Ecommerce makes Indian logistics attractive to foreign & domestic firms; Will GST end this?

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In addition to seller businesses, the Indian online retail industry also helps other businesses to bloom and blossom. The logistics companies in India are growing exponentially with the progress of ecommerce. This segment is expected to grow up to 48% by 2020, all on account of rapid ecommerce growth.

For the second year in a row, India was picked as the country with the most potential to grow as a logistics market, the Agility’s Emerging Markets Logistics index stated last month in a report. More than 800 supply chains and logistic experts were surveyed for the report prepared. These professionals indicated that –

  • Goods and Services Tax (GST) would impact business and require them to adjust themselves accordingly.
  • In the next five years India will be a top emerging market for investments from their firms.

Will logistics firms stop investing due to GST?

It appears unlikely. Though GST has a couple of specifications that need to be worked on, both global and domestic logistic entities are confident and aggressive about this segment of business. And, they are actively planning investments for this segment in the coming fiscal year.

Indian logistics entities

The executive director at DTDC Express, Abhishek Chakraborty, said, “For us, I do not see investments getting hampered if GST gets delayed. GST can only add to our current investment plans. As of now, in a growing logistics market like India, higher investments are much a need of the business to improve earnings and streamline operations.”

Out of the total revenue DTDC makes, 60-65% of it comes from its express business. Apart from this, the Bangalore-based firm is also into supply chain and ecommerce. By the end of this fiscal year, the logistics provider is looking to reach a top line of Rs.1,050 crore.

When it comes to investments, Chakraborty mentioned, “We plan to invest about Rs 20-25 crore through internal accruals of which a part will go into technology, hardware and increasing head count. Also, over the next one-two years, we expect to make more serious efforts to raise capital through either our subsidiaries or internally, and may even go to third parties for funds.”

Another logistics company looking at building its investments in this value added service is Inland World Logistics. It is a part of the Inland Group and has built a strong presence in the eastern region of the country. The firm is looking to invest in logistics within India as well as in neighbouring areas.

It already has its subsidiary in Bhutan and Nepal, where it builds traction between them and our country. In India, it has a multiplied its third-party logistics division, inventory management and warehouse management.

Inland World Logistics director, Praveen Somani stated, “India is the largest of entire SAARC (South Asian Association for Regional Cooperation) countries but a lot of Indian companies have trade with SAARC countries and hence we have plans to invest Rs 20-25 crore in Sri Lanka and Bangladesh next fiscal to increase our volumes.”

For the end of this financial year, the logistics provider aims at maintaining a top line of Rs.920 crore and would like to earn consolidated revenues of Rs.3,000 crore

Foreign logistics entities

The potential of the logistics market in India is so impressive that foreign companies are trying it too. In 2016, French logistics company, FM Logistics took over Spear Logistics, a Pune-based firm, to enter the Indian logistics market.

The company wants to invest Rs.300 crore in its business in India, during the course of the next three years, to improve its warehousing base across the country. In the next 6 to 8 months, the company is ramping up Spear Logistics’ custom-built warehouses, with an investment of Rs.300 crores.

The director of strategic projects and the director operation Asia of FM Logistics, Stephane Descarpentries, said, “We see a good growth potential for warehousing segment in the domestic market and would have invested even if GST was not round the corner.”

Descarpentries also mentioned, “With ecommerce segment growing in India, we see the need for better warehousing across country and hence this investment (of acquisition).”

Chinese etailer Alibaba is also strengthening its logistics in India for smooth ecommerce once it begins business here. Following this online retailer’s lead are Chinese logistic players.

Can we expect more investments in Indian logistics to improve this sector? Or will logistic losses like Delhivery’s and Ekart’s keep them from advancing?

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