Future Supply Chain Solutions (FSCS)

Revenues from operations increased by 35 percent to Rs 276 crore in Q2

FY19, compared to last year's revenue of Rs 205 crore. On sequential basis
revenues rose 21 percent. Strong performance from the Contract Logistics
segment, which contributes more than 60 percent of total revenues, drove
the overall topline growth. Revenues from this segment surged to Rs 221
Crores in Q2 FY19 from Rs 151 Crores in Q2 FY18, which translates to a
year-on-year (YoY) growth of 46 percent. Express logistics segment
revenues grew by 11 percent whereas the temperature controlled logistics
reported a flat topline.

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Overall gross profit margins and operating margins declined as fixed costs
increased due to addition of new distribution centres as well as new
warehousing space. During the quarter gone by, FSC added ~0.8 million
square feet of warehousing space for its contract logistics segment. The
total warehousing space at the end of the quarter stood at 6.4 mn sq. ft.
During Q2, the company reported a significant improvement in average
warehousing revenue to Rs 123 per square feet, which translates to an
increase of 12 percent on a sequential basis.

FSCS’s integration with Vulcan Express, logistics subsidiary of Snapdeal,

which the company acquired in Feb 2018 for Rs 35 crores, remains well on
track. At the end of Q2, FSCS integrated 7 Vulcan warehouses with itself
and also initiated a pilot project for delivery of food and grocery. The
management continues to focus on rationalising Vulcan’s cost structure.
Efforts appear to be bearing fruits, as the subsidiary reported an
improvement in financial performance on a sequential basis. Vulcan’s
revenues for Q2 FY19 stood at Rs 37.2 crores (vs 31.2 crores in Q1 FY19)
while the gross profit came in at Rs 3.7 crores (vs 1.5 crores in Q1 FY19).

The company continues to diversify its revenue stream by adding non-

anchor customers. In the first half of this fiscal year, FSCS has added
Haldirams, Crompton Greaves and Voltbek Home Appliances (JV between
Voltas and Turkey-based Arçelik) and JK Helene Curtis (Raymond Group
Company) to its list of clientele. The revenue visibility for the business
continues to remain strong considering the sales pipeline of Rs 400-500
Crores.

The management expects the operating margins to remain at current levels

as the new warehousing facilities would take some time to reach the
optimum level. Addition of new clients will lead to an improvement in
capacity utilisation and aid the margin expansion over the long run.