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

So good afternoon, everyone, and welcome to the interaction with the management of Blue Dart Express. So firstly, I would like to thank the management for giving us the opportunity to host the call. So today, we have with us Ms. Sudha Pai, our CFO, Blue Dart Express; Mr. Tushar Gunderia, Head of Legal & Compliance and Company Secretary, Blue Dart Express; and Mr. Sagar Patil, the Head of Corporate Accounts, Blue Dart Express. So I would now hand over the call to the management team to provide some opening remarks on the performance, and then we can start the Q&A session. Thank you, and over to you, sir.

Thank you, Alok, and good afternoon, everybody. A warm welcome to all of you into the quarter 3 financial year '24 earnings call of Blue Dart Express Limited. As you are aware, the Board of Directors of the company approved the third quarter financial results in its meeting held on 29th January 2025, and the company declared its financial results for the quarter and 9 months ended 31st December '24, wherein the company posted profit after tax of INR 791 million for the quarter ended December 31, 2024. Revenue from operations for the quarter stood at INR 15,117 million. Blue Dart known for its exceptional service quality, strengthened by advanced automation and technology remains a cornerstone for its operations, providing customers with a seamless one-stop solution for all their logistics needs. The results are already uploaded on the stock exchanges in compliance with the provisions of SEBI and listing agreement provisions and also posted on website of the company. I now hand over the call to Sudha Pai, CFO; and Mr. Sagar Patil, Head of Corporate Accounts for further proceedings. Thank you.

So I mean, just to give a synopsis of Q3, as Tushar mentioned, our revenue has grown by 9.3% and is at INR 15,117 million. And our profit before tax is at INR 1,064 million versus INR 1,050 million last quarter. So yes, with this, we open for questions.

[Operator Instructions] We will take the first question from Mr. Krupashankar.

So first of all, I just wanted to get a sense of what will be the tonnage for the quarter as well as the number of shipments carried?

So in terms of tonnage growth, we are -- we have grown by 12%, and shipment grown by 7.2%. In terms of absolute tonnages -- just a moment. Absolute tonnages, yes, for the quarter is 351,873 tonnes and shipment at 98.59 million shipments.

So just wanted to get a sense on the profitability improvement. While we have seen that during this quarter, despite challenging environment, the revenue growth has been quite good, around 9%. Your thoughts around the further scale-up of the -- to new fleet, any updates on that? And how that -- if there is any underutilization on the leg, which we had highlighted in the previous calls, how is it progressing? Can you throw some light on that?

So on utilization, we would -- it's a good news in this particular quarter is that we are -- we have reached at the optimal level of utilization. Yes, we do have a challenge on few of the lanes on these new fleets. However, it's better than the previous quarter.

Understood. So in this quarter, are you also seeing benefits of the ATF price correction reflecting in your margins? Is that a booster? Or is it more of a pass-through which is already reflecting in your numbers?

Sorry which you...

ATF price correction.

ATF price.

Yes. I mean it's not a pure pass-through. We have our mechanism to address this price increase. And it gives a little bit of a margin as well. So it's not a pure pass-through for the ATF prices.

Got it. Got it. Secondly, on the recently commenced hub in -- and congrats on that. I think globally, the DHL team also commented about the aspiration to expand its India operations. Anything further you would like to add on that particular investments towards new capacities? And what are your thoughts around both B2C and B2B?

So we are optimistic about improving our infrastructure on ground. Ground is where most of the growth happens. As I said, once again, we are witnessing the ground more in both surface B2B as well as in the B2C segment, and the investment would continue to be there. That's the outlook as far as our investment is concerned.

Yes. So while you highlighted that there were specific targets stated that e-commerce, you're targeting about 25% market share. So just something more on what are the steps taken towards achieving this market share target? Anything which you can highlight at the moment?

So our aim is to have a structured investment, which takes care of our profitable growth. For us, definitely increasing our market share. Those all aspects are pretty important, but we ensure that we have a profitable growth. So that's our -- that continues to be our outlook as the statement where we have given in each of the calls.

So any number perhaps on what you would be spending on infrastructure going ahead? Any outline?

We personally do not give any forward-looking statement, but we would be releasing our budgets very soon and that would give an outlook about what we intend to spend over the next year.

We will take our next question from Mr. Amit.

Just a couple of questions from my side. Sorry, I joined the call late, so maybe it might be a repetition. Just wanted to understand the price absorption part. Last time you indicated that we have announced the hikes of 9% to 12% from January '25. So just wanted to understand how do you see these hikes getting absorbed in the market since January month has already passed?

So about the price hikes, which are already in pipeline, you would get to know the concrete numbers around it most probably by the next quarter results, which is in the Q4 results that we would be publishing. But yes, we are intending that our GTS have been effectively taken by the consumers -- customers.

Okay. Ma'am also, we saw that EBITDA margin was possibly the highest in this year so far, I mean, in the 3 quarters. So just wanted to understand the key drivers of EBITDA margin in this quarter. Was it mix? Or was it anything to do with lesser competitive intensity or optimal utilization of fleet, as you mentioned? What were the key drivers of it and whether these will be sustainable going ahead?

So [indiscernible] it's a festive month -- it's a festive quarter. That was the most key thing that happened to us in Q3 and that normally happens in most of the Q3s. Apart from that, our peak utilization got improved and again, optimally -- we are very optimal in terms of our cost. These are the factors which led to a better quarter this year in terms of EBITDA.

Okay. One last one, if I may. What would the CapEx in 9-month FY '25 on a consol basis? and what is the target for the year?

I think when we released -- we spent around INR 622 million as on -- INR 622 million is the CapEx that we have spent up to Jan to December for the calendar year -- up to Jan to December. That's been our spend so far. The budget being INR 1,274 crores. We have spent only 50% of the CapExes that we had budgeted and largely into the infrastructure -- the spend is largely into the infrastructure. And then...

So that's a considerable shortfall. Was it by design? Or it just happened that you didn't see new opportunities? Or I mean, can you throw some more light on this, please?

It's a combination of internal and external factors. Yes, we do ensure that we review our profitability and the future outlook and then spend it accordingly. And also externally, it depends upon finalization of the deals, which place, which territory we want to invest into. Those are the external factors as well as these internal factors are the ones which lead to slightly behind, I would say, that in terms of CapEx. See also if you look at the GDP per se, like it's a bit muted for the next quarter. And even compared to the last year, it is from 8.2 -- it is somewhere at around 6.2 percentage. So that way we are very precarious in terms of consuming the entire CapEx. And we look into ensuring that we have a profitable growth. And again, we already invested into 2 aircrafts then one another the major hub that was recently -- that recently was made public. So that way we are very cautious in terms of our investments -- CapEx investments. Sagar, anything you want to add, please?

No.

And as of now, do we have a target for CY '25 that you can share?

Okay. We will be releasing our annual budgets very soon. Like -- so the targets on the CapEx and even on the top line and EBIT would be soon published by next quarter -- before the next quarter.

The budget will be our internal target sets.

Sure. Got it, sir.

[Operator Instructions] We'll take the next question from Mr. Lokesh Maru. Please go ahead.

So ma'am, from our just discussion with different D2C brands and channels, it's -- they suggest that Blue Dart has taken -- has become more competitive when it comes to e-commerce pricing, right? So is there any change in our approach or our - the way we're looking at e-commerce at this point, is it driving volumes? Or just some color on how we are looking at it? And what has the change been for us? Yes.

Yes, be a little louder, please, Lokesh.

Hello?

Yes, a bit louder.

Sir, so my point was in discussions with different D2C brands and just basic channels, it suggests -- they suggest that there has been -- we have become -- Blue Dart has become more competitive when it comes to pricing e-commerce deliveries, right? So I just wanted some color on is it -- I just wanted to confirm, first of all, if there has been any change in approach or aggression in pricing and the way we are looking at this segment?

In terms of being more competitive...

E-commerce.

In e-commerce, it's not in terms of any dilution in the yields, what we covered earlier -- in earlier quarters as well. We are now -- in last few years -- rather last 2 or 3 years, we absolutely have been focusing on increasing the scale on the ground e-commerce. So many times, the customer may look for 1 or 2 days of dilution in the transit time. And with us operating the Dart Plus product, which is -- which goes on a speed truck, the gap between air and Dart Plus in terms of service -- the transit times could be 1, 1.5 days. But in terms of the prices, it becomes very significant. So we do have now a more complete bouquet to offer to the customers where based on their requirement, they can either choose to go for air mode or for a Dart Plus mode. Both the products are, with our focus, continued on the profitability, remain competitive, but at the same time, also remain very profitable, helping both -- Blue Dart for ensuring share of wallet as well as customers to -- as per their requirement to choose from the 2 products.

Understood. So Dart Plus is something you're seeing has been a game changer for us in the last 2, 3 years. So sir, could you help understand like some color on how has growth been just for e-commerce in the last 2, 3 years? Asking this question because when we look at just the large 2 platforms, like Amazon and Flipkart, their growth has been high digit. But since we at, Blue Dart, deal with a wider bouquet of customers here, right, including D2C brands, so if you could help understand 2 things. One is growth in this segment that we have witnessed. And another, what is our value -- how does our pricing or value proposition differ from maybe the second largest player or maybe from the market leader in this space? Yes, that's all.

So in terms of the growth since -- the B2C as well as B2B products, both air as well as ground are quite integrated in operations, we do not publish segmented results. However, we have been sharing that it is the B2C and within that also B2C on ground that has been a growth driver for last few quarters, et cetera. And our dependence is not on very few customers, we have a good customer base. So only where it makes sense for the customers possibly without diluting on our required profitability, we are able to provide through a wider range of customers, not only for select few. So from that point of view, we have been witnessing a very consistent growth in the ground-based e-com products. And I think we have not seen a great dilution in the growth rate so far that -- we are not a very big player in the overall scenario within that segment. There are a lot of -- either captive or dedicated players for that. But for us, we look at the very niche customer requirements over there and continue to grow at consistent basis there.

Sir, sorry, last question. Just on the value proposition side. I mean what kind of premium do we charge if we compare to the second guy on pricing in the market?

I call it as premium because it's the differentiation of the service that the customers would pay a different price. So we may not be comparing like-to-like in terms of service, if we do look at only from a pricing perspective. So it may seem to be higher, but then so are our service quality standards that we maintain. We have certain internal KPIs that makes us kind of standing out. So we have not, from that perspective, premiumly priced as such, but we do that value for which we get the price.

We'll take our next question from Mr. Anshul Agrawal.

A couple of questions from my end. First, can you provide us some color about the growth that we have witnessed in volumes? Would this be primarily driven by surface versus air?

Yes, primarily surface.

Yes, correct.

Perfect. And secondly, if that is the case, on our margins, is surface particularly dilutive on our consol margins? Are our margins significantly different in surface and air, is what I'm trying to understand?

Yes. In terms of percentage, it won't be that very significant. But the base price will be different for air and for a surface product. Again, as I said, we do have a common first mile, last mile and sometimes middle mile between B2B and B2C. So when you talk about margins, it becomes what allocation criteria we apply. But then overall, we see consistent margins across the moves. We may differentiate internally, different allocation criteria to drive different products, but surface is not the reason for dilution. It has been last few quarters because of certain investments, which have started materializing now with good capacity utilization. So surface is not the reason for any dilution in the margins.

Great. That helps. Just one last follow-up on this. So our internal targets or the targets that we had sort of given to the Street around -- our PBIT margins being around 8% to 9%, that will not be sort of diluted if we expand further in surface, right? If you see surface growing faster than air or our ground surface or our e-commerce surface product growing faster than the other products? Is my understanding correct?

Yes, we would like to work towards that, though it is not a guidance or any other number that we are taking.

[Operator Instructions] So we'll take a couple of questions from the chat, sir. One is what was the proportion of ground versus air in this particular quarter?

[indiscernible] ground versus air data in terms of shipment, be it profitability or revenue.

Sure. Any mix on B2B and B2C in this quarter, if you can share that?

Yes. B2B, we witnessed a growth of 6.8% versus the previous quarter. And B2C is 15.6% in terms of revenue versus the previous quarter. And likewise, in terms of weight, it's 11% increase in weight in B2B and 16.9% in B2C.

Sure. And also since this quarter, the margins have improved on a Q-o-Q basis. So now that the price hike impact will also start coming in the fourth quarter, would directionally margins look up further in coming quarters?

That's the intent we have last quarter. Q3 was a festive quarter. We had certain festive -- we had certain -- we had a peak season surcharge that was during the festive quarter, which helped us to improve our Q3 top line as well as margin. And in the Q4, it's the GPI that should help us to retain the margins.

We'll take our next question from Mr. Achal.

Ma'am, if I were to ask you, in terms of the surface versus air mix, is it fair to say that the mix shift in last 3, 4 years could have been, say, 10 to 15 percentage points? Or not really -- that may not be the right understanding?

We can say that, that would be the safe assumption, Achal.

That's a fair resumption, right? And do you see the same continuing, like you can expect a 10%, 15 percentage point shift over next, say, 3 to 4 years? Could that be the possibility basis on the kind of investments? Yes.

Yes. we do not make much of a forward-looking statement, but our outlook is that the ground will grow in a double digit versus air, which would be less than 5%.

Okay. And in terms of the investments, what we've made, is it possible to get some sense out of our total asset, how much would be for air specifically? Like what kind of asset turns are you seeing in case of air versus surface? So even if the margins could be slightly different for surface, the ROCEs are even superior or similar?

One of the major investment was into aircraft. That's this thing. The second investment we did was in IT, and that's across the product. That's an enhancement to our software to improve the transparency and -- which is the thing -- that's across the product. And the last one is the bridge versus mega one, this we are talking? Mega is on the bridge which takes care of air as well as the ground speed product as well. So it's a mix impacting -- the last one is mix impacting ground and air.

Right. Ma'am, is it possible to get a sense in terms of the number of hubs or number of branches that we have, what kind of expansion we have seen in the last 4, 5 years? And if possible, even any sense about the direction from here on?

We don't have that data readily as of now, but we'll check with legal team if we can make it available for the public this thing, and we'll get back to you.

Sure. Just last question, if I may, ma'am. If we look at -- like you mentioned, 3Q had a benefit of the festive, the premium. But if we look at the gross margin, we are actually lower. But I presume it's a function of the mix as well. So in terms of the focus, is it fair to say that we will try to maintain margin and get more and more growth? Or we want to kind of focus more on the growth even if the margins could get somewhat impacted in the near term?

So margins also got impacted this particular quarter and compared to previous quarter, driven by the investments -- the three major investment which we normally keep on talking about at least from the past 3 quarters, and I hope it will increase in the upcoming quarters. So with the investment that we would do, certainly it will take a little bit of a toll on the margins. But it will help us to structure ourselves for the upcoming growth that we envisage there.

Right. Is it possible to get some sense about the capacity utilization ma'am for air and surface?

For surface, see -- for surface, we use trucks and those are very well utilized. There is no utilization challenge as such. [indiscernible] is a bit of a challenge in terms of having optimal utilization of our [indiscernible] in the last quarter of the last year and beginning 2 quarters. As of now, we are comfortable to say that our air -- fleet utilization is at the optimal level. Yes, there are certain things where we need to work up on, but at this point in time for this particular quarter, it's reasonable to say that we are optimum utilized.

And with the 5% -- let's say, for the sake of argument, the 5% kind of a growth in the air cargo, how soon would you require to add another aircraft?

Depends -- it depends, but nothing -- I mean no comments on that aspect as of date.

Understood. Understood. And just ma'am last question, sorry, if I may, with respect to the industry mix, is it possible to get some sense in terms of the total revenue, how the different industries like pharma or industrial or consumer or B2C? If you could give some sense of what is the mix? Maybe of FY '24 would also do, just to understand the composition of revenue for different sectors.

Sectoral, we don't have...

It's a business sensitive information. We don't put in the call.

Yes. So your question, Achal, on the 5% one where you say that with 5% increase in air would be at a new aircraft? I think it also depends on which sector and which rates this growth happens or which geography this growth happens. But as of now, for this level of growth, I think our current fleets are quite well enough to take of this growth rates.

We'll take next question from Mr. Gaurav.

I just have one clarification question. In all the management guidance, when we talk about margins, can you clarify which margin do you talk about? Is it stand-alone or consolidated? Is it EBITDA, EBIT, PBT? I just needed a bit clarification on this.

EBIT, earnings before interest and taxes. That's the way...

And stand-alone margin or the consol margin?

It's a consol margin.

Between the 2 if you compare [indiscernible].

Okay. Understood. Understood. That was my only question.

We'll take some questions from the chat. So what was the peak season surcharge during the third quarter?

Peak season surcharge, you mean in terms of -- understanding what it is for?

Yes, basically -- yes, the festive season surcharge or some premium which you charge, which led to the higher margin in third quarter.

So it's a price-sensitive information and all we can provide is an outlook that it's a festive-related phenomena, which we levy during festive season. And once festive seasons are done, these are rolled back.

Sure. And also one further question is on the growth outlook, while not really on the number side. But directionally, what is the growth outlook shaping up for FY '26 and '27 because it's been a pretty -- last few quarters have been pretty muted in terms of growth for the industry. So how are things looking up because some players have also been vocal about that it is very difficult to even take a price hike in the current scenario. So just your thoughts on what lies ahead for FY '26 in terms of volume growth as well as pricing growth?

First, we don't give any forward-looking statements.

Yes. Actually, it was -- yes. So actually, it was -- as I mentioned, it was not about numbers, but how do we see the growth shaping up? I mean, in terms of whether price -- realized price increase would go through and how the volumes could come up. That was basically the question.

Yes. So actually, it depends on multiple factors, one of the crucial being the domestic demand and our GDP growth and also then depending on the segments, B2B, B2C or air versus ground and so on. But overall, our outlook remains to be to grow profitably. We do not have per se an ambitious growth targets of growing in a double digit or 25% and so on. We want to keep it to have a very consistent growth year-on-year, as has been the Blue Dart style from past several years and would like to grow in similar run rate.

I think there is just one more question in the chat box. And I think if there are no further questions after that, we can close the call. The last question is on the competitive intensity, which has been there in the market, if you can highlight on that because the volumes have been pretty low at the industry level. So the competition is also pretty high. So just wanted -- so the question was regarding the -- what could be the impact of that? And how do you see the competitive intensity shaping ahead?

We do face competition, particularly on the ground where we have competitors like Delhivery, Safexpress and those competing with us on the ground part. On the air, with the growing, how to say that, multiple -- with the availability of the commercial airline space and so on, like we do face a constraint there. But then ultimately, for us, it's the service quality that helps us to -- is being a very differentiating factor. Perhaps that's the reason where we are still able to post consist -- stable growth as well as profitable growth versus any of our competitors.

I think we have completely run out of time now and there are no further questions. Just I think one last question, we'll take and then we can close the call. Yes, please go ahead.

Rajesh here. So just -- I joined the call a little late. I just wanted to know the volume number in tonnage and in shipments, if you could mention that, please?

So for the -- you're talking about for the April to December, right?

So I'm talking about the third quarter -- this quarter.

Okay, third quarter. Third quarter...

So we had 98.5 million shipments and 351,873 tonnes.

So that's the end of the call now, so I'll transfer the call to the management for any closing comments.

Yes. Tushar, for any management comments?

Yes, management comments, I mean, we are doing consistently well and we look forward to improve performance. Management is here to do what were the best methods are required for improved performance of the company. And it all depends on the economic outlook going forward.

Thank you. Thanks, everyone, for joining in. And...

Yes. Thank you so much for organizing, Alok. Thank you all.