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

So good evening, everyone, and welcome to the post earnings call of Blue Dart Express, and we have with us Mr. Aneel Gambhir, the CFO of the company. Thank you so much, sir, for giving us the opportunity to host this call. I would request you to start with the opening comments on the results, and then we can take the Q&A session, sir.

Thank you, Alok. Good evening to everybody. Hope all of you are doing well. More especially because we are in the middle of pandemic wave 3 and Omicron though we know that currently, this variant has not impacted much in terms of hospitalization but I think there are symptoms which are milder and we need to take care to make sure that we remain hale and healthy. So I pray that all of us remain healthy and hope that going forward, this becomes endemic and going forward, we don't see pandemic again impacting all of us or even economy. Having said that, I think let me come straight to the result highlights. I'm sure quite a few who are following this stock of this company regularly would know the -- some of the highlights are already given in the press release where we're talking about top line growth, EBITDA growth and also the bottom line growth. At a macro level, I think both the top line has shown very healthy growth. And similarly, there has been good improvement in the bottom line as well. So when we talk about quarter, I think we have 21% growth on top line which is coming from both the entire business, where we have all big verticals contributing to this growth. So be it e-commerce, be it BFSI or we talk about electronics, electric equipment, medical, pharma and medical, all these verticals have been doing well and which has contributed to healthy top line. And as a result, we have a good EBITDA margin, which is about 16.8% for the quarter. And similarly, on the 9-month performance, we have a very healthy growth of close to about 40% on top line and similarly, on bottom line, there's good growth. One point would -- you would have noticed if numbers are seen very clearly, the total full year profit, which we made INR 131 crores last year, profit before tax, is more than that is earned by company in this quarter itself. So versus INR 131 crores, you could see that INR 163 crore in earning before tax in this quarter. So that is where a very strong performance, very strong comeback and we have carried on this from the previous quarter where we left this quarter being a festive quarter obviously was a robust quarter in any case. So we carried on that healthy growth and healthy bottom line, which has been enabled by a better realization on top line and also the cost efficiency measures, which we have undertaken over a period of 1.5 years or 2 years, which have been sustained. And we feel that our journey on excellence, on cost efficiency side would continue. In addition to that, I'm sure you are tracking on the utilization of funds and those who look at cash flow side, I think there also, there have been a lot more financial reengineering which we have undertaken. And as a result, our borrowings have reduced drastically. Actually, technically speaking, there's no borrowing, we've become debt-free but because of low interest rates from banks, we have roughly about INR 65 crores of bank loan in both consol, I'm talking about half amount is in BDE and half is about in BDA. So while against that, we have a huge -- more than INR 300 crore kind of cash and balance sheet. So that's why I've said technically, it is a debt-free company at this point of time. The borrowings from banks have almost reduced or gone away. It is only group borrowing, which is at a very low interest rate and looking at this performance, I think in the recent past, we have been talking about higher dividends. So company has proposed or rather company would be paying a dividend of INR 25 as interim dividend and I guess that should be post the process completion. The record date is going to be around 9th of February and then probably towards end of month we'll be able to or before end of month, we'll be able to pay that amount. So I hope all of you are in sync with me or if you have different views, we can discuss about it. We can open for question and answer. Over to you, Alok.

Thank you so much sir for the opening comments. And now we'll start with the Q&A session. [Operator Instructions]. So I will take the first question from Mr. [ Dhaval Shah ]. Please go ahead.

There seems to be some technical issue. But in the meantime, I can see one question from Apurva Mehta in the Q&A section, which other expenses have gone up to INR 3.83 from INR 76 crores Q-on-Q, any one-off? So here, more than one-off, it is the company has undertaken, I'm sure you must have seen on commercials on TV. So there's a -- majority part is coming from the marketing exercise of the branding exercise which our company undertook. That's where probably there's a good amount of spending which has happened, and that's why you've seen that other expenses have gone up. It is not -- I would say, it's not one-off. But I think it will not be in the similar fashion. Going forward, it will be more spread over quarters because this is a time we have taken exercise or rather extended our this thing towards quarter end in the festive past season, that's why you see all accumulated in 1 quarter, but going forward, probably it will not be hitting in 1 quarter like this. But then it is not one-off. So what has changed in the last 2 years that company has been able to do 20% PBIT margin, Deep Shah? Okay. So there are 2, 3 things -- rather 3 things very strongly, which has changed over a period of time. So let me explain this part. Firstly, we have focused more on customer experience, enhanced or improved customer experience. And what does this mean? That we deliver using superior technology, better customer experience and a greater service quality. The kind of service quality Blue Dart has been delivering. I think that's unmatched with anybody, anybody can do it. That's point number one. So rather than focusing on what competition is doing, we are focusing more on improving customer experience, including branding 1 of the parts which we're seeing the part we headed. So we have rebranded our -- when I say rebranded, meaning reinforce brand whereby we have issued new uniforms, new bags, new all vehicle painting, et cetera, all has been done apart from the commercials, which are run on the TV and print media. So that is one exercise. And also, when I'm sure you yourself will be able to differentiate when you see Blue Dart delivery guy versus any other delivery guy coming to your place, properly uniformed with I-card, with properly groomed guy comes to deliver shipment to you rather than a person without grooming and chappals, et cetera. So that is where the company has been improving. And also, obviously, the technological improvement which has happened that we have been -- we have given devices to every single guy to go and deliver on device rather than taking -- continuing with old paper mechanism. So that's one change which has happened over a period of 2 to 3 years. Another change, which is a big one on the technology side. I think technology, people and network has been USP of Blue Dart or stronger pillar for Blue Dart. And that's why we have been focusing a lot more on that. While technology over a period of time has become hygiene for any business and more so when the volume grows, so obviously, you can't do -- keep doing manual things, you need to look at using technology so that within the time span you are able to handle more volume and also technology helps you in getting efficiency so that your scale improves. While having said that, I know that many PE-funded companies are talking about heavy technology. Now, there's a difference here. Technology -- having a technology is not a rocket science. It's available, I think anybody can develop. But deploying that technology strategically and in business, embedding your processes and derive benefit embedded in your strategy and derive benefit is an art, which very few people do it. And I think we have been successfully able to do that, and that is where things have changed and efficiency started coming in. And that's why we embedded not only the technology part, but also the cost efficiency part in that. So that it not only just improves the customer experience, but also provide efficiency to us. Obviously, we have been spending money to improve and upgrade our technology and which we'll keep doing so going forward as well. The third thing, which is agility. Agility hitherto was only buzz word, more with the technological or companies who were developing software. Post pandemic, this agility word has got embedded into organization strategy. One, from the point of view that when pandemic happened, the sustainability was under question and one had to take fast calls as to how do you make sure the business is operating during pandemic period. Then second part within that was how do you make sure that all the SOPs, which are changing continuously, are followed, all COVID protocols are followed while doing business. One is continuation of business. Second is that ensuring that those SOPs are followed by employees because ours is labor-intensive unit. So obviously, all those SOPs, which were changing fast had to be incorporated in our SOPs and people needed to abide by that. Third part, when we looked at it from the perspective of operations, so contactless deliveries which you talk about -- or you talk about billings and collections during COVID period, handling vendors, making payments to them, then using drones and piloting that, all of these needed agile mindset and that's why it got embedded and got integrated in organizational strategy, the benefit of which we are able to see that, that it's not just a word now, it is now every -- though one may still call it a buzzword, but then still it plays a vital role in not only sustaining business but also continuing and getting efficiency out of it, and reach early to the market. That's where these 3 things, 3 main pillars have made difference to the organization. I hope that answers your question.

Mr. Deepak if you can just ask question.

Sure. Aneel sir, hope you can hear me fine?

Yes, yes, I can hear you.

Yes, sure. So just one question for you, sir. Basically, essentially, if you look at the freight margins on a consol basis, Q-o-Q, there has been some decline. Now essentially, is this more because we do more B2C this quarter? Or can we go back to more than 50% as a percentage of sales? So any points that you want to highlight as to is freight margin decline this time more like temporary? And can we, on a normalized basis, see further improvement from here on? Because we do get benefit of the essential surcharge pass-through, right? That's why I just wanted to understand.

There are 2 things which are there when you're looking at consol margin. I'm sure you are referring to console margin, right?

Yes, sir, I'm referring to consol margin.

Yes. So one thing is definitely product mix which has changed, which has a marginal impact on the margin. The second thing is because of our arrangement, the cost plus arrangement which you have with the BDS and the cost efficiency of the financial reengineering which we did during the last few quarters. That is what has actually technically impacted our margin at EBITDA level. I'm sure you are talking at EBITDA level. But if you look at margins at PAT level, you will not see that dip. That is because of certain costs which were earlier above the line. When you consolidate, it goes below the line, the interest cost because earlier, the borrowing was part of the cost for stand-alone versus being part of a consol. So consol, it used to be below the line. But now because of the interest costs going down, because of borrowing going down, that's a technical reason because of which you will see in consol level margin slightly getting impacted, apart from the product mix, which has got changed. Because of high e-commerce volume, obviously, there will be some impact on the margins. So that is where it is. But if you look at it overall basis at PBT level or PAT level, you will not see much of difference.

Sure, sir. Just one follow-up. Just wanted to check on your B2B, B2C mix this quarter, any major shift? And in terms of realization, is air to ground still 4:1 or any change over there?

I think that remains the same. The realization ratio remains same versus -- air versus ground. But what was the first part of your question?

Just wanted to understand the mix this quarter, B2B, B2C, how has that changed?

So slightly B2C is improved because during festive season generally you'll find that multiple sales are there, one during festive Diwali time and second during Christmas time. So obviously, this quarter generally has a higher ratio of B2C as compared to B2B.

So we take the question from Mr. [ Dhaval Shah ], if you can just ask your question. I think there's some issue at his line. We'll take the questions from Mr. Mukesh Saraf.

Sir, I had a couple of questions. Firstly, within the e-commerce segment, we'll be focusing probably more on the B2C side of it, maybe some of these omnichannel side of it. Could you give some sense on your market shares in these businesses that broadly how we are placed vis-a-vis competition in some of these specific verticals?

So you rightly mentioned that we focus more on air side than B2C. While we do have a ground service, but currently, our ratio of revenue coming within B2C on air side is much higher as compared to the other part. Having said that, yes, since we are a premium service partner for many of the D2C players, so obviously, that -- and since base is also lower, obviously, growth will be much, much higher in that space. And the growth part also that holds a good promise for us because this is just at an infancy stage and many more omnichannels and brands will come up and put up their store. So from that perspective, I think that holds a good promise and good growth for us as we move ahead because all of them are looking at their loyal customer base to continue with them rather than being treated in a vanilla way. And that's the reason of putting up their own website and their own online stores. So we will continue to focus on that because that's a high premium and high margin business for us. Because [indiscernible] get delivered through that.

Yes. Right. So I was just trying to understand are we seeing higher competition in that space because we understand you have a niche there. But in terms of market share or competition. Could give you some sense in that specific?

I think at this point of time, it's too early to talk about market share because it's just a very infancy stage, so many more brand yet to come. So maybe it will be worthwhile to talk about market share in a year or 2 down the line on this front.

Right, right. Understood. And the second question is you announced a price hike from January. And obviously, we mentioned that customers who are kind of signing up in October to December period will not obviously see the price hike. So how has that response been? Have you seen a good new addition there in this 3-month period because of this impending price hikes. Could you give some sense?

I think this price hike practice which we have now institutionalized for the last 3, 4 years, and we've been doing that to take care of inflation or pass on inflation to customers so that it does not impact our margins. So from that perspective, I think it is well settled and we have been successful in the past years. And right now also, we have a good amount of confidence that we'll be able to pass on. In fact, some part of it is already implemented and in some cases, is still in discussion. So over a period of time, a month or 2, it gets completed and then the price hike happens. So the way we have performed in previous years, I'm sure in a similar way this year also will be no exception.

Right. So maybe by April, we can assume that the entire price hike has been taken?

I guess so, yes. Maybe before that, yes, in the quarter itself, yes.

Sir, we have one question from Mr. [ Dhaval ], who was trying to ask question, but because of some technical issue. So the question is that we would be doing around 9 lakh tonnes of cargo volumes. So at what volumes we will be requiring a new aircraft to be added?

The volume which you talk about is the total volume carried by company. So that is one part which you're referring to. But then what we do is we keep reviewing our utilization, which is quite high. And definitely, we need to also be cognizant of the fact that other capacity is available in the market and also the other avenues which will open up. I'm sure all of you must be reading in the media that government is spending a lot of money on infrastructure, including the road, railway, dedicated corridor, et cetera. So all of that, we need to take into account while planning for the newer capacity so that we don't sit with idle capacity and that impacts margin. Having said that, I think currently, we are almost at a full level of whatever maximum capacity utilization we can do, we are doing it. In fact, sometimes we are running this aircraft during day time to meet the requirement. So soon, probably we are currently reviewing our plan whether we need to add this capacity going forward. So maybe in a quarter or 2, you will get to hear about the decision on that.

Sure, sir. And also some -- a couple of more questions in the chat box. So gross margins have compressed on a quarterly -- Q-o-Q basis. And what would be the reason for the same? And what could be the sustainable margins ahead? And what would be the -- actually the sales -- strong sales growth was led by which factors, maybe the market share or the industry growing itself? If you could just highlight on that?

I think first let me deal with the second part. The growth in top line is contributed to higher volume. One that is unique is this was a festive period. But having said that, even last year also, we had a very strong growth in this quarter. So obviously, there was a high base. On that base also, we have grown 20% or 20% plus. So that itself is a healthy growth and contributed by all the sectors which I mentioned in the beginning, be it B2B or B2C side, both have them shown a healthy trend on growth. It is because of the demand and the economic activity, which has started improving. So that is where the volume of the growth has come in apart from our own Tier 3, Tier 4 cities where we have seen a good traction and also with the opening of economy post lockdown and pandemic, that's where normalized business has started happening. So all these factors have contributed to top line growth. Okay. And the first part was?

Yes, the margins have come up on a Q-o-Q basis.

So margin, if you look at -- obviously, when you have a high fuel surcharge, it does impact margin when you look at gross level because there's no profit when you pass on the fuel surcharge, you leave it to customers on the revenue front and the cost, both of them are neutralizing each other. So in that case, your margin -- gross margin will drop because there's no profit element in that. Hardly, there's any difference because we are doing a naturalized for fuel cost. So that would be one of the reasons where you will find that gross margin come under pressure. We all know that diesel and petrol prices have shot through the roof, even AT prices have almost 80% increase over previous year. So if you are comparing the previous year gross margin versus now or even previous successive quarters, you'll find that fuel prices had increased drastically in this quarter, and that's why you will see a drop in gross margin.

Sure. So we just cleared the questions in the chat box. So one more question is that the ROE for Q3 on an annualized basis is nearly 50% or so. So is that kind of sustainable in this kind of competitive industry?

I mentioned that it is a high growth quarter over previous year high growth quarter. This is an excellent or a stellar performance, but I'm sure this kind of performance cannot be repeated in every quarter, especially on this front. So I'm sure a slight fluctuation or variation should be allowed in that so that we remain in a reasonable place. As you rightly mentioned in the competitive scenario, we cannot have such high ROCE.

And just one question was a follow-up from Mr. [ Dhaval ]. Will Blue Dart be using [indiscernible] DFC by any chance for its operations?

We will be looking at all options available, be it dedicated road corridor or dedicated freight corridor from railways. All of this will be part of our plan to use them for our network.

Sure. We will take one question from the list. Mr [ Pulkit Singhal ], you could please ask your question.

Great set of results. I think one of the questions already on the gross margin bit has come in through. But I just wanted to check how much -- what percentage of your revenues is this fuel surcharge now contributing? I mean, how that might have changed?

Fuel surcharge is fluctuating, so it will be difficult to put a percentage to that as to how much of top line coming from it because every month, it varies. It varies with the way fuel behaves. Right now, if you see it has crossed INR now in this month. Yesterday, I was seeing that 90-plus because of geopolitical situation has been the price has been just going up.

No, I mean, because you mentioned this cost of sales going from 50% to 53% seems to be purely numerical in nature because of this aspect. Is it purely numerical? Or is there some element of, I mean, product mix as well and the...

Both are there. As we mentioned that initially, that product mix has also impacted slightly on the margin side because of B2C having relatively lower premium pricing.

Okay. Because I also wanted to just understand because when I look at the historical freight costs, it was 51% odd in FY '16 went to 56% in FY '19 and then came to 48% in FY '21. Now this fluctuation seems to coincide with the oil price increase and fall. So now at the same time, my understanding is at that point, the pricing power and the kind of demand situation was not that great as well. But now that seems to be different. So should we expect similar fluctuations or you will be able to take some pricing increases this time around to kind of keep it at a...

Price increase we have already announced, which we are working on. And in fact, there was one question on this back in the beginning, whether we will be taking the price hike this year. We have been working on it, and I'm sure the inflationary costs, which we incur every year will get passed on to our customers because that's one of the exercise which we have institutionalized every year for generally, we'll pass on inflation of previous year to the customers to protect ourselves from margin front. So I think that will continue. Having said that, there are many components which gets into the cost which you're talking about, operating cost. One is the product mix, which plays a vital role. And here, we are uniquely positioned. It's not just air or ATF, it is ground as well. So you have 3 components, which probably no other company has got. We have air, we have ground and we have also e-commerce. While air and ground is a premium pricing, but e-commerce is not a relatively lower premium price, so to say. So any input cost changing on them and even regulatory changes, like if you recall earlier, on ATF, we used to have input credit, which when GST came in, vanished because ATF is not part of GST. So that also impacts when you look at long-term comparison on cost of operating cost. So that is one part. Secondly, now fuel prices and third is product mix. So a number of things which influence our price. And so giving a specific answer to that becomes a little difficult in an overall perspective.

Right, right. But would you say you have more pricing power now than you had, say, 3 years ago? Is the environment such in terms of demand supply, which gives you more pricing?

I would say more enabled by the customer experience, a superior customer experience with a very, very high service delivery. So we talk about 97%, 98% kind of service quality as compared to competition talking mid-80s or so.

Right. And lastly, when you finally decide how much pricing increase to take, 2%, 5% or 10%? I don't know how much we've taken, but -- what variable are you trying to maximize there while when you finally boil down on that number of 5% or 9%? Is it EBITDA margins? Is it something else? I mean what are we trying to...

No. What we try to do here is we try to take a price hike for the increase in the inflationary cost, which gets increased. So we benchmark against each of the components, what kind of inflation we are seeing and basis that we arrive at what is the total impact and to neutralize that impact, how much price hike we need to take. Generally, it covers majority of the fixed cost.

And demand environment continues to be strong, I mean, the way we have seen things?

That's right. [ It has ] continue to be strong.

Sir, we take next question from Mr. Neelesh Dhamnaskar from Invesco.

Yes, I have a couple of questions. So one is -- I think I joined a bit late, but I think other expense line item, there was a sharp increase this quarter. So any specific reason for that?

I think it was the first question which was asked. So no problem since you joined late, I will repeat again. So this is more from branding and marketing exercise, which we have undertaken during this period. So that's why you will see -- you are seeing that increase in other costs. But going forward, it will be equally spread because this quarter completely or rather we extended additionally beyond plan this marketing on electric media. That's why that is additional hit here in this quarter. But this kind of hit is not one-off. I think it will be more spread as we move ahead in the quarters.

Right. got it. And the second question is, could you give us a sense -- you have various kind of offerings for your B2B Express clients. So what are the revenues you would be getting from next-day delivery services offerings which you give to provide to customers? Any rough sense?

So given a choice, we would like to do everything is next day because we are in express industry. And that's why we have so much of infra put in place, more especially on the air side. So it's only the physical challenges, which make us take a little longer time. But if we have our way and if we have a choice and if economic permits, entire country should be made for us.

Right. But that will take its own time. as a service offering and the takers who take it because it will be a costly affair for the client also. So what would be the revenues coming from that? Because that I'm presuming will be a very strong competition.

I think a significant portion of that will be in 24-hour category. Reason being because we have predominantly air service is a dominant part in our total revenue. So air generally is 24 hours, barring far off locations where generally it will extend to maybe next day. But majority will be in 24 hours category.

Okay. So majority of your revenues would be coming from this...

On air part, yes.

On the air part. And on the surface part?

Surface part only nearby location, you can get in 24 hours, but longer distance, obviously, you can't get in 24 hours. It may extend to 72 to 96 hours, like if you talk about Mumbai to Northeast, obviously, you can't reach in even 96 hours at times.

Got it. Basically, that proportion would be very low Right. And one last question is, so see, over the last few years, there's a proliferation of a lot of new direct-to-consumer entities. I mean, companies which directly sell to consumers and companies which are selling through omnichannel. So could you give us a sense of what's the kind of client base you have from that -- those kind of customers, B2B customers? And what proportion of revenues would be coming from that piece?

You rightly mentioned that offline, they have started taking off and many of them are putting up their own websites or online stores for -- to handle their loyal customers. So it is just -- the process has begun. And since most of them are trying to -- they are looking at a better customer experience when they deliver and also offer many value-added services to their dedicated customers or the loyal customers. And that's why they are choosing a premium player like us, Blue Dart. And we are focusing more on that as a strategy also. So having that said that, since it is an infancy stage, it holds a lot of promise for us in future. At this point of time, since being infancy stage, obviously, it's not worth talking about what kind of percentage of revenue it contributes to us, but then it also has good potential. That's point number one. Point number two, when you talk about customer categories, I think a few of them have been in public domain. They have publicly mentioned that they are exclusively tied up with Blue Dart. So I can talk about it. Otherwise, I may not be able to talk because contractual obligations. But here like Apple has been in public domain talking about it. There's [indiscernible] has been in the public domain. Even IKEA has been in public domain talking about that Blue Dart is the preferred partner. Even [indiscernible] even Nykaa in their IPO document, they mentioned that Blue Dart is the preferred logistics partner. So those things which are in public domain, I can talk to you that these are the kind of D2C players who are on board with us.

Right, right. And is the pricing for these players similar to what you price for the other set of customers or the -- I mean...

Pricing would be a function of what kind of SOP and what kind of value-added services one is asking for. So generally, since they go for value-added services, they would have premium pricing for that.

Sir, we take next question from Mr. Vikram Suryavanshi.

Yes, I joined the call a bit late. So in case if there is a repetition, just excuse. One is that what is current share of B2C in our revenue? And what kind of growth we can expect going ahead in next 2 to 3 years? That is one question. And second, regarding other income was a bit high in this quarter. So what was -- is there any onetime other income? Or if you can give some clarity on other income for this quarter?

Sure. So first point on -- let me deal with that B2C portion. So I think B2 portion -- and it holds a good promise. E-commerce has been one of the big vertical in terms of our top line. And it contributes roughly about 1/4 of the top line. And since this being still growing area and holds a good promise because it's still -- it's about 3.5%, 4% of the retail, which gets spent on e-commerce side, on online shopping versus developed countries having about 14% to 15% of spend on this front. So I think there's a lot of headroom available for growth. And that's why I say it holds good promise with the better service delivery from G side. So there's a good potential on that front. Having said that, -- what was the second question you had? Sorry, I missed that.

Other income.

Yes. So other income has got -- we had purchased aircraft in previous -- in October, which was announced in October Board meeting. So there is a component of that, which gets accounted difference between ROU asset and it's more of a technical accounting standard issue, 116 versus -- 116 where ROU asset versus the purchase value, which gets classified as income. Hope that answers your question. We had purchased aircraft, the difference of ROU versus the purchase price gets into the income. And that's what in this quarter, you see the other income going up apart from the interest income, which comes from the borrowing, which we have given to...

What was the quantum -- approximate quantum of that onetime income?

The entire increase which you see is coming from there.

Okay. And last question from my side that in terms of margins because initially, when we really started B2C, margins were very attractive. But over a period of time, we have seen some moderation in margin with the competition. So currently, how do we look at the profitability in that segment? And are we seeing some recovery coming in that margin front.

Has been quite strong. I'm sure you have seen the last 5, 6 quarters, the margin has been quite strong. And going forward also with the realization improvement and also cost efficiency measures which we have taken, which are sustainable, I think margin will -- we are hopeful that we'll be able to maintain that margin, if not grow.

We take the next question from [ Mr. Sanjay Shekhawati ]. I don't think there is any response. So we take next question...

I guess he's on listen mode. Sanjay is on mute.

So we can take the next question, sir. We can take next question from Ankita Shah.

Congratulations on a very good performance. So I have a couple of questions. So given that you're seeing very strong growth on the B2C side, is there any limit or cap that you would want to put to in terms of share of revenues going forward? Or are we okay to that becoming a significant portion of revenues going forward?

So as far as B2C -- firstly, thank you, Ankita. And as far as B2C business is concerned, I think there's no limitation. Whatever business which comes at a right price, we are willing to handle that part and expand our capability to deliver that. So be it B2B, B2C, I don't think we'll be shying away for picking up business which comes -- which is a profitable business.

Okay. Okay. And is there any synergies that you derive by -- between the B2B and B2C network? So if you have a very robust B2B network, does that help in expanding the B2C network for you also?

Definitely -- definitely, there's a synergy. We operate one network, B2B, B2C. We don't define it differently. Yes, there could be some legs where we have a dedicated because there's no capacity available in existing network. And as a result, we might run a different network for B2C. But otherwise, efforts will always be to have a synergy between both and have only one network rather than having different networks running simultaneously with lower capacity utilization. So we generally try to optimize on that unless situation demands that we need to run differently.

And would you be able to share how much area. I mean, in terms of the network area in terms of your sorting centers or your warehouse space or fulfillment centers or whatever we may term it as. But do we -- can we share how much is the area in terms of square feet that we manage or we handle or we have that?

Yes, sure. So Ankita, the point is since we are in Express business, this square feet becomes much more relevant in cases where you are in warehousing business. In our case, in fact, the faster you are able to move, the better it is because you are delivering time-definite shipments. And also that much you are efficient because, in fact, we will prefer cross docking like from one vehicle you're offloading, if there's another vehicle where -- which is ready for loading, we should move immediately. So that you are optimally able to utilize that space rather than expanding the space for restoring the shipment. And that more inefficiency will be there in the system if you keep storing. So our focus remains more on moving fast rather than having storage capacity or handling capacity to be increased because that will be much more inefficiency we'll be bringing in the system because when you have a space, you will store material, you will send it at a later time, then you will not be able to meet your customer promise. So obviously, customers will not be happy. So here, effort will be more on to moving faster in express mode and the first option available out rather than keep it there. Having said that, though it may not be relevant for express industry point of view, it is more relevant for storing and warehousing, but still we have a sizable infrastructure available, which will be close to maybe more than 4 million kind of square feet, which we will have. But then it should not be compared with any other warehousing company because as I mentioned earlier, it is not for storage, it is more for cross-docking and handling the shipment and volume and not for otherwise.

This is quite helpful.

Because, in fact, any express industry having much bigger warehousing capacity or storage capacity would become that much more inefficient because then you can't say yourself that you're in an express business.

Correct. So in an express business, -- the lesser the space you have, better...

The better efficiency you'll get. And the better utilization of space will happen.

Perfect. That's very helpful. That's helpful. Also, just want your views on the B2B industry. How is the competitive landscape there? And your views whether despite new companies coming in and consolidation happening in this industry, is there scope for continued double-digit growth in volumes and realization growth?

I think I believe in one philosophy. Philosophy that as long as you are meeting and exceeding customers' expectation, whatever competition may come, you don't have to worry about it. Reason being if you are meeting customer expectation, customer will keep coming to you for repeat business, and you'll be able to acquire more customers who would like to have their expectations met. It's a different thing that obviously, customers' expectation will keep increasing over a period of time. So what we need to work on is rather than looking at what competition is doing, one need to benchmark that what are the changing expectation of customers and how are you fulfilling it and how fast you are fulfilling it and how you are making it happy. If you are able to do that, you are in right business. And that satisfaction itself will take care of competition. And that's what currently we are doing it, be it technological upgradation, be it expansion of location or be it delivering faster, all these are meeting customer expectations.

Okay. One last. How much has we done CapEx in this year so far? And what is the plan going forward?

So this year, CapEx has been slightly muted because of, again, during second wave of pandemic and also we are doing financial reengineering. As a result, we changed our module. Instead of putting our own CapEx, we believed more in investing or taking equipment on lease. So that's why you will see relatively lower CapEx in this year. But I guess we are working on plan for next year also to follow the similar way so that our CapEx requirement is bare minimum from that angle. But yes, from automation side and also from system upgradation side, whatever it requires, we will be investing in that. And generally, it will be in the usual range what we have been doing in the last 2, 3 years.

We take next question from Ishpreet Kaur from Motilal.

Just wanted to check with you the price hike that we take, is it applicable for B2C business as well? Or is it only pertaining to B2B?

Applicable to all customers.

To all the customers.

All customers, except the ones which have been signed between October to December.

Okay. Right. And just wanted to get a sense on how much of the belly cargo capacity would be at what level versus the pre-COVID level in Q3? Because for us, I'm assuming the volumes have grown on a Y-o-Y basis in Q3 as well. So just wanted to get a sense on where would the belly cargo level be on a pre-COVID level basis?

Your question is not clear. Can you be a little more specific on...

So say the belly cargo capacity.

Our utilization of belly cargo, you're trying to understand that.

No, for the industry. So just trying to understand is the belly cargo capacity back to, say, a 70% or 80% or 90% of what it was at the pre-COVID level.

Okay. Thanks for clarifying. I think belly cargo space had not gone down even during the pandemic level in pandemic period. In fact, it has increased, if I may say so. Because what was happening, you are right in assuming that because lesser number of aircraft were operating, so obviously, the belly space had reduced. But at the same time, many of these airline companies had run aircraft -- passenger aircraft with the cargo on seat. So if you see number of aircraft which have flown during this period, be it or be it Indigo or others, almost all of them had billy and cargo kind of flights being operated during pandemic period. So earlier, while it was limited space available in belly, here, entire aircraft being offered as a cargo aircraft when they carried cargo on seats. So the capacity has not reduced, if you ask me.

Okay. Got it. And on the growth part, if you could just slightly throw some more light as to how much is the ground growing for us and how much is air growing?

So as indicators with the ease of doing business and also with GST removing the physical barriers on the state border, I think ground has been growing much, much faster as compared to air. So -- and also, obviously, there's an improvement in road network as well. Many new roads have been picked up, connectivity has improved and government has also been expanding the road. So from that perspective, I think since there is a major improvement in road network, obviously, road has grown much faster. And we believe going forward also road will continue to grow much faster as compared to. While road is expected to be in double-digit growth, air may be high single-digit growth could see as we move ahead.

Okay. That was the case, I think, with us last year as well, right? But we don't see a shift in the contribution of air and ground. So maybe -- if you could just help us with how much was it last year and how much is it this year?

So you're right. What has happened during pandemic, some of the times, obviously, customer preference change or some of the requirements change or some additional business comes in, like we have operated a number of charters during this pandemic period. That is added to our air tonnage or air networks. So that's why probably you may not be able to see currently that difference. But in terms of the overall contribution. But overall, if you remove that portion and neutralize it, you'll find that road portion growing much faster [indiscernible].

Got it. And would it be fair to assume to see a double-digit volume growth going forward as well on this base?

Overall, yes.

Overall, yes.

If one goes by the current economic indicators and the government push on PLI and Make in India and Atmanirbhar Bharat, I think that holds good promise for us to grow close to double-digit number, either high single digit or close to a double-digit number.

Sir, we take next question from [ Mr. Vikash Khatri ].

So my question is related to the previous question that what's the share of -- in revenue of the ground, point number one. Point number two, how is our per unit realization in B2B and B2C has grown year-over-year, last year quarter 3 to this year quarter 3. Is there any growth in both the segments or not? And third part is related to -- you said that our business model is in 3 parts: B2B ground, B2B air and B2C. How are the gross operating margin varied between these 3?

So I'll try and give you -- can you repeat your question because in between I could not hear.

I'm repeating.

First point, I could not hear because of...

Shares of ground in our revenue because that was related to previous question.

Yes, yes. Okay. The share of ground, as I mentioned, has been improving if you see over a period of time. And maybe you are not able to see currently at this point of time. But if you normalize the base, you will see that ground has been growing much faster and maybe kind of a double-digit growth, while air has been a high single-digit kind of a growth. And going forward also, we feel that the same will get replicated as we move ahead. This is the first question, right? Second question?

So is it -- now is it greater than B2C revenues? Grounds has become bigger product than B2C?

Almost similar range.

Okay.

On margin side, I think we have a premium pricing. So as far as air and ground is concerned, does not impact margin if the mix changes. But yes, when B2C changes, when I talk about B2C, meaning e-commerce, so obviously, there because of hypercompetitive activities and because prefunded companies are selling lower than cost price, obviously, there's some pressure on the pricing. And that's why we have a relatively lesser premium. And that's why if that grows, that has some impact on the margin.

So especially on the ground side, is there any pressure from the companies, new age companies, which are again highly funded pressure on the margins?

No. On ground side, there's no pressure on that. It is mainly on B2C side on e-commerce at this point.

And last was how our per unit realization has improved year-over-year?

So improvement has been good. And as I mentioned, the price hike is taken from all customers. So obviously, all of the product portfolios are profitable and improvement generally is the similar range because price hike is uniform. Across the offerings.

Sir, we take next question from [indiscernible].

I have joined the call late. So please apologize me if I have asked any repetitive question. So in view of the rising crude oil prices, have we passed on the entire rise to the end users or we have yet to pass on the full impact?

So thanks, [ Vipul ]. But then obviously, this is a repeat question for most of the people who are listening. We have a mechanism -- fuel surcharge mechanism, which is established over a period of 20 years now and through which any volatility or any price hike or reduction will be passed on to customers subject to certain limits. So we have been doing that. It has been established over a period of time, and we have been successful so far. And we believe that going -- since it's well settled and well accepted by customers. So whatever volatility off we are seeing, it has been passed on, especially on the ETF side and the crude side. And we believe that we'll continue to pass on that volatility to our customers or any changes in the fuel price on crude side to customers.

And sir, is there any lag between passing the burden of....

There's 1 month lag.

It is passed on immediately.

There's a 1-month lag. So whatever changes happened in December got passed on in January. Similarly, whatever happens in January will get passed on to customers in February. There's a month lag.

And sir, lastly, would you be able to quantify contribution of Road division for the 9-month revenue?

Generally, this information is not in public domain, but road now is one of the dominant section in the overall pie.

It should be more than 40%?

Yes. So Alok, I guess we are running out of time now.

Sure. We'll just take last question. Yes. So we'll take the last question from [ Mr. Neil Parikh ].

Sir, I just have a couple of questions. I just wanted to know what is the CAGR price hike the company would have undertaken in the last couple of years, both in Air Express and surface, if you can give that breakup?

Though we announced about 9.6% price hike is the MRP. But depending on volume and acceptability and acceptance, like we said that between October to December, customer sign will not be subject to price hike and also with the higher volume, many times customers do negotiate on the hike. So what we have seen over a period of time that roughly about 4.5% to 5% kind of price hike gets accepted in the market on an average versus the announcement of 12.6%. And this has been the practice in the last 2, 3 years, and we believe this year also it will be the same.

So broadly 5% price hike to adjust the inflation...

5%, yes, which neutralizes the inflation.

Okay. And sir, another question, largely this e-commerce business or this B2C business, what we hear from the other player is not that profitable due to higher competition intensity. So I'm just trying to understand how is it that Blue Dart is able to make money here whereas the other people are struggling. And even in this category, we are sort of a premium service provider. So just wanted to understand your thoughts on complete B2C business.

Sure. So what we do here, as you rightly mentioned, we do business -- only profitable business we do. We don't burn money like competition or we don't have the funding, which can keep funding for us. We are answerable to investors like you, obviously, on profitability side. So that is where whatever business we pick up, we pick up only which is profitable. Having said that, we try to give better customer experience and better service quality, which is not -- which competition is not able to match. One, from the point of view of their capability or focus; and second, since they are competing or selling at lower than cost, obviously, when you are not recovering cost, how do you invest further? And how do you improve your service quality? Because improving service quality will require further cost addition. So that is where probably there's -- I would say, we say cycle. So the moment you start selling and profitable, you will have a bandwidth to invest money to improve your service quality. If you're not doing that, obviously, you'll have to keep funding your business by regular infusion of investment. And that's what is seen in the market.

And this e-commerce would be contributing what about, sir, about 25%, if I've heard you correctly?

Roughly around that in that range.

And thanks, everyone, for joining in. If there are any pending questions, we can separately connect and we'll get it answered from the company. Thanks, everyone, for joining again. Thank you. Thank you so much, sir.

Take care. Bye.

Thank you. Thank you.