Mahindra Logistics is looking to acquire an overseas freight forwarder as part of its expansion plans. Plans are afoot to bolster margins through more warehousing and making use of input tax credits,, Pirojshaw Sarkari, CEO, Mahindra Logistics, told BusinessLine . Edited excerpts:
Increasingly, there are concerns about use of polluting vehicles, or use of diesel in places like Delhi-NCR. Are you shifting towards cleaner fuel?
Ratherthan shifting towards cleaner fuel, we are focusing on adopting cleaner vehicles that emit lower pollutants. We tell our business partners – truck owners – to adapt BS IV trucks, which have much lower emission levels than the ones they use. We explain to them the total cost of ownership, which is lower in these trucks. Even if these trucks cost more initially, a half kilometre a litre improvement in mileage means lower cost for truckers who drive an average of 7,000-8,000 km a month. Additionally, we explain to them Forward Charge Mechanism (FCM) available under GST, through which they can set off the tax paid by them.
How do you manage competition from biggies like Amazon, Flipkart (now acquired by Walmart), Future Group, all of which have supply chain arms themselves?
Logistics arm of Amazon and Flipkart-Walmart sublet their services to players like us. They set up their logistics arms to monitor us, and so that their company can focus on products and not logistics. They are more into technology and data analysis.
But, Mahindra Logistics is also into technology and data analysis.
Yes we are. So, when we handle Amazon, we use their technology. And if we were to handle a P&G, we will use our technology. Also, there is collaborative logistics. For instance, Hyundai has a logistics arm – Glovis, just like Mahindra Group has Mahindra Logistics.
We tie up so that the trucker who goes to South from West gets return cargo as well. By assuring return cargo, they charge us bit less for a round trip. The more warehouses we manage, the more round trip cargo we can provide to our partners.
What are your plans for freight forwarding?
Apart from expanding in warehouses, we will be expanding our freight forwarding. Global logistics players like Kuehne and Nagel, DHL get at least 25 per cent of revenue from freight forwarding. Unlike those, we are a pure contract logistics company.
At present, we get five per cent of revenue from freight forwarding, done by Lords Freight, which we had acquired. We would like to fully acquire Lords Freight, and also acquire a few more companies in the space by making investments large and fast. The company will have to be outside the country to develop the network. If we have to become a ₹6,000-crore company over the next few years, freight forwarding has to contribute 10-15 per cent of revenue.
Have freight rates gone up with increase in fuel prices?
Not necessarily. Trucks are becoming bigger, they travel more distance a day. Move in India has to be cheaper if Make in India has to succeed.
How have you managed a 10 per cent top-line growth and a 50 per cent profit after tax growth in the first half of present fiscal?
We are focusing more on value added services such as warehousing and in-factory logistics, which have higher margins than transportation. Second, having grown as a company, we can bargain more with our customers, and our purchasing power increases. Third, forward charge mechanism (FCM) under GST has allowed us to claim input tax credit, which was not available to us under the service tax regime. This allows our expenses to be set-off. All these add to our margins.