Logistics company Gati is gearing up to cater to rising e-commerce deliveries with a Rs 250-crore investment in technology, operations network and fleet size over the next five years.
Logistics company Gati is gearing up to cater to rising e-commerce deliveries with a Rs 250-crore investment in technology, operations network and fleet size over the next five years. Bala Aghoramurthy, deputy managing director, Gati, shares the details with Rouhan Sharma on this fast-growing segment:
How many packages does Gati deliver on daily at present and what is your target?
Today, we deliver about 3 lakh packages daily. About 40,000-45,000 are e-commerce deliveries while the remaining 2.6 lakh are business-to-business (B2B). Ideally, we would like both segments to contribute 50% each once we reach our target of a million deliveries per day by 2022.
How are you going to achieve this?
We have to move from being only an express distribution player to an end-to-end logistics solutions powerhouse. This means being present in distribution, warehousing as well as in transportation. We are known for distribution today as we operate a very efficient hub-and-spoke model. The investment we have to make is in technology, in our operations network and in our fleet. We already invested in the technology in 2016-17 and our shop-floor is fully automated today. Demonetisation and GST delayed things a bit but there’s stability now and over the last two quarters, we have added 80 more delivery locations to our existing 600 offices. We have added 100 business partners and in the next few months, will add 100 more locations and 500 more business partners.
What will be your CapEx?
This is an asset-light business. Our requirement is about Rs 30 crore per year in normal circumstances. For reaching a million packages, we need to lease more space and we will be leasing almost a million square feet more in the next six-eight months. We will not invest heavily in fleet as only about 5-10% of the total fleet is owned by us. Our assessment is that Rs 30 crore will go up to Rs 50 crore annually if we have to reach our target which means it is an incremental capex of about Rs 100 crore over a five-year period. This will be funded mostly though internal accruals.
What about the transportation business?
We are not going to enter the full truck load (FTL) business. We are targeting a very niche portion which is value-added transportation. The FTL business is about Rs 1.5 lakh crore but within this, we want to choose a niche market not greater than Rs 5,000 crore. Even if we get 10%, it is substantial. The value-added part is the point-to-point transportation on specified lanes or the point-to-multi-point milk-run drop-off, (just like a milk van that drops off milk to various customers). The reverse is also possible which is picking up from multiple points and delivering it to a single centre. We are trying to marry this value-added transportation with warehousing and distribution so, we can provide a composite end-to-end solution.
What is the performance of your cold storage subsidiary, Gati Kausar?
It is not an easy business to crack. We have confidence in the medium to long-term. The utilisation has ramped up to 70-80% from about 30% a year ago. It was affected by the meat ban which is an important product for the entire cold chain. However, we are broad-basing our clientele, so we are not limited to one product. Today, cod storage is a small part of our overall business Rs 40-45 crore of our total turnover of Rs 1,700 crore.
How are you growing this business in the next year?
Today, we have our own fleet of 175 vehicles. This will go up to 200-225 in the next one year. We have a growth plan and are also looking at both the vendor and purchase models. We are also looking at leasing space. Today, we have 5,500 pallet spaces of our own in Dharuhera, Haryana. Together, with the leased space, we have a total of about 7,000 pallet spaces. We are increasing the leased portion which is about 1,500 today, by about 200-300% in the next 12-18 months.