VRL to sell bus division

VRL has announced its plans to sell  its bus division to Vijayanand Travel, a promoter entity, for Rs 230 crore in a slump sale. The transaction is subject to non-promoter approval.

The development, it said in a regulatory filing, would enable VRL's shift to being a pure-play player in the goods transportation industry.

The company is currently engaged in the businesses of goods transportation and bus services. 

Over the last two years, this segment's contribution to group revenue and margins had dropped below 10 percent. Even though the cost of fuel as a percentage of revenue increased from 37 to 47 percent between fiscal 2020 FY20 and FY22, the average revenue per passenger declined in the last two years from Rs 1,000 to Rs 924. "Bus operations margins have a drag-down impact on consolidated results leading to lower Ebitda margins," the company said in the filing.

Ebitda which stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation,  is a statistic used to assess a company's operating performance and  is  a proxy for the cash flow generated by its complete operations.

In addition, 60 of VRL's 277 buses are at least six years old, and 65 percent of them are over nine years. In essence, the management said, a new round of capex would have been required to reinvigorate this industry.

On completion of the transaction, VRL Logistics said it will report a significant profit at the proposed consideration of Rs 230 crore as against net worth of Rs 35 crore as on FY22, an internal document prepared the company reveals. 

It is understood that VRL will deploy the sale proceeds to fund its previously stated capex of Rs 560 crore, through which it plans to expand its truck fleet of 5000 and odd trucks. In order to take advantage of the Vehicle Scrappage Policy, which requires the disposal of commercial vehicles (CV) having over 15 years of service, Hubballi-based VRL Logistics announced in April that it is plans to add roughly 1600 customised trucks. In the foreseeable future, about 1200 vehicles will be replaced as it attempts to take advantage of the scrappage policy. The company operates in Karnataka, Maharashtra, Andhra Pradesh, Telangana and Goa. It has 47 transhipment hubs.