Mahindra Logistics Ltd
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Mahindra Logistics Ltd
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Earnings Call Transcript

Earnings Call Transcript
2023-Q4

from 0
Operator

Ladies and gentlemen, good day, and welcome to the Mahindra Logistics Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Shogun Jain from SGA IR. Thank you, and over to you.

S
Shogun Jain
executive

Thank you. Good evening, everyone, and thank you for joining us on the Mahindra Logistics Limited Q4 FY '23 Earnings Conference Call. We have with us Mr. Rampraveen Swaminathan, MD and CEO, along with the senior management team. I hope everyone has had a chance to view our financial results and investor presentation, which were posted on the company's website and stock exchanges. We will begin the call with opening remarks from the management, followed by an open forum for Q&A. Before we begin, I'd like to point out that some of the statements made during today's call may be forward-looking in nature and a disclaimer to that effect has been included in the earnings presentation that was shared with you earlier. I now invite Ram, MD and CEO of Mahindra Logistics Limited to make some preliminary remarks.

R
Rampraveen Swaminathan
executive

Good evening, everyone, and good afternoon, everyone. Thank you for joining us. Thank you, Shogun. I trust all of you have had a chance to do our presentation and financial results, which has been uploaded on the stock exchange and the company's website. Before sharing commentary on our operations, order intake and key developments in the quarter, I should just have a quick update on external environment in our end markets and the business as a whole. I will conclude my comments by briefly outlining our financial performance for the quarter just ended in the full year financial year FY '23 and just talk a little bit of our focus areas for the upcoming year. In the interest of this time, going to bridge my comments a little bit this time. So we actually have more time for questions and answers. Just at a macro level, obviously, I think the global economy is experiencing kind of high-level volatility due to do fresh headwinds caused by turmoil in the banking sector. And that's a thin across relies economies and concerns over economic stability have being brought to the forefront as a result of the collapse or new collapse of several banks and the possibility of spillover of that into emerging markets as well. In light of that, in fact, the inflation continues to be doggy and central banks that can do the efforts to tighten monetary policy, albeit at a slower pace in the past. Our rate of inflation across major economies has been shown signs of moderation over the past several months, the process of returning inflation to the desired level, our controlling inflation desired level is proving to be long and difficult. The Indian logistics industry has been valued at around INR 14 trillion in FY 2021. And broadly, we anticipate to that on 14% at a CAGR of around 14%, around INR 29.7 trillion by 2026. The industry and the sector remains extremely critical for the overall growth of the economy as much of our demand is derived from other economic activities. And therefore, as the economy prepares it set to higher levels, we should see a strong spillover to our sector as well. That said, the sector remains highly fragmented with a large constitution of unorganized players and large organized players still constitute less than 20% of the overall market. And the majority of it is layered and managed by unorganized operators who have challenges in terms of infrastructure and scale and limited levels of automation and mechanization.Now coming specifically to the quarter itself and just talking about our specific end markets, and I'll begin with automotive, which has always been our bellwether sector. So obviously, the year has gone by without a major impact of COVID, and that's been the first full year after a gap of 2 years. Through the year, I think overall retail sales have seen robust double-digit growth, especially led by the 4-wheeler industry. The 2-wheeler segment annual retail sales of $13.9 million were the lowest in 7 years. And so that sector still remains distressed. EV penetration in the sector has been around 4.5% and it's kind of well set to grow. The 3-wheeler category maintained with outstanding year-on-year trajectory with an annual growth of 84%. And this segment has seen the most deepest level of electrification of 52% of volumes now being electrified in large measure due to the E-Rickshaw segment and increasingly due to cargo movement as well. The availability of finance, alternative fuels and government subsidies have obviously added to the growth of the segment. Passenger vehicle retail sales hit a new high of 3.6 million units, an increase of 23% year-on-year. Our positioning India is among the largest markets for 4-wheeler -- passenger vehicles in the world. As the year progressed, the shortage of semiconductors have begun to ease, which has resulted in a higher number of new product launches and improvement in product availability. The demand for higher-end models continues to see and disproportionate growth, and that is an encouraging sign. So the pressure on entry-level models remains and lower-end segments are seeing the pressure of higher inflation. Due to high base inflationary pressures, regular price increase and regulatory changes, growth is likely to probably slowdown in FY '24 as a period of rapid recovery and expansion is concluded. In addition, unexpected rains and hailstorms in North and Central India have impacted the Rabi crop and a harvesting, which could affect the rural sector, which is important, in general, for the segment and for us at Mahindra Logistics specifically. In addition, I think this year, we continue to see -- expect to see a higher level of EV penetration, which will impact the overall share of ICE products in the market. The e-comm industry still remains a very large demand market for us. The Indian e-commerce set market was valued at INR 6,210 billion in 2021, and we expect it to grow at a CAGR of around 27% over the next 5 years. In addition, I think we estimate to see strong growth in the online grocery market, which is expected to grow at a CAGR of around 34% to over INR 2,100 billion by FY '27. While the market has grown exponentially over the last 4-5 years, there is a been slow moderation in digital penetration. And we expect that this will continue in the midterm. As a result of this network expansion across large e-com marketplaces has seen moderation and consolidation affecting the level of outsourcing of these businesses, including to players such as ourselves where we have seen a consolidation driving some site shutdowns. Moving on to the consumer durable industry, following the soft [indiscernible] of festive season. The consumer doable industry has seen improving demand due to the ongoing summer especially given the forecast of high temperatures this year. Channel both can and leading brands continue to have a positive outlook on demand revival and that is anticipated to accelerate during the summer season. The quarter is a sequentially strong one for air conditioning and air temperature controlled products. So businesses hope to see a high rise in demand on account of that higher inflation has impacted some level of consumer enthusiasm for lower-priced products while premium products performed relatively better and continue to do so. Demand for lighting products is significantly not being impacted through the pandemic and that continues to be robust. Clearly, our business as well has seen the impact of many of these factors. While the auto and industrial businesses have been strong and have seen an uptick across logos. The slowdown in network expansion in e-com and consumer markets have impacted our business. We are seeing some site closures in the 3PL businesses from e-comm. And obviously, we've also taken some actions in last-mile delivery business to moderate the coverage on account of often increasing price competition in that space. Overall, as the annual contract volume from new order intake was a bit north of INR 100 crores during this quarter, primarily driven by the non-Mahindra side of the SCM business, and we expect that to moderate itself in the next quarter or so and kind of have an uptick as we come towards the festive season. Let me talk also about some of the important -- some key business updates, which are relevant to this quarter, especially, I'll begin with the Express business. A consequence of the acquisition of the Rivigo business, PTL business last quarter, we recently also transferred our existing Express businesses to MLL Express Services Private Limited for a lump sum payment of INR 20.8 crores. MESPL revenues reported for the quarter were slightly lower than the preceding quarter when the business is managed by Rivigo, largely on account of some transition impact and slowdown and seasonal adjustments based on specific demand patterns from customers in Northern India. The flow-through of the MESPL business of the MLL network business into the MESPL financials will happen post completion of the consolidation, which commenced this quarter. Most of our customers have already been transferred seamlessly, and we have managed to boost our service levels for most of our clients. We believe that our combined express operations are on the right track, and they will generate positive EBITDA towards the second half of the year, somewhere in Q3 of this financial year. A longer-term direction to build an Express business, which is among the top 3 or 4 companies in the industry with revenues of north of INR 1,000 crores remains intact. The freight forwarding business, which has been on the business saw a lot of change through this year and especially in the second half of the year. The forwarding business remains under significant pressure of downward pricing corrections. While the slope of the correction has moderated, the broad pressure confused to sustain. During the quarter, we saw the impact of that with a steep decline in year-on-year revenues. However, we have been able to mitigate that to some extent through volume growth, which has shown positive movement both across our Air and C products. We'll be launching charter operations from Dubai hub later in Q1 of FY '23, '24, and that should help us to strengthen recovery in this segment. Our short-term focus remains strongly on volume penetration across end markets, lean expansion and kind of expanding our service offerings. And we should be able to demonstrate stronger run-through on volume through Q2 and Q3 of this financial year. The third business, which has had a material impact, obviously, as a last-mile delivery business. During the quarter, we continued to invest in growing the last mile delivery business. At the same time, higher pricing intensity has resulted in our decision to cut back on several sites, which are being unprofitable. -- though that has been offset through other wins in other parts of the last-mile delivery service line. We have taken a prudent accounting approach on various penalties and damage claims in the quarter with some of our customers have raised, which has resulted in an underlying favorable impact on earnings. While these items are still under discussion, we chose to be prudent about them. Our continued focus remains on fulfillment as a service, grocery and subsea deliveries, all of which are showing strong progress in the quarter as it has done in the year, which has gone by. The performance of our eDel electric vehicle business, EV-based business is consistently improving. As of today, we are operating in more than 19 cities and have a fleet of more than 1,300 vehicles. Earlier this month, we actually launched our 4-wheeler offerings right in eDel and we hope to supplement that the 2-wheeler offering shortly. The 2x 2 business has been -- is a business with which we run a company-owned car carriers for the auto outbound segment, and that's a business which last year had seen significant impact on the back of shrinking automotive volumes. I think as I mentioned in the last earnings call, we have been in -- starting the sleep back again. But along the way, we have been investing in upgrading the fleet with modifications as for the new [ C&BR ] regulations for adding domes and also upgrading vehicles in terms of runability. And we've seen that progress through the fourth quarter. We ended the fourth quarter with our operating fleet almost completely on road, and we expect that in FY '23, '24, we should see that the consolidation of that turnaround in that business. Lastly, as a matter of significance. I think in the warehousing side, we are -- we continue to be committed to expanding our warehousing footprint in the quarter just by we have announced the development of a new 1 million square feet warehouse park in the Chakan-Talegaon region. This is a collaboration Ascendas-Firstspace and which will be spread over 3 phases -- the first phase, which is roughly 0.5 million square feet will be operational by the end of this financial year. The net -- that is something we will continue to expand. We're also at the same part going to launch our first automation and technology center, which will be where we'll do development and automation technologies, especially for warehousing. The overall warehousing footprint in the year -- in the quarter showed moderate green, and that was largely an impact of the restructuring of the Bajaj Electrical contract as a result of which we did drop warehousing space of many 0.6 million square feet largely in distributed branch warehouse locations. Those contracts were all largely back to back and therefore, do not have any residual impact on our earnings going forward. I'll now move on to our consolidated financial performance. Revenue for Q4 FY '23 increased by 17% on a year-on-year basis to INR 1,273 crores. That growth was on the back of adjustments, right, of lower growth, obviously, in our consumer business because of the restructuring of the Bajaj account and a decline in the freight forwarding business. Adjusted for those segments, our underlying volume growth and revenue growth is approximately 24%. The supply chain management, including 3PL and our network services businesses combined to 94% of our overall revenue, and the Mobility business contributed 6% of our revenue. Our gross margin on a fully consolidated basis, including MESPL impact stood at 10.2% in Q4 F '23 compared to 10.1% for the same quarter last year. EBITDA for the quarter was up 17% from INR 58 crores in Q4 at 22%, up to INR 68 crores adjusting for the consolidation of the Rivigo acquisition. PBT on a fully consolidated basis was obviously down, and we reported a negative PBT of negative INR 5 crores for the quarter, down from INR 9 crores for the same quarter last year, and we reported at on a fully consolidated basis of negative INR 1 crore. The earnings obviously were impacted by the consolidation effect of the Rivigo acquisition. And therefore, just share some numbers without the impact of Rivigo acquisition as well. With all the MESPL or the Rivigo acquisition, revenue for the quarter increased by 11% on a year-on-year basis to INR 1,206 crores. Gross margin for the quarter without the acquisition stood at 11.4% compared to 10.1% in the same quarter last year. EBITDA for the quarter rose from INR 58 crores for the same quarter last year to INR 87 crores. And PBT for the quarter grew from INR 9 crores to INR 24 crores, right? And our PAT effect without the acquisition grew from around INR 6 crores in the same quarter last year to INR 21 crores for Q4 F '23. As we obviously see the consolidation and the extraction of value of Rivigo business, we obviously expect that, that will actually be accretive to earnings, and that's covered in the investor deck on a section called Pathway to value creation. And we'll talk a little bit about that. Before I close, I just want to quickly recap subsidiary performance or component performance for your benefit. Our MLL stand-alone business for FY '23. And I talk about full year numbers. Revenue for FY '23 Mahindra Logistics is a holding company on a stand-alone basis of INR 4,459 crores, up 27% compared to INR 3,361 crores for F '22. PAT for the business was up from INR 24 crores in F-22 to INR 65 crores in FY '23. Large freight revenue for the year was down from INR 450 crores in FY '22 to INR 366 crores in FY '23. And consequently, PAT for the business – PAT was down by around 40%, 36% exactly from -- specifically from INR 16 crores in FY '20 to INR 10 crores in FY '23. The Express business showed revenue of INR 122 crores. Most of that is essentially the revenue spillover from the Rivigo acquisition. MLL network revenues are not factored in this. Revenues continue to be at adjusted run rate, as I mentioned earlier, right? And overall reported revenue was INR 122 crores for 4 months and 10 days, I think, roughly 4 months in a week. And PAT loss for the year on that revenue was INR 32 crores. We did take a deferred tax adjustment in the business, and I will talk a little bit about that in a bit. MLL Mobility revenue was up from -- was INR 185 crores as compared to INR 58 crores in the preceding year. That included underlying growth of 127% in revenues of the transport services. The airport based services segment and the consolidation effect of the enterprise transport mobility business from, which has transferred from MLL to MLL mobility. Consequent to our continuing activities on cost reduction there, PAT has narrowed right from INR 19. The losses have narrowed from INR 19.5 crores in FY '22 to INR 8.6 crores in FY '23. We expect the business to be in a strong growth momentum, and we are confident in breakeven in FY '23, '24. Whizzard reset, which is the investment we have made in the last mile delivery business. Our fulfillment business, we made an investment in reported revenue of around INR 130 crores, up 18% from a comparable time period last year, PAT for the year. Losses for the year increased from INR 4.4 crores last year to INR 7.5 crores this year. 2X2, the division has made a loss of INR 4 crores in FY '23, narrowing from the INR 6 crores in the preceding year. As I mentioned earlier, in my 2X2 comments, we expect that to be a simply cut back to profitability in FY '23. During the quarter, we also took -- and we also just had a deferred tax adjustment in 2 of our entities, principally MESPL, which is express services business. That adjustment was on account of our line of sight to profitability and our certainty and other profitability, we'll be able to generate in the business over the next 6 to 8 quarters and has been reviewed with our auditors and other -- and the Board, and we are comfortable with that accounting adjustment. Overall, we remain focused on investing for growth across all our segments. I think as I mentioned before, we think it is critical in our business to grow scale, and we remain committed to our vision of building an integrated logistics and mobility services business, which has deep capabilities in multiple service lines and combined to technology, people and process will create, I don't know, value of integration for our customers and emerge as a preferred choice for them as well. So with that, I'll open the question -- the floor for questions and answers.

Operator

We will now begin the Q&A session. [Operator Instructions] We have a first question from the line of Alok Deora from Motilal Oswal.

A
Alok Deora
analyst

Just first question on this -- the express business. So if you could just indicate what would be the revenue we generated from the Rivigo business in Q4.

R
Rampraveen Swaminathan
executive

I think we generated -- I think we reported revenues of INR 77 crores for the quarter for MESPL all of that essentially was the business which was transferred from Rivigo because, as you know, we've really not rolled in the revenues of the volume from the MLL network, right, for the large part. So almost all of that was that. I think when we did the acquisition, Alok had projected the kind of indicated that the run rate number is the INR 350 crore range on a 12-month basis. There are, of course, seasonal adjustments in those numbers, right? And that did impact us Q4 because of climatic conditions in the north. We did see some impact in load volume on the lanes in the north right there. It is not -- there's no customer account losses during the quarter because largely because of that. We did have some transition impact because several of our customers as we transitioned ownership, right, because we have to get contracts in place and so on. They stop orders on us for a period of time before they actually triggered it back on. So that did have some underlying impact. But from an underlying -- from an overall perspective, adjusting for those things, our revenues are pretty much in line with what we gave as an indication at the time of the acquisition.

A
Alok Deora
analyst

Sure. And sir, if I see the -- the EBITDA and the PAT for this segment. So we are currently at around 25% loss at the EBITDA level and around 28% loss, 20% sort of a loss at the PAT level which is kind of worse than what we had done in quarter 3. So I just wanted to see us how confident are we to turn around this and breakeven in the first half of FY '24, considering that what signals we are getting from the industry to the res business as a sector is kind of struggling because of various factors, demand slowdown and competition and all those factors. I just wanted your thoughts on that.

R
Rampraveen Swaminathan
executive

Sure. I think let me give my perspective on it. I think first of all, there is obviously -- I think that the Q3 versus Q4 comps are not actually very accurate because obviously, in Q3, what we reported as express business was largely our own business with around 1 month or 6 weeks of the MESPL business. we have seen obviously a full quarter impact of the Rivigo business. So that's the first thing. And therefore, if we reach out to us separately, we'll kind of give you a better reco directionally of that, right? What -- from an earnings quality perspective, I think the levers which you have said earlier still remain the same Alok, right? The first one, obviously, is that a substantial amount of this is low driven. We have a net worth of around 17 hubs 270 branches and the load which you carry on the network actually drives the operating leverage of the business. So the first thing which obviously will really make a big impact on the transition of the MLL network volumes on to that. We expect that to be done with very marginal increase in overall cost, right? And that should obviously substantially improve the operating leverage of the business. That is actually under play. We've just transferred effective April 1. The network business or MLL into MESPL. And so through this quarter, a lot of that load will actually transition out and we will see the benefit of that. It is quite significant given that facilities or operations costs are roughly around 18% of our total cost mix. And so that's a big operating leverage number. The second big element, of course, is which will drive value creation. There is just a transportation efficiency -- because we run -- because we'll be able to run at a higher load, consolidation of loads will be better. Vehicle efficiencies online haul, especially will increase, and we expect to see better density feeder and the pickup in last-month delivery volumes as well. So combining both of those, I think even without considering any further volume growth, we expect a substantial amount of the EBITDA loss to come down. As I said earlier in my comments, I think Alok, assuming based on our current forecasted transitions of accounts, we expect that by Q3 of this year, we will turn EBITDA post on the business. There are some obviously -- now coming to the other side of the question, which is where will growth come from. So I think, obviously, there is some softening in demand. I think also Express saw a bit of a spike during COVID, right, given that. But I think -- but we still believe underlying growth is still there. I think India's demand is getting densified, right. On the e-commerce side of the business, customers are owned to more suppliers fulfill volumes, which is actually creating demand for supplier fixed solutions and offerings, which are also part truckload in nature. So unlike probably what others, we do see that there is some robustness in specific parts of the segment. You must also remember that the fourth -- so I think -- and the other growth lever for us Alok, is the fact there is a substantial amount of our 3PL and other clients actually do have express volumes. Our penetration or share of wallet in that has historically been low because we didn't have an offering, right? So as the offering gets rolled out, we expect that we will actually improve share of wallet in those businesses and integrate FTL, warehousing Express, et cetera, in better ways for our clients to give them higher productivity. So we kind of broadly look at 12.5% to 13% annualized kind of growth rate secularly over the next 4, 5 years. And we believe that given the markets are right now, Alok those are very defensible and pretty much achievable numbers given our broad customer portfolio. So I think -- so the kind of mix of 3 or 4 levers together, there's also things we are doing in terms of productivity improvement, reducing productivity, improving density of the work for -- of the shop floor, right, to reduce operating costs. So combining those 3 or 4 things, I think we do believe that we should be able to get first in EBITDA breakeven by the third quarter of this year and get to probably a breakeven at a PAT level on a running basis by the end of this year. And therefore -- and then we'll kind of kick into more aggressive growth rates. As I said earlier on, our view of the business is, we have the opportune the next 4, 5 years to build a INR 1,000 crore business, right? We are starting with INR 450 crores, INR 500 crores when the business are consolidated, right, on a run rate basis, and we expect that to probably double over the next 4 to 5 years and peak it on 3% to 4% PAT levels. And then as we stand today, I think we are pretty -- we've not lost -- there's nothing which has given us any reason to revisit those -- that aspiration. Obviously, any integration does not go bankrupt completely on time on everything. So there are things which go a bit sideways, but those are all controllables. So we still pretty -- we feel we are in a good place. It has a carry on the numbers, something which we recognize. There is also a significant step-up in terms of MLL's penetration and our ability to be an integrated logistics provider for our clients.

A
Alok Deora
analyst

And also, this depreciation has increased to nearly INR 55 crores at the consolidated level. So what's the normalized run rate we can look forward for depreciation?

R
Rampraveen Swaminathan
executive

So I think depreciation has gone up. I think there are multiple components to that, Alok. And obviously, a part of that has essentially been around INR 10 crores of the increase in depreciation has been because of the Meru consolidated effect on a full year basis because of the mobility business, which we acquired from Meru, around INR 8 crores of it has really been the run rate impact of the MESPL business. So that's approximately being around 20%, if you may, of the increase in the overall depreciation prior 22%. The rest of it right has really been right [ NDA's ] impact of it. And the remaining INR 35 crores, INR 36 crores, [ NDA ] impact is around INR 27 crores, and I can give a more specific number. But I think it is down INR 27 crores. The remaining INR 10 crores is split between electric vehicle fleet edition, right, some other capital items and obviously, software depreciation and so on. From a run rate basis, I think SPL and the Meru depreciation should be capped roughly in this range. We don't expect any significant addition there, right? And as far as the MLL, the core 3PL business is concerned, I think we will see some normative increase in terms of capital, right, which is in the same range as this year. This year, we spent a capital of INR 85 crores for of year. INR 75 crores was our CapEx spend. And I think we expect it to be in the 80, 85 range at least for the -- at least for '23-‘24. So we expect that to roughly be in that range. The warehousing will obviously have a 1-month fixed impact, but that also -- there's also a tail of impact on 116 as some of the older leases come off. So net-net, we kind of expect that we will be a little bit up marginally up on the MLL side of the business, probably 7% to 8% up on depreciation. The MLL mobility and the MESPL number should roughly be capped.

A
Alok Deora
analyst

Sure. I have more questions and come back.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants. Kindly [ reductions ] to 2 at a time. You may join the queue for follow-up questions. We have the next question from the line of Amit Dikshit from ICIC Securities.

A
Amit Dixit
analyst

Just 2 questions from my side. Did you take any price hike in this quarter? And how was it absorbed by the customers, if you can split it, I mean business-wise that would be great?

R
Rampraveen Swaminathan
executive

So if it's just in the interest of everyone – if everyone's convinced. Can you just ask both the questions I'll answer both of them together.

A
Amit Dixit
analyst

Yes, sure. The second one is essentially on the industry, given that what you highlighted in our remarks that automotive is probably going strong, consumer durables likely to pick up and e-com is sort of still on a sticky wicket. So what kind of growth can we expect for FY '24 in terms of revenue? These are the 2 questions.

R
Rampraveen Swaminathan
executive

Yes. So I think in terms of growth, I think we expect that there will -- what drives our growth is a couple of things, right? I think Amit, one is underlying volume in all our existing sites. And that is kind of -- that's just how much of flow-through we get because we do have some amount of openings for unitized pricing. Per piece of unitized price in our business. We don't get some flow-through from that. And the second one, obviously, is network expansion. Now as customers want to put more sites as they densify their networks. I think for a broad demand perspective, I think transportation -- automotive largely since tends to be transportation heavy. And we expect that volume to be reasonably robust in the first half, but we expect a lot of growth in the first quarter. We do expect stronger growth in the automotive segment from the second quarter onwards. I think from an e-commerce consumer perspective, I do believe that we will see an uptick in volume definitely through the seasonal course through the season this year. Whether the question right now is how much of network capacity addition will be seen. Right? So we definitely see volume will go through and we will see kind of the mid-teens kind of growth in volume given what we are seeing across all our end markets and our logos. But we are still seeing some tentativeness in terms of site expansions and network expansion. So I think that's the one which very honestly Amit, hard to exactly forgot. But we are optimistic that in several segments. And given what we are doing, as I said, annualized contract value in the first -- in the fourth quarter was roughly around INR 100 crores, right, for the quarter. So that's actually a healthy sign. So hopefully, we'll be -- we are confident we'll be able to sustain that kind of run rate through the year. Q1 might be a little bit slower, basically, it's a little bit of what we expect. I think from a pricing action perspective, I think, as I said, we operate in multiple segments. The 3PL business, right, we have seen margin improvement there, I would say, largely on the basis of stronger cost management and operational new performance, right? Most of our contracts have been continued in nature. So really a fair amount of the business is a continuing business and has not changed dramatically being Q3 and Q4. I think on the forwarding business, as I've already said, prices have actually come down. The challenge has been to kind of full margin levels as prices have come down because I think people are -- a lot of times, people are making forward bets and further reductions in prices and putting those as making those -- taking those projections and putting them into the deal. So we've really not been able to do a lot of price movement on the forwarding business. I think clearly, we're not going to do a lot of increase there. I think on the last mile delivery business, I think, as I mentioned, we have optimized our margins there. We really optimized not by doing a broad price increase, but actually specifically we can account and offerings where we actually get better realizations, right? I don't think I would say across the board, there has been an increase, right? But it's been really about how we've optimized our offerings and our customers. And on the Express business, we have seen some uptick on what we call a retail end, which is really small and midsized establishments, but not so much on the enterprise and the enterprise end has been more topical or tactical and not really been -- I wouldn't say been across-the-board increase. So I hope that answered both your questions, Amit. And probably you should go -- and if you have any further questions, Amit, happy to take you back on the queue later.

Operator

We have our next question from the line of Saras Singh from [ Ripon ] Securities.

U
Unknown Analyst

So I've got 2 questions as well. So firstly, needed some clarity on the borrowing side. So we have around INR 400 crores of debt on our books. So where exactly this is being utilized. And can you give the time line of the debt repayment? And the second question is on the mobility side. So we have around INR 185 crores of revenue from Meru. So I would expect like -- I would assume that another INR 75 crores is from Alyte. So what has impacted Alyte in FY '23 that the revenue is down 50% here. That's all.

R
Rampraveen Swaminathan
executive

So let me take both those questions in some form. I think on the debt side, we do have roughly around INR 400 crores of debt on the books. It's spread across multiple parts of the business. The largest part of it, of course, has been -- has been debt acquired by MESPL, taken by MESPL for the acquisition of the Rivigo business, which is a little bit around -- roughly around INR 220 crores. That's long term in nature and has a structured repayment plan around it. [indiscernible] lot of details with the structural repayment plan on a fairly, I think, attractive coupon. But that is the largest part of it. Apart from that, we have around INR 150 crores, which is spread across -- within the MLL side of the business, which has largely been investments we made, borrowings we made to support acquisition of the Meru business from M&M in F ‘21-'22 and to support the -- and for the investment in Whizzard. Those are the 2 larger parts of that along with some amount of working capital there. There are also working capital lines in the 2x2 business. There are working capital side in the forwarding business as well, and those are purely working capital lines, right? So the large part of our long-term debt is actually is largely in -- is really around -- so 2 large parts. I think 45% of it is working capital to support operating cycle of the business, 55% of it is really to support the -- has been debt taken by MESPL to support the Rivigo acquisition. We are on structured plans. As you know, there's no -- our ratings are good. We have a window of cycling the long term -- or reaping the long-term debt. From a working capital perspective, I think that number moves up and down, right, as we need it. We have -- and we don't particularly see a significant change on the volume of that line. As far the other question was concerned. Sorry, can you repeat the second question? The Meru numbers and the mobility number? So the MLL mobility numbers, which you see declared here of INR 185 crores is the consolidation of the revenues of the Mobility business from Meru, which was inherent historically from Meru and the Alyte business, right? And there's a period impact of it because the Transit acquisition or the transfer of the business was on halfway during the year, right? And therefore, there is -- we want to portfolio revenues, right, of the Alyte business. From a full year perspective, the businesses together in the INR 185 crores, the erstwhile Meru component of that is around INR 50 crores, INR 55 crores and the remaining part of that -- that accounting revenue, it's not platform revenue, it's accounting revenue. And the remaining part of that is actually the enterprise transportation business, which is principally Alyte, right? And you'll see that obviously in the other part of our financials, unallocatable expenses have come down in our books, and that's largely because we are no longer reporting the mobility segment as a segment in stand-alone earnings. And therefore, to that extent, analyzable expenses have come down. But that's we the transfer impact. But if you really look at it, the lion's share from a revenue perspective is still actually the enterprise transportation business in the numbers.

Operator

We have a next question from the line of Krupashankar [indiscernible] from Avandas park.

U
Unknown Analyst

My first question, Ram, is on the warehousing revenues. While you did mention that there is a 0.6% [indiscernible] free production in warehousing space, but the decline has been for 2 quarters now. I just wanted to get a sense as to are we expecting warehousing to moderate from the current levels because we had this discussion in the past and you were quite upbeat on adding close to about 2.5 million square per annum. Is there any change in stance over there? That's the first question. Perhaps after a -- I'll answer the second question.

R
Rampraveen Swaminathan
executive

So I think on a warehousing perspective, I think as you have seen, we declared -- I think we reported a 9% declared reduction in warehouses and solutions revenues for the quarter, which is a back of 6% or 3% reduction, I think we reported in the preceding quarter of the year. I think a large part of it actually has been -- so if you look at Warehousing and Solutions create mentioned earlier, there are 2 parts to it. The largest part of it, obviously, is the pure warehousing piece. And there is -- when you do end-to-end solutions, there's an associated transportation piece as well, which is included in that number because we build to a client on an integrated basis. The decline in the year-on-year numbers in the fourth quarter has largely been on account of the restructuring of the Bajaj account. -- right? What has happened with the Bajaj account, obviously, is we had -- we reported year-on-year at INR 32 crore reduction in revenues, quarterly revenues on -- because of the restructuring of the Bajaj account, and that is a combination of warehousing and transportation, warehousing -- the warehousing space, which went away was either given away, as I said earlier on, all was replaced by other customers, right? The transportation revenue obviously completely went away. So if you look at our numbers, you are just at Bajaj reduction, you will find that warehousing, the rest of which is largely pure-play warehousing actually went up year-on-year, right? I think the net impact was INR 32 crores for the quarter, right? I think I just pull out the numbers. But I think -- but then I think you will actually see that it has gone up adjusting for the Bajaj impact. From a long-term stance perspective, there's no change. As I mentioned earlier, we just announced the construction of another million square feet of warehousing in the Chakan- Talegaon area. That is at the back of construction, which is already going on in Calcutta, in Guwahati expansions are going on other places. We obviously will have to talk tactically, we always do have white space challenges in different parts of the business. But as of now, whitespace, White space is only 4% of the overall volume, and therefore, that's something which is within our operating envelope.

U
Unknown Analyst

All right. The second was on the freight forwarding operations. Just wanted to ask here. So while I do understand there is a significant pressure on raising and what is it that we are trying to do with respect to sustainance of profitability? And from there on, I just wanted to get a ballpark number as to where in the profit -- or the margins over around in the freight forwarding business given that next year also, we are looking at a high base, we are starting at a decline of mid-teens [indiscernible]. So any light you can throw on this particular piece?

R
Rampraveen Swaminathan
executive

I think, Krupa, I think the freight forward in rate adjustment has been secular across the industry, right? So I think it's really not -- in fact if I actually look at everyone, many bellwether lanes for 20 feet cubes, prices are actually down up to 75%, 80%. We've actually been able to offset that through volume growth. And you go in -- so what I've always said Krupa, this business even earlier on is that you've got to go back and look at 3 years and adjust out this kind of onetime gorilla earnings we've had. And we adjusted out, I think our CAGR back to '18, '19 is stood around 26%, 27% on revenue and is not of that on earnings. So that growth trajectory still remains. I think the focus, Krupa continues to remain on growing volume and supplementing India Origin India destination volume with the hubs or the operations we are building in Dubai and the U.K. right from a broad guidance perspective or about an indication perspective, I think our aspiration there has been to grow the business at the 18% to 20% level, which would then in F ‘26, ‘27 mean revenue probably around INR 900 crores to INR 1,000 crores, right, on an annualized run rate basis. And we believe that the business will be at 2% to 3%, roughly the 3% PAT level. We've been there before, not just in the really, really good quarters. The really great quarters we have been above that. But normalized, I think we expect a lease 3% PAT will actually be very sustainable for us. I think once we breach around INR 500 -- INR 450 crores to INR 500 crores of annualized revenue, I think we should be in the normal around 3% PAT. Right? And so and there on, it's a volume growth play. And as I said earlier on, I think we clearly do understand and recognize that the pricing corrections have been huge. But as said, underlying volume growth has actually offset a bunch of it. I think as you go forward, if we are able to sustain that volume growth, we should be able to see a recovery to peak levels, our highest quarterly revenue of INR 112 crores, if I'm not wrong, and then INR 1,218 crores, right? And in that range. And I think we should be -- I fully expect to be able to get back to that kind of peak rate in the first half of F '24 '25.

Operator

We have a next question from the line of Tarun Bhatnagar from Tribeca Investment Partners.

U
Unknown Analyst

My question is on Rivigo, -- so we have seen very heavy losses in this quarter, which has led to a disappointing loss and despite your core business doing really well. In this regard, I wanted to understand, firstly, what was the thinking behind you acquiring Rivigo? And in case we are planning further acquisition, what sort of returns would you be expecting from them? And finally, how do you get Rivigo back to profitability and generate the desired returns?

R
Rampraveen Swaminathan
executive

Sure. I think all the questions that I think all interlinked in some form, but I'll answer the -- and answer the most outlier there in terms of what -- just from an acquisition philosophy perspective. So I think from our perspective, 3 years ago, we essentially said that our goal is to build a business, which is -- which combines the surface FTL transportation business with more warehouses in the 3PL side and then build out new service lines around freight forwarding, cross-border movement, part truckload and last mile delivery. So we can actually provide customers and coverage across the entire supply chain, right? And most of the acquisitions we not have all been in line with that story or that goal. We've not really kind of gone lifted away from that, right? So that's one which are ones that strategic intent for our strategic intent rise acquisitions and not the opportunistic value around the transaction itself. And that philosophy, I think, will remain in the business. I mean obviously, we run through returns profiles for all the acquisitions as we have done for Rivigo as well, as a matter of governance of the board. And those return -- long-term return profiles are essentially what the Rivigo acquisition will also deliver for us, right, on a fully consolidated Express business profile. But I won't go to segment targets in terms of returns. So longer-term target which we have set on the medium-term target we have set for the overall business is to get north of 18% return on equity of around 24% return on capital employed. And this -- and our current business plan for the Express business also ties into that, right? So from a philosophy from a directional perspective, I think it's intent driving the acquisition. The metrics are all accretive in nature. We are not -- we don't -- our acquisitions are not designed to basically chase revenue. But I've always said, in logistics, there are oceans of revenue and islands of profitability. We don't intend to be stuck in ocean. So that's kind of clearly there from a philosophical direction perspective. I think [indiscernible] to the Rivigo acquisition. I think our strategic view of supply chains in India is that across the board, India will see greater densification of networks. I think over the next 5 years, what we have seen over the last 5 to 7 years, a significant densification of networks. And densification has 2 dimensions, they are dimension of coverage and dimension of latency right, how deep you have to cover the geographies and what is the latency of which customers expect delivery to happen. As latency shrinks and coverage expands, the need for moving smaller loads of volume actually will increase further and further. We've seen that play out, and we expect that to further play out in the industry, right? Everything which is happening from things like Multimodal, et cetera, is all on arterial line haul kind of moments. It's not actually a solution for densification in the country. As we see more tier-2, tier-3 kind of penetration, this is something which we believe will continue. And the intent of buying Rivigo was to build a digital-first business with a strong technology stack that nationwide coverage in terms of direction to direct delivery coverage, right, and be able to start that network with existing volumes we already had with time-defined service levels right? And that's kind of what drove the acquisition rationale. I think what we've got with the business has very strong network coverage. We are in more than 270 locations across the country and strong retail or SME presence, right, with a strong business partner network, which adds yield to the business and its revenues, right? And obviously, a great fit into the rest of our business because it allows us to provide customers a real depth right in terms of coverage. So that's been the strategic intent and everything which we are right now on, we are pretty happy about it. I think it's kind of delivered our 90 day goal on the transaction. We remember, it's only been 90 days early since we acquired the company. It seems like a much longer time at time. So you see the numbers, but it has only been 90 days, right? And we kind of hit that 90-day goal, which has largely been integration. We're happy with the tech attack, and our network coverage has been solid. So all that has been really positive. Now that said, obviously the question of the big Gorilla in the ring is the profitability of the business, right, which I think is what you alluded to, right, in larger measure in your question. And I think I've answered that earlier when I think it was -- I don't who asked the question, but I think earlier that what we -- there are 4 levers. I think if we look at it simplistically in your cost structure of the business, you have 2 big transportation costs, which are linehaul and feeder. And the second is this a linehaul and the second is just feeder and delivery. And then you have operating costs of running your hubs and your network because this -- you run your harbor networks, no matter whether there's a load or not this a high operating leverage model. And then there is overheads and other cost optimizations, which are there, which is kind of below the gross margin level, but above the EBITDA line, right? So we have a compression strategy in all of them, right? Each of them is specific. I think the line haul as a transportation leverage, a lot of that will come as we transfer the MLL volume across and will further increase as we get additional volume growth, which we estimate to be the 12.5% to 15% range over the next few years on an annualized basis, right? So that's something which will kind of drive that optimization because we got to move to larger trucks, better loading of the trucks. For instance, on lanes that we've already done early optimization in April, we have seen a 6% to 7% improvement in vehicle utilization, which brings down -- which is a very significant impact on cost, right? The second part is, obviously, facilities rationalization. We were running -- we had effectively are running 2 networks, an MLL network and MESPL network. Those networks have been crushed together or combined together. And therefore, we will get a significant amount of volume leverage. But I think the same facilities, doing things are coming for 3 shifts. They're running at higher productivity levels, re-manning the floor to divert the improvements there. And that is quite significant because facilities and what is fixed period fixed cost in nature is on 18% to 20% of our cost mix. And so if we can run the same network with 30%, 40% more volume actual operating leverage flowing in. There is, of course, a bunch of things on other cost reductions, which are there in terms of our spend levels, overhead and so on, which are also being addressed. Some of those have already been addressed. They have not flown into the numbers in the quarter because, obviously, as you do optimization on some of that, you have you have cost of doing that, right, whether it's shutting on facilities and you have to take costs on shutting down facilities or adjusting productivity on manpower-- you have your associated costs of that. Those costs have shown up in Q4, but they will stop showing up from Q1 onwards, right? And therefore, you will see this optimization flow-through, right? Our first goal obviously is to get to the positive EBITDA and once we are able to -- so as we get to that level, I think then we actually are looking at optimizing the numbers. So there is a clear game plan. I understand that obviously, there's a sticker shock in some ways on the numbers, but that's actually what we had given as an indication when we did the transaction as well that we expect that there's a transaction which we closed everything on favorable economics from an acquisition price perspective because we have a 5 to 6-quarter window to optimize the business and get it to kind of accretive level and probably a little bit more time to get to peak earnings. And as of now, as I said, we are -- notwithstanding the size of what you see on the quarter's results, I think we feel pretty good about where we are, and we are well positioned to deliver what we said we will. And that will be in line with our 18% return on equity target for the company.

U
Unknown Analyst

Just one supplementary question on that. Firstly, maybe you can maybe talk us talk through on your acquisition strategy? Are there further acquisitions you're looking at? And secondly, I also wanted to understand, you mentioned that you will be getting back to profitability by end of this year. Firstly, can you confirm that? And secondly, like what are the things we should be watching out in terms of the actual operations in the business, which you are currently doing and which we should hope to achieve maybe by the end of -- when we talk 3 months later and maybe when we talk maybe next year sometime later in the second half.

R
Rampraveen Swaminathan
executive

Your question is specific to the Rivigo business the Express business, right?

U
Unknown Analyst

Yes, yes. Rivigo and also on acquisition plans.

R
Rampraveen Swaminathan
executive

So acquisition philosophy, I think, as I said earlier on, I think our strategic intent, we identified a few areas, and those are pretty much done now. So there is no deliberate desire to pursue an acquisition on any specific area in the near term. We might find a tactical transaction if something happens because it's really accretive to earnings and is very favorable as the pit. But let me just say, we are not looking right now. But I think our focus, as I said, last quarter and this quarter as well, Tarun is still get an up optimized the acquisitions we have done and deliver the earnings, we committed on that, right? And as you have done on the 3PL business, right to drive earnings improvement, we kind on the turnaround in large part on the mobility acquisition we did and how we kind of focus on doing the same thing on the MESPL or the Rivigo acquisition as well. So no real -- so that's kind of at least someone from a philosophy perspective, I hope that's clear. I think from an MESPL perspective, I think there are 3 big -- as I said, there are 3 big parts to this puzzle. And I think as you look at markers along the way, I think Tarun the 3 things which you should -- we look for and I'll be fairly transparent about that. The first one, I think, obviously, is volume growth, right? We are going through a cross-integration right now. It's a big focus on service delivery and controls, right, putting our governance systems in place, putting some of our processes and policies in place. But as we go into the second quarter of the next -- of this financial year, I think one thing you really want to look at is that volume growth coming back, right? And as I said, the combination of that volume, which on cubic feet basis is probably -- we are at a pre-acquisition level on a cubic basis, we are probably around 5 lakh tonnes. And so that's the first at a starting market. And then the question is how much do we grow from there. Our goal is to grow at 12.5% to 15% a year. So that's one marker to clearly look for Tarun. The second one, obviously, is to look at the gross margin line because that's where you have a lot of the direct costs in what, and that's where the operating leverage of the site utilization and linehaul cost efficiencies get better. So I think that's something which we hope to make progress on faster the governing on revenue because we are timing the optimization right now. And the third part, of course, is the EBITDA piece, which is between the gross margin and the EBITDA line, which is a lot around the optimization of various items. Obviously, there's a carrying cost of the debt, which is there on the transaction, which is separate there's a separate process through which we look at, say, one of the ways to kind of -- to reduce the impact of that. But those are the 4 things largely, I think, Tarun, which I would look at on a monthly or quarterly basis or hopefully something on a quarterly basis, but we catch up otherwise as well. Those are 4 things that I think will move the needle right on the path to profitability of the business.

Operator

We have a next question from the line of Sumit Kishore from Axis Capital.

S
Sumit Kishore
analyst

Two questions. The first one is on your part to value creation and the 18% ROE target by FY '26. I mean how does this look for you consider the business returns on a ROCE basis? And what is the math that you're using on net margin you arriving at the 18% ROE for a relatively asset-light business? The second question is on intangible assets and the fees that you're seeing in the balance sheet there. So from INR 10 crores to INR 40 crores. So what sort of explains that? And what is the intangible asset.

R
Rampraveen Swaminathan
executive

Yes. So I think – Sumit, I don't know that that intangible number with me, but I would say that almost all the -- a substantial part of the intangible growth has really been the goodwill on the MESPL acquisition. I think is the bulk share of that number, and I can have somebody reach out to you some more specific breakup of it. But I would assure I mean, is it probably 70%, 75% of the number is really that –

S
Sumit Kishore
analyst

I would have also thought so, but goodwill on consolidation, you mentioned in the presentation is flat at INR 4.3 crores in your disclosures.

R
Rampraveen Swaminathan
executive

Okay. So let me I'll come back to this, Sumit. I'm just looking at -- but while we do that, I think in terms of your earlier question -- your first part of your question in terms of further return on equity and how we measure it. I think as you know, I think we have said multiple sets of businesses, Sumit. So it's hard to say that I have one [indiscernible] number across the board. But I think if I look at it simplistically, first of all, I think we do obviously look at ROE rather than ROCE because we do have some leverage in the books. And therefore, if we had 0 leverage, we'll obviously look at ROC as being a proxy for ROE, but ultimately, shareholder value and wealth, which is most important. So bellwether metric is ROE, not ROCE. That's more an operating metric for us internally. Now in the constituents of that metric, I think 2 broad elements, I think one is what's profitability. The other one is what's going to be captable and continued cap investments in the business. And many of the captable investments in the business, the largest part in terms of density of our captable has always been the 3PL investment. And I think we've spent down INR 75 crores of CapEx last year. We've always said that can we expect capital to be the 1.7% to 2% range. That's been the bulk of it. And only exception was last year when capital went up around INR 120 crores on the back of some of the expansions we are doing. But in general, it's always been at that range. And I expect that very much to be as a train, right? And I think as we model out our numbers or look at our numbers, we kind of look at it being in that range. The other part of the equation, of course, is profitability. And while I won't give one number as a number for the entire company, I don't think that's very practical. I think we have said earlier, Sumit, as you know, that we expect the 3PL business to get around 2% at a PAT level, and we expect the different parts of the network services business to be between 3% to 4%, right, at a PAT level. Those businesses, we do believe will remain at 90% plus of the overall basket of MLLs earnings. I think those are the primary costs of that 18% [indiscernible] equity. Working capital moved a little bit. NWC was, I think, 14 days for the quarter, up 3 days compared to last year, but that's largely just with marginal movements on our DSO and not being any structural issues around it. right? So I think those 3 pieces largely, I think, Sumit what could a blend into that to our confidence in getting that 2% or past 18%. The biggest earnings element and then, of course, as we've already discussed at length today in multiple questions has been executes getting that back, clearly isn't hang and that's -- obviously, we have great a fair measure of confidence in delivering that. But that, I think, is the short-term hand which we have to solve for. And then, of course, you solve as volume builds up, we do believe that -- and there are -- and these numbers are even probably lower than some of the comps in the industry. So we actually feel pretty good about getting there. I don't know Sumit to answer that question. As far as your -- I think as far as the intangibles is concerned, I think it's largely around goodwill. I think the intangible is on consolidation. Yes. I think I'll come back to you on that, Sumit. I have your numbers is, I don't want to give you an half-baked answer. So just give me some time, and I will reach out to you separately Sumit and send you a note on that.

Operator

We have a next question from the line of Tina Virmani from Kotak Securities.

U
Unknown Analyst

I have 2 questions. One is related to this other unallocable expense, which you talked about the impact of mobility segment also. But there is a sharp decline between FY '23 and FY '24. So was the mobility segment contributing to somewhere around INR 79 crores, 80 crores to the overall component? And how do you see it going forward? Like was it a onetime impact.

R
Rampraveen Swaminathan
executive

So Tina I think a way to look at it is a bit of the other way around, right? The mobility business -- unallocatable expense is X rupees and that unallocatable is what is shared between both businesses. So when 2 businesses become one, there's nothing to share right -- the 2 businesses became 1 in September, right? So we had 2 segments reported till September. On September onwards, we reported in one segment. And because there will be one segment, there's nothing unallocable, everything is allocable -- so they're tax simple as that -- so don't associate with the mobility business as such because it's not a cost driven by the mobility business. It's just a fact that, that common expense pool, which would have been attributable to 2 segments is no longer attributable to 2 segments, but there is only one segment. And therefore –

U
Unknown Analyst

And it will remain?

R
Rampraveen Swaminathan
executive

Yes, that will remain and therefore, has been fully attributed into the 3PL businesses segment numbers and it's reflected in the profitability of the business.

U
Unknown Analyst

Okay. So this kind of trend, we will see going forward also.

R
Rampraveen Swaminathan
executive

I don't -- I think [indiscernible] expense is pretty flat in the second half of the year, and that's actually what I think you should expect to see going forward because the MLL Hold Co. right now is pretty much just – Mahindra Logistics is now almost completely just a 3PL logistics company. All the individual network services business and individual entities, as is the most business.

U
Unknown Analyst

Okay. My second question is related to Bajaj Electrical contracts like you mentioned that you are already scaling down the contract. So which components are actually getting scale down in this particular contract and how much incremental positive benefit that it can mean on the EBITDA because it would have some impact on the revenue side -- but -- so what is the negative impact on revenue and what is the positive impact on EBITDA that can happen? ‘24 onwards.

R
Rampraveen Swaminathan
executive

I think the Bajaj Electrical business at peak was in line with what we had said at the time of kicking off the business. I think when you did the contract, we see up at INR 200 crore annual business. I think at our run rate, this probably peaked around there because, as you know, we had COVID impact and so on through the year, right, in Q4, I think revenue was around INR 14 crores right down, as I said earlier, down around INR 32 crores for the same period last year, right? On a going-forward basis, we expect that should be at the same level through the most of this financial year, right? From a margin perspective, the business we are doing now is all margin accretive. And therefore, there is no -- shutting down the business further does not necessarily add to margins, if that's the question you're answering that, I would add the margins, right? So I think we are right at a place where obviously, volumes are around 25% of what the contract was initially expected to be at, right? And that should confuse for most of this financial year, right? And as I said, the margins are positive today at the pre and post NDA level. And therefore, there is no earnings optimization to further decline of volume.

Operator

Thank you. Ladies and gentlemen, in interest of time, that was the last question for today. I would now like to hand the conference over to management for closing comments. Over to you.

R
Rampraveen Swaminathan
executive

Thank you very much, and thank you all for joining us today. I hope you've been able to answer all the questions and queries you had. If you do have any further questions, please feel free to reach out to SGA Investor Relations partner or the management of the company, and we look forward to have the opportunity to respond to those. Thank you once again for fact interest in the company and our results and a good evening to all of you.

Operator

On behalf of Mahindra Logistics Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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