Until the early 1980s, people had fewer options to send postal articles and parcels, with the majority depending on the government-run post offices. Larger parcels were handled by regional- or national-level parcel companies.
A few years before Rajiv Gandhi ushered in the electronics and telecom revolution, a Mumbai-based company called Skypak created waves with the promise: ‘We’ll deliver wherever on earth, on time’. The modern courier industry was then born and it grew on the strength of its computer and telecom network to meet the demands of customers who wanted their articles to be delivered the next day anywhere in the country.
India Post had launched Speed Post to compete with the courier companies, while several regional players emerged in the country with a not-so-reliable track record in delivering articles on time. The courier industry has grown from its infancy to attain a size of Rs 14000 crore in 2015-16 and is expected to attain a turnover of Rs 20,000 crore by 2019.
The introduction of Goods and Services Tax (GST) and growth of e-commerce are set to benefit the courier industry, as more outsourcing of logistics is likely to take place on cost rationalisation and timely delivery to customers.
Here is a look at the prospects of prominent players in the industry:
Blue Dart Express Ltd (BSE: 526612, NSE: BLUEDART) Category: Mid Cap
Blue Dart Express Ltd, incorporated in 1991, is a global courier company with operations in 35,000 locations in 220 countries. It is a technology and infrastructure-driven company with state-of the-art Enterprise Resource Planning (ERP), MIS (Management Information Systems) and extensive warehousing network in 85 locations in 7 metros.
It was conferred with the “Business Superbrand” status for the 10th year in succession and Reader’s Digest Trust Brand Award for the 11th consecutive year. Last year, it made an investment of Rs 500 cr to strengthen its e-commerce support business by expanding its air hubs in Delhi and Mumbai with automated sorting facilities that will handle 500 tonnes of cargo daily.
Blue Dart has earned a net profit of Rs 21 cr in the June quarter, while sales rose over 7% to Rs 666.66 cr. It had earlier reported Rs 139.57 cr net profit for 2016-17 on a sales turnover of Rs 2680.87 cr. Earnings per share (EPS) has fallen sharply by Rs 8,89.
On a returns perspective, Blue Dart along with its peers has been faring poor, on monthly, quarterly and semi-annual perspectives with -14.23%, -11.54%, -3.05% respectively. But it fares well on financial ratios with return on equity of 32.56%, assets of 9.99, net profit margin of 5.19% and better liquidity ratios compared to peers.
Cash flow remains weak and is a cause for concern. Foreign promoters hold 75% stake and close to 5% is with general public. Trading at a Price Earnings Multiple (PE) of 83, it is over-valued by the market.
On technical charts, Relative Strength Index (RSI) of 28.24 is bearish and in oversold territory, while MACD line is below the signal line – indicating a selling trend. Average Directional Index (ADX) of 26.28 denotes range bound trading. Stochastic Momentum Indicator is bearish with oversold position with value of -89.58. Prices are trending below the 50 DMA of 4438.
Oversold position in charts are indicative of a possible reversal that could happen and hence investors need to look for ‘buy’ signals emerging.
Target: 4500 Duration: 4 weeks Strategy: Buy/Hold
GATI Ltd (BSE: 532345, NSE: GATI) Category: Small Cap
GATI Ltd was established in 1989 and is now offering services such as express delivery, supply chain solutions, freight forwarding, cold chain solutions, trading and GST solutions. It is a joint venture between GATI and Kinetsu World Express Inc of Japan, a leading world-wide logistics solutions provider. GATI, in Sanskrit, means speed with direction. It started in a small way with operations between Madurai and Chennai. In 2001, it launched the first millennium parcel express service, an exclusive cargo train between Mumbai and Kolkata in association with Indian Railways
In the March quarter, the company reported a profit of Rs 9,29 cr, representing a decline of 40% on annualised basis while sales fell 3.35% to Rs 410.28 cr.
On financial parameters, it is not on par with the competition – with return on equity of 5.19%, on assets of 2.18 and net profit margin of 1.74%. Liquidity ratios are negative although cash flow appears good. Promoters hold 32.86% stake in the company. Currently, trading at a price earnings multiple of 38.86, it seems to be valued moderately to higher by the market.
On technical charts, RSI of 35 indicates bearish position while ADX of 25 denotes range bound trading. MACD line is below signal line after a bearish cross over indicating a sell signal. Stochastic Momentum Indicator of -51 denotes oversold position but with a possibility of reversal happening any time. Prices are trending below the 50 DMA of 125.60.
Next possible uptrend could keep prices moving initially to 130 and 134 levels.
Target: 138 Duration. 6 weeks Strategy: Hold/Buy
Corporate Courier and Cargo Ltd (BSE:526737) and Skypak Service Specialist Ltd (BSE: 523846) aren’t actively traded in the market and hence not worth reviewing at this point of time.
Courier Industry in the News
The courier industry has been in the news in recent times thanks to aggressive technology infusion and expansion of existing operations of major players. The Rs 900-cr DTDC Express Ltd has grown through a series of acquisitions in India and abroad. The company is planning to invest Rs 600 cr in the next three years to expand its network through private equity infusion and public offering as well.
The Rs 240 cr First Flight Couriers Ltd has become the second logistics firm to buy own aircraft after Blue Dart to expand its operations. It will lease 3 ATPF aircraft, each with an 8 tonne payload capacity.
The courier industry is witnessing intensified activity thanks to economic growth, rising e-commerce volumes and the need for outsourcing logistics costs on implementation of GST. The year 2016-17 was quite stressful for the major players due to subdued economic activity and reduced consumer spending due to demonetisation, weak monsoon.
Courier players are aggressively expanding Indian and overseas operations. They are infusing technology, more investments in logistics management with buying aircrafts, new technology adoption and expanding of franchise network.
The industry expects to recoup such new capital investments in due course with premium service offerings and cost control measures. New business opportunities such as temperature controlled logistics, import based services. The industry needs a judicious mix of labour and technology at the backend to grow. The introduction of GST and the need to cut costs in warehousing for other industries is a boon for courier industry who can expect more outsourced business.