Surface express transporters who move relatively higher value consignments in a time-bound manner are seeing good growth in their businesses. TCI Express Ltd, which reported a strong double-digit growth in revenues in the March quarter (up 23%), said it expects the good performance to continue in FY19 also.
The surface express division of GATI Ltd, another logistics company, registered double-digit volume growth in the second half of FY18 and expects the growth momentum to continue.
Nevertheless, growth is not uniform across transporters. Goods transport revenues at VRL Logistics Ltd rose by about 11% last quarter. Consolidated revenues of GATI are up 9.6%. Blue Dart Express Ltd, which offers express air, transportation and distribution services, reported 6% rise in revenues last quarter.
Apart from the stabilization after the implementation of the goods and services tax (GST) and a cyclical recovery, the surface express logistics industry is also seeing a leg-up from the shift to organized transporters. After the implementation of GST and the e-way bill, customers can claim input tax credit only when they use organized logistics services. Adoption of new processes and the ability to offer solutions in the new tax regime is helping them attract fresh business, though compliance has raised costs.
TCI Express says roughly half of the growth is being driven by small and medium enterprises, with the rest coming from the automobile, engineering, textiles and pharmaceuticals sectors. While the e-way bill is not being implemented strictly right now, TCI Express expects this to happen after the next national election, which should help accelerate the shift to organized surface transporters. Also aiding the surface transport industry is the shift from air cargo to road transport. The price differential and rise in fuel costs are capping the growth in air cargo, claims the TCI Express management.
The commentary is encouraging, especially given the perception that benefits from GST have been rather gradual for the logistics sector. However, as an analyst with a domestic broking firm warns, one should wait for longer period data to gauge trends.
In the new tax regime, a significant portion of the new business is coming from retailers or firms with consumer-facing businesses. It involves transporting goods from warehouses to stores in a particular area or a city. So, the business may be lumpy or cyclical. Also, it has to be seen how sticky the customer will be to tariff changes, says the analyst cited above.
Meanwhile, hopes are firmly placed on the e-way bill and its ability to drive business to the formal sector. “E-way bill adoption across the states in the first quarter of FY19 holds tremendous promise for organised logistics,” GATI said in a post-March quarter results statement.livemint