Logistics firm DTDC plans expansion; to invest ₹500 crore in 3 years

Home-grown logistics firm DTDC is planning an investment of ₹400-500 crore over the next three years. Investments will be made towards setting up transit hubs and allied infrastructure.

According to Abhishek Chakraborty, Executive Director of DTDC Express Ltd, nearly 70 per cent of the investments are expected in the first two years.

A part of the funds will be raised from internal resources, especially with the company being profitable. Discussions are on regarding the other fund raising options that the company can look into.

The company is eyeing a 60 per cent growth in its profits for FY19 (as compared to the previous year).

New investments

“We are preparing for the next level of growth with 2022 being the focus year. The capex target is ₹400-500 crore and most of the funds are likely to be generated through internal accruals,” he told BusinessLine. Investments, as Chakraborty points out, will be in transit hubs, service centres (nearly 500-600 new facilities are expected to be added) and an over 100 per cent increase in truck-fleet (from the current 1300). New additions to its truck fleet will be on a lease-basis.

DTDC will look at three transit hubs around the Delhi-NCR region. and at least one transit hub each along the Goa-Karnataka-Kerala route and the Andhra-Telangana-Karnataka-Tamil Nadu circuit.

Chakraborty explains, post GST the concept of having multiple smaller warehouses across States have been substituted with strategically located larger warehouses. In this context, transit hubs will help in faster goods movement by road as it will bring down the travel time to almost half and also avoid unnecessary congestion at larger warehouses.

“Transit hubs are expected to reduce a 3-4 day journey to 48 hours on select routes,” he pointed out adding that the expansion of network will see DTDC cover nearly 92 per cent of the pin-codes across the country. This apart there will be technology-related additions that include outlay of equipments, scanning devices and use of AI.

Impact on bottomline

Naturally, a shore-up in bottom line is expected. These investments are expected to see 20-25 per cent growth in gross margins over the next two-to three years.

“In the first year, we expect there will be a 35-40 per cent improvement in gross margins with some of the capex plans materialising,” Chakraborty said.

Incidentally, DTDC has over the last few quarters carried out a lot of business re-organisation that has helped them bring down costs and strengthen the balance sheet.

De-risking was also carried out as the company looked to balance between e-com majors and a host of smaller or niche players that are more profitable per unit wise.

The e-commerce delivery business and ‘express ground services’ vertical are expected to the future growth drivers.