Logistics companies relook at targets amid slowdown

Written by Ashutosh Kumar | New Delhi | Updated: Nov 29 2008, 06:43am hrs
Logistics companies have started feeling the heat the global economic downturn and of revised growth projections domestically.

Integrated supply chain and logistics services provider Transport Corporation of India (TCIL) is pruning its Rs 200 crore expansion plan. The investment was focused on acquiring ships, trucks and warehousing space by 2010.

"We are slashing our expansion plan by half at Rs 100 crore, owing to slowdown in the economy. We will, for the time being, shelve plans for acquisition of ships and trucks," said Vineet Agarwal, executive director, TCIL. Agarwal said that the slowdown will acquire more serious dimensions in the near future.

"We have already seen substantial increase in failures on payment commitments by the clients. We will not hesitate in winding up operations in verticals that are not profitable," he added. The TCIL scrip has taken a beating on the stock exchanges.

The scrip slipped from Rs 175.85 per share in December last year to Rs 38 a share now, registering a sharp 78% dip.

The company has initiated mega cost-rationalisation drive to tide over the situation. "We are taking various initiatives to ensure that there is optimum utilisation of manpower, materials and resources," Agarwal added.

Another major player in the logistics space, Bluedart, which provides express air and integrated transportation services, has winded up its expansion plan worth Rs 200 crore for this year.

However, the company officials feel that the slowdown will certainly affect volume growth and in turn dent its bottomline.

Bluedart has already reported a 22% decline in profit after tax for the quarter ended September 30, 2008, at Rs 13.58 crore compared with Rs 17.43 crore in the corresponding quarter last year.

"Volume growth has comne down from 20% earlier to around 13-14% now," said Anil Khanna, managing director, Bluedart.

"The logistics sector is totally dependent on the services and manufacturing sectors, which are wilting under the slowdown heat. This is certainly having an impact on almost all verticals of logistics services. It now depends on what initiatives the government takes on lending rates and liquidity to boost consumption and growth," he added.

Bluedart, apart from cost rationalisation is also planning to hike freight charges by up to 5-10%, said Khanna.

Logistics services provider Safexpress, however, is quite confident of its investment plans.

"The current recession is affecting growth. But our plans of doubling revenues to 1,000 crore remains unchanged," said Vineet Kanaujia, general manager, Safexpress.

Speaking on the outlook of the sector, Harsh Srivastava, senior VP, (marketing), Feedback Ventures, said, "This sector will certainly grow. Economy demands logistics. Garments, power equipments, construction equipments, food will move as the economy is moving."