1、Research ReinventedSmartkarma unites Independent Research Providers,Investors,and Investor Relations in one network.At Smartkarma,We Do Things DifferentlyWelcome to another Smartkarma eBook-a showcase of selected Insights from the Smartkarma network.These eBooks are meant to be an illustration of th

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6、ch piece.This helps independent Insight Providers monetise their research and incentivises them to produce truly high-quality,differentiated work that stands out from the rest of the market.In the following pages,you will be able to see for yourself a sample of the efforts of Smartkarma and the Insi

7、ght Providers publishing on our platform.If you want more such Insights delivered to you in real time on your desktop or mobile,visit .Cover Photo by Pat Whelen on UnsplashPranav BhavsarIndian Consumer Analyst|India Independent InsightPranav Bhavsar is the Founder of ASA Capital Management,focusing

8、on research on consumer themes and companies operating in India or global companies that have significant exposure to India or the Indian economy.Areas of ExpertisePrimary Asset Class:EquitiesGeography:Asia PacificCountries:IndiaSectors:Consumer Discretionary,Consumer StaplesContent VerticalsEquity

9、Bottom-UpNitin MangalIndian Accounting Research AnalystNitin Mangal is a SEBI registered Research Analyst with more than 10 years of experience in Indian equities.He is a Pioneer of Corporate Governance and Accounting Research in the Indian Market.Areas of ExpertisePrimary Asset Class:EquitiesGeogra

10、phy:Asia PacificCountries:IndiaSectors:Consumer Discretionary,Consumer StaplesContent VerticalsESG,Forensic AccountingINSIGHT PROVIDERSThematic(Sector/Industry)Indian E-CommerceLogistics-ShippingInto The LimelightBy Pranav Bhavsar|03 Aug 2020EXECUTIVE SUMMARYThis is a joint insight with Nitin Mangal

11、The Indian logistics industry was one of the hot topics just a couple of yearsback pursuant to the revolutionary GST reforms along with the introductionof the E-way bill.It was expected that the entire dynamics of the industrywould change due to extinction of various taxes especially octroi,however

12、inreality it was found out that this was just another hype and that the industrystill functions more or less the same owing to poor GST implementation perse.Fast forward to 2019-20,opportunities galore for logistics,but this time it isattributed to the triumph of e-commerce in India.E-commerce in In

13、dia hasalready taken-off,however,it is set to champion the rally in the comingyears;with a significant share owing to the emergence of JioMart.Jios visionof digitalisation augurs well for the industry,probably being a game-changer.On the back of leading global investors,it is expected that JioMartwi

14、ll turn the tide in the logistics market,quite similar to what witnessed inthe telecom market.The market share dynamics would also change,asAmazon and Flipkart which combine to form 90%of the e commerce market,will see their market shares decline.Additionally,the pandemic and newsocial distancing no

15、rms can also turn out to be the icing on the cake.The primary crux of this insight is to study the Indian logistics sector and todetermine the reaction towards expected boom in e-commerce.Currently,the logistics industry has a good mix of established listed players like BlueDart,private/startups lik

16、e Delhivery and captive players like ATS,offering awide range of services across surface,3PL and e-commerce.Indian E-Commerce Logistics-Shipping Into The Limelight3As per our channel checks,we realised that the upcoming e-commercetraction would act as a Santa to all the players;since there is no par

17、ticularplayer who is a leader across all the services.The pie will be shared by thoseengaging in surface and 3PL as well,apart from the e-commerce orientedentities.However,the key is that e-commerce services of all the players willtake the hot seat,and would represent close to one-third of revenues.

18、In the battle of public players vs the startups,we presume that the startupshave a leading edge,especially due to their already-high specialisation in e-commerce and the ability to get funded regularly.Lastly,our preferred pickamong all the players would be E-kart,Delhivery and to some extent,Grabin

19、 the private space.Among the listed entities,we assume Blue Dart Express(BDE IN),Mahindra Logistics(MAHLOG IN)and TCI Express to gain arelatively higher advantage.DETAILInsight FlowThis Smartkarma Original deep dives into the Indian e-commerce logisticsindustry.We start the insight by providing conc

20、lusions and preferred ideasfor a high-level overview along with identifying key risks for our core thesis.We start the insight with why GST and E-Way bill were overrated game-changers for the industry,which did not yield the expected transformation.We then present key drivers for Jio,understanding t

21、he Indian E-commercevalue chain along with the Indian Internet landscape which altogether ispoised to yet again provide a transformative power to the Indian LogisticsIndustry.We then present our takeaways from channel checks along with ourthoughts on how changes in accounting standards are changing

22、profitabilityand return ratios in the Industry.We then profile each player,public and privat,e across industry sub-segments,dwelling on their key offerings,operational forte,revenue drivers,key risks and their valuations.Lastly,for the reader who was to understand the Indian Logistics Industryfrom s

23、cratch,we provide a broader top-down overview of the IndianLogistics Industry highlighting key sub-segments and transformations thatthe industry is witnessing.Indian E-Commerce Logistics-Shipping Into The Limelight4Companies covered in this Insight are as underCompanyStatusMarket Cap3M ATVAmazon Tra

24、nsportation ServicesPrivateNANABlue Dart Express(BDE IN)Public51,485 Mn2.0 MnDelhiveryPrivateNANADTDCPrivateNANAEcom ExpressPrivateNANAE-kartPrivateNANAFedEx IndiaPrivateNANAFuture Supply Chain Solutions(FSCSL IN)Public5,902 Mn6.4 MnGati Ltd(GTIC IN)Public5,652 Mn3.1 MnGrabPrivateNANAMahindra Logist

25、ics(MAHLOG IN)Public22,559 Mn4.6 MnSafexpressPrivateNANASpeed PostPrivateNANATCI Express Ltd(TCIEXP IN)Public26,068 Mn13.3 MnTVS LogisticsPrivateNANAUPS IndiaPrivateNANAXpressbeesPrivateNANAMarket Cap in INR Mn,As of 31.07.2020;Source:S&P Capital IQWhats Original?The Insight deep dives into the Indi

26、a Logistics Sector,with a specific focus ofE-Commerce Logistics.The Originality for the Insight comes in the form ofin-depth expert interviews(Channel Checks)that have been conducted forthis Insight and Forensic issues that highlighted so the companies in thesector can be avoided.The Insights Origin

27、ality is also amplified due to the coverage of both publicand private companies operating in the sector,making this appealing toboth public and private market investors.Indian E-Commerce Logistics-Shipping Into The Limelight5Conclusion&Preferred IdeasAfter transitioning to GST and E-way bill,the Ind

28、ian Logistics Industry,especially the one catering to E-Commerce is once again entering thelimelight.The Industry must prepare for the E-Commerce storm,lead by Jiothe strong catalyst.Most of the players offer services to e-commerce,however,the specializationdiffers.It is also observed that unlisted

29、players have caused havoc in termsof pricing and changed the complete dynamics of the industry.The listedplayers now stand at a greater risk of losing their market share.TCI Express with its focus on B2B customers,armed with a strong balancesheet and healthy growth is expected to be one of the least

30、 disruptedplayers.Blue Dart Express(BDE IN)is poised for growth as it restructured its balancesheet.Gati Ltd(GTIC IN)on the other hand neither had strong operational prowessnor had the acceptable governance,however,merger with Allcargo Logistics(AGLL IN)can prove a game-changer and can be a much nee

31、ded rescue.3PL players have transformed into asset light models and hence are moreflexible.Mahindra Logistics(MAHLOG IN)stands apart in this segment as itcan grow through double recovery help.Future Supply Chain Solutions(FSCSL IN)in contrast has forensic troubles despite growing in high doubledigit

32、s.Since FSC derives most of its revenues from the future group,anyfavourable news regarding the same would be aa delight for FSC.According to us,it is the captive and the startups that will lead thebeneficiary-line and rise with the Jio tide.Simply because of their high reachand deep-pocketed invest

33、or parentage.Out of all the players,E-kart will go the furthest distance as it tweaked itsbusiness model,enabling it to achieve a mouthwatering growth since thelast three years.E-kart was also the only company to have a significantpositive cash generation in F19.This coupled with cleaning of the boo

34、ks andhigh capex give a greater weight towards E-kart.Delhivery might also significantly benefit from the E-com boom,given itsoperational prowess and super-positive channel checks.Not to forget it isthe only unicorn in the industry which got funded the maximum in therecent years.Last but not the lea

35、st,despite of their minuscule revenues in front of rest ofthe start-ups,Grab can also see a huge traction in its revenue growth andbalance sheet strength.Jios impact on the logistics sector is expected to beparalleled to the one witnessed in telecom.JioMarts vision of digitalizingthe kiranas augers

36、well with Grabs business model of being hyperlocal.Indian E-Commerce Logistics-Shipping Into The Limelight6If JioMarts execution is equal to the hype,the industry might see apossible consolidation phase which could get nasty.Key Risks What Can derail ourcore thesis?Sharp Deceleration in GDP/Broader

37、Economy:The core sector thesisdwells on the premise that the current slowdown will not declaration furtherand will be limited to the current impact.Any further deceleration due tounforeseen factors could lead to a sharp contraction in consumer spendingwhich may put the broader sectorial thesis at ri

38、sk.Jio fails to deliver as per expectations:The core sector thesis also dwellson the premise that Jio will deliver as per expectations of disrupting theIndian E-Commerce Retail Sector.Any change of Jios plan with a strategy ofnow focusing on E-commerce and Omni Channel Retail will again put thecore

39、Investment Thesis for the sector at Risk.Company specific risks:High Competitive Intensity and cash burnacquisition strategy for Startups like Delivery will pose a significantheadwind for our pick Blue Dart.For Mahindra Logistics high dependencyon Automotive Industry can keep returns muted.For TCI s

40、lowdown in theeconomy which will impact MSME and SME Growth will post significantRisks to revenue growth.For the private players ability to attract investorsbased on the growth prospects of the sector will remain the primary concern.Any change in Investor Interest due to slower growth could alter se

41、ctordynamics.Overrated Industry Game Changers-GST&E-Way BillLogistics industry was under a limelight few years back,due to the alarminggovernment and regulatory norms.As couple of years passed by and yet nosignificant traction seen in the industry as expected,the future providesanother chance to see

42、 a fortune change in the form of expected E-commerceboom caused by none other than Jio.We first revisit the industry gamechangers back in time.Indian E-Commerce Logistics-Shipping Into The Limelight7GST Implementation:The implementation of the goods and services taxhas transformed the logistics indu

43、stry.It made most industry playersreorganize their supply-chain and outsourcing models,and reduce thenumber of storage points.However,GST has not led to satisfactory benefitsso far,mainly due to many rate changes,the time taken by the industry tounderstand the process,and the sizeable preparation ne

44、eded for supplychain re-orientation.Even though GST rates seem to have stabilised now,we expect actions forre-designing of supply chains to pick up ahead,driven by technology andinnovation.As a result of this new tax model,individual state administrativeborders are irrelevant for most industries;thi

45、s is driving force behind therationalisation of logistics operations and infrastructure.Due to the input-credit method,supply chains will eventually come into the formal taxsystem.The GST system works on the basis of taxing only the component of valueaddition at each level of goods or services suppl

46、y,by off-setting the tax paidalready at the previous level of the value chain.Thus,it automaticallyincorporates a mechanism that compels every level of the value chain toensure that the appropriate tax has already been paid in the previous level.Indian E-Commerce Logistics-Shipping Into The Limeligh

47、t8E-Way Bill:E-way bill complements GST,resulting in seamless movementof goods within and across states with proper government records forbuyers,transporters,and sellers.With the E-Way Bill,the government ismoving towards self-declaration with uniform reporting.It is also enhancingthe removal of che

48、ck posts that are to be replaced by random checks bydesignated government officials.The E-way bill will not only improve self-compliance with matching data of outward and inward supply but also thecollection of input tax credit.It will also reduce the intervention of officialsand use of technology t

49、o facilitate faster movement of goods.Source:https:/ewaybill.nic.in/EWB2YrJourney.pdfAs evident from GST collection data and E-way bills data in above chart,though GST was being implemented,but it has failed to reap desired benefitfor the industries and economy on the back of poor implementation and

50、frequent changes in the regulation.As a result,the Logistics industry wasnot able to witness the growth on expected lines.Jio Platforms-Eye of the StormThe Jio EffectReliance Industries(RIL IN)forayed into the telecom sector with the launchof Jio in 2016.Jio has been offering aggressive packages and

51、 transformed theface of telecom industry in India by making voice calling free and consumerto only pay for data.Jio offered data at dirt cheap price which lead to IndiasInternet Revolution whereby most of the population started using mobiledata.Indian E-Commerce Logistics-Shipping Into The Limelight

52、9Source:TRAILow cost of data,destroyed a couple of telecom companies,crashing theirARPUs which led to a huge consolidation in the sector.Source:TRAIWith low data cost per GB,average data usage has continued to increaserapidly.Indian E-Commerce Logistics-Shipping Into The Limelight10Jio Platforms-Can

53、 it repeat the telecomstrategyReliance has a deeply integrated strategy that aims to bring the physical anddigital divide among consumers.Jio also aims to leverage its retail brands aswell as digital assets to provide the customer with an 360 degree integratedexperience.While we will be touching upo

54、n certain aspects of Reliances e-commerce strategy,a complete deep dive on Jio Platform is beyond the scopeof this insight.Source:Reliance 2020 Annual ReportIndian E-Commerce Logistics-Shipping Into The Limelight11Jios Digital Eco System.;Source:Reliance 2020 Annual ReportSource:Armed with a cash wa

55、r chest and deep-pocketed strategic investors,theimpact of Reliance Jio will be lasting and transforming for the sector.Indian E-Commerce Logistics-Shipping Into The Limelight12Reliance Retail-The largest offline retailer inIndiaReliance Retail,part of Reliance Industries is one of the largest retai

56、lers inIndia.As of F20,Reliance retail has revenue of over USD13 bn and is amarket leader in three of the largest retail categories i.e.food&grocery,electronics and fashion retail.Reliance also has one of the largest storenetwork.Reliance Retail is the largest grocery retailer in India with a presen

57、ce of 797stores across 180+towns and cities.Reliance Retail endeavors to bringextensive selection of fresh produce,items of daily use and generalmerchandise in a modern setting and at an attractive value proposition.Inorder to achieve this,Reliance Retail operates four engaging store conceptsviz.Rel

58、iance Fresh,Reliance SMART,SMART Point and Reliance Market,delivering benefits of modern shopping experience to consumers.Source:Reliance 2020 Annual ReportIndian E-Commerce Logistics-Shipping Into The Limelight13Source:Reliance Investor PresentationStrong Brand Partnerships in Electronics,Grocery a

59、nd Fashion RetailReliance Retail also has the right brand partnerships that are spread acrossthe value spectrum in across core categories of Electronics,Grocery andFashion with a combination of in-house and third party local andinternational brands.Source:Reliance 2020 Annual ReportSource:Reliance 2

60、020 Annual ReportIndian E-Commerce Logistics-Shipping Into The Limelight14JioMart-Hyperlocal to see disruption andsecond chance for logisticWe expect Jios core focus will be JioMart.And JioMarts core focus to beHyperlocal where Reliance will aim to leverage its offline stores under theOmni Channel S

61、trategy as well as leverage the“Kirana”(Indias millions ofMom and Pop Stores).Reliance aims to offer back-end support andfulfillment to these mom and pop stores and hence are expected to changethe dynamics of Last Mile,Warehousing and Express Logistics dramatically.The new initiative by Reliance and

62、 with the huge capital raised,it isexpected that logistic sector is poised to get second chance for spectatorgrowth after GST bleep.Source:Q1F21 Analyst PresentationThe E-Commerce Logistics ValueChainTo understand the competitive positioning and key players of the industry,itis important to understa

63、nd the E-Commerce Logistics Value Chain and thestages involved.Indian E-Commerce Logistics-Shipping Into The Limelight15Data Source:Spire Research Whitepaper;Cost as of 2018,Channel Checksindicate Similar levels in 2020The movement of a product from a seller to the buyer in the e-tailingscenario inv

64、olves several stages.These stages or processes have ensuredorganised growth in the e-tail logistics segment and thus increased theflexibility and scalability of the whole system.These processes are listed andbriefly discussed below:First-mile Logistics:In this step,the goods are picked up from the s

65、ellersand transported to the e-commerce retailers mother hub or fulfillmentcenter as per the logistics model adapted.Post the arrival at the fulfillmentcenter,the product is checked against the transport receipt,following which,the product goes through a strict quality check,before it goes on to the

66、 shelf.Thereafter,inventory is updated through the Warehouse ManagementSystem(WMS),which reflects in the stock report generated.Processing at the Fulfillment Center(Mother Hub):Post first-milelogistics,the product lies on the shelf until fulfillment,which involvessorting,picking and packaging of pro

67、ducts.Once the order is placed on thee-tailers website,a pick list is generated,and the order is picked andconsequently updated in the WMS.Then,the products are packaged,categorised and moved to the mother warehouse,from where they are sortedfor last-mile delivery.Line Haul:The process involves link

68、ing the fulfillment centers with thedistribution/dispatch centers,via road,rail or air,subject to the mostefficient transit time and the lowest cost.Last-mile Logistics:This phase involves the dispatch and shipping ofproducts from the delivery/dispatch center to the end customer,from wherethey are s

69、hipped out to the customers.This leg of the entire logistics chainis dependent on manpower and infrastructure in terms of the number ofdelivery hubs,delivery vans and bikes.Reverse Logistics(part of last-mile):Another important,unforgettableaspect of e-commerce retail is product returns,which can be

70、 customer-initiated or due to a logistics failure.The returned products are cycled backinto the inventory,restocked and re-listed or sent back to the seller due toquality issues.There are several complications involved such as refunds,exchange and replacements that increase the overall cost of the s

71、upplychain.E-commerce retailers are endeavouring to minimise returnsconstantly by including as much information about the products as possible,such as detailed technical specifications in case of electronics and size andcolour information in case of apparel.The e-retail consumer today also hasthe op

72、tion to cancel his purchase even after the product has been dispatchedfrom the dispatch center.However,e-commerce retailers are striving toreduce returns with the implementation of stricter policies and additionalcharges and now with the majority of the orders being prepaid,returns arefinally coming

73、 under control.Indian E-Commerce Logistics-Shipping Into The Limelight16The E-Commerce Tailwind-RightBuilding BlocksE-Commerce Opportunity LandscapeIndia is already one of the largest internet markets and is expected to growstronger with the right building blocks.Indias wireless subscribers havegrow

74、n by 5x in the last 5 years.Post Jio,Indias data consumption has grown by 18x over the last years.Indian Internet customers consume the highest data per month.Indian E-Commerce Logistics-Shipping Into The Limelight17And pay the cheapest price per GB of Data,a mere 2 cents for a GB.Indians are also s

75、pending more time on daily on the internet compared toGlobal Average.Source:Indian E-Commerce Logistics-Shipping Into The Limelight18Source:With the majority of Indians still using Mobile to access the Internet.Indian E-Commerce Logistics-Shipping Into The Limelight19Source:The average retail e-comm

76、erce revenue per user in India is also not expectedto go up drastically implying more competition for market players.Source:StatistaKey Players across in E-CommerceLogisticsCurrently,Indian logistic sector is dominated by mix both listed and unlistedplayers across the logistic value chain.In last fe

77、w years unlisted playerseaten up market share from legacy players,since they are more aggressiveon the pricing and backed by renowned investors.Also,the emergence of e-commerce led to higher investment in technology for efficient and agileoperations.Indian E-Commerce Logistics-Shipping Into The Lime

78、light20Key Players operating in E-Commerce LogisticsSurface/AirExpressCaptive E-commerce3PLStartupsGlobalMajorsBlue DartAmazon TransportationServicesTCIDelhiveryFedEx IndiaGatiE-kartMahindra LogisticsEcomExpressUPS IndiaTCI ExpressFuture SupplyChainXpressbeesDHLSafexpressDTDCGrabDTDCTVS LogisticsSpe

79、ed PostStock ReturnsSource:S&P Capital IQIn terms of Stock returns,the Legacy players have been painful.All of themhave under performed the broader BSE Sensex,except TCI Express.Expert&Channel InteractionsWe interact with key experts and channels in the logistics industry tounderstand the potential

80、impact that Jio Platforms and their retail plansmay have on the Industry.Along with the understanding and estimatingJios disruptive power,our interactions were also focused on the broaderimpact E-Commerce is having on the Logistics Industry.The participantprofile consisted of second generation of a

81、large logistics company,E-Commerce Sellers based of out tier II locations like Pune,Vadodara andIndore with operating history of more than 5 years and 15 years in totaland also top sellers on Amazon.Product Managers/Executives andSenior Management of subject companies.Industry professionalsoperating

82、 in Express Logistics,Supply Chain Automation as well asStartups that help aggregate Supply Chains.Indian E-Commerce Logistics-Shipping Into The Limelight21Changing Face of the IndustryCOVID-19 has given a new face to the Industry.Logistics is now beinglooked into with a new perspective.Surface tran

83、sport has adequate capacity,however,warehousing needs to be modernised and hence presents anattractive investment opportunity.Reverse Logistics is no longer a painful process.The return rates thanks toprepaid orders have dropped substantially in the Industry offering a scope ofbetter utilisation of

84、fleet and margin improvement.Digital payments are now taking center stage and are likely to remain so inthe future.Technology is now at the forefront and is expected to be used by all playersto remain competitive.When it come to Kirana,Hyperlocal is expected to very Important and alsocompetitive.Due

85、 to COVID,Hyperlocal is slowly becoming a reality,withconcepts like micro fulfillment now being taken seriously to cover the entirecity when it comes to last mile logistics.COVID has also aided in volumes forhyperlocal delivery business.30%to 40%of the business for Logistic players should come from

86、E-Commerce over the next decade-Founder,B2B Supply ChainAggregatorPolicy Support from the GovernmentGST and E-way bill still are a problem for many small and large companies.For instance,if they want to dock their cargo in a warehouse outside theirstate they would need another GST registration to ta

87、ke input credit and theinternal transfer becomes complicated.Number of amendments made inGST has left a lot of open ended questions.Documentation is increased dueto E-way bill etc.when you are shipping it across India.Rail freight is picking up.Dedicated freight corridor(DFC)has been set up bythe go

88、vernment,trial runs indicate a 30%saving in time.For Instance,Delhi and BOM was 36 Hours compared to around 3 days on a regular route.With DFC average speed is 100 km/hr,so then the benefit will accrue.However,due to smaller size of E-Commerce Parcels no substantial changein Industry can be expected

89、.Costal routes have not picked up due to Cabotage rules that do not allowforeign carriers to pick up cargo on empty route,due to which the coastalroutes have not yet developed.The switch cost for instance to switch fromSurface to Rail to Costal is also very high making multi-modal logistics parkless

90、 attractive.Most of the Policy framework like GST and E-way Bill have only increasedthe complications and there is a lot of open ended interpretation-Managing Director,Large Logistic Company“Indian E-Commerce Logistics-Shipping Into The Limelight22Current Challenges and their Impact on GrowthManpowe

91、r continues to be the biggest challenge and in current time its evenworst.However,the same is not expected to post any major threat to theIndustries ambition,as most of them even if they even if there are living inthe hometown,they want to come back and work in urban locations.Hence,when the situati

92、on normalises the currently dislocated man power will comeback in the system.Industry standard for last mile attrition is 30%to 50%on a monthly basis,and companies sometimes ask riders to leave the job around 6 monthsdue to various health and back related issues that start cropping up.-Founder,one o

93、f the largest last mile providerWarehousingThe Warehousing market is fragmented and there is an oversupply ofWarehousing right now.Having said that,Quality A Grade Warehousingremains in Demand.The cost of acquisition of a Warehouse is low if the landhas been acquired sometime back.At current prices

94、returns would be verylow as the rentals are very low and land prices continue to be elevated.Mostof the warehousing earlier did not have proper facilities even for dockingtrailers etc,but now that is changing.E-Commerce players are driving demand,most of them have captivewarehousing but are also now

95、 looking for a new model,where they thespecifications are given and investments is made by the third party and E-com platforms will just operate it.Returns however,are very low andsometimes they lease it for 3 to 10 years.Most platforms operate on a assetlight model in this particular way.Finding ri

96、ght locations and at right pricesremains a major challenge for the Industry,with competition further drivingyields down.Going forward,Warehousing will becoming increasingly important alongas platforms continue to fight for customers with products that offersame day,two day or even two hour delivery.

97、Warehousing will become tothe central part of this strategy.-E-Commerce Logistics ProfessionalTechnology and automation will play a major role going forward as more andmore players start adopting the shared/cloud warehousing approach.Technology will also play a crucial role in integrating both legac

98、y and e-commerce warehouses and could also help converting stores and smallergodowns into micro-fulfillment centers.In-City warehousing is also a goodopportunity.Around 35%of the organised warehouses are held by 3PL players and35%held by E-Commerce Players.FMCG and Retail have also have nowoutsourci

99、ng their warehousing.-Supply Chain Automation Professional“Indian E-Commerce Logistics-Shipping Into The Limelight23Targeted Service level and type or product and service offered will determinethe warehousing requirement even for players like Jio.Smaller and agilewarehouses will be need of the hour

100、in future.Amazon has one of the highest fulfillment cents are most new entrants areexpected to catch up as warehousing is evident,if they want to have thequality and desired level of services.Most of them are likely to outsource.Disruptions in the Industry with Big BoyStartupsDelhivery is know as an

101、 3PL player,but is now trying to integrate andprovide all solutions.Pricing is one of the core acquisition strategy.Delhivery tries to be the lowest cost with technology at its backbone.Thebusiness model gives its the ability to provide lowest cost and maximumflexibility.Delhivery is following foots

102、teps of some of its Chinese counterparts.3PL is very cost effective,since you outsource the cost is per order basisin case of last mile logistics and hence the operating model is asset light.20%-25%cost saving due to outsourcing.-Executive of one of thecovered startupsPricing strategy of many of the

103、 startups is also agile.A lot of them also havedemand driven pricing with a strong focus on customer acquisition.Flipkart,Myntra,Amazon,Paytm,Zomato/Swigger,Ola/Uber then to be the mostpopular ecosystem operating in Indian Internet.Ekart is targeting 90%of the delivery in-house.Most of the E-Com sta

104、rtupsare well funded and hence,hash burn is not a problem,but there is hardlyany money to be made in B2B commerce.There is no sickness or loyaltywhen it comes to last mile logistics.Competitive Dynamics-Legacy Players,FundedStartups,International Players and India PostAs per customer and seller feed

105、back,Delhivery provide very good serviceand has very wide coverage.Quality of the network along with the reach isone of the primary differentiating factor when it comes to last mile logistics.Most of the newer age startups are burning cash and they provide service atvery competitive prices making th

106、em attractive for a number of e-commercesellers which anyways operate on thinner margins.Delhivery is servicing all areas,they come and collect it right now theyare the ones who are functioning-E-Commerce Seller“Indian E-Commerce Logistics-Shipping Into The Limelight24The legacy players like DHL(Blu

107、edart)/Fedex/Gati are more expensivecompared to the newer players as they are asset heavy.Bluedart has one ofthe most reliable and best network in the Industry,which justifies thepremium it commands.Service and network quality are a function of yourfleet and warehouse strength especially when it com

108、es to E-Commerce.Last mile will start seeing lot more partnerships in order to use idealcapacity where again technology will play a crucial role.Many other homedelivery chains like Dunzo,Swiggy and Zomato started offering grocerydeliveries as the country went under a total lockdown due to coronaviru

109、spandemic and this is again a trend that is here to stay.Omni Channel likely to be the best foot forward and is likely to be a strategyto adapted by most brands again where logistics an technology will play amajor role.Delhivery is one of the leaders in logistics,DHL and Mahindra focus more onWareho

110、using.Delhivery has a asset light model and hence is able to offermuch cheaper prices.Delhivery has also tied up with traditional frightforwards.The Traditional Express guys are not interested in the E-CommernceGame,they are happy with their old set of customers.-E-CommerceLogistics ProfessionalMost

111、 of the demand is driven by groceries and FMCG in the pandemic withlot of pressure on the team.In E-commerce,the SLAs ar very tight andmargins are low,making it unattractive for lot of traditional logisticsplayers.Around 5 Years before,global players like Bluedart were on top withdocuments being the

112、 primary backbone.Now that the businessdocumentation is slowly reducing,lot of legacy players have started focusingon E-Commerce.There is also increase trend of both Flipkart and Amazonfocusing more on in-house logistics and preferred delivery partners due towhich there is now excess capacity in e-c

113、ommerce b2b segment for pure play3pl players like Ecom Express and Delhivery now fighting for otherbusinesses not just E-Commerce.Even In-house logistics is not asset heavy,with breaking up the logistics chain and having a piece meal appoarch islikely to be the trend in future.The Choice of Market P

114、laces&Selling ModelsMost E-Com sellers operate in 3 Models,i.e.fulfilled by the platform in caseof Amazon its FBA(Fulfilled by Amazon),Just in time model where thepacking material etc.is given by the platform and lastly Seller fulfilled,where the Seller has to ship the product.Amazon usually prefers

115、 FBA modelas it gets better control over the product quality as FBA products are checkedfor quality plus it can earn rental on inventory that is on its warehouse.Themargins are more or else the same,but Just in time usually means lowerinventory and hence lower working capital for the seller.Flipkart

116、 andAmazon,cover 90%of market.Flipkart has a strong hold in clothing andfashion due to its Myntra acquisition.There is an automatic segeration forboth the market places.“Indian E-Commerce Logistics-Shipping Into The Limelight25“Flipkart has lost out in this pandemic,there courier partners are notfun

117、ctioning”-E-Commerce Seller“Amazon always pushes FBA,as there is more potential for rent”-E-Commerce SellerMost platforms have found the way to work around the new e-commernce policy and their“captive sellers”continue to sell productswith deep discounting prevalent in private labels.-E-Commerce Sell

118、erMost sellers typically do not prefer to search for their logistic partners.Since,most of the platforms have tie-ups with.And also due the scale ofoperations,most sellers prefer to outsource or use platform providedlogistics partners.There is around 15%-20%price difference at times among various lo

119、gisticsproviders,however,if there is enough volume,they tend to meet the price.Alot of brands and products now have E-Com and platform specific SKUs,sothere is less friction between the online and offline channel.Make in India is primarily working as a lot of Chinese Supply Chain is stilldisrupted.B

120、lue dart offers premium service,they need minimum order requirementthey are focused a lot on profitability.For a customer who is focused onreliability,the will prefer Bluedart and pay the premium price.-Founder,one of the largest last mile providerMNCs like Bluedart,Fedex and UPS are primarily drive

121、n due to globalagreements that they have with customers who also operate in India.India Post has an outstanding network,but the technology part is stilllagging.There is a lot of potential for upgradation and privatisation.Changing Customer BehaviourAmazon and Flipkart together control almost 90%of t

122、he market with mostcustomers now getting used to a particular platform.For instance Flipkart isa step ahead in Fashion due to Myntra.A couple of%discount wouldnt shiftloyalty,but the access to particular unique brand will definitely test loyalty.Hence,having exclusive Brand Tie-ups is important and

123、that too forproducts were no substitutes are easily available.Demand from teir 2 and 3 Location is going to increase substantially as mostpeople now consider working from their remote locations outside metroareas.“Indian E-Commerce Logistics-Shipping Into The Limelight26“There is an increasing numbe

124、r of people now moving away from urbanmetropolitan locations as work from home appears to be here to staylonger.This should drive demand for Warehousing,Darkstores&Micro-Fulfilment Centres even in smaller locations”-Supply Chain AutomationProfessonalFor a seller,interns of logistics,Network,reach an

125、d price is all that mattersand are not very brand loyal.The trust deficient is reduce now.Amazon and Flipkart already enjoy goodtrust from the customer and Jio is also likely to enjoy the same.Returns havedrastically reduced due pre-paid orders aiding logistic players.Scan and Pay is active across c

126、ustomer locations.We processing returns for Hyperlocal deliveries,we are dealing with notjust returns but also with customers Emotional Quient which needs to bekept in mind.-Exeuctive of a E-com platformJio-What to Expect?Exclusive brand tie-ups and access will be one of the key traffic drivers alon

127、gwith lower costs.Ability to get market share will depend on Brand Tie-upsand platform policies.Trust is one of the most important factor with even Reliance has!offers,cashbacks and brand ties will be key determents on how reliance will capturethe market.Indian Customers chose savings over connivanc

128、e”-Exeuctive of a E-com platform“Reliance is a in a better position to capture market with its offline storemarket and also the talks of investment in Big Bazaar”-E-CommerceSellerKirana can be potential last mile delivery model which reliance could aim toleverage,with Kiranas acting as micro fulfilm

129、ent centres,however,partnerloyalty will be area of concern.Jio Kirana model will also be focused heavilyon data and how to use data to improve and make supply chain productive.Wherever Jio goes,competition like Amazon will go and hence the wholesector will benefit.Jio has an advantage of 300 mn user

130、s,with 50 mn usersthat use smartphones ans is already doing around 200,000 deliveries a daywhich is very high considering the recent operations that they have started.They are expected to get a lot of market share in tier 2 and tier 3 locations.Kiranas are the place to be,however,they are very fragi

131、le ecosystem with alot of moving parts.For Instance reverse logistics processing things likereturns are going to be a huge challenge.Moreover using Kiranas as Microfullfilment also has their own set of challenges.“Indian E-Commerce Logistics-Shipping Into The Limelight27Currently,Jio is working most

132、ly with its offline partners like Reliance Fresh,and does have plans to start merchant to customer commerce as well.Merchants needs to be trained and will have to become more organised.When the merchants do a sale from a walk-in customer,they get same daycash,but platforms like Jio,Amazon pay the me

133、rchants with a lag and hencethey need to be prepared for that especially when it comes to grocery retail.Hence,the hyperlocal all though looks very attractive has its own set ofchallenges which companies like Jio as well as others will have to muster.And Jio would want to protect its brand and hence

134、 would go slow on thesame.For Jio Mart,price is going to be over customer connivance,since itsaims to capture a much wider audience.But will also keep in my thecustomer experience.They do not want just to dump cheap products.JioMart wants to open more opportunities for cross selling and hencewhite l

135、abels will be a very important part of the strategy.-Exeuctive of aE-com platformPotential Areas of Investment3PL logstics and Smart/Shared warehousing are some of the potential areasfor Investment.3PL will remain in focus due to disruptions and volumes thatare expected in e-commerce.Air express cou

136、ld be in focus with rising B2Btransactions.Last Mile is the most expensive part of the logistics and alsohas the highest volume with the lowest margins.Last-mile providers like Grab are almost like a drug,once you start usingthem,they cannot be ignored.The Opportunity-Core InvestmentThemes to Explor

137、eExpress Logistics:The Indian express industry is becoming increasinglyimportant for e-commerce companies today as it helps them to maximiseefficiency in production activities,minimise inventory costs and helpprovide a superlative customer experience.Estimated to grow at a CAGR of17%this industry is

138、 expected to reach a size of INR 480 bn by 2023.3PL:With significant room for growth,the Indian 3PL market is expected toreach a valuation of 1.2 tn by 2025.The segment is expected to clock in aCAGR of 17-18%.We believe that as the industry matures over the next fewyears,there will be a significant

139、shift from pure play transportation andwarehousing services towards sophisticated,high value integrated services.“Indian E-Commerce Logistics-Shipping Into The Limelight28Warehousing:The warehousing industry has witnessed a plethora ofchanges in the last four to five years and has yet managed to gro

140、w by leapsand bounds.Aided by the implementation of GST,favourable governmentinitiatives and policies and the grant of the infrastructure status thissegment has seen rapid institutionalisation and formalisation in the recenttimes and has successfully seen a transaction volume growth of CAGR 44%over

141、the last 3 years.New IND AS has major impactprofitability margins and returnratiosInd AS 116 Accounting for leases:This accounting standard came intoeffect from April 1st,2019.The change in Ind AS is brought in-line with theIFRS.Ind AS 116 will replace the current Ind AS 17 Leases.Ind AS 116 defines

142、 alease as a contract,or part of a contract,that conveys the right to use anasset(the underlying asset)for a period of time in exchange forconsideration.Ind AS 116 will be applicable to almost all non-cancellablelease contracts,except for leases with a contract of less than 12 months thatdo not cont

143、ain a purchase option i.e.short term lease,or leases for whichthe underlying asset is of a low value for instance personal computers ortablets;however no threshold value for the same is given.Upon transitioning,the entity will have to recognise a lease liabilityreflecting future lease payments and a

144、 right-of-use asset,unlike Ind AS 17where companies had to make a distinction between operating and financinglease.Accordingly the lease payments,which were reported by the lessees asan expense on a straight line basis will be replaced by depreciation expense,on the right-of-use asset and interest e

145、xpense,on the lease liability.Ind AS 116 comes in handy for logistics companies with asset light modelsand companies with high off-balance sheet lease obligations.There is agradual transition in the industry as the players now more towards assetlight models.This means that rent expenses will gradual

146、ly increase ascompanies look to increase their leased warehousing space and fleets.The accounting changes will have significant impact on the profitabilitymargins and return ratios of companies.The likely impact would be:Higher the leasing,higher the upwards impact on EBITDA and EBITDAmargins since

147、rent expenses will be replaced by Depreciation andfinance costs.The revised EBIT will also be higher since depreciation charge will belower than the quantum of rent expenses.Hence ROCE will be revisedupwards.Indian E-Commerce Logistics-Shipping Into The Limelight29However,PBT will be lower than earl

148、ier years due to unwinding ofhigher finance costs.Finance costs will gradually decrease in the latteryears as the lease liability gets reduced.Also finance costs will bedependent on companys discount rate.Due to depreciation and finance costs,cash from operations will behigher,correlating to higher

149、FCFs while financing cash flows would belower.Increase in assets would also lower the asset turn ratios.Logistics companies generally have high warehousing,high fleet size hencetheir impact due to Ind AS 116 will be significant.For example,Blue Dart hasmentioned that Ind AS 116 impact was INR 662 mn

150、,which corresponded to2%of sales.Gati on the other hand had a PBT impact of-43.1 mn due to IndAS 116.Company ProfilesIn this section,we deep dive into key players operating in the e-commercelogistics industry.The list includes top competitors in a mix of both listedand unlisted players.For listed pl

151、ayers,its important to compare theiroperational reach,revenue growth,return ratios,e-commerce contributionand ability to keep their margins intact.For the unlisted players(consisting mainly of startups),since they are moreaggressive on the pricing and backed by renowned investors,thecompetition is m

152、ore on the revenue side coupled with the level ofoperational reach along with key revenue drivers.These companies are loss-making in nature hence we omit margin analysis.Surface&Air Express-Key PlayersBlue Dart Express(BDE IN)Blue Dart Express Limited(BDE)provides courier and express services.Itprov

153、ides day-definite and time-definite delivery schedules across air andground.The company also offers air freight services between the airports ofKolkata,Delhi,Mumbai,Bengaluru,Chennai,Hyderabad,and Ahmedabadincluding door-to-door express deliveries for documents and packages;international services;an

154、d temperature-controlled logistics solutions,aswell as operates domestic express airline charter.The company was foundedin 1983 and is headquartered in Mumbai,India.Blue Dart Express Limited isa subsidiary of DHL Express(Singapore)Pte.Ltd.Indian E-Commerce Logistics-Shipping Into The Limelight30Key

155、Operating Segments&OfferingsBDE remains one of the leading players in Indias express logistics industry,with 48%/15%market share in the air/surface express segments.Thecompany operates 6 aircraft,22,336 vehicles and 2,173 facilities/hubs acrossover 35,400 locations.BDE offerings for E-commerce playe

156、rs are Cash on Delivery,Pre paiddelivery,Reverse/Exchange services,Same and next day delivery services,preferred time slot services,AM-PM deliveries,Cross Boarder services,andBusiness integration through API.Management Expectations:The management expects the air:surfacerevenue mix to reach 50:50 in

157、three to five years from the current 75:25.Themove follows an improvement in road infrastructure,regulations benefittingorganized players(GST,E-way bill,etc)and boom in growth in e-commerce(30-50%logistics outsourced).The management is focusing on growthopportunities in surface logistics,which is ri

158、sing faster than the air expresssegment;B2B:B2C revenue split remained at 80:20.A drop in E-commerce business mainly due to Amazon had reduceddependency and gradually helped start developing its own in-house supplychain management and delivery system for the company.This coupled withnext-to-zero und

159、ercutting in realization or price,are key reasons forsubdued EBITDA performance from 12.3%in F18 to 9.2%in F20.Going forward,if BDE can maintain their margin between 11%-12%on theback of reducing their revenue mix towards the 50:50 mark and beingalready a leader in air express could help the operati

160、onal presence as early aspossible.The company have a capex plan for technology advancement andautomation which could help them reduce the sorting and delivering time,catering to more tonnages.This could well transit into expansion of margin.The management expects that normalcy will come out in F22.I

161、ndian E-Commerce Logistics-Shipping Into The Limelight31Primary Revenue DriversBlue Dart is a dominant leader in the domestic air-express industry with 48%market share;15%of the ground segment.It carried 240 mn domesticshipments and 0.8 mn international shipments weighing 769,490 tonnes inFY20.All i

162、ts aircraft are owned through a subsidiary Blue Dart Aviation which runs scheduled services;80%of its vehicle fleet is outsourced.BDE is increasing its coverage and footprint in tier-2 and 3 cities with a focuson small and medium enterprises.It has warehouses at 85 locations in Indiaand bonded wareh

163、ouses in 7 major metros namely Ahmedabad,Bangalore,Chennai,Delhi,Mumbai,Kolkata,and Hyderabad.BDE has started an e-fulfilment centre at Gurgaon and Bangalore and is expanding to otherregions too.E-commerce and Retail segments have been growing at a pace of 25%-30%and going forward,growth will remain

164、 intact the new normal of socialdistancing will drive E-Commerce.This will boost express logistics and wecan see a growth of 10-15%in the organised express market.BDE derives75%revenue from air and the rest from surface.It gets 94%revenue frominstitutional clients;it has 40,000 such customers who si

165、gn annualcontracts,giving BDE strong revenue sustainability.Retail customers(walkins)account for 6%of its revenue,which is a high-margin business.E-commerce revenue share is 18%;this promises to be a high-growth business.Key RisksHighly Competitive E-Commerce Market:Blue Dart is currently operatingi

166、n a market that is highly price competitive courtesy of well-funded newentrants.Slow Down demand back to Air Express and revenue mix plan of 50:50:With economic slowdown,the cost-conscious customers and e-commerceplayers have made an affair with elongated delivery dates for their productdeliveries i

167、n order to save on air-express costs,which are+3x of surfaceexpress costs.Company aims to alter air:surface revenue mix to reach 50:50in three to five years from the current 75:25.Any slowdown in this plan mayhurt the company business.Gati Ltd(GTIC IN)Gati Limited is one of the more established play

168、ers in the surface business.The company provides a diverse set of services which includes expressservices through road,rail and air to both domestic and internationallocations.Alongside,the company offers e-commerce logistic solutions,warehousing solutions,project logistics;and inbound and outbound

169、courierservices.In addition,it provides truck load services for long haultransportation;reefer fleet services for the food chain businesses;customized cold chain solutions;and organized retail services.Indian E-Commerce Logistics-Shipping Into The Limelight32Key OfferingsGati provides B2B,B2C and C2

170、C on multi-modal distribution,placing itselfamong the surface leaders.The locker room also extends to e-commerce,which contribute 10%of revenues.Gati provides ecommerce offering likesPremium services,Express Services,Reverse/exchange pickup and Cash onDelivery.Gati also provides end to end solution

171、and cross border solution.Revenue DriversOmni channel has emerged as a faster and efficient way of transportinggoods to customers.There has been a shift in consumer spending behaviouras the consumers expect to find the products they want both in-store andonline.Both traditional retailers and e-comme

172、rce platforms are investing inomni-channel to create a seamless experience for customers.Omni channelretail will require a more synchronized and visible logistics function to meettime sensitive consumer demands.It will also require a high performing,cost effective fulfilment network,with enhanced sp

173、eed and greater last milereach.E-commerce growth drives Express Markets:E-commerce is alreadygrowing at rapid pace with the CAGR of F18-F25 25-30%.However,last miledelivery accounts for a considerable share in the total logistics expense andhence transportation cost comprises approximately 65-70%of

174、an e-retailerssupply chain management cost.Gati has a very good experience with the lastmile delivery as they are the lowest cost providers in listed space and havegood infrastructure for this kind of delivery.Indian E-Commerce Logistics-Shipping Into The Limelight33TCI ExpressTCI Express Limited pr

175、ovides express delivery solutions in India andinternationally.The company provides services,including surface express;reverse express;domestic and international air express;and e-commerceexpress for the automotive,pharmaceutical,retail,engineering,apparel,e-commerce,and other industries.Key Offering

176、s:TCIEXP provides B2B and B2C solutions on multimodal distribution foroptimum time delivery,with value added features like COD,pick and pack,Late night and morning deliveries.TCIEXP is primarily focused on B2B solutions,comprising single windowdoor-to-door pick-up and delivery of parcels weighing in

177、 the range of 5-40kg,in a time bound manner predominantly through surface transport whichcontributes 86%of total revenue.95%of revenue is generated throughB2B solutions which comprise service offerings like surface express,international&domestic air express and reverse express.In addition to core ex

178、press solutions,TCIEXP also offers value addedsolutions like Cash on Delivery(COD),Proof of Delivery(POD),Out ofDelivery Area(ODA),Sunday Delivery etc.The Company also serves thedomestic market through domestic air express for which it has strategicalliances with multiple carriers.Indian E-Commerce

179、Logistics-Shipping Into The Limelight34Key Revenue/Margin Drivers:The company witnessed EBITDA margin improvement from 8.45 in F17 to12%in F20 on account of its prudent pricing policy and concentration onB2B segment.TCIEXP was able to put separate diesel price clause to accountfor any volatility.Goi

180、ng forward,we expect TCIEXP to maintain or expandits margin on the back of:TCIEXPs ability to pass fuel price rise to 100%of its customer in FY21from current 90%.Higher focus on EMEs and spot booking,thereby yielding higherrealization and better margins.Consistent price hike every year.Optimum utili

181、zation of fleet from high growth regionDecreasing indirect expenses with better operation efficiencyMSME and SME Growth:The focus on tier-2 and 3 cities,and providesservices to industry verticals such as automotive,pharmaceuticals,retail,engineering,apparel and e-commerce.TCIEXP is focused on high-v

182、alueparcel sizes from 5kg to 1-tonne.Its revenue growth was driven primarilyby an increase in Small and Medium Enterprises(SME)customers andbranch expansion(added 70 in FY20).Its strong performance is a result ofoperational efficiency initiatives and better working-capital management.Management is c

183、urrently eyeing more MSMEs on the table,which can fuelgrowthKey RisksSlow Down in Economy and MSME sector growth:The demand for TCIsservices is highly dependent on economic activity and since we arewitnessed a slowdown in the economy due to COVID-19.A pro longedimpact of COVID 19 may lead to slower

184、activity in economy and MSMEsector which contributes 50%to the total revenue.SafexpressFounded back in 1997 by Mr.Pawan Jain,Safexpress is one of the largestprivate players in the logistics space.The firm provides logistics services for9 different business verticals ranging from Apparel&Lifestyle,E-

185、commerce,Healthcare,Hi-Tech,Publishing to Automotive,Engineering&ElectricalHardware,FMCG&Consumer Electronics and Institutional.While thecompany offers services including express distribution(Air/surface both),3PL and consulting,what really makes them stand out is the innovation intheir services.Ind

186、ian E-Commerce Logistics-Shipping Into The Limelight35Key OfferingsKey OfferingsServices forIndividuals/SMEsCampus 2 home:For graduating students who are willing to move away fromhostels.Safexpress takes care of all their shifting needs.Easy 2 move:For those who are relocating to another city,and wh

187、o are looking tomove excess packages.Sainik Express:Service especially designed to meet requirements of Army personnel.Safe Returns:Transmit baggages from exhibition centres to required destinations.Services forEnterprisesStock 2 shelf:Comprehensive management of the shelf-inventory levels at a reta

188、iloutletVendor managed inventoryVirtual WarehousingEnd to end supply chain managementExpressDistributionSafexpress offers door to door delivery of parcels.The freight services are multi-modal,using hub and spike and just in time management techniques.Number of surface and airhubs as of now aggregate

189、 to 76 and 54 respectively.3PL andInventorymanagementSafexpress offers a detailed warehousing solution for businesses.The service includes lothandling,shelf handling,integration with warehouse control systems,value-added services,customised strategies and wave planning.OthersSupply Chain ConsultingC

190、utomised ProjectsReverse LogisticsKey Revenue Drivers:Warehousing:51 warehouses combining a total space of over 16 mnsq.feet pan india.It delivers more than 100 million packages everyyear.Fleet size:over 7000 ISO-certified,fully containerized,all-weather-proof vehicles with GPS services.The fleet tr

191、averses over 10,00,000kilometers everyday on more than 1700 dedicated routes.Vehiclecapacity ranges from 1ton for pick-up and delivery to 15 tons fortranshipment.Revenue DriversKey Operational ForteFleet SizeWarehousingTotal pin-codes covered:30,345(E-commerce:28658)Services in every state and union

192、 territory1100 destinations76 hubs54 air hubsAlthough safexpress is well known for its innovative offline logisticsservices,it does have offerings catering to ecommerce.What sets it apart isthe number of pincodes covered i.e.28,658 pincodes,probably the largest inthe industry.This coupled with the w

193、arehousing capacity and fleet size,provides the company with a strong base and can capitalize on any boomgenerated in the E-commerce space.Indian E-Commerce Logistics-Shipping Into The Limelight36DTDCFounded in 1990,DTDC is one of the largest and oldest unlisted playersoperating in the surface logis

194、tics space.The company offers domesticservices such as DTDC Lite for handling of express and cargo in India,DTDCVAS includes COD services.The company also has an immense experience indocuments delivery including intracity services.DTDC also providespremium services such as DTDC Plus which offers nex

195、t day delivery,DTDCBlue provides second day delivery,prime time plus offers time bounddeliveries whereas premium express cargo is a service for heavyconsignments to be delivered on a specific dayApart from the mainstream domestic services,DTDC also has a wide array ofinternational and cross border f

196、acilities.DTDC Dotzot:In 2013,DTDC launched its arm DotZot which exclusivelycaters to the e-commerce segment.Dotzot provides premium services,express services and economy services across 11,000 pincodes pan-india.Apart from shipping,DotZot also has fulfilment services,employing around52 warehouses.H

197、owever,we believe that DotZot still has a small market share and failed tocompete suitably with the start-ups catering to the ecom segment.Operational Forte-Surface PlayersNameFleet size WarehouseareaPincodesServedSortingCentres/HubsShipment DeliveryAirFreighters/Air GatewayBluedart22,336 28.9 Mn Sq

198、Ft14,40021240.4 mnDomestic and 0.8International6 AirFreightersGati5000+600 4W and 750Bikers for Last MileDelivery3.3 Mn SqFt19,8001960,000 per DayTCI Exp500012 Mn SqFt3,5002824 AirGatewaysDTDC11,000SafeExpress7000+16 Mn SqFt30,34576Hubs54Air HubsIn terms of operational strenght,Blue Dart dominates m

199、ost of the metrics,having highest fleet size and largest warehouse area.Indian E-Commerce Logistics-Shipping Into The Limelight37Key Financials and Valuations-Surface PlayersIndian E-Commerce Logistics-Shipping Into The Limelight38In terms of operations,Bluedart unsurprisingly boasts the highestreve

200、nues and EBITDA for all the years.TCI on the other hand,hasput on a commendable show with respect to EBITDA margins.TCIalso had the highest revenue growth in F20.On the contrary,GATIdespite of having second highest topline,has been the most poorwith respect to revenue growth and margins.Note:Blue Da

201、rt reported one-off expense items due to restructuringcharges(INR 641 mn)and Covid 19 impact(INR 542 mn)in F20Indian E-Commerce Logistics-Shipping Into The Limelight39TCI express has the most formidable return ratios,and moreimportantly they have remained intact.It should be noted that BlueDarts ROC

202、E fall is largely attributed to the high amount of capexdone every year.Gati has the weakest return ratios and assetefficiency.ValuationDue to the varying degree of profitability,we use EV/EBIDTA as a reasonableestimate in order to ascertain valuations.Indian E-Commerce Logistics-Shipping Into The L

203、imelight40Gati 3 Year EV/EBITDA;Source:S&P Capital IQBlue Dart 3 Year EV/EBITDA;Source:S&P Capital IQTCI Express 3 Year EV/EBITDA;Source:S&P Capital IQIn terms of valuation,Blue Dart offers an attractive entry point dueto restructuring exercise,that has impacted its operating ratios.BlueDart is trad

204、ing discount to its 3 Year LTM EV/EBITDA whereas TCIdue to its better business prospects is trading at a premium.Indian E-Commerce Logistics-Shipping Into The Limelight41Why to aviod Gati-ForensicAnalysisConsequent to ARA of all the surface players,we found that Gati was the oddone out which had sev

205、eral tormenting balance sheet woes since a few years.Some of the key forensic findings which lead us to believe that Gati shouldbe avoided altogether are as follows:Red Flags,Red Flags and Red FlagsFirst and foremost aspect which meets the eye is that Gati fetched aqualified opinion from the auditor

206、s in F19 and F20.The qualified opinion inF19 was with respect to several alarming issues such as:1.MAT LiabilityNote 54 to the consolidated financial statements which states thatduring the financial year the Group has received Income tax demandfor INR 211.10 million relating to financial year 2012-1

207、3 due todisallowance of capital loss for MAT computation under section 115JBof the Income tax Act,1961.The Holding Company has filed an appealbefore the Honble High Court,Telangana as the issue involvesinterpretation of law.Based on the legal advice received no provisionfor the said tax demand has b

208、een made in the consolidated financialstatements of the Group during the year.In view of the uncertainty,weare unable to determine the impact on the consolidated financialstatements for the said demand.F19 Audit ReportThe above income tax demand amount forms 60.5%of the PBT in F19.2.Loans and advanc

209、es given to Entities in which KMP is having asignificant influence:“Indian E-Commerce Logistics-Shipping Into The Limelight42Note 55 to the consolidated financial Statements which states that theGroup has given operational advances to few parties aggregating INR228.80 millions which is long overdue

210、and the full recoverability ofwhich is doubtful.As set out in the aforesaid note,the management ismaking necessary efforts to ensure collection of dues from thoseparties.No impairment allowance for uncertainty in collectability hasbeen recognized against above advances.Based on the informationreceiv

211、ed from the management of the Group regarding theassumptions used in assessing the recoverability of this amount,wewere unable to determine the impact on the consolidated financialstatements,of a potential adjustment for impairment that might havebeen necessary in order to present the balance at its

212、 estimatedrecoverable value.-F19Annual ReportDetails of the above loans are given in the table below.The aggregateamount of these loans represented 65%of PBT as on F19 which is distressingsince the company is yet to write-off these advances.Moreover,Its aconcerning fact that all these loans pertains

213、 to promoter owned entities.Entity NameAmount outstanding as of F18(INR mn)Amount outstanding as of F19(INR mn)Jaldi Traders and Commerce HousePvt.Ltd66.657.0TCI Hi-ways Pvt Ltd.208.1171.8Solaflex Solar Energy Pvt Ltd.1.2-3.Provision for its obligation towards commitment feesNote 57 to the consolida

214、ted financial statements which states that,one of the subsidiaries has provided for its obligation towardscommitment fee based on the managements assessment of the likelyobligation in view of the ongoing negotiation with the investor relatingto the terms of the amended Bond Subscription Agreement,in

215、stead ofmeasuring the obligation at INR 83.77 million as per the terms of theaforementioned agreement.However,in the absence of sufficient andappropriate audit evidence in support of managements assessmentand pending final outcome of the negotiation referred above,we areunable to comment upon the ad

216、equacy of the provision and itsconsequential impact on the consolidated financial statements.-F19Audit ReportThe culprit was Gati Kausar India Limited(GKIL),a subsidiary that has agreat operational difficulty.According to the F19 annual report,it haschanged its business model to adopt an asset light

217、 model post which it hasnot drawdown the committed loan aggregating INR 610 mn.To meet itsobligation towards commitment fee,the management had decided to onlyprovide for INR 3.05 mn,which is far less than what stated according to theterms.The differential provision,i.e.INR 80.7 mn represented as hig

218、h as22.8%of the PBT.“Indian E-Commerce Logistics-Shipping Into The Limelight43Other Emphasis of matter,highlighted in F19Audit ReportThe audit report also highlighted other Emphasis of matters,and drewattention to:Subsidiarys(GKIL)ability to continue as a going concern:Note 59 to the consolidated fi

219、nancial statements which states that,inone of the subsidiary,Gati Kausar India Limited has incurred a net lossof INR 170.97 million during the year ended March 31,2019,and as ofthat date,the Companys accumulated losses amounts to INR 782.75million,which has resulted in complete erosion of the net wo

220、rth of thesaid subsidiary and the said subsidiarys current liabilities exceeded itscurrent assets by INR 338.71 million.These conditions indicateexistence of material uncertainty that may cast significant doubt onthe said subsidiarys ability to continue as a going concern.As stated inthe said note o

221、f the consolidated financial statement,going concernbasis of accounting used in preparation of the said subsidiary isdependent upon the successful implementation of the resolution planenvisaged by the key shareholders and management of the saidsubsidiary.To address this issue,GKIL is in a process of

222、 implementing a resolution plan.It should be noted that The entire investment in GKIL worth INR 401.3 hasbeen impaired already.With respect to creation of Special Reserve:With respect to the orders stated by high court,the group had created aspecial reserve worth INR 5.6 bn arising from amalgamation

223、 of subsidiaries.the audit report briefed the issues with respect to the same as highlightedbelow:Note 56 to the consolidated financial statements which states that,based on the Scheme of arrangement by the Honble Andhra PradeshHigh Court by its Order dated March 19,2013 the Group had createdSpecial

224、 Reserve which allows its utilization for adjustment of anycapital losses arising from transfer of assets and certain other lossesas specified in the Scheme and as the Board of Directors may deem fit.The Group has adjusted an amount of INR 29.10 million against thesaid Special Reserve in earlier yea

225、rs,which has been now recoveredduring the year and adjusted in the statement of profit&loss for theyear ended March 31,2019.With respect to excess remuneration paid to executive chairman ofsubsidiary(Gati-Kinketsu Express Private Limited)“Indian E-Commerce Logistics-Shipping Into The Limelight44Note

226、 58 to the consolidated financial statement regarding managerialremuneration paid to the Executive chairman of one of the subsidiaryfor the year ended March 31,2019 which exceeded the limit prescribedunder section 197 read with Schedule V of the Companies Act,2013 byINR 10.60 millions and.Pending ne

227、cessary approvals for the excessremuneration from members of the said subsidiary,no adjustment tothe consolidated financial statement has been made.The excess remuneration to the said chairman was existing even in earlieryears viz.F17(INR 7.8 mn)and F18(INR 6.3 mn).What matters here is thatthe same

228、is not approved by the shareholders thereby the amounts arereversed and shown as recoverable from WTD.It is highly questionable whythe company repeatedly paid high remuneration despite the non-approvalfrom shareholders in the first place.Goodwill ImpairmentThe auditor also mentioned impairment of go

229、odwill as a key audit matter.Out of the INR 4468 mn gross carrying amount of goodwill,the company hasalready impaired close to 5%.High Accrued InterestThe company has a high amount of accrued interest on loans,advances andinvestments worth INR 222.8 mn.This is perturbing on two accounts.Firstly,aver

230、age carrying value of all the possible loans,advances and deposits(barring capital advances),as at F19 amounts only to INR 383.8 mn;accruedinterest carried at F19 amounts as high as 60%of the same.Moreover,its imperative to note that 97%of the accrued interest i.e.INR215.7 mn has been already impair

231、ed.High recognition of accrued interestand simultaneous impairment is a sign of aggressive revenue recognitionpolicy.Questionable Transactions with Promoter ownedentitiesSpurious transactions with group companies are not just limited to the oneshighlighted in audit report.Apart from the ones mention

232、ed above in theaudit report,there were other transactions Gati Ltd entered with promotergroup companies(entities in which KMP is having a significant influence)which creates a bitter doubt regarding the entire governance which Gatifollows.The details of absurd transactions with some of the group com

233、panies arehighlighted as follows:“Indian E-Commerce Logistics-Shipping Into The Limelight45Entity NameOutstanding receivables as at F19(INR mn)Provision for interest receivable(INR mn)Amrit Jal Ventures Pvt Ltd226.9(226.9)Gati Infrastructure Sada MangderPvt.Ltd53.4(53.4)Entity NameCorp.Guarantees gi

234、ven as at F19(INR mn)Provision for invocation of corp.guarantee(INR mn)Gati InfrastructurePvt236(236.0)Entity nameNature of transaction in F19Amount(INR mn)Mangala Agribusiness Investments II LtdInterest Expenses33.3Mangala Agribusiness Investments II LtdPremium of redemption of debenture59.1Entity

235、nameNature of transaction in F18Amount(INR mn)Amrit Jal VenturesInterest Income50.1Gati Infrastructure Sada Mangder Pvt.LtdInterest Income14.4Solaflex Solar Energy Pvt Ltd.Interest Income0.6These transactions are rather worryingly absurd given their impairment;Trade receivables due from and corporat

236、e guarantee given to the promotergroup companies have all been written off which looks unpleasant.Theliability towards corporate guarantee invoked in F18 was detailed as anexceptional item in F18,and denoted 30.2%of F18s PBT before exceptionalitems.Furthermore,the income statement transactions in F1

237、8 represented 12%ofF18s PBT while transactions in F19 represented 26%of F19s PBT.It is alsopertinent to note that Gati Ltd carries investment in Amrit Jal Ventures atFVTPL.It has 18.75 million shares as at F19,however with a carrying valueof Nil.Transactions with promoter companies itself can be pre

238、carious to thegovernance,however when write-offs come into picture,they are definitely ared flag and must be addressed.High Contingent LiabilitiesContingent Liabilities(not provided for)aggregated to INR 1,955 million asat F19.This represented 23%of the net worth.Any adverse outcome withrespect to t

239、hese liabilities would cause a significant harm to the balancesheet strength.Indian E-Commerce Logistics-Shipping Into The Limelight46Asset Held for saleThe F19 annual report also mentioned the following:The Company had committed in an earlier year to transfer portion ofan office building to a trust

240、 for a consideration of INR 62.5 Mn againstwhich an advance of INR 25 Mn had already been received.As theTrust has not so far taken steps to Complete the transaction and inview of the long lapse of time,the said office space has not beenclassified as“Asset Held for Sale”in the Balance Sheet.The deta

241、ils of this transaction still remains unclear as to when it will getcompleted,accordingly it is questionable why there exists a long lapse oftime indeed.Sign of aggressive receivablesThe annual report also mentioned the following which is clearly a sign ofdoubtful receivable.However no provision wha

242、tsoever was created by themanagement.The receivable outstanding constituted 12%of F19s PBT.Advance receivable includes INR 41 Mn due from Air India Limited.Thematter was referred to the arbitral tribunal which passed an awarddated September 17,2013,directing Air India Limited to pay an amountof INR

243、266 Mn to the company along with interest 18%per annumon the awarded amount.Air India filed an appeal before the HonbleHigh court at Delhi for setting aside of award,which directed Air Indiato deposit INR 225 Mn to the company.The matter being pendingbefore the Division Bench of the said Honble High

244、 Court at New Delhi,no adjustment is considered necessary by the management and thedues from Air India limited of INR 41 Mn included in advancesreceivable is considered good for recovery by the management.COD Collections not disclosedBlue dart in its annual report has mentioned about cash collected

245、as CODpayments on behalf of customers and that it was parked in current account.The disclosure is highly vital for a logistic company,since the collectionsconstitute a high percentage of the net-worth(Blue dart:12.3%at F20).Gatihas not disclosed this anywhere in its annual report which is perplexing

246、.Also these collections form a part of Restricted Cash and accordingly mustnot be a part of CFO,or liquidity analysis.“Indian E-Commerce Logistics-Shipping Into The Limelight47Blue dart Restructuring-A clearerpath towards growthBlue Dart in F20 has incurred a much needed severe right sizing/restruct

247、uring costs worth INR 641.1 mn,denoting as high as 21.8%ofEBITDA.Although these costs hindered the bottom line ratios but they areone-of items.The restructuring is expected to clean some of the operatingmess and if proved successful it can lead to a better operational performancewhich means the comp

248、any would be poised to grow higher than the industryaverage.3PL-Key PlayersMahindra LogisticsMahindra Logistics(MLL)is one of Indias largest third-party logistics(3PL)solutions providers,and has an asset-light model.It operates in twobusiness segments Supply Chain Management(SCM)and EnterpriseMobili

249、ty(EM)that contribute 90%and 10%respectively to its revenue.Along the years,it has developed a scalable and flexible business model witha large network of business partners.Moreover,given its technologicalexpertise,client relationships,and Mahindra Groups strategic support,MLLshould be a major benef

250、iciary of a take-off in Indias 3PL market.Indian E-Commerce Logistics-Shipping Into The Limelight48Key Offerings and segmentsMLL offerings to E-Commerce players are end to end transportation&warehousing solutions,transportation management,customization ofproducts and flexibility,reverse logistics an

251、d dedicated control tower,365days non stop operation,COD and POD.SegmentsDescriptionSupply Chainmanagement(89%revenueContribution)Customized and end-to-end logistics solutions and services includingtransportation and distribution,warehousing,in-factory logistics and valueadded services.16.5mn sq.ft.

252、of warehousing space spread across multi-userwarehouses,built to suit warehouses,stockyards,network hubs and cross-docks.It serves over 200 domestic and multinational companies operating in severalindustry verticals,including automotive,engineering,consumer goods,pharmaceuticals,e-commerce and bulk.

253、Its key clients include Volkswagen India,Vodafone India,Thermax,JSW Steel,Ashok Leyland,Siemens,Bosch,BMW India,3M India,and Mercedes-BenzIndia.Operate in-factory stores and line feed at over 50 manufacturing locations.Network serves more than 17000 pin codes through 35 hubs located acrossIndia.Ware

254、housingServices(Warehousingaccounts for 20%ofSCM revenue)It manages multi-product,multi-user warehouses in Tauru Road,Gurgaon,and Chakan,Pune.It typically enters into 3-5-year project-based contracts,customized to certainterms,which may vary on the basis of per square foot,per headcount ofmanpower(c

255、ost plus),overall project cost plus margin and savings andoutput based,etc.Most of the warehousing contracts are pay per use and have back to backarrangement with customers due to this MLL has limited impact of Covid-19on its warehousing business.It typically enters into annual contracts customized

256、according to permanpower requirements,cost plus,and per vehicle production in plants etc.TechnologyIt has developed last-mile optimisation software and accounts-receivablemanagement systems for high visibility efficiency.Technology solutions helpto reduce transit time significantly for its clients.M

257、LL has two transport management systems(TMS):(1)Mahindra IntegratedLogistics Execution System(MILES),which is exclusively used fortransportation of finished automobiles.(2)MyCargo360,which is a flexibleand scalable TMS and is deployed across all industry verticals.Source:Company filingsIndian E-Comm

258、erce Logistics-Shipping Into The Limelight49Key Growth DriversSocial Distancing Norms will drive the client addition:Withintroduction of newer norms(social distancing)and regulations shoved intothe sector coupled with rising labour costs,it is challenging to maintain thesame level of operations with

259、 a particular customer.A 3PL company can beatthe tide viz a viz traditional player,by providing cost effective,betterturnaround,reverse logistics service to each client company alongside lowercapex and the ability to run the operations at better utilization levels.MLLended with 400 clients in FY20 a

260、nd expects 30-40 client additions eachyear.Offering more geographies drive freight forwarding business:MLLexpanded geographies,and now doing more import and export especially tothe western hemisphere like Europe and US and that has been expandingmore offerings there in the right partnership has been

261、 the strong lever ofgrowth.Expanding Presence in Pharma and FMCG durables:MLL are expandingtheir presence in the pharma industry,and enhancing their capabilities inFMCG durables.They have strategic inroads in the pharma segment,whichare big drivers from growth perspective.Integrating supply chain bu

262、siness with freight forwarding:MLL wantsto be focused on the front end and at the solutions level.It has done morework on providing end-to-end cross border solutions for customers.Themanagement has stated the following:So,there is some import side picking up from a location in China andusing a combi

263、nation of their freight forwarding and domestic supplychain business to deliver it in customer locations in India similarlyoriginating from India and using integrated capabilities to deliver itsomewhere in the Midwest US.Those solutions are feasible toarchitect by using freight forwarding and the ot

264、her parts of 3PLcapabilities together and that helped us increase share of wallet inmany of our existing customers,in many of our existing SCMcustomers who and what really using freight forwarding from us,wehave been able to gain penetration there and those are factors whichhad driven our freight fo

265、rwarding growth.“Indian E-Commerce Logistics-Shipping Into The Limelight50Key RiskSignificantly depends on Automotive Industry:Over dependency onautomotive industry can be risk for the company due to its 60%revenuecontribution.The automotive industry is already struggling from last yeardue to BS-6 t

266、ransmission coupled several headwinds like Insurance and HighGST Rate.COVID has caused a havoc this industry.Slower recovery in automay be troublesome for MLL in the near future.Highly competitive market:The Company operates in a highly competitiveindustry dominated by many unorganized players.Many

267、segments withinthe logistics industry are highly commoditized and have low barriers to entryor exit,leading to a market with a very high degree of fragmentation.Increased competition from other organized and unorganized third-partylogistics or people transport providers may lead to a reduction in re

268、venues,profit margin and a loss of market share.Future Supply Chain Solutions Limited(FSCSL)FSCSL is one of Indias leading third-party(3PL)logistics operators with80%revenue coming from contract logistics.It provides services for expressand temperature-controlled logistics as well,with a major focus

269、 on retailand FMCG sectors.It is a pioneer in adopting modern technology andautomation in warehousing and supply chain,and should be a majorbeneficiary of the growing logistics outsourcing in India.Key OfferingsIn contract logistics,the company offers these services:(1)Integratedbuilt-to-suit and au

270、tomated warehousing(2)Transportation anddistribution(3)Value added services such as kitting,packaging,andbundling And(4)Reverse logistics.Express business offers services for time-definite full-and-part truckloads,and point-to-point services.It works with a hub-and-spokedistribution model with real-

271、time shipment tracking.Temperature-controlled business accounts for 4%of revenue,provideswarehousing,and reefer transportation.Temperature-controlledbusiness is focused on frozen foods and is not in the commoditybusiness.Indian E-Commerce Logistics-Shipping Into The Limelight51Key Growth DriversDema

272、nd for 3PL Logistics:We anticipate a demand boom for third partylogistics(3PL)services as manufacturers sharpen focus on corecompetencies and outsource complex supply chain needs.Future SupplyChain Solutions(FSC)has high customer stickiness due to focus on contractlogistics business(82%of revenue),a

273、s well as diverse clientele in rapidly-growing consumer facing businesses.Earnings growth through cost rationalization and productivity:FSCLhas increased its focus on operational efficiency through project Lakshya,which aims for transport cost savings,network and warehouse redesign andconsolidation,

274、and revisiting customer contracts.It has scaled down its loss-making last-mile-delivery business since 3QFY20.Considering customerrationalization and warehousing consolidation,revenue growth will bemuted in the short term,with improvement in margins and earnings.Nippon Express to provide global expe

275、rtise with client addition:FSCand Nippon Express have signed a business collaboration agreement(BCA)to jointly explore growth opportunities for new and existing customers,based on a strategic partnership.Nippon Express will offer FSCs integratedservice to Japanese and other foreign customers,while F

276、SC will provideNippon Express global logistics services to Indian customers.Nippon willintroduce latest global technologies and process improvements and Kaizenactivity at FSC.India food grid-Redefining food and FMCG supply-chain in India:Indias food and FMCG supply chain is highly inefficient and fa

277、cesformidable challenges in terms of inventory management,availabilityissues,freshness of product,distribution costs and time-to market.FSC isdeveloping large food and FMCG distribution centres,making one IndiaFood Grid(IFG).Under this,manufacturers will get clear visibility in termsof stock availab

278、ility,and consumers will get quicker delivery of products.Indian E-Commerce Logistics-Shipping Into The Limelight52TVS Supply Chain SolutionsEstablished in 2004,TVS SCS is one of the flagship companies of the TVSgroup and ranked amongst the leading private players in the 3PL logisticsmarket.Key serv

279、ices include transportation and last mile solutions,Freightforwarding,packaging design and solutions,warehousing management,in-plant and after market solutions,infrastructure management andtechnology logistics.TVS SCS has 300 located warehouses employing morethan 10 million sq.feet area of warehousi

280、ng.TVS SCS has operations only meant for offline businesses;it has no proventrack record of competing for the E-com market.Operational Forte-3PL PlayersNameFleetsWarehouseareaPincodes PalletsSorting Centres/HubsMahindraLogistics10000+16.5 Mn Sq Ft17,500+28FSC1018.09 Mn Sq Ft11,434 16,55313 Hubs80 an

281、d 9 temperature distributioncentresAmong the two,Mahindra is a clear winner when one glances at theoperational reach.It has much larger fleet and warehousing area along withgreater number of pincodes served.Key Financials and Valuations-3PLPlayersIndian E-Commerce Logistics-Shipping Into The Limelig

282、ht53Indian E-Commerce Logistics-Shipping Into The Limelight54Indian E-Commerce Logistics-Shipping Into The Limelight55Its a mixed game between the two when we look at revenues andmargins.MLL has higher revenues and EBITDA,but it is FSC whichhas grown much higher and displayed better margins.However,

283、MLLs ROCE is comfortable in double digits,highlighting superiority.MLL has got a better asset efficiency as well,owed to the effortsundertaken to become asset light.ValuationsFSC 3 Year EV/EBITDA;Source:S&P Capital IQIndian E-Commerce Logistics-Shipping Into The Limelight56MLL 3 Year EV/EBITDA;Sourc

284、e:S&P Capital IQIn terms of valuation FSCs lower quality is reflected in lowervaluations that it commands compared to MLL.Why to avoid FSC-ForensicAnalysisLike Gati,FSC also has several disturbing governance issues that may proveenough to keep hands away from the stock.Worrying Related Party Transac

285、tionsOne of the commonality between FSCL and Gati is apparently related partytransactions;however the issues addressed in FSCL are a bit differentiatedbut equally upsetting.Future Supply Chain Solutions is enthralled by significant related partytransactions,especially Future Retail Limited.In fact a

286、 resolution was alsopassed to approve transactions with Future retail upto INR 8 bn for the yearF20.This also evidently is an eye-catcher.Indian E-Commerce Logistics-Shipping Into The Limelight57To consider and if thought fit,to pass with or without modification,asan ordinary resolution,the followin

287、g:“RESOLVED THAT Regulation23(4)of the SEBI(Listing Obligation&Disclosure Requirements)Regulations,2015(including any amendments thereto from time totime or any re-enactment thereof for the time being in force)(the“Listing Regulations”),applicable provisions of the Companies Act,2013 including any r

288、ules framed thereunder(the“Act”),in terms of thepolicy approved by the Board for dealing/transacting with relatedparties for the time being in force(“Policy”)and subject to such otherapprovals,consents,permissions and sanctions of any authorities asmay be necessary,approval of the shareholders be an

289、d is herebyaccorded to the Board of Directors(including any empoweredcommittee thereof or any director or official of the Companyauthorised in this behalf)to enter into transactions,either individual ortaken together with previous transactions,on arms length basis and inordinary course of business a

290、ctivities with Future Retail Limited,considered to be related to the Company pursuant to the Act and/orthe Listing Regulations or the Policy(“Related Party”)for an aggregateamount up to INR 800,00,00,000/-(Rupees Eight Hundred crore only)during the financial year 2019-20.-Annual Report F19The last t

291、wo years have seen some important significant transactions withrelated entities,which leave the business model itself as pale.Revenue foroperations from all the promoter group companies aggregated INR 7511 mnin F19,which represented as high as 61%of the total sales(F18:55%).Future retail limited per

292、 se,accounted for 48%of the total sales in F19(F18:45.9%).FSCL ipo document boasted itself by saying that it is one of thelargest 3PL players,sales contribution as high as this puts a substantialdoubt on the ability to service revenues from customers other than relatedparties which is ironical to be

293、ing a Third party Logistic player.If this was not enough,related party transactions also involved purchase offixed assets worth INR 438.3 mn from the group companies(F18:INR 463.4mn)Absurd relation between cash and debtCash parked in current account increased by 59.3%in F19 to INR 1.2 bn.Atthe same

294、time capital creditors soared to INR 326 mn from INR 93 mn.Moreover long term debt also surged to INR 2.2 bn in F19 from INR 251 mnin F18.Generally,excess cash is used to pay off any debt obligations,henceit is dubious why there exists rising cash-rising debt scenario.More importantly,the excess cas

295、h is placed in current account which is alsoirrational since it does not yield any return.The only plausible situation where excess cash is put in current account iswhen the cash is nothing but the COD payments collected on behalf ofcustomers.For all those offering COD services,it is likely that thi

296、s amountwould be significant.Nevertheless,since this cash is collected on behalf of“Indian E-Commerce Logistics-Shipping Into The Limelight58customers,it is classified as restricted cash and does not form a part ofCFO;additionally,the companies should disclose the same in the schedules.It is perplex

297、ing to note that only Blue Dart has disclosed the details of CODcollections but FSCL has not.Fleet size does not tally well with gross blockIn the ipo prospectus,the company had mentioned that it owned 144 reefertrucks as on July 2017,which it acquired in a slump sale from LaxmanLogistics Private Li

298、mited.As at F18,gross carrying block of Vehiclesamounted to INR 52 mn.Even if we attribute the entire amount towardsthese trucks,the value per truck is calculated as INR 0.36 mn which isastonighly low when compared to the market price.Unusual Interest on Bank DepositsInterest on bank deposits in F19

299、 amounted to INR 10.4 mn,galloping fromINR 0.5 mn in F18.However,average bank deposits at F19 only amounted toINR INR 8.4 mn.Twin Recovery-Auto/Warehouse-Mahindra LogsticsMahindra is better placed for future ramp up in growth as compared to FSC,just because of its business model.As mentioned earlier

300、,around 60%of therevenue comes from Auto sector whereas warehousing commands a vital17.5%share.Auto sector has seen one of the worst turbulence recently postwhich it has started to revive.Warehousing on the other hand is expected topick up as well according to the industry channel checks.The twin re

301、coverytherefore can come in very handy for Mahindra,enhanced by the type of riskdistribution this offers.Private Players/StartupsDelhiveryFounded in 2011 by Sahil Barua,Mohit Tandon,Suraj Saharan,Kapil Bhartiand Bhavesh Manglani,Delivery Pvt.Ltd is the only unicorn amongst theprivate players in the

302、logistics space.The company offers all range ofservices,but it has speciality in catering to the Ecom market.Indian E-Commerce Logistics-Shipping Into The Limelight59Key OfferingsDelhiveryExpressFully integrated self-owned operations that include a wide range of shipping services,andspecial services

303、 like oversize delivery,high value delivery and HAZMAT/Dangerous goods.FulfilmentServicesDelhivery has over 85 fulfilment centers across India,with over 6 million sq ft of storage andprocessing space.The warehousing management system is heavily integrated with all theprimary demand channels and cour

304、ier partners which enables efficient multi-tenant,multi-location warehousing.Delhivery also offers integrated distribution solutions to enterprises bycombining our warehousing and freight solutions.This facilitates fast and cost-efficient offlinedistribution.DelhiveryFreightOffers partial as well as

305、 full truckload services.All of this is done through Optimus and Orion simple freight booking and management interfaces of our PTL and FTL freight exchanges.DelhiveryCrossBorderThrough Starfleet,the global alliance for the company,the company offers all sorts of crossborder servicesDelhiveryE2EDelhi

306、very also offers End-to-End Supply Chain Solutions for Enterprises using an integratedfulfilment platform.Tailored solutions to cater to a business requirements are built using corewarehousing and transportation services,powered by in-house technology products.Key Revenue DriversOne of the principle

307、 reasons why Delhivery has become highly successful increating a pan-india reach is probably because of its integrated network.Akey part of its business model behind its strong warehousing and fulfilmentis probably the Partner-with-us strategy.Services under partner with usinclude:Constellation,wher

308、e the partners extend Delhiverys transportationnetwork to geographies which are currently not serviced by Delhiveryinternal operations.It currently has 700+Constellation partnerssuccessfully running 850+delivery centers across 850+cities.Cosmos:Small businesses and local retailers can partner with d

309、elhiveryto provide pick-up and delivery capacity to the Delhivery network incities serviced by its express network.In this way,delhivery saves afortune on its operational overheads.Delhivery currently has over9500+partners across 1500+cities.Integration:Delhivery provides customised supply chain man

310、agementand thorough operational management,online as well as offline,forsmall business for which it integrates with several partners acrossstorefronts,order,channel and shippling management.Delhiverycurrently helps over 5000 e-commerce companies,400 brands and150000 small businesses.Also,Delhivery i

311、s one of the most tech-advanced startups,justified by thefact that gross intangible assets almost doubled last year.Delhivery works with over 10,000 direct customers,which entails large andsmall ecommerce participants,SMEs,and over 350 leading brands.Indian E-Commerce Logistics-Shipping Into The Lim

312、elight60Revenue DriversKey Operational ForteAround one million shipments delivered a day;718 million packagesshipped till dateStrategic commercial partnership with AramaxTech-Advanced offeringsPartner with us which includesConstellationCosmosIntegrationFranchising18000+pin codes2500 cities70 hubs300

313、0+direct deliverycentres11000+partnercentres15000+vehicles40000+teammembersFunding HistoryBeing one of the unicorns in the industry,no doubt Delhivery is backed witha formidable investor force.The funding history along with the participantsis briefed in the table below.It is imperative to note that

314、Delhivery has themost number of renowned investors across all the private players.Moresignificantly,it has bagged the highest amount of funding in 2019,making itrelatively comfortable to take-off.YearInvestorsSum Invested2012 Series A:Times Internet Ltd$1.5 million2013 Series B:Times Internet Ltd,Ne

315、xus Venture Partners$5 million2014 Series C:Multiples Alternate Asset Management led by RenukaRamnath,Existing Investors$35 million2015 Series D:Tiger Global Management,Existing Investors$85 million2017 Series E:Carlyle Group,Fosun,Existing Investors$130 million2019 Series F:Softbank,Existing Invest

316、ors$413 million2019 Canada Pension Plan Investment Board$265 million across 2funding roundsSource:Company website,Ecom-ExpressEcom Expess is another giant player catering especially to the supply chainneeds of E-commerce market.Founded in 2012 by T.A.Krishnan,ManjuDhawan,K.Satyanarayana and Sanjeev

317、Saxena,Ecom express is e-commercefocused 3PL company,with proprietary line-haul and last mile distribution.Indian E-Commerce Logistics-Shipping Into The Limelight61Key offeringsMuch like other players,E-com express also provides all-round logisticservices.Summary of the services offered is as follow

318、s:ExpressServicesEnd to end service,and guaranteed last mile delivery within 24-72 business hours.E-comgroundserviceThis service is specifically tailored for the transportation of large and bulky products.ECOMFulfilmentServicesWarehousing and order managementOthersReverse LogisticsValue Added Servic

319、es such as Try and Buy,Switch Deliveries and Valuale CargoHandling.Digital Services which aids e-KYC-Aadhar based biometric verification and industryspecific cash/cheque/document collection and Contact Point Verification(CPV).Key revenue driversEcom boasts 30%market share in the outsourced e-com log

320、isticsmarket.High specialization in the E-com segment:Ecom Express,unlikeother players,caters specifically to e-commerce segment.Keycustomers for E-com express include Amazon,Flipkart,PayTM,Snapdeal,Ajio and various other leading ecom players.Expected E-commerce boom:As mentioned earlier,there has b

321、een asignificant traction seen in e-commerce the recent years due to rise indisposable income and advances in technologies.Consequently,EcomExpress managed a revenue growth of over 60%CAGR since F15.Since its commencement back in 2012,the company has grown wellenough to handle 5-6 million packages a

322、 month.Indian E-Commerce Logistics-Shipping Into The Limelight62Key Revenue DriversKey Operational ForteSpecializationExprected E-commerce BoomMarquee Customer baseRamped up capacity to handle nearly 5-6 millionshipments a month(as of 2018)Plan to hire 15,000 employees in the near futurewith the lat

323、est round of funding.29 States2400 towns25600+pin-codes covered2574+Delivery Branches19000+150 long haul and 480 short haulruns?700+tonnes capacity225,000 Network routre58 hubs20 fulfilment centres10,000 daily pickup locationsFunding HistoryYearInvestorsSum Invested2014Series A:Peepul Capital$17 mil

324、lion2015Series B:Warburg Pincus$133 million2017Warburg Pincus$30 million2019CDC Group$36 millionXpressbeesXpressbees,backed by Alibaba and PayTM is considered as a neck to neckcompetitor for Delhivery and Ecom Express.Founded only in 2015,Xpressbees also strictly caters to the e-commerce market.The

325、company wasfirst the logistics arm of Softbank based F but later in 2015 wasseperated and formed as a fresh entity.The services offered more or likecoincides with ecom-express and are as follows:Key OfferingsEcom LogisticsTested&robust end-to-end operationsSame Day Delivery(SDD)/Next Day Delivery(ND

326、D)SMART transportation planning&delivery frameworkSeamless Reverse LogisticsBespoke offerings designed to suit each unique client needDelivery Partners of choice for new products,launches&trial phasesExpress CargoMulti modal transport solutionsSMART transportation planning&delivery frameworkBespoke

327、offerings designed to suit each unique client needDelivery Partners of choice for new products,launches&trial phasesIndian E-Commerce Logistics-Shipping Into The Limelight63Cross Border LogisticsMulti-modal air,surface,seaExpress fulfillmentConsolidation centresFree trade warehousing infrastructures

328、Fulfilment ServicesIntegrated B2B&B2C frameworksSingle Integration&OrchestrationTransactional PricingStandardized ProductBespoke offerings designed to suit each unique client needKey Revenue DriversRevenue drivers for Xpressbees also more or less coincides with ecom-express since it offers mirrored

329、services and have some common clientbase.Some of the clientele for Xpressbees include big names like Snapdeal,Myntra,Firstcry,Bira,Bajaj Finserv,ICICI,Netmeds.It is imperative to notethat Xpressbees delivered over 600,000 packages a day,as of 2019.Key Revenue DriversKey Operational ForteServes Marqu

330、ee E-commerce playersSpecializationExpected E-com growth9000+pincodes2000+offices and service centres100+hubs52+cargo airports1 mn sq.ft+warehouse capacity500+customer base20,000+field executives1.5 mn+shipments traveling per day1400+citiesFunding HistoryYearFunding Details2015$5 million raised2016$

331、12.4 million raised from Saif Partners,IDG Ventures,NEA,Vertex Ventures,and Valiant Capital.2017$35 million raised from Alibaba2019INR 35 crores raised from InnoVen Capital in Debt2020$10 million raised from AlibabaNote:Details of all the funding rounds have not been disclosedclearly by the companie

332、s.However according to media,the totalfunding received till date is close to$168 million.Indian E-Commerce Logistics-Shipping Into The Limelight64Operational Forte-Private Players/StartupsNameFleetsWarehouseareaPincodes Sorting Centres/HubsShipment DeliveryAir Freighters/Air GatewayEcomExpress19000+

333、25,6002574+DeliveryCentres5-6 mn per month(2018)58 Hubs20 FulfilmentCentresDelhivery15000+6 Mn Sq Ft18,000+70 Hubs1 mn shipmentsdelivered per day3000+DirectDelivery CentresXpressbees1 Mn Sq Ft9000+100+Hubs6 Lakhs Per Day(2019)52+CargoAiportsDelhivery and E-com express are neck to neck in terms of operational reach,however Ecom express has higher pincodes and fleet size in its arsenal.Onthe contrar