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

Good evening, everyone, and thank you for joining us on the Blue Dart Express Limited Q4 and FY '22 Earnings Conference Call. So we have with us today Mr. Aneel Gambhir, the CFO of the company. So, we'll begin the call with the opening remarks from the management followed by a Q&A session. Thank you, and over to you, Aneel sir.

So is it okay if I keep my video off so that there's no concern on the audio. So I'll switch off my video. Good evening to all of you. I hope all of you are doing well. I welcome you to this call, which is the investor and analyst call, which is open call for everybody. And here, we will be talking about quarter and the year performance of the company, Blue Dart Express Limited and consolidated numbers of Blue Dart Group. So as you know, I'm sure most of you would have seen the results, especially -- let me start from the top line. From a top line perspective, there is a good growth on the top line, which is in high double digit, which is about 20%, 21% growth on the top line for stand-alone, which is coming with a healthy mix of volume and realization improvement. Though we know that there's a difficult situation, be it geopolitical scenario and still risk of pandemic is not over, we are hearing here and there and especially outside India again, wave 4 has been making noise, especially in our neighboring countries. But then we hope with the vaccination, which India had probably will give us protection. So going forward, also, we would probably not see impact as much as other countries are seeing. Coming back to the quarterly performance. On the bottom line side, I think EBITDA performance has been quite good, healthy margin, which is about 25% -- or over 25% growth over last year, same quarter Y-o-Y with the INR 226 crores of EBITDA. And margin also improved at 19.4% versus last year of 18.6%. If you talk about full year performance standalone, I think we have first time record that we crossed INR 4,000 crores. So currently, INR 4,409 crores top line growth, which is 34% growth over previous year. And similarly, on we being a fixed cost company and having an operating leverage, so obviously, we've seen a good amount of EBITDA, which is about INR 696 crores EBITDA, which is 92% growth over previous year. PAT stood at INR 376 crores, which is again almost 4x of previous year, which was INR 96 crores. So this year has been quite good, not only from the perspective of a healthy demand in the market. And since economic indicators have been good so far, and they look positive even going forward. So as a result, we had to put the volume growth, coupled with better realization, it's helped us in high growth in top line. And point to be noted here is that even last year, we had a very good growth in this quarter. And with a higher base quarter, again this year, the performance has been quite good. Coming to consol number, I think consol number also has been quite reflecting the same sentiment, what we spoke about on a stand-alone basis. So on consol though on the face of it, you might see slight drop in quarter for the margin, and that is actually not a drop in margin. It's because of interest costs being lower. As you know, that we had undertaken financial reengineering, as a result, our borrowing had gone down. And when you -- since we have a Blue Dart Aviation as a wholly owned subsidiary company, and we operate through CMI agreement under which all the costs are -- cost plus markup is borne by Blue Dart Express. So that is where since interest cost is lower, so since EBITDA in consolation interest cost goes down the line and since that interest is lower. So obviously, in consolidated, that technically shows a lower margin. But if you look at PBT and PAT number, both are showing healthy growth over previous year. And that's what I say that it is because of the technical reason of lower interest costs being there because borrowing have reduced. And also, we had some interest rate renegotiation because of interest costs had gone down. On a consol basis full year, if you look at it, we have improved EBITDA margin from 20.7% to 22.6%. And similarly, our margin on a PAT level also has increased from 3.1% to 8.7% on a consol basis. Because of this good performance, our EPS has improved from INR 40 odd to almost INR 160. On a stand-alone basis, INR 158.65. And that's why we have -- the Board of Directors have proposed a high dividend. We paid an interim dividend of INR 25 in between and another INR 35 is proposed final dividend for the year, which will take a dividend to be INR 60 or we can say 600 percentage. This year, during pandemic, we had started charter operations, which are international charters. This year also, that has continued and supported us in generating revenues. We have seen very encouraging results. Yes, the portion wise, it's a very small portion still, but probably if this trend contributes, this may hold good promise for us. But at this point of time, it's very, very small proportion, which you have on the charter side. Due to improved profitability and improved receivable management, we had a good amount of cash flow. So we paid off all the borrowings with the bank. As we speak, there's 0 borrowing from any of the bank. In Blue Dart Express -- actual Blue Dart Express becomes a debt-free and Blue Dart Aviation also technically debt free because they have INR 200 crore loan from a group company, but more than that, we are holding cash in the balance sheet. So obviously, from that point of view, that is also debt free. Then I'll move on to what we think from a future perspective, I think barring the risk of Wave 4 and also maybe the inflationary risk, which we see because of geopolitical situation, crude prices going up, even metal prices going up, that could have some impact on the production, on the manufacturing industry. As a result, there could be some impact to us. But otherwise, if you keep for the time being, if you discount them, then otherwise, all economic indicators, including government plans of improving infrastructure, making improving efficiency, Make in India, all these put together holds good promise for logistics industry, and that's where we are cautiously optimistic about the future as we move into a new financial year. With that, I'll take a pause, and maybe we'll start a question-and-answer session. Over to you, Alok.

[Operator Instructions] So first question, sir, we take from Mr. Pulkit Patni.

Sir, very good numbers. I just wanted to understand the realization bit. So if I look at the last 3 to 4 years, we were at about -- if I just divide the revenue by the number of parcels, we were at about INR 135 to INR 140 per parcel kind of a revenue realization. In the last 2 years with the pandemic, we've hit that number to about INR 170. Now I understand it includes some bit of these charters and some special business. Can you give a sense of how this number should trend going forward? If we assume a normalization in a post-COVID world, how should that realization number look going forward?

Pulkit, I think let me give you a little more clarity on the realization part, which you just mentioned. So as far as realization is concerned, as you know that every year, we have been announcing GPI that is to cover inflationary costs. And because we know that in India, inflation continues to be in 5% to 6% range. So to offset that impact, we do take a GPI every year, which becomes a structured exercise for last 3, 4 years. But when you calculate realization per shipment on a macro level, because of our product portfolio, which are different kind of offerings are there, probably may not give you a right picture. While there could be realization increase, but if there is lightweight shipment, especially said documents, if that increases, probably it may not give right picture documents or even retail shipments. So macro level calculation of realization per shipment may not be the right way of looking at this. It is a function of various combination of shipment which are carried from light to bulk. And when I say bulk is like it could be 1 ton, 5-tonne shipment. And if you -- since it will be counted as 1 shipment or revenue of 5-tonne shipment if you take, it will distort the picture. So my suggestion would be rather than looking at this realization, which may not give you a right picture, need to look at overall profitability point of view because currently, for each of the offerings like ground, e-commerce or air. There's no such information which is in public domain, which could be used to calculate realization per shipment. And this is a unique position for Blue Dart. Unlike if you talk about e-commerce companies, they have same kind of shipment, same profile of shipment. And if you talk about the bulk carriers on ground, they have one offering. But since Blue Dart is in a unique position and have all the offerings air, ground and e-commerce, probably this may not give you the right picture.

Fair point, sir. Completely understand. Let me just rephrase that part. See, what I'm trying to understand from here on is that we had some bit of cargo that came to us because we were in a unique environment of COVID, right, where courts were closed and a lot of lawyers were getting files through Blue Dart. And these examples which going forward now some bit of it reverses as we are looking at pretty much everything being reopened. So I'm just trying to understand from that standpoint, did that element have anything to do with your realization number? That's what I'm trying to understand. I completely understand we are a company where there are multiple products, multiple weights, so it's difficult to pinpoint. But because the jump that I see from INR 140 to INR 170 happen in 2 years, I just want to understand where does that trajectory he head from here on?

I think that is coming more from the product mix and the thing which you spoke about file moving, I think those are now behind us because we are now in an almost normal situation where everything is opened up. More so, when you talk about courts not working at that time, people getting files from court, I don't think so many files we moved from that perspective. But having said that, now document business in a normal way because now offices have opened up, so it is on a growth trajectory, and we are seeing healthy growth on that side. And with the travel opening up, passports moving, so travel logistics also is coming back in the way it was pre-pandemic, it used to happen. So I think we are in a normal situation currently for last 4, 5 months. And that's what has shown stability in our numbers, both on the product side as well as on the margin side.

Fair point, sir. Understood. Sir, my second question is on when do we expect another plane to be added to the fleet? I'm guessing with the kind of volumes you are seeing, we would be operating at almost full capacity at this stage.

Very good question, Pulkit. I think, yes, we are operating at a very high capacity of aircraft utilization. In fact, for charters, we have been leveraging same asset for international charter during daytime and night, we have been using for our network. And soon, you'll get to hear about -- we are currently working on this, and that's what mentioned we made in press release that we need to expand our air and ground capacities, which currently we are working on and soon we'll get to hear about it.

Sir, we take our next question from Mr. Aditya Shirgaonkar.

So excellent numbers this quarter, sir, congratulations for that. I have a question based on some research reports that I have read. Now to my mind, it looks like as the economy improves further from here, I would suspect there will be more operating leverage play out and help the numbers for Blue Dart. However, I saw some research reports mentioning that these current margins are not sustainable and hence, they are building in a margin decline in F '24 in spite of revenue increasing in F '23 and '24. So is it a realistic scenario? Is it possible that economy improves, revenues increase, but negative operating leverage plays out for Blue Dart and margins decrease? I mean I find it a bit difficult, but what is your view on this thought that is being floated in some research reports?

Yes. So you are absolutely right, Aditya. In fact, I -- this morning, I read one report. However, they do talk about increase in revenue, but there's no reason given that why the margin will go down. In fact, there has been no discussion or no such interaction with us to understand or to get a perspective as to why this margin will go down. While we have been saying that the cost rationalization initiatives, which we have been working on for the last 2 years, have started yielding results, and that's why we are seeing margin getting improved quarter after quarter. Having said that, yes, even let's agree to the practical fact that operating leverage is available basis the fixed cost. And you can leverage that fixed cost up to a certain level and then you need to invest in further capacities to improve the capacities as just now Pulkit was talking about. So if we need to add capacity, capacity you can -- you need to add for a longer term. And that's why initially cost hit happens. But over a period of time, it keeps providing leverage because of that fixed cost being sitting in the base. So I guess after a particular level, operating leverage probably goes down because of investment in capacity building. And once the capacity is built and that sits in the base, again, you start getting operating leverage. So those kind of scenarios would exist and has to exist because you cannot keep getting leverage out of the fixed cost indefinitely because at a certain point of time, your capacities would be full. And that's what is happening currently on the aircraft side, and we are talking about air and ground capacities to be built up. There could be short-term impact of those capacity buildup. But long term, story remains intact.

Perfect. Perfect. Just one more thought. So some reports also talk about how competition will build up, especially from the belly cargo space from commercial airlines. But I thought you had mentioned earlier in one of the previous con calls that commercial airline, belly cargo and your operations, they find it very difficult to compete straight away because they are more into the passenger ferry. So do you think this belly cargo from commercial aircraft is a real competitive threat going forward?

In fact, you're absolutely right. I have been maintaining and I will continue to maintain that belly cargo is a completely different ball game versus cargo flying and door-to-door time-definite deliveries. And the belly cargo thing is not scalable and it's cost prohibitive. For smaller capacities, yes, one can use it. But when it needs to be scaled up, then obviously, it does not work. The commercials or the practical operational does not work on belly space. So that is where -- otherwise, we would not have been adding aircraft and carrying so much of load in cargo aircraft. So for a smaller load, yes, it may be there, but that's not a competition because it cannot be scaled up. As we have been maintaining in the past, we continue to maintain for future. For a bigger business, you need to have a dedicated capacity with reliability and that can only be offered by cargo aircraft and not by belly space. And that's why we don't treat that as a part of our competition.

Sir, we -- before we take the next question, we had one question in the chat as well. How much would be the e-commerce portion in terms of revenue for this quarter and year?

So e-commerce portion is one of the important vertical for us, which has been contributing to the top line. So though this information is not in public domain, but it is one of the key vertical for us to grow. Right now, we are not providing that information on how much percentage per se. But on a rough scale basis, one can say roughly about in the range of, I would say, 1/4 or so, it contributes that much.

Sure. In terms of revenue as well as parcel size as well?

In revenue terms.

Sure. And in terms of volume, also, if any color on that?

I will not be able to provide that because that's not in public domain.

Sure. Sure, sir. Sure, sir. No problem. So sir, we now take the next question from Ankita.

So congratulations, sir, on a very good set of numbers. So I wanted to understand what is your demand outlook for B2B and B2C because in anticipation of strong demand is what is driving the CapEx plan and higher capacity addition in the air and ground Express. So your outlook on the B2B and B2C industry and growth going forward?

So very good question, Ankita, thank you for it. If you look back on last 5, 6 quarters, barring the quarter when we had a wave 2 impact, I think there has been a strong demand basis which we have been growing our top line. And going forward also, going by the economic indicators, be it the forecast from various agencies and also the government plans on improving infrastructure. So like we know that government has been heavily investing in infrastructure and there's a multiplier impact of that from the private sector. So if all of that has to happen, coupled with the PM Gati Shakti plan, where there's a lot more platform being created for coordinated efforts to improve infrastructure in the country, be it air, ground or road or even railways and also the kind of investments being spoken about in logistic parks to facilitate and to improve efficiency, coupled with what we are talking about is Make in India or China Plus or Air Bharat, all of this sounds well -- sounds good as far as logistics is concerned. And as I've been mentioning in the past, it has a double impact on us because one on supply side, one on the consumption side when the finished product is made. So that holds good promise for logistics company. Apart from this, what we have been talking about a GST benefit due to centralization of distribution, which has not happened. So I think if you take that also, if not now, maybe a year, 2 years down the line, that has to happen because by the time positions taken by people will get settled. So if all of those efficiency needs to come to the books as government has been talking about 13%, 14% cost of logistics to come down to 5%, 6% or if not 5%, 6%, at least 7%, 8% -- then all these efficiency measures, coupled with the scalability of infrastructure and also the manufacturing sector, which government is giving boost, including the PLI incentives for people to produce in India, all of that holds good promise, and that's where we feel that probably going forward, demand is going to be strong, barring if there are some temporary impact of inflation or maybe geopolitical situation could derail. If you discount these 2, I think going forward, demand would be good. And that's where probably we need to gear up to handle high demand and bring capacity not only on air, but also have capacity for handling packages on the ground.

Okay. On which segment are you more positive, B2B or B2C, which would be a growth driver?

Both hold good promise for us because B2C also is -- essentially, we are talking about e-commerce. There's a lot of headroom available from -- retail is spending of about 15% or so in developed countries in India still is close to 4%. So there's a lot of headroom available on retail side. And similarly, on B2B side also, all this manufacturing if moving to India holds good promise. So I think both sectors would be having good growth opportunities.

Got it. And one last from my side. What has been the impact of ATS price increase on the financials?

So very good question again, Ankita. The fuel has been quite volatile for last quite a few months. And we all know that geopolitical situation has been impacting the fuel and handling fuel volatility is not new to us. We have been handling it for almost 2 decades now. That's why we have had a fuel surcharge mechanism in place. So we've seen in the past, all volatility, including fuel prices going up to $140. And right now, also it's close to $110 or so. So it has effectively provided us hedge against such volatility, and we believe -- and which is well settled and well appreciated by customers. And we believe going forward also, that will continue to provide us natural hedge by pass on. So it will not impact -- it will not have much impact on our bottom line because that's a complete pass through the mechanism.

So you mean to say there is no material impact of increase in ATF price on the financials, for the quarter and for the full year?

For the quarter and the full year, because we have a fuel such as a mechanism, which provides us a natural hedge.

But it's with a lag?

Yes. There's a 1-month lag only.

Sir, we take next question from Mr. Krupashankar.

Good set of results, great margins. Just a couple of questions. First, on the employee cost, I can see that there's a sharp decline sequentially. So just wanted to understand, is there any one-offs or any specific reason why it is relatively lower?

Okay. Yes. For the quarter, I think there's a slight lower employee cost as compared to the previous quarters. Previous quarter actually was a festive quarter. That's where we do a lot of temp hiring, and that's why it impacts the wage bill. And this quarter being not a festive quarter, that's why there's some amount of improvement in efficiency. At the same time, there is a small reversal of the previous quarter. That's why because at the month end, when you make a provision and then sometimes you find that probably it was a little conservative and that's where a small reversal happens. And that's why for the quarter, you are seeing a slightly lower number. But on a year-to-year basis, I think there's a quite increase of about INR 23 crores, which is what generally we pay out as per annum kind of a cost for inflation.

Right, sir. So what would be the quantum of that provision reversal, which was adjusted in the fourth quarter?

So roughly, our wage bill for the quarter is generally in the range of about INR 135 crores also.

Got it. Got it. Still, if I look at it on a INR 135 crores, the first and the second quarter also had a fairly higher numbers. So I guess our provision was higher during those quarters?

No, no. There is one-off bonus, which -- COVID bonus, which was there in quarter 2. And the quarter 3 was festive season. That's where we do a lot of temporary hiring. And that's why it was on the higher side on that.

Understood. Second question also was on specific events which are happening in the market. So we came across multiple media articles stating that there were some integration challenges with respect to delivery and spot on. due to which a lot of the other Surface Express providers gained share. So just wanted to get your take as to was Blue Dart able to benefit out of this integration challenges of competition?

So I think that integration challenge, I'm sure any such event we would have that challenge. And what we understand, that is off-late scenario and not as much as in the quarter, which you were discussing correctly on the results side, because this is more towards in April or so when the reports have started appearing, right?

Correct. But yes, sir, I just wanted to get a directional sense as to whether -- are you seeing any benefits because of this and the volumes have remained strong. That's something which I wanted to just get your sense on it.

I think the scenario which you're talking about is in current scenario, so I may not be able to comment on this at this point of time. I'm really sorry for that. My apologies.

No worries. Just one more question I wanted to ask also on the overall gains what you have seen in the e-commerce space, while what you're seeing is that from a volume standpoint, e-commerce, especially omnichannel has done quite well. And Blue Dart's presence in the omnichannel is quite strong. But just wanted to pick your sense as to in the e-commerce, what would be a proportion of omnichannel or social commerce vis-a-vis the marketplace? And how are you placing yourself for a strong growth going ahead with respect to infrastructure as well as any other capabilities which we want to add or something?

Yes. So as far as omnichannel is concerned, you are absolutely right. We have a very strong presence because that's a value-add situation, which customers believe that Blue Dart is better prepared to handle and provide that value and also enhance customer experience. So from that perspective, I think customers have been preferring Blue Dart. And some of this information is in public domain already. So all of them have been very strongly tied up in dealing with Blue Dart. And we have been also having new wins also in that space. But since they are not in public domain, I'm not able to quote their names. But then, yes, we are progressing well in that space. And going forward also, we are focusing more on that. One that it is region well with Blue Dart's value added and better customer experience philosophy and also provides customers the omnichannel owners a good sense of value addition to the loyal customers. So I think it's a win-win scenario for all the 3 parties in this, and that's where our focus continues to remain on growing that space. At this point of time, it is still not a very significant part in the overall pie, but we expect in times to come, it will become a significant part in the overall e-commerce space.

Got it. So -- but the reason why I was asking this question is that given that growth prospects in the e-commerce space is substantially higher and one can perhaps see that B2B may not follow the same trajectory. With this sort of event happening, the mix would be further increasing towards e-commerce, if at all, that's the case. Then given that the e-commerce logistics is extremely competitive space vis-a-vis B2B side, do you see that the mix itself can have an optical challenge on the margin side? Is that something which is likely?

In fact, Blue Dart's philosophy has been all this file. to do profit -- to do business only with the profit. So we will pick up shipment with a profitable growth and not compete on pricing. And that's what we have been doing, and we have followed that, and we will continue to follow. Having said that, I'm sure you would -- if you are monitoring media reports recently, some of the players who were earlier selling cheap or selling lower than the cost, they have also increased prices because they -- at the end of it, sometimes they need to have accountability of doing business sustainably or show profitability at least to the investors. So taking that clue and also going by our philosophy of doing business profitably, I don't see much challenge on margin coming from this front because we will pick up and more so when you're talking about omnichannel growth, which will be much faster and much higher, that's where more of value addition is there, which happens at the premium pricing. So I don't see a challenge coming from this sector or this section on the margin side. It may not have any material impact.

So sir, we'll just take one question, which had come in the chat. So I just wanted the broad split of air and ground Express in the current quarter?

So almost 1/3 would come from the ground.

Sure. And how do we see this mix changing over the next 2 to 3 years?

Meaning going forward, you're talking about?

Yes, yes, yes, sir. Yes.

So going forward, it will be very difficult to comment at this point of time. But then yes, ground is growing faster than air. So obviously, there would be some skew towards ground as we move ahead. Now it depends how the situation pans out. Accordingly, I'll not be able to give you numbers as to what mix we are looking at. But definitely, there will be a skew towards ground.

Sure. And just one last question in the same chat. So what growth rate could be expected, sir, for both these verticals, air and ground?

So in ground side, you can comfortably going by the current indicators, high double-digit kind of a growth. And on air side, you can take high single-digit kind of a growth.

Sure, sir. Sure. Yes. So sir, we'll take a next question from the panel. So we'll take a question from Mr. Alok Deshpande.

Alok here this side. First of all, congratulations on a great set of numbers to the entire team and a great year also. Sir, 2 questions. One, I think in one of the responses to the earlier participants, you mentioned that there was a small reversal in the employee cost. I think even if you were to adjust for that, I think your margins would be 18% plus. I'm talking about the EBITDA margins. Would you say that, that is the new normal? I mean that becomes your base case in a way?

So current quarter, if you talk -- okay, you're saying you adjust and after adjusting, you're calculating the margin.

Yes, yes. I mean even if you add back that, whatever, INR 8 crores, INR 10 crores to the employee cost, I think still your margins would be almost close to 18% or even slightly higher than that vis-a-vis maybe 16.5% or something like that in Q3. What I wanted to know was, is this 18% odd becomes your new normal given the cost-cutting measures that we've been taking for the last few quarters?

So a very good question here. Though 18% looks quite high given the current competitive scenario. But then what I just mentioned about adding capacity and also ensuring that we continue to maintain our customer experience because we -- all decision we should take keeping customer in the forefront. So from that perspective, there could be some investments or some operating costs, which could get added on automation, digitalization, et cetera. So I'm sure if not the similar range, around same range, we would -- or maybe slightly 100 or 200 basis points one can assume even if it gets impacted on a conservative side. I think that's the kind of trajectory going forward, we'll try and maintain.

Fair point, sir. Fair point. And sir, you also mentioned Road Express being part of -- being 1/3 of this. So this is -- you're talking about the revenue share here or...

Yes, I'm talking about range of revenue share.

Okay. And sir, this is -- and the way this is defined is if any parcel goes from destination A to B completely through ground, then only that comes under this 1/3, right?

That's right. That's right.

Okay. Okay. And sir, just one last bit. This e-commerce, I think you -- I don't want to ask the revenue share, but is it fair to assume that the growth that you would be building in for the next couple of years or even after that, in the growth delta, the share of e-commerce would be fairly high, right? I mean -- you're absolutely right, yes.

Yes, absolutely right. Yes.

So sir, we take our next question from Mr. Sandeep Bansal.

Sir, my first question is that did I understand you correctly when you said that there is not going to be much impact on margins from a change in mix, if it happens? So are we saying that road margins and air margins are roughly similar?

Yes. So what we do is in our pricing strategy, currently, margin, we maintained at the same level almost with a very marginal difference. So if ground grows faster, still it may not impact margin as much as general perception is. You are absolutely right.

Sure. And sir, would it be fair to say that a bulk of the gains from cost rationalization measures are already reflected in the numbers, though obviously, it's an ongoing exercise, but bulk of it is already realized?

Yes, you are absolutely right. We are in the journey of excellence. And whatever were on the plate, a lot of it has already been actioned and that's why we are seeing the benefit of that. However, having said that, we continue to explore newer areas. And if you find there's opportunity, we definitely work on that so that we further improve our efficiency.

And sir, lastly, just to clarify to the -- your previous question response, you had said that margins could at worst have a downside of 100 to 200 basis points. That was from Q4 levels or from an entire financial year perspective?

So since reference was for the Q4, so the response was in response to the Q4 numbers.

Sure. But applicable for the whole year?

That would be, yes, absolutely.

Sir, we take the next question from Mr. Sanjay Sethupathi.

Sir, two quick questions. Number one, is that your revenue declined a bit sequentially. Is it because of Omicron wave or this is the typical seasonality of your business?

I'm not seeing the revenue number declining.

Compared to your December quarter?

Yes, December quarter, definitely, because that's a festive quarter, generally, you will have a high revenue. So is it more of a seasonality. So typically, for us, the highest revenue would be in December quarter, and followed by September quarter, followed by the March quarter and the lowest quarter generally used to be our June quarter. And that's how the scenario looks like if you go look in the past.

Okay. And there is no impact of Omicron wave per se?

Per se, in the last quarter, no.

Okay. Okay. And sir, my other question that is that as you say that December is your biggest quarter, but then even if I do all kind of adjustment, still, your margin in December quarter was a little lower than March quarter. And the -- is it because of the business mix that is in the festive season, your mix is more towards e-commerce, which is lower margin. And does that explain this margin volatility then?

I think there are 2, 3 factors which probably needs to be taken into account. As I mentioned, on the cost efficiency side, we have been working on the new -- by the time you regulize full potential of initiatives, obviously, that has a sequencing impact. So that's one. Secondly, what happens during festive period, we build up additional capacities. So sometimes, if all the capacities are not fully utilized. And then that obviously has an impact on the bottom line. So -- and this is what exactly happened in the December quarter. We had built up higher capacity, but utilization was not as expected because of a lower level of shipping, especially on the e-commerce side during that period. And that's why in that period, there was some impact to margin.

Wonderful, sir. So lastly, if you can just explain that you were saying that you are already operating at full capacity, and that's why you will be adding some flight to your fleet, you'll go through fleet expansion, and that may have some kind of margin price. So when is that likely to happen like it is -- it has been proposed for the current financial year or it is a little further away?

I think on this front, we'll come back to you soon as to what is our plan. Right now, plans are not final. So that's why I'm not able to comment on that.

Understood. But what you would rather say that basically, there could be some amount of cost dislocation because of that, but...

That will be for a temporary period. It will not be for longer term. It may be a quarter or 2 at the most.

Understood. Understood. Understood. So as you kind of clarified that you are anyway looking to sustain a quarter 4 margin with a plus/minus 100-odd basis points?

Yes, that's what is our thought and plan.

And that to we decent growth outlook for coming year?

That's right.

Sir, we take a next question from Mr. Nemish Shah.

Congratulations on good set of numbers. So I just wanted one clarification. So this -- we've seen a sequential decline in the depreciation number. So is this because of the aircraft that we purchased, and should we see this as a number going forward to sustain?

So now depreciation number has 2 things. And primarily for that responsibility comes from the 116 accounting standard. So if you sign new leases, suddenly, this number goes up. And if you have new facilities. If you don't add new facilities, obviously, sequentially, the depreciation number will keep going down. That's point number one. And second impact, you rightly identified because we purchased 3 aircraft. So earlier, those were appearing as a part of ROU asset, which now generally will be depreciated over a longer term. Earlier that gets depreciated over a period of lease term. Now instead of that, it becomes depreciation is over the period of life of aircraft. And also, if you recall, 2 quarters back, we did have some upgrade of the old systems, old systems for return.

Understood. And so can we expect the interest cost to also go down accordingly going forward?

Yes. So interest costs going forward on a consol basis would be very low because now since we become debt free, all the debts have been paid off. So if at all, the interest cost will be within the company and that in consol will get nullified. So it will be only the impact of INR 116, which features as a part of finance cost. Otherwise, there won't be any interest cost unless we start borrowing again.

Right. And sir, just again on this capacity investment front. So did I hear you correct that you may have to invest to increase your ground capacities as well?

Yes. So we need to upgrade our hub facilities to handle larger volume. So as we are talking about double-digit growth in surface. So obviously, if surface is growing that much, we need to have capacity built in, in our hubs for transshipment of those shipments. So it will require bigger space. So we may have to go for a bigger space for building that capacity of handing larger tonnage.

Okay. So -- and if you can share how much in terms of square feet, any ballpark number that you can share that how much area you manage or if you can share that?

So currently, about more than 3 million kind of space which we have. And going forward, what we're going to do, you'll get to hear in some time.

Got it. And this 3 million will be for entire operations for...

Yes, yes, yes.

Sir, we take next question from Ishpreet Kaur from Motilal AMC.

Congratulations on a good set of numbers. Just wanted to check with you what would be the share of the documents in this quarter?

So as far as document is concerned, it continues the similar range what we have seen earlier pre-pandemic, which is close to about -- in the range of about 1/4 kind of number.

Okay. So we are back to the prepandemic range.

Yes.

Okay. And just wanted to understand, like you were saying that the ATF prices are a complete pass-through with a lag of, say, a month or so max. The realizations for us will move in line with it, right? So what is the kind of realization growth that we could see? And also, if you could throw some kind of a light on the volume growth because our base of volume growth is very strong in FY '22. So how do we look at volume growth in FY '23?

So as far as volume growth is concerned, firstly, let me comment on -- you're right in talking about fuel surcharge mechanism, which is passed through and provides a hedge. As far as volume is concerned, I think we have been having a high double-digit volume growth. And that's why we -- in fact, we started giving numbers about the number of shipments and tonnage carried. But then on absolute number are already there in press release, which you mentioned, the number of shipments which we carried. Overall, it talks about roughly 30% or so volume growth and roughly about close to 4% kind of a realization growth.

Correct. [indiscernible] Right. So how do we look at it for FY '23 as the base is so strong?

I'll not be able to comment on that part because future guidance probably we are not giving. But yes, sense is we will continue to have a double-digit -- high double-digit growth. That's what our current sense is from the economic activities.

Okay. And realization growth may also be higher because of the ATF prices?

A similar range or maybe slightly higher than that.

Similar range in the sense of 4% to 5% seen this year?

Yes, yes.

And also the hike that we take of 8% to 9% that was again to be peak in the Jan of this year as well. Does that start reflecting in an overall, say, at some point of time at least 9%?

No. Actually, the 9.6%, which we announced is kind of a benchmark rate. But the effective realization because some customers have -- depending on volume, they do negotiate and not fully in that range. So average comes to about between 4% to 5% kind of realization every year for the last 3, 4 years, which you have seen. So we expect a similar scenario to happen in this year and some part of it is already reflected in the current quarter's number. And that's why we mentioned that realization growth, coupled with the volume -- healthy volume growth has helped in terms of the double digit or 21% top line growth, which we have.

Got it. And again, like you were just saying you still see a high double-digit growth with the 4%, 5% price hike?

Yes.

And sir, how much would be the CapEx? Like you were mentioning that we may do some investments. So ballpark, what would be the CapEx that we can take?

So right now, since we are on drawing board to finalize our plan, I'm not able to comment how much additional will be there. But if you go by the historical number and the earlier plan, it was roughly in the range of INR 150 crores to INR 200 crores. But then if there's an increase, we'll come back about it in some time.

Sir, we take our next question from Mr. Shivaji Mehta.

Sir, I had a question on the service transport business, wherein one of our competitors, namely Gati, they've been talking about a 3x growth in their top line in the next 3 years, wherein the industry is just going to grow at a CAGR of 12% to 15%, they are kind of targeting a 3x growth, which will mainly come from them taking away a chunk of the market share from the existing competitors. So just wanted your thoughts on this. Do you see this as a threat? And how confident are you about rolling out your market share?

So I'm not able to comment on what Gati has made a statement on because I'm sure they will have the strategy of how they want to do it. As far as Blue Dart is concerned, we always welcome competition because that helps us improving our offering to customers. As I mentioned earlier, that our focus continues to be on customer requirement and making sure that whatever decision we take, we keep customer in mind and keep meeting the customer requirement, and always have a happy customer. So if you have a happy customer, I'm sure customer is going to continue to deal with you as a service provider and that's what we are focusing on. Having said that, Gati has been in business for so many number of years, right? And the fact that we were the last intent in this field in 2008, in the premium segment, and we have been growing our market share year after year despite of presence of the Gati and Safe Express. So I'm sure customers are seeing value in our offering, and that's why they feel comfortable. And they continue to appreciate our service. And there's no reason for us to believe that going forward, that will lose value. So I'm not as much worried about what Gati is making a claim, as much worried about that, how do we further keep improving our service quality to customers, so that customer continues to deal with us. So we'll rather focus our all energies in improving customer experience so that customer remains happy and continue to deal with us with safety and reliability USP, which we have for so many years.

Right, sir. Makes sense. Sir, just one last question. Again, in the surface transport business, if you can give some color on the margins, how it kind of differs from, say, one end user industry to the other. So say, for example, in e-com versus pharma versus FMCG, how different could the margins be? And also, say, B2B versus B2C, how different are the margins there?

Since our offering is slightly different, we are not differentiating on the industry type. We -- for us, it is a package which we deliver. So our pricing strategy, be it pharma or be it textile or any other industry, the pricing strategy remains the same. So we don't differentiate basis the industry which you deal with. Rather we differentiate on the service and reliability and the safety of the package. So for us, pricing strategy remains the same.

So sir, we take next question from Mr. Vipul Shah.

Congratulations for a very good set of numbers, sir. My question is, what is our market share in e-commerce segment? And at what rate we are doing in that particular segment?

Sure. So right now, market share study has not been conducted because of pandemic. And now markets are stabilizing. So people are now talking about conducting a survey. As we know, earlier, we had a market share of about 18%. That's a pre-pandemic we are talking about. But there's a lot of change in customer buying habits and also growth have been quite high for us as well, especially on the number of shipments which you pick up or even on the top line side. So right now, I'm not able to comment because credible numbers are not available. Once the study is conducted by the market research agencies, maybe I'll be able to share with you. As far as our growth is concerned, I think we have very healthy double-digit growth on the e-commerce shipment side.

And sir, directionally, can you comment on the margin in the e-commerce segment vis-a-vis other segments? I don't want exact number, just direction.

Yes. So as earlier, I mentioned that Blue Dart believes in doing business profitably, and we will continue to do that. And I'm sure competition will follow now the same strategy because some of the media report suggests that -- now they are also coming in the same league. So if they come and compete on the same level playing field, I think Blue Dart would continue to do business profitably and also gain market share because of better service delivery and better customer experience. Because right now, it was unfair competition, so to say, in inverted commas because of PE funding, they have been undercutting, selling lower than the cost, and that's why they've been gaining the shipments or the volume. So once they do business sustainably, I'm sure Blue Dart will gain out of it. Including the margin. Alok, can we take one last question now.

Sure, sure. So we take the last question from Mr. Pulkit Singhal.

Congrats on a good set of numbers. Just wanted to get some clarity based on your response to some of the questions. You talked about high double-digit volume growth and 4% to 5% pricing growth, which seems to suggest almost a 20% plus kind of revenue growth. I'm not able to tie it up with what you said on the ground and air piece. How do you get this kind of revenue growth without air growing in double digits? Because you mentioned air would grow only at high single digits, whereas ground is just 1/3 of your business. So for you to achieve an overall 20% plus would mean ground should grow at 50% plus. I mean, so please help me understand the math. I mean, does this break into account that air will grow at double digits? Or what is the understanding?

So firstly, Pulkit, I did not say that we will grow 20%. I said that we will grow maybe double digit and also we'll have 4% to 5% kind of a realization gain, which we do get in -- as we have been getting in the past 2, 3 years. Having said that, if one goes by indicators and growth on ground is high double digit, could be anywhere between 15% to -- any number one can talk about 20%, 30%, one can look at it that way. That's point number one. Second, yes, from a long-term perspective, it could be high single digit. But short-term perspective, it could be double digit as well. But then that's what we are talking about how do we see future could be single-digit number on a CAGR basis. And that's what my question was. That's what my answer was.

You mean for air single-digit CAGR, but it could be double digits.

For short term, yes, yes, yes.

Okay. And does this take into account your capacity expansion plans? Or is this even before that?

So capacity expansion will be basis the volume growth which you take. So right now, we are talking about volume growth and even current capacity is not being sufficient. And that's why we are leveraging our asset during day operation. So when we expand capacity, obviously, that will help us in, one, timely delivery and second to cater to the capacity requirement, which will be basis the volume growth.

Understood. Sir, lastly, on the margin bit, if I look at the consolidated EBITDA margins for the last 3 quarters, and I'm seeing last 3 quarters because, obviously, first quarter was impacted by COVID. So it is close to 24% odd, right? And when we are talking about a business like yours at that revenue level and you have the kind of revenue growth you are predicting, which is a healthy double-digit revenue growth. And you're also simultaneously talking about competition being lower, they are also focusing on profitability. And the business has high operating leverage as well. So why should margins contract at all? I understand you would look to invest a bit. But wouldn't this mean that from your 24% levels, it should only grow higher? I'm just confused why it should contract.

No. I think the earlier discussion was from a stand-alone basis, and now you're comparing that with a consol basis.

Okay. So, sir, I'm curious to understand the trajectory of this 24% average EBITDA margin over the next couple of years.

So that could only have some impact, as I mentioned, because of investment requirement for building up capacity. And that could be short term. And thereafter, it will start giving leverage the way currently, we are seeing leverage of earlier investments.

Right. But the lower competition intensity and higher revenue growth, does it not offset the impact of this investment?

Maybe partially it could offset. We are being slightly on the conservative side because right now, when we presume that probably competition increasing price will give us some benefit, but what if it does not come?

So thanks. I think we have run out of time now. So thank you so much, everyone, for joining in. And thank you, Aneel sir for giving us the opportunity to host this call.

Thank you, pleasure talking to you and interacting with you and looking forward to having your feedback. If you have any feedback, you can always share with us maybe through Alot and other ways also most welcome.

Thank you. Thank you so much. Thanks.