Corporate Reports Business u the magazine of the corporate world Seeking a new avatar?

Blue Dart seeks to undergo changes, including a larger Jani, Kushroo Dubash and Clyde Coo- penetration into the b2c segment per in 1983, the company had seen

san steady growth in the 1990s and gradu-

j ally become a formidable name in the ay b document and courier segment, with orade its dedicated freighter operation being its critical differentiator. For d h l , it turned out to be a prized acquisition, when it decided to up the ante in the Indian market (FedEx was also a seri- ous suitor) during the early part of the last decade after establishing its pres- ence in India in the late 1970s. And, given its strong brand presence, d h l decided not to dilute its identity and let it operate and flourish with its orig- inal brand character, while inte- grating it with the group’s overall presence in the coun- Khanna: try. And the way the com- venturing out of pany has grown since then comfort zone? has proved that the German logistics giant had taken a judicious decision. The company’s revenue has grown by over five times since then (from sub R400 crore to almost R3,000 ome December end and Blue €50 billion revenue group is trying to crore) and it has also developed a Dart, the undisputed leader of develop e-commerce-centric services robust ground express business to Cthe air express business in India, as its next stronghold, after post and supplement its domestic air cargo would probably have laid out a major parcel. strength. “b d e l has a leadership posi- foundation for its future design. The In India, a happening market of tion in the domestic air express seg- promised future scene encompasses a d h l , the mandate to harness e-com- ment (a market share of 47.7 per cent) slew of changes, the most important merce opportunities has been largely and a dominant presence in the pre- of them being a larger penetration given to Blue Dart. “The group is mium segment of the road transpor- into the b2c segment, to align with fully behind Blue Dart to expand our tation market (14.4 per cent). b d e l’s the e-commerce boom in the coun- e-commerce centric business in the integrated air and surface transporta- try. In simple terms, it means serving country,” confirmsM alcolm Monteiro, tion network continues to facilitate its a larger volume of retail customers, c e o, d h l eCommerce India. The d h l strong competitive position. The com- on a pan-Indian basis. Belonging to group’s presence in India is defined by pany’s extensive network (over 35,000 the global logistics giant d h l group of five clear verticals or companies – d h l locations in India) and established Germany (which acquired Blue Dart Global Forwarding, d h l Supply Chain, infrastructure act as entry barriers and in 2004), the company’s riding the d h l Express, Blue Dart and SmarT- give it a competitive advantage over its wave of e-commerce, however, is not rucking. The latter is the latest addi- industry peers. Moreover, b d e l is the a country-specific strategic change; tion to the group’s Indian fold, meant only company in the express courier it’s part of the larger group design to to establish a staggering advanced fleet industry in India to operate its own make the most of the new opportu- size of over 10,000 smart vehicles for aircraft fleet. The agency believes that nities emerging in the space globally. fast express road transportation, pow- b d e l will continue to be the preferred “E-commerce logistics is going to be a ered by Internet of Things technology logistics partner for institutional cus- $3.4 trillion business globally by 2020 (IoT) in the next 10 years. tomers,” noted credit agency India and it is a domain of strategic impor- Talk to any observer in the mar- Ratings & Research (a unit of Fitch tance for us,” Charles Brewer, c e o, d h l ket and he will tell you that the inor- group) maintained in a recent report eCommerce, told Business India in a ganic component of d h l’s empire in on the company, wherein a stable out- telephonic conversation from Singa- India is probably the most shining look was awarded. pore, while emphasising that the over feather in its cap. Founded by Tushar “We are close to achieving the $1

u 44 u october 22-november 4, 2018 Business India u the magazine of the corporate world Corporate Reports billion revenue milestone in India in a cumulative sense,” discloses Malcolm. In a country where a clear billion dol- lar club is yet to emerge in the logistics space, despite immense potential and theories being spelt out with monoto- nous regularity, this is not a small feat. And here, Blue Dart, the only enlisted firm in d h l’s Indian stable, is making an immense contribution. Nothing surprising, the company remains the most visible face of the group in the market – at every outlet of the group companies, you will also find a con- scious co-branding drive, with Blue Dart’s name prominently mentioned. “They call India Blue Dart’s country in their promos,” says a senior indus- try representative. “This is an intel- ligent brand building drive. Despite belonging to a leading global player now, they are consistently telling their Brewer: e-com deliveries to be next major global vertical customers that they are rooted in India. It does lend emotional touch to vanguard of adopting advanced tech- service uses mobile technology in tan- their appeal.” nological applications. dem with specially designed lockers to “A major reason of the formidable ensure customers get all-day access to Formidable positioning positioning of companies like Blue their shipments from a safe, secure and Nearly 50 per cent and 15 per cent Dart is that they have been extremely convenient facility. Today, Blue Dart market share respectively in domestic receptive to the changing techno- has parcel lockers at 121 locations. air cargo and ground express itself tells logical wave and do not hesitate in Air Express cargo, however, still the formidable positioning of Blue Dart adopting what others may discard remains the major calling card of Blue in the Indian market. And, post-ac- considering it too futuristic,” says Dart and its most effective weapon for quisition, the company seems to have Kushal Nahata, c e o, Far Eye, a logistics its positioning in the markets offering found a new spring in its step. When tech start-up, which has also received nearly 500 tonnes capacity every night. it was acquired in 2004 (for R730- funding from d h l . On the technolog- And it’s a matter of a larger debate as odd crore by d h l for an overall 75 per ical advancement front, the company what has precisely helped the com- cent equity share), its topline was still claims to have digitised the entire pany to keep on ticking in a business short of R400 crore mark. But now it logistics chain, customised reports and which has turned out to be so difficult has swollen to nearly R2,800 crore. The automated performance updates, a pis, for others? It’s no secret to anybody addition of a well-oiled ground divi- 24x7 shipment visibility, online dash- that others like First Flight, Gati (in sion express (with a current fleet size boards for real time status, etc. association with ), Captain of about 2,000 outsourced vehicles) It is also offering multiple customer Gopinath’s Deccan 360, etc, had for- has further strengthened its presence, convenient payment options such as ayed in to the business. However, they giving it the opportunity of getting Cash on Delivery (CoD), digital pay- could not keep their ventures afloat the best of both the worlds – air and ment options including 15 digital for too long. “You can only survive in ground. It has gradually expanded its wallets, Mobile Point of Sale (MPoS) this business if you have captive cou- air fleet – presently operating six Boe- for debit and credit cards and United rier volume,” observes Akash Bansal, ing 757 freighters – responding to Payment Interface (u pi). In 2015, Blue head (logistics), Om Logistics. “If you the rising demand in the market and Dart became the first Indian company are relying on consignments to be pro- the company is seen as being in the to launch Parcel Lockers in India. This vided by others, then, the chances of failure are high. Blue Dart has primar- Financials (R crores ) ily been a courier and not a 3pl com- Year end 2015 2016 2017 2018 pany offering several sets of services. Total Income 2,292.98 2,582.49 2,708.69 2,813.39 With focus and determination, it has made the most of the opportunity in Total Expenditure 2,044.67 2,221.54 2,416.45 2,531.94 the air express business. The overall EBIDTA 248.31 361.28 292.24 281.45 impression in the minds of their cus- Profit Before Tax 193.56 289.92 217.06 211.78 tomers is that they are reliable”. Profit After Tax 126.84 189.98 139.57 142.10 One of the leading logistics play- Reserves 273.34 446.86 497.96 597.49 ers in the country, Om too had toyed

u 45 u october 22-november 4, 2018 Corporate Reports Business India u the magazine of the corporate world san e-commerce was identified as a sig- j ay b nificant vertical for the future. And

orade we know for sure that India is going to be an important market with only 4 per cent of consumers buying online,” says Brewer, while adding that glob- ally the e-commerce division is serv- ing all major giants in the e-commerce or retail space like Amazon, Walmart and Alibaba in some Asian countries. “Blue Dart is well poised to expand our e-commerce-centric business in the country. It has a direct consumer con- nect by way of delivering plastic cards, passports, etc. More penetration in the segment would be a logical extension,” points out Malcolm. Blue Dart, as Khanna claims, has been serving e-commerce com- panies since the early part of the decade when the great India online Monteiro: Blue Dart is poised to spearhead e-com centric services market story began. And by now, the vertical has become a major pillar of with the idea of getting directly into Today, the six freighters deployed the company’s business accounting the air express business with dedi- by Blue Dart operate between six for nearly one-fifth of its revenue. “We cated freighters four years ago. But major metros and – they have joined hands with all leading com- it had then abandoned the idea and offer bulk of the volume. Delivery panies in the space – Flipkart, Amazon, today primarily uses the belly space at strategic airports is then comple- Snapdeal, etc. Our b2b to b2c business of several passenger airlines for nearly mented by its ground capabilities for ratio today stands at 80:20, but the lat- 4,500 tonnes of monthly domestic door to door delivery. E-commerce, ter is growing at a brisk pace,” he says. air shipments. “Our biggest equity in banking services, drugs and pharma, The Indian e-commerce sector, esti- the market, I guess, is the reliability financial services, automotive, medi- mated to become a $28 billion busi- factor,” says Anil Khanna, m d, Blue cal equipment, textiles, etc, are some ness by the end of the current fiscal, Dart, who has been spearheading the of the leading verticals contributing has clearly excited players across the company since 2007. “If anybody, to the kitty of the company. It is com- board in the Indian organized logis- be it a corporate customer or a retail monplace knowledge in industry cir- tics space. According to Shamsher customer books something with us, cles that Blue Dart charges a premium Dewan, vp (corporate ratings), ic r a, he is assured that his consignment price for its services, especially for its the growing demand has already cre- will be delivered on time. And all air cargo business. But that has not ated operational dynamics in terms of our efforts are directed to sustain this really turned out to be a major hurdle an e-commerce centric logistics eco- reliability factor”. because of the consistency in delivery system. “When it comes to the struc- There have been some critical dif- it has maintained. “There is this per- tural logistics play in e-commerce, we ferentiators to Blue Dart’s strate- ception that we are charging higher notice three set of players. There are gic planning too in terms of keeping than our peers. But look at our e b i ta captive logistics units of players like its freighter operations in a perma- margin, which is in the 12-13 per cent Flipkart and Amazon, there are dedi- nent viable mode. For instance, 10 range. It was much higher in the past. cated e-commerce supply chain play- years back, when m i h a n , The point is: we are spending extra ers like Delhivery and E-com Express was aggressively pushed by the then for superior and guaranteed services,” and then there are traditional play- Civil Aviation Minister Praful Patel as Khanna counters. ers like Blue Dart, Gati, t c i Express, India’s answer to the FedEx cargo hub etc. For deliveries in the metro circles, in Memphis and there were many will- The B2C game plan captive divisions and dedicated com- ing takers to that theory, Blue Dart had The most interesting bit, which may panies are currently being used. For chosen to stay away from the chorus. trigger a major tweak to Blue Dart’s the larger pan-Indian deliveries, tra- “We did not believe that the hub and basic identity, is its developing major ditional companies are contracted,” spoke model will work for air cargo strength in the b2c segment by align- he underlines. He, however, adds that in India. Our own analysis was it will ing with the e-commerce sector – pricing pressure is taking a toll on the work more on the basis of airport to something that the group would recently formed dedicated companies airport movement, where the vol- want it to accomplish and is support- for e-commerce deliveries and this has ume is high and that is what we have ing it to the hilt. “In 2014, the group flung open the doors much wider for pursued,” points out Khanna. had issued a 2020 strategy wherein the traditional players especially in

u 46 u october 22-november 4, 2018 Business India u the magazine of the corporate world Corporate Reports

Ground express strength complementing air capabilities

the above 2 kg weight category. Jharkhand, West Bengal, Pondich- defined by Walmart’s acquisition of It is amidst such a scenario that Blue erry, Daman & Diu, Chandigarh, etc. Flipkart, has raised the expectations Dart has blown the bugle announc- “By doing this, Blue Dart is proba- that the next big frontier for the stake- ing its plan to go all out in the e-com- bly trying to send the message that holders in the business would be to merce centric services and make after India Post, it has the most robust give a serious push to hyper-local it a major vertical for its business. network in the country,” observes deliveries (grocery and other smaller “With air express leadership, ground Amit Kumar. household items). So does Blue Dart, express strength and backing from the as it seeks to expand its b2c vertical, group, the company has the where- Growth pace slackens also intend to develop such a micro- withal to aim for a leading position The company claims that it is spend- delivery structure? “It is not there in in the e-commerce delivery vertical,” ing R200 crore in expanding the pin our near to medium run scheme of observes Amit Kumar, leader, logistics, code drive, which includes open- things. Getting into the hyper-local Ernst & Young India, and the author of ing about 940 offices in the hinter- segment is not an option we are toying the recently published book, Last mile land and establishing local partners. with now. Our e-commerce expansion delivery simplified. Plus, the company has also initiated drive will remain restricted to fashion, Late last year, the company, which a parallel cluster development pro- books, and electronic items,” Khanna generates 90 per cent of its revenue gramme to catch m s m e s in Tier II loca- clarifies. from 30 top cities in the country, tions and lower. Dubbed as ‘The Rise’ Domestic low cost major Spice Jet decided to expand its reach, covering programme, the company has iden- created some flutter recently when about 19,100 pin codes in the coun- tified 104 clusters with a presence of it announced launching a dedicated try, which will literally give it access to s m e s and industrial areas in 17 states. freight services division, SpiceXpress. every Indian home. “This was a crit- These 17 states account for 90 per cent A dedicated move by a scheduled car- ical decision for us. At that point in of India’s Gross Domestic Product. The rier is seen to be significant in terms time, our pin code coverage was 6,164. 500 towns (apart from the top 30) tar- of creating a new wave of competition We felt we not doing enough to focus geted are with a fair density of indus- in the market. Even with belly space on smaller cities. It was a must for us trial clusters and with an opportunity cargo offering, dominant airlines like to both expand our b2c business and of generating additional business. On SpiceJet and Indigo have attained vol- break new ground in our established the basis of this major expansion drive, ume figures of 43,000 and over 90,000 b2b business. This programme was the company is expecting its b2c busi- tonnes respectively on a monthly basis rolled out in January and it has been ness to become as strong as the existing in the domestic 420,000 tonne air executed successfully,” Khanna says. b2b vertical. “We are looking at 50:50 cargo market. SpiceJet did not respond The company claims to have covered ratio for both components by the end to a detailed questionnaire sent to 17,697 pin codes by end-September. 2020 fiscal,” underlines Khanna, while elicit inputs on the precise plans of This includes 100 per cent pin code adding that the company is targeting SpiceXpress but, in a press statement, coverage in 16 states and Union terri- a R5,000 crore topline level in the next it has announced adding four dedi- tories, which include Madhya Pradesh, four-five years. cated freight aircrafts (Boeing 737-700) Bihar, Odisha, Uttar Pradesh, Haryana, The recent big-ticket developments by March 2019. , Punjab, Goa, Telangana, Gujarat, in the Indian e-commerce space, best Its freighter service initially will

u 47 u october 22-november 4, 2018 Corporate Reports Business India u the magazine of the corporate world

has undoubtedly been a sound com- Dedicated freight operations give pany. But in the last couple of years, it Blue Dart a cutting edge seems to have somewhat deviated from its value plot. For instance, there is that larger feeling that it is not as prompt as it used to be in responding to the cus- tomers’ feedback. But probably it hap- pens with all companies which run too fast for a stretched period of time. With pincode coverage extension and further b2c penetration, they are prob- ably looking to revitalise themselves,” says an industry veteran, who did not wish to be named. Supply chain head of a leading m n c medical device firm which has been using Blue Dart services for quite some time speaks (on the assurance of ano- nymity) no differently. “That sense of have a bit of domestic and interna- e-commerce, including mobile hand- participation, which Blue Dart used to tional mix covering destinations like sets, has now grown to 30-32 per cent bring to the table while serving its cus- Delhi, Bengaluru, Amritsar, Guwa- in the overall domestic air cargo pie,” tomers is depleting. While in metro hati, Hong Kong and Kabul. “With our he underlines. and Tier 1 circuits, they are definitely proven operational capability, this is A more serious concern for Blue strong, they also struggle when it an extension of our ‘belly cargo’ ser- Dart is probably the slackening pace comes to connecting to the locations vice to a ‘dedicated freighter’ with Boe- of its growth numbers. For instance, down below especially in the north- ing 737 aircraft. We are excited about its sales grew in low single digit in east. My own observation is as the the tremendous potential the logis- 2017-18 reaching to R2813 crore competition intensifies in the market tics industry offers. There is a huge from R2708 crore in the previous fis- and new players pop up in the logis- untapped market for air cargo ser- cal. There has also been a declining tics space, they have also begun chas- vices in India and a player like Spice- trend in its bottomline number since ing volumes,” he points out. Jet – with its low cost structure – is best 2016 fiscal (see chart – Blue Dart finan- Analysts also predict this value (Blue suited to address this need,” says Ajay cial numbers). Point this out to Khanna Dart’s major calling card) vs volume Singh, c m d, SpiceJet. and he responds: “Our volume growth equation coming more prominently Does this move entail some threat has been good. But the growth has in play as the company ventures out to Blue Dart’s leadership position since been higher in the ground express of its comfort zone of 30 cities, which Spice Jet is aiming to jack up its cargo business where rates are just half of have been the bedrock of its business capacity to 900 tonnes per day from the air cargo. And that is reflecting in so far. “Slackening of growth numbers the existing base of 500 tonnes after our numbers. Plus, we have also been in the recent past is not an issue now the induction of four freighters? “Any investing in our future plans.” Accord- that they have an expanded finan- competition is welcome. We have our ing to Bajaj, “there is a world of differ- cial base. The real challenge for them own plans to expand our capacity by ence in air cargo and ground express would be to maintain value driven inducting one more Boeing 757 aircraft charges. While a contracted deal for a e b i ta , which has been the case in the next year,” Khanna says. “It is difficult corporate client in air express could be past,” observes Arindam Som, analyst, to say how the scenario will unfold in in the range of R40/kg, the same con- India-Ratings. “Reaching out to the the domestic market after SpiceJet’s signment in ground express would be hinterland and turning it into fertile direct entry into the freighter opera- R20/kg or even less”. He adds that 90 business ground would be a different tions, because scheduled carriers have per cent of e-commerce consignments ballgame altogether. The value equa- started bleeding again financially, pri- are shipped by ground express to save tions of the game may not work there marily due to rising oil prices. That costs. “The improvement in highways and Blue Dart may have to learn new is why they are probably focussing has ensured that you can send your things and unlearn a few things while on international destinations for the goods at a matching delivery time in it tends to endear itself to non-metro cargo service because those services the 600-800 km radius.” consumers where the demand for low- will give them better margin,” observes priced items is humongous,” adds Amit Amit Bajaj, the newly elected presi- Challenges ahead Kumar, Ernst & Young. Prima facie, dent, Domestic Air Cargo Agents Asso- Losing the growth momentum on vital these seem to be pertinent advisories ciation of India (d a c a a i ). He, however, parameters notwithstanding, there is for Blue Dart, as it seeks to assume a emphasises that, for all stakeholders also an emerging feeling in the mar- new avatar. in the business, tapping e-commerce ketplace that a sense of complacency u r i t w i K s i n h a is the key agenda now. “The share of seems to have set in the company. “It [email protected]

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