GST benefits will reflect in 2-3 years: Blue Dart

Yogesh Dhingra, CFO & COO of Blue Dart, believes that even if the Goods and Services Tax (GST) Bill is passed in the Winter Session, it will take atleast two to three years for the tax’s benefits to become evident. Speaking to CNBC-TV18, Dhingra said that initial years will be difficult as there could be some hike in administrative costs due to the new tax. On the business front, he expects significant volume growth and improved capacity utilization. Margins will not be under any impact, he added.The recent Chennai floods has impacted business considerably, he said.Below is the transcript of Yogesh Dhingra’s interview with Ekta Batra and Nigel D’souza on CNBC-TV18.Ekta: Can you give us the detail to us on how exactly would the goods and services tax (GST) benefit you in case it does see the light of day based on the current recommendations?A: In terms of benefit, one needs to do a study because initial apprehensions are that it is likely to be not very positive for these logistics because if they are going to keep the petroleum products out of the GST, it is going to increase the cost because if you do not get the input credit on aviation turbine fuel (ATF), which is the major cost for flying the aircrafts, there could be issue.So, we need more time. We have to go through the rules one those are approved and deep dive further to see because when you are into logistics, you operate in each and every state. Today, the entire mechanism works at a one central registration level and if you have to follow and file returns, which will be close to about 60, it is going to increase a lot of administrative costs for the companies.So, overall we know GST is good for the economy in the long run, but initial 2-3 years will be very difficult for everyone. Global experience shows that, whenever you introduce something like this, first 2-3 years there is inflation, the cost goes up, so those are the apprehensions we all have.Nigel: What kind of downside could you see at least for the next three years in terms of margins? As you said, various administrative costs could go up. Do you believe that if the GST comes through, then 2-3 years hence, we could see some margin compression and what kind of margin compression could we see?A: It will differ from company to company, but for logistics, I guess it will not be very significant in terms of improvement. There would be some after 2-3 years, but not significant.Ekta: Just talking about the margin picture, you obviously consume a lot of fuel. So how are your margins doing at this point in time because if I look at Q2 your earnings before interest, taxes, depreciation and amortisation (EBITDA) saw a strong jump of 80 percent, your margins also expanded 650 basis points (bps). Was that primarily because of the crude benefit on a year-on-year (Y-o-Y) basis and what can we expect at least in the near-term for margins?A: In terms of improvement in margin, what you see in our Q2 results was on account of number of reasons. One that we had a very good volume because of the festival time, pre-festival, generally, there is a very good growth. Secondly, the benefit of low-inflation was there. Margins are not under pressure. Whatever good efforts our teams have put in in terms of cost rationalisation is working well. Thanks to the e-commerce, business to customer (B2C) business which is growing well and that is fulfilling our need of the capacity utilisation. So, if you get good volumes and you have good cost structures in place, one can expect a good margin in terms of profitability.Nigel: How has the quarter been so far? As you said, festive season just got over Diwali, but even Christmas is coming up. Have you seen in the first two months, good volume uptick?A: December is, as of now, it has not shown that Christmas intake. That will happen more around December 15-December 17 onwards. But, one thing which we as a country or as a company have suffered is what happened in Tamil Nadu, the Chennai floods. Almost for 4-5 days, there was no activity there and there was loss of business. But yes, that is part of life. One needs to face those kinds of casualties.