Blue Dart to add more planes to boost capacity

News Clip: The Financial Express, Mumbai

16th December, 2011.

German DHL's Indian subsidiary Blue Dart Express, a package delivery company, will add more capacity to ferry more cargo within India either by purchasing planes or buying space in rivals even as Indian companies postpone expansions in a slowing economy.

"We are growing aggressively after a few growth levers that we have identified," said Anil Khanna, MD, Blue Dart Express. "While we are being prudent and rationalising our costs, we are readying ourselves when the economy bounces back. We have not felt the slowdown effect in the business so far," he added. Blue Dart, purchased by DHL in Nov 2004, owns seven freighters with a capacity to move 400 tonne. The company, an industry leader with a 44.5% share, is expanding to grow its revenues by 20% every year.

"We are committed as trade facilitator to continuously invest ahead of the curve to meet the economic and industry growth aspirations," Khanna said.

The company is not new to growing in slowdowns, as in 2008. "During those tough times we took a lot of steps like having sector focus approach, introducing new products,and geographical focus. These steps have already started paying us off so we are not wary of the perceived and much talked about slowdown now," Khanna added.

"Air cargo airlines have a lot of capacity and it is advisable to buy capacity by partnering with them rather investing in assets which has lot of capital risks," said Manish Saigal, head, transportation and logistics, KPMG India. "Well placed air express companies which have premium pricing power make about 10% on operating margins.

Express cargo grows anywhere between 15 to 16% over GDP. The cargo movers ferry anywhere between $700 million and $800 million of goods a year, between 2-3% of total cargo moved in India.

Apart from air cargo expansion, Blue Dart, with zero debt, is also renewing its truck fleet of 6,189 vehicles by cutting down carbon footprint using bio-fuel and smart metering in warehouses to move goods faster. The package delivery company will invest roughly R150 crore in fiscal 2012-13 to roll out its plans, an amount it spent over the past two years. The company, however, is not over-bullish on Indian economy. "We too have deferred some plans for about six months," says Khanna. "These would be some IT upgrades or bringing in new systems or buying a new facility. We have kept them on hold for sometime," he added.

Air cargo business is the most profitable for logistic companies as it has highest margins compared to the other ones. "Compared to other businesses in supply chain arena, express has the greatest margins than the rest. It is not just because of prices here but also because we have to incur high amount of investment, be it in knowledgeable man-force or investment in infrastructure," said RS Subramanian, country manager, DHL Express India.

Blue Dart's shares closed at R1520.20, up 1.32% on Thursday on the BSE.