehicles in India’s private sector. The major business that
VRL logistics are into are logistics and travels. Some of the other businesses that the
organization owns are the Vijayavani Newspaper business and Aviation logistics.
The logistics division of the company with its huge fleet of 4473 goods transporting vehicles
helps in transporting consignments of various size and weights across the country and the
travels division have around 362 passenger transport vehicles enables a huge lot of people in
travelling from one place to another. The logistics division handles around 216 million cargos
per year making it one of the largest in the country. While the VRL Travels is having more than
80 branches with well over 1000+ agents making it the largest travels in Karnataka and
Maharashtra. VRL travels have around 350 routes in total and it does its working in 6 states
predominantly in South India.
CORPORATE GOVERNANCE
Corporate Governance structureinVRL Logistics Ltd.:
By corporate governance we mean the way in which a firm or a company is directed and
controlled. It consists of a system of rules, practices and processes to govern a company. The
board of directors and various concerned committees exerts corporate governance for the
company’s stakeholder’s benefits.
The Company’s philosophy on Corporate Governance has been developed with a tradition of
fair and transparent governance. Transparency, integrity, professionalism and accountability

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based values form the basis of the Company’s philosophy for Corporate Governance and the
continued application of these principles to the business practices has led to the growth of the
Company over the years. The Company firmly believes that corporate governance is beyond
financial results and is a pre-requisite to the attainment of excellent performance in terms of
stakeholders’ long term value creation. The Company believes Corporate Governance is an
ethically driven business process that is committed to values, aimed at enhancing an
organization’s brand and reputation. Hence, it is imperative to establish, adopt and follow best
corporate governance practices, there by facilitating effective management and carrying out
our business by setting principles, benchmarks and systems to be followed by the Board of
Directors (the “Board”), Management and all Employees in their dealings with Customers,
Stakeholders and Society at large.
MANAGEMENT- BOARD OF DIRECTORS:
NAME OF THE DIRECTOR CATEGORY
Dr. VijaySankeshwar Executive Director- ChairmanandManaging
Director
Mr. Anand Sankeshwar Executive Director- ManagingDirector
Mr. K N Umesh Executive Director- Whole time director
Mr. L R Bhat Executive Director- Whole time director
Mr. C Karunakara Shetty IndependentDirector
Dr. Prabhakar Kore IndependentDirector
Mr. J S Korlahalli IndependentDirector
Mr. Shankarasa Ladwa IndependentDirector
Mrs. Medha Pawar IndependentDirector
Dr. Anand Pandurangi IndependentDirector
Dr. Ashok Shettar Non-Executive Director
Dr. Raghottam Akamanchi Non-Executive Director
Mrs.Smriti Bellad$ IndependentDirector

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DIFFERENCEBETWEEN CONTROLLING GROUP AND OWNERSHIP:
The governance structure of the company is differentiating between two groups- controlling
and ownership. In large companies, Board of Directors is appointed to look into the affairs of
company. It is not necessary for the owners of company to be part of the Board of Directors.
VRL Logistics “Promotors” shares comprise of 68.05% out of the total equity shares. Board of
Directors consists of various renowned individuals who do not belong to the category of
Promoter Group. They have been appointed to look into the affairs of company and control
them. Mr. Anand Vijay Sankeshwar holds 34.61% of equity shares which is less than 51% and
hence, there is no controlling pattern seen in it. Thus it can be said that VRL LOGISTICS
differentiates between controlling group and ownership.
FIRM’S INTERACTION WITH FINANCIAL MARKET:
How does this firm interact with financial markets? How do markets get information on the
firm?
Firms interact with financial market through securities like shares and debentures. The Company’s
shares are compulsorily traded in dematerialized form and are available for trading with both the
depositories i.e. NSDL and CDSL. The shareholders can hold the Company’s shares with any of the DP,
registeredwiththesedepositories.The equitysharesandunsecured,redeemable,non-convertible,fully
paid up debentures are presently listed at the following stock exchanges.
1. BSE Limited (BSE)
2. The National Stock Exchange of India Limited (NSE)
Market gets information about the firms through various platforms.
 Financial Results
 Website of the company
 Investors’ Presentation
 Annual Report
 NSE Electronic Application Processing System (NEAPS)
 BSE Listing Centre
 SEBI Complaints Redress System (SCORES)

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SHAREHOLDING PATTERN: (INSIDERS, INSTITUTIONAL AND INDIVIDUALS)
DESCRIPTION AS ON 31ST MARCH 2019
TOTAL SHARES TOTAL %
PROMOTORS 61,480,000 68.05
MUTUAL FUNDS 17,510,393 19.38
FII 5,302,942 5.87
FPI 38,864 0.04
RESIDENT INDIVIDUALS 4,325,568 4.79
BODIES CORPORATE 871,253 0.96
HUF 272,563 0.30
NON RESIDENT INDIANS 307,942 0.34
CLEARING MEMBERS 28,577 0.03
INDIAN FIN INST. 25,730 0.03
BANKS 14,583 0.02
NBFC 24,040 0.03
TRUSTS 365 0.00
ALTERNATIVE INV. FUNDS 140,675 0.16
SOCIAL OBLIGATION AND SOCIAL IMAGE:
A) CONSERVATION OF ENERGY
I) Steps taken by the Company or impact on conservation of energy
1. They have increased the installation of solar panel across their branches and now a total of 85
branches are fitted with solar panels.
2. They have added 8 new electric forklifts at various transshipment hubs across the country.

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3. LED lighting is being predominantly used across a majority of the offices of the Company. Also,
preference is being given for the procurement of energy efficient equipment for new equipment
additions as also for replacement of existing equipment.
4. The 100 KW capacity solar facility installed at their Bengaluru transshipment hub has been
operationalizedduringthe yearandthe same has resultedinsignificantreduction of outside power for
the hub operations.
5. Instead using UPS and battery for operation of electronic equipment at branches, they have
developedanin-houseDC converter device for usage on this equipment. Usage of the same has been
regularized at their branches across the country.
II) The steps taken by the Company for utilizing alternate sources of Energy
The Companyhad pioneeredthe usage of bio-diesel onitsfleetof trucksandbuses.The same had given
goodresultsandhas alsoresultedincostsavings.Effortsandin-house studies are on to ascertain ways
of overcoming the shortcomings of this alternative fuel for an all-year-round operation. Continued
availabilityof bio-diesel supply also emerged as a big challenge and efforts are on to identify reliable
suppliers for the same.
III) The capital investment energy conservation equipment
On an average,a sum of around `70,000 per KW is spent on the solar branch lighting equipment which
is being presently installed across select branch offices of the Company.
B) CSR ACTIVITIES:
While the Companyiseligibletoundertake any suitable/rightful activity as specified in Schedule VII of
the Act and it proposesto undertake all the relevant activities on priority basis in the following Thrust
Areas:
1. Community healthcare, sanitation and hygiene, including, but not limited to:
(1) Establishment and management of state‐of‐the‐art healthcare infrastructure with high level of
excellence.
(2) Providingfinancial and/or other assistance to the Agencies involved in exclusive medical research,
public health, nursing etc.

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(3) Providingfinancial assistance todeserving people for specialized medical treatment in any medical
institution.
(4) Activities concerning or promoting:
a. General health care including preventive health care
b. Safe motherhood
c. Child survival support programs
d. Health / medical camps
e. Better hygiene and sanitation
f. Adequate and potable water supply, etc.
2. Education and knowledge enhancement, including, but not limited to:
(1) Establishmentandmanagementof educational andknowledge enhancement infrastructure such as
providing books, hostel facility to the poor students etc.
(2) Providing financial and/or other assistance to the needy and/or deserving students.
(3) Providing financial assistance to any Agency involved in education, knowledge enhancement and
sports.
(4) Facilitate enhancement of knowledge and innovation in the educational Agencies.
(5) Publishbooks,pamphlets,periodicalsandnewspapersforthe spreadandadvancementof education
and culture.
3. Social care and concern, including, but not limited to:
(1) Creating Public awareness
(2) Protection and upgradation of environment including ensuring ecological balance and related
activities.
(3) Rural development projects such as strengthening rural areas by improving accessibility, housing,
drinking water, sanitation, power and livelihoods.
(4) Undertake slum area development
(5) Others:
a. Establishment and management of orphanages, old age homes, Sanatoriums, Dharmashalas and
institutions of similar nature.

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b. Providingassistance toinstitutesof credibilityinvolvedinareasof social care,including:·Preservation
of heritage · Animal welfare, social welfare and related matters · Promoting gender equality and ·
Women empowerment
c. Other humanitarian activities.
Cost of equity
Cost of Equity is the rate of return a shareholder requires for investing equity into a business.
The Rate of return and investor requires is based on the level of risk associated with the
investment, which is measured as the historical volatility of returns. The measure of risk is
denoted by beta. We used the same to compute the cost of equity for VRL logistics Ltd. by
Capital Asset Pricing Model (CAPM).
The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and
expected return for assets, particularly stocks. CAPM is widely used throughout finance for
pricing risky securities and generating expected returns for assets given the risk of those assets
and cost of capital.
Cost of Equity (using CAPM)
RFR 6.50%
Beta 0.29
Market Rate of Return for Equity 10.58%
Cost of Equity (using CAPM) =6.50+(0.29*(10.58-6.50)) =7.68%

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Cost of Debt
(Data isfrom 2018-19 annual report)
TERM BORROWINGS I: is secured by first charge by way of hypothecation of certain Lorries.
TERM BORROWINGS II: is secured by first charge by way of Registered equitable mortgage of
land and Building situated at Mangalore
TERM BORROWINGS III: secured by first charge by way of Registered equitable mortgage of
land situated at Surat, Gujarat and Collateral security by registered equitable mortgage of Land
and Building situated at Gulbarga, Davangere, Belgaumand Chitradurga .
PARTICULARS AMOUNT(lacs)
TERM BORROWINGS I 410056000
TERM BORROWINGS II 24975000
TERM BORROWINGS III 698960000
TOTAL DEBT 1133991000
BEFORE TAX COST OF DEBT 9.79%
TAX RATE 39.34%
AFTER TAX COST OF DEBT
{before tax cost of debt*(1-tax rate)}
5.94%
{9.79*(1-.3934)}

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WEIGHTEDAVERAGE COST OF CAPITAL
The weightedaverage costof capital (WACC) isthe rate that a company isexpected topayon average to
all itssecurityholderstofinance itsassets.The WACCiscommonlyreferredtoasthe firm's cost of
capital.Importantly,itisdictatedbythe external marketandnotbymanagement.
PARICULARS AMOUNT WEIGHT COST
TOTAL DEBT ₹1,13,39,91,000.00 92.62% 2.94%
TOTAL EQUITY ₹9,03,43,495.00 7.38% 7.68%
TOTAL CAPITAL ₹1,22,43,34,495.00 100%
WACC = Weightof equity*costof equity+weightof debt*costof debt
= 7.38*7.68 + 92.62*2.94
= 3.29%
CAPITAL STRUCTURE
KINDS OF FINANCING THAT VRL LOGISTICS HAVE USED TO RAISE FUNDS:
VRL Logistics has raised a total of Rs.160 Crores ($22.4M) in funding over 2 rounds. Their latest
funding was on April 14th of 2015. That’s the same time during which the company went public
as well.
1. From an issue of equity shares worth around Rs.1,170 Crore ($163M), the company
invested Rs.67 Crore to acquire 250 trucks and Rs.28 Crore to partly repay debts.
2. By borrowing funds from Banks. As of 31st March 2019, they borrowed Rs.113 Crore
(Rs.11,331 Lakhs/$15M)

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DEBT EQUITY CONTINUUM OVER THE PAST 5 YEARS:
YEAR TOTAL DEBT TOTAL EQUITY DEBT-EQUITY RATIO
2014-15 42,899.40 35,522.28 1.2076
2015-16 24,500.65 51,392.67 0.4767
2016-17 17,396.35 54,123.17 0.3214
2017-18 6,277.58 59,321.97 0.1058
2018-19 12,879.84 64,593.80 0.1993
ADVANTAGES BY USING LESS DEBT:
It can be observed from the above table that VRL Logistics have decreased their debt over the
period of five years given.
 The effect of financial leverage for the VRL Logistics was maximum during their peak
times when they used debt as a major part of capital. When companies use debt to
provide additional capital for their business operations, equity owners get to keep any
extra profits generated by the debt capital, after any interest payments. Given the same
amount of equity investments, equity investors have a higher return on equity because
of the additional profits provided by the debt capital.
 Low financing cost is yet another advantage. Compared to equity, debt requires lower
financing cost. That's because debt is finite – you are liable to make periodic interest
payments for a fixed period of time. After that, the debt is paid off. Equity, on the other

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hand, is infinite. Once you have sold a stake in the company, you're going to be paying
some of your profit to the equity holder forever.
The trend of debt of VRL Logistics shows that it was previously using debt as a major
part of the capital structure; the company would have enjoyed this privilege back then.
 Since the company has used less debt as a financing option, the credit rating of the
company tends to go up. The company will be marked not too risky for investments as a
result.
 By decreasing debt, the company decreased their interest and tax amount that needs to
be paid as well which can show an impact in their Earnings after Interest and Tax (EBIT).
DISADVANTAGES BY USING LESS DEBT
 Since the company have decreased their debt over the period of five years, we can
safely assume that company is focusing less of borrowings and making debt as a source
of capital. Last few years have shown that the debt to equity ratio have come below 1
and it is a known fact that the ideal debt to equity ratio is in between 1 and 1.5.
 The profit sharing will be higher for the company as there would be more investments
and shares which are out there for buying and for all the shares that is bought by the
shareholders, a certain portion of the profits needs to be shared. That is clearly a
disadvantage for VRL logistics for using less debt.
IS THE DEBT TOO MUCH OR TOO LITTLE?
At the current scenario, VRL logistics seems to be under utilizing the debt. Using debt as a
source of investment is seemingly becoming lesser and lesser with the passage of years. The
debt-equity ratio for the latest financial year i.e. 2018-19 was found to be 0.1993, where as the
ideal range of debt-equity ratio is said to be between 1 and 1.5. Hence, as per our analysis it
was found that the debt is too little for VRL logistics at the moment.

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REWARD TO SHAREHOLDERS:
Over the last 4-5 years, the following is the dividend pattern of VRL Logistics:
YEAR DATE TYPE OF DIVIDEND AMOUNT/SHARE
(INR)
2015-16 01/02/2016 INTERIM 5.00
2016-17 25/01/2017 INTERIM 4.00
2017-18 05/11/2018 INTERIM 3.50
2018-19 01/08/2019 FINAL 2.00
2018-19 25/11/2019 INTERIM 4.00
TOTAL CASH ACCUMULATED OVERTIME (AS PER MARCH 31ST
, 2019)
The total cash and cash equivalents of VRL Logistics as on 31st March 2018: INR 185,181,000
The total cash and cash equivalents of VRL Logistics as on 31st March 2019: INR 126,007,000
The reason for the significant drop in cash in hand with the company during last financial year
was:
 Purchase of capital equipment and intangible asset
 Repayment of short term and long term debts.

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CONCLUSION
The company as per our view is doing well in terms of a shareholder’s point of view. They are
repaying their loans in a timely manner. The company’s debt to equity ratio being too little
gives the company a scope for improvement, but it is much better than having too much debt.
The reason behind having too little debt is because the company recently re payed all their
short term and long term loans. Along with the re payment of loans, since the company
purchased capital equipment and intangible assets, making their cash in hand to drop by
around Rs. 5,91,74,000.
Due to the fact that the company is spending money in order to further develop the company is
a positive point to be noted as they are not suffering from any debt crisis.
Also, the Weighted Average Cost of Capital (WACC) being 3.29% percentage, which means that
the company should pay and extra Rs. 0.0329 in return for every Rs 1 in funding, which is also
not bad. Moreover, the WACC is not decided by the management, but rather the external
market conditions.
In an overall, the company is doing well and their stock prices are constantly rising on an
average and from a shareholder’s perspective, VRL Logistics can provide good returns to their
investment.