Blue Dart Express Limited (526612) Earnings Call Transcript & Summary

So good evening, everyone and welcome to the earnings call with the management of Blue Dart Express. So we have with us Mr. Aneel Gambhir and the rest of the Blue Dart team to give us a perspective on the Q2 performance and the outlook for the company going ahead. So I would request Aneel sir to provide a brief overview on the results and the outlook and then we can take up the Q&A session. Thank you and over to you, sir.

Good evening. Thank you, Alok and good evening to everybody. I wish you all a very happy and prosperous Diwali. Hope you would be able to enjoy Diwali season and festivities with your near and dear ones and pray to Lakshmi Ji to have blessings on the people around you and your near and dear ones. Thank you. So with that, I will just give you brief, starting from the wave 2 of pandemic and how we have performed over a period of time and how does the scenario look like from that perspective. So we know that wave 2 of the pandemic was quite severe, which generally impacted almost everybody, either themselves or the near and dear ones in April and May. Thereafter, they started tapering down and June saw a strong pullback, especially from the -- on the business front. So -- and that's why you saw in the first quarter of '21, '22, we had growth but it was a muted growth because of 2 months of the pandemic, which had some amount of lockdowns, which was this time decentralized. But then from June, the journey which started, I think we have not looked back. There have been a strong pullback in demand. All economic indicators have been looking good. We have seen that IIP growing. We have seen PMI growing. We have seen GST collections being buoyant. And also, I'm sure once the quarter numbers are announced for GDP, those also will be in line with what we are seeing on the other parameters. So that is where it was in the current quarter. And so we -- the journey which we had started or the pullback which we had started experiencing from June has been continuing in the current quarter. I mean, when I say current quarter, meaning this call is related to September quarter. So we had a strong quarter, which is backed up by the good volume growth. And good volume growth, Blue Dart was happy to lap up and deliver better customer experience and through better service quality. So -- and that's why you see the top line is growing at 30%. And obviously, we're being a fixed cost model, there's operating leverage. Besides that, the cost efficiency measures, which we have been working on for almost 1.5 to 2 years now, with the financial reengineering added to that, all of that, including the automation have helped in having a strong bottom line as well. So you've seen sequentially margins have been improving. While top line has strong growth, similarly on margin also, there's a strong growth. And that's where currently the numbers are, which you have seen. Apart from the number of other activities during this quarter has happened, tea you all must be watching media where we did a drone -- on a pilot in Telangana state, which was a consortium, Blue Dart Med-Express Consortium through which we, first time in India delivered medicine to far off location. And we have been continuing those pilots still some of the locations to see whether this can be utilized as a emergency service situation in case of emergency, we're able to supply medicine or essential items to those locations. So at this point of time, it continues to remain in pilot mode. And maybe at a later date, we will just review whether it can be commercialized depending on the results of the pilot. In addition to that, it's in the press release, we did talk about purchase of 1 aircraft, which was earlier on lease, which we did during the month of October before the Board meeting. In fact, it's about 10, 15 days back, we had the transaction, which has been concluded. So with that, again, the criteria remains that we try and review whether it is in the interest of company to continue the lease or to buy this aircraft, which can give us better bottom line out of it. So in this case, we found, out of the 4 leased aircraft, 1 aircraft was beneficial for us to purchase. So likewise, like last year, we did buy 2 aircraft. We bought another 1 aircraft, which was on lease. So now BDA is owner of 3 aircraft and 3 another aircrafts are on lease. So that's how -- that's another thing which has happened. On availability of cash, I think we have financial reengineering. We have retired some of the bank debts. So strictly speaking, technically, there's no bank borrowing at this point of time, though there are bank borrowings, which are reported in the numbers. But then if you look at available cash with the books, you will find that technically company -- both the companies are debt-free from a banking borrowing point of view. While BDA does have some group borrowing and also borrowing from Blue Dart Express but from outside borrowing have almost reduced to nil. The reported numbers also, we plan to soon become debt-free as far as Blue Dart Express is concerned. There's another item, which is exception item, during the current quarter is about INR 36 crores worth of bonus or corona ex gratia amount which has been provided for the staff. As I was mentioning about wave 2 being quite severe, I mean, you can understand your next of the kins are suffering, still people had to take that hardship and still report to office to deliver shipments. As a token of appreciation of their efforts during pandemic time, company once again, like last year, we did give ex gratia. So once again, this year, we decided to pay ex gratia amounts to staff. So as a token of appreciation of their work during such trying and tough situation. Actually, that works well for our organization because the staff remains motivated and also goes out of the way during such times to help company in navigating the crisis in a much better way. And this is one of the reasons that we see a very high employee engagement when we do employee survey. On digital front, I think I spoke about earlier on the contactless deliveries and also during last quarter, we spoke about vendor portal where we are now looking at operating without paper or paperless kind of office where people can submit their invoices in a soft copy and can run through the workflow and get -- gets accounted automatically. So a number of automation are currently in pipeline, which will yield results for us as we move ahead in the time. That is on the activities during the quarter. Yes, one more thing which I would like to highlight on ESG front. I think company has been quite proactive. We have reported our activities on ESG front in our annual report. And we are continuing those good work, including reducing carbon emission or controlling carbon emission by way of planting trees. So far, we have planted 5,55,000 trees [indiscernible] in 5 years and also trying to piloting on use of electrical vehicles so that our carbon footprint reduces. At the same time, going forward, we are trying to put in green facilities so that our carbon footprint further gets reduced. On diversity side, I think we already have been quite vocal about it that we have opened 1 dedicated service center in New Bombay, which is manned by -- or which is managed by all women employees. Similarly, on courier front, we have started employing women couriers so that they also participate in delivery of shipments. So that's why we are looking at inclusive growth of people rather than dependent on a particular gender. So these are kind of things which are ingrained into Blue Dart's DNA and which we have been doing and now probably pace has only accelerated on that. Having said that, from a future point of view, I think all indicators from government side, be it budget of this year or be it policy front, so like you know that logistics has already been granted an industry status. There are a number of policies which are either being implemented or proposed to be implemented like National Air Cargo Policy, we have logistic policies, we have e-commerce policies. All of them are available in public domain. So these are basically to ensure that ease of doing business. Then on the infrastructure side, there's a lot of initiatives by government, be it dedicated road corridor, be it rail corridor or talking about improving or expanding air infrastructure, waterways, or also putting up logistic parks across the dedicated corridors. All these initiatives have been there to ensure that there's no issue as far as movement of goods or vehicles are concerned. So from -- that's from infrastructure point of view. On ensuring that there's a high production, so Make in India, Atmanirbhar Bharat or one talks about PLI scheme, which is incentivizing high manufacturing in India. We being part of supply chain, we get benefited twice, one, to meet the raw material supplies and on the consumption side to meet the consumer demand. So we play the dual role in the supply chain and tend to get benefit out of it. So all indicators put together, including the other parameters related to economy, which is lower interest cost, which we will talk about, lower inflation and also availability of credit with banks. All this augurs well for Indian economy. And obviously, if Indian economy grows, we being barometer of Indian economy tend to benefit out of it because of better volume and better production, better volume and better consumption or high consumption, which takes place. So all in all, if I have to summarize, the outlook at this point of time seems to be quite positive. And the initiatives which government has taken, if they were to all implement it in right earnest, I'm sure at least for time being, one can see a good growth in Indian economy. And as a result of that growth, we also would grow. With that, I will pause -- take a pause and hand over to Alok for question and answer. Thanks, Alok.

Thank you. Thank you so much, sir, for the update on the quarter. So we'll start with the Q&A session. [Operator Instructions] So first question we have, sir, from [ Kashyap Javeri ].

First of all, my best wishes for the festival season. And congrats for a great set of numbers. I have 2 questions. One, in terms of air cargo, in line with the policy initiatives that you highlighted versus, let's say, last about 4, 5 years, what are the green shoots or let's say, tailwinds that we are seeing in terms of air cargo volume growth? That's question #1. And question #2 is that one of our competitors is looking at starting a multimodel transport through railway to make faster deliveries in competition with air cargo. So what are your views on the same? Can rail be a meaning competition to air cargo in terms of speed and agility?

So Happy Diwali. So let me answer this question both through [indiscernible] I think post pandemic, if you see [indiscernible] take you back to prepandemic situation, where we used to see some shifting of volume, especially on e-commerce space from air to ground, which was consistently for 5 to 6 quarters, which you saw. But post pandemic, entire scenario has changed because the customer preferences have changed and the person who delivers faster gets a sale. Otherwise, all other gets returned back to the shipper. So what has happened in this scenario in order to get customers' attention or have their sale, I think the early the better kind of scenario is prevailing. So what we've seen is a reversal of the previous scenario where people are moving from air to ground to save on cost. Now to realize their sale, they are moving back to air so that they are the first ones to get attempted so that the shipment gets delivered and they collect the money or they realize the sale. So if you are not using the air, then will be high chance of it's returning back to the shipper. So they will incur double the cost of shipping firstly to the customer and returning back to the shipper without having any revenue. So I think that is where the customer preference has changed during pandemic and people are now looking at servicing the customer much faster. That's point #1. Point #2, with growth in economy, generally, what happens when your growth is low, you tend to be cautious about reducing costs and you start moving your material by road because you have ample time because demand is not high. But when your demand is high, you obviously want to fulfill that demand faster so that customer does not have to wait. And that's where if you are in a high growth scenario, suddenly, you will find that air shipment will grow because the customer generally would not wait for a longer time if there's an option that somebody is giving faster and you are still slower. So obviously, that becomes a tailwind for air shipments when you are a high-growth area or high-demand area so that you realize the sales rather than somebody else taking away your sale. So these are kind of things which impacts the customer behavior or the customer pull, creates a pressure on the seller that to reach faster to the customer and that's where our role comes in. Coming to the second part, I think when the dedicated corridor of railway starts, this will offer opportunity to all players, not just to competition but to ourselves as well. So we are also working on this as and when this opportunity is available, probably there could be space. This is just a thought where we could have a product between air and ground, which could be relatively cheaper and also maybe transit time is slightly higher than air but lesser than road. So there would be possibility of new products being launched by many players. So I don't think this will be applicable or available only to one player and not to others. Hope I answered your question.

Sorry. I was on mute. What I'm asking is that in this kind of multimodal transport, would then the margins on per shipment basis or, let's say, on volume basis be similar to what we get for air cargo?

So actually, it will depend on the pricing strategy depending on when this gets launched. So generally, we have been maintaining, if you look at historical numbers, be it ground or be it air, we have been maintaining our margin or rather we improved our margin. So as and when this offering would be available, I'm sure we would also take a call at that point of time to continue to maintain the margin.

So we have the next question from Mr. Nemish Shah.

Congratulations, sir, for a good set of numbers. So sir, I just wanted to understand the volume growth that we have seen this quarter. So which segment contributed to this volume growth or it was a broad-based volume growth that we had seen this quarter. So some highlight on that. And also, if you could just give some sense on the mix in terms of our various segments that we have.

Nemish, [indiscernible] for the compliment. Yes, as far as volume is concerned, I think that this quarter has seen a very strong double-digit growth in the volume. And it is generally broad-based. But yes, if you want to have a specific thing, e-commerce has been the highest contributor in terms of volume growth, followed by electronics and then pharma, medical equipment, auto parts, et cetera. So these have been the segments which have contributed but it is to highlight a few of them. But generally, it is broad-based volume growth.

Sure. And if you could just give some sense on the business mix in terms of ground, air, document, e-commerce for us.

So generally, the information point of view, I may give you indicators, right now we talked about 30% of the top line coming from ground and the balance 70% comes from, say, air. These are rough estimates.

And e-commerce will be about 20% or it will be more than this.

Yes, maybe slightly over 20% kind of scenario in the overall pie of 100%.

Okay. Got it. And another question I had in terms of -- so there were reports that we have taken a general price increase from 1st of Jan of about 9-odd -- 10-odd percent. So just wanted to understand will we -- net -- so will we have a net realizations of 10% or what kind of realization increase we expect out of this price increase?

So very good question. We have been taking this initiative of passing on inflationary cost to our customers so that we don't compromise on our margin. So like last 3, 4 years, we've been doing that. And similarly, this year also, we have announced a price hike effective January '22. Generally, we give 3 months' notice in advance for the customers so that they are able to built in, in their plans because generally, many MNC companies have [ merchandise ] exercise during October, November. So they get a notice prior to that so that they can built in. That's point #1. Coming to the realization, I think this 9.6%, which we just announced actually depends on customer to customer, depending on volume and the negotiation which takes place. So effectively, one sees about, say, 4%, 4.5% kind of realization, actual realization because somewhere it will be lower, somewhere it will be higher. The average comes to around 4%, 4.5% kind of realization from the price hike, which is sufficient to cover the inflationary cost.

Understood. And sir, one last thing from my side. So you mentioned that the outlook in terms of the volume growth you're quite positive. So if you could just give some directional sense of what kind of volume growth you are looking for in the next 2, 3 years? Will it be say, double digit or mid-teens? Some sense on what kind of growth you are targeting in terms of volume?

So the discussion which we had more of in -- directional in nature because all indicators on the economy front points to a positive outlook. As far as volume is concerned, generally, we do not give guidance on the volume side. But yes, there will be healthy volume growth, which is what we are looking at on the back up of -- which is backing of a positive economic indicators. That's what I can say at this point of time because generally, we have been not giving any guidance for the future performance or especially on the volume side.

[Operator Instructions] So we take the next question from [ Mr. Dhawal Shah ].

Sir, 2 questions from my side. First one, sir, the bonus which you have shared with the employees. Now this is the second year where this is reported as an exceptional item. So shouldn't this be now part of the employee cost because this is second -- again, it's repeated for the second year as well and it's part of remuneration what you do to the employees.

So I quite agree with you from the point of view that this is a repetition in the second year. Unfortunately, the situation has also occurred twice and that's why it is repeated. But from the treatment in accounting point of view is concerned, I think this is one-off item. Yes, it's coincidental that it got repeated twice but then it is linked to a event, which is not a regular event. And I don't think, let's pray that it does not reoccur again, from that perspective. So it is -- that's why it is shown separately so that when any time any comparison is done in future, that should reflect the right trend rather than showing ups and downs in the numbers, from that perspective.

Got it.

So maybe 2 years, 3 years down the line, when you look at it, you will realize that we are able to easily compare the number rather than adjusting those numbers again.

Correct. And sir, now my other question is on our freight handling and service cost. Now if we just look at -- look through past 6 quarters and compare, broadly, like the September quarter was around 45% of sales and now it's around 50% of sales. So does that mean that we have increased our capacity and right now, we are operating at a lower utilization or there's a large part of variable expense into it?

No. Say it again, what percentage you said.

So freight handling and service cost, the way we report in the annual report, also in the schedules. So it was INR 387 crores in the second quarter last year. And currently, it is INR 566 crores. So last year, it was around 44.7%. This year, it is 50.3%. So -- Yes, so this increase is because of the fuel cost and any other infrastructure where we are underutilized? Or how should we see this as cost?

No. I think your comparison point of view may not be right, clearly because what you're seeing is last year Q2 number on freight handling and servicing was INR 520 crores, not INR 347 crores, INR 347 crores was in April to June quarter, right?

No, second quarter, so what we are looking at is that the heads which you gave in the annual report -- yes, anyways, we'll take it separately off-line. No problem.

Okay. Because definitely, if you see trend-wise, last year, same quarter, we had roughly about 60% -- and now this comes to about 62% of the revenue with the increased fuel prices. Because when you compare directly, obviously, the fuel price will add to the cost. But when you take revenue and [indiscernible] because revenue offsets the fuel surcharge part and the revenue offsets the cost. So then obviously, it does not hurt. But from like-to-like comparison on the same cost item, it will show 2% increase. Or rather 1.8% to be precise.

Got it, sir. Okay. And sir, 2 months back, we had a call and you were discussing about the new initiative for better utilization of fleet by flying to the overseas market when the fleet is not delayed during the daytime. How is that business going? Any new -- any thoughts you can share?

So charter business, which we had started is -- we are continuing with that off and on, depending on availability of fleet, we have been undertaking charters. Even current quarter also, we had some charters undertaken to international destination. And I think time being, we'll continue doing those charters in the cross-border area. And I think maybe slightly later date, we'll take a call whether to continue and make it one of the main business line, that we can decide at later stage. But currently, we are continuing to explore those international charter opportunities.

Okay. Okay. And sir, if you can throw some light in terms of the competitive intensity, pricing, especially on the e-commerce side, how is it and any new initiatives you have taken to grab more market share? Any development from the last quarter conversation we had?

So from a competition point of view, I think if you talk about realization, we have improved our realization on e-commerce space. The way we just spoke about 6.9% or rather 9.6% increase which we have taken from customers of similar kind of GPI was applied to our e-commerce customers. And I'm happy to say that there have been acceptance of those GPIs from those set of customers and we have improved our realization on e-commerce space despite hypercompetitive activities. When we talk about the competition on realization, I think, of late, we see slightly different reaction than what we used to see earlier. Maybe it's coming because of they're planning to have IPO. So I'm not concerned about it but then that's what kind of experience or the kind of feedback which we are getting from market. Probably time will tell us over a period of time, whether that is true or not. But this is the kind of feedback which we're getting. But as far as we are concerned, we have improved our realization from e-commerce customers. And like earlier, we used to talk about 10%, 1,5% -- 10% to 15% premium. And now I think the premium has gone up further. But -- and with that premium, we are growing volume much faster than what we used to grow earlier.

Okay. Okay. Sir, there is one start-up called Shiprocket, which compares the prices of various logistic providers and gives it as a service to some guy who wants to sell it online. Are you aware of it? And secondly, how do they operate? So how do we pitch it to them? And I think they got funding also recently.

So I will not be able to comment on them. But yes, I'm aware that they do have in their platform prices of various customers. I'm not too sure how they do the benchmark because pricing is different for different players.

Exactly. Yes.

So their mechanism, I would not know that how they calculate and offer price on their platform. But yes, I'm aware that they offer some price to customers that if they want to ship, they can use it. But as this, like Shiprocket, there are other 2, 3 more consolidators are there. They also are in the similar business like Shiprocket, et cetera.

So do they come to us and book a -- book us some volume.

Yes. They are our customers as well. So they use our services, be it [indiscernible] or the other players which you mentioned. But then that's the offering which they have and maybe they will have margin on top and basis that they must be quoting there. I don't have visibility on their pricing mechanism. But yes, I'm aware of the [indiscernible] pricing. Yes.

Okay. Okay. And sir, last question, any guidance you would like to give for the next 2- to 3-year period or 1- to 2-year period on the top line? What do you see?

So I think basis the macroeconomic indicator which we discuss the outlook seems to be quite positive at this point of time. I think we can look at healthy growth on top line, which should continue to lead us to healthy bottom line as well.

So healthy is a very good word. But sir, any range, if you could share it would be great.

But from a guidance point of view, generally, we do not provide guidance. But maybe I would say if you're looking at macro, maybe in line with the current last 3, 4 quarters' performance, in line with that, we will continue to perform. That's what our expectation.

[Operator Instructions] So we take the next question from [ Mr. Vipul Shah ].

So sir, what will be the contribution from ground segment after, say, 3 to 4 years, which you said today is around 30%.

Thank you, Vipul bhai and wish you Happy Diwali. The fact remains that all of us know that now scenario has become very dynamic. 2 years back, nobody knew that everything will come to halt, everything will just freeze kind of scenario. And then when first wave was over, people have thought probably corona was over. And then again, second wave hit in. So the point which I'm trying to convey, though we do have a plan, definitely, businesses cannot work without plan. But then those plan becoming -- coming in public domain and talking about it becomes slightly challenging because the situation is so volatile outside and dynamic. So the point is, yes, I can give you macro view here. Macro view is that as we see more and more growth in the economy, the positive outlook would lead to higher growth in ground and also in e-commerce space because there's a lot of headroom in the e-commerce space growth. Similarly, with all this unorganized players turning into or moving towards organized player and also GST benefits with opening of boundaries -- state boundaries, all that will smoothen up movement by road. So road would grow faster than air. So there will be significant change or rather, I would say, contribution of revenue from ground and the overall mix of revenue, which could alter. But how much will it alter, probably time will tell us. But then yes, growth will be much faster as compared to air.

And sir, can you comment on the margin for the 2 segments? Naturally margin for air segment should be much higher than the ground segment, right?

Sorry. Can you repeat it please?

Yes, yes. So can you comment on the margin for the both segments, Air Express and Ground?

Air Express and Ground margin. Okay. So margin, I think more or less are the similar range because our pricing strategy is such that margin we continue to maintain.

[Operator Instructions] So sir, as more questions come in. So we have one question from Ishpreet from Motilal AMC.

So just wanted to check, so us scaling back in terms of our pin codes and thereby probably getting a little bit of limitation in terms of expanding our reach. Is there a possibility that we could outsource to expand our reach, I mean, tie up with other smaller players who are probably present in those pin codes. Is there some kind of a possibility?

Very good question. Thank you, Ishpreet and very valid question, which currently we have initiated. So unrepresented pin codes, we will have channel partners servicing it. So very soon, you will get to hear about it that the unrepresented areas being opened up for service.

Okay. And hence, probably even those pin codes coming under the kitty for us.

That's right. That's right. And also, this is a exercise which we have initiated after the big bang increase in pin codes and then we had rationalized. Thereafter, we took a call that slowly and gradually we -- as and when there's a traction in particular pin codes, we will keep opening them. So we have been doing that exercise. But at the same time, we are now looking at expanding further. So we will have that reach as well through our channel partners.

Sir, would this dilute the margins to a certain extent because we will have to share it with the channel partners or the pricing will take care of it?

No, I think pricing will take care of it. So [indiscernible] valuation because of this expansion.

[Operator Instructions] So sir, as more questions come in, so I had certain questions which certain investors who couldn't join had posted. So sir, first was on the margin performance. We have seen sharp improvement in margins. So is this sustainable in the next few quarters because it's -- or is it like a one-off because of the festive season buildup where we were able to take significant price increase as well to cover more -- to more than cover up for the diesel price increase. So just if you could throw some color on the sustainability of margin performance.

So as far as margin is concerned, I don't think there is any one-off. But yes, let me tell you, there could be some element of pent-up demand in the top line, which provides operating leverage to us to have a better bottom line. So if you shave off that element of top line growth because of pent-up demand, still, I think we will continue to be reasonably good margin. We'll continue to have good margin, maybe a slight dip from current percentage which you see, if at all, if that is there. Because right now, we still see -- we believe that there's a pent-up demand, which has helped in terms of improving bottom line because otherwise, 30% growth is not sustainable. There are 2 impacts. One is that last year base impact and this year, because of pent-up demand, some kind of addition is there. So if you shave off that, I'm sure still it will continue to be a very good margin. Having said that, our cost efficiency measures and financial reengineering is still continuing. So to some extent, whatever shave off would happen because of pent-up demand, so partly, we would be able to offset that impact because we are not giving up or not stopping our cost efficiency measures. We will continue to work on them. Like you've seen that last year, we purchased 2 aircrafts, which have helped us in improving our cost efficiency. Similarly, this year in October itself, post the quarter, we have bought another aircraft, which will also add to bottom line. So all these kind of initiatives, be it productivity improvement, be it automation, be it financial reengineering would continue to be there to offset if there's any element of pent-up demand because of which margin improvement has happened. So more or less, I'll say, with a small chip off from the current levels, I think we can continue to maintain the margin at least for the time being.

Sure, sir. And also, sir, this freight rates have been increasing since July. And the diesel prices have gone on -- had somewhat paused in September and then again, the move started in -- from October onwards. So we have been able to increase the freight rates in July but would we be able to continue like this because diesel prices are kind of still moving up. So there could be a time where we might not be able to increase it by the same proportion. So just your thoughts on that.

Alok, just one proposition here -- [indiscernible] proposition here. We have not increased the price in July. We had taken price hike in January, point #1. Point #2, as far as diesel rates are concerned, what we have done, rather than looking at price hike because of increase in diesel, which is continuing, we have a mechanism which has been tweaked and implemented. So that should take care of diesel price fluctuation up and down both sides going forward. The way we have air mechanism, similar way, we now have diesel mechanism, which will take care of diesel price increases or decreases. So that there is a transparently customer is able to see that the benefit if it goes down, is given to customer. And if it is going up, then customer pays for the increased price. So that we don't have to keep looking at pricing again and again. So pricing is done once in a year at the beginning of the year, 1st January, like we have announced this year. So that's a mechanism which has been put in, which will take care of particularly on the fuel side. Hope that answers your question.

Yes, sir. Yes, sir. And sir, one question was on the CapEx. So what is the CapEx we have done till now -- till in the first half? And what's the CapEx guidance for this year as well as next year, if you could just throw some light on that?

So CapEx in the first half has been relatively lower because of pandemic impact. But overall, I guess we will maintain the CapEx what we have done in last year, similar range we would have in this year as well.

Sure. So -- and for the next year, sir, any major CapEx because we are seeing a improved outlook on the freight side of it?

So more or less because generally, the additional cost which we are trying to add or rather the expansion which we are looking at is more or less generally on a variable cost. So there may not be any significant increase in CapEx at this point of time, we now -- what we expect. So it will be same INR 150 crores to INR 200 crores range.

Sure, sir. And also, sir, just wanted to understand that we have taken this rationalization of the pin code. So sir, that activity is kind of done? Or is it like an ongoing thing for next year as well, which could see some further improvement in profitability?

So these are 2 different things. One is the pin code rationalization. I think that exercise of rationalizing to [ 14,400 ] ended in 2019 itself. So thereafter, we have looked at it wherever there is a better business sense and there's a better demand, we have been -- one by one, we have been opening those pin codes. But these are small increases. So obviously, it does not show in the cost side. Having said that, what was your second part of the question?

No. So I was just trying to ask that would it lead to -- is it like a continuous process [indiscernible] to further. Yes. Yes.

Yes. Yes. Cost increases, I think cost efficiency measures, which you have just spoke about, would continue to be there for time to come because we believe that there's no limit to excellence and we should continue working on this so that we continue improving margin. So focus will continue to be more and more on automation so that with the lesser cost, you are able to deliver more.

Sure. Sure.

So that's where currently our plan is.

Got it, sir. Got it. And sir, we'll take one question from [ Mr. Shyam ]. Okay. I think he has some problem in the microphone. He just messaged. So we take another question from [ Gautami Desai ].

Sir, in one of your presentations, I could see that you had said that air grew at 2%, whereas you grew higher and the other surface and all grew at 5%, which means that air and surface, I mean, air versus the other, they react differently to GDP. So now with your years of experience, could you kind of put some number to the GDP multiplier like that if -- I mean, suppose if we grow at, say, like 7% to 8% and logistics if it grow at 1.5%, then air may not grow that much or the urgent part, the urgent parcels which you have, so you have a very kind of very niche business in terms of air and urgent parcels. So how would your business kind of grow in terms of GDP, something based on your past experience?

I think what you mentioned about 2% growth on air. I'm not too sure which presentation you are referring to. But current reality is our growth on air is much, much higher than the percentage which you mentioned. Having said that, when you talk about multiplier to GDP, I think in the past, we used to have a multiplier of 2, when there is not many services as part of GDP. Now with this many services getting added and the portion of services increasing much more in GDP calculation, it becomes very difficult to put a multiplier to that because there are many things which does not directly impact express logistics. Like if you talk about increase in agriculture, not much of express logistics will be connected with that. Similarly, if there's a more of a software services or electricity production or any hotel services, this may not impact logistics business. I think more and more -- maybe if there's a index on manufacturing, that would be more relevant than a GDP kind of calculation because manufacturing requires, as I mentioned in the opening statement that the supply of raw material and also finished product to be taken to the consumer. So that would be more relevant. And then GDP, which would have many other verticals, which will not be relevant from the logistic point of view. But in past, when services are not as a big a contributor in GDP, then it used to be a multiple of 2. At this point of time, it's very difficult to put a multiple to that.

Okay. Sir and in the -- one of the -- same your presentation only, I saw that you had given that you are now going to focus on 2, 3 sectors, you had given auto and FMCG and so sir, what exactly, what do you mean by FMCG?

Yes. So the point is, strategy is on the revenue side, how you want to grow, what is your revenue strategy to grow? So one could be that you already are present in particular vertical, customer vertical and you are dealing with some of the customers. So just to give an example, like in FMCG, there are maybe 20 industries are there. But if you are dealing with only 3 or 4, rest you have very low presence or negligible presence. So the focus would be to improve our presence or improve our contribution of revenue from those customers. This is one strategy. Other could be that there are certain customer categories or the verticals where we -- overall itself, one is that within we have -- within vertical, we have somewhere high presence, somewhere low, so we can improve on that. Second is that in the vertical itself, we have very low presence. So we can improve that penetration in that vertical. So those kind of things refers to the what you said in the presentation that FMCG, so in FMCG, there are 4 or 5 customers who are good but rest of the presence is not as high. So focus on them, cross-selling products, be it air, be it ground, be it document, be it international. So all of them cross-selling should be done so that you improve your share of wallet from those customers. That's the kind of revenue strategy one looks at it. Hope that clarifies.

And sir, what I want to ask you is that what kind of business in FMCG would come to Blue Dart, I mean the food part or the documents part to -- because what is express about FMCG?

So one is you look at currently the document part where you move certain documents which are urgent. So that would be one option. Other is, on ground segment, if you have a central order for processing, then one can meet customer demand directly. So like we -- in [ GST ], we talk about having a centralized mother warehouse and distribution from there. So many of these online marketing companies have taken that route whereby they procure order online and supply directly to the customer rather than moving through the traditional system of distributor and also C&F agents, et cetera. So they have removed the entire chain and moving directly from their mother warehouse to the customer. Case in example could be one talks about Herbalife in one kind of a scenario, online marketing company. So those kind of distribution could undergo from express company like Blue Dart. Hope that gives you clarity on this.

Yes. Sir, just one more thing. I don't know if you already covered this question, but sir, when belly cargo comes back to 100% of their capacity, would you think you would be impacted?

Not directly because the belly cargo generally is airport to airport while we are in express door-to-door service.

So Rahul, you had 1 question, if you could just unmute yourself.

So my question was related to the belly cargo only. So I think you've covered it. So you're not seeing any impact coming from that side?

Definitely no, because that distribution model is more of a cargo movement rather than express movement because belly space is available throughout the day. So while in express, you will see generally early morning belly -- this place being used and during day time it's all cargo. And early morning belly space is very, very limited. And even the airline themselves sell at a very, very high premium.

So do you, sir -- your business of 70% air cargo, so your surface side is pretty much linked to the air movement or you do only -- what is the only surface component of your business?

So this is completely independent of the air when you talk about surface business. So entire movement is my road from pickup to delivery.

Okay. Okay. So air cargo would include that last mile also you're saying?

Yes, that's right.

So sir, we had some question in the chat. So I'll just take those questions. So sir, just wanted to understand, so now after this 1 aircraft which we have added, there are around 7 freighters. And this new freighter is -- we have bought or it's on operating lease, if you could just highlight that? And would it be used for international cargo or domestic?

So just to give clarity, this is not a additional aircraft. It is -- we will continue to operate 6 aircraft at this point of time. The change or the action which we have initiated, earlier this aircraft was on lease. So just to give you example, pre this transaction, we had 2 aircrafts owned by BDA and 4 were on lease. Now with the purchase of this aircraft, now BDA owns 3 aircraft, which is 100% wholly owned subsidiary and 3 aircrafts continues to be on lease. So the total number of aircraft, which are going to be operating continues to be 6 at this point of time. And as far as international operation is concerned, I think we are -- as I mentioned earlier, we are continuing international charter operations with these aircrafts depending on the customer requirements.

Sure. And sir, one related question actually, now you -- since you mentioned this is not really an additional aircraft. So -- but how much peak revenue can a new aircraft add to the top line on an annual basis?

I think it is very difficult to assess because it depends on route and realization and also how many hours of flying it has. So I don't think anybody will be able to assess that, that how much revenue 1 aircraft can give. And also depends on what you're carrying in the aircraft.

Correct.

It is highly unlikely that one can arrive at a number that this much revenue one can get. Even like, if you would look at generally cargo, what route you fly, how many hours you fly and what kind of cargo content inside is, all that has a variable -- are the variables in determining the revenue one can get from aircraft.

Sure. Got it. Yes. So I think from the chat, we had those questions. So just a couple of questions which were sent directly. So sir, just if you could highlight on -- little bit more -- I know you have mentioned about it but a little bit more on the competitive intensity part, how is it looking like? I mean, right now, the volumes are strong, so it's kind of taken care. But how is it looking like? And how is the competitive intensity now, especially in the B2C side of it?

Alok, we keep discussing about competition. In fact, competition is good and competition only helps us in improving our services to customers so that we always on our toes to have better customer experience through our best service quality. So if you focus on that, I think competition would not have much of challenge for us, while competition should be there and is there and will continue to be there. We've seen in the past competition in every kind of offering which we have, be it ground, be it e-commerce, or be it air. So air, you saw Quikjet and Deccan and Gati and many of them putting aircrafts and flying but could not succeed. While we welcome them, but even SpiceJet, as late as recently tried and they could not make a sense out of -- commercial sense out of their air cargo operations, so they moved their aircraft from domestic cargo to international cargo. On ground side, we have seen that Gati, Safexpress, many of these players -- and TCI Express, all of them have been in existence for quite a long time. We were the last entrant but still on the basis of a better service delivery and customer experience and lower damage ratio, which is much, much lower than the competition, we've been able to not only grow our market share but also at a premium. The premium is about 25% to 30% over the competition. So everything boils down to that how much you meet the customer demand and how do you delight to customers. If you are able to meet and exceed customer expectation, then competition should not worry any business. The moment you falter on this, I'm sure competition would -- will have their own field day. So similarly, on e-commerce side, initially, we did have issue from competition on -- because they were selling below cost price. The moment they have started looking at the profitability and sustainable business, I'm sure all these customers would look to Blue Dart to serve them because our service quality has been one of the best in this space as well. And that's what currently we are experiencing that our volumes have grown much, much stronger as compared to others because probably there's now a realization that how long you will be able to sustain business without having a bottom line. So that is where I leave it on the competition front. Yes, competition in a healthy way is always welcome because then you are in the same wicket you're fighting. But if you become -- you compete only on the basis of having a top line and valuation, then it's a different ball game. And that can only be able to take you to a certain level. But when it comes to sustainability, it becomes a question mark.

Got it, sir. And sir, one question we have in the Q&A chat box. So that was on the document business. So how is that performing now? And what is the current contribution? And what is the outlook on that segment, sir?

I think the document, you rightly mentioned during pandemic time had seen [Technical Difficulty] because of offices not working and also certain verticals almost closed, see, like we've seen educational institution not holding exams and similarly, travel not happening. So obviously, passport logistics, which we used to do, had taken a beating. Though travel is still very muted but I think education side and also BFSI side, where they started producing credit cards and debit cards, welcome kits, et cetera, all of them have started. So we have come back to pre-COVID level. In fact, there's a slight growth at this point of time. But as gradually things open up, especially the travel opens up, tourism opens up, I think we will come back to the growth trajectory which we used to have prepandemic time. Yes, there is a risk of digitalization but we've seen that risk existing for now last 15 years. And still we have been growing that product. I'm sure with our reach expansion into Tier 3, Tier 4 cities where there are still SME customers, we will -- at least for the time being, we'll continue to grow our document business.

Sure, sir. [Operator Instructions] So I think there are no further questions, sir, at this point of time. So if anyone has any questions, you could connect with me and I could help with the answer. Thank you so much for joining in the call. And thank you so much, sir, Aneel sir and the Blue Dart team for giving us the opportunity to host the call.

It's a pleasure, Alok. Thank you very much. It's our pleasure to clarify doubts or provide information on the numbers and also outlook. Happy to provide this information. Wish you a Happy Diwali or wish all of you a very Happy Diwali. Thank you. Take care.

Thank you. Happy Diwali, sir and the entire team. Thank you so much.

Bye. Bye.