Executive Summary

The courier/logistics industry specialises in time-definite, reliable transportation services for documents, packages and freight. This is done via a combination of transport networking that includes road, rail, sea and air for door-to-door delivery. This extensive distribution system is supported by infrastructure that comprises hubs, warehouses, IT technology and human resources, as well as offices in various cities.

The fortunes of the industry are inextricably linked to the volumes of business that is generated, because this industry has a very high level of operating leverage. Thus, growth of this sector is driven by macroeconomic variables directly linked to the manufacturing sector and trade.

A B C India

Autoriders International

Balurghat Technologies

Blue Dart Express

Bombay Baroda Roadways

C R C Carrier

Chartered Carriers

Chokhani Global Express

Coastal Roadways

Container Corporation Of India

Corporate Couriers & Cargo

DHL

Elbee Services

Fedex

Frontline Corporation

Gati

Inter State Oil Carrier

Jai Yatayat

Menlo Worldwide

Orbit Multimedia

Patel On-Board Couriers

Patel Roadways

S E R Industries

Skypak Services Specialist

T C I

TNT Express

The domestic courier industry with a turnover of Rs 20 bn is still at a nascent stage when compared to developing countries like China where the industry is five to six times bigger.

At present, there are about 2300 courier companies in India, but four major players in the premium organised segment dominate the industry. Blue Dart Express Ltd. (Blue Dart) is the market leader, with a 36% market share in the domestic market, and Elbee Services Ltd., the second largest player, has a 20% market share. AFL-DHL is primarily focused on the international segment, where it is the market leader, whereas Gati Corporation Ltd. (Gati) is the market leader in the domestic packages, ground distribution segment. In the domestic air packages segment, Blue Dart (now a part of DHL) has developed its own air network and aircraft operations, is currently the market leader.

In the mid-1980s, professional couriers were used primarily to send time-sensitive documents. However, this trend began changing towards end-1980. It was during this period that payers like Blue Dart and Elbee really made an entry and, by the end-1980s, began shipment of samples for non-commercial purposes.

This period saw the domestic express industry growing at 30-35% per annum. Strategic alliances with global express companies give Indian companies access to global markets, without having to replicate their network in the international market. Liberalisation and the export boom in the early 1990s gave a further fillip to the industry. The end of 1996 saw a slowdown that stemmed from the economic recession and slowdown in industrial growth.

Most Indian companies have seen impressive growth in volumes this fiscal, with growth primarily being in the high-volume document business. In FY00 the industry recorded revenue of Rs 20.1 bn. A recent ORG-MARG survey forecasts the industry growing at 20% per annum over the next 5 years, to Rs 50.4 bn.

The organised segment dominates the package and the premium document business since it requires a strong infrastructure and resources, while the low-yield document business is the domain of the unorganised sector. However in value terms the share of the organised sector is 64% and of the semi-organised and unorganised sector is 36% inspite of the large volumes it handles.

International operations are less profitable, compared to domestic operations, due to the imperatives of revenue sharing of international business with the global partners. The revenue sharing break-up is more favorable to the partner who has a majority share (60%) of all international consignments delivered in India. This forces Indian companies to realign their product mix in favour of the more profitable domestic non-document business. Currently 64% of the revenues accrue from domestic operations and 36% from international operations

Wide Skilling: The courier and logistics are in the services sector and by this virtue, will have to take a look at widening their skills at all times. A strong focus on team building skills and communication will be required.

Leadership: Increasingly companies are shedding off their precious status of being in a business where business is assured. There is a lot more emphasis on leadership all around.
Building Retention: The industry also faces considerable attrition. This can create damaging situations, as a people intensive industry training and developing skilled personnel is critical to its growth.

A few large players in the organised segment dominate the Indian industry. High entry barriers will provide sustainable growth opportunities for these companies in the future.

E-commerce will present a huge growth opportunity, as there is expected to be a lot of business coming from Internet and e-commerce activities. Owing to a good distribution network, the courier industry is well positioned to tap emerging opportunities from e-commerce B2B and B2C trade.

E-commerce has become increasingly dependent on express companies for delivery of goods, rather than set up infrastructure for this purpose. Research has shown that, worldwide, B2B commerce is expected to grow from the present $138 bn to $541 bn by 2003. Indian courier companies are looking at additional volumes from B2C and other portals.

Third Party Logistics (TPL), whereby companies outsource logistics requirements in relation to Supplier Chain Management (SCM) and Customer Relationship Management (CRM), is also a big growth opportunity. Courier companies like Blue Dart and Elbee are positioning themselves as total logistics solution providers.

The lightweight documents business has a lot of potential, with the fast growth in the credit and ATM card market. The credit cards market is expected to grow at a CAGR of 30-35% in the next five years. An increase in Internet banking is also likely to provide good growth opportunity.

Courier companies are looking to be dominant regional players, as margins from domestic operations are 20-25% higher than those from international operations. With custom duties expected to come down, courier companies are bullish on international inbound volumes.

With the increased usage of fax, e-mail, etc. as well as increased competition from the emergence of a number of players in the semi-organised and unorganised sectors, the incremental business from the document segment has slowed down. This has already happened globally, and the trend is evident in the domestic market too, with the reduction in prices, by around 30% in the last three years.

According to research estimates the total costs of owning an aircraft are approximately Rs 1300 mn as against Rs 800 mn for commercial airlines. This includes not only the high fixed costs but also the cost of Air Turbine Fuel (ATF). With fixed costs being really high for aircraft operations companies have to rely on high operating leverages. When volume growth is low using commercial airlines are more viable as this model works on a lower fixed cost and a higher variable cost.

Owned aircrafts however reduce the dependence on commercial airlines. Moreover the plus of owning an aircraft is the flexibility to operate at night and ensure a 10:00 am delivery in the morning

In India, the logistics industry is still at a very nascent stage. However, as more and more parties outsource their supply chain management, third-party providers stand to gain. With the total value of e-commerce transactions in India expected to rise to around Rs 100 billion by 2002, logistics is expected to account for 5% of the value.

Manufacturing companies in the West have started outsourcing their logistics requirements. This trend will soon catch up in India.

Express companies such as Blue Dart and Elbee Services are already into the logistics business. Elbee is positioning itself as a total logistics solution provider. The company provides logistics solutions specifically tailored to meet customer requirements. Blue Dart also provides customised logistics solutions to meet the changing demands of businesses.

The distribution infrastructure these companies have, in terms of warehouses, hubs, transportation fleets and IT and manpower, makes logistics a natural extension for their activities.

Container Corporation (Concor), the public sector logistics service provider acts as a single -window service provider for all logistics and regulatory aspects (including customs and ports clearance before consignment reaches the point) related to transporatation of goods, mainly for Exim trade. It also deals with foreign shipping companies for further transit of outbound cargo. Concor has built an extensive infrastructure and systems in order to handle export-import and domestic cargo.

As import barriers are done away with over the next few years, the movement of international cargo and the resultant movement of domestic cargo is expected to increase multifold. This is because, just as doors open for freer imports, the world will welcome Indian exports.

Last updated:

May 2005.

Appendices