VRL Logistics Ltd is planning to sell its Bus Operations division.

VRL has announced plans to sell its bus division to Vijayanand Travel, a promoter entity, in a slump sale for Rs 230 crore. Non-promoter consent is required for the transaction.

According to a regulatory filing, the development will allow VRL to transition to a pure-play player in the goods transportation business.

Ebitda, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation, is a metric used to evaluate a company's operating performance and serves as a proxy for the cash flow created by its whole operations.

The company is currently involved in the transportation of commodities and the provision of bus services. This segment's contribution to group revenue and margins has fallen below 10% in the last two years. Even though the cost of gasoline as a proportion of revenue climbed from 37 to 47 per cent between fiscal 2020 FY20 and FY22, the average revenue per passenger fell from Rs 1,000 to Rs 924 in the last two years. "Bus operations margins drag down combined earnings, resulting in weaker Ebitda margins," the company stated in the statement.

Furthermore, 60 of VRL's 277 buses are at least six years old, and 65 per cent are more than nine years old. In essence, the management stated that a new round of capital expenditures would have been required to revitalize this industry.According to an internal document generated by the company, upon conclusion of the transaction, VRL Logistics will report a considerable profit at the proposed consideration of Rs 230 crore as opposed to a net worth of Rs 35 crore as of FY22.

VRL is expected to use the sale profits to pay its previously projected Capex of Rs 560 crore, which would be used to increase its truck fleet of 5000 and odd trucks. To take advantage of the Vehicle Scrappage Policy, which requires the disposal of commercial vehicles (CV) that have been in service for more than 15 years, Hubballi-based VRL Logistics said in April that it aims to add approximately 1600 tailored trucks. Around 1200 vehicles will be replaced shortly as it strives to take advantage of the scrappage policy. Karnataka, Maharashtra, Andhra Pradesh, Telangana, and Goa are the states in which the company operates. There are 47 transhipment hubs.

The Board of Directors of VRL Logistics Ltd approved the sale/transfer of its Bus Operations undertaking by way of slump sale on a going concern basis to an entity owned and controlled by the Company's promoters at its meeting on September 15, 2022.

The Bus Operations Division earned Rs. 20,483.75 Lakhs in revenue, accounting for 8.50% of the company's total income. The Bus Operations Division had a net worth of Rs. 3,452.09 lakhs as of March 31, 2022, which was 5.30% of the entire net worth of Rs.65,163.07 lakhs.